This book explains various methods of payment in international trade and trade finance schemes for international trade. It also presents an overview of the concepts, purposes, features, and risks of international trade.
A grasp of the features and risks of international trade facilitates a better understanding of the numerous methods of payment in international trade and the relevant trade finance schemes, which is essential to success in international trade transactions.
In order to complete an international trade transaction, depending on the terms, both parties need access to funds. Compared with large companies, small and medium-sized enterprises (SMEs), frequently face difficulties in raising capital or funds, but financing an international trade transaction is often the key to its successful completion. As such, selecting an appropriate financing mechanism from the various options available is vital.
This book offers a systematic overview of international trade and payment together with trade finance, providing instructive examples and illustrations of trade documents, each method of payment, and trade finance including export credit insurance or guarantee.
Author(s): Sang Man Kim
Publisher: Springer Singapore
Year: 2021
Language: English
Pages: 239
City: Singapore
Preface
Contents
About the Author
1 Introduction to International Trade
1.1 Concept of International Trade
1.2 Purposes of Engaging in International Trade
1.2.1 To Increase Revenues and Profits: The Exporter’s Perspective
1.2.2 To Use Production Capability Fully and Sell Excess Products: The Exporter’s Perspective
1.2.3 To Learn or Acquire Advanced Technology: The Importer’s Perspective
1.2.4 To Meet Domestic Demand: The Importer’s Perspective
1.3 Features of International Trade
1.3.1 Different Laws and Standards
1.3.2 Government Control and Intervention
1.3.3 Complex Documents
1.3.4 Different Customs and Cultures
1.3.5 Different Languages
1.3.6 Different Currencies
1.3.7 Long Distance
1.4 Risks in International Trade
1.4.1 Introduction
1.4.2 Risk Factors
1.4.3 Commercial Risk and Country Risk
References
2 International Trade Contracts
2.1 Concept of a Contract
2.2 Formation of a Contract
2.2.1 Requirements for the Formation of a Valid Contract
2.2.2 The Process of Offer and Acceptance
2.2.3 Information Included in an International Sale Contract
2.2.4 Ordering Process
2.3 Performance of a Contract
2.3.1 Obligations
2.3.2 Breach of Contract
2.3.3 Various Examples of Contract
References
3 Documents for International Trade
3.1 Introduction
3.2 Commercial Documents
3.2.1 Transport Documents
3.2.2 Commercial Invoices and Other Documents
3.2.3 Specimen and Examples
3.3 Financial Documents
3.3.1 Bill of Exchange (Documentary Draft)
3.3.2 Promissory Note
3.3.3 Payment of Bill of Exchange and Promissory Note
References
4 Overview of Payment Methods
4.1 Introduction
4.2 Basic Types of Payment Method
4.3 Case Study for Respective Methods of Payment
4.3.1 Payment in Advance (Cash in Advance)
4.3.2 Open Account
4.3.3 Documentary Collection
4.3.4 Documentary Credit
References
5 Payment in Advance (Cash in Advance)
5.1 Introduction
5.2 Operation of a Payment in Advance
5.2.1 Telegraphic Transfer (Bank Transfer, Wire Transfer)
5.2.2 Credit Card
5.2.3 Payment by Check
5.2.4 Electronic Payment
5.3 Advantages/Disadvantages
5.3.1 Advantages/Disadvantages
5.3.2 When to Use Payment in Advance
References
6 Open Account
6.1 Introduction
6.2 Operation of an Open Account
6.3 Features and Advantages/Disadvantages
6.3.1 Features (Comparison with a Documentary Collection)
6.3.2 Advantages and Disadvantages
Reference
7 Documentary Collection
7.1 Introduction
7.2 Operation of a Documentary Collection
7.2.1 Overview
7.2.2 Parties to a Documentary Collection
7.2.3 Documents Against Payment
7.2.4 Documents Against Acceptance
7.2.5 Collection Instruction
7.3 Features and Advantages/Disadvantages
7.3.1 Features
7.3.2 Advantage/Disadvantage
7.4 The Uniform Rules for Collections
References
8 Documentary Credit
8.1 Introduction
8.1.1 The Background
8.1.2 History
8.1.3 Concept
8.2 Operation of a Documentary Credit
8.2.1 Flow of a Documentary Credit Transaction
8.2.2 Application and Issuance of a Documentary Credit
8.2.3 Responsibilities of the Advising Bank
8.2.4 Presentation of Documents
8.2.5 Advantages/Disadvantages
8.3 Various Types of Credits
8.3.1 Basic Types of Credit Under UCP
8.3.2 Other Forms of Credit
8.4 Independence Principle and the Fraud Exception
8.4.1 Independence Principle
8.4.2 Complying Presentation and Strict Compliance
8.4.3 Fraud Exception
8.5 Issuing a Documentary Credit Through SWIFT
References
9 UCP and Letter of Credit Examples
9.1 UCP
9.1.1 History of the UCP
9.1.2 Basic Concepts
9.1.3 Major Clauses of UCP 600
9.2 Examples of Letters of Credit
9.2.1 Example by SWIFT MT700 Codes
9.2.2 Example 2 Documentary Credit Advice
9.2.3 Example 3 Documentary Credit Advice
References
10 Other Payment Methods
10.1 Bank Payment Obligation
10.1.1 Introduction
10.1.2 Basic Assumptions and Definitions
10.1.3 Some Basic BPO Definitions
10.1.4 Operation of Bank Payment Obligation
10.1.5 Advantages of Bank Payment Obligation
10.1.6 Comparison with a Documentary Credit (Letter of Credit) and an Open Account
10.2 Consignment
10.2.1 Introduction
10.2.2 Operation of Consignment
10.3 Netting
References
11 Independent Guarantee (Demand Guarantee)
11.1 Introduction
11.1.1 Overview
11.1.2 Concept
11.1.3 Standby Letter of Credit and Surety Bond
11.2 Types of Independent Guarantees
11.2.1 A Direct Guarantee and an Indirect Guarantee
11.2.2 Performance Guarantee and Payment Guarantee
11.2.3 Various Types of Performance Guarantee (Performance Type Guarantee)
11.3 Independence Principle and Fraud Exception
11.3.1 The Independence Principle
11.3.2 The Fraud Exception
11.4 Examples of Independent Guarantees
11.4.1 Example Tender Guarantee (Bid-Bond)
11.4.2 Example Performance Guarantee (In the Form of Indirect Guarantee/Counter Guarantee Type)
11.4.3 Example Performance Guarantee (P-Bond)
11.4.4 Example Standby Letter of Credit (For an AP-Bond)
11.4.5 Example Refund Guarantee in a Shipbuilding Contract
11.4.6 Example Payment Guarantee
11.5 Comparison of and Key Distinctions Between a Documentary Credit and a Standby Letter of Credit
References
12 Trade Finance for International Sale of Goods
12.1 Introduction
12.1.1 Concept of Trade Finance
12.1.2 Overview of Types of Trade Finance
12.1.3 The Bank’s Role in International Trade
12.2 Export Working Capital Financing for Pre-shipment
12.2.1 Export Working Capital Financing
12.2.2 Export Credit Guarantee Programmes for Pre-shipment Finance
12.3 Negotiation (Or Purchase) of Bills of Exchange
12.3.1 Introduction
12.3.2 Operation
12.3.3 Negotiation in a Documentary Credit Transaction
12.3.4 Negotiation in a Documents Against Acceptance Transaction
12.4 Export Factoring
12.4.1 Concept
12.4.2 Operation of Export Factoring
12.4.3 Advantages/Disadvantages of Export Factoring
12.5 International Forfaiting
12.5.1 Concept
12.5.2 Operation of International Forfaiting
12.5.3 Advantages/Disadvantages of International Forfaiting
References
13 Finance for Overseas Construction
13.1 Introduction
13.2 Supplier Credit and Buyer Credit
13.2.1 Supplier Credit
13.2.2 Buyer Credit
13.3 Project Finance
13.3.1 Concept
13.3.2 Features of Project Finance
13.4 Syndicated Loans
References
14 Export Credit Insurance or Guarantee
14.1 Introduction
14.2 Functions of Export Credit Insurance (Or Guarantee)
14.3 Main Types of Export Credit Insurance (Or Guarantee)
14.3.1 Overview
14.3.2 Short-Term Export Credit Insurance (Or Short-Term Export Credit Guarantee)
14.3.3 Medium and Long-Term Export Credit Insurance
14.3.4 Export Bond Insurance (Bond Insurance)
14.3.5 Export Credit Guarantee (Or Working Capital Loan Guarantee) for Pre-shipment Finance
References
Index
