The German government supports German companies, such as the machinery and plant engineering sector, with so-called export credit guarantees – also known as government Hermes Cover – to cover economically and politically induced bad debt losses against payment of risk-based fees. A lesser-known form of cover is the wholeturnover policy (APG).
Compared with other forms of cover, whoever repeatedly supplies several buyers in different countries, the wholeturnover policy is a cost-effective and easy-to-use form of cover for receivables due at short notice. The special feature is that the cover focuses on developing and emerging countries and is revolving.
In order to bring the Wholeturnover Policy closer to the mechanical and plant engineering sector in NRW in practical implementation, ProduktionNRW offered a virtual information event on August 18, 2022. The aim was to get to know how the state APG is integrated into operational practice.
APG in mechanical and plant engineering
Dr. Susanne Engelbach, VDMA foreign trade officer, showed that wholeturnover policies accounted for almost half of all new commitments to Hermes Cover in 2021. Wholeturnover policies are of interest to those companies that regularly deliver to specific foreign customers on open account. These short-term payment terms, which are common for components and spare parts but also for machinery, can be covered for high-risk markets with government Hermes cover.
Basic features of export credit guarantees and wholeturnover policies
Eva Stupp, corporate consultant at Euler Hermes AG, then presented the federal government’s export credit guarantees in general and the Wholeturnover Policy in particular. With this state export promotion, the federal government intends, among other things, to secure jobs in Germany. In addition, exporting companies are protected against bad debt losses and are given access to difficult markets.
The Wholeturnover Policy is a framework agreement with a risk mix of various export transactions. The prerequisite is an eligible business model with sufficient reference to Germany and the customers must have sufficient creditworthiness. The SGA requires a minimum risk mix: there should be at least three countries with a total annual turnover of at least 500,000 euros per year. If these requirements are not met, alternative forms of cover are available. Company advisors for export credit guarantees support exporters locally on how to obtain wholeturnover policies.
Wholeturnover Policyin Practice
Agricultural machinery manufacturer LEMKEN GmbH & Co KG has been using wholeturnover cover for 22 years and initially had to familiarize itself with the process. Initial teething problems were overcome with the help of Euler Hermes AG staff. Melanie Bröcheler, an employee in LEMKEN’s financial accounting department, presented the use of wholeturnover policies in-house. There, the Wholeturnover Policy is used for countries without sufficient coverage options in the existing private credit insurance. The organizational responsibility lies with the financial accounting department. This department works closely with the sales department in order to use the Wholeturnover Policy in a targeted manner. The audit period by Euler Hermes AG takes an average of three weeks. Bröcheler explained that it is advisable to have complete and plausible documentation of the order placement, delivery, invoicing and debt collection ready in the event of a claim.
- Basics of the APG: www.agaportal.de/exportkreditgarantien/grundlagen/apg
- Overview of the company consultants of Euler Hermes AG: www.agaportal.de/kontakt
The event was offered by ProduktionNRW. ProduktionNRW is the competence network of mechanical engineering and production technology in North Rhine-Westphalia and is carried out by VDMA NRW. ProduktionNRW sees itself as a platform to connect, inform and market companies, institutions and networks among each other and along the value chain. Significant parts of the services provided by ProduktionNRW are funded by the European Regional Development Fund (ERDF).