Chapter 5

Remittance
 Trade Settlement

CONTRACT

IMPORTER EXPORTER
 Remittance
 Documentary Collection
 Documentary Credit
 Cash Against Documents
 Open Account Trading
 Consignment
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5.1. Definition

 Remittance is a method of payment in which one

party requests a bank for transferring money to
another party.
 Remittance is to deliver the payment of the goods to
the seller by bank transfer

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5.2. Parties involved

 Remitter
 Beneficiary
 Remitting bank
 Paying bank
 Intermediary bank

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Payment will
be made by
T/T 120 days
after
receiving
commodity
with 100%
invoice value

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5.3. How does it work?
(1) Goods + Documents
Seller Buyer

(5)
Credits (2) (4)
Seller’s Set up wire Debits
account transfer Buyer’s
account

(3) T/T (wires the amount)

Paying Remitting
bank Bank

(3b) TT (3a) T/T

Corresponding
Usance payment bank
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Payment will be
made by T/T in
advance with
100% invoice
value

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5.3. How does it work?
(5) Goods + Documents Buyer
Seller

(4)
Credits (1) (3)
seller’s Set up wire Debits
account transfer buyer’s
account

(2) T/T (Wires the amount)

Seller’s bank Buyer’s
bank

(2b)TT Corresponding (2a)T/T

Advance payment bank

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5.4. Nature of Remittance
 Remittance is chiefly used for:
 payment in advance or cash with order,
 delivery first and payment afterwards for small quantity of
goods, commission, sundry charges, etc.
 If it is used for payment in advance or cash with
order, it will place the buyer in an advantageous
position.
 If for delivery first and payment afterwards, it will
place the seller in an advantageous position.

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 Types of Remittance

Check,
T/T M/T Bankdraft

Swift Telex

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 5.6. Legal resources
1. Ordinance on Foreign Exchange Control 2005
2. Circular 3/2019 to amend and supplement some articles
of Circular 32 of the SBV dated 26 December 2034 on
restrictions in using foreign exchange within the
territory of Vietnam (Circular 32/2013). Circular
3/2019 will take effect from 13 May 2019.

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5.7. Step-by-step at bank
 Outward Remittance

Receiving Remittance request

Examining Remittance request

Selecting Corresponding Bank

Swift MT 103

Accounting Entry – Records

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5.7. Step-by-step at bank

 Inward Remittance

Encoding Swift MT 103

Clarifying MT103

Notifying Credit note to the beneficiary

Accounting entry – Recording

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5.8. When used?

Exporter Importer

 Advantages: fast transfer, low fee and simple

documents required for proceeding international
sale contract of goods
 Disadvantages: low commitments of banks, high
risks for exporters (in usance) and importers (in
advance payment)
 When used?
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