chapterninePayment.ppt

1、Payment,Introduction In principle, there are altogether five ways in which the seller and the buyer can arrange for payment. buyer seller cash bank transfer check bill of exchange in kind,International cash payments are rare, and raise the question of illegal transactions. Payment in kind, such as t

2、he case with barter (direct exchange of goods, to be specific, a method of paying someone with goods or services instead of money), is outside the scope of this course. Therefore, the remaining three ways: bank transfer, check, and bill of exchange, are usually adopted in international payment.,Sect

3、ion OneInstruments of Payment,Bank transfer The buyer can send payment instructions to his bank electronically or on pre-printed forms. If he has enough funds on his bank account or is covered by a sufficient overdraft facility, the bank will execute the instruction. For international payments, spec

4、ial electronic formats and document forms exist. The instruction should be clear and signed, the electronic signature being represented by secret codes.,2. Bill of exchange (B/E) The Bill of Exchange is a written order from the drawer to the drawee to pay a specific sum of money on a specific date t

5、o a specific person, the payee or holder, or to his or her order. These three named parties are referred to as the parties to the bill.,The drawee is not a bank. In general it is the buyer of the goods, the party which has to pay. The drawer is also the payee or beneficiary: the seller. In short: I

6、(SELLER) ORDER YOU (BUYER) TO PAY ME.,Example: Bill of Exchange No. For , , At sight of this First Bill of exchange (Second being unpaid) Pay to or order the sum of Value received for of Drawn under L/C No. dated To: For and on behalf of Signature,Bill of Exchange,No. 12345 For US$35,000, Nantong, C

7、hina, 15/12/08 At thirty days after sight of this FIRST Bill of exchange (SECOND being unpaid) Pay to Nantong Mechanical Imp/Exp Company or order the sum of THIRTY-FIVE THOUSAND US DOLLARS Value received for two sets of machine tools Drawn under CITIBANK, Los Angeles, L/C No. 567890, dated 30/09/08

8、TO: Los Angeles Mechanics For and on behalf of Nantong Mechanical Imp/Exp Wu Longhua,Type of Bill of exchange 1) According to different drawer Bankers Draft; Commercial Draft 2) With or without documents attached Clean Bill; Documentary Bill 3) According to time of payment Sight Draft; Time Draft,Us

9、e of Bill of Exchange 1) Issue (pay to only; pay to order; pay bearer) 2) Presentation 3) Acceptance 4) Payment 5) Endorsement 6) Dishonor,Promissory Note A promissory note is a promise to pay a specific amount of money to a named person on a specific date. The provisions of the law on bills of exch

10、ange apply. The drawer is the same as the drawee, the buyer. There is no acceptance, because by signing, the buyer has already promised to pay.,In short: I (BUYER) COMMIT MYSELF TO PAY TO YOU (SELLER). A promissory note is less negotiable than a B/E, because the seller does not sign it and thus it i

11、s not liable for payment. Promissory note is sometimes used in international private-to-government or government-to-government transactions.,Type of promissory note Commercial promissory note Banks promissory note,4. Check (Cheque) A check is an unconditional written order to a bank to pay against s

12、urrender of the check a certain sum of money to a beneficiary named in the check or to his order. In other words, the buyer instructs his bank to pay the amount mentioned on the check to seller who may transfer the check to someone else.,Under most laws, a check has to include the following elements

13、: The word “check”, The unconditional order to pay; no restrictive provisions may appear The name of drawee, the bank that must make payment The name of the beneficiary, the seller,5) The drawers, buyers signature 6) The date and place of drawing 7) The amount and currency to be paid, in figures and

14、 in words,Parties to the check In its simplest form the check involves three parties: The drawer, the buyer who writes out the check, ordering his bank to pay a sum of money on demand, The drawee, the buyers bank which has to make payment, and with which the drawer/buyer has an account or credit fac

15、ility,3) The payee or beneficiary, the seller, to whom the amount stated on the check is paid or to whose account such amount is credited. In short: I (BUYER) ORDER YOU (MY BANK) TO PAY TO THE SELLER,Type of check (our country) Check for cash Check for transfer Other systems Crossed check Uncrossed

16、check,Validity of check Within ten days, by presentation after the date of drawing. (in China) The validity of a check under many legal systems is 30 years. Therefore, even 29 years after it has been drawn, it must still honored, i.e. paid.,Section TwoRemittance and Collection,Remittance The payer p

17、ays the money to the payee through the bank or other channels. Parties to remittance Remitter Payee,3) Remitting bank 4) Paying bank b. Types of remittance Mail transfer, M/T Telegraphic transfer, T/T Demand Draft, D/D,c. Disadvantages and advantages of remittance high risk Unbalanced burden of capi

18、tal Simple formality and less formality fee,d. Application of remittance Payment after arrival of the goods Open account transaction 2) Payment in advance Cash with order,2. Collection a. Banks are used as intermediaries to collect the money or to have the bills of exchange received. The rules of th

19、e game have been laid down in the Uniform Rules for Collection of the ICC.,b. Parties to collection Principal, person for whom a bank acts as his representative, usually the exporter Remitting bank, in the exporting country Collecting bank, in the importing country Presenting bank Drawee,c. Nature a

20、nd feature of collection Delivery of the goods first, payment made later Risk for the seller to collecting money Reducing expenditure, helpful to circulation of capital Arousing activity and positivity of the buyers purchase,d. Type of collection Clean collection Documentary collection documents aga

21、inst payment, D/P D/P at sight; D/P after sight documents against acceptance, D/A,Section ThreeLetter of Credit,Letter of credit, also known as documentary credit, is a method that gives the exporter the greatest certainty of obtaining his money. In international trade this is the ideal method of re

22、gulating the interests of buyer and seller in an even-handed manner.,To be specific, an L/C is essentially a statement by the importers bank to the exporter, confirming its commitment, in exchange for the stipulated documents, to pay the agreed purchase money. The L/C changes the exporters commercia

23、l risk on the importer into a risk on the bank which opens the credit.,Many L/Cs are made subject to the Uniform Customs and Practice for documentary credits, 1993 revision, ICC publication no. 500, short for UCP500. With the eUCP of 2002, the ICC has set rules for the era of “paperless trade”. They

24、 are used for air transport, but not yet for other means of transport where the conventions still require documents on paper to accompany the goods.,The export receives the L/C before shipping the goods. It defines exactly which documents are required. These may include invoice, packing list, B/E, B

25、/L, insurance policy, certificate of origin, quality certificate, inspection certificate and so on.,Nature, Features and Roles of an L/C 1) Guarantee of financial credit of the importer, provided by the importers bank, and the which opens the credit becomes the first “payer”.,2) Features of L/C Cred

26、it from the importers bank Document independent of contract Payment under L/C is made by exchanging documents,3) Roles of L/C Roles to the exporter guarantee of receiving the payment guarantee of obtaining foreign exchange guarantee of capital circulation,b. Roles to the importer guarantee of obtain

27、ing documents guarantee of receiving the goods circulation of capital,c. Roles to the bank Credit of bank replaces the commercial credit. Such replacement requires service charges. A lot of fees occur. For opening credit, advising, negotiation, confirmation, amending, etc.,2. An L/C involves the following parties The importer, applicant, who requires his bank to open the L/C. The issuing bank, opening bank, (frequently the buyers bank) that opens the L/C in the importers country. I