Open Account with Periodic Settlement, a payment system under export import


Open Account with Periodic Settlement, a payment method in International Trade

 

Open Account with Periodic Settlement, a payment system under export importUnder this form of payment, exporter sends the goods, directly, to the overseas buyer along with invoice. The exporter does not draw any bill of exchange on the importer. This form of payment is made when the exporter and importer are inter-connected companies like holding company and subsidiary company or where the relationship between them is long standing and absolute trust exists between the two. There is real risk to the exporter as there is no proof in the form of documentary evidence to establish the obligation on the part of the importer to make the payment. If no credit arrangement is agreed, the buyer has to make payment, immediate to the receipt of goods. However, in most of the cases, importer makes the payment only on the expiry of the stipulated credit period agreed. It is desirable for the exporter to enter into this manner of payment only when the bonafides of the importer is beyond doubt.

This method of payment is simple and involves no additional costs. This form of payment is possible only when the exporter is financially strong as he is meeting the credit requirements of the buyer. It presupposes that there are no exchange control restrictions in the importer's county. Otherwise, the importer may not be able to remit the amount when the amount falls due for payment.

Indian exporters are allowed to send the goods on this basis only with the special approval of RBI. RBI normally permits to foreign companies operating in India.

 

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