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UNCITRAL
UNCITRAL
United Nations Commission on International Trade Law
U.S.
Signs UNCITRAL
Convention on Assignment of Receivables in International
Trade
In November, 2003, the
CFA wrote to U.S. State Department Legal Advisor, William
H. Taft, III, to strongly urge the U.S. to sign the United
Nations Commission on International Trade Law (UNCITRAL)
Convention on the Assignment of Receivables in International
Trade. In the letter, CFA called on the U.S. to sign the
Convention to show its support for the pact in advance
of ratifying it in 2004. To
view the letter click here.
In late December 2003, the U.S. government did sign
the Convention. By signing the Convention, the U.S.
has demonstrated its support for the agreement and sends
a strong signal to the international community that
it is serious about ratifying the pact. Reportedly,
many countries are looking to see what action the U.S.
takes on the Convention before determining what course
they will take on it.
To date, Luxembourg and Madagascar have also signed the
agreement, but it is believed that many other countries
have withheld action until they can get a clearer indication
that the U.S. will adopt the Convention. Widespread international
adoption of the Convention will be beneficial to both
the asset-based financial services industry and to thousands
of American businesses.
Approved by the UN General Assembly in December 2001,
after nearly seven years of extensive work by representatives
of UNCITRAL's 36 member nations as well as the Commercial
Finance Association and other nongovernmental organizations
involved in international finance, the Convention on the
Assignment of Receivables is now eligible for ratification
by individual countries. A minimum of five nations must
ratify the pact for it to enter into force. Once it has
entered into force, the Convention will have a significant
impact on middle-market businesses in the United States
by making it easier for lenders to extend credit to U.S.
companies who do business overseas and wish to use their
foreign accounts receivable as collateral for commercial
loans. Loans such as these, secured by accounts receivable
or other assets, are the primary source of working capital
for thousands of small- and medium-sized businesses. In
2001, U.S. middle- market companies used their assets
to secure more than $310 billion in financing.
As the economies of the world have become increasingly
interconnected in recent years, exports have assumed a
more important role in the U.S. economy. In 2001, Exports
of U.S. goods and services represented 10.3 percent of
the nation's GDP. Of the approximately 231,000 U.S. companies
that exported goods in 1999 (the last year for which figures
are available), 97 percent had less than 500 employees.
Such small- and medium-sized businesses are the companies
most likely to secure financing through their accounts
receivables. By eliminating uncertainty for lenders wishing
to make loans on non-U.S. receivables, the Convention
on the Assignment of Receivables will strengthen the ability
of middle-market American businesses to expand exports
and create more high-value, trade-related jobs for U.S.
workers. In the 1990s, more than a quarter of all new
private-sector jobs were trade related. Jobs supported
by exports, on average, pay 13 to 18 percent more than
the national average.
In the U.S., treaties and international agreements must
be approved by the U.S. Senate and then signed by the
President. It is expected that the Convention on the Assignment
of Receivables in International Trade will be submitted
to the Senate for consideration in the first half of 2004.
CFA has worked closely with the State Department to educate
members and will continue efforts to generate support
for Senate approval of the Convention in the coming months.
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