1 / 13

RBS International Solutions

RBS International Solutions. International Solutions. Presentation to TBCCI By Mark Hernaman, International Manager Global Transaction Services June 2009. Trade – a definition Trade Risks The Risk Ladder What are Letters of Credit?. Export L/C’s – how they can help

aquila-sanford
Download Presentation

RBS International Solutions

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. RBS International Solutions

  2. International Solutions Presentation to TBCCI By Mark Hernaman, International Manager Global Transaction Services June 2009

  3. Trade – a definition Trade Risks The Risk Ladder What are Letters of Credit? Export L/C’s – how they can help Trade Flow using L/C’s Working Capital – A Trade Cycle Inco Terms – will affect margin RBS International Solutions

  4. International Solutions What is Trade? • Commerce, business, buying and selling (Collins Dictionary) • The business of distribution, selling and exchange (Webster’s Dictionary) • Trade is closely linked with cash - the absence of it requires funding • Trade has risks that need to be mitigated

  5. Fundamental risks faced in Trade • Commercial risk • End Buyer default, contractual dispute, control of goods • Financial risk • exchange rate, interest rate, additional funding requirements • Economic risk • country, political, bank • Market risk • Local market forces: Cyclical fluctuation, collapse in demand?

  6. International Solutions Trade Risk Ladder High Risk Low Risk Open Account D/A Collection D/P Collection Unconfirmed L/C Confirmed L/C Cash in Advance I M P O R T E R E X P O R T E R I M P O R T E R E X P O R T E R High Risk Low Risk

  7. Documentary Credits (Letters of Credit) “A written undertaking given by a bank on behalf of the buyer, to pay to the seller an amount of money within a specific time, provided the seller presents documents strictly in accordance with the terms laid down in the LC” • It may also be called an Import Letter of Credit (ILC) or an Export Letter of Credit (ELC) • It is a conditional guarantee of payment to the seller as long as they: • ship on time • present correct and compliant documents (as the LC calls for) • present documents within the laid-down timescales • Conversely, it is a guarantee to the buyer that the seller will only be paid if they fully meet all the conditions of the LC. • N.B. Banks pay against DOCUMENTS not the underlying goods

  8. RBS International Solutions How Export L/C’s Can Help Exporters • More secure export sale as compared to open account in absence of credit insurance • Who is the Issuing Bank – Is payment confirmation beneficial? • Accelerate cash flow – Discounting Term L/C’s. • Transferable L/C’s – Where agreed and workable self financing solution

  9. L/C L/C L/C Supplier/Exporter Buyer/Importer Flowchart of a typical documentary credit Supplier/ Exporter Buyer/ Importer CONTRACT Sales Contract and Agreement to settle by L/C Payment Documents Payment Documents L/C advised Goods shipped As stipulated by L/C Advising/Confirming Bank Issuing Bank Issuing Bank Documents Payment

  10. International Solutions

  11. Things to consider when trading internationally • Inco Terms (www.incoterms.org) – Will affect negotiated price • EXW - Ex works - Buyer collects from factory • FOB - Free on Board - Seller obligation ends when goods on board • CFR - Cost and Freight - Seller pays cost and freight • CIF - Cost, Insurance and Freight - Seller pays all costs, except duty • DDP - Delivered, Duty Paid - Seller pays all costs, including duty • Sight - offers no credit period - payment made when compliant documents presented • Term – Also called “Usance” extends a credit period of, e.g. 180 days from shipment - payment made at the end of the term

  12. International Solutions RBSG delivers real solutions to importers and exporters.

  13. International Solutions Mark Hernaman The Royal Bank of Scotland Global Transaction Services Waterhouse Square London EC1N 2TH Tel: 0207 - 427 8782 Mob: 07747 098 927 Email: mark.hernaman@rbs.co.uk

More Related