International Trade The Export ProcessPresentation Transcript
‘ Banking and Finance Information for Exporters’
16 th April 2008
Presented by Ray Buxton
Senior Manager International Trade, Bendigo Bank Limited
Tel: 03 8414 7755
Mob: 0409 406 009
International Trade The Export Process
Exporting - Risk Management
Methods of Payment.
FX Risk Management.
Major Export Risks
-methods of payment/debtor insurance
Bank & Country risk
Foreign Currency risk
Aim is to be paid.
The amount of trust between buyer and seller, determines the method of payment.
Do your homework, credit checks etc.(know your buyer)
Agreeing to payment terms is part of the sales process.
Methods of Payment
The Three Main Methods of payment (1) Open account. (2) Letter of Credit. (3) Documentary Collections. Talk to your banker about the most appropriate method.
Payment risk is dependant on who pays when.
As an exporter if payment is received up front, prior to shipment, payment risk has been mitigated.
Great for exporter, poor for importer.
May make your product offering less attractive in comparison to other payment terms.
Open Account cont’d
In reverse, if goods are shipped on the basis of payment against receipt of goods at the port of despatch, then obviously the exporter maintains all payment risk.
In either case insist on payment via telegraphic transfer direct to your bank account.
Documentary Letters of Credit
Guarantee issued by the importer’s bank authorising the payment of money to the exporter, against delivery by the exporter of specific documents.
Mitigates risk of non payment.
Document and payment flow under an Export Letter of Credit
What’s in a “typical” Letter of Credit
Exporter’s details, currency, amount.
Expiry date, latest shipment date.
Shipping details, Insurance details.
Incoterms, e.g FOB, CIF, C&F
Brief description of goods.
Terms of payment, sight, 30 days sight,etc.
Common Documents Required
Bills of Lading.
Certificate of origin.
How can Bendigo Bank assist?
Check to see if the L.C is workable.
Will you be able to comply with it?
Check the documents in readiness for dispatch.
Negotiate documents, lodge claim with the reimbursing bank.
Collect your funds.
Assist in mitigation of your FX risk.
Pre / Post-shipment finance.
Commonly known as “DP” or “DA”.
A compromise between open account trading and documentary letters of credit.
Payment not guaranteed.
Documentation: same as Letter of Credit
Document and payment flow under an Export Documentary Collection
Financing Trade Transactions
Pre - shipment finance.
-to provide finance for the purchase of raw materials/finished goods to fulfil an export order.
Post - shipment finance.
-to provide finance for the period from shipment to receipt of funds from overseas buyer
Finance available in all major currencies for a period no longer than 180 days.
Under Documentary Credit with/without recourse ( confirmed letter of credit).
Documentary Collection with recourse.
FX Risk Management
Forward Exchange Contracts.
-an agreement between two parties to exchange on a specific future date a fixed amount of one currency for an amount of another currency at a foreign exchange rate agreed on the day the agreement was entered into.
FX deposits / FX loans.
-term deposits and term loans denominated in a foreign currency.
Foreign Currency Accounts
-at call bank account denominated in a foreign currency.