Finance of exports in international sale of goods

Abstract

Generally, the purchaser authorizes the exporter to issue a bill of exchange on him. The exporter acquires a negotiable instrument while the purchaser is authorized a certain duration for payment unless the bill is payable at sight. According to Maltese law promissory notes are drawn by a person upon himself containing an unconditional promise to pay at maturity an amount certain in money to or to the order of a stipulated person. Cheques' economic functions serve as instruments for making payments. When the parties have not agreed for payment to occur in the vendor's country generally the exporter demands his bank to organize the collection of the price and the bank would perform such activity. The typical characteristic of letters of credit is that the purchaser organizes for the payment to be effected by a bank, generally at the vendor's country, on delivery of stipulated documents and on the fulfillment of other conditions affirmed in the credit and advised by the bank to the vendor. On delivery of the documents the bank pays the price. Bank guarantees can be acquired by the purchaser or by the vendor. If they are acquired by the purchaser, their purpose is to certify the payment of the price to the vendor. If they are acquired by the vendor, their aim is to protect the purchaser if he has a claim for damages against the vendor for non-shipment or other occurrences of non-performance. Factoring, forfaiting, financial leasing and non-recourse finance are financing means where finance is rendered obtainable by banks or financial institutions in present-day export commerce. Countertrade is a combined designation which expresses different modes of connecting two export agreements, one arising from the exporter's country and the other from that of the importer. The basic countertrade arrangements are reciprocal sales and barters.