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Course details

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New York School of Trade Finance

In-depth insight into international trade and commodity finance
  • Course Overview


    This Euromoney training course provides practical, in-depth coverage of international trade and commodity finance. The conflicting needs of buyer and seller are identified and how trade finance provides risk mitigation and working capital solutions for both exporter and importer


    The training covers the importance of Incoterms® rules, commercial contract, the nature of trade documentation, how to maintain control over the goods, the risks faced by exporters, importers and banks, and detailed coverage of the key trade products to include the parties, mechanics, risk mitigating features, optimal structuring techniques and financing solutions


    Emphasis is placed upon risk assessment, problem solving techniques and deal structuring, through a clear understanding of a corporate’s trade cycle. Great attention is paid to the effective and appropriate use of structured financing techniques in meeting the corporate’s needs for optimal working capital solutions, whilst satisfying the bank’s requirement for controlled lending and credit support.

    Methodology


    The course uses extensive case studies and exercises to develop the understanding of attendees in a practical and engaging way across a range of scenarios on the identification of risk, risk mitigation, structuring techniques and providing optimal working capital solutions for the bank and the corporate


    The case studies and exercises described are provided for indicative purposes only. The trainer reserves the right of discretion to vary the selection of case studies covered in the classroom depending upon the background, experience and key learning objectives of the delegates in attendance and classroom time availability


    Course Objectives


    By attending this interactive and highly practical 5-day training course you will:

    • Know when and how to use trade finance effectively
    • Appreciate the importance of the commercial contract, Incoterms® and trade documentation
    • Identify trade risk and how this can be mitigated 
    • Know the methods of payment, their use, risks and benefits to the buyer, seller and the financier
    • Identify when and how each of the trade finance products should be used
    • Understand the risks, benefits and key considerations of each of the trade finance products
    • Appreciate the operation and risk considerations of on demand guarantees and standby credits
    • Structure documentary credits, standby credits and letters of guarantee to mitigate risk
    • Be able to gather information to thoroughly assess and evaluate a trade proposition
    • Understand the fundamentals of deal structuring
    • Construct a trade cycle time line to evaluate type, amount and duration of trade finance
    • Appreciate why trade finance is an alternative to balance sheet lending assessment
    • Understand the key aspects and structuring techniques of receivables finance
    • Be aware of the key payables and supply chain finance solutions and when they should be used
    • Apply credit enhancement techniques, ECA support and evaluate credit insurance
    • Structure a self-liquidating trade finance facility
    • Appreciate the structures, products and risk management in commodity trade finance
    • Apply AML, sanctions and fraud based suspicious activity indicators
    • Be aware of the market trends and developments in trade finance


    Who should attend

    • Trade, export and commodity finance executives
    • Import and export managers
    • Corporate bank relationship managers
    • Staff within credit and risk management functions
    • Relationship managers within Financial Institutions
    • Trade operations personnel

  • Day 1

    Trade finance – its essential role in trade and revenue growth

    • Conflicting requirements of seller and buyer 
    • The importance and implications of trade credit: 
      > Need for credit 
      > Credit risk exposure
      > Liquidity risk 
    • Working capital optimisation: 
      > Cash conversion cycle 
      > Identifying the funding gap 
      > Importance of DSO and DPO ratios 
    • The essential role of trade finance: 
      > Benefits to corporate and bank 


    Exercise;
     calculation of DSO & DPO ratios and assessment


    Incoterms® rules 2010

    • Their relevance and importance to trade finance
    • Examination of the most commonly used Incoterms®
    • Importance of Incoterms® from a trade financing perspective

    Case Study; evaluation of the needs of the seller, buyer and financier in a case study and listing the Incoterms® rules in order of preference from a control and risk mitigation perspective

    Commercial contracts

    • Key aspects of the commercial contract: 
      - Its importance to the financier 


    Case study;
    examination of a commercial contract and identification of areas of risk for the seller and financier and the required amendments to mitigate risk


    Trade documentation; its importance to trade finance [examples provided in delegate pack] 


    Bill of lading;

    • Function and key features 
    • Taking control of the goods
    • The requirement for original clean shipped on board bills of lading 
    • Importance of consignee/negotiable status 
    • Taking title to the goods: pledge and trust receipt 
    •  Other types of bill of lading 
            > Air waybill 
    • Taking control of the goods:
       > Consignee
       > Practical issues 
    • Other transport documents and risk implications 
    • Cargo insurance; key aspects and considerations 
    • Inspection certification; basis of inspection and its importance to risk mitigation



    Identifying and managing trade risk: 

    •  Financial; buyer credit risk, country and transfer risk 
    •  Political risk; contract and/or payment frustration 
    •  Commercial risk: debt instrument, method of payment, commercial terms, sales leverage 
    •  Performance; supply chain, nature of goods, delivery, dispute 
    •  Documentary; trade instrument performance, export and import clearance 
    •  Legal risk; impact on ICC rules, trade products, control of goods, debt recovery 
    •  Regulatory compliance risk; AML, CFT, sanctions and fraud


    Methods of payment 

    • The payment “risk ladder”; key risk considerations for importer and exporter


    Exercise;
     determining the key commercial aspects of a trade transaction to mitigate risk


    Day 2 

    Documentary collections 

    • What a collection is and when it should be used: 
    • Bank responsibility:
      > Compliance with instructions
      > No undertaking to honour or pay (unless bank aval)
      > Document disclaimer; numerical count only 
    • Parties 
    • Types
      > Documents against payment (DP/CAD)
      > Documents against acceptance (DA) 
    • Operation 
    • Collection schedule of instruction (example) 
    • Risk and control features 
    • Protest 
    • When collections should be used 
    • Financing; advance against collections 
    • ICC URC 522 rules; appreciation 
    • Advantages and disadvantages


    Exercise
    ; identification of missing information in a collection schedule of instructions

    Bank Aval 

    • What avalisation is and when it should be used 
    • Risk and benefit features:
      > Seller
      > Buyer 
    • Avalising bank 
    • Financing bank
      > Financing opportunities

    Exercise; the delegates will be asked to identify missing information in a collection schedule of instructions 

    Documentary letters of credit 

    • What a letter of credit is and when it should be used 
    • Key aspects:
      > Bank liability
      > Irrevocable
      > Independence
      > Conditional undertaking to pay
      > Banks deal only in documents ‘on their face’:
            > Document disclaimer 
    • Parties 
    • Structure:
      > Sight and term
      > Availability by:
            > Sight payment
            > Acceptance
            > Deferred payment
            > Negotiation
      > Expiry date and place
      > Documentary presentation period
      > Bank to bank reimbursement


    Exercise; calculation of the letter of credit facility requirement for an importer 

    • Confirmation:
      > Unconfirmed credits; risk implications to the beneficiary
      > Confirming bank liability:
            > Without recourse financing
            > Documentary risk
      > Silent confirmation
            > Operation and terms of a ‘commitment to negotiate’ 
    • Letter of credit process 
    • Letter of credit example 
    • Amendments; acceptance and rejection 
    • Risk appreciation: structuring the letter of credit to protect the:
      > Applicant
      > Issuing bank
      > Beneficiary


    Exercise; examination of an import letter of credit application form and identification of technical issues and whether the application complies with the terms of credit sanction 

    Day 3 


    Documentary letters of credit 

    • Importance of documentation: standard for examination 
    • Use of the letter of indemnity (LOI); example
    • Complying presentation: Obligation to honour/pay:
      > Exceptions to the payment principle 
    • Discrepancy waiver: risk implications to the:
      > Applicant waiver
      > Applicant rejection
      > Issuing bank discrepancy waiver rejection 
    • Discrepant presentation; risk implications to the:
      > Beneficiary
      > Confirming bank
      > Negotiating bank 
    • Financing:
      > Pre-shipment finance
      > Discount/negotiation (example)
            > With and without recourse
      > Refinancing
      > Usance payable at sight
    • When letters of credit should be used 
    • ICC UCP 600, ISBP 745, URR 725 rules; appreciation 
    • Letters of credit; advantages and disadvantages


    Case study; evaluation of an n export letter of credit and identification of risk for the beneficiary.  Recommendations will be made for the restructuring of LC terms to mitigate risk for the manufacturer and to facilitate financing.


    Other forms of letters of credit 

    • Use, operation, risk and structuring of:
      > Transferable letters of credit
      > Back to back letters of credit
      > Revolving letters of credit 
    • Transferable letters of credit


    Case study;
    examination of a request to transfer a letter of credit and identification of changes which are allowed under UCP 600 

    • Back to back letters of credit 
    • Revolving letters of credit


    Standby credits 

    • What a standby credit is 
    • The operation of standby credits 
    • Commercial standby letter of credit (working example) 
    • Structuring standby credits; risk appreciation and mitigation 
    • The use of UCP 600 and ISP 98 
    • How a standby credit differs from a documentary credit and letter of guarantee


    Case study; assessment of the risk profile of a client request for a standby letter of credit in respect of the purchase of pre-sold goods. Construction of the trade cycle timelines, calculation of the facility requirement and formulation of the import and export trade financing structure re to mitigate risk for the bank and distributor.

    Demand Guarantees 

    • What demand bank guarantees are and when they are used
    • Key aspects:
      > Irrevocable
      > Independent
      > Unconditional undertaking to pay
            > Exceptions to the payment principle
      > Banks deal in documents only
      > Ease of claim (beneficiary claim documentation) 
    • Direct guarantees; operation and parties 
    • Indirect guarantees; operation and parties:
      > Nature, role and risk implications of the counter-guarantee (example) 
    • Types; Bid, performance, advance payment, payment, letter of indemnity 
    • Text wordings (examples)
      > Bank’s own standard wording
      > Private text (and requirement for approval) 
    • Key clauses; guarantee text construction 
    • Claim demand:
      > Demand requirements: Claim demand statement
      > Separateness of each demand
      > Period for examination 
    • Risk appreciation:
      > Unjustified claim (unfair calling)
      > Fair calling (political)
      > Extend or pay notice
      > Foreign laws and usage
      > Cancellation 
    • Risk management; structuring guarantees:
      > Operative clauses
      > Variation in amount 
    • URDG 758; appreciation and use

     

    Day 4 

    Case study; consideration of a request to issue an advance payment guarantee, identification of the risks and formulation of a proposal to mitigate risk exposure 


    Forfaiting 

    • What forfaiting is and when it is used 
    • Description, parties and operation 
    • Without recourse finance:
      > Events of recourse 
    • Primary and secondary purchase 
    • Risk appreciation and due diligence 
    • ICC URF 800; appreciation


    Case study; consideration of a request to purchase an avalised bill of exchange and identification of the risk features and further information required to assess the proposition 


    Short term credit insurance 

    • What credit insurance is and when it should be used 
    • Working with and evaluating a credit insurance policy:
      > Assessing the extent of cover
      > Financier endorsement; joint insured Vs loss payee 
    • Risk appreciation; adherence to policy terms and conditions


    Receivables finance 

    • Financing open account transactions:
      > What receivables finance is and when it is used 
    • Accelerating the receivable; improving the DSO ratio 
    • Nature of debt and implications for finance:
      > Invoice (example): assignment of debt
      > Bill of exchange and promissory note (examples) 
    • Proof of delivery (relevance of Incoterms® rule) 
    • Disclosed and undisclosed facilities:
      > Risk implications 
    • Recourse and re-purchase events 
    • Seller: Risk assessment:
      > Ability to perform 
    • ‘Going concern status’ 
    • Debtor: Risk Assesment 
      > Ability to pay and transfer risk 
      > Willingness to pay
            > Nature of goods; specification and quality
            > Timeliness of delivery
            > Post-delivery performance obligations
      > Trade credit term
      > Collectability of debt; legal right to recovery 
    • Prepayment; debt purchase at a discount to face value:
      > Determining the amount to finance (prepay); dilutions and retentions 
    • Types of receivables finance:
      > Specific debt purchase: Insured and Uninsured
      > Factoring
            > Difference between factoring and confidential invoice discounting 
    • The use of invoice finance and factoring in trade finance


    Case study; structuring of an insured receivables finance solution for the sale of vehicles to a buyer in Africa on three years trade credit


    Pre-shipment finance (supplier led) 

    • Description and operation 
    • Risk appreciation and structuring:
      > Identifiable and reliable transactional source of repayment
      > Importance of performance risk
      > Trade loans; aligned to the trade cycle

     
    Approved trade payables finance (buyer led) 

    • Description and operation
      > Risk appreciation


    Day 5 


    Export Credit Agency support (ECA) 

    • The role of an ECA 
    • Financing and mitigating risk with ECA support:
      > Credit insurance
      > Loan guarantee to lenders
      > Direct support/lending (in qualifying buyer credit transactions) 
    • Eligibility for ECA support; regulations and criteria 
    • Types of ECA support; description, parties and operation:
      > Supplier credit
      > Buyer credit
      > Lines of credit; general purpose and project specific
      > Partial guarantees to lenders
      > Bond support
      > Letter of credit confirmation support
      > Credit insurance cover


    Structured trade finance; exercising control

    • The self-liquidating facility; primary source of repayment
    • When and why deal structuring should be used:
      > Requirement to transfer the primary source of repayment away from the borrower
    •  Establishing an identifiable and reliable source of repayment:
      > Credit quality
      > Nature of the debt instrument
      > Dependencies; performance risk and allowable dilutions
    • Understanding and evaluating the trade cycle:
      > Key stages; risk profile of each
      > Plotting the time flow of goods, documentation and money
      > Identification of the funding gap
      > Determining the right form of finance
      > Calculating the facility quantum and period

    Exercise; identification of the funding gap and calculation of the facility requirement

    • Exercising control; ‘follow the goods, documentation and the money’
    • Facility structuring; key controls:
      > Linkage of payment and/or finance to trade documentation
      > Use and application of finance
      > Capture and ownership of the trade receivable
    • Structuring each stage of the trade cycle: controlling the nature of risk exposure
      > Use of labelled/descriptive trade loans
      > Managing risk exposure aligned to facility sub-limits;
            > Drawn down documentation
            > Duration; identifiable date set for repayment aligned to the trade cycle
    • Reality of title and control; liquidation of goods




    Commodities trade financing 

    • What structured commodity finance is and when it should be used
      > Using structured commodity finance to look beyond the balance sheet 
    • Typical commodities 
    • An appreciation of the key risk characteristics of commodity financing:
      > Inherent risk characteristics of the commodity to be financed
      > Market risk
      > Transactional risk
      > Control of the goods and receivable throughout the commodity trade cycle 
    • Financing the commodity trader:
      > Risk appreciation, evaluation and mitigation
      > Key methods of commodity financing: 
    • Pre-export/pre-payment: 
      > Risk appreciation and mitigation


    Case study; assessment of the risks of the pre-export finance of coffee crop and the structuring of a solution to mitigate risk 

    • Warehouse financing: 
      > Control of goods; warehouse receipt, warrant, letter of attornment: 
            > Warehouse receipt; negotiable or non-negotiable
      > Security over goods legal implications of  “lex situs”
      > Financing ratio
      > Risk appreciation and mitigation
      > Role of collateral managers 
    • Receivables 
      > Structural enhancement:
            > Off shore collection accounts
            > Debt reserve and service accounts
            > Top up and acceleration provision 
    • Borrowing base 
      > Operation 
      > Risk appreciation


    Case study; identification of the risks and construction of a trade financing solution across the commodity cycle for a copper transaction 

    Recent developments and trends 

    • Latest market trends: 
    • Increasing role of open account trade in import and export financing 
    • Results of the latest ICC market survey; trade finance default risk 
    • Bank Payment Obligation; operation and market constraints 
    • Blockchain finance; potential application in the trade finance market


    Course Summary and Close

    DELEGATE PACK 

    Trade document examples

    Document examples:

    • Debt instruments
      > Bill of exchange
      > Promissory note
      > Bank aval
    • Collection instructions
      > Accompanying shipping documents
    •  Letter of credit
      > Amendment
      > Documentary presentation
      > Allocation of proceeds
      > Discrepancy notice
    • Standby credit (UCP & ISP)
    • Guarantees;
      > Bid
      > Advance payment
      > Performance
      > Payment
      > Counter
    • Letter of indemnity (LOI)
    • Shipping guarantee
    • Warehouse receipt



     

  • Our Tailored Learning Offering

    Do you have five or more people interested in attending this course? Do you want to tailor it to meet your company’s exact requirements? If you’d like to do either of these, we can bring this course to your company’s office. You could even save up to 50% on the cost of sending delegates to a public course and dramatically increase your ROI.

    If you want to run this course at a location convenient to you or if you want a completely customised learning solution, we can help.

    We produce learning solutions that are completely unique to your business. We’ll guide you through the whole process, from the initial consultancy to evaluating the success of the full learning experience. Our learning specialists ensure you get the maximum return on your training investment.

  • We have a combined experience of over 60 years providing learning solutions to the world’s major organisations and are privileged to have contributed to their success. We view our clients as partners and focus on understanding the needs of each organisation we work with to tailor learning solutions to specific requirements.

    We are proud of our record of customer satisfaction. Here is why you should choose us to help you achieve your goals and accelerate your career:

    • Quality – our clients consistently rate our performance ‘excellent’ or ‘outstanding’. Our average overall score awarded to us by our clients is nine out of ten.
    • Track record – we have delivered training solutions for 95% of worlds’ top 100 banks and have trained over 250,000 professionals.
    • Knowledge – our 150 strong team of industry specialist trainers are world leading financial leaders and commentators, ensuring our knowledge base is second to none.
    • Reliability – if we promise it, we deliver it. We have delivered over 20,000 events both in person and online, using simultaneous translation to delegates from over 180 countries.
    • Recognition – we are accredited by the British Accreditation Council and the CPD Certification Service. In an independent review by Feefo we scored 96% on service and 95% on product
This course can be run as an In-house or Tailored Learning programme

Instructor

  • Stephen Jones

    Biography

    Stephen Jones is a highly experienced trade finance practitioner with over 40 years of trade finance expertise (35 of which was gained in the corporate banking environment). He has held senior trade positions in Lloyds Bank, NatWest and RBS.Stephen was the first in NatWest Corporate to win, structure and execute a multi-million pound limited recourse receivables finance structure for a new to bank major client. The structure used a syndicate of private insurers to transfer buyer and political risk. This resulted in the successful provision of 3 years trade credit to a buyer in Africa and off balance sheet receivables finance to the exporterDuring his time as Regional Head of International Trade, Stephen overviewed and structured his team’s trade finance submissions to the credit department achieving a 97% credit approval success rate over a 4 year periodStephen continues to work as a trade finance practitioner and consultant advisor handling trade transactions and letters of credit thus enabling him to deliver training material relevant to today’s market.