The Export Trade Note: A New Instrument for International Trade

Georgia Journal of International & Comparative Law, Dec 1986

By Eugene A. Ludwig and Michael J. Coursey, Published on 01/28/15

A PDF file should load here. If you do not see its contents the file may be temporarily unavailable at the journal website or you do not have a PDF plug-in installed and enabled in your browser.

Alternatively, you can download the file locally and open with any standalone PDF reader:

https://digitalcommons.law.uga.edu/cgi/viewcontent.cgi?article=1762&context=gjicl

The Export Trade Note: A New Instrument for International Trade

THE EXPORT TRADE NOTE: A NEW INSTRUMENT FOR INTERNATIONAL TRADE* Eugene A. Ludwig Michael J. Coursey a. FactorsFavoring a New York Forum .. 395 b. New York Courts' Subject Matter Jurisdiction Over ETN Disputes ........... 396 c. New York as the Exclusive ETN Forum 398 Need for a Designated Forum ............ .... B. Selection of the Forum ....................... New York State .......................... 382 * The authors express their appreciation to their friend and colleague, Richard Hyland, for his valuable observations on several concepts explored in this Article, and to Joseph Neuhaus and Kenneth Veilleux for their assistance in preparing this Article for publication. The views expressed in this Article are solely those of the authors. V. LIMITATION OF THE EXPORTER'S LIABILITY ............ VI. THE ETN's FOREIGN GUARANTY .................... The DiscountingBank as HDC ................ The Foreign Guarantor'sDefenses ............. VII. ETN-BACKED SECURITIES .......................... A. Reasons for ETN Securitization................ B. Domestic Guaranty of ETN Pools ............. VIII. CoNcLUSION ...................................... The persistently weak United States exports during the past several years' have contributed greatly to the recent staggering trade I From 1981 to 1984, United States exports decreased 8% in constant (1972) dollars, from $89.8 billion in 1981 to $81.4 billion in 1982, $76.7 billion in 1983 and $82.1 billion in 1984. As the chart below shows, the decline in exports to Central and South American countries has been especially severe. For example, between 1981 and 1984, United States exports to Chile were down 46076 in constant (1972) dollars. Over the same period, exports were down 450/ to Bolivia, 41% to Nicaragua, 39% to Venezuela, 34% to Mexico, 34% to Guatemala, 25% to Ecuador, 20% to Colombia, and 18% to the Dominican Republic. United States Department of Commerce, Bureau of the Census, Highlights of U.S. Export and Import Trade, FT 990 (monthly) [hereinafter cited as Trade Highlights]; U.S. Department of Commerce, Bureau of the Census, Survey of Current Business, FT 990 (monthly); Government Printing Office, Economic Report of the President, 43-48, 72 (February 1984) [hereinafter cited as Economic Report of the President]. deficits.' One cause of this weakness' is the limited financing available for United States export sales.' This Article proposes a new international financing technique the export trade note (the "ETN") to help provide the requisite financing for export sales of United States products, particularly sales by small exporters. The ETN is modeled after the forfait transaction, which has successfully driven an increasing amount of export trade in Western Europe for two decades. The ETN has been designed to avoid problems that have arisen in forfait transactions and also to make the financing technique more appropriate for United States export transactions. The basic concept of the ETN as an improved version of the forfait transaction suitable for use by United States exporters and financial entities was first developed by Mr. Austin Belton, a Manager of Brown Brothers Harriman & Co., a private New York banking organization that specializes in innovative trade financing.' United States Exports (millions of 1972 dollars) 1981 1984 % Change Guatemala 216.55 141.57 - 34 Honduras 135.31 120.93 - 10 Nicaragua 71.35 41.91 - 41 Mexico 6,894.84 4,508.30 - 34 Colombia 686.84 545.11 - 20 Venezuela 2,110.42 1,269.62 - 39 Ecuador 330.81 246.12 - 25 Peru 575.89 282.40 - 50 Bolivia 73.37 39.69 - 45 Chile 567.90 302.74 - 46 Panama 327.13 284.69 - 12 Dom. Rep. 299.26 242.70 - 18 2 From 1977-1981, the trade deficit hovered between $29 billion and $27 billion per annum. The trade deficit, however, has steadily increased since 1981, to $31.8 billion in 1982, $57.5 billion in 1983, and $107.9 billion in 1984. Through the first six months of 1985, the deficit was $62.5 billion. Trade Highlights, supra note 1. Two other much-discussed causes of the diminishing amount of United States exports are the relative strength of the dollar over other currencies, and the weakness of the economies of many importing countries. See General Trade Policy: Hearings on H.R. 2203 Before the Subcomm. on Commerce, Transportation and Tourism of the House Comm. on Energy and Commerce, 98th Cong., 2d Sess. 98-55 (Apr. 15, 1983) (testimony of George C. Lodge, Professor, Harvard Business School at p. 269); Strong Dollar: Causes, Consequences and Policy Implications: Hearings on J842 Before the Joint Economic Comm., 99th Cong., 2d Sess. 99-100 (1985). 4 "Many U.S. firms that normally export to the debtor countries, especially Mexico and Brazil, are currently unable to do so as trade credit from private sources has disappeared." Economic Report of the President, supra note 1, at 82. , See Belton, U.S. Capital Markets are Out There - But Where?, Euromoney As Part I of this Article de (...truncated)


This is a preview of a remote PDF: https://digitalcommons.law.uga.edu/cgi/viewcontent.cgi?article=1762&context=gjicl

Eugene A. Ludwig, Michael J. Coursey. The Export Trade Note: A New Instrument for International Trade, Georgia Journal of International & Comparative Law, 1986, Volume 16, Issue 3,