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international Trade and Finance? It’s nothing but providing goods or services across the border. The process of financing such trade is international trade
intermediaries between the exporter and the importer, sometimes just as agents and sometimes taking up much more responsibility than mere agents, we will talk about this later. Next are the transport companies, they are involved in the actual movement of the goods, if it is international movement
then its generally the shipping companies and Airlines, if it is inland movement it’s mainly by lorry trucks or rail. Now the journey made by the goods is a long one in international trade and even in inland trade during the journey from the seller to the buyer many unforeseen circumstances
may come, now Insurance companies insure the goods so that the risk of financial loss due to damaged goods can be avoided. Now there are many regulatory bodies in international trade but mainly there are World Trade Organization or WTO and the International Chamber of Commerce or
ICC, now WTO is basically an inter governmental organization that regulates the trade between various countries and ICC’s main role is setting up the rules in international trade. Now the rules are voluntary, mind it, but though they are voluntary they are observed in almost all kinds of
international trade. Now when the importer is buying goods without actually seeing them he may ask for various kind of certificates from the exporter, for example, if he is buying some kind of food item then he may ask for a health certificate, if he is buying something whose chemical composition
is important to him then he may ask for a test report from an independent laboratory, so various kind of certificates like these are there, one certificate worth mentioning is the certificate of origin which is usually provided by the chamber of commerce which certifies the country of origin of the
goods. now in trade Finance there are basically three kinds of movements happening, what are they? we have the exporter and the importer and the first kind of movement is
basically the movement of the goods happening from the exporter to the importer, next is the movement of the documents related to this goods, that is also happening from the exporter to the importer and keep in mind that these documents are very important because without this documents the importer
will not be able to release the goods in his own country and last but not the least the payment made by the importer to the exporter. Now depending on the timing of these three movements we basically have five different kinds of payment methods in international trade.Let’s see what they are
– advance payment, open account or cash on delivery, collection of bills, letter of Credit and bank payment obligation. It’s not much used in India, it’s are basically a new payment tool. Now let’s see each one by one. Now advance payment the name itself
suggests what it is, we have the buyer and the seller and the buyer is first making the payment to the seller and only after the seller gets the payment he is sending the goods to the buyer now, here the main parties involved are the buyer and the seller or the importer and the exporter, no banks
are getting involved directly so there is no risk mitigation by banks and the importer is at a very high risk because he is parting with the payment without getting the goods, then why will anyone do this? this usually happens when the importer is new and small in business size compared to the
exporter and he has no other way but to trust the exporter next is the open account or cash on delivery, it’s just the opposite of advance payment, we have the importer and exporter and the exporter is first sending the goods and only after getting the goods the importer is sending the
payment, again there is no risk mitigation by banks and just the opposite the exporter is at very high risk and again usually this happens when the exporter is new or small and business size compared to the importer let’s have an overview of collections and letter of Credit
what are they? now in both the cases the movement of the documents happen through the exporter’s and the importer’s banks instead of the exporter directly sending it to the importer, in collections the importer’s Bank hands over the document to the importer only after the importer
pays immediately or promises to pay at a future date, now you already know that these documents are very important for the importer because without the documents he cannot release the goods so here in documentary collections the exporter is at a much better control situation because he knows that
if the importer does not pay immediately or he does not promise to pay at a future date he will not be able to release the goods so he is in a better control situation, but the importer’s bank have no responsibility if no payment is made, where as in the letter of Credit the
banks are not only handing over the document to the importer according to the LC terms, that is either paying immediately or promising to pay at a future date, LC issuing bank gives irrevocable undertaking that if the importer fails to pay, the bank will pay the exporter, provided the LC terms are
followed, so here the exporter is getting a sort of payment guarantee, so it is a much robust and stronger payment method than documentary collections, now this is just an overview, short overview of collections and letter of Credit, we will be talking in detail about both of these
in our later tutorials, so don’t worry. Now we have already told that ICC publishes various kind of trade Finance rules, now you should know which is for which kind of
payment method, let’s see for LC we have uniform customs and practice of documentary Credit version 600, also known as UCP or UCPDC 600, to support this we have something called ISBP 745, international standard banking practice, for collections we have uniform rules for
collection 522 or URC 522, for the movement of the goods we have international commercial terms incoterms 2010, a new version is coming up Incoterms 2020 and there are some other publications like URR, URDG etc
CashNews, your go-to portal for financial news and insights.
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For beginners in Trade Finance, the Gist of Trade Finance in simple language
https://www.bankon.school/courses/international-trade-finance-certification
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Learn the ESSENTIALS of Letter of Credit and UCP 600!!
Three Hours of power learning in simple language explained with examples/ Real life documents/ CDCS FAQs –
https://www.bankon.school/courses/international-trade-finance-letter-of-credit-ucp-600
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For full course on SWIFT MT and ISO 20022 MX Messages including Overview of SWIFT GPI
https://www.bankon.school/courses/swift-mt-mx-iso-20022-message-types
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For a thorough and extensive understanding of Incoterms 2020 in easy words https://www.bankon.school/courses/incoterms-2020-training
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Hi mam,
Can I have this ppt please?
#TXTM
Tribe
Thank you so much for the video ,very good explanation
Great teaching
Best and best information and also need of method of finance is requested in export ginance
Hi. Thanks for the great explaining of Letter of Credit. I wish that buyers of goods should know, because a lot of buyers still do not understand L/C. For my business any buyers who want my goods and have not Letter of Credit we can not do business with them because they waist time.
WALKERS DOCUMENTATION FIRM
🙏🏻
Great job done by you guys .
You explain very well in simple words that's the best quality of your method 👌
The instructor has taken special care to ensure that complex topics are explained simply and is understandable to anyone. Kudos!
Enjoying this series.
Thankyou Madam
Finally I found one good video. Your explanation was indetail and excellent sister. Subscribed
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Can u suggest course for this carrer
Hey
very well explained
Thank you maam for the clear explanation🙏
Very clear
Hi !
Very good introduction
I am interested more traing any watsap no send me
Very well articulated Trade Finance Basics.
It was very nice and understanding.
Letter of credits is best payment method thank you
Hi i am mukesh can you both teach me internatinal business
Please revert
Very informative video ma'am. Thank you and will look forward to the other parts.
Can a bachelor in nautical science study masters in trade and finance and what will be the earning package of him?
Please guide it would be really appreciable
Thanks a lot for this video! Gave me a good high level view of what trade financing is
nice informative video tq for ur vidoes. plez make more video trade finance.
hi please make video on BOE closure
Very informative, just what I was looking for. Thank you
Nostalgic ❤️
Really amazing series . I don't know why there are less subscribers …
All the best and really good job 😍
Have been trying to understand trade finance watching youtube videos, but out of all, this is the one which made things so very clear to me… and the reason being, things are explained in such layman terms that anybody can understand. Thank you so very much! I immediately subscribed to your channel and started watching all your other videos as well, related to trade finance. Thank you. Do you have any video on trade loan, searched but couldn't find it.
Very nicely explained👌🏻
Love to watch the videos….
This is fantastic video.Ur way of explanation is incredible. I have seen your swift videos.. They are amazing. Will u please provide me tuition or training. I am a banking professional trying to get into payments domain. I have worked with HSBC and BARCLAYS. Please can you help My number 9007737156.
Sir make more videos on trade finance
If it is in hindi or urdu
Will be much useful for everynew comer either in trade or english
Mam, Which profile will be good as per individual career, growth and promotions prospects under trade finance department?
Amazing series! Please keep up the great work!
Hi, I’ve watched the entire playlist of Trade banking, it was very gud and understandable can you please post a detailed video on Bank Guarantees, it will be really helpful for all…
Great advice Mny thanks hope to hear more from your knowledge
Mam could you give videos for capital account transaction s FDI ODI ECB… TRADE SERVICE PAYMENTS… TRADE INWARDS.. THANKS MAM
Nice one, very informative. Thank you.
Ma'am could u guide me about refinace part 2
Sir
Pls make video on BG ,its types , process , eligibility
Sir please can you clear my doubt about trade credit ,what is trade credit and types of trade credit
Pl cover the ratio analysis with interpretation .
HELLO I WANT TO KNOW URC522 CLASS WITH DETAIL
thank you soo much mam it's very helpful video can you tell me your WHATSAPP number i want to know other details about trade finance please 🙏🙏🙏🙏