1. MEANS OF PAYMENT

2. INSTRUMENTS
Cash
Cheque
Payment order (bank transfer)
Draft (Bill of Exchange)
Promissory note

3. Payment order
Payment order corresponds to the domestic bank transfer
Cheap to use since the banks do not transmit documents of delivery
Cheque
Cheque can be mailed straight to the seller

4. Bill of Exchange
Bill of Exchange is a written, dated and signed unconditional order from the drawer that directs the drawee to pay a definite sum of money to the payee
It is to be paid
on demand => sight bill
at a specified future date => time bill

5. Legislation on Bills of Exchange
Britain: Bills of Exchange Act (BEA), 1882
USA: Uniform Negotiable Instruments Law, 1896
=> UCC, 1950
Standard laws in most European countries:
Geneva Conventions on the Unification of the Law Relating to Bills of Exchange (ULB), 1930

6. Drawer
Creates the Bill of Exchange or orders another party to pay to a third party
=> a seller, a creditor
Drawee
Is ordered to pay
=> a bank (check), a buyer (trade acceptance), a borrower (note)
Payee
The order or the bearer
Receives the payment
=> the seller himself (= trade acceptance) or a bank

7. Bill of Exchange Issuing date To: Drawee
On: __date of maturity____ PAY TO THE ORDER OF ___ Payee ______________
____Sum of money______________________________________________________
Accepted at __Drawee’s place ___________ on ___________Date of acceptance__
Payable at __Bank___________________
Drawer’s signature ___Drawer_________
Drawee’s signature __Drawee_____________
Bill of Exchange

8. Bill of Exchange: Trade Acceptance
105 Elm Street
Winnipeg
Canada
31 November 2005
To: Tresbien SA______
On: __April 30, 2006____PAY TO THE ORDER OF___Hulabaloo Inc.______________
____Two Hundred Thousand and oo/100___ CANADIAN DOLLARS ___200,000.oo__
The obligations of the drawee/acceptor of this bill arise out of the purchase of goods
from the drawer. The drawee/acceptor may accept this bill payable at any bank or trust
company in Canada which the drawee/acceptor may designate.
Accepted at __Paris, France___________ on ___________November 31, 2005_____
Payable at __Canadian Central Bank __ _Jack H. Baloo_______
__Main Street 357_____________ Hulabaloo Inc
__Montreal _____
Buyer’s signature _Tresbien SA__
By Agent or Officer ___________________ by ________________________________
Bill of Exchange: Trade Acceptance

9. Endorsement of Bills of Exchange:
Blank
endorsement:
Special
endorsement:
For and on behalf of Hulabaloo Inc
JackHBaloo
Jack H. Baloo (Director)
Pay to the order of Canadian Central Bank Ltd
For and on behalf of Hulabaloo Inc
JackHBaloo
Jack H. Baloo (Director)

10. Dishonouring a Bill of Exchange by non- acceptance:
The drawee rejects the draft by not accepting (not signing) it
Dishonouring by non-payment:
The drawee refuses to pay the Bill of Exchange
=> The drawer may protest the Bill of Exchange in 2 (USA 3) business days from its maturity
=>
By a notary public's certificate he may apply for execution at court
The protest also guarantees him recourse against the preceding endorsers.

11. TERMS OF PAYMENT High risk High cost RISK TO SELLER Low risk
Open Account
Clean Collection
Documentary
collection
Documentary Credit /
Letter of Credit
Cash in Advance
Low cost
High cost
COST TO BUYER

12. INTERNATIONAL TRADE
THE
GOODS
SELLER
BUYER
€ € €

13. According to the ICC uniform rules for collection 1978, the procedure of Documentary Collection is as follows:

14. DOCUMENTARY COLLECTION ARRANGEMENT
THE
GOODS
SELLER
BUYER
€ € €
BILL OF
LADING
The seller ships the goods
The carrier checks for outward compliance of the goods
=> gives the seller a bill of lading

16. DOCUMENTARY COLLECTION ARRANGEMENT
THE
GOODS
SELLER
BUYER
€ € €
REMITTING
BANK
BILL OF
LADING
etc.
The seller asks his bank, the remitting bank, to arrange for
the collection of the price
The seller forwards the shipping documents to the bank

17. DOCUMENTARY COLLECTION ARRANGEMENT
THE
GOODS
SELLER
BUYER
€ € €
REMITTING
BANK
COLLECTING
BANK
BILL OF
LADING
etc.
The remitting bank sends the shipping documents to the collecting
bank, for the collection of the price

18. DOCUMENTARY COLLECTION ARRANGEMENT
THE
GOODS
BUYER
SELLER
BILL OF
LADING
etc.
€ € €
REMITTING
BANK
COLLECTING
BANK
In the case of the D/A term, the buyer/importer does not have to pay immediately. The importer only does so after a certain period of time as originally agreed with the seller. When the documents are presented, the importer has to accept the tenor bill of exchange to signify his formal commitment to pay on the due date. Thus, on the due date, which may be 60 days, 90 days later, as originally agreed with the seller, the accepted tenor bill of exchange is presented to the buyer for acceptance.
Buyer pays the collecting bank
The collecting bank gives the documents to the buyer in
accordance with the collection instructions

19. DOCUMENTARY COLLECTION ARRANGEMENT
THE
GOODS
BUYER
SELLER
BILL OF
LADING
€ € €
REMITTING
BANK
COLLECTING
BANK
Buyer proves his title by showing the bill of lading to the carrier
Carrier hands over the goods to the buyer
The collecting bank forwards the money to the remitting bank

20. The remitting bank pays the seller
DOCUMENTARY COLLECTION ARRANGEMENT
SELLER
THE
GOODS
BUYER
€ € €
REMITTING
BANK
COLLECTING
BANK
The remitting bank pays the seller

21. DOCUMENTARY CREDIT / LETTER OF CREDIT
Principle of autonomy
Principle of strict compliance
Irrevocable or revocable

22. ICC Uniform Custom and Practice for Letter of Credit (Documentary
Credit) is as follows:
Opening a Letter of Credit:
1. The seller and the buyer sign a sales contract
2. The buyer asks a local bank (issuing bank) to open a Letter of Credit
3. The issuing bank asks a bank in the seller’s country (advising bank) to advice the seller that the Letter of Credit has been opened
4. The advising bank informs the seller
Presenting the Letter of Credit:
1. The seller ships the goods and gets the shipping documents
2. The seller presents the shipping documents to the advising bank
3. The advising bank checks the documents and if appropriate pays the seller
4. The advising bank notifies the issuing bank that the credit has been presented and forwards the shipping documents
5. The issuing bank transfers the money to the advising bank

23. Source: Ray August: International Business Law

25. Example:
BILL OF EXCHANGE IN DOCUMENTARY CREDIT
Exporter’s demand for payment:
In documentary Credit operations, the exporter draws a bill of exchange on the Issuing Bank
The bill should usually also show details of the Credit under which it is drawn
The exporter should sign the bill on its reverse, “endorse” it to the Advising Bank
The Buyer's bank, as the Issuing Bank for the documentary credit signifies that acceptance of the bill by signing it on the front or the back.

26. Endorsement of Bills of Exchange:
Example:
Endorsement of Bills of Exchange:
Blank
endorsement:
Special
endorsement:
For and on behalf of Export Company Ltd James Smith James Smith (Director)
Pay to the order of UK Export Bank Ltd
For and on behalf of Export Company Ltd
James Smith
James Smith (Director)

27. Example:

28. PROMISSORY NOTE IN DOCUMENTARY CREDIT
A promissory note is the buyer's promise to pay