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  • Payment: credit policy

     
     

    Exporters must decide for themselves which payment conditions to accept. They must assess the financial status of their buyers and act accordingly. Some information can be obtained from bank references that indicate a client's creditworthiness. Although such reports are useful, they cannot provide all the desired information nor do they place any responsibility on the bank that issues them. Exporters using borrowed working capital are usually subject to stringent conditions concerning the buyers they can sell to, and on what payment conditions.

    When entering into contracts and deciding on payment terms, sellers should investigate the identity of their buyers. International trading groups often work through foreign and local subsidiaries whose commitments are not necessarily guaranteed by the parent firm, even though they may trade under the same or similar names. When in doubt a seller can demand a guarantee from the parent firm that it accepts responsibility for the contracts with a given subsidiary.

    In some countries the monetary authorities dictate payment policy for exports, for instance by insisting that all exports must be covered by letters of credit to avoid possible loss of foreign exchange. This kind of blanket regulation results in some of the worlds largest corporations with impeccable credentials being asked to establish L/Cs. Many buyers simply refuse to establish letters of credit, and those that do establish them calculate the cost and inconvenience involved. Ultimately therefore it is the grower who pays for such bureaucratic attitudes.

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