By a Letter of Credit (or just: by credit)

A L/C is the most frequently used method of cash payment because it's advantageous and secure both to the Exporters and to the Importers though it is more expensive than payment by transfer.

It overcomes the gap between delivery and payment and gives protection to the Sellers by making the money available for them on the fulfillment of the transaction and to the Buyers because they know that payment will only be made against shipping documents giving them the title for the goods. This method is often used in dealings with developing countries.

4) by payment for collection:

this payment doesn't give any advantages to the Exporters because it doesn't give any guarantee that they will receive payment on time or at all. That is why the Exporter usually requires that the Importer present a guarantee of a first class bank that payment will be effected in due time.

There is also a long period of time between the delivery of the goods and actual payment. But it is advantageous to the Importer because there is no need to pay big sums of money before actually receiving the goods.

But in modern business transactions the following manners of payment are often applied:

1) payment by drafts (Bills of Exchange - B/E):

the Exporter credits the Importer which is advantageous to the latter. A draft is an order in written form from a Creditor to a Debtor to pay on demand or on a named date a certain sum of money to a company which is named on the Bill, or to their order. It's drawn by the Sellers on the Buyers and is sent through a bank to the Buyers for acceptance. The draft becomes legally binding when signed and dated by the Buyers on its face and it is to be met when due, i.e. 30, 60 or 90days after presentation.

The draft may be negotiable. If the Exporter wants immediate payment, he can discount the draft. All this makes the draft a very practical method of payment in foreign trade. To sum up its advantages one should say that it simplifies the financing of export and import foreign trade and cuts down numerous movements of currency.

2) payment in advance:

the Importer credits the Exporter, for a example, the Contract may stipulate a 10 or 15% advance payment, which is advantageous to the Sellers. This method is used when the Buyers are unknown to the Sellers.

3) payment in an open account:

open account terms are usually granted by the Sellers to the regular Buyers or customers in whom the Sellers have complete confidence, but sometimes they are granted if the Sellers want to attract new clients. Actual payment is made monthly, quarterly, annually as agreed upon. This method is disadvantageous to the Exporters, but may be good to gain new markets. Payments in cash and on credit are very often combined in a Contract. The currency for payment is a matter for arrangement between the parties to the Contract.

Each economic agent during the execution of the transaction wants to stand the most attractive method of payment to himself, which is the best in appropriate market conditions. In this way parties must always find a compromise.

TERMS OF DELIVERY

The Contract of sale stipulates the price and the terms of delivery, which constitute the framework of the subsequent agreements on financing, insurance and transportation. In accordance with the responsibilities of the parties in respect of the expenses of delivery and the risks of accidental damage to or loss of the goods there may be various terms of delivery. Most frequently used terms of delivery in international trade are CIF (cost, insurance, freight) and FOB (free on board). A CIF price includes apart from the value of the goods the sums paid for insurance and freight (and all other transportation expenses up to the place of destination). An FOB price only includes the value of the goods, transportation and other expenses until the goods are on board the vessel. On FOB and CIF terms the Sellers bear the risk of accidental loss of or damage to the goods until the goods pass the ship's rail. Other terms of delivery that may be used in foreign trade are:

1. FAS = free alongside ship, which means that the Sellers pay for all the charges up to and including the placing of the goods alongside ship but do not pay for loading.

2. CAF = cost and freight, which means that the Sellers undertake to pay for the cost of transportation of the goods to a specified destination. The risk passes when the goods have crossed the ship's rail at the port of loading. If the goods are carried by liners, the Sellers have to unload them at the port of destination for their account. If not by liners, the counterparts may agree to this effect, then it is indicated "cost and freight landed".

3. Ex ship with port of destination indicated which means that the Sellers pay for all charges up to and including the placing of the goods at the disposal of the Buyers on board the vessel at the port of destination. The risk passes accordingly.

4. Ex quay with port of destination indicated, which means that the Sellers pay for unloading the goods and the risk doesn't pass until the goods are placed on the quay in the port of destination.

The choice of the terms of delivery and the terms of payment as a rule remains with the Buyers, so they can insist, while negotiating a contract, on choosing those which they find most suitable for them.

PACKING AND MARKING

Packing and marking are important clauses of a Contract. Packing is a means, which helps to keep goods safe during transportation and storaging. There are a lot of kinds of packing. For example, some goods have inside and outside packing: perfume has inside packing (a bottle) and outside packing (a box). Packing can also be made of different materials: paper, glass, plastic, cardboard, iron and so on. Goods must be packed in full conformity with the specifications of each particular type. You can't transport glass in paper, it needs a firm kind of packing, or packing of food must keep it dry. And if packing correctly conforms with the features of goods, the latter would arrive safe and sound and can even withstand rough handling.

In a Contract all the above characteristics of packing should be stated. Improper or faulty packing may cause damages and breakages of goods.

Marking is usually made on packing. It must include the name and address of the Buyer, the Seller and the manufacturer of the goods, numbers of standards or technical documentation, numbers of roads, kinds of transport and some other details concerning this particular consignment of goods: weight, quantity and others. There are also various kinds of marking for goods that need careful handling, for example, WITH CARE, TOP, DO NOT TURN OVER, USE NO HOOKS and so on. There may be also pictures in marking. Some of them require careful handling too: "fragile", "avoid heat", "open here", etc.

There is also marking that states that the products or their packing are ecologically pure and don't make harm to environment: "green point", "produced of used materials", "this marking says for itself”, etc. Marking should warn of poisoned and harmful materials contained in packing.

If goods are transported by sea, their packing must be seaworthy and marking should be made with indelible paint. It is also very important that marking should be made right. Wrong marking can lead to short-shipment and short-delivery, improper handling, misdirection of the goods and many other unpleasant problems. Usually all these characteristics are stipulated in standards. Contracts only contain numbers of appropriate standards.