Mr Old Man Q&A ADVANCE PAYMENT AND ADVANCE PAYMENT GUARANTEE By Mr Old Man Posted on February 7, 2018 2 min read 0 0 3,279 Share on Facebook Share on Twitter Share on Google+ Share on Reddit Share on Pinterest Share on Linkedin Share on Tumblr A windy day! QUESTION Dear Mr. Old Man, A sale contract for USD150,000 states the payment terms as follows: 30% by T/T in advance 70% by D/P The buyer is afraid that it is risky for him to pay in advance as the seller may not effect shipment while he has received the advance payment. What should the buyer do to avoid the risk? Looking forward to your answer. Thank you —- ANSWER Hi, Advance payment means that the seller receives the payment for goods before they have been shipped. When accepting this payment term, the buyer would trust that the seller will deliver the goods in time and as specified. If the buyer must accept to pay in advance but fears that the seller fails to fulfill his obligation on delivery of the goods, he may insist on an advance payment guarantee to cover the risks of non-delivery of the goods and failure to repay the prepayment made. Last but not least, the buyer needs to know his customer (KYC) to determine if he agrees to pay in advance with or without an advance payment guarantee. Best regards, Mr. Old Man
IS THE NOMINATED BANK REQUIRED TO VERIFY WHETHER THE BENEFICIARY HAS AUTHORIZED THE PRESENTING BANK TO PRESENT THE DOCUMENTS?
CAN THE ISUING BANK CITE “LATE PRESENTATION” AS A DISCREPANCY SOLELY BASED ON THE DATE OF THE COVER LETTER?
IS THE NOMINATED BANK REQUIRED TO VERIFY WHETHER THE BENEFICIARY HAS AUTHORIZED THE PRESENTING BANK TO PRESENT THE DOCUMENTS?
CAN THE ISUING BANK CITE “LATE PRESENTATION” AS A DISCREPANCY SOLELY BASED ON THE DATE OF THE COVER LETTER?