Trade Services

Banking day: a day during which a bank is regularly open at the place at which an act subject to these rules is to be performed. 

Complying presentation: a presentation that is in accordance with the terms and conditions of the credit, the applicable provisions of these rules and international standard banking practice. 

Confirmation: a definite undertaking of the confirming bank, in addition to that of the issuing bank, to honour or negotiate a complying presentation.

Honour:
1. To pay at sight if the credit is available by sight payment 
2. To incur a deferred payment undertaking and pay at maturity if the credit is available by deferred payment. 
3. To accept a bill of exchange (“draft”) drawn by the beneficiary and pay at maturity if the credit is available by acceptance. 

Negotiation: the purchase by the nominated bank of drafts (drawn on bank other than the nominated bank) and/or documents under a complying presentation, by advancing or agreeing to advance funds to the beneficiary on or before the banking day on which reimbursement is due to the nominated bank. 

Nominated bank: the bank with which the credit is available or any bank in the case of a credit available with any bank. 

Shipping Guarantee (SG) / Delivery order (DO): is a formal financial obligations or undertakings in favour of third parties, issued by banks on behalf of customers, to facilitate their business dealings, The consignee and the Bank jointly undertake to indemnify the carrier against all liabilities relating to the delivery and undertake to surrender the bill of lading (BL) duly endorsed to the carrier on receipt of it.
Delivery Terms: EXW, FCA, CPT, CIP, DAT, DAP, DDP, FAS, FOB, CFR, CIF

B. Types Of Documentary Credit

1- Irrevocable LC: An irrevocable LC is the type of Letter Of Credit that can be cancelled or changed only with the consent of the beneficiary. Thus, the bank becomes dependent on the exporter and its bank.
2- Transferable LC: When a particular LC can be transferred by the main beneficiary to another secondary beneficiary, the LC is said to be transferable. However, the second beneficiary cannot further transfer the LC.
3- Standby LC: A standby LC is somewhere close to a bank guarantee since the bank makes payment only when the buyer (importer) fails to fulfil payment liabilities of the exporter.
4- Back to Back LC: In case of a back to back LC, a new LC is issued by the main beneficiary to the second beneficiary taking the original LC as security or guarantee. It is usually used for exporters or suppliers of goods.
5- Revolving LC: Single L/C that covers multiple-shipments over a long period. Instead of arranging a new L/C for each separate shipment, the buyer establishes a L/C that revolves either in value (a fixed amount is available which is replenished when exhausted) or in time.

C. Letter of Credit Cycle:

- The buyer and seller enter into a contract and agree that payment be made on the basis of Letter of Credit
- Buyer approaches DIB (issuing bank) to issue Letter of Credit in favour of the seller
- DIB issues Letter of Credit which is advised through its correspondent bank (advising bank) in the seller’s country
- Advising bank advises Letter of Credit to the seller 
- Upon receipt of the Letter of Credit, the seller prepares shipment and delivers documents to presenting bank
- Presenting bank dispatches documents to DIB for payment
- Upon receipt of complying presentation DIB pays the presenting bank as per letter of credit terms and conditions 
- DIB forwards the documents to the buyer, for further release of the goods

Bank guarantees protect both parties in a contractual agreement from credit risk. 
Applicant means the party indicated in the guarantee as having its obligation under the underlying relationship supported by the guarantee. The applicant may or may not be the instructing party.

Beneficiary means the party in whose favour a guarantee is issued. 

Expiry means the expiry date or the expiry event or, if both are specified, the earlier of the two.

Expiry date means the date specified in the guarantee on or before which a presentation may be made.

Expiry event means an event which under the terms of the guarantee results in its expiry, whether immediately or within a specified time after the event occurs, for which purpose the event is deemed to occur only When a document specified in the guarantee as indicating the occurrence of the event is presented to the guarantor, or if no such document is specified in the guarantee, when the occurrence of the event becomes determinable from the guarantor's own records.

Guarantor means the party issuing a guarantee, and includes a party acting for its own account

B. Type of Guarantees:

1- Tender Bond (Bid Bond) is designed to prevent the seller from withdrawing his tender if the transaction has become unattractive to him by the time the contract is awarded. The beneficiary wishes to safeguard himself against the submission of frivolous or inadequately thought out tenders.
2- Performance Bond is intended to ensure that the goods are delivered or the service rendered in accordance with the terms of the contract and on time.
3- Advance Payment Guarantee is to ensure that an advance payment is used in accordance with the intentions of the contract concluded between the applicant and beneficiary. The purpose of these payments is to provide the supplier with the necessary funds for the purpose of materials and components, the transportation of machinery to the construction site, the hiring of labor or the making of other preparations for the performance of the contract.
4- Retention Money Guarantee is to ensure that applicant will continue to fulfill contract obligations after withdrawing final payment of the contract price from the beneficiary in advance, at the request of the construction contractor or supplier.
5- Financial Guarantee is to ensue and guarantee payments towards beneficiary on financial obligations of the applicant.
6- Maintenance Guarantee is a guarantee against defective workmanship or materials after completion of a project. 
It’s often to incorporate an obligation guaranteeing ‘efficient or successful operation’ or other obligations of like intent and purposes.

C. Letter of Guarantee Cycle:

- The customer requests for the letter of guarantee from the bank when the supplier asks for one or when there is uncertainty in customers’ ability to pay. 
- When the bank receives the request for the letter of guarantee, it must verify that the customer qualifies or not. The bank scrutinises the underlying transactions, past transaction records, and other relevant materials. It can ask the customer for any additional information and document if required.
- Before the issue of the letter of guarantee, the bank can make the modification on the request of the customer or the supplier. 
- After the delivery of goods to the customer, the supplier made the claim for the compensation from the guaranteeing bank within the validity period. 
- The bank notifies the customer of the request. 
- The bank will then examine the claim document and verify that they comply with the clauses of the letter of guarantee.
- After checking that everything is in order, the bank makes the payment to the supplier.