Payment Terms in International Commodity Trade: T/T, CAD and Letters of Credit
How payment works in spice, coffee and pulse trade — advance T/T, part payment, cash against documents (CAD/D/P) and letters of credit, with risks and costs for buyers and sellers.
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Payment terms balance trust and risk between buyer and seller. Here are the options you'll meet in spice and commodity trade.
The main options
| Term | How it works | Risk for buyer | Risk for seller |
|---|---|---|---|
| Advance T/T | Buyer pays before shipment | High | Low |
| Part advance + balance | e.g. 30% advance, 70% against documents | Medium | Medium |
| CAD / D/P | Bank releases documents when the buyer pays | Low–medium | Medium |
| Letter of credit (L/C) | Buyer's bank guarantees payment against compliant documents | Low | Low |
| Open account | Buyer pays after delivery | Low | High |
Letters of credit
An L/C is strong protection for both sides, but document discrepancies are common. Every detail on the invoice, bill of lading and certificates must match the L/C exactly. Bank fees apply.
Building trust
- First orders: samples, then a smaller order with part advance or CAD
- Regular business: move to terms that reflect the relationship
- Large contracts: L/C protects both sides
Currency
Most spice and coffee trade is priced in USD, with EUR common for European buyers. Agree the currency and who bears bank charges. Check rates with the currency converter.
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Source spices, coffee and pulses from Pyalm
We trade from Calicut (Kozhikode), India on the Malabar spice coast and Dubai, UAE, exporting to buyers across Europe and worldwide. Wholesale, private label and dropshipping. See products & grades, export & shipping and quality.
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