[Federal Register Volume 62, Number 153 (Friday, August 8, 1997)]
[Rules and Regulations]
[Pages 42651-42664]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-20761]
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DEPARTMENT OF AGRICULTURE
Commodity Credit Corporation
7 CFR Part 1493
RIN 0551-AA35
CCC Facility Guarantee Program (FGP)
AGENCY: Commodity Credit Corporation, USDA.
ACTION: Interim rule with request for comment.
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SUMMARY: This interim rule provides for facility payment guarantees to
be issued by the Commodity Credit Corporation (CCC). The guarantees are
to be issued in connection with sales of goods or services to establish
or improve agricultural-related facilities in emerging markets to
expand exports of U.S. agricultural commodities or products.
DATES: Effective date: August 8, 1997. Comment date: Comments due on or
before October 7, 1997.
ADDRESSES: Comments must be submitted in writing to L.T. McElvain,
[[Page 42652]]
Director, CCC Operations Division, Foreign Agricultural Service, U.S.
Department of Agriculture (USDA), Stop 1035, Washington, DC 20250-1035;
FAX (202) 720-2949. All comments received will be available for public
inspection at the U.S. Department of Agriculture, Room 4523-S, 1400
Independence Avenue, SW, Washington, DC 20250 during regular business
hours.
FOR FURTHER INFORMATION CONTACT: William S. Hawkins, Branch Chief, or
Mark A. Rasmussen, Agricultural Marketing Specialist, Export Programs
Survey & Review Branch, CCC Operations Division, Foreign Agricultural
Service, U.S. Department of Agriculture (USDA), Stop 1035, Washington,
DC 20250-1035; telephone (202) 720-3241 or 720-1537; FAX (202) 720-
0938.
SUPPLEMENTARY INFORMATION:
Executive Order 12291
This rule has been determined to be 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 since 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).
Environmental Evaluation
The Foreign Agricultural Service (FAS) is excluded from the
requirements of preparing procedures to implement the National
Environmental Policy Act and is categorically excluded from the
preparation of an Environmental Assessment or Environmental Impact
Statement unless the Administrator of FAS determines that an action may
have a significant environmental effect. 7 CFR 1b.4(b)(7). The
Administrator has made no such determination with respect to this
action.
Paperwork Reduction Act
In accordance with provisions of the Paperwork Reduction Act of
1995, CCC will submit an emergency information collection request (ICR)
for the reinstatement of the Facility Guarantee Program (FGP)
submission.
Title: The Facility Guarantee Program.
OMB Control Number: 0551-0032.
Type of Request: Reinstatement, with change, of previously-approved
collection for which approval has expired.
Abstract: The information to be collected under the Office of
Management and Budget (OMB) Number 0551-0032 is needed to enable the
CCC to effectively administer the FGP. The information collection will
be used by the CCC to determine the eligibility of applications. CCC
considers this information to be essential to prudent eligibility
determinations. Failure to make sound decisions in providing payment
guarantees for the sale of goods and services may negatively impact
exports of U.S. agricultural commodities and products.
The FGP information collection is similar to those for the Export
Credit Guarantee (GSM-102) Program and the Intermediate Export Credit
Guarantee (GSM-103) Program (OMB control number 0551-004). The
information collection for the FGP differs primarily as follows:
(1) The applicant, in order to receive a payment guarantee,
provides information evidencing that the exported goods and services
used to develop improved infrastructure will primarily benefit exports
of U.S. agricultural commodities and products; (2) The applicant is
required to certify that the value of non-U.S. components of goods and
services is less than 50 percent of the contract value covered under
the payment guarantee.
Estimate of Burden: The public reporting burden for this
information collection is estimated to average 0.6 hours per response.
Respondents: Agricultural equipment manufacturers and exporters.
Estimated Number of Respondents: 25.
Estimated Number of Responses per Respondent: 11.
Estimated Total Annual Burden on Respondents: 159.
Topics for comments include: (a) Whether the collection of
information is necessary for the proper performance of the functions of
the CCC, including whether the information will have practical utility;
(b) the accuracy of the CCC's estimate of burden including the validity
of the methodology and assumptions used; (c) ways to enhance the
quality, utility and clarity of the information to be collected; and
(d) ways to minimize the burden of the collection of information on
those who are to respond, including the use of appropriate automated,
electronic, mechanical, or other technological collection techniques or
other forms of information technology.
Comments should be submitted in accordance with the Dates section
above and sent to the Desk Officer for Agriculture, Office of
Information and Regulatory Affairs, Office of Management and Budget,
Washington, D.C. 20503; and to L.T. McElvain, Director, CCC Operations
Division, Foreign Agricultural Service, U.S. Department of Agricultural
(USDA), Stop 1035, Washington, DC 20250-1035. Copies of this
information collection can be obtained from Valerie Countiss, Agency
Information Collection Coordinator, at telephone (202) 720-6713.
OMB is required to make a decision concerning the collection(s) of
information contained in these interim regulations between 30 and 60
days after the publication of this document in the Federal Register.
Therefore, a comment to OMB is best assured of having its full effect
if OMB receives it within 30 days of publication. This does not affect
the deadline for the public to comment to the Department of Agriculture
on the FGP regulations.
All responses will be summarized and included in the request for
OMB approval. All comments will also become a matter of public record.
Executive Order 12778
This interim rule has been reviewed under Executive Order 12778.
Civil Justice Reform. The interim rule has preemptive effect with
respect to any state or local laws, regulations, or policies which
conflict with the provisions of this rule. The rule does not have a
retroactive effect. The interim rule requires that certain
administrative remedies be exhausted before suit may be filed.
Summary of Benefit-Cost Analysis
The benefit-cost analysis identifies and estimates potential
benefits and costs attributed to provisions of this interim rule, which
has been designated as ``Significant.'' These provisions include
application requirements and program procedures. The changes in the
program made by this rule are expected to have only limited economic
effect and are not expected to increase administrative workload of the
Federal Government. Provisions of the Federal Agriculture Improvement
and Reform Act of 1996 (the 1996 Act) which target emerging markets
lower estimated subsidy costs by $2.5 million in FY 1997. Proposed
foreign content
[[Page 42653]]
provisions will provide participants with fewer restrictions when
negotiating terms and conditions of a sales transaction.
Request for Public Comment
The need for immediate action by CCC is predicated by two of the
1996 Act's amendments to the Food, Agriculture, Conservation, and Trade
Act of 1990, as amended (1990 Act). The 1996 Act (1) expanded the field
of eligible countries to include emerging markets and (2) provided the
Secretary of Agriculture the authority to determine and select the
emerging markets. These changes reflect the importance of CCC being
able to quickly respond to fleeting opportunities for increasing U.S.
agricultural exports to emerging market countries, often in volatile
and unpredictable circumstances, while at the same time enhancing and
helping stabilize the rural business systems of those countries whose
economies are in transition.
In addition, in order to implement a program to make available such
credit in a timely manner and in a manner that will provide a more
uniform distribution of funds in each fiscal year, it has been
determined that this rule shall become effective upon publication in
the Federal Register. However, comments are requested with respect to
the provisions of this rule and will be taken into consideration in the
development of the final rule. Comments should be submitted to the
person indicated in the section titled ADDRESSES.
Background
A. Statutory Authority
CCC provides export credit guarantees for export sales of U.S.
agricultural commodities under the Export Credit Guarantee (GSM-102)
program and the Intermediate Export Credit Guarantee (GSM-103) program.
The programs are authorized by section 202 of the Agricultural Trade
Act of 1978 as amended (1978 Act). Section 1542(a) of the 1990 Act
provides that CCC make available, for fiscal years 1996 through 2002,
not less than $1 billion in direct credits or export credit guarantees
for agricultural exports to emerging markets available under the 1978
Act. A portion of such credit guarantees must, in accordance with
section 1542(b) of the 1990 Act, be made available for the export of
goods and services for agricultural facilities. Guarantees are to be
made available if the Secretary of Agriculture determines that such
guarantees will primarily promote the export of United States
agricultural commodities and products thereof. Specifically, eligible
projects must provide for (1) the establishment or improvement of
agricultural facilities in emerging markets, or (2) for the provision
of goods or services in emerging markets, by U.S. persons to improve
handling, marketing, processing, storage, or distribution of imported
agricultural commodities or products in such markets. The phrase
``establishment or improvement of facilities'' allows for varied types
of projects ranging from the sale of equipment (e.g., refrigeration,
processing, transportation) and other goods needed to alleviate
impediments to increasing export sales of U.S. agricultural
commodities, to providing services, such as equipment installation,
testing, and training to facilitate achievement of the same purposes.
Section 1542(b) further requires CCC to give priority to projects
that (1) encourage the privatization of the agricultural sector in
emerging markets, (2) benefit private farms or cooperatives in emerging
markets, and (3) are supported by nongovernmental persons who agree to
assume a relatively larger share of the costs.
Section 1542(f) of the 1990 Act defines ``emerging market'' as any
country that the Secretary of Agriculture determines (1) is taking
steps towards a market-oriented economy through food, agriculture, or
rural business sectors of the economy of the country and (2) has the
potential to provide a viable and significant market for United States
agricultural commodities or their products.
B. Legislative History
CCC published an FGP interim rule on March 1, 1993, (58 FR 11786)
in response to the 1990 Act. The 1990 Act required CCC to develop an
export credit guarantee program for facilities in countries that were
determined by the President to be emerging democracies. However, the
FGP was not made operational before the authority expired on September
31, 1995. Congress changed the targeting of the FGP in the 1996 Act to
countries determined by the Secretary of Agriculture to be emerging
markets. The interim rule was deleted effective November 18, 1994 when
CCC revised 7 CFR part 1493 and issued a final rule on the GSM-102 and
GSM-103 programs.
C. Summary of Comments--1993 Interim Rule
The Commodity Credit Corporation (CCC) received eleven comments
from eight different sources in response to the Facility Guarantee
Program (FGP) Interim Rule published March 1, 1993 in the Federal
Register. The commenters included three equipment manufacturers, three
animal health product manufacturers, the Office of the Inspector
General, and a market research firm which submitted three separate
responses.
Three comments were project proposals that did not comment on the
regulatory aspects of the rule.
Three comments addressed the definition of ``acceptable
substitute.'' This definition was required by law in the 1990 Farm Act
to be included in the FGP rule. The commenters' believed that CCC
misinterpreted the intent of the law and requested that CCC change the
definition of acceptable substitute. This recommendation now is
unnecessary. The term acceptable substitute was deleted from the 1996
Farm Act. Accordingly, CCC has dropped the definition from the rule
under consideration.
One commenter suggested that CCC explain in the preamble of the
regulation how CCC arrived at defining ``close geographical location of
countries'' to be 1,000 miles from the target country. The law states
that CCC may not provide credit guarantees to projects that may
primarily benefit countries in close geographical location to the
target country. CCC believes this definition does not improve the
program and has dropped this definition from the interim rule. The
objective of the FGP is to primarily benefit U.S. agricultural exports.
In meeting this objective, no country, except the U.S., without regard
to geographic proximity to the targeted emerging market, may primarily
benefit from a FGP project.
One commenter requested that CCC provide 100 percent guarantee
coverage on principal and interest for letters of credit extended by a
foreign bank. CCC disagrees. If CCC provides 100 percent coverage on
principal and interest it loses the risk sharing mechanism inherent in
CCC's export credit programs. Risk sharing is necessary because CCC
does not have the resources required to perform project specific
financial and risk analysis. Therefore, to keep CCC's default rate at
acceptable levels, risk sharing is essential. CCC believes that risk
sharing in the FGP results in more efficient use of its limited
resources.
One commenter requested CCC provide a statement in the regulations
to include grain/food processing equipment as eligible projects under
the FGP. The commenter indicated that the interim rule was unclear on
this point. CCC disagrees. The regulations provide
[[Page 42654]]
that the FGP may guarantee credit extended for sales of equipment and
services that improve handling, processing, storage or distribution of
imported agricultural commodities. This program purpose clearly
addresses sales of grain/food processing equipment.
One commenter also suggested that CCC qualify Russian banks other
than those qualified to participate under the U.S. Export Import Bank
(Eximbank) programs. CCC reviews foreign banks against an established
set of eligibility criteria. These criteria may include financial and
economic factors similar to those reviewed by Eximbank. CCC qualifies
all foreign banks expressing a desire to participate in our programs if
they meet these criteria.
One commenter recommended that CCC reach out to the food processing
industries and agribusiness sector in target countries to promote the
use of the program. The commenter pointed out that linking agricultural
equipment sales to commodity sales may benefit the U.S. equipment
manufacturers and agricultural export industries. CCC agrees and will
endeavor to promote the FGP to these sectors in targeted emerging
markets.
One commenter suggested that CCC adopt a competitive bidding
process for projects to ensure the most cost effective bidder on a
project receives the guarantee. CCC disagrees. This suggestion
indicates a fundamental misunderstanding of the program. CCC does not
plan to solicit FGP applications for specific types of projects. FGP
applicants will propose projects and CCC will determine if such
projects meet the criteria of the program.
One commenter suggested that project requirements (the information
requested by CCC to determine if a FGP guarantee will be approved) be
published in the regulation and not the program announcement. CCC
agrees and has included such requirements in the regulation (7 CFR
1493.240 and 1493.250).
One commenter suggested that CCC explain why the application fee is
$200 in the preamble of the interim rule. CCC agrees. Simply, the $200
application fee serves as a disincentive to the submission of
speculative applications, and a means to defray a portion of CCC's
administrative costs.
One commenter requested the FGP application include detailed
financial information on the buyer. The commenter also specifically
recommended the application require plans for servicing the guaranteed
loan through field inspections, obtaining periodic financial
statements, a description of any liens against the buyer, information
concerning litigation against and defaults by the buyer, and the use of
consultants in preparing the application. The commenter suggested
further that the application require a description of planned insurance
coverage (i.e. life, hazard, flood) and the names of foreign regulatory
agencies that would require permits, licenses, or other clearances that
would impact the facility. CCC disagrees. The commenter's concern
appears to be in regard to assessing buyer or project risk. Assessing
the ability of the buyer to successfully manage a facility or whether
the facility will succeed financially is the role of the foreign bank.
CCC's guarantee covers the risk of default of the foreign bank on the
repayment obligation to the exporter or their U.S. bank assignee.
Two commenters referred to the application requirements concerning
evidence of primary benefits to U.S. agricultural exports. One
commenter recommended that the application requirements concerning
primary benefit not overburden the applicant. The commenter recommended
that CCC streamline paperwork requirements and reduce project approval
lead time. The second commenter recommended that the interim rule
require applicants to provide evidence of how a project proposal will
benefit U.S. agricultural exports. CCC believes that the overall goal
of the FGP is to promote U.S. agricultural exports. Sufficient
information must be required from applicants in order for CCC to fully
evaluate project proposals and the effects projects will have on U.S.
agricultural exports. CCC has made many improvements in the interim
rule to streamline the application process in comparison to the process
outlined by the 1993 interim rule. However, CCC remains open to
recommendations that specifically address how CCC may streamline the
application review procedures and reduce project proposal lead time.
One commenter suggested that CCC request information from the
applicant regarding the procurement funding or guarantees from sources
outside of CCC. CCC agrees and has included this recommendation in the
regulation (Sec. 1493.240(a)(22)).
One commenter recommended that the application include the names of
attorneys, accountants and other parties engaged in preparing the
application. CCC disagrees. Applications submitted under all CCC export
programs are required to be signed by a principal of the company
applying for a guarantee. CCC believes this is sufficient in addressing
any concerns regarding the veracity of the information contained in the
application.
One commenter suggested CCC expand the definition of a ``U.S.
person'' so that CCC may determine if the applicant fulfills this
criteria without seeking additional information. CCC believes that
program qualifications respond to the commenter's concern. CCC
qualifies applicants following a review of documents such as the
articles of incorporation, partnership or registration of
proprietorship that may permit CCC to determine if an applicant is a
legally registered U.S. business entity.
D. The FGP Addresses a Market Failure
The FGP is designed to address a specific market failure. Many
emerging markets lack sufficient infrastructure to support expansion of
agricultural commodity imports. The demand for capital financing in
emerging markets is significant. Agri-business projects must compete
with other infrastructure development for the limited capital
available. The market failure that arises is that private sector
financial institutions may be unwilling to provide credit to agri-
business projects, at a reasonable cost. This market failure may be
more pervasive for small and medium size enterprises than for larger
companies. The availability of CCC's guarantee under the FGP provides
an opportunity for U.S. private sector financial institutions to
provide credit to a foreign bank that will, in-turn, finance
infrastructure projects at a reasonable cost. Such credit extension is
unlikely to occur without the benefit of CCC's credit guarantee.
The market failure that FGP addresses, particularly for small and
medium size enterprises, is viewed as normally being below the
threshold level for multi-lateral and the regional development banks to
consider extending financing or guarantees.
E. Exporter and Project Eligibility
CCC will make export credit guarantees available in the form of
facility payment guarantees. Section 1542(b) of the 1990 Act provides
that an exporter must be a ``U.S. person'' to be eligible for a
facility payment guarantee. Under this interim rule, exporters must
also furnish certain information and certifications to CCC in order to
be eligible to receive payment guarantees.
Eligible projects must establish or improve agriculture-related
facilities in an emerging market. For CCC to approve a facility payment
guarantee such projects must primarily promote the export of U.S.
agricultural commodities or products. For CCC to make such a
[[Page 42655]]
determination, the exporter must convince CCC that the issuance of a
facility payment guarantee will cause exports of U.S. agricultural
commodities or products to the emerging market to increase:
(1) To a greater degree than similar exports from other countries;
(2) To levels significantly above those expected in the absence of
providing the facility payment guarantee; and
(3) For five years or until the facility payment guarantee expires,
whichever comes first.
F. Program Implementation
The FGP will be administered by the Office of the General Sales
Manager (GSM), Foreign Agricultural Service, U.S. Department of
Agriculture, on behalf of CCC. Initially, CCC will consider projects of
limited size in a limited number of emerging markets. The effectiveness
of the program will be assessed in view of the comments received on the
interim rule and after a number of facility payment guarantees have
been issued. The GSM will periodically issue program announcements
inviting submissions by exporters of applications for facility payment
guarantees. These program announcements will identify emerging markets,
indicate maximum guarantee coverage, and provide other pertinent
information.
CCC will review applications and provide to the exporter a
preliminary commitment letter if an application meets the standards of
the regulations and appears to represent the best use of CCC's
resources. CCC may also request additional information to clarify or
supplement an application. CCC may reject applications that do not
appear to meet program objectives or for other sufficient reasons.
Upon receiving a letter of preliminary commitment from CCC, the
exporter has six months to submit a final application. Such final
application must contain information confirming, updating, and
supplementing information previously provided. If CCC approves the
final application, it will issue a letter of final commitment requiring
the exporter to pay an exposure fee before a facility payment guarantee
is issued. CCC will issue a facility payment guarantee when the amount
of the exposure fee has been paid in full.
G. Credit Terms and Risk Coverage
The terms of CCC's coverage will be set forth in each facility
payment guarantee. These will conform to pertinent rules of the
Organization for Economic Cooperation and Development (OECD)
Arrangement on Guidelines for Officially Supported Export Credits
(Arrangement). Copies of the OECD Arrangement and classification of
country categories are available from: The Director, Office of Trade
Finance, Department of Treasury, Room 4448, 1500 Pennsylvania Avenue,
NW, Washington DC 20220. The OECD Arrangement sets out the most
favorable terms allowable for government credits and guarantees. For
example, pursuant to the Arrangement, the exporter must oblige the
importer to comply with CCC's initial payment requirement
(Sec. 1493.230(c)). This requires the importer to pay the exporter at
least 15 percent of the net contract value. The net contract value is
equal to the contract value minus (a) the value of goods that are not
U.S. goods; and (b) the cost of services that are not U.S. services
(except those services the exporter requests CCC to determine are vital
to the success of the project and approved to be included in the net
contract value (Sec. 1493.260(b)(1))).
CCC will initially offer facility payment guarantee coverage of 95
percent of the facility base value. This value is the amount of the net
contract value that remains after deducting the amount paid in
accordance with the initial payment requirement, and the value of any
discounts or allowances (Sec. 1493.260(b)(2)). CCC will also cover
interest on a variable rate basis. The method of determining the
variable interest rate coverage will be indicated in program
announcements and in each payment guarantee. The interim rule also
provides that the maximum interest rate, when determined by CCC, will
not exceed the average investment rate of the most recent Treasury 52-
week bill auction in effect at that time.
H. Guidelines for U.S. Content
CCC used certain guidelines relating to the inclusion and valuation
of goods that are not U.S. goods, services that are not U.S. services,
and imported components of U.S. goods in sales transactions covered
under this program. The most important of these guidelines are
summarized below:
1. FGP payment guarantees are derived only from that portion of an
exporter's sales contract that represents (a) U.S. goods, (b) U.S.
services, and (c) any services that are not U.S. services that CCC
determines are vital to the success of the project and are approved by
CCC for coverage. This derived value is called net contract value
(Sec. 1493.260(b)(1)). Any other goods or services included in the
exporter's contract (e.g., foreign goods that are not components of
U.S. goods, goods not exported from the U.S., and foreign services not
approved by CCC) cannot be included in net contract value.
2. U.S. goods may include imported components that are assembled,
processed or manufactured into goods within, and exported from, the
U.S. Services that are not U.S. services (e.g., foreign flag freight
(e.g., ocean, air), and related insurance, ship discharge operations,
inland transportation) provided by persons who are not citizens or
legal residents of the U.S. may receive guarantee coverage only if
approved by CCC. Most likely CCC will approve such services if they are
determined to be vital to the success of the project.
3. In addition to the above requirements, CCC will issue a facility
payment guarantee only if the value of covered imported components,
combined with the cost of covered services that are not U.S. services,
meet the 50 percent minimum U.S. content test (Sec. 1493.260(d)). This
means that those components and services must represent less than 50
percent of the net contract value. The 50 percent determination is made
on an aggregate or cumulative basis as exports of goods and services
occur, not item by item. For example, more than 50 percent of the value
of a single piece of equipment may be comprised of imported components
so long as the total value of covered imported components and cost of
services that are not U.S. services remain less than 50 percent of net
contract value for all goods and services.
To make the above 50 percent determination, imported components are
valued at their declared customs value or, in the absence of specific
information regarding declared customs value, the fair wholesale market
value of the components in the U.S. at the time they are acquired by
the exporter. The costs of services that are not U.S. services are the
actual amounts paid by the exporter for the services in an arms-length
transaction, or, in the absence of such a transaction, the fair market
value of the services at the time the services were provided.
4. Imported raw materials (such as iron, steel, nuts, and bolts)
which are processed, assembled or manufactured in the U.S. are
automatically included in CCC's coverage and are not counted as
imported components for the purpose of the 50 percent minimum U.S.
content test (Sec. 1493.260(d)). CCC will rely on commercial practice
and communication with participants to resolve issues that may arise
regarding raw materials.
[[Page 42656]]
I. CCC's Payment Guarantee Mechanism and Claims Procedure
CCC guarantees the exporter, or the exporter's assignee, against
defaults by a foreign bank under its irrevocable letter of credit or
related obligation. In the event of such a default, the exporter or the
exporter's assignee must notify CCC within a ten day period, and may
file a claim with CCC within six months. CCC will pay the guaranteed
amount of the claim plus eligible interest if all required claims
documentation has been received, including an instrument subrogating to
CCC the rights of the exporter and, if applicable, the exporter's
assignee, to the amount of payment in default. Recoveries made by CCC
pursuant to the subrogated rights, or from any source whatsoever, are
shared between CCC and the exporter or exporter's assignee on a pro
rata basis determined by their respective interests in such recoveries.
In the event that monies are recovered by the exporter or the
exporter's assignee from any source whatsoever, these must be paid to
CCC which will include them in pro rata sharing. The Appendix to
Sec. 1493.320 contains an example of pro rata sharing of recoveries.
J. Example: Typical Transaction
A typical transaction eligible for coverage under a facility
payment guarantee could be as follows: CCC issues a program
announcement inviting U.S. persons to apply for facility payment
guarantees in connection with eligible projects in a specified emerging
market. The program announcement states that the terms of coverage will
be 95 percent of the facility base value (Sec. 1493.260(b)(2)). An
exporter responds by submitting an application for the export sale of
goods and services to an importer in the emerging market. The goods and
services have a contract value of $2.2 million, of which $200,000
represents goods that are not U.S. goods which are not further
processed, assembled, or manufactured into U.S. goods and services that
are not U.S. services for which no CCC coverage is sought. Those goods
and services are subtracted from the contract value to provide the net
contract value of $2.0 million (Sec. 1493.260(b)(1)). The exporter does
not expect any discounts and allowances to be provided.
The combined value or cost of covered imported components contained
in U.S. goods and services that are not U.S. services for which CCC
coverage is requested is $650,000. This represents 32.5 percent of the
net contract value. Because this is less than 50 percent, the sale
meets the U.S. content test (Sec. 1493.260(d)). The exporter indicates
that the importer, in order to comply with the initial payment
requirement (15 percent of the net contract value), will pay the
exporter $300,000.
The net contract value ($2 million) minus the initial payment
requirement ($300,000), minus discounts and allowances (zero), equals
the facility base value ($1,700,000) to which CCC's rate of coverage
applies. The payment guarantee would thus show a guaranteed value of 95
percent of $1,700,000, or $1,615,000 as shown below. The facility
payment guarantee would also indicate how eligible interest would be
covered on a variable rate basis, consistent with relevant program
announcements.
Example
(1) Contract Value......................................... $2,200,000
(a) minus: Goods and services that are not U.S. goods
and services and are not approved for coverage by CCC. 200,000
(2) Equals: Net Contract Value............................. 2,000,000
------------
(a) minus: Initial Payment (15% of net contract value). 300,000
(b) minus: Discounts and Allowances.................... 0
------------
(3) equals: Facility Base Value............................ 1,700,000
(4) Guaranteed Value (95 percent of $1,700,000)............ 1,615,000
Exporters should recognize that the maximum liability for a claim
(Sec. 1493.310(b)), under certain circumstances, may turn out to be
less than $1,615,000. Under Sec. 1493.310(b), CCC's liability is
limited to the lesser of: (1) The guaranteed value as provided in the
facility payment guarantee, plus eligible interest, or (2) the
guaranteed percentage of a value called the exported value indicated in
the evidence of export report(s), plus eligible interest. The exported
value is the net contract value of the goods or services exported minus
(a) the initial payment and (b) the dollar amount of any discounts and
allowances (Sec. 1493.280(a)(7)). Thus, if for any reason, the exported
value decreases, the dollar amount of coverage would decrease. For
example, the exported value would be less if fewer goods and services
are exported; if the value of goods and services exported decreases
from the value originally reported to CCC; if discounts or allowances,
not foreseen at the time of application, are provided; or if payments
by the importer exceed the initial payment requirement.
List of Subjects in 7 CFR Part 1493
Administrative practice and procedures, Agricultural commodities,
Agriculture, Banks, Banking, Business and industry, Credit, Exports,
Finance, Foreign banks, Guaranteed loans, Reporting and recordkeeping
requirements.
Accordingly, Part 1493 of Title 7 is amended as follows:
PART 1493--[AMENDED]
1. The authority citation for Part 1493 continues to read as
follows:
Authority: 7 U.S.C. 5602, 5622, 5661, 5662, 5663, 5664, 5676, 15
U.S.C. 714b(d), 714c(f).
2. By adding a new subpart C to read as follows:
Subpart C--CCC Facility Guarantee Program (FGP) Operations
Sec.
1493.200 General statement.
1493.210 Definition of terms.
1493.220 Exporter eligibility.
1493.230 Eligible transactions.
1493.240 Initial application and letter of preliminary commitment.
1493.250 Final application and issuance of a facility payment
guarantee
1493.260 Facility payment guarantee.
1493.270 Certifications.
1493.280 Evidence of export report.
1493.290 Proof of entry.
1493.300 Notice of default and claims for loss.
1493.310 Payment for loss.
1493.320 Recovery of losses.
1493.330 Miscellaneous provisions.
Subpart C--CCC Facility Guarantee Program (FGP) Operations
Sec. 1493.200 General statement.
This subpart governs the Commodity Credit Corporation's (CCC)
Facility Guarantee Program (FGP). CCC will issue facility payment
guarantees for project applications meeting the terms and conditions of
the Facility Guarantee Program (FGP) and where private sector financing
is otherwise not available. This subpart describes the criteria and
procedures for applying for a facility payment guarantee, and contains
the general terms and conditions of such a guarantee. These general
terms and conditions may be supplemented by special terms and
conditions specified in program announcements or notices to
participants published prior to the issuance of a facility payment
guarantee and, if so, will be incorporated by reference on the face of
the facility payment guarantee issued by CCC.
Sec. 1493.210 Definition of terms.
Terms set forth in this subpart will have the following meaning:
[[Page 42657]]
Assignee. A financial institution in the United States which, for
adequate consideration given, has obtained the legal rights to receive
payment under the facility payment guarantee.
CCC. The Commodity Credit Corporation, an agency and
instrumentality of the United States within the U.S. Department of
Agriculture, authorized pursuant to the Commodity Credit Corporation
Charter Act of 1948, as amended, 15 U.S.C. 714 et seq., and subject to
the general supervision and direction of the Secretary of Agriculture.
Contacts P/R. A notice issued by Foreign Agricultural Service, U.S.
Department of Agriculture (FAS/USDA) by public press release which
contains specific names, addresses, and telephone and facsimile numbers
of contacts within FAS/USDA and CCC. 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 facility payment guarantees, to submit evidence of export
reports, and to give notices of default and file claims for loss.
Contract value. The total negotiated dollar amount for the export
sale of goods and services to emerging markets.
Date of export for goods. The on-board date of an ocean bill of
lading or an airway bill, the on-board ocean carrier date of an
intermodal bill of lading; 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.
Date of export for services. The date interest begins to accrue on
credit extended to cover payment for services, except for freight and
marine insurance where the date of export is the same date as for the
goods exported.
Discounts and allowances. Any consideration provided directly or
indirectly, by or on behalf of an exporter, to an importer in
connection with a sale of goods or services, in excess of the value of
such goods or services. Discounts or 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 obligation; or the whole or partial release of the importer
from any financial or contractual obligation.
Facility. An opportunity or project that improves the handling,
marketing, processing, storage, or distribution of imported
agricultural commodities or products.
GSM. The General Sales Manager, Foreign Agricultural Service, U.S.
Department of Agriculture, acting in his capacity as Vice President,
CCC; or his designee.
U.S. goods. Goods that are assembled, processed or manufactured in,
and exported from, the United States including goods which contain
imported raw materials or imported components.
U.S. services. Services performed by citizens or legal residents of
the United States, including those temporarily residing outside the
United States.
Sec. 1493.220 Exporter eligibility.
An exporter may apply for a facility payment guarantee if such
exporter:
(a) Is a citizen or legal resident of the United States or is a
business organized under the laws of any state of the United States or
the District of Columbia;
(b) Has an established place of business in the United States;
(c) Has a registered agent for service of process in the United
States; and
(d) Is not suspended or debarred, or owned or controlled by a
person who is suspended or debarred, from contracting with, or
participating in programs administered by, a U.S. Government agency.
Sec. 1493.230 Eligible transactions.
(a) Program announcements. From time to time CCC will issue program
announcements indicating the availability of facility payment
guarantees in connection with sales of goods or services to emerging
markets. The announcements will specify the emerging markets, the
maximum amount, in U.S. dollars, of guarantee exposure that CCC will
undertake, and may specify special terms or conditions that will be
applicable.
(b) Sale requirements. CCC will issue facility payment guarantees
only in connection with projects that CCC determines will benefit
primarily exports of U.S. agricultural commodities and products, and
only where there is a firm contract for the sale of goods or services
for the establishment or improvement of an agriculture-related
facility. The contract may be contingent, however, on the issuance of a
CCC facility payment guarantee.
(c) Initial payment requirement. The contract for sale of goods or
services between the exporter and the importer shall oblige the
importer to make an initial payment(s) to the exporter of at least 15
percent of the net contract value in Sec. 1493.260(b)(1). Such initial
payment(s) shall be in U.S. dollars or instruments having a definite
value in U.S. dollars, and shall be made prior to the export of the
goods or services.
(d) Required method of payment. CCC will issue a facility payment
guarantee only in connection with a sale in which payment will be made
under either:
(1) An irrevocable foreign bank letter of credit specifically
stating the deferred payment terms under which the foreign bank is
obligated to make payments in U.S. dollars as payments become due; or
(2) An irrevocable foreign bank letter of credit supported by a
related obligation specifically stating the deferred payment terms
under which the foreign bank is obligated to make payment in U.S.
dollars as such payments become due.
(e) Form of letter of credit. The foreign bank letter of credit
referred to in paragraph (d) of this section shall be an irrevocable
commercial letter of credit, subject to the revision of the
International Chamber of Commerce Uniform Customs and Practices for
Documentary Credits in effect when the letter of credit is
issued, providing for payment in U.S. dollars against stipulated
documents and issued in favor of the exporter by a CCC-approved foreign
banking institution.
(f) Form of related obligation. The related obligation referred to
in paragraph (d) of this section shall be in one of the following
forms:
(1) A letter of credit including a specific promise to pay on
deferred payment terms as a special instruction from the issuing bank
directly to the U.S. financial institution to refinance the amounts
paid by the U.S. financial institution for obligations financed
according to the tenor of the letter of credit;
(2) A separate document specifically identified and referred to in
the letter of credit as the agreement under which the foreign bank is
obligated to repay the U.S. financial institution on deferred payment
terms;
(3) A separate document setting forth the related obligation, or in
a duly executed amendment thereto, as having been financed by a U.S.
financial institution pursuant to, and subject to, repayment in
accordance with the terms of such related obligation; or
(4) A promissory note executed by a foreign bank issuing the letter
of credit in favor of the financial institution.
Sec. 1493.240 Initial application and letter of preliminary
commitment.
(a) Initial Application. An exporter may apply for a facility
payment guarantee by submitting the following information:
[[Page 42658]]
(1) A cover sheet with the title: ``Application for a Facility
Payment Guarantee--Preliminary Commitment'';
(2) The program announcement number;
(3) The emerging market;
(4) The name, contact person, address, and telephone number and, if
applicable, facsimile number and E-mail address of:
(i) The exporter;
(ii) The exporter's registered agent for service of process in the
United States;
(iii) The exporter's assignee, if applicable;
(iv) The importer;
(v) The end-user of the goods or services if other than the
importer;
(vi) The foreign bank expected to issue the letter of credit or
related obligation; and
(vii) The financial institution in the United States expected to
provide financing;
(5) A statement on letterhead from a:
(i) Foreign bank indicating an interest in guaranteeing payment, in
U.S. dollars, for goods or services to be exported under the facility
payment guarantee at least equal to the net contract value listed in
paragraph (a)(14) of this section, less the initial payment requirement
listed in paragraph (a)(15) of this section; and
(ii) Financial institution in the U.S. indicating an interest in
financing the export sales of goods or services under the facility
payment guarantee for an amount at least equal to the net contract
value listed in paragraph (a)(14) of this section less the initial
payment requirement listed in paragraph (a)(15) of this section. The
financial institution must state that such financing would not
otherwise be available without an FGP payment guarantee;
(6) The period for which credit is being extended to finance the
sale of goods or services covered by the facility payment guarantee;
(7) The exporter's sales number pertinent to this application and a
description of the status of the intended sale;
(8) A description (e.g., a process flow diagram) of the
agriculture-related facility that will use the goods or services to be
covered by the facility payment guarantee and an explanation of how
these goods and services will be used to improve handling, marketing,
processing, storage, or distribution of agricultural commodities or
products;
(9) A brief description of each good or service to be covered by
the facility payment guarantee including, where applicable, brand name,
model number, Standard Industrial Classification (SIC) or the North
American Industry Classification System (NAICS) code, and contract
specifications;
(10) The final date for export of goods or services. If applicable,
include construction start date, milestones (e.g., installation), and
contractual deadline for completion of project;
(11) The contract value for the sale of goods or services and the
basis of sale for goods to be exported (e.g., FOB, CFR, CIF);
(12) The description and value of the goods or cost of services
listed in paragraph (a)(11) of this section that are not U.S. goods or
services;
(13) Identification and cost of, and justification for, those
services listed in paragraph (a)(12) of this section for which the
exporter requests CCC to provide coverage;
(14) The net contract value in Sec. 1493.260(b)(1) obtained by
subtracting paragraph (a)(12) of this section from paragraph (a)(11) of
this section, and adding paragraph (a)(13) of this section;
(15) The amount to be paid in accordance with the initial payment
requirement (Sec. 1493.230(c));
(16) The description and dollar amount of discounts and allowances
provided in connection with the sale of goods or services covered by
the facility payment guarantee;
(17) The facility base value in Sec. 1493.260(b)(2) obtained by
subtracting paragraphs (a)(15) and (a)(16) of this section from
paragraph (a)(14) of this section;
(18) The maximum guaranteed value under the facility payment
guarantee determined by multiplying the facility base value listed in
paragraph (a)(17) of this section by the guarantee rate of coverage
announced by CCC in Sec. 1493.260(b)(3);
(19) A map or other description of the facility's location and
distance from major population centers of neighboring countries;
(20) For all principal agricultural commodities or products
(inputs) to be handled, marketed, processed, stored, or distributed, by
the proposed project after completion, provide:
(i) A list or table identifying such principal inputs;
(ii) The likely countries of origin for each input;
(iii) Estimated annual quantities, in metric tons, of each input
listed in paragraph (a)(20)(i) of this section to be used by the
project for five years from the final date of export or until the
expiration of the facility payment guarantee, whichever comes first;
and
(iv) An analysis, including price, cost, and other assumptions (the
reasons why U.S. agricultural commodities or products will be more
competitive inputs than commodities or products from other sources, and
whether the projected use of U.S. agricultural commodities or products
depends on the availability of U.S. export bonus or credit guarantee
programs), of which inputs listed in paragraph (a)(20)(i) of this
section will represent increased imports of U.S. agricultural
commodities or products:
(A) To a greater degree than imports of agricultural commodities or
products from other countries;
(B) To or at levels significantly above those expected in the
absence of the project; and
(C) For a period of five years from the final date of export or
until expiration of the facility payment guarantee, whichever comes
first.
(21) If applicable, a list of agricultural outputs or final
products of the proposed project and:
(i) Projected annual quantities (for five years or until the
expiration of the facility payment guarantee, whichever comes first),
in metric tons, of each output to be marketed;
(A) Within the emerging market; and
(B) In any other country;
(ii) Quantities, by country of origin, of products imported into
the emerging market during the past year which would compete with such
outputs; and
(iii) An analysis of whether products of the project will
significantly displace U.S. exports of similar agricultural commodities
or products in any market;
(22) If applicable, a description of any arrangements or
understandings with other U.S. or foreign government agencies, or with
financial institutions or entities, private or public, providing
financing to the exporter in connection with this export sale, and
copies of any documents relating to such arrangements;
(23) A description of the exporter's experience selling goods or
providing services similar to those for which the exporter seeks to
obtain facility payment guarantee coverage;
(24) A statement of how this project may encourage privatization of
the agricultural sector, or benefit private farms or cooperatives, in
the emerging market. Include in the statement the share of private
sector ownership of the project;
(25) The exporter's signature.
(b) Application fee. The exporter shall pay the application fee
specified in the program announcement at the time the application is
submitted. An application will not be considered without payment of the
specified fee. The application fee is nonrefundable.
(c) Letter of preliminary commitment. CCC will determine whether,
in its
[[Page 42659]]
judgment, the project in connection with which the exporter seeks a
facility payment guarantee is likely to increase exports of U.S.
agricultural commodities or products to an emerging market; and whether
the project is likely to benefit primarily U.S. agricultural
commodities or products as opposed to commodities or products
originating in other countries. If necessary, CCC may seek additional
information from an applicant prior to making its determination. If CCC
determines that an application meets these standards and appears to
represent, in CCC's judgment, the best use of available resources, CCC
will respond to the applicant with a letter of preliminary commitment
indicating CCC's interest in issuing a facility payment guarantee
conditioned on its approval of the exporter's final application.
Sec. 1493.250 Final application and issuance of facility payment
guarantee.
(a) Final application. An exporter who has received a letter of
preliminary commitment may, within six months of the date of such
letter, submit a final application to CCC for a facility payment
guarantee which shall include the following information:
(1) A cover sheet with the title: ``Application for a Facility
Payment Guarantee--Final Commitment.''
(2) A letterhead statement from the importer's bank or other
documentation confirming the importer has the financial ability to
comply with the initial payment requirement in Sec. 1493.230(c);
(3) Written evidence of a firm sale signed by the exporter and the
importer, specifying at minimum, the following information: Goods or
services to be exported, quantities of such items, delivery terms
(e.g., FOB, CFR, CIF), delivery period(s), contract value, payment
terms, and date of sale. A sales contract may be contingent upon
obtaining a facility payment guarantee;
(4) A description of any changes in the information submitted in
the preliminary application; and
(5) The exporter's signature;
(b) Additional information. CCC shall have the right to request the
exporter to furnish any other information and documentation it deems
pertinent to the evaluation of the exporter's final application for a
final commitment. CCC may request from the exporter an independent
engineering study or economic feasibility study relating to the
project.
(c) Final commitment letter. After making a favorable determination
on the exporter's submissions, CCC will issue a final commitment letter
indicating the applicable exposure fee rate and stating that CCC is
prepared to issue a facility payment guarantee upon receiving full
payment of the exposure fee within an allotted time. The letter will
also indicate the key terms and coverage of the guarantee to be issued.
CCC will also inform exporters in writing when it denies their request
for a facility payment guarantee.
(d) Exposure fee. The exposure fee is calculated by multiplying the
requested guaranteed value (up to the maximum established by CCC's
final commitment letter) by the exposure fee rate. Once the facility
payment guarantee is issued to the exporter, CCC will ordinarily not
refund the exposure fee. If CCC does not issue a facility payment
guarantee, or issues a guarantee for only part of the coverage
requested, CCC will make a full or pro rata refund of the exposure fee,
as appropriate.
(e) Issuance of the facility payment guarantee. Upon receipt of the
exposure fee, CCC will issue a facility payment guarantee.
Sec. 1493.260 Facility payment guarantee.
(a) CCC's maximum obligation. CCC will agree to pay the exporter or
the exporter's assignee an amount not to exceed the guaranteed value
stipulated on the face of the facility payment guarantee, plus eligible
interest, in the event that the foreign bank fails to pay under the
foreign bank letter of credit or related obligation. The exact amount
of CCC's liability in the event of default will be determined in
accordance with Sec. 1493.310(b).
(b) Calculation of maximum guarantee coverage. CCC will determine
the maximum amount of its obligation under a facility payment guarantee
by calculating a:
(1) Net contract value equal to the contract value minus:
(i) The value of goods that are not U.S. goods; and
(ii) The cost of services that are not U.S. services (except those
services the exporter requests CCC to determine are vital to the
success of the project and approved to be included in the net contract
value);
(2) Facility base value equal to net contract value minus:
(i) The amount to be paid in accordance with the initial payment
requirement in Sec. 1493.230(c); and
(ii) The amount of discounts and allowances; and
(3) Maximum guaranteed value equal to:
(i) A principal amount determined by multiplying the facility base
value (as determined in Sec. 1493.260(b)(2)) by the guaranteed
percentage specified in the program announcement; and
(ii) Interest on such principal amount at the rate specified in the
applicable program announcement, not to exceed the investment rate of
the most recent Treasury 52-week bill auction in effect at that time.
(c) Value and cost. For the purposes of this section:
(1) Value means declared customs value of the goods; or, in the
absence of specific information regarding declared customs value, the
fair market wholesale value of the imported goods in the United States
at the time they were acquired by the participant; and
(2) Cost means actual amount paid by the exporter for the services
in an arms-length transaction; or in the absence of an arms-length
transaction, the fair market value of the services at the time the
services were provided.
(d) U.S. content test. (1) CCC will issue a guarantee only if the
following items collectively represent less than 50 percent of the net
contract value in Sec. 1493.260(b)(1):
(i) The value of imported components (except for raw materials)
that are assembled, processed, or manufactured into U.S. goods included
in the net contract value;
(ii) The cost of services that are not U.S. services (including
freight on foreign flag carriers and transportation insurance
registered with foreign agents) that, at the request of the exporter,
CCC determines are vital to the success of the project and approves
their inclusion in the net contract value;
(2) For purpose of this subsection, minor or cosmetic procedures
(e.g., affixing labels, cleaning, painting, polishing) do not qualify
as assembling, processing or manufacturing;
(3) For purpose of this subsection, local services which involve
costs for hotels, meals, transportation, and other similar services
incurred in the emerging market are not U.S. services.
(e) Period of guarantee coverage. The payment guarantee will apply
to the period beginning on the date(s) of export(s) and will continue
during the credit term specified in the facility payment guarantee. For
goods, the period of coverage will also apply from the date on which
interest begins to accrue, if earlier than the date of export. The
final payments of principal and interest by the foreign bank must come
due within the period of guarantee coverage.
(f) Terms of the CCC facility payment guarantee. The terms of CCC's
coverage will be set forth in the facility payment guarantee and will
include the provisions of this subpart, which may
[[Page 42660]]
be supplemented by any program announcement(s) or notice(s) to
participants in effect at the time the facility payment guarantee is
approved by CCC.
(g) Final date to export. The final date to export will be stated
in the facility payment guarantee.
(h) Ineligible exports. Goods or services with a date of export
prior to the date CCC issues the facility payment guarantee are
ineligible for coverage unless approved by the GSM.
(i) Additional requirements. The facility payment guarantee may
contain such additional terms, conditions, and limitations as are
deemed necessary or desirable by the GSM. Such additional terms,
conditions or qualifications, as stated in the facility payment
guarantee, are binding on the exporter or the exporter's assignee.
(j) Amendments. Exporters must notify CCC of any amendments
concerning contracts covered by a facility payment guarantee. CCC will
determine if the contract amendments will require amendments to the
facility payment guarantee. Amending the facility payment guarantee may
result in an increase to the exposure fee. Requests made by the
exporter to amend the facility payment guarantee so as to change the
guaranteed value must have the concurrence of the assignee when an
assignment has been made.
(k) Effective date. The facility payment guarantee shall become
effective on the date of export of the goods or services.
Appendix to Section 1493.260--Illustration of FGP Coverage of
Imported Raw Materials, Components, and Services That Are Not U.S.
Services
The following example illustrates CCC's regulations and policy
options with regard to issuing a payment guarantee for a project
which includes imported raw materials, imported components, and
services that are not U.S. services:
1. Ten grain trucks and one truck scale are to be exported from
the U.S. to an emerging market. The trucks will provide the ability
to purchase larger quantities of grain from the U.S. The contract
value totals $2,025,000, cost, insurance and freight (CIF) basis.
2. The fenders, hoods and doors of the trucks have been
manufactured and assembled in the U.S. and contain some imported raw
materials (sheet metal).
3. Imported components consist of starters and alternators, with
a U.S. customs valuation of $149,000. These items are installed into
the trucks in the U.S.
4. The truck scale was imported from Canada into the U.S. with a
U.S. customs valuation of $20,000.
5. A U.S. citizen, will travel on a foreign airline carrier to
the emerging market (airfare is $1,000) to instruct mechanics in
repair and maintenance of the trucks. He will be paid a salary for
this service and, in addition, will be reimbursed separately for
local costs in the emerging market (e.g., hotel, meals,
transportation) which are estimated to be $5,000.
6. The trucks are to be shipped on foreign flag vessels, and the
marine insurance is to be placed with a foreign agent. The combined
cost of these services that are not U.S. services for which the
exporter seeks coverage is estimated to be $500,000.
CCC's Approval of Services that are Not U.S. Services
CCC agrees to include in the net contract value the foreign flag
freight and marine insurance ($500,000) and the airfare ($1,000) of
the U.S. instructor (Sec. 1493.260(b)(1)).
Calculation of Net Contract Value
CCC will calculate the net contract value by subtracting from
the contract value ($2,025,000) the U.S. customs value of the truck
scale ($20,000) in accordance with Sec. 1493.260(b)(1)(I) and the
local costs to be incurred by the U.S. instructor ($5,000) in
accordance with Sec. 1493.260(b)(1)(ii) to equal $2,000,000.
CCC's Determination of U.S. Content Eligibility
The imported components and services that are not U.S. services
approved for coverage total $650,000 (i.e., $149,000 for starters
and alternators, $1,000 for airfare, $500,000 for freight and
insurance; or 32.5 percent of the net contract value of $2,000,000
(Sec. 1493.260(b)(1)). Since this is less than 50 percent of the net
contract value the transaction meets the U.S. content test
(Sec. 1493.260(d)).
Sec. 1493.270 Certifications.
(a) Exporter's signature. The exporter's signature on documentation
submitted to CCC under this subpart, is the exporter's certification
that:
(1) There have not been and are no arrangements for any payments in
violation of the Foreign Corrupt Practices Act of 1977, as amended, or
other U.S. Laws;
(2) All information submitted to CCC is true and correct; and
(3) The exporter is in compliance with this subpart.
(b) False certification. False certifications under this subpart
may result in the termination of the facility payment guarantee,
suspension or debarment, or civil or criminal action.
Sec. 1493.280 Evidence of export report.
(a) Report of export. The exporter is required to provide CCC an
evidence of export report for each shipment of goods or provision of
services covered under the facility payment guarantee. Each report must
be numbered in chronological order and contain the following
information in the order prescribed below:
(1) The facility payment guarantee number;
(2) The date goods or services were exported or provided;
(3) The exporter's sale number, bill of lading numbers, or
identification of other documents that may be submitted to establish
the contract value of the goods or services exported or provided;
(4) The net contract value of the exported goods or services as
determined in accordance with Sec. 1493.260(b)(1);
(5) The amount paid in accordance with the initial payment
requirement (Sec. 1493.230 (c));
(6) A description and dollar value of discounts and allowances, if
any;
(7) The exported value of the shipment which is the net contract
value of the goods or services exported in paragraph (a)(4) of this
section minus:
(i) The initial payment requirement listed in paragraph (a)(5) of
this section; and
(ii) The dollar amount of any discounts and allowances listed in
paragraph (a)(6) of this section;
(8) The name of the carrier and, if applicable, the name of the
vessel;
(9) The final payment schedule showing the payment due dates and
amounts of principal, and payment due dates for interest accrual. If
the payment schedule is unknown, the exporter must indicate in writing
that: ``The payment schedule will be provided in an amendment to the
evidence of export report when the payment schedule has been
determined;''
(10) Written statements that:
(i) The goods exported or services provided were included in the
final application for a final commitment as approved by CCC for
coverage under the facility payment guarantee and this subpart;
(ii) The specifications and quantity of goods or services exported
conform to the information contained in the exporter's application
documents for a facility payment guarantee, or if different, that CCC
has approved of such changes;
(iii) A letter of credit has been opened in favor of the exporter
by the foreign bank shown on the facility payment guarantee to cover
the dollar amount of the sale of goods or services exported less the
amount paid in accordance with the initial payment requirement and less
discounts and allowances; and
(11) The exporter's signature.
(b) Final report of export. The final evidence of export report
submitted under a facility payment guarantee must contain:
(1) A written statement that exports under the facility payment
guarantee have been completed;
[[Page 42661]]
(2) The information requested in Sec. 1493.280(a) for the
shipment(s) included in the final report; and
(3) The combined total of all dollar amounts reported under
Sec. 1493.280 (a) and (b) for all reports.
(c) Time limit for submission of evidence of export report. Unless
extended by CCC for good cause, the exporter must submit to CCC an
evidence of export report:
(1) Within 60 days of the date goods are exported by rail or truck;
(2) Within 30 days of the date goods are exported by any other
carrier; or
(3) Within 30 days of the date of export of services.
(d) Late reports. If the evidence of export report is not received
by CCC within the time period for filing, the facility payment
guarantee will become null and void only if and only to the extent that
failure to make timely filing resulted, or would likely result, in:
(1) Significant financial harm to CCC;
(2) The undermining of an essential regulatory purpose of the FGP;
(3) The obstruction of the fair administration of the FGP; or
(4) A threat to the integrity of the FGP.
Sec. 1493.290 Proof of entry.
(a) Diversion. The diversion of goods covered by a facility payment
guarantee to a country other than that shown on the facility 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 goods authorized by the
facility payment guarantee. 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:
(1) For goods: An original certificate, signed by a duly authorized
customs or port official of the emerging market, by the importer, by an
agent or representative of the vessel or ship line which delivered the
goods to the emerging market, or by a private surveyor in the emerging
market, or other documentation deemed acceptable by CCC:
(i) Showing that the goods entered the emerging market;
(ii) Identifying the export carrier;
(iii) Describing the goods; and
(iv) Indicating date and place the goods were unloaded in the
emerging market.
Sec. 1493.300 Notice of default and claims for loss.
(a) Notice of default. If the foreign bank issuing the letter of
credit fails to make payment pursuant to the terms of the foreign bank
letter of credit or related obligation, the exporter or the exporter's
assignee must submit a notice of default to CCC as soon as possible,
but not later than ten days after the date that payment was due from
the foreign bank (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 facility 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 approved by the
Controller, CCC. The notice of default must include:
(1) Facility payment guarantee number;
(2) Name of the emerging market;
(3) Name of the defaulting bank;
(4) Payment due date;
(5) Total amount of the defaulted payment due, indicating
separately the amounts for principal and interest;
(6) Date of foreign bank's refusal to pay, if applicable; and
(7) Reason for the foreign bank's refusal to pay, if known.
(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) Facility 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 foreign
bank obligation applicable to the claim; and
(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)(A) The foreign bank's letter of credit securing the export
sale, and;
(B) If applicable, the document(s) evidencing the related
obligation owed by the foreign bank to the assignee financial
institution which is related to the foreign bank's letter of credit
issued in favor of the exporter.
(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 emerging market;
(iii) The exporter's sales invoice(s) showing the value and basis
of sale (e.g., FOB, CFR, or CIF) or, if services are billed separately,
documents that the exporter or its assignee relied upon in extending
the credit to the issuing foreign bank;
(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. The instrument must reference the applicable foreign bank
letter of credit and the related obligation, if applicable; and
(v) A copy of the evidence of export report(s) previously submitted
by the exporter to CCC pursuant to Sec. 1493.280.
(c) Subsequent claims for defaults on installments. The exporter or
an exporter's assignee need only provide one claim which meets full
documentation requirements relating to a covered transaction. For
subsequent claims relating to such failures of the foreign bank to make
scheduled installments on the same export, the exporter or the
exporter's assignee need only submit to CCC a notice of such failure
containing the information stated in paragraphs (b) (1), (2), and (3)
of this section; an instrument of subrogation as per paragraph
(b)(4)(iv) of this section, and the date the original claim was filed
with CCC.
Sec. 1493.310 Payment for loss.
(a) Determination of CCC's liability. Upon receipt in good order of
the information and documents required under Sec. 1493.300, CCC will
determine whether or not a loss has occurred for which CCC is liable
under the facility payment guarantee, this subpart, program
announcement(s) and notice(s) to participants. If CCC determines that
it is liable to the exporter 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. CCC's maximum liability for any
claims for loss submitted with respect to any facility payment
guarantee, not including any late interest payments due in accordance
with paragraph (c) of
[[Page 42662]]
this section, will be limited to the lesser of:
(1) The guaranteed value as stated in the facility payment
guarantee, plus eligible interest; or
(2) The guaranteed percentage (as indicated in the facility payment
guarantee) of the exported value indicated in the evidence of export
report (Sec. 1493.280(a)(7)), 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 claim was 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 latest 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, the
foreign bank's letter of credit, or any obligation owed by the foreign
bank to the assignee U.S. financial institution which is related to the
foreign bank's letter of credit issued in favor of the exporter, unless
it is determined to be in the best interest 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 the value of
goods or services covered by a facility payment guarantee, CCC will not
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
Sec. 1493.270 and Sec. 1493.280 excluding post-export adjustments
(i.e., corrections of evidence of export reports); and
(2) The exporter or the exporter's assignee furnishes the
statements and documents specified in Sec. 1493.300.
Sec. 1493.320 Recovery of losses.
(a) Notification. Upon payment of loss to the exporter or the
exporter's assignee, CCC will notify the foreign bank of CCC's rights
under the subrogation agreement to recover all monies 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, the foreign bank 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 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 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 facility
payment guarantee for which a claim has been paid by CCC, CCC will pay
the holder of the facility 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 days from the date of recovery or 15 days from
receiving the required information for determining pro rata
distribution, whichever is later, CCC will pay interest 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 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 facility payment guarantee.
(c) Allocation of recoveries. Recoveries made by CCC from the
importer or the foreign bank, 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 facility payment guarantee, CCC prorates 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 to Sec. 1493.320 provides an
example of the methodology used by CCC in applying this paragraph (c).
(d) Liabilities to CCC. Notwithstanding any other terms of the
facility payment guarantee, the exporter may be liable to CCC for any
amounts paid by CCC under the facility payment guarantee when and if it
is determined by CCC that the exporter engaged in fraud, or has been or
is in breach of any contractual obligation, certification or warranty
made by the exporter for the purpose of obtaining the facility payment
guarantee or for fulfilling obligations under the FGP. Further, the
exporter's assignee may be liable to CCC for any amounts paid by CCC
under the facility payment guarantee when and if it is determined by
CCC that the exporter's assignee engaged in fraud or otherwise violated
program requirements.
(e) Good faith. The violation by an exporter of the certifications
in Sec. 1493.270 or the failure of an exporter to comply with the
provisions of Sec. 1493.290 or Sec. 1493.330(e) will not affect the
validity of any facility 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 facility payment guarantee or at the
time of assignment of the facility 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 foreign
bank or the importer.
Appendix to Sec. 1493.320--Illustration of Pro Rata Allocation of
Recoveries
The following example illustrates CCC's policy, as set forth in
Sec. 1493.320, regarding pro rata sharing of recoveries made for
claims filed under the FGP. For the purpose of this example only,
even though CCC interest coverage is on a floating rate basis, a
constant rate of interest is assumed. A typical case might be as
follows:
1. The U.S. bank enters into a $300,000 three-year credit
arrangement for the export sale of goods and services with the
foreign bank calling for equal semi-annual payments of principal and
semi-annual payment of interest at a rate of 10 percent per annum
and a penalty interest rate of 12 percent per annum on overdue
amounts until the overdue amount is paid.
2. Exported value reported to CCC equals $300,000.
[[Page 42663]]
3. The foreign bank fails to make the final principal payment of
$50,000 and an interest payment of $2,493.15, both due on January
31.
4. On February 10, the U.S. bank files a notice of default and
claim in good order with CCC.
5. CCC's guarantee states that CCC's maximum liability is
limited to 95 percent of the principal amount due ($47,500) and
interest at a rate of 8 percent per annum (basis 365 days) on 95
percent of the principal ($1,894.80).
6. CCC pays the claim on February 22.
7. The latest investment rate of the 91-day Treasury Bill
auction average which has been published by the Department of
Treasury in effect on the date of nonpayment by CCC (February 11) is
7 percent.
Computation of Obligations
Using the above case, CCC's payment to the holder of the
facility payment guarantee would be computed as follows:
1. CCC's Obligation under the Facility Payment Guarantee:
(a) Principal coverage--(95% x $50,000).............. $47,500.00
(b) Interest coverage--(8% x $47,500 x 182/365).... 1,894.80
------------
Total.............................................. 49,394.80
(c) Late interest due from CCC (7% per annum for 11
days x $49,394.80).................................. 104.20
------------
(d) Amount paid by CCC on February 22.................. 49,499.00
============
2. Foreign Bank's Obligation under the Letter of Credit or
the Related Obligation:
(a) Principal due January 31........................... 50,000.00
Interest due January 31 (10% x $ 50,000 x 182/
365).............................................. 2,493.15
------------
Amount owed by foreign bank as of January 31....... 52,493.15
(b) Penalty interest due (12% per annum for 22 days x
$ 50,000)............................................. 361.64
------------
(c) Amount owed by foreign bank as of February 22...... 52,854.79
3. Amount of Foreign Bank's Obligation Not Covered by CCC's
Payment Guarantee:........................................ 3,355.79.
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 foreign bank 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 foreign bank is $52,854.79, CCC would be entitled to 93.65
percent ($49,499.00 divided by $52,854.79) and the holder of the
facility payment guarantee would be entitled to 6.35 percent
($3,355.79 divided by $52,854.79) of any recoveries of losses after
settlement of the claim. Since in this example, the losses were
recovered after the claim had been paid by CCC, Sec. 1493.320(b)
would apply.
Sec. 1493.330 Miscellaneous provisions.
(a) Assignment. (1) The exporter may assign the proceeds which are,
or may become, payable by CCC under a facility 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 facility payment
guarantee not already paid, may not be made to more than one party, and
may not, unless approved in advance by CCC, be subject to further
assignment. Any assignment may be made to one party as agent or trustee
for two or more parties participating in the assignment.
(2) An original and two copies of the written notice of assignment
signed by the parties thereto must be filed by the 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 such financial
institution and to the exporter issued the facility 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 facility
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; or
(2) Is the financial institution issuing the letter of credit or a
branch, agency or subsidiary of such institution; or
(3) Is owned or controlled by an entity that owns or controls the
financial institution issuing the letter of credit; or
(4) Is the U.S. parent of the foreign bank issuing the letter of
credit.
(c) Ineligibility of financial institutions to receive proceeds. A
financial institution will be ineligible to receive proceeds payable
under a facility payment guarantee approved by CCC if such financial
institution:
(1) At the time of assignment of a facility payment guarantee, is
not in sound financial condition, as determined by the Treasurer of
CCC;
(2) Is the financial institution issuing the letter of credit or a
branch, agency, or subsidiary of such institution; or
(3) Is owned or controlled by an entity that owns or controls the
financial institution issuing the letter of credit; or
(4) Is the U.S. parent of the foreign bank issuing the letter of
credit.
(d) Alternative satisfaction of facility payment guarantees. CCC
may, with the agreement of the exporter (or if the right to proceeds
payable under the facility payment guarantee has been assigned, with
the agreement of the exporter's assignee), establish procedures, terms
or conditions for the satisfaction of CCC's obligations under a
facility payment guarantee other than those provided for in this
subpart if CCC determines that those alternative procedures, terms or
conditions are appropriate in rescheduling the debts arising out of any
transaction covered by the facility 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
facility 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 goods or services
exported in connection with a facility payment guarantee, including
those records generated and maintained by agents, 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 facility 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, or a related company's books, records, and
accounts concerning transactions relating to the facility payment
guarantee, including, but not limited to, financial records and
accounts pertaining to sales, inventory, manufacturing, processing, and
administrative and incidental costs, both normal and unforeseen.
(2) The exporter must maintain the proof of entry required by
Sec. 1493.290(b),
[[Page 42664]]
and must provide access to such document 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, this subpart, program announcement(s), and
notice(s) to participants relating to the FGP, as applicable.
Applicants for facility payment guarantees under this program are
hereby on notice that they will be bound by any terms contained in
applicable program announcement(s) or notice(s) to participants issued
prior to the date of approval of a facility 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:
(1) Wording indicating the delegation of authority or, in the
alternative, by a certified copy of the delegation of authority; and
(2) 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 this subpart 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
facility payment guarantee or to any benefit that may arise therefrom,
but this provision shall not be construed to extend to the facility
payment guarantee if made with a corporation for its general benefit.
(i) Deadlines. (1) Where a deadline is fixed in terms of days, it
means business days and excludes Saturdays, Sundays and federal
holidays.
(2) Where a deadline is fixed in terms of months, the deadline
falls on the same day of the month as the day triggering the deadline
period, or if there is no same day, the last day of the month; and
(3) Where a deadline would otherwise fall on a Saturday, Sunday or
federal holiday, the deadline shall be the next business day.
Signed this 1st day of August, 1997 at Washington, DC.
Christopher E. Goldthwait,
General Sales Manager, Commodity Credit Corporation.
[FR Doc. 97-20761 Filed 8-7-97; 8:45 am]
BILLING CODE 3410-10-P
