1. Payment in International Trade
Chapter 5
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Payment in International Trade

2. 1 2 3 4 4 Overview Modes of International Payment
Fundamentals of Ngotiable Instruments 2
The Bill of Exchange 3
Documentary Letters of Credit 4
Standby Letters of Credit 4

3. □ Remittance □ Collection □ Letter of Credit
Modes of International Payment
□ Remittance
□ Collection
□ Letter of Credit

4. ■ Remittance Modes of International Payment (1)Mail Transfer (M/T)
(2)Telegraphic Transfer (T/T)
(3) Demand Draft(D/D)

5. ■ Collection Modes of International Payment (1) Clean Collection
(2) Documentary Collection

6. Modes of International Payment
A. Document against payment (D/P): the buyer shall not obtain the bill of lading and other documents until he has made the payment to the collecting bank.
B. Document against Acceptance (D/A): the collecting bank will hand over the shipping documents to the buyer only upon the acceptance of the draft.

7. ■ A Bill of Exchange (Draft)
Fundamentals of Negotiable Instruments
■ A Bill of Exchange (Draft)
A bill of exchange is a three-party instrument that is an unconditional written order by one party that orders the second party to pay money to a third party.
Three primary parties are involved in a bill of exchange(1)drawer-the party who writes the order, (2)drawee-the party who must pay the money stated in the draft(payer), (3) payee-the party who receives the money from a draft.

8. Fundamentals of Negotiable Instruments

9. ■ Check Fundamentals of Negotiable Instruments
It is drawn on a financial institution (the drawee) and is payable on demand. Three primary parties are involved in a check：drawer, drawee and payee. Drawer is the customer who has the checking account and writes the check.

10. Fundamentals of Negotiable Instruments

11. ■ Promissory Notes Fundamentals of Negotiable Instruments
It is a two-party negotiable instrument that is an unconditional written promise by one party to pay money to another party.

12. Fundamentals of Negotiable Instruments

13. ■ Laws Governing the Bill of Exchange
(1) the Bills of Exchange Act of 1882
(2) Geneva Conventions on the Unification of the Law Relating to Bills of Exchange
(3) Geneva Conventions on Unification of the Law Relating to Checks (ULC)
(4) China’s Negotiable Instrument Law

14. ■ Brief Requirements of the Bill of Exchange
(1) an unconditional order in writing;
(2) addressed by one person to another;
(3) signed by the person giving it;
(4) that the addressee pay on demand or at a fixed determinable future time;
(5) a sum certain in money;
(6) to or to the order of a specified person, or to a bearer;
(7) the date and place of issuing the instrument;
(8) of the words “bill of exchange” on the face of the instrument.

15. ■ Negotiation of the Bill of Exchange
(2) Endorsement
(3) Excused Drawers Can Use to Avoid Paying Off a Bill of Exchange.

16. Letter of Credit
The letter of credit is defined as a contract-conditional undertaking by a bank, issued in accordance with the instructions of the applicant (the buyer), in favor of the beneficiary (the seller) wherein the bank promises to pay, accept, or negotiate the beneficiary’s draft up to the amount of the contract price within the prescribed time limit, upon the beneficiary’s presentation of stipulated documents. A credit is irrevocable even if there is no indication to that effect.

17. Letter of Credit The Governing Rules: UCP600
The UCP 600 came into effect on July 1, UCP 600 “apply to any documentary credit, including, to the extent to which they may be applicable, any standby letter of credit, when the text of the credit expressly indicates that it is subject to these rules.

18. Letter of Credit ■Basic Legal Principles
(1)The Principle of Independence
(2)The Standard for Examination of Documents
(3)Period for Documents Examination
(4)Notice Procedure for the Dishonor
(5)Disclaimers of Banks

19. Standby Letter of Credit
The standby letter of credit is primarily a risk-shifting device, with the advantage of providing the beneficiary (the buyer) with easy access to funds in case of a default of performance by the seller, much as if the seller had left a cash deposit with the beneficiary.

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