[Senate Hearing 116-360]
[From the U.S. Government Publishing Office]
S. Hrg. 116-360
OVERSIGHT OF THE EXPORT-IMPORT BANK OF THE UNITED STATES
=======================================================================
HEARING
BEFORE THE
COMMITTEE ON
BANKING,HOUSING,AND URBAN AFFAIRS
UNITED STATES SENATE
ONE HUNDRED SIXTEENTH CONGRESS
SECOND SESSION
ON
EXAMINING THE EXPORT-IMPORT BANK'S RECENT ACTIVITIES AND OPERATIONS,
THE 7-YEAR REAUTHORIZATION LEGISLATION, AND THE EFFECT OF THE
DISRUPTION COVID-19 HAS HAD ON THE U.S. ECONOMY AND ITS IMPACT ON U.S.
EXPORTERS
__________
JUNE 23, 2020
__________
Printed for the use of the Committee on Banking, Housing, and Urban
Affairs
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available at: https: //www.govinfo.gov/
__________
U.S. GOVERNMENT PUBLISHING OFFICE
42-492 PDF WASHINGTON : 2021
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COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS
MIKE CRAPO, Idaho, Chairman
RICHARD C. SHELBY, Alabama SHERROD BROWN, Ohio
PATRICK J. TOOMEY, Pennsylvania JACK REED, Rhode Island
TIM SCOTT, South Carolina ROBERT MENENDEZ, New Jersey
BEN SASSE, Nebraska JON TESTER, Montana
TOM COTTON, Arkansas MARK R. WARNER, Virginia
MIKE ROUNDS, South Dakota ELIZABETH WARREN, Massachusetts
DAVID PERDUE, Georgia BRIAN SCHATZ, Hawaii
THOM TILLIS, North Carolina CHRIS VAN HOLLEN, Maryland
JOHN KENNEDY, Louisiana CATHERINE CORTEZ MASTO, Nevada
MARTHA McSALLY, Arizona DOUG JONES, Alabama
JERRY MORAN, Kansas TINA SMITH, Minnesota
KEVIN CRAMER, North Dakota KYRSTEN SINEMA, Arizona
Gregg Richard, Staff Director
Laura Swanson, Democratic Staff Director
Mike Quickel, Policy Director
Sarah Brown, Professional Staff Member
Homer Carlisle, Democratic Professional Staff Member
Cameron Ricker, Chief Clerk
Shelvin Simmons, IT Director
Charles J. Moffat, Hearing Clerk
Jim Crowell, Editor
(ii)
C O N T E N T S
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TUESDAY, JUNE 23, 2020
Page
Opening statement of Chairman Crapo.............................. 1
Prepared statement........................................... 26
Opening statements, comments, or prepared statements of:
Senator Brown................................................ 3
Prepared statement....................................... 27
WITNESS
Kimberly Reed, President and Chairman, Board of Directors,
Export-Import Bank of the United States........................ 5
Prepared statement........................................... 28
Responses to written questions of:
Chairman Crapo........................................... 36
Senator Brown............................................ 37
Senator McSally.......................................... 40
Senator Menendez......................................... 41
Senator Warren........................................... 44
Senator Cortez Masto..................................... 48
Senator Jones............................................ 58
(iii)
OVERSIGHT OF THE EXPORT-IMPORT BANK OF THE UNITED STATES
----------
TUESDAY, JUNE 23, 2020
U.S. Senate,
Committee on Banking, Housing, and Urban Affairs,
Washington, DC.
The Committee met at 2:30 p.m., in room SD-562, Dirksen
Senate Office Building, Hon. Mike Crapo, Chairman of the
Committee, presiding.
OPENING STATEMENT OF CHAIRMAN MIKE CRAPO
Chairman Crapo. This hearing will come to order.
As is our custom recently, this hearing room has been
configured to maintain the recommended 6-foot social distancing
between Senators, witnesses, and other individuals in the room
necessary to operate the hearing, which we have kept to a
minimum.
A few videoconferencing reminders: Once you start speaking,
there will be a slight delay before you are displayed on the
screen. To minimize background noise, please click the mute
button until it is your turn to speak or ask questions. If
there is a technology issue, we will move to the next Senator
until it is resolved. I remind all Senators and our witness
that the 5-minute clock still applies. You should have a box on
your screen labeled ``Clock'' that will show how much time is
remaining.
Unfortunately, in the last couple of hearings, we have had
a number of Senators who have either not had the box or have
not been able to locate it on their screens, and so I will do
my very best to rap the gavel at about 15 seconds before your
time is up point.
To simplify the speaking order process, Senator Brown and I
have again agreed to go by seniority for this hearing.
With that, we welcome our witness, the Honorable Kimberly
Reed, President and Chairman of the Board of the Export-Import
Bank of the United States. We welcome you back, Chairman Reed.
It has been almost exactly a year since your last appearance
before this Committee.
Today we will receive testimony on Ex-Im's recent
activities and operations, including your efforts to implement
the 7-year reauthorization legislation we enacted last
December, as well as your efforts to continue to process
through the transactions and other matters in your pipeline at
Ex-Im, and to increase your outreach and efforts to bring new
U.S. export opportunities into the pipeline.
In addition, we know the disruption of COVID-19 on the U.S.
economy has had an impact on U.S. exporters as well, and we
will be interested to hear of any efforts and initiatives you
are undertaking to deal with these challenges.
Chairman Reed, you have been on the job for a little over a
year now.
When you came before us for your nomination hearing, and
when you met individually with me and my colleagues on both
sides of the aisle, you made a commitment that, if confirmed,
you would move forward on implementing any outstanding
congressionally initiated reforms, as well as bring your own
commitment to greater transparency and accountability for the
Ex-Im Bank.
As I have since noted in other Ex-Im-related hearings in
this Committee, your efforts to follow through on your
commitment to transparency, accountability, and reform have not
gone unnoticed by me and by my colleagues on this Committee.
I commend you for those efforts and encourage you to
continue them.
In December 2019, this Congress enacted a 7-year
reauthorization of the Ex-Im Bank, the longest authorization
period in the Bank's history.
This extension provides much-needed certainty for U.S.
exporters and strengthens an important tool for the U.S. to
compete directly with China and others in the global
marketplace.
Included in the legislation is a new initiative focusing on
China and Transformational Exports, which will reserve a
significant portion of Ex-Im's exposure authority for
transactions that will put U.S. exporters in direct competition
with China.
This program will particularly focus on U.S. exports of
innovative technologies, like semiconductor manufacturing,
artificial intelligence, biotechnology, wireless
communications, renewable energy, and energy efficiency and
storage, as well as emerging financial technologies.
The new law also includes a requirement that, in addition
to its existing notification obligations to Congress, Ex-Im
shall consult with the State Department as part of the efforts
to assess any risk to the national interest for any proposed
transaction above $25 million involving any business entity
that is controlled by the Chinese Government.
Our reauthorization legislation also had an important focus
on increasing the participation of American small businesses in
Ex-Im projects, by raising the target from 25 percent to 30
percent for small business participation in Ex-Im-supported
exports.
Chairman Reed, we look forward to any update you can
provide on Ex-Im's implementation of these important
initiatives and all provisions included in the December
reauthorization.
We have discussed in previous Committee hearings you and
your Board colleagues faced a number of pending transactions
and other matters to address upon taking office.
Now that you all have had some time at Ex-Im, we would like
to hear an update on those efforts as well to address those
transactions and matters that had already been in the pipeline,
as well as your outreach efforts to bring new American
businesses and export and job creation opportunities into the
pipeline.
Finally, with regard to the COVID-19 global pandemic, we
know business and Government operations all over the world have
been impacted.
For an agency such as Ex-Im, with such a global scope to
its mission and operations, we would be interested in hearing
your thoughts about the challenges that you and your team have
faced, as well as those faced by the American businesses and
other stakeholders you work with on a daily basis.
And we ask that you share with us any initiatives Ex-Im has
commenced to assist U.S. exporters in dealing with the
challenges of COVID, while remaining competitive, creating
jobs, and growing our economy.
Chairman Reed, thank you again for your considerable
efforts, and I look forward to your and our continued work
together on these important efforts.
Senator Brown.
OPENING STATEMENT OF SENATOR SHERROD BROWN
Senator Brown. Thank you, Mr. Chairman, for calling today's
hearing. President Reed, thank you very much for joining us and
for the work you do at Ex-Im. This is a critical time for--am I
muted? I am OK, right? This is a critical time for Ex-Im.
Last year we finally provided certainty to American
exporters and their workers by enacting a 7-year extension of
the Ex-Im charter, as the Chairman said. This is a big victory
after years of obstruction by some of my Republican colleagues,
on this Committee and off this Committee.
We all know what happened here in Congress. In 2015, during
the last debate on reauthorizing the Bank, a small group of
opponents, supported by far-right special interests, tried to
kill the Bank altogether.
When that did not work, they decided to block all nominees
to the Bank's Board, denying it the quorum needed to approve
transactions greater than $10 million. Ex-Im supported some
160,000 jobs before it shut down, and Ex-Im was an essential
tool for creating manufacturing jobs with good salaries. Their
obstruction cost us some 130,000 jobs a year by 2018.
Today the economic damage from COVID-19 builds, and Mitch
McConnell refuses to let us do our jobs and pass additional
help for families and communities and small businesses. Ex-Im
will be called on to help ensure the survival of our
manufacturing base and its thousands of small businesses and
their workers.
Ex-Im during the last crisis added 515 new small business
clients in 2009 alone; the stakes are even higher today.
There are more than 100 export credit agencies and credit
programs around the word that support foreign manufacturers,
but we know our greatest challenge is China.
China's export finance activity is larger than all of the
export credit provided by the G7 countries combined. We can
expect China to continue using export credit as a weapon to win
manufacturing business in critical industrial sectors.
The President and many of my Republican colleagues want to
blame China for everything, including the virus that has taken
the lives of nearly 120,000 of our brothers and sisters and
parents and sons and daughters. That is in our Nation 30
percent of the world's deaths. China has not been a model of
responsibility, to be sure, but President Trump needs to stop
blaming China for his own failures to do more at home to
prevent the spread of COVID-19.
For my Republican colleagues who profess concern about
China, I wish they had shown the same concern with standing up
to China during our 4-year fight to support American
manufacturers.
And if you say you are concerned about China, then you
should support filling Ex-Im's board so our manufacturers can
better compete with China.
President Reed, I look forward to hearing how Ex-Im is
working both to assist American companies during this crisis
and to help them respond to China's efforts to use export
financing to gain market share. The Bank has an important role
to play during this crisis.
Sadly, we must also discuss Ex-Im's response to a tragic
incident in April at a power plant in India. The Sasan power
plant received significant financing from the Bank, and yet it
has a terrible safety record.
Finally, we must talk about the Senate's unfinished work. I
urge Members of this Committee to ask Leader McConnell to allow
the Senate to consider the long-delayed nominations of Paul
Shmotolokha and Claudia Slacik.
If we believe Ex-Im should be helping U.S. small businesses
during these difficult economic times and helping manufacturers
compete against State-backed Chinese companies, there is no
excuse for delaying the confirmation of Shmotolokha and Slacik.
It needs a full Board of Directors.
A core role of Ex-Im board members is educating the
business community about how to use the Bank's export financing
to expand sales abroad and to create more jobs in our country.
Many small businesses are just trying to survive right now.
We know that. Some of them do not know that Ex-Im is a tool
that can help. We need a full board that can be proactive about
offering support.
Mr. Shmotolokha, the Republican nominee as First Vice
President, was reported out of this Committee more than a year
ago. Ms. Slacik was first nominated nearly 4 years ago. Neither
is controversial.
Mr. Shmotolokha, the Republican, has deep experience in the
telecom industry and decades of experience in international
business. Ms. Slacik, the Democrat, previously served at Ex-Im
and has some 30 years of commercial banking experience.
I think Ex-Im has an effective management team. Thank you
for that, Ms. Reed, but you should be able to operate at full
capacity during an unprecedented crisis, not still missing two
members with critical expertise.
We have two nominees who can provide important expertise at
a critical time when we must help American businesses compete
against China. Somehow these noncontroversial nominees are
mysteriously blocked.
We also have a qualified Inspector General nominee, Peter
Coniglio, who is waiting for confirmation also.
Congress must take up these nominations immediately.
Thank you, Mr. Chairman.
Chairman Crapo. Thank you, Senator Brown.
As I indicated, we are joined today by the Honorable
Kimberly A. Reed, President and Chairman of the Board of the
Ex-Im Bank, or Chairman of the Ex-Im Bank of the United States.
Thank you for joining us today in the Committee.
Chairman Reed, you may proceed.
STATEMENT OF KIMBERLY REED, PRESIDENT AND CHAIRMAN, BOARD OF
DIRECTORS, EXPORT-IMPORT BANK OF THE UNITED STATES
Ms. Reed. Chairman Crapo, Ranking Member Brown, and Members
of the Committee, thank you for this opportunity. I hope
everyone is staying safe and healthy. Many of us have lost
loved ones, and I offer heartfelt thanks to our Nation's health
care professionals and essential workers.
The Export-Import Bank of the United States has the mission
of supporting American jobs by facilitating U.S. exports. Our
vision is ``Keeping America Strong: Empowering U.S. Businesses
and Workers to Compete Globally.'' I love this mission and
vision, as the U.S. worker is at the heart of everything we do.
And our mission has never been more important than it is today.
It has been nearly 1 year since I last appeared before this
Committee. At that hearing I shared with you my priorities that
I conveyed to my Ex-Im colleagues on my first day of work:
fully reopening, reforming, and reauthorizing Ex-Im, thereby
providing positive results for America's workers and
businesses, while protecting America's taxpayers. I want to
thank the Members of this Committee for your support and
engagement as we have worked hard to deliver on these
commitments over the past year.
Given time constraints, I make most of my remarks in my
written testimony. Today I will highlight areas of particular
interest to this Committee: Ex-Im's transaction pipeline
reforms, historic reauthorization, and COVID-19 response.
Last year I committed to you that Ex-Im would work through
its financing applications in a prudent way. In fiscal year
2019, Ex-Im authorized $8.2 billion in financing that is
estimated to support 34,000 U.S. jobs. We now have more than
$39 billion in pending Board-level transactions undergoing
various stages of due diligence and underwriting. We also are
in many preapplication stage conversations. I want to recognize
Board members Bachus and Pryor and our Ex-Im colleagues for
their efforts.
I pledged to this Committee that I would work to reform Ex-
Im by increasing transparency, strengthening taxpayer
protections, improving protections for domestic companies,
ensuring Ex-Im does not crowd out private financing options,
cracking down on bad actors, and working to reduce the reliance
on export credit agencies globally.
I am pleased to report we have made significant progress on
these six commitments. Most notably, after an 11-month public
review process, Ex-Im's Board in May unanimously adopted
reforms to the agency's economic impact and additionality
procedures. Specifically, Ex-Im sought public comment in the
Federal Register; held two public Ex-Im Advisory Committee
meetings, chaired by former Congressman Stevan Pearce and
featuring experts with diverse views; solicited independent
third-party review; and considered other Government agency
input. Collectively, the reforms to both sets of procedures
enhanced transparency and accountability while strengthening
taxpayer protections.
We achieved a major success for America's workers when
Congress passed and President Trump signed into law on December
20, 2019, a historic 7-year reauthorization of Ex-Im, the
longest in Ex-Im's 86-year history. Thank you.
Over the past 6 months, we have been implementing the
provisions of this reauthorization. I want to highlight two key
efforts.
To set the stage, I will preview Ex-Im's to-be-released
annual report on global export credit competition that we will
submit to Congress at the end of June. The world now has 115
known official export credit providers, up from 85 just 4 years
ago. When it comes to export credit financing, China is
fundamentally changing the nature of competition. China is very
aggressive, strategically focused, and unlike the United States
and many other countries, not subject to the same international
rules and agreements. From 2015 to 2019, China's official
medium- and long-term export credit activity alone was at least
equal to 90 percent of that provided by all G7 countries
combined.
Accordingly, Ex-Im is pleased to have the new congressional
mandate to compete with China and counter its opaque and
exploitative model of economic development and finance. We are
actively establishing the Program on China and Transformational
Exports, which is one of Ex-Im's most significant efforts in
its 86-year history and vital to help level the playing field
so our Nation's businesses and workers can succeed against the
fierce Chinese competition around the world. We are
expeditiously addressing policy and legal issues necessary to
compete successfully and working through a resource assessment
to ensure this program is fit for purpose.
Another focus is boosting Ex-Im's small business engagement
to achieve our new 30 percent small business mandate set by
Congress. We have launched initiatives focused on outreach and
education, resources for underserved markets, working with
private sector partners, increasing ease of doing business, and
improving transparency. I am confident we can reach and equip
more businesses with tools to reach new markets.
When it comes to COVID-19, Ex-Im swiftly responded
operationally and programmatically. On the operations side, Ex-
Im's workforce, 515 Federal civil servants and contractors
quickly transformed into a temporarily fully teleworking
agency. We are a family--I know they are watching right now--
and I am so proud of their commitment to our mission.
Ex-Im also responded programmatically. On March 12th, Ex-Im
announced temporary relief measures for current customers, and
in April, Ex-Im announced four temporary initiatives to address
targeted needs experienced by exporters and private sector
lenders.
The stress for Ex-Im borrowers appears primarily to be one
of short-term liquidity and not long-term solvency.
Thank you. I am pleased to answer any questions.
Chairman Crapo. Thank you, Chairman Reed.
I want to talk first about reforms and then second about
China. That will probably use up my time. Shortly after you
were sworn in as Ex-Im Chairman 13 months ago, you launched a
broad reform initiative that you referenced in your testimony.
Could you just speak a little more, maybe a couple minutes
more, about the details of the reforms of those six commitments
that you made, the types of reforms you have accomplished so
far?
Ms. Reed. Absolutely. From day one, at my nomination
hearing Senator Toomey asked me to commit to six promises under
oath in front of this Committee, and I want to thank my
colleagues at Ex-Im for helping us move this forward in
substantial ways over the past year.
When it comes to increasing transparency, every day I am
looking at what we are doing and how we can be sharing it with
you and with the American taxpayer so you will see more
transcripts posted online. If you look at our press releases,
you will be able to follow all of our activity, and I am
pushing to share more information about every transaction that
we support.
When it comes to strengthening taxpayer protections, we
have a full gamut of efforts that we are doing with our
approved Chief Risk Officer and Chief Ethics Officer. We want
to do everything we can to protect the taxpayer.
When it comes to improving protection for domestic
companies, as I mentioned, we revised our economic impact
procedures. And not to crowd out private financing, we have new
additionality procedures that we have just put into place.
I had a very nice conversation with Senator Toomey this
morning in his office, and we went through these in detail. I
have a sheet, and, sir, I would be happy to walk through any of
these efforts at length with any Member of this Committee. But
I want to say that we are really being sure that we are
cracking down on bad actors. We have not only increased our
focus domestically to ensure that bad actors do not act, but
also we are focused around the world, and with that we created
a new position at Ex-Im, our Senior Adviser for National
Security, and also we will be talking more about the China
Program, I am sure, in a little bit.
And then, finally, we are required by law to do what we can
to reduce reliance on ECAs. As I mentioned when I testified
here a year ago, we will be hosting the G12 here in Washington,
and that had to be postponed from April, but we look forward to
having a very robust conversation then. But many actions have
taken place from last year until now, including when I have
conversations directly with my colleagues, with Ambassadors,
and with Government officials at Treasury and with other
agencies in our Government and around the world. Thank you.
Chairman Crapo. Well, thank you. And as you know, those
reforms are very important to our getting the political support
that we need to continue to expand the base of support for the
Bank's operations, and I think you have done a great job in
moving forward on those, and I encourage you to continue to do
so.
My last question, we just have about a minute or two--well,
I have 2 minutes left--is on Chinese competitiveness. Last year
Congress mandated the establishment of a Program on China and
Transformational Exports at Ex-Im Bank to combat actions by
China that are preventing U.S. businesses from being able to
compete on a level playing field. Could you just provide us
with an update on your efforts to implement that program?
Ms. Reed. Absolutely. So we were delighted to get this new
mission. As you know, in law, it charges Ex-Im with focusing 20
percent of its $135 billion portfolio, or $27 billion, up to
that amount, to neutralize China and advance the United States'
comparative leadership in the world. And that program obviously
takes a lot of effort and a lot of focus to do it the correct
way. We have recruited from the Pentagon a Senior Counselor and
Senior Vice President for this new program, Dave Trulio. He is
currently assessing our resource needs. We are working
throughout our agency to see how our legal requirements and
other procedural requirements need to be addressed. We are
engaging already with applicants, potential applicants. We do
not want the program to be delayed in any way if there is a
need.
You will see that earlier this year we approved a deal in
the country of Mozambique that actually displaced China and
Russia, and it was the largest deal in the history of the
Export-Import Bank of the United States, and we are very
pleased that we have workers in our country now that get to
provide $5 billion of materials and services to Mozambique as
they take on this transformational effort.
But there is a lot of work to be done. Resource allocation
needs to be addressed because this program came forward after
our budget was set, and you can imagine that this has lots of
different issues. And I really want to thank our interagency
partners as well, as we work with the State Department and the
NSC and others to ensure we are doing everything we can.
I would be pleased to have a further briefing with you and
the Committee in detail at any time.
Chairman Crapo. Well, thank you. And thank you again for
your efforts in this area as well.
Senator Brown.
Senator Brown. Thank you, Mr. Chairman. And, Chairman Reed,
thank you to you and the Board for working to ensure Ex-Im is
doing the most it can for American exporters and workers during
this pandemic.
I noted earlier and you noted in your opening testimony
that China provides more exporting credit than the rest of the
G7 combined. Do you expect China or other Nations with
aggressive export credit programs to dial back their efforts at
all during this economic crisis?
Ms. Reed. Senator, China is not transparent with what they
do, so I am so glad that we have this new mandate to set up
this Program on China and Transformational Exports. We are
communicating directly with people in the countries where China
is advancing its Belt and Road Initiative and China 2025
Initiative. And we are sounding the drum as loud as we can
because we want the world to know they need to come to us, and
we in our country and our workers need to stand a chance to be
able to sell our great products to the world.
So because China is not transparent, this new program will
help us deliver more information to you over the next months to
come.
Senator Brown. Thank you, and thanks for your focus on
China. At Ex-Im we know how critical it is to America's
response.
The Board will soon consider a transaction to assist
aircraft engine exports that support some 11,000 jobs,
including more than 1,100 jobs at GE Aviation and its partners
across Indiana, North Carolina, and my State of Ohio. It is a
good example of a major transaction that can continue to make
American manufacturing competitive across the globe while
helping thousands of small business suppliers. It is difficult
to predict when or if the default rate will tick up toward the
2-percent cutoff threshold that Congress instituted, the 2-
percent requirement to appease Ex-Im critics in 2015, despite
the Bank's strong record of managing default risk. The damage
of delayed financing would be bad for large companies and their
small business suppliers. But would you succinctly explain what
happens to small businesses if Ex-Im financing is cutoff?
Ms. Reed. Senator, I had a great opportunity--and I was
sorry to miss you--when I was out in Columbus, Ohio, last
August at an event at Ohio State University's Business School,
where I met with a lot of key constituents that focus on small
business and success in Ohio. If Ex-Im--as you know, it was put
into law if we hit a 2-percent default rate--and I am pleased
to say we continue to maintain an under 0.5-percent default
rate. But as you get into unprecedented times, if we hit that
2-percent cap, of course, we are going to consult with you, but
it is pencils down. And just as we were faced when Ex-Im was on
the brink of expiring, when pencils down happened for small
businesses that are trying to export, especially at this time
of COVID, they need us now. They need that export credit
insurance. They need that working capital loan guarantee. They
need these products, and we are doing all we can to help our
small businesses. But this would be something that could be
alleviated if the default cap were reviewed again.
Senator Brown. Thank you, and some of us did not think that
cap was necessary or necessarily even wise, but thank you. You
again said it is under 0.5 percent. Please continue to update
our Committee on your efforts to monitor and manage the Ex-Im
portfolio.
My last question is about the Sasan power plant. I
mentioned in my opening statement the tragic loss of life at
that power plant in India. A dam holding fly ash from the coal-
fired power plant burst. A flood of contaminated sludge
traveled 3 miles resulting in six fatalities, including a
couple children. These are not the first fatalities, as you
know, at this plant. A 2015 report from Ex-Im's IG identified
at least 19 worker fatalities in prior monitoring of this
project. Understanding COVID-19 affects the ability of Ex-Im to
learn more about what is happening on the ground at Sasan after
the dam collapse and to ensure accountability for that, explain
what more Ex-Im can be doing and should be doing when a project
the Bank has financed has developed just an abhorrent safety
record like that has.
Ms. Reed. Absolutely, sir. As I took on this job a year
ago, I inherited a portfolio, and this project that you speak
about was one that the Board approved in 2010, and so I have
reviewed news articles that others can review as to why that
transaction came about. And I note that Senators from the State
of Wisconsin at the time showed their support for that deal,
but that was the Board's vote back then, and we take life
seriously. And so this particular project, even though we
financed some equipment that went to it, we are responsible as
Americans and as Ex-Im. And so there was a breach, and there
was a loss of life, and this is unacceptable. This happened
while COVID was happening; otherwise, I would have had our team
and our consultants on the ground immediately. But we continue
to communicate directly with people who are there in India, and
we will go as soon as we can.
But we sat down with Friends of the Earth. I would be
pleased to provide our response if you would like that we
provided to them. We also hosted a call with them and the
Sierra Club. We are doing all we can, and we take this very
seriously, and I am so glad that after this deal was originally
approved in 2010, the IG did a review of it, and from that we
had heightened environmental and social standards and processes
put in place at Ex-Im. And we have a great team, and they are
on top of it. But any loss of life is distressing to me.
Senator Brown. Thank you, Madam President.
Thank you, Mr. Chairman.
Chairman Crapo. Thank you.
Senator Toomey.
Senator Toomey. Thank you very much, Mr. Chairman. Chairman
Reed, thank you for joining us today. Thanks for stopping by my
office earlier for our discussion. And I want to thank you for
your sincere efforts to advance the cause of the reforms that
you and I have discussed.
Several of my colleagues have asked the question, you know,
what would happen if the Ex-Im Bank were not in business? What
would happen to exports? What would happen to our economy? Of
course, we have recent history to tell us exactly what happens.
The Ex-Im Bank's total volume of loans hit a recent peak back
in 2012, almost $40 billion in loans and loan guarantees. And
then for a variety of reasons, including the fact that we did
not confirm a quorum on the Board, the volume of Ex-Im Bank
financing dropped very, very precipitously to the point where
in 2018 it was less than $5 billion. So it was like a 90-
percent reduction in Ex-Im financing.
So what happened to U.S. exports during this time when Ex-
Im Bank financing was not available to U.S. exports, certainly
not to large-ticket transactions? Well, the answer is U.S.
exports continued to grow, and in 2018 hit an all-time record
high, while our economy was on our way to strong growth, record
low unemployment, and just doing remarkably well. So that is
the control experiment that we have witnessed.
Nevertheless, Madam Chairman, I understand it is your
responsibility to implement the law that was passed, the
reauthorization bill, and that is what you are working on. Let
me ask a couple questions about that.
My recollection is that in the reauthorization--and I think
you have alluded to a specific requirement that the Ex-Im Bank
counter and really compete with China in the subsidization of
exports. That is what the Ex-Im Bank does. That is what the
Chinese export agency does. And so knowing that, previously
when the Ex-Im Bank was fully operational, one of the biggest
customers was, in fact, the Industrial Commercial Bank of
China, getting guarantees to finance acquisitions for aircraft.
Given the new mandate with respect to China, is the Ex-Im
Bank still doing business with the Industrial Commercial Bank
of China?
Ms. Reed. Thank you, sir, and thank you for our visit this
morning. Currently in our portfolio we have very little when it
comes to China on our portfolio, but I am very pleased that the
new reauthorization law requires us to notify the State
Department and Congress whenever we have any application that
comes in involving China of $25 million or more. And so a lot
of scrutiny goes into every transaction, and it is a new day at
Ex-Im. National security is economic security. I care about
what we do. I also, as you mentioned, have to uphold the law,
and that asks us to not pick winners and losers, judge every
application based on reasonable assurance of repayment. So it
is a very fine line, but I will assure you that I look forward
to Congress' comments if we ever do get an application dealing
with China that you will be notified of.
Senator Toomey. OK. Thanks.
A second question I has is in regard to the additionality
guideline, as it is called. Additionality, of course, is the
Ex-Im Bank phrase for not crowding out private sources of
capital, as I understand it. And the guideline says that a
borrower, in order to qualify, would have to demonstrate, among
other things, that a foreign export credit agency is providing
readily available financing to a competitor, and that
commercial financing would not be available at rates and terms
that make the U.S. export competitive. It does not say
commercial financing is not available. It says it is not
available at terms that would make the U.S. export competitive.
So, obviously, if a foreign export agency is subsidizing a
foreign country's exports, then private commercial financing
may not be competitive. How far do you go in matching the terms
of another credit agency? How big a subsidy is too big if a
foreign export agency is subsidizing a competitor?
Ms. Reed. So we went through a very substantial public
process over 11 months to address additionality and economic
impact procedures, and I would like to note that this will go
under further scrutiny by an outside reviewer in the years to
come. So this was a very important first step to ensure that we
supplement and not compete with private capital. We have, as
you have mentioned, this new role when it comes to neutralizing
China, and the language in the statute is pretty clear. We
need----
Senator Toomey. Madam Chairman, I am asking more broadly,
not just with respect to China. The question is: When do you
decide that a foreign export agency is just providing too big a
subsidy and we are simply not going to match the terms? It is
not clear from these guidelines.
Ms. Reed. Yes, so I would say that we will review every
application based on the merit, and it is hard to predict until
those actual case scenarios through actual transactions appear
to us. Every action is based on reasonable assurance of
repayment and assuring us that we are not crowding out. It is a
more rigorous process now, and we will be posting summaries of
our analyses online, and we will also be reporting now for the
first time our financings when it comes to additionality to the
Congress on an annual basis. I look forward to further
engagement with you on this.
Senator Toomey. Thanks, Madam Chairman.
Thank you, Chairman.
Chairman Crapo. Thank you.
Senator Reed.
Senator Reed. Thank you very much, Mr. Chairman. And
welcome, Chairman Reed. I must say that that term has a sort of
ring to it. Maybe it is just me. But, anyway, welcome.
I want to join Senator Brown in suggesting that we
absolutely have to fill out the Board of the Ex-Im Bank. This
is a time of incredible crisis across the world, and having
talented additional hands on board can only help you and help
your colleagues. And I hope you would agree with that, Madam
Chairman.
Ms. Reed. Yes, we want to----
Senator Reed. Well, thank you very much.
Ms. Reed. ----increase our portfolio to 30 percent small
business, and that takes a lot of boots on the ground and a lot
of work.
Senator Reed. Well, you led me right to my next question,
which is: Small business and veterans' business are a big part
of the Rhode Island economy, and the efforts that the Ex-Im
Bank has to extend to these smaller companies takes sometimes a
little more work, a little more recruiting, a little more
effort. And you are committed to doing that. Can you give us
just an idea of how you are going to pursue that and what
additional resources you may need?
Ms. Reed. Absolutely. Well, right as we speak, sir, I am
missing the Women's Veteran Alliance webinar that we are
hosting at Ex-Im. So if I finish by 3 o'clock today, I will be
able to join them. So I send my best wishes to them. But we
have done a lot of unprecedented outreach through a variety of
organizations that I know you know so well, including the
National Veteran Business Development Council, National
Veterans Small Business Coalition, et cetera.
I also have made it a specific focus of mine, and my fellow
Board member, Spencer Bachus, is a veteran, and so he is
spearheading this for us. So we are doing a lot of outreach,
and last year we attended four veteran business-focused
conferences and, of course, are doing the webinars and look
forward to engagement. The Veterans Administration is directly
across the street from us, and I look forward to doing even
more, and even with you, sir. And you do have the best last
name in the world.
Senator Reed. Thank you very much. I agree, and
congratulations to you also.
Let me turn, as my colleagues have turned to a degree, to
China. You have been basically tasked with engaging with them
in a significant way to disrupt what for many years was
becoming a monopoly in terms of assistance to export-import
operations around the globe. Have you been given a particular
sector focus, for example, micro-electronics? How do you sort
out from all the different companies where you are going to put
your emphasis and your activity?
Ms. Reed. Yes, so this reauthorization legislation
identifies 10 specific sectors that we need to be focused on,
including 5G, water treatment and sanitation, biotechnology,
biomedical sciences. So there are 10 very specific sectors that
are innovative for our country, and so we are doing a lot of
outreach just standing this program up, and we are doing that
through strengthening America's competitiveness initiative. And
so we have been hosting webinars. We have had hundreds of
participants from all of these sectors to talk about what we
need to be doing, what they are understanding about China, how
we can be of help to them, and how we mesh that with our charge
going forward. And I cannot wait until we get our very first
application as the lender of last resort and where do we need
to be helpful to support exports that do compete with and
displace China in the world.
Senator Reed. Let me ask a follow-up question. That is,
this must be a governmentwide effort. You could do
extraordinarily good work, but if you are not being
coordinated, your efforts could be less than efficient.
Is there a coordinating mechanism within the Government to
help you, to give you direction? Is it the State Department? Is
it the Department of Commerce? Just quickly, because I have a
few seconds.
Ms. Reed. So I have recruited someone from the Pentagon to
lead this program, and we are putting our outreach everywhere,
because we were not authorized for 4 years, and this
Administration has come on board, and thankfully we are now up
and running. So it is doing a lot of outreach, and I would say
the commercial service over at the Commerce Department, we have
done a lot of outreach with them, with the State Department,
and with others. There is engagement also on the national
security front when you talk about something like 5G and how we
actually help make a difference when it comes to Huawei. So
lots of engagement, and more to be done.
Senator Reed. Thank you, Chairman Reed.
Ms. Reed. Thank you.
Chairman Crapo. Thank you.
Senator Rounds.
Senator Rounds. Thank you, Mr. Chairman. Chairman Reed,
thank you very much for your service and for joining us today.
Congratulations on your recent 1-year anniversary as Chairman.
I do appreciate your dedication to Ex-Im after what was a very
long and difficult confirmation process.
I would like to begin by asking about the landscape for
export credit agencies throughout the globe. Part of the reason
why I had an interest in seeing Ex-Im with a Board quorum was
to make our manufacturers more competitive against companies
and countries like Germany and China, whose Governments are
very aggressive when it comes to promoting exports. Can you
tell us how you have seen the landscape change for export
credit during your tenure? And then how do you see the activity
changing as we continue to work and work around the COVID-19
pandemic and what it has done right now with business activity
throughout the globe?
Ms. Reed. Absolutely. So as I mentioned in my opening
statement, you will be receiving our annual Competitiveness
Report at month's end, and I did a little preview of that. So
this year, looking back at the year 2019, this year's report
will indicate the volume of all of the other ECAs. And so
number one on the list is China, followed by Italy, Germany,
India, United Kingdom, France, Korea, and then the United
States. And how the landscape will change, obviously each
country is handling the COVID crisis in their own way.
President Trump has asked us and actually issued a memorandum
ordering Ex-Im to be helpful to Italy, and I have engaged with
Ambassador Eisenberg as well as the Italian ambassador to the
United States to let them know that we are there for them at
the President's direction in every way.
But as far as export credit agencies, we are there to be
helpful to our U.S. workers and businesses to compete, so we
have got a very robust program that we immediately stood up as
soon as COVID-19 happened to provide more flexibility and
provide those programs to help our country do what we can. So I
look forward as we reopen Ex-Im to help us do all we can in
every way to support workers and businesses in States across
the country, including yours.
Senator Rounds. When you talk about making improvements for
small businesses and our goal being to have perhaps 30 percent
of the business be from small businesses, let us talk about,
first of all, how we define that. We are not talking about 30
percent of the loans. We are talking about 30 percent of the
volume. Correct?
Ms. Reed. The statute indicates 30 percent of the dollar
amount of authorizations, and so that is a really wonderful
goal but very ambitious because we support businesses of all
size. So you might be a mom-and-pop small business--and I have
visited several of them now--where what you export is so
important, but it is not a very expensive export. And then you
are competing with others around the world who are doing the
same. So we want to help them through working capital loan
guarantees, our export credit insurance programs, and it is a
lot of work to also bring in new startup businesses. How do I
go from being focused on the United States to this wonderful
global marketplace outside of our borders? And that takes a lot
of work, so it might be a small-dollar amount that they need us
to come in and fill the gap, but we are doing thousands and
thousands of these small business transactions on a regular
basis. I think it is 2,000 transactions that we have done with
small business since our quorum was stood up. So dollar amount
might be small, and we are going to work to do all we can to
get that to the 30 percent.
Senator Rounds. One of the leading criticisms of Ex-Im--and
I think it is very important we have Ex-Im because of that
outreach to small businesses as well, and it does take a lot
more work. And if your emphasis is on it, you are going to have
your work cut out for you. But at the same time, one of the
leading criticisms of Ex-Im is that the Bank competes against
other institutions that would otherwise provide export credit
to American companies operating abroad.
Have you found that to be the case in starting your
position, particularly in light of the COVID-19 pandemic?
Ms. Reed. No, sir. So I have done engagement with thousands
of people now, every type of stakeholder possible in the United
States and around the world, and I cannot tell you how relieved
people are that we are back. And it is not just showing up and
turning on the switch after being shut for 4 years. It is doing
it in a thoughtful way but also building the confidence when it
comes to multinational companies, that they should not take
their supply chains to other countries, which is what happened
in some cases when we were shut. They need to bring them back--
thank you for giving us the certainty of 7 years. Of those 115
export credit agencies, I venture to say that we are the only
one that expires from time to time, and I am coming in with the
support of Senator Toomey and others in doing reforms. We do
not want to make it harder. We just want to be protecting the
taxpayer and really showing our very specific limited role to
help businesses succeed in our country and level the playing
field for them. We want them to win, not other countries'
workers to win.
Senator Rounds. Thank you.
Thank you, Mr. Chairman.
Chairman Crapo. Thank you.
Senator Menendez.
Senator Menendez. Thank you, Mr. Chairman. And welcome back
to the Committee, President Reed, and let me just briefly echo
Ranking Member Brown's comments and state that it is
unacceptable that you should have to wait so long for a full
Board, so I hope the Senate moves these forward soon.
Ex-Im's 2018 Competitiveness Report states that a
significant number of foreign export credit agencies have
changed their mission from leveling the playing field for their
exporters to proactively seeking to create transactions for
them and ``advancing their strategic interests over the long
term.''
According to one survey respondent in your report, ``Other
ECAs are actively seeking exporters to move production to their
country to fill the void Ex-Im Bank has left.''
President Reed, have American exporters lost production
opportunities to other countries who have adopted a more
aggressive strategy?
Ms. Reed. Yes, sir. We have heard definite reports of that,
and I found one report in a news article that a lot of times
companies are private about how they do their business. But I
have definitely heard that we have lost several deals, many
deals, millions of dollars of deals, while we were closed. And
who really loses out when that happens, when a multinational
company chooses to move their supply chain to a foreign country
that provides export credit financing? Our own supply chains,
our own small businesses who roll up their great small business
products into these larger multinational computers. Those are
who lose in our country.
So we are doing all we can, especially with this new
mandate on China, to say, world, we are here, and we want to be
exporting our great goods and services. And we welcome to
review any application. We do not pick winners and losers. We
have a set-out criteria based in law, and we want to be as
flexible as we can.
Senator Menendez. Let me ask you this. I appreciate that,
but--welcoming people to apply, I appreciate that. But how are
you responding to the shift, especially in times like these
when we and most of our economic competitors are looking to
strengthen supply chains and invigorate domestic manufacturing?
Ms. Reed. We are getting----
Senator Menendez. Do you need any additional authority from
Congress to respond to this shift and ensure that Ex-Im is
still able to advance its goal of supporting U.S. jobs and
exports?
Ms. Reed. So I am now actively working with my colleagues
to stand up this very targeted, aggressive authority with our
new Program on China and Transformational Exports. When you
look at the list of those 10 targeted categories, including 5G
and quantum computing, I believe that as we focus on that, that
will be a good program for us to ensure that we are competing
around the world the best we can. And what I mean by welcoming
is we support--we do not pick winners and losers, but it is
oftentimes raising awareness that we are back.
What we can do? I was so delighted to recently sign, for
example, a memorandum of understanding with my good friend
Chairman Rodney Hood of the National Credit Union
Administration to help credit unions even know when you have
one of their members go in to look for a small business loan
and support, that Ex-Im's resources are there, millions of
members, and that had really never been done before in a robust
way. So there is lots of work to be done.
Senator Menendez. Since you are talking about China, let me
ask you, according to Ex-Im's 2018 Competitiveness Report,
China extended $39 billion in medium- and long-term export
financing, hitting its highest point since 2014. In comparison,
the U.S. extended $0.3 billion, making it the third consecutive
year that the U.S. provided one of the lowest volumes among the
28 countries with noteworthy levels of export credit.
Last year we discussed this issue, and you noted that some
companies were setting up manufacturing plants outside of the
United States so that they could be eligible for other
countries' export financing. Have you seen any changes to that
trend in the past year? What impact does having one of the
lowest volumes of export credit in comparison to other
countries have on U.S. exporters and Ex-Im's ability to stay
competitive?
Ms. Reed. We will be sending to Congress at the end of the
month our annual Competitiveness Report, so you will see as a
preview in this year's report China was at $33.5 billion. In
the United States last year, remember, we came online with our
confirmation in May, and so last year we increased that amount
of exports to $5.3 billion. So we are number eight on the list
for 2019. So working up, but it is restoring that confidence in
people that Ex-Im is certain--it takes sometimes years to put
together an application and go through the whole process. And
when you are a company where you are beholden to your
shareholders, you have got the world to choose from. And so I
think that this new robust reauthorization will help us bring
back more of the supply chain, and I have talked with some of
those companies who have moved their operations to other
countries, and I am pleased that they are focused again on the
United States. So more to do, and I look forward to hopefully
celebrating some job successes in New Jersey.
Senator Menendez. Thank you. Well, we will look forward to
following up with you.
Ms. Reed. Thank you.
Chairman Crapo. Thank you.
Senator Tester.
Senator Tester. Thank you, Mr. Chairman. And I want to
thank you for being here, Kimberly. I appreciate what you are
doing.
I am going to explain a situation to you, and you tell me
what we can do to fix it. Right now, if I were to ship some
agricultural products to a foreign importer, the title needs to
first go to a foreign bank. The title is then held until an
importer formally receives it and pays for the shipment. But
here is the issue: If an importer decides they do not want it,
there is no legal obligation for them to pick up the title, and
in a time of extreme market volatility, this is not uncommon.
Now, Export-Import offers insurance for exporters so they
have a safety net if something goes wrong. However, this
insurance does not extend to cases where the title is left at
the bank and the importer never receives the shipment. So the
shipment is abandoned in a foreign port. The exporter has no
access to the title or the shipment.
First of all, are you aware of this situation? Is there
anything Ex-Im has in its policies to cover this kind of
situation?
Ms. Reed. Sir, I apologize, but I am having a really hard
time hearing you. I am happy to answer that in writing or have
our staff talk with you. But I did hear you say the word
``agriculture,'' so----
Senator Tester. Yeah, so let me back up just a second. I
should have hollered louder. I am sorry. But I send
agricultural products; the title goes to a bank. If the
importer decides they do not want it, there is no obligation to
pick the title up. The insurance for exporters does not work
when a title is left at a foreign bank, and the importer never
receives the shipment. The exporter never gets paid. And it
happens with some regularity.
Do you know of this situation? Is there anything Ex-Im can
do about it? Or is it something Congress needs to take up? Or
are we just hosed?
Ms. Reed. So I would say I have not heard the specific
instances that you are referring to, but our export credit
insurance program, that is exactly why it exists. We provide
that----
Senator Tester. Yeah, but it does not work if they do not
pick up the title. It just does not apply.
Ms. Reed. Sir, I would be happy to follow up with you on
this. Very committed to agriculture.
Senator Tester. Thank you very much.
So you talked a little bit about this with Senator Rounds,
but, number one, do you think your outreach to rural businesses
is adequate, particularly agricultural businesses? And if it
is, could you give me an idea--you have not been in this
position all that long, but how much of your time is spent on
rural outreach versus the big guys?
Ms. Reed. Absolutely. Well, sir, I remember your question
to me last year that kind of got at this issue. I am from rural
West Virginia to your home State, very committed to rural
America. It is a chief initiative. You quizzed me last year
about our regional offices, so I want you to know I took a
strong stand, and we are backfilling all of the positions and
fully reopening all of our 12 regional offices. And then, of
course, doing the outreach the best we can, 65 webinars in the
past 3 months alone, 160 email blasts. And if you would go to
our website, I put the hyperlink in my written testimony, but
we have done a new video that I welcome you to share with your
constituents, because we want to be helpful. We are doing all
we can to do small business leads as well.
After averaging 500 a month immediately before COVID, I
will say it hit a high of 1,387 in May, and we are on track to
pass that in June. So I want to do even more.
Senator Tester. Thank you. Do you like your job? You appear
to.
Ms. Reed. What did he say?
Senator Tester. Do you like your job?
Ms. Reed. I love my job. This is the best job I have ever
had, but it is so important and a lot of hard work.
Senator Tester. It shows. It shows, OK? So the question is:
As you look at this agency that you have been running for the
last--not all that long, what tools do you not have that you
need?
Ms. Reed. So we are transforming, sir, because of COVID--
and we are fully teleworking from home, 515 of us. I am so
proud of everyone. We will see how the workplace transforms as
we get further into the response on COVID. But I would say that
I am so proud that we have a COVID task force leading and
advising us all along the way.
The one thing is our new Program on China and
Transformational Exports. So in that December 20th legislation,
we were asked to do a deep dive, focus 20 percent of our
portfolio to neutralize China and advance America's comparative
leadership around the world. So that is one of the most
significant programs we have ever been asked to do, I would
say, in the 86-year history of the Bank, and our budget came
out before that program was mandated by law. And so I look
forward to further discussions on what resources we may need to
fully optimize that to fulfill the mandate that you set for us
to fulfill.
Senator Tester. Thank you very much.
Thank you, Mr. Chairman.
Chairman Crapo. Thank you.
Senator Cramer.
Senator Cramer. Thank you, Mr. Chairman. Thank you,
Chairman Reed, for attending and for the good work you are
doing. I am sorry that we have not been able to do more things
through this timeframe. However, the year is not over, and lots
of good things are happening.
I am going to follow up on both Senator Tester and Senator
Rounds. There is no need for you to answer again what you have
been doing to reach out to small and rural businesses, but I
will just throw in an invitation, since Senator Rounds and
Senator Tester and I all live in the same neighborhood. Perhaps
it is an opportunity when the weather becomes unbearable in
Washington, D.C., for existence, you could make a trip to the
Midwest and the West and come and meet some of the--both the
Bank's current borrowers that are small rural manufacturers and
neighbor businesses as well as use it as an opportunity to
solicit and invite and maybe inspire some more. So I would just
throw that invitation out. We would love to host you in our
part of the world.
Ms. Reed. Sir, may I comment?
Senator Cramer. Please.
Ms. Reed. So I was a nominee for this position for 2\1/2\
years, had two Senate confirmation hearings, and after one of
the confirmation hearings, the first one, I immediately walked
over to Union Station and got on a train and went cross-
country. My experience was great, and I had the pleasure--I
have never set foot in North Dakota. Does going past the State
on a train count? So I cannot wait to come. I know that you
invited me. I saw the sun rise, and I cannot wait to come and
do a field hearing or roundtables with you. You kindly invited
me, and we were getting ready to do that just as COVID struck
us. So as soon as we can get on a train or a plane or I can
drive, I am ready to do that with you.
Senator Cramer. Well, just so you know, once you get to
North Dakota, it is a long ways across North Dakota and South
Dakota and Montana before you get to Senator Tester, but it is
worth the drive or the train ride or the airplane ride. I would
just tell you that as we head now into late summer, even with
COVID-19, it might not be a bad time to do it in a responsible
way.
So, with that, Mr. Chairman, I yield the rest of my time
and just say I am grateful for your good work, Chairman Reed.
Chairman Crapo. Thank you, Senator Cramer.
Senator Van Hollen. Thank you, Mr. Chairman, Ranking Member
Brown. And, President Reed, welcome. Thank you for your
service.
I listened as you said that Ex-Im Bank ensures that its
investments are consistent with U.S. national security goals.
That is the right thing to do. One of those goals, of course,
is to prevent the proliferation of nuclear weapons. And I
wanted to ask you if you were aware of the provision in the
2020 appropriations bills that prohibits Ex-Im Bank from
extending any financing or benefits to nuclear technology
projects in Saudi Arabia unless they meet certain stringent
nonproliferation conditions. Are you aware of that language?
Ms. Reed. Yes, sir.
Senator Van Hollen. And have you had any discussions,
conversations, regarding the exports of nuclear technology to
Saudi Arabia since you were confirmed?
Ms. Reed. So Ex-Im is not involved in negotiations of 123
agreements, and I would say that any pending applications are
under review, and totally focused on what you are saying, and
we want to be fulfilling all legal requirements, including the
legislation in our appropriations language.
Senator Van Hollen. Are there any such pending applications
under review currently at the Ex-Im?
Ms. Reed. So we get many applications at any time, and I am
going to look to my counsel.
Senator Van Hollen. I am just asking if there are any
regarding nuclear technologies to Saudi Arabia.
Ms. Reed. We have one application, but it is not active.
Senator Van Hollen. OK. Again, I just want to provide that
admonition regarding the current appropriations bill, and, you
know, I think you can expect to see that extended.
Let me ask you about your efforts in the area of renewable
energy. I believe that was one of the 10 categories in the
Program on China and Transformational Exports. I appreciate the
fact that you held a teleconference meeting on renewable energy
recently, but can you give us the breakdown on the financing of
renewable energy projects versus fossil projects since you got
the quorum?
Ms. Reed. Sir, I would be pleased to give you that
breakdown with specificity. I do not have all the transaction
numbers of our deals that have taken place over the past year
with me, but I would say that we are very, very focused on
renewable energy, and I have tasked Director Judith Pryor with
leading that effort and look forward to doing even more deals
that we can.
Senator Van Hollen. OK. If you could get us that
information and breakdown as soon as possible, that would be
great.
Ms. Reed. Thank you.
Senator Van Hollen. Now, one of the other changes that
Congress has made recently in some of our efforts to finance
and support U.S. businesses overseas, making investments
overseas, was the change from OPIC to the Development Finance
Corporation, providing the Development Finance Corporation with
additional authorities. This was a bipartisan congressional
initiative.
Can you talk about whether and how Ex-Im is collaborating
with the Development Finance Corporation?
Ms. Reed. So Adam Boehler, the head of DFC, a wonderful
colleague, and since we have both been confirmed, our agencies
are aligning. We are complementary tools in the trade toolbox,
and so we provide that financing. But our focus is supporting
U.S. jobs. That is what we are required to do under law, and
that is a great mission, and DFC has their role as well as
being a development finance agency. And I will say Judith
Pryor, because she previously worked at OPIC, now DFC, brings a
lot of insight as well. But we want to be a whole-of-Government
approach to help our U.S. businesses win and succeed, and each
of us have our role to play.
Senator Van Hollen. Right. I just want to make sure that
you are all rowing in the same direction and not working at
cross-purposes. As you well know, and you have talked about it,
we provided this mandate to Ex-Im Bank with respect to making
sure our companies can compete with very aggressive Chinese
financing, and one of the goals of the Development Finance
Corporation is also to make sure that the United States does
not fall behind in certain parts of the world with respect to
the Belt and Road Initiative.
So I am hoping if you can just provide for the record some
examples of how you are collaborating, because these are two
taxpayer-funded U.S. agencies, and you do have slightly
different missions, but I think they are consistent. And it
would be helpful to know the extent to which you are
collaborating.
Ms. Reed. Absolutely, and look forward to standing up our
China Program in great ways to deliver victories for our
American businesses. Thank you.
Senator Van Hollen. Thank you.
Chairman Crapo. Thank you.
Senator Cortez Masto.
Senator Cortez Masto. Thank you, Mr. Chairman. Chairman
Reed, welcome. It is good to hear and see you again. Thank you
so much for joining us again. We really appreciate it.
Let me start off by talking a little bit about Nevada. The
Export-Import Bank has helped 24 companies in Nevada like
Dynamic Gasket and Seal, Geothermal, Development Associates,
and Fameco Group. They have exported $70 million worth of
products to countries like Mexico, Turkey, and India. And of
those 24 Nevada companies, 17 are small businesses. So I want
to ask you some questions around our small businesses in Nevada
and across the country.
Before I get to that, I do want to stress I also am
interested in whatever data and information that you provide to
Senator Van Hollen around the financing for renewable energy. I
would be interested in seeing that as well.
But let me start with last year, after you testified, I
asked for an update on how you were going to promote the Ex-Im
Bank products to Native American businesses, and I know that
you worked with the American Indian Procurement Technical
Assistance Center, and you participated in events like the
Reservation Economic Summit and the Navajo Nation Economic
Summit. I am curious. What has been the impact? How many Native
American-owned businesses have participated since you became
the Chairman?
Ms. Reed. Absolutely. I am very committed to supporting
Native American communities, and that is a big charge as we
look at increasing our U.S. small business number to 30
percent. And as you mentioned, we have been in regular touch
with the National Center for American Indian Enterprise
Development, the American Indian Chamber, and the Native
American Development Corporation.
In my prior Federal Government service, I headed the
Community Development Financial Institutions Fund where I also
spent a lot of time in Indian country and worked really hard
through our Native American awards. And so I was so pleased
when we were able to participate in the Reservation Economic
Summit in Las Vegas this past March.
So we have very targeted outreach that is going on.
Currently Ex-Im requests that businesses self-identify whether
they are minority- or women-owned. However, I am directing our
agency to revise our export credit insurance applications
because I have been frustrated by this lack of data as well. It
is one of my reforms. How can we get better information to
allow business owners to voluntarily identify themselves? And
so that will enable us to do an even better outreach and
engagement strategy.
In addition, we are engaging with the Department of
Commerce's Minority Business Development Agency to facilitate
greater information sharing and support.
So I look forward to working with you, and I am happy to do
more outreach in Nevada and beyond over the months to come.
Senator Cortez Masto. Thank you, and I welcome you to
Nevada as well when we have the opportunity to no longer
shelter in place and safely travel again.
Let me ask you this: The focus for me and working with a
lot of the chambers in my State is not just our women- and
minority-owned, Native-owned businesses, but veteran-owned
businesses as well. So whatever metrics and whatever outreach
you are doing to make sure that financing is available for our
veteran-owned business and working within our underserved
communities, I am interested in that space as well. So I
appreciate that.
Let me ask you, you touched a little bit earlier with one
of my colleagues--you made the announcement a few weeks ago
that the Ex-Im Bank and the National Credit Union
Administration announced its collaborative to promote the
export financing products among federally insured credit unions
and their clients. Can you talk a little bit about the impact
of this initiative and what has happened so far and your goals?
Ms. Reed. So I am very excited. When I was at the Community
Development Financial Institutions Fund, I worked regularly
with credit unions. So when I showed up as head of Ex-Im, I
said we really need to have our credit unions engaged. They are
key to so many of our small businesses. So this MOU signing
happened 2 weeks ago with Chairman Rodney Hood as the start of
a 3-year educational campaign. I have also engaged with folks
like Dan Berger and Jim Nussle at the various trade
associations to ensure their members know that Ex-Im exists and
its millions of customers and members who could be using our
products if they need them. It is very daunting for a small
exporter--and I am sure you have met some of them--to say, ``I
want to be focused on succeeding outside of our borders.'' And
we need that first place of business, such as a small bank, a
small community bank, or a credit union, where a business owner
will go in to say, ``How do I export? And how can I get the
support to do this?'' We need not only for them to provide
services, but if Ex-Im can be a tool helpful to them such as
through our export credit insurance product or our working
capital loan guarantee, that they share that with them.
So I look forward to just launching this, and perhaps that
is something that we can do together, if I am able to join you
in Nevada or at a larger event.
Senator Cortez Masto. Chairman Reed, thank you.
Ms. Reed. Thank you.
Chairman Crapo. Thank you.
Senator Sinema.
Senator Sinema. Thank you, Mr. Chairman. And thank you to
Chairwoman Reed for being here today. It is good to see you
again.
I am so proud to have worked across the aisle with Senator
Cramer, my Republican colleague from North Dakota, to
successfully deliver a 7-year reauthorization of the Export-
Import Bank. It helps finance billions in Arizona exports and
create thousands of jobs in my State.
I am also very grateful to Chairman Crapo and Ranking
Member Brown for their leadership on this vital issue.
I know you need a full team over at the Ex-Im Bank, which
is why the Senate should consider the nominations of Paul
Shmotolokha and Claudia Slacik to the Ex-Im Board. They are
qualified nominees, and they should be considered sooner rather
than later. The Ex-Im Bank is too critical to Arizona's economy
to be left without a full team.
Chairwoman Reed, I want to thank you for joining me in
Arizona last summer when we visited Copper State Bolt and Nut,
a second-generation, family owned, women-owned Arizona business
that manufactures construction products and industrial
supplies. When it is safe to do so, I hope to be able to host
you again in Arizona for another visit with other innovative
Arizona exporters who make us globally competitive and close
our trade deficit.
So my first question for you, Chairman Reed, is: As you
know, especially during this recession, smaller exporters need
the certainty that the Ex-Im Bank provides. How has Ex-Im
stepped up and adapted small business outreach during the
coronavirus?
Ms. Reed. Thank you, Senator Sinema, and it was so nice to
join you in Arizona. It was a very meaningful time to sit down
with the Arizona Chamber, and since that time, I actually did
another webinar with the Phoenix Chamber to help them know
about our new mandate, and I really appreciate your and Senator
Cramer's and this full Committee's leadership on that
reauthorization.
When it comes to small business, that is something that
drives me every day. And over the past 3 months alone, since
COVID has happened, we have done 65 webinars, 160 email blasts;
we created a special video message on our website, and if you
look at my written testimony, I purposely embedded the
hyperlink there so that each of you could share that with your
constituencies. And we are seeing a significant increase in
small business leads because of this engagement, more than
1,300 in May, and we know that that is going to happen more in
June.
So it is a lot of boots on the ground. We have re-staffed
our field offices across the country, lots of engagement, and
during this time it is through the Internet and webinars, but
look forward to, through initiatives, through our multipliers,
getting out there such as through the credit unions that I just
discussed with Senator Cortez Masto, but looking forward to
doing even more.
Senator Sinema. Thank you.
As you know, in May the Ex-Im Bank's Board adopted
additional measures to provide transparency and accountability
to the process. One of the key reforms was to provide--or to
make the process of determining additionality more detailed and
more transparent, with the goal of ensuring that the Bank is
creating new value instead of supplanting private sector
investment.
So my interest here is ensuring the reforms make the Ex-Im
Bank more transparent and precise in its actions without
imposing undue burden on U.S. exporters.
So, Chairwoman Reed, can you report briefly on the progress
of these reforms? And do you feel that you have struck this
important balance?
Ms. Reed. Absolutely, Senator. I had a very lengthy
discussion this morning with Senator Toomey in his office on
the actions that you mentioned there, and in my testimony you
will see, when it comes to economic impact and additionality,
we went through a very lengthy 11-month process, transparent
process, held two Ex-Im Advisory Board meetings, open to the
public, invited in diverse views, because everyone has a stake
in ensuring that we protect the taxpayer but we do not want to
unduly burden our businesses; but we also want to ensure that
we are not crowding out the private marketplace and not doing
harm to other businesses.
So this was a very thorough, thoughtful process. Even other
Government agencies commented on our processes. So what you see
that we did just a few weeks ago, in May our Board unanimously
approved these measures.
I am doing a lot under all six reforms, but I know, again,
we do not want to overburden our small businesses with more red
tape. We want to fulfill our legal duty, and we want to uphold
the law, and it is striking that right balance.
Senator Sinema. Well, thank you. I see that my time is
rapidly expiring, so I will go very quickly. My last question
concerns credit risk transfers and the ongoing reinsurance
pilot program at Ex-Im. I want to ensure the Ex-Im Bank can
serve as many small businesses as possible and reduce risk to
taxpayers. Did you find the ability to transfer credit risk via
the reinsurance pilot program useful in accomplishing both of
these goals?
Ms. Reed. Yes, Senator, it was a very successful pilot
program that we did, which was in our last reauthorization, and
we will be expanding that in a further way in the near term. It
was a good first step, and, of course, we want to do all we can
to protect the taxpayer and so stay tuned for more details on
this effort.
Senator Sinema. Thank you.
Thank you, Mr. Chairman.
Chairman Crapo. Thank you, Senator Sinema.
That concludes our questioning. Senator Brown has asked to
make a statement, and then we will conclude the hearing.
Senator Brown.
Senator Brown. Thank you, Mr. Chairman. A brief statement.
Thanks for your indulgence.
President Reed, you and your fellow Board members--and you
remember this well, of course--were first nominated in October
2017 but were not confirmed until May 2019. You talked about
your cross-country train trip. Claudia Slacik, as you also
know, has waited nearly--she is the Democrat and has waited
nearly 4 years. Paul Shmotolokha, the Republican nominee, has
waited more than a year. I have never heard--and I assume you
have not either--any criticism of their fitness to serve.
On a personal level, I know how anxious you were--we talked
about it personally, and it was obvious how anxious you were to
begin your work to help Ex-Im and its customers. Thank you for
putting your life on hold for a year-and-a-half while waiting
for the Senate to act.
Mr. Chairman, as President Reed said earlier, we need a
full Board--she used the term ``with more boots on the
ground''--reaching out to small businesses to help them use Ex-
Im. We have great nominees. They should not be delayed any
further.
Thank you, Mr. Chairman.
Chairman Crapo. Thank you, Senator Brown. And as you know,
I agree with you that we need to fill the entire Board, and I
would like to see us move as quickly as we can on these
nominees. There is a significant amount of obstruction on the
floor of the Senate these days, but I will continue to push for
these nominees to be moved forward.
With that, the hearing is concluded. For Senators who wish
to submit questions for the record, those questions are due
Tuesday, June 30th, and I ask that, Chairman Reed, you respond
to those questions as quickly as possible. Again, I thank you
for joining the Committee today.
The hearing is adjourned.
Ms. Reed. Thank you.
[Whereupon, at 3:50 p.m., the hearing was adjourned.]
[Prepared statements and responses to written questions
supplied for the record follow:]
PREPARED STATEMENT OF CHAIRMAN MIKE CRAPO
Welcome to our witness, the Honorable Kimberly Reed, President and
Chairman of the Board of the Export-Import Bank of the United States.
We welcome you back, Chairman Reed. It has been almost exactly a
year since your last appearance before this Committee.
Today, we will receive testimony on Ex-Im's recent activities and
operations, including your efforts to implement the 7-year
reauthorization legislation we enacted last December, as well as your
efforts to continue to process through the transactions and other
matters in the pipeline at Ex-Im, and to increase your outreach and
efforts to bring new U.S. export opportunities into the pipeline.
In addition, we know the disruption of COVID-19 on the U.S. economy
has had an impact on U.S. exporters as well, and we will be interested
to hear of any efforts and initiatives you are undertaking to address
these challenges.
Chairman Reed, you have been on the job for a little over a year
now.
When you came before us for your nomination hearing, and when you
met individually with me and with my colleagues on both sides of the
aisle, you made a commitment that, if confirmed, you would move forward
on implementing any outstanding congressionally initiated reforms, as
well as bring your own commitment to greater transparency and
accountability for the Ex-Im bank.
As I have since noted in other Ex-Im-related hearings in this
Committee, your efforts to follow through on your commitment to
transparency, accountability, and reform have not gone unnoticed by me
and by my colleagues on this Committee.
I commend you for those efforts and encourage you to continue them.
In December 2019, this Congress enacted a 7-year reauthorization of
the Ex-Im Bank, the longest authorization period in the Bank's history.
This extension provides much-needed certainty for U.S. exporters
and strengthens an important tool for the U.S. to compete directly with
China and others in the global marketplace.
Included in the legislation is a new initiative, focusing on China
and transformational exports, which will reserve a significant portion
of Ex-Im's exposure authority for transactions that will put U.S.
exporters in direct competition with China.
This program will particularly focus on U.S. exports of innovative
technologies, like semiconductor manufacturing, artificial
intelligence, biotechnology, wireless communications, renewable energy,
and energy efficiency and storage, as well as emerging financial
technologies.
The new law also includes a requirement that, in addition to its
existing notification obligations to Congress, Ex-Im shall consult with
the State Department as part of efforts to assess any risk to the
national interest for any proposed transaction above $25 million
involving any business entity that is controlled by the Chinese
Government.
Our reauthorization legislation also had an important focus on
increasing the participation of American small businesses in Ex-Im
projects, by raising the target from 25 percent to 30 percent for small
business participation in Ex-Im-supported exports.
Chairman Reed, we look forward to any update you can provide on Ex-
Im's implementation of these important initiatives, and all provisions
included in the December reauthorization.
We have discussed in previous Committee hearings, you and your
board colleagues faced a number of pending transactions and other
matters to address upon taking office.
Now that you all have had some time at Ex-Im, we would like to hear
an update on those efforts to address those transactions and matters
that had already been in the pipeline, as well as your outreach efforts
to bring new American businesses and export and job creation
opportunities into the pipeline.
Finally, with regard to the COVID-19 global pandemic, we know
business and Government operations all over the world have been
impacted.
For an agency such as Ex-Im, with such a global scope to its
mission and operations, we would be interested to hear about the
challenges that you and your team have faced, as well as those faced by
the American businesses and other stakeholders you work with on a daily
basis as part of your mission.
And we would ask you to share with us any initiatives Ex-Im has
commenced to assist U.S. exporters in dealing with the challenges of
COVID, while remaining competitive, creating jobs, and growing our
economy.
Chairman Reed, thank you again for your considerable efforts, and I
look forward to our continued work together on these important efforts.
______
PREPARED STATEMENT OF SENATOR SHERROD BROWN
Mr. Chairman, thank you for calling today's hearing. President
Reed, thank you for joining us. This is a critical time for Ex-Im.
Last year we finally provided certainty to American exporters and
their workers by enacting a 7-year extension of the Ex-Im charter. This
is a big victory after years of obstruction by some of my Republican
colleagues.
We all know what happened here in Congress. In 2015, during the
last debate on reauthorizing the Bank, a small group of opponents,
supported by far-right special interests, tried to kill the Bank
altogether.
When that didn't work, they decided to block all nominees to the
Bank's board denying it the quorum needed to approve transactions
greater than $10 million dollars. Ex-Im supported more than 164,000
jobs before the shut it down, and Ex-Im was an essential tool for
creating manufacturing jobs with good salaries. Their obstruction cost
us more than 130,000 jobs a year by 2018.
Today, as the economic damage from COVID-19 builds and Mitch
McConnell refuses to let us do our jobs and pass additional help for
families and communities and small businesses, Ex-Im will be called on
to help ensure the survival of our manufacturing base, and its
thousands of small businesses and their workers.
Ex-Im during the last crisis added 515 new, small-business clients
in 2009 alone, the stakes are even higher today.
There are more than 100 export credit agencies and credit programs
around the world that support foreign manufacturers, but the greatest
challenge is China.
China's export finance activity is larger than all of the export
credit provided by the G7 countries combined, and we can expect China
to continue using export credit as a weapon to win manufacturing
business in critical industrial sectors.
The President and many of my Republican colleagues want to blame
China for everything, including the virus that has taken the lives of
nearly 120,000 of our brothers and sisters and parents and sons and
daughters--that's 30 percent of the world's deaths. China has not been
a model of responsibility, but President Trump needs to stop blaming
China for his own failures to do more at home to prevent the spread of
COVID-19.
For my Republican colleagues who profess concern about China, I
wish they had shown the same concern with standing up to China during
our 4-year fight to support American manufacturers.
And if you say you are concerned about China, then you should
support filling Ex-Im's board so our manufacturers can better compete
with China.
President Reed, I look forward to hearing how Ex-Im is working both
to assist American companies during this crisis, and to help them
respond to China's efforts to use export financing to gain market
share. The Bank has an important role to play during this crisis.
Sadly, we must also discuss Ex-Im's response to a tragic incident
in April at a power plant in India. The Sasan power plant received
significant financing from the Bank, and it has a terrible safety
record.
Finally, we must talk about the Senate's unfinished work. I urge
Members of this Committee to ask Leader McConnell to allow the Senate
to consider the long-delayed nominations of Paul Shmotolokha and
Claudia Slacik.
If we believe Ex-Im should be helping U.S. small businesses during
these difficult economic times, and helping manufacturers compete
against State-backed Chinese companies, there is no excuse for delaying
the confirmation of Shmotolokha and Slacik. It needs a full Board of
Directors.
A core role of Ex-Im board members is educating the business
community about how to use the Bank's export financing to expand sales
abroad and create more jobs in the U.S. Many small businesses are just
trying to survive right now, and some of them don't know that Ex-Im is
a tool that can help. We need a full board that can be proactive about
offering support.
Mr. Shmotolokha, the Republican nominee as First Vice President,
was reported out of the Banking Committee more than a year ago, and Ms.
Slacik was first nominated nearly 4 years ago. Neither is
controversial.
Mr. Shmotolokha has deep experience in the telecom industry and
decades of experience in international business. Ms. Slacik previously
served at Ex-Im and has more than 30 years of commercial banking
experience.
I think Ex-Im has an effective management team. Thank you for that
Ms. Reed--but you should be able to operate at full capacity during an
unprecedented crisis, not missing two members with critical expertise.
We have two nominees who can provide important expertise at a
critical time when we must help American businesses compete against
China. Yet somehow these noncontroversial nominees are mysteriously
blocked.
We also have a qualified Inspector General nominee, Peter Coniglio,
who is waiting for confirmation.
Congress must take up these nominations immediately.
Thank you, Mr. Chairman.
PREPARED STATEMENT OF KIMBERLY REED
President and Chairman of the Board of Directors, Export-Import Bank of
the United States
June 23, 2020
Chairman Crapo, Ranking Member Brown, and Members of the Committee,
thank you for the opportunity to appear before you today to report on
the progress we have made in reopening and reforming the Export-Import
Bank of the United States (Ex-Im), as well as on the implementation of
Ex-Im's December 2019 Congressional reauthorization.
The past several months have been a challenging time for our Nation
and the world because of the COVID-19 (coronavirus) pandemic. I hope
that you, your staff, and all your loved ones are staying safe and
healthy as we work together to reopen our Nation safely and
responsibly. On behalf of my colleagues--515 Federal employees and
contractors--at Ex-Im, I want to offer heartfelt thanks to our Nation's
health care professionals--doctors, nurses and others--as well as the
many essential workers in other fields on whom millions of Americans
continue to depend during this unprecedented crisis. They have
heroically placed their health and even their lives at risk, and they
are a daily inspiration to me.
Ex-Im, the official export credit agency (ECA) of the United
States, has the important mission of supporting American jobs by
facilitating U.S. exports. Our vision is ``Keeping America Strong:
Empowering U.S. Businesses and Workers to Compete Globally.'' As the
President and Chairman of the Board of Directors of Ex-Im, I am proud
to lead a team of talented professionals who, even before this health
crisis unfolded, were working hard to expand the export of ``Made in
the USA'' products and services to the world and, in so doing, support
tens of thousands of jobs here at home.
It has been nearly 1 year since I last had the honor of appearing
before this Committee. At that hearing, I shared with you my priorities
that I also conveyed to my colleagues on my first day of work at Ex-Im:
Being committed to fully reopening, reforming, and reauthorizing Ex-Im,
thereby providing positive results for America's workers and
businesses, while protecting America's taxpayers. I want to thank the
Members of this Committee for your support and engagement as we have
worked hard to deliver on these commitments over the past year.
We achieved a major success for our Nation's businesses and workers
when Congress passed, and President Trump signed into law on December
20, 2019, a historic 7-year reauthorization of Ex-Im--the longest in
Ex-Im's 86-year history. I am grateful for the strong support of the
President, our bipartisan leaders in Congress--including Members of
this Committee, Ex-Im's dedicated workforce, my fellow Ex-Im Board
Members Spencer Bachus and Judith Pryor, and ex officio Board Members
Secretary of Commerce Wilbur Ross and U.S. Trade Representative
Ambassador Robert Lighthizer in achieving this historic effort.
Ex-Im's reauthorization provides long-term certainty to American
businesses that need Ex-Im's help to compete and win in the ever-
fiercer global marketplace. Over the past 6 months, we have been very
focused on implementing this legislation while also taking swift and
prudent actions to support U.S. jobs in response to COVID-19. We are
pleased to continue working with you as we move forward.
Reopening Ex-Im: Supporting American Jobs by Facilitating U.S. Exports
On May 8, 2019, the United States Senate voted on an overwhelming,
bipartisan basis to confirm my fellow Board Members and me. The
Senate's action restored a quorum on Ex-Im's Board of Directors and
enabled the agency to return to full functionality.
Ex-Im's major financing solutions to support American exports and
jobs include providing support for the purchase of U.S. exports through
loan guarantees and direct loans, insuring U.S. exporters from the risk
of nonpayment by foreign buyers, and extending working capital loan
guarantees to enable American businesses to fill export orders.
Ex-Im offers financing at rates and on terms that are competitive
with Government-backed export financing available from other countries.
The goal of Ex-Im financing is to ensure U.S. exporters and workers can
compete on the quality and price of their goods and services--and not
lose business to foreign competitors due to foreign Government-backed
export financing.
With Ex-Im back in full operation, we have been very focused on
communicating to all of our stakeholders--including exporters and
potential exporters especially in the small business community, private
sector lenders whose loans Ex-Im can guarantee, and prospective foreign
buyers--that the agency is now able to offer all of its financing
options to support U.S. exports.
Last year, when I testified before this Committee, I committed to
you that Ex-Im would work through its financing applications in a
prudent and thoughtful way that fulfills our obligation to protect the
interests of U.S. taxpayers and complies with relevant statutory
requirements. We have done exactly that.
In Fiscal Year (FY) 2019, Ex-Im authorized a total of $8.2 billion
in financing that is estimated to support 34,000 U.S. jobs, more than
double its financing in the previous fiscal year. While the numbers are
still preliminary, I am pleased to report that, in FY2020, Ex-Im has
authorized $1.7 billion in financing that is estimated to support
10,900 U.S. jobs and there are additional transactions in various
stages of review that Ex-Im staff expect to present to the Board for
consideration and potential final approval this fiscal year.
Alongside these authorizations, over the past year, Ex-Im's Board
also approved four preliminary commitments totaling $1.1 billion in
financing. A preliminary commitment, which is a nonbinding offer of Ex-
Im financing subject to the award of the export contract and Board
approval of an application for a final commitment, sends a strong
signal to potential foreign buyers that the agency has conducted
significant due diligence of the proposed transaction. It also
indicates the likelihood of providing financing upon receipt of an
application for a final commitment that meets all of Ex-Im's
requirements and the Board's review and approval.
Ex-Im has also seen significant demand for Letters of Interest,
which are a preexport tool to help U.S. exporters compete during the
bidding or negotiating of an export sale. This increase is an
indication of heightened interest by exporters for Ex-Im financing.
Today, we have more than $39 billion in Board-level transactions
that are undergoing various stages of due diligence and underwriting
and are estimated to support 147,000 U.S. jobs. Additionally, we are in
preapplication stage conversations with many companies that are
exploring what Ex-Im potentially can do for them. This period of
conversation can go on for varying amounts of time as companies assess
the unique Ex-Im value proposition.
Once a Board-level application is filed, which is a serious
commitment of time and resources by the company and its lender, Ex-Im
takes on a thorough analysis of the application to ensure that the
transaction meets all applicable statutory and agency requirements.
That means carefully reviewing the background of the parties to a
transaction; the cash-flow, debt burden, and financial stability of
those parties; the source of the downpayment; the quality of the
collateral; and the limitations on the use of the requested financing.
Based on those reviews, Ex-Im considers what additional risk mitigants
may be necessary to enhance the quality of the credit and to better
protect the U.S. Government from the risk of default.
At the same time, Ex-Im considers how the Board-level transaction
supplements--but does not compete with--private capital. This includes
a review of why the parties to a transaction are seeking Ex-Im
financing, what limitations exist in the availability or terms of
private capital, and the availability and terms of competing financing
offered by a foreign ECA. All transactions are processed in accordance
with Ex-Im policies and applicable law, such as those on U.S. content,
U.S. flag shipping requirements, and economic and environmental
impacts. All of this is then carefully documented as part of Ex-Im's
legal review of the transaction. This preserves Ex-Im's legal rights,
ensures Ex-Im is not creating distortions in capital markets, and
protects the U.S. Government from the risk of default.
This process is highly variable and heavily influenced by the
complexity of transactions, as well as legal and commercial
considerations that are outside of Ex-Im's control. Some of these
Board-level transactions may go from application to approval in months,
while others may take several years. Furthermore, some transactions may
not come to fruition for a variety of reasons. A Board-level
transaction may be withdrawn (and thus removed from the pipeline) due
to the availability of another source of financing; the buyer may alter
sourcing needs; or the parties may be unable to reach agreement on a
final transaction.
As Chairman, I am committed to educating exporters, lenders,
buyers, diverse stakeholders, and multiplier networks on the
opportunities available to them through Ex-Im financing. At the same
time, Ex-Im staff, my Board colleagues, and I are doing what we can to
help build the pipeline through increased outreach.
We are strengthening our relationship with key interagency
partners, including the U.S. Trade and Development Agency, U.S.
Department of State, USAID, U.S. International Development Finance
Corporation, and the U.S. Department of Commerce, including its Foreign
Commercial Service. For example, in recent months, Ex-Im staff
participated in numerous engagements in coordination with the
Commercial Service, including presentations in Italy, the Gulf States,
and Southeast Asia. Together, we are solidifying this enhanced
cooperative relationship through an interactive outreach and training
series.
My fellow Board Members and I also have tremendously valued the
opportunity to visit many of your States and look forward to resuming
this engagement in the near future. In the meantime, Ex-Im's outreach
continues virtually, reaching thousands of stakeholders both in the
United States and around the world.
While the results of these and other efforts will not be immediate,
they help position U.S. exporters to better compete in markets around
the world and will help support U.S. jobs for years to come.
When Ex-Im is fully operational, it is a self-financing agency due
to the fees and interest it charges to foreign buyers for the use of
its programs. After paying all of its operating and program costs, Ex-
Im has contributed a net of $9.4 billion to the U.S. Treasury since
1992. When it comes to protecting the taxpayer, Ex-Im has averaged a
default rate of less than one-half of 1 percent over the past decade as
a result of the strong underwriting and due diligence exercised during
the authorization process and postauthorization management of
transactions. Ex-Im's most recent quarterly default rate, as of March
31, 2020, is 0.473 percent.
Reforming Ex-Im: Transforming the United States' Official Export Credit
Agency
Before I was confirmed as Ex-Im's President and Chairman, I
committed to this Committee that I would work to reform--and, in fact,
transform--our agency in six different ways by: (1) Increasing
transparency; (2) Strengthening taxpayer protections; (3) Improving
protections for domestic companies; (4) Ensuring Ex-Im does not ``crowd
out'' private financing options; (5) Cracking down on bad actors; and
(6) Working to reduce the reliance on ECAs globally.
We are dedicated to these six reforms and ensuring that America and
the world can rely on a robust and principled ECA. A strong and
transformed Ex-Im also is critical to U.S. economic and national
security. As such, Ex-Im is committed to collaboratively working with
other Federal agencies towards our mutual goals.
I am pleased to report we have made significant progress on each of
these six commitments. Most notably, after an 11-month public and
transparent review process, Ex-Im's Board of Directors unanimously
adopted reforms to the agency's economic impact and additionality
policies and procedures. In undertaking these efforts, Ex-Im sought
public comment in the Federal Register; held two public Ex-Im Advisory
Committee meetings, chaired by former Congressman Stevan Pearce and
featured experts with diverse views about the role of Ex-Im; solicited
independent third-party review; and considered input from other U.S.
Government agencies.
With the economic impact reforms, we have increased the
transparency surrounding Ex-Im's detailed economic impact analyses and
streamlined the screening procedures surrounding the review of
commercial aircraft transactions.
Through new guidelines to strengthen the agency's determination of
``additionality''--the reason why a transaction could not go forward
without Ex-Im financing--Ex-Im bolstered its processes and
documentation of the reasons why Ex-Im financing is needed in a given
transaction, calling out the need for Ex-Im financing in its
application certifications, surveying private lenders, producing an
annual report on the additionality of its financing in the previous
fiscal year, and subjecting its additionality procedures to periodic
independent review. The Board also adopted a resolution that
underscores ``the importance of ensuring that Ex-Im provides
competitive financing to U.S. exporters while supplementing, not
competing with, private capital.'' And, to further ensure that Ex-Im
does not ``crowd out'' private financing options, we have instituted a
practice of requesting financial institutions to notify me, as
President and Chairman of Ex-Im, immediately if Ex-Im ever competes
with the private sector.
Ex-Im also implemented numerous initiatives to increase our
transparency and stakeholder engagement. This includes reestablishing,
as required by law, Ex-Im's Advisory Committee and Sub-Saharan Africa
Advisory Committee and releasing transcripts of the committee meetings,
boosting our public and Congressional engagement efforts, improving our
publicly available data, providing regular updates on Ex-Im's
authorizations, and increasing visibility into Ex-Im's operations by
building a more detailed public record of agency activity.
An organization's culture is critical in determining how well an
agency can perform a variety of work outcomes in order to drive
transformational change. As such, Ex-Im's revised Strategic Plan for
FY2020-2022 includes an important new goal of recruiting and retaining
top talent and emphasizes Ex-Im's collaboratively developed ``Shared
Values''--Integrity, Stewardship, Accountability, Inclusivity, and
Leadership.
In order to ensure Ex-Im is successful at fulfilling its mission
and becomes one of the best places to work in the Federal Government,
we also launched Ex-Im's Transformation Initiative--a sweeping
initiative formulated through extensive employee feedback and led by a
small team of dedicated civil servants with a singular focus: improve
the collective employee experience at Ex-Im.
Our Chief Management Officer (CMO) is making significant strides to
identify efficiencies, and enhance the workforce and work culture from
a strategic and operational standpoint. The CMO Team furthers Ex-Im's
mission by promoting good governance through improved policies and
processes, cultivating a high-performance workforce which garners
measurable results, providing excellent internal customer service in a
manner consistent with Ex-Im's core values, and improving internal
communication.
The Ex-Im Board showed our commitment to strengthening protections
for taxpayers and cracking down on bad actors by approving Ex-Im's
Chief Risk Officer and Chief Ethics Officer, as required by law, and
supporting other key initiatives. To underscore expectations to
employees, customers, and other stakeholders, we adopted Ex-Im's very
first Code of Business Conduct and Ethics, strengthened Ex-Im's
Financial Conflict of Interest and Recusal Policy, doubled the Office
of Ethics staff resulting in quicker review and certification of public
financial disclosure forms and enhanced transparency, and implemented
the U.S. Government Accountability Office's Fraud Risk Management
Framework. Finally, as required by law, we hired a Director of Data
Governance and implemented an Enterprise Data Management program to
foster innovation, strengthen best practices and ensure access to and
trust of shared data.
We also value the role of our Ex-Im Office of Inspector General,
which, through its independent and objective reviews, serves as an
agent for positive change at our agency.
I have been very clear with our global counterparts that Congress
has put a priority on reducing the reliance on export credit agencies
globally. I wholeheartedly agree with those who argue that, ideally,
economic freedom and prosperity are greater in a world without
Government-sponsored export credit agencies. Indeed, the agency's
Charter \1\ encourages an end to all ``predatory export financing
programs and other forms of export subsidies.'' \2\ The Charter further
requires Ex-Im, ``in cooperation with the export financing
instrumentalities of other Governments, seek to minimize competition in
Government-supported export financing and shall, in cooperation with
other appropriate United States Government agencies, seek to reach
international agreements to reduce Government subsidized export
financing.'' \3\
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\1\ The Export-Import Bank Act of 1945, as amended, serves as the
agency's Charter and is codified at 12 U.S.C. 635 et seq.
\2\ 12 U.S.C. 635a-1(a); see also 12 U.S.C. 635a-5(a)(1).
Additionally, 12 U.S.C. 635a-5 provides that the President of the
United States is to initiate and pursue negotiations with other major
exporting countries ``to substantially reduce, with the goal of
eliminating [ . . . ] subsidized export financing programs and other
forms of export subsidies.'' This mandate has been delegated to the
Secretary of the Treasury. Memorandum of President of the United States
for the Secretary of the Treasury, 81 FR 14,367 (Mar. 11, 2016).
\3\ 12 U.S.C. 635(b)(1)(A).
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As one of my first official actions in 2019, I met with the G12
Heads of Export Credit Agencies to make clear to them our expectations
around transparency and a level playing field. Working with my
international colleagues, we secured the opportunity to host the 2020
meeting here in the U.S. I look forward to furthering this discussion
about the importance of transparency and a level playing field as part
of the G12 meeting of export credit agencies that we will host later
this year.
In the meantime, as I previously testified to this Committee, the
United States cannot unilaterally disarm and turn its back on America's
workers in an ever-fiercer global marketplace fueled by ECAs. It is
imperative for the competitiveness of our Nation, when private sector
financing is not available, that Ex-Im help level the global playing
field for our U.S. businesses--especially America's small businesses--
and workers. I also welcome the participation of Members of this
Committee if they are interested in directly engaging our global
counterparts on this important topic.
Implementing Ex-Im's Reauthorization: Strengthening America's
Competitiveness in the World
As we continue to make major progress in these areas, Ex-Im also is
hard at work to implement its historic December 20, 2019,
reauthorization requirements (P.L. 116-94, Division I, Title IV). I
specifically want to highlight the progress we have made on two major
elements of our reauthorization.
Program on China and Transformational Exports
First and foremost, we are very pleased to have the new
Congressional mandate to establish a program to compete with China and
counter its opaque and exploitative model of economic development and
finance.
Specifically, Congress directed Ex-Im to establish a new ``Program
on China and Transformational Exports'' (Program). The Program's
purpose is ``to support the extension of loans, guarantees, and
insurance, at rates and on terms and other conditions, to the extent
practicable, that are fully competitive with rates, terms, and other
conditions established by the People's Republic of China'' \4\ or by
other covered countries (as designated by the Secretary of the
Treasury). The law charges Ex-Im with a goal of reserving not less than
20 percent of the agency's total financing authority--$27 billion out
of a total of $135 billion--for support made pursuant to the Program.
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\4\ 12 U.S.C. 635(l)(1).
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The Program has two legislative aims. The first is to ``directly
neutralize export subsidies for competing goods and services financed
by official export credit, tied aid, or blended financing provided by
the People's Republic of China'' or by other covered countries. \5\ The
second is to ``advance the comparative leadership of the United States
with respect to the People's Republic of China, or support United
States innovation, employment, and technological standards, through
direct exports'' in 10 areas key to America's future: \6\
---------------------------------------------------------------------------
\5\ 12 U.S.C. 635(l)(1)(A).
\6\ 12 U.S.C. 635(l)(1)(B).
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1. Artificial intelligence.
2. Biotechnology.
3. Biomedical sciences.
4. Wireless communications equipment (including 5G or subsequent
wireless technologies).
5. Quantum computing.
6. Renewable energy, energy efficiency, and energy storage.
7. Semiconductor and semiconductor machinery manufacturing.
8. Emerging financial technologies (including technologies that
facilitate financial inclusion through increased access to
capital and financial services; data security and privacy;
payments, the transfer of funds, and associated messaging
services; and efforts to combat money laundering and the
financing of terrorism).
9. Water treatment and sanitation (including technologies and
infrastructure to reduce contaminants and improve water
quality).
10. High-performance computing.
Accordingly, we are actively working to establish the Program,
which is one of the agency's most significant efforts in the 86-year
history of Ex-Im and vital to help level the playing field so our
Nation's businesses and workers can succeed against fierce Chinese
competition around the world. When it comes to Chinese competition, I
also would like to preview a few points that will be included in the
upcoming June 2020 ``Report on Global Export Credit Competition of the
Export-Import Bank of the United States'' (Competitiveness Report) for
Calendar Year 2019 that we will submit to Congress at the end of June.
The to-be-released ``Competitiveness Report'' will show that the world
now has 115 known official export credit providers, up from 85 just 4
years earlier--a 35-percent increase from 2015 to 2019. This
significant expansion occurred at the same time Ex-Im--an important
tool in the United States' trade toolbox for America's companies and
workers--was not able to consider medium- and long-term transactions
exceeding $10 million because it lacked a Board quorum.
Over this same period, China's official financing activity
continued to dominate the market. In fact, when it comes to export
credit financing, China is fundamentally changing the nature of
competition. China is very aggressive, strategically focused, and,
unlike the United States and many other countries, not subject to the
same international rules and agreements. From 2015 to 2019, China's
official medium- and long-term export credit activity alone was at
least equal to 90 percent of that provided by all G7 countries
combined. In addition, it is important to note, as this
``Competitiveness Report'' describes, that beyond its official ECAs,
China uses several other Government entities to finance its exports and
trade practices through a variety of means, including export credits.
Chinese State-backed unfair competition undermines our exporters
and even puts America at a disadvantage in key sectors critical to our
long-term economic and national security. As such, in April, I hired a
seasoned leader with extensive international business and national
security experience to Ex-Im from the Department of Defense to stand up
our new Program on China and Transformational Exports. In addition, we
are expeditiously addressing the underlying policy and legal issues
necessary to compete successfully, and we are working through a
resource assessment to ensure this Program is fit for purpose.
In support of the Program, we also launched our ``Strengthening
American Competitiveness Initiative,'' a series of engagements with
companies and related stakeholders that is a key platform for ensuring
that the Program--and Ex-Im generally--is optimally positioned to
support American jobs by facilitating U.S. exports. We are having
focused and substantive discussions with counterparts from each of the
10 statutory transformational export sectors noted above and making
sure their insights shape the Program in a way that has maximum impact
for our exporters. We also are encouraging leads on potential deals for
America's exporters.
Beyond this Program, I also was pleased that Congress included an
important notice and consultation provision regarding China, whereby
Ex-Im transactions greater than $25 million that involve Chinese State-
owned enterprises must be sent to the U.S. Department of State ``to
assess any risks posed by the entity or the transaction to the national
interests of the United States,'' with a subsequent notice to Congress
reporting on the consultation. \7\ Ex-Im is finalizing the procedures
required by law, and, in the meantime, has already been consulting with
the State Department about any such transaction as appropriate.
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\7\ Section 408 of the Export-Import Bank Extension, Further
Consolidated Appropriations Act, 2020, P.L. 116-94, Division I, Title
IV.
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Recognizing that ``economic security is national security,'' we
also established the first position ever within Ex-Im whose duties are
devoted to national security. Through this position, Ex-Im began more
active participation in the policy coordination process led by the
National Security Council and expanded its involvement in interagency
engagements.
Increasing U.S. Small Business
In a parallel Ex-Im reauthorization implementation effort, we are
also very focused on boosting our small business outreach and
engagement. In FY2019, Ex-Im authorized 2,091 small business
transactions for a total of $2.3 billion. This represented 89 percent
of Ex-Im's total authorizations and 27.5 percent of the total dollar
value of authorizations. Thus far in FY2020, Ex-Im has authorized 1,159
small business transactions for a total of $985 million. This
represents 89 percent of Ex-Im's total authorizations and 53.7 percent
of the total dollar value of authorizations fiscal year to date.
Ex-Im has the capacity to do much more and I invite small
businesses exporting their products around the world to consider how
Ex-Im can support their growth and competitiveness. Accordingly, I have
directed our staff to embark on five initiatives that seek to drive
increased support for our small businesses.
We are enhancing our outreach and education by restoring and
boosting our Ex-Im field office staff--as they are one of Ex-Im's most
important assets and our ``boots on the ground''--to better assist
small businesses, increasing our engagement in local business
development events, and leveraging our investments in digital marketing
resources to reach businesses looking to export their products
overseas.
Ex-Im is increasing our focus on historically underserved business
owners and start-up businesses. As part of this effort, we are trying
to better reach minority- women-, and veteran-owned businesses, rural
and agricultural businesses, businesses owned by persons with
disabilities, and other businesses in underserved communities. In
addition to a robust and well-funded digital media strategy, we are
developing targeted webinars, materials, and promotional support
designed to more effectively reach and educate these constituencies
about how to export goods using Ex-Im. We want to ensure all eligible
and appropriate companies have access to Ex-Im financing.
We have been working to develop new private sector partnerships
that can help amplify our message to thousands of member companies,
many of which are small businesses. For example, Ex-Im recently signed
a Memorandum of Understanding with the National Credit Union
Administration (NCUA) to launch the first-ever targeted Ex-Im outreach
to, and partnership with, private sector credit unions through a 3-year
educational initiative to promote Ex-Im financing products among
federally insured credit unions and their members--more than 5,000
institutions having total membership reaching 120.4 million. I was so
pleased to work with NCUA Chairman Rodney E. Hood on this effort.
Together, we will look to boost expanded opportunities for U.S.
businesses--particularly small businesses--and their American
workforce.
Ex-Im has looked at how we can make it easier for small businesses
to access financing. We have undergone an organizational realignment to
better allocate our resources to support our working capital guarantee
lenders, participating insurance brokers, and exporters. We have also
expanded and enhanced our product offerings, providing greater
flexibility and choice to exporters.
Finally, we have increased our transparency and reporting of small
business authorizations, priorities, and initiatives, which you can
find on Ex-Im's website.
With these efforts and more, I am confident we can reach more small
businesses and equip them with the tools they need to reach new markets
and support American workers.
Reopening America: Ex-Im's Swift Response to the Economic Challenges of
COVID-19
This has been a very challenging time for our country as we deal
with the consequences associated with the COVID-19 global pandemic. As
we focus on saving lives and protecting livelihoods, I want to
recognize and thank my Ex-Im colleagues who took swift action and
continue to respond to the global financial disruptions and
instabilities. Our Ex-Im workforce quickly transformed into a
temporarily fully teleworking agency, in order to better assist
American exporters and financial institutions dealing with the painful
financial pressures brought on by the pandemic.
Ex-Im tends to be needed most during periods of stress in global
financial markets. Ex-Im experienced this following the 2008 financial
crisis when the agency's authorizations increased by 80 percent.
With unprecedented speed, Ex-Im implemented emergency measures in
response to COVID-19. On March 12, Ex-Im announced temporary relief
measures for current customers including extended waivers, deadline
extensions, streamlined processing, and flexibility due to the
anticipated effects of the COVID-19 outbreak. These measures allow
businesses to return to their operations, focus on the safety of their
families and employees, and fulfill their Ex-Im-related obligations at
an appropriate time, without penalty. This relief currently remains in
effect through August 31, 2020, subject to future extensions.
In April, Ex-Im announced four temporary initiatives to address the
targeted needs experienced by exporters and private sector lenders. The
Bridge Financing Program supports short-term liquidity needs faced by
foreign buyers seeking to purchase U.S. goods and services. The Pre-
Export Financing Program supports progress delivery payments from
foreign buyers using long-term financing to purchase U.S. manufactured
goods. Ex-Im enhanced both its Supply Chain Financing Guarantee Program
and Working Capital Guarantee Program by increasing the level of its
guarantee and program flexibilities. Today, Ex-Im is working through
more than $870 million of financing requests from U.S. businesses
looking to take advantage of the flexibilities in these two programs
alone.
Finally, our Ex-Im Board of Directors temporarily suspended the
availability of its financing for certain medical supplies and
equipment necessary to treat and prevent the spread of COVID-19 that
are in short supply in the United States. We are continuously
monitoring the situation and working closely with our interagency
partners to ensure Ex-Im financing does not detract from our Nation's
domestic response to the COVID-19 crisis.
Like many financial institutions, COVID-19 also is affecting the
outstanding exposure on our robust Ex-Im portfolio. As of May 31, Ex-
Im's total exposure is $46.8 billion. Ex-Im has extensive experience on
how to structure transactions in a way that minimizes risk and protects
the U.S. Government--and the U.S. taxpayer--from the risk of default.
After transaction approval, Ex-Im takes a proactive approach toward
managing the transaction through regular reviews of the debt service
repayment capacity of the primary source of repayment.
As COVID-19 began to affect our customers, Ex-Im quickly reached
out to them to identify repayment risks and work directly with the
parties to the transaction to implement solutions to strengthen the
credit. This is an ongoing process we continue to diligently undertake.
And, of course, I invite any of your constituents or companies
experiencing payment issues or difficulty accessing liquidity to reach
out to Ex-Im.
While Ex-Im's portfolio remains sound, there is stress among three
specific types of transactions: asset-backed transportation,
commodities, and sovereign. Among our transportation portfolio, Ex-Im
expects to be fully repaid on all aircraft transactions. While
passenger air travel has dropped significantly, cargo aircraft have
continued to fly without issue. Furthermore, Ex-Im maintains
significant excess collateral in the case of nonpayment. When it comes
to commodities, the sharp drop in oil and gas prices has affected many
producers around the world. After a careful review of Ex-Im's exposure
in this sector, we do not project any significant repayment issues in
the near future. Finally, for those transactions in which foreign
Governments are the primary source of repayment, Ex-Im has received
several requests for short-term liquidity relief.
In sum, Ex-Im recognizes the importance that borrowers are placing
on maintaining liquidity to offset sharp declines in revenue. As of
this time, the nature of the stress for Ex-Im borrowers appears
primarily to be one of short-term liquidity and not long-term solvency.
We continue to work proactively with borrowers to protect the long-term
financial interests of the U.S. taxpayer.
I also would like to underscore that the Ex-Im Office of Small
Business has been working diligently to meet the needs of the
communities we serve in this unprecedented business climate.
We quickly implemented relief measures for our customers and
partners, offering the financial flexibility they need to weather this
crisis.
As part of that effort, we created a one-minute video (https://
www.exim.gov/coronavirus-response) on how Ex-Im can support American
businesses at this time. This is an example of how we are focusing our
digital marketing efforts on remaining connected and offering solutions
during this challenging time. We encourage your offices to share this
video, along with information about our COVID-19 relief measures, with
your constituents.
The longer the COVID-19 pandemic depresses global economic
activity, the greater the risk that Ex-Im will experience an uptick in
its default rate. By law, if Ex-Im's default rate were to exceed 2
percent, its total aggregate outstanding exposure would freeze, \8\
significantly limiting the agency's ability to support U.S. exporters,
small businesses, and American workers at a time when such assistance
may be most needed. We will keep this Committee fully informed as this
situation continues to develop.
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\8\ 12 U.S.C. 635e(a)(3).
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Conclusion
As I conclude my remarks, I note that these are difficult times for
many American businesses, workers, and their families. As we focus on
America's economic comeback, Ex-Im remains committed to our mission of
supporting American jobs by facilitating U.S. exports.
It is a point of pride for Ex-Im's diverse and talented colleagues
that we are a rare civilian agency within the Federal Government that
both supports large numbers of private sector American jobs and plays a
critical role in advancing U.S. leadership around the world.
It is an immense honor to be a part of and continue to further this
historic effort to advance our Nation's prosperity, support U.S. jobs
by serving American businesses of all sizes, and keep America strong
for years to come.
Thank you for the opportunity to address this Committee. I am
pleased to answer any questions you may have.
RESPONSES TO WRITTEN QUESTIONS OF CHAIRMAN CRAPO
FROM KIMBERLY REED
Q.1. Nuclear Energy Exports--Chairman Reed, Section 402 of the
recent reauthorization empowers the Ex-Im to counter China in
transformational exports. Would you favorably consider using
this program to support nuclear energy exports in markets where
Chinese or Russian supply is the probable alternative to U.S.
supply?
A.1. Yes, to the extent permitted by law, Ex-Im will consider
nuclear energy-related exports under the Ex-Im Program on China
and Transformational Exports (the ``Program''), which was
mandated by Congress as part of Ex-Im's 2019 Congressional
reauthorization legislation. \1\
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\1\ Further Consolidated Appropriations Act, 2020, P.L. 116-94,
Division I, Title IV, 402, December 20, 2019, codified at 12 U.S.C.
635(l).
---------------------------------------------------------------------------
Ex-Im has a critical role to play in supporting the
competitiveness of the U.S. nuclear energy industry in markets
around the world.
In July 2019, President Trump established the United States
Nuclear Fuel Working Group, which was charged with undertaking
``a fuller analysis of national security considerations with
respect to the entire nuclear fuel supply chain.'' \2\ In a
report issued earlier this year, the Working Group found that
``it is in the Nation's national security interests to preserve
the assets and investments of the entire U.S. nuclear
enterprise and to revitalize the sector to regain U.S. global
nuclear leadership.'' \3\
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\2\ Memorandum of President of the United States on the Effect of
Uranium Imports on the National Security and Establishment of the
United States Nuclear Fuel Working Group, (July 12, 2019). Available at
https://www.whitehouse.gov/presidential-actions/memorandum-effect-
uranium-imports-national-security-establishment-united-states-nuclear-
fuel-working-group/.
\3\ United States Nuclear Fuel Working Group. (2020) ``Restoring
America's Competitive Nuclear Energy Advantage: A Strategy To Assure
U.S. National Security''. U.S. Department of Energy. Available at
https://www.energy.gov/downloads/restoring-americas-competitive-
nuclear-energy-advantage.
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The Working Group found that foreign State-owned
enterprises are engaging in predatory export financing tactics
and that Ex-Im is an essential component of the U.S.
Government's efforts to offer competitive financing to
facilitate U.S. exports of nuclear energy-related goods and
services.
Ex-Im recognizes that competitive financing is one of the
biggest challenges U.S. commercial nuclear exporters face. As
U.S. Department of Energy Secretary Dan Brouillette recently
stated at Ex-Im's 2020 Annual Conference, ``America must regain
its leadership in nuclear technologies . . . and we want
[potential customer countries] to choose American nuclear
technology.'' \4\ The United States therefore needs to bring a
comprehensive package to potential customers that includes
technology, expertise, and of course, financial options.
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\4\ ``Department of Energy and Export-Import Bank Fireside Chat'',
2020 Ex-Im Annual Conference, September 11, 2020. Excerpts available at
https://www.energy.gov/articles/department-energy-and-export-import-
bank-fireside-chat.
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With regard to the Program, statute provides that its first
aim is to ``directly neutralize export subsidies'' financed by
the People's Republic of China (PRC). \5\ Therefore, under the
Program, Ex-Im will offer financing to support U.S. exports of
nuclear energy-related goods or services that are competing
directly against goods and services that benefit from Chinese
Government-backed export financing.
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\5\ 12 U.S.C. 635(l)(1)(A).
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The statute also provides that the Program may be used to
directly neutralize export subsidies financed by any other
country that meets specified criteria and that is designated a
``covered country'' by the Secretary of the Treasury in a
report to certain congressional committees. \6\ In the event
that Russia were deemed a ``covered country,'' the Program
could similarly be used to counter export subsidies financed by
Russia in the nuclear sector.
---------------------------------------------------------------------------
\6\ 12 U.S.C. 635(l)(2).
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The second statutory aim of the Program is to ``advance the
comparative leadership of the United States'' with respect to
the PRC, or ``support United States innovation, employment, and
technological standards'' with respect to direct exports in
specified areas. \7\ Since nuclear energy exports are not
listed as one of these areas \8\ and there are no other
countries designated as ``covered countries,'' financing under
the Program for nuclear energy exports is currently limited to
direct competition with PRC-backed export financing.
---------------------------------------------------------------------------
\7\ 12 U.S.C. 635(l)(1)(B).
\8\ Statute provides that ``renewable energy, energy efficiency,
and energy storage'' are one of the 10 areas covered under the China
and Transformational Exports Program. Ex-Im interprets ``renewable
energy'' consistent with the Organization for Economic Co-operation and
Development's Arrangement on Officially Supported Export Credits.
Nuclear energy is not among the listed sectors. Annex IV, Appendix I,
p. 97 (January 15, 2020). Available at http://www.oecd.org/trade/
topics/export-credits/arrangement-and-sector-understandings/.
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Applications that do not otherwise qualify under the terms
of the Program are still eligible for consideration through Ex-
Im's standard financing options, which include extended terms
for exports related to nuclear power projects. \9\ Ex-Im will
continue to put a high priority on offering competitive
financing in order to support U.S. exports, including nuclear
energy and related products and services.
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\9\ The Arrangement allows for enhanced financial terms and
conditions for nuclear power projects under Annex II: Sector
Understanding on Export Credits for Nuclear Power Plants. Separately,
the Arrangement also provides Participants to the Arrangement with the
ability to ``match . . . financial terms and conditions offered by a
Participant or a non-Participant.''
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------
RESPONSES TO WRITTEN QUESTIONS OF SENATOR BROWN
FROM KIMBERLY REED
Q.1. Sasan power plant in Madhya Pradesh, India--Chairman Reed,
thank you for your assurances during the hearing that Ex-Im
takes very seriously the six fatalities that occurred in April
at the Sasan power plant when a fly ash dam failed. How will
Ex-Im work to ensure that the plant's owner, Reliance Power, is
held accountable and further fatalities and safety-related
incidents are prevented? In addition to any general response to
the preceding question, will Ex-Im commit to the each of the
following actions in response to the April incident? If not,
please explain why such action is not possible or should not be
pursued.
A.1. In order to facilitate U.S. exports and support U.S. jobs
associated with this transaction, Ex-Im authorized a direct
loan on October 21, 2010 to Sasan Power Limited (Sasan), which
is a subsidiary of Reliance Power. Under the structure of this
transaction, Sasan is contractually obligated to construct,
operate, and monitor the project site with due diligence in
accordance with ``Good Industry Practice''; \1\ generally
accepted construction and engineering practices; all applicable
laws and regulations; Ex-Im's Environmental & Social Due
Diligence Procedures and Guidelines; the International Finance
Corporation (IFC) Performance Standards on Social and
Environmental Sustainability; and the project-relevant IFC
Environmental, Health and Safety Guidelines in force on the
execution date of the financing documents (September 2011).
---------------------------------------------------------------------------
\1\ Defined in the Sasan credit agreement as ``standards,
practices, methods and procedures complying with Applicable Law and all
Clearances, and with that degree of skill, diligence, judgment,
prudence and foresight which would ordinarily be expected from (as
applicable) an international skilled and experienced owner and operator
engaged in designing, engineering, constructing, developing,
commissioning, operating, insuring and maintaining power facilities,
mining facilities and/or the other facilities included within the
Project.''
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Reliance Power is not a party to the Sasan credit
agreement, which includes borrower operational covenants.
Reliance Power has no contractual obligation to ensure full and
timely compliance by Sasan with its contractual undertakings.
Therefore, Ex-Im works directly with Sasan and other project
lenders regarding Sasan's adherence to its contractual
obligations.
Ex-Im takes very seriously the recent tragic breach of the
fly ash pond. The loss of life that occurred is completely
unacceptable. Ex-Im has strongly urged Sasan to take immediate
action to address the needs of local affected communities and
comply with all applicable legal directives.
Since learning of the incident, Ex-Im has been in regular
communication with Sasan, the independent engineer, and the
independent environmental and social consultant to obtain
additional information about the incident, its effects on the
local community, and actions being taken to mitigate those
effects. Currently, much of India remains under lockdown in
response to the COVID-19 pandemic, limiting the ability of Ex-
Im and the independent consultants to directly assess these
matters. Despite the current limitations, Ex-Im continues to
monitor local developments as much as possible.
On May 21, 2020, Ex-Im held a teleconference meeting with
community and other stakeholder representatives shortly after
the ash dam failure to hear directly their accounts of the
incident and their recommendations on compensation and clean-
up. These stakeholders have assisted Ex-Im's review by
providing additional background information and documents from
local sources.
Ex-Im is assessing the circumstances that led to the
incident and, once pandemic mitigation measures have been
lifted to a degree that permits, Ex-Im will expand its
assessment of the ash dam failure and contributing
circumstances, including use of a suitable independent party to
investigate and recommend remediation measures.
Following the independent investigation and
recommendations, Ex-Im will work with Sasan and the other
project lenders to facilitate further improvements in safety at
the project, consistent with the standards in the financial
documents, including Good Industry Practice. In accordance with
the applicable requirements, Sasan is expected to place a high
priority on remediating the effects of the incident and
mitigating the potential for future adverse effects.
Ex-Im has been and will continue to be a strong force
pushing for improvements in the project safety and adherence to
high environmental and social standards.
Further responses are provided for the question related to
each of the following suggested actions. In each instance, note
that Ex-Im's response references working with Sasan directly.
As described above, Reliance Power has no contractual
obligation to ensure full and timely compliance by Sasan with
its contractual undertakings.
Q.2. Ensure Reliance Power provides sufficient compensation and
remediation for the loss of life, land, crops, and homes,
including clean up and restoration related to the flood of coal
ash.
A.2. Following the incident, Indian governmental authorities
issued directives to Sasan, imposing certain requirements
regarding compensation and remediation for the loss of life,
damages to the affected communities, and clean up and
restoration related to the flood of coal ash. Ex-Im and the
independent consultants will monitor compliance by Sasan with
these regulatory directives through engagement with Sasan and
the local community.
Q.3. Provide transparency in commitments made by Reliance Power
following the April dam collapse concerning compensation, clean
up, restoration.
A.3. Ex-Im is fully committed to transparency and
accountability, including with regard to this incident.
Q.4. Require that regular safety audits are conducted at Sasan,
including audits of the ash disposal site, and ensure property
safety measures are implemented.
A.4. Sasan is required to adhere to the applicable requirements
referenced above, including those related to workforce safety,
and the health and safety of project-affected people. As is
standard practice with project finance transactions, Ex-Im has
also retained independent consultants to conduct ongoing
independent monitoring and to conduct focused investigations of
individual incidents since the transaction became operative.
The independent consultants and advisors assess compliance with
the environmental and social standards mentioned above,
including those related to workforce safety, and the health and
safety of project-affected people. The independent consultants
perform their assessments through on-the-ground inspection
audits, engagement with affected communities, engagement with
local Government representatives and document reviews. The
consultants then report to Ex-Im on the degree of compliance
and identified risks. The scope of the consultants' mandates
includes monitoring of all known project infrastructure
elements where their failure could result in injury to the
community, including the ash disposal facilities. The
monitoring and incident investigations will continue as
required by the Sasan contractual agreements and will apply
particular attention to the conditions that led to the ash dam
failure.
Q.5. Ensure a new, thorough, and impartial independent
investigation is conducted that reviews the April disaster and
reports of corruption, human rights and labor violations since
the last Ex-Im OIG report.
A.5. Indian governmental authorities mandated that Sasan hire
an independent technical consultant to investigate the
structural safety and stability of the ash dike and an
environmental consultant to investigate the impact of the
spill, including an assessment of the cost of the environmental
damage, and the cleanup and restoration activities. The
technical consultant hired by Sasan has visited the Sasan site,
but the environmental consultant has been unable to visit the
site due to COVID travel restrictions.
In addition, Ex-Im's independent consultants will undertake
their own, separate review of the incident as described above.
Ex-Im takes allegations of corruption, human rights abuses,
and labor violations very seriously. Anyone with information
about such actions is asked to report them directly to Ex-Im or
Ex-Im's Office of the Inspector General for immediate
investigation.
Q.6. Require that Reliance Power cooperates with any criminal
or civil investigations conducted by Indian governmental
entities concerning the April fly ash dam collapse or
Reliance's safety practices.
A.6. As a condition of Ex-Im financing, Sasan is contractually
required to comply with all applicable laws, including any
Indian laws that require cooperation in civil and criminal
investigations. Ex-Im and its independent consultants will
continue to monitor Sasan's compliance with legal directives
and investigations.
------
RESPONSES TO WRITTEN QUESTIONS OF SENATOR McSALLY
FROM KIMBERLY REED
Q.1. A large group of national security experts wrote to
Congress last year \1\ to underscore the importance of the
[Export-Import Bank] to U.S. nuclear exports and multiple
security interests inherent in nuclear energy supply. Today,
those interests are threatened. Would you support using the Ex-
Im Bank to promote U.S. nuclear energy engagement abroad?
---------------------------------------------------------------------------
\1\ https://www.americansecurityproject.org/asp-sends-letter-to-
congress-regarding-ex-im-bank/
A.1. Yes, Ex-Im has a critical role to play in supporting the
competitiveness of the U.S. nuclear energy industry in markets
around the world.
In July 2019, President Trump established the United States
Nuclear Fuel Working Group, which was charged with undertaking
``a fuller analysis of national security considerations with
respect to the entire nuclear fuel supply chain.'' \2\ In a
report issued earlier this year, the Working Group found that
``it is in the Nation's national security interests to preserve
the assets and investments of the entire U.S. nuclear
enterprise and to revitalize the sector to regain U.S. global
nuclear leadership.'' \3\
---------------------------------------------------------------------------
\2\ Memorandum of President of the United States on the Effect of
Uranium Imports on the National Security and Establishment of the
United States Nuclear Fuel Working Group, (July 12, 2019). Available at
https://www.whitehouse.gov/presidential-actions/memorandum-effect-
uranium-imports-national-security-establishment-united-states-nuclear-
fuel-working-group/.
\3\ United States Nuclear Fuel Working Group. (2020) ``Restoring
America's Competitive Nuclear Energy Advantage: A Strategy To Assure
U.S. National Security''. U.S. Department of Energy. Available at
https://www.energy.gov/downloads/restoring-americas-competitive-
nuclear-energy-advantage.
---------------------------------------------------------------------------
The Working Group found that foreign State-owned
enterprises are engaging in predatory export financing tactics
and that Ex-Im is an essential component of the U.S.
Government's efforts to enable the U.S. private sector to offer
competitive financing for nuclear technologies.
Ex-Im is mandated to offer financing at rates and on terms
and conditions that are fully competitive with foreign
Government-backed financing. \4\ Ex-Im does not discriminate
against applications on the basis of their industry, sector, or
business. \5\
---------------------------------------------------------------------------
\4\ 12 U.S.C. 635(b)(1)(A).
\5\ See also 12 U.S.C. 635(k).
---------------------------------------------------------------------------
Any Ex-Im direct or guaranteed credit financing of a
foreign civil nuclear power project or civil nuclear-related
exports is subject to Ex-Im's legal and policy requirements.
\6\ In addition, all such financings are also subject to
compliance with relevant laws, including general requirements
of U.S. law that need to be satisfied by U.S. exporters, the
host country, and the project company. \7\ As a condition of
financing, Ex-Im also mandates compliance with relevant laws
and regulations of nuclear project host countries (and any
other relevant countries).
---------------------------------------------------------------------------
\6\ Including but not limited to 12 U.S.C. 635(b)(4); 12 U.S.C.
635(b)(5); the Further Consolidated Appropriations Act, 2020, P.L.
116-94, Division G, Title VI, December 20, 2019.
\7\ Such as the Atomic Energy Act, as amended (codified at 42
U.S.C. 2011-2259) and all applicable regulations.
---------------------------------------------------------------------------
As Ex-Im receives qualified nuclear export-related
applications, the agency will continue to give a full and fair
review and work to process them in a timely fashion. Please
note, however, that nuclear projects tend to be highly complex
and may take a long time for all the parties to reach an
agreement on all of the various technical, legal, and financial
matters.
Additionally, nuclear-related applications in which U.S.
exporters are competing against People's Republic of China-
backed export financing may qualify for financing under Ex-Im's
Program on China and Transformational Exports, which is
currently under development. \8\
---------------------------------------------------------------------------
\8\ 12 U.S.C. 635(l)(1)(A).
---------------------------------------------------------------------------
Finally, Ex-Im notes that legislative provisions that
impose greater limitations on the availability of its financing
for nuclear-related exports may result in foreign countries
choosing nuclear cooperation partners that have significantly
lower nonproliferation standards. \9\ Such an outcome may
adversely affect the U.S. Government's ability to support the
adoption of the highest standards of safety, security, and
nonproliferation in civil nuclear programs by countries that
are seeking to acquire civil nuclear technology.
---------------------------------------------------------------------------
\9\ For example, Further Consolidated Appropriations Act, 2020,
P.L. 116-94, Division G, Title VII, 7041(h)(2), December 20, 2019.
---------------------------------------------------------------------------
------
RESPONSES TO WRITTEN QUESTIONS OF
SENATOR MENENDEZ FROM KIMBERLY REED
Q.1. In past recessions, Ex-Im has typically expanded its
support as private commercial banks scale back their trade
financing. For example in fiscal year 2009, during the Great
Recession, Ex-Im's credit assistance grew 46 percent over the
prior year, and much of that new assistance was in support of
American small businesses.
What changes are you seeing in the private sector's
willingness or capacity to continue to lend to small exporters?
A.1. Ex-Im has put a priority on outreach and engagement with
small businesses throughout the COVID-19 crisis to better
understand exactly what they are facing as they look to export
their products and support their workforce. As part of this
effort, Chairman Kimberly Reed recently visited Wilmington
Paper Corporation, a small business in Pine Brook, New Jersey,
that exports scrap paper for recycling and was recently named
Ex-Im's Exporter of the Year. They discussed how the events of
the past year have affected their ability to access the
financing tools they need to successfully compete overseas.
Based on conversations like these with exporters and
lenders, Ex-Im has found that the private sector's capacity to
lend has been significantly reduced as lenders are reallocating
their funds to shore up their balance sheets. Lenders have
increasingly sought Ex-Im loan guarantees in order to maintain
existing credit lines.
For syndicated credit facilities that involve multiple
financial institutions, some lenders have dropped out
indicating that they will not continue to participate without
Ex-Im support. As a result, the lead banks in these facilities
have engaged with Ex-Im in order to supplement their financing
with guarantees that will enable the banks to maintain the
credit facility.
For new business opportunities, banks are seeking increased
guarantee coverage from Ex-Im in order to manage their balance
sheets by reducing capital reserve requirements for risk
weighted assets. Some banks are taking advantage of Ex-Im's
temporary expansion of its Working Capital Loan Guarantee and
Supply Chain Finance Guarantee programs. In response to the
pressures facing lenders, Ex-Im's Board of Directors approved a
temporary increase of its guarantee coverage (from 90 percent
to 95 percent). The temporary measure took effect in May and
will remain until at least April 30, 2021. \1\
---------------------------------------------------------------------------
\1\ For more information, see https://www.exim.gov/coronavirus-
response.
Q.2. Is Ex-Im prepared to respond now like it did after the
---------------------------------------------------------------------------
global financial crisis, if needed?
A.2. Yes, Ex-Im is similarly prepared to respond during the
current crisis and expand support if private commercial banks
scale back their trade financing. On March 25, Ex-Im's Board of
Directors underscored its strong support for new initiatives to
inject liquidity into the market and give maximum financing
flexibility to facilitate sales of U.S. goods and services
abroad.
Specifically, Ex-Im's Board of Directors, through its
unanimous adoption of a resolution during an open board meeting
with the public via teleconference, affirmed its support of the
following temporary Ex-Im programs \2\ to provide relief to
U.S. businesses, their buyers, financial institutions, and
American workers negatively impacted by COVID-19:
---------------------------------------------------------------------------
\2\ Ibid.
---------------------------------------------------------------------------
Bridge Financing Program;
Pre-Delivery / Pre-Export Financing Program;
Supply Chain Financing Guarantee Program; and
Working Capital Guarantee Program
Ex-Im also extended certain relief measures for U.S.
exporters and financial institutions that may have been
affected by COVID-19. These measures include waivers, deadline
extensions, streamlined processing, and flexibilities that will
enable participating businesses and financial institutions to
return to their business concerns and Ex-Im-related obligations
at an appropriate time without penalty. \3\
---------------------------------------------------------------------------
\3\ More information available at https://www.exim.gov/fact-sheet-
exim-covid-19-assistance.
---------------------------------------------------------------------------
As events continue to develop, Ex-Im is in regular contact
with exporters, lenders, international buyers, and other
stakeholders to determine what additional measures, if any, are
needed to better facilitate U.S. exports during this time of
significant stress in global markets. Should any additional
measures require legislative action, Ex-Im is pleased to work
with this Committee to ensure it has the authority and
resources it needs to effectively meet the needs of U.S.
exporters.
Q.3. In contrast to many international financial institutions
and some U.S. entities like the U.S. Development Finance
Corporation, Ex-Im does not have a fully independent
accountability mechanism to address complaints from communities
harmed by Ex-Im's projects. If we want to present developing
countries with a better economic model than the one offered by
China, we should be doing everything we can to make sure that
U.S.-led projects are transparent and truly deliver economic
benefits to local communities. In light of the standards
adopted at the U.S. Development Finance Corporation and
elsewhere, how does the Bank plan to improve upon its
accountability framework?
A.3. Among global export credit agencies, Ex-Im is generally
recognized as among the most transparent. Ex-Im goes beyond
international standards and best practices in publicly
disclosing information about pending and approved transactions
and soliciting feedback and input from potentially affected
communities.
Ex-Im has adopted and applies the internationally
recognized Performance Standards on Environmental & Social
Sustainability of the World Bank Group's International Finance
Corporation and the OECD's Recommendation of the Council on
Common Approaches for Officially Supported Export Credits and
Environmental and Social Due Diligence. These standards and
principles are applied by most export credit agencies financing
major projects, and many of the commercial lenders that
participate in transactions with Ex-Im. In Ex-Im's experience,
multilateral development banks and development financial
institutions, such as the U.S. Development Finance Corporation,
also apply these same international standards.
These international standards and best practices require
projects with the potential for ongoing risks and impacts on
surrounding communities to publish information about the
project publicly, proactively engage with the community, and to
establish a grievance mechanism to receive and facilitate
resolution of the affected community's concerns and complaints
about the project's environmental and social performance
throughout the life of the project. Ex-Im implements these
requirements.
Furthermore, since 2016, Ex-Im has hosted its publicly
available Environmental and Social Project Information and
Concerns web portal, which allows any stakeholder to request
project information, provide information regarding a project,
or submit project-related complaints or concerns directly to
Ex-Im. \4\ All submissions are reviewed by a cross-divisional
committee chaired by Ex-Im's Chief Risk Officer, who reports
directly to Ex-Im's President and Chairman. Based on the
submissions received through this portal, the committee engages
in regular discussions to ensure that project-related concerns
and complaints are brought to the attention of senior
management across divisions and project-related information is
made publicly available in a timely fashion.
---------------------------------------------------------------------------
\4\ Available at https://www.exim.gov/policies/ex-im-bank-and-the-
environment/environmental-and-social-project-information-and-concerns.
---------------------------------------------------------------------------
Ex-Im also maintains a public registry of project-related
complaints, including compliance with environmental and/or
social compliance, either during the construction or
operational phase of a project. \5\
---------------------------------------------------------------------------
\5\ Available at https://www.exim.gov/policies/exim-bank-and-
environment/registry.
---------------------------------------------------------------------------
Additionally, Ex-Im has an independent Office of the
Inspector General (OIG) that reviews Ex-Im's implementation of
its policies and procedures, including those relating to
environmental and social effects of projects.
------
RESPONSES TO WRITTEN QUESTIONS OF SENATOR WARREN
FROM KIMBERLY REED
Q.1. Please describe how the Export-Import bank is supporting
small businesses during the COVID-19 pandemic, including
outreach efforts to lenders and businesses, as well as the
steps Ex-Im is taking to ensure that its default rate does not
go [above] the 2 percent maximum default rate.
A.1. Digital outreach and education tools are uniquely
positioned to respond to the needs of small businesses during
the present crisis.
In the past, an important component of educating businesses
on Ex-Im support for exporting relied in part on
individualized, high-touch communications meeting and speaking
to company representatives one-on-one or in groups, often in
collaboration with other Federal Government agencies; public-
private partnerships, such as District Export Councils; and
State and local economic development agencies.
Under the current circumstances, in-person interactions are
not an option, so Ex-Im has increased its use of automated
digital platforms to stay connected with small businesses
during this time of social distancing.
The Outreach and Education team in Ex-Im's Office of Small
Business is driving digital communications strategies and
tactics forward with three goals in mind:
Be proactive to the needs of the community of small
business exporters (customers and prospects)
Drive as much normalcy and ``business as usual'' as
possible
Maintain a robust pipeline of actions to provide
continuity; keep moving forward so the agency is
prepared to address financing needs in a stressed and
volatile market.
Some of the specific actions Ex-Im has taken since social
distancing guidelines went into effect include an increased
focus on webinars with exporters, lenders, brokers, and partner
organizations; enhanced outreach through email communications
targeted to small businesses concern about nonpayment by
foreign buyers due to the effects of COVID-19; and recording
and making available an audio series on receivables financing,
insuring receivables against the risk of nonpayment, and
negotiating repayment terms in uncertain times. \1\
---------------------------------------------------------------------------
\1\ Available at https://www.exim.gov/what-we-do/export-credit-
insurance. A Spanish language version is under development.
---------------------------------------------------------------------------
Ex-Im tracks the risk involved with any particular
transaction by proactively managing the credit through all
parts of the transaction lifecycle, extending from disbursement
to repayment. Ex-Im monitors the credit-rating of obligors'
debt service repayment capacity, considering all factors that
directly impact ability and willingness to repay its debt in a
timely manner. These ongoing reviews strengthen staff's
familiarity and working relationships with obligors and allow
the agency to identify vulnerabilities in the credits.
Given the current economic uncertainty, these reviews are
happening rapidly and the risk of any particular transaction
being in default is fluid based upon these reviews. The
monitoring groups seek to achieve this goal through ongoing
assessments of the operating environment and financial
condition of the borrower and guarantors to determine whether
there have been changes that suggest an increase or decrease in
the risk associated with any of the key variables considered at
origination. Given the frequent communication between Ex-Im,
its borrowers, and guaranteed lenders, the ability to develop
and implement remediation action is strengthened and provides
Ex-Im with additional notice prior to default.
Accordingly, in order to provide flexibility and to
minimize defaults, Ex-Im is providing short-term liquidity
relief to its borrowers by:
Working with lenders to restructure debt
Waiving certain covenant requirements
Allowing the use of reserve accounts and applying
security deposits to current obligations
Waiving payments in advance and applying payments
in advance to current obligations
Paying out claims on defaulted installments
associated with guaranteed loans
As of this time, the nature of the stress for Ex-Im
borrowers is primarily one of short-term liquidity, not long-
term solvency. Therefore, Ex-Im expects its borrowers will
focus on maintaining sufficient liquidity over the short term.
Currently, with these liquidity relief efforts Ex-Im's
portfolio is stable and performing.
The COVID-19 pandemic is a highly fluid and dynamic
situation, and as more time elapses, a protracted crisis could
result in increased defaults, impede recovery efforts, and
thereby cause Ex-Im's default rate to rise. Ex-Im will continue
to provide relief as necessary and appropriate to its borrowers
in order to protect the long-term financial interest of the
U.S. taxpayer.
Q.2. Ex-Im and the National Credit Union Administration (NCUA)
recently signed a Memorandum of Understanding (MOU) to engage
in a collaborative effort to promote Ex-Im among federally
insured credit unions.
When will the outreach programs described in the MOU start
to take affect?
A.2. Planning for outreach to credit union associations began
shortly after the MOU signing. Four webinars have been
completed with the following organizations:
National Association of Credit Union Service
Organizations (NACUSO), July 15, 2020
Credit Union National Association (CUNA), July 22,
2020
National Association of Federally Insured Credit
Unions (NAFCU), August 5, 2020
National Credit Union Administration (NCUA) August
19, 2020
Ex-Im looks forward to considering additional outreach
activities with these organizations. Ex-Im also is working with
these partners on enhancing communications through other
channels, including association newsletters. \2\
---------------------------------------------------------------------------
\2\ For example: Reed, Kimberly A., ``Credit Union Customers Can
Export Confidently With Ex-Im Support'', The NAFCU Journal, September
2020: pp. 38-39. Available at https://www.nxtbook.com/ygsreprints/
NAFCU/nafcu_SeptOct2020/index.php#/p/38.
Q.3. Has Ex-Im been conducting outreach to community banks to
reach more small businesses? What steps is Ex-Im taking to
ensure this outreach is effective and reaches businesses in
---------------------------------------------------------------------------
underserved communities?
A.3. Currently, there are 54 private sector lenders actively
participating in Ex-Im's delegated authority program for
working capital loan guarantees. \3\ Ex-Im welcomes
applications from additional private sector lenders interested
in participating in this program.
---------------------------------------------------------------------------
\3\ A full list of all approved working capital lenders is
available at https://www.exim.gov/tools-for-exporters/delegated-
authority-lenders.
---------------------------------------------------------------------------
Ex-Im is currently realigning its field operations to
increase its focus on supporting the insurance brokers and
commercial lenders that connect small businesses with Ex-Im
financing. The purpose of this wholesale strategy is to provide
assistance and resources to partners, in both a way that they
see as valuable and will significantly increases the number of
exporters they can identify, originate, and onboard. This
increased attention on community lenders, combined with the
activities of Ex-Im's Minority and Woman-Owned Business team
across the country, including in rural communities, will help
expand outreach to underserved communities.
Q.4. Has Ex-Im been conducting outreach to community
development financial institutions (CDFIs) and minority
depository institutions (MDIs) to support community-based and
minority-owned small businesses?
A.4. Historically, Ex-Im has not been able to identify many
minority-owned banks that offer asset-based lending. Previous
efforts to invite minority-owned banks to participate in Ex-
Im's programs were unsuccessful as these lenders did not see
the value of the Working Capital Loan Guarantee Program for
their institutions.
However, Ex-Im does continue to engage with minority
lenders as they consider expanding their financing options for
their customers. In March, Ex-Im obtained an updated list of
CDFIs from Treasury and is reviewing the list for asset-based
lenders that may want to participate in Ex-Im's Working Capital
Loan Guarantee Program. This process is ongoing.
Q.5. Describe how the organizational realignment of Ex-Im, in
addition to the expanded access of product offerings you
referenced in your written testimony, has made it easier for
small businesses to access financing. What metrics and targets
is Ex-Im using?
A.5. Ex-Im's organizational realignment is designed to improve
the business development model for originating, identifying,
and onboarding exporters of U.S. made goods and services who
would benefit from Export Credit Insurance and Working Capital
Loan Guarantee programs. These programs provide financing and
insurance coverage directly to U.S. exporters and tend to be
heavily used by smaller businesses.
Most exporters access Ex-Im financing through private
sector broker and lender partners. These partners typically
serve as the primary point of contact for the exporter
regarding their utilization of Ex-Im financing. Traditionally,
Ex-Im's relationships with these partners have been focused on
``post-application'' support, with very little assistance in
the ``pre-application'' phase (i.e., business development).
Given the constraints of personnel, resources, and time,
Ex-Im's organizational realignment within the Office of Small
Business will allow it to scale up its outreach efforts by
adopting a wholesale strategy focused on the exporter-focused
business development needs of Ex-Ims broker and lender
networks. The purpose of this wholesale strategy is to provide
assistance and resources to partners by enhancing their
capability to identify, originate, and onboard new exporters
who can take advantage of Ex-Im financing.
This new strategy was developed based on extensive
interviews and through consulting with experts in channel
operations. Ex-Im will provide an account manager to each
qualifying partner, and that account manager will offer a menu
of potential resources and services to aid the partner in
finding and helping more exporters who can benefit from Ex-Im
financing.
This effort has a number of defined metrics and targets Ex-
Im will use to evaluate effectiveness. First and foremost, is
the aggregate number of authorizations originated in Ex-Im's
Export Credit Insurance and Working Capital Loan Guarantee
programs. This will be further evaluated on a per partner basis
to ascertain the value of the enhanced support provided in
increasing the number of Ex-Im authorizations.
The second goal is to ensure that the partners continue to
see value in the program, and that the assistance provided
continues to be effective in helping them meet their goals.
This will be measured based on the utilization and
effectiveness of each type of assistance provided, as well as
in aggregate on a quarterly basis by spot surveying partner
participants.
Lastly, based on how business development leads will be
provided to partners, Ex-Im will be able to measure both the
number of Ex-Im authorizations associated with those leads, as
well as the amount of non-Ex-Im financing these newly
identified businesses were able to access directly from the
private sector. This information can help provide better
insight into how Ex-Im financing supplements the private sector
and can provide value to partner institutions. These metrics
also better align Ex-Im's program incentives with those of
exporters and partners.
------
RESPONSES TO WRITTEN QUESTIONS OF
SENATOR CORTEZ MASTO FROM KIMBERLY REED
Q.1. Have borrowers needed forbearance because of reduced
revenue? If so, can you explain what forbearance the Export-
Import Bank offered and how those steps are working?
A.1. Yes, some borrowers have needed forbearance due to reduced
revenue. Forbearance requests have been generally limited to
airline borrowers--specifically linked to certain passenger
airlines. The grounding of passenger airlines around the world
has resulted in significant revenue declines for those
airlines. Ex-Im is working with these airlines to provide
short-term liquidity relief in order to protect the long-term
financial interest of the U.S. taxpayer.
Ex-Im tracks the risk involved with any particular
transaction by proactively managing the credit through all
parts of the transaction lifecycle, extending from disbursement
to repayment. Ex-Im monitors the credit-rating of obligors'
debt service repayment capacity, considering all factors that
directly impact ability and willingness to repay its debt in a
timely manner. These ongoing reviews strengthen Ex-Im staff's
familiarity and working relationships with obligors and allow
the agency to identify credit vulnerabilities.
Given the current economic uncertainty, these reviews are
happening rapidly and the risk of any particular transaction
being in default is fluid based upon these reviews. The
monitoring groups seek to achieve this goal through ongoing
assessments of the operating environment and financial
condition of the borrower and guarantors to determine whether
there have been changes that suggest an increase or decrease in
the risk associated with any of the key variables considered at
origination. Given the frequent communication between Ex-Im,
its borrowers, and guaranteed lenders, the ability to develop
and implement remediation action is strengthened and provides
Ex-Im with additional notice prior to default.
Accordingly, in order to provide flexibility and to
minimize defaults, Ex-Im is providing short-term liquidity
relief to its borrowers by:
Working with lenders to restructure debt
Waiving certain covenant requirements
Allowing the use of reserve accounts and applying
security deposits to current obligations
Waiving payments in advance and applying payments
in advance to current obligations
Paying out claims on defaulted installments
associated with guaranteed loans
As of this time, the nature of the stress for Ex-Im
borrowers is primarily one of short-term liquidity, not long-
term solvency. Therefore, Ex-Im expects its borrowers will
focus on maintaining sufficient liquidity over the short term.
Currently, with these liquidity relief efforts Ex-Im's
portfolio is stable and performing.
Q.2. What is your estimate of a loan default rate at the end of
the year? What can Ex-Im do to keep the default rate below 2
percent?
A.2. Ex-Im regularly performs default rate and stress test
scenarios to estimate future paths of the default rate given
the current market and financial conditions. As outlined in the
``Stress Test Addendum'' section in Ex-Im's latest Default
Report to Congress (covering the quarter ending in June 2020),
\1\ Ex-Im utilizes a forward-looking approach for its stress
testing protocol to develop stress scenarios that simulate
defaults based on the latest portfolio and internal credit
ratings for its transactions. \2\ For each scenario, Ex-Im runs
20,000 Monte Carlo simulations to create a distribution of
possible losses. Ex-Im reports its stress test results to
Congress on a semiannual basis and always includes a base case
scenario that assumes no underlying adverse financial or market
conditions. As of June 2020, the base case scenario's expected
default rate (i.e., the median value of the 20,000 Monte Carlo
simulations) is 0.38 percent with a 95 percent confidence level
that it would be less than 1.94 percent.
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\1\ Pursuant to 12 U.S.C. 635g(g); available at https://
www.exim.gov/who-we-serve/congressional-and-government-stakeholders/
facts-about-exim/default-rate-reports.
\2\ Ex-Im's internal risk rating system is similar to Moody's or
S&P's credit rating system.
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As part of the June 2020 Default Report, Ex-Im performed a
specific COVID-19 stress test scenario that covered a 1-2 year
forward-looking period for the three areas in the portfolio
that are expected to be most impacted by the fallout of the
COVID-19 pandemic: Transportation, Commodities, and Sovereign
risk (non-Transportation). Staff simulated deteriorating
financial and market conditions by applying risk rating
downgrades to every transaction in these three sectors. Under
this highly stressed scenario, Ex-Im's expected median default
rate would be 0.85 percent with a 95 percent confidence level
that it would be less than 2.63 percent.
Ex-Im proactively manages its portfolio and maintains
continuous contact with its borrowers in order to assess their
needs and minimize potential defaults in this unprecedented
crisis. As described in response to Question 1, Ex-Im has
undertaken a number of measures to provide forbearance to
borrowers experiencing liquidity needs.
The COVID-19 pandemic is a highly fluid and dynamic
situation, and as more time elapses, a protracted crisis could
result in increased defaults, impede recovery efforts, and
thereby cause Ex-Im's default rate to rise. Ex-Im will continue
to provide relief as necessary and appropriate to its borrowers
in order to protect the long-term financial interest of the
U.S. taxpayer. Ex-Im will continue to update its default rate
and stress test scenarios to reassess the impact of COVID-19 on
its portfolio.
Q.3. How has COVID-19 affected the ability of foreign companies
to secure financing? Is it easier or more difficult for foreign
companies that are buying from U.S. companies to obtain
financing from the private sector?
A.3. COVID-19 has negatively impacted the ability of foreign
companies to secure financing because of the uncertainty it has
created in the market. Various reports indicate that lenders in
multiple jurisdictions are building up their loan-loss reserves
in anticipation of increased defaults in their current
portfolios. Every dollar that is held to provision for
potential losses on existing loans is one that cannot be used
to extend new credit to customers. With a shrinking amount of
money to make loans, lenders tend to prioritize their top
clients, making it difficult for other companies to access
financing.
Additionally, if foreign buyers are using their local banks
(or other banks without U.S. dollar deposits), it is
difficult--and very expensive--to obtain term financing in U.S.
dollars. While the Federal Reserve has implemented swap lines
to central banks in select markets to facilitate short-term
U.S. dollar liquidity, purchases of U.S. capital equipment
generally require medium- or long-term financing due to the
cost and nature of the goods sold. Foreign companies looking to
buy U.S. exports such as these may find that the private sector
is unable to provide competitive financing in U.S. dollars to
facilitate the purchase.
Ex-Im expects to provide greater detail and insight on the
measures introduced by foreign export credit agencies to
mitigate the effects that COVID-19 is having on trade and
export finance as part of its annual Report to the U.S.
Congress on Global Export Credit Competition, covering calendar
year 2020. This report will also incorporate insight and
analysis based on surveys and interviews with market
participants and will be released in June 2021.
Q.4. How has the impact of the COVID-19 pandemic affected Ex-
Im's risk management practices?
A.4. The COVID-19 pandemic has resulted in material
macroeconomic, financial, and political deterioration across a
number of markets. As a result of the systemic and country-
specific shocks stemming from the COVID-19 pandemic, Ex-Im has
undertaken a number of actions both with regard to applications
currently under consideration as well as those transactions
that are currently in repayment in order to fulfill its mission
to support U.S. jobs while minimizing the risk of loss to the
U.S. Government.
Ex-Im's framework for analyzing transactions begins with an
assessment of country risk. Ex-Im is the Secretariat for an
interagency working group, chaired by the Office of Management
and Budget, that risk rates a country's ability and willingness
to repay its debt. In its role as Secretariat, Ex-Im's country
economists prepare the reports containing the assessment of
country risk for review and approval by the interagency working
group. This system, known as the Interagency Country Risk
Assessment System (ICRAS) provides separate risk ratings for
lending to the sovereign Government and lending to private
borrowers. The results of these reviews inform Ex-Im's
determination about whether transactions in a given market may
meet the statutory requirement for a reasonable assurance of
repayment, as reflected in the Country Limitation Schedule
(CLS). The CLS is available on Ex-Im's website and informs of
the markets in which it is open for business and general terms
and conditions for considering transactions in each market. \3\
Since the COVID-19 pandemic began, the interagency working
group has modified the ICRAS ratings for a number of countries
in recognition of the heightened risk brought on by
deteriorating conditions.
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\3\ Available at https://www.exim.gov/tools-for-exporters/country-
limitation-schedule.
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Ex-Im supplements the ICRAS reviews with continued
monitoring of economic conditions both globally and in
individual countries. This monitoring has been particularly
important in helping the agency more quickly identify how on
the ground realities are shifting the risk profile. Based on
these timely reviews, Ex-Im may further modify its risk ratings
or CLS when necessary to respond to significant developments on
the ground, either with regard to an individual transaction or
for all transactions in a particular country.
Ex-Im is also considering the effects of COVID-19 when
reviewing individual transactions to determine whether there is
a reasonable assurance of repayment. The analysis may include a
review of the financial and operating conditions pre-COVID-19
and how COVID-19 is affecting current operations.
Ex-Im tracks the risk involved with any particular
transaction by proactively managing the credit through all
parts of the transaction lifecycle, extending from disbursement
to repayment. Ex-Im monitors the credit-rating of obligors'
debt service repayment capacity, considering all factors that
directly impact ability and willingness to repay its debt in a
timely manner. These ongoing reviews strengthen staff's
familiarity and working relationships with obligors and allow
the agency to identify vulnerabilities in the credits.
Given the current economic uncertainty, these reviews are
happening rapidly and the risk of any particular transaction
being in default is fluid based upon these reviews. The
monitoring groups seek to achieve this goal through ongoing
assessments of the operating environment and financial
condition of the borrower and guarantors to determine whether
there have been changes that suggest an increase or decrease in
the risk associated with any of the key variables considered at
origination. Given the frequent communication between Ex-Im,
its borrowers, and its guaranteed lenders, the ability to
develop and implement remediation action is strengthened and
provides Ex-Im with additional notice prior to default.
Q.5. The Ex-Im Bank's reauthorization included a goal to set
aside at least 5 percent of annual funds to finance renewable
energy, energy efficiency, and energy storage technology
exports.
What is Ex-Im's plan to ensure 5 percent of funds are being
set aside to finance renewable energy exports?
A.5. Ex-Im's total outstanding loan, guarantee, and insurance
exposure is capped at a total of $135 billion. \4\ As of June
30, 2020, Ex-Im's aggregate outstanding exposure stood at $45.6
billion, with $89.4 billion (66 percent) available to finance
U.S. exports for any sector, industry, constituency, or export
destination, consistent with applicable statutory and policy
limitations.
---------------------------------------------------------------------------
\4\ 12 U.S.C. 635e(a)(2).
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To the best of Ex-Im's knowledge, the agency has always had
sufficient financing authority to finance qualified
applications for renewable energy, energy efficiency, and
energy storage technology exports.
Ex-Im's 2019 Congressional reauthorization makes it ``a
goal of the Bank to ensure that not less than 5 percent of . .
. '' the aggregate loan, guarantee, and insurance authority
``is available each fiscal year for the financing of renewable
energy,'' energy efficiency, and energy storage technology. \5\
The statute does not establish a ``set aside'' that would
require Ex-Im to delay or deny financing for exports that are
not considered renewable energy, energy efficiency, or energy
storage technology exports.
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\5\ Further Consolidated Appropriations Act, 2020, P.L. 116-94,
Division I, Title IV, 407, December 20, 2019, codified at 12 U.S.C.
635(b)(1)(K).
Q.6. Is Ex-Im increasing its outreach to companies in the
---------------------------------------------------------------------------
energy sector in order to meet this goal?
A.6. Ex-Im places a high priority on supporting renewable
energy and environmentally beneficial exports, consistent with
applicable statutory mandates. \6\ Ex-Im seeks to increase the
amount of its financing for renewable energy, energy
efficiency, energy storage, and environmentally beneficial
exports through increased outreach and engagement on Ex-Im's
value proposition.
---------------------------------------------------------------------------
\6\ 12 U.S.C. 635(b)(1)(C), 12 U.S.C. 635(b)(1)(K), 12 U.S.C.
635i-3(b)(1).
---------------------------------------------------------------------------
Ex-Im's outreach and engagement strategy for these key
sectors is centered around identifying U.S. businesses that are
active in this space and that are looking to export their goods
and services to foreign buyers. To accomplish this objective,
Ex-Im participates in a number of events that serve as focal
points for U.S. renewable energy manufacturers, prospective
buyers, trade associations, and Government officials. These
include trade events related to, for example, wind power,
microgrids, solar power, and energy storage. Ex-Im has also
participated in reverse trade missions and interagency working
groups that focus on supporting U.S. renewable energy exports.
Ex-Im also maintains regular contact with U.S. exporters and
foreign buyers in the sector who have previously utilized Ex-Im
financing to identify new financing opportunities.
Ex-Im featured several conversations related to renewable
energy, energy storage, and energy efficiency technologies at
its 2020 Annual Conference, which reached over 1,700
registrants, the largest conference in the agency's history.
\7\ During a fireside chat with Chairman Reed on the main
stage, U.S. Department of Energy Secretary Dan Brouillette
spoke about energy storage technology, noting: ``Coordinating
with stakeholders is critical as we work to position the United
States as a global leader in energy storage technologies of the
future. While research and development are the foundation of
advancing these technologies, the Trump Administration
recognizes global leadership also requires a commitment to
commercializing technologies from the lab to the marketplace.''
\8\ As these technologies become commercially available, Ex-Im
will continue to work closely with the Department of Energy and
other Federal agencies to support these exports, consistent
with applicable statutory requirements.
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\7\ For more information, see https://www.exim.gov/events/annual-
conferences/2020/agenda.
\8\ ``Department of Energy and Export-Import Bank Fireside Chat'',
2020 Ex-Im Annual Conference, September 11, 2020. Excerpts available at
https://www.energy.gov/articles/department-energy-and-export-import-
bank-fireside-chat.
---------------------------------------------------------------------------
In 2019, recognizing the importance of this mandate,
Chairman Reed tasked Ex-Im Director Judith Pryor with
supporting Ex-Im's outreach and engagement with major U.S.
exporters involved in renewable energy and environmentally
beneficial exports. Director Pryor joined the Commerce
Department's Renewable Energy and Energy Efficiency Advisory
Committee for a roundtable last year and, in late August,
participated in the Energy Storage Association's Annual
Conference to encourage buyers of U.S. energy storage exports
to access Ex-Im financing for future capital-intensive hybrid
and stand-alone energy storage projects. While some of her
business development travel has been postponed due to COVID
travel restrictions, Director Pryor has also been meeting with
a wide range of stakeholders, highlighting how Ex-Im's
financing solutions can help U.S. business reach and compete in
new markets.
More recently, Ex-Im established an interdivisional
renewable energy working group to strategize additional ways to
increase Ex-Im's financing of renewable energy, energy
efficiency, and energy storage exports. The working group meets
regularly and is focused on enhancing collaboration and
leveraging resources across divisions and interagency partners
to improve Ex-Im's outreach and communication to this sector.
These ongoing efforts have also been supplemented with
additional outreach and engagement associated with Ex-Im's
Program on China and Transformational Exports (the
``Program''), under which the agency has a goal to reserve not
less than 20 percent of its aggregate loan, guarantee, and
insurance authority towards financing exports under the
Program. \9\ Ex-Im is charged with offering financing under the
Program that, to the extent practicable, is fully competitive
with the rates, terms, and conditions offered by the People`s
Republic of China (and other countries as may be designated by
the Secretary of the Treasury) in order to advance the
``comparative leadership of the United States'' or support
``innovation, employment, and technological standards, through
direct exports'' in 10 specific areas, including renewable
energy, energy efficiency, and energy storage.
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\9\ 12 U.S.C. 635(l)(3)(A).
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As Ex-Im works to establish the Program, Chairman Kimberly
Reed launched the Strengthening American Competitiveness
Initiative, which seeks to engage stakeholders from the 10 key
areas identified in statute. On May 7, 2020, Ex-Im convened a
roundtable discussion via teleconference focused on renewable
energy exports to discuss how Ex-Im can better position its
products and policies to further support the renewable energy
and energy storage sector under the Program. \10\ More than 260
business owners and stakeholders in the U.S. renewable energy
sector participated in the call.
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\10\ The recorded call can be accessed at https://www.exim.gov/
who-we-serve/external-engagement/strengthening-american-
competitiveness.
Q.7. How can Congress better position U.S. exporters of
renewable energy products to respond to increasing foreign
---------------------------------------------------------------------------
demand?
A.7. As described above, Ex-Im is committed to supporting U.S.
exporters in the renewable energy sector. Based on feedback
from exporters and other stakeholders, some of the main
challenges facing exporters revolve around foreign Government
industrial and trade policies that may put U.S. businesses at a
competitive disadvantage in global markets. While Ex-Im does
not have any specific policy recommendations to address these
matters, the agency is pleased to work with this Committee on
policy proposals that are related to export finance.
Q.8. Please provide information on renewable energy export
deals, including types of products exported, number of deals
made, the dollar value of total insured shipments, guaranteed
credit, or disbursed loans, total authorizations, and other
relevant data, made since you were confirmed.
A.8. Since Chairman Reed was confirmed by the Senate on May 8,
2019, Ex-Im has authorized 18 transactions supporting the
export of renewable energy technologies, as of September 15.
The chart below reflects Ex-Im's financial authorizations for
renewable energy exports since May 8, 2019. These
authorizations include transactions that are still being
utilized by U.S. exporters. As a result, the total amount of
insured shipments, guaranteed credits, and disbursed loans
associated with these authorizations is not yet available.
The below chart reflects the amount of insured shipments,
guaranteed credits, and disbursed loans since May 8, 2019, and
includes activity associated with transactions that were
authorized prior to May 8, 2019.
Q.9. What outreach is Ex-Im doing to underserved communities or
business owners? Does Ex-Im have any initiatives or plans to
further support businesses in rural communities, especially in
the wake of the pandemic?
A.9. Ex-Im has established a Minority- and Women-Owned Business
(MWOB) group, which is staffed by a dedicated team of business
development specialists who work with businesses owned by
minorities, women, veterans, and persons with disabilities to
help them access Ex-Im financing.
This group has established long-standing partnerships with
organizations that have a minority trade focus and are
dedicated to working with Ex-Im to educate and raise awareness
about opportunities for exporters. Some of these organizations
include the National Minority Supplier Development Council,
Women's Business Enterprise National Council, U.S. Hispanic
Chamber of Commerce, National ACE, the Minority Business
Development Agency, the National Center for American Indian
Enterprise Development, the American Indian Chamber, and the
Native American Development Corporation, the Disabled Business
Association, and the National Veteran Business Council.
Ex-Im's MWOB team also travels throughout the country to
collaborate with its partners by hosting export seminars,
participating in trade shows, and organizing workshops focused
on trade finance and global business development.
In FY2019, Ex-Im staff participated in 119 outreach and
education events across the country engaging minority- and
women-owned businesses. In FY2019, Ex-Im approved $440.6
million in support of MWOB businesses.
Ex-Im's 2019 reauthorization underscored the importance of
outreach and engagement to small businesses owned by women,
minorities, veterans, and persons with disabilities, as well as
those located in rural areas and start-up businesses. \11\ In
order to strengthen its efforts in this regard, Ex-Im is
increasing its outreach staff to help more of these targeted
businesses learn about how its tools can support their ability
to increase exports and grow their workforce.
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\11\ Further Consolidated Appropriations Act, 2020, P.L. 116-94,
Division I, Title IV, 403, December 20, 2019, codified at 12 U.S.C.
635(b)(1)(E)(i)(I).
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As Chairman Reed described in her testimony, Ex-Im is
undertaking a number of initiatives that are designed to
enhance the agency's outreach to small businesses all across
the country, including those in underserved communities and
rural areas.
Throughout FY2020, Ex-Im has embarked on its All America
Initiative, an outreach effort focused on supporting companies
of all sizes in the 50 U.S. States, the District of Columbia,
and five U.S. Territories. To achieve this goal, Ex-Im's Board
Members and staff participated in numerous events to educate
businesses, State and local government economic development
agencies, chambers of commerce, trade associations, and other
organizations about how Ex-Im can support growth through
exporting. The Initiative began with in-person events, then
pivoted to virtual engagements after the onset of the COVID-19
pandemic. Ex-Im recently released a video highlighting the
agency's commitment to supporting exporters across the country
and increasing awareness of its products. \12\
---------------------------------------------------------------------------
\12\ Available at https://grow.exim.gov/all-america-video.
---------------------------------------------------------------------------
By boosting field office staff, Ex-Im will have greater
ability to send staff to meet businesses and exporters
throughout their designated regions. Field staff are able to
readily participate in local trade shows, seminars, and
workshops, as well as give presentations to local chambers of
commerce.
Ex-Im is also working on enhancing its private sector
partnerships. Currently, there are 54 private sector lenders
actively participating in Ex-Im's delegated authority program
for working capital loan guarantees. Ex-Im has signed memoranda
of understanding with both the National Credit Union
Administration and the National Association of Federally
Insured Credit Unions to collaborate on educational and
outreach initiatives. Through these efforts, Ex-Im looks to
engage credit unions on participating in its Working Capital
Loan Guarantee program.
Recognizing the important role that agriculture plays in
supporting rural economies and jobs, Chairman Reed has also
sought to increase Ex-Im's outreach to the agricultural sector.
When Ex-Im reconstituted its advisory committees in 2019,
Chairman Reed recommended, and the Board of Directors approved,
the appointments of Georgia Agriculture Commissioner Gary Black
to serve as a member of the Advisory Committee and North Dakota
Agriculture Commissioner Doug Goehring to serve on the Sub-
Saharan African Advisory Committee.
After COVID-19 began to spread earlier this year, Ex-Im has
participated in teleconferences hosted by the National
Association of State Departments of Agriculture and the U.S.
Department of Agriculture (USDA) focused on educating
participants on how Ex-Im can facilitate agricultural sales in
new and existing markets and support U.S. jobs.
In August, Ex-Im signed a Memorandum of Understanding with
USDA to improve coordination and collaboration as it relates to
supporting exports related to U.S. agricultural commodities,
educating small agribusinesses and cooperatives, and analyzing
market risk.
Ex-Im has additional outreach efforts targeting rural
companies and communities through its Regional Export Promotion
Program (REPP) which brings together State, county, and local
nonprofit economic development entities with the agency to
partner to expand export opportunities in rural communities.
Given social distancing guidelines that have been in effect
since March, Ex-Im has presented in 135 webinars with
exporters, lenders, brokers, and partner organizations;
enhanced outreach through email communications by conducting
more than 340 email campaigns, reaching more than one million
inboxes; and released an audio series on receivables financing,
insuring receivables against the risk of nonpayment, and
negotiating repayment terms in uncertain times. \13\
---------------------------------------------------------------------------
\13\ Available at https://www.exim.gov/what-we-do/export-credit-
insurance. A Spanish language version is under development.
Q.10. What process is Ex-Im using to ensure that there is no
financing of sales to entities that violated the Foreign
Corrupt Practices Act, are on sanctions lists, or are flagged
---------------------------------------------------------------------------
as bad actors by the U.S. Government?
A.10. Ex-Im has a multilayered system for performing due
diligence on the parties involved in its transactions. The
initial step is screening, which involves running the names of
buyers, borrowers, exporters, lenders, and others through a
subscription database clearinghouse that includes the
Department of Treasury Office of Foreign Assets Control (OFAC)
sanctions list, State Department and Commerce Department lists,
the U.S. Government exclusions (i.e., debarment) lists,
Department of Justice (DOJ) and Federal Bureau of Investigation
lists, Politically Exposed Persons lists, and the Multilateral
Institutions exclusions lists, among others. If there is a
``hit'' on any of these lists, the transaction undergoes
further legal review to determine whether and under what
circumstances it can move forward and satisfy all applicable
statutory requirements. If the entity is on any of the
foregoing U.S. Government exclusion list, Ex-Im acts
accordingly.
With regard to the Foreign Corrupt Practices Act of 1977,
as amended (15 U.S.C. 78dd-1, et seq.) (FCPA), penalties for
violations are addressed elsewhere in law and are based on the
severity of the violation. Ex-Im is not aware of any provision
of law that denies access to U.S. Government financing for
entities that have violated the FCPA. Questions about penalties
associated with FCPA violations should be directed to DOJ.
When, through the screening process or other due diligence, Ex-
Im becomes aware of a party being convicted for FCPA
violations, Ex-Im applies enhanced due diligence to such cases
to assure that the party in question has cooperated with DOJ,
the Securities and Exchange Commission, or other applicable
regulators; has removed the bad actors involved in the
violation; and, most importantly, has remediated or is
remediating the compliance failures that allowed the violation
to occur.
Ex-Im has the authority to deny applications for financing
if there is ``substantial credible evidence that any party to
the transaction or any party involved in the transaction has
committed an act of fraud or corruption in connection with the
transaction.'' \14\ All reasonable suspicions of a violation of
law in connection with an Ex-Im application or transaction are
promptly referred to the Ex-Im Inspector General's Office of
Investigations, where special agents conduct investigations of
the matter and communicate their findings to Ex-Im's Office of
General Counsel. As required by Ex-Im's 2019 reauthorization,
transactions must be denied if the ``end user, borrower,
lender, or exporter has been convicted of an act of fraud or
corruption in connection with an application for support from
the Bank made in the preceding 5 years.'' \15\ All parties
subject to this provision are identified through Ex-Im's
customer due diligence screening procedures.
---------------------------------------------------------------------------
\14\ 12 U.S.C. 635(f).
\15\ Ibid; see also: Further Consolidated Appropriations Act,
2020, P.L. 116-94, Division I, Title IV, 406, December 20, 2019.
---------------------------------------------------------------------------
In addition to screening and enhanced due diligence, all
Ex-Im transactions are subjected to varying degrees of credit
underwriting (depending on the program, financing amount, and
risk rating). Ex-Im may also review open source information as
part of its due diligence review.
Transactions over $25 million are subject to review by the
State Department and the National Advisory Council on
International Monetary and Financial Policies, which is chaired
by the Secretary of the Treasury and includes representatives
from the State Department, the Commerce Department, and the
United States Trade Representative. \16\
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\16\ Exec. Order No. 11,269, 31 FR 2,813 (Feb. 14, 1966), as
amended. 22 U.S.C. 286b note.
---------------------------------------------------------------------------
Ex-Im has recently launched a Customer Due Diligence
Working Group tasked with an in-depth review of Ex-Im's
customer due diligence and reporting on ways that Ex-Im's
customer due diligence can be improved to meet best practices
standards in the prevention and detection of financial crime,
including fraud, bribery, money-laundering, and sanctions
violations.
As part of this effort, Ex-Im issued a Request for Quote on
a contract for a Comprehensive Review of Illicit Finance Risks.
Ex-Im contracted with a small business in September 2020 that
will complete a comprehensive report by December 31, 2020. \17\
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\17\ More information available at https://beta.sam.gov/opp/
d9a82a1080b8466
eb806f3e14d51d319/view.
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------
RESPONSES TO WRITTEN QUESTIONS OF SENATOR JONES
FROM KIMBERLY REED
Q.1. Minority and Women Owned Businesses--According the Ex-Im's
website, 18 Alabama small businesses have used the bank's
services since 2019. Of those small businesses only 1 is
minority owned and 7 are women owned. These numbers seem low.
What is the total number of minority and women owned businesses
helped across the country since 2019? Bloomberg recently
reported that African American owned businesses declined by 41
percent from February to April, representing 440,000
businesses. I've heard from folks in Alabama's Black Belt that
they're concerned about the pandemic impacts, but they'd like
to make sure businesses in their communities are supported.
What outreach is the Export-Import Bank doing to minority and
women owned businesses to ensure they're supported and aware of
your programs?
A.1. Ex-Im's financing is not disbursed on the basis of a
predetermined amount of financing for an individual sector,
industry, constituency, or export destination. Rather, it is
primarily driven by the needs of U.S. businesses and their
foreign buyers to access Ex-Im financing in order to facilitate
U.S. exports. Consistent with applicable statutory
requirements, qualified applicants must agree to pay applicable
fees, premia, and interest to access Ex-Im financing. \1\
Applications must also align with the requirement that the
private sector was unable to provide viable, competitive
financing and that Ex-Im financing will supplement, not compete
with, private capital. \2\
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\1\ 12 U.S.C. 635(c)(1).
\2\ 12 U.S.C. 635(b)(1)(B).
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Given statutory requirements for qualifying applications
described above, Ex-Im seeks to increase the amount of its
financing for statutorily identified constituencies (including
minority- and women-owned businesses), sectors, and geographic
regions through increased outreach and engagement on Ex-Im's
value proposition. In order to achieve these objectives, Ex-Im
works to build awareness among the business community and
stakeholder organizations about how the agency's financing can
support exports. By improving awareness, Ex-Im encourages more
qualifying businesses to consider applying for financing.
Since January 2019, Ex-Im has authorized financing for a
total of 315 businesses that self-identify as minority-owned
businesses.
Ex-Im has established a Minority- and Women-Owned Business
(MWOB) group, which is staffed by a dedicated team of business
development specialists who work with businesses owned by
minorities, women, veterans, and persons with disabilities to
help them access Ex-Im financing.
This group has established long-standing partnerships with
organizations that have a minority trade focus and are
dedicated to working with Ex-Im to educate and raise awareness
about opportunities for exporters. Some of these organizations
include the National Minority Supplier Development Council,
Women's Business Enterprise National Council, U.S. Hispanic
Chamber of Commerce, National ACE, the Minority Business
Development Agency, the Disabled Business Association, and the
National Veteran Business Council.
The MWOB team also travels throughout the country to
collaborate with its partners by hosting export seminars,
participating in trade shows, and organizing workshops focused
on trade finance and global business development. As a result
of the COVID-19 pandemic, this group has increased its focus on
digital outreach and education tools.
Ex-Im welcomes congressional feedback on additional
organizations that could serve as potential partners to enhance
Ex-Im's outreach, as well as other avenues to better reach
minority- and women-owned businesses that are interested in
exporting and could benefit from its financing tools.
Q.2. Healthcare Manufacturing--Relying on other countries,
namely the People's Republic of China (PRC), for production of
basic medical necessities has been a public health risk during
the pandemic. My bill, the Build Health Care Equipment in
America Act, incentivizes companies to do just that. More
healthcare manufacturing could grow out of our existing
manufacturing and biotechnology economies.
Nidek Medical, a Birmingham company, manufactures high
quality oxygen concentrators for 110 markets worldwide,
including the PRC. Its CEO credits Ex-Im for getting him off
the ground in the early days in part because of the bank's
support. In fact, U.K. Prime Minister Boris Johnson recovered
from COVID-19 thanks to an Alabama made machine. As a result,
the British Royal Air Force sent planes to Alabama to pick up
thousands more. Mexico's President personally called the CEO of
Nidek Medical to order 1,000 oxygen concentrators. Would
expanding Ex-Im financing for the healthcare manufacturing
sector specifically help more American producers get off the
ground?
A.2. In the 2019 legislation directing the establishment of the
China and Transformational Exports Program, Congress explicitly
charged Ex-Im with advancing ``the comparative leadership of
the United States'' with respect to China and supporting
``United States innovation, employment and technological
standards'' by facilitating exports from among 10 key areas,
including biomedical sciences. \3\
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\3\ Further Consolidated Appropriations Act, 2020, P.L. 116-94,
Division I, Title IV, 402(a), December 20, 2019, codified at 12
U.S.C. 635(l).
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Ex-Im recognizes that the biomedical sciences sector
represents a critical area for America's global technological
leadership and has a direct bearing on our Nation's economic
and national security. As Ex-Im works to establish the program,
Chairman Kimberly Reed launched the Strengthening American
Competitiveness Initiative, which seeks to engage stakeholders
from these 10 key areas. On July 16, Ex-Im held a
teleconference with biomedical industry representatives to
discuss how the agency can support this important sector. \4\
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\4\ The recorded call can be accessed at https://www.exim.gov/who-
we-serve/external-engagement/strengthening-american-competitiveness.
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Ex-Im has a long history of supporting exports in the
health care industry, dating at least back to 1945 when it
provided financing to the Netherlands for the purchase of
various U.S. goods and services, including medical supplies.
Some of the exports of medical equipment and supplies
supported by Ex-Im since 2016 include mobility machinery,
surgical and orthopedic instruments, prosthetic limbs, dental
and orthodontic supplies and equipment, optometry and
ophthalmology equipment, X-ray and ultrasound machines, and
research laboratory equipment, among other things.
In FY2019, Ex-Im financed 72 transactions, providing $36.3
million to facilitate exports in the health care manufacturing
sector. This included 69 transactions, providing $34.4 million
that directly supported exports from small businesses.
As part of our Nation's domestic response to the COVID-19
crisis, however, Ex-Im has temporarily excluded certain medical
supplies and equipment that the President of the United States
and other Federal agencies have designated as being in short
supply. Ex-Im will continue to monitor developments to continue
supporting U.S. exporters while not detracting from the need to
maintain sufficient domestic supplies to address the COVID-19
crisis. \5\
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\5\ More information available at https://www.exim.gov/
coronavirus-response/fact-sheet-exim-response-to-scarce-covid-19-
related-medical-supplies.
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More generally, Ex-Im's financing is not disbursed on the
basis of a predetermined amount of financing for an individual
sector, industry, constituency, or export destination. Rather,
it is primarily driven by the needs of U.S. businesses and
their foreign buyers to access Ex-Im financing in order to
facilitate U.S. exports. Consistent with applicable statutory
requirements, qualified applicants must agree to pay applicable
fees, premia, and interest to access Ex-Im financing. \6\
Applications must also align with the requirement that the
private sector was unable to provide viable, competitive
financing and that Ex-Im financing will supplement, not compete
with, private capital. \7\
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\6\ 12 U.S.C. 635(c)(1).
\7\ 12 U.S.C. 635(b)(1)(B).
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Demand for Ex-Im financing varies by sector and may change
over time, based on the capacity of private sector financial
institutions, the relative competitiveness of U.S. exports, and
the presence of foreign Government-backed export credit
financing, among many other variables.
Due to the statutory requirement of reasonable assurance of
repayment, Ex-Im is generally not in a position to provide
export financing related to new businesses. Ex-Im typically
requires that companies have 3 years of audited financial
statements to demonstrate that they can fulfill their repayment
obligations.
Newer businesses that meet applicable credit standards and
are looking to expand global sales tend to utilize Ex-Im's
working capital and export credit insurance programs. These
programs enable businesses to increase their access to capital
while offering their foreign buyers competitive repayment
terms, which enables them to maintain and grow their American
workforce.
Q.3. Competing with China--Investing in the growth of America's
biotechnology, AI, telecomm, and quantum computing sectors is
not only vital to preparing for future growth, but to compete
against China's State-backed industries.
These industries also happen to be growth sectors targeted
by some of Alabama's largest employers like Daimler, Toyota,
UAB, Redstone Arsenal and Maxwell Air Force Base. For example,
Huntsville-based Adtran, recently beat out Huawei for a
significant contract overseas.
I'd like your assessment on how well the new Ex-Im China
program has fared to date. How does the bank intend to do
outreach to potential participants, like the small- and medium-
sized companies affiliated with Alabama's high tech industries
who could benefit?
What is your opinion on giving healthcare manufacturing
financial incentives to help the U.S. compete with China's
recent medical diplomacy--or ``mask diplomacy''--they have
attempted to leverage for geopolitical benefit?
A.3. In the 2019 law directing the establishment of the Program
on China and Transformational Exports (the ``Program''),
Congress explicitly charged Ex-Im with advancing ``the
comparative leadership of the United States'' with respect to
the People's Republic of China (PRC) and supporting ``United
States innovation, employment and technological standards'' by
facilitating exports from among 10 key transformational export
sectors, including biotechnology, artificial intelligence,
wireless communications equipment, and quantum computing. \8\
Ex-Im recognizes that these sectors represent critical areas
for America's global technological leadership and have a direct
bearing on our Nation's economic and national security.
---------------------------------------------------------------------------
\8\ Further Consolidated Appropriations Act, 2020, P.L. 116-94,
Division I, Title IV, 402(a), December 20, 2019, codified as 12
U.S.C. 635(l).
---------------------------------------------------------------------------
Ex-Im is diligently working with exporters, stakeholders,
and interagency partners to develop a program that will
effectively meet the mission laid out by Congress. Ex-Im is
prioritizing actions to address the underlying policy, legal,
resourcing, and operational issues necessary to implement the
Program. Despite the fact that the agency did not receive any
additional funding for implementation, Ex-Im has brought
onboard two senior detailees to lead the Program and leverage
support from across the agency. Ex-Im has reallocated and
prioritized its limited existing resources in order to
facilitate implementation of the Program.
As part of this effort, Chairman Kimberly Reed launched the
Strengthening American Competitiveness initiative, which sought
to engage stakeholders from the 10 transformational export
sectors. \9\ Over the course of this initiative, Ex-Im engaged
with more than 1,100 key stakeholders, including
representatives from the fields of artificial intelligence,
high-performance computing, quantum computing, and biomedicine.
These conversations provided insightful, actionable information
about challenges that companies in those sectors are
experiencing, particularly as it relates to PRC-backed
competition. This feedback is playing a crucial role in
ensuring Ex-Im is best positioned to deliver on its mission to
support American jobs by facilitating U.S. exports.
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\9\ The recorded calls can be accessed at https://www.exim.gov/
who-we-serve/external-engagement/strengthening-american-
competitiveness.
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Additionally, Ex-Im works to identify opportunities for
Board Members and staff to engage in outreach to educate small-
and medium-sized businesses on all financing options, including
the Program on China and Transformational Exports. This can
occur through speaking engagements, conferences, trade shows,
webinars, podcasts, District Export Council events, and
meetings with exporters.
Ex-Im seeks to ensure broad outreach to businesses across
the country, leveraging staff resources, technological
solutions, and regional partners. Ex-Im has field staff
assigned to support outreach to U.S. exporters in every U.S.
State and territory, including Alabama. In Alabama alone, Ex-Im
works with six participating Working Capital Guarantee Program
Lenders, 36 licensed insurance brokers, and, through its
Regional Export Promotion Program, the Alabama International
Trade Center.
In addition to these efforts, Chairman Kimberly Reed
assigned Director Spencer Bachus--the former U.S. Congressman
for Alabama's Sixth Congressional District--a key role in
supporting direct outreach to small businesses. Director
Bachus, who lives in Alabama and has significant experience
working with Alabama's business community, has personally
participated in a number of small business outreach events
targeting Alabama businesses with the following partners:
Mobile Area Chamber of Commerce (September 2019)
Birmingham Business Alliance (November 2019)
Huntsville Rotary Club (January 2020)
North Alabama International Trade Association
(September 2020).
That said, Ex-Im's financing is not disbursed on the basis
of a predetermined amount of financing for an individual
sector, industry, constituency, or export destination. Rather,
it is primarily driven by the needs of U.S. businesses and
their foreign buyers to access Ex-Im financing in order to
facilitate U.S. exports. Consistent with applicable statutory
requirements, qualified applicants must agree to pay applicable
fees, premia, and interest to access Ex-Im financing. \10\
Applications must also align with the requirement that the
private sector is unable to provide viable, competitive
financing and that Ex-Im financing will supplement, not compete
with, private capital. \11\
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\10\ 12 U.S.C. 635(c)(1).
\11\ 12 U.S.C. 635(b)(1)(B).
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Demand for Ex-Im financing varies by sector and may change
over time, based on the capacity of private sector financial
institutions, the relative competitiveness of U.S. exports, and
the presence of foreign Government-backed export credit
financing, among many other variables.
Regarding the PRC's ``mask diplomacy,'' as noted in the
National Security Strategy of the United States of America,
China challenges American power, influence, and interests. \12\
The PRC's ``mask diplomacy'' is consistent with its attempt to
advance its geopolitical aspirations. Ex-Im understands that
the U.S. is home to some of the most innovative medical device
companies in the world, many of which are small- and medium-
sized businesses.
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\12\ President Donald J. Frump. (2020) ``National Security
Strategy of the United States of America''. Available at https://
www.whitehouse.gov/articles/new-national-security-strategy-new-era/.
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Consistent with applicable legal and policy requirements,
Ex-Im is committed to supporting U.S. exporters in the
biomedical sector, including those that compete with the PRC.
Ex-Im offers financial tools to support U.S. manufacturers
looking to export their products on competitive export
financing terms to markets around the world. Ex-Im's main
financing tools are export credit insurance, working capital
loan guarantees, and buyer financing programs. More general
questions about financial incentives that are narrowly targeted
to support U.S. healthcare manufacturers are outside the scope
of Ex-Im's mission.
[all]