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Secrets of International Trade

Overview of Export Payment, Financing, and Documentation


Part 1

Part 2

Part 3

Part 4


"The 'currency' in which payment are to be made to you or your company, may risk an 'exchange loss' that could 'wipe out' profits"

For new client, the exporter should insist on payment by sight draft drawn against an irrevocable letter of credit  -
A Letter of Credit, is a written commitment by the foreign buyer's bank that it will pay for the goods.

Any doubts about the foreign buyer's bank or the exchange situation, the exporter may insist that the letter of credit (L.C.) to be confirmed by his own bank.

A confirmed LC means that the buyer bank has paid in full, the amount of (the LC) money into your overseas corresponding bank (and only when your bank is assured that money is on hand, will your bank issue or endorsed the LC as confirmed) in short: you (and your bank) are assured of payment provided that you have met all conditions specified in the LC.

Credit terms to the foreign buyer - ranging up to 180 days (Time Draft) may still be provided with a L.C. (Letter of credit).

With a Letter of Credit, the exporter will be assured of payment once he hands over to his advising bank - provided he has met all the necessary conditions e.g. shipping date, no partial shipment etc. as specified in the letter of credit.




Export insurance are also available to protect the exporter from financial loss, if the foreign buyer fails to pay.

Consideration should also be given to the currency in which payment are to be made to you or your company; if there is any risk of an exchange loss, it could wipe out expected profit.

Consider whether your foreign currency should be sold forward to the exporter's bank - particularly if credit terms are being given and payment are due weeks or months in the future.

Finally, the exporter should find out what types of documents Documentation for Export are required for an export transaction, how many copies of each, and from where they can be obtained.

For special problems involved in completing the documents that might cause difficulties: for example, with foreign customs authorities. The assistance of a freight forwarder or shipping agent can be helpful.


Overview of Packing Requirements for Export

Goods shipped abroad requires better packing than for goods sold locally because of the longer distance and rough handling while in transits.

Recommended further reading : Hazards of Export Packing & Shipping. The journey, that the exporter's product must make to its overseas destination are usually far more hazardous.

packing requirements will depend on the type of product, the distance to be traveled, and the type of carrier to be used.




For example, shipping goods by container is much safer than shipping goods in individual boxes or shipping goods by air is much safer than by sea.

Specific packing and shipping
questions to be asked...

1. What type of carrier will be used?
Export Transportation & Shipment

2. If, on board ship, whereabouts (Stowage)
(which part of the ship)?

3. What sort of weather conditions that are likely to be encountered if the goods are shipped on the open deck?

4. What type of handling will the goods be subjected to?

5.Will the packing withstand rough handling?

6. Will the packing be able to prevent stealing?

7. Do the packages or crate require strapping?

8. What marks or labels will be required on the outside of the package?


Overview of Export Transportation

The best way to ship goods to the foreign market always involve a compromised between the following factors: speed, cost, and safety. Sometimes the buyer may specify how the goods are to be sent.

In determining the export prices
some prior assumption have to be made about the:
Export Transportation and Shipment costs and the:
Type of carrier used:
As well as...
Insurance for Exporting to be protected from financial loss, if the goods are lost or damaged on the way.


Overview of Visiting Foreign Country

The final step, after all possible export research has been done in the exporter's own country, is to pay a visit to the foreign country so as to become personally familiar with the target country and to meet prospective agents, home country representatives, trade consulate as well as help answer unresolved questions.

To maximize the benefit, the exporter will need to prepare a detailed itinerary; specifying places to visit, persons to meet, and information to be obtained.

The exporter should arrange for one or more persons in the foreign country to assist him/her in their work e.g. government trade officials, prospective agents, etc.



Part 1/4
Export Promotions are marketing activities to persuade potential customers to buy your goods or services

Part 2/4
Role of the Foreign Agent & Exporter. The promotional strategy should be developed in consultation with them

Part 3/4
Trade Fairs; most export effective way to introduce a product and to find out exactly what international buyers think

Part 4/4 < This Page
Export Payment, Financing and payment by sight draft drawn against an irrevocable letter of credit

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