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Updated : August 28, 2007

International Trade Know-How

In this daily changing business world, MarginUp would like to remind you of some modest trading practices, especially for those who are first-time or novice traders.  The combined use of the proper payment methods and shipping terms is always encouraged and should be used with caution. Normally, the T/T payment method is least preferred, as it poses the highest risk to the importers, while the open account has the highest risk for exporters.  As to international transport, the International Commercial Terms (INCOTERMS) available from International Chamber of Commerce at, are commonly used in international shipping.  Below are some brief summaries for your quick reference:

1. Payment Methods

Sorted in order of risk, open account is the riskiest for the exporter, and payment  in advance is the riskiest for the importer:

        Open Account - the riskiest for the exporter, usually used between large corporations or trading partners. 

        Documents Against Acceptance - also referred to by sight draft, documents against payment, bill of exchange, usually used with a bill of lading. 

        Letter of Credit (LC) - guaranteed by the banks; here is how it works: an importer applies for LC through his/her bank (opening bank), the opening bank send LC to exporter's bank (advising bank) who notifies the exporter receipt of LC, freight forwarder dispatches the merchandise and provides the documents to the advising bank, then the advising bank forwards the documents to negotiating bank, which checks documents against LC and authorizes payment, the Importer's bank gives him/her the documents; with those documents, an importer can claim the merchandise. 

        Payment in Advance - T/T, check, international money order; the riskiest for the importer. 

2. Shipping Terms

Also known as INCOTERMS, traders usually use these terms to communicate for quotations such as FOB his/her port, or CIF his/her port.  Your custom brokers and freight forwarders are able to help you understand with these terms.  Here's a short list of commonly-used INCOTERMS:    

        Group F, Main Carriage Unpaid - FCA (Free Carrier), FAS (Free Alongside Ship), and FOB (Free on Board)      

        Group C, Main Carriage Paid - CFR (Cost and Freight), CIF (Cost, Insurance, and Freight), CPT (Carriage Paid To Location), and CIP (Carriage and Insurance Paid To Location)

If you'd like to learn more about the definitions of other INCOTERMS, please refer to International Chamber of Commerce Publishing. Or if you're interested in learning more trading tips,  please refer to the book Building an Import/Export Business by Kenneth D. Weiss, ISBN 0-471-17787-3.

3. Arbitration and Mediation

Please understand that MarginUp is an International Trade Marketplace that does not provide any arbitration or mediation services. However, should you encounter any fraud or scam, feel free to let us know.  Also, there is an international organization that is able to help you address those issues :

International Court of Arbitration:

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