CHAPTER 5 - ROLE OF BANKS IN INTERNATIONAL TRADE

·         Application of International Code of Banking Practices (UCP, URC, URR, ISBP, URDG, ISP etc).

·         Control over goods.

·         Provide Finance (Pre / Post Shipment, overdraft etc).

·         Transfer of Funds.

·         Credit /Confidential Reports.

·         Agency Role - Collection of cheques, Bill of Exchange, Promissory Notes, documents etc.

·         Advisory Role (Forward Contracts).

·         Channel of Communication (Authenticated SWIFT, Tested Messages (Telex).

·         Refinancing.

CHAPTER 4 - RISKS IN INTERNATIONAL TRADE

The Following is the risks associated with international Trade and some of the risks could also be common to domestic trade.

·         Nonpayment for the goods sold (Credit Risk / Default Risk).

·         Non receipt of goods.

·         Delay in payment.

·         Delay in delivery of goods.

·         Bankruptcy / insolvency of the seller / buyer / banks / insurance company / transport company (credit / confidential report).

·         Quality of goods received different from the one ordered (Inspection Certificate or Analysis Certificate).

·         Country Risk / Political Risk (Change in rules & regulations, payment moratorium, Currency inconvertibility, exchange control).

·         Force Majeure Risk (war, natural disaster).

·         Currency / Exchange Rate Risk (Devaluation / Revaluation / Convertibility).

·         Legal Risk (different laws) / Legislative Risk.       

·         High Demurrage Charges.                                         

·         Language / Local Customs / Business Practices.

CHAPTER 3 - PARTIES IN INTERNATIONAL TRADE

The various parties involved in any international Trade transactions are:

1. Buyer / Importer / Applicant / Opener / Drawer.
2. Seller / Exporter / Beneficiary / Drawee.
3. Manufacturer / Producer.
4. Agents (for seller & Buyer).
5. Banks (all roles).
6. Transporters (Transport Agents - Air, Sea, Land).
7. Insurance Companies (Insurers).
8. Government Departments, Embassies, Consulates and Trade Organizations, Central Banks, Customs & Excise Chamber of Commerce.

CHAPTER 2 - KEY FACTORS IN TRADE (Important)

Any Trade transaction can be broadly broken into:

•  Movement of Goods
•  Movement of Documents
•  Movement of Funds

CHAPTER 1 - INTRODUCTION - GENERAL TRADE

What is Trade?

Trade is purchase and sale of goods and results in the movement of goods from the seller to the buyer for a consideration.

Trade could be domestic or international.

Domestic Trade is the purchase and sale of goods within the same country and results in the movement of goods within the country.

International Trade is the purchase and sale of goods between two countries and results in the movement of goods from one country to another country.

When goods move from one country to another, the following considerations are to be kept in mind.

1. Physical movement of goods, which involve someone to undertake transportation of the goods.
2. Insurance of goods against any damage that may occur during transit. This will require a contract of insurance with an insurer and documents evidencing (insurance policy / certificate) that insurance has been affected.
3. Regulations with the importing and exporting countries: licensing requirements, exchange control regulations, tariffs, quotas etc.
4. Legal requirements within the countries.

In international Trade all or many of the above considerations apply since there is scarcely any face-to - face contact between the buyer and the seller and the goods and money has to move long distances across natural and artificial barriers (cross country movement).