This method of payment requires the buyer to pay before shipment is effected. The seller assumes no risk of bad debt and/or delays in payment because advance payment is a precon¬dition of shipment.
Sellers often require advance payment in cases in which the creditworthiness of the over¬seas customer is poor or unknown and/or the political/economic conditions of the buyer’s country are unstable. Cash in advance is sometimes used between related companies. It is also common to require money in advance for samples.
Source: Seyoum Belay (2014), Export-import theory, practices, and procedures, Routledge; 3rd edition.
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