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Exposure Fee Advice for Medium-Term Transactions Since 1978, Ex-Im Bank has worked with the Organization for Economic Cooperation and Development (OECD) Arrangement to minimize official export credit subsidies to ensure that buying decisions are made on factors other than the financing provided by official export credit agencies (ECAs). There have been many achievements, including the elimination of trade-distorting tied aid from a variety of sectors and the establishment of market-related minimum interest rates. The establishment of minimum fees that ECAs must charge for risk is another step in our efforts to give U.S. exporters a level playing field and to minimize cost to taxpayers. In February 2010, the Participants to the OECD Arrangement of Officially Supported Export Credits completed a round of negotiations which expanded the scope of the OECD premium rules to establish minimum premium rates (MPRs) for non-sovereign buyers, slightly reduce the MPRs for sovereign buyers, and institute a market-based pricing structure for transactions in Category 0 markets. Category 0 countries are defined as High Income OECD/Euro Countries. They are: Australia, Austria, Belgium, Canada, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Israel, Italy, Japan, Korea, Luxembourg, Malta, Netherlands, New Zealand, Norway, Poland, Portugal, Slovak Republic, Slovenia, Spain, Sweden, Switzerland, United Kingdom, United States. All of these changes to Ex-Im’s exposure fees went into effect on September 1, 2011. "Permitted Exceptions" (i.e., conditions that insulate Ex-Im Bank from country risk) do permit lower than minimum OECD benchmark fees. Examples of situations that may qualify include off-shore escrow accounts and local currency guarantees.
How do our current products fit into the OECD fee system?
What risk elements are included? The basic sovereign risk exposure fee, i.e., the minimum fee for a country, is determined by five variables: exposure fee level of the country, percentage of cover, the "quality" of product provided, and the length of the drawdown and repayment periods.
Ex-Im Bank's exposure fees are also dependent on two additional decision items: whether or not the exposure fee is to be financed and when the exposure fee is paid.
There are four options for paying the exposure fee:
How are non-sovereign rates determined for medium-term transactions? Beginning September 1, 2011, the OECD fee arrangement stipulates minimum fees per country for both sovereign and non-sovereign risk, Ex-Im Bank has incorporated a series of credit classification or “CC” levels which are OECD compliant. Fees for non-sovereign transactions cannot be less than the sovereign fee, except for permitted exceptions, and when "political risk only" cover is provided (these cases are priced at the level of Better than Sovereign or “BTS” level, which is 10% lower than the sovereign rate).If your transaction's financed/insured amount is $10 million or less (excluding the exposure fee) and the borrower/guarantor is unrated, the transaction will be rated using Ex-Im Bank's CC-based pricing system. CC levels are determined based on the credit risk of the buyer. For the descriptions of the 5 levels of private buyer risk – for both corporate and financial institution risk – please see Definitions for Non-Financial Institution Risk and Definitions for Financial Institution Risk. These credit factors constitute the range of CC scores. If your transaction ’s financed/insured amount is $10 million or less (excluding the exposure fee) and credit ratings and/or market spreads for the transactions' borrower/guarantor are available, Ex-Im Bank will assign a CC score based largely on this information. Please contact the Trade Finance and Insurance Division at (202) 565-3400 for price approximation. For transactions in Category 0 markets, pricing will be determined using market benchmark indicators based on the credit risk of the buyer. Please contact the Trade Finance and Insurance Division at (202) 565-3400 for price approximation or visit the Medium Term Exposure Fee Calculator to view the range of prices for given OECD Country Categories. How is country cover policy determined? Ex-Im Bank uses its Country Limitation Schedule (which remains based on ICRAS classifications) to determine country cover policy. Hence, the fact that the OECD agreement provides rates for countries where Ex-Im Bank is closed has no bearing on Ex-Im Bank's willingness to provide cover in a given market or for a particular transaction. To obtain an exposure fee once you know all of the variables mentioned above please go to Medium-Term Exposure Fee Calculator. |
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