Types of Payments in Foreign Trade

Payment of goods supplied in the local trade is a rather simple matter. It is made either in advance or within a sensibly short period after delivery. If a buyer fails to pay, there comes legal action after which payment can be enforced.

    The matter is different in foreign trade because a great deal of time is spent on business correspondence, dispatch and delivery. It is here that banks play a fundamental part.

    Payments in foreign trade are usually made by:

- banker’s transfer;

- bill of exchange;

- letter of credit.

    As well as in the local trade, payment may be made in advance and on open account.

    Payments in advance are used 1) when a buyer is in urgent need; 2) when a buyer is unknown to the seller; 3) in the case of a single isolated transaction. The method of payment in these cases will probably be by a banker’s transfer or banker’s draft.

    Open account terms are granted by a seller to a buyer of unquestionable reputation in whom he has complete confidence, e.g. regular customers, agents or distributors. In these cases payment is made quarterly by bill of exchange or banker’s transfer.

    The banker’s transfer is a mere transference of money from the bank account of the buyer in his own country to the bank account of the seller in the seller’s country.

    The bill of exchange is a written order from a creditor to a debtor to pay on demand or at a specified date a stated sum of money to a person named on a bill, or to his order.

    The letter of credit is the most generally used method of payment in the export trade. It starts with the buyer who instructs his bank to issue the L/C for the amount of the purchase and in favour of the seller. It may be paid to the seller not immediately upon execution of the order. If there is an agreement between the seller and the buyer the agent bank can accept the bill of exchange drawn by the seller on the agent bank. The buyer gets credit and the action is absolutely safe for the seller, who can discount the bill for ready cash if he needs it.

Exercise 9. Give the English equivalents for the following Russian words and word-combinations:

полностью доверять; акцептировать (принимать); по требованию; способ оплаты; поквартально; внешнеторговая операция; банковский счет; отправка и доставка товара; выполнение заказа; наличные (деньги); получить кредит; дисконтировать вексель; безотлагательная необходимость; выдавать аккредитив; клиент (заказчик).

Exercise 10. Comprehension questions.

1. What are types of payments in foreign trade?

2. In what way may they be made?

3. When are payments in advance used?

4. What is the method of payment in such cases?

5. Whom are open account terms granted to?

6. What is necessary for a customer to do while paying by banker’s transfer?

7. What is the bill of exchange?

Exercise 11. Translate into English.

- Кому могут быть предоставлены условия оплаты по открытому счету?

- Условия оплаты по открытому счету предоставляются покупателю с безупречной репутацией;

- Сроки по уплате таможенных платежей определяются исходя из положений международных договоров и законодательства стран-членов Таможенного Союза;

- Денежные средства, получаемые от уплаты иди взыскания таможенных платежей, подлежат зачислению в федеральный бюджет Российской Федерации.

Hints

As you translate the sentences, turn to the text of the textbook or glossary to this Unit

 

 

Exercise 12. Make questions to go with the given answers. Ask your partner these questions.

Questions When…? Why…?     What…?   How many…?   What…?   Why…?

Answers The question of Customs valuation was in the forefront during the Tokyo Round of the GATT negotiations in Geneva between 1973 and 1979. The Harmonised System is now used all over the world for a variety of purposes (Customs tariffs, trade statistics, internal taxes, freight tariffs etc.) Tariff quotas, rules of origin and tariff preferences are among the measures which depend on the value of goods. The HS is the international product nomenclature used by more than 150 countries. The desire for greater freedom created favourable cinditions for the standardization of Customs tariffs. Misclassification of goods can result in delays in clearance, evasion of trade controls, distortion of trade data and loss of revenue.

Exercise 13. Summarize the information of Unit 2.2 to be ready to speak on:

- information of Customs tariff system;

- types of payments in foreign trade;

- methods of determining Customs value.

Use the following prompts as a plan:

Customs Tariffs System tariff definition; the HS nomenclature; general rules of interpretation; to declare products to Customs by means of HS codes; The General Agreement on Tariffs and Trade (GATT); prompt clearance of goods; a protective tariff; to protect the value of domestic merchandise; negotiated tariff rates; a way to protect a country’s economic system; import tariff; an additional cost on products; ad valorem tariffs; encourage a business to find domestic markets; to impose economic sanctions on other countries; the outright ban on importing products; to ensure consistency in international trade; to discourage trade with particular countries; as a punitive measure.

 

Types of Payment in Foreign Trade common payment methods; cash in advance; Letter of credit; documentary collection; open account or credit; countertrade or barter; hybrid methods; wire transfer; type of product; customer’s creditworthiness; competitors’ offering; suppliers’ demand; risk in international trade; payment by check; buyer’s bank; to maintain the balance of payment position.

 

Methods of Determining Customs Value Customs Tariff Law; to comply with international rules; the import transaction of the imported goods; the benefit of the seller; cost of transport; cost of insurance; commissions; the value of materials; export quota and licence costs; interest charges; rights of reproduction; management fees; VAT; trade statistics purposes; freight; insurance; charges and expenses; profit and general expenses.

 

Exercise 14. Class discussion.How effective do you think is the tariff system in Russia. Use as much language from these pages as possible. Find additional information on the Internet.

Exercise 15. Work in pairs. Write a possible ending to each sentence. Then share your ideas with another group.

1. The Harmonised System is a systematic classification….

2. A good nomenclature must be continuously updated, be kept in step with…

3. Customs tariffs are based on the nature of goods and…

4. An ad valorem tax is a tax based on.…

 

Exercise 16. Put the verb in brackets in the correct form.

1. If the tourist had filled in an entry declaration, he (have) difficulties at the Customs control yesterday.

2. If you (see) him then, he would have told you the news.

3. If he (not work) hard, he wouldn’t have made progress.

4. If the passenger hadn’t been too nervous then, his luggage (not be checked).

5. If she had come to the university yesterday, she (take) part in the conference.

6. If the passenger had known Customs rules then, he (not exceed) duty-free allowance.

7. If his documents (be signed), he could have gone on a business trip last week.

8. If we (arrive) at the airport in time, we would have caught our flight to London then.

9. If I had known you were in our city in summer, I (go) to visit you.

10. If he (not lose) his baggage claim receipt then, he would have got his baggage at once.

Exercise 17. Put the verb into the correct form.

1. George got to the station in time to catch his train. If he (miss) it, he (be) late for his interview.

2. It’s good that you reminded me about Ann’s birthday. I (forget) if you (not remind) me.

3. Unfortunately, I didn’t have my address book with me when I was in New York. If I (have) your address, I (send) you a nice postcard.

4. I took a taxi to the hotel but the traffic was very bad. It (be) quicker if I (walk).

5. I wasn’t tired last night. If I (be) tired, I (go) home earlier.

Exercise 18. Write a sentence with if – clauses for each situation.

1. The accident happened because the driver in front stopped so suddenly.

If the driver in front ___________.

2. I didn’t know that George had to get up early, so I didn’t wake him up.

If I ___________.

3. I was able to buy the car only because Jim lent me the money.

If I ___________.

4. Margaret wasn’t injured in the crash because she was wearing a seat belt.

If Margaret ___________.

5. I didn’t get a taxi because I didn’t have any money on me.

If I ___________.

Exercise 19. Translate into English. Use Past Conditionals.

1. Они опоздали бы на самолет вчера, если бы не смогли поймать такси.

2. Если бы вы задекларировали все свои вещи, вы бы не оставили их на хранение в таможне на такой длительный срок.

3. Если бы вы не потеряли свой паспорт, у вас не возникли бы осложнения при оформлении визы.

4. Если бы груз был доставлен вовремя, заказ был бы выполнен в соответствии с условиями контракта.

5. Если бы ваши транспортные документы были в полном порядке, товары были бы выгружены очень быстро.

6. Если бы он знал, что их рейс будет задержан, он бы приехал в аэропорт позже.

GLOSSARY

account	счёт (в банке; за товары, услуги), кредитный счёт, кредит; сумма
adjustment	регулирование, согласование, корректирование
arrangement	размещение, расположение; классификация
banker	банкир
bill	счет; банкнота, купюра; инвентарь, документ
cash	деньги, наличные деньги; наличный расчёт
confidence	доверие, вера; уверенность
creditor	кредитор
customer	клиент, заказчик, покупатель
debtor	дебитор, должник
delivery	поставка, доставка
demand	требование; экон. спрос
dispatch	отправка, отправление, отсылка (курьера, почты)
distortion	искажение, извращение (высказываний, фактов)
distributor	дистрибутор, распространитель, агент по продаже
draft	набросок, черновик, проект; чек, счет
fictitious	поддельный, фальшивый, фиктивный
immediately	незамедлительно, сразу же
negotiations	переговоры
obstacle	преграда, препятствие
order	заказ; приказ, распоряжение
prompt	срочный, быстрый, немедленный
purchase	покупка, закупка, приобретение
revenue	доход
transaction	дело, сделка, соглашение
transfer	перевод, перечисление (денежных сумм)
urgent	срочный, неотложный
valuation	оценка, определение ценности
value	ценность, стоимость
to be granted to / be intended to	быть предоставленным / предназначенным для чего-либо
to conform	согласовывать, приспосабливать, адаптировать
to constitute	составлять, основывать
to discount	Уменьшать (цену); предоставлять скидку; фин. дисконтировать, производить дисконт
to dismantle	снимать, лишать
to draw	зд. представлять
to inflate	взвинчивать, вздувать (цены); вызывать инфляцию
to issue	выпускать, издавать; пускать в обращение; выдавать
to outlaw	объявлять незаконным; запрещать