EXPORT LETTERS OF CREDIT SEMINAR

 

Buddy Baker

+1-847-830-3038

buddy.baker@gtrisk.com


  I.  Choosing Credit/Payment Terms (Overview of Day 1 for New Participants)

II.   Basic Mechanics and Principles of Letters of Credit

    A.    Structure and flow

    1.3 parties: applicant, beneficiary, issuing bank

    2.3 contracts: contract of sale, L/C application, L/C

    B.    Principles

    1.independent

    2.documentary

    C.    Risk mitigation

    1.commercial risks: bankruptcy, slow payment, contract repudiation, contract dispute

    2.documentation risk remains

III. Confirmed Letters of Credit

    A.    Adding a 4th party to the structure

    1.rights of a confirming bank

    2.confirming bank must be authorized to confirm

    B.    Additional risk mitigation

    1.political risks

    2.transfer risks

    3.FX risks (direct & indirect)

    4.documentation risk still remains

    C.    Problems with confirming banks

    1.the confirming bank is chosen by the issuing bank

    2.the confirming bank has a monopoly position (a/k/a a license to steal)

    3.the confirming bank may be an affiliate of the issuing bank

    4.the confirming bank can be enjoined from making payment

IV.  International Letters of Credit

    A.    Adding an advising bank

    1.role of the advising bank

    2.responsibilities of the advising bank

    B.    Adding a nominated bank

    C.    How letters of credit are available

    D.    Rights of a negotiating bank

    1.L/C must call for drafts

    2.L/C must be available by negotiation

    3.L/C must be available with negotiating bank

    E.    Negotiation with recourse

    1.only available from a relationship bank

    2.similar to depositing a check with recourse

    3.speed up cash flow

    4.centralize international banking needs with one bank

    F.    The value of receiving “freely available” letters of credit

    G.    Discrepancy identification and resolution

    H.    Adding a reimbursing bank

V.   Dissecting a Typical L/C in the SWIFT Format

VI.  Managing Your Export Letters of Credit

    A.    Benefits of centralizing collection of letter of credit payments

    1.fees based on volume

    2.one-stop information

    3.consistency

    4.responsiveness, communication, service

    5.expedited funds availability

    6.shipper's indemnities

    B.    How to centralize

    1.Stop asking for confirmed L/Cs

    2.Stop asking for L/Cs to come through a particular bank

    3.Start asking for freely available L/Cs

    C.    Replacing confirmation

    1.reasons for having L/Cs confirmed

    2.how confirming banks get chosen

    3.what the exporter wants vs. what the exporter often gets (i.e. “the shaft”)

    4.advantages (and disadvantages) of “silent confirmation”

    5.“elective confirmation”

    D.    Using a document preparation service

VII. Usance Letters of Credit

    A.    L/Cs with time drafts vs. deferred payment L/Cs

    B.    Significance of whom drafts are drawn on

    1.obligations of the drawee

    2.fixing maturity

    C.    Discounting accepted drafts

    D.    L/C re-financing vs. time drafts

    E.    Effect of “discount charges for buyer” clause

VIII. L/C Quiz

IX.  Rules and Regulations to Be Aware Of

    A.    The Uniform Customs & Practice for Documentary Credits (“UCP”)

    B.    The Uniform Commercial Code, Article 5

    C.    International Standard Banking Practice for the Examination of Documents under Documentary Credits (“ISBP”)

    D.    The “eUCP” (rules for electronic presentation of documents)

    E.    The International Standby Practices (“ISP98”)

    F.    The Uniform Rules for Demand Guarantees

    G.    The International Commercial Terms (“Incoterms”)

    H.    Antiboycott regulations

    I.    Office of Foreign Assets Control (“OFAC”) sanctions

    J.    The USA PATRIOT Act and Anti-Money Laundering regulations

X.   A Look at the UCP600

    A.    What the UCP is

    B.    Major changes from the UCP500

    C.    Selected articles

XI.  Examining L/C Documents (Common Discrepancies)

XII. Quoting an L/C Sale (an L/C Instructions Form)