International payments and settlements currency transactions Essay

International payments and settlements currency transactions - Essay Example Prestigious companies of the stature of Halliburton, Lucent Technologies and Monsanto face allegations of bribery to gain unnatural advantage in business and billions of dollars involved. A discussion on this issue including an assessment of the impact of the Foreign Corrupt Practices Act and the Organisation of Economic Cooperation and Development Convention forms 'Section-2' of this paper. The objective of this section is to understand the law and to suggest a way forward for businesses and governments to control this menace. Utilitarian analysis of bribery serves no purpose at all since there is no ground for choosing an option that allows for bribery. International trade involves the exchange of goods and services ('goods') and international payments. There are several ways to make payment for goods received, each involving certain methods and procedures and the inherent advantages and disadvantages. The choice of mode of payment depends upon the contract negotiated between the exporter and the importer. Within this parameter, each partner to the agreement will tend to look for the most cost-effective and secure way of making the transaction. Open account trading is the simplest where the supplier makes an invoice and the buyer pays. Rarely followed in trade, only between the US, UK, and some European countries, and there is no further reference to this mode in this paper. Documentary Collection Exporters, to obtain payment from customers in another country, use the collection services provided by banks. The International Chamber of Commerce has established a set of, standard and internationally accepted, rules known as the 'Uniform Rules for Collection', (1995 Revision, ICC publication No. 522). The bank may be required to handle financial documents such as the bill of exchange or promissory note and other secondary documents like the Bill of Lading, Invoice, Certificates of Inspection and so on. When both types of documents are to be collected, it is called documentary collection. Clean collection is of only financial documents. The crucial financial document is the 'Bill of Exchange'. It is an agreement to pay a fixed sum by the buyer to the seller on a fixed date. It is an instrument made out in writing and signed by the maker (drawer, the importer) directing another person (drawee, usually a bank) to make payment to a third party (payee, the exporter). Called 'Bill of Exchange' in International law, it is called a 'Draft' in the Uniform Commercial Code. A bill of exchange differs from a promissory note, in that, it is a firm commitment to pay rather than a promise to pay and a third party - the drawee is involved. A bill of exchange may also be subject to meeting certain conditions by the payee. A draft has no value unless the Importer accepts it. However, the payment made immediately (Sight Draft, or Documents against Payment D/P) or at a mutually agreed future date, endorsed on the draft (Time Draft, or Documents against Acceptance D/A, or Usance). The advantages of this mode of payment are: It is relatively safe for exporter offering a measure of protection. The