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2nd reminder letter for payment for Export

all right hold balance Ryan you may begin thank you good morning everyone on behalf of the U.S commercial service we welcome all of you to our second part of our five-part trade Finance series during export week 2023 today our federal Partners from SBA and XM plus other subject matter experts will educate you the U.S exporter about export credit insurance payment terms letters of credit foreign exchange and just best tips and best practices my name is Brian beams and I am your Deputy team leader for ita's financial services team and your host for today's session our producer of the entire C Series is Anthony sargis based in our Connecticut office before I hand over the controls to today's moderator a couple of items to mention everyone is currently on listen only mode this session will be recorded if you object to that please disconnect at this time participants can write in questions into the Q a feature at any time during the presentation next week we will send out the recordings and resource materials of all five sessions to all their registrants lastly the views and opinions expressed in this presentation may not reflect the official policy and or position of the US government I will now turn it over to Joe raycraft the with the small business administration's office of international trade Joe thanks Brian and uh welcome everyone and and thank you for joining us today for export week's presentation um on export credit insurance payment terms letters of credit and foreign exchange as you can see on the slide this is our day two event uh yesterday we covered government resources and all the services that are available to small business exporters if you join us the rest of the week tomorrow we have an export business planning webinar that will feature a business advisor from the Small Business Development Center who will walk us through kind of that export business planning and strategy uh format and then on Thursday there's um a webinar on grant funding and how that can be used to support exporters we'll hear about the sba's State trade expansion program and also food exports branded program and then finally on Friday we're going to wrap up with financing for small business exports and that's going to be a webinar including myself from SBA and Richard Foy from exim Bank rich boy is on the line today and he'll be participating in today's event so today you're going to learn about an important financing tool and it's export Credit Insurance we're going to learn what it is how it works and what is the benefit that it provides to small business exporters and how export Credit Insurance can be used as a sales tool to generate higher export sales um we also have a team from Citizens Bank today it's going to provide a presentation on getting paid on your export sales the advantages and risks of the different types of payment terms that are offered anywhere from cash in advance to letters of credit and open account the bank's presentation will also discuss a little bit about foreign exchange and standby and letters of credit and some best practices um with the Citizens Bank team we have jerson de Silva he's vice president and relationship manager within the business banking group at um at Citizens Bank we're also joined by Carmel uh Dan Breville who's vice president of Trade Services and Aaron Aaron Paddock vice president Global markets and foreign currency or foreign exchange um so to kick things off I think we'll we'll move to jerson um and if if you wouldn't mind um you know talking about um I'm sorry are we going to go to export Credit Insurance first yeah Tom John I think you can probably check right into it perfect perfect okay so we're gonna uh pivot back to export Credit Insurance I want to introduce um Richard Foy from the export import Bank of the U.S and Tom Malloy from risk protection International and if you guys would uh just take a minute to introduce yourselves your organizations and what you do and Rich I'll start with you thanks Joe um my name is Richard Foy I'm the regional director for export import Bank of the United States otherwise known as XM bank I am responsible for the Northeast region of the United States we operate out of other Regional Offices uh around the the U.S so you can reach out to your local uh person as it were by visiting our website xm.gov we're fortunate to have Tom Malloy who's uh you know a long time professional in Trade Credit um and he's going to present Trade Credit to you the concept the benefits and so on so I'll I'll turn that over to Tom now thanks thanks for your time everybody my name is Tom Malloy I'm the managing partner of risk protection International we're a 40 year old insurance agency that specializes in ensuring accounts receivable and a few other related lines the presentation I have today is is a PowerPoint consist of maybe a dozen slides which I'll run through rather quickly and what what I've been asked to do is to kind of give a like a 10 000 foot view of what credit insurances simply some of the broad categories of how it works and um and then offline if anybody has any additional questions or anything else that you want us to delve into we can certainly deal with that later so let me start off and I think I see the slides are up on on the uh the uh the presentation online which is great so again today's my portion of today's presentation is just to talk a little bit about accounts receivable insurance and how it interacts with uh with accounts receivable and dealing with risks related to uh to International Trade now simply put Credit Insurance or accounts receivable insurance is just ensuring the payment risk of a receivable if you're selling cash in advance then you don't really have a receivable we even paid before your UH your product even leaves the shores you don't need to think about these types of risks but if you're in a competitive environment and you're selling product overseas and your buyers your customers are asking you to give them some terms to pay then you are in fact incurring a foreign risk so credit insurance is Simply a a seller an exporter in country a selling products to a buyer or series of buyers and countries b c d e f g that's really all it is there's a parallel line which is domestic credit insurance which is which is just ensuring transactions that don't go cross-border Connecticut companies selling to a company in Iowa that would be a domestic credit receivable and that could be done through Credit Insurance um Connecticut companies selling to Canada or Germany or France that's an export receivable and that could be covered through export Credit Insurance you just pop over to the next slide if you would please so if we look at companies whether you're a Manufacturing Company whether you're a trading company or anything in between when we look at balance sheets we we see that you know receivables are fairly usually a fairly good chunk of your asset base as are plant Machinery inventory Etc all of those other receivables are generally covered in some form of insurance so for example you have a facility you have a plant you may may have borrowed taking a mortgage on it you wouldn't be able to get the mortgage unless you had fire insurance on the plant you have inventories those are insured against theft deterioration fire risks things like that so what we see on a balance sheet is most most assets have some sort of an insurance backing but the one area that that is often overlooked are accounts receivable and they can be substantial on on a balance sheet it could be 20 30 40 50 percent of of your uh of your uh your asset base and this is where the insurance that we're talking about jumps in and protects those those receivables which may in fact be uninsured if you flip this the next slide please okay so I mean this is fairly obvious what consequences of bad debt if you have a sale that goes south and you have to write that receivable off you know obviously first you have a loss um that can make you a little bit weary about doing business again in that Marketplace uh you may want to think about going back to cash in advance and that has a potential drag on your your sales potential so so bad debt generally creates problems for companies the insurance is there to minimize the risk of bad debt by creating a secondary source of repayment if the buyer fails to honor their promise to pay you generally you can then look to the insurance company to step in and substitute and pay you where the buyer did not and then that insurance company will generally try to collect the debt from that delinquent buyer very simply how it works flip to the next screen if you wouldn't um reasons or some of the factors that go into companies thinking about using credit insurance and you can see there's six here that we've we've just highlighted it's interesting rich and I just put together a deal for a a company actually in New Jersey in fact they the transaction just shipped two weeks ago they paid the premiums the policy is in place and what this was was a very large deal for a fairly small company this company is in the telecommunication area they picked up a half a million dollar order from a very nice very stable looking company in Germany but they'd never done business with this company before and a half a million dollar order was extremely lumpy it was very large and outside of their normal water flow so they were concerned so they approached us because they had this concentration of risk with this one buyer it was a new customer it was a cross-border transaction and it was a special order because they had to produce this product specifically for that buyer and then to win the order they had to Grant credit terms so it really met four or five of these sort of parameters on the screen that highlighted why they should think about Credit Insurance in this particular order they had to basically sell the half million dollars uh with six payments basically at 30 60 90 120 150 and 180 days so it was a sixth of a payment every 30 days and when I was when we were speaking with the owner what they were concerned about is if this order went South and if they couldn't collect put a huge huge huge dent into their financial position into their borrowings and into their overall cash flow so action bank which is Rich's operation they were able to insure this for I think that what was a premium Rich it was like maybe 90 cents it was like it was less than one percent of the insured sales to get the deal done clients started with an application took a couple weeks to get the buyer vetted but say from start to finish two weeks three weeks they went from having a new order to having it fully covered to actually closing the deal those are those are the types of scenarios that we see all the time and that would generally Drive somebody to consider Insurance flip to the next screen if you would and again just to to Define Credit Insurance what what really what export Credit Insurance is it's a management tool and it basically is a secondary source of repayment if your buyer fails to pay so you've done what you've what you promised you've built the product you sold the product you deliver the product now the onus is on the buyer to honor their commitment and if they fail this is where the credit Insurance Pops in jump to the next slide if we would and types of things that are covered these are again just very broadly what what insurance is covering you for is if the foreign buyer goes bankrupt and we're all familiar with chapter 7 and 11 bankruptcies and different types of bankruptcies and in various countries if a customer takes an order goes bankrupt and you don't get paid blameable event under the policy but more importantly the second the second uh bullet here protracted the fall that's where you sell the product you say you give 30 day terms the buyer says okay I'll pay you in 30 days 30 days comes and goes in 60 days and 90 days and it just drags on and drives on and you're getting promises checks in the mail we have a little cash flow problem we're going to pay eventually on and on and on it goes you've made all reasonable efforts to collect the buyer's not insolvent they're not bankrupt they're still operating as far as you know they may be financially straight you have no idea they're in another country well that's a protracted default that can be claimed in under the policy and then the final area is a very broad category called what we call political risks and those are macro events that impact and impinge on the international transaction you sell product to uh you sell product to um well a classic example we have one of our clients sold product to the Ukraine war breaks out economy Goes to Hell they're not getting paid so we're filing claims in that particular scenario under the political facet of the policy three very broad categories each one has particular requirements but again from a ten thousand you know foot view very very broad coverage of your accounts receivable let's flip to the next slide if we may and uh the question is okay so so we know what Credit Insurance generally does uh where do you get it who provides it two broad sources we have the government program which is what Rich will talk about that's the export airport bank so U.S government agency it was formed through enabling legislation in the 30s it's been operating for 70 80 years and they very much were an innovator and a market leader in the export credit insurance industry in the United States in fact without them it wouldn't have existed so in the early years the 30s 40s 50s 60s and 70s they were very much Innovative providing a great amount of coverage for come for U.S customers us companies um in the last 20 30 years we've seen a proliferation of private Underwriters multi-line single line Underwriters that also offer Credit Insurance they offer domestic Credit Insurance for U.S transactions they offer export credit and transactions um and they're they're just another venue to go to so we can look at government program we can look at private programs and it's it's there's constantly players coming in just flip the next slide if you would maximum Hank is what Rich will talk about that's the U.S government agency and very strong a very strong provider of Credit Insurance flip to the next slide if we may and um again the the private Underwriters that operate in the U.S are um about there's about a dozen you know any given year some come in some come out some have expand their programs but they're they're leading companies some of the names you may have known in fact let's flip to the next slide just quickly if we may some of the uh logos of the major companies AIG which multi-line company that we all know and you in fact may use some of these companies in your business to ensure other types of transactions apart from receivables Allianz kofots Etc and again new companies coming in additional companies entering the market every year so we have a broad base of a broad base of companies providing cover uh we talked about uh the insurance providing various types of benefits the key thing is it gives you a secondary source of of collection in the event that your buyer does not pay um it it can do a number of other things it can be very uh you can use it as a sales tool to try to take on new daughters or additional orders or maybe go a little bit beyond your comfort zone and actually Grant credit terms or slightly longer terms to help you win business you can you can use the insurance for whatever purpose that it fits you or a particular need if it's strictly risk protection so be it if you want to use it as a sales tool if you want to tie it into working with the SBA or working with your bank to try to develop lives of financing you can you can see benefit and use it in that particular fashion and it can be a it can be an overlay to your credit function so if you if you have a credit department in your company the credit Insurance works very much hand in hand with your credit department if you don't have defined credit function the credit Insurance can actually fill some of those credit function needs for you again there are different ways to structure coverages and there are different types of programs but but there's probably a fit for whatever you need to do let's flip to the next slide if we may and again uh how it works a very simple process is all Insurance requires some sort of an application just basically who why what where what are you doing what type of product are you selling where are you selling where do you want to sell what type of terms are you providing that's that's the what's your experience been that's the general sort of five or six questions that are asked and then they can become a little more granular if you want to get into a lot of specifics about what you're doing and how you're trying to structure the policy but it's it's a fairly simple process um it takes a couple of weeks to put the policy together and again it's just usually an application that generates some back and forth questions with the Insurance Underwriters and then they'll structure an offer for you policies generally are written for a one-year period and they're renewed annually but again they can be shorter or longer they typically cover a substantial portion of the receivable that you generate 90 95 on average um there are different ways of writing the policy you can you can actually schedule every buyer to your to your policy you can structure policies where there's some grant of authority where you can just automatically cover the the foreign buyers via your internal credit practices all of this has to be laid out in the uh in the discovery and the application process and the premiums are usually structured as a percentage of whatever sales flow under the policy in the example we gave before the single buyer customer in Germany the premium there was like roughly I think 90 or 94 cents against half a million dollars so that client paid a premium of under 600 to cover a half a million dollar order let's flip to the final stage and uh how policies can be structured all over the board we mentioned single transaction the German account that's a single buyer policy you can take a pool of receivables say five or six countries or a particular product line that you you want to cover and cover all of the receivables within that particular area or you can structure the policy covering virtually all of your eligible export receivables whole turnover single buyer select risk there's all different ways to skin this the the key thing is the application process brings us to Define what those what those are and what your needs are and what your desires are and that is a it's a quick and dirty view of Credit Insurance based on I'll just um jump in here uh real quick this excellent uh presentation by by Tom to give an overview of the benefits of of Credit Insurance XM Bank we're a government agency as Tom uh stated we kind of um fill the gaps in the private Market we don't compete with the private Market we work very closely with Brokers such as Tom they are an advocate for you they're the middleman between the insurer and you the the exporter so they're a very uh they're a vital uh you know piece um here so I invite anybody uh that has any interest um in this to contact me we'll share my contact information Tom's information will also uh be shared and we'll just move on here to uh to Citizens so turn it over to you Joe perfect thanks um before we do I just have a quick uh quick question for uh for Tom kind of a follow-up and just kind of I mean it was uh thank you again great presentation very clear very understandable um just with kind of the economic and uncertainty that's out there globally are you seeing an increase in usage of this Credit Insurance again just because people are a little bit nervous about what's going on definitely I would say over the last three years we've seen a real spike in applications and new new policies written I think it started really with uh the the onset of covid and the disruption to the uh the economic flows that we saw here in the in the U.S and internationally and then of course some of the turmoils and the you know the Russian Ukraine situation is it's problematic and uh we're seeing we're seeing I think a spike of uh of of risks and Deals going back in Latin America so it's definitely the the volume is definitely picked up the claims volumes have gone up substantially in the last say 18 months seeing a lot more claims than we did the prior you know the prior two years yeah and um and and thank you for kind of covering the the cost of it I think you gave a good idea of what it is um it in in my sense and experience working with it it's a it's a fairly inexpensive financing tool that is uh is very powerful for a small business I've seen and I know you've covered both you know it covers both the commercial and the political risk associated with a transaction one you know one way I've seen it used is is a customer um of a company that you know long-term customer um you know long-term relationship and this this overseas customer was in a country where they suffered from a very significant currency devaluation and it wasn't that they didn't want to pay it's that they couldn't pay because now their their currency was worth literally half of what it was uh the week before so as a result of the delayed payment uh they did end up submitting a claim so sure um the transaction the US company sold in U.S dollars So the the the devaluation cost really was worn by the buyer exactly well Tom I thank you appreciate your time um and I'm sure there'll be some questions in the chat for later on next I want to move to our Citizens Bank team for the second part of the presentation where we're talking about um again getting paid payment terms letters of credit and foreign exchange um jerson I'd like to uh bring you back and and hand it over to you I'm thinking lots of good notes thanks for having me over here um I'm excited to be here um export week I can't believe it's here we've been talking about this for quite some time and um uh I can speak on behalf of my colleagues I'm really really happy to be here to talk to the to the audience yeah so um again I'm Gerson Da Silva I am a relationship manager for Citizens Bank in Connecticut I work around the beautiful Shoreline of Connecticut uh a business Banker essentially is an advisor to a business where where we are part of a team I am the go-to person for for a company where I am the resource and and I'm the go-to guy for all things business um you know I I clients are good at everything that they do I I tell them don't be good at my job so I'm always trying to look for solutions to help their lives easier uh you know whether it's banking on the go if if I can help you uh clients with Solutions with with uh receiving funds faster or or sometimes delaying of receivables uh I I do a lot of financing I help clients uh Finance the working capital working capital uh needs when when uh there's AR involved I help clients with equipment I help clients with real estate I do a a great deal of of you know um helping clients with Merchants buying out different companies buying out partners and we're also an SBA prefer lender so it's it's all very exciting uh as a relationship manager I spent a lot of time helping clients uh with with fraud provincial fraud mitigation tools we see a lot of of check fraud a lot of tonic fraud so I'm always um you know advising clients on that but something that's underutilized and I am very proud to be part here of Citizens Bank is is our international trade International Date form um if you go to the next slide please uh we have we have a team in-house who are who I call them a gurus my go-to you know every time a client is doing lots of volume and import or exporting or they starting to think about it uh uh important exporting I I usually sit down sit down with them and understand uh the implications of of of you know these transactions uh and again I I rely on two of my my colleagues here at next slide please um I have Aaron Paddock who works in foreign exchange is going to talk a little bit later he has a presentation for all of you Eric is a great resource not just for me for the whole bank I I'm going to have Aaron by my side and and of course we have Carmel dimmerville who's going to talk next Carmel is a trade specialist and she is again uh somebody who will relying on with questions about guaranteed payments and and the tools that she has in place to to help business clients um get paid uh with that said um I I want to have best baton to my colleague Carmel dimmerville to talk about Terry findings I appreciate it um thank you for for having me here this morning I really appreciate it and I applaud all the audience for being here simply because I'm thinking if you're here this morning it's because you are new to exporting or you are exporting and you are trying to get the proper information in order to conduct your business wisely so for that I applaud you because having the information before you enter into a foreign market is is absolutely necessary so um I think this is good so again my name is Carmel di amberville I work for Citizens Bank I've been there for about 10 years prior to that I worked at and all my career have been in trade on one from one capacity to the other I started um in the operations area you know examining documents uh moved on to account management moved over to product all in trade and then uh finally I joined the trade sales team uh some years back and now I do the business banking Market I used to be the law I used to do the larger corporates now I I concentrate on the business uh market so um one of the things we can move to the next slide if possible one of the things that I and I think uh the choir speaker Tom covered some of it with the credit Insurance um if you are going into a foreign market and you've never sold to a foreign country before it's necessary for you to know what you're getting yourselves into from every aspect and more importantly if you are planning on selling your product and making a profit you want to make sure that your risk are mitigated in every way shape or form you want to make sure you get paid you want to make sure that you you have control of your goods until you get paid so credit risk is the first one that that's really important you don't know who your buyer is you don't know who you're selling to again I believe um this is Tom O'Brien that spoke about that um going into an international market and not knowing the culture not knowing the country not knowing your buyer um there are certain countries that if you're selling okay I'll use Africa as an example you can trade rise you can sell rice to Africa but you wouldn't sell cotton because they grow cotton so there are certain things that you need to know about your Market you need to know about the culture especially let's say you're selling uh you're selling clothes to certain countries well due to the culture maybe some women cannot wear certain clothing so it's believe it or not most people are not thinking about those things but those are things to consider when you are entering a foreign market then of course you have the political risk we don't even need to go too far because the Ukraine and Russia War right now it's it's it's in everybody's mind and I'll just give you a quick example and I know we press for time but I have a client that a few years ago did a huge 15 million dollar deal by selling coal to Russia and they did it under a lot of credit they got paid and but he didn't like the fees that he paid so he went and he did a shipment for 5 million uh last year and he did it on you know straight to the straight to the buyer well the war happened and funds could not get out of Russia so he's calling me as I will come out what can we do and not much we can do so you've already studied the process but had if you had an LC and your your product was on the water we would not deliver it we would find a way to bring it back sure or you know send it to another party that would be able to um to purchase it in another country because we would still have control of the goods having the documents here um fxris and I think someone mentioned it um the currency fluctuates of course um if you're gonna buy I would say you do you get a dual invoice one in foreign currency one in US Dollars um and you may consider having a contract later on you know just because the the the rates fluctuates and what you think you're getting in payment may not be if if the if the currency have gone has gotten devalued so we really advise I mean Credit Insurance is absolutely a great way to go but a sec way of mitigating all this is a letter of credit uh and let me just before I go into a letter of credit let's go to the next slide and we'll just talk about the payment terms so when you are trading internationally there are four ways to do it always you could do a cash in advance and if you are doing cash in advance I applaud you because you don't need credit Insurance you don't need an LC um because you're getting the funds prior to sending your product and it's wonderful for you but it's not great for your importer so whoever is buying from you and from whatever country will have the same concerns that you on the other side of the coin would have okay I'm sending a wire transfer for five hundred thousand dollars to buy product from somebody that I don't know am I going to get the product that I that I ordered that's in the purchase uh purchase and sell it that's in purchase order or um am I going to get the product in time I you know am I going to get the product at all so all of that is a concern it's a concern for the buyer it's a concern for the seller so now you've got the second method of payment which is open account open account it's the reverse so if you're going you ship your goods and you get on your knees and you pray that everything works out well that you do get paid uh and you get paid on time and I believe um they mentioned about terms credit terms so imagine that you're selling to a foreign buyer at 180 days so you're not only selling sending your goods but you're going to give them terms and you're waiting for 180 days to get paid in the meantime you've got a problem with the cash conversion cycle because you do need the money in order to make other widgets to sell to other people so by not having your cash fast quickly it impairs your business right so the third method of payment we have is a cut between cash and Advance open account and a letter of credit so that's a documentary collection documentary collections are less secure than a letter of credit and the reason why there's no credit involved your buyer doesn't need to have a line of credit with their Bank the only thing the agreeing to do is having the paperwork go through the banking system and what do I mean by that if you are shipping you either shipping by air or you're shipping on a container by ship and the mode of Transport whether it's the bill of lading or or the airway bill is what the Importer needs in order to clear the goods those paperwork goes to the banking Channel again we more like a conduit the bank acts like a conduit so you you the buyer you the seller you send paperwork to the bank and you say to Citizens Bank I'm sending you the paperwork that covers this shipment we then send it to the foreign buyer bank and the foreign buyers Bank holds on to the paperwork they do not release it until payment is made now how how is this advantageous well the Comfort level here is that your buyer will not get a hold of the goods unless they pay and nine time out of ten they do pay I haven't seen one yet where they you know usually when this happens they do pay unless there's a huge circumstances as to why they don't but it's still not the safest way to transact especially if you're doing it overseas and most importantly is if you are giving them terms if you're giving them terms they get a hold of the documents they can pick up the goods and basically to turn that those goods into cash and to pay you later but they don't have an obligation to pay so if they don't pay under a documentary collection with terms you now have to think about the legal system and we don't want to go there with the legal system in different countries and that work so instrument that works the best it's been around for over 300 years they have yet they what all the technology Improvement and and so forth they have not been able to change it they haven't changed it because it works and that's a letter of credit if your buyer can give you a letter of credit automatically that should put you at ease simply because in order to obtain a letter of credit from their bank they have to have a relationship with that bank that's one thing second they either have a line of credit or they're going to put up the cash to open the letter of credit so what you know at that point is you have a guarantee of payment so once you say to your client I okay fine we're doing this and uh I want payment under a little credit and they said okay we agree you can rest assured that you have an 89 chance of getting paid and I said 89 I don't say 100 because getting paid is contingent upon you preparing the documents in ance to the terms and conditions of the letter of credit so you want to get paid you need to perform in ance to what the letter of credit requires now I heard you know I mentioned terms when I was talking about documentary collection under letter of credit let's say that you this is a new buyer and they want 180 days term and you kind of like that's a lot I don't know them if you're doing a letter of credit you can actually extend terms and you would this is where you would go to your bank and said you know I don't want to wait 180 days I want this else to confirm and discounted so you have the opportunity if your bank has a credit relationship with that foreign Bank your bank can pay you on day one rather than 180 days so we actually Finance the draft on on behalf of the Importer and then we pay you on day one so you shouldn't miss a payment based on the fact that the company is asking for terms if you're dealing under a letter of credit so those are the type of things to know that don't refuse right away but speak to your Bankers speak to your advisors to find out if you have options because there are options uh you can go to the next slide so what are the advantages and this is the thing that um I think I mentioned I covered a little bit of what that the slide is saying the advantages of using a letter of credit is you are assured of getting paid because you are no longer looking at your your buyer to pay you you're looking at the their Bank their bank is taking a credit position their bank is telling you the exporter don't worry if you meet the terms and conditions it's me the bank that's gonna pay you don't worry about your buyer and so with that in mind you really can feel comfortable in in sending you good overses um again there's a misconception that um there's such a thing as a revocable letters of credit there is no such thing all letters of credits are irrevocable they cannot be canceled the buyer or seller can I don't know when said oh I don't want to do this deal I want to cancel for letter of credit to be canceled both parties have to agree and unless both parties agree we cannot cancel the LC so this is a good thing like I said it's a good thing to know I've already covered the credit worthiness of the buyer because obviously if they're going to open an LC like I said it's either they have they have a credit relationship and obviously they have the cash um to to um secure it if they don't have a credit relationship what the bank does um what we do on your behalf is we negotiate the terms and conditions in cases where you're new to exporting we at Citizens Bank what we do is I provide new time exporters with what you call a letter of credit routing guide I can send a copy of that to Joe and you can distribute it to anybody in the audience that wants a copy and that's just you know in the perfect world that's what a letter of credit is supposed to look like so I would work one-on-one with an exporter to just say to them okay this is what you want on the LC the letter of credit is as much yours as it is the person that's issuing it because that is your method of payment so to have that all joined up meaning you think about the freight you think about who's paying for the freight you think about who's paying for the insurance you think about you know the documentation you don't want them requesting documentation that you can't present I've seen cases where they actually send requirements and they built in the discrepancy on the LC so which is why it's imperative that you have someone that can guide you through that process um that could say okay you you want them removing this you want them uh you know adding that again the bank acts as your intermediary we the one that's representing you we're not communicating with your buyer we are con communicating with your buyer's bank and anything that's that you want to change anything that you want to add you come to us and we go to the bank and we do an amendment to whatever um with the letter of credit if you need to change the terms and condition and again um though we we if we are able to and I'm gonna give a very brief um example and I know I'm pressed for time some years back there were some issues with Venezuela and some companies that were buying oil that was selling uh I'm sorry not buying but selling uh to Venezuela when the crisis happened I at the time I worked for Bank by we you know they still had to pay under a letter of credit because everything was in Conformity everything was in compliance doesn't matter what was going on we had confirmed letters of credit they had to pay so this is where I I really you know I I do encourage anybody exporting to um to at least think of using um any kind of international trade tool whether it's Credit Insurance or letters of credit uh you can move on to the next Carmel that's great uh great information especially you know on the letters of credit and and how important they are as a payment mechanism I'm curious if you can just comment briefly on you know generally on costs for issuing those again there would be costs on the the buyer side would there be any cost on the exporter side absolutely so so Ellie when you're thinking about um the size of a transaction and you think about the cost of the LC it's actually it's worth it so to advise and the good thing when we do an export client doesn't need a credit relationship per se we just need a DDA so that's the first thing um the cost for advising the LC to a client is 150 dollars so any charges for the bank in the US would be for the account of the seller for the exporter and any charges pertaining to the foreign transaction would be for the to the foreign bank would be for the account of the Importer so any charges overseas the Importer would bear it any charges here the exporter would bear it and and yeah and the only thing that cost a little bit I mentioned uh confirmation because we are financing uh if we if the client wants us to pay them ahead if there's a if there's a transaction that's 180 days and we're discounting it there's like a two percent fee and based on the country the rates can change so that is to be discussed it's uh you know it's per country per transaction per terms uh you know there's a whole bunch of different criterias um because we're a little pressed on time I know you were going to cover some uh standby letters of credit um I don't know if you can maybe take a minute I can do that in one second uh stand by stand by levels of credit in international trade in terms of exporters it's best when there's an open account transaction if you are selling on an open account and it let's say you're giving them terms you're not looking for the bank to discount it then your buyer opening up a standby letter of credit is would be perfect but the send by does it gives you a guarantee and I mean I'll guarantee that if anything happens you can get paid so if though you're giving them 180 days if a hundred and one day 181 days appears you don't get paid you can draw on that standby it's an instrument that is standing by in case there's non-performance it's used for a variety of reasons but for an exporter it would be uh use on non-payment of goods and that's my spill on standby I don't I don't think we have another slide I think the other slide is the questions yeah I think yeah no differences yeah we're going to share the um the slide Deck with with uh the audience so we can review the questions I think the questions are really good just in terms of them thinking about you know what they need to have in place when they're when they're going to start exporting having a good export plan and other things to think about so that's something they can they can review um later on absolutely I want to move to um Aaron who is the foreign exchange expert from Citizens Bank and just to talk um a little bit you know we we can just kind of do maybe a q a format Aaron uh just to help make it a little bit more efficient but if you could um you know just briefly introduce yourself and what you do and and you know first question would be you know what are the foreign exchange foreign exchange solutions that Citizens Bank offers to its clients thanks Joe appreciate it can you hear me okay I can fantastic so uh Aaron Paddock from Citizens Bank um been in foreign exchange for about uh 12 years now um I sit on the foreign exchange desk um working out of uh Massachusetts um and to answer the question um we have a full service foreign exchange offering which we're excited to offer to our business banking uh clients our small business clients and um I think what sets us apart differentiates us a bit Joe and and everybody um that we're fortunate to have participating here today um is that we have all the capabilities and foreign exchange Solutions of um our larger competitors so that's spot transactions we can offer uh hedging Solutions forward contracts uh options um and and and just general hedging solutions that allow our customers to to minimize risk um so really happy to to be here today um and to be able to offer these solutions that I mentioned um not just to our our largest clients um but to our small business clients which um I I think and I know uh separates us a bit so uh happy to be here okay excellent thanks and I'm not a foreign currency guy but you know I'm assuming that there's a lot of volatility in that market and um you know sometimes it's hard for you know the average business person to keep up with and just curious you know what services are available to minimize risk and you know how you how you guide some of your clients sure thanks uh you're right um lots of volatility in in the currency markets these days um and what comes to mind for exporters specifically is um we can offer foreign currency accounts so accounts uh this this is pretty unique I've done some homework on this and while there are some other institutions that offer it um we can do them quickly they're held in-house here at citizens that this would allow an exporter to receive payment in the local currency whether it's euros pounds Canadian dollars Japanese Yen Etc pulled the funds in that currency until it's an advantageous time either you know something they hear from us um or have their particular view of the market or it just makes sense to convert funds of that time um into Dollars into their their operating account so uh foreign currency account would be one um second would be to to work with a jerson and his team uh with a foreign exchange line of credit FX line of credit would allow you to lock in exchange rates um and in the case of exporters it would be selling the foreign currency so locking in exchange rates for the future um is a pretty valuable tool as well so um just real quickly you know if you knew you were going to be receiving funds say one month two months and six months from now for a a product or a service that you're delivering overseas we could actually uh give you a a rate today for those transactions in the future so even if the market was to move in your favor just a piece of not mind of knowing what what your uh exchange rate is going to be up to one year in the future has proven to be very valuable for for our customers um so those are a couple things that come to mind no that's good now for for companies that you know typically when they when they make a uh a quotation to an overseas buyer it's it's in U.S dollars So what's the what would be the advantage for me as a small business to actually accept foreign currency versus you know for the the US dollar which is really easy for me now if I'm ex if I'm accepting foreign currency it's gonna cause confusion with my CFO like what are the what are the real benefits to me by doing that sure so I I think there's a couple the first is that someone um sitting in uh let's say Japan for example if you're selling into an Asian market they might understand pricing in their local currency better than they understand US dollars so I I think that opens up um sales opportunities just to give someone the option uh whether it's a consumer individual or or a business so someone earlier mentioned a dual currency uh invoicing which I I think is powerful and good idea here so to give the ability to to remit or or for them to send payments in U.S dollars and their local currency as long as you're getting a good exchange rate and that's something that we would take care of here on the FX desk um it is is going to be key so uh one advantage understanding you know that there may be more sales opportunities to offer people the ability to pay um in their local currency also with those hedging products that I mentioned before you you can eliminate you know and minimize risk there by knowing what your exchange rates would be in the future if the market was the move against you you'd be glad that you had locked in those rates yeah absolutely so with everything going on in our um you know local banking sector um just curious has there been a big effect on foreign currency markets yeah we we see people moving to to um what I would call the safety currencies uh the the Majors US Dollars Euros Yen Canadian dollars and then we've also seen a a what I would call a pretty significant uptick in in companies um Import and Export companies that are wanting to lock in exchange rates to to minimize the risk that they're someone that I might have uh you know suggested opening up an account in a foreign currency a couple years ago and you know that they need time to think about it and that makes sense are now coming back and saying let's open up that account right um I I want to minimize my Risk by having the ability to hold uh currency in kind um just simply to have that that you know the rates locked in in a sense by by getting the funds in holding them in a foreign currency account and and then converting them when it makes sense for for our company here locally perfect and and just before we get to um some q a we get about five minutes left um just quick observation from you you know looking ahead uh on what might be coming in 2023-24 any any quick observations you have um I would just say um stay close to your Bankers whether whether it's uh citizens or or elsewhere there's some uncertainty um out there that that that's that's not a secret consider doing business in in the local currency if it makes sense um for for you hope that made some compelling reasons why it might make sense to to at least consider it understand that there are ways to minimize risk out there from from everybody we've heard from on the panel um one of the the scent the the the themes that I'm picking up on especially from from carmel's um products and services are that there there's ways to protect yourself so whether it's Insurance minimizing foreign exchange risk it seems more important now than ever to know that these resources are out there for you um in in to minimize risk wherever you can and you need to sometimes lean on your your banking Partners to do so so that that's what we're here for yeah no well said and and I agree um your your Banker is your trusted advisor so it's always good to keep in touch with them and then I would Echo carmel's um I think she said this at the beginning um you know get the information up front be proactive right learn about this stuff now and not when it's too late um so I think that was uh that was a really good message um Brian I'll I'll turn it over to you if there's um anything in the Q a that we need to address all right thank you everyone and remember everyone we will be accepting uh any written in questions in either the Q a or the chat feature this is your time to ask questions um please uh don't uh be shy I'm looking at scroll down what is the pricing formula for hedging say three to four or three months and six months I think that the uh let me see probably for Aaron but I don't know yeah I think that would be for me um David it's it's a great question um there's a little more to it um than I think I can sum up here in a couple minutes I I will look to connect with you David um and my contact information is here as well um it would depend on the currency um and a couple of other factors that I could sum up really quickly in an email which I'd love to do so uh aaron.addock at citizensbank.com let's connect if we could I need a little bit more time to kind of um explain that the three and six month Edge um which I'd love to do I can do it today all right and can you receive uh FX uh hold if for a period and then remit it to a vendor in that country with that same currency absolutely so that that would be the foreign currency account would be the way to do it so if you're looking to hold funds in a certain currency um foreign currency accounts the way to do it so we'll use Euros for example Euros come in you can hold them in euros and then deliver them out in Euros a lot of people will use this one to avoid the cost of currency conversions makes sense right um so we are able to offer that uh Victor with our foreign currency accounts can't do you know every