Book Online Tickets for MANAGING RISKS IN INTERNATIONAL TRADE AN, Mumbai. Introduction:
(Currency risk/counter party risk / country risk)
AND
COMPLYING WITH FEMA 1999 REGULATIONS
In international trade, transactions are happening with unknown parties in different countries.  In general companies are exposed to default

MANAGING RISKS IN INTERNATIONAL TRADE AND COMPLYING WITH FEMA (2 DAYS)

 

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About The Event

Introduction:

(Currency risk/counter party risk / country risk)

AND

COMPLYING WITH FEMA 1999 REGULATIONS

In international trade, transactions are happening with unknown parties in different countries.  In general companies are exposed to default risk of the counter party, country risk and currency exchange risks. 

Recently few cases are reported wherein Indian exporters were not able to recover their payments from the overseas buyers even though they received letter of credit as security.  Few cases are shared below: 

  • Indian exporter insisted a letter of credit from the overseas buyer to safeguard the default risk.  Buyer readily agreed and arranged for a letter of credit in favour of the Indian exporter.  Good were shipped and documents drawn under the letter of credit were presented through the exporter’s bank to the issuing bank.  Even after six months there was no response from the issuing bank.  
  • In another case Indian exporter received payment under the letter of credit but there was a deduction of 2.45% as confirmation charges which Indian exporter never expected.
  • Exporters are having good trade opportunities from under developed countries but always faced with default risks.

Last year it was reported in the market that more than 80,000 exporters were put under caution list for non-compliance of FEMA (Foreign Exchange Management Act) 1999.  When some of the cases were reviewed it was found that the exporter could realize more than 95% of the export proceeds but a small portion remained outstanding.  Though exporting company had written off financially it was not properly reported to Reserve Bank.  Reserve Bank through a system called EDPMS was able to capture the data of exporters who had not brought full payment to India within the prescribed IDPMS.   Though lots of powers are delegated to Authorised Dealers (AD) still there is a gap in implementing the delegated authority by AD.

Recently in 2018 USD moved from 63 to 75 levels.  Some of the exporters were waiting the USD to cross 75 levels to cover their exposures and some of the importers rushed to the market and covered their exposure at 74 levels.  But USD/INR came down to 67 levels.  Exporters missed the opportunity of capitalizing the up movements and importers rushed to the market at an inappropriate time.  When the currency market is moving on either side, companies should have a basic idea of understanding the currency market and should have currency risk management strategy.

This work shop is designed to provide an update to the participants to manage:

  • The default risk and country exposure how to receive a workable letter of credit and how to present a set of documents without any discrepancy to get the maximum benefit of the letter of credit.  From the Importers view how to structure a letter of credit to ensure that overseas seller complies with his entire contractual obligation and receive the desired goods. Practical hands on experience will be provided to the participants with a live case study. To have a thorough understanding of Foreign Exchange Management Act (FEMA) 1999 on export and import of goods and services and to avoid being caution listed in future the responsibilities and obligations of the exporting and importing companies with specific reference to FEMA guidelines will be discussed with case studies.
    • In this case study we will be discussing the implication of each Field in the revised SWIFT LC format which came into effect from 19th Nov 2018 with specific reference to UCP 600 appropriate articles. (Rules for LC transactions – Uniform Customs and Practice for Documentary Credits ICC 600)
    • To avoid discrepancies in the export documents under letter of credit, case studies will be introduced with specific reference to International Standard Banking Practice on Examination of Documents under Documentary Credit (ISBP 745).  This set of guidelines have reduced the discrepancies but the market is not aware about this publication at all (except few corporate and bankers).
  • To understand the currency movement a practical exercise will be introduced on currency market.  We will be discussing various types of currency exposure any company may have whether they have export or imports or only domestic transactions how they are getting affected by the global developments.  What type of risk management strategy to manage the currency risk a company should adopt?

 

Course Contents:

Day 1:  Export Related Discussions And Managing Currency Risks

  1. Overview of Global trade opportunities and a basic understanding of risks Impact of terms of delivery in influencing the pricing – how to choose appropriate INCOTERMS (International Commercial Terms) 2010 – difference between CIF and CIP etc.,- transference of risk from seller to buyer at which point of movement of goods.
  2. Different terms of trade settlements (payments) and the relevant risk factors.How to draft a letter of credit and identify the risky conditions.  Detailed discussions on SWIFT 700 format.  Difference between MT 700 and MT 710 – practical case study with specific reference to UCP 600.
  3. Different types of LCs and its uses for specific transactionsDifference between LCs and Standby LCs – in the structure and the RulesDifference between Standby Letter of Credit and Bank guaranteesDocuments in a letter of credit transaction – impact of ISBP 745 on discrepant documents with live case study.
  4. Foreign Exchange Management Act (FEMA 1999) on import of goods and services – with case studyObligations and responsibilities of an importer under FEMA 1999Impact of IDPMS in import transactionsProof of import – Bill of Entry data in IDPMS and physical copy of Bill of Entry in certain portsArranging Suppliers credit and buyers credit through LC transactionsHigh Sea sales transactions and Merchanting trade transactionsNon submission of proof of import and the impacts.

 Day 2:  Export Related Discussions And Managing Currency Risks

  1.  Foreign Exchange Management Act (FEMA) 1999 on export of goods and services with case studiesImpact of EDPMS in export transactionsHow an exporter is caution listed and how to avoid itApplying for extension / reduction in value / write off proceduresAdvance remittance for exports – changes in FEMA provisions.
  2. Handling export letters of credit  At the time of confirming the order sending a draft copy of LCAt the time of receipt of LCAt the time of presenting documentsCommonly observed discrepancies and how to avoid it.Impact of ISBP 745 on documents with case study.
  3. Export finance – Pre and Post shipment in Rupees or in Foreign currencyHow to choose the currency  of the export creditManaging risks through Export Credit Guarantee Corporation (India) LtdManaging risks through International Factoring – how it operates and how SME segments can take advantage with case study.
  4. Understanding currency risks Different type of exposures in currency  market – transaction / translation/ economic exposureDevelopment of foreign exchange market in India How to plan the risk management strategy –  a company in house policy with practical exercise – Corporate treasury to operate as cost centre or profit centreForeign currency credit Vs Rupee credit – how to choose right option.

Target Audience:

  • Marketing and sales team
  • Finance Managers
  • Procurement team managing imports
  • Export and import trade heads
  • Treasury in charges in companies
  • Logistics managers
  • Banking professionals who want to understand their client’s needs and identify suitable products
  • Banking professionals who are managing operations and regulatory compliance
  • Regulatory compliance officers (especially FEMA related issues)

Summing up by discussing check list for import and export exposures

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