Route planner for your global trade - International business Corporate Banking
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Route planner for your global trade International business Corporate Banking
Building bridges, opening doors Internationalisation can provide important stimuli for company growth. However, expanding your horizons beyond national borders can often lead to unfamiliar terrain, with its own special legal requirements and its own traditions. For this reason, if you want to take advantage of the opportunities offered by foreign busi- ness while reducing your exposure to the related risks, you need a partner who is familiar with foreign markets, who can open doors and offer professional sup- port for the financial development of your foreign business operations. To achieve that, Commerzbank offers experienced specialists to support you in all areas of international business. We are the market leader in the management of German foreign trade. In 2013, no other bank settled more letters of credit opened in favour of German exporters. Based on decades of experience and recognised expertise, Commerzbank has de- veloped highly efficient solutions for your cross-border business. You can access our services both through personal consultations and with convenient and time-saving tools at www.commerzbank.com/corporatebanking (Corporate Banking Portal). The innovative online services we offer include cross-border payment transactions, for- eign exchange trading and processing of letters of credit, collections and guarantees. Commerzbank is represented in the business and finance centres in more than 50 coun- tries via our network of branches, subsidiaries and representative offices. In addi- tion, Commerzbank can support your cross-border business through our International Desk, which is the coordinating interface between our branches at home in Germany and those in Asia, Western Europe, Eastern Europe and North America.
Contents I 03 Contents International payments: 04 Fast, efficient, transparent Documentary business: 05 Our precision ensures your security Foreign exchange business: 07 Understanding foreign currencies Structured Export & Trade Finance: 09 Supporting your foreign trade business
04 I International payments
International payments:
Fast, efficient, transparent
Success in international business requires efficient, reliable and
transparent processing of payment transactions that goes beyond
bank and national borders. Commerzbank has precisely aligned
its portfolio of services to meet those requirements.
Electronic solutions have widely replaced the
use of paper-based payment orders. Whether
you process your payment transactions with
electronic banking software, via SWIFT
(Society for Worldwide Interbank Financial
Telecommunication) or using our Corporate
Banking Portal, Commerzbank offers the right
solutions.
At the same time, you benefit from Commerzbank’s
international presence and network of about
5,000 correspondent bank connections
worldwide – for example, if you wish to open
decentralised local accounts for your branches
and subsidiaries abroad while still retaining
centralised control to optimise interest rates.
Commerzbank’s cross-border, interbank cash
pooling solutions provide the ideal solution in
this area.
You can find more detailed information in
our “Liquidity management with clockwork
precision. Cash management and payments”
brochure, which can be obtained from your
Commerzbank contact.Documentary business I 05
Documentary business:
Our precision ensures your security
In addition to political borders, there can also be thousands of
kilometres between you and your supplier. We provide you with
the payment and security instruments you need: letters of credit,
collections and guarantees.
Your Commerzbank documentary business for your customers or suppliers, we will be
specialist will be happy to advise you, in a happy to help you by issuing a guarantee and
face-to-face meeting, about which security vouching for you on the basis of our inter
instrument will be most effective in your nationally respected name. Commerzbank
specific case. Are you confident enough of offers you a full range of different guarantees –
your client’s motivation and solvency to use a from bid bonds to advance payment guar-
documentary collection? Or do you need the antees and delivery or performance bonds,
security you get from a letter of credit with through to contract fulfilment, warranty and
a definite payment undertaking from the payment guarantees.
issuing bank – if necessary, supplemented
with a confirmation from Commerzbank? Electronic support via Web Trade Services
Whether letters of credit, collections or guar-
Even once you have made your choice, it is antees, Commerzbank’s Corporate Banking
almost always the case that further questions Portal will help you get the complexity of your
and uncertainties will arise during the sub- foreign and guarantee business reliably under
sequent processing of the transaction. The control. The internet-based application Web
experience that our specialists can offer you Trade Services offers numerous options for
is invaluable in these instances, as even minor processing your foreign documentary busi-
errors or lapses in concentration – for example, ness; for example, allowing you to easily and
in the letter of credit documents – can result quickly order, amend and manage your guar-
in a letter of credit losing its guaranteed antees, import letters of credit and collections.
payment function. You can also manage export letters of credit
online. You can find more information in our
Unlike collections or letters of credit, a guar- “Providing the right impetus. Web-based and
antee is generally not a payment but a security software-based banking” brochure, which can
instrument. If you need to provide security be obtained from your Commerzbank contact.06 I Documentary business
Handling syndicated guarantees online involved, Commerzbank is pleased to offer you
Commerzbank Online Guarantee System the full-service solution Commerzbank Docu-
is one of the market’s leading online plat- ment Service to support you in successfully
forms. It allows the client and the banks completing your foreign business transactions.
participating in the syndicate to efficiently You are free to instruct our specialists to con-
manage guarantee facilities, which are used duct all or part of your documentary business
to issue a large number of guarantees. As on your behalf, as you prefer.
an agency tool, the Commerzbank Online
Guarantee System is able to provide all par- top@doc:
ties involved with a completely up-to-date the expert information service
overview of the drawings under the facilities, In our quarterly complimentary newsletter
individual limits and the commission calcula- top@doc, Commerzbank regularly provides you
tion. Once your syndicated guarantee facility with new information and recommendations
has been set up, you can access a variety regarding the settlement of your documentary
of convenient tools to capture, modify and foreign business. Here you will find incisive
monitor your transactions. articles on relevant and interesting topics,
current case studies and important issues
A full service for your documents surrounding letters of credit, documentary
Documentary foreign business is highly com- collections and guarantees. We have been
plex: it places significant technical demands on providing this information service since 2001
the people who oversee it and ties up resources and the archive of material we have generated
within your company. If you do not wish to in that time can provide you with a valuable
concern yourself with all the many subtleties reference source.
top@doc newsletter top@doc newsletter top@doc newsletter
Discrepancies in Credit Documents: Which decisions are at the discretion of Availability and payability of a credit – International Standard Banking Practice –
the issuing bank? (Part 2) meaning and consequences Background Information and Details
top@doc already dealt with this issue in its previous The November edition of top@doc dealt with the In July 2013, the International Chamber of Commerce
edition. The current newsletter will readdress the question relationship between a credit’s place of availability and (ICC) released a new edition of its publication “Inter
as to the leeway that the issuing bank has whenever its place of expiry. top@doc’s current edition will again national Standard Banking Practice for the Examination
discrepant documents are presented. The starting point focus on the availability of a credit. This time, we take a of Documents under UCP 600 (ISBP)”. What exactly is the
closer look at the correlation and differences between background and the purpose of the ISBP? What changes
this time: The applicant for the credit is willing to waive
availability and payability.
the discrepancies – but the issuing bank is, nevertheless, does the new edition contain? top@doc’s current issue
not prepared to take up the discrepant documents. will seek to give an answer to these questions, starting
As already explained in top@doc’s November edition, the
with the paragraphs A19 part g “documents acceptable
availability determines the place where the beneficiary must
Another case study should help to clarify whether the issuing as presented” and K10 part c “coverage effected from
present the credit documents in order to utilize the credit.
bank is in fact obligated to take up the documents. warehouse to warehouse”. Moreover, we will look more
This is of high importance, particularly with regard to given
timeframes and expiry of fixed time periods (life of the closely at further paragraphs of the ISBP in some
The exporter, Well Done Ltd., presents a set of documents documentary credit, presentation periods for documents) and forthcoming issues of this newsletter.
to Free and Easy Bank for drawing under a documentary the assignment of the mailing risk.
credit. Free and Easy Bank takes up the documents in its examination of the documents and the time required for pay- Documentary business can look back upon a long history.
capacity as nominated bank and forwards them to the issuing What does the term “payability” actually mean? ment. Making the credit payable with any bank other than the Already in medieval times, letters of credit, which ultimately
bank, namely the CarefulBank. At the same time, it requests The term “payability” is not defined in the “Uniform Customs issuing or the nominated bank does not appear to occur in led to the documentary credit that we know today, were
the reimbursement bank indicated in the credit to remit the Free and Easy Bank wastes no time in informing Well Done and Practice for Documentary Credits UCP 600”. In documen- practice. issued in Italy, which at that time was the centre of trade and In this context, the following important aspects have to be
Ltd. of the rejection of the documents by CarefulBank. Well tary practice payability is understood as the arrangements be- commerce in Europe. At the outset of the nineteenth century, kept in mind:
countervalue of the documents.
tween the issuing and the nominated bank with respect to the Do you have any questions or suggestions
Done Ltd. takes it easy since it holds a statement signed in documentary credit came to prominence as a prime instrument
Some days later, Free and Easy Bank, which already a legally binding manner by the applicant according to which
handling of reimbursement. These arrangements form part of
the credit and provide an indication for the beneficiary on how
regarding top@doc?
of payment in international trade and was increasingly utilized •Usually, documentary credits are expressly made subject
received the reimbursement and credited the account of the latter has waived the discrepancy and is prepared to
fast he will normally receive the proceeds after presentation • Your comments, opinions or queries are of utmost in the processing of trade transactions. With its “Uniform to the UCP (in their currently applicable version). There-
fore, they are binding for all parties. The ISBP, however,
Well Done Ltd. accordingly, receives a SWIFT message accept the discrepant documents. interest. Feel free to contact us any time. Please click Customs and Practice for Documentary Credits (UCP)”, the
of credit compliant documents.
from CarefulBank. The issuing bank informs the latter in here to access our contact form where you can address ICC Paris has set up rules designed to ensure a uniform are not a binding regulatory framework; they are a useful
accordance with the provisions of the “Uniform Customs Thereupon, Free and Easy Bank states in its reply to Careful any issues you may have. approach to the processing of documentary credits and support to interpret the UCP in a correct manner and to
When the credit is payable with the nominated bank, such an
and Practice for Documentary Credits UCP 600”, art. 16 c, Bank’s SWIFT message that the applicant will, according arrangement will mean that the nominated bank is authorised • In addition to this edition you will find all newsletters of examination of documents worldwide. apply them in accordance with the intentions of the ICC.
that it has discovered a discrepancy when examining the to the information in its possession, accept the documents. to either debit the issuing bank’s account maintained with it this information service in the top@doc archive in pdf
documents. For this reason, it has refused to take up the CarefulBank is, therefore, kindly requested to confirm that the directly or to reimburse itself on the issuing bank or a reim- format for downloading. Moreover, over the course of time certain standards, •Any refusal of documents must exclusively be based on
documents and contacted the applicant in respect of a waiver documents may be deemed taken up. bursement bank. • Our specialists for Cash Management and International customs and “best practices” for credit transactions have the UCP: refusal cannot be justified on the grounds that
of the discrepancy. Meanwhile, it will hold the documents Business will be pleased to answer any questions you been developed. Here again, the ICC supports the parties the ISBP have been violated or have not been observed.
at the disposal of Free and Easy Bank. By the way, the When the credit is payable with the issuing bank, such an may have on this issue or other documentary business to a credit by setting out these customs and standards in The ISBP only serve as an instrument to support an
discrepancy identified by CarefulBank is in fact an error in the arrangement will mean that the issuing bank will remit the topics. the aforementioned ISBP. These must always be read in argumentation.
documentation (a so-called “valid discrepancy”) which was
proceeds of the credit to the nominated bank as soon as it
receives the compliant documents. As a result, the beneficiary
• For more information on our foreign business services connection with the UCP and are meant to assist when
overlooked by Free and Easy Bank. and products please visit our website deciding upon the compliance of documents.
will, in this case, receive the countervalue of the documents http://www.commerzbank.com/documentarybusiness.
only upon the end of the period provided for the mailing, the
Corporate Banking
Mittelstandsbank Corporate Banking
Mittelstandsbank Corporate Banking
Mittelstandsbank
März 2014 2013
September Dezember 2013
December März 2014
March 2014
Available free of charge every three months: simply register for your free copy of top@doc in the order and
download center at www.commerzbank.com/corporatebanking.Foreign exchange business I 07
Foreign exchange business:
Understanding foreign currencies
Transactions with your foreign business partners are processed
smoothly, with payments in the corresponding foreign currency
arriving on time and according to contract. However, if exchange
rates subsequently change for the worse, this can turn all your
calculations upside down. Commerzbank’s foreign currency
management supports you in avoiding exactly this sort of
unwanted development.
The right rate opinion or the competitive situation as part of
Commerzbank occupies a leading position active currency management.
in the field of currency trading in Germany.
As an internationally recognised market- New standards for foreign exchange
maker, we provide exchange rates in line business
with the market and offer sound market The increasing internationalisation of business
information. As well as pure processing of relations in the SME sector makes efficiency,
currency exchange, appropriate hedging speed and reliability important success factors
is also given particular attention in this when processing foreign exchange transac-
regard. With currency forwards, for example, tions. This is where the internet provides new
the currency exchange does not take place opportunities compared to formerly processing
until a future date, although the exchange everything over the telephone. However, limit-
rate is actually fixed when the agreement ing yourself solely to online spot and forward
is signed. Therefore, you precisely know transactions is not sufficient.
what you will receive, regardless of any
exchange rate fluctuations that occur in the Commerzbank’s online trading platform
meantime. Should receipt of the currency be within our Corporate Banking Portal offers
delayed, hedging can be prolonged with a a truly comprehensive solution. With this
currency swap. system, you can feel as if you are almost
sitting in Commerzbank’s Frankfurt trading
Modern hedging products give you additional room, which is one of the largest in Europe.
opportunities to benefit from exchange rate All the different threads of our global presence
developments without losing sight of the and strong position on the international
hedging aspect. Using a modular approach, currency markets come together here – with
the specialists at Commerzbank can offer you information fed directly to the screen of your
customised solutions in line with your market PC via our Corporate Banking Portal.08 I Foreign exchange business
In collaboration with the personal support of Commerzbank’s specialists, as well as with tailor-
made hedging concepts, the trading platform offers a comprehensive range of services in the field
of foreign exchange trading. This system offers the highest possible efficiency in the preparation,
execution and evaluation of commercial transactions quickly and directly with just one click.
For more information, please refer to our brochure “Providing the right impetus. Web-based and
software-based banking”, which can be obtained from your designated Commerzbank contact.Structured Export & Trade Finance I 09
Structured Export & Trade
Finance: Supporting your
foreign trade business
Contract negotiations with foreign busi- credit is that it does not impact the balance
ness partners aren’t just about prices, sheet, as payment occurs immediately upon
delivery times and product features. delivery or performance. Commerzbank sup-
Foreign business partners often expect the ports you through a comprehensive range of
exporter or importer to provide financing advisory services – for example, helping with
too. Commerzbank offers professional so- drafting the payment conditions, formulating
lutions to help with this – even for smaller- the application for credit approval or calculat-
scale underlying transactions – which safe- ing the Hermes fee.
guard a prompt flow of liquidity.
Refinancing your supplier credits
It is also worth remembering that finance 1. Purchase of covered receivables:
geared optimally towards your commercial For existing business relationships, non-
activities (import and export) gives your recourse purchase of receivables through
company a real competitive edge in the Commerzbank provides a refinancing option
international business. Commerzbank can for your export receivables with short,
offer you highly specialised advice regard- medium or long payment terms (supplier
ing the whole value chain and support you credit). The prerequisite is that you obtain
with a reliable, complete financing package cover via a credit guarantee from the Federal
for orders, imports and trading business. Government of Germany provided by Euler
Risk hedging and liquidity optimisation Hermes as mandated agent (Hermes cover) or
give you additional financial scope. private credit insurance from Euler Hermes
Kreditversicherung-AG. In this way, you
Buyer’s credit assign all claims arising from your export
Credit for your customers business and any rights and claims arising
Buyer’s credit is the most common medium- from your Hermes cover or your Hermes
to long-term form of export financing in the credit insurance to the bank. In return,
capital goods and investment business. At you will receive the net present value of
Commerzbank, you can obtain a buyer credit the purchase price, as soon as you have
for export transactions as low as 250,000 euro. presented proper documentation. In this
The financing is based on a Hermes finance way, a business with deferred payment can
credit guarantee, granted directly to your be turned into a cash business. Overall, the
foreign customer or its principal bank through purchase of secured receivables represents a
existing framework agreements. The basis for lean and rapid funding alternative, in which
the delivery transaction is the export contract your customer abroad does not need to
which, among other things, stipulates payment be directly involved. You as an exporter,
through a buyer credit. The loan is paid to you however, remain responsible for the legal
as exporter and repaid by the importer. For validity of the claim and the proper conduct
exporters, an important advantage of buyer of the delivery transaction.10 I Structured Export & Trade Finance
If you already have Hermes cover in the form letters of credit with deferred payment periods
of a state-backed Whole-Turnover Policy, WTO not exceeding 365 days.
(in German “Ausfuhrpauschal-Gewährleis-
tungsgarantie des Bundes”, APG) or in the As buyer of the claim, Commerzbank takes
form of an extended Euler Hermes commer- the following risks:
cial credit insurance for your short-term and • The economic risk of insolvency of the
revolving deliveries in place, then we can debtor or his guarantor
provide you with tailor-made framework • The country risk, consisting of the political
agreements to enable the streamlined process- risk as well as conversion and transfer risk
ing of a non-recourse receivable purchase on • The currency risk (if the invoice is raised in
a revolving basis. This guarantees a prompt a foreign currency)
flow of liquidity, even when you export prod- • The collection risk (loss of the claim docu-
ucts such as non-durable consumer goods mentation in the mail, enforceability of the
and merchandise. claim, and the risk of paying agents)
2. Forfaiting and CAF – Commerzbank’s For you as an exporter, forfaiting offers the
purchase of letters of credit: following advantages:
Forfaiting refers to the non-recourse purchase • Reduced pressure on your balance sheet
of abstract (independent of the underlying • Improved liquidity
transaction) non-contestable, assignable, • Passing on the risks involved in the target
existing, but not yet due export receivables currency
against the immediate payment of the • Preservation of your credit lines
purchase price. • Fixed interest rates, which allow fixed
calculations
The claim must usually be secured by a bank • Elimination of credit monitoring and
in the country of the importer, or by another collection work, opening up space for
international bank, both of which have to be new projects
acceptable to Commerzbank AG. Claim ins
truments can include both book receivables Both forms of refinancing your supplier credits
and bills of exchange or promissory notes, reduce the pressure on your balance sheet
as well as LCs. Hedging instruments can and simultaneously create additional scope for
include deferred payment letters of credit, financing new transactions. As an exporter,
avalised bills of exchange or promissory you are responsible for the legal validity of the
notes, or letters of guarantee and payment claim and for completing the underlying trans-
guarantees. action in full as per the contract.
“CAF” – Commerzbank’s purchase of LC In addition to this, Commerzbank offers you
receivables – is the standardised form of other standardised financing products for your
forfaiting. This involves the purchase without export transactions, such as global export
recourse of existing export receivables for credit, advance export financing and a range of
goods sold and/or services rendered under factoring solutions.Structured Export & Trade Finance I 11
Just remember to talk to us while you are
conducting initial negotiations and drafting the
contract for your delivery transaction if you are
considering subsequent refinancing.
Structured trade and warehouse financing
as a finance solution for your whole value
chain
In the context of structured trade and ware-
house financing, Commerzbank supports your
trading business with short- and medium-term
financing, in which your commodity and goods
stocks, as well as claims for payment result-
ing from their marketing, can be included. If
required, lending can start at different points
in your commercial business and can cover the
entire value chain – starting at the point of pur- you in the purchase of raw materials and
chase from manufacturers and producers, who goods that you then sell, or in warehouse
are often located in foreign countries, through financing for stocks of raw materials and
to the sales you make to your customers. In the goods that you buy regularly or seasonally
course of this, different risk-minimising instru- and then temporarily store.
ments are applied to control risk, depending
on the specific stage of financing. Commerzbank is here to help you with your
foreign business as a reliable partner, offering
Commerzbank offers various forms of financ- personalised advice, a globally standardised
ing, depending on your precise needs. These customer relationship management model and
include trade financing, which generally a comprehensive array of services. Our special-
involves documentary credits or collections, ists will work with you to develop tailored solu-
possibly supplemented by the financing of tions for your international business.
price hedging. These forms of financing helpFor more detailed information concerning international business, our relationship Correct as at: 04/2014, VKS05051 managers for corporate clients as well as our specialists are at your disposal. They can also provide you with brochures for the following topic: • Cash management and payments Commerzbank AG Corporate Banking www.commerzbank.com/corporatebanking
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