International trade

Pages: 6 (1486 mots) Publié le: 4 mars 2010
1- Payment of international transactions :

• Cheque

a) Cheque (regular endorsement or blank endorsement)
b) Crossed cheque (only the person indicated on the cheque can cash it)
c) Clearance cheque (cashed across bank counters)
d) Banker’s draft (a cheque drawn by a bank on itself or on another bank)
e) Uncovered cheque (if the drawee does not have enough capitalon his account or, we can say, he has insufficient balance at the moment he has to realize the payment, his account should be covered by a sufficient overdraft facility )
f) Post-dated cheque (the agreed date of collection is placed on the cheque)
g) Endorsement « only for collection » (the party that receives a cheque endorsed only for collection acts as a holder on behalf of the owner)

•Bill of exchange (or a Draft)
Def : A written, dated and signed three-party instrument containing an uncoditional order by a drawer that directs a drawee to pay a definite amount of money to a payee on demand or at a specified future date.
The « Rule of Thumb » stipulates the drawer of any financial instrument is liable for payment.
There 3 types of bills of exchange :
a) Sight B/E : the buyermust pay the seller when he receives the documents from the lattest.
b) Time B/E : the buyer can pay the seller at a specified date or at a specified time
c) Deffered B/E : the buyer can pay the seller at a specified date or after a certain time from the moment he presents the sight bill to the bank. The difference between time bill and deffered bill is that in the case of the lattest, even ifthe payment is deffered, the bill it is a sight one.
d) A Red Clause : Advances are made to the seller before it presents the B/E to the bank. It is beneficial to middlemen and dealers.
Settlement of the Bill of exchange :
1) The seller and the buyer agree on using a Bill of exchange
2) The seller writes a B/E to the Buyer and sends it to the lattest for acceptance
3) After acceptance, theBuyer sends the B/E back to the Seller (« Accepted »+ signature on left side or signature on the left side)
4) The seller sends the documents to the Buyer
5) A) The Buyer pays for the goods at sight
B) The seller discount the B/E to a Holder (B/E against payment in change of a comission), therefore the Buyer should pay the Holder at a future date.

• Promissory notes
Def : A promise to paya certain amount of money at a specified date.
Drawer = Drawee = Buyer
Government to government or Public to Government
Money transfer realized from bank to bank. Fast but very expensive.
• Letter of credit
Def : A written conditional document issued by a the buyer’s bank ordering itself to pay to the seller a certain sum of money on a certain maturity date.
There are severaltypes of Letters of credit :
1- Irrevocable – It cannot be altered without beneficiary’s express consent.
→Preferred by beneciary because it offers him the best security

2- Confirmed – A second bank adds its endorsement on the L/C, indicating it will pay against documents
→ It gives the beneficiary addition assurancethat he will be paid

3- Revocable – Revocable by the Issuing bank
→ Disliked by beneficiary because it gives him less security

4- Negotiable – Allows the B/E to be negociated to any bank
→ Only the Issuing bank is obliged to pay. But if another bank pays, it is assured that the Issuing Bank will refund it the money

5- Revolving – Allows a Buyer to make several payments tothe Seller by issuing only on letter of credit (Ex : every month)
→ Used by a large importer company with a good credit record, purchasing regulary from the same Exporter

6- Back-to-back – A buyer arranges for two credits : a credit to pay the goods purchased from the seller and another one to the supplier’s seller
→ It is used to help the Exporter who may have some difficulties to...
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