1. There are three payment methods when doing foreign trade: L/C (Letter of Credit), T/T (Telegraphic Transfer), and D/P (Document against Payment). Among them, L/C is used the most, followed by T/T, and D/P is less used.

2. Explanation of terms

1. L/C letter of credit is currently the most commonly used payment method in international trade. It is an S/C that guarantees payment by a bank. . As long as you follow the terms of this contract one by one and provide the corresponding documents to the bank, it must pay you the money. Therefore, it should be said that letter of credit is a very safe payment method in theory. , a reliable letter of credit can even be used as collateral to obtain a loan from a bank, providing convenience to the seller, which is a "letter of credit packaged loan". However, in actual operation, letters of credit are sometimes not so safe. The reason is that there may be soft clauses in the letter of credit that are difficult for you to comply with, causing artificial discrepancies.

2. The operation of wire transfer T/T is very simple. It can be divided into front T/T and back T/T. Front T/T means that after the contract is signed, a part of the deposit is paid first. Generally, Both are 30%. After production is completed, payment will be notified, the balance will be paid, and then the goods will be shipped and a full set of documents will be delivered.

3D/P D/P is a method of delivering documents under the documentary collection method. It means that the exporter’s D/P is conditional on the importer’s payment, that is, the importer can only make payment to the The collecting bank collects the documents. It is divided into documents at sight (D/PatSight), which means that the exporter issues a sight draft and the collecting bank prompts it to the importer. The importer must pay after seeing the draft. When the payment is paid, the importer obtains the shipping documents.

3. Comparison between T/T and L/C

1. Comparing T/T and L/C, the operation is very simple and the flexibility is relatively large. For example, if the delivery time is tight, Changing packaging, etc., it doesn't matter as long as the customer agrees. If it is a letter of credit, the letter of credit must be modified, otherwise there will be discrepancies and the customer will refuse to pay.

2. The cost of T/T is lower than L/C. Bank deductions are relatively small, usually dozens of dollars. Letters of credit can sometimes amount to several hundred dollars. Therefore, some factories offer a lower price for T/T than L/C. But generally speaking, if the documents are well prepared, a letter of credit is more reliable than a T/T, and the payment is guaranteed by the bank. With the letter of credit, you can go to the bank to package a loan, and the financial pressure is very small. But in countries with poor bank credit or strict foreign exchange controls, letters of credit are very risky.

3. T/T and L/C each have their own advantages and disadvantages. If T/T and L/C are combined, it is quite safe, 30% T/T, Thebalance L/C.

Extended information

Foreign trade settlement, or collection, as the name suggests, is foreign trade collection, which can be simply divided into two categories.

1. Online payment, payment can be completed directly online, fast and convenient, guaranteed by a third-party payment company, payment can be refused, and consumer interests are protected. On the other hand, the relative risk increases, mainly for small-amount collections. Mainly used for online earning and foreign trade retail small amount collection.

① Electronic account category: The main payment is electronic account to electronic account mode (similar to Alipay and Alipay transactions, both parties need to register and have accounts), mainly including Paypal, MoneyBookers, Ap, Googlecheckout, LR, etc. wait.

②International credit card payment: It mainly uses a third-party credit card payment company to provide a payment channel to achieve the purpose of collection. It is a payment++ to payment++ model (similar to online banking payment), mainly including ChronoPay , IPS, PayEase, 95epay, ECPSS Gspay, online banking, Motopay, 2checkout, etc.

2. Bank remittance mode, mainly through bank transfer and remittance companies. It is convenient for large-amount payments and safe. It is not suitable for small-amount collections and has high fees. Once the funds are sent, they are irrevocable and there is no guarantee for consumers. Mainly used for wholesale foreign trade collection.

The main ones include wire transfer (TT, TelegraphicTransfer), letter of credit (L/C), Western Union (WU, Western Union, international express remittance company), MoneyGram (MG, MoneyGram, global rapid remittance business), etc.

Reference materials Baidu Encyclopedia Foreign Trade Settlement