[Federal Register Volume 81, Number 225 (Tuesday, November 22, 2016)]
[Notices]
[Pages 83836-83838]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-28083]


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EXPORT-IMPORT BANK

[Public Notice EIB-2016-0004]


Proposal To Adopt the 2010 Small Business Jobs Act Interim Rule 
as an Alternative Size Standard for Defining a Small Business for 
Export-Import Bank Programs

AGENCY: Export-Import Bank of the United States.

ACTION: Notice and request for comments.

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SUMMARY: The Export-Import Bank of the United States (``EXIM Bank'') 
proposes to adopt the Interim Rule (as defined below) set forth in 
Section 1116 of the Small Business Jobs Act of 2010 (Pub. L. 111-240) 
(the ``Jobs Act'') as an alternative standard for defining a small 
business for all of its programs. The Jobs Act mandated that the U.S. 
Small Business Administration (``SBA'') use maximum tangible net worth 
and average net income as an alternative to the use of industry based 
size standards as follows: Not more than $15 million in tangible net 
worth and $5 million in average net income after Federal income taxes 
to define a small business concern (``Interim Rule''). The SBA 
currently uses the Interim Rule for its business loans under Section 
7(a) of the Small Business Act (``7(a) Loan Program'') and development 
company loans under Title V of the Small Business Investment Act of 
1958 (``504 Loan Program'', and together with the 7(a) Loan Program, 
the ``SBA Loan Programs'') to determine size eligibility for an 
applicant if such applicant does not meet the size standards that it 
has developed for individual industries as defined under the North 
American Industry Classification System (``NAICS''). If approved by the 
SBA's Administrator, EXIM Bank will apply the Interim Rule as an 
alternative size standard in addition to using size standards 
established by SBA for individual industries to determine whether or 
not participants of EXIM programs can be categorized as small business 
concerns.

DATES: Comments must be received on or before December 6, 2016 to be 
assured of consideration.

ADDRESSES: Comments may be submitted through the Federal rulemaking 
portal at WWW.REGULATIONS.GOV. To submit a comment, enter EIB-2016-0004 
under the heading ``enter keyword or ID'' and select ``Search.'' Follow 
the instructions provided at the Submit a Comment screen. Please 
include your name, company name (if any) and EIB-2016-0004 on any 
attached document. Comments received will be made available to the 
public at WWW.REGULATIONS.GOV.

PURPOSE AND USE:  EXIM Bank proposes to align its size standards for 
determining a small business with SBA's current standards for the SBA 
Loan Programs by adopting the Interim Rule, set forth in the Jobs Act. 
The Interim Rule would be used as an alternative size standard, in 
addition to and not a replacement of, SBA's industry based size 
standards currently used for defining a ``small business concern'' for 
EXIM Bank's programs and reporting obligations. The Interim Rule 
provides that an applicant for a SBA Loan Program may be eligible for 
such a loan if (i) the tangible net worth of the applicant is not more 
than $15,000,000; and (ii) the average net income after Federal income 
taxes (excluding any carry-over losses) of the applicant for the two 
full fiscal years before the date of the application is not more than 
$5,000,000. If the request to adopt the Interim Rule as an alternative 
size standard is approved by the SBA's Administrator for EXIM Bank 
programs, any applicant for any EXIM Bank product would be screened to 
determine whether or not it is a small business concern as follows: (i) 
First by using the industry-based size standards and (ii) then by 
applying the Interim Rule, if such applicant does not qualify as a 
small business concern under the industry based- size standards. It is 
EXIM Bank's belief and understanding that the approval for EXIM Bank to 
adopt the Interim Rule would align its small business size definitions 
with SBA's current practices and bring consistency to the marketplace, 
would possibly increase the number of applicants qualifying as a small 
business concern for EXIM Bank's

[[Page 83837]]

programs and increase the accuracy of EXIM Bank's reporting to Congress 
on its small business activities.

Legal Framework and Statutory Background

    Section 2(b)(1)(E)(v) of the EXIM Bank Charter requires EXIM Bank 
to make available not less than 25% of its overall loan, guarantee and 
insurance authority to support the financing of exports by ``small 
business concerns.'' The Charter further states that a ``small business 
concern'' is ``as defined under Section 3 of the Small Business Act''. 
In addition to criteria for determining a ``small business concern'' 
set forth therein, Section 3 of the Small Business Act grants the 
Administrator of the SBA the general authority to establish small 
business size standards for Federal government programs. Through this 
authority, SBA has promulgated industry-specific size standards which 
determine eligibility as a small business for more than 1000 industry 
categories as defined by the North American Industry Classification 
System (NAICS). Historically, EXIM Bank has relied on these industry-
based size standards to be able to determine which participants in its 
programs can be considered a small business concern.
    Under the Jobs Act, Congress amended the definition of ``Small 
Business Concerns'' in Section 3(a) of the Act by adding an 
``Alternative Size Standard'' as an additional component of such 
definition. Under the new Section 3(a)(5) of the Small Business Act, 
Congress directed the SBA to establish an alternative size standard 
using maximum tangible net worth and average net income for applicants 
for the SBA Loan Programs. Further, the Jobs Act provided that until 
the SBA establishes a permanent tangible net worth and net income based 
alternative size standard, the Interim Rule would enable applicants to 
be eligible for the SBA Loan Programs if the applicant's: (1) Tangible 
net worth is not more than $15 million, and (2) the average net income 
after federal income taxes for the two fiscal years prior to the date 
of application is not more than $5 million. As of the publication of 
this notice, the SBA has not established a permanent alternative size 
standard definition and as a result, the SBA continues to apply the 
Interim Rule to define a small business concern for the SBA Loan 
Programs, in addition to using the industry based size standards. Based 
on EXIM Bank's Charter which emphasizes assistance to small business 
concerns and its mandate to adhere to SBA's definitions of small 
business, EXIM Bank proposes to adopt the Interim Rule as appropriate 
and necessary to accomplish those mandates, following approval by the 
SBA's Administrator.

Business Rationale

    An important rationale for aligning EXIM Bank's definition of small 
business with the SBA's definition as it applies to the SBA Loan 
Programs is that EXIM Bank programs are complementary and/or work in 
conjunction with the 7(a) Loan Programs. As a result, we believe that 
EXIM Bank and the SBA may often serve many of the same concerns. 
However, currently, small businesses that qualify for 7(a) Loan 
Programs under the Interim Rule but not under industry based size 
standards would not be considered small businesses for programs offered 
by EXIM Bank. Notwithstanding a small business's eligibility for the 
SBA Loan Programs under the Interim Rule, the same small business may 
potentially be subject to different size criteria for EXIM Bank's 
program's because EXIM Bank is currently unable to use the Interim Rule 
to determine whether a concern can be considered a small business for 
its programs. This inconsistency can cause confusion in the marketplace 
and cause the same entities to be treated differently by SBA and EXIM 
Bank even though such entities may be evaluated for similar purposes. 
It also poses a difficulty for EXIM Bank in providing accurate 
reporting on the size of its participants to Congress because the same 
concern may be considered a small business under a SBA Loan Program but 
not under an EXIM Bank program. Accordingly, EXIM Bank proposes to 
align its small business size criteria with the Interim Rule so that 
small businesses that are eligible for SBA Loan Programs under the 
Interim Rule will also be considered small businesses for EXIM Bank 
purposes.
    The 7(a) Loan Program represents the bulk of SBA's small business 
guaranteed loans. Furthermore, SBA's working capital and all of its 
international guaranteed loan programs fall under the umbrella of the 
7(a) Loan Program. The SBA's international programs include the Export 
Express Loan Program, Export Working Capital Program and the 
International Trade Loan Program. In each case, SBA is authorized to 
guarantee loans to small businesses using its industry based size 
standards or using the Interim Rule for businesses that otherwise may 
not be eligible under the industry based size standards. Similarly, 
EXIM Bank programs also provide various financing and other support to 
small businesses through working capital programs, medium and long term 
guaranteed credit, direct loans, trade credit insurance and other 
financial support that facilitates the export of US made goods and 
services. Although EXIM Bank programs are available to businesses of 
all sizes, significant efforts are made to make these programs 
accessible to small businesses, and some EXIM Bank programs are 
available exclusively to small businesses, such as Express Insurance. 
The SBA may require trade credit insurance on its loan guarantee 
programs where the borrower is exporting on open account terms. These 
credit insurance requirements could be met by EXIM Bank through the 
Express Insurance program. As further incentive, EXIM Bank provides a 
25% discount on insurance premiums for SBA borrowers who use any one of 
the many EXIM Bank insurance policy options. Other EXIM Bank programs 
are likewise useful to current SBA borrowers. For example, if a 
borrower's working capital needs exceed $5 million (the maximum loan 
amount under the 7(a) Loan Program), the EXIM Bank Business Credit 
Working Capital Guarantee Program (``WCGP'') can be used to replace the 
borrower's SBA guaranteed working capital facilities. In fact, to 
facilitate such a transition, EXIM Bank and the SBA share a common 
application with respect to these working capital guarantee programs. 
If the borrower needs to sell on terms longer than the three year 
maturity authorized for the SBA's Export Working Capital Program, EXIM 
Bank has a range of medium and long term buyer options that can ensure 
the booking of a sale. Given the complementary nature and similarities 
of the 7(a) Loan Program and EXIM Bank financing products, EXIM Bank 
believes it is in the best interest of the public that the Interim Rule 
be adopted for EXIM Bank products so that the standards for a small 
business are consistent between these federal agencies.

Impact of Adopting the Interim Rule

    EXIM Bank believes that the adoption of the Interim Rule for its 
programs would enable business concerns that do not qualify as small 
business concerns under the industry based size standards to qualify as 
small business concerns under the Interim Rule. EXIM Bank also believes 
that some business concerns that currently qualify as small business 
concerns for the SBA Loan Programs but not for EXIM Bank Programs will 
also qualify as small business concerns under the Interim Rule. EXIM 
Bank intends to collect data showing the amount of participants that 
qualify as a small business concern under the

[[Page 83838]]

Interim Rule if the Interim Rule is approved for EXIM Bank programs.
    Request for Comments: EXIM Bank seeks comments from the public with 
respect to its proposal to use the Interim Rule as an alternative size 
standard in addition to the industry based standards in determining 
what participants of EXIM Bank programs can be considered a small 
business. Commenters addressing this proposed rule should include data 
and/or other information they consider relevant in support of their 
comments.

INFORMATION ON DECISION:  Information on the final decision for this 
proposal will be available in the Federal Register.
    In accordance with SBA's small business size regulations, 
specifically 13 CFR 121.901-904, EXIM Bank must evaluate the comments 
and must submit them with its recommendation to the SBA's 
Administrator's approval. The public must be made aware that the 
proposed alternative size standard under the Interim Rule will not take 
effect until EXIM Bank publishes a final notice in the Federal 
Register, which will only occur after the SBA's Administrator has 
approved the adoption of the Interim Rule for EXIM Bank programs as an 
alternative size standard.

Joyce B. Stone,
Program Specialist, Office of the General Counsel.
[FR Doc. 2016-28083 Filed 11-21-16; 8:45 am]
 BILLING CODE 6690-01-P