How to avoid the risk of foreign trade settlement

Gong Yu and Qian Xuejun today, if you visit the mainland's "export-oriented enterprises", people talk about the most topics, no more than foreign trade business in the "foreign exchange assessment" and risk issues. Many business leaders said "foreign trade settlement risk", most worried, fearful that once caught in the "quagmire", may lead to an unmanageable situation. Here, we are on foreign trade practice in the common "foreign exchange operations and risk avoidance" and other issues for some discussion. As we all know, the current rapid development of international trade, the number, variety, amount, etc. are constantly expanding, the traditional "silver and goods" settlement method has long been unable to adapt to the needs of modern international trade, most of the foreign trade settlement is through the bank, through the transfer of bills, documents and other clearing tools and transmission, to settle international claims, debts, thus realizing the finalization of the sale. Thus realizing the final completion of the sale. At present, there are mainly the following international trade settlement methods, namely, remittance, letter of credit, collection, letter of guarantee and factoring. So, what kind of international settlement is the most favorable for the transaction? This mainly depends on the content of international economic and trade activities, financing needs, the degree of risk protection and the scope of banking services and other factors. Here only on a variety of settlement methods for some operational issues to analyze, for customers according to their own requirements tailored to suit. Remittance settlement based on commercial credit Remittance is an old settlement method, which is still widely used in foreign trade activities today. According to its nature, "remittance settlement" is divided into "pre-T/T" (PAYMENTINADVANCE) and "post-T/T" ("DEFFERREDPAYYY"). DEFFERREDPAYMENT) two kinds. The so-called "before T / T", that is, "prepaid", that is, the seller in the shipment before the payment has been received, and then, according to the time specified in the contract, the goods will be sent to the buyer of a settlement method. "After T / T", also known as "cash on delivery", that is, after the signing of the contract, the seller first shipment, the buyer receives the goods, and then pay the settlement. Obviously, "payment in advance" is a more favorable settlement for exporters varieties. Because the exporter in the shipment before the goods have received the payment, in fact, is equal to get the importer of interest-free loans, the degree of risk of its exports have been controlled. In other words, the exporter has accepted the importer's "purchase guarantee", thus taking the initiative to export. It can also be said that the "prepayment" is a more unfavorable settlement varieties of importers, because (1) the goods are not in the hands of the payment, is equal to the other side of the interest-free loan, resulting in interest losses; (2) the importer actually bear the risk of trade, that is, the exporter may be in the receipt of payment, not on time, according to the amount, according to the quality of the shipment, and make themselves in a passive position. Make themselves in a passive position. The "after T / T", that is, "cash on delivery", is just the opposite, is a favorable importers, but not favorable to the exporter's settlement. Therefore, the "remittance" transaction is actually completely in the buyer and seller on the basis of mutual trust, and therefore, known as "commercial credit". At present, in the import and export trade, there is also a "domestic trade" settlement method (in Yiwu, Zhejiang Province, Keqiao and other places most widely used), that is, the buyer and seller in the signing of the contract, the buyer pays 50% to 60% of the deposit. Factory production first, until the goods are shipped, and then to deliver the bill of lading as evidence (i.e., symbolic "delivery"), pay the remaining 40% to 50% of the purchase price. Generally speaking, this trade settlement, the amount of "deposit" to pay more or less, depending on the degree of trust between the buyer and seller, there is considerable room for expansion. If the two sides are "old customers", the other side of the deposit can be paid between 30% to 40%. Many exporters even allow importers in the receipt and inspection of goods, and then pay the rest of the purchase price. In general, "batch delivery, batch collection", can reduce the degree of risk of foreign exchange settlement. In practice, it is a mode of settlement that can be considered "risk aversion". Banks are not responsible for the collection settlement mode of international trade in the "collection settlement" mode program is relatively simple, this "simple" is relative to the letter of credit settlement mode, but the risk is self-evident. "Documentary collection" (DOCUMENTARYCOLLECTION) of the specific practice, the exporter to open a bill of exchange, together with a set of freight documents to the export bank, commissioned by the bank through its agents abroad, to the importer to collect the payment of a settlement method. Collections can be based on its nature, divided into "D / P spot" and "D / A forward" two. "D / P on demand" is the exporting country's collection bank receives the documents, after reviewing the correct, sent to the importing country's collection bank, the collection bank to notify the importer to come to pay the redemption of the single. Therefore, "D / P spot" procedures are simpler, the risk is relatively small. "D / A forward" is the specific practice, the collecting bank will be sent to the other bank, the importer to the bank to get a single. However, this time the importer does not need to pay, just to the collection bank to sign a "collection acceptance", to ensure that the due date of payment, on behalf of the goods can be taken away from the documents. Thus, the risk of "D / A forward" is also conceivable. At this time, if the importer does not come to pay the bill, or delay payment, or less payment, or even no payment, the exporter can not do anything about it. Because of the collection settlement mode, the importer whether to pay, based entirely on the credibility of the importer to complete the payment behavior. This is what is usually called "commercial credit", from the theory, the bank is not responsible. The advantages of international trade "collection and settlement" are obvious, fast and simple procedures. In documentary collection, the exporter controls the goods with documents that control the "right to goods". Collecting bank to deliver on behalf of the "goods" on behalf of the "delivery" of documents. The bank's "delivery", and the importer's "payment" or "acceptance" as a prerequisite. However, the "collection and settlement" for the exporter, it is more unfavorable. Because the seller can collect the payment on time, depends entirely on the credit of the importer. If the importer due to changes in business conditions, to the time of refusal to "non-payment" or refused to "non-acceptance", the buyer may be late to collect the payment of the goods, the danger of not receiving the payment of the goods. If this happens, the collecting bank and the collecting bank, this is not bear any responsibility, the so-called "commercial credit" risk is here. Especially when the use of "air delivery" mode, "collection settlement" should be more cautious. However, in a sense, choose to do "D / P spot" than choose to do "D / A forward" safer. Because the "D / P spot", the general bank must wait for the buyer to pay the money, before handing over the goods on behalf of the "documents", the seller will not fall into the "property and goods" situation. Theoretically, as long as the buyer has not paid, shipping documents are still in the bank, then, the right to the goods still belongs to the seller, the seller can still resell the goods to others or transported back. Comparatively speaking, "D / A forward" risk is relatively large, because, the importer may not come to the acceptance, or signed the acceptance, take the documents, after the goods, do not come to the due date of payment, or less payment, the bank and the seller is helpless. Therefore, in the foreign trade settlement, if the use of "remittance" or "collection" settlement, and at the same time choose "renewal of export credit insurance", is not a risk avoidance of the best Choice. To bank credit as a guarantee of the letter of credit settlement because of the "remittance" and "collection" settlement mode there are many shortcomings, in order to solve the problem of mutual distrust between buyers and sellers, "letter of credit "Settlement mode also came into being. "Letter of credit settlement" is the current international trade, the most widely used form of settlement. Its main feature is that the original importer to fulfill the "bill payment" responsibility, transferred to the bank to undertake. That is, usually referred to as "bank credit instead of commercial credit". Because, bank credit is more reliable, more robust, but also, the bank's capital is more powerful, so that both buyers and sellers have increased the sense of security, thus greatly promoting the development of international trade. Because of the issuing bank made "payment commitment", import and export parties in dealing with their relevant banks, each link may get the bank's capital financing. For example, the exporter in the receipt of letters of credit, can do "packaged loans"; payment, negotiation, can do "charge" and so on. This capital financing, to a certain extent, to ease the businessman's capital turnover difficulties, in favor of their foreign trade expansion. Some importing countries have "foreign exchange control", the country's import and export business, all have to report to the authorities for approval. However, if they open a letter of credit, it also means that the trade has been approved by the foreign exchange authorities. However, any kind of settlement can not be perfect, "letter of credit settlement" is no exception, its main weaknesses are: (1) due to the letter of credit settlement is a pure "documents buy and sell" behavior, as long as the "documents match", the issuer of the letter of credit. Documents match", the issuing bank must pay, the importer must also "pay for single". As a result, the importer may get with the letter of credit documents, but not necessarily get with the documents fully consistent with the terms of the goods; (2) letter of credit business, there may be fraud. Unscrupulous businessmen take advantage of the above characteristics of the letter of credit, illegal activities. For example, to provide no goods documents, counterfeit documents, etc.; (3) the exporter in the performance of the terms of the letter of credit, due to various reasons, resulting in "documents do not match", resulting in the issuer's refusal to pay; (4) the issuer and the importer may be unjustified refusal to pay or the inability to pay; (5) the issuer of the letter of credit in the opening, usually to the importer to collect a certain number of Deposit, due to the letter of credit settlement cycle is long, the funds are occupied by the bank; (6) letter of credit procedures are too complicated, the cost is too high; (7) the issuing bank may be listed in the letter of credit in some of the "soft terms", so that the letter of credit has lost its "guarantee payment" function And so on. Although the letter of credit settlement has the above shortcomings, but, due to the letter of credit settlement, "the bank has assumed the first payment responsibility", in fact, has become the modern international settlement of the most influential, the most widely used way to settle foreign exchange. (Author's unit: Bank of China Zhejiang Branch)