GSM-102/103 Programs: Limitation on Assignment to Certain U.S. Financial Institutions Owned or Controlled by Foreign Governments
Washington, D.C., July 12, 1991 --- F. Paul Dickerson, Associate Administrator and General Sales Manager of the U.S. Department of Agriculture's (USDA) Foreign Agricultural Service, and Vice President of the Commodity Credit Corporation (CCC), today announced that banks operating in the United States which are owned or controlled by the government of a foreign country will henceforth be ineligible to receive assignments of proceeds of payment guarantees issued under the CCC’s Export Credit Guarantee (GSM-102) and Intermediate Export Credit Guarantee (GSM-103) programs when such guarantees have been issued in connection with export sales of agricultural commodities to the foreign country in question.
Dickerson stated that this policy decision was being implemented by today's Notice in accordance with the provisions of 7 C.F.R. sections 1493.20(u) and 1493.60(c) of the recently-revised program regulations announced on June 6. 56 Fed. Reg. 25993, 26009, 26011 (June 6, 1991).
Dickerson noted that the policy announced today is intended to prevent the situation in which CCC would receive a claim for loss from a financial institution operating in the United States that was owned or controlled by a government which may have been directly or indirectly responsible for the default giving rise to the claim. In addition, Dickerson stated that this policy would reinforce other important program objectives, specifically the shared risk principal, by ensuring that the U.S. financial institution taking assignment makes an independent and objective evaluation of credit risk before extending financing to foreign purchasers. Risk-sharing is a fundamental element of the GSM-102/103 programs. Under current policy, CCC guarantees 98 percent of principal and a portion of interest, with the U.S. financial institution retaining the remaining risk.
Dickerson urged that financial institutions in the United States directly or indirectly owned or controlled by a foreign government carefully evaluate their positions before agreeing to take assignment of the rights to proceeds of a CCC payment guarantee involving an export sale to a country from which that ownership or control emanates. Specific inquiries may be directed to James R. Little, Treasurer. CCC. Room 6094-S, U.S. Department of Agriculture, Washington, D.C. 20250 (Telephone 202-447-3770).