International Marketing Narrative Essay Example

packing credit facility, exporters must provide the bank with certain documents as evidence. These include a formal application requesting the release of packing credit and an undertaking to submit relevant shipping documents to the bank within the specified time limit.

The text describes the requirements for a firm order, letter of credit, or message exchange between the exporter and the buyer. It also mentions the need for a license from GIFT if the goods fall under restricted or cannibalized categories, or if they are subject to quotas. The confirmed order from the overseas buyer should include their full name and address, the goods' description, quantity and value, destination port, and payment deadline.

The different stages of packing credit are also discussed. Before extending credit facilities, banks must appraise and sanction limits by considering factors such as product profile, political and economic details of the country involved, and the prospective buyer's credit report. Additionally, the bank ensures that the exporter is a regular customer with a good reputation in the market and possesses the necessary licenses, permits, or quotas required. The bank also checks if the exporter wants to do business with a country on the Restricted Cover Countries list.Disbursement of Packing Credit Advance - After the documents are sanctioned, the bank checks if the exporter has fulfilled the earlier mentioned comments. Disbursement is allowed when all the documents are properly executed. In some cases, when the exporter is unable to provide the export order when availing packing credit, the bank offers a special facility called Running Account Packing. When disbursing, the bank specifically examines certain particulars in the submitted documents such as the buyer's name, commodity to

be exported, quantity value (CIFS or FOB), last date of shipment/negotiation, and any other terms to be complied with. The amount of finance is determined based on the FOB value of the contract or the domestic values of goods, whichever is lower. Insurance and freight charges are usually considered later, when the goods are ready to be shipped. Disbursements are made in stages, if possible not in cash. The duration of packing credit is determined by the time required by the exporter for processing of goods, with a maximum period of 180 days. The bank may provide a further 90-day extension at its own discretion without referring to RIB (Risk Identification Bureau).The exporter must provide a stock statement to the bank, containing all the necessary information about their stocks. This statement serves as a guarantee for securing the packing credit in advance. The bank determines the rate at which these stocks should be submitted.

To convert the pre-shipment credit into post-shipment credit, the packing credit advance must be liquidated using the export proceeds from the relevant shipment. If the export does not occur, the entire advance can still be recovered, with interest.

RIB has allowed for some flexibility in this regulation, allowing banks to permit substitution of commodity or buyer without referring to RIB. This means that the packing credit advance can be repaid using proceeds from exporting the same or a different commodity to the same or a different buyer. However, the bank must ensure that this substitution is commercially necessary and unavoidable.

If the borrower fails to repay the packing credit by the due date, it is considered overdue by the bank. In such cases, the

bank takes necessary steps to recover its dues following normal recovery procedures.Authorized dealers are allowed to offer Pre-shipment Credit in Foreign Currency (FCC) to exporters, providing them with credit in foreign currency at competitive rates. This enables exporters to purchase raw materials after fulfilling their export orders. The interest rate on FCC is linked to the London Inter-bank Offered Rate (LABOR). The exporter has the freedom to avail FCC in convertible currencies such as USD, GBP, EUR, JPY, etc. However, the risk of cross currency truncation lies with the exporter. The sources of funds for banks to extend FCC facility include Foreign Currency balances, Earner Foreign Currency Account (EFFECT), Resident Foreign Currency Accounts RFC(D), and Foreign Currency(Non Resident) Accounts. When exporters receive direct payments from abroad through means like cheeses or drafts, the bank may offer export credit at a reduced rate until the proceeds from the cheeses or drafts are realized. The banks must ensure that the proceeds are related to an export order. Post Shipment Finance is a type of loan provided by a financial institution to an exporter or seller against a shipment that has already been completed.This type of export finance is granted from the date of extending the credit after shipment of the goods to the realization date of the exporter proceeds. Exporters don't wait for the importer to deposit the funds.
Basic Features
Post-shipment finance is meant to finance export sales receivable after the date of shipment of goods to the date of realization of exports proceeds. In cases of deemed sports, it is extended to finance receivable against supplies made to designated agencies. A post-shipment finance is provided

against evidence of shipment of goods or supplies made to the importer or seller or any other designated agency. Post -shipment finance can be secured or unsecured.
Since the finance is extended against evidence of export shipment and bank obtains the documents of title of goods, the finance is normally self liquidating. As a quantum of finance, post-shipment finance can be extended up to 100% of the invoice value of goods. In special cases, where the domestic value of the goods increases the value of the exporter order, finance for a price difference can also be extended and the price difference is covered by the government. Post-shipment finance can be of short terms or long term, depending on the payment terms offered by the exporter to the overseas importer.
In case of cash exports, the maximum period allowed for realization of exports proceeds is six months from the date of shipment.The concession rate of interest is available for a maximum period of 180 days, starting from the date of surrendering the documents. Normally, the documents should be submitted within 21 days from the date of shipment. This financing option is offered for various types of exports, including physical exports, deemed exports, and capital goods and project exports. For physical exports, the finance can be given to either the actual exporter or the exporter in whose name the trade documents are transferred. For deemed exports, the finance is provided to the supplier of the goods that are supplied to designated agencies. In some cases, finance is extended in the name of overseas buyers for capital goods and project exports, and the money is directly disbursed to

the domestic exporter. There are different types of post-shipment finance options available, such as export bills purchased/discounted, export bills negotiated, advance against export bills sent on collection basis, advance against export on consignment basis, advance against indrawn balance on exports, and advance against claims of Duty Drawback. Export bills (Non L/C Bills) used in indisputable international trade transactions can be discounted or purchased by banks, with proper limits sanctioned to exporters for the purchase of export bill facility. The issuing bank ensures payment.The risk can be further minimized if a bank pays the LLC and confirms it, as this method inherently provides security. Banks are often willing to offer financing against bills under LLC due to this level of security. However, this presents two significant risks for the banks: the risk of nonperformance by the exporter, resulting in the issuing banks not honoring the letter of credit, and the documentary risk where the issuing bank refuses to fulfill its commitment. Therefore, it is imperative for both the negotiating bank and the lending bank to carefully review all necessary documents before submission. Bills can only be sent on a collection basis if there are discrepancies with bills drawn under LLC. In some cases, exporters may request bills to be sent on a collection basis in anticipation of a strengthening foreign currency. Depending on the transit period for EDP Bills and the transit period plus issuance period for issuance bills, banks may allow advances against these collection bills to exporters at a preferential interest rate. It is important to note that the transit period starts from the date of acceptance of export documents at the bank's branch

for collection, not from the date of advance.

Bank financing may be provided for exports on a consignment basis, where the exporter bears the risk of sale and payment by the consignee. The bank instructs the overseas bank to release the documents only against a trust receipt or undertaking from the consignee to deliver the sale proceeds by a specified date, which should be within the prescribed timeframe. In certain trades, an advance bill for part of the estimated value may be drawn against the exports.

Banks commonly finance against the indrawn balance in export transactions, which is a small portion of the payment withheld for adjustments due to variations in rates, weight, quality, etc. The financing is subject to a maximum of 10 percent of the export value and is based on the normal level of indrawn balance in the specific line of export. The exporter must provide an undertaking to surrender the balance proceeds of the shipment within a stipulated time from the due date of payment or the date of shipment, whichever comes earlier.

Financing is also available for claims of duty drawback, which is a discount given to exporters in their own country. Duty drawback is granted if the in-house production cost is higher compared to international prices.

Exporters can receive financial support from banks to help them succeed in international markets. This support is granted in the form of advances with lower interest rates for a maximum of 90 days. However, these advances are only given if the exporter also receives other types of export finance from the same bank. After shipping their products, exporters submit their claims along with relevant

documents to government authorities. These claims are processed and the eligible amount is disbursed, with the bank authorized to receive the claim amount directly from the government authorities. ICC Banks provides Export Finance services to assist with cash flow in your business, offering both pre-shipment and post-shipment credit. Pre-shipment finance, known as Export Packing Credit, allows for funding of raw materials, import costs, processing, and packing of goods for export. Post-shipment credit supports export sales receivables from the point of shipment until the export proceeds are realized. ICC Bank offers post-shipment credit through Export Bill Negotiation.

The ICC Bank Edge provides competitive rates of interest and offers services such as negotiation, payment or acceptance of export documents under letter of credit, and document scrutiny to ensure compliance with LLC terms and conditions. They also arrange forfeiting of export bills drawn under LLC at competitive rates without recourse to the exporter.

Fund-based working capital products, such as cash credit, overdraft, bill discounting, short-term loans, and export financing, provide the necessary funds for businesses. Non-fund based facilities, on the other hand, include letters of credit and bank guarantees.

With ICC Bank's Letter of Credit, businesses can guarantee timely and correct payments from their buyers. This service allows easy interaction even with companies where there is limited experience or uncertainty about their credit history. ICC Bank offers two types of Letter of Credit: Sight LLC, which requires immediate payment upon presentation of necessary documents, and Issuance LLC, which allows payment on a specified future date after acceptance of presented documents.

The ICC Bank Edge offers quick sanctioning and issuance of services at competitive prices. The issuance period can

extend up to 180 days, and assessment is based on a parameterized model.

ICC Bank LLC offers the option to avail their services with a 100% cash margin in the form of Fixed Deposits. Additionally, ICC Bank LLC provides services with a cash margin of 25%-35% and 100% security in the form of residential property or liquid assets. The bank holds the first charge on current assets.
ICC Bank offers Bank Guarantees with minimal requirements and a quick processing time. These Bank Guarantees are also available in foreign currency for approved purposes as defined under FEM. The maximum tenor of guarantee is 18 months, valid for a maximum of 10 years. Bank Guarantees can also be issued with a cash margin of 25% and collateral security in the form of residential property or liquid assets. Bank guarantees in foreign currency are available against credit limits or 100% cash margin.
For fund-based exports, ICC Bank provides pre-shipment finance in the form of Export Packing Credit (EPIC) to meet working capital needs during the manufacturing process for export. They offer Export Packing Credit in both rupee and foreign currency at competitive rates.
Exporters can ensure timely delivery by insisting that their export Letters of Credit are advised through ICC Bank. They can also benefit from the credit strength of ICC Bank for confirmation of export Letters of Credit received from other foreign banks.ICC Bank offers confirmation services to eliminate risks associated with foreign banks and countries in export collections. By adding their confirmation to the Letter of Credit, ICC Bank assures payment, subject to non-discrepant documents, even if the LLC opening bank fails to pay. They also provide

purchase discounting of export bills for exports not covered under a Letter of Credit. Against sanctioned credit limits, they offer immediate payment of the discounted value of the invoice upon shipment, with the proceeds credited to the account if the export documents are presented before the cut-off time at an ICC Bank branch. ICC Bank provides competitive rates in both rupee and foreign currency, along with world-class service standards. They also negotiate export bills under a Letter of Credit if the documents strictly comply with the Letter of Credit conditions. Forfeiting, which involves discounting receivables without recourse on a fixed rate basis, is offered when the exporter sells goods on credit terms and the importers' bank provides a guarantee for the export receivables.This service allows you to fund activities that would not have otherwise been possible. By concentrating your Documentary Collection activities with ICC Bank, you can eliminate many exporting hassles. Not only will your international banking become more uniform, but you can also experience fewer delays in receiving payment, effortlessly access collection information details, gain increased control over export achievable, and have efficient cash flow management.

ICC Bank can provide financing for export on a consignment basis, where goods are exported at the exporter's risk for sale and eventual payment of sale proceeds to them by the consignee. This service covers the financing and collection of account receivables in domestic and international trade. It is an ongoing arrangement between the client and Factor (ICC Bank), where the client assigns the receivables to the Factor. By obtaining immediate payment of the invoices from the Factor, the company's cash flow is improved. Additionally, the involvement of Factor

minimizes credit risk on the buyer.

A Bank Guarantee is a guarantee issued by a banker that ensures reimbursement in case of a specific event occurring or non-occurring as stipulated in the contract.The bank evaluates the creditworthiness and business capacity of its clients in order to issue various types of bank guarantees, such as Financial Guarantees, Performance Bank Guarantees, and Deferred Payment Guarantees. These guarantees can be issued against Cash Margin and Mortgage of Immovable Properties.

When a buyer wants to purchase goods from an unknown seller or importer wants to import goods from an unknown exporter, they can seek assistance from banks in these transactions. Based on the buyer's creditworthiness, the bank issues a Letter of Credit addressed to the supplier or exporter. With this letter, the supplier or exporter can confidently supply or export goods to the unknown buyer or importer, knowing that they will be paid on the strength of the Letter of Credit issued by a reputable bank.

After the goods are supplied, the buyer or importer presents a Signed Invoice along with the Letter of Credit to their bank. The bank then directly makes payment to the seller or exporter. The process is as follows: the buyer and seller agree to conduct business, the seller requests a letter of credit for payment guarantee, the buyer applies to their bank for a letter of credit in favor of the seller, and the buyer's bank approves the credit risk and forwards the credit to an advising bank (usually located in the same geographical location as the seller) for authentication and forwarding to the seller.

The seller ships the goods and then verifies and prepares the

necessary documents to support the letter of credit. The specific documentary requirements may vary depending on the perceived risk associated with the company. The seller presents the required documents to the advising or confirming bank for payment processing. The advising or confirming bank reviews the documents to ensure they comply with the terms and conditions of the letter of credit. If the documents are correct, the advising or confirming bank will claim the funds by debiting the account of the issuing bank.

The advising or confirming bank will wait for the issuing bank to remit payment after receiving the documents. They may also reimburse another bank as required by the credit. The advising or confirming bank will then forward the documents to the issuing bank. The issuing bank will review the documents for compliance and, if in order, debit the buyer's account. Lastly, the issuing bank forwards the documents to the buyer.

An EFFECT Account, also known as Exchange Earners' Foreign Currency Account, is a foreign currency account maintained with an Authorized Dealer dealing in foreign exchange. It provides various benefits.

The facility offered to foreign exchange earners, such as exporters, allows them to deposit all of their foreign exchange earnings into an account. By doing so, they eliminate the need to convert foreign exchange into Rupees and vice versa, which in turn reduces transaction costs. This has become especially relevant as Indian exports have seen a remarkable growth in sectors like software, biotechnology, gems, jewelry, textiles, and more. Consequently, there has been a notable increase in inward remittances.