Trade Services:Letters of Credit

Agenda

International Trade

Documentary Credits

International Regulations

Documents Under Letters of Credit

Letters of Credit at TBC BANK

International Trade

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Reasons for and Threatsto International Trade

Reasons

Different Resources (nature, climate, commodities)

Different stage of technical development

Different density of people

Threats

Import – and Export – Licenses Taxes Contingents

Foreign Currency Applications, Deposits

Technical requirements

Risks to be considered

General Risks

Different laws, regulations and languages

Delivery Risk

Transport Risk

Acceptance Risk

Quality Risk

Economic Risks

Importer is unable or unwilling to pay

Political Risks

Exchange rate Risk

Convert ion/Transfer/Payment

War, Riots, Civil Commotions, Terrorism, Strikes

Embargo

Conditions of payment and security

Importer’s

interest

Exporter’s

interest

TradeFinance

Pre-payment

Confirmed letter of credit

Unconfirmed letter of credit

Documentary collection

Payment after receipt of goodsIncreasing security

In every international trade transaction,there must be:

an agreed product or service

a sales contract

shipping and delivery details

required documentation

insurance cover

terms of payment

Documentary Credits

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A definition of a Letter of Credit:

Contractual obligation of a bank for account and instruction of

a customer to effect a specified payment upon receipt of

specified documents in compliance with specified conditions

(as per Letter of Credit).

Documentary Letters of Credit

EEExporterImporter

Issuing Bank Advising Bank

8 2

1

5

7

3a

6 4b

4a

contract

Shipment of goods

Letter of credit

application

Delivery ofdocuments/debiting of

account

Remittanceof Documents/Payment

Letter of Credit opening

presentationof documents/

Payment

Advising

ConfirmationAbstract undertaking

to pay

3b

Types of Letter of Credit

Irrevocable Confirmed/Unconfirmed

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Revolving

Transferable

Payment Terms Sight

Deferred Payment

Acceptance

Others

International Regulations

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International Regulations – UCP600

ICC Uniform Customs and

Practice for Documentary Credits

Published by the International Chamber

of Commerce, Paris

Actual Version UCP 600, since 1st July 2007.

International Regulations - 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 2000

Documents Under Letters of Credit

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Documentary Requirements

Buyer – what document(s) does the

buyer need?

Seller – what documents will he be

able to supply?

Country of export –

– what documents are required

under the regulations of the

exporting country?

Country of Import –

– what documents are required

under the regulations of the

importing country?

Documents – which will be used?

Invoice

Bill of Lading (B/L)

Air Transport Document

Insurance Document

Certificate of Origin

Inspection Certificate

Others

Documents – which will be used?

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

Bill of Lading (B/L) Specimen

(Article 20 of UCP 600)

Documents – which will be used?

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 – which will be used?

Proving that the shipping contract has been signed and that goods have been received by the carrier

Indicates airports of departure and destination

Indicates the name of the carrier

Issued in 3 originals, original for the shipper must be presented to the bank

Air Transport Document Specimen

(Article 23 of UCP 600)

Documents – which will be used?

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 – which will be used ?

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 – which will be used?

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

Presentation of documents

Complying Presentation: presentation of documents in accordance with

- the terms and conditions of the credit

- the UCP 600- if applicable -and

- the international standard banking practice

Documents with discrepancies:

- change of documents

- payment under reserve

- approval of issuing bank

Presentation of documents

Discrepant documents presented to issuing bank

(UCP 600, Art.16c)

Notice of refusal within 5 banking-days mentioning all discrepancies + 4 possibilities of handling:

- hold documents pending further instructions from presenter

- hold documents until it receives a waiver form the applicant and agrees to accept it, or receives further instructions from

presenter prior to agreeing to accept a waiver

- returning documents to presenter

- acting in accordance with instructions previously received from the presenter

Letters of Credit at TBC BANK

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Letters of Credit at TBC BANK

If you deal with export /import activities, JSC TBC Bank would assist you in financing and reducing the risks concerned with the International Trade Operations.

We’ll swiftly and efficiently analyze your bargains and process your application.

Prior to sign of contract with your counterparty, we’ll assist in originating the forms and contents of the LC.

Letters of Credit at TBC BANK

In case of requirements, the world leading banks as Commerzbank, Deutche Bank CitiBank, EBRD would provide the confirmation to your documentary operations through our bank.

We can confirm your LC at either international first class bank . So being our partner, you become the partner of the world leading banks.

Letters of Credit at TBC BANK

Financing of International Trade

If you haven’t enough funds to realize International Trade Operations, we can provide financing with the affordable terms.

During the period of validity of LC, you’ll be extended with the line of credit at 7-10 % interest per annum.

THANK YOU FOR YOUR ATTENTION!

 Daniel Epstein

Private Client Manager

 Migdal Moshe Aviv - 40th floor

7 Jabotinsky street, Ramat Gan, 52520

 Tel:   +(972 3) 600 60 44

Fax:   +(972 3) 600 60 33

Cell:  +(972 52) 400 2250

 www.tbcinvest.co.il