Expanding a Company to Operate Internationally in Israel - Research Paper Example

All charges that follow such as delivery, commissions and distribution are upon the buyer. The disadvantage of this is that the risks involved transfer so early to the buyer. Arrangement of export and import licenses, as well as customs formalities, is a tedious process for the buyer (Deardorff, 2006). The disadvantage to the seller is that he loses control over the company to transport his goods.  

A term closely related to ex-works is free on board (FOB). This one shows that the price quoted by a seller or invoiced includes all charges up to where the goods are placed on board on a ship for transportation. It can also be called, freight collect, freight forward, or freight. The advantage of this to the seller is that he can easily recover the goods before it is onboard especially where the buyer defaults in payment or contract (Madura, 2011). The disadvantage of this term of trade is that the seller has limited or no responsibility for recovering the merchandise after the cargo crosses the rail of the ship. The buyer also suffers in case the cargo gets lost when the ship is in transit (Deardorff, 2006).

Free alongside ship (FAS) is also a term of sale indicating that the price quoted or invoiced by a seller includes all the charges only up to the port of departure of the goods. The buyer of the goods is thus responsible for the loading of the goods on the ship and all other subsequent costs for transportation (Madura, 2011). This form of terms of trade has the same advantages and disadvantages as the free onboard. Cost and freight (C & F), is a term of sale showing that the price quoted or invoiced by a seller for shipment purposes does not include insurance charges but includes all charges up to the destination port. The advantage to the buyer is that all the legal processes are done for him by the seller. The disadvantage to the seller is that he will be responsible if the cargo gets lost or spoilt during transit (Deardorff, 2006).

Cost, Insurance, freight (CIF), is a term of sale signifying that the price quoted by a seller includes the insurance charges, the cost of the goods and transportation costs up to the named port of destination. From the analysis of the terms of trade above, the most preferred to a buyer is the cost, insurance and freight. On the other hand, the most preferred to a seller is the ex-works. Cash in advance (CIA), is a payment method where an order from a buyer is not processed until full payment is received in advance (Madura, 2011). It is also called cash with order. Open accounts are a method of payment where the buyer of goods pays the sum payable only after the receipt of goods or on deferred payment terms.

A consignment sale is a trading agreement in which the seller of goods sends them to a reseller or a buyer who is supposed to pay for the goods when they are sold. In this case, the seller remains the owner of the goods until they are sold and paid for in full. If the goods are not paid for within the agreed-upon period, the goods are taken back by the seller (Deardorff, 2006). This type of payment is also called the sale or return of goods on consignment.

A sight draft is a bill of exchange that is payable only when it is presented. If not seen by the required party it will not have matured (Deardorff, 2006). On the other hand, a time draft is a bill of exchange that is payable at a determinable future time. This can be such as 30 days or 1 week time from the date of sight. The use of a time draft is mainly to allow the buyer to have a good time in paying for the goods purchased. Another type of draft is called a date draft and is only payable on a fixed date irrespective of the specific date it was seen by the buyer (Madura, 2011).

A letter of credit (L/C) is a written agreement that shows acceptance of the importer’s or buyer’s bank to pay off the amount to the seller’s or exporter’s bank (Deardorff, 2006). A letter of credit is a form of payment that guarantees payment of a specified sum of money in a certain currency provided the seller meets the set conditions and forwards the required documents within a specified time frame. In regard to the above payment methods, it is preferred that the buyer and seller decide to use a letter of credit. This will give both parties a good time to carry out their transactions while observing that all, the terms and conditions are met (Madura, 2011).