The Finance, Credit and International Business Association (FCIB) will hold its first Spring Conference at the National Association of Credit Management’s (NACM’s) 117th Credit Congress & Exposition on May 18-21, 2013 at the Rio Hotel in Las Vegas. NACM's Credit Congress has always provided a venue for both domestic and international credit professionals who extend business-to-business credit, but with the inclusion of a specialized Spring Conference comes a focus on the growing opportunities in global trade.

“The purpose of the FCIB Spring Conference is to expand the knowledge base for U.S. companies that are starting to export, and to further educate and provide tools for the advanced international credit management executive,” said Marta Chacon, CICP, FCIB Director - The Americas. “The specially-designed sessions will address the pressing issues facing international trade professionals around the world, and provide the solutions that work in various global markets.”

The FCIB sessions, integrated into the Credit Congress schedule of events, focus on expanding the efficiencies in international credit management. Topics include how to create profit, reduce risks, identify the potential pitfalls in exporting, discuss ethical compliance in order to work effectively on a global level and cover the intricacies of doing business in the United States' largest trading partners, Canada and Mexico.

The Spring Conference comes on the heels of other noteworthy FCIB endeavors. Earlier this month, FCIB entered into a strategic partnership with the U.S. Commercial Service to promote exporting under President Barack Obama's National Exporting Initiative (NEI), which aims to double U.S. exports by the end of 2014. The partnership aims to make it easier for all U.S. companies to take advantage of exporting opportunities offered around the globe, with FCIB acting as a portal through which exporters can find the tools and resources they need. Under the partnership, FCIB has already played a role in the development of the third edition of the International Trade Agency’s Trade Finance Guide, and the first Spanish-language version of the guide.

“With an estimated 95% of the world’s buying power existing outside the United States, U.S. businesses of all sizes should consider the benefits of selling their products and services abroad,” said Chacon. “By incorporating a spring conference into the yearly Credit Congress, FCIB furthers its role in helping companies expand into the international market. With FCIB's sessions open to all registrants, those looking to begin exporting, as well as already-advanced international trade professionals, receive the benefits of tailored education, in addition to numerous networking opportunities and an expo of product and service providers that a large venue offers.”

FCIB and NACM welcome walk-in registrants and the press.

- FCIB

The Finance, Credit and International Business Association (FCIB) is already an important global source of exporting education and professional networking. Now, however, the association is expanding to become a portal through which exporters of all sizes can find the tools and resources they need to effectively grow their business through international trade.

Most recently, at the Port of Los Angeles' Trade Connect seminar held on May 8, FCIB, in partnership with the U.S. Department of Commerce's International Trade Administration (ITA), unveiled the first-ever Spanish-language edition of the ITA's Trade Finance Guide. FCIB member Diego Jiménez, ICCE, credit analyst at Accuride International, Inc., was instrumental in the review of the translated guide, as well as to the program of this week's Trade Connect seminar. Another FCIB member, Timothy Bastian, ICCE, corporate credit manager for Western Oilfields Supply Company, also presented a session at the event.

The announcement came on the heels of FCIB and ITA signing a new memorandum of understanding (MOU) in order to increase awareness in the U.S. business community, particularly among small and medium-sized businesses, of the opportunities offered by exporting, as well as the tools and resources available to companies through the two organizations. The MOU builds on previous collaborations between FCIB and ITA, beginning with the drafting of the original Trade Finance Guide, its subsequent updates and now its first Spanish-language edition.

“By working together, FCIB and ITA are making it easier for all U.S. companies to take advantage of the exporting opportunities offered around the globe," said FCIB's Director–Americas Marta Chacon, CICP. "The Trade Finance Guide, which is now in its third edition and is now available to Spanish-speaking business owners, is only the first step in what will be a long line of collaborations geared toward unlocking world markets for businesses of all sizes."

Through the MOU and updated Trade Finance Guide, FCIB is becoming more deeply ingrained in the policy goals outlined in President Barack Obama's National Exporting Initiative (NEI), which aims to double U.S. exports by the end of 2014. FCIB's partnership with ITA puts them in good company with the U.S. Commercial Service's other strategic partners and will enable the association to better support the goals of the NEI by educating U.S. businesses about the benefits of exporting and directing them to the wealth of public and private resources available to assist them.

- FCIB
 

The European Central Bank (ECB) cut interest rates in the eurosystem by 25 basis points today, from 0.75% to a record low of 0.50%.

Putting it mildly, the emergency rate cut was driven by persistently weak economic performance among the members of the eurosystem. Most notably, unemployment among the 17 member countries that use the euro recently set a record at 12%.

"Weak economic sentiment has extended into spring of this year," said ECP President Mario Draghi after announcing the rate reduction. "The cut in interest rates should contribute to support prospects for a recovery later in the year," he added, leaving the door open for future cuts should they become necessary. "Against this overall background, our monetary policy stance will remain accommodative for as long as needed. In the period ahead, we will monitor very closely all incoming information on economic and monetary developments and assess any impact on the outlook for price stability," said Draghi.

The rate cut was no surprise to markets, but certain details mentioned by Draghi during his press conference raised some eyebrows among analysts. "Draghi confirmed at the press conference that the ECB is open to a negative deposit rate, which would effectively charge banks to deposit funds with the ECB and therefore act as a major incentive to boost lending," said Craig Erlam, market analyst at Alpari. "Obviously, as we’ve seen both in the eurozone and the UK, incentives don’t guarantee anything. However, this would be a bold step from the ECB and has understandably been met with approval in the markets."

However, Erlam remained skeptical that today's rate cut would jump-start a huge turnaround in the European market. "All things considered, the one thing to take from this is that the ECB has done nothing that is going to improve circumstances in the short term," he said. "Basically, it’s business as usual in the eurozone."

- Jacob Barron, CICP, NACM staff writer

 

The European Union tipped its cap to trade finance this week as it adopted Capital Requirements Directive IV (CRD IV), part of its ongoing implementation of the Basel III capital requirements. What's noteworthy about CRD IV is that it recognizes the inherently low risk associated with short-term trade finance transactions, ultimately allowing banks to hold less capital in reserve for these transactions and making it easier for them to provide export financing.

The EU's adoption of CRD IV came on the same day that the International Chamber of Commerce (ICC) released a report on how rare defaults are in trade finance transactions. Specifically, the report found that short-term trade finance transactions have a microscopic .02% default rate, compared to a 0.6% default rate for one-year, single A-rated corporate loans, a comparatively reliable transaction that defaults nearly thirty times as often as trade finance transactions do.

Among other provisions, CRD IV sets a lower credit conversion factor (CCF) for trade financing than previously suggested iterations of the Basel III reforms. For medium/low risk and medium risk off-balance sheet trade finance instruments, the CCF will be 20% and 50%, respectively. This means that banks won't have to keep the entire value of a trade finance transaction in reserve, thereby making this type of financing cheaper for banks to provide.

Advocates cheered the EU's decision. "Amendments agreed [to] by the EU institutions on capital, leverage and liquidity requirements for trade finance recognize the intrinsically safe nature of these products and their importance to companies, consumers and job creation," said Tod Burwell, president and CEO of BAFT-IFSA, an international trade banking association comprised of the Bankers' Association for Finance and Trade, and the International Financial Services Association. "Through these amendments, the European Union has taken significant steps to alleviate the regulatory burden for trade finance and to ensure it remains available and affordable to importers and exporters."

"This is a positive outcome for the real economy, and we ask the G20 and the Basel Committee to recommend that these Basel III changes be adopted in all member jurisdictions around the world," he added.

- Jacob Barron, CICP, NACM staff writer

MasterCard, the world's second largest credit card network, continues to face allegations of anticompetitive behavior on both sides of the Atlantic.

In addition to navigating the still yet-to-be-fully-approved $7.2 billion class action lawsuit in the U.S., the European Commission announced today that it had opened an investigation into MasterCard's potentially anticompetitive use of transaction fees on merchants. This dovetails with the Commission's ongoing investigation into similarly anticompetitive practices by Visa, which began last July, and the efforts of the eight European Union countries where both card processing giants are either under investigation or facing court proceedings.

The Commission announced that it was focusing particularly on transaction fees levied by MasterCard on payments made by cardholders from countries outside the European Economic Area (EEA), as when a U.S. resident uses their MasterCard to pay for a purchase at a merchant in the EEA, rather than other fees for cross-border transactions within the EEA, which were outlawed in 2007. Furthermore, the Commission said it would be broadly investigating any of MasterCard's related business practices that amplify the risk of anticompetitive behavior, such as the "honor all cards" rule, which requires merchants to accept all or none of MasterCard's payment cards.

"These fees and practices may restrict competition. The inter-bank fees are generally passed on to the merchants, leading to higher overall fees for them," said the Commission. "Ultimately, such behavior is liable to slow down cross-border business and harm EU consumers."

The parallel investigations into Visa and MasterCard's business practices are driven by the Commission's stated goal to create a level playing field for all payment card providers. Ideally, increasing transparency in the way these fees are set and levied will result in rate cuts and lower processing costs for card-accepting merchants.

New regulations on payment card fees are expected to be proposed by the Commission before summer.

- Jacob Barron, CICP, NACM staff writer

Agencies affected by the sequestration budget cuts have had some say as to where the cuts are made. Though no one believes it was the nation's only or best option, this level of flexibility in the sequester's application could help mitigate its effects in certain sectors of the federal government, such as in the Small Business Administration (SBA).

To ensure that the cuts are applied in the most effective way, the House Small Business Committee, chaired by Sam Graves (R-MO), sent a letter this week demanding that the SBA provide more details about how the agency plans "to conduct its core functions in a time of limited budgetary resources."

Graves stressed that the sequester's cuts be directed at programs that are wasteful, rather than at the SBA's core functions of counseling, increasing access to capital and contracting. Specifically, the letter sent from the committee to SBA Chairman Karen Mills requested details on contingency plans that the SBA would implement in the instance that demand for guaranteed loans exceed the funds available in the agency's business loan account. Essentially, Graves wants to make sure that the sequester affects lending less than it affects how the SBA's programs are administered.

In an oversight hearing held earlier in March, Graves' committee cited a Government Accountability Office (GAO) report that identified room for improvement across 52 of the SBA's entrepreneurial assistance programs, most of them geared toward unnecessary or inefficient filing and paperwork requirements. "The ways that these programs are administered could lead to inefficient delivery of services, such as requiring entrepreneurs to fill out applications to multiple agencies with varying program requirements," said William Shear, director of financial markets and community investments at the GAO. "These inefficiencies could compromise the government’s ability to effectively provide the needed services and meet the shared goals of the programs."

Ideally, the sequester cuts do more to clear out the waste in the SBA, rather than make it a less effective source of financing. "As our debt continues to pile up, an important way for us to rein in federal spending is to find ways to get rid of duplication and overlap in federal programs where taxpayer dollars are being wasted or used inefficiently," said Graves. "Rooting out duplication, inefficiency and waste in SBA programs to ensure small businesses are being best served is a goal of this Committee."

The SBA must respond to the committee's requests for contingency plans by April 15.

- Jacob Barron, CICP, NACM staff writer
 

Though there may be some budgetary hurdles in the future, this week the Obama Administration took the first step toward a Transatlantic Trade and Investment Partnership (TTIP) with the European Union by notifying Congress of its intent to start negotiations.

Originally teased in last month's State of the Union address, the TTIP has quickly become one of the President's top trade priorities, along with the Trans-Pacific Partnership (TPP), which last week gained a new potential member as Japanese Prime Minister Shinzo Abe announced that Japan hoped to join TPP negotiations in earnest. Taken together, the TTIP and TPP signal an effort by the Obama Administration to build on the United States' existing trade relationships that are already some of the strongest in the world.

In particular, the economic relationship between the U.S. and the EU currently generates goods and services trade flows of about $2.7 billion a day, according to a 2012 estimate. Exporters on both sides of the Atlantic already have few hoops to jump through in order to sell to their cross-ocean counterparts, but since the volume of trade between the U.S. and the EU is already so high, any further reduction in trade barriers could provide exponential increases.

"The decision to launch negotiations on the Transatlantic Trade and Investment Partnership reflects the broadly shared conviction that transatlantic trade and investment can be an even stronger driver of mutual job creation, growth and increased competitiveness," said Demetrios Marantis, Acting U.S. Trade Representative, in his notification letter to Congress. "With average U.S. and EU tariffs already quite low, new and innovative approaches to reducing the adverse impact on transatlantic commerce of non-tariff barriers must be a significant focus of the negotiations."

- Jacob Barron, CICP, NACM staff writer

 

Despite continually strong export figures, the U.S. trade deficit widened more than expected in January, driven by an uptick in oil imports.

According to the U.S. Commerce Department, the monthly gap between goods and services imported and goods and services exported hit $44.4 billion in January, which was about $2 billion higher than analysts had expected. December's figures were also revised downward, with Commerce lowering the trade deficit from $38.5 billion to $38.1 billion.

The $6.3 billion jump between December and January was the largest increase in the trade deficit since last March, as exports, although still hitting historically high levels, fell by 1.2%. Imports also rose 1.8% to $228.9 billion in January, an increase driven primarily by industrial supplies and materials, the imports of which increased by $4 billion.

Exports of cars, capital goods, consumer goods and food, feeds and beverages marked slight gains, but not enough to offset the slump in exports of industrial supplies and materials. Imports of crude oil increased by more than 13%, from about $22 billion in December to more than $25 billion in January, as the price for a barrel of imported oil dropped to its lowest level since July ($94.08).

On a country by country basis, the U.S. ran trade surpluses in January with Hong Kong ($2.7 billion), Australia ($1.2 billion), Brazil ($900 billion) and Singapore ($700 million), while its goods deficit with China continued to grow, hitting $27.8 billion. Continuing at this pace, the U.S. could break its record annual deficit with China, which hit $315 billion in 2012.

- Jacob Barron, CICP, NACM staff writer

Credit professionals looking for unique financing solutions should see where investors want to put their money. That was just one of the many insights offered during yesterday's FCIB New York International Roundtable, held at the offices of Lowenstein Sandler, LLP. During the event-ending panel, titled "Non-Traditional and Creative Methods for Receivables Management and Working Capital Finance," professionals from the brightest corners of commercial trade financing offered attendees some new ideas on how to approach managing their receivables.

Panelist John Barone of JP Morgan noted that credit professionals often fail to see the big picture in terms of how receivables are securitized and financed, cutting themselves off to a number of financing options. In essence, he made the point that creditors and their companies should look to areas where investors want to put their money, and investors are currently looking to invest in so-called high-yield markets. "When we discuss high-yield we mean any company that is rated BBB or less," said Barone. "If you were to look at a group of European high-yield names and you also look at the default rate and how those names as a portfolio have traded, the spread was astronomical."

Ultimately, the idea is that the greater the risk, the greater the reward, a fact that means greater profits for investors and thus greater access to unique financing solutions for companies looking to finance sales to this area. "Many of the credit professionals that we talk to don't look at this," said Barone. "They analyze those individual customers and they tend to not step back and think about things on a more macro basis. The market for high-yield risk in Europe is growing. Investors are looking to put their capital somewhere and they're looking for something they can also get a yield on their capital." Europe is one place where creditors can hope to increase sales while hedging their risks because investors are more interested in taking the risk of securitizing such transactions with puts and other financing options.

See more about this year's New York Roundtable in today's edition of NACM's eNews. For more information on FCIB's other educational and networking opportunities, click here.

- Jacob Barron, CICP, NACM staff writer

 

Nebraska's largest electric utility announced this week that last month's revision to the proposed route for the Keystone XL oil pipeline would delay work on transmission lines for the project. This means more progress on the pipeline will be delayed until 2015 at least, even if it receives presidential approval.

TransCanada, the company actually building the pipeline, had originally set a deadline for construction of transmission lines to be completed by the end of 2014. But Nebraska Public Power District (NPPD) officials admitted that the revised route, approved by Nebraska Governor Dave Heineman (D) in January, would delay the project, NPPD Chief Operating Officer describing the original deadline as "wishful thinking."

The pipeline's original route was rejected by President Barack Obama early in 2012, but revisions have continued since then to make the pipeline less of an environmental eyesore. Specifically, the U.S. State Department, which has jurisdiction over the project because it crosses the U.S.-Canada border, sought proposals to reroute the pipeline around Nebraska's environmentally-sensitive Sand Hills region.

TransCanada made the changes and received Heineman's approval, but the revision also complicated the other infrastructure changes that were necessary for the pipeline's construction.

The project has been a lightning rod for controversy, with thousands of protesters descending on Washington earlier this month to protest the pipeline. Their objections are economic and environmental, with opponents arguing that the project won't create as many jobs as TransCanada claims, and that the tar sands oil the pipeline will transport from Alberta, Canada to the U.S. Gulf Coast will only further increase America's dependency on fossil fuels.

- Jacob Barron, CICP, NACM staff writer
 

Credit conditions remained unchanged in the latest National Federation of Independent Business (NFIB) index of small business optimism, which increased 0.9 points to 88.9 in January. Despite the increase, 88.9 remains one of the lowest readings in the survey's 40-year history, indicating that small businesses are keeping their heads above water by reverting to "maintenance mode" in terms of spending and borrowing.

Only 6% of survey respondents said that all their credit needs were not met, the same reading as December's. Thirty-one percent of respondents reported that all their credit needs were met and only 3% considered a lack of financing to be their business' top problem. Another 31% of all owners reported borrowing on a regular basis, which was up two points from December's readings, but still a historically low figure.

News on planned capital outlays by small businesses was even worse, with the net percent of owners expecting better business conditions in six months stuck in a net negative 30%, a five point improvement from December but still the fourth lowest reading in nearly 40 years. Surveyed businesses seem content to maintain their current situations, focusing less on investment and growth and more on reducing inventory.

Economic uncertainty from Capitol Hill continues to be the dominant narrative driving respondents' pessimism. "Bad news continued to dominate the information flow to business owners. Gross Domestic Product (GDP) actually fell in the fourth quarter, and grew less than 2% for all of 2012. A sharp decline in defense spending subtracted about 1.3 percentage points from the growth rate, a warning as to what might happen if sequestration actually occurs with no deal to change its magnitude and timing," said NFIB Chief Economist Bill Dunkelberg. "A sharp decline in inventory building also knocked a point or more off the GDP growth rate. But even if those events had not occurred, overall growth would have still been around 2%."

- Jacob Barron, CICP, NACM staff writer

The latest edition of the National Association of Credit Management's (NACM's) Credit Managers' Index (CMI) marks its 10th-year anniversary of providing financial professionals, economists and policymakers with a startlingly accurate forecasting tool.

Since its inception in January 2003, the CMI's methodology has undergone a number of revisions, but never stopped being an immensely powerful economic predictor. In 2007 it was even able to tip analysts off to the start of the "Great Recession" in December 2007, showing a noteworthy decline in October of the same year.

Throughout the recession, the CMI reflected a remarkable sensitivity to the intricacies of the economic downturn, and resisted the month-to-month swings that characterized other economic indicators. Eventually it anticipated the recession's end as well, showing signs of market stabilization and nascent growth as early as February 2009, while the actual recession came to an end four months later in June.

The CMI's strength as a forecasting tool comes from the insight of credit and risk management professionals, whose responsibility it is to know what's coming next. "I think it's the nature of credit management," said NACM Economist Chris Kuehl, PhD. "Credit managers are as concerned about the condition of their clients 15, 30, 60 and 90 days from now as they are today. The tendency is to think ahead."

Moreover, the structure of the CMI survey eliminates the opportunity to speculate. Other economic indices ask respondents what their company intends to do in the coming months, but intentions don't always align with reality. "As soon as you start getting into that kind of conjecture, you kind of weaken the data," said Kuehl. "When responding to the CMI question, 'Do you have more credit applications?' there isn't a lot of room for interpretation. You're getting responses that have to do with credit applications and the status of accounts, and most of that stuff is oriented to the future."

Over the last decade these factors have combined to create an unrivaled forecasting tool that's relied upon by those in the highest levels of finance and economic policy. As participation continues to grow and people continue to recognize its value, the CMI looks poised for another winning decade.

For more on the CMI, or to participate, click here.

- NACM staff
 

The January Credit Managers' Index (CMI), published by the National Association of Credit Management (NACM), dipped slightly as it painted the picture of an economy in transition.

To find the kind of variety found in the most recent edition of the CMI, one would have to travel all the way back to 2008, in the months that preceded the slide into the recession. For every sign that things were deteriorating at that time, there was a part of the index that looked solid and unaffected by the impending crisis. Now, however, that transition is showing again, but seems to point in the opposite direction: for every factor suggesting that the economy is still in the doldrums, there are one or two other factors that point to better days ahead.

For example, while sales improved in this month's report, new credit applications declined, signaling potential trouble ahead. "The number for new credit applications is important in that it tends to anticipate the gains some of the other factors will have later,” said NACM Economist Chris Kuehl, PhD. “If there is not much in the way of new credit activity, it is a signal that fewer companies are in expansion mode."

The complete CMI report for January 2013 contains more commentary, complete with tables and graphs and individual data for the manufacturing and services sectors. CMI archives may also be viewed on NACM’s website.

-NACM staff

A recent study conducted by the Canadian Federation of Independent Business (CFIB) found that government regulations were the scourge of small businesses on both sides of the U.S.-Canada border.

According to the CFIB, sister organization to the United States' National Federation of Independent Business (NFIB), Canadian businesses pay significantly more in regulatory compliance costs than their U.S. counterparts on a per employee basis for every size of business except those with at least 100 employees. "Costs are high in both countries, with the smallest firms bearing a disproportionate burden of the per-employee costs," said the report. "In Canada, the smallest firms pay five times as much per employee compared to the biggest firms, while in the U.S small firms pay more than three times as much as their largest counterparts."

A Canadian business with fewer than five employees, including the business owner, pays an average of $5,942 per employee per year in compliance costs, whereas a similarly sized U.S. business pays only $4,084. Per employee regulatory costs get lower and lower as business size increases, with a company in Canada employing more than 100 paying only $1,146 per employee per year in regulatory costs, and a similar U.S. company paying $1,278. For the purposes of the study, the U.S. and Canadian dollars were considered to be at parity.

NFIB Senior Vice President for Public Policy Susan Eckerly said that the report confirms "that regulations cost too much ($198 billion in the United States) and disproportionately burden small firms. The study also points out that 31% of business owners in the U.S. and 23% in Canada said they may not have gone into business if they knew beforehand the regulatory burden they would face," she noted, indicating that bureaucratic red tape not only hamstrings existing businesses, but also prevents the formation of new ones.

The full report is available here.

- Jacob Barron, CICP, NACM staff writer

A bill in the Virginia House of Delegates would require commercial credit reporting agencies to identify their sources of "negative information" when they provided a copy of a report to the subject. This would mean that Virginia buyers would know which of their suppliers shared any of their negative payment history with a commercial credit reporting agency.

The bill, HB 2198, would also require agencies to provide Virginia businesses access to a free annual credit report and would allow the subject of a commercial report to dispute parts of the report within thirty days of receiving theirs, if the company in question believed that their report contained inaccuracies. After receiving the subject's complaint, the commercial credit reporting agency would then have 30 days to either delete the statement, or include a note in the report that signals that the subject of the report considers the particular statement inaccurate.

The bill originated from a series of meetings held between Virginia Delegates and the Virginia business community, wherein business owners complained about a lack of access to credit. Many companies raised their concerns that negative information in their commercial credit reports was making it harder for them to acquire bank and trade financing, so Virginia delegates responded with HB 2198.

Currently the bill has been referred to subcommittee #2 of the Virginia House of Delegates Committee on Commerce and Labor. It has four patrons, all members of the Republican majority in the House of Delegates: Chief Patron Michael Watson (James City/York Counties), Chief Co-Patron Christopher Head (Botetourt/Roanoke Counties), David Ramadan (Loudon/Prince William Counties) and Michael Webert (Culpeper/Fauquier/Rappahannock/Warren Counties).

Stay tuned to NACM's blog and NACM's eNews for updates on this legislation. If you have questions about the bill, please email jakeb@nacm.org or call Jacob Barron at (410)740-5560.

- Jacob Barron, CICP, NACM staff writer

Starting this Sunday, January 27, merchants can begin surcharging their customers for paying with a credit card, but don't tack on that fee just yet.

According to the terms of last year's settlement of a seven-year, $7.25 billion case between Visa and MasterCard and a group of retailers, following the agreement's preliminary approval, Visa and MasterCard had 60 days to amend their no-surcharging policies that they imposed on card accepting companies. The companies did so, and now, as of Sunday, merchants are within their rights to pass on their credit card processing fees to their customers, if they've met a series of conditions.

First of all, any surcharging activity has to wait until at least 30 days after the merchant has alerted both Visa or MasterCard and its acquiring bank of its intention to charge such a fee. Furthermore, the level of the fee that a merchant can charge is capped to the merchant's acceptance cost, but for merchants imposing a brand-wide surcharge, the surcharge is limited to the lesser of their average effective interchange rate or the maximum surcharge cap, established at 4%.

Merchants imposing a product level surcharge, meaning a surcharge for specific types of Visa or MasterCard products, can charge only what it costs to accept that particular product.

The fee must also be disclosed to the customer, at the point of sale and preferably ahead of time too. But regardless, it is vital that merchants speak with their general counsel and with their acquirer about what rights they have before levying any surcharge on their card-using customers.

- Jacob Barron, CICP, NACM staff writer
 

Despite a pair of noteworthy increases near year's end, 2012 closed with commercial bankruptcy filings at their lowest total since the 2008 financial crisis.

According to data provided to the American Bankruptcy Institute (ABI) by Epiq Systems, Inc., there were 57,788 total commercial bankruptcies during calendar year 2012, a 22% drop from the 74,415 filings during the same period in 2011. Chapter 11 filings also fell in 2012, as the 7,760 filings marked a 10% decrease from the 8,658 Chapter 11 filings in 2011.

Filings fell in the consumer world as well, as the 1,127,540 total noncommercial filings during 2012 represented a 14% drop from 2011's noncommercial total of 1,305,243. Combined, there were 1,185,328 total bankruptcy filings for calendar year 2012, which marks another 14% decrease from the 1,379,658 total filings in 2011.

In December 2012 alone, there were 3,739 commercial filings, 33% lower than the 5,569 filings during the same period in 2011. Chapter 11 filings registered a 25% drop with 742 filings in December 2011 compared to only 559 last month.

The per capita filing rate for calendar year 2012, measuring total filings per 1,000 population, decreased to 3.83, down from 4.46 in 2011. States with the highest filing rates through 2012 were Tennessee (6.88), Nevada (6.43), Georgia (6.43), Alabama (5.84) and Utah (5.76).

Read more about what to expect from bankruptcies in 2013 in this week's upcoming edition of NACM's eNews.

- Jacob Barron, CICP, NACM staff writer

The National Association of Manufacturers (NAM) sharply criticized Congress last week for failing to pass a bill that would've prevented a tax increase on the industry.

Each year, Congress conducts the Miscellaneous Tariff Bill (MTB) process, which cobbles together thousands of tiny pieces of tax and tariff reduction legislation, proposed by lawmakers in both chambers, into one omnibus package. The resulting bill typically lowers the cost of certain manufacturing inputs and some finished products not made or available here in the United States, and usually passes the House of Representatives and the Senate overwhelmingly.

However, the last-minute rush to avert the so-called "fiscal cliff," among other legislative quandaries that frequently left Congress paralyzed, led lawmakers to delay the completion of the MTB process until after 2012 had ended. This means that on January 1, 2013, a number of tax and tariff reductions from the previous year's MTB expired, leaving manufacturers holding the bill.

"Congress’s failure to pass the MTB has resulted in a tax increase on manufacturers in the United States, hurting their global competitiveness and putting jobs at risk," said NAM vice president of international economic affairs Linda Dempsey. "It is currently 20% more expensive to manufacture in the United States compared to our largest trading partners, and the lack of an MTB will only widen that gap."

A new MTB bill has already been drafted by the current Congress. The U.S. Job Creation and Manufacturing Competitiveness Act of 2013 (H.R. 6727) is aimed at addressing NAM's concerns and is expected to eventually pass with bipartisan support. While the content of the bill is uncontroversial, its late arrival, as well as any continued delays, will have a negative effect on the industry.

"Manufacturers of all sizes benefit from these important tariff suspensions to obtain raw materials and inputs that are not available in the United States," said Dempsey. "In failing to enact this important legislation, Congress has increased costs on manufacturers and made it more difficult for manufacturers to maintain and grow production and jobs in the United States."

- Jacob Barron, CICP, NACM staff writer

President Barack Obama signed H.R. 6156 into law today, officially establishing permanent normal trade relations (PNTR) with Russia.

Much of what the bill does is iterated in its full title, the Russia and Moldova Jackson-Vanik Repeal and Sergei Magnitsky Rule of Law and Accountability Act of 2012. In addition to repealing the Jackson-Vanik amendment, a regularly ignored Cold War regulation that made U.S. preferential tariff rates on Russian products conditional on the country allowing Jews and other minorities to emigrate freely, the bill also normalizes trade relations with Moldova and gives the U.S. the ability to sanction Russian human rights violators according to the terms of the bill's so-called Magnitsky provisions, named after Russian lawyer Sergei Magnitsky who died in Russian prison while investigating allegations of large-scale theft on the part of Russian officials.

Normalizing trade relations with Russia became a priority once Russia officially joined the World Trade Organization (WTO) in August. According to the terms of Russia's WTO accession agreement, the country could increase tariffs on products entering the country from the U.S. until the U.S. normalized trade relations with its fellow WTO member. The presence of the Jackson-Vanik Amendment on U.S. books was considered abnormal, and Russia was, until now, within its rights to discriminate against American products.

President Obama's signature clears the bill's final hurdle and allows U.S. companies to take advantage of the newly expanded market access generated by Russia's WTO membership.

“The United States strongly supported Russia’s accession to the WTO, because it is in the interest of our exporters and the Americans they employ to bring Russia more fully into the global trading system,” said U.S. Trade Representative Ron Kirk. “With the signing of this legislation, American businesses and workers are closer to enjoying the full economic benefits of Russia’s WTO commitments.”

- Jacob Barron, CICP, NACM staff writer

On a 92-4 landslide vote, the Senate today approved H.R. 6156, a bill that would establish permanent normal trade relations (PNTR) with Russia. The bill now heads to the President's desk for signature into law.

Specifically, the bill repeals the Jackson-Vanik amendment, a Cold War relic that makes U.S. preferential tariff rates on Russian products conditional on the country allowing Jews and other minorities to emigrate freely. Its presence on U.S. books is considered discriminatory, meaning Russia has, since joining the World Trade Organization (WTO) in August, been within its rights to increase tariffs on products entering the country until the U.S. repealed the amendment.

The bill's passage means that U.S. companies can begin to take advantage of the concessions Russia made in its accession agreement with the WTO, including increased access to several of the nation's fastest-growing markets.

H.R. 6156 also normalizes trade relations with Moldova and imposes sanctions on Russian human rights violators, particularly persons identified as responsible for the detention, abuse or death of Russian human rights lawyer Sergei Magnitsky, who died under mysterious circumstances in a Russian prison in 2009.

Approval of the bill was not always a guarantee in the Senate, as a group of prominent senators sought to expand the so-called Magnitsky provisions to apply to human rights violators from all countries, rather than just those in Russia. The expanded version of the measure was authored by Sen. Ben Cardin (D-MD) who dropped his objections to moving forward with H.R. 6156 while debating the bill last night. "I hope we will make this statutorily global," he said. "We will have that debate at a later date."

- Jacob Barron, CICP, NACM staff writer