Category: Global

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).

CargoX goes live with blockchain-based bill of lading

From Global Trade Review (GTR) | By Sanne Wass

Blockchain startup CargoX will roll its blockchain-based bill of lading solution into production next month, having carried out its first live pilot. The trial saw the shipment of garments from Shanghai in China to Koper in Slovenia, where it arrived on Sunday, using CargoX’s Smart B/L service. It involved Metro d.d (the importer), Hangzhou Doko Garments (the exporter) and was shipped by a large freight forwarder, whose name has not been disclosed. According to CargoX CEO and founder Stefan Kukman, other trials are currently underway, and the product will be made available to clients next month. The Slovenia-based blockchain firm raised over US$7mn in an ICO in January. The platform, which digitises the issuance and transfer of bills of lading, targets freight forwarders and NVOCCs (non-vessel operating common carriers), who will then be able to offer the solution to their customers. In the first live pilot, which the startup announced completion of today, the bill of lading was successfully processed in minutes, and at a cost of US$15, with the help of a public blockchain network. That’s a significant improvement from the days or weeks that a conventional, paper-based process usually takes, and which costs up to US$100. “This will give us the opportunity to lower the cost of importing goods significantly,” says Miloš Košir, logistics manager at Metro d.d., the pilot’s importer, which runs a network of 200 MANA clothing stores throughout Central and Eastern Europe. “We import hundreds of TEU [twenty-foot equivalent unit] from the Far East, and we are always trying hard to optimise our supply chain. If it raises the safety and reliability of the document transfer, that is an added value for us as well.” Zongyong Lin, CEO of Hangzhou Doko Garments, a manufacturer, and the exporter on the pilot, points to the option of overseeing the flow of the bill of lading, while always having access to an archive, as “advantages that we really think could bring a great benefit to us. We are looking into the opportunity and the effect it would have for our company as a whole”.   A tight race to digitise shipping CargoX is not alone in its aim to help firms involved in global trade digitise and streamline documentation using blockchain. Just earlier this month, Maersk and IBM announced they are live with the early adopter programme for their blockchain-powered global trade platform, called TradeLens, involving 92 participating organisations from across the globe. The platform connects all parties in the trade ecosystem and enables them to interact efficiently and access real-time shipping data. It also allows participants to digitalise and exchange trade documentation – anything from packing lists and shipping instructions to bills of lading and certificates of origin. The announcement followed a 12-month trial phase where more than 154 million shipping events were captured on the TradeLens platform, which will be made fully commercially available by the end of the year. Meanwhile, CargoX has dedicated its efforts to “solving one problem at a time”, says Kukman. In the first instance, the firm is focusing only on the bill of lading, but it plans to later expand its platform to the letter of credit. “Looking at the current situation, we made a proper decision and sticking to our game plan is paying out,” Kukman says. “By successfully completing the official test shipment we are concluding our development and testing phase of our CargoX Smart B/L solution, which will now be available to all logistics and shipping companies.” The firm says it is currently onboarding other large freight forwarders, NVOCCs and their customers. One client that has been named is Swiss freight forwarder Fracht AG. Kukman tells GTR the solution is now “stable from the development point of view”, but that “there might be some product tweaking as we gather feedback from customer trials”. The feedback has so far been positive, but rolling it out across all of the freight forwarder’s customers will take time, he says. “Forwarders of this magnitude are huge and globally dispersed entities, so it is not possible for them to roll out the solution in a very short time. They will evaluate how to integrate our solution into their processes, and we expect that to happen in the coming months. But the calculations of time and money saved speak for themselves – and this might help them improve their fiscal earnings really quickly and efficiently. And with less risk to their customers, too.” The post CargoX goes live with blockchain-based bill of lading appeared first on Global Trade Review (GTR).

Rising temperatures to threaten oil, agriculture and manufacturing exports

From Global Trade Review (GTR) | By Sanne Wass

Rising temperatures could “substantially undermine” export markets across emerging economies, new research from global risk analytics company Verisk Maplecroft finds. The firm’s newly-released 2018 Heat Stress Index assesses countries’ exposure to temperature and humidity conditions. It identifies four regional hotspots expected to bear the biggest economic brunt of rising temperatures over the next 30 years: West Africa, Central Africa, Middle East and North Africa (Mena) and Southeast Asia. In all, 48 countries are rated as being at ‘extreme risk’ from rising temperatures, with African countries accounting for almost half that number. Expected losses all come down to the fact that heat stress slows worker productivity by causing dehydration and fatigue. In extreme instances, Verisk Maplecroft notes, it can also cause death. The risk is therefore particularly high in the agriculture, mining, oil and gas and manufacturing sectors, as work is highly intense and often outdoors. West Africa is the most vulnerable region, given the importance of the extractives and agricultural sectors to the region’s export economy. The research finds that 10.8% of export values from West Africa are projected to be at risk from heat stress by 2045. This compares to 7.9% in Central Africa, 6.1% in Mena, 5.2% in Southeast Asia and 4.5% in South Asia. Using current values of exports, Verisk Maplecroft has translated this into an estimated loss of almost US$10bn per year for West Africa and US$78bn per year for Southeast Asia. Oil outputs from Nigeria and cocoa exports from Côte d’Ivoire and Ghana are “particularly vulnerable”, it says. In Central Africa, Angola and Gabon, where oil accounts for around 95% and 80% of their total exports respectively, are at high risk. The research also points to the manufacturing sector in Southeast Asia as being “under threat”, particularly in Vietnam and Thailand – key exporters of machinery and electrical components – which account for almost two thirds of the region’s total manufacturing export value. Meanwhile, strains on electricity infrastructure from rising demands for air conditioning to combat extreme temperatures will pose a major threat to reliable electricity supplies, particularly in countries that lack robust energy infrastructure. Again, Africa faces the greatest risks of disruption. With the continent’s urban population expected to expand by 235% by 2050, power capacity increases are “unlikely to keep pace with growing demand”, according to Verisk Maplecroft. The impact of rising temperatures could be dire – not just for the exposed economies, but also for global supply chains. “Taken together, the risk of disruption for companies operating in, or sourcing from, affected countries will substantially increase unless climate adaptation measures are implemented,” the company warns. According to Alice Newman, environment and climate change analyst at Verisk Maplecroft, these labour capacity losses could mean price rises for importers if product availability drops or production costs increase. “Supply chain disruption may also drive businesses to consider sourcing from lower risk locations, which would have a major knock-on effect on regional economies,” she says. Verisk Maplecroft’s estimates are calculated based on projected daily temperatures for the period 1980-2045 and data on the current values of exports. The research does not take into account future growth or diversification of export sectors, meaning it could serve as an important reminder of what is to come if exposed countries and companies turn a blind eye to the risk. “Forward-looking companies can mitigate heat stress risk through a range of measures, including sector diversification, changing work patterns, seasonal adjustment of output targets and climate control,” the firm says. But, it notes, such efforts will require “significant investment”, which many developing economies will struggle to mobilise. While this summer has seen Europe gripped by a heatwave, it remains the region most insulated from the economic impact of heat stress. The 10 lowest risk countries for heat stress are predominantly located in Europe, including the UK and Ireland and the Scandinavian countries. The post Rising temperatures to threaten oil, agriculture and manufacturing exports appeared first on Global Trade Review (GTR).

Industry rejects Fitch’s call to reclassify supply chain finance as debt

From Global Trade Review (GTR) | By Eleanor Wragg

A recent report by Fitch Ratings in the wake of UK construction firm Carillion’s collapse has sounded the alarm over supply chain finance (SCF) programmes, calling for the extension of payment terms due to reverse factoring to be classified as debt. The ratings agency says that reverse factoring was a key contributor to the largest construction bankruptcy in UK corporate history, as it “allowed the outsourcer to show an estimated £400-£500mn of debt to financial institutions as ‘other payables’ compared to reported net debt of £219mn”. Calling this an “accounting loophole”, the report suggests that supply chain finance programmes could be used to enable corporate buyers to operate with a lack of transparency in their finances – an implication which is roundly rejected by industry participants. “This is very standard practice,” Geoffrey Wynne, partner at Sullivan & Worcester UK tells GTR. His firm is currently working on a transaction whereby the bank is allowing the buyer to negotiate for 360-day payment terms. “If there were any suggestion that they were helping mislead investors, they would be really appalled. The simple answer is that this is a financing device for extending trade payables.” To ascertain the scale of the practice and whether an increase in reverse factoring is occurring, Fitch analysed historic payables days from 2004 to 2017, finding that median payables days were highest in 2017, rising 14 days since 2014. Fitch calculated that this suggests an overall increase in payables of US$327bn. “As seen in the case of Carillion, reverse factoring could have a potentially large impact on vulnerability to default for specific issuers,” Fitch said, adding that it will adjust credit metrics to classify any extension of payment terms due to reverse factoring as debt. One of the main benefits of SCF is that the financing structure is not treated as debt for balance sheet purposes, but as a trade payable which isn’t considered leverage. Such a reclassification would defeat the purpose of these kinds of arrangements for many corporate users. “SCF is different to bank debt,” points out Omar Al-Ali, partner at Simmons & Simmons. “The problem with debt is you essentially have a very large liquidity issue on a specific day when you need to repay, say, US$100mn. In SCF, you need to pay smaller amounts on spread-out days, which is less likely to give rise to liquidity issues. That is an important difference between the two.” If the view on SCF does change, it is likely that economic thresholds will be adjusted to reflect the new reality because the liabilities have always been there, and banks are comfortable with them. This is not the first time a ratings agency has called out supply chain finance. In late 2015, Moody’s Investors Service said that Spanish environment and energy group Abengoa’s large-scale reverse factoring programme had “debt-like” features, and announced a review of its rating methodology. The International Trade and Forfaiting Association (ITFA) successfully challenged that review, asserting that payables finance is a legitimate and acceptable form of finance which should not automatically result in trade debt being re-categorised as financial debt. “ITFA had a very good dialogue with Moody’s. It looks like we’re going to have to start the dialogue with Fitch,” says Sean Edwards, chairman of ITFA. “There has been an increase in days payable, because it is very widespread. But, does that mean that it should be treated as bank debt? I don’t think so. In abnormal cases, like possibly Carillion and Abengoa, they had additional features. In the case of Carillion, it dwarfed their other lines of finance.” For Fitch, the problem is one of disclosure. “An annual report should give you a fair picture without you having to guess. If you look hard enough, you can find clues that this is happening, but there is a distinction between being able to find clues and something being clearly disclosed,” Frederic Gits, managing director, corporate ratings Emea at Fitch and co-author of the report, tells GTR. “In itself, supply chain finance is a perfectly legitimate funding technique. The issue is that because disclosure around it is weak, it can leave a door open for companies to use it in a less appropriate way, for example to hide a debt increase in trade payables.” While those in the industry reject the charge that corporates are widely using SCF to hide debt, ratings agencies say that they have no way of knowing for sure unless there are stronger disclosures around SCF programmes, in order for investors to make better-informed decisions about whether they want to treat them as debt or not. The post Industry rejects Fitch’s call to reclassify supply chain finance as debt appeared first on Global Trade Review (GTR).

Maersk and IBM go live with global blockchain trade platform TradeLens

From Global Trade Review (GTR) | By Sanne Wass

Maersk and IBM are now live with the early adopter programme for their blockchain-powered global trade platform, called TradeLens, involving 92 participating organisations from across the globe. The announcement follows a 12-month trial phase where more than 154 million shipping events were captured on the blockchain. TradeLens will be made fully commercially available by the end of the year. It all falls under a revised partnership model between IBM and Maersk after industry players had expressed worry over “too much Maersk control”. TradeLens, jointly developed by Maersk and IBM, is a platform aimed at promoting more efficient and secure global trade. It connects all parties in the trade ecosystem and enables them to interact efficiently and access real-time shipping data. The platform will also enable participants to digitalise and exchange trade documentation – anything from packing lists and shipping instructions to bills of lading and certificates of origin – all backed by a secure, immutable audit trail. Its trade document module, called ClearWay, will allow for the automation of various businesses processes, such as import and export clearance, with smart contracts ensuring that all required approvals are in place. The platform also allows for the integration with internet of thing (IoT) and sensor data to measure events like temperature control and container weight. Maersk and IBM believe the blockchain-based system will significantly improve efficiency in shipping, an industry still largely dominated by manual, time-consuming, paper-based processes. During a trial, the platform helped reduce the transit time for shipments to the US by up to 40%, saving thousands of dollars in cost. Among the 92 organisations already signed up are port and terminal operators, ocean shipping lines, customs authorities, freight forwarders and logistics companies. While today’s announcement marks the formal launch of the early adopter programme, about half of the participants have already been onboarded and are now using the platform. In fact, over the last 12 months, during which users have been trialling the beta version, more than 154 million shipping events have been captured on the blockchain-based platform. This includes data such as arrival times of vessels and container “gate-in”, as well as the exchange of documents. According to IBM, this data is growing at a rate of close to 1 million events per day. No banks are a part of the project at this stage, but they are “on our roadmap”, says Marvin Erdly, global trade digitisation leader at IBM Blockchain. Speaking to GTR, he says the project will likely starting piloting with financial institutions next year. “We are currently having discussions and workshops with a lot of financial institutions, both for trade finance and trade insurance, and we will continue to do that and uncover what those capability requirements are and likely have something out in 2019. It’s not something we are going to be doing by the general availability release, but it’s absolutely a critical part of our plans,” he says. The idea is that banks providing trade finance products will be afforded increased visibility of key events affecting their financing, as well as the digital documentation supporting the transactions. It is hoped that this will enable them to free up more capital to lend elsewhere.   No joint venture Erdly emphasises that TradeLens is “definitely not a solution for Maersk”, but rather “an industry platform”. That’s why IBM and Maersk decided to ditch their original plan to form a joint venture to commercialise the platform, as announced in January. Maersk would have owned 51% of the company. But the announcement was followed by criticism, in particular from Maersk’s biggest rivals, who rejected the idea of joining a project that was not driven by the industry as a whole. “Some were worried about too much Maersk control,” Erdly says. “The idea is that you need to have a neutral industry platform. This is not a platform for Maersk, it is an industry platform that needs to be adopted by the industry. We announced we were going to form a joint venture, but we have since received feedback from many in the ecosystem. We did get some pushback, especially from other ocean carriers, who said if this joint venture cannot be more broadly distributed in the industry, it’s not a model they would find the best. We took that very seriously.” Instead, the parties decided to extend their existing collaboration model so that other participants can join as members of the platform, through agreements with IBM or Maersk. “It’s really a better way to drive widespread adoption,” Erdly says, adding that while AP Moller Maersk and IBM will continue to invest in the development of the platform, Maersk Line will be a participant just like any other in the network, on the same terms and conditions that others would sign up to. So far, IBM and Maersk have named only two other ocean carriers as current participants in the solution: Pacific International Lines (PIL) and Hamburg Süd. But, according to Erdly, the parties are in “active discussions” with rival shipping lines and are “very optimistic” that others will join “very quickly”. “The network is as important as the software product itself,” he explains. “The platform becomes more valuable as we add network participants. The most critical point for us is that we are able to bring on other ocean carriers, because that’s where we really get to expand the network.” To date the TradeLens network includes more than 20 port and terminal operators, including PSA Singapore and APM Terminals, a large number of beneficial cargo owners (BCOs), freight forwarders, transportation and logistics companies, as well as customs authorities in the Netherlands, Saudi Arabia, Singapore, Australia and Peru. After the commercial release, which is scheduled to take place by the end of the year, participants will be able to access the core platform through a subscription-based model. TradeLens will also host an “applications marketplace”, where – through APIs – participants can develop and offer value-added services and apps themselves. The post Maersk and IBM go live with global blockchain trade platform TradeLens appeared first on Global Trade Review (GTR).

Swift opens up payments tracking to corporates: “The beginning of a long journey”

From Global Trade Review (GTR) | By Sanne Wass

Corporates will soon be able to track their payments in real time as part of Swift’s global payments innovation (gpi) initiative – a function of the system that was previously only available to them through their banks. Over the coming months, Swift, together with 10 multinational corporates and 12 leading banks, will pilot what it calls an “enhanced multi-bank standard” for tracking payments, aimed specifically at bringing more transparency to multi-banked corporates. Swift’s payments tracker, which enables users to trace cross-border payments in real time, was rolled out in May last year. It came in response to a common complaint from Swift users about the lack of visibility on their payments status. Until now the tracker has only been available to banks, meaning that their clients have been dependent on them to monitor the status of their payments. “The unfortunate thing is that if you work with several banks you end up with several trackers,” Martin Schlageter, head of treasury operations at Roche, tells GTR. “For the initial setup within gpi, banks wanted individual trackers because they can build services around them. It means we would basically have a tracker for each and every bank that we are working with. This is highly questionable.” Roche, a Swiss multinational healthcare company, is among the firms taking part in the pilot. The aim is to start the live testing with two banks in September/October this year. The design for the system has been developed through co-creation workshops with pilot participants, which also include Airbus, Bank of America Merrill Lynch, BBVA, BNP Paribas,, Borealis, Citi, Deutsche Bank, General Electric, IATA, Intesa Sanpaolo, JP Morgan, LVMH Moët Hennessy Louis Vuitton, Microsoft, National Australia Bank, Ping An Group, RTL Group, Sumitomo Mitsui Banking Corporation, Société Générale, Standard Chartered Bank and UniCredit. The new capability essentially means that corporates will be able to bypass their banks’ trackers and instead integrate gpi flows in their ERP and treasury management systems. It’s a function that will be particularly useful for companies that want to initiate and track gpi payments to and from multiple banks. When initiating a payment instruction with the gpi tracker in its current iteration, a bank includes a unique end-to-end transaction reference (UETR), which enables it to trace the payment. In the upcoming pilot, a UETR will be created for the corporate client, allowing the corporate to follow the payment in its own system, independently of its banks. Schlageter explains the typical payment process without a UETR: “If you send a message through the old process, you get an acknowledgement that the message is on its way, but then it’s a black box. When another bank or a supplier then has a question regarding this payment, you start sending emails to your bank, they contact the next bank in the chain and so on, and it can take weeks before you get a copy of the Swift message to realise that fees were deducted, or a payment got stuck or whatever. It’s cumbersome and not transparent at all. It really eats up resources.” “Corporates want to track payments in real time and get confirmation of credit to the beneficiary’s account,” says Swift’s global head of corporates Marc Delbaere. “This new multi-bank capability will enable that experience in a consistent fashion, across multiple banks and multiple corporates. Having this information instantly in the corporate treasury space is what corporate customers are asking for.” But the pilot is just “the beginning of a long journey”, says Schlageter at Roche, noting that it will take time to implement, and there will still be shortfalls: not all banks are live with gpi. Currently, of Swift’s network of 11,000 financial institutions, 180 banks have signed up. However, he is hopeful that the new standard will eventually make cross-border payments easier and more transparent for a company like Roche, especially now that Swift is making it mandatory to include a UETR in all payment instructions across the network from November. Swift also recently announced it is moving towards universal adoption of the gpi, which will see all banks on its global network use the service by 2020. “We will achieve full transparency of all our flows, so this is quite ideal,” Schlageter says. “Once we are live with this, it will change the nature of how we do cross-border payments and how much resources we have to put into supporting these.” He adds that the initiative is also of strategic importance to Roche. “It’s important that we can still rely on Swift as our central comprehensive payment channel. That’s why we have been pushing Swift to close this last hole, where they are really losing ground, because they were not living up to corporates’ expectations.” The post Swift opens up payments tracking to corporates: “The beginning of a long journey” appeared first on Global Trade Review (GTR).

Industry veteran launches receivables finance community

From Global Trade Review (GTR) | By Sanne Wass

A new industry organisation has been launched to create a global voice and community for those involved in open account receivables finance around the world. Under the name World of Open Account (WOA), its mission is to be a “global collaborative competence centre for more, better and safer receivable financing”. It was founded and is run by Erik Timmermans, together with eight founding companies and with support from eight strategic advisors. Timmermans has worked in the receivables financing space for decades. He was secretary general at IFG (International Factors Group – a global trade association for factoring) from 2005 to 2015 and played a key role in the merger between IFG and FCI in late 2015. Speaking to GTR, he says that, over the years, he has seen a great need for a more accessible, peer-to-peer environment where professionals in receivables finance can network and share knowledge. This is where Timmermans sees WOA playing a role. He insists that it “is not an association, it’s a community”, and that it focuses on “a number of things that associations try to do but not always well: connecting people”. That’s why he is ditching the top-down approach of traditional associations in favour of a peer-to-peer structure, which is primarily run through digitally-driven initiatives (including webinars and other online offerings) to achieve as wide a reach as possible. One key element will be an online database of individual professionals, bank and non-bank financiers, service providers and other stakeholders, which can be used as a forum to discuss issues and ask for advice, knowledge and support. It is also hoped that firms looking for working capital solutions will engage in the project as well. “It should not just be a better phone book or LinkedIn group for the world of receivables finance, it should go beyond that,” Timmermans says. WOA will also work as a platform for community expert groups, something Timmermans believes will be the “backbone of the organisation”. The aim behind these groups is to bring new product and market ideas, as well as new technology, to the community. One example he mentions as an obvious area for expert groups to emerge around is blockchain. “There are a number of initiatives going on, but there is still a very big issue in getting feedback from the market. Once we have a community, members could create a community expert group for blockchain solutions for investing in receivables or factoring. They will work together, maybe create a survey, and that can lead to very quick feedback,” he says. The website and app will go live by the end of the year. Membership will be based on a so-called ‘freemium model’, whereby it will be free to sign up and use basic services, while more advanced features will be subject to a membership fee. The launch comes amid a global move away from traditional trade finance instruments towards more open account trading, which has created a growing need for new financing solutions. Meanwhile, the trend of unmet demand for trade finance continues. In a recent survey conducted by the ICC Banking Commission, 61% of banks perceived that there is more demand for trade finance than there is supply, while 80% expected little or no growth in traditional tools like the letter of credit. “If WOA is successful, in a few years from now, it’s not only about the number of individuals and companies who will be involved in the community, but it will definitely have contributed to an increase in open account, and that can be domestic or international business, and more receivables financing,” Timmermans ends. The post Industry veteran launches receivables finance community appeared first on Global Trade Review (GTR).

IFC and Citi expand US$1.2bn trade finance partnership

From Global Trade Review (GTR) | By Sanne Wass

IFC and Citi have extended their trade finance partnership by another four years, signing a US$1.2bn risk-sharing facility for the support of trade in emerging markets. It is the third time for the two parties to extend the facility that was first launched in 2009, under IFC’s global trade liquidity programme (GTLP). The goal, the institutions say in a statement, is to “expand the availability of trade finance at a time of reported global scarcity”. The facility extension will allow Citi to originate and fund more trade finance transactions to bank clients in emerging markets over a four-year span through a risk-sharing structure. Areas of coverage include banks in Africa, Asia, Central and Eastern Europe, Latin America and the Middle East, which will then extend financing to local importers and exporters. IFC and Citi will each contribute US$600mn to the facility. Since its inception, the collaboration between the two has financed a total trade volume of US$29bn (up US$9bn since its last extension), with around US$11.1bn in low-income and lower middle-income countries. This has been achieved through 4,092 trade transactions performed by 163 banks in 46 emerging market countries. Commenting on the facility, Paulo De Bolle, director of IFC’s financial institutions group, says the partnership is an important tool to support trade flows in “an environment challenged by derisking and continued volatility”. The funding is expected to support emerging market trade of another US$5bn through 2022. IFC’s GTLP programme is a global initiative that brings together governments, development finance institutions and private sector banks to support trade in developing markets. Launched in 2008, it has become a vital financing tool since the financial crisis. Some of the world’s biggest commercial banks have signed up. Over the last few years, for example, SMBC and Standard Chartered have each entered and renewed similar risk-sharing deals with IFC as part of GTLP. The post IFC and Citi expand US$1.2bn trade finance partnership appeared first on Global Trade Review (GTR).
Scroll to top