Export Insurance & Risk Mitigation Best-Kept Secrets for Reducing Costs and Risks in Exporting...

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