News Briefs

COFACE COUNTRY RISK UPDATE: FALL 2009

In its latest country risk update, Coface (www xoface-usa.com) announced that China (rated A3) and South Korea (A2) were removed from negative watch. The positive move for South Korea's rating is a result of the country's investmentdriven growth recovery, while China's removal from the list reflects the credit boom now driving its economic recovery. In addition, Honduras (C) was placed on negative watch. "The worsening of Honduras' economic and financial situation is attributable to the political crisis resulting from the military coup in late June of this year," states the Coface report. Of special value to credit pros, this latest Coface country risk update provides a summary of the current economic situations, growth forecasts, and risk indices on a regionby-region basis. To access the full report: www .coface-usa.com/CofacePortal/ShowBinary/ BEA%20Repository/US_en_EN/documents/ country%20risk%20fall%202009.

ARBITRATE, DON'T LITIGATE IN CROSSBORDER CONTRACTUAL DISPUTES

If you are involved in a contractual dispute with an overseas customer, arbitration is often the cheapest and fastest way to a resolution. The New York-based American Arbitration Association (www.adr.org) is part of a network of 53 arbitral institutions in 39 nations. AAA filing fees range from $500 to $7,000, depending on the dollar amount at issue, and the arbitrator costs between $ 1 ,000 and $2,000 a day. Most disputes are settled in one day, and the average AAA arbitration takes 242 days from time of filing to the actual award. Teleconferencing and translation services are also available.

SUPPLY CHAIN CASH FLOW SLOWED IN OCTOBER 2009

Following four consecutive months of improvement, Corteras Supply Chain Index (SCI) for October 2009 registered a sharp reversal. Although a slowdown in corporate payments to suppliers is typical during the holiday season, this does not ordinarily occur until November or December. Its appearance this early is a cause of concern for credit managers. The October 2009 Manufacturing ISM Report on Business indicates an economic recovery is underway for manufacturers, even though continuing corporate bankruptcies, tight credit, and concerns about consumer spending indicate this recovery could be slow and anemic. Comparing the SCI September 2007 (6.8 days) numbers to the September 2009 (9.56 days) numbers, the Supply Chain Index is fully 40 percent higher. Commercial AR debt greater than 30 days past due is also 50 percent higher than in September 2007. The Cortera SCI tracks late payments against agreed upon terms, measuring late AR, late AR greater than 30 days, and overall average days beyond terms. A two-year view of this data is available on Cortera's Web site: www xortera.com/stats. The Cortera SCI report is published monthly.

BANKRUPTCY DUE DILIGENCE RESOURCE

BankruptcyData.com/Bankruptcy Week has the industry's most extensive database of corporate bankruptcy information, a critical resource for credit pros keeping a sharp eye on their customers' creditworthiness and default risk. With access to a database of all public company filings and close to 500,000 private company filings, available either through a subscription or a one-time data request, this resource is invaluable in today's volatile economy. To subscribe go to https://www .bankruptcydata.com/NGR2000Subscr.htm; contact Ben Schlafman, vice president: ben@bankruptcy data.com; or call 800-468-3810, ext. 557.

CASH APPLICATION TIPS FOR INTERNATIONAL PAYMENTS

Applying cash is difficult enough for domestic transactions. It can become a nightmare on international sales when foreign exchange and bank fees often are deducted before the funds ever hit the bank account. Here are some ways that IOMA survey respondents addressed the issue: 1) When receiving a wire transfer, require a standard form to be faxed with the invoice number, dollar amount, and other details. 2) Distribute the funds using an Excel spreadsheet with the details. 3) Collect the best information via fax, and then phone for the rest. 4) Fax invoices rather than use the mail. It's cheaper and faster, and you have a record that it was received. This puts an end to lost-in-the-mail excuses.

CREDIT PROS MUST KNOW DIFFERENCE BETWEEN U.S. SALES CONTRACT LAW AND CISG RULES

The Convention on Contracts for the International Sale of Goods (CISG) governs international contracts and differs in crucial ways from the UCC rules used in domestic U.S. contracts. Important differences between U.S. law and CISG rules include: 1) oral agreements are unenforceable; 2) offers said to be open for acceptance for a certain time are irrevocable; 3) an acceptance containing additional or different material terms or incidental terms to which theother party objects isarejection; 4) there is no right to cancel if the other party fails to comply with a legitimate demand for assurances of performance; 5) the UCC sets out the meanings of commonly used trade terms, such as CIF and FOB, while the convention does not; and 6) the "perfect tender" rule does not apply.

SPECIAL ARBITRATION FACILITY FOR LETTERS OF CREDIT

Does the thought of explaining the intricacies of a letter of credit to a judge make you want to reach for a bottle of Tylenol? While no credit professional likes to think that any credit he or she extends will not turn out well, the reality is that a sale occasionally goes south and gets turned over to the court system. That process is difficult enough without having to explain how a letter of credit works to a judge. Expecting that official to understand the ins and outs in a relatively short period of time is just not realistic. To avoid this problem, many professionals recommend including an arbitration clause in their contracts, if letters of credit are involved. There is also an arbitration system designed specifically for letters of credit. The International Center for Letter of Credit Arbitration (ICLOCA) operates under rules based on the United Nations Commission on International Trade Law and the Institute of International Banking Law & Practice (www.iiblp.org). To learn more: www.iiblp.org/ files/uploads/Misc/ ICLOCA%20Rules%20of%2 OArbitration.pdf.

Copyright Institute of Management & Administration Jan 2010

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