INTERNATIONAL PAYMENTS

Nguyen Trung Thong

trungthong@gmail.com
 CHAPTER 1: Overview of International
Trade Payments
1.1 The concepts and roles of ITP
1.1.1 Concepts
1.1.2 Roles
1.2 Source Code regulation
1.3 Correspondent Bank Operations
1.3.1 Correspondent Banks
1.3.2 Communications and payments between correspondent
banks
1.4 Risks in ITP
1.4.1 Commercial risk
1.4.2 Political risk
1.4.3 Specialized risk
 1.1 The concepts and roles of ITP

• International trade can be defined by its various

purposes. International trade can be defined as the
“transaction of goods and/or services between two or
more countries”.
• It can also be defined as the “transaction of goods
and/or services across national boundaries”. Goods
are generally something tangible, while services are
intangible.
• Here are examples of international trade. An American
seller sells automobiles to a Chinese buyer. The
automobiles will be transported from the USA, across
national boundaries to China, and the funds for the
payment will be transferred from China to the USA.
This is an example of international trade in goods.
 1.2 Source Code regulation
• Different Laws and Standards
• Government Control and Intervention
• Complex Documents
• Different Customs and Cultures
• Different Languages
• Different Currencies
• Long Distance
1.3 Correspondent Bank Operations
• A correspondent bank is a bank in one country that is
authorized to provide services for another bank or financial
institution in a foreign country. The most common services
provided by a correspondent bank are currency exchange,
handling business transactions and trade documentation, and
money transfers.
• Correspondent banking works through an agreement between
a foreign and domestic bank where a correspondent account,
usually referred to as a vostro or nostro account, is
established at one bank for the other. Correspondent banking
typically involves the two banks establishing reciprocal
accounts with each other. These accounts are established to
enable the domestic bank to make payments or money
transfers on behalf of the foreign bank.
1.4 Risks in international trade

1.4.1 Trade risk: Market risk, non-receipt, non-

payment, non-delivery, freight risk
1.4.2 Political risks: war, uprising, civil unrest,
strike, embargo, payment banned
1.4.3 Specific risks: language risk, legal risk,
exchange rate risk
 CHAPTER 2: DOCUMENTS IN INTERNATIONAL TRADE

2.1 Financial Documents

2.1.1 Bills of exchange
2.1.2 Promissory notes
2.1.3 Checks
2.2 Commercial Documents
2.2.1 Transport documents
2.2.1.1 Bill of Lading
2.2.1.2 Airway bill
2.2.2 Goods Documents
2.2.2.1 Commercial Invoice
2.2.2.2 Certificate of Origin
2.2.2.3 Certificate of Quality
2.2.2.4 Certificate of Quantity
2.2.2.5 Packing List
2.2.2.6 Certificate of Fumigation
2.2.3 Insurance Documents
2.2.3.1 Insurance Policy
2.2.3.2 Certificate of Insurance
 Financial Documents

Bill of exchange - Drafts

• Bill of Exchange Act of 1882
• Uniform Commercial Codes of 1962 UCC
• Uniform law for bills of exchange – ULB
(Geneve, 1930).
• New York –A/CN 9/211, 18/2/1982
International Bills of Exchange and
Promissory notes.
 Definition

A bill of exchange is an unconditional

order to demand money drawn by an
exporter, seller, service provider, etc.
and require the person to pay a certain
amount, within a specified time, to the
beneficiary specified in the order.
 No 275/EX BILL OF EXCHANGE
may 05, 20xx
For USD 45,024.44
At …xxxx.. sight of this FIRST Bill of Exchange (Second
of the same tenor and date being unpaid) Pay to the
order of Sumitomo banking corporation of Korea the
sum of US dollars forty five thousand twenty four and
cents forty four only.

Value received as per our invoice (s) No(s) KR042-EX

Dated 24 APR 20xx
Drawn under Eximbank Vietnam Hochiminh city
Confirmed / irrevocable / without recourse L/C ..No 1405
Dated / wired …………18 MAR 20xx

To: EXIMBANK Drawer

of Vietnam of Hochiminhcity Sumitomo Co Korea
 Features of bills of exchange

• Indefinite
• Mandatory payment
• Circulatable of bills of exchange
 Types of B/E

• Terms:
+ At sight
+ Deferal payments
• Orders:
+ To the order of
+ Blank order
• Methods
+ Collection
+ Documentary credit
Collection

No……(1)… BILL OF EXCHANGE

( 2 )----20xx
For…………(3)………..
At …(4).. sight of this FIRST Bill of Exchange (Second of
the same tenor and date being unpaid) Pay to the order of
…………………………………………(5)………………………
…………………… the sum of
……………………………………………(6)……….

To…(12)……… (13) Drawer

DC
No……(1)… BILL OF EXCHANGE
( 2 )----20xx
For…………(3)………..
At …(4).. sight of this FIRST Bill of Exchange (Second of
the same tenor and date being unpaid) Pay to the order of
…………………………………………(5)………………………
…………………… the sum of
……………………………………………(6)……….

Value received as per our invoice (s) No(s)……(7)… …

Dated …………………(8)……………………
Drawn under ………………(9)…………………
Confirmed / irrevocable / without recourse L/C No …(10)…
Dated / wired …………(11)…………………………
To…(12)……… (13) Drawer
 Deferral Payment
There are many ways to negotiate:
If payment is due after how many days of receipt
of draft, it will be stated as “X days after sight…”
(At 20 days after sight …)
If payable after how many days of drawing the
bill of exchange, write "X days from the date of
draft" (At 20 days after bill of exchange date
sight).
If payment is due after how many days upon
delivery, it will be written as “X days after signing
the bill of lading …” (At 20 days after bill of lading
date sight).
 Money in words

+ USD 10,000.00
US Dollars ten thousand only.
+ USD 111,880.00
United states dollars One hundred
eleven thousand eight hundred and
eighty only
+ USD 544,165.20
United states dollars Five hundred forty
four thousand one hundred sixty five
and cents twenty only
Transactions of B/E
• Acceptance
• Endorsement
• Guarantee
• Protest
• Discount
Ex1: Savimex Company exports a
shipment worth $202,430.50 to XYZ
Co., Ltd. headquartered in New York.
According to this contract, the goods
were delivered on July 18, 20xx and
due for payment on October 18, 20xx
via Asia commercial bank. The bank
serving the importer is Bank of
America. As an exporter, draw a bill
of exchange against the importer.
(Collection)
Ex2: Providing a part L/C:
• To: Sakura bank Tokyo Japan
• From: Industrial and Commercial bank of
Vietnam Hochiminh City.
• We open Irrevocable Credit No
3601C93LC1461
• Date 07/June/20xx
• Expiry: 25/July/20xx
• Beneficiary: Sumitomo Corporation Tokyo
• Applicant: Viet Hung, Hiep Binh Chanh, Thu
Duc, Hochiminh City Vietnam
• Amount: USD 178,000 – CIF Hochiminh City
Port, Vietnam.
• Shipment must be effected not later than
20/July/20xx.
• Draft: at sight. B/L 20/7/20xx, draw the B/E.
 PROMISSORY NOTE
A promise or commitment to pay the payer.
Promissory note is issued by buyers and
importers.
 Cheque / Check
• Check is a payment order issued by the
holder of a deposit account, ordering the
Bank to deduct a certain amount from his
or her account to pay the check holder, the
person named on the check, or pay to
his/her order.
 Commercial Documents
• Transport Documents
In international trade for goods, either the seller or the buyer needs to conclude a
contract for carriage with a carrier or freight forwarder. SMEs commonly prepare the
shipment by a contract with a freight forwarder. A freighter books space for the cargo
and, in many cases, conduct customs formalities in addition.
Where the goods are delivered to a carrier or freight forwarder, a shipper receives
transport documents from the carrier or freight forwarder.Where a freight forwarder
(or non-vessel-operating common carrier (NVOCC)) issues a bill of lading, the bill
is in particular called a freight forwarder’s bill of lading or house bill of lading.
A freight forwarder (or NVOCC) plays dual positions in the transportation of the
goods; a carrier to its shippers and a shipper to the vessel-operating common carrier
(VOCC).
Transport documents evidence the contract of carriage, the receipt of goods, and
the details of the transport. Transport documents come in two main groups: those
that give title to the goods (“negotiable documents”) and those that do not give title to
the goods (“non-negotiable documents”). A bill of lading is a negotiable document,
while an air waybill is a non-negotiable document.
 Bill of Lading
A bill of lading, as a negotiable document, acts as a receipt of the goods, and
confers the title to the goods by constituting the contractual rights of the holder
in due course against the carrier. A bill of lading is not only an
acknowledgement that the goods have been loaded on board the ship (or that
the goods have been received by the carrier in a received bill of lading), but
also a separate contract with the shipping company, which includes the title to
the goods. The buyer cannot get access to the goods under a bill of lading
without possession of this document. A bill of lading is issued by a shipping
company and has negotiable status. As well as evidencing the contract of
carriage terms and the receipt of goods, they provide entitlement to receive the
goods.
Air Waybill
Sea Waybill
Charter Party Bills of Lading
Missing Bills of Lading
 Commercial Invoice
A commercial invoice is the bill issued by the seller to the buyer. A commercial invoice
is to be produced by the seller in accordance with the contract (and/or the proforma
invoice). A commercial invoice will normally be issued in the same currency as that in
the contract or the documentary credit, and contain a description of the goods.
The accuracy of a commercial invoice is of vital importance in a documentary credit.
The description of the goods in a commercial invoice must correspond with that
appearing in the documentary credit concerned (Article 18(c) of UCP 600).
An English court found that “machine shelled groundnut kernels” in the commercial
invoice was not the same description as “Coromandel groundnuts” in the documentary
credit, although it was understood by traders that machine-shelled groundnut kernels
were the same good as Coromandel groundnuts.
For exports to some countries, consular invoices are required in the form laid down and
signed by the appropriate official in the embassy or agency of the country concerned or
customs invoices in the form laid down by the customs office in the importing country.
• Packing List
A packing list is used to describe how the goods are packaged for shipment.
Packing list forms are available through commercial stationers or packing
companies. A packing list lists the shipper/exporter, the consignee, and the
notifying party, and indicates the details of the weight, serial numbers, and
markings placed on the packing. Some countries may set specific requirements
for the packaging for goods.Apacking list is used for filing insurance claims
when there is damage or casualty to the cargo during transportation.

• Certificate of Origin
• Inspection Certificate
CHAPTER 3: REMITTANCE METHOD
(TELEGRAPHIC TRASFER/FUND TRANSFER)

CONTENT

01 Fund Transfer method

02 Process of payment

03 Amendment/Investigation
1. Fund transfer method

Types of fund transfer method:

a. Transfer for Import/Export

§ In advance

§ After receiving goods/services payment

b. One way transfer for Enterprises

c. Bankdraft
The payer, the buyer, the importing company
request the serving Bank to transfer a
certain amount of money to pay the
beneficiary (the seller, the exporting
company, the recipient) at a specified
location (bank account number) for a certain
period of time.
Related parties:
• T/T order issuer (buyer, importer)
• The receiving bank of the money
transfer (the bank where the
remittance unit opens a foreign
currency deposit account).
• Paying bank.
• Recipients (sellers, exporters,
etc.)
Article 3: Payment
By TTR IN ADVANCE via INDUSTRIAL AND
COMMERCIAL BANK OF VIETNAM,
TRANSACTION OFFICE NR.2
Payment documents required:
•Commercial invoice in triplicate, Packing list
in triplicate
•3/3 Original Bill of Lading.
•2/2 Insurance Policy covering all risks for
110% contract value.
• 3/3 Certificate of quantity/Quality
issued by Seller.
• Certificate of origin issued on or
prior B/L date by China Council
For The Promotion Of International
Trade.
• Third party documents acceptable.
• Overdue payment will be charged
1% per month.
• All banking charge inside Vietnam
for Buyer’s account.
Charge fee
Charge OUR: importer pay all fee from both sides
Charge BEN: beneficiary pay all fee from both sides
Charge SHR: fee will be shared
Ex: Importer A - VCB HCMC VN
Exporter B - DBS Singapore
$10,000.00
VCB $90
DBS $10

Importer A Exporter B
OUR -$10,100 +$10,000
BEN -$10,000 +$9,900
SHR -$10,090 +$9,990
 1. Fund transfer method
In advance

Importing bank Exporting bank

3. T/T 4. T/T

Nostro bank

5. Credit
7. Supporting
2. T/T order

docs

6. Shipment & Docs

Importer Exporter
1. Contract
 After receiving goods/services in T/T

Importing bank Exporting bank

4. T/T 5. T/T

Npstro bank

6. Credit
3. T/T order

2. Shipment & Docs

1. Contract
Importer Exporter
One-way T/T

(1) Advise

(2) (4)
T/T Credit

(3)
Order
(MT103 via SWIFT)

Bank Ben Bank

Bank draft

(1) Fee advise

(4) Send Bankdraft

(2) (3a) (5) (6)

Open Open Presenting Credit
order BD BD

(3b) Advise BD

BD Bank (7) Debit

Nostro
2. T/T process from VN to foreign countries
Calculation, accounting and
Docs submitting compose message on
(1) Corebanking
(4)

Checking Docs
(2) Authorize
and make
transaction
SWIFT
(5)
Customer Reviews / deal and
submit to competent authority (if
any)(3)

Delivery of CREDIT
documents
Records
Follow up with
documents (if any)
(6)
 Types of T/T Docs

(For Enterprises) 1. T/T order

2. Foreign currency purchase form (if any)
In advanced imports 3. Foreign trade contract
4. Import license (if any)
5. Commitment to supplement documents

After receiving goods 3. Foreign trade contract

imports 4. Customs declaration of import customs clearance
5. Commercial Invoice
6. Customer's commitment to not violate the conditions for
foreign loans of enterprises that are not guaranteed by the
Government (if it is a medium and long-term deferred loan
for goods)
 Types of T/T Docs

(For Enterprises) 1. T/T order

2. Foreign currency purchase form (if any)
In advanced imports 3. Foreign trade contract
4. Import license (if any)
5. Commitment to supplement documents

After receiving services 3. Foreign trade contract

imports 4. Commercial Invoice
5. Customer's commitment to not violate the conditions for
foreign loans of enterprises that are not guaranteed by the
Government (if it is a medium and long-term deferred loan
for goods)
 Purpose Docs
Personal Resident 1. T/T order
2. Foreign currency purchase form
Study abroad 2. Notice of tuition fee
3. Passport for international students
4. Visa (if any)
Immigration 2. Passport of settlers
3. Visa allows to settle down
Support for relatives abroad 2. Documents proving the kinship relationship
3. Papers proving that relatives are residing abroad
4. ID card/CCCD/Passport of money sender

…
Swift via Nostro bank

Importing bank Exporting bank

MT / 910
10 3
3 T 10 2
M T 20
M

Nostro bank
CHAPTER 4: COLLECTION OF PAYMENT
Nội dung chính:

01 Collection of Payment

02 URC 522

03 Process of payment

04 Documents against Payment

05 Documents against Acceptance

 1. Collection of payment

1.1. Clean
collection D/P
Types of
collection
1.2. Documentary
collection D/A

D/OT
Clean collection
Drawee Drawer
Contract
Goods + Docs
cheque/Promisorry note (1) Credit
T/T(5) Advise of (7)
Cheque/Pro
collection
(4) misorry
note
(2)

Cheque/Promisorry note (3)

T/T(6)
Collecting Bk/ Remitting Bk
Presenting Bk
 D/P

(1) Contract

Exporter/D Importer/Drawee
rawer (2) Goods
(3) (8)
Docs Credit (5) (6)
presenting Advise Payment
Docs & Docs

(4) Docs

(7) T/T Collecting Bank

Remitting Bank Presenting Bank
 D/A

(1) Contract

Exporter/
Drawer (2) Goods Importer/Drawee
(8)
(3) (6)
Deadli (11) (5)
Docs Accept
ne Cre Docs (9)
notice dit B/E & T/T
notice
Receiv
(4) Docs e Docs

(7) Accept advise

Collecting Bank
Remitting Bank (10) T/T
Presenting Bank
URC 522

Uniform Rules for Collections gọi tắt là URC

Current version is URC No. 522 of ICC revised in1995

URC 522

Group

A: Terms and general (article 1-3)

B: Structure of collection (article 4)

C: Types of presenting (article 5-8)

D: Rights & Obligations (article 9-15)

E: Payment (article 16-19)

F: Interest & fee (article 20-21)
G: Others (article 22-26)
3. Process of payment

(1) Receiving docs

(2) Checking docs

(3) Input in Corebanking

(4) Authorising
SWIFT
(5) Advising

(6) Storing docs and waiting for customer

Nguyễn Trung Thông 49

CHAPTER 5: DOCUMENTARY CREDIT

01 UCP600

02 L/C issuing porocess

03 Process of L/C payment

04 At sight L/C payment

05 Accepting L/C payment

 At sight L/C payment

(1)

Exporter/ (5) Importer/

Beneficiar Applicant
y

(4) (6) (11 (2) (8) (9)

)

(3)

(7)
Exporter’s Bank/ Importer’s
Advising Bank (10) Bank/Issuing
Bank

Nguyễn Trung Thông 51

 Accepting L/C payment

(1)

Exporter/ Importer/
Beneficia (5) Applicant
ry

(4) (6) (11 (13 (2) (8) (9) (12a)

) )

(3)
(7)
(10 Importer’s
Exporter’s Bank/
Advising Bank ) Bank/Issuing
(12b) Bank

Nguyễn Trung Thông 52

 1. UCP 600

Includes 39 articles
General terms and definitions: Articles 1-5
Obligations and Responsibilities: Article 6-13
Examination of documents: Article 14-17
Types of documents: Articles 18-28
Other provisions: Articles 29-33
Disclaimer: Articles 34-37
Transfer and transfer of proceeds: Articles 38-39

Nguyễn Trung Thông 53

Article 2: Definitions
§ L/C (Credit) § Honour
§ Applicant § Nominated Bank
§ Beneficiary § Negotiation
§ Issuing Bank § Complying presentation
§ Advising Bank
§ Confirmation
§ Confirming Bank

Nguyễn Trung Thông 54

2. Issuing L/C

(6) Inputting message text and charging

(1) Receiving L/C application fee

(2) Checking credit (7) Authorising

line and advisory

(3) Passing docs (8) Sending message oversea

(4) Credit line request (9) Sending docs to customer

(5) Provision (10) Saving docs

3. Process of L/C payment

(1) Receiving docs (1st time)

(2) Checing docs

(3) Input in corebanking

(4) Authorising
SWIFT

(5) Advising (2nd time)

(6) Follwing and reminding

customer
 CHAPTER 6: OTHER PAYMENT METHODS
IN INTERNATIONAL TRADE
• 6.1 Open Account
• 6.2 Cash Against Documents
• 6.3 Border Trade Payment
 Open Account
• The Open Account method is a
payment method where the payment of
debts is collected and paid at the same
time at a certain time (month-end,
quarter-end).
• Usually this method is applied in the
payment between two units that have a
regular relationship and trust each
other.
 CAD: Cash against documents

• CAD method is a payment method in

which the importing organization on the
basis of a sales contract requires the
exporting country's bank to open for itself
a trust account to pay money to the
exporting organization. When the exporter
presents all documents in accordance with
the agreement.
Process:

(3) Goods
Exporter Importer

(5) T/T (4) (2) (1)

Send Docs

(6)

Bank
 Cross-Border Payment
• Subjects of application: Enterprises allowed
to trade goods via the borders between
Vietnam and China/Cambodia.
• Procedures: Customers send Application
form for money transfer with related
documents.
• Importers use money transfer method in
cross-border payment between Vietnam and
China/Cambodia.
• Payment currencies: VND/CNY, VND/KHR.
• Quick and flexible transfer period.