内容提要

    国际结算是商业银行主要的中间业务之一。本书对商业银行国际结算业务中涉及的票据、国际结算和融资的方法以及单据等三大内容进行了全面系统的论述。本书用英文撰写，涉及大量的国际银行业务术语，不仅是一本有实用价值的国际结算教材，而且是一本国际银行业务英语阅读教材。本书可以作为高校金融和国际贸易专业的双语教学教材，也可供从事银行国际结算业务工作的人员阅读。

Acknowledgements

This book reflects my 19 years of teaching to undergraduate students in the Department of Finance and Insurance at Nanjing University. Not only has it benefited from the students feedback but also from lots of literature and materials I have referred to. Thus, I should thank all the authors who have been listed or missed in the references.
I am most grateful to Liu Guoqiang who was the manager of the International Department of the Bank of Communications in Nanjing and offered me a chance of getting to know what the practice was in 1996. I am grateful to Johan Bergamin, a consultant in trade and commodity finance with the ING Bank Barings Amsterdam back in 1999 who provided me with some valuable resources for my teaching and the book. I would like to thank my former graduate student Liu Kun who currently works in the Jiangsu  Branch of the ExportImport  Bank of China and has been helping me with materials and even added a few segments in Chapter 10. I would also like to thank my former graduate students Zhang Xiaochen and Jiang Yalin for their assistance in collecting some materials and Liu Kun  for proofreading the whole book.
I would like to thank my two former classmates at Nanjing University, Wu Ping and Jia Yun, for their time and efforts in proofreading the book and preface for grammatical fixes which make the book read smoothly. I should also thank Ms. Zhou Ju, the editor from the Southeast University Press for her hard working in proofreading the book.
My special thanks are extended to Professor Pei Ping, Associate Dean of the School of Business at Nanjing University, for writing a preface for the book. Preface●Preface
As an important component of foreignrelated economic activities, international settlement possesses the characteristics of being theoretical and operational. In institutes of higher learning, international settlement has been one of the important compulsory courses on economics and business administration curriculum, especially in finance and trade specialties. Thus, selecting or writing a good textbook is of great importance to classroom teaching and the construction of finance and trade specialties. Especially since China entered the World Trade Organization (WTO), its foreignrelated economic activities have increased both in volume and complexity, the contents of international settlement have been constantly enriched and renewed, and the specific operation procedures and expressions have tended to be internationally standardized. Therefore, there is a great demand for talents who not only have a good command of knowledge in international settlement but  also are proficient in conducting international settlement operations in English. Moreover, the Ministry of Education encourages some specialties in higher learning institutes, such as finance specialty, to practice bilingual teaching in some courses. The publication of this English edition of International Settlement and  Finance not only marks a new stage of bilingual teaching and learning in the Department of Finance at Nanjing University, but  also helps promote bilingual teaching and learning in economics and business administration specialties in China, and hence contributes to the training of internationalized professional talents.
Some claim that English textbooks for specialty courses should be directly imported from the United States or other developed countries. It may not be a bad option, but I do not think that it is the best one available. Speaking as someone who once studied and obtained a degree in Europe, was a Fulbright professor and visiting professor in the United States and other developed countries for some time, has engaged in teaching and researching in finance for 20 years, and translated some American textbooks in finance, I am of the opinion that the high costs of importing English textbooks from developed countries matter, but only secondarily. What matters most is that the contents of such books are to some extent not applicable to the practical conditions in China and that some of the contents are not even international but with “local colors” and “local accents”. Of course, writing textbooks solely based on Chinese conditions and in Chinese does little good to the training of internationalized professional talents. The best option is for Chinese professors who are good at English, who have mastered relevant theories and knowledge and possess international perspectives to write English edition textbooks in relative specialties. The reason is simple: they understand international customs and practices as well as domestic conditions; they know what to convey to students and how, and can express their thoughts accurately in English.
Associate Professor Zhao Weis academic records are highly impressive. She had an M.A. in English Language and Literature from Nanjing University, studied economics and business administration under American professors at Nanjing University—the Johns Hopkins University Center for Chinese and American Studies, studied as a visiting scholar in the Joint Educational Program in Economics in the Faculty of Economics and Business Administration at Tilburg University of the Netherlands, and obtained a Ph.D. in management at Nanjing University. She has engaged in teaching Spoken English, Financial English and International Settlement for 19 years. I have sat in on her classes conducted in English, and personally witnessed the positive feedback from students on her teaching. I have also heard her interpreting when she accompanied the two Nobel Laureates Lawrence Klein and Michael Spence on their visit to the School of Business at Nanjing University. I have read some of her academic papers published in core journals such as the World Economy. Her academic levels in finance and English, especially her exactness in and devotion to work, are appraised highly by both faculty and students. It should be said that she is bestsuited to write an English edition of International Settlement and Finance, as evidenced by the enormous success enjoyed by the former English edition in 2003.The textbook results from years of diligent English study and bilingual teaching and research. The characteristics of this textbook can be summarized as follows: (1)  The basic framework and main contents are internationally acceptable and at the same time reflect Chinese theories and practices in international settlement; (2)  The textbook lists many domestically and internationally seen documents used in international settlement and elaborates on major operation procedures; (3) The important concepts and terms are explained in Chinese with a glossary of terms; (4)  The English used in this textbook is a “working language” acceptable to both Chinese and foreigners in conducting international settlement operations, and the language is relatively smooth.
I hope that the new version textbook will receive high ratings from readers upon publication and that Associate Professor Zhao Wei would be given an opportunity to perfect this book in her future teaching and researching.

Pei Ping
At An Zhong Building
Nanjing University
July 2014Contents

●Contents

Acknowledgements1
Preface1
1Introduction1
1.1International settlement vs. trade finance1
1.2The evolution of international settlement3
From cash settlement to noncash settlement3
From direct payment to indirect payment4
From simple price terms to complex price terms5
From paper documents to electronic documents7
1.3Electronic communication and payment systems10
SWIFT10
BOLERO12
CHIPS13
CHAPS & Faster Payment14
Fedwire Funds Service, Fedwire Securities Service and National Settlement Services15
TARGET and TARGET217
CNAPS18
1.4 Players, roles and risks in international trade payments
19
Exporter19
Importer20
Banks21
1.5Types of payment techniques21
Consignment22
Open account22
Documentary collections23
Letters  of credit23
Guarantees/standby letters of credit23
Payment in advance23
Factoring26
Forfaiting26
1.6Related laws, customs and practice27
Laws on negotiable instruments27
International customs and practice for collections, documentary letters of credit, standby letters of credit, guarantees and international factoring27
International conventions on bills of lading28
1.7Correspondent bank30
Correspondent bank agreement30
Control documents30
2Negotiable instruments39
2.1Characteristics and functions of negotiable instruments
40
Negotiability40
Unconditional promise or order to pay40
Requisite in form41
Noncausative nature41
Functions of negotiable instruments43
2.2Negotiable instrument laws43
2.3Parties to a negotiable instrument45
Drawer45
Drawee46
Payee46
Indorser47
Acceptor48
Guarantor48
Holder49
The relationship of the parties to negotiable instruments
51
2.4Bills of Exchange53
Definition53
Essential items required in a bill of exchange55
2.5Acts related to a bill of exchange62
Issue62
Indorsement63
Presentment or presentation67
Acceptance68
Payment70
Dishonour72
Protest73
Notice of Dishonour76
Right of recourse77
Guarantee or aval78
Acceptance for honour supra protest81
Payment for honour supra protest83
Classification of bills of exchange84
2.6Promissory Notes85
Definition85
Essential items of a promissory note86
Joint notes vs. joint and several notes87
Types of promissory notes89
Differences between bills of exchange and promissory notes
90
2.7Cheques92
Definition92
Essential items of a cheque93
Types of cheques93
Differences between cheques and bills of exchange99
3Remittance100
3.1Definition100
3.2Parties to a remittance101
Remitter101
Remitting bank101
Paying bank102
Payee or beneficiary102
3.3Types of remittance102
Mail transfer102
Telegraphic transfer103
Demand draft104
3.4Reimbursement of remittance cover105
3.5The cancellation of remittance106
3.6Application of remittance in international trade107
Cash in advance107
Open account108
3.7Trade finance under remittance109
Financing under T/T109
Credit insurance and bank financing110
3.8Other methods of remittance110
Credit card111
PapPal112
Western Union and MoneyGram113
Cheque payment114
4Collection115
4.1Definition115
4.2Basic parties to a collection117
Principal117
Remitting bank118
Collecting bank118
Presenting bank119
Drawee120
Collection instruction121
The relationship between the basic parties122
4.3Types of collection123
Clean collection123
Documentary collection123
Procedures of a documentary collection transaction
124
4.4Terms of releasing documents125
Documents against payment (D/P)125
Documents against acceptance (D/A)126
4.5Liabilities and disclaimers of banks under a collection
127
Banks have no obligation to handle a collection127
Disclaimer for acts of an instructed party128
Disclaimer on documents received128
Disclaimer on effectiveness of documents128
Disclaimer on delays, loss in transit and translation
129
Banks do not deal with the goods, services or other acts
129
4.6Financing provided by banks under a collection129
Financing provided by the remitting bank to the exporter
130
Financing provided by the collecting bank to the importer
132
4.7Problems frequently arising from a collection134
The problems of using D/P at a fixed period after sight
134
Problems related to insurance136
Negative events that may occur to the exporter137
5Letters of credit139
5.1Definition139
5.2Characteristics of a documentary credit141
A written undertaking on the part of the issuing bank
141
Independent of the sales contract142
Exclusively dealing with documents142
5.3Parties to a letter of credit143
Applicant143
Issuing bank145
Beneficiary146
Advising bank147
Confirming bank148
Paying bank/accepting bank150
Negotiating bank150
Claiming bank151
Reimbursing bank152
5.4Stages to a documentary credit operation153
Stage 1： The importer applies to its bank for a documentary credit153
Stage 2： The issuing bank reviews the importers application for credit and issues a documentary credit154
Stage 3： The advising bank advises the credit to the seller
155
Stage 4： The exporter examines the credit， prepares for the required documents and submits the documents to the nominated bank156
Stage 5： The issuing bank examines the documents and pays or reimburses the negotiating bank158
Stage 6： The importer redeems the documents from the issuing bank and picks up the goods against the bills of lading from the shipping company159
5.5Contents of a documentary credit159
Items on the credit itself159
Items on draft160
Items on goods, shipping documents and transport160
Other items160
5.6The examination of a documentary credit163
The examination by the advising bank163
The examination by the exporter171
5.7Types of credit175
Irrevocable credit175
Confirmed irrevocable credit175
Sight payment credit176
Acceptance credit177
Deferred payment credit179
Negotiation credit180
Straight credit182
Anticipatory credit183
Green clause credit184
Transferable credit185
Backtoback credit188
Revolving credit189
Reciprocal credit190
5.8Trade finance provided by banks192
Finance provided to the exporter192
Finance provided to the importer197
5.9Letters of credit vs. other payment methods200
6Standby letters of credit202
6.1Definition202
Origin202
UCP 600 vs. ISP 98203
Definition by ISP 98203
6.2Characteristics of a standby letter of credit204
Clean credit204
Financial obligation205
Nonfinancial obligation205
Irrevocable form205
Duration and amount206
Payment procedures206
6.3Parties to a standby letter of credit206
Applicant206
Issuer208
Beneficiary209
Transferree beneficiary 209
Confirmer210
6.4Types of documents required in a standby letter of credit
210
Demand for payment211
Statement of default or other drawing event211
Negotiable documents211
Legal or judicial documents212
Other documents212
Examination of the documents213
6.5Types of standby credit214
Performance standby214
Advance payment standby214
Bid bond/tender bond standby214
Counter standby215
Financial standby215
Direct payment standby215
Insurance standby216
Commercial standby216
6.6The problems arising by making a standby subject to UCP
216
When a copy bill of lading is required216
When partial payment is used217
7Letters of guarantee218
7.1Definition218
Demand guarantee218
Contract guarantee219
7.2Characteristics of a demand guarantee220
7.3Basic parties to a demand guarantee220
7.4Direct and indirect guarantees222
7.5Types of guarantee222
Tender guarantee/bid bond223
Performance guarantee223
Repayment guarantee223
Advance payment guarantee223
Maintenance guarantee223
Retention money guarantee224
Counter guarantee224
7.6Contents of a guarantee225
Basic contents of a guarantee225
Additional clauses of a guarantee226
Basic contents of a counter guarantee231
8International factoring239
8.1Origin and legal framework239
Origin239
Legal framework240
8.2What is factoring?241
8.3The procedures of international factoring242
8.4Types of factoring243
Maturity factoring and financed factoring243
Disclosed factoring and undisclosed factoring244
Single factoring and cofactoring244
8.5Services provided to the exporter by a factor245
Credit investigation of buyers245
Credit protection246
Collection and management of receivables247
Finance247
8.6The role of factoring in international trade248
8.7Risks faced by factors249
Credit risks249
Operational risks250
Legal risks250
8.8 Factoring in China251
9International forfaiting257
9.1Origin and evolution257
9.2What is forfaiting?259
Parties to the forfaiting transaction261
Required Documents261
Aval or guarantee262
Costs262
Application and tenors263
9.3The mechanics of a forfaiting transaction264
The underlying trade contract264
The forfaiting proposal265
Terms and conditions267
Summary of the procedures of forfaiting270
9.4Forfaiting vs. other trade financing methods271
Forfaiting vs. officially supported export credits271
Forfaiting vs. factoring272
9.5Forfaiting in China272
10Documents used in international trade payments
274
10.1Types and functions of documents274
Basic documents and additional documents274
Financial documents and commercial documents274
Representing the title to the ownership of the goods
275
Evidencing the fulfillment of obligations275
10.2Draft(s) drawn under a letter of credit275
Characteristics of drafts drawn under a letter of credit
276
Examination of the draft(s) drawn under a letter of credit
276
The most frequently found discrepancies with drafts
278
10.3Commercial invoices278
Contents of a commercial invoice278
Other invoices280
10.4Transport documents284
Marine bills of lading284
Basic parties to a bill of lading285
Main contents of a bill of lading286
Types of bills of lading286
The most frequently found discrepancies with a bill of lading
290
Other transport documents291
10.5Insurance documents295
Types of marine cargo transport insurance295
Examining an insurance policy under a letter of credit
296
The most frequently found discrepancies with an insurance document300
10.6Other documents305
Certificates of origin305
Inspection certificate309
Packing list and weight list309
Cable copy309
Beneficiarys statement309
Shipping companys certificate310
Certificate of analysis310
Certificate of weight310
10.7Examination of documents under documentary credits
310
Examination of documents with reference to the documentary credit311
Examination of documents with reference to the UCP
312
Examination of documents with reference to one another
312
References313