Basic Methods of International Payment
A.J. Anderson
International Trade Specialist
USEAC, U.S. Dept. of Commerce
515-288-8614
Method | Usual Time of Payment | Goods Available to Buyer | Risk to Exporter | Risk to Importer |
| Cash in Advance | Before shipment | After payment | None | Completely relies on exporter to ship goods as ordered |
| Letter of Credit/ Confirmed/Sight | When shipment is made | After payment | Credit Risk with Confirming Bank and Documentary Risk | Completely relies on exporter to ship goods as ordered |
| Letter of Credit/ Confirmed/Time | On maturity of draft | Before payment | Credit Risk with Confirming Bank and Documentary Risk | Completely relies on exporter to ship goods as ordered |
| Letter of Credit/ Unconfirmed/Sight | When shipment is made | Before payment | Credit risk with Issuing Bank and Documentary Risk | Is assured shipment made but relies on exporter to ship goods described in documents |
| Letter of Credit/ Unconfirmed/ Time of draft | On maturity | Before payment | Credit risk with Issuing Bank and Documentary Risk | Is assured shipment made but relies on exporter to ship goods described in documents |
| Sight draft, documents against payment | On presentation of draft to buyer – often a verbal notification receipt by the collecting to the buyer | After payment | Disposition of goods if shipment not accepted. Involves many side risks such as exchange availability | Is assured shipment made but relies on exporter to ship goods described in documents unless he can inspect goods before payment |
| Time draft, documents against acceptance | On maturity of draft | Before payment | Disposition of goods if shipment not accepted. Relies on buyer to pay draft at maturity | Is assured shipment made but relies on exporter to ship goods described in documents unless he can inspect goods before payment |
| Open account | As agreed | Before payment | Relies completely on buyer to pay his account as agreed upon | None |
