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3) Check A check is an unconditional order in writing addressed by the customer (drawee) to a bank(draw) signed by the customer authorizing the bank to pay on demanding a specified sum of money to or to the order of a named person or to bearer (payee). A check is a special kind of draft in that the drawee is always a bank with which the drawer has an account. Besides, a check is always paid upon presentation. If the drawer wants to write a check now but does not want the payee to collect the money immediately, the drawer can postdate the check.
The most newly developed payment procedure for passing and recording international payment is called the Society for Worldwide Inter-bank Financial Telecommunication (SWIFT). This system is known for its uniform format, fast transfer and low cost.
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Third, different regulations and systems of law that are applied further complicate the arrangements. Fourth, the monetary and financial matters are different in different countries and different methods are used. Because of the above reasons, international payment arrangements involve more risks and must be handled with special care.
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2) Promissory Note A promissory note is an unconditional promise in writing made by one person( the maker) to another (the payee/ the holder) signed by the maker engaging to pay on demand or at a fixed or determinable future time a sum of money to or to the order of a specified person or to bearer. A promissory note can be issued by a person, a firm, or a bank. But promissory notes issued by individuals and firms are not widely used in trade today.
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D/P (D/P at sight and D/P after sight) D/A
D/P means documents can only be released to the importer when he has paid the amount on the draft. D/P at sight means that payment should be made as soon as the importer is presented the draft. D/P after sight requires the collecting bank to release the documents upon payment. D/A is different from D/P in that the documents will be released to the importer once the importer has accepted the draft.
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Compared with payment arrangements for domestic transactions, payments for international transactions are more complicated and difficult for a number of reasons. First, the arrangements are international; as a result, longer distance and more procedures are involved. Second, longer time is needed in setting an international payment.
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3) Documentary credit a documentary credit is a written undertaking by a bank given to the exporter at the request of the importer to effect payment up to a stated sum of money, within a prescribed time limit and against stipulated documents.
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2、Modes of payment in international trade 1）Remittance Remittance means that the importer remits the amount of money to the exporter through banks according to the terms and time stipulated in the contract. There are kinds of remittance: Mail Transfer (M/T) Telegraphic Transfer (T/T) Demand Draft (D/D)
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1.Payment Instrument of International Trade 1) Draft or Bill of Exchange 2) Promissory Note 3) Check 2. Modes of payment in international trade 1）Remittance 2）Collection 3）Documentary credit
Specimen Letter of Credit THE CHARTERED BANK Singapore Irrevocable L/C No.94625
Date: May15, 2008
To: China National Import & Export Corp., Shanghai Branch Dear Sirs， You are hereby authorized to draw on Hua Feng Trading Co., Singapore for a sum not exceeding USD 7,850.00 CIF (Say US Dollars Seven Thousand Eight Hundred and Fifty only) available by your draft, drawn in duplicate, on them at sight, accompany by the following documents: 1）3 Non negotiable copies of clean shipped on board bill of lading, marked “Freight prepaid”; 2）Signed Invoice in triplicate;
2）Collection It is a kind of commercial credit, means the presentation for payment of an obligation and the payment thereof. By collection, it is the exporter who draws a bill of exchange on the importer for the sum due, with or without relevant shipping documents attached, and asks his bank to arrange for the acceptance or payment of the The bank will carry out his instructions through it branch or a correspondent bank in the importer’s place. To be specific, in collection, payment is made through banks under the terms of Documents against Payment (D/P) or Documents against Acceptance (D/A).