Veteransbank TIOD Trade & International Operations 2024 PDF

Trade & International Operations Department (TIOD) Trade Services Processing and Administration  For Approval of the HR Com Objectives: To have a basic working knowledge on the different Trade and Remittance products and services offered by the bank....

Trade & International Operations Department (TIOD) Trade Services Processing and Administration  For Approval of the HR Com Objectives: To have a basic working knowledge on the different Trade and Remittance products and services offered by the bank. To be able to identify the role of Philippine Veterans Bank in Trade and Remittance business.  For Approval of the HR Com Overview of Trade WHAT IS TRADE? Trade is the commercial business of buying and selling with profit either within or between countries.  For Approval of the HR Com Overview of Trade WHY DO WE DO TRADE? Philippine Veterans Bank earns in the form of commission, interest, fees and exchange gains from various products under Import and Export product lines using the acceptable payment methods by the Bangko Sentral ng Pilipinas (BSP).  For Approval of the HR Com Overview of Trade PARTIES INVOLVED IN TRADE PARTY ROLE DOCUMENT Buyer/Importer Places order and imports the goods Purchase Order Seller/Exporter Manufactures/sells/exports goods Sales Invoice Transport Company/Carrier Transports the goods Bill of Lading/Airway Bill Insurance Company Insures goods against risk Insurance Policy Regulate import and export of goods, inspect Regulatory Agencies goods etc. Banks Process payment and provide financing  For Approval of the HR Com Overview of Trade WHY BANKS ARE IMPORTANT? - Facilitate and process payment between parties. - Provide financing to either party. REMEMBER: Banks deal only with documents and not with the actual goods.  For Approval of the HR Com Overview of Trade WHAT THEY WANT? BUYER: - Receive the purchased merchandise/services at the right time, right place, right quality and right quantity. - Extend payment terms as long as possible - Less cost whenever possible. - Less trouble as much as possible (e.g. credit limits etc.) SELLER: - Ensure receipt of payment - Wants immediate payment  For Approval of the HR Com Rules Governing Trade INTERNATIONAL CHAMBER OF COMMERCE (ICC PUBLICATIONS) UCP 600 - Uniform Customs and Practice for Documentary Credit dated July 2007 The Uniform Customs and Practice for Documentary Credits (“UCP”) is the rule governing the Documentary credits. URR 725 - Uniform Rules for Bank-to-Bank Reimbursements ICC Publication No. 725, shall apply to any bank-to-bank reimbursement when the text of the reimbursement authorization expressly indicates that it is subject to these rules. These rules are binding on all parties thereto, unless expressly modified or excluded by the reimbursement authorization. URC 522 – Uniform Rules for Collections In essence, the URC 522 rules outline what banks should do with documents against acceptance (D/A) and documents against payment (D/P). URDG 758 - Uniform Rules for Demand Guarantee An international set of rules produced by the International Chamber of Commerce governing the rights and obligations of parties under demand guarantees. ISP 98 - International Standby Practices An international set of rules governing the rights and obligations of parties under standby letters of credit  For Approval of the HR Com Rules Governing Trade Bangko Sentral ng Pilipinas (BSP) Manual of Regulations for Banks (MORB) Manual of Regulations on Foreign Exchange Transactions (FX Manual) BSP Circular 925, 1030,1124 etc. Other Government Agencies Bureau of Customs Bureau of Internal Revenue Philippine Veterans Bank Internal Policies and Procedures  For Approval of the HR Com Trade Products and Services  For Approval of the HR Com Other Trade Products and Services  For Approval of the HR Com LETTER OF CREDIT DEFINITION An arrangement, whereby a bank, the Issuing Bank, acting at the request, and on the instructions of its customer (the Importer/Applicant), engages itself to make payment to a third party (the Exporter/Beneficiary) at sight or at a determinable future date up to a stated sum of money, against presentation of documents evidencing shipment of merchandise or delivery of services, in accordance with the terms and conditions of the LC. LC is one of the most secure mode of payment because the Buyer’s Bank substitutes its credit worthiness and good name in place of the Buyer.  For Approval of the HR Com PARTIES TO A LETTER OF CREDIT PARTY ROLE Applicant Buyer of goods who opens/applies for a letter of credit Beneficiary The party on whose request the credit is issued Issuing Bank The bank that issues a credit at the request of an applicant Advising Bank Bank that advises the credit at the request of the issuing bank Bank that adds its confirmation to a credit upon the issuing bank's Confirming Bank authorization or request Bank that negotiates documents delivered to bank by the beneficiary fo Negotiating Bank the LC Reimbursing Bank Bank so named in the credit to pay for the value of the documents  For Approval of the HR Com LETTER OF CREDIT - ADVANTAGES BUYER Assurance that the bank will refuse any payment to the seller unless he/she complies with the terms of the LC. SELLER Assurance of payment as long as he/she presents documents in accordance with the terms and conditions of the LC. : The financial standing of the buyer is replaced by that of the issuing/confirming bank, thus, there is more security of payment.  For Approval of the HR Com LETTER OF CREDIT :  For Approval of the HR Com CLASSIFICATION OF LCs CONFIRMED LC A Confirmed LC is a letter of credit wherein the Confirming Bank has a commitment to pay the Seller against the Seller’s presentation of documents complying with the terms and conditions of the LC if the Buyer’s Bank fails to pay. : UNCONFIRMED LC An Unconfirmed LC is the obligation only of the issuing bank. The Letter of Credit has not been guaranteed or confirmed by any bank other than the bank that opened it.  For Approval of the HR Com LETTER OF CREDIT CONFIRMATION Why would the seller asked for a Confirmed LC? 1. The seller has doubts on the buyer’s bank or the Issuing Bank’s ability to pay; 2. The Seller has reservations about the country in which the Buyer’s Bank is located; or The issuing Bank will request the Confirming Bank to add its confirmation to the LC. The Confirming Bank is under no obligation to agree to the request and can refuse to : add its confirmation. A fee will be charged by the Confirming Bank depending upon several risk factors (i.e. credit standing of the Issuing Bank, the LC amount and the tenor of the LC).  For Approval of the HR Com LETTER OF CREDIT – PAYMENT TERMS SIGHT Payment is to be made at the time documents are presented.. USANCE Payment is to be made at a fixed future time from presentation of documents (e.g. 60 days after sight, 90 days from BL date, 60 : days from invoice date, etc.)  For Approval of the HR Com LETTER OF CREDIT – SHIPPING DOCUMENTS COMMERCIAL DOCUMENTS DEFINITION Draft (Bill of Exchange) Written order to pay a sum of money Commercial Invoice Billing document issued by the seller to the buyer Issued by the carrier or its agent with a detailed list of shipment of Bill of Lading goods. It is a receipt for the goods and evidence of title : OTHER DOCUMENTS DEFINITION Certificate of Origin Where goods were manufactured Packing List Indicates contents of each package Inspection Certificate Required for merchandise of great value and quantity  For Approval of the HR Com STAGES TO A LETTER OF CREDIT 1. ISSUANCE Regular LC – Client’s facility as approved by Management/Credit Committee 2. ADVISING Via Authenticated SWIFT (Society for Worldwide Interbank : Financial Telecommunication) SWIFT provides a network that enables financial institutions worldwide to send and receive information in a secure, standardized and reliable environment Confirmation Advise – MT700. The swift message is sent by the Issuing Bank to the Advising Bank. Advising Bank advised the LC directly to the beneficiary or thru a noted “advised through bank” in country of the seller.  For Approval of the HR Com STAGES TO A LETTER OF CREDIT 3. AMENDMENT An amendment is to be made upon the request of the applicant of the LC to reflect new terms and conditions agreed upon between applicant and beneficiary. : 4. NEGOTIATION - Documents received from foreign negotiating bank shall be checked against the terms and conditions of the Letter of Credit, including amendments if any Issuing bank/PVB Negotiating bank  For Approval of the HR Com STAGES TO A LETTER OF CREDIT Payment to the beneficiary against compliant documents presented under the credit TYPES OF NEGOTIATION Clean Negotiation – documents presented are in strict compliance with all the terms and conditions of the LC. Discrepant Negotiation – documents presented are not in compliance with the terms and conditions of the LC. : 5. REIMBURSEMENT Payment of charges – by applicant or beneficiary Tenor of the LC – sight, usance Import LC Cycle For Approval of the HR Com BASIC DOCUMENTS REQUIRED: IMPORT/FOREIGN LC OPENING - Duly filled up & signed LC application form - Copy of pro-forma invoice - Government permits/clearances, if applicable - Marine Insurance Policy/certification whenever applicable - Printed electronic IED of SAD-TAN (single administrative document/temporary assessment notice with a validity of 7 calendar days DOMESTIC LC OPENING In a Domestic LC, the buyer and the seller are in the same country. BASIC DOCUMENTS REQUIRED - Duly filled up & signed LC application form - Copy of pro-forma invoice STANDBY LETTERS OF CREDIT A Standby Letter of Credit (SBLC) is an undertaking or commitment from the Issuing Bank, by order of and for the account of the Applicant, to pay a certain amount to the Beneficiary in the event the Applicant fails to fulfill an obligation. GOVERNING RULES: ISP98 or UCP600 BASIC DOCUMENTS REQUIRED - Duly filled up & signed application form - Invitation to bid &/or copy of the contract &/or agreement indicating the requirement for Standby LC - Promissory note in case of default - Letter format approved by our legal department STANDBY LETTERS OF CREDIT DIFFERENCE FROM COMMERCIAL LC: Does not call for documents evidencing shipment of merchandise Used more as a security, thus often expires unutilized BANK GUARANTEE A Bank Guarantee is a definite undertaking by the bank (guarantor) in favor of a receiver of goods or services, whereby it pledges to pay the beneficiary a certain sum of money within a specified period if the applicant (principal), who is the client of the bank, fails to pay or fulfill his obligations under a contract A guarantee involves a minimum of three (3) parties namely beneficiary, applicant and guarantor. As definition, Applicant is the bank’s client who applies for the issuance of the guarantee which covers a particular performance by him. Beneficiary is the one in whose favor the guarantee has been issued, who requires security against the risk of the applicant’s non- performance or default under a contract. Guarantor is the bank that issues the guarantee on behalf of the applicant. This bank is the applicant’s bank which is situated in the same place as the applicant. Governing Rule is URDG 758 SHIPPING GUARANTEE WHAT IS IT? It is an undertaking: - Issued by the bank at the request of the importer - Addressed to the carrier (shipping company) - Asking the carrier to accept the guarantee in place of an original bill of lading - To release the carrier of any legal consequences because he has released the goods w/o an original bill of lading. WHY DO WE HAVE IT? - The goods have arrived - The original bill of lading is not yet available - The importer wants the goods - The shipping company will not release the goods unless a bank issues a Shipping Guarantee  Issuing bank/PVB Importer/buyer In the absence of original shipping documents importer may apply for a shipping guarantee to be able to claim the goods. REQUIREMENTS FOR ISSUANCE Application form for shipping guarantee Undertaking of delivery of goods without original Bill of Lading Copies of the shipping documents Duly signed Trust receipt agreement Duly signed Draft Fire insurance policy TRUST RECEIPT The Bank allows the buyer to take the delivery of imported goods but retains the title to them. This arrangement allows the importer to acquire and sell goods without making payment under a Letter of Credit. The Buyer undertakes to hold the goods in trust for the Bank. With the execution of the TR Agreement, the buyer importer undertakes to: 1. Keep the goods or any part thereof insured to their full value. 2. Turn over to the bank the proceeds as soon as received to apply as payment for the TR. 3. Keep the goods, manufactured products or proceeds thereof, separate and capable of identification as property of the bank. 4. In case of non-sale, to return the goods covered by the TR to the bank upon its demand. TRUST RECEIPT LAW (Presidential Decree 115) CRIMINAL OFFENSE Goods are intended for resale. Goods that will be used as raw material for manufacture or processing with the purpose of ultimate sale Requirements for TR Booking: Duly signed TR Agreement Duly signed Draft Fire Insurance coverage for the goods IMPORTANT THING TO REMEMBER The BL must be consigned to Philippine Veterans Bank WHY TR? Bank owns the goods Short term Proceeds goes to the beneficiary Shows proof of business activity Criminal liability NON-LETTERS OF CREDIT These are mode of payments in International Trade other than Letters of Credit wherein business relationship between the Buyer and the Seller are more established and full trust and confidence have already been built. Documents against Payment (D/P) This is a mode of payment wherein supplier presents all the original documents to their banker abroad which sends the original shipping documents to buyer’s bank with the instruction to release the original shipping documents to buyer only upon payment of the draft. Bank acts as collecting agent. Documents against Payment (D/P) Documents against Acceptance (D/A) This is a mode of payment wherein supplier presents all original documents to their banker abroad which sends the original shipping documents to buyer’s bank with instruction to release the original shipping documents to buyer only upon its acceptance of the draft which will mature at a fixed future date. Documents against Acceptance (D/A) Open Account Arrangement (O/A) This is a mode of payment wherein the supplier directly sends the original shipping documents to buyer, payment at which shall be made at a fixed future date as agreed by the parties. Bank acts as remitting agent. Open account must be payable at least 30 days after shipment date. BSP now allows tenor of OA > 360 days. Open Account Arrangement (O/A) Direct Remittance (D/R) This is a mode of payment wherein supplier directly sends the Original shipping documents to buyer under the term “sight”. Bank acts as remitting agent. As prescribed by BSP, payment must be made within 29 calendar days from shipment date. Direct Remittance (D/R) Advance Payment (A/P) This is a mode of payment where seller requires payment, in whole or in part, in advance of shipment (e.g. made-to-order goods to finance production, special or custom-built equipment). Bank acts as remitting agent. EXPORTS All export shipments shall be covered by an Export Declaration using the prescribed form. AABs shall require submission, for record purposes. Two (2) Ways of Handling Export Documents: 1. Export Bills Purchased – a facility granted by the bank to the exporter/client by purchasing their export documents presented by advancing the funds to the beneficiary before the reimbursement is received from the Issuing Bank. 2. Export Bills for Collection – the drafts and documents are sent to the opening bank for payment. The bank will credit the exporter’s account upon receipt of payment from the buyer’s bank.  Export Cycle 8. Arrival of 4. Ships goods goods Importer/buyer Exporter/supplier 1. Apply LC 7. Release documents 5. Present 3. Nego bank documents will advise exporter Issuing Bank/FX Bank Advising/Confirming/ Negotiating Bank/PVB 2. Advise LC 6. Send documents ADVANCE / FINAL DUTIES It involves the payment of import/export duties and taxes due to the BOC for the release of goods. Payment Abstract Secure System 6 (PASS 6) is a secured Electronic facility/system that handles the settlement of Duties and Taxes. It is the system used by all Authorized Agent Banks (AABs). All stakeholders are required to enroll in PAS6 before doing any transaction. All payment made by client should be via debit to their maintained CASA (cleared funds) account. Procedure in Processing PAS6 transactions 1. Importer/Exporter opens and account with PVB 2. Enroll in PAS6 a) Fill out the PAS6 AAB Enrollment Form b) Provide Bureau of Custom Certificate of Registration 3. Submit documents to Trade Services 4. Bank issues an AAB Ref. No. (Authorized Agent Bank Number) and informs the Importer/Exporter 5. Broker can now lodge the import/export declaration in the e2m portal and this will be transmitted to the AAB via PAS6 6. Trade Services collects payment and confirms payment via PAS6 Remittance Channels: -Trade and International Operations Department - The team is responsible for timely and accurate implementation of Trade Finance and Remittance transactions in accordance with the established internal and external policies, rules and regulations, and agreed Service Level Agreement. ORGANIZATIONAL STRUCTURE