Export Trade Finance & Insurance SeminarTrade ConnectGlobal Trade Cycle Solutions“Financing the Global Supply Chain”1Presented by:Caroline Brown, First Vice PresidentInternational Trade Finance, Western MarketMay 8 2013
Objective Market Dynamics Overview of Global Trade Cycle Tools & Methods of Payment Closing Comments
Market DynamicsU.S. Exports and Imports – Increase in 2012In 2012, U.S. exports and imports of goods were thehighest on record -- U.S. exports increased 4% andU.S. imports increased 3%.Source: International Trade AdministrationNote: Import data is not available by stateSource: International Trade Administration, TradeStats ExpressGlobal: Trade Statistics - U.S.Comerica’s Footprint -- 37% of Total ExportsIn 2012, Comerica’s footprint represented 37% of totalU.S. exports. TX is the #1 export market, followed byCA, #2 (11% of total exports); FL, #6; MI, #8 and AZ,#25.#2#25#1#8#6
Global: Trade Statistics - CaliforniaCalifornia – Exports IncreaseExports from California experienced an increase (2%) in2012, going from $159 billion in 2011 to $162 billion in2012.Michigan Exports2000-2009Value in thousands ($USD)05,000,00010,000,00015,000,00020,000,00025,000,00030,000,00035,000,00040,000,00045,000,00050,000,0002000 2001 2002 2003 2004 2005 2006 2007 2008 2009ExportsSource: International Trade Administration, TradeStats ExpressNote: Import data is not available by stateSource: International Trade Administration, TradeStats ExpressNote: Import data is not available by stateExports – Top Trading PartnersThe top 10 trading partners for California are:(2012 figures in thousands, $USD) Mexico 26,319,672 Canada 17,295,931 China 13,977,175 Japan 13,059,903 South Korea 8,238,081 Hong Kong 7,827,087 Taiwan 6,334,103 Germany 4,985,576 Netherlands 4,551,259 United Kingdom 4,343,909Market Dynamics
Market DynamicsCompany Global Trends Primary Goals• To optimize working capital• To mitigate key risks• To reduce costs• To simplify the trade process
Market DynamicsCompetition: How We Differentiate Ourselves [cont.] Leading Letter of Credit Provider within U.S. Comerica ranks #7among the top U.S. commercial banks, in letter of credit outstandings.1 Leading Lender for Ex-Im Bank Working Capital Guarantee Program.Comerica ranks #4 among the top lenders nationwide.2 We hold the“Super” Delegated Authority Lender and “Fast Track” Lender designations. Strong Credit Ratings. Comerica has strong credit ratings -- required forthe acceptance of a Standby Letter of Credit. Present Ratings -- “A2” byMoody’s Investors Service, “A” by Standard & Poor’s and “A” by FitchRatings. Foreign Correspondent Bank Network. Comerica has coveragethroughout Asia, Europe, Latin America, the Middle East and Africa.1 Source: Documentary Credit World (FDIC Statistics on Banking), 3rd Quarter 20122 Source: Ex-Im Bank, FY 2012
9IMPORTER (BUYER) BENEFITS EXPORTER (SUPPLIER) BENEFITS Optimize working capital Improve cash flow forecasts Take advantage of supplier discount terms Improve supplier relations Increase Days Payables Outstanding (DPO) Optimize use of credit capacity Reduce costs Interest rate and capital arbitrage Reduce working capital needs by using betterinventory control and cash flow management Improve sales forecasts Lower financing rates on required working capital Reduce Days Sales Outstanding (DSO) Manage buyer credit risk more effectively Reduce costs Interest rate and capital arbitrageBenefitsEffective management of the global trade cycle providesnumerous benefits:
Tools & Methods of Payment11There are four primary methods of payment for global transactions, withthe level of risk varying for each.
Overview – Global Trade Cycle12Types of RiskThe evaluation of risk in global commerce plays a major role indetermining the method of payment to be used for settlementbetween buyer and supplier.RISK5 EXAMPLESCountry / Political Risk Economic instability, government restrictions on payment, war, embargoCommercial Risk Insolvency, unscrupulous buyers, fraudCurrency Risk Convertibility of currency, exchange controlsTransportation Risk Timeliness of delivery, piracy, pilferage, unions, loss of productDocumentary Risk Wrong documents, improperly prepared documents, incompletedocumentsForeign Bank Risk Insolvency, creditworthinessProduct Risk Quality, quantity
Tools & Methods of Payment13Global Trade Cycle SolutionsLetters of Credit:Commercial Letters of CreditStandby Letters of CreditDocumentary CollectionsFinancing:Direct Bank FinancingBankers’ Acceptances (BA)Trade AcceptancesEx-Im Bank Working Capital Guarantee Program(WCGP)Private InsurancePrivate Export Funding Corporation (PEFCO)Online Solutions:Comerica GlobalTRADE WebComerica TM Connect WebComerica eFX
Tools & Methods of Payment14Letters of CreditSOLUTION DESCRIPTIONCommercial Letters of Credit • Irrevocable undertaking by a bank on behalf of its customer in favor of a designatedbeneficiary, under which payment is effected only if the beneficiary presentsdocuments in accordance with the letter of credit terms and conditions.• Often referred to as Import Letters of Credit and Export Letters of Credit or TradeLetters of Credit.• Confirmed Export Letters of Credit provide additional protection to exporters.(Note: Bank deals only with documents, not goods.)Standby Letters of Credit • Performance Standby Letter of Credit: Irrevocable undertaking by a bank to makepayment to a designated beneficiary in the event that its customer fails to perform anon-financial contractual obligation (e.g., cover performance ofcontractors/suppliers, in lieu of a bid or performance bond).• Financial Standby Letter of Credit: Irrevocable undertaking by a bank to makepayment to a designated beneficiary in the event that its customer fails to fulfill afinancial contractual obligation (e.g., support advance payment/payment guarantee,in lieu of cash or security deposit, support IRB/EDC).
Tools & Methods of Payment15Documentary CollectionsSOLUTION DESCRIPTIONDocumentary Collections • Buyer: Bank receives documents conveying title to goods from foreign bank anddelivers documents to its customer in exchange for payment or promise to pay ata future date.• Supplier: Bank delivers documents conveying title to goods to foreign buyer’sbank for delivery to its customer in exchange for payment or promise to pay at afuture date.
Tools & Methods of Payment16SOLUTION DESCRIPTIONEx-Im Bank WorkingCapital GuaranteeProgram (WCGP)• Working capital loans backed by Ex-Im Bank guarantee (90% of loan amount, includingprincipal and interest). Enables U.S. exporters -- large and small -- to facilitate the exportof goods and services.• Comerica holds:• “Super” Delegated Authority lender designation (allowing us to commit credit facilitiesup to $10 million per borrower, without pre-approval from Ex-Im Bank); and• “Fast Track” designation (allowing us to commit credit facilities greater than $10 millionand up to $25 million per borrower, with expedited Ex-Im Bank approval).SBA Export WorkingCapital Program (EWCP)• Working capital loans for small businesses backed by SBA guarantee (guaranteesrepayment of up to $1.5 million or 90% of loan amount, whichever is less). Similar to theEx-Im Bank WCGP, however, no U.S. content or military/defense product and servicerestrictions.Financing
17Thank YouCaroline BrownFirst Vice PresidentTrade Finance OfficerLong Beach, CA562-590-2525CVBrown@Comerica.com