VI – Financing 支付
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A. SCOPE OF INTERNATIONAL FINANCING（国际支付的范围）
B. FINANCING FOREIGN TRADE（对外贸易融资）
C. BILLS OF LADING（提单）
D. BILLS OF EXCHANGE（汇票）
E. PROMISSORY NOTES（本票）
F. NEGOTIABILITY OF BILLS AND NOTES（票据的流通性）
G. THE NEGOTIATION AND TRANSFER OF BILLS AND
NOTES（票据的流转）
H. THE ROLE OF BANKS IN COLLECTING AND PAYING
NEGOTIABLE INSTRUMENTS（银行在流通票据收支中的地位）
I.
LETTERS OF CREDIT（信用证）
J. FINANCING FOREIGN OPERATIONS（对外经营融资）
A.SCOPE OF INTERNATIONAL FINANCING
1. The Financing of Foreign Trade:
Involves the underwriting, paying, and
collecting of money for the purchase of
goods and services
 2. The Capitalization of Foreign
Investments: Involves the acquisition of
debt and equity financing to establish
or expand overseas business
operations
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B.
FINANCING FOREIGN TRADE
1. Trade Documents
 a. Reason for use in international trade:
Buyers and sellers are separated both in
distance and by the differing financial
practices of their home countries.
 1) Difficult for seller to determine the
credit standing of a foreign buyer.
 2) Difficult for buyer to reliably establish
the foreign seller’s integrity and reputation.
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C. BILLS OF LADING
1. The Essential Document for all
international sales
 a. A document of title: It represents the
goods.
 1) Allows for transfer of title while goods
are in the possession of a carrier or
warehouseman.
 2) Discussed in Lecture 10.
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D.
BILLS OF EXCHANGE
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Defined: A bill of exchange (or draft) is —
A written, dated and signed instrument.
Containing an unconditional order.
From drawer.
Directing drawee.
To pay a payee.
A definite sum of money.
With payment to be made.
On demand, or
At a specified future date.
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1.
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• 2. Bills of Exchange are Negotiable
Instruments
• a. A proper holder will take it free of the
“personal defenses” or “equities” that the
drawer might have that:
• 1) The underlying contract was
improperly performed, or
• 2) The instrument was improperly made.
• b. Importance: Bills of exchange are
more readily saleable and, therefore,
useful financial tools for raising money.
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3. The Laws Governing Bills of Exchange
a. Three basic laws:
1) Anglo-American laws.
a) English Bills of Exchange Act (BEA) of 1882.
1] Applicable in UK and commonwealth countries.
b) United States Uniform Commercial Code (UCC).
1] Adopted in all US states except Louisiana.
2) Model laws applicable in the rest of the world.
a) Uniform Law on Bills of Exchange and Promissory
Notes (ULB) of 1930.
b) Uniform Law for Checks (ULC) adopted in 1931.
3) United Nations’ Convention.
a) UN Convention on International Bills of Exchange
and International Promissory Notes (CIBN) of 1988.
b) Meant to make international transactions uniform.
c) Not yet in force — unlikely to be in force soon.
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4.
a.
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The “Form” of Bills of Exchange
BEA and UCC requirements:
In writing.
Payable either to order or to bearer.
b. ULB requirements:
1) In writing.
2) Payable either to order or to bearer.
3) Contain the term “bill of exchange” in —
a) The body, and
b) The language of the check.
4) State the place where the bill is drawn.
5) State the place where payment is to be
made.
6) Be dated.
• 5. Types of Bills of Exchange
• a. Time bill: Drawee must pay at a definite
future time.
• b. Sight (or demand) bill: Drawee must pay
either when —
• 1) The holder presents the bill for payment, or
• 2) At a stated time after presentment.
• c. Trade acceptances: Drawee is one who
bought goods from the drawer and owes the
sale price to the drawer.
• 1) Drawee is a credit buyer.
• 2) May be a time or sight bill.
• d. Checks: Drawee is holding money on
account for drawer.
• 1) Drawee is a bank.
• 2) Checks are always payable on demand.
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PROMISSORY NOTES
1. Defined: A promissory note (or simply a
“note”) is a written promise to pay a determinate
sum of money made between two parties.
1) Maker: The issuer of a promissory note.
2) Payee: The person to whom the note is to be
paid.
2. Difference Between a Promissory Note and
a Bill of Exchange The maker of a note
promises to personally pay the payee rather
than ordering a third party to do so
 3. Governing Law: Same as those that apply
to bills of exchange
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NEGOTIABILITY OF BILLS AND NOTES
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Requirements of Negotiability
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a. Be in the proper form, and
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b. Contain the following promissory elements:
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1) State an unconditional promise or order to pay.
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2) State a definite sum of money or a monetary
unit of account.
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a) Money.
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1] BEA, UCC and ULB define money as “a
medium of exchange authorized or adopted by a
domestic or foreign government as part of its currency.”
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2] International practice also includes ad hoc
currency baskets established by the parties.
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b) Definite Sum: The sum to be paid must
be ascertainable from the bill or note itself
without reference to any outside source.
• 3) Be payable on demand or at a definite time.
• 4) Be signed by the maker or drawer.
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a) Signature: “Any symbol executed or
adopted by a party with present intention to
authenticate a writing.”
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THE NEGOTIATION AND
TRANSFER OF BILLS AND NOTES
1. Assignment: The transfer of rights
under a contract
 a. The assignee acquires only those
rights that the assignor possessed.
 b. Any objections to honoring the
assigned obligations that could be
raised against the assignor can be
raised against the assignee.
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• 2. Negotiation: The transfer of a bill or note in
such a way that the recipient becomes a holder
• a. Negotiating order paper.
• 1) Order paper: A bill or note payable to a named
payee.
• 2) Negotiated by delivery and endorsement.
• b. Negotiating bearer paper.
• 1) Bearer paper: A bill or note payable to the bearer
or to cash.
• 2) Negotiated by delivery.
• c. Converting order to bearer paper and bearer to
order paper.
• 1) Order to bearer paper:
• a) By an endorsement in blank, i.e., the endorsee’s
signature alone.
• b) By an endorsement to pay to the bearer.
• 2) Bearer to order paper: By the use of a special
endorsement, e.g. “pay to John Adams.”
• 3. Forged Endorsements
• a. Effect.
• 1) ULB: A forged endorsement is
effective.
• a) Both the person taking a forged
instrument and all subsequent holders
are entitled to payment.
• b) Rationale: This rule encourages the
free transfer and exchange of bills and
notes.
• 2) BEA and UCC: A forged endorsement is ineffective.
• a) The endorsee taking from a forger is responsible
for determining the validity of an endorsement.
• Case 12-3. Mair v. Bank of Nova Scotia
• 1] Exceptions:
• a] Impostor rule: A forged endorsement is effective if a
drawer, maker, or endorser draws, makes or endorses
an instrument to an imposter.
• b] Fictitious payee rule: A forged endorsement is
effective if the instrument was issued in the name of a
payee who had no interest in the instrument.
• b) Rationale: Liability is imposed on the person best
able to prevent the forgery from happening.
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c) Problem with rule: It encourages litigation.
• 1] Determination of whether one or the other of the
two exceptions applies has to be made after the fact.
• 2] The last holder has to initiate suit against the
dishonoring party to determine who must press the
claim against the forger.
• 4. Limitations on the Excuses that Drawers and
Makers Can Use to Avoid Paying Off a Bill or Note
• a. ULB limitations.
• 1) Basic rule: Anyone who acquires a bill or note by
negotiation is a holder who is entitled to payment from
the maker or drawer.
• 2) Exceptions:
• a) The possessor is not a holder because he did not
acquire title through an uninterrupted series of
endorsements.
• b) The holder acquired the instrument in bad faith.
• 1] Bad faith includes:
• a] Actual theft of the instrument.
• b] Knowing that the instrument is stolen, lost, or
misplaced.
• c] Knowing that the payee, or some prior holder, is
not properly entitled to payment.
• c) The holder acquired the instrument through gross
• b. BEA/UCC limitations:
• 1) Basic rule: The maker or drawer does not
have to pay someone who is not a holder, he
can assert “personal defenses” or “equities”
against a holder, but only “real defenses”
against a holder-in-due course.
• a) Holder: One who acquired the bill or note
through an uninterrupted series of
endorsements.
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b) Holder in Due Course (HDC): A holder who
acquires an instrument:
• 1] For value,
• 2] In good faith, and
• 3] Without notice that it is overdue, or that it
has been dishonored, or that the maker,
drawer, or a prior endorser has a valid excuse
for not paying it off.
• 2) Personal Defenses:
• a) Breach of contract (including breach
of contract warranties).
• b) Lack or failure of consideration.
• c) Fraud in the inducement.
• d) Illegality, incapacity (other than
minority), or duress, if the contract is
voidable.
• e) Previous payment of the instrument.
• f) Unauthorized completion of an
incomplete instrument.
• g) Nondelivery of the instrument.
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3) Real Defenses:
a) Forgery.
b) Fraud in the execution.
c) Material alteration.
d) Discharge in bankruptcy.
e) Minority, if the contract is voidable.
f) Illegality, incapacity, or duress, if the
contract is void.
• 5. Liabilities of Makers, Drawers,
Drawees, and Endorsers
• a. Liability on the Instrument: Liability
arising out of a signature.
• 1) Makers and drawees have “primary”
liability: Must make payment on
presentment of the instrument.
• Case 12-4. Far East Realty Investment,
Inc. v. Court of Appeals
• 2) Drawers and endorsers have
“secondary” liability: Only have to pay if
the maker or drawee fails to do so.
• b. Warranty Liability: Responsibility arising out of the
implied guarantees a person makes at the time he
transfers or presents a negotiable instrument.
• 1) BEA and ULB: No warranty liability.
• 2) UCC: Every person who transfers an instrument
(whether order or bearer paper) in exchange for
consideration makes five implied guarantees to his
immediate transferee and to every subsequent holder
who takes the instrument in good faith.
• a) The transferor has good title to the instrument or is
otherwise authorized to obtain payment or acceptance on
behalf of one who does have good title.
• b) All signatures are genuine or authorized.
• c) The instrument has not been materially altered.
• d) No defense of any party is good against the
transferor.
• e) The transferor has no knowledge of any insolvency
proceedings against the maker, the acceptor, or the
drawer of an unaccepted instrument.
H. THE ROLE OF BANKS IN COLLECTING
AND PAYING NEGOTIABLE INSTRUMENTS
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1. Functions Banks Perform in connection
with negotiation of bills and notes
a. Issue instruments themselves (e.g., certified
checks and certificates of deposit).
b. They assume primary liability (as drawees
and acceptors) on bills of exchange and
promissory notes.
c. They act as the collecting agent for holders
and transferees.
d. They take instruments as endorsees, paying
the endorser, and presenting the instrument for
payment in their own right.
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LETTERS OF CREDIT
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1. Alternatives to Using Letters of Credit
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a. “Cash in advance” term: Used if seller is unable to determine
buyer’s creditworthiness.
b. “Documents Against Payment” term: Used when buyer wants to
confirm that the goods have been shipped.
1) Seller instructs a bank in the buyer’s country to release title
(e.g., a carrier’s bill of lading) only after the buyer delivers to the
bank a receipt from the seller indicating that the seller has received
payment.
c. “Documents Against Acceptance” term: Buyer insists upon taking
delivery before making payment.
1) Seller instructs a bank in the buyer’s country to release title
only on receipt of an acknowledgement of delivery.
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• 2. The Letter of Credit Transaction
• a. Defined: An instrument —
• 1) Issued by a bank, or other person, at the
request of a customer (called an “account
party”).
• 2) It is a conditional agreement between the
issuer and the account party that is intended to
benefit a third party.
• 3) It obliges the issuer:
• a) To pay a bill of exchange drawn by the
account party, up to a certain sum of money,
• b) Within a stated time period, and
• c) Upon presentation by the beneficiary of
documents designated by the account party.
• b. Function: To substitute the credit of a recognized international
bank for that of the buyer.
• c. The parties:
• 1) The buyer is the account party.
• 2) The buyer’s bank is the issuing bank.
• 3) The seller is the beneficiary.
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d. Types of Letters of Credit:
• 1) Irrevocable: Cannot be altered without the beneficiary’s
express consent.
• a) Preferred by beneficiaries because it provides the most
security.
• 2) Revocable: Revocable by the issuing bank.
• a) Disliked by beneficiaries because it provides the least security.
• 3) Confirmed: A second bank adds its endorsement to the credit,
indicating that it too will make payment against the specified
documents.
• a) Gives the beneficiary additional assurance that payment will
be made.
• 3. Governing Law:
• a. International Chamber of Commerce’s
Uniform Customs and Practices for
Documentary Credits (UCP) governs
virtually all international letter of credit
transactions.
• 1) Most banks incorporate the UCP in
the terms of the credits they issue.
• 4. Applying for a Letter of Credit
• a. Applicant must have an existing relationship
with a bank.
• b. Applicant completes a “Letter of Credit
Application.”
• 1) Caveat: Not an application for credit, but a
set of instructions telling the issuing bank what
needs to be included in the letter of credit.
• c. The consequences of not obtaining a letter
of credit when the buyer has contractually
agreed to obtain one • 1) If the credit was a condition precedent to
the formation of the contract: There will be no
contract, and consequently no breach.
• 2) If the credit was a condition for the
performance of the contract: Because the
contract already exists, the failure to obtain a
credit will be a breach that will entitle the
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5. Documentary Formalities
a. No particular form is required.
b. Must have the following formalities:
1) Be in writing.
2) Be signed by the issuer.
3) Be complete and precise.
4) Indicate if it is irrevocable.
a) Presumption that a credit is revocable.
1] Note: The latest version of the UCP (UCP 500) changes this
rule so that a credit is presumed to be irrevocable.
5) Indicate clearly when and how credits are to be paid.
a) This may be by:
1] Sight payment.
2] Deferred payment.
3] Acceptance.
4] Negotiation.
6) Name the bank(s) which is/are authorized to:
a) Pay the credit,
b) Accept bills of exchange drawn in accordance with the letter,
or
c) Negotiate the credit.
• 6. Advising and Confirming Letters of
Credit
• a. Advising Bank: A corresponding bank
in the beneficiary’s county which delivers
the credit to the beneficiary.
• 1) Assumes no liability for paying the
letter of credit.
• 2) Only obligation is to the issuing bank,
to insure that the beneficiary is advised
and the credit delivered, and to take
“reasonable care to check the apparent
authenticity of the credit.”
• a) It does this by comparing the signature
on the credit with the authorized
• b. Confirming Bank: A bank that
independently promises that it will pay, accept,
or negotiate a credit, as appropriate, when the
documents specified in the credit are
presented to it and the other terms and
conditions of the credit have been complied
with.
• 1) A confirming bank is entitled to
reimbursement from the issuing bank if the
documents it receives are in order.
• 2) Obligations of confirming banks:
• a) If the documents are not in order the
confirming bank will be left with title to the
goods in its own name.
• b) If the issuing bank or the account party are
unable to reimburse the confirming bank, the
confirming bank will be left with title to the
goods in its own name.
• 7. The Obligations of Banks
• a. To examine documents with
reasonable care.
• b. Paying, accepting, or negotiating banks
must forward irregular documents to the
issuing bank.
• c. To honor or refuse credits “on the basis
of the documents alone.”
• 1) So long as the documents appear
regular on their face, the bank must pay.
• a) The Rule of Strict Compliance: A bank
may reject documents that do not exactly
comply with the terms specified in the
letter of credit.
• 2) Fraud by the Seller.
• a) If the seller delivered mislabeled goods
to a carrier to obtain the documents it
needed to collect against a letter of credit,
the issuing bank may nevertheless pay
the seller even if it knows of this.
• c) If the underlying transaction was
fraudulent and the credit is revocable, the
issuing bank may refuse to pay the seller.
• d) If the underlying transaction was
fraudulent and the credit is irrevocable,
the issuing bank probably has to pay the
seller.
• 1] There is no firm rule in the UCP.
• 3) Fraud in the Collection Process.
• a) If a collecting bank, knowing that a
letter of credit has been altered, attempts
to collect from the issuing bank, the
issuing bank does not have to pay.
• 8. Rights and Responsibilities of Beneficiaries
• a. Basis of rights and responsibilities: Commercial
practice.
• 1) There are no contractual rights.
• b. Prerequisites for collecting on a letter of credit:
• 1) The beneficiary must comply with the terms and
conditions of the credit.
• 2) The beneficiary must present to the issuer (or the
issuer’s agent) the documents designated in the credit.
• a) Commonly these include • 1] A certificate of origin: To comply with customs
requirements.
• 2] An export license and/or a health inspection
certificate: To show that the goods are approved for
export.
• 3] A certificate of inspection: To show that all of the
goods have been shipped.
• 4] A commercial invoice: To identify the shipment.
• 5] A bill of lading: To show title to the goods.
• 6] A marine insurance policy.
J. FINANCING FOREIGN OPERATIONS
1. Private Sources of Capital
 a. Debt and equity funding are available
from the private sector to finance the
operations of multinational ventures.
 2. Governmental Sources of Capital
 a. Host Country Development Banks and
Government Agencies.
 b. Home Country Import and Export
Financing Agencies.
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• 3. Regional and International Development
Agencies
• a. Regional Development Banks.
• 1) African Development Bank.
• 2) Asian Development Bank.
• 3) Central American Bank for Economic Integration.
• 4) European Bank for Reconstruction and
Development Bank.
• 5) European Investment Bank.
• 6) Inter-American Development Bank.
• b. International Development Banks.
• 1) World Bank: The International Bank for
Reconstruction and Development (IRBD).
• a) Provides funds to governments.
• 2) Subsidiaries of the World Bank.
• a) International Development Association (IDA).
• 1] Provides funds to governments.
• b) International Finance Corporation (IFC).
• 1] Provides funds to private companies.