Basics Of Trade Operations Training Slide PDF

BASICS OF TRADE OPERATIONS  Introduction To International Trade Introduction To International Trade ❑ What is International Trade? ▪ This is the exchange of goods and services between countries/individuals in different countries. ▪ It exists because no single country can produce all its need...

BASICS OF TRADE OPERATIONS  Introduction To International Trade Introduction To International Trade ❑ What is International Trade? ▪ This is the exchange of goods and services between countries/individuals in different countries. ▪ It exists because no single country can produce all its needs. ▪ All countries rely on trade for survival. It could be export or import of physical goods, technology or services ▪ The seller’s main goal is to ensure that the buyer is able to pay. ▪ The buyer’s main goal is to ensure that the seller is able to deliver the goods. ▪ Globalization has made the world a village! Modes of Payment In International Trade International Trade Import Export Commercial Visible Non Export. Letter of Credit Invisible Commercial. Bill for Collection. Letter of Credit. Open account. (Remittances). Bill for Collection Export. Advance Payment. Advance Payment,. etc Introduction To International Trade (Cont’d) ▪ International trade starts with an agreement (sales contract) between a buyer and seller. ▪ The Sales Contract will contain the following among others: ✓ Product - type, quality, quantity, packaging, etc. ✓ Terms of Sale – Credit or Cash sales ✓ Payment Mode – LC, Collection, Open account, etc ✓ Time of delivery – Shipment date ✓ Mode of transport – Land, Air or Sea ✓ Currency of Payment ✓ Port of Loading and Discharge Sales Contact may be in form of: Formal Agreement Pro-forma Invoice Purchase Order SWIFT messages E-mails Telephone calls Introduction To International Trade (Cont’d) ❑Barriers to International Trade ▪ Natural Barriers ✓ Language ✓ Multiple currencies ✓ Geographical distance ▪ Trade Barriers ✓ Tariff - Customs duties, levies etc ✓ Non Tariff – licenses, quota, embargo, subsidies, currency devaluation. etc Introduction To International Trade (Cont’d) ❑Restrictions in International Trade To prevent adverse balance of trade which may negatively affect Balance of payment To protect local industries, employment creation, prevention of dumping, health hazards, environmental pollution, etc - Socio-economic reasons Political reasons as dictated by the foreign policies of the country (International & national sanctions e.g. OFAC) Conservation of foreign exchange earnings of the country Security reasons - Internal security Introduction To International Trade (Cont’d) ❑ Who can Participate in International Trade? The following can participate in International trade as either importer, exporter or intermediary: ✓ Individuals, Companies, Parastatals, Governments, None-Profit organizations, Churches, etc. ❑ International Trade Intermediaries ✓ Banks are the major intermediaries in International Trade through the use of SWIFT (Society for Worldwide Interbank Financial Telecommunication). ✓ Other intermediaries are Shipping Companies, Port Authorities, Airlines, Clearing Agents, Inspectation Agents, Customs Authorities, International Chamber of Commerce, Courts of Arbitration for Trade, Maritime Bureau, etc. Introduction To International Trade (Cont’d) ❑ Why Are Banks Needed In International Trade? The buyer needs the bank: The seller needs the bank: To act as intermediary party in To act as intermediary party in handling funds between the handling funds between the buyer and the seller buyer and the seller To process documents as per To process documents as per regulations regulations To provide finance/credit To provide finance/credit To protect buyers from To protect sellers from fraudulent sellers fraudulent buyers To facilitate payments (because To facilitate payments (because the bank has access to SWIFT) the bank has access to SWIFT) To provide advisory services on To provide advisory services on transaction dynamics transaction dynamics Because of it’s credit worthiness For the government: To handle documentations with ease To provide accurate records To help revenue collections such as tax and custom duties To provide information on customer as banks carry out KYC Benefits of International Trade to UBA Trade transactions are regulated, short tenured and Repeated. The bank is sure of constant income and boost to its balance sheet because the transactions results to: ✓ Generating inflow in local currency or/and FCY ✓ Locking the customers transactions with bank ✓ Incomes in fees and commissions ✓ Retaining customers and winning new ones ✓ Getting referrals from satisfied customers ……. and thereby achieving target. Benefits of International Trade to UBA ❑ Major Income Lines From Trade Transactions Commission on Transaction processing – Letters of Credit, Bills for Collection and Invisible payments FX Income – FX Spread, etc Interest Income – Interest on loan to importer/exporter Float Income – Float income on deposits till day of use COT @ N3/mille on N158m = 0.5m Management & Commitment fees on trade loans DDA average N100m (30 days @ 12%) = 1.0m Fees for Forms approval if any Others – amendment and discrepancy fees Benefits of International Trade to UBA Document, Establishment and Processing fees Commissions Loan Interest & fees. Grow Income DDA & Float Spread International trade = Multiple Income Streams Risks of International Trade ❑ Country Risk Events in buyer’s or seller’s country that may affect: ✓ payment by the buyer to the seller; or ✓ supply of goods or services by the seller to the buyer Country risk comprises political, social and economic components and includes: ✓ Exchange control regulations ✓ Changes in government policies ✓ Trade embargoes ✓ Lack of or shortage in foreign currency supply especially for countries where their currencies are not internationally convertible or traded ❑ Commercial Risk Buyer Risk – Buyer’s ability to pay seller for reasons other than country risk or “act of God” (Force Majeure) Seller Risk - Seller’s ability to supply the correct quality and/or quantity of goods at the right time for reasons other than country risk Bank Risk or “act of God” (Force Majeure) ✓ A bank’s ability to settle its debts for reasons other than country risk or “act of God” (Force Majeure Risks of International Trade (Cont’d) ❑ Transaction Risk Things that may go wrong due to the transaction dynamics ✓ Sales Contract incomplete or incorrect ✓ Incorrect structuring of the Documentary Credit or Collection that does not tie up with the sales contract ✓ Insurance cover of goods are not adequate ✓ Performance risk of third parties such as: o Warehousing agent o Haulage/transport companies o Inspection companies o Shipping companies, forwarding and clearing agents o Customs departments o Third party suppliers of goods  International Trade Transaction Initiation Transaction Initiation – Form M ❑ Basic Documents E-Form M One original Proforma Invoice E-Insurance Certificate A copy of relevant & valid permit (SON product Cert. and NAFDAC are online) Additional requirement for LC Duly completed LC application form (if LC) with N50.00 postage stamp and signatures duly verified Customer's request for foreign exchange / bid letter duly verified for cash covered LCs Required approvals if Unconfirmed or ITF (CAT/CACOM) Transaction Initiation – Form M LC Credit Memo : This is an internal document required for cash backed LCs to enable Trade determine source of funding. The document is issued by the Business Office of the customer to specify whether the LC is fully funded by customer, partially or fully funded by the Bank. Transaction Initiation – Form M ❑ DIFFERENT PERMITS REQUIRED FOR FORM M PROCESSING SONCAP Product Certificate/SON Import Permit – for industrial and household items. NAFDAC Certificate/NAFDAC Import Permit - For Food, Drugs & Chemicals PHCN Clearance (Nigeria Electric Regulatory Commission Permit -NERC) - for Importation of Generating Sets.  Transaction Initiation – Form M Federal Department of Fisheries approval for importation of fish. Department of Petroleum Resources (DPR) Certificate - for importation of Petroleum Products. DEPOT License on ownership of a storage facility or Through put Agreement where the storage facility belongs to a 3rd party. NESREA Certificate- National Environmental Standards and Regulation Enforcement agaency for importation of used items. Retention of Premises Certificate - for Pharmaceutical products Annual License to Practice – for Pharmaceutical products Police Permit for arms/ammunitions/explosives Plant Import Permit Federal Ministry of Agriculture permit for importation of agricultural materials Transaction Initiation – Form M Validity Plant, General Machinery& Merchandise Equipment Initial Validity 360 Days 720 Days Extension By Bank 180 Days 360 Days Further Extension As approved by the CBN Note! Shipment must not predate Form M acceptance date! A Form M is deemed cancelled if no shipment had taken place on the Form after ✓ 2years for importation of general merchandise ✓ 5years for importation of capital goods (Plant & Machinery) Form M –Document flow Order Importer shipment(4) Supplier Goods Shipped (5) Form M (1) Rejection NCS/Entry point Authorised dealer Register (2) accept accepted (3) Nigeria Custom Services Modes of Payment in International Trade Modes of payment in international trade ❑ Clean payment ❑ Documentary Collection ❑ Letters of Credit Clean payment Clean payments are modes of payment in international trade characterized by trust. This mode of payment have little or no security of payment or performance when executed. The risk level are quite high. In clean payments transactions, all shipping documents including title documents are handled directly by the trading parties. The role of banks under this payment mode is limited to movement of fund where necessary Modes of payment in international trade ❑ Clean payment can be divided into two types 1.Advance payment 2. Open Account Advance Payment : This payment mode requires that the importer sends funds to the beneficiary first and expect goods to be sent afterwards Open Account: On this payment mode, the exporter sends goods first to the importer and trust the importer to make payment when goods have been received. e.g. 30, 60, days etc from shipment date or sometimes at the convenience of the buyer Payment Mode – “Advance Payment” ❑ ADVANCE PAYMENT What is the Risk? 1. Commercial risk - seller may not ship goods. Seller has both the goods and the money 2. Seller may not ship right quality/quantity of goods 3. Seller’s country may prevent shipment to take place 4. Country risk - buyer’s country may prevent payment in advance for imported goods by changing their law 5. Additional costs and/or losses may be incurred if goods are manufactured before payment is received from the buyer When to use Advance Payments: ❖ Buyer ✓ The buyer has absolute trust that the seller will ship the right quality and/or quantity of goods ❖ Seller ✓ New relationship or a history of problems in the relationship between buyer and seller ✓ Country risk of the buyer is unacceptable ✓ Seller is not able to provide credit to the buyer Payment Mode – “Open Account” ❑ OPEN ACCOUNT This is an arrangement between the Buyer and the Seller whereby the Buyer will pay the Seller after the Buyer received the goods e.g. 30, 60, days etc from shipment date or sometimes at the convenience of the buyer Seller bears the Commercial risk of buyer - Buyer has both goods and money - Country risk of buyer’s country - Delays in payment by the buyer Buyer may have difficulty to enforce Contract of Sale in event of non- performance by the seller - Lack of control over shipment dates ❑ When to use Open Account: ✓ Well-established relationship between buyer and seller ✓ Buyer must be financially sound ✓ Country risk of buyer’s country must be minimal ✓ Seller must be able to provide credit to the buyer Payment Mode – “Bills for Collection” ❑ Documentary Collections (Bills for Collection) ❖ This provides a compromise between open account and payment in advance ❖ Used by sellers to obtain payment from buyers through the international banking system ❖ Banks only release documents to the buyer upon acceptance of a term bill of exchange or upon payment of the amount owed ❖ Offers the seller a degree of security, provided all documents of title are sent through the banking system ❖ Banks act as intermediaries and control the goods through the documents of title Uniform Rules for Collections (URC), ICC publication number 522 defines a collection as: Handling of documents in accordance with instructions received in order to: ✓ Obtain payment and/or acceptance, or ✓ Deliver documents against payment and/or acceptance Payment Mode – “Bills for Collection” ❖ Features of a Bills for Collection Transaction It does not have the commitment of any bank to pay supplier. The seller is taking the risk of the buyer by extending a trade credit It is therefore not as secured as Letter of Credit. It is mainly used by parties who have good business relationship or related companies. The banks become liable only when they fail to carry out instructions as stated on the collection order/bill of exchange Payment is usually made on receipt of the documents or at an agreed future date Payment Mode – “Bills for Collection” ❖ Parties to a Collection Transaction Principal/Drawer – Party entrusting the handling of the collection to a bank - Seller/Exporter The Remitting Bank – Bank which the drawer entrusts his documents - Seller’s bank The Collecting Bank – Bank that makes payment on the collection at the instruction of the drawee – Buyer’s bank Drawee – The party on whom presentation is made on – Buyer/Importer. Payment Mode – “Bills for Collection” ❖ Types of Collection The payment clause in the Collection order, contract of sale and in the quotation may refer to one of the following types of collection: i. Against Payment – Documents released after payment by the importer. ii. Acceptance or irrevocable written undertaken – Documents released once importer signs the bill of exchange in accordance with their account mandate. iii. Free of Payment – Documents released without any obligation on bank. iv. Avalized – Documents released to importer after a bank has guaranteed payment of the bill. Payment Mode – “Bills for Collection” ❖ Documents Required for Payment in a Collection Transaction The following documents will come from the offshore bank: i. Transport Documents - Bill of Lading/Airway bill/Way bill ii. Commercial Invoice iii. Packing list iv. Manufacturer’s Certificate/Chemical Analysis v. Certificate or Origin vi. Bill of exchange/Letter of undertaking vii. Bill history or Collection order Payment Mode – “Bills for Collection” ❖ LIABILITY OF BANKS UNDER A BILL FOR COLLECTION TRANSACTION Banks have no liability under a collection transaction. However a bank may be liable if any of the follow happens: A. Deliver documents contrary to collection order: Deliver Sight documents without payment by the Drawee Deliver documents to a wrong party Deliver Sight documents on Acceptance Deliver documents on Acceptance without endorsement of the Bill of Exchange by authorized signatory Make payment on BFC to a wrong Remitting Bank Deliver documents that requires Avalization on Acceptance only B. OTHERS Delay delivery of documents to Drawee – importer claims demurrage for such delays Remit BFC proceeds contrary to local Exchange Regulations Placing outstanding Shipping documents in non-security areas Where the BOE is drawn on the bank Transaction Cycle for BC Form M (2) Endorse docs (6) Presenting/Collecting Drawee/Applicant/Buyer Or Applicant Bank Submit ECD+Bid req. (7) Agreement (1) Remit (8) Document (5) Ship (3) Payment (9) Drawer/Beneficiary Remitting Bank Or Seller Documents (4) Payment Mode – “Letter of Credit (LC)”. ‘Any arrangement, however named, or described, that is irrevocable and thereby constitutes a definite undertaking of the issuing bank to honor a complying presentation’ (UCP600 – ICC publication) Payment Mode – “Letter of Credit (LC)” ❑ A commitment given by a Bank, (Issuing Bank) at the request of a Buyer (Applicant), to pay the Seller (Beneficiary) of goods, services or performance a certain amount of money provided the Beneficiary conforms with the specified terms and conditions contained in the Credit within the prescribed period of Time. Features: ▪ Irrevocable - can only be amended or cancelled with the consent of issuing bank, beneficiary and confirming bank, ▪ The beneficiary is guaranteed payment by the issuing bank (and confirming bank) if all the terms and conditions are complied with ▪ Can be made payable at sight or at a future date Payment Mode – “Letter of Credit (LC)” ▪ Satisfies the requirements of both buyer and seller: ✓ The buyer knows payment will only take place if the terms and conditions of the Credit are complied with; ✓ The seller knows he will be paid provided he complies with the terms and conditions of the Credit ▪ Governed by the International Chamber of Commerce’s Uniform Rules for Documentary Credits, UCP 600 ▪ Other payment methods tend to favour either the buyer or the seller. ▪ LCs strike a good balance in satisfying the needs of both buyer and seller. It is for these reasons that LCs are considered the safest and most convenient means of payment for international trade transactions Payment Mode – “Letter of Credit (LC)” ❖ Parties to a Letter of Credit Applicant: Party on whose request the LC is issued Beneficiary: Party in whose favour the LC is issued Issuing Bank: The bank that issues the LC Advising Bank: Informs beneficiary that LC is issued at the request of issuing bank Confirming Bank: A bank that adds its definite undertaking to honor complying presentation Negotiating (Nominated) Bank: Pays/purchases complying presentations drawn on another bank. It is any bank with which the credit is available. Payment Mode – “Letter of Credit (LC)” ❖ LC STRUCTURES/TYPES LCs are structured to meet the requirements of the underlying contract between the importer and exporter. The LC request can come under any of the following: ✓ Red Clause Credit ✓ Back to Back LC ✓ Revolving LC ✓ Transferable LC ✓ Standby LC ✓ Local LC ✓ Deferred Payment Payment Mode – “Letter of Credit (LC)” ❖ Types of LCs (Cont’d). ▪ Red Clause LC ✓ A credit that authorizes the advising bank to provide the exporter a pre- shipment finance before presentation of shipping documents ✓ Maximum amount to be paid must be specified ✓ Bank may ask for bank guarantee/performance bond from offshore bank ▪ Back-To- Back LC ✓ These are two independent letters of credit that relate to the same merchandise ✓ It is issued against the security backing of another LC (master LC wherein the master LC is used as a sort of collateral) and reimbursement will stem from documents presented on the master LC ✓ Beneficiary of the first LC is usually a middle man ✓ Issuing bank of the second LC has an obligation to pay under it Payment Mode – “Letter of Credit (LC)” ❖ Types of LCs (Cont’d). ▪ Revolving LC ✓ This automatically reinstates after each drawing or upon receipt of authorisation (amendment) from issuing bank with limits as to duration and amount involved (cumulative or non cumulative) ✓ Usually used between the buyer and seller where goods have to be shipped on continuous basis. ▪ Transferable LC ✓ A letter of credit that permits beneficiary to transfer all or some of the rights and obligations to a second beneficiary or beneficiaries ✓ The transferees cannot subsequently transfer their credit ✓ Permissible Changes: Amount, Quantity, Unit price, Shipment date, Validity and Period of presentation Payment Mode – “Letter of Credit (LC)” ❖ Types of LCs (Cont’d). ▪ Standby LC: This is a written undertaking given by a bank at the request of a customer, to pay the beneficiary a certain amount of money in the event of the customer being in breach of its contractual obligations ✓ It is a Credit used as security to cover applicant’s contractual obligations to beneficiary ✓ The Standby LC is realizable on presentation to the issuing bank of a declaration that a named party has not fulfilled the contract. ✓ Simply put, the SBLC is a guarantee for non performance of a contract and can be issued to guarantee payments on: ✓ Equipment Leasing & Loans ✓ Open account shipment & Unconfirmed LC ✓ Collections & Upfront payment, etc. ▪ Local LC : Letter of credit transaction which begins, progresses and concludes within the same country, with all parties in same country. Its usually denominated in the local currency. ▪ Deferred Payment: This is a credit that allows a customer to utilize credit from a supplier for a specified period. The tenor usually starts from shipment or Invoice date (90days from BL date or 60days from invoice date). Though this involves a foreign credit line, the issuing bank of the LC is liable in case of default by the customer. Payment Mode – “Letter of Credit (LC)” ❖ Confirmed and Unconfirmed Credits Confirmation ▪ This means a definite undertaking of a bank, in addition to that of the issuing bank, to honour or negotiate a complying presentation ▪ Confirmation is the commitment of a bank nominated by the issuing bank to pay beneficiary upon presentation of complying documents ▪ Beneficiary may rely solely on the bank which has added its confirmation ▪ If the confirming bank is a bank in the beneficiary’s country: ✓ beneficiary can deal with a bank in its own country ✓ then no country risk from beneficiary’s point of view ▪ If credit is available with confirming bank, proceeds can be discounted ▪ However the debt obligation of the issuing bank is not waived Confirmation may be added by: Customer’s own funds LCY Loan FCY loan Payment Mode – “Letter of Credit (LC)” ❖ Confirmed and Unconfirmed Credits (Cont’d) Confirmation is usually requested because: ▪ the country risk of the issuing bank is not acceptable to the beneficiary ▪ the commercial risk of the issuing bank is not acceptable to the ▪ beneficiary ▪ the beneficiary prefers dealing with and relying on a bank in the beneficiary’s own country as: ✓ payment is usually effected more speedily as the Credit is payable at the counters of the confirming bank. ✓ There is no waiting period for the documents to be forwarded to the issuing bank before payment is effected ▪ It is easier to discount the proceeds ▪ The confirming bank is irrevocably bound to honour or negotiate as at the time it adds its confirmation to the credit Payment Mode – “Letter of Credit (LC)” ❖ Confirmed and Unconfirmed Credits (Cont’d) Unconfirmed Credits An unconfirmed Credit is advised to the beneficiary by the advising bank without adding its own independent undertaking to make settlement or accept responsibility for payment. The beneficiary relies solely on payment being effected by the issuing bank hence takes both the country risk and the issuing bank’s commercial risk Issuing bank has a debt obligation to beneficiary and must pay upon compliance Customers enjoy this after a credit approval by the bank This is a contingent liability that crystallizes once shipment is made and complying presentation made by beneficiary Payment Mode – “Letter of Credit (LC)” ❖ Confirmation Line/Clean Line ▪ This is the confirmation of a LC using the offshore line of the bank at the request of a customer subject to internal credit approval ▪ This implies that customer will not purchase foreign exchange to cash cover the LC at the point of opening. ▪ The credit line given to the issuing bank by the confirming bank but extended to the customer at a fee (Confirmation fee). ▪ If confirmed, when payment to the beneficiary is due, it is made by the correspondent bank and a loan booked against the bank (in favour of its customer) which the customer repays at the maturity of the facility. ▪ Importer may purchase foreign currency needed for the payment at documents presentation instead of asking for FCY loan to be booked.  Payment Mode & Risk Profile EXPORTER Risk decline Risk of Non Payment Open Account – No risk for importer - High Risk for Exporter Documentary Collections - Less Risk for importer - High Risk for exporter Documentary Credit - Less Risk for both importer & Exporter Advance Payment - No Risk for Exporter - High Risk for the importer IMPORTER Risk decline Risk of non delivery.  Different Transaction dynamics under Letter of Credit Letter of Credit Unconfirmed Deffered or at Sight Confirmed UnLC (IMP) Via Line Usance Via Cash backed LC (ITF) line May be Confirmed Customer + Customer only By Correspondent Issuing Bank Bank Payment LC (IMP) LC (IFF) only Confirmation Confirmation + Usance line line Transaction Cycle (Import LCs) Applicant Form M & LC Application 2 Issuing/Opening Bank Documents 9 3 L/C Advise Documents Agreement 7 1 Ship Goods 5 L/C Advise 4 6 Documents Payment 8 Beneficiary Advising Bank  Trade Shipping Documents Handling Shipping Documents Handling ❑ The following documents are required for payment under a Letter of Credit: i. Transport Documents - Bill of Lading/Airway bill/Way bill ii. Commercial Invoice iii. Packing list iv. Manufacturer’s Certificate/Chemical Analysis v. Certificate of Origin For Petroleum Products In addition to Clean/Shipped on Board Bill of Lading: ❑ Final Invoice ❑ Certificate of Quality/Inspection detailing petroleum product specifications ❑ In case of purchase from mother vessel, photocopy of the Bill of Lading of Mother Vessel is required Note: The above documents are presented after shipment of goods has been effected. Shipping Documents Handling Please note It is a requirement by Central Bank of Nigeria that at least one original bill of lading and one original copy each of the documents received and the Bill History/Bill of Exchange are retained by the issuing bank. Shipping Documents Handling “…a bank will only accept a clean transport document. A clean document is one bearing no clause or notation expressly declaring a defective condition of goods or their packaging’’ Missing Documents … In case of missing endorsed shipping documents, the bank will retrieve another Original Bill of Lading or Copy of Airway bill from the file and endorse to the customer provided the following are presented; 1. Police report 2. Letter of indemnity 3. Sworn affidavit. View image detail Final Exchange Control Documents Exchange Control Documents (ECDs) ❑ … are the evidence that goods imported, entered the country through any of the Ports (Sea or Air) and cleared by the Customs Service. ❑ They are issued by the Nigerian Customs Service and Nigeria Ports Authority. ❑ The importer must submit them to the bank where the Form M for the import was opened within ninety days of release of endorsed Shipping documents. Exchange Control Documents (ECDs) ❖ Exchange Control Documents (ECDs) comprise of the following: ✓ Single Good Declaration Form SGD (ASYCUDA) or Bill of Entry ✓ Terminal Delivery Order or Tally sheet for Seaport or Gate Pass in case of goods received through Airport ✓ Payment Schedule ✓ Used Pre Arrival Assessment Report (PAAR) ✓ Assessment Notice. ❑ SGD Form The SGD Form must be stamped “Valid for Exchange” (for LC/BC) and signed by the authorized signatory of Nigerian Customs at the port of entry. It shows the item of import, name of importer, Form M number, amount of duty paid, etc. Exchange Control Documents (ECDs) ❑ Tally Sheet/Gate Pass Issued by the Nigerian Ports Authority at the Seaport or Airport of entry of the goods to the town. It shows that the goods have been collected by the importer. This has been replaced with Exit Note based on the CBN Circular of 19th April 2017. ❑ In line with CBN regulations, ECDs should be submitted to the bank ninety (90) days from the date of releasing endorsed documents to the importer. ✓ Where a customer fails to submit ECDs within the stipulated period, the bank reports the customer to CBN via our monthly returns in the prescribed format. Exchange Control Documents (ECDs) - Processing On receipt of ECDs from the customer, the bank: ❑ ensures the ECD belongs to the bank’s customer through the Form M authorized dealer code – 033 on the SGD Form. ❑ verifies the Customs signature on the ‘Valid for Exchange’ stamp from the Nigeria Customs Service mandate file. ❑ inputs the ECDs received into the system for update. ❑ files the ECDs in the respective L/C files and where they are for B/C the documents are passed for Remittance processing. Invisible Payments Invisible Payments (Form A) ❑ Invisible transactions are qualified services that are payable from the official sources of fund. ❑ Documentations required are according to CBN Policy and Foreign Exchange manual ❑ It is initiated on completion of Form A and inclusion of the required supporting documents. Some Common Invisible Transactions I. Payment of School Fees & living allowances II. Payment of Subscription, course and training III. Payment for Aircraft lease, Charter, Rental IV. Foreign Loan Repayment V. Technical Management and Consultancy Service Fees VI. Personal Home Remittance VII. Payment for Medical Services VIII. Business and Personal travels IX. Repairs and Maintenance of vessels, aircrafts, machines X. Air tickets (net sales) ❖ Payments are subject to prescribed documents per country Exports Export Processing ❑ Documents Required Commercial Form e-NXP to be completed on CBN tradesystem.gov.ng Proforma Invoice Nigeria Export Promotion Council (NEPC) Certificate (Valid for one year) Open an Export Domiciliary Account (New customer) Certificate of Incorporation (New customer) Non Commercial Form NCX – in 3 copies (triplicate) Proforma Invoice or Packing list, showing the number of items, quantity and approximate naira value. Example include samples, machine or equipment shipped out for repairs Export Documentation ❑ Final Documents Required After Shipment Bill of Lading Certificate of Origin Commercial Invoice Single Goods Declaration (SGD) Nigerian Export Proceeds (NXP) Form Clean Certificate of Inspection (CCI) Packing List CBN REQUIREMENTS FOR EXPORT TRANSACTIONS The shipping documents for export must be routed through the processing bank for onward dispatch to the importer offshore; (however we require that copies of such documents should be forwarded to the bank for our records whereby the originals are dispatched directly by the exporter). Photocopies of NXP forms endorsed and stamped by the Nigeria Custom Service evidencing shipment should be submitted to the bank within one week of endorsement. Export proceeds must be repatriated within 90days and 180 days of shipment for Oil and Non-Oil Export respectively into the customer’s dedicated export domiciliary account number. (No other funds may be received into this Export Domiciliary account other than proceeds of NXPs/advance payment on exports).  CONTINUATION……. Proceeds less than 95% of declared value is to be accompanied with a letter and documentary evidence on the shortfall. Reference number of your NXP form must be stated on payment advices, also bills of Lading for all commercial exports from Nigeria must reflect the Form ‘NXP’ number of the underlying cargo. Consequently, any exporter that defaults in the repatriation of export proceeds within the stipulated period shall be barred from accessing all banking services including access to the foreign exchange market. And one last thing……. ! Watch those Documents!!! Thank You