This can reduce one of the chronic frustrations associated with importing. Paying Your Supplier There are four basic options to consider. They are open account, documentary collection, letter of credit and cash in advance. Each has its benefits and risks. The seller absorbs the credit risk and goods are available to the buyer before payment.
Seller draws a draft on the buyer when the shipment is made.
Draft and supporting documents are presented by the seller to his bank who, acting as his agent, forwards the documents to the buyer's bank in the buyer's country. This works like a C.O.D. with payment going through the banking system. If a sight draft is used, the goods are available to the buyer after payment. If a time draft is used, the goods are available before payment. The buyer's bank substitutes its name and credit for the buyer's in order to facilitate payment when certain predetermined documents have been correctly and promptly presented to the bank.