Contents

CHAPTER 1: OVERVIEW OF INTERNATIONAL PAYMENT..................................................................2

I. Definition...................................................................................................................................................... 2
II. Time of payment......................................................................................................................................... 3
III. Instruments of international payment.....................................................................................................7
IV. Methods of payment..................................................................................................................................8
CHAPTER 2: FOREIGN EXCHANGE CONTROL REGIME OF VIETNAM...........................................9
I. Foreign exchange......................................................................................................................................... 9
II. Subjects and scope of regulation of FX...................................................................................................11
III. Aims of FX control..................................................................................................................................11
IV. FX activities............................................................................................................................................. 11
CHAPTER 3: EXCHANGE RATE AND BALANCE OF INTERNATIONAL PAYMENT......................11
I. Definition.................................................................................................................................................... 11
II. Basis of exchange rate.............................................................................................................................. 12
1. Prior to 1971...........................................................................................................................................12
2. After 1972............................................................................................................................................... 12
III. Exchange rate quotations....................................................................................................................... 14
1. Exchange rate statement....................................................................................................................... 14
2. Exchange rate interpretation................................................................................................................15
3. Foreign exchange quotation..................................................................................................................15
4. Cross exchange rate...............................................................................................................................16
5. Exchange rate classification..................................................................................................................19
6. Factors affecting exchange rate............................................................................................................20
CHAPTER 4: INSTRUMENT OF INTERNATIONAL PAYMENT...........................................................22
1. Negotiable instruments (Công cụ chuyển nhượng).............................................................................22
2. Bill of exchange...................................................................................................................................... 23
3. Promissory note (Kỳ phiếu/Hứa phiếu)...............................................................................................28
4. Cheques (Séc)......................................................................................................................................... 29
CHAPTER 1: OVERVIEW OF INTERNATIONAL PAYMENT
I. Definition
- What:
o Payment activities between residents and nonresidents of a country by using currencies to one or
more transactions party.
o Regulations on participants, currency, instruments, method of payment and credit support tool.
- Participants: Central Banks (on behalf of government signed the Agreement), Commercial Banks,
Organizations & Individuals.
- Payment currency:
o Used to settle the payment for contracts >< Price currency (mentioned in contract)
- Currency classification:
o Usage range: National, International, World

National currency: Existed, circulated and issued by Central Bank include cash and
credit money (traditional and electronic).
 International currency: Common currency of economic unions or agreements.
 Bretton Woods Agreement (1944 – 1971) (IMF): USD is the international
currency, có khả năng tính toán quốc tế, thanh toán quốc tế và dự trữ quốc tế.
 Jamaica Agreement (1976): SDR - Special Drawing Rights (Quyền rút vốn đặc
biệt) is the international currency, 1 SDR = 1 USD = 1/35 ounce gold, rổ tiền tệ:
SDR included US Dollar & German Mark & Japanese Yen & British Pound &
French Franc, có khả năng tính toán quốc tế và dự trữ quốc tế.
 SEV Agreement: Transferable Rouble is international currency, used for countries
which have banking accounts at MBES & MIB, có khả năng tính toán quốc tế,
thanh toán quốc tế và dự trữ quốc tế.
 EU & ALBA
 World currency: Only gold (but not used for valuing the contract, regular payment
among countries, freely transferable and only used for settle balance if there is no credit
tools).
o Convertible ability:
 Free convertible: without permission, license, commission. Include 2 types: total free
convertible (USD, GBP, EUR, JPY) & partial free convertible (TWD, PHP, THB, KRW,
IDR)
 Note: VND thuộc partial convertible
 Transferable: Only be transferred from one account to another, not allowed to cash draw.
Faced with 3 barriers:
 country residency
 limit quantity
 mục đích chuyển đổi vd: XM, investment, education abroad, treatment abroad,
tourism)
 Clearing: Is used in clearing account, not allowed to transfer or cash draw (khả năng
chuyển đổi kém, chỉ dùng để mua bán, ko dùng để trao đổi hoặc rút tiền mặt)
o Existing forms:
 Cash: Paper money & Coin
 Credit currency: Money in bank account
o Aims of currency usage:
 Account currency (Price currency)
 Payment currency
o Usage level in int payment:
 Hard currency
 Weak currency
- Factors affecting choice of settlement currency:
o Market status: ng bán chọn đồng tiền đang lên giá, ng mua chọn đồng tiền xuống giá
o Levels of usage / popularity: chọn đồng tiền phổ biến
o Customs of currency usage (tập quán sử dụng, niêm yết giá trên sàn giao dịch): tuỳ theo mặt
hàng e.g. mua bán dầu thô, vàng dùng USD; mua bán kim loại màu dùng bảng Anh
o Common currency of 1 region, unions: e.g. ở EU chọn đồng EUR
II. Time of payment
- Advance payment:
o Definition: fully or partial payment is made after signing the contract or when exporter accept
the purchase order but before delivery date.
o Include 2 types:
 Credit support for exporter
 The payment is made after x days from signing the contract or after the contract is
valid
 The amount of advance payment depends on the loan demand of exporter and the
credit support ability of importer
 The loan interest is depreciated into imported price.
 Formula:
  Performance bond
 The importer pays a deposit to exporter, which ensure the fulfillment of import
contract
 Shorter time for advanced payment (10-15 days)  Provision in contract: x days
before shipment
 This advanced payment is not understanded as a credit, therefore, interest rate
may be waved
 The advanced payment depends on each case:
o Case 1: The exporter doubts the import’s ability of payment

o Case 2: Contract price > Market price, to anticipate that the importer
canceled the contract, the exporter requires them to pay deposit for
contract performance:

Case 1:
 rủi ro thuộc về exporter
 adjustment:
o đổi “after 3 days” thành “within 3 days after”
o 10% value gì ghi rõ ra
o TTR ko ghi tắt
Case 2:

 adjustment:
o 100% value gì ghi rõ ra
o within 5 working days từ cái gì ghi rõ ra
- At sight payment: Include 5 types
o COD (Cash On Delivery):
 The importer pays exporter after the exporter has fulfilled the delivery at named place,
not loading on the means of transport.
 The shipping document serves as a proof of delivery fulfillment at named place:
 Warehouse receipt of delivery (EXW);
 “Receipt for shipment” B/L (FAS);
 Commercial invoice certified by importer;
 AWB, RWB, Post receipt.
 After fulfill the delivery, the exporter informs the importer the above shipping document
and require at sight payment.
o COB (Cash On Board):
 The importer pays exporter after the exporter has fulfilled the delivery at named place,
loading on the means of transport.
 Suitable for marine transport, for other means of transport, the exporter can only deliver
goods at carrier’s warehouse.
 The shipping document serves as a proof of delivery fulfillment at named place:
 “Shipped on board” B/L (signed by: as carrier, as master, as agent for, on behalf
of, …)
 “Received for shipment” B/L, noted “On board”/ “Shipped on board”/ “Laden on
board”
 After fulfill the delivery, the exporter informs the importer the above shipping document
and require at sight payment.
o CORSD (Cash On Receiving Shipping Documents):
 After fulfill the delivery, the exporter sends the shipping documents to the importer, the
importer makes payment after receiving them.
 Shipping documents here can be understanded as Commercial documents.
 The amount and type of documents is presented in the contract and depends on method of
payment.
 How to deliver the shipping documents to importer?
 By international post (standard or express delivery)
 By carrier
 By importer’s agency in exporter country
 By banking system
 Condition for importer to receive shipping documents:
 Without condition, which means the shipping documents is sent directly to
importer without condition to make payment. In this case, B/L is usually straight
to importer (Named B/L / Straight B/L).
 With condition, which means the shipping documents are only sent to importer
when the importer makes payment in case of at sight payment, or accepts to pay
in case of deferred payment.
o D/P x days (Cash at x days (5-7 days) after receiving shipping documents):
 Apply for goods with various kinds, complicated specifications, great number
 Bank delivers documents to importer (except for B/L) to check them from 5 to 7 days.
When importers make payment, bank will endorse or hand over the B/L to importer
 Order B/L: To order of issuing bank
 o Cash on receipt:
 The importer makes at sight payment after receiving goods at named place or destination
port.
 Locations:
 Exporter country
 Named place at importer country, after inspection serving as proof for payment
 Means of transport issued by importer to receive goods
- Deferred payment: Include 4 types
o Payment is made at x days after receiving notification of exporter that has fulfilled delivery at
named place, not loading on means of transport.
o Payment is made at x days after receiving notification of exporter that has fulfilled delivery at
named place, loading on means of transport.
o Payment is made at x days after receiving documents – D/A
o Payment is made at x days after receiving goods
o Payment is made at x days due date of goods guarantee
- Mixed terms of payment: depends on contract, goods specialization, payment terms condition

o Tại sao có “before receiving goods” → Exporter vẫn còn rủi ro Campuchia mang phương tiện
vận tải tới bốc hàng trước
o Case - Payment term: 10% advance by TTR, after 3 days when contract signed. 90% from 3 days
by DP when receiving copy of shipping documents
→ Fix: “from” to “within”, clear 10% of what, define “by bank TTR”, define DP “Document
against payment”
III. Instruments of international payment
- Credit instrument is the result of credit relations:
 o Commercial credit relations: Commercial bill (Thương phiếu) including Bill of exchange (Hối
phiếu thương mại) & Promissory note (Kỳ phiếu thương mại)
o Bank credit relations: Bank draft (Hối phiếu ngân hàng), Bank bond (Kỳ phiếu ngân hàng),
Check (Séc), CDs (Chứng chỉ tiền gửi), L/C (Thư tín dụng), Letter of Guarantee (Thư bảo lãnh),
Trust receipt (Biên lai tín thác), Credit card (Thẻ tín dụng)
o Investment credit relations: Stock (Cổ phiếu), Bond (Trái phiếu), Derivative docs (Chứng từ phái
sinh), Right certificate (Quyền mua cổ phần), Warrant (Chứng quyền), Option contract (Hợp
đồng quyền chọn), Future contract (Hợp đồng tương lai)
- Bill of Exchange / Draft (Hối phiếu)

o Exporter: PVOIL
o Importer: AMERICAN LUBES
o Method of payment: L/C
o Drawee: Anz Royal Bank
o Drawer: PVoil
o Beneficiary: Bank for investment and development of VN
o Nếu để beneficiary là exporter → Ký hậu chuyển nhượng ở mặt sau hối phiếu / Ký lại
- Promissory note (Kỳ phiếu)

- Check / Cheque (Séc)

- Bank card: Payment card / Credit card / Debit card
IV. Methods of payment
- In terms of attached docs:
o Non-documentary methods: Exporter send all doc along with goods to importer
 Open account – Ghi sổ
  Remittance – Chuyển tiền
 Clean collection – Nhờ thu trơn
 Letter of Guarantee – Thư bảo lãnh
 Standby L/C – Thư tín dụng dự phòng
o Documentary methods: Exporter keep all doc and then send to bank
 Documentary collection – Nhờ thu kèm chứng từ
 L/C – Thư tín dụng chứng từ
 Letter of Authority to Purchase – Thư uỷ thác mua
- In terms of bank role:
o Intermediary of payment:
 Remittance
 Open account
 Collection
o Commitment to pay:
 Letter of Guarantee
 Standby L/C
 L/C
 Letter of Authority to Purchase
- Definition: Methods of payment are all conditions and manner recommended for Commercial bank to
transfer proceeds between residents and non–residents of one country.

- Factors affecting choices of methods of payment:

o Trust degree between both parties
o Capital ability of each party
o Partner relationships
o The competition of each party/Market status
o The political/economic situation of importer’s country
o Requirement of foreign exchange control in each countries
o The volume and type of business transaction
 If big volume: secure method
If products is perishable: fast method (TT, clean collection)
If limited network: most secure for exporter, if diverse network: flexible method
__________________________________________________________________________________________
CHAPTER 2: FOREIGN EXCHANGE CONTROL REGIME OF VIETNAM
I. Foreign exchange
- Definition: Foreign Exchange (FX) includes all payment instruments that are used in international
settlements (financial assets).
- In general, FX comprises:
o Foreign currency
o Financial instruments denominated in foreign currency
o Standard gold
o The domestic currency held by non-residents (nội tệ có nguồn gốc từ ngoại tệ)
- In VN, FX consists of:
o Foreign currency
 Currency of other nations and territories
 Or the European common currency
 Or other common currencies used in international and regional payment
 5 major currencies: USD, EUR, JPY, CHF, CNY
o Means of payment in foreign currency (Foreign currency payment instrument):
 Check
 Payment card (Credit card / Debit card / Bank card)
 B/E
 Promissory notes
 And other means of payment
o Valuable papers denominated in foreign currency
 Government’s bonds
 Corporate’s bonds
 Terms bonds
 Shares
 And other valuable papers (CDs)
o Gold
 Gold in the state foreign exchange reserves (nằm trong quỹ dự trữ ngoại hối quốc gia)
 Gold in the oversea accounts of the residents (nằm trong tài khoản ở nước ngoài của
người cư trú)
 Gold in form of block, bar, grain, piece in case of being carried out of and into the
territory of Vietnam (origin: circular no 11/2014/TT-NHNN til now có sự thay đổi trong
quy định)
 carrying of ingot gold, raw material gold are not allowed
 jewelry gold, fine-art gold articles are only allowed in total amount of 300 grams
o Currency of the Socialist Republic of Vietnam (VND)
 In case of being remitted into and out of the territory of Vietnam (max: 15 millions)
 Or being used in the international payment
II. Subjects and scope of regulation of FX

III. Aims of FX control

IV. FX activities

__________________________________________________________________________________________

CHAPTER 3: EXCHANGE RATE AND BALANCE OF INTERNATIONAL

PAYMENT
I. Definition
- Exchange rate: the price of one currency expressed in terms of other currency.
- Exchange rate affects interest rate rather than the other way around
- Ordinance on foreign exchange control (Pháp lệnh quản lý ngoại hối): Vietnamese dong exchange rate
means the price of one foreign currency unit calculated in the Vietnamese currency.
II. Basis of exchange rate
1. Prior to 1971
- Each country’s monetary authority ser the value of its currency relative to an international standard such
as gold  Gold standard
- There are 3 distinct types of “gold standard”:
o gold specie standard (chế độ bản vị vàng) (1875 – 1914): tiền đúc thành vàng đưa vào lưu
thông, dùng quantity để compare  gold parity (ngang giá vàng) is the exchange rate
 system in which monetary unit is associated with the value of circulating gold coins
 is known as classic gold standard
 was period of unprecedented economic growth with free trade in goods, labor, capital
o gold exchange standard (chế độ hối đoái vàng) (1914 – 1944): due to international trade
among countries  Central Bank set the rule on quantity of gold can be converted to from paper
note aka paper note có thể chuyển đổi sang vàng tuỳ theo tỷ lệ nhất định, dùng hàm lượng vàng
trên paper note để compare (giữ vàng ko thì sẽ cản trở hoạt động lưu thông hàng hoá)
 government guarantees a fixed exchange rate with another country using gold standard
o USD gold exchange standard system (1945 – 1971): chỉ US có khả năng chuyển paper note
sang gold, USD trở thành đồng trung gian để chuyển sang vàng
 Đều dựa vào gold standards (ngang giá vàng)
o Was a commitment by participating countries to fix the prices of their domestic currencies in
terms of specified amount of gold
o Was also an international standard determining the value of a country’s currency in terms of
other countries’ currency
o Ít khi có lạm phát, lạm phát đc điều chỉnh bởi hàm lượng vàng chảy giữa 2 nước  E/R is
adjusted by gold-flow between 2 countries
o Paper notes are convertible into pre-set, fixed quantities of gold
o Exchange rates were fixed, the price levels around the world move together  price-specie flow
mechanism
e.g. slide 9:

- tỷ lệ ko thay đổi, chỉ có thị trường thay đổi

- vàng đổi từ Anh sang Pháp in this case
1.8 (tụt xuống từ 2) cho thấy đồng Pháp đang lên but đồng Anh đang tụt, giữ đồng Pháp mua đc nhiều
đồng Anh, đổi sang vàng ở Anh, rồi mang đổi sang tiền ở Pháp
mua ở 1.8 bán ở 2 (arbitrage)
2. After 1972
- No country curently use the gold standard as the basis of its monetary system.
- No currency is convertible into precious metal.
- There are some regimes of exchange rate:
o Freely floating rate: occurs when a government allows the exchange rate to be determined
purely by market demand and supply, and there is no attempt to ask the central bank to influence
the external value of the exchange rate.
 o Managed floating rate (dirty float): exchange rate is neither entirely free (or floating) nor fixed.
Rather, the value of the currency is kept in a range against another currency (or against a basket
of currencies) by central bank intervention.
o Target zone: a scheme intended to limit the flexibility of an exchange rate without going as far
as fixing or pegging the value of one currency against another.
- To determines exchange rate  PPP (Purchasing Power Parity) (ngang giá sức mua)
o Definition: A unit of domestic currency should purchase the same amount of goods in the home
country as it would of identical goods in a foreign country.
o Law of one price is applied: in competitive markets free of transportation costs and barriers to
trade (such as tariffs), identical products sold in different countries must sell for the same price
when their prices is expressed in terms of the same currency
o Absolute form of PPP: price of similar basket of goods to two countries should be equal when
measured in a common currency, not referred to inflation.

o Relative form of PPP: The strictest version of PPP is not supported empirically, but changes in
relative inflation rates are related to changes in exchange rates.

e.g. lạm phát ở VN cao hơn US thì tỷ giá tăng  tỷ lệ chỉ thay đổi based on lạm phát
o PPP implication: the currency of countries with high inflation rates should devalue relative to
countries with low inflations rates.
o Rationale:
III. Exchange rate quotations

1. Exchange rate statement

- In full statement:

- In short statement:

- Bid rate (Tỷ giá mua) vs Ask rate (Tỷ giá bán)
o Bank: Bid < Ask (Buy low – Sell high)  Profit: Spread between Bid & Ask
o Customer: Bid > Ask (Buy high – Sell low)
- in full statement: e.g.
bid rate USD/VND = 23,000 (buy 1 USD thì pay 23,000 VND)
ask rate USD/VND = (sell 1 USD thì đc 23,500 VND)
 pros: customers of CB can easily understand what exchange rate will apply
- in short statement (more common): e.g. USD/VND = 23,000 (bid rate: the price of 1 USD CB willing to
buy)/ 23,500 (ask rate: the price of 1 USD CB willing to sell)
- Note:
o CB: market maker vs client: market taker
o spread tuỳ thuộc vào đồng tiền, vào giao dịch
o CB: sell high buy low; client: sell low buy high
 commodity currency (yết giá) / term currency (định giá) = bid / ask
o commodity currency (đồng tiền hàng hoá, cơ sở, yết giá): currency being traded or being valued
o term currency (đồng tiền định giá): currency express the commodity currency
- ask – bid = spread (profit for market-marker)  factors affecting spread:
o popularity of exchange rate
 popular  lower spread btw bid rate & ask rate
 rare  higher spread btw bid rate & ask rate
o supply & demand
 high demand, low supply  lower spread
 vice versa
o stability of currency
 stable  lower spread
 unstable  higher spread
o monetary policy of Central Bank / State Bank  SnD in forex market affected
o convertibility
 high  lower spread
 low (mua vào but chưa chắc bán ra đc)  higher spread
e.g. spread của USD (đô Mỹ) lower than spread của AUD (đô Úc)
2. Exchange rate interpretation
- USD / CAD = 1.2213 (1 unit 22 figure and 13 pip/point)
- A/B lấy 2 digits sau dấu phẩy thì B/A lấy 6 digits, otherwise cả 2 tỷ lệ đều lấy 4 digits
- pip/point (điểm phần trăm): smallest quoted unit of the spot price, ko cố định mà tuỳ thuộc tỷ giá thay
đổi và đc niêm yết ntn
- additional statement:
o USD/JPY = 110.18 / 110.34 ~ 110,18 / 34
o USD/CAD = 1.2356 / 1.2387 ~ 1.2356 / 87 ~ 56/87 (thường quote sau 1 tháng như vậy)
3. Foreign exchange quotation
- Direct quotation (major): price of foreign currency in terms of units of domestic currency, e.g. Vietnam
& most of countries  USD/VND
Indirect quotation: price of domestic currency in terms of units of foreign currency, e.g. UK, New
Zealand, EU  GBP/USD, EUR/USD, NZD/USD, AUD/USD, SDR/USD
 US apply direct quotation for currency of countries applying indirect quotation, vice versa.

- International markets: American terms vs European terms  đều có sự tham gia của USD
o American terms: USD is the term currency in the rate, e.g. EUR/USD
o European terms: USD is the commodity currency in the rate, e.g. USD/EUR
- Bid – Ask Spread:
- Exercise:

- Forward quotes: Forward rates can be quoted as either as an outright quote, points or as an annualised
% forward premium or discount.

o A forward quotation expressed in points is not a foreign exchange rate as such. It is the
difference between the forward rate and spot rate.
o Bid points > Ask points: you subtract the points from the spot rate to get the outright forward
quote
o Bid points < Ask points: you add the points to the spot rate to get the outright forward quote
4. Cross exchange rate
- narrow meaning: USD as intermediate currency
- broad meaning: widely traded third currency
- Exercise p.41: USD/AUD = 1.0806; USD/DKK = 5.7210  1 USD = 1.0806 AUD = 5.2710 DKK
5.2710
 1 AUD = DKK
1.0806
 - There are 3 cases of cross rate:
o Intermediate currency is term currency in 2 available rates.
o Intermediate currency is commodity currency in 2 available rates.
o Intermediate currency is commodity in 1 rate and term currency in other rate.

Case 1: Intermediate currency is term currency in 2 available rates

o ký hiệu (c): từ perspective của client not CB

Ask (c) USD/JPY = Bid (b) USD/JPY
Bid (c) USD/JPY = Ask (b) USD/JPY
o tính sao mà Ask (c) < Bid (c)
Ask (c) USD/JPY = Bid (b) USD/JPY aka giá mua USD giá bán JPY
step 1: 1 USD = 23,200 VND (mình bán thì áp giá mua bid)
step 2: 1 JPY = 227 VND (mình mua thì áp giá bán ask)
23,200

227
Bid (c) USD/JPY = Ask (b) USD/JPY aka giá bán USD giá mua JPY
step 1: 1 USD = 23,400 VND
step 2: 1 JPY = 223 VND
23,400

223
Case 2: Intermediate currency is commodity currency in 2 available rates

bid (mua): 1 USD = 93.08 JPY (ask) = 1.22 CAD (ask)

ask (bán): 1 USD = 93.12 JPY (bid) = 1.24 CAD (bid)
Ask (c) CAD/JPY = Bid (b) CAD/JPY aka giá mua CAD (bán USD) giá bán JPY (bán USD)
93.08
1.24
Bid (c) CAD/JPY = Ask (b) CAD/JPY aka giá bán CAD (mua USD) giá mua JPY (bán USD)
 93.12
1.22
Case 3: Intermediate currency is commodity in 1 rate and term currency in other rate

(bid) / (ask)
GBP/USD = (mua GBP aka bán USD) / (bán GBP aka mua USD)
USD/JPY = (mua USD aka bán JPY) / (bán USD aka mua JPY)
<hình dung trong tay mình có đồng gì i.e. USD>
Ask (c) GBP/JPY = Bid (c) GBP/JPY aka giá mua GBP (mình bán GBP thu USD) giá bán JPY (mình
bán USD thu JPY)
 1.5245*93.08
Bid (c) GBP/JPY = Ask (c) GBP/JPY aka giá bán GPB giá mua JPY
 1.5250*93.12
Case 4: có 3 đồng tiền A,B,C (HW)

trái thẳng phải chéo & vice versa

đồng nào đứng sau trong tỷ giá thì chưa biết đc giá của đồng đó
1) A/C (c) = x/y = x1/y2 (ask (c) = bid (b)) = x2/y1 (bid (c) = ask (b)) [x1/y2 < x2/y1]
2) B/C (c) = y/x = y1/x2 (ask (c) = bid (b)) = y2/x1 (bid (c) = ask (b)) [y1/x2 < y2/x1]
3) A/C (c) = x1y1 (ask (c)) < x2y2 (bid (c))
4) C/A (c) = 1/(x2y2) (ask (c)) < 1/(x1y1) (bid (c))
Exercise:

o HKD/USD then USD/JPY

 step 1 (sell USD lấy JPY tức bid rate của b USD/JPY): 500.000/150,90 = 3313,45 USD
 step 2 (sell HKD lấy USD tức ask rate của b USD/HKD): 3313,45*7,8270 = 25934,37
HKD
o HKD/USD then USD/AUD
 step 1 (sell HKD lấy USD tức ask rate của b USD/HKD): (8.000.000 - 25934,37)/7,8270
= 1.018.789,53 USD
 step 2 (sell USD lấy AUD tức ask rate của b AUD/USD): 1.018.789,53/0,70 =
1.455.413,61 AUD
Exercise:

5. Exchange rate classification

- Upon the bank transaction of foreign exchange
o Bid rate / Ask rate
o Opening rate / Closing rate
o Spot rate / Derivative rate (Forward rate)
 contract date & value date
 spot: within 2 days from contract date
 forward: more than 2 days from contract date
 Forward value date (FVD) = T + N
 T: Time of contract concluded
 N: Term of contract
  Note: the exchange rate is binding in the contract in expected value → Used for
hedging, speculate
o Cash rate (Bank note rate) / Transfer rate:
 Case VB: Tai sao yet gia Cash va Transfer (Cash< Transfer) trong Bid rate?
→ Bank encourage to we sell currency by transfer bid rate (Security, Convenience,
Quality, …)
 Tai sao Ask rate khong chia ra Cash va Transfer?
→ Usually transfer, if we ask cash bank will only respond to you
- Upon the instruments of international payment
o Telegraphic transfer rate (TT rate):
 The rate at which banks sold foreign currency to their clients accompanying
responsibilities to transfer to the oversea beneficiaries by means of Electronic Funds
Transfer (EFT).
 Basic rate
 Pros: High speed of fund transfer, Reduce FX risks
 Cons: High cost
o Mail transfer rate (MT rate):
 The rate at which banks sold foreign currency to their clients accompanying
responsibilities to transfer to the oversea beneficiaries by post mail.
 Pros: Low cost
 Cons: Rarely used, Low speed of funds transfer
o Bank’s cheque exchange rate:
 The rate at which banks sold foreign currency in cheque form to their clients
accompanying responsibilities to transfer to the oversea beneficiaries.
 Lower than TT rate as cheque is longer and bank hold your money  cover the interest
o At sight Bank’s Draft exchange rate:
 The rate at which banks sold foreign currency in at sight Bank’s Draft form to their
clients without responsibilities to transfer to the oversea beneficiaries.
 Calculation: same as Bank’s cheque
o Usance Bank’s Draft exchange rate:
 The rate at which banks sold foreign currency in usance Bank’s Draft form to their clients
without responsibilities to transfer to the oversea beneficiaries.
- Upon the regime of foreign exchange management:
 6. Factors affecting exchange rate

- Difference of inflation rates between 2 countries:

- Difference of interest rates between 2 countries:

o Why Difference of interest rates between two countries affect the Difference of exchange rates
between two countries?
→ Based on interest rate parity: no matter what currency you invest in, the result of investment is
equal
o In long term:
 Real rates of interest are equalized across countries through arbitrage.
 A long-run tendency for interest rates differentials to offset exchange rate changes has
been demonstrated empirically.
 Currencies with low interest rates would appreciate with respect to currencies with high
interest rate.
o Example:

o The equation of interest rate parity: (1 + iUSD) = F/S (1 + iEUR). In USA:

 If iUSD goes up → Demand of USD rises → Supply of Euro goes up (inflow of Euro) →
S EUR/USD goes down
  If iUSD goes down → Demand of USD goes down → Supply of Euro goes down → S
EUR/USD goes up
 Factors affect demand/supply of forex: turnover of export, government (controlled
exchange rate), government debt (if VN attract foreign investment → increase supply of
foreign currency)
- The other factors:

__________________________________________________________________________________________

CHAPTER 4: INSTRUMENT OF INTERNATIONAL PAYMENT

1. Negotiable instruments (Công cụ chuyển nhượng)
- Definition: an unconditional promise or order to pay a fixed sum of money, with or without interest or
other charged described in the promise or order.
o Negotiable: transferable (ownership can be easily transferred)
o Instrument: document (means of making payment)
- Assignment instrument: shall be a valuable paper that unconditionally acknowledges a payment order
or a payment commitment for a definite amount of money at a certain point of time.
 Org can trade those valuable paper (to bank) to raise capital instead of debt (which required lots of
conditions with limit credit allowance).
- There are 3 kinds of negotiable instruments:
o Bill of exchange (B/E)
o Promissory notes
o Cheque
- Elements of negotiable instruments:
o Payable to order or bearer
o An unconditional order or promise to pay  Case: If the cargo not meet requirements and late
delivery: dispute settlement through contract, buyer (B) don’t accept to make payment. And if
seller (A) sell B/E to another party (C) and buyer do not make payment to C, A has to make
payment to C. In some case, in advanced economy, everyone can issue B/E without contract and
completion of delivery, as the one who issue has the final responsible of paying that amount of
money.
o Payable for a specific (fixed) amount of money
o Payable on demand or a specific future date
o In writing and signed by the person issuing the instrument
- Parties to negotiable instruments:
 o The drawer (người ký phát): person or party who writes the check (depends on negotiable
instrument – B/E: seller, Promissory note: buyer)
o The drawee (người bị ký phát): bank that holds the checking account
o The payee: person or party to whom the check is written (if B/E is not paid, payee can be
drawer)
o The endorser: person or party who makes an endorsement (ký hậu hối phiếu) (signature/mark
made to negotiate the instrument)
- Liabilities of the parties:
o The drawer is liable for paying the instrument even if it is dishonoured by the drawee.
o The drawee has an obligation to all drawers to pay checks that are properly payable and
therefore must accept all such instruments for payment when presented.
o The person or party who endorses and transfers an instrument that is presented for payment and
dishonoured must take the instrument back and pay the amount. In this case, the instrument must
be returned, and notice of dishonour must be given, in a timely manner in order for the endorser
to be liable.
o Another liability taken on by an endorser who transfers an instrument is a warrant that there are
none of the following problems with the instrument:
 It is not stolen.
 It has not been altered.
 It does not contain any forgeries.
 No other person has a claim to it.
 The endorser does not have any knowledge that the drawee or acceptor is unable to pay
the item when it is presented.
2. Bill of exchange
- Definition: B/E is an unconditional order in writing addresses by one person (drawer, exporter) to
another (drawee, importer), signed by the giving person (drawer) to whom it is addressed (drawee) to
pay on the demand or at a future date a certain sum of money to a specified person or bearer (payee).
- Features:
o Must be in writing, duly signed by drawer, accepted by drawee, properly stamped.
o Must contain an order to pay.
o Must be unconditional order.
o Must be to pay money and money alone.
o The sum payable must be certain / capable of being made certain.
o Parties to a bill must be certain.
- Elements: A bill of exchange contains
o (1) Title “Bill of exchange” inserted in B/E and in language drawing up B/E (compulsory)
o (2) An unconditional order to pay a determinate sum of money
 Amount of money must be stated in both number and word.
o (3) Name of person who is to pay (drawee)
o (4) Statement of time/term of payment
 Where term of payment is not stated in the bill of exchange, the bill of exchange thereof
shall be paid at sight when presented;
 Sight draft: at sight / on presentation / on demand / at X sight / after sight
  Time draft: after X days after sight / at X days after date of B/E / at X days after B/E date,
shipment date / on X
o (5) Statement of place where payment is to be made
 Where place of payment is not stated in the bill of exchange, the bill of exchange thereof
shall be paid at the address of the drawee;
 Where place of drawing is not stated specifically in the bill of exchange, the bill of
exchange thereof shall be considered as being drawn at the address of the drawer.
o (6) Name of person to whom or to whose order payment is to be made (payee)
o (7) Statement of date and place where the bill is issued
o (8) Signature of person who issues the bill (drawer)
 Signature is the direct signature by hand.
 Signature of representative of organization must be enclosed with a seal.

- Parties to B/E:
o Drawer: person to who draws the bill (exporter or party to whom the amount is due)
 Draw B/E
 Ensure presentation of B/E must be accepted (time/term) and paid (sight)
 Accepts full compensation responsibility for holders in case the bill is dishonored
 o Drawee: person to whom the bill is addressed to (importer or party who is required to pay
amount)
 Not liable until accepted it using the customary form of acceptance
 Any change to payment methods after acceptance will mean an amendment to maturity
date of the bill is necessary.
 Accept the terms of B/E  Legally bind to pay in accordance with acceptance condition
 Fail to accept the bill  Dishonored by non-acceptance
 Fail to pay on due date after acceptance  Dishonored by non-payment
o Payee: person to whom the sum for which the bill is drawn to be paid (usually drawer)
o Endorser
o Endorsee
o Acceptor: By accepting the bill, a drawee undertakes to pay it in accordance with terms of
acceptance
o Holder (in due course) (Người nắm giữ hợp pháp)
 Acquires more rights in an instrument than the transfer or had
 To obtain the rights, they must satisfy a number of conditions
- Document & Payment cycle:

- Classification:
o Time/term of payment:
 Sight draft: payable on presentation to the drawee (or after 1 day belong to custom)
  Time draft (usance bill / tenor bill / term bill): allow for delay in payment (30, 60, 90,
120 days counted from acceptance date), presented to the drawee, who signifies
acceptance by writing or stamping notice of acceptance on its face.
o Drawer:
 Trade/Commercial bill: used primarily for financing loan transaction which originated
from trade transaction.
 Bank bill: when banker has accepted a bill, the market regards bill as a commodity of
different quality from an ordinary trade bill (Read more: Nostro – Vostro)
o Document:
 Clean bill: bill forwarded without accompanying documents but has some validity in the
case of payment claims are known  Use for payment of small amount of money
 Documentary bill: after shipping, bill & relevant documents must be forwarded to bank
for processing
o Transferability:
 Nominal draft: clearly name the payee without term “to order”  Cannot be transferred
by hand exchange or endorsement, only by contract procedure
 Order draft: clearly name the payee with term “to order”  Easy to transfer by
endorsement
 To bearer draft: who hold the draft can transfer it by hand exchange
- Clause on B/E:
o D/P (applied for sight draft)
 The drawer/seller gives instructions to the remitting bank to deliver documents (B/E &
commercial documents) relating to the goods against payment of the bill.
 The remitting bank instructs the agent bank, i.e. collecting bank to follow the same
instructions. These instructions are in the case of a sight bill of exchange.
 The buyer makes payment and takes delivery of the documents, which need to be
presented to the carrier to delivery of the goods.
o D/A (applied for usance draft)
 This is another clause also used in the case of usance bill of exchange.
 The seller sells goods on a credit basis.
 The drawer/seller gives instructions to the remitting bank to deliver documents relating to
the goods after the bill has been sighted i.e. accepted and the maturity date is calculated,
as instructed by the seller, e.g. after the date of the bill of exchange or the bill of lading.
 This means the buyer agrees with the terms and conditions of the sale contract and
undertakes to pay on the maturity date.
 The remitting bank instructs the agent bank i.e. collecting bank to follow the same
instructions.
- Some techniques related to B/E:
o Acceptance:
 The beneficiary must present B/E to request for acceptance in following cases:
 Drawer stated on B/E: “This B/E must be presented to request for acceptance”
 B/E states the payment term: “After a certain period since the date where B/E is
accepted / B/E must be presented to request for the acceptance within a period of
one year since the drawing date”
  Where the bill is payable after sight. Presentment for acceptance is necessary in
order to fix the maturity of the instrument.
 Where a bill is drawn payable elsewhere than at the residence or place of business
of the drawee.
 Importance and requisites of acceptance:
 The acceptance of a bill is signification by the drawee of his assent to the order of
the drawer  Acceptor shall be obliged to make unconditional payment in line
with the accepted content to the beneficiary.
 An acceptance is invalid unless it complies with following conditions:
o It must be written on bill and signed by the drawee.
o It must not express that drawee will perform his promise by any other
means than the payment of money.
o The presentation of bill of exchange to request for the acceptance shall be
considered as valid where the bill of exchange is presented by the
beneficiary or the legal representative of the beneficiary at the place of
payment, during the working time of the drawee and is not overdue yet.
 Form and contents of acceptance:
 Form: accepted, date of acceptance and signature on the front side of B/E or
another distinct document.
 Contents:
o General acceptance: to confirm the drawee’s liability and agreement to
terms of bill.
o Qualified acceptance: upon accepting bill, drawee varies or alters its term
e.g. by partial acceptance of the amount. Include: Qualified as to certain
event / as to amount / as to tenor / as to place of payment
o Guaranty (Bảo lãnh):
 Definition: a third person (guarantor) makes a commitment with the guarantee to pay one
part or entire of the amount of money stated on B/E upon its maturity where the
guarantee fails to make payment or makes insufficient payment.
 Form of guaranty:
 The guaranty of bill of exchange is performed by the way where the guarantor
states the phrase “guaranteed”, amount to be guaranteed, name, address, signature
of the guarantor and name of the guarantee on the bill of exchange or on its
attached auxiliary sheet
 In the event where the name of the guarantee is not stated, the guaranty thereat
shall be considered being provided to the drawer.
o Endorsement (Ký hậu):
 Definition: the transfer of any document or instrument to another person by signing on its
back / face / slip of paper attached to it.
 Apply for “To order B/E”. A bill is an order bill when:
 It is expresses to be payable to order, or
 It is payable to the order of a particular person, or
 It is payable to a particular person and does not contain “prohibiting any transfer”
 Endorsement is not required on transfer of bearer bill
 Types of endorsements:
  Blank endorsement:

 Special endorsement:

 To order endorsement:

 Nominated / Restrictive endorsement

 Conditional endorsement (considered):

 Without recourse endorsement

3. Promissory note (Kỳ phiếu/Hứa phiếu)
- Definition: an unconditional written promise by one party, the maker, to pay a specified amount of
money to another party, the payee or to the bearer of instrument, at a fixed or determinable future time
or on demand.
- Features:
o Must be in writing, duly signed by its maker and properly stamped.
o Must contain an undertaking or promise to pay.
o Must not be conditional
o Must contain promise to pay money only.
o The parties must be certain.
o May be payable on demand or after a certain day.
o The sum payable mentioned must be certain / capable of being made certain.
- Content:
 o Title: “Promissory note” is stated on the front side of the promissory note
o A commitment of unconditional payment of a definite amount of money
o Payment term: on demand (khi được yêu cầu)
o Place of payment  If lack, it shall be the address of issuer.
o Name for organizations, full name for individuals of the beneficiary appointed or requested by
the drawer to pay the Promissory Note in accordance with the order of the beneficiary or
requested to pay the promissory note for the holder  Beneficiary: Exporter (Seller)
o Place and date of drawing (Không liên quan đến ngày giao hàng trên B/L or Consignment note
vì đây là lời hứa)  If lack, it shall be the address of issuer.
o Name for organizations, full name for individuals, address and signature of the issuer  Drawer:
Importer (Buyer)
- Party:
o Maker (Drawer): the person who makes the note and promises to pay the amount stated therein.
o Payee: the person to whom the amount is payable.
o Endorser: the person who endorses the note in favor of another person.
o Endorsee: the person in whose favor the note is negotiated by endorsement
- Distinction between B/E & Promissory note:

4. Cheques (Séc)
- Definition: A cheque is bill of exchange, drawn on a bank and payable on demand  A cheque
contains the implied promise of its drawer that the drawer has funds on deposit at the bank to meet the
amount.
- Features:
o Must be in writing and duly signed by the drawer.
o Must contain an unconditional order.
o It is issued on specified banker only.
o The amount is always certain (both in figures and words).
o The payee is always certain.
o It is always payable on demand.
o Must bear a date otherwise it is invalid and shall not be honored by bank.
- Contents:

o The title “Cheque” to be printed on top of the cheque;

o A definite amount of money;
o Name of the bank or the payment service supplier being the drawee;
o Name for organization, full name for individual of the beneficiary who is designated or
requested by the drawer to make payment of the cheque in accordance with the order of the
beneficiary or requested to make payment of the cheque to the holder;
o Place of payment  If lack, it shall be paid at business place of drawee (bank).
o Drawing date;
o Name for the organization, full name for individual and signature of the drawer.
- Notice:
o Apart from the contents stipulated in Paragraph 1 of this Article, cheques suppliers may provide
more contents without arising any legal obligation of parties, such as the account number which
the drawer is entitled to use to draw cheques, address of the drawer, address of the drawee and
other contents.
o In the event where a cheque is paid through the Cheque Clearing Payment Center, there shall be
further contents as provided for by the Cheque Clearing Payment Center on the cheque.
o The back side of a cheque is used for stating contents of cheque assignment. The amount of
money stated in number of a cheque must be equal to the amount in word. Where the amount in
number is different from the amount in word, the cheque shall not be valid for payment.
- Classification:
 o Traveler’s Check: A check, often used as a substitute for cash, that is (1) drawn on or payable
through a bank and (2) payable on demand by the holder. A traveler’s check does not require the
holder to present it to the drawee bank for payment.
o Cashier’s Check: A check drawn by the bank on itself, rather than on a drawer’s account, which
constitutes the bank’s (1) promise to pay the payee on presentment and (2) assumption of
liability if the bank fails to pay.
o Certified Check (Séc bảo chi): A check that has been accepted by the drawee bank prior to
presentment (indeed, often at the time it is issued). By certifying the check, the bank assumes all
liability for failure to pay the check on presentment.
o Open cheque: A cheque is called ‘Open’ when it is possible to get cash over the counter at the
bank
o Crossed cheque: The payment of this cheque is not made over the counter at the bank. It is only
credited to the bank account of the payee. A cheque can be crossed by drawing two transverse
parallel lines across the cheque, with or without the writing ‘Account payee’ or ‘Not Negotiable’.
o Bearer Check: This check is payable to anyone who presents the check. The check can be
marked "cash," without naming anyone in particular
o Order check: An order cheque on the hand is a cheque made payable to a certain person or order.
The language of such a cheque runs thus ‘Pay to Mr. X or order USD five hundred only’. An
order cheque can be transferred only by endorsement.
o Nominated cheque: cheque made payable to a certain person, cannot be transferred by
endorsement.
- Negotiation & Transfer:
o Negotiation of an instrument payable to an identifiable person requires the endorsement of the
identifiable person and delivery, or transfer, of the instrument.
o If the endorsement of the payee is forged, then negotiation does not occur, and the rightful owner
can make a claim against the person in possession of the instrument.
o If the bank takes the check with the forged endorsement, the bank is subject to a claim directly
from rightful owner or a claim from the paying bank for breach of the transfer warranty. The
bank would most likely absorb the loss.
o This is the reason many banks are reluctant to take third party checks.
- Endorsement:
o A blank endorsement (or an endorsement in endorsement blank) consists simply of the signature
of the payee and is the most common form of endorsement.
o A special endorsement may state like “Pay to the order of Mr A.” and signed under that
statement.
o In a restrictive endorsement, the payee or other holder of the instrument, in addition to signing
his or her name, identifies the purpose of the transfer and restricts the use to which the
instrument can be put. The most common restrictive endorsement, used for depositing an item to
an account, is "For Deposit Only."
- Holder in due course:
o Negotiable instruments are processed freely through the clearing system and given value (cash or
credit) because they have protections. Accepting a negotiable instrument without being liable for
any claims and defenses against it is known as being a holder in due course.
- Distinction between cheque & B/E: