国际经贸函电课件 9 Terms of Payment

international trade is the L/C.
Besides the L/C, other modes of payment are also
used in foreign trade.
Learning Objectives:
• Know the definition and classification of the L/C • Grasp how to urge the establishment of the L/C
the Documentary Letter of Credit.
The definition of L/C
• A documentary Letter of Credit is the written promise of a bank , on behalf of a buyer, to pay a
(1) The presentation of documents (that evidence
title to goods shipped by the seller) (2) Make payment
The characteristics of L/C
L/C is a contract between the issuing bank and
(3) According to the transferability of the L/C:
• Transferable L/C can be transferred or made available to
the second beneficiary, usually indicate “transferable”
Section 1 Introduction
Payment by Letter of Credit The other modes of payment
Requirements for writing
1.1 Payment by Letter of Credit
The definition and characteristics of L/C The classification of L/C
the beneficiary
Issuing bank provides the guarantee of payment
with its credit.
L/C mainly deals with the documents instead of
goods and services.
The classification of L/C
Collection
Instruments of payment
Payment in international trade is practically non-cash payment. Financial documents are usually used as instruments of payment in international trade. Instruments of payment: • Bills of Exchange • Promissory note
without prior notice.
• Irrevocable L/C: cannot be cancelled or withdrawn after it
has been opened and noticed to the beneficiary as long as
there is no agreement on cancellation and withdrawal among the applicant of the L/C (buyer), issuing bank and the beneficiary (seller).
seller the amount specified in the credit
provided the seller can present the complete set
of documents set forth in the credit.
The definition of L/C
• The terms and conditions of a Documentary Letter of Credit revolve around two issues:
• Time L/C allows a deferred payment within
the specified time.
(2) According to the responsibility of the issuing bank: • Revocable L/C : can be amended, revoked or cancelled by the issuing bank without the beneficiary’s consent and even
• Documentary L/C means that the exporter is required to present documents stated in the letter of credit evidencing current shipment of the goods ordered before the money is released.
(6) Reciprocal and Back-to-back Credit • Reciprocal Credit is usually used in a barter transaction or compensatory trade, in which the applicant and the beneficiary of the L/C are both importers and exporters.
Collection
• Collection means the creditor(exporter) issues the bill of exchange and entrust the bank to collect the payment of the
Chapter 9 Terms of Payment
Payment in international trade is much more complicated than that in domestic trade.
The most commonly used method of payment in
The flowchart of the L/C
The definition of L/C
• The Letter of credit used in international trade should always be accompanied by export
documents or shipping documents, so it is called
• Understand the main
procedures of the L/C • Know the other modes of payment in international trade
• Grasp how to amend and
extend the L/C • Master useful words, phrases and expressions
The flowchart of the Documentary L/C
Applicant (Buyer/Importer) ② Application ⑩ Presentation ①contract ⑤Shipment Beneficiary
(Seller/Exporter)
④ Notification ⑥ Presentation ⑨ Payment
⑾ Payment
③Issuing the L/C ⑦ Negotiating ⑧ Payment
Issuing bank
(Paying bank) (Buy’s bank)
Advising other modes of payment
Instruments of payment Remittance
(“transmissible”, “assignable”, “divisible” )
• Non-transferable L/C cannot be transferred, usually indicate “non-transferable” or “not transferable”. • Note: In the absent of any indication, the L/C is deemed to be non-transferable.
• Back-to-back Credit is a new letter of credit issued to
another beneficiary on the basis of a primary credit. It is used in a three-party transaction (Entrepot Trade or the middleman resale the other’s goods)
• Checks
Remittance
• Remittance is one of banking customer services, in
which funds will be transferred from one person to
another. • Remittance includes Mail Transfer (M/T), Telegraphic Transfer (T/T) and Demand Draft (D/D). • Remittance is often used in payment in advance, cash with order and open account business.