IIBF Trade Finance cheat sheet

Trade cycle: pre-shipment (procurement, packing credit) → shipment (bill of lading, invoice, packing list) → post-shipment (bill discounting, collection, LC negotiation).

Documentary sale is autonomous: banks deal in documents, not goods, services or performance (UCP 600 Art. 5); a compliant tender triggers payment irrespective of underlying cargo disputes.

Bill of lading as document of title: consignee order (to order of shipper/bank) is negotiable; straight consignee named is non-negotiable and cannot be endorsed.

Clean on board date governs shipment date compliance; a 'shipped on board' notation converts a received-for-shipment B/L into an on-board B/L as of that date.

Incoterms 2020 risk transfer: FOB/CFR/CIF risk passes at loading on vessel; FCA risk at delivery to carrier; DAP/DPU/DDP risk at destination - DDP alone places import duty on seller.

CIF/CFR require the seller to procure marine insurance (CIF, minimum 110% of invoice value, Institute Cargo Clauses C unless agreed); FOB/FCA leave insurance to buyer.

Invoice must match LC: description of goods must correspond with LC (Art. 18(c)); other documents may describe goods in general terms not inconsistent with LC.

Discrepancy cost rule: each refusal must state all discrepancies in a single notice within 5 banking days of presentation (UCP 600 Art. 16(c)); pre-checking avoids post-shipment rejection.

UCP 600 timeline: issuing/confirming/nominated bank has maximum 5 banking days after presentation to examine and determine compliance (Art. 14(b)); refusal notice within that period.

Presentation period: if LC silent, documents must be presented within 21 calendar days after shipment and not later than LC expiry (Art. 14(c)).

LC is independent of the sales contract (Art. 4); issuing bank's undertaking is to honour a complying presentation, and confirmation adds a second, separate undertaking in the confirming bank's country.

Amendment binding rule: an irrevocable LC cannot be amended without agreement of issuing bank, confirming bank (if any) and beneficiary; silence is not acceptance (Art. 10).

Transferable LC: may be transferred only if expressly designated 'transferable'; can be transferred once, and fractions may be transferred to multiple second beneficiaries provided partial shipments are allowed (Art. 38).

Tolerance rules: 'about/approximately' = ±10%; a 5% tolerance applies to quantity only when goods are not stated in packing units or individual items (Art. 30).

URC 522 collections: banks act on instructions only, handle documents without examining them, and give no undertaking to pay; goods must not be consigned to a bank without its agreement (Art. 10).

Collection types: documents against payment (D/P) releases documents only against payment; documents against acceptance (D/A) releases against acceptance of a term draft, creating buyer credit risk.

URC 522 protest: if a draft is dishonoured, the presenting bank must give notice of dishonour; instructions on protest/warehousing must be explicit as banks are not obliged to act beyond instructions.

Demand guarantee is independent of the underlying contract; payment is triggered by a complying written demand, not proof of default, unless the guarantee requires specified supporting statements.

URDG 758 examination: guarantor has 5 business days after presentation to examine and either pay or reject (Art. 20); rejection must state each discrepancy (Art. 24).

URDG 758 expiry: a demand must be presented on or before expiry at the place stated; if expiry falls on a non-business day, it extends to the next business day (Art. 26).

URDG 758 force majeure: if the guarantee expires during force majeure, it is extended 30 calendar days after the place of presentation resumes business (Art. 26).

ISP98 standby: examination within 3 business days after presentation (Rule 5.01); standby is irrevocable unless stated otherwise and is suited to financial and non-performance guarantees.

Reduction/termination clauses: guarantees often reduce automatically by amounts paid or on presentation of a shipment document or acceptance certificate; partial drawings must be expressly permitted.

Counter-guarantee chain: instructing party → counter-guarantor → guarantor → beneficiary; each is independent, and the counter-guarantee must mirror the guarantee's terms to avoid mismatch.

URDG 758 Art. 15: a demand must be supported by a statement of breach indicating in what respect the applicant is in breach; the guarantor examines the statement for form only.

FEMA 1999 replaced FERA; it is a regulatory (not prohibition) framework - restrictions are imposed by RBI rules and directions rather than blanket bans.

Export realisation: full export proceeds must be repatriated within 9 months from date of shipment (or as specified by RBI for certain sectors), with extension possible only by RBI/AD bank approval.

Import payment: advance remittance limits and time limits for settlement of import bills are governed by RBI Master Direction on Import of Goods and Services; AD Category-I banks handle documentation.

Export declaration: shipping bill/EDF (export declaration form) is filed with customs; AD bank certifies and monitors realisation via the EDPMS (Export Data Processing and Monitoring System).

Import monitoring: IDPMS (Import Data Processing and Monitoring System) tracks bills of entry against remittances; unmatched entries require closure or write-off approval.

FEMA permits resident individuals to hold foreign currency and use international cards within Liberalised Remittance Scheme (LRS) limits ($250,000 per financial year per individual, subject to RBI revisions).

Current account vs capital account: trade in goods/services is a current account transaction and generally permitted; loans, guarantees and property abroad are capital account and need specific approval or limits.

Compounding: FEMA contraventions can be compounded by RBI under FEMA (Compounding Proceedings) Rules 2000; voluntary disclosure and quantum of contravention affect the compounding amount.

Pre-shipment credit (packing credit) finances procurement/manufacture before shipment; post-shipment credit discounts or advances against export bills after shipment.

Export credit interest: concessional rates apply to eligible rupee export credit, with pricing linked to repo-linked benchmarks and tenor caps set by RBI/IBRD norms.

Forfeiting: exporter sells accepted/availed term bills or promissory notes at a discount to a forfeiter without recourse; the forfeiter bears importer and country risk.

Forfaiting vs factoring: forfeiting is transaction-based, usually medium-term and backed by bank aval/guarantee; factoring is relationship-based, short-term receivables financing with recourse options.

ECGC covers export credit risk: specific policies for buyer/letter of credit risk, and whole-turnover policies; cover percentage is typically up to 90% for certain buyer risks.

Country risk assessment for trade finance includes transfer/convertibility risk, political/event risk and sovereign default; export credit agencies (ECAs) mitigate these with guarantees and insurance.

Bill discounting risk: with recourse, the exporter remains liable on dishonour; without recourse (forfeiting), the financier absorbs the credit loss but retains documentation and fraud risk.

Fraud risk rule: forged bills of lading, phantom shipments and duplicate financing are detected through carrier verification, eBL platforms, and cross-checking EDPMS/IDPMS entries.

MT700 issues a documentary credit; MT701 adds continuation pages; MT707 amends; MT710/MT720 advise credits issued by a third bank; MT730 acknowledges receipt.

MT103 is a single customer credit transfer; MT202 is a general financial institution transfer; MT202 COV carries cover data for a customer payment and includes underlying party details.

MT760 issues a guarantee/standby; MT767 amends it; MT769 reduces or releases the guarantee amount.

MT400/MT412: MT400 advises a collection; MT412 advises acceptance; MT410 acknowledges; MT416 advises non-payment/non-acceptance under URC 522.

MT798 is the free-format message used for trade-related queries and is replaced in MX by structured trade messages with equivalent business roles.

MX migration: ISO 20022 messages replace MT categories; trade messages such as tsrv (trade services) and tsin (trade instruments) use structured XML with a Business Application Header (BAH).

Coexistence period: SWIFT ran MT/MX coexistence from March 2023 to November 2025, after which MT messages in scope are retired and only MX is accepted.

Field mapping caution: MT700 field 45A goods description and field 46A documents map to structured MX components; free-text fields must be re-modelled, not copied, to avoid truncation.