EXIM has a general prohibition on the support of “defense articles” contained within its congressional charter. Considerations on whether an item is a defense article are based upon (1) the nature of the export, (2) the intended end use of the export items, and (3) the identity of the buyer and end user. Items sold to militaries are generally considered defense articles. However, there are exemptions and exclusions to the defense articles prohibition that permit EXIM to provide support, even when the buyer and/or end user is a military entity.
Three specific exclusions that can be used even when there is a military end user are: (1) small craft used for routine border patrol, (2) humanitarian exports, and (3) food for U.S. troops. These exemptions are the most common way EXIM finances military sales.
EXIM also has two statutory exceptions. These exceptions are if the exports are classified as “dual use” (primarily to meet a civilian need, with limited benefit to the military and non-lethal in nature), or if a Presidential Determination is made under the Anti-Drug Abuse Act that the defense article will be used specifically for drug interdiction. Note the dual use exception requires annual reporting and monitoring over the life of EXIM financing.
An example of EXIM applying an exception to the defense prohibition is Tactical Medical Solutions (TacMed), a veteran-owned business based in Anderson, South Carolina. TacMed is a leading U.S. design manufacturer of proprietary pre-hospital emergency trauma care solutions for military, law enforcement, fire, EMS, and civilian customers. CEO Ross Johnson, a former Special Forces medic for the U.S. Army, uses EXIM’s Export Credit Insurance to mitigate the risks associated with exporting the company’s products to markets of crucial need.
To export to customers in Brazil, Argentina, and Uruguay, TacMed turned to EXIM. Utilizing Export Credit Insurance, TacMed offers internationally competitive credit terms to overseas buyers and protects the company’s foreign receivables from nonpayment. Offering open account terms enables TacMed’s international partners to carry more inventory, which saves lives by improving delivery times to end users.
After five years of export growth the company has now raised more than $490 million in investor equity due to their outstanding performance.
To learn more about EXIM’s financing support, please click here to schedule a free consultation with an EXIM trade finance specialist.
