On August 8, 2017, EXIM adopted the term “pre-export payments” in lieu of the term “progress payments” to better align with commercial terminology.
For EXIM purposes, pre-export payments are contractual provisions for partial periodic payments made in support of work performed on a U.S. good during the time that the good is in its production stages in advance of export. Pre-export payments are different from general milestone payments in that pre-export payments may only be made in relation to actual work performed prior to export, whereas milestone payments more broadly refer to the payment schedule for large projects involving a combination of U.S. goods and services and work performed both in the U.S. and at the project site at any time prior to contract completion, including post export.
For medium- and long-term transactions[1], EXIM may allow disbursements for pre-export payments for eligible goods and servicesin an amount not to exceed 85 percent of 85 percent of the Net Contract Price[2] in the aggregate for such goods (based on the Disbursement Percentage identified in the Exporter’s Certificate). EXIM limits disbursements for pre-export payments to encourage the exporter to complete production and export the relevant goods before EXIM disburses the remaining eligible amount. EXIM’s Engineering and Environment Division will determine whether the proposed pre-export payment schedule is reasonable and consistent with normal industry practice, and will confirm the percent eligible for disbursement prior to export, which may differ from the Disbursement Percentage indicated on the Exporter’s Certificate. The exporter must also certify within their Exporter’s Certificate that the accrued costs for actual work performed are at least equal to the value of the respective pre-export payment. Thus, disbursements, including disbursements in respect of initial downpayments contained in the commercial contract, may not occur until such time that the exporter has certified that the value of the work performed to date equals or exceeds the amount invoiced to date.
[1] EXIM can also support pre-export payments for short-term transactions. However, such support is unusual since exports supported by short-term programs do not entail lengthy production periods, and therefore, they do not require pre-export payments.
[2] The Net Contract Price is the aggregate price of all goods and services in the U.S. Contract less: (1) goods and services that are not eligible for EXIM support (e.g., third country goods not shipped from the United States), and (2) the aggregate price of all goods and services originated in the hostcountry.