2.

Characteristics, Advantages and Risks of using T/T payment method

2.1. Characteristics
- In fact, in the T/T payment method, the two buyers and sellers can apply one of
two money transfer type

 Telegraphic Transfer Remittance (TTR): the importer pays an amount of

money in advance to the exporter before delivery.
 TT after shipment: means the importer pays money to the exporter after
receiving the goods

2.2. Advantages
2.2.1. Regarding cost
and process
- Simple and quick operation: Simple, fast TT payment helps speed up the transaction process.
- Cost savings: Compared
TT payment is
usually lower.
because there is only money transfer fees
- No documents are held by the bank, the bank is only intermediary making the
payment, so it is not bound by anything.
- The set of documents when making TT payment is not too strict for the exporter
because it does not have to be presented at the request of the importing bank it
helps save time and effect.
2.2.2. For Sellers
- Limit costs instead of opening L/C (LC opening and repair fees)
- If the seller uses 100% TTR, it is considered safe in the transaction
- TTR is convenient for the seller because they will receive money from the buyer
before delivery so there is no fear of damage or risk of goods.
2.2.3. For Buyers
- Limit the risks from the export side due to late delivery or poor quality goods.
- TT after shipment transfer is convenient for buyers because they will receive the
goods before transferring money so they do not have to fear damage due to slow
delivery or low quality goods from the manufacturer.
2.3. Limitations
- T/T payment method carries the greatest risk because payment depends on the
buyer's goodwill. Only use this method in cases where the buyer and seller
have trust, long-term cooperation and pay small amounts.
2.3.1. TTR
- The risk will be pushed to the buyer because they have to pay in advance while
not knowing the condition of the goods. The seller may receive money without
delivering the goods, delivering late or making poor quality goods.
- With TTR, the seller may bear the risk of foreign exchange rate differences at
the time of payment and the time of receipt if the two parties do not clearly the
exchange rate in the contract.
- Do not use 100% TT in advance of the entire contract. TT should be applied,
which means paying 40% in advance and the rest in other forms as agreed.
2.3.2. TT after shipment
- Disadvantage for the exporter because if the importer is late in making a
money transfer and sending it to the bank, the exporter will be slow to receive
payment even though the goods had been shipped. The bank has no duty or
method to urge the importer to quickly transfer payment to ensure their rights.
beneficial for exporters.
- The buyer can take advantage of poor quality products to pressure the good'
prices
- In case the importer does not receive the goods, the exporter must pay shipping
costs, sell them cheaply or re-export them.