2 Review What are the meanings of a bill of exchange, a promissory note Question 1 :What are the meanings of a bill of exchange, a promissory noteand a cheque?Question 2 :Could you list the essential items for a bill of exchange?Question 3 :Are there any differences among a bill of exchange, a promissory note and a cheque?
3 International Exchange International exchange refers to operational activities related with the currency conversion and transfer of funds between countries in order to settle the claims and debts by payment instruments through banks.-- In broad sense: the international settlement-- In narrow sense: international bank remittanceTypes:RemittanceReverse remittancecontractpayerpayeecontractpayerpayeeBank ABank BBank ABank B
4 How to transfer money between banks Vostro AccountWhen a foreign bank maintains a current account with a local bank ,from the point of a domestic bank, the account is a vostro accountNostro AccountWhen a domestic bank maintains a current account with a foreign bank ,from the point of a domestic bank, the account is a nostro accountVostro a/c(1)in cover,we have credited you’re a/c with usRemitting bankPaying bank(2)in cover,please debit our a/c with youNostro a/c
5 Definition and parties of a Remittance Remittance refers to a bank (remitting bank), atthe request of its customer (remitter), transfersa certain sum of money to its overseas branchor correspondent bank (paying bank) instructingit to pay a named person domiciled in that countryParties of a remittance-- Remitter-- The Remitting Bank-- The paying bank-- Beneficiary or Payee
6 Methods and procedures of remittance Remittance can be classified as M/T、T/T、 D/DRemittance by Airmailthe remitting bank transfers the funds by mailing aP.O.cheap but slowTelegraphic Transferthe remitting bank sends the P.O. to the paying bankby cable, telex, or SWIFT, authorizing the paying bankto make payment to the payee.fast ; safe ; limited time for banks to keep the funds
7 Methods and procedures of remittance Procedures of M/T、T/T(8)payeeremitter(1)(2)(4)(5)(6)(3)RemittingbankPayingbank(1)Remittance application with funds and commission;(2)receipt(3)sends P.O. /telex/SWIFT instructing paying bank to make payment(4)after authenticating, notifies the payee(5)upon receipt, the payee provides the paying bank a receipt(6)the paying bank debited the remitting bank’s a/c and make payment(7)sends the debit advice and payment receipt from payee to the remitting bank(8)the debt is discharged
8 Methods and procedures of remittance Remittance can be classified as M/T、T/T、 D/DRemittance by Bank Demand Draftthe remitting bank draws a bill of exchange on thepaying bank ordering the latter to pay on demanda certain sum of money to the beneficiary who willalso be the payee of the draft.convenient and transferable
9 Application of remittance Payment in advance--The time of payment comes before the delivery of goods or the provision of services--This method is favorable to the exporter while putting the importer at a great risk of non-deliveryOpen Account-- Exporter will make the delivery of goods or the provision of services before importer makes payment-- This method is favorable to the importer while putting the exporter at a great risk
10 Application of remittance Consignment-- Exporter ships the goods to the importer and retains the title to the goods until the importer make payments-- This method is favorable to the importer while putting the exporter at a great risk
11 Preview Analysis the risks for importer and exporter Under remittance? Compare the advantages and disadvantages among M/T, T/T and D/D?Analysis the risks for importer and exporterUnder remittance?