Professional Documents
Culture Documents
Importer
Port of Destination
Land Transport
and Delivery
Port of Departure
Final Payment
Sea Transport
Production
Customs!
Shipment assured.
Documents inspected.
May allow better sales terms.
Relatively low-cost financing.
Easy cash recovery if discrepancies arise.
4. Types of L/Cs
a. Documentary
b. Irrevocable
c. Confirmed
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D. DRAFTS
1. Definition:
- Unconditional order in writing
- Exporters order for importer to pay
- At once (sight draft) or
- In future (time draft)
F. OPEN ACCOUNT
1. Creates a credit sale
2. To importers advantage
3. More popular lately because
a. Major surge in global trade.
b. Credit information improved.
c. More global familiarity with exporting.
4. Benefits of Open Accounts:
a. Greater flexibility in making a trade.
b. Lower transactions costs.
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5. Major disadvantage:
- Highly vulnerable to government
currency controls.
DOCUMENTS USED IN INTL TRADE
A. Three most used documents
1. Bill of Lading (most important)
2. Commercial Invoice
3. Insurance Certificate
B. Bill of Lading
Three functions:
1. Acts as a contract to carry the goods.
2. Acts as a shippers receipt
3. Establishes ownership over goods if
negotiable type.
C. Commercial Invoice
Purpose:
1. Lists full details of goods shipped
2. Names of importer/exporter given
3. Identifies payment terms
4. List charges for transport and insurance.
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D. Insurance Certificate
1. Two Categories:
a. Marine: transport by sea
b. Air: transport by air
2. Insurance certificate issued to show
proof of insurance.
SHORT-TERM FINANCING TECHNIQUES
FINANCING TECHNIQUES
A. Four Types:
1. Bankers Acceptances
a. Creation: drafts accepted
b. Terms: Payable at maturity to holder
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2. Discounting
a. Converts exporters drafts to cash
minus interest to maturity and
commissions.
b. Low cost financing with few fees.
c. May be with (exporter still liable) or
without recourse (bank takes liability for
nonpayment).
3. Factoring
Firms sell accounts receivable to another
firm known as the factor.
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2. Restrictions:
- At least 51% U.S. content
- No armaments
- Must be environmentally friendly
COUNTER-TRADE: A sophisticated form of barter
in which the exporting firm is required to take
the countervalue of its sale in local goods or
services, instead of cash. (Shapiro, P.660-663)
A. Three Specific Forms:
1. Barter: Direct exchange in kind.
2. Counter-purchase: Sale/purchase of
unrelated goods but with currencies.
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