ICC Banking Commission Meetings Mexico City, November 2012 “FCI and International Factoring” By Jeroen Kohnstamm Secretary General Factors Chain International

FCI 1968

Amsterdam Headquarters

Factoring exploring new horizons

Exploring New Horizons FCI IN N UMBERS 262 MEMBERS (today) 71 COUNTRIES (today) € 1,151 BILLION (2011)

Exploring New Horizons WORLD 2011 FACTORING COMPANIES 2,503 DOMESTIC VOLUME € 1,741 BILLION INTERNATIONAL VOLUME € 274 BILLION

Exploring New Horizons DomesticInternational EUROPE1, AMERICAS ASIA AUSTR./N.Z AFRICA ( IN B ILLIONS OF EUR)

Exploring New Horizons 2011 FCI TWO-FACTOR BUSINESS LARGEST EXPORT MARKETS (IN MILLIONS) CHINA € 3,897 (+4%) € 3,733 TURKEY € 3,009 (+35%) € 2,225 TAIWAN € 2,618 (0%) € 2,623 HONG KONG € 1,786 (+54%) € 1,157 GREECE € 1,212 (+43%) € 849 SPAIN € 785 (+24%) € 634

Exploring New Horizons ….AND FCI EXPORTS FOR 2012 ( FIRST SIX MONTHS IN MILLIONS ) W ORLD € 11,450 € 8,127 C HINA € 3,523 (+235%) € 1,493 (+41%)

Exploring New Horizons 2011 FCI TWO-FACTOR BUSINESS LARGEST IMPORT MARKETS (IN MILLIONS) USA € 5,103 (+11%) € 4,591 GERMANY € 2,286 (+30%) € 1,757 FRANCE € 2,039 (+47%) € 1,385 ITALY € 1,246 (+13%) € 1,103 U.K. € 966 (+8%) € 897 CHINA € 931 (+2%) € 916 SPAIN € 830 (-5%) € 871

Exploring New Horizons ….AND FCI IMPORTS FOR 2012 ( FIRST SIX MONTHS IN MILLIONS ) W ORLD € 11,450 € 8,127 C HINA € 1,493 (+329%) € 453 (+41%)

French Seller French Buyer French 1Financing 2Collection service 3Credit Risk Protection DOMESTIC FACTORING Factor

Exporter Importer Export Import Credit Risk Protection 2Financing 3 Collection service 1 Chinese French INTERNATIONAL FACTORING Chinese Factor

MECHANICS of INTERNATIONAL FACTORING

TRADE PROMOTION 1 Quality of Product 2 Price 3 Terms of Sale

 L/C letter of credit  D/P documents/ payment  D/A documents/ acceptance  Open Account EXP. IMP.    

OPEN ACCOUNT SALES DAY 1  shipment/invoice date 13  delivery date 60  invoice due date 60+??  collection date  payment under guarantee date

EXP EF IMP IF 1 EXPORTER (EXP) AND EXPORT FACTOR (EF) SIGN EXPORT FACTORING CONTRACT

EXPIMP EF IF 2 EF SENDS REQUESTS TO SELECTED IF’S EXP GIVES EF LISTING OF IMPORTERS, INDICATING NECESSARY CREDIT LINES

3 EXPIMP EFIF INFORMS EXP ABOUT LIMIT DECISIONS (VIA EF) IMPORT FACTOR CHECKS CREDIT WORTHINESS OF IMPORTER(S)

EXP 4 IMP EF IF IMPORTER PLACES NEW ORDER WITH EXPORTER

5 EXP IMP EF IF EXPORTER SENDS GOODS, INVOICE & SHIPPING DOCUMENTS TO IMPORTER

6 EXPIMP EF IF EXPORTER SENDS INVOICE DETAILS TO EF (AND RECEIVES IMMEDIATE CASH ADVANCE FROM EF)

7 EXP IMP EF IF IF BOOKS INVOICE AND REGULARLY REMINDS THE IMPORTER EF SENDS INVOICE DETAILS TO IF

8 EXP IMP EF IF IMPORTER PAYS FULL INVOICE AMOUNT TO IF AT DUE DATE OR SHORTLY THEREAFTER

9 EXP IMP EF IF EF PAYS REST-AMOUNT TO EXPORTER IF IMMEDIATELY TRANSFERS FULL INVOICE AMOUNT TO EF

Exploring New Horizons FCI GRIF (G ENERAL R ULES FOR I NTERNATIONAL F ACTORING ) 1.First edition introduced in Now used in 71 countries, in standard form, NO country deviations! 3.Will govern in 2012 a total factored trade volume of nearly EUR 24 Billion. 4.In 42 years, disagreements under the GRIF resulted in ONLY 5 arbitration cases.

Exploring New Horizons FCI EDI FACTORING. COM 1.Internet based communication system used between ALL 262 members of FCI. 2.A series of 26 messages, covering all information aspects of handling open account invoices under a factoring arrangement. 3.No transaction charges, yearly membership fee of EUR 7,500 offers unlimited use. 4.Payment transfers are handled via SWIFT.

Exploring New Horizons A DVANTAGES FOR E XPORTERS 1.Increased sales in foreign markets by offering competitive terms of sale % protection against credit losses on customers 3. Accelerated cash flow through faster collections 4. Lower costs than the total charges for L/C transactions 5.Cash against receivable instead of bank credit, liquidity for working capital 6.Full information about the receivables including standing of the foreign buyers and trade customs

Exploring New Horizons A DVANTAGES FOR I MPORTERS 1.Purchase on convenient 'open account' terms 2.Expanded purchasing power without blocking existing lines of credit 3.Orders can be placed swiftly without incurring delays, L/C opening charges, negotiation charges, etc. 4.Importer uses his own language for communicating with Import Factor

Exporter Export Factor CANADA Import Factor POLAND Import Factor JAPAN Import Factor

COST OF EXPORT FACTORING? 0.5%-1.0% OF INVOICE VALUE  total export volume  average invoice value  number of importers  type of industry

Concerns…