BILL OF EXCHANGE AND

CHEQUE
Methods of payment
• When quoting terms, you may require, or suggest, any several methods
of payment
• E.g: letter of credit, bill of exchange
- On receipt of a cheque for the amount quoted, we will send the article
by registered mail
- Payment for initial orders should be made by sight draft, payable at Den
Norske Credit Bank, cash against documents
- We are willing to consider open account facilities if you can provide the
necessary bank reference
 Methods of payment
1. Bank Transfer (remittance) The customer orders a bank to transfer money to the supplier’s account. If telegraphed,
this is known as a TELEGRAPHIC TRANSFER (TT)

2. Bill of exchange: Is an order sent by the DRAWER (exporter) to the DRAWEE (importer)

- The supplier draws a bill on the customer . The bill states that the customer will pay the supplier an amount within a
stated time, e.g: 30 days. The bill is paid through the bank

- If the drawee accepts the bill, they will sign their name on the face of it and date it

+ Sight draft: the customer will pay immediately

D/P (Documents against Payment), the sight bill is presented to the importer with the shipping documents and the
importers pay immediately

+ Term draft: the customer signs the bill before the goods are sent and pays later

D/S (DAYS AFTER SIGHT)

D/A (Documents against acceptance)

 Methods of payment
3. Cheque: It is possible to pay an overseas supplier by cheque, but it takes a long time before they get their money

4. Documentary Credit: An order might be cancelled. The risks can be reduced by issuing a letter of credit, which is a
more binding from a payment .When a letter of credit is accompanied by shipping documents . The money is credited to
the supplier’s account as soon as confirmation of shipment is made

There are two types of letter of credit: REVOCABLE (those that be cancelled)

IRREVOCABLE (those that cannot be cancelled)

5. CAD (Cash against documents)

1. Remittance – Bank transfer

- remittance: nghiệp vụ chuyển tiền

- Beneficiary : người thụ hưởng

- Correspondent banks abroad: ngân hàng đại lý ở nước ngoài

- Telegraphic transfer: chuyển tiền bằng điện

- Mail Transfer: chuyển tiền bằng thư

- Prepaid money transfer: chuyển tiền trả trước

- Conduct a check : tiến hành kiểm tra hồ sơ

- Conduct a debit: tiến hành ghi nợ, trừ tiền vào tk

- Postpaid money transfer: chuyển tiền trả sau

 Remittance
The remittance is a method in which importers requires his bank to transfer a certain amount to the export beneficiary in a certain
location. The bank will transfer money through its agent in the beneficiary country to perform the money transfer operation

Therefore, in order to to transfer money to the exporter, the importer must go to bank to process the money transfer and the bank will
pass his agent in the beneficiary’s country to transfer money.

The list of correspondent banks abroad is listed on the website of every commercial bank

There are two main forms of remittance:

T/T – telegraphic transfer

+ T/T in advance

+ Postpaid money transfer

M/T – Mail transfer

Payment procedure of T/T is faster than M/T. The bank of importer conducts a check and conducts a debit to the importer’s account
2. Bill of exchange - Vocabulary

- Commercial Bill of exchange:

- Characteristics

- Abstraction

- Economic relationship

- Mandatory payment:

- In contravention

- Circulation of the Bill of exchange

 MEANS OF INTERNATIONAL PAYMENT
1. BILL OF EXCHANGE
1. Concept and law governing bills of exchange
2. Contents of bills of exchange
3. Types of bills of exchange
4. Exchange of bills of exchange
2. Check (chèque)
1. Concept
2. Content
 BILL OF EXCHANGE
A commercial bill of exchange is an unconditional payment order
issued by the exporter asking the importer to pay a certain
amount on the bill of exchange, at one location and in one
certain time period
THE LAW OF BILL OF
EXCHANGE
Bill of exchange is a document that the exporter asking the
importer to pay money, it adjusts the relationship between the
exporter and importer so it will be governed by legal provisions.
Here we have the provisions of international law:
1. Geneva Convention (1930) on Bills of Exchange and Checks
(Geneva Conventions 1930)
2. ULB: Uniform Law for Bills of Exchange
3. ULC: Uniform Law for Check
4. BEA: Bills of Exchange Act of 1882
5. UCC: Uniform Commercial Code of 1962
Characteristics of Bill of
exchange

1.Abstraction
2. Mandatory
payment
3.Circulation of the
Bill of Exchange
1. The first characteristic is the abstraction. When we reads the content of the Bill of exchange, we do not
see the trading relationship between the exporter and the importer, what kind of goods the two sides buy
and sell, the quantity, how to deliver the goods, we only see the certain amount of money the importer
needs to pay
2. Unless the Bill of exchange is made in contravention of regulations, the Bill of exchange is not paid. If
the Bill of exchange is made according to the regulations and there are no errors, it is mandatory to pay.
That is, the importer must be obliged to pay the exporter and this is must be shown on the Bill of exchange
in the term ”pay to order of….”. In principle, we will pay according to the order of the exporter. However,
since the exporters have authorized their bank, we might pay by the order of the bank of the exporter
3. Circulation of the Bill of exchange is reflected in 2 things:
+ It is possible to endorsed the Bill of exchange transfer from one person to another
It is possible to bring Bill of exchange to banks to apply for a Bill of exchange discount
Form and language of bills of
exchange
oA bill of exchange is a confirming an obligation to pay, so it
must be drawn up in the form of a document.
oThe usual language used is English.
oAn ordinary bill of exchange is made in 2 (two) copies,
numbered and of equal value.
oThe second copy states: “at sight of this FIRST bill of exchange,
SECOND of the same tenor and date being unpaid”, it means
that immediately after seeing the first sheet of this Bill of
exchange, the second sheet has the same content and dates are
not payable. Thus, the importer only have to pay 1 in 2 Bill of
exchange only
Content of Bill of
Exchange
Content of Bill of
Exchange
Types of bills of
exchange
oA sight bill is a bill of exchange where, upon seeing, the payer
must immediately pay the amount stated on the bill of exchange
to the beneficiary.
oAn usance bill is a bill of exchange that is payable only after a
certain number of days from the date of drawing or from the date
of sighting of the draft.
oBearer bill is an anonymous bill of exchange, on the bill of
exchange does not write the beneficiary's name but only says "Pay
to bearer /ourselves" or nothing at all.
Types of bills of
exchange
-A Clean Bill: is a bill of exchange whose payment is not
accompanied by conditions relating to the sending of trade
documents.
-A Documentary Bill is a bill of exchange that, when sent to the
payer, is accompanied by the goods documents.
-A nominal bill is A bill of exchange is a bill of exchange with the
beneficiary's name on it.
-An order bill: A bill of exchange is not transferable by
endorsement. A bill of exchange is a bill of exchange that, if it is to
be transferred, must be endorsed by the beneficiary.
Endorsement of bills of
exchange
o Endorsement is the procedure of transferring a bill of exchange
from the beneficiary of the bill of exchange to another beneficiary.
The endorser only signs the back of the bill of exchange and gives it
to the direct beneficiary
Types of
endorsements
oA blank endorsement is an endorsement that does not
specify who the next beneficiary is. White endorsement is
commonly used because it allows the bill of exchange to be
transferred many times before maturity, increasing the
circulation of the draft.
oOrder/special endorsement is an endorsement that
presumptively designates the beneficiary of a bill of
exchange. Thus, the beneficiary of the bill of exchange has
not been specified. For example: “Pay to the order of Mr…” or
“Pay to Mr… order”.
Types of
endorsements
oA restricted endorsement is an endorsement specifying the
name of the next beneficiary and only that person. With this type
of draft, the bill of exchange cannot be further transferred by
endorsement.
oWithout recourse endorsement is an endorsement after which
the next beneficiary is not entitled to recover money from the
endorser when the debtor refuses to pay the bill.
oConditional endorsement is the endorsement of the transfer of
a bill of exchange to a person if that person fulfills the provisions
set forth by the endorser.
Bill of Exchange Discounts

oIt is a lending business by banks by buying back drafts with a term

before maturity to help businesses get money soon.
o The value of money that the business receives from the bank
when discounting the draft is always less than the actual value of
the draft because the difference in value is the discounting interest
of the bank.
Bill of Exchange
Discounts
3. (Chèque - Check)
A check is an unconditional order from the holder of a deposit
account, ordering the bank to deduct a certain amount of money
from his account to repay the check holder.
 Conditions for the establishment
of a check

- The issuer of the check must have funds in an account opened

at the bank: The amount on the check cannot exceed the
balance on the account at the bank
- Checks have direct payment value as currency.
- The beneficiary of the check can be one person and it can
also be many people
Validity period of the
check
o The validity period of the document is calculated from the
website issue date and is indicated on the document.
Validity period of
the check
oThe duration of a regular check depends on the space in which
the check is circulated and the laws of the country. According to
the 1931 Geneva Convention, the validity period of checks is:
o08 working days if the check circulates within the same
country;
o20 working days if the check is circulating in countries on the
same continent;
o 70 working days if the check is circulating in countries not on
the same continent.
Content of check
Content of check
Types of cheque
oA nominal check is a check that clearly states the beneficiary's
name and cannot be transferred to another person.
oA check to bearer is a check payable to the holder. This type of
check can be transferred through the hands of many people,
whoever holds the check can bring it to the bank to receive
money.
oCheck to order is a type of check commonly used in
international payments and is paid to the order of the beneficiary.
This type of check is transferable to another person by
endorsement.
Types of
cheque

-Crossed check The purpose of the cross is to not withdraw

cash, used for bank transfer.
-Cash check: is a type of check used to withdraw cash at Bank.
-Traveler's check: is a check issued by a bank and paid at any
branch or agent of that bank in the country or abroad.
Flow chart of cheque
through a bank
Flow chart of cheque
through a bank
Paying by cheque in
vietnam
Chu┞ể
ﾐ
khoả
ﾐ ,
23%

Cheques are very popular instruments in developed

countries. However, according to statistics of State Bank, in
the form of non-cash payments between businesses, the
check only accounts for 2%.
 Paying by cheque in
Vietnam

- The seller is concerned that the buyer's account has no

money, fake checks, easy to lead to payment risks.
- Checking the SBV's checks is still manual, the payment is
slow and time consuming.
- The legal corridor has not been completed. There is no
mandatory regulation to use checks in payment
4. Letter of credit
• Letter of credit is an agreement in which the bank at the request of
applicant for a letter of credit pledges to pay a certain amount to third
person or accept a draft (bill of exchange) issued by a third person
when they present to the bank a set of payment documents in
accordance with the regulations in the letter credit.
5. Cash against documents (CAD)
• Cash against documents: đổi chứng từ trả tiền
• Trust account : tài khoản tín thác
• Deposit : ký quỹ, nộp tiền
• Advantage of : ưu điểm
• The set of documents: bộ chứng từ
• Conduct payment : tiến hành thanh toán
• Hand over : bàn giao (bộ chứng từ)
5. Cash against documents (CAD)
• The CAD method is a payment method in which the importer requires
the bank to open a trust account to pay the exporter when the
exporter presents the required documents. That is, before the
exporter delivers the goods, the importer will go to the bank to open
an account and deposit money into it . After the deposit is completed,
the bank will notify the exporter , the exporter will proceed to deliver
the goods, then presents the documents to the bank to receive
money. And then the bank will hand over the documents to the
importer so that the importer will receive the goods
• The advantage of this method is that the exporter after sending the
goods will receive the money immediately