General

I believe everyone knows that the receipt and payment of export trade is a very important part of the trade process, and there are many types of foreign trade payment methods. Today, Xiao Zhijun will introduce common foreign trade payment methods and processes to everyone, let's take a look together.

1、 Prepayment method

Process description:

1. The customer communicates with the supplier for sales and places an order. The customer provides the order information to the import and export company and pays the full amount in RMB for the goods.

2. Import and export companies issue payment notices to customers for fees such as taxes and agency fees.

3. The import and export company signs import agency contracts with customers and suppliers, and the import and export company pays foreign exchange after receiving payment.

4. The supplier arranges for factory shipment and provides transportation documents such as invoices and packing lists.

5. The import and export company is responsible for transporting and receiving goods, and notifying the customer. The customer decides and notifies in writing whether the goods will enter the bonded warehouse.

6. The customer pays import taxes, agency fees, etc. to the import and export company, and the import and export company handles customs clearance procedures, delivers goods to the customer, and provides import tax receipts.

It should be noted that:

1. If the payment amount is greater than 30000 US dollars, a bank guarantee is required regardless of whether it exceeds 15% of the contract amount.

2. If the foreign exchange payment amount is greater than 100000 US dollars and exceeds 15% of the contract amount, a bank guarantee is required to be issued and filed with the State Administration of Foreign Exchange

3. If the prepayment amount exceeds 15% of the contract amount, it must be clearly stated in the contract.

2、 Spot telegraphic transfer foreign trade payment method

Process description:

1. The customer communicates with the supplier for sales and places an order. The customer provides the order information to the import and export company, and pays the full amount of RMB before making foreign exchange payments.

2. Import and export companies issue payment notices to customers for fees such as taxes and agency fees.

3. Import and export companies sign import agency contracts with customers and suppliers.

4. The supplier arranges for factory shipment and provides transportation documents such as invoices and packing lists.

5. The import and export company is responsible for transporting and receiving goods, and notifying the customer. The customer decides and notifies in writing whether the goods will enter the bonded warehouse.

6. The customer pays import taxes to the import and export company, which handles customs clearance procedures, delivers goods to the customer, and provides import tax receipts.

7. The import and export company pays foreign exchange after receiving payment.

3、 Sight letter of credit foreign trade payment method

Process description:

1. The customer communicates with the supplier for sales and places an order. The customer provides the order information to the import and export company and pays the letter of credit deposit.

2. Import and export companies issue payment notices to customers for fees such as taxes and agency fees.

3. Import and export companies sign import agency contracts with customers and suppliers, and after receiving the deposit, import and export companies open letters of credit externally.

4. The supplier arranges for factory shipment and provides transportation documents such as invoices and packing lists.

5. The import and export company is responsible for transporting and receiving goods, and notifying the customer. The customer decides and notifies in writing whether the goods will enter the bonded warehouse.

6. The customer pays import taxes, payment for goods, and agency fees to the import and export company. Import and export companies handle customs clearance procedures and release goods.

4、 Usance Letter of Credit Foreign Trade Payment Method

（1） Foreign exchange settlement credit. Considering the time for domestic interbank transfers and the time for import and export companies to purchase foreign exchange from banks, the credit term provided by the import and export companies to customers is shorter than the term of the forward letter of credit.

Process description:

1. The customer communicates with the supplier for sales, places orders, and provides order information to the import and export company.

2. The import and export company issues a notice to customers to collect fees such as the issuance deposit, taxes, and agency fees.

3. The import and export company signs import agency contracts with customers and suppliers, and after receiving the deposit, the import and export company opens a 90 day forward letter of credit to the outside world.

4. The supplier arranges for factory shipment and provides transportation documents such as invoices and packing lists.

5. The import and export company is responsible for transporting and receiving goods, and notifying the customer. The customer decides and notifies in writing whether the goods will enter the bonded warehouse.

6. The customer pays import taxes to the import and export company. The import and export company handles customs clearance procedures and the customer obtains a credit of 83 to 85 days provided by the import and export company to obtain the goods.

7. Before the expiration of the credit term, the import and export company shall issue a notice of external payment in RMB to the customer. During the credit term, the customer pays the import and export company for the goods.

8. On the expiration date of the usance letter of credit, the issuing bank shall pay the foreign currency payment to the supplier.

If the customer is unable to make payment to the import and export company on schedule within the credit term, they should notify the import and export company in writing two working days in advance and fulfill their payment responsibilities within 10 working days. Within these 10 working days, the customer must bear the penalty interest on the overdue amount (0.05% of the overdue amount per day), and the agent import and export company will temporarily stop granting credit to the customer. If the customer is unable to fulfill their payment obligations within 10 working days, the import and export company has the right to choose to enter legal proceedings.

（2） No credit granted

Process description:

1. The customer communicates with the supplier for sales, places orders, and provides order information to the import and export company.

2. The import and export company issues a notice to customers to collect fees such as the issuance deposit, taxes, and agency fees.

3. The import and export company signs import agency contracts with customers and suppliers, and after receiving the deposit, the import and export company opens a 90 day forward letter of credit to the outside world.

4. The supplier arranges for factory shipment and provides transportation documents such as invoices and packing lists.

5. The import and export company is responsible for transporting and receiving goods, and notifying the customer. The customer decides and notifies in writing whether the goods will enter the bonded warehouse.

6. Customers pay import taxes and payment to import and export companies based on the demand for goods. Import and export companies handle customs clearance procedures and deliver to customers.

7. During the period when the goods are stored in the bonded warehouse, customers should add a deposit of 5% of the inventory value every 15 days.

8. Agency fees, bonded warehouse operation fees, and other expenses shall be paid together with the corresponding taxes and payment when the last batch of goods is released.

9. On the expiration date of the usance letter of credit, the issuing bank shall pay the foreign currency payment to the supplier.

Advantages of the usance letter of credit model:

1. Customers will receive more capital turnover time to alleviate financial pressure.

2. The issuing bank assumes the primary payment responsibility, which helps to eliminate manufacturers' concerns about whether funds can be returned on time and promote deeper and broader cooperation between manufacturers and customers.

Explanation of the letter of credit model

1. As the import and export company is the applicant for the letter of credit, it bears direct responsibility for foreign payments. This responsibility is not exempted because domestic users have not fulfilled their obligation to pay in RMB. So, in addition to the credit model, import and export companies must receive the corresponding payment before releasing the goods.

2. In the mode of sight letter of credit, the payment terms of the purchase and sales contract should specify the words' Domestic users shall pay the amount after deducting the deposit to the import and export company two days before negotiation abroad or two days before delivery (whichever comes first) '. Because there may be situations where foreign negotiation occurs before the arrival or domestic users pick up the goods.

If the foreign negotiation is in advance and the RMB funds of the domestic user have not been transferred to the account of the import and export company before the corresponding funds are transferred by the bank, advance interest will be charged from the date of the bank transferring the corresponding funds.

3. Letter of credit deposit: (usually 30% of the contract amount in RMB) If domestic users do not pay for the goods, although the import and export company holds the right to the goods, it also bears the risk of market price decline, so a letter of credit deposit is required. Only when the customer withdraws the goods can the opening deposit be offset against the payment for the goods. If the goods are picked up in batches, the deposit can be proportionally reduced according to the value of the picked up goods

4. Materials for filing the payment of forward letters of credit:

(1) The letter of credit (stamped with the bank's reserved seal) is confirmed by the issuing bank's official seal. Attention: Each sheet must be covered!

(2) Contract

(3) One copy of each of the above three types of documents for the license, also stamped with the official seal.

(4) The application form is stamped with the official seal.