How the documentary business of Ukreximbank helps exporters and importers
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According to the results of 2022, the export of goods from Ukraine decreased by 35% in money terms to 44.1 billion dollars, by 38.4% in terms of mass to 99.8 million tons.
As noted by the Ministry of Economy, under normal conditions, trade indicators could appear catastrophic, because the value of exports is 35% lower than in 2021, but in war conditions, this is a feat. Last year was a year when the volume of exports and logistics came to the fore.
Before the war, 75% of Ukraine’s external trade was carried out at sea ports. Since February 24, they have all been blocked, and the grain export corridor can hardly be called reliable given the unstable behavior of the Russian Federation.
Therefore, today Ukraine’s foreign trade takes place by road, rail and through three river ports on the Danube. These routes ensure export and import of up to 35% of goods.
Logistics in conditions of war
Before the war, maritime transportation and ports of Ukraine were the main way to export products of the agro-industrial complex, which in 2021 brought in $27.9 billion.
In addition, they were the main export routes for metallurgy ($16 billion), chemical industry ($2.7 billion), mineral fertilizers ($8.42 billion) and other products.
Before the war, approximately 90% of Ukraine’s port trade turnover in 2021 (in particular, 90% of agricultural exports) passed through ports in Odesa, Mykolaiv, Kherson regions, Berdyansk and Mariupol.
As for rail logistics, freight transportation by rail decreased by 65.3% in 2022. The profitability of Ukrzaliznytsia freight transportation is formed by two components: the transportation tariff and the cost of using wagons.
Both components increased significantly in the year of the war: the tariff was increased by 70% (from $6.5 to $11/ton), and the cost of using wagons increased from UAH 2,000 to UAH 14,600 per day.
Since the transportation of goods by sea and rail transport has its limitations, the domestic market of transport services began to give priority to road transport for the transportation of goods, and shippers and carriers were forced to change the logistics of export transportation and direct goods to western border crossings.
Today, business has adapted, reoriented and started to develop new export routes through land corridors through European countries, but considering that a full-scale war is ongoing in Ukraine, it is important for Ukrainian exporters to have an effective protection mechanism against the risks of non-payment and financial losses, which are a serious challenge for participants in international trade .
A bank with a full range of services
In view of the complex logistics and in order to reduce the risks of exporters and importers, today it is expedient for exporters to use documentary transactions. In international practice, documentary instruments are often used in financing international trade transactions.
Ukreximbank offers a wide range of operations, services and services in trade financing and documentary operations.
The bank provides professional expertise and various forms of support and financing of trade operations.
In particular, pre-export and post-import financing, pre-export and post-export financing and guarantees of contractual obligations.
Pre-export financing is financing or replenishment of the working capital of the importer for the future purchase of raw materials, goods, services, equipment, technological lines produced in the country of the exporter, but not yet delivered to the territory of Ukraine.
Thanks to such financing, the Ukrainian manufacturer-importer receives additional working capital from the Bank, with which it makes advance payments to exporter-suppliers for goods/services/raw materials that have not yet been delivered to Ukraine and are needed by the importer to complete the current production cycle.
The client does not spend working capital on advance payments to suppliers from abroad due to the fact that the Bank, together with the EBRD, finances the working capital of the importer to make such advance payments.
In the event that the client needs short-term capital to complete and optimize the production cycle, Ukreximbank provides post-import financing, namely, opens a credit line and concludes an Agreement on the opening of an uncovered confirmed letter of credit with post-import financing.
Ukreximbank also provides financial support to exporters. Thanks to pre-export financing, the Ukrainian manufacturer-exporter receives funds for the production or completion of goods that will be exported under an already concluded contract with a foreign customer.
Such financing enables the exporter to expand production capacity to fulfill new export contracts with the money of foreign partners – and to repay the loan after the receipt of money from export deliveries.
Post-export financing allows the exporter to receive revenue early after the shipment of products by submitting documents under a letter of credit to Ukreximbank, i.e. earlier than the terms of payment under the contract provide.
Ukrexim can finance the exporter without collateral for the amount of the goods shipped by him under the letter of credit.
Trade financing from Ukreximbank is an opportunity to minimize risks in conducting foreign economic operations related to the level of trust between counterparties, as well as to optimize costs associated with settlements.
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