In cross-border e-commerce B2B business, payment and settlement are related to the interests of both parties, especially the seller, and often become the focus of debate between the two parties during transaction negotiations, and will be clearly stipulated in the contract. Cross-border payment and settlement mainly involve cross-border payment, foreign exchange settlement and cash withdrawal, export tax rebate and application for export incentives.
Cross-border payment refers to the act of parties in international economic activities to repay debts in a certain payment method. Common cross-border payment methods are remittance, collection and letter of credit.
Remittance, also known as remittance, is the simplest cross-border payment method. It refers to the remitter actively handing over the money to the payee through a bank or other channels. Remittance involves four parties: the remitter, i.e. the debtor, the payee, i.e. the creditor, the remitting bank and the receiving bank. Remittance is divided into three types: telegraphic transfer, letter of credit and bill of exchange.
(1) Telegraphic Transfer (T/T).
Telegraphic transfer refers to a payment method in which the remitting bank, upon the request of the remitter, sends a secured telegram or telex to a branch or agent bank (receiving bank) in another country to instruct it to pay a certain amount of money to the payee. Telegraphic transfer is fast and the payee can receive the money quickly, but the telegraphic transfer fee is relatively high. At present, telegraphic transfer is the most commonly used remittance method.
(2) Mail Transfer (M/T).
Mail Transfer refers to a payment method in which the remitting bank, upon the request of the remitter, sends a letter of authorization to the receiving bank by airmail, authorizing it to pay a certain amount of money to the payee. The cost of mail transfer is relatively low, but it will take the payee a long time to receive the money.
(3) Remittance by Banker’s Demand Draft (D/D).
A remittance by banker is a remittance method in which the remitting bank, upon the request of the remitter, opens a sight draft on behalf of the remitter with its branch or agent as the paying bank to pay a certain amount of money to the payee. The difference between a remittance by banker and a letter of credit or telegraphic transfer is that a remittance by banker does not require the payee to be notified to withdraw the money, but the payee can go to the bank with the draft to collect the money. In this way, the draft can be transferred and circulated after being endorsed by the payee. The remittance procedure is relatively simple. The bank only charges a handling fee, which is relatively low. However, the remittance risk is high and the financial burden is unbalanced. If the payment is made on delivery, the seller’s financial burden is relatively heavy; if the payment is made in advance, the buyer’s financial burden is relatively heavy. For customers who trust each other very much, remittance is a more ideal settlement method.