Chapter One Brief Introduction to International settlement

International trade&International settlement

Sales agreement between buyer and seller Buyer Seller Contract or Agreement Two important terms of sales agreement ★ Seller’s undertaking to provide the goods to buyer ★ Buyer’s undertaking to pay the price in return All the other agreements and procedures commonly used in Int’l trade result from the performance of this The Sales Agreement

★ Other contracts involved in the international trade ◆ a carriage contract with carrier to transport goods from seller’s country to buyer’s country BuyerSellerCarrier Continued to arrange shipment

Continued The buyer arranges payment through bank Buyer Arrange payment through its Bank Transfer money or foreign exchange to Seller’s Bank Pay to Seller The buyer arrange payment of foreign exchange through banking system to seller The buyer arrange payment of foreign exchange through banking system to seller

Contract of Sale ★ The buyer and seller must agree on the goods to be sold and the price to be paid and ◆ which court or arbitration system has jurisdiction to hear any claims in the event of a dispute ◆ how the goods are to be delivered ◆ the method of payment ◆ the time period for delivery

Concept international settlement is the transaction arised from sales of commodities, services provided, transfer of funds, international borrowing and loan between two parties located in different countries which must be entrusted to the banks for payment of or claims to money on behalf of them

Money transfers from one country to anotherdue to international trade, investment and other reasons, to settle debts, claims, etc.

Money transfers: ◇ Visible trade ◇ Invisible trade ◇ Financial transaction ◇ Payments between governments ◇ Others

Visible trade: The main weight of int’l money transfer originates from importing/exporting commodities. Trade finance is to aid the money transfer or importing/exporting commodities, because commodities represent money. Invisible trade: service trade, technology transfer, patent, copyright contracts, transportation,Insurance, travel communication, postage, bankservice

Financial transaction: international credit including export credit, syndicated loan and international bond issues, all of which must go through bank settlement, which are under capital account and financial account in the balance of payments.

Payments between governments: grants, aids, disaster relief, etc. Others: oversea remittances, educational expenses, inheritances, etc.

Types International trade settlement International non-trade settlement

Evolution of International Payments and Settlements seller goods buyer gold Seller in London goods Buyer in New York 1 draft Buyer in London pay Seller in New York goods 2 draft 3 draft pay Non-cash settlement Non-cash settlement Country A goods Country B goods barter Cash settlement Draft=bill of exchange

2).From direct settlement to settlement through banks.

Seller in China Deliver goods Carrier B/L Documents =goods Bank in China Send documents Bank in USA = Agent bank Documents =goods Buyer in USA pay B/L Deliver goods pay Payment through financial intermediary Documentarized goods Certified performance Bankers only take care of documents instead of goods

3)From settlement against goods to settlement against documents. One of the functions of bill of lading is the document of title which would enable the goods documentarized.Presentation of B/L amounts to the delivery of goods.

The objects of International settlement study are as follows: ◇ Financial instruments ◇ Payment methods ◇ Commercial documents ◇ Rules?

Uniform Rules ◇ UCP600 ◇ URC522