Information and materials on this page are
based on those provided by the author, Dr. Belay Seyoum
Chapter Outline
Background
Exporters prefer to be paid on or
before shipment of the goods, whereas buyers want to delay
payment until they have sold the merchandise.
To expand export sales, many
governments offer a wide choice of financing programs.
Such assistance increases the
exporter's credit line needed for corporate and domestic
transactions, neutralizes financing as a factor, and creates a
level playing field with competitors in other countries who also
benefit from similar financing programs.
The OECD (Organization for
Economic Cooperation and Development) has developed guidelines
on export credits for its members.
Chapter 01.
Growth and Direction of International Trade
Chapter 02. International and Regional Agreements
Affecting Trade
Chapter 03. Setting Up
the Business
Chapter 04. Planning
and Preparations for Export
Chapter 05. Export
Channels of Distribution
Chapter 06.
International Logistics, Risk, and Insurance
Tariffs and Nontariff Barriers as Import Restrictions
Methods of Levying Tariffs
1.
Ad valorem:
Duty based on value of the imported
product
2.
Specific:
Duty based on quantity or volume
3.
Compound:
Duty that combines both ad valorem and
specific
Nontariff Barriers
Nontariff barriers include quotas, tariff quotas, labeling
requirements, licensing
requirements, prohibiting the entry of certain imports, and
requirements
to purchase domestically produced goods.
Preferential Trading Arrangements
NAFTA, U.S./Israel FTA, U.S./Australia FTA, the Caribbean Basin
Initiative,
Andean Trade Preference, the Generalized System of Preferences,
AGOA.
Trade Intermediaries and Services
Customs brokers, free-trade zones, and bonded warehouses.
Customs Brokers
Customs brokers act as agents for importers with regard to (1)
the entry
and admissibility of merchandise, (2) its classification and
valuation, and
(3) the payment of duties and other charges assessed by customs
or the refund
or drawback thereof.
Export-Import Bank of the United States (Eximbank)
Eximbank
is an independent agency of the U.S. government, the purpose of which is
to aid in financing and to facilitate trade between the United States
and other countries.
The
bank, which is expected to be self–sustaining (except for the initial
capital of $1 billion to start operations), makes loans and guarantees
with reasonable assurance of repayment. It complements private sources
of finance.
Major Export Financing
Programs Provided by Eximbank
Working Capital Guarantee
Program
This
enables exporters to meet critical pre–export financing needs, such
as inventory build up or marketing. Eximbank will guarantee 90
percent of the loan provided by a qualified lender. The guarantee
has a maturity of twelve months and is renewable.
The
major features of the working capital guarantee program are as
follows:
Qualified
Exports: Eligible
exports must be shipped from the United States and have at least
50 percent U.S. content.
Guarantee Coverage and Term of
the Loan: In
the event of default by the exporter, Eximbank will cover 90
percent of the principal of the loan and interest, up to the
date of claim for payment, insofar as the lender has met all the
terms and conditions of the guarantee agreement.
Collateral and Borrowing
Capacity:
Guaranteed loans are to be secured by a collateral.
Qualified Exporters and Lenders:
Exporters must be domiciled in the United States (regardless of
domestic/foreign ownership requirements), show a successful
track record of past performance, including an operating history
of at least one year, and have a positive net worth.
Export Credit Insurance Program
A
wide range of policies to accommodate different insurance needs. Its
major features are: U.S. content requirements, restrictions on sales
destined for military use and to communist nations.
Short–term single–buyer policies: These cover a single sale
or repetitive sales over a one–year period to a single buyer.
They provide coverage against political and commercial risks.
They support products such as consumables, raw materials, spare
parts, low–cost capital goods, etc.
Short–term multibuyer policies: These cover short–term
export sales to many different buyers against political and
commercial risks. Product coverage is the same as above.
Small
business policy (graduate to short–term multibuyer when
annual export credit sales exceed $3 million): This short–term
policy covers small businesses with average annual export credit
sales of less than $3 million. It provides coverage against
political and commercial risks.
Small
business environmental policy: This short–term policy
provides coverage to small businesses that export environmental
goods and services against political and commercial risks.
Financial institution buyer credit policy: This protects
financial institutions against losses on short–term direct
credit loans or reimbursement loans to foreign buyers of U.S.
goods and services.
The
bank letter of credit policy: This provides coverage against
the failure of a foreign financial institution (the issuing
bank) to honor its letter of credit to the insured bank.
Financing and operating lease policy: These two separate
leases provide coverage against political and/or commercial
risks—policies protect lessor against loss of a stream of lease
payments and fair market value of the leased product.
Guarantees:
The program provides repayment protection for private–sector loans
to creditworthy buyers of U.S. goods and services. There is also
special coverage for U.S. or foreign lenders on lines of credit
extended to foreign banks or foreign buyers.
Direct
Loan Program:
This is an intermediate/long–term loan provided to creditworthy
foreign buyers for the purchase of U.S. capital goods and services.
Project Finance Program:
This program supports exports of U.S. capital equipment and related
services for projects whose repayment depends on project cash flows,
as defined in the contract.
with
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