Key takeaways
- First trade with a counterparty: insist on L/C, even if the seller pushes back on cost
- Established counterparty, new origin or new currency: D/C is usually adequate
- Long-running relationship, repeat tonnage: open account 30/60/90 against credit insurance
- Always pair the payment instrument with the [right Incoterm](/blog/incoterms-2020-for-polymer-buyers)
Polymer trade clears on three payment instruments: letter of credit, documentary collection, and open account. Each shifts cost and risk differently. Buyers who default to whatever was used last time leave money and security on the table.
An L/C is a bank promise. The buyer’s bank commits to pay the seller against the presentation of specified documents — typically the bill of lading, the commercial invoice, the certificate of analysis, the packing list, and the certificate of origin. The seller is paid by the bank, not by the buyer; the buyer reimburses the bank.
L/Cs are slow and document-heavy, but for new trading relationships across a credit gap they are the safest instrument both sides have. The cost runs roughly 0.1–0.4% of the contract value per quarter, charged to the buyer’s account.
A D/C is a step lighter. The seller’s bank ships the documents to the buyer’s bank; the buyer’s bank releases them only against payment (D/P) or against a written promise to pay (D/A). There is no bank guarantee behind the transaction — if the buyer refuses to take up the documents, the seller still owns the cargo, but it is now sitting at a foreign port.
D/C is appropriate when the trading relationship is established but not yet open-account, or when the goods are easy to redirect to another buyer (commodity-grade polyolefins moving on container). It is rarely appropriate for engineering plastics where the customer-specific grade may not have a backup buyer.
Open account means the seller ships and invoices on a credit term — typically 30, 60, or 90 days from bill-of-lading date. There is no bank in the middle. It is the cheapest and fastest instrument, and the most exposed to credit risk.
Open account works only inside an established trading relationship, and the seller carries the buyer’s default risk for the full credit term. Most sellers offset that risk with trade credit insurance (Atradius, Coface, Allianz Trade) which costs the seller 0.1–0.5% of the receivable and is rarely visible to the buyer.
- First trade with a counterparty: insist on L/C, even if the seller pushes back on cost
- Established counterparty, new origin or new currency: D/C is usually adequate
- Long-running relationship, repeat tonnage: open account 30/60/90 against credit insurance
- Always pair the payment instrument with the right Incoterm
OmniaStrata’s portal supports L/C, D/C, and O/A on the same trading relationship — the contract clause is set per shipment, not per counterparty. That flexibility matters when the desk wants to step a relationship up the credit ladder over six or nine months.