WPPOP International Trading Co., Ltd.
When you start to make international payments To suppliers, the first question is: How do I pay without risking my money or delaying the order?
If you choose poorly, you may experience scams, delays, or loss of merchandise.
If you choose well, your operation flows smoothly, the supplier feels secure, and you maintain control.
In this guide, we explain three forms of payment —transfer in parts, letter of credit y escrow— with plain language, real-life examples, and concrete steps.
The goal is for you to decide with confidence and have ready texts to include in your contract.
- First order o risk country → prioritize letter of credit o escrow.
- Known supplier and amounts low/medium → transfer in parts pruebas.
- Decide with 3 factors: imported, country risk y confidence at the provider.
- Always add: Clear Incoterms, quality tests and, if there is merchandise, Safety.
What’s at stake when you pay abroad?
Paying abroad isn’t like a local transfer. They intervene. correspondent banks, changes of currency, shipping times y commercial culture.
The supplier wants collect safely; you want to pay when what was agreed upon is fulfilled.
The key is align incentives: that the supplier has reasons to comply and you have tools to verify before releasing the money.
That is why the payment methods are complemented with documents (shipping receipt, inspection, quality certificate) and clear rules (Incoterms).
What each “pillar” of foreign trade covers (and what it doesn’t)
- Incoterms 2020 (ICC): standardize tasks, costs and risks in delivery between seller and buyer; the current edition is in force from January 1, 2020They don’t set payment, price, or transfer of ownership (that’s in the contract).
- Letters of Credit (LC): are governed by UCP 600 (ICC) and the practical guide ISBP 821 (2023) for documentary examination. The LC is a bank’s commitment to pay if the submission of documents complies what was agreed upon. It can be requested confirmation from another bank if there is country/issuing entity risk. (If you operate with electronic documents, the supplement applies eUCP 2.1).
- Proof of Shipping/Delivery: depending on the mode, it is usually used BL (maritime) or RCM (road). The WRC Convention governs international road transport between contracting States and their e-CMR Protocol allows the electronic note.
- Bank identifiers: IBAN (standardized account format) and BIC / SWIFT (entity identifier). SWIFT publish the IBAN Registry and is the BIC registration authority, used to process cross-border payments correctly.
Quick comparison (decide in 1 minute)
| Option | What is | Security | Rib | Speed | When to use | Risk if it goes wrong |
|---|---|---|---|---|---|---|
| Transfer in parts | You pay directly, divided into phases | Media | Low | High | Known supplier, low/medium amounts | Difficulty in recovering money |
| Letter of credit | Your bank only pays if there are correct papers | High | High average | Media | First order, high amounts, risk country | Documentary errors delay collection |
| Escrow | A third party keeps the money and releases it with evidence | High | Media | Media | One-off operation or new supplier | Poorly written instructions cause disputes |
How to choose without technicalities (decision tree)
How much money is it?
<15.000 € → Transfer in parts if there is trust; if it is a supplier newuse custody.
€15.000–100.000 → If the country is low/medium risk and there is some confidence, custody o Simple LC; if it is new or the country is medium / high, LC.
> 100.000 € → As a rule, LC. If not applicable, custody with strict inspection and milestone payments.
What is the risk of the supplier’s country?
Low (EU, USA, etc.) → more margin for transfer in parts or custody.
Medium / High → Increase protection: LC (better confirmed if the bank or country does not inspire confidence).
Do you know the supplier?
- New → part with LC o custody.
- Known with history → you can use transfer in parts adding pruebas before the balance.
Can you do pre-inspection or testing?
Yes → include it as payment condition (in LC as a document; in custody as milestone).
Quick glossary (no jargon)
- Letter of Credit (LC): your bank pays the supplier solo if you present the correct papers.
- LC confirmed: in addition to the issuing bank, another reliable bank also guarantees payment.
- Escrow: A third party holds the money and releases it when the payment is made milestones.
- Shipping Receipt (BL/CMR): document proving that the merchandise he left.
- Inco terms: rules that assign costs and risks of transport.
- Milestone Payments: you pay split according to verifiable progress.
Frequently Asked Questions (FAQs)
Is the transfer secure?
It is yes you pay in parts, you check the account and you demand pruebas before the balance. For new suppliers, it’s better custody o LC.
When is it worth opening a letter of credit?
En first order, high amount o risk country. It gives security to both parties if the text is well written.
Does custody apply to physical merchandise?
Yes. It works very well if you define what test releases payment (inspection, BL, delivery/commissioning).
What happens if there are errors in the LC papers?
Are considered discrepancies and the bank can not to pay until corrected; it is advisable to make a short list and coordinate with the forward, Following ISBP 821.
Should I request a confirmed LC?
Yes, if the issuing bank or country They do not inspire confidence: confirmation adds the commitment of a second bank solvent.
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