Chapter 8: International Payments & Settlement

1. Chapter 8: International Payments & Settlement

2. 1. Introduction (1) • Definition for international payments & settlements • Basic points for attention in international payments and settlements • As a rule, international traders would pay or receive freely convertible currencies. • Time of payment can be different in international payments and settlements as the case may be. • Method of payment can be different in international payments and settlements includes: remittance, collection, letter of credit and bank guarantee. • Foreign exchange control is being enforced in all the socialist countries, most developing countries, or even a few developed countries. • International traders should be aware that legal title to the exported goods passes from the exporter to foreign buyer by means of documentation.

3. 1. Introduction (2) • Features of Modern International Payments and Settlements • Convenient • Diversify • Effective

4. 2. Credit Instruments (1) • Definition • A credit instrument is a written or printed paper by means of which funds are transferred from one person to another. • Bill of exchange, promissory notes, cheques • Functions of Negotiable Instrument • As a means of payments • As a credit instrument • As a negotiable instrument

5. 2. Credit Instruments (2) • Parties to a Negotiable Instrument • Drawer (出票人） • Drawee （付款人） • Payee （收款人） • Acceptor （承兑人） • Endorser （背书人） • Endorsee （被背书人） • Acceptor for honour （参加承兑人） • Guarantor （保证人） • Holder （持票人） • Holder for value （付对价持票人） • Holder for due course （正当持票人）

6. 3. Bill of Exchange (1) • Definition • It is an unconditional order in writing addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed 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 or to bearer.

7. Introduction • Bill of Exchange, Draft • Concept and content • Bill of Exchange • Payment Order • Amount • Time of Payment • Place of Payment • Drawee, Payer • Payee • Time of Date • Place of Date • Signature of Date

8. 3. Bill of Exchange (3) • Acts of a Bill of Exchange • Issue (出票） • Endorsement（背书） • Presentment （提示） • Acceptance （承兑） • Payment （付款） • Dishonour （拒付） • Notice of Dishonour （拒付通知书） • Protest （抗议） • Right of recourse （追索权）

9. Kinds of bill of exchange • Banker’s Draft & Commercial Draft • Clean Bill & Documentary Bill • Sight Draft & Time Bill or Usance Bill • At ** days after sight • At ** days after date • At ** days after date of Bill of Lading • Fixed Date

10. Using • Issue • Pay A Co. only / Pay ** Co. not negotiable • Pay ** Co. or order / Pay to the order of ** Co. • Pay Bearer • Presentation • Acceptance • Payment • Endorsement: Endorsee and Endorser / Discount • Dishonor • Dishonor by non-acceptance and Dishonor by non-payment • Protest • Right of Recourse • Without Recourse

11. 4. Promissory Note and Cheque (1) • Definition • Features of a Promissory Note • It is an unconditional promise in writing • The basic parties to a promissory note are the maker and the payee. • There is no need to accept the instrument if it is payable at a fixed or determinable future time. • Issued by bank

12. 4. Promissory Note and Cheque (2) • Cheque • Definition • Features of Cheque • Unconditional • Be drawn on a bank • A sum certain in money must be written on a cheque • The date of a cheque is not essential • The payee may be a bearer, a specific person or his order • Crossing on Cheque

13. Three often used ways of payment • remittance • collection • Letter of Credit

14. 5. Remittance • Definition • Ways of Transfer • By airmail (M/T) • By cable/telex/SWIFT (T/T) • By banker’s demand draft (D/D) • Methods of Reimbursement

15. 6. Terms and Methods of Payment in international Trade Payment in Advance, Open Account Business, Collection (1) • Payment in Advance • Definition • It is to transfer the payment before delivery of the goods from the importer to the exporter through banks. (by cheque, banker’s draft, mail transfer, telegraphic transfer, SWIFT message, international money order)

16. 6. Terms and Methods of Payment in international Trade Payment in Advance, Open Account Business, Collection (2) • Open Account Business • Collection • Outward collection • Inward collection • Types of collections • Clean collections • Documentary collections (D/P, C.A.D., D/A)

17. 7. Letter of Credit (1) • Definition • Parties to a Letter of Credit • Applicant or opener • Beneficiary • Issuing bank or opening bank • Advising bank • Confirming bank • Negotiating bank • Paying bank • Accepting bank • Reimbursing bank

18. 7. Letter of Credit (2) • Contents of a Letter of Credit P78 • Classification of Letter of Credit • According to the attaching of documents • According to the revocability of credit • According to the adding of confirmation • According to the time of payment • According to the method of payment • According to the credit amount to be used revolvingly • Other credits

19. Parties to a Letter of Credit • Applicant • Issuing Bank • Advising Bank/Notifying Bank • Beneficiary • Negotiating Bank • Paying Bank

20. Applicant • It is usually up to the importer to choose a • commercial bank that is willing to open a letter of • credit on his behalf. In international business, the • applicant is often referred to as the buyer, opener or consignee(收货人).

21. Issuing Bank • It is the bank that issues the letter of credit on behalf of the applicant. It takes full responsibility for payment if the exporter presents the correct documents.

22. Advising Bank/Notifying Bank • (通知行): It is the bank that advises the beneficiary of the arrival of the letter of credit.

23. Beneficiary • It is the party in whose favor the letter of credit is issued.

24. Negotiating Bank • (兑现银行，票据转让银行): It refers to the advising bank that is willing to buy the full set of shipping documents presented by the exporter.

25. Paying Bank • It refers to the bank that pays the amount of money to the exporter as stipulated in the letter of credit.

26. 8. Guarantee • Definition • Classification of Guarantee • Tender guarantee, tender bond, or bid bond • Performance guarantee or performance bond • Repayment guarantee • Advance payment guarantee • Loan guarantee

27. 9. Documents (1) • Bill of lading • Definition • The functions of a bill of lading are: • It serves as a receipt • It forms the evidence of a contract for delivery • It is a negotiable document of title to the goods

28. 9. Documents (2) • Main types of bill of lading • Shipped on board bill of lading • Received for shipment bill of lading • Clean or unclaused bill of lading • Claused or unclean bill of lading • Insurance Document • Commercial Invoices • Other Documents

29. Comprehension questions(Page 87)