7. st International Payment.ppt

Zhou Ruiqi Chapter Seven International Payments 7.1 Issues in Concern When the two trading parties are negotiating payment terms, several factors need to be taken into consideration. Very different impact on the participants. Not negligible. 7.1.1 In What Currency Will the Payment Be Made? Use their own currency; Use the buyer’s currency; Use the third currency.(USD) Currency risk from the fluctuation in exchange rate Hard currency and hedge 7.1.2 Who Will Bear the Credit Risk? Providing a longer credit =bear more credit risk Long distance and long time period Uncertainty exists 7.1.3 What Is the Cost Implication of Each Method of Payment? “If trust exists, there is no need to use and pay for the bank’s services.” The more work banks need to do, the more risks banks need to bear; The more banks get involved, the more has to be paid by the traders. 7.1.4 Are There Any Political or Legal Risks? Political instability can lead to changes in trade policy, and etc. Legal risks can also affect a transaction. The two risks are outside the control of traders, but can be predicted. 7.2 Paying Instrument Paying Instrument Draft / Bill of Exchange 汇票 Promissory note 本票 Check 支票 1. Draft / Bill of Exchange 汇票 Definition: A draft is an unconditional written order addressed by one person to another, singed by the person giving it, requiring the addressed person to pay at sight or at a fixed future time the sum of money clearly specified, to the payee or to his order. Three parties concerned A: The drawer Normally the exporter Fill in the content of a bill of exchange and sign his name B: The drawee / payer The party to whom B/E is addressed If sight draft, make payment If time draft, accept the draft and pay when the amount is due Under L/C – the bank Under collection – the importer C: The payee/beneficiary The party who is supposed to receive the payment usually the exporter or the bank at which the drawer has his account Present B/E to the payer for payment or