Payment Method

　　International trade is an important pillar of global economic development, and while promoting the economic growth of various countries, it also involves complex transaction processes. As one of the core links in international trade, the mode of payment is directly related to the security, efficiency and interests of all parties involved in the transaction. In international trade, according to the characteristics of the transaction, credit status and risk tolerance, commonly used payment methods include the following:

　　First, the letter of credit (LetterofCredit,L/C)

　　Letter of credit is one of the most common payment methods in international trade, by the buyer's bank to the seller to provide payment guarantees. The main feature of the letter of credit is to ｒｅｐｌａｃｅ the buyer's credit with the bank's credit, thus reducing the risk of the transaction.

　　1.Advantages:

　　-Provides the seller with a reliable guarantee of payment.

　　-The buyer can control the quality and quantity of goods through the bank.

　　2.Disadvantages:

　　-Involves complicated paperwork and higher bank charges.

　　-Any discrepancy in the terms of the letter of credit may result in delayed or refused payment.

　　II. Telegraphic Transfer (TelegraphicTransfer,T/T)

　　Telegraphic Transfer (T/T) is a direct cross-border fund transfer through the banking system, which is fast and inexpensive.

　　1.Advantages:

　　-Fast transfer of funds, suitable for emergency payments.

　　-Procedures are simpler.

　　2.Disadvantages:

　　-To the seller there is a risk of non-payment by the buyer, especially for prepayment.

　　-The need for buyers and sellers have a certain basis for trust.

　　Third, the collection (DocumentaryCollection, D / P or D / A)

　　Collection refers to the seller through the bank documents to the buyer in exchange for payment or acceptance. According to the payment time, can be divided into immediate payment delivery (D/Patsight) and acceptance delivery (D/A).

　　1. Advantages:

　　-The handling fee is low, suitable for small and medium-sized amount of transactions.

　　-The buyer needs to pay in the bank or acceptance before picking up the goods, the seller's risk is relatively low.

　　2.Disadvantages:

　　-Seller relies on the buyer's ability to pay and credit.

　　-Not as good as a letter of credit with a bank guarantee, the risk is higher.

　　Fourth, international factoring (InternationalFactoring)

　　International Factoring means that the seller transfers the accounts receivable to the factoring company, which provides fund advance and bad debt guarantee services.

　　1.Advantages:

　　-Improves cash liquidity and reduces financial pressure on the seller.

　　-The seller does not need to bear the risk of the buyer defaulting on payments.

　　2.Disadvantages:

　　-Factoring companies charge higher service fees.

　　-Limited scope of application, mainly used for credit transactions.

　　V. Open Account (OpenAccount)

　　OpenAccount means that the seller delivers the goods first and the buyer pays for the goods within the agreed period. This method is usually used between trading partners with long-term cooperation and high mutual trust.

　　1. Advantages:

　　-Simplify the process, low transaction cost.

　　-Enhances the buyer's liquidity.

　　2.Disadvantages:

　　-Higher risk to the seller, if the buyer defaults or refuses to pay, recovery is difficult.

　　Sixth, cash payment (CashinAdvance)

　　Cash payment refers to the buyer to pay the full or partial payment before shipment, applicable to high-risk or small-scale transactions.

　　1.Advantages:

　　-No capital risk for the seller, high security.

　　-Applicable to new customers or special circumstances.

　　2.Disadvantages:

　　-High financial pressure on the buyer, may reduce competitiveness.

　　-Higher risk to the buyer, difficult to recover when the goods do not match or cannot be delivered.