Our Articles

Enjoy,comment and share

RSS World Trade Organization — Latest news

  • Trade Policy Review: Saudi Arabia March 3, 2021
    The third review of the trade policies and practices of Saudi Arabia takes place on 3 and 5 March 2021. The basis for the review is a report by the WTO Secretariat and a report by the Government of Saudi Arabia.
    WTO
  • Civil society call for fishing subsidies deal welcomed by Dr Ngozi and negotiations chair March 1, 2021
    Director-General Ngozi Okonjo-Iweala welcomed civil society’s plea for a successful conclusion to the fisheries subsidies negotiations, illustrated through a fish ice sculpture set up by a coalition of non-governmental organizations (NGOs) in front of the WTO headquarters on 1 March. Dr Okonjo-Iweala visited the sculpture accompanied by the chair of the negotiations, Ambassador Santiago Wills […]
    WTO
  • Twelfth Ministerial Conference to take place in Geneva in late 2021 March 1, 2021
    WTO members have agreed that the organization’s Twelfth Ministerial Conference (MC12) will take place in the week of 29 November 2021 in Geneva, Switzerland. The timing and venue were endorsed at a meeting of the WTO’s General Council on 1 March.
    WTO
  • DG Okonjo-Iweala: WTO can deliver results if members “accept we can do things differently” March 1, 2021
    Addressing the WTO General Council immediately after taking office on 1 March, Director-General Ngozi Okonjo-Iweala called on members to “do things differently” to achieve reforms necessary to keep the WTO relevant, starting with swift action to curb harmful fisheries subsidies, and to help scale up COVID-19 vaccine production and distribution. The new head of the […]
    WTO

International trade Payment Methods



 

 

International trade transactions tend to be characterised by a higher level of risk and complexity. While, the risks resulting from the transport of the goods could be managed by relying on the Incoterms rules, the risks associated with the payment requires a specific approach.

Indeed, the risk of non-payment is probably one of the most sensitive aspects of cross-border trading, and as such, it requires a central attention.

Whereas for domestic trade the buyer and the seller have to comply with their respective national laws, things are quite different for cross-border transactions since there is no supranational jurisdiction.

From this perspective, adopting an open account method, where the buyer can pay between 30 to 90 days after the reception of the goods, might be risky especially with new buyers with whom no relationships has been built. Needless to say that in case of non-payment issues, the procedure is likely to be costly and time consuming.

Conversely adopting an upfront payment or cash in advance method, could be a risk-free option for the Seller. However, this could impact adversely the Exporters’ competitiveness since it increases cash-flow needs for Importers who will be more likely to look for other suppliers with better conditions. Furthermore, importers are usually reluctant to make upfront payments in foreign countries, by fear of not receiving the ordered goods.

Fortunately, overtime many tools have been developed to address those shortcomings, which enabled the international trade to experience an unprecedented growth.

It is of paramount importance to have a broad perspective of the international trade payment methods available in order choose the best option.

Indeed, there is no one size fit all way of organising payment in international trade, which is why most of the methods developed below have their own advantages, drawbacks and limits.

Now let’s see each International trade payment method in more details