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In international sales of commodities, the main issues concerning the settlement of payment are means of payment, time and place of payment, and mode of payment, etc. Issues in this regard should be clearly specified in the contract by the parties concerned.

Means of payment include settlement in cash and settlement with bill. Most of the payment in international trade is not settled in cash but with bills such as draft, promissory note and check, among which drafts are widely used.

Draft is an unconditionally written order drawn by the drawer for the money to be paid by the drawee (payer). Drafts are negotiable instruments and may be sold.

Promissory Note is a written and signed promise to pay a stated amount of money to a particular person.

Check is a written order to a bank to pay a certain sum of money from one’s bank account to another person.

Modes of payment include remittance, collection and Letter of Credit：

Remittance is a process that the payer instructs his bank or other institutions to have payment made to the payee. It is often used for payment of advance payment, cash with order, open account, down payment, payment in installments and commission etc. Remittance can be made by mail, telegraph and draft.

Collection means the handling by banks, on instructions received, of documents in order to obtain acceptance and/or payment; deliver commercial documents against acceptance and/or payment; deliver documents on other terms and conditions.

Letter of Credit is a binding document that a buyer can request from his bank in order to guarantee that the payment for goods will be transferred to the seller. Basically, a letter of credit gives the seller reassurance that he will receive the payment for the goods. In order for the payment to occur, the seller has to present the bank with the necessary shipping documents confirming the shipment of goods within a given time frame. It is often used in international trade to eliminate risks such as unfamiliarity with the foreign country, customs, or political instability. There are many kinds of L/C including： Documentary L/C; Irrevocable L/C; Revocable L/C; Sight Credit; Usance L/C; Transferable L/C and Confirmed L/C.

Becker： Mr. Santinelli, we have settled the price, quality and quantity of the transaction. Now, let’s come to the terms of payment. What do you say?

Santinelli： For payment, we only accept confirmed irrevocable letter of credit payable against draft at sight and with partial shipment and transshipment allowed clause.

Becker： Oh, that will tie us up too severely. Would you give us some favorable terms, such as D/A, for the sake of our future cooperation?

Santinelli： I have to say sorry, Mr. Becker. Payment by L/C is our usual practice. As a matter of fact, L/C protects the importer as well as the exporter.

Becker： That is true, but opening an L/C is rather complicated. I wonder if D/P is acceptable to you, then.

Becker： You see opening an L/C with a bank involves a deposit. That will tie up our funds.

Santinelli： You might consult with your bank and see if the required deposit can be reduced to a minimum.

Becker： Nevertheless, bank charges still occur. How about 50% by L/C and the rest by D/P?

Santinelli： I am awfully sorry. I am afraid I cannot promise even that. We usually require payment by confirmed irrevocable L/C, payable against shipping documents.

Becker： Well, it seems that I have no other choice but to accept the payment by sight L/C. The season is drawing near, you know, so we’d like to take delivery at the end of June.

Becker： Very well. I’ll arrange for the L/C as soon as I get home. Thank you very much.

Santinelli： Good morning, Mr. Becker! This is Valentina Santinelli. I’m sorry to ring you like this.

Becker： Ah, that’s all right.

Santinelli： Did you receive our June shipment?

Becker： Yes, we did.

Santinelli： When did it arrive?

Becker： Er… it arrived on the …5th of July.

Santinelli： Are all things you ordered included?

Becker： Yes, thank you, yes.

Santinelli： Did you get the invoice as well?

Becker： Yes… yes

Santinelli： And, er, have you paid the invoice for the last shipment yet?

Santinelli： Because I haven’t a record of the payment and our department was just getting a bit worried about it.

Becker： A major problem is that our own customers are going through a difficult period too.

Becker： We have a number of outstanding accounts ourselves, so we know exactly how you feel.

Becker： We’re hoping that out bank will show us some generosity and allow us to overdraw our account.

Becker： We did not get the bank loan, and what’s more we have guaranteed one of our major clients an extra two weeks’credit and…er… they’ve accepted our offer.

Becker： And as if that isn’t enough, we have a large crisis on our hands with another customer who owes us a lot of money.

Santinelli： Well, please try and send the cheque before the end of this month. That is one more week. Our accounts department is considering changing the conditions of payment for future orders otherwise.

Becker： We are friends. Could you accept D/P or D/A as a special treatment instead of confirmed, irrevocable L/C as we agreed before? You must know that payment by L/C is complicated and costs us a lot. What’s more, we shall pay a large sum of deposit.

Santinelli： Payment by L/C is the rule of our company, though we believe that a world famous MNC of your standing will not default.

Becker： Then, let’s meet each other half way. What do you say to 50% by L/C and the balance by D/P?

Santinelli： Well, in view of our long-standing friendship and the effort you’ve made in pushing the sales, we agree to your suggestion.

Santinelli： And we hope to keep you as a regular customer despite any troubles you may be having.

cash with order定货付现，认购即付 open account未清结的账目，往来账户

1. For payment, we only accept confirmed irrevocable letter of credit payable against draft at sight and with partial shipment and transshipment allowed clause. 就付款而言，我们只接受凭即期汇票付款的保兑不可撤销信用证，并带有允许分批装运和转船的条款。Irrevocable L/C：不可撤销信用证。是指信用证一经开出，在有效期内未经信用证各有关负责人的同意，开证行不得单方面修改或撤销的信用证。Confirmed L/C：保兑信用证。是指有开证银行所开出的有另一家银行加以保兑的信用证。保兑银行对受益人负责承担第一手的付款责任。draft at sight/sight draft：即期汇票，即见票即付的汇票。即期汇票一般以提示日为到期日，持票人持票到银行或其他委托付款人处，后者见票必须付款的一种汇票，这种汇票的持票人可以随时行使自己的票据权利，在此之前无须提前通知付款人准备履行义务。partial shipment：分批装运。指一笔成交的货物，分若干批装运。国际贸易的合同或信用证往往有一项清晰的条款明确规定分批装运是否被允许，如果违反该条款，可以导致买方不付货款或者不完全付清货款.

2. D/A：Documents against Acceptance, 承兑交单。是指出口人以进口人承兑汇票为交单条件的托收方式。即出口人在装运货物后开具远期汇票，连同货运单据，通过银行向进口人提示，进口人承兑汇票后，代收银行即将货运单据交给进口人，进口人在汇票到期时方才履行付款义务.

3. D/P：Documents against Payment, 付款交单。是指卖方交单以买方付款为条件。出口人发货后，取得装运单据，委托银行办理托收，并在托收委托书中指明银行。只有在进口人付清货款后，才能把装运单据交给进口人。

4. That will tie up our funds. 这将占用我们的资金。tie up：占用。例如：He tied up the phone for an hour. 他占用电话一个小时。

5. The season is drawing near, you know, so we’d like to take delivery at the end of June. 销售季临近，所以我们想在六月底收货。take delivery：提取货物，收货。

6. extension of credit：贷款展期。贷款展期是指贷款人在向贷款银行申请并获得批准的情况下，延期偿还贷款的行为。

7. overdraft：透支。银行与存款户约定，允许存款户超过存款帐户余额支取一定数额款项的放款业务。

8. overheads：管理费用。经营一家企业的费用，特别是那些不能与所生产和销售的产量单位相联系的固定费用，如房租、房地产税、职员的薪水等。

9. Outstanding accounts：应收账款；未付账单，未结算账目。Language Skills

1) To make sure that our funds would not be tied up, can we make the payment by L/C after sight?

2) We only accept payment by confirmed, irrevocable L/C available by draft at sight instead of T/T reimbursement.

3) As there is no direct steamer to your port, we would like you to amend your L/C to allow transshipment.

2. Payment of other terms

1) We are old friends and you know our reputation, I hope you will accept the payment by D/P or D/A.

2) We’d like to make a down payment first, and then after the delivery, we pay off the rest of them in four payments in accordance with the progress of the project installation.

3) For small orders, we’d like to make the payment by mail transfer after the receipt of the documents.

1) I really sympathize with the problem you have had in clearing the balance and am waiting to extend the credit for another six weeks, would you please confirm that the credit will be settled then?

2) You account has been extended another month, but I will insist on payment by the end of May.

3) We are unable to settle the account due to the bankruptcy of one of our customers, who we hoped would have cleaned his balance with us.

1. Translate the following into Chinese orally.

1) Can we use the City Bank as our opening bank?.

2) What is your usual practice concerning terms of payment?

3) To avoid having our funds tied up, can we make the payment by L/C after sight?

4) If you do not open the L/C in time, you will be responsible for any loss resulting from the delay.

5) If you can entertain payment on deferred terms, we would be in a position to place orders with you for the book cases.

4) 谢谢你方即期交货。随函附上一张可向中国银行支取的1 500美元汇票。能否在收到后通知我方？

5) 很抱歉未能结清8月份的账，因为仓库失火烧毁了我方的大部分原材料。我方正等待保险公司理赔以便支付我方供应商。

2) What is Letter of Credit and how it is performed, please describe the entire procedure.

3) How would you negotiate on the terms of payment in your favor if you were the seller and buyer respectively?

Find a partner and act the following roles according to the situation

Situation： Mr./Ms Wang is talking with Mr./Ms Bauman about the terms of payment.

You are Mr./Ms Wang, General Manager of Xinfang Trading Co.Ltd

1) State the confirmed irrevocable L/C is the usual practice.

2) Insist on the payment by L/C and state reasons.

3) Promise to ship the goods duly.

You are Mr./Ms Bauman, an English businessperson

1) Ask about the usual payment terms.

2) Suggest D/A or D/P as the payment form.

3) Agree to open the L/C under the condition of earlier shipment.

The danger of squeezing prices

If you squeeze the price too low—perhaps by threatening to walk away from the negotiations—you may end up getting a poor deal. The supplier may have to cut costs elsewhere—in a area such as customer service, which could prove costly to you in the long run.

Even if you a supplier’s main customer and enjoy most of the bargaining power, forcing it to meet low prices at which it could go out of business will damage your reputation as a highly valued customer. The supplier will soon look for other customers and is likely to feel resentful.

Some specific price negotiating techniques will be familiar if you have ever bartered at a market.

● Never accept the first offer—make a low counteroffer in return. The other party is likely to come back with a revised figure. Always ask what else they can include at the given price.

● If the price is suspiciously low, ask yourself why, are the goods of sufficiently high quality? Do they really offer value for money? What will after-sales service be like?

● You can also try to make the asking price look high by exposing any ongoing costs. Ask about repair costs, consumables and other expenses. If the current state of the supplier’s market means prices are falling, point this out.

● If the price includes features you don’t need, try to lower it by asking to remove those features from the deal.

● Use your bargaining power to get a good deal. For example, if you’re a big customer of the supplier, you could ask for bulk discounts.

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