1 / 38

Increasing Your Export Sales

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

krista
Download Presentation

Increasing Your Export Sales

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Increasing Your Export Sales Short-Term Insurance Overview & Single-Buyer Products

  2. 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

  3. Overview Purpose: • 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

  4. Types 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

  5. 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

  6. 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

  7. Benefits - 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

  8. Cash Flow: Uninsured Borrowing Insured Receivables Base Borrowing Base Annual Domestic Credit Sales $1,000,000 $1,000,000 Annual Foreign Credit Sales 500,000 500,000 Turnover of 60 days, $1,500,000/6 = Average Outstanding 250,000 250,000 ($125,000 foreign) Lender’s Deductions Foreign Receivables Uninsured (125,000) Insured Policy Deductible (6,250) 5% Commercial Risk Retention Borrowing Base Availability $125,000 $243,750 95% increase! Benefits - Financing 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

  9. 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

  10. Benefits Sell more without increasing risk: • Sales - uninsured: $ 200,000 exposure: $ 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

  11. US Content Requirements Short-Term Insurance… Product must be at least 50% US content (labor and material), excluding mark-up 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

  12. S-T Export Credit Insurance Single-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

  13. Exporter: Single-buyer Financial Institution: Export Letter of Credit Financial Institution Buyer Credit (FIBC) Policy Types 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

  14. 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

  15. Single-Buyer Policy 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 Small Business All Other 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

  16. Single-Buyer Policy Other features: Small All BusinessOther • Assignment of Enhanced/ Simple proceeds to a lender Documentary or Simple • Claim filing window 90-240 Days (from due date) 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

  17. Bank L/C Policy • Allows banks to confirm L/Cs and refinance up to 180/360 days with coverage • Irrevocable letters of credit must conform to UCP 500 • 95% coverage - commercial and political risk • 98% coverage - agricultural products • 100% coverage - sovereign issuing bank • Recourse (“passback”) to a third party for uninsured amount allowed 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

  18. 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

  19. Financial Institution Buyer Credit • Covers extension of SHORT-TERM direct buyer/supplier credit loans and reimbursement loans • Single-buyer policy • Two formats of coverage: • Documentary – Protects bank against defects in the underlying transaction (i.e., Exporter Certificate) • Non-Documentary – Bank is at risk for transaction conformance to policy • Maximum Coverage: DocumentaryNon-Doc. Sovereign obligors 100% N/A Non-sovereign obligors/ guarantors 90% 90% Bulk agricultural commodities 98% 98% L/C transactions Excluded Excluded 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

  20. Financial Institution Buyer Credit • No application or commitment fees • 90 day commitment on approvals • Policy Period – up to 1 year • Risk-based premium rates • Minimum premiums (payable in advance): • Sovereign / political-only coverage: $ 750 • L/C’s, banks, & non-sovereign gov’ts: $1,500 • Private buyers: $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

  21. Financial Institution Buyer Credit Other features: DocumentaryNon-doc. • Eligible transactions Buyer Credits/ All other SB Supplier Supplier Credits Credits • Exporter/Beneficiary Yes No Certificate • Claim filing window 90-240 days (from due date) Financial Institution 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

  22. FIBC – Direct Credit Bank Buyer 2 3 1 Exporter 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 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

  23. FIBC – Reimbursement Loan 3 Bank Buyer 4 2 1 Exporter 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 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

  24. S-T Export Credit Insurance Multi-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

  25. Multi-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

  26. Multi-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

  27. Small 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

  28. Small Business Policy Features: • 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

  29. Small Business Policy - Premia Premium Rate Schedule Transaction Type Class I Class I I Class I I I Payment Terms (days o/a) 1-60 $0.19 $0.24 $0.65 0.39 1.06 61-120 0.32 0.41 0.50 1.35 121-180 181-270 0.51 0.63 1.70 0.62 0.77 2.08 271-360 Note: Premium is charged per $100 of gross invoice value. 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

  30. Small Business Policy Sample Annual Export Credit Sales: $2,000,000 Std Credit Terms Extended: 60 days Aggregate Policy Limit: $500,000 Deductible: $0 Premium Rate: $0.65 per $100 of gross invoice value (from rate sheet) Exclusions: Confirmed irrevocable L/C Sales to subsidiaries/affiliates Special Conditions: Preshipment Consignment Payments in foreign currency Nonacceptance Discretionary Credit Limits: Credit $25,000 Ledger $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

  31. Assignment of Policy Proceeds Simple Assignment • Lender maintains recourse back to exporter (eg, Policy violations resulting in claim denial) OR Enhanced • Available under small business policy • Bank obtains documents related to transactions, e.g.: • Copy of invoice • Export bill of lading • Purchase 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

  32. “Enhanced” Assignment Benefits to Banks: • Claim payment is made to assignee regardless of provisions of the policy which would be reason for claim denial • Bank may file claim in place of insured but must have all required documents • Bank is paid; Ex-Im Bank pursues buyer or exporter • No risks to Banks beyond their control 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

  33. 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

  34. Multi-Buyer Policy Eligibility: • Covers SHORT-TERM sales made during a 12-month period • Reasonable spread of risk Coverage: • Option A: 90% commercial, 100% political; or • Option B: 95% for commercial and political risks • 100% on sovereign buyers • 98% for bulk agricultural products 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

  35. Multi-Buyer Policy Premium: • $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

  36. Financial Institution Supplier Credit • Lender financing export A/R on a select basis • $2,000 minimum annual premium Two formats: DocumentaryNon-doc. Eligible exporters SB SB – all other ENB Policy < $5,000,000 avg. annual export Exporter Certificate Yes No Percentage of coverage Sovereign 100 100 Political 100 90 Commercial 95 90 Bulk 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

  37. ST 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

  38. Insurance Claims - FY 1999 Claims Filed *: 218 $48.1MM Claims Approved: 164 95.5% Claims Denied: 29 2.1% Claims Withdrawn: 18 1.5% Reasons for Denial: • No Premium • Missing Documents • Late Filing * 100% Commercial 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

More Related