<<< Go BackExportMethods of Payment

1. LETTER OF CREDIT
2. PAYMENT IN ADVANCE
3. PAYMENT AGAINST DOCUMENTS
4. CASH AGAINST GOODS

Methods of Payment

1-LETTER OF CREDIT

A letter of Credit is a guaranty of payment of the value of goods that are the subject matter of the export transaction.
The Banks and Private Finance Institutions draw up the import permit within 10 days of receiving the instructions for opening a letter of credit from the importers and on the basis of this they also initiate the sale of foreign currency. Within the framework of general principles a deferred payment letter of credit can be opened. The payment terms can be stated freely on the bill of lading and carrier’s receipt. The permission for the customs withdrawal of the goods that are imported without the Turkish Money Transfer Certificate, Foreign Currency Sale Certificate or a record showing that a Foreign Currency account has been opened, would not be given.  

1. A contract is executed between the importer and exporter stating that the sale of the goods will be on the basis of a letter of credit.
2. The importer instructs the issuing bank to open a credit in favor of the exporter.
3. The issuing Bank, informs the correspondent bank in the country of the exporter and requests a confirmation.
4. the correspondent bank in the country of the exporter informs the exporter that the letter of credit will be opened (issues notification) and requests a confirmation of the export transaction.
5. Exporter dispatches the goods.
6. The exporter submits the dispatch documents (the documents stated under the terms of the letter of credit facility) to the correspondent bank.
7. After the bank accepts and confirms the compliance of the said documents to the conditions of the Letter of Credit Facility, the payment will be initiated (an endorsement or a draft may be needed).
8. The correspondent bank sends the documents to the issuing bank located in the importing country.
9. The issuing bank checks the compliance of the documents to the conditions of the Letter of Credit Facility,

• If the exporter sends the documents to the issuing bank then the payment will be made either directly to the exporter or the correspondent bank.
• Payment; The payment can be made to the correspondent bank, the confirming bank, the bank that accepts the endorsement or the draft.

10. After the issuing Bank establishes the compliance of the documents to the conditions of the Letter of Credit, the documents will be sent to the exporter for the value of the letter of credit to be paid.
11. The importer sends the carrier’s documents to the forwarding company and takes delivery of the goods.
TYPES OF LETTER OF CREDIT:
A. Revocable Letter of Credit : The importer or the exporter can revoke/terminate the letter of credit unilaterally..
B. Irrevocable Letter of Credit: in this type of Letter of Credit the facility can only be revoked if all the parties to it consents to the revocation.
C. Confirmed Letter of Credit: This is a type of facility that covers the export procedure that takes place between the parties on the basis of the contract executed between them, as explained above.

2. PAYMENT IN ADVANCE

In this type of payment the importer pays the value of the goods to the exporter before the export process takes place and without requiring any documents such as the bill of lading or commodity paper.
a. The value of the goods, in national currency, is deposited by the importer to the issuing bank in the importing country
b. The issuing bank instructs the correspondent bank located in the country of the exporter, to pay the funds to the exporter..
c. The exporter collects the value of goods in its local currency and in return for the payment draws up the Foreign Currency Purchase Certificate.  .
d. The exporter ships the goods ordered to the importer.
The transfer requests pertaining to the advance payments will be closed within 5 days of such requests and a Foreign Currency Sale Certificate will be arranged. The importers on the other hand can request a closure of the transaction within 180 days of the payment, by submitting the Customs Documents and the original of the invoice.

3. PAYMENT AGAINST DOCUMENTS

In this payment method, the importer issues the payment on the basis of the document representing the goods purchased.
1. A sales contract is executed between the importer and the exporter.
2. The exporter dispatches the goods.
3. The exporter sends the dispatch documents to its bank (issuing bank)
4. The issuing bank send the dispatch documents in attachment to the foreign currency letter to the correspondent bank..
5. The importer pays the value of the imported goods to its bank, the correspondent bank.
6. The correspondent bank sends the dispatch documents to the importer.

4. CASH AGAINST GOODS

In this type of export transaction the value of goods is paid after the goods are imported..
1. The exporter dispatches the goods.
2. The importer withdraws the goods sent from customs.
3. The exporter deposits the value of the goods to the bank.
4. The bank transfers the value of the goods to the exporter..