Abstract When international firms get into contracts to sell and buy commodities they are at liberty to negotiate particular terms. These terms comprise the quantity, price and characteristics of the commodities as (Dyson 2010) established. Every global trade agreements also include what is known as an International commercial term (Incoterms). In general, there are 13 principal terms and a number of secondary terms which outlines the grounds at which the carrier, shipper and the consignee responsibility and risk start and end. The companies or the parties carrying out the transaction choose the Incoterms which describes who makes payment of every transportation segment, the party who takes the responsibility of loading and offloading the goods and the party that bears the loss risk at any particular time in the course of international shipment.
The International commercial terms also affects the valuation of customs of the merchandise imported. According to (Dyson, 2010), the International Chamber of Commerce (ICC) overseas in Paris and supervises Incoterms and are abided to by the major world trading nations. The ICC documented the initial package of this international regulations in 1936 commonly referred to as (“INCOTERMS 1936”) and these terms are amended after every decade.
This report discusses the global trade operations of two companies of two different regional trade blocks. These two companies deal in other goods. The report also explores how the seller will make sure that they receive their payments and outlines how either party organizes short-term capital so as to support the cash flow. At the last bit of the discussion, the paper identifies the documentations which will be needed to attain a successful result of this transaction.
Background Information The Company of my choice is LG Electronics Inc. and is the exporter. The buyer is (Ibrahim Electronic) in South Africa. LG Electronics. Ibrahim Electronics is the major distributor for Plasma TV in South Africa. The companies want to make place order for 1 container for Plasma Tv from LG Electronics. Introduction According to (Watson and Head 2010) in global commercial processes, the exporters and the buyers would want to transact within the best conditions to themselves. Although the buyer will opt for the longest and the cheapest termed type of payment while paying for the costs of commodities in our case (Sony TW cameras) the seller in most cases prefers cash payments, which is the payment type that is most advantageous and also a type of collection that has the minimal risks.
The agreement of Ibrahim Electronic and LG on how and I what terms the payment shall be done is a quite serious moment for both parties. In this section, the payment methods shall be explored in details and their superiorities and risks for export and the Ibrahim Electronics will be evaluated.
The Trade Payments methodsLG who is the exported organizes the commodities and makes them ready for the dispatch as agreed upon by Ibrahim Electronics, (buyer), has to considers the terms of payment and a financing program is they might experience severe hardships if they are not paid. As a result, it is important for the LG to have adequate information regarding the various payment processes available to them.