August 1, 2026 · 3 min read · Whitehorse Foodtech
International payment methods in import/export, compared
Picking the wrong payment method won't sink a deal on its own, but it can leave one side carrying risk it didn't need to. Here are the five most common methods in import/export, ordered from safest to riskiest for the seller.
1. 100% Advance Payment (T/T in advance)
The buyer transfers funds before the seller ships. Completely safe for the seller, highest risk for the buyer (who has to fully trust the seller). Usually reserved for small-value orders, trial orders, or once both sides already have a track record together.
2. Letter of Credit (L/C)
The buyer's bank commits to pay once the seller presents a fully compliant set of documents. A good balance of safety for both sides, but it demands document accuracy — even a small discrepancy in the paperwork can lead a bank to refuse payment. According to the ICC Trade Register 2025, default rates on instruments like L/Cs are currently under 0.3% — one of the safest instruments in international trade — and recent trends show more businesses returning to L/Cs as tariff volatility increases.
3. Documents against Payment (D/P)
The bank passes documents to the buyer, but the buyer must pay before receiving the documents needed to claim the goods. Safer than open account since the goods remain effectively "held" by documentation until payment, but the bank doesn't guarantee payment the way it does with an L/C — if the buyer refuses the goods, the seller has to handle it themselves (find another buyer, ship the goods back, or sell at a discount at the destination port).
4. Documents against Acceptance (D/A)
Similar to D/P, but the buyer only has to sign an acceptance to pay on a future date to receive the documents immediately. Riskier for the seller than D/P since the goods are released before actual payment.
5. Open Account
The seller ships the goods and sends documents directly to the buyer, with payment due later per agreed terms (30/60/90 days). Most convenient for the buyer, riskiest for the seller since nothing binds the payment. Usually reserved for long-standing, high-trust relationships.
Quick comparison
| Method | Safety for seller | Safety for buyer | Cost | |---|---|---|---| | 100% advance T/T | Very high | Low | Low | | L/C | High | High | Higher (bank fees) | | D/P | Medium–high | Medium | Medium | | D/A | Medium | High | Medium | | Open Account | Low | Very high | Low |
Which one should you choose?
There's no single right answer — it depends on the level of trust between the parties, order value, and each side's risk tolerance. For a first order between partners who haven't worked together before, a partial advance payment plus L/C or D/P for the balance is a common, balanced approach. Once there's a good transaction history, both sides often move toward more flexible terms like D/A or short-term open account.
Sources: