presents presents Financing In-Transit Inventory: Legal Risks to Lenders Legal Risks to Lenders Structuring In-Transit Financing to Protect Lenders From the Risk of Borrower Insolvency A Live 90-Minute Teleconference/Webinar with Interactive Q&A A Live 90-Minute Teleconference/Webinar with Interactive Q&A Today's panel features: James C. Chadwick, Partner, Patton Boggs , Dallas C. Edward Dobbs, Partner, Parker Hudson Rainer & Dobbs , Atlanta Thomas Hemmendinger, Of Counsel, Brennan Recupero Cascione Scungio & McAllister , Providence, RI Th H di Of C l B R C i S i & M Alli t P id RI Wednesday, March 31, 2010 The conference begins at: The conference begins at: 1 pm Eastern 12 pm Central 11 am Mountain 10 10 am Pacific P ifi You can access the audio portion of the conference on the telephone or by using your computer's speakers. Please refer to the dial in/ log in instructions emailed to registrations.
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Financing I n- Financing I n g -Transit I nventory: Legal Risks to Transit I nventory: Legal Risks to y y g g Lenders Lenders Structuring I n Structuring I n- -Transit Financing to Protect Lenders From the Transit Financing to Protect Lenders From the Risk of Borrower I nsolvency Risk of Borrower I nsolvency James C. Chadwick - James C. Chadwick - Partner Partner Patton Boggs LLP Patton Boggs LLP - - Dallas, TX Dallas, TX C. Edward Dobbs C. Edward Dobbs – – Partner Partner Parker, Hudson, Rainer & Dobbs LLP Parker, Hudson, Rainer & Dobbs LLP - , , , , - Atlanta, GA Atlanta, GA , Thomas Hemmendinger - Thomas Hemmendinger - Of Counsel Of Counsel Brennan, Recupero, Cascione, Scungio & McAllister, LLP Brennan, Recupero, Cascione, Scungio & McAllister, LLP - , , p p , , , , g g , , - Providence, RI Providence, RI , Presented via webinar for Strafford Publications Presented via webinar for Strafford Publications March 31, 2010 March 31, 2010 ,
Financing Goods in Transit Financing Goods in Transit Financing Goods in Transit Financing Goods in Transit • Competitive Advantages for your Lender Competitive Advantages for your Lender p p g g y y clients clients – Provides additional liquidity for borrowers Provides additional liquidity for borrowers q q y y – If done properly, risk profile is comparable to If done properly, risk profile is comparable to a letter of credit structure a letter of credit structure – Enhanced collateral position for the Lender Enhanced collateral position for the Lender – Reduces credit risk resulting from Reduces credit risk resulting from g interruptions in borrower’s supply chain interruptions in borrower’s supply chain March 31, 2010 March 31, 2010 4
Practical Example Practical Example Practical Example Practical Example • Damascus Steel Transaction Damascus Steel Transaction – $135,000,000 credit facility $135,000,000 credit facility – Steel being transported from China and other Steel being transported from China and other countries to the United States was the primary source countries to the United States was the primary source countries to the United States was the primary source countries to the United States was the primary source of raw materials for the borrower of raw materials for the borrower – The lender was able to perfect its interest in the in The lender was able to perfect its interest in the in- - t ansit steel and p o ide t ansit steel and p o ide transit steel and provide up to $40,000,000 additional transit steel and provide up to $40,000,000 additional p to $40 000 000 additional p to $40 000 000 additional availability availability – The ability to do the deal allowed the lender to The ability to do the deal allowed the lender to establish a business relationship that can now be establish a business relationship that can now be extended into other banking products extended into other banking products March 31, 2010 March 31, 2010 5
V P C W SELLER BUYER E E O O U U A A S R S R GOODS S T T E TO BE TO BE E E O O H H SHI PPED L M O S U S E • To take advantage of the benefits of financing To take advantage of the benefits of financing goods in transit, you need to be perfected at every goods in transit, you need to be perfected at every point in this chain point in this chain – Not every financial institution has this capability, but by mastering this material, Not every financial institution has this capability, but by mastering this material, you can be prepared to assist your clients with their opportunities to finance you can be prepared to assist your clients with their opportunities to finance goods in transit goods in transit d d i i t t it it – Note that goods in transit can also be financed through a letter of credit Note that goods in transit can also be financed through a letter of credit structure, which does not present the same issues as the types of transactions structure, which does not present the same issues as the types of transactions we will discuss today we will discuss today we will discuss today we will discuss today March 31, 2010 March 31, 2010 6
Basics of Goods in Transit Basics of Goods in Transit • Common Modes of Transportation • Common Modes of Transportation Common Modes of Transportation Common Modes of Transportation – Ocean Vessel, Aircraft, Rail and Motor Truck Ocean Vessel, Aircraft, Rail and Motor Truck March 31, 2010 March 31, 2010 7
Basics of Goods in Transit Basics of Goods in Transit • T T Terminology Terminology i i l l – Seller and Buyer Seller and Buyer – Shipper, Consignor, Consignee Shipper, Consignor, Consignee – Vessel Owner, Carrier, NVOCC, Charter Party Vessel Owner, Carrier, NVOCC, Charter Party – Customs Broker Customs Broker – Customs Bonded Warehouse and Free Customs Bonded Warehouse and Free- -Trade Trade Zone Zone March 31, 2010 March 31, 2010 8
Basics of Goods in Transit Basics of Goods in Transit • Documentation • Documentation Documentation Documentation – Bill of Lading (Clean On Board) Bill of Lading (Clean On Board) • Sets forth the contractual terms of carriage Sets forth the contractual terms of carriage Sets forth the contractual terms of carriage Sets forth the contractual terms of carriage • Possibly evidences title to the goods Possibly evidences title to the goods – Straight Bill of Lading Straight Bill of Lading – – Not Negotiable Not Negotiable – Order Bill of Lading Order Bill of Lading – – Negotiable and Title is “Locked Up” Negotiable and Title is “Locked Up” in the Bill in the Bill • Carrier obligation to deliver Carrier obligation to deliver g • Master bills vs. house bills Master bills vs. house bills March 31, 2010 March 31, 2010 9
Basics of Goods in Transit Basics of Goods in Transit • Documentation Documentation Documentation Documentation – Certificate of Origin of the Goods Certificate of Origin of the Goods – Commercial Invoice Commercial Invoice – Certificate of Inspection Certificate of Inspection – Evidence of Insurance Evidence of Insurance – Arrangements with Other Parties Expected to Receive Arrangements with Other Parties Expected to Receive Possession of the Goods Possession of the Goods • Freight Forwarders • Freight Forwarders Freight Forwarders Freight Forwarders • Customs Brokers Customs Brokers • Storage Companies Storage Companies March 31, 2010 March 31, 2010 10 10
Potentially Applicable Laws Potentially Applicable Laws • Many laws can govern the rights of the • Many laws can govern the rights of the Many laws can govern the rights of the Many laws can govern the rights of the parties in the goods parties in the goods • Here s what we need to know: • Here’s what we need to know: Here’s what we need to know: Here s what we need to know: – Where are the goods coming from? Where are the goods coming from? – Where are they going? Where are they going? Where are they going? Where are they going? – How are they getting there? How are they getting there? – How do the parties plan to document their – How do the parties plan to document their How do the parties plan to document their How do the parties plan to document their arrangement? arrangement? – Where will the documents be located? Where will the documents be located? do u do u s b s b o a o a d d March 31, 2010 March 31, 2010 11 11
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