On 7 November 2011 the Government announced two changes that widen the scope and accessibility of the New Zealand Export Credit Office to support more New Zealand companies to trade abroad.
The changes will:
- allow the NZECO to add China's Renminbi to its list of approved currencies that it can underwrite its trade guarantees in; and
- give the NZECO more flexibility to support transactions with benefits to New Zealand over and above the level of local value-added content.
Frequently Asked Questions
UPDATING NZECO'S APPROVED CURRENCY LIST
Why include the Renminbi on the NZECO's list of approved currencies?
New Zealand exporters are increasingly under demand from their Chinese buyers to transact directly in the renminbi. Several New Zealand banks have recently introduced the option for New Zealand companies to open renminbi foreign currency accounts, and to convert payments and receipts between renminbi and New Zealand dollars directly.
The inclusion of the renminbi as an NZECO approved currency may help support those exporters who are looking to better leverage opportunities in China, including those arising from New Zealand's Free Trade Agreement.
How do I apply?
The NZECO works with you and your bank. If you are considering offering your buyer payment terms denominated in their local currency, you should discuss this with your bank and the NZECO as quickly as possible.
To qualify, the NZECO must be satisfied that the counterparty risk (e.g. Chinese buyer or bank) is creditworthy and, for short-term trade credits, the exporter must confirm that the private sector is unable to provide or continue to support the export transaction(s) on reasonable terms and conditions.
The NZECO will be contacting financiers to discuss options to issue guarantees in Renminbi.
CHANGING NZECO'S 30% CONTENT RULE
Why are we adapting the measure?
This technical amendment will enable the NZECO to more effectively support a number of NZ companies who are pursuing opportunities as part of the global supply chain, either here or through NZ subsidiaries that they have established overseas.
What will this mean?
The Government has introduced flexibility for the NZECO to support transactions where there are benefits to New Zealand over and above the level of NZ value-added content. This means that NZECO will use one or more of the following to measure New Zealand "economic benefit" instead of its existing 30% New Zealand value-added content rule:
Direct financial benefits to New Zealand:
a. The value of the goods or services provided from New Zealand, either solely or in conjunction with other New Zealand residents including expenditure on materials (excluding customs, excise/duties, imports), labour, overheads, and marketing cost elements, or
b. Profit derived from the transaction that will be repatriated back to New Zealand, or
Other indirect New Zealand benefits:
c. The level of intellectual property underpinning the transaction, and the potential to further leverage and grow this intellectual property (for example into new technology or research and development activities), or
d. The potential for growth into countries and industry sectors considered of strategic economic benefit to New Zealand. ( i.e. the NZECO will take into account transactions in countries that are aligned with New Zealand's Free Trade Agreements (existing and proposed) and other cross-government work where sectors are already receiving priority).
What are the implications for NZ jobs?
NZ value-added content remains important. If the NZECO's capacity is squeezed as a result of increased demand then we will make sure that New Zealand content is prioritised.
How do I apply?
The NZECO works with you and your bank. If you are pursuing trade as part of the global supply chain and are unlikely to have 30% NZ value-added content, you should discuss this with your bank and the NZECO as quickly as possible.
The NZECO will be contacting financiers to discuss options to issue guarantees to support exporters operating as part of the global supply chain.