lOMoARcPSD|18296471

lOMoARcPSD|18296471

FOB
* COST
- Seller : Packaging & Verification , Loading , Transport , Customs export , Handing
- Buyer : Freight , Handing , Customs import , Transportation to destination
, Unloading
* RISK
- Seller : Packaging & Verification , Loading , Transport , Customs export , Handing
- Buyer : Freight , Handing , Customs import , Transportation to destination
, Unloading
* INSURANCE
- Seller : N/A
- Buyer : Cover
Better for seller who do not have experiences for logistics.

CIF
* COST
- Seller : Packaging & Verification , Loading , Transport , Customs export , Handing
, Freight
- Buyer : Handing , Customs import , Transportation to destination , Unloading
* RISK
- Seller : Packaging & Verification , Loading , Transport , Customs export , Handing
- Buyer : Freight , Handing , Customs import , Transportation to destination
, Unloading
* INSURANCE
- Seller : Transport , Customs export , Handing , Freight
- Buyer : N/A

EXW
* COST
- Seller : Packaging & Verification
- Buyer : Loading , Transport , Customs export , Handing , Freight , Handing
, Customs import , Transportation to destination , Unloading
* RISK
- Seller : Packaging & Verification
- Buyer : Loading , Transport , Customs export , Handing , Freight , Handing
, Customs import , Transportation to destination , Unloading
* INSURANCE
- Seller :
- Buyer :

The delivery of goods in the international payment mostly transfers by sea: - Low cost
-The volume of goods is large; the goods are bulky; prohibited goods or goods that
are chemicals or liquids. -Safety and diversity of goods.- Easy to transport more than
other ways.

RISK IN INTERNATIONAL PAYMENT

International payment risks are risks arising in the process of making international
payments related to international transactions, caused by relationships between parties
to international payments such as: export, import, banks, individuals and
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intermediaries ... or caused by other objective factors such as natural disasters, war,
politics, ...

Kinds of Risks
- Trade risks : Seller , Buyer , Banks
- Risk in payment : Credit - Moral - National - Legal - Foreign exchange risk

- Credit risk: This is the risk of insolvency of one of the parties to the payment,
especially in the documentary credit method. The reason is that the fierce competition
between businesses in the market makes many businesses difficult, defaulting, leading
to insolvency.
- Exchange rate risk: Exchange rate risk is also known as currency risk, foreign
exchange risk. This type of risk refers to the losses that an international financial
transaction may incur due to currency fluctuations.
+ For exporters: a decrease in the exchange rate (decreased USD/VND) will cause
export restrictions and affect exporters.
+ For importers: an increase in the exchange rate (USD/VND increase) will create
adverse to importers when they have to buy foreign currency at a high price to pay,
but the consumption price depends on the market
+ For banks: Exchange rate risk in banking activities arises in the process of lending
foreign currency or doing foreign currency trading when the exchange rate fluctuates
in an unfavorable direction for the bank.
- Country risk: These are risks related to political, economic, and foreign exchange
management policies of a country that make exporters not receive money for goods,
importers do not receive goods.
+ Risks for importers: the importing country forbids domestic companies to pay
foreign currency abroad, or banned imported goods that cannot clear customs
+ Risks for exporters: changing policies of importing countries, difficult customs
clearance, or political tensions between countries
- Moral hazard is the risk that occurs when a party intentionally fails to perform its
obligations properly, causing damage to the interests of others. For example, in the
L/C method, the bank is the one who bears the risk when the importer and exporter
collude to commit fraud against the bank or the exporter can cheat documents to get
payment from the bank

DEFINE, DRAW, AND DESCRIBE METHODS

* Remittance method
The remittance is a method of payment that customer (who want to transfer) requires
the bank to transfer a certain amount of money to another person (beneficiary) at a
certain location and a certain period of time.
Description
- The buyer and the seller conduct direct payment together.
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- The bank only plays the role of an intermediary to collect fees, not being
obligated in the negotiation between buyer and seller.
Remitter Beneficiary

Remitting bank Paying Bank

(1) After signing the foreign trade contract, the exporter delivers the goods and the
goods documents to the importer.
(2) After checking the documents (and goods), if deciding to pay, the importer write a
transfer order (by M/T or T/T) or write a payment order, then sending to the
remitting bank.
(3) After checking documents and remittance conditions. The remitting bank
will deduct the account to transfer money and send a notification to the importer.
(4) The remitting bank gives the order (by M/T or T/T at the request of the remitter)
to the paying bank (the paying bank) and pays for the beneficiary.
(5) The paying bank transfer to the beneficiary's account and sends a notification to
the beneficiary.

*Clean Collection
Seller requests the bank to collect money from the buyer.
The collection documents only include financial documents, while commercial
documents are sent directly to the importer.
- Financial documents: B/E, P/N, Cheque.
- Commercial documents: Commercial invoice, Packing list, transport documents,…

Principal Drawee

Remitting bank Collecting Bank

(0) Sign the contract, and the payment term with a clean collection method.
(1) The seller (exporter) sends goods and commercial documents directly to the payer
(importer).
(2) Exporter sends a collection request with financial documents to the remitting
bank. (3) The remitting bank prepares, sends a collection order and financial
documents to the collecting bank to collect money from the importer.
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(4) The collecting bank notifies the importer : Pay immediately, or Sign the B/E,
or Accept other terms and conditions
(5) The importer pays immediately or accepts to pay
(6) The collecting bank transfers money or notifies the accepted bill of exchange to
the remitting bank
(7) The remitting bank transfers money or notifies the accepted bill of exchange to the
exporter.

* Documentary Collection
A payment method, the documents sent for a collection that include commercial
documents AND financial documents; or commercial documents only (NO attached
the financial documents). The collecting bank will only hand over the documents to
the buyer when they have paid, accepted the payment, or completed the other
conditions in the Collection Order.

Principal Drawee

Remitting bank Collecting Bank

(0) Signing the contract, the payment condition is the documentary collection method.
(1) The exporter sends the goods to the importer.
(2) The exporter makes the Application for Collection and the documents
(including commercial documents and financial documents, if any) to the remitting
bank.
(3) The remitting bank creates the collection order and sends the documents to the
collecting bank.
(4) The collecting bank notifies the Collection Order and presents the documents to
the importer.
(5) The importer agrees with the Collection Order by:
Pay immediately (B/E at sight, cheque, ...), or
Accept the draft, or Issuing promissory notes or debt letter.
(6) The collecting bank gives commercial documents to the importer.
(7) The collecting bank transfers money, or received bills of exchange, or promissory
notes, or debt notes to the remitting bank.
(8) The remitting bank transfers money, or bill of exchange, or a promissory note, or
debt note to the exporter.

* Documentary credit or the L/C method

Documentary credit is a method of payment, at the request of a customer, a bank will
issue a letter, called Letter Of Credit - L / C, the issuing bank has a commitment to
pay or accept a draft to a third party when this person presents to the issuing bank the
payment documents with the terms and conditions set out in the L / C.
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Buyer Beneficiary
(Applicant for ( Exporter)
L/C)

Issuing Bank Advising bank

1. Chiến tranh thương mại Mỹ Trung ảnh hưởng đến Việt Nam

This will affect Vietnam's exports to China, because China has to focus on consuming
domestic goods. The trade war directly caused a slowdown in global economic
growth and caused an increase in trade protectionism, adversely affecting Vietnam's
open economy. to problems such as fraud and tax evasion , causing Vietnamese
goods to face higher import taxes than the US .

The reason of war:

- Trump’s presidential protection policy
- Large US trade deficit with China.
- China's ambition to become the world's leading technology nation.
- The US accuses China of serious copyright infringement related to intellectual
property
- China's investment restriction policies
Benefits:
- Vietnam’s export/imports to the United States have increased.
- Vietnam would do well to further diversify its export markets/future value.
Vietnam will have the opportunity to capture export market share in the US
market from China including textiles, bags, electronic assembly, footwear, etc.
- Increase FDI. Investment capital increased sharply in the form of capital
contribution and share purchase.
- The influence of the US-China trade war has led to the relocation of factories
and industrial zones of large companies to Vietnam, such as Samsung,
Apple.
Risks:
- The high cost of importing input materials makes it difficult for domestic
enterprises to depend too much on raw materials from China.
- The US-China trade war happened, causing the increase in USD and leading
to an increase in the USD/VND exchange rate, causing difficulties for
Vietnamese importers.
- China has increased trade barriers and measures against Vietnam to protect
domestic enterprises from the tension of the trade war.
- The US imposes high taxes on some Vietnamese products because they are
made from materials from China

2. So sánh 4 qui trình (chuyển tiền, thu trơn, kèm chứng từ, L/C)
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a. Remittance
Advantages:
- Simple payment, easy business process
- Fast speed
- The bank is only an intermediary to make the payment and does not take as
many risks as in other payments.
- For importers, postpaid money transfer will help the importer ensure that the
goods have been delivered in full and in accordance with the requirements
- For exporters, transferring money in advance will reduce the risk when the
exporter is afraid that the importer will not pay
Disadvantages:
- No documents attached
- High cost of money transfer by T/T
- Possible exchange rate risk
- Risk when transferring money in advance, importer will face the risk when
the exporter does not deliver the goods on time, with the right quality.
- Risks when transferring money to pay later, exporters may face risks
when importers do not pay or late.

b. Clean collection
Advantages:
- Simple and easy payment process
- Banks play a role as payment intermediaries
- The advantage belongs to the buyer because the seller has to fulfill the
delivery obligation to the buyer
Disadvantages:
- For exporters: highly dependent on the importer's finances. If the importer goes
bankrupt, the exporter will never receive the payment
- Fraud risk: Scam importer, refused to pay
- Importer's risk: collection orders come before the goods, which means that the
importer has to make payment before the goods arrive and it is possible that the goods
they receive may not be of the right quality or delivered late.

c. Documentay collection
Advantages:
- Exporter: only handing over documents when paid or accepted for payment
- Importer: can check the set of documents when paying or accepting payment
- Banking: fee income, credit extension from trade finance.
Disadvantages:
- The seller refuses to pay while the goods have been sent
- The bank sent the collection request late, unable to pay
- The set of documents is fake, has errors, or has commercial fraud
- Exchange rate risk
- The collecting bank is responsible for checking the received documents

d. L/C
Advantages:
- For exporters: Issuing bank commits to pay according to the provisions of L/C
regardless of whether the importers pay or not.
- For the importer: the importer only pays when receiving the goods
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- For banks: service fees (L/C opening fee, money transfer fee, etc)
Disadvantages:
 With the Bank having to commit to paying the exporter when the documents
are valid, even if the importer is unable to pay or goes bankrupt, the bank still
has to make the payment.
 Risks related to documents: faulty or invalid documents that the issuing bank
did not detect but still pay will lead to the consequence that when the importer
re-checks and finds invalid, the importer reserves the right to refuse payment.
 Cheating: The exporter cheats documents to get payment, or the exporter
colludes with the importer to commit fraud against the bank.

Compare methods
 Remittance Method & Clean collection (Chuyển tiền vs nhờ thu trơn )
Same : In both methods, the exporter transfers the goods and documents directly
to the exporter.
Difference:
-In Remittance Method, the importer actively pays, so whether or not to pay depends
on the goodwill of the importer. If the goods are delivered in short order, of poor
quality, at a reduced price, etc., the importer is more likely to not pay for the goods.
- In the clean collection the exporter takes the initiative to claim money by means of a
bill of exchange governed by the law of drafts. If the importer does not pay for the
goods, the reason must be clearly stated, stating the wrong reason will be sued, so the
pressure to pay for the importer in the collection of smooth slips is higher than in
Remittance Method.

 Clean Collection & Documentary collection

Same : Both are payment methods in which the person who has the receivables
is stated on the payment instruments, but cannot collect from the drawee himself,
but must authorize the bank to collect on his behalf.
Difference:
- Clean Collection:
+ Document collection: Financial documents
+ The role of banks: Only play the role of collection
+ Risk: High, consignee may not pay or delay in payment

- Documentary Collection:
+ Document collection: Financial and/or commercial documents
+ The role of banks: In addition to acting as a collector, he is also responsible for
controlling commercial documents for the benefit of the exporter
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+ Risk: Lower than due to smooth collection, but there is still a risk that the importer
will not receive the goods

 Documentary collection & L/C ( nhờ thu kèm chứng từ vs L/C)

Same: Both methods guarantee payment

Difference:
Charges Incurred:
+ L/C: The charges incurred on the importer by the issuing bank are generally higher
+ Documentary Collection: The charges incurred on the exporter while issuing
Documentary Collection are generally lower

Issuing Authority:
+ L/C: The importer's bank is the issuing authority for the Letter of Credit.
+ Documentary Collection: The exporter's bank is the issuing authority for the
Documentary Collection.

Level of Security:
+ L/C: Provides a higher level of security in international transactions as the
responsibility of remittance lies on the importer’s bank.
+ Documentary Collection: Not considered a safe tool for international transactions
as the importer is at a higher risk of fraud.

 Remittance Method & Documentary collection

Same : -All have the participation of at least 4 parties: exporter, importer, bank
serving exporter, bank serving importer. Banks act as intermediaries to collect money
or transfer money to the seller without any responsibility for the payment of the buyer.

Difference:

Remittance Method: The buyer is the person who executes the order that initiates
the payment process.
- Mail Transfer – M/T: The payment order of the remitting bank will be shown in
the letter, then sending to the paying bank through the post.
- Telegraphic Transfer – T/T: The payment order of the remitting bank sends to
the paying bank, through Telex or telecom networks such as SWIFT.
Documentary collection: The seller is the one who orders the start of the payment
process. The seller delivers the goods and then makes drafts and documents to the
collection bank. The set of documents is not sent to the buyer prior to payment or
acceptance of payment.