1. Unit 6 Terms of Payment

2. Teaching objective Upon completion of this unit, the students will:
1. Get a general idea of international payment.
2. Learn about various means of payment.
3. Learn about remittance, collection, open account, etc.
4. Understand and be able to express terms of payment.
5. Practice writing letters on payment by D/A, D/P, T/T, etc.

3. Some questions before the class:
1. The payment is complicated in foreign trade
In foreign trade, buyers and seller are in two countries. Sometimes, they have to do business with unknown buyer. If the seller delivers goods before payment has been made, he runs certain risks of nonpayment of the buyer, and if the buyer makes payment in advance, he likewise runs risks of non-delivery of the goods. It becomes necessary for a third party to act as an intermediate between them to solve the problem of payment. This party is the bank, who either guarantees payment to the seller and examine the seller’s shipping documents for the buyer or makes collection for the seller. That is why we say payment in foreign trade is rather complicated.

4. 6.1 questions
• Why are payment managements for international trade more complicated than those for domestic trade?
Long distance and more procedures are involved
Long time is needed in settling payments
Different regulations and systems of law that are applied further complicate the arrangements
The monetary and financial matters are different in not the same countries and various methods are used.

5. What payment instruments are used in international trade
What payment instruments are used in international trade? Are you clear about them?
Besides payment by L/C, what other methods are used in the financing of international trade?

6. Which method is safer and better for the seller, D/P or D/A? why?

7. 6.2 instrument of payment Bill of Exchange Def
an unconditional order in writing
signed by one person/party (drawer)
to a second party (drawee,or payer)
requiring the second party to pay
on demand, or at a fixed or determinable future time
a sum certain in money
to, or to the order of, a specified person (the payee), or to bearer

8. Bill of Exchange

9. Classification
Banker’s draft and Commercial draft
Clean Draft and Documentary Draft
Sight Draft and Time Draft

10. Promissory Note
Promissory note is an unconditional promise in writing made by one person (the maker) to another (the payee/the holder)signed by the maker engaging to pay on demand or at a fixed or determinable time a certain amount of money to or to the order of a specified person or to bearer.

11. Promissory Note

12. R

13. Check
A check is an unconditional order in writing addressed by the customer(drawer) to a bank(drawee) signed by the customer authorizing the bank to pay on demanding a specified sum of money to to to the order of a named person or to bearer(payee).

14. Cheque
Return

15. 6.3 method of payment
CIA
CWO
Cash Payment before Shipment
Remittance
Letter of Credit
Collection
O/A

16. Remittance
Remittance is a kind of payment method by which the importers remit the money to the exporters through bank. There are three ways of remitting the money: M/T(mail transfer), T/T(telegraphic transfer), D/D(demand draft).
It is commonly used in “payment in advance” trade, “cash with order”trade, “cash on delivery” trade,and so on .

17. Mail transfer
The buyer gives money to a local bank which sends a trust deed for payment to its correspondent bank at the seller’s end by mail and entrusts it with the task to pay money to the seller.

18. Telegraphic transfer
At the request of the buyer, a local bank sends a trust deed for payment by cable directly to its correspondent bank at the seller’s end and entrusts the work to it to pay money to the seller.

19. Demand draft
The buyer buys a draft from a local bank and sends it by mail to the seller, the seller or his appointed person can collect money from the relative bank at his end against the draft sent by the buyer.

20. Collection
Normally, the buyer does not remit the purchase price, but allows the exporter to draw a bill of exchange, with or without documents attached on him. In such a case, the exporter asks his bank to arrange for the acceptance or payment of the bill overseas, and the bank will carry his task through its own branch office abroad or a correspondent bank. This procedure is termed as collection of proceeds of sales.

21. Parties to a documentary collection
Principal/drawer
Payer/drawee
Remitting bank
Collecting bank

22. Kinds of collection
Collection on clean bill & Collection on documentary bill
Collection on clean bill (clean bill for collection): It means that the exporter collects the purchase price against the draft only, without any shipping documents attached thereto.
Collection on documentary bill (documentary bill for collection): It means that the exporter collects the purchase price against the documentary bill.

23. Collection on documentary bill can be
subdivided into two kinds:
Documents against payment (D/P): It calls for actual payment against the transfer of shipping documents.
Documents against acceptance(D/A): It calls for delivery of documents against acceptance of the draft drawn by the exporter. It makes the importer get hold of shipping documents and take delivery of the goods before payment. So the exporter would have to take great risks.

24. In international trade, payment through collection is accepted only when the financial standing of the importer is sound or where a previous course of business has inspired the exporter with confidence that the importer will be good for payment.

25. 6.4 Steps in writing a payment letter
Mentioning the contract, goods, etc.
Suggesting the term of payment and the reason
Wishing the reader to accept

26. 6.5 steps in replying a payment letter
Stating that you have received their letter
Giving your reply of agreeing or refusing with reasons
Stating your good will and your wish to do business with the reader

27. 1.pay deferred payment 延期付款 payment in full 全部付讫 clean payment 单纯支付
payment agreement 支付协定
pay order 支付凭证
payment order 付款通知
payment by banker 银行支付
payment in kind 实物支付
payment in part 部分付款
payment in full 全部付讫
clean payment 单纯支付
payment by installment 分期付款
payment respite 延期付款
payment at maturity 到期
payment in advance 预付（货款）

28. 2.Cash （现金付款）： Cash with order Cash payment before shipment
Cash against documents 凭单付款
Cash against delivery　货到付款
Cash against shipping documents凭装运单据付款
Cash market 　现货市场
Cash in 兑现，收到...的货款
Cash in on... 从...中获利

29. 3.draw ①attract draw your attention ②compose draw up a contract
③write out (a bill on sb. for…)
draw(v.t.)a draft=draw(v.i.)
eg. As arranged, we have drawn on you against the documents for the amount of invoice through the Bank of China.
Drawings 用汇票支取的金额
Your L/C is to allow 5% more or less in drawings.
你方信用证应准许在收款时有5%的上下幅度。

30. 4.Draft
draw a draft (bill ) on sb.
accept/honour a draft on sb.
draft at sight/ Time draft
draw a 60 days’ draft ( a draft of 60 days’ after sight/ a draft at 60 days’ sight)
draw a 60 days’ draft on sb. for the amount of…
a documentary draft
a documentary draft at sight

31. L/C available by draft at 30days after sight
5.at sight 即期
见票后30天议付的信用证
L/C available by draft at 30days after sight
Time L/C at 30days after sight
Time L/C at 30days
30days time L/C
L/C at 30days sight
即期信用证：
L/C available by draft at sight
L/C payable against draft at sight
L/C payable against sight draft
L/C at sight
Sight L/C

32. 6.negotiable adj. 可转让的，可流通的，可议付的，可协商的 Negotiable check 流通支票
Negotiable bill of lading 可转让提单　
Negotiated amount 议付金额
Negotiated price 议价
Negotiating bank 议付行

33. 7. open account 赊账交易
8. payment in advance 预付
9. remitting bank 托收行
10. payment on deferred terms 迟期付款
11. collection on clean bill 光票托收
12. collection on documents 跟单托收
13. commercial invoice 商业发票　
14. documentary bill 跟单汇票
15. clean bill(draft)　 光票
16. presentation n 提示，提交
17 shipping documents 装船单据
18. Promisorry note 本票

34. 19. Book the shipping space
20. Charter the vessel
21.To get ready for shipment / dispatch
22. To set a precedent / to be treated as a precedent
23. To draw your attention to the fact that ……
24. The tie-up of the funds
25. To be conductive to…
26. Shipping documents
27. Freight to be collected
28. Freight prepaid
29. In due course / at maturity
30. To have authority to draw on sb.
31. Acceptance of the draft
32. In duplicate / in triplicate…
33. Insurance certificate / insurance policy
34. Certificate of origin
35.At the conversion rate

35. 6.6 Useful Sentences
1. In view of the small amount of this transaction, we are prepared to accept payment by D/P at sight (or at 30 days’ sight) for the value of the goods shipped.
2. In compliance with your request, we will make an exception to our rules and accept delivery against D/P at sight, but this should not be regarded as a precedent.

36. 3. We regret having to inform you that although it is our desire to pave the way for a smooth development of business between us, we cannot accept payment by D/A.
4. Payment is to be made against sight draft drawn under a confirmed, irrevocable (divisible and transferable) letter of credit without recourse for the full amount of purchase.

37. 5. Our terms of payment are by confirmed, irrevocable letter of credit in our favour, available by draft at sight, reaching us one month ahead of shipment, remaining valid for negotiation in China for another 21 days after the prescribed time of shipment, and allowing transshipment and partial shipments.

38. 6.7 Exercises 6.7.1 translation
1.我们通常的做法是凭即期付款交单而不用信用证。因此,我们希望你对这笔交易和今后交易也接受付款交单方式。
2.对你方1156号定单,我们可以接受你们所提的用远期汇票支付的建议。货物装出后，我们将向你方开出60天期的汇票，请到期即付。

39. 3.为了你方在你市场推销我方产品铺平道路，我方将接受即期付款奖章方式付款、以示特别照顾。
4.你方以付款交单方式付款的要求,我方已予以考虑,鉴于这笔交易金额甚微,我们准备以此方式办理装运。

40. 1.  It has been our usual practice to do business with payment by D/P at sight instead of by L/C. we should, therefore, like you to accept D/P terms for this transaction and future ones.
2.  Your proposal for payment by time draft for Order No is acceptable to us, and we shall draw on you at 60 days’ sight after the goods have been shipped. Please honour our draft when it falls due.

41. 3. In order to pave the way for your pushing the sale of our products in your market, we will accept payment by D/P at sight as a special accommodation.
4. Your request for payment by D/P has been taken into consideration. In view of the small amount of this transaction, we are prepared to effect shipment on this (D/P) basis.

42. 6.7.2 Letter-writing
Answer an enquiry from ABC company, who wants to know what method of payment your firm is prepared to accept.
G.E Walter & Co. asked you to supply them with goods to the value of 45,000 pounds sterling. They request payment by D/A at 60 d/s for the amount of your invoice. Write a tactful letter explaining that you can only do this against an irrevocable letter of credit confirmed by your bank.

43. Dear Sirs
Thank you for your letter of 20 March.
As regards payment terms you inquire for, we wish to inform you that we only accept payment by confirmed, irrevocable letter of credit available by draft at sight and that it should be opened in our favour and reach us one month ahead of shipment, remaining valid for negotiation in China for another 21 days after the prescribed time of shipment and allowing transshipment and partial shipments.
We hope that you will effect payment in this way for all the transactions concluded between us. 
Yours sincerely

44. Dear Sirs
Thank you for your letter of 5th July and are pleased to learn that you are in the market for our Canned Mushrooms to the value of £45,000. With regard to payment terms, you request payment by D/A at 60 d/s for the amount of our invoice.
Although we appreciate your intention and suggestion, we regret being unable to consider your request for payment by D/A at 60 days’ sight. As we generally require payment by confirmed, irrevocable letter of credit available by draft at sight, we cannot make arrangement contrary to our usual practice, especially for a new customer. May we suggest that we do business on the basis of payment by L/C first and leave the matter to be discussed at a later date.
We look forward to the pleasure of receiving your first order.
Yours sincerely

45. Keys to Ex.III
1. Payment is to be made by confirmed, irrevocable letter of credit in our favor, payable by draft at sight, reaching us one month ahead of shipment.
2. Enclosed please find our invoice for US$8,500 and we have drawn on you for this amount at sight, attaching the shipping documents to our draft.
3. It’s our usual practice to do business on sight L/C basis, therefore, we regret being unable to meet your request for payment by 60 days D/P.
4. Most of our suppliers are drawing on us at 60 days, documents against acceptance, and we should be pleased if you could grant us the same terms.

46. Keys to Ex.IV
1. The validity date of L/C No.304 is November 30, in country of the beneficiary, unless otherwise instructed.
2. One thing we have to point out is that all banking charges outside England will be debited to your account.
3. Our terms of payment are by confirmed irrevocable L/C available by draft at sight for the full amount of the invoice value
4. In compliance with your request, we will make an exception to our rules and accept delivery against D/P at sight, but this should not be regarded as a precedent.
5. We write to inform you that we have now opened an irrevocable letter of credit in your favor for ￡30,000 with the Chartered bank, Westminster branch, London, valid until 30 November.
6. In order to avoid the subsequent amendment of the L/C, please see to it that the L/C stipulations are in strict conformity with those of the contract.
7. If you can open your L/C to reach here before July 10, we will do our best to arrange the shipment of your order at the beginning of next month.
8. I can say, in all sincerity, your proposal is impossible. But to meet you half way, we suggest that 40 % of the amount be paid by T/T and the balance by irrevocable L/C at 90 days sight.

47. Keys to Ex. I Dear Mr. XXX, Re: Your Purchase Order No. 688
We have received your letter of 25 July, asking us to accept D/P payment terms for your order No.688.
In reply, we regret our being unable to grant your request, as we stated during our negotiations that payment should be made by a confirmed, irrevocable L/C payable by draft at sight. In view of our friendly relations, we, however, exceptionally agree to accept L/C payable by draft at 60 days’ sight. We hope this accommodation will result in your procuring large orders for us.
We are awaiting your L/C at an early date, upon receipt of which we shall arrange shipment without delay.
Sincerely yours,

48. Keys to Workshop
This is to confirm the receipt of your Sales Confirmation No.S/CJXS As requested, we have opened through our banker the covering L/C for USD36,300 in the favor of HONGCHANG CHEMICALS IMP. & EXP. CORPORATION. The advising bank is Bank of China, Jiangxi Branch, No. 1 Zhan Qian Xi Road, Nanchang PC330003, China.
For your information, we have obtained the relevant import license which is to expire within a limited time, so we would like to draw your attention to the necessity of the punctual delivery of the goods, which, according to the contract, are expected to reach the port of destination by the end of this month.
Please fax us the shipping advice once the shipment is made. Thanks!