Ex.4. Read the following statements. Say whether they are true, if not correct them. 1. The methods of securing payment from overseas customers are Banker’s Transfer, Letter of Credit and Bill of Exchange.

1. The methods of securing payment from overseas customers are Banker’s Transfer, Letter of Credit and Bill of Exchange.

2. In case of a standard Banker’s Transfer money isn’t credited to the account of the Seller.

3. In case of paying by Irrevocable Letter of Credit the correspondent bank establishes the credit in the name of the Buyer.

4. L/C doesn’t have a validity interval.

5. L/C is usually opened against shipping documents.

6. When a company loses a major customer it can get into financial difficulties.

7. In case of Sight Draft the shipping documents are handed to the Buyer as soon as he pays for the goods.

8. The bank can’t accept bills on the Buyer’s behalf.

9. When you draw on your customer at sixty days the drafts are sent to his bank for collection.

 

 

Read and translate the following texts:

A draft is an order to pay. It is made out by an exporter and presented to the importer, usually through a bank. It is also called а bill of exchange, and it may be payable immediately on presentation (a sight or demand draft), or so many days after presentation (a term draft). In the latter case the drawee writes " Accepted" across it and signs his name. When a B/E has been signed by the importer, the exporter usually has to wait about 90 (or sometimes 180) days before it can be exchanged for money. Because a B/E is negotiable, the exporter may discount (sell) the bill at his bank before the 90 days have passed. The exporter has the money to start another transaction immediately and the bank collects the money when the B/Е is paid. The bank may rediscount the bill to a discount house which specialises in this work.

There are other methods of payment such as TT (telegraphic transfer) or mail remittance. They are given to a buyer only when he is a trusted customer or agent. If they let you down you’ve shipped your goods without any assurance of getting payment. But with a letter of credit the payment is guaranteed, at least when it’s confirmed and irrevocable which is the only type of L/C we accept nowadays. That means the bank at our end guarantees payment in case the opener of the credit defaults and the credit can’t be cancelled before the expiry date.

 

Answer the questions.

1. How may a draft be payable?

2. How long does the exporter have to wait before he can get his money?

3. Is a B/E negotiable? What does it mean?

4. What other methods of payment do you know?

5. When are they given to a customer?

 

A Bill of Exchange is a sort of post-dated cheque. Look at this Bill of Exchange and answer the questions about it.

 

 

Exchange for            750 pounds           London 14 July 2000 At 90 days pay this solo        Bill of Exchange to the order of ourselves _____________ the sum of seven hundred and fifty pounds sterling  -------------------------------------------------------------- Value          goods_____________ To Dom KK                                                Signed Sheila Baker 705 3-chome Yamaguchi                                  for BOS Ltd.    Osaka                                                          13 Mill Street Japan                                                           Harlow                                                                      Essex CM 20 2TR              Accepted M Satsuma             for DOM KK

1. Which company will receive the money?

2. How many copies of the Bill are there?

3. What date will the Bill be paid?

4. Which company will pay the Bill?

5. Is this transaction “documents against payment” or “documents against acceptance”?

 

ROLE PLAYS.

1.Discuss all pros and cons of different methods of payment used in foreign trade with your partner.

2.You have been trading with a rather reliable partner for some time. Now he is facing certain financial difficulties. Decide with your colleagues if you are going to change the method of payment or not.

 

Problem-solving:

The production process used in your factory is known, by your scientists, to produce pollution. At the moment it is not scientifically possible to test and prove this and so there is no legal obligation to change your process. There is an alternative process but it would make your product more expensive and therefore less competitive. What should you do?

 

Answer the questions on the topic:

1. Characterize all the methods of payment you know.

2. Explain when and why each one is used.

3. What problems can occur when you use them?

 

Unit 6

Insurance

Part 1

DIALOGUE 1

Paula Williams runs the Export Sales Department of Mercury Com­puters Ltd. Her assistant, Bob Seagrum, has just joined the firm. Paula talks to Bob about insuring a consignment of goods for South America.

PAULA Here's an interesting letter, Bob. It's from a customer in Colombia, Mr Carrera. Do you remember him?

BOB Yes. What does he say?

PAULA Let me put you in the picture, first. A few weeks ago Mr. Carrera bought some of our microcomputers. Now he's written to say he'll be placing regular orders with us.

BOB That's good. We don't sell much to South America at the moment, do we? It'll give us a foothold in the market.

PAULA Yes. I hope it'll be the start of something quite big. Carrera doesn't just do business in Colombia. He's got sales outlets in Venezuela and Ecuador as well.

BOB Just the kind of contact we need, then.

PAULA Definitely. The orders will be fairly large — about three to five thousand pounds (£ 3—£ 5, 000) worth a month. Carrera wants us to arrange insurance cover for the shipments.

BOB So the invoices will be made out CIF, won't they?

PAULA Yes, CIF Caracas. Mr Carrera will airfreight the goods from there to Bogota, or perhaps bring them overland.

BOB How do we go about getting insurance? Is it tricky?

PAULA Oh, not really. We'll be sending computers regularly to Colombia. So. we'll take out an all risks open policy for, say, fifty thousand pounds (£ 50.000). It’ll cover consignments from our warehouse to the port of destination - Caracas.

BOB I’m afraid 1 don't know much about insurance terms. What is an all risks open policy?

paula  It's a policy that'll cover all consignments made to Mr Carrera over a twelve-month period. Up to a value of fifty thousand pounds (£ 50.000).

BOB Yes, but what about the ‘all risks’ bit? Can you explain precisely what it means?

paula  It means all risks mentioned in the policy.

BOB Such as?

paula  Fire, theft, damage of various kinds, like breakage.

BOB I see. To take out an open policy, I suppose we phone our insurance broker.

paula  Right. We contact our broker. Then he gets in touch with a Lloyd's[1] underwriter. It's the underwriter who quotes a rate for the shipment and issues the Insurance Certificate. And it's the broker who collects the premium.

BOB If we agree to the rate, are all shipments immediately covered?

paula  It works like this. While the policy is being prepared, the broker sends us a Cover Note. As soon as we get that, our consignments are insured.

BOB Mm, there are also some Declaration Forms to fill in, aren’t there?

paula  Ah, so you do know something about insurance, Bob! Yes, each time we ship goods, we sign a Declaration Form and send a copy to the broker. It provides a record of each insured shipment.

BOB  It sounds fairly simple, this insurance business.

paula  Oh, it's dead easy, once you get the hang of it.

 

 

Answer the questions:

1. What is Paula’s position in the company?

2. What problem is she discussing with her assistant?

3. Why is Mercury Computers LTD interested in doing business with Mr. Carrera?

4. How large are the orders going to be?

5. How will Mr. Carrera deliver the goods?

6. What kind of policy are they going to take out? Explain their choice.

7. What risks are mentioned in the policy?

8. What is the procedure of taking out the policy?

9. When are the consignments insured?

10. How is the record of each insured shipment provided?

PART 2

DIALOGUE 2

An Italian importer, Mr. Mazzi, telephones Miss Scott, manager of a British firm supplying typewriters.

 

SCOTT Hello?

MAZZI Hello. This is Mazzi here. Gennari Import Agency. I'm calling about, the consignment of typewriters you've just sent us.

SCOTT Before you go any further, Mr Mazzi, could you tell me the order number, please?

MAZZI Oh, I'm sorry. It's PT two-six-o (260).

SCOTT Thank you. I'll just note that down. Now then, what's the problem?

MAZZI I'm afraid there's been a great deal of damage to the goods. I'd say the consignment is a complete write-off. We can’t salvage anything.

SCOTT Really? What on earth happened?

MAZZI We're not absolutely sure. When we received it, the case was badly crushed. All the machines were damaged beyond repair,

SCOTT Mm, sounds as if something heavy fell on it. Another con­signment probably. You'd better get the surveyor to inspect the case right away.

MAZZI I've already done that. It didn't take him long to carry out his investigation. The machines were in a terrible state — bits and pieces everywhere.

SCOTT That's bad. Would you mind sending the surveyor's report to me personally, please? You could forward it with your claim. I’ll take the matter up with our insurers.

mazzi It's going to be a pretty big claim, you know. Well over...

SCOTT I realise that, and I assure you we'll try to speed things up for you at this end. You must be compensated without delay.

mazzi Thanks. That's very good of you. But we still need replace­ment machines. We can't keep our customers waiting.

scott  No, of course not. We'll despatch another ten machines to you by the end of this week. I'll telex you as soon as we have shipping details.

mazzi  Fine. Let's hope this consignment is handled more carefully.

scott  It had better be, or else I’ll start sending our goods by air —

even if it does cost a lot more.

mazzi  Oh, I'm sure it won't come to that. Let's keep our fingers crossed and hope for the best.

scott Well, sorry for all the trouble. Goodbye, Mr. Mazzi.

mazzi  Ciao.

  

Answer the questions:

1. What is Miss Scott’s occupation?

2. What is she discussing on the phone?

3. What happened to the consignment of typewriters?

4. How were the goods damaged?

5. Why was it necessary to get the surveyor?

6. What did the investigation of the surveyor show?

7. Why was it necessary to send the surveyor’s report to Miss Scott?

8. How will the compensation be provided?

9. Why will another ten machines be despatched to Mr. Mazzi? What are they called?

10. Why is Miss Scott thinking of sending the goods by air?

 

 

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