Choosing how you get paid is as important as the price itself. For perishable goods moving in reefer containers across 7–21 day transit windows, the payment method decides how much risk the exporter and the importer each carry, how quickly cash is released, and how much the deal costs in bank fees. This guide explains the four payment methods used in international fresh-produce trade — Telegraphic Transfer (TT), Letter of Credit (LC), Cash Against Documents (CAD) and Open Account — how each works, who carries the risk, and when each one fits.

Table of Contents

• The Payment-Risk Spectrum
• Advance Payment and Telegraphic Transfer (TT)
• Letter of Credit (LC)
• Cash Against Documents (CAD)
• Open Account
• Payment Methods Compared: Who Carries the Risk
• How Payment Terms Relate to Incoterms
• Choosing the Right Method for Egyptian Exports
• Payment Terms in Practice at PEI Trade
• Sources and References

The Payment-Risk Spectrum

Every payment method trades exporter security against importer security. The more secure the exporter is, the more cash and trust the importer must commit up front — and vice versa. From the exporter’s point of view, the methods rank from safest to riskiest as follows:

1. Advance Payment (cash in advance, usually by TT) — the exporter holds the money before shipping.
2. Confirmed Letter of Credit — two banks guarantee payment, one of them in the exporter’s country.
3. Irrevocable (unconfirmed) Letter of Credit — the importer’s bank guarantees payment against compliant documents.
4. Cash Against Documents – D/P (documents against payment) — the bank releases shipping documents only when the importer pays.
5. Cash Against Documents – D/A (documents against acceptance) — documents are released against the importer’s promise to pay at a future date.
6. Open Account — the goods ship and arrive before payment is due.
7. Consignment — payment only after the importer sells the goods (highest exporter risk).

Advance Payment and Telegraphic Transfer (TT)

A Telegraphic Transfer (TT) — also called a bank wire or SWIFT transfer — is a direct bank-to-bank electronic payment. Used as advance payment, the importer wires funds before the goods are shipped. It is the simplest and cheapest method and gives the exporter complete security, but it places all the risk on the importer, who pays before seeing or receiving the goods.

In practice, fresh-produce trade often uses a split TT: a deposit (commonly 20–30%) is wired on order confirmation, and the balance is wired against a copy of the shipping documents or the bill of lading. This shares the risk and is widely used between partners who have an established relationship but do not want the cost and paperwork of a Letter of Credit.

Letter of Credit (LC)

A Letter of Credit — or documentary credit — is a written undertaking by the importer’s bank (the issuing bank) to pay the exporter a fixed amount, provided the exporter presents a set of compliant documents within the stated deadlines. Payment depends on the documents, not on the goods, so accurate and on-time documentation is critical. Letters of Credit are governed internationally by the ICC’s UCP 600 rules. Common variations include:

• Irrevocable LC — the standard form; it cannot be changed or cancelled without all parties’ agreement.
• Confirmed LC — a second bank (usually in the exporter’s country) adds its own guarantee, protecting the exporter if the issuing bank or country defaults.
• Sight LC — payment is made when compliant documents are presented.
• Usance / deferred LC — payment is made at a fixed date after presentation (for example 30, 60 or 90 days), effectively offering the importer credit.

An LC protects both sides, which makes it the default choice for first transactions or higher-value shipments. The trade-offs are cost (issuing, advising and confirmation fees) and discipline: for perishables, any discrepancy in the documents can delay payment past the point where the cargo has already been delivered.

Cash Against Documents (CAD)

Under Cash Against Documents — also called a documentary collection — the exporter ships the goods and then sends the shipping documents through the banking chain. The importer can only collect the documents (and therefore clear and receive the goods) by meeting the agreed condition. Documentary collections are governed by the ICC’s URC 522 rules. There are two forms:

• D/P — Documents against Payment: the bank releases the documents only when the importer pays.
• D/A — Documents against Acceptance: the bank releases the documents when the importer accepts (signs) a bill of exchange promising to pay on a future date.

CAD is cheaper and simpler than an LC, but the key difference is that the banks act only as intermediaries — they do not guarantee payment. If the importer refuses the documents (for example because the market price dropped), the exporter is left with goods at a foreign port. CAD therefore suits trusted relationships more than first-time buyers.

Open Account

On Open Account terms, the goods are shipped and delivered before payment is due — typically 30, 60 or 90 days after the invoice or arrival date. This is the most competitive offer for the importer and is standard practice with large retail buyers in mature markets, but it carries the highest risk for the exporter, who has parted with the goods and waits for payment. Exporters commonly manage this risk with trade-credit insurance or by reserving open-account terms for long-standing, reliable buyers.

Payment Methods Compared: Who Carries the Risk

How Payment Terms Relate to Incoterms

Payment terms and Incoterms are two separate parts of the same contract and should never be confused. Incoterms (such as FOB, CIF, CFR and DAP) define who arranges and pays for transport and insurance, and where the risk passes from seller to buyer. The payment method (TT, LC, CAD or Open Account) defines how and when the money moves. A complete agreement specifies both — for example: CIF Rotterdam, payment 30% TT advance and 70% by irrevocable LC at sight.

Choosing the Right Method for Egyptian Exports

For Egyptian growers and exporters, the choice usually follows the relationship and the cargo:

• First order with a new buyer: advance payment (full, or a TT deposit with the balance against documents) or an irrevocable — ideally confirmed — Letter of Credit.
• Established buyer, recurring shipments: a split TT or Cash Against Documents reduces cost while keeping reasonable security.
• Large retail or distribution buyers in the EU and UK: open-account terms are often expected; pair them with trade-credit insurance.
• Perishables on tight reefer schedules: remember that LC payment depends on document compliance, which can lag behind delivery — agree realistic document deadlines before shipping.

Payment Terms in Practice at PEI Trade

PEI Trade works with importers worldwide on transparent payment terms matched to each market and relationship. For first orders we generally structure a TT deposit with the balance against documents, or an irrevocable Letter of Credit; established partners move to split TT, CAD or open-account terms with credit cover. Payment terms are always set alongside the agreed Incoterm and shipping plan — see our Payment & Shipping Terms, and our Egyptian Mango Export Guide and Complete Guide to Egyptian Citrus Export for product-specific terms. To structure your first order, contact the export desk at [email protected] or +20 109 911 1918.

Sources and References

This guide is based on the official ICC rules governing documentary credits and collections.

• International Chamber of Commerce — UCP 600 (documentary credits) and URC 522 (collections)

Frequently Asked Questions