Foreign economic activity. Criteria for choosing forms of foreign trade settlements (the most important)

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Foreign economic activity. Criteria for choosing forms of foreign trade settlements (the most important)

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80. Criteria for choosing forms of foreign trade settlements

The main forms of payment for foreign trade transactions with foreign partners must be subject to the main commercial purpose of the contract. Therefore, the preparation and negotiation of the contract should be based on careful calculation, excluding an excessive increase in individual risk components.

One of the complex problems in the commercial practice of enterprises is to ensure the break-even of foreign trade activities, which is associated with an increased risk that accompanies the settlement and financial side of export-import operations.

The fulfillment of financial obligations between foreign partners, which are part of the terms of a foreign trade transaction, is largely determined by the form of selected settlements and the procedure for their execution, which are subject to international practice, and also depend on the nature of monetary and financial restrictions in the domestic market of the country where trading partners are located.

Violation of international rules and customs in the implementation of foreign trade settlements leads to protracted negotiations, significant financial costs and is associated with great difficulties in the event that the counterparty's claim is satisfied in court or arbitration.

From the point of view of the profitability of using the forms of payment for the exporter (in descending order), the profitability should be highlighted:

▪ advance transfer (prepayment);

▪ letter of credit;

▪ collection;

▪ bank transfer.

Profitability is considered from the standpoint of a higher degree of guarantee. Advance transfer and letter of credit have a higher degree of guarantee for the timeliness of payment, and for the full amount of the payment, but they are technically complex in terms of implementation processes. The collection form and bank transfer are easier to use technically, but the degree of their guarantee is lower. A bank transfer has the weakest degree of guarantee.

From the point of view of the importer, the most advantageous forms of foreign trade settlements are as follows:

▪ subsequent transfer (payment after receiving the goods);

▪ collection with preliminary acceptance.

They are simpler in technical execution and financially cheaper for the importer. The most expensive form of payment is a letter of credit. It has an advantage over others in a number of ways:

▪ a letter of credit is much cheaper than an advance transfer (for the exporter);

▪ the cost of issuing a letter of credit and confirming it with a first-class bank, as well as the rate for a loan in the form of a documentary letter of credit is much lower than the commercial lending rate;

▪ the seller, thanks to reliable security and guaranteed execution of payment, is much more willing to negotiate and reduce export prices or even defer payment, which is more profitable for the importer;

▪ the importer has the opportunity for financial modeling, since working capital is not diverted, but, on the contrary, can bring a certain part of the income;

▪ a certain degree of convenience for both the importer and the exporter;

▪ a letter of credit reduces the risks characteristic of foreign trade transactions:

▪ if there is confirmation or participation of a “third” first-class bank;

▪ a letter of credit is a less conflicting form of payment;

▪ Letter of credit is used most often where there is an intermediary.

Letter of credit takes place in barter, offset and counter transactions, as part of foreign exchange transactions, which in this case are used to finance international trade transactions. Most often within the framework of trade in raw materials, but not through exchange trade, but through counter trade; they are designed to convert the settlement currency into the clearing currency. In such transactions, as a rule, there is a dealer who receives a certain commission.

Author: Bobkova O.V.

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