Acknowledgements 1
Preface 1
1 Introduction 1
1.1 International settlement vs.trade finance 1
1.2 The evolution of international settlement 3
From cash settlement to non-cash settlement 3
From direct payment to indirect payment 4
From simple price terms to complex price terms 5
From paper documents to electronic documents 7
1.3 Electronic communication and payment systems 10
SWIFT 10
BOLERO 12
CHIPS 13
CHAPS ＆ Faster Payment 14
Fedwire？ Funds Service,Fedwire Securities Service and National Settlement Services 15
TARGET and TARGET2 17
CNAPS 18
1.4 Players,roles and risks in international trade payments 19
Exporter 19
Importer 20
Banks 21
1.5 Types of payment techniques 21
Consignment 22
Open account 22
Documentary collections 23
Letters of credit 23
Guarantees/standby letters of credit 23
Payment in advance 23
Factoring 26
Forfaiting 26
1.6 Related laws,customs and practice 27
Laws on negotiable instruments 27
International customs and practice for collections,documentary letters of credit,standby letters of credit,guarantees and international factoring 27
International conventions on bills of lading 28
1.7 Correspondent bank 30
Correspondent bank agreement 30
Control documents 30
2 Negotiable instruments 39
2.1 Characteristics and functions of negotiable instruments 40
Negotiability 40
Unconditional promise or order to pay 40
Requisite in form 41
Non-causative nature 41
Functions of negotiable instruments 43
2.2 Negotiable instrument laws 43
2.3 Parties to a negotiable instrument 45
Drawer 45
Drawee 46
Payee 46
Indorser 47
Acceptor 48
Guarantor 48
Holder 49
The relationship of the parties to negotiable instruments 51
2.4 Bills of Exchange 53
Definition 53
Essential items required in a bill of exchange 55
2.5 Acts related to a bill of exchange 62
Issue 62
Indorsement 63
Presentment or presentation 67
Acceptance 68
Payment 70
Dishonour 72
Protest 73
Notice of Dishonour 76
Right of recourse 77
Guarantee or aval 78
Acceptance for honour supra protest 81
Payment for honour supra protest 83
Classification of bills of exchange 84
2.6 Promissory Notes 85
Definition 85
Essential items of a promissory note 86
Joint notes vs.joint and several notes 87
Types of promissory notes 89
Differences between bills of exchange and promissory notes 90
2.7 Cheques 92
Definition 92
Essential items of a cheque 93
Types of cheques 93
Differences between cheques and bills of exchange 99
3 Remittance 100
3.1 Definition 100
3.2 Parties to a remittance 101
Remitter 101
Remitting bank 101
Paying bank 102
Payee or beneficiary 102
3.3 Types of remittance 102
Mail transfer 102
Telegraphic transfer 103
Demand draft 104
3.4 Reimbursement of remittance cover 105
3.5 The cancellation of remittance 106
3.6 Application of remittance in international trade 107
Cash in advance 107
Open account 108
3.7 Trade finance under remittance 109
Financing under T/T 109
Credit insurance and bank financing 110
3.8 Other methods of remittance 110
Credit card 111
PapPal 112
Western Union and MoneyGram 113
Cheque payment 114
4 Collection 115
4.1 Definition 115
4.2 Basic parties to a collection 117
Principal 117
Remitting bank 118
Collecting bank 118
Presenting bank 119
Drawee 120
Collection instruction 121
The relationship between the basic parties 122
4.3 Types of collection 123
Clean collection 123
Documentary collection 123
Procedures of a documentary collection transaction 124
4.4 Terms of releasing documents 125
Documents against payment(D/P) 125
Documents against acceptance(D/A) 126
4.5 Liabilities and disclaimers of banks under a collection 127
Banks have no obligation to handle a collection 127
Disclaimer for acts of an instructed party 128
Disclaimer on documents received 128
Disclaimer on effectiveness of documents 128
Disclaimer on delays,loss in transit and translation 129
Banks do not deal with the goods,services or other acts 129
4.6 Financing provided by banks under a collection 129
Financing provided by the remitting bank to the exporter 130
Financing provided by the collecting bank to the importer 132
4.7 Problems frequently arising from a collection 134
The problems of using D/P at a fixed period after sight 134
Problems related to insurance 136
Negative events that may occur to the exporter 137
5 Letters of credit 139
5.1 Definition 139
5.2 Characteristics of a documentary credit 141
A written undertaking on the part of the issuing bank 141
Independent of the sales contract 142
Exclusively dealing with documents 142
5.3 Parties to a letter of credit 143
Applicant 143
Issuing bank 145
Beneficiary 146
Advising bank 147
Confirming bank 148
Paying bank/accepting bank 150
Negotiating bank 150
Claiming bank 151
Reimbursing bank 152
5.4 Stages to a documentary credit operation 153
Stage 1:The importer applies to its bank for a documentary credit 153
Stage 2:The issuing bank reviews the importer's application for credit and issues a documentary credit 154
Stage 3:The advising bank advises the credit to the seller 155
Stage 4:The exporter examines the credit,prepares for the required documents and submits the documents to the nominated bank 156
Stage 5:The issuing bank examines the documents and pays or reimburses the negotiating bank 158
Stage 6:The importer redeems the documents from the issuing bank and picks up the goods against the bills of lading from the shipping company 159
5.5 Contents of a documentary credit 159
Items on the credit itself 159
Items on draft 160
Items on goods,shipping documents and transport 160
Other items 160
5.6 The examination of a documentary credit 163
The examination by the advising bank 163
The examination by the exporter 171
5.7 Types of credit 175
Irrevocable credit 175
Confirmed irrevocable credit 175
Sight payment credit 176
Acceptance credit 177
Deferred payment credit 179
Negotiation credit 180
Straight credit 182
Anticipatory credit 183
Green clause credit 184
Transferable credit 185
Back-to-back credit 188
Revolving credit 189
Reciprocal credit 190
5.8 Trade finance provided by banks 192
Finance provided to the exporter 192
Finance provided to the importer 197
5.9 Letters of credit vs.other payment methods 200
6 Standby letters of credit 202
6.1 Definition 202
Origin 202
UCP 600 vs.ISP 98 203
Definition by ISP 98 203
6.2 Characteristics of a standby letter of credit 204
Clean credit 204
Financial obligation 205
Non-financial obligation 205
Irrevocable form 205
Duration and amount 206
Payment procedures 206
6.3 Parties to a standby letter of credit 206
Applicant 206
Issuer 208
Beneficiary 209
Transferree beneficiary 209
Confirmer 210
6.4 Types of documents required in a standby letter of credit 210
Demand for payment 211
Statement of default or other drawing event 211
Negotiable documents 211
Legal or judicial documents 212
Other documents 212
Examination of the documents 213
6.5 Types of standby credit 214
Performance standby 214
Advance payment standby 214
Bid bond/tender bond standby 214
Counter standby 215
Financial standby 215
Direct payment standby 215
Insurance standby 216
Commercial standby 216
6.6 The problems arising by making a standby subject to UCP 216
When a copy bill of lading is required 216
When partial payment is used 217
7 Letters of guarantee 218
7.1 Definition 218
Demand guarantee 218
Contract guarantee 219
7.2 Characteristics of a demand guarantee 220
7.3 Basic parties to a demand guarantee 220
7.4 Direct and indirect guarantees 222
7.5 Types of guarantee 222
Tender guarantee/bid bond 223
Performance guarantee 223
Repayment guarantee 223
Advance payment guarantee 223
Maintenance guarantee 223
Retention money guarantee 224
Counter guarantee 224
7.6 Contents of a guarantee 225
Basic contents of a guarantee 225
Additional clauses of a guarantee 226
Basic contents of a counter guarantee 231
8 International factoring 239
8.1 Origin and legal framework 239
Origin 239
Legal framework 240
8.2 What is factoring? 241
8.3 The procedures of international factoring 242
8.4 Types of factoring 243
Maturity factoring and financed factoring 243
Disclosed factoring and undisclosed factoring 244
Single factoring and co-factoring 244
8.5 Services provided to the exporter by a factor 245
Credit investigation of buyers 245
Credit protection 246
Collection and management of receivables 247
Finance 247
8.6 The role of factoring in international trade 248
8.7 Risks faced by factors 249
Credit risks 249
Operational risks 250
Legal risks 250
8.8 Factoring in China 251
9 International forfaiting 257
9.1 Origin and evolution 257
9.2 What is forfaiting? 259
Parties to the forfaiting transaction 261
Required Documents 261
Aval or guarantee 262
Costs 262
Application and tenors 263
9.3 The mechanics of a forfaiting transaction 264
The underlying trade contract 264
The forfaiting proposal 265
Terms and conditions 267
Summary of the procedures of forfaiting 270
9.4 Forfaiting vs.other trade financing methods 271
Forfaiting vs.officially supported export credits 271
Forfaiting vs.factoring 272
9.5 Forfaiting in China 272
10 Documents used in international trade payments 274
10.1 Types and functions of documents 274
Basic documents and additional documents 274
Financial documents and commercial documents 274
Representing the title to the ownership of the goods 275
Evidencing the fulfillment of obligations 275
10.2 Draft(s)drawn under a letter of credit 275
Characteristics of drafts drawn under a letter of credit 276
Examination of the draft(s)drawn under a letter of credit 276
The most frequently found discrepancies with drafts 278
10.3 Commercial invoices 278
Contents of a commercial invoice 278
Other invoices 280
10.4 Transport documents 284
Marine bills of lading 284
Basic parties to a bill of lading 285
Main contents of a bill of lading 286
Types of bills of lading 286
The most frequentl+]++[ found discrepancies with a bill of lading 290
Other transport documents 291
10.5 Insurance documents 295
Types of marine cargo transport insurance 295
Examining an insurance policy under a letter of credit 296
The most frequently found discrepancies with an insurance document 300
10.6 Other documents 305
Certificates of origin 305
Inspection certificate 309
Packing list and weight list 309
Cable copy 309
Beneficiary's statement 309
Shipping company's certificate 310
Certificate of analysis 310
Certificate of weight 310
10.7 Examination of documents under documentary credits 310
Examination of documents with reference to the documentary credit 311
Examination of documents with reference to the UCP 312
Examination of documents with reference to one another 312
References 313