Blog/News

How Letters of Credit Can Benefit Your Business During COVID-19

By: Dina Davletshina, New Business Development

COVID-19 has disrupted nearly every part of our lives. Yes, the public health consequences are tragic. But along with this, small and large businesses alike are feeling significant economic pain. Companies in the consumer goods industry are encountering significant supply chain challenges and quickly shifting consumer spending habits. The retail and the apparel apparel industry in particular are facing their own share of supply chain challenges. The list goes on and on.

During times of such economic upheaval and uncertainty, normalcy disappears, once reliable customers start canceling orders and ask for extended payment terms. Stores suddenly close and it’s unclear whether they will ever open again. Shipping delays become more common and trading partners less flexible.

In this climate, all businesses need to reduce their risk to survive this economic storm. One way to do this is to leverage financial instruments like letters of credit (LCs), which can help achieve the highest risk-adjusted returns.

How Letters of Credit Can Benefit Your Business

Letters of credit offer businesses substantial advantages that are amplified by the uncertainty caused by COVID-19.

Supply chain risks and cancelled orders are a greater risk in this global pandemic, so letters of credit can give you more confidence that you’ll actually get paid.

Most prominently, letters of credit minimize risk for both buyers and sellers. Buyers are that their goods are shipped and documentation is in order before submitting payment. Sellers get the confidence they need to ship goods to their buyers.

Letters of credit are also helpful because they free up capital for both buyers and sellers. By using an LC, buyers do not need to leave deposits to start production. Instead, the LC is opened for the transaction’s full value, letting buyers more efficiently allocate their capital. Suppliers can then borrow against their letter of credit, which can provide them with more liquidity before the transaction closes. It is a win-win for both buyers and suppliers. 

Buyers and sellers may be transacting with new parties or others they may not fully trust, letters of credit can include provisions that must be satisfied before the transaction is completed. This can include everything from inspection of the delivered goods to specific delivery times. These provisions can ensure that your goods arrive in the precise manner that you expect – if they don’t, you have the option to reject the goods without payment or to seek a discount for the suppliers errors-

Helping Business Go Forward

It’s unclear when the COVID-19 crisis will end. In the meantime, business has become inherently riskier. There’s a greater chance that your suppliers and customers won’t pay for your goods and services. Because of this, letters of credit can help you continue business as usual while minimizing risk and preserving cash flow. For these reasons, we encourage you to leverage LCs when possible throughout this global pandemic.

At Express Trade Capital, we are happy to help you leverage all the the benefits of letters of credit. Banks require you to jump through several hoops (like collateral requirements or a prior credit relationship with the bank) to obtain a letter of credit. At Express Trade Capital, we have removed these restrictions by allowing clients to use our already existing LC facilities with out banks, thereby allowing you to quickly obtain LCs for your specific business needs without onboarding to a bank.

To learn more about how we can help you, don’t hesitate to click here.


An Update to Our Clients

Dear Valued Client:

Due to the market disruption caused by the COVID-19 virus, many stores are postponing, rejecting and even canceling orders, while others are delaying payment on existing receivables. We understand that these issues will cause cash flow problems for many of our clients.

We are here to help you where possible, but many businesses will need additional capital to make it through the next few months. We strongly encourage affected business owners to make short term loans to their businesses to cover these immediate cash needs.

There are also federal, state and local public resources available:

  • For assistance outside of New York, please check with your state and local agencies as well as local SBA offices (listed at the bottom of the SBA website provided)

We encourage you to research all your options, reach out to your account officer to discuss any issues you are facing and let us know how we can help you during these challenging times.

Update as of 3/24/2020: As a reminder no client is allowed to grant any additional payment terms to any customer without the prior written authorization of the respective Re-factor.



Essential Updates for Businesses & Individuals

As each new day unfolds during the current COVID-19 crisis, we are continuing to keep you updated on important information that we believe is relevant.

We encourage you to research all your options and reach out to your account officer to discuss any issues you are facing and let us know how we can help you during these challenging times.

Financial Assistance Programs

Due to the market disruption caused by the COVID-19 virus, many stores are postponing, rejecting and even canceling orders, while others are delaying payment on existing receivables. We understand that these issues will cause cash flow problems for many of our clients.

There are federal, state and local public resources available to help businesses that are experiencing COVID-19 issues:

•  The Small Business Administration offers consulting and loan programs to help small businesses: https://www.sba.gov/page/coronavirus-covid-19-small-business-guidance-loan-resources

•  For NYC based businesses, NYC Small Business Services offer programs that include interest free loans and grants to help small businesses cover payroll and other necessary expenses: https://www1.nyc.gov/site/sbs/businesses/covid19-business-outreach.page

•  For assistance outside of New York, please check with your state and local agencies as well as local SBA offices (listed at the bottom of the SBA website provided)

Duty Extensions

US Customs and Border Protection is accepting requests for a 7-day duty payment extension. Interested parties should send requests (name of importer and IOR#) to Director Randy Mitchell at randy.mitchell@cbp.dhs.gov.

The National Customs Brokers & Forwarders Association of America (NCBFAA), an industry group serving importers and exporters, has asked Customs for a 90-day tolling or deferral period, and Customs is considering the request.

IRS Pushes Tax Date to July 15

At a press conference held late Friday, Treasury Secretary Steven Mnuchin announced that the in addition to the extension on the Federal tax payment deadline, the filing deadline has also been delayed by 90 days.

•  This postponement applies to any individuals, trusts, estates, partnerships, associations, and companies or corporations.

•  Taxpayers do not have to file Forms 4868 or 7004 for an extension.

•  There is no limitation on the amount of the payment that may be postponed.

•  No interest or penalty is due during the 90-day extension. 

•  Interest & penalties on postponed Federal income tax filings and payments will begin to accrue on July 16, 2020.

State Filings

State filing information is still being updated for all states, including New York. For further information on State filing updates, check out : https://www.aicpa.org/content/dam/aicpa/advocacy/tax/downloadabledocuments/coronavirus-state-filing-relief.pdf.


CBP CONSIDERING DUTY PAYMENT EXTENSIONS

In response to the difficulties facing American businesses due to the COVID-19 pandemic and associated control measures, Customs and Border Protection is contemplating granting relief to importers.  In consideration of requests from the National Customs Brokers and Forwarders Association Customs Committee, chaired by GEODIS’ SVP of Trade Services and Government Relations Mary Jo Muoio, along with other industry group requests, CBP is looking at ways to provide flexibility to and extensions for a wide variety of deadlines importers face with customs obligations.

Specifically, CBP is considering granting a ninety-day extension of duty payments.  At this time CBP is working to understand authorities and mechanisms which may allow this and specifics are not available. In the meantime, CBP is reviewing extraordinary requests on a case-by-case basis.  As of today, lacking specific individual permissions, duty and related obligations remain in place.  We expect more information in the near future and will alert our clients as soon as known. If you would like to seek temporary duty-payment relief from CBP, please contact us immediately.  Initially, this relief would be for importers having duty payments due in the next week; if broader CBP issued extensions are not granted, we will pursue additional case-by-case requests.

 If you have questions about your duty payments, bond obligations or challenges meeting other CBP commitments, contact your account representative at Express Trade Capital, Inc. 

China Market Update

Overall Market Conditions:

China officials have extended the Spring Festival Holiday until after February 2. The length of the extensions may vary depending on the location. Shanghai has extended until February 10, while others until February 14 or longer. As factories re-open, labor continues to be minimal as public transportation in certain cities or provinces are still under restriction and quarantine. These can last up to an additional 14 days or longer. Trucking equipment and services as well are still impacted due to the lack of labor as well as road restrictions preventing normal pickup and delivery services.

Airlines:

Passenger Flights: Over 60 airlines have announced cancellation from flights to/from China.

Freighter Flights: Freighter flights are slowly returning as demand continues to increase. As of now, 60% of freighter flights are still not operating.

Airfreight Pricing: Due do the current supply & demand, transit is continued to be limited under a Force Majeure environment based on first come basis.

Infrastructure:

The major airports that are impacted are PVG & CGO with limited amount of staff. WUH is closed until further notice and those operating under normal conditions include, BJS, SZX, HKG, LAX, ORD, JFK, AMS, & FRA. 

All Seaports are operating under normal conditions, excluding Wuhan & Yichang a Hunan province. Ocean demand has dropped by more than half and is not expected to pick up again until after February 20.

Please contact our logistics office with any further questions contact@expresstradecapital.com.


If You Import from China – US and China have come to a decision regarding tariffs

Carli Valinoti, Express Trade Capital

Chinese President Xi Jinping with President Donald Trump in June in Japan. They are the primary actors in the longest-running, most serious trade war in history.
via Getty Images/WSJ

After months of negotiation, the US and China have announced that they have come to an agreement on trade. The US will cut the current taxes on $120 billion of Chinese goods from 15% down to 7.5% and has decided to not move forward with adding tariffs to the rest of the $160 billion Chinese goods. This will take effect on December 15, 2019. A 25% tariff rate will continue to stay in place on approximately $250 billion worth of US goods. In return, China has agreed to increase its purchases of US goods and services along with around $40-50 billion in agriculture products.

For questions on how this affects your imports from China, contact our logistics office for further assistance. Contact@expresstradecapital.com


Short-Term Future for Retail: Not Looking Great

By: Carli Valinoti – Express Trade Capital, Inc.

It’s not uncommon in today’s retail market that large companies who have been around for years are forced to file for bankruptcy. With growing competition from online retailers, including Amazon, stores have continued to see a decrease in foot traffic and overall sales. Retail stores have accrued debt from overstocking and increasing rent prices. If large, well known retailers such as Forever 21, Barneys New York, and Payless can’t beat the online retail presence, what does the future hold for smaller retailers?

Even with the upcoming holiday season, retail sales are projected to decline. According to the US Commerce Department, retail sales fell in September by 0.3%, the first time since February. Concerns that manufacturing-led weakness and trade tariff challenges are hitting the broader market could potentially have a negative affect on consumers spending habits. If consumers decide to keep their spending to a minimum, retailers should prepare for the potential continuation of declining sales.

expresstradecapital.com
212 997 0155


Turkey Steel Tariff Returning to 50%

President Trump announced that Turkey’s tariff rate for steel products under the Section 232 would be returning to 50% in response to a military invasion from Turkey into Syria. The steel tariffs on Turkish steel was previously increased to 50% in August 2018 and then reduced back to 20% in May 2019.

In addition to the increased steel tariffs, the president advised that the U.S. will cease trade talks with Turkey and will impose additional sanctions. In May, the U.S. terminated Turkey’s participation in the Generalized Systems of Preferences (GSP).


Section 301 Tariffs Increase to 30 Percent on Chinese Goods Suspended

After meeting with Vice Premier Liu He of the People’s Republic of China, President Trump announced in a news release on October 11, 2019 that the duty increase from 25% to 30% on List 1, 2, and 3 products would be suspended. A final decision will be made later regarding the additional duties scheduled to go into effect December 15, 2019 for List 4B commodities.

Information regarding the phase one deal can be found in the White House news release here.


IF YOU IMPORT FROM THE E.U.

Following a World Trade Organization decision paving the way, the U.S. Trade Representative (“USTR”) has published a list of products form E.U. origin which will be subject to additional duty rates of 10% or 25% ad valorem, effective October 18, 2019.

We expect that a FEDERAL REGISTER notice will be published with the details including confirming the definition of the October 18 effective date; effective dates are commonly based on the date of entry. 

A link to the list of products, countries and additional tariff rates may be accessed at:  https://ustr.gov/sites/default/files/enforcement/301Investigations/EU_Large_Civil_Aircraft_Final_Product_List.pdf

As with other tariffs, close coordination with your carrier and EXPRESS representative is needed to avoid duties assessed to shipments arriving before the effective date.  EXPRESS Trade Capital, Inc. is available to answer your questions, help assess impact to your business and discuss mitigation strategies. Reach out to us at logistics@expresstradecapital.com