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1、UNIT 10 Learning Objectives Understanding the main modes of payment in international trade Negotiating terms of payment Writing a letter asking for L/C amendments 國際支付Terms of PaymentUNIT 10 國際支付Terms Speaking Task Warm-up Practice Listening Task Follow-up PracticeCONTENTS Writing Task Reading Task
2、Speaking Task Warm-up PracWarming-up PracticeWe need to discuss some questions about what we are going to learn in this unit.Sure, thatll help us understand better about what we are asked to do.Warming-up PracticeWe need to 1. The terms of payment are an important part of the sales contract both sel
3、lers and buyers are concerned about. Now store the words and phrases that are associated with payment terms and then explain or describe these terms. letter of creditPayment Terms1. The terms of payment are an 2) Discuss the following questions.1) What are the main contradictions that exist between
4、sellers and buyers in international payment?2) What are both sellers and buyers concerned about in negotiating payment?3) What are the commonly used methods of payment in international trade? Can you tell the advantages and disadvantages of each for both sellers and buyers? 2) Discuss theIntroductor
5、y Remarks The terms of payment are an important part of the business contractFrom the sellers point of view, the best terms would be full payment in cash at the time of sale,while the buyers would prefer to have the goods before making paymentImporters and exporters are separated from each other by
6、thousands of milesThis adds to the difficulties of coming to an agreement on how payment should be madeThe exporters and importers usually meet each other half way and agree to payment by letter of credit opened by a reliable bankA letter of credit is a bankers guarantee that payment will be made on
7、 presentation of all the required shipping documents. In this way,the sellers or exporters receive a guarantee not only from the buyers or importers, but also from a banker that payment will be made on delivery of the goodsOn the other hand, the buyers or importers are given the guarantee that the b
8、anker will not make payment unless the shipping documents are presentedIntroductory Remarks Main Modes of Payment in International Trade I. Remittance A. Mail Transfer (M/T) B. Telegraphic Transfer( T/T) C. Demand Draft (D/D) II. Collection A. Clean Bill for Collection B. Documentary Bill for Collec
9、tion 1. Document against Payment (D/P) (1) D/P at sight (2) D/P after sight D/P T/R 2. Document against Acceptance III. Letter of Credit (L/C)Main Modes of Payment in InteUnderstanding Letters of CreditDo you know that 50% of L/C documents presented to banks are rejected? This costs you dearly, in e
10、xtra bank charges, your wasted time and the customer dissatisfaction. Key ContentsWhat is a letter of credit? Learn the differences between different types of L/Cs and when to use them. Discover which are the most usual types of L/C - Sight, Deferred Payment, Transferable, Standby. Understanding Let
11、ters of CrediApplicant(Importer)Beneficiary(Exporter) 1 S/C Paying bank Issuing bankAdvising bank Negotiating bank8 Paying the money for documents2 L/C application4 Credit advice5Presenting documents for negotiation3 Issuing L/C6 Recourse 7 Reimbursement Performance of L/CApplicantBeneficiary 1 S/C
12、Pa商務(wù)英語課件Unit10InternationalPayments10pptDifferent Types of Letters of Credit1. According to the attaching of documents 1) Clean credit 2) Documentary credit2. According to the revocability of credit 1) Revocable credit 2) Irrevocable credit3. According to the transferability of credit 1) Transferabl
13、e credit 2) Non-transferable credit4. According to the adding of confirmation 1) Confirmed credit 2) Unconfirmed credit5. According to the time of payment 1) Sight credit 2) Usance or time credit6. According to the method of payment 1) Payment credit 2) Deferred payment credit 3) Acceptance credit 4
14、) Negotiation credit 7. According to the credit amount to be used revolvingly 1) Automatic 2) Semi-automatic 3) Non-automatic 8. Other credits 1) Red clause credit 2) Back to back credit 3) Reciprocal credit 4) Standby credit Different Types of Letters of Identify the following letters of credit 1.
15、Deferred L/C is a credit available by deferred payment, under which payment must be effected on a specified future date. 2. Red Clause L/C is one with a clause inserted into the credit authorizing the negotiating bank to make an advance of the amount under the credit, whole or part, to the beneficia
16、ry. 3. Transferable L/C The beneficiary is entitled to ask the bank to transfer L/C rights partially or wholly to a third party. This is used for direct financing of supplies, where the selling party is not the direct producer but is an intermediary. 4. Revolving L/C The underlying L/C amount is ren
17、ewed during the life of the L/C according to pre-defined terms and conditions. It is advantageous for contracts with repeated goods deliveries. Revolving L/C Transferable L/C Clean L/C Sight L/C Deferred L/C Irrevocable L/C Red clause L/C Confirmed L/CIdentify the following letters5. Clean L/C is a
18、credit under which payment will be effected only against a draft without any shipping documents attached thereto or sometimes, against a draft with an invoice alone attached thereto.6. Irrevocable L/C is a credit that constitutes a definite undertaking of the issuing bank and can be amended or cance
19、lled by the issuing bank only on condition that all parties concerned. 7. Confirmed L/C is a credit that is advised to the beneficiary with another banks confirmation added thereto.8. Sight L/C calls for the presentation of sight drafts, under which the beneficiary (the drawer) is entitled to receiv
20、e payment at once on presentation of his draft to the drawee bank or to the issuing bank if drawn on the issuing, once the relevant documents have been checked and found to be in order. 5. Clean L/C is a credit underAdvantages & Disadvantages of a Letter of Credit Advantages to the Exporter Shifts c
21、redit risk from the Importer to the Importers Bank (Issuing Bank). An undertaking from the Issuing Bank that payment will be made under the Letter of Credit, provided that you meet all terms and conditions of the Letter of Credit. If the Letter of Credit is not issued as agreed, you are not obligate
22、d to ship against it. Disadvantages to the Exporter Documents must be prepared in strict compliance with the requirements stipulated in the Letter of Credit. Non-compliance leaves you exposed to risk of non-payment and removes the protection afforded by the Issuing Bank since the final decision on t
23、he documents then rests with the Importer. Advantages & Disadvantages of Advantages and Disadvantages of Documentary CollectionThe major advantage of a cash against documents payment method for the Buyer is the low cost, versus opening a Letter of Credit. The advantage for the Seller is that he can
24、receive full payment prior to releasing control of the documents, although this is offset by the risk that the Buyer will, for some reason, reject the documents (or they will not be in order). Since the cargo would already be loaded (to generate the documents), the Seller has little recourse against
25、 the Buyer in case of non-payment. A payment against documents arrangement involves a high level of trust between the Seller and the Buyer and should be adopted only by parties well known to each other. Advantages and Disadvantages oRisks in Documentary CollectionsFor the Exporter If it is a sight d
26、raft, the exporter will reduce the risk of non-payment but will not eliminate it totally since the importer may not be in a position to pay for the goods or may not be able to procure sufficient foreign exchange to make the payment. In this case the exporter may be forced to either call back the goo
27、ds or negotiate sale to some other interested party, which may be at a reduced rate. In the case of term draft, the risk to the exporter is higher since the foreign buyer will take possession of the goods and may not pay at due date, forcing therefore the exporter to try and collect payment from the
28、 foreign buyer in the foreign buyers home country. For the Importer The importer faces the risk of paying for goods of sub-standard quality or even with shortages. In such a circumstance, it would take some time to get refunds from the exporter. It could also happen that the exporter refuses to make
29、 refunds, leading the importer to lengthy legal proceedings. Risks in Documentary CollectioWhen to use Documentary Collections? Since Documentary Collections transactions entail some measure of trust, it is advisable to use the mechanism when the following conditions apply: When the exporter and imp
30、orter have a well established relationship When there is little or no threat of a total loss resulting from the buyers inability or refusal to pay When the foreign political and economic situation is stable When a letter of credit is too expensive or not allowed When to use Documentary Collec商務(wù)英語課件U
31、nit10InternationalPayments10pptListening TaskIn this part you will listen to a conversation about modes of international payment, and a passage about letter of credit. Try to finish the exercises while listening. Are you ready?Listening TaskIn this part you 10.1.1 Listen to the dialogue about the mo
32、des of international payments and fill in the tree according to what you hear in the dialogue. M/TT/TD/DD/AD/P Sight L/C Time L/Cremittancecollectionletter of creditModes of International PaymentIrrevocable L/CRevolving L/C 10.1.1 Listen to the dialog 10.1.2 Listen to the following passage and fill
33、in the missing parts. A letter of credit, also referred to as an L/C , is a payment term generally used for international sales transactions . It is basically a mechanism , which allows importers to offer secure terms of payment to exporters in which a bank (or more than one bank) gets involved . At
34、 the very outset one must understand that letters of credit deal in documents, not goods . The idea in an international trade transaction is to shift the risk from the actual buyer to a bank . Thus a letter of credit is a payment undertaking given by a bank to the seller and is issued on behalf of t
35、he applicant i.e. the buyer. The buyer is the applicant and the seller is the beneficiary. The bank that issues the L/C is referred to as the issuing bank which is generally in the country of the buyer. The bank that advises the L/C to the seller is called the advising bank which is generally in the
36、 country of the seller. The specified bank makes the payment upon the successful presentation of the required documents by the seller within the specified time frame . Note that the bank scrutinizes the “documents” and not the “goods” for making payment . Thus the process works both in favor of both
37、 the buyer and the seller. The seller gets assured that if documents are presented on time and in the way that they have been requested on the L/C the payment will be made and buyer on the other hand is assured that the bank will thoroughly examine these presented documents and ensure that they meet
38、 the terms and conditions stipulated in the L/C. 10.1.2 Listen to the folSpeaking TaskIn this part you are going to read two conversations in pairs and then you will be asked to answer some questions about what you have read. Please read louder! Speaking TaskIn this part you 10.2.1 Read the dialogue
39、 and then answer the following questions. 1) What is Mr Songs usual terms of payment with his customers? Confirmed, irrevocable letter of credit against presentation of sight draft.2) What payment terms did Mr Brown propose? D/A against presentation of time draft or term documentary credit.3) Did Mr
40、 Song agree to accept Mr Browns payment terms? What did he say? No. He said their capital would be tied up for several months after they effected shipment 4) What was Mr Browns proposed number of days after sight or term documentary credit? 90 days5) What was Mr Browns explanation? Because of the si
41、ze of this order, they might not be able to make full payment till the end of the fiscal year. The current economic downturns in the U.S. and other existing factors had drained their cash flow to the limit.6) What payment terms did Mr Song accept in the end? He made a concession by accepting D/P at
42、sight for half the total payment, and deferred payment credit at 90 days for the remaining balance10.2.1 Read the dialogue and t1) What was Mr Zhangs proposal on terms of payment? Confirmed, irrevocable letter of credit payable against shipping documents. 2) Why was Mr Stone against paying by letter
43、 of credit?Paying by letter of credit was really troublesome and cost him a lot. 3) Why did Mr Zhang insist L/C should be used?Because a confirmed and irrevocable letter of credit allows exporters the additional protection of the bankers guarantee.4) What was Mr Stones proposal?50% by L/C and the ba
44、lance by D/P.5) What was their final conclusion?Payment by L/C at sight.6) When should Mr Stone open the covering L/C? He should open the L/C early in May, about 30 days before the time of shipment.10.2.2 Read the dialogue and then answer the following questions1) What was Mr Zhangs proposReading Ta
45、skReading Task 1) Which method of payment would you choose for international transactions? And why?2) What kind of services can a banker offer to you in international transactions? How do they help you?3) What do you think are the main risks that are involved in international trade payment for both
46、an exporter and a banker?PRE-READING QUESTIONS FOR PAIR WORK PRE-READING QUESTIQuestions1) Why has international trade always been considered “l(fā)ow risk” by banks?Compared with other forms of bank lending, financing trade transactions is popular because these deals are short term, self liquidating, s
47、ecured (by the underlying goods) and speedily completed. 2) What kind of risks does a bank face in financing international transactions?There are three main areas of risk micro risks, macro risks, and product risks. 3) To avoid fraud, what should a lending banker to the importer consider?Before unde
48、rtaking to establish a DC for an importer, the bank should consider the financial standing of the importer, the goods and the status of the exporter (or beneficiary of the DC. 4) What is one of the greatest services a bank can do for its exporter in advising the DC it receives from an overseas bank?
49、 Check carefully whether the DC is workable and that the exporter will be able to comply with its terms and conditions.5) How does this article enlighten you as an importer/exporter?(Open)Questions1) Why has internatiIn this part you are going to learn how to check letter of credit and write letters
50、 for L/C amendment. Writing TaskWriting TaskL/C Amendment If payment of export trade is made by letter of credit, the seller, on receiving the relevant L/C, should first of all make a thorough examination to see whether the clauses set in the L/C are in full conformity with the terms stated in the S
51、/C.A minor difference between the two, if not discovered or duly amended, may cause the seller much inconvenience because the negotiating bank will refuse negotiation of the documents according to the instructions given by the opening bank. Therefore, if any discrepancies or some unforeseen special
52、clauses to which the seller does not agree are found in the L/C, the seller should send an advice to the buyer, asking him to make amendments. Sometimes an unexpected situation regarding supply, shipping, etc. may arise. In this case, an amendment to the original L/C will also be required. L/C Amend
53、ment Amendment to a Letter of Credit For the seller to change the terms noted on an irrevocable letter of credit, it must request an amendment from the buyer. The amendment process is as follows:The seller requests a modification or amendment of questionable terms in the letter of credit;2. If the b
54、uyer and issuing bank agree to the changes, the issuing bank will change the letter of credit;3. The buyers issuing bank notifies the sellers advising bank of the amendment; and4. The sellers advising bank notifies the seller of the amendment. AmeChecking the L/CWhen checking the L/C, the seller nee
55、ds to focus on the following provisions: The shipment date; The time of validity of the L/C; The quantity of the goods and amount of payment; The address of the beneficiary; The price terms, the loading and unloading port; Insurance clause; The packing clause; The description of the goods.Checking t
56、he L/CWhen checking Sample Letter (1) Dear Sirs,Thank you very much for your L/C No. BOC 05/10/06. However, upon checking, we have found the following discrepancies and would appreciate it very much if you will make the necessary amendments as early as possible so as to facilitate our shipping arran
57、gement:The amount of the credit should be CAN $ 125 000(Say Canadian Dollars one hundred and twenty-five thousand only) instead of CAN$ 120 000.The B/L should be marked “freight prepaid” instead of “ freight to collect”.The port of destination should be Vancouver instead of Montreal. The credit shou
58、ld expire on July 15, 2006 for negotiation in China instead of June 30, 2006. Your early amendment will be highly appreciated.Yours faithfully,Sample Letter (1) Dear SirsSample Letter (2)Dear Sirs, Thank you for your irrevocable L/C opened through Bank of China for 10 cases of bottled medicine. Acco
59、rding to the stipulations of the L/C, the total quantity should be shipped not later than February 10. Although we have been making great efforts to book shipping on time, much to our regret, we were told by the shipping companies contracted that there would be no shipping container before3 January.
60、 Therefore, we hereby request you to have both the date of shipment and validity of the L/C extended not later than February 15 and 30 respectively. Since this is an urgent matter, please amend the L/C immediately. Your compliance with our request will be highly appreciated. Yours truly,Sample Lette
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