Methods of Payment in International Trade for Export & Import (2020)

Summary

In this educational video, Billy from Training Resources introduces various payment methods in international trade, including open account, advance payment, documentary collection, and documentary credit. With over 25 years of experience, Billy and his assistant, Sling, aim to share their expertise through online videos, starting with an in-depth look at the open account method where the importer receives goods before making payment, highlighting the trust required between trading parties.

Takeaways

• 😀 Billy from Training Resources has over 25 years of experience in training on letters of credit, international trade, and shipping documents.
• 🌐 Training Resources was established in 1994, and since then, Billy has trained staff from over 2,000 companies across Malaysia, Singapore, Indonesia, and other countries.
• 🎥 Billy and his assistant, Sling, are now creating online content, including videos, to share their expertise with the international community.
• 💡 The first video topic is 'Methods of Payment in International Trade', which is crucial for understanding the financial aspects of global transactions.
• 📈 There are four primary methods of payment in international trade: Open Account, Advance Payment, Documentary Collection, and Documentary Credit.
• 🔄 Open Account involves the exporter shipping goods first and then the importer making payment based on the sales contract.
• ✅ Advance Payment requires the importer to pay the exporter before the goods are shipped, reducing the exporter's risk.
• 🤝 Trust is a significant factor in both Open Account and Advance Payment methods, as one party must rely on the other to fulfill their part of the agreement.
• 🏦 When trust is lacking between exporter and importer, banks step in with Documentary Collections and Documentary Credits to facilitate secure transactions.
• 📑 Documentary Collections involve the bank releasing documents to the importer only after payment (DP) or acceptance (DA).
• 💼 The next video will provide an overview of how a Letter of Credit (LC) works, which is a key financial instrument in international trade.

Q & A

What is the primary focus of Training Resources?

Training Resources specializes in training on letters of credit, international trade, and shipping documents.

In what year was Training Resources established?

Training Resources was established in the year 1994.

What was Billy's role at the international bank in Malaysia?

Billy was the head of the training faculty at an international bank in Malaysia.

How many companies has Billy trained staff from across various countries?

Billy has trained staff from more than 2,000 companies from Malaysia, Singapore, Indonesia, and other countries.

What is the first video topic that will be presented by Billy's assistant, Sling?

The first video topic is 'Methods of Payment in International Trade'.

What are the four methods of payment discussed in the script?

The four methods of payment discussed are Open Account, Advance Payment, Documentary Collection, and Documentary Credit.

What is the risk for the exporter in the Open Account method of payment?

In the Open Account method, the risk for the exporter is that they rely completely on the importer to pay as agreed per the sales contract.

What is the risk for the importer in the Advance Payment method of payment?

In the Advance Payment method, the risk for the importer is that they have to rely completely on the exporter to ship out the goods as ordered.

Why might banks be involved in international trade transactions?

Banks might be involved to resolve issues when there is no trust between the exporter and importer, by providing methods like Documentary Collections and Documentary Credit.

What is the difference between DP and DA in Documentary Collection?

DP (Documents against Payment) requires payment before the documents are released, while DA (Documents against Acceptance) allows the release of documents against a time draft which the importer accepts.

What will be the focus of the next video mentioned in the script?

The next video will provide an overview of how a Letter of Credit (LC) works.