International Payments Chapter Seven International Payments

Learning 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 exchange define the three basic terms of payment compare and contrast the characteristics of terms of payment identify the major parties involved in different payment methods state the stages involved in using a letter of credit explain the variations of documentary credit SEIB OF GDUFS

7.2 Remittance Definition After 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 amount to his creditor. SEIB OF GDUFS

Type of Remittance Payment Order 进口商将 货款交付 进口商往 来银行委托 出口地 银行 出口商 Banker’s demand draft 进口商向 本地银行 购买汇票 后寄交 出口商将 汇票交付 出口地 银行托收 SEIB OF GDUFS

Types of remittance Three types of remittance Mail transfer (M/T) 信汇 by mail lower charges, but slow Telegraphic transfer (T/T) 电汇 by telecommunication system (telex or telegraph or swift). Faster, safer, but more expensive Banker’s Demand Draft (D/D) 票汇 Imp. buys a check from a bank in imp. country and sends to the exp. Lowest charge, slowest Transferable SEIB OF GDUFS

7.2.1 Remittance The party involved in remittance remitter(汇款人) remitting bank(汇出行) receiving bank(汇入行) payer (收款人) SEIB OF GDUFS

Procedure of remittance remitter payer 买卖合同规定以电/信汇付款 1 电/信 汇申请 书、交款、付费 3汇 款 通 知 4 收 据 5 付 款 * (Telegraphic Transfer, T/T） （Mail Transfer, M/T） 2 电/信汇委托通知 * Receiving bank Remitter bank 6 收回垫款或付讫借记通知 SEIB OF GDUFS

7.3 Collection 托收 Definition an 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 pay by a specified date. SEIB OF GDUFS

7.3.1 Collection 托收 Parties involved Drawer / 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 SEIB OF GDUFS

Types of Collection Documentary Collection Documents 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/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. SEIB OF GDUFS

Procedure of Documentary Collection Drawer (seller) Remitting bank (drawer ’ s bank) Drawee (buyer) Collecting ( drawee s bank) 1. Contract 2. Goods 3. Application + Documents + Draft 4. Advice of terms of collection + documents + draft 5. Advise of collection 9. Payment 8. Payment 6. Payment/ Acceptance 7. Documents released SEIB OF GDUFS

Remittance in contract clause The Buyers shall pay the total value to the Sellers in advance by T/T（M/T or D/D）not later than .... . SEIB OF GDUFS

Remittance in contract clause 20% of the total contract value as advance payment shall be remitted by the Buyer to the Seller through telegraphic transfer within one month after signing this contract. SEIB OF GDUFS

Collection in contract clause Upon first presentation the Buyers shall pay against documentary draft drawn by the Sellers at sight . The shipping documents are to be delivered against payment only. SEIB OF GDUFS

Collection in contract clause The Buyers shall duly accept the documentary draft drawn by the Sellers at ...days sight upon first presentation and make payment on its maturity. The shipping documents are to be delivered against payment only. SEIB OF GDUFS

Collection in contract clause The Buyers shall duly accept the documentary draft drawn by the Sellers at ... days sight upon first presentation and make payment on its maturity. The shipping documents are to be delivered against acceptance. SEIB OF GDUFS