The U.S. Department of Agriculture's Foreign Agricultural Service has released additional fiscal-year 2014 funds for its Export Credit Guarantee Program (GSM-102).
The total amount now available through the program to U.S. agricultural exporters is $3.586 billion.
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, USDA said credit guarantees “encourage exports to buyers in countries — mainly developing countries — that have sufficient financial strength to have foreign exchange available for scheduled payments.”
Specifically, the program guarantees credit extended by private U.S. banks to approved foreign banks using dollar-denominated, irrevocable letters of credit for purchases of U.S. food and agricultural products by foreign buyers. FAS administers the program on behalf of the Commodity Credit Corp., which issues the credit guarantees. GSM-102 covers credit terms of up to three years; maximum terms may vary by country.
To participate in GSM-102, CCC must qualify exporters before accepting guarantee applications. An exporter must have a U.S. business office and not be debarred or suspended from any U.S. government programs. Banks must meet certain criteria and be approved by CCC. CCC sets limits and advises each approved foreign bank on the maximum amount it will guarantee for that bank.
The exporter negotiates terms of the export credit sale with the importer. The exporter usually seeks payment at time of shipment and must work closely with the eligible U.S. bank to ensure that arrangements are in place for the U.S. bank to pay the exporter and extend credit to the foreign bank.
FAS said once a firm sale exists, the 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,” FAS explained.
Regions and countries currently approved to participate in the GSM-102 program include Africa-Middle East, Caribbean, Caucasus/Central Asia, Central America, China, Mexico, South America, South Korea, Southeast Asia and Turkey. Effective July 29, the U.S. government has suspended all bilateral export credit programs for Russia.
For more details about GSM-102, access the FAS website
or contact the FAS Credit Programs Division at email@example.com
or (202) 720-6211.