国际经贸函电课件 9 Terms of Payment

1、Chapter 9Chapter 9Terms of PaymentTerms of Payment Payment in international trade is much more Payment in international trade is much more complicated than that in domestic plicated than that in domestic trade. The most commonly used method of payment in The most commonly used method of payment in i

2、nternational trade is the L/C.international trade is the L/C. Besides the L/C, other modes of payment are also Besides the L/C, other modes of payment are also used in foreign trade.used in foreign trade.Learning Objectives: Know the definition and classification of the L/C Understand the main proce

3、dures of the L/C Know the other modes of payment in international trade Grasp how to urge the establishment of the L/C Grasp how to amend and extend the L/C Master useful words, phrases and expressionsSection 1 IntroductionPayment by Letter of CreditThe other modes of payment Requirements for writin

4、g1.1 Payment by Letter of CreditThe definition and characteristics of L/CThe classification of L/CThe flowchart of the L/CThe definition of L/CThe definition of L/C The Letter of credit used in international trade The Letter of credit used in international trade should always be should always be acc

5、ompaniedaccompanied by export by export documents or shipping documents, so it is documents or shipping documents, so it is called the called the Documentary Letter of CreditDocumentary Letter of Credit. .The definition of L/CThe definition of L/C A documentary Letter of CreditA documentary Letter o

6、f Credit is the written is the written promise of a bank , on behalf of a buyer, to pay promise of a bank , on behalf of a buyer, to pay a seller the amount specified in the credit a seller the amount specified in the credit provided the seller can present the complete set provided the seller can pr

7、esent the complete set of documents set forth in the credit.of documents set forth in the credit.The definition of L/CThe definition of L/C The terms and conditions of a Documentary The terms and conditions of a Documentary Letter of Credit Letter of Credit revolve around two issues:revolve around t

8、wo issues:(1)(1) The presentation of documents (that evidence The presentation of documents (that evidence title to goods shipped by the seller)title to goods shipped by the seller)(2)(2) Make payment Make paymentThe characteristics of L/CThe characteristics of L/C L/C is a contract between the issu

9、ing bank and L/C is a contract between the issuing bank and the beneficiarythe beneficiaryIssuing bank provides the guarantee of Issuing bank provides the guarantee of payment with its credit.payment with its credit.L/C mainly deals with the documents instead of L/C mainly deals with the documents i

10、nstead of goods and services.goods and services.The classification of L/CThe classification of L/C(1)(1) According to the time of payment: According to the time of payment: Sight L/CSight L/C requires the buyer to pay at sigh requires the buyer to pay at sigh when the when the bill of exchangebill o

11、f exchange, which is drawn , which is drawn by the seller, is presented.by the seller, is presented. Time L/C Time L/C allows a deferred payment within allows a deferred payment within the specified time.the specified time.(2) According to the responsibility of the issuing bank: Revocable L/C : Revo

12、cable L/C : can be amended, revoked or cancelled by can be amended, revoked or cancelled by the issuing bank without the beneficiarys consent and the issuing bank without the beneficiarys consent and even without prior notice.even without prior notice. Irrevocable L/C: Irrevocable L/C: cannot be can

13、celled or withdrawn after it cannot be cancelled or withdrawn after it has been opened and noticed to the beneficiary as long as has been opened and noticed to the beneficiary as long as there is no agreement on cancellation and withdrawal there is no agreement on cancellation and withdrawal among t

14、he applicant of the L/C (buyer), issuing bank and among the applicant of the L/C (buyer), issuing bank and the beneficiary (seller).the beneficiary (seller).(3) According to the transferability of the L/C: Transferable L/C Transferable L/C can be transferred or made available to can be transferred o

15、r made available to the second beneficiary, usually indicate “transferable” the second beneficiary, usually indicate “transferable” (“transmissible”, “assignable”, “divisible” )(“transmissible”, “assignable”, “divisible” ) Non-transferable L/C Non-transferable L/C cannot be transferred, usually cann

16、ot be transferred, usually indicate “non-transferable” or “not transferableindicate “non-transferable” or “not transferable”. Note: In the absent of any indication, the L/C is deemed to be non-transferable.(4) According to the involvement of a third party bank to guarantee payment: Confirmed L/C Con

17、firmed L/C can be confirmed and guaranteed by a third party bank for the payment in the event that the opening bank becomes bankrupt. Non-confirmed L/C Non-confirmed L/C without the confirmation of a third party bank, so the risk of payment by non-confirmed L/C is higher than confirmed L/C, because

18、the beneficiary cannot get the money if the opening bank becomes bankrupt. (5) According to the existence of shipping document : Documentary L/C Documentary L/C means that the exporter is required to present documents stated in the letter of credit evidencing current shipment of the goods ordered be

19、fore the money is released. Clean L/C Clean L/C is a letter of credit with no documentary requirement other than a demand for payment, usually a draft. Note: In this course, the words “letter of credit” and “L/C” refer to the documentary credit(6) Reciprocal and Back-to-back Credit Reciprocal Credit

20、 Reciprocal Credit is usually used in a barter transaction or compensatory trade, in which the applicant and the beneficiary of the L/C are both importers and exporters. Back-to-back Credit Back-to-back Credit is a new letter of credit issued to another beneficiary on the basis of a primary credit.

21、It is used in a three-party transaction (Entrepot Trade or the middleman resale the others goods)The flowchart of the Documentary L/C Applicant(Buyer/Importer)Issuing bank(Paying bank)(Buys bank)Advising bankNegotiating bankBeneficiary(Seller/Exporter)contractShipmentApplicationIssuing the L/CNotifi

22、cationPresentation Payment Negotiating Payment Payment Presentation1.2 The other modes of paymentInstruments of paymentRemittanceCollectionInstruments of paymentPayment in international trade is practically non-cash payment. Financial documents are usually used as instruments of payment in internati

23、onal trade. Instruments of payment: Bills of Exchange Promissory note ChecksRemittance Remittance is one of banking customer services, in which funds will be transferred from one person to another. Remittance includes Mail Transfer (M/T), Telegraphic Transfer (T/T) and Demand Draft (D/D). Remittance

24、 is often used in payment in advance, cash with order and open account business.Collection Collection means the creditor(exporter) issues the bill of exchange and entrust the bank to collect the payment of the shipment from the debtor(importer). Collection can be divided into: Clean Collection(光票托收光

25、票托收) Documentary Collection（跟单托收）（跟单托收）Collection Documentary Collection : Documents against Payment (D/P) 付款交单付款交单 Documents against Acceptance (D/A) 承兑交单承兑交单 D/P calls for actual payment against transfer of shipping documents. There are D/P at sight and D/P after sight. D/A calls for delivery of d

26、ocuments against acceptance of the draft drawn by the exporter. D/A is always after sight. 1.3 Requirements for writingUrging establishment of L/CThe amendment to the L/CThe extension of the L/CUrging establishment of L/C It is practice in international trade that the L/C is to be opened and to reac

27、h the seller one month prior to the date of shipment, so as to give the seller ample time to make the goods ready and booking shipping space. The letter of urging establishment of L/C usually includes:Urging establishment of L/C Inform that the goods contracted has been ready for shipment. Remind th

28、at the covering L/C has not been received. Request for expediting establishment of L/C Hope to receive an early replyThe amendment to the L/C On receipt of the L/C, the seller must check it carefully. If there is something that is not in accordance with the clauses stipulated in the sales contract,

29、a letter of L/C amendment is sent. Both the buyers and sellers can ask for the amendment to an L/C if either party finds there is something needs to be changed.The amendment to the L/CThe letter of amendment to L/C usually includes: Express gratitude and refer to the number of L/C. State the discrep

30、ancies in the L/C(main content). Request for amending L/C and look forward to receiving the amendmentThe extension of the L/C Sometimes the seller may fail to get the goods ready for shipment in time or the buyer may request that the shipment be postponed for one reason or anther, then the seller wi

31、ll have to ask for extension of the validity date as well as the date of shipment of the L/C. The letter of extension of L/C usually includes:The extension of the L/CThe letter of extension of L/C usually includes: Express gratitude and refer to the number of L/C Request for extension of the L/C and

32、 explain the reason look forward to receiving the amendmentSection 2 Useful words, phrases and expressionsWords & PhrasesExpressionsWords & Phrases(1) abide by: in accordance with sth; be faithful to sth; observee.g. One of our guiding principles in doing business is to abide by contracts and keep g

33、ood faith.(2) violation: antonym of abide bye.g. Violation of any terms of this Agreement shall cause the termination of the Agreement. (3) draw (finance): write out (a cheque, draft, etc) 开出，签发开出，签发n draw on sb. for a sum against sth.:向向开具汇票开具汇票e.g. You are authorized to draw a 60 days draft on our

34、 bank against this credit for the amount of your invoice. In keeping with our usual terms of payment we have drawn on you at 60 days for the amount of US$ 10,000. n drawer 出票人出票人n drawee 付款人，受票人付款人，受票人 (4) amend: revisee.g. Please amend the amount of the L/C to read “2% more or less”.(5) in question

35、: be discussede.g. Up to now we have not heard anything from the seller about the order in question. The goods in question have been in good demand since the beginning of this year. (6) amount: n. in the amount of , for the amount of 指若干金额指若干金额 to the amount of 达到若干金额达到若干金额 e.g. We have opened an L/

36、C in your favor in/ for / to the amount of $ 25,000. v. amount to 合计，等于合计，等于 e.g. The weight amount to 3,500 pounds.(7) easy: acceptable; become weaken e.g. easier payment terms The market has turned easy.(8) debit n. written note in an account of a sum owed or paid out 收方，借方收方，借方e.g. The cheques is

37、sued have been cashed and the amounts now appear as debit in the statement of account.v. debit sth (against/to sb/sbs account); debit sb /sbs account (with the amount of): record (a sum of money) owed or withdrawn (by sb)e.g. Bank charges for handling the transaction have been debited to (against) y

38、ou (your account). We have debited you (your account) with this amount. (9) effect v.t. accomplish; bring oute.g. As usual, payment will be effected by an irrevocable L/C issued by our bank. Shipment can be effected in early October. We usually effect insurance against All Risks and War Risk for the

39、 invoice value plus 10%. n. result; outcomee.g. The improved packing will achieve the effect of promoting sales.l in effect: in fact; (of a rule, law, etc.) in operatione.g. These two proposals are, in effect, the same- a request for a more favorable price. The law will remain in effect till the end

40、 of the year.l take effect: come into force; operatee.g. The new import regulations will take effect on and after January 1, 1999.l to the effect: with the general meaning(or information)e.g. We have received your cable to the effect that shipment will be effected according to our instructions.(10)

41、as of 1) from 自自起起e.g. Inquiries were delivered to 20 suppliers as of early August.2) until 直至直至e.g. As of this writing, no reply has been received.ExpressionsTerms of paymentUrging establishment of L/CAmendment to and extension of L/CTerms of payment(1) Please see to it that payment is made by conf

42、irmed, irrevocable letter of credit in our favor, available by draft at sight, and allowing transshipment and partial shipment. (see to it: make certain of sth)(2) With regard to terms of payment, we regret being unable to accept D/P terms, we insist on the terms of L/C. Terms of payment(3) Under re

43、levant L/C, your draft should be accompanied by a complete set of shipping documents, and other documents consisting of (4) In order to facilitate your effort in introducing our products to your market, we are now giving you a special accommodation by granting D/P. Urging establishment of L/C(1) The

44、 date of delivery of your Order No.123 is approaching, but we still have not received the covering L/C up to date. Please do your utmost to expedite the L/C to reach us before June 1st so that shipment may be effected without delay.Urging establishment of L/C(2) As the goods against your Order No.12

45、3 have been ready for quite some time, it is imperative(urgent) that you take immediate action to have the covering L/C established as soon as possible. Urging establishment of L/C(3) Much to our regret, we have not yet received your L/C against our Sale Confirmation No. 3246, although it should hav

46、e reached us by the end of March as stipulated, so please make sure that your L/C reach us before 30th March. Amendment to and extension of L/C(1) On examination of the L/C stipulations, we found the following discrepancies: . Therefore, please instruct your bank to make the necessary amendments.(2)

47、 Please amend the L/C to read “This L/C will expire on August 20, 2009 in China.”Amendment to and extension of L/C(3) As direct steamers to your port are few and far between, we have to ship the goods via Hongkong. Therefore, we hope that your L/C should be amended to read “Transshipment is allowed.

48、”Amendment to and extension of L/C(4)We are sorry that owing to some delay on the part of our suppliers, we are unable to get the goods ready before the end of this month, so we hope that you can extend the shipment date of your L/C to 15 June and the validity to 25 June thus enabling us to effect s

49、hipment of goods in question.Section 3 specimen Case 1: informing the establishment of L/CLetter 8-2: P186Letter 8-6: P190Letter 8-7: P191Section 3 specimen Case 2: Urging establishment of L/CLetter 8-8: P 192Supplement letter 1 for optional readingSection 3 specimen Case 3: The amendment to and The

50、 extension of the L/CLetter 8-9: P 193Letter 8-10: P 194Supplement letter 2 for optional readingSection 3 specimen Case 4: Seller asking for paymentLetter 8-3: P 187Letter 8-4: P 188Letter 8-5: P 189Section 3 specimen Case 5: Buyer asking for easier payment termsLetter 9-5: P 220Section 3 specimen C

51、ase 6: Asking for more time to payLetter 9-7: P 222Letter 9-8: P 223Letter 9-9: P 224Supplement 1: Exporter urges importer to establish a letter of creditDear sirs,We regret to inform you that there has been no news from you at all about your letter of credit, which should have reached us before Sep

52、t. 9th, 2009. This has caused us much inconvenience, since we have already made preparations for shipment according to our Sales Confirmation No.4.You may recall that the same thing happened to the execution of our last contract. It was only after the market had turned for the better that you opened

53、 the covering L/C, quite beyond the time limit. We should have refused then to effect shipment, but we acceded to / accepted your request for fulfillment of your order. At the same time we pointed out that you should take effective measures to prevent a similar occurrence.This article, as you know,

54、has met with great popularity since offered for sale, and new orders have nearly exhausted our stock. But considering our long-term business relationship we are still holding the goods for you. We hope that you will lay great store on your credit standing this time and establish the relevant L/C bef

55、ore Oct. 9th, 2009.Please note that unless the L/C reaches us before the suggested time, we shall have no alternative but to cancel the contract and will not enter into any more transactions with you next year. We regret this decision, but of course we are in no way to blame. We are looking forward

56、to your letter of credit.Supplement 2 :asking for Amendment to the L/CDear sirs,We have received your L/C No.xx, but regret to find that there are certain points which are not in accordance with the terms of our Sales Confirmation No. xx.1.Our S/C No. xx emphasized that your letter of credit shall a

57、llow transshipment, but the Credit states: “transshipment prohibited”;2. Your L/C calls for shipment in two equal monthly lots during June/July, 2002, whereas it is explicitly stipulated in the S/C that shipment is to be made in a single lot not later than July 31,2002.3.There is no word “about” bef

58、ore the quantity and amount in the L/C, although the word is clearly used before them in our S/C.4.Your L/C stipulates for the goods in an assortment of Types A, B, C：20%, 40%, 40% RESPECTIVELY. But the assortment contracted for is：Types A 30%, B 30%, and C 40%. You are requested to make the necessa

59、ry amendments, as the shipment is conditional upon / subject to the conformity of the L/C with our Sales Confirmation.We hope that in future you will establish your letters of credit exactly according to the terms and conditions of relevant sales confirmation, or include in them such terms as “AS PE

60、R S/C No.”. By so doing you will not only save much trouble, but also help to facilitate shipment of your products.We are awaiting your banks amendment of the L/C. Task 6 Write a letter in English asking for amendments to the Write a letter in English asking for amendments to the following letter of