The U.S. Department of Agriculture’s (USDA) Export Credit Guarantee Program
(GSM-102) provides credit guarantees to encourage financing of commercial
exports of U.S. agricultural products, while providing competitive credit terms
to buyers. By reducing financial risk to lenders, credit guarantees encourage
exports to buyers in countries—mainly developing countries—that have sufficient
financial strength to have foreign exchange available for scheduled payments.
The GSM-102 program guarantees credit extended by the private banking
sector in the United States (or, less commonly, by the U.S. exporter) to
approved foreign banks using dollar-denominated, irrevocable letters of credit
for purchases of U.S. food and agricultural products by foreign buyers. USDA’s
Foreign Agricultural Service (FAS) administers the program on behalf of the
Commodity Credit Corporation (CCC), which issues the credit guarantees. GSM-102
covers credit terms of up to three years; maximum terms may vary by country.
CCC guarantees payments due from approved foreign banks to exporters or
financial institutions in the United States. However, the financing must be
obtained through normal commercial sources. Typically, 98 percent of principal
and a portion of interest are covered by a guarantee. Because payment is
guaranteed, financial institutions in the United States can offer competitive
credit terms to the foreign banks, usually with interest rates based on the
London Inter Bank Offered Rate (LIBOR). Any follow-on credit arrangements
between the foreign bank and the importer are negotiated separately and are not
covered by the CCC guarantee. Program announcements issued by FAS provide
information on specific country and commodity allocations, length of credit
periods, and other program information and requirements.
Eligible Countries or Regions
Interested parties, including U.S. exporters, foreign buyers, and banks, may
request that CCC establish a GSM-102 program for a country or region. Prior to
announcing the availability of guarantees, CCC evaluates the ability of each
country and foreign bank to service CCC-guaranteed debt. New banks may be added,
or levels of approval for others may be increased or decreased, as information
CCC selects agricultural commodities and products according to market potential
and eligibility based on applicable legislative and regulatory requirements.
CCC must qualify exporters for participation before accepting guarantee
applications. An exporter must have a business office in the United States and
must not be debarred or suspended from any U.S. government program. Financial
institutions must meet established criteria and be approved by CCC. CCC sets
limits and advises each approved foreign bank on the maximum amount CCC will
guarantee for that bank.
The exporter negotiates terms of the export credit sale with the importer.
The exporter usually wishes to be paid at the time of shipment; so the exporter
must work closely during negotiations with the eligible U.S. financial
institution to ensure that arrangements are firmly in place for the U.S.
financial institution to pay the exporter and to extend credit to the foreign
Once a firm sale exists, the qualified U.S. exporter must apply for a payment
guarantee before the export date. The exporter pays a fee calculated on the
dollar amount guaranteed, based on a rate schedule. Fee rates are currently
based on the country risk that CCC is undertaking, as well as the repayment term
(tenor) and repayment frequency (annual or semi-annual) under the guarantee.
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 to the U.S. financial institution the right to
proceeds that may become
payable under the CCC’s guarantee. Under this arrangement, the exporter would
also provide transaction-related documents required by the financial
institution, including a copy of the export report, which must also be submitted
If the foreign bank fails to make any payment covered by the GSM-102 guarantee,
the exporter or assignee must submit a notice of default to CCC. A claim for
loss also may be filed, and CCC will pay claims found to be in good order.
For CCC audit purposes, the U.S. exporter must obtain documentation to show
that the commodity arrived in the eligible country, and the exporter or the
exporter’s assignee must maintain all transaction documents for five years from
the date of completion of all payments.
For more information, contact: Director, Credit Programs Division, Office of
Trade programs, FAS/USDA, Stop 1025, 1400 Independence Ave. SW, Washington, DC
20250-1025; tel.: (202) 720-6211; fax: (202) 720-2495. For program
participation, contact: Operations Division, Export Credits; tel.: (202)
720-6211; fax: (202) 720-2949.
Export credit guarantee program information, such as risk-based fee schedules
and country ratings, and commodities eligible for coverage, is available on the
FAS Web site: http://www.fas.usda.gov/excredits/ecgp.asp
FAS announcements of GSM-102 allocations are posted at: http://www.fas.usda.gov/excredits/exp-cred-guar.asp
General information about FAS programs, resources, and services can be found