international trade the export process 255

7/31/2019 International Trade the Export Process 255

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International TradeThe Export Process

Banking and Finance Information

for Exporters

16th April 2008

Presented by Ray Buxton

Senior Manager International Trade, Bendigo Bank Limited

Tel: 03 8414 7755

Mob: 0409 406 009


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Exporting - Risk ManagementMethods of Payment.

Financing.

FX Risk Management.


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Major Export Risks

Buyer risk-methods of payment/debtor insurance

Bank & Country risk-confirmation

Foreign Currency risk-hedging strategies

Transit risk-Marine insurance


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Aim is to be paid.

Timely manner.

The amount of trust between buyer and

seller, determines the method of payment.

Do your homework, credit checks etc.(know

your buyer)

Agreeing to payment terms is part of the

sales process.

Methods of Payment


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The Three Main Methods of payment(1) Open account.

(2) Letter of Credit.

(3) Documentary Collections.

Talk to your banker about the most appropriate

method.


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Open AccountPayment risk is dependant on who pays when.

As an exporter if payment is received up front,

prior to shipment, payment risk has been

mitigated.

Great for exporter, poor for importer.

May make your product offering less

attractive in comparison to other payment terms.

.


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Open Accountcontd

In reverse, if goods are shipped on the basis

of payment against receipt of goods at the

port of despatch, then obviously the

exporter maintains all payment risk.

In either case insist on payment via

telegraphic transfer direct to your bank

account.


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Documentary Letters of Credit

Guarantee issued by the importers bank

authorising the payment of money to the

exporter, against delivery by the exporter ofspecific documents.

Mitigates risk of non payment.


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Document and payment flow under an

Export Letter of Credit1

Exporter contract specifiespayment using a

documentary letter of credit

(such as an irrevocable letterof credit)

Exporter

5Exporter ships

goods Importer4

Exporters

bank advises

and/or

confirms thedocumentary

letter ofcredit

6Exporter sends

documents to

its bank

8bAmount due is

paid (or bank

may extend

credit)

2Importer

applies to a

local bank for

a documentaryletter of credit

10Exporter

receivespayment

8aBank sends

documents toimporter

9

Importers

bank transmitsfunds due to

exporter7

Documents

sent for review

Exporters

Bank

3Importers bank informsexporters bank when a

documentary letter of

credit has been issued

Importers

Bank


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Whats in a typical Letter of

Credit

Exporters details, currency, amount.

Expiry date, latest shipment date.

Shipping details, Insurance details.

Incoterms, e.g FOB, CIF, C&F

Brief description of goods. Terms of payment, sight, 30 days sight,etc.


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Common Documents Required

Invoice.

Packing List.

Bills of Lading.

Airway Bills.

Certificate of origin. Phytosanitary certificate.

Insurance certificate.


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How can Bendigo Bank assist?

Check to see if the L.C is workable.

Will you be able to comply with it?

Check the documents in readiness for dispatch.

Negotiate documents, lodge claim with the

reimbursing bank.

Collect your funds. Assist in mitigation of your FX risk.

Pre / Post-shipment finance.


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Documentary Collection

Commonly known as DP or DA.

A compromise between open account

trading and documentary letters of credit.

Payment not guaranteed.

Documentation: same as Letter of Credit


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Document and payment flow under an Export

Documentary Collection

1Exporter ships goods

Exporter

(Title not transferred until step 6)

Importer

2Exporter

submits billof exchange,

invoice,

packing list,and bill of

lading

8Payment

6

Importersbank releasesbill of lading,

transferringtitle of goods

to importer

5Payment

4

Importers

banknotifiesimporter

that thedocuments

have beenreceived

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Payment

Exporters

bank

3

Exporters bankforwards

documents to

importers bank

Importers

bank


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Financing Trade Transactions

Pre - shipment finance.-to provide finance for the purchase of raw materials/finished goods to

fulfil an export order.

Post - shipment finance.-to provide finance for the period from shipment to receipt of funds

from overseas buyer

Finance available in all major currencies for a period no longer than

180 days. Under Documentary Credit with/without recourse (confirmed letter of

credit).

Documentary Collection with recourse.


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FX Risk Management

Forward Exchange Contracts.-an agreement between two parties to exchange on a specific future

date a fixed amount of one currency for an amount of another currency

at a foreign exchange rate agreed on the day the agreement was entered

into.

FX deposits / FX loans.-term deposits and term loans denominated in a foreign currency.

Foreign Currency Accounts-at call bank account denominated in a foreign currency.


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Questions?