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Criteria & Guidelines

Before any commitment is confirmed, the New Zealand Export Credit Office (NZECO) must ensure that its eligibility criteria are satisfied.  The NZECO is subject to a set of international rules as well as its internal operational guidelines.  These are described below.

Currency

Cover can be issued in the following approved currencies: NZ dollar, Australian dollar, US dollar, the Euro, Japanese Yen or UK sterling.  Approval of other currencies may be sought on a case-by-case basis.

Risk-sharing

A degree of risk-sharing with banks, or the exporters, is expected and the NZECO will provide a standard level of cover, generally between 80% and 95% of the credit amount, depending on the export transaction.

The risks insured are political and commercial.

New Zealand Content

The New Zealand content of an exported good or service must amount to a minimum of 30% of the total value of the export transaction.  As a guide, the value of the New Zealand content may include the following components:

  • expenditure on materials to manufacture or produce the goods (excluding the cost of materials imported into New Zealand);
  • cost of New Zealand labour and overheads;
  • the cost of transporting the export goods (shipping or airline fees);
  • the cost of any services performed in connection with the supply, installation, erection, operation, training, maintenance or repair of capital goods manufactured in whole or in substantial part in New Zealand;
  • intellectual property rights / know how (mainly resulting from work or research in New Zealand); and
  • trademark (owned, assigned or first used in New Zealand).

New Zealand content does not include any profit or marketing cost elements of the exported services or goods in their finished state.

If 30% local content is not reached then the NZECO can co-insure with another export credit agency or limit cover to the New Zealand value added component.

NZECO’s Prices

International rules require the NZECO to fully cover its costs. 

Accordingly, the NZECO levies premiums and an application fee in relation to each of its products.  These prices are set to fully recover operating costs, anticipated losses and the Crown’s cost of capital.  There will be no subsidisation to the New Zealand export sector by the NZECO’s operations.

Advance Payment

A minimum cash advance payment of 15% of the export contract value is required to be paid before the starting point of credit.  It is a condition of the NZECO’s risk cover that the exporter has received this advance payment from their international buyer.

This advance payment is not part of the guaranteed credit amount.

Term of Credit and Repayment

Along with other OECD export credit agencies, the NZECO is obliged to follow the OECD Arrangement on Guidelines for Officially Supported Export Credits (“the Consensus”) in relation to all export credit transactions greater than two years.  The Consensus describes the most generous export credit terms and conditions that may be supported by its Participants, with the aim of achieving a level financial playing field regarding their use. 

The Consensus has set maximum credit terms for every country (between 5 – 10 years), as well as for certain industries.  Generally, the buyer has to repay the export credit in equal instalments and at intervals no longer than six months. The first repayment must be made within six months from the starting point of credit.

The interest is calculated on the credit amount outstanding on the occasion of the interest payment (which is also at intervals of no longer than six months).

The minimum credit term that the NZECO can normally support is one year, because the NZECO’s operational criteria is to complement the private insurance sector’s short term credit cover by offering medium to long term credit cover. 

Local Costs

Local costs are the expenditures incurred for goods or services (excluding any commission payable to the exporter’s agent) in the buyer’s country. 

The proportion of local costs that can be supported on credit terms in an export transaction must not exceed the amount of the advance payment (e.g. if local costs amount to 20% of the total costs, then the advance payment must be 20%). 

A further condition is that the local costs are necessary for the performance of the contract.

Collateral for Payment

In certain cases the NZECO may require collateral in order to cover the risk associated with a transaction.  As an example, this may apply in cases where it is difficult to assess the buyer’s risk, or where the buyer’s credit rating is not good enough.

Collateral may take the form of a payment guarantee, a letter of credit, or a contract for a bill of exchange from either a bank or company approved by the NZECO.

Sustainable Development

In partnership with other OECD export credit agencies, the NZECO pays particular attention in its underwriting activities to environmental considerations and to combating corruption.

Exporters applying to the NZECO for a guarantee will be asked to briefly describe any environmental effects that their export transaction may involve.  The assessment covers both the external environment and socio-economic and cultural conditions.  Read more about the NZECO’s environmental policy and guidelines for environmental assessment.

The NZECO also does not accept corruption, and will require every exporter applying for a guarantee to verify that no bribes have been paid in connection with the transaction in question.  The NZECO’s guarantee will cease to be valid should it later emerge that bribes were paid.  Read more about the NZECO’s anti-bribery policy and procedures.

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