FOREIGN TRADE INTERMEDIARIES

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Introduction

Foreign Trade is the exchange of goods and service between one country and another country. There are some intermediaries between the trade partners such as; insurance firms, freight forwarders firms, customs firms and Banks. In this paper functions of these intermediares will be explained.

Finance in Foreign Trade

Banks play a critical role in facilitating international trade by guaranteeing international payments and thereby reducing the risk of trade transactions.; the most critical aspects of trade is getting paid. Because getting paid in full and on time is the ultimate goal for each export sale, an appropriate payment method must be chosen carefully to minimize the payment risk while also accommodating
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Pros
• giving security to both the seller and the buyer.
• A variety of payment, financing and risk mitigation options available
Cons
• Relatively expensive method in terms of transaction costs
Cash in advance
Cash in advance is the risk free payment methods except the potential consequences about non delivery of the goods by the seller. Exporter can avoid the risk of non payment since payment is recieved prior to shipment. This payment method is not favorable for buyer because buyer is concerned about the non delivery of goods when the payments made in advance. Accordingly it is not an competitive option for if customer has other vendors who offer more attractive payment methods.
Pros
• Payment before shipment
• Eliminates risk of nonpayment
Cons
• May lose customers to competitors over payment terms
• No additional earnings through financing operations “
The most commonly used cash in advance options are wire transfers and credit cards. Wire transfer is secure and preffered cash in advance method and has the advantage of of being almost immediate. Seller must provide clear routing instructions for wire transfers when using this method. These intructions includes; name and adress, telephone, type of bank account , and account number of the sellers. Credit card is the viable cash in advanced
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