Table Of ContentCGT Intl Trade Fince_aw:Layout 1 2/5/08 14:23 Page 1
Intended for use by anyone involved in international sales, finance, shipping and
administration, The Handbook of International Trade and Finance provides a ful THE HANDBOOK OF
explanation of the key finance areas of international trade – including risk
management, international payments and currency management. It is an essential
reference source that will help you to reduce risks and improve cashflow, identify
the most competitive finance alternatives, structure the best payment terms, and
minimize finance and transaction costs.
Coverage includes information on:
• trade risks and risk asesment; Trade and
• methods of payment;
International
• bonds, guarantees and standby letters of credit;
• currency risk management;
• export credit insurance; Finance
• trade finance;
• structured trade finance;
The Complete Guide to Risk Management, International
• terms of payment.
Payments and Currency Management, Bonds and Guarantees,
Designed for all businesses, regardless of size and business sector, the book also
describes the negotiating process from the perspectives of both the buyer and the Credit Insurance and Trade Finance
seller – giving you valuable insight into the complete financing process.
Anders Grath has over 25 years’ experience in international trade and finance
within major European financial institutions, as head of both international
departments and corporate units. For many years he has organized educational
seminars for a number of banks and trade councils. He is also the author of a
series of similar titles on individual markets, including the United Kingdom and the
Scandinavian countries.
£35.00
US $70.00
ISBN: 978-0-7494-5320-6
Kogan Page Kogan Page US
120 Pentonvile Road 525 South 4th Stret, #241 ANDERS GRATH
London N1 9JN Philadelphia PA 19147
United Kingdom USA
www.koganpage.com Business and management
T HE HANDBOOK OF INTERNATIONAL TRADE AND FINANCE ANDERS GRATH
CGT Int'l Trade Finance TP:Layout 1 30/4/08 12:54 Page 1
THE HANDBOOK OF
I nternational
Trade and Finance
The Complete Guide to Risk Management, International
Payments and Currency Management, Bonds and
Guarantees, Credit Insurance and Trade Finance
ANDERS GRATH
London and Philadelphia
Publisher’s note
Every possible effort has been made to ensure that the information contained in this book is
accurate at the time of going to press, and the publishers and authors cannot accept responsibility
for any errors or omissions, however caused. No responsibility for loss or damage occasioned
to any person acting, or refraining from action, as a result of the material in this publication can
be accepted by the editor, the publisher or any of the authors.
First published in Great Britain in 2005 by Nordia Publishing Ltd for The Institute of Export as
International Trade Finance
Published in Great Britain and the United States in 2008 by Kogan Page Limited as The
Handbook of International Trade and Finance
Apart from any fair dealing for the purposes of research or private study, or criticism or review,
as permitted under the Copyright, Designs and Patents Act 1988, this publication may only be
reproduced, stored or transmitted, in any form or by any means, with the prior permission in
writing of the publishers, or in the case of reprographic reproduction in accordance with the
terms and licences issued by the CLA. Enquiries concerning reproduction outside these terms
should be sent to the publishers at the undermentioned addresses:
120 Pentonville Road 525 South 4th Street, #241
London N1 9JN Philadelphia PA 19147
United Kingdom USA
www.koganpage.com
© Anders Grath, 2005, 2008
The right of Anders Grath to be identified as the author of this work has been asserted by him in
accordance with the Copyright, Designs and Patents Act 1988.
ISBN 978 0 7494 5320 6
British Library Cataloguing-in-Publication Data
A CIP record for this book is available from the British Library.
Library of Congress Cataloging-in-Publication Data
Grath, Anders, 1943–
The handbook of international trade and finance : the complete guide to risk management,
bonds and guarantees, credit insurance and trade finance / Anders Grath.
p. cm.
Includes index.
ISBN 978-0-7494-5320-6
1. International trade. 2. International finance. I. Title.
HF1379.G725 2008
382– –dc22
2008010589
Typeset by JS Typesetting Ltd, Porthcawl, Mid Glamorgan
Printed and bound in Great Britain by Bell & Bain Ltd, Glasgow
Contents
Preface vii
Acknowledgements/Disclaimer ix
Introduction 1
1 Trade risks and risk assessment 9
International trade practices 9
Product risks 14
Commercial risks (purchaser risks) 18
Adverse business risks 20
Political risks 22
Currency risks 24
Financial risks 26
2 Methods of payment 29
Different methods of payment 29
Bank transfer (bank remittance) 32
Cheque payments 40
Documentary collection 42
Letter of credit 47
Counter-trade 65
3 Bonds, guarantees and standby letters of credit 69
The use of bonds and guarantees 69
Common forms of guarantee 76
Demand guarantees 80
Standby letters of credit 83
The structure and design of guarantees 85
iv CONTENTS __________________________________________________________
4 Currency risk management 89
Currency risk 89
The currency markets 91
Currency exposure 95
Hedging currency risks 98
Practical currency management 105
5 Export credit insurance 109
A mutual undertaking 109
The private sector insurance market 112
Export credit agencies 116
Investment insurance 123
6 Trade finance 125
Finance alternatives 125
Pre-shipment finance 127
Supplier credits 130
Refinancing of supplier credits 134
Buyer credits 141
The international money market 145
7 Structured trade finance 149
International leasing 149
Lines of credit and local currency finance 154
Project finance and joint venture 155
Multilateral development banks 158
8 Terms of payment 163
Terms of payment and cash management 163
Contents of the terms of payment 164
Structure of the terms of payment 168
Composite terms of payment 172
The final design of the terms of payment 174
Glossary of terms and abbreviations 177
Index 193
Index of advertisers 198
THIS PAGE INTENTIONALLY
LEFT BLANK
v
THIS PAGE INTENTIONALLY
LEFT BLANK
vi
Preface
This handbook was originally published more than 20 years ago, and has since been
updated in new editions. It has also been published as separate country-specific
editions in several European countries where it has become a reference handbook for
companies, banks and other institutions involved in international trade, irrespective of
their size or the nature of their business.
However, for practical reasons it would not be possible to cover more than a
handful of countries in this way, and for some time I have been considering doing a
completely new and country-neutral edition that could be marketed in most countries
involved in international trade around the world. The only drawback is that it is not
feasible to describe the specifics for every country; on the other hand, the basic aspects
of international trade, payments and finance are almost the same all over the world,
and that is the foundation for this new handbook.
There is great advantage in being able to combine this basic description with
numerous references to places where country-specific information in a number of
areas can be found. This information is readily available from internet sites from a
variety of domestic institutions in most countries. Therefore it has been possible to
create a situation where this book provides the foundation but readers from all over
the world can add all the detailed and country-specific information they require. There
is another big advantage in such an approach, namely that the basics of this handbook
should be relatively stable over time, whereas detailed information from local and
domestic institutions will certainly change over time; however, these changes will be
constantly communicated through local internet services.
Even though new editions have been published in different countries over the
years, they have all been based on the same concept: their practical nature. They
contain no theoretical elements, just information based on the author’s almost 30
years of payment and finance experience gained from managerial positions as head of
international departments in a number of European banks. Those in such positions are
necessarily involved in thousands of trade transactions each year, and the advice and
comments given in this book are based on that experience.
viii The HANDBOOK OF INTERNATIONAL TRADE AND FINANCE ________________________
I am very pleased with this new international edition now published by Kogan Page,
and feel confident that it will become the reference handbook of choice in numerous
countries around the world, for many years to come. It will certainly be of significant
benefit to all international traders in the daily work of expanding their businesses or
when entering new global markets, but the book will equally be used in trade education
and within the international departments of commercial banks and other trade-related
institutions around the world.
Acknowledgements/
Disclaimer
The author would like to thank the companies, banks and other institutions that have
contributed with support, advice and comments when creating this book; however,
the author is solely responsible for the views, illustrations and recommendations
expressed.
While every care has been taken to ensure the accuracy of this work, no responsi-
bility for loss occasioned to any person or company acting or refraining from action as
a result of any statement in it can be accepted by the author or publisher.
