E9-22661. Solicitation of Input from Stakeholders on Revised Fees for the Export Credit Guarantee (GSM-102) Program

AGENCY:

Foreign Agricultural Service and Commodity Credit Corporation, USDA.

ACTION:

Notice and request for comments.

SUMMARY:

This notice solicits comments on proposed revisions to the fee rate schedule for the U.S. Department of Agriculture (USDA), Commodity Credit Corporation (CCC) Export Credit Guarantee Program (GSM-102). The Food, Conservation, and Energy Act of 2008 (the Act) amended certain GSM-102 program provisions related to fees. CCC's goals in proposing this revised fee structure are to create fees more commensurate with risk, generate additional program revenue in fiscal year (FY) 2010 to offset program costs, and consider allowing program participation by riskier countries.

DATES:

Comments on this notice must be received by October 21, 2009 to be assured of consideration.

ADDRESSES:

You may submit comments by any of the following methods:

• E-mail: [e-mail].
• Fax: [phone]; “Attention: GSM-102 Fee Comments.”
• Mail: P. Mark Rowse, Director, Office of Trade Programs, Credit Programs Division, Foreign Agricultural Service, U.S. Department of Agriculture, 1400 Independence Avenue, SW., Mail Stop 1025, Washington, DC 20250-1025.
• Hand Delivery/Courier: 1250 Maryland Avenue, SW., Suite 420, Washington, DC 20024.

All comments received will be available for public inspection at the above address during regular business hours.

FOR FURTHER INFORMATION CONTACT:

P. Mark Rowse, Director, Office of Trade Programs, Credit Programs Division, Foreign Agricultural Service, U.S. Department of Agriculture, 1400 Independence Avenue, SW., Mail Stop 1025, Washington, DC 20250-1025; telephone: [phone].

SUPPLEMENTARY INFORMATION:

Background and Purpose

The GSM-102 program is currently authorized under the Agricultural Trade Act of 1978, as amended. The GSM-102 program provides credit guarantees to encourage financing of commercial exports of U.S. agricultural products on competitive credit terms. The CCC currently has authorized availability of guarantees for transactions in at least 176 countries and regions, with 2,900 exporters eligible to participate. Since 1981, CCC has issued nearly $92 billion in credit guarantees under the GSM-102 program. Under the terms of the guarantee, typically, 98 percent of principal and a portion of interest are covered on credit terms of up to 3 years. By financing less than 100 percent of the exported value, CCC encourages risk-sharing by the exporter or the exporter's assignee.

The issuance of the guarantee is subject to a fee paid by the applicant (the exporter). In July 2005, USDA initiated a risk-based fee structure. A fee is charged based on the tenor (length of credit period) of the guarantee and terms for principal payment installments, whether 6 months or annually, and the risk grade of the obligor country. CCC assigns a numeric risk category (0-7, lowest to highest risk) to each obligor country.

The Food, Conservation, and Energy Act of 2008 (the Act) amended certain GSM-102 program provisions related to fees. The Act repealed the 1 percent cap on fees. The Act also requires the Secretary, in carrying out the GSM-102 program, to “work with the industry to ensure, to the maximum extent practicable, that risk-based fees associated with the guarantees cover, but do not exceed, the operating costs and losses over the long-term.” The Act defines the “long term” as “a period of 10 or more years.”

CCC intends to revise the current fee structure, which has been in place since July 2005. The revised fee structure is designed to accomplish the following goals:

1. Create a fee structure more commensurate with risk. The 1 percent fee cap in effect prior to the Act resulted in a program fee structure with disproportionately high fees for low-risk transactions and disproportionately low fees for higher-risk transactions. CCC proposes to correct this imbalance by reducing fees for transactions with lower risk countries and shorter tenors and increasing fees for certain higher risk countries and longer tenors. In doing so, CCC is responding to many program participants who have noted that fees for low-risk transactions are prohibitively expensive compared to fees for higher-risk transactions.

2. Generate additional program revenue in fiscal year (FY) 2010 to offset program costs, as measured by budget subsidy. Although budget subsidy costs are re-estimated each fiscal year, the Office of Management and Budget's most recent calculations of estimated budget subsidy for FY 2008 and FY 2009 are 3.05 percent and 0.87 percent, respectively. Although the initial budget subsidy estimate for FY 2010 is −1.21 percent (indicating revenues are projected to exceed costs), CCC must offset any costs that might ultimately be incurred in FY 2008 and FY 2009 to meet the provisions of the Act.

3. Consider allowing program participation by riskier countries. When CCC implemented risk-based fees in July 2005, the highest-risk countries were eliminated from programming because the 1 percent fee cap did not permit CCC to charge fees commensurate with the associated risk. With the elimination of the fee cap, CCC can now consider allowing some of these countries to participate, charging higher fees to offset risk. The chart below shows the proposed fee schedule:

GSM-102 Program: Proposed Premium per U.S. $100 of Coverage

Risk category
Tenor	0	1	2	3	4	5	6	7
Annual Payment of Principal
9 months	$0.087	$0.130	$0.191	$0.297	$0.429	$0.627	$0.850	$1.116
12 months	0.116	0.173	0.254	0.394	0.569	0.832	1.127	1.480
15 months	0.125	0.185	0.270	0.417	0.599	0.874	1.180	1.544
18 months	0.148	0.213	0.308	0.469	0.671	0.970	1.303	1.694
24 months	0.212	0.292	0.415	0.617	0.873	1.241	1.650	2.115
30 months	0.249	0.340	0.482	0.712	1.000	1.408	1.856	2.353
36 months	0.302	0.413	0.584	0.855	1.194	1.656	2.158	2.695
Semi-Annual Payment of Principal
30 days	0.010	0.015	0.021	0.033	0.048	0.070	0.095	0.125
60 days	0.020	0.029	0.043	0.067	0.096	0.141	0.191	0.250
90 days	0.029	0.044	0.064	0.100	0.144	0.211	0.286	0.376
4 months	0.039	0.058	0.086	0.133	0.192	0.281	0.381	0.500
6 months	0.058	0.087	0.128	0.199	0.287	0.420	0.569	0.748
9 months	0.068	0.102	0.149	0.231	0.334	0.489	0.662	0.870
12 months	0.087	0.130	0.191	0.296	0.427	0.625	0.847	1.112
15 months	0.102	0.150	0.219	0.338	0.486	0.707	0.955	1.249
18 months	0.129	0.184	0.266	0.403	0.576	0.831	1.115	1.447
24 months	0.173	0.240	0.343	0.512	0.725	1.035	1.378	1.770
30 months	0.218	0.299	0.424	0.627	0.882	1.241	1.637	2.076
36 months	0.262	0.358	0.506	0.743	1.040	1.447	1.891	2.371

For comparison purposes, the current GSM-102 fee structure may be found at http://www.fas.usda.gov/​excredits/​gsm102fees.html.

Implementation Plans

CCC will consider stakeholder input in determining the revised fee structure. CCC plans to implement a revised fee structure no later than September 30, 2009, so that any revised fees will be in effect for the FY 2010 GSM-102 program. Review of the fee structure will be an on-going process. CCC intends to make future revisions as internal and external events warrant, including in response to budget subsidy re-estimates, with the goal of being responsive to comments from program participants and meeting the requirements of the Act.

Signed at Washington, DC, on Sept. 3, 2009.

Michael V. Michener,

Administrator, Foreign Agricultural Service, and Vice President, Commodity Credit Corporation.