Trade Financing Solutions

Export-Import Bank

of the United States

Increasing Your Export Sales

Increasing Your Export Sales

Short-Term Short-Term Insurance Insurance Overview & Overview & Single-Buyer Single-Buyer ProductsProducts

E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

Overview

Most frequently used program: Over 60% of total transactions

Total authorizations: $2.4 billion FY 2000

E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

OverviewPurpose: Provide foreign credit risk

protection for exporters and lenders

Covers: Commercial & political risks of

default

Does Not Cover: Product disputes Cancellation of contract

E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

Types of Exports SupportedTypes of Exports Supported

Raw materials, spare parts and consumable items and services: Up to 180 day terms

Capital equipment, bulk agricultural items, fertilizer and consumer durables:Up to 360 day terms

E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

Why Buy Insurance?

Risk Mitigation

Financing Aid

Competitiveness / Marketing

E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

Benefits – Risk Mitigation

Risk Mitigation:

Provides foreign credit risk protection against commercial risks of default, bankruptcy, and political risks of default, political violence, government intervention, and transfer or inconvertibility risk.

E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

Benefits - FinancingBenefits - Financing

Financing: Ability to assign foreign A/R

Increase collateral base Get $$$

E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

Benefits - Financing

Receivables Uninsured BorrowingBase

InsuredBorrowing Base

Annual Domestic Credit Sales $1,000,000 $1,000,000Annual Foreign Credit Sales 500,000 500,000Turnover of 60 days,$1,500,000/6 = Average Outstanding 250,000 250,000

Lender’s DeductionsForeign Receivables Uninsured (125,000) Insured

Policy Deductible

5% Commercial Risk Retention (6,250)Borrowing Base Availability $125,000 $243,750

95% increase!95% increase!

Cash Flow:

($125,000 foreign)

E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

Benefits - Competitiveness

Competitiveness/Marketing: Extend open account credit terms

directly to foreign buyers Compete with sellers from other

countries Cheaper for buyer than L/C’s Pursue riskier buyers/countries Sell more to existing buyers with less

risk

E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

Benefits

Sell more without increasing risk:

Sales - uninsured: $ 200,000exposure: $ 200,000

Sales - insured: $4,000,000 exposure: $ 200,000

(assuming 95% coverage)

E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

Short-Term Insurance…

Product must be at least 50% US content (labor and material), excluding mark-up

US Content Requirements

E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

S-T Export Credit InsuranceS-T Export Credit Insurance

Single-Buyer PoliciesSingle-Buyer Policies

E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

Policy Types

Exporter: Single-buyer

Financial Institution:

Export Letter of Credit

Financial Institution Buyer Credit (FIBC)

E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

Single Buyer Policy - Exporter

Eligibility: Covers single or multiple sales to

individual buyers Terms generally up to 180 days; 360

days for capital goods and bulk agricultural products

Coverage (Commercial & Political): 90% for private buyers 95% for L/C transactions 98% for bulk agricultural products 100% for sovereign buyers

E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

Features cont.:Features cont.: No application or commitment fees 90 day commitment on approvals Risk based premium

Minimum premium:

Sovereign / political only coverage:$ 500$ 750

L/C’s / banks / non-sovereign govt: $ 750$1,500

Private buyers: $1,000 $2,500

Single-Buyer PolicySingle-Buyer Policy

Small Busines

s

All Othe

r

E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

Other features:Other features: SmallSmall All AllBusinessBusiness

OtherOther

Assignment ofAssignment of Enhanced/Enhanced/SimpleSimple

proceeds to a lenderproceeds to a lender DocumentaryDocumentaryor Simpleor Simple

Claim filing windowClaim filing window 90-240 90-240 DaysDays

(from due date) (from due date)

Single-Buyer PolicySingle-Buyer Policy

E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

Bank L/C Policy

Allows banks to confirm L/Cs and Allows banks to confirm L/Cs and refinance up to 180/360 days with refinance up to 180/360 days with coveragecoverage

Irrevocable letters of credit must Irrevocable letters of credit must conform to UCP 500conform to UCP 500

95% coverage - commercial and 95% coverage - commercial and political riskpolitical risk

98% coverage - agricultural 98% coverage - agricultural productsproducts

100% coverage - sovereign issuing 100% coverage - sovereign issuing bank bank

Recourse (“passback”) to a third Recourse (“passback”) to a third party for uninsured amount party for uninsured amount allowedallowed

E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

Bank L/C Policy Risk-based premium Bank Credit Limits

Discretionary credit limits Credit Ledger

Issuing Bank Credit Limits (see STCS)

Pre-presentation cover available $2,000 minimum annual premium Documentary – Bank gets

Exporter/ Beneficiary Certificate Claim filing window (past due) 60

– 120 days

E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

Financial Institution Buyer CreditFinancial Institution Buyer Credit

Covers extension of Covers extension of SHORT-TERMSHORT-TERM direct direct buyer/supplier credit loans and reimbursement loansbuyer/supplier credit loans and reimbursement loans

Single-buyer policy Single-buyer policy Two formats of coverage:Two formats of coverage:

Documentary – Protects bank against defects in Documentary – Protects bank against defects in the underlying transaction (i.e., Exporter the underlying transaction (i.e., Exporter Certificate)Certificate)

Non-Documentary – Bank is at risk for transaction Non-Documentary – Bank is at risk for transaction conformance to policyconformance to policy

Maximum Coverage:Maximum Coverage: DocumentaryDocumentary Non-Non-Doc.Doc.

Sovereign obligorsSovereign obligors 100%100% N/AN/A

Non-sovereign obligors/Non-sovereign obligors/

guarantors guarantors 90% 90% 90%90%

Bulk agricultural commoditiesBulk agricultural commodities 98% 98% 98%98%

L/C transactionsL/C transactions Excluded Excluded ExcludedExcluded

E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

Financial Institution Buyer Credit

No application or commitment feesNo application or commitment fees 90 day commitment on approvals90 day commitment on approvals Policy Period – up to 1 yearPolicy Period – up to 1 year Risk-based premium rates Risk-based premium rates Minimum premiums (payable in Minimum premiums (payable in

advance):advance):Sovereign / political-only coverage:Sovereign / political-only coverage: $ $ 750750

L/C’s, banks, & non-sovereign gov’ts:L/C’s, banks, & non-sovereign gov’ts:$1,500$1,500

Private buyers: Private buyers: $2,500$2,500

E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

Other features:Other features: DocumentaryNon-doc.

Eligible transactionsEligible transactions Buyer Credits/Buyer Credits/ All All otherother SB SupplierSB SupplierSupplier Supplier

CreditsCredits CreditsCreditsExporter/BeneficiaryExporter/Beneficiary YesYes No No CertificateCertificateClaim filing windowClaim filing window 90-240 days 90-240 days (from due date)(from due date)

Financial Institution must remain at risk for Financial Institution must remain at risk for uninsured retentionuninsured retention

Financial Institution Buyer CreditFinancial Institution Buyer Credit

E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

FIBC – Direct Credit

1. Contract for Goods - outside the insurance policy

2. Buyer obligation created between buyer and bank

3. Bank pays out exporter upon presentation of trade documents

2

3

1

BankBank BuyerBuyer

ExporterExporter

E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

FIBC – Reimbursement Loan

1. Contract for goods -- basis for the insurance policy

2. Buyer pays exporter for goods

3. Bank reimburses buyer

4. Buyer obligated to pay within 180 (360) days

22

33

11

BankBank BuyerBuyer

ExporterExporter

44

E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

S-T Export Credit InsuranceS-T Export Credit Insurance

Multi-Buyer PoliciesMulti-Buyer Policies

E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

Multi-Buyer Policy ProductsMulti-Buyer Policy Products

Small Business Multi-Buyer: Small Business Environmental Umbrella

Standard Multi-Buyer Policy

Financial Institution Financial

Institution Supplier Credit

E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

Multi-Buyer Policy ProductsMulti-Buyer Policy Products Common features:

Claim filing window (past due): 90 – 240 days

Cover capped at WSJ prime < 0.5% (does not apply to FISC)

Shipments (financings) reported month-to-month basis

E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

Small Business PolicySmall Business Policy

Ex-Im Bank’s most popular product

Eligibility:At least 1 year of successful

operations Positive net worth At least 1 principal engaged full

time in company No more than $5,000,000 in

average annual export credit sales over prior 2 years

Meets SBA definition of “small”

E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

Small Business PolicySmall Business PolicyFeatures: 12 months, renewable Whole turnover 95% commercial, 100% political

coverage Buyer credit limits

Discretionary credit limits Credit Ledger

Special buyer credit limits (see STCS) $500 refundable advance

premium Enhanced or simple assignment of

proceeds to a lender

E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

Small Business Policy - PremiaSmall Business Policy - Premia

Premium Rate Premium Rate ScheduleSchedule

Note: Premium is charged per $100 of gross invoice value.Note: Premium is charged per $100 of gross invoice value.

Payment TermsPayment Terms(days o/a)(days o/a)

1-60 $0.19 $0.24 $0.65

61-120 0.32 0.39 1.06

121-180 0.41 0.50 1.35

181-270 0.51 0.63 1.70

271-360 0.62 0.77 2.08

Transaction Type

Class I Class I I Class I I I

E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

Small Business Policy SampleSmall Business Policy Sample

Annual Export Credit Sales:Annual Export Credit Sales: $2,000,000$2,000,000

Std Credit Terms Extended:Std Credit Terms Extended: 60 days60 days

Aggregate Policy Limit:Aggregate Policy Limit: $500,000$500,000

Deductible:Deductible: $0$0

Premium Rate:Premium Rate: $0.65 per $100 of gross $0.65 per $100 of gross

invoice value (from invoice value (from rate sheet)rate sheet)

Exclusions:Exclusions: Confirmed irrevocable Confirmed irrevocable L/CL/C Sales to Sales to subsidiaries/affiliatessubsidiaries/affiliates

Special Conditions:Special Conditions: PreshipmentPreshipmentConsignmentConsignment

Payments in foreign Payments in foreign currencycurrency Nonacceptance Nonacceptance

Discretionary Credit Limits:Discretionary Credit Limits: Credit $25,000Credit $25,000Ledger $50,000Ledger $50,000

E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

Assignment of Policy Assignment of Policy ProceedsProceeds

Simple AssignmentSimple Assignment Lender maintains recourse back to Lender maintains recourse back to

exporter (eg, Policy violations exporter (eg, Policy violations resulting in claim denial)resulting in claim denial)

OROREnhancedEnhanced Available under small business Available under small business

policypolicy Bank obtains documents related to Bank obtains documents related to

transactions, e.g.:transactions, e.g.: Copy of invoiceCopy of invoice Export bill of ladingExport bill of lading Purchase orderPurchase order

E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

Benefits to Banks:Benefits to Banks:

Claim payment is made to Claim payment is made to assignee regardless of provisions assignee regardless of provisions of the policy which would be of the policy which would be reason for claim denialreason for claim denial

Bank may file claim in place of Bank may file claim in place of insured but must have all required insured but must have all required documents documents

Bank is paid; Ex-Im Bank pursues Bank is paid; Ex-Im Bank pursues buyer or exporterbuyer or exporter

No risks to Banks beyond their No risks to Banks beyond their controlcontrol

““Enhanced” AssignmentEnhanced” Assignment

E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

Small Business Environmental Policy

Eligibility: Same as Small Business Policy Products/services

environmentally related

Features: Same as Small Business Policy,

including “Enhanced” assignment No export credit sales volume

entry or exit threshold provided continued eligibility as “small” business

E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

Eligibility: Eligibility: Covers SHORT-TERM sales made Covers SHORT-TERM sales made during a 12-month periodduring a 12-month period

Reasonable spread of riskReasonable spread of risk

Coverage: Coverage: Option A:Option A: 90% commercial, 90% commercial, 100% political; or100% political; or

Option B:Option B: 95% for commercial 95% for commercial and political risksand political risks

100% on sovereign buyers100% on sovereign buyers 98% for bulk agricultural 98% for bulk agricultural productsproducts

Multi-Buyer PolicyMulti-Buyer Policy

E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

Multi-Buyer PolicyMulti-Buyer PolicyPremium: $500 refundable advance premium Risk-based premium:

Payment terms Type of buyer Spread of country risk Transaction type Previous export experience

First loss deductible Simple assignment of proceeds to

a lender Claim filing window (past due) 90-

240 days

E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

Financial Institution Supplier CreditFinancial Institution Supplier Credit Lender financing export A/R on a select basis

$2,000 minimum annual premiumTwo formats: Documentary Non-doc.Eligible exporters SB SB – all other

ENB Policy< $5,000,000avg. annualexport

Exporter Certificate Yes NoPercentage of coverage

Sovereign 100 100Political 100 90Commercial 95 90Bulk ag. 98 98

Premium rates SB r/s Country r/s No cap on interest rate Lender must remain at risk for uninsured retention

E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

ST Rate SheetST Rate Sheet

MEXICO

Short Term Single Buyer Insurance

Term Sight LIC CAD/SDOP 1-60 61 -1.20 121 -180 181 - 270 271 - 360

SOV/POL/PS: $0.04 $0.07 $0.19 $0.32 $0.41 $0.51 $0.62 F.I.: $0.04 $0.09 $0.24 $0.39 $0.50 $0.63

$0.77 NFI: $0.12 $0.24 $0.65 $1.06 $1.35 $1.70 $2.08

Pre-Presentation for Letters of Credit

Term Sight - 90 91 –120 121 -180 181 - 270 271 - 360

SOV: $0.04 $0.05 $0.07 $0.11 $0.15 F.I.: $0.04 $0.07 $0.09 $0.13 $0.18

Sov= Sovereign; POL=Political Only; PS=Preshipment; F.I. = Financial Institution (public/private); NFI=Non Financial Institution (public/privato)

E x p o r t – I m p o r t B a n k o f t h e U n i t e d S t a t e s

Insurance Claims - FY 1999Insurance Claims - FY 1999

Claims Filed *:Claims Filed *: 218218$48.1MM$48.1MMClaims Approved:Claims Approved: 164164 95.5%95.5%Claims Denied:Claims Denied: 29 292.1%2.1%Claims Withdrawn:Claims Withdrawn: 18 181.5%1.5%

Reasons for Denial:Reasons for Denial: No PremiumNo Premium Missing DocumentsMissing Documents Late FilingLate Filing

* 100% Commercial Risk* 100% Commercial Risk