This article will help us in understanding the various methods of payment in exporting business.

The export process is incomplete without payment receipt. Export receipts are not considered earned until payment is received. Below you will find the most recognized form of payment for export:

Letter of Credit (L/C)

The most popular and secure international payment method is an irrevocable confirmed letter of credit.

Documentary credit – letter of credit, documentary letter of credit or commercial letter of credit – is an agreement whereby the applicant (the importer) requests and instructs the issuing bank (the importer’s bank) or the issuing bank acting on its own, pays the beneficiary (the exporter) or accepts and pays the draft (bill of exchange) drawn by the beneficiary, or authorizes the consulting bank or designated bank to pay the beneficiary or accept and pay the draft drawn by the beneficiary, or authorizes the consulting bank or the bank designated to negotiate, Against stipulated document(s), provided that the terms and conditions of the documentary credit are fully respected. To maintain consistency of text, the words “letter of credit”, “credit” and “L/C” are used on this site to refer to documentary credit.

Another thing you should learn concerning the methods of payment in exporting business are the types of credit letters.


Irrevocable or revocable letters of credit A letter of credit (L / C) can be irrevocable or revocable. The L / C usually indicates whether it is an irrevocable or revocable letter of credit. In the absence of this indication, the L / C is considered irrevocable. Irrevocable Letter of Credit An irrevocable letter of credit cannot be amended or canceled without the consent of the issuing bank, the confirming bank, if applicable, and the payee. Payment is guaranteed by the bank if the credit conditions are fully respected by the beneficiary. The words “irrevocable documentary credit” or “irrevocable credit” may be indicated on the L / C. In some cases, an irrevocable L / C received by the beneficiary may become invalid without the modification or cancellation of this L / C, for example, when trade between importing and exporting countries is suspended, as in the case of a commercial sanction, or when the issuing bank has ceased operations. There have been instances where an irrevocable L / C has been

modified without the consent of beneficiary no. The affected beneficiaries were exporting manufacturers from a developing country.

Importers were able to convince and ask the issuing bank to change the shipping deadline in the L / Changing to a date earlier than agreed, when the recipient could not ship the OEM products. Importers used unfair tactics to trick recipients into defaulting on delivery.

The importers’ intention was to cancel orders from existing OEM suppliers and buy from other suppliers in another developing country, where prices had become lower. In case of modification as the case above, the beneficiary must immediately notify the rejection of the modification to the bank that notified the modification.

Irrevocable and no appeal letter of credit

The irrevocable letter of credit received from an advising bank may be referred to as “irrevocable documentary credit without right of recourse”. The words “no recourse” mean that the advising bank will not be able to recover the amounts paid to the beneficiary if the issuing bank does not pay the advising bank.

Revocable letter of credit

A revocable letter of credit can be amended or cancelled by the issuing bank at any time without the consent of the beneficiary, often at the request and on the instructions of the applicant. There is no guarantee of payment on a revocable letter of credit (L / C). The words “this credit is terminable without notice”, “revocable documentary credit” or “revocable credit” are generally indicated on the L / C.

Revocable L / C was not uncommon in the 1970s and

earlier when it comes to less developed countries. That is to say

rarely seen in international trade today.

confirmed irrevocable versus unconfirmed irrevocable

credit notes

Confirmed irrevocable letter of credit

An irrevocable letter of credit (L / C) opened by an issuing bank whose authenticity has been confirmed by the advising bank and where the advising bank has added its confirmation to the credit is called a confirmed irrevocable letter of credit. The words “we confirm the credit and hereby assume …” or “we add our confirmation to this credit and hereby assume …”

are normally included in the L / C.

An exporter whose method of payment is a confirmed irrevocable L/C is guaranteed payment even in the event of default by the importer or issuing bank. Confirmed irrevocable L/C is especially important for buyers in an economically or politically unstable country. On a confirmed letter of credit, the exporter or importer pays an additional fee called a confirmation fee, which may vary from bank to bank within a country. Charges are usually added to the exporter’s account. The exporter may indicate in the sales contract that confirmation and other costs outside the seller’s country will be borne by the buyer.

Unconfirmed irrevocable letter of credit

An irrevocable letter of credit (L/C) opened by an issuing bank in which the advising bank does not add its confirmation to the credit is called an unconfirmed irrevocable letter of credit. The payment promise comes only from the issuing bank, as opposed to a confirmed irrevocable L/C in which the issuing bank and the advisory bank commit to pay the beneficiary.

Revolving Letter of Credit

When a letter of credit (L/C) is specifically designated as a “revolving letter of credit”, the amount involved when it is used is reinstated, ie the amount is available again without the issuance of another L/C and usually under the same terms and conditions. Rotating L/C can be used to ship a wide variety of goods to a buyer within a period of time (typically several months to a year).

Another thing you should learn concerning the methods of payment in exporting business is documentary collection.


Documentary collection is necessary when the withdrawal is made at the importer. The exporter should instruct the collecting bank on what to do with the withdrawal and shipping documents in the document collection instructions, also

known as a follow-up letter or a letter of instruction. The letter specifies the conditions under which the collecting bank can deliver the documents to the importer and the steps to be taken. The format of instruction forms and drafts may vary from bank to bank, but they contain essentially the same information. Forms and minutes are available from banks.

Uniform rules for collections

The Uniform Rules for Royalties, ICC Publication No. 322, which describes the conditions governing royalties, including presentation, payment and acceptance, are published by the International Chamber of Commerce (ICC) in Paris, France. The Uniform Rules for Collections and other ICC publications are available from local chambers of commerce affiliated with the International Chamber of Commerce.


The term is the credit term for the withdrawal. It can be in cash (on request) or on request or after the date (on payment).



The case of necessity is the party in the importer’s country designated by the exporter that can assist in securing payment or acceptance of the draft or that can be authorized by the exporter to act fully on its behalf – waiver of protest, granting a discount, etc. Whether the need is “to be guided” or “to accept your instructions”, put an X in the appropriate box.


In documents against payment (D / P) – documents against payment (DOP or D / P) – documents attached to the draft (invoice) prepared by the exporter and necessary to obtain the goods are not delivered to the importer only after he has paid the bill. The document against payment (D / P) applies to cash withdrawal.


In documents against acceptance (D / A) – documents about acceptance (DOA or D / A) – documents attached to the project (invoice) prepared by the exporter and necessary to obtain the goods are not delivered to the importer only after he has accepted the account for later payment. Documents against acceptance (D / A) apply to one term draft.

“DELIVER THE PRODUCT…” Upon receipt of payment by the collecting bank, the collecting bank delivers the product to the sending bank. The sending bank then credits the exporter’s account, less any applicable fees.



Protest is the legal action to be taken by the collecting bank, upon instruction of the exporter, if the importer does not pay cash withdrawals, does not accept installments, or does not pay withdrawals not accepted in maturity. In practice, protest is usually required by the exporter and is made within three (3) business days from the filing date or deadline. In some countries, the absence of protest can cause the exporter to lose legal rights against the importer.

In cases where the instruction is “do not protest”, such

the instruction may encourage inaction or deferred payment by the importer. In some countries, especially in the West, protests against the importer can harm their solvency. Therefore, the importer is encouraged to act quickly if the “protest” is heard by the exporter.


Interest charges, if any, are normally agreed between the exporter and the importer. It is integrated with the export price or collected separately. Under certain pre-established credit conditions, a discount may be granted on the prepayment of a term withdrawal.


In practice, the collecting bank may not recover some of its costs, despite instructions to collect all its costs.

Another thing you should learn concerning the methods of payment in exporting business is about opening of accounts.


In an open account trading agreement, goods are shipped to a buyer with no guarantee of payment. Often the buyer does not pay within the agreed time. Unless the buyer’s integrity is unquestionable, this commercial agreement is risky for the seller.

Another thing you should learn concerning the methods of payment in exporting business is about shipping.


In a consignment agreement, the seller sends the goods to the buyer when no purchase is made. The buyer is obligated to pay the seller for the goods at the time of sale.

The seller retains ownership of the goods until the buyer sells them.


The most secure form of payment, cash advances are most often applied by check or bank draft. In some cases, the CID term is paid by wire transfer (T / T).

Also, you should learn concerning the methods of payment in exporting business is tools or instruments for export business.


Here are some of the ways an exporter can repatriate the export proceeds:


When exporting to offshore countries, payment by check and bank draft is most often done in small orders, ranging from a few hundred to a few thousand US dollars. Bank checks and withdrawals are often used in open account and deposit agreements. Both large and small businesses can default on their payments, regardless of the amount involved. In times of economic uncertainty, businesses large and small can go bankrupt. It is important to receive the check or bill of exchange before releasing the shipment. Unless the integrity of the importer is known, it is very important to wait until the check or money order is cashed before shipping. Clearing international checks and bank withdrawals typically takes 3-4 weeks (except for a cash withdrawal from a paying bank in the seller’s country).

Not all checks and invoices are genuine, and not all genuine checks have cash value.


Electronic transfer – electronic transfer or electronic transfer –

–It is the equivalent of a cash payment that can be credited directly to the seller’s account (the name and address of the seller’s bank and the seller’s bank account number are required by the buyer’s bank). It’s fast and secure. Unlike a check or check payment, where the shipping time alone can take from several days to a few weeks, to which the clearing period of 3 to 4 weeks is added for a total of approximately 4 to 6 weeks before the seller can receive the money, through T/T the seller can receive the money in hours or days. It is important to wait for receipt of the T/T before shipping, especially when the buyer’s integrity is unknown.

In order for an exporter to successfully repatriate export earnings, he must have an active household account in any reputable commercial bank in Nigeria. This account can be a dollar, a euro or a pound sterling. As a professional, I advise each exporter to manage three currency accounts for greater flexibility. When opening a household account, the exporter must request the offshore account data of his commercial bank which must be presented to the foreign buyer in this format;




STREET, NEW YORK, NY 10043, United States










Sample document:

Instructions and draft document collection

(Billing letter and draft)


The valid payment terms are:

Bank transfer by money order

Bank transfer by T / T

Payment against document (CAD)

Cash on delivery

Prepayment of a certain% of the contract value

Any other type of payment agreed.

You can sell these ones via, a marketplace for food and agriculture.

Don’t miss out on our exportation masterclass. Link to Exportation business part 1. and check out other articles on we have written on exportation.

About the author


Israel Otoijamun is the founder of Ofarms.Co and PrintLab Studio.

Add Comment

Click here to post a comment