International Trade Finance - Masterclass

Course Overview:

On days one, two and three participants will learn about the various methods of settlement for import/export transactions and their benefits. It will explain the purpose of International Commercial Terms of Trade (INCOTERMS 2000) and their effect on a customer’s international trading activities.

Participants will learn how to identify customer needs and recommend appropriate product solutions, as well as assess various risks to both bank and customer in international trade transactions. They will also gain an ability to explain and identify ways of mitigating that risk and carry out the processes involved in documentary collections, documentary letters of credit and contract guarantees.

The course will also address the purpose and application of the various International Chamber of Commerce rules and practices, identify customer needs for finance of exports/imports and explain the features and benefits of each method.

On the last two days the course is advanced and will provide delegates who are already familiar with or are working in a trade finance environment, with an insight into the more complex trade finance techniques that are becoming more common.

International Trade has always been the engine for global economic growth and is playing an ever important role, as new powerful economies emerge, shifting the balance of trade influence from the traditional wealth creators to new regions and economies.

Much of complex International Trade is either misunderstood or undervalued mainly because the terminology and practices seem difficult and confusing to master. This course will completely de-bunk this misconception and will leave delegates with a clear and working knowledge of how trade is undertaken at its most complex level.

It will show what actually happens and just how profitable this section of a bank’s business can be. It will also suggest methods of handling problems when things go wrong.

At the end, all delegates will have a clear and full understanding of exactly how complex trade takes place across the globe at an advanced level.

A good working knowledge and familiarity with International Trade finance is required to derive the maximum benefit from this course.

Course Content:

Role of Banks in International Trade Incoterms 2010 and Methods of Settlement
 Overview of the banks involvement and, in particular, the advantages/disadvantages to Importer/Exporter in the use of Incoterms 2010 and in the main methods of settlement.

Key characteristics of Commercial Documents
 Invoices
 Marine/Ocean Bills of Lading
• Title, negotiability and transfer
• Control over goods
• Delivery of goods
 Charter party bill of lading
 Multimodal Transport Document
• Title/Negotiability/Transfer
• Control over goods
• Delivery of goods
 Air Transport Document
 Road, Rail or Inland Waterway Transport Documents
 Insurance Policy/Certificate
 Certificate of Origin
 Certificate of Inspection

Export/Import Documentary Collections
 Relationship between Principal and Remitting Banker
 Relationship between Correspondent Banks (agency arrangements)
 Legal and practical issues regarding the duties of the remitting bank
 Liability of the banks involved
 Conditions for release of documents
 Conditions for transfer of funds
 Difficult areas of risk:
• Partial payments
• Avalising
• Consignment of goods to banks
• Release of goods on trust
 Use of Letters of Trust/Letters of Hypothecation
 Procedures for Protest and underlying risks
 Complexities of the Uniform Rules for Collection ICC 522

Documentary Letters of Credit – Introduction
 Banker/Customer Relationship
 Risk factors when issuing letters of credit
 The autonomy of letter of credit operations (Independence Principle)
 Contract between Applicant and Issuing bank - reducing risk
 Legal opinion on contractual issues


Instructions to issue/amend credits
 The importance of the application form (legal issues)
 Front-end electronic systems (bank/applicant)
 Workability of the credit

Introduction to the International Chamber of Commerce UCP 600 Rules:
 (structure and obligations under documentary credits;
 standard for examination of documents; discrepant documents, waiver and notice;
 the UCP transport articles;
 transferable credits and other issues; and
 changes at SWIFT for UCP 600

Examination of documents
 The standard for examination of documents
 Key elements of the main articles of UCP 600
 Processing non-compliant documents as issuing bank
 Processing non-compliant documents as Nominated/Confirming Bank
 Risks arising from non-adherence to UCP 600
 Legal cases and ICC Banking Commission opinions
 Bankers duties and rights
 Analysing irregularities in documents
• The current position on 'original' documents
 Fraudulent documents
• How banks and their customers become victims of documentary fraud
• Are you financing trade or fraud?
 Case studies on difficult issues affecting payment and rejection of documents

International Standard Banking Practice ISBP 681
 What constitutes an “alteration” or “addition” to a document, when and how should these be authenticated?
 How should documents be signed, if this is not explicitly stated in the credit?
 How should one handle typing errors on documents regarding the name and address, different addresses of same company, etc.?
 Must trade terms, such as Incoterms, appear on the invoice?
 What is the “face” of a transport document and should a practitioner examine the reverse side to determine the name of carrier, description of the journey, etc.?
 What is a full set of insurance documents, a copy vs. an original, endorsements, and the effective date?


Instructions to advise credits
 Obligations and Risks associated with the Advising Bank
 The use of the Bill of Exchange in Letters of Credit
 Fraudulent Credits

Application of the Uniform Rules for Bank-to-Bank Reimbursement ICC 725
 Rationale
 Concerns
 Familiarisation of articles, including: types, parties, issuance, documents and presentation

Related issues
 Release of goods connected with Credits against Indemnities issued or countersigned by banks
• Steamship guarantee/indemnities
• Airway releases and delivery orders
• Letters of Indemnity
• Liabilities
• The form of the Letter of Indemnity
• Counter Indemnities
 Assignment of Proceeds
 Case studies based on opinions of the ICC and legal judgements

Specialised Letters or Credit
 Standby Letters of Credit
 Transferable
 Back-to-Back
 Risks
 Advanced worked example
 Red Clause Credits
 Revolving & Reinstatement Credits

Contract Bonds and Guarantees
 Types of guarantees:
• Tender/bid bonds
• Performance bonds
• Retention money guarantees
• Advance payment guarantees
• Maintenance guarantees
• Bail bonds
• General guarantees
• Surety bonds
• Indemnities/counter guarantees
 Risk Assessment
 Wording of Guarantees
 International Banking Practices
 Uniform Rules for Demand Guarantees 758
 Problem Claims and Insurance against Unfair Calling.
 Expiry and Cancellation
 Case studies

The Market
 Historical evolution and current developments in the market place
 Trade Finance versus ‘balance sheet lending’
 Understanding and controlling the cash flow
 Typical users of Trade Finance products and services

Risk – The Critical Issues
 Understanding, identifying and managing risk
 Sovereign, Political / Country risk
 Institutional risk / Bank risk
 Corporate and other critical risks
 Importer and Exporter’s risk
 Risk mitigation, management and transfer



Review of Key Products
 How does the customer analyse his risk?
 Which products does he use and why?
 Cash in Advance
 Open Account
 Collections – Outward & Inward / Clean & Documentary
 Letters of Credit (covered below)
 Risks and opportunities
 Control possibilities

Supply Chain Management & Finance
 The origins of SCM
 Understanding the issues in SCM – “the tug of war” between supplier & buyer
 Identifying Market Opportunities
 Bringing about a “balance” between parties for effective processing
 Understanding about movement of ‘information’ ,’goods’ and ‘cash’
 Supply Chain Finance – not just a new opportunity but an essential element for sustainable business
 Review the risk aspects of SCF

Letters of Credit (L/Cs) - Advanced Mechanisms

The mechanics and use of:
 Back to Back L/C structures
 Transferable L/Cs
 Revolving L/Cs

Pre-Export Finance
 The effective use of red and green clause letters of credit
 Looking at the big picture
 Understanding the purpose of borrowing
 Country risk issues
 The reality of title and control

Controlling Credit Exposure – Formulating a Limit
 Understanding and explaining the trade cycle
 The use of time lines
 Assessing and appreciating funding gaps

Structured Trade Finance Situations (apart from Case Studies)
 Analysis of 2-3 examples based on above situations

Structuring Finance for the Trader

Facility Management:
 Analysing the trade flows
 Assessing facility size and structure
 Specific lending with identifiable maturity dates
 Appreciating and controlling sources of repayment

Effective Use of Collections for Short-Term Finance
 Using collections as financing opportunities
 Identifying and mitigating risks
 Maintaining control

Supporting the Trader
 Using the goods as collateral
 Assessing the value of goods
 The value of pledges and trust receipts
 The need for structured lending






Warehousing of Goods
 Warehouse location
 Management assessment
 Legal frameworks
 Obtaining and retaining title and control
 Risks and responsibilities of Collateral Managers
 Cost versus control

International Demand and Contract Guarantees / Bonds
 Scope and Application – an introduction
 Different types - Bid, Performance, Advance payment and Retention bonds
 Rules governing guarantees and bonds
 Legal jurisdiction and expiry date issues
 Opportunity spotting
 Standby L/C’s (SBLCs)

Receivables Financing
 Mechanics of Securitisation
 Mechanics of Factoring and Invoice Discounting
 Forfaiting – an important adjunct to the TF mechanism
 Role of Credit Insurance
 Nightmare scenarios

The Commodity Sector and its Players
 History and origins of the commodity industry
 Understanding the nature of ’commodities’
 Analysing the players – growers / producers; traders and end-users
 Financing of commodities
 Looking beyond the balance sheet
 Available documentation – taking and retaining title
 Commodity futures, options and derivatives
 Hedging – a critical process in commodity finance
 Role and function of the exchanges

Countertrade
 Overview – when to use
 Pitfalls and complications
 Possible structures and Time management

Syndications
 When to syndicate
 Lead or participant role
 Impact of quasi governmental agencies
 Risk/reward analysis

Structured Trade Finance Situations (apart from Case Studies)
 Analysis of 2-3 examples based on above situations

Course Conclusion and Review / Feedback

Delivery:	Classroom
Regions:	London
Category:	Corporate Finance