There are three payment methods commonly used in foreign trade: 1. Letter of Credit (L/C), a wide variety; Second, remittance, mainly including Telegraphic Transfer (T/T), Mail Transfer (M/T) and Demand Draft (D/D); Third, Collection, mainly including Payments Payment (D/P) and Documents (Accounting Acceptance, D/A). T/T is a wire transfer (the document is usually sent directly to the customer by us, without going through the bank). If we use the T/T payment method with the customer, the general practice is that the customer must first give us a 30% advance payment, the remaining 70% The general insurance method is that after the cargo is loaded, the customer will pay the original bill of lading with us, and then the original set of documents will be mailed to the guest after the payment is received. The L/C L/C payment method belongs to bank credit, which is a kind of payment method that is very insured. However, the credit of the issuing bank must be good. The documents of the documents should be carefully and carefully reviewed. The company's business, storage, transportation and documentation departments should be coordinated and avoided. There is a discrepancy in the document. D/A acceptance order The difference between D/P and D/A is that D/P must pay the bill, pay the bill of lading first, and pay the bill of lading if the bank is privately placed. The D/A importer pays the bill after XX days of acceptance on the bill. The bill of lading is available, and if the payment is not made within the time limit, the bank has no responsibility. Documents/paid payment (DMS) is a method of delivering documents under the documentary collection method. It means that the exporter’s delivery is conditional on the payment of the importer, that is, the payment by the importer can be collected. The bank collects the documents. Divided into spot bills (D/P Sight) means that the exporting party issues a sight draft, which is prompted by the collecting bank to the importing party. The importing party must pay after seeing the ticket. When the payment is paid, the importing party obtains the shipping document. The so-called "acceptance" is the act of approval of the bill of exchange when the bill payer (importer) prompts the forward bill of exchange at the collecting bank. The formalities for acceptance are that the payer signs on the draft, endorses the words "acceptance" and the date, and returns the draft to the holder. Regardless of the transfer of the draft, the payer shall pay by ticket on the due date of the draft. (1) Under the T/T mode, the importer does not need to apply to the bank for the development of the letter of credit, and the process related to the letter of credit can be omitted. (2) After completing the customs declaration and other formalities, the exporter will no longer use the "bashing" method to deliver the documents to the bank, but will send the documents directly to the importer on the "document list" page. (3) The importer can directly process the relevant documents upon receipt of the documents, and then pay the funds back to the importer after the goods are recovered. (4) After the importer pays, the bank can notify the exporter to settle the foreign exchange. References: Extracted from International Trade Practice Textbook and SIMTRADE Simulation Internship Platform To do TT, you will usually hit a certain percentage of the deposit, such as 30%. This will help the company have a start-up capital for the project. However, if LC is used, the foreign exchange collection will usually be obtained after the delivery, and the documents will be obtained from all parties.
D/P is the payment delivery form. We prepare our negotiation documents after delivery, and deliver the documents to the customer's bank through our bank. The customer bank prompts the customer documents to arrive, and the bank pays the bill after the customer pays.
D/A is the acceptance bill, and it is also delivered to the customer bank through our bank. The difference is that the customer can take the original receipt only after accepting the receipt of the bill, and then pay after the expiration.
D/P payment order
D/P after sight or after date means that the exporting party issues a forward draft, which is prompted by the collecting bank to the importing party. After the importing party accepts the bill, the maturity date of the bill of exchange or the maturity date of the bill of exchange, The importer pays the redemption order.
D/A Documents against Acceptance is a method for the exporter (or collection bank) to deliver the documents to the importing party on the condition of acceptance under the documentary collection method.
The above D/P Sight can also be done, others are more risky (relative to L/C), but there are also customers who do not pay redemption due to market price issues, if they do, Can only be an old customer with good reputation and long-term relationship.
T/T (Telegraphic Transfer) wire transfer means that the remittance bank should apply for the remittance, send the telegram telegraph, telex or SWIFT to the branch or correspondent bank (ie the remittance bank) in another country to explain the payment of a certain amount. A way of sending money from a payee.
The difference between T/T and L/C
TT is a wire transfer, L/C is a letter of credit (can be revoked and irrevocable) and can be divided into long-term and near-term.