The Letters of Credit Training Course

Course Overview:

This practical three day course considers the use, implementation and practical applications of documentary letters of credits (LC’s) in their many forms and guises. Like predictions of the “cashless” society, the impending death of documentary credits continues to be postponed despite the all-conquering popularity of the account method of trading. There are many territories where LC’s are at the core of trading operations for a host of reasons, not just risk transference.

Much of International Trade, including LC’s, is either misunderstood or undervalued mainly because the terminology and practices seem difficult and confusing to master. This course will completely de-bunk this misconception and will leave delegates with a clear and working knowledge of how LC trade is undertaken, what actually happens and what are the implications for all.

Using numerous case studies and considerable interactive class discussions, the Director will encourage delegates to question and test their knowledge at each stage of the course. At the end, all delegates will have a clear and full understanding of exactly how LC trade takes place across the globe at almost every level.

At the end of the course participants will be able to:

• Understand the fundamental basis and importance of LC’s.
• Differentiate between the various methods of payment
• Appreciate the risks/rewards for each party in all transactions
• Know the difference between the various types of LC
• Understand the basic terms of trade and their relevance and importance
• Consider how and why various deals are structured as they usually are
• Appreciate the significance of international conventions such as Incoterms and UCP
• Appreciate the role of international export agencies
• Identify the most suitable means of short, medium and long term funding
• Explain why comparative and absolute advantage are key components in contract negotiations
• Appreciate that underlying every transaction is a genuine desire between the buyer and seller to do business with each other.

Who Should Attend:

• Corporate and Commercial Bankers
• Risk Managers
• Trade Finance Specialists
• Trade Operations Staff
• Trade Managers or Division Executives
• Anyone Dealing with international Trade

Methodology:

Classroom lectures and intensive hands-on practical workshop sessions including detailed exercises. The director particularly welcomes interactive discussions with the delegates and is able and willing to customise the course content, where necessary to meet delegate’s actual and operational needs. Delegates are free to bring their own cases/examples to the sessions.

Level of Preparedness:

Basic knowledge of finance and commerce

Course Content:

Overview of Trade Finance

• Principles of trade finance
• Parties to a transaction
• Roles, obligations, interests

Banks in Trade Finance

• Core Services
• Structured Services
• Interaction with ECA’s and others
• Importance of banks in promoting commerce
• The value proposition

Regulatory Context – overview

• UCP
• URDG
• Incoterms
• UCP600
• Jurisdiction
• Compliance

Transaction/Product Overview

• Open account
• Collections
• Documentary credits
• Guarantees and standby letters of credit
• Payment in advance

Trade Finance & Risk

• Overview of selected risks
• Mitigation options

Documentary Letters of Credit – Definitions

• Definition of Documentary Letters of Credit (L/C’s)
• Parties to a credit
• Contractual relationships
• Confirmed L/C’s
• Terms of payment
• Transferable & Back to Back L/C’s
• Red Clause
• Green Clause
• Confirmed
• Silent confirmation
• Other Features of L/C’s

Documentary Letters of Credit – Applications

• Observations on financing
• Acceptances
• Discounting
• Aval
• Factoring
• Forfaiting
• Other finance mechanisms
• Buyer/supplier credits
• Checking, honouring & negotiation of documents
• Obligations and responsibilities of the parties

UCP 600

• Practical application of these latest rules
• Changes from UCP 500
• Practical issues
• Challenges
• Key legal decisions (Santander v Paribas, CIC v CMB)

International Standard Banking Practice 2013

• Introduction
• UCP not amended. Emphasis on integration
• Detailed practices when working with different trade documentation
• Documents not covered by UCP
• Packing lists, Weight lists
• Beneficiary certificate
• Non-negotiable sea waybill
• Analysis inspection, health, phytosanitary, quantity & quality certificates

Transferable Credits

• Advantages
• Disadvantages
• Risks
• Key legal issues
• Implications for parties
• Client interests
• Acceptability

Red & Green Clause (Advance Payment) Credits

• Pre-export finance applications
• Role on the market
• Financing mechanisms
• Structural analysis
• Risks for each party
• Risk mitigation & control

Revolving Credits

• Structure
• Mechanism
• Automatic restrictions
• Amount or time, not usually both
• Cumulative or non-cumulative

Evergreen Credits

• Definition
• Operation
• Risks

Standby L/C’s

• Evolution
• Definition
• Difference between SBLC and LC
• Dominant role in trade finance
• Main uses of SBLC’s
• Receiving SBLC’s as security
• Issuing SBLC’s
• Common features
• Benefits
• ISBP98

Fraud in International Trade

• L/C’s
• Autonomy of L/C’s
• Documents only weakness
• Proof of fraud
• Incidence
• Basic fraud prevention