Solution to complete international payment activities by documentary credit method at Joint Stock Commercial Bank for Foreign Trade of Vietnam, Vung Tau branch - 2

funding sources of international financial institutions, meeting capital needs in business.

Second, international payments contribute to improving the bank's competitiveness and at the same time helping the bank to integrate into the world community. International payment approaches advanced payment techniques on the basis of modern information technology development, ensuring safety and accuracy.

1.3 The role of international payments in the economy.

1.3.1 For foreign trade

Foreign trade plays an important role in the national economy, contributing to solving domestic needs for products, goods and services that cannot be met by domestic production, and at the same time providing products, goods and services that are in short supply and in demand in foreign countries. Foreign trade helps countries to supplement the limitations and shortcomings that the domestic economy still has difficulties or inefficiencies.

International payment is the final step to complete foreign trade relations. Import-export activities and foreign trade activities can only develop normally when the payment stage is done satisfactorily. International payments help maintain and promote stronger foreign trade.

Foreign trade expands and develops, promotes international cooperation in many fields, promotes international economic integration.

1.3.2 For banking and finance.

International payment is not only about transferring money between countries, but also related to the financial and banking system of each country. International payments are associated with credit-financial relations, so they involve capital flows from one country to another across the world.

Maybe you are interested!

in the world, helping to solve the payment capital needs for countries with unstable financial backgrounds.

International payment links the activities of the domestic banking system with foreign banks and international financial institutions, helping the banking system of developing countries to access the current payment system. At the same time, consolidating and expanding cooperation relations between banks of other countries, expanding direct and indirect investment activities.

Solution to complete international payment activities by documentary credit method at Joint Stock Commercial Bank for Foreign Trade of Vietnam, Vung Tau branch - 2

Thanks to the development of international payment methods, the connection between domestic and foreign banks has been expanded, forming a global connection of the banking system - this is an extremely important condition for promoting commercial banks. development of international economic relations, the formation of the international financial system.

In international payments, banks play the role of payment intermediaries, making the payment process safe, fast and convenient, and reducing cash costs. The bank with the entrustment of customers stands out to protect the interests of customers in payment transactions, and at the same time advises customers to reduce risks and increase customers' confidence in foreign transactions. . The payment process not only increases the bank's income through fees and commissions collected, but also increases the bank's capital because customers open accounts and make deposits. In addition, the bank can perform other operations such as discounting drafts, accepting drafts, financing credits, guaranteeing payments for customers,... Thus,

1.3.3 For social diplomacy.

International payments not only arise in economic, trade, finance and banking, but also directly contribute to the implementation of diplomatic relations.

society between countries. In the trend of international integration, all fields such as finance, banking, economy, trade, diplomacy, society... are no longer separate activities but have close relationships between them. together. Economic and commercial relations include diplomatic, political and social relations; On the contrary, socio-political relations contain economic and commercial relations. Good settlement of economic and trade relations is a good settlement of diplomatic, political and social relations behind.

The good settlement of international relations contributes to accelerating the development of the world economy, the more countries understand each other, draw closer together and develop together in peace, cooperation and friendliness. .

The above analysis shows that international payments are increasingly occupying an important position in the operation of commercial banks.

1.4 Common methods of international communication today

Currently, commercial banks implement many different payment methods such as money transfer, collection, documentary credit , bookkeeping, delivery of receipts... With different advantages and disadvantages of each payment method. payment, the choice of method of application must be stated in the purchase and sale contract by the buyer and seller.

1.4.1 Remittance method

Money transfer is a method of international communication in which a customer of a bank (the person requesting the transfer) requests his or her bank to transfer a certain amount of money to another person (the beneficiary) in a certain location, within a certain time by means of money transfer requested by the customer.

The current popular method of payment for money transfer is wire transfer (T/T - Telegraphic transfer), which is a form in which the payment order of the remittance bank is shown in the content of a telegram that

the bank sends the payment by fax, telex or through the SWIFT telecommunications network.

Figure 1.1: Money transfer payment process


Paying Bank

Remitting Bank




(3) (2)

Remitter (Remitter)

(1) After signing a foreign trade contract, the exporter delivers the goods according to the contract, prepares a set of goods documents and sends it to the importer to receive the goods.

(2) The importer, after receiving the goods, inspecting the goods and the goods documents, if he finds that the terms of the signed contract are consistent with the terms of the signed contract, makes an application to transfer the money to the bank serving him. .

(3) After checking the documents and money transfer conditions as prescribed, if it is found to be valid and capable of paying, the bank will deduct the account to transfer money and send a debt note to the importer.

(4) The remitter makes a money order, sends it through its correspondent bank or branch to the paying bank.

(5) The paying bank credits the beneficiary's account and sends a credit note to the beneficiary.

Accordingly , money transfer payment is a form of direct payment between the money transmitter and the money receiver. The bank only acts as an authorized payment intermediary to enjoy the commission and is not bound at all for both the buyer and the seller.

1.4.2 Method of collection

Collection is a method of payment in which the seller (exporter) after fulfilling his obligation to deliver goods or provide a service to a customer, entrusts his serving bank to present a set of documents. through a collection bank on behalf of the buyer (importer) for payment, acceptance of draft or other terms and conditions.

All collection requests must go through the bank and involve at least 03 partners, namely the bank, the seller and the buyer. All procedures are governed by Collection Rule URC 522.

Types of collection and professional processes:  Based on the content of documents sent to the collection bank, this payment method is divided into two types: Thanks to smooth collection.

Clean collections is a method of payment in which the collection documents include only financial documents (bills, promissory notes, checks, promissory notes or other payment instruments), and other payment documents. Commercial documents (transportation documents, invoices, insurance..) have been processed at another stage.

Diagram 1.2: Smooth collection process


(Remitting Bank)


(Collection Bank)



(1) (6) (4)


Trustee (Principal)

Payer (Drawee)

(0) Sign a contract of sale and delivery

(1) The exporter makes a collection request and sends it together with the financial documents to the bank serving it.

(2) The requesting bank shall make a collection order together with financial documents and send it to the collecting bank.

(3) The collection bank notifies the collection order to the importer.

(4) The importer makes a payment order and sends it to the collecting bank..

(5) The collecting bank transfers the collection value to the receiving bank



(6) The collecting bank transfers the collection value to the exporter By collecting documents.

Is a payment method, in which the documents sent for collection include:

(i) or commercial documents together with financial documents, or (ii) commercial documents only without accompanying financial documents. The collection bank only gives the set of documents to the importer after he meets the requirements of the collection order.

The exporter, after delivering the goods to the importer, issues a bill of exchange with all relevant documents, thanks to the banking system notifying the importer. Depending on the term of the bill of exchange, people are divided into immediate collection (D/P- Documents against payment) or deferred payment (D/A - Documents against acceptance). Collection Instructions The Bank delivers the documents prepared in accordance with the wishes of the exporter. The collection bank only delivers the set of documents when the importer has fully complied with the collection instructions.

Entrustment transactions are performed on the confidence of the exporter in the ability and willingness to pay of the importer. Banks

Participant does not assume this payment responsibility on behalf of the importer.

In the event that the importer fails to pay or accept the bill of exchange, the exporter bears the risk that his goods will be stored in the importing country, incurring additional costs of collection or sale to others.

Figure 1.3: Business process for collection with documents


(Remitting Bank)


(Collection Bank)



(2) (8) (6) (5) (4)

Delegate (Exporter)




(0) Signing a sale and purchase contract, in which the payment terms stipulate the application of the method of “Accounting for collection with documents”

(1) The exporter delivers the goods to the importer in accordance with the provisions of the contract


(2) The exporter makes a request for collection and sends it with a set of documents (including

commercial and financial documents, if any) to the bank serving you.

(3) The collecting bank establishes a collection order and sends the same set of payment documents to the collecting bank.

(4) The collecting bank notifies the collection order and the set of documents to the importer.

(5) The importer makes a payment order or sends the accepted draft to the collecting bank.

(6) The collection bank hands over the goods documents for the importer to pick up the goods.

(7) The collecting bank transfers the value for collection, or the accepted draft, to the collecting bank.

(8) The collection bank transfers the collection value, or accepted draft, to the exporter.

In this payment method, banks on both sides of the importing country and the exporter only participate as an intermediary to collect money on behalf of the seller, the bank does not commit, does not guarantee payment to the seller. as buyer.

When the bill of exchange is due, the holder will send it to collect money according to the Clear Collection procedure.

1.4.3 Bookkeeping method (Open account)

The bookkeeping method is a payment method in which the exporter, when exporting goods or services, debits the importer in a separate book, and the payment of these debts is made within a period of time. certain (monthly, quarterly).

By doing this, the exporter has made a trade credit. Normally, this method is only applied in payment between two units that have a regular relationship and trust each other.

1.4.4 Cash on delivery method.

The method of delivery of receipts is a payment method in which the importer, on the basis of a sales contract, requests the exporter's bank to open a trust account for payment.

Payment to the exporter when the exporter presents all documents as agreed upon.‌

1.4.5 Documentary Credits

Documentary credits are the most common payment method today, with a growing volume of payments, so the Paris International Chamber of Commerce (ICC) has issued Uniform Rules and Practices for Documentary Credits. (Uniform Customs and Practices for Documentary Credit) for the same application by the exporting and importing parties and the banks concerned. Documentary credit method is based on the main instrument, Letter of Credit.

1.5 Documentary credit method (TDCT)

1.5.1 Basis for the formation of credit institutions

For import-export businesses, buying or selling goods outside the national territory is very complicated because it is related to the transportation of goods, the import-export regulations of each country, the foreign exchange management regime, and prestige. of partner businesses. In order to facilitate the exchange of goods and to ensure the interests of all parties involved such as the buyer who wants to make sure they pay for the correct shipment of goods or services according to the pre-agreed requirements, The reseller wants to make sure that they will receive the money after providing the right goods or services to the partner, the documentary credit method was born and is widely used around the world.

Documentary credit requires the exporter to present to the bank documents evidencing the delivery or dispatch of the requested goods, for which, if the documents are valid, the seller will be paid. Documentary credit method brings safety for import and export payment. However, when there is a request to use a letter of credit, the parties involved must clearly state it in the sales contract.

1.5.2 Concepts, characteristics and roles of mathematical formulas Concept of documentary credit method

Documentary credit method (also known as payment by letter of credit) is an arrangement in which a bank (the opening bank) at the request of a customer (the applicant for the letter of credit). undertake or authorize another bank to pay a certain amount to the beneficiary of a letter of credit or to accept to pay a draft drawn by him to the extent such amount, when the beneficiary has made fulfill the conditions specified in the letter of credit by presenting to the bank a set of payment documents in accordance with the terms and conditions specified in the letter of credit.

Letter of Credit (L/C)  is a document (email or letter) in which the bank opening the L/C undertakes to pay the exporter if they present a set of documents in accordance with the contents of the letter of credit. L/C capacity.

Thus letter of credit is a very important means of documentary credit payment method. If the letter of credit cannot be opened, this method of payment cannot be established and the exporter will not be able to deliver the goods to the importer.

In addition, the importing party also uses the letter of credit to concretize, detail or to add more fully to the terms of the sale and purchase contract and also correct and correct loopholes in the contract. foreign trade contracts. Features of documentary credit method

Letter of Credit (L/C) is a document that governs the entire payment process by documentary credit, indicating the participating banks, delivery time, shipment, validity period, and time. payment time,..

In a documentary credit, all parties involved transact only by documents, not by goods, services and/or other affairs to which such documents may relate.

A letter of credit is a separate transaction from the commercial contract entered into between the buyer and the seller, although this is the basis for the letter of credit. The Bank is not involved in or bound by such contracts, even if there is any reference to such contracts in the credit. Therefore, L/C becomes a legal basis for payment and settlement of payment disputes if any. This is the most important feature of L/C. Therefore, when opening a L/C, the terms in the L/C must be strictly regulated by the importer, both consistent with the signed commercial contract, while ensuring maximum benefits for themselves. On the contrary, the exporter (the beneficiary of L/C) when receiving the L/C sent by the advising bank, should carefully check the conditions required by the partner, The role of documentary credit method

Under the documentary credit method, the interests of both parties are guaranteed, if the seller delivers the goods and presents the documents in accordance with the provisions of the letter of credit, the money will definitely be received, the buyer will pay the money. and receive the goods as agreed in the contract.

Commitment to pay is not from the buyer but from the bank, so it is quite certain. The seller does not have to pay much attention to the solvency of that credit institution. If the credit institution's reputation is still not guaranteed, the seller can request another bank to confirm the letter of credit, increasing the level of security in payment.

1.5.3 Legal basis of documentary credit payments.

Documentary credit transactions require a legal basis for banks to perform. The document that fully demonstrates international practices and practices and is accepted and applied by commercial banks around the world is the Uniform Code of Practice for Documentary Credits (UCP) prepared by the International Chamber of Commerce (ICC). , is widely used worldwide.

UCP500 and UCP600 (Uniform customs and practice for documentary credits): After seven revisions to fully implement the rules, on October 25, 2006 the ICC announced UCP600 effective July 1, 2007. UCP is an international document that is not binding on international buyers and sellers. Therefore, if UCP is to be applied, it must be referenced in your letter of credit. Up to now, more than 160 countries around the world have recognized and declared the application of UCP. It should be noted that the later versions do not negate the previous versions, so they have practical value in international payments.

eUCP (the Supplement to the Uniform Customs and Practice for Documentary Credits for electronic presentation) published January 2002 applies to presentation of electronic documents under L/C. eUCP has 12 terms.

ISBP 681 (The International Standard Banking Practices for Examination of Documents under Documentary Credits - Banking practice according to international standards for examining documents under L/C, issued by ICC in April 2007 and effective at the same time. score with UCP600.

INCOTERMS (International commercial terms): International commercial terms, abbreviated with three letters, represent transactional practices between businesses in contracts for the sale of goods. Incoterms describe the obligations, costs and risks involved in the delivery of goods from seller to buyer. The applicable Incoterms are INCOTERMS 2000 and INCOTERMS 2010.

1.5.4 Concept, content and classification of letters of credit‌ Concept of Letter of Credit.

Letter of Credit (L/C)  is a document (email or letter) in which the bank opening the L/C undertakes to pay the exporter if they present a set of documents in accordance with the contents of the letter of credit. L/C capacity. Contents of letter of credit.

A letter of credit usually contains the following basic contents:

a) L/C number, location and opening date:

+ L/C number: All L/Cs must have its own number. The effect of the number is to exchange letters and telegrams related to the implementation of L/C. The number of the L/C is also used to write in the relevant documents in the payment documents of the L/C, especially as a reference when making a bill of exchange.

+ Location of L/C opening: The place where the bank opening the L/C commits to pay the beneficiary. This location involves referencing applicable conflict resolution laws, if any.

+ L/C opening date: is the effective date of the commitment of the bank opening the L/C to the beneficiary. The L/C opening date also has the same meaning as the date the L/C opening bank officially accepts the importer's L/C application, is the starting date of the L/C's validity period and is also the basis of the L/C opening date. Just let the exporter check that the importer has opened the L/C on time as in the contract.

b) Type of letter of credit:

Each type of L/C has different properties and contents, and the rights and obligations of the people involved in the letter of credit are also very different. Therefore, when opening a letter of credit, the person in need needs to specify specifically which type of letter of credit to open.

c) Names and addresses of the persons involved:

Persons involved in documentary credit including L/C requestor, L/C beneficiary, L/C opening bank, L/C advising bank should be clearly indicated with name and address. only in the letter of credit.

d) Amount of letter of credit:

The amount of the letter of credit is a very important content that is strictly regulated, shown by the need to write in numbers, and in words consistent with each other. The currency name should be clear, specific, the amount should not be written as an absolute number that can make it difficult to deliver and receive money from the seller. The best way is to write a reasonable amount based on the way the quantity is recorded, if the quantity can be written correctly, the amount is correct, if not, the tolerance is allowed. According to clause 30 UCP600, the words “approximately”, “approximately”, “approximately” or equivalent words are understood to be the allowable tolerance of +/- 10%.

e) Validity period of L/C:

Validity period is the period within which the bank opening the L/C undertakes to pay the exporter if the exporter presents a set of payment documents within that period and in accordance with the terms specified in the L/C. C. Validity period of L/C starts from the date of L/C opening to the expiry date of L/C. If the validity period of the L/C is too long, the importer will be stuck with capital.

Exporters benefit and have more time for preparation and presentation of payment documents. On the contrary, the L/C's validity period is too short, which avoids capital stagnation for the importer, but makes it difficult for the exporter to prepare and present payment documents because the time is too tight. Therefore, it is necessary to determine a reasonable term of validity of the L/C, both to avoid stagnation of capital for the importer and not to cause difficulties in presenting the payment documents of the exporter. This determination needs to satisfy the following criteria:

following switch:

Firstly, the delivery date must be within the validity period of the L/C and must not coincide with the expiry date of the L/C. In practice, the "L/C stipulating delivery date coincides with the L/C's expiry date" still occurs and the exporter can still satisfy this requirement.

Second, the date of opening the L/C must be a reasonable time before the delivery date, and must not coincide with the delivery date. This reasonable time is calculated as a minimum of the number of days required to notify the L/C, the number of days the L/C is kept at the advising bank, the number of days to prepare the goods for delivery to the importer if the item complicated production, must be transported from afar to the port and must be processed before delivery. If the delivery is in the wet season, the number of days to prepare for delivery must be many, whereas if it is an industrial product, it does not require a large number of preparation days. According to UCP600, if the L/C does not prohibit delivery before the date of opening the L/C, the banks concerned must accept the documents (including the B/L as the basis for determining the delivery date) issued before the date of opening the L/C. /C and in fact, it still happens, although not very often.

In addition, the effective expiration date of the L/C must be a reasonable time after the date of shipment.

f) Payment term of L/C:

The payment term is concerned with paying now or paying later, depending on the contract. The payment term may be within the validity period of the letter of credit (if payment is made immediately) or it may be outside the validity period of the letter of credit (if payment is delayed). In this case, it must be noted that a time draft must be presented for acceptance within the validity of the credit.

g) Delivery term:

The delivery period stated in the letter of credit is based on the contract

Date published: 09/04/2022
Trang chủ Tài liệu miễn phí