《国际物流与经营管理》课件-第7章-国际贸易支付.ppt

,Terms of Payment,Characteristics of International Payment IssuesRisks in International Trade Alternative Terms of PaymentCash in AdvanceOpen AccountLetter of Credit Documentary Collection Terms of Payment as a Marketing Tool,Terms of Payment,Characteristics of International Payment IssuesRisks in International Trade Alternative Terms of PaymentCash in AdvanceOpen AccountLetter of Credit Documentary Collection Procurement CardsTradeCard Terms of Payment as a Marketing Tool,Terms of Payment,Characteristics of International Payment Issues,Reduced Credit Information Lack of Personal Contact Difficult and Expensive Collections No Easy Legal Recourse Higher Litigation Costs Mistrust,Characteristics of International Payment IssuesRisks in International Trade Alternative Terms of PaymentCash in AdvanceOpen AccountLetter of Credit Documentary Collection Procurement CardsTradeCard Terms of Payment as a Marketing Tool,Terms of Payment,Risks in International Trade,Country RiskCountry risk is also known as political risk.The probability of not getting paid by a creditor,because the creditors country has:Insufficient foreign exchange reserves.Political risk can also mean the probability of nationalization of a firms subsidiary by the host country.,Risks in International Trade,Commercial Risk The probability of not getting paid by a creditor,because this creditor does not have the funds to pay the debt or because the creditor refuses to pay the debt.Exposure The relative consequences of a bad-debt risk for an exporter;the risk of a$50,000 loss would represent a greater exposure for a small exporter than for a large exporter.,Characteristics of International Payment IssuesRisks in International Trade Alternative Terms of PaymentCash in AdvanceOpen AccountLetter of Credit Documentary Collection Procurement CardsTradeCard Terms of Payment as a Marketing Tool,Terms of Payment,Alternative Terms of Payment,Cash in AdvanceOpen AccountLetter of Credit Documentary Collection,Alternative Terms of Payment,Table 7-1:Advantages and Disadvantages of Several Terms of Payment,Characteristics of International Payment IssuesRisks in International Trade Alternative Terms of PaymentCash in AdvanceOpen AccountLetter of Credit Documentary Collection Terms of Payment as a Marketing Tool,Terms of Payment,Cash in Advance,DefinitionIn a Cash in Advance transaction,the exporter requests that the customer provide payment in advance,before shipment of the goods can take place.It is the ultimate“risk-free”alternative for the exporter.In a Cash in Advance transaction,the risk is completely transferred to the importer.,Cash in Advance,Applicability This method is only justified in rare cases.It could be used when the importer is perceived as being very high risk(commercial or country risk).It should be avoided.,Characteristics of International Payment IssuesRisks in International Trade Alternative Terms of PaymentCash in AdvanceOpen AccountLetter of Credit Documentary Collection Terms of Payment as a Marketing Tool,Terms of Payment,Open Account,Definition In an Open Account transaction,the exporter conducts international business in a manner similar to the way it conducts business domestically.The exporter ships the goods,accompanied by an invoice,and expects the importer to pay within a defined time period(30-60 days).,Open Account,ApplicabilityThe exporter is confident that the importer will pay(e.g.long-standing business relationship).The exporter is competing with companies that offer Open Account terms.The exporter wants to create goodwill.In cases where the exporter is unsure of the importers credit,the exporter can use credit insurance.,Open Account,Credit Insurance An insurance policy under which commercial risk is covered.The insurance company bears the risk of non-payment by the importer,deducting a slight percentage of the receivable.Credit insurance does not cover political risk,unless the exporter has explicitly asked for additional political coverage that is obtained through the Ex-Im Bank.,Characteristics of International Payment IssuesRisks in International Trade Alternative Terms of PaymentCash in AdvanceOpen AccountLetter of Credit Documentary Collection Terms of Payment as a Marketing Tool,Terms of Payment,Letter of Credit,DefinitionA Letter of Credit is a document with which the importers bank promises to pay the exporter if the importer does not pay.,Letter of Credit,Issuing Bank The bank providing the Letter of Credit to the importer.The bank that will pay the exporter when it provides all the necessary documents,should the importer be unable to pay.Advising BankThe bank that determines whether the terms of the Letter of Credit offered by the Issuing Bank are appropriate.The Advising Bank is generally the exporters regular bank.In some cases,the exporters bank will delegate this role to another bank which is more experienced in international trade.,Letter of Credit,Applicant The firm asking the Issuing Bank for a Letter a Credit.Usually,the applicant is the importer.Beneficiary The firm named in a Letter of Credit as the firm to which the issuing bank is promising payment if the importer does not pay.Usually,the beneficiary of a Letter of Credit is the exporter.,Letter of Credit(Process),Issuance First Step-Negotiation between exporter and importer.Second Step-Applicant(Importer)requests the bank to open a Letter of Credit(L/C)on importers behalf and naming exporter as beneficiary.Third Step-Issuing Bank sends this L/C to Advising Bank(Exporters Bank).Fourth Step-The Advising Bank notifies the beneficiary that the L/C is acceptable.,Letter of Credit,Issuance of a Letter of Credit,Letter of Credit(Process),Shipment Fifth Step The exporter ships the merchandise to the importer.After all documents are collected,the exporter sends them to the Advising Bank,.Sixth step The Advising Bank checks the documents against the terms of the L/C,and sends them to Issuing BankSeventh step-After receiving and checking the documents,the Issuing Bank notifies the importer,who uses them to clear Customs.,Letter of Credit(Process),Shipment Under a Letter of Credit,Letter of Credit(Process),PaymentEighth Step-Importer pays Issuing Bank.Ninth Step-Issuing Bank pays Advising Bank.Tenth Step-Advising Bank pays Exporter.,Letter of Credit(Process),Payment Under a Letter of Credit,Letter of Credit(Process),Entire(Simplified)Process of a Letter of Credit,Letter of Credit,A Letter of Credit is:IrrevocableIt cannot be altered without the express consent of all parties involved.Virtually all Letters of Credit are irrevocable.DocumentaryThe beneficiary must present a certain set of documents(bill of lading,invoice and miscellaneous certificates)to the bank.It is paid on documents,not the safe arrival of the goods.,P185,Letter of Credit,Confirmed Letter of Credit The exporter asks a bank to provide an additional level of payment security to a Letter of Credit.If the importer does not pay,and the Issuing Bank does not pay,the Confirming Bank pays.Correspondent Bank A foreign bank with which a domestic bank has a preferred business relationship.,P185-186,Letter of Credit,UCP 600Universal Customs and Practice for Documentary Credit,2007 Revision,International Chamber of Commerce.URR 725Uniform Rules for Bank-to-Bank Reimbursements under Documentary Credits.,P186-188,Letter of Credit,Applicability Letters of Credit are an outstanding means of making sure that the exporter will be paid.Letters of Credit are costly.Letters of Credit are cumbersome.,P190,Additional Types of Letters of Credit,Stand-By Letters of CreditTransferable Letters of CreditBack-to-Back Letters of Credit,P190,Characteristics of International Payment IssuesRisks in International Trade Alternative Terms of PaymentCash in AdvanceOpen AccountLetter of Credit Documentary Collection Terms of Payment as a Marketing Tool,Terms of Payment,Documentary Collection,DefinitionIt is a process by which an exporter asks a bank to“safeguard”its interests in the foreign country by not releasing the documents.It is accompanied by a Bill of Exchange(also called a Draft).,P192,Documentary Collection,Remitting Bank The bank that interacts with the exporter and with the Presenting Bank in the importing country.Receives the documents from the exporter and then sends them to the Presenting Bank.It has no obligation to render judgment or advice on the quality of the packet of documents;it just transmits them to the Presenting Bank.Presenting Bank The bank that interacts with the importer on behalf of the exporter.Receives the documents from the exporter or from the Remitting Bank and holds them until the importer either signs a draft or pays the exporter.Follows the Letter of Instructions from the Exporter.,P192-193,Documentary Collection,Sight Draft D/PThe Remitting Bank is instructed to release the documents only when the Importer pays.The importer has to pay“on sight.”Time Draft D/P D/AThe Remitting Bank is instructed to release the documents only after the Importer has signed the Draft.A Promissory Note that the importer has to pay in 30,60,90 or 180 days after the date at which it signs the Draft.The exporter extends credit to the importer.,P193-194,Documentary Collection,Date Draft D/P D/AThe Remitting Bank is instructed to release the documents only after the Importer has signed the Draft.A Promissory Note that the importer has to pay in 30,60,90 or 180 days after the date at which the goods were shipped(BOL date).The exporter extends credit to the importer.,P194,Documentary Collection,Bankers Acceptance The Remitting Bank is instructed to sign the Draft on behalf of the Importer.The Remitting Bank only does so if it is convinced that the Importer will eventually pay.The Remitting Bank“avals”the Draft.The opposite of“Traders Acceptance.”,P195,Documentary Collection,Applicability Almost as secure as a Letter of Credit if used with a Bankers Acceptance,but about as expensive in that case.,Documentary Collection,Process of A Documentary Collection,Characteristics of International Payment IssuesRisks in International Trade Alternative Terms of PaymentCash in AdvanceOpen AccountLetter of Credit Documentary Collection Procurement CardsTradeCard Terms of Payment as a Marketing Tool,Terms of Payment,Terms of Payment as a Marketing Tool,The exporter should offer the Term of Payment that is the least constraining for the importer and which is generally the best alternative.The exporter should protect its interests through means that are invisible to the importer(Credit Insurance).European competitors will tend to offer“Open Account”terms.,