Federal Register Notices
[Federal Register: December 17, 2008 (Volume 73, Number 243)]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
DEPARTMENT OF AGRICULTURE
Commodity Credit Corporation
7 CFR Part 1493
Export Credit Guarantee Program
AGENCY: Foreign Agricultural Service and
Commodity Credit Corporation, USDA.
ACTION: Advanced notice of proposed rulemaking.
SUMMARY: This advanced notice of proposed
rulemaking (ANPR) solicits comments on options
to reform the USDA, Commodity Credit Corporation
(CCC), Export Credit Guarantee Program
(GSM-102). The purpose of the ANPR is to invite
suggestions on improvements and changes to be
made in the implementation and operation of the
GSM-102 program, with the intent of improving
the GSM-102 program's effectiveness, efficiency,
and lower costs.
DATES: Comments on this notice must be received
by February 2, 2009 to be assured consideration.
ADDRESSES: You may submit comments by any of the
Fax: (202) 720-2495, Attention: ``GSM102/ANPR Comments''.
Mail to: P. Mark Rowse, Director, Office of Trade
Programs, Credit Programs Division, Foreign
Agricultural Service, U.S. Department of
Agriculture, Stop 1025, Washington, DC
Hand Delivery or Courier: 1250 Maryland Avenue, SW.,
Washington, DC 20024.
All comments received will be available for public inspection
at the above address during regular business
FOR FURTHER INFORMATION CONTACT: P. Mark Rowse,
Director, Credit Programs Division, at the
address stated above or telephone: (202)
The GSM-102 program is currently authorized under the
Agricultural Trade Act of 1978, as amended. The
GSM-102 program helps to ensure that credit is
available to finance commercial exports of U.S.
agricultural products on competitive credit
terms. The CCC currently has authorized
availability of guarantees for transactions in
at least 176 countries and regions, with 2,900
exporters eligible to participate. Since 1981,
CCC has issued approximately $86.5 billion in
credit guarantees under the GSM-102 program.
By allowing assignment of the guarantee by the U.S exporter
to an approved U.S. financial institution, the
program guarantees credit extended by the
approved U.S. financial institution (or, less
commonly, by the U.S. exporter if not assigned)
to approved foreign banks. The credit facility
mechanism is a dollar-denominated, irrevocable
letter of credit.
Under the terms of the guarantee, typically, 98 percent of
principal and a portion of interest are covered
on credit terms of up to three years. By
financing less than 100 percent of the exported
value, CCC encourages risk-sharing by the
exporter or the exporter's assignee.
By law, the program may not be used for foreign aid, foreign
policy or debt rescheduling purposes, or in
countries that the Secretary of Agriculture (the
Secretary) has determined cannot service the
If the foreign bank fails to make any payment as agreed under
the GSM-102 program guaranteed transaction, the
exporter or assignee must submit a notice of
default to the CCC. A claim for loss also may be
filed, and the CCC will promptly 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 must
maintain all transaction documents for five
years from the date of completion of all
The 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 the CCC.
The CCC evaluates the ability of each country and each
approved foreign bank to service CCC-guaranteed
debt. For programming purposes, a credit limit
is established for each obligor country. Banks
within that approved obligor country are
reviewed and individual bank credit lines are
established. New banks may be added or existing
approved bank levels may be increased or
decreased as appropriate, based on available
The CCC selects agricultural commodities and products
according to market potential and eligibility
based on applicable legislative and regulatory
requirements. These include bulk, intermediate
and consumer ready agricultural products
encompassing food, feed, fiber, aquaculture and
forest products. The agricultural commodities
must be 100 percent U.S. origin unless they have
been determined by the Secretary to be
high-value agricultural products. If a
high-value product determination is made, 90
percent or more of the agricultural components
by weight, excluding packaging and added water,
must be entirely produced in the United States.
The issuance of the guarantee is subject to a fee paid by the
applicant. In July 2005, USDA initiated a
risk-based fee structure. A fee is charged based
on the terms of the guarantee in tenure (length
of credit period) and terms for principal
payment installments, whether 6 months or
annually, and the risk grade of the obligor
country. The CCC assigns a numeric risk category
(0-6, lowest to highest risk). The risk
category, along with the other factors cited,
determines the fee
Statutory Revisions and Budgetary Limits
Prior to the June 18, 2008, enactment into law of the Food,
Conservation, and Energy Act of 2008, provisions
of the Agricultural Trade Act of 1978, as
amended, required the Export Credit Guarantee
programs operated by CCC to make available not
less that $5.5 billion in credit guarantees
under its combined authority to issue short-term
credit guarantees (GSM-102 and Supplier Credit
Guarantee (SCGP) programs) up to three years,
and medium-term credit guarantees (GSM-103
program) from three to 10 years. Origination
fees for the short-term credit
guarantees were also previously capped at 1
percent. Section 1542 of the Food, Agriculture,
Conservation and Trade Act of 1990 required that
CCC make available not less than $1 billion in
direct credit or credit guarantees to emerging
markets, of which a portion should be made
available for facilities and services.
The authority for the SCGP, the GSM-103 program, and the 1
percent origination fee cap were all repealed by
the Food, Conservation, and Energy Act of 2008.
The Food, Conservation, and Energy Act of 2008
also amended the statutory funding levels for
short-term credit guarantees
by requiring that CCC make credit guarantees
available for each fiscal year (FY) through FY
2012 in an amount equal to, but not more than,
(a) the lesser of $5.5 billion in credit
guarantees, (b) or the sum of the amount of
credit guarantees that could be made available
using budget authority of $40 million, plus any
unobligated budget authority for credit
guarantees from prior fiscal years and required
that, to the maximum extent practicable, ensure
that the risk-based fees associated
with the guarantees cover, but do not exceed,
the operating costs and losses for the program
over the long term.
Beginning in FY 2005, increased global liquidity and the
advent of risk-based fees resulted in a decline
in program usage from an average annual value of
sales registered of approximately $3 billion for
the preceding 10-year period, to $1.36 billion
in FY 2006. However, from July through September
of FY 2007, CCC experienced a significant
increase in participation and dollar value
levels under the GSM-102 program. Part of this
increase was the result of increased commodity
prices. However, tightening of global credit
markets also is believed to have contributed
significantly to the increase in participation
and program demand. These driving factors
propelled GSM-102 transactions from $1.4 billion
in FY 2007, to over $3 billon in FY 2008. Demand
usage is expected to further increase in FY
As a result of anticipated increase in demand, we are
soliciting the responses of interested parties
to the following specific questions concerning
options under consideration for the GSM-102
program. Interested parties may choose to
address any or all of the questions listed or
provide other comments. CCC's aim is to improve
upon the GSM-102's effectiveness and efficiency,
and lower costs.
Additional program information inclusive of our fee structure
is available on our Web site at
--Does the current risk-based fee schedule
correctly distinguish levels of risk specific to
loan tenor, country of obligor and amount of
--Does the current risk-based fee structure
capture sufficient variables that are responsive
to the changing credit markets?
--Should CCC consider charging fees for
amendments to guarantees or applications?
--How should the fee structure take into account
levels of risk particular to individual
2. Alternative Registration Processes
--Should CCC consider moving from the current
first-come, first-serve and pro-rata
methodologies for issuance of guarantees?
--Should the GSM-102 program be run on an awards
basis? CCC would award GSM-102 guarantees on a
competitive basis based upon exporter bids which
would propose varying levels of coverage and
different fee structures.
--Should CCC consider permitting exporters to
submit letters of intent in which they propose
how much they would like to export under a
specified announcement? CCC would review all
letters of intent and award shares of the
announcement based on the letters of intent.
--Should CCC require copies of sales contracts
and proof of financing to be submitted with the
application for guarantee?
--Should CCC require that a ``firm sale''
include approved financing?
3. Additional Questions
--Should CCC consider permitting global banking
whereby any CCC approved bank could finance
sales of U.S. agricultural products for shipment
to any CCC approved country?
--Should CCC consider no longer permitting sales
in which the exporter, intervening purchaser, or
importers are affiliated organizations?
--Should CCC consider no longer permitting sales
in which there is an intervening purchaser?
--Should CCC consider no longer permitting
foreign bank amendments to the
application/guarantee except under extraordinary
circumstances which would require documentation
from the original foreign bank?
--Should CCC consider more rigid qualification
criteria for exporters?
--Should CCC bring the time frame for claims
payment into conformity with that contemplated
under the Prompt Payment Act?
Consideration of Comments: Additional comments on other
program modifications to the GSM-102 program
that are responsive to the principles outlined
herein are encouraged. CCC will carefully
consider all comments submitted by interested
parties. After consideration of the comments
received, CCC will consider what changes should
be made to the GSM-102 program. Some of the
changes described above would require
solicitation and consideration of comments
received from interested parties via the
rulemaking process. Other changes might be
changing internal policies and procedures.
Comments received will help CCC to determine the
extent and scope of any future rulemaking.
Signed at Washington, DC, on November 26,
W. Kirk Miller,
Executive Vice President, Commodity Credit
Corporation, and Administrator, Foreign
[FR Doc. E8-29831 Filed 12-16-08; 8:45 am]
BILLING CODE 3410-10-P