A Study on Risk Management of Concerned Parties in Forfaiting

Park Se Hun 한국무역상무학회 2011 貿易商務硏究 Vol.52 No.-

Possibility of credit risk, foreign exchange risk and interest rate risk of exporter increases in the recent international Commercial transactions, due to financial crisis of Europe and liberalization of Middle East. Under this circumstance, Forfaiting is trade finance that forfaiter purchase negotiable debt instrument without recourse from exporter, which occurred related with international commercial transactions, and credit risk, contingency risk, foreign exchange risk and interest rate risk of exporter can be transferred to forfaiter. Forfaiting is typically medium-term finance(three to five years) concluded at fixed interest rate, although it can also arranged on a floating interest-bearing basis for periods from six months to ten years or more. But Forfaiting service of Korea has limitation as follows. First, forfaiting in Korea deals with unrestricted irrevocable documentary credit as debt instruments. Period that forfaiting is provided is short and amount of money is limited, compared with advanced forfaiting. But forfaiting provided in advanced countries deals with various methods such as guarantee for bill, payment guarantee, and can be resold in financial market. Recently importance of forfaiting is increasing in international commercial transactions. Therefore profound study on forfaiting is required. The study will examine the risk that happens to the concerned parties in forfaiting, and its management measures. The study adopted literature review method such as local and foreign books and papers about trade finance, internet information about forfaiting, and professional journal related with international finance.

A Study on Risk Management of Concerned Parties in Forfaiting

박세훈 한국무역상무학회 2011 貿易商務硏究 Vol.52 No.-

Possibility of credit risk, foreign exchange risk and interest rate risk of exporter increases in the recent international Commercial transactions, due to financial crisis of Europe and liberalization of Middle East. Under this circumstance, Forfaiting is trade finance that forfaiter purchase negotiable debt instrument without recourse from exporter, which occurred related with international commercial transactions, and credit risk, contingency risk, foreign exchange risk and interest rate risk of exporter can be transferred to forfaiter. Forfaiting is typically medium-term finance(three to five years) concluded at fixed interest rate, although it can also arranged on a floating interest-bearing basis for periods from six months to ten years or more."But Forfaiting service of Korea has limitation as follows. First, forfaiting in Korea deals with unrestricted irrevocable documentary credit as debt instruments. Period that forfaiting is provided is short and amount of money is limited, compared with advanced forfaiting. But forfaiting provided in advanced countries deals with various methods such as guarantee for bill, payment guarantee, and can be resold in financial market. Recently importance of forfaiting is increasing in international commercial transactions. Therefore profound study on forfaiting is required. The study will examine the risk that happens to the concerned parties in forfaiting, and its management measures. The study adopted literature review method such as local and foreign books and papers about trade finance, internet information about forfaiting, and professional journal related with international finance.

국제무역거래에서 포페이팅(Forfaiting) 방식의 금융을 통한 위험의 헤지

김종호 국제거래법학회 2009 國際去來法硏究 Vol.18 No.1

This article will focus on the forfait transaction. Forfaiting is a method of trade finance that allows exporters to obtain cash by selling their medium-term foreign accounts receivable at a discount on a “without recourse” basis. The main advantage of forfaiting is that it allows exporters to increase sales and put the risk on forfaiter who are better equipped to handle such risks. The exporter may approaches a forfaiter before finalizing a transaction’s structure. Once the forfaiter commits to the deal and sets the discount rate, the exporter can incorporate the discount into the selling price. The exporter then accepts a commitment issued by the forfaiter, signs the contract with the importer, and obtains, if required, a guarantee from the importer’s bank that provides the documents required to complete the forfaiting. The exporter delivers the goods to the importer and delivers the documents to the forfaiter who verifies them and pays for them as agreed in the commitment. Since this payment is without recourse, the exporter has no further interest in the transaction and it is the forfaiter who must collect the future payments due from the importer. Part II introduce forfaitng history and market, compare forfaiting with factoring similar tool of international trade finance. Part III will illustrate a typical forfaiting transaction, identify the parties and process of forfaiting, and Part IV will state the fundamental elements of the forfait transaction. Part V conveys the legal and business risks associated with forfaiting. Part VI will review the advantages of the application of forfaiting in international transaction with the trade documents. Finally, some suggestions are presented in part VII.

2012년 제정 ICC 포페이팅통일규칙(URF)에 관한 소고

허해관 韓國貿易商務學會 2013 貿易商務硏究 Vol.58 No.-

This article introduces and briefly examines the Uniform Rules for Forfaiting (URF)(ICC Publication No. 800), which were prepared by a joint project of the Banking Commission of the International Chamber of Commerce (ICC) and the International Forfaiting Association (IFA), and became effective on January 1, 2013. Forfaiting is a kind of trade financing technic performed by way of a sale and purchase of payment claim between its seller and its buyer, the forfaiter, on a without recourse basis. URF is designed to facilitate global trade finance and embraces all the international payment instruments which are currently used and will be newly developed in the future. URF is expected to be a set of standardized terms and conditions for both the primary and secondary forfaiting markets. In this context, this article first looks into the concept of the forfaiting and certain features and structure of forfaiting transactions. Then this article moves to discussing URF itself. For this it examines (i) the nature and scope of URF and some important definitions provided in URF, (ii) some provisions of URF that apply to the delivery of documents to the forfaiter, the examination, and the acceptance or refusal, of such documents by the forfaiter, and (iii) the payment of purchase price by the forfaiter to its seller, including the matter of "payment under reserve" and repurchase by the seller from the forfaiter. Finally, this article examines liabilities of the parties concerned, before conclusion.

포페이팅거래의 당사자 책임과 실무상 유의점에 관한 연구

박세훈 한국무역금융보험학회(구 한국무역보험학회) 2014 무역금융보험연구 Vol.15 No.3

본연구는2013년1월1일제정된포페이팅통일규칙을중심으로 포페이팅거래의 당사자 책임과실무상유의점에 관하여 연구하였다. 포페이팅거래에서 당사자에게는일정한의무가부여되고이를위반할경우에는계약위반에 따른책임을지게된다. 포페이팅거래의당사자책임은포페이팅거래1차시장의포페이팅계약서 나2차시장의포페이팅확인서에명시적으로당사자의책임이규정되어있는경우에는그에따르 고,명시적규정이없을경우에는포페이팅에관한준거법인포페이팅통일규칙(URF)에의하여 보충될수있다.참고로 URF제13조에서규정하고있는포페이팅거래의당사자책임은다음과 같다. ①일반적책임, ②원매도인의책임, ③1차포페이터의책임, ④2차시장에서매도인의 책임(1차포페이터가아닌경우)으로구분하고있다. 본연구의기대효과는포페이팅거래 당사자인수출자,제1차포페이터,제2차포페이터,보증 인및수입자에게 포페이팅거래의 당사자책임에대한인식을제고하고,실무상유의점을제시한 것에의의가있다. This paper is to examine practical notes and liability of the parties in forfaiting transaction. According to the Uniform Rules for Forfaitng(hereinafter called URF), Fofaiting transactionmeans the sale by the seller and the purchase by the buyer of the payment claimon a without recourse basis on the terms of forfaiting agreement or forfaiting confirmation. In forfaiting transaction, the parties are given the liability for the breach of forfaiting agreement or forfaiting confirmation. Parties shall followthe express terms if there are expressly fixed liability of forfaiting agreement or forfaiting confirmation. if not, it will be settled in accordancewithURF. URF Art. 13 liability of parties is consist of as follows :①general liability,②initial seller’s liability,③first forfaiter’s liability, ④seller’s liability in second market if not first forfaiter

포페이팅 이용실태와 우리나라에서동 제도의 활성화 방안에 관한 연구

오원석,이운창,김필준 한국무역보험학회 2013 무역금융보험연구 Vol.14 No.4

Forfaiting enables the exporter not only to remove risks related to trade, but to increase his liquidity by selling accounts receivable to the forfaiter. Despite these benefits, however, forfaiting has been limited in its utilization compared to other similar products such as factoring. In Korea, other than its limited usage, the bigger problem is that domestic commercial banks rarely deal with forfating transactions. Looking at rankings of forfaiters that supported forfating transactions in Korea during 2010, number one and two are foreign banks, followed by the Export-Import Bank of Korea, a government-run bank. So this paper tries to find out reasons that forfaiting has not been widely used in Korea. Based on this analysis, this paper seeks the ways of increasing forfaiting transactions in Korea, expecially by domestic commercial banks and the means of boosting the secondary market of forfating in Korea. 포페이팅을 이용할 경우, 수출상은 수출에 따른 대외위험뿐만 아니라 매출채권을 포페이터에 매각함으로써 유동성을 제고할 수 있음에도 불구하고 포페이팅은 우리나라에서 유사한 기능을 하는 팩토링 등에 비해 광범위하게 사용되고 있지 않은 실정이다. 우리나라의 경우, 전체적으로 포페이팅의 실적 자체도 미미하지만 우리나라 상업은행이 포페이팅을 거의 취급하지 않고 있는 것이 더 큰 문제이다. 우리나라에서 2010년 포페이팅 지원실적을 살펴보면, 1, 2위 포페이터는 외국계 상업은행이며, 그나마 국책은행인 한국수출입은행(이하 “K-EXIM”)이 3위를 차지하고 있다. 이에 본 논문은 우리나라의 포페이팅 시장 부진사유를 살펴보고, 특히 국내 상업은행이 현재보다 포페이팅을 보다 적극적으로 활용할 수 있는 방안과 아울러 2차 포페이팅 시장의 활성화 방안도 함께 제시하였다.

Legal Issues in Forfaiting Transactions

Jae-Seong Kim,Se-Hun Park 한국무역연구원 2015 貿易 硏究 Vol.11 No.5

Forfaiting transactions are financial support programs using a promissory note, bill of exchange, documentary credit, payment guarantee, and trade receivable management to exporters or a bona fide holder under a fixed or fluctuating interest rate without recourse. Many export companies made an attempt to diversify payment settlement options due to the difficulties of collecting proceeds by L/C since 1997 under IMF conditions in Korea. To improve these problems, many export companies tried to establish forfaiting transactions with foreign financial institutions. In 2002, the EXIM bank introduced forfaiting transactions to support export companies who lack a mortgage ability. In payment under reserve, a buyer has right to demand repurchase to the seller when the savings are not cured by the credit support document. Forfaiters may also buy a payment claim from the seller without recourse. In this case, the seller may eliminate credit risk but the buyer shall assume the risk. The parties shall agree on jurisdiction and governing laws to prevent conflicts or disputes. The forfaiting contract may be accepted in a country but may not be accepted in the other country.

어음보증을 이용한 포페이팅거래에 관한 연구

이홍숙(Hong Shu LI),김종칠(Jong Chill KIM) 한국무역상무학회 2016 貿易商務硏究 Vol.69 No.-

An increasing number of transactions in the bilateral trade between Korea and China rely on collection and remittance, resulting in an increase in exporters' demand for trade financing. Therefore, there is a need to vitalize forfaiting transactions using drafts or promissory notes, which are based on the collections. In the forfaiting transactions, exporters transfer a payment claimto forfaiters on a non-recourse basis through a without recourse endorsement. However, forfaiters do not know importers' creditworthiness and ability to repay drafts or promissory notes; thus, they need a bank aval as ameans of credit support. In forfaiting using aval, the drafts or promissory notes are transferred internationally. However, there is no internationally unified law that regulates drafts and promissory notes, and the governing laws related to such drafts and promissory notes do not accept the “principle of party autonomy.” Therefore, there is no other choice but to apply the laws of a certain country, in the event of any dispute relating to such drafts or promissory notes. This paper examined forfaiting using aval from the comparative law perspective, focusing on the “Law of China on Negotiable Instruments.” The results of this study may to provide businesses involved in international trade with practical guidance and assistance when using forfaiting with aval, especially in trade with China.

Legal Issues in Forfaiting Transactions

김재성,박세훈 한국무역연구원 2015 무역연구 Vol.11 No.5

Forfaiting transactions are financial support programs using a promissory note, bill of exchange, documentary credit, payment guarantee, and trade receivable management to exporters or a bona fide holder under a fixed or fluctuating interest rate without recourse. Many export companies made an attempt to diversify payment settlement options due to the difficulties of collecting proceeds by L/C since 1997 under IMF conditions in Korea. To improve these problems, many export companies tried to establish forfaiting transactions with foreign financial institutions. In 2002, the EXIM bank introduced forfaiting transactions to support export companies who lack a mortgage ability. In payment under reserve, a buyer has right to demand repurchase to the seller when the savings are not cured by the credit support document. Forfaiters may also buy a payment claim from the seller without recourse. In this case, the seller may eliminate credit risk but the buyer shall assume the risk. The parties shall agree on jurisdiction and governing laws to prevent conflicts or disputes. The forfaiting contract may be accepted in a country but may not be accepted in the other country.

어음을 이용한 포페이팅의 법적 원리

허해관(Hur, Hai Kwan) 한국무역상무학회 2009 貿易商務硏究 Vol.43 No.-

This paper sees some legal phases of the forfaiting transactions performed by using bills of exchange (drafts) or promissory notes. It focuses on the issues of the endorsement without recourse and the aval under the Korean statute for such negotiable instruments which is enacted by succeeding to the Convention Providing a Uniform Law For Bills of Exchange and Promissory Notes (Geneva, 1930) of the League of Nations. This paper purposes to give basic legal guides for forfaiting participants in order for them to be able to prevent and solve some problems caused by lack of understanding for relevant rules of law. Forfaiting is a useful technic as it provides financing for international export businesses by enabling forfaiters to discount future payment obligations on non-recourse basis. It gives benefits to exporters by removing political, transfer and commercial risks of importers or their country. Also it protects exporters from the risks of the increase of interest rates and the fluctuation of exchange rate as well. In traditionally normal forfaiting transactions, exporter of goods generally takes promissory notes or accepted drafts from importers in payment for the price of goods. Further, when the exporter is not comfortable with the importer's credit or is not confident whether the importer will pay the accepted drafts or the promissory notes as they come due, the exporter nomally requires the importer to make the importer's bank (avalizer or guarantor) add an aval, which is made by the written expression of intention, the words of "per aval", and the guarantor's signature on the draftsor promissory notes. The exporter endorses without recourse to transfer the drafts or the promissory notes to the forfaiter, typically a bank, who purchases the drafts or the promissory notes without recourse.