Letter of Credit Transactions, International Trade, ISBP 745, INCOTERMS 2010 & URBPO
Programme & Its Objectives
In international trade counter part y risk and country risk cannot be avoided. More than a century, instruments like letters of credit and bank guarantees are used by the companies for trade settlements and to mitigate their risks.
Some of the data available through market survey indicates that more than 70% of the documents presented under letter of credit are rejected at the first presentation.
The survey also pointed out the reason as:
• letters of credit accepted by the exporters have certain tricky conditions
• exporters are not fully aware about the UCP Rules and ISBP (International Standard Banking Practice) while executing documents under letters credit which results in discrepancies
• importers are not able to prescribe appropriate documents to safe guard their interest at the time of establishing letters of credit
This program will exclusively address the operational issues in letters of credit transactions with detailed discussions on important UCP 600 articles relating to each filed in the standardised SWIFT LC format. This will enable the participants to interpret the implications of the terms and conditions in a letter of credit. One live case study will be circulated to the participants for effective understanding.
Detailed discussions on each document (Bill of Exchange, commercial invoice, bill of lading, airway bill, insurance, certificate of origin, packing list and weight certificate) with commonly observed discrepancies will be taken up with practical exercise. Interpretation of some of the provisions in ISBP 745 (published by ICC Paris on 1st July 2013) will be explained with the practical exercise.
In import transactions, letter of credit is used for availing buyers’ credit. Issues relating to buyers credit will be discussed.
While finalising the commercial terms in international trade, terms of delivery plays an important role in pricing their product and risk transference. By using appropriate INCOTERMS 2010 (CIF / CIP etc) both the parties are able to express clearly the responsibilities and obligations of each of them. This ‘INCOTERMS’ is indicating the required documents for a particular transaction while structuring a letter of credit. Brief discussion on the implication of certain ‘INCOTERMS 2010’ will be addressed.
International market has come out with a new product known as Bank Payment Obligation (BPO). ICC Paris has set the rules for this instrument. This instrument will be a mix of Letter of Credit and Bank guarantees. This instrument has come into force from 1st July 2013. Highlight of this instrument with detailed explanation will be discussed.
By participating in this workshop, participants will be able to enrich, with hands on experience in handling letters of credit transactions from the initial stages of finalising the terms of delivery and terms of payment in a commercial transaction as well as update themselves with the latest developments which will result in reducing the transaction cost and better usage of these instruments.
Who will Benefit Most from this program?
• Companies having international exposure on cross border trade handling Letters of Credit.
• Marketing-in-charges & Finance heads of Export firms who are frequently dealing in LC transactions.
• Importers having high value transactions who want to ensure due compliance of the contractual obligations by the overseas sellers through proper documents.
• Bankers (working in trade finance desk, Relationship Mangers, In charge of commercial banking, product managers, document examiners, and credit risk analysts) can update their professional skills to serve their clients more efficiently.
Structuring a letter of credit transaction – significance of underlying contract in identifying terms of delivery – basic understanding of INCOTERMS 2010 – terms of payment – quick review of letter of credit operation – responsibilities and of different parties in a letter of credit transaction – types of letters of credit – difference between Standby letter of credit and letter of credit.
How to structure import transaction through letters of credit – Significance of each fiel d in SWIFT MT 700 format – transferring the contents of the commercial contract to Letter of credit application form – prescribing appropriate documents – discussion on important UCP 600 Articles
Documents in a letter of credit transaction – commonly observed discrepancies in draft (bill of exchange), invoice, transport documents, insurance and certificate of origin – detailed discussion on the latest version ISBP 745 with practical exercise
Discussion on the proposed new instrument – Bank Payment Obligation (BPO) – Uniform Rules for BPO
Case studies – some of the opinions, ruling and decisions of International Chamber of Commerce, Paris, on certain specific issues and certain court decisions will be discussed through case studies.
Question and answer – summing up