Getting Paid Safely on Export Orders

The biggest risk in exporting usually isn't shipping. It's shipping and then not getting paid — with your goods already in another country, under someone else's law. The way to manage it is simple in principle: match how you get paid to how much you can actually verify about the buyer.

First, a distinction that trips people up

Incoterms and payment terms are two different things. Incoterms (FOB, CIF, DAP and the rest) settle who arranges and pays for transport, and where risk passes. They say nothing whatsoever about when money moves. You can be paid in advance on a CIF sale or wait sixty days on an EXW sale. Agree both, separately and explicitly.

The four ways you'll get paid, safest first

• 1. Payment in advance

  Money first, then you ship. All the risk sits with the buyer, which is exactly why established buyers resist it. Realistic for small trial orders, samples, and buyers in higher-risk situations. Often used partially — a deposit up front, balance later.

• 2. Letter of Credit (L/C)

  The buyer's bank undertakes to pay you once you present documents that match the credit exactly. Strong protection for a first deal with an unknown buyer — you are relying on a bank, not a stranger. The catch is that it is a documentary promise: banks pay against compliant paperwork, and a trivial discrepancy (a date, a spelling, a missing certificate) can delay or defeat payment. L/Cs are governed by the ICC's UCP 600 rules.

• 3. Documentary collection (CAD / D/P)

  You ship, then send the shipping documents through the banking chain; the buyer only receives the documents needed to collect the goods once they have paid. Cheaper and lighter than an L/C — but note the bank is only handling documents, not guaranteeing payment. If the buyer walks away, your cargo is sitting at a foreign port and you carry that problem.

• 4. Open account (pay in 30–60 days)

  You ship and invoice; they pay later. This is what large, established buyers expect, and it is the norm in mature markets. It is also the riskiest for you: you have financed the shipment and hold nothing but an invoice. Reserve it for buyers with a track record — ideally with credit insurance behind it.

Matching the method to the buyer

• Brand-new buyer, no history: deposit plus balance, or an L/C. Start with a small trial order rather than the full container they asked about.
• Second or third order, all went smoothly: documentary collection is a reasonable step down in friction.
• Established relationship, repeat volume: open account on defined terms — and consider insuring it.

Being willing to move down this ladder over time is itself a selling point. Saying so explicitly ("L/C for the first shipment, open account from the third") reads as professional rather than distrustful.

Habits that keep you out of trouble

• Never release original documents early

  Whoever holds the original bill of lading generally controls the cargo. Handing it over "to speed things up" before the payment condition is met gives away your only leverage.

• Consider credit insurance

  Trade-credit insurers and national export credit agencies will cover non-payment on approved buyers. It costs a small percentage and turns a business-ending loss into a claim.

• Check the L/C the day it arrives

  Read every condition against what you can actually produce. If a clause is impossible — a document you can't obtain, a date you can't meet — request an amendment immediately, not after shipment.

• Put payment terms in the quote, not the negotiation

  Stating your terms up front sets the expectation and filters out buyers who were never going to accept them.

The warning sign worth memorising

Any "buyer" who requires you to pay something first — registration fees, agent fees, licence fees, a "refundable" deposit to release a huge order — is running a well-worn scam. Genuine buyers do not charge suppliers for the privilege of selling to them. Neither do genuine agents ask for money before any business exists.

Where this fits with AgrifoodQuote

AgrifoodQuote's quote builder has payment terms and a shipping- documents checklist built in, so every quote you send states plainly how you expect to be paid and what paperwork travels with the goods — the two things that most often get left vague and cause arguments later.

This guide is for general reference and doesn't constitute legal, financial or trade-finance advice. Payment instruments carry legal consequences — take advice from your bank or trade-finance adviser before agreeing terms.