GTR Ventures News

Kenyan trade financiers “losing the battle” with Chinese banks

From Global Trade Review (GTR) | By Sanne Wass

Kenyan trade finance bankers express concern that they are “losing the battle” with Chinese banks, whose expanding business in the country is increasingly leaving local banks out of the equation or in advising roles only. The concern is raised as China continues to up its stake in the African continent. Speaking on Monday at the start of the three-day Forum on China-Africa Co-operation in Beijing, China’s President Xi Jinping pledged another US$60bn for African development over the next three years. This funding will go towards agricultural modernisation, infrastructure connectivity, green development and healthcare projects. Xi also said China would implement trade facilitation programmes and hold free trade negotiations with interested African countries and regions. Reacting to criticism that Beijing is tangling African governments in a debt trap, he said: “Only Chinese and African people have a say when judging if the co-operation is good or not between China and Africa. No one should malign it based on imagination or assumptions.” In Africa, meanwhile, the Chinese dominance is very real: while financial support is generally appreciated, it’s not always deemed as good for the continent. In Kenya, for example, critics have for long warned against a “Sino-invasion”, as business reporter Dominic Omondi called the problem in an op-ed in Kenya’s Standard newspaper in May. Under the headline “Poor strategy dug Kenya into Chinese trade hole”, he argued that China has “stretched Kenya’s hospitality”, “taking advantage of the country’s open-door policy to flood the market with all manner of goods”. The numbers speak for themselves: as of June 2017, China controlled no less than 66% of Kenya’s total Sh722.6bn (US$7.2bn) bilateral debt, according to the Kenya National Bureau of Statistics in its 2018 economic survey. At Sh478.6bn (US$4.75bn), this is more than a seven-fold increase from China’s Sh63bn (US$625mn) debt to Kenya in 2013. And while Kenya imported goods worth US$7.38bn from China in 2017, it only exported US$114.5mn-worth of goods to the Asian country, according to estimations by Coriolis Technologies. Kenyan trade finance bankers are also worried that they are not getting as big a slice of the Chinese pie as they would wish. This is despite the fact that most Kenyan banks now have Chinese relationship managers, or have even created full Chinese departments, as recently reported by GTR. Timothy Mulongo, trade finance business development manager at Co-operative Bank of Kenya, says Kenyan banks are sometimes cut out of deals altogether by local Chinese branches, a trend he says is “a major cause of concern”. “We see a lot of the Chinese banks setting up locally, so instead of marketing their products from offshore, they would set up a local office and build customer relationships from there,” he says. “What that means is that there are less and less opportunities for local banks to do business. It becomes more or less like local Chinese trade: Kenyan banks would not even have an opportunity to intermediate.” This experience is shared by other banks. George Kiluva, head of trade finance at Commercial Bank of Africa (CBA), points to “the dominance of the Chinese business in the region” as an issue often raised at the Trade Finance Association of Kenya, a local professional body for Kenya’s 44 financial institutions launched last year to discuss challenges and harmonise practices. One challenge, Kiluva explains, is that local public sector construction agencies in certain instances have started to accept performance guarantees on local projects directly from China, rather than locally. “That is our business being exported. The Chinese banks are taking away a lot of our banking business, because we expect to issue these guarantees locally. We’ve continuously looked at how to lobby against this,” he says.   Priced out of the guarantee market While Kenyan banks started to encounter the problem last year, Kiluva says it is now becoming “entrenched”. “Whenever there is a local project that Chinese firms are undertaking here in Kenya, we would get a counter-guarantee from a bank in China, and on the back of a that, we issue a guarantee,” explains Mulongo of Co-op Bank. “But Chinese counterparties are always looking at how to cut their costs. So we have seen that they send out a guarantee directly from a bank in China. It doesn’t make much sense, because you are accepting an instrument from a counterparty that you don’t know.” The trend means that guarantee business is increasingly run without involvement of the local banks, he adds. “They do not play their intermediation role in the industry. And when the local banks are utilised, it is for advising only, not for local issuance or confirmation.” The fact is that Kenyan authorities have gained a high level of comfort in Chinese contractors, after years of working together. “The Chinese say: ‘We’ve done so many projects in Kenya and nothing has gone wrong, you’ve not had the need to demand on the guarantees.’ So why bring in a local bank that will charge extra and make the cost high? You find local banks are losing the battle on that front,” says a trade finance banker who preferred not to be named. Kenyan banks are simply unable to compete with the price of the guarantees issued out of China. According to Janet Mulu, trade finance manager at Ecobank in Kenya, the average price for a performance guarantee by a Kenyan bank is about 2% per annum, whereas Chinese banks typically offer 0.8%-1%, and have even been known to go as low as 0.2%. It leaves banks in Kenya with the challenge to find other revenue streams that they can leverage from Chinese commercial activity, such as collection and payments. More banks are also looking at how they can grow their business through supply chain finance programmes and invoice discounting. In June, for example, CBA launched a new supply chain platform to finance more SMEs, built by Nairobi-based fintech firm Ennovative Capital (ECap). But China’s fast pace will undoubtedly leave some local banks behind. As Theo Osogo, director of business development at Sidian Bank, puts it: “Competition has come, and those who are surviving are the ones who are structuring things differently.” The post Kenyan trade financiers “losing the battle” with Chinese banks appeared first on Global Trade Review (GTR).

HSBC exploring Middle East for next trade finance blockchain trial

From Global Trade Review (GTR) | By Sanne Wass

HSBC is looking to carry out its next trade finance blockchain pilot in the Middle East, according to the bank’s regional head of trade. Speaking to GTR for its upcoming Fintech Issue, Sunil Veetil says the Middle East will be the next region of focus for HBSC when expanding its recently successful trial for a blockchain-based letter of credit solution. The bank made big headlines in May when it announced it had conducted its first live, commercial trade finance transaction on blockchain together with ING for agrifood trading giant Cargill. The deal was completed using the R3 Corda platform, with a cargo of soybeans exported from Argentina to Malaysia. Corda’s letter of credit module, which has been developed by 12 banks, enabled the transaction time to be reduced from a standard five to 10 days, to 24 hours. According to Veetil, the announcement created great interest among clients in the Middle East, some of which HSBC is now looking to involve in the next stage of the trial. He did not give any further information on which clients the bank is in discussions with, but says the Middle East is an “ideal place” for testing blockchain, given the region’s growing importance as a trade hub between the East and West. “If you look at the region, there is a huge reliance on trade, so there are huge benefits that our clients can derive from this technology,” he says. Another “uniqueness” of the Middle East, he explains, is that there’s considerable push for change from the regulators. “There is currently a large focus on blockchain, fintechs are opening up, banks are encouraging fintech and accelerators, and we have our own hubs where we work with locally groomed startups. Definitely I can see that interest is very high in the region, within the government and the regulators. And they are quite nimble, they move quickly,” he says. He adds that HSBC is currently in discussions with UAE regulators, which are keen to provide the necessary support for the bank’s blockchain pilot. The UAE has thrown its weight behind fintech and blockchain more so than any other government in the region. In April, it launched its Emirates Blockchain Strategy, which seeks to transform 50% of government transactions into the blockchain platform by 2021. In doing so it expects to save AED11bn in transactions and documents processed routinely, 398 million printed documents annually and 77 million work hours every year. Meanwhile, Dubai has its own blockchain strategy, run by its Smart City Office.   Ideal for trade finance technology HSBC has also had a great focus on the Middle East for piloting other trade and supply chain finance technologies. Last year, when HSBC and IBM introduced an AI solution to automate and digitise trade finance documentation, they selected the UAE as one the first countries (together with Hong Kong) to go live in. The bank also recently rolled out its trade transaction tracker, a smart-phone based application, which was first piloted in Qatar. And it has just launched a new supply chain finance platform in the region together with Kyriba, a financial software provider. HSBC isn’t alone in its quest: a growing number of global banks and software firms are starting to see the Middle East as a perfect location to test and roll out new trade technology. Standard Chartered, for one, announced last week that it had chosen the UAE to kick off an “industry-first client pilot” for blockchain-based smart guarantees in trade finance, together with Siemens Financial Services and blockchain firm TradeIX. TradeIX’s CFO Daniel Cotti specifically quoted the government’s “enormous drive for digitalisation and blockchain” as one important reason for choosing that location over others. This was followed by an announcement by Finastra, one of the world’s largest financial software companies, that it had joined Bahrain’s accelerator programme Bahrain Fintech Bay, with the goal to expand its open innovation platform FusionFabric.cloud to local fintech startups. Finastra went live with the platform earlier in June in order to accelerate innovation for its 9,000 bank clients by allowing them to easily connect to fintech applications within an open marketplace. “Now couldn’t be a better time to be part of this community as the Bahrain Fintech scene heats up,” says Wissam Khoury, Finastra’s managing director for the Middle East and Africa. While it’s still early days for fintech in the Middle East (in fact, the region had as of January 2017 only attracted 1% of the US$50bn raised globally by fintech startups since 2010, according to consulting firm Accenture), it seems that this is set to change. Fintech Hive, an accelerator which was launched last year in Dubai International Finance Centre (DIFC), kicked off its 2018 programme this week, after having received “overwhelming response” from applicants for what will be its second programme. It got more than 300 applications from around the world – three times more than in 2017. According to Raja Al Mazrouei, executive vice-president of FinTech Hive at DIFC, it is a “testament to the increasing demand for disruptive technologies in the region”. As for HSBC, it has not revealed the specific timeline for the roll-out of its blockchain solution for letters of credit. Vivek Ramachandran, the bank’s global head of innovation and growth for commercial banking, told GTR in May that we can expect to see another few live transactions on the platform, as the bank learns how it interacts with the systems of other banks and corporations. Then the primary focus will be on driving industry-wide adoption. “We’ve still got a few more steps to do before we get to widespread adoption,” he said. The post HSBC exploring Middle East for next trade finance blockchain trial appeared first on Global Trade Review (GTR).

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).

Seasoned alternative financier becomes CEO of fintech firm

From Global Trade Review (GTR) | By Sanne Wass

Investly, a UK-based invoice finance fintech firm, has appointed Wayne Hughes as its new CEO. A seasoned working capital executive, Hughes brings over 25 years of experience working in the UK’s financial services industry, including senior roles with leading alternative financiers such as Demica and Bibby Financial Services. He joined Investly in May as consultant chief commercial officer. Now appointed the firm’s CEO, Hughes has been charged with “making Investly the leading receivables finance platform across the UK and rest of Europe”, the company writes in a statement. Investly launched its invoice finance platform for working capital and e-invoice providers last month. The platform, which allows businesses to sell their invoices, employs emerging technology to improve the speed and drive down the cost of financing, while expanding the reach of businesses that can be served sustainably. For example, the platform utilises open banking APIs to allow businesses to onboard seamlessly by connecting it to their bank accounts. The APIs also help the fintech firm to perform up-to-date monitoring for changes in credit risk to prevent fraud and overextension of limits. In a statement, Hughes says that while market and media commentary tend to focus on fintech’s disruption of incumbent players, he will rather seek to establish “mutually beneficial partnerships across the industry”. “I believe the true value exists in cooperative B2B relationships between fintech partners and existing market participants,” he says. And so instead of going after banks’ businesses directly, Investly is focusing on making its technology available for large origination partners which can then extend invoice discounting to their customers without having to build it in-house. Siim Maivel, founder and the previous CEO of Investly, now assumes the role of chief data officer. He says: “Working with the significantly larger pools of customers of our partners opens up further tools for data-driven credit decisioning, fraud prevention and automation. I will be carrying our long-held vision towards machine assisted credit decisioning engine in our next phase of growth as chief data officer. Credit intelligence will be key in becoming a market leader and sustaining healthy credit model.” The post Seasoned alternative financier becomes CEO of fintech firm appeared first on Global Trade Review (GTR).

Swift recruits Barclays executive to grow gpi in North America

From Global Trade Review (GTR) | By Sanne Wass

Swift has hired Dave Scola as its new head of North America, based in New York. He joins from Barclays, where he worked for almost seven years, most recently as global head of financial institutions. Prior to that, he spent seven years at Deutsche Bank, and previously worked at BNY Mellon. In his new position, which he will take up on October 1, Scola will be in charge of Swift’s innovation and growth strategy in the US and Canada. He will have a particular focus on driving growth in Swift’s global payments innovation (gpi) service and financial crime compliance portfolio. Swift’s gpi was launched last year to speed up settlement time and improve transparency for international payments. The service has so far been adopted by more than 200 financial institutions globally, but Swift recently announced it will move towards universal adoption of the gpi, meaning that all 10,000 banks on its global network will use the service by 2020. Commenting on the appointment, Javier Pérez-Tasso, Swift’s chief executive, Americas and UK, says: “With a proven track record of leadership in the Americas and Europe, Dave is ideally positioned to deliver innovation and growth in North America. We are delighted to welcome him on board as we accelerate our strategy in the region.” The post Swift recruits Barclays executive to grow gpi in North America appeared first on Global Trade Review (GTR).

Swift trials instant cross-border payments in Asia Pacific

From Global Trade Review (GTR) | By Finbarr Bermingham

gpi Swift is looking to bring cross-border payments times down to “instant” in a new trial that it has begun in Asia Pacific, focusing on settlements into Australia. It will pilot an improved version of its global payments innovation (gpi) service, which was launched in January 2017 to bring faster cross-border payments to its network. So far, Swift has managed to reduce payment clearing times to under 30 minutes in more than half of gpi use cases. Now the company will seek to reduce this further. Swift’s new “gpi real-time service” will be tested using Australia’s new payments platform (NPP), an instant payments platform that went live earlier this year, and which has so far been used to process domestic payments. Swift was commissioned by the Reserve Bank of Australia (RBI) to design and build this solution in 2015. This move to improve the gpi service will involve banks from Australia, China, Singapore and Thailand. These are: ANZ, Bangkok Bank, Bank of China, China Construction Bank, Commonwealth Bank of Australia (CBA), DBS, ICBC, Kasikornbank, National Australia Bank (NAB), Siam Commercial Bank, Standard Chartered and United Overseas Bank (UOB). The banks had previously been involved in workshops around instant payments with Swift. Whether or not the new gpi service replaces the existing one is undecided: Swift is waiting for the results of the trial, which it plans to announce at Sibos, its annual banking, finance and fintech conference, which takes place in Sydney this October. “The gpi real-time service is a critical step in delivering cross-border instant payments. The commitment and support we have from Asia Pacific’s leading banks is a strong indication that they understand the immediate value of partnering with Swift to realise a fast, secure and seamless cross-border real-time payment service that scales globally,” says Eddie Haddad, managing director at Swift in Asia Pacific. Already, the gpi is being used to settle US$100bn in payments every day, according to Swift. It has been gaining traction in Asia Pacific. In June, 10 Chinese banks went live with the gpi service, with 17 others in the process of implementing it. In July, Swift announced that all 10,000 banks on its global network will use gpi by 2020, after Swift was impressed by the progress made with the technology since its launch. Sun Shangbin, deputy general manager in Bank of China’s clearing department, says the instant gpi would “substantially enhance cross-border payments efficiency, providing high-quality service experience for our customers”. Silawat Santivisat, executive vice-president of Kasikornbank in Thailand adds: “The keen competition amongst payment channels, competitive transaction fees and transaction speeds offered by new entrants, mean that a faster Swift gpi service is crucial to driving international payments. While real-time payment is common for domestic transfers, it is an innovation for international payments.” He may be referring to competition from outfits like Ripple, which have been able to reduce payment times to instant – or close to it – by using blockchain technology. Swift, for its part, has trialled blockchain for nostro account reconciliation, but has not been convinced that it is a technology ready for use at the required scale. At an event in Hong Kong in June, a Ripple executive dismissed the gpi service as being only a marginal improvement on the traditional Swift offering. “Swift was built 40 or 50 years ago, before the internet was created. So their architecture is very old. They realise that this is a big problem and they consider us a big competitor. They’re also trying to make a big improvement based on the existing architecture, called Swift gpi. We consider it just a marginal improvement of their existing architecture,” said Ripple’s director of joint venture partnership, Emi Yoshikawa The market, however, will welcome another move from Swift to reduce payment times. It is used across the board by banks around the world and the likelihood is that most would prefer to use a payments service from a company they know and trust, rather than using a new player. “Swift’s new instant cross-border payments service is an important industry initiative that will complement our efforts to provide clients more control of and insight into their transactions,” says So Lay Hua, head of group transaction banking at UOB. The post Swift trials instant cross-border payments in Asia Pacific appeared first on Global Trade Review (GTR).

US-Mexico trade deal “puts pressure on Canada” to save Nafta

From Global Trade Review (GTR) | By Finbarr Bermingham

us-mexico After the US and Mexican presidents celebrated a breakthrough in the arduous renegotiation of the North American Free Trade Agreement (Nafta), analysts claim that the pressure is now on Canada to save its place in the deal. Earlier this week, US President Donald Trump announced that a deal had been struck with its neighbour to the south. The deal resolves long-standing sticking points in the automotive sector, where the US has negotiated a requirement that 75% of a vehicle be made in North America (a hike from the previous 62.5%). Of that 75%, between 40% and 45% must be made by workers earning at least US$16 an hour – placing the benefit firmly in US hands, where workers earn a higher wage. Furthermore, the US has agreed to a more relaxed 16-year lifespan, with a review every six years. Previously it had insisted on a five-year renewal clause, a scenario both Canada and Mexico have been keen to avoid, due to the uncertainty that would bring. Trump has suggested that the “US-Mexico trade agreement” replace Nafta, while his Mexican counterpart Enrique Pena Nieto has said he hopes that Canada could be included. Either way, the onus has shifted to Canada, with foreign minister Chrystia Freeland cutting her tour of Europe short for trade talks in Washington DC. “This agreement puts Canada under pressure and brings a breakdown of Nafta a step closer. Pena Nieto will gain nothing politically from the deal which, if ratified, may prevent meddling by Mexican President-elect Andres Manuel Lopez Obrador, but will also absolve him of all responsibility for any of its negative impacts for his entire six-year term, which starts in December,” says William Arthur, North America analyst at Oxford Analytica. Trump has said that talks with Canada are “going well” and expressed confidence that a Nafta deal could be concluded this week. Canadian Prime Minister Justin Trudeau, however, was less effusive about the progress, saying that his negotiating team would hold out for an agreement that suits Canada. “We’re seeing if we can get to the right place by Friday. We’re going to be thoughtful, constructive, creative around the table but we are going to ensure that whatever deal gets agreed to is the right deal for Canada and the right deal for Canadians,” he told reporters. Other analysts have downplayed the significance of the US-Mexico deal, saying that while the reaction of the financial markets has been positive, thus far, it does not alleviate wider concerns about the protectionist bent of the US government. They point to the ongoing trade war with China: on August 23, the US began implementing an additional 25% tariff on a second list of Chinese products. “At the same time as US negotiators were formalising the pact with Mexico, trade talks with China came to nothing and no dates were announced for further talks. Public hearings on proposed US tariffs on US$200bn of Chinese imports also ended yesterday. And our working assumption is still that the US will ultimately go ahead and impose these tariffs,” says Oliver Jones, markets economist at Capital Economics. He added, however, that the fact that the US administration is willing to negotiate and accept a compromise on trade will be welcomed in China. It is also likely that should this deal see the light of day, it will force auto manufacturers to rejig their supply chains if they wish to operate tariff-free in the region. The Mexican government estimates that 30% of the cars it makes and sells to the US would not contain sufficient North American content to meet the requirements. “They [manufacturers] will have to take on new costs — which cars made outside the region will not — whose only benefit is continued access to the zero tariff. And these are not the kinds of costs leading to tangible consumer gains — ie, don’t expect increased fuel efficiency, safer vehicles, or additional creature comforts,” writes Chad Bown, senior fellow at the Peterson Institute of International Economics. Bown predicts that  some manufacturers in the US may benefit from less direct competition from makers in Europe and Asia. However, the downside may be passed onto the US consumer. “But these ‘gains’ are more than likely offset by their economic downside. Rising costs imply higher prices for American consumers. Equally important is North America’s deteriorating competitiveness as a global export platform for carmakers. As consumer growth in North America slows, these companies are evaluating where they can produce competitively in order to access emerging markets in Asia, South America, and elsewhere. Clunky new rules and higher costs make America, Mexico and Canada a considerably less attractive hub,” Bown says.   The post US-Mexico trade deal “puts pressure on Canada” to save Nafta appeared first on Global Trade Review (GTR).

Do Japanese banks’ project pipelines conflict with shift in coal policy?

From Global Trade Review (GTR) | By Finbarr Bermingham

japanese banks Despite suggesting they would restrict their funding for coal projects, the project pipelines of Japan’s three major banks suggest they are still heavily involved in the sector. Mizuho, MUFG and SMBC all updated their coal-funding policies in May and June of this year. The move was welcomed by environmentalists, given that these banks are among the heaviest funders of dirty coal projects in Asia. However, new research from Market Forces, a lobby group, shows that each is set to fund large projects that would be in contravention of their updated policies. Combined, these projects will emit 1.6 billion tonnes of CO2 over their lifetimes. The study shows that if they were to follow their policies to the letter, Mizuho would be ruled out of 40% of their pipeline projects by capacity. MUFG would be ruled out of 31%, while SMBC would have to scrap 31% of these projects. Mizuho’s policy brief states that “primary considerations is whether the use of greenhouse gas-producing technology is appropriate due to economic necessity when compared to feasible alternative technologies which offer similar levels of energy efficiency”. The MUFG document reads: “MUFG Bank and Mitsubishi UFJ Trust and Banking refer to international guidelines such as OECD arrangement on officially supported export credits, when considering the provision of financing for new coal-fired power generation.” These guidelines restrict funding for the majority of coal-fired projects. Those that can be funded are those that require “ultra-supercritical technology”, which rules out most of the pipeline, according to Market Forces. SMBC’s updated policy also refers to ultra-supercritical technology, defined as power plants which “require less coal per megawatt-hour, leading to lower emissions (including carbon dioxide and mercury), higher efficiency and lower fuel costs per megawatt”. The bank’s policy reads: “Our policy for new financing will be stricter, limiting financial support to only coal-fired power plants that use ultra-supercritical or more advanced technologies which are considered highly efficient”. None of the banks were willing to comment on the report, however an MUFG representative raised the bank’s positive ranking  with regard to clean energy financing, stating that while 50% of MUFG’s portfolio of power-related project finance worldwide is in the renewable sector, less than 10% goes to coal. The projects in question span five countries: Botswana, Bangladesh, Myanmar, Mongolia and Vietnam. Almost 50% of the coal-fired plants will be built in Vietnam, which has been investing heavily in power plants, the majority of which are coal-fired. SMBC was among the lenders on the S$1.87bn syndicated loan for the Nghi Son 2 coal-fired power plant in Vietnam, which reached financial close in April, despite claims that it will generate “twice as much” CO2 per every unit of power generated as the average generating plant in Vietnam. Meanwhile, Sumitomo Mitsui Trust Bank, part of the same group as SMBC, told Reuters in July that it “would stop providing project finance for new coal-fired power stations as a basic rule”. The post Do Japanese banks’ project pipelines conflict with shift in coal policy? appeared first on Global Trade Review (GTR).

Trump’s ‘America first’ policy yet to impact US trade flows

From Global Trade Review (GTR) | By Eleanor Wragg

In 2016, US President Donald Trump told Americans: “Ladies and gentlemen, it’s time to declare our economic independence once again.” But less than two years later, the United States International Trade Commission’s (USITC) Year in Trade 2017 report shows little evidence of the ‘America first’ policy’s impact on trade, and American trade finance bankers remain sanguine about their prospects – at least for now. Despite Trump’s mercantilist aim to boost exports across the board while cutting imports, the US saw an increase in the value of both exports and imports of goods in 2017, according to the figures released by the USITC this month. Exports were up US$95.7bn, or 6.6%, and imports up US$155.1bn, or 7.1%. The growth in export value was mostly driven by the crude price increase  and the removal of the US government ban on most exports of crude to countries other than Canada in December 2015, which pushed energy-related product exports 45.5% higher to US$143.2bn. According to the USITC, the value of merchandise exports to all major trading partners increased, with the exception of Taiwan, which saw a decrease of 1.1%. India saw the biggest rise, of 18.7%. “It’s really value change that we saw in the US, not increased volume. The cost of oil affected both sides of the ledger,” says Michael Quinn, managing director of global trade and loan products at JP Morgan. “A rising tide raises all boats.” In a year which saw the fastest economic growth in three years and four Federal Reserve rate hikes in 12 months, “the macroeconomic aspect is supporting positive performance more than any specific policy”, says Michael McDonough, JP Morgan’s head of corporate trade and supply chain. Trump has made cutting the US trade deficit one of the cornerstones of his trade spats with major partners, but this new data shows that only the agricultural sector experienced a trade surplus in 2017, with US$5.7bn more in exports than imports. This actually narrowed from 2016, where agricultural exports were worth US$129.7bn versus imports of US$113.1bn. The energy-related products sector’s deficit fell to US$4.5bn, but the trade deficit in other sectors of the US economy widened. There are structural reasons for this. As a recent Oxford Analytica Daily Brief pointed out: “A permanently higher dollar due to the desire of investors to buy US assets will keep the US goods balance in deficit despite trade policy.” “The impact of individual policy changes hasn’t penetrated yet,” explains Quinn. He believes that 2017 was in general a “better year” in US trade finance than prior years, largely due to global economic strength. However, with the US pushing forward with plans to impose further tariffs on China, the implications for lenders could be serious. USITC figures show the value of imports from China were the biggest gainer in 2017, up 9.3%. “If tariffs kick in with any permanence then I think sourcing patterns would change. US steel or aluminium, because of reciprocal tariffs, would become more expensive and a European Union importer could then turn to China or India for the same product,” says Quinn, although he believes it is still “too early to tell for the future if tariffs are going to be sustained”. So far, then, America’s trade finance banks are yet to see any material implications of the ‘America first’ policy. “Ultimately, our business will change if and when our clients change their sourcing and their selling patterns. If we were to see a wholesale shift away from manufacturers importing input to then manufacture and export, that would impact our business. But as of yet, we have not. We haven’t seen any substantive, longer-term shifts in clients’ behaviour that we weren’t seeing already,” says McDonough. For now, despite sabre-rattling from the US president, it remains business as usual for trade finance in the country. “Looking at the future, I think the changes we see are more dependent on longer-term trends such as the continued shift to open account, which drives an increase in supply chain finance or other related open-account financing activities. We are also seeing an increased shift towards digitalisation or electronic trade,” says McDonough. “Those are both long-term trends, and frankly I don’t think that change in trade policy has much impact on them.” The post Trump’s ‘America first’ policy yet to impact US trade flows 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).

Standard Chartered and Siemens pilot blockchain-based trade finance guarantees in UAE

From Global Trade Review (GTR) | By Sanne Wass

Standard Chartered and Siemens Financial Services, the financing arm of Siemens, are kicking off what they call “an industry-first client pilot” for blockchain-based smart guarantees in trade finance. They will do so in collaboration with blockchain firm TradeIX, a provider of a trade finance specific open-source blockchain platform, which allows financial institutions to develop their own trade finance applications with open APIs. Using TradeIX’s tools, Standard Chartered and Siemens started building the solution in March. It is among a number of proof of concepts that the bank has conducted on the open platform – and one which it has now decided to pilot with the purpose of commercialisation. Built on R3’s Corda framework, the solution will enable Siemens to digitise and automate its guarantee process – a traditionally paper-intensive business – for customers with large transaction volumes, from initiation of the bank guarantee to the claim handling. It utilises a decentralised ledger and auto-executing smart contracts to provides a streamlined communication tool between the guarantee issuer (in this case Siemens), the bank (Standard Chartered), and the beneficiary (Siemens’ customers). The pilot is expected to be fully completed later this year. “Unlike a letter of credit, which involves multiple parties, performance details and over 100 pages of documents, a commercial bank guarantee is a much simpler instrument to digitise,” Standard Chartered says in a statement. According to Michael Bueker, CFO at Siemens in the Middle East, having such a digital trade finance solution “is an important step” toward making the company’s trade finance operations “smoother, faster and more efficient”. “We are delighted to partner with Standard Chartered in leading such a game-changing transformation, which will help our customers go digital in their guarantee and claim processes and achieve higher efficiency,” he adds. The parties will pilot the solution in the UAE, which offers a good location for such an initiative, given the government’s “enormous drive for digitalisation and blockchain”, Daniel Cotti, CFO at TradeIX, tells GTR. He adds that most of the beneficiaries of the guarantees will be government entities. The UAE has thrown its weight behind blockchain more so than any other government in the region. In April, it launched its Emirates Blockchain Strategy, which seeks to transform 50% of government transactions into the blockchain platform by 2021. In doing so it expects to save AED11bn in transactions and documents processed routinely, 398 million printed documents annually and 77 million work hours annually. Meanwhile, Dubai has its own blockchain strategy, run by its Smart City Office. Commenting on the pilot, Motasim Iqbal, Standard Chartered’s head of transaction banking in the UAE, says: “This is an industry-defining solution which we believe will transform the way guarantees are issued and processed in the UAE. Siemens Financial Services has been a key partner for us to build and develop this pilot on the distributed ledger and we believe that this technology can further be harnessed by the Dubai Smart City initiative.” A range of projects are currently being carried out on TradeIX’s platform. The most prominent one goes under the name Marco Polo and is a platform for open account trade developed with R3 and 10 international banks, also including Standard Chartered. Pilots for this project are currently being prepared and are scheduled to begin in October, before being commercialised next year. The blockchain firm has also worked with Standard Chartered and global insurer AIG on a project to develop a blockchain-powered invoice finance programme for DHL. Now implemented by the logistics company, the solution helps its customers extend their payment period whilst maintaining the company’s receivables at current terms. The post Standard Chartered and Siemens pilot blockchain-based trade finance guarantees in UAE appeared first on Global Trade Review (GTR).

Standard Chartered on trade war: “At what time does sanity prevail?”

From Global Trade Review (GTR) | By Finbarr Bermingham

standard chartered The US-China trade war can only have negative effects in the long run, even if the short term impact have been minimal for trade finance providers in Asia. Those are the views of Standard Chartered’s global head of trade finance, who has called for common sense, as trade tensions continue to escalate. In an interview with GTR in Hong Kong, Farooq Siddiqi voiced concerns over the negative effect the US-China conflict may have on trade and investment sentiment. Citing examples of trade wars in the 1930s and 1970s, Siddiqi says: “When you look at the benefits, did it protect employment or help GDP? The answer is all negative. In the long run, if you have this mutually-assured destruction, it doesn’t help anybody. The question is: at what time does sanity prevail?” Standard Chartered is one of the leading funders of trade in emerging markets and is extremely active throughout emerging Asia, including in China. A sizeable portion of the bank’s book comes from financing trade between China and the rest of Asia. In an earnings call after the bank reported a healthy profit over the first half of 2018, chairman Jose Vinals said: “Our direct exposure to the risks of US-China trade tensions is limited. We generate far more income financing commerce between China and other markets in our footprint — meaning we stand to benefit over time if that were to increase — than we do on trade between China and the US.” This sentiment was echoed by Siddiqi, who says that the US-China trade Standard Chartered finances is “not a material number”. However, it may lead to shifts in production bases, according to research the bank has done with clients in China. “We did research with some companies in the Pearl River Delta, asking them for their your response to the trade war. Some will try to figure out a separate sourcing strategy. In the medium term, they’ll look to move their manufacturing location to another country. The big theme is companies moving south to Asean, Cambodia, Myanmar, and so on,” he says. This research surveyed more than 200 companies working in the Pearl River Delta. Of these, 70% expect a high or medium negative impact from a trade war. This in part explains the shift towards other markets in Asia, a medium-term endeavour that may take three to five years to complete. However, these shifts are likely to occur regardless of the resolution of the trade war, due to the increase in labour costs in China. “Net-net I don’t expect anybody to benefit from the trade war. In the long term it will have a negative impact. In the short term I expect companies to look for tactical places to switch sourcing. In the medium term if it really stays, they will look at rebasing manufacturing into other locations,” Siddiqi says. His views are largely shared among Asia Pacific trade financiers: the industry is yet to experience a material impact from the trade war – with the caveat that the tariffs have only recently started taking effect. “When we think about the trade wars, from my perspective I am more concerned with the trade rhetoric damaging investor sentiment, investor confidence and sending markets lower,” said HSBC’s chief executive John Flint on an earnings call earlier this month. Siddiqi, meanwhile predicts that the future growth engine of global trade will be intra-Asian trade and domestic consumption in emerging markets in the region, namely China, India and Indonesia. This reshuffling of the traditional export model may help shelter the region from future scuffles between the US and China. It may also help banks such as Standard Chartered, which have domestic footprints in these markets. “Traditional factors which drove trade growth in the past were trade between Asia and OECD countries. The EU and US would consume, Asia would produce and sell to those markets. That model is fundamentally changing. Mostly, people will produce to consume it locally: look at markets like Indonesia. Yes, today is dominated by the trade war rhetoric, but these are green shoots that banks like ours are focusing on, because that’s where the revenue growth will be,” he says. The post Standard Chartered on trade war: “At what time does sanity prevail?” 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).

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).

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).
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