Case: a Colombian distributor imports inputs from India and how it pays for them

Paying an order to a supplier in India is not a single wire: it is a sequence of decisions about when cash leaves, who carries the risk that the goods never arrive and at what rate each dollar is bought. Getting the order wrong can cost more than the channel fee.

At Soulbit Academy we present this case as an illustrative, composite example. The company, the supplier and every figure are fictional and labeled as assumptions. The focus is the advance, the letter of credit versus direct payment, and shipping lead times. For Asia payments in general, see the case of the Colombian importer paying Asian suppliers.

The case: Distribuidora Andina de Insumos and its supplier in Gujarat (illustrative profile)

Distribuidora Andina de Insumos S.A.S. is an illustrative company in Medellín with 35 employees. It distributes pigments and chemical additives to Colombian paint and textile manufacturers. It buys from a single supplier in the state of Gujarat, India, which invoices in US dollars and sells order by order.

The standard order is USD 200,000 every two months. The distributor's customers pay in pesos, 30 days after invoice. This is the classic importer mismatch: it buys in dollars, sells in pesos and the goods spend weeks at sea before they can be invoiced.

What is different about buying from India compared with other Asian corridors?

In the case, the assumed sea transit is 35 days and the Indian exporter answers to its own rules on collecting export proceeds. For the buyer this means long orders, more tied-up cash and the need to agree clearly when each tranche is paid.

Paying suppliers in India: advance, payment against documents or letter of credit

There are three usual ways to pay a supplier in India: a full advance, a partial advance with the balance against documents, and a letter of credit. Each splits risk between buyer and seller differently, and each moves cash on a different date. Table 1 compares them using the order in the case.

Structure	When cash leaves (assumed)	Who carries the risk	Extra cost (assumed)
100% advance	Day 0, before production	The buyer: pays before receiving anything	None direct; most cash tied up
30% advance and 70% balance against documents	30% on day 0 and 70% on presentation of documents (day 35)	Shared: the buyer risks the advance and whether the goods shipped conform	None direct; medium cash tied up
Letter of credit at sight	100% at shipment, if the bank finds the documents compliant	The bank pays only against compliant documents	Opening and negotiation fees, e.g. 1.5% of the value
Open account after goods arrive	After arrival, on the agreed term	The seller	Uncommon with a new supplier; usually priced into the unit cost

Distribuidora Andina picks the 30% advance with the 70% balance against documents. The supplier agrees because 30% covers its production cost, and the buyer agrees because the 70% leaves only once a bill of lading proves the goods have shipped.

A letter of credit would be safer but costs fees and paperwork. The guide to letters of credit, guarantees and trade finance for SMBs explains when it pays off. The practical rule of the case: with a new supplier or a large order, the letter of credit protects; with a supplier of many years and recurring orders, its cost may not justify itself.

Shipping lead times and Incoterms: when each tranche is paid

Lead times on an order from India decide when each tranche is paid and how long cash stays tied up. The case assumes 30 days of production and inspection, 5 days to issue and present documents, 35 days of sea transit from shipment and 7 days of customs clearance. These are assumptions, not market timings; real figures depend on route, carrier and port.

The Incoterm in the contract defines who answers for the goods at each stage. According to the ICC Academy explanation of CFR and CIF, under CIF risk passes to the buyer once the goods are loaded on board at the port of shipment, even though the seller contracts and pays for freight and insurance to destination. Under FOB, risk also passes at that point. That is why the balance against documents is paid when the risk is already the buyer's, and it calls for cargo cover in force.

Each tranche should be tied to a verifiable milestone. The advance is tied to order confirmation, and the balance to presentation of the bill of lading, the commercial invoice and the packing list. The contract should also say what happens if shipment slips: who bears the cost, whether there is a penalty and whether the buyer can cancel and recover the advance.

What happens to the advance if the supplier does not ship?

The buyer recovers it only if the contract provides for it and the supplier complies. Without a refund clause the advance depends on the seller's good faith; with one, it is still a claim against a third party in another country, slow to collect. That is why the advance should be capped at the production cost.

Paying in dollars and selling in pesos: the exchange rate between advance and balance

The exchange rate between the advance and the balance changes the peso cost of an order whose dollar price is fixed. Each tranche is bought at the rate of the day it is paid, so the distributor is exposed to peso depreciation during the weeks between the two payments. Table 2 follows the order with assumed rates.

Day (assumed)	Milestone	Payment in USD	Assumed rate (COP per USD)	Cost in pesos
0	Order confirmation and 30% advance	60,000	4,000	240,000,000
30	Production ends, inspection and shipment	0	Not applicable	0
35	70% balance against documents	140,000	4,200	588,000,000
65	Arrival at the Colombian port	0	Not applicable	0
72	Customs clearance and delivery to warehouse	0	Not applicable	0
102	Customer pays at 30 days	0	Not applicable	0
Total	Order cost in pesos	200,000	4,140 (average)	828,000,000

The arithmetic checks out: 60,000 times 4,000 is 240,000,000; 140,000 times 4,200 is 588,000,000; the sum is COP 828,000,000. If the whole order had been bought at 4,000 it would cost 800,000,000. The difference, COP 28,000,000 or 3.5%, is the FX effect of assuming the dollar rises by 200 pesos between the two payments.

The effect can run either way: if the dollar falls, the balance gets cheaper. What matters to a CFO is that the exposure exists on every order and can be managed. The guide to FX hedging for companies with USD revenue and local costs describes the instruments. A simple option is to lock the balance rate when signing the order, if the financial institution offers that cover.

For the budget, the distributor should use the highest plausible rate for the balance, not the rate of the advance day. Budgeting the order cost at 4,000 understates the real cost, which is measured when the end customer is invoiced.

Working capital tied up in transit

Tied-up working capital is money already paid to the supplier and not yet recovered through sales, and in this case it lasts between 67 and 102 days. The advance of COP 240,000,000 is out of cash from day 0 until the customer pays on day 102. The balance of COP 588,000,000 is tied up for 67 days, from day 35 to day 102.

To price it, the case assumes a financing cost of 1.2% per month. Adding peso-days (240,000,000 times 102 plus 588,000,000 times 67, that is 63,876,000,000), dividing by 30 and multiplying by 1.2%, the financing cost of transit is about COP 25.6 million. It is an assumed figure, but it shows the order of magnitude: as relevant as the FX effect.

How much of the cost of importing depends only on time?

A share comparable to the exchange rate. In the case, time costs about 25.6 million and the dollar 28 million, on an order of 828 million: together, close to 6.5% extra. Cutting days in transit or negotiating a smaller advance is worth as much as negotiating the unit price.

Three levers reduce this cost. The first is to lower the advance to the minimum the supplier accepts. The second is to negotiate a discount for early payment when the distributor pays sooner, as the guide to early-payment discounts from overseas suppliers explains. The third is to project cash in two currencies with the guide to cash flow forecasting with foreign-currency revenue, so the shortfall is not discovered on balance day.

What Colombia and India require: exchange channeling and the exporter's collection

Colombia requires import payments for goods to be channeled through the foreign exchange market. Resolution External 1 of 2018 of the Banco de la República provides that residents must channel through the exchange market the payments covering the value of their imports, and that exchange market intermediaries collect the information on each operation. See the text in the official compendium of the resolution.

In practice, the advance and the balance both go through an authorized intermediary that files the exchange declaration. The import itself is cleared with the DIAN through its import declaration. The guide to the Colombian foreign exchange regime for companies details that circuit; this article does not replace a review with the intermediary or an adviser.

On the Indian side, the exporter must realize and repatriate export proceeds under the Reserve Bank of India Master Direction on Export of Goods and Services. The realization period and the date from which it runs may have changed in recent amendments that we did not confirm in a primary source. Check the current text on the RBI site. This sits on the seller's side, but it explains why an Indian supplier prefers clear, documented collections.

For the same reason, an Indian supplier should not be assumed to accept stablecoins. This article does not state that the Reserve Bank of India framework recognizes that collection method, and each supplier and its financial institution will decide what they accept. Until there is written confirmation, payment remains a dollar wire transfer.

What Soulbit V1 delivers and what it does not

Soulbit V1 delivers balances in stablecoins (USDC and USDT) and fiat (USD, EUR and GBP) under institutional custody, KYB, payment links, collection QR codes, OTC conversion by quote on request, disbursement over Colombia's local banking rail, batch payroll, traceability and human support. For an importer, the value lies in managing the dollar balance and its conversion, not in structuring the trade.

What Soulbit does not deliver is what this case might suggest. It does not issue or confirm letters of credit, file exchange declarations or replace the exchange market intermediary. Nor does it guarantee that a supplier in India will receive stablecoins or accept anything other than a dollar wire, and it does not claim the local rail operates outside Colombia.

It also offers no API integration with accounting systems, no automatic conversion, no card and no yield on balances. No price advantage is claimed, because there is no closed rate card and conversion is quoted case by case. Mobile apps are planned but not available until they are published in the stores.