Order Payment Cost (Payment Cost) refers to all expenses incurred by the buyer to complete payment for an order in international trade, including bank charges, remittance fees, letter of credit issuance fees, acceptance fees, telecommunication fees, currency exchange losses, etc. This term is commonly used in quotation calculations for trade terms such as FOB and CIF. Especially when the contract stipulates payment methods such as Letter of Credit (L/C), Telegraphic Transfer (T/T), or documentary collection (D/P, D/A), payment costs directly affect the buyer's total procurement cost. Note: Payment cost is different from 'Payment Terms', which refers to the timing and method of payment (e.g., 30% advance payment + 70% against copy of B/L), while payment cost is the actual financial expense incurred. It is also different from 'financing cost', which is interest incurred due to deferred payment. In practice, the buyer should obtain quotations from banks in advance and include them in the cost. If the seller agrees to bear part of the costs (e.g., L/C issuance fee), it must be clearly stated in the contract.
📝 Examples
1. When quoting, we must include the order payment cost, for example, L/C issuance fee and cable charges account for about 0.15% of the goods value; otherwise, profits will be eroded. (Note: The buyer needs to consider bank charges in the payment process when calculating the total procurement cost.)
2. Since this contract adopts D/P at sight, the buyer must bear the collection commission and postage. These order payment costs should be confirmed with the seller before signing the contract as to who pays. (Note: Under different payment methods, the party bearing payment costs may differ, and it should be stipulated in the contract.)
💡 Foreign Trade Tips
Foreign trade terms are the foundation of international business communication
Trade practices may vary slightly by country; pay attention when using them
When using terms in contracts, specify the applicable version (e.g., Incoterms 2020)
For unfamiliar terms, use GlobalSync's multilingual email helper to confirm with your partner