Methods of international payments

International payments is one of the business of banking in the payment of the value of the shipment between the buyer and the seller in the field of foreign trade . The international payment method is now the most common:

1. Wire transfer (TT: Remittance Telegraphic Transfer ) or Money (MTR: Mail Transfer Remittance ).
2. Trả tiền lấy chứng từ (C.A.D: Cash Against Document).
3. Nhờ thu (Collection).
4. Tín dụng thư (L/C: Letter of Credit).

1. REMITTANCE

Buyers will transfer their money through a local bank to sell part or all of the shipment value (depending onthe contract of foreign trade)
.

By this method of money transfer (Remitter) ordered his bank (Remitting bank) bank transfer to the seller (the beneficiary) account (Beneficiary Bank). After receiving the money, the sellers will expedite delivery.

2. NOW GET MONEY VOUCHERS

The buyer will sign with a CAD bank memorandum includes two parts:

1. Open a trust account (Trust account) called the buyer to the seller benefit.
2. Requirements of proof of payment which the seller must present to the bank CAD

The buyer then transfer the money into trust accounts. Bank CAD notify the seller of the trust account is opened. After receiving notice from the bank, the seller expedite delivery and set up payment vouchers. If the documents are valid CAD bank will make payment to the seller. CAD Bank will transfer the documents to the buyer to receive goods.

3. COLLECTION

Seller after delivery will authorize the bank, collecting bank because the amount of goods purchased abroad. There are two types of collection:

a)       Thanks for accepting (D / A: Document Acceptance )

b)      Nhờ thu kèm chứng từ (D/P: Document against Payment)

The process is as follows:

After shipping, seller will send the documents together with the goods under the draft (Bill of Exchange or "Draft) for his collection bank (Remitting bank). The bank may use its agents or through another bank but the bank accounts overseas buyers (Collecting Bank) to the collection of money each household.Collecting bank will send copies of the documents and draft to the buyer. If a collection of documents is accepted buyer will accept to sign and return the bill to the bank for collection. If the documentary collection from: The buyer sends payment orders to the bank again.

4. LETTER OF CREDIT

Letters of credit (also known as false letters of credit ) is a legal document issued by a financial institution (usually a bank ), to provide a guarantee of payment for a beneficiary on the basis of the beneficiary must meet the terms of the letter of credit. This means: When a beneficiary or a presenting bank (representativepayee ) to satisfy the issuing bank or confirming bank during the period of validity of LC (if any) the following conditions:

• The documents necessary to satisfy the terms and conditions of the LC. Such as bills of lading(original and copies), consular invoice , draft contracts, insurance etc. ...
• The practices of the UCP and international banking operations.
• The practice of issuing bank or bank verify receipt (if any).

To put it succinctly, a letter of credit is:

• One type of payment vouchers
• By the buyer (or the importer) for opening.
• Communications channels through banks.
• Paid by the issuing bank or confirming bank through the bank notice (advising bank in the beneficiary countries) within a specified time if they produce the type of document full compliance with the conditions , terms.

The financial institutions are not banks can issue LC.

Letters of credit can also be a source of payment for a transaction, meaning that an exporter will be paid by purchasing LC. LC is used primarily in transactions long union g international trade of high value. LC is also used in completing product development process to ensure that public infrastructure has been approved (such as roads, sidewalks, embankments wave .. etc) will be built.

V         THE NAMES & SYMBOLS OF THE LETTER OF CREDIT

• Letter of credit: LOC , LC , L / C .
• Documentary credit: DC, D/C.
• Documentary letter of credit.
• Credit (as defined in UCP 600 ).

V         STAKEHOLDERS

The parties involved are always present in LC transactions:

• The beneficiary (Beneficiary): a recipient money.
• Issuing banks (opening / issuing bank) is a bank that applying for an LC.
• Advising bank (advising bank) is the bank that the beneficiary is the customer.

However, people applying for an LC is not a party in the LC.

According to UCP 600, the LC is used today as L / C irrevocable . In the process of conducting transactions, LC combines the normal function of checks and direct deposit .

V         EXCHANGE L / C TYPICAL

• Bank opening / issuing bank will choose a notification by the exporter in the country. Usually banks have a good relationship with the bank open / release or an agent / affiliate of the bank.
• Advising Bank will notify the payee L / C (usually the seller / exporter) of L / C is opened with the contents of the L / C. If the beneficiary accepts or requests for repairs, the newspaper reported the bank ---> notify the issuing bank to release or modify.
• After accepting the contents of L / C, then the exporter will expedite delivery and set up the documents.
• Exporters who send documents to the advising bank
• Advising bank copy of the documents sent by the bank open / release test.
• If the valid documents, the bank open / release process the payment to the exporter (beneficiary) and retrieve the documents via the advising bank.

V         THE TYPE OF LETTER OF CREDIT

• Letters of credit may be revocable ( revocable L / C ): This category was dropped in UCP 600 and all letters of credit is irrevocable
• Letter of credit irrevocable ( irrevocable L / C )
• Confirmed letter of credit ( Confirmed L / C )
• Revolving letter of credit (R evolving L / C )
• Back to back letter of credit (B ack to Back L / C )
• Thư tín dụng đối ứng (Reciprocal Letter of credit)
• Thư tín dụng dự phòng (Standby Letter of credit)
• Thư tín dụng thanh toán dần (Deferred payment letter of credit)
• Thư tín dụng ứng trước (Packing letter of credit)

V         O L / C

Open an L / C is not completely easy, banks often based on the following characteristics:

• Characteristics of export goods.
• Financial capability and credibility of the L / C.
• Business situation of the actual opening of L / C.
• Depending on the bank's regulations and laws of the host country.

The cost of an L / C and the importers often have to pay a fixed fee plus a percentage (and possible commissions.) Cost L / C of the importers are often increased in some common scenarios below:

• Request your bank (Bank Open / release) the issuance of letters of guarantee, letters of authorization to receive, endorse the original application by L / C.

For the exporter, they will have to pay many expenses. Cost L / C's exporters are often increased in some common scenarios below:

• L / C can not pay immediately.
• Letter of credit business has more than two participating banks.
• Who asked to confirm the export credit.
• Vouchers are not uniform, or need for additional or modified.