Mixed Payments in International Trade

Mixed payments work as a kind of financial security tool for exporters in international trade transactions.

Exporters demand a portion of the transaction amount from importers in advance of the shipments, such as 30% of the total amount. 

Remaining amount could be paid against CAD, letter of credit or sending copies of shipping documents by fax or e-mail to the importer.

Today I would like to explain mixed payments as used in international trade transactions.




What is a mixed payment?

If total invoice amount will be paid in more than one payment terms, mixed payment term establishes under any type of foreign trade businesses.

Some examples of mixed payments
  • 50% of proforma invoice will be paid in advance on order confirmation, 50% of remaining amount will be paid 1 week before shipment.
  • 30% of invoice amount will be paid in advance 1 week before shipment, 70% of order amount will be paid against copy of shipment documents send via e-mail to the importer.
  • 20% of proforma invoice will be paid in advance on order confirmation, 80% of remaining amount will be paid cash against documents.
  • 25% of proforma invoice will be paid in advance outside of the letter of credit, 75% of remaining amount will be paid against presentation of conforming documents.
What are the advantages of mixed payments to the exporters?

Exporters could gain additional payment security against various risks especially if they choose to receive advance payments before order confirmation or shipments. 

Some of the risks that can be prevented with the advance payments would be as follows:
  • Order cancellation risk 
  • Non acceptance of the documents risk under cash against documents payment terms 
  • Non payment risk under cash against documents payment terms 
  • Non payment risk under letter of credit payment terms
How to demand an advance money transfer under mixed payments?

Advance payment money transfer should be requested from the importers with the help of the proforma invoice. Banks generally demand a proforma invoice when they are making advance payment transfers to the exporters.
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