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Fundamentals of International Trade Finance

Learn and understand the key concepts and fundamentals of international trade finance

The Shard a modern architectural marvel dominates the London skyline

A one-day course

Introductions

  • Trainer & participants
  • What do you know?
  • Aims and objectives
  • Course context 

What is Trade Finance?

During this international trade finance training course, we cover:

  • Benefits of trade finance to businesses and banks
  • Introduction to the trade cycle
  • Incoterms
    • Summary of terms
    • The advantages/disadvantages to importer/exporter in the use of Incoterms
    • Principal methods of settlement
  • General Risk Considerations
    • Trade finance products vs open account
    • Financial Crime Compliance - AML, CFT and Sanctions
    • Know Your Customer (KYC) and Customer Due Diligence (CDD)
    • Correspondent Bank risk
    • Counterparty risk
    • Credit risk 

Group exercise to understand Incoterms application. 

Key characteristics of Commercial Documents in international trade

  • Invoices (commercial, tax, customs, consular, Pro-forma invoice)
  • Marine/Ocean Bills of Lading
    • Title, transfer
    • Control of goods
    • Delivery considerations
  • Other forms of the transport document
    • Multimodal Transport Document
    • Air Transport Document
    • Road, Rail or Inland Waterway Transport Documents
    • Non-negotiable bills of lading
  • Insurance Policy/Certificate
  • Other certificates (Certificate of Origin, Inspection Certificate, Phytosanitary, etc)
  • Bills of exchange

Exercise - using examples of commercial documents to help participants to understand their technical content and the significance and importance of particular documents. 

Core Trade Products

Fundamentals of international trade finance training covers the following products:

  • Import / Export Documentary Collections
  • Letters of Credit
  • Guarantees 

Import / Export Documentary Collections

  • Principal parties – roles and responsibilities
  • Benefits to importers and exporters of Documentary Collections
  • Relationship between principal and bank(s)
  • Role of banks (incl. correspondent banks/agency arrangements)
  • Legal and practical issues concerning the duties of the banks involved in handling collections
  • Conditions for release of documents
  • Areas of risk:
    • Usance collections
    • Partial payments
    • Avalisation in documentary collection
    • Release of goods on trust
  • Procedures for Protest of Bill of Exchange (B/E) and underlying risks
  • Complexities of the ICC Uniform Rules for Collection (URC 522) 

Case Studies

  1. a)  Alpha Ltd considers the needs of an exporter and importer and the benefits of using Documentary Collections in a cross-border transaction
  2. b)  Beta Ltd covers the collections procedure and the practical application of the URC 522 

Documentary Letters of Credit

  • Principal parties – roles and responsibilities
  • Benefits to importers and exporters of Documentary Letters of Credit
  • Relationship between principal parties
  • Advantages/disadvantages of letters of credit
  • Risk factors when issuing letters of credit
  • The autonomy of letter of credit operations (Independence Principle)
  • Importance of the application form (legal issues)
  • Instructions to issue/amend credits
  • Workability of the credit
  • Jurisdiction 

Introduction to the International Chamber of Commerce UCP 600 Rules

  • Structure and obligations under letters of credit;
  • Availability of credits, expiry date and place for presentation
  • Availability by payment, deferred payment, acceptance, deferred payment standard for examination of documents; dealing with discrepant documents, waiver and notice of refusal; 

Examination of documents

  • Key elements of the main articles of UCP 600
  • The standard for examination of documents: “no conflict” rule – article 14
  • Processing non-compliant documents as Nominated/Confirming Bank
  • Processing non-compliant documents as Issuing Bank
  • Risks arising from non-adherence to UCP 600
  • Legal cases and ICC Banking Commission opinions
  • DOCDEX (Documentary Instruments Dispute Resolution Expertise) – dispute settlement mechanism of ICC for trade finance
  • Analysing irregularities in documents

International Standard Banking Practice ISBP 745 (2013 Rev)

  • What constitutes an “alteration” or “addition” to a document, and when and how should these be authenticated?
  • How should documents be signed, if this is not explicitly stated in the credit?
  • How should one handle typing errors on documents regarding the name and address, different addresses of the same company, etc.? 

Advising, confirming, and reimbursing credits

International trade finance fundamental training considers:

  • Obligations and Risks associated with the Advising Bank, Nominated Bank, Confirming Bank
  • The use of the Bill of Exchange in Letters of Credit
  • Application of the Uniform Rules for Bank-to-Bank Reimbursement ICC 725
  • Assignment of proceeds 

Case Studies

  1. a)  Gamma Ltd considers the needs of an exporter or importer and the suitability of using a Letter of Credit in a cross-border transaction
  2. b)  Theta Ltd looks at the Documentary Letter of Credit procedure and the practical application of UCP600 

Other forms of Letter of Credit

A review of the purpose, procedure and risks associated with:

  • Irrevocable/revocable
  • Usance credits
  • Transferable Credits
  • Back-to-Back Credits
  • Red and Green Clause Credits
  • Revolving / Reinstatement Credits
  • Standby Credits
  • Synthetic Credits

Guarantees

  • Types of guarantees:
    • Tender/bid bonds
    • Advance payment guarantees
    • Performance bonds
    • Retention money guarantees
    • Warranty Guarantees (Maintenance guarantees)
    • Bail bonds
    • Payment guarantees
    • Indemnities/counter guarantees
  • Risk Assessment (including risk weighting)
  • Wording of Guarantees
  • Demand under guarantees: issues
  • Extend or Pay demands
  • Expiry and Cancellation Uniform Rules for Demand Guarantees 758: main principles, URDG 758 guarantee sample wording, sample clauses 

Case Studies

  1. a)   Sigma Ltd reviews a business’ need for guarantees, the identification of the appropriate product and the practical application of URDG 758, and the effect of local banking practice and different legal jurisdictions. 

Financial Crime Compliance

Understanding the implications of FCC is an important aspect of international trade finance, this training course covers:

  • Constituent parts (money laundering, terrorist financing, sanctions breaches)
  • Current examples
  • An introduction to the nature of compliance risk in cross-border transactions
  • Why are international trade transactions increasingly a target for abuse?
  • The consequences of non-compliance (for banks, corporates and individuals)
  • Risk assessment from the FCC perspective

Case study; Omega Limited, the assessment of a potential AML / CFT / sanctions breach through the use of one of the above trade products, requiring the delegates to identify key compliance risk issues and the need for further information to make a risk-based assessment

  • Summary of day’s learning
  • Opportunity to refresh and clarify key points
  • Review main learning points.

Redcliffe’s international trade finance course leader is a highly experienced banker with a 40-year-long career at HSBC.

Passionate about international trade financing and ensuring good outcomes for both the bank and its customers, this trainer has experience in numerous sectors including international businesses, debt syndication, acquisition finance, credit risk and debt recovery management. His principal specialism is trade and commodities financing. During his career, he was selected for several key roles involving complex problem identification, analysis and resolution, leading to reductions in risk and loss and improved processes and compliance.

For 36 years of his career, this trainer undertook a wide range of management roles in business, commercial and corporate banking. Positions included Credit and risk, but predominantly as a relationship manager with a portfolio of trade-intensive customers in addition to 10 years as a Senior Trade Corporate Banking Manager, based in the City of London.

This position included responsibility for 20+ large trade-intensive relationships (import/export and commodities), where the turnover of the largest clients was c£6 billion. Our international trade and finance course specialist was also responsible for credit risk management aspects. During this time he began running training courses, initially on the subject of trade finance credit. Spending his final seven years at HSBC as Senior Trade Portfolio Risk Manager in London, roles included:
  • overseeing the UK commercial segment’s trade portfolio, monitoring general performance and quality assurance
  • providing expert advice to sales managers, credit officers and other stakeholders on debt structuring and the use of appropriate products
  • developing analytical and monitoring models to support increased facilities or to identify adverse trends
  • assisting corporate recovery managers in minimising potential losses due to debt exposure or from an operational perspective
  • delivering trade finance training courses to stakeholders (in debt structuring and products)
Before leaving HSBC he completed the Certificate in Trade Based Financial Crime Compliance issued by ICA / Manchester University Business School
Since leaving HSBC this trainer has been delivering courses to a wide range of banks, finance houses and trading companies.

Our international trade finance fundamental course covers the following objectives:
  • Identify customer needs and recommend appropriate trade product solutions
  • Assess various risks to both banks and customers in international trade transactions
  • Explain and identify ways of mitigating the underlying risks associated with trade finance transactions
  • Understanding the processes involved in documentary collections, documentary letters of credit and guarantees, including the responsibilities of the various parties

  • Our trainer has 40 years of practical trade finance experience with a major international bank
  • Redcliffe’s international trade finance course reflects the trainer’s direct experience in structuring trade deals, corporate relationship management responsibilities, credit risk assessment and trade operations
  • The examples/case studies used are taken from the trainer’s personal experience.
  • The varied case studies are practical examples which will greatly assist delegates in understanding this subject
  • This Fundamentals of International Trade Finance course is a ‘must’ for any financial, legal or corporate professional seeking an understanding of International Trade Finance.

This Fundamentals of International Trade Finance course is a ‘must know’ for:
  • Bankers who are new to trade finance
  • Bank Relationship Managers whose portfolio includes international trading entities
  • Bank Officers whose role encompasses oversight of aspects of trade finance (e.g. risk managers, compliance officers etc.), who wish to enhance their Trade Finance and trade product knowledge
  • Financial, Legal and Corporate professionals seeking an understanding of International Trade Finance companies and associated products.
International trade finance courses are also a ‘nice to know’ for:
  • Finance, accountancy, legal and other advisers seeking to better understand the mechanics of International Trade Finance and associated products, including Documentary Collections, Letters of Credit and Guarantees.

Despite the increasing movement to unstructured open account trading, Trade Finance remains an important option for businesses of all sizes. For small and medium-sized enterprises which either import or export, there are many significant benefits.

This one-day Fundamentals of International Trade Finance course will provide a firm foundation to participants new to the concepts of trade finance, as well as reinforce and consolidate the knowledge of those participants who already have experience. In learning how to identify customer needs, participants will be better placed to recommend appropriate product solutions.

Included in the course are practical sections covering documentation and practical issues relating to core trade finance products, (documentary collections, documentary letters of credit and contract guarantees), as well as the importance of the various International Chamber of Commerce (ICC) rules together with a high-level oversight into Anti-Money Laundering (AML), Countering the Financing of Terrorism (CFT) and Sanctions considerations.

The International Trade Finance Course is highly interactive and centres around the use of a variety of case studies, predominantly based on actual files and ICC opinions.

This is a foundation-level course which can be supplemented by additional, more in-depth training.

  • The instructor was highly experienced, the course was well organized and structured

  • The presentation was clear and the instructor demonstrated a good use of cases and questions to get participants actively participate 
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