Chapter 8: International Chapter 8: International Payments & SettlementPayments & Settlement

1. Introduction (1)1. Introduction (1)

• Definition for international payments & settlementsDefinition for international payments & settlements• Basic points for attention in international payments and Basic points for attention in international payments and

settlementssettlements– As a rule, international traders would pay or receive As a rule, international traders would pay or receive

freely convertible currencies.freely convertible currencies.– Time of payment can be different in international Time of payment can be different in international

payments and settlements as the case may be.payments and settlements as the case may be.– Method of payment can be different in international Method of payment can be different in international

payments and settlements includes: remittance, payments and settlements includes: remittance, collection, letter of credit and bank guarantee.collection, letter of credit and bank guarantee.

– Foreign exchange control is being enforced in all the Foreign exchange control is being enforced in all the socialist countries, most developing countries, or even a socialist countries, most developing countries, or even a few developed countries.few developed countries.

– International traders should be aware that legal title to International traders should be aware that legal title to the exported goods passes from the exporter to foreign the exported goods passes from the exporter to foreign buyer by means of documentation.buyer by means of documentation.

1. Introduction (2)1. Introduction (2)

•Features of Modern International Features of Modern International Payments and SettlementsPayments and Settlements– ConvenientConvenient– DiversifyDiversify– EffectiveEffective

2. Credit Instruments (1)2. Credit Instruments (1)

• DefinitionDefinition– A credit instrument is a written or printed A credit instrument is a written or printed

paper by means of which funds are paper by means of which funds are transferred from one person to another.transferred from one person to another.

– Bill of exchange, promissory notes, chequesBill of exchange, promissory notes, cheques

• Functions of Negotiable InstrumentFunctions of Negotiable Instrument– As a means of paymentsAs a means of payments– As a credit instrumentAs a credit instrument– As a negotiable instrumentAs a negotiable instrument

2. Credit Instruments (2)2. Credit Instruments (2)

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

3. Bill of Exchange (1) 3. Bill of Exchange (1)

• DefinitionDefinition– It is an unconditional order in writing It is an unconditional order in writing

addressed by one person to another, addressed by one person to another, signed by the person giving it, requiring signed by the person giving it, requiring the person to whom it is addressed to the person to whom it is addressed to pay on demand or at a fixed or pay on demand or at a fixed or determinable future time a sum certain determinable future time a sum certain in money to or to the order of a specified in money to or to the order of a specified person or to bearer.person or to bearer.

IntroductionIntroduction

• Bill of Exchange, DraftBill of Exchange, Draft– Concept and contentConcept and content

• Bill of ExchangeBill of Exchange

• Payment OrderPayment Order

• AmountAmount

• Time of PaymentTime of Payment

• Place of PaymentPlace of Payment

• Drawee, PayerDrawee, Payer

• PayeePayee

• Time of DateTime of Date

• Place of DatePlace of Date

• Signature of DateSignature of Date

3. Bill of Exchange (3)3. Bill of Exchange (3)

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

– Kinds of bill of exchangeKinds of bill of exchange•BankerBanker’’s Draft & Commercial Drafts Draft & Commercial Draft

•Clean Bill & Documentary BillClean Bill & Documentary Bill

•Sight Draft & Time Bill or Usance BillSight Draft & Time Bill or Usance Bill– At ** days after sightAt ** days after sight– At ** days after dateAt ** days after date– At ** days after date of Bill of LadingAt ** days after date of Bill of Lading– Fixed DateFixed Date

– Using Using • IssueIssue

– Pay A Co. only / Pay ** Co. not negotiablePay A Co. only / Pay ** Co. not negotiable– Pay ** Co. or order / Pay to the order of ** Co.Pay ** Co. or order / Pay to the order of ** Co.– Pay BearerPay Bearer

• PresentationPresentation• AcceptanceAcceptance• PaymentPayment• Endorsement: Endorsee and Endorser / DiscountEndorsement: Endorsee and Endorser / Discount• DishonorDishonor

– Dishonor by non-acceptance and Dishonor by non-Dishonor by non-acceptance and Dishonor by non-paymentpayment

– ProtestProtest– Right of Recourse Right of Recourse – Without RecourseWithout Recourse

4. Promissory Note and Cheque 4. Promissory Note and Cheque (1)(1)

• DefinitionDefinition• Features of a Promissory NoteFeatures of a Promissory Note

– It is an unconditional promise in writingIt is an unconditional promise in writing– The basic parties to a promissory note The basic parties to a promissory note

are the maker and the payee.are the maker and the payee.– There is no need to accept the There is no need to accept the

instrument if it is payable at a fixed or instrument if it is payable at a fixed or determinable future time.determinable future time.

– Issued by bankIssued by bank

4. Promissory Note and Cheque 4. Promissory Note and Cheque (2)(2)• ChequeCheque

– DefinitionDefinition• Features of ChequeFeatures of Cheque

– UnconditionalUnconditional– Be drawn on a bankBe drawn on a bank– A sum certain in money must be written on a A sum certain in money must be written on a

chequecheque– The date of a cheque is not essentialThe date of a cheque is not essential– The payee may be a bearer, a specific person The payee may be a bearer, a specific person

or his orderor his order• Crossing on ChequeCrossing on Cheque

• Three often used ways of Three often used ways of paymentpayment

remittanceremittance

collectioncollection

Letter of CreditLetter of Credit

5. Remittance5. Remittance

• DefinitionDefinition

• Ways of TransferWays of Transfer– By airmail (M/T)By airmail (M/T)– By cable/telex/SWIFT (T/T)By cable/telex/SWIFT (T/T)– By bankerBy banker’’s demand draft (D/D)s demand draft (D/D)

• Methods of Reimbursement Methods of Reimbursement

6. 6. Terms and Methods of Payment in Terms and Methods of Payment in international Trade Payment in international Trade Payment in Advance, Open Account Business, Advance, Open Account Business, Collection (1)Collection (1)• Payment in AdvancePayment in Advance

– DefinitionDefinition– It is to transfer the payment before It is to transfer the payment before

delivery of the goods from the importer delivery of the goods from the importer to the exporter through banks.to the exporter through banks.

(by cheque, banker(by cheque, banker’’s draft, mail s draft, mail transfer, telegraphic transfer, transfer, telegraphic transfer, SWIFT message, international money SWIFT message, international money order)order)

6. 6. Terms and Methods of Payment in Terms and Methods of Payment in international Trade Payment in international Trade Payment in Advance, Open Account Business, Advance, Open Account Business, Collection (2)Collection (2)• Open Account BusinessOpen Account Business

• CollectionCollection– Outward collectionOutward collection– Inward collectionInward collection– Types of collectionsTypes of collections

1)1) Clean collectionsClean collections

2)2) Documentary collections (D/P, C.A.D., Documentary collections (D/P, C.A.D., D/A)D/A)

7. Letter of Credit (1)7. Letter of Credit (1)

• DefinitionDefinition• Parties to a Letter of CreditParties to a Letter of Credit

– Applicant or openerApplicant or opener– BeneficiaryBeneficiary– Issuing bank or opening bankIssuing bank or opening bank– Advising bankAdvising bank– Confirming bankConfirming bank– Negotiating bankNegotiating bank– Paying bankPaying bank– Accepting bankAccepting bank– Reimbursing bankReimbursing bank

7. Letter of Credit (2)7. Letter of Credit (2)

• Contents of a Letter of Credit P78Contents of a Letter of Credit P78

• Classification of Letter of CreditClassification of Letter of Credit– According to the attaching of documentsAccording to the attaching of documents– According to the revocability of creditAccording to the revocability of credit– According to the adding of confirmationAccording to the adding of confirmation– According to the time of paymentAccording to the time of payment– According to the method of paymentAccording to the method of payment– According to the credit amount to be used revolvinglyAccording to the credit amount to be used revolvingly– Other creditsOther credits

Parties to a Letter of Credit

ApplicantIssuing Bank Advising Bank/Notifying BankBeneficiary Negotiating BankPaying Bank

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 ).

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.

Issuing Bank

( 通知行 ): It is the bank that advises the beneficiary of the arrival of the

letter of credit.

Advising Bank/Notifying Bank

Beneficiary

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

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.

Paying Bank

It refers to the bank that pays the amount of money to the exporter as

stipulated in the letter of credit.

8. Guarantee8. Guarantee

• DefinitionDefinition

• Classification of GuaranteeClassification of Guarantee– Tender guarantee, tender bond, or bid bondTender guarantee, tender bond, or bid bond– Performance guarantee or performance Performance guarantee or performance

bondbond– Repayment guaranteeRepayment guarantee– Advance payment guaranteeAdvance payment guarantee– Loan guaranteeLoan guarantee

9. Documents (1)9. Documents (1)

• Bill of ladingBill of lading– DefinitionDefinition– The functions of a bill of lading are:The functions of a bill of lading are:

a)a) It serves as a receipt It serves as a receipt

b)b) It forms the evidence of a contract for It forms the evidence of a contract for deliverydelivery

c)c) It is a negotiable document of title to It is a negotiable document of title to the goodsthe goods

9. Documents (2)9. Documents (2)

• Main types of bill of ladingMain types of bill of lading– Shipped on board bill of ladingShipped on board bill of lading– Received for shipment bill of ladingReceived for shipment bill of lading– Clean or unclaused bill of ladingClean or unclaused bill of lading– Claused or unclean bill of ladingClaused or unclean bill of lading

• Insurance DocumentInsurance Document• Commercial InvoicesCommercial Invoices• Other DocumentsOther Documents

Comprehension questionsComprehension questions(Page 87)(Page 87)