EXIM offers Export Credit Insurance (ECI) which protects U.S. exporters against foreign buyer nonpayment due to political and commercial risks. There are several types of ECI policies, such as Single-Buyer which covers single or multiple shipments to one buyer, Multi-Buyer, which covers an exporters’ entire export portfolio, and Multi-Buyer Select Risk, which covers a negotiated portfolio. Because exporters can face unique circumstances, there are also a variety of policy endorsements which can expand or modify policy coverage. An example is the recently revised Pre-Shipment Endorsement which pertains to Short-Term Single Buyer (ESS) policies.
While ECI policies protect exporter invoices against nonpayment for finished goods that have been shipped to an international buyer, EXIM’s Pre-Shipment endorsement provides additional protection for an exporter’s manufacturing costs – in other words, the costs incurred by the exporter for their partially-finished goods that are still a work-in-process, or their finished goods that have yet to be shipped from the United States to international buyers. Coverage under the Pre-Shipment endorsement reimburses the exporter for those incurred costs, plus a small profit margin, when certain political risk events prevent shipment of the goods, such as cancellation or non-renewal of a license, war and insurrection, and in the case of a private-sector buyer, the buyer’s insolvency. Contract frustration or cancellation by the buyer is not covered. This coverage is best suited for exporters that manufacture customized products requiring extended manufacturing periods.
Pre-Shipment endorsement premiums are also assessed differently than standalone ECI policies, which are based on the items that ship each month. Under the endorsement, the exporter pays for pre-shipment and post-shipment coverages at the applicable rates based on the amount of the exporter's contract with the buyer.
The claims process for this endorsement is also different – because some goods have not been shipped and only the exporter’s manufacturing costs are at stake, the exporter is required to submit accounting information detailing these costs.
The insurance policy provides the complete terms and conditions, and all policies and endorsements must be approved by EXIM’s Underwriting department. For more information, please schedule a free consultation with an EXIM trade finance specialist.
