Which Parties are involved in Trade Finance?
Presented by: Ammad Awan Glasgow
Trade Finance ● Trade finance is the process of financing certain
activities related to commerce and international trade. ● Trade finance is a short-term credit availed by a bank to their borrower for importing and exporting activities. ● Trade finance includes such activities as lending, issuing letters of credit, factoring, export credit and insurance. ● Various intermediaries such as banks and financial institutions can facilitate these transactions by financing the trade.
Parties involved in trade finance ● Buyer ● Seller ● Manufacturer ● Carriers ● Insurance company
● Government and trade organizations
● Is the one who is willing to buy specific goods or services, to
find a seller and place the order.
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A buyer's main goals are: to receive goods or services in required quality and quantity; to receive goods or services in specific destination and time; to pay to a seller as later as possible and only when the seller is fulfilled its liabilities in full; to receive financing for buying goods or services.
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Buyer / importer
● one who is willing to sell specific goods or services, to
find a buyer and arrange the delivery.
A seller's main goals are: ● to be sure that a buyer will fulfill its payment liabilities; ● to receive financing for goods production and preparation; ● to deliver the goods or services as soon as possible; ● to receive payment in specific amount and time.
Seller / exporter
manufacturer ● Manufacturer - one who produces the goods or
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services. May sell the goods by himself or using other companies as sellers. A buyer's bank may assist in: searching for suppliers all over the world; consulting the buyer and protecting his interests; preparing and checking the documents; sending the payment; financing related to a purchase.
● A seller's bank may assist in: ● searching for buyers all over the world; ● consulting the seller and protecting his interests; ● preparing and checking the documents; ● receiving the payment;
● financing related to a sale.
Carriers ● Goods may be transported using air, land, sea and
mixed (multimodal) ways of transportation. ● It depends on geographical location, goods character, requirements of a buyer or capabilities of a seller. ● Carriers include shipping companies, postal services, courier services, air carriers, railroad companies, haulers and etc. ● Carriers usually provide transport documents, which confirm the goods delivery and delivery conditions.
Insurance companies ● Insurance companies cover risks of goods loss or
damage during the delivery.
● Insurance cover may be provided by either seller or
buyer, and the amount of covered risk depends on the contract terms and delivery option.
Government and trade organizations • Different organizations like chambers of commerce,
trade unions, inspections companies, customs and etc. are directly or indirectly involved in trade operations. The same is for exporting countries.
• Exporters may have to receive the export license, to
complete the pre-shipment or sanitary inspections, to fulfill the customs and government requirements for some categories of goods.
Roles and responsibilities ● Good faith in contract execution ● Legal provisions of contract ● Appropriate performance of contract. ● Reasonable conditions and terms of contract. ● Basis or clear functions for negotiation. ● Ways to deal with financial intitutions.
● Terms regarding delivery and payment.
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