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Terms of Payment (Topic 5 IF) (Collection (Document agst PAYMENT (D/P)…

- - - - Control over timing of payment
      - receive goods before payment
      - less documentation
      - less commission & handling costs
    - - No control over timing of delivery of goods
  - - - LOSES CONTROL over title of goods
      - Non payment by buyer
      - Exporter is exposed to economic/ political risks in importer's country
      - Payment in foreign cheque may cause further delay
      - Difficult to control cash flow
    - - Method is flexible
      - Less documentation
- - - - Usually gets a discount
    - - Risk of buyer not delivering the goods
  - - - Have control over title of goods
      - no risk of non payment
      - less commission & handling costs
    - - None
- - - - (using CC (D/A), CC(D/P), DC(D/A)) Risk of non payment, non acceptance by importer, Since goods have been sent to a foreign country, buyer may collect goods & default payment, Additional cost incurred if buyer has not collected the goods (warehouse, insurance, etc), buyer will also have to sell to others at discount or ship goods back, even with DC(D/A), if importer has accepted the bill, there is still risk of non payment
    - - (using DC (D/P) Exporter has control over title of goods, documents of title are released to importer only upon payment, collecting bank act on behalf of exporter to pursue payment from importer, generally cheaper than documentary credit
  - - - Under CC(D/P) & (D/A) , DC(D/A), importer gets goods before payment, can use goods as security, importer enjoys trade credit (free financing by using term draft), convenient & cheaper than documentary credit, exporter will normally bear the collection charges
    - - No control over quality of goods, under DC (D/P) importer pays first, goods received might be defective, under DC (D/A), importer is still liable to pay, but problem arise of goods are later found to be sub-standard