Continued business growth anticipated for Colorado in upcoming quarters

April 23, 2015 

Continued business growth anticipated for Colorado in upcoming quarters, says CU-Boulder report.

With an increase in business filings in Colorado through the first quarter of 2015 -- including new and renewing entities and trade names -- employment in the state is expected to keep growing during the second and third quarters of the year, according to a University of Colorado Boulder report released today by Colorado Secretary of State Wayne Williams.

The quarterly indicators report, prepared by CU-Boulder’s Business Research Division at the Leeds School of Business, uses data from the secretary of state’s central business registry.

During the first quarter of 2015 a total of 28,115 new businesses formed, up from 26,523 during the same period in 2014.

“Coloradans continue to drive our economy upward by adding their ideas to the marketplace,” said Williams. “Our small businesses are the lifeblood of our communities and their growth is encouraging.”

Colorado recorded 103,719 new entities during the 12-month period ending in March, up from 102,127 new entities recorded in the 12-month period ending in December 2014.

“Despite a drop in employment in Colorado from February to March, other indicators continue to point to a very healthy economy,” said economist Richard Wobbekind, executive director of CU-Boulder’s Business Research Division.

“While new business filings remain impressive, the employment outlook is dampening slightly for 2015.”

Existing entity renewals spiked in the first quarter of 2015 at a record 126,282, up from 107,848 in the fourth quarter of last year. Domestic limited liability companies represented the greatest increase in renewals among existing entities.

The number of Colorado entities in good standing went up in the first quarter to 571,386, a 7 percent increase compared with the same time in 2014.

Visit the secretary of state’s website at http://www.sos.state.co.us/pubs/business/quarterlyReports/index.html to view current and past reports or to sign up to receive reports by email.

Richard Wobbekind, Leeds School, 303-492-1147

[email protected]

Brian Lewandowski, Leeds School, 303-492-3307

[email protected]

Elizabeth Lock, CU-Boulder media relations, 303-492-3117

[email protected] 

Tim Griesmer, Colo. Dept. of State, 303-860-6903

[email protected]

Business Research: Colorado February Jobs Report Analysis and Other Economic Indicators

For more publications by the Business Research Division of the Leeds School of Business at CU Boulder, click here. By Brian Lewandowski, Associate Director, Business Research Division, Leeds School of Business

The March jobs report was released for Colorado today, with the preliminary numbers showing a month-over-month decline in employment (-3,900 jobs, -0.2%), and a downward revision to the February estimates. According to data from the Bureau of Labor Statistics, March recorded 67,700 more jobs than the same month in 2013, increasing 2.8% year-over-year. The pace of growth slowed, according to the preliminary March numbers, after growing in excess of 3% for 16 consecutive months. Year-over-year growth in March ranked Colorado 11th nationally, and monthly growth ranked the state 32nd. Average weekly wages increased year over year for the first three quarters of 2014 (4.2%, 2.9%, and 3%, respectively). State per capita personal income increased 3.9% in 2014 to rank 14th nationally, and quarterly personal income rose 5.9% year-over-year in Q4 2014.

Colorado employment grew year-over-year in all of Colorado’s metropolitan statistical areas

(MSAs), while monthly growth decreased in three MSAs. Industry growth was recorded in 10 of the 11 industries in the state year-over-year, but growth was only recorded in four industries month-over-month. The velocity of growth slowed in 8 industries.

The greatest year-over-year percentage gains were in Construction (10.4%), Mining and Logging (8.9%), and Education and Health Services (4.9%). The weakest sectors for growth included Information (-2.3%), Other Services (0.7%), and Professional and Business Services (1%). Compared to February, the strongest growth came from Financial Activities, Government, and Education and Health Services; the weakest being Mining and Logging, Professional and Business Services, and Other Services.

Growth in Colorado’s Manufacturing Sector ranked 3rd nationally, with 3.3% year-over-year

growth, but employment slipped 0.2% from February to March. Employment in the Mining and

Logging sector, which is dominated by oil and gas activity, was up 8.9% year-over-year in

March, but the employment estimates were revised down in February, and continued to lose jobs in March (1.1% month-over-month).

The construction industry increased by the greatest pace and absolute number of jobs year-over- year in Colorado, and home prices increased 9% year-over-year in Q4 2014 according to the FHFA home price index.

While WTI oil spot prices began to fall in June 2014, the economic indicators remained fairly

strong until early 2015, subsequently declining. As of mid-April, the WTI spot price was down

52% from June 20, 2014. Average weekly natural gas (Henry Hub) prices were down 43% year- over-year in mid-April, and gasoline prices down 36%. The falling oil and gas prices have placed a drag on the oil and gas industry nationally and in Colorado. The Baker-Hughes rig count in Colorado was down 42% in April compared to the same period in 2014, and was down 48% nationally. Evidence of the slowing industry also shows in the employment numbers—the Mining and Logging Sector as a whole lost jobs nationally in January, February, and March, down 29,000 jobs from December (-3.2%). Colorado has recorded two consecutive months of Business Research Division  Leeds School of Business  University of Colorado Boulder modest employment declines in the sector, as has the Greeley MSA. Monthly drilling permits—a metric that tends to be volatile—decreased year-over-year in March. Of the 42 states with published Mining and Logging employment, only 5 states marked monthly employment growth in March, and 12 recorded year-over-year growth.

The March unemployment rate stood at 4.2% for the fourth consecutive month, ranking

Colorado 14th nationally. At the low end, Nebraska and North Dakota are ranked 1st and 2nd, at 2.6% and 3.1%, respectively. At the high end, Nevada and Mississippi were ranked 50th and 49th with 7.1% and 6.8% unemployment, respectively. Year-over-year growth (1%) in the Colorado labor force ranked 28th in percentage terms and 22nd in absolute growth.

Comparing Colorado job growth to other states, Colorado still remains one of the best recovery states in the nation in terms of employment, ranking 4th nationally for growth above the previous peak, behind only North Dakota, Texas, and Utah. Colorado now measures 6% above 2008 peak employment compared to 2% for the nation. National job growth weakened in March, with the United States adding 126,000 jobs compared to 264,000 in February. The three-month moving average ending in March was 197,000, compared to 193,000 a year ago.

March State Employment Growth, Month-over-Month

Data Source: Bureau of Labor Statistics, CES (Seasonally Adjusted).

Despite growth across the state, wide variations persist, with the year-over-year growth recorded in the Greeley (7.2%), Denver-Aurora-Broomfield (3.6%), Pueblo (2.9%), Fort Collins-Loveland (2.8%), Colorado Springs (2%), Boulder (1.7%), and Grand Junction (1.3%) MSAs. Month-over-month growth was recorded in the Fort Collins (0.5%), Colorado Springs (0.3%), Grand Junction (0.2%), and Boulder (0.1%) MSAs. Month-over-month, employment decreased slightly in the Denver-Aurora-Broomfield (-0.2%), Greeley (-0.5%), and Pueblo (-0.7%) MSAs.

The April national jobs report will be released May 8, 2015. The April state jobs report will be released May 27, 2015.

For more publications by the Business Research Division of the Leeds School of Business at CU Boulder, click here.

TPG stake in Cirque du Soleil

TPG, which is the world's largest casino owner will hold the majority stake in Cirque du Soleil. As it turn out Cirque has seen a decline in show success, not in all shows, but a few since 2012.

Ian Austen of the Wall Street Journal wrote the following.

OTTAWA — Like many a Vegas act, Cirque du Soleil had become a bit flabby and passé. But a group of investors is betting that China — and more important, its growing demand for Western entertainment — may be an answer to the circus troupe’s midlife ennui.

On Monday, a consortium of private equity investors led by TPG agreed to buy Cirque du Soleil for 1.5 billion Canadian dollars, a purchase that will pave the way for the company to expand into China.

One of the buyers, Fosun of China, is heavily invested in entertainment and travel businesses, including the recent purchase of Club Med. The plan is to open a Cirque office in China.

Investors and companies around the globe are trying to capitalize on the swelling leisure spending by China’s growing middle class. The Walt Disney Company is building a $5.5 billion theme park resort in Shanghai. Several American movie studies, including Lionsgate, Studio 8 at Sony Pictures and STX Entertainment, have formed joint ventures with Chinese players. On Sunday, Dick Cook, a former chairman of Walt Disney Studios, announced the formation of a movie company in partnership with the Chinese conglomerate Citic Guoan Group.

“We’re looking at an entertainment boom in China,” said Robert Cain, a film producer from Los Angeles who has done business there for about 25 years. “It’s really underdeveloped.”

Cirque — which merges elements of dance, performance art and high-technology stagecraft with traditional circus acrobatics — has struggled to break into the fast-growing Chinese market.

In 2012, a lavish Cirque production in Macau closed prematurely because of poor attendance. Chinese gamblers, unlike their counterparts in Las Vegas, where Cirque has eight permanent shows running, don’t have much interest in entertainment.

L. Patrick Leroux, a professor at Concordia University in Montreal who founded an academic group that researches circuses, said that shorter-run Cirque shows presented in other Chinese cities have also struggled. Part of the problem, he said, is that the Cirque’s traditional formula is just not to Chinese tastes.

He says that Cirque usually focuses heavily on New Age narratives, often about the plight of a common man or woman. Instead, the Chinese tend to prefer shows that feature large numbers of performers, where the acrobatics “are choreographed and very precise.” Several Chinese circuses, Mr. Leroux said, have combined those elements with Cirque’s style to create successful shows.

The investors did not offer many specifics about their plans in China, instead speaking to their global ambitions. “We are excited about the opportunity to bring our global platform of resources and know-how to propel the growth of Cirque’s unique brand, content and capabilities around the world,” David Trujillo, a partner at TPG, said in a statement.

Joshua B. Grode, a lawyer with Irell & Manella in Los Angeles who has been involved in movie deals in China, said that TPG and Fosun were most likely attracted by both Cirque’s high brand recognition in the West as well as the prospect of a China expansion. “You have a growing middle class and that middle class starts to have the beginnings of disposable income, how do you capture that?” he said. “One approach is to bring in recognized brands and have them do what they do without having to learn it.”

Continue reading the main storyContinue reading the main storyContinue reading the main story The sale will be politically sensitive in Quebec, where Cirque is based and where it is a major employer. In a less prominent case in 2012, the province effectively blocked a deal for Lowe’s to buy a Quebec-based home repair company.

By including Caisse de dépôt et placement du Québec, the provincial pension and investment fund, as a minority partner, the new owners hope to block that kind of problem. The founder, Guy Laliberté, will also maintain a stake. The deal will include guarantees that the business headquarters and “center for creative and artistic services” remain in Montreal. Mr. Laliberté, who started in the business as a busker and fire breather, opened Cirque three decades ago with a grant from the provincial government. The company now has 17 elaborate productions playing in North and South America as well as Europe. And in recent years it has become as closely associated with Las Vegas as Dean Martin and Sammy Davis Jr. once were.

Last year, Cirque established a theatrical division to develop shows for Broadway. That division is now teaming with NBC on a live musical broadcast of “The Wiz,” and hopes that broadcast will transfer to the stage.

The path to a sale started more than eight years ago as the global economy started to stumble.

In 2008, Cirque sold a stake to a group of Dubai investors. The investors, the real estate company Nakheel and Istithmar World Capital, would provide the funds to further Cirque’s international expansion.

At the same time, Mr. Laliberté stepped back from daily management of Cirque to spend time with his family and focus on personal endeavors including a spaceflight aboard a Russian Soyuz capsule.

When the global financial crisis hit, and the Dubai investors failed to come up with the necessary funds, Mr. Laliberté bought back their 20 percent stake.

Cirque struggled, as some new shows failed. “For the first time, after 25 years of constant growth, we went through a crisis,” Mr. Laliberté said.

A closing forced by the 2011 tsunami in Japan eventually led to the shutdown of a major production there. Other shows around the world did not attract sufficient audiences, or were so costly that profits were minimal. Its New York efforts have largely faltered; the 2010 production of “Banana Shpeel” at the Beacon Theater was a flop, and then a production of “Zarkana,” at Radio City Music Hall, ran only two summers, instead of the anticipated five.

In 2012, Mr. Laliberté returned to active management, and ordered a strategic review. The company cut roughly $100 million in annual costs, including laying off 400 employees.

During the news conference, Cirque’s new chairman, Mitch Garber, a Quebec businessman with close ties to TPG and Mr. Laliberté, described the company as “very profitable.” Last year, Mr. Laliberté said Cirque had annual revenues of 850 million Canadian dollars.

“This is by no means a rebuilding acquisition,” Mr. Garber said.

Correction: April 21, 2015 An earlier version of this article misstated the surname of a lawyer who has been involved in movie deals in China. He is Joshua B. Grode, not Grod.

Brooks Barnes contributed reporting from Los Angeles and Michael Paulson from New York.

Andy Stanley - Leadercast 2015 Speaker

Leadership Communicator & Author Communicator, author, and pastor, ANDY STANLEY founded Atlanta-based North Point Ministries in 1995.

Today, NPM is comprised of six churches in the Atlanta area, serving more than 36,000 people weekly, as well as a network of 30 churches around the globe. As host of NBC’s Your Move with Andy Stanley, reaching over 36 million viewers in less than two years on the air, and author of 20-plus books including Ask It, How to Be Rich, Deep & Wide, Visioneering, and Next Generation Leader, he is considered one of the most influential living pastors in America.

Andy Stanley and his wife, Sandra, have three grown children and live near Atlanta.

The Biggest Thing Wrong With Hiring Is the People Doing It

A growing number of great companies are dumping hiring managers altogether, and putting hiring in the hands of peer teams. It turns out eight to ten brains are better than one.Harvard Business Review says 80 percent of employee turnover is due to bad hiring decisions, and that those decisions can cost more than five times the annual salary of the bad hire. The problem is largely with who is doing the hiring: managers.

Easily the most broken part of the recruiting process is that hiring and ops managers are the ones doing it. That's an archaic Industrial Age factory system approach that was a bad idea back then, and a much worse idea in the Participation Age we're in today. When managers do the hiring, it's just one more thing that makes Dilbert funny, and Dilbert should no longer be funny.

Managerless Hiring Works Better

Managers may be the start of the process, but at a growing number of great companies, they not only don't do the hiring, they no longer exist, having been replaced with self-managed teams. In many companies with very high retention, hiring is done by peers of the person who is being hired. W. L. Gore (10,000 Stakeholders), Semco (3,000), Barry Wehmiller (7,000), and hundreds more with some of the highest retention in the world, all push hiring to the peer team level.

At Semco, a manufacturing company, with 3,000 people--there isn't a single manager in the whole place; all hiring is done by the 8-10 person team on which that new hire will work. How does it work to have peers do the hiring? Semco's employee turnover for the last 20+ years has consistently hovered in the incredibly low 1-2% range.

Barry-Wehmiller, a $1.7billion company, never does a "head count" of retention, they count hearts. How does this culture help them? The data is dramatic. While 88% of employees in traditionally managed companies feel they work for an organization that doesn't care for them, at Barry-Wehmiller, where peers do the hiring and managers don't exist, it's 180 degrees the other way--79 percent surveyed by an outside organization said they believe BW cares about them. Culture matters, and having peers hire peers is a core cultural distinction for BW.

Managerless Cultures See People Very Differently

It's important to understand why this works. Gore, Semco, Wehmiller and other managerless cultures share a common, simple but very profound belief; that EVERYONE is smart and motivated. Because that belief is deeply held, they have all set up a company business culture where that can be a self-fulfilling prophecy. They attract and retain nothing but smart and motivated people who don't need to be managed.

In contrast, companies who rely on managers to do the hiring have a culture that believes the manager is at least a little bit smarter and more motivated, more experienced, more committed, etc. And too often, the assumption is the manager is a lot more of all those things. That is also a cultural distinction, but a very negative one.

Such a common but insidious mindset is a self-fulfilling prophecy as well. Those companies have trouble finding or retaining good people. Why wouldn't they? Who wants to work in an environment where it's clear I'm not going to be allowed to be as smart and/or motivated as the people up the hierarchy from me?

Can You, Or Can't You?

If your culture is set on believing people are smart and motivated, you can take managers out of the picture and put the hiring process in the hands of those most affected by the decision--the new hire's peers. If you think only certain rare people have the skill, experience, smarts or motivation to hire, you're communicating the worst possible message to those you are hiring, as well as those who are already there.

As Henry Ford said, "Whether you think you can, or you think you can't, you're right. Believe that everyone is smart and motivated, and wants to participate in the building of a great company. Don't just hope it will work out, but intend for them to take the ball and run with it, because you get what you intend, not what you hope for.

Article as seen on Inc.com

Connect & Collaborate - Title IX Working Group

There seems to be a constant focus from the media, on campus sexual assault. They bombard us with salacious headlines, and graphic details while placing blame anywhere they can, whether that's on the university, the investigative process or a multitude of other factors. Often times emphasizing the conflicts between the administrative reporting process, and a police investigation. In an effort to combat such obstacles the Denver District Attorney's office has established a collaborative effort between all of Denver's university campuses, law enforcement, investigators, hospitals and other organizations. That collaboration is known as the Title IX Working Group, made up of agency stakeholders in sexual assault response, forming increased coordination regarding co­occurring Title IX and criminal investigations.

We will talk with Denver District Attorney, Mitch Morrissey and University of Denver Director of Equal Opportunity and Title IX Coordinator, Kathryne Grove about specific ways these agencies work together, and how best to serve students who are impacted by sexual assault on campus.

Title IX Working Group Participating Agencies include:

•  Denver Police Department
•  Denver District Attorney’s Office
•  The Blue Bench
•  Community College of Denver
•  Johnson & Wales University
•  Metropolitan State University of Denver
•  Regis University
•  University of ColoradoDenver/Anschutz Medical Campus
•  University of Denver

Listen Saturday at 1:00 PM on 710 KNUS –  Please let us know what you think of our program, either by commenting here or on Facebook at Connect & Collaborate with ICOSA or join the discussion on Twitter @ICOSAMagazine.

Income Tax Versus Consumption Tax: A Taxing Tale

Changing the U.S. income tax system to a consumption tax system is appealing. The Senate Finance Committee is considering the consumption-tax idea. It's thought that this method of taxing would boost economic growth. Consumption tax would tax money spent instead of income earned. John D. McKinnon further explains consumption tax in his article, "Tax Proposals Would Move U.S. Closer to Global Norm." Below is that article.

As lawmakers have examined a tax overhaul, “it becomes extremely difficult to see a political path to accomplish it” within the confines of the current income-tax system, said Sen. Ben Cardin (D., Md.), co-chairman of a Finance Committee working group negotiating a possible overhaul of business taxes.

As a result, the idea of a consumption tax “is getting a great deal more respect, and it is in the discussions,” he said.

Mr. Cardin introduced legislation last year to create a type of consumption tax known as a value-added tax and at the same time lower business taxes and scrap income taxes completely for lower-income Americans.

Republicans on the working group also are interested in the concept, including a proposal put forward recently by GOP Sens. Marco Rubio of Florida and Mike Lee of Utah. That plan would make several changes to the tax code that would move the nation closer to a consumption-based system.

Many GOP members “believe that there are economic benefits to moving away from taxation of income and toward taxation of consumption,” a Senate aide said. That includes Republican John Thune of South Dakota, co-chairman of the working group along with Mr. Cardin, the aide said.

As the name implies, consumption-style taxes hit the money taxpayers spend, rather than income they receive. One prominent feature of consumption systems is that they generally tax savings and investment lightly or not at all. That, in turn, encourages more investment and innovation, and ultimately more growth, many economists contend.

The U.S. tax system already has some features of a consumption system, such as tax-advantaged retirement-savings accounts and lower rates for investment income. In general, though, the consumption-tax proposals being floated would go much further.

The plans vary widely in their details. They include European-style value-added taxes, a type of sales tax that is collected along each stage of the production process; traditional sales taxes; and taxes on carbon-based pollution.

Some of these proposals would have consumers pay another tax in addition to existing state and local sales taxes, while others would merely reshape the current system to tilt it more toward consumption.

The discussions are in early stages. The likelihood that senators will agree on a consumption tax—or any major overhaul—in current negotiations remains slim. Introducing such a different tax system also brings the fear of the unknown.

Still, the talks open up a possible new direction in slow-moving discussions about rewriting the U.S. tax system. Enactment of a broad-based federal consumption tax would align the U.S. with a global trend. In the U.S., most of those taxes now are in the form of state and local sales taxes.

Until now, efforts in Congress to revamp the tax system largely have focused on rewriting the income-tax rules. The most prominent was a plan put forward last year by then-Ways and Means Chairman Dave Camp (R., Mich.) that would have lowered rates for businesses and individuals while paring back deductions.

But that approach, some lawmakers contend, faced a basic mathematical problem, particularly on the business side: The U.S. corporate tax rate is the highest in the developed world, and lowering it substantially would require eliminating a large number of tax breaks to avoid adding to budget deficits. That could offset any economic benefit of lower rates.

Many experts believe moving to a consumption tax would ease the difficult policy task, at least on paper. While there is still lively debate about the relative merits of income and consumption taxes, some economists believe consumption taxes encourage more savings and lead to faster economic growth.

Some liberals are concerned that consumption taxes affect poor people disproportionately, while unduly benefiting the rich, unless adjustments are made. For their part, conservatives fear that some types of consumption tax—particularly value-added taxes—would make it too easy to dial up government revenue collection.

Some lawmakers also worry about the potential impact on the federal deficit, particularly if Congress relies too much on estimates of a future economic boost.

Both of the leaders of the tax-writing committees in Congress, Rep. Paul Ryan (R., Wis.) and Sen. Orrin Hatch (R., Utah), say they are intrigued by the consumption-tax approach, while acknowledging some potential drawbacks.

“There’s a lot of merit” to a consumption-tax system, said Ryan spokesman Brendan Buck. As the House Ways and Means Committee thinks long-term about a tax overhaul, the consumption-tax approach is one that will be considered, he added.

The Obama administration declined to comment. President Barack Obama’s aides have been critical of some consumption-tax proposals, particularly sales-tax ideas that they view as unfair to lower- and middle-income households.

“I would not count on consumption-tax regimes to replace the income tax, given the need for [more] revenue,” said Harry Stein of the liberal Center for American Progress.

Write to John D. McKinnon at [email protected]

Connect & Collaborate - Development Progress

A vibrant community doesn't just happen. In Aurora, there are people working to recruit businesses, attract growth industries like aerospace and defense, and other efforts, all to ensure a healthy economy, and employment opportunities. Wendy Mitchell is the President of the Aurora Economic Development Council, with a focus on leading the city of Aurora to a prosperous future. The job is not without obstacles. One of Aurora's most promising development projects, the Gaylord Rockies hotel, conference center and water park, faced a tough battle over the implementation of tax incentives  under the Regional Tourism Act. A group of competing hotels brought a lawsuit against the Gaylord project, in attempts to slow it down and ultimately shut it down.

The battle was hard won, and Wendy joins us with details about the project moving forward, to break ground later this year.

Then, later in the show, we talk with Representative Beth McCann, House District 8. We will discuss her latest legislative efforts, including health care and bio-medical/ pharmaceuticals, criminal justice reform concerning juvenile offenders, and advocacy for human trafficking victims.

There is much more to talk about, not the least of which, her intentions to seek election to the Denver District Attorney's Office, which will become available when current D.A. Mitch Morrissey reaches term limit restrictions in 2016, the same time McCann's legislative career reaches term limits.

Listen Saturday at 1:00 PM on 710 KNUS –  Please let us know what you think of our program, either by commenting here or on Facebook at Connect & Collaborate with ICOSA or join the discussion on Twitter @ICOSAMagazine.

The Connection with Cuba (O La Conexión con Cuba)

The United States and Cuba, long frozen in a political stalemate lasting more than half a century, could finally be turning towards a more open and collaborative relationship with each other. This is exciting news for both citizens and businesses looking to travel, exchange culture and develop trade opportunities. On December 17, 2014 both Barack Obama and Raul Castro held simultaneous press conferences announcing their intention to begin normalizing diplomatic and trade relations. Given the deep and stormy history, reconnecting with Cuba serves as an important and symbolic step for connecting with the rest of Latin America.

While discussions likely started well before December, the administrations no doubt had this week in mind when they made their original announcement.  Starting Friday, April 10th is an important meeting for the entire Western Hemisphere: the Summit of the Americas hosted in Panama City.

In preparation for this week's summit and for an upcoming business trip, the Chamber of the Americas brought in an internationally renowned expert on US-Cuba relations, Arturo Lopez-Levy. In addition to being a professor on Latin American politics and comparative politics, the Cuban-American has in fact written the book on "Raul Castro and the New Cuba". ICOSA Media and the Colorado Business Roundtable would like to thank Gil Cisneros and Laura Frigo from the Chamber of the Americas for bringing in such a high caliber expert on this timely subject.

While the luncheon was not filmed, he covers a small selection of the same perspective below in this interview following the December 17th announcements. For future events and for information regarding the upcoming trip to Cuba, please visit http://www.chamberoftheamericas.com/

You can read more about US-Cuba relations from Arturo's perspective here or by following him on twitter @turylevy

Documentary Collection: Importing Veterinary Tools From Pakistan

Trade Acceptance, Bankers’ Acceptance, Draft, Collection, Letter Of Credit, Beneficiary

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DOCUMENTARY COLLECTION: TRADE ACCEPTANCES

As in any business, trade buzzwords exist in the international arena and each has its own particular and sometimes peculiar meaning, such as “trade acceptances” and “bankers’ acceptances.” In keeping with the theme of this book, let’s develop some scenarios rather than furnish dry academic definitions.

EXTENDING CREDIT TERMS

An importer in the United States purchased veterinary tools from a supplier in Pakistan. He developed a high level of trust after several years of a satisfactory working relationship. As a result, the supplier extended 90 days terms to the importer.

The supplier wanted to strengthen his balance sheet to impress his banker in order to obtain financing. He requested an obligation from the buyer to provide something a little stronger than “foreign accounts receivable” on his financial records. At the time of each shipment, the supplier prepared typical shipping documents plus a draft drawn on the buyer payable in 90 days.

The supplier presented the draft with attached shipping documents to his bank on a collection basis. The supplier’s bank couriered the documents to the buyer’s bank in the United States, which then requested the buyer to acknowledge his obligation to pay in 90 days by accepting the draft. The bank stamped the face of the draft with a stamp which said, “Accepted,” and asked the buyer for a signature and date on the draft. At this point the buyer has a legal obligation to pay when it matures in 90 days.

TRADE ACCEPTANCES VS BANKERS' ACCEPTANCES

This is known as a “trade acceptance” to distinguish it from a “bankers’ acceptance,” drawn and accepted by a bank.

Bankers’ acceptances most commonly occur in letter of credit transactions. The terms of the letter of credit require the beneficiary to present a draft for acceptance and state that it is payable at some future date. When a bank accepts a draft, they obligate themselves to pay at maturity. Investors generally perceive that bankers’ acceptances carry less risk than trade acceptances. In fact, a secondary market exists for bankers’ acceptances, which allows investors to readily buy and sell them. No established secondary market exists for trade acceptances.

Leadercast 2015 - CMDR Rorke Denver

CMDR Rorke Denver

Navy SEAL Commander & Author

By Leadercast

Commander Rorke T. Denver has run every phase of training for the U.S. Navy SEALs and led special-forces missions in the Middle East, Africa, Latin America and other international hot spots. He starred in the hit film Act of Valor, which is based on true SEAL adventures. His NY Times Bestseller, Damn Few: Making the Modern SEAL Warrior, takes you inside his personal story and the fascinating, demanding SEAL training program he oversaw. Some people are born to lead. Rorke Denver is one of those people. Throughout his 13-year career as a platoon commander and training leader with the Navy SEALS, he constantly found himself leading in the face of danger. Denver led more than 190 combat missions and never lost a member of his team. His amazing leadership and bravery led to him running all phases of U.S. Navy SEAL training. Rorke communicates about leadership with unparalleled passion and intensity, rooted in his desire to see everyone lead to the best of their ability.

Biography

 by CAA Speakers

Commander Rorke T. Denver has run every phase of training for the U.S. Navy SEALs and led special-forces missions in the Middle East, Africa, Latin America and other international hot spots. He starred in the hit film Act of Valor, which is based on true SEAL adventures. His first book, Damn Few: Making the Modern SEAL Warrior, takes you inside his personal story and the fascinating, demanding SEAL training program he now oversees.

After completing the SEALs’ legendary Basic Underwater Demolition program in 1999 (BUD/S Class 224), Denver began an action-filled 13-year career as a platoon commander and training leader with America’s premier special-operations force. As assistant officer in charge of BRAVO Platoon at SEAL Team THREE, he was deployed to SOUTCOM, the Central and South American Area of Operations, where his platoon was the “alert” SEAL team for maritime interdiction, hostage rescue, counter-insurgency and counter-narcotics. As SEAL officer aboard the USS Bonhomme Richard, Denver led his group’s response to a murderous uprising in the Ivory Coast nation of Liberia, launching advanced-force operations, conducting hydrographic beach reconnaissance and helping to get U.S. Marines safely ashore. At Special Boat Team TWELVE, he started the Maritime Capable Air Deployable Boat Detachment, which specialized in parachuting large assault boats from U.S. aircraft.

In 2006, Denver was officer in charge of BRAVO Platoon of SEAL Team THREE in Iraq’s Al Anbar Province in one of the most combat-heavy deployments of any regular SEAL team since Vietnam. Stationed in Habbaniya, his team conducted more than 190 missions including sniper operations, direct assaults, special reconnaissance and ground patrols. Two of his teammates were killed in action, including Mike Monsoor, who received the Medal of Honor for jumping on a live grenade to save his teammates. Denver’s team has been widely credited with propelling the “Tribal Awakening” that helped to neutralize Iraq’s Shia insurgency. Denver was awarded the Bronze Star with “V” for valorous action in combat.

After returning to the United States, Denver was appointed flag lieutenant to Admiral Joseph Maguire, commanding officer of Naval Special Warfare, traveling to Afghanistan and briefing Congress on SEAL operations. In 2009, he became First Phase officer of SEAL Basic Training including Hell Week, then rose to Basic Training officer. He went on to run all phases of training including advanced sniper, hand-to-hand fighting, communications, diving and language.

Denver is an honor graduate of the United States Army Ranger School. He holds a Bachelor of Arts degree from Syracuse University, where he was an All-American lacrosse player and captain of the varsity lacrosse team. He earned a Master’s Degree in Global Business Leadership from the University of San Diego. He lives with his wife and two young daughters in Colorado. In his off-duty hours, he enjoys surfing, hunting, fly-fishing, reading and playing on the living-room floor with his amazing girls.

Leadercast 2015 - Brave Moves for Boring Meetings

Leadercast is a brand that builds Leaders Worth Following. We believe that leadership is not reserved for those with a ‘C’ in their title. We need better leaders in our communities, businesses, organizations, and in homes across the world. Leadercast exists to serve individuals and organizations across all sectors who want to become intentional about raising their standard of leadership. Leadercast Live will be simulcast from KNUS 710 on May 8th.  Leadercast Live is a one-day leadership event broadcast from Atlanta to hundreds of locations globally.   Speakers include Rudy Giuliani, Aja Brown, Malala Yousafzai and Seth Godin. I took a look at the Leadercast website, and found an April's Fools day blog post titled, "Brave Moves for Boring Meetings," I had to share.  Below is that blog post.

We’ve all had to experience those terribly boring meetings where every ten minutes feels like an hour. Have you ever wondered what it would look like if someone actually acted upon some of the thoughts we’ve all had while sitting in one of those meetings? For April Fools Day, we put together a short video to show a lighter side of bravery with 10 bold moves you probably shouldn’t pull in your next meeting…

1. Obnoxiously send emails with your speaker volume up.
2. Bring fajitas for lunch.
3. Don’t know someone’s name? Just take a guess.
4. Tell them how you really feel.
5. I mean, if the donuts are free, just take seven. No one’s looking…
6. Synchronized pen clicking: The new way to annoy your boss.
7. Interrupt the meeting to encourage a nice team outing to the Cheesecake Factory.
8. Attach fundraising forms to the meeting agenda. A little hint never hurt anyone.
9. Arm wrestling: Hey, at least we learned Stan’s name! That’s a point for productivity, right?
10. Multitask with no shame. #SorryNotSorry

Now it’s your turn:

Have you experienced some bold moves in your meetings? Share it with us on Facebook. We will re-post our favorites!

To experience a different level of bravery and hear from some of the bravest leaders in sports, business, government and more, join Leadercast Live.

Letter of Credit: History of the Red Clause

Red Clause, Letter Of Credit, Beneficiary, Draft, Applicant

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RED CLAUSE RESULTED IN $70,000 SAVINGS ANNUALLY

A US company importing mosaic ceramic tile sent an annual payment on January 1st to their Italian supplier for the entire year’s purchases. The supplier always performed and presented no obvious risk of nonperformance.

When the US company learned of the red clause letter of credit, they realized it could save them money. Issuing a red clause letter of credit to the supplier would enable them to borrow money from their own bank and pay interest instead of using the importer’s money interest free. After issuing a letter of credit with the red clause, they estimated that they saved $70,000 the first year.

WHY IS IT CALLED "RED CLAUSE?"

A red clause letter of credit, originally so called because of a clause printed in red ink on the face of the letter of credit, permits the beneficiary to obtain advance funds from the letter of credit with the intent to repay the funds at the time he presents documents for payment. The red clause typically restricts the advance to a certain percentage of the letter of credit, say 30%. When the beneficiary presents documents for payment, the bank uses 30% to repay the loan and the beneficiary receives the remaining 70%.

ORIGINS OF THE RED CLAUSE

Several versions of the history of the red clause letter of credit have circulated. Jim Harrington believed it began in the Philippine Islands. The Philippines established home-based businesses to produce lace tablecloths. Eager buyers filled a demand of a ready market in the United States. Buying agents would call on home-based businesses throughout the Philippine Islands agreeing with each to order a certain quantity of tablecloths.

The agents discovered they could get better prices by paying for a portion of the goods in advance because the households needed money for living expenses and also to purchase needles and thread to make the tablecloths. The red clause allowed the agent to borrow from the Philippine bank, pay the households and then store the tablecloths until he had enough to make a shipment and draw a draft against the LC. The proceeds of the draft paid off the borrowed money.

The applicant of the letter of credit should understand the risk: The beneficiary could get the advance and disappear with the money. In that case, the bank which made the advance has recourse to the applicant. As in any other transaction, a high level of trust reduces the risk.

Because of the risk, buyers rarely use red clause letters of credit. However, buyers such as the mosaic tile importer, who have to pay cash up-front, may consider the red clause letter of credit as a viable alternative.

In one of his workshops, Jim Harrington stated that he wanted to put to rest a myth. With a twinkle in his eye, he explained that the red clause has nothing to do with lobsters whose claws turn red when placed in boiling water.

Connect & Collaborate - Space Innovation

Colorado is home to some of the most innovative research in space exploration. The state ranks highest in the nation for private sector employment in the space industry. Even so, much of the work can go unnoticed by many of our residents. We at the Colorado Business Roundtable work to keep you informed of the many great companies and organizations making advancements in aerospace. This week we bring you an inside look at Sierra Nevada Corporation, and the latest on the upcoming Space Symposium.

Mark Sirangelo, Corporate Vice President of Sierra Nevada Corporation's Space Systems, joins us for a Pro-Business Colorado segment with Dave Tabor, from the Colorado Association of Commerce and Industry. Mark shares inspiring stories about their work on space vehicles and other important components. SNC boasts 26 years in space, and has been a part of 425 missions, as the largest builder of small satellites. They make possible weather reporting systems which allow farmers to determine which areas of their land require watering, or helping firefighters determine the driest areas where forest fires might flare up, as well as asset tracking for companies like FedEx.

Another current project is a solar probe spacecraft to be launched close to the sun to monitor its' storms. Radiation from those storms have the potential to destroy the GPS satellites and other systems that we rely upon here on earth.  Sierra Nevada also anticipates in coming weeks, the arrival of New Horizions on Pluto, after 10 years of travel, at a speed of 20 thousand miles per hour.

Later in the show, we also check in with Edgar Johansson, President of the Colorado Space Business Roundtable about the upcoming Space Symposium in Colorado Springs, April 13-18th. The Space Symposium is a gathering of top aerospace scientists and engineers from around the world, discussing classified projects so it is not open to the public. But, if you want to indulge your or your child's interest in aerospace, get them registered for Yuri's night, leading up to the symposium on April 12th. Yuri's night is a celebration of the first human in space, Yuri Gagarin, who circled the earth on April Meet astronauts, and enjoy fun interactive activities. 12, 1961. Find more information and registration information here. Meet astronauts, and enjoy fun interactive activities.

Listen Saturday at 1:00 PM on 710 KNUS –  Please let us know what you think of our program, either by commenting here or on Facebook at Connect & Collaborate with ICOSA or join the discussion on Twitter @ICOSAMagazine.

The State of Immigration: U.S. is Far Behind in the Race for Global Talent

The Business Roundtable has found that the U.S. is Far Behind in the Race for Global Talent.

Based on a comprehensive examination of 10 advanced economies to identify and evaluate the best immigration policies to promote economic growth, the United States ranked 9th out of 10 competitor countries, ahead of only Japan, a country historically closed to outsiders.

This analysis found that America’s near-bottom ranking among major advanced economies is due to U.S. laws and regulations that impose unrealistic numerical limits and excessive bureaucratic rules on hiring workers that the country’s economy needs.

For example, while Germany has a high approval rate for skilled foreign workers, the US limits the number of H-1B visas so much so that they run out almost immediately. In fact, starting today, the United States Citizenship and Immigration Services agency starts assigning H-1B visas for the year. By next week, the full 65,000 cap will be reached. Demand far outpaces supply.

This morning in the Wall Street Journal, Gary Beech writes about the issue. He, like many people on both sides of the political spectrum, is advocating for the removal of the H-1B visa cap. Start learning more about the arguments for and against this action by reading his full article here: http://blogs.wsj.com/cio/2015/04/01/remove-the-h1b-visa-cap/

It's a bipartisan opinion: let skilled, hardworking employees and entrepreneurs build their businesses here in America.

(Click the Business Roundtable graphic to view the full size)

Crib Potatoes, TV for Babies

By Joe Flint / The Wall Street Journal You’ve heard of couch potatoes. Here come crib potatoes

In the ultracompetitive children’s-TV market, most networks don’t target viewers any younger than four years old. One channel is now testing that boundary.

BabyFirstTV, which is making its way into more U.S. homes after cutting deals with pay-TV distributors including Time Warner Cable,is aiming its programming at children as young as six months.

The channel, owned by closely held BFTV LLC, carries mostly animation programs that focus on rudimentary skills including counting, vocabulary and differentiating shapes and colors.

It launched in 2006, but started gaining real momentum only in recent years and now reaches more than 50 million U.S. households, a mark it passed in January. The channel’s viewership figures will become public in the third quarter of this year, when a grace period ends with measurement firm Nielsen.

The notion of targeting infants is controversial. The American Academy of Pediatrics recommends no television for children under the age of two, arguing that children learn best by interacting with people. But that may be wishful thinking. A Kaiser Family Foundation study found most babies are watching some television.

So then the question turns to what kind of television babies see.

“What is important is what we put our kids in front of and we think we are offering the cleanest, safest alternative,” said Sharon Rechter,who co-founded BabyFirst with her husband Guy Oranim.

Building a TV channel when more U.S. consumers are “cutting the cord,” or dropping pay-TV service, will be challenging. And BabyFirst faces fierce competition in the wider children’s-TV market, a crowded field that includes Walt Disney Co.’s Disney Channel and Disney XD, Viacom Inc.’s Nickelodeon and Nick Jr. and ComcastCorp.’s Sprout. Amazon.com Inc. and Netflix Inc., as well, are courting little ones with their streaming services.

BabyFirst’s ‘Harry the Bunny.’ An app features the character and teaches matching skills. PHOTO: BABYFIRSTTV

In 2014, advertisers spent $1.2 billion on kids channels, according to Kantar Media. Pressure from watchdog groups and regulators has led some companies including snack food and candy manufacturers to steer clear, but other sectors have stepped up including packaged-goods manufacturers hoping to sell to the parents watching with their kids.

BabyFirst’s advertisers include Honest Co., which makes organic products such as shampoo, and ABC Mouse, an educational website.

“It really is trying to speak to a mom when she is engaged with the programming she is watching,” said Darcy Bowe, a vice president and director of Starcom USA, a media-buying firm.

Some marketers say they are waiting for the channel’s Nielsen ratings before they move ahead with advertising deals. “We’ve seen some good proposals from them, and certainly think the model has merit. However, measurement remains an issue,” said Sharon Cullen, a managing director at media agency OMD.

Ms. Rechter said research by Kantar Media determined the average daily viewership is 108 minutes and that one out of every three mothers is a viewer.

One positive for BabyFirst is that expenses are low, compared with most TV channels. Much of the content is visual, with little dialogue, and the programming doesn’t require much dubbing to work in international markets.

Mr. Oranim and Ms. Rechter said the annual operating expenses for BabyFirstTV are less than what it costs to make one episode of HBO’s “Game of Thrones,” which costs about $7.5 million.

BabyFirst expects to make a profit in the fourth quarter of this year, but declined to provide further details on its finances.

Distributors of BabyFirst say the channel’s popularity is growing. “It’s a good service that has very loyal fans,” said Dan York, chief content officer at DirecTV.

BabyFirst’s programming is mostly low-cost animation made in Israel where both Ms. Rechter and Mr. Oranim have ties. Shows such as “Baby U” and “Rainbow Horse” typically run between three and seven minutes.

Ari Brown, an Austin, Texas, pediatrician and lead author of the AAP’s television policy, described BabyFirst as “Muzak for babies.” Though she isn’t in favor of children under two watching TV, Dr. Brown said BabyFirst won’t make a tyke an “ax murderer.”

BabyFirst relies on a network of about 500 mothers as a sounding board. Autumn McCall of Downey, Calif., credits BabyFirst with helping her daughter Violet learn the alphabet and numbers.

“I know there is a lot of criticism about babies and young kids watching TV, but I think in moderation and with parent supervision it can be a great benefit,” she said.

How BabyFirst figures out what will intrigue a toddler isn’t always the most scientific process. Sometimes it just comes down to what’s more compelling—content or candy.

Earlier this year, Ms. McCall’s daughter Violet, who is now two, took part in a test for a mobile app in development—the apps are aimed at keeping babies and parents engaged in BabyFirst content away from the TV. This app teaches matching skills and features Harry the Bunny, one of the channel’s characters.

To see how engaged Violet was in the app, BabyFirst educational director Todd Eller offered a lollipop in exchange for the iPad. Violet took hold of the lollipop for a second but ultimately stuck with the game.

“It’s a real big win,” said Ms. Rechter of Violet’s choice. “Typically, nine out of 10 choose the lollipop” when BabyFirst is testing new games.

A few minutes after BabyFirst was done with Violet, an 18-month old boy tried to take a bite out of the iPad.

“Him we’re not getting,” Ms. Rechter said.

Write to Joe Flint at [email protected]

Volvo Plant in U.S.

State to be chosen in a month; car maker says labor rates are just part of it

Written by John D. Stoll of The Wall Street Journal

After years of losing out to Mexico in the race for new automotive assembly plants, the U.S. is about to notch a victory.

Volvo Car Corp., owned by a Chinese company, will spend $500 million to build a new vehicle plant in the U.S. The decision comes weeks after Daimler AG plans to spend a half-billion dollars to build a Mercedes-Benz van factory in South Carolina, a move that followed a string of auto makers choosing to locate new factories in Mexico instead of the U.S.

In an interview, Chief Executive Håkan Samuelsson said Volvo is making the move to smooth out its international presence. With plants in Europe and China, the executive wants a North American factory to be closer to one of its prime markets, take advantage of attractive labor rates and protect against currency fluctuations.

“This will complete our industrial footprint,” Mr. Samuelsson said. Volvo is also aiming to reiterate its commitment to the U.S., a market it has been in since 1957. In recent years, Volvo has struggled to sell cars in the U.S., forcing the auto maker to adjust its strategy several times.

Mr. Samuelsson said Volvo is still considering a handful of states for its new factory, and will announce its pick in about a month. The plant will build vehicles off the company’s new “SPA” platform, an engineering architecture that will serve as the blueprint for several vehicles, including the new XC90 SUV hitting the market this year.

Volvo, bought by Zhejiang Geely Holding Group Co. in 2010, sold 466,000 vehicles in 2014, a record amount of cars globally. But momentum has come from gains in China and Europe; U.S. sales fell 8% to 56,000—short of the 100,000 vehicles Mr. Samuelsson says the brand needs to prove viability.

Mr. Samuelsson said there is no current plan to share the plant with Geely. Volvo is, however, working with its partner on developing small cars, and the factory could eventually be an avenue for the Chinese auto maker to distribute cars in the U.S.

For now, Mr. Samuelsson is working to freshen the product lineup, boost marketing spending and offer better financing options.

Some European auto makers have been successful at capping labor costs in the U.S. Volkswagen recently opened a plant in Tennessee, and its hourly labor rate—including benefits—equals $38 an hour, $10 less than Fiat Chrysler Automobiles and $20 less than General Motors Co.

Volvo’s move stems the tide of investment aimed at Mexico, where labor rates are a fraction of the U.S. costs. Auto makers and parts suppliers have earmarked more than $20 billion of new investments, with many executives citing an array of free-trade pacts as the reason for the decisions.

Mr. Samuelsson said Volvo considered Mexico, but the benefits of building cars in the world’s most-profitable market tipped the decision in America’s direction.

Write to John D. Stoll at [email protected]

Letter of Credit Rules: Comparing Apples with Oranges

UCP, Letter Of Credit

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LETTER OF CREDIT RULES

The rules for Letters of Credit, the UCP (Uniform Customs and Practices for Documentary Credits), states, “The description of the goods, services or performance in a commercial invoice must correspond with that in the credit” (Article 18 c). Banks typically have interpreted this to mean a verbatim description, letter for letter, and punctuation for punctuation, in accordance with the letter of credit.

The UCP further provides, “In documents other than the commercial invoice, the description of the goods, services or performance, if stated, may be in general terms not conflicting with their description in the credit” (Article 14 e).

APPLES, ORANGES AND FRUIT

Note the use of the words, “not conflicting.” If a letter of credit states “Apples” as the merchandise description, then the invoice must read “Apples.” Other documents, such as the bill of lading, may state “Fruit,” and be considered acceptable because "Fruit" does not conflict with “Apples.”

A bill of lading which states, “Oranges” does conflict and is unacceptable. Interpretation of this policy is more difficult for a banker who has no knowledge of the merchandise or if the merchandise is highly technical.

In recent years I have seen documents prepared by freight forwarders showing all documents, not just the invoice, with the merchandise description identical to the letter of credit. Undoubtedly, this safe method leaves no need on the part of the bank to interpret the description from document to document.

An uncertain bank will take the safe, conservative approach, and ask for replacement documents, refuse payment, or obtain a waiver of the discrepancy from the applicant, if the documents do not strictly match the letter of credit.

Connect & Collaborate - Water Summit

Water is our most precious resource, however limited it may be. Particularly so in Colorado, where water is most abundant where people are scarce, and scarce where people are more abundant. Thus begins the battle over water rights, where to accumulate it, which communities get it, and how to distribute water between agriculture and utilities. Fortunately, both the people and the pundits of this state, do their best to work together to solve water issues. James Eklund considers these issues every day, as the Director of the Colorado Water Conservation Board. This week, he shares the state's concerns and proposed solutions. He acknowledges that eighteen down-water states depend on Colorado for their share of water, and we have a responsibility to supply them while also providing sufficient water for our own state's needs.

We will also talk with Representative J. Paul Brown of District 59, about his agenda for this legislative session, including water rights issues for the Western Slope.

If you're interested in contributing to the larger conversation about water rights, join the Colorado Business Roundtable along with additional, important sponsors for the South Metro Denver: Water Summit, Thursday April 9th at the Lone Tree Arts Center:

We also have guest, Laura Frigo, Executive Director of the Chamber of the Americas Foundation on Denver's international impact. Laura is newly appointed to create new micro-development programming and build relationships between U.S. companies and institutions, and their partners abroad. Laura has an impressive international background, and experience living, working and researching in both Mexico and Brazil. We are excited to learn more from Laura about the connections to be formed from Denver, internationally.

Listen Saturday at 1:00 PM on 710 KNUS –  Please let us know what you think of our program, either by commenting here or on Facebook at Connect & Collaborate with ICOSA or join the discussion on Twitter @ICOSAMagazine.

Letter Of Credit Discrepancy Created A New Market For Greek Candy

Letter Of Credit, Shipment Date, Applicant, Negotiate Documents

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LETTER OF CREDIT REQUIRED A LATEST SHIPPING DATE

A US importer applied to a New York bank for a letter of credit for candy from a supplier in Greece. The letter of credit stipulated a shipment date which would insure arrival of the candy in time for a particular Greek festival.

LETTER OF CREDIT PAYMENT REFUSED

Unfortunately, the supplier dispatched the candy one day after the latest date allowed for shipment. When the issuing bank noted this discrepancy, they contacted the applicant for approval to pay, but the applicant declined because the late shipment meant missing the festival date. The Greek bank was notified that payment had been refused.

Since the Greek bank had negotiated the documents and already paid the supplier, they were now the sweet owner of the candy and promptly contacted the New York bank for assistance in finding a new buyer for it.

"NEGOTIATING" A LETTER OF CREDIT

Let’s clarify the technical term “negotiate.” According the UCP, “Negotiation means the purchase by the nominated bank of drafts (drawn on a bank other than the nominated bank) and/or documents under a complying presentation, by advancing or agreeing to advance funds to the beneficiary on or before the banking day on which reimbursement is due to the nominated bank” (Article 2).

In other words, a bank other than the issuing bank may purchase the beneficiary’s documents before the issuing bank receives the documents and consents to payment. This provides an advantage for the beneficiary who receives the money faster. It also provides income to the negotiating bank by collecting fee income plus a fee to compensate them for the cost of “float,” or interest on the money, which they paid but have not yet collected from the issuing bank.

The negotiating bank, however, takes the risk of the issuing bank not paying. In this story, why the negotiating bank chose to purchase discrepant documents remains unclear. Apparently, unable or unwilling to recover the payment from the beneficiary, they solicited the issuing bank’s assistance in the matter.

CREATING A NEW MARKET FOR THE CANDY

Fortunately, the story ends well. The New York bank discovered an agent who was willing to sell the candy for a 20% commission. He traveled the country and successfully established ecstatic buyers for the candy. After he kept 20%, the New York bank remitted over $143,000 more than the draft amount to the Greek bank and the agent launched a new market for the candy.

Thank you to Jim Harrington for another entertaining story.