Procedures are same as (3) with the exception that a U.S. bank
"confirms" the LC, or, in other words, substitutes its own
performance for that of the local foreign bank which issues the LC.
Payments under a CILC are remitted immediately by the U.S. bank
issuing its confirmations upon receipt of documents and LC. It
should be noted that the Buyer pays all charges for opening the LC
at its local foreign bank and the Seller pays all charges for
confirming the LC. The U.S. Bank that confirms the LC assumes all
credit, political and exchange risks of the foreign bank and its
country.
Buyer deposits cash with its local (foreign) bank. Seller presents
documents to its U.S. bank for "collection". U.S. bank sends
documents to foreign bank that remits payment back through U.S.
bank and forwards documents to buyer.
4. Sight Draft/Documents Against Payment (SD/DP)?
7. Promissory Notes
Generally used for medium term (one to five year) sales of capital
equipment or quasi-capital goods. A Promissory Note is a signed
valid and enforceable obligation to pay a certain amount
("principal") plus interest by the "Maker" (or Buyer) to the "Payee"
(or Seller). Payments are made in one, or a series of installments
until the entire principal is repaid. Promissory Notes may also be
guaranteed by a third party ("Guarantor") who is affiliated with the
Maker. A Guarantor can be an individual (e.g. owner), parent
company or financial institution. Rarely are promissory notes used
for short term sales of non-capital goods.