336 



THE INDIA RUBBER WORLD 



[April 1. 1916. 



Financing Imports of Plantation Rubber. 



CRUDE rubber, like other raw products, may be purchased 

 in the Far East, transported to this country, manufactured 

 and sold before any money is paid by the importing man- 

 ufacturer, if a banker esteems the importer's reputation, financial 

 standing and responsibility such as to warrant the issuance of a 



commercial let- 



SfCCiriEN 



APPUCATION FOR COMMERCIAL CREDIT , 

 New York, ^jtihai ^ /^ ~ 

 - - Trust Company 



Credit ID iviyt of 



tor .SOOO--'- H^fM 

 »giuni A'J}fPtm CjUifmt. of shipment of. 



' ' ■ --^ 7JA 





(pj^i 



(yUpyU^'J 'jl>tlA-jpna£/> H/^ 



Fig. 1. — Application for Credi 



Jones & Co., of New York City, are 

 import at least some of the crude 



ter of credit 

 and subse- 

 quently the re- 

 leasing of the 

 r a vv material 

 under the con- 

 d i t i o n s of a 

 trust receipt. 



To clearly 

 understand the 

 general system 

 of import cred- 

 its as applied 

 to the rubber 

 industry an im- 

 aginary trans- 

 action will be 

 d e s c r i bed in 

 which fictitious 

 names are used. 



Let it be sup- 

 posed that John 

 rubber manufacturers who 

 ubber thev use. William 



Smith & Co. are rubber dealers at Singapore, Straits Settlements. 

 When the Xew York representative of the latter concern ar- 

 ranges with John Jones & Co. for the sale of a certain lot of 

 crude rubber, Smith's New York representative cables in code to 

 the Singapore house that the sale has been consummated, the 

 understanding being that William Smith & Co. will receive pay- 

 ment in the form of a draft at 90 days' sight, drawn under a 

 commercial letter of credit on the London correspondent of 

 John Jones & Co. Previous arrangements had, of course, been 

 made that William Smith & Co. would be provided with such a 

 bankers letter of credit under which the draft would be drawn 

 to finance the purchase. 



While the Singapore exporter is completing his arrange- 

 ments for shipping the rubber, John Jones & Co. go to their 

 bankers in New York, with the statement of the conditions under 

 which purchases are to be made and request the issuance of a 

 commercial letter of credit. The form used in making this ap- 

 plication is shown in Fig. 1. 



This application requests cable advice of the credit, which is 

 customary for rubber dealings in the Far East on account of the 

 distance. The amount of the credit desired is, say £5,000, al- 

 though this first purchase costs about one-third of that amount, 

 the idea being that the balance of the credit may be drawn to 

 pay for other purchases up to the total amount of the credit at 

 any time before the date of its expiration, which is July 1, 1916. 

 This is done to avoid the issuing and cabling of small credits 

 for each subsequent transaction. 



At the time of issuing the letter of credit John Jones & Co. 

 are required to sign an agreement or "obligation" shown in 

 Fig. 2, which provides that they will supply funds to meet 



SPECIME/V AGIMiCMaNT 



»_5?^i&4«^Z 



: Company 



ajactOTy to you, at not txeeedin^ tvtf days' » 



prWHWl* t\frtai, titoti b 



Xo^York.tilhtriftono 



.Agreement of Purch.\ser. 



