Short answer: Trade.gov describes five export payment methods: cash in advance, letters of credit, documentary collections, open account and consignment. They shift risk between buyer and seller. Cash in advance protects the seller but strains the buyer's cash flow; open account favours the importer. Which terms a maker accepts is for the written quote.
Not legal, customs or tax advice. General information from public pages read on 2026-11-13; confirm with the authority, your customs broker or a lawyer.
Five methods
| Method | What the source says | Source |
|---|---|---|
| Cash in advance | The seller is paid before ownership of the goods transfers and avoids credit risk; wire transfers and credit cards are most common; buyers find it least attractive because of cash flow | [1] |
| Letter of credit | The buyer's bank commits to pay once the stated terms and documents are verified; the buyer pays the bank for this; suits cases where buyer credit information is hard to get | [1] |
| Documentary collection | The seller's bank sends documents through the buyer's bank and the buyer pays to receive them; there is no verification process and limited recourse if the buyer does not pay; generally cheaper than a letter of credit | [1] |
| Open account | Goods ship before payment, typically due in 30, 60 or 90 days; favours the importer and is one of the highest-risk options for sellers | [1] |
| Consignment | The foreign distributor pays only after selling the goods and the seller keeps title until then; described as very risky because payment is not assured | [1] |
How a letter of credit is built
| Party | Role | Source |
|---|---|---|
| Applicant | Usually the buyer, who asks the bank to issue the credit | [2] |
| Beneficiary | Usually the seller, who is paid under the credit | [2] |
| Issuing bank | Issues the credit and promises to pay on compliant documents | [2] |
| Advising bank | Informs the beneficiary of the credit and any amendments | [2] |
| Confirming bank | Adds its own promise to pay, for a fee | [2] |
Wikipedia adds that banks deal with documents rather than the goods, that most letters of credit follow the ICC rules UCP 600, and that banks charge a fee and often require collateral for a letter of credit [2].
Questions for your written quote
- [ ] Which payment methods are acceptable for a first order and for repeat orders? (general practice)
- [ ] Is any amount due before production starts, and what does it cover? (general practice)
- [ ] If a letter of credit is used, which documents must match and who bears the bank charges? [2]
- [ ] What happens to the balance if the goods are rejected at inspection? (general practice)
- [ ] In which currency is the invoice issued? (general practice)
Document names are on the import documents overview, proforma invoice and commercial invoice. This page states no terms for any maker; terms are in the written quote.
Questions answered
Which payment method favours the importer?
Trade.gov says open account, where goods ship before payment and payment is typically due in 30, 60 or 90 days, favours the importer.
Do banks check the goods under a letter of credit?
Wikipedia says banks deal with documents and are generally not expected to verify the quality or quantity of the goods.
Where are payment terms confirmed?
In the written quote and purchase order; this page does not state terms for any maker.
Sources
| No. | Source page | Publisher | Fetched |
|---|---|---|---|
| [1] | Methods of payment (Trade Finance Guide) | International Trade Administration, trade.gov | 2026-11-13 |
| [2] | Letter of credit | Wikipedia | 2026-11-13 |
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As of 2026-11-13. General information, not legal, customs or tax advice. Wording is paraphrased from the pages linked above; your written quote and contract govern. Examples use invented numbers unless a source is named.