increasing your export sales
DESCRIPTION
Increasing Your Export Sales. Short-Term Insurance Overview & Single-Buyer Products. Overview. Most frequently used program: Over 60% of total transactions Total authorizations: $2.4 billion FY 2000. Overview. Purpose: Provide foreign credit risk protection for exporters and lenders - PowerPoint PPT PresentationTRANSCRIPT
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