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its own particular issue is the financing of exports and imports. The fact is that the actual movement of money, related to income and expenditure, almost never occur at the same time, payments for goods and services usually occur a few months after placing the order on them and deliver goods or services.In the international business due to his involvement in a variety of factors, exposure to credit risk and the likelihood of its manifestation are increased. Because the time of delivery and communication between the parties increases, the time between placing orders and receipt of funds also significantly increased. Resolving the issues of increasing the credit period is also complicated by differences in legal systems and practices of the trade.
Find theoretical information about export and import financing ;
Analyze the information about export and import financing
Make a conclusion on the theme
1.4 Government guarantees and insurance
In many cases, the Government
concludes that in the interests of society should subsidize the export
of some sort. These public interest
could range from creating or preserving jobs and protect the industry,
working for export, to assist in economic development _me-it or ^ otsialiskhideskim
developed countries. The U.S. government has
developed a wide variety of institutions for promoting exports in cases
where private interest is not enough to carry out foreign trade.
Export-Import Bank has three objectives that serve U.S. interests. First, it is the guarantor
for the granting of loans to certain importers who buy American exports.Second,
in some cases, he offers such loans. And thirdly, it provides
financial grants to assist those exporters who have to compete in areas
where its competitors are subsidized.
Stock Corporation Private Export (FKCHE) is working with the Export-Import
Bank to provide financing of medium-and long-term export transactions. FKCHE sells long-term
bonds secured by guarantees of the Export-Import Bank and uses the proceeds
from these sales to long-term financing of exports of capital goods.
Association for the insurance of foreign loans (ASIK) provides subsidized
loans to exporters, and political risk insurance. Banks can get here an
insurance policy that helps them to authorize letters of credit for
foreign banks and importers, who are engaged in more risky trades. It also provides insurance
of bank service leasing the export of capital goods.
The main types of financing
In carrying out calculations by the export-import operations, the Bank may finance the operations of the company referred to by different instruments, using the credit limits of the Western partner banks. The main types of financing:
3.1 Documentary letter of credit
Letter of credit - is
money the bank's obligation to pay the seller for the goods a sum agreed
upon by contract, after will be presented documents proving the shipment
of goods and the corresponding mutual agreement between buyer and seller. The bank issuing the obligation
to make payment to the exporter or to ensure the implementation of payment
by another bank.
To carry out the letter of credit transaction to the client, as a rule,
you must provide a letter of credit through cash deposit or other collateral.
Buyer's documentary credits are advantageous in that it can attach conditions
to the seller and to minimize the risk of default provider of its obligations
to deliver the goods. Besides, he gets the goods,
using the bank's extensive experience in similar transactions. The seller on the other
hand can be sure that after sending the goods and the provision of all
documents in accordance with the terms of the letter of credit he gets
paid regardless of the buyer, because in this case, the bank pays.
Letters of credit are divided into the following categories:
revocable / irrevocable;
confirmed / unconfirmed;
transferable / transferable.
Irrevocable letter of credit can not be canceled before its expiry date
without the consent of the seller.
Revocable letter of credit can be canceled without the consent and even
without informing the seller. In practice, however,
such letters of credit are used very rarely, because do not give a guarantee
to the seller.
Confirmed Letter of Credit - a letter of credit on which the payment
obligation is not only the buyer's bank, but the seller's bank or a
third bank, added the proof.
Transferable letter of credit - a credit which by order of the mediator
(1st beneficiary) can be transferred to his bank in favor of the supplier
(2nd beneficiary). When transferring credit
1st beneficiary can be amended only in the following items of credit:
price and, accordingly, the amount of credit (down)
dates of shipment and expiry date of letter of credit (down).
Transferable letter of credit can not be translated.
The use of documentary credits in international payments is governed
by a special document - "Uniform Customs and Practice for Documentary
Credits» UCP-600, developed by the International Chamber of Commerce
(ICC) in Paris.
Rietumu ensure the implementation of both export (if the client - the
seller) and import (if the client - the buyer), credits for the sale
or purchase of goods from the client's business partner abroad.
3.2 International bank guarantee
Under the conditions of general globalization and
the rapid development of international trade and other forms of economic
cooperation between businesses from different countries, the importance
and relevance of international bank guarantees is constantly growing.
International Bond - is a tool that ensures the implementation of the
foreign partner contractor of its obligations under the contract and
allows you to balance the interests of the parties have entered into
international commodity-monetary or other economic relations. International
bank guarantees are made and issued in accordance with the Uniform Rules
established by the International Chamber of Commerce.
Under the provision of services to provide a bank guarantee, bank guarantee
on behalf of his client - the principal must pay the guarantee amount
to the recipient guarantees - the beneficiary, upon request, in case
of default by the principal contractual obligations. Depending on the
type of economic relationship between the principal and the beneficiary,
the distinguished performance guarantee, refund, maintenance, tenders,
customs and judicial guarantees.
On the mechanism of international payment bank guarantees are divided
into conventional and guarantees on-demand (unconditional). In the first
case, the beneficiary may request the amount of the guarantee, the guarantor
providing evidence of a failure to contractor of its obligations under
the contract. List of documents required to prove, should be specified.
An example of a conditional guarantee - standby letter of credit under
which the guarantor bank shall make payments under the condition of
providing justification: judgment for damages or bankruptcy of the principal
solutions of bilateral commissions, etc. According to the guarantee at
the request of the beneficiary is entitled to receive compensation for
the first written demand, without providing any supporting documents
and evidence.
On the mechanism of action is open and direct and indirect international
bank guarantee. Direct warranty is provided directly by the bank of the
principal, indirect, usually given by a bank selected by the beneficiary
on the basis of the bank's counter-guarantee of the principal.
International Bond - a document that contains a specific list of details
that reflect the essence of the transaction. The bank guarantee shall
contain: information about the contract, about which it is issued, the
warranty period (typically greater than the basic validity of the contract),
the guarantee amount and the currency in which it has to be paid, the
payment terms under warranty (on-demand or at the request against these
documents.) Can be specified as the method and place of payment and procedure
for resolving disputes. Regardless of the deadline, the guarantee may
be terminated at the written request of the beneficiary. Period of validity
of bank guarantee may be extended if necessary and with the consent
of the parties.
International bank guarantee shall be in writing and signed by authorized
representatives of the bank guarantee. In the case of implied warranty
in writing is also a counter-guarantee issuing bank.
For an international bank guarantee, the customer must contact the bank
with a statement of guarantee to provide documents as required by the
bank, an agreement on a bank guarantee and transferred to cover the
expense of the amount required for its issuance. After expiration of
the warranty in the absence of a beneficiary to demand payment, the
bank returns the principal amount of coverage.
3.3 Organization of international finance
The role of international organizations in developing financial sector among the countries over the world is realized in the recent years. In the same direction, the countries have adopted reforms process to develop their financial markets
3.4 Rre-export financing
This is a loan guarantee on principal and interest for export-related inventory and accounts receivable. The guarantee can be up to 90% of the lender’s loan amount to the exporter.
This is a valuable tool to increase exporters’ access to credit during the critical production phase prior to actual exports.
These guarantees are typically for one year or less, but in exceptional cases can be for up to 36 months.
The benefits for exporters under the pre-export financing are substantial:
Increase sales and profit
Expand collateral base:
Export-related inventory, including work in progress - as it supports instruments such as stand-by L/C and performance bonds
Export-related accounts receivables
The types of Exporters supported by these guarantees are:
Manufacturers
Trading companies
Wholesalers and distributors
Service companies
Eligible US Exporters
Goods must have at least 50% US content to guarantee the entire transaction
Exports must be manufactured in and shipped from the US
There should be a reasonable assurance of repayment; this is ascertained by:
Minimum of one year operating history
Debt service ability
Adequately capitalized relative to requested loan amount
CONCLUSION.
Importers and exporters are exposed to credit risk is much more than business, working only on the domestic market. This is due to time delays, costly information,and long distances. To reduce this risk has been developed quite an effectivesystem of letter of credit, from which derive their profits by saving on the scale of operations, and large multi-national banks that provide credit, the possibility offunding and associated currency exchan
List of used literature.