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11 Cards in this Set
- Front
- Back
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The buyer pays the exporter up front.
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Advanced Payment
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The exporter receives payment after the product is delivered to the buyer.
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Open Account
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The exporter receives no payment until the product is resold.
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Consignment
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The export transaction is completed through an exchange of documents which authorizes payment and transfer of title.
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Documentary Collection (Sight Collections)
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A letter is issued by a bank at the buyer's request in favor of the exporter in which the payment has been conditionally guaranteed by the bank.
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Letters of Credit
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Advantages of Documentary Collections:
What are the advantages to the buyer (importer)? |
-Delays payment until receipt of documents
-Can be financed directly by seller through use of time drafts (Trade acceptance) -More convenient and less costly than L/Cs |
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Advantages of Documentary Collections:
What are the advantages to the seller (exporter)? |
-Retains title to goods until payment or acceptance
-More convenient and less costly than L/Cs |
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Advantages of Documentary Collections:
What are the risks to the seller? |
-Financial instability of buyer
-Underlying sales agreement can be cancelled -Country's political and economic instability |
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Advantages of Commercial Letter of Credits:
What are the advantages to the buyer (importer)? |
-Unless fraud, pays for what is ordered
-Delays payment until receipt of documents -KNows latest shipping date and can arrange distribution to customers -May obtain lower prices due to reduced credit risk |
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Advantages of Commercial Letter of Credits:
What are the advantages to the seller (exporter)? |
-Shifts commercial/political risk from buyer to buyer's bank
-Provides assured and prompt payment -Improve ability to obtain bank financing |
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Advantages of Commercial Letter of Credits:
What is the risk to the buyer? |
-Bank only deal in documents, not goods
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