TIẾNG ANH KINH TẾ Financing international trade slides

UNIT FINANCING INTERNATIONAL TRADE Brief discussion questions What are some of the risks involved in trading internationally? What payment methods you know that are used when exporting or importing goods? What is the role of the banks in international trade? Suggested answer  Risk of not being paid (for the exporter)  Risk of not receiving goods (for the importer)  Risk of receiving goods which are different from those ordered or of lower quality or in a damaged condition  Risk of force majeure (Eg: storms, disasters etc.) Suggested answer     Open account Document credit Bills for collection Advance payment Suggested answer  Active role: When the Banks get involved in the payment process, supporting both the exporter and the importer to complete their obligations so that the contract is carried out as agreed For example, in the documentary credit method of payment Suggested answers  Passive role: When the bank only things as requested For example, just transferring money to the account of the seller/exporter Reading Doing reading comprehensive tasks in the text book Look at the diagrams below to explain how a letter of credit works 10 11 Double-check with the text of Reading 12 Conclusions about each method of payment mentioned above 13 Open account  Is only used for transactions between exporters and importers which have already established a trust-worthy and long-term business relation  Saving time for both exporter and importer as they deal directly with each other – not much involvement of banks 14 Documentary credit  Being used worldwide  Safer for exporter as it makes sure he will get his money for the goods sold provided that he presents the correct documents  Ensure the importer that he will get the goods bought as long as he pays for them or agreed to pay in a fixed date in the future  Greatly supportive involvement of banks in the transaction process  Taking more time than other methods of payment 15 Bills for collection  Clean collection: more risky as the importer can use the documents of the title to receive the goods only by agreeing to pay in a fixed date in the future  Documentary collection: safer as the importer has to pay in return of the documents of title to receive the goods after all  More passive roles of the banks They only what is required 16 Advance payment  Safest for the importer if the importer has to fully pay for the good bought in advance  Still safe if the importer pays in part in advance  Time saving  Being used if there is more demand than supply for that kind of commodity 17 Questions to answer What is the commonest method of payment? Why? What information is there in a letter of credit? Answer the questions What is the commonest method of payment? Why? -Letter of credit is the commonest method of payment Because it is more secure The bank must pay even if the importer defaults on payment 2 What information is there in a letter of credit? -The name and address of the exporter -The type of credit (revocable or irrevocable) -The expiry date -The name and address of the importer -The name of the party on whom the bills of exchange are to be drawn, and whether they are to be at sight or a particular tenor -Precise instructions as to the documents against which payment is to be made -A brief description of the goods covered by the credit -The terms of contract and shipment (i.e, whether ‘EXW’, ‘FOB’, ‘CIF’, etc.) -The amount of the credit, in sterling or a foreign currency -Shipping details, including whether partshipments and/or transhipments are allowed Also recorded should be the latest date for shipment and the names of the ports of shipment and discharge (It may be in the best interest of the exporter for shipment to be allowed ‘from any UK port’ so that a choice is available if, for example, some ports are affected by strikes The same applies for the port of discharge  ... risks involved in trading internationally? What payment methods you know that are used when exporting or importing goods? What is the role of the banks in international trade? Suggested answer