The proceeds of the credit, in respect of any international transaction, may hold important issues. To avoid this risk requires a thorough knowledge of the subject and know the techniques, features, mechanisms, advantages and disadvantages of each type of payment used in international trade, becomes, therefore, a strategic element.
elements to be considered for an international payment are essentially six:
elements to be considered for an international payment are essentially six:
- form of payment - can be: a bank, a bank check, a documentary collection, built a simple, built-in electronic rather that a credit documentary.
- the way - The mode of payment may or courier / mail, or via SWIFT or eba-target.
- date - ie the time of payment may be brought forward, postponed or contextual
- the place of payment - may be the country of the buyer, seller or a third country.
- the currency - for what concerns the money may be used in domestic currency or a currency of account currency
- banks that are involved in the payment - are called into question those managing "their" accounts or "our" accounts. The
variables related to international payments are many and are things to consider when choosing the market and essentially are:
- the insolvency of the other party / buyer, the best defined commercial risk ;
- the country's political and economic situation of the counterparty;
- the ability to enable sales coverage and / or political
- the distance and the volume of supplies;
- the currency regime in the country of the buyer, then the practice international banking.
To try to get a good degree of security in international payment must follow some basic rules:
- Information about all ' reliability and solvency of the foreign (ICE provides a survey of foreign counterparts for a fee) ;
- should always negotiate the form of payment ;
- preparation on possible solutions to the payment ;
- define precisely the technical form of payment. We must ask ourselves
some questions in negotiations. Who pays for bank charges? How big is the foreign exchange risk? It will be appropriate to negotiate the foreign currency exchange rate of the trading day as well as giving a written form to great lengths to avoid misunderstandings.
E 'can receive payment in advance of the delivery, when delivered with the system COD (cash on delivery) or after delivery.
What are the payment systems? There are many ways
- Information about all ' reliability and solvency of the foreign (ICE provides a survey of foreign counterparts for a fee) ;
- should always negotiate the form of payment ;
- preparation on possible solutions to the payment ;
- define precisely the technical form of payment. We must ask ourselves
some questions in negotiations. Who pays for bank charges? How big is the foreign exchange risk? It will be appropriate to negotiate the foreign currency exchange rate of the trading day as well as giving a written form to great lengths to avoid misunderstandings.
E 'can receive payment in advance of the delivery, when delivered with the system COD (cash on delivery) or after delivery.
What are the payment systems? There are many ways
- post or courier;
- the SWIFT (Society for Worl-wide interbank Telecomunications)
- the EBA (European Banking Association), through Birla (Bank of Italy Regulation Gross);
- TARGET (Transeuropean Automated Real Time Gross Settlement Express Transfer).
The SWIFT is not a form of payment, but a system of a corporation whose shareholders are the banks themselves.
The TARGET system is instead a sort of chain drive: Customer ordering, issuing banks, Central Bank of the sender country, the ESCB (TARGET), Central Bank of the receiving country, the receiving bank, beneficiary customer.
It examines bank through a correspondent bank. Following the contract between buyer and seller, the buyer instructs his bank via SWIFT to transfer funds to the bank that the seller will credit the funds to the seller.
In case of bank transfer through a bank does not match, there will be a third bank that will be placed between the bank of the buyer and the seller's bank.
It 'important to know the abbreviations related to bank transfer:
PO = Payment Order
MT = Mail Transfer
Telex TT = Transmission
ST = Swift Transfer
The analysis steps 's foreign check. It can be: current account, a SWIFT checks, circular tour or placed. This also works as a communication between the banks of the will of their clients: the buyer sends the check to the seller shall deliver to its bank for trading, which will send the same to its foreign correspondent bank for collection, the bank foreign correspondent bank of the seller will send the check to the buyer's bank, which will charge the payment on behalf of his client, the buyer, and the amount credited to the account of foreign correspondent bank of the merchant's bank. The correspondent bank will credit the check to the merchant's bank, which in turn will credit the amount on behalf of his client, the seller.
Examine the risks of the check and then foreign bank: there may be differences in the legal framework between the countries compared in this respect, the credit is not definitive, but is subject to collection, the time is long for ' outcome of the payment there can be differences of meaning and value to the protest, we must put into account travel days of the check, are put in a difficult account to act in the process of regression and lack of autonomy and enforceability payment and this type of payment is also revoked.
The Bank Draft Negotiating subject to collection has the disadvantage that if the payment was not honored, is debited to the beneficiary plus bank fees and charges.
If you send after final payment, you can talk very much in advance payment. It awaits the conclusion of the procedure that leads to the crediting of the bank account of the beneficiary and then provide for the supply.
Finally, in the case of the so-called "Lock Box System", the recipient inform your bank of the countries of operation and corresponding foreign bank which is domiciled at the Lock Box (PO Box), then the beneficiary authorizing the foreign bank domiciled in the estuary Lock Box to trading on its behalf and at their own risk, the check is then deposited by the buyer to the post box at the bank in the country of domicile of the buyer at the buyer's bank.
The advantages of the Lock Box System are therefore: reduced risk, speed-of collection, the buyer's liking (it uses a fast way of payment), built in the country diemissio0ne, saving commissions in case of a failure to pay can be exercised 'action for recovery under the terms established by the law of the buyer, there was a significant improvement of day to credit the amount of currency, because of fact is transformed into a bank abroad, and the scrutiny of the payment becomes faster and more effectively. The
COD (cash on delivery) can be paid via: bills, check bank account, bank statement block of funds, check drawn by the bank (bank draft), bank certificate of transfer of the funds, bank statement order of receipt of payment to the seller, bill is accepted.
E 'important in the case of COD:
The TARGET system is instead a sort of chain drive: Customer ordering, issuing banks, Central Bank of the sender country, the ESCB (TARGET), Central Bank of the receiving country, the receiving bank, beneficiary customer.
It examines bank through a correspondent bank. Following the contract between buyer and seller, the buyer instructs his bank via SWIFT to transfer funds to the bank that the seller will credit the funds to the seller.
In case of bank transfer through a bank does not match, there will be a third bank that will be placed between the bank of the buyer and the seller's bank.
It 'important to know the abbreviations related to bank transfer:
PO = Payment Order
MT = Mail Transfer
Telex TT = Transmission
ST = Swift Transfer
The analysis steps 's foreign check. It can be: current account, a SWIFT checks, circular tour or placed. This also works as a communication between the banks of the will of their clients: the buyer sends the check to the seller shall deliver to its bank for trading, which will send the same to its foreign correspondent bank for collection, the bank foreign correspondent bank of the seller will send the check to the buyer's bank, which will charge the payment on behalf of his client, the buyer, and the amount credited to the account of foreign correspondent bank of the merchant's bank. The correspondent bank will credit the check to the merchant's bank, which in turn will credit the amount on behalf of his client, the seller.
Examine the risks of the check and then foreign bank: there may be differences in the legal framework between the countries compared in this respect, the credit is not definitive, but is subject to collection, the time is long for ' outcome of the payment there can be differences of meaning and value to the protest, we must put into account travel days of the check, are put in a difficult account to act in the process of regression and lack of autonomy and enforceability payment and this type of payment is also revoked.
The Bank Draft Negotiating subject to collection has the disadvantage that if the payment was not honored, is debited to the beneficiary plus bank fees and charges.
If you send after final payment, you can talk very much in advance payment. It awaits the conclusion of the procedure that leads to the crediting of the bank account of the beneficiary and then provide for the supply.
Finally, in the case of the so-called "Lock Box System", the recipient inform your bank of the countries of operation and corresponding foreign bank which is domiciled at the Lock Box (PO Box), then the beneficiary authorizing the foreign bank domiciled in the estuary Lock Box to trading on its behalf and at their own risk, the check is then deposited by the buyer to the post box at the bank in the country of domicile of the buyer at the buyer's bank.
The advantages of the Lock Box System are therefore: reduced risk, speed-of collection, the buyer's liking (it uses a fast way of payment), built in the country diemissio0ne, saving commissions in case of a failure to pay can be exercised 'action for recovery under the terms established by the law of the buyer, there was a significant improvement of day to credit the amount of currency, because of fact is transformed into a bank abroad, and the scrutiny of the payment becomes faster and more effectively. The
COD (cash on delivery) can be paid via: bills, check bank account, bank statement block of funds, check drawn by the bank (bank draft), bank certificate of transfer of the funds, bank statement order of receipt of payment to the seller, bill is accepted.
E 'important in the case of COD:
- not leave the management of transport to the other party
- pay attention to the provision of delivery of the goods (Incoterms)
- choose carefully instructing the agent accurately and on time delivery constraint about
- shipping charge him with a clear letter of instruction (mandate) to return the mandate
- be countersigned for acceptance specified in the same conditions under which it is bound to deliver the
- goods specified nell'incarico (mandate) the responsibilities of the shipper
- challenge, via registered mail, any shortcomings if the shipper does not comply with the instructions which he promptly accepted
- check if COD is unsuccessful
- not overlook the importance of getting hold Visa confirming the release of goods from the customs territory in case of non-EU destination of the goods.
Another form of international payment is the documentary collection. This works on the principle of "payment against documents", ie, as a result of the contract between the parties, the seller shall ship the goods, then takes care of delivering the documents to the remitting bank to send the documents to the collecting bank, which will forward the documents to the presenting bank, which in turn will take care of the documents to the buyer who will collect the same and the payment to the presenting bank. The presenting bank then transfers the funds to the collecting bank, which will make the transfer to the transmitter that will credit the payment to the seller. You can also talk about " documents against acceptance, a procedure similar to that described above to which is added by the buyer the right to accept or reject the documents before proceeding to payment. The actors involved in this type of payment are therefore five: the customer (the seller) or leasing documents called "principal", the remitting bank, known as "remitting bank", the collecting bank, called a "collecting bank " the presenting bank, known as "presenting bank", and finally the drawee (buyer) said "drawee".
There are essentially four types of documentary collection:
There are essentially four types of documentary collection:
- against payment at sight against accepting payment for a specific date
- free payment / settlement
- against accepting payment at a future date and context, and endorsement or bank guarantee.
I risks of this type of international payment are due to six types:
- the renunciation of the goods by the buyer, the difficulty in
- ago return the goods are not withdrawn and place it under economic cost, to another buyer
- removal of the goods without making payment or accepting
- the request for withdrawal of documents against payment of an amount discounted from the original
- non-payment at maturity of the bill is accepted bill of exchange or promissory
- removal of the goods without the presentation of the representative document: the bill of lading
The ncassi the simple (clean collection) are
- the promissory note (promissory notes);
- accepted and not accepted bills of exchange drawn (bill of exchange accepted or not accepted)
- checks bank account (check or checks), bank receipts (banker's receipt).
The electronic receipts instead are
- the Lastschriften, built by debit notes in Austria, Switzerland and Germany);
- the BOR, Billet a Ordre releve (concealed electronic promissory notes in France )
- LCR Lettre de Change releve (to collect receipts or bills of exchange drawn accepted or not accepted in France);
- IEF, Efecto de Electone Cash (concealed electronic bills in Spain);
- MAV, RID, interbank relations, direct RIBA Cash Receipts Bank of Italy.
There is a form of payment that Documentary Credit . This consists of a written undertaking of the issuing bank on behalf of the buyer, this commitment is sent to the merchant's bank, that bank or advising or confirming or designated, the commitment is an obligation to perform a benefit (payment, acceptance or negotiation ) at a certain date to the seller, subject to the submission documents requested and provided that they meet the terms and conditions of credit as defined by UCP (Uniform Standards and Uses), Pub. 550 the ICC (International Chamber of Commerce) http://www.cciitalia.org
we examine the Uniform Customs and Practice for documentary credits to (UCP). These applications designate the claim, the meaning of "credit", the documents and goods / services / performance, the necessary instructions to issue and amend the form and notification of claims, obligations and responsibilities, documents, tolerances The validity and place of submission of documents, the transferability of credit, an assignment of proceeds.
The characteristics of this form of payment are essentially:
we examine the Uniform Customs and Practice for documentary credits to (UCP). These applications designate the claim, the meaning of "credit", the documents and goods / services / performance, the necessary instructions to issue and amend the form and notification of claims, obligations and responsibilities, documents, tolerances The validity and place of submission of documents, the transferability of credit, an assignment of proceeds.
The characteristics of this form of payment are essentially:
- time: credits are by their nature, separate operations from sales contracts or other contract in which they can rely
- abstraction: the claim is released from the case in which it originated, ie the underlying contract
- Formalism : banks will have to examine only the documents presented to establish that, in the form they displayed in accordance with the terms and conditions of the credit, because the benefits promised by them is bound (subject) the submission of required documents only
- Binding of ' commitment: the issuing bank and / or the Purchaser have entered into a database at its heart require the submission of documents required before an effective date in accordance with all terms and conditions set out in credit.
The Documentary Credit can be revocable or irrevocable in the second case can also be confirmed or unconfirmed, if it were irrevocable and can not be confirmed "by appointment" or "without appointment."
unconfirmed irrevocable letter of credit is a commitment to provide only the issuing bank, thus requiring the elimination of commercial risk, otherwise known as "risk score".
If the documentary credit is irrevocable and confirmed, it is a commitment to service by a bank other than the issuing bank in addition to the commitment of the issuing bank, thus requiring the removal of country risk and bank risk.
parties that are involved in the documentary credit are: 'originator, the beneficiary, the issuing bank, the advising bank, the nominated bank, the confirming bank and the bank rimborsante.
The documentary credit is structured along the following steps:
unconfirmed irrevocable letter of credit is a commitment to provide only the issuing bank, thus requiring the elimination of commercial risk, otherwise known as "risk score".
If the documentary credit is irrevocable and confirmed, it is a commitment to service by a bank other than the issuing bank in addition to the commitment of the issuing bank, thus requiring the removal of country risk and bank risk.
parties that are involved in the documentary credit are: 'originator, the beneficiary, the issuing bank, the advising bank, the nominated bank, the confirming bank and the bank rimborsante.
The documentary credit is structured along the following steps:
- conclusion of the contract assignment
- emission
- pre-constitution of the funds
- credit emission
- receive credit
- issued notice of the issue of credit
- confirmation, if requested
- control
- any change
- production and shipping
- delivery of documents to the designated bank and / or confirming
- compliance review documents
- execution performance if it conforms
- sending documents to the issuer
- verify compliance by the issuer
- reimbursement documents to the buyer delivery charge and collect the goods
-
The phases are summarized as follows:
- conclusion of the contract between seller and buyer
- behalf of the buyer to the bank to issue credit
- issuance of documentary credit
- notification letter of credit confirmation letter of credit if required
- edit any letter of credit
- use of the documentary credit
- document examination
- regulation of documentary credit
At the time of the seller and the buyer will have the contract of supply; the buyer will then open the letter of credit with the issuing bank, which will issue the credit to the advising bank that will inform the seller of the future issuance of credit confirmation.
If you decide to change the text of the letter of credit, there must be a p Revio agreement between seller and buyer, the buyer will require the issuing bank to amend the wording, the issuing bank will accept the change and notify the bank Advising the same. The advising bank, finally, accept the change and notify the seller of the change occurred.
The presentation of documents for use of credit, will provide: an effective date, place and period of validity of the documents requested in the text of documentary credit.
There are various types of documentary credit:
If you decide to change the text of the letter of credit, there must be a p Revio agreement between seller and buyer, the buyer will require the issuing bank to amend the wording, the issuing bank will accept the change and notify the bank Advising the same. The advising bank, finally, accept the change and notify the seller of the change occurred.
The presentation of documents for use of credit, will provide: an effective date, place and period of validity of the documents requested in the text of documentary credit.
There are various types of documentary credit:
- transferable credit revolving credit
- subsidiary credit or credit controcredito
- anticipation
- standby letter of credit
The standby letter of credit is a particular form of documentary credit which is a payment guarantee that the bank shall deliver to the beneficiary, unconditionally committed to perform the promised service (payment, acceptance or negotiation), if the other party was at fault.
The regulations governing this tool is expressly mentioned UCP by the ICC Pub. 500 in force since 1 January 1994, but is a specific regulation with the publication. 590 of the ICC regarding the rules and international practice on the Stand By "(ISP 1998), in force since 1 January 1998. The
Stand By L / C is not a direct commitment : is a commitment liabilities of the issuing bank and / or confirming it is a tool and do not guarantee payment; assists a payment by bank transfer via SWIFT is subject to international standards may eventually be confirmed, the bank agrees to pay upon presentation of documents, there may be a declaration of default by the beneficiary of the originator.
Credit risk: how to deal with?
The regulations governing this tool is expressly mentioned UCP by the ICC Pub. 500 in force since 1 January 1994, but is a specific regulation with the publication. 590 of the ICC regarding the rules and international practice on the Stand By "(ISP 1998), in force since 1 January 1998. The
Stand By L / C is not a direct commitment : is a commitment liabilities of the issuing bank and / or confirming it is a tool and do not guarantee payment; assists a payment by bank transfer via SWIFT is subject to international standards may eventually be confirmed, the bank agrees to pay upon presentation of documents, there may be a declaration of default by the beneficiary of the originator.
Credit risk: how to deal with?
- commercial risk
- Payment
- Internal Management Check
- to Export Credit Insurance
- Assignment of receivables without recourse
- Bank guarantee is not confirmed and irrevocable letter of credit
- Stand by letter of credit has not been confirmed
- Discount without recourse securities
- Political Risk and Trade:
- Payment
- to Export Credit Insurance (SACE or SACE BT)
- irrevocable letter of credit confirmation and
- Stand by letter of credit confirmation with
- Discount without recourse securities
- supplier credit for perfecting the bank
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