Three methods of the international payments
The three methods of the international payments are remittance、collection and letters of credit.
Remittance
Remittance, as a frequent payment method in international trade , refers to the transfer of funds from one party to another among different countries. Remittance, which is always used by those import enterprise, indicating the bank to a certain way pay a certain sum of money to the export enterprises. Now the World Bank generally use the remittance way, as SWIFT system treatment telegraphic transfer (T/T). By remittance, the goods’ direct payment provided by import enterprise is paid to export enterprise, while the documents representing the goods by the export enterprise directly submitted to import enterprise. Payment and the order of the shipment, directly determine the size of import and export both in case of any risks. Practically, some import enterprises’ remittance is divided into former T/T and after T/T j before the so-called roughly the equivalent of advance payments, T/T roughly equivalent to cash on delivery. Obviously, if export enterprise products’ market is competitive, it can make proper requirements before T/T import enterprise pay the cost only if the import and export both have good credit and credit after T/T is stable and powerful tool for orders.
Collection
A collection means an arrangement whereby the seller draws a draft on the buyer and authorizes its bank to collect the money from the buyer . Collection differentiates from open account or cash in advance.
Collection is pointed out in the shipment of the goods after mouth enterprise issued by financial documents and commercial documents, entrust its bank through the collecting bank which import enterprise is located to its payment. Specifically, under different way remittance export enterprise, the collection of
whole set of documents transmitting through Banks. Import and export enterprise bear risks are relatively small, because only export enterprise after the shipment of the goods can tip documents. At the same time import enterprise pays or accepts samples according to the document can be achieved. Collection can be classified into two types, one is against payment (D/P), one is accepted (D/A). Generally speaking, d/p has lower risk than d/a, because export enterprises’ prompt payment is received, or still control the goods. D/A holds as long as import enterprise acceptance, the bank will release the documents. But import enterprise acceptance is totally commercial creditable, expire to pay no payment still depend on import companies credit.
Letter of credit
A letter of credit is a conditional written undertaking by the issuing bank to pay money, because payment is upon presentation of a draft or written demand for payment together with specified documents.
L/C refers to the issuing bank that import enterprise request, made a study on the complying presentation to honor the firm commitment. It is the bank credit intervention in the product of payment in international trade. It will appear not only in largely solved the problems between import and export enterprises in the contradiction about mutual distrust, but also can make both sides in the payment process access to bank financing in convenience. However, the Banks made promises for the confirmation as conditional, namely, the presentation is complying. If documents with discrepancies, issuing bank dishonored documents in accordance with the rules can be use as rules. Export enterprises in documents under construction and repair system, L/C must pay extra attention and be more cautious, in strict compliance with the terms and conditions of the credit. Therefore, the L/C made for export enterprise in full payment according to ability and level of underlying demand is higher. But currently, our country foreign trade enterprise, especially small and
