Barclyes

1. PRESENTATION ABOUT BANIKNG
OPERATIONS & INTERNATIONAL TRADE.
-:Prepared By
TRADE FINANCE OPS
,TEAM
.BARCLAYS BANK – EGYPT
1

2. Generic meaning of word
” ” BANK
INVESTORS
THE BANK DEPOSITORS
BANK OPERATIONS 2

3. ..Chapter One
• Traditional and Non-Traditional Bank’s
services, including Principles of lending.
3

4. ?What are types of banking operations
Traditional Non- Traditional
Bank‘s Services Bank‘s Services
Other support
-:services
Logistics
Accept Deposits .Legal Dept
Financial leasing
.H.R
.Finance Dept
Grant credits Auto loan
.Compliance
.I.T.support
investment Hire purchase
.Information
Agricultural mortgage
Insurance services 4

5. Non-Traditional Bank Services
• Logistics definition has its origin in the Greek word ‘ logistiki’ which
means financial organization, but in France it has the meaning of
channel to transport goods from one location to other.
• the logistics definition is the combination of packing, material
handling, inventory, warehousing, transportation, security and
information.
• It controls the sequence of supply which is important for the
utilization of location and time.
• It determines the path of transporting goods and many important
information between the consumer point and the production or
source point.
• It has the special term production logistics which gives the
assurance of the supply of the high quality product in time, with
security.
5

6. ..NON- TRADITIONAL BANK SERVICES
• Financial leasing..
• If you do not wish to purchase an asset by means of installments credit.
you may decide to lease the asset only by paying a rental charges over an
agreed period of time ,
Then you will have the exclusive use of this asset but the asset itself is still
belonging under the ownership of the bank.
There is NO option to purchase this asset under a financial lease arrangement.
At the end of the initial leasing period you may have the option to renew the
agreement at a much reduced rate .
The bank is responsible for maintenance of the asset, but the customer must
insure this asset against fire, theft, and any other normal business risk.
What the customer does not have to bear is the problem of the asset becoming
obsolete.
6

7. ..NON- TRADITIONAL BANK SERVICES
• Hire Purchase..
• Hire purchase is an agreement to hire an
item for a given period plus an option to
purchase after the last installment has
been paid.
• Until the balance is paid, the bank owns
the title of this asset.
7

8. .Principles of Lending
• Before you have had the opportunity to develop
judgment and experience, there are some basic
considerations which can help you to reach your
decision.
• One easy way to help you to remember is by
using a credit technique assessment like
C.A.M.P.A.R.I.
• Which stand for : Character, Ability, Margin,
Purpose, Amount, Repayment, and Insurance.
8

9. .Principles of Lending
• CHARACTER..
• Age / health.
the sole source of repayment for lending to personal customers is often
earnings, which normally rely on the continued good health and
employment of the customer.
2) Personal stability.
evidence of the customer ‘s residential status whether the customer is an
owner, tenant, or perhaps living with parents, and how long the
customer has lived at that address these information may provide some
indication of personal stability.
likewise, marital status and whether there are any or many dependants, are
also indicator,
likewise, the type of occupation could be important to your decision, and
how long has the customer been in that employment and what position
do they hold, how secure is the job.
9

10. .Principles of Lending
• CHARACTER..
• 3) integrity and honesty,
whether we feel that we can trust the customer
depends upon our own subjective view also any previous
dealings with our bank or other banks can help to
identify how honest and trustworthy of the customer has
been in the past.
4) Personal resources,
reasonable indicators can be found by a visit to the
customer’s home or place of business and also during
conversation.
10

11. .Principles of Lending
• CHARACTER..
• 5) outgoings,
what type of life-style does a customer enjoy
and how much does it cost in regular
expenditure.
6) connections,
to check whether it might be a strong family
connections or not , we must only bear in mind
these connections in mind and never lend if
repayment is doubtful.
11

12. .Principles of Lending
• ABILILTY..
• Providing that the individual has the legal
capacity to borrow funds, that they are
over 18, then we need to check that they
have the ability to manage their financial
affairs effectively and will succeed in their
aims or not.
12

13. .Principles of Lending
• Margin ..
• You must decide what return you can expect for
the type of borrowing requested.
• The greater the risk, the higher the interest rate
to be charged.
• Commission and fees.
• Cross- selling.
• Business development opportunity.
13

14. .Principles of Lending
• PURPOSE..
• We need first of all to ensure that the purpose for which the money
will be used is legal not immoral and that there are NO government
restrictions on lending.
• It may be bank ‘ s policy from time to time to reduce the availability
of funds for certain types of lending ex., weapons trading.
• Therefore, at this stage we must think carefully about the following
questions,
• Why is loan needed?
• Does it in the customer’s best interest ?
• Does it against bank’s policy or any government regulations?
14

15. .Principles of Lending
• AMOUNT..
• With regard to personal loans for customer
durables, ex., carpets, furniture, videos, TVs,
weddings, holidays, guidelines are laid down to
help you determine minimum and maximum
amounts for certain types of lending.
• Therefore, you will need to establish whether
the amount required is correct, reasonable,
enough, suitable.
15

16. .Principles of Lending
• REPAYMENT..
• Technically, most bank lending on overdraft and loan is repayable
on demand.
• However, it would be unrealistic to expect such immediate response
from a customer and usually agreement is reached on the timescale
for repayment.
• Ex. Customer needs one million USD, repayment after five years,
purpose to spend one month holiday in Australia - - the expected
answer that you will never see this customer again.
• Therefore we must think carefully about the source of repayment
ex., sale of assets, cash generation, profits, other customer’s
income, can repayments be met without strain.
• Finally we must check whether the repayment amount ( principle
amount + interest + fees + charges ) Vs. period of timescale are
both within guidelines.
16

17. ..Principle of Lending
• INSURANCE..
• If the proposition does not seem appropriate without taking security, which
should have to be realized on the failure of the debtor, then you should not
lend in the first place.
• Security should be considered only as a safety net, not as a prime point of
consideration in whether to lend.
• Security is merely an insurance against unforeseen events that adversely
affect what would otherwise have been a good proposition , for ex., civil
war, strikes, or any similar kind of FORCE MAJUIRE.
• In addition you might need to consider whether life insurance or similar
insurance against unemployment or sickness might be helpful for both the
customer’s as well as the bank ‘s benefits.
• Any security taken should be :-
• Easy to take realize.
• Easy to value.
• Easy to charge ( for the bank to obtain a good title).
17

18. ..Chapter Two
• International & Local Trade,
• generic meaning of the word Guarantee.
18

19. International / Local Trade Finance
• Local Trade represents the exchange operations of
Goods / Services between people located within same
country.
• International Trade represents the exchange operations
of Goods / Services between people located in different
countries.
• The most important factors for the existence of trade
operations are:-
• 1) the rareness of natural resources.
• 2) the new technology.
19

20. .Formula of Trade Transaction
• Document + Goods/ Services = Payment.
• Seller:-
• Delivers Goods / or Provides Services
accompanied by relevant Document (s).
• Buyer:-
• Receives Goods / or Services against
payment.
20

21. International & Local Trade
• There are three probabilities :-
• 1) Goods Vs. Goods = Barter.
• 2) Goods Vs. Service = Performance.
• 3) Goods Vs. Money = Payment.
• And the vise is the versa.
21

22. External factors that may affect
.International Trade Markets
• P.E.S.T.E.L.
• The PESTEL model is
• A well-known tool that is often .Political
• Used to assess the impact of .Economic
• External factors that affect .Social
• A business and the market in which .Technology
• it operates. .Environment
• In other words, the bigger issues .Legal
• and factors that affect two countries
• when they decide to trade with each other.
22

23. .TRADE FINANCE
• The concept of trade cycle.
• It can be defined as the time period between
the start of,
• The supply chain,
• The ordering of goods,
• Prepare / purchasing raw materials, processing,
packing, delivery.
• And the receipt of payment for the sales of
finishing goods/ products.
23

24. .SHORT – TERM TRADE FINANCE
• Short trade finance is provided and repaid within
two years,
• This covers the purchase and sale of consumer
goods such as:-
• Overdraft,
• Invoice Discounting,
• Factoring,
• Avalized Bill of Exchange.
• Negotiation under L/Cs.
• Counter Trade.
24

25. MEDIUM / LONG –TERM TRADE
.FINANCE
• Finance provided over two years up-to five years is
considered medium – term finance,
• And above five years is considered as long-term finance.
• Both of them are mostly suited to the sale and purchase
of the capital and semi-capital goods such as :-
• Buyer’s credit facilities,
• supplier’s credit facilities
• Lines of credit,
• Forfeiting
• Eurobonds.
25

26. OPERATIONS / PRODUCTS.
International
.Trade Products Payments
Guarantees
Inward transfers Outward transfer
Doc. Collections under Import
.or Export Transactions
Clean Collections
Import Letters ofCredit
Screening Unit
Export Letters of Credit
26

27. Possible ways for settlement any
.trade transactions
• For the successful execution of this
formula, banks intervene by applying one
of the following concepts or may apply
both concepts at the same time:-
Guarantee against Methods of Payment
performance in
case of default
.Doc. Collection
AVALIZATION
O/ Account Cash in Advance
Surety Bond Stand By L/C
Letters of Credit
Letters of Guarantee 27

28. THE GENERIC MEANING OF THE WORD
(GUARANTEES ) AS AN INSTRUMENT USED
.IN TRADE
GUARANTEES
AVALIZATION Letters of Guarantee Indemnities Stand By L/C
28

29. ..GUARANTEES
• In fact, the term ‘ GUARANTEE ‘ has NO precise
definition in the International law.
• It is frequently used to mean any transaction in which
one person offers security for another‘s obligations.
• In other words, the basis function of a guarantee is to
provide security.
• This includes not only surety bonds & promises of
payment but also some other devices such as a Letter of
Comfort, which are morally binding only.
29

30. INDEPENDENT LETTER OF
..GUARANTEE
• The Independence of Undertaking :-
• An undertaking is Independent where the
Guarantor / Issuer‘s obligations to the
beneficiary are not dependent upon the
existence or validity of any underlying
transaction ( Contract ) or upon any other
undertaking.
30

31. DEFINITION
• The Letter of Guarantee is a written undertaken
issued from the bank upon the request of a
person called the remitter (applicant, principal,
contractor, supplier, or exporter) to pay an
amount, specified or liable to be specified to
another person called the
beneficiary( purchaser, buyer, or importer) if he
asks the bank to do so, within the period
determined in the letter of guarantee and
without any objection whatsoever.
31

32. L/G‘S NATURE
• Letters of Guarantee by their nature are
separate transaction from the contracts or
tender conditions on which they may be
based, and L/G‘s are in NO way concerned
with or bound by such contracts or tender
conditions, despite the inclusion of a
reference to such contracts in the L/G‘s
text.
32

33. L/G‘..s Deed
• Date : / /2xxx.
• Messrs. ( Beneficiary‘s Name & Address).
• L/G‘s type ------- & Ref.----
• We hereby guarantee / Applicant‘s Name.
• For the extent of/ amount & Currency.
• In respect of :--------( legal purpose).
• We undertake to pay you any sum or sums within the above mentioned
extent without any contestation from any party whatsoever.
• This L/G valid until : --/ -- / -----.
• Therefore, any claim for payment must reach us on or before that date at
the latest, otherwise you are NO longer entitled to such claim and the
present L/G will be definitely as null and void without the need of any
advice whatsoever.
• This L/G is personal to you and is not assignable.
33

34. BANK‘S DUTY
• The duty of a guarantor ( the bank )
under L/Gs is merely to pay the sum or
sums therein stated on the presentation of
a written demand for payment and other
documents specified in the L/G‘s text
which appear on their face to be in
accordance with the terms of the L/G.
34

35. Types of L/G‘s
• From the Legal Point
of view are :-
FINAL
PROVISIONAL
35

36. TYPES OF L/Gs
• From the Operational
Point of view are:-
Local
Foreign
36

37. L/G‘s Parties
• For Local L/Gs
. .
.
37

38. L/G‘s Parties
• For Foreign L/Gs :-
38

39. From the Technical point of view
All Types
Contracts Customs Financial
L/G’s L/G’s L/G’s
Bid-bond / Money Temporary import
Tender of Goods
Demurrage Facility .Open Acc
Retention
Handling Tax Duty
Performance Maintenance containers Payment
Installments
Advance Goods for Profession
Warranty transit only
Payment L/G
Payment Related
Customs Duty
Travel Carnet
39

40. L/G‘.S LIFE CYCLE
EXTENSION
DECREASE RENEWAL
ISSUANCE
INCREASE RE-ISSUE
ALTERATION CANCELLATION
40

41. ..Question for the Day One
• What is the core different between the
word “ GUARANTEE “ and the word
“SECURITY” ?
41

42. ..Chapter Three
• Most Important Document used in Trade.
• Commercial Documents & Financial
Documents.
42

43. .DOCUMENTS USED IN TRADE
• Any documents can be classified into two
categories:-
• First Category is : Financial Documents,
• Such as,
• Bills of Exchange.
• Promissory Notes.
• Cheques.
• Or
• Any other similar instruments used for obtaining
the payment of money.
43

44. .DOCUMENTS USED IN TRADE
• Second Category is : Commercial Documents such as :
• Commercial Invoice.
• Bill of Lading.
• Air Way Bill.
• Certificate of Origin.
• EURO 1 – Certificate.
• Insurance policy.
• Packing List.
• Weight List.
• Inspection Certificate.
• Health Certificate.
• Analysis Certificate.
• Fumigation Certificate.
44

45. ..Financial Documents
• Bill of Exchange
• Definition :-
• A bill of exchange is an unconditional order in
writing, addressed by one person to another,
signed by the person who giving it, requiring the
person to whom it is addressed to pay on
demand or at a fixed or determinable future
time a sum certain in money to a specified
person or to the order of a specified person or to
bearer.
45

46. ..Financial Documents
• Cheques,
• The legal structure of a cheque is similar
to that of a bill of exchange.
• Unlike the bill of exchange , a cheque
must be drawn on a bank and it is payable
upon presentation to that bank.
46

47. ..Financial Documents
• Promissory note,
• It also has most of the same features as a bill of
exchange.
• The essential differences is that it is not an order
to another party to pay, but it is a direct promise
of payment by the party who signs the
promissory note.
• In the way as the bill of exchange, it must be
drawn up in unconditional terms.
47

48. What are the commercial
? documents
• There are a lot types of commercial
documents,
• Such as …………………….
48

49. .COMMERCIAL INVOICE
• Must appear to have been issued by the
beneficiary, and it needs not to be signed.
• Must be made out in the name of the
applicant.
• It includes full description of goods as
stated in the credit, such as quantity,
quality, item price, and total price.
49

50. .BILL OF LADING
• A bill of lading however named must appear to
indicate the name of the carrier and be signed
by the carrier or his agent,
• Or by the master or his agent.
• It indicates that, the goods have been shipped
on board a named vessel from the port of
loading to the port of discharge.
• Transshipment means, unloading from one
vessel and reloading to another vessel during
the carriage.
50

51. .AIR WAY BILL
• An air transport document however named,
must appear to indicate the name of carrier and
be signed by the carrier or his agent.
• Indicates the air port of departure and the air
port of destination stated in the credit.
• Transshipment means, unloading from one
aircraft and reloading to another aircraft during
the carriage from the airport of departure to the
airport of destination.
51

52. .CERTIFICATE OF ORIGIN
• Basic requirements:-
• Be dated and signed.
• Stated the origin of the goods ( i.e produced by
which country).
• Indicates the description of the goods in general
terms not identical as the credit.
• The exporter’ s name or the manufacturer’ s
name.
• The applicant’ s name.
52

53. .EUR 1 – CERTIFICATE
• EUR 1, is the name of the form which is used in international
commodity traffic.
• It is based on application of various multilateral agreements within
the European Union Association Agreement.
• In the trade free agreements, goods are defined which apply to
cheaper rates of duty or to be completely duty-free introduced,
under the condition that, they were completely manufactured in a
member country.
• EUR 1, must be handed over to the competent authority in order to
enjoy with the preferential rate during a customs clearance.
• EUR 1 certificate, is recognized also as a certificate of origin in the
external trade in legal sense.
53

54. INSURANCE POLICY AND / OR
.CERTIFICATE
• An insurance document such as insurance policy,
or insurance certificate must appear to be signed
by an insurance company, or their agents.
• The insurance policy must indicate that, risks are
covered at least between the place of shipment
and the place of final destination.
• It will include the applicant’s name, the
beneficiary’ name, place of shipment, and final
place of destination.
54

55. .INSURANCE POLICY
• Based on the London code, the general cargo are
available at three levels of coverage:-
• Clause ” A ” will cover loss due to,
• 1) Problems with the carrying vessel or train – such as
collision, explosion, fire, sinking, running aground,
washed overboard, lost on loading or unloading.
• 2) it covers events such as volcanic activity and
earthquakes.
• 3) it covers costs incurred due to theft and non-delivery.
• Clause ” B ” will cover all risks under (1) & (2) only.
• Clause ” C ” will cover all risks under (1) only.
55

56. .INSURANCE POLICY
• Additional cover can be obtained by purchasing
insurance with one of the standard institute
cargo clauses for wars or strikes.
• The insured is not covered for :-
• Misconduct by the insured.
• Poor packing.
• Any inherent of the cargo such as a tendency to
deteriorate over time.
• Insolvency of the carrier.
• An unseaworthy vessel.
56

57. ..Chapter Four
• Methods of Payments used in Trade:-
• Open Account.
• Advance Payments.
• Documentary Collections.
• Export & Import Letters of Credit.
57

58. Methods of Payment in Local &
.International Trade
O/Acc
Cash in Advance
Documentary Collections
Letters of Credit / Documentary Credits
58

59. .OPEN ACCOUNT
Open account trading is most commonly
used in situations in which the two
companies concerned know each other
well and have a long established trading
.relationships
? How do it operate
59

60. .Open Account
• When business is conducted between seller and
buyer on open account terms:-
• 1) the sellers dispatches goods to the buyer and
at the same time sends to the buyer an invoice
together with other appropriate documents.
• 2) the buyer makes arrangements to pay on the
relevant date according to the terms of the
agreement, and he may use any payment
method such as an international bank transfer or
cheque.
60

61. .Open Account
• This system is particularly attractive to buyer
because it affords them the opportunity of
examining the goods before they have to make
payment.
• On the other hand, seller using open account
methods obtain NO security for payment and
have to rely on the creditworthiness and good
faith of the buyer.
61

62. .CASH IN ADVANCE
• A buyer may make payment in advance, before the
goods are shipped.
• The reasons for using this methods may be due to:-
• 1) seller may not have finance with which to buy raw
materials or prepare the goods for shipment.
• 2) seller may be unwilling to ship goods to the country
of the buyer for reasons of contry risk.
• 3) buyer may wish to encourage the seller into long term
trade relationship.
• 4) buyer feels comfortable with its relationship with the
seller and wish to enjoy with a good discount for goods’
value.
62

63. .DOCUMENTRY COLLECTIONS
• Seller will dispatch the goods or services to the buyer’s
country.
• The seller will send all the relative documents to his
bank ( usually known as Remitting bank) for collecting
his money.
• The seller’s bank, will forward such documents to the
collecting bank (usually in buyer’s country) in order to
obtain payment from the buyer under certain conditions.
• The collecting bank will deliver these documents to the
buyer to obtain payment in accordance with collection
instruction received from the remitting bank.
63

64. DOCUMENTARY COLLECTIONS
• System mechanism first phase:-
Send docs. For
Remitting
The seller collection
bank
Dispatch Forward
goods documents
The Deliver docs. Collecting
buyer Against payment bank
64

65. DOCUMENTARY COLLECTIONS
• System mechanism second phase:-
Remitting
The seller Credit his account bank
Information of shipment details Transfer
money
The Collecting
buyer Payment or acceptance bank
65

66. .DOCUMENTARY COLLECTIONS
• Under this procedures, the banks channel the
documents but they do NOT themselves give any
payment undertaking.
• This solution offers less security than a documentary
credit but in return the costs are lower.
• The seller’s interest is best served where the buyer is
not able to obtain possession of the goods without
presentation of shipping documents that are sent
through the banking system by the seller.
66

67. DOCUMENTARY COLLECTIONS
• Definition of Collection:-
• Collection means the handling by banks of documents, in accordance with
instructions received in order to :-
• 1) obtain payment and / or acceptance.
• OR
• 2) deliver documents against payment and / or acceptance.
• 2/A) C.A.D. ( Cash Against Document)
• 2/B) D / P (Deliver Against Payment)
• OR
• 3) deliver documents on other terms and conditions.
67

68. DOCUMENTARY COLLECTIONS
• Avalization procedures:-
• If the seller has agreed to supply the goods on a short-
term credit it can stipulate that the documents be
handed over against the buyer’s acceptance of a bill of
exchange or signature on a promissory note.
• Then the bank can add its avalization to such instrument
in order to become guaranteed for payment by the
bank.
• The seller may be able to discount the bill or note in
return for an immediate payment or he may wait to
present this instrument on its maturity date to get his
money.
68

69. .DOCUMENTARY COLLECTION
• Collection Instruction:-
• All documents sent for collection must be
accompanied by a collection instruction
indicating that the collection is subject to URC
522 and must give a complete and precise
instruction.
• Banks are only permitted to act upon the
instruction given in such collection instruction.
• Banks will not examine documents in order to
obtain instructions.
69

70. DOCUMENTARY COLLECTIONS
• Collection instructions should contain at least the
following items of information:-
• 1) details of the bank from which the collection was
received including full name, postal code , swift code,
telephone number, fax number and related reference
number.
• 2) details of the principal ( seller) including full name,
postal address, telephone and fax number.
• 3) details of the drawee ( buyer ) including full name,
postal address or domicile at which presentation is to be
made and if applicable telephone or fax number.
70

71. DOCUMENTARY COLLECTIONS
• 4) Details of the presenting bank including full name, postal code,
swift code, postal address, and telephone or fax number.
• 5) Amount (s) and currency to be collected.
• 6) List of all documents enclosed.
• 7) Terms and conditions upon which payment and / or acceptance
is to be obtained.
• 8) Terms of delivery of documents whether :
• - Cash against Document.
• Or
• - Delivery against Acceptance.
• Or
• - any other terms & conditions.
71

72. DOCUMENTARY COLLECTIONS
• Disclaimer on effectiveness of documents:
• Banks assume NO liability or responsibility for
the form, sufficiency, accuracy, falsification or
legal effect of any document or for the general
and / or particular conditions stipulated in the
document.
• Also banks assume NO liability or responsibility
for the description, quantity, weight, quality,
conditions, packing, delivery terms, value or
existence of the goods represented by any
document.
72

73. .LETTER OF CREDIT
• DEFINITION.
• Letter of credit means any arrangement however named or
described, that is irrevocable and thereby constitute a definite
undertaking of the issuing bank to honor a complying presentation.
• Complying presentation means a presentation that is in accordance
with the terms and conditions of the credit, the applicable provisions
of the UCP rules and the international standard banking practices.
• The Uniform Customs and Practice for documentary credit, 2007
Revision, ICC publication number 600, (UCP) are rules that apply to
any documentary credit when the text of the credit expressly
indicates that it is subject to these rules.
• They are binding on all parties thereto unless expressly modified or
excluded by the credit.
73

74. DOCUMENTARY COLLECTIONS
• Advice of acceptance / or non-
acceptance.
• The collecting bank must send without
delay an advice of acceptance or non-
acceptance to the bank from which the
collection instruction was received.
• On this stage, the whole documentary
collection’s process will be closed.
74

75. Letter of Credit
• Documents V. Goods, Services & Performance.
• Banks deal with Documents only and not with
Goods, Services or performance to which the
documents may relate.
• A credit by its nature is a separate transaction
from the sale or order contract on which it may
be based.
• Banks are in NO way concerned with or bound
by such contract even if any reference to it is
included in the credit.
75

76. .LETTER OF CREDIT
• All parties concerned are :-
SHIP. GOODS
Seller / Buyer/
beneficiary/expo applicant/
SEND PROFORMA INVOICE
rter importer
Presentation
Advice L/C’s
-Docs
SIGN APPLICATION
ADVICE DOCS
Nominating Issue swift700
bank Issuing bank
FORWARD DOCS
76

77. FLOW CHART OF ALL BANKS ROLE
.UNDER DOC. CREDIT
EXPORTER IMPORTER
ADVISING BANK
ISSUING
CONFIRMING BANK
BANK
NOMINATED BANK
77

78. .ADVISING BANK
• An advising bank advises the credit and
any amendment to the beneficiary without
any undertaking to honor.
• The advising bank must signify that it has
satisfied itself as to the apparent
authenticity of the credit or its
amendment.
78

79. .ISSUING BANK
• An issuing bank is irrevocably bound to
honor as of the time it issues the credit.
• An issuing bank undertakes to reimburse a
nominated bank that has honored or
negotiate a complying presentation and
forwarded the documents to the issuing
bank.
79

80. .NOMINATED BANK
• Any authorization issued from the issuing
bank to the nominated bank in order to
honor a complying presentation, does not
impose any obligations on that nominated
bank to honor, except when expressly
agreed to by that nominated bank and so
communicated to the beneficiary.
80

81. .CONFIRMING BANK
• Confirming bank means the bank that, adds its
confirmation to a credit upon the issuing bank’s
authorization or request.
• A confirming bank is irrevocably bound to honor
a complying presentation as of the time it adds
its confirmation to the credit.
• A confirming bank undertakes to reimburse
another nominated bank that has honored a
complying presentation and forwarded the
documents to the confirming bank.
81

82. .LETTER OF CREDIT
• A BASIC DOCUMENTARY CREDIT TRANSACTION
WILL BE ESTABLISHED IN ACCORDANCE WITH
THE FOLLOWING STEPS:-
• 1) often, the seller sends to the buyer a pro
forma invoice, indicating details of the Goods
and their unit prices, quantity, quality, terms of
payment, before conclusion the transaction.
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83. .LETTER OF CREDIT
• 2) agreement,
• In this situation seller and buyer
frequently maintain their own set of
standard conditions of sale and purchase
setting out the terms on which they
normally conduct business.
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84. .LETTER OF CREDIT
• 3) Application format,
• The buyer completes & signs a standard
documentary credit application form made
available by banks, requesting that the bank to
issue a documentary credit in favor of the seller.
• This application form should specify the
documents that are to be presented and all
required terms & conditions to be complied with.
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85. .LETTER OF CREDIT
• 4) Issuing L/C :
• The issuing bank will check customer’s position
before taking any action, and may seek proper
approval in case of there is NO credit line facility
available to issue this L/C.
• After getting all proper approval, the issuing
bank will issue this L/C by sending a SWIFT
message M.T 700 to the nominating bank.
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86. .LETTER OF CREDIT
• 6) Goods & Docs:-
• The seller will dispatch the Goods directly
to the buyer as per L/C’s terms.
• Then send to the buyer (by Fax) Shipment
details and copies of some docs.
• Presents all the required documents to the
counters of the nominating bank with time
frame for presentation.
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87. .LETTER OF CREDIT
• 5) Advising L/C :-
• The nominating bank will be responsible
to advice the seller with this L/C’s terms &
conditions without any delay.
• The seller will review all terms &
conditions and may seek any amendments
before shipping the Goods.
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88. .LETTER OF CREDIT
• 7) Docs Examination:
• The nominating bank will examine all
documents presented to make sure that
they are complied with L/C’s terms and
conditions.
• Then, forward these documents to the
issuing bank’s counter.
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89. .LETTER OF CREDIT
• 8) Issuing bank’ Role:-
• Examine these documents again in order
to make sure that there is NO
discrepancies in such docs.
• Inform the buyer to receive the docs.
• Make payment to the nominating bank in
accordance with L/C’s terms.
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90. .LETTER OF CREDIT
• Terms of payment will be one of the
following methods:-
• First : AT SIGHT PAYMENT.
• Means that payment should be made on
demand upon presentation of complied
docs.
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91. .LETTER OF CREDIT
• Third : by ACCEPTANCE:
• It means that the payment is not
immediate.
• Drafts are required to be presented and
payment is on the maturity date of the
draft.
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92. .LETTER OF CREDIT
• Second : by DEFERRED PAYMENT.
• Means that, payment is not immediate.
• Payment is a time in the future
determinable in accordance with the
documentary credit.
• A draft is NOT required to be presented.
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93. .LETTER OF CREDIT
• Fourth : By NEGOTIATION,
• Payment may or may not be immediately.
• Drafts may or may not be required for
presentation.
• It means the purchase by the nominated bank of
documents and / or drafts under a complying
presentation by advancing or agreeing to
advance funds to the beneficiary on or before
the banking day on which reimbursement is due
to the nominated bank.
93

94. ..Chapter Five
• Delivery terms,
• International commercial terms.
• INCO TERMS 2010.
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95. INCO TERMS 2010.
(( DELIVER TERMS
• In order for trade to prosper, buyers and sellers
must be clear as to where their responsibilities
under commercial contracts begin and end.
• Consequently, buyers and sellers will need to
know who is responsible for the payment of
carriage, insurance, loading, unloading costs,
import / export taxes and other related
expenses.
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96. .INCO TERMS 2010
• As a result,
• The International Chamber of Commerce
in Paris ( ICC ) designed an international
commercial terms ( INCO TERMS) which
were first published in 1936,
• There are now the accepted international
standard for trade terms referred in
commercial contracts.
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97. .INCO TERMS 2010
• Failure to establish transparently the parameters
of these responsibilities within the commercial
contracts would make it difficult for sellers to
price their goods accurately and for buyers to
calculate the full purchase costs.
• Such failure would also increase the number of
contractual disputes between buyers and sellers,
which would have to be resolved by arbitration
or through the courts.
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98. INCO TERMS 2010.
1) EX. Works,
• Means that, the seller delivers when he places
the goods at the disposal of the buyer at the
seller’s premises or another named place such
as work, factory, or warehouse, not loaded on
any collecting vehicle, and at the agreed date /
period.
• If the buyer fails to give notice for delivery to
the seller then the buyer bears all risks of loss or
damage to the goods from the agreed date or
the expiry date of the agreed period of delivery.
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99. .INCO TERMS 2010
• 2) FCA: Free Carrier:
• This INCOTERM can be used for any mode of transport
and may be also used where more than one mode of
transport is used.
• Means that the seller delivers the goods cleared for
export to the carrier named by the buyer at the seller’s
premises, seller will be responsible for loading
• or
• at another named place ( seller will not be responsible
for loading).
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100. .INCO TERMS 2010
• 3) FAS : Free Alongside Ship,
• Means that the seller delivers when the
goods are placed alongside the vessel, on
a quay or in a lash barge cleared for
export at the named port of shipment.
• In case of containers, then the point will
be at the container yard.
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101. .INCO TERMS 2010
• 4) FOB .. Free On Board,
• Means that, the seller delivers the goods on
board the vessel nominated by the buyer at the
named port of shipment.
• The buyer has to bear all costs and risks of loss
or damage to the goods from that point.
• This term can only be used for sea or inland
waterway transport.
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102. .INCO TERMS 2010
• 5) CFR .. Cost and Freight,
• Means that, the seller delivers when the
goods are placed on board the vessel.
• The seller must contract for and pay the
costs and freight necessary to bring the
goods to the named port of destination.
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103. .INCO TERMS 2010
• 6) CIF .. Cost, Insurance & Freight,
• Same as above, but the seller also has to
produce marine insurance against the
buyer’s risk of loss or damages.
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104. .INCO TERMS 2010
• 7) CPT .. Carriage Paid to,
• Can be used for any mode of transport
and may be used also where more than
one mode of transport is used.
• The seller delivers the goods to the carrier
nominated by him and pays the freight of
carriage the goods to the named
destination.
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105. .INCO TERMS 2010
• 8) CIP.. Carriage & Insurance Paid To,
• Same as above, but the seller will contract for
insurance cover against risk of loss or damage
for the goods during the carriage.
• However, the seller is required to obtain a
minimum cover only.
• If the buyer needs more risks to be covered he
must either agree with the seller for such
additional risks or arrange to obtain himself for
such insurance.
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106. .INCO TERMS 2010
• 9) DAT - - DELIVERED AT TERMINAL.
• This rule is available for any mode of
transportation.
• The seller delivers when the goods once
unloaded from the arriving means of transport,
and placed at the disposal of the buyer at a
named terminal at the named port or place of
destination such as ‘ terminal, quay, warehouse,
container yard, or road, rail or air cargo
terminal.
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107. .INCO TERMS 2010
10 ) DAP – DELIVERED AT PLACE.
This rule can be used for any mode of transport.
The seller must deliver the goods by placing them at the disposal of
the buyer on the arriving means of transport ready for unloading at
the agreed point or at the named place of destination on the agreed
date or within the agreed period.
The seller bear all risks of loss or damage to the goods until they have
been delivered to the buyer.
Except,
If the buyer fails to fulfill is obligations in obtaining the import license
or other official authorizations required to carry out all customs
formalities for the importation of the goods.
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108. .INCO TERMS 2010
• 11) DDP.. DELIVERED DUTY PAID.
• This term is available for any mode of transportation.
• Same as No. (10) DDP,
• But, in this case the seller is responsible for not only for
delivering the goods cleared for export, but also cleared
for import.
• Which means that, the seller is responsible to pay any
duty for both export and import in order to carry out all
customs formalities.
• This term represents the maimum obligations on the
seller.
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109. ..Chapter Six
• International Payments & SWIFT
mechanism.
109

110. .S.W.I.F.T
These initials stand for:-
The Society for
Worldwide Inter-bank
Financial
Telecommunication.
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111. .S.W.I.F.T
• It is an international organization.
• The membership of which consists of
more than 3000 bank and financial
institutions located in 72 country.
• The society which was created under
Belgian law, is based in Brussels, but has
representative offices worldwide,
particularly in the major financial centers.
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112. .S.W.I.F.T
• It was formed to accelerate the transfer of funds
and other messages between member
institutions.
• By mid 1991, the society was handling 1.5
million messages a day.
• The system works by means of a
telecommunications link between the computer
systems of the members that allows the rapid
transmission of messages.
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113. .S.W.I.F.T
• It is used to execute telegraphic transfers
previously sent by cable or telegraph and
may also be used for international
payment orders / air mail transfers at the
discretion of the member institution,
making for a much faster execution of the
customer‘s instructions.
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114. International Payment
..Transactions
Clean Collections
Inward Transfer Outward Transfer
Screening Unit
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115. .THANKS FOR YOUR ATTENTION
• TRADE FINANCE OPS TEAM.
Barclays Bank, Egypt.
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