[221117.EN.BIZ] Maersk Expands Trade Financing to Shippers' Suppliers

DANISH shipping giant Maersk Line plans to expand a new programme providing trade financing to customers by also providing credit to customers' suppliers as well. It said it is close to sealing four loan agreements that are the first in a new "supply chain" initiative created in a trade-financing programme launched by company as it looks for ways to distinguish itself from competitors.

After a successful test, beginning in India two years ago, Maersk launched the programme in Singapore, Spain, India, United Arab Emirates and the Netherlands. In May, it began offering it in five American states - New York, Texas, Florida, New Jersey, and Georgia.

For the first time, a Maersk customer can use their own creditworthiness and their relationship with the carrier to help a vendor get trade financing in the carrier's trade financing programme. The first four customers are in the garment, agricultural products, refrigerated cargo and manufacturing sectors.

Maersk says it has so far underwritten credit in excess of US$150 million in the programme, which it says can help shippers cut 15 to 30 per cent from their financing costs, IHS Media reported.

Maersk says it can provide trade finance faster and easier than banks. The carrier says the programme comes with little risk of a loan default to the carrier - or any need for the customer to provide collateral - because Maersk controls the cargo.

The programme initially focused on providing finance to exporters and importers, but Maersk is looking to broaden it to help vendors - a move that the carrier says has stoked considerable interest.

"This is where the industry is going," William C Duggan, Maersk's head of trade finance north America, told the 29th Apparel Importers Trade & Transportation Conference. "We think this is the wave of the future."

Trade financing is typically sought by shippers to provide a financial bridge while the cargo is in transit - helping the supplier, who wants early payment, and shipper, who does not want to pay until the goods arrive. Such financing typically takes the form of a loan or letter of credit that provides for payment once the bank receives certain documents, such as a bill of lading.

The World Trade Organization estimates that 80 per cent of global trade is supported by some sort of financing or credit insurance, and Maersk is not the only logistics company to take an interest in the concept. Flexport, the digital freight forwarder, has linked up with Wells Fargo Strategic Capital, in a trade-financing programme in which the freight forwarder would use its trade data to evaluate the financing applicant before advancing the funds.

Source : HKSG.