Ex-Im Bank Medium-Term Export Credit Insurance

Summary

Exporters and Financial Institutions supporting the sale of U.S. capital equipment, its installation and a complement of spare parts if necessary, can insure their foreign receivables against losses with Ex-Im Bank medium-term policies.

Ex-Im Bank medium-term policies protect U.S. sales to a single foreign buyer against the buyer's failure to pay an obligation because of unforeseen commercial or political reasons. The policies can often help U.S. exporters obtain financing and, therefore, compete in selling overseas through the use of prudent credit extension practices. Also see Ex-Im Bank's Fact Sheet on the Medium Term Bank-to-Bank Credit Line Export Credit Insurance Policy, form EIB99-10.

There is no requirement to insure all sales under the medium-term policies since each policy covers transactions with one particular buyer for single or repetitive sales.

Policy Format

Policies will be issued in one of two formats:

  1. A "Documentary" policy will be issued to financial institutions wherein the insured bank will be required to obtain specific documents (signed buyer obligation, transport documents, invoice and Exporter Certificate, form EIB94-07) which evidence conformity with the policy requirements. If the beneficiary of the funding is other than the exporter, a Beneficiary Certificate, form EIB92-37, is required as well. The insured financial institution is protected against fraud, disputes and other defects of the underlying transaction. The documentary policy is available for both single sale and buyer specific repetitive sales transactions.
     
  2. A "Non-Documentary" policy will be issued to exporters. This policy is assignable to financial institutions and a documentary assignment will be made available to provide the same protection to the assignee financial institution as the documentary policy. The non-documentary policy will be available to accommodate both single sale and repetitive sales transactions.

Both formats require the use of an Ex-Im Bank Promissory Note form or a different note form that meets certain criteria. Ex-Im Bank has special promissory notes which can be found in Applications and Forms as well as standard notes, form EIB92-58.

What Is Covered

The maximum cover available under medium-term policies is $10 million. All cover is subject to Ex-Im Bank foreign content guidelines. Ex-Im Bank's medium-term policies cover:

  1. Commercial losses resulting from nonpayment for such reasons as a buyer's insolvency or failure to pay an obligation within 30 days of the due date.
     
  2. Political losses.

Ex-Im Bank indemnifies an insured for 100 percent of the financed portion in the event of a commercial loss or political loss.

Ex-Im Bank's medium-term policies cover credit sales in which payment terms range between one and five years (exceptionally 7 years) after the goods arrive at the port of importation. Policies are available to accommodate two types of transactions:

  1. single sales - one-time transactions; and
     
  2. repetitive sales - ongoing relationships, generally between an exporter and a dealer or distributor.

All of the medium-term policies require that the insured obtain a cash down payment from the buyer in an amount equal to at least 15 percent of the contract price prior to delivery. The remaining financed portion is then insured at 100 percent. The buyer's obligation to pay the financed portion must be evidenced by a promissory note. The financed portion must be payable in at least semiannual equal installments of principal and interest.

APPLICATION PROCEDURE

The applicant submits an application, through Apply Online. If the application is approved, Ex-Im Bank issues a policy stating the coverage parameters. Those parameters include Ex-Im Bank's limit of liability, the amount of the contract price, the down payment and the financed portion, the payment terms, the premium amount, the final shipment date, and any special conditions required.

Following shipments or funding, the insured submits a report of premiums payable through Exim Online stating shipments made during the month and accompanied by the appropriate premium check.

ELIGIBLE REPAYMENT TERMS

The length of payment terms available under Ex-Im Bank medium-term policies depends on the total value of sales and, to some extent, upon the unit value of capital goods. The following table shows the maximum terms for specified dollar amounts:

Contract Price of Transaction                 Maximum Payment Term
less than $80,000                                      two years
$80,000 - less than $175,000                      three years
$175,000 - less than $350,000                    four years
$350,000 or more                                      five years

Sales to dealers or others for resale are limited to maximum credit terms of two years.

PREMIUM RATES AND PAYMENT

All policies require premium payment by the last business day of the month immediately following each insured shipment or funding for financial institutions. Premium is calculated on the financed portion of the medium-term shipments made during the period.

Applicants may obtain a non-binding rate indication by referring to the Exposure Fee Calculator at Ex-Im Bank's Internet Homepage or by contacting the Business Development Division with specifics of the contemplated transaction. Changing conditions may result in a different rate being finally offered than is initially indicated. However, premiums specified by Ex-Im Bank in writing are firm.

INTEREST COVERAGE

The interest rate insured on medium-term transactions is 100 percent of the rate provided in the note. To be covered, post-maturity interest must be stipulated by the insured in the promissory note. Post maturity interest is covered at the original note rate. Coverage of interest charges may extend to the date of claim payment, or 150 days, whichever is earlier.

OVERDUES AND CLAIMS

Insureds must report all buyers which fall into default within 30 days of the default and on a monthly basis, form EIB92-28. In all cases, these monthly reports of overdues situations should continue for as long as the overdues exists, or until a claim is submitted.

When claims are submitted, copies of all documents pertaining to the transactions, such as invoices, bills of lading, promissory notes and guarantees, must be forwarded in conjunction with the proof of loss form, EIB92-26, for review.

There is a 30-day waiting period after the date of default before a claim can be filed. The latest date for filing any type of claim is 150 days after the date of default.

INFORMATION REQUIRED FROM APPLICANTS

Applicant information. A completed application, form EIB03-02, is required. If the applicant is other than the exporter or suppler, such as a financial institution, then information on the exporter and supplier is required.

Buyer information - The applicant must also provide information about the buyer and guarantor, if any. In general, the following guidelines apply:

  • a credit report from an agency, dated not more than 6 months from the application date;
     
  • a commercial bank checking, dated not more than 6 months from the application date; and
     
  • three years of financial statements and an interim statement if the latest fiscal year end statement is dated more than 9 months from the application date.

Audited financial statements are preferred and generally will be required when Ex-Im Bank's total potential exposure exceeds $1 million. If unaudited statements are provided, they must be signed and accompanied by a summary of significant accounting practices used in their preparation.

Ex-Im Bank has published its Medium Term Credit Standards, EBD-M-39, for Buyers that may be consulted to determine the information necessary and the likelihood of approval.

More Information

Headquarters
U.S. Toll Free Number
Worldwide Number
Trade Finance Division
Internet

(800) 565.3946 (EXIM)
(202) 565.3946
Refer to Contact Us for counsel
http://www.exim.gov

This is not a solicitation by the Export-Import Bank of the United States or its employees. It is a descriptive summary only. The complete terms and conditions of the policy are set forth in the policy, applications and endorsements.

     
 

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