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20 March 2009

USDA Foreign Agricultural Service. Office of Trade Programs. GSM-102 Credit Guarantee Program. 20 March 2009. USE GSM-102 TO FACILITATE YOUR NEXT TRANSACTION. Promote international commerce Encourage the extension of financing Meet competition’s selling terms Risk mitigation . GSM-102.

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20 March 2009

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

  2. USE GSM-102 TO FACILITATE YOUR NEXT TRANSACTION • Promote international commerce • Encourage the extension of financing • Meet competition’s selling terms • Risk mitigation

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

  4. GSM-102 • Up to 98% guarantee on principal • Interest variable coverage • Credit terms up to 3 years • Freight is generally covered • Uses a Letter of Credit

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

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

  7. GSM-102 PARTICIPANTS • U.S. Exporter • Importer • Approved U.S. Bank • Approved Foreign Bank

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

  9. BENEFITS TO IMPORTERS • Increased buying capacity due to bank access to trade credit. • Possible access to credit from local bank.

  10. BENEFITS TOFOREIGN BANKS • Access to trade finance with U.S. banks • Increased credit lines from U.S. banks • Ability to borrow longer term • Lower funding costs (interest rates and fees) • Ability to support and finance customers

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

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

  13. GSM-102 Registrations in U.S. Dollars by Region $ Millions $1.44B in 2007 $3.11B in 2008 *$2.8B in 2009 As of 6 March 09

  14. GSM-102 Top Commodities in Dollars by Registration Value $ Millions $2.8B As of 23 March 09

  15. Announced $3.5 Billion in Credit Guarantees For FY 2009! 3.5

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

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

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

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

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

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

  22. CREDIT PROGRAMS DIVISION KEY CONTACTS

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