Chapter 2 International Bank RemittanceIn this chapter, we will learn: 1. Methods, parties and procedures of remittance 2. Advantages and disadvantages of remittance. 3. Practice of remittance. 4.The function of remittance in international trade. 2.1 DefinitionInternational remittance happens when a client (payer) asks his bank to send a sum of money to a beneficiary abroad by one of the transfer methods at his option. 2.2 parties concerned and methods1. Parties involved in international bank remittance include the following: (1) The remitter The remitter is also the payer. (2) Remitting bank, outward remittance (3) Paying bank, inward remittance (4) The payee 2. Methods: (1) Remittance by air mail-M/T Payment order, mail advice or credit advice/ please debit advice are transmitted by airmail. (2) Remittance by cable/telex/SWIFT- T/TInstructions are transmitted by cable, through SWIFT/CHIPS (3) Remittance by bankers demand draft.- -D/DA bankers draft is a negotiable instrument drawn by a bank on its overseas branch or its correspondent abroad ordering the latter to pay on demand the stated amount to the holder of the draft. It is often used when the client wants to transfer the funds to his beneficiary himself. 1. The procedure for bank remittance by mail or by cable usually comprises the following: nWritten application nDebit advice nPayment order nPayment nReimbursement claim2.3 ProceduresMail transfer, M/TMail transfer, M/TTelegraphic transfer, T/T2. The process of a demand draft is asfollows: nD/D application nBank sight draft. nThe remitter forwards the draft to the payee. nThe payee presents the draft to the drawee bank for payment. nThe drawee bank verifies the signatures, pays the draft, and claims back the amount that is paid according to its agency arrangement with the remitting bank.Bankers Demand Draft, D/D2.4 Advantage and Disadvantage1.Advantage . Advantage of D/D: Demand draft is a negotiable instrument, which can be transferred so that it is more convenient in use for payment. Advantage of M/TIt involved bank-to-bank instruction with banks responsible for making payments, so it is rather reliable. Advantage of T/T THE FASTEST WAY2. Disadvantage: Disadvantages of remittance by demand draft: (1) The transmission of D/D is slower than that of T/T and cannot serve the purpose of quick payment. (2) It is possible for a demand draft to be lost, stolen or destroyed. Disadvantages of remittance by airmail: (1)It is possible for the mail transfer order to be delayed or lost in the post. (2) The transmission is slower than that of T/T and cannot serve the purpose of quick payment. (3) Unlike the remittance by demand draft, the beneficiary must await notification from the bank concerned.Disadvantages of remittance by cable: (1) The most expensive way of remittance (2) The beneficiary must await notification from the bank concerned. Swiftness, reliability, safety and inexpensive are major advantages of transactions by means of SWIFT messages.nComparison among the three kinds of remittances:2.5 The practice of remittancenOutward remittance: To send M/T advice, or payment order through airmail Or to send payment instruction by telegram Or to issue a bankers demand draftnInward remittance: To verify the signature/ test key And to pay And to reply the advice with reimbursement 电报或电传的电文nFM: BANK OF ASIA, TIANJIN （remitting bank）nTO: THE HONGKONG AND SHANGHAI BANKINGCORP., HONGKONG（paying bank）nDATE: 1ST MARCHnTEST 1235 /OUR REF. 208TT0517 /NO ANY CHARGES FOR US/ PAY USD 20，000.00 VALUE /1ST MARCH /TO YOUR HAY WAY BUILDING BRANCH 58 STANLEY STREET HONGKONG（ 收款人的帐户行）/FOR (CREDIT OF) ACCOUNT NO. 004-110-106028-001 FAVOURING PRECISION PHOTO EQUIPMENT LTD. HONGKONG（收款 人）/MESSAGE CONTRACT NO. P10158 ORDER /PHOTO GRAPH CO. TIANJIN（汇款人） /COVER DEBIT OUR HO ACCOUNT.2.6 Reimbursement 2.5 The function of remittance in international trade 1. Pay in advance This signified that the importer pays the exporter before delivery of the goods. 2. Open Account Transaction , Deferred Payment TransactionSummary nGeneral descriptionnThe definition of remittancenThe different types of remittancenThe procedure of remittancenPractice