Pages: 31

This chapter highlights different payment methods and the execution of export– import business, from establishing the contract of sales to the different risk exposures of the parties involved. Using many cases associated with the methods of payments this chapter explains the role and responsibilities of negotiating banks, confirming banks, and paying banks. Also, with reference to ICC guidelines, specifically, URC- 522, this chapter explains the risk factors banks carry while using documentary collection. Also, the SWIFT message format describes the MT fields and their relevance and specifically explains the functionality of partial shipment and transhipment as described by UCP 600. Moreover, this chapter explains the normal transit period and its importance in the settlement of funds for sight bills and the “n”days usance bill from the date of sight. Overall, factoring and forfaiting concepts are depicted as a parallel financial facility to the banking sector.

Pages: 26

Not only do countries vary in terms of their policy frameworks and regulatory structures, but when it comes to establishing business across borders, cultural differences and language differences also vary widely. To mitigate the unwarranted risks associated with the export–import business and to avoid untidy trade relationships across borders it is important that exporters, importers, banks, and other financial institutions understand the well-set regulatory framework under which they are expected to operate. Like any other country, India also follows two different sets of regulatory structures: (a) domestic regulatory framework and (b) international regulatory framework. In this chapter, we discuss the overview of domestic regulatory bodies like the Reserve Bank of India (RBI), Foreign Exchange Association of India (FEDAI), Foreign Trade Policy (FTP, 2020) by the Directorate General of Foreign Trade (DGFT), Export Credit Guarantee Corporation of India (ECGC), and Export-Import Bank (EXIM). Moreover, we discuss the importance of the International Chamber of Commerce in balancing trade disputes across international borders.

Pages: 18

This chapter explains the operational structure and functionality of different letters of credit products, for example, Back-To-Back Letter of Credit, Transferable Letter of Credit, Standby Letter of Credit, Instalment Letter of Credit, Revolving Letter of Credit, Green-clause and Red-clause Letter of Credit, and Transit Letter of Credit. With the conceptual framework, it depicts documentation flow, cash flow, and associated risk of the banks. This chapter not only describes the necessity of all the different types of Letter of credit in international trade, but also helps in understanding different ICC guidelines which are discussed in reference to many live cases and ICC cases. Moreover, documentary discrepancies for each of the products have been explained with reference to UCP 600 and ISBP.

Pages: 20

This chapter describes the role and responsibilities of the International Chamber of Commerce and the interpretation and execution of these guidelines by commercial banks. In this chapter, we start the discussion by describing the connection between different payment methods and the rules of the Chamber of Commerce. For example, it describes that a standby letter of credit may be open under UCP 600 or ISP 98. On the other hand, it depicts different practical scenarios to explain the application of such rules by banks to manage their export–import business. It describes some important concepts likethird-party documents, stale documents, and 5% and 10% tolerance limits with the associated documentary discrepancies. Also, using different examples this chapter describes a few cases reported by the Documentary Credit Dispute Resolution Expert Committee (DOCDEX).

Pages: 34

In international trade, one of the major factors behind the documentary discrepancies is the inapt submission of transport documents. This chapter explains the importance of date and signature in transport documents by representing many practical case scenarios. Also, we discuss the conditions for which the transport documents may be rejected for payment. Moreover, this chapter describes all the types of transport documents, like different types of bills of lading and ways bills. Many different case studies have been used to explain the importance of the use of negotiable bills of lading and non-negotiable bills of lading. The advantages and shortfalls of the charter party bill have been well explained contextually. Furthermore, we discuss different types of other commercial documents, for example, Proforma Invoices, Packing Lists, Insurance Certificate, Certificate of Origin, Quality Certificate, etc.

Pages: 16

This chapter provides a detailed description of the International Commercial Terms or INCOTERMS. INCOTERMS are primarily used in international trade to divide the risk and cost between the exporter and importer. This chapter explains each of the INCOTERMS used in international trade while associating them with the negotiating power of the exporter and importer. There are seven INCOTERMS, for example, EXW or Ex Works, FCA or Free Carrier, CPT or Carriage Paid To, CIP or Carriage and Insurance Paid To, DAP or Delivered At Place, DDU or Delivered Duty Unpaid, and DDP or Delivered Duty Paid, used for any mode of transport. The other four INCOTERMS, for example, FAS or Free Alongside Ship, FOB or Free on Board, CFR or Cost and Freight, and CIF or Cost, Insurance, and Freight are used for waterway transport only. This chapter also discusses many practical aspects of using the INCOTERMS and associates them with the documentary discrepancies.

Pages: 19

This chapter briefs the provisions of export credit available to the Indian exporter. It explains the basic functionality of Exchange Earners’ Foreign Currency Accounts and Diamond Dollar Accounts. It conceptualizes advance payment against export, consignment export, counter trade agreement, export of goods by Special Economic Zones, export of services by Special Economic Zones to Domestic Tariff Area (DTA) Units, project exports, service exports, and export of currency. This chapter discusses the switch from barter trade to normal trade at the Indo-Myanmar border and counter trade arrangements with Romania. Export credit financing is discussed by the pre-shipment credit and various types of post-shipment credit, for example, advance against undrawn balances on export bills, advance against retention money, export on a consignment basis, post-shipment advance against duty drawback entitlement, post-shipment export credit in foreign currency, etc.

Pages: 14

This chapter addresses the recent development of Trade credit, that is, buyer's credit and supplier's credit. Following RBI's definition of trade credit as the credit extended to the importer, this chapter discusses many intricacies in the process flow of trade credit. Also, this chapter describes in large the importance of suppliers’ credit, the reason for the requirement, and the process flow. This chapter also explains many practical case studies associated with the buyer's credit and supplier's credit.

Pages: 11

Merchanting Trade refers to a trade transaction when goods go from importer to exporter country without touching the periphery of the importing country. Merchanting Trade in recent days has become very popular and is in operation majorly with two payment methods bank-to-back letter of credit and transferable letter of credit. This chapter explains the Merchanting Trade concept covering both the export leg and Import leg, and the cash flow and documentation procedures involved in such trade. The payment methods linked to merchanting trade and associated regulatory methods are well depicted through different case studies.

Pages: 45

Forex market is the largest financial market having more than 7.5 trillion USD traded every day (BIS Report 2022). Among all the segments (e.g., Spot, Forward, Forex Swap, and Currency Swap), the most liquid segment is Forex Swap having 3.8 trillion dollar transaction a day, followed by the spot segment 2.1 trillion dollars a day (Table 10.1). Table 10.1 Forex Daily Trade: Product-wise Net–net basis, daily averages in April, in billions of US dollars Instrument 2001 2004 2007 2010 2013 2016 2019 2022 Foreign exchange instruments 1,239 1,934 3,324 3,971 5,355 5,088 6,581 7,508 Spot transactions 386 631 1,005 1,488 2,046 1,654 1,979 2,107 Outright forwards 130 209 362 475 679 700 998 1,163 Foreign exchange swaps 656 954 1,714 1,759 2,239 2,383 3,198 3,810 Currency swaps 7 21 31 43 54 96 108 124 Options and other products 60 119 212 207 337 254 298 304

Pages: 26

This chapter covers different types of bank guarantees with practical examples and the SWIFT message format. The types of bank guarantees covered in this chapter are bid bonds, advance payments, performance guarantees, financial guarantees, etc. This chapter also covers caselets to make an easy understanding of the operations of bank guarantees. Furthermore, different rules of URDG have been explained through case studies.