The Export-Import Bank of the United States (Exim Bank) operates as an independent governmental agency. It undertakes credit insurance in conjunction with the Foreign Trade Insurance Association (FTIA). FTIA undertakes insurance with Exim Bank of short and medium-term export sales. It provides only commercial risk insurance, the political risk cover being provided by Exim Bank directly.
Together with the Bankers’ Association of Foreign Trade, Exim Bank established Private Export Funding Corporation (PEFCO) to supplement the traditional sources of funds from the non-bank private sector from which principally fixed rate moneys can be raised in support of US exports. Although PEFCO operates as a commercial entity, its borrowings carry the guarantee of Exim Bank.
Credit Insurance. The credit insurance programme is administered by FCIA. For short-term insurance, there are standard whole-turnover policies to cover one year’s activities for sales on 18-day terms. Consumables, services and capital goods are eligible for insurance. The policy contains a discretionary limit per buyer up to which the exporter can automatically secure cover. Above this limit specific approval of FCIA is required. The cover is limited to 90% of commercial and 100% of political loss. Exporters can combine short and medium-term cover by taking out a master policy, valid for one year. The exporter can establish a per buyer discretioary limit. The policy can cover only the political risk. Cover is same as for short-term policies.
In addition to standard sales insurance cover, exporters can take out consign-ment sales cover for goods shipped on consignment, pre-shipment cover for goods manufactured particularly for one buyer and switch cover for capital goods sold through a particular foreign distributor.
Export Finance. Exim Bank provides guarantees to banks for medium-term transactions (one year to five years) to cover 90% of commercial risk and 100% of political risk. The guarantee can cover a single transaction or several exports to a particular buyer. A variant of this guarantee programme is the bank-to-bank guarantee and insurance programme. The purpose of such a programme is the establishment of medium-term revolving lines of credit from a US bank to a foreign bank to assist in financing US exports to that foreign bank’s customers.
Under the discount loan programme fixed rate moneys are made available by Exim Bank for the total finance requirement. To secure access to this programme, the exporter’s bank has to certify the Exim Bank that it is not prepared to lend the required funds on a fixed rate basis. Exim Bank can purchase outright a US bank’s foreign obligations at any time during the facility life to a maximum value of 85% of the US export value.
In respect of export on long-term basis (beyond five years), Exim Bank’s long-term finance support takes the form of either a direct loan to the buyer/borrower by Exim Bank at a fixed rate, or a guarantee to a lending bank or group of banks of moneys lent to buyers/borrowers.
