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Supply Chain – Indirect Exporters Are Exporters Too
March 26, 2020 Office of Small Business/Office of Communications

Not only do U.S. companies that sell internationally come in all sizes, but they are also involved in all parts of the manufacturing process. Even though a U.S.- based company may be selling its products or services to another U.S. based company, when the finished product is sold to a foreign buyer, companies in the product’s supply chain are considered indirect exporters.

Indirect exporters might not ship products or supply services directly to foreign buyers but their products and handiwork are found throughout the globe as part of direct exporters’ products and solutions. This requires supply chain companies to carefully analyze and understand what their product is being used for and where it is being shipped. Why? Because it opens opportunities to work with government agencies like the Export-Import Bank of the United States (EXIM).

For example, a manufacturer of shoelaces (Strings and Things) in West Virginia supplies shoelaces to a shoe company (OrgoFeet) in North Carolina and OrgoFeet exports its shoes to Japan. Clearly, Strings and Things is not exporting its products directly to Japan, but it is exporting them indirectly as part of the product being exported by OrgoFeet. Due to the increased demand that OrgoFeet has in its expanding Japanese market, it needs twice as many shoelaces per month to fulfill those orders. Since supplier Strings and Things is at maximum capacity, it would need to purchase new equipment and hire extra employees to keep up with this new demand for its products. As an indirect exporter, Strings and Things is eligible for a Working Capital Loan guarantee or a Supply Chain Finance guarantee by EXIM. The company is able to access the influx of cash needed to expand operations.

In the case of loan guarantees, EXIM does not act as a lender but works with lenders to provide a guarantee of loan repayment with the full backing of the United States government. EXIM covers 90 percent of the risk associated with the line of credit granted to the company. EXIM’s guarantee provides the supply chain exporter with benefits like lower rates, faster approvals, and an increased cash flow.

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EXIM’s Blog postings are intended to highlight various facets of exporting, but the postings are not legal advice, and are not intended to summarize all legal requirements associated with exporting.