T2 - Trade Finance - CIMB Niaga
T2 - Trade Finance - CIMB Niaga
Buyers Risk
Country Risk
Stable political climate? War? Late arrival of the goods?
Revolution? Damaged goods?
Positive economic environment? Goods not as per contract requirement?
Solid legal infrastructure?
Exotic countries OFAC List?
RISKS
Sellers Risk
Distance?
Foreign Exchange Risk
Credit worthiness of Buyer?
Volatile foreign currency?
Disputes?
Restrictions imposed by governments?
Commercial Risk
Reliable information concerning the companys track record?
Insolvency of your trading partner?
Default or termination on your contract?
Risks Issues in International Trade
Risk
Mitigation
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COMMERCIAL CONTRACT
Commercial Contract
Payment Methods
Clean Payment Documentary Collection
in
Open Account International Trade
Clean Collection and CAD
Advance Payment
Sight Draft and Time Draft
D/P and D/A
Documentary Credit
Exporter Exporter
Importer Importer
Clean Payment
OPEN ACCOUNT ADVANCE PAYMENT
Seller gives credit to Buyer. Buyer provide credit to Seller.
Disadvantage to Seller. Most advantageous to Seller.
Protection is short for Seller when Protection is short for Buyer when
Buyer freely take goods after their order of goods cannot be realized by
arrival at the port of destination. Seller while Buyer has already provide
the fund for such purpose.
This payment method occurs because:
Usually carried out only for trade
Seller has been really sure that
transaction with the following
Buyer will realize payment at the
condition:
time already set.
Trade value is not of great amount.
Seller is sure that there is no
blocking payment policy from Buyer has really trust Seller.
government of Buyers country.
Such goods are really required and
Seller has sufficient liquidity to give there is no other choice
credit to Buyer
Documentary Collection
7
Acceptance & Payment
REMITTING BANK COLLECTING / PRESENTING BANK
Documentary Collection
Types of Documentary Collection:
Advantages of DC
As instrument in goods purchase transaction especially import goods.
As financing basis of DC Issuing Bank to finance importer.
Constituting a safer method for the parties involved in trade transaction concerning
uniformity in interpreting terms in its implementation.
Documentary Credit (DC)
EXPORTER / BENEFICIARY DC CYCLE IMPORTER / APPLICANT
1. CommercialContract
5
6A Goods shipped 9 2
Payment
Document Document
(Sight)
Payment
or (Sight) DC
Acceptance Advise the DC
or Application
(Usance) Acceptance
4 8
7B (Usance)
Issue DC
3
6B Document
Standby DC
DC that provide payment undertaking against Beneficiary Attestation rather than
documentary evidence .
Issued to guarantee performance of the transaction, goods and services, between
Applicant and Beneficiary.
Payment under Standby DC will be made when Applicant cannot perform the
transaction (default) and it is attested by Beneficiary when claim payment to
Standby DC Issuing Bank.
Same purposes with Bank Guarantee issuing.
Documentary Credit (DC)
International Commercial Terms (Incoterms)
Incoterms are the international rules for the interpretation of trade terms. It is a term of
the contract of sale and represents contemporary commercial practice.
Incoterms clearly defines the respective obligations of the Sellers and Buyers to give
notice, provide documents, provide information including security-related information,
procure insurance, and pack the good properly and clear them for export and import
and carry out all formalities for the export and import of the goods.
Documentary Credit (DC)
Most Frequent Incoterms applied for Documentary Credit
SELLER BUYER
ON BOARD
FOB SELLER'S COSTS & RISKS BUYER'S COSTS & RISKS BUYER'S COSTS & RISKS