Göteborg Trade Finance Presentation Autumn 2006


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Göteborg Trade Finance Presentation Autumn 2006

  1. 1. Göteborg Trade Finance Presentation Autumn 2006
  2. 2. Topics for Discussion Documentary Credit Roles of Different Banks How to mitigate risk using Documentary Credit Possible Financing Arrangements Documentary Collections Roles of Different Banks Possible Financing Arrangements Other Financing Arrangements without using Documentary Credit or Documentary Collection instruments Usage of Documentary Credit and Documentary Collection in China
  3. 3. Documentary Credit Contract Seller - Beneficiary Buyer - Applicant L/C- advice Application The Advising Bank The Issuing Bank The Issuance of L/C
  4. 4. Documentary Credit Seller - Beneficiary Shipment Buyer - Applicant Doc Doc Doc The Advising/Negotiating Bank The Issuing Bank
  5. 5. Confirmed Credit - when??? > Uncertainty about the financial strength of the country and/or the Issuing Bank . > Risk for political disturbances. > Risk for war. > Long delivery period could be a reason in certain cases. > The value of the goods is of a substantial size for the Seller. Note! Our payment obligations is in force only if documents presented are in accordance with the L/C terms.
  6. 6. Financing Possibilities using Documentary Credit Buyer – Finance a transaction via Trust Receipt Seller – Discount a Confirmed Letter of Credit without Recourse – Discount a bill with Recourse
  7. 7. Documentary Collections Documents against Payment – Cash against delivery of documents Documents against Acceptance – Credit terms granted by the seller to the buyer Role of different banks - Remitting Bank - Collecting Bank Financing possibilities - Bills Discounting - Trust Receipt
  8. 8. Other Financing Arrangements without using Documentary Credit or Documentary Collection Instruments Supplier’s Financing – Arrange based on the risk of the buyer - SEB discount an invoice which is submitted and accepted by the Buyer and pay their Supplier upon deduction of interest and handling commission Purchase of Receivables – Arranged based on the risk of the seller - SEB discount an invoice submitted by the Seller and pay the Seller by buying the risk of the Buyer. - Interest will be charged on maturity or a pre-agreed date
  9. 9. Usage of DC and DP in China Important to note that all domestic trade are conducted in RMB USD Transactions within China are only allowed if or at least one party is located in the Free Trade Zone Handling of documentation in China Bonded Logistic Park (BLP) in the Free Trade Zone - Deemed Export - Avoid HK “round tripping”
  10. 10. The ratio of the registered foreign capital to total investment If the company sets up a wholly owned company, 2/3 of the investment must be submitted as registered capital, if the total investment is below 3 MUSD. 1/3 can be foreign debt. Total investment Registered capital US$3,000,000 and below 70% US$3,000,000---10,000,000 50% (Less than US$ 12,500,000) (not less than US$2,100,000) US$10,000,000—30,000,000 40% (Less than US$12,500,000) (not less than US$5,000,000) Above US$30,000,000 33.3% (Less than US$36,000,000) (not less than US$12,000,000)