Month: March 2010

Payment terms are the requirements both parties agree to in order to finish the payment process. Generally, exporter wants to be paid before releasing products, and importer wants to receive merchandise before making payment. Learn export import online with us and have a deep understanding of international trade payment methods.   Choosing an appropriate payment method that is advantageous for both the exporter and importer is crucial to increasing business at an international level. In international trade, different payment methods and terms are available that both parties can select according to their convenience. 

Different Types of Payment methods- 

1 Cash in Advance- 

In simple terms, cash with advanced is a method where the payment is received before goods ownership is transferred. It is also called cash on order. Options for payment include wire transfers, international cheques, and payments by debit cards.  It is one of the safest methods of payment for the exporters, while it is the least appealing for the importers. Cash in Advance poses a great deal of risk to the importers, as the exporter remains in possession of the goods and has received payment. 

2 Letter of Credit- 

In this type of payment, a bank acts as a principal on behalf of the importer and promises to pay an exporter if all terms of the contract have been met. It is one of the safest and most common forms of payment in international trade.  This type of document also protects the buyer since the buyer is not obligated to pay until the goods have been shipped. LCs are commonly used when there is a new and untested trading relationship between the importer and exporter. 

3 Open Account- 

The importer receives the goods on credit and pays them later. Open accounts are terms of payment in which the goods are shipped before payment is due. Usually, payment is due in 30, 60, or 90 days.  Taking delivery of goods without paying for them is clearly in the favor of importers, but it entails a higher risk for exporters since there is the risk of non-payment or bankruptcy. 

4 Documentary Collection- 

Exporters instruct their banks to send the documents related to the sale to the buyer’s bank with a request that the documents be presented to the buyer as a request for payment. They also specify when and under what conditions the documents can be released to the buyer.  A documentary collection is a kind of payment that occurs between two banks acting on behalf of both parties. 

5 Consignment- 

 The consignment payment in international trade procedure in which payment to the exporter is sent after the goods are sold to the customers by the importers. The payment method works like an open account.   Exporters who use this payment mode are at risk since they are not guaranteed to receive payment. The exporter retains ownership of the goods while they are in the possession of the importer. 

Conclusion-  

It’s up to the two parties to negotiate and agree on these critical trade terms, some payment terms will be more favourable to the exporter and some to the importer. Exporters and importers need to understand the different payment terms that are available and the costs & risks attached to each.  To understand more about payment terms, join import export management course. You can also attend our live free webinar and start your import export business in just 60 days. Click the link below to attend the webinar.   https://chat.whatsapp.com/Bqz4SWH55nSGtKj3GnJAC8 Do give us a visit 

E-commerce has a huge impact on every trade nowadays, but when E-commerce initially came into existence, it was met with a rebellion. Scepticism was at its peak when E-commerce first came into the picture. Even EXPORT IMPORT is unimaginable without E-commerce. E-commerce has now become an inseparable part of any business. For most of us, it’s hard to imagine modern life without E-Commerce. It would not only be inconvenient but also much more complicated.   Lets first define E-commerce. E-commerce, also known as Electronic commerce or Internet commerce, deals with buying and selling goods and/or services using the internet, and the transfer of money or data to execute these transactions.   Micheal Aldrich, in 1979, introduced E-Commerce. He is also considered as founder or inventor of E-Commerce. Micheal connected a transaction-processing computer with a modified TV Through a Telephone connection. To secure data, Micheal connected these devices. E-commerce affects the Export business in a lot of ways. E-commerce can elevate export by highlighting the export product’s quality or can state the ugly truth in a harsh way that adversely affects the exporter.   Before jumping to how E-commerce affects export business, let’s first see the different types of E-commerce. There are about 6 established types of E-commerce, they are:

• Business-to-Consumer (B2C):

B2C is one of the most popular sales models of E-commerce. The meaning of B2C is the transaction made between a business and a consumer, as the name suggests. An example of this type of E-commerce would be when you buy clothes from an online retailer.

• Business-to-Business (B2B):

B2B E-commerce, unlike B2C, includes sales made between businesses, that is trade between a manufacturer and a wholesaler. Consumers are not involved in this type of commerce. B2B, more often than not, focuses on the repackaging of products that are sold to customers or sales of raw materials.

• Consumer-to-Consumer (C2C):

C2C is one of the earliest forms of E-commerce and it mostly deals with sales of product or services between customers. The best example of this would be UBER & OLA. The way it functions is it puts the car owner in touch with the people requiring its services.

• Customer-to-Business (C2B):

C2B is the exact opposite of what traditional E-commerce is all about, with individual customers offers their services for business buyers. This means that customers have special products or services that can be valuable to businesses. In this type of E-commerce, customers are not investing their capital in anything but the business organization investing in the individual or product.

• Business-to-Administration (B2A):

B2A encompasses the transaction between Businesses and Administration bodies. This type of commerce can be understood by an example of filing taxes. When you fill the form to pay tax online, which is paid to the Government, through a third party involved, is called a B2A transaction.

• Consumer-to-Administration (C2A):

Consumer-to-Administration type of E-commerce is similar to B2A, the only difference being a consumer directly offers services or sells products to a Government organization. The above example will fit perfectly when you remove the involvement of a third party in filing online tax to the government. 

nother example can be booking an appointment online at the hospital for a health check-up. E-Commerce serves every sector and affects every small to big businesses because of its ready involvement and ease of promoting any business. Many websites not only use E-commerce but runs effectively because of E-commerce.  E-commerce helps small and big businesses to reach out to a greater number of people which leads to the generation of greater profit. The impact of E-commerce can not be denied on any business but let’s look at how it specifically impacts Export Import Businesses.

• Small Business can reach out to Global Customers:

Adopting E-commerce can be a slow process for a small business but those who welcome it with open arms unlock a whole new realm of possibilities and opportunities. E-commerce is particularly useful for small business owners because it not only helps small businesses reach diverse customers all around the world but also poses a fair chance at competition.   

In India, E-commerce immensely helps promote small businesses, because the need to buy items within the economic range is always there but not a lot of people are aware of small businesses in the local market.  

• Huge offline businesses are turning to E-commerce:

Small and local businesses are mostly online which poses competition to established, big businessmen. They are forced to turn to E-commerce to promote their hereditary business. Big businesses, for their growth and expansion, need to promote their business online with the help of E-commerce.

• Increase in the E-commerce marketplaces:

Only a decade or two ago, a person living in India could not dream of wearing US fashion, unless that person visits the States. With the advent and growth of international E-commerce marketplaces like Alibaba and Amazon, this everyone who dares to dream is actually living that dream. These Giants have offered customers a broad range for selection of products and by delivering those products home, convenience is at par. Such can be some of the reasons for the success of E-commerce Giant Marketplaces. India has adopted a few policies to support and secure E-commerce. The National E-commerce Policy uses various strategies to promote Export through E-commerce.

• Introduction of E-commerce Policy under Logistics Policy:

 To promote the growth of E-commerce, the Indian Government introduced this policy under Logistics Policy. For all the shopping done online, it becomes necessary to have a physical platform for the products to be collected in one place.  Thus when Indian goods are Exported such infrastructure is built to promote Export. It is proposed that E-commerce will be separately handled under Logistics Policy. 

• Policies Supporting Courier Export:

According to the extant Courier Import and Export (Clearance) Regulations, 1998, the export is done by courier services and costs within 25 k INR, only is passed to use courier services. Packages costing beyond this range is exported through Cargo mode, which increases the expenses significantly.    

Indian Government proposed to extend this limit and make Indian e-commerce Export more attractive even for high-value packages export through courier mode.

• International Freight Carriers: 

The exporting body bears the cost of International Logistics. Such International Logistics providing companies may charge huge sum which might be unaffordable for small businesses, thus creating a difficult situation for small businesses to export. Private courier companies provide end to end delivery services that ensure sustainable and continuous export for small businesses. Indian Post bears the responsibility to negotiate for lower costs with International Freight Carriers.  The government is putting in efforts to promote and expand E-commerce in India. With India’s fast-growing business and convenience seeking youth, acceptance and spread of E-commerce is unstoppable.  Even the Exim Industry is making full use of E-commerce’ potential to increase trade exponentially in International Markets.     If you are interested in reading EXPORT IMPORT related blogs, click on the link below and enter the kingdom of EXIM BLOGS.   https://digitalexim.com/blog/   If you are inspired enough to actually learn to expand your business or start a business of your own, click the link below and be enlightened.   https://digitalexim.com/advanced-export-import-program/