[Federal Register Volume 61, Number 127 (Monday, July 1, 1996)]
[Rules and Regulations]
[Pages 33825-33839]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-16674]
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Rules and Regulations
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Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules
and Regulations
[[Page 33825]]
DEPARTMENT OF AGRICULTURE
Commodity Credit Corporation
7 CFR Part 1493
RIN 0551-AA30
Commodity Credit Corporation Supplier Credit Guarantee Program
AGENCY: Commodity Credit Corporation, USDA.
ACTION: Interim final rule with request for comments.
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SUMMARY: The Commodity Credit Corporation (CCC) is issuing this interim
rule which amends the regulations for the Commodity Credit
Corporation's (CCC) Export Credit Guarantee Program (GSM-102) and the
Intermediate Export Credit Guarantee Program (GSM-103) by adding a new
subpart D, Supplier Credit Guarantee Program (SCGP). The SCGP is
designed to assist exporters of U.S. agricultural commodities who wish
to provide relatively short term (up to 180 days) credits to their
foreign buyers. Under SCGP, CCC will guarantee payment of such credits
by the foreign buyer, and the exporter may assign such guarantees to an
eligible U.S. financial institution.
This program will be administered by the Office of the General
Sales Manager (GSM), U.S. Department of Agriculture, on behalf of CCC.
DATES: The provisions of this interim rule are effective August 30,
1996; comments must be submitted on or before December 30, 1996.
FOR FURTHER INFORMATION CONTACT: L.T. McElvain, Director, CCC
Operations Division, Foreign Agricultural Service, U.S. Department of
Agriculture (USDA), Ag. Box 1035, Washington, DC 20250-1035; telephone
(202) 720-6211; FAX (202) 720-2949. The USDA prohibits discrimination
in its programs on the basis of race, color, national origin, sex,
religion, age, disability, political beliefs and marital or familial
status. Persons with disabilities who require alternative means for
communication of program information (braille, large print, audiotape,
etc.) should contact the USDA Office of Communications at (202) 820-
5881 (voice) or (202) 720-7808 (TDD).
SUPPLEMENTARY INFORMATION:
Executive Order 12866
This rule has been determined to be economically significant and
was reviewed by the Office of Management and Budget (OMB) under
Executive Order 12866.
Regulatory Flexibility Act
It has been determined that the Regulatory Flexibility Act is not
applicable to this interim rule because CCC is not required by 5 U.S.C.
553 or any other provision of law to publish a notice of rulemaking
with respect to the subject matter of this rule.
Executive Order 12372
This program is not subject to the provisions of Executive Order
12372, which requires intergovernmental consultation with state and
local officials. See the notice related to 7 CFR part 3015, subpart V,
published at 48 FR 29115 (June 24, 1983).
Paperwork Reduction Act
The paperwork requirements that would be imposed by this interim
rule were described in the proposed rule and approved by the Office of
Management and Budget (OMB) under the Paperwork Reduction Act of 1980.
The OMB-assigned number for those requirements is OMB No. 0551-0037.
The public reporting burden for these collections is estimated to
average 0.18 hours per response, including time for reviewing
instructions, searching existing sources, gathering and maintaining the
data needed, and completing and reviewing the collection of
information. Send comments regarding this burden estimate or any other
aspects of this collection, including suggestions for reducing this
burden, to Department of Agriculture, Clearance Officer, OIRA, Room
404-W, Washington DC 20250; and to the OMB, Paperwork Reduction Project
# 0551-0037, Washington, DC 20503.
Executive Order 12778
This interim rule has been reviewed under the Executive Order
12778, Civil Justice Reform. The interim rule would have preemptive
effect with respect to any state or local laws, regulations, or
policies which conflict with such provisions or which otherwise impede
their full implementation. The rule would not have retroactive effect.
The interim rule requires that certain administrative remedies be
exhausted before suit may be filed.
The USDA is committed to carrying out its statutory and regulatory
mandates in a manner that best serves the public interest. Therefore,
where legal discretion permits, the Department actively seeks to
promulgate regulations that promote economic growth, create jobs, are
minimally burdensome and are easy for the public to understand, use or
comply with. In short, the Department is committed to issuing
regulations that maximize net benefits to society and minimize costs
imposed by those regulations.
Background
In the Federal Register of July 19, 1995 (60 FR 37025), CCC issued
a proposed rule to amend the regulations for the CCC Export Credit
Guarantee Programs (GSM-102/103), codified at 7 CFR part 1493, by
adding a new subpart D. Subpart D establishes the terms and conditions
for the Supplier Credit Guarantee Program (SCGP). The deadline for
comments on the proposed rule was September 18, 1995. Comments were
received from six U.S. exporters, one importer, three producer
associations, seven agribusiness associations, one U.S. financial
institution, and one U.S. Government agency (USDA Office of Inspector
General). These nineteen parties made approximately 88 separate and
significant comments regarding either the proposed rule, the
Preliminary Economic Impact Analysis, or the policy issues involved in
administering the SCGP.
Reason for Issuing an Interim Rather Than Final Rule
CCC is issuing this rule on an interim rather than a final basis
because, based on comments received on the proposed rule, it has made
several significant changes and is providing the public with an
additional opportunity for
[[Page 33826]]
comment. Specifically, CCC is establishing a condition on its payment
of a claim that results from a default under a guaranteed promissory
note. CCC will pay claims unless it determines that the guaranteed
portion of port value exceeds the prevailing U.S. market value of the
agricultural commodity or product exported. The reasons for this change
are discussed below under the General Comments section, Other general
comments, and under the Section-by-Section Analysis of Subpart D,
Sec. 1493.450, Payment guarantee. Also, CCC has modified Sec. 1493.510,
Payment for loss, to remove the immunity of assignees from the effects
of determinations by CCC not to pay claims based on the new exception.
CCC is publishing this interim rule, but will establish a comment
period of 120 days from the rule's effective date to permit program
participants an opportunity to provide views based, if possible, on
actual program experience.
Interim Economic Impact Analysis
Two of the commenters addressed, in part, the Preliminary Economic
Impact Analysis (PEIA). One commenter felt that each program option,
considered by CCC and briefly discussed in the PEIA, ``should be
implemented as each addresses a different need.'' The same commenter
also questioned why the SCGP was selected as the preferred option, in
that the PEIA did not discuss why the other options were ruled out. CCC
concurs that the other program options considered have merit, although
the reasons for selecting the SCGP option were given. CCC may, in the
future, incorporate features of the other options into, the SCGP
(subpart D), the GSM-102/103 programs (subpart B), or additional
programs that could be developed.
Another commenter stated that CCC may want to ``reassess the
estimated $3.1 million subsidy level'' determined for the SCGP. The
commenter felt that this estimate may be too low and enclosed a news
article discussing difficulties by some U.S. exporters in collecting
payments from importers. CCC by itself does not determine the
methodology used in estimating the subsidy level for its export credit
guarantee programs. The model for estimating the subsidy amount was
developed by the Office of Management and Budget (OMB). Country risk
ratings which are an important component in determining the subsidy
estimate are developed by a U. S. Government interagency group which is
chaired by OMB. After assessing the results of the initial phase of
operating the SCGP, CCC may propose changes in the subsidy model, or in
the model inputs, to more accurately determine appropriate subsidy
levels for the program.
The interim Economic Impact Analysis of the SCGP is available upon
request from Mary T. Chambliss, Deputy Administrator, Export Credits,
FAS/USDA, Ag. Box 1030, Washington DC 20250-1030; telephone (202) 720-
6301; FAX (202) 690-0727.
General Comments
Eighteen commenters commended CCC on its efforts to design a new
program to promote the sale of U.S. agricultural products. They
generally agreed that the program had potential for reducing export
financing costs, allowing importers to enjoy the benefits of CCC credit
guarantees more directly than is possible under the GSM-102/103
programs, and increasing the competitiveness of U.S. agricultural
products overseas. One commenter neither supported nor opposed the
program.
Guarantee Coverage
Eighteen respondents commented on CCC's proposal to inaugurate the
program with maximum coverage of 50 percent of principal (defined as
port value), with no coverage of interest. One commenter agreed that
the structure of the SCGP entails certain financial risks for CCC that
justify lower levels of coverage. Another commenter thought the
proposed coverage may be a starting point, but adjustments would have
to be made if the program is to gain wide acceptance, particularly from
the banking sector. Sixteen of the commenters contended that the
proposed coverage was too low to provide an incentive to exporters to
use the program. One commenter asserted that the proposed coverage
would be unattractive to exporters and the assignee bank, and that the
added risk would increase the cost of the transaction to the importer.
Two commenters suggested that CCC vary its level of coverage based on
the past performance of the importer. They also suggested that the
exporter be required to furnish information on the importer which,
under criteria to be established, could permit a higher level of
coverage. Suggestions for the level of coverage of principal ranged
from 70 percent to 98 percent, depending on whether or not interest
and/or freight would be included in the coverage.
After considering these comments, CCC has determined that during
the initial phase of the program, CCC's coverage will normally be
limited to 50 percent of principal. This level of coverage will provide
an incentive to U.S. exporters and their assignees to evaluate
carefully the credit risks posed by importers while still permitting an
expansion of export sales of targeted commodities and products. The
suggestion that CCC vary its level of coverage based on the past
performance of the importer or other information furnished by the
exporter on the importer may have merit. However, CCC will be in a
better position to assess this approach after gaining experience
operating the program. The amount of guaranteed coverage is not
specified in the regulation because CCC wishes to retain the ability to
adjust coverage, as necessary, to make the program workable, efficient,
and responsive to market conditions.
Freight Coverage
Six comments were received regarding the inclusion of freight costs
in the value on which guarantee coverage is based. Five commenters
argued that, with freight excluded, coverage would be too low. Two
commenters felt that, with freight coverage, exporters would be more
likely to use the SCGP. One commenter suggested that when freight costs
are more than 20 percent of export value, the level of coverage should
be increased.
CCC recognizes the validity of the concerns expressed. In cost and
freight (CFR) and cost, insurance and freight (CIF) transactions where
freight costs are a high percentage of total export value, CCC coverage
of 50% of commodity value would result in overall coverage of
substantially less than 50 percent of transaction value. CCC therefore
will retain the flexibility through Program Announcements to determine
whether, and to what extent, to provide coverage on a free on board
(FOB), free alongside ship (FAS), CFR, or CIF basis.
Guarantee Fees
Thirteen respondents commented on CCC's intention to set the
guarantee fee ``in the midpoint of the range of insurance premiums for
good risk countries charged by Eximbank'' (recently about 95 cents per
$100.00 of guaranteed coverage). One commenter agreed that the benefits
offered by the SCGP entail corresponding financial risks for CCC and,
therefore, justify higher fees. Another thought that the proposed fee
may be a starting point, but that adjustments would have to be made if
the program is to gain wide acceptance. Ten commenters felt the
proposed fee was too high given the proposed level of guaranteed
coverage. In general, their additional comments
[[Page 33827]]
can be summarized as follows: (1) Fees should be at or close to the
GSM-102 (subpart B) fee levels; (2) fees should be reasonable because
fees add to the overall financial exposure of the exporter; and (3)
high fees could be a disincentive for program participation. Two
commenters suggested that CCC vary its fees based on the past
performance record of the importer. They also suggested that the
exporter be required to furnish information on the importer which,
under criteria to be established, could permit lower fees.
One commenter stated that the Foreign Credit Insurance Association
varies its fees according to where exports are shipped, how shipments
occur, the payment history of customer, and the payment collection
history experienced by the exporter with the importer.
CCC appreciates these comments. To avoid a possible misconception
concerning the proposed fee structure for the SCGP, CCC provides the
following clarification: the fee would be assessed only on the value of
actual CCC coverage, (e.g., 50 percent of the port value), not on the
total port value registered. CCC recognizes that the 95 cents per
$100.00 fee on covered value is high in comparison to the fees charged
for credits of up to 180 days duration under the GSM-102 (subpart B)
program. However, under subpart B, CCC is insuring risks of eligible
foreign banks; under SCGP (subpart D), foreign buyer risk is likely to
be higher. Exporters will have a greater incentive to investigate the
creditworthiness of an importer if they have a larger degree of
financial risk in the export sales transaction. Also, a higher fee may
dissuade exporters from entering into speculative transactions because
the fee will not normally be refundable if the transaction is not
completed. Thus, CCC intends to initiate the SCGP with the fee policy
it described in the proposed rule. Adjustments in fee schedules can be
made in light of experience in operating the program.
Regarding the comment that CCC reduce its fee on transactions with
importers who have a proven performance record, CCC has determined
initially to have a single fee for all countries and commodities.
However, a sliding fee scale based on the importer's past performance
and other factors may have merit and remains an option as CCC gains
experience operating the program. The level of the registration fee is
not specified in the regulation, giving CCC flexibility in this matter.
Clarification
One respondent questioned what CCC meant by the statement in the
background of the proposed rule that CCC does not intend to routinely
conduct independent evaluations of the creditworthiness of individual
importers.
Although CCC does not at this time intend to make such evaluations
routinely, the proposed rule provides that CCC may request that the
exporter submit information/documentation on the importer as a
condition to CCC's approval of the exporter's application of a payment
guarantee. Such instances will, at the outset, be determined on a case-
by-case basis and will be related to the degree of experience CCC has
with the parties to the transaction, or to other pertinent credit risk-
related factors.
Country and Commodity Selection
Four respondents commented on the selection of countries and
commodities under the SCGP. One commenter felt that it would be a
mistake to direct SCGP primarily towards high value products and that
the program should be available for all U.S. agricultural commodities.
One commenter felt that the best way to determine where, and for what
commodities, the program should be used would be to begin operation of
the SCGP. The response of the financial and commodity markets would act
as the ``best barometer'' for the size and scope of the program.
Another respondent, an importer, urged CCC to include poultry to the
Commonwealth of Independent States under the SCGP. The importer stated
that the cost of obtaining a letter of credit in Russia was high and
further required payment in full to the bank in 30 days. By using SCGP,
the importer could have the certainty of financing and could proceed
with plans for building a facility in Russia to process U.S. poultry.
One commenter urged that country allocations for GSM-102/103 (subpart
B) and the SCGP be made separately.
CCC has given careful consideration to the issues of programming
countries and commodities under the SCGP. CCC intends initially to
program countries and commodities and/or products which it considers
may benefit from the SCGP and may not have benefitted from GSM-102.
Commodity and country selections will be made separately from the GSM-
102/103 (subpart B) program, but will follow the same criteria
specified in 7 CFR 1493.5. CCC will retain the flexibility, through
Program Announcements, to revise the SCGP country and commodity
allocations, as necessary, to ensure the most effective use of the
program.
Other General Comments
One commenter, a government agency, recommended that the provisions
of the Office of Management and Budget (OMB) Circular A-129, ``Policies
for Federal Credit Programs and Non-Tax Receivables,'' be applied to
the SCGP. The commenter recommended that: (1) Fees should be high
enough to cover the cost of making the loan guarantee, including
administrative costs, default and other subsidy costs; (2) in view of
budget constraints, the maximum fee permitted by law (7 U.S.C.
5641(b)(1)(B)), $1.00 per $100, should be charged; (3) lower fees may
be justified in instances where borrowers (importers) prepay part of
the shipment because the risk of default would be reduced; (4) riskier
buyers should be charged more in fees than those who pose less risk;
and (5) fees should be set on a sliding scale reflecting country and
commercial risk factors. According to this commenter, such factors
should include the strength of the country's central bank and whether
or not the country subscribes to uniform commercial code agreements
that govern international commerce. The commenter further suggested
that CCC require exporters to certify and document that they cannot
obtain credit from private sources, and that CCC determine whether the
applicant is delinquent on any Federal debt, including tax debt, before
approving the guarantee. This commenter also suggested that CCC should
require exporters to follow due diligence in collecting past due
accounts and in using litigation to enforce payment on guaranteed
credits. The commenter recommended that CCC require that the export
sales contract state that CCC will, in the event of nonpayment, assess
interest, penalties, and administrative charges against the importer.
The commenter further recommended that all accounts due CCC that are
six months or more past due be turned over to a collection contractor
unless CCC is involved in litigation.
Although applicable statutes do not require the CCC to apply the
provisions of OMB Circular No. A-12, CCC agrees that program rules
should operate not only to lower CCC's risk, but also to assure that
CCC and exporters are sharing the risk of loan defaults. The proposed
rule includes certain provisions, i.e. lower level of coverage and
higher fees, that are intended to encourage exporters to evaluate
carefully importer creditworthiness. However, the provisions of the
proposed
[[Page 33828]]
rule may not adequately ensure that (1) the risk sharing objectives
outlined in the Background section of the proposed rule (part C, How
certain SCGP provision differ from GSM-102) will be achieved, or (2)
CCC would be protected from paying excessive claims stemming from
export transactions with prices inflated far above prevailing market
levels. Therefore, CCC is establishing a condition on its payment of a
claim to address these two concerns. This new provision and required
related modifications are discussed below under Section-by-Section
Analysis of Subpart D, Section 1493.450, Payment guarantee.
The other suggestions of the commenter have also been considered
carefully and evaluated in terms of cost-effectiveness and relevance to
protecting the financial interests of CCC. Many of the suggestions of
the commenter could be implemented as a matter of policy under the rule
as proposed. CCC has therefore determined not to incorporate the
suggestions into this interim rule, but will continue to review them in
light of experience gained in operating the SCGP.
Other commenters addressed issues other than the proposed
regulations. CCC has determined not to discuss these unrelated
comments. CCC will, however, take these additional views into
consideration as they relate to CCC's other commercial export programs.
Section-by-Section Analysis of Subpart D
The numbering system of the interim rule differs somewhat from that
of the proposed rule. One section was deleted. For the purposes of this
discussion, the numbering system of the interim rule will be used,
except where otherwise indicated.
Section 1493.400 General Statement
Two respondents commented on Sec. 1493.400(a), Overview. One
commenter felt that the proposed 180 day maximum terms are adequate for
single transactions. However, this commenter suggested that to better
coincide with existing trade practices, CCC should guarantee lines of
credit, rather than single transactions. This commenter also thought
that annual (or shorter) revolving credit guarantees would reduce
administrative costs for the exporter, importer, and CCC without
reducing the ability of CCC to manage its risk. The commenter stated
that established buyers would have better procurement planning and
control under a line of credit. The second commenter felt that because
of small profit margins on cotton, exporters would not find open
accounts for up to 180 days a viable business practice. The commenter
added that some countries under GSM-102/103 operate with strict central
bank guidelines regarding foreign exchange that require letters of
credit to make the import purchases. The commenter wondered how the
SCGP could be successful in such countries.
CCC recognizes that the SCGP may not work effectively for all
commodities in all countries. Exporters who have successfully used the
GSM-102 program may continue to rely on that program.
Regarding revolving lines of credit, CCC finds this an interesting
concept and will continue to assess its merits. However, at this time
the budget allocation and subsidy funding for SCGP are not based on
revolving lines of credit. A revolving line of credit would require
fundamental changes in CCC accounting and computer database systems.
CCC will not be in a position to consider implementing revolving lines
of credit guarantees until these and other issues are resolved.
Section 1493.410 Definition of Terms
Although no public comment was received specifically regarding the
definition of Importer obligation, found at Sec. 1493.410(n), comments
were received on Sec. 1493.470, Importer obligation of the proposed
rule (see Section-by-Section Analysis of Subpart D, Sec. 1493.470
Importer Obligation). Based on those comments, CCC revised the
definition to read: ``A promissory note or notes that conform(s) with
the requirements for such note(s) specified in the applicable country
or regional Program Announcement(s).'' By specifying the provisions of
the promissory note(s) in the Program Announcement, CCC will retain
flexibility to specify provisions for a particular country or region
and, if necessary, to make changes in such provisions in light of
changing circumstances. In addition to specifying the form of the
promissory note in Program Announcement, CCC will refer to the
particular form of promissory note in the special terms and conditions
described on the face of the guarantee and attach the required form of
the promissory note to the guarantee. This change requires deletion of
Sec. 1493.470 Importer Obligation, from the interim rule.
Three respondents made comments regarding Sec. 1493.410(x), the
definition of a U.S. agricultural commodity. Two commenters stated that
for the SCGP to be effective and increase sales of high value or value
added products, changes would be needed regarding permissible levels of
foreign-origin agricultural components in such products. One commenter
stated that Congress should better define the term ``U.S. origin'' or
provide a tolerance for foreign components.
The Department of Agriculture agrees with these comments and
supports legislation to change the definition of ``product of an
agricultural commodity'' now contained in section 102(7)(B) of the
Agricultural Trade Act of 1978, as amended, (7 U.S.C. 5602)(7)(B)).
Until such legislative action, the definition contained in the proposed
rule must be retained.
Section 1493.420 Information Required for Program Participation
No public comments were received on this section. No changes have
been made in this section of the interim rule.
Section 1493.430 Application for Payment Guarantee
Two respondents made comments regarding Sec. 1493.430(a), which
requires that a firm export sale exist before an exporter may submit an
application for a payment guarantee. Both commenters suggested that
this requirement be changed to allow the export sale to be contingent
upon approval of the payment guarantee. The commenters advocated that
an exporter and importer should agree on the terms of the sale but, if
the payment guarantee is not obtained, cancellation of the sale should
be allowed. One commenter recommended that CCC require a copy of the
sales contract be submitted at the time the payment guarantee is
requested. The commenter believed that the list of the 17 requested
items could be reduced if the sales contract was provided.
The ``firm'' sale requirement of Sec. 1493.430(a) does not preclude
a sales contract from being contingent on approval by CCC of a payment
guarantee. At a minimum, this rule requires that the exporter and
importer be in agreement regarding the terms and conditions required to
be reported in an application for a payment guarantee.
Regarding the comment that CCC require exporters to submit sales
contracts, CCC disagrees that the suggestion would save time. Sales
contracts often contain terms and conditions that CCC does not need to
review. CCC does not want the burden of reviewing and safeguarding a
large quantity of business confidential and sensitive private documents
where that is unnecessary. CCC reserves the right to request an
exporter's sales contract in reviewing applications from newly
[[Page 33829]]
eligible applicants, where questions of program compliance or control
arise.
Three comments were received regarding Sec. 1493.430(16). These
concerned the statement that CCC would reserve the right to require
exporters to submit additional information about the importer. One
respondent was concerned about the nature of the information. If CCC
requested proprietary information, would CCC protect the information
from public disclosure? The respondent felt that exporters may be
reluctant to provide importer information unless there are clear
protections against its release. Another commenter felt that providing
information regarding the importer could be a potential paperwork
burden. The third respondent suggested that information be requested
for all first-time applicants of the program. This commenter suggested
that the information requested should, at a minimum, include credit
rating, trade references, and bank references and should be submitted
before CCC approves the payment guarantee.
As stated in the background section of the proposed rule (part
C(5), Application), CCC will not routinely conduct independent
evaluations of the creditworthiness of individual importers, but will
reserve the right to require exporters, in the application process, to
provide additional information concerning the importer. Such
information may include the importer's credit and payment history with
the applicant, and any credit analysis the exporter has done regarding
the importer. CCC will protect any proprietary information submitted by
exporters to the extent permitted by law.
Three comments were received regarding CCC's price review process
established under Sec. 1493.430(b). Two commenters asked whether the
SCGP would be subject to price review. One commenter stated that
elimination of price review would save time and reduce paperwork. The
commenter also felt that if price review were included in the SCGP, it
would make the program unattractive. Another commenter wondered how
prices would be reviewed because for short term credit transactions it
is a common commercial practice to build interest into the sales price.
One commenter noted that the rule does not contain a detailed
discussion of price review and urged CCC to be as flexible as possible
in the administration of this function. The respondent noted that for
fresh produce, price review must be sensitive to prices which can vary
from hour to hour.
To the extent that SCGP transactions may be subject to price
review, CCC may choose to price review different commodities
differently or exempt some commodities from price review. Although CCC
does not intend to provide guarantee coverage for interest risk
separately, CCC realizes that, under SCGP, exporters may build interest
into their sales prices. If CCC were to subject the SCGP to price
review, CCC could take this into account.
Four respondents commented on Sec. 1493.430(c), Ineligible
Exporter. One commenter felt strongly that no financial or ownership
connection should exist between exporter and importer. The commenter
indicated that if such a connection existed, defaults would be
encouraged and make the program unworkable. Another commenter felt that
restrictions on relationships between importers and exporters would
dissuade many potential participants. In particular it would restrict
many smaller import/export companies because the U.S.-based exporter
may be related to the importer. One commenter felt that CCC may be
increasing its export risk, in some cases, with its prohibition against
within-company and joint venture transactions. This commenter agreed
that taxpayers should not finance intra-company sales. However, in some
instances, particularly common-owner or joint-venture sales, such
restrictions would force export sales to competing foreign suppliers.
The commenter requested greater flexibility to allow CCC to choose
export transactions benefiting U.S. agriculture.
The ``ineligible exporter'' provision is intended to avoid the
situation in which CCC would receive a claim for loss from an exporter
that directly or indirectly owns or controls, or is owned or controlled
by, the importer responsible for the default. CCC has determined not to
change this provision.
One commenter felt that any exporter who has three defaults under
the program in five years should be considered ineligible for further
participation. With respect to this comment, CCC does not wish to
qualify exporters based upon the performance of importers. However, CCC
will continue to evaluate whether program modifications may be needed
to provide incentives/disincentives to exporters based on program
participation experience.
Section 1493.440 Certification Requirements for a Payment Guarantee
No public comments were received on this section. No changes have
been made in this section of the interim rule.
Section 1493.450 Payment Guarantee
To address the risk issues raised by comments from a government
agency (see General Comments, Other general comments), CCC has revised
the first sentence of Sec. 1493.450(a) to read: ``The payment guarantee
will provide that CCC agrees to pay the exporter or the exporter's
assignee an amount not to exceed the guaranteed value, plus eligible
interest, in the event that the importer fails to pay under the
importer obligation unless CCC determines, with respect to the
particular transaction and claim, that the guaranteed portion of the
port value exceeded the prevailing U. S. market value for the same, or
same type of, agricultural commodity or product. In making this
determination, CCC will adjust the prevailing U.S. market value for
estimated freight and/or insurance costs if the export sale was made on
a CFR or CIF basis.''
CCC recognizes that determining a prevailing U.S. market value may
be difficult for some products, particularly for some high value and
value added products. CCC will, therefore, utilize information from all
available sources including, when appropriate, information furnished by
participants to the transaction to support the validity of the claim.
Exporters using normal pricing practices, i.e., pricing at or near the
market without excessive markups intended to shift to CCC all risk of
loss, need not be concerned that the new claim review provision will
result in a denial of a claim should a default occur.
In instances where CCC has reviewed the unit price of the commodity
in the process of approving an exporter's application for a payment
guarantee pursuant to Sec. 1493.430(b), and the price of the commodity
reported by the exporter in the evidence of export report has not
changed (Sec. 1493.470(a)(7)), CCC will not conduct another review of
the price of the transaction as a condition for paying a claim.
Although CCC may conduct some price reviews pursuant to
Sec. 1493.430(b) as it deems desirable, it does not intend to do so
with respect to all exporter applications. Such price reviews will be
done entirely at CCC's discretion, and nothing in the SCGP regulations
provides exporters the right to demand or expect that such price
reviews take place prior to issuing a payment guarantee.
This new provision is intended to ensure that there will be
substantial risk sharing on the part of the exporter, and that CCC will
not pay claims inflated by transaction prices far above prevailing
market levels. CCC has no intention of avoiding payment of normal
claims, nor does it intend to regulate or control
[[Page 33830]]
exporters' profit margins. CCC's sole intention is to enhance the
integrity of the SCGP. CCC encourages and welcomes any comments
regarding this provision.
Section 1493.460 Guarantee Rates and Fees
No public comments were received on this section. No changes have
been made in this section of the interim rule.
Section 1493.470 Importer Obligation (as in the Proposed Rule)
As stated in Sec. 1493.410, Definition of Terms, of the Section-by-
Section Analysis of Subpart D, CCC has determined to delete
Sec. 1493.470. Three comments were received regarding this section. One
commenter thought that the terms of the promissory note were too
onerous. Another commenter felt that use of a promissory note as
evidence of indebtedness was a step in the right direction. However,
the commenter was concerned that not enough is known about the legal
enforceability of the promissory note in countries whose commercial
code is different from ours. Having a foreign bank aval or guarantee
would mitigate the risk of possibly having a legally unenforceable
document. The commenter also recommended that the optional provision
regarding late interest under Sec. 1493.470(d)(1), be made a
requirement since it is customary business practice to charge late
interest when payments are not made on the due date. The commenter felt
that this would also provide CCC with a mechanism to be paid interest
on outstanding claims. Another commenter felt the promissory note may
need to include a ``sound product provision.'' This commenter suggested
that if there were quality problems upon arrival, it may be appropriate
to be flexible in adjusting the value of the promissory note.
CCC's decision to retain flexibility in adapting the provisions of
the promissory note should partially address the concerns expressed
that the note contained in the proposed rule would be too onerous and
may not be legally enforceable in some countries. Although CCC
continues to believe that the previously proposed promissory note, or
one substantially similar to it, will be the basic instrument required
by most Program Announcements in the initial implementation of the
SCGP, CCC will make adaptations, including adaptations specific to a
particular country or region, if they appear necessary to enhance the
likelihood of enforceability. Similarly, if experience demonstrates
that the terms of the proposed note are too onerous, modifications will
be considered that are consistent with overall program goals and
criteria.
CCC's intention to make adaptations, as necessary, in the form of
the required promissory note would be compatible with the objectives
stated by other commenters. For example, CCC could adopt a note
permitting a foreign bank aval or a guarantee. For now, however, CCC
has determined not to make this a program requirement because one of
the primary intentions of the SCGP is to remove the foreign bank's
mandatory involvement in the transaction. Additionally, CCC could
choose to incorporate a provision regarding late interest into the
importer's promissory note. Regarding a ``sound product provision,''
value adjustments could be agreed to by exporters and importers. In the
event the promissory note had already been executed prior to
establishing the actual export value, a substitute promissory note
might need to be executed. If the exporter had submitted an Evidence of
Export (EOE) before the value adjustment is made, the exporter would
have to file an amended EOE with CCC. In any event, CCC's principal
coverage would be limited to the lower of the value of the export
transaction established by the EOE or the principal amount of the
promissory note.
Section 1493.470 Evidence of Export
One comment was received regarding Sec. 1493.470(b), Time limit for
submission of the EOE (of the interim rule). The respondent suggested
that CCC allow a standard 60 days to submit the EOE. The respondent
thought exporters would be seeking extensions of the proposed 30-day
period in order to obtain a fully executed promissory note from the
importer.
Under the proposed rule, EOEs must be filed in 30 days if export is
by vessel, and 60 days if export is by truck or rail. Experience under
the GSM-102/103 programs has not shown a need to increase the 30 day
filing requirement for EOEs on vessels. However, under the proposed
rule, an exporter needing additional time to file an EOE may request
that the General Sales Manager extend the time limit for filing. CCC
has determined not to change the time limit for filing the EOE, but to
assess the need for such a change after the SCGP has been in operation.
Timely submission of the EOEs will be important to permit CCC to keep
accurate program data for release to the public as well as for internal
program monitoring and controls.
Section 1493.480 Certification Requirements for Evidence of Export
No public comments were received on this section. No changes have
been made in this section of the interim rule.
Section 1493.490 Proof of Entry
One comment was received regarding Sec. 1493.490(b), Records of
proof of entry (of the interim rule). From the viewpoint of the
commenter, the requirement that exporters obtain written proof that the
exported goods entered the country would be particularly problematic
for fresh produce exporters. Traditionally, once the product leaves the
dock the exporter ceases to have any control or liability for the
goods. It is not currently a practice in the produce industry to
provide proof the goods actually left the U.S. The commenter requested
that CCC seek an alternate approach which will satisfy the requirements
of the program, but be practical for fresh produce exporters.
CCC has determined to make no changes in this section. The
requirement that exporters maintain records of an official or customary
commercial nature, or other documents to verify the arrival in the
foreign country of the agricultural commodity exported, is mandated by
section 401(a)(1) of the Agricultural Trade Act of 1978, as amended (7
U.S.C. 5661(a)(1)). Furthermore, if a default occurred under a
guaranteed transaction in which the commodity was exported by truck or
rail, the entry certificate or similar document would be included when
filing a claim for loss (see Sec. 1494.500(b)). If traditional forms of
entry documentation are unobtainable, Sec. 1494.490(b) permits CCC to
consider other types of documents which can be deemed acceptable by the
General Sales Manager. CCC believes that these provisions are flexible
enough to meet the concerns raised by the commenter.
Section 1493.500 Notice of Default and Claims for Loss
One comment was received regarding Sec. 1493.500, Notice of default
and claims for loss (of the interim rule). This commenter suggested
that CCC pre-approve documents that are normally submitted in the claim
procedure. The respondent stated that there is a need for greater
certainty in the approval of documentation in case of a default, and
that exporters would be willing to pay a fee to cover the cost of pre-
approval.
Partly because of the added administrative burden that pre-approval
of documents would place on CCC, this suggestion will not be adopted at
this time. However, CCC will continue to consider this issue which is
also
[[Page 33831]]
relevant to the GSM-102/103 (subpart B) programs.
This same commenter suggested that CCC provide an example of
subrogation language in an addendum to its regulations. Since exporters
are not banks, they require specific language to fulfill their
responsibility in the event of a default. CCC agrees with the comment
and will make available an example of language for an Instrument of
Subrogation and Assignment.
Section 1493.510 Payment for Loss
Although no comments were received regarding Secs. 1493.510 (b) and
(e), CCC has revised these provisions to be consistent with the changes
made in Sec. 1493.450(a), CCC's obligation.
Section 1493.510(b), Amount of CCC's liability, is revised to read
in part: ``Subject to a determination by CCC with respect to prevailing
U.S. market value pursuant to Sec. 1493.450(a), of this part, CCC's
maximum liability for any claims for loss * * * .''
Section 1493.510(e), Action against the assignee, is revised to
read: ``Notwithstanding * * *. CCC will not, except pursuant to a
determination under Sec. 1493.450(a) of this part, hold the assignee
responsible or take any action or raise any defense against the
assignee for any action, omission, or statement by the exporter of
which the assignee has no knowledge provided that:''
Section 1493.520 Recovery of Losses
No public comments were received on this section. No changes have
been made in this section of the interim rule.
Section 1493.530 Miscellaneous Provisions
One comment was received regarding Sec. 1493.530(a), Assignment (of
the interim rule). The commenter suggested that greater flexibility is
needed in the assignment of proceeds, including the sub-assignment to
more than one party. The commenter felt this would bring the
transaction in line with standard practice for similar financial
instruments.
CCC has traditionally not allowed assignment of a payment guarantee
to more than one party. However the proposed rule permits further
assignment if `` * * * approved in advance by CCC.'' Therefore, CCC has
determined it is not necessary at this time to change Sec. 1494.530(a).
List of Subjects in 7 CFR Part 1493
Administrative practice and procedures, Agriculture, Agricultural
commodities, Credits, Exports, Guarantees, Reporting and recordkeeping
requirements.
PART 1493--[AMENDED]
Accordingly, part 1493 of title 7 is amended by adding and
reserving subpart C and adding subpart D reading as follows:
Subpart C--[Reserved]
Subpart D--CCC Supplier Credit Guarantee Program Operations
Sec.
1493.400 General statement.
1493.410 Definition of terms.
1493.420 Information required for program participation.
1493.430 Application for a payment guarantee.
1493.440 Certification requirements for a payment guarantee.
1493.450 Payment guarantee.
1493.460 Guarantee rates and fees.
1493.470 Evidence of export.
1493.480 Certification requirements for the evidence of export.
1493.490 Proof of entry.
1493.500 Notice of default and claims for loss.
1493.510 Payment for loss.
1493.520 Recovery of losses.
1493.530 Miscellaneous provisions.
Authority: 7 U.S.C. 5602, 5622, 5661, 5662, 5663, 5664, 5676; 15
U.S.C. 714b(d), 714c(f).
Subpart C--[Reserved]
Subpart D--CCC Supplier Credit Guarantee Program Operations
Sec. 1493.400 General statement.
(a) Overview. (1) This subpart contains the regulations governing
the operations of the Supplier Credit Guarantee Program (SCGP). The
restrictions and criteria set forth at subpart A for the Commodity
Credit Corporation (CCC) Export Credit Guarantee Program (GSM-102) and
the Intermediate Credit Guarantee Program (GSM-103) will apply to this
subpart. The SCGP was developed to expand U.S. agricultural exports by
making available payment guarantees to encourage U.S. exporters to
extend financing on credit terms of not more than 180 days to importers
of U.S. agricultural commodities.
(2) The SCGP operates in cases where credit is necessary to
increase or maintain U.S. exports to a foreign market and where private
U.S. exporters would be unwilling to provide financing without CCC's
guarantee. The program is operated in a manner intended not to
interfere with markets for cash sales. The program is targeted toward
those countries where the guarantees are necessary to secure financing
of the exports but which have sufficient financial strength so that
foreign exchange will be available for scheduled payments. In providing
this credit guarantee facility, CCC seeks to expand market
opportunities for U.S. agricultural exporters and assist long-term
market development for U.S. agricultural commodities.
(3) The credit facility created by this program is the SCGP payment
guarantee (payment guarantee). The payment guarantee is an agreement by
CCC to pay the exporter, or the U.S. financial institution that may
take assignment of the exporter's right to proceeds, specified amounts
of principal and, where applicable, interest due from, but not paid by,
the importer incurring the obligation in connection with the export
sale to which CCC's guarantee coverage pertains. By approving an
exporter's application for a payment guarantee, CCC encourages private
sector, rather than government, financing and incurs a substantial
portion of the risk of default by the importer. CCC assumes this risk,
in order to be able to operate the program for the purposes specified
in Sec. 1493.2.
(b) Credit facility mechanism. (1) For the purpose of the SCGP, CCC
will consider applications for payment guarantees only in connection
with export sales of U.S. agricultural commodities where the payment
for the agricultural commodities will be made under an unconditional
and irrevocable importer obligation to a U.S. exporter payable in U.S.
dollars, as defined in Sec. 1493.410(n).
(2) The exporter may assign the right to proceeds under the
importer obligation to a U.S. bank or other financial institution so
that the exporter may realize the proceeds of the sale prior to the
deferred payment date(s) as set forth in the importer obligation.
(3) The SCGP payment guarantee is designed to protect the exporter
or the exporter's assignee against those losses specified in the
payment guarantee resulting from defaults, whether for commercial or
noncommercial reasons, by the importer under the importer's obligation.
(c) Program administration. The SCGP will be administered pursuant
to subpart A and this subpart and any Program Announcements and Notices
to Participants issued by CCC pursuant to, and not inconsistent with,
this subpart. This program is under the general administrative
responsibility of the General Sales Manager (GSM), Foreign Agricultural
Service (FAS/USDA). The review and payment of claims for loss will be
administered by the Office of the Controller, CCC. Information
regarding specific points of contact for the public, including names,
addresses, and
[[Page 33832]]
telephone and facsimile numbers of particular USDA or CCC offices, will
be announced by a public press release (see Sec. 1493.410(c),
``Contacts P/R'').
(d) Country allocations and program announcements. From time to
time, CCC will issue a Program Announcement to announce a SCGP
allocation for a specific country. The Program Announcement for a
country allocation will designate specific allocations for U.S.
agricultural commodities or products thereof, will indicate the form of
promissory note required by CCC, and will provide other pertinent
information. Exporters may negotiate export sales to importers in that
country for one of the commodities specified in the Program
Announcement and seek payment guarantee coverage within the dollar
amounts of specified coverage for that commodity. The Program
Announcement will contain a requirement that the exporter's sales
contract contain a shipping deadline within the applicable program
year. The final date for a contractual shipping deadline will be stated
in the Program Announcement. Program Announcements may also contain a
specified ``undesignated'' or ``unallocated'' dollar amount for the
purpose that if dollar amounts specified for a specific commodity for a
country become fully used, an additional allocation from the
``unallocated'' or ``undesignated'' portion of the total country
allocation may then be designated for a specific commodity. Program
Announcements that include an ``unallocated'' or ``undesignated''
dollar amount will contain further information on the ``unallocated''
or ``undesignated'' portion of the country allocation.
Sec. 1493.410 Definition of terms.
Terms set forth in this subpart and in CCC Program Announcements,
Notices to Participants, and any other CCC-originated documents
pertaining to the SCGP will have the following meanings:
(a) Assignee. A financial institution in the United States which,
for adequate consideration given, has obtained the legal rights to
receive the payment of proceeds under the payment guarantee.
(b) CCC. The Commodity Credit Corporation, an agency and
instrumentality of the United States within the Department of
Agriculture, authorized pursuant to the Commodity Credit Corporation
Charter Act of 1948 (15 U.S.C. 714 et seq.), and subject to the general
supervision and direction of the Secretary of Agriculture.
(c) Contacts P/R. A notice issued by FAS/USDA by public press
release which contains specific names, addresses, and telephone and
facsimile numbers of contacts within FAS/USDA and CCC for use by
persons interested in obtaining information concerning the operations
of the SCGP. The Contacts P/R also contains details about where to
submit information required to qualify for program participation, to
apply for payment guarantees, to request amendments of payment
guarantees, to submit evidence of export reports, and to give notices
of default and file claims for loss.
(d) Date of export. One of the following dates, depending upon the
method of shipment: the on-board date of an ocean bill of lading or the
on-board ocean carrier date of an intermodal bill of lading; the on-
board date of an airway bill; or, if exported by rail or truck, the
date of entry shown on an entry certificate or similar document issued
and signed by an official of the Government of the importing country.
(e) Date of sale. The earliest date on which a contractual
obligation exists between the exporter, or an intervening purchaser, if
applicable, and the importer under which a firm dollar-and-cent price
for the sale of agricultural commodities to the importer has been
established or a mechanism to establish such price has been agreed
upon.
(f) Discounts and allowances. Any consideration provided directly
or indirectly, by or on behalf of the exporter, or an intervening
purchaser, to the importer in connection with a sale of an agricultural
commodity, above and beyond the commodity's value, stated on the
appropriate FOB, FAS, CFR or CIF basis. Discounts and allowances
include, but are not limited to, the provision of additional goods,
services or benefits; the promise to provide additional goods, services
or benefits in the future; financial rebates; the assumption of any
financial or contractual obligations; the whole or partial release of
the importer from any financial or contractual obligations; or
settlements made in favor of the importer for quality or weight.
(g) Eligible interest. The maximum amount of interest, based on the
interest rate indicated in CCC's payment guarantee or any amendments to
such payment guarantee, which CCC agrees to pay the exporter or the
exporter's assignee in the event that CCC pays a claim for loss. The
maximum interest rate stated in the payment guarantee, when determined
or adjusted by CCC, will not exceed the average investment rate of the
most recent Treasury 52-week bill auction in effect at that time.
(h) Exported value. (1) Where CCC announces coverage on a FAS or
FOB basis and:
(i) Where the commodity is sold on a FAS or FOB basis, the value,
FAS or FOB basis, U.S. point of export, of the export sale, reduced by
the value of any discounts or allowances granted to the importer in
connection with such sale; or
(ii) Where the commodity was sold on a CFR or CIF basis, point of
entry, the value of the export sale, FAS or FOB, point of export, is
measured by the CFR or CIF value of the agricultural commodity less the
cost of ocean freight, as determined at the time of application and, in
the case of CIF sales, less the cost of marine and war risk insurance,
as determined at the time of application, reduced by the value of any
discounts or allowances granted to the importer in connection with the
sale of the commodity; or
(2) Where CCC announces coverage on a CFR or CIF basis, and where
the commodity is sold on a CFR or CIF basis, point of entry, the total
value of the export sale, CFR or CIF basis, point of entry, reduced by
the value of any discounts or allowances granted to the importer in
connection with the sale of the commodity.
(3) When a CFR or CIF commodity export sale involves the
performance of non-freight services to be performed outside the United
States (e.g., services such as bagging bulk cargo) which are not
normally included in ocean freight contracts, the value of such
services and any related materials not exported from the U.S. with the
commodity must also be deducted from the CFR or CIF sales price in
determining the exported value.
(i) Exporter. A seller of U.S. agricultural commodities or products
thereof that has qualified in accordance with the provisions of
Sec. 1493.420.
(j) FAS/USDA. The Foreign Agricultural Service, U.S. Department of
Agriculture.
(k) GSM. The General Sales Manager, FAS/USDA, acting in his
capacity as Vice President, CCC, or his designee.
(l) Guaranteed value. The maximum amount, exclusive of interest,
that CCC agrees to pay the exporter or assignee under CCC's payment
guarantee, as indicated on the face of the payment guarantee.
(m) Importer. A foreign buyer that enters into a contract with an
exporter, or with an intervening purchaser, for an export sale of
agricultural commodities to be shipped from the U.S. to the foreign
buyer.
(n) Importer obligation. A promissory note or notes that conform(s)
with the requirements for such note(s) specified in the applicable
country or regional Program Announcement(s).
[[Page 33833]]
(o) Incoterms. The following customary terms, as defined by the
International Chamber of Commerce, Incoterms current
revision):
(1) Free Alongside Ship (FAS);
(2) Free on Board (FOB);
(3) Cost and Freight (CFR, or alternatively, C&F, C and F, or CNF);
and
(4) Cost Insurance and Freight (CIF).
(p) Intervening purchaser. A party that agrees to purchase U.S.
agricultural commodities from an exporter and sell the same
agricultural commodities to an importer.
(q) Late interest. Interest, in addition to the interest due under
the payment guarantee, which CCC agrees to pay in connection with a
claim for loss, accruing during the period beginning on the first day
after receipt of a claim which CCC has determined to be in good order
and ending on the day on which payment is made on such claim for loss.
(r) Notice to participants. A notice issued by CCC by public press
release which serves one or more of the following functions: to remind
participants of the requirements of the program; to clarify the program
requirements contained in these regulations in a manner which is not
inconsistent with the regulations; to instruct exporters to provide
additional information in applications for payment guarantees under
specific country and/or commodity allocations; and to supplement the
provisions of a payment guarantee, in a manner not inconsistent with
these regulations, before the exporter's application for such payment
guarantee is approved.
(s) Payment guarantee. An agreement under which CCC, in
consideration of a fee paid, and in reliance upon the statements and
declarations of the exporter, subject to the terms set forth in the
written guarantee (including the required form of promissory note),
this subpart, and any applicable Program Announcements or Notices to
Participants, agrees to pay the exporter or the exporter's assignee in
the event of a default by an importer under the importer obligation.
(t) Port value. (1) Where CCC announces coverage on a FAS or FOB
basis and:
(i) Where the commodity is sold on a FAS or FOB basis, U.S. point
of export, the value, FAS or FOB basis, U.S. point of export, of the
export sale, including the upward tolerance, if any, as provided by the
export sales contract, reduced by the value of any discounts or
allowances granted to the importer in connection with such sale; or
(ii) Where the commodity was sold on a CFR or CIF basis, point of
entry, the value of the export sale, FAS or FOB, point of export,
including the upward tolerance, if any, as provided by the export sales
contract, is measured by the CFR or CIF value of the agricultural
commodity less the value of ocean freight and, in the case of CIF
sales, less the value of marine and war risk insurance, reduced by the
value of any discounts or allowances granted to the importer in
connection with the sale of the commodity; or
(2) Where CCC announces coverage on a CFR or CIF basis and where
the commodity was sold on CFR or CIF basis, point of entry, the total
value of the export sale, CFR or CIF basis, point of entry, including
the upward tolerance, if any, as provided by the export sales contract,
reduced by the value of any discounts or allowances granted to the
importer in connection with the sale of the commodity.
(3) When a CFR or CIF commodity export sale involves the
performance of non-freight services to be performed outside the United
States (e.g., services such as bagging bulk cargo), which are not
normally included in ocean freight contracts, the value of such
services and any related materials not exported from the U.S. with the
commodity must also be deducted from the CFR or CIF sales price in
determining the port value.
(u) Program announcement. An announcement issued by CCC which
provides information on specific country and commodity allocations and
may identify eligible agricultural commodities and countries, length of
credit periods which may be covered, specify dollar limitations for CCC
exposure in particular countries, the form of promissory note required
for a particular country or region, and include other information and
requirements.
(v) SCGP. The Supplier Credit Guarantee Program described by this
subpart.
(w) United States or U.S. All of the 50 states, the District of
Columbia, and the territories and possessions of the United States.
(x) U.S. agricultural commodity. (1) With respect to any
agricultural commodity other than a product of an agricultural
commodity, an agricultural commodity entirely produced in the United
States; and
(2) With respect to a product of an agricultural commodity:
(i) A product all of the agricultural components of which are
entirely produced in the United states; or
(ii) Any other product the Secretary may designate that contains
any agricultural component that is not entirely produced in the United
States if:
(A) Such component is an added, de minimis component;
(B) Such component is not commercially produced in the United
States; and
(C) There is not acceptable substitute for such component that is
commercially produced in the United States (For purposes of this
paragraph, fish entirely produced in the United States include fish
harvested by a documented fishing vessel as defined in title 46, United
States Code, in waters that are not waters [including the territorial
sea] of a foreign country).
(y) USDA. United States Department of Agriculture.
Sec. 1493.420 Information required for program participation.
Before CCC will accept an application for a payment guarantee under
the SCGP, the applicant must qualify for participation in this program.
Based upon the information submitted by the applicant and other
publicly available sources, CCC will determine whether the applicant is
eligible for participation in the program.
(a) Submission of documentation. In order to qualify for
participation in the SCGP, an applicant must submit to CCC, at the
address specified in the Contacts P/R, the following information:
(1) The address of the applicant's headquarters office and the name
and address of an agent in the U.S. for the service of process;
(2) The legal form of doing business of the applicant, e.g., sole
proprietorship, partnership, corporation, etc.;
(3) The place of incorporation of the applicant, if the applicant
is a corporation;
(4) The name and U.S. address of the office(s) of the applicant,
and statement indicating whether the applicant is a U.S. domestic
corporation, a foreign corporation or another foreign entity. If the
applicant has multiple offices, the address included in the information
should be that which is pertinent to the particular export sale
contemplated by the applicant under this subpart;
(5) A certified statement describing the applicant's participation,
if any, during the past three years in U.S. Government programs,
contracts or agreements; and
(6) A certification that: ``I certify, to the best of my knowledge
and belief, that neither [name of applicant] nor any of its principals
has been debarred, suspended, or proposed for debarment from
contracting with or participating in
[[Page 33834]]
programs administered by any U.S. Government agency. [''Principals,''
for the purpose of this certification, means officers; directors;
owners of five percent or more of stock; partners; and persons having
primary management or supervisory responsibility within a business
entity (e.g., general manager, plant manager, head of a subsidiary
division, or business segment, and similar positions).] I further agree
that, should any such debarment, suspension, or notice of proposed
debarment occur in the future, [name of applicant] will immediately
notify CCC.''
(b) Previous qualification. Any exporter that is qualified under
subpart B, Sec. 1493.30 is qualified under this section to submit
applications for a SCGP payment guarantee, and the information provided
by the exporter pursuant to Sec. 1493.30 will be deemed to also have
been provided under this section. Each application must include the
statement required by Sec. 1493.430(a)(17) incorporating the
certifications of Sec. 1493.440, including the certification in
Sec. 1493.440(e) that the information previously provided pursuant to
Sec. 1493.420 has not changed. If the exporter is unable to provide
such certification, such exporter must update the information required
by paragraph (a) of this section which has changed and certify that the
remainder of the information previously provided has not changed.
(c) Additional submissions. CCC will promptly notify applicants
that have submitted information required by this section whether they
have qualified to participate in the program. Any applicant failing to
qualify will be given an opportunity to provide additional information
for consideration by CCC.
(d) Ineligibility for program participation. An applicant may be
ineligible to participate in the SCGP if:
(1) Such applicant is currently debarred, suspended, or proposed
for debarment from contracting with or participating in any program
administered by a U.S. Government agency; or
(2) Such applicant is controlled or can be controlled, in whole or
in part, by any individuals or entities currently debarred, suspended
or proposed for debarment from contracting with or participating in
programs administered by any U.S. Government agency.
Sec. 1493.430 Application for a payment guarantee.
(a) A firm export sale must exist before an exporter may submit an
application for a payment guarantee. An application for a payment
guarantee may be submitted in writing or may be made by telephone, but,
if made by telephone, it must be confirmed in writing to the office
specified in the Contacts P/R. An application must identify the name
and address of the exporter and include the following information:
(1) Name of the destination country;
(2) Name and address of the importer;
(3) Name and address of the intervening purchaser, if any, and a
statement that the commodity will be shipped directly to the importer
in the destination country;
(4) Date of sale;
(5) Exporter's sale number;
(6) Delivery period as agreed between the exporter and the
importer;
(7) A full description of the commodity (including packaging, if
any);
(8) Mean quantity, contract loading tolerance and, if the exporter
chooses, a request for CCC to reserve coverage up to the maximum
quantity permitted by the contract loading tolerance;
(9) Unit sales price of the commodity, or a mechanism to establish
the price, as agreed between the exporter and the importer. If the
commodity was sold on the basis of CFR or CIF, the actual (if known at
the time of application) or estimated value of freight and, in the case
of sales made on a CIF basis, the actual (if known at the time of
application) or estimated value of marine and war risk insurance, must
be specified;
(10) Description and value of discounts and allowances, if any;
(11) Port value (includes upward loading tolerance, if any);
(12) Guaranteed value;
(13) Guarantee fee;
(14) The term length for the credit being extended and the
intervals between principal payments for each shipment to be made under
the export sale;
(15) A statement indicating whether any portion of the export sale
for which the exporter is applying for a payment guarantee is also
being used as the basis for an application for participation in any of
the following CCC or USDA export programs: Export Enhancement Program,
Dairy Export Incentive Program, Sunflowerseed Oil Assistance Program,
or Cottonseed Oil Assistance Program. The number of the Agreement
assigned by USDA under one of these programs should be included, as
applicable;
(16) Other information as requested by CCC or specified in Program
Announcements and Notices to Participants, as applicable; and
(17) The exporter's statement, ``ALL SECTION 1493.440
CERTIFICATIONS ARE BEING MADE IN THIS APPLICATION'' which, when
included in the application by the exporter, will constitute a
certification that it is in compliance with all the requirements set
forth in Sec. 1493.440.
(b) An application for a payment guarantee may be approved as
submitted, approved with modifications agreed to by the exporter, or
rejected by the GSM. In the event that the application is approved, the
GSM will cause a payment guarantee to be issued in favor of the
exporter. Such payment guarantee will become effective at the time
specified in Sec. 1493.450(b). If, based upon a price review, the unit
sales price of the commodity does not fall within the prevailing
commercial market level ranges, as determined by CCC, the application
will not be approved.
(c) Ineligible exporter. An exporter will be ineligible to obtain a
payment guarantee if such exporter:
(1) Directly or indirectly owns or controls the importer;
(2) Is directly or indirectly owned or controlled by the importer;
or
(3) Is directly or indirectly owned or controlled by a person(s) or
entity(ies) which also owns or controls the importer.
Sec. 1493.440 Certification requirements for payment guarantee.
By providing the statement in Sec. 1493.430(a)(17), the exporter is
certifying that the information provided in the application is true and
correct and, further, that all requirements set forth in this section
have been or will be met. The exporter will be required to provide
further explanation or documentation with regard to applications that
do not include this statement. The exporter, in submitting an
application for a payment guarantee and providing the statement set
forth in Sec. 1493.430(a)(17), certifies that:
(a) The agricultural commodity or product to be exported under the
payment guarantee is a United States agricultural commodity or a
product thereof, as defined in Sec. 1493.410(x);
(b) There have not been and will not be any corrupt payments or
extra sales services or other items extraneous to the transaction
provided, financed, or guaranteed in connection with the transaction,
and that the transaction complies with applicable United States law;
(c) If the agricultural commodity is vegetable oil or a vegetable
oil product, that none of the agricultural commodity or product has
been or will be used as a basis for a claim of a refund, as drawback,
pursuant to section 313 of the Tariff Act of 1930, 19 U.S.C. 1313, of
[[Page 33835]]
any duty, tax or fee imposed under Federal law on an imported commodity
or product;
(d) No person or selling agency has been employed or retained to
solicit or secure the payment guarantee, and that there is no agreement
or understanding for a commission, percentage, brokerage, or contingent
fee, except in the case of bona fide employees or bona fide established
commercial or selling agencies maintained by the exporter for the
purpose of securing business; and
(e) The information provided pursuant to Sec. 1493.420 has not
changed, the exporter still meets all of the qualification requirements
of Sec. 1493.420, and the exporter will immediately notify CCC if there
is a change of circumstances which would cause it to fail to meet such
requirements. If the exporter breaches or violates these certifications
with respect to a SCGP payment guarantee, CCC will have the right,
notwithstanding any other rights provided under this subpart, to annul
guarantee coverage for any commodities not yet exported and/or to
proceed against the exporter.
Sec. 1493.450 Payment guarantee.
(a) CCC's obligation. The payment guarantee will provide that CCC
agrees to pay the exporter or the exporter's assignee an amount not to
exceed the guaranteed value, plus eligible interest, in the event that
the importer fails to pay under the importer obligation. unless CCC
determines with respect to the particular transaction and claim that
the guaranteed portion of the port value exceeded the prevailing U.S.
market value for the same, or same type of agricultural commodity or
product. In making this determination, CCC will adjust the prevailing
U.S. market value for estimated freight and/or insurance costs if the
export sale was made on a CFR or CIF basis. Payment by CCC will be in
U.S. dollars.
(b) Period of guarantee coverage. The payment guarantee will apply
to a credit period not exceeding 180 days beginning either on the
date(s) of export(s) or from the date when interest begins to accrue
whichever is earlier, and will continue during the credit term
specified in the payment guarantee or amendments thereto. However, the
payment guarantee becomes effective on the date(s) of export(s) of the
agricultural commodities or products thereof specified in the
exporter's application for a payment guarantee.
(c) Terms of the CCC payment guarantee. The terms of CCC's coverage
will be set forth in the payment guarantee, as approved by CCC, and
will include the provisions of this subpart, which may be supplemented
by any Program Announcements and/or Notices to Participants in effect
at the time the payment guarantee is approved by CCC.
(d) Final date to export. The final date to export shown on the
payment guarantee will be one month, as determined by CCC, after the
contractual deadline for shipping.
(e) Reserve coverage for loading tolerances. The exporter may apply
for a payment guarantee and, if coverage is available, pay the
guarantee fee, based at least on, the amount of the lower loading
tolerance of the export sales contract; however, the exporter may also
request that CCC reserve additional guarantee coverage to accommodate
up to the amount of the upward loading tolerance specified in the
export sales contract. If such additional guarantee coverage is
available at the time of application and CCC determines to make such
reservation, it will so indicate to the exporter. In the event that the
exporter ships a quantity greater than the amount on which the
guarantee fee was paid (i.e., lower loading tolerance), it may obtain
the additional coverage from CCC, up to the amount of the upward
loading tolerance, by filing for an amendment to the payment guarantee,
and by paying the additional amount of fee applicable. If such
amendment to the payment guarantee is not filed with CCC by the
exporter within 30 days after the date of the last export against the
sales contract, CCC may determine not to reserve the coverage
originally set aside for the exporter.
(f) Ineligible exports. Commodities with a date of export prior to
the date of receipt by CCC of the exporter's telephonic or written
application for a payment guarantee, or with a date of export made
after the final date for export shown on the payment guarantee or any
amendments thereof, are ineligible for guarantee coverage under this
subpart, except where it is determined by the GSM to be in the best
interests of CCC to provide guarantee coverage on such commodities.
(g) Foreign agricultural component. CCC may approve payment
guarantees under this subpart only in connection with sales of United
States agricultural commodities as defined in Sec. 1493.410(x). CCC may
not provide guarantee coverage under this subpart on credit extended
for the value of any foreign agricultural component.
(h) Additional requirements. The payment guarantee may contain such
additional terms, conditions, and limitations as deemed necessary or
desirable by the GSM. Such additional terms, conditions or
qualifications, as stated in the payment guarantee are binding on the
exporter or the exporter's assignee.
(i) Amendments. A request for an amendment of a payment guarantee
may be submitted only by the exporter (with the concurrence of the
assignee, if any). CCC will consider such a request only if the
amendment sought is consistent with this subpart and any applicable
Program Announcements and Notices to Participants. Amendments may
include, but will not be limited to, a change in the credit period and
an extension of time to export. Any amendment to the payment guarantee,
particularly those that result in an increase in CCC's liability under
the payment guarantee, may result in an increase in the guarantee fee.
(Technical corrections or corrections of a clerical error which may be
submitted by the exporter or the exporter's assignee are not viewed as
amendments.)
Sec. 1493.460 Guarantee rates and fees.
(a) Guarantee fee rates. The current payment guarantee fee rate(s)
will be available by Program Announcement.
(b) Calculation of fee. The guarantee fee will be computed by
multiplying the guaranteed value by the guarantee fee rate.
(c) Payment of fee. The exporter shall remit, with his written
application, the full amount of the guarantee fee. Applications will
not be approved until the guarantee fee has been received by CCC. The
exporter's check for the guarantee fee shall be made payable to CCC and
mailed or delivered by courier to the office specified in the Contacts
P/R.
(d) Refunds of fee. Guarantee fees paid in connection with approved
applications will ordinarily not be refundable. CCC's approval of the
application will be final and refund of the guarantee fee will not be
made after approval unless the GSM determines that such refund will be
in the best interest of CCC. If the application for a payment guarantee
is not approved or is approved only for a part of the guarantee
coverage requested, a full or pro rata refund of the fee remittance
will be made.
Sec. 1493.470 Evidence of export.
(a) Report of export. The exporter is required to provide CCC an
evidence of export report for each shipment made under the payment
guarantee. This report must include the following:
(1) Payment guarantee number;
(2) Date of export;
(3) Exporter's sale number;
(4) Exported value;
[[Page 33836]]
(5) Quantity;
(6) A full description of the commodity exported;
(7) Unit sales price received for the commodity exported and the
basis (e.g., FOB, CFR, CIF). Where the unit sales price at export
differs from the unit sales price indicated in the exporter's
application for a payment guarantee, the exporter is also required to
submit a statement explaining the reason for the difference;
(8) Description and value of discounts and allowances, if any;
(9) Number of the Agreement assigned by USDA under any other
program if any portion of the export sale was also approved for
participation in any of the following CCC or USDA export program:
Export Enhancement Program, Dairy Export Incentive Program,
Sunflowerseed Oil Assistance Program, or Cottonseed Oil Assistance
Program; and
(10) The exporter's statement, ``ALL SECTION 1493.480
CERTIFICATIONS ARE BEING MADE IN THIS EVIDENCE OF EXPORT'' which, when
included in the evidence of export by the exporter, will constitute a
certification that it is in compliance with all the requirements set
forth in Sec. 1493.480.
(b) Time limit for submission of evidence of export. The exporter
must provide a written report to the office specified in the Contacts
P/R within 60 calendar days if the export was by rail or truck; or 30
calendar days if the export was by any other carrier. The time period
for filing a report of export will commence upon each date of export of
the commodity covered under a payment guarantee. If the evidence of
export report is not received by CCC within the time period for filing,
the payment guarantee will become null and void only if and only to the
extent that failure to make timely filing resulted, or would be likely
to result, in:
(1) Significant financial harm to CCC;
(2) The undermining of an essential regulatory purpose of the
program;
(3) Obstruction of the fair administration of the program; or
(4) A threat to the integrity of the program. The time limit for
submission of an evidence of export report may be extended if such
extension is determined by the GSM to be in the best interests of CCC.
(c) Export sales reporting. Exporters may have a mandatory
reporting responsibility under section 602 of the Agricultural Trade
Act of 1978, as amended (7 U.S.C. 5712) for exports of wheat and wheat
flour, feed grains, oilseeds, cotton, and other agricultural
commodities and products thereof.
Sec. 1493.480 Certification requirements for the evidence of export.
By providing the statement contained in Sec. 1493.470(a)(10), the
exporter is certifying that the information provided in the evidence of
export report is true and correct and, further, that all requirements
set forth in this section have been or will be met. The exporter will
be required to provide further explanation or documentation with regard
to reports that do not include this statement. If the exporter breaches
or violates these certifications with respect to a SCGP payment
guarantee, CCC will have the right, notwithstanding any other rights
provided under this subpart, to annul guarantee coverage for any
commodities not yet exported and/or to proceed against the exporter.
The exporter, in submitting the evidence of export and providing the
statement set forth in Sec. 1493.470(a)(10), certifies that:
(a) The agricultural commodity or product exported under a payment
guarantee is a United States agricultural commodity or product thereof,
as defined in Sec. 1493.410(x);
(b) Agricultural commodities of the grade, quality and quantity
called for in the exporter's sales contract with the importer have been
exported to the country specified in the payment guarantee;
(c) There is an importer obligation as defined in Sec. 1493.410(n)
to cover the exported value of the commodity exported;
(d) There have not been and will not be any corrupt payments or
extra sales services or other items extraneous to the transaction
provided, financed, or guaranteed in connection with the transaction,
and that the transaction complies with applicable United States law;
and
(e) The information provided pursuant to Sec. 1493.420 has not
changed, the exporter still meets all of the qualification requirements
of Sec. 1493.420 and the exporter will immediately notify CCC if there
is a change of circumstances which would cause it to fail to meet such
requirements.
Sec. 1493.490 Proof of entry.
(a) Diversion. The diversion of commodities covered by a SCGP
payment guarantee to a country other than that shown on the payment
guarantee is prohibited, unless expressly authorized by the GSM.
(b) Records of proof of entry. Exporters must obtain and maintain
records of an official or customary commercial nature and grant
authorized USDA officials access to such documents or records as may be
necessary to demonstrate the arrival of the agricultural commodities
exported in connection with the SCGP in the country that was the
intended country of destination of such commodities. Records
demonstrating proof of entry must be in English or be accompanied by a
certified or other translation acceptable to CCC. Records acceptable to
meet this requirement include an original certification of entry signed
by a duly authorized customs or port official of the importing country,
by the importer, by an agent or representative of the vessel or
shipline which delivered the agricultural commodity to the importing
country, or by a private surveyor in the importing country, or other
documentation deemed acceptable by the GSM showing:
(1) That the agricultural commodity entered the importing country;
(2) The identification of the export carrier;
(3) The quantity of the agricultural commodity;
(4) The kind, type, grade and/or class of the agricultural
commodity; and
(5) The date(s) and place(s) of unloading of the agricultural
commodity in the importing country. (Records of proof of entry need not
be submitted with a claim for loss, except as may be provided in
Sec. 1493.500(b)(4)(ii).)
Sec. 1493.500 Notice of default and claims for loss.
(a) Notice of default. If the importer fails to make payment
pursuant to the terms of the importer obligation, the exporter or the
exporter's assignee must submit a notice of default to CCC as soon as
possible, but not later than 10 calendar days after the date that
payment was due from the importer (the due date). A notice of default
must be submitted in writing to the Treasurer, CCC, at the address
specified in the Contacts P/R. If the exporter or the exporter's
assignee fails to promptly notify CCC of defaults in accordance with
this paragraph, CCC may make the payment guarantee null and void with
respect to any payment(s) applicable to such default. This time limit
may be extended only under extraordinary circumstances and if such
extension is determined by the Controller, CCC, to be in the best
interests of CCC. The notice of default must include:
(1) Payment guarantee number;
(2) Name of the country;
(3) Name of the defaulting importer;
(4) Due date;
(5) Total amount of the defaulted payment due, indicating
separately the amounts for principal and interest;
(6) Date of importer's refusal to pay, if applicable; and
(7) Reason for importer's refusal to pay, if known.
[[Page 33837]]
(b) Filing a claim for loss. A claim for a loss by the exporter or
the exporter's assignee will not be paid if it is made later than six
months from the due date of the defaulted payment. A claim for loss
must be submitted in writing to the Treasurer, CCC, at the address
specified in the Contacts P/R. The claim for loss must include the
following information and documents:
(1) Payment guarantee number;
(2) A certification that the scheduled payment has not been
received;
(3) A certification of the amount of accrued interest in default,
the date interest began to accrue, and the interest rate on the
importer obligation applicable to the claim;
(4) A copy of each of the following documents, with a cover
document containing a signed certification by the exporter or the
exporter's assignee that each page of each document is a true and
correct copy:
(i) The importer obligation;
(ii) Depending upon the method of shipment, the negotiable ocean
carrier or intermodal bill(s) of lading signed by the shipping company
with the onboard ocean carrier date for each shipment, the airway bill,
or, if shipped by rail or truck, the entry certificate or similar
document signed by an official of the importing country;
(iii)(A) The exporter's invoice showing, as applicable, the FAS,
FOB, CFR or CIF values; or
(B) If there was an intervening purchaser, both the exporter's
invoice to the intervening purchaser and the intervening purchaser's
invoice to the importer;
(iv) An instrument, in form and substance satisfactory to CCC,
subrogating to CCC the respective rights of the exporter and the
exporter's assignee, if applicable, to the amount of payment in default
under the applicable export sale. The instrument must reference the
applicable importer obligation; and
(v) A copy of the report(s) of export previously submitted by the
exporter to CCC pursuant to Sec. 1493.470(a).
(c) Subsequent claims for defaults on installments. If the initial
claim is found in good order, the exporter or an exporter's assignee
need only provide all of the required claims documents with the initial
claim relating to a covered transaction. For subsequent claims relating
to failure of the importer to make scheduled installments on the same
export shipment, the exporter or the exporter's assignee need only
submit to CCC a notice of such failure containing the information
stated in paragraph (b) (1), (2), and (3) of this section; an
instrument of subrogation as per paragraph (b)(4)(iv) of this section,
and including the date the original claim was filed with CCC.
Sec. 1493.510 Payment for loss.
(a) Determination of CCC's liability. Upon receipt in good order of
the information and documents required under Sec. 1493.500, CCC will
determine whether or not a loss has occurred for which CCC is liable
under the applicable payment guarantee, this subpart and any applicable
supplemental Program Announcements and Notices to Participants. If CCC
determines that it is liable to the exporter and/or the exporter's
assignee, CCC will pay the exporter or the exporter's assignee in
accordance with paragraphs (b) and (c) of this section.
(b) Amount of CCC's liability. Subject to a determination by CCC
with respect to prevailing U.S. market value pursuant to
Sec. 1493.450(a) of this part, CCC's maximum liability for any claims
for loss submitted with respect to any payment guarantee, not including
any late interest payments due in accordance with paragraph (c) of this
section, will be limited to the lesser of:
(1) The guaranteed value as stated in the payment guarantee, plus
eligible interest; or
(2) The guaranteed percentage (as indicated in the payment
guarantee) of the exported value indicated in the evidence of export,
plus eligible interest.
(c) Late interest payment. If a claim is not paid within one day of
receipt of a claim which CCC has determined to be in good order, late
interest will accrue in favor of the exporter or the exporter's
assignee beginning with the first day after the day of receipt of a
claim found by CCC to be in good order and continuing until and
including the date that payment is made by CCC. Late interest will be
paid on the guaranteed amount, as determined by paragraphs (b)(1) and
(2) of this section, and will be calculated based on the average
investment rate of the most recent Treasury 91-day bill auction as
announced by the Department of Treasury as of the due date.
(d) Accelerated payments. CCC will pay claims only for losses on
amounts not paid as scheduled. CCC will not pay claims for amounts due
under an accelerated payment clause in the export sales contract or the
importer obligation unless it is determined to be in the best interests
of CCC by the Controller, CCC. Notwithstanding the foregoing, CCC at
its option may declare the entire amount of the unpaid balance, plus
accrued interest, in default and make payment to the exporter or the
exporter's assignee in addition to such other claimed amount as may be
due from CCC.
(e) Action against the assignee. Notwithstanding any other
provision in this subpart to the contrary, with regard to commodities
covered by a payment guarantee, CCC will not, except pursuant to a
determination under Sec. 1493.450(a) of this part, hold the assignee
responsible or take any action or raise any defense against the
assignee for any action, omission, or statement by the exporter of
which the assignee has no knowledge, provided that:
(1) The exporter complies with the reporting requirements under
Secs. 1493.470 and 1493.480, excluding post-export adjustments (i.e.,
corrections to evidence of export reports); and
(2) The exporter or the exporter's assignee furnishes the
statements and documents specified in Sec. 1493.500.
Sec. 1493.520 Recovery of losses.
(a) Notification. Upon payment of loss to the exporter or the
exporter's assignee, CCC will notify the importer of CCC's rights under
the subrogation agreement to recover all moneys in default.
(b) Receipt of monies. (1) In the event that monies for a defaulted
payment are recovered by the exporter or the exporter's assignee from
the importer or any other source whatsoever, such monies shall be
immediately paid to the Treasurer, CCC. If such monies are not received
by CCC within 15 business days from the date of recovery by the
exporter or the exporter's assignee, the exporter or the exporter's
assignee will owe to CCC interest from the date of recovery to the date
of receipt by CCC. This interest will be calculated based on the latest
average investment rate of the most recent Treasury 91-day bill
auction, as announced by the Department of Treasury, in effect on the
date of recovery and will accrue from such date to the date of payment
by the exporter or the exporter's assignee to CCC. Such interest will
be charged only on CCC's share of the recovery.
(2) If CCC recovers monies that should be applied to a payment
guarantee for which a claim has been paid by CCC, CCC will pay the
holder of the payment guarantee its pro rata share immediately,
provided that the required information necessary for determining pro
rata distribution has been furnished. If payment is not made by CCC
within 15 business days from the date of recovery or 15 business days
from receiving the required information for determining pro rata
distribution, whichever is later, CCC will pay interest
[[Page 33838]]
calculated on the latest average investment rate of the most recent
Treasury 91-day bill auction, as announced by the Department of
Treasury, in effect on the date of recovery and such interest will
accrue from such date to the date of payment by CCC. The interest will
apply only to the portion of the recovery payable to the holder of the
payment guarantee.
(c) Allocation of recoveries. Recoveries made by CCC from the
importer, and recoveries received by CCC from the exporter, the
exporter's assignee, or any other source whatsoever, will be allocated
by CCC to the exporter or the exporter's assignee and to CCC on a pro
rata basis determined by their respective interests in such recoveries.
The respective interest of each party will be determined on a pro rata
basis, based on the combined amount of principal and interest in
default. Once CCC has paid out a particular claim under a payment
guarantee, CCC pro rates any collections it receives and shares these
collections proportionately with the holder of the guarantee until both
CCC and the holder of the guarantee have been reimbursed in full.
Appendix A to Sec. 1493.520--Illustration of Pro Rata Allocation of
Recoveries--provides an example of the methodology used by CCC in
applying this paragraph (c).
(d) Liabilities to CCC. Notwithstanding any other terms of the
payment guarantee, the exporter may be liable to CCC for any amounts
paid by CCC under the payment guarantee when and if it is determined by
CCC that the exporter has engaged in fraud, or has been or is in
material breach of any contractual obligation, certification or
warranty made by the exporter for the purpose of obtaining the payment
guarantee or for fulfilling obligations under SCGP. Further, the
exporter's assignee may be liable to CCC for any amounts paid by CCC
under the payment guarantee when and if it is determined by CCC that
the exporter's assignee has engaged in fraud or otherwise violated
program requirements.
(e) Good faith. The violation by an exporter of the certifications
in Secs. 1493.440(b) and 1493.480(d) or the failure of an exporter to
comply with the provisions of Secs. 1493.490 or 1493.530(e) will not
affect the validity of any payment guarantee with respect to an
assignee which had no knowledge of such violation or failure to comply
at the time such exporter applied for the payment guarantee or at the
time of assignment of the payment guarantee.
(f) Cooperation in recoveries. Upon payment by CCC of a claim to
the exporter or the exporter's assignee, the exporter or the exporter's
assignee will cooperate with CCC to effect recoveries from the
importer.
Appendix A to Sec. 1493.520--Illustration of Pro Rata Allocation of
Recoveries
The following example illustrates CCC's policy, as set forth in
Sec. 1493.520(c), regarding pro rata sharing of recoveries made for
claims filed under the SCGP. A typical case might be as follows:
1. The U.S. exporter enters into a $200,000, 180 day credit
arrangement with the importer calling for two equal payments of
principal and two equal payments of interest at a rate of 10 percent
per annum and a penalty interest rate of 12 percent per annum (basis
360 days) on overdue amounts until the overdue amount is paid.
(Basis for interest calculation may be 360 or 365 days.)
2. The importer fails to make the final principal payment of
$100,000 and an interest payment of $2,500.00 (10% per annum for 90
days on $100,000), both due on January 31.
3. On February 10, the U.S. exporter files a claim in good order
with CCC.
4. CCC's guarantee states that CCC's maximum liability is
limited to 60 percent of the principal amount due ($60,000) and
interest at a rate of 8 percent per annum (basis 365 days) on 60
percent of the principal outstanding ($1,183.56) (8% per annum for
90 days on $60,000). (CCC's basis for interest calculation is 365
days.)
5. CCC pays the claim on February 22.
6. The average investment rate of the most recent 91-day
Treasury Bill auction average which has been published by the
Department of Treasury in effect on the date of nonpayment by CCC
(January 31) is 7 percent. (CCC's late interest rate.)
Computation of Obligations
Using the above case, CCC's payment to the holder of the payment
guarantee would be computed as follows:
1. CCC's Obligation under the Payment Guarantee:
(a) Principal coverage--(60% $100,000).............. $60,000.00
(b) Interest coverage--(8% per annum for 90 days on
$60,000, basis 365 days)........................... 1,183.56
---------------
$61,183.56
(c) Late interest due from CCC (7% per annum for 11
days on $61,183.56, basis 365 days)................ 129.07
---------------
(d) Amount paid by CCC on February 22............... $61,312.63
2. Importer's obligation under the importer obligation:
(a) Principal due January 31........................ $100,000.00
Interest due January 31.........................
(10% per annum for 90 days on $100,000, basis
360 days)...................................... 2,500.00
---------------
Amount owed by importer as of January 31........ $102,500.00
(b) Penalty interest due (12% per annum for 22 days
on $102,500.00, basis 360 days).................... 751.67
(c) Amount owed by importer as of February 22....... $103,251.67
3. Amount of importer's obligation not covered by CCC's
payment guarantee: $41,939.04 ($103,251.67-$61,312.63).
Computation of Pro Rata Sharing in Recovery of Losses
In establishing each party's respective interest in any recovery
of losses, the total amount due under the importer obligation would
be determined as of the date the claim is paid by CCC (February 22).
Using the above example in which the amount owed by the importer is
$103,251.67, CCC would be entitled to 59.38 percent ($61,312.63
divided by $103,251.67) and the holder of the payment guarantee
would be entitled to 40.62 percent ($41,939.04 divided by
$103,251.67) of any recoveries of losses after settlement of the
claim. Since in this example, the losses were recovered after the
claim has been paid by CCC, Sec. 1493.520(b) would apply.
Sec. 1493.530 Miscellaneous provisions.
(a) Assignment. (1) The exporter may assign the proceeds which are,
or may become, payable by CCC under a payment guarantee or the right to
such proceeds only to a financial institution in the U.S. The
assignment must cover all amounts payable under the payment guarantee
not already paid, may not be made to more than one party, and may not,
unless approved in advance by CCC, be:
(i) Made to one party acting for two or more parties; or
(ii) Subject to further assignment.
(2) An original and two copies of the written notice of assignment
signed by the parties thereto must be filed by the
[[Page 33839]]
assignee with the Treasurer, CCC, at the address specified in the
Contacts P/R.
(3) Receipt of the notice of assignment will ordinarily be
acknowledged to the exporter and its assignee in writing by an officer
of CCC. In cases where a financial institution is determined to be
ineligible to receive an assignment, in accordance with paragraph (b)
of this section, CCC will provide notice thereof, to the financial
institution and to the exporter issued the payment guarantee, in lieu
of an acknowledgment of assignment.
(4) The name and address of the assignee must be included on the
written notice of assignment.
(b) Ineligibility of financial institutions to receive an
assignment. A financial institution will be ineligible to receive an
assignment of proceeds which may become payable under a payment
guarantee if, at the time of assignment, such financial institution:
(1) Is not in sound financial condition, as determined by the
Treasurer of CCC;
(2) Owns or controls the entity issuing the importer obligation; or
(3) Is owned or controlled by an entity that owns or controls the
entity issuing the importer obligation.
(c) Ineligibility of financial institutions to receive proceeds. A
financial institution will be ineligible to receive proceeds payable
under a payment guarantee approved by CCC if such financial
institution:
(1) At the time of assignment of a payment guarantee, is not in
sound financial condition, as determined by the Treasurer of CCC;
(2) Owns or controls the entity issuing the importer obligation; or
(3) Is owned or controlled by an entity that owns or controls the
entity issuing the importer obligation.
(d) Alternative satisfaction of payment guarantees. CCC may, with
the agreement of the exporter (or if the right to proceeds payable
under the payment guarantee has been assigned, with the agreement of
the exporter's assignee), establish procedures, terms and/or conditions
for the satisfaction of CCC's obligations under a payment guarantee
other than those provided for in this subpart if CCC determines that
those alternative procedures, terms, and/or conditions are appropriate
in rescheduling the debts arising out of any transaction covered by the
payment guarantee and would not result in CCC paying more than the
amount of CCC's obligation.
(e) Maintenance of records and access to premises. (1) For a period
of five years after the date of expiration of the coverage of a payment
guarantee, the exporter or the exporter's assignee, as applicable, must
maintain and make available all records pertaining to sales and
deliveries of and extension of credit for agricultural commodities
exported in connection with a payment guarantee, including those
records generated and maintained by agents, intervening purchasers, and
related companies involved in special arrangements with the exporter.
The Secretary of Agriculture and the Comptroller General of the United
States, through their authorized representatives, must be given full
and complete access to the premises of the exporter or the exporter's
assignee, as applicable, during regular business hours from the
effective date of the payment guarantee until the expiration of such
five-year period to inspect, examine, audit, and make copies of the
exporter's, exporter's assignee's, agent's, intervening purchaser's, or
related company's books, records and accounts concerning transactions
relating to the payment guarantee, including, but not limited to,
financial records and accounts pertaining to sales, inventory,
processing, and administrative and incidental costs, both normal and
unforeseen. During such period, the exporter or the exporter's assignee
may be required to make available to the Secretary of Agriculture or
the Comptroller General of the United States, through their authorized
representatives, records that pertain to transactions conducted outside
the program, if, in the opinion of the GSM, such records would pertain
directly to the review of transactions undertaken by the exporter in
connection with the payment guarantee.
(2) The exporter must maintain the proof of entry required by
Sec. 1493.490(b), and must provide access to such documentation if
requested by the Secretary of Agriculture or his authorized
representative for the five-year period specified in paragraph (e)(1)
of this section.
(f) Responsibility of program participants. It is the
responsibility of all program participants to review, and fully
acquaint themselves with, all regulations, Program Announcements, and
Notices to Participants issued pursuant to this subpart. Applicants for
payment guarantees are hereby on notice that they will be bound by any
terms contained in applicable Program Announcements or Notices to
Participants issued prior to the date of approval of a payment
guarantee.
(g) Submission of documents by principal officers. All required
submissions, including certifications, applications, reports, or
requests (i.e., requests for amendments), by exporters or exporters'
assignees under this subpart must be signed by a principal or officer
of the exporter or exporter's assignee or their authorized designee(s).
In cases where the designee is acting on behalf of the principal or the
officer, the signature must be accompanied by: Wording indicating the
delegation of authority or, in the alternative, by a certified copy of
the delegation of authority; and the name and title of the authorized
person or officer. Further, the exporter or exporter's assignee must
ensure that all information/reports required under these regulations
are submitted within the required time limits. If requested in writing,
CCC will acknowledge receipt of a submission by the exporter or the
exporter's assignee. If acknowledgment of receipt is requested, the
exporter or exporter's assignee must submit an extra copy of each
document and a stamped self-addressed envelope for return by U.S. mail.
If courier services are desired for the return receipt, the exporter or
exporter's assignee must also submit a self-addressed courier service
order which includes the recipient's billing code for such service.
(h) Officials not to benefit. No member of or delegate to Congress,
or Resident Commissioner, shall be admitted to any share or part of the
payment guarantee or to any benefit that may arise therefrom, but this
provision shall not be construed to extend to the payment guarantee if
made with a corporation for its general benefit.
(i) OMB control number assigned pursuant to the Paperwork Reduction
Act. The information requirements contained in this part (7 CFR part
1493, subpart D) have been approved by the Office of Management and
Budget (OMB) in accordance with the provisions of 44 U.S.C. Chapter 35
and have been assigned OMB Control Number 0551-0037.
Signed this 25th day of June 1996 at Washington, DC.
Mary T. Chambliss,
Acting General Sales Manager, Foreign Agricultural Service and Acting
Vice President, Commodity Credit Corporation.
[FR Doc. 96-16674 Filed 6-28-96; 8:45 am]
BILLING CODE 3410-10-P
