Question

Even though title may pass from the seller to the buyer under INCOTERM(S) contained in the sales contract, sellers should still continue to protect their interest until the goods have actually been paid for. To determine the extent to which this interest may be present, it is important to understand how goods are paid for in international commerce. Identify the methods of payment described below. C O L D

A) Consignment
B) Open Account
C) Letter of Credit
D) Documentary Collection

Answer 1

The methods of payment in international trade described are Consignment, Open Account, Letter of Credit, and Documentary Collection, each offering different levels of security and payment timing to protect seller interests.

Step-by-step explanation:

The question is about different methods of payment used in international trade, each representing how sellers can protect their interests until they receive payment for goods. The four methods described by C O L D are:

1. Consignment (C): The seller ships the goods but retains ownership until the buyer sells the goods to the end customer.
2. Open Account (O): The seller ships the goods and allows the buyer to pay at a later date, often after the receipt of goods.
3. Letter of Credit (L): A letter issued by the buyer's bank guaranteeing payment to the seller upon the fulfilment of specific terms and conditions.
4. Documentary Collection (D): The seller entrusts the collection of the payment to a bank, which releases the goods to the buyer upon payment.

These payment methods are crucial for ensuring that payments flow across borders, aligning with the economic reality that if a nation participates in global trade, it must also engage in international capital movements.