07/01/2024

INTERNATIONAL PAYMENT

PHAN VŨ NGỌC LAN – MDE

International Business
Administration Department
lanpvn@huflit.edu.vn

Chapter 2

INSTRUMENTS OF PAYMENT

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In this chapter
1. Bill of exchange (B/E)
2. Promissory Note
3. Cheque / Check
4. Payment cards

BILL OF EXCHANGE [DRAFT],

PROMISSORY NOTE, CHEQUE

Unconditional
order or promise

Negotiability
(transferability) by
means of
endorsement

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1. Bill of Exchange
1. Definition
2. Features
3. Forms and content
4. B/E acceptance
5. B/E endorsement
6. B/E guarantee
7. B/E Protest
8. B/E discount
9. Classification

1.1. Definition
 Bill of exchange means a valuable paper
created by a drawer, requesting the drawee
to pay unconditionally a specific sum upon
demand or upon a fixed time in the future to
the beneficiary.
(Article 4.2, Law on Negotiable instrument
2005)

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1.1. Definition
 An unconditional order in writing from the
drawer (usually seller) to the drawee
(e.g.confirming bank or issuing bank),
directing/requiring the drawee to pay a
specified amount on demand or at a fixed
future time to or to the order of a named
person, or to bearer. (the
payee/beneficiary/drawer).
(Bills of Exchange Act 1882) (UK)

1.1. Definition
drawn [signed] by
An the seller (the requiring the
uncondition drawer) on the drawee to
al order in buyer or the pay a fixed
writing buyer’s bank (the amount
drawee)

to or to the order
on demand of a specified
signed by
or at a fixed person, or to
the drawer
future time bearer (the
payee/beneficiary)

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1.1. Definition
 Law governing:
- Uniform Law for Bills of Exchange – Geneve
Convention 1930 (ULB 1930)
- Bill of Exchange Act of 1882 (UK) (BEA 1882)
- Uniform Commercial Codes of 1962” (UCC
1962) (USA)
- Law on Negotiable instruments - Luật các
công cụ chuyển nhượng Việt Nam 2005.
(VN)

Parties involved
 Drawer
 Drawee
 Beneficiary/Payee

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1.2. Features
 Abstraction
 Obligatory payment
 Circulation

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1.3. Forms and content

General requirements
 B/E has to be made in written form

 B/E can be typed, handwritten or in fixed

format
 Language: can be any language: English,
Vietnamese, …(lưu ý)
 Must be dated even if L/C does not require*

 B/E cannot be written with erasable ink, red

ink, pencil or with any correction.**
 Number of B/E: usually 2

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A valid B/E contains:

An unconditional
The term `bill order to pay a Name of the Time of
of exchange' determinate drawee payment
sum of money

Place of
payment Name of the
beneficiary/payee Date and Signature of
place of the drawer
issuing

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A valid bill of exchange contains:

1. The term `bill of exchange' inserted in the body of the

instrument;
2. An unconditional order to pay a determinate sum of
money;
3. The name of the person who is to pay (drawee);
4. The time of payment;
5. The place where payment is to be made;
6. The name of the person to whom or to whose order
payment is to be made (payee);
7. The date and place where the bill is issued;
8. The signature of the person who issues the bill (drawer).

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BILL OF EXCHANGE (1)

No.(2)………….
For (3a)………….. (4)……(5)…....

At (6)…………………. of this FIRST Bill of exchange

(SECOND of the same tenor and date being unpaid)
pay to (the order of) (7)……………… the sum of
(3b)……………….
Drawn under (8)…………….
To: (9) ………………
For and on behalf of (10)…………..
(Authorized signature)
………………..
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Main content of B/E

(1) Title
 “Bill of Exchange”, “Draft”, “Exchange for…”

 In the same language of the content

(2) Reference No.

 Given by the Drawer

(3) Amount of money

 3a: amount in number (e.g. For: USD
100,000.00)
 3b: amount in words (e.g. The sum of: United
States Dollars one hundred thousand only)
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Main content of B/E

(4) Place of B/E drawing
(5) Date of B/E drawing
(6) Time of Payment
 At sight B/E -> “At sight of”

 Time B/E:

- At X days after sight/At X days sight*

- At X days after acceptance date

- At X days after B/L date**

- At X days after B/E date/At X days date

- At X days after Invoice date**

- On the fixed future date

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Main content of B/E

(7) Beneficiary’s name
 Nominated: Pay to Mr. A / Pay to Co. A
(only*)
 To order: “Pay to the order of …” (in Vietnam:
pay to the order of …Bank  endorsement)
 To the bearer

(8) Documents for reference

 E.g: Drawn under L/C no. … / Contract No.
…/ Commercial invoice no…

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Main content of B/E

(9) Drawee
 Name of importer/buyer (if payment by other
modes of payment)
 Name of issuing bank (or bank nominated by
issuing bank) (if payment by L/C)
(10) Drawer
 Exporter  Contract signing party  legal
representative of corporation

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Practice 1
On 28/11/2013, Cholimex Corporation
signed the contract No. 22/2013Ex for
exporting frozen shrimp to Japan. The
contract was worth 92,857USD and payment
was to be made by usance L/C of 60 days
after sight. The goods were shipped on board
on 03 Jan 2014 at VICT port according to L/C
no. 123456/LC issued by Bank of Tokyo –
Misubishi on 19/12/2013.
 Task: Based on the information supplied,
draw a B/E.

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Practice 2
 Exporter: AAA Company, 30 Tran Phu, Hanoi. Bank
account number: 11223344 at Bank for Foreign Trade of
Vietnam.
 Importer: BBB Company, 18 Bank Street, Singapore. Bank
account number: 1011453346 with Citibank Singapore
 Sales contract no. ABC123, signed on 01 March 2014. Total
value: SGD 82,345.00. Payment by Collection.
 Commercial invoice no. EFG123, dated 10 April 2014

Based on the Commercial Invoice, on 20 April 2014, draw a

B/E against the Importer in consideration of the following:
a. Payment at sight
b. Payment on 30/12/2014
c. Payment after 60 days of sight
d. Payment after 30 days of B/E signature
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Practice 2 (cont.)
e. In case payment is made by Irrevocable
Letter of Credit No. HIJ123 issued by
Citibank Singapore, 53 Ang Mo Kio Avenue,
dated 10 March 2014. How should the B/E
be changed?

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Practice 3
 On 1st June 2016, Hung Phu Import – Export Company
(HP Co.) exported Rubber to ABC Trading Co. in
Singapore under the following terms and conditions:
 Quantity: 20 MTS (10% more or less)

 Price: 1,000 USD/MT FOB Saigon Port

 Payment in 60 days after sight by D/A.

On 14th June 2016, HP Co. delivered 22 MTS and

transfered documents to Citibank HCMC for collection and
entrust this B/E to United Overseas Bank for collection from
Buyer.
1/ Find the mistakes and/or missing information in the B/E
and correct them.

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BILL OF EXCHANGE
No. 12345
For: USD 200,000.00 Hochiminh city , 18th June 2016
At 60 days after shipment of this FIRST Bill of exchange
(SECOND of the same tenor and date being unpaid) pay to the
order of Citibank HCMC Branch the sum of United States
Dollars two hundred thousand only.
Drawn under Invoice No. 001/EXP dated July 12th 2016
To: United Overseas Bank Singapore
For and on behalf of Hung Phu Import – Export Company
Director
(Signature)

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1.4. B/E Acceptance

 B/E Acceptance acts as a confirmation for
payment from the drawee when B/E is due.
 Acceptance can be made by:
- Writing “Acceptance” or equivalent words +
signature on the first / second page of B/E.
- Composing a separate document
 Acceptance is unconditional.

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Sample of B/E Acceptance by

Telex

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Classification of Acceptance
Based on the amount of money accepted for
payment
 Full acceptance

 Partial acceptance

Based on the party who accept

 Trade acceptance

 Banker’s acceptance

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1.5. B/E Endorsement

 B/E endorsement is a procedure showing that
B/E has been passed from this beneficiary to
another.
Classification
 Blank endorsement

 To order endorsement

 Restrictive endorsement

 Without recourse endorsement

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1.6. B/E Guarantee / Aval

 Guarantee is a commitment from a third party
to make payment to the beneficiary if the
payer fails to perform or perform insufficiently
his/her duties when the B/E is due.
Guarantee can be made by:
 writing the word “guarantee” together with
signature on the 1st or 2nd page of the B/E.
 Separate paper (confidential)

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1.6. B/E Guarantee / Aval

 What if the guarantee does not mentioned
the Guaranteed?
 Guarantee for the Drawer
 Can the Guarantor be the Drawer or
Drawee?
 None, both are not allowed to sign as the
Guarantor.

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1.7. B/E Protest

 B/E Protest is a document issued by the
beneficiary within 2 days after B/E’s due date
and sent to the drawee and other relevant
parties, announcing that payment has not
been made.

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1.8. B/E Discount

 The Seller or Beneficiary transfer B/E which
is not due to the bank in exchange for a sum
of money lower than that stipulated in the
B/E.

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1.9. B/E Classification

 Based on the terms of payment
 Based on whether the documents are
included or not
 Based on B/E’s negotiability
 Based on the kinds of drawers

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Classification of B/E
1. Based on the terms of payment
- (At) sight draft: B/E that is payable as soon
as it is shown to the drawee.
- Usance / Time / Term draft: B/E that is
payable at a specified time after it is written.
2. Based on whether the documents are
included or not
- Clean draft
- Documentary draft

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Classification of B/E
3. Based on B/E’s negotiability
- Nominated / Nominal draft:“Pay to Mr. X”
(rarely used)
- Order draft: “At … sight of this first bill of
exchange pay to the order of <name of bank>
the sum of …”
- Bearer draft / bill
+ “At … sight of this first bill of exchange pay to …
(blank)” / “At … sight of this first bill of exchange
pay to the order of … (blank)”
+ Blank endorsement / Order endorsement in
blank
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Classification of B/E
4. Based on the kinds of drawers
- Commercial bill / Trade bill: a B/E used in
the buying and selling goods.
- Bank bill: a B/E given by a bank and
instructing another bank to pay money to
someone.

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2. Promissory Note
 A buyer's written promise to repay a loan
within specific time
 Not commonly used in International Trade

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PROMISSORY NOTE

An unconditional
PROMISE in writing made
by one person to another
signed by the maker,
engaging to pay, on
demand or at a fixed
future time, a sum certain
in money, to, or to the
order of, a specified person
or to bearer. (Art. 83, Bills
of Exchange Act 1882)

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A valid promissory note contains:

An unconditional
promise to pay a
determinate sum of
The term money; The time of
`promissory payment
note'

The place of The payee The date and The signature

payment place of of the person
issuing who issues
the note
(maker).

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A valid promissory note contains:

1. The term `promissory note' inserted in the body
of the instrument;
2. An unconditional promise to pay a determinate
sum of money;
3. A statement of the time of payment
4. A statement of the place where payment is to be
made
5. The name of the person to whom or to whose
order payment is to be made (payee/beneficiary);
6. A statement of the date and of the place where the
promissory note is issued;
7. The signature of the person who issues the
instrument (maker).
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PROMISSORY NOTE

Notes: The maker

of a promissory
note is bound in
the same manner
as an acceptor of a
bill of exchange.
(Art. 78, ULB 1930)

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PROMISSORY NOTE (1)

No.(2)………….
For (3a)………….. (4)……(5)…....

At (6)…………………. of this Promissory note, we

promise to pay to (the order of) (7)……………… the
sum of (3b)……………….
Place of payment (8)…………….
For and on behalf of (9)…………..
(Authorized signature)
………………..

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Main content of Promissory

Note
1. Title
2. Reference No.
3. Amount of money
4. Place of issuing/drawing
5. Date of issuing/drawing
6. Time of payment
7. Beneficiary/Payee
8. Place of payment
9. Maker/Drawer
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3. Cheque / Check
 Definition
 Parties involved
 Features
 Content
 Validity and Presentation
 Classification

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3.1. Definition
 A cheque is a written authorization to pay or
order money from an account to the payee.
 Cheques are issued by financial institutions
such as Banks, Building and Saving
Societies, Post Offices etc

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3.1. Definition
 Law governing:
- Uniform Law on Cheque– Geneve Convention
1931 (ULC 1931)
- Law on Negotiable instruments - Luật các
công cụ chuyển nhượng Việt Nam 2005.

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Sample Check

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SAMPLE CHEQUE/CHECK

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Sample Check

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Sample Check

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A Sample of Traveller’s Cheque

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3.2. Parties involved

 Drawer: buyer, account holder, debtor, ...
 Drawee: bank
 Beneficiary

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Cheque circulation (1 bank)

Drawee (Bank)

Goods + Docs
Beneficiary / Drawer
Payee (Seller) (Buyer)
Cheque

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Cheque circulation (2 banks)

Credit note
Remitting Bank Drawee
(Seller’s Bank) (Buyer’s Bank)
Presentation for Collecting
Credit note

Debit note
collection

Goods + Docs
Beneficiary / Drawer
Payee (Seller) (Buyer)
Cheque

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3.3. Features
 Abstraction
 Obligatory payment
 Circulation

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3.4. Content
 Title “Check / Cheque”
 Date of issuance
 Place of issuance
 Drawee
 Drawer’s account
 Request for unconditional payment
 Beneficiary
 Drawer’s name and signature

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CHEQUE/CHECK

“A cheque is a bill of exchange drawn on a

banker payable on demand.

Except as otherwise provided in this Part,

the provisions of this Act applicable to a bill
of exchange payable on demand apply to a
cheque.” (Art. 73 Bills of Exchange Act
1882)

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A valid cheque contains:

An
unconditional
The term order to pay a The name of
`cheque' determinate the drawee
sum of money

The place of The name of the The date and The signature
payment payee/beneficiar place where of the drawer
y the cheque is
drawn;

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A valid cheque contains:

1. The term “cheque” inserted in the body of the
instrument;
2. An unconditional order to pay a determinate sum of
money;
3. The name of the person who is to pay (drawee)

4. A statement of the place where payment is to be made

5. The name of the person to whom or to whose order

payment is to be made (payee/beneficiary);
6. A statement of the date when and the place where the
cheque is drawn;
7. The signature of the person who draws the cheque
(drawer).
(Geneva Uniform Law for Cheques 1931)
(Bills of Exchange Act 1882)
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TIME OF PAYMENT

A cheque is payable at sight. (Art. 28

Geneva Uniform Law for Cheques 1931)

Neither the death of the drawer nor his

incapacity taking place after the issue of the
cheque shall have any effect as regards the
cheque. (Art. 33 Geneva Uniform Law for
Cheques 1931)

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3.5. Validity and Presentation

time
 Validity time: Calculated from the time of
issuance and stipulated clearly.
 Presentation time (from the date of issue)
- 8 days: if payable within country of issuance
- 20 days: if place of issue and place of
payment are in the same continent.
- 70 days: if place of issue and place of
payment are not in the same continent.
(Article 29, ULC 1931)

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3.6. Cheque classification

Based on Circulation
 Nominated / nominal cheque: Beneficiary’s
name specified  non-negotiable, cannot be
endorsed
 Nameless / Bearer check: No beneficiary
specified – Pay to holder
 Order check / Check to order: - Pay to the
order of …  can be negotiable by
endorsement

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3.6. Cheque classification

Based on usage
 Crossed check: crossed by the Drawer /
Transferer  can be transferred through
banks but cannot be used to withdraw cash.
+ Check crossed generally / General crossed
cheque
+ Check crossed specially / Special crossed
check: Name of the bank is specified in the
cross.
 Traveller’s check

 Certified check

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3.6. Cheque classification

Based on drawer
BANK DRAFT (Banker’s
BUYER’S CHEQUE: cheque):

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Buyer’s cheque v.s Bank draft

BANK DRAFT (Banker’s
BUYER’S CHEQUE:
cheque):
1. A cheque drawn
1. A cheque drawn by a bank on
by a buyer on a itself, or on a correspondent bank
bank. in another city or country for
2. Must be payment in the name of a
returned to the particular person or organization.
buyer’s country 2. Will clear in the seller’s
to be cleared. country.
3. The chance of
3. Bank drafts can not bounce.
the cheque
‘bouncing’
4. Can take => Bank draft is more secure than
anything from buyer’s cheque
one to six weeks.
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Bounce (vi)
To be left
unpaid
and
returned
by a bank
because of
insufficien
t funds in a
checking
account
Ex. a check
that
bounced.

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4. Payment Card
 History of payment card (textbook)
 Definition
 Technical description
 Parties involved
 Process of payment card circulation
(textbook)
 Classification
 Benefits of payment cards (textbook)

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4.2. Definition
 Payment cards: means of payment issued by
banks or financial institutions so that card
holders can withdraw, top up, make
payments or remittance.

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4.3. Technical description

 Size: 96mm x 54mm x 0.76mm
 Surface: information of bank, logo, serial
number, validity and expiry date, card owner.
 Back: magnetic stripe storing information
about the account, timing, PIN (Personal
Identification Number), ...

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4.4. Parties involved

 Card Association
 Card issuing bank
 Acquirer (Payment bank)
 Merchant
 Card holder

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4.6. Classification
 Based on region
- Domestic cards
- International cards
 Based on issuing organization
- Cards issued by bank
- Cards issued by non-banking institution

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4.6. Classification
 Based on card features
- ATM card
- Debit card
- Credit card

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4.7. Benefits
 For card holders
 For banks
 For merchants
 For the society

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THANK YOU FOR YOUR LISTENING

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