5.--Payment-by-Installments

PaymentbyInstallmentsMr.Frazer,abusinessmanfromaHollandengineeringcorporation,ishavingatalkwithMissHuang,thesalesmanagerofGreatWallTechnologyImportCorporationaboutpaymenttermsforacompleteplantofachemicalfactory.Atendofthetalk,they'vereachedtheagreementofpaymentbyinstallmentsforacompleteplant.F:We'vetalkedovertheprice.Althoughit'sonthehighsideascomparedwiththoseofrivalgoods,thequalityofyourproductswillmakeupforit.Nowwe'vecometothetermsofpayment.H:Yes,that'swhatIwasgoingtosay.MayIhearyourpropositionaboutthetermsofpayment?F:Wewouldlikepaymentpriortodelivery,sincethisisyourfirstorder.H:Isee.Iwaswonderingifwecouldmakepaymentafterdelivery.Asyouknow,thegoodsareveryexpensive.F:Iknowtheyareveryexpensive,butwhydoesthatmeanyoushouldpayafterdelivery?H:It'salargeorder,soffwegiveanadvancepayment,wewillhavemoneytrouble.F:Let'sdoitthisway.Wewillacceptpaymentbyinstallments.Whatdoyouthinkofthat?H:Good.F:But,thenumberofinstallmentpayments,theamountofeachpayment,andthemodeofpaymentwillallhavetobecarefullydiscussed.H:Yousaidit.F:Whatkindofinstallmentpaymentdoyouhaveinyourmind?H:Inmyopinion,thepaymentcanbedividedintothreeinstallments,thatis,50%ofthetotalvalueoftheplantwillbepaidupondelivery,40%afterfinalacceptance,and10%aftertheexpirationoftheguaranteeperiod.F:MissHuang.Sinceyouhavebeeninthislineforyears,youmustknowverywellthatforsuchsizeabletransactionsandlongdeliveryanadvancepaymentwillbemadeuponthesightingofthecontract.H:Doyoumeantopayaperformancebond?F:Yes.Youmaycallitaperformancebond.H:Mr.Frazer,youmayrestassuredthatpaymentisguaranteed.Ourcorporationalwaysfaithfullyimplementsallcontractstipulationswiththesellersabroad.F:Iknowyourcorporationiswidelypopularthroughouttheworld.Butthisdelayinpaymentisimportantforusthatitcanhelpfinancetheproject.Youknowtheprocessofmanufacturingtheplantanditsaccessoriesandpartsrequiresaslongastwoyears,andinvolvesatremendoussumofmoney.Duringtheprocessofmanufacture,weadvancethecostforthemainmachinesweproduce,andbesidesthistherearelargesumstobepaidtooursubcomractorsforthemanufactureoftheaccessoriesandparts.Furthermore,theadvancepaymentismadeasageneralrule.H:Mlfight.I'llagreetopaytheperformancebond.Howmuchdoyousay?F:20%ofthetotalcontract.H:What?Youmeanthatwehavetopay$564,000forthebond?Butwhenweimport,fromotherexporters,weusuallyneedtopayatmost10%foranadvancepayment.Assuminganinterestrateof10%,comparedwithothersthebondyouaskwillletusloseatleast$34,000ofinterestonlyforoneyear.Itiswellknownthattheinterestrateisgoingup.Theriskofhigherinterestratesisaddedtotherisksthatwerun.SoI'llpayatmost10%fortheadvancepayment,andIamnotpreparedtomakeconcessions.Ifyoucan'tagreethistermI'llretreattheorder.F:Missttuang,youcertainlyhaveawayoftalkingmeintoit.Allright,inviewofkeepingournegotiationsgoingforward,Ithinkweacceptanadvanceof10%,60%upondeliver5,.But.forothertwopayments,Isuggest25%afterfinalacceptanceand5%aftertheexpirationoftheguaranteeperiod.IhopeyoucanacceptthesesinceIhavemadesomeconcessionsalready.H:ItseemsthereisnothingmoreIcoulddobuttakeyouroffer.