Key takeaways
- Polymer trade clears on three payment instruments — letter of credit (L/C), documentary collection (D/C) and open account (O/A) — each with a different risk and cost profile.
- An L/C is a bank promise to pay against documents: slow and document-heavy but the safest instrument for a first trade, costing roughly 0.1–0.4% of value per quarter to the buyer.
- A D/C ships documents bank-to-bank with no guarantee — fine for established relationships or easily-redirected commodity polyolefins, risky for customer-specific engineering grades.
- Open account invoices on 30/60/90-day credit with no bank in the middle — cheapest and fastest, but the most exposed; sellers usually offset the risk with trade credit insurance.
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 can structure L/C, documentary-collection, or open-account terms per shipment rather than per counterparty, where the desk judges the credit relationship supports it. Which instrument applies to any given transaction is agreed in that shipment’s contract — open-account credit in particular is never automatic and remains at OmniaStrata’s discretion.
Frequently asked
Questions on the desk
What payment terms are used in international polymer trade?
Three instruments: letter of credit (L/C) — a bank pays the seller against specified documents; documentary collection (D/C) — banks exchange documents against payment or a promise to pay, with no guarantee; and open account (O/A) — the seller ships and invoices on credit terms.
Which payment term should I use for a first trade with a new counterparty?
A letter of credit, even if the seller pushes back on the cost. Across a credit gap with an unproven counterparty it is the safest instrument both sides have. Step down to D/C once the relationship is established, and to open account only for long-running, repeat-tonnage relationships.
What is a documentary collection (D/C)?
The seller's bank sends the shipping documents to the buyer's bank, which releases them only against payment (D/P) or a written promise to pay (D/A). There is no bank guarantee — if the buyer refuses the documents, the seller still owns the cargo, now sitting at a foreign port.
How much does a letter of credit cost?
Roughly 0.1–0.4% of the contract value per quarter, charged to the buyer's account. It buys document-checked, bank-backed payment security that is worth more than a couple of cents on the resin price on a first trade.
General market commentary from the OmniaStrata desk, provided for information only. It is not legal, financial, tax, or trading advice, and it is not an offer or a commitment to any terms. Figures such as price ranges, spreads, financing costs, and credit periods are illustrative market context, not OmniaStrata's rates or terms. Actual contract terms — including price, payment instrument, credit, insurance, and Incoterms — are agreed in writing on a per-transaction basis and at OmniaStrata's discretion. Market conditions change; figures reflect the publication date.