Apr 19, 2016

Finance English practice: Unit 45 — Financing International Trade

22 cards
, 57 answers
  • Complete the sentences below. Use the key words if necessary.
    • Documentary credits

      key words
      exporter      ○      importer      ○      documentary credit      ○      letter of credit      ○      irrevocable      ○      Irrevocable credits


      A company which sells goods or services to other countries is known as an . A company which buys products from other countries is called an . Payment for imported products is usually by , also called a . This is a written promise by a bank to pay a certain amount to the seller, within a fixed period, when the bank receives instructions from the buyer.

      Documentary credits have a standard form. They generally contain:
      • a short description of the goods
      • a list of shipping documents required to obtain payment
      • a final shopping date
      • a final date (or expiration date) for presenting the documents to the bank.

      Documentary credits are usually , meaning that they cannot be changed unless all the parties involved agree. guarantee that the bank which establishes the letter of credit will pay the seller if the documents are presented within the agreed time.

      Bills of exchange

      key words
      bill of exchange      ○      draft      ○      endorse


      Another method of payment is a or . This is a payment demand, written or drawn up by an exporter, instructing an importer to pay a specific sum of money at a future date. When the bill matures, the importer pays the money to its bank which transfers the money to the exporter’s bank. This bank then pays the money to the exporter after deducting its charges.

      A bank may agree to or accept a bill of exchange before it matures. To endorse a bill is to guarantee to pay it if the buyer of goods does not. If a bill is endorsed by a well-known bank, the exporter can sell it at a discount in the financial markets. The discount represents the interest the buyer of the bill could have earned between the date of purchase and the bill’s maturity date. When the bill matures, the buyer receives the full amount. This way the exporter gets most of the money immediately, and doesn’t have to wait for the buyer to pay the bill.

      Export documents

      key words
      shipment      ○      commercial invoice      ○      bill of lading      ○      carrier      ○      insurance certificate      ○      in transit      ○      certificate of origin      ○      Quality      ○      weight      ○      export licence


      Exporters gave to prepare a number of documents to go with the or transportation of goods.
      • The contains details of the goods: quantity, weight, number of packages, price, terms of delivery, terms of payment, and information about the transportation.
      • The is a document signed by the or transporter (e.g. the ship’s master) confirming that the goods have been received for shipment; it contains a brief description of the goods and details of where they are going.
      • The also describes the goods and contains details of how to claim if they are lost or damaged — while being transported.
      • The states where the goods come from.
      and certificates, issued by private inspection and testing companies, may be necessary, confirming that these are the correct goods in the right quantity and quality.
      • An giving the right to sell particular goods abroad is necessary in some cases.

    • Are the following statements true or false?
      • 1. With a letter of credit, the buyer tells the bank when to pay the seller. clue
        A letter of credit is a written promise by a bank to pay a certain amount to the seller when the bank receives instructions from the buyer.
        • false
        • true

      • 2. Letters of credit are only valid for a certain length of time. clue
        A letter of credit is a written promise to pay a certain amount within a fixed period.
        • true
        • false

      • 3. An exporter usually has the right to change a letter of credit. clue
        Documentary credits are usually irrevocable, meaning that they cannot be changed unless all the parties involved agree.
        • false
        • true

      • 4. The bill of lading confirms that the goods have been delivered to the buyer. clue
        The bell of lading is a document confirming that the goods have been received for shipment
        • false
        • true

      • 5. With a bill of exchange, the seller can get most of the money before the buyer pays. clue
        If a bill is endorsed by a well-known bank, the exporter can sell it in the financial markets. This way the exporter gets most of the money immediately, and doesn’t have to wait for the buyer to pay the bill.
        • true
        • false

      • 6. Bill of exchange are sold at less than 100%, but redeemed at 100% at maturity. clue
        The exporter can sell it at a discount. When the bill matures, the buyer receives the full amount.
        • false
        • true

    • Put the sequence of events in the correct order. The last stage is b.
      • a — A bank accepts or endorses the bill of exchange.

        • b — The accepting bank pays the full value of the bill of exchange to whoever bought it.

          • c — The exporter sell the bill of exchange at a discount on the money market.

            • d — The importer receives the goods and pays its bank.

              • e — The importer’s bank transfers the money to the accepting bank.

                • f — The seller or exporter writes a bill of exchange and sends it to the buyer or importer (and ships the goods).
                  • a, f, c, d, e, b
                  • f, a, c, d, e, b
                  • f, a, d, c, e, b

              • Make the word combinations with the nouns below. Use words from the box.
                • the box
                  accept      draw      endorse      sell      write      prepare      present      require      sign      describe      receive      sell      transport

                  • a bill of exchange
                    a bill of exchange
                    a bill of exchange
                    a bill of exchange
                    a bill of exchange

                    • documents
                      documents
                      documents
                      documents

                      • goods
                        goods
                        goods
                        goods

                      • Complete the sentences.
                        • 1. Exporters can get paid sooner if a bill of exchange is  . . . 
                          accepted
                          by a bank.
                          • described
                          • accepted

                        • 2. The bill of lading and the insurance certificate both  . . . 
                          describe
                          the goods.
                          • describe
                          • endorse

                        • 3. Exporters  . . . 
                          sell
                          goods to foreign countries.
                          • accepted
                          • sell

                        • 4. The transporter  . . . 
                          signs
                          a document confirming that it has  . . . 
                          received
                          the goods.
                          • endorses | sold
                          • signs | received

                        • 5. In order to be paid, the exporter has to  . . . 
                          present
                          the shipping documents to a specific bank.
                          • present
                          • sign

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