Detailed explanation of cross-border e-commerce remittance: process and classification
Remittance is an important means of payment in international trade, and its process and classification are crucial for companies engaged in cross-border trade. This article aims to explain in detail the definition of remittance, the roles of relevant parties and the specific process classification.
Definition of remittance and roles of parties
Remittance refers to one of the ways in which the payer actively remits money to the payee through a bank or other channels. In cross-border e-commerce transactions, when the buyer and seller reach an agreement based on the terms of the contract, the buyer usually remits the payment to the seller through the bank in accordance with the agreed conditions (such as receipt of documents or goods) and time. There are four main roles involved in this process:
- Remitter (Remitter): Usually the importer, responsible for initiating the remittance request.
- Payee (Payee, Beneficiary): Usually the exporter, waiting to receive payment.
- Remitting Bank: A bank entrusted by the remitter to perform remittance operations.
- Remitting Bank (Paying Bank): A bank that accepts instructions from the remitting bank and pays the payee.
When submitting a remittance application to the remittance bank, the remitter needs to provide detailed remittance information. This application is regarded as the basis of the agreement between the remitter and the remittance bank.
Classification of remittances
According to different payment instruments, remittance can be divided into three types: letter transfer, wire transfer and draft remittance.
Mail Transfer, M/T
Letter transfer refers to a method in which the remittance bank transfers money to the payee by mailing a letter at the request of the remitter. The advantage of this method is that it is less expensive, but it takes longer to process because it relies on the postal system.
Telegraphic Transfer, T/T
Telegraphic transfer means that the remittance bank sends a payment order to the foreign correspondent bank through electronic communication means such as telegram or telex in accordance with the instructions of the remitter, instructing it to pay a certain amount to the designated payee. Wire transfers are fast and efficient, but they also incur higher handling fees.
Remittance by Banker’s Demand Draft, D/D
Draft remittance refers to a form of remittance in which the remittance bank issues a sight draft from its own branch or agency to the paying bank based on the remitter’s application and delivers it to the payee. The bill transfer procedure is simple and the fee is moderate, but because the bill can be circulated and transferred, there are certain risks.
Remittance payment process
Each payment method has its own specific operating procedures:
- The process of letter remittance includes the steps of the remitter filling out the application form and making payment, the remitting bank mailing a letter to the foreign agent bank, and the remittance bank notifying the payee to withdraw the money.
- The wire transfer process covers the debtor’s submission of application form, payment, remittance via telex or SWIFT notification to the agent bank, and the remittance bank notifying the payee to withdraw the money.
- The bill remittance process involves the remitter filling out an application form and making payment. The remittance bank issues a bill of exchange and gives it to the remitter. The remitter sends the bill to the payee, and the payee presents the bill to the remitter. The process of withdrawing money from the remittance bank and so on.
To sum up, understanding the different types of remittances and their processes is crucial for smooth cross-border transactions. Whichever option you choose, you should consider the pros and cons of each in order to make the best choice for your situation.
The above content is compiled from three references.