A payment arrangement in which an exporter instructs a bank to hand over shipping and title documents to the importer. International Terms Of Payment: Cash In Advance; Letter Of Credit; Cash Against Documents (CAD); Performance Bond; POP - Proof of Product. Terms Of Foreign Trade: RWA - Ready, Willing and Able; SOFT PROBE; SWIFT.
Advance Repayment Guarantee (ARG) No. Dated: Place:
Guarantor: JSC registered in the Register of Enterprises of the Republic of under No.
Person requesting the Guarantee: SIA
registered in the Register under No.
Beneficiary of Guarantee: SIA
registered in the Register under No.
The person requesting the Guarantee SIA , hereinafter referred to as the Supplier, has informed us that on _. an agreement No. was signed between the Supplier and the Beneficiary of Guarantee SIA , hereinafter referred to as the Purchaser on supply of Goods (description of Goods) in the total amount EUR. According to the agreement, the Purchaser will pay an advance payment to the Supplier in the amount of EUR, which makes up % of the total value. According to the provisions of the mentioned agreement, advance repayment should be secured by a bank guarantee in the amount of advance payment.
Letter of Credit (L/C)
In simple terms, a letter of credit is an undertaking by a bank to make a payment to a named beneficiary within a specified time, against the presentation of documents which comply strictly with the terms of the letter of credit.
Its main advantage is providing security to both exporter and the importer, but the security offered, however, comes at a price and must be weighed against the additional costs resulting from bank charges. The exporter must understand the conditional nature of the letter of credit and the fact that payment will not be made unless the terms of the credit are met precisely.
A letter of credit is opened by an importer (applicant), to ensure that the documentation requested reflects and proves that the seller has performed under the requirements of the underlying sales contract, by the exporter by making them conditions of the letter of credit (N.B. The sales contract is not an inherent part of the Letter of Credit, although the Letter of Credit may contain a reference to such contract). For the exporter a letter of credit, apart from cash in advance, is the most secure method of payment in international trade as long as the terms of the credit are met.
Payment Terms Of Foreing Trade. International Terms Of Payment.
Cash Against Documents (CAD)
A payment arrangement in which an exporter instructs a bank to hand over shipping and title documents (see document of title) to the importer when the importer fully pays the accompanying bill of exchange or draft. Also called documents against payment.
1. Shipment in trust by seller and no guaranty for payment from buyer side.
2. Documents in trust in buyer’s bank.
3. Buyer will pay when buyer need documents for customs clearance (based on previous experience)
PB - Performance Bond
This is a type of bank guarantee which is issued from the Seller to the Buyer. It guarantees that the Seller will meet the terms of the contract. Normally issued in the amount of 2 % of the total amount of the contract, a performance bond can be drawn upon by the Buyer in the event that the Seller breaks the contract and fails to provide the product which was stipulated in the contract.
POP - Proof of Product
A Proof of Product (POP) is often requested by customers or agents who believe it will give them some guarantee of the existence of the product and ability of the supplier to deliver the product. In practice many POPs are false. POP offers no proof at all, because once a POP has been drafted it is automatically out of date - the product could have been sold to another buyer and therefore no longer exists.
To (Full name and address)
You have concluded on /date _ contract No with Messrs _ (company name) for the purchase of: (A brief description of the contract details is Following- quantity, price, shipment, quality specs… ) As security for the due performance of the contract (_)an indemnity by a bank shall be furnished.
At the request of (company name) we, herewith irrevocably undertaken to pay you on first demand, irrespective of the validity and the legal effects of the above mentioned contract and waiving all rights of objection and defense arising therefrom, the amount of the 5% of the total contract value of usdollars .. (in words dollars) upon receipt of your duly signed request for payment stating that Messrs , have failed to fulfil their contractual obligations.
Exemple of SWIFT payment.
Buyer: (SWIFT 700) – AGAINST BG Seller: (SWIFT 760) - MAJOR WORLD BANK -103%
1. Buyer sends ICPO
2. Buyer signs NCND and IMFPA
3. Seller issues full corporate offer (FCO) and buyer returns one copy of FCO duly countersigned signifying acceptance of all terms and conditions herein stated
4. Seller sends the draft contract to the buyer
5. Buyer sends contract duly signed, stamped and sealed to seller in electronic format
6. Seller returns contract to the buyer duly signed, and sealed in electronic format
7. Buyer sends a letter (addendum 4) about readiness to issuance the first payment by swift mt700 with a draft of swift mt700 (addendum 1) coordinated by buyer’s bank and contract duly signed and sealed by courier to the seller
8. Within 2 (two) banking days after receiving of a letter about readiness to issuance the first payment from the buyer the seller sends invoice through fax and courier with a hard copy of contract to the buyer
9. Within 2 (two) banking days buyer’s bank sends the first payment by swift mt700 according to the invoice to the seller’s account
10. Seller sends the bank guarantee (bg) by swift mt760 (addendum 2) to the buyer’s account after then swift mt700 will be come unconditionally immediately
11. Shipments begin according to contract and continue until fully contracted quantity is shipped and delivered (addendum 3)
PAYMENT TERMS AND GUARANTEES
Each bank have his rate in the wold each year
Exemple or TOP -30 the most reliable banks in the world 2012
Rank Bank Country Total Assets (US$b) Date
1 Deutsche Bank Germany 2,805.50 31/03/2012
2 Mitsubishi UFJ Financial Group Japan 2,641.22 31/03/2012
3 HSBC Holdings UK 2,637.22 31/03/2012
4 Industrial & Commercial Bank of China China 2,607.75 31/03/2012
5 BNP Paribas France 2,545.34 31/12/2011
6 Credit Agricole Group France 2,514.81 31/03/2012
7 Barclays PLC UK 2,430.74 31/12/2011
8 Japan Post Bank Japan 2,363.15 31/03/2012
9 JPMorgan Chase & Co. USA 2,320.33 31/03/2012
10 Royal Bank of Scotland Group UK 2,246.52 31/03/2012
11 Bank of America USA 2,181.45 31/03/2012
12 China Construction Bank China 2,107.21 31/03/2012
13 Bank of China China 2,046.37 31/03/2012
14 Mizuho Financial Group Japan 1,995.57 31/03/2012
15 Agricultural Bank of China China 1,993.25 31/03/2012
16 Citigroup Inc USA 1,944.52 31/03/2012
17 Sumitomo Mitsui Financial Group Japan 1,726.21 31/03/2012
18 Banco Santander Spain 1,712.05 31/03/2012
19 ING Group Netherlands 1,656.88 31/03/2012
20 Societe Generale France 1,592.72 31/03/2012
21 Lloyds Banking Group UK 1,548.00 31/03/2012
UCP 600 are the latest revision of the Uniform Customs and Practice that govern the operation of letters of credit.
UCP 600 comes into effect on 01 July 2007
The 39 articles of UCP 600 are a comprehensive and practical working aid to bankers, lawyers, importers, and exporters, transport executives, educators, and everyone involved in letter of credit transactions worldwide.
ICC Uniform Customs and Practice for Documentary Credits (UCP 600)
This revision of the Uniform Customs and Practice for Documentary Credits (commonly called UCP) is the sixth revision of the rules since they were first promulgated in 1933. It is the fruit of more than three years of work by the International Chamber of Commerce’s (ICC) Commission on Banking Technique and Practice. ICC, which was established in 1919, had as its primary objective facilitating the flow of international trade at a time when nationalism and protectionism posed serious threats to the world trading system. It was in that spirit that the UCP were first introduced – to alleviate the confusion caused by individual countries’ promoting their own national rules on letter of credit practice. The objective, since attained, was to create a set of contractual rules that would establish uniformity in that practice, so that practitioners would not have to cope with a plethora of often conflicting national regulations. The universal acceptance of the UCP by practitioners in countries with widely divergent economic and judicial systems is a testament to the rules’ success.