There are four main methods by which an exporter can be paid for goods in an international sales transaction. In order of least to most risk for the exporter these are: pre-payment; payment by letters of credit; payment against documents; and payment on open account. A discussion of each of these methods of payments follows together with some observations regarding the way in which exporters can minimise risk of non-payment in each case.

PRE-PAYMENT

Pre-payment occurs when the exporter is paid for the goods before they leave the exporter's place of business. Pre-payment usually occurs electronically with the purchaser arranging with their bank to transfer the funds to the account specified by the exporter in the contract of sale. While most exporters would prefer this means of payment, it is difficult to get a buyer to agree unless there is a long-established relationship between the parties and a sufficient degree of trust to allow any problems with conformity of the goods or their transport to be resolved in an amicable fashion.

LETTERS OF CREDIT

Payment by letter of credit is perhaps the most frequently used method of payment in international trade. A 2001–2002 survey of UK exporters revealed the extent of use of letters of credit for export transactions between UK exporters and buyers in third countries. For importers in Asia, Africa and the Middle East, letters of credit represented around 50% of all payment types.