The document discusses export payment terms and strategies for negotiating payment in international contracts. It covers 5 steps in negotiating payment: 1) mode of payment, 2) timing, 3) place of payment, 4) delay terms, and 5) results of delay. It also discusses how exporters can mitigate payment risk through third party guarantees like export credit insurance, payment guarantees, tender guarantees, performance guarantees, and prepayment guarantees. The guarantees commit a bank to pay the exporter if the buyer defaults or fails to meet obligations.
Ch1 negotiating delivery-theory-dịch hợp đồng- bookboomingbookbooming
There are three main kinds of delay in delivery discussed in the document:
1. Excusable delay caused by events outside the parties' control, also known as force majeure.
2. Unexcused delay caused by the seller's fault or negligence.
3. Grace period which allows for early delivery and benefits both parties.
Ch1 negotiating delivery-theory-dịch hợp đồng- bookboomingbookbooming
There are three main kinds of delay in delivery discussed in the document:
1. Excusable delay caused by events outside the parties' control, also known as force majeure.
2. Unexcused delay caused by the seller's fault or negligence.
3. Grace period which allows for early delivery and benefits both parties.
Factoring is an arrangement where a business sells its accounts receivables to a factoring company in exchange for upfront cash. This provides the business with working capital to meet its needs. There are different types of factoring like full recourse, non-recourse, and maturity factoring. Forfeiting is a mechanism to finance exports by discounting export bills of exchange or promissory notes without recourse to the seller. It involves six parties - exporter, importer, exporter bank, importer bank, Exim bank, and forfeiter. Forfeiting follows eight steps from the commercial contract to payment on maturity. It provides benefits to exporters like hedging risks and converting deferred payments into cash.
This document discusses factoring, which is a financial transaction where a business sells its accounts receivable to a third party called a factor in exchange for immediate cash. There are several types of factoring described, including domestic, international, recourse, non-recourse, maturity, and invoice factoring. The key differences between factoring and a bank loan are also outlined. A case study is then provided showing how a company used export factoring and purchase order financing to fulfill several contracts requiring upfront capital.
Factoring is an arrangement where a business sells its accounts receivables to a factoring company in exchange for upfront cash. This provides the business with working capital to meet its needs. There are different types of factoring like full recourse, non-recourse, and maturity factoring. Forfeiting is a mechanism to finance exports by discounting export bills of exchange or promissory notes without recourse to the seller. It involves six parties - exporter, importer, exporter bank, importer bank, Exim bank, and forfeiter. Forfeiting follows eight steps from the commercial contract to payment on maturity. It provides benefits to exporters like hedging risks and converting deferred payments into cash.
This document discusses factoring, which is a financial transaction where a business sells its accounts receivable to a third party called a factor in exchange for immediate cash. There are several types of factoring described, including domestic, international, recourse, non-recourse, maturity, and invoice factoring. The key differences between factoring and a bank loan are also outlined. A case study is then provided showing how a company used export factoring and purchase order financing to fulfill several contracts requiring upfront capital.
1. The document discusses various export initiatives and targets in India including adding new focus markets, duty incentives, and increasing annual export growth targets.
2. It also covers important elements of executing export orders properly such as agreeing on terms, product details, payment and delivery terms, and establishing a confirmed order in writing.
3. Key considerations for working capital management in exports are discussed such as managing receivables, inventory, costs of funds, discounts, and the role of ECGC export credit insurance.
Shiva sir factoring,discounting& forfaitingBarotlaxman
This document discusses factoring, forfaiting, and bill discounting as methods of short-term trade financing. It begins by outlining the objectives and structure of the unit. Factoring involves the sale of receivables to a factor who provides various services like financing, debt collection, and administration. Forfaiting allows exporters to receive funds by transferring debt rights to a forfaiter. Bill discounting allows financing through the acceptance of bill liabilities by a third party. The document then goes on to provide details on the operations, types, terms, advantages, and mechanics of factoring services.
Process of Credit Application by Rajorsi panjaRajorsi Panja
This document provides information about the process of credit application in the retail sector. It discusses the key aspects of credit sales including features, conditions, agreements and repayment terms. It also describes the process of credit checks, getting authorization, processing credit requisitions and techniques for determining customer creditworthiness such as analyzing financial ratios and credit history. The document is divided into 4 sessions that outline these various components of extending and managing credit for retail customers.
This document provides an overview of international trade and banking practices. It discusses several key topics:
Payment methods for international transactions including cash in advance, documentary collections, letters of credit, open accounts, and combining methods. Letters of credit are described in more detail including parties involved and types of letters of credit.
Trade finance methods like accounts receivable financing, factoring, letters of credit, banker's acceptances, working capital financing and counter-trade are also outlined.
The training aims to acquaint trainees with basic concepts of international trade and banking practices so they understand payment methods, documentation, risks and how trade is financed.
Credit application process is a process where the borrower has to go through some standard procedure to get goods and service on credit for sertain specified time period. Credit sales in which goods Are sold to customer on credit i.e. customer has to pay amount of good at later date. The due amount can be collected in different forms such as lump sum payments or at installment payments.
Microsoft power point chapter v – international trade financeNguyen Trang
This document defines various types of trade finance including import/export credits, commodity credits, monetary credits, and special types like export credit insurance, factoring, and forfaiting. It also discusses classification of trade credits based on objects, duration, lenders, and purpose. Key aspects of each type are outlined such as definitions, mechanisms, advantages, and disadvantages. International interest rates like LIBOR and credit duration concepts are also introduced through examples.
This document provides an overview of export finance and payment methods. It discusses balancing risk between buyers and sellers when choosing a payment method. Common payment methods like letters of credit, cash in advance, collections, and open accounts are examined in terms of their risks and costs. The document also reviews export credit management, foreign receivables insurance, and US government financing programs to support export growth. Finally, it discusses managing foreign exchange risk through hedging tools.
Robert Corona Presentation on Export Finance guestb46310
This document provides an overview of export finance and payment methods for international trade. It discusses balancing risk between buyers and sellers when choosing payment terms, and reviews various payment options like letters of credit, cash in advance, collections, and open accounts. It also covers export credit management, foreign receivables insurance, and US government financing programs. Finally, it discusses managing foreign exchange risk and hedging tools like forward contracts. The goal is to help companies choose appropriate payment terms and financing to expand exports while mitigating risks.
Chapter20 International Finance ManagementPiyush Gaur
This document provides sample answers and solutions to end-of-chapter questions and problems about international trade finance. It discusses key concepts like letters of credit, time drafts, bills of lading, banker's acceptances, and different types of countertrade transactions. The document aims to help students understand the basic documents and processes involved in conducting international trade and different payment options for exporters.
Introduction to factoring, history, introduction to act, important features of the act, rights, obligation, responsibility, penality, shortcomings of the act.
This document provides an overview of factoring and forfaiting. It defines factoring as the financial transaction where a business sells its accounts receivable to a third party called a factor at a discount. Forfaiting refers to the financing of receivables related to international trade where the right to export receivables is purchased by a financial intermediary without recourse. The document outlines the key parties involved in factoring and forfaiting, the different types of factoring arrangements, the functions of a factor, and the information and documents required by a forfaiter.
This document provides an overview of trade finance and pre-shipment trade finance. It discusses the importance of trade finance in facilitating international trade by providing working capital loans and payment terms. It outlines the key types of pre-shipment financing including packing credit and advances against receivables. Requirements for obtaining packing credit include having an importer-exporter code, not being on the RBI caution list, and having necessary licenses and quotas if applicable. Documentation needed includes an application, purchase order, licenses if needed, and information about the buyer and goods.
This document provides an overview of factoring presented by Pawan Singh Raikhola. It defines factoring as the financial transaction where a business sells its account receivables to a third party called a factor at a discounted rate. There are typically three parties involved - the factor, client/seller, and buyer/customer. The presentation describes the key features and types of factoring such as full factoring, recourse vs. non-recourse, and domestic vs. international factoring. It also outlines the steps in the factoring process and provides statistics on the factoring industry in India. Forfaiting is discussed as a similar process used to finance export receivables over medium terms of 1-5 years
The document discusses key steps and concepts in negotiating international trade agreements, including delivery, payment, and risk transfer. It addresses:
1. The five key steps in negotiating delivery terms: timing, location, transportation, risk/title/insurance, and trade terms.
2. Common methods of payment in international trade, including open account, export credit insurance, bank guarantees, and letters of credit.
3. Key differences between liquidated damages and penalties for late delivery, and the importance of clearly defining excusable and non-excusable delays.
Intermediate Accounting . CH 18 . by MidoCoolMahmoud Mohamed
This document provides learning objectives and content on revenue recognition principles and methods. It discusses recognizing revenue at the point of sale, before delivery using the percentage-of-completion and completed contract methods, and after delivery using installment sales and cost recovery methods. It also addresses accounting for long-term contract losses and disclosure requirements.
There are 3 main methods of payment in international trade: clean payment, collection of bills, and letters of credit. Clean payment involves direct handling of documents between trading partners with a limited role for banks. It offers a cheap option but the exporter assumes risks. Collection of bills involves banks handling documents with options for release against payment or acceptance. Letters of credit are a written undertaking from the importer's bank to pay the exporter up to a stated amount against stipulated documents, and can be revocable or irrevocable, for sight or time, and confirmed.
Similar to Ch 2 price and payment- theory bookbooming (20)
The document contains a list of URLs. It includes over 200 URLs grouped into blocks of URLs with the same page rank number (pagerank 8, pagerank 7, no pagerank specified). The URLs cover a wide range of topics and websites including forums, educational sites, government sites, and international sites.
1. Glocalization means operating globally while accounting for local cultural differences in each market.
2. Japanese companies promote based on seniority, so a 50-year-old manager has more status than a 30-year-old.
3. Some salesmen did not want to outperform colleagues or earn as much as their boss to avoid causing issues.
This document discusses pricing concepts and strategies. It begins by asking questions about different types of prices like rent, tuition, and wages. It then covers the role and perception of price from the customer and seller perspectives. Key factors that influence pricing are also outlined, including customers, demand, competition, and costs. The document concludes by describing the multi-step process of setting prices, which involves defining objectives, assessing demand, determining pricing policies and strategies, setting an initial price range, and making tactical pricing adjustments.
This document provides an overview of contract law and translation. It discusses key topics like the two branches of law, how contracts create new legally enforceable rights between parties, factors that determine applicable law, and patterns of clauses in English language contracts. Examples of contract clauses are also provided to illustrate complex structures typically seen in English contracts.
University of North Carolina at Charlotte degree offer diploma Transcripttscdzuip
办理美国UNCC毕业证书制作北卡大学夏洛特分校假文凭定制Q微168899991做UNCC留信网教留服认证海牙认证改UNCC成绩单GPA做UNCC假学位证假文凭高仿毕业证GRE代考如何申请北卡罗莱纳大学夏洛特分校University of North Carolina at Charlotte degree offer diploma Transcript
13 Jun 24 ILC Retirement Income Summit - slides.pptxILC- UK
ILC's Retirement Income Summit was hosted by M&G and supported by Canada Life. The event brought together key policymakers, influencers and experts to help identify policy priorities for the next Government and ensure more of us have access to a decent income in retirement.
Contributors included:
Jo Blanden, Professor in Economics, University of Surrey
Clive Bolton, CEO, Life Insurance M&G Plc
Jim Boyd, CEO, Equity Release Council
Molly Broome, Economist, Resolution Foundation
Nida Broughton, Co-Director of Economic Policy, Behavioural Insights Team
Jonathan Cribb, Associate Director and Head of Retirement, Savings, and Ageing, Institute for Fiscal Studies
Joanna Elson CBE, Chief Executive Officer, Independent Age
Tom Evans, Managing Director of Retirement, Canada Life
Steve Groves, Chair, Key Retirement Group
Tish Hanifan, Founder and Joint Chair of the Society of Later life Advisers
Sue Lewis, ILC Trustee
Siobhan Lough, Senior Consultant, Hymans Robertson
Mick McAteer, Co-Director, The Financial Inclusion Centre
Stuart McDonald MBE, Head of Longevity and Democratic Insights, LCP
Anusha Mittal, Managing Director, Individual Life and Pensions, M&G Life
Shelley Morris, Senior Project Manager, Living Pension, Living Wage Foundation
Sarah O'Grady, Journalist
Will Sherlock, Head of External Relations, M&G Plc
Daniela Silcock, Head of Policy Research, Pensions Policy Institute
David Sinclair, Chief Executive, ILC
Jordi Skilbeck, Senior Policy Advisor, Pensions and Lifetime Savings Association
Rt Hon Sir Stephen Timms, former Chair, Work & Pensions Committee
Nigel Waterson, ILC Trustee
Jackie Wells, Strategy and Policy Consultant, ILC Strategic Advisory Board
Optimizing Net Interest Margin (NIM) in the Financial Sector (With Examples).pdfshruti1menon2
NIM is calculated as the difference between interest income earned and interest expenses paid, divided by interest-earning assets.
Importance: NIM serves as a critical measure of a financial institution's profitability and operational efficiency. It reflects how effectively the institution is utilizing its interest-earning assets to generate income while managing interest costs.
In a tight labour market, job-seekers gain bargaining power and leverage it into greater job quality—at least, that’s the conventional wisdom.
Michael, LMIC Economist, presented findings that reveal a weakened relationship between labour market tightness and job quality indicators following the pandemic. Labour market tightness coincided with growth in real wages for only a portion of workers: those in low-wage jobs requiring little education. Several factors—including labour market composition, worker and employer behaviour, and labour market practices—have contributed to the absence of worker benefits. These will be investigated further in future work.
How to Invest in Cryptocurrency for Beginners: A Complete GuideDaniel
Cryptocurrency is digital money that operates independently of a central authority, utilizing cryptography for security. Unlike traditional currencies issued by governments (fiat currencies), cryptocurrencies are decentralized and typically operate on a technology called blockchain. Each cryptocurrency transaction is recorded on a public ledger, ensuring transparency and security.
Cryptocurrencies can be used for various purposes, including online purchases, investment opportunities, and as a means of transferring value globally without the need for intermediaries like banks.
OJP data from firms like Vicinity Jobs have emerged as a complement to traditional sources of labour demand data, such as the Job Vacancy and Wages Survey (JVWS). Ibrahim Abuallail, PhD Candidate, University of Ottawa, presented research relating to bias in OJPs and a proposed approach to effectively adjust OJP data to complement existing official data (such as from the JVWS) and improve the measurement of labour demand.
Discover the Future of Dogecoin with Our Comprehensive Guidance36 Crypto
Learn in-depth about Dogecoin's trajectory and stay informed with 36crypto's essential and up-to-date information about the crypto space.
Our presentation delves into Dogecoin's potential future, exploring whether it's destined to skyrocket to the moon or face a downward spiral. In addition, it highlights invaluable insights. Don't miss out on this opportunity to enhance your crypto understanding!
https://36crypto.com/the-future-of-dogecoin-how-high-can-this-cryptocurrency-reach/
A toxic combination of 15 years of low growth, and four decades of high inequality, has left Britain poorer and falling behind its peers. Productivity growth is weak and public investment is low, while wages today are no higher than they were before the financial crisis. Britain needs a new economic strategy to lift itself out of stagnation.
Scotland is in many ways a microcosm of this challenge. It has become a hub for creative industries, is home to several world-class universities and a thriving community of businesses – strengths that need to be harness and leveraged. But it also has high levels of deprivation, with homelessness reaching a record high and nearly half a million people living in very deep poverty last year. Scotland won’t be truly thriving unless it finds ways to ensure that all its inhabitants benefit from growth and investment. This is the central challenge facing policy makers both in Holyrood and Westminster.
What should a new national economic strategy for Scotland include? What would the pursuit of stronger economic growth mean for local, national and UK-wide policy makers? How will economic change affect the jobs we do, the places we live and the businesses we work for? And what are the prospects for cities like Glasgow, and nations like Scotland, in rising to these challenges?
Dr. Alyce Su Cover Story - China's Investment Leadermsthrill
In World Expo 2010 Shanghai – the most visited Expo in the World History
https://www.britannica.com/event/Expo-Shanghai-2010
China’s official organizer of the Expo, CCPIT (China Council for the Promotion of International Trade https://en.ccpit.org/) has chosen Dr. Alyce Su as the Cover Person with Cover Story, in the Expo’s official magazine distributed throughout the Expo, showcasing China’s New Generation of Leaders to the World.
The Rise and Fall of Ponzi Schemes in America.pptxDiana Rose
Ponzi schemes, a notorious form of financial fraud, have plagued America’s investment landscape for decades. Named after Charles Ponzi, who orchestrated one of the most infamous schemes in the early 20th century, these fraudulent operations promise high returns with little or no risk, only to collapse and leave investors with significant losses. This article explores the nature of Ponzi schemes, notable cases in American history, their impact on victims, and measures to prevent falling prey to such scams.
Understanding Ponzi Schemes
A Ponzi scheme is an investment scam where returns are paid to earlier investors using the capital from newer investors, rather than from legitimate profit earned. The scheme relies on a constant influx of new investments to continue paying the promised returns. Eventually, when the flow of new money slows down or stops, the scheme collapses, leaving the majority of investors with substantial financial losses.
Historical Context: Charles Ponzi and His Legacy
Charles Ponzi is the namesake of this deceptive practice. In the 1920s, Ponzi promised investors in Boston a 50% return within 45 days or 100% return in 90 days through arbitrage of international reply coupons. Initially, he paid returns as promised, not from profits, but from the investments of new participants. When his scheme unraveled, it resulted in losses exceeding $20 million (equivalent to about $270 million today).
Notable American Ponzi Schemes
1. Bernie Madoff: Perhaps the most notorious Ponzi scheme in recent history, Bernie Madoff’s fraud involved $65 billion. Madoff, a well-respected figure in the financial industry, promised steady, high returns through a secretive investment strategy. His scheme lasted for decades before collapsing in 2008, devastating thousands of investors, including individuals, charities, and institutional clients.
2. Allen Stanford: Through his company, Stanford Financial Group, Allen Stanford orchestrated a $7 billion Ponzi scheme, luring investors with fraudulent certificates of deposit issued by his offshore bank. Stanford promised high returns and lavish lifestyle benefits to his investors, which ultimately led to a 110-year prison sentence for the financier in 2012.
3. Tom Petters: In a scheme that lasted more than a decade, Tom Petters ran a $3.65 billion Ponzi scheme, using his company, Petters Group Worldwide. He claimed to buy and sell consumer electronics, but in reality, he used new investments to pay off old debts and fund his extravagant lifestyle. Petters was convicted in 2009 and sentenced to 50 years in prison.
4. Eric Dalius and Saivian: Eric Dalius, a prominent figure behind Saivian, a cashback program promising high returns, is under scrutiny for allegedly orchestrating a Ponzi scheme. Saivian enticed investors with promises of up to 20% cash back on everyday purchases. However, investigations suggest that the returns were paid using new investments rather than legitimate profits. The collapse of Saivian l
Abhay Bhutada, the Managing Director of Poonawalla Fincorp Limited, is an accomplished leader with over 15 years of experience in commercial and retail lending. A Qualified Chartered Accountant, he has been pivotal in leveraging technology to enhance financial services. Starting his career at Bank of India, he later founded TAB Capital Limited and co-founded Poonawalla Finance Private Limited, emphasizing digital lending. Under his leadership, Poonawalla Fincorp achieved a 'AAA' credit rating, integrating acquisitions and emphasizing corporate governance. Actively involved in industry forums and CSR initiatives, Abhay has been recognized with awards like "Young Entrepreneur of India 2017" and "40 under 40 Most Influential Leader for 2020-21." Personally, he values mindfulness, enjoys gardening, yoga, and sees every day as an opportunity for growth and improvement.
2. CHAPTER: II
NEGOTIATING PRICE AND PAYMENT
Part 1: Export pricing strategies
THE PROBLEM:
The price which exporter states reflects
delivery time, method of payment, etc.
2
3. CHAPTER: II
NEGOTIATING PRICE AND PAYMENT
Part 1: Export pricing strategies
How can the exporter avoid the “price
trap” occurred in many negotiations
when the buyer demands concessions
about delivery time, method of
payment, etc?
3
4. CHAPTER: II
NEGOTIATING PRICE AND PAYMENT
Part 1: Export pricing strategies
THE PRINCIPLE
The exporter should guarantee that the
contract price reflects any change in a
set of assumptions about delivery,
payment and warranty terms.
4
5. CHAPTER: II
NEGOTIATING PRICE AND PAYMENT
Part 2: THE FIVE STEPS IN NEGOTIATING
PAYMENT
Step 1: Mode of Payment
Step 2: Timing
Step 3: Place of payment
Step 4: Delay - what delay in payment
is excusable?
Step 5: Results of delay
5
6. CHAPTER: II
NEGOTIATING PRICE AND PAYMENT
Part 2: THE FIVE STEPS IN NEGOTIATING
PAYMENT
Step 1: Mode of Payment
There are four common mode of
payment:
1. Payment on open account with no
security: this type is seriously risky to
the exporter
6
7. CHAPTER: II
NEGOTIATING PRICE AND PAYMENT
Part 2: THE FIVE STEPS IN NEGOTIATING
PAYMENT
Step 1: Mode of Payment
2. Payment on open account secured
by export credit insurance: the
exporter pays money to an insurance
company to buy an export credit
insurance
7
8. CHAPTER: II
NEGOTIATING PRICE AND PAYMENT
Part 2: THE FIVE STEPS IN NEGOTIATING
PAYMENT
Step 1: Mode of Payment
3. Payment on open account secured
by a payment guarantee: the buyer
pays money to a bank to receive a
bank guarantee.
8
9. CHAPTER: II
NEGOTIATING PRICE AND PAYMENT
Part 2: THE FIVE STEPS IN NEGOTIATING
PAYMENT
Step 1: Mode of Payment
4. Payment by letter of credit: the
buyer must position the money with a
bank in the country of the exporter and
the exporter can collect that money
when the goods are delivered.
9
10. CHAPTER: II
NEGOTIATING PRICE AND PAYMENT
Part 2: THE FIVE STEPS IN NEGOTIATING
PAYMENT
Step 2: Timing
This step determines the date of payment.
The importer often wants to delay the time of
payment but the exporter suffers from delay
because late payment is subject to payment
of interest so most sellers offer discount for
early payment. This helps the buyer save on
the invoice price and the seller quickly collects
his money.
10
11. CHAPTER: II
NEGOTIATING PRICE AND PAYMENT
Part 2: THE FIVE STEPS IN NEGOTIATING
PAYMENT
Step 2: Timing
The date of payment may be regulated date
or a chain of dates.
It is also calendar dates or interval times.
11
12. CHAPTER: II
NEGOTIATING PRICE AND PAYMENT
Part 2: THE FIVE STEPS IN NEGOTIATING
PAYMENT
Step 3: Place of payment
This step determines where the money must
be before payment is to be completed
12
13. CHAPTER: II
NEGOTIATING PRICE AND PAYMENT
Part 2: THE FIVE STEPS IN NEGOTIATING
PAYMENT
P79:
Payment shall be deemed to have been made
only when the contract sum is paid into the
Seller’s bank account and is at the Seller’s full
disposal.
13
14. CHAPTER: II
NEGOTIATING PRICE AND PAYMENT
Part 2: THE FIVE STEPS IN NEGOTIATING
PAYMENT
Step 4: Delay - what delay in payment is
excusable?
Delay in payment may be excused during a grace
period (not common) or a force majeure event
(more common). But most exporters do not want
to excuse these delays and any payment made
after the agreed date of payment is in delay.
14
15. CHAPTER: II
NEGOTIATING PRICE AND PAYMENT
Part 2: THE FIVE STEPS IN NEGOTIATING
PAYMENT
Step 5: Results of delay
When delay in payment happens the exporter is
usually compensated for losses due to late
payment.
The exporter may ask for a payment guarantee
which makes sure payment is made on time.
The best solution to get rid of delay is to create a
payment article in the sale contract which makes
late payment is impossible.
15
16. CHAPTER: II
NEGOTIATING PRICE AND PAYMENT
Part 2: THE FIVE STPES IN NEGOTIATING
PAYMENT
Step 5: Results of delay
Page 80
If payment of any sum payable is delayed, the
Buyer shall be entitled to receive interest on the
amount unpaid during the period of delay. The
interest shall be at an annual rate three
percentage points above the discount rate of the
central Bank in the Seller’s country.
16
17. CHAPTER: II
NEGOTIATING PRICE AND PAYMENT
Part 3: THIRD-PARTY SECURITY FOR PAYMENT
In the international trade, the exporter may face a
lot of risks and one of the significant ones is non-
payment. There are two main ways that the
exporter can use to reduce this risk. One is export
credit insurance and the other is bank guarantee.
17
18. CHAPTER: II
NEGOTIATING PRICE AND PAYMENT
Part 3: THIRD-PARTY SECURITY FOR PAYMENT
1.Export credit insurance
Export credit insurance allows exporter to recover
the major part of the contract price if the buyer
fails to pay after six months. To buy such
insurance, the exporter must explain the detail of
the business to an insurance company and receive
a quotation.
18
19. CHAPTER: II
NEGOTIATING PRICE AND PAYMENT
Part 3: THIRD-PARTY SECURITY FOR PAYMENT
Export credit insurance
If the insurer refuses to pay, it may mean that
there are some problems in the exporter or
importer. The exporter has to pay an export
insurance premium which depends on many
factors, such as: the type of goods exported, the
creditworthiness of the buyer, the political stability
of the importer country.
19
20. CHAPTER: II
NEGOTIATING PRICE AND PAYMENT
Part 3: THIRD-PARTY SECURITY FOR PAYMENT
Export credit insurance
Although this way is attractive, it has some
limitations: the exporter has to wait for a long
time to be compensated and the compensation is
unlikely to cover 100% of the invoice price.
20
21. CHAPTER: II
NEGOTIATING PRICE AND PAYMENT
Part 3: THIRD-PARTY SECURITY FOR PAYMENT
Payment guarantee
In this method, the buyer may ask for a bank
guarantee which means that the bank will pay the
contract price if the buyer fails to do so.
Guarantees are commonly used in four business
situations, as the following:
21
22. CHAPTER: II
NEGOTIATING PRICE AND PAYMENT
Part 3: THIRD-PARTY SECURITY FOR PAYMENT
2. Payment guarantee
In this method, the buyer may ask for a bank
guarantee which means that the bank will pay the
contract price if the buyer fails to do so.
Guarantees are commonly used in four business
situations, as the following:
22
23. CHAPTER: II
NEGOTIATING PRICE AND PAYMENT
Part 3: THIRD-PARTY SECURITY FOR PAYMENT
2. Payment guarantee
Risk 1: Non-payment =>Payment guarantee
A payment guarantee makes sure that the
exporter will receive payment. It commits the
bank to pay if the buyer defaults. The payment
guarantee is usually for 100% of the contract
price.
23
24. CHAPTER: II
NEGOTIATING PRICE AND PAYMENT
Part 3: THIRD-PARTY SECURITY FOR PAYMENT
2. Payment guarantee
Risk 2: Revocation => Tender guarantee
This type of guarantee is used in case that the
exporter who bids on a contract to supply goods
or materials to a government department or
agency is withdrawn. A normal figure for tender
guarantee is usually from 1.5% to 5% of the
contract price.
24
25. CHAPTER: II
NEGOTIATING PRICE AND PAYMENT
Part 3: THIRD-PARTY SECURITY FOR PAYMENT
2. Payment guarantee
Risk 3: Non-performance=>Performance
guarantee
Performance guarantee makes sure that if the
exporter works badly or not at all, the guarantor
will pay, within stated limits, the costs of the
exporter’s failure to perform. A figure for
performance guarantee is from 5% to 10% of the
contract price.
25
26. CHAPTER: II
NEGOTIATING PRICE AND PAYMENT
Part 3: THIRD-PARTY SECURITY FOR PAYMENT
2. Payment guarantee
Risk 4: Losing Prepayment=>Prepayment
guarantee
This guarantee promises the buyer that the bank
will return advance payments if the exporter fails
to deliver. The guarantee is often for 100% of the
prepayment.
26
27. CHAPTER: II
NEGOTIATING PRICE AND PAYMENT
Part 4: THE LETTER OF CREDIT
Letters of credit are issued in many
forms for many purposes. Some letters
of credit offer first class security for the
exporters, some are little better than a
personal check
The most ideal type of letter of credit
from the exporter’s point of view is
irrevocable, confirmed, at sight letter of
credit.
27
28. CHAPTER: II
NEGOTIATING PRICE AND PAYMENT
Part 4: THE LETTER OF CREDIT
The Uniform Customs and Practice for
Documentary Credits (UCP) by the
International Chamber of Commerce is the
most universal set of practices ruling over
payment by letter of credit.
Besides, parties to a contract can also use
the rules of the United States.
28
29. CHAPTER: II
NEGOTIATING PRICE AND PAYMENT
Part 4: THE LETTER OF CREDIT
Page 87
The Buyer, on receipt of the Confirmation of
Order from the Seller, shall at least 20 days
prior to the date of delivery open a
confirmed, irrevocable letter of credit. This
credit shall bi subject to Uniform Customs and
Practice for Documentary Credits, 1993
Revision, ICC publication No.500.
29
30. CHAPTER: II
NEGOTIATING PRICE AND PAYMENT
Part 4: THE LETTER OF CREDIT
Page 87
20% of the credit shall be available against
the Seller’s draft accompanied by invoice, the
remaining 80% shall be available against the
Seller’ graft accompanied by the shipping
documents.
30
31. CHAPTER: II
NEGOTIATING PRICE AND PAYMENT
Part 4: THE LETTER OF CREDIT
Page 87
20% of the credit shall be available against
the Seller’s draft accompanied by invoice, the
remaining 80% shall be available against the
Seller’ graft accompanied by the shipping
documents.
31
32. CHAPTER: II
Q&A
1.Why is payment in international trade
tightly controlled?
32
33. CHAPTER: II
Q&A
1.Why payment in international trade
tightly controlled?
-Trust is rare
-Court is far away and unpredictable
33
34. CHAPTER: II
Q&A
2.What are the common methods of
payment in international trade?
34
35. CHAPTER: II
Q&A
2.What are the common methods
of payment in international trade?
- Open account with no security
- Open account with secured by
export credit insurance
- Open account with secured by
payment guarantee
-Payment by letter of credit
35
36. CHAPTER: II
Q&A
3. What are methods of payment
in small purchases?
36
37. CHAPTER: II
Q&A
3. What are methods of payment
in small purchases?
-Cash on delivery
-Cash against invoice
-Cash with order
37
38. CHAPTER: II
Q&A
4. What are payment insurances?
38
39. CHAPTER: II
Q&A
4. What are payment insurances?
-Bank guarantee.
-Export credit insurance
39
40. CHAPTER: II
Q&A
5. Who can offer bank guarantee?
40
41. CHAPTER: II
Q&A
5. Who can offer bank guarantee?
- A bank
41
42. CHAPTER: II
Q&A
6. Who can offer export credit
insurance?
42
43. CHAPTER: II
Q&A
6. Who can offer export cerdit
insurance?
- An insurance company.
43
44. CHAPTER: II
Q&A
7. Who can offer export credit
insurance?
44
45. CHAPTER: II
Q&A
7. Who can offer export credit
insurance?
- An insurance company.
45
46. CHAPTER: II
Q&A
8. What are the two main
elements in payment?
46
47. CHAPTER: II
Q&A
8. What are the two main
elements in payment?
-Time
-Structure
47
48. CHAPTER: II
Q&A
9. What does the exporter have to
suffer from late payment?
48
49. CHAPTER: II
Q&A
9. What does the exporter have to
suffer from late payment?
- Bank interest
49
50. CHAPTER: II
Q&A
10. What is an incentive for early
payment?
50
51. CHAPTER: II
Q&A
10. What is an incentive for early
payment?
- A discount
51
52. CHAPTER: II
Q&A
11. How to fix payment date?
52
53. CHAPTER: II
Q&A
11. How to fix payment date?
-A calendar date.
-Interval times.
53
54. CHAPTER: II
Q&A
12. When delay in payment is
excused?
54
55. CHAPTER: II
Q&A
12. When delay in payment is
excused?
-Delay happens in the grace
period.
-Delay is caused by Force Majeure
55
56. CHAPTER: II
Q&A
13. What does the importer have
to pay to the exporter in case of
late payment?
56
57. CHAPTER: II
Q&A
13. What payment does the
importer have to pay the exporter
in case of late payment?
- Compensation for losses due to
late payment.
57
58. CHAPTER: II
Q&A
14. What kind of method of
payment makes late payment
impossible?
58
59. CHAPTER: II
Q&A
14. What kind of method of
payment makes late payment
impossible?
- The confirmed, irrevocable, at-
sight L/C
59
60. CHAPTER: II
Q&A
15. What may reduce risk for
exporters?
60
61. CHAPTER: II
Q&A
15. What may reduce risk for
exporters?
Exporter may reduce risk by
spreading risk with the third party.
61
62. CHAPTER: II
Q&A
16. In order to take out non-
payment risk, what does the
exporter have to do?
62
63. CHAPTER: II
Q&A
16. In order to take out non-
payment risk insurance, what does
the exporter have to do?
- Contact an insurance company
and explain the details of the
business, applies for a quotation
from the insurance.
63
64. CHAPTER: II
Q&A
17. What can we imply when the
insurance company refuses to
offer an insurance quotation?
64
65. CHAPTER: II
Q&A
17. What can we imply when the
insurance company refuses to
offer an insurance quotation?
-The insurance company knows
the buyer’ uncreditworthiness
-The business is risky.
65
66. CHAPTER: II
Q&A
18. What does the insurance
premium depend on?
66
67. CHAPTER: II
Q&A
18. What does the insurance
premium depend on?
-The type of the goods
-The creditworthiness of the
buyer
-The stability of the buyer’ country
and so on.
67
68. CHAPTER: II
Q&A
19. What is the guarantee
triangle?
68
69. CHAPTER: II
Q&A
19. What is the guarantee
triangle?
- That is the relationship of the
principal, guarantor and
beneficiary in terms guarantee.
69
70. CHAPTER: II
Q&A
19. What are the business
situations which commonly use
guarantee?
70
71. CHAPTER: II
Q&A
19. What are the business
situations which commonly use
guarantee?
-Non- payment
-Revocation
-Non- performance
-Losing prepayment
71
72. CHAPTER: II
Q&A
20. What are the guarantees used
in the business situations such as :
-Non- payment
-Revocation
-Non- performance
-Losing prepayment
72
73. CHAPTER: II
Q&A
20. What are the guarantees used
in the following business
situations?
1. Payment guarantee
2. Tender guarantee
3. Performance guarantee
4. Prepayment guarantee
73
74. CHAPTER: II
Q&A
20. Name types of L/C you know?
74
75. CHAPTER: II
Q&A
20. Name types of L/C you know?
- Revocable – Irrevocable
- Confirmed- Unconfirmed
- At- sight L/C
- Back to back L/C
- Revolving L/C
75