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CHAPTER 1: OVERVIEW OF INTERNATIONAL PAYMENT

1. Definition
Payment activities between residents and nonresidents of a country by using currencies to 1 or
more transactions party

2. Participants
● Central bank: on behalf of Government signed the agreement
● Commercial banks
● Organization, individuals

3. Payment currency
Used to settle the payment for contract
Classification
● Usage range
○ National currency: Issued by central bank → legal & domestic currency: cash &
credit money
○ Int’l currency: Common currencies of economic unions/ agreements (Bretton
Woods, SEV, EU, ALBA)
○ World currency: Is accepted and used by all countries in the world
● Convertible ability
○ Free convertible currency. Total free convertible (USD, GBP, EUR, JPY) + partial
free convertible currencies (TWD, PHP, THB, KRW, IDR)
○ Transferable currency: Only be transferred from 1 account to another, not
allowed to cash draw
○ Clearing currency: Is used in clearing account, not allowed to transfer or cash
draw → just for small transactions like shopping
● Existing forms
○ Cash: Paper money & Coins
○ Credit money: Money in bank account
● Currency usage: Account currency (price currency) & Payment currency
● Usage level in international payment: Hard currency & Weak currency
(?) Factors affecting the choice of settlement currency
● Market status (seller’s or buyer’s): Widely recognized, trusted, reputable to have more
bargaining power
● Level of usage: More available, liquid, convenient for transactions
● Customs of currency usage: Established patterns & preferences of using certain
currencies → more stable, familiar, predictable
● Common currency of one region, unions: Reduces transaction costs, exchange rate risks,
uncertainties
4. Time of payment
4.1. Advance payment
● Credit support for exporter

● Performance bond (Guarantee to conduct contract)

○ Shorter time for advance payment (10-15 days before payment

○ Usually no interest rate
○ Case 2 happens when importer is in urgent need to buy the goods/ lack of
information about market prices → Advance payment = Gap between market
price and contract price
 4.2. At-sight payment
COD: Cash on delivery
Payment is made after exporter delivers the goods at his named place, not loading on means of
transport (EXW - giao tại xưởng, FAS - giao dọc mạn tàu, DAF - giao tại biên giới, FCA - giao
cho người vận tải)
COB: Cash on board
Payment is made after exporter delivers the goods at his named place, loading on means of
transport ⇒ Only FOB (vessels)
Shipping documents:
● Signed by carrier, master, agent for, on behalf of,...
● Received for shipment B/L noted On board, Shipped on board or Laden on board (lên
tàu nhưng chưa đi)
Cash on receiving shipping docs
Payment is made after importer receives the shipping documents (at-sight L/C, D/P,...)
● Required documents must be regulated in detail: number of docs, kind of docs, place
and conditions of presenting docs, mode of sending docs
○ Mode of sending docs: attached to cargo, through carrier, send by post, send to
import agency, via bank - most common and safest
● Conditions of receiving docs:
○ Without condition: Named B/L, send docs directly to importer
○ With condition: D/P, D/OTC,...
● Times of docs presentation
Cash after receiving shipping docs from 5-7 days (D/P xx days)
Cases:
● Goods with various kinds, complicated specifications, great number
● Bank can make delivery of docs to importer (except for B/L)
● Order B/L are applied
4.3. Deferred payment:
Payment made after delivery of goods, Payment is made at xx days after shipment
● Shipment date (B/L date)
○ Stipulated in contract: if payment not based on shipping docs
○ Stipulated in shipping docs: if payment based on shipping docs
● B/L: on board/ shipped on board → date of issue
● B/L: received for shipment → date of notation on board
● Payment is made at xx days after docs presentation → D/A
● Payment is made at xx days after good receiving
● After due date of goods guarantee
4.4. Mixed term of payment
Cases: high-stake contracts with high value, complicated commodity
Eg. Advance 10% 30 days after signing date of contract → export-credit
5% after last shipment → at-sight payment
80% after installation → deferred payment
5% after guarantee due date → deferred payment
(!) Required documents
● B/L 1 origin + 3 copies
● Commercial invoice 1 original + 3 copies
● Packing list 1 origin + 3 copies
CHAPTER 2: FOREIGN EXCHANGE CONTROL REGIME OF VN

A. FOREIGN EXCHANGE
1. Definition
Includes all payment means that are used in international settlements (financial assets),
comprises:
● Foreign currencies
● Financial instruments denominated in foreign currencies
● Standard Gold
● Domestic currency held by non-residents
Ordinance on Foreign exchange 2005, FX in VN comprises
● Foreign currencies
● Means of payment in foreign currency
● Valuable papers denominated in foreign currencies
● Gold
● Currency of Socialist Republic of VN VND
1.1. Foreign currency
● Currency of other nations and territories
Eg. TWD, HKD, SDR (Special Drawing Right, issued by IMF)
● European common currency
● Other common currency which are used in international and regional payment
5 major currencies: USD, EUR, JPY, GBP, CHF (now change to CAD & CNY)
The stronger the currency is, the less it is influenced by exchange rates
1.2. Means of payment in foreign currencies
B/E, Promissory note, Check/ cheque, Payment card (credit card/ debit card/ bank card), etc.
1.3. Valuable papers denominated in foreign currency
● Government bonds
● Corporate bonds
● Term bonds
● Shares
● Other valuable papers (Deposit certificates)
1.4. Gold
● In the state foreign exchange reserves
● In the oversea accounts of residents
● In form of block, bar, grain, piece in case of being carried out of and into territory of VN
1.5. Currency of Socialist Republic of VN
● In case of being remitted into and out of territory of VN
● Being used in international payment
B. EXCHANGE RATE
1. Definition
Nguyen Van Tien (int’l finance): The price of one currency expressed in terms of another
currency
Ordinance on foreign exchange control 2005: VND exchange rate means the price of 1 foreign
currency unit calculated in VND
2. Basis of exchange rate
2.1. Prior to 1971
Each country’s monetary authority set the value of its currency relative to an international
standard such as gold standard
● Gold standard: Paper notes are convertible into pre-set, fixed quantities of gold
● Exchange rate were fixed → Price-specie-flow mechanism: price levels around the
world move together through an automatic balance-of-payment adjustment process
Gold specie standard (1875-1914)
Gold is widely used → Compare by the amount of gold in each currency
Eg. 1 GBP = 7,988g 1 USD = 1,50476g
GBP/USD = 7.988/ 1.50476 = 5.308 → 1 GBP = 5.308USD
Gold exchange standard (1914-1944)
Monetary system where a government guarantees a fixed exchange rate to a foreign currency
that uses a gold standard
2.2. After 1972
No country uses the gold standard as the basis of its monetary system, instead they use
regimes of exchange rates:
● Free floating rate
● Managed-floating rate (VN)
● Target zone
2.3. Purchase Power Parity
What determines the exchange rate is PPP Purchase Power Parity: A unit of domestic
currency should purchase the same amount of goods in home country as it would of identical
goods in a foreign country
The law of one price: In competitive markets free of transportation costs and barriers to trade
(such as tariffs), identical products sold in different countries must sell for the same price when
their prices is expressed in terms of the same currency
Eg. A iPad cost GBP460 in London and $700 in NY.
GBP/ USD = $700/ GBP460 = $1.52 per GBP
2 forms of PPP
● Absolute form of PPP: Price of similar basket of goods to 2 countries should be equal
when measured in a common currency, not referred to inflation
 ● Relative form of PPP: Changes in relative inflations rates are related to changes in
exchange rate

PPP implication
Currency of countries with high inflation rates should devalue relative to countries with low
inflations rates
 3. Exchange rate quotation
3.1. Exchange rate statement

1st currency: Commodity/ Based currency

2nd currency: Quote/ Term currency
Bid - Ask = Spread
3.2. Exchange rate interpretation
Pip (point): Smallest quoted unit of the rate
Eg. 1 pip = 0.001 CHF, 1 pip = 0.01 JPY, 1 pip = 1VND
● Unit: The integer number (số nguyên)
● Figure: The first 2 digit after decimal point
● Pip (point): The last 2 digit after decimal point
100 pips = 1 big figure
3.3. Foreign exchange rate quotation
Direct vs Indirect
● Direct quotation: Foreign currency/ Domestic currency
Eg. SGD/ VND
● Indirect quotation: Domestic currency/ Foreign currency
GBP, AUD, NZD, EUR, ADR
Eg. GBP/ USD
● The US follows both direct & indirect quotation
Eg. JP → USD/ JPY, US → USD/ JPY, UK → GBP/ USD
American terms vs European terms
● American terms (USD is the term currency)
Eg. EUR/ USD, JPY/ USD
● European terms (USD is the commodity currency/ underlying asset)
Eg. USD/ EUR, USD/ JPY
4. Cross rate
4.1. Meaning
Narrow meaning: Exchange of 2 currencies which is derived from rates against USD, where
USD plays the role as the intermediate currency
Broad meaning: Exchange rate of 2 inactively traded currency is determined through their
relationship to a widely traded third currency
 4.2. 3 Cases

Lưu ý: ask rate và bid rate để (c) tức là bid rate (c) > ask rate (c), đảo nghịch lại mua - bán
(thông thường sẽ hiểu là bid – ask → mua – bán đối với ngân hàng và bán – mua đối với mình)

Flow hiểu: Bid rate < Ask rate và Bid rate (c) > Ask rate ©
Mua cao bán thấp (đối với mình) → Ask rate (c) là giá mình bán, Bid rate (c) là giá mình mua

(?) Bán USD để thu bao nhiêu JPY? → Ask (?) Bán JPY để thu USD với giá bao nhiêu?
(c) USD/ JPY → Bán USD lấy VND, bán → Bid (c) USD/ JPY → Mua USD bằng VND,
VND lấy JPY lấy VND bằng JPY
Bán USD (giá thấp) Mua USD (giá cao)
Bid price of USD/VND = 23200 Ask price of USD/ VND = 23400
Mua JPY (giá cao) Bán JPY (giá thấp)
Ask price of JPY/VND =227 Bid price of JPY/ VND = 233
⇒ Ask (c) USD/JPY = 23200/227 = 102.2 ⇒ Bid (c) USD/ JPY = 23400/223 = 104.9
Ask (c) CAD/ JPY → Mình bán CAD mua JPY Bid (c) CAD/ JPY → Mình mua CAD bán JPY
Mua USD bằng CAD (lập luận trong bài như Ask rate CAD/ USD = 1/1.22
thế): 1USD = 1.24CAD (1) Bid rate JPY/ USD = 1/93.12
Chuyển số USD đã mua sang đồng JPY: 1 ⇒ Bid (c) CAD/JPY = (1/1.22):(1/93.12) =
USD = 93.08 JPY (2) 76.33
⇒ Ask (c) CAD/ JPY = (1/1.24):(1/93.08) =
75.06

Ask (c) GBP/ JPY → Bán GBP bằng JPY Bid (c) GBP/ JPY → Mua GBP bằng JPY
Bid rate GBP/ USD = 1.5245 Ask rate GBP/ USD = 1.5250
Bid rate USD/ JPY = 93.08 Ask rate USD/ JPY = 93.12
⇒ Ask (c) GBP/ JPY = 1.5245 x 93.08 = ⇒ Ask (c) GBP/ JPY = 1.5250 x 93.12 =
141.90 142.01
4.3. Arbitrage
A: GBP/ USD = 2.0315/55 GBP/ EUR = 1.4388/28
B: USD/ GBP = 0.4870/10 USD/ EUR = 0.7072/16
Find the arbitrage opportunities of GBP/ USD, GBP/ EUR, USD/ EUR
(A) GBP/USD = 2.0315/2.0355 GBP/EUR = 1.4388/1.4428
(B) USD/GBP = 0.4870/0.4910 ⇒ GBP/USD = (1/0.4910) / (1/0.4870) = 2.0367/2.0534
USD/EUR = 0.7072/0.7116
Answer
Không thể mua ở B bán ở A (bị lỗ) ⇒ Mua ở A (2.0315) bán ở B | GBP/ USD = 2.0315/2.0534
(!) Bid > Ask thì mới có cơ hội arbitrage

EXERCISES
1 HK company (HKD) in 1 day was informed that they received the payment for the order of
50,000GBP & 100,000CHF. Meanwhile, they have to pay an amount of 80,000EUR for the
imported goods. The remaining was transferred to HKD. Calculate the remaining in HKD
● GBP/ CHF = 1.4620/40
● GBP/ EUR = 1.1880/90
● CHF/ HKD = 8.5270/75

B1: Bán 50.000GBP sang EUR để trả tiền hàng nhập khẩu
B2: Tính số EUR còn thiếu (từ 80.000EUR) rồi mua đúng số EUR còn thiếu từ đồng CHF
(100.000 CHF nhận được)
B3: Chuyển toàn bộ số CHF còn lại sang HKD
*Trong TH có tỷ giá tính trực tiếp hay gián tiếp rẻ hơn thì nên chọn cách chuyển rẻ nhất
GBP/ CHF = 1.4620/ 1.4640
GBP/ EUR = 1.1880/ 1.1890
CHF/ EUR = (1.1880/

A Vnmese importer receives 8,000,000 HKD simultaneously and has to pay 500,000 JPY for
imports. The remaining (if any) wants to convert to AUD to invest in Australia. Calculate the
maximum amount in AUD that this importer can receive, with the following exchange rates
● USD/ JPY = 122.75/ 122.82
● USD/ HKD = 7.8260 / 7.8270
● AUD/ USD = 0.71 / 0.85 (tính ra AUD/ HKD để so sánh với tỷ giá đã được niêm
yết xem cách nào cao hơn)
● AUD/ HKD = 5.25 / 5.45
B1: Bid (c) JPY/ HKD = 7.8270/122.75 = 0.0638
0.0638 x 500,000JPY = 31900 HKD
B2: 8,000,000HKD → 31,900HKD = 7968,100HKD
B3: Ask (c) HKD/AUD
(1) AUD/ HKD = 5.25 / 5.45 → HKD/AUD = (1/5.25) / (1/5.45)
(2) AUD/HKD = 5.5565/6.6529 → HKD/AUD = (1/5.5565) / (1/6.6529)
Chọn HKD/AUD = (1/5.25) / (1/5.45)
CHAPTER 3: INSTRUMENTS OF INTERNATIONAL PAYMENT

A. BILL OF EXCHANGE
1. History
2. Legal regulations on negotiable instruments
● In VN
● In other countries: Convention Providing a Uniform Law for Bill of Exchange (ULB 1930
Geneva)
3. Definition
B/E Act in UK 1882
An unconditional order in writing, addressed by 1 person to another, signed by the person
giving it, requiring the person to whom it is addressed to pay on demand, or at a fixed or
determinable future time, a sum certain in money to or to the order of a specified person, or to
bearer.

ULB 1930
A BE contains
● The term BE inserted in the body of the instrument and expressed in the language
employed in drawing the instrument
● An unconditional order to pay a determinate amount of money
● Name of drawee
● Statement of time of payment
● Statement of place where payment is to be made (where beneficiary can require
payment)
● Name of beneficiary/ payee
● Statement of date and place where BE is issued (the time release for payment
requirement and settlement law)
● Signature of DRAWER (company)
Parties involved to BE
● Drawer: usually exporter → issue/ draw/ sign BE
● Drawee: whose responsibility of payment → on whom BE is drawn
● Payee: who is beneficiary (drawer and payee can be the same person)
● Acceptor: accepts to pay on due date (when signed, drawee become acceptor)
● Endorser/ assigner: Must be beneficiary who has the right to endorse
● Avaliseur: middle-man to guarantee the default payment of BE
(*) Acceptor presents mostly in Usance B/E than At-sight B/E
ngày xuất trình B/E 1 2 hay 3 ngày theo luật VN 2005???

4. Characteristics of B/E
(Underlying transaction-based instrument) Unconditional + Vaguity = Transferability
 (1) The order must be unconditional (without regards to default of goods)
(2) Must be in writing
(3) Must be dated
(4) Must be signed by the drawer
(5) Should be properly stamped
(6) Drawer, drawee and payee must be certain
(7) The sum payable must be certain
(8) Must contain an express order to pay money + money alone at specified period (???)
(?) Relationship between B/E and check?
● Both are financial instruments
● B/E: Commercial B/E & Bank B/E
Check: Commercial check (drawer is exporter) & Bank check (drawer & drawee are
banks)
→ Bank B/E = Bank check (Bank check is a special case of B/E)
(?) Can Commercial invoice be used to ask for payment?
YES but this is not financial instrument (transferable) because all information of contract can be
seen on Commercial invoice (Lack of Vaguity)
Essential format conditions of B/E
(1) Must be in writing
(2) Can be typed, printed or handwritten
(3) Should not be made by pencil, red ink or any easily erased ones
(4) Language: Int’l laws allow any languages in B/E but in 1 B/E only 1 language is used
(!) If B/E is attached with L/C → Follow L/C terms and conditions
(5) B/E is usually made out into 2 copies
(!) >= 2 copies does not mean partial payment → If the first B/E is to be paid, the remaining is
for reference (quote: “Pay against first and second B/E)
Rare case: Pay against this sole B/E
(6) Should be properly signed (and stamped)
3 main purposes of B/E
● Payment method
● Risk management
● Trade financing (short-term financing): Buy today to get paid in the future (to extend the
credit)
 5. Main contents of B/E

(1) Title: Mandatory depends on national law (Anglo.American legal system: Optional; Geneva
1930 + VN’s law: Mandatory). Title’s language = B/E language
(2) Reference number: for reference and checking
(3.1) Amount in figure
(3.2) Amount in word
(!) If (3.1) & (3.2) both are in figure/ word → take the lower number
If (3.1) & (3.2) both are different numbers → take the amount in word (ULB, UK, US, VN Law is
valid, China law is invalid)
(4) Name of issue & Date of issue: Can be skipped or use the address of the drawer beside the
drawer’s name (head office, place of business). Date of issue can determine
● Date of payment (not common)
● Date of presentation (LOAI 2005)
○ At-sight B/E: beneficiary have to present within 90 days from drawing date
○ Usance B/E: beneficiary have to present within 1 year from drawing date
● Date of presentation (ULB 1930)
○ Both B/E can be presented within 1 year from drawing date
(!) Date of presentation is not written on B/E
(5) Time of payment
● Can be invalid for B/E with >2 conditions (because of unconditional characteristic)
● NO PAYMENT IN ADVANCE → only at-sight or deferred payment
● To pay
○ On demand/ At sight BE: eg. upon request, upon presentation (D/P - document
against payment, L/C at sight)
○ At fixed time (rare)
○ Determinable future time (Usance BE): eg. at 60 days after B/L issuance date, at
30 days after sight (after xx days)
Date of issue L/C → Time of payment → At-sight → Submit within 90 days after date of issue
→ Issue B/E → Within 1 year after date of issue
(!) Dont turn this into a condition for drawee → CANNOT use terms like: payment after
inspection, after ship arrived port, etc.
(6) Payee: Pay to
● To: Nominated name (not common due to limitation of transferability)
● To the order of: Someone or someone assigned (most popular) eg. pay to the order of
company A → Endorse
● Nameless /To the bear: Who hold the BE eg. pay to … (left blank), pay to the order of …,
pay to the holder (bearer).../ blank endorsement → Handover
(!) Transferable = Responsibility to payment does not change (except for without recourse
endorse - ký hậu miễn truy đòi)
→ Explain: The drawer does not need to be the beneficiary but the final acceptor of the B/E if
the drawee refuses to pay
(7) Drawee (depends on method of payment)
● Importer (open account, collection)
● Importer’s bank = Issuing bank (L/C) (Info: No. of L/C, issuing date of L/C, name of
Issuing bank)
(8) Drawer/ Issuer: SELLER
6. Classification of B/E
6.1. Time of payment
● At-sight B/E

Payment on presentation of next working day of presentation day

 ● Time/ Usance B/E

Payment on due date or beyond

6.2. Attached commercial documents
● Clean B/E: Open account, Clean collection (exporter ship the goods along with
documents without making them as payment conditions)
○ Payment against soly B/E (without other documents)
○ Applied case: transportation fee, insurance fee, commission, etc., trusted partner
● Documentary B/E: L/C, D/P = CAD(at-sight B/E), D/A (usance B/E)
6.3. Convertibility of B/E
● Nominated B/E: Without endorsement right for endorsee
(!) Not common because to collection foreign payment, drawer has to endorse for banks
● Order B/E
● Nameless B/E
6.4. Drawer
● Commercial B/E: Drawer = Individual
Seller ships goods → Issue B/E → Banks collect payment from buyer (at-sight B/E or
usance B/E)
● Bank B/E: Drawer = Bank
6.5. Acceptance status
● Non-accepted
● Accepted (trade’s acceptance & bank’s acceptance)
(*) Bank’s acceptance is preferred for its high fluidity and trustworthiness
Acceptance can be used for advance payment (but not usually)
6.6. Currency
 ● Domestic currency
● Foreign currency
6.7. Basis of B/E
● Real B/E
● Counterfeit B/E
7. B/E circulation
7.1. Acceptance
Law on assignment instrument 2005 VN
Acceptance is the commitment of drawee on payment of entire/ one part of money amount
stated in B/E in accordance with provisions of this law
Form and contents of acceptance
● “Accepted by…” on B/L surface and auxiliary sheet attached to B/E
● May accept entire/ partial amount of B/E but without additional conditions
● Must state clearly accepted amount
● Acceptor = Drawee (importer/ issuing bank)
● Date of acceptance: optional or mandatory
● Accept before due date of B/E
Valid acceptance: Partial acceptance
Invalid acceptance: after B/E’s validity period or payment period
7.2. Endorsement
Definition: Beneficiary transfer his ownership of B/E to the assignee by endorsing the back side
of B/E and transfer B/E to assignee (no need to notice drawee)
● Be applicable to all types of B/E (Except for non-assigned B/E with “non-assigned”,
“assignment is prohibited”, “non-payment under the order of, etc.)
Principles of assignment
● Endorsement = Entire amount of money + all rights arising from B/E
● Beneficiary = acceptor, drawer, assignor
● Drawer → Order endorsement → Order endorsement (use without-recourse
endorsement) →… → (end with) Nominated endorsement
● INVALID ENDORSEMENT:
○ Partial amount of money
○ To >= 2 persons
○ Further conditions
○ Adjusted content on B/E
○ Overdue/ Refused to be accepted/ Refused to be paid cannot be assigned
Types of endorsement
● Blank endorsement ⇒ Handover
○ Sign name on backside of B/E
○ Transfer B/E to assignee
● Full endorsement (restrict/ nominated endorsement)
○ Sign assignor’s name on backside of B/E
 ○ State full assignee's name + date of assignment
○ CANNOT endorse to the next asignee
● To order endorsement (most popular)
○ Sign name on backside of B/E
○ State full name of assignee/ his order
○ Can endorse to next assignee but should be before payment due date
● Without recourse endorsement
○ Sign assignor’s name on backside of B/E
○ State assignee who has no right of recourse against the endorsers
Example: Drawer = A, Drawee = B. A endorse B/E for G → G endorse B/E without recourse
for K → K endorse B/E without recourse for H → H present B/E to ask for payment from B
(!) IF B refuse to pay, H will ask for payment form A (drawer) and lose rights to ask for payment
from K (because of “without recourse”)
(!) IF there’s no “without recourse”, H have rights to ask for payment from ANY ENDORSER (A,
G, or K)
7.3. Guaranty of B/E
3rd person (guarantor) makes a commitment with guarantee to pay partial/ entire money upon
its maturity where the guarantee fails to make payment/ makes insufficient payment
- guarantee for drawee/ acceptor
- guarantee for drawer: if info is not specified clearly/ drawee refuse B/E
Principles of guarantee:
● Guaranty in unconditional
● State “guaranteed”/ “aval”, amount to be guaranteed, name, address, signature of
guarantor + name of guarantee on B/E
● Guaranty to pay partially or entire of amount
7.4. Protest for non-payment
● Assignor who has made payment to beneficiary shall have right to make recourse from
drawer/ his previous assignor
● If acceptance/ payment of B/E is refused → beneficiary must give a written notice to
drawer, his assignor, their guarantor of that refusal

EXERCISE
The garment corp Chien Thang, Hanoi is the beneficiary of a L/C No BOC 00105LCS
Singapore, payable at 180 days after date of shipment, issued by the UOB Singapore on 06
Aug 2023 at the request of Hanway Co. Ltd Singapore. The LC is advised through BIDV of
Vietnam. L/C amount: 400,000 USD +/-5%. On Sep 7th 2023, Chien Thang shipped the
goods with the total value of shipment: 390,000 USD (this is value of B/E)
a) Draw the B/E in compliance with Law 2005, VN
b) Who has obligation to accept the above B/E
c) Who has the right to endorse that Bill of Exchange?
If the method of payment is changed to collection, how should the B/E be drawn
 UOB: Issuing bank (importer’s bank)
→ TO ACCEPT
BIDV: Advising bank (exporter’s bank)
→ TO ENDORSE
Hanway Corp: Importer
However L/C → UOB: Drawee

a) Answer
(1) Bill of Exchange
(2) No: Ghi 01, không ghi số B/L
(3.1) For: 390,000 USD
400,000 là giá trị cam kết thanh toán sẽ được hưởng 390,000 USD (nằm trong dung sai +/-5%
của 400,000 USD).
Trong trường hợp là 450,000 USD (vượt quá cam kết nhà phát hành) → Đòi tối đa là 420,000
USD và đòi thêm 1 hối phiếu khác 30,000 USD (hối phiếu trơn) đối với nhà nhập khẩu
(?) Nếu giao hàng chỉ có 370,000 USD thì sẽ phụ thuộc vào quy định L/C có cho phép giao
hàng từng phần hay không. Nếu không được phép (partial shippment is not allowed/ permitted)
thì sẽ không được thanh toán → Bắt buộc phải giao đúng trị giá thư tín dụng. TH ngược lại thì
ngân hàng sẽ chấp nhận thanh toán cho người xuất khẩu
(4) Hanoi, Vietnam
(5) At 180 days after date of shipment (Aug 6th 2023) sight
(6) BIDV
(3.2) 390,000 USD
(7) UOB (người trả tiền là Issuing bank: Phương thức TT không dùng hối phiếu, L/C thì cần và
Beneficiary thì sẽ luôn đòi tiền Issuing bank)
(8) Chien thanh Corp
b) UOB
c) BIDV
d) Hanway is the drawee
C. CHECK/ CHEQUE
1. Definition
Law on assignment instrument 2005:
Cheque is a valuable paper, which a drawer draws up, orders drawee being a bank or an
authorized payment services supplier of the State Bank of VN to deduct a certain amount of
money from his account to make payment for beneficiary
(?) Differences with B/E?
→ Acceptance: Cheque does not have acceptance because of its at-sight payment. However, it
does have endorsement
→ Drawee: Always COMMERCIAL BANK
2. Applicable rules
*References: ULB1930 for B/E and UKC1931 for cheque
Theo luật VN
- B/E at sight: Xuất trình trong 90 ngày
- B/E usance: Xuất trình trong 1 năm
- Cheque: Thời hạn xuất trình 30 ngày nhưng không quá 6 tháng
Theo luật ULB1930 (Geneva)
- B/E: Xuất trình 1 năm kể từ ngày ký phát
- Cheque: Phát hành và thanh toán trong cùng 1 quốc gia Xuất trình trong vòng 8 ngày
Khác quốc gia, trong cùng 1 châu lục 20 ngày
Khác quốc gia, khác châu lục 70 ngày
ULC 1931
3. Contents of Check

(!) Amount in words/ Amount in smaller figure

ULC 1931 (art 1) Law on assignment instruments 2005

- Term “cheque” inserted in body of instrument - Word “cheque” printed on top of cheque
+ expressed in language employed in drawing (MUST HAVE)
up instrument (MUST HAVE)

- An unconditional order to pay a determinate - Definite amount of money

sum of money
 Name of person who is to pay (drawee) Name of drawee = bank/ payment service
supplier
Name of beneficiary (full name) =
individual/ organization

Place of payment Place of payment

(!) No place of payment/ issue → should state (!) No place of payment → should present
first address beside drawee’s name, drawee’s at drawee’s address/ business place
business place)

Signature of person who draws cheque Drawing date

(Drawer) Name of drawer + signature of drawer

Principles of cheque
● MUST HAVE title Cheque
● Unconditional money drawing order
● Definite amount of money
● Time of payment: Payment against presentation (no due date) → Can use like money
● Place of issue: can be skipped
4. Form of Check
2 parts: The cheque itself + A stub/ counterfoil
● When cheque is written, only cheque itself is detached, and stub is retained in the
checkbook as a record of the check
● When a check is mailed, a separate letter/ remittance advice may be attached to inform
recipient of the check’s purpose
5. Classifications
5.1. Convertibility of cheque
● Nominated cheque → cannot endorse
● Nameless cheque → handover
● To order cheque → endorse
5.2. Form of cheque
● Transferable cheque: ask bank to transfer money to another bank’s account. Cannot
endorse/ money drawing
● Cash cheque: to be paid in cash
5.3. Issuer of cheque
● Private cheque/ Commercial cheque: issued by a business or an organization, using their
own funds to pay for goods or services (not as secure as bank cheque)
● Bank cheque: Issued by issuing bank and guaranteed by the bank’s own funds → Serve
the development of commercial banks
5.4. Other types of cheque
● Traveler’s cheque: Can be used directly like cash
 ● Certified cheque (séc bảo tri): the recipient knows that the bank has verified the check,
signature, and availability of funds.
● Crossed cheque: Generally crossed cheque & Specially crossed cheque. To transfer
money to the bank and not for payment/ endorsement except for bank (no payee’s
name on cheque)
6. Actions in cheque circulation
6.1. Endorsement
● Definition: BENEFICIARY transfers his ownership of cheque to the assignee by
endorsing on the backside of cheque and transfer the cheque to the assignee
● Classification
○ Nominated endorsement
○ Blank endorsement
○ To order endorsement
● Endorsement = all rights arising out of a cheque
○ With/ without clause “to order”
○ “To bearer” = endorsement in blank
● INVALID ENDORSEMENT
○ Partial endorsement
○ Endorsement by the drawee
○ Conditional endorsement
● Without-recourse endorsement: Beneficiary cannot ask for payment from endorser but
the DRAWER
● Differences between Assignment by endorsement VS assignment by transfers for
collection.
○ Foreign beneficiary cannot collect payment from check, instead they has to
assign the bank to payment terms of COLLECTION (clause: “value in collection”/
“for collection” on cheque)
○ To prove the rights to collect payment, bank has to show the evidence of
assignment endorsement
○ The owner is still the beneficiary
(!) A cheque CANNOT BE ACCEPTED
6.2. Guarantee
● Definition (Law on assignment instruments - LOAI 2005): The guarantee shall be
implemented in accordance with provisions on the guarantee of B/E as stipulated from
Art. 24 to Art 26 herein
● Guarantor: a 3rd-party, not drawer or bank, choose payment → Only PAYMENT
● Guarantee:
○ Drawer (automated if this is left blank)
○ Endorser
● Guaranty cannot be canceled during validity period, except for invalid cheque
● ULC1931
 ○ An " aval " is given either on the cheque itself or on an " allonge ".
○ An " aval " must specify for whose account it is given. In default of this, it is
deemed to be given for the drawer
Letter of guarantee: guarantor only be responsible for beneficiary
Signature on cheque: guarantor be responsible for all related persons specified on cheque (1st
beneficiary, endorser, drawer, drawee)
6.3. Presentment & payment

Criteria Law on Instrument 2005 VN ULC1931

Period of - 30 days since drawing date, not exceed 6 - Presented in the same country: 8
presentation MONTHS since drawing date days
(!) Cheque can be paid when: - Presented in different country, same
continent: 20 days
> Not exceed 6 months since drawing
- Presented in different countries,
> Drawee not receive notice of payment
different continents: 70 days
suspension
> drawer’s account has enough money for Date stated on cheque = Date of issue
payment

Place of - Payable at place of payment stated on - Payable at place of payment stated

payment cheque or cheque
- OR paid at business place of drawer - OR place beside drawee’s name
(first place named if >1 places)

Time of ALWAYS Payable at sight

payment → Date of presentation/ Following working day

7. Circulation of cheque
7.1. Private cheque
7.2. Bank’s cheque
CHAPTER 4: METHOD OF INTERNATIONAL PAYMENT
Definition: All conditions and manner recommend for Commercial bank to transfer proceeds
between residents and non-residents of one country

● Demand guarantee: Seller request bank to promise to pay them a certain amount of
money in case the buyer is default
● Authority to purchase: seller authorizes a 3rd party to purchase goods and resell to the
buyer
Collection includes 2 types:
● Clean collection
● Documentary collection
○ D/P
○ D/A
○ D/ OTC: Docs on other terms and conditions (promissory note, bank
undertaking)
Advance payment > LC at sight > LC time > DP > DA > Clean collection > Open account
Selecting payment terms - Question to ask:

FACTORS QUESTION

Trust degree between both parties/ How long have buyers been operating the
Partner relationship business, what is their credit history?
Has your business sold successfully to buyers
before?
Are there reasonable alternatives for collecting if
the buyer does not pay? (does buyer’s country
have legal and business infrastructure for settling
disputes fairly and swiftly?)

Capital ability of each party/ control Can your business afford the loss if it is not paid?
cash flow Can the sale be made only by extending credit?
Will extending credit and the possibility of
waiting several months for payment still make
the sale profitable?

Competition of each party/ market

status

Volume/ value of business transaction

Characteristic of goods/ nature of If shipment is made but not accepted, can

goods alternative buyers be found?

Nature of order

Distance between 2 countries

political/ economic situation of

importer’s country

Requirement of foreign exchange

control in each country
(!!!) D/C = DOCUMENTARY CREDIT (not documentary collection)

L/C is popular in South America, the Middle East, Asia, South Africa (because the ability to
execute contracts is weaker)

Questions Open account Advance Documentary Documentary

payment credit collection

Customer Established Never New Established

relationship

Nature of order Normal Custom Custom Normal

Political Stable Unstable Unstable Stable

situation/
Economic
situation

Competitors’ Yes Non No Yes

offer terms

Risk of price No Yes Yes No

changes

Need to control No Yes Yes No

cash flow
A. Remittance/ Transfer remittance
1. Definition
● Method of payment by which applicant requires his/ her bank to transfer an amount of
money to the beneficiary at a certain place
● Method of payment thereby buyer requires his/ her bank to remit/ transfer an amount of
money to seller at seller’s bank
Parties of remittance
● Applicant:
○ Payer: Importer, drawee, etc.
○ Remitter: investor, remittance (kiều hối)
● Beneficiary
● Remitting bank: in the country of APPLICANT
● Intermediary bank: in the country of BENEFICIARY
● Paying bank
2. Types of remittance

Mail transfer remittance: M/T Telegraphic transfer remittance (T/T

- Rarely used nowadays through wire/ Telex/ Swift)
- Lowcost, Low speed - Popular & safe
- Risky - Costly, speedy

3. Procedure of transfer remittance

3.1. Remittance before shipping goods

- at least 4 parties
● Beneficiary: exporter/ seller
 ● Applicant: importer/ buyer
● Buyer’s bank = remitting bank
● Seller’s bank = paying bank
● Underlying transaction between importer and exporter: contract
- Term of payment: advance payment/ payment before shipping good
⇒ Application for remittance (in fact = contract for services supplied by remitting banks to
applicants)
● Sale contract: prove the legal transaction between both parties
● Export/ import license → Spot foreign exchange transaction (hợp đồng mua bán ngoại
tệ giao ngay. Giải thích: là 1 công ty không có nguồn thu bằng ngoại tệ thì phải dùng
đúng ngoại tệ thu được, nếu không sẽ phải mua bán ngoại tệ với ngân hàng)
(?) What risk? Who risks?
TRAP (Terminate > Reduce > Accept > Pass-on): Risk management tool
- Importer (perform the first obligation in process)
● Default goods/ delay shipment
● Contract cancellation
⇒ Prevent by: Letter of guarantee (make payment on behalf of exporter), Standby L/C (similar
to letter of guarantee)
- Commercial bank
● False/ Fake transaction
⇒ Prevent by: Require importer to sign a guarantee that he will send the commercial bank a
full set of documents detailed in commodity for records and inspection. OR connect with
high-trusted customers
3.2. Remittance after shipping goods

Differences with case 1: Step 1 Seller ship commodity along with documents
(?) Differences between L/C and Standby L/C + T/T?
● L/C: complicated process
● T/T: more convenient + simple process → incase of fast document delivery (fresh foods)/
high-value commodity, not fully trusted partner
3.3. Mixed remittance: before & after shipping goods

4. Applicable situations
● Trade in service
● Simple but risky, extreme
● Should combine with other method to prevent risks
● Have no international convention or customs on remittance
● Used separately/ a part of the other methods of payment
Remittance only benefits IMPORTER because importer only pays after receiving goods
B. Open account
1. Definition
A method of payment in which seller ships goods along with invoice and other documents to
buyer, who is invited to pay an agreed amount on appointed date into the account indicated by
exporter (periodically)
(!) Open account opened by SELLER, not bank → Little involvement from bank
Drawer = Exporter, Drawee = Importer
2. Features of open account
● Least secure method of trading for export, most attractive to buyer
● Buyer send to goods to export without any instant payment
● No payment protection for exporter at all
● Without bank’s participation
● Simple procedure
● Higher price than instant payment
● Most popular in Europe (60%)
3. Procedure of open account

(1) (2) Drawer fulfill services and open account for drawee
(3) Drawee ask Bank to transfer money periodically
(4) Buyer’s bank transfer remittance order to seller’s bank
(5) Seller’s bank notice payment in seller’s bank acount
4. Classification
4.1. Security of payment
● Open account to be secured: can be subjected to bank guarantee by buyer (L/G, standby
L/C, performance bond)
● Open account to be naked: without any protection
4.2. Receiving payment
● Open account by collection
● Open account by remittance
5. Applications
- transactions involving small amounts/ regularly
- exporter has no doubt about credit worthiness/ willingness of buyer to pay
- both parties are well known to each other → trust each other
- consignment, parent company/ subsidiary company
(1) Open account only benefits DRAWEE

C1. Letter of guarantee L/G

1. Definition
One-way contract between a bank as guarantor and a beneficiary as party to whom a
guarantee is made . Under this contract the bank undertakes to make payment to beneficiary
within limits of stated sum of money, if a 3rd party fails to perform effectively or if some other
event materializes/ fails to materialize
● Must be in writing
● ALWAYS a commitment to pay (wholly/ partly) amount stated BUT not guarantee
fulfillment of actual delivery or any other obligation which the principal may have
towards the beneficiary
● Any demand under guarantee must be received by guarantor on/ before EXPIRY at the
PLACE FOR PRESENTATION indicated above
2. Parties to guarantee
2.1. Guarantor
- Who gives written promise
● Commercial banks (most popular)
● Financial institutions, insurance companies, financial co., factoring co., forfaiting co.
● Legal entities: central bank, financial ministry, treasury office
- Issuer of L/G, commits to remedy beneficiary in case thereof that the guarantee does not
fulfill his obligation on due date stipulated on L/G
2.2. Principal (debtor/ borrowing customer): The person whose responsibilities are being
secured.
Exporter can be principal for (payment guarantee)
● L/G or performance guarantee/ bonds to support contractual obligations (5-10%)
● Repayment guarantee or advance payment bonds (10-20%)
● Progress payment guarantee (often issued in the name of/ as part of repayment
guarantee)
● Retention guarantee or maintenance bonds (10-15%)
● Warranty guarantee (often issued in the name of/ as part of performance guarantee)
(10-15%)
Importer can be principal for (performance guarantee)
● payment guarantee are issued on instruction of buyer infavor of seller, in order to cover
buyer’s payment obligation for g&s to be delivered according to contract
● Guaranteed acceptance (aval): a bank may add its guarantee directly to B/E
⇒ Guaranteeing the due payment obligations of drawee (buyer)
● Indemnity guarantee for missing/ lacking original B/L
Contractor can be principal for:
 ● L/G as Bid bonds/ tender bonds (1-5%)
Borrower
● Credit guarantee: covers the contractual obligation of the borrower towards a lender
2.3. Beneficiary: the person to whom L/G is issued, can be
● Importer
● exporter/ supplier
● Creditor/ Lender
● Project owner/ promoter
3. Applicable rules
- URDG: Uniform Rules for Demand guarantees of International Chamber of Commerce (ICC)
- VN: Ordinance on Bank guarantee issued in accordance with Decision No26/2006-NHNN
4. Classification

Direct Guarantee Indirect/ Encounter Guarantee

- ordinarily issued by bank in - Principal debtor/ account party requests his bank
applicant’s country to instruct a bank in beneficiary’s country to issue
- client authorizes bank to issue a the guarantee
guarantee directly to beneficiary - beneficiary frequently stipulate for issuance of
guarantee by a bank in their own country (bc more
(Direct Guarantees contain a direct benefits)
guarantee of the guarantor bank
against the Applicant while Counter (!) a second bank is involved (usually foreign bank
Guarantees are letters of guarantee located in beneficiary’s country of domicile): this
issued by another bank called as bank is requested by the initiating bank (principal’s
counter guarantor bank against the bank) to issue a guarantee in return for the latter’s
guarantor bank in order to ensure the counter liability and counter-guarantee
guarantor bank to issue a letter of
guarantee against the Applicant.)
 Conditional guarantee Unconditional guarantee
(simple demand guarantee)

- becomes payable when issuing bank - becomes payable:

has verified that ● On first demand from beneficiary
● principal has defaulted/ in ● Without prior approval by principle
breach of contractual ● Without proving to issuing bank that a
obligation default has occurred
● beneficiary has suffered loss, - Similar to bank cheque: beneficiary can cash any
damages as specified in a time during validity of guarantee
claim document → submitted - Put beneficiary (usually buyer) in stronger position
together with demand for
payment 1/ exporter = principal, importer = beneficiary
(more common, usually the same purpose as
standby L/C)
2/ importer = principal, exporter = beneficiary

Other types

- bid guarantee - tender guarantee

- performance guarantee
- repayment/ advance payment guarantee
- payment guarantee
- guaranteed acceptance
- progress payment guarantee
- retention guarantee - maintenance bonds
- warranty guarantee
- credit guarantee
- duty exempt guarantee
- indemnity guarantee

C2. Standby L/C

Procedures
- Principal + Applicant: Exporter ask exporter’s bank to issue standby L/C in favor of importer
- Beneficiary: Importer
- Seller’s bank = issuing bank
- Importer’s bank = advising bank
* can serve as a bid bond, performance bond, or advance payment guarante
→ a guarantee from a bank that the seller will receive the payment from the buyer if the buyer
fails to fulfill the contractual obligations
● If applicant breach contract, beneficiary send B/E + claim documents to bank for
payment
→ Stand-by LC’s purpose if not for payment all the time (like commercial L/C). It is automatedly
invalid when exporter has performed full obligation
⇒ Protect exporter (payment default) or importer (non-performance) depends on situation
D. Collection
1. Definition
URC 522 (Uniform rules for collection) - Sub-article (a): Collection means the handling by
banks of documents as defined in Sub-article (b) in accordance with instructions received, in
order to:
● Obtain payment and/ or acceptance
● (or) deliver documents against payment and/ or against acceptance
● (or) Deliver documents on other terms and conditions
2. Documents
Sub-article 2(b): “documents” means financial documents and/ or commercial documents
● “Financial documents” = B/E, promissory notes, cheques, financial invoices, or other
similar instruments used for obtaining the payment of money
● “Commercial documents” = invoices, transport documents, documents of title or other
similar documents, or any other documents whatsoever, not being financial documents
3. Parties to a collection
● Principal: party entrusting the handling of a collection to a bank
→ EXPORTER
● Remitting bank: bank to which principal has entrusted the handling of a collection
→ EXPORTER’S COUNTRY
● Collecting bank (corresponding bank of remitting bank): Any bank other than remitting
bank which involves in processing the collection. Located in importer’s country
→ IMPORTER’S COUNTRY
● Presenting bank: Collecting bank making presentation to drawee
● Drawee: one to whom presentation is to be made in accordance with collection
instruction
→ IMPORTER
(!) Collecting bank = Presenting bank if Collecting has bank account of importer
(!) Collecting bank does not have bank account of importer → Send documents to presenting
bank (the bank who has bank account of importer) to request importer to
● make payment (D/P)
● accept B/E drawn by exporter (D/A)
⇒ Importer’s ability depends on method of payment
⇒ In the process of collection, there are 2-3 banks
(?) Why is drawee not an importer's bank?
Because payment is made directly by importer

Banks’s obligation
 Collection instruction Banks are only permitted to act upon instructions
available
Bank will not examine documents in order to obtain instructions

Disregard any instructions from any banks/ parties other than bank/
party from whom they received the collection (unless otherwise
authorized in collection instruction)

Remitting bank SEND documents and collection instruction

→ directly to collecting bank
→ through another bank as intermediary

Nominated bank Bank nominated by principal: Remitting bank utilize that bank
→ Indemnity (có trách nhiệm khi làm sai instruction)

No nomination from principal: Remitting bank utilize

- any bank of its own
- another bank in country of payment/ acceptance
- another bank in country where other terms and conditions have to
be complied with
(IMPORTER’S COUNTRY)
→ Without indemnity (miễn trừ trách nhiệm) in this choice

No nomination from remitting bank: Collecting bank utilize a

presenting bank of its choice
→ Without indemnity
(!) Differences in bank’s obligation in L/C and Collection
● L/C: Issuing bank has to examine document submitted by exporter
● Collection: Does not have obligation to check documents submitted by exporter before
sending them to corresponding bank located in the same country of importer
→ Follow only 1 bank’s instruction
(remitting bank → collecting bank, collecting bank → presenting bank)
Collection instruction
- Details of bank from which collection was received
- Details of principal + drawee + presenting bank
- Amount and currency to be collected
- List of documents enclosed (and numerical count)
- Terms and conditions upon which payment and/ or acceptance is to be obtained
- Charges to be collected, indicating waived or not
- Interest to be collected, if applicable, indicating whether it may be waived or not
- Method of payment and form of payment advice
- Instruction in case of non-payment, non-acceptance and/ or non-compliance with other
instructions
 4. Types of collection

CLEAN COLLECTION DOCUMENTARY COLLECTION

collection of financial documents not Collection of:

accompanied by commercial documents ● Financial documents accompanied by
commercial documents
● Commercial documents not accompanied by
financial documents

Procedures:
underlying transaction → exporter send financial documents with goods
→ principal (exporter) apply a request of collection & financial documents (B/E) to remitting bank
→ remitting bank send collection order to collection bank through SWIFT & send financial documents
through a fast delivery services
→ collecting bank make payment for a drawee ( → presenting bank may payment for drawee if
collecting bank has no bank account of drawee)
⇒ documents was received from shipment (no terms of “release documents”)
Lệnh chỉ dẫn nhờ thu = obtain payment/ obtain acceptance

Applicable cases Types of documentary collection:

● Seller and buyer trust each other - D/P at sight: documents against at-sight payment
(long-time relationship) ⇒ in collection instruction is stated clause “release
● Banks only play the role as documents against payment”
intermediary for remitting proceeds - D/P at XX days after sight: release document
● Seller is at risk of neither controlling against XX days after sight
goods nor receiving goods value ⇒ applicable cases
● Commercial docs arrived before goods
● Importer need to arrange financial aids/
payment
● Goods specifications are so complicated and
numerous
 - D/A: documents against acceptance
- D/ OTC (or D/OT, D/TC): documents against other
terms and conditions

Pros: all in favor of buyer a) Document against payment: limited for exporter bc
Cons: goods are in foreign port (theft, damage, seizure)
- for exporter If buyer’s payability is default/ Pros: mostly in favor of exporter, who retains control
buyer’s payment remittance is blocked by over goods until payment is made
buyer’s country Cons: buyer’s payment remittance is blocked by
→ exporter has neither goods nor money & buyer’s country
exporter may not get goods back (this method is automatically applied if the contract
Reason: bankrupt, fraud, suspension of does not specify clearly payment condition)
payment
(in collection, banks does not have b) Document against acceptance:
obligation to pay, only REMITTANCE → Pros: almost in favor of buyer
depends on good faith of importer) Cons: so risky for seller
- for buyer if documents arrived before - If buyer’s payability is default/ buyer’s payment
goods, buyer pay the proceeds/ accept B/E remittance is blocked by buyer’s country
but → exporter has neither goods nor money & exporter
● Goods was not send may not get goods back
● Goods was not appropriate with Reason: bankrupt, fraud, suspension of payment
stipulation of contract
● Not authorized documents ⇒ Solution: B/L is avalised (guaranteed) by a high
credit-level bank, possible default by importer might
⇒ Solution: Limitation clause in underlying be avoided. However it’s still a political risk to
contract, collection instruction and mail, eg: exporter (avalising bank may fail, central bank may
- Specify time of payment/ acceptance after block release of foreign exchange)
bank presenting financial instruments &
(Overall Documentary collection)
penalty on delay payment
Cons for buyer
- buyer can have documents to receive goods before
payment
- buyer is at risk of exporter not issuing appropriate
documents
● Not authorized documents
● Discrepancies on documents
● Seller’s fraud in preparing commercial
documents

⇒ Solution: Combine documents and payment time

→ Exporter assign banks to control documents by:
- D/P
- D/A
- D/TC (documents against other terms & conditions)
(!) Banks have no obligation to check the documents
● Ocean transportation (+ to order B/L of banks): Bank endorse documents to importer
who has paid/ accepted before
 ● Other transportation: Banks send documents to importer
● If Importer see discrepancy between B/L and contract → refuse payment
⇒ Solution for payment refusal:
- Discount of commodity prices (in case of inferior goods, delay shipment, etc.)
- Find alternative buyers
- Send bank to exporter’s country (in case of valuable commodity)
- Public auction: Sell for one who pay the highest price (in case of bulk, low-value goods, high
warehouse fee, etc.)

E. Documentary Credit D/C (use mainly L/C)

1. Definition
Art 2, UCP 600, 2007, ICC: Credit means any arrangement, however named or described, that
is irrevocable and thereby constitutes a definite undertaking of the issuing bank to honor a
complying presentation
● Arrangement: any methods of payment (L/C, etc.)
● Irrevocable
● Honor (in 3 ways)
○ Available by at-sight payment
○ Incur a deferred payment undertaking + pay at maturity if the credit is available
by deferred payment
○ Accept B/E (drawn by beneficiary - exporter) + pay at maturity if the credit is
available by acceptance
● Presentation: delivery of documents under a credit to the issuing bank/ nominated bank
● Complying presentation: presentation that is in accordance with terms and conditions
of credit, the applicable provisions of these rules and international standard banking
practice
Documents can be different compared with contracts
2. Applicable rules
- LC
- UCP (Uniform customs and practice for documentary credit)
→ ICC (International chamber of commerce) in 1933
- ISBP - International Standard Banking Practice for the Examination of Documents under
Documentary Credit

3. Parties to Documentary Credit

● Applicant: party whose request credit is issued
→ IMPORTER
● Issuing bank: bank that issues a credit for applicant as the request of an applicant/ on
its own behalf (*applicat’s bank can be different to issuing bank)
→ IMPORTER’S BANK
● Beneficiary: party whose favor a credit issued
→ EXPORTER
● Advising bank (usually corresponding bank): advises credit as request of issuing bank
→ EXPORTER’S BANK
 ● Confirming bank: bank that adds its confirmation to a credit upon issuing bank’s
authorization or request (if beneficiary does not have bank account in advising bank)
○ Together with issuing banks guarantee the payment for exporters. Confirmed
L/C needs confirmation from issuing bank & confirming bank (in case of risk of
bank insolvency/ political country) ⇒ Confirming bank’s role is quite similar to
issuing bank.
○ (!) in L/C there are only 2 banks committing to guarantee payment: ISSUING
BANK + CONFIRMING BANK (the remaining banks should follow instruction on
L/C)
○ Confirming bank is usually located in Advising bank’s country (to avoid the
country risk of issuing bank)/ OR Issuing bank and confirming can be the same if
they are located in 1 country
● Nominated bank: bank with which credit is available
● Presenter: beneficiary, bank or other party that makes a presentation
(?) Why does the issuing bank want advising banks to be the presenter instead of
exporter/ beneficiary?
→ to authenticate the L/C. Normally, L/C should be presented through advising bank
first instead of directly presented to issuing bank (advising bank is located in exporter’s
country → know more about document in that country)
⇒ avoid the risk of counterfeit documents (not counterfeit L/C) which is not issued by
authorized institutions
UCP: Banks are not responsible for validity of documents
4. Procedure of Documentary Credit

(0) Underlying contract + Terms of payment = L/C

(1) Application to issue credit
● Copies or original contract
● commodity information (import license)
● Insurance policy
 ● Deposit before shipment (if it is too low compare with the value of the commodity, the
bank will require to raise the deposit to make sure the insolvency of the buyer)
(2) Issuing bank issue credit in favor of exporter + send to advising bank
(3) Advising bank authenticate L/C and send original L/C for beneficiary (exporter)
(4) Exporter check all terms and condition on L/C → Shipment of goods without sending
original documents
(5) L/C available by at-sight payment (Issuing bank pays)
● Available L/C + at-sight L/C = at-sight payment
● Available L/C + deferred L/C = deferred payment
● Acceptance L/C + B/E = deferred payment on maturity of B/E
The payment is whether happened or not depends on the present of discrepancies of L/C
L/C is available with ____
(1) Available with advising bank by payment
⇔ Advising acts as examining bank and paying bank under nomination of issuing bank
(2) Available with a nominated bank by payment
⇔ Advising bank = examining bank; Bank A = Paying bank = Nominated by issuing
bank
(3) Available with advising bank by negotiation/ with any bank by negotiation
⇔ advising bank or any bank act as negotiating bank
(4) Available with the issuing bank by TTR (telegraphic transfer reimbursement claim)
(5) Available with issuing bank by payment/ acceptance/ deferred
Exporter’s side (in order)
● Choose (1) because advising bank is at exporter’s country (maturity date counted at
exporter’s country)
● Choose (4):
● Choose (3): (Negotiation usually applies for deferred payment/ acceptance)
○ “Available with any bank by negotiation/ Available with advising bank by
negotiation” (ngân hàng thanh toán mua lại hối phiếu để đòi ngân hàng khác
thay vì ngân hàng mình)
○ Negotiation means the purchase by nominated bank of B/E (drawn on a bank
other than nominated bank) and/ or documents under a complying presentation,
by advancing/ agreeing to advance funds to the beneficiary on or before the
banking day on which reimbursement is due to nominated bank (1 day before)
○ Use for case exporter wants early payment + discount to facilitate money flow
(Before maturity)
○ Differences with (5): Earlier and more flexible → more common (give choices for
exporter to negotiate BUT banks does not need to negotiate)
● Choose (5) most basic: Acceptance + B/E / Deferred (no need to B/E)
Or choose (2) depends on situation
(6) ___
(7) Applicant pay or refuse to pay
If applicant still want to pay for L/C despite of discrepancy → write a mail to accept (bank will
process in 5 working days from the date receiving L/C)
(8) Issuing bank inform to accept or refuse to receive documents
Remember that (!) The importer does not have the right to accept payment in documentary
credit, because the documentary credit is not a payment method, but a payment guarantee.
● The importer’s bank (the issuing bank) issues the documentary credit to the exporter
(the beneficiary) on behalf of the importer (the applicant), and agrees to pay the
exporter upon presentation of compliant documents.
● The importer pays the issuing bank according to the terms of the credit agreement,
which may be before, at sight, or after the shipment of the goods.
⇒ The documentary credit is a way of securing the payment for both parties, but it does not
replace the actual payment
Remember that (!) The advising bank plays the role of authenticating the letter of credit issued
by the issuing bank, but not the documents presented by the beneficiary. The advising bank
verifies that the letter of credit is genuine and informs the beneficiary of its terms and
conditions1. However, the advising bank does not have any obligation to pay or accept drafts
under the letter of credit, unless it also acts as a confirming bank or a nominated bank.
(?) Are Incoterms terms affected by the bank's L/C issuance request procedure? What does
BANK/ EXPORTER check in a contract before issuing L/C?
- L/C checking step: What content is checked in the L/C? Test criteria? Purpose of testing?
The bank will have 5 working days to check. If not suitable, the bank has the right to refuse
payment
- What BANK check:
● Can that item be freely exported? Be licensed before?
● Items with high fluctuations in value (there is a possibility that the buyer will refuse to
receive the goods) → Do they need to raise the deposit accordingly?
● Nature of the item (eg: customized for the buyer → should have 100% deposit/ mass
commodity → lower % deposit)
● Incoterm conditions are in the contract that require the buyer to present insurance in the
presented documents before issuing L/C: FOB or CFR (and the rest). The usual
consignee of B/L in L/C is Issuing bank. If the conditions of use are CIF, it already has an
insurance policy so there is no need to present more. (The L/C issuing bank always
requires and checks the purchase of insurance for the shipment in which the bank will
pay 100% for that shipment).
● The amount cannot exceed the contract amount
Availability
 5. Applicable situation

- In trading with new partner → eliminate the screening phase importer/ country risk → trust
only the bank
- Big amount of contract value: Shouldn’t use deferred/ DP
- Required by legal regulations or customs in trade or payment
● Vd: ở Nhật khuyến nghị trên 5000 đô dùng L/C, một số quốc gia yêu cầu ngân hàng
tham gia vào việc thanh toán để đảm bảo quản lý ngoại hối
- Required by credit insurer
● The export company is in need of capital, so it uses the importer's capital (Prepayment).
The credit insurer is certain that the money lent to the exporter will be recovered
- Required by foreign exchange regulation

F. Letter of Credit (payment tool for D/C)

(quy trình L/C P.326-P.338)
1. Definition
Definition: L/C is a document, thereby constitutes a definite undertaking of issuing bank to
honor a complying presentation
● L/C is conditional undertaking which is definite and irrevocable undertaking to pay/
accept documents
● Can be issued in traditional form (air-mail) or electronic format (Telex, SWIFT)
 2. Features of L/C
- L/C is to be independent of underlying transaction/ contract
- Banks deal with DOCUMENTS, not g&s or performance to which documents may related
- L/C is to be required strict compliance of documents with terms and conditions of L/C
- L/C = tool of payment to avoid risks in international trading, HOWEVER could be used for
suspension, postponement of payment or fraud
(!) L/C play more important role than B/E because to receive goods, the importer has to present
an appropriate set of documents that strictly in accordance with L/C (in language, amount of
money, etc.)
⇒ applicant + beneficiary consider
● Documents required for presentation
● Whom documents are to be issued
● Data content of documents
● Time frame documents are to be presented
⇒ New & high-stake contracts.
(!) Benefits of L/C
● Removes buyer’s credit risk
● Removes buyer’s country risk + issuing bank’s credit risk (if confirmed)
● Allows payment despite contract dispute with buyer
● Irrevocable = Has the right to cancel but with the consent of the beneficiary (similarly, if
you want to amend the L/C, you still need the consent of the beneficiary).
*If the beneficiary does not express agreement with both the original L/C and the
amended L/C → The bank can be involved in both commitments (in original L/C and amended
L/C)
⇒ IF beneficiary present amended L/C = agree with amended L/C (and otherwise. In
both case beneficiary does not need to show their approvement on amendments)
(!) Risk of L/C compared to advance payment (rarer)
• The buye reject to receive goods (in this case exporter can sue this case)/ The L/C issuer is an
unreliable financial institution
• Country risk: Middle East, Russia region can affect money delivery policy
⇒ In this case can use standby L/C for guarantee
• Delay and non-payment by issuing bank (to favor the buyer to suspend the payment time)
• Counterfeit L/C (the risk of counterfeit L/C happens if there is no advising bank)
• Inability or Failure to comply with the L/C terms (Ms. Nga does not consider)
3. Classification of L/C
- Revocable L/C - Irrevocable L/C
- Confirmed L/C: A confirmed L/C is a type of letter of credit that involves two banks: the
issuing bank (the buyer’s bank) and the confirming bank (the seller’s bank). The confirming
bank adds its guarantee to the letter of credit and pays the seller even if the issuing bank fails
to do so
- Without recourse L/C: issuing bank cannot claim back the money from the beneficiary if it
fails to receive reimbursement from the buyer
- Transferable L/C: transfer the right on L/C for someone else
- Revolving L/C (tuần hoàn): be used for multiple transactions over a certain period of time
- Back to back L/C (giáp lưng): involving an intermediary between the buyer and seller
- Reciprocal L/C (đối ứng): only valid when another letter of credit is issued in exchange for it.
- Deferred payment L/C)
- Red Clause L/C (advance payment)
- Standby LC (issued by exporter to importer)
- UPAS LC (Usance Letter of Credit payable at sight)
4. Parties to L/C
● Applicant = Importer
● Beneficiary = Exporter
● Issuing bank/ opening bank: approvate any amendments in L/C +confirm the
documents sent by exporter (only the outside content, not contractual legality, etc.)
→ IMPORTER’S CHOICE
● Advising bank: Transfer L/C documents to beneficiary
→ EXPORTER’S COUNTRY
● Paying bank: Other than Issuing bank. If place of payment is at beneficiary’s country
→ Advising bank
● Confirming bank: a 3rd bank commits to pay for beneficiary with Issuing bank (usually
reputable bank)
5. Credits vs Contracts
- Credit is separate transaction from sale or other based contract
→ Terms and conditions of credit/ any amendment are independent of sale contract
- Bank are NOT CONCERNED WITH or bound by contract
- A beneficiary in no case avail (benefit) itself of the contractual relationship existing between
banks/ between applicant and issuing bank
- Issuing bank should discourage any attempt by applicant to INCLUDE as an integral part of
credit, copies of underlying contract, proforma invoice and the like
 6. Main contents of L/C

SWIFT CODE of bank: BIDV VN VX 130 (130 indicates branch, xxx indicates headoffice)

Confirmed L/C → M: Mandatory

Tag27: 1/1, 1/2 (copies of documents)
Tag40: Irrevocable
Tag20: L/C number
Tag40E: UCP which version
Tag31D: Date and place of expiry
Exporter usually wants place of expiry to exporter’s country
Tag46A: Docs required
(4 types of documents always requires signature: B/E, B/L, Insurance policy & Certificate
documents/ Declaration documents)
a/ Commercial invoice in 3 copies (at least 1 original + 2 copies) certified by applicant
→ Presentation can have difficulties in certification by applicant/ importer
(If L/C is different from contracts yet still acceptable → approve)
b/ FOB + Insurance policy
→ Presentation needs insurance certificate
c/ B/L marked “freight prepaid”
→ Presentation needs exact comments
Tag 48: (not mandatory) Period of presentation
Should be before at least the day of validity of L/C. If it is not mentioned → 21 days since date
of shipment and not expiry date of L/C
Eg.
Date of issue: 1/9
Date of shipment: 15/9
Date of expiry date: 15/10
● If L/C stipulate that time for presentation of L/C within 7 days after shipment →
presentation before 21/9
● If L/C not stipulate → Presentation within 21 days since 15/9 AND not exceed expiry
date of L/C ⇒ 15/10
State: Stale documents are acceptable (accept late presentation but before expiry date)
Tag 41D: Available with ___ (name of bank) by___ (form of payment) (look into contract to
amend L/C)
(1) Reference number
● On L/C issued via air mail: “please quote credit No… on all correspondence”
● On L/C issued via SWIFT MT 700 or 701: tag 20 “our reference number”
(2) Place of issue: Where issuing bank issues a commitment to pay to beneficiary
(3) Date of issue/ Date and place of expiry
Date of issue L/C does not need to be date of issue B/E
(4) Names of parties to L/C and their address
● Applicant: tag 50
● Beneficiary: tag 59
● Issuing bank
● Advising bank
● Applicant bank: Tag 51D
(5) Currency code, amount:
- Tag 32B
- Should not stipulate exact amount of L/C
- Should use amount tolerance other than absolute amount (Tag 39A: Percentage credit
amount tolerance)
(6) Validity of L/C (validity period of L/C)
- Period of which a L/C remains effective → exporter must present documents for payment
- Period of which issuing bank commits to honor complying presentation
- Period during which beneficiary of L/C must meet all its requirements
Remember that: Payment period can fall outside the validity period of L/C
Eg: Exporter wants the validity period of L/C to be longer → ability to submit many times +
At-sight L/C
(a) 270 days valid + at sight
(b) 40 days valid + 180 days after sight (maturity date of L/C)
⇒ Exporter choose A

31C: date of issue

31D: date and place of expiry
Principles to define the validity of period of L/C
● Shipment date should be at proper time after date of issue and before expiry date (or in
the validity period of L/C)
○ L/C → Proper time before shipment date: sum of days to inform opening L/C, L/C
at Advising bank, shipment preparation period
○ L/C → Proper time before expiry date: sum of days to form document set of L/C,
L/C delivery to Issuing bank/ presentation place, L/C at Advising bank and days
when bank check documents
● Shipment should not be date of issue or on expiry date
(7) Payment period/ Date of payment
- Depending on the stipulation in contract. If payment is by B/E → stipulated on B/E
- Payment period can be in or out of validity period of L/C
- L/C have 2 types
● At-sight L/C → Payment time at validity period of L/C
● Usance L/C → Payment time at validity period of L/C OR validity period of L/C for
bank’s acceptance
(8) Shipment period/ Shipment date → Latest date of shipment
- Tag 44C: Latest date of shipment or 44D: Shipment period
- Shipment date is stipulated in underlying contract
- Applicant should ensure that any credit/ amendment it requires for is not ambiguous/
conflicting in its terms and conditions and in contract
- be in strict relation with expiry date of presenting and expiry date of L/C
- Should not indicate neither exact date for shipment nor ambiguous/ conflicting
- Should state by expression: Latest date of shipment, Not later than, On or about, Between,...
(!) Wrong shipment date: “The latest shipment date is in 30 days after seller’s receiving L/C
→ Because when receiving L/C, exporter does not need to confirm the date of receipt → does
not have evidence to count as 30 days
(9) Period of presentation
Tag 48: Article 33 UCP 600 - Expiry date and place fore presentation
● A credit must state an expiry date for presentation. An expiry date stated for honour or
negotiation will be deemed to be an expiry date for presentation
● Place for presentation = Place of bank with which credit is available
● A presentation by or on behalf of beneficiary must be made on or before expiry date
Article 33 - Hours of presentation: A bank has no obligation to accept a presentation outside of
its banking hours.
ISBP 745, A19b: stale documents acceptable
- documents may be presented later than 21 calendar days after date of shipment as long as
they are presented no later than expiry date of credit
- this will also apply when credit specifies a period of presentation together with condition
“stale documents acceptable”
⇒ The words "from" and "after" when used to determine a maturity date or period for
presentation following the date of shipment, the date of an event or the date of a document,
exclude that date in the calculation of the period.
(10) Description of goods and/ or services
Tag 45A
- Description in L/C must no be conflicting that in underlying contract
- Terms and conditions of a credit and any amendment thereto are independent of underlying
sale or other contract
- description of goods, services or performance in a commercial invoice must correspond with
that appearing in credit
(11) Transport/ transshipment/ discharge/ lading
- Tag 43P: Partial shipment
- Tag 43T: Transshipment
- Tag 44E: Port of Loading/Airport of Departure
- Tag 44F: Port of discharge/Airport of Destination

(12) Documents required (Tag 46A)

- Should not require presentation of a document that is to be issued, signed or countersigned
by the applicant.
- The beneficiary should consider the appropriateness of such a requirement and determine its
ability to comply with it or seek a suitable amendment.
- Clearly state the number of originals and copies
- State how to make out these documents (title, drawer, signed or not, amount of money,
drawee...)
(13) Bank’s commitment to pay to beneficiary
- UCP 600: irrevocable L/C
- Definite undertaking to pay
- Complying presentation
(14) Additional conditions
(15) Signature of issuing bank (Signature/ telex key/ swift code)

D/A D/P

Require importer to pay after receiving docs Require importer to pay for B/E at-sight
(within 30-180 days)

Risk of non-payment from buyer Risk of non-delivery (risk documents does

not delivered as same as goods)

Về mặt lý thuyết, Trong nhờ thu trả sau, hối phiếu sẽ được luân chuyển 2 lần: lần đầu là obtain
acceptance và lần 2 là payment
Về thực tế, hối phiếu sẽ được giữ lại bởi remitting bank và remitting bank sẽ giữ lại hối phiếu chứ
không đưa cho exporter
Application = Contract between remitting bank vs principal
Some methods:
Payment collection VS Payment acceptance + B/E
—--------------------------------------------------------------------------------------------------

BÀI TẬP
Bài tập trong sách: P385

Risk of exporter in D/P

Example: 10% advance by TTR (telegraphic transfer reimbursement), after 03 days when
contract signed + 90% from 03 days by D/P when receiving copy of shipping document
→ Disadvantages for exporter
● Có thể chứng từ DHL chuyển đến cho ngân hàng của người mua BBVA, rổi BBVA đưa
chứng từ cho người mua mà chưa thanh toán
● 2 bên thông đồng với nhau nhận chứng từ thông qua 1 nhánh của DHL, ngân hàng
không có lỗi
● FOB: Người mua book tàu, mà tàu có quen biết với người mua
⇒ Solution: 10% value of contract + Bank TTR + within 3 (calendar/ working) days
Nên ký B/L theo lệnh của ngân hàng:
- Khi chứng từ bị mất vẫn phải quay lại ngân hàng để ngân hàng ký hậu và chuyển nhượng B/L
đã đứng tên ngân hàng, tránh TH chiếm dụng (tuy nhiên vẫn không kiểm soát được việc ngân
hàng thông đồng với người nhập khẩu)
- Người mua từ chối nhận hàng thì vẫn người mua vẫn phải chịu trách nhiệm nhận hàng. Trong
TH từ chối thì người mua sẽ phải làm giấy từ bỏ hàng hóa (phức tạp hơn)

Pros and cons of collection compared with D/P, D/A

PROS CONS

The exporter receives 10% of the payment in The exporter bears the cost and risk of
advance by TTR, which reduces the risk of shipping the goods before receiving the full
non-payment and improves the cash flow. payment.

The exporter does not have to wait for the The exporter is exposed to the risk of
buyer to accept the documents, as in the case exchange rate fluctuations, as the payment is
of D/A, but only has to present them to the made in different stages and at different
bank for collection. times.

The exporter retains the title to the goods The exporter has no guarantee that the
until the buyer pays the remaining 90% by buyer will pay the 90% by D/P, as the buyer
D/P, which gives some security in case of can refuse to honor the payment on any
default or dispute. grounds. In that case, the exporter may have
to incur additional expenses and difficulties
 to recover the goods or resell them in a
foreign market.

Questions with L/C

Who requires to open L/C?
Importer/ Buyer

Who is the beneficiary of L/C?

Exporter/ Seller

Time of payment of L/C?

Advance (Red clause)
At-sight
Later payment (30 60 90 180 days)

B/E is always required in case of

A. Documents against payment (D/P)
B. Documents against acceptance (D/A)
(the exporter instructs the bank to hand over the shipping and title documents to the importer
only if the importer accepts the accompanying B/E by SIGNING IT, indicating that they he will
pay the amount due at a specified date)
C. When L/C is available by acceptance
(this means that the bank will accept a term B/E drawn by the beneficiary and pay it at
maturity)

B/E is always required in case of (L/C)

A. Payment
B. Acceptance (the issuing bank or the confirming bank agrees to pay the beneficiary at
maturity date of the bill of exchange. The beneficiary can either wait until the maturity date to
receive the payment, or discount the bill of exchange with another bank for immediate cash)
C. Negotiation (beneficiary can sell the bill of exchange to a nominated bank (usually the
advising bank) at a discount before the maturity date. The nominated bank then collects the
full amount from the issuing bank or the confirming bank at the maturity date)
D. Deferred payment

A credit requires an "invoice" without further definition. Which of the following MUST be
considered a discrepancy?
Presentation of a document identified as a tax invoice.
An invoice that is not signed
An invoice made out in a different currency than the credit
An invoice issued for an amount in excess of that permitted by the credit

In accordance with UCP 600, what is the maximum number of days (inclusive of
presentation date) that a Confirming Bank is allowed to refuse the documents due to
discrepancies?
5
(The correct answer is b. 5. According to UCP 600 article 16, a confirming bank has a
maximum of five banking days following the day of presentation to determine if an expression
is complying and, if not, to refuse the documents and notify the presenter of the refusal)

Which kind of Documentary Credit enables a Beneficiary to obtain pre-shipment financing

without impacting his facility?
a. Transferable
(transferable documentary credit: allows the beneficiary to transfer all or part of his rights
under the credit to 1 or more second beneficiaries
→ This does not enable the beneficiary to obtain pre-shipment financing, but rather to use the
credit as a means of payment for his own suppliers
b. Red clause (L/C điều khoản đỏ: yêu cầu ứng trước tiền)
Irrevocable, payable at sight
(documentary credit that cannot be amended or canceled without agreement of all parties and
that requires the issuing bank or the confirming bank to pay beneficiary at sight upon
presentation of complying documents. This does not enable the beneficiary to obtain
pre-shipment financing, but rather to receive payment as soon as he ships the goods and
submits the documents)
c. Confirmed Irrevocable, payable at maturity
(documentary credit that cannot be amended or canceled without the agreement of all parties
and that requires a second bank (usually in the beneficiary’s country) to add its confirmation to
the credit and undertake to pay the beneficiary at maturity (i.e., on a specified future date) upon
presentation of complying documents. This does not enable the beneficiary to obtain
pre-shipment financing, but rather to receive payment with a deferred term and with an
additional assurance from the confirming bank)

Marine Bill of Lading acts as

1. an acknowledgment of receipt of the goods by the carrier
2. evidence of a contract of carriage
3. a document of title for the goods
4. evidence of the contract between the seller and the forwarding agent.

An Issuing Bank becomes bound by the terms of an amendment to a Documentary Credit

at the time at which the:
Beneficiary accepts the amendment whether expressly or by implication
Reimbursing Bank agrees to the Applicant's request for an amendment.
The advising Bank advises the amendment to the Beneficiary.
The Amendment leaves the Issuing Bank's control.

If an Exporter is willing to release the shipping documents directly to the Buyer, but wishes
to retain some guarantee of payment should the Buyer fail to pay on the due date, which of
the following Documentary Credits BEST suits the Exporter's needs?
Transferable
Revolving
Standby
Evergreen
Mid-term questions

1. Who has no right to endorse without recourse: drawer

2. According to law on assignment of VN 2005, BE is to be signed and dated
3. (case of collection) The principal entrusted the collection instruction to his bank “release
documents against payment” attached to b/E payable at 90 days after sight. What
happens?
Answer: The bank should release does to drawee against payment
Wrong: The bank should follow collection instructions and the content of attached documents/
The collection will be valid/ The bank should release documents against acceptance and
drawee to pay on due date

(case of L/C) Ngân hàng sẽ không follow hướng dẫn mà chỉ release document against
payment đối với trường hợp L/C chứ không phải collection

Other cases: Release document against acceptance + B/E at sight → Drawee accept (dựa trên
chỉ dẫn nhờ thu, chứ ngân hàng không đọc chứng từ để trao đúng nội dung chứng từ → Release
documents dựa theo COLLECTION INSTRUCTION, không phải B/E at sight trong chứng từ)

(!) Thanh toán hối phiếu trả ngay không có nghĩa là ngay lập tức mà theo luật VN có quyền trả
trong vòng 3 ngày kể từ ngày xuất trình hối phiếu, acceptance thì là 2 ngày để chấp nhận

VD: Clean collection + Standby L/C (trong TH người mua không thanh toán thì người xuất
khẩu có quyền đòi tiền ngân hàng phát hành L/C)

Câu hỏi:
(1) L/C at 60 days after sight
(2) T/T after shipment 80 days after sight + Standby L/C

Thì (2) sẽ process nhanh hơn (1) nhưng phải tin là người mua có khả năng trả T/T (và dưới 50%
có khả năng dùng standby L/C). Hoặc khi giá trị đơn hàng cao hơn so với bình thường thì có thể
dùng standby L/C để tránh TH người mua không có khả năng thanh toán

(!) Trong TH chọn 1 trong 2 phương thức thì nên có công cụ bảo lãnh (Standby L/C hoặc Letter
of Guarantee L/G) ~ Credit support tool (các công cụ hỗ trợ tài chính) à Có thể áp dụng cho các
phương thức thanh toán khác như Open account, clean collection

(!) Final-term: Open account/ Clean collection/ TT after shipment + ___? To protect
exporter?
→ L/C standby, L/G, etc. (can be the same and use as alternatives)

D/P, DA shares the same benefits between buyer and seller → Prioritize above combination
rather than D/P, D/A
Risk of importer not accepting the goods → can happens in L/C and Collection

L/C Collection

- The seller is guaranteed to receive the - The seller relies on the buyer’s willingness
payment from the bank if they present the and ability to pay for the goods upon
required documents that conform to the L/C. presentation of the documents by the bank.
- The buyer cannot reject the documents or - The buyer can reject the documents or the
the payment based on their dissatisfaction payment if they have any reason to doubt the
with the goods, unless they can prove that quality or quantity of the goods, or if they
the documents are fraudulent or that the face any financial difficulty or change of
seller has breached a fundamental term of market conditions.
the contract. ⇒ The seller may not receive any payment
⇒ However, the buyer can still reject the for their goods, and may have to incur
goods after shipment if they find any defect additional costs and risks of storing or
or non-conformity that affects their interest. reselling the goods, unless they can recover
In this case, the buyer may have to bear the their losses from the buyer or invoke any
costs and risks of returning or disposing of retention of title or security clause in the
the goods, unless stated otherwise in contract.
contract
(?) Does title to the goods still be maintained to the exporter after refusal?

In both case, the exporter lost his title to the goods

Difference between Documentary collection & Documentary credit,

Letter of guarantee and Standby L/C, D/P and collection,

3 phần: MCQ + 2 tự luận (short answer) case study ngắn gọn + bài tập (ký phát hối phiếu, tính
tỷ giá, bài L/C)