International financial correspondence

（2011—2012学年第一学期）

课号： 013I03Y00 课程名称： 国际金融函电 改卷教师： 学号： 096060009 姓 名： 笪 君 得 分：

The Application of International Financial Correspondence

in the Settlement for International Trade

Abstract：International financial correspondence has many functions in the settlement for international trade，this article draws the main functions and advantages of international financial correspondence and lists some specific cases of the application of international financial correspondence in the settlement for international trade.

Key words：international financial correspondence; settlement for international trade;

With China's accession to WTO, it's economy and international trade develop rapidly. In the international trade, commercial banks play an important role in a financial intermediary of both exporters and importers,which provides particular types of services according to the

international payments and settlements. And among all of those elements the banking correspondence is considered to be the most important part of international trade settlement.

1. Functions of international financial correspondence in the international settlements

The international settlements contain some financial activities conducting among different countries in which payments are influenced or funds are transferred from one country to another in order to solve accounts, claims and debts that have been emerged in the course of political, economic or cultural contacts among them.

In those activities, banking letter makes sense in transmission of information and dealing with business issues.

For example,when an enterprise wants to apply for opening a letter of credit, first we should write a banking letter to require a letter of credit.And also,when the beneficiary seeks to amend the relative credit letter,he must write a bank letter to the issuing bank which contains the terms needed to be amended.

No matter in the credit or in the remittance and collection,banking correspondence is the major way of communication.

2. Advantages of international financial correspondence in the international settlement

From my point of view, the function of international banking correspondence is the bridge which links the bilateral communication exchange, accurate and specific delivery of the various relevant information of two sides. Moreover, it enormously promotes the efficiency of international settlement. More specifically, I think using international banking correspondence in the negotiation with banks can reduce the unnecessary cost.

In terms of the settlement for international trade,traditional ways of communication are not suitable for them.

Sometimes it calls for face-to-face communication between banks, which may waste a large sum of money and time. It's not accorded with high level of efficiency and safety.

Telegraph communication sometimes lacks security,and mostly can not illustrate clearly.Because there are many tedious details in the communication of the settlement for internationalt trade.

Compared with those above, international banking correspondence saves the cost and time of the settlement for internationalt trade.

At the same time,International banking correspondence has it’s own advantage.

 Accuracy The contents of international banking

correspondence is related to the direct interests of overall condition, and therefore it should be complete, accurate expression, even the punctuation should be accurate, so as to avoid unnecessary troubles.

 Pithiness In addition to accuracy, banking correspondence is not so lengthy.

 Security International banking correspondence can be used as an evidence when there exists any controversies in the settlement for internationalt trade.

In a word, international banking correspondence is the indispensable component in the settlement for internationalt trade.

3. Main contents of international financial correspondence in the international settlement

Generally in international settlement there are three commonly used payment methods.During the three methods,the Letter of credit is most common.So This section focuses on the contents of the international financial correspondence in the letter of credit.

Now let’s start from the application of international financial

correspondence in remittance.

 Remittance

What is remittance?A bank, at the request of its customer, transfers a certain sum of money to its overseas branch or correspondent bank, instructing it to pay a named person domiciled in that country.

Correspondence are obtained in many cases of remittance.

When a remitting bank takes the way of mail transfer,it will send the mail transfer advice or the advice of payment to the paying bank.

In the above processes , the mail transfer advice and the advice of payment are essentially the international banking correspondence.

When the paying bank refuses to pay to the seller,it will mail the advice of withdrawal to the remitting bank. In the remittance process,if there is any problem,the both two banks need to solve these problems by correspondence.

 Collection

What's the definition of collection? The collection is an arrangement whereby the goods are shipped and a relevant draft drawn by the seller on the buyer, or shipping documents are forwarded to the seller’s bank with clear instructions to collect the money from the buyer through one of its correspondent banks．

In fact,the application of correspondence in collection is quite wide

as well.For example, when the remitting bank authorizes the collecting bank to release relative documents to drawee free of payment,or when the collecting bank misses the documents, the correspondence will be able to come in time.

 Letter of credit

Letter of credit is the main method in international payment,which is a written undertaking by a banker in importer’s country to the exporter or the beneficiary at importer’s request.

The application of correspondence in the letter of credit is the most abundant.The following paragraphs are about some usefulnesses of international financial correspondence in the letter of credit with their main contents:

 When the advising bank get the letter of credit,finding that one of the signatures thereon is found out of its previous specimen shapes in the authorized signature book. The advising bank will use correspondence to require the issuing bank verify the signature.In this correspondence, there must be the business number(L/C number),the name of the beneficiary,the reason of writing this letter and the indispensable part that the advising bank will return the letter of credit if the issuing bank doesn't reply before deadlines.

 When the advising bank has advised the letter of credit, it should send the receipt correspondence to the issuing bank.In this letter, the advising bank is supposed to give details of the matters of commission.If the advising bank does not use correspondence to show that,there will be the risk of losing commission.So if the issuing bank requires the advising bank to claim the commission from the beneficiary,the following sentences must be written in the correspondence:

Commissions and charges will be claimed from the beneficiary.If unpaid,we reserve the right to debit your account,or to claim amount due after expiry.

 When the beneficiary needs to amend the letter of credit,he will ask the advising bank to use the financial correspondence to notify the issuing bank with the specific matters of amending. As the same with other correspondences about the letter of credit,the L/C number,the name of the beneficiary,the issuing date of this letter of credit and the amount should be written down.But the most important content is the matters of amending the letter of credit,because this is the aim of this correspondence.And in what cases should the letter of credit be amended?Here are some of the

answers.

 The credit is in absence of detailed address of drawee.  The unit price is claused unambiguously on a CNF basis whereas the credit goes on to require that bills of lading indicate FRIGHT TO COLLECT thereupon.  The L/C AMT was wrongly typed.

 The beneficiary wants to take partial shipment.  The beneficiary is unable to effect shipment in due time.  The beneficiary require the issuing bank to cancel the letter of credit.

 When the documents are not consistent with the letter of credit,the advising bank should notice the issuing bank.The correspondence could like the next format.

We enclose original documents as detected hereunder covering negotiation of undermentioned bill.Due to the discrepancies listed bellow,documents have been forwarded on an approval basis.

Dispreies:×××××

Upon acceptance of the discrepancies listed, please remit

proceeds by teletransmission quoting our reference number for

credit of our account with ×××bank.In the event of non-acceptanc, please immediately advise reasons to ourselves by return.

 Upon the discrepancies,the negotiating bank should solicit the views of the issuing bank before negotiating this letter of credit. The correspondence could like the following format.

About your letter of credit No×××,Date ×××,please be informed that beneficiary has presented the documents,which in order except:

Dispreies:×××××

Please urgently tested advise us whether we may negotiate

quoting our Reference Number×××.

 After the negotiation of the L/C,the negotiating bank should send the correspondence to the issuing bank to inform it.This kind of correspondence should be concise,and the L/C number and amount can not be omitted.

 Another important thing after negotiating the L/C for the negotiating bank is to obtain the payment from the issuing bank. If the issuing bank does not pay to the negotiating bank for long

time, a correspondence, to remind the issuing bank to credit the account of the negotiating bank, is necessary. The correspondence could like the following paragraph.

We negotiated the draft with relative documents drawn

under the captioned credit and requested you to credit the proceed to our account with you.However,we have not received any credit advice to this effect from you up to now.Since this matter has been long outstanding,please investigate whether or not you have already credited/remitted the proceed as requested and inform us of the result as soon as possible.

 Other application in the international settlement

In other aspects of international settlement,the international financial correspondence also has important applications.I want to introduce the functions that the international financial correspondence has in guarantees and credit investigation process.

When the guarantor bank receives the correspondence of claim,the bank will send a correspondence to counter guarantor to require the balance of the previous payment guarantee should be reduced accordingly.

Under normal circumstances,if one bank wants to investigate the credit status of a foreign company,it usually finishes the investigation

with the help of a local correspondent bank. Hence, the exchange of correspondence becomes essential.

The correspondence of inquiry could be like the next paragraph.

About credit status inquiry on:

×××CO.LTD

Address×××

We should be grateful if you would supply us the background and credit information of the above.

Information given will be treated as strictly privare and confidential in reply，please quote us.

The reply could be referred to the following format.

About your correspondence concerning credit status enquiry on

×××CO.LTD

Quote as follows：

The Specific description of the credit status of ×××CO.LTD

This opinion is private and confidential and is given without the

responsibility on the part of our bank。

4. My Feeling and experience towards international financial

correspondence

In the last several months, I have to admit that I had the wrong understanding that international financial correspondence is just same as the normal letter. The only difference is using some professional words and data.

After learning the methods of writing various kinds of correspondence, I have mastered the basic rules of business writing. Besides the format of a bank letter, we also learned the agency relationship, credit inquiry, accounting business and settlement of international trade. Meanwhile, we have an opportunity to review the knowledge which we studied in the course of international settlement. In the class, professor Ying often tells us some interesting stories relating to customs and habits when living in the UK which broaden my horizon and make the class very interesting.

I believe that one of the most important rules one has to keep in mind when learning this course is that spending time on concluding different types and grasping the main differences. There are various kinds of writing methods in banking letters and it’s hard to remember every details. So once you learn a new way to express, you'd better try to compare it with others. It will be helpful for your understanding.

As a student majoring in finance who will face graduation and hunting jobs one year later, grasping the methods of writing business letters is a basic and important skills which is useful to my future. As we all know, business letters have so many kinds that we don’t have enough time to learn all the contents in just a short semester. I will insist on studying on this subject by myself after class and try to improve my writing ability at the same time. I hope that I will get a higher level through my efforts in studying.