Chapter 3
International Trade Payment
授课教师 狄琳娜
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Learning objectives:
? 1.To learn the most commonly used instruments of
payment– bill of exchange,promissory note and cheques.
? 2.To learn the methods of payment in international
trade– remittance,collection,letter of credit and bank
guarantee.
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Section 1 Instrument of Payment
?1,Bill of exchange (draft)
?2,Promissory note
?3,Check
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1,Bill of exchange (draft)
? 1.1 Definition of bills of exchange
? 1.2 Contents of bill of exchange
? 1.3 Acts of bill of exchange
? 1.4 Types of bills of exchange
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1.1 Definition of bills of exchange
? A bill of exchange ( or draft as it is sometimes called) is
a written,dated and signed instrument that contains
an unconditional order from the drawer that directs
the drawee to pay a definite sum of money to a
payee on demand or at a specified future date,It is a
useful instrument because it allows one party( the
drawer) to direct another ( the drawee) to pay money
either to himself,to his agent,or to a third party.
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? Of course,the order is valid only if the drawee has
underlying obligation to pay money to the drawer.
This can arise in situations where the drawee is
holding money on account of the drawer(i.e.,the
drawee is a bank),where the drawer lent money
to a drawee (i.e.,the drawee is a borrower),or
where the drawer has sold goods to the drawee
and the drawee owes the sale price to the
d r a w e r ( i, e,,t h e d r a w e e is a b u y e r ),
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e.g.
? Exchange for US$1,000.—
At sight pay to the order of the Bank of
China the sum of one thousand U.S.dollar only.
Value received.
To:The City Bank
New York,N.Y.,U.S.A.
For China National Chemicals
Import& Export Corporation,S.B.
(signed)
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1.2 Contents of bill of exchange
? A bill of exchange must fulfil the following
requirements:
? (1)Indicating the word‖draft‖ or ―exchange‖.
(2) An unconditioned order in writing.
(3) Certain amount
(4) Payer’s (drawee’s) name,usually the buyer or
its nominated bank.
(5) Payee’s name,usually the seller or its
nominated bank.
(6) Date and place of issue.
(7) Signature of the drawer,usually the seller
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1.3 Acts of bill of exchange
Drawer Payee
(1) issue,The drawer draws and signs and delivers it to
the payee.
(2) Presentment:Production of a draft to a party liable to
pay on it for that party’s acceptence(i.e.,commitment
to pay) or payment.
(3) Acceptance:Acceptance means the drawee of the bill
writes the(acceptor) commits himself to pay the bill of
Payerissue
present
accept,pay
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1.4 Types of bills of exchange
? (1)According to who is the drawer
? a.Take draft,It is a bill issued by a trader on another
trader or on a bank.
? b.Banker’s draft,It is a draft drawn by a bank on
another bank,Both the payer and the payee are banks.
? (2) According to whether the shipping documents are
attached or not
? a.Clean draft,It is a bill without shipping documents
attached thereto.
? b,Documentary draft,It is a bill with shipping
documents attached thereto.
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1.4 Types of bills of exchange
? (3) According to the tenor
? a.Sight draft or demand draft,It is a bill payable on
demand or at sight or on presentation.
? b.Time draft or usance draft,It is a bill payable at a
fixed or determinable future time.The time may be
expressed in the following three ways:
? (i)at…… days after sight.
? (ii) at …… days after date.
? (iii) at a fixed date.
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1.4 Types of bills of exchange
? (4)According to who is the acceptor
? a.Trader’s acceptance draft,It is a time bill drawn
on a trader and accepted by him.
? b.Banker’s acceptance draft,It is a time bill drawn
on a bank and accepted by this bank,that is,the
bank guarantees the payment of draft,This kind of
bill is more preferable and negotiable than the
trade’s acceptance bill and is more acceptable in
the discount market.
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2,Promissory note
? 2.1 Definition of
promissory note
? 2.2 Differences between
a bill of exchange and a
promissory note
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2.1 Definition of promissory note
? A written promise to pay a determinate sum
of money made between two parties is a
promissory note,or simply a note,The party
who promises to pay is called the maker; the
party who is to be paid is the payee.
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e.g.
? Promissory Note London,May 20,1999
? US$ 3,000.
On the September 20th,1999 fixed by the
promissory note we promise to pay xx or
order the sum of three thousand U.S,dollars
only.
For and on behalf of
YYY(signed)
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2.2 Differences between a bill of
exchange and a promissory note
? The nature of a promissory note has much in
common with that of a bill of exchange,However,
there are some differences between these two
instruments,which lie in:
? (1) A promissory note is a promise to pay,whereas
a bill of exchange is an order to pay;
? (2) There are only two parties to a promissory
note,namely the marker and the payee,whereas
there are three parties to a bill of exchange,
namely the drawer,the drawee and the payee,
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2.2 Differences between a bill of exchange and
a promissory note
? (3) The maker is primarily liable on a
promissory note,whereas the drawer is
primarily liable,if it is a sight bill and the
acceptor becomes primarily liable,if it is a time
bill.
? (4) When issued,a promissory note has an
original note only,whereas a bill of exchange
and third of exchange in addition to the
original one.
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2.2 Differences between a bill of exchange and a
promissory note
? All in all,the major difference between a
promissory note and a bill of exchange is that
the maker of a note promises to personally pay
the payee,rather than ordering a third party to
do so.
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3.Cheque
? e.g.
? Cheque for US$3,000.- Shanghai,May 5,1999
Pay to the order of John Smith the sum of three
thousand U.S,dollars.
To:Bank of China
Shanghai,China
For China National Arts&Crafts
Import&Export Corp.
Shanghai Branch
(signed)
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Section 2 Remittance and Collection
? 2.1 Remittance
? a.definition of remittance
? b.parties related to a remittance
? c.ways of transfer
? d.application of remittance
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2.1 Remittance
? a.definition of remittance
Remittance refers to the transfer of funds from
one party to another among different
countries,that is,a bank (remitting bank),at
the request of its customer( the remitter),
transfers a certain sum of money to its
overseas branch or correspondent bank ( the
paying bank) instructing them to pay to a
named person or corporation(the payee or
beneficiary) domiciled in that country.
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b.parties related to a remittance
? (1) Remitter
A remitter is the person who requests his bank to remit
funds to a beneficiary in a foreign country.He is also
called the payer.
? (2) Parties related to a remittance
A person who is addressed to receive the remittance is
called the payee or beneficiary.
? (3) Remitting bank
A remitting bank is the bank transferring funds at the
request of a remitter to its correspondent or its branch
in another country and instucting the latter to pay a
certain amount of money to a beneficiary.
? (4) Paying bank
A paying bank is the bank entrusted to by the remitting
bank to pay a certain amount of money to a beneficiary
named in the remittance advice.
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c.ways of transfer
? There are three basic ways for a bank to
transfer funds for its client from home country
to abroad.They are remittance by airmail,
remittance by cable,and remittance by
demand draft.
? (1) Remittance by airmail (M/T)
? (2) Remittance by cable/telex/SWIFT (T/T)
? (3) Remittance by banker’s demand draft(D/D)
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(1) Remittance by airmail (M/T)
? Remittance by airmail is more generally known
as mail transfer,i.e,M/T.A mail transfer is to
transfer funds by means of a payment order or
a mail advice,or sometimes a debit advice
issued by a remitting bank,at the request of the
remitter,A payment order,mail advice or debit
advice is an authenticated order in writing
addressed by one bank to another instructing
the latter to pay a sum certain in money to a
specified person or a beneficiary named
thereon.
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(2) Remittance by cable/telex/SWIFT (T/T)
? Remittance by cable /telex/SWIFT is often referred to
as cable transfer or telegraphic transfer,namely
T/T.It is exactly the same as a mail transfer,except
that instructions from the remitting bank to the paying
bank are transmitted by cable instead of by airmail.It
is therefore faster,but more expensive than the mail
transfer.It is often used when the remittance amount
is large and the transfer of funds is subject to a time
limit.The only means of authenticating a cable
transfer is the test key.However,remittance by
SWIFT should be authenticated by SWIFT authentic
key.
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M/T,T/T 程序图示
? HBITC 汇款人 收款人 IBM
? BOCHB 汇出行 汇入行 BOCNY
1、申请
2、付款委托书
3、回执 4、付款
5、借 /贷记通知
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(3) Remittance by banker’s demand draft(D/D)
? Remittance by banker’s demand draft is often
referred to as D/D,A banker’s draft is a
negotiable instrument drawn by a bank on its
overseas bank.
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D/D 程序图示
? HBITC 汇款人 收款人 IBM
? BOCHB 汇出行 汇入行 BOCNY
1、申请 2、出票
4、邮寄汇票
3、邮寄票根
5、提示 6、付款
7、借 /贷记通知
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d.application of remittance
? Remittance is mostly used in the advance payment
and open account business such as cash on delivery,
cash with order,etc.
? In our foreign trade practice,remittance is only
adopted in making down payments,commissions,etc,
It is not the major method of payment.But it is a major
method in developed countries,because of the
substantial internal transactions of transnational
companies and reliable trade partners and sales
network.
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2.2 Collection
? a.definition of collections
? b.parties to a collection
? c.types of collections
? d.the nature of collection
? e.points for seller’s attention in adopting
collection
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a.definition of collections
? After he has shipped the goods to his customers
abroad,the exporter draws a bill of exchange on
the latter with or without shipping documents
attached thereto and then gives the draft to his
bank together with his appropriate collection
instructions.
? In simple terms,a collection means that the
creditor (the exporter) entrusts the bank to collect
payment from the debtor(importer).The bank
acts as the intermediary.
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b.parties to a collection
? (1) Drawer or principal
It is the exporter or the seller who entrusts the collection
items to his bank.
? (2) Drawee
It is the buyer or the importer to whom the collection
items are to be presented for acceptance or payment
? (3) Remitting bank
It is the bank to which the drawer entrusts the
collection items.Upon receipt of the collection items
from the exporter,the bank forwards them to the
collecting bank,in accordance with the collection
instructions given by the principal.
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b.parties to a collection
? (4) Collecting bank
It is the bank entrusted by the remitting
bank to present the collection items to the
drawee.The collecting bank is generally a
branch of a correspondent or an agent of the
remitting bank.
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c.types of collections
? (1) Clean collections
Clean collections are collections on financial
instruments without being accompanied by
commercial documents,such as invoice,bill of
lading,insurance policy,etc.
? (2) Documentary collections
Definition:Documentary collections may be
described as collections on financial instruments
accompanied by commercial documents or
collections on commercial documents without
being accompanied by financial instruments,that
is,commercial documents alone without a bill of
exchange.
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c.types of collections
? The two types of documentary collections
(i) Documents against payment (D/P)
When entrusting the bank to collect,the
principal instructs the bank to deliver the
documents when payment has been
made.According to the different time of
payment,it is divided into (a)D/P at sight and
(b)D/P after sight.
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(a) D/P at sight
? The draft issued is demand draft,When
the collecting bank makes presentation to
the drawee ( the importer),the latter should
make payment upon presentation.The
collecting bank will then deliver the
documents to him.
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D/P即期流程图
HBITC 付款人 运输公司 委托人 IBM
BOCHB 代收行 托收行
BOCNY
1、装运
2、提单
3、托收申请书 +
跟单汇票
5、回执
4、托收指示 +跟单汇票
6、提示
7、审单、付款
8、交单
9、提单
10、货物
11、汇交款项
12、交款
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(b) D/P after sight
? Time draft is used in D/P after sight,When the
collecting bank makes presentation,the buyer
shall first make acceptance after checking the
documents,and will make payment on the date
of expiry of payment.
? The common point between D/P at sight and D/P
after sight is that the buyer shall not get
documents without making payment.Therefore,
the responsibilities and risks sustained by the
seller are almost the same.
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D/P远期流程图
HBITC 付款人 运输公司 委托人 IBM
BOCHB 代收行 托收行
BOCNY
1、装运
2、提单
3、托收申请书 +
跟单汇票
5、回执
4、托收指示 +跟单汇票
6、提示
7、承兑
8、到期日
付款、交单
9、提单
10、货物
11、汇交款项
12、交款
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(ii) Document against acceptance (D/A)
? Time draft is used in D/A,The seller instructs
the bank to deliver the documents provided
the buyer has accepted the draft.The buyer
shall make payment on expiry date.
? D/A is somewhat the same as cash on
delivery,The buyer accquires documents
without making payment,If the buyer fails to
make payment,the seller will probably suffers
money as well as cargo losses.
? Therefore,the smaller should be very
cautious in the settlement by D/A.
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D/A 流程图
HBITC 付款人 运输公司 委托人 IBM
BOCHB 代收行 托收行
BOCNY
1、装运
2、提单
3、托收申请书 +
跟单汇票
5、回执
4、托收指示 +跟单汇票
6、提示
7、承兑、交单
10、到期日
付款
8、提单
9、货物
11、汇交款项
12、交款
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d.the nature of collection
? Collection is a trade credit settlement.The
banker’s responsibility is only providing
services of delivering documents and
collecting payment.Whether the payment
gets to be made or not depends on the
buyer’s credits.
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e.points for seller’s attention in adopting
collection
? There are a number of risks which may be
incurred to the exporter.The seller should take
cautious attitude in adopting collection,
? The following factors should be taken into
consideration:
(i) Always make sure that the overseas importer
is of good reputation and of good financial
standing.Otherwise,an importer without
satisfactory credit worthiness may reject the
goods on some pretext after its arrival,in the
hope of driving the seller into a price reduction.
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e.points for seller’s attention in adopting
collection
? (ii) Take into account the economic and
political conditions in the importing country,
For instance,if the market price of the
imported goods falls,the importer may also
find a pretext to refuse to make payment.
? (iii) The amount of transaction should be
moderate.
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Section 3 Letter of Credit
? 3.1 Definition of Letter of Credit
? 3.2 Parties to a Letter of Credit
? 3.3 Procedures of Letter of Credit
? 3.4 Contents of Letter of Credit
? 3.5 Characteristics of Letter of Credit
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3.1 Definition of Letter of Credit
? A letter of credit of L/C is a conditional
undertaking of payments by a bank.
? (1) At the request of the buyer.
? (2) Against the surrender of the
stipulated documents complying with the
terms and conditions of the credit.
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? (3)If the above requirements are met,the bank will
pay to the seller,or accept the draft and make
payment.
? (4) The paying bank may be the issuing bank itself,or
the bank nominated by it.The payee may be the
beneficiary or the bank nominated by it.
? In simple terms,a credit is a document which
provides payment to a seller of goods upon proof of
the seller’s compliance with requirements set forth
by the document.A letter of credit is normally issued
by a bank (which represents the purchaser-importer-
of goods) to the bank that the details of the purchase
transaction have been strictly complied with.The
process of L/C transaction shall be discussed in detail
in this section.
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3.2 Parties to a Letter of Credit
? 1.Applicant or opener
? 2.Beneficiary
? 3.Issuing bank or opening bank
? 4.Advising bank
? 5.Negotiating bank
? 6.Paying bank
? 7.Reimbursing bank
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3.3 Procedures of letter of credit operations
? The documentary credit procedure involves
three basic groupings of steps in the
procedure:Issuance—Amendment--Utilization
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典型信用证业务流程图
（即期议付信用证）
HBITC 申请人 运输公司 受益人
UNICAM
ICBCHB 开证行 Midland Bank 通知行 议付行
1、申请开证
2、开证
3、回执
4、核对密押
转递
5、装运
6、提单
7、交单、议付
8、垫付
9、索汇
10、偿付
11、提示
12、付款赎单
13、提单
14、货物
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3.4 Contents of a letter of credit
? At present,most L/Cs are opened by
telecommunication,Although the forms are
different,their contents are,in the main,the
same,The following details are to be found
on all credits.
? (1) Name and address of issuing bank.
? (2) Type of the credit,Every credit must
indicate whether it is revocable or irrecocable,
Whether it is a transferable credit or a
confirmed credit must also be indicated in the
credit.
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? (3) Name and address of the beneficiary.
? (4) Amount of the credit and its currency.
? (5) Expiry date of the credit and its place to be
expired.
? (6) Name and address of the applicant
? (7) L/C number and date of issue.
? (8) Drawer and drawee as well as tenor of the
draft.The drawer is always the beneficiary,the
drawee may be the issuing bank of any other
bank.
? (9) Full details of the goods.
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? (10)Full details of the documents to be presented.
? (11)Partial shipment permitted/not permitted.
? (12)Transhipment allowed/not permitted.
? (13)Port of shipment and port of discharge.
? (14)Latest date for shipment,and the latest date for
presentation of documents.
? (15)Instructions to the advising bank,negotiating bank
or paying bank.
? (16)Other special terms and conditions.
? (17)The undertaking clause of the issuing bank.
? (18)The indication ―This credit is subject to the
Uniform Customs and Practice for Documentary
Credit(1993 revision),International chamber of
Commerce Publication No.500,
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3.5 Characteristics of letter of credit
business
? (1) A banker’s credit
? (2) A letter of credit is a self-sufficient
instrument
? (3) Banks deal with documents
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(1) A banker’s credit
? The issuing bank undertakes to effect payment,
provided the documents presented are in
compliance with the terms and conditions of
the letter of credit.Thus the bank assumes a
primary liability rather than a secondary
liability for payment.
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(2) A letter of credit is a self-sufficient instrument
? Although the credit is issued on the basis of the
sales contract,bank are in no way concerned
with or bound by such contract,even if any
reference whatsoever to such contract is
included in the credits,The bank,when issuing
the credit has no regard for the sales contract
but follows an application handed in by the
buyer.
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(3) Banks deal with documents
? In letter of credit business,banks deal with documents
and not with goods,ser vices a nd/or other
performances to which the documents may relate.
They examine exclusively on the basis of the
documents presented to them whether the terms of the
credit are fulfilled.They are not in a position to verify
whether the goods supplied actually conform with
those specified in the credit.They are not to be held
liable for a discrepancy between the goods invoiced
and those actually delivered.If the documents
presented are not in compliance with the terms and
conditions of the credit,the bank will refuse to pay no
matter whether the goods shipped are agreed with
t h o s e m e n t i o n e d in t h e c o n t r a c t,
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3.6 Classification of the letter of credit
? (1) According to the attaching of documents
? (2) According to the revocability of credit
? (3) According to the adding of confirmation
? (4) According to the time of payment
? (5) According to the method of payment
? (6) Special credits
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(1) According to the attaching of documents
? a.Clean credit
A clean credit is a credit against which the
beneficiary of the credit may draw a bill of
exchange without presentation of documents,
Payment will be effected only against a draft
without any shipping documents attached
thereto or sometimes,against a draft with an
invoice alone attached thereto.
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?b.Documentary credit
A documentary credit is universally used
as a method of payment in international
trade.It is a credit under which payment
will be made against documents
representing title to the goods and thus
making the transfer of title possible.
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(2) According to the revocability of credit
? a.Revocable credit
A revocable credit is a credit which can be
amended or cancelled at any money by the issuing
bank without prior notice to the beneficiary,
However,under such a credit,if the payment,
acceptance,or negotiation has been effected by
the banks concerned prior to their receipt to
reimburse them.In other words,if any bank
authorised to do so has paid,negotiated,or
accepted against documents presented in
compliance with the terms of a revocable
documentary credit,such action remains in
force,provided it took place prior to that bank’s
receipt of notice of amendment of revocation,
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(2) According to the revocability of credit
? A revocable credit because it offers little
security to the seller,therefore a revocable
credit is generally unacceptable and rarely
used.
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(2) According to the revocability of credit
? b.Irrevocable cedit
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(3) According to the adding of confirmation
? (1) Confirmed credit
? (2) Unconfirmed credit
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International Trade Payment
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Learning objectives:
? 1.To learn the most commonly used instruments of
payment– bill of exchange,promissory note and cheques.
? 2.To learn the methods of payment in international
trade– remittance,collection,letter of credit and bank
guarantee.
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Section 1 Instrument of Payment
?1,Bill of exchange (draft)
?2,Promissory note
?3,Check
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1,Bill of exchange (draft)
? 1.1 Definition of bills of exchange
? 1.2 Contents of bill of exchange
? 1.3 Acts of bill of exchange
? 1.4 Types of bills of exchange
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1.1 Definition of bills of exchange
? A bill of exchange ( or draft as it is sometimes called) is
a written,dated and signed instrument that contains
an unconditional order from the drawer that directs
the drawee to pay a definite sum of money to a
payee on demand or at a specified future date,It is a
useful instrument because it allows one party( the
drawer) to direct another ( the drawee) to pay money
either to himself,to his agent,or to a third party.
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? Of course,the order is valid only if the drawee has
underlying obligation to pay money to the drawer.
This can arise in situations where the drawee is
holding money on account of the drawer(i.e.,the
drawee is a bank),where the drawer lent money
to a drawee (i.e.,the drawee is a borrower),or
where the drawer has sold goods to the drawee
and the drawee owes the sale price to the
d r a w e r ( i, e,,t h e d r a w e e is a b u y e r ),
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e.g.
? Exchange for US$1,000.—
At sight pay to the order of the Bank of
China the sum of one thousand U.S.dollar only.
Value received.
To:The City Bank
New York,N.Y.,U.S.A.
For China National Chemicals
Import& Export Corporation,S.B.
(signed)
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1.2 Contents of bill of exchange
? A bill of exchange must fulfil the following
requirements:
? (1)Indicating the word‖draft‖ or ―exchange‖.
(2) An unconditioned order in writing.
(3) Certain amount
(4) Payer’s (drawee’s) name,usually the buyer or
its nominated bank.
(5) Payee’s name,usually the seller or its
nominated bank.
(6) Date and place of issue.
(7) Signature of the drawer,usually the seller
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1.3 Acts of bill of exchange
Drawer Payee
(1) issue,The drawer draws and signs and delivers it to
the payee.
(2) Presentment:Production of a draft to a party liable to
pay on it for that party’s acceptence(i.e.,commitment
to pay) or payment.
(3) Acceptance:Acceptance means the drawee of the bill
writes the(acceptor) commits himself to pay the bill of
Payerissue
present
accept,pay
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1.4 Types of bills of exchange
? (1)According to who is the drawer
? a.Take draft,It is a bill issued by a trader on another
trader or on a bank.
? b.Banker’s draft,It is a draft drawn by a bank on
another bank,Both the payer and the payee are banks.
? (2) According to whether the shipping documents are
attached or not
? a.Clean draft,It is a bill without shipping documents
attached thereto.
? b,Documentary draft,It is a bill with shipping
documents attached thereto.
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1.4 Types of bills of exchange
? (3) According to the tenor
? a.Sight draft or demand draft,It is a bill payable on
demand or at sight or on presentation.
? b.Time draft or usance draft,It is a bill payable at a
fixed or determinable future time.The time may be
expressed in the following three ways:
? (i)at…… days after sight.
? (ii) at …… days after date.
? (iii) at a fixed date.
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1.4 Types of bills of exchange
? (4)According to who is the acceptor
? a.Trader’s acceptance draft,It is a time bill drawn
on a trader and accepted by him.
? b.Banker’s acceptance draft,It is a time bill drawn
on a bank and accepted by this bank,that is,the
bank guarantees the payment of draft,This kind of
bill is more preferable and negotiable than the
trade’s acceptance bill and is more acceptable in
the discount market.
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2,Promissory note
? 2.1 Definition of
promissory note
? 2.2 Differences between
a bill of exchange and a
promissory note
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2.1 Definition of promissory note
? A written promise to pay a determinate sum
of money made between two parties is a
promissory note,or simply a note,The party
who promises to pay is called the maker; the
party who is to be paid is the payee.
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e.g.
? Promissory Note London,May 20,1999
? US$ 3,000.
On the September 20th,1999 fixed by the
promissory note we promise to pay xx or
order the sum of three thousand U.S,dollars
only.
For and on behalf of
YYY(signed)
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2.2 Differences between a bill of
exchange and a promissory note
? The nature of a promissory note has much in
common with that of a bill of exchange,However,
there are some differences between these two
instruments,which lie in:
? (1) A promissory note is a promise to pay,whereas
a bill of exchange is an order to pay;
? (2) There are only two parties to a promissory
note,namely the marker and the payee,whereas
there are three parties to a bill of exchange,
namely the drawer,the drawee and the payee,
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2.2 Differences between a bill of exchange and
a promissory note
? (3) The maker is primarily liable on a
promissory note,whereas the drawer is
primarily liable,if it is a sight bill and the
acceptor becomes primarily liable,if it is a time
bill.
? (4) When issued,a promissory note has an
original note only,whereas a bill of exchange
and third of exchange in addition to the
original one.
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2.2 Differences between a bill of exchange and a
promissory note
? All in all,the major difference between a
promissory note and a bill of exchange is that
the maker of a note promises to personally pay
the payee,rather than ordering a third party to
do so.
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3.Cheque
? e.g.
? Cheque for US$3,000.- Shanghai,May 5,1999
Pay to the order of John Smith the sum of three
thousand U.S,dollars.
To:Bank of China
Shanghai,China
For China National Arts&Crafts
Import&Export Corp.
Shanghai Branch
(signed)
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Section 2 Remittance and Collection
? 2.1 Remittance
? a.definition of remittance
? b.parties related to a remittance
? c.ways of transfer
? d.application of remittance
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2.1 Remittance
? a.definition of remittance
Remittance refers to the transfer of funds from
one party to another among different
countries,that is,a bank (remitting bank),at
the request of its customer( the remitter),
transfers a certain sum of money to its
overseas branch or correspondent bank ( the
paying bank) instructing them to pay to a
named person or corporation(the payee or
beneficiary) domiciled in that country.
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b.parties related to a remittance
? (1) Remitter
A remitter is the person who requests his bank to remit
funds to a beneficiary in a foreign country.He is also
called the payer.
? (2) Parties related to a remittance
A person who is addressed to receive the remittance is
called the payee or beneficiary.
? (3) Remitting bank
A remitting bank is the bank transferring funds at the
request of a remitter to its correspondent or its branch
in another country and instucting the latter to pay a
certain amount of money to a beneficiary.
? (4) Paying bank
A paying bank is the bank entrusted to by the remitting
bank to pay a certain amount of money to a beneficiary
named in the remittance advice.
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c.ways of transfer
? There are three basic ways for a bank to
transfer funds for its client from home country
to abroad.They are remittance by airmail,
remittance by cable,and remittance by
demand draft.
? (1) Remittance by airmail (M/T)
? (2) Remittance by cable/telex/SWIFT (T/T)
? (3) Remittance by banker’s demand draft(D/D)
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(1) Remittance by airmail (M/T)
? Remittance by airmail is more generally known
as mail transfer,i.e,M/T.A mail transfer is to
transfer funds by means of a payment order or
a mail advice,or sometimes a debit advice
issued by a remitting bank,at the request of the
remitter,A payment order,mail advice or debit
advice is an authenticated order in writing
addressed by one bank to another instructing
the latter to pay a sum certain in money to a
specified person or a beneficiary named
thereon.
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(2) Remittance by cable/telex/SWIFT (T/T)
? Remittance by cable /telex/SWIFT is often referred to
as cable transfer or telegraphic transfer,namely
T/T.It is exactly the same as a mail transfer,except
that instructions from the remitting bank to the paying
bank are transmitted by cable instead of by airmail.It
is therefore faster,but more expensive than the mail
transfer.It is often used when the remittance amount
is large and the transfer of funds is subject to a time
limit.The only means of authenticating a cable
transfer is the test key.However,remittance by
SWIFT should be authenticated by SWIFT authentic
key.
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M/T,T/T 程序图示
? HBITC 汇款人 收款人 IBM
? BOCHB 汇出行 汇入行 BOCNY
1、申请
2、付款委托书
3、回执 4、付款
5、借 /贷记通知
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(3) Remittance by banker’s demand draft(D/D)
? Remittance by banker’s demand draft is often
referred to as D/D,A banker’s draft is a
negotiable instrument drawn by a bank on its
overseas bank.
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D/D 程序图示
? HBITC 汇款人 收款人 IBM
? BOCHB 汇出行 汇入行 BOCNY
1、申请 2、出票
4、邮寄汇票
3、邮寄票根
5、提示 6、付款
7、借 /贷记通知
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d.application of remittance
? Remittance is mostly used in the advance payment
and open account business such as cash on delivery,
cash with order,etc.
? In our foreign trade practice,remittance is only
adopted in making down payments,commissions,etc,
It is not the major method of payment.But it is a major
method in developed countries,because of the
substantial internal transactions of transnational
companies and reliable trade partners and sales
network.
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2.2 Collection
? a.definition of collections
? b.parties to a collection
? c.types of collections
? d.the nature of collection
? e.points for seller’s attention in adopting
collection
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a.definition of collections
? After he has shipped the goods to his customers
abroad,the exporter draws a bill of exchange on
the latter with or without shipping documents
attached thereto and then gives the draft to his
bank together with his appropriate collection
instructions.
? In simple terms,a collection means that the
creditor (the exporter) entrusts the bank to collect
payment from the debtor(importer).The bank
acts as the intermediary.
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b.parties to a collection
? (1) Drawer or principal
It is the exporter or the seller who entrusts the collection
items to his bank.
? (2) Drawee
It is the buyer or the importer to whom the collection
items are to be presented for acceptance or payment
? (3) Remitting bank
It is the bank to which the drawer entrusts the
collection items.Upon receipt of the collection items
from the exporter,the bank forwards them to the
collecting bank,in accordance with the collection
instructions given by the principal.
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b.parties to a collection
? (4) Collecting bank
It is the bank entrusted by the remitting
bank to present the collection items to the
drawee.The collecting bank is generally a
branch of a correspondent or an agent of the
remitting bank.
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c.types of collections
? (1) Clean collections
Clean collections are collections on financial
instruments without being accompanied by
commercial documents,such as invoice,bill of
lading,insurance policy,etc.
? (2) Documentary collections
Definition:Documentary collections may be
described as collections on financial instruments
accompanied by commercial documents or
collections on commercial documents without
being accompanied by financial instruments,that
is,commercial documents alone without a bill of
exchange.
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c.types of collections
? The two types of documentary collections
(i) Documents against payment (D/P)
When entrusting the bank to collect,the
principal instructs the bank to deliver the
documents when payment has been
made.According to the different time of
payment,it is divided into (a)D/P at sight and
(b)D/P after sight.
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(a) D/P at sight
? The draft issued is demand draft,When
the collecting bank makes presentation to
the drawee ( the importer),the latter should
make payment upon presentation.The
collecting bank will then deliver the
documents to him.
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D/P即期流程图
HBITC 付款人 运输公司 委托人 IBM
BOCHB 代收行 托收行
BOCNY
1、装运
2、提单
3、托收申请书 +
跟单汇票
5、回执
4、托收指示 +跟单汇票
6、提示
7、审单、付款
8、交单
9、提单
10、货物
11、汇交款项
12、交款
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(b) D/P after sight
? Time draft is used in D/P after sight,When the
collecting bank makes presentation,the buyer
shall first make acceptance after checking the
documents,and will make payment on the date
of expiry of payment.
? The common point between D/P at sight and D/P
after sight is that the buyer shall not get
documents without making payment.Therefore,
the responsibilities and risks sustained by the
seller are almost the same.
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D/P远期流程图
HBITC 付款人 运输公司 委托人 IBM
BOCHB 代收行 托收行
BOCNY
1、装运
2、提单
3、托收申请书 +
跟单汇票
5、回执
4、托收指示 +跟单汇票
6、提示
7、承兑
8、到期日
付款、交单
9、提单
10、货物
11、汇交款项
12、交款
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(ii) Document against acceptance (D/A)
? Time draft is used in D/A,The seller instructs
the bank to deliver the documents provided
the buyer has accepted the draft.The buyer
shall make payment on expiry date.
? D/A is somewhat the same as cash on
delivery,The buyer accquires documents
without making payment,If the buyer fails to
make payment,the seller will probably suffers
money as well as cargo losses.
? Therefore,the smaller should be very
cautious in the settlement by D/A.
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D/A 流程图
HBITC 付款人 运输公司 委托人 IBM
BOCHB 代收行 托收行
BOCNY
1、装运
2、提单
3、托收申请书 +
跟单汇票
5、回执
4、托收指示 +跟单汇票
6、提示
7、承兑、交单
10、到期日
付款
8、提单
9、货物
11、汇交款项
12、交款
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d.the nature of collection
? Collection is a trade credit settlement.The
banker’s responsibility is only providing
services of delivering documents and
collecting payment.Whether the payment
gets to be made or not depends on the
buyer’s credits.
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e.points for seller’s attention in adopting
collection
? There are a number of risks which may be
incurred to the exporter.The seller should take
cautious attitude in adopting collection,
? The following factors should be taken into
consideration:
(i) Always make sure that the overseas importer
is of good reputation and of good financial
standing.Otherwise,an importer without
satisfactory credit worthiness may reject the
goods on some pretext after its arrival,in the
hope of driving the seller into a price reduction.
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e.points for seller’s attention in adopting
collection
? (ii) Take into account the economic and
political conditions in the importing country,
For instance,if the market price of the
imported goods falls,the importer may also
find a pretext to refuse to make payment.
? (iii) The amount of transaction should be
moderate.
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Section 3 Letter of Credit
? 3.1 Definition of Letter of Credit
? 3.2 Parties to a Letter of Credit
? 3.3 Procedures of Letter of Credit
? 3.4 Contents of Letter of Credit
? 3.5 Characteristics of Letter of Credit
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3.1 Definition of Letter of Credit
? A letter of credit of L/C is a conditional
undertaking of payments by a bank.
? (1) At the request of the buyer.
? (2) Against the surrender of the
stipulated documents complying with the
terms and conditions of the credit.
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? (3)If the above requirements are met,the bank will
pay to the seller,or accept the draft and make
payment.
? (4) The paying bank may be the issuing bank itself,or
the bank nominated by it.The payee may be the
beneficiary or the bank nominated by it.
? In simple terms,a credit is a document which
provides payment to a seller of goods upon proof of
the seller’s compliance with requirements set forth
by the document.A letter of credit is normally issued
by a bank (which represents the purchaser-importer-
of goods) to the bank that the details of the purchase
transaction have been strictly complied with.The
process of L/C transaction shall be discussed in detail
in this section.
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3.2 Parties to a Letter of Credit
? 1.Applicant or opener
? 2.Beneficiary
? 3.Issuing bank or opening bank
? 4.Advising bank
? 5.Negotiating bank
? 6.Paying bank
? 7.Reimbursing bank
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3.3 Procedures of letter of credit operations
? The documentary credit procedure involves
three basic groupings of steps in the
procedure:Issuance—Amendment--Utilization
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典型信用证业务流程图
（即期议付信用证）
HBITC 申请人 运输公司 受益人
UNICAM
ICBCHB 开证行 Midland Bank 通知行 议付行
1、申请开证
2、开证
3、回执
4、核对密押
转递
5、装运
6、提单
7、交单、议付
8、垫付
9、索汇
10、偿付
11、提示
12、付款赎单
13、提单
14、货物
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3.4 Contents of a letter of credit
? At present,most L/Cs are opened by
telecommunication,Although the forms are
different,their contents are,in the main,the
same,The following details are to be found
on all credits.
? (1) Name and address of issuing bank.
? (2) Type of the credit,Every credit must
indicate whether it is revocable or irrecocable,
Whether it is a transferable credit or a
confirmed credit must also be indicated in the
credit.
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? (3) Name and address of the beneficiary.
? (4) Amount of the credit and its currency.
? (5) Expiry date of the credit and its place to be
expired.
? (6) Name and address of the applicant
? (7) L/C number and date of issue.
? (8) Drawer and drawee as well as tenor of the
draft.The drawer is always the beneficiary,the
drawee may be the issuing bank of any other
bank.
? (9) Full details of the goods.
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? (10)Full details of the documents to be presented.
? (11)Partial shipment permitted/not permitted.
? (12)Transhipment allowed/not permitted.
? (13)Port of shipment and port of discharge.
? (14)Latest date for shipment,and the latest date for
presentation of documents.
? (15)Instructions to the advising bank,negotiating bank
or paying bank.
? (16)Other special terms and conditions.
? (17)The undertaking clause of the issuing bank.
? (18)The indication ―This credit is subject to the
Uniform Customs and Practice for Documentary
Credit(1993 revision),International chamber of
Commerce Publication No.500,
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3.5 Characteristics of letter of credit
business
? (1) A banker’s credit
? (2) A letter of credit is a self-sufficient
instrument
? (3) Banks deal with documents
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(1) A banker’s credit
? The issuing bank undertakes to effect payment,
provided the documents presented are in
compliance with the terms and conditions of
the letter of credit.Thus the bank assumes a
primary liability rather than a secondary
liability for payment.
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(2) A letter of credit is a self-sufficient instrument
? Although the credit is issued on the basis of the
sales contract,bank are in no way concerned
with or bound by such contract,even if any
reference whatsoever to such contract is
included in the credits,The bank,when issuing
the credit has no regard for the sales contract
but follows an application handed in by the
buyer.
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(3) Banks deal with documents
? In letter of credit business,banks deal with documents
and not with goods,ser vices a nd/or other
performances to which the documents may relate.
They examine exclusively on the basis of the
documents presented to them whether the terms of the
credit are fulfilled.They are not in a position to verify
whether the goods supplied actually conform with
those specified in the credit.They are not to be held
liable for a discrepancy between the goods invoiced
and those actually delivered.If the documents
presented are not in compliance with the terms and
conditions of the credit,the bank will refuse to pay no
matter whether the goods shipped are agreed with
t h o s e m e n t i o n e d in t h e c o n t r a c t,
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3.6 Classification of the letter of credit
? (1) According to the attaching of documents
? (2) According to the revocability of credit
? (3) According to the adding of confirmation
? (4) According to the time of payment
? (5) According to the method of payment
? (6) Special credits
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(1) According to the attaching of documents
? a.Clean credit
A clean credit is a credit against which the
beneficiary of the credit may draw a bill of
exchange without presentation of documents,
Payment will be effected only against a draft
without any shipping documents attached
thereto or sometimes,against a draft with an
invoice alone attached thereto.
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?b.Documentary credit
A documentary credit is universally used
as a method of payment in international
trade.It is a credit under which payment
will be made against documents
representing title to the goods and thus
making the transfer of title possible.
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(2) According to the revocability of credit
? a.Revocable credit
A revocable credit is a credit which can be
amended or cancelled at any money by the issuing
bank without prior notice to the beneficiary,
However,under such a credit,if the payment,
acceptance,or negotiation has been effected by
the banks concerned prior to their receipt to
reimburse them.In other words,if any bank
authorised to do so has paid,negotiated,or
accepted against documents presented in
compliance with the terms of a revocable
documentary credit,such action remains in
force,provided it took place prior to that bank’s
receipt of notice of amendment of revocation,
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(2) According to the revocability of credit
? A revocable credit because it offers little
security to the seller,therefore a revocable
credit is generally unacceptable and rarely
used.
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(2) According to the revocability of credit
? b.Irrevocable cedit
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(3) According to the adding of confirmation
? (1) Confirmed credit
? (2) Unconfirmed credit
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