[Federal Register Volume 74, Number 150 (Thursday, August 6, 2009)]
[Proposed Rules]
[Pages 39240-39242]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-18801]
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DEPARTMENT OF AGRICULTURE
Commodity Credit Corporation
7 CFR Part 1493
RIN 0551-AA73
Facility Guarantee Program
AGENCY: Foreign Agricultural Service and Commodity Credit Corporation,
USDA.
ACTION: Advanced notice of proposed rulemaking.
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SUMMARY: This advanced notice of proposed rulemaking (ANPR) solicits
comments on options to reform the USDA, Commodity Credit Corporation
(CCC), Facility Guarantee Program (FGP). The purpose of the ANPR is to
invite suggestions on improvements and changes to be made in the
implementation and operation of the FGP, with the intent of improving
the FGP's effectiveness and efficiency and lowering costs.
DATES: Comments on this notice must be received by October 5, 2009 to
be assured consideration.
ADDRESSES: You may submit comments by any of the following methods:
E-Mail: [email protected].
Fax: (202) 720-2495, Attention: ``FGP/ANPR Comments.''
Mail to: P. Mark Rowse, Director, Office of Trade
Programs, Credit Programs Division, Foreign Agricultural Service, U.S.
Department of Agriculture, Stop 1025, Washington, DC 20250-1025.
Hand Delivery or Courier: 1250 Maryland Avenue, SW.,
Washington, DC 20024.
All comments received will be available for public inspection at
the above address during regular business hours.
FOR FURTHER INFORMATION CONTACT: P. Mark Rowse, Director, Credit
Programs Division, at the address stated above or by telephone: (202)
720-6211.
SUPPLEMENTARY INFORMATION:
Background
The FGP is currently authorized by the Food, Agriculture,
Conservation, and Trade Act of 1990 (the 1990 Act), as amended. Under
the FGP, CCC provides payment guarantees to facilitate the financing of
manufactured goods and services exported from the United States to
improve or establish agriculture-related facilities in emerging
markets. By supporting such facilities, the FGP is designed to enhance
sales of U.S. agricultural commodities and products to emerging markets
where the demand for such commodities and products may be limited due
to inadequate storage, processing, handling or distribution
capabilities for such products.
Under the FGP, CCC guarantees a loan established by a U.S. bank
(or, less typically, by a U.S. exporter) to an importer's bank. The
eligible importer's bank issues a dollar-denominated letter of credit
in favor of the exporter. The eligible U.S. bank, working with the
exporter, extends credit to finance the sale of equipment, goods or
services for an FGP approved project.
As a Participant to the Organization for Economic Cooperation and
Development's (OECD) Arrangement on Officially Supported Export
Credits, the United States has agreed to adopt the terms and conditions
of that Arrangement for the FGP. The Arrangement can be found on the
OECD's Web site at: http://www.oecd.org/topic/0,3373,en_2649_34169_1_1_1_1_37431,00.html.
Project Eligibility
USDA does not designate specific projects but instead solicits
proposals from exporters. Private sector importers, exporters and the
banking sector should determine which projects are commercially viable.
The FGP will support the financing of projects that
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focus on improvements to the storage, processing, handling or
distribution of agricultural commodities. The exporter, with
information from the importer, must make a reasonable economic argument
that the project will primarily benefit U.S. agricultural commodity
exports.
Payment and Coverage
CCC requires a minimum 15 percent initial payment by the importer
to the exporter prior to the export of the goods or services. After the
initial payment is deducted from the net contract value, the FGP
guarantee covers a portion of the facility base value (historically 95
percent) and a portion of the interest for a repayment term of up to 10
years, depending on the country. By financing less than 100 percent of
the net contract value, CCC encourages risk-sharing by the exporter or
the exporter's assignee.
Participation Criteria
The CCC must qualify FGP participants before accepting guarantee
applications. An exporter must have a business office in the United
States and must not be debarred or suspended, or otherwise excluded,
from any U.S. government program. Financial institutions must be
approved by the CCC.
The CCC evaluates the ability of each country and each approved
foreign bank to service CCC-guaranteed debt. For programming purposes,
a credit limit is established for each obligor country. Banks within
the approved obligor country are reviewed and individual bank credit
lines are established. New banks may be added or existing approved bank
levels may be increased or decreased as appropriate, based on available
information.
Defaults/Claims
If the foreign bank fails to make any payment as agreed under the
FGP guaranteed transaction, the exporter or assignee must submit a
notice of default to the CCC. A claim for loss also may be filed, and
the CCC will promptly pay claims found to be in good order. For CCC
audit purposes, the U.S. exporter must obtain documentation to show
that the commodity arrived in the eligible country, and must maintain
all transaction documents for 5 years from the date of completion of
all payments.
Fees
The issuance of the guarantee is subject to a fee paid by the
applicant. Fees are based on the risk grade of the obligor country,
tenor of the guarantee (length of credit period), and terms for
principal payment installments, whether 6 months or annually.
Statutory Authority and Revisions
The FGP is authorized by section 1542 of the Food, Agriculture,
Conservation, and Trade Act of 1990, as amended (1990 Act). Section
1542(a) of the 1990 Act, as amended, provides that CCC make available,
for fiscal years 1996 through 2012, not less than $1 billion in direct
credits or export credit guarantees for exports to emerging markets. 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
U.S. agricultural commodities and products thereof. Specifically,
eligible projects must provide for (1) the establishment or improvement
of agricultural facilities in emerging markets, or (2) the provision of
services or U.S. products goods 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 U.S.
agricultural commodities or their products.
The Food, Conservation, and Energy Act of 2008 extended the
authority for the FGP through fiscal year 2012, and amended section
1542(b) by providing for a ``Construction Waiver'' that would allow the
Secretary of Agriculture to waive the requirement for U.S. goods used
in the construction of the facility if the Secretary determines that
U.S. goods are not available or the use of U.S. goods is not
practicable.
Regulatory History
CCC published an FGP interim rule on March 1, 1993 (58 FR 11786),
in response to the 1990 Act. However, the interim rule was deleted
effective November 18, 1994, when CCC revised 7 CFR 1493 and issued a
final rule on the GSM-102 and GSM-103 programs, and the program was not
made operational before its authority expired on September 30, 1995.
Congress changed the targeting of the FGP in the Federal Agriculture
Improvement and Reform Act of 1996 to countries determined by the
Secretary of Agriculture to be emerging markets. On August 8, 1997, a
new interim rule with request for comment was issued that provided for
facility payment guarantees to be issued by the CCC. To date, no final
rule has been issued for the FGP and the comments received related to
the 1997 interim rule were never addressed by CCC.
Comments
CCC is soliciting the responses of interested parties to the
following specific questions concerning options under consideration for
the FGP. Interested parties may choose to address any or all of the
questions listed or provide other comments. CCC's aim is to streamline
the FGP's application process and to improve upon the program's
effectiveness and efficiency. Additional program information is
available on our Web site at: http://www.fas.usda.gov/excredits/ecgp.asp.
1. Application and Review Process
--Should CCC simplify or eliminate the preliminary review stage of the
application process?
--Should CCC simplify/reduce the information required by 7 CFR
1493.240(a)(20) that is intended to ensure that the facility being
financed will primarily promote the exports of U.S. agricultural
commodities?
--What information should CCC require to ensure that the facility being
financed will primarily promote the exports of U.S. agricultural
commodities?
--Should CCC continue to require an analysis of project outputs as
required by 7 CFR 1493.240(a)(21)?
--In what way could 7 CFR 1493.240(a)(21) be simplified?
--Should CCC continue to require per 7 CFR 1493.240(a)(5) that letters
of interest from U.S. and foreign banks
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be submitted at the time of initial application?
--What documentation should an applicant submit to CCC to establish
evidence that the initial 15 percent down payment requirement has been
met?
2. Coverage
--What coverage should CCC offer under the FGP (principal and
interest)?
--Should CCC continue to require a risk share partner? If not, please
explain why a risk share partner is unnecessary.
3. Construction Waiver
With the enactment of the Food, Conservation, and Energy Act of
2008, the Secretary of Agriculture may waive the requirement for U.S.
goods used in the construction of the facility if the Secretary
determines that U.S. goods are not available or the use of U.S. goods
is not practicable.
--What documentation should CCC require the applicant provide to
support a request for a determination that U.S. goods are unavailable?
--What documentation should CCC require the applicant provide to
support a request for a determination that the use of goods from the
United States is not practicable?
--How does CCC incorporate delivery lead time of the goods in a
determination of non-availability?
--Should pricing of goods be a determinant of practicability?
--Should practicability take into consideration the compatibility of
U.S. goods with local inputs?
Consideration of Comments:
Additional comments on other program modifications to the FGP that
are responsive to the principles outlined herein are encouraged. CCC
will carefully consider all comments submitted by interested parties.
After consideration of the comments received, CCC will consider what
changes should be made to the FGP. Some of the changes described above
would require solicitation and consideration of comments received from
interested parties via the rulemaking process. Other changes might be
adopted by changing internal policies and procedures. Comments received
will help CCC to determine the extent and scope of any future
rulemaking.
Signed at Washington, DC, on July 24, 2009.
Suzanne Hale,
Acting Administrator, Foreign Agricultural Service, and Executive Vice
President, Commodity Credit Corporation.
[FR Doc. E9-18801 Filed 8-5-09; 8:45 am]
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