I. Short Term Services Content Policy
EXIM Bank's mission is to support U.S. jobs through exports. To fulfill its jobs mandate, EXIM Bank relies on U.S. content as a proxy to evidence support for U.S. jobs.
Services may be performed either inside or outside of the United States. To be eligible for EXIM Bank support the service must meet the following criteria:
- Eligible U.S. services export contracts or purchase orders are those that are signed by the U.S. entity. 1
- To qualify as eligible U.S. content, the person(s) performing the service must be a legal U.S. worker(s), as evidenced by the employer having an I-9 form on file for the employee.
- Foreign-developed licenses owned by a U.S. entity for one year or more at the time of application are considered U.S. content. (Note: Foreign-developed licenses owned for less than one year are considered foreign content and thus ineligible for ST support.)
- Insurance policy Services Endorsements must exclude contract cancellation/frustration risks.
- The exporter must discontinue providing services if the borrower is in default for more than 90 days and/or if the buyer terminates the contract before completing the contract.
B. LEVEL OF SUPPORT
- Small Business Eligibility Criteria
In determining the content eligibility of services exported by small businesses, applicable U.S. content consists of direct costs (i.e., labor, materials, and direct overhead) and indirect costs (e.g., research and development) associated with the U.S. export.
To be eligible for EXIM Bank support:
- Each service listed or described on an invoice must have more than 50% U.S content based on all direct and indirect costs including, but not limited to, labor, research, and administrative costs, exclusive of profit; or
- The aggregate content of all services of all invoices within a transaction must be more than 50% U.S. content based on all direct and indirect costs including, but not limited to, labor, research, and administrative costs, exclusive of profit.; or
- If the U.S. content of any service or aggregate U.S. content of all services of all invoices within a transaction is 50% or less, only the U.S. content is eligible.
If the service or the aggregate services of all invoices within a transaction meets the more than 50% U.S. content eligibility threshold described above, the entire gross invoice value (sales price) is normally eligible for coverage at the applicable percentage. If the U.S. content of the service or aggregate services of all invoices within a transaction is 50% or less, EXIM Bank may only support the value of the U.S. content at the applicable percentage. Based on the program (i.e., Working Capital Guarantee or Export Credit Insurance), standard percentages of coverage are 90% to 95%.
- Non-Small Business Eligibility Criteria
In determining eligibility of services exported by non-small businesses, applicable U.S. content consists of direct costs 3 (i.e., labor, materials, and direct overhead) associated with the U.S. export.
To be eligible for EXIM Bank support, each service 4 listed in a single invoice must have more than 50% U.S. content based on labor, materials, and direct overhead, exclusive of any profit.
If the service(s) meets the eligibility criteria summarized above, the entire gross invoice value (sales price) is normally eligible for coverage at the insured percentage that is applicable. Based on the applicable program or policy type chosen, standard percentages of coverage are 90% to 95%.
II. Short Term Support for Recurring Royalty Fees
EXIM Bank can provide support for recurring royalty fees under its short-term programs on a case-by-case basis, provided the following criteria are met:
- Transactions adhere to EXIM Bank's short-term content policy.
- Each application for pre and post-export financing or insurance and the associated contract for recurring royalty fee coverage are subject to a case-by-case review.
- Credit insurance should be required if a licensor requests support for recurring royalty fees under EXIM Bank's Working Capital Guarantee Program.
- EXIM Bank has approved a credit limit for the licensee.
- Transaction parties agree to fee per use, the metric to determine use, repayment terms, and frequency of invoicing.
- The transaction parties provide consistent Usage Reports and invoices with distinct deliverables/amounts.
- EXIM Bank limits its support to goods or services delivered.
Royalty payments associated with overseas franchises are also eligible for coverage on a case-by-case basis under EXIM Bank's short-term services policy.
III. Example of Short Term Services Policy
Export of Computer Software Package
The U.S. small business exporter is exporting a customized software package with the following characteristics:
- The main module of the software package was developed in the U.S.
- Materials and direct overhead - $20,000 (U.S. Content)
- The software was customized to the foreign buyer's specification in the U.S. by individuals with I-9 documentation.
- Labor – $10,000 (U.S. Content)
- Additional customization was performed by foreign labor
- Labor – $5,000 (Eligible Foreign Content)
- The U.S. small business exporter ultimately exported the software package to the foreign buyer.
- Final sales price of the software package is $45,000 (including mark-up and profit)
The export is eligible for EXIM Bank support as the U.S. content, determined by U.S. costs, is more than 50% of the total costs of the export ($30,000/$35,000=86%). Consequently, the Bank can support 100% of sales price ($45,000).
IV. Example of Short Term Services w/ Recurring Royalty Fees Policy
Export of Multi-Media Distribution Software
A U.S. business licenses multi-media distribution software and is requesting coverage for both an upfront licensing fee, as well as for recurring royalty payments. The export has the following characteristics:
- The software is produced, using 100% U.S. content, and distributed to various foreign licensee Internet Service Providers (ISP).
- Materials and direct overhead – $200,000
- Additional customization costs are incurred outside of the United States by individuals with I-9 documentation – $25,000
- The exporter and the licensee agree to a royalty structure such that the exporter is paid $20 per ISP subscriber per month.
- The fee per subscriber was negotiated before EXIM Bank's coverage goes into effect.
- Royalty fees are paid on a monthly basis.
- The final sales price of the software is $300,000 (including mark-up and profit).
- Licensee tracks the number of ISP subscribers using an on-line customer portal, which the exporter has access to. The number of subscribers is reported on a monthly basis.
- In an event that the licensee is unable to make a timely payment (e.g. 90 days past due), the licensor has the ability to turn off the software.
The export is eligible for EXIM Bank support as the U.S. content, determined by U.S. costs, is more than 50% of the total costs of the export ($225,000/$225,000=100%). Consequently, the Bank can support 100% of sales price ($300,000).
V. Documentation and Compliance
As all Exporters are responsible to certify that they meet the above U.S. content requirements, it is important that supporting documentation is available to confirm the U.S. content certification. Additionally, EXIM Bank may randomly review Exporters with whom we will work to understand their processes and data used that give the Bank confidence in the integrity of the U.S. content certification process.
For additional questions related to EXIM Bank's support for Short Term services, please contact:
- Policy and Planning Division at 202.565.3771
- Business Credit Division at 202.565.3902
- Trade Credit Insurance Division at 202.565.3499
- Trade Finance Division at 202.565.3400
1 Invoices may be issued by the U.S. operations of a firm or a foreign affiliate of the U.S. exporter approved by Exim Bank.
2 If the small business exporter opts to aggregate multiple products of all invoices within a transaction, a Content Report is required.
3 Indirect costs are not included in the content calculation for non-small business exports.
4 Non-small businesses cannot aggregate the U.S. content of all products of all invoices within a transaction to calculate eligibility. The U.S. content of each individual product is treated separately.