Page 12 - Trade Finance Profile

SHIPPING TERMS
Letter of Credit or L/Cs
More correctly, Documentary Credits, enable
international payments typically for foreign
sourced goods. LCs entail a formal set of
documents to be delivered to the Purchaser’s
bank which, if all in order, will result in the
bank making a payment to the seller’s bank.
Documents include a commercial invoice, Bill
of Lading, packing list, amongst others. LCs
have expiry dates, beyond which the delivery of
the above documents will result in no payment
being made.
A Telegraphic Transfer
This is an instruction (via SWIFT) on behalf of a
buyer to credit the account of a seller. Effectively, to indemnify the insured in the event of the
an international EFT.
Foreign Exchange Contracts
FEC/Forward Cover is an agreement to exchange
one currency for another currency at a fixed rate
on a specified date in the future. This agreement
fixes the price of foreign currency payments or
receipts expected to materialise at a future date
and eliminates adverse currency movements
beyond the agreed forward rate.
Factoring
This is a sophisticated, financial tool which
enables credit sales to be converted into working
capital by allowing a third party to purchase your
outstanding book of debts, against which an
amount is advanced, and the balance paid to you
once it has been collected from your customers.
The third party controls and maintains your
debtors’ ledger.
Invoice Discounting
This is a method to raise debt from a company’s
outstanding invoices that does not require the
company to relinquish administrative control of
the invoices.
Marine Insurance
This refers to the insurance of goods being
transported in all forms of transport including air,
road or rail.
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General Notarial Bond
GNB or NGB is registered over movable property
in general terms. That is, the movables are not
individually specified in the notarial bond, but,
instead, are generally identified (for example, as
trading stock or furniture).
Special Notarial Bond
This is registered over specified movable
property. The goods are specified through their
description in the bond, which must make it
readily recognisable and identifiable.
Insurance
This is a contract whereby the insurer undertakes
specified risk arising. It is the intention of the
insurance agreement to place the insured in the
position in which they would have been, had the
insurable event not occurred.
Open Marine Policy
This is normally used when there is a high volume
and frequency of goods movement. Quite often
these are taken out by Freight Forwarders
and Clearing Agents to offer to their clients.
Declarations of goods being covered need to be
provided to the insurer before the realisation of a
claim.
Freight Forwarders
They arrange transport on behalf of a buyer
or seller of goods. When contracting with a
transport owner (such as a ship owner) can also
be known as a Shipper. In SA, Freight Forwarders
usually also provide customs clearing services.
Clearing Agents
They interface with customs and excise to declare
goods in the correct manner, use the correct
forms and procedures as well as the correct
formulas and calculations to ensure that goods
are properly cleared, and customs duties paid.
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