Đề cương môn IP

Question Answer

1. What is - Definition: International payment means the performance of payment

international obligations due to economic and non-economic activities between
payment? Give counterparties located in different countries.
examples. Example:

2. What are the 4 characteristics:

characteristics of  International payments are governed by Int' laws; national laws;
international International custom and practices such as ULB, UCP,URC,URR
payment? and Incoterms.
 Ip transactions are mainly done through commercial banking
systems.
 Ip is a type of baking services
 Int' payments are influenced by the variation in exchange rate and
foreign exchange reserves.

3. What are the 3 sources of law:

three sources of  Int’ law
law that regulate  National law
international  International custom and practices such as ULB, UCP, URC, URR
payment and Incoterms. ( The new version is released to replace the old
activities? version. If you wish to apply it, it must be recorded in the relevant
documents.
E.g:
 UCP 600 is written in L/C
 URC 522 is written in the collection instruction.
 Incoterms are written in commercial contracts. ( Incoterms are a set
of international trade rules that govern the responsibilities,
obligations, and timing of transfer between the seller and the buyer
in international sales contracts.)

4. What are the  Financial documents: means bill of exchange, promissory notes,
two categories of cheque or other similar instruments used for obtaining the payment
documents in of money
international +Letter of Credit (L/C)
payment? +Bill of Exchange (Draft)
+Bill of Lading
+Bank Draft
 Commercial document (chứng từ thương mại): means invoices,
transpo rt documents, documents of title or other similar
documents, or any other documents whatever, not being financial
documents.
+Commercial Invoice
+Packing List
 +Certificate of Origin
+Insurance Certificate

5. What is a A "B/E" in the context of international trade and finance commonly refers
B/E? to a "Bill of Exchange." A Bill of Exchange (B/E), also known as a draft, is
a written order issued by the seller (drawer) to the buyer (drawee),
directing the drawee to pay a specified amount of money at a
predetermined future date. It serves as a financial instrument that facilitates
transactions, particularly in international trade.

6. What are the There are two main types of Bills of Exchange:
characteristics of  Sight Bill: The drawee is required to make the payment
B/E? immediately upon presentation (sight) of the bill.
 Time Bill: The payment is to be made at a future date specified in
the bill.

7. What is a Cheque means a valuable paper created by a drawer, ordering the

Cheque? paper being a bank or an organization providing payment services, which is
licensed by the State Bank of Vietnam, to pay a fixed sum from its account
to the beneficiar (Law on Negociable Instruments 2005).
Cheque is a written order from one party (the drawer) to another
(the drawee, normally a bank) requiring the drawee to pay a specified sum
on demand to the drawer or to a third party specified by the drawer (CPSS
Glossary - March 2003)

8. Distinguish A check is a financial instrument issued by an individual or an entity

between bills of directing the bank to provide the recipient with the stated amount of
exchange and money. On the other hand, a Bill of Exchange is a written order from one
cheque? party (the drawer) to another party (the drawee) to pay a specific amount of
money to a third party (the payee) at a later date. By definition, a check is a
check drawn on a bank account.

Cheque Bill of Exchange

Checks are written orders from bank
account holders to the bank to pay a
specified amount to the person
named on the check or to the person
holding the check.
It is always drawn on a bank.
It is always payable on demand.
It is used for transactions between
individuals or between individuals
Basically, a bill of exchange is an
order from one party (the drawer)
to another party (the drawee) to pay
a specific amount to a third party
(the payee) on a specific date.
It can be drawn on a bank or any
other person or organization.
It may be payable on demand or on
a specific date.
It is used mainly for transactions
between businesses.
 and businesses.
It is governed by the Negotiable It is governed by the Bills of
Instruments Act, 1881 in India. Exchange Act, 1881 in India.
It is a simple, straightforward It is a complex instrument that
instrument and easy to use. requires a greater level of expertise
to use and understand.
It is used for small transactions and It is used for large transactions and
personal payments. commercial payments.
It is always payable in cash. It can be payable either in cash or
in kind.
Once a cheque is issued, the drawer In a bill of exchange, the drawer
cannot stop payment. has the right to stop the payment
before it becomes due.
Cheque can be dishonored due to Bill of Exchange can be dishonored
insufficient funds, signature if it is not accepted by the drawee
mismatch, etc. before the due date.

9. Terms of  Definition:
currency of - Currency of payment means in what currency will payment be made. The
international contract currency will differ from (at least) one of the parties' national
payment? currencies.
- In some cases, the choice of currency for a contract is more important
than the contract price (or unit price) itself.
 Classify:
- Hard currency: Currencies of certain countries have a fairly wide
acceptance for settlement of international obligations and are used as a
medium in international transactions.
Characteristics:
+ Issued by a government with a stable economy and political system.
+ Relatively stable exchange rate.
+ Highly liquid in the foreign exchange market.
Eg: US dollar (USD), British pound sterling (GBP), Japanese yen (JPY),
Euro (EUR)
- Soft currencies: are not widely accepted as a medium for settling
international financial transactions.
Characteristics:
+ Issued by a country with a weak economy and/or political instability.
+ Prone to high inflation and exchange rate volatility.
+ Less readily accepted in international trade.
+ Not typically held as foreign reserves.
+ Soft currencies can fluctuate erratically or depreciate against hard
 currencies, and a transaction with a soft currency can thus cause bigger
problems for the other party.
Eg: Zimbabwean dollar (ZWL), Vietnam Dong (VND), Cuban peso (CUP)
 Several approaches to managing currency risk:
+ Sharing currency fluctation risk
+ Currency adjustment contract clause
+ Currency hedging

10. Terms of  Definition: Term of payment refers to when payment should take
time of place. International trade presents a spectrum of risk, which causes
international uncertainty over the timing of payments between the exporter
payment? (seller) and importer (buyer).
 Classify:
1. Advance payment:
- Payment in advance is used in very limited circumstances: products in
high demand, unique products that are not available everywhere, small
orders (such as spare elsewhere, the importer is a new customer…)
- 2 main types used in advance payment:
 Cash with order (CWO): means that payment is settled immediately
when making an order.
 Remittance in advance: means that the goods are paid before they
have been exported and received.
Evaluate:
- Payment in advance is used in very limited circumstances.
- Advantages for seller: Minimizes risk of non-payment, secures working
capital.
- Disadvantages for buyer: Less flexibility, ties up cash flow, increased
exposure to fraud.
2. Concurrent payment:
- At sight: Payment is made against a documentary bill that is issued by a
sight L/C.
- Document against Payment (D/P): Payment is made upon delivery of
document.
- Cash on delivery (COD): Payment is made upon delivery of goods,
delivery order or warehouse warranty.
Evaluate:
- D/P preferred by sellers: Offers some security with document control.
- COD preferred by buyers: No upfront payment required.
3. Deferred Payment:
- Usance basis: Payment is made after the shipment against documentary
bills under a unsance L/C.
- Escrow account: Payment held by third party until agreed-upon
conditions are met.
- Document against acceptance (D/A): Payment is made against acceptance
of bills.
- Open account: Payment made on credit based on agreed-upon terms.
 Evaluate:
- Maximizes working capital: Buyer retains use of cash for longer.
- Increases risk for seller: Higher risk of non-payment.
- Usance and D/A: Offer sellers some security through delayed payment.
- Open account: Requires strong creditworthiness and trust between
4. Mixed Payment Terms:
A mixed payment term combines two or more of the previously mentioned
payment methods. This approach offers flexibility and can be beneficial for
both the buyer and seller.
Examples: Advance payment + usance; CWO + open account; D/P + D/A
Evaluate:
- Increased flexibility
- Reduced risk
- Improved cash flow

11. Terms of *Definition: It refers to the question of where payment should take place
place of and must be defined, since it determines the fulfillment of the obligations
international of the buyer. This also relates to what form of payment is used
payment? *The different methods of payment cause the different places of payment:
-Documentary credit: the place of payment is issuing bank
-Documentary collection: the place of payment is collecting bank
-Cheque: It is up to the parties to decide if the buyer’s obligations
have been fulfilled when the cheque is sent, when it has been received by
the seller or when it has been cleared in the banking system and the
payment is available to the seller as cleared funds.
-Bank transfer: The place of payment must be decided by the parties
involved. The seller wants the payment to be received by their bank before
accepting that the buyer has fulfilled their payment obligations, whereas
the buyer may consider their obligation to have been fulfilled when they
pay the amount at their local bank.
-Open account (O/A): . If no such agreement is made, disputes may
arise later on, and may then have to be decided by the applicable law. In
most countries, the law stipulates that the debt should be paid at the
domicile of the creditor, namely the seller.

12. Terms of *Definition: It shows that how payment is made depends on the role of the
method of banks involved and affects the security offered to both buyer and seller.
international *Types of methods of international payment
payment? a,Payment in advance:
-Definition: In a payment in advance, the seller gets paid before
“delivery of goods”. Payment in advance requires the buyer to pay prior to
the delivery of the goods.
-Advantages and disadvantages of payment in advance:
+Advantages: Immediate and easy; the most secure and least risky
payment method for the seller, the most favorable and advantageous
method of payment for the seller.
 +Disadvantages: the most disadvantages for the buyer, and bring the
highest risk to the buyer; creating cash flow problems for the buyer.

13. Definition 13. Definition and process of documentary collection payment method?
and process of  Definition: is collection of financial documents (drafts)
documentary accompanied by commercial documents (invoices, transport and
collection insurance documents, etc.)
payment  Process:
method? - Documentary against payment (D/P): This transaction requires the buyer
to pay the draft’s face amount on sight. To put it in another way, the
importer must pay the collecting bank when the former receives the draft
before the release of shipping documents. This is the more popular option
than the other type as it involves a lower risk for the importer.

- Documentary against acceptance (D/A): In this case, the seller offers a

credit arrangement to the buyer by utilizing a time draft or bill of exchange.
This means that the importer can claim the goods after signing and
accepting the draft. However, once the buyer signs the time draft, they
become legally obligated to make payment on a particular date. On this
date, the collecting bank contacts the buyer for payment. After receiving
the amount from the buyer, the collecting bank transfers the funds to the
remitting bank for payment to the seller.
14. What are the 14. What are the pros and cons of documentary collection
pros and cons of payment method?
documentary Advantages
collection
payment method *Seller
? -A documentary collection
can increase the certainty of
payment.
-A documentary collection
includes drafts, and the drafts
can help the seller to
negotiate the documents and
the drafts to the bank.
*Buyer
-The documentary collection
can provide some assurance
to the buyer that the goods
paid for and accepted for will
arrive.
-The documentary collection
can improve cash flow to the
buyer.
Disadvantages
*Seller
-Should the buyer not pay or
accept the drafts, the costs of
reselling or shipping back the
goods would be high.
-Buyers may try to bargain
down the price once they take
the goods, claiming some
defect.
*Buyer
-The buyer may receive
defective goods after they
make payment or accept
documents.
-A documentary collection
costs more than an open
account.

15. Distinguish Feature Clean Collection Documentary Collection

between clean
collection and Nature of Unconditional payment or Payment or acceptance against
documentary Transaction acceptance of a clean draft presentation of documents
collection?
Risk Lower risk as no documents Higher risk as it depends on the
 Involved are involved documents presented

Documents No specific documents Documents such as invoice, bill

Required required of lading, etc. required

Payment Typically immediate Payment based on compliance

Terms payment or acceptance with specified documents

Common in open account Used in international trade

Usage transactions transactions

Bank Minimal involvement, often Intermediary banks may be

Involvement handled directly by buyer involved to handle documents

Less complex, fewer More complex, compliance

Compliance compliance requirements with document requirements

Dispute Easier to resolve disputes Disputes may arise due to

Resolution due to simplicity discrepancies in documents

16. Definition  Definition

and process of The Uniform Customs and Practice for Documentary Credits (the sixth
documentary revision of 2007, UCP 600) Article 2 defines a documentary credit
credit payment ("credit"):
method? "Credit means any arrangement, however, named or described, that is
irrevocable and thereby constitutes a definite undertaking of the issuing
bank to honor a complying presentation."
A documentary credit (or Letter of credit) is a definite undertaking of the
issuing bank to pay a complying presentation (presentation of documents).
An issuing bank would pay a beneficiary (normally the seller) if the
documents presented comply with the terms and conditions of the credit.
+Independence principle
+Abstractness principle
 Process
17. What are the -Definiton: A documentary credit serves as a secure payment mechanism
pros and cons of benefiting both the seller (exporter) and the buyer (importer) in a sales
documentary agreement. For the seller, it provides assurance, typically arranged through
credit payment the buyer's bank, that payment will be received upon fulfilling the shipment
method? of goods. Conversely, for the buyer, the documentary credit ensures a
guarantee that the ordered goods will be delivered as specified in the
agreement.
Advantage Disadvantage

*For the importer: * For the importer

• The importer will obtain
transport documents prior to
payment. The importer needs not
pay out funds before the
documents have arrived;
• the importer may be able to
obtain a price discount in return
for a documentary credit;
• the importer may be able to
obtain favorable payment terms
such as usance documentary
credit, deferred payment
documentary credit.
* For the exporter:
• Payment is more secured: the
issuing bank must accept and
pay the complying presentation;
• the payment risk is transferred
from the buyer's credit rating to
• the amount of the documentary
credit is treated as the importer's
contingent liability;
• the amount of the documentary
credit will reduce the credit limit
of the importer;
• the importer should pay
documentary credit issuance cost;
• the importer's account will be
debited on receipt of compliant
documents;
• the importer may receive
defective goods even after
payment.
* For the exporter:
• the exporter must present
complying documents within the
letter of credit expiry date;
• the importer may request a price
 the issuing bank's credit rating discount in return for a
• post-shipment financing may documentary credit;
be available such as negotiation, • the exporter usually pays the cost
factoring and forfaiting incurred in their country.
• pre-shipment finance may be
available;
• the transport documents and
the draft may be negotiated
easily.

18. Types of *Definition of letter of credit: A letter of credit, or a credit letter, is a letter
Letter of Credit? from a bank guaranteeing that a buyer’s payment to a seller will be
received on time and for the correct amount. If the buyer is unable to make
a payment on the purchase, the bank will be required to cover the full or
remaining amount of the purchase. It may be offered as a facility (financial
assistance that is essentially a loan).
*Types of letter of credit:
1. Sight credit (or sight letter of credit) means a credit that is available
by sight payment. Sight payment means that payment should be
made on presentation or on demand.
2. Deferred payment credit (or deferred payment letter of credit)
means a credit that is available by deferred payment. In a deferred
payment credit, the issuing bank or the nominated bank accepts a
complying presentation, and pays at a future due date
3. Acceptance credit (or acceptance letter of credit) means a credit that
is available by acceptance. In an acceptance credit, an issuing bank
or a nominated bank accepts drafts and/or documents complying
with the credit and pay at a future due date
4. Negotiation credit (or negotiation letter of credit) means a credit
that is available by negotiation/acceptance. In a negotiation credit,
the nominated bank is authorized to negotiate the complying
presentation but is not obligated to do so
*Other forms of credit:
5. Transferable credit: means a credit that can be transferred to a
second beneficiary by a first beneficiary
6. Back-to-back credit is a credit that serves as the collateral for
another credit. The advising bank of the first letter of credit ("back-
to-back credit" becomes the issuing bank of the second letter of
credit (normally "local letter of credit").
7. Red clause credit is the credit that includes a clause (traditionally
written or typed in red ink) that allows the advising bank to make
advances to the beneficiary in advance of the shipment or before
presenting the prescribed documents.
8. Revolving credit can be used to avoid the need for repetition of
issuing and advising credits, and thus is used for regular shipments.
 The credit stipulates that it is revolving whether automatically or
under specified conditions.
9. Standby letter of credit is similar to documentary credit (letter of
credit) but is used as a guarantee that contractual undertakings are
fulfilled
10. A confirmed credit is used when the seller wishes to have a
documentary credit issued by a foreign bank to be confirmed by a
bank in an exporting country.

19. Definition  Definition: In an open account transaction, the seller ships (or
and process of delivers) goods and sends the shipping documents including invoice
open account directly (not using a banking system0 to the buyer without
payment receiving payment, and the buyer will pay at a future due date. The
method? seller extends credits to the buyer by allowing them to pay in
arrears
 Process:

1. The seller and buyer conclude a contract for sale, for which the
payment method is an open account
2. The seller ships the goods according to a contract for sale
3. The seller sends shipping documents (transport document (bill of
lading or airway bill), invoice, packing list) directly to the buyer
4. The buyer simply instructs its bank to transfer the amount by
depositing funds or by debiting his account. This is the same as a
normal bank transfer in domestic trade transactions
5. The buyer’s bank transfers funds to the seller’s bank by crediting
the seller’s bank account or by debiting their account with the
seller’s bank.
6. The seller’s bank gives the funds to the seller by crediting the
seller’s account with the bank

20. What are the What are the pros and cons of open account payment method?
pros and cons of Advantage Disadvantage
open account
payment
 method? - The buyer will be of cash
flow problem
- The buyer has time to
inspect goods before
payment
- The buyer can save costs,
such as the letter of credit
issuing fee, collection fee,..
- The seller will lose control
of goods without payment
- The seller will lose control
of goods without securities
for payment, such as B/E (a
documentary draft),
promissory note, payment
guarantee, documentary
credit.
- The seller can hardly use
trade finance techniques
such as negotiation,
factoring, or forfaiting
- The seller will suffer cash
flow problem
- The seller has to pursue
collection abroad in case of
non-payment
- The seller may not get paid
by reason of market claim
by the buyer

Cách làm bài tập hối phiếu

BILL OF EXCHANGE (1)
No: …,…(7)
For:…(2)
At (4)…. sight of this first bill of exchange (second of the same tenor and date being unpaid).
Pay to the order of…(6) the sum of USD (2)… only
To:…(3) For and on… (8)
Place of payment (5) (Signed and sealed)
(2): Số tiền
(3): Drawee (ng có trách nhiệm thanh toán HP)
- Nếu PTTT là LC -> issuing bank
- Các Pthuc khác -> importer
(4): Tgian thanh toán
- At sight (at sight, D/P, COD)
- At X days after sight (usance basis, D/A, Escrow account, Open account)
(5): Địa điểm thanh toán
(6): Payee (ng thụ thưởng) – the order of Vietcombank Cau Giay Branch
(7): Nơi lập HP (là nước ng XK) (sau ngày giao hàng)
(8): Drawer (ng ký phát hối phiếu)