《国际贸易实务与操作》Chapter 6

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Risk Distribution of the Four Terms of Payment
High Open Account /Consignment
Exporter‟s Risk
Draft L/C
Advance Payment Low Low Importer‟s Risk High
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5. Hybrid Methods Frequently, trading partners will use a combination of payment methods. For example, the seller may require that 50% payment be made in advance using a wire transfer and that the remaining 50% be made by documentary collection and a sight draft.
国际贸易实务与操作
International Trade Practice and Operation
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Chapter 6 International Payment
Teaching Objectives 1. Identify the risks of different methods of payment in international trade. 2. Discuss the form and function of bill of exchange, check, and promissory note. 3. Explain the procedures of documentary collection. 4. State the types of letter of credit and the procedures of payment. 5. Outline different parties‟ responsibilities under the letter of credit payment.
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1. Payment in Advance The buyer simply prepays the seller prior to shipment of the goods． It provides the seller with the most security but leaves the buyer at great risk. Cash in advance is usually a wire transfer or a check.
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Section 2 Bills of Exchange
The bill of exchange is a specialized type of negotiable instrument commonly used to expedite foreign money payments in many types of international transactions. It acts as a substitute for money, and a financing or credit device. 1. Definition of Bill of Exchange A bill of exchange is a written instrument which contains an unconditional order whereby the drawer directs the drawee to pay a definite sum of money to the payee or to his order on demand or at a definite time.
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Section 2 Bills of Exchange
3. Types of Bills of Exchange According to the tenor, there are time and sight bills. According to the acceptors, there are trade acceptance and bank‟s acceptance. An acceptance is a time draft that has been accepted and signed by the drawee (the buyer or the bank) for payment at maturity． Trade acceptance Banker’s acceptance
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Section 2 Bills of Exchange
2. Parties Involved Basically three parties: drawer drawee payee Other parties: acceptor, endorser, endorsee, bearer, etc.
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4. Open Account The buyer agrees to pay for the goods within a designated time after the shipment,usually in 30, 60, or 90 days．
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2. Documentary (Letter of) Credit A letter of credit is a bank‟s commitment to pay the seller a specified sum on behalf of the buyer under precisely defined conditions． Letters of credit are the most common form of international payment because they provide a high degree of protection for both the buyer and the seller.
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3. Documentary Collections A documentary collection is similar to an international cash on delivery (COD). The seller ships goods to the buyer but sends the documents, including the bill of lading (title document), through the banks with instructions to release them to the buyer only upon payment. When the buyer obtains the title documents, he has the right to take ownership of the shipment． Letter of credit belongs to banker‟s credit. Remittance and collectionБайду номын сангаасbelong to commercial credit. The buyer is responsible for making payment, the seller handing over documents.
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6. Other Payment Methods (Extension) The consignment method requires that the seller ship the goods to the buyer, broker or distributor but not receive payment until the goods are sold or transferred to another buyer. Although this is the riskiest sort of transaction, it is nonetheless common in the trade of fresh produce. Countertrade(对等贸易） is a general name given to a variety of activities to promote trade with nations that are short of convertible currency. The basic activity is similar to barter – the exchange of goods for goods – but today it is more sophisticated than that. The following types of countertrade have been identified: compensation trade, counterpurchase, buy-back, offset, switch , triangular deals, and so on.
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There are four basic methods of payment: payment in advance, documentary (letter of) credit, documentary collections, open account.
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Remittance is an act of transmitting money, bills, or the like, to a distant place, as in satisfaction of a demand, or in discharge of an obligation. There are three types of remittance: (1) Mail Transfer (M/T), (2) Telegraph Transfer (T/T), (3) Demand Draft (D/D) . Four parties are involved in the remittance process: the remitter, the payee, the remitting bank and the paying bank.
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Section 2 Bills of Exchange
Case 6-1 NORTON v．KNAPP FACTS：Norton delivered a mill, price at $80, to Knapp．When Knapp did not pay the $80, Norton drew a draft on Knapp payable on sight．When Knapp received the sight draft, he wrote “Kiss my foot” on the back and signed his name． Claiming that Knapp‟s writing and signature constituted a valid acceptance, Norton sued for the unpaid draft． ISSUE：If a bill is presented to a drawee for his acceptance, will he be considered an acceptor if he does anything to it or with it which does not clearly indicate that he will not accept it?