solution

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Importer company in Brazil and the main terms of your agreement

The importer is a large and well-established company founded in 1965, headquartered in Sao Paolo. Your initial investigations show that the company has good credibility and relationships with local banks in Brazil. This will be the first time your company is doing business with this company. You also learned that this company has been importing from many parts of the world for a long time.

You have agreed to export your products to this Brazilian company as CIF with a payment term of B/L+120 days. The importer wants the payment on open account terms, but you tend to complete this transaction under a L/C. So, you’re still negotiating over financial alternatives.

The profile of the importer company in Japan and the main terms of your agreement

The importer is a new small-scale company established in Tokyo in 2019. They do not have long-term banking relationships in Japan, but the founders are young and want to expand their business in the Japanese market. This will be the first time your company will do business with this company.

Your agreement with this Japanese company is FOB. The importer (at sight) wants cash against documents, but you tend to complete this transaction under a deferred L/C with a payment term of B/L+45 days.

Question

If you agree to export, write down the main advantages and disadvantages for you as an exporter:

a-) By open account or L/C in Brazil operation (write comparison of both options)