International payment

and Export – Import

financing

Lecturer: Msc. Trang Pham

Module description The module provides students with a basic
understanding of international payment
activities and trade finance and guarantee
including applicable laws, international
customs and practice, documents for
international payment, terms of international
payment, methods of international payment as
well as different types of trade finance and
guarantees.
 Chapter 1: Introduction to international payment and
Export - Import financing
Module outline
Chapter 2: Instruments of international payment

Chapter 3: Terms of international payment

Chapter 4: Methods of international payment

Chapter 5: Import and export financing

Chapter 6: Import and export guarantee

 References

1 2
PGS.TS.Nguyễn Thị Phương Liên Andars Grath (2008), The
(2014), Giáo trình Thanh toán handbook of International Trade
quốc tếvà tài trợ xuất nhập khẩu, and finance. Kogan Page Limited
NXB Thống kê.
Assessment 10% attendance

30% mid-term (1 test, 1 self-study

assignment and Group discussion)

60% final exam

 CHAPTER 1
Introduction to International payment
and Export - Import financing
1.1 Definition, characteristics and roles of international
payment
1.1.1 Definition

 International payment means the performance of payment obligations due to

economic and non-economic activities between counterparties located in
different countries.

 More specific, international payment is made by the Goverment, or individual or

organisation of one country to Goverment, or individual or organisation of
another through the banking systems.
1.1 Definition, characteristics and roles of international
payment
1.1.2 International payments are not only governed by national laws, but also by
Characteristics international laws, conventions, custom and practices such as ULB, UCP, URC,
URR and Incoterms.
International payments are influenced by the variation in exchange rates and
foreign exchange reserves.

International payment transactions are mainly done through commercial banking

systems.

International payment is a type of banking services.

1.1 Definition, characteristics and roles of international
payment
1.1.3 Roles

 Commercial banks

 Export and Import businesses

 Economy
1.2 The legal framework of international payment
1.2.1 United Nations Convention on Contracts for the International Sale of
International Goods – Wien Convention 1980;
Conventions
Convention Providing a Uniform Law for Bills of Exchange and
Promissory Notes (Geneva, 1930) – ULB 1930;
Convention Providing a Uniform Law for Cheques (Geneva, 1931) –
ULC 1931;
United Nations Convention on International Bills of Exchange and
International Promissory Notes;
Other Laws and International Conventions on Transport and Insurance.
1.2 The legal framework of international payment
1.2.2 National Civil law;
Laws
Commercial law;

Foreign Exchange Law;

Law on Negotiable Instruments;

Law on International Payment.

1.2 The legal framework of international payment
1.2.3 The Uniform Customs and Practice for the Documentary Credits ;
International
custom and
practices Uniform Rules for Collection;

Uniform Rules for Bank to Bank Reimbursements ;

International Commercial Terms.

1.2 The legal
framework of
international payment

1.2.3 International
custom and practices

1.2.3.4 International
Commercial Terms
1.3 Documents for international payment
According to the URC 522 (the Uniform Rules for Collections, 1995 Revision, ICC
Publication No. 522), documents come in two types: “financial documents“ and
“commercial documents“.

 “Financial documents” means bills of exchange, promissory notes, cheques, or other

similar instruments used for obtaining the payment of money;

 “Commercial documents” means invoices, transport documents, documents of title or

other similar documents, or any other documents whatsoever, not being financial
documents.
 1.3 Documents for
international payment

1.3.1 Commercial documents

1.3.1.1 Transport Documents

 Multimodal Bill of Lading

 Ocean Bill of Lading - B/L

 Airway Bill

 Railway Bill
 1.3.1 Commercial documents

1.3.1.2 Commercial invoice

1.3 Documents for A commercial invoice is the bill

international payment issued by the seller to the buyer. A

commercial invoice is to be produced
by the seller in accordance with the
contract.
1.3 Documents for international payment
1.3.1 Commercial documents

1.3.1.3 Other documents

Insurance certificate

Packing list

Certificate of Origin (C/O)

Others
 1.3 Documents for
international payment

1.3.1 Financial documents

 “Financial documents” means bills

of exchange, promissory notes,
cheques, or other similar instruments
used for obtaining the payment of
money;
1.4 The concept of Export and Import financing
1.4.1 Definition of Export and Import financing

Export and Import financing (Trade finance) means financing the funds required for the
performance of an international trade transaction. In an international sale of goods, both
exporter and importer seek trade finance depending on the terms and conditions of a
transaction.

Trade finance is self-liquidating as it is financed from the cash flow of the under- lying
international trade transaction,
1.4 The concept of Export and Import financing
1.4.2 Principal players involved in Export and Import financing

Players involved
in trade finance

Financial Non-financial
Institutions Institutions

Financial
Commercial Financial
leasing Exporters Importers Manufacturers
Banks Companies
companies
1.4 The concept of Export and Import financing
1.4.3 Roles of Export and Import financing

 Protection Against Risk of Noncompletion

 Protection Against Foreign Exchange Risk

 Financing the Trade

1.5 Classification of of Export and Import financing
Trade finance can be classified into:

 pre-shipment finance” and “post-shipment finance” by the time of finance;

 “supplier credit” and “buyer credit” by who undertakes to provide the funds

 required for the performance of a contract; and

 “short-term trade finance” and “mid–long-term trade finance” by the loan period.
Dicussion Question
An exporter buys goods from a local supplier. The local supplier demands cash in advance for the
payment terms. The exporter sells the goods to a foreign buyer (importer) on an open account of 90
days from bill of lading date because the exporter has to grant extended sales terms to offer
competitive payment terms.

It takes three months for the manufacture of the goods, and the exporter thus takes delivery of the
goods after three months from the payment to the local supplier. Then, the exporter ships the goods
and sends the shipping documents to the importer. The importer pays three months after shipment.

 Dicussion the difficulties in working capital management the exporter might face. If possible,
provide some solutions.
 References

1 2
PGS.TS.Nguyễn Thị Phương Liên Andars Grath (2008), The
(2014), Giáo trình Thanh toán handbook of International Trade
quốc tếvà tài trợ xuất nhập khẩu, and finance. Kogan Page Limited
NXB Thống kê.