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Export Insurance & Risk Mitigation
Best-Kept Secrets for Reducing Costs and Risks in Exporting
December 11, 2012 10:00 – 11:00 AM
Ex-Im Bank – Exports Through Jobs
The official Export Credit Agency (ECA) of the U.S. Government
Self-sustaining and independent
Established in 1934 Headquarters in D.C. Eight regional offices
We support sales of U.S.-made goods and services
to create and maintain American jobs.
Ex-Im Bank Support Covers the Spectrum
Pre-Export Financing
Post-Export Financing
Working Capital Guarantees
InsuranceGuarantees
Direct Loans
Growing Export Sales and Minimizing Risks
Extension of Credit
Working Capital Guarantee
Funds to Fulfill Orders
Buyer FinancingMedium- and Long-Term Insurance & Loan Guarantee
Receivables Insurance
Exporter Need
Ex-Im Bank Solution
Ex-Im Bank FY 2011 Authorizations
Loans $6,323
Guarantees 19,400
Short Term Insurance (Bank-held):250 policies
4,648
Short Term Insurance (Exporter-held)2,600 policies
2,116
Medium Term Insurance100 policies
239
TOTAL $32,727
In Millions of USD
Ex-Im Bank Support in Massachusetts
Trade Terms on the Risk Spectrum
Seller Risk Trade Terms Buyer Risk
High Low
Low High
Open Account Cash Against Document
Usance / Deferred Letters of CreditSight Letters of CreditPayment in Advance
What is Export Credit Insurance?Supply Contract
Goods and/or Services
Payment(s) on Credit Terms
Claims Payment(s)
Export Credit Insurance Policy
Premium Col
lect
ion(s
)
Policy Assignment
U.S. Exporte
r
Foreign
Buyer
Foreign A/RFinancing
Exporter Benefits
Expand Export Sales Risk Mitigation Competitiveness/Marketing Extend Credit Terms to BuyersFinancing Tool Ability to assign foreign receivables Accelerate cash flow
Lender Benefits
Assignment of policy proceeds
Expand relationship with exporting customers Include export receivables in borrowing
base Improve effectiveness of working capital
loansImprove credit quality of loanCompete effectively for new customers
Short-Term Export Credit Insurance
Protects against non-payment by foreign buyers Commercial Risks: insolvency and protracted defaultPolitical Risks: currency inconvertibility; war, revolution, insurgency, expropriation; cancellation of import or export licenseCoverage generally 95%
Sell on competitive credit terms Up to 180 days for consumable products, and to
distributors Up to 360 day terms for some bulk agricultural products,
and to end users of capital equipment
Obtain additional financing Add insured foreign A/R to your borrowing base by
assignment of policy proceeds (claim payments) to lender
Short-Term Policy Types
Single BuyerOne policy per buyer
Multi-Buyer*ExpressSmall BusinessStandard Reasonable Spread of Risk (RSOR)
* Premium discount of 25% available when combined with an Ex-Im or SBA export working capital loan
Pricing: Small Business Multi-Buyer Policy
Term/Type of Foreign Buyer
Class I:Sovereign
Class II:Bank
Class III:Private
Sight Letters of Credit $0.03 $0.03 N/A
S/DD/P; CAD $0.06 $0.08 $1.20
1-60 Days $0.16 $0.20 $0.55
61-120 Days $0.27 $0.33 $.90
121-180 $0.35 $0.43 $1.15
181-270 days $0.43 $0.54 $1.45
271-360 Days $0.53 $0.65 $1.77
Pricing per $100 of insured shipments
Pricing: Single Buyer Policy
www.exim.gov
Exporter Underwriting Standards
ContentNo Defense Articles or
Services, or Military Buyers
Exceptions possible for humanitarian purposes, drug interdiction, dual-use items
U.S. Content
Short-term: each item must have more than 50% U.S. content
Services must be performed by U.S.-based personnel, either in the US or in the “host” country
Short-term U.S. Content Requirements
Non-Small Business Small Business ONLY
Eligible
Labor, Materials & Direct Overhead(excluding profit and indirect overhead)
All costs(excluding profit)
Origin of Goods
Must be manufactured in the US May be foreign-originated
Thresholds < 50% US content = Ineligible < 50% US content = Cover only US
Calculation of
SupportItem-by-item basis
Item-by-item basis
Option: Allowed to aggregate items on an invoice with the submission
of a Content Report
Evidence of Exportation
All goods must be shipped from US
All goods must be shipped from US
CountryCountry Eligibility
Support available in 170 countries
Restrictions may apply for political or economic reasons
Refer to the Country Limitation Schedule (CLS) at www.exim.gov, on the homepage under “Quick Start” or “Tools”
Creditworthy Buyers
See Short-Term Credit Standards available on exim.gov
Buyer Information
Up to $100k: credit report or trade reference
$100 to $300k: both, incl. some financial info
$300k+: additional trade reference, full financials
Underwriting Buyer Credit Limits
Policy Assignments
Standard Assignment Lender is named loss payee Allows exporter to borrow from
lender against insured A/R Only the exporter can file the
claim In event of buyer default and
claim approval, Ex-Im pays claim proceeds to lender
Enhanced Assignment Exclusively for qualified small
businesses – any policy type as long as exporter meets criteria
Adds exporter performance risk protection to lender
Lender must obtain specific documents
Lender can file a claim
On-Line Policy Management
Web-based application and policy management system All exporter insurance policies, accessible by
brokers and lenders Access all policy documents Report export shipments and pay premium
www.eximonline.exim.gov
www.exim.gov
Claims
Report shipments on the correct buyer and pay premium
Follow policy requirements for extending credit
Documentation Purchase Order, Invoice,
Bill of Lading Evidence of collection
efforts Other as specified in policy
File claim within the Claims Filing Window: 3 to 8 months after due
date
Prospective Applicants