Route planner for your global trade

International business
Corporate Banking

Building bridges, opening doors

Internationalisation can provide important stimuli for company growth. However, expanding your horizons beyond national borders can often lead to unfamiliar terrain, with its own special legal requirements and its own traditions. For this reason, if you want to take advantage of the opportunities offered by foreign business while reducing your exposure to the related risks, you need a partner who is familiar with foreign markets, who can open doors and offer professional support for the financial development of your foreign business operations. To achieve that, Commerzbank offers experienced specialists to support you in all areas of international business. We are the market leader in the management of German foreign trade. In 2012, no other bank settled more letters of credit opened in favour of German exporters. Based on decades of experience and recognised expertise, Commerzbank has developed highly efficient solutions for your cross-border business. You can access our services both through personal consultations and online, via our Corporate Banking portal (www.commerzbank.com/corporatebanking) with its convenient and timesaving tools. The innovative online services we offer include cross-border payment transactions, foreign exchange trading and processing of letters of credit, collections and guarantees. Commerzbank is represented in the business and finance centers in more than 50countries via our network of branches, subsidiaries and representative offices. In addition, Commerzbank can support your cross-border business through our International Desk, which is the coordinating interface between our branches at home in Germany and those in Asia, Western Europe, Eastern Europe and North America.

ContentsI03

Contents
International payments: fast, efficient, transparent Documentary business: our precision ensures your security Foreign exchange business: understanding foreign currencies Structured Export & Trade Finance: Supporting your foreign trade business 04

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04IInternational payments

International payments: fast, efficient, transparent

Success in international business requires efficient, reliable and transparent processing of payment transactions that goes beyond bank and national borders. Commerzbank has precisely aligned its portfolio of services to meet those requirements.

Electronic solutions are increasingly replacing paper-based monetary transfer forms for international payments. Whether you process your payment transactions with electronic banking software, via SWIFT (Society for Worldwide Interbank Financial Telecommunication) or using our Corporate Banking portal, Commerzbank offers the right solutions and can, on request, also take care of any reports that need to be sent to the Bundesbank under the terms of Germanys Foreign Trade Ordinance (AWV). At the same time, you benefit from Commerzbanks international presence and network of about 5,000 correspondent bank connections worldwide for example, if you want to open decentralised local accounts for your branches and subsidiaries abroad while still retaining centralized control to optimise interest rates. Commerzbanks cross-border, inter-bank cash pooling solutions provide the ideal solution in this area. You can find more detailed information in our Success factor: Cash Management and Payments brochure, which can be obtained from your Commerzbank contact.

Documentary businessI05

Documentary business: our precision ensures your security

Between where you are and the location of your supplier lie sometimes thousands of kilometres and not just political borders. We provide you with the payment and security instruments you need: letters of credit, collections and guarantees.

Your Commerzbank documentary business specialist will be happy to advise you, in a face-to-face meeting, about which security instrument will be most effective in your specific case. Are you confident enough of your clients motivation and solvency to use a documentary collection? Or do you need the security you get from a letter of credit with a definite payment undertaking from the issuing bank if necessary, supplemented with a confirmation from Commerzbank? Even once you have made your choice, it is almost always the case that further questions and uncertainties will arise during the subsequent processing of the transaction. The experience that our specialists can offer you is invaluable in these instances, as even minor errors or lapses in concentration for example, in the letter of credit documents can result in a letter of credit losing its guaranteed paymentfunction. Unlike collections or letters of credit, a guarantee is generally not a payment but a security instrument. If you need to provide security

for your customers or suppliers, we will be happy to help you by issuing a guarantee and vouching for you on the basis of our inter nationally respected name. Commerzbank offers you a full range of different guarantees from bid bonds to advance payment guarantees and delivery or performance bonds, through to contract fulfilment, warranty and payment guarantees.

Electronic support via Web Trade Services Whether letters of credit, collections or guarantees Commerzbanks Corporate Banking portal will help you get the complexity of your foreign and guarantee business reliably under control. The internet-based application Web Trade Services offers numerous options for processing your foreign documentary business; for example, allowing you to easily and quickly order, amend and manage your guarantees, import letters of credit and collections. You can also manage export letters of credit online. You can find more information in our Portals and Frontends for your international banking brochure, which can be obtained from your Commerzbank contact.

06IDocumentary business

Handling syndicated guarantees online Commerzbank Online Guarantee System is one of the markets leading online platforms. It allows the client and the banks participating in the syndicate to efficiently manage guarantee facilities, which are used to issue a large number of guarantees. As an agency tool, the Commerzbank Online Guarantee System is able to provide all parties involved with a completely up-to-date overview of the drawings under the facilities. Once your syndicated guarantee facility has been set up, you can access a variety of convenient tools to capture, modify and monitor your transactions. A full service for your documents Documentary foreign business is highly complex: it places significant technical demands on the people who oversee it and ties up resources within your company. If you do not wish to concern yourself with all the many subtleties involved, Commerzbank is pleased to offer you

the full-service solution Commerzbank Document Service to support you in successfully completing your foreign business transactions. You are free to instruct our specialists to conduct all or part of your documentary business on your behalf, as you prefer.

top@doc: the expert information service In our monthly complimentary newsletter top@doc, Commerzbank regularly provides you with new information and recommendations regarding the settlement of your documentary foreign business. Here you will find incisive articles on relevant and interesting topics, current case studies and important issues surrounding letters of credit, documentary collections and guarantees. We have been providing this information service since 2001 and the archive or material we have generated in that time can provide you with a valuable reference source.

top@doc newsletter
Is a draft part of the shipping documents? Do the documentary credit terms also refer to this draft?
Shipping documents is a term frequently used in documentary credit business. However, the term is not defined in the Uniform Customs and Practice for Documentary Credits (UCP). Given this, one may ask whether a draft is also part of the shipping documents. And must the credit requirements specified for the documents to be presented also be taken into account with respect to the draft? These questions will be at the center of top@docs current edition and will be given a closer scrutiny by way of a practical example.

top@doc Newsletter
Presentation of discrepant documents What are the obligations of the issuing bank?

top@doc newsletter
On board notation: clean or unclean that is the question.
When a bill of lading is required under a credit, the terms of the credit usually require a clean transport document, that is to say, this document may not state that the goods or the packaging is damaged. In its January edition 2005 (Serial No. 40), top@doc already dealt with this issue, particularly with respect to the deletion of the word clean in the on board notation. Even eight years later this issue is as up to date as ever so that we will take it up again in the current top@doc edition, whereby the focus will be laid on additions to the on board notation referring to the condition of the goods.

If discrepant documents are presented to the issuing bank, it may, according to the provisions of the uniform customs and practice for documentary credits (UCP 600) refuse to take up the documents. However, corresponding information sent to the presenter within five banking days following the presentation is required. But does this also apply in cases where the presenting bank already referred to the discrepancy explicitly and evaluated the documents as discrepant in its cover letter? This question will be at the centre of the current edition of top@doc. By way of a practical example we wish to specify which time limits and notification duty the issuing bank has to observe in such a case.

The term shipping documents is a term frequently used in documentary credit business. Although the term is not defined in the Uniform Customs and Practice for Documentary Credits (UCP), it does not only refer to shipping documents as its literal translation into German might suggest but, from a general perspective, to all credit documents as well.

In field 46 documents required presentation of the following documents is requested: commercial invoice bill of lading packing list certificate of origin NitpickerBank received from its customer, the beneficiary of an export credit, documents for examination and forwarding to the issuing CarelessBank. According to the transport document, shipment of the goods took place after the last possible date indicated in the credit. This discrepancy can no longer be corrected and NitpickerBank thus forwards the documents to the issuing bank. In its cover letter, NitpickerBank states that the documents are non-compliant since they show a late shipment. Three weeks after dispatch of the documents, NitpickerBank sends a reminder to CarelessBank requesting payment of For the utilization of the credit, the exporter presents to his bank the documents required by the credit, as well as the draft. All documents evidence the reference number mnop89001. Only the draft does not show this number. The bank refuses to take up the documents reasoning that the reference number mnop89001 is missing on the draft. the counter value of the documents. Consignment tracking makes it evident that five business days had passed since receipt of the documents by the issuing bank. Since CarelessBank had given no indication of its refusal to take up the documents during this period, the documents are regarded as being taken up and the beneficiary is thus entitled to payment in accordance with the UCP provisions. CarelessBank sends an indignant reply pointing out that NitpickerBank itself has referred in its document dispatch note to the discrepancy in the documents. For this reason, it is quite superfluous that CarelessBank on its part refers once again to this discrepancy and expressly refuses to take up the documents. These non-compliant documents cannot be regarded by NitpickerBank as being taken up. Moreover, the UCP provision according to which information as to the non-acceptance of the documents must be sent five banking days after receipt of the documents at the latest is not applicable in this case. Therefore, CarelessBank holds the view that there is no obligation to make payment for the documents. However, CarelessBank is grossly mistaken in its belief. Even though NitpickerBank has indicated in its cover letter a discrepancy, CarelessBank is nevertheless obligated to make a decision as to the acceptance of the documents. It continues to be bound by the corresponding UCP provisions. The information whether the documents will or will not be The presented transport document shows that the condition of the goods has not been considered at all. CarefulBank takes the view that goods and packaging may thus be in perfect condition, but can just be damaged as well. Therefore, a confirmation regarding the perfect condition of goods and CarefulBank declines to take up this document pointing out that a credit requires presentation of a clean transport document. This is the only way to prove that the goods including packaging were loaded on board of the vessel in perfect condition. The beneficiary presents a transport document titled as bill of lading that contains the following notation: shipped on board ignoring condition of cargo. Even though CarefulBanks reasoning seems logical, the transport document in question can be taken up without reserve despite the addition ignoring condition of cargo since according to the provisions of the Uniform Customs and Practice for Documentary Credits (UCP 600) banks will regard a transport document as clean provided that it does not contain notations or clauses that make an express reference to a defective condition of the goods or its packaging. For this reason, notations that state a possible damage to the goods and/or the packaging are acceptable. Hence, clauses according to which the condition of the goods and/or the packaging has not been considered, are of no consequence whatsoever. Let us take a look at an example from day-to-day practice: CarefulBank has advised a credit to its customer stipulating, inter alia, presentation of a bill of lading: full set of clean on board ocean bill of lading. Is CarefulBank on the right track with this view? packaging can not be given, since it is precisely this condition that has not been considered ( cargo). ignoring condition of

Does a draft required under the credit belong to these shipping documents? We will examine this question by way of a practical example and set out the case in which a draft is in fact part of the shipping documents. After all, when dealing with credit requirements that refer to all shipping documents, the meaning of this term should be clear to all parties involved.

Field 47 additional conditions includes inter alia the following condition: all shipping documents must show reference no. mnop89001.

In field 42 C, the credit requires presentation of a draft: draft at 90 days after sight

Corporate Banking
November 2012

Corporate Benking
Dezember 2012

Corporate Banking
January 2013

Available free-of-charge every month. You can register for a free subscription to top@doc in Commerzbanks Corporate Banking portal (www.commerzbank.com/corporatebanking).

Foreign currencyI07

Foreign exchange business: understanding foreign currencies

Transactions with your foreign business partners are processed smoothly, with payments in the corresponding foreign currency arriving on time and according to contract. However, if exchange rates change for the worse since then, this can turn all your calculations upside down. Commerzbanks foreign currency management supports you in avoiding exactly this sort of un-wanted development.
The right rate Commerzbank occupies a leading position in the field of currency trading in Germany. As an internationally recognised marketmaker, we provide exchange rates in line with the market and offer sound market information. As well as pure processing of currency exchange, appropriate hedging is also given particular attention in this regard. With currency forwards, for example, the currency exchange does not take place until a future date, although the exchange rate is actually fixed when the agreement is signed. Therefore, you precisely know what you will receive, regardless of any exchange rate fluctuations that occur in the meantime. Should receipt of the currency be delayed, hedging can be prolonged with a currencyswap.
With foreign currency options, you also have the opportunity to forfeit the options if the actual exchange rate on the maturity date is more favourable than the rate fixed in the option. In this way, you benefit from any favourable exchange rate movement.

New standards for foreign exchange business The increasing internationalisation of business relations in the SME sector makes efficiency, speed and reliability important success factors when processing foreign exchange transactions. This is where the internet provides new opportunities compared to formerly processing everything over the telephone. However, limiting yourself solely to online spot and forward transactions is not sufficient.
Commerzbanks online trading platform within our Corporate Banking portal offers a truly comprehensive solution. With this system, you can feel as if you are almost sitting in Commerzbanks Frankfurt trading room, which is one of the largest in Europe. All the different threads of our global presence and strong position on the international currency markets come together here with information fed directly to the screen of your PC via our Corporate Banking portal. In collaboration with the personal support of Commerzbanks specialists, as well as with tailor-made hedging concepts, the trading platform offers a comprehensive range of services in the field of foreign exchange trading. This

08IForeign currency

system offers the highest possible efficiency in the preparation, execution and evaluation of commercial transactions quickly and directly with just one click. The services offered range from basic online trading functions for spot, forward (including forward/forward) and swap transactions, right up to limit order management (monitoring and execution of overnight and intra-day limit orders). The fastest possible execution of transactions is guaranteed via live-streaming prices and one-click trading. Alongside current transactions, promptly displayed as they happen, historical reports of all trading activity can also be called up. The layout of the screen and the on-screen language can be individually adapted, based on the specific requirements of the company in question. Different legal entities within a corporate

group can, for example, each conclude deals clearly allocated to them. And all of this can be achieved through simple access via the internet, where tried and tested SSL encryption ensures a high level of trans mission security. However, the foreign exchange trading plat form is more than just an internet application for foreign exchange business. It offers direct access to liquidity and prices in a wide variety of currency combinations, and with a wealth of convenient functions for demanding users when it comes to pricing, fast execution and consistent transaction follow-up. Swaps, multi-forward and fund splitting, news ticker, intra-day charts, display of percentage changes, as well as monitoring and execution of orders, are all typically available around the clock. This really is an all-inclusive offering.

Structured Export & Trade Finance I 09

Structured Export & Trade Finance: Supporting your foreign trade business
Contract negotiations with foreign business partners arent just about prices, delivery times and product features. Foreign business associates often expect the exporter or importer to provide financing too. Commerzbank offers professional solutions to help with this even for smallerscale underlying transactions which safeguard a prompt flow of liquidity. It is also worth remembering that finance geared optimally towards your commercial activities (import and export) gives your company a real competitive edge in the international business. Commerzbank can offer you highly specialised advice regarding the whole value chain and support you with a reliable, complete financing package for orders, imports and trading business. Risk hedging and liquidity optimisation give you additional financial scope. Buyers credit Credit for your customers Buyers credit is the most common mediumto long-term form of export financing in the capital goods and investment business. At Commerzbank, you can obtain a buyer credit for export transactions as low as 250,000 euros. The financing is based on a Hermes finance credit guarantee, granted directly to your foreign customer or its principal bank through existing framework agreements. The basis for the delivery transaction is the export contract which, among other things, stipulates payment through a buyer credit. The loan is paid to you as exporter and repaid by the importer. For exporters, an important advantage of buyer
credit is that it does not impact the balance sheet, as payment occurs immediately upon delivery or performance. Commerzbank supports you through a comprehensive range of advisory services for example, helping with drafting the payment conditions, formulating the application for credit approval or calculating the Hermes fee.

Refinancing your supplier credits 1. Purchase of covered receivables: For existing business relationships, nonrecourse purchase of receivables through Commerzbank provides a refinancing option for your export receivables with short, medium or long payment terms (supplier credit). The prerequisite is that you provide cover via a credit guarantee from the Federal Government of Germany provided by Euler Hermes as mandated agent (Hermes cover) or private credit insurance from Euler Hermes Kreditversicherung-AG. In this way, you assign all claims arising from your export business and any rights and claims arising from your Hermes cover or your Hermes credit insurance to the bank. In return, you will receive the net present value of the purchase price, as soon as you have presented proper documentation. In this way, a business with deferred payment can be turned into a cash business. Overall, the purchase of secured receivables represents a lean and rapid funding alternative, in which your customer abroad does not need to be directly involved. You as an exporter, however, remain responsible for the legal validity of the claim and the proper conduct of the delivery transaction.

10 I Structured Export & Trade Finance

If you already have Hermes cover in the form of a state-backed Whole-Turnover Policy, WTO (in German Ausfuhrpauschal-Gewhrleistungsgarantie des Bundes, APG) or in the form of an extended Euler Hermes commercial credit insurance for your short-term and revolving deliveries in place, then we can provide you with tailor-made framework agreements to enable the streamlined processing of a non-recourse receivable purchase on a revolving basis. This guarantees a prompt flow of liquidity, even when you export products such as non-durable consumer goods andmerchandise.

letters of credit with deferred payment periods not exceeding 365 days. As buyer of the claim, Commerzbank takes the following risks: The economic risk of insolvency of the  debtor or his guarantor The country risk, consisting of the political  risk as well as conversion and transfer risk The currency risk (if the invoice is raised in  a foreign currency) The collection risk (loss of the claim docu mentation in the mail, enforceability of the claim, and the risk of paying agents)

2. Forfaiting and CAF Commerzbanks purchase of letters of credit: Forfaiting refers to the non-recourse purchase of abstract (independent of the under lying transaction) non-contestable, assignable, existing, but not yet due export receivables against the immediate payment of the purchase price.
The claim must usually be secured by a bank in the country of the importer, or by another international bank, both of which have to be acceptable to Commerzbank AG. Claim instruments can include both book receivables and bills of exchange or promissory notes, as well as LCs. Hedging instruments can include deferred payment letters of credit, avalized bills of exchange or promissory notes, or letters of guarantee and payment guarantees. CAF Commerzbanks purchase of LC receivables is the standardised form of forfaiting. This involves the purchase without recourse of existing export receivables for goods sold and/or services rendered under

For you as an exporter, forfaiting offers the following advantages: Reduced pressure on your balance sheet Improved liquidity Passing on the risks involved in the target  currency Preservation of your credit lines Fixed interest rates, which allow fixed  calculationsn Elimination of credit monitoring and  collection work, opening up space for new projects Both forms of refinancing your supplier credits reduce the pressure on your balance sheet and simultaneously create additional scope for financing new transactions. As an exporter, you are responsible for the legal validity of the claim and for completing the underlying transaction in full as per the contract. In addition to this, Commerzbank offers you other standardised financing products for your export transactions, such as global export credit, advance export financing and a range of factoring solutions.

Structured Export & Trade Finance I 11

Just remember to talk to us while you are conducting initial negotiations and drafting the contract for your delivery transaction if you are considering subsequent refinancing.

Structured trade and warehouse financing as a finance solution for your whole value chain In the context of structured trade and warehouse financing, Commerzbank supports your trading business with short- and medium-term financing, in which your commodity and goods stocks, as well as claims for payment resulting from their marketing, can be included. If required, lending can start at different points in your commercial business and can cover the entire value chain starting at the point of purchase from manufacturers and producers, who are often located in foreign countries, through to the sales you make to your customers. In the course of this, different riskminimising instruments are applied to control risk, depending on the specific stage of financing.
Commerzbank offers various forms of financing, depending on your precise needs. These include trade financing, which generally involves documentary credits or collections, possibly supplemented by the financing of price hedging. These forms of financing help you in the purchase of raw materials and goods that you then sell, or in warehouse financing for stocks of raw materials and goods that you buy regularly or seasonally and then temporarily store.

For more detailed information concerning foreign business, our relationship managers for corporate clients as well as our specialists are at your disposal. They can also provide you with brochures for the following topics: Cash Management and payments Electronic solutions SEPA

Commerzbank AG Corporate Banking www.commerzbank.com/corporatebanking

Correct as at: 12/2012, VKS05051