Terms and Conditions

EFIC can provide a Documentary Credit Guarantee (DCG) for banks which are confirming medium term documentary credits and providing without recourse trade facilities to exporters. The DCG guarantees the principal and interest payment obligations of the Issuing Bank and provides the opportunity for EFIC and the trade finance bank to share risk.

The DCG can ease the pressure on the country limits of financing banks and provide exporters with another solution for their trade finance needs.

Guarantor

Export Finance and Insurance Corporation (EFIC).

Exporter  

Any Australian company undertaking a Contract for the supply of capital goods or services.

Financier

The bank that is confirming/negotiating documents under a documentary credit to provide without recourse trade facilities to an Exporter.

Issuing Bank

The bank on which a guarantee of payment obligation is being considered by EFIC.

Contract

EFIC’s DCG facility supports contracts involving the export of Australian capital goods and services. Capital goods are machinery and equipment of high unit values, but low unit value supplies may also qualify for EFIC’s support in the context of a larger project. Services include, but are not limited to, project management, design, commissioning and advisory services provided by Australians.

Eligible Contract Value

The “Eligible Contract Value” represents EFIC’s estimate of the qualified Australian and foreign-sourced content in the Contract. Typically, EFIC looks to see at least a 60% level of Australian content in an eligible Contract.

Cash Payment

The Exporter must receive a direct payment of 15% of the Eligible Contract Value prior to shipment. This may come from the Buyer or even be provided by the Financier.

Maximum Guarantee Value

Under guidelines established by the OECD, EFIC may guarantee up to a maximum 85% of the Eligible Contract Value. The Financier can also choose to take a higher percentage of Issuing Bank risk at their discretion. For instance, EFIC could guarantee 75% and the Financier take 25% of the Issuing Bank risk during the credit life of the documentary credit.

Loan Currency

Australian dollars or US dollars.

Interest Rate

The interest rate for the documentary credit is determined by the Financier and imbedded in the documentary credit as a fixed interest rate. This interest rate is inclusive of financing margins.

Interest Payments

Interest is payable semi-annually in arrears on principal balances outstanding.

Repayment of Principal

Repayment of principal will be in a set number of equal and consecutive semi-annual instalments commencing within six months from the final Shipment date.
After the final Shipment, semi-annual instalments of loan principal would be synchronised with interest payments.

Risk Fee

A Risk Fee is payable within 5 days of accepting the Offer made by EFIC. This fee compensates EFIC for the risks and costs in extending the guarantee and is determined by various factors, including the amount of EFIC’s exposure and the proposed terms.

Documentation

EFIC and the Financier sign a Master Guarantee Agreement (MGA) which details the terms and conditions by which the DCG facility will operate.

An invitation (Schedule 1 of MGA) to participate in the documentary credit risk is sent to EFIC by the Financier for each documentary credit transaction.

EFIC will then assess the Issuing Bank and if the risks are acceptable, will respond to the Financier with an Offer to provide a risk guarantee (Schedule 2 of MGA).

The Financier can then send their Acceptance of the Offer to EFIC (Schedule 2 of MGA) together with a signed original Exporter’s Statement completed by the Exporter (Schedule 3 of MGA).

DISCLAIMER This document is provided to give you an indication of the terms and conditions upon which EFIC may be willing to provide  finance. In connection with a particular transaction, EFIC reserves the right to make any changes or additions to the final terms and conditions that it believes are necessary or desirable. All requests for guarantees are considered on a case by case basis.