1. Spoken English for International Business Lesson 5 Payment Foreign Languages College

2. Learning Point In this lesson, we will learn how to negotiate payment terms effectively and make international payment correctly in complex business environments. In this lesson, we will learn how to negotiate payment terms effectively and make international payment correctly in complex business environments. Lesson 5 Payment

3. Background Knowledge Every commercial transaction specifies the price of the merchandise and how and when it will be paid for. Pricing merchandise in an international transaction is more complicated than in a purely domestic setting because more than one currency is involved. Determining the precise method that will be used to make payment is also more difficult because traditional methods like cheques and drafts pose legal technical problems in processing, clearing and enforcement. Every commercial transaction specifies the price of the merchandise and how and when it will be paid for. Pricing merchandise in an international transaction is more complicated than in a purely domestic setting because more than one currency is involved. Determining the precise method that will be used to make payment is also more difficult because traditional methods like cheques and drafts pose legal technical problems in processing, clearing and enforcement. Lesson 5 Payment

4. What ’ s more, both the exporter and the importer face risks in an export transaction because there is always the possibility that the other party may not fulfill the contract. What ’ s more, both the exporter and the importer face risks in an export transaction because there is always the possibility that the other party may not fulfill the contract. Considering the characteristics of payment and the risks in international transactions, different methods of payment have been developed. These methods are: 1. bank transfer, 2. cheques, 3. promissory note, 4. documentary draft, 5. letter of credit, 6. cash in advance, 7. open account Considering the characteristics of payment and the risks in international transactions, different methods of payment have been developed. These methods are: 1. bank transfer, 2. cheques, 3. promissory note, 4. documentary draft, 5. letter of credit, 6. cash in advance, 7. open account Lesson 5 Payment

5. Case Study

6. Documentary collection F: I wonder if we can make payment for this order by documentary collection? F: I wonder if we can make payment for this order by documentary collection? C: I am sorry, you can't. Generally, we only accept payment by ir ­ revocable letter of credit payable against shipping documents. C: I am sorry, you can't. Generally, we only accept payment by ir ­ revocable letter of credit payable against shipping documents. F: You know our order this time is very large. To open an L/C for such a large amount at a bank is costly. Can you be a bit more flexible and bend the rules a little? F: You know our order this time is very large. To open an L/C for such a large amount at a bank is costly. Can you be a bit more flexible and bend the rules a little? C: I really can't help you. Presently, the situation on the international money market is unstable. To be on the safe side, we insist on the payment by L/C. C: I really can't help you. Presently, the situation on the international money market is unstable. To be on the safe side, we insist on the payment by L/C. …… …… …… …… …… …… Lesson 5 Payment

7. When will you send us the L/C? C: Could you send us the L/C 20 days in advance? That is, 20 days before shipment is made? C: Could you send us the L/C 20 days in advance? That is, 20 days before shipment is made? F: Sure. No problem. But when do you plan to ship the goods? F: Sure. No problem. But when do you plan to ship the goods? C: According to our manufacturer, the goods will be ready in Octo ­ ber. So we'd really appreciate it if the L/C could reach us by September the first. Furthermore, we need a transferable L/C. C: According to our manufacturer, the goods will be ready in Octo ­ ber. So we'd really appreciate it if the L/C could reach us by September the first. Furthermore, we need a transferable L/C. F: What about the term of validity? What's your company's stipu ­ lation on that? F: What about the term of validity? What's your company's stipu ­ lation on that? C: That we can go according to conventions. Let's say the L/C expires 15 days after the loading is completed in China, okay? C: That we can go according to conventions. Let's say the L/C expires 15 days after the loading is completed in China, okay? F: Okay, sounds good to me. Any other requirement? F: Okay, sounds good to me. Any other requirement? C: Just one more thing. Please add a brief statement that the seller has the right to add or deduct a total of 5 % worth of goods. C: Just one more thing. Please add a brief statement that the seller has the right to add or deduct a total of 5 % worth of goods. F: Fine. We'll open the L/C according to your requirement within the designated time. F: Fine. We'll open the L/C according to your requirement within the designated time. Lesson 5 Payment

8. Class Activity

9. Compose dialogues on the following situations. 1. You represent China National Arts & Crafts Imp & Exp Corp., Fujian Branch ( 工艺美术品总公司福 建分公司 ). You sell paper umbrellas. Now a businessman from Japan likes your umbrellas id has ordered a total of $ 15 000 worth of your products. Now the two of you are talking about ways of making the payment: sight L/C, usance L/C, confirmed L/C; and finally both of you agree it should be paid by irrevocable L/C payable against ship ­ ping documents. 1. You represent China National Arts & Crafts Imp & Exp Corp., Fujian Branch ( 工艺美术品总公司福 建分公司 ). You sell paper umbrellas. Now a businessman from Japan likes your umbrellas id has ordered a total of $ 15 000 worth of your products. Now the two of you are talking about ways of making the payment: sight L/C, usance L/C, confirmed L/C; and finally both of you agree it should be paid by irrevocable L/C payable against ship ­ ping documents. Lesson 5 Payment

10. 2. You're another member on this largest ever purchase delegation to the U.S. You represent China Metallurgical Imp & Exp Cor ­ poration ( 中国冶金进出口 总公司 ). Your purpose on this trip's to import a complete set of computer controlled technology that can increase your present iron casting ( 铸铁 ) production capacity by 30%. The total amount of the deal that you have in mind is somewhere between $ 45 000 to $ 50 000. Now you're negoti ­ ating the deal with your American counterparts, and you start with the price inquiry and terms of payment. 2. You're another member on this largest ever purchase delegation to the U.S. You represent China Metallurgical Imp & Exp Cor ­ poration ( 中国冶金进出口 总公司 ). Your purpose on this trip's to import a complete set of computer controlled technology that can increase your present iron casting ( 铸铁 ) production capacity by 30%. The total amount of the deal that you have in mind is somewhere between $ 45 000 to $ 50 000. Now you're negoti ­ ating the deal with your American counterparts, and you start with the price inquiry and terms of payment. Lesson 5 Payment

11. Exercises

12. I. Answer the following question. How many payment methods do you know in international business transactions? How many payment methods do you know in international business transactions? II. Interpret the following sentences. II. Interpret the following sentences. 1 ．根据惯例，信用证应在装船前 15 到 20 天 由买方开出。 1 ．根据惯例，信用证应在装船前 15 到 20 天 由买方开出。 2 ．我现在无权对你的要求做出答复，我得 和我们公司总部联系一下。 2 ．我现在无权对你的要求做出答复，我得 和我们公司总部联系一下。 Lesson 5 Payment

13. 3 ．如果是老客户，我们可以按照承 兑交单来做；但对新客户，我们都按信 用证的方式来做。 3 ．如果是老客户，我们可以按照承 兑交单来做；但对新客户，我们都按信 用证的方式来做。 4 ．在分期付款和延期付款上，我们 对客户加收的利率是一样的。 4 ．在分期付款和延期付款上，我们 对客户加收的利率是一样的。 5 ．最主要的是，我们需要你方议付 行开出的保兑信用证。 5 ．最主要的是，我们需要你方议付 行开出的保兑信用证。 Lesson 5 Payment

14. Thanks a lot!