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  • Members pursue convergence for an IP COVID-19 response October 14, 2021
    At a meeting of the Council for Trade-Related Aspects of Intellectual Property Rights (TRIPS) on 13-14 October 2021, WTO members noted encouraging exchanges at recent small group discussions and bilateral meetings which helped to identify points of convergence on how to provide a common intellectual property (IP) response to COVID-19. The chair of the TRIPS […]
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  • Turkey launches safeguard investigation on grinding balls and similar articles for mills October 13, 2021
    On 13 October 2021, Turkey notified the WTO’s Committee on Safeguards that it initiated on 9 October 2021 a safeguard investigation on grinding balls and similar articles for mills.
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  • Trade Policy Review: Republic of Korea October 13, 2021
    The eighth review of the trade policies and practices of the Republic of Korea takes place on 13 and 15 October 2021. The basis for the review is a report by the WTO Secretariat and a report by the Government of the Republic of Korea.
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  • WTO briefs members and observers on COVID-19 related initiatives and analysis October 12, 2021
    Over 180 representatives from 111 members and observers participated on 12 October in a virtual information session on the WTO Secretariat’s work to support equitable access to COVID-19 vaccines.
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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