Week in Review
March 2, 2020
Nightmare week for global credit may just be start of virus impact. Coronavirus outbreak closes U.S., Europe company bond markets while U.S. investment-grade spreads jump most since financial crisis. (Bloomberg)
Venezuela to let companies raise capital in dollars as Maduro liberalizes economy. Venezuela will allow companies to raise capital in foreign currency, according to a new rule by the country's securities regulator, as socialist President Nicolas Maduro liberalizes the struggling economy in the face of sanctions. (NASDAQ)
In Lebanon, default is “virtually certain” after stark credit downgrades. The lira, officially pegged to the dollar, has plummeted 40% on the black market as local banks ration dollars necessary for imports of food, medicine and other essential goods. (CNBC)
Coronavirus crash wipes $5 trillion off world stocks. Coronavirus panic sent world share markets skidding again on Feb. 28, compounding their worst crash since the 2008 global financial crisis and pushing the week’s wipeout in value terms to $5 trillion. (Reuters)
German companies brace for big blow from coronavirus. Companies in Europe’s largest economy are rushing to limit the impact of the spreading coronavirus epidemic, which is hitting an already weakened German economy in a particularly painful spot: the supply chains of its export-oriented manufacturers. (HSN)
Iranian rial plunges as coronavirus threatens export lifeline. Iran’s rial hit a one-year low against the dollar on Feb. 26 as a sharp rise in coronavirus cases forced the closure of most of its borders, threatening the non-oil exports that are its main economic lifeline. (Reuters)
What is driving the stock market plunge? Besides risks to global supply chains, travel restrictions and profit warnings, many are seeing other dangers as part of a worsening economic picture. The risk to the global consumer is the real problem. (Seeking Alpha)
U.K., EU gear up for thorny post-Brexit negotiations. The U.K. and the European Union set the stage for months of tense and highly pressured negotiations, laying out clashing approaches to their post-Brexit relationship. (HSN)
Boris Johnson to put U.K. on collision course with European Union over trade. Prime Minister Boris Johnson put the U.K. on collision course with the European Union on Feb. 27 when he laid out his government’s red lines before talks start on a post-Brexit trade agreement this week. (Business Mirror)
U.S. Exim signs guarantee backing SME exports to Argentina. The U.S. Export-Import Bank (U.S. Exim) has backed the export of oil and gas services equipment from the United States to Argentina with a seven-year guarantee. (Global Trade Review)
Russia and Ukraine: Nothing good lies ahead? Ukrainian President Vladimir Zelensky’s decision to sign the Steinmeier formula has allowed peace talks between Russia and Ukraine to resume. However, a few months after the Normandy Four summit, the chances of solving the protracted conflict in eastern Ukraine remains unlikely. (Global Risk Insights)
South African cross-border trade and financial flows to be improved. The Treasury has announced the simplification of cross-border trade and financial flows, which it says will reduce the burdensome approval processes of the past. (Herald)
China likely to increase tolerance for bad debts of small businesses. China will further increase its tolerance for loans to small businesses that turned bad to help them traverse hard times due to the novel coronavirus outbreak, especially in regions where the epidemic impact is huge. (HSN)
Pakistan trade under pressure after terrorist financing warnings. Pakistan has taken a step closer to being blacklisted by a highly influential global financial crime watchdog, upping the risks for banks financing trade to and from the South Asian country. (Global Trade Review)
Europe Faces Multitude of Crises in 2020
Chris Kuehl, Ph.D., NACM Economist
As the year started, the news coming out of the United States had been better than expected. There had been a significant number of economists who were expecting recessionary conditions, but the consumer continues to power ahead and the economy is holding its own. The news from Europe has not been nearly as encouraging.
With every passing week, there seems to be another crisis unfolding. The latest blow has come from the advance of the COVID-19 virus in Italy and its appearance in other European states. This has already hammered a weak Italian economy. Most expect the country to be flirting with recession by the end of the year. The EU budget battle was already getting heated. The Italian crisis has made this conversation that much worse because Italy will certainly not be able to meet the budget demands currently set by the European Union.
There’s more, however. Three political battles will have a direct bearing on the economic situation in Europe this year and into the future. The Germans are in a state of political transition; one that has no clear outcome in sight. Angela Merkel will be leaving office as chancellor and has already resigned as head of the Christian Democratic Union (CDU) Party. It was assumed that her successor would be Annegret Kramp-Karrenbauer. But after several bad decisions, Kramp-Karrenbauer has stepped down as head of the CDU and out of the running. The current favorite is Armin Laschet because he has been able to bridge some of the gap in the CDU between the hardline conservatives and the moderates that supported Merkel. He has also made common cause with Jens Spahn, the health minister. Spahn’s desire to block the other conservative contender, Friedrich Merz, seems to have fueled his decision to ally with Laschet. This puts Merkel’s ally in position to lead the party and become chancellor, but it also opens the door wider for the rise of the right-wing AfD (Alternative fur Deutschland).
Meanwhile, there is the Brexit discussion. That has started out more than antagonistic. Prime Minister Boris Johnson has been belligerent and demanding as he seems to continue to play to his domestic audience, but this is not playing at all well with the European negotiator who is now asserting that the EU will alter nothing in an effort to make things easier on the U.K. This is going to be a bitter battle. Estimates are that Britain will hit a prolonged and deep recession. The EU will also be experiencing very slow growth.
The reaction to COVID-19 is also preoccupying the EU. The Chinese example has many worried about what comes next. The disease may have been contained in China, but it has taken draconian moves. Factories were shut down, travel prohibited, crowds were not allowed and public events were banned. Whole cities of millions of people were placed in quarantine enforced by the police and military. Can Europe (and for that matter, the U.S.) do the same? Analysts doubt this very seriously. That means a wider exposure, and as a result, more deaths and more money spent on treatment.
Credit Congress Spotlight Session: Take Your Game
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Speaker: Jake Hillemeyer, Dolese Bros. Co.
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Credit Congress Spotlight Session:
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Get Yourself Ready for 2024 - Goal Setting & Future Planning
Speaker: Hailey Zureich, zHailey Coaching
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Global Expert Briefings: Trade Credit Risks
Speaker: Jay Tenney, Trade Risk Group
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Export Invoice vs. Accounting Invoice: What’s the Difference?
David Noah, Shipping Solutions
Invoices play an important role in the export process. The invoice is the single document that describes the entire export transaction from start to finish.
When completed properly, the invoice provides important information to the buyer, freight forwarder, customs, the bank and other parties in the international transaction. Done incorrectly, it can cause confusion, delays and disagreements.
Too many exporters—particularly new exporters—don't understand how the invoices they prepare for their exports often require more information than they may include on their invoices for domestic sales. I get too many calls from exporters whose shipments are stuck in customs, or they're having trouble getting paid because their invoice is incomplete.
To help explain how invoices used for your exports may require more information than the invoices you generate for your domestic sales, I like to use the terms export invoices and accounting invoices.
An export invoice is really an umbrella term that encompasses exporting forms like the commercial invoice and the proforma invoice—forms that indicate the buyer and seller of the goods, a description of the items, the items’ value and the terms or proposed terms of the sale. Many governments use export invoices for calculating and assessing customs duties and taxes.
Sometimes, customers look at our sample export invoice forms and call our office with questions, worried because our forms either have extra information they’re unfamiliar with or they think a form is missing information because it doesn’t have the fields they’re used to seeing on their invoices.
So, what’s the confusion? The difference is, our customers are comparing standard export invoices to their own accounting invoices—the invoices they use for their domestic sales. They don’t realize these two versions of the invoice have different purposes. Accounting invoices are used to get paid and often don't work well for exporting purposes because these invoices may not include certain information export invoices must have.
Major Differences Between Invoices
An export invoice will typically include the following information:
Product Classification—This is either the Schedule B or HTS code. However, there may be some times you may not include an HS number on your invoice, which are listed in our article, Why You Shouldn't Include HS Numbers on a Commercial Invoice.
Country of Origin—This is the last country in which the product was manufactured or significantly altered. This may be different from the country in which the supplier or manufacturer is located or where you purchased the product.
Incoterms 2020 Rules—Incoterms are an internationally recognized standard and are used worldwide in international and domestic contracts for the sale of goods. First published in 1936, Incoterms provide internationally accepted definitions and rules of interpretation for most common commercial terms.
The Proper Value of Goods—Because it may be for customs value only, the export invoice will need to include value of a good that wouldn’t need to appear on an accounting invoice. Exporters have to indicate the true value of goods even if they’re sending the items over for free, as a sample, etc. You wouldn’t do this on your accounting invoice. You can learn more in our article, Export Compliance: Using the Proper Value on a Commercial Invoice.
Destination Control Statement—The Destination Control Statement is a legal statement required for items controlled under the Export Administration Regulations (EAR) or the International Traffic in Arms Regulations (ITAR) stating that the goods you are exporting are destined to the country indicated in all the shipping documents. While it’s not a requirement for all transactions, including a Destination Control Statement on every transaction is allowed and is a good practice.
- Export license information, if appropriate.
- Import country requirements, if known.
- Additional certifications and statements required by the buyer's country.
- U.S. government-issued certifications to be provided.
Additionally, the original export invoice form must be signed in blue ink, and three copies of the invoice should be provided.
The Main Takeaway
You need to be aware that an export invoice serves a different purpose than an accounting invoice. Each form has information that serves a different purpose, and you can’t substitute one for the other. If you mistake an accounting invoice for an export invoice, your goods could be held up in customs due to insufficient information, and you could be opening yourself up for fines or penalties based on that incorrect information. One of the best ways to prevent this from happening is to have a conversation with the buyer during the sales process about the sales contracts, which type of documents will be used, and what type of information should be included on the invoice to help the goods clear customs.
Reprinted with permission from Shipping Solutions.
G20 International Merchandise Trade Continued to Shrink Q4 2019
International merchandise trade in the G20 continued its downward path in the fourth quarter of 2019. Compared with the previous quarter, exports contracted by 0.1% and imports by 1.3%, and now stand at their lowest levels in two years, according to the Organisation for Economic Co-operation and Development (OECD).
Evidence of significant disruption to Asian supply chains related to the Covid-19 outbreak suggests that this downward trend is likely to continue into the first quarter of 2020.
All North American G20 economies saw international merchandise trade contract. Worst affected was Mexico, where exports fell by 3.4% and imports by 3.2%. Canada recorded falls of 1.6% and 1.8%, respectively, and the United States saw falls of 0.6% and 3.2%.
Major European G20 economies fared a little better, with exports up in France (by 1.1%), Italy (1%) and, marginally, Germany (0.2%). Imports fell in France and Italy (by 0.8% and 2.3%, respectively) but picked up, again marginally, in Germany (by 0.2%). However, German international trade remains around 6% below recent highs. In the United Kingdom, on the back of a strong appreciation in sterling against the U.S. dollar in the fourth quarter, exports and imports both picked up, by 2.4% and 1.1%, respectively. They were, however, down on the previous quarter when measured in sterling.
In Asia, the on-going Japan-Korea trade dispute continued to weigh on international trade, with exports and imports falling significantly in both countries: in Japan (by 3.4% and 3.6%, respectively) and in Korea (by 2.6% and 2.4%). Over the last two years, Korea has seen its exports contract by 12.3% and its imports by 8%.
In China, both exports and imports increased by 0.4% and 2.8%, respectively. In India, exports grew by 2.8% while imports fell by 4.4%. In Indonesia, exports were unchanged while imports grew by 2.6%.
In South America, Argentina’s exports grew by 6.2%, however imports contracted strongly by 9.9%. Imports also contracted significantly in Brazil, by 8.1% (partly unwinding the 11% growth seen in the previous quarter), and exports also fell (by 1.5%).
The G20 aggregate is derived from seasonally adjusted data of the individual economies in U.S. dollars. G20 economies include Argentina, Australia, Brazil, Canada, China, France, Germany, India, Indonesia, Italy, Japan, Korea, Mexico, Russia, Saudi Arabia, South Africa, Turkey, the United Kingdom, the United States and the European Union.
Week in Review Editorial Team:
Diana Mota, Associate Editor and David Anderson, Member Relations