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- Account Performance Security Guarantee
- (Account PSG) A 100% irrevocable and unconditional first-demand guarantee provided on a facility basis by EDC to financial institutions (banks and credit unions).
- Account PSG Validity Period
- (Account PSG) The time frame specified in the Account PSG Certificate of Cover, and referenced in the Account PSG General Terms and Conditions, as the time frame during which standby letters of credit and letters of guarantee can be submitted to EDC under a Request for Cover and for which a Confirmation by EDC can be issued.
- (EGP) A document executed by the borrower, in the form referred to as the “Acknowledgement” in the Approval, declaring or representing concurrence with the statements therein relating to corruption, environmental laws, subrogation and disclosure.
- Advance payment bond
- (Account PSG) An advance payment bond is a guarantee, in the form of either a standby letter of credit or letter of guarantee, issued by an appropriately licensed financial institution (bank or credit union) in favour of a buyer. It guarantees that the buyer’s advance payment will be returned if the agreement under which the advance was made cannot be fulfilled.
- (EGP) The approval issued by EDC that incorporates the general terms and conditions and sets out the details of an EGP guarantee, together with any special conditions that add to or supersede any of the general terms and conditions.
- Bid bond
- (Account PSG) A guarantee, in the form of either a standby letter of credit or letter of guarantee, issued by an appropriately licensed financial institution (bank or credit union) in favour of a buyer. It guarantees that if the bid is accepted, the contract will be entered into in accordance with the terms of the bid.
- Breach of contract
- (PRI) The refusal or inability of a foreign government to pay compensation to an investor or Canadian exporter following arbitration.
- Capitalized upfront non-honouring of sovereign debt (NHS) premiums
- (PRI) The present value of all NHS premiums to be paid during the life of a loan, which the financial institution may elect to pay up front. An upfront premium payment is referred to as being capitalized if the financial institution agrees to increase the loan amount by an equivalent amount.
- Certificate of Cover
- (Account PSG) The certificate issued by EDC to the financial institution (bank or credit union) in conjunction with the Account PSG General Terms and Conditions. It specifies the coverage details together with any special conditions that amend or supplement the General Terms and Conditions.
- Claim waiting period
- (PRI) A period of time, following the occurrence of an insured risk, during which EDC cannot be liable to pay a claim. Under some PRI policies, the claim waiting period also indicates the period during which the insured risk must continuously take place in order for the policyholder to have the right to file a claim.
- (EGP) All primary collateral and all other collateral associated with EDC’s Approval.
- Commercial borrower
- (PRI) A business to which a loan is made, or may be made, in which all or the majority of the voting shares are held by private investors, whether individuals or companies.
- Commercial risks
- (ARI) “Commercial risks” means the following: buyer insolvency; failure of the buyer to pay when due; buyer refusal to take possession of the goods; and contract cancellation by the buyer through no fault of the insured (provided pre-shipment coverage is in place).
- (Account PSG, FXG and EGP) The counterparty is the financial institution that is the beneficiary of EDC’s Account PSG, FXG or EGP as applicable.
- Credit approval
- (ARI) A notice given by EDC to the insured stating the amount of the credit limit for a buyer or group of buyers. It stipulates any specific conditions or changes to the insurance coverage applicable to sales to that buyer or group of buyers.
- Credit limit
- (ARI) The maximum amount of loss that the insured may sustain in respect of any individual buyer and still obtain the maximum insurance coverage under the ARI policy.
- Credit management schedule
- (ARI) A schedule setting out the methods that the insured may use to establish a credit limit for each buyer.
- Currency inconvertibility
- (PRI) Inability to convert a country’s local currency into freely convertible currencies such as the U.S. dollar, the euro, the Canadian dollar, the Swiss franc or the British pound.
- Currency non-transfer
- (PRI) Inability to transfer freely convertible currencies outside a country.
- Debt Management
- (ARI) An online service offered to EDC policyholders to streamline the process for reporting overdue accounts and submitting claims.
- (EGP) A completed document, executed by the borrower, substantially in the form referred to as the “Declaration” in the EGP Approval. It is a requirement when EDC’s support relates to a revolving line of credit covering upfront costs associated with multiple export contracts.
- Declaration form
- (ARI) A document used by the insured company to declare insured sales and calculate the premium due.
- (EGP) A demand by the institution for payment by EDC under an EGP guarantee.
- Demand Details Form
- (EGP) A document, executed by the institution, substantially in the form referred to as the “Demand Details Form” in the Approval. It is required as part of the EGP claim process, whether you decide you want to get paid up-front or on a residual loss basis.
- Discretionary limit
- (ARI) The maximum credit limit that the insured may establish for a buyer, without contacting EDC, by using one of the methods set out in the ARI policy’s credit management schedule.
- Distribution method
- (EGP) The primary distribution method, other distribution method or any special distribution method specified in an Approval.
- EDC acquired rights
- (EGP) The rights under the Transaction Documentation that accrue to EDC upon payment by EDC under a guarantee.
- EDC Direct
- EDC Direct is a restricted-access portal for EDC customers. It supports Accounts Receivable Insurance, Trade Protect, Contract Frustration Insurance, Account Performance Security Guarantees and Foreign Exchange Facility Guarantees. It enables customers to get credit approvals, pay premiums, report overdue accounts and file claims. Financial institutions do not have access to EDC Direct.
- Emerging markets
- (PRI) Any country other than the industrialized nations (Canada, the United States, Japan, Australia, New Zealand and the nations of Western Europe).
- Enforcement plan
- (EGP) The financial institution’s general proposed course of action with respect to the enforcement and preservation of rights under the Transaction Documentation.
- (PRI) Acts taken or omissions made by a country’s government that have the effect of nationalizing or confiscating a foreign-owned company or foreign-owned physical assets.
- First demand
- (Account PSG and FXG) First demand means that the financial institution is not required to take any action against the customer prior to submitting a claim to EDC.
- First prior charge
- (EGP) The highest obtainable registered, perfected or published security interest or hypothec in respect of the collateral, in the relevant jurisdiction, by a secured creditor acting prudently in similar circumstances, together with all necessary subordination or cession of rank or other inter-creditor agreements required to create a first prior security interest against all prior registered secured creditors.
- Foreign exchange contract
- (FXG) A derivative contract, excluding historical rate rollovers, under the Foreign Exchange Facility, with a term not greater than the Maximum Foreign Exchange Contract Term, whereby the financial institution and the customer agree to exchange the currency of one country for the currency of another country for a specified exchange rate on a settlement date.
- Foreign exchange facility
- (FXG) The facility set up by the financial institution for a customer, under which the customer may enter into FX contracts, and in respect of which the financial institution and the customer have entered into a Foreign Exchange Facility Agreement.
- Foreign Exchange Facility Guarantee
- (FXG) A 100% irrevocable and unconditional, first-demand guarantee provided by EDC to a financial institution (bank, credit union or foreign exchange broker) for the value of the collateral security required by the financial institution to support a Foreign Exchange Facility settlement risk.
- Foreign Exchange Facility Guarantee validity period
- (FXG) The time frame established in the FXG Certificate during which foreign exchange contracts must be entered into for coverage under the FXG.
- Foreign-domiciled inventory
- (EGP) Inventory owned by either a Canadian parent or a foreign affiliate of a Canadian company, which is located outside Canada either in a warehouse or on a foreign affiliate’s premises.
- Forward contract
- (FXG) A binding agreement between a financial institution and the customer to buy or sell a given quantity of foreign currency in the future at a set exchange rate.
- FXG Certificate
- (FXG) The certificate issued by EDC to the financial institution (bank, credit union or foreign exchange broker) in conjunction with the Foreign Exchange Facility Guarantee General Terms and Conditions. It specifies the coverage details, together with any special conditions that amend or supplement the General Terms and Conditions.
- General Terms and Conditions
- (Account PSG and FXG) These products each have a General Terms and Conditions document that, in conjunction with a Certificate of Cover (for Account PSG) or an FXG Certificate (for FXG) sets out all coverage details, definitions, rights, obligations and conditions.
- (EGP) A document, executed by EDC, substantially in the form referred to as the “Indemnity” in the Approval. It is issued only in cases where EDC may direct the financial institution to take enforcement action in respect of EDC’s acquired rights under the Transaction Documentation after EDC’s payment under a guarantee.
- Indemnity agreement
- (Account PSG and FXG) An agreement entered into by the customer and any other co-indemnitors that are required by EDC. Under the agreement, the customer and any co-indemnitors (if applicable) agree to indemnify EDC for all claims and demands made in respect of an Account PSG or FXG.
- Insurable sales
- (ARI) Sales made on credit each month to all insured countries during the declaration period, except those shipments to buyers or countries which have been excluded by EDC.
- Letter of guarantee
- (Account PSG) An irrevocable promise of a financial institution to compensate the buyer, under clearly prescribed conditions, fully, immediately and without failure, for damages suffered. To be used in the event of default by the customer.
- Material adverse change
when used to qualify a default, any default that indicates, or results from, a material adverse change in:
- the financial condition or business of the obligor or any Third Party Guarantor;
- the ability of the obligor or any Third Party Guarantor to perform its obligations under the Transaction Documentation; or
- the rights and remedies available to the institution under the Transaction Documentation.
when used to qualify the reporting as to the Enforcement Plan, any actions that are not technical or administrative in nature and include:
- the appointment of a receiver, receiver-manager, monitor or other similar professional;
- the identification and valuation of the collateral, including the identification of potential buyers for the collateral;
- the sale or lease of any collateral;
- the receipt and/or application of any Recovered Amounts;
- the receipt or delivery by the institution of any communication in respect of the EDC Acquired Rights;
- the release, subordination or discharge of any Security;
- any settlement with any creditor or with respect to any collateral; or
- the initiation or participation in any bankruptcy, insolvency, reorganization or similar proceedings.
- when used to qualify a default, any default that indicates, or results from, a material adverse change in:
- Material adverse effect
(EGP) An increase in the risk that:
- EDC would be required to make a payment under a guarantee and/or not be able to recover the amount claimed under the guarantee from the obligor, Third Party Guarantors or any other person under the Transaction Documentation; or
- EDC would not be able to realize on the collateral after payment under this guarantee, provided that if EDC and the institution disagree as to the occurrence of a Material Adverse Effect, such determination shall be settled by the courts referred to in a contract.
- Maximum Aggregate Liability
- (Account PSG and FXG) The total amount of liability EDC is prepared to assume.
- Maximum foreign exchange contract term
- (FXG) The limit on the length of an FX contract. The customer must settle amounts owed to the financial institution under the contract within this time limit.
- Other distribution method
(EGP) The process for distributing the proceeds of Other Collateral as defined in the EGP Approval. Distribution takes place in the following order, after deduction of related reasonable costs of acceleration and enforcement, of any amounts required to be paid in respect of statutory liens, deemed trusts, garnishment rights or other unregistered priority claims:
- First, to the institution for all indebtedness of the obligor to the institution under the Transaction Documentation other than the indebtedness of the obligor under the Transaction, subject to any limitations specified in the Approval;
- then, on a pari-passu basis, to EDC the applicable guaranteed percentage of such amounts and to the institution, the applicable non-guaranteed percentage of such amounts until EDC has been paid in full in respect of the guaranteed amount; and
- then to the institution for any other indebtedness owing by the obligor to the institution.
- Pari passu
- (EGP) The sharing of security in the same proportion as the risk is shared under the EGP.
- Payment default
- (EGP) A borrower’s failure to pay the institution in full, when due, of any part or all of the amounts owing under the transaction.
- Performance bond
- (Account PSG) A guarantee, in the form of either a standby letter of credit or letter of guarantee, issued by an appropriately licensed financial institution (bank or credit union) in favour of a buyer. It guarantees that the customer will fully honour all contractual performance obligations.
- Performance Security Insurance
- (Account PSG) Covers the customer against losses resulting from wrongful calls (or justified rightful calls outside the customer’s control) on standby letters of credit or letters of guarantee. EDC assumes liability for 95% of the payment made under the insured standby letter of credit or letter of guarantee.
- Physical assets
- (PRI) Assets that have a material existence, such as inventory, machinery and equipment.
- Political risks
(ARI, and PRI) For ARI, political risks include the following: currency conversion or transfer restrictions; war or hostilities between two countries other than Canada; insurrection; civil commotion; and acts of terrorism. It also includes cancellation of permits or imposition of export or import restrictions by the governments of the importing and exporting countries. These risks are covered after shipment of goods, or after a contract is entered into for ARI contracts policies and after services are rendered for ARI services policies.
For PRI, these risks emanate from government decisions or government inaction and are associated with doing business in a foreign country, whether through exporting or foreign direct investment. Common political risks under PRI include the risk of expropriation, political violence, and restrictions on the conversion of local currency into hard currency or on the transfer of hard currency outside a country.
- Political violence
- (PRI) Politically motivated acts of violence that prevent a foreign-owned company from operating in a country or that damage or destroy its physical assets there.
- Primary distribution method
(EGP) Refers to the process for distributing the proceeds of Primary Collateral as defined in the EGP Approval. Distribution takes place in the following order, after deduction of related reasonable costs of acceleration and enforcement, of any amounts required to be paid in respect of statutory liens, deemed trusts, garnishment rights or other unregistered priority claims:
- First, on a pari passu basis, to EDC, the applicable guaranteed percentage of such amounts and to the institution, the applicable non-guaranteed percentage of such amounts, until EDC has been paid in full in respect of the guaranteed amount; and
- then to the institution for any other indebtedness owing by the obligor to the institution.
- Rank of charge
- (EGP) A first prior charge, subject to any permitted liens or other exceptions specified in the Approval.
- Recovered amounts
- (EGP) Any proceeds of realization of collateral and any payments under any third-party guarantees.
- Regulatory body
- (Account PSG) A government or quasi-government entity responsible for establishing and overseeing the rules and standards of an industry. Canadian examples are the Canadian Grain Commission, the Fédération des producteurs acéricoles du Québec and the Ontario Pork Producers’ Marketing Board.
- Schedule A
- (ARI) A schedule to a Tripartite Agreement – Specific Receivables listing the insured accounts receivable that are sold to a financial institution.
- (EGP) All third-party guarantees and/or all security interests or hypothecs in the collateral, as the context may require.
- Sovereign borrower or guarantor
- (PRI) An entity that can engage the full faith and credit of the country when borrowing or guaranteeing another party’s debt obligations.
- Standby letter of credit
- (Account PSG) A standby letter of credit is a written undertaking given by an issuing financial institution, at the request of a customer, to provide assurance to a buyer regarding the customer’s (or a third party’s) performance or financial obligations. The issuing financial institution promises to pay the buyer a sum of money on the presentation of a documentary demand conforming to the terms and conditions specified in the letter of credit. Unlike a commercial letter of credit, which is expected to be the means of payment in the underlying transaction, a standby letter of credit is typically not drawn unless there is a default in the underlying transaction.
- Warranty bond
- (Account PSG) A guarantee, in the form of either a standby letter of credit or letter of guarantee, issued by an appropriately licensed financial institution (bank or credit union) in favour of a buyer. It guarantees that the customer will fully honour their contractual warranty obligations.
The definitions set out in this document are intended for informational purposes only and may be updated from time to time. The terms and conditions that apply to your coverage may be different from those described in this document. For the actual terms, conditions and definitions that apply to your coverage, please consult your policy.