– Exchange rates, the choice of which along with its level, the interest rate and currency exchange rate depends on the degree of efficiency of the transaction;
– The currency of payment, which must be repaid the obligation of the importer (or borrower); mismatch of currency rates and currency of payment – the simplest method of exchange risk insurance;
– Payment terms – an important element of foreign trade transactions. Among them are distinguished: cash payments, payments to a loan, a loan with an option (the right to choose) cash payment.
By cash international settlements are settlements in the period from the date of readiness of the exported goods to the transfer of documents of the importer.
Provision of credit has a definite influence on the conditions of international payments. If his calculations are carried out after the international transfer of goods in the ownership of the importer, exporter that lends it’s usually in the form of issuing a bill. If the importer pays for goods in advance, he credits the exporter.
Loan with an option for cash payment, if the importer, exercise the right of deferral of payment for goods purchased, he is deprived of discounts offered by cash payment.
5.3. The main forms of international settlements
To link the opposing interests of counterparties in the international economic organizations and their payment relationship apply various forms of payment.
The choice of methods of payment depends on:
– Type of product;
– Availability of credit agreement;
– The solvency and reputation of counterparties for foreign economic transactions.
The contract specifies the conditions and methods of payment.
– The collection form of payment – the client's order to the bank on receipt of payment from the importer of goods and services and placement of these funds to the exporter's bank. Banks perform collection operations, using the instructions received from the exporter in accordance with the Uniform Rules for Collections.
– Letter of credit – an agreement on the obligation of the bank at the request of the customer to pay for the documents, accept, or (negotiate) a bill in favor of a third person (beneficiary) to whom a letter of credit.
The procedure for this form of payment is regulated by the Uniform Customs and Practice for Documentary Credits. The letter of credit (especially irrevocable and confirmed) to a greater extent than the collection ensures timely payment.