Enterprises importing goods/services can make payments to foreign customers by various methods (direct money transfer (T/T), letter of credit (L/C), collection), …etc) is subject to the agreement of the parties and has been recorded in the contract. Let’s learn more about this issues with LSX Law firm in the following article consulting on international payment procedures
The concept of international payment
International payment is the performance of payment obligations and monetary benefits arising on the basis of economic and non-economic activities between organizations and individuals of this country and organizations and individuals of other countries; besides between a country and an international organization, through relationships between banks of the countries concerned.
The role of international payment methods
Firstly, for the economy: International payments contribute to the expansion and promotion of foreign economic relations, strengthen the economic position of each country in the international market, and create a bridge between countries in the relationship.
Secondly, for businesses: International payment serves the payment needs of businesses in international goods purchase and sale activities.
Lastly, for commercial banks: International payment generates service revenue and promotes the development of other activities of the bank.
If payment is by money transfer (T/T), the basic documents include
- Legal documents of the enterprise (Business registration license, Investment license)
- Application for money transfer by wire (under the bank’s form)
- Application form for the bank to sell foreign currency (in case the customer do not have enough foreign currency for payment)
- Set of payment documents
Payment before receiving goods
– Foreign trade contract
– Import license/quota (for items requiring import permit import/quota)
– The State Bank’s written confirmation of registration for foreign loan and debt repayment in case the contract’s payment term is > 1 year
Payment after receiving goods:
– Foreign trade contract
– Customs declaration of imported goods
– Transport documents (if any)
– Import license/quota (for items requiring an import license/quota)
– The State Bank’s written confirmation of registration for foreign loan and debt repayment in case of payment deadline of the contract > 1 year
If the payment is by letter of credit (L/C)
L/C is divided into many types as follows:
- Revocable L/C (Revocable L/C)
- Irrevocable Letter of Credit (Irrevocable L/C)
- Confirmed Letter of Credit (Confirmed L/C)
- Transferable L/C
- Back to Back L/C
- Revolving Letter of Credit Standby Letter of Credit Reciprocal Letter of Credit (Reciprocal L/C)
- Red Clause L/C
The person who requests the letter of credit: the importer or the importer entrusts another person
Issuing bank of the letter of credit: is the bank in the country of the importer.
Applicant bank: The branch of the issuing bank. In Vietnam, the L/C requestor must go through the Issuing Bank’s branch to file a request for L/C issuance. The Issuing Bank entrusts its branch to receive the L/C application.
Beneficiary: The exporter or any other person nominated by the beneficiary.
Advising bank: The correspondent bank of the issuing bank in the beneficiary’s country.
Points to note
Firstly, the importer who wants the L/C issuing bank must make a written request for the import L/C to the bank issuing the L/C in Vietnam.
Secondly, any amendments to foreign L/Cs must be notified by the L/C issuing bank to the importing unit.
Lastly, the beneficiary must check the letter of credit.
An international payment card is a type of card associated with a domestic bank and an international card organization, besides, with this card, you can comfortably make shopping transactions in many countries around the world; as long as there is a service that supports payment with the card you are using.
There are 2 ways to make international payment cards:
Firstly, go to the bank and complete the procedure to request card issuance.
Secondly, register online.
However, opening a card in the traditional way takes a lot of time because customers have to go directly to the bank to fill out the registration form and receive the card after 7-10 days. Not to mention the times when there are many transactions and opening cards, you will have to wait for a long time.