Vocabulary notes

to be aware – сознавать, представлять

to anticipate – предусмотреть наперёд

likelihood – вероятность

to occur – происходит, случаться

to alleviate – облегчать

insurance – страховка

to avoid – избегать, уклоняться

wilder beasts – более дикие звери

to term – называть, квалифицировать

option – выбор

a forward exchange contract – предварительный контракт по обмену валют

currency borrowing facility – возможность обмена валюты

expenditure – трата, расход

to match – соотносить, сравнивать

receivable – получаемый

risk-reduction – уменьшение риска

available – доступный

to specify – конкретно определять

to ensure – убедиться

commitment – обязательство, договорённость

Comprehension and Discussion Questions

1. What should be done to alleviate the risk of payment difficulties?

2. What is the alternative open to the exporter?

3. How would you arrange invoicing for your product services in foreign currencies?

4. Is it possible to minimize the risk in currency exchange?

5. What is the role of clearing banks to arrange a forward exchange contract?

6. What should you know before entering into currency commitments?

Unit XV Text I. Export and methods of payment

Getting paid promptly for the goods or services you provide to a customer in the UK has its own problems. Before supplying your goods to a UK customer you will have to consider their standing, how much credit should be allowed, their reputation and track record for paying on time. Should problems arise the telephone is to hand and. If need be, you can jump into your car and meet the customer face to face to resolve the problem.

The logistics of dealing with someone on the other side of the Channel, or perhaps even the other side of the world, present much greater problems. Not only distance needs to be taken into account but also the fact that you may have to communicate in a foreign language, handling foreign currencies, while possibly coping with different standards and measurements. Furthermore, in some instances the countries involved may not be as economically or politically stable as your home market.

It is important at the outset, therefore, for you to negotiate the most secure method of payment you can, bearing in mind, of course, the need to remain competitive. Any exporter would prefer to be paid before sending the goods, whilst the importer would prefer not to pay until after he has sold them. An acceptable arrangement regarding the method of payment somewhere between the two will have to be agreed. Therefore, it is most important to be aware of the methods of payment you might encounter when selling abroad. In this way you can relate the risk involved to the standing of your buyer and the country he operates in. Basically there are four methods of payment which are listed below in order of preference:

1. Payment in Advance.

2. Payment by irrevocable Documentary Letter of Credit.

3. Payment by Documentary Collection (sometime called bills of Exchange).

4. Payment on Open Account.

There is also a fifth way which is by barter or countertrade. Where export sales are made conditional upon an undertaking to accept manufactured goods, raw materials or commodities from the overseas market in settlement. Although countertrade is gaining in importance, it is unlikely that the smaller exporter would become involved, particularly at the outset.

Selection of the most appropriate method from the basic four mentioned above will depend on a variety of factors. These include the standing of the respective buyer, competitive pressures, country risk and the degree of security required by both parties. Let us now look at each method in more detail, to assist you in making the right selection for your company.