Paying

Prepare

Overview

In this module, we will identify the different ways of effecting international payments in export-import transactions. In particular, we will compare their relative merits for exporters and importers and, therefore, how lawyers should advise clients who are engaging in global transactions with relatively new versus established partners.

Read

To prepare, please download and complete the assigned reading for this module.

Demonstrate Class Engagement

Demonstrate class engagement by submitting evidence of (a) pre-reading and (b) post-class reflection in relation to any five modules of the course.

Come to Class

The class is on 18 January 2025 (intensive class).

Participate

Warm-Up

The following videos provide simple overviews of (a) why different payment options exist for export-import transactions and (b) what the alternatives are.

Payment Options for Transborder Transactions

Comparison of International Payment Options

The following charts summarise the steps in each different payment option:

Image 1: Payment in Advance

Image 2 Open Account

Image 3: Letter of Credit

Image 4: Documentary Collection

Game

To consolidate your understanding of the different international payments, we will play an export-import game. Toys will be placed on a table indicating (a) the Seller's warehouse, (b) the Seller's bank, (c) the Buyer's place of business, and (d) the Buyer's bank.

The professor will give you a role (Buyer or Seller) and let you know the agreed payment system. For the purposes of the game, the Seller is based in Tokyo and will use the Yen Bank; the Buyer is based in New York and will use the Dollar Bank.

Using the toys, you will narrate (a) the risks you are bearing or minimising by accepting the payment system; (b) the flow of funds; and (c) the documents that are created, issued or delivered during the course of the payment transaction.

If you get it right, you can win a prize!

Advise

First, you will recall that your client wants to order 10 Ball-Bots to be delivered to New York by late July in preparation for the tennis tournaments in Canada and the US in August and September as part of the North American hard court swing. Your client agrees to the deal of a fixed lease of Y200,000 per month per unit. (Both parties agree to forego the Y50,000 service charge since the Ball-Bots will be used for fewer than three months).

Identify the four means your client may make international payment to JSport AI for the Ball-Bots.
Which mode of payment would be most attractive to your client? Under what commercial circumstances would JSportAI be prepared to avail itself of this payment mode?
Which mode of payment would be least attractive to your client? Under what commercial circumstances should your client be prepared to accept this mode of payment?
What are the two most secure forms of payment for both your client and JSportAI ? What makes these methods more secure than the other two modes of international payment? Describe the steps involved in effecting payment.

Second, you will continue your negotiations on the line-calling technology.

You will recall that, although Hawkeye is still the cutting-edge in camera technology for line calls in professional tennis matches, JSportAI KK has developed hardware that includes better audio responses. Instead of simply calling "fault" or "out", it can also detect when a call is close and give a verbal explanation of where the ball landed to satisfy incredulous players and fans (for example, the ball landed 10% on the outside edge of the baseline). It also has software which contains an "emotion chip" that can provide "gentler voices" depending on the stage of the match (for example, in a tiebreak). In Japan, however, the technology has been deployed in country clubs -- (tennis is mostly a club sport for wealthy people in Japan, especially in the larger metropolitan cities) -- and it has two problems for your client: (a) the audio messages are in Japanese; and (b) the encoded voices are "cute" anime-style voices that, while fun for the country club setting, are not appropriate for professional, globally-televised matches.

To date, the sticking point in the negotiations has been over software licensing and modifying the voice recordings. Although these issues remain, the parties agree now to a two-stage business arrangement. The first stage involves: (a) the purchase of JSportAI's hardware with a limited license to use them in the lower-tier Challenger and Futures tournaments in Europe in April and May 2025 (leading up to the French Open); (b) with JSportAI incorporating English voice recordings into the revised software using its preferred voice actors; and (c) with no right for the client to re-engineer the software or hardware. The deal involves the sale of 100 line-calling cameras for USD $1,000 each to be delivered to the client's storage warehouse outside the Port of Osthafen, Frankfurt, by 30 May 2025.

(The second-stage involves a "closer partnership" where the two parties jointly develop the "second generation" of line-calling technology for deployment in professional tennis tournaments worldwide in 2025 and 2026. (The details of the second-stage business arrangement are yet to be finally settled).)

In this round of negotiations, you will discuss the shipping terms (INCOTERMS) and payment details for the line-calling cameras based on this current shared understanding.

Consolidate

Of the international payment methods, (a) the letter of credit and (b) the documentary collection (bill of exchange) might be the most unfamiliar to you. Below are some animations that explain these two payment methods in greater depth than the overview videos above.

Videos on Letters of Credit

Videos on Documentary Collection

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