Summary of common foreign trade payment methods essence
Every customer’s transaction and order generation start from payment! This is even more inevitable in international trade. Mastering various payment methods has become a compulsory course for foreign traders. The editor has sorted out some common payment methods today for your study and reference. Let’s have a look!
Two payment types
1. Corporate accounts: T/T, L/C, D/P, D/A, O/A
2. Private account: Western Union remittance, Paypal, express remittance, T/T
These two payment methods can be distinguished by the received account. The following will describe the payment methods of each account in detail!
T/T (Telegraphic Transfer) telegraphic transfer refers to a kind of remittance method that the remitter sends a charged telegram telex or SWIFT to the branch or agent bank in another country (i.e. the remitting bank) to instruct to pay a certain amount to the payee at the request of the remitter.
T/T payment is settled in foreign exchange cash. Your customer will remit the money to the foreign exchange bank account designated by your company. T/T is a commercial credit. After the goods are ready, if the customer pays off all the money, you can send the documents directly to the customer without going through the bank.
T/T telegraphic transfer is divided into two types:
One is called pre-TT (pre-T/T). In the international trade industry, those who pay 100% of the payment before the consignor delivers goods are called pre-TT (pre-T/T). This method of payment is the safest way of trade in international trade compared with the seller, because the seller does not need to bear any risk. As long as it receives the money, it will ship, and if it does not receive the money, it will not ship.
Front TT (front T/T) can also be divided into many flexible ways, first 20%~40% deposit, then 80%~60% before delivery. The specific proportion is flexible according to different situations.
The second is post-TT (post-T/T) payment method. The post-TT (post-T/T) payment method is defined in the bank as that the buyer pays the balance after delivery. How did the buyer pay the balance? Generally, the post-TT (post-T/T) will pay the balance according to the copy of B/L (BL) bill of lading. The post TT (post T/T) mode is also flexible.
In general, the international post-TT (post-T/T) payment method is generally popular. The guests pay 30% deposit first, and the other 70% of the guests pay the balance at the copy of the bill of lading (BL, B/L). Of course, some are 40% deposit and 60% see bill of lading.
Letter of Credit (L/C) refers to a written document issued by a bank (issuing bank) to make payment to a third party (beneficiary) or its designated party according to the requirements and instructions of (applicant) or on its own initiative, on the condition that the terms of the letter of credit are met. That is, a letter of credit is a written document issued by a bank that promises to make payment conditionally.
In international trade activities, the buyer and the seller may not trust each other, and the buyer is worried that after the advance payment, the seller does not deliver goods according to the contract requirements; The seller is also concerned that the buyer will not pay after delivery or submission of shipping documents. Therefore, two banks are required to act as the guarantors of the buyer and the seller, collect and deliver documents on behalf of them, and replace commercial credit with bank credit (bank credit is higher than commercial credit).
The tools used by banks in this activity are letters of credit. Letter of credit is the certificate that the bank guarantees payment conditionally, and has become a common settlement method in international trade activities. According to the general provisions of this settlement method, the buyer shall first deposit the payment for the goods in the bank, and the bank shall open a letter of credit, notify the seller’s bank of deposit in the other place to inform the seller, and the seller shall deliver the goods according to the terms specified in the contract and the letter of credit, and the bank shall make payment on behalf of the buyer.
Documents against payment (D/P) refers to a settlement method in which the collecting bank can deliver the commercial (freight) documents to the importer only after the importer has paid the goods.
D/P Sight indicates that the exporter issues a sight draft, and the collecting bank will remind the importer that the importer must pay after sight. When the payment is paid, the importer will obtain the shipping documents.
D/P after sight or after date means that the exporter issues a usance bill, and the collecting bank will prompt the importer to pay for the bill after the importer accepts it.
Documents against acceptance (D/A) means that the exporter’s presentation is conditional on the importer’s acceptance on the bill of exchange. That is, the exporter issues a usance bill after shipping the goods, together with the commercial documents, and prompts the importer through the bank. After the importer accepts the bill, the collecting bank will deliver the commercial documents to the importer, and the payment obligation will be performed only when the bill expires. As D/A means that the importer can obtain the commercial documents to take delivery of the goods as long as he accepts the bill of exchange. Therefore, the method of D/A is only applicable to the collection of usance bills.
D/A is a common method of payment in international trade. The exporter instructs the collecting bank through the collecting bank to issue the ownership and other shipping documents to the importer after the importer accepts the bill of exchange. The exporter will face the risk that the importer will not pay the bill on time.
The so-called “acceptance” refers to the acceptance of the bill of exchange when the drawee (importer) presents the usance bill to the collecting bank. The procedure of acceptance is that the drawee signs the bill of exchange, signs the word “acceptance” and the date, and returns the bill to the holder. No matter how many times the bill has been transferred, the drawee shall pay against the bill on its maturity date.
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Western Union is the abbreviation of Western Union, the world’s leading express remittance company. It has a history of 150 years. It has the largest and most advanced electronic remittance financial network in the world, and its agency outlets are distributed in nearly 200 countries and regions around the world.
Western Union is a subsidiary of First Data Corporation (FDC), one of the Fortune 500 companies in the United States. China Everbright Bank, China Post Savings Bank, China Construction Bank, Zhejiang Juzhou Commercial Bank, Jilin Bank, Harbin Bank, Fujian Straits Bank, Yantai Bank, Longjiang Bank, Wenzhou Bank, Huishang Bank, Pudong Development Bank and other banks are partners of Western Union remittance in China.
For small private remittance, Western Union remittance is preferred. Customers can pay only by saying your name and nationality to the customer. Remember the order of surname and first name: Chinese GIVEN NAME is the first name, and also FIRST NAME. China’s FAMILY NAME is the last name. Tell the customer not to write it backwards. After the customer pays, there will be a payment voucher, which is often called a water slip. There is an important information MTCN number on it, called the monitoring number. With this number, you can conduct the collection operation on the above bank counter or network.
The service charge for Western Union remittance is paid by the payer. Therefore, the cost of collection is zero.
PayPal (PayPal Holdings, Inc., whose brand is PayPal in Chinese Mainland) is a wholly-owned subsidiary of American eBay. It was founded by Peter Thiel and Max Levchin in December 1998 and is headquartered in San Jose, California, USA.
Transferring funds between users who use e-mail to identify their identities avoids the traditional method of mailing checks or remittances. PayPal also cooperates with some e-commerce websites to become one of their payment methods; However, PayPal charges a certain amount of handling fee when transferring money in this way of payment.
Moneygram is a kind of global rapid remittance business between individuals, which can complete the remittance process from remitter to payee in more than ten minutes. It is fast and convenient. Express remittance is a remittance institution similar to Western Union.
The remitter does not need to choose a complex remittance path, and the payee does not need to open a bank account first to realize fund transfer.
If RMB is drawn in US dollars, this business is the settlement of foreign exchange. For the settlement of foreign exchange of any matter, whether domestic or overseas individuals, each person can settle the equivalent of 50000 US dollars (including) each year with his/her valid ID card. That is, the amount of single foreign exchange settlement is no longer limited, as long as it does not exceed the equivalent of 50000 US dollars in the current year.
So when your customers tell you that they have remitted you a MONEY GRAM, you just need to ask your customers
(1) Reference number (remittance password) eight digits
(2) Sender’s first name
(3) Sender’s surname
Then go to the local branch of the relevant local cooperative bank where there is a special MONEY GRAM counter. They will give you a receipt form, fill in the relevant information of the customer and yourself, and bring your own ID card to get the money.
Personal T/T: It refers to the payment to an individual account. It is relatively simple. You only need to provide the following information to receive it. Of course, there is still a limit of $50000 per person per year.
A/C BANK: XXXXXXX
SWIFT CODE: XXXXXX
POST CODE: XXXXXX
The above are several commonly used types of foreign trade payment, which are used more and safer in life. In the process of foreign trade documentary, the editor still suggested that you should reasonably choose the remittance method according to the actual situation. Finally, I wish you all have big orders every day!