Questions:
(a)
i. Negotiation of letter of credit- request to confirming Bank to pay upon handing-over and verification of documents in relation to a confirmed letter of credit.
ii. Trust Receipts- receipts issued to the warehouse manager authorizing the withdrawal of goods from the warehouse kept under the responsibility of a Bank. The warehouse contains goods imported for a customer, but financed by a bank.
iii. Avalised bill of exchange - bill of exchange on which a bank puts its signature to pay at expiry date.
(b) Structured Trade Finance Deals are deals between the importer and the Bank, but with the help of a warehouse manager, a quality/ quantity surveyor, together with an insurance company. The Bank import s goods on behalf of the importer and goods are stored in a bonded warehouse, whose manager has been nominated by the Bank. No goods can leave the warehouse without the prior written approval of the Bank. The Warehouse manager works solely for the Bank. The Surveyor has the responsibility to verify the quality and quantity of goods that enter the warehouse and he reports to the Bank. This is a control on the Warehouse manager. The insurance company insures the goods as well as the warehouse against unforeseen contingencies. Each time the importer needs goods, he has to repay part of the debts with the Bank and then the Bank issues a trust receipt to the Warehouse manager authorizing the remittance of goods to the importer.
(c) MadaChimi can be requested to import only against letters of credit opened by acceptable banks. Against this proposal, Chemico may consider conceding a small discount that could cover the fees and commissions on letters of credit, taking into account the good level of profit made on this deal.
Chemico might also consider taking an export insurance such as Atradius or Gerling NCM on Madachimi. Should the insurance company accept to cover the risk on Madachimi, it would be a good indication that Madachimi has got good credit risk ratings. Once insured, the Bank may provide advances on exports already covered by an insurance company.