Summer Intern Hsbc111

A PROJECT ON

INTERNATIONAL TRADE PROCESS AND DOCUMENTATION

MASTER OF BUSINESS ADMINISTRATION (FINANCE)

Submitted in partial fulfillment of the requirements for award of

Master of Business Administration of Talik Maharastra

University, Pune

Submitted by :-

MOHIT SONI

PRN:-07408012623

Ashoka Plaza, S.No. 32/2, Nagar Road, Pune 411014

Tilak Maharashtra University

Gultekdi, Pune 411037

DATE :- 13-10-2009

TILAK MAHARASHTRA UNIVERSITY Page 1

ACKNOWLEDGEMENT

I would like to take this opportunity to express my gratitude to some of the

people who spared their valuable time in guiding me through my project and

without whom it is needless to say, the project would have been destined to

remain incomplete.

At the outset, I would like to thank HONGKONG & SHANGHAI BANK

CORPORATION for having considered me to be competent enough to undertake

this project. In particular, I would like to thank Mr. Vaibhav Kala Manager-

Operations TRADE SERVICES, for having consented to be my guides for the

various sub-parts of the project which brought with itself the additional burden of

intrusion into his daily routines. I also take this opportunity to thank the rest of

the Team at HSBC of Trade Services i.e. Farmers and Hunters, for the very

insightful discussions and guidance offered on varied themes and constituted an

integral part of the project study.

It often happens that a great part of our learning takes place as the result of

discussions with colleagues and peers. I have also been rather fortunate to have

been placed in an erudite and helpful team alongside which have also contributed

positively, both directly and indirectly towards the completion of this project.



DECLARATION

This project well bred “INTERNATIONAL TRADE PROCESS AND

DOCUMENTATION AT HSBC BANK” Jaipur, I hereby declare that all the details furnished in the Report are true to the best of my knowledge and this report is submitted to TILAK MAHARASHTRA UNIVERSITY (Pune) as this is a part of MBA program . I further declare that this work is not submitted for any other purpose.

MBA/2008-2010

MOHIT SONI

PUNE (MAHARASHTRA)

)

CONTENTS


2.ABSTRACT.........................................................................................7-8

3.OBJECTIVES......................................................................................9-10

4.INTRODUCTION...............................................................................11

5.INTERNATIONAL TRADE – INDIA’S CONTEXT........................12-15

6.FACTS & FIGURES FY08-09............................................................16-18

7.REGULATORY AUTHORITIES ......................................................19-21

8.BANKS – “ACATALYST” - IN INTERNATIONAL TRADE..........22

9.COMPANY PROFILE – HSBC INDIA..............................................23-29

a. Introduction to HSBC.................................................23-27

b. Various subsidiaries....................................................27

c. Top Level Management – India..................................28

d. Corporate Awards in the company’s Basket...............29.

10.HSBC JAIPUR....................................................................................30

11.TRADE SERVICES OFFERED BY HSBC...................................... 31-35

12TRADE PROCESS............................................................................. 36-45

13. EXPORT & IMPORT PROCEDURE...............................................45-49

14.PARTIES INVOLVED in International Trade...................................50

15.INCOTERMS..................................................................................... 51-55

16. INTERNATIONAL TRADE DOCUMENTATION.........................56-62

17.GROWTH FACTORS IN TRADE SME – HSBC.............................63-64

18.SWOT ANALYSIS............................................................................ 65

19.REFERENCES....................................................................................66

20.QUESTIONNAIRE.............................................................................67-69

ABSTRACT


The share of India in global merchandise exports has surpassed 1 percent and the country continued its impressive performance in the global exports of commercial services with a share of 2.7 per cent. This optimism has also been reflected in the Foreign Trade Policy which has set a target of achieving a 5 per cent share of world trade in both goods and services by the year 2020. Enhancement of international competitiveness and broadening and deepening of sectoral and geographical reach have underpinned India’s buoyant external sector performance.

With strong business fundamentals, and in line with the increasingly competitive global trading environment, the Banks are proactively seeks to enhance the competitive edge of Indian companies through a comprehensive range of financing programmes and advisory and support services which encompass all stages of the export business cycle. Towards facilitating inclusive globalization, the Banks are also involved in creating export capability in small and medium enterprises, grassroots business enterprises and agro industries.

Keeping this in view I have been assigned a project “INTERNATIONAL TRADE PROCESS AND SERVICES AT HSBC”. The purpose of this study is to understand the process of international trade with the point of view of exporters and importers and the role of HSBC bank acting as a catalyst in international trade services. It includes understanding of the organization HSBC and the various trade services offered to its client in Jaipur. The project has been divided into two phases: - Phase I, understanding the basics of international trade and the various trade services provided by HSBC along with the process followed. This is done with the information available through different sources like company manuals, newspapers, research papers, books, internet and knowledge from mentor. Phase II, questionnaire designing for the customer satisfaction in trade services and getting them filled from respondents at office which has been done and data has been tabulated and graphs are to be made on the basis of the data collected. The data collected can be used further for the comparative study of HSBC and other competitor banks in which certain parameters will be taken to find out the scope and innovation that can be made by HSBC in its trade services in order to expand its business in Jaipur City. In addition because International Trade is a very vast topic and cannot be covered as a whole. The report would be emphasizing on Process and Documentation part of International Trade services followed by HSBC, Jaipur branch, along with the Growth of this branch with the help of comparative study covering the


different factors involved in the growth of the Jaipur branch as far as Trade services is concerned, over the past few years.

The Process part starts from the time at which customer opens a new Trade current account with the HSBC bank bought by the Hunter (Sales person of Trade Service Department), follows by taking care of the customer by the Farmer ( Relationship manager of Trade Service Department). The Operational Team starts working from the time it receives the Bill ( Export-Import Documents) from the customer. The Process details are explained in the Main text part of the report.

The Documentation part covers all the documents and papers require to complete the deal. The commercial contract should provide all details of the documents required. If the documents are drawn incorrectly, there may be a delay in payment. Documentation provides tangible evidence that the goods ordered that have been produced and dispatched in accordance with the buyer’s requirements. Also filling all the hard copy of the Export-Import bill for the future bank reference comes in the frame of Documentation. It includes maintaining the proper record of all the bills and other relevant documents in a well structured order. Along with the hard copy, the database of each and every bill and other documents are maintained in order to have the quick reference, if needed. Everything has to be recorded in the system considering the criticality of the Trade department.

OBJECTIVES OF THE PROJECT

A. Process and Documentation of trade transactions


B. To study the role of banks as an intermediary in international trade.

C. To identify the various sources of finances provided by HSBC to Importers and Exporters

D. Growth factors – which led to rise of Trade Transactions at HSBC Jaipur

METHODOLOGY

Research methodology adopted for study included:

SECONDARY DATA SEARCH

Secondary data included information available from different sources like company manuals, newspapers, research papers, internet etc. to understand the basics. Secondary data was used in following way for conceptual understanding and laying the foundation for further research:

Understanding the basics of International Trade Role of banks in International Trade Facts & Figures of foreign Trade in India and its growth in current

financial year Company profile of Hongkong and Shanghai Banking Corporation

Private Limited(HSBC) Various Products offered under Trade Services at HSBC Financial Performance Of HSBC over years Trade Process and Documentation Followed by Trade Department of

HSBC

PRIMARY DATA SEARCH


Primary data search included information so collected from various Bank officials at HSBC bank and other banks. In addition information was gathered through the learnings from day to day activities

LIMITATIONS OF THE RESEARCH STUDY

Firstly exact data could not be provided as bank data is confidential and is a matter of compliance.

Secondly data from other banks was a matter of great difficulty as officials does not have much time and also the same reason as above.

Thirdly ,The customers were least interested in filling the questionnaire and providing the required details

Fourthly, The data size of the samples so collected was quite less in order to execute research using SPSS and advanced techniques. However dummy data was prepared in order to complete the research.

Lastly , because international trade is a vast subject to cover , study have been restricted to international trade process and documentation.

INTRODUCTION


International trade is exchange of capital, goods, and services across international borders or territories. In most countries, it represents a significant share of gross domestic product (GDP). While international trade has been present throughout much of history, its economic, social, and political importance has been on the rise in recent centuries. Industrialization, advanced transportation,globalization, multinational corporations, and outsourcing are all having a major impact on the international trade system. Increasing international trade is crucial to the continuance of globalization. International trade is a major source of economic revenue for any nation that is considered a world power. Without international trade, nations would be limited to the goods and services produced within their own borders.

International trade is in principle not different from domestic trade as the motivation and the behavior of parties involved in a trade does not change fundamentally depending on whether trade is across a border or not. The main difference is that international trade is typically more costly than domestic trade. The reason is that a border typically imposes additional costs such as tariffs, time costs due to border delays and costs associated with country differences such as language, the legal system or a different culture.

International trade uses a variety of currencies, the most important of which are held as foreign reserves by governments and central banks. Here the percentage of global cumulative reserves held for each currency between 1995 and 2005 are shown: the US dollar is the most sought-after currency, with the Euro in strong demand as well.

Another difference between domestic and international trade is that factors of production such as capital and labor are typically more mobile within a country than across countries. Thus international trade is mostly restricted to trade in goods and services, and only to a lesser extent to trade in capital, labor or other factors of production. Then trade in good and services can serve as a substitute for trade in factors of production. Instead of importing the factor of production a country can import goods that make intensive use of the factor of production and are thus embodying the respective factor.

INTERNATIONAL TRADE – INDIA’S CONTEXT


http://en.wikipedia.org/wiki/Factors_of_production

http://en.wikipedia.org/wiki/Factors_of_production

http://en.wikipedia.org/wiki/Euro

http://en.wikipedia.org/wiki/US_dollar

http://en.wikipedia.org/wiki/Central_bank

http://en.wikipedia.org/wiki/Government

http://en.wikipedia.org/wiki/Foreign_reserve

http://en.wikipedia.org/wiki/Currency

http://en.wikipedia.org/wiki/Domestic_trade

http://en.wikipedia.org/wiki/Globalization

http://en.wikipedia.org/wiki/Outsourcing

http://en.wikipedia.org/wiki/Multinational_corporation

http://en.wikipedia.org/wiki/Multinational_corporation

http://en.wikipedia.org/wiki/Globalization

http://en.wikipedia.org/wiki/Transport

http://en.wikipedia.org/wiki/Industrialization

http://en.wikipedia.org/wiki/Trade

http://en.wikipedia.org/wiki/Gross_domestic_product

http://en.wikipedia.org/wiki/International_borders

http://en.wikipedia.org/wiki/Service_(economics)

http://en.wikipedia.org/wiki/Goods

http://en.wikipedia.org/wiki/Capital_(economics)

Trade and commerce have been the backbone of the Indian economy right from ancient times. Textiles and spices were the first products to be exported by India. The Indian trade scenario evolved gradually after the country’s independence in 1947. From the 1950s to the late 1980s, the country followed socialist policies, resulting in protectionism and heavy regulations on foreign companies conducting trade with India. India’s international trade situation improved when Prime Minister Rajiv Gandhi reformed the trade policies in the late 1980s. With tax reforms, deregulations and privatization initiatives, India has attracted the global market’s attention.

SOURCE : RBI Report

India Trade: Market Share

A significant boost to India’s trade in the late twentieth century resulted in the country getting the tag of an “emerging economy.” According to a report published by the World Trade Organization (WTO) in May 2007, India’s share in the global market for merchandise and services rose from 1.1% in 2004 to 1.5% in 2006. Commerce and Industry Minister Kamal Nath expects this figure to cross 2% in 2009.

According to leading management consultancy McKinsey & Co, the growth of India’s economy can match that of China (about 10% per annum) if the former eliminates the main impediments to trade.

India Trade: Exports


Indian exports comprise mainly of engineering and textile products, precious stones, petroleum products, jewellery, sugar, steel chemicals, zinc and leather products. Most of the exported goods are exempt from export duties. Duties are levied on processed agricultural products, sheep, goat and bovine leather.

India also exports services to several countries, primarily to the US. In fact, India is among the world’s largest exporters of services related to information and communication technology (ICT). It is also the key destination for business process outsourcing (BPO). According to the Information Economy Report 2007-2008, the ICT industry accounted for 5.4% of India’s GDP in 2006, up from 4.8% in 2005. Backed by ICT-related exports, the services sector accounted for 37% of the country’s total exports in 2006, up from 18% in 1995.

INDIA’S EXPORT OF PRINCIPAL COMMODITIES FOR LAST 3 YEARS {% SHARES}


INDIA’S IMPORT OF PRINCIPAL COMMODITIES FOR LAST 3 YEARS {% SHARES}

India Trade: Imports

India’s major imports comprise of crude oil, machinery, military products, fertilizers, chemicals, gems, antiques and artworks. Imported goods are divided into the following categories:

Freely importable items: For these items, no import license is required. They can be freely imported by an individual or a firm.

Licensed imports: These imports comprise of precious and semi-precious stones, firearms, pharmaceuticals, insecticides, and plants and animals.

Canalized items: These items can only be imported by public sector firms. For example petroleum products fall under this category.

Prohibited items: Items such as unprocessed ivory, animal rennet and tallow fat cannot be exported to India.

India International Trade reflects the growing prominence of Indian economy in the global market, in turn leading to an international economic recovery. The development of the international economic environment has helped the other developing countries as well, improving the entire global economy. The present liberal trading policies taken by the Indian government have facilitated the establishment of an just international economic order setting up a symbiotic relation between the developed and developing countries.


The liberal reforms launched so far have attracted many investors to participate in the India International Trade. The penetration of the Indian market by the several multinational companies has encouraged many Indian companies to strive for international recognition. For instance, India is one of the major exporting nations with an overflow of scientists in the field.

India International Trade had been influenced by the Indian external economic environment of 2005-06 and 2006-07. The growth in output and trade of India International Trade, in spite of increasing global imbalances, protracted Doha negotiations, volatile international crude oil prices, and inflation have been found to be increasing.

The India International Trade have successfully placed India as one of the major players in the global economy, with bilateral and multilateral trade relations with different foreign countries.


FACTS & FIGURES

India’s Merchandise Trade Turnover increased from US$95 bn in FY02 to US$ 391 bn in FY08 (CAGR of 27.8%).India’s Exports increased from US$44 bn in FY02 to US$ 163 bn in FY08 (CAGR of 24.5%).India’s Imports increased from US$ 51 bn to US$ 251 bn (CAGR of 30.3%)

India has been exporting majority of its product in the Asian markets which contribute nearly 50% of the total market share for export. The other regions where India exports are Europe (22.9%), North America (13.5%), Africa (7.1%) and other regions in the world (4.9%).


While the significant upward export trend in recent years attests to India’s growing global Competitiveness, expanding imports may be largely attributed to the Indian manufacturing sector. With regard to commodity composition of India’s exports in 2008-09 (April- December), growth was particularly robust in the case of agriculture and allied products at 12.2per cent; petroleum products by 28.4 per cent; gems and jewellery by 19.7 per cent; ores and minerals by 24.6 per cent; and engineering goods by 16.1% per cent. Oil imports increased to US$ 77 billion in 2008-09 from US$ 56.9 billion in the previous year, registering a growth of 35.3 per cent. Non-oil imports during 2008-09 stood at US$ 158.9 billion, which was 23.4 per cent higher than the level of such imports valued at US$ 128.8 billion in the previous year.


IMPORTS OF PRINCIPAL COMMODITIES {% SHARES}


REGULATARY AUTHORITIES

Export and Import in India is governed by the certain rules and regulation, which are issued by the import-export governing bodies. Import Export government authorities decide which items will be imported or exported and which item will be prohibited. The quantity of goods to be traded and tax imposed on the goods is also under the control of these governing bodies. Import-Export governing bodies also play an important role in settling the Foreign Trade Agreement in matters related to export-Import of goods.

International Chambers of commerce (ICC):

Established in Paris in 1919, this is the non-governmental organization serving world business. It has taken upon itself the responsibility of designing by laws governing international trade transactions so as to ensure uniformity across the trading partners. The guidelines issued by the ICC are known as Uniform Customs and Practices for Documentary Credits (UCPCD) and the regulations are currently in Force are prescribed in the booklet of UCPDC 500.

Ministry of Commerce and Industry:

The Ministry of Commerce and Industry is the nodal authority for formulating and implementing the foreign trade policy in matter related to Import and Export. The Department of Commerce play a key role in matters related to multilateral and bilateral commercial relations, state trading, export promotion measures and development and regulation of certain import oriented industries and commodities.

There are two departments under the Ministry of Commerce and Industry. The first one is the Department of Commerce and the second is Department of Industrial Policy & Promotion. The department of Ministry of Commerce which is sometimes also termed as Department of Industrial Policy & Promotion was established in the year 1995, and in the year 2000 Department of Industrial Development was merged with it. Ministry of Commerce and Industry has its offices in all the major cities.

Directorate General of Foreign Trade (DGFT):


DGFT or Directorate General of Foreign Trade is a government organization in India responsible for the formulation of guidelines and principles for importers as well as exporters of country.

Preparation, formulation and implication of Exim Policies are one of the main functions of DGFT. Apart from Exim Policy, DGFT is also responsible for issuing IEC or Import Export Code. IEC codes are mandatory for carrying out import export trade operations and enable companies to acquire benefits on their imports/exports, customs, exports promotion council etc in India. DGFT also play an important role in controlling DEPB rates and setting standard input-output norms. Any changes or formulation or addition of new codes in ITC-HS Codes are also carried out by DGFT (Directorate General of Foreign Trade). DGFT has its offices in all the major cities.

Central Board of Excises Customs (CBEC):

The Central Board of Excises Customs (CBEC) under Ministry of Finance is the controlling authority to handle custom duty related matters. CBEC regularly publishes the "Indian Customs Tariff Guide that provides all types of information on custom duty rules and regulation in India. Custom duty not only raises money for the Central Government but also helps the government to prevent the illegal imports and exports of goods from India. The Central government has emergency powers to increase import or export duties whenever necessary after a notification in the session of Parliament.

The Foreign Exchange Dealers Association of India (FEDAI):

It is a self regulatory body for the Authorized Dealers (AD) in foreign exchange. FEDAI provide guidelines which governs business hours, export transactions, import transactions, merchandising trade, clean instruments, guarantees, exchange, contracts, early delivery extension and cancellation of forward contracts.

Foreign Exchange Management Act (FEMA) by RBI:

The Foreign Exchange Management Act (1999) or in short FEMA has been introduced as a replacement for earlier Foreign Exchange Regulation Act (FERA). FEMA came into act on the 1st day of June, 2000. The main objective


behind the Foreign Exchange Management Act (1999) is to consolidate and amend the law relating to foreign exchange with objective of facilitating external trade and payments and for promoting the orderly development and maintenance of foreign exchange market in India. FEMA is applicable to all parts of India. The act is also applicable to all branches, offices and agencies outside India owned or controlled by a person who is resident of India.

Reserve Bank of India (RBI):

The Reserve Bank of India is the central bank of India, and was established on April 1, 1935 in accordance with the provisions of the Reserve Bank of India Act, 1934. The Central Office of the Reserve Bank was initially established in Kolkata but was permanently moved to Mumbai in 1937. Though originally privately owned, the RBI has been fully owned by the Government of India since nationalization in 1949.It manages the Foreign Exchange Management Act, 1999 and facilitates external trade and payment and promotes orderly development along with maintaining of foreign exchange market in India.

Export-Import Bank of India:

Export-Import Bank of India is the premier export finance institution of the country, set up in 1982 under the Export-Import Bank of India Act 1981. Government of India launched the institution with a mandate, not just to enhance exports from India, but to integrate the country’s foreign trade and investment with the overall economic growth.

Since its inception, Exim Bank of India has been both a catalyst and a key player in the promotion of cross border trade and investment. Commencing operations as a purveyor of export credit, like other Export Credit Agencies in the world, Exim Bank of India has, over the period, evolved into an institution that plays a major role in partnering Indian industries, particularly the Small and Medium Enterprises, in their globalization efforts, through a wide range of products and services offered at all stages of the business cycle, starting from import of technology and export product development to export production, export marketing, pre-shipment and post-shipment and overseas investment.


http://en.wikipedia.org/wiki/Government_of_India

http://en.wikipedia.org/wiki/Mumbai

http://en.wikipedia.org/wiki/Kolkata

http://en.wikipedia.org/wiki/1935

http://en.wikipedia.org/wiki/April_1

http://en.wikipedia.org/wiki/India

http://en.wikipedia.org/wiki/Central_bank

ROLE OF BANKS IN INTENATIONAL TRADE –

A CATALYST

Banks play a vital role. They perform many functions but the most important one is that they are the intermediaries through whom documents are exchanged for money between exporters and importers. They are also the extended arms of RBI in the administration of FEMA.

With strong business fundamentals, and in line with the increasingly competitive global trading environment, the Bank proactively seeks to enhance the competitive edge of Indian companies through a comprehensive range of financing programmes and advisory and support services which encompass all stages of the export business cycle. Towards facilitating inclusive globalization, the Banks are also involved in creating export capability in small and medium enterprises, grassroots business enterprises and agro industries. India’s project exports, commencing with a modest beginning in the early 1980s, have evolved over the years to exhibit expertise in a wide range of activities thereby reflecting technological maturity, industrial capabilities, and growing sophistication of Indian exports, and the Bank’s pioneering and pivotal role in this direction has served to catalyze such exports.

Every commercial bank deals in foreign exchange since it is an activity with good potential for profits. But broadly we could classify the functions into:

Finance of exports Finance of import, letters of credits Remittances and other miscellaneous services like traveller’s cheque,

currency encashment, credit card transactions, etc. Dealings, rates of exchange. MIS, returns and statistics.


COMPANY PROFILE – hsbc India

INTRODUCTION

The Existence of the HSBC Group in India can be traced back to October 1853 when the Mercantile Bank of India, London and China were founded in Bombay (now Mumbai). Starting with an authorized capital of Rs. 5 million, the Mercantile Bank soon opened offices in London, Madras (Chennai,) Colombo and Kandy, followed by Calcutta (Kolkata), Singapore, Hong Kong, Canton (Guangzhou) and Shanghai by 1855. The following hundred years were in many ways propitious for the Mercantile Bank. In 1950 it moved into its new head office building in Mumbai at Flora Fountain.The acquisition in 1959 by The Hong Kong and Shanghai Banking Corporation Limited of the Mercantile Bank was a decisive factor in laying the foundation for today's HSBC Group. Founded in 1865 to serve the needs of the merchants of the merchants of the China coast and finance the growing trade between China, Europe and the United States, HSBC has been an international bank from its earliest days.

After the Mercantile Bank was acquired by The Hong Kong and Shanghai Banking Corporation, the Flora Fountain building became and remains to this day, the Head Office of the HSBC Group in India.

Through the 1990s, HSBC has vigorously developed its role as one of the leading banking and financial services organizations in the world. Its strategy of 'managing for value' emphasizes the Group's unique balance of business and earnings between older, mature economies and faster-growing emerging markets.

HSBC in India is proud to have retained the Group's pioneering streak by being an active partner in the development of the Indian banking industry-even giving Indian its first ATM way back in 1987. The organization's adaptability, resilience and commitment to its customers have further enabled it to service through turbulent times and prosper through good times over the past 150 years.


HISTORY - HSBC

1865The founding member of the HSBC Group, The Hongkong and Shanghai Banking Corporation, is established in both Hong Kong and Shanghai.

1959The Mercantile Bank of India Limited and The British Bank of the Middle East, now HSBC Bank Middle East Limited, are purchased.

1965A 51 per cent interest (subsequently increased to 62.14 per cent) is acquired in Hang Seng Bank Limited. Hang Seng Bank is the fourth largest listed bank in Hong Kong by market capitalisation.

1980A 51 per cent interest in Marine Midland Banks, Inc., now HSBC USA, Inc is acquired (with the remaining interest acquired in 1987).

1987A 14.9 per cent interest in Midland Bank plc, now HSBC Bank plc, one of the UK’s principal clearing banks, is purchased.

1991HSBC Holdings plc is established as the parent company of the HSBC Group.

1993As a consequence of the Midland acquisition, HSBC’s head office is transferred from Hongkong to London in January.

1999HSBC acquires Republic New York Corporation, subsequently merged with HSBC USA, Inc., and Safra Republic Holdings S.A.

2000HSBC completes its acquisition of 99.99 per cent of the issued share capital of Credit Commercial de France S.A., now HSBC France.

2002HSBC acquires 99.59 per cent of Grupo Financiero Bital, S.A. de C.V., and the holding company of what is now HSBC Mexico.

2003HSBC acquires Banco Lloyds TSB S.A.- Banco Múltiplo in Brazil and the country’s leading consumer finance company, Losango Promotora de Vendas Limitada.

2004

HSBC Bank USA, Inc. merges with HSBC Bank & Trust (Delaware) N.A. to form HSBC Bank USA, N.A. The acquisition of The Bank of Bermuda Limited is completed. HSBC acquires 19.9 per cent of Bank of Communications, mainland China’s fifth largest bank by total assets, and Hang Seng Bank acquires 15.98 per cent of Industrial Bank.

2005 HSBC Finance completes the acquisition of Metris Companies Inc., making HSBC the fifth-largest issuer of MasterCard and Visa cards in


the USA.

2006

In July, HSBC enters into an agreement with Grupo Banistmo S.A. (‘Banistmo’), the leading banking group in Central America, to make a tender offer to acquire 99.98 per cent of the outstanding shares of Banistmo for a total consideration of US$1.97 billion. The transaction is completed in November. Banistmo’s principal area of operation is Panama, but the group also has a significant presence in five countries new to HSBC, namely Costa Rica, Honduras, Colombia, Nicaragua and El Salvador.

BUSINESS CAPABILITIES

Personal Banking

Credit and Debit Cards

Private Clients

Corporate and Institutional banking

Commercial banking

Payments and Cash Management

Trade Services

Bullion

Treasury and Capital Markets

Custody and Clearing

Investment Banking

Insurance services

Asset Management

Private Equity

Global Data Processing Software Development

COMPETITIVE STRENGTHS


Wide International Network

Comprehensive range of products & services

Long term customer orientation

Quick response times

The business capabilities Mentioned as under:-

Personal Banking

Corporate Banking

Investment Banking

Financial Performance of HSBC, India

Particulars As at 31.3.2008

(in cr. Rs.)

As at 31.3.2007

(in cr. Rs.)

As at 31.3.2006

(in cr. Rs.)

Assets 75921 54987 37473

Income 7096 4720 3130

Net Profit 1192 846 515


VARIOUS SUBSIDIARIES OPERATIONAL ACCROSS TYPES OF BUSINESSES IN INDIA

The Hongkong and Shanghai Banking Corporation Limited

HSBC Asset Management (India) Private Limited

HSBC Electronic Data Processing India Private Limited

HSBC Insurance Brokers (India) Private Limited

HSBC Operations and Processing Enterprise (India) Private Limited

HSBC Private Equity Management (Mauritius) Limited

HSBC Professional Services (India) Private Limited

HSBC Securities and Capital Markets (India) Private Limited

HSBC Software Development (India) Private Limited


TOP LEVEL MANAGEMENT hierarchy –

HSBC INDIA as on 31st march 2009

Naina Lal Kidwai : Group General Manager and Chief Executive Officer { CEO -INDIA }

Simen Munter : Deputy Chief Executive Officer

Anurag Adlakha : Chief Financial Officer { CFO }

Leslie Leland : Chief Information Officer

Ranjit Gokarn : Head - Credit Risk Management

Hitendra Dave & : Co-Heads - Global Markets

Anand Krishnamurthy

Rajnish Bahl : Head - Personal Financial Services

Tarun Kataria : Head - Corporate, Investment Banking and Markets

Puneet Chaddha : Head - Commercial Banking


HSBC Also Known For Best Awards in Corporate world :

Year Award Company/Entity Body/Publication

2008 Best Consumer Internet bank

HSBC Global Finance Magazine

2008 Top World Bank HSBC The Banker

2007 Best Trade Finance

Provider (UK)

HSBC Global Finance Magazine

2007 Best Structured Trade Bank

HSBC Trade Finance

2007 Best for Currencies

HSBC Euromoney Foreign

Exchange Poll2007

Leading Trade Services Bank in

Asia Pacific

HSBC Global Trade Review

2003-07 Best Trade Finance Bank in

Asia

HSBC Asset Asian Awards


HSBC – JAIPUR

HSBC being one of the leading international banks opened its branch at Jaipur on 13th Nov 2003. Jaipur is a big market of jewels import export and with new opportunities of business and personnel growth this fact was noticed by the organization and finally a branch of HSBC was inaugurated by Sir John Bond on 23rd Nov. 2003. Branch is now working efficiently and has a good deal of investments. Branch has sufficient weapons to defeat its competitors which includes punctual and efficient employs who r always ready in the service of bank.


HIERARCHIAL STURUCTURE OF TRADE DEPARTMENT

AT

HSBC JAIPUR

Various types of services offered under trade services

To SME clients

The various products offered by the bank can be classified as under:


SMALL & MEDIUM ENTERPRISE

{S.M.E}

OPERATIONAL MANAGER

MARKETING MANAGER

SENIOR SALES MANAGER

SENIOR RELATIONSHIP MANAGER

7 SALES MANAGERS {HUNTERS}

3 RELATIONSHIP MANAGERS {FARMERS}

A) Export Services

Export Collections It can collect your commercial / shipping documents through it’s banking network. For exporters, it is a more secure option than trading on open account terms because the shipping document will be delivered to the importer only against payment or an acceptance to pay on due date. It also offers instant email functionality, providing details on the export collection transactions, to a designated person in your office through it’s EDCA offering.

Export FinancingIt can address funding gaps in your trade cycle and support your business, by providing you export financing options in foreign currency (at LIBOR linked rates) or in Indian Rupees, both at the pre-shipment and post-shipment stage.

It can discount your export receivables by negotiating bills drawn under a DC or discounting bills under collection, with the latter available both for D/P (Documents against Payment) and D/A (Documents against Acceptance). It can reduce country and bank risk, exposure to interest and exchange rate fluctuations and turn your receivables into cash. It also provides instant email advice.

Advance Remittances Any payments into the country by overseas parties are processed expeditiously and credited to your account promptly.

DC Advising A Documentary Credit ("DC") opened by the overseas importer's bank, will be checked for authenticity and couriered across to your doorstep. With a presence in over 83 countries and over 9,800 group offices, and global correspondent banking relationships with over 2,500 banks, it has Swift key arrangements with most of the major banks, to facilitate straight through processing of DC advising. It also offers a real time electronic DC advising functionality wherein the DC is sent through an automated email to a designated person in your office.

DC Confirmation Reduce bank and country risk effectively by enjoying the security of payment commitments from both the issuing bank and the confirming bank. HSBC is one of the largest institutional banks with global


http://www.hsbc.co.in/1/2/corporate/trade-and-factoring-services/documentary-credits-dc-


http://www.hsbc.co.in/1/2/corporate/trade-and-factoring-services/advance-payment

http://www.hsbc.co.in/1/2/corporate/trade-and-factoring-services/collections

correspondent banking relationships with over 2,500 banks. If HSBC confirms the DC, and your documents are presented in compliance with the DC terms, payment from HSBC will be final.

DC Transfer Ideal for buyers working with sourcing agents who require credit cover. If you are a sourcing agent or the first beneficiary, it can provide guidance on the terms and conditions of your DC and assist in either fully or partially transferring your DC to the ultimate supplier.

Trade SolutionsIt has designed a special program for exporters, supplying to certain large reputed buyers in the US and Europe. As an established supplier to such large reputed overseas buyers, you are entitled to enjoy a range of extra benefits when you present documents to HSBC for negotiation under Documentary Credits (DCs) issued by other HSBC group offices. These extra benefits include:

Lower overseas bank charges viz. handling charge, courier, cable charges, discrepancy fee, reimbursement fee; which are to the account of beneficiaries.

Faster communication and quicker turnaround times. As both the import and export legs of the transactions are handled by one bank you should receive funds 6 days earlier on average, saving you interest charges.

Peace of mind that documents are only checked once and held by the local HSBC office until acceptance; and

Opportunities for Pre and Post shipment finance.

Bill Negotiation/ LC Discounting

To close the gap between the presentation of shipping documents and the receipt of proceeds from the documentary credit issuing bank under a documentary credit transaction, one may ask HSBC to negotiate or discount the sight bills and tenor bills respectively to get an immediate access to cash.

HSBC service offers:

· Same-day processing and advance payment to you if documents are received



before 2pm on a working day· Access instant cash to pay your suppliers or expand your business· Professional advice - ensure your documents comply with the documentary

credit terms, avoiding delayed payment due to minor mistakes· Close follow-up of your export bill payments· Immediate phone advice on the exact amount of forwards available for your

use Forfaiting

It can arrange for an offshore financing on your export receivables to countries esp. high / medium risk with medium to long credit periods. Advisory services on any export transaction – It’s local experts understand trade thoroughly, and they can provide value to your business by performing advisory on a host of trade issues, including structuring DCs for your export business.

Packing Credit

Packing Credit is a loan or advance granted or any other credit provided by a bank to an exporter for financing the purchase, processing, manufacturing or packing of goods prior to shipment, on the basis of letter of credit opened in his favor or in favor of some other person, by an overseas buyer or a confirmed and irrevocable order for the export of goods from the producing country or any other evidence of an order for export from that country having been placed on the exporter or some other person, unless lodgement of export orders or letter of credit with the bank has been waived.

B) Import Services

Issuance of documentary credits (DCs) and standby letter of credits (SBLCs) - When issuing DCs or SBLCs through HSBC, you enjoy the following benefits:

Detailed advice on structuring the instruments to meet your import

requirements.

Comprehensive guidance on the DC terms and conditions.

Access to HSBC's vast global expertise and resources.

Ability to turnaround transaction processing expeditiously.

1) Import Collections services - This is a cost-effective solution for trading internationally. Under this arrangement, the importer gets


the shipping documents, after making payment or providing an acceptance to pay at a future date. HSBC has established strict service standards, which ensure that you are promptly informed of any documentary collections drawn on you.

2) Import Financing - It can address funding gaps in your trade cycle and support your business, by providing you import financing options in foreign currency (at LIBOR linked rates) or in Indian Rupees. It can arrange import buyers' credit financing through HSBC branches / group entities overseas, at internationally competitive LIBOR linked rates.

3) Advance Remittances / Direct Remittances - For your import payments to be made to overseas beneficiaries, it provides a quick turnaround for payments by way of Telegraphic Transfer / Demand Drafts etc.

4) Issuance of shipping guarantees/delivery order or any other guarantee - In case the goods you import arrive before the transport documents, it could issue you a shipping guarantee / delivery order to facilitate taking delivery of the goods. You then have immediate access to your goods and avoid expensive storage fees and demurrage charges.

Advisory services on any Import transactions - Whatever your

sourcing requirements, it is well positioned to provide you expert advice for

structuring your import transactions. Leveraging on it’s global presence, it can

offer solutions where HSBC group entities can handle the transaction on both

sides thereby ensuring a smoother, safer and a more cost-effective execution of

transactions.


Exports

Export collections

LC Advising/Confirmation/

Negotiations/Transfer

Domestic Trade

Letter of credit

Documentary collections

Trade process

{Export – import procedure}

Pre-Shipment Finance:

An exporter may need financial assistance for execution of an export order from the date of receipt of an export order till the date of realization of the export proceeds at any stage. Financial assistance extended to the exporter from date of


CUSTOMER

HSBC BANK

Guarantees

Bid/performance/advance payment

Exports

Export collections

LC Advising/Confirmation/

Negotiations/Transfer

Imports

Letters of Credit

Documentary Collections incl. Open A/c

Buyers Credit

Co-acceptance

receipt order till the date of shipment is known as Pre-shipment credit .It is extended to an exporter for the purpose of procuring raw material, processing, packing, transportation, warehousing of goods meant for exports.

Post-Shipment Finance:

Credit facility extended to an exporter from the date of shipment of goods till the realization of the export proceeds is known as Post-shipment credit. Types of post-shipment finance

1) Export bills purchased/negotiated/discounted2) Advances against bill sent on collection bills etc3) Advances against export on consignment basis

Exchange Earners' Foreign Currency (EEFC) Account - When the exporter receives the money, he has a choice to convert foreign currency into rupees or to keep a percentage of this in an account called EEFC account. EEFC account is a facility given to exporters to facilitate them in hedging against their import payments and no interest is paid on this account.

FIRC (Foreign Inward Remittance Certificate)

The certificate, which the customer requires for getting the foreign remittance, is called Foreign Inward Remittance Certificate (FIRC)

As and when the proceeds are realized in the bank, it issues an FIRC to the company that the amount is realized, the company then shows the required documents to show the amount realized is for a particular export made. Then the money is transferred to the company’s account. Also banks allot each transaction with it a special unique no. called reference no. Banks also issue a document called advice for every transaction with it eg. Payment made, payment received etc. for recording and informing each transaction.

CHARGES… Banks in India associated themselves with the export letters of credit in various capacities such as advising bank, confirming bank, transferring bank and reimbursing bank.In every cases the bank will be rendering services not only to the Issuing Bank as its agent correspondent bank but also to the exporter in advising and financing his export activity.


http://rbidocs.rbi.org.in/rdocs/notification/PDFs/15017.pdf

1. Advising an Export L/C.

2. Advising of Amendments to L/Cs

3. Confirmation of Export Letters of Credit

4. Discounting/Negotiation of Export LCs

5. Reimbursement of Export LCs

Remittances:

Remittances department would deal with the issuance and payment of demand draft, telegraphic transfers, mail transfers, issue and encashment of travelers’ cheque, sale and encashment of foreign currency notes, maintaining non-resident accounts, etc.

Dealings:

Banks buy and sell foreign currencies from and to the public. To carry out these functions they need to keep stock of currencies with the team and also maintain bank account abroad. This department does rate computation, that is, it gives the exchange rate for all currencies. It maintains foreign currency accounts with bank abroad .It books forward contracts (both sale and purchase) on behalf of its customers and undertakes cover operations and exchange dealings .

MIS, Returns, and Statistics:

This department is responsible for submission of returns and statistics to RBI and also to the bank’s head office, collecting and providing of credit information for and behalf of their constituents.

CORRESPONDENT RELATIONSHIP:

To facilitate dealings in foreign exchange, a bank in India maintains accounts with banks abroad. Similarly some foreign banks may maintain accounts with bank of India. In banking terminology these are known as Nostro account, Vostro account, and Loro account.

a) Nostro Account:


Nostro means our account with u. e.g. HSBC maintains an account with Nat west bank, London.

b) Vostro Account:

The account opened by a foreign bank in Indian rupee with an Indian bank would be referred by all correspondence by Indian banks as Vostro account, meaning your account with us.

c) Loro Account:

Loro account means their account with you. e.g.; HSBC has an account in US dollars with Chase Manhattan Bank in New York. When any other bank wishes to refer the account of HSBC with Chase Manhattan bank it would refer to it as Loro account.

Advance Payment

When the buyer’s credit is doubtful or the political or economic environment in the buyer’s country is unstable seller may demand advance payment, which will be to his advantage. Without any assurance for supply of goods, blocking his capital prior to receipt of goods or services the buyer will be at a disadvantage position. The seller gets the benefit of financial assistance and eliminated


payment risk. Buyer’s risk includes issues such as whether regulations permit, seller’s country prohibit shipment of the goods, funds are blocked, performance risk.

Direct Collections:

By an arrangement between the buyer & the seller manufactured goods will be delivered directly to the buyer directly or to his order & the buyer will pay at the end of the agreement.

BILLS ON COLLECTION

It is an arrangement by which seller after shipping the goods submits the documents to his banks as agent for collection. Documents are presented to the buyer through the correspondent bank of the seller’s bank, which will be released upon buyer’s payment of the amount specified. The documents are


routed on bank-to-bank basis and docs are delivered on DP / DA Basis, and there is no undertaking from Bank for the payment. It is applicable where there exists reasonable trust, no risk of Advance or Direct Bills or Cost of LC transaction. Seller’s risk includes issues like dependency on buyer to collect goods and make payment. Seller’s benefits include delivery against DA/DP; Banker’s acting as agent, better recourse than Direct Bills. Buyer’s benefits include D/P payment is effected after shipment, D/A payment is effected after goods are received and quantity is known. .

Important Instruments used in Trade

Letter of Credit (Documentary Collection)

An import letter of credit (LC) is an unconditional undertaking, given by a bank (issuing bank) at the request of a customer (applicant) to pay a seller


(beneficiary) against stipulated documents provided all the terms & conditions of the credit are complied with. In LC arrangement, the issuing bank can:

Undertake to make payment to or to the order of the beneficiary or to accept & pay bill of exchange drawn by the beneficiary

Authorize another bank to effect such payment, or to accept & pay such bill of exchange

Authorize another bank to negotiate against stipulated documents

It is applicable in cases of new trade relationship, concern over credit worthiness, potential economic and political risk. Seller risks include issues like payment risk of the issuing bank / confirming bank. Seller gets the benefits like payment against submission of complying documents, and no refusal beyond the scope of LC. Buyer’s Risk & Issues: Any remedy outside the LC terms. Buyer’s benefits include payment, which is effected only after the goods have been dispatched within the time and Payment as per LC terms and conditions.

TYPES OF LETTER OF CREDIT

IRREVOCABLE/REVOCABLE A revocable credit can be cancelled at any moment without prior notice to the beneficiary. However the issuing bank is bound to reimburse the Negotiating the bank if they had paid value before receiving information of cancellation from the Issuing Bank. An irrevocable credit is a definite undertaking and cannot be amended or cancelled without the agreement of the issuing bank and the beneficiary and the Confirming Bank, if any.

CONFIRMED Issuing Bank requests another Bank – can be in the exporter’s country or in the third country to pay to the beneficiary on their behalf against presentation of documents. Once this arrangement is agreed for, then this credit is known as confirmed credit

RESTRICTED/FREE Issuing Bank, while issuing the letter of credit, nominates a specified bank to negotiate the documents under this credit. It means only the nominated Bank will be authorized to negotiate the documents.In a freely negotiable letter of credit any bank can negotiate the documents and claim reimbursement. Beneficiary has got the choice of


presenting the documents to his own bank and claim payment. This will be advantageous to the exporter

TRANSFERABLE A LC is transferable only if the issuing bank designates it. Beneficiary has the right to request the nominated bank to transfer credits in parts or in full in favour of one or more beneficiaries if partial shipment permitted.

REVOLVING The amount of drawing is reinstated and made available to the beneficiary again for the agreed period of time on notification of payment by the applicant or on submission of documents

RED CLAUSE/GREEN CLAUSE This credit in red color authorizes nominated bank to allow advance to the beneficiary prior to shipment to meet pre-shipment credit requirements.Green clause credits provides expenses relating to storage charges before shipment in addition to pre-shipment credit

STANDBY CREDITS Promise to honor beneficiary’s presentation of a document indicating the default of the applicant Act as a standby arrangement in case the obligation is not fulfilled by the applicant .More useful in collection instruments. In respect of any debt, obligation or any liability by the overseas party in connection with bonafide trade transaction as a backup instrument for collection

DOCUMENTS UNDER L/C

BILL OF EXCHANGE Section 5 of negotiable instruments act, 1881 instrument in writing signed by the maker directing a certain person to pay a certain sum of money only to/the order of the payee/beneficiary or to the bearer of the instrument

BILL OF LADING


A formal receipt by the ship owner or the master of the ship acknowledging that the goods of the stated specifications, quantity and condition are in a certain ship or at least received in the custody of the ship owner for the purpose of shipment .

Each Shipping Company has its own Bill of lading and as soon as the exporter obtains the Mate’s receipt, he should prepare the Bill of Lading in the forms obtained from the shipping company or its agent. Following details are required:

Name of the consigner Name and destination of the vessel Details of the goods (Description, Quantity, Destination...etc.) No. of packages Date and place of shipment Gross and net weight Amount of freight

INVOICE

It is a prima facie evidence of the contract of sale and purchase. The

invoice should be strictly in accordance with the contract of sale and

should be on the paper of seller and must be signed by him or by the

person acting on his behalf. It contains the following details:-

Detailed description of the goods consigned

Consigners name

Consignee’s name

Name of steamer

No. and date of bill of lading

Order acceptance

Country of Origin

Selling price to the purchaser

CERTIFICATE OF INSPECTION

This is a document signed by an independent third party, attesting to the quality, type and number etc of goods being shipped by the seller.


Requiring such certificate offers some assurance to the buyer that file merchandise shipped is the one ordered.

CERTIFICATE OF ORIGIN

It is a signed statement providing evidence of the origin of the merchandise. It must be issued by an independent official organization such as chambers of commerce.

PACKING LIST

A packing list enables the buyer or seller to locate a particular item if

there are several packages with different contents. It contains the

following details:

Date of packing

Order no.

Shipping details

Connecting invoice no

Details of goods ( Quantity, Weight, and/or item wise details)

INSURANCE POLICY/CERTIFICATE

Shipping across the international boundaries is a risky business. The

goods may be handled at several different stages: receipt, loading,

unloading, warehousing. The carriers themselves are susceptible to

mechanical failures, Natural Disasters. To guard against the risk that

goods might be lost or damaged in transit, an insurance policy/

certificate is required and it indicates the following details:

Specific risks to be covered

Amount of coverage

Time period of the coverage

SHIPPING BILL/ AIRWAY BILL-

When the bill of lading is presented at the custom office the bill then issued after custom clearance is shipping/airway bill. It is a proof of not


only the shipment but also of the custom clearance and therefore is essential to be sent to the importer for clearance at his end. It should be in the books of government, the export, for duty drawbacks later.

SELF DECLERATION FORM - It is an undertaking by the company to deliver to the bank the foreign exchange representing the full export value of goods before six months in the manner prescribed in the FEMA Act 1999.

EXPORT PROCEDURE AT HSBC

Buyer asks / contacts the Exporter & asks for the specification & price & related information.

Exporter informs the Buyer about all the specification & issues the Performa.

Buyer check the Performa also the specifications & issues the purchase order.

Exporter accepts the purchase order.

Exporter opens a HIE (HSBC IMPORT EXPORT ACCOUNT) account with the HSBC bank

Exporter or relationship manager of HSBC brings the document for the purpose of realization of Bill or reporting to RBI (Reserve Bank of India) with the help of bank

Documents are checked by the trade department official to verify that they are in order and all the necessary documents are submitted with the bank

Documents can be submitted by customers for three purposes1. Regularization


2. Original document to be Sent to Buyer directly3. Original document sent to bank

Document Submitted by the customers are scanned with the help of GWIS (Group Work and Imaging System) and sent to HOPE (HSBC Operations and Processing Enterprises Private Limited) situated in Delhi.

The cut off Time for the scanning of the document assigned at all the HSBC offices is 2 P.M. After the cut off time special permission is required by HOPE for scanning of document so that those documents can be processed on the same day.

The Documents Scanned are verified by HOPE to check that documents are prepared and the goods are exported according to rules and regulations given by RBI.

After the verification of the Documents is done, HOPE generates a reference number which is the identification number for that particular bill and the bill is lodged in the system e.g.

OBC JAI 123456 where

OBC means the purpose for which the bill has been sent to bank by customer

JAI means the Jaipur branch of HSBC from where the bill has been scanned

123456: It is serial number given to the bill for further reference

Various type of reference number given to the export and import documents

OBCPayment of Bill will be received after due date

PRPPayment of Bill has been received in advance and bill is sent to the bank for regularization


EBRPayment of bill has been received after shipment of Bill

BPC/BAC

Bill has been sent to bank for discounting and such a Bill is sent by HSBC to the corresponding bank in buyer country

OAImport payment Bill whose payment has been made in advance

CIOCORImport payment bill whose payment is to be made on Due date

The documents which are scanned before the cut off time have to be sent on the same day and the DHL Courier is booked for the document to be sent to buyers directly and to the seller’s bank. In case the document is to be sent within India than bank has a tie up with TNT services.

After the bill is cleared and the reference number is generated all the shipping bills, GR forms ,SDF forms, and A1 forms are sent to JANASWAMY ASSOCIATES MUMBAI an agent of HSBC who reports to RBI of the transaction undertaken by HSBC with respect to export and import

IMPORT PROCEDURE AT HSBC

I. The buyer and seller enter into a contract.

II. The buyer approaches the HSBC bank to issue a LC in favor of beneficiary.


III. The LC is issued and sent; beneficiary ships the goods to the buyer and collects the documents.

IV. The beneficiary submits the under LC documents to the issuing bank through their bankers.

V. The issuing bank debits the account of the customer and makes payment to the beneficiary.

PRICING GRID (HSBC)

EXPORTS Business Vantage Business Select

1 DC AND AMENDMENTS ADVISINGFOR SWIFT-COMMISION INR 1500 INR 1000FOR NON SWIFT-PHYSICAL/TELEX

INR 1500 INR 1000

2 EXPORT BILL NEGOTIATION UNDER DCA)WITHOUT DISCOUNTINGPROCESSING CHARGES 0.10% Min INR

20000.10% Min INR 1500

COURIER INR 750 INR 750SWIFT/TELEX INR 750 INR 750

3 DOCUMENTARY COLLECTIONPROCESSING CHARGES 0.625% Min INR 0.625% Min


1500 INR 1500COURIER INR 750 INR 750

4 BRCs/FIRCs INR 100 INR 100

IMPORTS

5 DOCUMENTS UNDER COLLECTION (IBC)RETIREMENT CHARGES 0.25% Min INR

20000.25% Min INR 1500

SWIFT/TELEX INR 750 INR 750

6 DIRECT IMPORT PAYMENTS (OA)RETIREMENT CHARGES 0.125% Min INR

20000.125% Min INR 1500


7 ADVANCE REMITTANCE (CIO)PAYMENT COMMISSION 0.25%.Min INR

20000.25%.Min INR 1500


PARTIES INVOLVED IN INTERNATIONAL TRADE

Buyer – importer

Seller – exporter


Manufacturer

Shipping company

Insurance company

Government and embassies

Custom and excise

Various professional bodies

Lawyers

Agents

Shipping registries

Chambers of commerce

Banks

INCOTERMS

Inco terms describe the most commonly used terms of trade in commercial contracts & are published by the international chamber of commerce (ICC) These terms aim to standardize the terminology used in international trade are and are periodically revised to reflect current commercial and transport practice. They aim to eliminate doubts between buyers and seller


Defining the method of delivery of the goods by the seller. Stating exactly what charges are included in the seller’s price. Defining the responsibilities of the parties to the contract of sale for the

arrangement of insurance, shipping and packaging.However, the use of Inco terms is voluntary; if incoterms rules are being applied to a transaction they must be incorporated by specific reference in the contract,

ICC has given the three letter abbreviation for key incoterms. The responsibilities of the buyer and seller defined under the key incoterms may be modified by having additional terms attached to them.

Some key incoterms used

DDP (Delivered Duty Paid)

“Delivered duty paid” means the seller fulfills his obligation to deliver when the goods have been made available at the named place in the country of importation. The seller has to bear the risk and costs, including duties, taxes and other charges of delivering the goods thereto cleared for importation.

DDU (Delivered Duty Unpaid)

“Delivered Duty Unpaid” means that the seller fulfills his obligation to deliver when the goods have been made available at the named place in the country of importation but not cleared for import.

The seller is also responsible for all the cost involved to deliver the goods to the named place of destination. The seller’s risk also does not end until it reaches the place of destination.

A common misconception with DDU is that the seller is also responsible for the inland transport of goods to their final destination after the buyer has arranged for import clearance. This is incorrect. The buyer assumes all risk and responsibility for import clearance, duties and delivery to final destination.

Under DDU terms the seller’s risk and responsibility end once the goods have been made available to the buyer at the named place of destination. The seller is also responsible for all costs up to the named place of destination, but is not responsible for delivering the goods to their final destination.


DEQ (Delivered ex quay)

“Delivered ex quay (duty paid)’means that the seller fulfils his obligation to deliver when he has made the goods available to the buyer on the quay (wharf) at the named port of destination , cleared for importation. The seller has to bear all risks and costs including duties , taxes and other charges of delivering the goods thereto.

This term should not be used if the seller is unable directly or indirectly to the import licence.

If the parties wish the buyer to clear the goods for importation and pay the duty the word ‘duty unpaid’ should be used instead of “duty paid”

DES (Delivered ex ship)

“Ex Ship” means that the seller fulfils his obligation to deliver when the goods have been made available to the buyer on the board the ship uncleared for import at the named port of destination. The seller has to bear all costs and risks involved in bringing the goods to the named port of destination. This term can only be used for sea or inland waterway transport.

DAF (Delivered at frontier)

“Delivered at frontier” means that the seller fulfils his obligation to deliver when the goods have been made available , cleared for export, at the named point and place at the frontier , but before the customs border of the adjoining country. The term frontier may be used for any frontier including that of country of export.

CIP (Carriage and insurance paid)

Costs of carriage and insurance of the goods, duty unpaid to the name destination. Applies to all modes of transport.

CPT (Carriage paid to)


‘Carriage paid to “means that the seller pays the freight for the carriage of the goods to the named destination. The risk of loss of or damage to the goods as well as any additional costs due to events occurring after the time the goods have been delivered to the carrier is transferred from the seller to the buyer when the goods have been delivered into the custody of the carrier.(carrier means any person who in contract of carriage undertakes to perform or to procure the performance of carriage by rail, road, sea, air , inland waterway or by combination of such modes.

If subsequent carriers are used for the carriage to the agreed destination , the risk passes when the goods have been delivered to the first carrier.

CFR (Cost and freight)

“Cost and freight” means that the seller must pay the cost and freight necessary to bring the goods to the named port of destination but the risk of loss of or damage to the goods , as well as any additional cost due to events occurring after the time the goods have been delivered on board the vessel is transferred from seller to the buyer when the goods pass the ship’s rail in the port of shipment.

Te CFR term requires the seller to clear the goods for export.(for sea and inland waterway transport)

CIF (Cost, insurance and freight)

“Cost, insurance and freight “means that the seller has the same obligation as under CFR but with the addition that he has to procure marine insurance against the buyer’s risk of loss or damage to the goods during the carriage. The seller contracts for insurance and pays the insurance premium.

The seller is required to obtain insurance in minimum coverage and used for sea and inland waterway.

FOB (Free on board)

“Free on board “means that the seller fulfills his obligation to deliver when the goods have been passed over the ship’s rail at the named port of shipment . This


means that the buyer has to bear all costs and risks of loss or damage to the goods from that point (for sea and inland waterway)

INSURANCE

For the international trade transactions, the contract should clearly state which party is responsible for arranging insurance and, in some cases, the point at which responsibility changes from supplier to buyer. This will be reflected in the inciter applied to the contract. Irrespective of the responsibility, it is important that the insurance cover is in force for the entire journey being undertaken, including any loading, unloading and temporary storage.

Where the supplier’s is responsible for arranging insurance, the insurance certificate or policy will be sent with the shipping documentation as evidence of cover.

Insurance cover arranged by the supplier may end when the goods are landed at the port of arrival which can lead to problems such as:

Cover needing to be arranged for the transit of goods from the port of arrival to the buyer’s premises or those of the ultimate purchaser.

Goods arriving damaged or incomplete at the port of arrival may lead to disputes between seller and buyer. Unless the goods are inspected immediately upon arrival, it will be difficult to prove where the loss or damage occurred.

Delay in settlement of claims if insurance is arranged through an overseas insurer.

These problems can be avoided by:

Extending the sellers marine insurance cover to the ultimate destination, with the buyer assuming responsibility for the insurance premium relating to the period after arrival at the port of entry.

Separate insurance cover being arranged by the buyer covering the final stages of the transit through this may not resolve demarcation disputes.

The buyer taking responsibility for insurance from the suppliers premises to the ultimate destination.

FREIGHT FORWARDNESS


For an importer, a physical presence at the port or airport is essential. One way to achieve this is to employ forwarding agents. Alternatively, make use of the clearance departments maintained by the major carrying lines to prepare and lodge import declarations.

Suppliers often arrange the dispatch of orders through the services of an international freight forwarder. These are firms experienced in transportation procedures that can advise on and arrange transport, prepare some of the necessary documents and arrange covers. Economies of scale mean that consignments by freight forwarders are consolidated with others in containers which are consigned through to a named point usually an inland clearance depot.

DOCUMENTATION

The commercial contract should provide all details of the documents required .if the documents are drawn incorrectly; there may be a delay in payment.

Importance of Documentation

Documentation provides tangible evidence that the goods ordered that have been produced and dispatched in accordance with the buyer’s requirements.


Consignment details need to be communicated to the various parties so both importers and exporters need to be familiar with the principal documents used. Documentation is also used to satisfy government regulations in the UK and overseas and has become an increasingly important factor in obtaining finance for international trade.

It is normally the responsibility of the exporter to make sure that documents for the transportation of goods are complete, accurate and properly and promptly processed .failure to do so may result in additional costs being incurred.

The importer has the responsibility for completing accurately the necessary forms for the goods to be licensed for import and cleared through customs. Incorrect documentation can cause delay in the clearance of the goods at their destination. Goods can be impounded, warehoused or left on the quayside, with the risk of damage or loss and consequent expense. The use of a forwarding agent can help reduce administrative and pressures on importers and exporters.

FINANCIAL DOCUMENTS

The principal financial documents used in international trade are described below.

1) BILL OF EXCHANGE

A bill of exchange or draft is used to establish a legal commitment to pay a sum of money. It also provides a convenient mechanism for the giving or receiving of a period of credit.

A sight bill is payable on demand, or at sight. A term bill or usance bill is payable at a fixed or determinable future

time. The drawee agrees to pay on the due date by writing an acceptance across the face of the bill.

A bill of exchange is a kind of promissory note without interest. It is used primarily in international trade and is a written order by one person to pay another a specific sum on a specific date sometime in the future. If the bill of exchange is drawn on a bank it is known as bank draft. If it is drawn on another party it is called trade draft.

As with all financial documents the source, I.e. the drawer or issuer of the bill of exchange must be carefully investigated. If it is a bank then the bank must be


contacted to verify the authenticity of the document and the creditworthiness of the bank must be established through independent research . If the bill of exchange is drawn on a private party then the risk depends on the creditworthiness

The bill of exchange must conform exactly with the terms of the letter of credit with the sum specified not exceeding the amount of LC.

A bill of exchange is usually defined as:

An unconditional order in writing Addressed by one person (the drawer) To another (the drawee) Signed by the person giving it (the drawer) Requiring the person to whom it is addressed To pay on demand , or at a fixed or determinate future time A sum certain in money To , or to order of , a specified person or to bearer (the payee)

2) PROMISSORY NOTES

A promissory note is a promise to pay issued by the buyer (the maker) in favor of the seller (the payee or beneficiary). Although it is similar to a bill of exchange it does not always carry the same legal rights.

Promissory notes are popular in forfeiting arrangements and with countries where there is some fiscal reason for not issuing a bill an exchange.

A promissory note is usually defined as:

An unconditional promise in writing. Made by one person (the maker) to another. Signed by the maker. Engaging to pay, on demand, or at a fixed or determinate future time. A sum certain in money. To, or to the order of, a specified person or to bearer (the payee or

beneficiary).

OTHER INTERNATIONAL TRADE DOCUMENTS

Trade documents required for import are:


Commercial invoice A-1 form FEMA declaration Bill of entry

3) COMMERCIAL INVOICE

A commercial invoice is a claim for payment for the goods under the terms of the commercial contract. It is addressed to the importer by the exporter. An invoice will normally include a detailed description of the goods together with unit prices, totals, weights and terms of payment, as well as packing details and shipping marks. It serves as a checklist so that a particular consignment can be identified and is the main evidence in any assessment for customs duty.

A document that generally contains the name and address of the seller and buyer, date of the sale, a description of the goods, quantity, unit price, terms of sale, amount due under the Letter of Credit and type of currency.



4) A-1 FORM

Applications by persons, firms and companies for making payments, exceeding USD 500 or its equivalent, towards imports into India must be made on appropriate form A 1.


5) FEMA DECLARATION

It is a declaration cum undertaking determining the authenticity of the importer in the international trade and is compulsory as per the RBI regulations

6) BILL OF ENTRY

A statement of the nature and value of goods to be imported or exported, prepared by the shipper and presented to a customhouse. A bill of exchange or draft is used to establish a legal commitment to pay a sum of money. It also provides a convenient mechanism for the giving or receiving of a period of credit.

A sight bill is payable on demand, or at sight.

A term bill or usance bill is payable at a fixed or determinable future time. The drawee agrees to pay on the due date by writing an acceptance across the face of the bill.

There are various other documents required for import depending on the nature of import transactions

For direct payment (Open Account Payment – Goods received and then the payment is made)

1. Invoice copy2. Transport document3. Form A14. FEMA declaration5. Bill of Entry (exchange control) in original6. Customer’s letter

I. Authorizing HSBC to debit their account for payment and chargesII. Benf bank details

III. Specific license if any required or undertaking that the goods are covered under OGL.


For advance Payment (RBI guidelines – the amount remitted cannot exceed USD 100K or its equivalent)

1. Performa invoice/accepted purchase order2. Form A13. FEMA declaration4. Specific license if any required5. Covering letter giving details:

I. Benf bank detailsII. Undertaking that the goods are covered under OGL (open general

licence) and not restrictedIII. Undertake to submit the bill of entry within 180 days of paymentIV. Authorize us to debit the account for payment amount and our

charges


FACTORS WHICH CONTRIBUTED TO THE GROWTH - HSBC

HSBC Jaipur branch has grown up very rapidly since its inception as far as Trade services is concerned and has been showing very fruitful output. Some of the factors which have boosted the growth of HSBC in Trade Services are as follows:

1) NOSTRO-VOSTRO Account- HSBC India has been maintaining 18 Nostro accounts with other banks and in these 18 other banks, most of the foreign banks are of HSBC only like HSBC USA , HSBC Hongkong, etcBecause of this, there are no extra charges taken from the customer for the transfer of money which is big growth factor of HSBC, Jaipur as no other bank at jaipur has such a vast network with no extra charge as far as this is concerned.

2) Inward TT rate Again in comparison to other banks, HSBC, Jaipur doesn’t charge any thing extra as Inward TT charges. Whereas, other banks do charge some % of amount as its service charge.

3) TT receivable time period for the same dayAt HSBC, Jaipur, the TT receivable time period for the same day is till 12 pm. Any TT received before 12 pm is credited on the same day and gets reflected in our Nostro accnt. This service also makes the HSBC far ahead from other banks.

4) Runner to collect the documentsThis is one of customer centric service from HSBC, Jaipur- Providing the facility of a runner to collect the documents and bills from the customer as and when required. This is one of the aggressive extra service which this bank provides.


5) BRC issuance and chargesBRC( Bank Realization Certificate) is issued only by HSBC and not any other bank by sometimes charging extra charges for the same. Other wise in most of the other cases, no other bank issues BRC on its own. The customer has to get is issued on its own.

6) FIRC send directly to customerThis is again a customer centric service leaded by HSBC Jaipur in providing the door facility by sending the cleared(balance NIL) FIRC to the customer on its own, without any prior request of the customer. In other banks, the customer has to give request first to avail this service.

7) Competitiveness in Import CommissionThe Import Commission charge by HSBC, Jaipur is very competitive in comparison to other banks. Due to the secrecy policy, the figures cannot be let out.

8) Swift Massages on MailAlthough this service is available to all the authorized banks but only some of the banks are using this service and one of them is HSBC. HSBC, Jaipur uses SWIFT massages on Mail in order to make the services very fast and secure. LC discounting request and many other information among the banks are shared through these massages.


SWOT Analysis of HSBC

STRENGTHS

World Wide Recognition Need Base Analysis Same Global Standard Services in all Branches Fair Deal in all Transactions Customer Services at Door Step Ethical conduct Infrastructure Customer Relationship Highly Professional and trained Staff

WEAKNESS

Frequent Job Rotation Only one branch in Jaipur and two in whole of Rajasthan Only one ATM in Jaipur Strict Rules and Regulation Focus on only Premium Customers High Charges Less number of advertisements

OPPORTUNITIES

Scope in jaipur as it is in the developing phase Large Number of exporters as it is jewellery hub of India Lack of awareness and lots of wealth with the people

THREATS

Large number of competitors Myth among Jaipurites that international banks are not trustworthy Not that popular in jaipur as compared to other banks


QUESTIONNAIRE ON THE TRADE SERVICES OF HSBCBANK, JAIPUR

NAME: DATE:

Address (optional):

Email-id:

BRANCH (Name where you Bank with):

Which is the sector you trade in?

a) Gems & Jewellery

b) Handicraft

c) Textile

d) Others

You are currently associated with which other banks with respect to trade services

Are you satisfied with the Conversion rate for Inward/Outward Remittances provided by the bank?a) Completely


a) AXIS BANK

b) ICICI

c) IDBI

d) SBI

b) Neverc) Sometime

How many times the bank has played its role in educating and helping you to follow the prescribed guidelines?a) Alwaysb) Sometimec) Never

Did the bank provide any door step service regarding collecting or submitting of bills or any other relevant documents?a) Yesb) Noc) Sometime

Which one you prefer to be your bank for Trade service?a) Nationalized bankb) Private bank

Why?

What can you say about the bank’s customer service to you?a) Satisfactoryb) Unsatisfactoryc) Partially satisfactory

Are you satisfied the commission/ charges taken by the bank for offering different services?

a) Completely

b) Partially

c) Not at all


Does the Trade department Relationship manager replies to your queries in detail and understandably

a) Yes.

b) No.

How would you rate your bank overall?a) Excellentb) Goodc) Averaged) Poor


References

www.hsbc.co.in

www.eximkey.com

www.dgft.gov.in

www.eximbankindia.com

www.rbi.org.in

www.google.com


http://www.google.com/

http://www.rbi.org.in/

http://www.eximbankindia.com/

http://www.dgft.gov.in/

http://www.eximkey.com/

http://www.hsbc.co.in/