By cash international settlements are settlements in the period from the date of readiness of the exported goods to the transfer of documents of the importer.
Provision of credit has a definite influence on the conditions of international payments. If his calculations are carried out after the international transfer of goods in the ownership of the importer, exporter that lends it’s usually in the form of issuing a bill. If the importer pays for goods in advance, he credits the exporter.
Loan with an option for cash payment, if the importer, exercise the right of deferral of payment for goods purchased, he is deprived of discounts offered by cash payment.
5.3. The main forms of international settlements
To link the opposing interests of counterparties in the international economic organizations and their payment relationship apply various forms of payment.
The choice of methods of payment depends on:
– Type of product;
– Availability of credit agreement;
– The solvency and reputation of counterparties for foreign economic transactions.
The contract specifies the conditions and methods of payment.
– The collection form of payment – the client's order to the bank on receipt of payment from the importer of goods and services and placement of these funds to the exporter's bank. Banks perform collection operations, using the instructions received from the exporter in accordance with the Uniform Rules for Collections.
– Letter of credit – an agreement on the obligation of the bank at the request of the customer to pay for the documents, accept, or (negotiate) a bill in favor of a third person (beneficiary) to whom a letter of credit.
The procedure for this form of payment is regulated by the Uniform Customs and Practice for Documentary Credits. The letter of credit (especially irrevocable and confirmed) to a greater extent than the collection ensures timely payment.
However, this is the most complex and expensive form of payment, the importer in this case has to reserve the amount of credit or use credit bank.
– Bank Transfer – order one bank to another to pay the payee (beneficiary) a certain amount. It involves:
– Originator – the debtor;
– A bank, took the assignment;
– The bank that executes instructions;
– Payee.
In international transactions often take the transferor bank customers. In the form of transfer payments made collections, advance payments recalculated. Bank transfers are often combined with other forms of payment, as well as the guarantees of banks.
The instruction specifies a way to recover the bank of the payer amount paid to them. Payee bank is guided by specific instructions contained in the payment order.
– Advance payment – the payment of goods importer in advance of shipment, and sometimes to their production (for example, the import of expensive equipment, ships and aircraft). In contrast to international practice, where advance payments are 10 – 33% of the contract, in Russia they reach 100%. Thus lend importers of foreign suppliers. Consent of the importer at a pre-payment due either to his interest, or the pressure of the exporter.
– Calculations on open account – settlements providing for periodic payments in a timely manner at the importer to exporter of regular supplies of goods on credit to this account. These calculations are most beneficial to the importing and practices of trust and long-term relationship with a foreign supplier.
