By Zlatko Salcic (auth.)
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Additional info for Export Credit Insurance and Guarantees: A Practitioner’s Guide
In the context of the ECA cover, a private foreign buyer is always a legal entity, usually incorporated as a company. Individuals rarely take part in export credit transactions but if they do they are also treated as private buyers. Political and Commercial Risks 25 When explaining the term ‘private buyer’, it is useful to mention two categories of foreign buyers called sovereigns and public buyers. A sovereign is a state or a state entity such as a government, ministry, department or other authority that enters into an export credit transaction when purchasing goods or services.
The second category of foreign buyers is a company owned or controlled wholly or in majority by a state or government. Such foreign buyers are usually called public foreign buyers but they must be distinguished from sovereigns because they cannot validly bind the state and they can be made bankrupt. Finally, a private buyer is a foreign buyer that is neither sovereign nor public. These three categories of foreign buyers are analysed in Chapter 20. Insolvency of the guarantor The above definition includes insolvency of a guarantor as an additional commercial risk in relation to the foreign buyer’s insolvency.
This depends on the situation in the foreign buyer’s country and possible difficulties transferring the foreign buyer’s payment out of its country. The percentage of the ECA cover for short-term transactions is usually the same as the cover for medium- to long-term credit risks. 4 Short-term cover and international regulations Credits with the maximum duration of less than two years are classified as short-term credits according to the criteria provided in the Arrangement. However, the Arrangement does not apply to short-term credits and these transactions do not need to satisfy the requirements for issuing the ECA cover for medium- to long-term transactions.
Export Credit Insurance and Guarantees: A Practitioner’s Guide by Zlatko Salcic (auth.)