FOR IMMEDIATE RELEASE January 16, 2001
Marianna Ohe (202) 565-3200
The Export-Import Bank of the United States (Ex-Im Bank) and the Export Credits Guarantee Department (ECGD) of the United Kingdom today signed a co-financing agreement that will make it easier for exporters in both countries to compete in the global economy. It is Ex-Im Bank's first such co-financing agreement with the export credit agency (ECA) of another nation. Ex-Im Bank's Board of Directors last week approved co-financing principles and new foreign content and local cost procedures to guide bilateral negotiations on co-financing agreements with ECAs.
Under the agreement signed in London by Ex-Im Bank Chairman James A. Harmon and ECGD Chief Executive Vivian Brown, Ex-Im Bank and ECGD will enable American and British exporters to provide one-stop-shop trade finance services to their buyers. This allows companies to source their foreign orders from more than one country while dealing with only one export credit agency (ECA).
This agreement paves the way for Ex-Im Bank and ECGD to co-finance projects, enabling exporters in both of our countries to choose the best mix of price and technology to strengthen their overseas bids, said Ex-Im Bank's Harmon. At the same time, exporters will be able to provide their buyers with only one set of terms and conditions covering both countries sourcing elements.
ECGD's Brown added: We are delighted to be a party to U.S. Ex-Im Bank's first ever cooperation agreement. I am sure it will provide significant benefits to exporters and lenders in both our countries. In our experience, cooperation agreements can make all the difference to winning a contract when a competitive tender is called for.
Harmon said the administrative simplicities and seamless financing provided under the new agreement will change the way Ex-Im Bank does business. We hope it will provide a model for similar structures with other governments, enabling Ex-Im Bank to deliver the same type of flexibility offered by an ever-increasing number of ECAs.
The main features of this agreement are: 1) where there is a joint U.K.-U.S. bid, the country whose exporter is the main contractor (and will often have the major share of the contract) will normally take the lead and offer to provide export credit support for the whole of the bid on its usual terms; and 2) the ECA whose exporter is the sub-contractor (and will often have the minor share of the contract) will provide the other ECA with reinsurance.
When Ex-Im Bank is the lead ECA on an export transaction, its newly approved procedures will make Ex-Im Bank's ways of doing business more consistent with the one-stop-shop model used by other ECAs. When Ex-Im Bank is the follower ECA on a transaction, Ex-Im Bank will continue to ensure that it meets all of its policy and legislative responsibilities.
Under revised foreign content procedures approved last week, Ex-Im Bank will continue to support the lesser of: 85% of the U.S. supply contract or 100% of the U.S. content of an export transaction. However Ex-Im Bank will now use an aggregate approach to calculating the foreign content of transactions, replacing the item-by-item procedure used until now. The simplified procedures provide U.S. exporters with a more efficient and predictable disbursement process. Ex-Im Bank will work with exporters to monitor and report on the impact of these procedural changes to ensure they achieve the desired result of maximizing U.S. exports and U.S. jobs.
Ex-Im Bank still provides up to15% of the U.S. contract price of an export to support locally obtained products and services in the country of the foreign buyer. Under the newly approved procedures, Ex-Im Bank has eased the eligibility criteria in three ways: 1) Now all long-term cases can obtain local cost support when the costs are connected to the U.S. exporter's responsibilities in carrying out his contract. (Ex-Im Bank will continue to offer local cost support for all medium- and long-term environmental exports and for project finance transactions); 2) Ex-Im Bank is eliminating certain documentary requirements for local cost financing to avoid unintended expenses for U.S. exporters; and 3) For limited recourse project finance transactions, Ex-Im Bank may now support any local costs that benefit the project as a whole and contribute to the U.S. export.
ECGD, the Export Credits Guarantee Department, Britain's official export credit agency, is a separate Government Department responsible to the Secretary of State for Trade and Industry. One of its main functions is to underwrite bank loans to enable overseas buyers to purchase capital and project related goods/services from the UK.
ECGD has now signed cooperation agreements with the agencies of 23 countries, 14 of which include reinsurance provisions. So far, 34 deals have been concluded with a combined value of over 5 billion British pounds. There is one deal already being considered for joint ECGD/Ex-Im Bank support.
Ex-Im Bank is an independent U.S. government agency that helps finance the sale of U.S. exports primarily to emerging markets throughout the world, by providing loans, guarantees, and insurance. Ex-Im Bank supported $15.5 billion in U.S. exports in fiscal year 2000.