International trade offers important advantages for buyers and sellers because it brings the occasion to expand their business opportunities; however, as in any other commercial relationship, the risk of non-payment exists and due to the distances and differences in the legal systems, this risk becomes, if not higher, at least more costly for the parties. Therefore, the financial system and the international commercial custom have created a series of instruments to mitigate the risk of non-payment by the buyer and this article, given the importance of these instruments, aims to point out the most important characteristics of the most popular international payment methods:


The letter of credit, “is a document used as a payment instrument, issued by a bank (Issuing Bank), on behalf of one of its clients (Originator), by means of which it authorizes another bank (Correspondent Bank) abroad, to pay a natural or legal person (Beneficiary) a certain amount of money, upon compliance with certain requirements indicated in the Letter of Credit”1.

According to the Bogotá Chamber of Commerce, among the types of letters of credit that exist, there are the  letter of credit2:

  1. Confirmed: The Issuing Bank asks the Correspondent Bank to include its confirmation, which implies that it assumes the responsibility towards the Beneficiary to negotiate, accept or make the payment as soon as the documents evidencing compliance with all the conditions stipulated in the credit and constituting a compliant presentation are presented (Art. 8 UCP 600).
  2. Unconfirmed (advised): The Correspondent Bank does not accept any commitment with the Beneficiary, it simply notifies the existence of the credit. In this scenario the Exporter only has the promise of the Importer’s Bank (issuer).
  3. Revolving: This type of credit allows the beneficiary to dispose on the credit several times up to its full value. Nowadays it tends to be replaced by the Stand By Letter of
  4. Stand By: It is an irrevocable, independent, documentary and binding obligation for all parties, issued by an Issuing Bank at the request and on behalf of its client to guarantee to a third party (Beneficiary) the fulfillment of an obligation.
  5. Revocable: Provides that the credit may be modified or cancelled independently by the parties (Originator, Beneficiary, Issuing Bank and Correspondent Bank), without prior notice. It is very risky and little
  6. Irrevocable: Gives the seller greater security in the payment, since in order to modify or cancel it, the consent of all parties involved must be obtained; it is currently the most widely used.
  7. On demand: This term is used when the Beneficiary (Exporter) is expected to receive payment as soon as the documents are delivered to the Correspondent Bank (for verification or payment) and these documents comply with the conditions stipulated in the
  8. Acceptance: A credit is an acceptance credit when there is a term granted by the seller to the buyer to make payment, generally within 30, 60 or 90 days. The Beneficiary must draft a bill of exchange to the Correspondent Bank upon receipt of the
  9. Transferable: This is a condition that allows the Beneficiary (exporter), known as the first beneficiary, to assign all or part of the loan to one or more beneficiaries, known as second beneficiaries, on a one-time
  10. Non-transferable: It cannot be assigned by the Beneficiary to another beneficiary or non beneficaries.

Important Note: Banks deal with documents and not with the goods, services or benefits to which the documents may be related (Art. 5, UCP 600, International LC Rules). Depending on the agreed conditions, the documents to be presented by the Beneficiary for the collection of a letter of credit are: Commercial Invoice, Insurance Policy or Certificate and Transport Document: maritime (Bill of Lading – B/L clean), air (Air Waybill – AWB), land (Bill of  Lading).


In this means of payment, the Originator (importer) of a good requests the services of a drawer bank in his country to send the foreign exchange resulting from a commercial transaction, using as intermediary a receiving bank, where the Beneficiary (exporter) has an account. In this means of payment, documents are sent by mail or other means without the intervention of banks. There are several types:

  1. Direct or Post-shipment Draft: Payment is made once the goods have been
  2. Direct Financed Draft: It is the payment of a good already shipped by the exporter and whose funds are financed by the Drawing Bank directly to the Originator of the draft, the Drawing Bank pays the value of the operation abroad and the debt in dollars between the Originator and the Drawing Bank remains in force.
  3. Advance Draft: It is the payment made before shipping the goods.


The bank transfer, also called a payment order, is a payment made by the importer’s bank to the exporter’s bank, which credits the funds to the account of its collecting customer (exporter). This form of payment is made by electronic means, the most widely used being the SWIFT system. The SWIFT network brings together the vast majority of the world’s banks and enables fast and secure communication between them. 4


It is the international means of payment whereby an exporter delivers documents representing goods or services to his bank, with the instruction to send and deliver them to the buyer against payment or the acceptance of a bill of exchange or the presentation of a promissory note/forward commitment or other terms and conditions. In simple terms, it means entrusting the collection of the documents to a bank. 5

In this case, the exporter assumes the risks as the bank assumes no responsibility for payment. The International Chamber of Commerce (ICC) publication 522 constitutes the regulatory framework for this instrument, in addition to local laws and banks’ internal bylaws.

6Collections can be: 7

  1. Documentary Collection at This type of collection works as follows: the Assignor (exporter) delivers the export documents to an Assignor Bank in his country. This bank sends by registered mail the documents and collection instructions to the Collecting Bank in the importer’s country. The Collecting Bank notifies the Drawer (importer) that there are documents in his name and that once payment is received, the documents will be delivered to him immediately.
  2. Documentary Collection by Acceptance. Consists of the Assignor and the Drawee establishing a specific time period for payment, which is provided in a Bill of The Assignor ships the goods and delivers the export documents together with a Bill of Exchange to the Assignor Bank in its country. This bank sends by registered mail the documents and the Bill of Exchange duly completed by the exporter to the collecting bank in the importer’s country. This bank will notify the drawee that there are some documents in his name and that when he “accepts” the Bill of Exchange with his signature, he will have the documents for the nationalization of the goods.


According to the CCB8, it is a document by means of which a bank undertakes to pay a sum of money, within a determined period, to a third party (Beneficiary), in the event that the client, to whom it provides the guarantee service (Originator) fails to comply with the obligation agreed in the contract.

There is a wide range of guarantees that can be issued; however, the most popular ones are those that guarantee or cover international commercial operations: Bid Bonds and Performance Bonds. In the United States, “Foreign Guarantees” are known as “Stand By Letters of Credit”.


Through this document, a bill of exchange is issued or accepted by a financial institution that becomes a joint debtor by guaranteeing the payment of goods to an exporter prior to their respective dispatch. It may also be feasible for the bank to grant a guarantee to  its customers, in these cases, the bank asks for access to financing in other financial institutions in the country or abroad.

Actually, the guarantee is an unpopular operation among banks, since under this modality they assume the “customer” risk without carrying out the corresponding financing, which is precisely the specific activity of banks. 9


A current account in foreign currency is one that is constituted in any of the currencies (Dollar, Euro, Pound or Yen) convertible to Colombian Pesos to residents and/or non-residents in the country.10 According to the Banco de la República they may be: Current Accounts in Foreign Currency in Colombian banks, Current Accounts in Foreign Currency in foreign banks and Current Clearing Accounts in foreign banks, such accounts have for their opening a series of requirements that must be complied with.

In any case, international transactions have many more risks than those of non-payment by the buyer, so, in each case, those should be analyzed and thus avoid a possible future dispute, for this, we will be very prompt to resolve all your concerns and advise you in this regard.

You can contact us by e-mail at or by telephone in Bogotá at (571) 7498261. You can also visit our official website

About the author:

Luisa Lamprea is a lawyer, part of the team of Gestiones Empresariales López & James Bogotá and has experience in the private sector. She specializes in the areas of Commercial Law, Corporate Law and Private International Law.

Bogotá D.C. March 1, 2021.


1 Centro Internacional de Negocios de la CCB (s.f). Medios De Pago Internacionales – Aspectos Prácticos. Cámara de Comercio de Bogotá:

2 Cinollo, R., Jorquera, J., Romero, N., y Tornaghi, C (2016). Modalidades de Cobro y Pago en el Comercio Internacional. Facultad de ciencias económicas UNCUYO.

3 Centro Internacional de Negocios de la CCB (s.f). Medios de Pago Internacionales – Aspectos Prácticos. Cámara de Comercio de Bogotá:

4 Ibidem.

   5 Ministerio de Comercio Exterior y Turismo y Dirección Nacional de Desarrollo de Comercio Exterior del Perú (2006). Guía Comercial y Crediticia Para el Usuario del Comercio Exterior: Serie Pepe MYPE. MinCetur:

6 Ibidem.

   7 Centro Internacional de Negocios de la CCB (s.f). Medios De Pago Internacionales – Aspectos Prácticos. Cámara de Comercio de Bogotá:

8 Ibidem.

9 See:

10 Art. 2, Decreto 1735 of 1993.