by Robert S. Fisher
The practitioner with an
aspiring exporter as a client will wish to be familiar with letters of credit
and other protective devices that will guarantee that the client ultimately
receives payment for the shipped goods. Some of the tools that may be available
are highlighted in this emerging issues commentary.
Governments sponsor trade
support programs designed to promote the country's exports. These programs
often include a variety of financing and insurance programs. The Export-Import
Bank of the United States (Ex-Im Bank) is the official export credit agency of
the United States. Ex-Im Bank assists U.S. businesses in financing the export
of goods and services to international markets. A business seeking to expand
its marketing overseas may consider looking to the Ex-Im Bank. The bank may
offer businesses insurance covering, among other things, the risk of buyer
nonpayment in connection with certain letter of credit transactions.
Historically, the export trade has been the province of mid- to large-size
companies or huge distributors, which are better able to absorb the risks of
such trade and better schooled in how to sidestep the pitfalls. Farmers, for
instance, often sell for export through domestic cooperatives, which in turn
deal with international distributors. In the defense sector, a small business
with a hot product may wish or be forced to deal with big defense contractors.
This can apply to software as well as to hard or durable goods.
Options for Small Businesses
The practitioner with an aspiring exporter as a client will wish to be familiar
with letters of credit and other protective devices that will guarantee that
the client ultimately receives payment for the shipped goods. Some of the tools that may be available are highlighted below.
1. For an exporter from the U.S., a U.S. bank can guarantee that the importer
overseas will pay your client when it delivers a product or service or, more
likely, on a guarantee that a foreign bank (usually proposed by the importer)
will make good on its letter of credit or guarantee of payment by paying the
exporter on notice of the foreign importer's default.2. An exporter may also need to post a surety bond to protect the
foreign importer, if a bank will not issue a letter of credit, guaranteeing the
exporter's performance. If a bond is not available from a bank because the terms
of performance are too complex or risky, the surety subsidiary of an insurance
company may provide relief. Unless the client has a direct relationship with
such a surety company, such a bond typically must be negotiated with one of the
major insurance brokers.
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Robert S. Fisher has practiced extensively in the area of consumer financing of
motor vehicles, recreational vehicles, recreational yachts, general aviation
aircraft, and general commercial equipment leasing. He has represented banks,
finance, general leasing, and yacht chartering companies in setting up leasing
programs and in the purchase, sale, and securitization of vehicles and
equipment.He has lectured on recreational vessel
matters before the Maritime Subcommittee of the American Bar Association, where
he is chair of the Boat Working Group of the National Title Task Force, and at
the Association of the Bar of the City of New York, where he was a member for
two terms of the Admiralty Committee. He has also lectured for the Conference on
Consumer Finance Law of Oklahoma City University School of Law and written for
the Consumer Financial Quarterly and the Rutgers Law Review. Mr. Fisher writes
frequently on maritime legal topics for Yachting Magazine.