When an exceptionally high level of trust exist between the importer and exporter, then remittance of funds in this instance is normally effected before goods are dispatched, received, or the service has been rendered.
The seller's country may impose laws that prevent the shipment from taking place.
The seller may not ship the right quality and/or quantity of goods, or he/she may not ship at all.
The buyer's country may not allow advance payments in respect of imported goods.
The buyer's cash flow may not allow for payment to be made. It can cost the seller dearly as he/she may have incurred manufacturing and other costs on the understanding that an advance payment would be forthcoming.
How can these risks be minimised?
Bank/status reports can be obtained to ascertain the reliability and integrity of the seller.
Country reports are useful in determining the stability of the seller's country.
If the seller will be incurring costs to either manufacture or secure the goods from another supplier, reports should be obtained on the buyer and the buyer's country.
The buyer may request the seller to issue an Advance Payment Guarantee covering any monies advanced to the seller, should the seller default.