Collecting payment on exported shipments is one of the main business concerns for exporters and is required for export documentation. For Commercial Letters of Credit, BGI Worldwide Logistics assists our export clients by providing support documentation, certification of the banking requirements and instructions. BGI transports cargo around the world via air and ocean under different terms and payment methods.
Below is an overview. Contact us and we can explain export documentation payment methods in great detail, so you can decide which is best for you and your shipment.
The buyer agrees to pre-pay for the goods before shipment. This option reduces your risk. However, it is difficult to find a buyer who will agree to these terms.
With an Open Account, you send an invoice to the buyer with the shipment of goods. Most buyers will certainly agree to this payment method. However, if the buyer doesn’t pay, you may be unable to collect payment from a buyer in a foreign country. This method is ill advised, particularly, if you have never done business with the buyer before.
Letter of Credit
In the third, and most reasonable, payment method, a bank issues a Commercial
Letter of Credit in which the bank agrees to pay upon the presentation of specific documents. In this way, the bank essentially steps into the shoes of the buyer to guarantee payment to you.
There is a fee for this method and the fee increases in relationship to the purchase price of the goods being shipped. However, it may significantly reduce your risk of non-payment. Your actual risk may be affected by your ability to present documents to the bank as required in the Letter of Credit, the creditworthiness of the bank, and the terms and conditions in the Letter of Credit.