Author: Shannon Manders

Expert analysis: How trading companies can circumvent protectionist policies

From Global Trade Review (GTR) | By Shannon Manders

At a time of rising protectionism, there are ways in which companies engaged in global trade can legally bypass increasingly restrictive policies. In fact, for over 100 years, international traders have been following legitimate rules to obtain favourable tariff treatment. With a slow-burning trade war now fuelling anti-globalisation sentiment, GTR speaks to Robert Silverman, partner at law firm Grunfeld Desiderio Lebowitz Silverman & Klestadt and a member of IR Global, about the opportunities available in global customs and trade laws to minimise the impact of new tariffs and quotas. The escalating tariff war is already having a very tangible impact on businesses and financiers around the world. Results of an HSBC Navigator survey, which incorporates the views of more than 6,000 businesses across 26 countries and was published in Q1, found that 61% of companies think that governments are becoming more protective of their domestic economies. The survey reported that, as a result, companies are focusing on trading with partners within their own geographic region rather than exploring opportunities further afield. But there are “self-help” techniques that companies can adopt to ensure ongoing profitability in trade, says Silverman. In this exclusive Q&A, he explains how firms can mitigate trade barriers via commercial contracts and take advantage of free trade zones when agreeing contracts, and why it’s important to understanding import/export regulations across jurisdictions.   GTR: Is the world economy becoming more protectionist? Silverman: Not really. Sovereign nations have always protected certain ‘sweetheart’ business sectors with high duty rates or quotas to permit those industries to flourish without interference from foreign producers. Over the years we have seen a trend for countries to enter into free trade agreements to reduce customs duties on products that have not been blessed with protection. In the past year, however, the US administration has imposed additional customs duties and quotas to rectify what it claims to be unfair trade practices by Chinese exporters and flooded steel and aluminium markets from most of the US’ trading partners. President Donald Trump’s theory is that additional duties or quotas can be used to boost US production of certain products, and eliminate unfair behaviour by its trading partners. In addition, the US department of commerce has created a domestic producer-friendly market which has encouraged a plethora of antidumping duty (ADD) and countervailing duty (CVD) cases which have also taken a large bite out of the profits of importers of certain products. We don’t see this type of activity by other countries, except that they are passing retaliatory tariffs to strike back at the ever-growing list of US-protected companies.   GTR: Is there anything that an international trader can do to avoid these new protectionist policies? Silverman: In addition to the slow moving political route or filing claims at the World Trade Organisation, international companies can use the opportunities available in the customs and trade laws to minimise the impact of these new tariffs and quotas. Remember, most of the world works with the same tariff classification and valuation codes, so the rules are available to everyone. We are suggesting relying on old chestnuts to provide self-help:
  1. Structuring products to obtain favourable classifications. All products have to be classified under a tariff provision upon entry. Each tariff provision has its own duty rate. A favourable classification may result in products that are duty free, quota free, outside the scope of some recently imposed exorbitant duty rate, or outside the scope of some huge ADD or CVD rates (which can sometimes be over 100%).
  2. Structuring purchase transactions to lower dutiable value. That is, if you are stuck with a high duty rate, you can try to lower dutiable value by unbundling any additional non-dutiable elements included in the purchase price. Or you can try to have dutiable value be based on the factory price rather than the higher trading company price. Alternatively, you can have the manufacturer act as the importer of record to get lower values. Most duty rates are expressed as a percentage of value so lower values result in the payment of less duties.
  3. Change country of origin to achieve favourable duty treatment. Obviously you can always source goods from a country that can receive favourable duty rates or that makes them eligible for a duty-free programme. For example, if there is an ADD case on tyres from China, then sourcing the goods from Vietnam will do the trick. Alternatively, you can shift some of the manufacturing processes from China to Vietnam so that the country of origin will be considered to be Vietnam. Shifting some of the manufacturing processes can be tricky and must meet the import country origin rules. In the US and China, for example, the test is called ‘substantial transformation’, but the application of the test is totally different in both countries.
  GTR: Are these manoeuvres legal? Silverman: Absolutely. These programmes have been used by international traders for over 100 years to obtain favourable tariff treatment. Pearl necklaces have been unstrung before importation and re-strung after importation. Passenger cars have been imported at very low duty rates and transformed after entry into trucks which would otherwise have been subjected to duty rates 10 times higher. The customs services around the world may not like it, but if the rules are followed, and proper declarations are made, there is nothing they can do about it. And the same tactics work for avoiding ADD or CVD assessments.   GTR: What other programmes are available to minimise duties? Silverman: Different countries permit importers to use bonded warehouses to store goods until they are needed, without the payment of any duties or fees. Foreign trade zones can be used in the country of importation to create products that can be imported at significantly lower duty rates. In the US, there is a new programme where goods sold in e-commerce can be imported totally duty free. There are always things to do if you are willing to invest the time to search for them.   GTR: Do these measures come with any risks? Silverman: Yes. If the programme is not set up correctly or the proper disclosures are not made, then the importer can be subject to audits, investigations, civil and even criminal penalties. These are not programmes that you can do by intuition or by ‘figuring them out’. You need to work with a trade professional to make the magic happen. There are a number of attorneys, accountants and consultants who work with international traders to take advantage of the hidden gems that the customs and trade laws have to offer. The post Expert analysis: How trading companies can circumvent protectionist policies appeared first on Global Trade Review (GTR).

Nafta’s renegotiation in nine questions

From Global Trade Review (GTR) | By Shannon Manders

The US and Mexico last week bilaterally agreed the basis of a renegotiated North American Free Trade Agreement (Nafta), putting pressure on the third Nafta member, Canada, to follow suit. Talks between Washington and Ottawa failed to reach agreement by Friday’s US-imposed deadline, but will continue this week. Paul Maidment, director of analysis and managing editor of Oxford Analytica, a global advisory and analysis firm, answers nine critical questions about the process thus far, and what we can expect going forward.   GTR: In the bilateral agreement with the US, what has Mexico given up? Maidment: Mexico has conceded significant ground over the auto sector, notably over the rules of origin. The current Nafta agreement calls for vehicles to contain 62.5% North America-made content. While the US wanted to raise this to 85%, Mexico has agreed to 75%. Around 30% of cars exported by Mexico do not meet the new figure, but producers will have a transition period of up to five years to reach it. Vehicles that fail to reach the limit will still be exportable to the US, but subject to a 2.5% tariff. What will have a more significant impact on the Mexican auto industry is the new requirement that 40%-45% of automobiles be manufactured in countries where workers earn at least US$16 per hour – a stipulation that will only affect Mexican factories. The average hourly wage in Mexico’s auto industry is estimated to be US$7-US$8 (compared with US$29 in the US). The extent to which that requirement will affect Mexican producers has yet to become apparent, but it is likely to hinder the manufacturing of auto parts. Another important concession by Mexico – and one that is particularly likely to frustrate Canadian negotiators – was the cancellation of Nafta’s independent dispute resolution mechanism. Trade disputes between member countries are now to be resolved in US courts. This will be a huge sticking point for Canada, and may force Ottawa into an unwanted choice between making diary concessions and saving the dispute resolution mechanism. Mexico also failed to get the increase in Nafta visas for Mexican nationals it sought.   GTR: What has the US conceded? Maidment: Washington rowed back from its initial demand for a ‘sunset clause’ that would see the agreement expire automatically after five years unless all parties confirmed its continuation. Both Mexico and Canada oppose such a provision due to the uncertainty it would create among investors. Instead, the accord will be valid for 16 years, with reviews taking place every six years from 2024. US negotiators also dropped their demand that Mexico could only export specific agricultural products at certain times of the year. Agrarian trade will remain free of any tariffs or subsidies. US aims to curtail exports of textiles were conceded, but in the pharmaceuticals sector, 10-year patent protections were introduced for drug manufacturers. The absence of them from the original Nafta agreement was a particular pain point for US pharmaceutical companies, and now likely to become one, not so much for Mexico, but for Canadian pharma.   GTR: What are Mexico’s priorities in the final renegotiation of Nafta? Maidment: First, to protect Nafta in the face of President Donald Trump’s belligerent rhetoric by ensuring new arrangements that would provide certainty, and to end the threat that Trump might either impose stiff tariffs on Mexican exports (notably automobiles and agricultural products) or withdraw the US from Nafta by executive order. Second, to have the renegotiation – with or without Canada – concluded before the president-elect Andres Manuel Lopez Obrador (AMLO) takes office on December 1.   GTR: What are the advantages for AMLO if Nafta is renegotiated before he takes office? Maidment: The proposed six-year term agreed with Mexico dovetails with both the duration of the fixed one-term Mexican presidency and with what would be the end of a second Trump term. This will let AMLO simultaneously endorse the deal and distance himself from it. It would also take one highly contentious issue in US-Mexican relations off the table, and in that sense provide some economic certainty, if not necessarily stability, for Mexico. AMLO has made several early appointments to his team designed to demonstrate its economic competence to ease concerns about his populist left-wing economic policies more generally, which suggests he wants to send signals of economic stability to international investors. One such nomination was that of Jesus Seade, a respected economist and trade official, as his top Nafta negotiator and who participated in the latest negotiations.   GTR: Who will ultimately decide if Nafta is revived or laid to rest? Maidment: Trump can end Nafta by pulling the US out by executive order, but he has to get the approval of the US congress for amendments to it. If ultimately there is a three-way accord on a reformed Nafta, rather than new bilateral deals, the legislatures of all three signatory countries would have to approve that. The US house of representatives, as a general matter, has to ratify all trade agreements that it has delegated the US president to negotiate. In this particular case, congress gave Trump the authority to pursue a renegotiated trade agreement with two other countries, not one. Legally, therefore, congress cannot at this point consider voting on a bilateral US-Mexico deal that excludes Canada.   GTR: What is the risk of Trump pulling out of Nafta? Maidment: That would be the nuclear option, but the risk that Nafta collapses remains a severe risk. If Trump issued an executive order ending US participation, it would likely be challenged in the US courts, and damage to the economies of all three countries would probably be felt before legal cases were resolved. Mexico’s President Enrique Pena Nieto will hail the avoidance of such a scenario as a political victory, citing economic certainty as the primary justification for his government’s actions, which at least in some respects will look like a significant climbdown for Mexico.   GTR: Where does Canada now stand? Maidment: The Trump administration’s tactic was to peel off Mexico with a separate agreement and then use that to press Canada to fall in line. Washington has much more economic leverage over Mexico City than it does over Ottawa. Friday’s deadline for Canada to join was self-imposed by the Trump administration. It was not met, but negotiations continue. Trump needs the deal settled quickly for domestic political reasons, notably the midterm US congressional elections in November, which will be a test of ‘Trumpism’, even though the president will not be on any ballot. Trump wants to be able to campaign for his fellow Republicans as having kept another of his pre-election promises. It should also be remembered that if the Democrats retake control of the house in the midterms, that could alter the political arithmetic in the US congress on Nafta.   GTR: How much domestic US political support is there for Canada and Mexico’s positions? Maidment: The US-Canada trade relationship is stronger and more deeply intertwined with the overall US-Canada relationship than the US-Mexican one is. This is true not only at the federal level but also at the state, city and corporate levels in the US. It is thus one that has a lot more political protection from US legislators, governors and business groups than Mexico can rely on. Mexico’s position is further complicated by the immigration issue, which is at least as important for Trump’s political base if not more than ‘unfair trade’.   GTR: Will a renegotiated Nafta cut the US trade deficit? Maidment: Not materially and not immediately, given the extended transition period for the auto sector changes. However, at this point, these renegotiations are about securing political wins for Trump ahead of the midterms. The post Nafta’s renegotiation in nine questions appeared first on Global Trade Review (GTR).

Innovative structure for Tanzanian project to “kick off” surety in Africa’s credit insurance market

From Global Trade Review (GTR) | By Shannon Manders

Broking firm Marsh is providing what it calls a “sophisticated” surety structure for the construction of a Tanzanian railway line, which it says could be attractive to banks and contractors on other African projects. Marsh collaborated with the African Trade Insurance Agency (ATI) on the US$95mn unfunded bank surety solution, which is being provided to Turkish construction company Yapi Merkezi. It guarantees Yapi Merkezi’s contractual performance-related obligations and the repayment of advance payments for the construction of a new high-speed electric railway in Tanzania. The solution is backed by a consortium of reinsurers: TrustRe (lead reinsurer), BarentsRe, AfricaRe and ZepRe. The structure works as follows: Yapi Merkezi, which was awarded the contract by the Tanzanian state-run railway firm Tanzania Railways Corporation, was obligated to use local Tanzanian banks to comply with project requirements. As this was not an option immediately available to the contractor, the Tanzanian government initially accepted Turkish bank guarantees as an interim solution. Meanwhile, Marsh – which has a long-standing relationship with Yapi – together with ATI as the risk sharer, arranged what they refer to as an “innovative syndication structure”, which enabled two local Tanzanian banks, CRDB Bank and NMB Bank, to issue guarantees to replace the Turkish bank guarantees. “What we’ve done has allowed two domestic banks to issue guarantees with pretty big limits – certainly much bigger than they would have been able to do otherwise – and we’ve backed those guarantees up with insurance,” explains John Lentaigne, chief underwriting officer at ATI. “If Yapi defaults and there’s a call on the guarantees, the local banks would pay, but they would have recourse through ATI.” Crucially, the structure has also allowed Yapi to free up its domestic Turkish banking lines, releasing its overall risk limit and ultimately enabling the company to take on more project risk in Africa.   Bringing surety to Africa Both ATI and Marsh agree that with this solution, contractors working in Africa now have a new way of getting local banks to offer guarantees for their projects. “Having guarantors involved is critical for contractors to be able to do big ticket projects,” says Lentaigne. Although surety solutions are well-established in more advanced markets, such as the US (where they originated during the Great Depression in the 1930s) and Europe, they have been less present in Africa. But this may be set to change. According to Manuel Lopez, who set up and runs Marsh’s global surety bank syndication desk, the solution is both applicable and scalable, and “something that will work in other countries”. Lopez tells GTR that the feedback from African banks about adopting the solution has been positive. “Local and regional banks have limited risk appetite, and that’s what we think is a big opportunity: to fill this gap with sophisticated insurance solutions,” he says. Lentaigne agrees that this is something ATI can help to develop further. “We think there is appetite for it: this will kick things off.” Nevertheless, the complexities of local regulatory environments mean that the solution is not one that can simply be duplicated across different countries. “It’s not a copy and paste solution, especially when it comes to the guarantee markets,” says Lopez. “Everybody is initially suspicious of these solutions, and it takes some time to make them comfortable.” The solution in Tanzania was three months in the making. To be able to qualify for such solutions, projects need to be of strategic importance to the host country. In Tanzania, the first phase of the 300km railway line from Dar Es Salaam to Morogoro will replace a century-old track and have the capacity to transport 17 million tonnes of cargo each year. It is expected to be completed by the end of 2020. The post Innovative structure for Tanzanian project to “kick off” surety in Africa’s credit insurance market appeared first on Global Trade Review (GTR).

Bank of America Merrill Lynch gets global trade head

From Global Trade Review (GTR) | By Shannon Manders

BAML_logo_on-the-move Geoffrey Brady has been named Bank of America Merrill Lynch’s head of global trade and supply chain. He moves from JP Morgan, where he was managing director and Americas region executive in its global trade and loan products division. At BofAML, where he started yesterday, Brady reports to Hubert JP Jolly, global head of financing and channels, who joined from Citi in June last year. Brady has more than 20 years of experience in banking and has held management roles in a variety of businesses, including portfolio management and payments, as well as trade finance. He is BofAML’s first formal global head of trade in almost a year. Percy Batliwalla – who took over from Bruce Proctor when he retired in 2015 – held the position until September last year and then moved to become managing director, strategic initiatives within global transaction services. Jolly has been leading the team in the interim. At the end of last year the bank announced the expansion of roles for two executives who now report to Brady. Fiona Deroo took over leading trade product sales specialists (PSS) for North America global commercial banking in addition to her current role leading PSS for North America large corporate. Her title became head of North America trade and supply chain finance product sales. Lesley McNamara, head of strategy, took on an expanded responsibility as head of global product management, assuming the title of head of global product management and strategy for trade and supply chain finance   The post Bank of America Merrill Lynch gets global trade head appeared first on Global Trade Review (GTR).

Canopius’ credit and political risk hiring spree continues

From Global Trade Review (GTR) | By Shannon Manders

Canopius has appointed Sean Redden as underwriting counsel for its specialty division, with a specific focus on credit and political risk. This is a new London-based role, which reports to Bernie de Haldevang, head of specialty. Redden, a qualified lawyer, joins from Chubb Insurance, where he was the global political risk and credit claims manager. He previously held positions at Signature Litigation, Aspen Insurance, Clyde & Co, Allens and Minter Ellison. At Canopius, he will support the credit and political risk underwriting team, to “help reduce operational risk, increase efficiency and enhance client support in loss mitigation and potential claims scenarios”, according to the insurance firm. He will also assist in managing the legal aspects of debt restructuring and refinancing. “I am delighted to welcome a legal mind of Sean’s calibre to our growing speciality team,” says de Haldevang. Canopius has been steadily growing its London trade credit team since de Haldevang was brought in to lead the specialty division in mid-2016. Underwriters Scott Morrison and William Clark both joined from AIG at the start of last year. Clark leads the trade credit team, reporting to de Haldevang. Mid-2017 then saw the arrival of underwriters Claire Davenport, Daina Muceniece, Stephen Pike and Tim Phillips, senior underwriter Yvonne McCormack and credit and political risk analyst Bruce Shepherd. More recently, Rebecca Marsden left her position as credit and political risk underwriter at AXA Africa’s specialty risks department to take on the same role at Canopius. The post Canopius’ credit and political risk hiring spree continues appeared first on Global Trade Review (GTR).

Crowell & Moring appoints trade partner, establishes California presence

From Global Trade Review (GTR) | By Shannon Manders

Crowell & Moring has hired David Stepp as a partner in the firm’s international trade group in Los Angeles. He joins the firm from Bryan Cave Leighton Paisner. Stepp, a global customs and trade compliance lawyer, has more than 30 years of experience. His arrival expands the presence of the firm’s international trade group into California, further broadening its reach to serve clients across the Pacific Rim. “David’s global customs experience represents a wonderful addition to our international trade group,” says Philip Inglima, chair of Crowell & Moring. “Further building our highly-regarded trade practice is a firm priority, and David’s presence in California presents new opportunities for us. He has a well-earned reputation as a trusted advisor, and his experience will be a tremendous benefit to many of the firm’s clients.” Stepp’s remit is focused on customs compliance and counselling, including tariff classification, valuation, country of origin marking, free trade agreements and other international trade regulatory requirements. He also advises companies on their e-commerce strategies globally, conducts global customs and international trade audits, and counsels clients on improving compliance programmes across borders. He also has experience in advising on trade remedies and co-ordinating government investigations. With a particular focus on Asian trade, his clients span a range of industries, including retail, e-commerce, aerospace and a broad range of consumer goods. According to John Brew, chair of the firm’s international trade group, the hire now allows Crowell & Moring to expand its capabilities to provide counsel on “emerging trade issues worldwide”. “Given the current trade wars and uncertainties of the global trade environment, clients are hungry for deft guidance to minimise tariffs, resolve supply chain disruptions and secure market access. David has a strong trade practice and skill set that meets all of these client needs,” he says. Stepp has practiced in California, Singapore and Washington. He joined Bryan Cave as a partner in 2005, and later served as managing partner of Bryan Cave’s Singapore office. His previous experience includes working with a major US customhouse broker, where he advised the company’s importing clients on US customs practices and procedures. The post Crowell & Moring appoints trade partner, establishes California presence appeared first on Global Trade Review (GTR).

UKEF backs country’s largest export deal with Israel

From Global Trade Review (GTR) | By Shannon Manders

Boeing 787 Dreamliner Take-off UK Export Finance (UKEF), the country’s export credit agency, is providing a guarantee for a US$125mn loan from Citi to El Al Israel Airlines to finance their purchase of one Rolls-Royce-powered Boeing 787 aircraft. The deal is part of Rolls-Royce’s contract to supply engines for 16 such aircraft for the Israeli airline. According to UK international trade secretary Liam Fox, this contract is “the largest single export deal the UK has had with Israel, and a marker of the strength of the trade relationship between the two countries”. “British goods remain in global demand – this is the first time that UKEF has supported an aircraft delivery to El Al and clearly shows the value of support from the UK’s export credit agency to the UK’s aerospace engineering sector,” says Fox. This is the sixth aircraft to be delivered as part of the contract. UKEF is considering extending its support to cover future deliveries of Rolls-Royce-powered Boeing aircraft to El Al. The announcement comes days after the UK government launched its new export strategy, which lays the foundation for how the government plans to support exporters in the years ahead. The strategy sets out the government’s ambition to increase exports as a proportion of GDP and to produce “more tailored support” to UK companies. Key elements of this support will be peer-to-peer learning to encourage more businesses to export; the development of the department for international trade (DIT)’s website into a “single digital platform” for practical advice and assistance on exporting; and the creation of an online tool to enable UK businesses to easily connect to overseas buyers, markets and other UK exporters. The response from the UK trade community has been mixed, with one source telling GTR that the new strategy is a sign that the government has acknowledged that its lack of communication forms part of its shortcomings and is simply “passing the buck” on to UK companies themselves to engage in peer-to-peer learning. The plan comes into play immediately and with no fixed deadline. “We are considering next steps in terms of an implementation plan and its governance, including monitoring and tracking progress against each of the measures,” a spokesperson from the DIT told GTR this week.   The post UKEF backs country’s largest export deal with Israel appeared first on Global Trade Review (GTR).

Trump’s sanctions halt trade credit insurers’ return to Iran

From Global Trade Review (GTR) | By Shannon Manders

Two weeks after renewed US sanctions against Iran, it appears trade credit insurers are winding down the little business they had reinstated in the country since 2016. US President Donald Trump’s decision to reimpose sanctions for non-US persons doing business with Iran, just over two years after they were officially lifted, came as yet another blow to the hope for commercial normalcy in the country. Since the implementation of the Joint Comprehensive Plan of Action (JCPOA) – also known as the Iran nuclear deal –  in January 2016, many global companies worked to resume activities with their Iranian counterparts, and trade insurers reopened their Iranian cover to support this business. Now, reports have emerged about the difficulty in continuing to provide insurance lines for the country. In a Reuters article, Lloyd’s of London chairman Bruce Carnegie-Brown said the re-imposition of sanctions meant insurers “probably” would not be able to process Iran-related business through the Lloyd’s IT platform. Meanwhile, oil tankers have also expressed fears of not being able to access ship insurance. Speaking to GTR, Katayoon Valizadeh, a senior consultant in credit insurance and risk management in Tehran, says she has seen first-hand the withdrawal of most trade insurers from Iran as a result of the sanctions. “After the announcement of the US sanctions, all private credit insurers who had some interests in dealing with the US stopped their cover on Iran. Now as far as I know, only export credit agencies (ECAs) continue to give cover to Iran,” she explains. Technically speaking, cover cannot be cancelled retrospectively, so companies should be able to use the insurance they have already subscribed to in case of default due to the re-implementation of sanctions. Rob Nijhout, executive director of the International Credit Insurance & Surety Association (ICISA), explains: “As far as I am aware sanctions do not apply retroactively, so any delivery prior to new sanctions is subject to the pre-sanction situation. If goods or services were delivered in line with policy conditions, namely in an insured manner when cover was in place, any non-payment resulting from that is covered and paid by the insurer. If exports are made after cover has been withdrawn, either on a buyer or on a country, these are not insured and cannot be claimed if a non-payment occurs.” Based on local observations, it shouldn’t take too long for insurers to wind down their Iranian business, because they are largely only involved in short-term deals, explains Valizadeh. “Some of the big credit insurers, which had claims on Iran because of the blockage of channels of payments due to ex-sanctions, could all recover all their debts [after the JCPOA]. So they reopened their cover for Iran. But on the whole, both businesses and insurers had a tendency to be involved in short-term, rather than medium and long-term transactions or projects.” Statistics on the amount of trade credit and political risk insurance cover in Iran since 2016 are hard to come by, as insurers do not report country-specific data to a central organisation such as ICISA. Individually, representatives from JLT, Lloyd’s, Marsh, Willis and Gallagher all declined to comment on this story. The reticence could suggest that credit insurers are fearful of Trump’s harsh rhetoric against Iran. Talking to the current levels of insurance cover in Iran, Arash Shahraini, board member and deputy CEO of the Export Guarantee Fund of Iran (EGFI), says that he while he observed the return of large private credit insurers in the past two years, it was “not as fast as expected after the JCPOA”. He believes this is because European banks continued to be cautious of working with Iran, despite – in theory – being allowed to do so under the Iran deal. As a result, there has simply not been much business for credit insurers to cover. According to him, the majority of bilateral finance agreements signed between Iran and other nations since the JCPOA, which totalled over US$30bn, “have not been practically implemented due to banking problems”. Iranian companies that have made use of private insurance will now have to turn to other options, such as ECAs. “Right now, I am in the process of negotiations for some transactions and projects for getting cover from ECAs for Iranian projects and transactions,” notes Valizadeh. And while trade with large corporates with interests in the US will likely be interrupted, trade between smaller regional companies still presents opportunities, albeit banking issues will make this trade mostly cash-based, and a lot more expensive. Valizadeh’s consultancy, for example, is currently working with Iranian SME importers to help them build a credit profile and negotiate credit terms with foreign sellers. On the export side, Iranian credit insurers, as well as EGFI, are still extending cover for transactions, both letters of credit and open account. “Iranian traders will find appropriate ways to continue business with their international counterparts, but the costs of foreign trade transactions are expected to increase considerably,” adds Shahraini. The post Trump’s sanctions halt trade credit insurers’ return to Iran appeared first on Global Trade Review (GTR).

UK’s new export strategy draws mixed response from trade community

From Global Trade Review (GTR) | By Shannon Manders

The UK government’s new and much-anticipated export strategy sets out its ambition to increase exports as a proportion of GDP and to produce “more tailored support” to UK companies. Key elements of this support will be peer-to-peer learning to encourage more businesses to export; the development of the department for international trade (DIT)’s website into a “single digital platform” for practical advice and assistance on exporting; and the creation of an online tool to enable UK businesses to easily connect to overseas buyers, markets and other UK exporters. Response to the new strategy – which was launched today by international trade secretary Liam Fox – has been mixed. The British Exporters Association (BExA) says it is “extremely encouraged” by the new plan and welcomes the “challenging growth targets” that have been set. BExA co-chair Marcus Dolman calls the government’s export target of 35% of GDP “ambitious but achievable”. In 2017, this number was 30%, amounting to £620bn-worth of goods and services exported by British companies. It’s the first time the government has used this measure to quantify its exports. “It’s preferable to a nominal value target as it more accurately reflects changes in the UK’s underlying export performance,” a DIT spokesperson tells GTR. No time frame on the target was provided. According to DIT estimates, as many as 400,000 businesses believe they could export but don’t – and these form the focus of the new strategy. Demand for British expertise and goods overseas, meanwhile, is growing. The strategy’s business-led approach –in which the government intends to work closely with the private sector to drive exports – has been hailed by some market players as crucial. Speaking at the launch, Adam Marshall, director general of the British Chambers of Commerce, said that the right day-to-day support for exporters is “as important as efforts to negotiate new trade deals”. “Trusted, face-to-face support is key to export success. When firms get the information and connections they need to develop new markets and find new customers – that is when we see confidence, investment and results,” he explained. Others are less encouraged by this approach. One source tells GTR that the new strategy is a sign that the government has acknowledged that its lack of communication forms part of its shortcomings and is simply “passing the buck” on to UK companies themselves to engage in peer-to-peer learning. The new strategy stipulates that there will be an “increased focus on amplifying the voice of existing exporters to inspire other businesses and facilitating peer-to-peer learning”. It does not outline how the government will incentivise companies to support their peers in this regard. “It’s not going to work,” says GTR’s source, a former UK banker with close ties to the government, who prefers to remain unnamed. “Most UK companies are lethargic. Those that are proactive and have this knowledge know exactly how much energy, cost and time it’s taken to get hold of that information and keep it up to date. Often this knowledge is gleaned from having in-country capability. They’re not going to give that away for nothing.” The DIT tells GTR that it will be creating a “community of new UK Export Champions” as one way of overcoming this hurdle. “Our consultations with businesses have concluded peer-to-peer is a more sensible way of engaging with business rather than dictation from government,” the spokesperson says. The new strategy – which comes into play immediately and with no fixed deadline – lays the foundation for how the government plans to support businesses in the years ahead. The next phase will see the DIT work across government to review what further measures could help improve its export performance and meet the 35% goal. “We are considering next steps in terms of an implementation plan and its governance, including monitoring and tracking progress against each of the measures,” the spokesperson explains. “It’s a long-term aspiration.” The post UK’s new export strategy draws mixed response from trade community appeared first on Global Trade Review (GTR).

Argentina’s SMEs to get better loan terms with new deal

From Global Trade Review (GTR) | By Shannon Manders

Argentinian SMEs will benefit from a US$55mn loan that the International Finance Corporation (IFC) is providing to private bank Bind Banco Industrial. More than 70% of Argentina’s SMEs have difficulties accessing financing. Through this funding the Bind Banco Industrial will be able to offer SMEs longer-term financing than currently available in the local market. “With IFC’s partnership, we will strengthen our support to SME clients, which represent our main market segment,” says Javier Popowsky, the bank’s CFO. Bind Banco Industrial has a strong focus on SMEs, mainly in the agribusiness, services and manufacturing industries, as well as wholesale trade. It became an IFC client in May 2018 when it joined IFC’s global trade finance programme, which facilitates trade flows through guarantees and includes a network of more than 70 banks in Latin America. “Bind Banco Industrial has a solid track record supporting smaller businesses in Argentina, and with this new funding we want to help the bank extend the tenor of its lending to SMEs,” says David Tinel, IFC regional manager for the Southern Cone. “Longer-term credit is crucial to plan, seek growth and hire new employees.” Over the past 18 months, the IFC has committed approximately US$1.7bn to support sustainable private sector projects in Argentina. The post Argentina’s SMEs to get better loan terms with new deal appeared first on Global Trade Review (GTR).

Mizuho Americas takes on new transaction banking head

From Global Trade Review (GTR) | By Shannon Manders

Jan-Erik Andersen has joined Mizuho as managing director and head of global transaction banking department Americas (GTBDA). He makes the move from Exvere, a Seattle-based mergers and acquisitions advisory firm, where he served as managing partner and COO. He previously held positions at Fifth Third Bank and Standard Chartered. Andersen is based in New York and reports to Takeshi Ohashi, general manager of the global transaction banking department in Singapore. Within GTBDA, Andersen is tasked with leading the group’s expansion of trade and cash management product capabilities. He will also lead the Mizuho Americas’ working capital solutions initiative, to create more multi-product, cross-regional opportunities for clients, a spokesperson for the bank tells GTR. The post Mizuho Americas takes on new transaction banking head appeared first on Global Trade Review (GTR).

PIB TradeRisk Solutions expands team

From Global Trade Review (GTR) | By Shannon Manders

PIB Insurance Brokers has made another appointment to expand its TradeRisk Solutions team, hiring Maria Antonia De Carli as an account executive. The move follows the appointment of Nicola Salmon as an account executive last year. De Carli previously worked within the political risk and structured credit team at Aon and is based in London. Like Salmon, De Carli will have an international remit to provide political risk and structured credit insurance solutions to clients in the SME, corporate, commodity trade, banking and financial institution sectors. Her current focus, De Carli says, is on LatAm markets. “This region has a great potential, and due to its more stable geopolitical and economic scenario, it presents great opportunities for our clients.” Richard Miller, head of TradeRisk Solutions, comments on the hire: “Maria’s geopolitical and economic research and analysis will help our clients trade and compete on the global stage. Maria is well respected by underwriters and her focus on client service and delivery expands our offering and further deepens the expertise of our team.” The team’s main strategy is focusing on development as well as PIB Insurance Brokers’ presence and expansion, says De Carli. “We aim to grow nationally and worldwide and become an international reference for new clients and underwriters.”   The post PIB TradeRisk Solutions expands team appeared first on Global Trade Review (GTR).

Standard Chartered creates metals and mining head role

From Global Trade Review (GTR) | By Shannon Manders

Standard-Chartered_logo_on-the-move Richard Horrocks-Taylor has been named global head of metals and mining at Standard Chartered – a new role for the bank. He is based in London and reports to Ananth Venkat, global head of global industries group. An experienced industry banker with over 20 years covering the mining sector, Horrocks-Taylor has a record of working with mining clients across the emerging markets. He was most recently with the Royal Bank of Canada (RBC), where he headed the bank’s European, African and former Soviet Union metals and mining business from 2008. Prior to RBC, he worked for other banks, including JP Morgan and Flemings in London, Johannesburg and Hong Kong. Commenting on the hire, Venkat says: “The appointment of Richard into this role will ensure that we continue to keep a granular focus on this [metals and mining] sector and build further depth to support the future growth aspirations of our clients.” The post Standard Chartered creates metals and mining head role appeared first on Global Trade Review (GTR).

UK could move towards US-style sanctions regime after Brexit

From Global Trade Review (GTR) | By Shannon Manders

The UK government will have the power to impose sanctions independently of the international community after Brexit. That’s as a result of a new law, the Sanctions and Anti-Money Laundering Act 2018, which received royal assent in May, and will come into force when the UK officially leaves the EU next year. In the short term there may be little substantive divergence from the existing regime – under which the UK has to follow the EU. But the act “sets the stage for possible variance once the UK starts to establish a clearer political path in the world as it sets out on its own”, says Charles Enderby Smith, associate at law firm Carter-Ruck. The UK government could decide to replicate sanctions coming out of the EU or it could choose to mirror the US’ approach towards sanctions, which would not be an unsurprising move, he tells GTR. This may result in a widening of the application of sanctions to include whole geographical areas, groups of people and may even bring about the implementation of so-called secondary (extraterritorial) sanctions – the likes of which the US has just reimposed on Iran. Regardless of the direction the government takes when moulding its newly-autonomous sanctions programme, institutions “must be alive to a new layer of compliance”, Enderby Smith says. In an interview with GTR, he explains the most important features behind the new legislation, and what that tells us about the powers that the UK seeks as it prepares for its new independence.   GTR: Why is the Sanctions and Anti-Money Laundering Act required? Enderby Smith: With Brexit set for March 2019, the UK is preparing the framework for its future independent sanctions programme, which may in time evolve in a direction at variance from the European Union’s existing sanctions regime. The act will come into force on March 29, 2019, the day the UK formally leaves the EU. The UK currently implements sanctions in accordance with its international obligations. These include:
  • European Union sanctions, which are given direct effect in the UK by virtue of the European Communities Act 1972; and
  • UN sanctions (to the extent these are not already reflected through EU sanctions), which are effected through domestic legislation.
There are also narrowly defined circumstances in which the UK implements its own sanctions, including combatting international terrorism. While the UK will continue to be required to implement UN sanctions through domestic legislation, Brexit will put paid to the automatic implementation of EU sanctions, leaving a potential gap in the UK’s sanctions programme. It is this lacuna that the act seeks to address, while also opening the door for the UK to develop its own autonomous programme once it is no longer subject to the EU’s common foreign and security policy.   GTR: To what extent does the act extend the government’s powers, and what does this tell us about the powers the UK government seeks in preparation for a more autonomous role in the world? Enderby Smith: While not surprising given the purpose of the act, arguably the most striking feature of the new legislation is the substantial increase in powers it provides to the UK government. In its preamble, the act is said to “make provision enabling sanctions to be imposed where appropriate for the purposes of compliance with United Nations obligations or other international obligations or for the purposes of furthering the prevention of terrorism or for the purposes of national security or international peace and security or for the purposes of furthering foreign policy objectives”. A further amendment to the act also allows the UK to use sanctions to promote human rights. This is a wide-ranging mandate. Moreover, the act allows the UK government to designate persons by reference to a description rather than a specific name. While the government claims this power will only be exercised where it is unable to identify the relevant persons by name, this provision has raised concerns over potential uncertainty and the burden it will place on businesses and their compliance teams. The government says it will provide as much information as possible to help identify the appropriate individuals. However, the question remains how useful this will be in practice where the government itself has been unable to achieve effective identification. One could be forgiven for interpreting this simply as a means to give practical effect to foreign policy decisions about broad categories of persons the government wishes to be sanctioned.  Also of note is that under the act the current EU requirement for sanctions to be reviewed annually is extended to every three years. Designated persons will still be able to challenge their designations, and the act also provides for a designation to be revoked if the government considers that the required conditions are not met in respect of the relevant designation “at any time”. However, this considerable extension of time between default reviews will no doubt shift the burden away from government and on to designated persons. Its inclusion is perhaps suggestive of a more heavy-handed sanctions programme post-Brexit.   GTR: You mention the possible burden placed on businesses by the government’s increased powers. Are there any other ways the act may make life more difficult for third parties dealing with potentially sanctioned persons? Enderby Smith: Under the act, third-party institutions wishing to deal with potentially designated persons may find themselves facing increased reporting requirements. Currently only certain businesses are subject to reporting requirements in the UK, such as legal and financial services professionals. However, the government may use the act, through secondary legislation, to broaden such requirements to all natural and legal persons. They would be required to report to the government where they become aware, or have reasonable grounds to suspect, that they are dealing with a designated person or that an offence has been committed by a designated person. There would likely be criminal penalties for those who fail to comply. This development, coupled with the potential new problems interpreting the scope of sanctions that I mentioned previously, suggests that it may become more difficult for third parties to navigate the sanctions landscape.   GTR: Given the act allows the UK government to forge its own path when it comes to its sanctions programme, which direction do you think it will choose to take? Enderby Smith: This is a political and diplomatic question. Sanctions are after all a stark expression of a country’s foreign policy objectives, and the UK’s approach will be heavily contingent on how it sees itself on the global stage post-Brexit. The UK government has strongly signalled its desire to continue to work closely with the EU post Brexit. In this respect, we may see the UK government simply using the act to replicate sanctions coming out of the EU. However, this may be unacceptable on a political level amongst those in favour of a cleaner break, and also on a practical level, with the difficulties implicit in seeking to align foreign policy objectives with those of 28 other countries without membership of a central administration. Another possibility is gravitation towards the US, in line with the two countries’ “special relationship”. This would be an interesting and not altogether unsurprising move, given the two countries often agree on matters of foreign policy, and the likely increased dependency the UK will have on the US once its ties with Europe are lessened.   GTR: How might a move towards the US result in a different approach by the UK government to its sanctions regime? Enderby Smith: Such a move may result in a significant widening of the UK government’s application of sanctions, with broad-scope sanctions applying to whole geographical areas or whole groups of people – in contrast to the EU’s approach which has generally been to target individual sectors or persons. The wider powers granted under the act, and in particular the government’s ability to designate by description rather than by name, would certainly seem to allow for such expansion should the UK government see fit, and are perhaps telling of the government’s intended approach. Should the UK incline towards the US’ methods, it will be interesting to see whether it will also move towards the adoption of so-called secondary sanctions. Secondary sanctions “bite” on a sanctioning state’s citizens as with primary sanctions. However, persons are designated on the basis of who they do business with, essentially forcing them to make a choice between trading with the true target of the sanctions – for example an Iranian company – or the US. Thus a form of extraterritorial reach is achieved. It is unlikely that secondary sanctions applied by the UK would be as effective as the US’, given the disparity in economic clout between the two nations. However, such a move would not be inconsequential and would herald a much more aggressive approach by the UK to matters of foreign policy. The post UK could move towards US-style sanctions regime after Brexit appeared first on Global Trade Review (GTR).

Eastwood leaves Gii, joins BACB

From Global Trade Review (GTR) | By Shannon Manders

Clint Eastwood has left Gii Capital Advisors after a year of service and joined BACB as head of trade distribution. He replaces Debbie Emmanuel, who is leaving the bank, and reports to James Cantamantu-Koomson, BACB’s managing director of client coverage. Eastwood will “work with and across all the country, regional and product teams to continue developing our asset distribution capacity to further enhance our solution delivery offering to our customers”, a spokesperson for the bank tells GTR. Eastwood started at Gii in September last year, having left a 22-year career at Standard Chartered in March. At the time, Eastwood said the move away from the bank was “so refreshing”. At Gii, he was director of trade distribution and asset sales. He was hired as part of the firm’s expansion strategy, with Gii announcing then that it would be growing its personnel – with more hires to come in the “not too distant future”. As part of its drive to expand its offerings, in December last year Gii launched a new fund to invest in trade receivables and structured assets collateralised by trade receivables globally. At Standard Chartered, Eastwood was most recently director of transaction banking, trade asset sales and syndications for Europe and Sub-Saharan Africa. He started his banking career there in 1999. He remains based in London. The post Eastwood leaves Gii, joins BACB appeared first on Global Trade Review (GTR).

Energy projects to benefit from new Islamic trade finance fund

From Global Trade Review (GTR) | By Shannon Manders

A new sovereign energy trade finance fund – thought to be a world first – is being launched by the International Islamic Trade Finance Corporation (ITFC) and US investment manager Federated Investors. The ITFC Sovereign Energy Fund (ISEF) aims to raise US$300mn for its first close. The portfolio will be a private offering available to ITFC’s qualified investors across the member countries of the Organisation of Islamic Co-operation (OIC) and ITFC’s global partners. It will invest primarily in energy-related trade and export finance, structured trade,  supply chain and project finance assets of sovereign entities across the energy value chain in the OIC’s 57 member countries. “From our best knowledge this is the first sovereign energy trade finance fund ever to be raised in the industry globally,” Miloud Boudjemai, fund manager at ITFC, tells GTR. He adds that the fund is currently assessing 10 transactions and that deployment will begin in October. The fund will be sharia-compliant, meaning that investments will be realised through transaction structures that adhere to Islamic principles. It will be sponsored and managed by ITFC with strategic input from Federated Investors’ UK-branch. The investment manager and ITFC have worked together on a broad array of Islamic trade-finance transactions since 2014.     The post Energy projects to benefit from new Islamic trade finance fund appeared first on Global Trade Review (GTR).

Barclays gets new trade head after Baghdadi departure

From Global Trade Review (GTR) | By Shannon Manders


Barclays’ global head of trade and working capital Baihas Baghdadi has left the bank. Sources tell GTR that he will be replaced by Deutsche Bank’s James Binns, who currently holds the position of global head of cross product solutions, cash management. It is understood that he will join Barclays in September.

The reason behind Baghdadi’s departure, and his next move, remain unknown to GTR. He had been with Barclays for 10 years and was appointed trade head in 2015.

Binns has been with Deutsche Bank since 2014 and previously worked at HSBC in a variety of trade roles across a number of locations.

The post Barclays gets new trade head after Baghdadi departure appeared first on Global Trade Review (GTR).

Bozek joins Santander to lead working capital solutions

From Global Trade Review (GTR) | By Shannon Manders

Chris Bozek has joined Santander Bank North America as managing director, head of working capital solutions, based in Boston.

Bozek previously worked at Bank of America Merrill Lynch, where he had been since 2004, most recently as global head of trade product and North America trade head.

Earlier in his career he held positions within finance, global product and general management, sales and international business development with Fortune 100 companies and startup firms.

At Santander, Bozek leads a team that is focused on delivering globally integrated card, FX, trade and supply chain solutions that enable businesses of all sizes to streamline and digitise payment processing, manage currency and counterparty risk, and optimise working capital.

“Chris brings to Santander more than 25 years of invaluable experience in working capital solutions, global trade and supply chain finance, procure-to-pay, complex payments and card-based solutions,” says Ken Deveaux, Santander North America’s head of transaction banking. “He is a leader in our industry and we’re pleased to have him on board as we continue to expand our portfolio of core electronic banking capabilities.”

The post Bozek joins Santander to lead working capital solutions appeared first on Global Trade Review (GTR).

Denmark’s Vestas gets EKF backing for wind turbine order in Senegal

From Global Trade Review (GTR) | By Shannon Manders

Senegal’s first utility-scale wind power project has reached financial close, drawing in support from Danish export credit agency EKF and Overseas Private Investment Corporation (Opic), the US government’s development finance institution. EKF’s backing is the most recent of the two: it announced this week that it is making available a €140mn export loan with a tenor of 17 years. Opic committed US$250mn in financing and US$70mn in reinsurance back in 2016. The Taiba N’Diaye wind power project, situated 70km north of Dakar, will operate under the name Parc Eolien Taiba N’Diaye and will deliver up to 158.7MW of energy to the rapidly expanding local grid, increasing Senegal’s power generation by 15%. It is expected to be fully operational in less than two years. The project is expected to be able to provide green power for around 2 million people and to prevent the frequent power cuts in the capital Dakar. With EKF backing, Danish wind giant Vestas is providing the project’s 46 wind turbines, and is responsible for the farm’s construction – which is imminent – and maintenance. “As the first utility-scale wind power project in the country, Taiba N’Diaye forms a critical component of Senegal’s clean energy strategy. The project will create an impact that lasts for generations,” says Chris Ford, COO at project owner Lekela, a renewable power generation company that delivers utility-scale projects that supply clean energy to communities across Africa. Lekela has sponsored a number of initiatives in recent years in countries such as South Africa, Egypt and Ghana. African nations have some of the best renewable energy sources on the planet, and yet green energy made up only 1% of the continent’s energy sources in 2016. Fossil-based power plants, including coal and diesel, provide much of Africa’s energy, but far from enough to meet its growing needs. “Wind energy is a fast and sustainable way to solve the supply deficit, get rid of the dependence of fossil fuels and free a country from the fluctuations in oil prices. Onshore wind farms can be built and deliver electricity at a price that can compete with the price of constructing coal and diesel power stations, and the potential for Danish wind export to Africa is therefore very big,” says Anette Eberhard, CEO of EKF. Investment volumes for renewable projects need to be increased by “a factor of five”, adds Lekela CEO Chris Antonopoulos. “We need long-term capital. To attract this type of capital we need to be able to showcase successful energy projects and we hope the project in Senegal will make a difference.” Other players in the region have also turned their attention to this challenge. In a bid to boost climate finance in Africa, the African Export-Import Bank, for one, recently announced that it had partnered with pan-African energy conglomerate Aenergy to support sustainable infrastructure projects with innovative financial mechanisms, including green bonds. The post Denmark’s Vestas gets EKF backing for wind turbine order in Senegal appeared first on Global Trade Review (GTR).

DNB grows London trade team with second ANZ hire

From Global Trade Review (GTR) | By Shannon Manders

Norwegian bank DNB continues to expand its London-based trade team with the appointment of Sven Rynhoud as vice-president of trade and export solutions.

He joined the bank last week from ANZ, where he had been for the last 12 years, most recently as director of oil and gas for Europe transaction banking.

Rynhoud reports to Peter Sargent, first vice-president and head of trade Central Europe, Middle East and Africa (Cemea), who joined DNB in November last year and in turn reports to global head, Jan Martin Holst. Also from ANZ, Sargent served as the bank’s head of transaction banking, Europe from 2007 to 2016. He previously held positions at ABN Amro, Citi and Lloyds Bank, and co-founded an advisory business, International Trade Initiatives, in 2016.

Tasked with setting up and running DNB’s trade organisation in Cemea, Sargent has brought in Rynhoud on the trade side of the business.

Another new hire, Chantelle Stevens, will join in August to handle cash management. Further hires will be made later in the year.

“There’s a big opportunity here. If we can get this business started in a correct manner, this team can expand on a considered but regular basis,” Sargent tells GTR. The bank will eventually be looking to roll out new trade products, “especially around the working capital product area, ultimately using digital delivery”, he says.

The new team has in part been driven by DNB’s desire to look beyond its traditional industry focus and the associated supply chains.

“The bank is focused by industry: Norway is a world leader in shipping, oil and gas and seafood, and those three industries are vital to the way we do our business. But supply chains around those industries are increasingly important,” says Sargent. He adds that the bank also wants to expand selectively into the financing of manufacturing, services and packaging – all of which are tied in some way to Nordic countries.

“There is a strong desire to develop this product set in the bank to add to existing borrowing facilities already extended to large corporates,” Rynhoud tells GTR. This will include onboarding new customers.

Rynhoud’s initial focus will be on rolling out more extensive trade propositions, such as supply chain programmes, for large non-Norwegian oil and gas corporations and services companies.

“I see a combination of receivables and payables opportunities,” Rynhoud explains. “The low-hanging fruit for me initially will be receivables financing – short-dated crude and petro invoice discounting between customers of the bank and other major counterparties.” He adds that DNB will also be looking to tap into and provide liquidity to its partner banks’ programmes.

The post DNB grows London trade team with second ANZ hire appeared first on Global Trade Review (GTR).

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