USDA Foreign Agricultural Service Office of Trade Programs

USDA Foreign Agricultural Service Office of Trade Programs GSM-102 Credit Guarantee Program 20 March 2009

USE GSM-102 TO FACILITATE YOUR NEXT TRANSACTION üPromote international commerce üEncourage the extension of financing üMeet competition’s selling terms üRisk mitigation

GSM-102 Does not provide financing, but guarantees payments due from foreign banks under Letters of Credit to U. S. banks or exporters.

GSM-102 üUp to 98% guarantee on principal üInterest variable coverage üCredit terms up to 3 years üFreight is generally covered üUses a Letter of Credit

GSM-102 COMMODITIES ü 100% produced in USA ü Food, Feed or Fiber ü CCC “basket” of commodities ü High-Value products (90% U. S. Content)

GSM-102 Eligible Commodities Consumer Ready fresh fruit, vegetables, meats, condiments, wine and beer, meats, frozen dinners, etc. Intermediate Animal feed Cattle Hides Flour Soybean Meal Sweeteners Bulk Also: Seafood – Forest Products – Aquaculture - Fibers

GSM-102 PARTICIPANTS üU. S. Exporter üImporter üApproved U. S. Bank ü Approved Foreign Bank

WHY SHOULD YOU USE THE GSM-102 PROGRAM? Since 98% of the loan and part of the interest is guaranteed, U. S Banks can offer attractive credit terms to eligible foreign banks.

BENEFITS TO IMPORTERS üIncreased buying capacity due to bank access to trade credit. üPossible access to credit from local bank.

BENEFITS TO FOREIGN BANKS üAccess to trade finance with U. S. banks üIncreased credit lines from U. S. banks üAbility to borrow longer term üLower funding costs (interest rates and fees) üAbility to support and finance customers

How It Works • U. S. Exporter qualifies for GSM on-line (two days approximate) • U. S. exporter applies to CCC (pays a fee) for guarantee • The buyer and seller negotiate a firm sales contract • Importer approaches a CCC-approved bank in destination country/region and goes through the bank qualification process for credit if not already • If importer qualifies, the bank in destination country/region opens a letter of credit under the terms of GSM-102 • U. S. exporter (normally) assigns GSM-102 guarantee to a U. S. Bank

Deal flow chart (GSM) CCC ship goods Guarantee fee payment guarantee Importer 90 days contract LC application Importing bank Exporter present docs letter of credit U. S. Bank three years annual payments sight

GSM-102 Registrations in U. S. Dollars $ Millions by Region $1. 44 B in 2007 $3. 11 B in 2008 *$2. 8 B in 2009 As of 6 March 09

GSM-102 Top Commodities in Dollars $ Millions by Registration Value $2. 8 B As of 23 March 09

Announced $3. 5 Billion in Credit Guarantees For FY 2009! 3. 5

GUARANTEE FEE One-time fee. ü ü Included in price Financed as a part of the GSM credit Cost of guarantee fee outweighed by lower-cost, longer- term financing package. ü ü Cost of confirmation of L/C lower.

Example Sales Transaction • Importer wishes to buy U. S. feed grains • Importer approaches U. S. embassy for list of interested U. S. exporters • Importer checks USDA website for terms of the GSM-102 program in a press release • Importer and exporter enter into a firm sales contract for feed grains

Example Sales Transaction • Importer asks approved foreign bank to open an L/C in favor of the U. S. exporter under terms of the GSM-102 program • Foreign bank issues the L/C and advises the L/C through a CCC approved U. S. Bank that it has a U. S. Dollar credit facility • Exporter registers the sale with CCC and pays fee • CCC issues U. S. exporter a GSM-102 payment guarantee • U. S. exporter assigns the payment guarantee to a U. S. bank • U. S. exporter ships goods to importer • U. S. exporter presents shipping documents to the U. S. bank, including evidence of export report

Example Sales Transaction • U. S. bank pays U. S. exporter for the port value of the shipping documents • U. S. bank extends GSM-102 Payment Guarantee financing terms to the foreign bank • Foreign bank determines terms to extend to importer

Deal flow chart (GSM) CCC ship goods Guarantee fee payment guarantee Importer 90 days contract LC application Importing bank Exporter present docs letter of credit U. S. Bank three years annual payments sight

GSM-102 Regional Analysts EURASIA • GSM Marketing Specialist Chris Williams 202 -720 -7241 • GSM Bank Specialist Hal Taylor 202 -690 -1267 • FAS Announcements of GSM-102 allocation are posted at: http: //www. fas. usda. gov/excredits/exp-cred-guar. asp • Export credit guarantee program information, such as riskbased fee schedules and country ratings, and commodities eligible: http: //www. fas. usda. gov/excredits/ecgp. asp

CREDIT PROGRAMS DIVISION KEY CONTACTS Registration & Operations John Doster (Application process) Branch Chief 202 -720 -3277 Risk & Asset Management (Banking information) Teri Ryan Branch Chief 202 -720 -0663 Planning & Analysis (Business Development) Lorie Jacobs Branch Chief 202 -720 -2074