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International Trade Payments

You want the least amount of risk in the transaction.  So does your trade partner overseas.  Before you can close the deal, you need to come to an agreement that works for both parties.

That’s where we can help by clarifying your risks for each proposed option, allowing you to choose well and negotiate with confidence.  Plus, we’ll spell out the exact tool and processes associated with each payment method, so you can plan accordingly.

The diagram below shows a variety of payment methods, the desirability of each whether you’re the buyer or seller, and the products typically associated with that method.



Payment Instructions
If you are expecting an incoming international wire payment, please provide your customer with our standard settlement instructions which can be printed from the following link:
 
National Penn Standard Settlement Instructions

INTL-PaymentOptions-Diagram

Selling on an open account is the most risky form of payment for the exporter, while cash in advance is the most uncertain for the buyer. A buyer may reject a cash in advance request for a number of reasons, including a lack of cash, lack of trust or simply because the competition does not require it. Therefore, a buyer and seller typically agree on a payment method somewhere in between and both of their respective banks are involved. The chart below summarizes the various payment methods, when goods are available and the risks involved.

payment chart

Incoming and Outgoing International Payments

International payments include both incoming and outgoing payments. Outgoing payments can be made by a wire transfer, which is the fastest and most secure way to send funds abroad, or by a draft. A wire transfer is the electronic transfer of funds from one financial institution to another through the Federal Reserve wire communication system (also known as Fedwire), Tested Telex or SWIFT. Funds transfer through these mechanisms are immediate and irrevocable.

A foreign bank draft, on the other hand, is a negotiable instrument drawn on one of our correspondent banks in the country involved. It is payable in the currency of that country and made payable to the specified beneficiary. Once the beneficiary has received the draft, it may be presented to the bank on which it is drawn for payment. If it is presented to an intermediary bank, the draft will be processed similar to clearing a domestic check. To obtain current exchange rate information, simply call our International Group at (888) 461-1864. Remember that exchange rates are dynamic and can change frequently, so the actual rate for a given transaction will be the one that’s in effect when the payment is authorized.

Incoming payments are often made by wire transfer.  But, the payment method may also be made in the form of a check. If the check is not payable in U.S. dollars, is drawn on a foreign bank, and/or is not micro-encoded, the bank must submit the check for collection. Foreign check collection consists of submitting a check, drawn on a foreign bank, to that particular bank for payment. The check may be in either U.S. dollars or foreign currency. This process involves forwarding the check under separate cover to the foreign bank and awaiting remittance of proceeds, which commonly takes four weeks to six months. Upon receipt of funds by our bank, your account is credited. On the other hand, cash letter items are foreign checks that can be collected very quickly because they are properly drawn on a major bank in a country with an efficient collection system. Our bank extends credit with recourse to you pending final payment of the check by the party against whom the check was drawn.

Contact our International Trade team at 888.461.1864 or international@nationalpenn.com.

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