Secure terms payment and the Incoterms rules

Trade finance mechanisms such as letters of credit and documentary collections allow buyers and sellers to deal with each other in an environment of limited trust

• sellers wish to retain control of the goods until they are sure they are going to get paid
• buyers need to know that the goods are going to be despatched as agreed in the contract

Letters of credit and documentary collections are based on the principle that banks can control documents that represent the goods.

The Incoterms rules include (section A8) obligations on the seller to provide documents to the buyer, but they say little about what these documents should be.

What transport modes and documents are appropriate for secure terms trading?  What are the implications for the choice of an Incoterms rule?

The C rules – work best with letters of credit

Ex Works and the F rules

The D rules