Common payment terms and how to write them in cross-border payments

In the field of cross-border payments, the drafting of payment collection and payment terms is crucial. It not only protects the interests of both parties to the transaction, but also standardizes the payment process. This article will introduce in detail several common payment methods and corresponding expression methods.

1. T/T (Telegraphic Transfer)

T/T is a common prepayment method, and the specific terms can be expressed in the following forms:

• The buyer should prepay the entire payment to the seller by T/T before the specified date. For example, “The buyer shall pay the total value to the seller in advance by T/T not later than lst Jan. 2019.”
• The buyer shall pay a certain percentage (such as 40%) as deposit in advance and pay the remaining balance before the goods are dispatched from the factory: “The buyer shall pay 40% of the total value as deposit in advance and pay the balance before the dispatching of goods from the factory”
• In addition, there are also situations where part of the deposit (such as 30%) is paid and the remaining part is paid according to the copy of the bill of lading: “The buyer shall pay 30% in advance by T/T and the balance payment against the copy of B/L. ”

2. Documentary Letter of Credit

When using a documentary credit, the standard expression is usually as follows:

• “By 100% confirmed, irrevocable, transferable sight L/C to reach the seller 30 days before the date of shipment and to remain valid for negotiation in China till the 15th day after the final date of shipment.” This means A full, confirmed, irrevocable, transferable letter of credit at sight is required, and the letter of credit must reach the seller one month before the shipment date and remain valid for negotiation in China until after the final shipment date. Day 15.

3. Collection

Collection usually refers to the buyer paying and delivering the document immediately upon first sight against the sight documentary draft issued by the seller:

• “Upon first presentation, the buyer shall pay against documentary draft drawn by the seller at sight. The shipping documents are to be delivered against payment only.” This method requires the buyer to pay immediately when seeing the bill to obtain the shipping documents. .

4. Combined L/C and Collection

For the mixed use of letters of credit and collection, the general statement is as follows:

• Part of the payment (for example, 60%) is paid through an irrevocable letter of credit at sight, while the remaining part (for example, 40%) is paid through collection, and payment is due within thirty days after the buyer sees the bill. “60% of the value of goods by irrevocable L/C at sight and remaining 40% on collection’s basis, D/P at 30 days after sight. The full set of shipping documents are to be delivered to the buyer until full payment of invoice value is made.”

The above are several common payment terms and their writing methods in cross-border trade. Proper understanding and application of these terms can help ensure smooth conduct of international trade.