eNews March 29, 2012

March 29, 2012



News Briefs

  1. Electronic Signatures a Growing Topic of Importance, on Slate for Credit Congress
  2. Argentina Suspended from American Trade Preferences
  3. Are Surprise Japanese Trade Numbers Show of Resilience, or Delaying the Inevitable?
  4. Congress Approves JOBS Act As Dueling Small Business Tax Cuts Emerge
  5. Municipal Bankruptcy Roundup: Providence, Stockton, Jefferson County
  6. Dodd-Frank Implementation Could Conflict with Basel III, Other International Regulations

 

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Electronic Signatures a Growing Topic of Importance, on Slate for Credit Congress

As noted in the February issue of Business Credit, many functions such as online credit applications and electronic signatures are increasingly going the paperless/online route. While inertia and reluctance to change remain large hurdles for any overhaul in how business gets done, in credit or otherwise, the fact is that ever-increasing Internet use is making this a credit and business migration that can't be ignored.

In a December NACM survey, about one-quarter of all respondents noted their respective companies had an online credit application. While paltry on the surface, digging into comments finds many believe they're starting to become more familiar with such options and are investigating technological expansion or are even ready to launch something. Said Bruce Nathan, Esq., Lowenstein Sandler PC, such a wave "absolutely is going to come."

"It might be a little slow to come right now, but people are starting to do these things," said Nathan, who will address the topic from a legal standpoint during a two-part session at Credit Congress on the morning of June 13. "More and more you're hearing about online credit applications, entering into contracts electronically and electronic signatures. These are non-bankruptcy legal issues that people deal with day to day, and they will come up more and more prevalent."

He noted there are issues credit professionals must become more familiar with, such as enforceability of signatures, ability to maintain electronic records and the pitfalls ofsigning an electronic contract without knowledge of associated statutes, among others.

Nathan—along with Wanda Borges, Esq., Borges & Associates LLC, and Val Venable, CCE, Ascend Performance Materials—will present the two-part educational session "Ignorance is Not Bliss: Challenging Non-Bankruptcy Legal Issues Facing Credit Professionals" as part of NACM's 2012 Credit Congress, taking place June 10-13 at the Gaylord Texan in Grapevine, TX.

Brian Shappell, CBA, staff writer

Consider Becoming a Silent Auction Donor

The NACM Scholarship Foundation is delighted to again host its Silent Auction during the Credit Congress & Expo in Grapevine, Texas. Funds raised from the auction go directly to the Foundation to support its goal of providing financial assistance to credit professionals for educational programs that increase their knowledge and strengthen the profession and business community. 

Click here to review details on donating and bidding on the NACM Credit Congress web pages.

 Argentina Suspended from American Trade Preferences

President Barack Obama suspended Argentina's benefits under the nation's Generalized System of Preferences (GSP) this week. When the suspension takes effect in 60 days, Argentina will no longer be able to take advantage of the GSP program, which aims to help developing countries expand their economies by allowing certain goods to be imported to the U.S. duty-free.

Argentina's refusal to pay $300 million in awards, plus interest, to U.S. companies that invested in the country led to their removal from the program. Part of the GSP eligibility criteria requires Argentina to act in good faith in recognizing as binding arbitral awards in favor of U.S. companies. In this case, two companies brought cases against the Argentine government and were awarded $300 million between them. Payment on those awards has yet to arrive. "We urge the government of Argentina to pay the subject awards," said U.S. Trade Ambassador Ron Kirk. "This would allow us to consider reinstating Argentina's GSP eligibility and promote the growth of a mutually beneficial U.S.-Argentina trade and investment relationship."

Until its suspension, Argentina was the ninth-largest beneficiary under the GSP program.

"Argentina's actions are unjustified, and they should not receive GSP benefits while refusing to pay American investors what they are owed," said House Ways and Means Committee Chairman Dave Camp (R-MI). "I have personally pressed Argentina to resolve my grave concerns about the direction of Argentina's trade policy. I again urge Argentina to live up to its commitments, which would benefit Argentina, the United States and the international trading system."

In the same proclamation that suspended Argentina, President Obama also designated the world's youngest country as a new GSP beneficiary. South Sudan, which became an independent nation in July, was added to the GSP list, offering the new country an opportunity to use trade to boost its development by allowing 4,900 products to be imported into the U.S. from the country duty-free. GSP compliance is also a prerequisite for other trade benefits under the African Growth and Opportunity Act (AGOA), which could provide South Sudan with other trade advantages further down the road.

Jacob Barron, CICP, NACM staff writer

Become a Certified International Credit Professional (CICP)

REGISTRATION DEADLINE: May 8, 2012

FCIB's International Credit & Risk Management Online Coursesm, leading to the Certified International Credit Professional (CICP), begins May 13, 2012.

In 13 weeks, you'll better understand how to manage and mitigate export credit risks while building a valuable global network of fellow professionals.

The course's 12 modules cover topics such as:

• International Accounts Receivables
• International Risk Assessment
• Payment Terms
• Foreign Exchange
• International Trade Law
• Structured Trade Finance
• Cash and Treasury Management

Click here to learn more.

Are Surprise Japanese Trade Numbers Show of Resilience, or Delaying the Inevitable?

Economists and experts lined up early this year to intimate that Japan's era of trade strength was essentially on life-support (the March issue of Business Credit featured this very topic). Then came last week's statistics showing a surprise trade surplus in February. Now, there seems to be more of a split between those who believe the positive news is a sign of things to come and those who believe a slide into a long-term trade deficit is unavoidable. But significant problems still loom.

Japan's finance ministry reported the value of exports at 5.44 trillion yen, and imports coming in just short of 5.41 trillion yen. The trade surplus, which came even as exports dropped by 2.7% and imports rose 9.2% compared to the previous February, surprised market-watchers and drew claims of a resilient Japanese economy that wasn't given enough credit as it recovers from last year's natural disasters.

NACM Economist Chris Kuehl, PhD—who, among others in that Business Credit article, had expressed "fear" for the Japanese economic and trade outlooks going forward—admitted that "unmistakable progress" has taken place and an argument can be made for hope of the dawn of a real recovery. After all, Japan remains one of the three largest world economies. However, their reasons for deep concern have not fully faded...far from it, actually.

"The endemic issues that have plagued Japan for over two decades have hardly disappeared, and they will continue to be a drag on the economy unless there are some fundamental changes made to chronic structural flaws," said Kuehl. The biggest threats are as follows:

  • How the nation handles its energy needs, especially with an expected, perhaps unavoidable movement away from nuclear power, at least in the short term.
  • Can the export sector overcome advantages held by other regional nations' manufacturing sectors, especially China, and the overly high, even troublesome, value of the yen as investors take money out of the euro.
  • One word: debt...the debt-to-GDP ratio is presently tracking at an astonishing 225%.

Brian Shappell, CBA, NACM staff writer

New Lien and Bond Course Available in Credit Learning Center

Construction-orientated credit professionals understand the value of knowing the basics of the lien and bond process.

In "Liens and Bonds: The Critical Nature of the Preliminary Notice," the newest module in NACM's Credit Learning Center, the preliminary notice is stripped down to its basic components. This module addresses the when, why and how the preliminary notice relates to retaining lien rights, while leveraging receivables down the ladder of supply. From state-to-state nuances through timeframes and required elements, this must-view module will get you started down the right path.

Click here for more information about this course and the Credit Learning Center.

Congress Approves JOBS Act As Dueling Small Business Tax Cuts Emerge

Congress approved the Jump-Start Our Business Startups Act (JOBS Act) earlier this week, sending it along to President Barack Obama for signature into law.

The House approved an amended version of the bill by a 380-41 vote, after the Senate passed the legislation last week, 73-26. Essentially, the bill aims to spark business and job creation by loosening regulations and reporting requirements for small businesses and startup firms seeking to raise cash, including through public offerings.

"Since 2007, we've seen a 23% drop in new business creation, according to the Bureau of Labor Statistics, and October's annual World Bank's Doing Business report found that the United States fell to No. 13 for ease of starting a business, down from No. 3 in 2007," said House Small Business Committee Chairman Sam Graves (R-MO). "The JOBS Act helps address this by increasing opportunities for capital formation and easing the pathway for high-growth companies to go public."

Specifically, the bill makes it easier for companies to solicit private investors and relaxes Securities and Exchange Commission (SEC) filing requirements associated with initial public offerings.

The goodwill that ushered the JOBS Act through Congress seems to have been short-lived, however, as dueling tax cut proposals emerging over the last week have once again ramped up the partisan rancor. House Republicans unveiled a bill, the Small Business Tax Cut Act of 2012, that would allow qualified small businesses to deduct an amount equal to 20% of their business income. Senate Democrats responded with a proposal of their own, one that would give small businesses a 10% tax credit for any new hiring or pay raises in 2012, while also allowing them to write off the full cost of new capital investments for expanding operations.

Aside from the obvious differences between the bills, the House proposal has received a great deal of criticism for its general lack of exclusions. In essence, if a business has fewer than 500 employees, then, according to the legislation, it's technically a small business, and can take the 20% deduction. Democrats were quick to point out that under this definition, sports franchises, celebrity companies and hedge funds would all benefit from the tax cut, despite the fact that few would consider these companies among those most in need of federal assistance.

Jacob Barron, CICP, NACM staff writer

Distressed Business Services

Many NACM Affiliates are involved in a national network to provide assistance in the rehabilitation (if possible) or liquidation (if necessary) of businesses in severe financial difficulty.

While courts can take several months or more to start a reorganization plan, NACM Affiliates can assist in getting a plan approved in as little as 30 days. Most helpful is the knowledge that experienced professionals are ready to step in at the most difficult time. NACM Affiliate staff members can serve as secretary to creditors' committees, provide other needed advisory services and are fully aware of the prevailing laws and regulations relevant to each situation.

Click here to learn more about NACM's Distressed Business Services.

Municipal Bankruptcy Roundup: Providence, Stockton, Jefferson County

Though Detroit seemed destined for a Chapter 9 municipal bankruptcy filing, a reported, tentative deal between the troubled city and Michigan officials will apparently thwart such an option, even if city lawmakers have to cede some level of power on financial decisions. Not every debt-hobbled community may be so lucky.

In Providence, RI this week, a former state Supreme Court justice and the state-appointed receiver for the Rhode Island's Central Falls bankruptcy from last summer, Robert Flanders, argued a Chapter 9 for the city is essentially unavoidable. Like Central Falls, the key fiscal challenge seems to be with contracts, largely pension entitlements, tied to retired workers. To wit, its mayor, Angel Taveres, noted the city could go broke by June without concessions. Such an argument forced an out-of-court settlement between Central Falls and its retired workers following its Chapter 9 filing.

There now is more evidence than ever that Stockton, CA is heading toward municipal bankruptcy, as well. Former U.S. Bankruptcy Court Judge Ralph Mabey has been tasked with the role of mediator in Stockton's debt negotiations and said mediation between the city and its stakeholders and creditors is required per a 2011 California law forcing parties to the table for up to 90 days prior to a Chapter 9 filing being allowed. Stockton officials have become the first to begin going through the new mandate's mediation process. Labor/retiree contracts are a notable issue in this situation, as well. If filed, Stockton would unseat Jefferson County, AL as the largest municipal bankruptcy filing in U.S. history.

Meanwhile, the Jefferson County, AL case will continue despite legal efforts by creditors tied to what is to date the largest Chapter 9 filing ever in the United States. U.S. Bankruptcy Court Judge Thomas Bennett ruled earlier this month that, despite creditor arguments, the municipality's officials indeed did have the legal standing to file for Chapter 9 protection. Subsequent runs to derail the proceedings have also failed. Jefferson County has been reeling financially from a botched sewer retrofit venture that has left the county, which includes the city of Birmingham, with upwards of $4 billion in debt.

Brian Shappell, CBA, staff writer

Best-in-Class Service from NACM's Mechanic's Lien and Bond Services (MLBS)

MLBS' Lien Navigator is a web-based service that provides up-to-date information for all 50 states and Canada, including notice, lien, payment bond and suit timelines, procedures and other relevant information in a state-by-state/province-by-province format.

MLBS also offers two preliminary notice to owner (NTO) services, deadline tracking, a lien and bond filing program and a suit against bond and foreclosure service. Both NTO services include, at no additional charge, a Next Action Notification Email. These reminders are sent automatically to ensure that your lien and suit deadlines are met during each step of the lien process.

For more information on NACM's MLBS, click here.

Dodd-Frank Implementation Could Conflict with Basel III, Other International Regulations

A lot has been said about the Dodd-Frank bill, more completely referred to as the Dodd-Frank Wall Street Reform and Consumer Protection Act. But for a bill that seemed to react directly to an already-devastating financial crisis, few people have described it as "ahead of its time."

In terms of international regulatory trends, however, that's exactly what Dodd-Frank has turned out to be, according to Lael Brainard, undersecretary for international affairs at the U.S. Treasury Department. "By moving forward with this framework, we really set the terms for the international debate and were able to move other countries to our framework," she noted in a hearing last week on the international implications of the Dodd-Frank Act's implementation. Brainard said that enacting the sweeping reforms included in the bill allowed the U.S. to influence related efforts conducted by authorities in other countries. Had the bill not been enacted when it was, "we would've been reacting," she said, adding that as implementation progresses, the U.S. is "elevating the world's standards to our own."

Conflicts have arisen across borders, however, and at the same hearing, titled "International Harmonization of Wall Street Reform: Orderly Liquidation, Derivatives and the Volcker Rule," conducted last week in the Senate Committee on Banking, Housing and Urban Affairs, one notable divergence between U.S. and international regulation could ensnare the world of trade finance.

In his testimony, acting head of the Office of the Comptroller of the Currency (OCC) John Walsh noted that Dodd-Frank requires federal agencies to rely less heavily on credit ratings as a measure of creditworthiness. In fact, it practically requires them not to rely on ratings at all. "Section 939(a) of the Dodd-Frank Act...requires all federal agencies to remove references to, and requirements of reliance on, credit ratings from their regulations and to replace them with appropriate alternatives for evaluating creditworthiness," said Walsh.

On the other hand, the latest edition of the Basel capital requirements, Basel III, makes no such change. "Basel III, in contrast, continues to rely on credit ratings in many areas, making it difficult to implement those provisions domestically," he added.

Basel III already poses a threat to the world of trade finance by increasing the risk rating of these sorts of transactions, and ultimately making them more expensive for banks. As discussed in "Bank Exodus: Basel III Threatens Trade Finance," in the January issue of Business Credit, the framework could lead banks to abandon the trade finance market altogether. Dodd-Frank's requirements could increase the severity of this trade finance exodus, especially domestically, by making risk measurements harder to align with both the new U.S. regulations and Basel III's international counterparts. "The cumulative implementation will be challenging, particularly for community banks," he noted.

For more information on global regulatory issues in banking and trade finance, attend FCIB's International Credit Executives (I.C.E.) conference, featuring keynote speaker Bart Chilton, commissioner of the U.S. Commodity Futures Trading Commission (CFTC). To find out more, or to register, click here.

Jacob Barron, CICP, NACM staff writer

Do You Have It? Introducing the "NEW" Manual of Credit and Commercial Laws—2012 Edition

Now in four separate volumes to meet your specific needs. Buy whatever volumes you need, or get the complete set at a significant savings!

NACM has re-envisioned and revitalized the Manual of Credit and Commercial Laws. Not only will the new edition continue to provide essential information for credit and finance professionals, it will do so in a highly flexible and more affordable format. In its new form, the Manual of Credit now comprises four volumes that either may purchased separately or as a comprehensive set. Chapters and appendices from the book have been reorganized under the following headings:

• Volume I: General Business Law, Related Statutes and Collections
• Volume II: Commercial and Consumer Credit Topics
• Volume III: Construction Issues
• Volume IV: Bankruptcy and Insolvency Issues

Many sections within the chapters have also been reworked, including those covering cellphone-based collection efforts, FTC rulemaking in terms of decedent estates and data security/breach initiatives at the federal government level.

Click here to visit NACM's online Bookstore for Manual features and updates, and more information about the wide array of resources available to today's credit professionals.

 

To view past eNews issues or to visit the NACM Archives, click here.

 

 

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