OVERSEAS TRADE FINANCE ( OTF )

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Overseas Trade Finance ( OTF )
Port to Port Trade Finance
Trade Finance Equity
Trade Finance Report 3
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Overseas Trade Finance specialise in sourcing trade finance, and arrange
funding for export transactions on behalf of exporters, and international trade
finance professionals world wide. We arrange the finance for Trade related business
and forfeiting. OTF specialise in arranging
non-recourse discounting of domestic and
export receivables,based on the purchase
of Bills of Exchange, Promissory Notes and
invoices. We also have particular expertise
in arranging Letters of Credit finance,
including refinancing, confirmation and
discounting.
Overseas Trade Finance is dealing with
Trade Finance related business and
Forfaiting.
In terms of countries, our primary areas
of specialisation are EU,USA,Turkey,NZ
China however we are improving our
specialty over Middle East, Asian and
European countries as well.
Our Trade Finance team assists businesses engaged in domestic and
international trade. We can arrange finance through carefully selected institutions
and help put in place financial structures which enable you to carry out your
business more effectively.
At OTF, we have a wide knowledge of the players in th e market, and know who
is hungry for business and who specialists in certain industries are.
Our company philosophy is simple. We believe in building strong relationships
through understanding your needs and aspirations. This is supported with a flexible
and adaptable approach. And because OTF are independent, it means you have
direct access to the decision makers.
Our Services
Overseas Trade Finance Ltd facilitates companies’ efforts to finance international
and domestic transactions, better manage risks globally, and develop their
business.
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Trade Finance services
Importers:
• L/C Issuance
• Back to Back LC
• Import Bills for Collection
• Import Loan
• Shipping Guarantee
• Trust Receipt Facilities
• Import Invoice Financing
Other Trade Finance Services
• Forfaiting
• Purchase ( Stock) Finance
• Export VAT finance
• Invoice finance/ factoring
• Gurantee or Bond
• Standby Letter of Credit
• Foreign Exchange Risk Management
• Manage your Business Accounts
Receivables
• Unpaid Invoice Solutions
• Receivable Financing
• Fiduciary and Lock-Box Services
Letter of Credit (LC)
Letters of credit have been a cornerstone of international trade activity for many
years. They provide one of the safest mechanisms to trade internationally and they
often add the essential ingredient for confidence about payment.
Letters of credit are used between the importer and the exporter whereby the
letter of credit guarantees that the exporter will be paid by a major bank
providing that the exporter can provide documents required under the letter of
credit. The importer will not have to pay until the documents have been presented.
It is a considerably secure method of payment as it replaces the unknown credit of
the buyer with the unimpeachable credit of the Bank. The letter of credit can be
clean or documentary. A clean letter of credit makes cash available on demand.
Letters of credit used by traders are always documentary. This means that the
exporter is required to produce documents stated in the letter of credit evidencing
current shipment of the goods ordered before the money is released.
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Overseas Trade Finance Ltd facilitates companies’efforts to finance
international and domestic transactions,better manage risks globally, and develop
their business.
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Trade Finance services
Arranging the following Trade Finance Services for
Importers:
• L/C Issuance
• Back to Back LC
• Import Bills for Collection
• Import Loan
• Shipping Guarantee
• Trust Receipt Facilities
• Import Invoice Financing
Exporters:
• L/C Advising & Confirmation
• L/C Transfer
• Export Bills for collection
• Export Bills Advance
• Export Bills under LC for Collection
• Negotiation/ Discount of Export Bills under LC
• Packing Loan
• Pre shipment Financing
• Export Invoice Discounting
• Sourcing trade finance, and arrange funding for
export transactions on behalf of exporters
• Arranging discounting of time drafts arising from
letters of credit
• Arranging discounting of Letter of credits
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How it Works
1. The importer and exporter conclude a sales contract which provides for payment
through a letter of credit.
2. On the instructions of the importer, his bank known as the issuing bank), prepares
the credit in favour of the exporter. In doing so, the issuing bank must be satisfied as
to the credit-worthiness of the importer.
3. The issuing bank asks a bank in the exporter’s country to advise the credit to the
exporter.
4. The advising bank informs the exporter that the credit has been issued and sends
him the credit.
5. The exporter checks closely all the requirements of the letter of credit to see that
they match the terms of agreement in the sales contract. If there are any
discrepancies, they should be clarified immediately with the importer, and either the
contract or the letter of credit should be amended so that they conform with each
other.
6. Exporter despatches goods as specified in the credit to the importer.
7. The exporter presents the documents, together with a bill of exchange if called for,
to the bank which has been nominated in the letter of credit as the aying/accepting/
negotiating bank, (this is usually, although not necessarily,the advising bank).
8. The paying/accepting/negotiating bank checks the documents and, if they are in
order, either pays the exporter (under a sight credit), accepts the bill of exchange for
payment at a later date (under an insurance credit) or undertakes to pay at a later
date (under a deferred payment credit).
9. The paying bank sends the documents to the issuing bank.
10. The issuing bank checks the documents and if they are in order reimburses the
paying/accepting/negotiating bank, as arranged previously.
11. The importer pays the issuing bank the amount due or in terms, which have been
agreed.
12. The issuing bank releases the documents to the importer.
13. The importer uses the documents to take delivery of the goods.
For more information and issuing Letter of Credit contact us. support@otf.co.nz
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Back to Back Letter of Credit
Back-to-Back Letters of Credit are used in international and domestic trade. The
parties to a Backto-Back Letter of Credit are:
1. the buyer and his bank as the issuer of the original letter of credit,
2. the seller/manufacturer and his bank,
3. the manufacturer’s subcontractor and his bank.
This type of credit transaction is used when a seller/manufacturer has to purchase a
component or farm out part of the manufacture of a product, but may not have the
cash flow to do so.
In this case, the seller/manufacturer applies to his bank for a letter of credit, identical
to the original Letter of Credit he received from the Buyer, except that it is for a lesser
value.
This second letter of credit, called
a Back-to-Back, is sent to the
subcontractor’s bank and therefore
the subcontractor knows that he will
be paid and can proceed.with his part
of the transaction - supplying
components or service to the manufacturer.
A Back-to-back L/C safeguards your interests as a middleman by refraining from the
disclosure of the identity/details of your supplier to your customers and vice versa. You
simply provide us with the original L/C (called “master L/C”) and we will issue another
L/C involving the same lot of goods (called “baby L/C”) to the supplier.
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Import Bills for Collection
Import collection is a simpler alternative to L/Cs. When your suppliers send the
documents to your bank through their bankers, your bank will inform you immediately.
Documents are released to you when your supplier’s payment terms are fulfilled.
How it works:
The exporter despatches their goods to you
(the importer), and instructs their bank to send
the shipping documents to your (the importer’s)
bank, along with instructions about collecting
payment. The bank acts on behalf of the
exporters bank to collect payment from you, or
a promise that you will pay at a later date if you
have agreed this with the exporter.
This promise normally involves you (the importer)
accepting a Bill of Exchange. Under the agreement,
the bank will not release the shipping documents
until payment or acceptance has been made.
Key advantages
• You, the importer, pay for goods only when you are happy that the shipping
documents – such as invoices, insurance certificate and bills of lading – are as
stipulated in the underlying commercial contract.
• Provides you with a degree of security that, if the paperwork is correct, the
corresponding shipment should be in order too.
• Useful for trading situations that require more security than Open Account but which
do not warrant the expense of a Documentary Credit.
• Easy and speedy to set up, making them particularly suitable for transactions that
need to take place quickly.
• Often used to bridge the gap between trading on Documentary Credits and open
account, where a relationship is building up between buyer and supplier
that indicates mutual trust.
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Exporters
L/C Advising & Confirmation
LC Advising
Advising Letters of Credit (LC) is part of the trade operation process. The bank
requested to advise the LC would do so without any engagement on its part.
But the bank shall take reasonable care to check the apparent authenticity of the
Credit and to advise out the LC without delay. Banks usually advise LC received from
their own Branches overseas or LC of their correspondent Banks. If the Bank chooses
not to advise the LC or unable to establish the authenticity the LC, it must inform the
Issuing Bank without delay. LC may be advised directly to the importer/beneficiary or
through their bankers, depending on the instruction contained in the LC. We can
arrange advising bank for your LC that provide you LC advising services with Speed
and reliability. Simply ask your buyer to choose the Bank which we introduce to you
as the L/C advising bank to benefit from the quality and professional service.
L/C Transfer
A Transfer L/C is an ideal solution.
You can wholly or partially transfer
the L/C to your suppliers at your
request, provided the L/C is
“transferable”. Under such
circumstances, the name of the buyer
and that of the supplier must be disclosed.
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Other Trade Finance Services
Forfaiting
The term “a forfait” in French means, “relinquish a right”. Here, it refers to the
exporter relinquishing his right to a receivable due at a future date in exchange for
immediate cash payment, at an agreed discount, passing all risks and
responsibilities for collecting the debt to the forfaiter.
Historical Development of Forfaiting
The origins of the forfaiting market lie in changes in the world economic structure
during the early sixties, when trade between Western and Eastern Europe was
re-established. The growing importance of trade with developing countries in Africa,
Asia and Latin America boosted the forfaiting market to an international level.
Forfaiting vs. Factoring
The terms factoring and forfaiting have been mixed up frequently. Factoring is
suitable for financing several and different smaller claims for consumer goods with
credit terms between 90 and 180 days, whereas forfaiting is used to finance capital
goods exports with credit terms between a few months and seven years. Factoring
only covers the commercial risk, whereas forfaiting additionally covers the political
and transfer risk.
Letter of Credit - (L/C)
A document, issued by a bank pursuant to instructions of a buyer of goods,
authorising the seller to draw a specified sum of money under specified terms,
usually the receipt by the bank of certain documents within a given time. In effect,
the bank substitutes its credit for that of its customer (the buyer).
Bill of Lading
A document that establishes the terms of a contract between a shipper and a
transportation company under which freight is to be moved between specified
points for a specified charge. Usually prepared by the shipper on forms issued by
the carrier, it serves as a document of title, a contract of carriage, and a receipt for
goods
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Factoring also provides the following benefits:
Credit Risk Protection
We provide you with 100% credit risk protection for sales covered by an agreed
credit line, when the buyer goes bankrupt, closes business or fails to effect payment.
Collection Services
Our correspondent will remind your buyers to pay on time, thus reducing your
burden of debt collection.
Flexible Financing
In addition to your existing banking facilities, we provide you with another source of
financing to facilitate your cash flows.If your customers are concerned about the
credit risks (such as non-payment, non-delivery of goods, warranty,etc.), what can
you do? We can arrange different types of Guarantees or Bonds to suit your needs.
A guarantee or bond states that you will comply with the terms of the
contract/agreement with your customers, otherwise your customers will be
compensated .
Four types of Guarantee or Bond:
• Bid Bond
• Performance Bond
• Advance Payment Guarantee or
Down Payment Guarantee
• Payment Guarantee
Standby Letter of Credit
Whether for yourself or your business, a Standby Letter of Credit can be used to
secure a variety of transactions where a third-party guarantee of payment may
replace a cash or bond deposit. It’s a strategically smart way to leverage the credit
power of your portfolio. A Standby L/C is a guarantee to the beneficiary against
defaults by the applicant in the performance of his commitment. It is often used in
lieu of a performance guarantee; for example, to help another company obtain
credit. For more information contact us. support@otf.co.nz
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Escrow Account Lock-Box Services
You want to be entirely sure that you will be paid for your services?
You want payment in advance, but your client wants a counter guarantee?
Your credit insurance limit is insufficient to cover the risk of non-payment?
Your client can only pay you once they have been paid?
The solution is Escrow account.
An Escrow Account is a special bank
account for the deposit of funds, to which
the beneficiary’s access is a subject of
the fulfillment of certain conditions.
An escrow agreement setting out these
conditions is usually drawn up.
Escrow is your “trusted third party”,
ensuring a problem-free transaction
between buyer and seller thanks to an
effective procedure.
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Port to Port finance
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Trade Finance Report 3
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OVERSEAS TRADE FINANCE LIMITED
ADRESS
: 1 GLENALMOND ROAD
MT. EDEN AUCKLAND 1024 NEW ZEALAND
TEL
: +64 (0)9 889 3416
FAX
TELEX
Website
Email
: +64 (0)9 951 8352 ,
: 410235 OTIGNZ ,
: www.otf.co.nz
: info@otf.co.nz , support@otf.co.nz
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OVERSEAS TRADE FINANCE ( OTF )

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