kl le thuy truc 70900251

FACULTY OF BUSINESS ADMINISTRATION SOME SOLUTIONS LIMITING THE RISK OF INTERNATIONAL PAYMENT FOR IMPORTED GOODS AT PRINTING MATERIAL EQUIPMENT IMPORT-EXPORT COMPANY – PRINTEXIM CO.,LT

FACULTY OF BUSINESS ADMINISTRATION

SOME SOLUTIONS LIMITING THE RISK OF INTERNATIONAL PAYMENT FOR IMPORTED

GOODS AT PRINTING MATERIAL

EQUIPMENT IMPORT-EXPORT COMPANY –

PRINTEXIM CO.,LTD

Thesis submitted as a requirement for degree Bachelor of Business Administration

Supervisor: MBA MAI NGUYEN TRUONG SON

Student : LE THUY TRUC Student ID : 70900251

Class : 09070101 Intake : 13th

HO CHI MINH CITY, 7 - 2013

During the time studying in Ton Duc Thang University, I have given the enthusiastic teaching from lecturers of Business administration faculty Throughout major trade subjects, I have a thorough grasp of professional knowledge and I am deeply aware of the importance and the usefulness of this field to the social development

Besides that, the time of practicing and studying in Printexim helps me implement the theory into practical as well as learning new more wealthy experiences All of those will be my valuable luggage that helps me get strong steps onto forward society Moreover, I hope that I can use my energy and my knowledge as well to contribute to develop the country

I honestly give my profound thanks to senate of Ton Duc Thang University and Mr Mai Nguyen Truong Son for his great guidelines for internship I also would like to express my sincere gratitude to director of company and all of employees in export-import department – especially

Mr Duc (export-import manager) and Mr.Hien (export-import deputy manager) who have helped me during that time

Once again, I would like to send sincere thanks and wishes for health and success to the company and teachers

Ho Chi Minh City, July 10th 2013

Student

LE THUY TRUC

I hereby declare that this is my own research and is under the scientific guidance of MBA Mai Nguyen Truong Son The content of the research and the result of this subject are truthful and not published on any form before The data in tables for analysis, comment and evaluation is collected by author from various sources which stated clearly in the references

In addition, the thesis also uses a number of comments as well as evaluation of data

by other author, other agencies have cited and annotated sources

If you detect any fraud, I bear full responsibility for the content of my thesis Ton Duc Thang University does not involve in the violation of copyright because I caused in the implementation process (if any)

Ho Chi Minh City, July 10th, 2013

LE THUY TRUC

SUPERVISOR’S REMARK

Ho Chi Minh City, July , 2013

Ho Chi Minh City, July , 2013

Ho Chi Minh City, July , 2013

INTERNATIONAL PAYMENT FOR IMPORTED GOODS AT PRINTING MATERIAL EQUIPMENT IMPORT-EXPORT COMPANY – PRINTEXIM CO.,LTD ” which comes from the status of imported payment operation of

Printexim company which faced many risks although there are some limiting risk measures that the company has not applied

The purpose of present study is that focusing systematic study of issues related to international payment operation for imported goods at the Printexim company Basing on that giving out solutions limiting risks in international payment and helping company improve the imported payment operation The research project is based on available theory combined with synthetic methods, comparison and analysis of secondary data provided by the company Besides that, combining analysis of market status to realize existing risks in the payment activities of the company; then suggesting solutions to minimize them Two major research methodologies are statistical synthetic methods and comparative analysis method

Research subjects are issues related to the activities of international payments for

imported goods at Printexim company

The result of present study after analysis and synthetic show that there still existence of risks in payment operation of company Therefore, the present study has given out some solution helping company hedge those risks, they are:

- Establish risk management process

- Using derivative transaction to hedge exchange rate risk

- Enhance the ability of negotiation in order to select the logical payment method

- Diversify the imported resource

- Building and strengthening relationships with banks

Chapter 1: The literature review of risk in international payment operation for

imported goods 1

1.1 The literature review of risk 1

1.1.1 Definition 1

1.1.2 Type of risk 1

1.2 International payment risk 2

1.2.1 Definition 2

1.2.2 Risk classification 3

1.2.2.1 Commercial risk 3

1.2.2.2 Risk of payment 4

1.3 Some common risks exist in international payment method 8

1.3.1 Risks of remittance 8

1.3.2 Risks of collection 8

1.3.2.1 Document against acceptance (D/A) 8

1.3.2.2 Document against payment (D/P) 8

1.3.3 Risks of letter of credit 8

1.4 Some real lesson from risk payment in Vietnam 10

1.5 The meaning of limiting risks in payment operation 11

1.6 The overview of international payment operation for imported goods 12

1.6.1 Definition 12

1.6.3.1 For commercial trade 14

1.6.3.2 For finance-banking 15

1.6.3.3 For society diplomacy 15

1.6.4 The role of imported payment operation in company 16

1.6.5 The condition of international payment of import 16

1.6.6 The means of international payment tools for imported goods 17

1.6.7 The factors influence on payment operation for imported goods in companies 18

1.7 The major payment procedures for imported goods in company 19

1.7.1 Remittance 19

1.7.2 Collection 20

1.7.2.1 Clean collection 20

1.7.2.2 Documentary collection 20

1.7.3 Letter of credit 21

1.8 The status of international payment in Vietnam 22

Chapter 2: Status of payment operations for imports at Printing material equipment import-export company – Printexim Co.,Ltd 25

2.1 The general introduction of the establishment and development of company 25 2.1.1 The overview and process of establishment of company 25

2.1.1.1 The period of military administration (1975 – 1997) 25

2.1.1.3 The period from 1990 to now 27

2.1.2 Functions and tasks of Printexim company 27

2.1.2.1 Functions 27

2.1.2.2 Tasks 28

2.1.3 Organizational system 28

2.1.3.1 The organization chart 29

2.1.3.2 Functions and tasks of the board of directors 29

2.1.3.3 Functions of the financial accounting Department 30

2.1.3.4 Functions and tasks of the Administrative Organization 30

2.1.3.5 Functions and tasks of Business Department 31

2.1.4 The overview of human resource 32

2.1.5 The purpose and business scope of the company 32

2.1.5.1 The purpose 33

2.1.5.2 Business scope 33

2.1.6 Recent income statement of Printexim in 2009-2011 34

2.2 The status of imported operation at company 38

2.2.1 Business field 38

2.2.2 The imported goods structure 38

2.3 The import situation 40

2.6 The status of imported payment operation at company 43

2.6.1 The implementation of payment operation at company 43

2.6.2 The structure of international payment methods for imported goods at company 44

2.6.2.1 The situation of imported payment by remittance 47

2.6.2.2 The situation of imported payment by letter of credit 52

2.6.2.3 The situation of imported payment by collection method – Documentary against payment 56

2.7 The evaluation of payment operation for imported goods in Printexim company 60

2.7.1 Advantage 60

2.7.2 Disadvantage 61

2.8 The factors impact on imported payment operation o company 61

2.8.1 Internal environment 61

2.8.2 External environment 65

Chapter 3: Some solutions limiting the risk of international payment for imported goods at Printing material equipment import-export company – Printexim Co., Ltd 73

3.1 Development orientation of the company 73

3.3 Some solutions limiting the risk of international payment for imported goods at

Printing material equipment import-export company – Printexim Co., Ltd 75

3.3.1 Establish risk management process 75

3.3.2 Using derivative transaction to hedge exchange rate risk 79

3.3.3 Enhance the ability of negotiation in order to select the logical payment method 80

3.3.4 Diversify the imported resource 82

3.3.5 Building and strengthening relationships with banks 83

3.4 Some recommendations 83

3.4.1 For Vietcombank 83

3.4.2 For government 84 CONCLUSION

REFERENCE

APEC Asian-Pacific Economic Cooperation B/E Bill of exchange

B/L Bill of lading

C/O Certificate of Origin

D/A Documentary against acceptance D/P Documentary against payment L/C Letter of credit

T/T Telex Transfer

VN Vietnam

WTO World Trade Organization

Table 1.1: The advantage and disadvantage of the form of payment in

international trade transactions 9

Table 2.1: The income statement in 2009 – 2011 34

Table 2.2: The imported goods structure in 2009-2011 39

Table 2.3: The export-import turnover in 2009-2011 41

Table 2.4: The import market from 2009-2011 41

Table 2.5: The structure of international payment methods for imported goods at company 45

Table 2.6: The situation of imported payment by remittance payment in 2009-2011 48

Table 2.7: The situation of imported payment by letter of credit in 2009-2011 52

Table 2.8: The situation of imported payment by D/P in 2009-2011 57

Table 2.9: Payment services served by banks 68

Table 2.10: SWOT analyzing 74

Table 3.1: The risk management process 79

Chart 1.1: The revenue of international payment in 2009 – 2012 24 Chart 1.2: The imported payment process 25 Chart 2.1: Organization structure 29 Chart 2.2: The comparison among revenue, net income before tax and net income after tax in 2009-2011 36 Chart 2.3: Inbound material in 2009 – 2011 37

Chart 2.4: The structure of international payment methods for imported

goods at company (2009-2011) 46 Chart 2.5: The proportion of imported value by using T/T 48 Chart 2.6: Process payments for importing in form of T/T sight payment 50 Chart 2.7: Process payments for importing in form of T/T advanced payment 51 Chart 2.8: The proportion of imported value by using letter of credit method 53 Chart 2.9: The process of opening L/C 55 Chart 2.10: process payments for importing in the form of letter of credit 56 Chart 2.11: The proportion of imported value by using D/P 58 Chart 2.12: The process of payment by D/P 59

Our country is now in the process of industrialization and modernization and becomes the industrialized countries in 2020 Besides that, with an open door policy for integration and development, Vietnam's economy has achieved many great achievements That result belongs to the significant contribution of import and export activities Along with export, import takes an important part on contributing

in international trade International payment is an important link in the chain of national economic activities International payment is an important step in trading goods and services between individuals and organizations of different countries This contributes to settling the relationship between commodity and currency, creating a continuous production process and hastening the circulation of goods process on an international scale If international payment activities are conducted fast and safe, the circulation of goods and monetary between buyers and sellers will be smooth and more secure

We all know that risks always exist in our life that we did not anticipate, such as: healthy risks, security risks or political law all of these risks are affected directly

or indirectly on the lives and ourselves One of the risks we also need to consider is the risks of international payment operations because it causes several impacts to the property and the vitality of the firm We admit that risk is an objective reality, because it is independent thinking outside human awareness Risks are always unexpected and unpredictable so that it cannot be absolutely resolved We can only limit the risk and prevent risks from implicit danger in order to timely respond and correct in cases of force majeure Payment issue seemed be simply that the seller gets payment from the buyer and release cargo In fact it still has so much import-export company get in trouble of making international payment That leads payment delay, prolonged complaints, can be tricked and damage company Therefore, how can companies prevent and limit the risk when the international payment is a big issue left open

Therefore, the review, analysis and evaluation of international payment operations are essential and necessary Practice-time at the company helps I realize that the international payments of imports of the company needs more interest and clearly understand Be aware of that as long as the dedicated guidance of MBA Mai

Nguyen Truong Son I chose the topic "SOME SOLUTIONS LIMITING THE

RISK OF INTERNATIONAL PAYMENT FOR IMPORTED GOODS AT

- Deeply analyzing payment process and the status of imported payment operation

- Seeking advantages and disadvantages of imported payment operation

- Basing on that to suggest solution to limit risks

Statistical synthetic method

Comparative analysis method

6 Data research:

This present study uses two kinds of data:

Primary data: all of information collecting form company department, including: revenue, income, the value of imported goods,

Secondary data: collected from variety sources on the internet, reports, newspaper and professional books That includes: exchange rate, forex market, policy, derivative transactions, government’s regulation, Decision, Circular, ect

7 The meaning of science and the practice of topics:

Testing the theoretical knowledge learned in books on the practice of which enhance understanding and application

Making it as a reference for the direction of company operations as well as limiting issue of risks in payment activity to improve the work efficiency for company

Chapter 2: Status of payment operations for imports at Printing material equipment import-export company – Printexim Co.,Ltd

Chapter 3: Some solutions limiting the risk of international payment for imported goods at Printing material equipment import-export company – Printexim Co.,Ltd

Chapter 1: The literature review of risk in international payment operation for imported goods

1.1 The literature review of risk:

1.1.1 Definition:

Traditionally, risk is considered as unluckiness, damage and danger It also is not reputed a good thing and suddenly happens It is the loss of property or the actual profit decline than expected profits Risks also is understood as the unintended uncertainties occur in the business process, manufacturing of business as well as adverse effecting on the survival and development of a business In short, according

to this view, the risk is damage, loss, or factors related to danger, difficulty or uncertainty that may occur to people

Modernly, risk is the measurement uncertainty, both positive and negative The risk may bring losses to human loss, but can also bring benefits and opportunities If positive risk research, one can find out what precautions and limit the negative risks, welcomed the opportunity to bring good results for the future Risk depends

on the circumstance, if people do not have the concept or they are not related to risk For example, the rain will be risky for pedestrians but in a closed room, is not affected, there is no risk

Risk includes three factors: probability, the ability of impacts on objectives and duration The nature of risk is uncertainty, if certainty (probability equal to 0% or 100%), the risk is not known

1.1.2 Type of risk:

Risk can be divided by these below aspects:

 Moveable risk and Static risk

Moveable risk related to the ever-changing, especially in the economy That is the risk that its consequences can be beneficial, but can also be brought to the losses

(the change in customer tastes can fit the product of business or not, technological change is consistent with the technical financial viability of the business or not, the change is too fast or not? )

Static risk is risk, but it is only a result of the appearance-related losses or not, is not profitable, and not influenced by changes in the economy These risks often associated with static objects: asset, human, civil liability

 Individual risk and General risk

Individual risk is the risks affecting each region, each department which separates investment activities This type of risk can be reduced by diversification of investment

General risk the type of risk affects all stages, all the departments in investment operation This type of risk cannot be mitigated by the diversification of investments

 Traditional risk and Speculative risk

Traditional risk: the risks objectively, not all depend on objective wills of investor, the risks generally only bring losses to the plan of investment

Speculative risk is that risks depend on the subjective desirability of investors, it happens in the case of investors actively choose whether schemes that can benefit or damage

1.2 International payment risk:

comes from the connection between attendances of international payment, such as: importer, exporter, intermediate, or from objective aspects like disaster, war, politic, etc

Risks of international payment is similar to risk of domestic trade transaction but different geographic, culture, law, all of these things contribute to increase the difficulty as well as worse consequences

 For exporter:

- The shortcoming of commodity payment stage

- The weakness or loss of financial solvency of buyers

 For importer:

The scope of terms of contract:

- The lateness of goods delivery affects the progress of work

- The commodity deliver is different from contract

- The change of term and time of payment will messy the plan that leads getting more difficulty for importer in case of they have to loan for paying the value of contract

- The price changes and is not like what two parties had agreed That creates more disadvantage for importer because they are not unable to pay or they have to accept another price that must be higher

- The changes in term of delivery may lead to delay delivery or transport

- The quality of commodity is not as good as contract term

- The different of origin of goods may lead to reduce the quality of goods

- The certificate of sanitation is different from what is stated in the contract That may lead to an issue that the goods may not be accepted to import

- Risk of insurance: when there is uncertainty, risk occurred despite insurance compensation but the amount is still lower than the value of goods

- Risk of stocking fee at terminal or warehouse: documentation comes late while the cargo has arrived at the terminal but cannot get Therefore, there will be cost extra storage

The reason of risk of commercial:

- The geographical distance may lead to shortage information of two parties

- Exporter is unclear the payment ability of importer

- Import is unclear the implementation contract of exporter

- Both importer and exporter lack of international commercial law and national law of each country

1.2.2.2 Risk of payment:

A Credit risk:

That is risk of losing payment ability of one of two sides, especially in documentary credit

 Credit risk from importer:

When the importer is bankrupt or loses payment ability that would make risk for L/C issuing bank Issuing bank will represent importer commit to pay for

exporter In case of importer loan from issuing bank instead of making 100% deposit and the importer loses payment ability The risk of payment will occur and make difficult and loss for issuing bank

 Credit risk from exporter:

It usually happens when negotiation bank implement negotiate for exported goods The deficiency of checking document leads to make mistake for payment document At that time negotiation bank legally require exporter reimburse but the exporter cannot pay that would make risk for negotiation bank

 Credit from issuing bank

If issuing bank loses payment ability because of some reasons or being closed or bankrupt it will make risk for negotiation bank and exporter

The reason of credit risk:

- In the market economy, firm as well as commercial banks operating in the fiercely competitive environment, governed by the law of supply and demand, competition law should be regularly face risks from all sides Sometimes due to price changes, outdated technology, the ability to manage and weak operators, financial crisis causing a chain reaction that enterprises encounter difficulties in trading losses, defaults and even

bankruptcy

- Due to incomplete information, if a party fails to grasp the financial status and reputation of paying partner, uninformed, do not check the number of technical information and the effectiveness of its project financing, the credit risk is inevitable This is called the imbalance of information

B Ethical risk:

That is the risk that occurs when a party willfully fails to comply with its obligation to cause damage to the interests of others Ethical can be interpreted

as trust, reputation in the business Here is the important issue of commerce and international payments, because the parties involved business partners are very far away, not even meeting each other in the implementation of payment processes

 Ethical risk from importer:

If customers are not longtime imported partner and reliability, it easily has cheated seller ship on board; then delayed, denied payment by the professional tricks in seeking error of document and forcing seller sales at loss price In some cases, exporters have to accept that way instead of hiring a ship to turn the cargo back to their country because that would reduce the damage Sometime, when the imported price decreases, the importer is afraid of loss so that they refuse document (which means that they do not want to receive the cargo); or delay payment That pushed bank into difficult situation in solving capital, especially

in usance Besides that, the honest document is appreciated because there is some cheating in issuing document form “the fake bank”

 Ethical risk form exporter:

When the exporter knowingly delivered goods not in accordance with contract but the submitted document is perfect and coincide with the terms of the contract; or exporter issued an unreal document (they did not release cargo but establish a delivery document), the bank bases on that document to implement payment to beneficiary At that time, the importer has to take this risk If bank fund for importer, the bank will be take this risk Therefore, importer has to check carefully whether the cargo is shipped on board or not

In case of having a tendency of price increasing, the exporter does not want to deliver cargo to importer anymore That damages for importer because of breaking business plan All of violations are considered as ethical risk

 Ethical risk form carrier:

The carrier receives cargo then disappearing or selling them all while the bank is responsible for paying in accordance to document It wastes a lots of time for suing carrier or waiting for reimbursing from insurance Both importer and exporter are risk

 Ethical risk form bank:

In some cases, issuing bank also breaks its commitment, such as: postpone, refuse to pay for exporter Besides that, negotiation bank is dishonest in negotiating imperfect document then announcing to issuing for reimbursement The issuing bank trusts it and makes payment Therefore, it is so difficult to reclaim money

E Foreign exchange risk:

That is risk when the payment was determined by a certain currency When foreign exchange rate fluctuates, it will damage for one of two parties When the currency which was chosen in payment increases and damage to exporter; which means that if it decreases, it will be harm for importer

F Operational risk:

It is the main technical risks causing by parties This risk is reflected in establishing the imperfect document and does not meet the terms and conditions

of the L / C or wrongly doing accordance to UCP-500 and the usual, customary international

1.3 Some common risks exist in international payment method:

1.3.1 Risks of remittance:

This method is usually applied in cases which the buyer and seller have to know and trust each other Payment method is simple, low cost However, this method is the biggest risk for the seller if the payment is made after the buyer received the goods Because the payment entirely depends on the buyer, if the buyers get difficulties, the sellers hard receive money In case the buyer must pay in advance, the major risk to the buyer The buyer will be easy to lose money in advance if sellers have difficulty selling or dishonest

1.3.2 Risks of collection:

1.3.2.1 Document against acceptance (D/A):

The exporter will send documents to Remitting bank after finishing delivery through Collecting bank Remitting bank will deliver the documents to the importer

if the importer accepts payment (deferred payment) Although the documents were accepted to pay by importer, Remitting bank is not responsible for payment when exporters fails to pay when meeting maturity day This method is quite risky for exporters

1.3.2.2 Document against payment (D/P):

The exporter will send documents to Remitting bank after finishing delivery through Collecting bank Remitting bank will deliver the documents to the importer

if the importer makes payment This method is less risky than D/A but it is still

disadvantageous for exporter if importer refuses cargo

1.3.3 Risks of letter of credit:

This is a common method which is frequently used in international payment It is because this method balance the benefit as well as risk for both importer and

exporter However, it has complicated proficient technical knowledge It is not simple for implementation and easy to get disputes and big losses in business

The table 1.1: The advantage and disadvantage of the form of payment in international trade transactions

receive cargo Risk for importer

Deferred payment Before cargo

Importer is guaranteed of cargo deliver but still depending on delivering cargo of exporter

Document against

acceptance

At the date of expire of B/E

At the time of B/E acceptance

Less risk, importer can refuse payment

at the date of expire of B/E

Document against

payment

When bank of exporter receives documents

After making payment

Importer is guaranteed of cargo deliver but still depending on delivering cargo of exporter

1.4 Some real lesson from risk payment in Vietnam:

- Cheating on payment:

Economic development has brought about the development of tactics in payment fraud increasingly sophisticated and difficult to detect Typically some common phishing tips as follows:

According to The fraud in international payment, The Labor newspaper,

02/04/2009

+ Take advantage of business agreed:

This is the most common form of phishing Taking advantage of the large number of enterprises lake information in markets, prices and law, foreign firms sell cheap goods to stimulate the up lyrics by several companies For example, while the price of fertilizers imported from Ukraine on 235 USD/ton but no less Vietnamese enterprises still getting bid 110 USD/ton from companies in US Coming along with the low price is the strict payment and it is so hard to know whether Vietnamese can get goods or not when making payment; and when seeking the buyer, do not see anyone

+ Change cargo when delivery:

There has been some cases of fraud occurs in form of purchasing feed, Malaysia importer offered the sample of goods with protein 90% but then it is only the mixture of sandy soil and husk Another case is that the Indian exporter offered for sale of frozen shrimp but when opening the container, whole container just contains the water trays

With this form of fraud, foreign companies force Vietnamese firms make payment by irrevocable letter of credit, 100% paid immediately upon receipt of B/L and invoices valid Those documents are too

perfect that the bank cannot refuse payment When the cargo came, what done has been done, Vietnamese firms cannot do anything

+ Lack of experience:

A Vietnamese company signed a contract to buy billet with Indian company They reported that the cargo had arrived at Vung Tau and all documents are also sent to L/C Issuing Bank Customs at Vung Tau port confirmed that ships was in the harbor Vietnamese company trusted so that making payment but there no cargo there After checking again, Vietnamese company found that the ship was in port to repair due to the malfunction Then Vietnamese company phoned to Embassy in India for asking help find that company The result was that Indian company was just one shop selling furniture The lesson is worth 700,000USD

Another lesson is Acama firm, a firm specializing in furniture imports U.S After receiving a bill in the form of collection of foreign partners, Acama has followed the general guidelines to make the bank transfer without carefully checking collecting bank Therefore, Acama had lost money Moreover Acama was fined for

a late payment

- The explosion of banking development:

It is also a thread for international payment Bank raises as mushroom that leads to unbelievable in the proficient of bank, staff not professional, easy to cause errors in

the documentation stage censorship causing financial losses for businesses

1.5 The meaning of limiting risks in payment operation:

Limiting risks in payment operation will help businesses avoid the consequences it causes Therefore, limiting the risk of payment is extremely important:

- Limiting losses on assets for the company, contributing to improving the efficiency of capital for other business activities Finance is also important issue It is the visible consequences immediately, quantify and direct impact

on revenue and assets of the company and banking

- Raising company prestige In case of international integration economic, company’s prestige is important That is an important issue which affects development of manufacturing, business of company as well as international payment operation of the bank The consequence of prestige does not arise immediately, not quantitative, and it takes a long time for people to realize it However, when it happens, it would be serious and irremediable Prestige is

a sensitive issue and must be built in a long time Therefore, creating a reputation on the international market is difficult, but lost it and regained it much more difficult

1.6 The overview of international payment operation for imported goods: 1.6.1 Definition:

International payment is the process for implementing trade income and expense for

a country to countries, to complete the economic relations, trade, scientific and technical cooperation, diplomacy, society across countries

International payment is the process executing obligations to payment and entitlements to benefits of money which results in economic and non-economic activities between organizations, individuals of different nationalities or between a nation and an international organization through banks of related partners The payment includes: trade payment and non-trade payment (Asian Commercial Bank’s definition)

usual, documents are always enclosed in payment operation Seller and buyer are wrapped up in contract or other commitments such as letter, telex, Each contract shows a certain connection between two entities and it has to state clearly the rude

of payment

Basically, international payment is created as commercial activity Payment is the last step of exchange operation of commodity Therefore, the more good of international payment is, the more valuable commodities are That would contribute

to enhance trade development.International payment increases economic exchanges relationships between countries, makes the payment process fast, safe, convenient and reduces costs for participants Every year, there hundreds commodities are exchanged all over market of the world so that international payment requires suitable methods

In recent years, according to the strong influent of science technical and the new tendency of era, the international relationship has been moving to another new epoch The exchange of commodity does not limit by national policy any more The international market is opened; nations are aware of that change so the payment methods and their condition must modernize in order to integrate to others

The international payment is now really complicated because exchange rate has dramatically fluctuated in international currency market That leads requirements for payment operation such as: warrantee for import contract, in time turnover money for export contract, safety and accurateness The purchase connection between countries is so complex because risks can happen at any time Therefore, the importer as well as exporter needs mean of payment and payment methods which are ability for reducing risks or un-expectation

1.6.2 The characteristics of international payment:

First, the currency of payment is the foreign currency with at least one party in the transaction Two subjects have two different nationalities, so the payment can only

select one of the currencies of the two countries to be the currency of payment In addition, two parties can choose another currency of the third country which is more stable and freely convertible

Second, the payment must go through the bank because of geographic distance, directly payment is impossible and especially in paying by cash That is really risky

so paying throughout the bank is the best choice The stage of dependence on bank belongs to payment method and the relation of two sides

Third, international payment must be legal compliance of two countries and international rules and practices

Fourth, the imported international payment has many risks Because of distance, two sides are difficult to learn each other as well as observing partner operation Therefore, the importer might not receive goods even though they had paid if they use unsure payment method such as giving advance or deposit

Fifth, credit is often used in international payment instead of cash because of its safety and fastness in payment That is two top criteria of payment: time assurance and safest Moreover, credit is not only convenient but it also generates capital for corporate liquidity

Sixth, international payment using this form of electronic payment applications chairs should have the information technology in database when making payment The bank made payment based entirely on electronic data, cannot directly meet to pay cash or to make paper by hand Currently, process payments between the banks and companies are gradually electronically to save time and effort Therefore, it is necessary to apply information technology applications in international payments

1.6.3 The role of international payment in economic:

1.6.3.1 For commercial trade:

Foreign trade takes an important role in each economy country It also contributes apart to solve domestic demand about goods or services that the manufacturers have not supplied yet Besides that, foreign trade also supplies commodities or services that foreign countries have not got yet Foreign trade will help know more shortage and demand that domestic economic still gets difficulty, elimination or un-efficiency

1.6.3.2 For finance-banking:

International payment is not only the implementation of payment process, remittance between countries, but it is also relative to finance-banking field of each country

International payment often sticks to financial credit so that it involves the rotation

of short-term money flows from country to country in the whole world Throughout that, it helps solve the capital needs of international payment transactions for the countries whose financial situation is not stable

International payment is not only associated with the operation of domestic bank and foreign bank, but also with international finance organizations Base on that it helps the system bank of least developed countries and developing countries can access to modern payment transaction system Moreover, it strengthens and expands the relationship between this bank and the other one of other countries and expands the investment activities directly and indirectly

1.6.3.3 For society diplomacy:

International payment not only arises in the field of trade economic, banking sectors, it is also are directly contributing to the set up social relations

finance-between the countries

In trade and economic relations contains diplomatic relations, socio-political, and vice versa International payment is also part of the interwoven relationships If a

good deal of economic relations and trade is also a good deal of diplomatic relations

in society

1.6.4 The role of imported payment operation in company:

For the national economy, the payment activity plays very important role Imported payment helps boost imports, making this operation is fast, easy, satisfying the demand for goods, machinery and equipment as well as a domestic technology For the imported payment in company, payment operation also affirms its importance role:

- Payment operation is the link between exporter and importer When doing imported contract, payment is the work that 2 parties have to do together and get agreement of payment method

- Besides that, imported payment is the basic to enhance the effective imported operation A good making payment activity will create favorable conditions for the development and expansion of imports The payment of imports is quickly made big advantage to imported goods

- Moreover, the imported payment directly effects on benefit of each side during the transaction so that it is also the best way to make benefit equable

In international trade, the importer needs goods and exporter wants to get money A suitable payment method is a equipment that two sides get benefit

1.6.5 The condition of international payment of import:

The condition of payment is agreed terms that guarantees for benefit and mission of relative sides They include:

 Monetary condition:

- The currency pricing: as usual, the currency is chosen to be the currency pricing has to be stable Which is considered are: USD, EURO, GBP, JPY, HKD, AUD and some other freedom currencies

- The currency paying: it can be the currency of export country or import country or the third country The currency of third country has to be strong and freely convertible

 Payment time condition:

The place of payment is selected at the headquarters either at one of two sides or

in a third country This choice depends on the similar forces of the two sides, depending on the payment method As usual, if the currency paying belongs to one party, the place of payment will be at that country There are three types of payment time condition which are divided by time of payment:

- Pay down: This is the method of payment at the time of receiving document or receiving goods at ports

- After payment: the importer will pay after a period of time since receiving goods as the deal of two sides

- Before payment: The importer can put down a deposit for an exporter or giving exporter credits interest

1.6.6 The means of international payment tools for imported goods:

Means of payment is a tool that people actually pay for each of the business relationship with each other Cash is means of payment but it plays a minor role in international payment Means of payment used primarily in international payment are drafts/ bill of exchange, cheque, credit cards, Each tool has its own uses, appropriate for each subject and type of payment transaction of the economic entity

 Cheque:

It is an order forms which is paid without condition Cheque is used when a customer of bank order this bank to transfer a certain amount of money from their bank account to who is holding cheque or to the person who named on the cheque

1.6.7 The factors influence on payment operation for imported goods in companies:

There are many factors influencing on the payment operation for imported goods in companies They include objective factors and subjective factors

 Subjective factors:

Firstly, company’s prestige takes an important role Enterprise works well and builds prestige with partners will facilitate the payment, easy to reach agreement on the method of payment for their benefit as cash, or at least collection method

Secondly, the briefly organizational structure will create favorable conditions for payment method for imported goods in company Which means that the time of completing payment will be shorten

Thirdly, the qualification of payment employees is very important because it directly decides on company payment The payment employees need to be well-qualified to save time of payment, reduce errors or mistakes and limits risk in doing imported payment

Finally, that is the relation of company with bank This helps to facilitate payment, easy and faster Moreover, companies have more opportunities to appropriate capital such as being partly made deposit or being loan whole

 Objective factors:

- Internal factors: rate policy, trade policy and diplomacy policy All of these policies impact on imported payment operation throughout controlling

import operation as well as controlling foreign exchange market because exchange rate is a sensitive object of international payment These policies affect on the operation of bank then it directly impact on the imported payment operation

- External factors: norm, practice and development of bank system The norms and practices of international payment identifiable pattern, as common standards The payment must comply with the standards The banking system is highly developed today creates very favorable conditions for international payments In spite of distance between countries, the payment can take place immediately with high accuracy The payment type of bank also extended richer ago

1.7 The major payment procedures for imported goods in company:

Remittance helps reduce bank fee It is extremely beneficial because transfers are usually conducted after delivery (Deferred payment), the importer can capture the transaction discretion, may pay or refuse payment if the goods do not meet their claims On the other hand, importers may still have trouble using Sight payment or Advance payment

Besides the advantage of cost reductions paying for the bank, cash transfers are also disadvantages such as delivery and payment are separated so exporters will rarely

accept this method because it cannot guarantee for export This method is applied for two entities that have long relationship and trust each other as well as the value

of contract is not too high

There are three remittance methods: mail transfer (M/T) and telegraphic transfer (T/T) and SWIFT Each method has its own advantage and disadvantage M/T has low cost but it takes time T/T and SWIFT are vice versa which means that they are faster but more expensive than M/T However, according to the development of information technology, most of remittance uses SWIFT for payment because it fast, convenient and the cost is still acceptable

1.7.2 Collection:

1.7.2.1 Clean collection:

Clean collection is payment method in which exporters after delivery cargo and documents to the importer, just signed a bill of exchange (or cheque) to claim the importer and to require the bank collect the amount stated on the draft without any conditions enclosed

Throughout the clean collection, the exporter is not guaranteed the benefit Banks play a mediating role; whether the bank collected money or not it also takes bank fees Banks are not responsible if the importer fails to pay So, if the exporter should only use collection methods in the case of completely trusting importers or small imported value

1.7.2.2 Documentary collection:

In this method, after the completion of the delivery, exporter has bank collect money The collection not only bases on B/E but also based on the attached documents Provided that the importer agrees to pay or accept the draft, the bank will release the documents to the importer to take cargo

Basing on the time of payment, there are two types:

 Documents against payment (D/P): it is used in case of purchase with payment at sight The document will be given to importers as soon they make payment to the bank

 Document against acceptance (D/A): it is used in case of schedule purchase Only when the importer accepts payment in the draft (fixed time-limit draft), the bank will release documents At the deadline of B/E, the importer is responsible for the timely payment for whom holding B/E

Using documentary collection will be more secure, not lost goods for exporter if the importer fails to pay The role of banks is more advanced, more responsible However, the slow pace of payments, imported risk is still large Therefore, methods that are commonly used when both parties have high confidence or for the payment of freight, postal, insurance, commissions, profit etc

1.7.3 Letter of credit

One of the popular international payment methods is L/C L/C is an agreement in which issuing bank will be accordance to applicant’s requirement (importer’s requirement) to pay a certain money to beneficiary (exporter) or accepting B/E with the amount of money Besides that, beneficiary has to submit documents which comply with the condition of L/C

L/C is an important method in international payment Failing to open L/C, the exporter cannot deliver cargo to importer L/C is also a legal document in which the bank commits to pay for exporter a certain amount of money in fixed time stated clearly in L/C There are so many kinds of L/C, divided by:

 Type: Revocable L/C and Irrevocable L/C

 Time of payment: Sight L/C and Deferred usance L/C

 Use:

- Irrevocable at straight L/C

- Irrevocable negotiable L/C

Different from other payment methods, bank takes an important role in L/C It is majorly responsible, the intermediary who collect and pay The bank is also the representative for the importer to pay the exporter and ensures that importer can get the standard goods

However, the fee of using this type of payment is higher than others because bank joins whole payment process On the other hand, the importer also can be risky if documents are fake one because the bank just bases on the documents

1.8 The status of international payment in Vietnam:

 The advantageous factors for developing:

Vietnam's economy is increasingly integrated into the regional economy and the world Currently, Vietnam has established diplomatic relations with 168 countries from all continents, including all countries and major political centers of the world Vietnam is also a member of 63 international organizations and relations with more than 500 non-governmental organizations At the same time, Vietnam had trade relations with 165 countries and territories Through its participation in regional economic organizations such as the Asian and world (28-7-1995), APECT (14-11-