Deferred Payment is a payment method in international trade where the buyer, after receiving the goods or documents, agrees to pay the purchase price on a specified future date or after a certain period. It is typically used in a buyer's market or long-term cooperation, where the seller grants the buyer a credit period. Use cases include large machinery and equipment, bulk commodity transactions, or cooperation with reputable long-standing customers. Precautions: The seller bears the credit risk of buyer default, so it is advisable to assess the buyer's creditworthiness, obtain export credit insurance, and clearly specify in the contract the payment time, interest, and liability for breach. It is similar to Open Account, but Deferred Payment emphasizes a fixed deferral period; it differs from D/A (Documents against Acceptance), which is based on bill acceptance, whereas Deferred Payment does not necessarily use a bill of exchange. It also differs from a Usance L/C under a letter of credit, where bank credit is involved. In short, Deferred Payment is commercial credit granted by the seller to the buyer and requires careful risk management.
📝 Examples
1. According to the contract terms, the buyer shall pay the full amount by telegraphic transfer within 60 days after receipt of the goods, which is a deferred payment method. (Note: specifies the deferral period and payment method)
2. Given the long-term cooperation between both parties, the seller agrees to grant the buyer a 90-day deferred payment credit period, but requires the buyer to provide a bank guarantee. (Note: deferred payment combined with guarantee measures to reduce risk)
💡 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