Thuyết trình chủ đề methods of payment

INTERNATIONAL PAYMENT METHODS OF PAYMENT ▪ Đặng Khánh An Group 6: ▪ Đỗ Đức Anh ▪ Nguyễn Hữu Bảo ▪ Trần Cẩm Tú ▪ Nguyễn Thu Hà ▪ Trần Thị Thu Hằng ▪ Hà Tú Linh Contents Open account Collection of payment Bank remittance Documentary credit I Open account Definition: G6 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 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 ) I Open account • 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 G6 I Open account Procedure of open account payment G6 Advantages of method of open account payment Exporter ❖Easiest payment method, low expense, friendly payment method ❖Reduce document expense ❖Reduce Text prices ❖Increase exporter’s completion in international market  Reduce bank expense  There are only two parties to be exporter and importer Both parties Importer ❖Pay the goods after receiving all of the cargo Text ❖To be the credited by the exporter in specific duration time Risk Risks to Seller Risks to Buyer •Buyer defaults on payment obligation •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 •Seller does not ship per the order (product, quantity, quality, and/or shipping method) •Seller does not ship when requested, either early or late Applying case - Exporter and importer trust each other - Use in regular transactions - Use in pay transport expenses, commission expenses, guarantee expenses 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 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 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 G6 II Collection of payment G6 Parties - 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) Types of collection of payment Clean Collection Documentary Collection IV Documentary credit Types of L/C Standard types of L/C Special types of L/C G6 IV Documentary credit Types of L/C Standard types of L/C - Revocable L/C: L/C that may be amended or cancelled any time by the buyer (the account party) without the approval of the seller (the beneficiary) - Irrevocable L/C: this L/C cannot be cancelled (or its terms amended) without the seller’s(beneficiary’s) prior written approval and comes usually as a confirmed irrevocable letter of credit Also called irrevocable credit G6 IV Documentary credit G6 Types of L/C Standard types of L/C - Confirmed irrevocable L/C: L/C that adds the endorsement of a seller’s bank (the accepting-bank) to that of the buyer’s bank (the issuing bank) It provides the highest level of protection to the seller because not only the L/C cannot be canceled (or its terms changed) unilaterally by the buyer (the account party), but also both banks involved in the transaction guaranty its payment on its due (maturity) date - Irrevocable without recourse L/C: Without recourse term defines the situation in which the paying bank will not be able to claim refunds from the beneficiary in case the letter of credit documents are not paid by the issuing bank In general the confirming bank pay the letter of credit amount to the beneficiaries without recourse terms IV Documentary credit G6 Types of L/C Special types of L/C • Transferable L/C: A transferable letter of credit is a letter of credit that permits the beneficiary of the letter to make some or all of the credit available to another party, thereby creating a secondary beneficiary • Back to back L/C: consist of two letters of credit (LCs) used together to finance a transaction A back to back L/C is usually used in a transaction involving an intermediary between the buyer and seller such as a broker, or when a seller must purchase the goods it will sell from a supplier as part of the sale to his buyer • Revolving L/C: A letter of credit established one time that enables the receiver to access specific amounts of credit for scheduled shipments over a specified period of time Issued as a cumulative or non-cumulative L/C, the former allows for unused credit amounts to rollover into subsequent periods while the latter maintains affixed amount of credit available each period IV Documentary credit G6 Types of L/C Special types of L/C  Standby L/C: • A standby letter of credit (SLOC) is a guarantee of payment issued by a bank on behalf of a client that is used as “payment of last resort” • Standby letters of credit are created as a sign of good faith in business transactions and are proof of a buyer’s credit quality and underwriting duties to ensure the credit quality of the party seeking the letter of credit, then sends notification to the bank of the party requesting the letter of credit (typically a seller or creditor)  Deferred payment L/C: A type of letter of credit that enables the buyer in a transaction to pay the seller and receive the goods immediately, and to pay the bank back for the sale amount at a later date Also called ausance letter of credit  Red clause letter of credit: The red clause letter of credit is a specific type of letter of credit in which a buyer extends an unsecured loan to a seller Red clause letters of credit permit documentary credit beneficiaries to receive funds for any merchandise outlined in the letter of credit These letters are commonly used by beneficiaries who act as purchasing agents for buyers in another country  Green clause letter of credit: A condition in a guarantee document that allows a purchaser to receive advances ahead of shipment against collateral property represented by warehouse receipts Use of a green clause letter of credit is often used in the agricultural business where a company can fund the harvest of a new crop by pledging available stock as collateral IV Documentary credit Procedure G6 IV Documentary credit Legal documents of LC UCP: (Uniform customs and practice) for Documentary Credits Historically, the commercial parties, particularly banks, have developed the techniques and methods for handling letters of credit in international trade finance UCP is issued by ICC (International Chamber of Commercial ) in 1933 and updating it throughout the years => The result is the most successful international attempt at unifying rules ever, as the UCP has substantially universal effect The latest version of UCP called UCP 600, formally comes into effect on 1, July 2007 G6 IV Documentary credit Legal documents of LC The Uniform Customs and Practice for Documentary Credits (UCP) is a set of rules on the issuance and use of letters of credit Bankers, lawyer, traders, transporters, academics and all who deal with letter of credit transactions worldwide will refer to UCP 600 on a daily basis G6 IV Documentary credit Important features of UCP • All versions of UCP are implemented when used • UCP is not a compulsory legal documents • In cases, commercial documents apply UCP, it becomes a compulsory legal document G6 IV Documentary credit Term of LC G6 G6 Question:1 UCP 600 comes into effect on 01 July A.2007 B.2008 C.2009 Question:2 What is DISADVANTAGES of documentary collection? A Payment time is slow B For the seller to use this method is expensive C The importer can’t refuse to receive the cargo Question:3 What is NOT applying much in case of clean collection? A Paying services expenses of importing ans exporting activities B Importer and exporter trust each other/ one another C Trade payments D Parent company and branches (MNCs, MNEs) ... to the risk of nonpayment - Additional costs associated with risk mitigation measures G6 I Open account Procedure of open account payment G6 Advantages of method of open account payment Exporter... 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 G6 II Collection of payment. .. Importer’s Bank) Types of collection of payment Clean Collection Documentary Collection Types of collection of payment Clean Collection • Definition: Clean Collection are collections of financial documents