IB0018- Export-Import FinanceIB0018- Export-Import Finance

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Spring 2012

Master of Business Administration - Semester 4

IB0018: “Export-Import Finance”

(4 credits)

ASSIGNMENT- Set 1

Marks 60

Note: Each Question carries 10 marks. Answer all the questions.

Q1. What methods are used for payment in international trade? Explain one of them in detail.

Answer : Consignment Purchase

Consignment purchase terms can be the most beneficial method of payment for the importer. In this method of purchase, importer makes the payment only once the goods or imported items are sold to the end user. In case of no selling, the same item is returned to the foreign supplier. Consignment purchase is considered the most risky and time taking method of payment for the exporter.

Cash-in-Advance (Pre-Payment)

Cash in Advance is a pre-payment method in which, an importer the payment for the items to be imported in advance prior to the shipment of goods. The importer must trust that the supplier will ship the product on time and that the goods will be as advertised. Cash-in-Advance method of payment creates a lot of risk factors for the importers.

In international trade, Cash in Advance methods of payment is usually done when-

Q2. Discuss the types of credits available under UCP.

Answer : Types of Letters of Credit

Types of Letters of Credit:

Traveler's letters of credit, which were commonly used in eighteenth century, were the first financial instrument contains very similar characteristics with the contemporary letters of credit. From traveler's letters of credit days to today's complex global economy, the letters of credit have been performing their duties as a secure and reliable payment method. Actually, during this period letters of credit have gained a

.

Q3. List out the details which should be contained in the collection Instruction.

Answer: DATA ELEMENT COLLECTION INSTRUCTIONS

Details each of the Early Childhood Education and Care National Minimum Data Set data elements relevant to the National Early Childhood Education and Care Collection, including detailed collection instructions for both unit record level and aggregate collection methodologies.

A user guide or user's guide, also commonly

Q4. Explain various types of commercial invoice.

Answer : The types of international trade invoices

In international trade, for different purposes using different invoices, the invoice different names for different types of invoices, Drawing-up should be strictly in accordance with the letter of credit requirements. Common types and Drawing-up the invoice as follows:

    (1) Commercial Invoice: If the L / C provisions INVOICE (Invoice), COMMERCIAL INVOICE (commercial invoice), SHIPPING INVOICE (

Q5. Discuss FEDAI rules regarding negotiation of documents under credit.

Answer : Export Bills Purchased/Negotiated/Discounted

1)      Foreign currency bills when purchased/negotiated/discounted shall be at the Authorised Dealers’ bill buying rate on that day or at the contracted rate. Interest for the transit,usance,grace period where applicable shall be recovered simultaneously. (Also refer to our Special Circulars No. 2643/NTP/SPL-18/86 dated 27th May 1988).

2)      For bills remaining unpaid for a period of 30 days after the transit period in case of demand bills and the due date in case of usance bills, the foreign currency amount shall be reversed from the “export bills purchased portfolio” on the 30th day by the Authorised Dealer. In case 30th day happens to be holiday, or

Q6. What are the RBI guidelines regarding packing credit finance?

Answer : INTRODUCTION

The exporter on receipt of the Letter of Credit / Confirmed Order, approaches the bank for necessary finance. Normally the export financing is done at two levels viz. At the time of Pre-shipment and at the time of Post-shipment.

EXPORT FINANCING

Spring 2012

Master of Business Administration - Semester 4

IB0018: “Export-Import Finance”

(4 credits)

ASSIGNMENT- Set 2

Marks 60

Note: Each Question carries 10 marks

Q1. Distinguish between pre-shipment finance and post shipment finance.

Answer : Per shipment finance

Pre-shipment is also referred as “packing credit”. It is working capital finance provided by commercial banks to the exporter prior to shipment of goods. The finance required to meet various expenses before shipment of goods is called pre-shipment finance or packing credit.

Q2. Explain import financing under foreign credits.

Answer : For making Indian Companies globally competitive, EXIM bank seeks to provide foreign

           currency loan for import of eligible capital goods under available lines of credit.

           Only the Indian companies who qualify under term lending programmers of EXIM bank are

           eligible to obtain the above mentioned fiancé for importing eligible capital goods against

           available lines of credit. The list of available lines of credit can be obtained from the EXIM

           bank itself.

Q4. Describe the purpose of setting up EXIM Bank.

Answer : Export-Import Bank of India is the premier export finance institution of the country, established in 1982 under the Export-Import Bank of India Act 1981.

Exim Bank is managed by a Board of Directors, which has representatives from the Government, Reserve Bank of India, Export Credit Guarantee Corporation of India, a financial institution, public sector banks, and the business community.

Ø  The Bank's functions are segmented into several operating groups including:

Ø  Corporate Banking Group which handles a variety of financing programmes for Export Oriented Units (EOUs), Importers

Q5. Distinguish between for faiting and factoring.

Answer : Forfeiting and factoring are services in international market given to an exporter or seller. Its main objective is to provide smooth cash flow to the sellers.

Definition of Forfeiting

The terms forfeiting is originated from a old French word ‘forfait’, which means to surrender ones right on something to someone else. In international trade, forfeiting may be defined as the purchasing of an exporter’s receivables at a discount price by paying cash.

Q6. Explain Commercial and Political Risks covered under ECGC Policies.

Answer : In order to provide export credit and insurance support to Indian exporters, the GOI set up the Export Risks Insurance Corporation (ERIC) in July, 1957. It was transformed into export credit guarantee corporation limited (ECGC) in 1964. Since 1983, it is now know as ECGC of India Ltd.

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