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Trade Services: Letters of Credit

Trade Services: Letters of Credit. Agenda. International Trade Documentary Credits International Regulations Documents Under Letters of Credit Letters of Credit at TBC BANK. International Trade. Back to top. Reasons for and Threats to International Trade. Reasons

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Trade Services: Letters of Credit

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  1. Trade Services:Letters of Credit

  2. Agenda International Trade Documentary Credits International Regulations Documents Under Letters of Credit Letters of Credit at TBC BANK

  3. International Trade Back to top

  4. Reasons for and Threatsto International Trade Reasons • Different Resources (nature, climate, commodities) • Different stage of technical development • Different density of people Threats • Import – and Export – Licenses Taxes Contingents • Foreign Currency Applications, Deposits • Technical requirements

  5. Risks to be considered General Risks • Different laws, regulations and languages • Delivery Risk • Transport Risk • Acceptance Risk • Quality Risk Economic Risks • Importer is unable or unwilling to pay Political Risks • Exchange rate Risk • Convert ion/Transfer/Payment • War, Riots, Civil Commotions, Terrorism, Strikes • Embargo

  6. Conditions of payment and security Importer’s interest Pre- payment Exporter’s interest Confirmed letter of credit Unconfirmed letter of credit Documentary collection Increasing security Payment after receipt of goods TradeFinance

  7. In every international trade transaction,there must be: • an agreed product or service • a sales contract • shipping and delivery details • required documentation • insurance cover • terms of payment

  8. Documentary Credits Back to top

  9. Contractual obligation of a bank for account and instruction of a customer to effect a specified payment upon receipt of specified documents in compliance with specified conditions (as per Letter of Credit). A definition of a Letter of Credit:

  10. Documentary Letters of Credit Importer EEExporter 1 contract 5 Shipment of goods 2 8 6 4b 3b Letter of credit application Delivery of documents/ debiting of account Advising Confirmation presentation of documents/ Payment Abstract undertaking to pay 4a 7 Issuing Bank Advising Bank Remittance of Documents/Payment 3a Letter of Credit opening

  11. Types of Letter of Credit Irrevocable • Confirmed/Unconfirmed • Back to Back • Revolving • Transferable Payment Terms • Sight • Deferred Payment • Acceptance • Others

  12. International Regulations Back to top

  13. International Regulations – UCP600 ICC Uniform Customs and Practice for Documentary Credits Published by the International Chamber of Commerce, Paris Actual Version UCP 600, since 1st July 2007.

  14. International Regulations - Incoterms Published by ICC Paris, published 1936 latest revision in 2000 • Necessary due to different terms of trade in each country • To avoid misunderstandings, trouble recommendable to use Incoterms.

  15. INCOTERMS 2000

  16. Documents Under Letters of Credit Back to top

  17. Documentary Requirements • Buyer – what document(s) does the buyer need? • Seller – what documents will he be able to supply? • Country of export – – what documents are required under the regulations of the exporting country? • Country of Import – – what documents are required under the regulations of the importing country?

  18. Documents – which will be used? • Invoice • Bill of Lading (B/L) • Air Transport Document • Insurance Document • Certificate of Origin • Inspection Certificate • Others

  19. Bill of Lading (B/L) Specimen (Article 20 of UCP 600) Documents – which will be used? • Embodies the proprietary right to the goods afloat • Indicates port of loading and port of discharge • Indicates the name of the carrier • Normally issued in 3 folds

  20. Documents – which will be used? Commercial Invoice Specimen (Article 18 of UCP) A commercial invoice usually includes the following information: • Name and address of the seller and the buyer • Amount and currency • Description of goods • Other information required by the credit • Need not to be signed

  21. Documents – which will be used? • Proving that the shipping contract has been signed and that goods have been received by the carrier • Indicates airports of departure and destination • Indicates the name of the carrier • Issued in 3 originals, original for the shipper must be presented to the bank Air Transport Document Specimen (Article 23 of UCP 600)

  22. Documents – which will be used? Insurance Certificate Specimen (Article 28 of UCP600) • Insurance Policy – Insurance Certificate • Issued for at least 110 % of the value of the goods • Indicates amount and risks covered

  23. Documents – which will be used ? Certificate of Origin Specimen • Gives evidence of the origin of the goods • Used in the importing county to check possible import restrictions or to calculate the customs duty • As a rule issued by a competent Chamber of Commerce

  24. Documents – which will be used? Inspection Certificate Specimen • As a rule issued by a appropriate authority, either a governmental entity or a private inspection company • Gives evidence, that the goods were inspected and indicates results

  25. Presentation of documents • Complying Presentation: presentation of documents in accordance with - the terms and conditions of the credit - the UCP 600- if applicable -and - the international standard banking practice • Documents with discrepancies: - change of documents - payment under reserve - approval of issuing bank

  26. Presentation of documents • Discrepant documents presented to issuing bank (UCP 600, Art.16c) Notice of refusal within 5 banking-days mentioning all discrepancies + 4 possibilities of handling: - hold documents pending further instructions from presenter - hold documents until it receives a waiver form the applicant and agrees to accept it, or receives further instructions from presenter prior to agreeing to accept a waiver - returning documents to presenter - acting in accordance with instructions previously received from the presenter

  27. Letters of Credit at TBC BANK Back to top

  28. Letters of Credit at TBC BANK If you deal with export /import activities, JSC TBC Bank would assist you in financing and reducing the risks concerned with the International Trade Operations. • We’ll swiftly and efficiently analyze your bargains and process your application. • Prior to sign of contract with your counterparty, we’ll assist in originating the forms and contents of the LC.

  29. Letters of Credit at TBC BANK • In case of requirements, the world leading banks as Commerzbank, Deutche Bank CitiBank, EBRD would provide the confirmation to your documentary operations through our bank. • We can confirm your LC at either international first class bank . So being our partner, you become the partner of the world leading banks.

  30. Letters of Credit at TBC BANK Financing of International Trade • If you haven’t enough funds to realize International Trade Operations, we can provide financing with the affordable terms. • During the period of validity of LC, you’ll be extended with the line of credit at 7-10 % interest per annum.

  31. THANK YOU FOR YOUR ATTENTION! Tea Gagua Manager 0f Settlements and Correspondent Banking Dep. Tel: + 995 32 272727 ext 1127 E- Mail:tgagua@tbcbank.com.ge Kakha Kakhiani Documentary Operations Expert Tel: + 995 32 272727 ext 1132 E- Mail:kkakhiani@tbcbank.com.ge

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