What Is an Export Credit Guarantee and How Does It Work?

An export credit guarantee is an insurance-style product that reimburses a U.S. exporter for most of an unpaid invoice when a foreign buyer fails to pay. Standard policies typically cover 90% to 100% of the invoice value, with 95% being the common figure for commercial and political losses on private-sector sales.¹ Two federal programs serve U.S. exporters: the Export-Import Bank of the United States (EXIM) for manufactured goods and services, and the USDA’s GSM-102 program for agricultural commodities. Private insurers such as Allianz Trade, Coface, and Atradius compete in the same market.

How the Guarantee Works in Practice

Three parties are involved in every transaction: the exporter, the foreign buyer, and the insurer or guarantor. You ship goods on credit terms, report the sale to the insurer, and pay a premium. If the foreign buyer doesn’t pay, the insurer reimburses you for the covered percentage of the loss.²

The protection isn’t the only benefit. An insured foreign receivable is a stronger asset on your balance sheet, and commercial lenders are far more willing to extend working capital financing against accounts receivable that carry government-backed insurance. For many small and mid-sized exporters, that access to financing is what makes a large overseas order possible in the first place.

What Risks Are Covered

Coverage falls into two categories, and most policies bundle them together.

Commercial Risks

Commercial risks turn on the buyer’s ability or willingness to pay. The most common triggers are the buyer’s insolvency or bankruptcy and protracted default, where the buyer simply stops paying an undisputed invoice. Coverage also applies when a buyer refuses to accept shipped goods for reasons unrelated to a legitimate commercial dispute.³

Political Risks

Political risks are events outside the control of either party. War, revolution, and civil unrest in the buyer’s country are the dramatic examples, but the more frequent triggers are government actions that block payment. Currency inconvertibility is a common one: the buyer has the local currency to pay but the government won’t allow conversion to dollars. Revocation of import or export licenses and seizure of goods by a foreign government also qualify.³

EXIM also offers political-only coverage for situations where the buyer’s creditworthiness is solid but the country risk is the concern. Political-only cover doesn’t protect against defaults tied to commercial market disruptions or currency depreciation.⁴

How Much of a Loss Is Actually Covered

The exact percentage depends on the policy type and the classification of the buyer. Getting this right matters because it determines how much of a loss you absorb yourself.

EXIM’s multi-buyer policies, which cover sales to multiple foreign buyers under one contract, carry a base coverage level of 95% for private-sector buyers. Sovereign buyers receive 100% coverage, and bulk agricultural commodity exports qualify for 98%.⁵ EXIM sells several multi-buyer variants tailored to company size and portfolio complexity, from a simplified Express Insurance product up to Standard Multi-Buyer and Select Risk policies with individualized underwriting.

Single-buyer policies cover sales to one specific foreign buyer, and the percentages vary more:

Private sector buyers: 90%
Letter of credit transactions: 95%
Bulk agricultural transactions: 98%
Sovereign buyers: 100%

Repayment terms on single-buyer policies run up to 180 days, with exceptions up to 360 days for qualifying transactions. There is no first-loss deductible, and for an additional premium you can add pre-shipment coverage that protects against losses incurred before goods leave the country.⁶

Who Qualifies

Both the exporter and the transaction have to meet criteria. EXIM’s rules are representative of what most providers look for.

The business generally needs to have been operating for at least three years, employ at least one full-time person, and show a positive net worth.⁷ The exported products or services must be U.S.-made or U.S.-provided. Short-term single-buyer policies require at least 51% U.S. content, including labor but excluding markup.⁶ Medium- and long-term transactions generally require 85% U.S. content, though transactions in congressionally defined Transformational Export Areas may qualify with as little as 51%.⁸ This threshold catches some exporters off guard, especially those sourcing components internationally.

The buyer must be in a country that EXIM lists as “open for cover” on its Country Limitation Schedule, which classifies each country by economic and political risk, sector (public or private), and length of exposure.⁴ “Open for cover” means EXIM will consider an application; approval still runs through individual underwriting. “Off-cover” means EXIM won’t consider routine transactions there at all. Check the schedule before quoting credit terms to a foreign buyer.

Confirmed letters of credit and cash-in-advance sales are excluded from coverage, since those payment methods already protect the exporter.⁶

Prohibited Goods

Defense articles are the most significant categorical exclusion under EXIM’s congressional charter. Items sold to foreign militaries are generally treated as defense articles and are ineligible.⁹ Narrow exceptions exist for humanitarian items like medical equipment and ambulances and for small marine vessels or aircraft used for border patrol or drug interdiction. All sales to foreign security forces, military or police, go through review by the U.S. Department of State.

What It Costs

EXIM premium rates for multi-buyer policies depend on policy type, payment terms, and the buyer’s country and sector. For the two fixed-rate policy types, rates per $100 of insured sales for private-sector buyers break down as follows:

Express Insurance: $0.65 (1–60 day terms), $1.06 (61–120 days), $1.35 (121–180 days)
Small Business Multi-Buyer: $0.55 (1–60 day terms), $0.90 (61–120 days), $1.15 (121–180 days)

Standard Multi-Buyer and Select Risk policies use portfolio-tailored rates that reflect the exporter’s specific mix of countries and buyers. Letter of credit and sovereign buyer transactions carry different rates.⁵ In practical terms, insuring a $100,000 shipment on 120-day terms under an Express policy costs roughly $1,060 in premium.

Using an EXIM-registered broker doesn’t add to your cost. Broker commissions are paid by EXIM out of the premium rather than billed to the exporter.¹⁰

Filing a Claim When a Buyer Defaults

The claims process has strict deadlines that vary by policy type, and missing a deadline is one of the most common reasons a claim gets denied.

For short-term exporter policies, you can file a claim no earlier than three months and no later than eight months after the default date. Medium-term insurance and guarantee claims run on a tighter window of 30 to 150 days from default. Letter of credit claims must be filed between 60 and 120 days after default.¹¹ For multi-buyer policies specifically, EXIM must receive your proof of loss within 240 days of the date of non-payment.¹²

Documentation matters as much as timing. You need invoices, proof of shipment showing the goods left the United States, and the completed claim form.

Beyond late filings and missing shipping documents, two policy-compliance failures cause the most denials. Extending credit to a buyer beyond your authorized discretionary credit limit without EXIM approval leaves losses on the excess amount uncovered. And continuing to ship to a buyer who is already overdue voids coverage on those later shipments. Both the policy and the discretionary credit limit endorsement require you to stop shipping to delinquent buyers.¹² The commercial pressure to keep shipping to a big customer is real, but ignoring that requirement voids your coverage. When in doubt, contact your broker or your EXIM relationship manager before making the next shipment.

Choosing Between EXIM, GSM-102, and Private Insurers

If you export U.S. agricultural commodities, the USDA’s GSM-102 program is a separate track. It’s administered by the Commodity Credit Corporation and guarantees repayment of credit used to finance commercial exports of U.S. agricultural commodities on terms up to 24 months.¹³ The program is aimed at developing-country buyers who need credit access but present risk that commercial lenders won’t take on unbacked. Eligible commodities include high-value products like frozen foods, fresh produce, and meats; intermediate products like hides and flour; and bulk commodities like grains, oilseeds, and rice.¹⁴ Manufactured goods and non-agricultural services don’t qualify for GSM-102; for those, EXIM is the federal option.

Private insurers sometimes cover transactions or countries that EXIM won’t, and they can move faster on underwriting. Many exporters work through an insurance broker who compares EXIM against private options for a given deal. Because EXIM pays broker commissions out of the premium, working through a broker doesn’t raise your cost, and it can surface a better fit than going straight to one insurer.

1
Export-Import Bank of the United States. Multi-Buyer Standard Insurance
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Export-Import Bank of the United States. Export Credit Insurance
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International Trade Administration. Export Credit Insurance
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Export-Import Bank of the United States. Country Limitation Schedule
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Export-Import Bank of the United States. Comparison Multi-Buyer Export Credit Insurance Policies for US Exporters
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Export-Import Bank of the United States. Short-Term Single-Buyer Export Credit Insurance
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Export-Import Bank of the United States. Eligibility
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Export-Import Bank of the United States. Medium- and Long-term Content Policy
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Export-Import Bank of the United States. Export with Confidence – Tools and Opportunities for the Military Industry
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Export-Import Bank of the United States. Broker Commission Schedule for Export Credit Insurance Policies
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Export-Import Bank of the United States. Claims Processing
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Export-Import Bank of the United States. Filing Claims for Multi-Buyer Export Credit Insurance Policies
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Office of the Law Revision Counsel. 7 USC 5622 – Export Credit Guarantee Program
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Foreign Agricultural Service. Export Credit Guarantee Program (GSM-102)