| Method |
Goods Available |
~Time of Payment |
Risk to Exporter |
Risk to Importer |
| Cash in Advance |
After Payment |
Before Shipment |
Very Low |
Maximum - Relies on exporter to ship goods as ordered |
Letter of credit
*Confirmed
*Unconfirmed
(Advised) |
After Payment |
When documents are available at shipment |
Very Low |
Assured of quantity and quality of shipment if inspection report is required |
| Documentary Collection Sight Draft Documents against Payment |
After Payment |
On presentation or draft to importer |
If draft unpaid, goods must be returned or disposed of, usually at loss |
Assured of quantity, also quality, if goods are inspected before shipment |
| Documentary Collection Time Draft Documents against Acceptance |
Before Payment |
On maturity of draft |
Relies on importer to pay draft |
Minimal - Can check shipment for quantity and quality before payment |
| Cosignment |
Before payment, exporter retains title until goods are sold or used |
After use; inventory and warehousing cost to exporter |
Substantial risk unless through foreign branch of subsidiary |
Very Low |
| Open Account |
Before payment |
As agreed |
Relies on importer to pay account as agreed -- complete risk |
Very Low |
