International Trade Finance and Forex Operations Theory and Application

1 Methods of Payment in International Trade: Special Reference to Letter of Credit 1

1.1 Trade Finance in Today’s Context 1

1.2 Contract of Sale and Parties Involved in International Trade Flow 2

1.3 Payment Methods 4

1.4 Roles and Responsibilities of Banks under Documentary Credit 9

1.5 A Sample Letter of Credit (Created by MT 700, SWIFT) 10

1.6 Export Bill Negotiation/Purchase/Discount 13

1.7 Normal Transit Period 13

1.8 Checklist: Recommendations for a Letter of Credit 14

1.9 Factoring 15

1.10 Forfaiting 16

2 Domestic and International Regulatory Framework 32

2.1 The Role of the Regulatory Bodies in International Trade 32

2.2 Foreign Exchange Management Act, 1999, Regulatory Framework – An Overview 32

2.3 Reserve Bank of India (RBI) 35

2.4 Foreign Exchange Dealers Association of India (FEDAI) 36

2.5 Directorate General of Foreign Trade and Foreign Trade Policy 37

2.6 Export-Import Bank of India or EXIM Bank 42

2.7 Export Credit Guarantee Corporation of India 45

2.8 International Chamber of Commerce 51

3 Structured Products and Letter of Credit 58

3.1 Structured Documentary Credit 58

3.2 Back-to-Back Letter of Credit 58

3.3 Transferable Letter of Credit 61

3.4 Red-Clause Letter of Credit 63

3.5 Green-clause Letter of Credit 66

3.6 Revolving Letter of Credit 66

3.7 Instalment Letter of Credit 68

 

3.9 Standby Letter of Credit 68

4 Documentary Discrepancies and Banking Operations: Case lets on URC 522 and UCP 600 76

4.1 International Chamber of Commerce 76

4.2 Documentary Collection and URC 522 77

4.3 Letter of Credit Transaction 81

5 Transport Documents and Other Commercial Documents: In International Trade 96

5.1 Transport Document – Bill of Lading (BL) 96

5.2 Types of Bill of Lading 97

5.3 Waybill 101

5.4 Caselet on Transport Documents 102

5.5 Proforma Invoice 105

5.6 Packing List 106

5.7 Insurance Certificate 107

5.8 Certificate of Origin 110

5.9 Quality Certificate 111

6 INCOTERMS: Division of Risk and Cost between Exporters and Importers 130

6.1 International Commercial Terms – INCOTERMS 130

7 Export Trade and Export Credit 146

7.1 Export Trade – Basics 146

7.2 Some Important Concepts Related to Different Types of Accounts 147

7.3 Advance Payment against Export 148

7.4 Consignment Exports 149

7.5 Counter Trade Arrangement 150

7.6 Export of Goods by Special Economic Zones (SEZs) 150

7.7 Export of Services by Special Economic Zones (SEZs) to DTA Units 150

7.8 Project Exports and Service Exports 151

7.9 Export of Currency 151

7.10 Switching from Barter Trade to Normal Trade at the Indo-Myanmar Border 152

7.11 Counter Trade Arrangements with Romania 152

7.12 Handing Over Negotiable Copy of Bill of Lading to Master of Vessel/Trade Representative 152

7.13 Follow-up of Overdue Bills 152

7.14 Change of Buyer/Consignee 152

7.15 Shipments Lost in Transit 153

7.16 “Netting off” of Export Receivables against Import Payments – Units in Special Economic Zones (SEZs) 153

7.17 Financing Export Credit 153