German government enhances the flexibility of its export credit guarantees

With immediate effect, it will be possible to include a substantially higher proportion of supplies and local costs from abroad in the coverage provided by government-financed export credit guarantees (known as Hermes guarantees). The new rules, which were adopted by the competent Interministerial Committee in Berlin, expand the coverage of guarantees for equipment and services procured in the country of purchase ("local costs") as well as for supplies from third countries ("supplies from abroad").

Federal Minister of Economics and Technology Michael Glos stated: "By expanding the scope of export credit guarantees, the German Government is responding to long-standing requests from Germany's export industry and to recent developments in other industrialised nations. The new rules seek to address the increasing intensification of the international division of labour as well as the trend toward globalised production chains that feature changing supply structures. In this way, they enhance the ability of Germany's export industry to compete on international markets by offering high-quality products at competitive prices."

By way of example, it will be easier in the future to combine supplies from emerging economies such as Brazil, India and China with core components from Germany, for purposes of achieving more competitive overall prices or alleviating supply bottlenecks. It was not considered necessary to expand the rules any further given Germany's already diversified production structure, which will continue to allow a significant proportion of supplies to be provided directly from within Germany.

In the future, a uniform OECD limit of 30% of the export order value will apply to the amount of local costs that may be covered by the guarantee (or 23% when applied to the guaranteed value of the export contract including permissible local costs). In addition, local costs and supplies from abroad may be covered - either separately or in combination, and without further explanation - in an amount of up to 30% of the guaranteed value of the export order. Beyond this base rate, it is possible for foreign supplies in an amount of up to 49% of the total order value to be covered by the guarantee, if sufficient justification is provided; this requires the use of a simplified procedure. Moreover, in individual cases where an export transaction is particularly worthy of support, foreign supplies in an amount of more than 49% of the total order value may be guaranteed.

The German government provides export credit guarantees in the amount of 15-20 billion euros annually. These guarantees boost the international competitiveness of German exporters, which thereby fosters employment and helps the country to maintain its status as a location for innovation and production.

Additional information on export credit guarantees can be found on the Federal Government's foreign trade and investment website (www.ixpos.de, in German) and on the website for the institutions that have been mandated by the government to process the export credit guarantees (www.agaportal.de, in German and English).