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RISKS IN INTERNATIONAL PAYMENTS

International trade carries in it a lot of risks, with various kinds of frauds and deceptions that will cause damages to exporting enterprises. Exporters should stay cautious and choose a trustworthy partner as well as appropriate payment term.

For example, in 2022, 100 containers of cashew nuts worth USD twenty million exported to Italy under D/P term were subject to fraud and at risk of loss.

In 2023, the same situation happened to 5 containers of agricultural goods worth USD 500.000 exported to United Arab Emirates under the same term of payment.

Therefore, exporting enterprises must beware of and assess the specific risks of each payment term to pick the safe and suitable one.

Payment term

Risks

Telegraphic transfer

(TT)

Advanced TT

• No risk if payment is made at full before shipment.

TT after shipment

• Buyer makes payment after receiving goods. The assumption that buyer will pay is based on trust but there is no guarantee of payment.

Collection

Documents against payment (D/P)

• Buyer may refuse the documents and the shipments, thus making no payment to the exporters.

• In case of B/L consigned to the buyer or To bearer B/L, if documents are stolen during delivery, the shipment is considered loss since it is no longer under the ownership or control of the exporter.

• A dishonest collecting bank may refuse payment despite sufficient document presentation.

Documents against acceptance (D/A)

• The documents are delivered to the buyer as the buyer accepts to pay at a date in future. However, by payment date, the exporter may receive no payment despite that goods are released to the buyer.

L/C

L/C at sight – Usance L/C

• Bank will refuse payment if it finds any discrepancy in the presented documents.

• A dishonest issuing bank may falsely perceive discrepancy in the presented documents to delay/refuse payment.

Exporting enterprises should pay close attention to the following before choosing a payment term for their shipment:

✅DO research buyers carefully before enter any transaction.

✅DO choose trustworthy collecting banks and issuing banks with high credit rating.

✅DO choose the payment term with the least risk, such as Advanced TT (100%) or Letter of credit or a combination of both.

❌ DO NOT ship goods under To bearer B/L and/or Straight B/L.

A To order B/L is a good choice. It helps avoid the risk of shipment falsely received by bearer of the documents in case the documents are stolen/lost during delivery.

For further consultation and support, please contact ACB’s offices.