Slide thuyết trình TACN2 chủ đề: The Five Steps in

THE PROBLEM“PRICE TRAP” METHODS OF PAYMENT Negotiate about payment in the contract etc ?????... Step 1: Mode of payment Remittance Collection Letter of Credit Methods of payment... 1.

I THE PROBLEM

“PRICE TRAP”

METHODS OF PAYMENT

Negotiate about

payment

in the contract

etc ?????

How will payment be

made?

What is the date of the payment?

What delay

in payment is excusable?

What are the results

of non-excusable delay in payment?

Where must the money be before payment

is considered complete?

1 Step 1: Mode of

payment

Remittance Collection Letter of Credit

Methods of payment

• Payment in advance (cash in advance)

• Open account (The opposite of payment in advance)

1.1 Remittance

-Advantage

Simple, quick payment, Low cost

Based on trader’s credit

-Disadvantage

High reliability between two parties

Clean collection

Documentary Collection

D/A

D/P

1.2 Collection

• Clean collection: The collection on financial instruments

alone without being accompanied by commercial documents

• Documentary collection: The collection on financial

instruments being accompanied by commercial documents

1.2 Collection

Further classification of documentary collection

 Documents against payment (D/P)

The documents are released against the importer’s payment to the draft

Documents against acceptance (D/A)

The documents are released against the importer’s acceptance to the draft

1.3 Letter of credit

Advantages

For Exporter/ Seller -Be guaranteed payment

-Eliminates risk of the Seller canceling the

order => reduces production risk

- Makes it easier for the Seller/Exporter to

secure order/production

financing-pre-export financing

For Importer/ Buyer -If the Exporter/Seller doesn't ship the goods they don't get paid.

-Certainty that payment will only be make

to the Exporter/Seller upon presentation

of documents in strict compliance with the L/C evidencing the shipment of goods.

1.3 Letter of credit

Disdvantages

For Exporter/ Seller

* Still subject to political risk of the

country the L/C originates

* Subject to the financial strength and

stability of the Issuing bank

* More cumbersome - requires a high

level of expertise to successfully navigate

the process

* More expensive than other methods of

payment

For Importer/ Buyer

* Costs involved with issuing, negotiating, and other fees (like amendments), can make L/C expensive.

* Seller's bank controls the shipping documents

* The goods shipped may not conform (inferior quality for example) to the order.

2 Step 2: Timing

The date of payment may be regulated date or a chain of dates

It is also

• calendar dates ( for example: 16th April)

• or interval times (for example, within 30 days of the date

of invoce)

3 Step 3: Place of

Payment

Payment shall be deemed to have been made only when the contract sum

is paid into the seller’s bank account and is at the Seller’s full disposal.

This step determines where the money must be before payment is to be completed.

According to the Article 57 Vienna Sales Convention 1980

* If the buyer is not bound to pay the price at any other particular place, he must pay it to seller

at the seller’s place of business; or if the payment is to be made against the handing over of the goods or of documents at the place where the handing over takes place.

* The seller must bear any increase in the expenses incidental to payment which is caused by a change in his place of business subsequent to the conclusion of the contract.

4 Step 4: Delay

Delay in payment may be excused during a grace period (not common) or a force majeure event (more common).But most exporters do not want to excuse these delays and any payment made after the agreed date of

payment is in delay

5 Step 5: Results of

Delay

A typical contract clause: Delay payment

If payment of any sum payable is delay, the buyer shall be entitled to receive interest on amount unpaid during the period

of delay The interest shall be at an annual rate three percentage point above the discount rate of the central bank in the selller’s country.

What happens when payment is

late ???

Let’s have funny with Game

D/P: Mostly in favour of the exporter, who retains control over the goods until payment is made D/A: Favour of the Importer

Compare D/P and D/A

Which one is favorable

to the Importer/

Exporter?

Regarding “Payment in advance”

Whom this method is favorable? Exporter or Importer? Why?

“ Exporter” because: The exporter can make use of the funds before

he makes the delivery of the physical goods or the provision of goods

or the provision of services

Translate into Vietnamese

Payment shall be made by means of an irrevocable, confirmed letter of credit The Buyer shall be open the letter of credit on or before 8th

March 20 on the terms agreed by the parties and annexed to this

Contract as Appendix 1

=>.Việc thanh toán sẽ được thực hiện bằng thư tín dụng không thể hủy ngang, có xác nhận Người mua phải mở thư tín dụng vào hoặc trước ngày 8 tháng Ba năm , theo như những điều khoản đã đươc thỏa

thuận bởi 2 bên và đính kèm bởi phụ lục 1 trong Hợp đồng này

Translate into Vietnamese

In case of delayed delivery except for force majeure cases, the Seller shall pay

to the Buyer for every week of delay penalty amounting to 0.5% of the total value of the goods whose delivery has been delayed Any fractional part of a week is to be considered a full week The Seller grants a grace period of four weeks from the delivery date before penalties shall be applied.

=> Trường hợp hàng hóa bị giao chậm không nằm trong trường hợp bất khả kháng, người Bán phải trả cho người mua 1 khoản tiền phạt với mỗi tuần giao chậm lên tới 0.5% tổng giá trị những hàng hóa bị giao chậm Bất kì phần lẻ nào của 1 tuần cũng được tính là 1 tuần Người Bán được hưởng khoảng thời gian miễn phạt là 4 tuần từ ngày giao hàng trước khi các án phạt được thi hành

Thank

you!

Name Student code

Trần Thị Kiều Oanh 1314160088 Công Thị Hải Hiền 1314160048

Nguyễn Thị Hảo 1315160046 Bùi Thị Ngọc Hằng 1311160039 Phạm Thị Phương Thảo 1311110622