Introduction:

The documentary credit is considered one of the important processes in international trade and an effective way to bring trust and security to the parties involved in commercial transactions. It has resulted in stability in commercial dealings between countries in an environment that encourages trust and reassurance. This has helped buyers conclude purchase contracts without having to transfer the payment in advance, thus avoiding the freezing of their funds for long periods. It also provides exporters with security and confidence in collecting the value of their goods upon completion of shipping operations, regardless of any developments that may occur after the opening of the documentary credit, such as changes in currency control systems, internal unrest, wars, and so on. Additionally, banks that deal with letters of credit have achieved substantial profits through the commissions generated from opening these letters.

Objectives:

At the end of this training course, participants will be able to:

  • Define the importance of sales contracts in international trade and their contents, including parties involved, payment terms, delivery terms.
  • Distinguish the delivery terms in international trade and their relationship to the cost of goods and the distribution of responsibilities among the parties of the sales contract, according to INCOTERMS2020.
  • Define the types and methods of payment in international trade and compare between these methods.
  • Understand the fundamentals of documentary credits as a preferred payment method in international trade.
  • understanding of documentary credits by learning about the parties, types, terms, and conditions of documentary credits.
  • Understand the Uniform Customs and Practice for Documentary Credits issued by the International Chamber of Commerce (UCP600).
  • Understanding the key documents required in documentary credits.
  • Learning the terms used in documentary credits in English.

Course Outline:

Methods of Settlement under International Trade and International Commercial Terms

Sales contract:

  • Introduction.
  • The content of a sales contract.

International Commercial Terms (INCOTERMS 2020):

What the Incoterms® rules do?

  • What the Incoterms® rules do NOT do?
  • How best to incorporate the Incoterms® rules?
  • Delivery, risk and costs in the Incoterms® 2020 rules.
  • Rules for the contract of sale and their relationship to other contracts.
  • Differences between Incoterms® 2010 and Incoterms® 2020.
  • INCOTERMS® 2020 Sellers and Buyers Obligations.

The sales contracts and the methods of settlement:

Advance payment:

  • Advantages & disadvantages.

Open account:

  • Advantages & disadvantages.
  • Payment secured by a bank guarantee under open account.

Documentary Collections:

  • Definition.
  • Parties involved in the documentary collection.
  • Documentary collection payable on a sight basis.
  • Documentary collection payable on a usance basis (Acceptance).
  • Advantages of documentary collection.
  • Disadvantages of documentary collection.
  • Documentary collections vs. Documentary credits.

Documentary Credits:

  • Documentary credit cycle.

Documentary Credits Fundamentals

Documentary Credits:

  • Documentary credits definition.
  • Parties of the Documentary Credit.

Types of the Documentary Credits:

  • According to commitment methods
  • According to usage methods

Availability under documentary credits:

  • Sight payment
  • Deferred payment
  • Acceptance
  • Negotiation

Terms and Conditions of D/C:

  • Tolerance in Credit Amount, Quantity and Unit Prices
  • The Expiry date (Latest day for presentation) & Place of presentation
  • The latest date of shipment & Shipment period
  • Period of presentation of documents
  • Partial & Transhipment Shipments
  • Goods, Services or Performance
  • Correspondent Bank Charges & Commissions

Amendments under Documentary Credits.

Documents required under Documentary Credits.

Questions and Exercises.

Examination of documentary credits documents according to the International Standard Banking Practice publication number ISBP821

Documentary credits documents (reviewing the following documents and the required conditions according to Uniform Customs and Practice for Documentary Credits UCP600 and the International Standard Banking Practice ISBP821):

  • Draft/ Bill of Exchange(Financial Document).
  • Transport Documents:
    • Multimodal or Combined Transport Document.
    • Bill of Lading.
    • Non-Negotiable Sea Waybill.
    • Charter party bill of lading.
    • Air Transport Document.
    • Road, Rail or Inland Waterway Transport Documents.
    • Courier Receipt, Post Receipt or Certificate of Posting.
  • Insurance Documents.
  • Commercial &Official Purposes Documents:
    • Commercial Invoice.
    • Certificate of origin.
    • Packing list.
    • Weight list or certificate.
    • Beneficiary’s certificate.
    • Analysis, inspection or surveillance, health or veterinary, phytosanitary, quantity, quality certificate.
  • Submission and examination of documents (complying documents, discrepant documents, and notification of document rejection).
  • Practical cases on documents examination.