Payments In International Commercial Transaction

Chapter 1: Economic Environment………………………….….…4
1. Introduction…………………………………………………………..…...4
2. The Economic Environment of Industrialized Countries……….……..….4
2.1. European Economic Community (EEC or EC)………….….…...4
2.2. Japan…………………………………………………….…..……6
2.3. United States and Canada…………………………………..……7
2.4. Australia and New Zealand………………………………..……..8
3. The Economic Environment of Newly Industrialized Countries…..……..9
          3.1. Pacific Rim Countries……………………………………….…...9
3.2. Latin America…………………………………………….…….11
4. The Economic Environment of the Less Developed Countries…………12
 4.1. Characteristics of the Less Developed Countries…………….…….12
4.1.1. Low per Capita Income……………………………………….12
4.1.2. Dependence on Primary Goods……………………………….13
4.1.3. Lack of Economic Diversification……………………………13
4.1.4. High Illiteracy Rate…………………………………………...13
4.1.5. Population Explosion…………………………………………14
 4.2. Obstacles to Economic Development………………………...…....15
   4.2.1. Lack of Sources of Capital……………………………………15
   4.2.2. External Sources of Capital…………………………………..15
4.2.3. Inadequate Infrastructure……………………………………..16
4.2.4. Import Substitution…………………………………………...16
Global Insight:
Understanding Eastern European Countries in the 1990s………………….17
5. Summary………………………………………………………………...17
Chapter 2: Export – Import Activities…………………………………..19
1. Introduction……………………………………………………………...19
2. Methods for Reaching Foreign Markets……………………….………...19
 2.1. Organizational Structures for Direct Exporting……………...…….19
2.1.1. Built-in Export Department…………………………………..19
2.1.2. Separate Export Department………………………………….19
 2.2. Foreign Distribution Channels……………………………...……...20
 2.3. Indirect Exporting…………………………………………...……..20
2.3.1. Intermediaries Acting on Behalf of the Manufacturer….…….20
2.3.2. Intermediaries Representing Buyers…………………….……21
2.3.3. Intermediaries Acting on their own Behalf. ………………….21
 2.4. Documentary Requirements…………………………………...…...22
3. Channels for Importing………………………………………………….23
 3.1. Direct Import…………………………………………………...…..23
 3.2. Indirect Import…………………………………………………..…24
 3.3. Clearing Imports through Customs……………………………...…25
3.3.1. Filling the Entry………………………………………………25
3.3.2. Protest…………………………………………………………26
3.3.3. Shipment in Bond……………………………………….…….26
 3.4. Examination and Appraisal……………………………………...…26
4. Incoterms………………………………………………………………...27
5. Summary………………………………………………………………...32
Chapter 3: Sales Without Money………………………………………...33
1. Countertrade……………………………………………………………..33
 1.1. Introduction…………………………………………………...……33
 1.2. How Important is Countertrade?.......................................................34
 1.3.Counterpurchase………………………………………………….....35
1.3.1. Advantages……………………………………………………35
1.3.2. Countertrade Structure………………………………………..35
1.3.3. Contents of Counterpurchase Agreement…………………….37
1.3.4. Commission Payments………………………………………..38
1.3.5. Counterpurchase – Some Legal Aspects……………………...38
 1.4. Compensation…………………………………………………...….40
1.4.1. Compensation Agreements…………………………………...40
1.4.2. Advance Compensation………………………………………40
 1.5. Barter…………………………………………………………...…..40
 1.6. Offset………………………………………………………..….…..41
 1.7. New Direction………………………………………………...……42
2. Industrial Cooperation……………………………………………….......42
 2.1. Joint Venture……………………………………………………….42
 2.2. Coproduction and Specialization…………………………………..45
 2.3. Subcontracting……………………………………………………..45
 2.4. Licensing…………………………………………………….……..45
 2.5. Turnkey Plants……………………………………………………..45
Chapter 4. Methods of Payment…………………………………………47
1. Introduction……………………………………………………………...47
2. Bank Transfer……………………………………………………..……..47
3. Cash in Advance…………………………………………………..…….48
4. Open Account……………………………………………………..…….49
5. Payment by Cheque…………………………………………….….……52
6. The Bill of Exchange……………………………………………..……..55
7. Payment Order…………………………………………………..………56
8. Cash against Documents Payments………………………….…..………57
9. Summary………………………………………………………….……..61
Chapter 5: Letter of Credit…………………………………….………...62
1. General Presentation of Letter of Credit……………………….………..62
 1.1. Definition…………………………………………………………..62
 1.2. The Parties Involved in the Documentary Credit………….……….62
1.2.1. The Applicant……………………………………...………….62
1.2.2. The Issuing Bank…………………………………….……….63
1.2.3. The Advising Bank………………………………….………..63
1.2.4. The Beneficiary…………………………………….…………63
2. Letter of Credit Classification………………………………….………..63
 2.1. Revocable Credit………………………………...…………………64
 2.2. Irrevocable Credit…………………………………………………..64
A. Transferable Credit…………………………………….…………66
B. Acceptable Credit…………………………………….…………..67
C. Deferrable Payment Credit…………………………….…………68
D. Negotiation Credit…………………………………….………….69
E. Red Clause Credit……………………………………….………..70
F. Revolving Credit……………………………………….…………70
G. Back-to-Back Credit…………………………………….………..71
H. Commercial Letter of Credit………………………….………….72
I. Stand-By Letter of Credit……………………………....…………73
 2.3. Methods of Payment under the Credit…………………..………....75
 2.4. Some Advantages and Disadvantages to the Exporter and Importer Involved in Letter of Credit………………………………………………...76
2.4.1. Advantages……………………………………………………76
2.4.2. Disadvantages………………………………………………...77
 2.5. Conclusions………...………………………………………………77
Bibliography………………………………………………………………79