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• Requires a certain trust in the importer i.e., their standing and financial position.

• No previous adverse experiences i.e., payment delays, non-payment.

• Importer should be located in a politically stable country.

• There is a possibility to retain control of the goods via documents of title i.e., bills of lading or consignments to a bank (with such bank's prior agreement).

• There must be an understanding that one of the parties will take out necessary insurance cover for the transit of the goods. 

Main risks:

Importer/Buyer Risk (Credit Risk) - e.g., an importer may not pay for the goods due to insolvency or wilful default.

Country Risk - e.g., an importer may be more than willing to pay for goods received but its Government may introduce laws (i.e., exchange controls) which prevent payment being made. 

Transit Risk - e.g., the need to insure risks for the movement of goods including damage, loss and theft. loss and/or damage.

This subject is covered in far greater detail within our training module ‘documentary collections in practice' which can be purchased at https://www.tradefinance.training/shop/

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