For the exporter, Cash in advance is, of course, the most desirable method of all since the shipper is relieved of collection problems and has immediate use of the money. On the other hand, unless it is a very small order the foreign buyer may object to these terms because it ties up capital until the merchandise is received and resold. Buyers also may have reservations as to whether or not they will actually receive the merchandise or protect their capital. This method of payment can be used when the buyer has not previously established credit arrangements. This procedure allows the seller to send the cost of the equipment and all accrued charges collect to the buyer and the merchandise is released to the buyer only when a certified check of all due charges is issued to the seller.
Payment is made at a later pre-arranged time.
In addition, the exporter's capital is tied up while the order is in transit until payment is received. It is standard practice, in many countries, to wait until the merchandise is received, thus delaying payment even longer. In consignment sales, the same basic procedure is followed as in the United States. The material is shipped and consiged to a foreign concern on a deferred payment basis until they have sold the products and are able to reimburse the seller. The countries in which sales of this nature are contemplated should be examined closely for economic and political stability.