Payment Terms

Payment Terms in International Trade

Meaning of Payment Terms, according to the Dictionary of International Trade (Global Negotiator): That part of a contract that defines when, where, to whom and in what currency the underlying obligation is to be discharged. The exporter will consider the following factors in negotiating terms of payment for goods to be shipped:

Practices in the industry.

Terms offered by competitors.

Relative strength (negotiation power) of the buyer and the seller.

Some of the payment terms commonly used in international trade are: cash in advance; open account; letter of credit, documents against payment and acceptance; and consignment.