Solution to complete international payment activities by documentary credit method at Joint Stock Commercial Bank for Foreign Trade of Vietnam, Vung Tau branch - 7

Conclusion of chapter 3.

Based on the business development orientation of Vietcombank Headquarters and Vietcombank Vung Tau, along with the development direction of Vietcombank Vung Tau's international payment activities , chapter 3 has proposed a number of recommendations to improve operations. International payment activities by documentary credit method include solutions for Vietcombank Vung Tau, Vietcombank Headquarters, recommendations to the State Bank of Vietnam and some proposals for import-export businesses in the area. on operations, policies, awareness and actions,... in order to ensure the interests of related businesses and bring maximum service revenue to Vietcombank Vung Tau.


In the growing trend of globalization of the economy and international trade, international payment has become a basic and indispensable service of commercial banks, as well as an important factor. determine the successful implementation of foreign trade contracts. International payment activities also play an important role in helping the country's economic development. A country cannot develop with an economic closure policy, relying only on domestic accumulation but must promote its comparative advantage and combine domestic strength with the outside world. In the current context when all countries prioritize foreign trade in their economic development strategies, the role of international payments is increasingly being affirmed.

Ba Ria - Vung Tau province is located in the southern key economic region, with many industrial parks and residential areas, with a high economic growth rate. Import-export turnover in the area accounts for a large proportion of the country's import-export turnover. In the context of fierce competition between domestic commercial banks, domestic banks and foreign bank branches, Vietcombank Vung Tau has found some solutions and new directions to attract customers. goods, expanding types of international payment activities. Vietcombank Vung Tau identifies the documentary credit payment method with outstanding advantages as a leading important business that needs to be developed.

By systematizing the basic theories of international payment and documentary credit method, the thesis analyzes and evaluates the current situation of international payment activities by documentary credit method at Vietcombank Vung Tau, at the same time find out some reasons leading to the remaining limitations.

Next, the thesis refers to the development orientation of payment activities

international accounting at Vietcombank Vung Tau. On the basis of academic research and practical work, the author proposes a number of solutions to improve international payment activities by documentary credit method as practical and effective as professional solutions. , policies, customer work... All to help the international payment by documentary credit method at Vietcombank Vung Tau develop more and more.


Maybe you are interested!

1. Nguyen Dang Don, editor (2006),  International payments , General Publishing House of Ho Chi Minh City. Ho Chi Minh.

2. Editor-in-Chief Nguyen Dang Don (2006),  Banking Credit (Commercial Banking) , Statistical Publishing House, Ho Chi Minh City.

Solution to complete international payment activities by documentary credit method at Joint Stock Commercial Bank for Foreign Trade of Vietnam, Vung Tau branch - 7

3. Tran Hoang Ngan (2003),  International Payment , Statistical Publishing House, HCMC.

4. Accounts Department of the Board of Directors (2012),  “Strategic Shareholders of Vietcombank: Success and Expectations”, Vietcombank Magazine , No. 09/2012, pp. 29 - 31.

5.  General Department of State Bank of Ba Ria Vung Tau Province , General Report 2009, 2010 and 2011

6.  Vietcombank Vung Tau International Office,  Report on international communication activities of Vietcombank Vung Tau in 2009, 2010 and 2011

7. Vietcombank Vung Tau , Business results report of Vietcombank Vung Tau in 2009, 2010 and 2011

Websites: hop-tac-ben-vung-toan-dien.html


1. Operation process of documentary credit method.

1.1 Parties to a documentary credit.

The parties to the documentary credit method include:

+ The person applying for the opening of L/C: usually the buyer or the importer.

+ Beneficiary: is the seller or exporter.

+ Opening bank or issuing bank of letter of credit: is the bank that serves the importer, provides credit to the importer and is the bank that is usually agreed, selected and approved by the importing and exporting parties. specified in the commercial contract. Without prior agreement, the importer has the right to choose a bank.

+ Advising bank: is the bank serving the exporter, notifying the exporter that the letter of credit has been opened. This bank is usually located in the exporting country and may be a branch or agent bank of the bank issuing the letter of credit.

In addition to the above parties, there may be other banks involved, including:

Confirming bank: is the responsible bank that will jointly open a letter of credit with the bank to guarantee the payment to the exporter in the event that the issuing bank fails to pay. The confirming bank can be the advising bank or another bank requested by the exporter, usually a large, reputable bank in the international financial markets.

+ Paying bank: can be the bank opening the letter of credit or it can be another bank designated by the opening bank on its behalf

pay or discount the bill of exchange to the exporter.

+ Negotiating bank: is the bank that checks the documents and is usually the bank that advises the L/C. In case the L/C provides for free negotiation, any bank can be a negotiable bank. However, there are also cases where the L/C is only negotiated at a certain bank.

The assigning bank, the reimbursement bank, the collecting bank, the accepting bank, the documenting bank, are all given specific responsibilities in the letter of credit.

1.2 Rights and obligations of banks in documentary credit.

(i) Rights and obligations of L/C issuing bank: Issuing bank is the bank that, at the request of the L/C applicant or on its own behalf, issues a letter of credit. They must be responsible for guiding customers to provide sufficient documents and procedures to issue L/C. Once the L/C has been opened, it is the responsibility of the issuing bank to deliver the L/C to the beneficiary through the advising bank nominated by the customer or one of its correspondent banks in the beneficiary's country. Upon receipt of the set of documents presented under the L/C sent by the beneficiary's bank or nominated bank, they must check the validity of the documents and make an appropriate decision within 5 working days. from the date of receipt of such document. On the other hand, under Article 7 of UCP600, the Issuing Bank must pay if the credit is valid:

* Pay now, pay later or accepted by the issuing bank;

* Instant payment by a designated bank and that nominated bank does not pay.

* Pay later by a designated bank and designated bank

no commitment to pay later or commitment to pay later but not to pay at maturity;

* Acceptance by a nominated bank and the nominated bank does not accept a draft drawn against them or accepts but fails to pay at maturity; or

* Negotiated by a nominated bank and that nominated bank does not negotiate payment.

The Issuing Bank is irrevocably bound for payment from the date of issue of the Letter of Credit. In return, they are entitled to collect the issuance fee, L/C amendment fee (if any), different documents fee and other related service fees such as swift fee, inspection fee....

(ii) Rights and obligations of confirming bank of L/C: Confirming bank is the bank that, upon request and authorized by the issuing bank, adds its confirmation to a letter of credit. use. It is up to the bank to agree to confirm the letter of credit or not. When a bank is authorized by an issuing bank and requests to confirm a letter of credit but it is not willing to do so, it must immediately notify the issuing bank that it can only advise letter of credit without confirmation. When a confirming bank agrees to confirm the L/C, it is irrevocably bound for payment or negotiation from the time of confirming its L/C. The confirming bank undertakes to pay another nominated bank when that bank has paid or negotiated for a conforming presentation and has delivered the documents to the confirming bank. Refund of the amount of a presentation in accordance with a credit payable by acceptance or post-payment at maturity, whether paid or purchased by the nominated bank before maturity or are not. The bank's commitment

reimbursement to the nominated bank is independent of the confirming bank's commitment to the beneficiary. Confirming bank is entitled to collect L/C confirmation fee.

(iii) Advising bank's rights and obligations: The advising bank advises the credit at the request of the issuing bank. This bank may be appointed by the seller or selected by the issuing bank itself. The advising bank, if not the confirming bank, advises the credit and any amendments thereto without any undertaking to pay or negotiate for payment. Advising banks understand themselves to be satisfied with the apparent truthfulness of the credit or amendment and that the notice must accurately reflect the terms and conditions of the credit or amendment. If a bank is required to advise a credit or amendment but decides not to do so, it must immediately notify the bank from which it received the credit, amendment or notice. In return for that,

1.3 Process of payment by documentary credit method.

Figure 1.5: Documentary credit payment process

(where the issuing bank is also the paying bank)

Issuing bank

Advising/Negotiating Bank




(11) (10) (2) (9) (6) (4)

Opener (NK House)

Beneficiary (Exporter)



(1) The import-export parties sign a commercial contract.

(2) The importer carries out procedures to request the issuing bank to open the L/C for the beneficiary exporter.

(3) The issuing bank opens the L/C at the request of the importer and asks the bank to notify the transfer to the exporter.

(4) The L/C advising bank transfers the L/C to the exporter.

(5) Based on the content of the L/C, the exporter delivers the goods to the importer.

(6) The exporter, after delivering the goods, prepares the relevant documents and sends them to the nominated bank (the negotiating bank) for payment.

(7) The negotiating bank transfers the documents to the L/C opening bank for consideration and payment.

(8) The bank opening the L/C after checking the documents, if it finds it suitable, then deduct the money and transfer it to the negotiating bank to credit the beneficiary. If it is not suitable, refuse to pay and notify the importer about the status of the documents.

(9) The negotiating bank credits and credits the exporter.

(10) If the documents are suitable, the bank opening the L/C will deduct the account and notify the importer and deliver the documents for the importer to receive the goods.

(11) In case the documents are not suitable, the importer considers accepting payment and the bank opening the L/C delivers the documents so that the importer can receive the goods.

Through the content and sequence of steps to carry out the documentary credit method as described, we see that the documentary credit method ensures the interests of both exporters and importers. The exporter is committed to pay by the bank, and the importer is reviewed and checked by the bank to ensure that the importer receives the full amount.

sufficiently, timely and accurately ordered goods when paying. In this method, the bank plays an active role in payment, not just as an intermediary like other payment methods, so it is most used in international payments. However, the documentary credit payment method can only be used in a commercial payment relationship, and in non-commercial payments, the money transfer method must still be used.

2. Advantages and disadvantages of documentary credit.

Documentary credit method is more and more widely used in international payments thanks to its many advantages over other payment methods. With this payment method, the interests of exporters and importers are guaranteed. Specifically:

2.1 For exporters.

2.1.1 Advantages.

- Get a sure payment commitment not from the buyer but from a bank. Therefore, the possibility of receiving money after delivery and presenting a perfect set of documents is almost certain.

- Minimizing possible risks for new customers without reputation and brand in the market.

- It is possible to ask another bank to confirm the letter of credit in case the seller does not have absolute confidence in the ability of the issuing bank.

- Get professional advice on payment by letter of credit from the bank.

2.1.2 Disadvantages.

- Requiring the seller to fulfill the terms and conditions of the letter of credit if it wants to be paid.

- Letter of credit service fees are usually higher than other payment methods

other math.

2.2 For importers.

2.2.1 Advantages.

It is also beneficial for importers to choose documentary credit:

- The importer is assured that payment will be made only when the seller fully meets the terms and conditions of the letter of credit.

- Importers can negotiate more favorable terms of trade using this method.

- Importers can prove their solvency by being issued L/C by a bank. This is very important when entering into a commercial contract with a new client.

- Get professional advice on payment by letter of credit.

2.2.2 Disadvantages.

- Letter of credit cannot guarantee to the buyer that the delivered goods have the actual quality and quantity as the signed contract because the parties only deal through documents. Therefore, it is important for buyers to review and evaluate the seller's reputation when making this payment method, to avoid signing too hastily because they think they have a good price with a ghost business, in addition to the registration number. The business has no people or offices. However, the laws of Western Europe, Northern Europe and Singapore severely punish such fraudulent acts.

- In order for the issuing bank to open a L/C for himself, the buyer must either make an deposit or have measures to secure the loan.

- Service fees associated with payment by letter of credit are generally higher than with other payment methods.

2.3 For banks.

Documentary credit service brings the bank huge service revenues such as L/C issuance fee, amendment fee, payment fee, notice fee, verification fee, discount interest, etc. high proportion of total annual service revenue of the bank.

Successfully performing this operation will enhance the bank's position and reputation in the international arena. The relationship between the bank and international organizations is constantly expanding, increasing the ability to handle and solve transactions at the bank.

Through documentary credit, the bank can also provide other services such as credit, money transfer, consulting, guarantee for customers,

... both help increase service revenue and facilitate the expansion of other market shares.

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Date published: 09/04/2022
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