There are give main export payment terms. These are mechanisms by which the exporter can be paid for the products that are exported. These mechanisms are:
- Payment in advance. As the name suggests, the exporter demands to be paid before the goods will be shipped.
- Letter of credit. Here, a bank essentially certifies that the buyer will be able to pay the exporter.
- Documentary collection. Here, the buyer must pay for the goods when they are received.
- Consignment. In this mechanism, the buyer pays for the goods after they have sold the goods.
- Open account. This method essentially trusts the buyer to be good for the payment. The buyer receives the goods but has no obligation to pay for them until some specified future time.