OVERVIEW OF INTERNATIONAL BANKING SERVICES AND INTERNATIONAL TRADE FINANCE

SunTrust International Marsha Sompayrac (804) 782-5558 International Banking Division 919 East Main Street Richmond, VA 23219

International Banking at SunTrust Offering a full range of international financial solutions to meet our clients’ needs including: International Methods of Payment and Currency Risk Management to facilitate trade and mitigate financial risks Financing vehicles for importers and exporters Established global network of correspondent banks Focus on high quality service and finding customized solutions International Trade Banking

International Trade Products Trade Services Commercial Letters of Credit - Import & Export Standby Letters of Credit Documentary Collections Trade Finance Working Capital Loans for exports Foreign Receivable Financing Foreign Buyer Financing Overseas Investment Financing Forfaiting International Trade Banking 9

INTERNATIONAL METHODS OF PAYMENT Trade Terms Exporter Risk Importer Risk Open Account Documentary Collection(Time) Documentary Collection (Sight) Letters of Credit (Time) Letters of Credit (Sight) Payment in Advance High Low International Trade Banking 10

How can we be sure he’ll pay?! Open account... are you really sure? (You ship the goods, they sell them and then pay you...maybe) How can we be sure he’ll pay?!

Cash in Advance? (They send you the money then you ship the goods!) Be careful! Don’t ship before you are sure you are in receipt of collected funds wire transfer: make sure they have complete instructions & verify receipt check - determine that check has been paid by drawee bank foreign check - may take up to 3 weeks to clear

One of the most common questions for people interested in international trade is “What is the best method of payment for international shipments?”

One of the most common questions for people interested in international trade is “What is the best method of payment for international shipments?” (continued)

Trade Services (Traditional Bank Products) A. Letter of Credit (sight) The buyer’s bank promises to pay the seller if the seller presents documents that comply with the conditions listed in the letter of credit. Payment will be at sight (immediate) upon presentation of conforming documents. B. Letter of Credit (time) The same as above except that payment will be at a designated time after presentation of compliant documents. Example: 30 days after bill of lading date. Provides terms for buyer but seller must wait for payment. C. LC Discount & Acceptance (time) A simple form of trade finance, which gives the buyer time to pay but your company receives cash following shipment. Build in the cost!!

Trade Services (Traditional Bank Products) (continued) D. Collections (sight) Similar documents as in letter of credit but there is neither bank examination nor promise of payment by bank. Should be used with strong or long established buyer as it carries risk of non-payment by the buyer. . E. Collections (time) Similar to sight, but gives buyer time to pay. Like open account but carries a “protest” mechanism.

Commercial Letter of Credit arrangement by a bank to settle international commercial transaction provides a measure of security for parties involved creates contractual framework for trade transaction payment

Letters of Credit L/Cs are a payment mechanism, not a quality assurance device. To assure quality, product inspection must be made. (e.g.: SGS or other method) Bank guarantee of payment. If the documents outlined in the Letter of Credit are in complete compliance with the terms and conditions of the letter of credit, payment will be made. Documents are checked for “discrepancies”, or differences between what is required and what is submitted. Discrepancies will usually delay payment.

Payment under L/C is effected against receipt of documents only...not against shipment or examination of merchandise if documents comply with credit terms

Confirmed Letter of Credit A confirmed letter of credit carries the obligation of both the issuing bank and the confirming bank to pay the exporter if the terms and conditions of the credit are met. Foreign country risk is eliminated, as the risk moves to the US bank. Cash flow may improve, as payments are from a US vs. Overseas bank. Additional expense, as another bank (confirming) is now involved in the transaction.

When a U.S. bank adds its confirmation to a credit issued by a foreign bank it is taking on the obligation to effect payment if for any reason the issuing bank defaults. Basically, confirmation is a kind of insurance. Confirming Bank Issuing Bank

Confirmation costs money... Confirming banks charge a commission to cover the risks they assume. Percentages vary depending on the issuing bank and country of issue among other things.

If you want your L/C confirmed... consult with SunTrust Bank whether or not L/C can be confirmed, if issued request confirmation when setting up sales contract with buyer determine up front who will pay confirmation commission

Letters Of Credit Standby Bid Bonds Guarantees Performance Advance Or Down Payment Guarantee Standby Letters Of Credit

Documentary Collections International Method of Payment No Credit Approval Required Collection processing handled in Atlanta SunTrust acts as collecting bank for payment against shipping documents pertaining to international transaction Not recommended for sales on extended terms International Trade Banking 11

Documentary Collections (D/C) Documents are presented to the seller’s bank. There is no checking of the documents. The seller’s bank forwards documents to buyer’s bank for payment. Requires trust and an established business relationship. The B/L and documents are controlled by the banks, so the buyer may not obtain access to the merchandise. The seller has no guarantee of payment If the buyer does not pay, the seller still controls the product, but it is in a foreign port. This leaves 3 options. Options: 1) Find another buyer in that country; 2) Liquidate in the foreign country; 3) Repatriate the product for later resale.

Documents Against Acceptance (D/A) Documents are presented to the seller’s bank. The seller’s bank forwards documents to buyer’s bank for payment. As in D/C. Seller has no assurance of payment. Same as D/C However, this instrument revolves around the buyer “accepting” the product, and usually minimum quality is the standard to be met by the exporter/manufacturer.

These methods are fine – but what if your customer wants extended terms of payment or your competitors are offering better terms? Trade Finance may be the solution to your customer’s needs and the way to make exports a manageable part of your growth strategy. Trade Finance Who Can Receive Financing? ** Seller (Exporter) ** Buyer (Importer) ** Buyer’s Bank (If buyer’s credit is poor) ** Foreign Country or Agency

Trade Finance Tools Export-Import Bank of the U.S.A. Insurance and Guarantees for short, medium and long term financing Overseas Private Investment Corp. Insurance and Guarantees for overseas investments and project financing Private Insurance covering commercial and political risk International Trade Banking 21

Other Government Programs SBA / TDA / CCC / USDOC / OPIC Programs target different size transactions for different US products

Avoid Quoting Price without knowing the financing details! Train your sales team to build your portion of financing costs into the sale. This minimizes eroded margin and is exactly what your foreign competition is doing