Comprehension and Discussion Questions. 1. What should be done to alleviate the risk of payment difficulties?
1. What should be done to alleviate the risk of payment difficulties?
2. What is the alternative open to the exporter?
3. How would you arrange invoicing for your product services in foreign currencies?
4. Is it possible to minimize the risk in currency exchange?
5. What is the role of clearing banks to arrange a forward exchange contract?
6. What should you know before entering into currency commitments?
UNIT XV
Text I. EXPORT AND METHODS OF PAYMENT
Getting paid promptly for the goods or services you provide to a customer in the UK has its own problems. Before supplying your goods to a UK customer you will have to consider their standing, how much credit should be allowed, their reputation and track record for paying on time. Should problems arise the telephone is to hand and. If need be, you can jump into your car and meet the customer face to face to resolve the problem.
The logistics of dealing with someone on the other side of the Channel, or perhaps even the other side of the world, present much greater problems. Not only distance needs to be taken into account but also the fact that you may have to communicate in a foreign language, handling foreign currencies, while possibly coping with different standards and measurements. Furthermore, in some instances the countries involved may not be as economically or politically stable as your home market.
It is important at the outset, therefore, for you to negotiate the most secure method of payment you can, bearing in mind, of course, the need to remain competitive. Any exporter would prefer to be paid before sending the goods, whilst the importer would prefer not to pay until after he has sold them. An acceptable arrangement regarding the method of payment somewhere between the two will have to be agreed. Therefore, it is most important to be aware of the methods of payment you might encounter when selling abroad. In this way you can relate the risk involved to the standing of your buyer and the country he operates in. Basically there are four methods of payment which are listed below in order of preference:
1. Payment in Advance.
2. Payment by irrevocable Documentary Letter of Credit.
3. Payment by Documentary Collection (sometime called bills of Exchange).
4. Payment on Open Account.
There is also a fifth way which is by barter or countertrade. Where export sales are made conditional upon an undertaking to accept manufactured goods, raw materials or commodities from the overseas market in settlement. Although countertrade is gaining in importance, it is unlikely that the smaller exporter would become involved, particularly at the outset.
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Selection of the most appropriate method from the basic four mentioned above will depend on a variety of factors. These include the standing of the respective buyer, competitive pressures, country risk and the degree of security required by both parties. Let us now look at each method in more detail, to assist you in making the right selection for your company.
Vocabulary notes
promptly –немедленно
to bear in mind –помнить
irrevocable credit –безотзывный аккредитив
payment by collection –плата инкассо
to be aware of –знать
to encounter –встречать
undertaking –обязательство
competitive pressures –конкурентное давление
Comprehension and Discussion Questions
1. What should an exporter know when deciding to supply goods to a UK customer?
2. What facts should be taken into account when supplying goods to any country in the world?
3. Can you explain the position of an exporter and an importer in the problem of payment?
4. Is it important for an exporter to know the standing of the respective buyer?
5. What are the methods of payment?
6. Is counter trade important nowadays? What do you think of it?
Grammar Task:
Read through the text and find sentences with ing-forms, defining Gerund or Participle I. Translate the sentences.
Text II. PAYMENT IN ADVANCE
This is obviously the most attractive way to be paid, but it means that, in effect, the buyer is extending credit to the exporter. It therefore follows that is a somewhat unusual practice, unless the exporter is selling a unique product into a market where there is limited competition. In the case of large contracts where goods have to be specially made, it is sometimes possible to negotiate a percentage payment in advance. In these circumstances the buyer very often requires an “Advance Payment Guarantee”, to be given by the exporter’s bank. The bank will require security for the guarantee and will charge fee for the service. If the contract is not completed, then the guarantee will be called and the bank will look to the exporter for its money.
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If your advance payment takes the form of a cheque payable abroad, do remember that your bank will have to clear the cheque before they credit your account and this may take 21 days or more. Payment in advance is fine if you ensure you have clean money on your account unencumbered by an Advance Payment Guarantee.
Vocabulary notes
payment in advance –предоплата
obviously –очевидно
attractive –привлекательный
to negotiate –договариваться
to extend credit –предоставить кредит
circumstances –обстоятельства
to charge fee –требовать гонорар
to ensure –гарантировать
unencumbered –необременённый
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