国际贸易实务(英文版)(第二版)七.International-Payment

1、国际贸易实务(英文版)(第二版)七.International-PaymentLearning objectives After learning this chapter you will be able to:identify the key issues in handling international payments understand the use of paying instruments, especially the bill of exchange2define the three basic terms of payment compare and contrast

2、 the characteristics of terms of paymentidentify the major parties involved in different payment methodsstate the stages involved in using a letter of creditexplain the variations of documentary creditestablish a basic understanding of export financing27.1 Issues In ConcernWho will bear the credit r

3、isk?In what currency the payment would be made?What are the costs of each method of payment?What might be the political or legal risks?3Determinant Factors of PaymentNature of merchandiseIndustry norms/practicesDistance between buyer and sellerPotential currency fluctuationPolitical & economic stabi

4、lityRelationship between buyer and seller4International PaymentCredit instrumentsBill of Exchange/ Draft 汇票Promissory Note 本票Check 支票Terms of paymentRemittance 汇付Collection 托收Letter of Credit 信用证5Differences between payment instruments and payment termspayment instruments - Financial documents which

5、 can be used in different manners serving specific paying purposepayment terms - A series of activities or operations facilitating the movement of funds from one destination to the otherInternational Payment67.2 Paying Instrument : Draft / Bill of Exchange 汇票Definition: A draft is an unconditional w

6、ritten order addressed by one person to another, singed by the person giving it, requiring the addressed person to pay at sight or at a fixed future time the sum of money clearly specified, to the payee or to his order. 7Three parties concernedA: The drawer Normally the exporterFill in the content o

7、f a bill of exchange and sign his name B: The drawee / payer The party to whom B/E is addressedIf sight draft, make paymentIf time draft, accept the draft and pay when the amount is due Under L/C the bankUnder collection the importerC: The payee/beneficiaryThe party who is supposed to receive the pa

8、ymentusually the exporter or the bank at which the drawer has his accountPresent B/E to the payer for payment or acceptance8Three parties concerned9The content of a B/E (Specimen 7.1-7.4)The words of “Bill of Exchange” or “Draft”The date and place of issuance of draftA specific sum which shall be ex

9、actly the same with that indicated on export invoiceThe tenor, that is, the period of creditIf not stipulated, regarded as Sight draftThe name of the draweeThe name and signature of the drawerThe name of the payee or order or bearerThe endorsement of the payee when applicable 10Procedure of a B/E pr

10、acticeIssuance 出票 The act of the drawer issuing a draft to the draweePresentation 示票The act of the payee or the bearer presenting the draft to the payer for payment or acceptanceTwo results: being honored or dishonored11Procedure of a B/E practicePayment 付款- Draft honored by paymentFor sight draft,

11、the payer pays to the payee a specified sum of money indicated on the draft at presentation.12Procedure of a B/E practiceAcceptance 承兑 - Draft honored by acceptanceThe act of the payer making acceptance by cross-signing on the face of the bill and promising to pay on or before the expiry date of a t

12、ime/usance draftAn accepted bill shall be returned to the presenting party 13Procedure of a B/E practiceDiscount 贴现An accepted draft is negotiableIf the holder wants to get money before mature date, the draft can be discounted by a discounting bank at the prevailing discount rateIt is the sale of an

13、 accepted time bill for less than its face value before its maturity date. Endorsement 背书The act of the transferor in transferring a draft to the transferee by making a signature on the back of the draft14Procedure of a B/E practiceDishonor 拒付The refusal of the drawee or payer to make payment or acc

14、eptance of a duly presented draftHolder can recourse the drawer for paymentTo exercise his right of recourse, the bill holder needs to present a Certificate of Protest (拒付证明）from a notary public Draft with the word “without recourse” can hardly be discounted15Types of draftClean draft vs. documentar

15、y draft光票与跟单汇票Bankers Draft vs. Commercial draft 银行汇票与商业汇票Sight draft vs. time draft即期汇票与远期汇票16Clean Draft vs. Documentary DraftClean Draft is the one which is used without the company of any commercial documentsEg. Bankers DraftDocumentary Draft is the one that calls for the attachment of relevant

16、commercial documents. Popular in international trade Eg. Commercial Draft17Bankers Draft vs. Commercial DraftBankers Draft is an order from one bank (the drawer) to another (the drawee) with whom it normally maintains a correspondent relationship, to pay to a named person (the payee) a specified sum

17、 of money on demand.Commercial Draft is an order from a firm or individual (the drawer) to another firm, individual or bank (the drawee) to pay to a named person (the payee) a specified sum of money on demand.18Sight Draft vs. Time Draft Sight draft is the one that is payable on sight of the documen

18、ts of title or on first presentation of the title documents. Normally used when the exporter wishes to retain title to the goods until it reaches its destination and payment is made.Bearing the wording as “at sight of this bill of exchange, pay to”Not bank credit, therefore higher risksTime draft (u

19、sance draft, term draft) is the one that is payable in a specified number of days after sight, after the date of issuance or acceptance, or at a fixed future time.Bearing the wording as “at 30/45/60/90 days sight of this bill of exchange, pay to .”In case of dishonor, the exporter or the foreign ban

20、k can sue for the money on the basis of documentary draft alone197.3.1 RemittanceDefinitionAfter conclusion of a business transaction, the debtor instructs his bank to send (remit) the transaction amount to his creditor in export country. It is the debtor who takes initiative to send the payable amo

21、unt to his creditor.20Procedure of remittance and parties involved First, the remitter (the importer) applies for a remittance. To do so the importer needs to have sufficient funds in his account in the bank. The remitting bank either issues a remittance instruction to, or draws a draft on, one of i

22、ts overseas branches or correspondent banks in the exporters country. When the overseas branch or correspondent bank receives the remittance instruction, it becomes the paying bank and will credit the payees (the exporters) account with the relevant amount accordingly. In the event of using a demand

23、 draft, the remitting bank will give the draft to the importer and the importer will then provide the draft to the exporter by his own way. Once the exporter receives the draft, he can present it to the nominated paying bank for the withdrawal of payment. 21Procedure of remittance The importer/ the

24、remitterThe exporter/ the remitteeThe remitting bankThe paying bank 1. Submit applicationa2. Issue the remittance instruction (telex, SWIFT)b2. Draw a draft on paying bank (normally a demand draft)a3/b5. Make paymentb4. Present the draftb3. Surrender the draft22Types of remittanceThree types of remi

25、ttanceMail transfer (M/T) 信汇by maillower charges, but slowTelegraphic transfer (T/T) 电汇by telecommunication system (telex or telegraph or swift). Faster, safer, but more expensiveBankers Demand Draft (D/D) 票汇Imp. buys a check from a bank in imp. country and sends to the exp. Lowest charge, slowest T

26、ransferable 237.3.2 Collection 托收Definitionan arrangement whereby the seller draws a draft on the buyer and authorizes its bank to collect. A means of payment ensuring that the goods are handed over to the buyer only when he pays the amount shown on a bill or when he accepts the bill and commits to

27、pay by a specified date.Parties involvedDrawer / exporter/principal 委托人Drawee / importer / payer 付款人Remitting bank（托收行）in exporting country Collecting bank （代收行）in the importing country 24Procedure of Documentary CollectionExporter collecting shipping documents;Exporter drawing a B/E on importer;Exp

28、orter submitting all documents with complete instructions for collection to a local bank (remitting bank) and instructing the bank to effect collection for him;Remitting bank forwarding B/E with other documents to its correspondent bank (collecting bank) in the importers country passing on exactly t

29、he instructions received from exporterCollecting bank/presenting bank presenting bill and documents to importer;Collecting bank/presenting bank releasing documents to the importer upon receipt of payments or acceptance from importer;Collecting bank remitting payments to remitting bank;Remitting bank

30、 crediting payment to principal (exporter)s account. 25Procedure of Documentary Collection and Parties InvolvedDrawer(seller)Remitting bank(drawers bank)Drawee(buyer)Collecting bank(draweesbank)1. Contract2. Goods 3. Application + Documents +Draft 4. Advice of terms of collection + documents + draft

31、 5. Advise of collection 9. Payment8. Payment6. Payment/Acceptance7. Documents released26Types of CollectionDocumentary CollectionDocuments against Payment (D/P) 付款交单the collecting bank releases the documents to the importer only upon full and immediate cash payment. Documents against Acceptance (D/

32、A) 承兑交单If a period of credit to the importer is agreed upon, a usance bill will be used The documents will be released against acceptance by the importer. Clean Collection 光票托收 without the company of commercial documents277.3.3 Letter of CreditDefinitionThe written promise of a bank, undertaken on b

33、ehalf of a buyer, to pay a seller the amount specified in the credit provided the seller complies with the terms and conditions set forth in the creditFeaturesBank creditSecurity of payment to exporterEnsure importer receive goods as ordered (payment released only if title documents are received)Car

34、e only for documents, not for actual transaction of the goods 28Content of L/C (See Specimen7.9)Name & address of opening bankDate of issuance of L/CNumber of L/CCredit amountDescription of cargoType of L/CName & address of the parties concernedDocuments providedDetails of shipmentValidity period fo

35、r L/CSettlement instructions Fees clausesSpecial clause, if any29Procedure of L/CAfter signing the sales contract with the seller, the buyer (the applicant) will present to his local bank (the issuing bank) the contract, an application letter and other documents required for the opening of an L/C. T

36、he issuing bank then issues the letter of credit to one of its branches or correspondent banks in the sellers country (the advising bank) if the applicant complies with all the conditions required. The advising bank will notify the seller of the arrival of the credit. Once paying an advising fee, th

37、e seller (the beneficiary) receives the original of the documentary credit. He has to examine the credit closely before he accepts it. 30Issuing Bank/ Buyers BankSeller/ BeneficiaryL/C ApplicationBuyer/Applicant Advising BankLetter of CreditL/C AdviceContract (1)(2)(3)(4)Opening an L/C 31Methods of

38、settlement Settlement by sight paymentSettlement by deferred paymentSettlement by acceptanceSettlement by negotiation32Settlement by Sight Payment Docs released Buyer/Applicant Seller/ BeneficiaryIssuing Bank/ Buyers BankPresenting BankDocsDocsGoods (5)(10)(7)(6)Payment (9)Payment (8)Payment (11)33S

39、ettlement by Deferred Payment Docs released Buyer/Applicant Seller/ BeneficiaryIssuing Bank/ Buyers BankPresenting BankDocsDocsGoods (5)(8)(7)(6)Payment (10)Payment (9)Payment (11)34Settlement by Acceptance DocsBuyer/Applicant Seller/ BeneficiaryIssuing Bank/ Buyers BankPresenting BankDraft & DocsDr

40、aft & DocsGoods (5)(7)(6)Payment (11)Payment (8)Payment (9)Draft drawn onAcceptance notice(12)(10)35Settlement by Negotiation Docs ReleasedBuyer/Applicant Seller/ BeneficiaryIssuing Bank/ Buyers BankNegotiating BankDraft & DocsDraft & DocsGoods (5)(11)(8)(6)Payment /Acceptance(7)Payment /Acceptance(

41、9)Payment (10)Draft drawn on36Types of Letter of Credit 1. Revocable vs. Irrevocable CreditRevocable credit 可撤销的信用证An L/C which can be amended or cancelled by the issuing bank without prior notice of the beneficiary.unfavorable to the exporter therefore not widely employed The cancellation can be ma

42、de before the date the L/C expires.Otherwise, the opening bank shall reimburse the negotiation bank or payment bank if the payment is effected by them before receipt of the notice of cancellation.Irrevocable credit 不可撤销的信用证An L/C which cannot be cancelled or amended without the agreement of the bene

43、ficiary (the exporter) and all other parties.Gives assurance of payment, but less flexible to change credit termAccording to UCP600, if the wording of revocable or irrevocable not found on the credit, this credit shall be deemed as irrevocable37Types of Letter of Credit 2. Confirmed vs. Unconfirmed

44、CreditConfirmed credit 已保兑信用证An L/C that a bank, other than the issuing bank, undertakes to honor the credit issued by adding its confirmationConfirming bank signs under the statement, “We hereby add our confirmation to this credit”. Confirming bank will be liable for payment in case of default by t

45、he issuing bank.It should be an irrevocable credit. Double insurance of payment Unconfirmed credit 未保兑信用证An L/C which does not indicate the undertaking to effect payment by any other bank, except the issuing bank38Types of Letter of Credit 3. Sight vs. Usance CreditSight credit 即期信用证An L/C under whi

46、ch the opening bank will immediately effect payment upon presentation of all documents as long as the documents are in accordance with terms in credit.Usance/term credit 远期信用证An L/C which indicates that payment will not be made at the date of receipt of documents until the maturity date specified in

47、 the credit provided that all the documents presented are in accordance with the credit.39Types of Letter of Credit 4. Straight vs. Open CreditStraight credit 限制议付信用证An L/C that is available to the beneficiary by presentation of documents to the issuing bank. Beneficiary presenting documents directl

48、y to the issuing bank rather than to any other bankIn practice, the beneficiary normally presents documents to a nominated local bank known as negotiation bank Open credit 自由议付信用证Also free negotiable creditThe issuing bank commits to honoring drafts and documents held by third parties as long as the

49、 documents comply with the credit.40Types of Letter of Credit5. Transferable vs. Non-transferable creditTransferrable credit 可转让信用证Under which the beneficiary is entitled to instruct the advising bank to transfer his rights, in whole or in part, to another party.Used especially when the exporter is

50、not the direct manufacturer but a middle merchant Transferor the prime/first beneficiary; transferee the second beneficiaryA credit must state clearly that it is “transferable”A transferable L/C can be transferred once only, namely, from first beneficiary to second beneficiary(ies).Where there are s

51、everal second beneficiaries involved, the credit must permit partial shipments.Non-transferable credit 不可转让信用证An L/C under which the beneficiary is not entitled to transfer his rights, in whole or in part, to another party.41Types of Letter of Credit6. Revolving Credit 可循环信用证A revolving credit oblig

52、es the issuing bank to restore the credit to the original amount after it has been utilized, without the need for amendment. Used especially for ongoing transactions. 42Types of Letter of Credit7. Reciprocal Credit 对开信用证A reciprocal credit is a counter credit under which the applicant of a first cre

53、dit becomes the beneficiary of the second reciprocal credit, while the beneficiary of the first credit becomes the applicant of the second reciprocal credit.It is often used in barter transactions, trade of processing incoming materials, counter trade or compensation trade. 43Types of Letter of Cred

54、it8. Back to Back Credit 背对背信用证Credit payment arrangement in which a documentary credit is used as the “backup” for issuing a new creditMainly used by middlepersonsThe first credit must be irrevocable and non-transferable 44Types of Letter of Credit9. Red Clause/Anticipatory Credit 红条款/预支信用证An antic

55、ipatory credit authorizes the advising bank to make advances to the beneficiary before his presentation of documents required.The applicant is bearing the liability of repayment in case of the beneficiarys failure of presenting documents for settlement. 45Types of Letter of Credit10. Standby Credit

56、备用信用证A standby credit is a clean credit that guarantees the payment for a possible unfulfilled obligation on the part of the applicant.It is similar to a Letter of Guarantee. 46Letter of CreditCharacteristics Its content should comply with the sales contract, but once opened the credit will exist in

57、dependent from the contract.It provides a high level of protection and security to both buyers and sellers engaged in international trade. The seller is assured that payment will be made by a party independent of the buyer so long as the terms and conditions of the credit are met.The buyer is assure

58、d that payment will be released to the seller only after the bank has received the title documents called for in the credit.Banks only deal with documents, not involved in any detail of the actual transaction. 47Letter of CreditGoverned byUniform Customs and Practice for Documentary Credits 600 (UCP

59、600)487.7 Letter of Guarantee (L/G)DefinitionLetter of Guarantee is an irrevocable undertaking by which the issuer holds itself financially liable for the consequences of non-performance of the obligations by a third party towards the beneficiary.49Both seller and buyer can be the beneficiary of an L/GTwo kinds of L/G: credit L/G and payment L/GWidely used in trade of commodity and serviceEssential requirements of an L/G:IrrevocableUnconditiona