110303 DACT Traditional Trade · 2018-03-27 · C L I E RBS00000 2 Introduction Hans Noordzij...
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Master Class Trade Finance - Traditional Trade - Supply Chain Finance Rotterdam, 3 March 2011
Transcript of 110303 DACT Traditional Trade · 2018-03-27 · C L I E RBS00000 2 Introduction Hans Noordzij...
Master Class Trade Finance
- Traditional Trade- Supply Chain Finance
Rotterdam, 3 March 2011
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Introduction
Hans Noordzij Global Compliance Manager Trade
+31 – 10 – 217 6387
Jan van de Noort GTS Sales manager
+31 – 10 – 217 6375
Herman Gartner Regional Trade Advisor, Supply Chain Finance
+31 – 20 – 464 1510
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The office of your well known, reliable customer who always paysyour invoice in time……
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Agenda
• Introduction
• payment terms
• pre-payment / open account
• collections
• letters of credit
• l/c types
• confirmation
• l/c example
• critical moments
• bank guarantees
• compliance
• Supply Chain Finance
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Some types of risk
Type of Risk exporter importer
Contract risk XXXXX
Transport risk XXXXX XXXXX
Credit risk XXXXX
Non-delivery risk XXXXX
Political risk XXXXX XXXXX
Transfer risk XXXXX
Exchange risk XXXXX XXXXX
Quality risk XXXXX
Product liability risk XXXXX
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Payment conditions
� clean payment before shipment – Pre payment
� clean payment after shipment – Open Account
� Documentary Collection
� Documentary Credit
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Payment conditions
Payment Conditions
Pre-Payment Letter of CreditDocumentary
CollectionPayment against
Invoice – open acct.
Advantage for Seller
Advantage for Buyer
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Payment terms
Prepayment
l/c
collection
Open account / cheques
secu
rity ch
arg
es
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SWIFT
Society for
Worldwide
Interbank
Financial
Telecommunication
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Documentary collection
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Definition
An exporter will handover his documents representing the goods to his bank with his instruction to send them to the buyer’s bank and to have them delivered to the buyer against payment or acceptance of a bill of exchange.
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Bill of lading
BILL OF LADING FOR COMBINED TRANSPORT SHIPMENT OR PORT TO PORTSHIPMENTShipper
Aquariumspecialist Sittard B.V.Ringstraat 12345
1234 AB SITTARD SUB-LLOYD_________________________________________________ INCORPORATED INTHEConsignee or Order NETHERLANDS AS
SUBLLOYD LIJNENB.V.to the order of ROTTERDAMASIA PACIFIC BANK LTD., SINGAPORE THE NETHERLANDS
_______________________________________________________________________________________Notify Party / Address
Hang Yeng Corporation ORIGINALP.O.Box 121234 Singapore / Singapore_______________________________________________________________________________________Ocean Vessel Port of Loading Port of Discharge Bill ofLading nr.
HANZELLOYD ROTTERDAM SINGAPORESBLD900000
_______________________________________________________________________________________Marks and Nos; Number and kind of Packages; Gross Weight
Measurements
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Exporter
Importer
Documentary Collection
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Exporter
Importer
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Exporter
Importer
BankExporter
BankImporter
+ instructions
+ instructions
Presentationof docs
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Exporter
Importer
BankExporter
BankImporter
Credit account
Payment order
payment
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Exporter
Importer
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Direct collection
• Exporter sends the documents directly to the collecting bank
• Collecting bank must handle the collection as if received by the remitting bank.
• Exporter delivers the details on-line to the remitting bank
• All follow up the same between the remitting bank and the collecting bank.
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Exporter
Importer
BankExporter
BankImporterPresentation
of documents
Online Info about collection
Documents via courier
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But what if the buyer does not pay????
• The documents remain under the disposal of the seller
• The collecting bank will report non-payment to the remitting bank and will require new instructions
Options:
• Buyer and seller come to an agreement as yet
• Seller will look for a new buyer in the region
• Seller instructs his freight forwarder to return the goods
So:
Documentary collection is a solution to be used for existing clients which you trust well enough, based on previous business or track record, but not enough to deliver them in open account (yet).
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Uniform Rules forCollections
ICC Publication 522
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Documentary collection
D / P : Documents against Payment
D / A : Documents against Acceptance
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Bill of Exchange
Bill of Exchange:
A bill of exchange is a written, unconditional instruction topay a specific amount of money on a specific date to the
order of a specific party or to his order.
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Example bill of exchange
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Exporter
Importer
BankExporter
BankImporter
Report acceptance
Accepted bill of exchange
Handover of documents
Report
acceptance
via swift
Same example, but now documents against acceptance
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Exporter
Importer
BankExporter
BankImporter
Credit account
Payment order
payment
via swift
On due date
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So consider using documentary collections:
• for existing customers in which you have a certain trust
• in case of sufficient transit time to settle before arrival of the goods
• in combination with sea freight
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Letters of credit
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Definition of a letter of credit
An irrevocable payment undertaking of the importer’s bank towards the exporter, on the explicit condition that he presents the required documents in conformity with the credit and within the validity
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Documentary Credits
When ?
• Buyer and seller don’t know each other (enough)
• International tensions
• Governments prescription
• Requirement of credit insurer
• Custom in branch
Why ?
• Security for both parties
• Exporter: secured payment (upfront), credit facility with advising bank (Asia)?
• Importer: payment only when required docs are presented, enforce timely
delivery!
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Exporter
Importer
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Exporter
Importer
BankExporter
BankImporter
!Advice of opening
Request to issue lc
opening L/C
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What details can be found in an l/c?
• Expiry date
• Ultimate date of despatch
• Brief goods description
• required documents
• instructions re partial
shipments and transshipment
• Availability
• Period for presentation of documents
• Instructions re payment of charges
• UCP600-endorsement
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A random example of a letter of credit 1/6
LOC:NL1O2O INSWFT MSG-700 TMPL-01253100 TRN:E00000-000 01/12/10
(1: FO1RBOSNL2ABXXXO126325951}
(2: 07001905091201BBCCESBAA90956666645367474N}
************************************************
FROM:
BANCO BARCA CATALAN S.A.
DIAGONAL, 6
08008 BARCELONA
SPAIN
* * *** * * ***** * * **** * * * *
(4:
** 27 SEQUENCE OF TOTAL
:27:1/1
** 40 FORM OF DOCUMENTARY CREDIT
:40A: IRREVOCABLE TRANSFERABLE
** 20 DOCUMENTARY CREDIT NUMBER
:20: O1IM100613
** 31C DATE OF ISSUE
:31C: 101201
** 40E APPLICABLE RULES
:40E:UCP LATEST VERSION
** 31D DATE AND PLACE OF EXPIRY
:31D: 110131 IN ROTTERDAM
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A random example of a letter of credit 2/6
** 50 APPLICANT :
JUEGOIMPEX S.A.
POLIGONO INDUSTRIAL DEL SUR
AVDA. VIRGEN DE LA SALUD S/N
08103 TERRASSA (BARCELONA)
SPAIN
* 59 BENEFICIARY
HANDELMIJ. TIMMERZAAK B.V.
KONYNENGAARD 16-18
0010 ZS BOSDORP
THE NETHERLANDS
** 32B CURRENCY CODE, AMOUNT
:32B: USD 43,560.00
** 39A PERCENTAGE CREDIT AMOUNT TOLERANCE
:39A: 00/00
** 41 AVAILABLE WITH.. . BY...
:41A: RBOSNL2A
BY DEFERRED PAYMENT AT 30 DAYS SIGHT
** 43P PARTIAL SHIPMENTS
:43P: PROHIBITED
** 43T TRANSHIPMENT
:43T : ALLOWED
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A random example of a letter of credit 3/6
** 44E PORT OF LOADING:
:44E: KEELUNG PORT
** 44F PORT OF DISCHARGE:
:44F: BARCELONA PORT
* 44C LATEST DATE OF SHIPMENT
:44C: 110121
** 45 DESCRIPTION OF GOODS AND/OR SERVICES
:45A: 10000 PCS ITEM NO.TF999934 WOODEN TELEPHONES, SMALL SIZE,
|’TELEFONICA’-LOGO AT USD 4,00/PC USD 40,000.00
EXTRA COSTS:SPECIAL PRINTING USD 2,000.00 +
GIFT BOXES USD 2,560.00 +
LESS DISCOUNT USD 1,000.00 -
TOTAL USD 43,560.00
CIF BARCELONA PORT (AS PER INCOTERMS 2000)
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A random example of a letter of credit 4/6
** 46 DOCUMENTS REQUIRED
:46A:
+1) COMMERCIAL INVOICE MADE OUT IN THE NAME OF THE APPLICANT
IN ONE ORIGINAL AND TWO COPIES
+2) FULL SET OF ORIGINAL CLEAN ON BOARD OCEAN BILLS OF LADING PLUS
THREE NON-NEGOTIABLE COPIES MADE OUT TO ORDER OF BANCO BARCA
CATALAN S.A., BARCELONA, SHOWING APPLICANT WITH
FULL NAME AND ADDRESS AS NOTIFY-PARTY AND MARKED FREIGHT PREPAID
+3) CERTIFICATE OF TAIWANESE ORIGIN MADE OUT IN THE NAME OF THE
APPLICANT IN ONE ORIGINAL AND ONE COPY
+4) SHIPPING COMPANY’S OR THEIR AGENT’S CERTIFICATE CERTIFYING THAT
THE CARRYING VESSEL IS NOT MORE THAN 15 YEARS OLD AT THE DATE OF
LOADING OF THE GOODS
+5) INSURANCE POLICY OR CERTIFICATE ISSUED TO THE ORDER OF BANCO BARCA
CATALAN S.A., BARCELONA FOR 110 PERCENT OF THE CIF INVOICE VALUE
COVERING ALL RISKS AS PER INSTITUTE CARGO CLAUSES (A), WAR RISK
AS PER INSTITUTE WAR CLAUSES (CARGO) AND S.R.C.C. FROM SHIPPER’S
WAREHOUSE IN TAIWAN TO APPLICANTS WAREHOUSE IN TERRASSA, SPAIN
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A random example of a letter of credit 5/6
**47A ADDITIONAL CONDITIONS
:47A:
+ALL DOCUMENTS AND OUTER CARTONS MUST BEAR THE FOLLOWING
SHIPPING MARKS:
JUEGOIMPEX
/ \
/ \
/ \
/ TELEFONICA \
/ ITEM TF999934 \
/ MADE IN TAIWAN \
\ ROC /
\ BARCELONA /
\ /
\ /
C/NO. 1-UP
+ THIS L/C IS TRANSFERABLE BY THE ADVISING BANK ONLY
+ IN CASE OF DISCREPANT DOCUMENTS WE SHALL CHARGE A DISCREPANCY FEE
OF USD 40.00 FOR EACH DISCREPANT SET OF DOCUMENTS PLUS ADDITIONAL
HANDLING FEE AS THE CASE MAY BE
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A random example of a letter of credit 6/6
** 7lB CHARGES
:71B: ALL BANK CHARGES AND COMMISSIONS OUTSIDE THE NETHERLANDS
ARE FOR BENEFICIARY’S ACCOUNT
** 48 PERIOD FOR PRESENTATION
:48: WITHIN 10 DAYS AFTER THE DATE OF SHIPMENT
** 49 CONFIRMATION INSTRUCTIONS
:49: WITHOUT
** 53 REIMBURSEMENT BANK
:53D: CHASUS33
JP MORGAN CHASE BANK N.A.
NEW YORK, N.Y. U.S.A.
** 78 INSTRUCTIONS TO THE PAYING/ACCEPTING/NEGOTIATING BANK
:78: +ALL DOCUMENTS MUST BE DESPATCHED TO OUR ADDRESS: DIAGONAL, 6
08008 BARCELONA, ESPANA ATTN DEPTO EXTRANJERO/CREDITOS DOC. DE IMP.
BY COURIER SERVICE
+AT MATURITY YOU MAY CLAIM ON THE REIMBURSING BANK
** 57 “ADVISE THROUGH” BANK
:57D: THE ROYAL BANK OF SCOTLAND N.V. NETHERLANDS
SWIFT: RBOSNL2A
** 72 SENDER TO RECEIVER INFORMATION
:72: /TELEBEN/
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Exporter
Importer
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ExporterBankExporter
! Document checking
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BankExporter
BankImporter
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ImporterBankImporter
settlement
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Exporter
Importer
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Confirmation
• Confirmation is elimination of country and bank risk (transferrisk / insolvency risk)
• Confirmation is not always possible
• Confirmation pricing case by case
• Issuing bank should request the advising bank in the lc to add theirconfirmation
• Silent confirmation / commitment to pay
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Documentary Credits
Some types of L/C’s:
• Revocable / irrevocable
- Never accept a revocable credit!!!
• acceptance / deferred payment
- Bill of exchange required or not
• back to back / transferable
- Intermediary trade
• Standby L/C
- Surityship, no payment condition!
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Documentary Credits
Uniform customs and
practice for
Documentary
Credits.
ICC Publication 600
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Critical moments
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Critical moments
1. Defining the terms of the contract
2. Receipt of the letter of credit
3. Submission of the documents
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The first critical moment
Defining the terms of the
contract
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The first critical moment
Financial Paragraph
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Payment by means of an Irrevocable Letter of Credit to be advised by:
The Royal Bank of Scotland N.V., Weena 455, 3013 AL Rotterdam, Netherlands
by means of a SWIFT MT700 to be sent to RBOSNL2A.
• Received ultimately …………………..
• Available at the counters of the credit advising bank
• Documents required
o ……………………….……………...
o ……………………………..………..
o ……………………………………….
o ……………………………………….
o ……………………………………….
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• Terms of Delivery ………………...…..……..….…...
• Shipment from ……… to ………………………....…
• Latest date of shipment ……….…………..…….…..
• Partial shipments ……………….………...………….
• Transhipments ……………………...……...………...
• Documents to be presented within ………...………
• Charges ……………………………………...……….
• Confirmation ……………………………...…….…….
• Subject to UCP 600 …………………………..……..
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The second critical moment
The advising of the letter of credit
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Study the contents of the letter of credit!
Take your time!
You can secure your payment with it!
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The third critical moment
Presentation of the
documents to the bank
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The third critical moment
How to handle in case of discrepancies?
• Amend or replace the documents
• Have the documents amended by 3rd parties
• Ask for authorization by the issuing bank
• Send documents on an approval basis
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Bill discounting
• Clean accepted bill of exchange
• Accepted bill of exchange in a documentary collection
• Accepted bill of exchange in a letter of credit
• Deferred payment obligation
Option A: wait for settlement on due date
Option B: check if the bank is willing and/or able to pay at sight under deduction of interest.
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Incoterms 2010 vs trade transactions
Recommendable combinations:
C- group (CPT CIP CFR CIF)
D- group (DAT DAP DDP)
- Exporter is in charge of transport and will have access to the shipping documents
- Only the bill of lading is a title document!
- Other means of transportation also possible with l/c’s, not recommendable with collections.
E- group (EXW)
F- group (FCA FAS FOB)
- Importer is in charge of transport!
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Next steps
Your company’s risk policy:
• Clear to everyone in my organisation?
• When do we choose for an l/c?
• Detailed l/c conditions must be incorporated into the quotation and the sales contract
• Contract is only valid after acceptance of the l/c by the seller?
• Make sure everyone in your organisation takes the letter of credit seriously
• Learn from your mistakes!
Bank guarantees
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What is a bank guarantee?
A bank guarantee is an independent
irrevocable obligation of a bank towardsthe beneficiary in which it replaces the clients
credit worthiness for that of their own
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Characteristics of a bank guarantee
Independent commitment
Irrevocable
Unconditional
Payable on first demand
Wordings that cannot imply any discussion
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Some types of guarantees
• Bid bond
• Performance bond
• Advance payment bond
• Payment guarantee
• Rental guarantee
• Guarantee for missing bill of lading
• etc….
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ICC publication 758: The Uniform Rules for Demand Guarantees
• Applicable since 1 July 2010
• mitigates your risk
• clear set of rules
• extend or pay
• claim procedures
Discuss the use of URDG758 with your business partner!
Make sure your bank is instructed to apply URDG758 on your guarantee!
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Forms of bank guarantees
Direct guarantee:
• The bank of the applicant guarantees the due fulfillment of the contractual obligations of the applicant towards the
beneficiary.
• If necessary, via an advising bank without any further
obligation
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Issuing bank
buyer
Bank
van de importeur
Supply of goods
Direct payment guarantee
Issue guarantee
instruction
seller
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Forms of bank guarantees
Indirect guarantee:
• Beneficiary requires a guarantee of his own, local, bank
• Applicant instructs his bank to issue a counter guarantee
and to request the local bank to issue a guarantee directly in favor of the beneficiary.
• subject to local law and regulations
• Compare this to confirming a letter of credit!
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seller buyer
Bank of seller
Supply of goods
Indirect payment guarantee
Bank of buyer
instruction
Counter
guarantee
Issue local
guarantee
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Similarities Differences
• independent obligation
of a bank
• 100% liability freeze
• risk premium comparable
• - l/c applicable to
worldwide accepted rules- guarantee applicable tolocal law
• - l/c = payment instrument- guarantee = suretyship
• expiry
• discharge of guarantees
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Compliance
parties
products
countries
currencies
banks
ports
shipping lines
defense related material
The compliance check is executed before processing the transaction.
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Our compliance clause in our advising letter
questions ?questions ?
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RBS Global Disclaimer
This marketing communication has been prepared by The Royal Bank of Scotland N.V. or an affiliated company and for the purposes of Directive 2004/39/EC has not been prepared in accordance with the legal and regulatory requirements designed to promote the independence of research. As such regulatory restrictions on RBS dealing in any financial
instruments mentioned in this marketing communication at any time before it is distributed to you do not apply.
This marketing communication is for your private information only and does not constitute an analysis of all potentially material issues nor does it constitute an offer to buy or sell any
investment. Prior to entering into any transaction with RBS, you should consider the relevance of the information contained herein to your decision given your own investment objectives, experience, financial and operational resources and any other relevant circumstances. Views expressed herein are not intended to be and should not be viewed as advice or as a recommendation. You should take independent advice on issues that are of concern to you.
Neither RBS nor other persons shall be liable for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including lost profits arising in any way from the information contained in this communication.
Any views or opinions expressed herein might conflict with investment research produced by RBS.
RBS and its affiliated companies may from time to time have long or short positions in, buy or sell (on a principal basis or otherwise), make markets in the securities or derivatives of, and provide or have provided, investment banking, commercial banking or other services to any company or issuer named herein.
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This marketing communication is not intended for distribution to retail clients in the UK under any circumstances.
RBS is authorised by De Nederlandsche Bank and regulated by the Financial Services Authority; regulated by the AFM for the conduct of business in the Netherlands and the Financial Services Authority for the conduct of UK business.
Copyright 2007 RBS. All rights reserved. This communication is for the use of intended recipients only and the contents may not be reproduced, redistributed, or copied in whole or in part for any purpose without RBS’ prior express consent.
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