EXPORT NEWS AND OPPORTUNITIES
USDA Reinstates Credit Guarantee Programs for India and Pakistan and Increase Credit Guarantees to Mexico
Since the last publication, the United States Department of Agriculture (USDA) has reinstated the export credit guarantee programs for the purchase of U.S. agricultural commodities by buyers in India and Pakistan. Both countries were suspended from participating in the export credit guarantee programs as part of the sanctions imposed under the Arms Control Act. However, effective July 15, USDA will accept applications for credit guarantees under the GSM-102 program in connection with sales of U.S. agricultural commodities under the previously announced credit lines of $20 million for India and $250 million for Pakistan. Various horticultural products are eligible under the India GSM-102 program.
On July 14, USDA increased by $260 million the amount of operational credit guarantees available to U.S. exporters in connection with sales of previously announced U.S. agricultural commodities to Mexico under the 1998 GSM-102 program. The total 1998 authorization for coverage to Mexico under GSM-102 remains unchanged at $1.26 billion and is now fully allocated. All other terms and conditions remain the same.
The GSM-102 program makes available financing for the sales of U.S. agricultural commodities overseas. USDA does not provide financing, but guarantees payments due from foreign banks. USDA typically guarantees 98 percent of the principal and a portion of the interest. The GSM-102 program covers credit terms from 90 days to 3 years.
Under the program, once a firm sale exists, the qualified U.S. exporter applies for a payment guarantee before the date of export. The U.S. exporter pays a fee calculated on the dollar amount guaranteed, based on a schedule of rates applicable to different lengths of credit periods. The CCC-approved foreign bank issues a dollar-denominated, irrevocable letter of credit in favor of the U.S. exporter, ordinarily advised or confirmed by the financial institution in the United States agreeing to extend credit to the foreign bank. The U.S. exporter may negotiate an arrangement to be paid as exports occur by assigning the U.S. financial institution the right to proceeds that may become payable under the guarantee, and later presenting required documents to that financial institution. Such documents normally include a copy of the export report.
If a foreign bank fails to make any payment as agreed, the exporter or the assignee may file a claim with USDA for the amounts due and covered by the guarantee. USDA will pay the U.S. bank and will take on the responsibility of collecting the overdue amount from the foreign bank.
The table at the end of this article shows FY 1998 GSM-102 programs for which USDA has authorized credit guarantees for sales of U.S. horticultural products as of August 14, 1998. Additional information about the GSM-102 program, regulations, country specific press releases and program announcements, and a Monthly Summary of Export Credit Guarantee Program Activity may be accessed on the Internet at: http://www.fas.usda.gov/excredits/exp-cred-guar.html
USDA Amends Jamaica and Mexico Supplier Credit Guarantee Programs
On July 6, USDA amended the allocation of credit guarantees available for sales of U.S. agricultural commodities to Jamaica and Mexico under the 1998 Supplier Credit Guarantee Programs (SCGP) to include fruit and vegetable concentrates, pastes, pulps, and purees. All other terms and conditions previously announced remain the same.
The SCGP is unique because it covers short-term financing extended directly by U.S. exporters to foreign buyers and requires that the importers sign a promissory note in case of default on the CCC-backed payment guarantee. The SCGP emphasizes high-value and value-added products, but may include commodities or products that also have been programmed under the GSM-102 program.
The table on page 16 presents the FY 1998 SCGPs for which USDA has authorized credit guarantees for sales of U.S. horticultural products as of August 14, 1998. Additional information about the SCGP, regulations, country specific press releases and program announcements, and a Monthly Summary of Export Credit Guarantee Program Activity may be accessed on the Internet at: http://www.fas.usda.gov/excredits/scgp.html
Note: The GSM will consider requests to establish a SCGP and/or GSM Program for a country or region or amend an authorized program to include horticultural commodities and products which are currently not eligible.
(For further information on the SCGP or GSM-102 Program for horticultural commodities, contact Yvette Wedderburn Bomersheim, 202-720-9903).
FY 1998 GSM 102 CREDIT GUARANTEE COVERAGE (pdf format)