Cash in advance / Cash with Order Placement / Pre-Payment
This is the safest method of payment for the exporter as he receives payment upon order placement. Keep in mind that the buyer has the highest risk in such a transaction as he has no surety that he will receive the goods as ordered.

Documentary Letters of Credit (L/C)
A Letter of Credit (L/C) is a written undertaking by a bank (the issuing bank), on the instructions of the buyer (the importer  = applicant), to pay the seller (the exporter = beneficiary) a stated amount, for his goods/services, once the seller has provided the required documents in strict compliance with all terms and conditions as stipulated in the Letter of Credit. A letter of credit cannot be amended or cancelled without the permission of the importer, issuing bank (importer's bank) and the beneficiary (exporter).
There are different types of L/C’s, the most commonly used being: Unconfirmed Irrevocable Letter of Credit and Confirmed Irrevocable Letter of Credit

Unconfirmed Irrevocable Letter of Credit
With an Irrevocable L/C the issuing bank commits itself to pay the beneficiary (exporter) upon complying with the terms and conditions as stipulated in the letter of credit, on a pre-determined date. However, due to political instability of some countries, with this type of L/C the buyer is still at risk, as the issuing bank can default on payment.

Confirmed Irrevocable Letter of Credit
Confirmed Letters of Credit are usually requested for countries of which the issuing bank is situated in a political and economic unstable country. This is the most secure L/C, as a bank, other than the issuing bank confirms that they will pay, even if the issuing bank does not transfer the funds.

Documentary Bank Collection
The International banking system is used to collect payment from the buyer, with the difference that the bank does not guarantee payment. Though cheaper than the L/C, this method is far less secure.
The exporter must trust that the buyer will accept the documents presented to his bank and pay as per agreed term.

Open Account
This is an inexpensive method of payment in which the product ordered is dispatch to the buyer without payment. The buyer then pays the exporter as per their agreement. The only role of the bank is to transfer the funds, upon instruction of the buyer.
One would consider Open Account when:
The buyer's country is politically and economically stable.
An establish business relationship exist between the seller and buyer.
Selling in a higly competitive market.
Selling to an overseas affiliated company.

We strongly recommend that the exporter contact the International Div. Of his commercial bank, for advice and assistance on selecting the most effective method of payment and other possible options, for overseas transactions.

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