UNIT 6: PAYMENT IN INTERNATIONAL TRADE

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

documentary collection

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

draft (bill of exchange)

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)

letter of credit

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

bill of lading

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

open account

The mode of payment in which an importer pays an exporter for merchandise before it is shipped.

advance payment

7.______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

revolving 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.

bach-to-back letter of credit

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

standby 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.

advised letter of credit

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

confirmed letter of credit

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

revocable letter of credit

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

Irrevocable 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.

deferred payment letter of credit

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

red clause letter of credit

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

transferable letter of credit