Replying To [Catalyst]:
First thanks for your article. Second I would say is that a person that would be using escrow is a personal buyer or small company that does not have the resources of a much larger company. Even I would not do a $100,000.00 USD + deal thru escrow. But for the individuals that are doing deals of $25,000.00USD or less I consider it a good method. In fact and its been my experience that major banks will not even open a documentary credit less than $100,000.00USD so it leaves a void for safe payment terms for these small buyers. The company whose service I know also has a binding arbitration of disputes that will go no longer than 28 days. This arbitration is not done by the escrow company itself and is not the benefactor of the arbitration. Deals can be ammended if ratified by both barties without additional costs unlike an L/C. This company will only provide the service if the seller shipis via a trackable shiping process. What escrow does offer that a regular L/C does not is a time for the buyer to inspect the goods first. Thus if a buyer were buying 10 items to resell that cost 5000.00 they could forgo the cost associated with a pre-shipment inspection. Something that any buyer on a larger scale would not do.
Quoting from [Catalyst]:
Replying to [Ranger]:
In India, Africa, South America, South East Asia, and in many other countries in these parts of the world, U$100,000 is not an amount to be scoffed at by the commercial banks. Having been there for well over 25 years, I have seen a v. large number of LCs opened by banks in India and overseas (including those from the US, the UK, and some of the former European nations) for amounts far below US$100,000 (or equivalent).
The article was to make the readers aware of the plus and minuses of escrow (as a method of settlement of international trade) as compared to an LC. If the article has been able to do that, my purpose in writing the article would have been achieved!
Once again Mr. Bose that has been achieved. I have been researching what it does cost to open Documentary credits in several countries with several large banking institutions in each of the countries and have found that the costs to open these credits are actually very close in their opening fee's but in regards to other fee's such as ammending the original documentary credit and even an insertion of a red clause can be very low to a very substantial fee. Even in the fee of the confirming bank seems to be based on the country where the original documentary credit was opened. This fluctuation however with regards to the confirming banks may be based on the overall credit liquidity of the origination banks due greatly in part to the default of housing loans and the debt carried by even the most remote banking institutions who thought that getting into the U.S. housing loans was very safe. Actually I would love to see a sub-category of Payment and Finance with regards to economic investment.
Thank you for your great article on ESCROW. Definitely it has both merits and demerits. Nevertheless, we can think of other soft way of monitoring or controlling behavior or both Buyer/supplier. As many of Asian developing countries are bound to use LC and if you see majority of Alibaba member except China are Asian SMEs.
and ESCROW is to (stuck) invest money in advance (for about a month or more). I worked with some Chinese companies they usually says 15-20 days lead time in order to get the order. Later they add 1-2 months additional time, Probably ESCROW is somewhat a good soultion, still stucked money for longtime.
What do you think ? if Alibaba or other B2B implement option like Reputation ranking (Gold membership refining based on their performance). This is a segmentation (from current Liquidity or critical mass) of potentially Loyal (trustable) Buyer and supplier, Where both buyer and supplier has to be member, (Supplier already paid for Gold membership) now buyer (may be paid or not upto e-marketplace's business model). Buyer can search supplier /product with high earned Gold karats to low, then send RFQ (Request for quotation) and supplier whoever send request and participate for Reverse auction will get +ve remark (+little Gold Karats adds up). Now negotiation will be much easier for Buyer just check the Reverse auction (NSS + DSS). Choose one supplier with given deliver date + product details + price and payment terms or payment date). If accepted by buyer and goes for order placement meaning agreement for exact payment terms+ payment date. Any delay for payment he will buyer will be punished with -ve Gold Karats or decrease Karats earned. Similarly if delivery not done within offered date by supplier will also earn -ve Gold karats. This is share to only Gold Karats based member within the current B2B e-marketplace,about companies loyalty background and to make people (member) know them to avoid opportunistic behavior /loyalty gap/ Negotiation support/ decision support for potential partner. will update more features once i get some feedback from you.
I wish to get your feedback on it. Thanking you!!