Unit 4: Financing of International Trade
4.1 Bill of Exchange
The instrument: the negotiable order — the drawer’s unconditional order to the drawee to pay the payee (the three parties’ design); the acceptance (the drawee’s commitment — the acceptor’s liability); the negotiation (the endorsement’s transfer); the payment. The trade’s use: the payment’s term (the credit sales — the time bill); the collection route (the documentary collection: the D/P-and-D/A terms — the documents against payment/acceptance); the discounting (the banker’s purchase — the liquidity’s source). The law: the negotiable-instruments law’s family (the Bills of Exchange Act 1882’s lore; the Nepali Negotiable Instruments legislation — the Banking course’s depth, LAW5802).
4.2 Direct Payment
The simple route: the buyer’s payment to the seller (the advance, the open-account, the consignment’s settlement). The risk’s allocation: the advance (the buyer’s trust — the seller’s security); the open account (the seller’s trust — the buyer’s credit); the consignment (the agent’s sale — the settlement later). The instruments: the wire transfers (the banking channels — the NRB’s faces); the currency-and-compliance questions (the exchange controls, the KYC-and-AML of the Banking course’s world).
4.3 Documentary Credits
The letter of credit (L/C): the bank’s promise — the issuing bank’s undertaking to pay the seller (the beneficiary) against the documents’ presentation (the credit’s terms: the documents — the invoice, the B/L, the insurance, the inspection certificates). The principle of independence (the autonomy): the credit separate from the sale (the bank pays on the documents — not the goods; the fraud exception’s narrowness). The strict-compliance doctrine: the documents’ exact match (the UCP’s standard — the ICC’s Uniform Customs-and-Practice 600’s faces); the discrepancies’ consequences (the refusal’s notice; the cure’s window). The parties’ chain: the applicant (the buyer), the issuing bank, the advising bank, the confirming bank (the added promise), the nominated-and-transferring banks. The types: the sight-usance credits; the revocable-irrevocable (the modern irrevocable norm); the confirmed (the country-risk cover — the developing-country trade’s staple); the transferable-and-back-to-back (the intermediary trade); the standby (the default’s security — the guarantee’s sibling). The Nepal practice:
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