In foreign trade, several commonly used payment methods are TT (telegraphic transfer), L/C (letter of credit), and D/P (documents against payment). Many domestic factory owners are not familiar with foreign trade payment methods, so they stipulate that foreign trade salesmen can only use the T/T method to collect payments, in order to ensure the absolute safety of the payment, and regard L/C and D/P as a scourge. There are many payment methods for international trade, and 30% T/T deposit and 70% balance payment on the copy of the bill of lading are basically acceptable payment methods. If you blindly restrict salesmen to use the T/T payment to delivery method, you will lose a lot of customers and business opportunities. Combined with the country risk level of the customer, controlling the risks in the payment method can ensure the smooth recovery of the payment while expanding exports.
(i) T/T 100% advance (100% advance payment by telegraphic transfer)
T/T 100% advance is a payment method where payment is made before production. It is a zero-risk payment method for the exporter and a 100% risk payment method for the importer. This means that the exporter has received the full payment before the goods are made. This payment method is only accepted when the customer is in urgent need of a certain product and must receive the goods in a very short time, and there are only a handful of suppliers who can complete the delivery, and the customer has no choice. The amount of such an order is generally not too large.
(ii) T/T 30% DEPOSIT and 70% balance before shipment (30% deposit is paid in advance by telegraphic transfer, and the 70% balance is paid before loading)
This payment method is also safe. The higher the deposit ratio, the higher the safety factor.
For countries with good commercial credit, such as the United States, Canada, Germany, France, and the United Kingdom, as long as the background of the customer company is investigated and confirmed to be a normal and powerful company, it is usually safe to collect payment. If the customer abandons the goods after receiving the deposit, you can resell the goods, and there are still many coping plans.
If it is a high-risk country, the customer may abandon the goods after paying the deposit. For example, the Turkish lira has plummeted recently. A Turkish customer paid a deposit. If he wants to continue importing, he will have to spend more lira to exchange for US dollars. The exchange rate eats up his profit. If he does not have high market expectations for the goods, he will abandon the goods. Therefore, when facing customers from high-risk countries or regions, it is necessary to adjust the payment method to ensure the safety of the payment.
(III) T/T 30% DEPOSIT and 70% L/C at sight (30% deposit is paid in advance by telegraphic transfer, and the remaining 70% is settled by letter of credit at sight)
This is a very safe payment method. The biggest risk is that if there are discrepancies in the documents, the customer will refuse to pay. However, customers will generally accept the payment of discrepancies, because they have already paid a 30% deposit and it is impossible for them to give up the deposit and the goods just because of some discrepancies on the documents. Except for high-risk countries or regions, this payment method is still very safe.