Role play

Imagine you are speaking with an Englishman who is living in Windsor. Ask him a few questions about Windsor and Eton.

Unit forty five

Payments in international trade

Text

On Monday morning the participants resumed their work and listened to the lecture on payments in international trade.

Here is a part of the lecture:

With any form of international trade it is essential to ensure that payment will be received in accordance with the terms of the un­derlying commercial contract. The most secure and established methods of settling international trade transactions are:

• by documentary letters of credit and

• by documentary collection bills.

Documentary letters of credit are opened by the importer's bank with a bank in the exporter's country, usually the importing bank's correspondent in the exporting country. Exporters submit to the bank in their country all the shipping, insurance and other docu­ments specified in the letter of credit issued by the importer's bank. If the documents are in order the bank in the exporting country will credit the exporters with the proceeds. The proceeds are reim­bursed-by the importer's bank in due course.

Documentary collection bills are presented to the importer's bank or its correspondent by the exporters together with all the shipping, insurance and other documents, specified in the contract. If the documents are in order the importers instruct their bank to pay and they collect the shipping documents then.

There are a few ways of transferring money from bank to bank. In the recent past these ways were:

• mail transfers and

• telegraphic transfers.

Now these two types of messages are practically replaced by SWIFT messages. SWIFT stands for the Society for Worldwide Inter­bank Financial Telecommunication. It is a network serving now more than 3,000 banks in about 100 countries. It speeds up payment messages between banks immensely. If sending and receiving banks are both 'logged-in', a message can be delivered in under 20 seconds. Over 1 million messages are sent every day via the computers of SWIFT and its member banks.

The role of correspondent banks is permanently growing. They facilitate and expedite international payments. A correspondent bank is one which carries a deposit balance for another bank lo­cated in another city or country and engages in an exchange of services with that bank.