Trade Payment & Finance Risk Mitigation


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Compliance Due Diligence
Wisconsin International Trade Conference, May 12, 2009

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  • Final deck 9/25/07 2:27PM
  • Trade Payment & Finance Risk Mitigation

    1. 1. Wisconsin International Trade Conference Trade Payment and Finance Risk Mitigation S   T   R   I   C   T   L   Y     P   R   I   V   A   T   E     A   N   D     C   O   N   F   I   D   E   N   T   I   A   L Presenter: Tom Gaglione Global Trade Services 414-977-6733
    2. 2. Global Capabilities & Coverage USD and Local Currency Loan Syndications International Capital Markets International Cash Management Global FX and Rates Trade Finance and Logistics Investment Management Liquidity Solutions Investment Banking M&A and Advisory USD and Local Currency Bilateral Loans <ul><ul><li>Strong capitalized firm with disciplined approach to risk management </li></ul></ul><ul><ul><li>Market leading global products offered across a broad set of countries and currencies </li></ul></ul><ul><ul><li>Expanding international footprint and local product capabilities in over 50 countries </li></ul></ul><ul><ul><li>One global relationship team providing cross-border execution </li></ul></ul><ul><ul><li>Bankers overseas dedicated to support US clients’ needs </li></ul></ul><ul><ul><li>International banking teams based in Europe, Asia, Australia, and the Americas </li></ul></ul>GLOBAL COVERAGE GLOBAL PRESENCE Optimize Trade Flow and Investment Returns 0
    3. 3. Global Presence & Reach Argentina Buenos Aires Bahamas Nassau Brazil Rio de Janeiro São Paulo Canada Calgary Montreal Toronto Vancouver Cayman Islands Georgetown Chile Santiago Colombia Bogotá Mexico Mexico City Monterrey Peru Lima United States Chicago Dallas Los Angeles New York San Francisco Tampa Venezuela Caracas America s Austria Vienna Belgium Brussels Channel Islands Jersey Czech Republic Prague France Paris Germany Berlin Frankfurt Munich Greece Piraeus Ireland Dublin Italy Milan Rome Luxembourg Netherlands Amsterdam Norway Oslo Poland Warsaw Portugal Lisbon Russian Federation Moscow Spain Barcelona Bilbao Madrid Pamplona Seville Valencia Sweden Stockholm Switzerland Geneva Zurich United Kingdom Bournemouth Edinburgh Glasgow Isle of Man London Europe Egypt Cairo Nigeria Lagos South Africa Cape Town Johannesburg Pietermaritzburg Africa Australia Adelaide Brisbane Buderim Canberra Gold Coast Melbourne Perth Sydney Bahrain Manama China Beijing Hong Kong Shanghai China (cont’d) Shenzhen Tianjin India Mumbai New Delhi Indonesia Jakarta Iraq Baghdad Israel Tel Aviv Japan Osaka Tokyo Lebanon Beirut Malaysia Kuala Lumpur Labuan Selangor New Zealand Auckland Pakistan Karachi Philippines Manila Singapore South Korea Seoul Taiwan Pan Chiao City Taipei Thailand Bangkok Turkey Istanbul Uzbekistan Tashkent Vietnam Hanoi Ho Chi Minh City Sri Lanka Colombo Middle East/ Asia Pacifi c
    4. 4. Compliance Due Diligence <ul><ul><li>Compliance: Yield to, follow a wish, request, demand. </li></ul></ul><ul><ul><li>- aka; Requirements and Process </li></ul></ul><ul><ul><li>Diligence: Attentive care / Painstaking effort </li></ul></ul><ul><ul><li>- i.e. the Devil is in the Details </li></ul></ul>
    5. 5. Global Trade Risks <ul><ul><li>Payment Risks </li></ul></ul><ul><ul><li>Commercial </li></ul></ul><ul><ul><li>Political </li></ul></ul><ul><ul><li>Regulatory and Counter Party Risk </li></ul></ul><ul><ul><li>Trade Compliance </li></ul></ul><ul><ul><li>Supply Chain Parties </li></ul></ul><ul><ul><li>Reputational Risk </li></ul></ul><ul><ul><li>- Good Name and Image </li></ul></ul>
    6. 6. Methods of Payment Exporter’s uncertainty increases <ul><li>Cash in Advance </li></ul><ul><li>Letter of Credit </li></ul><ul><ul><li>Confirmed </li></ul></ul><ul><ul><li>Advised </li></ul></ul><ul><li>Documentary Collections </li></ul><ul><ul><li>D/P </li></ul></ul><ul><ul><li>D/A </li></ul></ul><ul><li>Open Account </li></ul>Importer’s uncertainty increases
    7. 7. Letters of Credit <ul><ul><li>Tried and True Payment Risk Mitigation Tool </li></ul></ul><ul><ul><li>Ship and Comply with ALL LC Conditions = Payment Assurance </li></ul></ul><ul><ul><li>Strong Widely Applied Governing Rules and Case Law </li></ul></ul><ul><ul><li>___________________________________ </li></ul></ul><ul><ul><li>Costly and Expensive Instrument ! </li></ul></ul><ul><ul><li>Onerous to Structure and Use ! </li></ul></ul>
    8. 8. Letters of Credit - Cost <ul><ul><li>Consider the Benefit to Risk Proposition: </li></ul></ul><ul><ul><li>Reputable bank promise to pay </li></ul></ul><ul><ul><li>If confirmed, a U.S. bank promise to pay </li></ul></ul><ul><ul><li>vs </li></ul></ul><ul><ul><li>Cost of loss of shipment value / margin </li></ul></ul><ul><ul><li>Plus cost of collection agencies or legal costs </li></ul></ul><ul><ul><li>Plus cost of time and productivity lost </li></ul></ul><ul><ul><li>Plus Opportunity Cost related to more productive pursuits </li></ul></ul>
    9. 9. Letters of Credit – Structure & Use <ul><li>Take Charge of the Process !! </li></ul><ul><li>Seek Assistance and Ask Questions Upfront with your bank </li></ul><ul><li>Use Letter of Credit Guide Tool - and then Template </li></ul><ul><li>Minimize / Eliminate the Complications and Balkiness </li></ul><ul><li>Optimize Cash Flow </li></ul>3
    10. 10. Guide for Requesting a Letter of Credit <ul><li>  PLEASE INSTRUCT YOUR BANK TO OPEN AN IRREVOCABLE LETTER OF CREDIT SUBJECT TO THE UNIFORM CUSTOMS AND PRACTICE FOR DOCUMENTARY CREDITS, INTERNATIONAL CHAMBER OF COMMERCE PUBLICATION 600 AND IN ACCORDANCE WITH THE FOLLOWING TERMS AND CONDITIONS: </li></ul><ul><li>  BENEFICIARY: (NAME AND ADDRESS AS YOUR INVOICE WILL BE TITLED) </li></ul><ul><li>______________________________________________________________ </li></ul><ul><li>PROFORMA INVOICE NO: _______________________ PROFORMA INV. DATE: ________ </li></ul><ul><li>YOUR ORDER NO: ______________________________ YOUR ORDER DATE: ____________ </li></ul><ul><li>AMOUNT: _________________________ CURRENCY: ____________________ </li></ul><ul><li>  MERCHANDISE DESCRIPTION (provide a brief description, omit unnecessary details) : </li></ul><ul><li>______________________________________________________________ </li></ul><ul><li>LETTER OF CREDIT SHOULD BE ADVISED THROUGH: </li></ul><ul><li>JPMORGAN CHASE BANK, N.A. </li></ul><ul><li>GLOBAL TRADE SERVICES – Mail Code: IL1-0236 </li></ul><ul><li>300 South Riverside Plaza, 2 nd Floor </li></ul><ul><li>Chicago, Illinois 60606 </li></ul><ul><li>SWIFT: CHASUS33 TELEX: ITT 420120 CMBUI </li></ul><ul><li>  </li></ul><ul><li>AVAILABILITY: L/C MUST BE AVAILABLE (BY PAYMENT, ACCEPTANCE OR NEGOTIATION AS APPLICABLE) AT THE COUNTERS OF JPMORGAN CHASE, OR BE FREELY NEGOTIABLE BY ANY BANK AND PROVIDE REIMBURSEMENT INSTRUCTIONS. </li></ul><ul><li>  PARTIAL SHIPMENTS:  ALLOWED  NOT ALLOWED </li></ul><ul><li>   </li></ul><ul><li>CONFIRMATION:  ADD CONFIRMATION  DO NOT ADD CONFIRMATION </li></ul><ul><li>If a confirmation is requested, such confirmation should be issued by JPMorgan Chase. </li></ul><ul><li>  EXPIRATION DATE: __________ OR _______ DAYS AFTER DATE OF ISSUANCE </li></ul><ul><li>  SHIPMENT DATE: __________ OR _______ DAYS AFTER DATE OF ISSUANCE </li></ul><ul><li>  TENOR OF DRAFT:  SIGHT  _____ DAYS AFTER SIGHT </li></ul><ul><li> _____ DAYS AFTER BILL OF LADING DATE </li></ul><ul><li>  </li></ul><ul><li>PRESENTATION: PRESENTATION OF DOCUMENTS WITHIN_____ DAYS AFTER SHIPPING DATE. (NOTE: PLEASE DO NOT USE THE WORD “STALE” IF YOU NEED MORE THAN 21 DAYS FOR PRESENTATION OF DOCUMENTS. REQUEST L/C TO READ: DOCUMENTS PRESENTED IN EXCESS OF 21 DAYS ARE ACCEPTABLE. </li></ul><ul><li>  CREDIT MUST BE ISSUED BY:  SWIFT  TELEX  COURIER MAIL </li></ul>3
    11. 11. Guide for Requesting a Letter of Credit <ul><li>SHIPPING TERMS:  EXW  FCA  FAS  FOB </li></ul><ul><li> (OCEAN ONLY ) </li></ul><ul><li> CFR  CIF  CPT  CIP </li></ul><ul><li> NAMED PLACE / PORT /AIRPORT ______________________________ </li></ul><ul><li>OTHER: __________________________________________________________________________________ </li></ul><ul><li>DOCUMENTS REQUIRED: </li></ul><ul><li> COMMERCIAL INVOICE_____ ORIGINAL (S)_____COPY (IES) </li></ul><ul><li> PACKING LIST _____ ORIGINAL (S)_____COPY (IES) </li></ul><ul><li> INSURANCE POLICY/CERTIFICATE COVERING ALL RISKS (SPECIFY ANY ADDITIONAL RISKS, WHICH ARE TO BE COVERED IF ANY) :________________________________________________________ </li></ul><ul><li>TRANSPORT DOCUMENTS: </li></ul><ul><li>MARINE BILL OF LADING ____“CONSIGNED TO” OR____”CONSIGNED TO THE ORDER OF”: </li></ul><ul><li>______________________________________________________________________________________ </li></ul><ul><li>   MULTIMODAL TRANSPORT DOCUMENT ____”CONSIGNED TO” OR____”CONSIGNED TO THE ORDER OF”: ______________________________________________________________________________ </li></ul><ul><li>   AIR WAYBILL CONSIGNED TO: ___________________________________________________________ </li></ul><ul><li>   TRUCK BILL OF LADING CONSIGNED TO: ______________________________________________ </li></ul><ul><li>   OTHER TRANSPORT DOCUMENTS: __________________________________________________________ </li></ul><ul><li>  TRANSPORT DOCUMENTS MUST SHOW SHIPMENT </li></ul><ul><li>FROM________________________________TO__________________________________AND BE MARKED: _____ FREIGHT COLLECT OR ________FREIGHT PREPAID AND NOTIFY (NAME AND ADDRESS): __________________________________________________________________________________________ </li></ul><ul><li>  </li></ul><ul><li>OTHER DOCUMENTS (IF ANY):__________________________________________________________________ </li></ul><ul><li>FOR TRANSFERABLE L/Cs: L/C MUST STATE THAT IT IS TRANSFERRABLE AND TRANSFERS, IF ANY ARE RESTRICTED TO THE ADVISING BANK. </li></ul><ul><li>  </li></ul><ul><li>BANK CHARGES: ISSUING BANK CHARGES ARE FOR THE ACCOUNT OF APPLICANT. BANK CHARGES OTHER THAN THOSE OF THE ISSUING BANK (ADVISING, CONFIRMATION, PAYMENT, ETC) ARE FOR THE ACCOUNT OF_______APPLICANT OR________BENEFICIARY. </li></ul><ul><li>  DISCOUNT CHARGES: IF APPLICABLE, ARE FOR THE ACCOUNT OF______APPLICANT OR______BENEFICIARY </li></ul><ul><li>  </li></ul><ul><li>OTHER SPECIAL INSTRUCTIONS: __________________________________________________________ </li></ul>3
    12. 12. Letter of Credit Checklist <ul><li>Upon receipt of the letter of credit, read it in its entirety and check the following: </li></ul><ul><li>  Buyer _________________________________ </li></ul><ul><li>Purchase Order No. _____________ or </li></ul><ul><li>Pro Forma Invoice No. ___________ dated _________________ </li></ul><ul><li>L/C No. _________________________ </li></ul><ul><li>Date Received __________________[ ] Preadvised by phone </li></ul><ul><li>  TERMS TO CHECK </li></ul><ul><li>Letter of Credit is [ ] Irrevocable [ ] Revocable </li></ul><ul><li>Letter of Credit has been [ ] Advised [ ] Confirmed </li></ul><ul><li>Beneficiary’s name and address [ ] OK [ ] NO </li></ul><ul><li>Amount sufficient to cover costs [ ] OK [ ] NO </li></ul><ul><li>Price, Quantity, good description [ ] OK [ ] NO </li></ul><ul><li>Expiry Date [ ] OK [ ] NO </li></ul><ul><li>Latest Shipment Date [ ] OK [ ] NO </li></ul><ul><li>Terms of the Draft [ ] Sight [ ] Time (Usance/terms) </li></ul><ul><li>U. S. bank charges [ ] Buyer [ ] Seller </li></ul><ul><li>  SHIPPING INSTRUCTIONS </li></ul><ul><li>Export License needed [ ] YES [ ] NO </li></ul><ul><li>Need documents legalized [ ] YES [ ] NO </li></ul><ul><li>Partial Shipments [ ] Allowed [ ] Prohibited </li></ul><ul><li>Transshipments [ ] Allowed [ ] Prohibited </li></ul><ul><li>Shipment via [ ] Ocean [ ] Air </li></ul><ul><li>Shipment terms [ ] FOB [ ] FCA [ ] FAS [ ] CFR [ ] CPT [ ] CIF [ ] CIP [ ] EXW </li></ul><ul><li>Shipment from __________________________ to ______________________________ </li></ul><ul><li>Consigned to ____________________________________________________________ </li></ul><ul><li>Shipping Marks ____________________________________________________________ </li></ul><ul><li>Bank to present documents to _________________________________________________ </li></ul><ul><li>Copy of Letter of Credit to be sent to: </li></ul><ul><li>[ ] Freight Forwarder [ ] Traffic Department </li></ul><ul><li>[ ] Credit Department [ ] Sales Department </li></ul><ul><li>  </li></ul>
    13. 13. Common LC Discrepancies <ul><li>DRAFTS </li></ul><ul><li>Drawn on the wrong party </li></ul><ul><li>Tenor (sight/time) is incorrect </li></ul><ul><li>Not properly signed and/or endorsed </li></ul><ul><li>Amount differs from what is indicated on the invoice </li></ul><ul><li>Amount differs in words and numbers </li></ul><ul><li>Letter of Credit number and issuing bank’s name are missing </li></ul><ul><li>Drawn on statement not per letter of credit </li></ul><ul><li>COMMERCIAL INVOICE </li></ul><ul><li>Description of goods not exactly as per the letter of credit </li></ul><ul><li>L/C amount exceeded. Excess quantity shipped </li></ul><ul><li>Partial shipment effected (when prohibited) </li></ul><ul><li>Shipping terms not stated, or inconsistent with the letter of credit </li></ul><ul><li>Packages listed as cartons, are described as cases on the bill of lading (inconsistency) </li></ul><ul><li>Goods shipped not required under the letter of credit (i.e. samples at no charge) </li></ul><ul><li>The amount of freight charges, if shown separately, differs from that shown on the transport document </li></ul><ul><li>Includes unauthorized charges, (i.e. handling and documentation charges in addition to FOB vessel/FCA airport terms </li></ul><ul><li>Not signed/not visaed by Chamber of Commerce or not legalized (when required). </li></ul><ul><li>MARINE BILL OF LADING </li></ul><ul><li>Unclean bill of lading presented (i.e. expressly declares a defective condition of the goods/ and or of the packaging </li></ul><ul><li>No evidence of goods actually shipped or loaded on board a named vessel (i.e. notation is not dated or signed) </li></ul><ul><li>Shipment made between ports other than those specified in the letter of credit </li></ul><ul><li>Issued or endorsed to the wrong party </li></ul><ul><li>Notify party and consignee not per letter of credit requirement </li></ul><ul><li>Bill of lading issued by forwarding agent </li></ul><ul><li>Transshipment effected (when prohibited) </li></ul><ul><li>Late Shipment </li></ul>
    14. 14. Common LC Discrepancies <ul><li>AIR WAYBILL </li></ul><ul><li>Evidences unauthorized charges to be collected from consignee contrary to shipping terms (i.e. handling, documentation, cartage, insurance) </li></ul><ul><li>Shipment made between airports other than those on the letter of credit </li></ul><ul><li>Not signed by carrier, or his agent, does not bear the reception stamp of the carrier or his agent </li></ul><ul><li>Does not include flight date and/or flight number </li></ul><ul><li>INSURANCE DOCUMENT </li></ul><ul><li>Goods are under-insured </li></ul><ul><li>An insurance certificate was presented when credit calls for an insurance policy </li></ul><ul><li>Does not identify with goods shipped (i.e. missing shipping marks, number of shipping units, weights, etc.) </li></ul><ul><li>Dated after the date of shipment, and no evidence that coverage is effective at the latest date from shipment </li></ul><ul><li>Not endorsed or countersigned </li></ul><ul><li>Not all originals presented or accounted for </li></ul><ul><li>Insurance risks covered not as specified on the letter of credit </li></ul><ul><li>GENERAL </li></ul><ul><li>Late presentation </li></ul><ul><li>Letter of Credit expired </li></ul><ul><li>Partial shipment effected when the letter of credit prohibits it </li></ul><ul><li>Documents inconsistent with one another (i.e. shipping marks, weights, quantities differ) </li></ul><ul><li>Beneficiary’s name/address not per the letter of credit </li></ul><ul><li>Applicant’s name/address not per the letter of credit </li></ul><ul><li>Absence of documents called for in the letter of credit </li></ul><ul><li>Absence of signatures on documents, when required </li></ul>
    15. 15. Incoterms 2000 Beneficiary (Seller) Applicant (Buyer) EXW FCA FAS FOB DAF DES DEQ DDU DDP CFR CIF CPT CIP Dock of Exportation Dock of Importation Transportation to Dock Transportation to Buyer Import Duty Loading onto Vessel Ocean Freight Marine Insurance Unloading Charges Loading onto Vessel Ocean Freight Marine Insurance Unloading Charges
    16. 16. Documentary Collection <ul><ul><li>Defined as the process by which a bank known as the Remitting Bank , acting upon the instructions of an exporter, presents documents associated with an export transaction to the importer. </li></ul></ul><ul><ul><li>This is done with the assistance of a second bank, known as the Collecting Bank . Documents typically consist of one financial instrument (Bill of Exchange or Draft) and multiple commercial (invoice, bill of lading, etc) documents. </li></ul></ul><ul><ul><li>Banks involved have NO OBLIGATION to pay, however… </li></ul></ul><ul><ul><li>Bank acting as collection agent can be effective </li></ul></ul><ul><ul><li>Protesting a defaulted draft can have significant legal impact </li></ul></ul><ul><ul><li>Signed Draft enhances legal position vs. general creditors </li></ul></ul>
    17. 17. Credit Insurance Due Diligence <ul><li>A trade credit insurance policy generally differs from most types of property/casualty policies in that it requires ongoing maintenance. So, unfortunately, you can not just file it away and only refer to it when a loss occurs. Here are some of the typical requirements and responsibilities you need to be aware of in order to make certain you are in compliance with your specific policy. </li></ul><ul><li>Policy Declarations - Be certain you know and understand these features of your policy: </li></ul><ul><li> Policy inception date and expiration date </li></ul><ul><li> Policy limit – maximum amount insurer will pay out in claims per policy period </li></ul><ul><li> Coinsurance – percentage of each loss that you retain/insurer doesn’t cover </li></ul><ul><li>Deductible – annual first loss dollar amount, usually per policy period </li></ul><ul><li>Premium – amount due, when, and how calculated </li></ul><ul><li> Specific products and/or services to be insured </li></ul><ul><li>Maximum payment terms allowed </li></ul><ul><li>Any specific exclusions (countries, payment terms, buyers) </li></ul><ul><li>Country waiting period – time frame before claims may be filed or paid </li></ul><ul><li>Claim filing window – earliest and latest dates claims may be filed </li></ul><ul><li>Buyer and Credit Limit Approvals – Know how approvals are made and who grants them: </li></ul><ul><li> Who approves buyers and limits, you or the insurance company? </li></ul><ul><li> Credit information is required for approvals </li></ul><ul><li> Credit limit approved for each buyer intended for insurance </li></ul><ul><li> Credit limit still operative – has not been reduced or cancelled </li></ul><ul><li> Credit limit sufficient to cover highest amount of outstanding invoices </li></ul><ul><li> Payment terms same or less than policy maximum; any special conditions </li></ul><ul><li>Invoices are sent to buyer’s legal name and address specified on approval </li></ul><ul><li>Reporting Requirements – Know what you have to do and when: </li></ul><ul><li>Report past due invoices, usually at 60 days overdue for amounts over $10,000; continue reporting until invoice is paid or a claim is filed; if none, report “none” </li></ul><ul><li> Notify insurer immediately if buyer asks for an extension of past due invoice </li></ul><ul><li>Notify insurer immediately (within 10 days of receipt) of any buyer bankruptcy or preference payment notices </li></ul>
    18. 18. Credit Insurance Due Diligence <ul><li>Annual Policy Renewal – Plan to begin renewal at least 2 months before your policy expires: </li></ul><ul><li>Review buyer credit limits; indicate any that need increases, reductions, or cancellation </li></ul><ul><li> Pay invoice for additional premium due, if applicable </li></ul><ul><li>Complete and submit renewal application and requested information </li></ul><ul><li>Review new policy quote </li></ul><ul><li>If acceptable, acknowledge and sign quotation; pay new premium invoice </li></ul><ul><li>Review all policy documents, endorsements and policy text </li></ul><ul><li>  </li></ul><ul><li>Claim Filing Documents </li></ul><ul><li>Keep copies of correspondence with buyer concerning past due invoices and/or product disputes or warranty issues </li></ul><ul><li>Complete insurer’s Proof of Loss form </li></ul><ul><li>Typical documents required: Purchase order/proforma invoice, commercial invoice, evidence of shipment to buyer, buyer’s acknowledgment of receipt of product in good condition, written demand for payment of past due invoice and any other collection efforts </li></ul><ul><li>MISTAKES TO AVOID! </li></ul><ul><li>Unfortunately, some claims are denied because the insurance policyholder failed to do something required under the Policy.  Please help us to help you avoid these mistakes.  Here are four common reasons that multi-buyer insurance claims are not paid. </li></ul><ul><li>LATE CLAIM FILINGS – In order to be paid in full under the Policy, you must file your claim on time.  Know your claim filing deadline! </li></ul><ul><li>LACK OF PROOF OF EXPORT OR SHIPMENT – You must have shipping documents that show that the items you sold were shipped to the buyer who ordered them. </li></ul><ul><li>VIOLATING BUYER CREDIT TERMS – Be certain you did not extend payment terms longer than your approval states or failed to follow any special conditions approved for that buyer. </li></ul><ul><li>FAILURE TO STOP SHIPPING – Do not continue shipping new orders to buyer when: payments are over 60 or 90 days past due, credit limit has been reduced or cancelled, files bankruptcy, or other conditions as stated in your policy. </li></ul><ul><li>Please remember, you must read and understand your entire Policy – and especially read the endorsements !  In order to get your claim paid, there are typically other conditions in the Policy that must be satisfied in addition to those mentioned here; these are just a few of the items that may cause denials of your claim.  When in doubt, ask! </li></ul>
    19. 19. Global Trade Compliance Worksheet <ul><li>JPMORGAN REF NO: ______________________ ITEM NO: ________________________ </li></ul><ul><li>AMOUNT : ______________________ DATE: ________________________ </li></ul><ul><li>REVIEWED BY : ______________________ SIGNATURE: ________________________ </li></ul><ul><li>(Print Name) (Sign Name) </li></ul><ul><li>I HAVE REVIEWED THIS TRANSACTION IN ACCORDANCE WITH THE GLOBAL TRADE SERVICES AML POLICY AND PROCEDURES, GTS OFAC/BIS POLICY AND PROCEDURES, AND GTS ANTI-BOYCOTT POLICY AND PROCEDURES LOCATED IN THE QMS DATABASE. </li></ul><ul><li>OFAC Review </li></ul><ul><li>List all names (parties including locations, vessels, etc.) or attach a screen print of names scanned and initial applicable box (es) below: </li></ul><ul><li>  </li></ul><ul><li>______________________________________________________________________________________________________ </li></ul><ul><li>□ OFAC checked electronically □OFAC checked manually, no match found. □ Screen print attached. </li></ul><ul><li>□ OFAC checked manually and escalated to Trade Risk Management/local compliance officer. </li></ul><ul><li>Note: If referred via the GTS Trade Compliance Mailbox attach a copy of the response to this form. </li></ul><ul><li>Anti-Boycott Review (Initial applicable box): </li></ul><ul><li>□ Reviewed for Boycott language and no Boycott language found. </li></ul><ul><li>□ Reviewed for Boycott language and escalated to GTS Risk Management/local compliance officer. </li></ul><ul><li>Note : If referred via the GTS Trade Compliance Mailbox attached a copy of the response to this form. </li></ul><ul><li>Anti-Money Laundering and Suspicious Activity Review (Initial applicable box): </li></ul><ul><li>(See reverse side for red flags and referral guidelines) </li></ul><ul><li>□ Reviewed for suspicious activity and no referral required. </li></ul><ul><li>□ Reviewed suspicious activity and escalated to Supervisor, Trade Risk Management or local compliance officer. </li></ul><ul><li>Note: If referred via the GTS Trade Compliance Mailbox attached a copy of the response to this form. </li></ul><ul><li>  </li></ul><ul><li>Supervisor and Trade Risk Management Use Only: </li></ul><ul><li>  ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------- </li></ul><ul><li>  </li></ul><ul><li>Name of Supervisor or Trade Risk Manager: _______________________ Date: __________________ </li></ul>
    20. 20. “ Red Flags” Reference Guide <ul><li>All Transactions: </li></ul><ul><li>Refer the following concerns to Trade Risk Management or local compliance officer: </li></ul><ul><li>The structure of the transaction is overly complex. </li></ul><ul><li>Transaction does not &quot;make sense&quot; or looks too good to be true. </li></ul><ul><li>The apparent misuse of the trade product being requested. </li></ul><ul><li>Request to pay third party. </li></ul><ul><li>Insufficient, false or suspicious information provided by customer. </li></ul><ul><li>Refer the following concerns to your supervisor and escalate to Trade Risk Management, or local compliance officer if resolution cannot be reached: </li></ul><ul><li>The transaction is an offshore shipment (e.g. buyer/seller located in USA, while movement of goods occurred offshore of USA). </li></ul><ul><li>The amount appears to be extraordinarily large (as determined by the nature of the transaction and customer). </li></ul><ul><li>Inquiries are numerous, or there is a high of a sense of urgency for the transaction. </li></ul><ul><li>Customer appears inexperienced yet confident. </li></ul><ul><li>Transaction or parties in high-risk jurisdiction. </li></ul><ul><li>Sudden change in customer’s pattern of trade transactions. </li></ul><ul><li>Commercial and Standby Letters of Credit: </li></ul><ul><li>Refer the following concerns to Trade Risk Management or local compliance officer: </li></ul><ul><li>The merchandise or service provided is inconsistent with the nature of the customer's business. </li></ul><ul><li>The LC has been amended excessively, making the transaction overly complex. </li></ul><ul><li>Transaction is designed to evade home country legal restrictions. </li></ul><ul><li>The LC contains non-standard clauses, or phrases such as: </li></ul><ul><li>Request to issue a &quot;ready, willing, and able&quot; message, or a &quot;Letter of Interest&quot;; LC is &quot;unconditional, divisible, and assignable”; transactions requiring “Proof of Product”; Funds are &quot;good, clean and cleared, of non-criminal origin&quot;; bearer instrument Letter of Credit; transferable and assignable without utilization; “Top 50 Prime International Banks” or similar language. </li></ul><ul><li>The merchandise description indicates equipment for military or police organizations of foreign governments, weapons, ammunition, controlled substances, chemical mixtures, classified defense articles or technical data. Such merchandise may require an export license. </li></ul><ul><li>Documents evidencing shipment locations or goods inconsistent with LC and/or customers usual and customary business. </li></ul><ul><li>Over or under pricing. </li></ul><ul><li>A drawing is received under Standby Letter of Credit shortly after issuance. </li></ul><ul><li>Middleman does not add value to the transaction. </li></ul>
    21. 21. “ Red Flags” Reference Guide <ul><li>Refer the following concerns to your supervisor and escalate to Trade Risk Management, or local compliance officer if resolution cannot be reached: </li></ul><ul><li>The LC to be advised should state the full name and address of the beneficiary, (not a P.O. Box). The LC does not state full merchandise description, only shows purchase order numbers or non-specific descriptions such as &quot;general merchandise&quot; or “ spare parts”. </li></ul><ul><li>The LC does not require a transport document or a forwarders cargo receipt. </li></ul><ul><li>The transport document does not match the transaction. </li></ul><ul><li>Applicant-issued documents called for in the letter of credit. </li></ul><ul><li>Transport document does not match the transaction. or consigned to a party other than applicant or issuing bank. </li></ul><ul><li>Beneficiary or Applicant refuses to provide documents to prove shipment of goods. </li></ul><ul><li>LC received as unauthenticated SWIFT or untested telex message. </li></ul>
    22. 22. Safe or Sorry ? <ul><ul><li>Export compliance will continue to remain one of the manufacturing world’s greatest challenges. </li></ul></ul><ul><ul><li>When things go wrong, the first and most problematic question asked by regulatory officials is “do you have a file describing the due diligence you performed before the export? </li></ul></ul><ul><ul><li>If the answer is no , the next steps can be expensive, time consuming, and reputation damaging </li></ul></ul><ul><ul><li>Key parts of a Compliance Program to avoid compliance failures ? </li></ul></ul>
    23. 23. 12 Steps to Effective Compliance Prog. <ul><ul><ul><li>OBTAIN C-LEVEL MANAGEMENT AND BOARD COMMITMENT </li></ul></ul></ul><ul><ul><ul><li>ASSESS CURRENT PROCESS / PERFORM GAP ANALYSIS </li></ul></ul></ul><ul><ul><ul><li>KNOW / MAINTAIN LIST OF EMBARGOED COUNTRIES </li></ul></ul></ul><ul><ul><ul><li>SCREEN NAMES AND ADDRESSES (ELECTRONICALLY) </li></ul></ul></ul><ul><ul><ul><li>ESTABLISH ON-GOING SCREENING PROCESS </li></ul></ul></ul><ul><ul><ul><li>PERFORM END-USE AND DIVERSION RISK SCREENING </li></ul></ul></ul>
    24. 24. 12 Steps to Effective Compliance Prog. <ul><ul><li>JURISDICTION & CLASSIFICATION INFO. FROM SUPPLIERS </li></ul></ul><ul><ul><li>PERFORM LICENSE DETERMINATION </li></ul></ul><ul><ul><li>DOCUMENT PROCEDURES FOR EACH BUSINESS FUNCTION </li></ul></ul><ul><ul><li>TRAIN, TRAIN !, TRAIN !! </li></ul></ul><ul><ul><li>FOLLOW ISO 9000 AND SARBANES-OXLEY STANDARDS </li></ul></ul><ul><ul><li>PERFORM AUDITS OF PROCEDURES EVERY YEAR </li></ul></ul>
    25. 25. Trade Management Consulting <ul><ul><li>HELP! </li></ul></ul><ul><ul><li>USDOC – BIS (Bureau of Industry and Security) </li></ul></ul><ul><ul><li>Independent Trade Consulting Firms </li></ul></ul><ul><ul><li>Captive Trade Management Practices of Large Service Firms </li></ul></ul><ul><ul><li>Law Firms </li></ul></ul><ul><ul><li>Accounting Firms </li></ul></ul><ul><ul><li>Freight Forwarders </li></ul></ul><ul><ul><li>Scale, Volume, and Complexity of your company’s Trade Flows and Trade Lanes will determine best fit </li></ul></ul>
    26. 26. ON DEMAND Trade Consulting <ul><ul><ul><li>On Demand Consulting Service is a subscription based service with a minimum commitment of 80 hours of export or import service over 1 year. </li></ul></ul></ul><ul><ul><ul><li>Designed to give companies the flexibility to engage – quickly – trade management consulting expertise to address a wide range of export, import compliance and/or supply chain issues </li></ul></ul></ul><ul><ul><ul><li>Service augments a company’s current resources and helps companies understand the export or import requirements as they apply to their business, and also can supplement the company’s management of their compliance operations on a day-to-day basis </li></ul></ul></ul><ul><ul><ul><li>Can be used to get started or as an on-going expertise resource </li></ul></ul></ul><ul><ul><ul><li> </li></ul></ul></ul>
    27. 27. Standard “On Demand” Operational Compliance Services <ul><li>Imports </li></ul><ul><ul><li>HTSUS Classification </li></ul></ul><ul><ul><li>Country of Origin Determination </li></ul></ul><ul><ul><ul><li>CBP marking requirements </li></ul></ul></ul><ul><ul><ul><li>End Use / End User Review </li></ul></ul></ul><ul><ul><li>Free Trade Agreement Management </li></ul></ul><ul><ul><li>Valuation </li></ul></ul><ul><ul><ul><li>Accuracy of declarations </li></ul></ul></ul><ul><ul><ul><li>Additions and deductions </li></ul></ul></ul><ul><ul><ul><li>Filing of adjustments with CBP </li></ul></ul></ul><ul><ul><li>Broker Management </li></ul></ul><ul><ul><ul><li>Audit of import documentation and broker invoices </li></ul></ul></ul><ul><ul><ul><li>Performance measurements </li></ul></ul></ul><ul><li>Exports </li></ul><ul><li>Jurisdiction Determination </li></ul><ul><ul><li>Department of Commerce (EAR) or </li></ul></ul><ul><ul><li>Department of State (ITAR) </li></ul></ul><ul><li>Export Classification </li></ul><ul><ul><li>ECCN/USML </li></ul></ul><ul><ul><li>HTS </li></ul></ul><ul><li>Export Order Review </li></ul><ul><ul><li>Restricted Party Screening (RPS) and resolution </li></ul></ul><ul><ul><li>License Determination </li></ul></ul><ul><ul><li>End Use / End User Review </li></ul></ul><ul><li>Auditing of Export Documentatio n </li></ul><ul><ul><ul><li>And other trade compliance related services and support as requested by clients (e.g. development of import/export compliance manuals, desk-level work instructions, delivery of training/education, etc.) </li></ul></ul></ul>
    28. 28. Thank you! <ul><ul><ul><li>Questions? </li></ul></ul></ul><ul><li>Tom Gaglione </li></ul><ul><li>Global Trade Services </li></ul><ul><li>414-977-6733 </li></ul><ul><li>[email_address] </li></ul>