Short note: Foreign exchange related terms
Short note: Foreign exchange related terms
Quasi Negotiable Instruments are those Instruments that can be transferred by endorsement and delivery but the transferee does not get a better title that of the transferor. Therefore they cannot be classified as negotiable Instruments and hence the Negotiable Instruments act is not applicable to them.
Quasi Negotiable Instruments:
1. Bill of Lading
2. Dock Warrant
3. Carriers Receipt
4. Letters of Credit
5. Railway Receipt
Question: Why bill of lading is not a negotiable instrument?
The bill of lading as a document of title can have several functions:
(a) the bill of lading represents the goods so that possession of a bill of lading is equivalent to possession of the goods;
(b) under certain conditions, the transfer of the bill of lading may have the effect of transferring the property of the goods; and
(c) the lawful holder of a bill of lading is entitled to sue the carrier.
The effect of the transfer of a bill of lading depends on the intention of the parties, and on the applicable law. The only right that is indisputably transferred by the endorsement of a bill of lading is the right to demand and have possession of goods described in it. This right is guaranteed to a legal holder of the bill of lading in all jurisdictions. However, this is not the case in respect of the transfer of property and the transfer of contractual rights.
# Received for Shipment Bill of Lading:
The “received for shipment” bill of lading is considered as a document of title in civil law, while in common law its legal status is not quite clear. The main distinction is that a “received” bill represents the goods as they are received for shipment, while the shipped bill represents the goods as loaded aboard the vessel. It is submitted that this does not prevent the “received” bill from being a document of title.
A contrary view is expressed by the learned authors of Benjamin’s Sale of Goods. The argument put forward is that it is impossible or extremely difficult to deal with the goods physically, once the goods are loaded, and that it was this difficulty which originally led to the recognition of shipped bills as documents of title, while the same level of impossibility or extreme difficulty does not exist before the goods are loaded, so there was “correspondingly less need to regard documents relating to them as documents of title”. Arguably however, this is not relevant for the status of the “received” bill as a document of title. Actually, the seller’s need for disposal of the goods by the transfer of a bill of lading may even be greater in the case of a “received” bill, especially when it is expected that the period between delivery of the goods into the charge of a carrier and their loading will be protracted.
A “received” bill arguably has weaker evidential value as compared to a “shipped” bill, since the goods may be lost or damaged after a “received” bill is issue. Besides, a “received” bill does not contain the date of shipment which is usually required by the contract of sale. This is why a CIF buyer or a bank usually does not accept “received” bills, not because the “received” bill is not a document of title.
There is little doubt that the “received” bill is capable of representing the goods and that its transfer can transfer constructive possession. It is true that the goods may perish after a “received” bill is issued, but even a “shipped” bill does not represent an absolutely secure document, e.g. if a “shipped” bill is wrongfully issued for the goods which have never actually been shipped. If the goods delivered at the port of destination to a consignee do not correspond to the description in the “received” bill, the consignee will be entitled to sue for damages the carrier who issued the bill. Actually, the main risk associated with “received” bills is that under the Hague Rules the carrier may not be liable for any damage which occurs before the goods are loaded.
# Ship’s Delivery Order:
The ship’s delivery order has some similarities to bills of lading: it is issued by or on behalf of the carrier and it confers on their holders rights against the carrier which are nearly the same as those of bill of lading holders. The main distinction is that ship’s delivery order is not a transport document stricto sensu. Ship’s delivery orders are issued after the carriage has started or even when it is finished. They do not necessarily contain a duty to carry the goods but only to deliver them. The contract of carriage may provide for issuance of delivery orders, but their legal basis is the contract of sale, not the contract of carriage.
Article 1(4) of the Carriage of Goods by Sea Act 1992 (COGSA 1992) defines the delivery order as a document which includes “an undertaking by the carrier to the person identified in the document to deliver the goods to which the document relates”. The COGSA 1992 obviously fell short of fully recognising the status of a document of title to the ship’s delivery order, since it implies the carrier’s liability against the “person identified in the document” and not against the holder of the document.
It is not clear why ships’ delivery orders were denied the status of documents of title, since the holders of a delivery order may also have an interest to dispose of the goods in transit. In order to grant the status of a document of title to the ship’s delivery order it would be sufficient to replace the expression “the person identified in the document” by the expression “the lawful holder of the document”. This is simpler, more practical, legally feasible and in accordance with other national legislation which regulates delivery orders.
## Loan against Imported Merchandise (LIM): This is basically an import loan provided to the clients against the imported merchandise. Under this arrangement, the bank asks for a margin from the client and the ownership of the imported goods will be retained by the bank until the full payment of loan by the client.
## Bill of Exchange: A bill of exchange is an order made by the shipper or an exporter who is called a drawer of bill to the buyer or importer who is called a drawee of the bill, asking him to make the payment of the amount specified in the Bill of exchange against the value received by way of submission of shipping documents and giving a detailed account for the drawee in the form of commercial invoice.
In the international trade, there are very few instances of drawing a clean bill of exchange as the payment is usually made against shipping documents evidencing the actual shipment made. The exporter draws a dr5aft which may be either at sight or usuance. The bills are drawn in to two sets if the goods are shipped by sea. These sets are presented to the buyer by an authorised dealer through its foreign correspondent.When any of the drafts is paid it is a sight draft and accepted by the buyer when it is a usance draft.
The bill of exchange are either negotiated/purchased or sent through collection. If there is a purchased /negotiated and the credit can immediately given to the exporter and if there is no such facility available the amount stated therein will be made available to the drawer only on receipt of the proceeds of said Bill of Exchange.
Bill of exchange is a negotiable instrument as per Section 5 of Negotiable Instrument Act,1881 and simillar Acts are also inforce in various other countries. The rights and responsibilities of the drawer, the drawee and the endorsers are as per the negotiable Instruments Acts. Though the banker is acting as an agent for collections or a holder in due course, the principal responsibility of the payment to be received is that of the drawer of the bill and incase bill of of exchange remaining unpaid or payment refused, the banker holds no responsibility except may be charged and proved with gross negligence in handling the documents.
In order to protect the interest of the banks and the financial institutions negotiating the bill of exchange under the letter of credit, Uniform Customs and Practice for Documentary Credits has laid down that though the Bill of Exchange are drawn without recource to the drawer of the bill under letter of credit, in case of bil of Exchange remaining unpaid the negotiating banker has a right to recall the funds disbursed at the time of negotiation. If the bill is dishonoured it should be got noted and protested from a Notary Public who will give his observations on the date dishonour and will charges his fee for this job.
## International Monetary Fund (IMF): The (IMF) International Monetary Fund was originally created as part of the Bretton Woods system exchange agreement in 1944.The International Monetary Fund (IMF) is an organization of 188 countries, working to foster global monetary co-operation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world.
The IMF’s fundamental mission is to help ensure stability in the international 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.This led to the devaluation of national currencies and a decline in world
The IMF was formally organized on December 27, 1945, when the first 29 countries signed its Articles of Agreement. The International Monetary Fund was one of the key organizations of the international economic system; its design allowed the system to balance the rebuilding of international capitalism with the maximization of national economic sovereignty and human welfare, also known as embedded liberalism.
The members of the IMF are 188 members of the UN and the Republic of Kosovo. All members of the IMF are also International Bank for Reconstruction and Development (IBRD) members and vice versa.
Member countries of the IMF have access to information on the economic policies of all member countries, the opportunity to influence other members’ economic policies, technical assistance in banking, fiscal affairs, and exchange matters, financial support in times of payment difficulties, and increased opportunities for trade and investment.The IMF works to foster global growth and economic stability. It provides policy advice and financing to members in economic difficulties and also works with developing nations to help them achieve macroeconomic stability and reduce poverty.
## Convertibility of Taka:
Bangladesh Bank declared Taka convertible on 24th March 1994 for current Account transactions interms of Article viii of the IMF article of agreement. The declaration symbolized a turning point in the country’s exchange management and exchange rate systems.
Simultaneously Bangladesh Bank worked towards systematically liberalizing the exchange restrictions. These measures coincided with the overall macro-economic reforms undertaken by the Government concerning trade liberalization, export orientation and deregulations. These measures were aimed at creating an environment conducive to growth in Investment and productivity and pave the way for entry into global village (Globalization).
Convertible means the ability of the residents to convert Local Currency into foreign currencies at the ruling exchange rates for paying their external obligations. In other words, Convertibility means free floating of the Taka with least intervention from the Govt. and the central bank in the fixation of exchange rate and making foreign exchange freely available for all transactions.
Convertibility of the Taka implies a process of strengthening the Taka to the status of an International Liquidity to create more confidence in the domestic and par value of Taka for its easy acceptability both in national and international economic transactions. The ideas of freeing the Taka had been prompted by the continuous stability in Macro-economic management, especially the maintenance of monetary stability and reduction of budgetary deficits through effective fiscal measures.
A currency is said to be convertible when it may be fully exchanged for another currency. Convertibility of currency is not meant for domestic transactions propose. It is also required for international transactions.
In Bangladesh, our currency is convertible in current Account transactions. We know that economic transactions of a country with the rest of the world are recorded in Balance of payment (BOP). A country’s BOP is a summary statement of all its economic transactions with other countries of the world during a particular period of time. The main components of BOP are: —
A) CURRENT ACCOUNT
B) CAPITAL ACCOUNT
C) OFFICIAL RESERVE ACCOUNT
## Current Account :
The account that includes trade in goods (visible exports & imports) services and unilateral transfers.
## Capital Account:
The account shows the change in the nation’s assets abroad and foreign assets in the nation. It includes direct investments, the purchase and sale of foreign securities and nation’s bank and non-bank claims on and liabilities to foreigners.
## OFFICIAL RESERVE ACCOUNT:
The account shows the change in a nation’s official reserve assets and change in the foreign official assets in the nation. (It is not related with convertibility of currencies).
The basic requirements of convertibility are:
a) an appropriate exchange rate;
b) an adequate level of international liquidity;
c) Sound macro-economic policies;
d) Incentives for domestic economic agents to respond to market prices.
Nonetheless, several factors have contributed us to join in convertibility and foremost among them is gradual adjustment of external value of Taka to a realistic level. Moreover, substantial growth of exports earnings and expatriates remittances encouraged Bangladesh to go for convertibility.
Convertibility creates an environment conducive to foreign investment. For rapid development of the economy, we should go for more liberalization of trade and exchange restrictions.
## Convertibility: Convertibility is the quality that allows money or other financial instruments to be converted into other liquid stores of value. Convertibility is an important factor in international trade, where instruments valued in different currencies must be exchanged.
## COMMERCIAL REMITTANCES:
COMMERCIAL REMITTANCES Prior permission of Bangladesh Bank is not required by the ADs for:
-opening back-to-back import LCs on account of manufacture-exporters for their input imports as per prescribed input-output coefficients;
-issue of bank guarantee/performance bond on account of the merchandise exporters of Bangladesh in favour of foreign buyers;
-remittance on account of short weight, quality claim, partial shipment etc. upto 10% of realised export proceeds.
-payment of discount not exceeding 10% of the invoice value at the request of the exporter where foreign importers refuse to clear goods due to discrepant documents etc.,
-remittance of premia on foreign currency policies taken by Bangladesh nationals while residing abroad,
-remittance of premia on account of re-insurance,
-remittance of “General Average” collected from consignees in Bangladesh,
-remittance of pre-shipment inspection fees,
-remittance of bonafide expenses incurred by Bangladesh Biman and Bangladesh Shipping Corporation in foreign ports/stations,
-remittance on account of charter hire of foreign ships,
-remittance of purchase price of ships acquired by private firms/companies,
-remittance of royalty/honoraria/fees to non-residents including foreign news agencies for features, articles etc. subscribed by local newspapers/magazines,
-advertising of Bangladeshi commodities in mass media abroad.
## CONVERTIBILITY ON TRADE ACCOUNT:
Bangladesh Taka is fully convertible for settlements of trade related transactions. Import licence is not required for import of items not in the control list. An importer has automatic access to foreign exchange for import of all items outside the control list, and also for import of control list items as per general or specific authorization of the office of the Chief Controller of Imports and Exports.
## EXCHANGE FACILITIES FOR EXPORTERS:
New Exporters : Annual foreign exchange quota for business travel abroad for new exporters has been set at US $ 6000. Bonafide requirement beyond US $ 6000 is accommodated by Bangladesh Bank upon written request submitted with supporting documentation.
Retention Quota for merchandise exporters:Merchandise exporters may retain up to 50% of realised FOB value of their exports in foreign currency accounts in US$, Euro, Japanese Yen. For export items with high import contents (such as naptha, furnace oil, bitumen, readymade garments etc.), the retention quota is 10%. The computer software and data entry/processing service exporters may also retain up to 50% of realised export proceeds in foreign currency accounts. Funds from these accounts may be used to meet bonafide business expenses, such as business visits abroad, participation in export fairs and seminars, import of raw materials, machineries and spares etc. Funds from these accounts may also be used to set up offices abroad without prior permission of Bangladesh Bank. Exporters may, at their option, retain the foreign currency in interest bearing renewable term deposit accounts in Bangladesh with a minimum amount of USD 2,000 or Pound Sterling 1,500 equivalent. 5.3 Retention quota for service exporters : Service exporters may retain 5% of their repatriated income in foreign currency accounts. Funds may be drawn from these accounts to meet expenses for bonafide business expenses abroad. This quota may also be kept in interest bearing renewable term deposit accounts. However, foreign exchange earnings on account of indenting commission or agency commission for export from Bangladesh may not be credited to such accounts since these incomes originate from Bangladesh sources.
## FOREIGN CURRENCY ACCOUNTS :
NFCD Accounts: Non-resident Foreign Currency Deposit (NFCD) accounts may now be maintained as long as the account holders desire. Amounts brought in by non-resident Bangladeshis can be deposited in foreign currency account any time after return to Bangladesh
F.C Accounts of non-resident Bangladeshis: Foreign currency accounts opened in Bangladesh in the names of Bangladesh nationals or persons of Bangladesh origin working or self employed abroad can now be maintained as long as the account holders’ desire.
Accounts: Persons ordinarily resident in Bangladesh may maintain foreign currency accounts with foreign exchange brought in at the time of their return to Bangladesh from visits abroad. These accounts are termed as Resident Foreign Currency Deposit (RFCD) accounts. The amount brought in with declaration to customs authorities on form FMJ and up to US $ 5000 brought in without declaration may be credited to this account. However, proceeds of export of goods or services from Bangladesh and commission earnings arising from business deals in Bangladesh cannot be credited to such accounts. Balances of such accounts are freely remittable abroad. Balances of RFCD accounts may also be used by the accounts holders for their travel abroad in the usual manner. RFCD accounts may be opened in US Dollar, Euro, Pound Sterling, Deutsche Mark or Japanese Yen and may be maintained as long as the account holders desire. Interest may be paid on these deposits if these are for a term of not less than one month and the balance is not less than US $ 1000 or Pound Sterling 500 equivalent.
F.C Accounts of other entities: ADs do not require prior permission of Bangladesh Bank for opening of foreign currency accounts of : -non-resident foreign persons/firms; -diplomatic missions in Bangladesh and their expatriates; -diplomatic bonded warehouses (duty free shops); -local and joint venture contracting firms employed to execute projects financed by foreign donors/international donor agencies; -Bangladesh nationals working in the international bodies in Bangladesh and drawing pay and allowances in foreign currency.
Maintaining of bank accounts abroad: Bank accounts outside Bangladesh opened by Bangladesh nationals while working abroad may now be maintained even after their return to Bangladesh.
## MISCELLANEOUS REMITTANCES:
Remittance of membership fees: ADs may remit membership fees of foreign professional, scientific institutions and fees for application, registration, admission, examination (TOEFL, SAT etc.) in connection with admission into foreign educational institutions as per estimate of the concerned institution.
Evaluation and Visa Processing Fee: ADs may remit evaluation and visa processing fee on behalf of Bangladeshis desiring immigration to foreign countries, as per demand note of the foreign immigration authorities.
Visa fee: Intending travellers may send visa fees through ADs to the embassies of countries that do not have consular offices in Bangladesh.
Consular/visa fees collected by foreign embassies in Bangladesh Taka may be remitted abroad by the ADs without prior approval of Bangladesh Bank.
Family maintenance: Remittance of moderate amounts of foreign exchange for maintenance abroad of family members (spouse, children, parents) of Bangladesh nationals are allowed by Bangladesh Bank, on written request supported by certificates from the Bangladesh mission in the concerned country.
## Money changer :
A money changer is a person or organisation whose business is the exchange of coins or currency of one country, for that of another. This trade was a predecessor of modern banking.
## What is floating exchange rate:
A floating exchange rate is determined in foreign exchange markets depending on demand and supply, and it generally fluctuates constantly.
## A fixed exchange rate:
A fixed exchange rate denotes a nominal exchange rate that is set firmly by the monetary authority with respect to a foreign currency or a basket of foreign currencies. By contrast, a floating exchange rate is determined in foreign exchange markets depending on demand and supply, and it generally fluctuates constantly.
## Proforma invoice: An invoice proforma is the one that is sent to the buyer containing all the details of the good, typically in social circumstances. These are the details that are yet unknown. Basically, it is a document that holds a commitment by the seller to deliver the product or services to the customer on a specific price. Though, it is not a true invoice.
In this, there is an information of the goods and services, weight of the goods, amount, and service being provided and it is not a type of invoice as accounts payable.
## Discuss the inco-terms which are used in the International Trade.
Answer: Incoterms 2010: The eighth published set of pre-defined terms, Incoterms 2010 defines 11 rules, reducing the 13 used in Incoterms 2000 by introducing two new rules (“Delivered at Terminal”, DAT; “Delivered at Place”, DAP) that replace four rules of the prior version (“Delivered at Frontier”, DAF; “Delivered Ex Ship”, DES; “Delivered Ex Quay”, DEQ; “Delivered Duty Unpaid”, DDU). In the prior version, the rules were divided into four categories, but the 11 pre-defined terms of Incoterms 2010 are subdivided into two categories based only on the method of delivery. The larger group of seven rules applies regardless of the method of transport, with the smaller group of four being applicable only to sales that solely involve transportation over water.
Rules for Any Mode(s) of Transport
The seven rules defined by Incoterms 2010 for any mode(s) of transportation are:
EXW – Ex Works
FCA – Free Carrier
CPT – Carriage Paid To
CIP – Carriage And Insurance Paid To
DAT – Delivered At Terminal
DAP – Delivered At Place
DDP – Delivered Duty Paid
- EXW – Ex Works (named place of delivery)
The seller makes the goods available at its premises. This term places the maximum obligation on the buyer and minimum obligations on the seller. The Ex Works term is often used when making an initial quotation for the sale of goods without any costs included. EXW means that a seller has the goods ready for collection at his premises (works, factory, warehouse, plant) on the date agreed upon. The buyer pays all transportation costs and also bears the risks for bringing the goods to their final destination. The seller doesn’t load the goods on collecting vehicles and doesn’t clear them for export. If the seller does load the good, he does so at buyer’s risk and cost. If parties wish seller to be responsible for the loading of the goods on departure and to bear the risk and all costs of such loading, this must be made clear by adding explicit wording to this effect in the contract of sale.
- FCA – Free Carrier (named place of delivery)
The seller hands over the goods, cleared for export, into the disposal of the first carrier (named by the buyer) at the named place. The seller pays for carriage to the named point of delivery, and risk passes when the goods are handed over to the first carrier.
- CPT – Carriage Paid To (named place of destination)
The seller pays for carriage. Risk transfers to buyer upon handing goods over to the first carrier.
- CIP – Carriage and Insurance Paid to (named place of destination)
The containerized transport/multimodal equivalent of CIF. Seller pays for carriage and insurance to the named destination point, but risk passes when the goods are handed over to the first carrier.
- DAT – Delivered at Terminal (named terminal at port or place of destination)
Seller pays for carriage to the terminal, except for costs related to import clearance, and assumes all risks up to the point that the goods are unloaded at the terminal.
- DAP – Delivered at Place (named place of destination)
Seller pays for carriage to the named place, except for costs related to import clearance, and assumes all risks prior to the point that the goods are ready for unloading by the buyer.
- DDP – Delivered Duty Paid (named place of destination)
Seller is responsible for delivering the goods to the named place in the country of the buyer, and pays all costs in bringing the goods to the destination including import duties and taxes. This term places the maximum obligations on the seller and minimum obligations on the buyer.
Rules for Sea and Inland Waterway Transport
The four rules defined by Incoterms 2010 for international trade where transportation is entirely conducted by water are:
- FAS – Free Alongside Ship (named port of shipment)
The seller must place the goods alongside the ship at the named port. The seller must clear the goods for export. Suitable only for maritime transport but NOT for multimodal sea transport in containers (see Incoterms 2010, ICC publication 715). This term is typically used for heavy-lift or bulk cargo.
FOB – Free on Board (named port of shipment)
The seller must load the goods on board the vessel nominated by the buyer. Cost and risk are divided when the goods are actually on board of the vessel (this rule is new!). The seller must clear the goods for export. The term is applicable for maritime and inland waterway transport only but NOT for multimodal sea transport in containers (see Incoterms 2010, ICC publication 715). The buyer must instruct the seller the details of the vessel and the port where the goods are to be loaded, and there is no reference to, or provision for, the use of a carrier or forwarder. This term has been greatly misused over the last three decades ever since Incoterms 1980 explained that FCA should be used for container shipments.
- CFR – Cost and Freight (named port of destination)
Seller must pay the costs and freight to bring the goods to the port of destination. However, risk is transferred to the buyer once the goods are loaded on the vessel (this rule is new!). Maritime transport only and Insurance for the goods is NOT included. This term is formerly known as CNF (C&F).
- CIF – Cost, Insurance and Freight (named port of destination)
Exactly the same as CFR except that the seller must in addition procure and pay for the insurance. Maritime transport only.
## Red clause Letter of credit:
A red clause documentary credit is a documentary credit with a special condition incorporated into it that authorizes the confirming bank or any other nominated bank to make advances to the beneficiary before the presentation of the documents.
## Confirmed Irrevocable Documentary Credit:
A confirmation of an irrevocable documentary credit by a bank (the confirming bank) upon the authorization or request of the issuing bank constitutes a definite undertaking of the confirming bank, in addition to that of the issuing bank, provided that the stipulated documents are presented to the confirming bank or to any other nominated bank on or before the expiry date and the terms and conditions of the documentary credit are complied with, to pay, to accept draft (s) or to negotiate.
## Revolving Documentary Credit:
A documentary credit is one by which, under the terms and conditions thereof, the amount is renewed or reinstated without specific amendments to the documentary credit being required. The revolving documentary credit may be revocable or irrevocable, and may-revolve in relation to time or value.
## Transferable Documentary Credit:
A transferable documentary credit is a credit under which the beneficiary (first beneficiary) may request the bank authorized to pay, incur a deferred payment undertaking, accept or negotiate (the “transferring bank”), or in the event of freely negotiable credit, the bank specifically authorized in the credit as a transferring bank to make the documentary credit available in whole or in part to one or more other beneficiary/ies (second beneficiary/ies).
## Back-to-Back Documentary Credit:
The benefit of an irrevocable documentary credit (the primary credit) may be made available to a third party where the primary beneficiary uses the documentary credit as security/collateral to obtain another documentary credit (the secondary credit) in favour of the actual supplier. This secondary credit is known as back-to-back documentary credit.
## What is stale bill of lading:
A bill of lading is said to a stale it bears a date subsequent to the expiry date of credit under which the goods are shipped. It shows that the goods were put on board the ship on a date later than that authorized by the credit. A bill of lading is also said to be stale if it is presented so long after the sailing of the carrying vessel that the goods will be reaching the port of destination long before the buyer will get the documents. The buyer, in these conditions will be unable to take possession of the goods when they arrive at destination, and will thus be put to demur rage and in absence of documents banks do not usually accept bills of lading in these circumstances.
## Charter Party Bill of Lading (CPBOL):
This is a contract for the hire of a whole or part of ship setting in detail the rights and obligations of the owners and liners or charterers.Charter are usually arranged by ‘ship brokers’ who have know-how of this type of work.Charters are divided into time charters and voyage charters. The former are for specified period of time, while the matter are for particular voyage.Where under a charter, the charterer virtually becomes, for the time being owner of the ship, making all arrangements for working and insuring the vessel.
Charter party bill of lading covers the shipment on chartered ships-issued subject to charter party agreements which supersede the usual memorandum of conditions of carriage appearing on the reverse of bill of lading.These bills of lading are not acceptable unless specially authorised.
A charter party specifies among other details, the particular ports to which the ship is to go, the cargo to be carried and the freight to be paid for the hire of the ship. It is open to the charterer to sublet a portion or whole of the vessel unless he is prohibited to do so under the terms of the charter party.
In voyage charters, the charterer is required to load and unload within a specified period of time known as ‘ lay days’. Where the lay days are exceeded the charter incurs a panel charge known as ‘ demurrage; where some days are saved from the lay days, the charterer is rewarded with an allowance termed as ‘ dispatch money’.
A shipper who has chartered a vessel may provide shipping space to other exporters and issue bills of lading. If and when a bill of lading is issued by the charter of a ship, such a document will be subject to the terms and conditions of the charter party i.e. the contract between the charter and the owners of the vessel. A bank, which is called upon negotiable a bill of exchange accompanied by a charter party bill of lading or where it is offered as collateral for a loan or advance, will not accept such a bill of lading until it has examined and is satisfied with the terms and conditions of the charter party.
## The bill of lading :
The bill of lading is one of the most important documents which accompanies bills of exchange drawn under letter of credit.It is an evidence of the fact that goods have been dispatched by the exporter and gives the importer title of goods and enables him to collect them on arrival at destination.
A bill of lading is a document issued by shipping company and signed by the master of a ship or by the shipowners or their agents acknowledgement the receipt of specified goods for carriage and embodying an undertaking that the goods will be delivered to a consignee named in the bill, or to his order or assigns or merely to order.The documents specifies the port of shipment, the destination, and conditions under which the goods are received for carriage.
It is at the same time a receipt for goods delivered to the carrier for transportation, a contract between the shipper and the carrier for transportation of goods and their delivery to the consignee or his order and a documents of title to the goods giving the holder title to the goods mentioned.
Bills of lading are generally made out in the sets of two or three originals. All the originals duly signed by the master of the ship or the agent of the steamship company and all the originals are equally valid for taking the delivery of goods and once one original copy is utilized the other originals become null and void.
## World trade organization (WTO):
World Trade Organization (WTO), international organization established to supervise and liberalize world trade. The WTO is the successor to the General Agreement on Tariffs and Trade (GATT), which was created in 1947 in the expectation that it would soon be replaced by a specialized agency of the United Nations (UN) to be called the International Trade Organization (ITO). Although the ITO never materialized, the GATT proved remarkably successful in liberalizing world trade over the next five decades. By the late 1980s there were calls for a stronger multilateral organization to monitor trade and resolve trade disputes. Following the completion of the Uruguay Round (1986–94) of multilateral trade negotiations, the WTO began operations on January 1, 1995.
## Straight Bill of Lading (SBOL):
Straight Bill of Lading (SBOL) is one which is made out in the name of consignee. At the port of destination it is not necessary to present a straight bill of lading to take delivery of goods, except where it is necessary for the purpose of identification. If the consignee is known to the master of the ship, goods are delivered against a simple receipt. An ‘order’ bill of lading is one which is made out to the order of the consigner or supplier,It can be transferred by endorsement to other parties.Such a bill of lading usually contains a condition directing the shipping company to notify the consignee when the goods arrived in case of straight bill of lading, the consignor loses control over the goods as soon as the bill is obtained from the shipping company.The title to the goods cannot be transferred to the intermediate parties, such as a bank and therefore, the document has no use as collateral. It can not be attached to bills of exchange presented for negotiation. This type of bill of lading is generally used when goods are cousigned by a firm to a branch or where the buyer has paid in advance and there is no need for financing , The document has only limited use in special circumstances.
## North American Free Trade Agreement(NAFTA):
Answer: The North American Free Trade Agreement (NAFTA) is a treaty between Canada, Mexico and the United States. That makes NAFTA the world’s largest free trade agreement. The gross domestic product of its three members is more than $20 trillion. NAFTA is the first time two developed nations signed a trade agreement with an emerging market country.
The three signatories agreed to remove trade barriers between them. By eliminating tariffs, NAFTA increases investment opportunities. The NAFTA agreement is 2,000 pages, with eight sections and 22 chapters.
On September 30, 2018, the United States, Mexico, and Canada renegotiated the North American Free Trade Agreement. The new deal is called the United States-Mexico-Canada Agreement. It must be ratified by each country’s legislature. As a result, it wouldn’t go into effect before 2020.
The Trump administration wanted to lower the trade deficit between the United States and Mexico.
The new deal changes NAFTA in six areas. The most important is that auto companies must manufacture at least 75 percent of the car’s components in the USMCA’s trade zone.
NAFTA’s pros and cons are hotly debated. Critics point to three main disadvantages of NAFTA. First, it sent many U.S. manufacturing jobs to lower-cost Mexico. Second, workers who kept jobs in those industries had to accept lower wages. Third, Mexico’s workers suffered exploitation in its maquiladora programs.
But NAFTA also has three significant advantages. U.S. grocery prices would be higher without tariff-free imports from Mexico. Imported oil from both Canada and Mexico has prevented higher gas prices. NAFTA has also increased trade and economic growth for all three countries.
Functions of NAFTA:
First, NAFTA grants the most-favored-nation status to all co-signers. That means countries must give all parties equal treatment. That includes foreign direct investment. They cannot give better treatment to domestic investors than foreign ones. They can’t offer a better deal to investors from non-NAFTA countries. Governments must also offer federal contracts to businesses in all three NAFTA countries.
Second, NAFTA eliminates tariffs on imports and exports between the three countries. Tariffs are taxes used to make foreign goods more expensive. NAFTA created specific rules to regulate trade in farm products, automobiles and clothing. These also apply to some services, such as telecommunications and finance.
Third, exporters must get Certificates of Origin to waive tariffs. That means the export must originate in the United States, Canada or Mexico. A product made in Peru but shipped from Mexico will still pay a duty when it enters the United States or Canada.
Fourth, NAFTA establishes procedures to resolve trade disputes. Chapter 52 protects businesses from unfair practices. The NAFTA Secretariat facilitates an informal resolution between the parties. If this doesn’t work, it establishes a panel to review the dispute. That helps all parties to avoid costly lawsuits in local courts. It helps the parties interpret NAFTA’s complex rules and procedures. These trade dispute protections apply to investors as well.
Fifth, all NAFTA countries must respect patents, trademarks, and copyrights. At the same time, the agreement ensures that these intellectual property rights don’t interfere with trade.
Sixth, the agreement allows business travelers easy access throughout all three countries.
NAFTA has two other agreements that update the original. The North American Agreement on Environmental Cooperation supports the enforcement of environmental laws. The North American Agreement on Labor Cooperation protects working conditions.
How NAFTA Affects the U.S. Economy
NAFTA increased the competitiveness of the these three countries in the global marketplace. It allows them to better compete with China and the European Union. In 2007, the EU replaced the United States as the world’s largest economy. In 2015, China replaced both.
It took three U.S. presidents to put NAFTA together. President Ronald Reagan kicked it off during his campaign in 1980. He wanted to unify the North American market to better compete with the EU.
In 1984, Congress passed the Trade and Tariff Act. That gave the president “fast-track” authority to negotiate free trade agreements. It permits Congress only the ability to approve or disapprove. Congress can’t change negotiating points. Otherwise, countries would never concede valuable trade privileges.
In 1992, President George H.W. Bush signed NAFTA after he took office. It then went back to the legislatures of all three countries for ratification.
In 1993, President Bill Clinton signed it. NAFTA became law January 1, 1994. For more, see History and Purpose of NAFTA.
NAFTA would have been smaller than two other agreements. But the Trump administration pulled out of the Trans-Pacific Partnership. It has not pursued the Transatlantic Trade and Investment Partnership.
## The European Union:
The European Union (EU) was formally established when the Maastricht Treaty—whose main architects were Helmut Kohl and François Mitterrand—came into force on November 1, 1993. The European Union is an economic and political union of 27 member states which are located primarily in Europe. Its de facto capital is Brussels. In 2004, the EU saw its biggest enlargement to date when Cyprus, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovakia, and Slovenia joined its ranks. On December 9, 2011, Croatia signed the EU accession treaty making it the 28th member state as of July 2013.
The EU operates through a system of supranational independent institutions and intergovernmental negotiated decisions by the member states. Important institutions of the EU include the European Commission, the Council of the European Union, the European Council, the Court of Justice of the European Union, and the European Central Bank. The European Parliament is elected every five years by EU citizens.
The EU has developed a single market through a standardized system of laws which apply to all member states. EU policies aim to ensure the free movement of people, goods, services, and capital; enact legislation in justice and home affairs; and maintain common policies on trade, agriculture, fisheries, and regional development.
With a combined population of over 500 million inhabitants, or 7.3% of the world population, the EU generated the largest nominal world gross domestic product ( GDP ) of 17.6 trillion US dollars in 2011. This figure represented approximately 20% of the global GDP when measured in terms of purchasing power parity.
## Reimbursing Bank:
Reimbursing Bank shall mean the bank instructed and/or authorized to provide reimbursement pursuant to a reimbursement authorization issued by the issuing bank.
Reimbursing Bank is the settlement bank between the issuing bank and the nominated bank or the confirming bank.
If letter of credit currency is USD, reimbursing bank is usually located in US. If letter of credit currency is EUR, reimbursing bank is generally located in Germany.
## What you know about SWIFT:
SWIFT (Society for Worldwide Inter Bank Financial Telecommunication) is a in the automation of the global financial industry. Established in 1973, the bank owned co-operative has achieved its first mission to standardize and automate international payments messaging for the benefit of banks through the world.
Today, SWIFT is a strategic asset of the international banking community and its most financial system. Customers trust the SWIFT network to transmit over 680 million messages a year.
SWIFT is helping its members to prepare for the 21st century by facilitating the full automation and integration of all activities related to end financial transaction messaging and Processing. This will allow members to reduce risks further and improve thing competitive Position.
Head Office : Belgium
Other Offices : United States , Hongkong.
Customer Service Centres:
There is a three service centres such as
1) United States.
2) The Netherlands.
3) Asia Pacific.
These three centers are to be opened 24 hours. If one service centre is stop, automatically other service centre will receive the message. Customer does not feel any disturbance.
In 1973, SWIFT was found by 239 banks in 15 countries to create a united international transaction processing and transmission system.
In 1977, The first message was sent SWIFT counted 513 member banks in 15 countries. In 1987, Membership expands to include financial institutions operating in securities
and Money markets.
In 1993, 100 country connected, 2 million messages received daily.
1999 Oct. 189 countries are involved and more than 4 million messages sent daily.
SWIFT Membership :
2) Sub Members
## The International Development Association (IDA):
The International Development Association (IDA) is an international financial institution which offers concessional loans and grants to the world’s poorest developing countries. The IDA is a member of the World Bank Group and is headquartered in Washington, D.C., United States. It was established in 1960 to complement the existing International Bank for Reconstruction and Development by lending to developing countries which suffer from the lowest gross national income, from troubled creditworthiness, or from the lowest per capita income. Together, the International Development Association and International Bank for Reconstruction and Development are collectively generally known as the World Bank, as they follow the same executive leadership and operate with the same staff.
The association shares the World Bank’s mission of reducing poverty and aims to provide affordable development financing to countries whose credit risk is so prohibitive that they cannot afford to borrow commercially or from the Bank’s other programs. The IDA’s stated aim is to assist the poorest nations in growing more quickly, equitably, and sustainably to reduce poverty.The IDA is the single largest provider of funds to economic and human development projects in the world’s poorest nations.From 2000 to 2010, it financed projects which recruited and trained 3 million teachers, immunized 310 million children, funded $792 million in loans to 120,000 small and medium enterprises, built or restored 118,000 kilometers of paved roads, built or restored 1,600 bridges, and expanded access to improved water to 113 million people and improved sanitation facilities to 5.8 million people. The IDA has issued a total $238 billion USD in loans and grants since its launch in 1960. Thirty-six of the association’s borrowing countries have graduated from their eligibility for its concessional lending. However, eight of these countries have relapsed and have not re-graduated.
## Export Development Fund (EDF) :
Export Development Fund (EDF) is a special credit window created by Bangladesh Bank to provide short-term finance in foreign currency for import of raw materials by opening L/C at sight by the export oriented garment industries.
At the request of Bangladesh Government with a view to developing its export, the International Development Organization (IDA) established an export development fund in Bangladesh Bank (Loan – 2000 BD). In this respect a treaty was signed with IDA on 26 April 1989 and the project started its activity from October’ 89.
Initial Proposed fund for 31.20 mUS$ was arranged as under:
i. IDA – 25.00 mUS$
ii. Bangladesh Govt. – 5.00 mUS$
iii. US Aid – 1.20 mUS$
• To help import financing for the exporters of non-traditional items, especially where high value addition is maintained.
• To grow confidence of foreign suppliers.
• To expedite high value added export where import is made under BTB LC under bonded warehouse system.
1. Limit US$500,000.00 for single import bill.
2. Aggregated amount US$20,00,000.00 to single importer at the time of disbursement.
3. Interest LIBOR + 1% and 10% for interim period
4. To be refunded within 180 days from the date of receipt of fund from Bangladesh Bank (may be extended to 270 days for special case)
1.Intimation to Bangladesh Bank:
• At the time of opening EDF BTB LC, intimation in a prescribed form stating details of LC is given to Bangladesh Bank through International Division.
• The branch will claim for disbursement of EDF sub-loan immediately after receipt of Negotiated import bills complying credit terms from the negotiating bank abroad.
What is a Cross Rate?
A cross rate is the currency exchange rate between two currencies when neither are the official currencies of the country in which the exchange rate quote is given. Foreign exchange traders often use the term to refer to currency quotes that do not involve the U.S. dollar, regardless of what country the quote is provided in.
The cross rate is the currency exchange rate between currency A and currency C derived from exchange rate between currency A and currency B and between currency B and currency C.
Currency vendor provides quotes for only the most liquid currencies such as the US dollar, Euro, Pound Sterling, Swiss Franc, etc. Exchange rates between other currencies is normally calculated as the cross rates using the quotes for major currencies.
Understanding Cross Rate
An exchange rate between the euro and the Japanese yen is considered to be a cross rate in the market sense because it does not include the U.S. dollar. In the pure sense of the definition, it is considered a cross rate if it is referenced by a speaker or writer who is not in Japan or one of the countries that uses the euro. While the pure definition of a cross rate requires it be referenced in a place where neither currency is used, the term is primarily used to reference a trade or quote that does not include the U.S. dollar.
## Combined Bill of Lading:
Combined transport bill of lading. a document that gives information about goods being transported in large containers by sea and land : The combined transport bill of lading covers whatever means of transport is used when the majority will be by sea.
## Foreign Correspondents:
## Bill of Entry:
## Consular Invoice:
A document required by some foreign countries, showing shipment information such as the consignor, consignee, and value description, etc. Certified by a consular official of the importing country stationed in the foreign country, it is used by the country’s customs officials to verify the value, quantity, and nature of the shipment.
Prepared by: exporter
## Dhaka inter-bank offer rate (DIBOR):
Interbank market is considered to be a risk free market, though in reality, the banks do carry counterparty risk. However, for practical purposes, interbank market carries lowest risk, not only to sovereign risk; hence the interest rates prevailing in interbank market constitute “benchmark” rates.
Bangladesh Bank Governor Atiur Rahman formally launched on 6th January 2010. Dhaka inter-bank offer rate (DIBOR), which will help banks get a benchmark interest rate or reference rate.
In line with the international regulators, the central bank issued a circular in December making the inter-bank offer rate effective from January 1 ,2010.
The governor said: “An established benchmark rate is required for the buoyancy and transparency of any interbank market. Hopefully, this is a beginning towards the development of a liquid interbank term market in Bangladesh.”
“DIBOR will provide a leading indicator of our economic and financial condition to foreign investors, who for long have been enquiring about such an indicator,” the BB governor said.
“For the domestic market it will provide a reference rate to price various new products. In the long run, DIBOR should allow the financial institutions to develop new and innovative products, which will bring benefits to business community and the economy as a whole.”
Lending to local customers as well as foreign investors may be benchmarked with this new reference rate and will impact cost of fund of multiple entities, Rahman said.
“A benchmark rate will create a positive impression on our market and attract more foreign investors, as they will now have a reference rate, which they can use to estimate their financial projections.”
Rahman also thanked Bangladesh Foreign Exchange Dealers’ Association for its efforts in rolling out the offer rate. He called upon the association members to regularly contribute to the inter-bank offer rate as per the parameters set by the association.
Such offer rates existing in other cities include LIBOR in London, SIBOR in Singapore, TIBOR in Tokyo and EURIBOR in eurozone.
The central bank has introduced DIBOR after an effort of around four years.
Brexit is the withdrawal of the United Kingdom from the European Union. Following a referendum held on 23 June 2016 in which 51.9 percent of those voting supported leaving the EU, the Government invoked.
Brexit is an abbreviation for “British exit,” referring to the U.K.’s decision in a June 23, 2016 referendum to leave the European Union (EU). The vote’s result defied expectations and roiled global markets, causing the British pound to fall to its lowest level against the dollar in 30 years
What is the main purpose of Brexit?
Europe is Britain’s most important export market and its biggest source of foreign investment, and membership in the bloc has helped London cement its position as a global financial center. An announcement, or at least a threat, from a major business to leave Britain because of Brexit is a regular occurrence.
## The Asian Development Bank (ADB) :
The Asian Development Bank (ADB) was conceived in the early 1960s as a financial institution that would be Asian in character and foster economic growth and cooperation in one of the poorest regions in the world.
A resolution passed at the first Ministerial Conference on Asian Economic Cooperation held by the United Nations Economic Commission for Asia and the Far East in 1963 set that vision on the way to becoming reality.
The Philippines capital of Manila was chosen to host the new institution, which opened on 19 December 1966, with 31 members that came together to serve a predominantly agricultural region. Takeshi Watanabe was ADB’s first President.
During the 1960s, ADB focused much of its assistance on food production and rural development.
The Asian Development Bank aims for an Asia and Pacific free from poverty. ADB in partnership with member governments, independent specialists and other financial institutions is focused on delivering projects in developing member countries that create economic and development impact.
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