PRESENTATION

 Course: International Financial Management

 (MSBA-2nd Semester)
 Prepared by: Mian Shabir Hussain

 Presented To: Prof. Muhammad Imran Sb

 Presented by:
Mian Shabir Hussain
Muhammad Nadim
H. M. Iqbal
H. M. Imran
INTERNATIONAL
TRADE
ROLE OF BANKING
SECTOR
DOCUMENTS USED
International trade is the exchange of goods
and services across international boundaries or
territories. In most countries, it represents a
significant share of GDP. While international
trade has been present throughout much of history
its economic, social, and political importance has
been on the rise in recent centuries.
 Industrialization,
advanced transportation,
globalization, multinational corporations
outsourcing and specially Financial Institutions
(Banking sector) are all having a major impact.
Increasing international trade is basic to
“Globalization”.
ROLE OF BANKING
SECTOR TO PROMOTING
INTERNATIONAL TRADE
WHY INVOLVEMENT OF BANK IN
INTERNATIONAL TRADE IS
INEVITABLE?

 It is impossible to be in international trade without involving

your bank for all the services they provide such as advice on
financial issues and the potential risks involved.

 A free trade or market economy can only function if those

who supply goods and services are assured payment; and in
return, those who pay receive goods and services.

Contd……
 This seemingly obvious statement gains considerable
complexity international trade, particularly when geo-political
borders representing separate economies at varying stages of
market systems development are involved.

 The non-convertibility of a multitude (large number) of

currencies in today's world market still represents a serious
barrier to the free flow of goods in international trade.

Contd……
 A critical hurdle of SMEs is the lack of information on
international trade processes, documentation and banking
procedures necessary to carry on with business abroad.

 For result oriented and cost effective international trade, these

organizations need access to accurate and timely information
and a sound knowledge of banking.
 ROLE OF BANKS
Banks play a crucial role in helping to overcome hurdles in
international trade and perform the following functions in
promotion of trade:
 International banking system

 Speed International Payment Transfers

 Bankers Share Expertise

 Facilities to Exporters and Importers

TYPES OF FACILITIES FOR
EXPORTERS

 Rupee Export Credit (pre-shipment and

post-shipment)
 Pre-shipment Credit in Foreign Currency

 Negotiation of Bills under L/C

 Export Bill Rediscounting

 Bank Guarantees
TYPES OF FACILITIES FOR IMPORTERS
 Letterof Credit
 Collection of Import Bills

 Financing of import

 Bank Guarantees

 Remittances

 Forex & Treasury Services

 Resident Foreign Currency A/Cs

 Correspondent Banking Services

DOCUMENTS USED
IN INTERNATIONAL
TRADE
CLASSIFICATION OF
DOCUMENTS
a. Commercial documents
b. Official documents
c. Insurance documents
d. Transport documents
e. Financial and financing documents
A. COMMERCIAL DOCUMENTS:
 Invoice

 Certificateof origin
 Weight notes or certificates

 Packing List

 Quality or Inspection certificate

INVOICE
 An invoice is a commercial document issued by a seller to a
buyer, indicating the products, quantities and agreed prices for
products or services with which the seller has already provided
the Buyer. An invoice indicates that, unless paid in advance,
payment is due by the buyer to the seller, according to the
agreed terms. Invoices are often called Bills.
TYPES OF INVOICE
 Proforma Invoice:
It is a memorandum of the terms of a contract of sale wherein the seller
gives the quotation to the potential buyer. If the buyer approves its terms, he
sends a definite order for supply. Such an invoice is marked with the word
“Proforma Invoice”.

 Commercial Invoice:
A commercial invoice is a bill for the goods from the seller to the buyer.
Commercial invoice are utilized by customs officials to determine the value
of the goods in order to assess customs duties and taxes.

 Certified Invoice:
An invoice bearing a signed statement by someone in the importer’s country
who has inspected the goods and found that the goods are in accordance
with the specific contract of the proforma and that the goods are of a
specific country of origin.
CERTIFICATE OF ORIGIN

It is a specified document certifying the country of origin of

the merchandise required by certain foreign countries for
tariff purposes. This certificate is issued by Chamber of
Commerce, Trade Association or any other authorized body
of the exporting country and it sometimes requires the
signature of the consul of the country to which it is
designed.
WEIGHT NOTES OR CERTIFICATES

This certificate indicates the weight of the goods

issued by a public agency. It can be evidenced by
means of a separate document, or by a weight
stamp/declaration of weight superimposed on the
transport document by the carrier or his agent.
PACKING LIST

The exporter must prepare a packing list showing

description of items, number of containers/boxes with
specification of net weight & gross weight etc. to
enable the importer of the goods to check the
shipment.
 QUALITY OR INSPECTION
CERTIFICATE

This is a certificate declaring that the goods have been

examined and found to be in accordance with the contract
of sale. It is signed by the manufacturer or supplier or
any recognized independent inspection body as required
by the importer.
B. OFFICIAL DOCUMENTS
 Consular Invoice: It is an invoice made out in a specially printed
form of the exporter and is shown before the consul of importing
country stationed in the exporter’s country as being correct in all
respect. The consular of the importing country then certifies the
invoice. A consular invoice enables the importer country to have all
accurate record of the merchandise shipped.

 Legalized Invoice: Some Middle East countries require that the

commercial invoice should be countersigned and stamped by the
authorized officer in their Embassy or the consulate in the exporter’s
country instead of consular invoice.

Contd….
 Black-listed Certificate: Under this certificate, the exporter has to
provide a Black-listed certificate evidencing that all parties involved
including the bank and shipping line are not black-listed. Due to
strained political relation or any other reasons some countries do not
allow transactions with some particular countries. These countries and
the exporters are treated as Black-listed.

 Health, Veterinary and Sanitary Certificate/Photo Sanitary

Certificate, Certificate of Analysis: This certificate is generally
needed in purchase of foodstuff, hides and livestock and in the use of
packing materials. It is issued by the recognized health authorities in
the exporting countries. The certificate confirms that the shipment
meets the required health, veterinary and sanitary standards.
 C. INSURANCE DOCUMENTS
 There are some risks of damage, loss or destruction of goods during
the time of transit. Marine Insurance plays a very vital role in this
respect. The scope of Marine Insurance extends to Sea, Land and
Air conveyances only in respect of good from one country to
another country or one place to another place with short distance
through the vessel, craft which the goods are carried or conveyed.
Marine insurance comprises of the following:
 Marine Cargo Insurance
 Marine Hull Insurance
 Freight
 TYPES OF MARINE INSURANCE
POLICIES
There are various types of marine insurance policies, which differ in
respect of the cover provided to the insured. The main types are as
follows:
 Floating policy: A floating policy is a contract of insurance means to
cover a number of shipments, the details of which are not finalized when the
insurance contract is concluded. Under the floating policy, insurance cover is
given in general terms and details of shipments are declared subsequently and
endorsed in the policy.

 Time policy: It covers the subject matter of insurance for a period of

time.

 Voyage policy: It insures the subject matter from one place to

another irrespective of the length of time taken.
 Mixed policy: It covers both a voyage and a period of time
exceeding 30 days.

 Open cover or Blank policy: This policy is automatically covers

all the shipments of the exporter up to an estimated amount during a
given period.

 Specific policy: A specific policy is a contract of insurance, which

covers a specific shipment.

 Valued policy: A valued policy is one, which specifies the agreed

value of merchandise insured.

 Unvalued policy: In this type of policy, the value of the

merchandise insured is not specified. The insurable value of the goods
is ascertained later on subject to the limit of the sum insured.
D. TRANSPORT DOCUMENTS:

These documents indicates that the goods, which are delivered to the
named shippers, airlines or transporters, must be carried to a named
port, airport or place of delivery. Following transport documents are
being used at present in the international trade:
 Airway Bill/Air consignment Note
 Mate’s Receipt
 Bill of Lading
 Railway consignment Note/Railway Receipt
 Roadway Bill
 Post Parcel Documents
 Airway Bill/Air consignment Note: This document confirms the
delivery of goods to an airline or its agent for transportation by air to a
named consignee according to the defined and agreed terms.

 Mate’s Receipt: It is a prima facie evidence of the quantity and

condition of the goods received. When the goods are delivered to the
shipping company for transportation, at first a temporary receipt is issued
by the ship’s Chief Officer acknowledging the delivery of the goods
alongside the carrying vessel which is known as Mate’s Receipt. On the
basis of Mate’s receipt, the shipper has to pay the port dues and other
charges.
 Bill of Lading: A bill of lading is a document which is issued y the
transportation carrier to the shipper acknowledging that they have
received the shipment of goods and that they have been placed on board
a particular vessel which is bound for a particular destination and states
the terms in which these goods received are to be carried.
Normally a bill of lading contains the port of shipment and of
destination, the name of consignee, the number, contents and
identification marks of the goods shipped and the amount of freight
“paid” or “to pay”.

The bill of lading serves three main purposes,

1. as a document of title of the goods
2. as a receipt from the shipping company and
3. as a contract for transportation of the goods.
 Railway consignment Note/Railway Receipt: When the exporter
or his agent delivers a consignment to the railway authorities for its
onward carriage to a named destination, they issued a receipt,
indicating the details of the consignment and destination to which they
would carry it. This document is called the Rail Consignment Note or
Railway Receipt.

 Roadway Bill: It is an internationally approved document of

transaction when goods are being sent by road through the countries
that had ratified the CMR (Convention Merchandise Routers).

 Post Parcel Documents: It is a receipt issued by Post Office for the

parcel. The post office has received for direct delivery to the addressee.
It is not a document of title of goods and generally contains the post
office stamp.
E. FINANCIAL AND FINANCING
DOCUMENTS

There are some documents used for payment in

international trade transaction such as:

 Letter of Credit
 Bill of Exchange
 Promissory Note
 Trust Receipt
Thank you