Forms of international payments
The national currency is exchanged for foreign primarily to make payments abroad at vozviknovenii liabilities to foreign legal entities and individuals. On the other hand, the main channel of foreign exchange into the country are payments from abroad.
Monetary assets and liabilities in foreign currency arise on the basis of economic, political, cultural, scientific and technological relations between states, corporations and individuals located in different countries. International operations represent the organization and regulation of the payments on the above mentioned monetary claims and liabilities.
International payments are the daily activities of banks, generating payments to foreign countries on the basis of worked out by the international community and accepted by most of the world environment, the rules and order of settlement. Banks’ activity in the sphere of international payments is subject to state regulation.
Basically, international payments are made by means of transfer through banks by establishing correspondent (contractual) relationships between credit institutions in different countries. For this purpose, banks enter into with one another correspondent agreement on opening accounts ( “nostro” – accounts of the bank in other banks and “Loro” – accounts of other banks in the bank), which stipulates the procedure for settlement, the amount of the commission, as well as methods replenishment of correspondent accounts as expenditure.
Banks may conduct international payments and through its overseas branches and offices. Depending on the conditions of foreign trade contracts, the degree of convertibility and the position of the national and foreign currency are various forms of international payments.
Forms of international payments. World practice has developed forms and methods, such as collection, letters of credit, bank transfer, advance payments, payments on open account, as well as payments in the form of promissory notes and checks. In recent decades, a new means of credit cards.
While in the Russian practice, the term “Forms of international payments” is common, apparently, it would be useful to make a distinction between the ways and means of payment for International Settlements, bearing in mind that the term “form of international payments” combines both of the above concepts.
By the methods of payment include: advance payment, letter of credit, collection, payment on open account, payment immediately upon shipment.
By the means of payment are: check, bill of exchange, bank draft, transfer (postal, telegraph / telex payment order, the payment order by SWIFT, the international payment order).
The regulation of international payments by means of the developed world practice rules and customs. Thus, calculations using documentary credits codified Uniform Customs and Practice, which were first adopted by the International Chamber of Commerce at the Vienna Congress (in 1933). And shall be reviewed periodically (currently valid edition, 1993). The calculations in the collection form are governed by the Uniform on collection rules ( first developed by the International Chamber of Commerce in 1936 .; currently operating in the 1978 edition.). In this case the said documents do not join the country, and banks. In the case of accession rules and customs are binding for banks and their customers, who use these forms of payment.
Selecting form of payment is determined by a number of factors. Interests of importers and exporters are not the same goods and services: the exporter is seeking payment from the importer as soon as possible, at the same time the latter seeks to delay payment until the final disposition of the goods. Therefore, the chosen form of payment is a compromise that takes into account the economic position of counterparties, the degree of mutual trust, economic conditions, political situation, etc. In addition to this important type of product – the object of the transaction, as well as the supply and demand for the goods – subject of the transaction. Because international payments are closely related to credit relationships, the presence or absence of the credit agreement (as at the international level and on the level of counterparty) also influences the choice of forms of payment.
Reaching a compromise does not mean that the exporter and the importer receives the same benefits: some forms are more favorable to the exporter, the other – the importer. The most reliable form of payment to the exporter’s point of view is a down payment, and the least secure – payment on an open account.
The main forms of international payments are collections and letters of credit.
The collection form of payment. The essence of the collection operation is that the bank on behalf of its client (the exporter or lender) receives payment from the importer (the payer) after the shipment of goods and services. The resulting funds are credited to the client’s bank account. In this case payments impotera may be levied on the basis of:
a) only the financial documents (simple or clean collection);
b) financial documents accompanied by commercial documents, or only commercial documents (documentary collection).
Scheme documentary collection can be presented simplistically as follows: after the conclusion of the contract, which stipulates, through which banks will be performed calculations, the exporter makes the shipment of goods. Upon receipt of the carrier transport document exporter sends all the necessary documents to the bank, which he entrusts to carry out collection (the remitting bank). Remitting bank, checking documents, routes them to the correspondent bank in the importing country (the collecting bank). Last, checking documents, submits them to the importer-payer. The collecting bank may do so directly or through another bank (called the presenting bank). The documents issued earlier:
a) against payment;
b) against acceptance; and less;
c) no payment documents according to the collection order. After receiving payment from the importer, the collecting bank sends the proceeds to the remitting bank, which will credit it to the account of the exporter.
1. Conclusion of the contract (usually with a bank through which payments will be made).
2. Shipment exporter of goods, the principal in accordance with the terms of the contract.
3. Preparation of an exporter of the transport documents of the carrier.
4. Preparation Kit exporter documents (transport, etc., And if necessary, financial) and their representation at the collection order to his bank (the remitting bank).
5. Check the remitting bank documents (for external features) and send them along with the collection order to the correspondent bank (the collecting bank) in the country of the importer.
6. Presentation of the collecting bank collection order and documents the importer (the payer) to verify the purpose of obtaining payment or acceptance of drafts (bills of exchange), either directly or through another bank, called in this case, the presenting bank.
7. Preparation of the collecting bank payment from the payer and issue the documents to him.
8. Transfer revenue collecting bank remitting bank (by post, telegraph, telex, as indicated in the relevant instructions).
9. Transfer the remitting bank received the proceeds to the account of the exporter.
Collection operations is generally more favorable to the importer, as the payment is made against documents, which give him the right to the goods. Therefore, up to this moment the importer can save your money in circulation. However, he is not subject to the risk of paying for goods not yet shipped. On the contrary, the exporter after shipment payment is not guaranteed: there is always a risk that the importer for various reasons, may refuse the goods. In addition, due to him getting exporter of revenue does not occur immediately after delivery, and after a while. Thus, the exporter actually lends to the buyer. Moreover, since the run documents through banks can last from several weeks to a month, and in some cases even longer, there is a risk of introduction of currency restrictions (this applies primarily to countries that have not yet announced their accession to Article VIII of the IMF to abolish foreign exchange restrictions on current account).
Letter of credit. A more favorable to the exporter a letter of credit form of payment. The letter of credit is a bank instruction (or other credit institution) to produce at the request of the client payment documents in favor of a third party – the exporter (beneficiary), subject to the fulfillment of certain conditions. In addition, the letter of credit can provide a short-term loan, provided the consent of the bank to produce records (purchase) documents. Letter of credit consists of the following main points.
Exporters and importers enter into contracts for the supply of goods or services, indicating that the calculations will be made in the form of a letter of credit. Importer contact your bank (the issuing bank) statement on the opening akrreditiva in favor of the exporter. The issuing bank sends the letter of credit to one of the banks in the country exporter, with which it maintains correspondent relations (the advising bank), charging him to give credit to the exporter.
Upon receipt (a copy of) the letter of credit the exporter makes the shipment of goods, and in accordance with the terms of the letter of credit is required documents to the bank specified in the letter of credit (they may be the advising bank), which forwards them to the issuing bank. The issuing bank checks the accuracy of documents and makes them pay. After the transfer of money in the advising bank, the issuing bank shall issue the documents to the importer. Advising bank credits received from the issuing bank to the account of the exporter, the importer receives the goods.
However, in accordance with the terms of the letter of credit payment documents submitted exporter can produce not only the issuing bank, but another bank specified in the letter of credit (the executing bank). In this case, the executing bank (they may be the advising bank) after the payment of the submitted documents the exporter is seeking payment made at the issuing bank.
Figure 2. Letter of credit / 4 /
1. Conclusion of the contract, which states that the parties will use letters of credit.
2. Notification of the importer on the preparation of goods for shipment.
3. Submission of application by the importer to his bank to open a letter of credit with a precise indication of its conditions.
4. The opening of the letter of credit issuing bank (nominated bank) and sending it to the exporter (beneficiary) through a bank, as a rule, the service beneficiary, which (Bank) informs (advises) the last amendment of the credit.
5. Checking the authenticity of a letter of credit advising bank and transfer it to the beneficiary.
6. Check the letter of credit beneficiary for compliance with the contract and with the consent of the shipment of goods to them in a timely manner.
7. Preparation of the beneficiary of transport (and other required by the letter of credit) documents from the carrier.
8. Presentation of the beneficiary received from the carrier’s documents to his bank.
9. Check the bank received from the exporting beneficiary documents and sending them to the issuing bank for payment, acceptance (consent to the payment or guarantee of payment) or negotiation (purchasing).
10. Check the issuing bank the documents received and (in the case of fulfillment of all the conditions of the letter of credit) transfer amount of the payment to the exporter.
11. debiting issuing bank accounts importer.
12. Admission advising bank proceeds to the account of the beneficiary.
13. Preparation of the importer-instructing documents from the issuing bank, and taking possession of the goods.
When making payments in the form of a letter of credit banks charge a higher fee kommissionny because it is complex and involves high costs.
Payments in the form of an advance. The most profitable exporter in the form of advance payments (ie the payment of the contract value before shipment). As a rule, in the form of an advance payment can be up to 1/3 of the total amount of the contract. However, this form can be used only if the importer is very interested in receiving the goods (in case the number of sellers on the world market or the quantity is limited), or if the exporter has on it a lot of pressure, which the importer can not be a number of reasons resist.
Payment upon shipment of goods produced by the buyer (if the seller and buyer agreed on the use of this method of payment) upon receipt of telegraphic or telex message from the seller with a detailed description of the goods shipped. If the payment from the customer is received, the exporter has some assurance, since all the necessary documents for the receipt of the goods are in his hands. However, in this case there is a problem of implementation of the shipped goods. Given the risk that arises with this method of payment, it can be used primarily between firms that have strong ties.
open account calculations. In the implementation of the settlement of open invoices importer makes periodic payments to the exporter after receiving the items. After the calculations are made final verification and repayment of the remaining debt. This method of calculation is most advantageous for the importer, the exporter did not have firm guarantees receipt of payment for goods shipped. In addition, he has in some cases resorting to a bank loan. Therefore, payments on open account often used between business partners with close economic relations, and experiencing a high degree of confidence in each other.
Other forms of payment. Among the tools of calculations is less than the time required calculations using SWIFT (Joint-Stock Company for Worldwide Interbank Financial Telecommunication Network, established in Brussels in 1973 .; Russia (USSR) is a member since 1989), as well as wire transfers. Calculations based on checks and bills take a longer period.
Applied in international bills of exchange calculations (drafts) are unconditional order of the drawer (lender) the drawee (the borrower) on payment of the specified term in the bill payee (a third party) a certain amount of money. Accepted drafts banks (ie drafts, with the consent of the payer to pay) may be converted into cash by taking into account (that is, by selling their bank or specialized agency before the expiry of that charge a fee for this). The regulation bill legislation based on the Uniform Law promissory note, bill adopted by the Geneva Convention of 1930.
Calculations using the checks are based on the 1931 Convention Checkbook. The check represents the cash form of document containing an unconditional order to pay the bank the drawer of the check to the bearer the sum specified therein. A check may be issued in any currency. registration costs are relatively low. However, the risks (e.g., losses in transit check) decrease efficiency calculation means.
In recent years, increasingly credit cards are used in international payments – nominal monetary instruments that give their owners the opportunity to purchase goods and services without cash payment. Used credit cards are issued mainly by US banks. In recent years there has been a tendency to increase the role of credit cards in Russia.
It is expected that with the introduction of scientific and technical achievements in the practice of international payments will increase the role of electronic means.
Russia, which began a radical transformation of its economy, gradually forming a national monetary system, taking into account existing international practice. Russia’s accession to the International Monetary Fund mean that it accepts the obligations contained in the Charter of this organization. Formation of the national monetary system is fast. Russian commercial banks are beginning to enter the international capital market, establish correspondent relationships with foreign banks, are increasingly using the existing forms of international payments.
International monetary relations are one of the fastest growing forms of international economic relations. Cash countries currency units become, when used in international economic relations. Depending on the degree of freedom of the national currency for foreign exchange differ freely convertible (unrestricted), partially convertible and non-convertible (closed) currency.