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  • WTO launches new edition of Handbook on the TRIPS Agreement November 27, 2020
    The WTO launched today (27 November) the second edition of “A Handbook on the WTO TRIPS Agreement”, which describes the historical and legal background to the Agreement on Trade-related Aspects of Intellectual Property Rights (TRIPS), its role in the organization and its institutional framework. The publication coincides with the 25th anniversary of the entry into […]
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  • WTO to host first Trade for Peace Week November 25, 2020
    The WTO will host the first edition of the Trade for Peace Week from 30 November to 4 December 2020. Ten virtual panel sessions will explore the nexus between trade and peace, with the focus on fragile and conflict-affected countries in accession which want to use trade and economic integration to promote sustainable and inclusive […]
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  • DDG Agah at ITC Joint Advisory Group: Open trade and economic inclusion key to post-COVID recovery November 25, 2020
    In remarks on 25 November to the 54th session of the Joint Advisory Group that oversees the work of the International Trade Centre (ITC), WTO Deputy Director-General Yonov Frederick Agah argued that open international trade, together with efforts to ensure the benefits from economic activity are widely shared, would be necessary to repair the social […]
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  • DDG Wolff: “WTO reform is both necessary and feasible” November 24, 2020
    Speaking at the “1+6” roundtable meeting presided by Chinese Premier Li Keqiang on 24 November, Deputy Director-General Alan Wolff urged WTO members to begin serious engagement on improving the WTO, arguing there was enough common ground to reach major new agreements. He also called on China to participate actively and contribute positively to planning far-reaching […]
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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