Instruments and terms of payment in export import

Question 1

Methods of receiving payment

Answer 1

1. Payment in Advance
   - most favoured
2. Documentary Bills
   - documentary bills are a bridge, as documents are routed through the bank.
   - slight bill and acceptance bill.
   - Usance period may be 30 to 180 days.
3. Documentary Credit Under Letters of Credit
   - bank acting at request of the instruction of a customer (importer) to make payment to third party (exporter) against stipulated documents
4. Open Account with Periodic Settlement
   - exporter sends the goods, directly to the overseas buyer along with invoice.
5. Shipment on Consignment Basis
   - the seller ships the goods to his agent or representative.

Question 2

INSTRUMENTS OF PAYMENT

Answer 2

1. Telegraphic Transfer
   -money is deposited with the banks in India and the Indian banker
   sends a cable, telegram or fax to the foreign branch/correspondent to make certain payments to the specific party, on that very date.
   -Telegraphic transfer is the quicker method for transmitting funds, involving no risk.
2. Mail Transfer
   - by post
3. Bank drafts and cheques
   -issued by a bank on its own branch or correspondent bank abroad.
4. Bill of exchange
   - order drawn by a person upon a bank or another person asking to the latter to make payment to third party.
   - exporter-bank-importer
   (a) Ordinary or Clean Foreign Bill
   (b) Documentary Bill