As our customers know, if you are looking to do business with the Export-Import Bank (EXIM Bank), you should have a basic familiarity with the Country Limitation Schedule. Below you will find a brief synopsis of what you need to know to get started using the Country Limitation Schedule.
Put simply, the Country Limitation Schedule lists the countries where EXIM Bank is both willing and unwilling to providing financial support.
For example, let’s say your firm is in the process of selling its goods to a foreign customer and you hope to use an EXIM Bank product to protect against nonpayment risk, extend credit terms, or access working capital. The Country Limitation Schedule can tell you whether the country of that foreign customer is “open for cover” or “off-cover,” as well as under which conditions EXIM Bank can help.
However, before you start digging through the Country Limitation Schedule, there are some details you need to know:
- What country are you selling to?
- Are you selling to the public sector or private sector?
- Over what time period do you need financing?
The country to use is determined by where your foreign buyer is located. The concern here is “repayment risk.” For example, if you are a U.S. firm selling and shipping your product to a foreign customer in Nigeria, it is the home country of that foreign customer that is used. In this example: Nigeria.
However, let’s say your Nigerian customer wants you to ship you product to Cameroon, but the payment comes from Nigeria. The “repayment risk” is still in Nigeria; therefore, the country you should use is Nigeria.
Are You Selling to the Public Sector or Private Sector?
The question to ask is: Are you selling to a foreign government (public), or to a non-government entity (private) within that country? EXIM Bank calculates risks from a foreign sovereign governments and non-government entities differently, and splits how it is “open for cover” based on that distinction.
For the public sector in a country, risk is calculated on the country’s willingness and ability to pay its debts and is based on the country’s history of payments and macroeconomic conditions. Whereas for the private sector, risk is based on factors like the business climate, exchange rate stability and foreign exchange availability, and the legal system.
Over What Time Period (Term) Do You Need Financing?
The question to ask is: How long will the term of this transaction be? Is this a short term deal of under one year, or a long term deal more than seven? The duration for which your firm needs financing has a big effect on risk. This not only determines whether EXIM is “open for cover,” but also what product type is best for your needs. The Country Limitation Schedule breaks term into three categories: up to one year, one to seven years, and over 7 years.
For many countries, there are of course further details and extenuating circumstances that need to considered. In some cases, EXIM Bank is legally prohibited from providing support to a certain country (e.g., Iran). In other cases, there are U.S. laws and treaties that affect how business transactions are conducted. There are even variations on which product offerings are available under different circumstances. These are all outlined in the Country Limitation Schedule notes.
This synopsis is intended to be a very simplified overview of what you need to know to get started using the Country Limitation Schedule. It should provide you with the minimum details to know why the Country Limitation Schedule is important and to look up whether EXIM can support your U.S. firm exporting to a foreign country. It is however, by no means comprehensive. If you want more details or have questions you can contact us at 1-800-565-EXIM. Also if you are ready to talk details with one of our regional trade finance directors located throughout the U.S., you can request a free export finance consultation.
If you found this overview helpful, and would like us to cover the Country Limitation Schedule in more detail, or any other export finance subject, let us know by leaving a comment below.