TPCC Inter-Agency Trade Officer Training

1. TPCC Inter-Agency Trade Officer Training Financing and Risk Management for International Trade Presented by Steven W. Howlett Managing Director Government Agency Funding and Advocacy GE Capital Markets - Corporate September 26, 2012

2. Training Overview:- Introduction to GE Capital Markets Corporate Function- Spectrum of Risks Associated with International Trade- Private Sector Tools for Mitigating Risks

3. GE Expertise in Multiple Product Areas Export/ Structured Finance Trade Finance Project Finance • Private • Bank guarantees • Letters of credit • Deferred payments • Forfaiting • Short-term • Public Sector Buyers (Sovereign, Non-Sovereign, etc.) • Private Sector Buyers • ECA loans/ guarantees • ECA Co-financing • MT/LT • Sourcing issues • SPC (special purpose company) • No guarantees, limited guarantees • Financing dependent on cash flows/off-take agreements • Frequently requires ECA/MDB support Leasing/ Lending Political Risk Insurance (PRI) & Credit Insurance • Insure against expropriation, political violence, currency inconvertibility. etc. • Insure against corporate risk • credit default swaps • Financing typically equipment specific • Applicable for more developed markets • Financing frequently requires int’l bank support

4. Spectrum of Certain Risks Associated with International Trade

5. Spectrum of Risks: The Balance Between U.S. Exporter and Foreign Buyer Exporter Wants Payment as Soon as Possible at time of Contract Signing or at Time Of Shipment. Buyer Wants to Delay Payment as Long as possible until Sale of Goods, Receipt & Processing of Goods, Collection of Receivables.

6. Background: Incoterms • The International Chamber of Commerce ("ICC") created “INCOTERMS” in 1936 to uniform global trade. The ICC periodically revises publications of INCOTERMS. The latest version was released in January 2011. • Set of uniform terms applicable to all the various types of purchase agreements and shipping agreements, which also serve as a “global language”. • Defines the responsibility of the Buyer and the Seller - conveys “risk” and “responsibility”; which party is to pay which charges, and where delivery takes place.

7. Movement of Goods: Scope of Seller and Buyer Responsibilities (Ex Works) (Free Alongside Ship) (Free Carrier) (Free On Board) (Cost & Freight) (Cost, Ins, Freight) (Carriage Paid To) (Carriage & Ins. Paid) (Delivered at Frontier) (Delivered Ex Ship) (Delivered Duty Unpaid) (Delivered Ex Quay (Delivered Duty Paid)

8. Tools to Mitigate Risks

9. Mail Document Collection (5) (3) Documents Remitting Bank Presenting Bank (4) Exchange (6) (2) Documents Buyer Seller (1) Shipment of Goods

10. Open Account vs. Letter of Credit Terms Buyer Sales Contract Open Account Letter of Credit Buyer + Letter of Credit Sales Contract Payment risk reduced with a Letter of Credit

11. Credit Insurance • Protects U.S. exporters against loss should a foreign buyer default due to commercial or political risks. • Private Sector vs. Public Sector policies (e.g. Ex-Im Bank, OPIC etc.) • Types: Single Buyer, Multi-Buyer, Lease cover, PRI, etc. • Use Brokers

12. Summary • There are many risks associated with cross-border transactions (e.g. payment, shipping, foreign exchange, etc.) • Particularly problematic for low-resource exporters or inexperienced exporters • Key government and private sector institutions and programs are available to deal with these risk issues Take Advantage of What’s Out There!