Bid and performance models cause the exporting community a great deal of angst. But for sheer anxiety, nothing beats foreign trade, says #b#Charles Dugan#/b#, vice president of global trade finance at TD Bank.
Together with TD Bank colleague Art Steinhauer, a foreign exchange specialist, Dugan will present “Foreign Exchange for Exporters on Friday, June 4, at 10 a.m. at Monmouth University. Cost: $45. Call 732-571-3636 or E-mail firstname.lastname@example.org.
Dugan says the goal is to demysify bid and performance models for small and medium-size exporters and “give them some confidence to pursue projects that require either bid performance bonds or foreign exchange.”
#b#Demysifying#/b#. “I’d like to get across that there is nothing wrong in agreeing to take a contract in a foreign currency,” Dugan says. “But when you do that, you need to manage the risks that may accompany that.”
Managing the risk usually means locking in the exchange rate. “That’s not speculating,” says Dugan. “It’s just a risk management tool. It helps expand business by broadening the universe of potential customers and contracts.”
A foreign exchange contract is the customary way to lock in an exchange rate. “Once an exporter knows how much he will receive at an approximate date in the future, he can sell that foreign currency to a bank at an agreed-upon rate today,” says Dugan. “Then they’ll know what their dollar proceeds will be.” In a strict accounting sense, this is matching up an asset and a liability with no exchange risk from that point on. “Companies need to have a relationship with a bank to do it, but it’s very straightforward,” he says.
Bid and performance models are sometimes required by the foreign buyer, especially when the buyer is a government or a large entity such as an oil company.
“The bid bond essentially secures a company’s bid for a project. It means that they are serious,” says Dugan.
“A performance bond ensures that they will perform under the contract. In domestic transactions these are usually provided by an insurance company. In foreign transactions they are usually provided by a bank.”
#b#Exporting from New Jersey#/b#. Chemical businesses, light and medium manufacturing companies, high techs, renewable energy companies, and manufacturers of middle grade and medium size industrial products are among the state’s chief exporters. But service companies count too.
“People don’t always think about consulting and engineering and other companies,” says Dugan. “When these companies provide a service to another country, that is an export as well.”
According to Dugan, there has been an uptake in exports from New Jersey since last year. “So much so,” he says, “that there is a shortage of vessels and containers for exports.
The steamship companies took a lot of vessels out of service when the market collapsed in 2008, so it’s a function of increased exports and reduced capacity. We have customers who have difficulty getting containers and difficulty getting space on vessels.”
Dugan says that the increased demand for local products is due to Latin and particularly Asian economics not suffering to the same extent as the U.S. and European economies did during the recent recession. The weak dollar also helped.
Dugan grew up in Bucks County, where his father worked at the post office. He graduated from the University of Pennsylvania in 1976 with a degree in international relations.
“I had a little credibility problem,” he says. “Not only had I not been anywhere internationally, I’d never even been on an airplane. So I did what anyone in that situation does. I joined the Peace Corps.”
Dugan spent two years in Tunisia building drinking wells in rural areas. Then he worked for the non-profit Catholic Relief Services, managing a project that built grain silos in Rwanda.
“I had a lot of fun doing that in my 20s,” he says. “It gave me a lot of satisfaction and a lot of great experiences. We even managed to do a little bit of good while we were there. But it’s a young person’s endeavor. After four-and-a-half years of that, I figured it was time to get a real job.”
He graduated with his MBA from Columbia in 1982 and began his career at the Bank of New York, working mostly in the Middle East and Africa. Then he spent 12 years with Chase, working on the domestic side with exporters. He has been with TD Bank for about five years.
According to Dugan, TD Bank offers a full suite of international services in trade finance and foreign exchange and cash management services for importers and exporters. “This particular seminar is geared to exporters,” he says, “but there is another side and we have other customers who import. We provide letters of credit, what are called collection services, as well as international payments, foreign exchange.”