Geniwala export house

Geniwala export house are exporter of furniture, forest products, wood and
wood products which is based in Auckland city of New Zealand. This report is
based on New Zealand wood products limited, based in Otahuhu,
Auckland which supplies some of the highest quality specialist engineered
wood products to the New Zealand construction industry and around the world.
The products manufactured New Zealand wood products limited are
exported by Geniwala export house.

About New Zealand wood products limited:

New Zealand wood products limited work with sustainable timber businesses
and products, and are members of the FSC and PEFC. They are also New
Zealand-owned and operated, and carry the Buy NZ Made mark.
At New Zealand wood products limited, youll find a complete range of
treated and untreated plywood, LVL, scaffold boards and formwork beams.
Were also the New Zealand distributers of JPLy, Jplank, I-Beams, Hynes and
Trex products.

Above shown are some of the products manufactured by New Zealand wood
products limited

Major competitor for New Zealand wood products limited For

manufacturing wood and wood products is Carter Holt Harvey wood
products which is another New Zealand based manufacturer located in
Onehunga, Auckland indulged in production of wood and wood products
products. Major markets for this product lies in countries like Australia, USA,
UK, China, Etc. Now lets have a look at other areas associated with the Export
of this product.

Other points of focus in the report are:

1)
2)
3)
4)

Risk management strategies.

Methods of trade finance.
Methods of payment.
Terms of payment and cash management.

Risk management strategies

Risk is defined in commercial and business literature as an uncertain event that
may impact negatively on the achievement of goals. Exports are goods/services
which a company supplies to customers abroad, so export risks are understood
as events which, with a certain degree of probability, will adversely affect the
success of foreign business.
Such risk are also faced by Geniwala export house while exporting Wood
and wood products. Risk of loss of currency, political risks, natural risks, risk
of product damage, etc are the risks faced during export of this product.

Method of payment:
A key concern in any export transaction is to ensure the seller gets paid and the
buyer receives their goods. The banking system provides a complete mechanism
for settling trade transactions. The method to be used in paying for exports is
reached by agreement between the exporter and the importer. The relative
bargaining strengths of each will affect the final outcome.
Geniwala export house uses letter of credit as a Method of payment to
receive payment from buyer. A letter of credit adds a bank's promise to pay
the exporter to that of the foreign buyer provided that the exporter has complied
with all the terms and conditions of the letter of credit. The foreign buyer
applies for issuance of a letter of credit from the buyer's bank to the exporter's
bank and therefore is called the applicant; the exporter is called the beneficiary.

Payment under a documentary letter of credit is based on documents, not on the

terms of sale or the physical condition of the goods. The letter of credit specifies
the documents that are required to be presented by the exporter, such as an
ocean bill of lading (original and several copies), consular invoice, draft, and an
insurance policy. The letter of credit also contains an expiration date. Before
payment, the bank responsible for making payment, verifies that all document
conform to the letter of credit requirements. If not, the discrepancy must be
resolved before payment can be made and before the expiration date. Such
method of payment reduces the risk of fraud in payment by importer
considerably.

Insurance:
Damaging weather conditions, rough handling by carriers, and other common
hazards to cargo make insurance an important protection for exporters. If the
terms of sale make the exporter responsible for insurance, the exporter should
either obtain its own policy or insure the cargo under a freight forwarder's
policy for a fee. If the terms of sale make the foreign buyer responsible, the
exporter should not assume that adequate insurance has been obtained. If the
buyer neglects to obtain adequate coverage, damage to the cargo may cause a
major financial loss to the exporter.
As Geniwala export house export Wood and wood products product
through shipment by sea their shipments are covered by marine cargo insurance.
Export shipments are usually insured against loss, damage, and delay in transit
by cargo insurance. Arrangements for insurance may be made by either the
buyer or Geniwala export house, in accordance with the terms of sale.
A sample of Insurance Certificate is presented ahead.

Sample Insurance Certificate

Forward exchange contract:

Geniwala export house use Forward exchange contracts to minimize the
risk of loss of currency while entering into export contract for Wood and
wood products. This export house always accepts payment in US Dollars.
Forward exchange contracts is a special type of foreign currency
transaction. Forward contracts are agreements between two parties to exchange
two designated currencies at a specific time in the future. These contracts
always take place on a date after the date that the spot contract settles, and are
used to protect the buyer from fluctuations in currency prices.

They cannot be canceled except by the mutual agreement of both parties

involved. The parties involved in the contract are generally interested in
hedging a foreign exchange position or taking a speculative position.

Methods of trade finance(Pre-shipment)

Pre-shipment is also referred as packing credit. It is working capital finance
provided by commercial banks to the exporter prior to shipment of goods. The
finance required to meet various expenses before shipment of goods is called
pre-shipment finance or packing credit.
Financial assistance extended to the exporter from the date of receipt of the
export order till the date of shipment is known as pre-shipment credit. Such
finance is extended to an exporter for the purpose of procuring raw materials,
processing, packing, transporting, warehousing of goods meant for exports.

Pre-shipment finance alternatives:

1. Cash Packing Credit Loan:
In this type of credit, the bank normally grants packing credit advantage initially
on unsecured basis. Subsequently, the bank may ask for security.
2. Advance against Hypothecation:
Packing credit is given to process the goods for export. The advance is given
against security and the security remains in the possession of the exporter. The
exporter is required to execute the hypothecation deed in favour of the bank.
3. Advance against Pledge:

The bank provides packing credit against security. The security remains in the
possession of the bank. On collection of export proceeds, the bank makes
necessary entries in the packing credit account of the exporter.
4. Advance against Red L/C:
The Red L/C received from the importer authorizes the local bank to grant
advances to exporter to meet working capital requirements relating to
processing of goods for exports. The issuing bank stands as a guarantor for
packing credit.
5. Advance against Back-To-Back L/C:
The merchant exporter who is in possession of the original L/C may request his
bankers to issue Back-To-Back L/C against the security of original L/C in
favour of the sub-supplier. The sub-supplier thus gets the Back-To-Bank L/C on
the basis of which he can obtain packing credit.
6. Advance against Exports Through Export Houses:
Manufacturer, who exports through export houses or other agencies can obtain
packing credit, provided such manufacturer submits an undertaking from the
export houses that they have not or will not avail of packing credit against the
same transaction.
7. Advance against Duty Draw Back (DBK):
DBK means refund of customs duties paid on the import of raw materials,
components, parts and packing materials used in the export production. It also
includes a refund of central excise duties paid on indigenous materials. Banks
offer pre-shipment as well as post-shipment advance against claims for DBK.
8. Special Pre-Shipment Finance Schemes:
Exim-Banks scheme for grant for Foreign Currency Pre-Shipment
Credit (FCPC) to exporters.
Packing credit for Deemed exports.

Buyers credit:
In foreign trade, the buyers credit refers to a long-term credit granted by the
exporters bankers to the overseas buyer on the latters undertaking to pay the
value of the exports by installments at regular intervals over a specified number
of years and furnishing a bank guarantee.

Steps Involved in a Buyers Credit (Buyers Credit Process) :

Importer imports the goods using either LC, collections or open account
Importer approaches the LOU issuing bank or the Buyers Credit arranger
to arrange for a Buyers Credit quote
LOU issuing Bank or the arranger of the quote arranges for a Buyers
Credit offer letter at the best possible rates from the funding bank

 LOU issuing bank issues the LOU in the favor of the funding bank
Funding bank on receipt of the LOU, credits the NOSTRO account of
LOU issuing bank with the funds
LOU issuing bank makes the payment to the exporter and thus settles the
liability of the importer towards the exporter
On the due date, the importer either requests for the rollover of the buyers
credit or recovers the funds from the importer and retires the liability of
the importer towards the bank against the LOU.
Where,
LC refers to Letter of credit
LOU refers to Letter of undertaking
NOSTRO refers to an account which is held within a foreign country by a
domestic bank, in the currency of the foreign country.

International money market:

The International money market is the market that handles the international
currency transactions between the various central banks of the nations. In the
international money market, the transactions are carried out mainly in gold or in
US dollar.
The International money market is governed by the international monetary
transactions between various nations currency. The international money market
mainly handles the currency trading between the countries. The trading of one
country's currency for another one is also named as the foreign exchange
currency trading or FOREX trading. The international money market has grown
phenomenally over last few years and is expected to grow even more. It is the
largest financial market in the world and the participants in this large market are
large banks, central banks, governments, multinational corporations and
currency speculators.
The major international money market participants are:
Citigroup
Deutsche Bank
HSBC
Barclays Capital
UBS AG
Royal Bank of Scotland
Bank of America
Goldman Sachs
Merrill Lynch

 JP Morgan Chase
The International money market takes care of the exchange rates on a regular
basis. Currency band, exchange rate regime, fixed exchange rate, linked
exchange rate and floating exchange rates are some of the other indices that
govern the international money market in a huge way.

Methods of payment
Different Methods of payment:
Cash-in-advance
Letter of credit (L/c)
Escrow
Document against payment/Bills of exchange
Open account

Letter of Credit (L/C)

Geniwala export house uses letter of credit as a Method of payment
to receive payment from buyer.
The L/C is a guarantee, given by the buyer's bank that they will pay for
the goods exported, provided that the exporter can provide a given set of
documents in accordance with clauses specified in the L/C and in a timely
manner.
The technical term for letter of credit is "Documentary Credit."

 Letters of credit deal in documents, not goods. Thus, the process works
both in favor of both the buyer and the seller.
Simply put, a letter of credit is a letter written by the importer's bank to
the exporter. It verifies that the payment will be guaranteed when the
bank is presented with concrete documents (bills of lading and freight
documents).
Most letters of credit are "irrevocable" once the importer has had them
sent, which means it cannot be changed unless both the buyer and seller
agree.
Risk is shared evenly by both exporter as well as buyer.
The main advantage of a letter of credit is that it eliminates the need for
up-front cash payments.
However, sellers may encounter problems with letters of credit, such as
impossible delivery schedules or unacceptable costs.
Attempts to modify the terms of a letter of credit may also cause
disruptions in the transaction. Discrepancies in the documents presented
by the seller may also cause the issuing bank to void the letter of credit,
according to the Credit Research Foundation.

Letter of Credit transaction carried out by Geniwala Export house:

After the Geniwala Export house and buyer agree on the terms of a sale,
the buyer arranges for its bank to open a letter of credit that specifies the
documents needed for payment. The buyer determines which documents
will be required.
The buyer's bank issues, or opens, its irrevocable letter of credit includes
all instructions to the seller relating to the shipment.
The buyer's bank sends its irrevocable letter of credit to a NZ bank and
requests confirmation.
The NZ bank prepares a letter of confirmation to forward to the Geniwala
Export house along with the irrevocable letter of credit.
The Geniwala Export house reviews carefully all conditions in the letter
of credit. The Geniwala Export house's freight forwarder is contacted to
make sure that the shipping date can be met.
The exporter arranges with the freight forwarder to deliver the goods to
the appropriate port or airport.
When the goods are loaded, the freight forwarder completes the necessary
documentation.

The exporter (or the freight forwarder) presents the documents,

evidencing full compliance with the letter of credit terms, to the NZ bank.
The bank reviews the documents. If they are in order, the documents are
sent to the buyer's bank for review and then transmitted to the buyer.
The buyer (or the buyer's agent) uses the documents to claim the goods.
A draft, which accompanies the letter of credit, is paid by the buyer's
bank at the time specified or, if a time draft, may be discounted to the
Geniwala Export house's bank at an earlier date.

Documentation:
Geniwala export house uses two major forms along with other miscellaneous
documents. These two major forms are Standard Shipping Note (SSN) and
Export Cargo Shipping Instruction.
Standard Shipping Note (SSN):
The SSN is a shipping document that gives details about the contents of a
consignment sent by Geniwala export house to carriers, receiving authorities
and forwarders. The SSN is used to accompany deliveries of non-hazardous
goods in transit.
By using the SSN, Geniwala export house complete the same standard
document for all consignments, regardless of which port or depot they are going
to.
SSN gives the receiving authority complete, accurate and timely information
about your consignment. So they have clear and precise details on how your
goods should be handled.
Export Cargo Shipping Instruction:
The ECSI is the instruction from Geniwala export house to the forwarder or
carrier.
The ECSI is intended as a multi-purpose document that can be used for any of
the following functions:
movement and handling of goods
customs formalities, including clearance and payment of any duties and
taxes
distribution of commercial and transport documents related to the
consignment
allocation of freight and other operational charges
special instructions, for example if the goods are dangerous or if
additional documents are needed
So its very important that the information provided in the ECSI is accurate.

Standard Shipping Note (SSN) & Export Cargo Shipping Instruction of

Geniwala export house is attached ahead respectively.

Exporter

Customs Reference Status

Booking No.

Exporter's
Reference
Forwarder's Reference
Consigned the Order Of

Notify Address

Frieght Forwarder

International Carrier
For Use of Receiving agent only

Other Transport Details

Vessel No. & Date

Port of Loading

Port of Discharge

Destination

Shipping Marks

No. and Kind of packages;

Description of Goods: Special
Storage Requirements

For use of Shipping Company Only

Container ID No.

Seal Number(s)

Container size &

Type

The company preparing this note

declares that Information Provided
regarding good in SSN to the best of
their Knowledge are True &
Correct.
To the Receiving Authority
Gross Weight
(Kg) of Goods:

Cube (m3) of
Goods

Total Gross
Weight Of Goods

Total Cube of
Goods

Tare(Kg)

Total Gross
Weight(Including
Tare) (Kg)

Haulier's Detail

Receiving Authority
Remarks

Name & Tel. No. of Company preparing This

Note
Place & Date
Name of Contact

Terms of Payment & Cash Management

Terms of payment in Export contract:

The buyer shall establish an irrevocable operative Letter of Credit without
recourse to Sellers by Cable as per the Geniwala export house proforma in US Dollars for 100% value of exported product quantity
contracted with a first class International Bank, authorizing
reimbursement by Cable with the Correspondent agency of the L/C
issuing Bank and available at the counter of receiving bank in New
Zealand, so as to be in the sellers hand within 7 days from the date of
contract. Such a Letter of Credit shall be valid for negotiation for a
minimum period of 30 days after the last date of shipment stated in the
L/C. In case of delay in providing L/C as aforesaid, the buyer shall also
provide in the L/C for payment of carrying charges up-to the date of
shipment as per relevant clause of the contract.
The charges for establishing the Letter of Credit and any Bank charges
will be on Buyers account.
The Buyers shall immediately on hearing from Geniwala export house
amend the Letter of Credit so as to make it fully operative for effecting
shipment and realization of proceeds. The Bank charges and expenses
incidental to such amendment shall be borne by the Buyers. The date of
receipt of such amendment, operative L/C will be deemed as the effective
date of receipt of L/C.
Only on receipt of shipping instructions, nomination of vessel and
provision of adequate containers by Buyers, L/C shall be deemed fully
operative.
It shall be the responsibility of the buyer to keep the L/C operative for
shipment for a minimum period of 45 days from the last date of shipment
as per contract or till the entire contracted quantity is shipped whichever
is later and related documents are negotiated by the Geniwala export
house.
The Geniwala export house shall be entitled to draw the full amount
against the Letter of Credit immediately after shipment and on
presentation of the shipping documents without any further need for
certification / authorization etc. In the event of delay in receiving
payment beyond 5 working days, the sellers shall be entitled to charge
and the buyers liable to pay Interest @ 13.5 % p.a. on monthly rest basis
on such delayed amount.

 In lieu of establishing an irrevocable Letter of Credit, the buyer shall have

the option to make advance payments in the account of the Geniwala
export house to facilitate shipments as per terms of this contract. For
this amount received in advance, cash discount @ 8.0% p.a. on sale
consideration excluding statutory Taxes & Duties shall be payable to the
buyer on pro-rata basis for the unavailed shipment period to be reckoned
from the date of realization upto the last date of free shipment period.
However, if any quantity of the contract remains unshipped within the
shipment period then the buyer shall be liable to pay late lifting charges
@0.40 % p.m of 30 days will belevied from the next day of expiry of free
shipment period till the date of Bill of Lading.
In case of non receipt of LC/ Shipping Instructions in time or any
eventuality of non-performance of the contract, Geniwala export house
shall forfeit the deposit money of the buyer.

Cash Management:
The corporate process of collecting, managing and (short-term) investing cash.
A key component of ensuring a company's financial stability and solvency.
Frequently corporate treasurers or a business manager is responsible for overall
cash management.
Successful cash management involves not only avoiding insolvency (and
therefore bankruptcy), but also reducing days in account receivables (AR),
increasing collection rates, selecting appropriate short-term investment vehicles,
and increasing days cash on hand all in order to improve a company's overall
financial profitability.
Below is the figure showing Components of cash management process of
NZWOOD.

Receivable
s

Collection

Payments

Cash
Manageme
nt

Liquidity
managemn
et

Forecastin
g

Components of Cash Management Process of NZWOOD

Cash Management Process of NZWOOD:

Receivables & Payables:
NZWOOD provides 45 day credit period to their customers as a collection
period of their amount. And on the other hand gets 60 day credit period from
their Suppliers which helps them maintain a balance between Receivables and
payables.

Forecasting:
NZWOOD forecast their Annual Incomes and Expenses and accordingly plan
their short-term as well as long term budgets for the respective financial year.
They also have a well balanced working capital cycle.

Liquidity management:
NZWOOD maintain liquidity Ratio of 2:1 which means that their liquid assets
are always double to their liquid liabilities. Such ratio always helps them to run
their business smoothly and is always capable of meeting their liquidity
requirements.

Collection:
The collection system of NZWOOD is well maintained. Reminders are sent to
the debtors at regular interval for the payment of outstanding amounts and on
the due date the amounts are being collected from them through XYZ collection
agency working on behalf of NZWOOD.

By this ways Cash management Process of New Zealand wood products

limited operates.

Bibliography

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