Frequently Asked Questions
Want to know more about payments to and from the U.S.? Have questions about credit checks? Want to know what do when you receive a cheque in a foreign currency? These are just some of the questions that will be answered below.
Are payments to and from the U.S. different from other countries?
In selecting from different payment methods, both importer and exporter consider factors such as similarity of legal systems, ease of collection, language, geographic proximity, availability and quality of credit and other information on trading partners, and any pre-existing business relationships. The closeness between Canada and the U.S. has certainly promoted open account trade between our countries. However, keep in mind that proximity and a common language are only two of many factors that must be considered when selecting the appropriate payment method.
What if I have already shipped the goods, but I find out the buyer can't pay?
The answer to this question depends on the method of payment that you and your trading partner have agreed upon. A confirmed letter of credit offers the best protection in this situation, for the confirming bank (e.g. RBC Royal Bank) is obligated to pay for the shipment. Other payment options are riskier, however, and you may have to resort to a legal undertaking in the country where the importer is located. See our section on Letters of Credit for more details, or consult an International Trade Specialist.
What if the goods that I am importing don't arrive as specified in the sales contract?
When paying under letters of credit and foreign collections, the importer can stipulate specific requirements for shipping documents that provide full details of the goods shipped. However, the importer is not normally permitted to have samples drawn from the goods or to have their quality inspected without specific authorization from the exporter or the remitting bank. As a precaution, some buyers ask the exporter to supply a certificate of inspection from an independent organization in order to provide documentary evidence of the quality of the goods supplied. The importer can call for such a certificate of inspection in the letter of credit or collection order. However, it is important to remember that the financial institution's role in this case is strictly to ensure that the stipulated certificate of inspection conforms to instructions in the letter of credit or the collection order. The financial institution does not vouch for the quality of the goods, or the quality of the inspection.
Getting credit checks... should I bother?
In recent years, credit-checking services have become more accessible and affordable for smaller companies that want some assurance as to the financial standing of their trading partners. Doing a little research on the company before you finalize the contract is always a good idea. Check out our links to some credit reporting agencies that offer commercial credit reports on companies around the world.
What type of insurance coverage should I have?
At the very least, you will need to make sure that the goods are insured in transit. Responsibility for insuring the shipment is something that should be agreed upon with your trading partner before the deal is finalized. Exporters may also want to think about credit insurance to cover potential losses that can occur if a foreign buyer fails to pay. Check out our section on Credit Insurance for more information.
Can I require payment in Canadian dollars in order to avoid foreign exchange risk?
You may require payment in Canadian dollars, but it is important to recognize that in doing so you are passing that foreign exchange risk on to your trading partner. In competitive markets, forcing your buyer to assume additional risk may make your products less attractive, so you might want to look at other options. Financial instruments like forward contracts and currency options are designed to hedge your exposure to exchange risk, making it possible to offer more attractive terms to your buyer. Check our section on Foreign Exchange for more information, or contact our trade team.
I have arranged a foreign collection for my purchase, but my bill of lading is missing. What will happen?
Without a properly endorsed negotiable bill of lading, the shipping company will not release the goods. If a negotiable bill of lading goes missing or does not arrive before the shipment, the importer can ask his bank (the collecting bank) to issue an appropriate guarantee by providing the bank with the proper indemnity. This means that the shipping company can release the goods, and the bank assumes liability to the shipping company on behalf of the importer until the bill of lading is produced.
I have just received a cheque in a foreign currency. What should I do with it?
Canadian banks can exchange financial instruments payable in most freely traded foreign currencies. However, if the instrument is a cheque drawn on a foreign bank, you may find some delay in receiving value for the foreign cheque. In other words, the bank may not pay the cheque for a period of days, sometimes even weeks. For example, a cheque presented for payment to RBC Royal Bank in Canada, drawn on a domestic bank in Germany, has to be sent "on collection" to that bank. This is because RBC Royal Bank has no means of determining if the German bank will pay that cheque. Sometimes, the German bank may have to contact the payor for authorization to pay the cheque, which causes further delays. Therefore, RBC Royal Bank cannot credit your account until we receive value for the funds from the foreign bank.
What government programs are there to help importers and exporters?
Most of the programs offered by the federal and provincial governments are targeted toward small and medium sized exporters. Information on federal export programs is available from both Industry Canada and the Department of Foreign Affairs and International Trade. Regional support for exporters varies, but most provinces provide a variety of programs for business development and export.
For more information about how our international trade solutions can benefit your business, contact an international trade specialist.
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