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T/T MEANS TELEGRAPHIC TRANSFER, OR SIMPLY WIRE TRANSFER. IT'S THE SIMPLEST AND EASIEST PAYMENT METHOD TO USE. T/T PAYMENT IN ADVANCE IS USUALLY USED WHEN THE SAMPLE AND SMALL QUANTITY SHIPMENTS ARE TRANSPORTED BY AIR. THE REASON WHY IS THAT THE DOCUMENTS LIKE AIRWAYBILL, COMMMERCIAL INVOICE AND PACKING LIST WILL BE SENT TO YOU ALONG WITH THE SHIPMENT BY THE SAME PLANE. AS SOON AS THE SHIPMENT ARRIVES, YOU CAN CLEAR THE CUSTOMS AND PICK UP THE GOODS WITH THE DOCUMENTS. AS IT'S ACKNOWLEDGED, T/T PAYMENT IN ADVANCE PRESENTS RISK TO THE IMPORTER IF THE SUPPLIER IS NOT AN HONEST ONE.
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An irrevocable Letter of Credit (L/C) is also an often payment method. It is often referred to an L/C. Letters of Credit are formal payment methods that offer a lot of protection to the parties. It is a letter written by the importer's bank to the exporter. It verifies that the payment will be guaranteed when the bank is presented with concrete documents (bill of lading, and freight documents). Most letters of credit are irrevocable. A letter of credit usually include applicant (you, the importer), beneficiary (our, I exporter) bank, negotiating bank, specification and quantity of the goods, amount of money, loading port and destination port, shipment date, validity date of L/C, terms and conditions agreed by both the importer and seller, and the documents required by the importers (bill of lading, commercial invoice, packing list, insurance certificate, inspection, etc.). |
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1)The importer applies to open the L/C to my principal manufacturer/seller through a bank who can open the L/C in your country.2) The opening bank will inform the seller's bank that the L/C has been sent.3) The seller's bank will inform us that the LC has been established. 4) The seller will check all the terms and conditions listed in the LC. If all the terms and conditions are acceptable, the seller will arrange the shipment within the specified time in the LC. 5) After the goods are loaded into the ship without any damage, the ship agent will issue the clean bill of lading to the seller. 6) The seller will submit the clean bill of lading and other relevant documents to the seller's bank to gather the payment. Only with the clean bill of lading can you claim the ownership of the goods.7) The seller's bank will send the clean bill of lading and relevant documents to your bank (the opening bank). 8) The opening bank will inform the buyer that all documents are received. 9) The buyer will go to the bank to make the payment to get the clean bill of lading and relevant documents. 10) With all the documents, the buyer can clear the import customs and pick up the goods after the goods arrive on the destination sea port. |
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D/P (DOCUMENT AGAINST PAYMENT) |
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The exporter makes shipment and send the shipping documents to the importer's bank for collection. The seller's bank sends the shipping documents along with a collection letter to the importer's bank, who then sends a collection notice to the importer. The importer makes payment upon receiving the notice, and the only after payment does the importer receive the original shipping documents with which you take the physical possession of the goods. The major advantage of the use of cash against documents payment is the low cost, versus using the letter of credit. But this is offset by the risk that the importer will for some reason reject the documents. Since the cargo would already be loaded (to generate the documents), we have little recourse against the importer in cases of non-payment. So, a payment against documents arrangement involves high level of trust between the exporter and the importer. |
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