Explain in detail the various terms of payment in international trade.
In international trade, various terms of payment are used to govern the financial aspects of transactions between buyers and sellers across different countries. These terms help define when and how payment should be made and provide a framework for managing the associated risks. Here are some of the key terms of payment in international trade:
1. Cash in Advance (CIA): In this method, the buyer pays for the goods or services before they are shipped. It provides a high level of security for the seller but can be a barrier for the buyer as they bear all the financial risk.
2. Open Account: In an open account arrangement, the seller ships the goods and invoices the buyer, who is expected to make payment at a later date. This places the onus of trust on the buyer and can be risky for the seller.
3. Letter of Credit (LC): LC is a widely used method that involves a bank guarantee. The buyer's bank issues a letter of credit, ensuring payment to the
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