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IS480 Team wiki: 2015T1 A3xy ProjectOverview

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Project Description

The purpose of the project is to develop a Trade Finance portal and integrate it into the existing SMU tBank architecture. This application will be a self-service channel for “corporate customers” (students) to implement a number of financial instruments related to international trade, such as; Letter of Credit, Bill of Exchange, Bill of Lading, Bank Guarantee, Documentary Collection, Open Account, Export Factoring. Another deliverable will be an end-to-end trade simulator that can be used in the classroom to illustrate the movement of goods and trade documents across the relevant parties, eg; Importer, Exporter, Freight Forwarder, Issuing Bank, Advising Bank.

The proposed web application, SMU tBank Trade Finance will consist of the following modules:

Importer
LC Application
LC Amendment
Document Acceptance
Import Notifications
Request Shipping Guarantee
Request Trust Receipt
LC Status
Payment


Exporter
Accept LC
Accept LC Amendment
Document Presentation
Import Notifications
Request Banker's Guarantee
LC Status
Payment


Business Scenario


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Source: Irrevocable Letter of Credit

Important Terms

  • Importer (applicant) : The party who buys goods from a foreign country for future sale or trade, and who is liable for the payment.
  • Exporter (beneficiary) : The party who sells its goods to an importer in another country for sale, exchange,etc.
  • Letter of Credit : A letter issued by a bank to another bank in a different country to serve as a guarantee for payments made to a specified person under specified conditions.
  • Issuing Bank : Buyer’s or importer's bank which establishes (opens) a letter of credit (L/C) in favor of a beneficiary (seller or exporter), forwards it to an advising bank (seller’s or exporter’s bank) for delivery to the beneficiary, and commits itself to honor demand drafts drawn by the beneficiary against the amount specified in the L/C.
  • Advising Bank : Seller’s or exporter’s that receives a letter of credit (L/C) from the issuing bank for authenticating it and informing ('advising') the exporter (the L/C's beneficiary) that a L/C has been opened by the importer in the exporter's favor.
  • Bill of Lading : A legal document between an exporter of a good and a transporter or carrier as a contract of carriage of goods and details a shipment of merchandise and gives title of that shipment to a specified party
  • Bill of Exchange : A written order to a person requiring them to make a specified payment to the signatory or to a named payee; a promissory note.
  • Banker’s Guarantee : A guarantee from the advising bank to the exporter ensuring that if the importer fails to settle a debt, the bank will cover it
  • Shipping Guarantee : A written guarantee, issued by the bank which will bear joint liability, and is presented by the importer to the carrier for picking up the goods in the case of arrival of cargo prior to the shipping documents (bill of lading)
  • Trust Receipt : A type of short-term loan to provide the importer with financing to settle goods imported under Letter of Credit where title of goods is held by the bank (e.g. taken when importer can’t pay back before reselling the goods)
  • Bill Discounting : Cashing or trading a bill of exchange at less than its par value and before its maturity date (When a buyer buys goods from the seller, the payment is usually made through letter of credit. The credit period may vary from 30 days to 120 days. Depending upon the creditworthiness of the buyer, the advising bank discounts the amount that needs to be paid at the end of credit period.)