International trade payment methods: detailed explanation and application of remittance

Remittance, also known as remittance, is a payment method in which overseas buyers remit payment to sellers through banks. In international trade, remittance is widely used in a variety of scenarios, reflecting the trust relationship between buyers and sellers. This article aims to introduce in detail the specific operation process of remittance, especially wire transfer, and its practical application in international trade.

Remittance Overview

Remittances are mainly divided into three forms: Telegraphic Transfer (T/T), Mail Transfer (M/T) and Demand Draft (D/D). Telegraphic transfer is the most common form of current international transactions. The most common method of remittance.

Wire transfer business process

The wire transfer business process is as follows:

1. The remitter (buyer) submits an application: First, the remitter needs to submit a remittance application to the local bank and deliver the corresponding payment.
2. Get a wire transfer receipt: Once the overseas bank (i.e. the remitting bank) confirms the remitter’s request, the remitter will receive a wire transfer receipt as a voucher.
3. Send instructions: Subsequently, the remitting bank will send payment instructions to the seller’s bank (i.e., the remitting bank) via encrypted telegram or telex.
4. Collection Notice: When the remitting bank receives the above information and verifies the key, it will prepare a wire transfer notice and notify the payee (i.e. the seller) to come and collect the payment. formalities.
5. Confirm receipt: After receiving the notification, the payee must stamp the receipt for confirmation and return the original to the remitting bank.
6. Complete payment: After confirming the identity of the payee, the remitting bank will deduct the corresponding amount from the remitting bank’s account and deposit it into the payee’s account.
7. Close report: Finally, the remitting bank will send a payment debit advice to the remitting bank to inform the latter that the remittance has been successfully paid.

Characteristics of wire transfer business

Under the wire transfer mode, depending on the payment time, it can be divided into two situations: payment first and shipment later (T/T In Advance) and payment after shipment (T/T After Arrival). The former requires the buyer to pay for the goods before the seller ships the goods, which completely relies on the seller’s reputation; while the latter requires the buyer to pay for the goods after the seller ships the goods, at which time the risk is transferred to the buyer. It should be noted that in these two cases, the bank only acts as a service provider and does not provide any guarantee for the actual payment of the goods, so remittance is essentially commercial credit.

Applications of remittance

In international trade practice, remittance is not only applicable to common transaction methods such as Payment in Advance, Cash with Order, and Open Account, but is also widely used in payment of deposits, Settlement of various expenses such as installment payment, final payment and commission.

• Advance payment: For the seller, this means that payment has been received before delivery, which helps relieve financial pressure.
• Cash on order: Also beneficial to the seller, as full payment can be received before shipment.
• Sales on credit: Although more friendly to the buyer, it means taking on higher risks for the seller.

To sum up, although the remittance method has obvious advantages in terms of convenience and flexibility, when choosing this payment method, you still need to consider the trust foundation between the two parties and the level of risk that each party can bear.