Hello all,

Just recently, I have a tough issue to provide answer to.

If you check my website (www.unointernasional.com), you will find that i am selling seafood products. Some of these products are sent in live condition and should reach the destination in the same way.

I had a negotiation with one fellow buyer. We could finally reach aggreement on the price. Only one very crusial thing remain mutually unaggreed, the payment term.

It is my standard of trading to only accept TT in advanced from buyer, against my confirmation on the availability of the goods quantity and quality. Buyer should TT the money after getting the goods availability advise from me. As soon as I confirm the transfer is in, then I will send the goods right away.

I know what you are thinking. How come I always advise people to only use LC for the sake of safety, while me myself is asking my buyer to pay in advanced TT?

Very good question. Here are the reasons:

1. Not that I am over confident, but I am very confident in myself that I will not cheat on buyer. You can run a check on my background and I guarantee that you will not find me ever cheating my buyer. Remember, I wrote that in the end, it is your credibility that sells. That's what I believe in and that's why I try my best to maintain my credibility. So, do not worry when I ask you to pay TT in advanced.

2. The commodity that I am selling is a living commodity. This is very mcuh different from other regular non living commodities. The living commodity is valuable when it is still alife. Once it is dead, it's value becomes very little if not valueless at all.

Live commodity is common to trade. Do to it's nature, live commodity is delivered by air. Buyer would receive the commodity mostly not more than 20 hours after the seller sending it. It is very important that every party taking part in live commodity trading (seller, freight forwarder, buyer) to give their best cooperation in order to make sure that the commodity could reach it's destination in good condition.

Because live commodities reach the destination (buyer) in much shorter time compared to other non living commodities, it is very natural if seller requires advanced TT payment.

Now, here is the problem.

- On buyer's side, what guarantee does buyer have that after TT-ing the payment, seller will send the goods? Also, what if seller does send the goods but some of the them are dead?

- On seller's side, what gurantee does seller have that after sending the goods, buyer will TT the payment? Also, who wcould verify buyer's report on dead commodity? What if buyer reports 10% death rate while the fact is only 5%?

Back to the main question: "Why not use LC?"

Well, classical reason is that LC cost relatively much. For live commodity trading that usually only involves relatively small quantity per shipment (like 100kg per shipment, but the frequenscy could be high like every two days), LC is certainly not favorable. It costs too much.

Secondly, to cash LC on seller's side, it could take up to 7 working days. It really doesn't make sense for seller to send the goods, hand the docs to the seller's bank, seller's bank send the docs to the buyer's bank, buyer's bank hand the docs to buyer. This wholeprocess takes long time while the goods already reach the destination port on the next day after seller dispatch it.

So, how then we can do business like this? If you ask others who have run this kind of business for years, they will say that trust is all that matter. But still the question remain, for first time trading, who should trust who? Who should be left with all the risk? What's the most fair way?

If you aks my opinion, i will present you an answer from seller's point of view.

It is really not fair at all to just leave all the risk to one side, seller only or buyer only. When mutual trust is already achieved, risk is not the question anymore.

So there must be a fair way to spread the risk to both seller and buyer.

From seller's point of view, once sending the goods, the risk component is as follows:

1. The cost of the product itself (not the selling price but the cost of getting the product)

2. The freight rate

Here, I came up with a simple formula. The amount of actual risk seller is bearing once sending the goods is:

The cost of product + freight rate + 10% selling price = Potential risk

Here is an example:

Commodity: Live fish

Cost of product = USD5/kg

Freight rate = USD2/kg

Selling Price (CNF) = USD12/kg

Based on the above formula, the potential risk that seller is bearing is:

USD5 + USD2 + USD1.2 = USD8.2

This is equal to 68% of the CNF selling  price.

So, i think it is only natural if seller then request advanced TT up to 70% off the total payment.

Is it fair for the buyer?

Again, from seller's point of view, i think it is fair. I called some of my collegues who have been in this kind of business for years. In their case, since their credibility is unquestionable anymore (they would tell you their clients and they would let you to verify if you do not trust them), they would ask for 100% advanced payment. Not only that, they are very confident that they are not opened for price negotiation. If you are willing to pay higher price, then you can buy from them.

Well, i really should remind everybody that in the end, all transaction should be based on mutual trust. But it costs to get to there. In modern business facilitated by such unreal marketplace, trust is not achieve instantly. Trust takes time.

I hope this explain some of the seller's behaviour. Please not to get me wrong when any of you have a chance to negotiate business with me and i ask for an advanced payment.

But still, safety is always number one.

Happy safe trading

Your article is good.

I think international trade needs the particiation of lawyers.

I think for your business TT is the best simply because you are dealing with live products and also in small quantities.For the buyer I'm sure that a lot of buyers understand that in buying live products they realise that it is time sensitive but once you get the deal perform the requirements of shipping falls on your part to ensure that the product doesn't delay
All the best in your trading

Quoting from [wambo]:


I think for your business TT is the best simply because you are dealing with live products and also in small quantities.For the buyer I'm sure that a lot of buyers understand that in buying live products they realise that it is time sensitive but once you get the deal perform the requirements of shipping falls on your part to ensure that the product doesn't delay

All the best in your trading

T/T is the best way for most of such cases worldwide, also a Pre-shipment QC Inspection from a third-party is necessary for large orders.

Good point!


All the payment terms and methods exist because are appropiate in some particular cases, so before sending money, spend a bit of time checking out.