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Risk Prevention In International Payments Letter of Credit Group 6: Huỳnh Mỹ Ngân CS150496 Trần Thị Mai Huyền CS150192 Hồ Huỳnh Long CS150580 Võ Cao Danh CS150834 Table content 01 International payments 02 Common risks when implementing L/C document credit payment method and handling measures 03 Reducing risks in documentary letter of credit 01 International payments International payments International payment means the performance of payment obligations and monetary benefits arising based on economic and non-economic activities between organizations and individuals of this country and organizations and individuals of other countries Other, or between a country and an international organization, through the relationship between the banks of the countries concerned Risks in international payments: Risks in international payment are economic risks arising in the process of performing international payment activities, it is caused by causes arising from the relationship between the parties participating in international payment (exporters, importers) Exporters, banks, organizations, individuals, and intermediaries ) or other objective factors such as natural disasters, war, politics Letter credit payment method Documentary credit payment method is an arrangement whereby a bank (the issuing bank of the letter of credit) at the request of the customer (the applicant for the letter of credit) will pay a certain amount of money to another person (the beneficiary of the amount of the credit) or accept a bill of exchange drawn by such person to the extent that such person makes a proper presentation 02 Common risks when implementing L/C document credit payment method and handling measures Risks from the bank issuing the L/C This is the risk that the seller may face when the buyer opens an account at the issuing bank of the L/C but does not guarantee solvency, has poor credit, or does not have a Swift Code Handling measures: The seller can ask the buyer to open L/C at reputable banks In some cases, it is possible to designate the L/C issuing bank to be the bank's agent in the exporting country or vice versa to have a secured relationship Risk due to exporter not supplying the right goods In many cases, the exporter does not send the goods in full or when receiving the goods is not the same as the sample picture and negotiated on the commercial contract At this time, the importer will bear all risks Handling measures: + Work with reputable partners, negotiate closely on delivery packaging conditions (must have photos and videos sent to importers) + Consult the bank about the partner's business history + Clearly stipulate terms and penalties in foreign trade contracts if the contract is not performed + Send staff to directly supervise the packaging and shipping process The exporter fails to comply with the provisions of the L/C The exporter is slow to deliver the goods because he has not prepared the goods in time according to the provisions of the contract Handling measures: + Survey the transport route right after signing the contract + Rent a train if the number of goods goes a lot + Choose a shipping company that has strengths in that shipping route + In case the exporting party does not commit to deliver the goods on schedule, it is necessary to amend the L/C If the exporter delivers the goods in parts: First of all, read carefully to understand the requirements of the L/C + Suggest clearly how many times each delivery, how much delivery time + The volume of goods delivered several times, divided into each batch, how many cases, if the exporter does not deliver the goods on schedule, this fee is usually borne by the exporter The exporter fails to present the set of documents in accordance with the L/C regulations Handling measures: + Prepare full documents, when making L/C payment, it is necessary to have good professional personnel to avoid the case of multiple L/C corrections + Choose a business partner with goodwill, not make it difficult or make excuses + It is necessary to negotiate in the contract all documents, to limit the arising after signing the contract + Strictly control risks that may arise when using L/C + Get advice from the beneficiary bank supporting the exporter + Learn more about L/C payment regulations and documents + Based on the reasonable time to prepare documents for negotiation on the day of opening the L/C, limit opening too early or opening the goods on the day of shipment if the exporter has not yet prepared the L/C Exporters send documents invalid documents, fake Handling measures: + Documents related to goods such as: C/O, I/P, C/Q, Test Report must be issued by a competent authority + Regarding the bill of lading, the shipping company created after loading goods must be checked and supervised by the representative of the importing party (information on the date of departure, the date of release, the name of the vessel, the number of trips, the train schedule ) + The importer must receive the original bill of lading to check and compare with the documents on the L/C + Documents need to be signed by the representative of the inspecting importer and signed by competent authorities Risks due to unreliable shipping lines Using an unreliable shipping company will have cases of missing delivery, lost goods, damaged goods without compensation, using an old ship may have an accident, not receiving adequate compensation Handling measures: When paying the L/C, the importer should take the initiative to charter the vessel Designating a reputable shipping company or having an office in the importing country will help the importer minimize risks Buy cargo insurance (Buy FOB can buy more insurance or enter CIF for sea freight) 03 Reducing risks in documentary letter of credit For importers: - Some measures should be put in place to prevent the risk of poor quality or insufficient quantity of goods delivered by the seller, such as: - Conduct surveys, select reputable export partners - Specify the terms and conditions for the exporter to perform - Requires presentation of third-party pre-shipment inspection and pre-shipment documents - Buy insurance for the goods and clearly agree which party will buy cargo insurance - Applying forward rate when paying L/C - The importer only has to pay when the goods have actually been delivered - The importer can rest assured that the exporter must comply with the provisions of the L/C to ensure that he will be paid (if he does not comply with the regulations, the exporter will have to lose money) For exporters: Regardless of whether the buyer pays or not, the exporter will be paid by the bank in accordance with the letter of credit Minimizing the delay in transferring documents The payment is made immediately after the documents are transferred to the issuing bank, for deferred payment L/C, the payment will be made within a pre-determined day In order to have money to use in advance for the preparation of the contract, the customer can ask for a discount of the L/C in advance THANK’S! ... an arrangement whereby a bank (the issuing bank of the letter of credit) at the request of the customer (the applicant for the letter of credit) will pay a certain amount of money to another... (information on the date of departure, the date of release, the name of the vessel, the number of trips, the train schedule ) + The importer must receive the original bill of lading to check and... must be issued by a competent authority + Regarding the bill of lading, the shipping company created after loading goods must be checked and supervised by the representative of the importing