《国际结算（英文）》chapter12 Financing

InternationalSettlementChapter12FinancinginInternationalSettlement

Chapter12FinancinginInternationalSettlement

12.1ExportFinance12.2ImportFinance12.3InnovationinInternationalTradeFinance12.1ExportFinanceRedClauseCreditPackingLoanOutwardBillDiscountForfaitingFactoringFinancingbeforeshipmentFinancingaftershipment1、RedClauseCreditUnderredclausecredit,theapplicantiswillingtoprovidebeneficiarysuchfinancingfacilitiesforthefollowingreasons:Redclausecreditprovidesfinancingfacilitiestotheexporter,whichauthorizesthedesignatedbank(usuallytheadvisingbank)toprepaymoneytothebeneficiarybeforeshipment.1、themarketsituationisdemandexceedingsupply,theimporterwantsthegoodseagerlysoitprovidesthesellersuchcompetitivepayingmethodtomakethedeal;2、theexporterislackofmoney,sotheimporteroffershimsuchadvantagesoastolowerthecostsofgoods;3、intheexportbusinessofsomeproductswhichneedheavyinvestmentandlongperiodforproductionsuchasvessel,airplaneetc,theexporterisundergreatrisks,soitmayrequiretheimportertoprepaymoneytoreduceshisrisks.2、PackingLoanWhentheexporterisshortofmoneytoarrangeproduction,itmayapplyforaloanbypresentingtheletterofcreditasacollateral,thefundsprovidedbytheexporter’sbankwillbeonlyusedforpreparingthegoods,thiskindoffinanceiscalledpackingloan.Inpractice,packingloanisafinancialfacilitywhichusestheoriginalletterofcredititselfascollateraltoapplyforaloan,soitisacreditloan,。Thus,banksmustverycautiousinprovidingsuchfinancingandexaminethecreditcarefully.Theproceduresofpackingloan:ApplicationVerificationSigningofpackingloancontractReleasingofpackingloanPayingbackofthepackingloan3、ComparisonbetweenPackingLoanandReadClauseCreditDifferences:

DifferencesPackingLoanReadClauseCreditrelativepotentialriskstheimporterisnotawareofthefinancing,thusit’stheexporter’sbankthatbearsrelativepotentialriskstheimporterknowsthefinancing,anditbearsrelativepotentialrisksrelativecostandexpensesundertakenbyexporterundertakenbyimporterRangeofapplicationdoesnotputlimitonbusiness,soitiswidelyusedoftenusedinsomeparticulartransactionssuchasmakingdealwithcountriesintheFarEast,NewZealand,SouthAfrica,Australiaandetc.Similarity:bothofthemarefinancingfromexportingbanktoexportersbeforeshipment;exportersmustpresentnegotiableinstrumentstothebankprovidingthefinancingfacilities;theinterestisdeductedfromthenegotiatedamount.4、OutwardBillOutwardbillisalsocalledoutwarddocumentarybills,outwardbillcreditorbillpurchased,itisabusinessofexporter’sbanktoprovideshorttermfinancingtoexporter,theexporterobtaintheproceedsofsalebeforetheissuingbankeffectspayment.OutwardBillNegotiationunderdocumentarycreditAdvanceagainstdocumentarycollectionNegotiationunderdocumentarycredit:underletterofcredit,anexporterappliesforafinancingbanktopaypartialorthewholepurchasepricewithfullsetofdocumentsascollateraltosolvethedifficultyofexporter’scapitalturnover.Advanceagainstdocumentarycollection:undercollection,anexportercommissionsafinancingbanktochargeanimporterforpurchaseprice,meanwhile,requirethefinancingbanktoprepaypartialorallofthisfundtotheexporterwhichwillbepaybacktothefinancingbankafterthereceiptofthecollectingamount.5、DiscountDiscountisthebuyingoftimedraftwhichhasnotyetexpiredafteracceptancebythebankwithrightofrecourse,whichisdeductiblefromparvalueaccordingtothecertaindiscountrate.Itprovidesshorttermfinancingforclientandhaspositiveeffectonacceleratingturnoverofcapital.Draftsavailablefordiscountare:draftunderletterofcredit;draftundercollection;anddraftunderfactoring.Theyareusuallydraftsacceptedbybankordiscountcompaniesandwithexporterasdrawer.thecalculationofdiscount:therearetwoconceptsweshouldclear:1)netproceeds;2)discountingdays.Forexample:aUSD1000draftisissuedon1stJuly,2011;thetenoris3monthaftersight(whichmeansthedraftisdueon1st,October2011).Anexportertakesthisdrafttothebankfordiscounton20thAugust,andthenthediscountingdaysofthisdraftisfrom20th,Augustto1stOctober,whichcovers42days.NetProceeds=ParValue-ParValue*DiscountRate*DiscountingDays/360Ifthediscountrateis3.5%,thenthenetproceedsofthisdraftcanbecalculatedas:NetProceeds=1000-1000*3.5%*42/360=1000-4.08=USD995.926、ForfaitingBenefits：forfaitingisthepurchaseofatradedebtorreceivable,atadiscount,withoutrecoursetotheexporterorpreviousholderifthenegotiableinstrumentevidencingthedebtisnotpaidatmaturitybytheobligororguarantor.（1）Thetransactionisconductedtoavoidthefluctuationofexchangerates,whichproteststheexporteragainstrisksarisingfromthefluctuationofexchangerates.Italsoeliminatespolitical,commercialandtransferablerisks.（2）Theforfaiterprovides100%withoutrecoursefinancetotheexporter,whichmakestheexportermorecompetitiveandevenpromotestohighriskareas.(3)Forfaitingturnsthecreditintocash,nottyinguptheexporter’scapitalandbetteringtheexporter’sfinancialconditions.CharacteristicsofForfaiting:(1)Whentheexportergetstheacceptednegotiableinstrumentsfromthebank,headds“Withoutrecourseright”clauseontheinstrumentswhichmeanshelosesalltherightstotheinstruments,andthushetransfersallthebenefit,rights,risksandresponsibilitiestothebank;(2)Forfaitingismainlyusedincapitalgoods;(3)

Forfaitingismedium-termfinancingwithperiodof3to7years,mostly5years,butupto10years;(4)Therateofforfaitingisusuallyfixed,andthecurrencyofforfaitingoftenuseUSD,CHF,DMandsomeconvertiblecurrencyinEuropeanmarket.Totheexporter,theadvantagesare:1,Itturnedfuturecreditintocash,theturnoverofcapitalismorequickly;2,Becausetheforfaiterpurchasetheinstrumentwithoutrightofrecourse,theexporterisnotresponsiblefortheworkofcapitalmanagementandserviceofdebtaswellasrelativeexpenses;3,Forfaitingtransferstherisktoforfaiter,sotheexporterneedn’tbearsuchrisksasinterestrate,exchangerateriskandetc;4,Forfaitingisconductedonfixedrate,soitisconvenientfortheexportertocalculatecost;5,Dealingwithforfaitingbusinessonlyneedinstrumentsbutnotdocuments,soitiseasytoprepareandsubmit;6,Thefinancingagreementhasalreadybeenconcludedbeforesingingthecontract,theforfaitershouldmakeaquickdecisionofwhethertoconductthebusinesswhenhereceivestherelativeinstruments,sotheefficiencyishighlyimproved.1)Inadequateorunauthorizeddocumentation.2)PriceRisk.3)TransactionRiskTherisksinForfaiting7、FactoringTheadvantageofFactoring：Factoringisafinancialtransactionwherebyabusinessjobsellsitsaccountsreceivable(i.e.,invoices)toathirdparty(calledafactor)atadiscount.Infinancedfactoring,thefactorprovidesfinancingtotheselleroftheaccountsintheformofacash"advance,"often70-85%oftheaccountamount,evenupto90%,uponthecollectionofthesell’sinvoiceamount,afterdeductingthediscountfee(commission)andothercharges,thebalanceofthepurchasewillbepaidtotheexporter.1,factoringallowstheliablepartytoberelievedofthedebtforlessthanthefullamount,andtheexporter(beneficiary)receivesworkingcapital,whilethefactorisabletomakeaprofitbybuyingtheaccountamountforsubstantiallylessthanwhatitisworthandthencollectingonit.2,afactorcanprovidesexporterswith100%protectionagainsttheimporter’screditlosses.3,factoringcanacceleratecashflowsandincreaseliquidityofworkingcapital.12.2ImportFinanceLineofCreditUsanceCreditPayableatSightTrustReceiptInwardBillReceivableDeliveryagainstBankGuarantee1、

LineofCreditTherearetwokindsoflineofcredit:Lineofcreditisthemaximalamountthattheissuingbankwillgranttotheapplicantaftercheckingandverifyingthecreditstatus,financialsituationandrelevantaspectsoftheapplicant.Lineofcreditisakindofcreditgrantingprovidedbytheissuingbanktotheapplicant.Underletterofcredit,theissuingbankundertakestheconditionalpaymentobligation.Aslongastheapplicantsubmitsthecomplyingdocumentsastherequirementsandstipulationsofthecredit,theexporterwillsurelygetthepayment.

generalL/Cline：Thelineofcreditisrecyclableandtheissuingbankcanmakenecessaryadjustmentaccordingtothevariationintheapplicant’screditstatusandbusinessrequirements.

onetimelineofcredit：itisapprovedforacertainoforcouplesoftradecontracts.Whentheapplicantmakesadealwithanenormoustradingvolume,theapplicantwillchoosetoapplyforaonetimelineofcreditinsteadofthegenerallineofcredit.2、UsanceCreditPayableatSightBenefits：Fortheacceptancecredit,theexporter(beneficiary)mayeitherholdtheaccepteddraftsandpresentforpaymentatduetime,ordiscountittoacceleratetheturnoverofthisfundwhichmeanstheexportershouldbearthediscountingcharges,while,thediscountingchargesareaccountfortheimporterwhentheexporter(beneficiary)discountstheaccepteddraftsindiscountmarket,thiskindofcreditiscalledusancecreditpayableatsight(buyer’susancecredit).Totheimporter：itgetstheadvantageofmoreflexiblecashturnoverwithexpensecost;Totheexporter：itgetsatsightpaymentbeforetheduedateofdraftwiththeriskofbeingclaimed.3、TrustReceiptTrustreceiptisakindofconfirmationprovingthatimporterpledgesthegoodstotheimporter’sbank.Trustreceiptcanbeusedbothincollectionandletterofcreditbusiness.Undercollection,importerborrowsthedocumentsfromthecollectingbankagainstthetrustreceiptforcustomsclearance,pickingupgoodsandsales.Andthenitpaystothecollectingbankandredeemthetrustreceiptback.Underletterofcredit,applicantappliesforthelineoftrustreceiptalongwiththecreditline.Afterthelineisapproved,whiletheissuingbankpaysagainstcomplyingpresentation,itwillreleasethedocumentstotheapplicantaccordingtothetrustreceipt.4、InwardBillReceivableInwardbillreceivablemeansthattheissuingbankeffectspaymenttothebeneficiaryuponpresentationoftherequireddocumentsbeforetheapplicantactuallypays.Theamountofpaymentisusuallywithinthecreditlineapprovedbytheissuingbanktotheapplicant.Underinwardbillapplicant,therearetwowaysforapplicanttogetsdocumentsfromtheissuingbank:1）

bytrustreceipt；2）byinwardbillreceivableagreement.5、DeliveryagainstBankGuaranteeWhengoodshavearrivedatthedestinationwhiledocumentsarestillontheway,andtheimporteriseagertotakethegoodsforproductionoritwantstoexemptfromhighsluggishwarehousefee,itcanmakeawrittenundertakingalongwiththeissuingbank(undercollection)/theissuingbank(undertheletterofcredit)oraskimporter’sbanktomakesuchanundertakingalone,andthensubmitittotheshipperforthereleaseofgoods.Thiskindoffinancialfacilityprovidedbyimporter’sbankiscalleddeliveryagainstbankguarantee.12.3innovationininternationaltradefinancetheunavoidablelimitsandshortcomingofthetraditionalfinance:1)Thosesimpletraditionalfinancemethodcannotbeusedinthehighrisky,unfitemergingmarketanddevelopingcountries.2)Theyareonlyadaptabletoreducethedefaultriskandliquidityriskundernormalmarketconditionandunabletodealwiththeriskscausedbynationalsovereignty,legalsystem.3)Theyarenotsuitabletothelongtermandlargeamounttradefinancedemand.thenewinternationaltradefinancemethods:1、theexporttaxrefundloan2、warehousefinancing3、purchaseorderfinancing4、stockfinancing5、tradefinanceunderexportcreditinsurance6、riskparticipation7、accountsreceivablepoolfinancing8、exportinvoicediscount1theexporttaxrefundloanAstheexporttaxcannotberefundedtimely,inordertosettletheshorttermliquiditydifficulty,bycustodiantheexporttaxrefundaccount,thecommercialbankwillprovideshorttermliquidityfinancetotheexporter.Anyexporterwhoregisteredinthestatebusinessandadministrationdepartmentwithimportandexportoperationrightscanapplythistradefinance.warehousefinancingWarehousefinancingisalsocalledwarehousereceiptpledgefinancing.Exportstoresthecargowhichistotallyoccupiedbyhimintothewarehousingcompanydesignatedbycommercialbank,submitthewarehousereceiptaspledge(financeguarantee),thenobtainthespecificshorttermtradeloanwhichcanonlybeusedtomanagetheproductssimilartothecommodityshownonthereceiptfromcommercialbank.Warehousefinancingissuitabletothemassproductwithhighliquidity,especiallytheprimaryproductwithinternationalmarketscale,suchasnon-ferrousmetalandrawmaterials,ferrousmetalsandrawmaterials,coal,rubbercornandsomeotheragricultureproducts.3purchaseorderfinancingBenefits：Purchasingorderfinancingisapre-shipmentfinance.Underthenon-documentarycreditinternationalbusinesstransactions,suchasremittanceandcollection,theexporterapplyshorttermfinanceagainstexportcontract/purchasingorderfromthecommercialbankforthecontractperformanceofrawmaterialspurchasing,productionandshipment,itisalsocalledpackingloanundercollectionandremittance.Purchasingorderfinancehasprovidedfundstotheexporterfortheproduction(cargo)preparationstage,facilitatetheexporterfulfillthesalescontract,looseningitsliquidityfundspressure.Fromtheperspectiveofoperation,itiseasyhandlingandthedocumentsrequirementissimple.4stockfinancingadvantagestoimporter:Stockfinancingisafinancingmethodusingspotcommodityorrightsofthegoodsaspledgetoobtainfundsfromcommercialbank.Stockfinancingiscombinedusingwithlineofcreditapplication,inwardbillspurchasing,remittancefinancing(limitedtocashondeliveryterms)anddomesticcomprehensivefactoring.Theacceptablespotcommodityincludeautomobile,coal,steel,chemicalproduct,grain,cottonandoilproduct.1)Itcanrevitalizethecashcommodity,reducingtheoccupationonpledgedproducts;2)Improvingcomprehensivecompetitivenessofthesupplychainsystemofexporter,itcanpromotethedevelopmentofforeigntrade,settlethefinancingobstaclesofsmallandmedium-sizedenterprise;3)Exportercangetanewfinancingchanneltosatisfyitsfundsrequirement,andthenobtainmoretradeopportunities.5tradefinanceunderexportcreditinsuranceWhenexporthascoveredtheexportcreditinsuranceintheinsurancecompany,theclaimrightsunderinsurancepolicyhasthenbeentransferred,thecommercialbankwillprovideportio