International Trade Settlement Method

1. Letter of credit settlement method

Letter of credit (L/C) is the product of bank credit intervention in the settlement of international sale and purchase price.

It not only solves the contradiction of mutual distrust between buyers and sellers to a certain extent, but also enables the two sides to get the convenience of bank financing in the process of using the letter of credit to settle the loan, thus promoting the development of international trade.

Therefore, it is widely used in international trade and has become a major way of settlement in international trade today.

A letter of credit is a conditional promise of payment made by a bank, that is, a written document issued by a bank to the beneficiary according to the request and instructions of the applicant, with a certain amount, and within a specified period of time, on the basis of the stipulated documents.

Belonging to bank credit, the converse method is adopted.

2. Remittance and collection settlement.

Remittance and collection are commonly used in international trade.

(1) remittance

Remittance, also known as remittance, is a kind of payment made by the drawee through the bank and using various settlement tools to remit the loan to the payee.

There are four parties involved in the remittance business: the payer (remittance remmitter), the payee (payee or beneficiary), the remittance trip (remittingbank) and the remittance line (payingbank).

Among them, the payer (usually the importer) has a contractual relationship with the remittance trip (the bank entrusted to remit the remittance), and there is a contractual relationship between the remittance and the remittance agency.

When handling remittance business, it is necessary to fill in the remittance application to the remittance by the remitter. The remittance is obligated to issue the payment letter to the remittance bank according to the instructions of the remittance application. After receiving the accounting instruction, the remittance bank has the obligation to solve the payment to the payee (usually the exporter).

However, remittance and remittance are not responsible for any loss caused by their own negligence (such as loss of payment or delay in the postal order, etc., which causes the payee not to receive the payment in due course or late).

(2) collection (Collection)

A collection is a bill of exchange (with or without shipping documents) issued by the exporter after the shipment is made to the importer as a drawee. The Bank of the exporter is entrusted to the importer to collect the payment by means of its branch or agency in the place of import.

It belongs to commercial credit, and the converse method is adopted.

The parties to the collection method include principals, collection banks, collecting banks and payers.

The principal (principal), that is, the person who draws the bill to entrust the bank to collect foreign funds from foreign payers, also known as the drawer (drawer), is usually the exporter; the remitting bank is the export bank that accepts the entrustment of the exporter; the collecting (bank) is the importing bank that receives the entrusted payment from the entrusted payer; the drawee (payer or drawee), the drawee on the bill of exchange, the payer of the collection, usually the importer.

Among the above parties, the principal and the collection bank, the collection bank and the collecting bank are all principal agent relations. There is no legal relationship between the drawee and the collecting bank, and the drawee pays the contract according to the sales contract.

Therefore, whether the trustor can receive the payment depends entirely on the reputation of the importer, and neither the collecting bank nor the collecting bank is liable.

When handling the collection business, the trustor should submit a letter of collection to the collection bank, in which all instructions are issued, and the collecting bank and the collecting bank collect money from the drawee in accordance with the instructions of the entrustment.

(3) bank guarantee letter

Banker s letter of guarantee, short for L/G, is also known as bank guarantee, bank guarantee, or short letter of guarantee. It refers to a written certificate issued by the bank to the beneficiary in the application of the principal to ensure that the applicant performs the contract in accordance with the regulations, otherwise the bank will be responsible for paying the debts.

(4) the combined use of various means of settlement.

In international trade business, the settlement of a paction can only be settled by one settlement method (usually), and it can also be used in combination with two or more ways of settlement according to needs, such as different trading commodities, different trading objects and different trading practices, or is conducive to facilitating pactions, or is conducive to safety and timely collection of foreign exchange, or is conducive to properly handling the payment of foreign exchange.

Common forms of settlement include: letter of credit combined with remittance, letter of credit and collection, remittance and bank guarantee or letter of credit.

A, L / C and remittance combination

This means that the payment for a paction is partly made by L / C and the balance is settled by remittance.

This form of settlement is commonly used in pactions where certain quantities of certain primary products are allowed to be delivered.

In this regard, with the consent of both parties, the L / C stipulates that the amount of the invoice should be paid in advance according to the shipping documents or the amount of advance payment before the goods are dispatched. The balance will be paid after the arrival of the goods to the destination (port) or the actual quantity of the re inspection.

To use this combination form, we must first specify what kind of letter of credit and what kind of remittance is adopted and the proportion of payment by letter of credit.

Combination of B, L / C and collection

This means that the payment for a paction is partly made by L / C and the balance is settled by collection.

The specific practice of this form of combination is usually: the letter of Credit stipulates that the beneficiary (exporter) opens two bills of exchange, which is part of the credit under the letter of credit, which is paid by a clean draft, while the balance is enclosed on the bill of collection under the bill of collection, which is collected by sight or forward payment.

This practice is safer for the exporters to receive foreign exchange, and the importers can reduce their gold deposits, which is easy for both sides to accept.

However, a letter of credit must specify the type and amount of the letter of credit, as well as the type of collection, and also stipulate the terms "after the full payment of the invoice value".

C, remittance and bank guarantee or letter of credit combination.

The combination of remittance and bank guarantee or letter of credit is commonly used in the settlement of goods such as complete sets of equipment, large machinery and large means of pport (aircraft, ships, etc.).

This kind of product, with large paction amount and large production cycle, often requires the buyer to prepay a portion of the money or deposit by the way of remittance, and the rest of the goods are paid by the buyer in installment or late by letter of credit.

In addition, there are combinations of remittance and collection, collection and standby letters of credit or bank guarantee bonds and so on.