1. International Trade, Cash Management and Taxes

2. Payment Terms in International Trade 1. Cash in advance (importer pays first) 2. Letter of Credit, L/C (bank is credit risk) 3. Draft (importer is credit risk) 4. Consignment (importer pays after making a sale) 5. Open Account (importer makes periodic payments)

3. Letter of Credit 1. Irrevocable vs. Revocable 2. Documentary vs. Clean 3. Confirmed vs. Unconfirmed 4. Transferable (to a secondary beneficiary)

4. Drafts (Bill of Exchange) 1. Drawer (usually the payee) 2. Drawee (payer) 3. For confirmed L/C the drawee is the confirming bank 4. Sight Draft (paid at dox presentation) 5. Time Draft (paid at specified future date) 6. Banker’s Acceptance

5. Documents in International Trade 1. Bill of Lading 2. Commercial Invoice 3. Insurance Certificate 4. Consular Invoice

6. Financing Trade 1. Banker’s Acceptance 2. Discounting Trade Draft 3. Factoring (non recourse) 4. Forfaiting (popular in Western Europe) – Medium term receivables – Usually capital goods – 1.25% over cost of funds

7. Government Sources of Export Financing and Credit Insurance 1. Ex-Im Bank 2. Private Export Funding Corp. (PEFCO) 3. Export Credit Insurance 4. Foreign Credit Insurance Association

8. Countertrade 1. Citi’s Export Trading Company 2. Barter (Iran oil for guns) 3. Counterpurchase – Pepsi sells soft drinks for Russian rubles – Uses rubles to buy and export vodka 4. Buyback (natural gas from investment in gas fields)

9. FX Risk and Trade Transactions 1. Do nothing 2. Forward contracts 3. Options 4. Timing Options

10. International Taxes 1. Value Added Tax 2. Income Tax 3. With-holding Tax 4. Excise Tax (import tariff) 5. Sales Tax 6. Payroll Tax

11. International Cash Management 1. Multilateral Netting 2. Re-invoicing Center 3. Concentrating FX Exposures 4. Leading and Lagging intercompany payments 5. Borrow and deposit with banks as necessary 6. Captive Finance Company