The Export-Import Bank of the United States (US Ex-Im Bank), the Iraqi ministry of finance, and the Trade Bank of Iraq (TBI) have signed a framework agreement that enables Ex-Im Bank to continue supporting US exports for Iraqi reconstruction.

The 5 October agreement replaces a December 2003 agreement between the two banks and the now defunct Coalition Provisional Authority (CPA), thus belatedly reflecting the assumption last June of sovereignty by the Iraqi Interim Government (IIG).

Continued access

Established in July 2003, TBI aims to provide trade-financing services witha focus on letters of credit (L/Cs) to facilitate Iraqi reconstruction and benefit the economy of Iraq.

In November 2003, Ex-Im Bank approved a US$500 million short-term insurance facility to support the export of US goods and services to Iraq financed by TBI. This latest agreement simply allows the TBI continued access this facility.

L/C insurance

Thus Ex-Im Bank can support US exports through its Bank Letter of Credit Insurance Policies (BLCIP) facility under which the bank will insure L/Cs issued by the TBI and confirmed by a commercial bank.

The facility provides comprehensive coverage to the confirming bank against the failure of the TBI to pay the confirming bank under an irrevocable L/C.

Buyer credit insurance

The latest agreement also enables Ex-Im bank to continue to operate its Financial Institution Buyer Credit Insurance Policies under which the bank will provide comprehensive coverage on short-term credits extended to the TBI by an insured bank.

Under this facility US exporters will receive payment under L/Cs issued by the insured bank. Certain provisions of the policy, including reporting and claim filing periods, will be aligned to BLCIP provisions.

Multilateral effort

Export credit agencies (ECAs) of 15 other nations signed framework agreements similar to Ex-Im Bank's in December 2003.

The bank said in a statement that it sees the latest agreement as part of a multilateral effort and it looks forward to other ECAs developing similar agreements.

This article represents the views of the author and not necessarily those of the ICC or any of the other partners in DC-PRO.