This document provides an overview of international payment methods, including cash in advance, letters of credit, documentary collections, and open account. It discusses the advantages and disadvantages of each method from the perspective of both buyers and sellers. Letters of credit are described in more detail, outlining the key parties involved, steps to obtain an L/C, required documents, and potential issues that can arise. Export incentive programs from the US are also briefly outlined.
Letter of Credit | Documentary Collection | DA and DP process | Trade FinanceSachin Paurush
Various topics of Trade finance:
1. Letter of Credit: parties involved and process
2. Documentary Collection
3. DA and DP process
4.Trade Finance avenues
Mike Filchock's powerpoint slides from his presentation at Fayette County's Exporting 101 Seminar. Mike is with SunTrust Bank's Global Trade Solutions Department.
Letter of Credit | Documentary Collection | DA and DP process | Trade FinanceSachin Paurush
Various topics of Trade finance:
1. Letter of Credit: parties involved and process
2. Documentary Collection
3. DA and DP process
4.Trade Finance avenues
Mike Filchock's powerpoint slides from his presentation at Fayette County's Exporting 101 Seminar. Mike is with SunTrust Bank's Global Trade Solutions Department.
World Bank plays role as an admin and controls imports & exports among various countries. It sets certain required rules to be guided by facilitating payment procedures by means of IBRD and IDA.These are the two branches that control the transactions of funds very efficiently without causing any tiff between the importer and the exporters.
Non-Recourse Factoring Overview for Commercial Finance BrokersChris Lehnes
What is Factoring?
The sale of a company’s accounts receivable invoices in order to obtain working capital.
Although there are numerous types of factoring; Versant offers full notification, non-recourse factoring.
This means that account debtors (customers of the client company) are notified to pay Versant directly while the credit risk of non-payment is assumed by Versant.
It also means we do not care about the financial condition of your client. We only care about the quality of their accounts receivable.
5. Methods of Payment in International Trade/Export and Import FinanceCharu Rastogi
This presentation discusses methods of obtaining export and import finance such as Accounts Receivable Financing, Factoring (Cross-Border Factoring), Letters of Credit (L/C) Banker’s Acceptance (BA), Working Capital Financing, Medium-Term Capital Goods, Financing (Forfaiting) and Countertrade. It also discusses methods of payment of international trade; Cash in Advance, Letters of Credit, Documentary Collections and Open Account followed by a comparative study of different methods. Furthermore, types of letter of credit and procedure of working of a letter of credit are also discussed.
Documentary letter of credit process flow chartKamal Mohta
Letter of credit is an excellent way to protect yourself from fraudulent Chinese suppliers. This diagram will show the entire documentary letter of credit opening process in easy to understand process flow chart. For more details about ways to pay advance deposit to vendors in a safe way please visit http://www.chinaimport.co/china-sourcing-news/methods-of-payment-to-the-chinese-suppliers
World Bank plays role as an admin and controls imports & exports among various countries. It sets certain required rules to be guided by facilitating payment procedures by means of IBRD and IDA.These are the two branches that control the transactions of funds very efficiently without causing any tiff between the importer and the exporters.
Non-Recourse Factoring Overview for Commercial Finance BrokersChris Lehnes
What is Factoring?
The sale of a company’s accounts receivable invoices in order to obtain working capital.
Although there are numerous types of factoring; Versant offers full notification, non-recourse factoring.
This means that account debtors (customers of the client company) are notified to pay Versant directly while the credit risk of non-payment is assumed by Versant.
It also means we do not care about the financial condition of your client. We only care about the quality of their accounts receivable.
5. Methods of Payment in International Trade/Export and Import FinanceCharu Rastogi
This presentation discusses methods of obtaining export and import finance such as Accounts Receivable Financing, Factoring (Cross-Border Factoring), Letters of Credit (L/C) Banker’s Acceptance (BA), Working Capital Financing, Medium-Term Capital Goods, Financing (Forfaiting) and Countertrade. It also discusses methods of payment of international trade; Cash in Advance, Letters of Credit, Documentary Collections and Open Account followed by a comparative study of different methods. Furthermore, types of letter of credit and procedure of working of a letter of credit are also discussed.
Documentary letter of credit process flow chartKamal Mohta
Letter of credit is an excellent way to protect yourself from fraudulent Chinese suppliers. This diagram will show the entire documentary letter of credit opening process in easy to understand process flow chart. For more details about ways to pay advance deposit to vendors in a safe way please visit http://www.chinaimport.co/china-sourcing-news/methods-of-payment-to-the-chinese-suppliers
Some of the documents required in export transaction are preliminary inquiry and offer, confirmation of order, export license, finance among others. There are two dozen commercial and regulatory documents that are involved in the pre-shipment stage of an export transaction.
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BANK AND FOREIGN TRADE
International trade terminologies
• Trade
• Home trade
• Foreign trade
• Import
• Export
• Importer
• Exporter
• Risk
• Types of risks
• ECGC
• Marine insurance
Steps in Export process
Steps in import process
Pre shipment finance and its importance
Post shipment finance and its importance
Methods of payment in international trade
Banking formalities in trade
Procedure of obtaining export finance
DOCUMENTS USED IN FOREIGN TRADE
• Commercial invoice
• Consular invoice
• Certificate of origin
• Bill of lading
• Mates receipt
• Shipping bill/ Let ship order
• Bill of Entry
LETTER OF CREDIT
Meaning of letter of credit
Procedure of obtaining letter of credit
Parties involved under letter of credit
Types of letter of credit
Payment terms - EXIM Business and Credit Risk AnalysisKartik Jhamb
An understanding about the international payment terms used in the industry for export / import business.
Credit Risk Analysis is very important to protect capital and keep the business sustainable.
Payment for exports and export promotion schemeHarender Singh
Payment for exports refers to the process of receiving payment from a foreign buyer for goods or services that have been exported. The payment process for exports can be complex and involves various risks, including currency exchange rate fluctuations, non-payment, and fraud.
There are several methods of payment that can be used for exports, including:
Advance Payment: This is where the buyer pays for the goods or services in advance, before they are shipped or delivered. This method is the most secure for the exporter, but it may not be acceptable to the buyer who may not want to bear the risk of paying in advance.
Letters of Credit: This is a guarantee issued by a bank on behalf of the buyer that the payment will be made to the exporter once the goods or services have been delivered and the required documentation is provided. Letters of credit provide a secure method of payment for the exporter as long as all conditions of the letter of credit are met.
Documentary Collections: This is a process where the exporter ships the goods to the buyer and provides the shipping documents to their bank. The bank then sends the documents to the buyer's bank, who will release the documents to the buyer once payment has been made.
Open Account: This is where the exporter ships the goods to the buyer and allows the buyer to pay at a later date, typically 30-90 days after the shipment. This method is the least secure for the exporter as they may not receive payment if the buyer defaults.
It is important for exporters to carefully consider their payment options and to understand the risks associated with each method. Exporters may also want to consider using the services of a trade finance professional or export credit agency to help mitigate risks and ensure timely payment.
It includes EXIM financing - Preshipment and Post shipment Financing, Forfaiting and factoring. In addition to this Interest rate subvention and ECB are also covered
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Since pi network is not launched yet on any exchange, the only way you can sell pi coins is by selling to a verified pi merchant, and this is because pi network is not launched yet on any exchange and no pre-sale or ico offerings Is done on pi.
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Lecture slide titled Fraud Risk Mitigation, Webinar Lecture Delivered at the Society for West African Internal Audit Practitioners (SWAIAP) on Wednesday, November 8, 2023.
Turin Startup Ecosystem 2024 - Ricerca sulle Startup e il Sistema dell'Innov...Quotidiano Piemontese
Turin Startup Ecosystem 2024
Una ricerca de il Club degli Investitori, in collaborazione con ToTeM Torino Tech Map e con il supporto della ESCP Business School e di Growth Capital
2. Trade Statistics
• According to U.S. Department of Commerce (October,
1999), U.S. exports to Taiwan amounted to U.S.$ 10.466
billion from January to July of this year, while during the
same period only U.S.$ 7.466 billion worth of American
products were sold to mainland China.
• The United States exported 1.4 times more goods to
Taiwan than to the mainland. Mainland China is, however,
265 times the geographical size of Taiwan with a
population 58 times larger.
3. Cash in Advance
• Buyer pays before shipment
• Used in new relationship
• Transactions are small and buyer has no
choice
• Maximum security to sellers
• No guarantee that goods are shipped
4. Draft:
• A bill of exchange-- an unconditional
promise drawn by party (exporter),
instructing the importer (buyer) to pay the
face amount of the draft upon presentation
5. Letters of Credit
• What is L/C?
– A document issued by a bank stating its
commitment to pay someone (seller or
exporter) a stated amount provided the seller or
exporter meets specific terms and conditions
• also called the documentary letters of credit
• Most common payment method in
international trade
6. International Methods of Payment: Advantages and
Disadvantages
Method
cash in advance
Risk
L
Sight draft
M/L
Letters of credit
Irrevocable
Revocable
M
M/H
Time draft
M/H
Consignment sales
M/H
Open account
H
Chief Advantage
Chief Disadvantage
No credit extension required Can limit sales potential, disturb
some potential customers.
Retains control and title;
If customer does not or cannot
ensures payment before
accept goods, goods remain
goods are delivered
at port of entry and no payment is due
Banks accept responsibility If revocable, terms can change
pay; payment upon
during contract work.
presentation of paper; costs
go to buyer
Lowers customer resistance Same as sight dragt, plus goods
by allowing extanded paymentdelivered before payment is due
after receipt of goods
or received
Facilitates delevery; lowers Capital tied up until sales; must
customer resistance
establish distributor's creditworthiness
need political rish insurance in some
countries; increased risk from
currency controls
Simplified procefure; no
High risk; seller must finance
customer resistance
production; increased risk from
currency controls
7. Methods of Payment
Risk Protection
Buyer
Min
Max
Confirmed
Unconfirmed
Sight
Draft
Max
Cash in
Advance
Letter of
Credit
Seller
Time
Draft
Documentary
Collection
Min
Open
Account
8. Steps in Obtaining L/C
• Buyer and seller agree on the terms of a sale, seller
requests buyer to arrange for his bank to open a
L/C
• The buyer’s bank (issuing bank) prepares a L/C
• The buyer’s bank then sends the L/C to its
corresponding bank (buyer’s bank), which is
called the advising bank
• The advising bank forwards the L/C to the buyer
for approval-- terms can be amended
• After final terms (agreed), goods shipped
9. • L/C (continued)
• Shipping documents
• Bill of Lading:
–
–
–
–
title documentcontract between carrier and shipper
shipper’s receipt of the goods
document assigns control of goods
• Commerce Invoice:
– description of the product, price and others
10. • Packing list:
– outlines things to be filled
• Certificate of Insurance
• Certificate of Origin
11. Documentary Credit Procedure
(1) Contract of Sale
Buyer
(Importer)
(2)
Request
to Provide
Credit
(5) Delivery of Goods
(8)
Documents
& Claim for
Payment
Importer’s Bank
(Issuing Bank)
Seller
(Exporter)
(6)
Documents
Presented
(7) Documents Presented to
issuing Bank
(9) Payment
(3) Credit Sent to Correspondent
(4)
Letter of
Credit
Delivered
Correspondent
Bank
13. Documentary Letter of Credit
• Conditional, legal obligation of bank to pay
beneficiary
• Bank places its internationally accepted
credit rating before customer’s
• Eliminates commercial risk
14. Principal Parties to Letter of
Credit
• Applicant
(importer/buyer/account party)
• Beneficiary
(exporter/seller)
• Issuing Bank
(guarantor)
• Correspondent Bank
15. Use a Letter of Credit to Seller
when:
•
•
•
•
•
Credit standing of buyers is uncertain
Your ability to absorb risk is low
Merchandise is custom-made or high value
Economic, political conditions unstable
Use does not harm you competitive stand
16. To the seller,
having a Letter of Credit means:
• Issuing bank eliminates commercial risk of
buyer
• Confirmation eliminates economic,
political, foreign bank risk
• Streamlines pre-export financing
17. To the buyer,
having a Letter of Credit means:
• Payment made upon full compliance of L/C
term
• Possible import/export financing
(bankers’ acceptance)
• Buyer must tie up credit availability
(potential loan)
18. The life of a Typical Banker’s Acceptance
5. Shipment of Cars
Prior to B/A Creation
At and just after B/A Creation
At maturity date of B/A
3. L/C
7. Shipping documents & Time Draft
American Bank
Draft Accepted (B/A Created)
8. Payment - Discounted Value of B/A
9. Payment-Discounted Value of B/A
Mr. Susuki
(Exporter)
6. Shipping Documents & Time Draft
1. Purchase Order
4. L/C Notification
9. Payment - Face Value of B/A
10. Signed Promissory Note for
Face Value of B/A
6. Shipping Documents
2. L/C Application
Mr. Jones
(Importer)
Japan Bank
15. B/A Presented at Maturity
16. Payment - Face Value of B/A
Money Marker
13. Payment-Discounted Value of B/A
Investor
12. B/A
19. Where We Go Wrong:
• L/C expired
• Late shipment
• Documents discrepancy
–
–
–
–
Amount differs with invoice
Amount in excess of L/C
Signatures missing
Drawn on wrong party
20. Where We Go Wrong Commercial
Invoices
•
•
•
•
Good description differs from L/C
Extension of cost wrong
Partial shipment not authorized
Term of shipment missing
21. Where We Go Wrong Insurance
Certificates
•
•
•
•
Required risks not covered
Amount of coverage not enough
Currency not consistent with L/C
Effective date later than bills of lading
22. Exporter Trouble Shooting
• Can you meet documentary requirements
• Can you meet shipping/expire/dates?
• Is description of goods accurate?
• Are names and addresses correct?
24. A Letter of Credit Does Not:
• Replace a contract
• Substitute for buyer’s confidence in seller
and vice versa
• Constitute a guarantee of performance
• Assure payment if an condition not meet
25. Advantages to both parties:
• Flexible document
• Governed by internationally accepted set of
rules
The Uniform Customs and Practice for
Documentary Credits (The UCP)
26. Problems of L/C
• Shipping schedule is not met
• stipulations concerning freight cost are
unacceptable
• price is insufficient due to FX rate changes
• unexpected quantity of product
• description of product insufficient or too detailed
• documents are impossible to obtain specified in
L/C
28. • Documents against Payment (D/P)
– Buyer may only receives the title and other
documents after paying for the goods
• Documents against Acceptance (D/A)
– the buyer may receive the title and other
documents after signing a time draft promising
to pay at a later date.
• Acceptance Documents against Payment
(Acceptance D/P)
– the buyer signs a time draft for payment at a
later date. Goods remain in escrow until
payment is made
29. Why DC?
• Easier to use and lower bank fee
• collection procedure entails risk
• Conditions to use DC
–
–
–
–
No doubt on buyer’s integrity
buyer’s country is stable and safe
No foreign exchange control
goods are marketable (exporter resell goods)
30. DC Procedure
• Exporter ships the goods
• exporter forwards the documents to seller
bank (remitting bank),which in turns gives
the document to the buyer’s bank
(collecting bank)
• Collecting bank informs the importer the
conditions of the document or contract
31. Export Incentive Programs
• Export-Import Bank of the U.S. (Exim-Bank)
– set up in 1934
– to facilitate finance and export of American goods and
services and maintain American companies in oversea market
– offers programs like guarantees, bank insurance and export
credit insurance
• Foreign Export Credit Insurance
– provide insurance to exporters (nonpayment and preshippment
risk
• Small Business Administration (SBA)
– provide business loans and financing for small companies
32. Export Incentive Programs
• Commodity Credit Corporation (CCC)
– provide assistance in production/marketing of US agricultural
products overseas
• Overseas Private Investment Corporation(OPIC)
– formed in 1971
– insuring direct US investments in foreign countries
– provide medium and long-term financing
• Private Export Funding Corporation (PEFCO)
– consortium of commercial banks and industrial companies
– provides medium to long-term financing to foreign buyers
• United States Export Assistance Center (USEAC)