Nguyễn Thị Hồng Anh 1701015030

UNIT 4: PAYMENT IN INTERNATIONAL TRADE

B. VOCABULARY:
1-b 2-f 3-j 4-g 5-a
6-e 7-c 8-d 9-h 10-i
1. invoice: lists of goods sold as a request for payment.
2. clean collection: payment by bill of exchange to which documents are not attached.
3. documentary collection: payment by bill of exchange to which commercial
documents (and sometimes a document of title) are attached.
4. bill of exchange: signed document that orders a person or organization to pay a
fixed sum of money on demand or on a specified date.
5. bill of lading: document that shows details of goods being transported; it entitles
the receiver to collect the goods on arrival.
6. document of title: document allowing someone to claim ownership of goods.
7. issuing bank: bank that issues a letter of credit (i.e. the importer’s bank).
8. collecting bank: bank that receives payment of bills, etc. for their customer’s
account (i.e. the exporter’s bank).
9. confirming bank: bank that confirms they will pay the exporter on evidence of
shipment of goods.
10. letter of credit: method of financing overseas trade where payment is made by a
bank in return for delivery of commercial documents, provided that the terms and
conditions of the contract are met

C. READING:
READING 1:
Discussion:
1. What are some of the risks involved in trading internationally?
They are: non-payment (for the exporter), non-delivery (for the importer), goods not
conforming to the specifications in the contract or being in bad condition, import or
export restrictions, political uncertainty and risk of exchange rate...
1. Product risks
2. Cultural and ethical risks
3. Legal risks
4. Customs documentation risks
5. Political and country risk
6. Credit and setalment risks
7. Market risks
8. Operational risk
-> Non payment, late payment, late delivery, wrong documents
2. What payment methods do you know that are used when exporting or
importing goods?

There are 4 primary methods of payment for international transactions: open account,
document credit, bills for collection and advance payment
3. What is the role of the banks in international trade?
The banks play a critical role in international trade. They can be either active or
passive.
Active role (usually shown in the documentary credit method): When the Banks get
involved in the payment process, they support both the exporter and the importer to
complete their obligations so that the contract is executed as agreed.
Passive role: the Banks only do things as requested from their customer.
Commercial banks don’t create money

READING COMPREHENSION TASKS

Understanding main points:
1. open account
2. bills for collection
3. documentary credit
4. advance payment
Understanding details:
1. T 2. F 3. T 4. F 5. T
6. F 7. T 8. T 9. F 10. T
Word search:
1. undertaking
2. consignment
3. intermediary
4. maturity
READING 2: HOW A LETTER OF CREDIT WORKS
1.
1-b 2-d 3-c 4-a
2.
5-k 6-i 7-e 8-h 9-g 10-f
D. EXERCISES:
Exercise 1:
1. Open account
2. Documentary
3. Bills for collection
4. Advance payment
1 - b, c, d, f 2 - a, g 3 - b, c, d, e, f 4-f
Exercise 2:
1. draw 2. forwards 3. dispatches 4. present
5. accept; release 6. dishonours 7. remit
E. EXTENSION ACTIVITIES:
1. The importers may face the risks of non-delivery, goods received with inferior
quality, the issuing bank going bankrupt and fraud in documents under a fictitious
shipment.
Open account is probably the most secure payment method for the importers as they
can receive goods before making payment. Letters of credit is also one of the most
secure instruments available to both the importers and exporters.
2. A letter of credit is a document issued by the importer’s bank, known as the issuing
bank, which guarantees payment for goods or services when the exporter provides
acceptable documentation.
3. There are several factors for the exporters to consider in choosing a method of
payment, such as cash flow availability, relationships with the importers, supply and
demand in a market, interest rates and exchange rates. Ultimately, any sale is a gift to
the exporters until payment is received. Since they want to receive payment as soon as
possible, advance payment is probably the most favorable. However, the other matters
need to be examined with regards to the importers’ benefits.
REVIEW:
1. A transferable L/C is recommended. In a transferable letter of credit, the bank will
include provisions for transferring the extension of credit - all or part of the credit - to
secondary beneficiaries.
The L/C must be marked “To be transferable”.
2. A red clause L/C is completely suitable as it permits the beneficiary to receive a
sum prior to shipment.
3+4. UPAS L/C is the best option. UPAS LC is an LC where payment is made on a
sight basis to the exporter but the payment of the buyer (applicant) will be made to
issuing bank at the usance term.
5. A confirmed L/C will ensure that the importers will be paid even if something fails
to happen. The confirming bank takes responsibility for payment in case both buyer
and primary issuing bank default.
6. A back-to-back L/C is the one and only choice. This type of L/C is typically used
by the agent to hide the identity of the real supplier of the goods or services.
UNIT 5:
Paragraph 1. Selling and marketing concepts
Paragraph 2. Identifying market opportunities
Paragraph 3. The importance of market research (in GB) (marketing research in U.S.)
Paragraph 4. The marketing mix
Paragraph 5. Company-to-company marketing