unit 3-esp 2
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U 3- FINANCING FOREIGN TRADE
LÊ HỒNG LINH Tel: 0903 978 552 Email: lehonglinh.ftu@gmail.com Faculty of ESP FTU
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U 3- FINANCING FOREIGN TRADE
CASH IN ADVANCE ?
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U 3- FINANCING FOREIGN TRADE
CASH IN ADVANCE Cash in advance is a term describing
terms of purchase, when full payment for a good or service is due before the merchandise is shipped. This presents the least risk to a seller while having the most risk to the buyer.
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U 3- FINANCING FOREIGN TRADE
CASH IN ADVANCE ( CIA) Payment method in which an order is
not processed until full payment is received in advance. Also called cash with order ( CWO).
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U 3- FINANCING FOREIGN TRADE
CASH IN ADVANCE When to apply : Goods must be special Goods manufactured to buyer-only
specification.
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U 3- FINANCING FOREIGN TRADE
L/CWhen to make payment: After shipment is made Documents presented to the bank.
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U 3- FINANCING FOREIGN TRADE
Confirmed irrevocable L/C ?
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U 3- FINANCING FOREIGN TRADE
Confirmed irrevocable L/C: L/C that adds the endorsement of
a seller's bank to that of the buyer's bank. It provides the highest level of protection to the seller because not only the L/C cannot be canceled (or its terms changed) unilaterally by the buyer, but also both banks involved in the transaction guaranty its payment on its due date.
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U 3- FINANCING FOREIGN TRADE
Revocable letter of credit?
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U 3- FINANCING FOREIGN TRADE
Revocable letter of credit L/C that may be amended or canceled any
time by the buyer without the approval of the seller. Since it does not provide any protection to the seller, it is rarely used. Some banks even refuse to issue such L/Cs because of the fear of getting involved in the possible litigation between the buyer and the seller.
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U 3- FINANCING FOREIGN TRADE
Revolving letter of credit?
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U 3- FINANCING FOREIGN TRADE
Revolving letter of credit Single L/C that covers multiple-shipments
over a long period. Instead of arranging a new L/C for each separate shipment, the buyer establishes a L/C that revolves either in value or in time (an amount is available in fixed installments over a period such as week, month, or year).
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U 3- FINANCING FOREIGN TRADE
Standby letter of credit?
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U 3- FINANCING FOREIGN TRADE
Standby letter of credit Primarily a substitute for a performance
bond or payment guaranty, this L/C is used mainly in the US where banks are legally barred from issuing certain types of guaranties. It serves as a parallel (collateral) payment source in case the primary source fails to meet its obligations in part or in full.
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U 3- FINANCING FOREIGN TRADE
Transferable letter of credit ?
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U 3- FINANCING FOREIGN TRADE
Transferable letter of credit Irrevocable L/C with two (and only two) successive
beneficiaries. In this arrangement, the first beneficiary (an intermediary or importer's foreign representative) can assign part or whole of the L/C amount to a second beneficiary (the supplier or manufacturer). To be transferable, the L/C must be so marked by the issuing bank on the instructions of the buyer or importer (the account-party). On the instructions of the first beneficiary the advising bank can transfer it to the second beneficiary but not any further.
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U 3- FINANCING FOREIGN TRADE
Red clause letter of credit
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U 3- FINANCING FOREIGN TRADE
Red clause letter of credit L/C that carries a provision (traditionally written or
typed in red ink) which allows a seller to draw up to a fixed sum from the advising or paying-bank, in advance of the shipment or before presenting the prescribed documents.
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U 3- FINANCING FOREIGN TRADE
Draft / Bill of exchange which is a written payment order from one party (the drawer) to another (the drawee) to pay a stated sum to a third party (the payee) either immediately (in case of a sight draft) or on or before a specified date (in case of a time draft).
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U 3- FINANCING FOREIGN TRADE
When presented with shipping and/or title documents, it is called a documentary draft; without them, a clean draft. Also called draft bill of exchange.
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U 3- FINANCING FOREIGN TRADE
Sight draft: Bill of exchange payable on the day it is presented to
the named entity (the drawee). Also called sight bill or sight draft.
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U 3- FINANCING FOREIGN TRADE
Sight draft: Bill of exchange payable on the day it is presented to
the named entity (the drawee). Also called sight bill or sight draft.
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U 3- FINANCING FOREIGN TRADE
Open Account Most of the foreign trade is conducted on an Open Account basis - as the most simple, straightforward and flexible method available.
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U 3- FINANCING FOREIGN TRADE
Open Account Payments for open account can be made in three main ways:
Electronic funds transfer (i.e. SWIFT/IMT)
Bankers draft Buyer's own cheque.
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U 3- FINANCING FOREIGN TRADE
Open Account Payments for open account can be made in three main ways:
Electronic funds transfer (i.e. SWIFT/IMT)
Bankers draft Buyer's own cheque.
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U 3- FINANCING FOREIGN TRADE
THANK YOU !
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