PART Ⅲ
MAIN BUSINESS CLAUSES
UNIT 9
Payment Terms
Payment plays an important role in the course of business. The final result of all business activities should recover the value of goods supplied or services rendered. If payment is not ensured everything will be meaningless.
Payment in foreign trade is much more complicated than that in domestic trade. The method of payment for each transaction is to be agreed upon between the two trading parties at the time of signing a contract. Terms of payment in foreign trade can be made through many channels. Letter of Credit（abbreviated to L/C）, collection and remittance are the three main kinds.
Letter of Credit（L/C）is the most commonly used method of payment in international trade. It is safe and reliable for both the seller and the buyer. It can assure the interests of both parties, and is favorable to the relevant parties, which can solve the problem of disbelief between the seller and the buyer of a transaction.
L/C is a conditional undertaking by a bank, issued in accordance with the instructions of the buyer, namely the applicant, addressed to or in favor of the beneficiary. The bank promises to pay, accept, or negotiate the beneficiary's draft up to a certain sum of money, in the stated currency, within the prescribed time limit, upon the presentation of the stipulated documents. In international trade, the applicant is the importer, the beneficiary is the exporter and the issuing bank is the bank at the importer's side. In an L/C transaction, banker's credit replaces the commercial credit. As long as the seller complies with all conditions stipulated in the L/C, such as submitting the documents required in the L/C within the time limit, the seller is safer in terms of being paid than in other modes of payment. In a word, the bank functions as the credit provider for both the exporter and the importer in an L/C business, where the relevant parties' interests are assured.
Collection is based on commercial credit which is a quite popular settlement method. Under collection, whether the seller can get paid or not fully depends on the credit of the buyer and the bank is without any obligations to pay. Payment can be made through banks under the terms of Documents against Payment（D/P）or Documents against Acceptance（D/A）. D/P requires actual payment against shipping documents. There are D/P at sight and D/P after sight. D/A requires delivery of documents against acceptance of the draft drawn by the exporter, it represents the highest risk for the exporter.
Remittance means that the importer remits the amount of money to the exporter through banks. It is trader's credit, and represents greater risk. Under remittance, fund burden is unbalanced for the two sides but it is simple, prompt and is of low cost. There are mainly three types of remittance: Mail Transfer（M/T）, Telegraphic Transfer（T/T）and remittance by banker's Demand Draft（D/D）.
As far as the exporter's benefit is concerned, L/C is better than D/P. D/P at sight is better than D/P after sight while D/P is better than D/A. Sound choice of the payment modes depends very much on the credit situation of the business partners involved.
Specimen Letters
Letter-9 (1) (Asking to Establish L/C as the Terms of Payment)
YANTAI XIANGYU IMPORT & EXPORT CORPORATION
71 Jianshe Road, Zhifu District, Yantai
Shandong Province, 264000
P.R.CHINA
August 18, 2015
DASTECH INTERNATIONAL, INC.
101 Cutter Mill Road, Great Neck
New York 11025
USA
Dear Mr. Kahen，
Many thanks for your order of 36 MT of apple but regret being unable to accept your terms of payment stated therein.
The day before yesterday we sent you by fax one sales contract stating clearly our general terms and conditions. You know clearly that our usual terms of payment are irrevocable Letter of Credit in our favor, available by draft at sight, reaching us one month ahead of shipment, remaining valid for negotiation in China till the 21st day after the prescribed time of shipment, and allowing transshipment and partial shipments.
We would like to inform you that most of our trading partners have already done business with us in accordance with the above-mentioned terms. We hope that you will agree with us in this concern and conclude the first deal between us as soon as possible.
We await your early confirmation.
Yours truly，
Wang Hong
Letter-9 (2) (The Buyer Asks Using Other Terms Except L/C)
TIVOLI PRODUCTS PLC.
Berstofsgade 48, Rotterdam, The Netherlands
20th July, 2015
UNIVERSAL TRADING CO., LTD.
Rm 1201-1216 Maying Plaza, 131
Dongfang Road, Shanghai, China
Dear Sirs，
Our previous purchase of Electrical Fans from you has been paid by confirmed, irrevocable L/C, which has indeed cost us a great deal. From the moment to open credit till the time our buyers pay us, the tie-up of our funds lasts about three months. Under the present circumstances, this question is particularly serious owing to the tightening of monetary policy by the government and unprecedentedly high bank interests.
If you would kindly make easier payment terms, we are sure that such an accommodation would be conductive to encouraging business between us. We propose either “T/T on arrival of goods” or “D/P at 30 days' sight”.
Your kindness in giving priority to the consideration of the above request and giving us an early favorable reply will be highly appreciated.
Yours sincerely，
Browning Kakaly
Letter-9 (3) (Request for D/A Payment)
DASTECH INTERNATIONAL, INC.
101 Cutter Mill Road, Great Neck
New York 11025, USA
Sept. 12th, 2015
Yantai Xiangyu Import & Export Corp.
Yantai
CHINA
Dear Sirs，
We have received your letter dated on Sept. 10th with thanks and are glad to notice that you have effected the last shipment in time but we are surprised that you still require us to make the payment against documents for the new order. After so many years of pleasant cooperation, we have the feeling that we are entitled to easier terms. In fact, many of our old business partners have adopted D/A 45 days as terms of payment with us. We would appreciate it very much if you could follow suit in this regard.
We are looking forward to your early and favorable reply.
Truly yours，
Edward Cohen
Import Manager
Letter-9 (4) (Decline Payment by D/A)
CHINA NATIONAL IMPORT & EXPORT CORPORATION
FUZHOU, CHINA
December 15, 2015
Messrs. Shell & Co.
London, E. C. 3
UK
Dear Sirs，
Payment for Order No. 234
Thanks a lot for your letter dated December 1, 2015. As already pointed out in our previous letters, we had made our arrangements with our manufacturers to make delivery as punctually as possible in future. You can rest assured that your interest will be well taken care of at all times.
As for the terms of payment, while we have every confidence in your integrity and ability, we wish to reiterate that our usual term of payment by irrevocable Letter of Credit remain unchanged in all ordinary cases. For the time being, therefore, we regret our inability to accept D/A terms in all transactions with our buyers abroad.
For future shipments, however, we shall do our best to effect the shipment within the time stipulated. If, by any chance, it is impossible for us to do so, we will effect shipment on a D/P basis in order to avoid putting you to so much trouble in the extension of Letter of Credit. We trust you will understand and accept our suggestions.
Thank you in advance.
Yours sincerely，
China National Import & Export Corp., Fuzhou
Hooke Lee
Letter-9 (5) (Payment Proposal for Future Business)
CHINA NATIONAL IMPORT & EXPORT CORPORATION
FUZHOU, CHINA
October 15, 2015
Messrs. Shell & Co.
London, E. C. 3
UK
Dear Sirs，
We are in receipt of your letter of October 8, contents of which have been duly noted.
With regard to Contracts No. DSG 267 and BSG 268, we agree to D/P payment terms for these contracts. However, we consider it advisable to make it clear that for further transactions D/P will only be accepted if the amount involved for each transaction is below US$ 2,000.00 or its equivalent in Renminbi at the conversion rate then prevailing. If the amount exceeds that figure, payment by Letter of Credit will be required.
We wish to reiterate that it is only in view of our long friendly business relations that we extend you this accommodation. It is our sincere hope that we can enlarge the business in these lines to our mutual benefit.
Your faithfully，
Zhang Xiaohua
Words, Phrases and Notes
1. therein: adv. thereof; wherein 在其中，在那里
2. general sales terms and conditions：一般销售条款
3. irrevocable Letter of Credit: one of the main kinds of L/C 不可撤销的信用证，与revocable Letter of Credit 相对应。Irrevocable L/C: means “The applicant cannot amend the terms of the L/C without the agreement of the relevant parties.” 不可撤销的信用证的含义：开证申请人未经有关当事人的同意，不能修改信用证的条款。
4. negotiation: n. mainly refers to the process in which the exporter presents the documents to the bank for the payment of the goods after the exporter has shipped the goods and got the documents ready under the L/C basis 议付，主要指在信用证业务中，出口商装运货物后，做好单据并提交银行要求付款的过程。
e.g. Adequate time should be left for the bank negotiation．应留有足够的时间到银行议付。
The negotiation of this credit is restricted to Bank of China．该信用证仅限在中国银行议付。
5. prescribed [pri'skraibd]: adj. stipulated; specified; stated 规定的
e.g. Any clauses prescribed in our contract should be abided by strictly．合同规定的所有条款都应严格遵守。
6. transshipment: n. change the shipment of the goods by another vessel 转运，转船
7. partial shipments: shipment by installment; part shipment 分批装运
8. trading partners: mercantile partnership; other business party 贸易伙伴，交易伙伴
9. in accordance with: as per; according to 与……一致
e.g. Every clause should be in accordance with what is prescribed．所有条款都应与规定的一致。
10. in this concern: in this regard; in this issue; at this point 在这方面
e.g. Your accommodation and cooperation in this concern is highly appreciated．非常感谢贵方在这方面的理解与合作。
11. open credit: issue/establish an L/C 开立信用证
e.g. You should open the credit in our favor 30 days before the time of shipment．你方应当在装运货物前30天开立以我方为受益人的信用证。
12. tie-up of fund: capital occupation 资金的占用
tie up: invest or commit（funds, etc.）and so make unavailable for other uses 占压
e.g. She has tied up her money in the stock market．她的钱已被套牢在股市里了。
His business is on the rocks because a large amount of stocks tied up his fund．他的生意不景气，因为大量的库存占用了他的资金。
13. tightening of monetary policy 紧缩银根
monetary policy 货币政策
14. unprecedentedly [ʌn'presidentidli]: adv. than ever before 空前地，史无前例地
15. bank interest: the income of the bank from the money deposit or withdrawal 银行利息
16. accommodation: n. make an exception in sb.'s favor 通融
e.g. Thank you very much for your accommodation to use payment in advance as the payment term for this business．非常感谢你方对这单业务的通融，使用预付货款作为支付方式。
17. be conductive [kən'dʌktiv] to: be helpful/favorable/beneficial 有利于，有益于，有助于
18. T/T: Telegraphic Transfer 电汇
19. D/P: documents against payment 付款交单
可分为D/P at sight（即期付款交单）和D/P after sight（远期付款交单）
20. give priority to: have priority; take precedence 优先，优先考虑
21. effect: v. cause to happen 实现，实施
effect shipment 装船
effect insurance 投保
n． 生效，效果
in effect: in fact 事实上
e.g. It is in effect the same thing．实际上是一回事。
take effect: come into force 生效
e.g. The contract will take effect on the first day of next month．合同将于下月第一天生效。
to the effect: with the general meaning 意思大概是
e.g. We have received their e-mail to the effect that shipment is to be held pending your instructions．我们已经收到了他们的邮件，意思大概是等候你方的装运指令。
to the same effect: with the same meaning 相同的意思
e.g. We sent a telegram and wrote a letter to the same effect．我们发了一封电报，并按相同意思又写了一封信。
22. be entitled to: be authorized to; give authority to 有权
e.g. You are entitled to draw a 60 days' draft．你有权开立60天汇票。
23. adopt: v. use; employ 采用
24. D/A: documents against acceptance 承兑交单
e.g. Our usual terms of payment is D/A．我们通常的付款方式为承兑交单。
25. follow suit: do the same 跟着做
26. in this regard: in this concern; in this issue 在这一点上
regard 的其他用法：
best regards 诚挚的问候，最美好的祝愿
regarding; as regards; with regard to; in regard to… 关于……
e.g. Regarding your order, we promise to effect shipment early next month．关于你方的订货，我们保证下月初装运。
27. make delivery: deliver the goods; send the goods 交货，送货
28. rest assured: put one's mind at ease 放心
e.g. Please rest assured that we will book the first available vessel to ship the goods on receiving your order．请放心，一收到订单我们就会订最早的船转运货物。
29. integrity [in'tegriti]: n. honesty 诚实，正直
30. reiterate [riː'itəreit]: v. restate; say sth. more than once 重申
e.g. We want to reiterate once again that quality of the goods is the most important．我们再次重申货物的质量是最重要的。
31. for the time being: at present; at the moment 暂时，眼前
e.g. At least for the time being, we can not lower the price any longer．至少，暂时我们不能再降价了。
32. by any chance: just in case 万一
33. equivalent: adj． 等价的
n. the same value 等值
34. conversion rate：汇率，折合率
Commonly Used Sentences
1. Our term of payment is by a confirmed irrevocable Letter of Credit by draft at sight．我们的支付方式是以保兑不可撤销的、凭即期汇票支付的信用证。
2. Since the total amount is so big and the world monetary market is rather unstable at the moment, we cannot accept any terms of payment other than the L/C．因为这次交易额巨大，而且目前国际金融市场很不稳定，所以我们除了接受信用证付款外，不能接受其他的付款方式。
3. We would suggest that for this particular order you let us have a D/D, on receipt of which we shall ship the goods on the first available steamer．此次订货，我们建议你们使用票汇。收到该批货款后，我们将把货物装上第一艘可订到的船。
4. In order to conclude the business, I hope you'll meet me half way. What about 50% by L/C and the balance by D/P？为了做成这笔生意，希望双方都做出让步。50%用信用证付款，另外的50%按付款交单怎么样？
5. For such a large amount, L/C is costly. Besides, it ties up money. All this adds to my cost．开这样大数额的信用证，不仅费用很高，而且也会积压资金。这些都会增加我们的成本。
6. I'd like to discuss the terms of payment with you. I wonder if you would accept D/P．我想和你方讨论一下支付方式。不知你方能否接受付款交单的方式？
7. Since we are old friends, I suppose D/P or D/A should be adopted this time as the mode of payment．咱们是老朋友了，我想这次我们可以采取D/P或者D/A作为付款方式。
8. Your request for D/P payment has been considered and we agree to grant you this facility．我们已经考虑过了你方付款交单的要求，并同意给予你们这个方便。
9. The buyer suggested D/A as the terms of payment, but the seller was unwilling to make any exception．买方建议用承兑交单作为付款方式，但卖方不愿破例。
10. For payment we require 100% value, irrevocable L/C in our favor with partial shipment allowed clause available by draft at sight．我们要求用不可撤销的、允许分批装运的、金额为全部货款并以我方为受益人的信用证，凭即期汇票支付。
Effective Writing Skills
To negotiate the terms of payment, traders usually adopt the following three steps to write a letter:
（1）Mention the contract No., order No. and even the main clauses which the two sides have agreed upon, etc.
（2）Suggest the terms of payment and give out the reasons. Remember that you should always express your accepted terms explicitly and unmistakably in business correspondence in order to avoid misunderstanding and subsequent trouble.
（3）Wish the other side to accept.
When you receive a letter mentioned above, you should also adopt three steps to reply to the letter:
（1）State that you have received the letter which you want to reply.
（2）Give the reply of agreeing or refusing the terms of payment, probably together with other terms if they are needed and try to present the reasons.
（3）State your good will and your wish.
Letters for Optional Study
LOS-9 (1) (Stating the Terms of Payment)
Dear Mr. Trooborg，
Thank you for your letter dated 18th March. We are pleased to get your reply.
Your price is competitive, and we now wish to place an initial order for 100 MT of the goods. We are now ready to open through Bank of China, Shanghai Branch, an irrevocable and without recourse Letter of Credit in favor of your company, for the amount of US$ 30,000（US Dollars Thirty Thousand only）available by draft in duplicate at 30 days after sight for full invoice value against shipment of 100 MT of the goods, accompanied by the following documents:
Invoice in triplicate.
Packing list in triplicate.
Full set of clean bills of lading made out to order and endorsed in blank, notifying the buyers and marking the freight payable at destination.
Evidence of shipment of the said merchandise to be effected on or before the end of June 2014 from Shanghai to San Francisco. Partial shipments are not permitted. Transshipments are not allowed.
Marine insurance to be effected by the buyers in San Francisco.
We hereby agree duly to accept the above mentioned draft on presentation, and pay the amount thereof at maturity, provided such draft shall be negotiated within three months from this date.
Yours faithfully，
UNIVERSAL TRADING CO., LTD.
Edward Mary
LOS-9 (2) (Proposing Payment on a D/P Basis)
Dear Sirs，
We have received your letter of March 1, 2015 and noted your kind intention of pushing the sale of our canned mushroom in your country.
Although we appreciate your trial order for 100 cartons of canned mushroom, we regret that we are unable to consider your request for payment under D/A terms, the reason being that we generally ask for payment by Letter of Credit.
In consideration of the friendly relations between us, we are, as an exceptional case, prepared to accept payment for your trial order on a D/P basis. In other words, we will draw on you a documentary draft at sight through our bank on a collection basis.
We hope that the above payment terms will be acceptable to you and look forward to hearing from you soon.
Truly yours，
Adam Smith
LOS-9 (3) (Proposing Payment on a D/A Basis)
Dear Sirs，
We are the largest department store in Kuwait and have recently received a number of enquiries for your stainless-steel cutlery. We think there are good prospects for the sale of this cutlery, but at present it is little known here and as we can not count on regular sales, we do not feel able to make purchases on our own account.
We are therefore writing to suggest that you send us a trial delivery for sale on D/A terms. We make the proposal, hoping to place firm orders when the market is established.
We believe our proposal offers good prospects and hope you will be willing to give it a trial. As to our standing, you may check it with our banker, the National Bank of Kuwait.
Yours faithfully，
Exercises
I. Answer the following questions.
1. What are the three main kinds of payment in international business?
2. What are the three types of remittance?
3. What are the main types of collection?
4. Why is L/C the most widely used payment term?
5. What is the meaning of an irrevocable L/C?
6. If you are an importer, which payment term would you choose first? And which is your second choice? Payment in advance, L/C or D/P?
II. Put the following English phrases into Chinese or Chinese phrases into English.
1. D/P
2. D/A
3. applicant
4. conform to
5. general sales terms and conditions
6．转船
7．以……为受益人
8．不可撤销的信用证
9．电汇
10．预付货款
III. Translate the following sentences from English into Chinese.
1. Our term of payment is by confirmed, irrevocable Letter of Credit in our favor, available by draft at sight, reaching us one month ahead of shipment, remaining valid for negotiation in China for another 21 days after the prescribed time of shipment, and allowing transshipment and partial shipments.
2. In view of the small quantity you have ordered, we are in a position to accept payment by D/P at sight for the value of the goods shipped.
3. In compliance with your request, we will make an exception to our rules and accept D/P at sight, but this should not be regarded as a precedent.
4. We regret having to inform you that although it is our desire to pave the way for a smooth development of business between us, we cannot accept payment by D/A.
5. We regret our inability to make any arrangement contrary to our usual practice, which is payment by confirmed, irrevocable Letter of Credit payable upon presentation of shipping documents and valid for at least 15 days beyond the promised date of shipment.
6. Your L/C No. 123 calls for shipment to be made in June/July while it is explicitly stipulated in the S/C No. 567 that the shipment is to be made in two equal lots in July/August. Please amend the L/C accordingly.
7. It has been found in your L/C that the amount is USD 1,000 short against the total value of the S/C. We hope you will immediately approach your bank to increase the L/C amount by USD 1,000.
IV. Translate the following sentences from Chinese into English.
1．我们希望您参照我们9月10日的信，信中我们请你方将装运期和议付期分别延展到10月31日和11月15日。然而，到现在为止，我们没有收到你方任何回信。请注意，除非我们在本月底前收到您的修改通知，否则我们将无法在10月31日前装运货物，并且只能将其再次延展一个月。
2．我们通常的付款方式是……
3．我们承诺30天承兑交单。请向我方开立金额为发票金额的汇票，并将下列单据附在所开汇票上。
4．建议您尽早开立相关信用证以便我方按时装运。
5．考虑到所涉及金额较少，我们准备破例接受即期付款交单作为您第一个试订单金额的付款方式。
6．请注意，付款是以保兑的、不可撤销的、允许分船和转船、见票即付的信用证支付。
7．我们通常的做法是凭即期付款交单而不是用信用证。因此，我们希望在这笔交易和今后的交易中，你们能接受付款交单方式。
8．请注意，信用证所规定的事项应该完全与合约条款一致。
V. Translate the following letter into English.
我公司已收到你方3月5日的来信，要求付款方式使用承兑交单（D/A）。你们也知道，我们通常的付款方式是不可撤销的即期信用证。因此，我们不可能接受你们的要求。但考虑到你我双方长期友好的业务关系，我们准备破例接受付款交单（D/P）。希望你们能够理解并接受。