Financial Instruments

International trade opens up many prospects for the company, leads to higher productivity, expanding the market for goods and services, increasing trade, and creating new jobs. When entering the international level of cooperation, it is necessary to understand about the specific difficulties that may arise during establishing partnerships with foreign contractors.

In particular, it is necessary to keep in mind the significant risks associated not only with the possibility of non-compliance with its commitments, but also with the economic and political risks associated with geographic, political, economic, and national factors, limited knowledge of the legal environment in the counterparty’s country. 

Imagine the exporter and importer, who want to make a deal. However, they live in different countries, far from each other, have never met, they speak different languages, work in different political, social and economic conditions. Everyone wants to make money and everyone follows the principle of "self comes first," so they treat each other with suspicion. Since they cannot practically exchange goods for money, so everyone imagines a diagram calculation. 

From the exporter’s point of view, the importer must first pay for the goods and the delivery of the goods should be exporting only after receiving the money.

Importer has the risk of losing money during no-delivery the goods. From the importer’s point of view the situation should look different: the exporter sends the goods, and the importer pays for it only after receipt. In this case, the exporter may lose the goods during. From the point of view of the exporter, the importer must first pay for the goods and the delivery of the goods should be exporting only after receiving the money.

To protect the exporter against the risk of failure of goods, non-payment or late payment, on the one hand, and to ensure proper implementation of the counterparty of the contract to the importer, on the other hand, as an intermediary between the Financial instruments, such as various forms of credit, guarantee.

The practice of international trade shows, the most appropriate, from the point of view of the search of consensus between the parties on foreign trade transactions are documentary collections and documentary credit.

 Presented financial instruments in this section most often are used in the conduct of international trade by companies, which consequently confirmed by the tendency of constant increase in the share of documentary transactions in international payments, can help reduce these risks in the implementation of foreign trade contracts.