EXIM Board Votes to Modernize Agency’s “Local Costs” and “Reachback” Policies to Increase Transparency and Support for EXIM Customers
FOR IMMEDIATE RELEASE December 10, 2020
Office of Communications (202) 565-3206
WASHINGTON – The Export-Import Bank of the United States (EXIM) Board of Directors today unanimously approved reforms to its short-term ‘local costs’ and medium- and long-term ‘reachback’ policies to better support U.S. exporters and American workers by updating both policies to reflect the current global competitive market.
EXIM’s short-term “local costs” policy refers to the eligibility for EXIM insurance coverage when it comes to expenses incurred by U.S. exporters abroad in the buyer’s county (such as local duties and taxes, “last-mile” shipping costs, etc.) that cannot reasonably be procured in the United States. Previously, EXIM could cover such costs only in medium- and long-term transactions (i.e., with terms of more than one year).
Under the new policy approved by the EXIM Board, the agency can also cover such expenses in short-term transactions that have a duration of 12 months or less, and are primarily utilized by small businesses, which approximately 90 percent of EXIM transactions directly benefit. As a result, many small business exporters could purchase EXIM export credit insurance that protects them against non-payment for their product as well as local costs incurred as a result of the exporting process. Additionally, the update makes EXIM short-term financing more competitive globally by bringing the local cost policy in line with that of other export credit agencies in other nations. Following the EXIM Board’s approval, multiple EXIM divisions will work together to implement the new short-term local costs policy, a process that may take a number of months to fully complete.
EXIM’s medium- and long-term (MLT) “reachback” policy establishes the eligibility criteria for EXIM coverage of loan, guarantee, and export credit insurance transactions to facilitate the export of U.S. goods and services in these circumstances. Under the new policy approved by the EXIM Board, shipments that occur on or after the date of the earliest binding (i.e., signed) commercial contract, pro forma invoice, supply contract, or purchase order or similar agreement between buyer and seller would be acceptable for EXIM cover.
This policy change bolsters EXIM competitiveness relative to foreign export credit agencies with similar policies, and also delivers on EXIM President and Chairman Kimberly A. Reed’s commitment to transparency. The reachback change takes effect immediately for pending and future applications.
“Since our Board’s 2019 arrival at EXIM, many of our stakeholders and EXIM staff raised the importance of modernization of these two issues,” said EXIM Chairman Kimberly Reed. “I want to commend all of my colleagues for their hard work and leadership, and especially EXIM’s Office of Policy Analysis and International Relations Senior Policy Analyst Paxton Stephan who presented to our Board of Directors today. I want to underscore a key point Ms. Stephan made to me: Today’s actions ‘will ensure EXIM supports U.S. exporters effectively and efficiently, while increasing transparency for decision makers.’ I find this is especially important when the extension of insurance coverage benefits U.S. small business exporters."
“EXIM policies need to balance the agency’s mission of supporting U.S. jobs with our responsibilities to supplement, not supplant, the private sector and both these policy changes do so,” said EXIM Board Member Judith D. Pryor. “I appreciate the time and effort put into updating these policies by so many across the agency. I am pleased to support these changes today to ensure American exports are competitive on the global market and American companies, especially small businesses, can export with confidence.”
“Local costs, including taxes, tariffs, and transportation, can be significant for some exporters,” said EXIM Board Member and former member of Congress Spencer Bachus. “And in most cases these services cannot reasonably be purchased in the U.S. Providing cover for local costs on short-term transactions extends EXIM’s comprehensive financing to the companies that need it most. Regarding EXIM’s reachback policy, as a practical matter, projects don’t always fit within an arbitrary 12-month window. Changing the coverage period to a commercially determined timeframe is a common-sense approach and aligns EXIM with other Export Credit Agencies around the world.”
EXIM is an independent federal agency that promotes and supports American jobs by providing competitive and necessary export credit to support sales of U.S. goods and services to international buyers. A robust EXIM can level the global playing field for U.S. exporters when they compete against foreign companies that receive support from their governments. EXIM also contributes to U.S. economic growth by helping to create and sustain hundreds of thousands of jobs in exporting businesses and their supply chains across the United States. In recent years, approximately 90 percent of the total number of the agency’s authorizations has directly supported small businesses. Since 1992, EXIM has generated more than $9 billion for the U.S. Treasury for repayment of U.S. debt.
For more information about EXIM, please visit www.exim.gov.