Third in the series of handbooks typically used for graduate work in International Trade and Finance.

1. With permission from the
Publisher, we are able to share the
entire text from the chapter I
authored (chapter 22) in the
"Handbook of International Credit
Management" Third Edition
Edited by Brian W. Clarke
(The chapter appears on pages 290 through 302 in the Handbook - spelling is as edited in the UK)
22
EXPORT FINANCE TECHNIQUES
IN THE USA
Albert A. Cannistra, CCE
Is virtual reality on a trajectory to becoming the real world? One only needs to view the exponential growth of the Internet
or World Wide Web. The Web is rewriting the way we live, communicate and conduct our affairs of daily living. Just a few
years ago it was a relatively new phenomenon and now it is a constellation of linked computers circumnavigating the
globe.
With Web enabled technology and communication, entire business processes are becoming dynamic. In the
world of commerce, what worked yesterday may not necessarily work tomorrow. New business models are being
created everyday, and we are rapidly becoming an economy based on innovation.
The world has survived Y2K and is now able to address new tactical initiatives. It is a time to move away from
flat mode concepts and embrace change. With the advent of worldwide information, quickly shared, there is a new
generation that will no longer think border specific.
Perhaps we have experienced the last global frontier but, with certainty not beset without its problems.
Computer viruses have already created havoc around the world and are becoming more sophisticated at each new turn.
Simple viruses have evolved into polymorphic worms and, even given the best efforts of anti-virus technicians, have the
ability to interrupt information flow.
The entire playing field has changed and, to a great extent, in favor of the customer. With unprecedented
access to information, customer loyalty is unlikely to remain static. The ability to communicate, shop and purchase within
a world market will continue to exert pressure on price and service. The Web is the leveler which allows smaller
businesses to compete on a global scale. This is extremely significant if one considers that the American Small Business

2. Administration reports that over one-half of the US gross product is shared amongst 23 million businesses employing half
the workforce.
B2B (Business to Business) electronic transactions are forecasted to reach almost 3 trillion dollars by 2004.
Companies are expected to buy one-third of goods via the Web including on-line marketplace, direct sales through
corporate sites and EDI. Driven by efficiencies and cost savings, the Web enhanced synchronization and optimization of
the supply chain “order to cash process” will bring new value to the world market.
Preserving and acquiring new customers will no longer be dependent on bricks and mortar. Web enabled E-
solutions will continue to drive businesses into cyberspace. Collaboration between business partners, integration of
people and technology will diminish time and distance constraints. Borders and time zones are becoming meaningless.
We are living in a real-time global environment.
The technology race will not go away nor diminish its velocity. Already, we are moving rapidly toward the
“Wireless Web” enabling communications anywhere at anytime. ISP’s (Internet Service Providers) are now seeing the
onset of ASP’s (Application Service Providers) which bring new value to business processes by using Web enabled
software and reducing or eliminating investment and management costs associated with the traditional internal Computer-
Information Systems department. As this segment develops further, smaller companies will have access to the most
current technology making them even more competitive with the multi-national industry giants.
How does all of this information apply to international trade finance? Quite simply, those engaged in the
business must look to the strategic longer term, not with abandon of fundamentals, but with an open mind and a vision
synchronized to what we currently call the virtual world.
Any apparent duplication with parts of Chapter 20 and other chapters is deliberate in that, although US multinationals
operating in Europe and elsewhere may find similar techniques and options, they are often applied in subtly different
ways.
SHORT-TERM FINANCING
There are essentially five ways to collect payment for goods and/or services sold to customers abroad. Each method,
once beyond prepayment, carries its own degree of risk for the exporter. Variations exist within the five categories, yet
upon closer examination each variation can be classified within the basic framework.
Cash in advance, letter of credit, documentary sight draft, documentary time or dated draft and open
account are the five basics. The appropriate choice is determined by the buyer's creditworthiness, the ability of the
exporter to finance, market conditions - including political conditions and hard currency availability, the competitive
situation and the importance of the market to the sellers goals. Variations may involve third parties, guarantees,
government programs and insurance providers. In many cases, banks play an indispensable role in conducting an
international transaction.
COMMERCIAL BANKS
Commercial banks have long been the providers of many corporate financial services. Large European banks had an
advantage over American banks in that their American counterparts were restricted by regulations limiting their ability to
expand beyond their state borders.
The reversal of this policy, culminating in passage of the Gramm-Leach-Bliley Act of 1999 by the US Congress
will allow American banks to realize synergistic savings by consolidation of administrative functions. The banking
industry will continue to consolidate into fewer, but more powerful institutions better suited to serve an increasingly
diverse customer base and better able to compete in a global environment. As the banks increase their arsenal of
financial products, the former tendency to specialize in local industry should give way to a broadened outreach for
international opportunities.
LETTERS OF CREDIT
Modern day letters of credit can be traced back to the early 1800's; their beginnings are traceable back to banks in the
UK. After the First World War, this activity became popular with European and American banks and has evolved into a
sophisticated, controlled process which is described in considerable detail in Chapter 16.
A letter of credit is a commitment by a bank to pay a seller a certain sum of money at a future date, provided
the seller is in compliance with the specified terms of the credit. The letter of credit can be payable on presentation
or, in the case of a time (acceptance) letter of credit, payable forward a specified number of days typically calculated
from shipment or presentation date. The methodology provides a compromise between the buyer, whose interest is
protected by not advancing payment until documentation evidencing shipment or performance is delivered, and the
seller, who is interested in being guaranteed payment upon providing proof of compliance. Depending upon the
needs of the shipper, a time letter of credit may be discounted by the bank for immediate funds or the proceeds of the

3. letter of credit may be assigned to a third party. The rules governing letters of credit are not codified US law (i.e. not
governed by the Uniform Commercial Code), but when cited on the letter of credit become binding on all parties.
There are several types of letters of credit. A revocable letter of credit is one that can be revoked by the
issuing bank at any time prior to presentation. This particular type of credit cannot be relied upon for guaranteed
payment and is quite rare. An irrevocable letter of credit is one that cannot be cancelled prior to its expiration date
except with the consent of all parties involved. In this case, the beneficiary relies upon the creditworthiness of the
issuing bank and its promise to pay in the specified currency on the date of maturity. A confirmed irrevocable letter of
credit has the guarantee of a secondary bank, usually in the supplier's own country and it is this bank which becomes
the supplier’s ultimate source of payment.
Before accepting a letter of credit, its terms and conditions should be reviewed by the beneficiary to determine
his ability to comply with all terms and conditions. If there are conditions which cannot be met, the buyer should be
requested to instruct the issuing bank to issue an amendment making the letter of credit acceptable to all parties.
Discrepancies will cause a letter of credit to go unpaid pending the buyer’s subsequent approval and instructions to the
issuing bank and, without that approval, the credit may go unpaid indefinitely.
With the advent and increasing use of the Internet, several initiatives are underway to automate the letter of
credit process. It is likely that these initiatives will result, among other things, in a significant reduction or the complete
elimination of physical documents, which will be replaced by electronic confirmations of shipment, inspection, etc.
REVOLVING LETTERS OF CREDIT
Revolving letters of credit may be used when business transactions are expected to be conducted on a regular
repeating basis, such as an agreed upon monthly purchase. Rather than opening multiple credits to cover each
shipment, a revolving letter of credit with multiple drawings over a specified period of time allows the beneficiary to
draw up to a designated amount at specific intervals and self-renews for the next period.
A revolving letter of credit can be cumulative or non-cumulative. If cumulative, amounts not drawn in one
period carry over to the next and subsequent periods accumulating value for possible future drawings. If
non-cumulative, amounts not drawn are lost.
STAND-BY LETTERS OF CREDIT
A stand-by letter of credit is one in which a bank guarantees payment up to a specified amount, for a certain period of
time, to a specified beneficiary, provided that the beneficiary presents required documentation within the terms of the
stand-by. Documentation can be as simple as a draft or a signed letter from the beneficiary stating that payment was
not made or performance completed as agreed. It is a letter of credit which typically is not expected to be drawn upon.
This type of letter of credit allows for the extension of an open account type arrangement from the supplier to
the customer with the assumption that the buyer will make good on his promise to pay, but assures the supplier that
in the event of a default by the customer, the supplier will receive payment from the issuing bank. A stand-by letter of
credit is also used in a manner similar to a surety bond or guarantee, where the bank assures a buyer of performance
by the seller with monies available to the buyer in the event of default by the seller.
BACK TO BACK LETTERS OF CREDIT
Most banks no longer accede to customers’ requests for back to back letters of credit. Under a back to back
arrangement, the original beneficiary of a documentary letter of credit would request its bank to issue a second letter of
credit on the strength of the first. This would typically occur in situations where the beneficiary of the first letter of credit
was acting as a middleman between the buyer (issuer of the first letter of credit) and the actual manufacturer of the
merchandise. Most often, a request for a back to back letter of credit occurs because the middleman has insufficient
credit lines with his bank to issue a new letter of credit in favor of the manufacturer. In these circumstances the
middleman’s bank would sometimes agree to consider the first letter of credit as “collateral” against which it would issue
the second letter of credit, without the need to establish a formal credit line for the middleman.
Most banks have recognized that they face the risk of having to pay out under the second letter of credit issued
by them while being unable to collect under the first and have therefore discontinued issuance of back to back letters of
credit. A suitable alternative in some circumstances may be a “transferable” letter of credit, where the first beneficiary is
authorized by the terms of the letter of credit to request a full or partial transfer of the letter of credit in favor of a third
party (typically the manufacturer).
GUARANTEES
BANK GUARANTEES
Bank Guarantees are not synonymous with letters of credit. In some countries, guarantees are a means of assuring
payment to the supplier on behalf of the purchaser. The bank issuing the guarantee will hold adequate security, but
will apply outstanding guarantees to the importer’s credit ceiling, thus reducing overdraft and other facilities. These

4. guarantees are not without internal control as banks classify the guarantees as actual liabilities rather than potential
liabilities and are restricted by reserve requirements imposed by the local Central Bank. Not all banks may be
acceptable to the exporter.
In the US, Bank Guarantees were generally not used, standby letters of credit being the more popular
alternative. US legislation does not actually preclude US banks from issuing “first demand” guarantees subject to the
URDG (Uniform Rules for Demand Guarantees). As a practical matter, US banks have elected to issue instruments
subject to UCP (Uniform Customs and Practices for Documentary Credits) and increasingly, are switching to ISP
(International Standby Practices) which offers them more protection. ISP use is spreading both in the US and
abroad. Reference is made to the ISP site for more detailed information.
www.ISP98.com
PERSONAL GUARANTEE OR CORPORATE GUARANTEE
Not unlike bank guarantees, personal or corporate guarantees are the assurance of a third party that a debt will be
paid. This type of guarantee may be used when an American individual or corporation has a vested interest in a
foreign company and wishes to induce the extension of credit facilities by a supplier based upon its own strength.
The guarantee is, however, only as sound as the individual or corporation that stands behind it.
DOCUMENTARY COLLECTIONS
Documentary collections (see Chapter 15) are the written confirmation of arrangements between two international
trading parties in which shipping and other documents are presented by the exporter through a third party, usually a
commercial bank, to the importer in exchange for payment or the promise to pay. If payment is expected on
presentation, this term is considered "at sight." The promise to pay at a future specified time takes the form of a
"time draft" or "dated draft" and assumes the risk that the importer will pay as agreed at a later date. The documents
accompanying these collections are evidence of performance by the exporter and the presentation of this evidence
enables the collection of funds by the bank.
Documentary collections (not to be confused with documentary letters of credit) are not without risks. There is
no question that they provide more security than strict open account, but they do not provide the same third party
guarantee given by a letter of credit. There is the possibility that the buyer will not take possession of the goods and
abandon the transaction either because of financial or market changes. If this occurs, the shipper faces the possibility of
having to quickly find another buyer or having to pay return freight, in either case accompanied by demurrage charges or
even the possibility of total loss of the entire shipment if it were sold for salvage value.
Negotiating documentary collections with a commercial bank is a means for an exporter to obtain immediate
cash. An assumption is made that the bill of exchange is worth its face value (self-liquidating) when payment specified is
due and the bank will advance funds less certain discounting charges. It is important to recognize that this negotiation is
with recourse and, in the event of the buyer’s default, the bank will expect to be reimbursed by the seller with interest on
the funds advanced.
The buying discount rate is the rate at which the accepting bank discounts its bankers' acceptances or the
effective interest charge for funds paid in advance of collectability. Rates will fluctuate on a daily basis and will vary
according to market conditions, creditworthiness of the buyer and other factors as determined by the accepting bank's
treasury department.
CLEAN COLLECTIONS
Clean collections work in the same manner except that there is no accompanying evidence of performance. This type of
collection involves the bank collecting funds from importers solely on presentation of the exporter's bill of exchange, the
shipping and other documents having gone direct to the importer. Promissory notes, or other forms of financial receipts
can be used as clean collections. Clean collections can be used for a variety of reasons such as cash management
(allowing the exporter to know when payment should take place) or to add payment discipline to an open account
customer who should want to avoid any adverse commercial publicity surrounding dishonored bills of exchange. They
may also be a requirement in some countries that use clean drafts as a method of controlling foreign exchange through
a central bank.
EXIMBANK
Eximbank (Export-Import Bank of the United States) is an agency of the US government. Its function is to assist
exporters of US goods or services in arranging necessary financing. Among the programs available are a broad range
of credit insurance policies, guarantees of medium (1-7 years) and long term (8-12 years) commercial loans and
Eximbank direct loans to foreign buyers of goods or services originating from US sources. The bank’s headquarters are
located in Washington, DC.

5. The cost of Eximbank support will vary depending upon repayment terms, the country and the type of
customer; financing may be structured as the buyers or suppliers credit. www.exim.gov
EXPORT FINANCE AND CONFIRMING HOUSES
There are few confirming houses operating today, most of the business now having been absorbed by commercial
banks. This method of financing was popular in the UK where its original purpose was locating exporters for overseas
buyers and providing a guarantee of payment against clean documents.
The financing offered by the confirming house allowed the exporter to be paid in 30 days, at a discounted rate,
with the buyer paying the confirming house at some future specified date. In its original concept, the confirming house
brought unsolicited orders to the seller; in its modern variation, sellers tend to seek out the ‘bank’ export finance house
for facilities available in a particular market.
FACTORING
Factoring is another means whereby an exporter can turn his invoices into immediate cash funds. Funds can be
obtained without recourse in approved markets and with credit approved customers. Invoices are sold at a discount to a
factoring house which will also provide comprehensive ledger and collection service.
This means of financing is usually attractive to smaller and medium-sized companies that have no credit
administrative infrastructure of their own. Larger companies, staffed with proper levels of expertise, tend to avoid this
alternative as being too costly, preferring to conduct the function internally at a fraction of the cost.
EXPORT CREDIT INSURANCE
The purpose of credit insurance is to avoid unexpected losses and to guarantee the selling company that it will be paid
for goods shipped to and/or services performed for commercial buyers who default on payment obligations (see Chapter
10). Exporters can obtain coverage for both political and commercial risks and the insurance policies can be used to
enhance trade finance facilities.
Studies indicate that fewer losses occur on new accounts than with old established customers. An account
that may have been good for a decade or two causes the loss because of deterioration of its business, a change in focus
or a change in the controlling interest. Any of these occurrences may go undetected especially if the account pays its
bills to your company on a timely basis right up to the end.
In international trade, use of credit insurance may cut costs by removing the need for letters of credit,
enabling the seller to be more competitive and, perhaps, more aggressive in certain markets. Another reason for
considering use of credit insurance is the increase in the collateral value of your own accounts receivable to lenders.
It allows the reduction of bad debt reserve to a negotiated deductible level, allows better budgeting by capping losses
and provides an outsource credit support service.
CAPTIVE INSURANCE COMPANIES FOR EXPORT RISKS
This concept is best suited to the larger, multi-divisional company that already has an established captive for other
insurance needs. The costs of operating solely for the purpose of export insurance would usually be prohibitive.
Self-insurance makes a company less vulnerable to the cyclical movements of the credit insurance market,
but imposes many other considerations which must be carefully evaluated prior to this undertaking, not the least of
which is re-insurance in the outside insurance market and the consideration of whole-turnover or catastrophe forms of
coverage.
Other considerations before embarking in this arena are the need for administrative and operational
management of the captive, assessment of an acceptable level of losses that the company can endure, procedures
to be followed and standards of acceptable risks to be taken at the divisional level and a means to monitor
compliance. The establishment of terms, conditions and pricing to the divisions by the captive must also be
considered. Assistance from the outside insurance market should not be overlooked.
FORFAITING
Literally meaning ‘without recourse’, forfaiting is a form of medium-term export financing that had its beginning in
Europe in the 1950’s. The technique evolved with specialists in the former West Germany, Switzerland and Austria
who were dealing with East European paper. Today, London is a leading center for forfaiting transactions. Forfaiting
is currently used in the US, albeit not being as popular as other methods of financing. An exporter has the option to
seek out sources in any major US financial center or with a London based specialist. (See also Chapters 9 and 20.)
This method of financing is suggested when there is a need to go beyond 90-180 day facilities, the exporting
company is unwilling or unable to provide financing themselves and when direct bank financing may be too
cumbersome. It is a means whereby the seller may offer extremely competitive terms of sale to the buyer without the
added risks. Forfaiting normally involves the issuance of a bill of exchange or a promissory note which, after acceptance

6. by the buyer, is avalized (guaranteed) by a major bank, then discounted by a forfaiting bank for immediate payment to
the exporter and subsequently held to maturity or resold in the `a forfait market.
The forfait market is estimated to be US$ 30 billion in terms of outstandings. The US portion is estimated to
account for US$ 5-6 billion. Compared to other finance options, forfaiting is simple and flexible, but it is also more
expensive. Unlike current Eximbank programs, there is no US content requirement for goods sold.
PROMISSORY NOTES
Provided the seller has the means, short term financing may be accomplished by having the customer sign a promissory
note and obtain the collateral signature of the principals or the corporations which own the assets pledged to guarantee
the payment of the transaction.
When using this form of financing, compliance with local requirements of negotiable instruments, specific
language, interest rates, place of payment and currency of payment are essential and legal advice is recommended. In
the event that formal collection of the note is required, documents evidencing existence, authority and legal standing of
both debtor and creditor may be required. Promissory notes bearing the guarantee of a bank (also called an “aval”)
usually provide enhanced security and may be saleable without recourse prior to maturity (see also Bank Guarantees
above).
COUNTERTRADE
Common forms of countertrade include barter, counterpurchase and compensation arrangements. This methodology, in
various forms, is among the most commonly employed non-conventional means of international financing and is most
commonly requested when the buyer’s country is experiencing a shortage of foreign currency reserves. Typically, the
buyer requires the seller to accept full or partial payment in the form of specific goods or to find another buyer for those
goods. This method of financing is well suited to transactions in East-West trade and with developing countries in Asia,
Africa and Latin America.
Barter involves the exchange of goods for goods of comparable value without the transfer of money. Most
often, these are negotiated one-time transactions that are consummated in short time periods - usually completed in less
than 24 months. The goods to be exchanged and the quantities are always specified at the time the contract is signed.
Counterpurchase is similar in that it also typically involves a one-time transaction in the short term. The
difference is that counterpurchase involves two linked contracts in which the seller agrees to deliver goods to the buyer,
accept goods in return as payment from the buyer and, in turn, resells those goods to a second buyer for payment in the
form of currency.
Compensation arrangements are typically much larger value deals, involving large-scale projects extending
over a long period of time. This type of arrangement is best suited to the delivery of technology or equipment for a
specified project accompanied by a reciprocal agreement to purchase specific goods or services resulting from that
project.
Countertrade is covered in detail in Chapter 17.
US GOVERNMENT AND LOCAL STATE GOVERNMENT
Businesses should look to their own states for export financing assistance. Various programs exist which can
supplement the offering at the federal level. Some programs provide the majority of the financing with a portion
supported by a commercial bank. Other states may offer working capital loan guarantees, sometimes only in
conjunction with an export sale backed by an irrevocable letter of credit or export insurance.
The US government maintains export assistance centers in many US cities; in addition, several states
maintain offices in major cities around the world which can provide local and regional support and advice.
Most export finance schemes with different degrees of government involvement cover medium-term project
financing, but some short-term financing might also be available.
MEDIUM AND LONGER TERM FINANCING
EXIMBANK
Eximbank (Export-Import Bank of the United States) is mentioned earlier in this chapter in the section dealing with short
term financing. However, it would be remiss to fail to mention this resource once again for the longer term transaction.
For more specific detail, please refer to the earlier paragraphs and Eximbank’s web site. www.exim.gov

7. OVERSEAS PRIVATE INVESTMENT CORPORATION
OPIC is a US government agency whose function is to promote US private investment in some 140 developing
countries. Investors can look here for assistance in new ventures or the expansion of existing ones; assistance may
be in the form of political risk insurance, direct loans or loan guarantees. The political coverage protects up to 90
percent against expropriation, nationalization or confiscation by a foreign government, war or insurrection and
currency inconvertibility; the investor will be at risk for the remaining 10 percent. OPIC does not support projects that
could result in the loss of US jobs, adversely affect the environment or contribute to workers rights violations.
Small business projects eligible for OPIC support include: new investments, privatizations, expansions,
modernizations. formation of a new branch office, sales office, or service center, warehousing or small assembly
operations, contracting to provide construction, advisory or technical assistance services and exporting equipment.
www.opic.gov
COMMODITY CREDIT CORPORATION
CCC is a wholly owned US Government corporation within USDA (United States Department of Agriculture) created to
stabilize, support, protect farm income and prices and to help maintain balanced and adequate supplies of agricultural
commodities. CCC provides the funding for farm programs and for the purchase, storage and disposal of agricultural
commodities. The CCC provides support programs for such commodities as wheat, feed grains, cotton, rice and
peanuts. The CCC acquires the commodities, which it sells in the US and abroad; transfers to other government
agencies; donates through federal, state and private agencies for welfare purposes; and barters to fill US
government needs abroad.
The support operations are handled primarily through loan, purchase, and payment programs. The
CCC has an authorized capital stock of $100 million held by the US and may borrow up to $30 billion for its programs.
www.fas.usda.gov/info/factsheets/gsmprog.html
PRIVATE EXPORT FUNDING CORPORATION
PEFCO was established in 1970 with the support of the United States Department of the Treasury and the Export-
Import Bank of the United States (Eximbank) to assist in financing the export of capital goods and services of United
States origin through the mobilization of private capital supplementing the financing already available through
Eximbank, commercial banks and other lending institutions. PEFCO shareowners consist of commercial banks,
including many major US banks involved in the financing of international trade, industrial companies involved in
exporting US goods and services and financial service companies.
PEFCO’s principal function is to make long term, fixed rate loans to foreign importers; a secondary function
is to provide lenders with liquidity support through the purchase without recourse of short, medium and long-term
loans guaranteed or insured by Eximbank. PEFCO does not evaluate credit risks, economic conditions in foreign
countries or other factors affecting collectibility of its loans. The decision to participate in the financing of a loan is
made principally upon the presence of the Eximbank guarantee or insurance policy. www.pefco.com
THE WORLD BANK
Founded in 1944, the World Bank Group consists of five closely associated institutions: the International Bank for
Reconstruction and Development (IBRD); International Development Association (IDA), International Finance
Corporation (IFC); Multilateral Investment Guarantee Agency (MIGA); and the International Center for settlement of
Investment Disputes (ICSID).
The purpose of the group is to channel money from developed countries into developing nations for productive
purposes with a goal toward raising the standard of living in those nations. Focus is on high-priority economic projects,
which have basic financial soundness. It is a requirement that procurement of goods and services be made on an
international competitive basis in order to accomplish maximum benefit. www.worldbank.org
THE INTERNATIONAL BANK FOR RECONSTRUCTION AND DEVELOPMENT
The IBRD provides loans and development assistance to middle income countries and creditworthy poorer countries.
Voting power is linked to members’ capital subscriptions, which in turn are based on each country’s relative economic
strength. The IBRD obtains most of its funds through the sale of bonds in international capital markets.

8. THE INTERNATIONAL DEVELOPMENT ASSOCIATION
IDA plays a key role in supporting the Bank’s poverty reduction mission. IDA assistance is focused on the poorest
countries, to which it provides interest-free loans and other services. IDA depends on contributions from its wealthier
member countries-including some developing countries-for most of its financial resources.
THE INTERNATIONAL FINANCE CORPORATION
IFC promotes growth in the developing world by financing private sector
investments and providing technical assistance and advice to governments and businesses. In partnership with
private investors, the IFC provides both loan and equity finance for business ventures in developing countries.
THE MULTILATERAL INVESTMENT GUARANTEE AGENCY
MIGA helps encourage foreign investment in developing countries by providing guarantees to foreign investors
against loss caused by non-commercial risks. MIGA also provides technical assistance to help countries disseminate
information on investment opportunities.
THE INTERNATIONAL CENTRE FOR SETTLEMENT OF INVESTMENT DISPUTES
ICSID provides facilities for the settlement – by conciliation or arbitration – of investment disputes between foreign
investors and their host countries.
THE INTERNATIONAL MONETARY FUND
The IMF is an international organization of 182 member countries, established to promote international monetary
cooperation, exchange stability and orderly exchange arrangements; to foster economic growth and high levels of
employment; to provide temporary financial assistance to countries under adequate safeguards to help ease balance
of payments adjustment. www.imf.org
ALTERNATIVE FINANCING RESOURCES
An American exporter should not overlook the possibility of financing made available through organizations in the
buyer’s country, geographic region or those external to but supporting development in the buyer’s country. Some of
these resources follow but further research may produce additional opportunities
THE EUROPEAN BANK FOR RECONSTRUCTION AND DEVELOPMENT
EBRD, based in London, was established in 1991. Its purpose is to facilitate the transition toward open market
economies and to promote enterprise in Central and Eastern Europe. Financing is provided for private sector
activities, restructuring and privatization as well as the infrastructure that supports these activities. www.ebrd.com
EUROPEAN INVESTMENT BANK
EIB, based in Brussels, was established by the Treaty of Rome and is the first of the regional development banks. Its
purpose is to promote the growth of the European Union, assisting in funding projects in underdeveloped regions of the
EU, modernizing existing facilities and contributing to development of the EU that has no other means of financing
available. The EIB in an effort to achieve stability and peace also supports projects in Africa, Asia, the Pacific,
Caribbean and Latin America. www.eib.org
INTER-AMERICAN DEVELOPMENT BANK
IDB, based in Washington, DC, was established in 1959 for the purpose of improving economic and social development
in member countries. It is the largest source of external financing for Latin America and the Caribbean. The bank has 46
members, including the US and other countries outside the region. The bank's programs lean toward the least
developed countries, lending to both public and private entities through the administration of three different funds.
Interest rates and terms vary from market to concessionary based on need. www.iadb.org
AFRICAN DEVELOPMENT BANK
ADB, African Development Bank Group is a multinational development bank supported by 77 nations (member
countries) from Africa, North and South America, Europe and Asia. Headquartered in Abidjan, Cote d’ Ivoire, the
Bank Group consists of three institutions: the African Development Bank (ADB), the African Development Fund (ADF)

9. and the Nigerian Trust Fund (NTF). Established in 1964, its mission is to promote economic and social development
through loans, equity investments and technical assistance. www.afdb.org
ASIAN DEVELOPMENT BANK
ADB, based in Manila, The Philippines, was established in 1966, for the purpose of promoting economic development
and cooperation in developing Asian countries. It administers funds offering both conventional and concessional loans
giving special attention to the needs of smaller, less developed countries. www.adb.org
ARBITRATION IN RESOLVING INTERNATIONAL DISPUTES
No matter what financing technique may be used, occasional disputes are inevitable. Arbitration provides a fast,
efficient, fair, private and final process involving the submission of a dispute to a neutral arbitrator who makes a decision
subsequent to a hearing with representation from both sides. Arbitration can be effected by including the proper clause
in the negotiated contract, with specific designation of the arbitration organization which will settle any dispute, or, after
the fact, provided that both disputing parties agree. (See also Chapter 24.)
Arbitration awards are enforceable throughout the world. The Convention on the Recognition and Enforcement
of Foreign Arbitral Awards (commonly known as the New York Convention)
(sice.oas.org/DISPUTE/comarb/uncitral/nycon_e.asp) recognizes the enforceability of arbitration awards. Many
countries have signed the treaty and agreed to enforce awards issued by signatory countries. Other conventions have
similar enforceability and should not be overlooked. These are the Inter-American Convention on International
Commercial Arbitration (www.oas.org/juridico/english/treaties/b-35.htm) and the Convention on the Settlement of
Investment Disputes Between States and Nationals of Others States (www.internationaladr.com/tc11.htm). In fact,
arbitration awards may be more easily recognized and enforceable than judgments issued by foreign judicial courts.
Arbitration, as opposed to litigation promotes the development and continuation of good relations by reducing
adversarial posturing of the parties involved. Usually more economical, informal and private, it involves arbitrators with
expertise, tends to reduce claimants with unreasonable positions and eliminates unpredictable local judicial decisions.
There are, however, certain limitations of which one must be aware; the discovery process common to American
litigation is ordinarily not available; the decision is often not accompanied by a written lengthy opinion explaining the
award and the award is final - there is no appeal process.
Major international arbitration organizations include The London Court of International Arbitration, The Zurich
Chamber of Commerce, Equilaw's International Arbitration Forum, The Court of Arbitration of the International Chamber
of Commerce, The Hamburg Chamber of Commerce, The Japan Commercial Arbitration Association, The Arbitration
Institute of the Stockholm Chamber of Commerce, The Netherlands Arbitration Institute and the Korean Commercial
Arbitration Association.
SOURCES FOR BUSINESS OPPORTUNITIES AND REGULATORY ADVICE
THE UNITED STATES DEPARTMENT OF COMMERCE
The USDC can offer assistance on financial issues, licensing, etc. Pre-taped replies to specific licensing questions and
connection to a live consultant are available at (202)-482-2753. Trade America offers trade leads, referrals and other
information at (405)-624-3319. The Small Business Foundation of America offers referrals to trade specialist regionally
at (800)-243-7332. The Canadian government offers the Business Opportunities Sourcing System, questions answered
at (613)-954-5031. And finally, World Trade Center databases, ‘TradeLinks’ and ‘Network’, connect 186 centers in 75
countries, information available at (212)-435-2552. www.osec.doc.gov
THE NATIONAL COUNCIL ON INTERNATIONAL TRADE DEVELOPMENT
The National Council on International Trade Development is a nonprofit membership organization supported by
American industry dedicated to providing direct expertise on a wide range of international topics. NCITD’s work
encompasses the full breadth of export and import regulations, the Customs Modernization Act and the North American
Free Trade Agreement to name but a few.
Look to NCITD for comprehensive coverage of export and import regulations and a voice in
government/international regulatory policy. It is a support network of experienced professionals, along with large, small
and medium sized firms pursuing common goals and partnering with government compliance programs. www.ncitd.org
ORGANIZATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT

10. The OECD groups 29 member countries in an organization that, most importantly, provides governments a setting in
which to discuss, develop and perfect economic and social policy. Parts of the OECD Secretariat collect data, monitor
trends, analyze and forecast economic developments, while others research social changes or evolving patterns in
trade, environment, agriculture, technology, taxation and more. www.oecd.org/about/general/index.htm
The US Council for International Business through the Business and Industry Advisory Committee
(BIAC), directly communicates business positions to the OECD in such areas trade, economic and financial
policies, multinational corporate investment, development of information and telecommunications policy, taxation
practices and environmental regulation. www.uscib.org/global/biac.htm
US CHAMBERS OF COMMERCE
US Chamber of Commerce is the world’s largest business federation, representing nearly three million companies,
3,000 state and local chambers, 850 business associations and 87 American Chambers of Commerce abroad. The
Chamber was founded in 1912 and is headquartered directly in front of the White House in Washington, D.C. Among
its’ priorities is to expand American exports and increase public support for free trade.
www.uschamber.com/about/aboutorg.html
AMERICAN CHAMBERS OF COMMERCE ABROAD
American Chambers of Commerce Abroad (AmChams) are voluntary associations of American enterprise and
individuals doing business in a particular country as well as firms and individuals of that country who operate in the
United States. Formed to advance the interests of American business overseas, AmChams make available publications
and services and sponsor a variety of business development programs. They may also prove very useful in
recommending local assistance to aid in debt collection from a customer who does not pay his obligations. Currently, 86
AmChams in 76 countries are affiliated with the US Chamber of Commerce; a listing by country is available at this Web
site. www.uschamber.com/intl/amcham.htm
INTERNATIONAL CHAMBER OF COMMERCE
ICC is a world business organization representing business interest from more than 130 countries. It was founded in
1919 and is located in Paris.
The purpose of the ICC is to promote international trade, investment and the market economy system. It
makes rules that govern the conduct of business across borders. The ICC establishes the business stance on broad
issues of trade and investment, including competition law, the environment, financial services, information technologies,
intellectual property, marketing ethics, taxation, telecommunications and transportation among others.
www.uscib.org/global/icc.htm
THE UNITED STATES COUNCIL FOR INTERNATIONAL BUSINESS
USCIB was founded in 1945 to promote an open system of world trade, investment, finance and is the US affiliate of the
International Chamber of Commerce, the Business and Industry Advisory Committee to the OECD and the International
Organization of Employers. It facilitates international trade through harmonization of commercial practices and
advances the interests of American business officially representing US business positions on foreign business
communities and with their governments. www.uscib.org/whoweare/whowe.htm
RECOMMENDED READING
st
Gilpan, Robert & Jean (2000) Challenge Of Global Capitalism: The World Economy In The 21 Century.
Hinkelman & Thurmond (1998) Short Course In International Payments.
Omae, Kenichi (1999) The Borderless World: Power And Strategy In The Interlinked Economy.
Rockwell, Browning J. (1998) Using The Web To Compete In A Global Marketplace.
SPECIAL APPRECIATION AND GRATITUDE
No greater resource and collaborator of information could have possibly provided more accurate banking information
and updates on the current offerings made available by the agencies mentioned in this chapter. My sincerest thanks to
Richard Waple for his expert guidance and recommendations in this endeavor.
Richard Waple is Vice President, Trade Finance Department, Bank of Montreal – Harris Trust and Savings
Bank – Chicago, Illinois USA
In addition, a special thank you is extended to Melanie Cadoree, my research assistant at WORLD KITCHEN,
Inc. Melanie’s particular Internet talent has made available the Web sites mentioned in this chapter.

11. About the Publisher - Who is Gower / Ashgate:
Ashgate is a leading independent press dedicated to publishing the finest academic research - Each year
Ashgate publishes more than 700 new books across fifteen subject areas in the Social Sciences and
Humanities, representing the best academic research from around the world.
Gower and Lund Humphries are part of the Ashgate Publishing Group One of the most trusted brands in
business and management publishing for over forty years.
Specialist publishers of research and scholarship - Books published within the Ashgate program are
subject to peer review by recognized authorities in the field.
Ashgate Publishing Group is international - Offices in the UK, North America and Australasia
Publisher: Gower / Ashgate Offices: Farnham, Surrey UK
http://ashgate.com/
On the Publisher's site:
http://www.ashgate.com/default.aspx?page=1751&calctitle=1&pageSubject=1002&title_id=2984&edition_
id=4712
Also available at Amazon at the time this slide was prepared.
Some comments tagged to the publication:
Probably the most comprehensive handbook on international trade credit and financial management in a
single, substantial volume, this book will be of equal value to the large multinational and the small
exporting firm. It covers all aspects of export credit management as well as the management of overseas
subsidiary companies’ credit operations through a series of inter-linked chapters written by 25 experts in
the international field.
(I wrote this contribution to the third edition in 2000 - it was my vision of where we were headed at
the time... I was also privileged to author a chapter in the previous edition of this handbook - proceeds
from both chapters were donated to UNICEF at my request)