TERMS OF PAYMENT

Foreign companies can obtain bank references on prospective customers before undertaking business in Italy, and to consider whether checks by commercial credit agencies are appropriate. Before agreeing a method of payment (see below) it is best to contact the International Division of your bank. Although there will be companies who manage to secure payment in 60 days or less the period of credit offered by a supplier to a customer tends to be amongst the highest in Europe, anything from 90 to 120 days. The method of payment will need to be agreed when negotiating the contract. It will depend on the degree of commercial trust that exists between the parties involved and whether credit is offered or required by either party.

1) Open Account

Most of the foreign trade is conducted on an Open Account basis - as the most simple, straightforward and flexible method available. However you must ensure that your customer is highly reputable if business is to be conducted on this basis with, for example your invoice being sent direct to them along with documents and requesting payment within the stipulated term. If he pays by cheque all costs associated with clearing the payment are borne by the exporter. If your bank has an operating subsidiary in Italy it may simplify payment by asking them to open a foreign currency account in Italy.Payments for open account can be made in three main ways:

Electronic funds transfer (i.e. SWIFT/IMT)

Bankers draft

Buyer's own cheque.

2) Documentary Collection (or Cash Against Documents)

Normally carried out through a bank and a slightly more secure method of trading than Open Account. The exporter delivers all the necessary documents to his own bank which then sends them to a bank in the importer country. Documents are only released in accordance with the exporter's instructions e.g. against sight payment, or acceptance of a term bill of exchange.Unless the goods are consigned to a third party the exporter risks loss until settlement is made, if the importer fails to take up documents by paying or accepting the bill of exchange. There is also an additional risk of a buyer subsequently dishonouring an accepted bill of maturity. As with Open Account the exporter may be able to insure against this by Credit Insurance.

MNİDA