Based upon changes to the local cost policy, below is an illustration of how EXIM Bank structures local cost financial support in conjunction with support for U.S. exports.
EXIM Bank Content Policy:
To be eligible for EXIM Bank financing, goods and services must be shipped from the United States to a foreign buyer. EXIM Bank will support the lesser of 85% of the Net Contract Price or 100% of the US content.
EXIM Bank Local Cost Policy:
EXIM Bank can support up to 40% or 50% of the value of the US exports (i.e., US and eligible foreign content) for locally originated and/or manufactured goods and services. EXIM support is limited to 40% for OECD Category I countries; all other countries may receive support up to 50%1.
Scenario:
A U.S. exporter has been awarded a $150 million contract to build a solar power plant in Brazil. The U.S. exporter is responsible for providing the solar modules from the U.S. while its subsidiary in Brazil is responsible for managing the site work (local landscaping services and local labor).
Assumption:
- The U.S. Supply Contract is $150 million.
- The ineligible foreign content is $20 million.
- The local costs included in or related to the U.S. exporter's scope of work is $50 million.
- The Net Contract Price is $80 million.
- The U.S. content is $70 million.
- The eligible foreign content included in the Net Contract Price is $10 million.
The long-term transaction is structured as follows:
| U.S. Supply Contract | $150,000,000 |
| U.S. Content | $ 70,000,000 |
| Eligible Foreign Content | $ 10,000,000 |
| Net Contract Price (70mm + 10mm) | $ 80,000,000 |
| Cash Payment (15% of $80mm) | $ 12,000,000 |
| Amount of Net Contract Price financed | $ 68,000,000 |
| Amount of local cost in the Supply Contract: | $ 50,000,000 |
| Amount of local cost financed (50% of $80mm) | $ 40,000,000 |
| Total EXIM Bank Financing support | $ 106,000,000 |
The Net Contract Price includes US content and eligible foreign content (and excludes ineligible foreign content and local costs). This amount consists of 85% of the Net Contract Price (maximum support) plus 50% of the Net Contract Price (maximum support for local costs).
| Terms, Definitions and Calculations | USD | |
|---|---|---|
| A | Supply Contract/ Purchase Order(s) This amount consists of the aggregate price of all Goods and Services in the Supply Contract/Purchase Oder(s), which includes US content, eligible foreign content (i.e., goods shipped from the United States), ineligible goods and services, and local costs. | $150,000,000 |
| B | Excluded Goods and Services The aggregate price of all Goods and Services that are not eligible for (or excluded from) Ex-Im Bank support (e.g., goods not shipped from the U.S.) | $ 20,000,000 |
| C | Contract Price (A minus B) | $130,000,000 |
| D | Local Costs The aggregate price of all Goods originated/manufactured in the Purchaser's country and all Services provided by residents of the Purchaser's country. | $ 50,000,000* |
| E | Net Contract Price (C minus D) | $ 80,000,000 |
| F | Foreign Content The aggregate cost to the Exporter of any Goods (or components thereof) that were produced or manufactured outside the U.S., Services provided by third country-resident personnel, and foreign freight costs and foreign insurance included in the Net Contract Price for Goods exported from the U.S. (Such amount shall not include any Local Costs.) | $ 10,000,000 |
| G | U.S. Content (E minus F) | $ 70,000.000 |
| H | U.S. Content Percentage (G divided by E, expressed as a percentage.) | 85% |
| I | Disbursement Percentage The lower of (i) 85% and (ii) the percentage in H. | 85% |
*EXIM can support a maximum of 50% of the Net Contract Price in local costs, which in this case is $40,000,000. The remaining $10,000,000 of local costs will fall outside of EXIM Bank support.
1Country categorizations are found at the OECD under “Maximum Repayment Terms.” Questions on country categorization should be directed to the International Relations Division of OPAIR.