Review Question 1 : What are the meanings of a bill of exchange, a promissory note and a cheque? Question 2 : Could you list the essential items for a bill of exchange? 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?
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 remittance Types: payer payee Bank ABank B contract Remittance payer payee Bank ABank B contract Reverse remittance
How to transfer money between banks Vostro Account When a foreign bank maintains a current account with a local bank,from the point of a domestic bank, the account is a vostro account Nostro Account When a domestic bank maintains a current account with a foreign bank,from the point of a domestic bank, the account is a nostro account Remitting bank Paying bank (1)in cover,we have credited you’re a/c with us (2)in cover,please debit our a/c with you Vostro a/c Nostro a/c
Definition and parties of a Remittance Remittance refers to a bank (remitting bank), at the request of its customer (remitter), transfers a certain sum of money to its overseas branch or correspondent bank (paying bank) instructing it to pay a named person domiciled in that country Parties of a remittance -- Remitter -- The Remitting Bank -- The paying bank -- Beneficiary or Payee
Methods and procedures of remittance Remittance can be classified as M/T 、 T/T 、 D/D Remittance by Airmail the remitting bank transfers the funds by mailing a P.O. cheap but slow Telegraphic Transfer the remitting bank sends the P.O. to the paying bank by cable, telex, or SWIFT, authorizing the paying bank to make payment to the payee. fast ; safe ; limited time for banks to keep the funds
Methods and procedures of remittance Procedures of M/T 、 T/T payee remitter Paying bank Remitting bank (1)(2) (3) (4)(5)(6) (8) (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
Methods and procedures of remittance Remittance can be classified as M/T 、 T/T 、 D/D Remittance by Bank Demand Draft the remitting bank draws a bill of exchange on the paying bank ordering the latter to pay on demand a certain sum of money to the beneficiary who will also be the payee of the draft. convenient and transferable
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-delivery Open 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
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
Preview Compare the advantages and disadvantages among M/T, T/T and D/D? Analysis the risks for importer and exporter Under remittance?