VI – Financing 支付

VI – Financing 支付 • A. SCOPE OF INTERNATIONAL FINANCING（国际支付的范围） • B. FINANCING FOREIGN TRADE（对外贸易融资） • C. BILLS OF LADING（提单） • D. BILLS OF EXCHANGE（汇票） • E. PROMISSORY NOTES（本票） • F. NEGOTIABILITY OF BILLS AND NOTES（票据的流通性） • G. THE NEGOTIATION AND TRANSFER OF BILLS AND NOTES（票据的流转） • H. THE ROLE OF BANKS IN COLLECTING AND PAYING NEGOTIABLE INSTRUMENTS（银行在流通票据收支中的地位） • I. LETTERS OF CREDIT（信用证） • J. FINANCING FOREIGN OPERATIONS（对外经营融资）

A.SCOPE OF INTERNATIONAL FINANCING • 1. The Financing of Foreign Trade: Involves the underwriting, paying, and collecting of money for the purchase of goods and services • 2. The Capitalization of Foreign Investments: Involves the acquisition of debt and equity financing to establish or expand overseas business operations

B. FINANCING FOREIGN TRADE • 1. Trade Documents • a. Reason for use in international trade: Buyers and sellers are separated both in distance and by the differing financial practices of their home countries. • 1) Difficult for seller to determine the credit standing of a foreign buyer. • 2) Difficult for buyer to reliably establish the foreign seller’s integrity and reputation.

C. BILLS OF LADING • 1. The Essential Document for all international sales • a. A document of title: It represents the goods. • 1) Allows for transfer of title while goods are in the possession of a carrier or warehouseman. • 2) Discussed in Lecture 10.

D. BILLS OF EXCHANGE • 1. Defined: A bill of exchange (or draft) is — • a. A written, dated and signed instrument. • b. Containing an unconditional order. • 1) From drawer. • 2) Directing drawee. • 3) To pay a payee. • c. A definite sum of money. • d. With payment to be made. • 1) On demand, or • 2) At a specified future date.

2. Bills of Exchange are Negotiable Instruments • a. A proper holder will take it free of the “personal defenses” or “equities” that the drawer might have that: • 1) The underlying contract was improperly performed, or • 2) The instrument was improperly made. • b. Importance: Bills of exchange are more readily saleable and, therefore, useful financial tools for raising money.

3. The Laws Governing Bills of Exchange • a. Three basic laws: • 1) Anglo-American laws. • a) English Bills of Exchange Act (BEA) of 1882. • 1] Applicable in UK and commonwealth countries. • b) United States Uniform Commercial Code (UCC). • 1] Adopted in all US states except Louisiana. • 2) Model laws applicable in the rest of the world. • a) Uniform Law on Bills of Exchange and Promissory Notes (ULB) of 1930. • b) Uniform Law for Checks (ULC) adopted in 1931. • 3) United Nations’ Convention. • a) UN Convention on International Bills of Exchange and International Promissory Notes (CIBN) of 1988. • b) Meant to make international transactions uniform. • c) Not yet in force — unlikely to be in force soon.

4. The “Form” of Bills of Exchange • a. BEA and UCC requirements: • 1) In writing. • 2) Payable either to order or to bearer. • b. ULB requirements: • 1) In writing. • 2) Payable either to order or to bearer. • 3) Contain the term “bill of exchange” in — • a) The body, and • b) The language of the check. • 4) State the place where the bill is drawn. • 5) State the place where payment is to be made. • 6) Be dated.

5. Types of Bills of Exchange • a. Time bill: Drawee must pay at a definite future time. • b. Sight (or demand) bill: Drawee must pay either when — • 1) The holder presents the bill for payment, or • 2) At a stated time after presentment. • c. Trade acceptances: Drawee is one who bought goods from the drawer and owes the sale price to the drawer. • 1) Drawee is a credit buyer. • 2) May be a time or sight bill. • d. Checks: Drawee is holding money on account for drawer. • 1) Drawee is a bank. • 2) Checks are always payable on demand.

E. PROMISSORY NOTES • 1. Defined: A promissory note (or simply a “note”) is a written promise to pay a determinate sum of money made between two parties. • 1) Maker: The issuer of a promissory note. • 2) Payee: The person to whom the note is to be paid. • 2. Difference Between a Promissory Note and a Bill of Exchange The maker of a note promises to personally pay the payee rather than ordering a third party to do so • 3. Governing Law: Same as those that apply to bills of exchange

F. NEGOTIABILITY OF BILLS AND NOTES • 1. Requirements of Negotiability • a. Be in the proper form, and • b. Contain the following promissory elements: • 1) State an unconditional promise or order to pay. • 2) State a definite sum of money or a monetary unit of account. • a) Money. • 1] BEA, UCC and ULB define money as “a medium of exchange authorized or adopted by a domestic or foreign government as part of its currency.” • 2] International practice also includes ad hoc currency baskets established by the parties.

b) Definite Sum: The sum to be paid must be ascertainable from the bill or note itself without reference to any outside source. • 3) Be payable on demand or at a definite time. • 4) Be signed by the maker or drawer. • a) Signature: “Any symbol executed or adopted by a party with present intention to authenticate a writing.”

G. THE NEGOTIATION AND TRANSFER OF BILLS AND NOTES • 1. Assignment: The transfer of rights under a contract • a. The assignee acquires only those rights that the assignor possessed. • b. Any objections to honoring the assigned obligations that could be raised against the assignor can be raised against the assignee.

2. Negotiation: The transfer of a bill or note in such a way that the recipient becomes a holder • a. Negotiating order paper. • 1) Order paper: A bill or note payable to a named payee. • 2) Negotiated by delivery and endorsement. • b. Negotiating bearer paper. • 1) Bearer paper: A bill or note payable to the bearer or to cash. • 2) Negotiated by delivery. • c. Converting order to bearer paper and bearer to order paper. • 1) Order to bearer paper: • a) By an endorsement in blank, i.e., the endorsee’s signature alone. • b) By an endorsement to pay to the bearer. • 2) Bearer to order paper: By the use of a special endorsement, e.g. “pay to John Adams.”

3. Forged Endorsements • a. Effect. • 1) ULB: A forged endorsement is effective. • a) Both the person taking a forged instrument and all subsequent holders are entitled to payment. • b) Rationale: This rule encourages the free transfer and exchange of bills and notes.

2) BEA and UCC: A forged endorsement is ineffective. • a) The endorsee taking from a forger is responsible for determining the validity of an endorsement. • Case 12-3. Mair v. Bank of Nova Scotia • 1] Exceptions: • a] Impostor rule: A forged endorsement is effective if a drawer, maker, or endorser draws, makes or endorses an instrument to an imposter. • b] Fictitious payee rule: A forged endorsement is effective if the instrument was issued in the name of a payee who had no interest in the instrument. • b) Rationale: Liability is imposed on the person best able to prevent the forgery from happening. • c) Problem with rule: It encourages litigation. • 1] Determination of whether one or the other of the two exceptions applies has to be made after the fact. • 2] The last holder has to initiate suit against the dishonoring party to determine who must press the claim against the forger.

4. Limitations on the Excuses that Drawers and Makers Can Use to Avoid Paying Off a Bill or Note • a. ULB limitations. • 1) Basic rule: Anyone who acquires a bill or note by negotiation is a holder who is entitled to payment from the maker or drawer. • 2) Exceptions: • a) The possessor is not a holder because he did not acquire title through an uninterrupted series of endorsements. • b) The holder acquired the instrument in bad faith. • 1] Bad faith includes: • a] Actual theft of the instrument. • b] Knowing that the instrument is stolen, lost, or misplaced. • c] Knowing that the payee, or some prior holder, is not properly entitled to payment. • c) The holder acquired the instrument through gross negligence (i.e., carelessly but without actual knowledge).

b. BEA/UCC limitations: • 1) Basic rule: The maker or drawer does not have to pay someone who is not a holder, he can assert “personal defenses” or “equities” against a holder, but only “real defenses” against a holder-in-due course. • a) Holder: One who acquired the bill or note through an uninterrupted series of endorsements. • b) Holder in Due Course (HDC): A holder who acquires an instrument: • 1] For value, • 2] In good faith, and • 3] Without notice that it is overdue, or that it has been dishonored, or that the maker, drawer, or a prior endorser has a valid excuse for not paying it off.

2) Personal Defenses: • a) Breach of contract (including breach of contract warranties). • b) Lack or failure of consideration. • c) Fraud in the inducement. • d) Illegality, incapacity (other than minority), or duress, if the contract is voidable. • e) Previous payment of the instrument. • f) Unauthorized completion of an incomplete instrument. • g) Nondelivery of the instrument.

3) Real Defenses: • a) Forgery. • b) Fraud in the execution. • c) Material alteration. • d) Discharge in bankruptcy. • e) Minority, if the contract is voidable. • f) Illegality, incapacity, or duress, if the contract is void.

5. Liabilities of Makers, Drawers, Drawees, and Endorsers • a. Liability on the Instrument: Liability arising out of a signature. • 1) Makers and drawees have “primary” liability: Must make payment on presentment of the instrument. • Case 12-4. Far East Realty Investment, Inc. v. Court of Appeals • 2) Drawers and endorsers have “secondary” liability: Only have to pay if the maker or drawee fails to do so.

b. Warranty Liability: Responsibility arising out of the implied guarantees a person makes at the time he transfers or presents a negotiable instrument. • 1) BEA and ULB: No warranty liability. • 2) UCC: Every person who transfers an instrument (whether order or bearer paper) in exchange for consideration makes five implied guarantees to his immediate transferee and to every subsequent holder who takes the instrument in good faith. • a) The transferor has good title to the instrument or is otherwise authorized to obtain payment or acceptance on behalf of one who does have good title. • b) All signatures are genuine or authorized. • c) The instrument has not been materially altered. • d) No defense of any party is good against the transferor. • e) The transferor has no knowledge of any insolvency proceedings against the maker, the acceptor, or the drawer of an unaccepted instrument.

H. THE ROLE OF BANKS IN COLLECTING AND PAYING NEGOTIABLE INSTRUMENTS • 1. Functions Banks Perform in connection with negotiation of bills and notes • a. Issue instruments themselves (e.g., certified checks and certificates of deposit). • b. They assume primary liability (as drawees and acceptors) on bills of exchange and promissory notes. • c. They act as the collecting agent for holders and transferees. • d. They take instruments as endorsees, paying the endorser, and presenting the instrument for payment in their own right.

I. LETTERS OF CREDIT • 1. Alternatives to Using Letters of Credit • a. “Cash in advance” term: Used if seller is unable to determine buyer’s creditworthiness. • b. “Documents Against Payment” term: Used when buyer wants to confirm that the goods have been shipped. • 1) Seller instructs a bank in the buyer’s country to release title (e.g., a carrier’s bill of lading) only after the buyer delivers to the bank a receipt from the seller indicating that the seller has received payment. • c. “Documents Against Acceptance” term: Buyer insists upon taking delivery before making payment. • 1) Seller instructs a bank in the buyer’s country to release title only on receipt of an acknowledgement of delivery.

2. The Letter of Credit Transaction • a. Defined: An instrument — • 1) Issued by a bank, or other person, at the request of a customer (called an “account party”). • 2) It is a conditional agreement between the issuer and the account party that is intended to benefit a third party. • 3) It obliges the issuer: • a) To pay a bill of exchange drawn by the account party, up to a certain sum of money, • b) Within a stated time period, and • c) Upon presentation by the beneficiary of documents designated by the account party.

b. Function: To substitute the credit of a recognized international bank for that of the buyer. • c. The parties: • 1) The buyer is the account party. • 2) The buyer’s bank is the issuing bank. • 3) The seller is the beneficiary. • d. Types of Letters of Credit: • 1) Irrevocable: Cannot be altered without the beneficiary’s express consent. • a) Preferred by beneficiaries because it provides the most security. • 2) Revocable: Revocable by the issuing bank. • a) Disliked by beneficiaries because it provides the least security. • 3) Confirmed: A second bank adds its endorsement to the credit, indicating that it too will make payment against the specified documents. • a) Gives the beneficiary additional assurance that payment will be made.

3. Governing Law: • a. International Chamber of Commerce’s Uniform Customs and Practices for Documentary Credits (UCP) governs virtually all international letter of credit transactions. • 1) Most banks incorporate the UCP in the terms of the credits they issue.

4. Applying for a Letter of Credit • a. Applicant must have an existing relationship with a bank. • b. Applicant completes a “Letter of Credit Application.” • 1) Caveat: Not an application for credit, but a set of instructions telling the issuing bank what needs to be included in the letter of credit. • c. The consequences of not obtaining a letter of credit when the buyer has contractually agreed to obtain one ‑ • 1) If the credit was a condition precedent to the formation of the contract: There will be no contract, and consequently no breach. • 2) If the credit was a condition for the performance of the contract: Because the contract already exists, the failure to obtain a credit will be a breach that will entitle the injured party to sue for damages.

5. Documentary Formalities • a. No particular form is required. • b. Must have the following formalities: • 1) Be in writing. • 2) Be signed by the issuer. • 3) Be complete and precise. • 4) Indicate if it is irrevocable. • a) Presumption that a credit is revocable. • 1] Note: The latest version of the UCP (UCP 500) changes this rule so that a credit is presumed to be irrevocable. • 5) Indicate clearly when and how credits are to be paid. • a) This may be by: • 1] Sight payment. • 2] Deferred payment. • 3] Acceptance. • 4] Negotiation. • 6) Name the bank(s) which is/are authorized to: • a) Pay the credit, • b) Accept bills of exchange drawn in accordance with the letter, or • c) Negotiate the credit.

6. Advising and Confirming Letters of Credit • a. Advising Bank: A corresponding bank in the beneficiary’s county which delivers the credit to the beneficiary. • 1) Assumes no liability for paying the letter of credit. • 2) Only obligation is to the issuing bank, to insure that the beneficiary is advised and the credit delivered, and to take “reasonable care to check the apparent authenticity of the credit.” • a) It does this by comparing the signature on the credit with the authorized signatures it maintains on file.

b. Confirming Bank: A bank that independently promises that it will pay, accept, or negotiate a credit, as appropriate, when the documents specified in the credit are presented to it and the other terms and conditions of the credit have been complied with. • 1) A confirming bank is entitled to reimbursement from the issuing bank if the documents it receives are in order. • 2) Obligations of confirming banks: • a) If the documents are not in order the confirming bank will be left with title to the goods in its own name. • b) If the issuing bank or the account party are unable to reimburse the confirming bank, the confirming bank will be left with title to the goods in its own name.

7. The Obligations of Banks • a. To examine documents with reasonable care. • b. Paying, accepting, or negotiating banks must forward irregular documents to the issuing bank. • c. To honor or refuse credits “on the basis of the documents alone.” • 1) So long as the documents appear regular on their face, the bank must pay. • a) The Rule of Strict Compliance: A bank may reject documents that do not exactly comply with the terms specified in the letter of credit.

2) Fraud by the Seller. • a) If the seller delivered mislabeled goods to a carrier to obtain the documents it needed to collect against a letter of credit, the issuing bank may nevertheless pay the seller even if it knows of this. • c) If the underlying transaction was fraudulent and the credit is revocable, the issuing bank may refuse to pay the seller. • d) If the underlying transaction was fraudulent and the credit is irrevocable, the issuing bank probably has to pay the seller. • 1] There is no firm rule in the UCP.

3) Fraud in the Collection Process. • a) If a collecting bank, knowing that a letter of credit has been altered, attempts to collect from the issuing bank, the issuing bank does not have to pay.

8. Rights and Responsibilities of Beneficiaries • a. Basis of rights and responsibilities: Commercial practice. • 1) There are no contractual rights. • b. Prerequisites for collecting on a letter of credit: • 1) The beneficiary must comply with the terms and conditions of the credit. • 2) The beneficiary must present to the issuer (or the issuer’s agent) the documents designated in the credit. • a) Commonly these include ‑ • 1] A certificate of origin: To comply with customs requirements. • 2] An export license and/or a health inspection certificate: To show that the goods are approved for export. • 3] A certificate of inspection: To show that all of the goods have been shipped. • 4] A commercial invoice: To identify the shipment. • 5] A bill of lading: To show title to the goods. • 6] A marine insurance policy.

J. FINANCING FOREIGN OPERATIONS • 1. Private Sources of Capital • a. Debt and equity funding are available from the private sector to finance the operations of multinational ventures. • 2. Governmental Sources of Capital • a. Host Country Development Banks and Government Agencies. • b. Home Country Import and Export Financing Agencies.

3. Regional and International Development Agencies • a. Regional Development Banks. • 1) African Development Bank. • 2) Asian Development Bank. • 3) Central American Bank for Economic Integration. • 4) European Bank for Reconstruction and Development Bank. • 5) European Investment Bank. • 6) Inter-American Development Bank.

b. International Development Banks. • 1) World Bank: The International Bank for Reconstruction and Development (IRBD). • a) Provides funds to governments. • 2) Subsidiaries of the World Bank. • a) International Development Association (IDA). • 1] Provides funds to governments. • b) International Finance Corporation (IFC). • 1] Provides funds to private companies.

VI – Financing 支付