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What are the differences and advantages and disadvantages of letter of credit, remittance and collection?

  Payment method is very important in international trade, to grasp the security of payment, we must grasp the advantages and disadvantages of various payment methods, then our common payment method is remittance。Letter of credit, collection, Western Union, etc。Below I will explain the advantages and disadvantages of these payment methods and the points to be aware of。


  There are three kinds of remittance: telegraphic transfer, mail transfer and bill transfer。

  Advantage: Convenience。快速。Flexible, the simplest, the least intermediate procedures, the most direct method。

  Disadvantages: business reputation, poor security。

  In the case of advance payment, there is a risk that the exporter will not deliver the goods to the importer;

  If payment is made after delivery, the exporter risks non-payment after delivery;

  Therefore, remittances are suitable for a small number of (affordable) transactions, and both buyers and sellers have a deep basis for cooperation。

  2.Letter of credit

What are the differences and advantages and disadvantages of letter of credit, remittance and collection?

  Benefits: Bank credit, more security。

  In useLetter of creditAt the time of settlement, the beneficiary (exporter) is guaranteed to receive the payment, especially in the case that the exporter knows less about the importer, the advantage of the letter of credit is more obvious for the importing country with foreign exchange controls。

  Disadvantages: the formalities are complicated and cumbersome, the document requirements are more strict, and the bank fees are higher。

  Documents review and other links are more technical, increase operating costs, but also occupy the buyer's funds, which involves at least four roles: letter of credit applicants。Issuing bank。Advising bank。Credit beneficiary。

  As the letter of credit is an indicative document, the relevant bank only deals with the characteristics of the document, so it is easy to produce fraud。


  Benefits: low cost, simple operation, buyers in the capital is more convenient, improve export competitiveness。

  Disadvantages: poor security and high risk。

  Since the exporter ships first, if the importer refuses to pay, even if the real right document is still in the hands of the exporter, the goods are stranded in the other port, backlog and shipped back to the domestic freight。The losses caused by the banks are not small。

  If the market changes, or the buyer goes out of business because of poor management, the importer may not need the goods, and the exporter will face the risk of not being paid。

  Although the operation of D/P and D/A is much simpler than that of a letter of credit, and the fees of the advising bank are less, the bank does not bear any risk and liability in the collection process。Entrusted collection conforms to the buyer and seller have a deep foundation of cooperation, there will be no non-payment situation。

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