The solution will cover International Financing Methods, Financial Transaction Risks, Legal Requirements for the Documents, Letter of Credit Transaction, Incoterms for Imports and Exports, Finance, Documents, and Logistics.
International Financing Methods:
The Uniform Custom and Practice for Documentary Credits (UPC) is a document that contains standardized rules for issuing and handling letters of credit, which is published by the International Chamber of Commerce and the international banking community (Shaffer, 2011). The UPC creates the standard for letter of credit, established regulations by which banks process letter of credit transactions, and defines the rights and responsibilities of all parties to the credit (Shaffer, 2011). Letters of credit transactions are governed or regulated by the UCP only to the extent that it states that it is to be interpreted according to the UCP. The UCP is used by judges in deciding letter of credit cases, and references it in every reported decision on international letters of credit (Schaffer, 2011).
Financial Transaction Risks:
The risks of financial transaction when buying and selling goods in foreign countries are delivery risk and payment risk. Delivery risk is the risk to the buyer that the seller will fail to ship the goods as stated in the sales contract (Schaffer, 2011). The payment risk is the risk to the seller that the buyer will fail to pay as promised (Schaffer, 2011). Both risks can result in litigation that can develop from the breach of the sales contract and the risk of fraud (Blodgett & Wilson, 1993). The bank is not concerned about what the parties promised to do under the contract, rather that the buyer presents required documents to the bank. These documents include commercial invoice, bill of lading, insurance policy, etc. required by the letter of credit. The purposes of these documents are to serve as customs declaration, a document of title of goods, and liability coverage against damage (Schaffer, 2011).
Legal Requirements for the Documents:
The legal requirements for these documents are as follows: 1) commercial invoice; must be provided by the person or corporation that is exporting an ...
The Solution provides a short explanation of the financial terms: International Financing Methods, Financial Transaction Risks, Legal Requirements for the Documents, Letter of Credit Transaction, Incoterms for Imports and Exports, Finance, Documents, and Logistics.