Unit 6- Payment in international trade

documentary collection

The mode of payment in which a bank acts as an intermediary without accepting financial risk is called

draft (bill of exchange)

A document ordering an importer to pay an exporter a specified sum or money at a specified time is called a (an)

letter of credit/L/C

The mode of payment in which the importer's bank issues a document stating that the bank will pay the exporter when the exporter fulfills the terms of the document is called a (an)

bill of lading

A contract between the exporter and carrier that specifies destination and shipping costs of the merchandise is called a(n)

open account

The mode of payment in which an exporter ships merchandise and later bills the importer for its value is called; is the most secure mode of payment for the importer

advance payment

The mode of payment in which an importer pays an exporter for merchandise before it is shipped; is the most secure mode of payment for exporters

Revolving letter of credit

is a letter of credit calling for renewed credit to be made available when the issuing bank informs the beneficiary that the buyer has reimbursed the issuing bank for the drafts already drawn

Back to back letter of credit

means two letters of credit with identical documentary requirements, except for the difference in the price as shown by the Invoice and draft

A Standby Letter of credit

is a letter of credit that can be drawn against, but only if another business transaction is not performed

Advised letter of credit

is a letter of credit issued by a bank and forwarded to the beneficiary by a second bank in his area. The second bank validates the signatures and attests to the legitimacy of the first bank.

Confirmed letter of credit

is a letter of credit issued by one bank to which a second bank adds its commitment to pay

Revocable letter of credit

is a letter of credit that may be canceled at any moment without prior notice to the beneficiary

Irrevocable letter of credit

is a letter of credit that cannot be canceled nor amended without agreement of all parties

Deferred payment letter of credit

is a letter of credit under which the documents are forwarded to the importer's bank, while sight draft is presented at a later future date

Red clause letter of credit

is a letter of credit permitting the beneficiary to receive a sum prior to shipment

Transferable letter of credit

is a letter of credit that can be utilized by someone designated by the original beneficiary