TRADE FINANCE INSTRUMENTS

Armswissbank CJSC is a reliable intermediary for its clients in international trade activities. The services we provide will help both exporters and importers reduce their risks in international trade. Documentary letter of credit is one of the most popular financial instruments for financing international trade.

Documentary credits

Documentary letter of credit is a one-off obligation, whereby the bank undertakes to pay the exporter (supplier) the goods or services on the basis of the buyer, on the basis of the letter of credit, upon presentation of the letter of credit, and the terms and conditions are met. Documentary letter of credit transactions in international banking are governed by the Uniform Customs and Practice (UCP 600) rules of the International Chamber of Commerce.

Armswissbank CJSC offers its customers the following types of documentary letter of credit:

Confirmed LC (Confirmed LC)

In order to reduce the risk of default by the importer's bank, the exporter may require the importer to issue an approved letter of credit subject to approval by the exporter's trusted bank. In this case, in case of non-payment by the importer's bank with a letter of credit the payment shall be made by the confirming bank.

LC without confirmation (LC without confirmation)

Only the buyer (issuer) bank shall be liable for payment under the unconfirmed letter of credit.

Irrevocable LC (Irrevocable LC)

The terms and conditions stated in the non-revoked letter of credit shall not be subject to change without the consent of the exporter (beneficiary).

Revocable LC (Revocable LC)

The terms stated in the withdrawal letter of credit may be unilaterally modified by the buyer. As this letter of credit contains additional risks for the exporter, it is rarely used.

Standby LC (Standby LC)

A reserve letter of credit is a financial instrument whereby the bank is obliged to pay the seller (the supplier) if the buyer fails to fulfill its obligations to the seller within the timeframe specified in the contract.

Advantages of the letter of credit for the buyer (importer)

  • Restricts risk when dealing with unknown sellers
  • the item is shipped before payment by the buyer
  • the seller will not receive the appropriate payment if he / she breaks the deadline for delivery of the goods and does not deliver the goods within the agreed time,
  • payment is made by seller after delivery of goods and submission of shipping documents, which minimizes buyer risks
  • Documents are reviewed by the Uniform Customs and Practice (UCP 600) rules of the International Chamber of Commerce

    • Advantages of the letter of credit for the exporter (seller)

  • as in the case of a letter of credit the seller owes the payment to the Bank from the buyer, the seller can be sure that he will receive payment for the shipped goods within the timeframe and documents required
  • in case of a confirmed letter of credit, there is additional confirmation by the bank confirming the fulfillment of the payment obligation
  • the seller gets the opportunity to perform in the international market with more competitive conditions thanks to secure payment method
  • the seller receives payment for the shipped item before the goods reach the buyer

Basic terms and conditions of issuance and service of documentary letter of credit

IMPORT LETTER OF CREDIT

In case of an import letter of credit the bank issues a letter of credit on the recommendation of the buyer (importer). Import letter of credit is one of the most popular tools for conducting international trade transactions.

ServiceTariff
Letter of credit prior noticeAMD 25.000
Issue of letter of credit0.15% of the letter of credit amount, at least AMD 50,000
Confirmation of letter of credit by a third banktariff applied by the third bank
Deferred paymentby contract
acceptance of transferable bill of ladingby contract
checking documentsAMD 50.000
change in terms of letter of creditAMD 25.000
withdrawal of letter of credit
without the approval of a third bankAMD 50.000
with the approval of the third bankthird bank tariff+ AMD 50.000
No.ConditionBank resourcesThrough international trade financing programs for international organizations and foreign partners
1. Secured by cash With other collateral
2. Customer Resident / non-resident legal entity of RA, Private Entrepreneur
3. Minimum amount not defined
4. Maximum amount not defined
5. Deadline up to 36 months up to 12 months, in some cases up to 24 months
6. Annual interest rate up to 2.0% *** 2.0-5.0% without intermediate bank approval with the approval of a contractual intermediate bank USD/EUR 3.0%- 4.75%*
7. Currency USD, EUR and other freely convertible currency
8. Providing method Non-cash
9. Interest payment procedure One-time **
10. Type of security Cash (time deposit) Real Estate, Fixed Assets, Bank Guarantees Acceptable
11. Request for collateral insurance - At the Bank's request, at least the amount of the letter of credit issued
12. Deadline for issuing a letter of credit Within 5 business days after submission of all documents required by the Client for the guarantee formulation and final consent of the parties to the transaction.
13. Place of receipt of letter of credit Head office of ARMSWISSBANK CJSC

* Includes only the approval fee charged by the third bank, if the tariff exceeds the minimum tariff set by the intermediate bank.

** In some cases, depending on the amount, term and / or other terms of the issued letter of credit, it may be paid on a monthly or quarterly basis.

*** With a time deposit pledge.

The documentary letter of credit can be issued both through the freezing of funds at the account of the Client at the Bank and through the security of other collateral acceptable to the Bank.
SecurityReal estate, fixed assets, equities / shares, third party guarantees
Loan / mortgage maximum limitUp to 80%
Request for collateral insuranceat the request of the bank, at least in the amount of the loan balance
Approximate annual cost of insurance /%-Annual property insurance premium is 0.15-0.3% of property value,
- Annual equipment insurance premium is 0.2-0.5% of property value,
- Annual insurance premium for working capital accounts for 0.3-0.5% of property value,
- The annual insurance premium for vehicles starts at 2.5% of property value.
Collateral valuationUpon request by an independent rating agency partnering with the bank *
Approximate collateral valuation expense for each property unitFor appraisal of residential property starting from AMD 15,000
For appraisal of non-residential property starting from AMD 25,000
For vehicle evaluation starting from AMD 8,000
For detailed information, see the list of specialized valuation companies that work with the Bank

* Includes only the approval fee charged by the third bank, if the tariff exceeds the minimum tariff set by the intermediate bank.

** In some cases, depending on the amount, term and / or other terms of the issued letter of credit, it may be paid on a monthly or quarterly basis.

*** With a time deposit pledge.

The documentary letter of credit can be issued both through the freezing of funds at the account of the Client at the Bank and through the security of other collateral acceptable to the Bank.

* LIST OF SPECIALIZED ASSESSMENT ORGANIZATIONS COOPERATING WITH "ARMSWISSBANK" CJSC http://www.armswissbank.am/en/individuals/fiz-loans/hipotek-loan/

* LIST OF SPECIALIZED INSURANCE COMPANIES COOPERATING WITH "ARMSWISSBANK" CJSC http://www.armswissbank.am/en/corporate-clients/insurance/

1. General documentsNotes
Application (Applicable only to customer)In the form provided by the Bank attach R
CharterCopyR
IDs of the director and founders (shareholders) stipulated by the Armenian Law (Passport, identification card, etc.), as well as a statement of actual place of residence ** (if available, if not the relevant reference), as well as a statement of actual place of residence ** (copy provided by the bank)Copies/ in the case of founders (participants) as required R
The decision (statement of decision) of a superior or competent authority (Board or General Meeting, single member) to serve factoring (Applicable only to customer)OriginalR

N 1. General documentsNotes
1.Application formIn the form provided by the Bank attach R
2.CharterCopyR
3.IDs of the director and founders (shareholders) stipulated by the Armenian Law (Passport, identification card, etc.), as well as a statement of actual place of residence ** (if available, if not the relevant reference), as well as a statement of actual place of residence ** (copy provided by the bank)Copies/ in the case of founders (participants) as requiredR
4.Financial data in the form required by the loan officer for the last 2 reporting periods (e.g. for financial position, financial results, cash flow)CopyR
5.Statements of accounts with other banks (for the last 12 months)OriginalAR
6.Current loan, collateral and other contractsCopyAR
7.Certificate or lease of ownership of the place of businessCopyAR
8.Business plan or feasibility studyOriginalAR
9.License (in case of activity requiring licensing)CopyR
10.Other documents (calculations and reports presented to the State Income Committee, last act of tax monitoring, statement on loan accounts, insurance contracts/policies, official audit report, procurements issued by the director, etc.)Copy/ prescribed by law statutory audit companies present the financial statement package and audit reportAR
11.Reference about the obligations to the state budgetOriginalAR
12.Other documents (construction, contractual contracts, sales contracts, service contracts, invoices, fixed assets, raw materials contracts, invoices)CopyAR
13.Resolution (excerpt from the resolution) of the authorized body (Board or General Meeting, sole shareholder) about receiving the loan and/or pledging the suggested collateralOriginalR
14.Statement from the state register about the changes of the members, the director as well as the charterOriginal/is required by the Bank when it is not possible to obtain information about the company from the agency through an online inquiryAR
15.For Joint Stock companies extract from the register about the shareholders of the company issued by the Central Depository of RA. OriginalAR

Resolution of the authorized body of the company owning the collateral about making a pledge.Report on the assessment of the collateralProperty Mapping ReportVehicle registration certificate / technical passportStatement about the limitations on the disposal of the vehicleList of pledged fixed assetsInsurance certificate(s) of the collateral
N 2. Collateral documentsNotes
1.Certificate of ownership of the collateralCopy R
2.ID (passport, identification card, etc) of the owner and/or the guarantor(s) of the collateral stipulated by the Armenian legislation, if available, and in case of absence - relevant reference, as well as a statement of actual place of residence ** (copy provided by the bank)CopyR
3.ID (passport, identification card, etc) of the collateral’s owner(s)’ spouse stipulated by the Armenian legislation, , if available, and in case of absence - relevant reference, as well as a statement of actual place of residence ** (copy provided by the bank)CopyR
4.Marriage certificate of the owner(s) of the collateral.CopyR
5.Legal documents of the company owning the collateral and ID of the director.copyAR
6.Statement from the state register/depository about changes in the statute, shareholders and director of the company owning the collateral.Original/ if the bank receives a certificate from the state through an online inquiry, it is not required by the customerAR
7.OriginalR
8.For the beginning it can be a statementR
9.Original /is required in case of land pledgingR
10.CopyR
11.State registration certificate for the ownership registration of the vehicleCopy (to be presented after the credit committee approves the loan)R
12.Original (to be presented after the credit committee approves the loan) R
13.Stating the name, quantity, model, production date, country of production, serial numberR
14.Technical passport(s) of the fixed asset(s)CopyR
15. List of pledged working capitalStating the name, measurement unit, quantity, price, amountR
16.Consent from the collateral’s lessees Original AR
17. Copy
(to be presented after the credit committee approves the loan) 		AR
18. Other documents (documents certifying the purchase of the collateral, procurements issued by the pledgor, spouse’s notary certified consent)Original/ copyAR

*In case of prime security the of the documents might not be required by the Bank.

    The Bank might require

  • The client to insure the collateral
  • The documents requested by the Bank can be required (R) or at request (AR)
  • Documents listed in point 10 through 15 are required if the collateral is a vehicle or other fixed/working asset.

    • ** If necessary, at the request of the Head of Lending Department or Customer Service Department, the client shall provide a statement from the Passport and Visa Department of the RA Police or the condominium of residence.

EXPORT LETTER OF CREDIT

In case of export letter of credit, the bank of the exporter notifies in favor of the letter of credit issued by its customer (exporter).

Service Tariff
Letter of credit prior noticeAMD 25.000
Issue of letter of credit0.15% of the letter of credit amount, at least AMD 50,000
Establishment of a letter of credit under the Trade Finance Program0.50% of the letter of credit annually, at least AMD 50,000
Export promotion financingin accordance with the terms of the trade financing loans
Checking and sending documentsAMD 50,000 + postage in case of approved letter of credit
AMD 15,000 + postage in case of unapproved letter of credit
Transfer of letter of credit0.15% of the letter of credit amount, at least AMD 25,000

Objective factors

Customer experience in the field, partner experience, financial reporting package, bank account turnover, frequency of transactions, credit history, willingness to provide a guarantee to the Bank's partner organization, etc.

Subjective factors

Customer business acceptance and compliance with Bank policy, transparency of customer business, quality of management, prospects for cooperation development, etc.

If you fail to meet your obligations to repay the liabilities on the pledge account, if the pledge is not sufficient to cover your credit liabilities, it is possible to repay the liabilities on your other property account (if available).

For more information on terms, conditions and tariffs for providing statements, their duplicates, references, and other information during the term of the contract, see the "Accounting for Legal Entities and Individual Entrepreneurs" page.

Bank Guarantees

A bank guarantee is an instrument by which the bank is obliged to pay the seller (the supplier) if the buyer fails to fulfill his obligations to the seller within the timeframe specified in the contract.

ARMSWISSBANK CJSC provides both domestic and international guarantees.

ARMSWISSBANK offers the following types of guarantees to its clients.

Performance Guarantee

The Bank guarantees to the Beneficiary the amount of the guarantee amount if the partner fails to perform its obligations under the contract.

Advance payment guarantee

The beneficiary is guaranteed a refund of the advance payment paid by him, unless the contractor fails to fulfill his contractual obligations (for example, not delivering the goods).

Tender guarantee

The tenderer guarantees the organizer a compensation in the amount of the guarantee amount if the tenderer refuses to conclude the contract or is unable to fulfill its obligations stipulated therein.

No.Condition Bank resources Through international trade financing
programs with international organizations
and foreign partners
    Cash security Other collateral security  
1.Purposeful use of the Service For the provision of services or goods, for the performance of contractual obligations (including contractual agreements)
2. Deadline up to 36 monthsup to 12 months, in some cases up to 24 months
3. One-time guarantee fee * 0.5%, minimum 50,000 ՀՀ դրամ AMD 50,000
4. Annual interest rate up to 2.0%*** up to 6%` without intermediate bank approval with the approval of a contractual USD/EUR 3.0%- 4.75%1
5. ARMSWISSBANK CJSC approves issuance of guarantee for the bank's client under trade finance program 0,5% per year, minimum AMD 50,000
6. Currency USD/EUR, other freely convertible currency
7. Interest payment procedure One-time**
8. Type of security Cash (time deposit) real estate, fixed assets, bank guarantees acceptable
9. Request for collateral insurance - At the Bank's request, at least the amount of the guarantee
10. Guarantee early repayment fee conventional
11. Guarantee notice including notice of change AMD 25,000
12. Deadline of making a decision of the Guarantee providing Within 5 business days after submission of all documents required by the Client for the guarantee formulation and final approval of the parties involved in the transaction.

* If the guarantee requires approval or notification of a third bank, the commission will be increased by the commission of that bank.

** In some cases, it may be paid on a monthly or quarterly basis, depending on the amount, term, and / or other conditions required.

*** With a time deposit pledge.

No.Condition Secured by cash With other collateral
1.Purposeful use of the Service To provide services or products, to fulfill contractual obligations (including contractual agreements), to ensure the participation of the tender
2. Deadline up to 60 months
3. One-time guarantee fee 0.5%, minimum AMD 25,000, maximum AMD 250,000
4. Annual interest rate up to 2% up to 4%
5. Interest payment procedure One-time or monthly
6. Change of terms of letter of guarantee up to AMD 25,000
7. Currency AMD or foreign currency
8. Type of security Cash (time deposit)) Real Estate, Fixed Assets, Bank Guarantees Acceptable
9. Date of guarantee decisionWithin 5 business days after submission of all documents required by the Client for the guarantee formulation and final approval of the parties involved in the transaction.
10. Guarantee providing conditions 1. In case of failure to provide the necessary information for financial monitoring, a 0.2% annual bank guarantee service fee shall be applied, calculated against the bank guarantee balance and charged twice a year.
2. If the bank guarantee is converted into a loan, the loan will be provided for a period of 3 months with 24% annual interest rate.
3. The Bank shall supervise the Customer in the amount of 10% of the non-Targeted Expenditure in case of breach of the Target Spending Direction in case of breach of the Target Spending Fund.

1 includes only the approval fee charged by the third bank, provided that the rate exceeds the minimum rate set by the intermediate bank.
Security real estate, fixed assets, equities / shares, third party guarantees
Maximum loan / mortgage limit up to 80%
Request for collateral insurance at the request of the bank, at least in the amount of the loan balance
Approximate annual insurance expense / % • Annual property insurance premium is 0.15-0.3% of property value,
• Annual equipment insurance premium is 0.2-0.5% of property value,
• Annual insurance premium for working capital accounts for 0.3-0.5% of property value,
• The annual insurance premium for vehicles starts at 2.5% of property value.
Collateral valuation Upon request by an independent rating agency working with the bank *
Approximate collateral valuation expense for each property unit
For appraisal of residential property starting from AMD 15,000 For appraisal of non-residential property starting from AMD 25,000
For vehicle valuation starting from AMD 8,000
For detailed information, see the list of specialized valuation companies that work with the Bank

* LIST OF SPECIALIZED ASSESSMENT ORGANIZATIONS COOPERATING WITH

* * LIST OF SPECIALIZED INSURANCE COMPANIES COOPERATING WITH "ARMSWISSBANK" CJSC

1. General documentsNotes R/AR
1. Application (Applicable only to customer) In the form provided by the Bank R
2. Charter copy R
3. IDs of the director and founders (shareholders) stipulated by the Armenian Law (Passport, identification card, etc.), as well as a statement of actual place of residence ** (if available, if not the relevant reference), as well as a statement of actual place of residence ** (copy provided by the bank) Copies/ in the case of founders (participants) as required R
4. The decision (statement of decision) of a superior or competent authority (Board or General Meeting, single member) to serve factoring (Applicable only to customer) Original R
1. General documents Notes R/AR
1. Application (Applicable only to customer) In the form provided by the Bank R
2. Charter Copy R
3. IDs of the director and founders (shareholders) stipulated by the Armenian Law (Passport, identification card, etc.), as well as a statement of actual place of residence ** (if available, if not the relevant reference), as well as a statement of actual place of residence ** (copy provided by the bank) Copies/ in the case of founders (participants) as required R
4. Financial data in the form required by the loan officer for the last 2 reporting periods (e.g. for financial position, financial results, cash flow) copy R
5. Statements of accounts with other banks (for the last 12 months) Original AR
6. Current loan, collateral and other contracts copy AR
7. Certificate or lease of ownership of the place of business copy AR
8. Business plan or feasibility study original AR
9. License (in case of activity requiring licensing) copy R
10.Other documents (calculations and reports presented to the State Income Committee, last act of tax monitoring, statement on loan accounts, insurance contracts/policies, official audit report, procurements issued by the director, etc.) Copy/ prescribed by law statutory audit companies present the financial statement package and audit report AR
11.Reference about the obligations to the state budget original AR
12.Other documents (construction, contractual contracts, sales contracts, service contracts, invoices, fixed assets, raw materials contracts, invoices) copy AR
13. Resolution (excerpt from the resolution) of the authorized body (Board or General Meeting, sole shareholder) about receiving the loan and/or pledging the suggested collateral Original R
14. Statement from the state register about the changes of the members, the director as well as the charter Original/is required by the Bank when it is not possible to obtain information about the company from the agency through an online inquiry R
15.For Joint Stock companies extract from the register about the shareholders of the company issued by the Central Depository of RA. Original AR


2. Collateral documents Notes R/AR
1. Ownership certificate of the collateral copy R
2. ID (passport, identification card, etc) of the owner and/or the guarantor(s) of the collateral stipulated by the Armenian legislation, if available, and in case of absence - relevant reference, as well as a statement of actual place of residence ** (copy provided by the bank) copy R
3. ID (passport, identification card, etc) of the collateral’s owner(s)’ spouse stipulated by the Armenian legislation, , if available, and in case of absence - relevant reference, as well as a statement of actual place of residence ** (copy copy R
4. Marriage certificate of the owner(s) of the collateral. copy R
5. Legal documents of the company owning the collateral and ID of the director. copy R
6. Statement from the state register/depository about changes in the statute, shareholders and director of the company owning the collateral. Original/ if the bank receives a certificate from the state through an online inquiry, it is not required by the customer AR
7. Resolution of the authorized body of the company owning the collateral about making a pledge. original R
8. Report on the assessment of the collateral For the beginning it can be a statement R
9. Property Mapping Report Original /is required in case of land pledging R
10.Vehicle registration certificate / technical passport copy R
11.State registration certificate for the ownership registration of the vehicle copy (to be presented after the credit committee approves the loan) R
12.Statement about the limitations on the disposal of the vehicle Original (to be presented after the credit committee approves the loan) R
13.List of pledged fixed assets Stating the name, quantity, model, production date, country of production, serial number R
14.Technical passport(s) of the fixed asset(s) copy R
15.List of pledged working capital/td> Stating the name, measurement unit, quantity, price, amount R
16.Consent from the collateral’s lessees original (to be presented after the credit committee approves the loan) AR
17.Insurance certificate(s) of the collateral copy (to be presented after the credit committee approves the loan) AR
18.Other documents (documents certifying the purchase of the collateral, procurements issued by the pledgor, spouse’s notary certified consent) original /copy AR

*In case of prime security the of the documents might not be required by the Bank.

  • The Bank might require the client to insure the collateral.
  • The documents requested by the Bank can be required (R) or at request (AR)
  • Documents listed in point 10 through 15 are required if the collateral is a vehicle or other fixed/working asset.

** If necessary, at the request of the Head of Lending Department or Customer Service Department, the client shall provide a statement from the Passport and Visa Department of the RA Police or the condominium of residence.


Objective factors

Customer experience in the field, partner experience, financial reporting package, bank account turnover, frequency of transactions, credit history, willingness to provide a guarantee to the Bank's partner organization, etc.

Subjective factors

Customer business acceptance and compliance with Bank policy, transparency of customer business, quality of management, prospects for cooperation development, etc.

  • If you fail to meet your obligations to repay the liabilities on the pledge account, if the pledge is not sufficient to cover your credit liabilities, it is possible to repay the liabilities on the account of your other property (if any).
  • For more information on terms, conditions and tariffs for providing statements, their duplicates, references, and other information during the term of the contract, see the "Accounting for Legal Entities and Individual Entrepreneurs" page.

Documentary collection

Document collection operations in international banking practice are governed by the Uniform Rules for Collections (URC522) rules of the International Chamber of Commerce.

There are two types of documentary collections that are usually defined by the terms of a trade contract payment.

Documents against payment

Under this form of collection, the seller's bank authorizes the buyer's bank to provide documents certifying ownership of the goods only after the buyer has made payment for those goods.

Documents against acceptance

This form of collection applies when the buyer and seller agree to delay payment. The buyer receives written assurances of ownership of the goods on the condition of payment upon payment of those goods in the future.

Import Collection

Service RateMinimumMaximum
Notice of issued collection AMD 15,000    
Providing documents  
• against of the transfer 0.10% AMD 7,500 AMD 25,000
• against for acceptance 0.15% AMD 15,000 AMD 60,000
Return of unpaid documents AMD 15,000+ postal costs
Change in collection conditions AMD 15,000

Export Collection

ServiceRateMinimumMaximum
Issue of Collection Amount of collection 0.20% AMD 25,000 -
Receiving and sending of documents AMD 15,000 + postal costs
Change in collection condition AMD 10,000 + postal costs