Chapter ⅤTerms of Payment Background Briefing Terms of payment is a vital part of the business contract. Generally there are two commonly used methods: the Letter of Credit (L/C) and collection. The letter of credit is an assurance given to the exporter by the bank under the requirement of the importer. It is the most generally used method of payment in the financing of international trade for it is reliable and safe, facilitating trade with unknown buyers and giving protection for both sellers and buyers. Sometimes payment is sometimes made by collection through banks under the terms of Document against Payment(D/P) or Documents against Acceptance(D/A). In the international business，as far as the seller’s benefit is concerned, L/C is better than D/P. D/P at sight is better than than D/P after sight, whereas D/P is better than D/A. Payment through collection is risky unless the importer’s financial standing is sound or he is your regular customer. Situational Dialogue After settling everything in connection with this transaction, the both parties are going to discuss the terms of payment. Susan : Well, Mr. Morgan, we’ve agreed on the question of price and quantity. Shall we have a talk about terms of payment today?. Johnson: What do you think of the terms of payment? Susan: We only accept payment by irrevocable letter of credit payable against shipping documents. Johnson: I see. Could you make an exception and accept D/A or D/P? Susan: I’m afraid not. We insist on a letter of credit. Johnson: To tell you the truth, a letter of credit would increase the cost of my import. For such a large amount, a L/C is costly. Besides, it ties up my money. All this adds to my cost. 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? Susan: Since the total amount is so big and the world monetary market is rather unstable at the moment, and we must adhere to our customary practice. I’m afraid we can not accept any terms of payment other than Letter of Credit. we hope that you will not think us unaccommodating. Johnson: If that’s the case, I’ll have no choice. By the way, when must we open the irrevocable L/C? Susan: The L/C should be reach us 15 to 30 days before the date of delivery so that we can make the necessary arrangement.. Johnson: How long should our L/C be valid? Susan: The L/C should be valid 30 days after the date of shipment. III. Additional Dialogues: Dialogue One: Insist on L/C （1） A: In terms of payment, I propose that we pay by D/P as usual. B: I’m sorry, but I’m afraid we have to discuss the payment problem this time. As you are probably aware, the international money market is not so stable nowadays. A: That’s true. However, we are old business partners. I believe that our pleasant cooperation over the years has proved us trustworthy partners. B: Yes, I know. I’m not worrying about your reliability. A: Let’s think of another way, say, a letter of credit. Do you think that’s acceptable? B: A confirmed and irrevocable letter of credit should be all right. A: OK, we shall open an irrevocable letter of credit in your favor, payable in Shanghai against shipping documents. Dialogue Two Insist on L/C （2） A: Well, Susan. I think we have come quite a long way. Shall we go on to discuss the terms of payment? B: What do you say about our old terms, confirmed and irrevocable L/C? A: In view of this order of small quantity, we propose payment by D/P with collection through a bank so as to simplify the payment procedure. B: As we all know, the current situation on the international money market is unstable. To be the safe side, I’m afraid we still insist on our usual payment terms. A: I see. I have no alternative but to accept your terms of payment. Dialogue Three Insist on L/C (3) A: I’m very pleased that we have come to an agreement on prices at last. What is your regular practice about terms of payment? B: We always require confirmed and irrevocable letter of credit. A: Payment by L/C is the safest method, but rather complicated. You know our order this time is very large, It is costly to open an L/C for such a large amount at a bank, so could you make an exception and accept D/P ? B: I’m sorry, Mr. Johnson. Our company would take a considerable risk if we accept D/P. A. In this case, to avoid having our funds tied up, can we make the payment by L/C after sight, say 30 days L/C? B. Well, Mr. Johnson, In view of our long friendly relations and the efforts you have made in pushing the sales, we have offered you the most favorable price. Payment by sight L/C is quite usual in international trade. As a rule, we only accept L/C. Useful phrases and sentences 付款方式 客人询问付款方式 1. Shall we discuss the terms of payment? 2. What is your regular practice about terms of payment? 3. What are your terms of payment? 4. How are we going to arrange payment? 回复询问付款方式 5. We’d like you to pay us by L/C. 6. We always require L/C for our exports and we pay by L/C for our imports as well. 7. We insist on full payment. 8. We ask for a 30 percent down payment. 9. We expect payment in advance on first orders. 客人建议付款方式 10. We hope you will accept D/P payments terms. 11. In view of this order of small quantity, we propose payment by D/P with collection through a band so as to simplify the payment procedure. 12. Payment by L/C is the safest method, but rather complicated. 礼帽拒绝客人 13. I’m sorry. We can’t accept D/P or D/A. We insist on payment by L/C. 14. I’m afraid we must insist on our usual payment terms. 15. “Payment by installments” is not the usual practice in world trade. 16. It is difficult for us to accept your suggestion 接受客人付款方式 17. In view of our long friendly relations and the efforts you have made in pushing the sales, we agree to change the terms of payment from L/C at sight to D/P at sight; however, this should not be taken as a precedent. 18. I have no alternative but to accept your terms of payment. 信用证要求及货币 19. When should we open the L/C? 20. Your L/C must reach us 30 days before the date of delivery so as to enable us to make all necessary arrangements. 21. How long should our L/C be valid? 22. The L/C should be valid 30 days after the date of shipment.