ChapterSeven InternationalPaymentsandSettlements TheMainContentsinThisChapter I BriefIntroductionofInternationalPaymentsandSettlementsII BasicMethodsofInternationalPaymentsandSettlementsIII ImportanceofDocumentsinInternationalPaymentsandSettlementsIV CreditInstrumentsV LetterofCreditVI Documentarycollection LearningObjectives Bytheendofthischapter youshouldbeableto DefinetheInternationalpaymentsandsettlements Explainthebasicpaymentmethods DefinetheLetterofCreditandUCP500 DefinethecollectionandURC522 Definethedraftanditskinds LearntomakedocumentsaccordinganL C PreviewCase Whenthetourists merchants delegationsorotherpeoplegoabroad theyneedmoneytospend tobuysomething ortopayforvariousexpensesandchargesthere Themostcommonmeansforthemtocarryfundsarecash traveler scheck traveler sletterofcreditandcreditcard Doyouthinkthesearetheinternationalpaymentsandsettlements I BriefIntroductionofInternationalPaymentsandSettlements Aseverybodyknows mostinternationalpaymentsoriginatefromtransactionsintheworldtrade theyaremoneytransfersasaresultofinternationalclearing Paymentsofvisibletrade Paymentsofinvisibletrade Paymentsoffinancialtransaction Paymentsbetweengovernments Otherspaymentssuchasoverseasremittances educationalexpenses etc DefinitionofInternationalPaymentsandSettlements Internationalpaymentsandsettlementsarefinancialactivitiesconductedamongdifferentcountriesinwhichpaymentsareeffectedorfundsaretransferredfromonecountrytoanotherinordertosettleaccounts debts claims etc emergedinthecourseofpolitical economicorculturalcontactsamongthem ClassificationsofInternationalPaymentsandSettlements 1 Internationaltradesettlement2 Internationalnon tradesettlement EvolutionsofInternationalPaymentsandSettlements 1 Fromcashsettlementtono cashsettlement2 Fromdirectpaymentmadebetweeninternationaltraderstopaymenteffectedthroughafinancialintermediary3 Frompaymentsundersimplepricetermstopaymentsundermorecomplexpriceterms4 Internetera CharacteristicsofModernInternationalPaymentsandSettlements 1 Transferofforeignexchangefundsandconveyofmessagesareverymuchfacilitated2 Vehiclecurrenciesaremorediversifiedthanbefore3 Greatimportanceisattachedtohighefficiencyonthepartoftheforeignexchangebanks4 Internationallendingisoftencombinedwithinternationalpayment MajorPointsConcerningInternationalPaymentsandSettlements 1 Internationalpaymentandsettlementmethods 2 Thefinancialinstrumentsthatfacilitateinternationalpaymentsandsettlements 3 Documentsusedininternationalpaymentsandsettlements 4 Thecurrenciesusedininternationalpaymentsandsettlements 5 Rulesandregulationsoninternationalpaymentsandsettlements ClearingSystemsofInternationalInter banks 1 SWIFT 世界银行远程通信协会 SocietyforWorldwideInter bankFinancialTelecommunication2 CHIPS 纽约银行同业电子清算系统 ClearingHouseInter bankPaymentSystems3 CHAPS 英国交换银行自动收付系统 ClearingHouseAutomatedPaymentSystems4 TARGETS 泛欧自动即时总额清算系统 Trans EuropeAutomatedReal timeGrossSettlementExpressTransfer II BasicMethodsofInternationalPaymentsandSettlements Settlementsoncommercialcredit1 Cashinadvance2 Openaccount3 Remittance4 CollectionSettlementsonbankcredit1 Letterofcredit2 Bankguarantee CashinAdvance ProvidesgreatestsecurityforsellerandgreatestriskforbuyerThebuyersimplyprepaysthesellerpriortoshipmentofthegoods Thistermofpaymentrequiresthatthebuyerhaveahighlevelofconfidenceintheabilityandwillingnessofthesellertodeliverthegoodsasordered OpenAccount Anarrangementbetweenthebuyerandsellerwherebythegoodsaremanufacturedanddeliveredbeforepaymentisrequired Openaccountprovidesforpaymentatsomestatedspecificfuturedateandwithoutthebuyerissuinganynegotiableinstrumentevidencinghislegalcommitment Thesellermusthaveabsolutetrustthathewillbepaidattheagreeddate Itprovidestheleastriskforthebuyerandthegreatestriskfortheseller MajorRemittanceMethods Therearethreebasicwaysforabanktotransferfundsforitsclientfromthehomecountryabroad 1 M T MailTransfer2 T T TelegraphicTransfer3 D D Banker sDemandDraft4 SWIFT SocietyforWorldwideInterbankFinancialTelecommunication DocumentaryCollections Securityandalmostequalriskforbothbuyerandseller Lesscostlyandeasiertousethanadocumentaryletterofcredit Adocumentarycollectionissimilartointernationalcashondelivery COD Thesellershipsgoodstothebuyerbutsendsthedocuments includingthebilloflading titledocument throughthebankswithinstructionstoreleasethemtothebuyeronlyuponpayment Whenthebuyerobtainsthetitledocuments hehastherighttotakeownershipoftheshipment DocumentaryLetterofCredit SecurityandalmostequalriskforbothbuyerandsellerAddedcosts forthehandlingofthedocumentarycredit tobuyerAdocumentaryletterofcreditisabank swrittenpromisetopayaselleronbehalfofthebuyersolongasthesellercomplieswithpreciselydefinedtermsandconditionsspecifiedinthecredit BankGuarantee Abankguaranteeisusedasaninstrumentforsecuringperformanceorpaymentespeciallyininternationalbusiness Itisawrittenpromiseissuedbyabankattherequestofitscustomer undertakingtomakepaymenttothebeneficiarywithinthelimitsofastatedsumofmoneyintheeventofdefaultbytheprincipal Itmayalsobedefinedastheirrevocableo