Transcript Slide 1

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
Does not provide financing,
but guarantees payments
due from foreign banks
under Letters of Credit to U.S.
banks or exporters.
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
GSM-102 COMMODITIES
100% produced in USA
 Food, Feed or Fiber
 CCC “basket” of commodities
 High-Value products (90% U.S. Content)
GSM-102 Eligible Commodities
Consumer Ready
fresh fruit, vegetables,
meats, condiments, wine
and beer, meats, frozen
dinners, etc.
Intermediate
Animal feed
Cattle Hides
Flour
Soybean Meal
Sweeteners
Bulk
Also: Seafood – Forest Products – Aquaculture - Fibers
GSM-102
PARTICIPANTS
U.S. Exporter
Importer
Approved U.S. Bank
 Approved Foreign Bank
WHY SHOULD YOU USE THE
GSM-102 PROGRAM?
Since 98% of the loan and part of the interest
is guaranteed, U.S Banks can offer attractive
credit terms to eligible foreign banks.
BENEFITS TO IMPORTERS
Increased buying capacity due to bank
access to trade credit.
Possible access to credit from local bank.
BENEFITS TO FOREIGN 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
How It Works
• U.S. Exporter qualifies for GSM on-line (two days approximate)
• U.S. exporter applies to CCC (pays a fee) for guarantee
• The buyer and seller negotiate a firm sales contract
• Importer approaches a CCC-approved bank in destination
country/region and goes through the bank qualification process for
credit if not already
• If importer qualifies, the bank in destination country/region opens a
letter of credit under the terms of GSM-102
• U.S. exporter (normally) assigns GSM-102 guarantee to a U.S. Bank
Deal flow chart (GSM)
CCC
ship goods
Guarantee fee
payment
guarantee
Importer
90 days
contract
LC
application
Importing
bank
Exporter
present
docs
letter of credit
U.S. Bank
three years
annual payments
sight
GSM-102 Registrations in U.S. Dollars
by Region
$ Millions
700
600
500
$1.44B in 2007
$3.11B in 2008
400
*$2.8B in 2009
As of 6 March 09
300
200
100
2007
2008
Ko
re
a
Ca
rib
be
an
SE
As
ia
M
ex
ico
m
er
ic
a
a
S.
A
Eu
ra
si
Ru
ss
ia
Tu
rk
ey
C.
Am
er
ic
a
0
2009
GSM-102 Top Commodities in Dollars
by Registration Value
$ Millions
1200
1000
800
600
400
200
Fe
ed
2009*
Ri
ce
gr
ai
ns
O
ils
ee
Po
ds
ul
try
M
ea
Pr
t
ot
ei
n
M
ea
l
W
he
Po
at
ul
try
O
ffa
ls
Co
tto
Po
n
rk
O
ffa
ls
0
$2.8B
As of 23 March 09
Announced $3.5 Billion in Credit Guarantees
For FY 2009!
3.5
4
3.11
3
3
2
1.44
2
1
1
**
*
20
09
20
08
20
07
0
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.
Example Sales Transaction
• Importer wishes to buy U.S. feed grains
• Importer approaches U.S. embassy for list of
interested U.S. exporters
• Importer checks USDA website for terms of
the GSM-102 program in a press release
• Importer and exporter enter into a firm sales
contract for feed grains
Example Sales Transaction
• Importer asks approved foreign bank to open an L/C in
favor of the U.S. exporter under terms of the GSM-102
program
• Foreign bank issues the L/C and advises the L/C through
a CCC approved U.S. Bank that it has a U.S. Dollar credit
facility
• Exporter registers the sale with CCC and pays fee
• CCC issues U.S. exporter a GSM-102 payment guarantee
• U.S. exporter assigns the payment guarantee to a U.S.
bank
• U.S. exporter ships goods to importer
• U.S. exporter presents shipping documents to the U.S.
bank, including evidence of export report
Example Sales Transaction
• U.S. bank pays U.S. exporter for the port
value of the shipping documents
• U.S. bank extends GSM-102 Payment
Guarantee financing terms to the foreign
bank
• Foreign bank determines terms to extend to
importer
Deal flow chart (GSM)
CCC
ship goods
Guarantee fee
payment
guarantee
Importer
90 days
contract
LC
application
Importing
bank
Exporter
present
docs
letter of credit
U.S. Bank
three years
annual payments
sight
GSM-102 Regional Analysts
EURASIA
• GSM Marketing Specialist Chris Williams 202-720-7241
• GSM Bank Specialist
Hal Taylor
202-690-1267
• FAS Announcements of GSM-102 allocation are posted at:
http://www.fas.usda.gov/excredits/exp-cred-guar.asp
• Export credit guarantee program information, such as riskbased fee schedules and country ratings, and commodities
eligible: http://www.fas.usda.gov/excredits/ecgp.asp
CREDIT PROGRAMS DIVISION
KEY CONTACTS
Registration & Operations John Doster
(Application process)
Branch Chief
202-720-3277
Risk & Asset
Management
(Banking information)
Teri Ryan
Branch Chief
202-720-0663
Planning & Analysis
(Business Development)
Lorie Jacobs
Branch Chief
202-720-2074