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Consignment Payment Method in International Trade - Pros And Cons


There are many ways to pay and get paid in international trade. Some types of payment are more beneficial for the buyer rather the seller or opposite.


Which one is the best for your business?


One of the top 5 most used internationally payment methods is the Consignment Payment Method.


If you haven't seen our post about the Advance Payment method, you can find it here. Also, the Open Payment method is described in more detail here and Documentary Collection Payment Method description is here. Read about Letter of Credit here.


CONSIGNMENT PAYMENT METHOD


Under this method, the exporter receives the payment only after the goods have been sold by the importer to the end customer.


This international payment method is based on an agreement under which the foreign seller retains ownership of the merchandise until it has been sold. In exchange, the buyer is responsible for the management and sale of the merchandise to the end customer.


Consignment is usually only recommended for buyers and sellers with a trusting relationship or reputable distributors and providers. Given the high risk involved, sellers should make sure they have adequate insurance coverage that can cover both the goods from transit to final sale and mitigate any damages caused in the event of non-payment by the buyer.

Source 1, Source 2, Source 3


Pros and Cons of Consignment


Source


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