Remittance is to pay in advance, which is the biggest risk for the purchaser-because if the supplier fails to deliver the goods on time and fails to pay back the money, there is a risk of both money and goods.

For the buyer, collection means presenting all documents including bill of lading through the bank after the supplier delivers the goods. After paying the price to the collecting bank, the buyer can obtain these documents and pick up the goods at the port of destination. This is, of course, the least risky payment method for the buyer. And if the market changes, then you don't have to pay, you don't have to redeem the bills, and of course you don't want the goods-although it reduces the market risk, it damages your reputation.

Letter of credit is a fair and widely used settlement method to solve the common concerns of buyers and sellers through the intervention of the issuing bank. When a letter of credit is opened, as long as the seller delivers the goods according to the date stipulated in the letter of credit and submits the documents that meet the requirements of the letter of credit, he can get the payment from the issuing bank first. For the buyer, the payment must be that the supplier has delivered the goods and got all the documents including the bill of lading, which is equivalent to collection-but if the market changes, the buyer can't redeem the documents like collection-which is the fairness of the letter of credit.

For suppliers:

Remittance is an advance payment, which is the least risky-because the supplier has received the payment before delivery, there is almost no risk.

For suppliers, collection means delivery before collection, that is, after delivery, the supplier presents all documents including bill of lading to the buyer's bank through the bank. After the buyer pays the price to the collecting bank, the collecting bank pays the supplier's collecting bank. This is of course the most risky payment method for suppliers, that is, if the market changes and the buyer can neither pay nor deliver the goods, then the suppliers will not receive the money.

As mentioned above, letter of credit is a fair and widely used settlement method for suppliers and buyers. When a letter of credit is opened, as long as the seller delivers the goods according to the date stipulated in the letter of credit and submits the documents conforming to the letter of credit, the issuing bank can get the payment from the issuing bank. No matter how the market changes, even if the buyer goes bankrupt, the issuing bank will pay the beneficiary (supplier). This is a remarkable feature of the letter of credit.

The advantages and disadvantages of the above three settlement methods are analyzed from the nature of the supply and demand sides. From the cost analysis, it is all the same, that is, the cost of remittance and collection is relatively low, while the cost of letter of credit is relatively high.