10/01/2024

Payment Methods
Nguyen Xuan Vinh
January 2024

Payment methods
• Payment methods is one of important terms in a sale contract
• The seller and the buyer may choose a suitable method, depending
on the risks associated with each method and the trust between
them
• Commonly used methods are
• Remittance
• Collection
• Documentary Credit

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Remittance
• The buyer (importer) requests his bank (importer bank) to remit a
sum of money (the invoice value) to the exporter
• After the importer has received the goods or the documents to receive the
goods. The goods are released before the exporter receives the funds
• Before he has received the documents to receive the goods (pre-payment).
The exporter receives the funds before the goods are released

Remittance (2)
• Let’s examine a set of real documents for remittance or TT
• Find some information needed for payment:
• The exporter, importer, goods…
• Why we need some types of documents?
• Invoice, contract…
• Explain in detail the transfer message
• It is a remittance before or after receipt? Why?

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The process for Remittance

after receipt of the goods
1
Sale contract
Importer Exporter
Documents: Shipping/Documents
- Application for remittance
Remittance order

Debit advice

- Sale contract
Credit advice

- Invoice 2 3
- P/L, B/L 5
- Customs declaration

Importer Telegraphic Transfer

Exporter
bank bank
4

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The process for Remittance before

goods receipt
1
Sale contract
Documents:
Importer Exporter
- Application for remittance
- Sale contract Delivery/documents

Remittance order
- Invoice 6

Debit advice
- A commitment or pledge

Credit advice
2 3
5

Importer Telegraphic Transfer

Exporter
bank bank
4

Risks for the remittance methods

• Risks and costs for each party?

• In what circumstances the method is commonly used?

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Collection
• Collection is a payment method in which the exporter, after delivering
the goods to the carrier, instructs his bank (remitting bank) to collect
a sum of money (the invoice value) from the importer, using a bill of
exchange drawn by the exporter
• Enclosed with commercial documents (Documentary collection): the importer
bank deliver documents against payment or acceptance (D/P or D/A)
trả ngay trả có kì hạn
• Without commercial documents (Clean collection)
không kèm chứng từ

• It is applied in pursuant to Uniform rules for the collection - URC 522,

ICC, 1995
International Chamber of Commerce

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Collection (2)
• Parties concerned: ủy thác nhận thu tiền
bên ủy thác
• The principal: the exporter who entrusts the handling of a collection to a bank
ngân hàng chuyển chứng từ
• The remitting bank: entrusted by the principal
• Collecting bank: any bank, other than the remitting bank
• The presenting bank: the collecting bank making presentation to the drawee
ngân hàng xuất trình

• Collection refers to a bank’s handling of documents as per the

exporter’s instructions. Banks will not be responsible for non-
payment of the importer.

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nếu theo phương thức trả chậm Documentary Collection

-> acceptance
1
Sale contract
Importer Exporter
Commercial documents

Shipping of goods
Payment/acceptance

Collection request
Bill of exchange

Credit advice
deliver
5 5
2 7
4
báo toán xuất khẩu
3
bộ chứng từ
Collecting bank Documents
Remitting bank
(NH thu hộ) Telegraphic Transfer (NH nhờ thu)
chuyển điện
6

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Collection (3)
• Let’s examine a real documents for collection
• Find information on parties in collection:
• The principal, the drawee, the remitting bank…
• Which types of documents needed? Why?

• Explain in detail the transfer message

• It is a remittance before or after receipt? Why?

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15

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Clean Collection

1
Sale contract
Importer Exporter
Shipping/documents
Payment/acceptance

Collection request
Bill of exchange

Credit advice

5
2 7
4

Collecting bank Bill of exchange

Remitting bank
(NH thu hộ) Telegraphic Transfer (NH nhờ thu)
6

- Không gửi kèm bộ chứng từ

- Mối quan hệ lâu năm, đơn hàng trị giá nhỏ

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Advantages and costs for collection

• Advantages for the exporter?
- The exporter keeps the right to take delivery of goods from the carrier until the
importer pays or accepts to pay for the goods.
- Collection is more flexible than documentary credit.

• Limitation or costs?
- Time for collection may be long, banking charges for collection are higher
- The risks that the importer refuses to pay or to take delivery.

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Documentary credit tín dụng chứng từ

• Documentary credit is a payment method in which a bank, at the

phát hành sự cam kết
request of the importer, issue a commitment (known as a letter of
credit) to pay to the exporter provided that the latter presents to the
bank documents conforming to the stipulated terms, thanh toán cho ai, bao nhiêu, khi nào
• The concerned parties:
• Applicant: the importer
• Issuing bank: the bank issues a credit at the request of the applicant
• Advising bank: the bank advises the credit at the request of the issuing bank
• Beneficiary: the party in whose favor a credit is issued

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Issuing a letter of credit

1
Sale contract
Importer Exporter
Application for LC

Advising LC
2 yêu cầu mở thư tín dụng
4

thông báo
Issuing bank Advising LC Advising bank
ngân hàng phát hành 3 vai trò xác thực thông tin
(có thu phí)

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- Giảm thiểu rủi ro cho nhà xuất khẩu Negotiation/Payment of a LC

ứng trước tiền
5

Importer Shipping the goods Exporter

Presenting Documents
Payment/acceptance

Documents

Payment/
Negotiation
9
6 6 8
9

7
Documents
Issuing bank Advising bank/
Reimburse/ pay/accept Nominated bank
8 ngân hàng được chỉ định
chưa ứng tiền -> thanh toán tiền có thể trùng với ngân hàng thông báo hoặc có thể không
đã ứng tiền -> hoàn trả

- negotiation: ứng trước tiền cho người thụ hưởng

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Advantages and Costs for LC

• Advantages for each side

• Costs

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