Company Name:
Lishui Huanqiu Bearing Trading Co., Ltd.
Company Address:
No.11 Shiting Road, Shuige Industrial Zone,Lishui, Zhejiang,China
Contact Person: William
Email: admin@tradebearings.com
Homepage: www.asiabearings.com
Bearing B2B: www.tradebearings.com
Generally speaking, it is not very difficult for buyers and sellers in domestic trade to get to know each other's financial status and other information, and payment is likely to be made in a straight forward manner . say by remittance or by debiting the debtor's account. In international trade, however , things are far more complicated. Purchase and sale of goods and services are carried out beyond national boundaries, which makes it rather difficult for the parties concerned in the transaction to get adequate in formation about each other's financial standing and creditworthiness. Therefore, mutual trust is hard to build. Both the exporter and the importer face risks as there is always the possibility that the other party may not fulfill the contract.
For the exporter there is the risk of buyer default. The importer might fail to pay in full for the goods. He might go bankrupt ; his government might, for various reasons, ban trade with the exporting country or ban imports of certain commodities; the buyer might run into difficulties getting the foreign exchange to pay for the goods. It is even possible that the buyer is not reliable and simply refuses to pay the agreed amount on various excuses.
On the part of the importer, there is the risk that the shipment will be delayed, and he might only receive them long after payment. The delay may be caused by problems in production or transportation, and such delays may lead to loss of business''. There is also a risk that wrong goods', might be sent as a result of negligence of the exporter or pin-ply because of his lack of integrity.
Polities risks such as war, quotas, foreign exchange control; commercial risks like market change and exchange rate fluctuations; and even language barriers all add up to the problems in international trade. Because of these problems and risks, exporters are hesitant to release their goods before receiving payment, while importers prefer to have control over the goods before parting with their money
A lot of international transactions are paid for by means of the draft, which , also referred to as the bill of exchange , is an unconditional order TO a bank or a customer to pay a sum of money to someone on demand or at a fixed time in the future. The person who draws the draft, usually the exporter, is called the drawer, and the person to whom the draft is drawn is called the drawee. There is yet another party the payee, i. e. the person receiving the payment, who and the drawer are generally but not necessarily the same person, as the drawer can instruct the drawee either to pay "to the order of ourselves" or to the order of someone else, for instance, the bank.
A draft is either a sight draft or a usance draft (also called tenor draft or term draft). The former calls for immediate payment on presentation to the drawee while the latter is payable at a later date, e. g. 30, 45, 60, or 90 days after sight or date. A draft is either clean (without documents) or documentary. In the latter case, the draft is accompanied by the relevant documents such as the bill of lading, the invoice, the insurance policy etc.
In documentary collection, the exporter sends the draft and the shipping documents representing title to the goods20 to his bank, which forwards them to another bank in the importer's country, which in turn contacts the customer. In the case of documents against payment (D/P)21, documents will not be released to the importer until payment is effected. There are D/P at sight and D/P after sight. The former requires immediate payment by the importer to get hold of the documents. The latter gives the importer a certain period after presentation of the documents, but documents are not released to him until he actually pays for the merchandise. In the case of documents against acceptance (D/A)22, documents are handed over to the importer upon his acceptance of the bill of exchange drawn by the exporter. Payment will not be made until a later date. D/A is always after sight.
So far as the exporter's interest is concerned , D/P at sight is more favourable than D/P after sight, and D/P is more favourable than D/A. In actual trade, payment by collection should be accepted with discretion. It is usually used when the financial standing of the importer is sound, or when the exporter wishes to push the sale of his goods, or when the transaction involves only a small quantity. Otherwise, the letter of credit is generally preferred.
