Export Trade Finance & Insurance Seminar

Trade Connect

Global Trade Cycle Solutions

“Financing the Global Supply Chain”

1

Presented by:

Caroline Brown, First Vice President

International Trade Finance, Western Market

May 8 2013

Objective

Market Dynamics

Overview of Global Trade Cycle

Tools & Methods of Payment

Closing Comments

Market Dynamics

U.S. Exports and Imports – Increase in 2012

In 2012, U.S. exports and imports of goods were the

highest on record -- U.S. exports increased 4% and

U.S. imports increased 3%.

Source: International Trade Administration

Note: Import data is not available by state

Source: International Trade Administration, TradeStats Express

Global: Trade Statistics - U.S.

Comerica’s Footprint -- 37% of Total Exports

In 2012, Comerica’s footprint represented 37% of total

U.S. exports. TX is the #1 export market, followed by

CA, #2 (11% of total exports); FL, #6; MI, #8 and AZ,

#25.

#2 #25

#1

#8

#6

Global: Trade Statistics - California

California – Exports Increase Exports from California experienced an increase (2%) in

2012, going from $159 billion in 2011 to $162 billion in

2012.

Michigan Exports

2000-2009

Value in thousands ($USD)

0

5,000,000

10,000,000

15,000,000

20,000,000

25,000,000

30,000,000

35,000,000

40,000,000

45,000,000

50,000,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

Exports

Source: International Trade Administration, TradeStats Express

Note: Import data is not available by state

Source: International Trade Administration, TradeStats Express

Note: Import data is not available by state

Exports – Top Trading Partners

The top 10 trading partners for California are:

(2012 figures in thousands, $USD)

Mexico 26,319,672

Canada 17,295,931

China 13,977,175

Japan 13,059,903

South Korea 8,238,081

Hong Kong 7,827,087

Taiwan 6,334,103

Germany 4,985,576

Netherlands 4,551,259

United Kingdom 4,343,909

Market Dynamics

Market Dynamics

Company

Global Trends

Primary Goals

• To optimize working capital

• To mitigate key risks

• To reduce costs

• To simplify the trade process

Market Dynamics

Competition: How We Differentiate Ourselves [cont.]

Leading Letter of Credit Provider within U.S. Comerica ranks #7 among the top U.S. commercial banks, in letter of credit outstandings.1

Leading Lender for Ex-Im Bank Working Capital Guarantee Program. Comerica ranks #4 among the top lenders nationwide.2 We hold the “Super” Delegated Authority Lender and “Fast Track” Lender designations.

Strong Credit Ratings. Comerica has strong credit ratings -- required for the acceptance of a Standby Letter of Credit. Present Ratings -- “A2” by Moody’s Investors Service, “A” by Standard & Poor’s and “A” by Fitch Ratings.

Foreign Correspondent Bank Network. Comerica has coverage throughout Asia, Europe, Latin America, the Middle East and Africa.

1 Source: Documentary Credit World (FDIC Statistics on Banking), 3rd Quarter 2012 2 Source: Ex-Im Bank, FY 2012

Overview –

The Global Trade Cycle

Global Trade Cycle Solutions

9

IMPORTER (BUYER) BENEFITS EXPORTER (SUPPLIER) BENEFITS

Optimize working capital

Improve cash flow forecasts

Take advantage of supplier discount terms

Improve supplier relations

Increase Days Payables Outstanding (DPO)

Optimize use of credit capacity

Reduce costs

Interest rate and capital arbitrage

Reduce working capital needs by using better

inventory control and cash flow management

Improve sales forecasts

Lower financing rates on required working capital

Reduce Days Sales Outstanding (DSO)

Manage buyer credit risk more effectively

Reduce costs

Interest rate and capital arbitrage

Benefits Effective management of the global trade cycle provides

numerous benefits:

Tools & Methods of Payments

Tools & Methods of Payment

11

There are four primary methods of payment for global transactions, with

the level of risk varying for each.

Overview – Global Trade Cycle

12

Types of Risk The evaluation of risk in global commerce plays a major role in

determining the method of payment to be used for settlement

between buyer and supplier.

RISK5 EXAMPLES

Country / Political Risk Economic instability, government restrictions on payment, war, embargo

Commercial Risk Insolvency, unscrupulous buyers, fraud

Currency Risk Convertibility of currency, exchange controls

Transportation Risk Timeliness of delivery, piracy, pilferage, unions, loss of product

Documentary Risk Wrong documents, improperly prepared documents, incomplete

documents

Foreign Bank Risk Insolvency, creditworthiness

Product Risk Quality, quantity

Tools & Methods of Payment

13

Global Trade Cycle Solutions Letters of Credit:

Commercial Letters of Credit

Standby Letters of Credit

Documentary Collections

Financing:

Direct Bank Financing

Bankers’ Acceptances (BA)

Trade Acceptances

Ex-Im Bank Working Capital Guarantee Program (WCGP)

Private Insurance

Private Export Funding Corporation (PEFCO)

Online Solutions:

Comerica GlobalTRADE Web

Comerica TM Connect Web

Comerica eFX

Tools & Methods of Payment

14

Letters of Credit SOLUTION DESCRIPTION

Commercial Letters of Credit • Irrevocable undertaking by a bank on behalf of its customer in favor of a designated

beneficiary, under which payment is effected only if the beneficiary presents

documents in accordance with the letter of credit terms and conditions.

• Often referred to as Import Letters of Credit and Export Letters of Credit or Trade

Letters of Credit.

• Confirmed Export Letters of Credit provide additional protection to exporters.

(Note: Bank deals only with documents, not goods.)

Standby Letters of Credit • Performance Standby Letter of Credit: Irrevocable undertaking by a bank to make

payment to a designated beneficiary in the event that its customer fails to perform a

non-financial contractual obligation (e.g., cover performance of

contractors/suppliers, in lieu of a bid or performance bond).

• Financial Standby Letter of Credit: Irrevocable undertaking by a bank to make

payment to a designated beneficiary in the event that its customer fails to fulfill a

financial contractual obligation (e.g., support advance payment/payment guarantee,

in lieu of cash or security deposit, support IRB/EDC).

Tools & Methods of Payment

15

Documentary Collections SOLUTION DESCRIPTION

Documentary Collections • Buyer: Bank receives documents conveying title to goods from foreign bank and

delivers documents to its customer in exchange for payment or promise to pay at

a future date.

• Supplier: Bank delivers documents conveying title to goods to foreign buyer’s

bank for delivery to its customer in exchange for payment or promise to pay at a

future date.

Tools & Methods of Payment

16

SOLUTION DESCRIPTION

Ex-Im Bank Working Capital Guarantee Program (WCGP)

• Working capital loans backed by Ex-Im Bank guarantee (90% of loan amount, including

principal and interest). Enables U.S. exporters -- large and small -- to facilitate the export

of goods and services.

• Comerica holds:

• “Super” Delegated Authority lender designation (allowing us to commit credit facilities

up to $10 million per borrower, without pre-approval from Ex-Im Bank); and

• “Fast Track” designation (allowing us to commit credit facilities greater than $10 million

and up to $25 million per borrower, with expedited Ex-Im Bank approval).

SBA Export Working Capital Program (EWCP)

• Working capital loans for small businesses backed by SBA guarantee (guarantees

repayment of up to $1.5 million or 90% of loan amount, whichever is less). Similar to the

Ex-Im Bank WCGP, however, no U.S. content or military/defense product and service

restrictions.

Financing

17

Thank You

Caroline Brown

First Vice President

Trade Finance Officer

Long Beach, CA

562-590-2525 CVBrown@Comerica.com