Chapter 10 Payments Payment in foreign trade is often more

complicated and difficult than selling in the home market because a great distance separates the exporter and his customer,and in many cases, several parties will have to be involved in order to get the payment made. To recover the value of the goods supplied or services rendered, the exporter should have a good investigation into the credit standing of the importer and work out the most appropriate credit policy.

Basically there are four methods of obtaining payment for Export shipment (1) remittance ( including

Payment in advance and cash with order), (2) open account, (3) documentary credit(using letter of credit) and (4) documentary collection (D/P or D/A).

Letter of credit (L/C) is the most commonly used means of payment in international trade, as it can ensure that an exporter gets his money when he dispatches the goods– not when they are received by the customer, thus giving the exporter the

Largest possible protection. D/P and D/A are less safe than L/C To the exporter. They are often used when

the amount of the deal is relatively small. How to write a letter of payment For a seller, he or she should write in this way: 1. Mentioning the contract, goods, etc. Useful expressions: We refer you to Contract No… Referring to… With regard to (with reference to)… our

contract…

2. Suggesting the term of payment and the reason Useful expressions: As…we shall be glad if you… As you know,…we suggest… Owing to….we would appreciate it if you… 3. Wishing the reader to accept Useful expressions: We wish you can accommodate us in this

respect. We hope to receive your favorable reply. For a buyer, he or she should reply in this way:

1. Stating that you have received their letter Useful expressions: Thank you for your letter of… 2. Giving your reply of agreeing or

refusing and your reasons. Useful expressions: We agree to.. We want to make it clear that… With regard to… we regret being unable

to accept …

3. Stating your good will and your wish to do business with the

Reader Useful expressions: It is in view of our friendly relationship that

we extend you this accommodation. We sincerely hope that we can do business

to our mutual benefit. How to write a letter of L/C amendment 1. Thanking /informing the buyer for /of

their opening of the L/C and pointing out the mistakes in the L/C.

Useful expressions: Thank you for your L/C… On perusal, we found that… With regard to your L/C… 2. Explaining the reason for the need of

amendment. Useful expressions: As there is no direct steamer to… We are sorry that owing to some delay…,

3. Specific suggestions for amendment Useful expressions: We shall be glad if you can amend the

L/C… Please amend the L/C to read… Please extend by fax… 4. Wishing the reader to send the

amendment without delay Useful expressions: We look forward to receiving your

amendment by the end of this week.

Useful Word & Expressions 1. L/C, LC letter of credit (Ls/C)n. An L/C is a tool or instrument of payment, and

the payment is guaranteed by a bank. We appreciate your difficulty in opening Ls/C. As exporters, we must pay special attention to

every stipulation contained in the L/C and see if these provisions are acceptable to us.

Amend the L/C We shall be grateful if you will instruct your

bankers to amend the L/C to read “commission 3%”.

You should amend the amount of the L/C as CAN$125,000. We have amended the L/C as allowing

transshipment and partial shipment. …days L/C We are unable to persuade the sellers to

agree to 30 days L/C. Establish/open/issue an L/C (Ls/C) If orders are booked for prompt shipment,

it is necessary to establish Ls/C by telex. They have opened an L/C through the Bank

of China, London.

Expedite the L/Cextend the L/C We would ask you to do your best to

extend the L/C for 30 days. Please extend the above L/C to July 31st

and August 15th for shipment and negotiation respectively.

L/C at sight For the finished products ,an L/C at sight

is required. L/C for…(amount of

money,order,contract, quantity)

They have received your L/C No. A105 for the amount of US$ 10,000. We wish to state that the relative L/C for this order

will be opened by us sometime in September. We regret to learn that the L/C for Contract No.

HS3418 issued by our bank has not reached you up to now.

As requested, we are opening with our bank two separate Ls/C ,each for 25,000 metric tons.

Rush the L/C L/C available by sight draft=L/C payable against

sight draft

Sight L/C=L/C at sight Term/time/usance L/C In favor of sb=in sb’s favor We will request our bankers to open an

L/C in your favor upon receipt of your confirmation of this order.

The balance standing in our favor is US$ 10,000.

Order,indentorder for goods,indent order Order form/note/sheet 10-4 Write a letter in English asking for

amendments to the following letter of credit by checking it with the given contract terms.

Dear Sirs, L/C No. F-07567 Thank you for your L/C against our Contract

No.28KG603. After checking the L/C, we have found some discrepancies and would request you to make the following amendments:

1. The date and place of expiry should read: Dec.15th ,1999 in Dalian ,China. 2. The amount both in figures and in words should re

spectively be US$ 27,600 and say US Dollars Twenty-seven Thousand Six Hundred only. 3. Transshipment should be allowed. 4. Insurance clause is to be deleted. 5. The Contract No. should be 28KG603. Please make the Amendments as soon as possible so

that we may arrange shipment timely. Sincerely,

Visit the following websites: http://www.cnexp.net http://www.training.mofcom.gov.cn http://guohang.org/