Payment by A US company
I have had a query from a company who have received an enquiry from the US, and they are putting together their proposal.
They normally only export software which has activation keys, so if the customer doesn’t pay, they don’t activate the software, or it only for a limited period only.
However, this enquiry involves their software being already installed on hardware which they are shipping to the US.
Essentially, the software is free, and makes the hardware good value.
They want some advice about the payment terms they should offer.
They have no qualms about the US company; it appears to be totally legit but obviously he doesn’t want to ship a fair quantity of hardware with no guarantee of payment.
It is after what is customary dealing with US companies, so he can put the paperwork together for his proposal.
Any advice would be appreciated, so I can advise the cleint the best way forward.
I would suggest one of two options here:
They agree with their U.S. buyer to arrange Payment in full against "sight" of documents through his bank and the buyers U.S Bank. Ie his freight forwarder would release bills of lading to him once vessel departs, upon receipt he then takes them to his bank who in turn will let the US Bank know they have "SIGHTED" the bills of Lading and request payment in full. The buyer cannot afford to delay the payment as his goods cannot be released to him until the Original Bills have been couriered down.
Another way is to ask his freight forwarder to retain ALL original documents until payment is received. Without the Original Bills Of Lading the buyer cannot take delivery of his goods and he will incur heavy demurrage and storage costs on quay whilst he waits for his docs. Once he has payment he can advise his freight forwarder to issue an EXPRESS RELEASE of the goods to his buyer. Cheaper than option A and this is the way a lot of our U.S.A. exporters send their goods.
Any further advice or help ask them to contact us
Business Development Manager
STI Global Logistics Ltd
Unit 1 Lords Court
Basildon Essex SS13 1SS
Tel: +44 (0)1268 289653
Mobile: +44 (0)7554 117585
Fax: +44 (0)1268 289649
Above comments from Ian apply to seafreight. The same rules do not apply to airfreight or courier shipments.
Also you mention the software is free – that’s fine but that does not mean it does not have a value for customs purposes. Take care with the calculation of the value that should be declared to customs.
For more information please feel free to contact me directly