Lesson 1 - Subjects in Internatinal Trade

L/O/G/O
International Trade Finance

LESSON 1
THE SUBJECTS IN INTERNATIONAL
TRADE TRANSACTION
MFB & MBA. BÙI QUỐC KHÁNH

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7/4/2023 1
Contents
• Exporters.
• Importers.
• Freight forwarders.
• Warehousemen.
• Carriers.
• Insurers.
• Banks.
• Government agencies and international financial institutions.
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Exporters
 For customs purposes, the party who makes (Or on whose
behalf an agent or broker makes) the export declaration.
 The exporter is the party whom sells its goods to someone :
• In another country.
• In export processing zone (From outside, and vice versa).
• In duty free area (From outside, and vice versa).
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Exporters
 Export processing zone: a Customs area where one is allowed to
import plant, machinery, equipment and material for the manufacture
of export goods under security, without payment of duty.
 Type of free trade zone, set up generally in developing countries by
their governments to promote industrial and commercial exports.
These zones offer other incentives such as exemptions from certain
taxes and business regulations.
 Duty free zone: an area where goods can be imported or exported
without having to pay the tax that would normally be charged.
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Importers
 For customs purposes, the party who makes (Or on whose behalf an
agent or broker makes) the import declaration, and who is liable for the
payment of duties (If any) on the imported goods.
 Normally, the importer is named either as the consignee in the shipping
documents and/or as the buyer in the exporter's invoice
Note: the consignee is the entity who is financially responsible (the buyer)
for the receipt of a shipment. Generally, the consignee is the same as the
receiver.
If a sender dispatches an item to a receiver via a delivery service, the sender
is the consignor, the recipient is the consignee, and the deliverer is
the carrier.
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Freight forwarders
 A company that handles the tasks of preparing goods for transport for a
shipper.
 Freight forwarders usually provides a full range of services including:
• Freight consolidation. • Cargo insurance.
• Warehousing. • Filing of insurance claims
• Negotiating freight charges. • Booking cargo space
• Tracking inland transportation. • Preparation of shipping and export
documents.
Freight consolidation: service provided by a freight forwarder in which

several smaller shipments are assembled and shipped together to get
better freight rates and security of cargo (also called assembly service,
cargo consolidation)7/4/2023 6
Warehousemen
 Warehousemen perform a valuable service prior to
the shipment of goods and after their arrival at the
port of destination.
 As they are always holding goods belonging to a
third party it is essential that they meet stringent
security requirements, the most important of which is
that they should be completely independent.
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Carriers
 The party responsible for physically taking

product from one point to another.
 Goods may be transported in a number of
different ways and by several types of
carriers.
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Insurers
 The party to an insurance arrangement who undertakes to
indemnify for losses.
 An insurer is frequently an insurance company, and is also known
as an underwriter.
Insurance Claim: A formal request to an insurance company asking
for a payment based on the terms of the insurance policy.
Insurance claims are reviewed by the company for their validity and
then paid out to the insured or requesting party (on behalf of the
insured) once approved.
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Banks
 Provide a multitude of services to every operator in
the trade chain and for every stage of any
transaction.
 Including :
• Issuing bank.
• Confirming bank.
• Advising bank
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Issuing bank
 Buyer's or importer's bank which establishes a letter of credit :
 In favor of a beneficiary.
 Forwards it to an advising bank for delivery to the
beneficiary.
 And commits itself to honor demand drafts drawn by the
beneficiary against the amount specified in the letter of credit.
 Also called opening bank.
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Confirming bank
Bank in an exporter's country which guarantees that the
letter of credit established by the importer (For the benefit
of the exporter) will be honored once the conditions therein
are fully complied with.
The confirming bank (maybe the advising bank)
undertakes this responsibility on an arrangement (Called
confirmation) with the importer's bank which issued the
letter of credit (Called the issuing bank).
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Confirming bank
Confirming bank is defined as “the bank

that adds its confirmation to a credit
upon the issuing bank’s authorization or
request” . In most situations this would
be a bank in the country of the seller.
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Advising Bank
A branch or correspondent bank at or near the

domicile of the beneficiary, to which the
issuing bank either sends the LC, or a
notification that a LC has been issued, with
instructions to notify the beneficiary. The
advising bank advises the beneficiary of the
LC without engagement.
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Advising Bank
The advising bank usually also takes on other
roles in the transaction, such as :
• Accepting a bill of exchange by endorsing it.
• Paying the exporter on presentation of
documents (Also called adviser bank or
nominated bank).
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Nominated bank
Nominated bank is defined as “the

bank with which the credit is available
or any bank in the case of a credit
available with any bank” . In the case of
a DC, this would normally be the
advising bank.
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Negotiating bank
Usually the beneficiary’s bank which,

after satisfying itself that the documents
conform with the LC, agrees to
purchase the draft (pay the
beneficiary).
7/4/2023 17
Government agencies and
international financial institutions
 Government agencies.
• The ministry of foreign trade.
• The central bank.
• The customs.
 International financial institutions.
• IMF.
• WB.
• Multilateral development banks.
• International development agencies.
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• IMF: The International Monetary Fund is an organization of 188 countries,
working to foster global monetary cooperation, secure financial stability,
facilitate international trade, promote high employment and sustainable
economic growth, and reduce poverty around the world.
• Created in 1945, the IMF is governed by and accountable to the 188

countries that make up its near-global membership.
• The IMF’s fundamental mission is to ensure the stability of the international
monetary system. It does so in three ways: keeping track of the global
economy and the economies of member countries; lending to countries with
balance of payments difficulties; and giving practical help to members.
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• WB: The World Bank is a vital source of financial and
technical assistance to developing countries around the
world.
• WB provides low-interest loans, zero to low-interest
credits, and grants to developing countries. These support
a wide array of investments in such areas as education,
health, public administration, infrastructure, financial and
private sector development, agriculture, and
environmental and natural resource management.
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 Multilateral Development Banks are institutions that provide
financial support and professional advice for economic and
social development activities in developing countries.
 The term Multilateral Development Banks (MDBs) typically refers to
the World Bank Group and these four Regional Development Banks:
• The African Development Bank
• The Asian Development Bank
• The European Bank for Reconstruction and Development
• The Inter-American Development Bank Group
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L/O/G/O
Thank You!
7/4/2023 22

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L/O/G/O

International Trade Finance

MFB & MBA. BÙI QUỐC KHÁNH

Freight consolidation: service provided by a freight forwarder in which

 The party responsible for physically taking

Confirming bank is defined as “the bank

A branch or correspondent bank at or near the

Nominated bank is defined as “the

Usually the beneficiary’s bank which,

• Created in 1945, the IMF is governed by and accountable to the 188

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