• Foreign Trade

    Foreign trade may be transacted in one of three ways:
    Open Account – This is the case where there is complete trust between exporter and importer. This is the case where the exporter sends the goods and purchase documents directly to the importer's address, and the importer pays the exporter on a pre-agreed future date. Upon the agreed date, payment is made to the exporter as per the invoice. This is the cheapest, most efficient way for both parties to conduct foreign trade.
  • Forward transaction

    An agreement / contract specifying the terms for a future transaction to buy and sell foreign currency. In this transaction, the buyer and seller agree in advance the future exchange rate (i.e. the value of one currency in terms of the other currency), the date for the transaction to be made, and the transaction amount. The future exchange rate is calculated based on the spot rate, plus difference between interest rates on the currencies for the transaction term. For example: In two weeks you are about to receive a certain amount in NIS, and wish to buy US Dollars for it. The current exchange rate is NIS 3.50 for USD 1, but you are concerned about the exchange rate changing in two weeks' time. To ensure this exchange rate, you can use a forward contract to specify the exchange rate, amount and date for the future transaction.

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