Payment for exports refers to the process of receiving payment from a foreign buyer for goods or services that have been exported. The payment process for exports can be complex and involves various risks, including currency exchange rate fluctuations, non-payment, and fraud. There are several methods of payment that can be used for exports, including: Advance Payment: This is where the buyer pays for the goods or services in advance, before they are shipped or delivered. This method is the most secure for the exporter, but it may not be acceptable to the buyer who may not want to bear the risk of paying in advance. Letters of Credit: This is a guarantee issued by a bank on behalf of the buyer that the payment will be made to the exporter once the goods or services have been delivered and the required documentation is provided. Letters of credit provide a secure method of payment for the exporter as long as all conditions of the letter of credit are met. Documentary Collections: This is a process where the exporter ships the goods to the buyer and provides the shipping documents to their bank. The bank then sends the documents to the buyer's bank, who will release the documents to the buyer once payment has been made. Open Account: This is where the exporter ships the goods to the buyer and allows the buyer to pay at a later date, typically 30-90 days after the shipment. This method is the least secure for the exporter as they may not receive payment if the buyer defaults. It is important for exporters to carefully consider their payment options and to understand the risks associated with each method. Exporters may also want to consider using the services of a trade finance professional or export credit agency to help mitigate risks and ensure timely payment.

1. International Logistics
13
Team
Harender Singh
PRN099
Indrajeet Hulyalkar
PRN100
Ashwani Kumar
PRN088
Ruchir Mishra
PRN131
Mayank Kumar
PRN114
& Export Promotion Schemes
Payments for Exports

2. Introduction to Payment Methods
To sell internationally, it's critical to offer appropriate payment methods that are safe and have favourable terms for
both the buyer (importer) and the seller (exporter) as there are certain risks involved in international trade.
There are 5 types of payment methods:
Payment Method Pros Cons
Cash in Advance
Buyer: No effect.
Seller: Gets paid before goods are received.
Buyer: Risk of not receiving shipment.
Seller: No way to compete in the market, all
competitors have this opportunity.
Letter of Credit
Buyer: Customizable payment terms and Payment only
after shipment is received.
Seller: Customizable payment terms Sale is secured by
the Buyer's bank. (low risk)
Buyer: Most expensive payment method and Currency
risk impacts the payment heavily.
Seller: Strict documentation requirements
Documentary Collection
Buyer: Payment is made once the goods are delivered.
Seller: Seller retains ownership of goods until payment
is made.
Buyer: Relies on the seller to deliver the goods as
specified. Payment is made before shipment is checked.
Seller: No guarantee
Cancellation risk and If the buyer cannot pay, seller is
then required to pay the return shipment.
Open Account Terms
Buyer: Payment not due until good received.
Seller: Increases sales.
Buyer: no effect.
Seller: No guarantee that the payment can be received,
and cancellations can happen at any time.
Consignment and Trade
Finance
Buyer: Payment is received only after the goods are
sold.
Seller: Depending which country the good are stored,
this could be a cost-saving measure.
Buyer: Relies on good faith by the seller.
Seller: Delays payment.

3. 1. Cash in Advance
Wire transfers and credit cards are the most used cash-in-advance options available to exporters. With the
advancement of the Internet, escrow services are becoming another cash-in-advance option for small export
transactions.
Escrow Service
When to Use Cash-In-Advance
With cash-in-advance payment terms, an exporter can avoid credit risk because payment is received before the
ownership of the goods is transferred.
For international sales,
Some factors that may make the cash-in-advance option more appropriate:
 The importer is a new customer and/or has a less-established operating history.
 The importer's creditworthiness is doubtful, unsatisfactory or unverifiable.
 The political and commercial risks of the importer's home county are very high.
 The exporter's product is unique, not available elsewhere, or in heavy demand.
 The exporter operates an internet-based business where the acceptance of credit
card payments is a standard way of conducting business transactions.
Accredited with an “A” Rating by
the BBB
Escrow Agent
Seller
Buyer
2. Transfer Asset

4. 2. Letters of Credit (LCs)
An LC is a commitment by a bank on behalf of the buyer that payment will be made to exporter, provided that the
terms and conditions stated in the LC have been met, as verified through presentation of all required documents.
One of the most secure instruments
available to international traders
Benefits to
The exporter
Offer reasonable
payment terms
Guarantee of
Payment
High Certainty of payment
When LC is useful ?
How LC works ?
1. Importer applies to
their bank to open
letter of credit
2. Importer’s bank
draft the Letter of
Credit and transmit it
to exporter’s bank
Exporter’s bank reviews
and approves the LCs
and send it to exporter
3. Exporter ships the
goods and submits
the required
document to their
bank
4. Exporter Bank check
the document for
compliance
Exporter Bank submits
the complying
document to importer’s
bank
5. Exporter Bank
release payment to
exporter’s bank
Importer bank release
documents to claim the
goods
1 2 3 4 5
When reliable credit information about a foreign buyer is difficult to obtain,
but the exporter is satisfied with the creditworthiness of the buyer’s foreign bank
An LC also protects the buyer since no payment obligation arises until the goods
have been shipped as promised.

5. 3. Documentary Collection
Documentary Collection is a transaction whereby the exporter entrusts the collection of the payment for a sale to its
bank (remitting bank), which sends the documents that its buyer needs to the importer’s bank (collecting bank), with
instructions to release the documents to the buyer for payment. Funds are received from the importer and remitted to
the exporter through the banks involved in the collection in exchange for those documents.
Typical Simplified D/C Transaction Flow
1 2 3 4 5 6 7
Exporter ships the
goods to the
importer and
receives the
documents in
exchange
Exporter presents
the documents
with instructions for
obtaining payment
to the bank
Exporter's remitting
bank sends the
documents to the
importer's
collecting bank
The importer uses
the documents to
obtain the goods
and to clear them
at customs
Once the collecting
bank receives
payment, it
forwards the
proceeds to the
remitting bank
The remitting
bank credits
Exporter's account
The collecting bank
releases the
documents to the
importer on receipt
of payment of
acceptance of the
draft
When to Use Documentary Collections Documents required from Importer
An open account sale is considered too risky, and an LC
is unacceptable to the importer
Exporter is confident that the importing country is
politically and economically stable
Exporter and importer have a well-established
relationship.
Commercial
Invoice
Packing
List
Certificate of
Origin
Bill of Landing or
Airway Bill

6. 4. Open Account Transaction
Methods of Payment in International Trade
 An open account transaction in international trade is a sale where the goods are shipped and delivered before
payment is due, which is typically in 30 or 60 days.
 This option is advantageous to the importer in terms of cash flow and cost, but it is a risky option for an exporter.
 Open account terms will undoubtedly boost export competitiveness, exporters should carefully consider the
political, economic, and commercial risks.
Export Working
Capital Financing
• Exporters who lack
sufficient funds to extend
open accounts to
potential international
customers.
• Post that there is need for
export working capital
financing that covers the
entire cash cycle.
Export
Factoring
• Factoring in international
trade is the discounting of
short-term receivables up
to 180 days.
• The exporter transfers
title to their short-term
foreign accounts
receivable to a factoring
house.
Government-
Guaranteed Export
Working Capital
Programs
• The U.S. Small Business
Administration and the
U.S. Export-Import Bank
offer programs.
• These program guarantee
export working capital
funds granted by
participating lenders to
U.S. exporters.

7. 5. Consignment
Consignment in international trade is a variation of open account in which payment is sent to the exporter only
after the goods have been sold by the foreign distributor to the end customer.
Consignment helps exporters become more competitive based on better availability and faster delivery of goods.
Payment Risk Document
Least
Secure
Most
Secure
Exporter
Importer
Cash in
Advance
Letters of
Credit
Documentary
Collection Open
Account Consignment
Consignment Open
Account
Documentary
Collection
Letters of
Credit
Cash in
Advance
During or before contract negotiations, you should consider which
method in the figure is mutually desirable for you and your customer.

8. Export Promotion
Scheme
Merchandise Exports
from India Scheme
(MEIS Scheme)
Other Schemes:
• Duty Drawback Scheme (DBK Scheme)
• Scheme for Rebate on State and
Central Taxes and Levies (RoSCTL
Scheme)
• Export Promotion Capital Goods
Scheme (EPCG Scheme)
• EOU/EHTP/STP/BTP Schemes
• GST Refund for Exporters / LUT Bond
facility / 0.1% GST benefit for Merchant
Exporters.
• Transport and Marketing Assistance
Scheme (TMA Scheme)
• Market Access Initiative (MAI Scheme)
• Towns of Export Excellence (TEE)
• Interest Equalization scheme (IES)
• NIRVIK Scheme
Exports play a major role in the economic development of a country. More the exports more will be the
inward foreign remittance, more jobs & employment, lower current account deficit, and hence greater
overall economic growth. Therefore, India needs to increase its export performance to grow quickly.
Important Schemes in Indian Market
Rebate of Duties &
Taxes on Export
Products (RoDTEP
Scheme)
Service Export from
India Scheme (SEIS
Scheme)
Advance Authorization
Scheme (AAS)
Duty-free Import
Authorization (DFIA
Scheme)

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Thanks
Do you have any questions?
harender.singh@siom.in
+91 9812969049