Presented by: Charles Avaunzaff Vice President Global Trade Sales Presented to MBIA Presented by: Charles Avaunzaff Vice President Global Trade Sales

Know Your Counterparty

Make the Sale (Sales) Avoid a Loss (Credit) vs. s9098-003 9/26/95

Major Risks in International Trade Country Business / Commercial Risk

Country Risk War, Civil Disturbance Repatriation Risk Exchange Control Expropriation

Commercial / Business Risk Disputes Control of Title Customer Liquidity… Insolvency! Quality Control

Who should take the Risk and how are we going to get Paid?

METHODS OF EXPORT PAYMENT

WHAT ARE THE OPTIONS? Open Account Documentary Collection Letters of Credit Pre-Payment

Risks in Methods of Payment Buyer Seller High Open Account Low R I Documentary Collection R S I K Letter of Credit S K Low Pre-Payment High

STANDARD DOCUMENTS BILL OF EXCHANGE OR DRAFT TRANSPORT DOCUMENTS (OCEAN B/L, AIR WAYBILL, TRUCK B/L) COMMERCIAL INVOICES PACKING LIST MISCELLANEOUS DOCUMENTS

OCEAN BILL OF LADING Receipt for the Merchandise Contract of Carriage Title to Merchandise

Letters of Credit

LETTER OF CREDIT OPENING BANK’S GUARANTEE THAT THE SELLER’S DRAFT WILL BE HONORED, IF THE TERMS AND CONDITIONS OF CREDIT ARE MET BY THE SELLER . MINIMAL RISK TO SELLER

Letter of Credit Payment Terms Sight Payment is Due When Conforming Documents Are Presented Usance - Banker’s Acceptance Payment is Due at a Later Date up to 180 Days Can be Paid at a Discount Before Maturity Deferred Payment Future Payment Undertaking Without Draft Discount Difficult

Key Issues ! Confirmation Discrepancies Consignment

Advising vs Confirming Bank Advising Bank Authenticates Letter of Credit Has no Obligation to Pay Confirming Bank Adds Undertaking “to Pay” to That of Issuing Bank Obligated to Pay for Conforming Documents

Confirmation Local Bank Risk Payment Can be Expedited No Foreign Country Risk Known Bank Payment Can be Expedited Additional Charges for Confirmation Most Letters of Credit Not Confirmed

Discrepancies Nearly 80% of Transactions Have Discrepancies Ray-Ban vs Ray Ban Loss of Letter of Credit Protection Risk of Non-Payment

USES OF STANDBY LCs Bid Bonds Performance Bonds Advance Payment Bonds Credit Enhancements Non-Payment of Invoices Support Bank Guarantees

Standby Letters of Credit Not Intended as Primary Source of Payment Hence they are a “Standby” Source of Payment

INT’L COMMERCIAL TERMS (INCOTERMS) EX-WORKS FAS (Free Along Side) FOB (Free on Board) CFR (Cost & Freight) CIF (Cost, Insurance & Freight) Others

Financing Trade

Financing Trade Import Financing - Usance Letters of Credit - “Trade” vs. “Clean” Advances - B/A’s Export Financing - Usance Letters of Credit - Government Programs (Eximbank)

Ex-Im Bank Supported Programs Working Capital Guarantee Program Medium Term Guarantee Program Letter of Credit Policy Program Credit Insurance (Short-Term A/R)

Other Programs Commodity Credit Corporation (CCC) Private Credit Insurance A Forfait Financing (“Forfaiting”)

Some of Union Bank of California’s Ex-Im Closings Solar panel exporter Northern California. Grocery goods exporters in Northern California Software exporter in the Central Valley Seafood exporter in the Pacific Northwest Cosmetic exporter in Southern California Publishing company in Northern California.

Current Ex-Im Deals Pending Environmental company in Pacific Northwest. Scrap metal exporter Southern California. Gas valve exporters Northern California. Environmental company Northern California

Benefits for Prospects in UBOC Ex-Im Partnership Expedited loan approval process due to UBOC being a delegated authority lender Local Union Bank Trade Specialists navigate the program for the exporters. Structuring complex transactions with the support from Ex-Im Bank.

Other Ways GTS can Help! There are other ways GTS can help import/export customers: Problem: Customer wants to increase export sales but is uncomfortable with non-payment risk (commercial & political) and cannot finance foreign A/R. Solution: Export credit insurance and potential UBOC financing of foreign A/R that is credit-insured by an acceptable insurer. GTS works with several reputable export credit insurance brokers & insurers. Problem: Customer wants to increase sales by offering invoices payable in local and/or USD. Solution: Work with F/X to provide dual currency invoices or simply invoices in local currency. Problem: Customer processes import or export payments through another bank but is not happy with the level of service. Solution: GTS performs a “diagnostic” and proposes a Web-based service solution at competitive prices.

Global Trade Sales Division Thank You