The Upgraded Complex of Payment Methods Following Expansion of Contract Manufacturing in International Trade

Abstract

The problem of payment for goods in international trade is associated with the risk experienced by both the seller and the buyer. Various scholars have been conducting research in this area for five decades, and the business literature and literature for university students include a complex of methods in which payers operate in international trade transactions. On one side of the block-shape complex, it is customary to display the payment methods that pose the greatest risk to an exporter, and on the other side of the block-shape complex, the methods that pose the least risk to an exporter. The same methods, in reverse order, have the lowest risk for an exporter on the first side of the block-shape complex and the highest risk for an importer on the right side of the block-shape complex. In principle, such a block-shape complex is represented by many authors by stylizing graphically and describing the advantages and disadvantages of each method. According to the classic block-shape complex, the lowest risk for an exporter is to receive money in advance, the higher risk is to sell under a letter of credit - a letter of credit, the medium risk is to sell under the documentary collection method, and the highest risk is for the open account method and consignment. From an importer's point of view, these risks are in reverse order. The lowest risk for an importer is the consignment method, the following methods are arranged in order of increasing risk as follows: open account, document collection, letter of credit and prepayment. All these methods are represented in the classical complex, not reflecting the contractual case of production. The authors of the article conducted a qualitative study among the contract manufacturers of goods operating in Eastern Europe and importers of their products - brand owners. The conducted research allows to include the method of payment before production into the classic complex of five payment methods.