Thuyết trình môn thanh toán quốc tế assignment methods of payment

Procedure of open account payment 1 First, the Seller exporter and the Buyer importer make a contract 2 Then the goods will be shipped to the buyer from the seller 3 After that the buye

NATIONAL ECONOMICS UNIVERSITY INTERNATIONAL PAYMENT

ASSIGNMENT

TOPIC:

METHODS OF PAYMENT

Group 6 :

1 Đặng Khánh An

2 Đỗ Đức Anh

3 Ngyễn Hữu Bảo

4 Nguyễn Thu Hà

5 Trần Cẩm Tú

6 Hà Tú Linh

7 Trần Thị Thu Hằng

2

Hà Nội 2017

Contents

I Open account 3

1 Definition 3

2 Features of open account method or characteristics of an open account 3

3 Procedure of open account payment 4

4 Advantages of method of open account payment 4

5 Risk 4

6 Applying case 5

7 Note 5

II Collection of payment 5

1 Definition 5

2 Features 5

3 Parties 5

4 Types of collection of payment 5

4.1 Clean Collection: 5

4.2 Documentary Collection 7

5 Legal Documents 8

• Uniform Rule for Collection 522 8

III Bank remittance 10

1 Definition : 10

2 Parties in bank remittance 10

3 Types of bank transfer 10

IV Documentary credit 11

1 Definition: 11

2 Features of Letter of credit (L/C) 12

3 Parties: 12

4 Function of L/C: 12

5 Types of L/C: 12

a Standard types of L/C: 12

b Special types of L/C 13

6 Procedure: 14

7 Legal documents of LC 14

8 Important features of UCP: 14

9 Term of LC 15

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I Open account

1 Definition

Open account method means that the seller delivers goods or services to the buyer without receiving cash, a bill of exchange or any other legally binding enforceable undertaking at

the time of delivery, and the buyer is expected to pay according to the terms of the sales contract and the seller’s latter invoice

2 Features of open account method or characteristics of an open account

• Applicability: Recommended for use in secure trading relationships or markets or

in competitive markets to win customers with the use of one or more appropriate trade finance techniques

• Time: as agreed between a buyer and seller, net 15, 30, 60 day terms, etc., from date of invoice or bill of lading date

• Risk: Exporter faces significant risk as the buyer could default on payment obligation after shipment of the goods ( highest risk )

• Trust: the exporter and importer trust one another implicitly, and they have traded together for a number of years

• Pros (advantage)

- Boost competitiveness in the global market

- Establish and maintain a successful trade relationship

• Cons (disadvantage)

- Exposed significantly to the risk of nonpayment

- Additional costs associated with risk mitigation measures

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3 Procedure of open account payment

1) First, the Seller (exporter) and the Buyer (importer) make a contract

2) Then the goods will be shipped to the buyer from the seller

3) After that the buyer go to the importing bank to set up wire transfer

4) The amount from importer’s bank will be wired to exporter’s bank

5) Then the exporting bank will transfer credits into the seller’s account

4 Advantages of method of open account payment

• Exporter

- Easiest payment method, low expense, friendly payment method

- Reduce document expense

- Reduce prices

- Increase exporter’s completion in international market

• Importer

- Pay the goods after receiving all of the cargo

- To be the credited by the exporter in specific duration time

• Both parties

- Reduce bank expense (because bank does not participate in open account method)

- There are only two parties to be exporter and importer

5 Risk

Risks to •Buyer defaults on payment obligation

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Seller •Delays in availability of foreign exchange and transferring of funds from

buyer’s country occur

•Payment is blocked due to political events in buyer’s country

Risks to

Buyer

•Seller does not ship per the order (product, quantity, quality, and/or shipping method)

•Seller does not ship when requested, either early or late

6 Applying case

- Exporter and importer trust each other

- Use in regular transactions

- Use in pay transport expenses, commission expenses, guarantee expenses

7 Note

- Must regular specific kinds of currency

- Define specific currency value to be paid in shipping date

- Which kinds of currency transfer will be used in payment date – Mail transfer or TTR transfer

II Collection of payment

1 Definition

Collection of is process, in which after deliver the goods, the seller instructs his bank

to forward documents related to the export of goods to the buyer’s bank with a request

to present these documents to the buyer for payment, indicating when and on what conditions these documents can be released to the buyer

2 Features

- Collection order between exporter and exporting bank is not a contract

- In collection of payment, banks are only intermediary in payment method

- Collection of payment is only implemented after the seller delivers goods basing on issuing documents

3 Parties

We have 4 parties join in this method:

- Principal (Seller, Exporter, Drawer)

- Drawee (Importer, Buyer)

- Remitting Bank (Principal’s Bank, seller’s bank, exporter’s bank)

- Collecting Bank and/or Presenting Bank (Buyer’s Bank, Importer’s Bank)

4 Types of collection of payment

4.1 Clean Collection:

• Definition: Clean Collection are collections of financial documents (promissory notes, Checks, payment slips, etc…) without attacted commercial documents (invoices, shipping documents and insurance documents)

• Procedure

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• Simple

• Beneficial to the importer

• Receiving cargo and

paying the cargo are separate

• Export may not be paid for shipping the cargo

• Payment time is slow because of some reasons

as follow:

• Up to good will of the importers/buyers

document process

• Do not take all advantages

of bank

• Applying cases

1 Paying services expenses of importing and exporting activities

2 Importer and exporter trust each other/one another

3 Parent company and branches (MNCs, MNEs)

 Accepted and application of the case: The method of obtaining a slippery slip does not apply much in trade payments, as it does not guarantee the seller's rights as the buyer's receipt is completely separate from the payment stage, the buyer may receive

No payment or late payment For buyers applying this method is also disadvantageous because if the draft comes sooner than the voucher, the buyer must pay immediately while not knowing whether the seller's goods are in compliance with the contract or not

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4.2 Documentary Collection

• Definition: Documentary Collections are collections of financial documents, which may have attached commercial documents, or collections of commercial documents without financial documents

• Procedure

• Overcome disadvantages of

clean collection Payment and

together

• Collecting bank will control

commercial documents instead

of sending directly to importer when deliver the cargo

• For the seller to use this method

is not expensive, and the seller

is helped by the bank to control and control the transport document until guaranteed payment

• The benefit to the buyer is that

there is no obligation to pay if the documents have not been inspected in some cases,

• The importer can refuse to receive the cargo

• Payment time is slow

• For exporters at risk as importers do not accept the goods sent by not receiving the documents

• The importer's credit risk, political risk in the importing country and the risk of the goods may be kept by the customs

• Paying too late, from delivery

to receipt may take several months to a year

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including goods

• Type of Documentary Collection:

In this method, we divide into 3 kinds include: D/P; D/A and D/OT or D/TC

1 Documents against payment (D/P)

In D/P terms, the collecting bank releases the documents to the buyer only upon full and immediate cash payment D/P terms most closely resemble a traditional cash on delivery transaction

2 Documents against Acceptance (D/A)

In D/A terms, the collecting bank is permitted to release the documents to buyer against acceptance (signing) of a bill of exchange or signing of a time draft at the bank promising to pay at a later date (usually 30,60, or 90 days)

3 Acceptance Documents against Payment) (D/TC)

An acceptance documents against payment has features from both D/P and D/A:

- The collecting bank presents a bill of exchange to the buyer for acceptance

- The accepted bill of exchange remains at the collecting bank together with the documents up to maturity

- The buyer pays the bill of exchange at maturity

- The collecting bank releases the documents to the buyer who takes possession of the shipment

- The collecting bank sends the funds to the remitting bank, which then in turn sends them to the seller

• Role of bank in documentary collection

Banks act upon specific instruction givens by the principal (seller) in the collection order

- Banks are required to act in good faith and exercise reasonable care to verify that the documents submitted appear to be as listed in the collection order

- Banks are not liable nor can they be held accountable for the acts of third parties

- Banks also assume no responsibility regarding the quantity or quality of goods shipped

- Without explicit instructions, the collecting bank takes no steps to store or insure the goods

- If a collection remain unpaid or a bill of exchange is not accepted and the collecting bank received no new instructions within 90 days it may return the documents to the bank from which it received the collection order

5 Legal Documents

• Uniform Rule for Collection 522

• Rules of collection

• National law

• International law

• Uniform Rule for Collection 522

1 Definition

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The ICC Uniform Rules for Collections are a practical set of rules to aid bankers, buyers, and sellers in the collections process

This is a legal document that, when using the collection method, needs to be investigated

2 Content

• The URC underline the need for the principal and/or the remitting bank to attach

a separate document—the collection instruction—to every collection subject to the Rules; makes it very clear that banks will not examine documents; addresses problems banks experience in respect of documents against acceptance and documents against payment; clearly indicates that banks have no obligation to store and insure goods when instructed

• This document consists of 26 articles, 7 sections, of which:

• General provisions and provisions (Articles 1-3)

• Form and structure of collection (Article 4)

• Form of presentation of documents (Articles 5 - 8)

• Obligations and Responsibilities (Articles 9 - 15)

• Payment (Articles 16 - 19) Interest, fees and charges (Articles 20 - 21)

• Other provisions (articles 22 - 26)

Example:

• URC 522 Article 2

ARTICLE 2 DEFINITION OF COLLECTION For the purposes of these Articles:

(a) "Collection" means the handling by banks of documents as defined in sub-Article 2(b), in accordance with instructions received, in order to:

1 obtain payment and/or acceptance, or

2 deliver documents against payment and/or against acceptance, or

3 deliver documents on other terms and conditions

(b) "Documents" means financial documents and/or commercial documents:

1 "Financial documents" means bills of exchange, promissory notes, cheques, or other similar instruments used for obtaining the payment of money

2 "Commercial documents" means invoices, transport documents, documents of title or other similar documents, or any other documents whatsoever, not being financial documents

(c) "Clean collection" means collection of financial documents not accompanied

by commercial documents

(d) "Documentary collection" means collection of:

1 Financial documents accompanied by commercial documents

2 Commercial documents not accompanied by financial documents

• URC 522 – Article 3

ARTICLE 3 PARTIES TO A COLLECTION

(a) For the purposes of these Articles the "parties thereto" are:

1 The "principal" who is the party entrusting the handling of a collection to a bank;

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2 The "remitting bank" which is the bank to which the principal has entrusted the handling of a collection;

3 The "collecting bank" which is any bank, other than the remitting bank, involved in processing the collection;

4 The "presenting bank" which is the collecting bank making presentation to the drawee

(b) The "drawee" is the one to whom presentation is to be made in accordance

with the collection instruction

III Bank remittance

1 Definition:

- This is a method of transferring money by instructing a bank to directly transfer funds from one bank account to another without the uses of checks

- The seller delivers goods or services to the buyer without receiving cash, a bill of exchange or any other legally binding and enforceable undertaking at the time delivery and the buyer is expected to pay according to the terms of the sale contract and seller’s later invoice

2 Parties in bank remittance

- Buyer (remitter)

- Buyer’s bank (paying bank)

- Seller’s bank (remitting bank)

- Seller (beneficiary)

3 Procedure

Seller

4 Types of bank transfer

• Mail transfer

Invoice

Bank transfer

3

4

1

2

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Transfer of funds between branches through the medium of post offices either for credit of an account holder or for payment to a certain beneficiary

Transaction is done by email

When you’re too busy, you may request the bank to remit the payment:

+ fill in the full name, address, telephone number of the beneficiary

+ the bank will write to its correspondent bank to make the payment

- Requirements of payment is implemented through a letter

- Low expense

- But take time

• Telegraphic transfer (TTR)

It is an electronic method of transferring funds; it is utilized primarily for overseas wire transactions

Transfer of funds by telegraph, telex, cable, or SWIFT from a bank to its branch or another bank authorizing the payment of funds to a specified account

- Usually fairly expensive due to the fast nature of the transaction Generally, the Telegraphic Transfer is complete within two to four business days depending on the origin and destination of the transfer, as well as any currency exchange requirements

- Fastest mode of money transfer and is used for payments

- It makes a couple of days to transfer

+ Based in oversea: within 5 days + Based on local: within same day

IV Documentary credit

1 Definition: