Pickup basis is a payment arrangement used in international trade to ensure that the seller is paid before the buyer receives the goods. There are three types of pickup arrangements: sight pickup, real-time charging, and clean eraser collection base. A letter of credit is the most common payment agreement used in international trade.
The pickup basis is a payment arrangement used when shipping products internationally. Under a collection basis agreement, the buyer cannot receive the goods until payment has been released to the seller. This type of agreement helps ensure that the seller will not lose a substantial sum of money, which could occur if the buyer picks up the goods and then fails to pay. A collection basis payment agreement is typically used when the buyer is unable to provide a standard letter of credit from a bank, but the seller is still relatively certain that the buyer has the means and intent to pay for the goods.
A letter of credit serves as the most common payment agreement used in international trade. With a letter of credit, the buyer has his bank send a certified letter to the seller stating that he has the funds available to pay for the goods. The bank will then hold these funds until the seller has shipped the goods and the buyer has received them. At this point, the bank automatically releases the money to the seller. With a letter of credit agreement, both parties are protected against fraud or non-payment.
There are three basic types of basic pickup arrangements for buyers and sellers to choose from when trading across international borders. Under a sight pickup basis, the shipping agent holds the goods until payment has been sent to the seller. This can be accomplished by the buyer simply by bringing payment when picking up the goods at the shipping facility, or by sending payment directly to the seller. The seller then alerts the shipping agent that it is acceptable to release the products.
Under a real-time charging basis, the buyer can pick up the goods simply by signing a draft payment on the contract in their country of origin. You can then pay them off later, which serves as a way to extend credit. This type of agreement helps protect the seller in countries with unique trade laws, where a simple invoice or order information may not be enough to enforce payment from fraudulent buyers.
Finally, certain countries allow a clean eraser collection base. Under this arrangement, the seller’s bank agent sends the bill or money order directly to the buyer’s bank. Once the bank receives this draft, the buyer is free to collect the goods, even if they have not yet paid for them.
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