1、Zhou HongyunBusiness school of Lishui University1st Semester, 2014-2015A Short Course in International Payments Chapter 1 Course Introduction and Key Issues in International Payments Course IntroductionChinese Foreign Trade amounted to US 4.16 trillion in 2013 which increased by 7.6% compared with 2

2、012. Every piece of merchandise sold worldwide needs to be paid.Issues of payment and credit finance are important to everyone involved in international sales and cannot be considered an esoteric subject understood only by the trade financing departments of international banks.Course Introduction1、W

3、hy do we study international settlement?Do you know how to make payment safely and efficiently in the international trade?Do you know how to finance in the international trade?Do you know the customs and practice in international trade payment? An example of payment terms in sales contract: The supp

4、lier agrees that the Buyer will effect payments under the term of T/T against receipt of B/L by fax.International settlement in fact is the course that tells us how to make payment in an international transaction.Intended learning outcomes: Further understand international payments in terms of more

5、practical issues, methods and cases Further improve business English by learning more terms, practices ad theories in international tradeFurther enhance your confidence for future career in international trade or banking Course IntroductionTeaching arrangement Time: about one chapter a week, altoget

6、her about 16 weeks, some of the 20 chapters will not be discussed, for example, chapter 5(Contract Basics),6(Incoterms 2000),15(Sample bank fees),19(Glossary) and 20(Resources). Methods: A mixture of methods will be adopted in teaching, including lecturing, questions and answers, group discussion, r

7、esearch project, individual presentation , case studies which will not be conducted strictly in accordance with the content of the textbook, etc. Remain relaxed in the study! PhotoDiscCourse IntroductionThe Research Object of International Settlement 1.Tools of international payment and settlement（國

8、際結(jié)算工具）2.Methods of international paymentand settlement（國際結(jié)算方式）3. Documents of international Payment and Settlement（國際結(jié)算單據(jù)）4.International payment system （國際支付體系）Bill of Exchange匯票Check支票Promissory Note本票Remittance匯款Collection托收Letter of credit信用證Factoring保理Forfeiting福費(fèi)廷Letter of guarantee銀行保函Invoice

9、發(fā)票Transport Documents運(yùn)輸單據(jù)Insurance Documents保險單據(jù) etc.SWIFT(環(huán)球銀行金融電訊協(xié)會） CHIPS（清算所同業(yè)支付系統(tǒng)）CHAPS（交換銀行自動收付系統(tǒng)）etc.Foundation of international settlementNowadays methods are constantly developing Read the textbook before the class (1-3 times).Go over the lesson and finish the exercises after the class. Fin

10、al exam：in EnglishCourse Requirements 1ChapterBrief Introduction to and key issues in International Settlement1. Concept of international settlement2. Types of international settlement3. Basic methods of international payment4. Basic concepts about international payments5. Key issues in internationa

11、l payments Chapter ObjectivesWords meaning of international settlement (國際結(jié)算的字面理解）What is international settlement?international1. Of, relating to, or involving two or more nations2. Extending across or transcending national boundariessettlementTransfer of money to provide forthe future needs of a p

12、ersonIn simple words, international settlement means money transfer across national borders. What is international settlement?Definition of International settlement：International settlement refers to the money transfer via banks to settle accounts, debts and claims among different countries.國際結(jié)算的定義：

13、國際結(jié)算是指處于兩個不同國家的當(dāng)事人，通過銀行辦理的兩國間貨幣收付業(yè)務(wù)。What is international settlement?Three elements in international settlement（國際結(jié)算中的三要素）（1）Persons in different countries（不同國家）（2）Banks Participation（銀行參與）（3）Funds transfer (資金轉(zhuǎn)移）Types of International SettlementInternational settlements originate from transactions

14、in the world trade. And it can be divided into the following two types:Visible TradeInvisible TradeFinancial TransactionPayment between governmentsInternational Trade SettlementInternational Non-Trade SettlementService, Financial transaction, Travel,Other non-trade settlementAccounting for 20% of in

15、ternational settlement, but increasing quicklyAccounting for 80% of international settlementBasic Methods of International SettlementIn any international trade transaction, credit (信貸) is provided by either the supplier (exporter), the buyer (importer), one or more financial institutions, or any com

16、bination of the above.The form of credit whereby the supplier funds the entire trade cycle is known as supplier credit (供應(yīng)商信貸).Basic Methods of International SettlementSettlement on commercial credit基于商業(yè)信用的結(jié)算Settlement on bank credit基于銀行信用的結(jié)算1.Payment in advance(預(yù)付貨款）2.Open account（賒賬交易）3.Remittance

17、(匯付）4.Collection（托收）1. Letter of credit（信用證）2. Bank guarantee（銀行擔(dān)保）Methods of PaymentRisk AssessmentExporters Risk Importers Risk LOWLOWHighHigh Open Account Collection Letters of Credit Cash in AdvanceBasic concepts about international payments What are the major types of International Banking Offi

18、ces facilitating international payment?Representative Office (代表處 Not licensed institution, which cannot accept deposits or make loans, but assist MNC clients of the parent bank)Agency Office (代理處 One part of the parent bank, not a dependent legal person, which cannot to accept deposits, but can mak

19、e loans, trade financing, issuing L/C, and make acceptance.)Foreign Branch (海外分行)Correspondent Bank (代理銀行)Subsidiary Bank (附屬銀行)Affiliated Bank (聯(lián)營銀行Partly owned but not controlled by the parent )Consortium Bank (銀團(tuán)銀行A joint venture in which no single owner has a controlling interest )Correspondent

20、Bank（代理銀行）Definition:A bank having direct connection or friendly service relations with another bank. A correspondent banking relationship exists when two banks maintain deposits with each other.The relationship is still very important because a bank cannot do any business without the cooperation of

21、 local banks.How to establish correspondent bank relationship? Through signing contract and exchanging control documents (控制文件,如電報押碼、密碼、收費(fèi)表及印鑒等) establishing inter-bank accounts (銀行往來帳戶). Control documents include: Specimen Signature(印鑒樣本） Telegraphic test key（Cable and telex密押） SWIFT authentic key

22、(SWIFT會員行驗證密押) Terms and conditions（條款費(fèi)率表） Inter-bank accounts: Banks must open an account in other banks in foreign countries, thus forms the inter-bank accounts Nostro account (我方賬號due from account) and Vostro account (你方賬號due to account).Correspondent Bank（代理銀行）What are the three inter-bank clear

23、ing network for international payment? SWIFT (The Society for Worldwide Inter-bank Financial Telecommunication環(huán)球銀行金融電訊協(xié)會): a major quick and cheap system for international inter-bank fund transfer and clearingCHIPS (Clearing House Inter-bank Payment System紐約銀行同業(yè)電子清算系統(tǒng)): an inter-bank clearing comput

24、er system for USD in New YorkCHAPS (Clearing House Automated Payment System倫敦銀行同業(yè)自動化清算系統(tǒng)): an inter-bank clearing system for currencies in London Correspondent Bank（代理銀行）Key issues in international payments Credit risks(信用風(fēng)險）Financing costs and risks （融資成本與風(fēng)險） Foreign exchange risks Political and le

25、gal risks Transportation costs and risks Payment method risksOthers culture risks, economic risks, etc.Benefits from careful consideration of these key issues in international paymentsKeep costs lower Ensure timely delivery of goods or receipt of payment Eliminate risks of payment Make transaction g

26、o smoother Make contract favor your side Key issues in international payments 1. Credit risks Risks caused by giving easy, extended or inexpensive credit terms in international payments, such as the seller gives the buyer the opportunity to resell the goods before payment; the buyer pays to the sell

27、er before receiving the goods.Conflicts: both the seller and buyer want the other, not himself, to bear the credit risk. The buyer wants to receive the goods once or even before he pays, while the seller wants to receive payment once or even before he ships the goods. Key issues in international pay

28、ments 2. Financing costs or risks Financing costs and risks for the seller: the costs and risks he bears during the period before receiving payment, including manufacturing, packaging, transporting, inspecting, customs clearing, etc. Financing costs and risks for the buyer: those he bears during the

29、 period before resale of the goods, including waiting, warehousing, reselling, getting paid, etc. Conflicts: both want the other party to finance the transaction and to bear the costs and risks. Key issues in international payments Question for your critical thinking In reality, in order to make an

30、international transaction happen, what do both seller and buyer typically need to do? 2. Financing costs or risks (Cont.) Key issues in international payments 3. Foreign exchange risks Risks caused by the appreciation or depreciation of the specified currency for the payment between the contract dat

31、e and the payment date. Hard currency or soft currencyConflicts: The seller wants to get paid in own currency, a hard currency, or a currency expected to increase in value; the buyer wants to pay in own currency, or a currency expected to decrease in value.Key issues in international payments 4. Pol

32、itical and legal risks Risks caused by political instability, changes in trade policy, restrictions on trade, changes in monetary policy, riots, etc.Usually beyond control, but predictable and avoidable to some extent. Conflicts: The seller usually considers these risks more important than the buyer

33、. Key issues in international payments Some typical examples of these risks: 1. Transportation documents showing “stop-over Israel port” may not be honored by some Arabians. 2. Documents showing Taiwan as a country will be not honored by Mainland Chinese. 3. A contract signed in a foreign country wa

34、s ruled invalid because the trader was improperly in the country on a tourist visa. 4. Political and legal risks (Cont.) Key issues in international payments 5. Transportation costs and risks Costs and risks caused by the shipping of the goods to remote locations, insurance coverage, timeliness. Con

35、flicts: The buyer wants the seller to bear all these costs and risks, thinking in terms of landed cost in his own market (CIF?); the seller wants the buyer to bear these costs and risks and to deliver the goods and transfer ownership at a local port or warehouse (FOB, Ex-works?)Key issues in international payments 6. Payment method costs and risks Costs and risks caused by using different methods of international payment, e.g. late payment costs the seller money, while payment in advance means high costs and ri