presentation of sample bank products

BankingPRESENTATION OF SAMPLE BANK PRODUCTSREMITTANCES, LETTERS OF CREDIT, DOCUMENTARY COLLECTION, LETTERS OF GUARANTEE

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Presentation of Sample Bank Products: Remittance 2

Remittance

Presentation of Sample Bank Products: Remittances 3

Remittance

Is free transfer of funds between two parties

Buyer(importer)

Seller(exporter)

PracticeRegulations

TradeLaw

CBEInstructions

International

Anti Money Laundry Practice

BankGuidance

Presentation of Sample Bank Products: Remittances 4

Remittance

Types :

Individual

Corporate

Full Settlement 100 % of Proforma Invoice

Partial SettlementPayment %

Payment TypeAdvance Payment

Post Payment

Routing :

Non-Banking Institutions : Transfer officesWestern Union

MoneyGram

Al-Rajhi

Banks

Illegal transfers

Presentation of Sample Bank Products: Letter of Credit 5

Letter of CreditL/C or ILC & ELC


• Definition:

– A Letter of Credit, simply defined, is a written instrument issued by a bank at the request of its

customer, the Importer (Buyer), whereby the bank promises to pay the Exporter (Beneficiary)

for goods or services, provided that the Exporter presents all documents called for, exactly as

stipulated in the Letter of Credit, and meet all other terms and conditions set out in the Letter

of Credit.

• If the Letter of Credit is issued in course of international trade

– the Letter of Credit should comply with CBE regulations,

– and are also subject to provisions of Uniform Customs and Practices for Documentary Credit

(UCPDC) framed by International Chamber of Commerce (ICC)

currently applied UCP600 since Jan’2017


• Synopsis :

Letter of Credit therefore:

– Are an arrangement by banks for settling international commercial

transactions.

– Provide a form of security for the parties involved.

– Ensure payment, provided that the terms and conditions of the Letter of

Credit have been fulfilled.

– Mean that payment by such means is based on documents only, and not

on merchandise or services involved.


8. Payment of L/C8. Payment of L/C at term


Terms Definition ActivityApplicant الطالب Importer المستورد Buy

Beneficiary المستفيد Exporter المصدر Sell

Issuing/Opening Bank االصداربنك Importer’s Bank المستوردبنك Issues L/C

Advising Bank المبلغبنك Exporter’s Bank المصدربنك Advises L/C

Confirming Bank التعزيزبنك Advising Bank or 3rd Party Bank الثالثالطرفبنك Confirms L/C

Paying Bank الدفعبنك Any bank as specified in L/C االعتمادمشمولبنك Pays the Draft


> Types of Letter of Credit

• Revocable & Irrevocable Letter of Credit

– Irrevocable LC : A letter of credit is deemed to be an irrevocable credit, which can neither be

amended nor cancelled without an express agreement of all the parties concerned. i.e. the

applicant, issuing bank, beneficiary and confirming bank (if any).

– *Revocable LC : The concept of “ Revocable Credit “ which was in effect till UCPDC 500 (till 30th

June, 2007) has been withdrawn under the latest revision. Thus an LC can only be irrevocable in

nature.


> Types of Letter of Credit

• Sight Credit & Acceptance (Usance) Credit

– Sight Credit : is the LC prescribes the condition of ‘ payment at sight ‘, in this the beneficiary gets

the benefit of immediate payment upon presentation of the proper documents laid down as per the

terms of LC at the paying bank.

– Usance Credit: If the beneficiary decides to grant a period of credit to importer after sight such a

LC is called Acceptance Credit. The period of credit is called Usance, in this type of LC the beneficiary

draws a usance draft on the buyer or issuing bank or confirming bank depending on the terms. This

draft is presented along with documents and the beneficiary is advised that the amount in the draft

will be paid to him on prefixed future date .


> INCOTERMS

Published by ICC Paris,

published 1936 latest revision in 2000

• Necessary due to different terms of trade in each country

• To avoid misunderstandings, trouble recommendable to use Incoterms.


> INCOTERMS


> Documents

• Invoice

• Bill of Lading (B/L)

• Air Transport Document

• Insurance Document

• Certificate of Origin

• Inspection Certificate

• Others


> DocumentsBill of Lading (B/L) Specimen(Article 20 of UCP 600)

• Embodies the proprietary right to the goods afloat

• Indicates port of loading and port of discharge

• Indicates the name of the carrier

• Normally issued in 3 folds


> Documents

Commercial Invoice Specimen

(Article 18 of UCP)

A commercial invoice usually includes the following information:

Name and address of the seller and the buyer

Amount and currency

Description of goods

Other information required by the credit

Need not to be signed


> Documents

Insurance Certificate Specimen

(Article 28 of UCP600)

• Insurance Policy – Insurance Certificate

• Issued for at least 110 % of the value of the goods

• Indicates amount and risks covered


> Documents

Certificate of Origin Specimen

• Gives evidence of the origin of the goods

• Used in the importing county to check possible import restrictions or to calculate the customs duty

• As a rule issued by a competent Chamber of Commerce


> Documents

Inspection Certificate Specimen

• As a rule issued by a appropriate authority, either a governmental entity or a private inspection company

• Gives evidence, that the goods were inspected and indicates results


> Documents

EURO 1 Certificate Specimen

• As a rule issued by a appropriate authority, either a governmental entity or a private inspection company

• Gives evidence, that the goods were inspected and proves conformity to EU standards

Presentation of Sample Bank Products: Documentary Collection 22

Documentary CollectionD/C or IBC (International Bills Collection)


> Definition

Basic Definition

A documentary collection is a trade transaction in which the exporter hands over the task of collecting payment for goods supplied to his or her bank, which sends the shipping documents to the importer’s bank together with payment instructions.

Cons

D/Cs are less complicated -> No revision

and cheaper than letters of credit -> 0.3%

Against

Riskier for the exporters

a. they do not have a verification process

b. offer limited recourse if the importer does not pay

International Standards

The URC 522 are the Uniform Rules for Collections. URC 522 came into effect on 01 January 1996.


Terms Definition Principal ActivityDrawee عليهالمسحوب Importer المستورد Buy

Principal المستفيد Exporter المصدر Sell

Remitting Bank االصداربنك Importer’s Bank المستوردبنك Issues D/C

Presenting Bank المبلغبنك Exporter’s Bank المصدربنك Collects D/C

Collecting Bank التعزيزبنك Any 3rd Party Bank الثالثالطرفبنك Collects L/C


> Payment Terms

CAD – Cash Against Documents

The remitting bank shall only pays if the documents are handed to drawee.

FOP – Free Of Payment

The remitting bank hand the documents to draweewithout asking for payment. (Adv. Payment)

DAB – Delivery Against Bill

The remitting bank hand the documents to drawee after signing a term-bill for payment.

DABA – Delivery Against Bank Avalization

The remitting bank hand the documents to drawee after the drawee bank signs a term-bill for payment.

OT – Open Term (Thanks to Mina Gamal)

The remitting bank hand the documents to draweewithout asking for payment. (Post Payment)


> Documents

Bank Schedule Specimen

• As a rule issued by a appropriate bank, containing payment terms

• Gives same details of L/C issuance SWIFT

Presentation of Sample Bank Products: Letter of Guarantee 28

Letter of Guarantee


Basic Definition

A letter of guarantee is a type of unconditional and irrevocable undertaking issued by a bank on behalf of a customer to pay a certain amount upon first request of the beneficiary without any contest from the applicant in the event of its default.

ن تعهد غير قابل لاللغاء أو الرجوع فيه صادر من البنك بناء على طلب عميله بسداد مبلغ محدد عند أول طلب م.المستفيد بدون االلتفات ألى معارضة من طالب االصدار عند إخفاقه فى القيام بمسئوليته التعاقدية

:ضوابط االصدار

360: 355المواد –1999لسنة 17قانون التجارة رقم

.ضوابط خطابات الضمان الصادرة من البنك المركزى المصرى

منها ما يتعلق بالعميلمنها ما يتعلق بالبنك المصدر


> Parties of L/Gs

Client BuyerGoods / Services

Payment

Bank


Bid Bond – Preliminary L/G – خطاب ضمان ابتدائى

To enter bids, should be terminated shortly.

> Types of L/Gs

Performance Bond – Final L/G – خطاب ضمان نهائى

To perform a contract. Warrantee Bond – Final L/G – خطاب ضمان نهائى

To insure warrantee. Payment Bond – Final L/G – خطاب ضمان نهائى

To insure warrantee.

Advance Payment L/G – خطاب ضمان دفعة مقدمة

To guarantee received advance payment.

Customs L/Gs – خطاب ضمان جمارك

To guarantee the customs and duties on temporary released goods.


> Types of L/Gs

Local L/Gs – خطابات ضمان محلية

L/Gs traded locally within one country.

External / Foreign L/Gs – خطابات ضمان دولية

L/Gs traded locally between two countries.

Standby L/Gs – خطابات الضمان القائمة تحت الطلب

A form of payment guarantee in international trade.

Fully Covered L/Gs – خطابات ضمان مغطاة بالكامل

L/Gs are covered by cash cover. Fully Secured L/Gs – خطابات ضمان مضمونة بالكامل

L/Gs are covered by Other Securities.


> Notes on L/Gs

Expiry انتهاء

Extension مد

Amendment تعديل

Liquidation تسييل

Confiscation

Dispute النزاع

34

Thank you

Ahmed MOUSTAPHA

Manager – Corporate Finance

QNB ALAHLI Bank

[email protected]

presentation of sample bank products

Economy & Finance