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)