India has become the second largest export destination after the United States and growing with a good successful percentage as well!
Mode of Payment in Export Business with Foreign Buyers:
(A) T/T : Telegraphic Transfer or cash Advance. It is the safest mode of payment as we receive the payment in advance from our consignee.You have to sent the full set of original documents to the buyer as per agreed term only.
* This mode of payment is mostly useful for starting relationship with a new client/consignee to avoid risk. In this mode of payment 100% risk is buyers only.
(B) L/C : at Sight: L/C means letter of credit. It is a guarantee, given by the buyer's bank, that they will pay for the goods exported, provided that the exporter can provide a given set of documents in accordance with clauses specified in the L/C and in a timely manner. It is also a safest mode as if the buyer does not pay the amount, their bank have to pay the amount being the guarantor.
* If there would be any discrepancy in the documents, buyer's bank can highlight that and they have authority to deduct the some amount that should be mention in the discrepancy clause in the L/c.
a) L/c can be according to the days term which means the payment will be received after 45/60/90 days of bill of lading date. But the payment is secure as the bank is the guarantor.
(C) CAD : Cash Against Documents/Bill of Exchange/DP,:You have to send the documents (including the bill of lading necessary to claim the goods at the foreign port)to the buyer through your bank and they will forward those documents to a bank in the buyer's country, along with instructions on how to collect the money from the buyer.
# When the foreign bank receives the documents, they will contact the buyer and provide documents to the buyer only when the buyer pays.