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

2. Know Your Counterparty

3. Make
the
Sale
(Sales)
Avoid a
Loss
(Credit)
vs.
s /26/95

4. Major Risks in International Trade
Country
Business / Commercial Risk

5. Country Risk War, Civil Disturbance Repatriation Risk Exchange Control
Expropriation

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

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

8. METHODS OF EXPORT PAYMENT

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

10. 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

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

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

13. Letters of Credit

14. 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

15. 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

16. Key Issues !
Confirmation
Discrepancies
Consignment

17. 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

18. 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

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

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

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

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

23. Financing Trade

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

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

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

27. 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.

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

29. 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.

30. 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.

31. Global Trade Sales Division
Thank You