Our series of articles on international payment methods has discussed the major payment approaches in use today including letters of credit, documentary drafts, escrow and cash in advance. Our final article in this series discusses several less common methods of payment that may have value in your business.

The documentary draft, like the letter of credit, is used to protect the interests of both buyer and seller. Both methods require that payment be made based on the presentation of documents transferring ownership of goods and documents giving evidence that specific steps have been taken such as shipping, obtaining necessary certificates and so on.

A Letter of Credit is a standard tool for international transactions. A letter of credit (LOC) is issued by a foreign bank (representing the buyer) and confirmed by a corresponding bank usually in the country of the seller. The LOC is the buyer's bank's commitment to pay for goods sold.

Payment made by cash in advance is ideal if you are the seller. Before you release your products to the buyer, the buyer pays you. However, if you are the buyer, cash in advance puts you at significant risk. You have paid before you have any product in hand. If the supplier does not follow through, you have lost your money.

The escrow account is less often used in international trading because there is a presumtion that the escrow agent is known and trusted by both parties, a situation that can't always be achieved across international borders.

As your sourcing efforts expand internationally, you will discover that the typical credit card transaction or invoice/payment within 30 days arrangement is less common. In fact, if you are not only buying internationally but also selling internationally, you should plan to be much more cautious in extending credit than you may be when dealing within your own country.

Any time you import goods from another country, you are required to assure that the goods meet your country's health and safety standards. If they do not and there is a claim, you as the importer are likely to be held responsible.

Excellent! You have done your research, you know what you want to sell and now you have found a supplier for your products. The next step is to establish a relationship with that supplier that will serve you both well.

Incoterms are standardized terms that make it easier for buyers and sellers to understand the division of costs and responsibilities when shipping goods from one country to another.

It's always exciting to find a new supplier for a product that you are interested in selling. It's particularly thrilling when it looks like you're going to be able to lower your cost of product. Before you get lost in the novelty of something new, be sure to do your homework and verify that your supplier is authentic, reliable and here to stay.