CHAPTER 4: CURRENT OPERATIONS IN INTERNATIONAL PAYMENT
4.3. Process in international payment under letter of credit method at Sacombank
4.3.1. Profession in imported Letter of Credit
In term of the imported L/C, Sacombank play a role as beneficiary. Process of imported L/C will include the following:
4.3.1.1. Steps of issuing Letter of Credit
Sacombank was based on the following criteria to classify clients who need to full collateral security or not:
+ Customers who get international payment transaction in first time or regularly with Sacombank.
61 + The financial indicators, business performance, the level of reputation in the market.
+ Noticeably: the enterprises need to deposit at least 30%.
Figure 4.2: Process of issuing Letter of Credit
Step 1: In branch, staff of IP department will receive the documents about issuing L/C of the customer. In particular, records that customers need to present to issue L/C are:
+ The original application for opening L/C (appendix No.1).
+ A copy of the foreign trade contract / Records with equivalent legal validity.
62 + The original of proposal for foreign currency purchase (if customers want to buy foreign currency for deposit issued L / C). (appendix No.2)
+ A copy of permit for imported quota (for commodities which need permit for imported quota)
+ Legal documents (for the first client in transaction) including:
business registration / investment license, certificate of tax number …
For the case of issuing L/C with collateral security is not worth full 100% L / C, customers need to add the two following papers:
+ The original certificate of insurance (applicant is responsible for buying insurance)
+ The original business plan (if the import for business needs)
Step 2: Then, banking staff will check records, guide customers to modify or supply one of above documents if it is necessary. At the same time, Sacombank‘s staff will advise clients about content of typical risk terms in L/C such as:
+ When it comes to the certificate of insurance: customers purchase C conditions instead of A conditions or insurance does not include tolerance, not the full charge yet, not yet/cannot provide certificate of insurance and irrespective of percentage.
+ In terms of shipping documents: customers enable to present the bill of lading (B/L) under charter party, blank back bill of lading, bad note in B/L, not worth owning commodities.
For the case of issuing L / C collateral security is not worth full 100% L / C: Sacombank‘s staff will analyze and evaluate the effectiveness as well as ability to pay contract on time along with building the solutions to guarantee for the content of L/C with risk and issued recommendations. At this stage, dividing into two cases:
+ In the limited decision of the branch: = < USD 500.000. Except for the L/C at sight, branch‘s long-cooperative companies with the limit which has been previously submitted to the Head Office. So, L/C will be issued by branch‘s manager.
+ In the contrast, exceeding the limit decision of the branch: > USD 500,000. Branch manager will put forward to issue and transfer records to the headquarters in which will announce results for the branch.
Step 3: After the customer‘s records has completed the conditions / issued approval, staff of IP begins counting and recording the amount money to be
63 deducted collateral security/blocked and collecting fees from customers. Here, there will be three specific cases:
+ Case 1: If customers wish to purchase foreign currency from the bank to deposit the staff will make foreign currency trading account.
+ Case 2: If the client does not intend to buy foreign currencies for payment or want to deposit with their own capital funds but they want to temporarily freeze deposit accounts to deposit. So, staff will block customer‘s deposit account.
+ Case 3: Customers will deduct deposits with their own capital in foreign currency of L/C.
Step 4: In the branch, staff in IP will present document to manager of IP department to sign for approval and transfer the entire record to the international payment center at head office through electronics and computer software profession - T24 program.
In the headquarter, staff in IP center will check all these records, if there is any shortage or errors staff in IP canter will call or send email to advise branch for editing / adding necessary documents. Once the inspection is completed and nothing missing, staff in IP center reports transaction in issued L/, charges issuing L/C fee and prepare issued telegraphic transfer.
Next, staff in IP center will submit for director of IP center to sign for approval and telegraphic transfer to abroad. In addition, staff in IP center will transfer to branches through T24 program.
Step 5: Finally, both of branch and IP center at headquarter record and wait for document.
4.3.1.2. Process of processing documents and endorsing Bill of Lading (B/L)
Processing document
Step 1: At the branch, staff receives the documents presented under the L/C and comparison to number of documents, the courier receipt / postal receipt delivery / post office before signing the receipt. Then, staff seal "arrival notice" and note the time of receipt the documents onto cover letter. More importantly, the delivery of documents between the staff together should be recorded
Step 2: Then staff in IP department preliminary checks the following contents:
+ The signatures on the documents presented comply with the signature on the original document of the current UCP.
64 + Number of original documents, extra documents with the number shown on the cover letters t and in accordance with the provisions of the L/C, UCP.
+ Endorsing the bill of lading / authorized delivery / guaranteed delivery…
Step 3: After checking, staff in branch record, certify the result of test and transfer imported L / C document (within 1 day after receiving document from the courier unit / post office) to IP center at headquarter through professional program - T24.
Step 4: At IP center, staff will examine in detail: the content in cover letter of foreign banks and conformity of document with terms and conditions specified in the L/C, UCP. After director of IP center sign for approval, the staff enters documents into the T24 program and transfer result of test to the branch (within 4 working hours after receiving the complete documentation and completion from the branch). At this stage, two cases arise:
Case 1: PRINT arrival notice (by L/C) on the T24 program (banking program Sacombank) if document claim by mail, without endorsing the bill of lading / authorized delivery / guaranteed delivery before original document come bank SCB. SETTING arrival notice (by L/C) if document had paid by cover letter or had endorsed the bill of lading / authorized delivery / guaranteed delivery before original document come back to Sacombank.
Case 2: when it comes to invalid documents, composing telegraphic transfer about invalid documents on T24 and presents it to director of IP center. After that, transferring to abroad and informing to customers about the invalid documents to ensure customer acceptance or not the invalid documents.
Step 5: Finally, at the branch, staff pay or accept payment or record of customer feedback/foreign banks.
65 Figure 4.3: Process of processing and endorsing documents
Endorsing Bill of Lading (B/L)
Step 1: At branch, staff in IP department receives and examine records with following contents: the L/C, name of goods, value of invoice, the amount of traffic on the customer‘s documents in accordance with L/C (if not the original SCB‘s documents). Documents including proposal for bill of lading endorsement (appendix No.3) by supplement of clients which have full content, stamp of company and signed by the competent authority or person authorized in writing.
Step 2: At branch, staff in IP department calculate and record deposit amount / blocked and charge fee from the client. Here, the process is divided into two cases:
Case 1: In term of deduction deposits: proposal for deposit deduction shown following information: the amount money deducted additional collateral, the fees
66 Receiving, inspecting
and processing exported L/C's document
Paying exported L/C
collected from customers including endorsement fees/ consignee authorized/
guaranteed delivery fee, payment fee / acceptance payment or uncollected fees (if any)
Case 2: In term of credit limit in blockade/ deposit account: proposal for deposit deduction / blocked present information:
• The amount money proposed credit limit in blockade/ customer's deposit account (the related costs will be recorded and collected when making payment)
• The amount money deducted requested additional collateral security or additional blockade.
Step 3: At the branch, after completion of charge fee, staff in IP department will present to director of branch to endorse B/L, backup files and hand them to customers with original B/L which has been endorsed. Finally, transferring to IP center (headquarter) the copy of records and recording files.
4.3.1.3. Process of payment in imported Letter of Credit At the branch, staff calculates and records
the amount money to be deducted and charges fee from customer charge. Next, staff carry out some profession such as disbursement of loans, foreign currency account (if customer needs to buy foreign currency from banks to pay L/C) and fulfill deposit to payments. After accounting documents was approved, documents will be transferred to IP center.
At the headquarter, receiving records and staff in IP center will implementing payment accounting, charging from foreign, composing and transferring telegraphic L/C to abroad.
Finally, both of branch and IP center record, close L/C has paid up value.
Figure 4.4: Process of payment in imported L/C