CCC Export Credit Guarantee (GSM-102) Program and Facility Guarantee Program (FGP), 79253-79282 [2013-29439]

Agencies

• DEPARTMENT OF AGRICULTURE
• Commodity Credit Corporation

[Federal Register Volume 78, Number 249 (Friday, December 27, 2013)]
[Proposed Rules]
[Pages 79253-79282]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-29439]



[[Page 79253]]

Vol. 78

Friday,

No. 249

December 27, 2013

Part VI





Department of Agriculture





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Commodity Credit Corporation





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7 CFR Part 1493





CCC Export Credit Guarantee [lpar]GSM-102[rpar] Program and Facility 
Guarantee Program [lpar]FGP[rpar]; Proposed Rule

Federal Register / Vol. 78 , No. 249 / Friday, December 27, 2013 / 
Proposed Rules

[[Page 79254]]


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DEPARTMENT OF AGRICULTURE

Commodity Credit Corporation

7 CFR Part 1493

RIN 0551-AA74


CCC Export Credit Guarantee (GSM-102) Program and Facility 
Guarantee Program (FGP)

AGENCY: Foreign Agricultural Service and Commodity Credit Corporation 
(CCC), USDA.

ACTION: Proposed rule.

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SUMMARY: This proposed rule would revise and amend the regulations that 
administer the Export Credit Guarantee (GSM-102) Program. Changes in 
this proposed rule incorporate program operational changes and 
information from press releases and notices to participants that have 
been implemented since the publication of the current rule, and include 
other administrative revisions to enhance clarity and program 
integrity. This proposed rule also incorporates certain changes as 
suggested in comments received in response to the initial publication 
of the proposed rule on July 27, 2011. These changes should increase 
program availability to all program participants and enhance access and 
encourage sales for smaller U.S. exporters. Changes are also intended 
to improve CCC's financial management of the program. The proposed rule 
would eliminate provisions for the Intermediate Export Credit Guarantee 
(GSM-103) Program, consistent with the repeal of authority to operate 
this program in the Food, Conservation, and Energy Act of 2008 (2008 
Act).

DATES: Comments concerning this proposed rule must be received by 
January 27, 2014 to be assured consideration.

ADDRESSES: Comments may be submitted by any of the following methods:
     Federal eRulemaking Portal: Go to https://www.regulations.gov. Follow the online instructions to submit comments.
     EMail: GSMregs@fas.usda.gov.
     Fax: (202) 720-2495, Attention: ``GSM102 Proposed Rule 
Comments''.
     Hand Delivery, Courier, or U.S. Postal delivery: Amy 
Slusher, Deputy Director, Credit Programs Division, Foreign 
Agricultural Service, U.S. Department of Agriculture, 1400 Independence 
Ave. SW., Stop 1025, Room 5509, Washington, DC 20250-1025.
    Comments may be inspected at 1400 Independence Avenue SW., 
Washington, DC, between 8:00 a.m. and 4:30 p.m., Monday through Friday, 
except holidays. A copy of this proposed rule is available through the 
Foreign Agricultural Service (FAS) homepage at: https://www.fas.usda.gov/excredits/exp-cred-guar-new.asp.

FOR FURTHER INFORMATION CONTACT: Amy Slusher, Deputy Director, Credit 
Programs Division; by phone at (202) 720-6211; or by email at: 
Amy.Slusher@fas.usda.gov.

SUPPLEMENTARY INFORMATION:

Background

    The Commodity Credit Corporation's (CCC) Export Credit Guarantee 
(GSM-102) Program is administered by the Foreign Agricultural Service 
(FAS) of the U.S. Department of Agriculture (USDA) on behalf of CCC, 
pursuant to program regulations codified at 7 CFR part 1493 and through 
the issuance of ``Program Announcements'' and ``Notices to 
Participants'' that are consistent with this program regulation. The 
current regulations became effective on November 18, 1994. Since that 
time, CCC has implemented numerous operational changes to improve the 
efficiency of the program, including an automated, Internet-based 
system for participants and revised program controls to improve program 
quality, reduce costs, and protect against waste and fraud. Also since 
that time, agricultural trade and finance practices have evolved. This 
proposed rule is intended to reflect these changes and to enhance the 
overall clarity and integrity of the program. In addition, the 2008 Act 
repealed the authority to operate the GSM-103 Program, and this change 
is reflected in the proposed rule.
    On July 27, 2011, CCC published a Proposed Rule in the Federal 
Register (Vol. 76, No. 144, pages 44836-44855) revising and amending 
the regulations that administer the Export Credit Guarantee (GSM-102) 
Program. Changes in this proposed rule incorporated program operational 
changes and information from press releases and notices to participants 
that have been implemented since the publication of the current rule, 
and included other revisions to enhance clarity and program integrity. 
The deadline for comments on the proposed rule was October 26, 2011 
(extended from the initial deadline of September 26, 2011, at the 
request of interested commenters). CCC received comments on the 
proposed rule from 20 parties, including U.S. exporters, U.S. 
cooperator groups, U.S. banks, foreign banks, foreign importer 
associations, and individuals (including one set of comments submitted 
jointly by a group of 12 interested parties).

Reason for Reissuing a Proposed Rule

    CCC is reissuing this rule as a proposed rule instead of a final 
rule because, based on comments received on the initial proposed rule, 
it has made several significant changes and is providing the public 
with an additional opportunity for comment. Comments received and 
changes made by CCC are discussed below in the Section-by-Section 
Analysis. CCC is publishing this proposed rule with a comment period of 
30 days from date of publication.

General Comments

    Ten respondents provided general comments on the proposed rule. 
Three commenters indicated that there were a number of improvements to 
the proposed rule and that the proposed changes reflect the evolution 
of agricultural trade and finance practices and will enhance program 
clarity and integrity.
    Three respondents expressed general concerns regarding the 
potential negative impact of the proposed changes on the GSM-102 
program. One commenter suggested that the proposed rules on fees and 
tightened requirements for exporters would increase the cost of the 
program to exporters, who will pass on these costs to importers, 
negatively impacting the ability of the program to promote trade. One 
respondent expressed the need for modifications to ensure the program 
reflects commercial realities and facilitates trade. One respondent 
expressed concern that under the proposed rule, U.S. financial 
institutions could be caught in a situation where a guarantee is 
withdrawn without the assignee's knowledge.
    Comments received from two respondents indicated that the proposed 
changes would render the GSM-102 program inoperable because: (1) The 
changes are inconsistent with international banking practices and 
procedures for letters of credit, making it less likely banks will 
participate; and (2) the program would become more cumbersome and 
costly for participants and discourage small business participation. 
These results would contradict the requirements of Section 202(k)(2) of 
the Agricultural Trade Act of 1978, specifically the requirements to 
maximize the export guarantees made available and used each year and to 
maximize the export sales of agricultural commodities.
    CCC recognizes the validity of these concerns and is proposing 
changes to

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make the rule more consistent with standard international finance 
practices and to reduce the burden on participants. These changes are 
discussed in detail in the Section-by-Section Analysis and are open for 
additional public comment to ensure CCC has met these objectives. As 
CCC noted in the initial proposed rule; however, many of the proposed 
changes are designed to protect the integrity of the program--
specifically to increase program controls, mitigate against waste and 
fraud, and improve CCC's chances of recoveries in cases of default 
(which will benefit not only the program by reducing costs in the long 
term, but also benefit CCC's risk share partners and U.S. taxpayers). 
CCC is attempting to balance program integrity concerns with 
maintaining a viable program that supports U.S. agricultural exports, 
recognizing that the result may be certain program modifications that 
increase the burden on both participants and CCC.
    One respondent indicated that the GSM-102 program is losing 
competitiveness versus commercial financing because: (1) Shifts have 
occurred in long- and short-term interest rates; (2) companies are 
penalized if they repay a loan midway through the repayment period; and 
(3) program fees are too high. This respondent also commented that the 
country risk classification for South Korea is too high (i.e., risky), 
and questioned whether the purpose of the proposed changes was to make 
the program more attractive to small and medium-sized enterprises 
(SMEs) at the expense of major exporters.
    CCC does not control interest rates or the repayment arrangements 
between the importer and the foreign financial institution. With 
respect to program fees, CCC is subject to both statutory and trade 
policy requirements. While CCC acknowledges that program fees have 
increased since 2009, program use has remained strong (and consistent 
with historical use) during those years. However, CCC is open to 
receiving specific comments on how fees can be adjusted, within current 
program confines, to better promote program utilization. Country risk 
classifications are based on a U.S. Government interagency country risk 
assessment system and are updated every one to three years. CCC notes 
that participants continue utilizing the program to support sales to 
South Korea despite the current country rating and fee rates. While 
certain proposed changes are designed to improve the access of SMEs to 
the program, CCC does not intend for this improved access to be at the 
expense of major exporters. CCC's goal is a set of program rules that 
attempt to provide equity to all participants.
    One commenter expressed concern that the proposed rule does not 
permit U.S. financial institutions to apply directly for GSM-102 
payment guarantees, a practice that would allow the GSM-102 program to 
support additional U.S. exports. The commenter noted that other export 
credit agencies allow both exporters and banks to apply for coverage 
under their programs. CCC agrees that allowing U.S. financial 
institutions to apply for coverage is a change that should be 
considered for the GSM-102 program. It is also a significant change 
that would have numerous operational ramifications and would impact 
other program participants. As such, it needs to be carefully 
considered, and CCC was not prepared to implement this change in this 
proposed rule. CCC will continue to consider this idea going forward in 
the context of future regulatory changes.
    One respondent asked if the proposed rule would go into effect 
during fiscal year 2012. The timing of implementation is uncertain 
until comments are received on the reissued proposed rule and 
additional comments considered.

Section-by-Section Analysis

    The section-by-section discussions below include a summary of 
comments received on the proposed rule, CCC's responses to those 
comments, and a discussion of any additional changes made by CCC. In 
some instances, the numbering systems differ between the new and 
initial proposed rules. For purposes of this discussion, the numbering 
system of the new proposed rule will be used, except where otherwise 
indicated.
    No comments were received on Subpart A, Restrictions and Criteria 
for Export Credit Guarantee Programs. CCC added Sec.  1493.3(a)(3) to 
reflect that, in addition to consideration of country risk, CCC will 
not issue guarantees in connection with sales financed by foreign 
financial institutions that CCC determines cannot adequately service 
the debt.

Subpart B--CCC Export Credit Guarantee (GSM-102) Program Operations

Section 1493.10 General Statement

    One commenter asked, with respect to language in paragraph (a) that 
GSM-102 guarantees are issued for terms up to three years, whether CCC 
envisions extending maximum tenor to three years for better risk 
countries within the near future. CCC cannot predict whether tenor will 
be extended to three years in the future, as maximum tenor is a 
function of both risk and policy considerations. CCC has eliminated the 
specific reference to three years in this paragraph.

Section 1493.20 Definition of Terms

    CCC made a number of proposed revisions to this section based on 
comments received, and also removed the numbering within this section 
to allow it to be governed by alphabetical order. All defined terms 
have been capitalized throughout the proposed rule.
Affiliate
    No comments were received on this definition. However, CCC revised 
this term to reflect its varied usage within the proposed rule. The 
term ``affiliate'' refers to: (1) An entity's organizational structure; 
and (2) related entities to which certain required certifications 
apply, specifically related to government-wide suspension and 
debarment. The original definition, taken from government-wide 
suspension and debarment regulations at 2 CFR Part 180, was too 
detailed with respect to general questions of organizational structure. 
Therefore, CCC has more generically defined ``affiliate'' for purposes 
of collecting organizational information. In cases where the term 
``affiliate'' relates to suspension and debarment certifications, the 
reference to 2 CFR 180.905 has been added to clarify the definition 
that applies.
Definitions of Incoterms (Cost and Freight (CFR), Cost, Insurance and 
Freight (CIF), Free Alongside Ship (FAS), Free Carrier (FCA), Free on 
Board (FOB))
    CCC received several comments related to Incoterms definitions in 
the proposed rule. Two respondents noted that the definitions did not 
reflect the 2010 version of Incoterms, effective January 1, 2011. One 
respondent indicated that the trading terms CFR, CIF, FAS, and FOB 
cover only the movement of goods by sea and inland waterway transport, 
and that the proposed rule contained no terms related to air, rail or 
truck shipments.
    CCC agrees with these comments and has updated these definitions to 
reflect that all terms are as defined by Incoterms 2010, or as 
superseded. The definitions for CFR, CIF, FAS, and FOB have been 
updated to reflect that they apply only to sea and inland waterway 
transport, and Free Carrier (FCA) has been added for air, rail and 
truck shipments. Throughout the proposed

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rule, references to Incoterms have been amended to include FCA. 
Additionally, CCC included a definition of ``Incoterms'' for clarity.
    One respondent requested that CCC include a provision that requires 
all sales contracts to be subject to Incoterms. The definition of 
``Firm Export Sales Contract'' in this section includes a requirement 
for delivery terms (FOB, C&F, FCA, etc.). CCC does not believe any 
changes are necessary in response to this comment.
Eligible Export Sale
    This definition has been added to the proposed rule. CCC believes 
that a practice for some exporters has become to identify export 
transactions that occur outside of the GSM-102 program but nevertheless 
to register such exports under a GSM-102 payment guarantee. Under such 
practice, there is no expansion of U.S. exports, because the goods 
covered by the payment guarantee are shipped and paid for wholly apart 
from the benefit of the CCC guarantee. CCC believes this practice is 
inconsistent with the purpose of the GSM-102 program to increase 
exports of U.S. agricultural commodities. In these cases, there is no 
increase in U.S. agricultural exports, because the export sale would 
have occurred without the GSM-102 program. These sales improperly 
utilize program allocation that otherwise could be used to support 
exports that would not occur in the absence of the payment guarantee. 
Furthermore, these transactions create a liability for CCC for which 
there is no corresponding benefit to U.S. agricultural exports. In 
response to these concerns, which have been echoed by some program 
participants, CCC has added a definition of ``eligible export sale'' 
with the intent of prohibiting these types of transactions. CCC 
believes that this will help ensure that financing is coupled with an 
actual exporter movement of a U.S. agricultural commodity.
FAS Web Site
    Although no comments were received, this definition has been 
deleted from the proposed rule because the Web site location is subject 
to change. The current Web site is https://www.fas.usda.gov/excredits/ecgp.asp. To avoid confusion with the term ``Free Alongside Ship 
(FAS),'' references to the FAS Web site were changed to ``USDA Web 
site.''
Final Date To Export
    CCC received two comments on the definition of ``final date to 
export.'' Because these comments relate specifically to Sec.  1493.100 
(Terms and requirements of the Payment Guarantee), these comments are 
discussed in that section. This definition was unnecessary and has been 
deleted.
Firm Export Sales Contract
    One comment was received on the ``Firm Export Sales Contract'' 
definition, indicating that allowing an export sale to be contingent 
upon the CCC guarantee is contradictory to having a firm contract.
    No changes were made to this definition. CCC does not believe there 
is any inconsistency between a ``firm'' contract and one that is 
contingent upon CCC's approval of a payment guarantee. The purpose of 
the GSM-102 program, as specified in Sec.  1493.10(a), is to ``expand 
U.S. Agricultural Commodity exports.'' An agricultural sale that will 
occur only with the presence of a GSM-102 payment guarantee is 
consistent with this goal and also allows flexibility for U.S. 
exporters. This definition specifies that the exporter and importer 
must be in agreement regarding the terms and conditions of the sale, 
thus requiring the details of the sales contract to have been worked 
out in advance of the exporter's application for the payment guarantee.
Foreign Financial Institution
    Although no comments were received, CCC determined that the 
original definition unintentionally excluded multilateral and sovereign 
institutions. CCC revised it to specifically include these institutions 
as eligible, and also added a clarification that this definition 
encompasses foreign branches of U.S. financial institutions.
Foreign Financial Institution Letter of Credit (or Letter of Credit)
    Two comments were received on this definition, which was not 
modified in the initial proposed rule. One commenter indicated that it 
is unclear whether the current definition covers the standard GSM-102 
repayment mechanism, the sight letter of credit. The commenter 
suggested the definition be re-written to specifically cover the sight 
letter of credit and exclude the reference to a related obligation. A 
second commenter asked whether ``related obligation'' refers to a bank-
to-bank agreement outside of the letter of credit.
    CCC revised this definition, moving a portion of it to Sec.  
1493.90 (Special requirements of the Foreign Financial Institution 
Letter of Credit and Terms and Conditions Document, if applicable), and 
modifying the two options listed in the prior definition in an attempt 
to add clarity. The term ``related obligation'' has been changed to 
``Repayment Obligation'' as noted below and refers to a commitment of 
the foreign financial institution to pay the exporter or the U.S. 
financial institution on deferred payment terms. Section 1493.90(a) 
specifies acceptable methods for documenting the repayment obligation. 
CCC believes these changes will clarify this term.
Holder of the Payment Guarantee
    This definition has been added to the new proposed rule. Although 
no comments were received, CCC was concerned about potential confusion 
regarding the phrase ``exporter or exporter's assignee'' that appeared 
throughout the rule. This phrase typically is used to indicate CCC's 
risk-share partner in the transaction and the party responsible for 
filing notices of default and claims. To clarify in certain instances 
that CCC is referring to one specific party, CCC created the term 
``Holder of the Payment Guarantee.'' The new proposed rule has been 
updated throughout with this term where applicable.
Importer and Importer's Representative
    Three comments were received on the definition of an importer, 
which required the importer to be physically located in the country or 
region of destination specified on the payment guarantee. One commenter 
explained that this may not always be possible due to unique local 
transit trade regulations, loan regulations, or tax consequences, and 
recommended instead that CCC add the term ``presence of business'' with 
defined requirements. A second commenter noted that requiring the 
importer to be physically located in the country is counter to free 
trade practices. The importer's location should not be of concern to 
CCC provided the goods arrive at the intended destination. Three 
commenters felt this change would have a negative impact on program 
utilization.
    CCC agrees with these comments and modified the definition of 
``Importer'' accordingly. The term ``Importer's Representative'' was 
added to the new proposed rule (in lieu of the term ``presence of 
business''), along with additional requirements that are explained in 
the relevant section(s).
Intervening Purchaser
    CCC received one comment asking if an intervening purchaser can be 
located in the United States. CCC does permit the intervening purchaser 
to be located

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in the United States. No change is necessary to this definition.
Letter of Credit Account Party
    One respondent suggested the term of ``Letter of Credit Account 
Party'' be changed to ``Letter of Credit Applicant'' and that the term 
``entity'' in the definition be changed to ``party'' to be consistent 
with international banking practice and the Uniform Customs and 
Practice for Documentary Credits (UCP 600). CCC agrees that this term 
should be defined consistently with UCP 600; however, because it is 
used only once in the proposed rule, it has been deleted from the 
Definitions of Terms section. The UCP 600 definition is now referenced 
in Sec.  1493.70(a)(4).
Notice to Participants
    No comments were received on this definition, but it was deleted 
because the concept is explained in Sec.  1493.10(b).
Principal
    One respondent suggested the definition of ``Principal'' is too 
broad and requested that it be limited to the entity providing the 
relevant certifications, rather than applying to an array of 
individuals within the participating entity.
    The term ``principal'' is used throughout the proposed rule to 
refer to: (1) Individuals who must submit documents under the program; 
and (2) individuals to whom certain required certifications apply, 
specifically related to government-wide suspension and debarment rules. 
Although CCC does not agree with the suggestion to apply this term only 
to the entity making the certifications, CCC acknowledges that the 
original definition, taken from government-wide suspension and 
debarment regulations at 2 C.F.R Part 180, was too detailed with 
respect to submission of documents under the program. Therefore, CCC 
more generically defined ``Principal'' for purposes of document 
submission. In cases where the term ``principal'' relates to the 
certifications for suspension and debarment, the reference to 2 CFR 
180.995 was added to clarify the definition that applies.
Repayment Obligation
    Although no comments were received on this definition, CCC changed 
the term ``related obligation'' to ``Repayment Obligation.'' CCC 
believes the new terminology more accurately reflects that this term 
refers to a contractual commitment, rather than a particular document. 
Although the definition did not change, CCC added clarification that 
the repayment obligation must be documented using one of the methods 
described in Sec.  1493.90.
System for Award Management (SAM)
    Since publication of the initial proposed rule, the U.S. Government 
implemented the System for Award Management (SAM), a combined federal 
procurement and federal domestic assistance system. The Excluded 
Parties List System (EPLS) that participants must check for suspension 
and debarment purposes has been included in SAM; therefore, 
participants will now be required to check SAM. All references to EPLS 
in the new proposed rule were replaced with SAM. The current Web site 
is www.sam.gov. Any future updates will be provided on the USDA Web 
site.
Terms and Conditions Document
    CCC added this definition to the proposed rule in response to 
comments received on Sec.  1493.90 indicating that certain requirements 
were inappropriate for the letter of credit. CCC added flexibility for 
participants to use a separate document linked to the foreign financial 
institution letter of credit and stating the terms and conditions 
required by CCC. This concept is addressed in more detail in the 
discussion of Sec.  1493.90.
U.S. Financial Institution
    Although no comments were received on this definition, CCC 
determined that it may have unintentionally excluded U.S. branches of 
foreign financial institutions. CCC revised the definition to 
specifically include these institutions as eligible U.S. financial 
institutions.
Weighted Average Export Date
    This term was added to the new proposed rule. CCC received requests 
from participants to allow the holder of the payment guarantee to 
bundle certain exports and utilize a credit period starting point other 
than the date of export of each individual shipment. CCC agrees with 
these requests and included this concept in Sec.  1493.100(b). This 
option is described in further detail in the discussion of changes to 
Sec.  1493.100.

Section 1493.30 Information Required for Exporter Participation

    CCC received two comments on this section. One respondent asked how 
a determination of exporter ineligibility (paragraph (d)) would affect 
existing guarantees with that exporter. The commenter noted there is no 
specific provision for CCC to notify the assignee if an exporter is 
deemed ineligible. A second respondent suggested that currently 
qualified exporters be required to submit a description of their 
business activities and related information to prove that the exporter 
is a ``true'' exporter, even if the exporter has submitted an 
application within the past two years.
    CCC made no changes in response to these comments. CCC determines 
at the time of application for the payment guarantee whether an 
exporter is currently eligible. If the exporter is ineligible at that 
time, no guarantee is issued. However, if a guarantee is issued and the 
exporter is subsequently deemed ineligible, there is no impact on the 
existing guarantee; therefore, there is no need for CCC to notify the 
assignee in this case.
    In response to the second comment, CCC notes that the commenter 
provided no definition of ``true'' exporter. CCC has authority to 
collect the new information in Sec.  1493.30 from current exporters 
based on paragraph (d), which states that an applicant may be deemed 
ineligible if the applicant cannot provide the information required in 
Sec.  1493.30. Following publication of the final rule, CCC will 
determine whether, when and how to collect this information from 
currently approved exporters.

Section 1493.40 Information Required for U.S. Financial Institution 
Participation

    CCC received one comment requesting clarification of whether 
submission of an annual report or 10-K is acceptable to meet the 
requirement for year-end audited financial statements in paragraph 
(a)(4). CCC confirms that the10-K annual report submitted to the 
Securities and Exchange Commission is acceptable to meet CCC's 
requirement for year-end audited financial statements. The ``annual 
report to shareholders'' (sent to shareholders prior to annual 
shareholders' meetings) can be submitted for informational purposes but 
does not meet the requirement for year-end audited financial 
statements, as the report generally does not include sufficient 
financial detail. No changes were needed in response to this comment.

Section 1493.50 Information Required for Foreign Financial Institution 
Participation

    CCC received one comment requesting clarification of the impact on 
existing guarantees if CCC reduces or cancels a foreign financial 
institution's (FFI) participation limit (per paragraph (c) or (d)) or 
if the FFI is otherwise

[[Page 79258]]

deemed ineligible for participation (per paragraph (e)) after a 
guarantee has been assigned to a U.S. financial institution. The 
respondent also asked whether the U.S. financial institution would be 
notified whether the FFI is within its participation limit at the time 
a guarantee is assigned.
    CCC determines prior to issuing a payment guarantee whether the 
foreign financial institution is eligible and has a sufficient 
participation limit for that guarantee. Except in cases of default as 
provided in Sec.  1493.160(c), a change in the eligibility or 
participation limit of an FFI has no impact on existing payment 
guarantees. CCC will not notify a U.S. financial institution regarding 
changes in an FFI's participation limit, as there is no impact of such 
changes on existing guarantees. CCC considers an FFI's participation 
limit confidential; any questions regarding that limit should be 
directed to the FFI.
    Although CCC deems that no changes are needed in response to these 
comments, two modifications were made to this section in the new 
proposed rule. In paragraph (a)(2), CCC clarified that applicants must 
provide year-end, audited financial statements in English, in 
accordance with the accounting standards established by the applicant's 
regulators. CCC does not have the resources to translate such 
information for review. Multilateral institutions not subject to local 
regulations in their country of domicile must provide financial 
statements in accordance with prevailing accounting standards. 
Paragraph (d) was modified to clarify that CCC has the right to cancel 
a foreign financial institution's limit if the FFI does not participate 
in the GSM-102 program for two consecutive fiscal years. CCC must 
review all foreign financial institutions annually to ensure their 
continued ability to repay debt guaranteed by CCC. Given the number of 
FFIs in the program, CCC must focus its limited resources on those 
institutions that participate. Those that choose not to participate for 
this length of time may be removed from eligibility, but may resubmit 
all information required under Sec.  1493.50 for reconsideration. CCC 
also added requirements for annual year-end financial statements 
consistent with the changes made in paragraph (a)(2) of this section.

Section 1493.60 Certifications Required for Program Participation

    Three comments were received related to this section. One 
respondent requested clarity on how U.S. and foreign financial 
institutions should document they are in compliance with all regulatory 
requirements and U.S. anti-money laundering and terrorist financing 
statutes.
    CCC does not require that evidence of compliance be provided when 
submitting an application. As part of the application review process, 
CCC contacts the U.S. bank's regulator to verify compliance with 
regulatory requirements and can conduct follow up reviews at any time. 
CCC can verify compliance with U.S. anti-money laundering and terrorist 
financing statutes with the Office of Foreign Assets Control (OFAC).
    A second respondent requested CCC limit the certifications to the 
U.S. financial institution and exclude company principals or, if not 
possible, then limit the term ``principals'' to bank shareholders. This 
respondent also requested that the regulation allow the Director to 
permit qualifications to the certifications, and requested the wording 
in paragraph (b) be changed from ``are in compliance with'' to ``comply 
with.'' The commenter noted that the state of being in compliance with 
the regulation is a broader and more absolute concept than the act of 
complying with the regulation. The act of complying generally carries 
with it a good faith standard of knowing what the rules are on having 
mechanisms in place to ensure, to the extent possible, that the bank 
complies with them.
    As noted in the discussion on Definition of Terms (Sec.  1493.20), 
the terms ``principal'' and ``affiliate'' have multiple uses in the 
program. With respect to the certifications found in Sec.  1493.60(a), 
these terms have the specific meaning found in government-wide 
suspension and debarment regulations. Therefore, CCC has revised Sec.  
1493.60(a) to clarify that these certifications employ ``principal'' 
and ``affiliate'' as defined in 2 CFR 180.995 and 2 CFR 180.905, 
respectively. Because the GSM-102 program must comply with government-
wide suspension and debarment rules, CCC made no changes to narrow the 
definition of ``principal'' and made no changes specifically in 
response to this comment. All applicants for participation must make 
the certifications required in Sec.  1493.60 with respect to both the 
applicant and its principals, where required. For the same reason, CCC 
does not include a provision to allow the Director flexibility to 
change the certifications. However, in accordance with Sec.  
1493.40(a)(9), a U.S. financial institution must provide an explanation 
or documentation if it cannot include the certifications in its 
application. Further, paragraph (b) of Sec.  1493.40 permits the 
Director to consider additional information from the applicant if the 
applicant fails to qualify.
    CCC does not agree with the request to change the wording in the 
certifications in paragraph (b)(1) from ``are in compliance with'' to 
``comply with.'' The phrase ``are in compliance with'' means that the 
applicant is certifying to these statements at the time the 
certification is made. This is CCC's intent, and therefore, this 
wording remains.
    A third respondent asked if CCC would provide specific wording for 
the certification statements. CCC notes that required wording has 
already been provided in Sec.  1493.40(a)(9) and Sec.  1493.50(a)(6) 
for U.S. and foreign financial institutions, respectively. These are 
general certification statements that, when made on a qualification 
application, encompass all of the certifications in Sec.  1493.60. No 
changes were needed in response to this comment.
    CCC modified Sec.  1493.60(b)(2) in the new proposed rule, adding 
to this certification a requirement that relevant applicants be in 
compliance with the Foreign Corrupt Practices Act of 1977. CCC has 
previously reminded all program participants in a notice to 
participants that they are required to be in compliance with this Act. 
Exporters are required to certify that each GSM-102 transaction is 
compliant with this Act, and because it also applies to financial 
institutions doing business in foreign markets, CCC determined it was 
appropriate for financial institutions to make this certification as 
well.

Section 1493.70 Application for Payment Guarantee

    CCC received three comments related to the requirement in paragraph 
(a)(16) that, upon request by CCC, the exporter must provide written 
evidence that the foreign financial institution specified in the 
application for payment guarantee has agreed to issue the letter of 
credit. Two commenters requested more detail about the type of written 
evidence CCC will require, the timeframe for providing it to CCC, and 
the consequence to the exporter if the information is not provided or 
the foreign financial institution letter of credit is never issued. Two 
respondents noted that it could be difficult and time-consuming to 
obtain such documentation, and therefore, one respondent requested that 
it only be required in cases where multiple exporters register under 
the same foreign financial institution's available line of credit. One 
respondent requested this provision be deleted or

[[Page 79259]]

that CCC obtain such evidence directly when needed.
    CCC made no revisions in response to these comments. In certain 
country and regional allocations, multiple exporters register under a 
single, limited foreign financial institution (FFI) participation 
limit. This situation delays issuance of payment guarantees. CCC made 
past attempts to contact exporters and FFIs to determine which 
application is acceptable to the FFI. Different situations required 
different methods to obtain this information most efficiently. For this 
reason, CCC has chosen not to set a specific requirement, but instead 
will request documentation on a case-by-case basis to minimize burden. 
Under certain circumstances, CCC agrees that it may be appropriate for 
CCC to obtain this information independently of the exporter. In these 
cases, CCC will obtain the information; otherwise, it will be the 
exporter's responsibility.
    CCC agrees that documentation is needed only under limited 
circumstances and intends to utilize this provision specifically in 
those circumstances. CCC will provide the exporter with a reasonable 
timeframe to obtain this information. If CCC determines, based on the 
documentation received, that an exporter has registered against an 
FFI's limit without the bank's knowledge or approval, that exporter 
will be required to modify or cancel its application for payment 
guarantee. However, there will be no consequence to the exporter if an 
FFI later determines not to issue the letter of credit, as CCC 
acknowledges that this situation can legitimately occur.
    CCC made several changes to this section in the new proposed rule. 
In paragraph (a), CCC clarified that a firm export sales contract for 
an ``Eligible Export Sale'' must exist before an exporter submits an 
application for a payment guarantee. This change is consistent with the 
new prohibition in Sec.  1493.100(f)(7) on transactions not meeting the 
definition of ``Eligible Export Sale.'' A definition of this term was 
added to Sec.  1493.20.
    In paragraph (a)(1), CCC added that if the export sale is being 
registered under a regional allocation, the exporter must indicate the 
country or countries within the region to which the commodities will be 
exported. This will permit CCC to better track the destination of 
commodities under the program, although CCC recognizes that such 
information may not be final until reported in the evidence of export 
report.
    In paragraph (a)(2), CCC proposes additional requirements if the 
importer is not located in the country or region of destination, but is 
instead utilizing an ``Importer's Representative'' in the country or 
region. As noted in the Definition of Terms discussion, allowance of 
this concept is in response to comments received to the initial 
proposed rule. Specifically, CCC proposes to require the name and 
address of the importer's representative that will be taking receipt of 
the commodities exported under the payment guarantee. CCC will 
routinely check these entities against the SAM and OFAC lists to ensure 
unauthorized parties are not serving this function in GSM-guaranteed 
export sales. CCC also modified the required statement regarding direct 
shipment of the registered commodities to the importer to allow for 
direct shipment to the importer's representative. This statement was 
previously found in paragraph (a)(5), but was moved to paragraph (a)(3) 
to clarify that it is required on all applications for payment 
guarantees, not simply those utilizing an intervening purchaser.
    In paragraph (a)(4) of this section, CCC deleted the term ``letter 
of credit account party'' in response to the comment received on the 
definition in Sec.  1493.20 and instead utilizes the definition of 
``applicant'' directly from the UCP 600.
    In paragraph (a)(9) of this section, CCC added that the commodity 
grade and quality specified in the application for the payment 
guarantee must be consistent with that specified in the firm export 
sales contract and foreign financial institution letter of credit. As 
noted in the discussion below on Sec.  1493.90(a), CCC agrees with 
comments that this requirement should not be contained in the letter of 
credit and that the exporter should be responsible for ensuring this 
requirement is met. Therefore, this language has been added to the 
application for payment guarantee section. The exporter may be held 
liable if CCC pays a claim for default and determines that the cause of 
the default was a discrepancy, specifically related to this 
requirement, between the firm export sales contract and the foreign 
financial institution letter of credit.

Section 1493.80 Certification Requirements for Obtaining Payment 
Guarantee

    Three comments were received regarding the practicality of having 
the exporter confirm that the importer is excluded from participation 
by the Excluded Parties List System (EPLS) or Office of Foreign Assets 
Control (OFAC) lists as required by paragraph (d) of this section. The 
respondents noted that both of these lists have standard disclaimers 
regarding potential errors and omissions. Because of these disclaimers, 
exporters can only certify that the importer or intervening purchaser 
is not on the list at the time of application. They cannot certify that 
the importer is not suspended, debarred or otherwise precluded. CCC 
agrees with these comments and modified the language in Sec.  
1493.80(d) to require the exporter to certify that neither the importer 
nor the intervening purchaser are present on these lists at the time of 
application for the payment guarantee. As discussed in the Definition 
of Terms section, references to EPLS were changed to SAM.
    CCC made several additional changes to the certifications in the 
new proposed rule. A reference to the Foreign Corrupt Practices Act of 
1977 was added to paragraph (b), consistent with this addition to the 
certification found at 1493.60(b). CCC also added a new certification 
in paragraph (f) of this section. The exporter will be required to 
certify that it is in compliance with the requirements for submitting 
evidence of export (EOE) reports for all existing payment guarantees. 
CCC faces continual issues with exporters not submitting these reports 
in a timely manner. In response, a new provision was added at 
1493.130(c) in the initial proposed rule that will preclude acceptance 
of new payment guarantee applications if an exporter is not in 
compliance with EOE submission timelines. CCC determined it is 
appropriate to require exporters to certify in each application for 
payment guarantee that they are compliant with this requirement with 
respect to other existing payment guarantees. CCC hopes this 
certification will prompt exporters to be more vigilant about meeting 
EOE requirements.

Section 1493.90 Special Requirements of the Foreign Financial 
Institution Letter of Credit and the Terms and Conditions Document, if 
Applicable

    Thirteen respondents submitted comments on Sec.  1493.90. Overall, 
respondents indicated that many of the changes proposed by CCC are 
inconsistent with international banking practices and accepted 
guidelines for letters of credit as found in the Uniform Customs and 
Practice for Documentary Credits (UCP 600). They noted that requiring 
specific language will increase the time, costs, and risks associated 
with issuing the letter of credit and jeopardize the willingness of 
both U.S. and foreign financial institutions to participate. Several 
respondents suggested CCC provide a standardized

[[Page 79260]]

template for the letter of credit requirements to ensure participants 
comply with the provisions of this section, and allow such requirements 
to be contained in the special instructions of the letter of credit or 
in a separate document, such as a loan agreement. One respondent 
commented that CCC should enter a framework agreement with each 
approved foreign financial institution to cover the terms and 
conditions of this section so they are not required in every letter of 
credit.
    In response to these comments CCC modified Sec.  1493.90 and 
removed the requirement that the specified terms and conditions be 
contained in the foreign financial institution letter of credit. 
Instead, CCC added the concept of a ``Terms and Conditions Document'' 
that may accompany the letter of credit. This change will allow 
participants the flexibility of having the required language in either 
the letter of credit or a separate document. CCC also clarified in 
Sec.  1493.90(a) that such terms and conditions may be contained in the 
letter of credit as a special instruction, but eliminated the option of 
a promissory note because of lack of use of this mechanism. Although 
CCC considered the option of developing a framework agreement for each 
approved foreign financial institution, some institutions preferred 
that the required terms be contained in the letter of credit or related 
document rather than a separate framework agreement.
    Paragraphs (a) and (b) of this section were re-ordered in the new 
proposed rule: Paragraph (a) describes the option to use either the 
letter of credit or terms and conditions document to contain the 
special requirements found in paragraph (b). CCC added a proposed 
requirement in paragraph (a) that the letter of credit stipulate 
presentation of at least one original clean on-board bill of lading as 
a required document. A number of program participants have suggested 
this provision as a means of preventing non-eligible export sales. CCC 
would not require an original bill of lading be submitted at time of a 
claim, but would ensure that the letter of credit contained this 
provision.
    Section 1493.90(b) now includes a listing of requirements of the 
letter of credit or terms and conditions document, which CCC believes 
eliminates the need for a standardized template. As noted in the 
Definition of Terms discussion, ``related obligation'' has been 
replaced with the term ``Repayment Obligation.'' Two new requirements 
were added: Jurisdictional language in case of legal action (Sec.  
1493.90(b)(2)) and a requirement to specify post-default interest terms 
(Sec.  1493.90(b)(4)). The language specifying legal jurisdiction was 
added to protect the interests of both CCC and its risk share partner 
in case of default, in hopes of increasing chances of recoveries if CCC 
takes legal action. CCC does not require a specific post default 
interest rate under the letter of credit, and this information is often 
omitted. Requiring the letter of credit to specify such interest terms 
(even if the rate is zero) will add clarity in cases where CCC has been 
subrogated the rights to recovery.
    Seven comments were received on the requirement that the letter of 
credit specify the transaction is a bona fide trade transaction (Sec.  
1493.90(a)(1) in the initial proposed rule). Three respondents 
indicated this language is not applicable to all GSM-102 transactions; 
therefore, in certain cases participants would be unable to comply. Two 
respondents suggested revised wording they believe would cover all GSM-
102 guaranteed transactions. Three respondents requested that CCC 
define the terms ``bona fide trade transaction'' and ``trade finance 
debt,'' while one respondent indicated this language may be confusing 
to foreign financial institutions because the documentary letter of 
credit is the internationally accepted mechanism for financing ``bona 
fide'' trade. One respondent pointed to the need for CCC to allow the 
Director to approve modifications to this language on a case-by-case 
basis to respond to an issuing bank's interpretation of the wording. 
One respondent requested that CCC permit refunds of guarantee fees if 
the foreign financial institution is unable to comply with this 
requirement, and another suggested this requirement be included as part 
of the foreign financial institution's initial qualification for the 
program. CCC agrees with the concerns expressed by participants and 
eliminated this requirement in the new proposed rule.
    Five respondents provided comments on the requirement that the 
letter of credit contain an acceleration clause (Sec.  1493.90(b)(3)). 
One commenter indicated that acceleration clauses are not normally 
contained in letters of credit, and two commenters suggested this 
language be included in a framework agreement between the U.S. and 
foreign financial institution or in the special instructions in the 
letter of credit. Three commenters requested that CCC provide specific 
language to meet this requirement to ensure compliance, with one 
respondent requesting that the Director have the flexibility to allow 
modifications to this language.
    As previously noted, CCC modified Sec.  1493.90 to permit the 
requirements of this section, including the acceleration clause, to be 
contained in the special instructions of the letter of credit or in a 
separate terms and conditions document. CCC did not add specific 
required language for this clause, as CCC believes the requirement 
described in the regulation is sufficient. Past experience indicates 
that such clauses are not uncommon in letters of credit and that 
exporters and financial institutions have utilized them in the past; 
therefore, specific language is not necessary, nor is flexibility for 
the Director to allow language modifications.
    Six respondents provided comments on the requirement that the 
commodity grade and quality specified in the sales contract be 
consistent with the commodity grade and quality in the letter of credit 
(Sec.  1493.90(a)(3) in the initial proposed rule). Most commenters 
indicated that this requirement is inconsistent with international 
banking standards found in the UCP 600. The letter of credit is a 
separate transaction from the sales contract and the payment obligation 
under the letter of credit is based on meeting documentary conditions, 
not upon performance of the underlying contract. Two respondents 
requested this provision be deleted. One respondent indicated that 
adding the commodity quality and grade to the letter of credit should 
not be problematic because this information is contained in the bill of 
lading and invoice, and another commenter suggested attaching the 
invoice to the letter of credit to convey this information. One 
commenter stated that it should be the responsibility of the exporter 
to certify this requirement.
    CCC agrees with the comments that this language should not be part 
of the letter of credit and that the U.S. financial institution should 
not be responsible for verification and removed this language from 
Sec.  1493.90 in the new proposed rule. However, CCC continues to 
believe this requirement is important to avoid defaults based on 
failure to comply with the underlying terms of the sale; therefore, 
changes in Sec.  1493.70 (Application for Payment Guarantee) clarify 
that the exporter is responsible for ensuring this requirement is met.

Section 1493.100 Terms and Requirements of the Payment Guarantee

    Although CCC received no formal comments on Sec.  1493.100(b), 
Period of guarantee coverage, CCC is proposing modifications in this 
section in an attempt to facilitate container shipments under the 
program. The small dollar

[[Page 79261]]

value of individual container shipments often make the use of separate 
letters of credit for each shipment too costly, and the extended 
delivery period over which these shipments occur may require a long 
validity period for the letter of credit, increasing its costs. CCC 
hopes to mitigate these factors by giving participants the option to 
utilize either the date of export or a weighted average export date as 
the start of the credit period. By using a weighted average export 
date, the exporter and assignee can ``bundle'' all shipments having 
dates of export within a 30 calendar day period and have the credit 
period begin on the average date of these shipments, weighted by the 
guaranteed portion of the exported value of each shipment. Participants 
would be permitted to bundle all shipments within a 30 calendar day 
period, with the first 30 calendar day period beginning on the first 
date of export under the payment guarantee, the second 30 calendar day 
period beginning 31 calendar days after the first date of export, and 
so on until the final date to export specified on the payment 
guarantee.
    For example, assume an exporter has three shipments as follows 
within a 30 calendar day period:

March 1 (first) shipment: $500,000 in guaranteed value
March 10 (second) shipment: $400,000 in guaranteed value
March 25 (third) shipment: $800,000 in guaranteed value

    The weighted average export date would be calculated as follows:

[[sum] (day of the month) x (guaranteed value for that day) ]/[[sum] 
(total guaranteed value)]

    In this example, the first shipment date would be the first day 
of the month; therefore, March 1 would be ``1.'' The calculation is:

[(1 x 500,000) + (10 x 400,000) + (25 x 800,000)]/(500,000 + 400,000 
+ 800,000) = 24,500,000/1,700,000 = 14.4, or March 14.
    If the exporter chooses to bundle these shipments, the weighted 
average export date would be March 14. The credit period for this 
bundle of shipments would, therefore, commence on March 14.

    CCC also included the option for payment guarantee coverage to 
begin when ordinary interest begins to accrue, if such interest begins 
to accrue prior to the first date of export. This provision is found in 
the current regulation, but was inadvertently deleted in the initial 
proposed rule. It is CCC's policy to permit coverage of interest 
accrued prior to the date of export, although the payment guarantee 
does not become effective until the date of export. Interest may begin 
to accrue prior to the date of export in export sales made on the basis 
of FOB, U.S. interior points of loading, such as sales to Mexico 
shipped in trucks or railcars. The provisions of Sec.  1493.100(b) 
indicate that the credit period can begin either upon the date of 
export or on the date that interest begins to accrue, whichever is 
earlier. A provision has been added to allow for the weighted average 
date when interest begins to accrue at the option of the holder of the 
payment guarantee.
    Seven respondents submitted comments on Sec.  1493.100. Three 
respondents disagreed with the elimination of the 30-day grace period 
found in the current regulation at Sec.  1493.60(d). Two commenters 
noted that issues outside of the exporter's control, such as 
transportation delays, lack of container availability, and weather 
problems, may delay shipments. One commenter noted that the elimination 
of the grace period will impact both small and large businesses and is 
counter to the goals of the National Export Initiative, the Paperwork 
Reduction Act, and the intent of the proposed rule. One respondent 
commented that with a new cotton crop becoming available each August 
and September, the grace period provides the exporter additional time 
to work out shipping problems. During 2009/2010, the grace period was 
particularly helpful due to the transportation congestion and backlogs 
that occurred. One commenter stated that the 30-day grace period should 
be reinstated to match commercial realities, and that otherwise CCC 
should allow for guarantee fee refunds in cases where the exporter 
cannot make shipments within the designated time period. CCC agrees 
with these concerns and reinstated the 30-day grace period in Sec.  
1493.100(d) of the new proposed rule.
    Three respondents provided comments on CCC's proposed changes to 
Sec.  1493.100(e), Reserve coverage for loading tolerances. Two 
commenters noted that the most common tolerance in bulk agricultural 
contracts is plus or minus 10 percent and that CCC's guarantee should 
reflect that reality. CCC agrees and revised the proposed rule to allow 
for an upward loading tolerance of 10 percent. CCC will require 
exporters to pay the guarantee fee based on the mean loading tolerance 
(instead of the lower loading tolerance). Because reserve coverage ties 
up both country and foreign bank limits, CCC hopes that requiring 
exporters to pay the fee based on the mean loading tolerance will 
ensure that exporters are serious about the need for such coverage at 
time of application. One respondent asked if an exporter was entitled 
to a refund of the fee paid for reserve coverage if this coverage is 
not utilized. Although an exporter is not entitled to a fee refund for 
unutilized reserve coverage, CCC will consider such requests from 
exporters on a case-by-case basis if the exporter's inability to 
utilize such coverage was outside of the exporter's control. Exporters 
may be required to submit documentation to CCC to support such a 
request.
    One comment was received on the requirement that the exporter file 
for a payment guarantee amendment within 15 calendar days of the final 
export date or CCC will cancel the exporter's reserve coverage. With 
bulk agricultural shipments, the exporter may be unable to determine 
the allocation of the shipped commodity across multiple registrations 
until the vessel reaches its final destination, which could be 30 to 40 
days from the loading date. The respondent requested CCC allow the 
exporter 45 days from the date of export to file the amendment to 
utilize reserve coverage.
    CCC does not agree with the suggestion to allow the exporter 45 
days to file an amendment for reserve coverage. Reserve coverage allows 
exporters to hold program allocation that may not be utilized and could 
be made available to other exporters. However, CCC recognizes that 
exporters may need time past the final date to export to compile 
relevant documents and determine the final amount of coverage. 
Therefore, CCC increased this timeframe to 21 calendar days after the 
final export date. This timeframe is consistent with the evidence of 
export (EOE) reporting requirements, because the exporter will know by 
the submission of the final EOE what level of reserve coverage is 
needed.
    CCC received four comments on Sec.  1493.100(f), now titled Certain 
export sales are ineligible for GSM-102 Payment Guarantees. One 
commenter noted that the U.S. financial institution may be unable to 
determine at the time of taking assignment of a payment guarantee 
whether a transaction is prohibited. This respondent requested 
clarification on whether a prohibited transaction could be deemed 
ineligible for coverage after assignment. Two respondents requested 
similar clarification with respect to Sec.  1493.100(f)(6), which 
prohibits coverage of a transaction that has been guaranteed by CCC 
under another payment guarantee. Specifically, these respondents 
requested assurance that CCC would not revoke coverage or take action 
against the assignee in this case.

[[Page 79262]]

    CCC agrees that an assignee may not know that a transaction 
registered under the GSM-102 program is prohibited. Section 
1493.180(e), Action against the assignee, states in part that CCC will 
not ``hold the assignee responsible or take any action or raise any 
defense against the assignee for any action, omission, or statement by 
the exporter of which the assignee has no knowledge.'' If a prohibited 
transaction were registered under a payment guarantee, CCC would take 
action against the exporter, if warranted, but not against the 
assignee, provided the assignee had no knowledge that the transaction 
was prohibited. CCC believes that Sec.  1493.180(e) protects the 
assignee in such cases and that no additional changes are needed in the 
proposed rule.
    Two commenters proposed methods by which CCC could determine which 
individual or entity is the valid exporter if a transaction is 
registered under multiple payment guarantees, which is prohibited by 
Sec.  1493.100(f)(6). One respondent noted that an exporter is unlikely 
to know if a second entity acquires its bills of lading and uses them 
to register export transactions under another guarantee. This commenter 
suggested that CCC detail in the regulations that the ``valid'' 
registrant should be either (1) the actual shipper of the goods (i.e., 
the exporter who arranges and pays to have the goods loaded onto the 
vessel); or (2) the exporter whose contract with its supplier indicates 
that neither the supplier, its affiliates, nor any third party has 
registered the goods under any U.S. government program. A second 
respondent suggested that the exporter of record should determine which 
entity holds the valid payment guarantee. A third respondent 
recommended that CCC require the exporter to make a certification with 
respect to Sec.  1493.100(f)(6) in both its application for payment 
guarantee and evidence of export report.
    CCC made no changes in response to these comments. Based on CCC's 
recent experience, there is not a single, most appropriate method for 
determining which exporter has the eligible export sale when an export 
sale is registered under more than one payment guarantee. By 
definition, only one eligible export sale can exist. This determination 
could involve contacting both exporters who registered the export sale; 
requesting and reviewing documents, such as bills of lading and/or bank 
and payment records; and contacting suppliers, importers or agents 
associated with the export sale. It is not possible for CCC to dictate 
in the rule all possible methods of making this determination. It also 
is unclear what is meant by ``exporter of record'' or how CCC could be 
assured that this entity validly holds a payment guarantee. Finally, 
CCC does not believe an exporter could certify that a transaction has 
not been registered by another entity under another payment guarantee, 
as the exporter may not know this was occurring. Therefore, CCC will 
review these transactions on a case-by-case basis to determine when a 
specific transaction is prohibited.
    To further clarify this requirement, CCC added a prohibition on any 
transaction that is not an ``Eligible Export Sale'' in Sec.  
1493.100(f)(7). An explanation is found in the discussion of this 
term's definition in Sec.  1493.20.
    Three respondents commented on the proposed prohibition on coverage 
where the issuance of the foreign financial institution letter of 
credit is more than 30 calendar days after the date of export. Two 
respondents noted that the timing of letter of credit issuance is often 
outside of the exporter's control and legitimate factors exist that 
could delay issuance beyond 30 days, including delays in receiving 
bills of lading and approvals required by the foreign financial 
institution. Additionally, the exporter, foreign financial institution 
and applicant for the letter of credit may not develop the exact 
requirements of the letter of credit until after the exporter registers 
the sale with CCC. A third respondent noted that although most letters 
of credit meet the 30-day criteria, this requirement will negatively 
impact small- and medium-sized exporters, whose customers and issuing 
banks are slow in issuing letters of credit.
    Although the proposed rule would allow the Director to make 
exceptions to this provision on a case-by-case basis, one commenter 
noted that such extension requests will add paperwork and delays and 
will, therefore, reduce the advantages of the GSM-102 program. One 
commenter stated that U.S. financial institutions would require proof 
that CCC had granted such an extension, which could delay payment to 
the exporter. One respondent noted that U.S. financial institutions 
would be required to implement a procedure at the time of examination 
of documents to verify the letter of credit issuance date. Such a 
process is not covered by the UCP 600, nor is it a standard 
international banking practice for the examination of documents. 
Further, the foreign financial institution would not know at the time 
of receiving the letter of credit application whether the letter of 
credit will be eligible, because the date of export is unknown at that 
time. One of the commenters indicated that CCC's transaction risk 
begins at the bill of lading date and that the letter of credit 
issuance should not affect CCC's risk profile. Two of the commenters 
requested this provision be deleted because it is inconsistent with 
standard banking practice and will hurt program utilization.
    CCC made no changes in response to these comments. In the preamble 
to the initial proposed rule, CCC noted that it is increasingly common 
for exporters to obtain a payment guarantee and not have the required 
foreign financial institution letter of credit in place for an extended 
period of time after the export date. In some cases, the letter of 
credit is never issued and the transaction is cancelled by the 
exporter. The ``cost'' of such cancellations is that other exporters 
who may have utilized the allocation are unable to do so. This 
provision is not related to CCC's risk profile, nor is it intended to 
reduce CCC's risk. It is intended to ensure that exporters who register 
sales have legitimately worked with the importer (or other letter of 
credit applicant) and the foreign financial institution prior to 
registering for coverage and are not simply ``rushing in'' to garner a 
portion of the announced allocation, a practice that negatively affects 
other exporters (including small- and medium-sized exporters) by 
reducing their access to the program. Given that exporters typically 
have 90 days from the date of registration to export, a 30-day shipment 
grace period (which as noted previously, is being reinstated by CCC), 
and 30 days from shipment to issue the letter credit, participants have 
up to 150 days, or five months, to accomplish issuance of the letter of 
credit after the sale is registered with CCC. CCC believes this 
timeframe should be sufficient. CCC has, however, modified this 
provision to allow for issuance of the letter of credit up to 30 days 
after the weighted average export date, if this is the date utilized by 
the holder of the payment guarantee for the starting point of the 
credit term.
    CCC acknowledges there may be an additional burden in requesting 
extensions to this provision, but will develop internal procedures for 
handling these requests to minimize paperwork and delays, including 
notifying assignees. CCC also acknowledges that verification of the 
issuance date of the letter of credit may not be a standard practice 
covered by UCP 600. However, the letter of credit issuance date is 
required in all letters of credit, and CCC does not consider comparison 
of this date against a bill of

[[Page 79263]]

lading date to be an undue burden on assignees.
    Three respondents commented on the proposal to allow CCC to charge 
a fee for payment guarantee amendments (Sec.  1493.100(i)). One 
respondent noted that fees are intended to offset the transaction risk 
undertaken by CCC, and that fees for amendments could make a 
transaction unviable and are inconsistent with other export credit 
agency programs. Further, it would be time-consuming for CCC and the 
exporter to track these additional fees. This respondent requested the 
provision be eliminated. A second respondent asked for clarification on 
the elements of the payment guarantee that can be amended and the cost 
for each type of amendment. A third respondent suggested that exporters 
be permitted one free amendment with a $500 fee assessed thereafter.
    CCC made no changes in response to these comments. Under the 
statute governing the program, CCC must work to ensure ``to the maximum 
extent practicable, that risk-based fees associated with the guarantees 
cover, but do not exceed, the operating costs and losses over the long 
term.'' Processing payment guarantees and amendments incurs a cost that 
should be offset by fee revenue. CCC is routinely faced with a large 
number of amendment requests and views such fees as an option to offset 
the costs associated with amendments. Additionally, the proposed rule 
does not implement such a fee but simply gives CCC the right to charge 
a fee. No such fee rates have been developed, and CCC does not intend 
to modify the types of amendments that exporters can currently request. 
If CCC determines that such fees should be implemented, comments 
received from participants will be considered in developing these fees, 
and they will be posted on the USDA Web site.

Section 1493.110 Guarantee Fees

    Five respondents commented on the provision in the proposed rule to 
determine guarantee fees through a competitive bidding process. Three 
respondents stated that an auction process would benefit larger 
exporters with the most information and financial resources to the 
detriment of small- and medium-sized exporters--counter to CCC's intent 
to increase program access for all U.S. exporters. One respondent noted 
that an auction process would create uncertainty in prices (as fees are 
often included in the exporter's sales quote), which could cause 
exporters to lose sales. Two respondents noted that the proposed rule 
did not contain specific parameters of an auction. One commenter stated 
that an auction would require establishment of minimum base fees, but 
in some cases current fees already exceed the market, making 
utilization cost-prohibitive. For an auction to work, these fees would 
need to be reduced. One respondent did not support the concept of an 
auction if it is intended only to garner increased fees for 
oversubscribed allocations. However, if CCC were willing to accept 
lower fees for underutilized allocations, the auction process could 
prompt program activity in underutilized markets and demonstrate that 
prices are truly market-based.
    No changes were made in response to these comments. CCC has not 
determined whether to implement a competitive bidding process for fees 
and acknowledges that additional research is needed before this step 
could be taken. The proposed rule does not dictate such a process, but 
simply allows for it. As noted, any information or instructions under a 
competitive bidding process would be made public on the USDA Web site. 
However, CCC will consider these comments in deciding whether to 
utilize an auction process in the future.
    Four respondents commented on paragraph (d), Refunds of fees. One 
commenter agreed that CCC should not refund fees under an auction 
scenario, as this would allow exporters to overbid with no consequence. 
This respondent also agreed that refunds should not be permitted when 
programs are over-subscribed, as otherwise, exporters can ``over-
apply'' with no consequence. Because unutilized amounts are generally 
not returned to the allocations, this practice can prohibit full 
program use. However, two respondents noted that, given the changes in 
the proposed rule, CCC should permit fee refunds when circumstances 
outside of the exporter's control prohibit the exporter from utilizing 
the guarantee--particularly if the inability to get a letter of credit 
in place is outside of the exporter's control. If CCC cancels a 
guarantee, CCC should not be paid for risks not assumed. One respondent 
suggested that if an exporter receives anything less than 90 percent of 
its requested registration, CCC should refund the fee because any 
lesser amount prohibits the exporter from exercising the firm sales 
contract.
    CCC made no changes in response to these comments. Given the myriad 
of potential scenarios, it is impossible to specify in the regulation 
all circumstances in which CCC would grant a fee refund. The general 
rule is that fees are non-refundable. However, CCC retained the caveat 
that the Director may grant a refund that he/she determines is in the 
best interest of CCC. CCC acknowledges that there will be cases when an 
exporter is unable to utilize a guarantee, including instances where a 
letter of credit is not issued, that will be outside an exporter's 
control. CCC will consider requests for refunds on a case-by-case 
basis. However, CCC fully expects that all parties to the transaction 
are familiar with the program regulations and have discussed a given 
transaction prior to the exporter's submission of an application for 
payment guarantee. Therefore, CCC expects fee refunds to be granted 
only on an exceptional basis. Participants are reminded that guarantee 
fees, in accordance with the program statute, are intended to cover not 
only CCC's risk but also its administrative costs. An application that 
is subsequently canceled by the exporter incurs an administrative cost.
    One respondent asked for clarification regarding the types of 
refunds CCC has permitted in recent years. This respondent also 
requested that CCC return to its previous system of letting an exporter 
pay the guarantee fee after CCC accepts the exporter's application, as 
requiring the fee with the application has not solved oversubscription 
problems.
    CCC allows refunds of fees only in exceptional circumstances. For 
example, if an importer decides post-shipment not to utilize the 
payment guarantee, CCC may refund the fee if the exporter submits 
relevant shipping documents with an explanation. Additionally, CCC has 
granted fee refunds post-shipment when the importing country 
implemented sanitary-phytosanitary restrictions prohibiting entry of 
the goods. CCC does not agree with the suggestion to allow submission 
of the guarantee fee after CCC accepts the exporter's application. CCC 
has had past problems with exporters not submitting guarantee fees in a 
timely manner. This creates a burden on CCC to repeatedly contact 
exporters to collect fees and ties up allocations that could be 
utilized by another exporter. Therefore, CCC is maintaining the 
requirement that fees be submitted with the exporter's application.

Section 1493.120 Assignment of the Payment Guarantee

    One respondent commented on this section, stating that although the 
bank will complete required OFAC checks prior to engaging in a GSM-102 
transaction, it should be CCC's responsibility to determine whether the 
foreign financial institution is excluded

[[Page 79264]]

from participation via the EPLS (now SAM) prior to issuing the payment 
guarantee.
    CCC made no changes in response to this comment (although 
consistent with the previously described definition change, EPLS has 
been changed to SAM). Prior to issuance of a payment guarantee, CCC 
checks all participants in the transaction against both OFAC and SAM. 
However, USDA suspension and debarment regulations at 2 CFR 417.215(b) 
require primary tier participants under the export credit guarantee 
programs to check the EPLS (SAM) prior to entering a transaction at the 
first lower tier. The regulations at 2 CFR 417.222(a) state that ``a 
transaction at the first lower tier might be a payment obligation of a 
foreign bank under an instrument, such as a loan agreement or letter of 
credit, to the U.S. financial institution assigned the guarantee . . . 
'' The U.S. financial institution is a primary tier participant under 
the GSM-102 program and is, therefore, required to make this check 
against SAM.
    In paragraph (b) of this section, CCC added that notices of 
assignment should be received by CCC within 30 calendar days of the 
date of assignment. It is important for CCC to know who the holder of 
the payment guarantee is for each guarantee, particularly when a 
default occurs. Some U.S. financial institutions delay submitting 
notices of assignment to CCC. This provision is a reminder that these 
notices should be submitted timely.
    In response to comments discussed in Sec.  1493.80, CCC modified 
the language in Sec.  1493.120(c)(i) to require the U.S. financial 
institution to certify that the foreign financial institution is not 
present on the SAM or OFAC lists at time of acceptance of the notice of 
assignment. CCC made a similar change in paragraph (f) of this section, 
and also incorporated the newly defined terms ``Holder of the Payment 
Guarantee'' and ``Terms and Conditions Document'' where applicable.
    No comments were received regarding Sec.  1493.120(f); however, CCC 
made several clarifications to this language in the new proposed rule. 
Additionally, CCC determined that the required clauses in paragraph 
(f)(1)(iii) and (f)(1)(v) of this section in the initial proposed rule 
were unnecessary; both have been deleted.

Section 1493.130 Evidence of Export

    Four respondents commented on this section. Two respondents 
requested that CCC reinstate the 30-day timeframe for filing the 
evidence of export report (EOE). Three commenters noted that it will be 
difficult for exporters to submit EOEs within ten days. An exporter may 
not receive bills of lading until well after loading and; therefore, 
may be unable to determine within ten days which shipment parcels apply 
to certain guarantees. One commenter explained that the 10-day 
timeframe will be problematic for container shipments of high value 
products. Hundreds of such containers can comprise a GSM-102 guaranteed 
sale and associated letter of credit, and the bills of lading for these 
shipments are often bundled over several months. A 10-day submission 
requirement for EOEs would, therefore, stop container shipments of 
high-value products under the program.
    CCC acknowledges these concerns and increased the timeframe for EOE 
submission to 21 calendar days in the new proposed rule. The proposed 
rule permits requests for extension of this timeframe, which CCC will 
consider on a case-by-case basis. Further, the proposed rule does not 
call for cancelation of a guarantee where the exporter is unable to 
meet this timeframe. Instead, pursuant to paragraph (c) of this 
section, failure to meet the timeframe or receive an approved extension 
means that the exporter will be unable to submit applications for new 
payment guarantees until EOE submissions are current. CCC does not 
believe this consequence is tantamount to stopping an entire category 
of shipments under the program.
    Two commenters stated that the current 30-day EOE submission 
requirement historically has not been enforced by CCC and that 
exporters have been instructed not to submit extension requests due to 
the burden this creates on CCC. Further, one respondent suggested that 
the budget and policy issues requiring timely EOEs only correspond to 
the middle and end of the fiscal year; therefore, CCC should consider 
enforcing this deadline only at those times, or at other critical dates 
as determined by CCC. Another commenter stated that the 10-day 
requirement places a priority on CCC's internal process over commercial 
realities.
    CCC acknowledges that the 30-day submission requirement has not 
been enforced. This is because, under Sec.  1493.80(b) of the current 
rule, CCC's recourse for late EOEs is to nullify the guarantee. This 
can only be done if CCC can demonstrate one of the consequences 
specified in Sec.  1493.80(b). CCC has determined that, in most cases, 
late EOEs do not cause sufficient harm to CCC to warrant nullifying the 
associated guarantees. As a result, there effectively has been no 
recourse available to CCC for late EOEs and no purpose to requiring 
requests for extensions to the filing deadline.
    Proposed changes to this section are specifically intended to 
provide CCC such recourse, and CCC fully intends to enforce the new 
requirement, including responding to requests for extensions. CCC does 
not agree that this requirement should only be enforced at the middle 
and end of a program (fiscal) year. Lack of timely EOEs negatively 
affects CCC's ability to accurately report on the GSM-102 program in 
its financial statements. Additionally, receipt of EOEs allows CCC to 
reduce usage against foreign bank and country limits to the extent that 
exporters do not export the full value of the guarantee. Absent EOEs, 
exporters may unnecessarily restrict utilization of foreign bank and 
country limits. Program availability is an issue throughout the year, 
not only at the middle and end of the fiscal year.
    One respondent asked what CCC would consider a ``legitimate 
circumstance'' warranting a request for an EOE filing extension. There 
could be multiple reasons why CCC would permit an extension to the 
filing deadline. CCC cannot predict in advance what these circumstances 
will be. Approvals will be granted case-by-case, based on the 
explanation (and corresponding documentation, if any) provided by the 
exporter at the time of request.
    One respondent stated that U.S. financial institutions are unable 
to determine whether an exporter has submitted an EOE on time, as CCC's 
on-line system does not contain an EOE submission date. Further, if CCC 
implements the shortened timeframe, assignees will require evidence 
that EOEs for assigned guarantees are submitted within the required 
timeframe.
    CCC does not agree that the U.S. financial institution must be 
advised whether EOEs are submitted within the required timeframe or if 
CCC has granted an extension to this timeframe. The consequence of 
failure to comply with this requirement is that the exporter cannot 
submit applications for new payment guarantees per Sec.  1493.130(c). 
There is no impact on the relevant guarantee if the EOE is late, no 
consideration of the timeliness of the EOE at the time of claim and, 
therefore, no impact on the assignee. However, CCC is willing to share 
this information with assignees upon request. CCC will consider adding 
this information to the GSM web-based system so that it is readily 
available to assignees.

[[Page 79265]]

Section 1493.140 Certification Requirements for the Evidence of Export

    CCC received one comment on this section, with the respondent 
agreeing with CCC's proposal to remove the certification found at Sec.  
1493.90(c) in the current rule (which requires the exporter to certify 
that the letter of credit has been opened). No changes were needed in 
response to this comment. Consistent with changes made with respect to 
the SAM and OFAC certifications, CCC modified the certification at 
Sec.  1493.140(d).
    CCC added two certifications to the new proposed rule. In Sec.  
1493.140(b), CCC proposes to require the exporter to certify that the 
commodities under the payment guarantee were shipped directly to the 
importer (or to the importer's representative) in the destination 
country or region. This certification is intended to enhance compliance 
with the new requirements related to the importer's representative and 
to ensure the goods are shipped consistent with the information 
provided in the exporter's application for payment guarantee. When 
making this certification, an exporter is certifying that either the 
importer on the payment guarantee or the importer's representative, as 
specified in the application for the payment guarantee, is taking 
receipt of the goods in the destination country or region. If CCC 
determines that the agricultural commodities exported under a payment 
guarantee are shipped to an entity other than the importer or the 
importer's representative, the exporter will be in violation of the 
requirements of this sub-part and the certification statement made on 
the EOE. At Sec.  1493.140(e), CCC added a certification that the 
transaction reported in the EOE is an ``Eligible Export Sale.'' The 
meaning of this term is found in the discussion of Sec.  1493.20. 
Because CCC will prohibit coverage of any transaction that does not 
meet the definition of ``Eligible Export Sale,'' CCC will require 
exporters to certify that the transaction reported under the evidence 
of export report meets this requirement.

Section 1493.150 Proof of Entry

    CCC received one comment on this section, noting that requiring 
proof of entry documentation with a claim for default (found in Sec.  
1493.170) would slow payments from the U.S. financial institution and 
negatively affect exporters' cash flows, as the proof of entry document 
is often outside of the exporter's control. Further, these cash flow 
problems will most notably affect small businesses.
    CCC agrees with this comment, as well as additional comments 
received on this issue under Sec.  1493.170. In response, CCC removed 
the requirement to provide proof of entry as a claims document. CCC 
added a statement to Sec.  1493.150(b)(1) reminding exporters they must 
submit proof of entry documentation to CCC at the Director's request. 
Exporters are advised that CCC may request this documentation following 
submission of a claim for default by the holder of the payment 
guarantee. Assignees are reminded that pursuant to Sec.  1493.191(d), 
Misstatements or noncompliance by Exporter may lead to rescission of 
Payment Guarantee, the assignee is held harmless for the exporter's 
failure to comply with proof of entry requirements provided that the 
assignee had no knowledge of the exporter's noncompliance at the time 
of taking assignment of the payment guarantee.

Section 1493.160 Notice of Default

    Three respondents commented on CCC's proposal to change the notice 
of default submission timeframe from ten calendar days to five business 
days after the date payment is due from the foreign financial 
institution. Two respondents requested CCC retain the current 
timeframe, noting that the reduced timeframe poses an operational risk 
to the exporter or assignee and a reputational risk to the foreign 
financial institution. Specifically, the shorter time period does not 
allow sufficient time to resolve operational errors and oversights or 
to detect or reconcile missed payments. One respondent requested that 
the timeframe be extended to 60 days, due to possible discrepancies in 
presentation of documents under the letter of credit.
    No changes were made in response to these comments. It is CCC's 
responsibility in a default to avoid jeopardizing additional taxpayer 
resources. CCC can only uphold this responsibility if it is notified 
immediately of a default and prevents issuance of additional guarantees 
with the defaulting institution. CCC does not believe this change poses 
undue risk upon the exporter or assignee. The timeframe is clear; if 
the holder of the payment guarantee knows that a payment has not been 
made, or cannot verify whether the payment has been made, the holder 
should submit the notice of default within the prescribed timeframe to 
protect its rights under the guarantee. CCC acknowledges the 
possibility of ``technical'' defaults that are due to oversight and 
quickly resolved. As the notice of default requires a reason for 
refusal to pay, this possibility will be conveyed to CCC on the notice 
of default. CCC will work with all parties to minimize any reputational 
risk to the foreign financial institution.
    One respondent requested clarification on the meaning of the due 
date of the payment and what CCC considers to be a payment default. 
These clarifications can be found in paragraph (a) of this section. The 
``due date'' is ``the date that payment was due from the Foreign 
Financial Institution.'' A default is any case where ``the Foreign 
Financial Institution issuing the Letter of Credit fails to make 
payment pursuant to the terms of the Letter of Credit or the Terms and 
Conditions Document.''
    CCC received comments from five respondents on paragraph (c) of 
this section regarding the impact of a default on other existing 
payment guarantees. One commenter noted several issues with this 
provision: (1) the guarantee may have been the basis for the exporter 
to enter the sale with the importer; (2) the exporter may not have a 
line of credit with another approved foreign financial institution; and 
(3) if the letter of credit has already been issued and confirmed, 
under UCP 600 rules it cannot be cancelled without the consent of all 
parties. The respondent also noted that when CCC issues a guarantee, it 
does so based on its assessment that the foreign financial institution 
is creditworthy throughout the 120-day maximum shipping period. If a 
default occurs, CCC should notify the exporter and continue to honor 
guarantees, provided the letter of credit is issued not later than 30 
days following the final shipment date. The respondent noted that all 
parties would likely make a good faith effort not to ship additional 
product, but this may not be possible if the letter of credit has been 
issued and documents have been presented to the U.S. financial 
institution.
    Three respondents noted that this change will make CCC's guarantee 
conditional. In contrast, the required payment mechanism (the letter of 
credit) would remain irrevocable. This situation would create 
significant additional risk to the U.S. financial institution and would 
require it to carry more capital and charge higher lending margins, 
thereby making financing under the program more costly. This cost would 
in turn be passed on to the exporters, making the program less 
attractive to all participants. Respondents requested this provision be 
revised or removed. One respondent requested that CCC allow the foreign 
financial institution time to resolve

[[Page 79266]]

technical payment issues without affecting existing payment guarantees.
    In response to these comments, CCC revised paragraph (c) to reflect 
that CCC will only withdraw guarantee coverage of the defaulting 
foreign financial institution where the letter of credit has not yet 
been issued for the export sale. CCC agrees that once the letter of 
credit is issued and documents presented, the U.S. financial 
institution is obligated to make payment and the letter of credit 
cannot be canceled without consent of all parties. It is not 
appropriate for CCC to revoke its guarantee at this time. If a default 
occurs, CCC will provide written notice (likely via email) to all 
exporters and assignees with payment guarantees involving the 
defaulting foreign financial institution. CCC will not provide coverage 
for any letters of credit that are issued by the defaulting foreign 
financial institution on or after the date the exporter and assignee 
receive this notice from CCC. If CCC withdraws coverage of that foreign 
financial institution, the exporter will have the option of finding an 
alternate foreign financial institution within 30 calendar days or 
cancelling the guarantee (with a refund of the fee corresponding to any 
cancelled guarantee amount). CCC will also consider other requests for 
amendments from the exporter if needed to facilitate completion of the 
export sale. If the holder of the payment guarantee subsequently files 
a claim, CCC will confirm during the claim review process that the 
letter of credit was issued prior to CCC's notification. Although CCC 
recognizes that this policy creates risk for the exporter, which may 
have conditioned the sale upon the guarantee, CCC has a responsibility 
to protect against additional losses. If a default is technical in 
nature, this fact will be indicated on the notice of default and CCC 
will work with all parties to try to resolve the default without 
affecting existing payment guarantees.

Section 1493.170 Claims for Default

    Three respondents commented on the requirement to submit proof of 
entry documentation at the time of claim under Sec.  
1493.170(a)(5)(iii) of the initial proposed rule. Two respondents noted 
that the U.S. financial institution does not typically receive this 
document because it is the exporter's responsibility. The U.S. 
financial institution has no assurance the exporter would provide it at 
time of claim or that it would be satisfactory to CCC. One respondent 
commented that with this requirement, the exporter would be paid when 
the goods arrived at destination rather than at export. This change 
would have a significant negative effect on the exporter's cash flow, 
especially for smaller exporters. In addition, the exporter must rely 
on the importer for this document and letters of credit would have to 
be issued for longer periods to accommodate the time needed to obtain 
the document, all of which would increase risk and costs to the 
exporter. There are no rules for determining the acceptability of these 
documents, which would increase review time and operational risks to 
U.S. financial institutions.
    CCC agrees with these comments and eliminated the requirement to 
provide proof of entry at time of claim. CCC clarified in Sec.  
1493.150 that the exporter must provide this documentation to CCC at 
the request of the Director.
    One respondent asked what CCC will accept as evidence of the 
repayment schedule required in paragraph (a)(3)(i). Although there is 
no specific document CCC requires to meet this provision, U.S. 
financial institutions typically submit a copy of the loan notification 
to the foreign financial institution, which contains the information 
required by paragraph (a)(3)(i). If the loan notification is not 
available, the U.S. financial institution may contact CCC with any 
questions regarding an alternate document.
    One commenter suggested CCC move paragraph (d), Alternative 
satisfaction of Payment Guarantees, to Sec.  1493.190. CCC does not 
agree because paragraph (d) is often invoked in response to a claim for 
default. Therefore, this paragraph remains in Sec.  1493.170.
    CCC made additional changes to this section in the new proposed 
rule. Paragraph (a), which describes the documents and information 
required in a claim for default, has been reorganized to group like 
requirements together, such as certifications, to make this section 
easier to follow. In paragraph (a)(1)(iii), a new certification was 
added requiring the holder of the payment guarantee to certify that 
conforming documents required by the letter of credit have been 
submitted to the negotiating bank or directly to the foreign financial 
institution (if the payment guarantee has not been assigned). This was 
added as part of CCC's effort to avoid claims for default due to 
document discrepancies. Paragraph (a)(3)(v) was modified to reflect 
that the evidence of export (EOE) report provided with the claim must 
be in conformity with the regulatory requirements for EOEs. A 
requirement was also added for the holder of the payment guarantee to 
provide written evidence of a repurchase if the defaulted amount was 
part of a transaction executed under a repurchase agreement. Receipt of 
this documentation will allow CCC to confirm that the repurchase 
occurred as required by Sec.  1493.120(f)(1)(ii). CCC also updated this 
section with the new terms ``Holder of the Payment Guarantee'' and 
``Terms and Conditions Document'' as relevant, and added additional 
detail to some of the requirements to clarify the information that must 
be provided.

Section 1493.180 Payment for Default

    CCC received two comments on this section. One respondent requested 
that, with respect to the provision for accelerated payments in 
paragraph (d), CCC pay claims for accelerated amounts if payments under 
the letter of credit are required to be accelerated.
    It is CCC's intent to pay claims for defaults on an accelerated 
basis if CCC requires the holder of the payment guarantee to invoke the 
acceleration provision in Sec.  1493.90(b)(3). The purpose of paragraph 
(d) is to make clear that CCC will not make accelerated payments if the 
holder of the payment guarantee determined unilaterally to invoke the 
acceleration clause.
    One respondent commented that under paragraph (e)(1), the assignee 
may not know if the exporter has complied with the reporting 
requirements under Sec.  1493.130 and Sec.  1493.140, and therefore 
requested this requirement be excluded from the limitation on the 
assignee's liability. CCC does not agree with this suggestion. The 
evidence of export report (EOE) is a required claim document under 
Sec.  1493.170(a)(3)(v); therefore, the assignee should ensure that it 
receives this document from the exporter. Further, the assignee can 
review the program regulation to determine whether the EOE conforms 
with the requirements of Sec.  1493.130 and Sec.  1493.140. CCC 
acknowledges that the assignee may not know if the exporter includes 
inaccurate or false data or certifications in the EOE, but in such 
circumstances CCC would hold the assignee harmless provided the 
requirements of paragraph (e) are met. CCC has modified this provision 
to more broadly require that in order to be held harmless, the assignee 
must submit all required claims documents such that they ``appear on 
their face'' to conform with all requirements of Sec.  1493.170. With 
this change CCC believes sub-paragraphs (1) and (2) of this provision 
are no longer needed.

Section 1493.190 Recovery of Defaulted Payments

    CCC received no comments on this section. In the new proposed rule, 
CCC updated this section with the term

[[Page 79267]]

``Holder of the Payment Guarantee'' as discussed in Sec.  1493.20. 
Paragraph (e) from the initial proposed rule has been moved to the new 
section 1493.191 (see discussion below). In paragraph (c), Allocation 
of recoveries, CCC clarified that the ``respective interest of each 
party'' in a recovery is based on the date the claim is paid by CCC. In 
the paragraph Cooperation in recoveries (now paragraph (e)), CCC added 
that the exporter, whether or not the holder of the payment guarantee, 
is also required to cooperate with CCC to effect recoveries. In some 
instances, the exporter may have information or be able to take some 
action that would increase the likelihood of recoveries following a 
default.

Section 1493.191 Additional Obligations and Requirements

    This section was added to the new proposed rule but is a 
compilation of existing provisions previously found in other sections, 
including Sec.  1493.195, Miscellaneous provisions. CCC believes these 
provisions represent important obligations on participants and risked 
being overlooked; they have therefore been consolidated in this new 
section.
    One respondent commented on paragraph (a) of this new section, 
previously found in Sec.  1493.195, Miscellaneous provisions, noting 
that pursuant to privacy laws, USDA may be required to obtain a 
subpoena to review GSM-102 related documents unless the customer has 
provided prior written consent. CCC does not agree with this comment. 
Section 402(a)(1) of the Agricultural Trade Act of 1978, as amended, 
requires ``each exporter or other participant under the program to 
maintain all records concerning a program transaction for a period of 
not to exceed 5 years after completion of the program transaction, and 
to permit the Secretary to have full and complete access, for such 5-
year period, to such records.'' This statutory provision does not 
require USDA to obtain a subpoena for access to documents covered by 
this regulatory provision.
    In the revised proposed rule, CCC modified paragraph (a) to clarify 
that the requirement for records maintenance and access to premises 
applies both to the exporter and the assignee. CCC also made changes to 
remind participants that they are expected to respond fully to any 
inquiries from CCC related to their program participation and any GSM-
102 transactions. CCC felt it was necessary to clarify that 
participants must respond to verbal and written inquiries that do not 
specifically involve submission of documents. The title of this 
paragraph has been changed to reflect this addition. Paragraph (d), 
previously titled ``Good faith,'' has been renamed ``Misstatements or 
noncompliance by Exporter may lead to rescission of Payment 
Guarantee.''

Section 1493.192 Dispute Resolution and Appeals

    No comments were received on this section and no changes were made 
in the proposed rule.

Section 1493.195 Miscellaneous Provisions

    Several of the provisions previously found in this section have 
been moved to the new Sec.  1493.191, Additional obligations and 
requirements. No comments were received on paragraphs (a) and (b) of 
this section and CCC made no changes in the new proposed rule.

Executive Order 12866

    This proposed rule is issued in conformance with Executive Order 
12866. It has been determined to be not significant for the purposes of 
Executive Order 12866 and was not reviewed by OMB. A cost-benefit 
assessment of this rule was not completed.

Executive Order 12988

    This rule has been reviewed in accordance with Executive Order 
12988. This rule would not preempt State or local laws, regulations, or 
policies unless they present an irreconcilable conflict with this rule. 
Before any judicial action may be brought concerning the provisions of 
this rule, the appeal provisions of 7 CFR part 1493.192 would need to 
be exhausted. This rule would not be retroactive.

Executive Order 12372

    This program is not subject to Executive Order 12372, which 
requires intergovernmental consultation with State and local officials. 
See the notice related to 7 CFR part 3015, subpart V, published at 48 
FR 29115 (June 24, 1983).

Executive Order 13132

    This proposed rule has been reviewed under Executive Order 13132, 
``Federalism.'' The policies contained in this proposed rule do not 
have any substantial direct effect on States, on the relationship 
between the Federal government and the States, or on the distribution 
of power and responsibilities among the various levels of government, 
nor does this proposed rule impose substantial direct compliance costs 
on State and local governments. Therefore, consultation with the States 
is not required.

Executive Order 13175

    The United States has a unique relationship with Indian Tribes as 
provided in the Constitution of the United States, treaties, and 
Federal statutes. On November 5, 2009, President Obama signed a 
Memorandum emphasizing his commitment to ``regular and meaningful 
consultation and collaboration with tribal officials in policy 
decisions that have tribal implications including, as an initial step, 
through complete and consistent implementation of Executive Order 
13175.'' This proposed rule has been reviewed for compliance with E.O. 
13175 and CCC worked directly with the Office of Tribal Relations in 
the rule's development. The policies contained in this proposed rule do 
not have tribal implications that preempt tribal law.

Regulatory Flexibility Act

    The Regulatory Flexibility Act does not apply to this rule because 
CCC is not required by 5 U.S.C. 553 or any other law to publish a 
notice of proposed rulemaking with respect to the subject matter of 
this rule.

Environmental Assessment

    CCC has determined that this proposed rule does not constitute a 
major State or Federal action that would significantly affect the human 
or natural environment. Consistent with the National Environmental 
Policy Act (NEPA), 40 CFR part 1502.4, ``Major Federal Actions 
Requiring the Preparation of Environmental Impact Statements'' and the 
regulations of the Council on Environmental Quality, 40 CFR parts 1500-
1508, no environmental assessment or environmental impact statement 
will be prepared.

Unfunded Mandates

    This proposed rule does not impose any enforceable duty or contain 
any unfunded mandate as described under Title II of the Unfunded 
Mandates Reform Act of 1995 (UMRA). Therefore, this rule is not subject 
to the requirements of sections 202 and 205 of UMRA.

Paperwork Reduction Act of 1995

    In accordance with the Paperwork Reduction Act of 1995, CCC is 
requesting comments from all interested individuals and organizations 
on a proposed revision to the currently approved information collection 
for this program. This revision includes proposed changes in 
information collection activities related to the regulatory changes in 
this proposed rule.

[[Page 79268]]

    Title: CCC Export Credit Guarantee Program (GSM-102).
    OMB Control Number: 0551-0004.
    Type of Request: Revision of a currently approved information 
collection.
    Abstract: This information collection is required to support the 
existing regulations and proposed changes to 7 CFR Part 1493, subpart 
B, ``CCC Export Credit Guarantee (GSM-102) Program Operations,'' which 
establishes the requirements for participation in CCC's GSM-102 
program. This revision reflects an expected increase in program 
participation due to the new proposed rule, and also incorporates the 
additional estimated burden to program participants as a result of 
certain new requirements in this proposed rule for exporters, U.S. and 
foreign financial institution qualification; applications for payment 
guarantees; notices of assignment; repurchase agreements; evidence of 
export reports; submission of claims for default; and appeals. This 
information collection is necessary for CCC to manage, plan and 
evaluate the program and to ensure the proper and judicious use of 
government resources.
    Estimate of Burden: The public reporting burden for this collection 
of information is estimated to average 0.51 hours per response.
    Respondents: U.S. exporters, U.S. financial institutions, and 
foreign financial institutions.
    Estimated Number of Respondents: 96 per year.
    Estimated Number of Responses per Respondent: 66 per year.
    Estimated Total Annual Burden on Respondents: 3,224 hours.
    Comments on this information collection must be received by 
February 25, 2014 to be assured consideration. Comments may be 
submitted to CCC in accordance with any of the methods specified for 
submitting comments to this proposed rule. All comments received in 
response to this notice will be a matter of public record.

E-Government Act Compliance

    CCC is committed to complying with the E-Government Act to promote 
the use of the Internet and other information technologies to provide 
increased opportunities for citizen access to Government information 
and services and for other purposes. The forms, regulations, and other 
information collection activities required to be utilized by a person 
subject to this rule are available at: https://www.fas.usda.gov.

Title 7--Agriculture

List of Subjects in 7 CFR Part 1493

    Agricultural commodities, Exports.

    For the reasons stated in the preamble, CCC proposes to amend 7 CFR 
part 1493 as follows:

PART 1493--CCC EXPORT CREDIT GUARANTEE PROGRAMS

0
1. The authority citation for 7 CFR part 1493 continues to read as 
follows:

    Authority:  7 U.S.C. 5602, 5622, 5661, 5662, 5663, 5664, 5676; 
15 U.S.C. 714b(d), 714c(f)

0
2. Subpart A is revised to read as follows:
Subpart A--Restrictions and Criteria for Export Credit Guarantee 
Program
Sec.
1493.1 General statement.
1493.2 Purposes of programs.
1493.3 Restrictions on programs and cargo preference statement.
1493.4 Criteria for country and regional allocations.
1493.5 Criteria for agricultural commodity allocations.

Subpart A--Restrictions and Criteria for Export Credit Guarantee 
Programs


Sec.  1493.1  General statement.

    This subpart sets forth the restrictions that apply to the issuance 
and use of Payment Guarantees under the Commodity Credit Corporation 
(CCC) Export Credit Guarantee (GSM-102) Program and Facility Guarantee 
Program (FGP), the criteria considered by CCC in determining the annual 
allocations of Payment Guarantees to be made available with respect to 
each participating country and region, and the criteria considered by 
CCC in the review and approval of proposed allocation levels for 
specific U.S. Agricultural Commodities to these countries and regions.


Sec.  1493.2  Purposes of programs.

    CCC is authorized to issue Payment Guarantees:
    (a) To increase exports of U.S. Agricultural Commodities and expand 
access to trade finance;
    (b) To assist countries, particularly developing countries and 
emerging markets, in meeting their food and fiber needs;
    (c) To establish or improve facilities and infrastructure in 
emerging markets to expand exports of U.S. Agricultural Commodities; or
    (d) For such other purposes as the Secretary of Agriculture 
determines appropriate.


Sec.  1493.3  Restrictions on programs and cargo preference statement.

    (a) Restrictions on use of Payment Guarantees. (1) Payment 
Guarantees authorized under these regulations shall not be used for 
foreign aid, foreign policy, or debt rescheduling purposes.
    (2) CCC shall not make Payment Guarantees available in connection 
with sales of U.S. Agricultural Commodities to any country that the 
Secretary determines cannot adequately service the debt associated with 
such sale.
    (3) CCC shall not make Payment Guarantees available in connection 
with sales of U.S. Agricultural Commodities financed by any Foreign 
Financial Institution that CCC determines cannot adequately service the 
debt associated with such sale.
    (b) Cargo preference laws. The provisions of the cargo preference 
laws do not apply to export sales with respect to which Payment 
Guarantees are issued under these programs.


Sec.  1493.4  Criteria for country and regional allocations.

    The criteria considered by CCC in reviewing proposals for country 
and regional allocations will include, but not be limited to, the 
following:
    (a) Potential benefits that the extension of Payment Guarantees 
would provide for the development, expansion, or maintenance of the 
market for particular U.S. Agricultural Commodities in the importing 
country;
    (b) Financial and economic ability and/or willingness of the 
country of obligation to adequately service CCC guaranteed debt 
(``country of obligation'' is the country whose Foreign Financial 
Institution obligation is guaranteed by CCC);
    (c) Financial status of participating Foreign Financial 
Institutions in the country of obligation as it would affect their 
ability to adequately service CCC guaranteed debt;
    (d) Political stability of the country of obligation as it would 
affect its ability and/or willingness to adequately service CCC 
guaranteed debt; and
    (e) Current status of debt either owed by the country of obligation 
or by the participating Foreign Financial Institutions to CCC or to 
lenders protected by CCC's Payment Guarantees.


Sec.  1493.5  Criteria for agricultural commodity allocations.

    The criteria considered by CCC in determining U.S. Agricultural 
Commodity allocations within a specific country or regional allocation 
will include, but not be limited to, the following:
    (a) Potential benefits that the extension of Payment Guarantees 
would

[[Page 79269]]

provide for the development, expansion or maintenance of the market in 
the importing country for the particular U.S. Agricultural Commodity 
under consideration;
    (b) The best use to be made of the Payment Guarantees in assisting 
the importing country in meeting its particular needs for food and 
fiber, as may be determined through consultations with private buyers 
and/or representatives of the government of the importing country; and
    (c) Evaluation, in terms of program purposes, of the relative 
benefits of providing Payment Guarantee coverage for sales of the U.S. 
Agricultural Commodity under consideration compared to providing 
coverage for sales of other U.S. Agricultural Commodities.
    3. Subpart B is revised to read as follows:
Subpart B--CCC Export Credit Guarantee (GSM-102) Program Operations
Sec.
1493.10 General statement.
1493.20 Definition of terms.
1493.30 Information required for Exporter participation.
1493.40 Information required for U.S. Financial Institution 
participation.
1493.50 Information required for Foreign Financial Institution 
participation.
1493.60 Certification requirements for program participation.
1493.70 Application for Payment Guarantee.
1493.80 Certification requirements for obtaining Payment Guarantee.
1493.90 Special requirements of the Foreign Financial Institution 
Letter of Credit and the Terms and Conditions Document, if 
applicable.
1493.100 Terms and requirements of the Payment Guarantee.
1493.110 Guarantee fees.
1493.120 Assignment of the Payment Guarantee.
1493.130 Evidence of export.
1493.140 Certification requirements for the evidence of export.
1493.150 Proof of entry.
1493.160 Notice of default.
1493.170 Claims for default.
1493.180 Payment for default.
1493.190 Recovery of defaulted payments.
1493.191 Additional obligations and requirements
1493.192 Dispute resolution and appeals.
1493.195 Miscellaneous provisions.

Subpart B--CCC Export Credit Guarantee Program (GSM-102) Operations


Sec.  1493.10  General statement.

    (a) Overview. The Export Credit Guarantee (GSM-102) Program of the 
Commodity Credit Corporation (CCC) was developed to expand U.S. 
Agricultural Commodity exports by making available Payment Guarantees 
to encourage U.S. private sector financing of foreign purchases of U.S. 
Agricultural Commodities on credit terms. The Payment Guarantee issued 
under GSM-102 is an agreement by CCC to pay the Exporter, or the U.S. 
Financial Institution that may take assignment of the Payment 
Guarantee, specified amounts of principal and interest in case of 
default by the Foreign Financial Institution that issued the Letter of 
Credit for the export sale covered by the Payment Guarantee. Under the 
GSM-102 program, maximum repayment terms vary based on risk of default, 
as determined by CCC. The program operates in a manner intended not to 
interfere with markets for cash sales and is targeted toward those 
countries that have sufficient financial strength so that foreign 
exchange will be available for scheduled payments. In providing this 
program, CCC seeks to expand and/or maintain market opportunities for 
U.S. agricultural exporters and assist long-term market development for 
U.S. Agricultural Commodities.
    (b) Program administration. The GSM-102 program is administered 
under the direction of the General Sales Manager and Vice President of 
CCC, pursuant to this subpart, subpart A, and any Program Announcements 
issued by CCC. From time to time, CCC may issue a notice to 
participants on the USDA Web site to remind participants of the 
requirements of the GSM-102 program or to clarify the program 
requirements contained in these regulations in a manner not 
inconsistent with this subpart and subpart A.
    (c) Country and regional program announcements. From time to time, 
CCC will issue a Program Announcement on the USDA Web site to announce 
a GSM-102 program for a specific country or region. The Program 
Announcement for a country or region will designate specific U.S. 
Agricultural Commodities or products thereof, or designate that all 
eligible U.S. Agricultural Commodities are available under the 
announcement. The Program Announcement will contain any requirements 
applicable to that country or region as determined by CCC.


Sec.  1493.20  Definition of terms.

    Terms set forth in this subpart, on the USDA Web site (including in 
Program Announcements and notices to participants), and in any CCC-
originated documents pertaining to the GSM-102 Program will have the 
following meanings:
    Affiliate. Entities are affiliates of each other if, directly or 
indirectly, either one controls or has the power to control the other 
or a third person controls or has the power to control both. Control 
may include, but is not limited to: Interlocking management or 
ownership; identity of interests among family members; shared 
facilities and equipment; or common use of employees.
    Assignee. A U.S. Financial Institution that has obtained the legal 
right to make a claim and receive the payment of proceeds under the 
Payment Guarantee.
    Business Day. A day during which employees of the U.S. Department 
of Agriculture in the Washington, DC metropolitan area are on official 
duty during normal business hours.
    CCC. The Commodity Credit Corporation, an agency and 
instrumentality of the United States within the Department of 
Agriculture, authorized pursuant to the Commodity Credit Corporation 
Charter Act (15 U.S.C. 714 et seq.).
    CCC Late Interest. Interest payable by CCC pursuant to Sec.  
1493.180(c).
    Cost and Freight (CFR). A customary trade term for sea and inland 
waterway transport only, as defined by the International Chamber of 
Commerce, Incoterms 2010 (or as superseded).
    Cost Insurance and Freight (CIF). A customary trade term for sea 
and inland waterway transport only, as defined by the International 
Chamber of Commerce, Incoterms 2010 (or as superseded).
    Date of Export. One of the following dates, depending upon the 
method of shipment: The on-board date of an ocean bill of lading or the 
on-board ocean carrier date of an intermodal bill of lading; the on-
board date of an airway bill; or, if exported by rail or truck, the 
date of entry shown on an entry certificate or similar document issued 
and signed by an official of the government of the importing country.
    Date of Sale. The earliest date on which a Firm Export Sales 
Contract exists between the Exporter, or an Intervening Purchaser, if 
applicable, and the Importer.
    Director. The Director, Credit Programs Division, Office of Trade 
Programs, Foreign Agricultural Service, or the Director's designee.
    Discounts and Allowances. Any consideration provided directly or 
indirectly, by or on behalf of the Exporter or an Intervening 
Purchaser, to the Importer in connection with an Eligible Export Sale, 
above and beyond the commodity's value, stated on the appropriate FOB, 
FAS, FCA, CFR or CIF basis (or other basis specified in Incoterms 2010, 
or as superseded), which includes, but is not limited to, the provision 
of additional goods, services or benefits; the promise to

[[Page 79270]]

provide additional goods, services or benefits in the future; financial 
rebates; the assumption of any financial or contractual obligations; 
commissions where the buyer requires the Exporter to employ and 
compensate a specified agent as a condition of concluding the Eligible 
Export Sale; the whole or partial release of the Importer from any 
financial or contractual obligations; or settlements made in favor of 
the Importer for quality or weight.
    Eligible Export Sale. An export sale of U.S. Agricultural 
Commodities in which the obligation of payment for the portion 
registered under the GSM-102 program arises solely and exclusively from 
a Foreign Financial Institution Letter of Credit or Terms and 
Conditions Document issued in connection with a Payment Guarantee.
    Eligible Interest. The amount of interest that CCC agrees to pay 
the Holder of the Payment Guarantee in the event that CCC pays a claim 
for default of Ordinary Interest. Eligible Interest shall be the lesser 
of:
    (1) The amount calculated using the interest rate specified between 
the Holder of the Payment Guarantee and the Foreign Financial 
Institution; or
    (2) The amount calculated using the specified percentage of the 
Treasury bill investment rate set forth on the face of the Payment 
Guarantee.
    Exported Value. (1) Where CCC announces Payment Guarantee coverage 
on a FAS, FCA, or FOB basis and:
    (i) Where the U.S. Agricultural Commodity is sold on a FAS, FCA, or 
FOB basis, the value, FAS, FCA, or FOB basis, port of shipment, of the 
export sale, reduced by the value of any Discounts and Allowances 
granted to the Importer in connection with such sale; or
    (ii) Where the U.S. Agricultural Commodity was sold on a CFR or CIF 
basis, point of entry, the value of the export sale, FAS, FCA or FOB, 
port of shipment, is measured by the CFR or CIF value of the U.S. 
Agricultural Commodity less the cost of ocean freight, as determined at 
the time of application and, in the case of CIF sales, less the cost of 
marine and war risk insurance, as determined at the time of 
application, reduced by the value of any Discounts and Allowances 
granted to the Importer in connection with the sale of the commodity; 
or
    (2) Where CCC announces coverage on a CFR or CIF basis, and where 
the U.S. Agricultural Commodity is sold on a CFR or CIF basis, port of 
destination, the total value of the export sale, CFR or CIF basis, port 
of destination, reduced by the value of any Discounts and Allowances 
granted to the Importer in connection with the sale of the commodity; 
or
    (3) When a CFR or CIF U.S. Agricultural Commodity export sale 
involves the performance of non-freight services to be performed 
outside the United States (e.g., services such as bagging bulk cargo) 
which are not normally included in ocean freight contracts, the value 
of such services and any related materials not exported from the U.S. 
with the commodity must also be deducted from the CFR or CIF sales 
price in determining the Exported Value.
    Exporter. A seller of U.S. Agricultural Commodities that is both 
qualified in accordance with the provisions of Sec.  1493.30 and the 
applicant for the Payment Guarantee.
    Firm Export Sales Contract. The written sales contract entered into 
between the Exporter and the Importer (or, if applicable, the written 
sales contracts between the Exporter and the Intervening Purchaser and 
the Intervening Purchaser and the Importer) which sets forth the terms 
and conditions of an Eligible Export Sale of the eligible U.S. 
Agricultural Commodity from the Exporter to the Importer (or, if 
applicable, the sale of the eligible U.S. Agricultural Commodity from 
the Exporter to the Intervening Purchaser and from the Intervening 
Purchaser to the Importer). Written evidence of a sale may be in the 
form of a signed sales contract, a written offer and acceptance between 
parties, or other documentary evidence of sale. The written evidence of 
sale for the purposes of the GSM-102 program must, at a minimum, 
document the following information: The eligible U.S. Agricultural 
Commodity, quantity, quality specifications, delivery terms (FOB, C&F, 
FCA, etc.) to the eligible country or region, delivery period, unit 
price, payment terms, Date of Sale, and evidence of agreement between 
buyer and seller. The Firm Export Sales Contract between the Exporter 
and the Importer (or, if applicable, between the Exporter and the 
Intervening Purchaser and between the Intervening Purchaser and the 
Importer) may be conditioned upon CCC's approval of the Exporter's 
application for a Payment Guarantee.
    Foreign Financial Institution. A financial institution (including 
foreign branches of U.S. financial institutions):
    (1) Organized and licensed under the laws of a jurisdiction outside 
the United States;
    (2) Not domiciled in the United States; and
    (3) Subject to the banking or other financial regulatory authority 
of a foreign jurisdiction (except for multilateral and sovereign 
institutions).
    Foreign Financial Institution Letter of Credit or Letter of Credit. 
An irrevocable documentary letter of credit, subject to the current 
revision of the Uniform Customs and Practices for Documentary Credits 
(International Chamber of Commerce Publication No. 600, or latest 
revision), providing for payment in U.S. dollars against stipulated 
documents and issued in favor of the Exporter by a CCC-approved Foreign 
Financial Institution.
    Free Alongside Ship (FAS). A customary trade term for sea and 
inland waterway transport only, as defined by the International Chamber 
of Commerce, Incoterms 2010 (or as superseded).
    Free Carrier (FCA). A customary trade term for all modes of 
transportation, as defined by the International Chamber of Commerce, 
Incoterms 2010 (or as superseded).
    Free on Board (FOB). A customary trade term for sea and inland 
waterway transport only, as defined by the International Chamber of 
Commerce, Incoterms 2010 (or as superseded).
    GSM. The General Sales Manager, Foreign Agricultural Service, USDA, 
acting in his or her capacity as Vice President, CCC, or designee.
    Guaranteed Value. The maximum amount indicated on the face of the 
Payment Guarantee, exclusive of interest, that CCC agrees to pay the 
Holder of the Payment Guarantee.
    Holder of the Payment Guarantee. The Exporter or the Assignee of 
the Payment Guarantee with the legal right to make a claim and receive 
the payment of proceeds from CCC under the Payment Guarantee in case of 
default by the Foreign Financial Institution.
    Importer. A foreign buyer that enters into a Firm Export Sales 
Contract with an Exporter or with an Intervening Purchaser for the sale 
of U.S. Agricultural Commodities to be shipped from the United States 
to the foreign buyer.
    Importer's Representative. An entity having a physical office and 
registered to do business in the destination country or region 
specified in the Payment Guarantee and that is authorized to act on the 
Importer's behalf with respect to the sale described in the Firm Export 
Sales Contract.
    Incoterms. Trade terms developed by the International Chamber of 
Commerce in Incoterms 2010 (or latest revision) which define the 
respective obligations of the buyer and seller in a sales contract.
    Intervening Purchaser. A party that is not located in the country 
or region of

[[Page 79271]]

destination specified in the Payment Guarantee and that enters into a 
Firm Export Sales Contract to purchase U.S. Agricultural Commodities 
from an Exporter and sell the same U.S. Agricultural Commodities to an 
Importer.
    OFAC. The Office of Foreign Assets Control of the U.S. Department 
of Treasury, which administers and enforces economic sanctions programs 
primarily against countries and groups of individuals such as 
terrorists and narcotics traffickers.
    Ordinary Interest. Interest (other than Post Default Interest) 
charged on the principal amount identified in the Foreign Financial 
Institution Letter of Credit or, if applicable, the Terms and 
Conditions Document.
    Payment Guarantee. An agreement under the GSM-102 program by which 
CCC, in consideration of a fee paid, and in reliance upon the 
statements and declarations of the Exporter, subject to the terms set 
forth in the written guarantee, this subpart, and any applicable 
Program Announcements, agrees to pay the Holder of the Payment 
Guarantee in the event of a default by a Foreign Financial Institution 
on its Repayment Obligation under the Foreign Financial Institution 
Letter of Credit issued in connection with a guaranteed sale or, if 
applicable, under the Terms and Conditions Document.
    Port Value. (1) Where CCC announces coverage on a FAS, FCA, or FOB 
basis and:
    (i) Where the U.S. Agricultural Commodity is sold on a FAS, FCA, or 
FOB basis, port of shipment, the value, FAS, FCA, or FOB basis, port of 
shipment, of the export sale, including the upward loading tolerance, 
if any, as provided by the Firm Export Sales Contract, reduced by the 
value of any Discounts and Allowances granted to the Importer in 
connection with such sale; or
    (ii) Where the U.S. Agricultural Commodity was sold on a CFR or CIF 
basis, port of destination, the value of the export sale, FAS, FCA, or 
FOB, port of shipment, including the upward loading tolerance, if any, 
as provided by the Firm Export Sales Contract, is measured by the CFR 
or CIF value of the U.S. Agricultural Commodity less the value of ocean 
freight and, in the case of CIF sales, less the value of marine and war 
risk insurance, reduced by the value of any Discounts and Allowances 
granted to the Importer in connection with the sale of the commodity.
    (2) Where CCC announces coverage on a CFR or CIF basis and where 
the U.S. Agricultural Commodity was sold on CFR or CIF basis, port of 
destination, the total value of the export sale, CFR or CIF basis, port 
of destination, including the upward loading tolerance, if any, as 
provided by the Firm Export Sales Contract, reduced by the value of any 
Discounts and Allowances granted to the Importer in connection with the 
sale of the commodity.
    (3) When a CFR or CIF U.S. Agricultural Commodity export sale 
involves the performance of non-freight services to be performed 
outside the United States (e.g., services such as bagging bulk cargo), 
which are not normally included in ocean freight contracts, the value 
of such services and any related materials not exported from the U.S. 
with the commodity must also be deducted from the CFR or CIF sales 
price in determining the Port Value.
    Post Default Interest. Interest charged on amounts in default that 
begins to accrue upon default of payment, as specified in the Foreign 
Financial Institution Letter of Credit or, if applicable, in the Terms 
and Conditions Document.
    Principal. A principal of a corporation or other legal entity is an 
individual serving as an officer, director, owner, partner, or other 
individual with management or supervisory responsibilities for such 
corporation or legal entity.
    Program Announcement. An announcement issued by CCC on the USDA Web 
site that provides information on specific country and regional 
programs and may identify eligible U.S. Agricultural Commodities and 
countries, length of credit periods which may be covered, and other 
information.
    Repayment Obligation. A contractual commitment by the Foreign 
Financial Institution issuing the Letter of Credit in connection with 
an Eligible Export Sale to make payment(s) on principal amount(s), plus 
any Ordinary Interest and Post Default Interest, in U.S. dollars, to an 
Exporter or U.S. Financial Institution on deferred payment terms 
consistent with those permitted under CCC's Payment Guarantee. The 
Repayment Obligation must be documented using one of the methods 
specified in Sec.  1493.90.
    Repurchase Agreement. A written agreement under which the Holder of 
the Payment Guarantee may from time to time enter into transactions in 
which the Holder of the Payment Guarantee agrees to sell to another 
party Foreign Financial Institution Letter(s) of Credit and, if 
applicable, Terms and Conditions Document(s), secured by the Payment 
Guarantee, and repurchase the same Foreign Financial Institution 
Letter(s) of Credit and Terms and Conditions Documents secured by the 
Payment Guarantee, on demand or date certain at an agreed upon price.
    SAM (System for Award Management). A Federal Government owned and 
operated free Web site that contains information on parties excluded 
from receiving Federal contracts or certain subcontracts and excluded 
from certain types of Federal financial and nonfinancial assistance and 
benefits.
    Terms and Conditions Document. A document specifically identified 
and referred to in the Foreign Financial Institution Letter of Credit 
which may contain the Repayment Obligation and other special 
requirements specified in Sec.  1493.90.
    United States or U.S. Each of the States of the United States, the 
District of Columbia, Puerto Rico, and the territories and possessions 
of the United States.
    U.S. Agricultural Commodity or U.S. Agricultural Commodities. 
(1)(i) An agricultural commodity or product entirely produced in the 
United States; or
    (ii) A product of an agricultural commodity--
    (A) 90 percent or more of the agricultural components of which by 
weight, excluding packaging and added water, is entirely produced in 
the United States; and
    (B) That the Secretary determines to be a high value agricultural 
product.
    (2) For purposes of this definition, fish entirely produced in the 
United States include fish harvested by a documented fishing vessel as 
defined in title 46, United States Code, in waters that are not waters 
(including the territorial sea) of a foreign country.
    USDA. United States Department of Agriculture.
    U.S. Financial Institution. A financial institution (including U.S. 
branches of Foreign Financial Institutions):
    (1) Organized and licensed under the laws of a jurisdiction within 
the United States;
    (2) Domiciled in the United States; and
    (3) Subject to the banking or other financial regulatory authority 
jurisdiction within the United States.
    Weighted Average Export Date. The mean Date of Export for all 
exports within a 30 calendar day period, weighted by the guaranteed 
portion of the Exported Value of each export.


Sec.  1493.30  Information required for Exporter participation.

    Exporters must apply and be approved by CCC to be eligible to 
participate in the GSM-102 Program.

[[Page 79272]]

    (a) Qualification requirements. To qualify for participation in the 
GSM-102 program, an applicant must submit the following information to 
CCC in the manner specified on the USDA Web site:
    (1) For the applicant:
    (i) The name and full U.S. address (including the full 9-digit zip 
code) of the applicant's office, along with an indication of whether 
the address is a business or private residence. A post office box is 
not an acceptable address. If the applicant has multiple offices, the 
address included in the information should be that which is pertinent 
to the GSM-102 export sales contemplated by the applicant;
    (ii) Dun and Bradstreet (DUNS) number;
    (iii) Employer Identification Number (EIN--also known as a Federal 
Tax Identification Number);
    (iv) Telephone and fax numbers;
    (v) Email address (if applicable);
    (vi) Business Web site (if applicable);
    (vii) Contact name;
    (viii) Statement indicating whether the applicant is a U.S. 
domestic entity or a foreign entity domiciled in the United States; and
    (ix) The form of business entity of the applicant (e.g., sole 
proprietorship, partnership, corporation, etc.) and the U.S. 
jurisdiction under which such entity is organized and authorized to 
conduct business. Such jurisdictions are a U.S. State, the District of 
Columbia, Puerto Rico, and the territories and possessions of the 
United States. Upon request by CCC, the applicant must provide written 
evidence that such entity has been organized in a U.S. State, the 
District of Columbia, Puerto Rico, or a territory or possession of the 
United States.
    (2) For the applicant's headquarters office:
    (i) The name and full address of the applicant's headquarters 
office. A post office box is not an acceptable address; and
    (ii) Telephone and fax numbers.
    (3) For the applicant's agent for the service of process:
    (i) The name and full U.S. address of the applicant's agent's 
office, along with an indication of whether the address is a business 
or private residence;
    (ii) Telephone and fax numbers;
    (iii) Email address (if applicable); and
    (iv) Contact name.
    (4) A description of the applicant's business. Applicants must 
provide the following information:
    (i) Nature of the applicant's business (e.g., agricultural 
producer, commodity trader, consulting firm, etc.);
    (ii) Explanation of the applicant's experience/history with U.S. 
Agricultural Commodities for the preceding three years, including a 
description of such commodities;
    (iii) Explanation of the applicant's experience/history exporting 
U.S. Agricultural Commodities, including number of years involved in 
exporting, types of products exported, and destination of exports for 
the preceding three years; and
    (iv) Whether or not the applicant is a ``small or medium 
enterprise'' (SME) as defined on the USDA Web site;
    (5) A listing of any related companies (e.g., Affiliates, 
subsidiaries, or companies otherwise related through common ownership) 
currently qualified to participate in CCC export programs;
    (6) A statement describing the applicant's participation, if any, 
during the past three years in U.S. Government programs, contracts or 
agreements; and
    (7) A statement that: ``All certifications set forth in 7 CFR 
1493.60(a) are hereby made in this application'' which, when included 
in the application, will constitute a certification that the applicant 
is in compliance with all of the requirements set forth in Sec.  
1493.60(a). The applicant will be required to provide further 
explanation or documentation if not in compliance with these 
requirements or if the application does not include this statement.
    (b) Qualification notification. CCC will promptly notify applicants 
that have submitted information required by this section whether they 
have qualified to participate in the program or whether further 
information is required by CCC. Any applicant failing to qualify will 
be given an opportunity to provide additional information for 
consideration by the Director.
    (c) Previous qualification. Any Exporter not submitting an 
application to CCC for a Payment Guarantee for two consecutive U.S. 
Government fiscal years must resubmit a qualification application 
containing the information specified in Sec.  1493.30(a) to CCC to 
participate in the GSM-102 program. If at any time the information 
required by paragraph (a) of this section changes, the Exporter must 
promptly contact CCC to update this information and certify that the 
remainder of the information previously provided pursuant to paragraph 
(a) has not changed.
    (d) Ineligibility for program participation. An applicant may be 
ineligible to participate in the GSM-102 program if such applicant 
cannot provide all of the information and certifications required by 
Sec.  1493.30(a).


Sec.  1493.40  Information required for U.S. Financial Institution 
participation.

    U.S. Financial Institutions must apply and be approved by CCC to be 
eligible to participate in the GSM-102 Program.
    (a) Qualification requirements. To qualify for participation in the 
GSM-102 Program, a U.S. Financial Institution must submit the following 
information to CCC in the manner specified on the USDA Web site:
    (1) Legal name and address of the applicant;
    (2) Dun and Bradstreet (DUNS) number;
    (3) Employer Identification Number (EIN--also known as a Federal 
Tax Identification Number);
    (4) Year-end audited financial statements for the applicant's most 
recent fiscal year;
    (5) Breakdown of the applicant's ownership as follows:
    (i) Ten largest individual shareholders and ownership percentages;
    (ii) Percentage of government ownership, if any; and
    (iii) Identity of the legal entity or person with ultimate control 
or decision making authority, if other than the majority shareholder.
    (6) Organizational structure (independent, or a subsidiary, 
Affiliate, or branch of another financial institution);
    (7) Documentation from the applicable United States Federal or 
State agency demonstrating that the applicant is either licensed or 
chartered to do business in the United States;
    (8) Name of the agency that regulates the applicant and the name 
and telephone number of the primary contact for such regulator; and
    (9) A statement that: ``All certifications set forth in 7 CFR Sec.  
1493.60 are hereby made in this application'' which, when included in 
the application, will constitute a certification that the applicant is 
in compliance with all of the requirements set forth in Sec.  1493.60. 
The applicant will be required to provide further explanation or 
documentation if not in compliance with these requirements or if the 
application does not include this statement.
    (b) Qualification notification. CCC will notify applicants that 
have submitted information required by this section whether they have 
qualified to participate in the program or whether further information 
is required by CCC. Any applicant failing to qualify will be given an 
opportunity to provide additional information for consideration by the 
Director.
    (c) Previous qualification. Any U.S. Financial Institution not 
participating in

[[Page 79273]]

the GSM-102 program for two consecutive U.S. Government fiscal years 
must resubmit a qualification application containing the information 
specified in Sec.  1493.40(a) to CCC to participate in the GSM-102 
program. If at any time the information required by paragraph (a) of 
this section changes, the U.S. Financial Institution must promptly 
contact CCC to update this information and certify that the remainder 
of the information previously provided pursuant to paragraph (a) has 
not changed.
    (d) Ineligibility for program participation. A U.S. Financial 
Institution may be deemed ineligible to participate in the GSM-102 
Program if such applicant cannot provide all of the information and 
certifications required by Sec.  1493.40(a).


Sec.  1493.50  Information required for Foreign Financial Institution 
participation.

    Foreign Financial Institutions must apply and be approved by CCC to 
be eligible to participate in the GSM-102 Program.
    (a) Qualification requirements. To qualify for participation in the 
GSM-102 program, a Foreign Financial Institution must submit the 
following information to CCC in the manner specified on the USDA Web 
site:
    (1) Legal name and address of the applicant;
    (2) Year end, audited financial statements in accordance with the 
accounting standards established by the applicant's regulators, in 
English, for the applicant's three most recent fiscal years. If the 
applicant is not subject to a banking or other financial regulatory 
authority, year-end, audited financial statements in accordance with 
prevailing accounting standards, in English, for the applicant's three 
most recent fiscal years;
    (3) Breakdown of applicant's ownership as follows:
    (i) Ten largest individual shareholders and ownership percentages;
    (ii) Percentage of government ownership, if any; and
    (iii) Identity of the legal entity or person with ultimate control 
or decision making authority, if other than the majority shareholder.
    (4) Organizational structure (independent, or a subsidiary, 
Affiliate, or branch of another legal entity);
    (5) Name of foreign government agency that regulates the applicant; 
and
    (6) A statement that: ``All certifications set forth in 7 CFR 
1493.60 are hereby made in this application'' which, when included in 
the application, will constitute a certification that the applicant is 
in compliance with all of the requirements set forth in Sec.  1493.60. 
The applicant will be required to provide further explanation or 
documentation if not in compliance with these requirements or if the 
application does not include this statement.
    (b) Qualification notification. CCC will notify applicants that 
have submitted information required by this section whether they have 
qualified to participate in the program or whether further information 
is required by CCC. Any applicant failing to qualify will be given an 
opportunity to provide additional information for consideration by the 
Director.
    (c) Participation limit. If, after review of the information 
submitted and other publicly available information, CCC determines that 
the Foreign Financial Institution is eligible for participation, CCC 
will establish a dollar participation limit for the institution. This 
limit will be the maximum amount of exposure CCC agrees to undertake 
with respect to this Foreign Financial Institution at any point in 
time. CCC may change or cancel this dollar participation limit at any 
time based on any information submitted or any publicly available 
information.
    (d) Previous qualification and submission of annual financial 
statements. Each qualified Foreign Financial Institution shall submit 
annually to CCC its audited fiscal year-end financial statements in 
accordance with the accounting standards established by the applicant's 
regulators, in English, so that CCC may determine the continued ability 
of the Foreign Financial Institution to adequately service CCC 
guaranteed debt. If the Foreign Financial Institution is not subject to 
a banking or other financial regulatory authority, it should submit 
year-end, audited financial statements in accordance with prevailing 
accounting standards, in English, for the applicant's most recent 
fiscal year. Failure to submit this information annually may cause CCC 
to decrease or cancel the Foreign Financial Institution's dollar 
participation limit. Any Foreign Financial Institution not 
participating in the GSM-102 program for two consecutive U.S. 
Government fiscal years may have its dollar participation limit 
cancelled. If this participation limit is cancelled, the Foreign 
Financial Institution must resubmit the information and certifications 
requested in paragraph (a) of this section to CCC when reapplying for 
participation. Additionally, if at any time the information required by 
paragraph (a) of this section changes, the Foreign Financial 
Institution must promptly contact CCC to update this information and 
certify that the remainder of the information previously provided under 
paragraph (a) has not changed.
    (e) Ineligibility for program participation. A Foreign Financial 
Institution may be deemed ineligible to participate in the GSM-102 
program if:
    (1) Such applicant cannot provide all of the information and 
certifications required in Sec.  1493.50(a); or
    (2) Based upon information submitted by the applicant or other 
publicly available sources, CCC determines that the applicant cannot 
adequately service the debt associated with the Payment Guarantees 
issued by CCC.


Sec.  1493.60  Certifications required for program participation.

    (a) When making the statement required by Sec. Sec.  1493.30(a)(7), 
1493.40(a)(9), or 1493.50(a)(6), each Exporter, U.S. Financial 
Institution and Foreign Financial Institution applicant for program 
participation is certifying that, to the best of its knowledge and 
belief:
    (1) The applicant and any of its principals (as defined in 2 CFR 
180.995) or affiliates (as defined in 2 CFR 180.905) are not presently 
debarred, suspended, proposed for debarment, declared ineligible, or 
excluded from covered transactions by any U.S. Federal department or 
agency;
    (2) The applicant and any of its principals (as defined in 2 CFR 
180.995) or affiliates (as defined in 2 CFR 180.905) have not within a 
three-year period preceding this application been convicted of or had a 
civil judgment rendered against them for commission of fraud or a 
criminal offense in connection with obtaining, attempting to obtain, or 
performing a public (Federal, State, or local) transaction or contract 
under a public transaction; violation of Federal or State antitrust 
statues or commission of embezzlement, theft, forgery, bribery, 
falsification or destruction of records, making false statements, or 
receiving stolen property;
    (3) The applicant and any of its principals (as defined in 2 CFR 
180.995) or affiliates (as defined in 2 CFR 180.905) are not presently 
indicted for or otherwise criminally or civilly charged by a 
governmental entity (Federal, State or local) with commission of any of 
the offenses enumerated in paragraph (a)(2) of this section;
    (4) The applicant and any of its principals (as defined in 2 CFR 
180.995) or affiliates (as defined in 2 CFR 180.905) have not within a 
three-year period preceding this application had

[[Page 79274]]

one or more public transactions (Federal, State or local) terminated 
for cause or default;
    (5) The applicant does not have any outstanding nontax debt to the 
United States that is in delinquent status as provided in 31 CFR 
285.13;
    (6) The applicant is not controlled by a person owing an 
outstanding nontax debt to the United States that is in delinquent 
status as provided in 31 CFR 285.13 (e.g., a corporation is not 
controlled by an officer, director, or shareholder who owes a debt); 
and
    (7) The applicant does not control a person owing an outstanding 
nontax debt to the United States that is in delinquent status as 
provided in 31 CFR 285.13 (e.g., a corporation does not control a 
wholly-owned or partially-owned subsidiary which owes a debt).
    (b) Additional certifications for U.S. and Foreign Financial 
Institution applicants. When making the statement required by Sec.  
1493.40(a)(9) or Sec.  1493.50(a)(6), each U.S. and Foreign Financial 
Institution applicant for program participation is certifying that, to 
the best of its knowledge and belief:
    (1) The applicant and its Principals are in compliance with all 
requirements, restrictions and guidelines as established by the 
applicant's regulators; and
    (2) All U.S. operations of the applicant and its U.S. Principals 
are in compliance with U.S. anti-money laundering and terrorist 
financing statutes including, but not limited to, the USA Patriot Act 
of 2001, and the Foreign Corrupt Practices Act of 1977.


Sec.  1493.70  Application for Payment Guarantee.

    (a) A Firm Export Sales Contract for an Eligible Export Sale must 
exist before an Exporter may submit an application for a Payment 
Guarantee. Upon request by CCC, the Exporter must provide evidence of a 
Firm Export Sales Contract. An application for a Payment Guarantee must 
be submitted in writing to CCC in the manner specified on the USDA Web 
site. An application must identify the name and address of the Exporter 
and include the following information:
    (1) Name of the destination country or region. If the destination 
is a region, indicate the country or countries within the region to 
which the U.S. Agricultural Commodity will be exported.
    (2) Name and address of the Importer. If the Importer is not 
physically located in the country or region of destination, it must 
have an Importer's Representative in the country or region of 
destination taking receipt of the U.S. Agricultural Commodities 
exported under the Payment Guarantee. If applicable, provide the name 
and address of the Importer's Representative.
    (3) A statement that the U.S. Agricultural Commodity will be 
shipped directly to the Importer (or to the Importer's Representative, 
if applicable) in the destination country or region.
    (4) Name and address of the party on whose request the Letter of 
Credit is issued, if other than the Importer.
    (5) Name and address of the Intervening Purchaser, if any.
    (6) Date of Sale.
    (7) Exporter's sale number.
    (8) Delivery period as agreed between the Exporter and the 
Importer.
    (9) A full description of the U.S. Agricultural Commodity 
(including packaging, if any). The commodity grade and quality 
specified in the Exporter's application for the Payment Guarantee must 
be consistent with the commodity grade and quality specified in the 
Firm Export Sales Contract and the Foreign Financial Institution Letter 
of Credit.
    (10) Mean quantity, contract loading tolerance and, if necessary, a 
request for CCC to reserve coverage up to the maximum quantity 
permitted.
    (11) Unit sales price of the U.S. Agricultural Commodity, or a 
mechanism to establish the price, as agreed between the Exporter and 
the Importer. If the commodity was sold on the basis of CFR or CIF, the 
actual (if known at the time of application) or estimated value of 
freight and, in the case of sales made on a CIF basis, the actual (if 
known at the time of application) or estimated value of marine and war 
risk insurance, must be specified.
    (12) Description and value of Discounts and Allowances, if any.
    (13) Port Value (includes upward loading tolerance, if any).
    (14) Guaranteed Value.
    (15) Guarantee fee, either as announced on the Web site per Sec.  
1493.110(a)(1), or the competitive fee bid per Sec.  1493.110(a)(2), 
depending on the type of fee charged by CCC for the country or region.
    (16) Name and location of the Foreign Financial Institution issuing 
the Letter of Credit and, upon request by CCC, written evidence that 
the Foreign Financial Institution has agreed to issue the Letter of 
Credit.
    (17) The term length for the credit being extended and the 
intervals between principal payments for each shipment to be made under 
the export sale.
    (18) A statement indicating whether any portion of the export sale 
for which the Exporter is applying for a Payment Guarantee is also 
being used as the basis for an application for participation in USDA's 
Dairy Export Incentive Program (DEIP). The number of the Agreement 
assigned by USDA under the DEIP should be included, as applicable.
    (19) The Exporter's statement, ``All certifications set forth in 7 
CFR 1493.80 are hereby being made by the Exporter in this 
application.'' which, when included in the application by the Exporter, 
will constitute a certification that it is in compliance with all the 
requirements set forth in Sec.  1493.80.
    (b) An application for a Payment Guarantee may be approved as 
submitted, approved with modifications agreed to by the Exporter, or 
rejected by the Director. In the event that the application is 
approved, the Director will cause a Payment Guarantee to be issued in 
favor of the Exporter. Such Payment Guarantee will become effective at 
the time specified in Sec.  1493.100(b). If, based upon a price review, 
the unit sales price of the commodity does not fall within the 
prevailing commercial market level ranges, as determined by CCC, the 
application will not be approved.


Sec.  1493.80  Certification requirements for obtaining Payment 
Guarantee.

    By providing the statement in Sec.  1493.70(a)(19), the Exporter is 
certifying that the information provided in the application is true and 
correct and, further, that all requirements set forth in this section 
have been met. The Exporter will be required to provide further 
explanation or documentation with regard to applications that do not 
include this statement. If the Exporter makes false certifications with 
respect to a Payment Guarantee, CCC will have the right, in addition to 
any other rights provided under this subpart or otherwise as a matter 
of law, to revoke guarantee coverage for any commodities not yet 
exported and/or to commence legal action and/or administrative 
proceedings against the Exporter. The Exporter, in submitting an 
application for a Payment Guarantee and providing the statement set 
forth in Sec.  1493.70(a)(19), certifies that:
    (a) The commodity or product covered by the Payment Guarantee is a 
U.S. Agricultural Commodity;
    (b) There have not been any corrupt payments or extra sales 
services or other items extraneous to the transaction provided, 
financed, or guaranteed in connection with the transaction, and the 
transaction complies with applicable United States law, including the 
Foreign

[[Page 79275]]

Corrupt Practices Act of 1977 and other anti-bribery measures;
    (c) If the U.S. Agricultural Commodity is vegetable oil or a 
vegetable oil product, that none of the agricultural commodity or 
product has been or will be used as a basis for a claim of a refund, as 
drawback, pursuant to section 313 of the Tariff Act of 1930, 19 U.S.C. 
1313, of any duty, tax or fee imposed under Federal law on an imported 
commodity or product;
    (d) At the time of submission of the application for Payment 
Guarantee, neither the Importer nor the Intervening Purchaser, if 
applicable, is present on either the SAM or the OFAC Specially 
Designated Nationals (SDN) lists;
    (e) The Exporter is fully in compliance with the requirements of 
Sec.  1493.130(b) for all existing Payment Guarantees issued to the 
Exporter or has requested and been granted an extension per Sec.  
1493.130(b)(3); and
    (f) The information provided pursuant to Sec.  1493.30 has not 
changed and the Exporter still meets all of the qualification 
requirements of Sec.  1493.30.


Sec.  1493.90  Special requirements of the Foreign Financial 
Institution Letter of Credit and the Terms and Conditions Document, if 
applicable.

    (a) Permitted mechanisms to document special requirements. (1) A 
Foreign Financial Institution Letter of Credit is required in 
connection with the export sale to which CCC's Payment Guarantee 
pertains. The Letter of Credit must stipulate presentation of at least 
one original clean on board bill of lading as a required document.
    (2) The use of a Terms and Conditions Document is optional. The 
Terms and Conditions Document, if any, must be specifically identified 
and referred to in the Foreign Financial Institution Letter of Credit.
    (3) The special requirements in paragraph (b) of this section must 
be documented in one of the two following ways:
    (i) The special requirements may be set forth in the Foreign 
Financial Institution Letter of Credit as a special instruction from 
the Foreign Financial Institution; or
    (ii) The special requirements may be set forth in a separate Terms 
and Conditions Document.
    (b) Special requirements. The following provisions are required and 
must be documented in accordance with paragraph (a) of this section:
    (1) The terms of the Repayment Obligation, including a specific 
promise by the Foreign Financial Institution issuing the Letter of 
Credit to pay the Repayment Obligation;
    (2) The following language: ``In the event that the Commodity 
Credit Corporation (``CCC'') is subrogated to the position of the 
obligee hereunder, this instrument shall be governed by and construed 
in accordance with the laws of the State of New York, excluding its 
conflict of laws principles. In such case, any legal action or 
proceeding arising under this instrument will be brought exclusively in 
the U.S. District Court for the Southern District of New York or the 
U.S. District Court for the District of Columbia, as determined by CCC, 
and such parties hereby irrevocably consent to the personal 
jurisdiction and venue therein.'';
    (3) A provision permitting the Holder of the Payment Guarantee to 
declare all or any part of the Repayment Obligation, including accrued 
interest, immediately due and payable, in the event a payment default 
occurs under the Letter of Credit or, if applicable, the Terms and 
Conditions Document; and
    (4) Post Default Interest terms.


Sec.  1493.100  Terms and requirements of the Payment Guarantee.

    (a) CCC's obligation. The Payment Guarantee will provide that CCC 
agrees to pay the Holder of the Payment Guarantee an amount not to 
exceed the Guaranteed Value, plus Eligible Interest, in the event that 
the Foreign Financial Institution fails to pay under the Foreign 
Financial Institution Letter of Credit and, if applicable, the Terms 
and Conditions Document. Payment by CCC will be in U.S. dollars.
    (b) Period of guarantee coverage. (1) The Holder of the Payment 
Guarantee may, with respect to a series of shipments made within a 30 
calendar day period, elect to have the Payment Guarantee coverage being 
on the Weighted Average Export Date for such shipments. The first 
allowable 30 calendar day period for bundling of shipments to compute 
the Weighted Average Export Date for such shipments begins on the first 
Date of Export for transactions covered by the Payment Guarantee. 
Shipments within each subsequent 30 calendar day period may be bundled 
with other shipments made within the same 30 calendar period to 
determine the Weighted Average Export Date for such shipments.
    (2)(i) The period of coverage under the Payment Guarantee begins on 
the earlier of the following dates and will continue during the credit 
term specified on the Payment Guarantee or any amendments thereto:
    (A) the Date(s) of Export or the Weighted Average Export Date(s), 
as selected by the Holder of the Payment Guarantee consistent with 
paragraph (b)(1) of this section; or
    (B) the date when Ordinary Interest begins to accrue, or the 
weighted average date when interest begins to accrue.
    (ii) However, the Payment Guarantee becomes effective on the 
Date(s) of Export of the U.S. Agricultural Commodities specified in the 
Exporter's application for the Payment Guarantee.
    (c) Terms of the CCC Payment Guarantee. The terms of CCC's coverage 
will be set forth in the Payment Guarantee, as approved by CCC, and 
will include the provisions of this subpart, which may be supplemented 
by any Program Announcements and notices to participants in effect at 
the time the Payment Guarantee is approved by CCC.
    (d) Final date to export. The final date to export shown on the 
Payment Guarantee will be one month, as determined by CCC, after the 
contractual deadline for shipping.
    (e) Reserve coverage for loading tolerances. The Exporter may apply 
for a Payment Guarantee and, if coverage is available, pay the 
guarantee fee, based on the mean of the lower and upper loading 
tolerances of the Firm Export Sales Contract; however, the Exporter may 
also request that CCC reserve additional guarantee coverage to 
accommodate up to the amount of the upward loading tolerance specified 
in the Firm Export Sales Contract. The amount of coverage that can be 
reserved to accommodate the upward loading tolerance is limited to ten 
(10) percent of the Port Value of the sale. If such additional 
guarantee coverage is available at the time of application and the 
Director determines to make such reservation, CCC will so indicate to 
the Exporter. In the event that the Exporter ships a quantity greater 
than the amount on which the guarantee fee was paid (i.e., the mean of 
the upper and lower loading tolerances), it may obtain the additional 
coverage from CCC, up to the amount of the upward loading tolerance, by 
filing for an application for amendment to the Payment Guarantee, and 
by paying the additional amount of fee applicable. If such application 
for an amendment to the Payment Guarantee is not filed with CCC by the 
Exporter and the additional fee not received by CCC within 21 calendar 
days after the date of the last export against the Payment Guarantee, 
CCC will cancel the reserve coverage originally set aside for the 
Exporter.
    (f) Certain export sales are ineligible for GSM-102 Payment 
Guarantees. (1) An export sale (or any portion thereof) is ineligible 
for Payment Guarantee

[[Page 79276]]

coverage if at any time CCC determines that:
    (1) The commodity is not a U.S. Agricultural Commodity;
    (2) The export sale includes corrupt payments or extra sales or 
services or other items extraneous to the transactions provided, 
financed, or guaranteed in connection with the export sale;
    (3) The export sale does not comply with applicable U.S. law, 
including the Foreign Corrupt Practices Act of 1977 and other anti-
bribery measures;
    (4) If the U.S. Agricultural Commodity is vegetable oil or a 
vegetable oil product, any of the agricultural commodity or product has 
been or will be used as a basis for a claim of a refund, as drawback, 
pursuant to section 313 of the Tariff Act of 1930, 19 U.S.C. 1313, of 
any duty, tax or fee imposed under Federal law on an imported commodity 
or product;
    (5) Either the Importer or the Intervening Purchaser, if any, is 
excluded or disqualified from participation in U.S. government 
programs;
    (6) The export sale has been guaranteed by CCC under another 
Payment Guarantee; or
    (7) The sale is not an Eligible Export Sale.
    (g) Certain exports of U.S. Agricultural Commodities are ineligible 
for Payment Guarantee coverage. The following exports are ineligible 
for coverage under a GSM-102 Payment Guarantee except where it is 
determined by the Director to be in the best interest of CCC to provide 
guarantee coverage on such exports:
    (1) Exports of U.S. Agricultural Commodities with a Date of Export 
prior to the date of receipt by CCC of the Exporter's written 
application for a Payment Guarantee;
    (2) Exports of U.S. Agricultural Commodities with a Date of Export 
later than the final date to export shown on the Payment Guarantee or 
any amendments thereof; or
    (3) Exports of U.S. Agricultural Commodities where the date of 
issuance of a Foreign Financial Institution Letter of Credit is later 
than 30 calendar days after:
    (i) The Date of Export, or
    (ii) The Weighted Average Export Date, if the Holder of the Payment 
Guarantee has elected to have the Payment Guarantee coverage begin on 
the Weighted Average Export Date.
    (h) Additional requirements. The Payment Guarantee may contain such 
additional terms, conditions, and limitations as deemed necessary or 
desirable by the Director. Such additional terms, conditions or 
qualifications as stated in the Payment Guarantee are binding on the 
Exporter and the Assignee.
    (i) Amendments. A request for an amendment of a Payment Guarantee 
may be submitted only by the Exporter, with the written concurrence of 
the Assignee, if any. The Director will consider such a request only if 
the amendment sought is consistent with this subpart and any applicable 
Program Announcements and sufficient budget authority exists. Any 
amendment to the Payment Guarantee, particularly those that result in 
an increase in CCC's liability under the Payment Guarantee, may result 
in an increase in the guarantee fee. CCC reserves the right to request 
additional information from the Exporter to justify the request and to 
charge a fee for amendments. Such fees will be announced and available 
on the USDA Web site. Any request to amend the Foreign Financial 
Institution on the Payment Guarantee will require that the Holder of 
the Payment Guarantee resubmit to CCC the certifications in Sec.  
1493.120(c)(1)(i) or Sec.  1493.140(d).


Sec.  1493.110  Guarantee fees.

    (a) Guarantee fee rates. Payment Guarantee fee rates charged may be 
one of the following two types:
    (1) Those that are announced on the USDA Web site and are based 
upon the length of the payment terms provided for in the Firm Export 
Sales Contract, the degree of risk that CCC assumes, as determined by 
CCC, and any other factors which CCC determines appropriate for 
consideration.
    (2) Those where Exporters are invited to submit a competitive bid 
for coverage. If CCC determines to offer coverage on a competitive fee 
bid basis, instructions for bidding, and minimum fee rates, if 
applicable, will be made available on the USDA Web site. Under a 
competitive bidding process, the final guarantee fee rate will be 
determined by CCC and will be advised to the Exporter.
    (b) Calculation of fee. The guarantee fee will be computed by 
multiplying the Guaranteed Value by the guarantee fee rate.
    (c) Payment of fee. The Exporter shall remit, with his application, 
the full amount of the guarantee fee. Applications will not be accepted 
until the guarantee fee has been received by CCC. The Exporter's wire 
transfer or check for the guarantee fee shall be made payable to CCC 
and be submitted in the manner specified on the USDA Web site.
    (d) Refunds of fee. Guarantee fees paid in connection with 
applications that are accepted by CCC will ordinarily not be 
refundable. Once CCC notifies an Exporter of acceptance of an 
application, the fee for that application will not be refunded unless 
the Director determines that such refund will be in the best interest 
of CCC, even if the Exporter withdraws the application prior to CCC's 
issuance of the Payment Guarantee. If CCC does not accept an 
application for a Payment Guarantee or accepts only part of the 
guarantee coverage requested, a full or pro rata refund of the fee will 
be made.


Sec.  1493.120  Assignment of the Payment Guarantee.

    (a) Requirements for assignment. The Exporter may assign the 
Payment Guarantee only to a U.S. Financial Institution approved for 
participation by CCC. The assignment must cover all amounts payable 
under the Payment Guarantee not already paid, may not be made to more 
than one party, and may not, unless approved in advance by CCC, be:
    (1) Made to one party acting for two or more parties, or
    (2) Subject to further assignment.
    (b) CCC to receive notice of assignment of payment guarantee. A 
notice of assignment signed by the parties thereto must be filed with 
CCC by the Assignee in the manner specified on the USDA Web site. The 
name and address of the Assignee must be included on the written notice 
of assignment. The notice of assignment should be received by CCC 
within 30 calendar days of the date of assignment.
    (c) Required certifications. (1) The U.S. Financial Institution 
must include the following certification on the notice of assignment: 
``I certify that:
    (i) [Name of Assignee] has verified that the Foreign Financial 
Institution, at the time of submission of the notice of assignment, is 
not present on either the SAM or OFAC Specially Designated Nationals 
(SDN) lists; and
    (ii) To the best of my knowledge and belief, the information 
provided pursuant to Sec.  1493.40 has not changed and [name of 
Assignee] still meets all of the qualification requirements of Sec.  
1493.40.''
    (2) If the Assignee makes a false certification with respect to a 
Payment Guarantee, CCC may, in its sole discretion, in addition to any 
other action available as a matter of law, rescind and cancel the 
Payment Guarantee, reject the assignment of the Payment Guarantee, and/
or commence legal action and/or administrative proceedings against the 
Assignee.
    (d) Notice of eligibility to receive assignment. In cases where a 
U.S. Financial Institution is determined to be

[[Page 79277]]

ineligible to receive an assignment, in accordance with paragraph (e) 
of this section, CCC will provide notice thereof to the U.S. Financial 
Institution and to the Exporter issued the Payment Guarantee.
    (e) Ineligibility of U.S. Financial Institutions to receive an 
assignment and proceeds. A U.S. Financial Institution will be 
ineligible to receive an assignment of a Payment Guarantee or the 
proceeds payable under a Payment Guarantee if such U.S. Financial 
Institution:
    (1) At the time of assignment of a Payment Guarantee, is not in 
compliance with all requirements of 1493.40(a); or
    (2) Is the branch, agency, or subsidiary of the Foreign Financial 
Institution issuing the Letter of Credit; or
    (3) Is owned or controlled by an entity that owns or controls the 
Foreign Financial Institution issuing the Letter of Credit; or
    (4) Is the U.S. parent of the Foreign Financial Institution issuing 
the Foreign Financial Institution Letter of Credit; or
    (5) Is owned or controlled by the government of a foreign country 
and the Payment Guarantee has been issued in connection with export 
sales of U.S. Agricultural Commodities to Importers located in such 
foreign country.
    (f) Repurchase agreements. (1) The Holder of the Payment Guarantee 
may enter into a Repurchase Agreement, to which the following 
requirements apply:
    (i) Any repurchase under a Repurchase Agreement by the Holder of 
the Payment Guarantee must be for the entirety of the outstanding 
balance under the associated Repayment Obligation;
    (ii) In the event of a default with respect to the Repayment 
Obligation subject to a Repurchase Agreement, the Holder of the Payment 
Guarantee must immediately effect such repurchase; and
    (iii) The Holder of the Payment Guarantee must file all 
documentation required by Sec. Sec.  1493.160 and 1493.170 in case of a 
default by the Foreign Financial Institution under the Payment 
Guarantee.
    (2) The Holder of the Payment Guarantee shall, within five Business 
Days of execution of a transaction under the Repurchase Agreement, 
notify CCC of the transaction in writing in the manner specified on the 
USDA Web site. Such notification must include the following 
information:
    (i) Name and address of the other party to the Repurchase 
Agreement;
    (ii) A statement indicating whether the transaction executed under 
the Repurchase Agreement is for a fixed term or if it is terminable 
upon demand by either party. If fixed, provide the purchase date and 
the agreed upon date for repurchase. If terminable on demand, provide 
the purchase date only; and
    (iii) The following written certification: ``[Name of Holder of the 
Payment Guarantee] has entered into a Repurchase Agreement that meets 
the provisions of 7 CFR 1493.120(f)(1) and, prior to entering into this 
agreement, verified that [name of other party to the Repurchase 
Agreement] is not present on either the SAM or OFAC Specially 
Designated Nationals (SDN) lists.''
    (3) Failure of the Holder of the Payment Guarantee to comply with 
any of the provisions of Sec.  1493.120(f) will result in CCC annulling 
coverage on the Foreign Financial Institution Letter of Credit and 
Terms and Conditions Document, if applicable, covered by the Payment 
Guarantee.


Sec.  1493.130  Evidence of export.

    (a) Report of export. The Exporter is required to provide CCC an 
evidence of export report for each shipment made under the Payment 
Guarantee. This report must include the following information:
    (1) Payment Guarantee number;
    (2) Evidence of export report number (e.g., Report 1, Report 2) 
reflecting the report's chronological order of submission under the 
particular Payment Guarantee;
    (3) Date of Export;
    (4) Destination country or region. If the sale was registered under 
a regional program, the Exporter must indicate the specific country or 
countries within the region to which the goods were shipped;
    (5) Exporter's sale number;
    (6) Exported Value;
    (7) Quantity;
    (8) A full description of the commodity exported;
    (9) Unit sales price received for the commodity exported and the 
Incoterms 2010 basis (e.g., FOB, CFR, CIF). Where the unit sales price 
at export differs from the unit sales price indicated in the Exporter's 
application for a Payment Guarantee, the Exporter is also required to 
submit a statement explaining the reason for the difference;
    (10) Description and value of Discounts and Allowances, if any;
    (11) Number of the agreement assigned by USDA under the Dairy 
Export Incentive Program (DEIP) if any portion of the export sale was 
also approved for participation in the DEIP;
    (12) The Exporter's statement, ``All certifications set forth in 7 
CFR 1493.140 are hereby being made by the Exporter in this Evidence of 
Export.'' which, when included in the evidence of export by the 
Exporter, will constitute a certification that it is in compliance with 
all the requirements set forth in Sec.  1493.140; and
    (13) In addition to all of the above information, the final 
evidence of export report for the Payment Guarantee must include the 
following:
    (i) The statement ``Exports under the Payment Guarantee have been 
completed.''
    (ii) A statement summarizing the total quantity and value of the 
commodity exported under the Payment Guarantee (i.e., the cumulative 
totals on all numbered evidence of export reports).
    (b) Time limit for submission of evidence of export. (1) The 
Exporter must provide a written report to the CCC in the manner 
specified on the USDA Web site within 21 calendar days of the Date of 
Export.
    (2) If at any time the Exporter determines that no shipments are to 
be made under a Payment Guarantee, the Exporter is required to notify 
CCC in writing no later than the final date to export specified on the 
Payment Guarantee by furnishing the Payment Guarantee number and 
stating ``no exports will be made under the Payment Guarantee.''
    (3) Requests for an extension of the time limit for submitting an 
evidence of export report must be submitted in writing by the Exporter 
to the Director and must include an explanation of why the extension is 
needed. An extension of the time limit may be granted only if such 
extension is requested prior to the expiration of the time limit for 
filing and is determined by the Director to be in the best interests of 
CCC.
    (c) Failure to comply with time limits for submission. CCC will not 
accept any new applications for Payment Guarantees from an Exporter 
under Sec.  1493.70 until the Exporter is fully in compliance with the 
requirements of Sec.  1493.130(b) for all existing Payment Guarantees 
issued to the Exporter or has requested and been granted an extension 
per Sec.  1493.130(b)(3).
    (d) Export sales reporting. Exporters have a mandatory reporting 
responsibility under Section 602 of the Agricultural Trade Act of 1978 
(7 U.S.C. 5712), for exports of certain agricultural commodities and 
products thereof.


Sec.  1493.140  Certification requirements for the evidence of export.

    By providing the statement contained in Sec.  1493.130(a)(12), the 
Exporter is certifying that the information provided in the evidence of 
export report is true and correct and, further, that all

[[Page 79278]]

requirements set forth in this section have been met. The Exporter will 
be required to provide further explanation or documentation with regard 
to reports that do not include this statement. If the Exporter makes 
false certifications with respect to a Payment Guarantee, CCC will have 
the right, in addition to any other rights provided under this subpart 
or otherwise as a matter of law, to annul guarantee coverage for any 
commodities not yet exported and/or to commence legal action and/or 
administrative proceedings against the Exporter. The Exporter, in 
submitting the evidence of export and providing the statement set forth 
in Sec.  1493.130(a)(12), certifies that:
    (a) The agricultural commodity or product exported under the 
Payment Guarantee is a U.S. Agricultural Commodity;
    (b) The U.S. Agricultural Commodity was shipped to the Importer (or 
to the Importer's Representative, if applicable) in the country or 
region specified on the Payment Guarantee;
    (c) There have not been any corrupt payments or extra sales 
services or other items extraneous to the transaction provided, 
financed, or guaranteed in connection with the export sale, and that 
the export sale complies with applicable United States law, including 
the Foreign Corrupt Practices Act of 1977 and other anti-bribery 
measures;
    (d) If the Exporter has not assigned the Payment Guarantee to a 
U.S. Financial Institution, the Exporter has verified that the Foreign 
Financial Institution, at the time of submission of the evidence of 
export report, is not present on either the SAM or OFAC Specially 
Designated Nationals (SDN) lists;
    (e) The transaction is an Eligible Export Sale; and
    (f) The information provided pursuant to Sec. Sec.  1493.30 and 
1493.70 has not changed (except as agreed to and amended by CCC) and 
the Exporter still meets all of the qualification requirements of Sec.  
1493.30.


Sec.  1493.150  Proof of entry.

    (a) Diversion. The diversion of U.S. Agricultural Commodities 
covered by a Payment Guarantee to a country or region other than that 
shown on the Payment Guarantee is prohibited, unless expressly 
authorized in writing by the Director.
    (b) Records of proof of entry. (1) Exporters must obtain and 
maintain records of an official or customary commercial nature that 
demonstrate the arrival of the U.S. Agricultural Commodities exported 
in connection with the GSM-102 program in the country or region that 
was the intended country or region of destination of such commodities. 
At the Director's request, the Exporter must submit to CCC records 
demonstrating proof of entry. Records demonstrating proof of entry must 
be in English or be accompanied by a certified or other translation 
acceptable to CCC. Records acceptable to meet this requirement include 
an original certification of entry signed by a duly authorized customs 
or port official of the importing country, by an agent or 
representative of the vessel or shipline that delivered the U.S. 
Agricultural Commodity to the importing country, or by a private 
surveyor in the importing country, or other documentation deemed 
acceptable by the Director showing:
    (i) That the U.S. Agricultural Commodity entered the importing 
country or region;
    (ii) The identification of the export carrier;
    (iii) The quantity of the U.S. Agricultural Commodity;
    (iv) The kind, type, grade and/or class of the U.S. Agricultural 
Commodity; and
    (v) The date(s) and place(s) of unloading of the U.S. Agricultural 
Commodity in the importing country or region.
    (2) Where shipping documents (e.g., bills of lading) clearly 
demonstrate that the U.S. Agricultural Commodities were shipped to the 
destination country or region, proof of entry verification may be 
provided by the Importer.


Sec.  1493.160  Notice of default.

    (a) Notice of default. If the Foreign Financial Institution issuing 
the Letter of Credit fails to make payment pursuant to the terms of the 
Letter of Credit or the Terms and Conditions Document, the Holder of 
the Payment Guarantee must submit a notice of default to CCC as soon as 
possible, but not later than 5 Business Days after the date that 
payment was due from the Foreign Financial Institution (the due date). 
A notice of default must be submitted in writing to CCC in the manner 
specified on the USDA Web site and must include the following 
information:
    (1) Payment Guarantee number;
    (2) Name of the country or region as shown on the Payment 
Guarantee;
    (3) Name of the defaulting Foreign Financial Institution;
    (4) Payment due date;
    (5) Total amount of the defaulted payment due, indicating 
separately the amounts for principal and Ordinary Interest, and 
including a copy of the repayment schedule with due dates, principal 
amounts and Ordinary Interest rates for each installment;
    (6) Date of the Foreign Financial Institution's refusal to pay, if 
applicable;
    (7) Reason for the Foreign Financial Institution's refusal to pay, 
if known, and copies of any correspondence with the Foreign Financial 
Institution regarding the default.
    (b) Failure to comply with time limit for submission. If the Holder 
of the Payment Guarantee fails to notify CCC of a default within 5 
Business Days, CCC may deny the claim for that default.
    (c) Impact of a default on other existing Payment Guarantees. (1) 
In the event that a Foreign Financial Institution defaults under a 
Repayment Obligation, CCC may declare that such Foreign Financial 
Institution is no longer eligible to provide additional Letters of 
Credit under the GSM-102 Program. If CCC determines that such 
defaulting Foreign Financial Institution is no longer eligible for the 
GSM-102 Program, CCC shall provide written notice of such ineligibility 
to all Exporters and Assignees, if any, having Payment Guarantees 
covering transactions with respect to which the defaulting Foreign 
Financial Institution is expected to issue a Letter of Credit. Receipt 
of written notice from CCC that a defaulting Foreign Financial 
Institution is no longer eligible to provide additional Letters of 
Credit under the GSM-102 Program shall constitute withdrawal of 
coverage of that Foreign Financial Institution under all Payment 
Guarantees with respect to any Letter of Credit issued on or after the 
date of receipt of such written notice. CCC will not withdraw coverage 
of the defaulting Foreign Financial Institution under any Payment 
Guarantee with respect to any Letter of Credit issued before the date 
of receipt of such written notice.
    (2) If CCC withdraws coverage of the defaulting Foreign Financial 
Institution, CCC will permit the Exporter (with concurrence of the 
Assignee, if any) to utilize another approved Foreign Financial 
Institution, and will consider other requested amendments to the 
Payment Guarantee, for the balance of the export sale covered by the 
Payment Guarantee. If no alternate Foreign Financial Institution is 
identified to issue the Letter of Credit within 30 calendar days, CCC 
will cancel the Payment Guarantee and refund the Exporter's guarantee 
fees corresponding to any unutilized portion of the Payment Guarantee.


Sec.  1493.170  Claims for default.

    (a) Filing a claim. A claim by the Holder of the Payment Guarantee 
for a defaulted payment will not be paid if it

[[Page 79279]]

is made later than 180 calendar days from the due date of the defaulted 
payment. A claim must be submitted in writing to CCC in the manner 
specified on the USDA Web site. The claim must include the following 
documents and information:
    (1) An original cover document signed by the Holder of the Payment 
Guarantee and containing the following information:
    (i) Payment Guarantee number;
    (ii) A description of:
    (A) Any payments from or on behalf of the defaulting party or 
otherwise related to the defaulted payment that were received by the 
Exporter or the Assignee prior to submission of the claim; and
    (B) Any security, insurance, or collateral arrangements, whether or 
not any payment has been realized from such security, insurance, or 
collateral arrangement as of the time of claim, from or on behalf of 
the defaulting party or otherwise related to the defaulted payment.
    (iii) The following certifications:
    (A) A certification that the scheduled payment has not been 
received, listing separately scheduled principal and Ordinary Interest;
    (B) A certification of the amount of the defaulted payment, 
indicating separately the amounts for defaulted principal and Ordinary 
Interest;
    (C) A certification that all documents submitted under paragraph 
(3) of this section are true and correct copies; and
    (D) A certification that all documents conforming with the 
requirements for payment under the Foreign Financial Institution Letter 
of Credit have been submitted to the negotiating bank or directly to 
the Foreign Financial Institution under such Letter of Credit.
    (2) An original instrument, in form and substance satisfactory to 
CCC, subrogating to CCC the respective rights of the Holder of the 
Payment Guarantee to the amount of payment in default under the 
applicable export sale. The instrument must reference the applicable 
Foreign Financial Institution Letter of Credit and, if applicable, the 
Terms and Conditions Document; and
    (3) A copy of each of the following documents:
    (i) The repayment schedule with due dates, principal amounts and 
Ordinary Interest rates for each installment (if the Ordinary Interest 
rates for future payments are unknown at the time the claim for default 
is submitted, provide estimates of such rates);
    (ii)(A) The Foreign Financial Institution Letter of Credit securing 
the export sale; and
    (B) if applicable, the Terms and Conditions Document;
    (iii) Depending upon the method of shipment, the negotiable ocean 
carrier or intermodal bill(s) of lading signed by the shipping company 
with the onboard ocean carrier date for each shipment, the airway bill, 
or, if shipped by rail or truck, the bill of lading and the entry 
certificate or similar document signed by an official of the importing 
country;
    (iv)(A) The Exporter's invoice showing, as applicable, the FAS, 
FCA, FOB, CFR or CIF values; or
    (B) If there was an Intervening Purchaser, both the Exporter's 
invoice to the Intervening Purchaser and the Intervening Purchaser's 
invoice to the Importer;
    (v) The evidence of export report(s) previously submitted by the 
Exporter to CCC in conformity with the requirements of Sec.  
1493.130(a); and
    (vi) If the defaulted payment was part of a transaction executed 
under a Repurchase Agreement, written evidence that the repurchase 
occurred as required under Sec.  1493.120(f)(1)(ii).
    (b) Additional documents. If a claim is denied by CCC, the Holder 
of the Payment Guarantee may provide further documentation to CCC to 
establish that the claim is in good order.
    (c) Subsequent claims for defaults on installments. If the initial 
claim is found in good order, the Holder of the Payment Guarantee need 
only provide all of the required claims documents with the initial 
claim relating to a covered transaction. For subsequent claims relating 
to failure of the Foreign Financial Institution to make scheduled 
installments on the same export shipment, the Holder of the Payment 
Guarantee need only submit to CCC a notice of such failure containing 
the information stated in paragraph (a)(1)(i) and (ii) and 
(a)(1)(iii)(A) and (B) of this section; an instrument of subrogation as 
per paragraph (a)(2) of this section; and the date the original claim 
was filed with CCC.
    (d) Alternative satisfaction of Payment Guarantees. CCC may 
establish procedures, terms and/or conditions for the satisfaction of 
CCC's obligations under a Payment Guarantee other than those provided 
for in this subpart if CCC determines that those alternative 
procedures, terms, and/or conditions are appropriate in rescheduling 
the debts arising out of any transaction covered by the Payment 
Guarantee and would not result in CCC paying more than the amount of 
CCC's obligation.


Sec.  1493.180  Payment for default.

    (a) Determination of CCC's liability. Upon receipt in good order of 
the information and documents required under Sec.  1493.170, CCC will 
determine whether or not a default has occurred for which CCC is liable 
under the applicable Payment Guarantee. Such determination shall 
include, but not be limited to, CCC's determination that all 
documentation conforms to the specific requirements contained in this 
subpart, and that all documents submitted for payment conform to the 
requirements of the Letter of Credit and, if applicable, the Terms and 
Conditions Document. If CCC determines that it is liable to the Holder 
of the Payment Guarantee, CCC will pay the Holder of the Payment 
Guarantee in accordance with paragraphs (b) and (c) of this section.
    (b) Amount of CCC's liability. CCC's maximum liability for any 
claims submitted with respect to any Payment Guarantee, not including 
any CCC Late Interest payments due in accordance with paragraph (c) of 
this section, will be limited to the lesser of:
    (1) The Guaranteed Value as stated in the Payment Guarantee, plus 
Eligible Interest, less any payments received or funds realized from 
insurance, security or collateral arrangements prior to claim by the 
Exporter or the Assignee from or on behalf of the defaulting party or 
otherwise related to the obligation in default (other than payments 
between CCC, the Exporter or the Assignee); or
    (2) The guaranteed percentage (as indicated in the Payment 
Guarantee) of the Exported Value indicated in the evidence of export, 
plus Eligible Interest, less any payments received or funds realized 
from insurance, security or collateral arrangements prior to claim by 
the Exporter or the Assignee from or on behalf of the defaulting party 
or otherwise related to the obligation in default (other than payments 
between CCC, the Exporter or the Assignee).
    (c) CCC Late Interest. If CCC does not pay a claim within 15 
Business Days of receiving the claim in good order, CCC Late Interest 
will accrue in favor of the Holder of the Payment Guarantee beginning 
with the sixteenth Business Day after the day of receipt of a complete 
and valid claim found by CCC to be in good order and continuing until 
and including the date that payment is made by CCC. CCC Late Interest 
will be paid on the guaranteed amount, as determined by paragraphs 
(b)(1) and (2) of this section, and will be calculated at a rate equal 
to the average investment rate of the most recent Treasury 91-day bill 
auction as announced by the Department of Treasury as of the due date. 
If there has been no 91-day auction within 90 calendar days of the date 
CCC Late Interest begins to accrue, CCC will

[[Page 79280]]

apply an alternative rate in a manner to be described on the USDA Web 
site.
    (d) Accelerated payments. CCC will pay claims only on amounts not 
paid as scheduled. CCC will not pay claims for amounts due under an 
accelerated payment clause in the Firm Export Sales Contract, the 
Foreign Financial Institution Letter of Credit, the Terms and 
Conditions Document (if applicable), or any obligation owed by the 
Foreign Financial Institution to the Holder of the Payment Guarantee 
that is related to the Letter of Credit issued in favor of the 
Exporter, unless it is determined to be in the best interests of CCC. 
Notwithstanding the foregoing, CCC at its option may declare up to the 
entire amount of the unpaid balance, plus accrued Ordinary Interest, in 
default, require the Holder of the Payment Guarantee to invoke the 
acceleration provision in the Foreign Financial Institution Letter of 
Credit or, if applicable, in the Terms and Conditions Document, require 
submission of all claims documents specified in Sec.  1493.170, and 
make payment to the Holder of the Payment Guarantee in addition to such 
other claimed amount as may be due from CCC.
    (e) Action against the Assignee. If an Assignee submits a claim for 
default pursuant to Section 1493.170 and all documents submitted appear 
on their face to conform with the requirements of such section, CCC 
will not hold the Assignee responsible or take any action or raise any 
defense against the Assignee for any action, omission, or statement by 
the Exporter of which the Assignee has no knowledge.


Sec.  1493.190  Recovery of defaulted payments.

    (a) Notification. Upon claim payment to the Holder of the Payment 
Guarantee, CCC will notify the Foreign Financial Institution of CCC's 
rights under the subrogation agreement to recover all monies in 
default.
    (b) Receipt of monies. (1) In the event that monies related to the 
obligation in default are recovered by the Exporter or the Assignee 
from or on behalf of the defaulting party, the Importer, or any source 
whatsoever (excluding payments among CCC, the Exporter, and the 
Assignee), such monies shall be immediately paid to CCC. Any monies 
derived from insurance or through the liquidation of any security or 
collateral after the claim is filed with CCC shall be deemed recoveries 
that must be paid to CCC. If such monies are not received by CCC within 
15 Business Days from the date of recovery by the Exporter or the 
Assignee, such party will owe to CCC interest from the date of recovery 
to the date of receipt by CCC. This interest will be calculated at a 
rate equal to the latest average investment rate of the most recent 
Treasury 91-day bill auction, as announced by the Department of 
Treasury, in effect on the date of recovery and will accrue from such 
date to the date of payment by the Exporter or the Assignee to CCC. 
Such interest will be charged only on CCC's share of the recovery. If 
there has been no 91-day auction within 90 calendar days of the date 
interest begins to accrue, CCC will apply an alternative rate in a 
manner to be described on the USDA Web site.
    (2) If CCC recovers monies that should be applied to a Payment 
Guarantee for which a claim has been paid by CCC, CCC will pay the 
Holder of the Payment Guarantee its pro rata share, if any, provided 
that the required information necessary for determining pro rata 
distribution has been furnished. If a required payment is not made by 
CCC within 15 Business Days from the date of recovery or 15 business 
days from receiving the required information for determining pro rata 
distribution, whichever is later, CCC will pay interest calculated at a 
rate equal to the latest average investment rate of the most recent 
Treasury 91-day bill auction, as announced by the Department of 
Treasury, in effect on the date of recovery and interest will accrue 
from such date to the date of payment by CCC. The interest will apply 
only to the portion of the recovery payable to the Holder of the 
Payment Guarantee.
    (c) Allocation of recoveries. Recoveries received by CCC from any 
source whatsoever that are related to the obligation in default will be 
allocated by CCC to the Holder of the Payment Guarantee and to CCC on a 
pro rata basis determined by their respective interests in such 
recoveries. The respective interest of each party will be determined on 
a pro rata basis, based on the combined amount of principal and 
interest in default on the date the claim is paid by CCC. Once CCC has 
paid a particular claim under a Payment Guarantee, CCC pro-rates any 
collections it receives and shares these collections proportionately 
with the Holder of the Payment Guarantee until both CCC and the Holder 
of the Payment Guarantee have been reimbursed in full.
    (d) Liabilities to CCC. Notwithstanding any other terms of the 
Payment Guarantee, under the following circumstances the Exporter or 
the Assignee will be liable to CCC for any amounts paid by CCC under 
the Payment Guarantee:
    (1) The Exporter will be liable to CCC when and if it is determined 
by CCC that the Exporter has engaged in fraud, or has been or is in 
material breach of any contractual obligation, certification or 
warranty made by the Exporter for the purpose of obtaining the Payment 
Guarantee or for fulfilling obligations under the GSM-102 program; and
    (2) The Assignee will be liable to CCC when and if it is determined 
by CCC that the Assignee has engaged in fraud or otherwise violated 
program requirements.
    (e) Cooperation in recoveries. Upon payment by CCC of a claim to 
the Holder of the Payment Guarantee, the Holder of the Payment 
Guarantee and the Exporter will cooperate with CCC to effect recoveries 
from the Foreign Financial Institution and/or the Importer. Cooperation 
may include, but is not limited to, submission of documents to the 
Foreign Financial Institution (or its representative) to establish a 
claim; participation in discussions with CCC regarding the appropriate 
course of action with respect to a default; actions related to 
accelerated payments as specified in Sec.  1493.180(d); and other 
actions that do not increase the obligation of the Holder of the 
Payment Guarantee or the Exporter under the Payment Guarantee.


Sec.  1493.191  Additional obligations and requirements.

    (a) Maintenance of records, access to premises, and responding to 
CCC inquiries. For a period of five years after the date of expiration 
of the coverage of a Payment Guarantee, the Exporter and the Assignee, 
if applicable, must maintain and make available all records and respond 
completely to all inquiries pertaining to sales and deliveries of and 
extension of credit for U.S. Agricultural Commodities exported in 
connection with a Payment Guarantee, including those records generated 
and maintained by agents, Intervening Purchasers, and related companies 
involved in special arrangements with the Exporter. The Secretary of 
Agriculture and the Comptroller General of the United States, through 
their authorized representatives, must be given full and complete 
access to the premises of the Exporter and the Assignee, as applicable, 
during regular business hours from the effective date of the Payment 
Guarantee until the expiration of such five-year period to inspect, 
examine, audit, and make copies of the Exporter's, Assignee's, agent's, 
Intervening Purchaser's or related company's books, records and 
accounts concerning transactions relating to the Payment Guarantee, 
including, but not

[[Page 79281]]

limited to, financial records and accounts pertaining to sales, 
inventory, processing, and administrative and incidental costs, both 
normal and unforeseen. During such period, the Exporter and the 
Assignee may be required to make available to the Secretary of 
Agriculture or the Comptroller General of the United States, through 
their authorized representatives, records that pertain to transactions 
conducted outside the program, if, in the opinion of the Director, such 
records would pertain directly to the review of transactions undertaken 
by the Exporter in connection with the Payment Guarantee.
    (b) Responsibility of program participants. It is the 
responsibility of all Exporters and U.S. and Foreign Financial 
Institutions to review, and fully acquaint themselves with, all 
regulations, Program Announcements, and notices to participants 
relating to the GSM-102 program, as applicable. All Exporters and U.S. 
and Foreign Financial Institutions participating in the GSM-102 program 
are hereby on notice that they will be bound by this subpart and any 
terms contained in the Payment Guarantee and in applicable Program 
Announcements.
    (c) Submission of documents by Principals. All required 
submissions, including certifications, applications, reports, or 
requests (i.e., requests for amendments) by Exporters or Assignees 
under this subpart must be signed by a Principal of the Exporter or 
Assignee or their authorized designee(s). In cases where the designee 
is acting on behalf of the Principal, the signature must be accompanied 
by: wording indicating the delegation of authority or, in the 
alternative, by a certified copy of the delegation of authority; and 
the name and title of the authorized person or officer. Further, the 
Exporter or Assignee must ensure that all information and reports 
required under these regulations are timely submitted.
    (d) Misstatements or noncompliance by Exporter may lead to 
rescission of Payment Guarantee. CCC may cancel a Payment Guarantee in 
the event that an Exporter makes a willful misstatement in the 
certifications in Sec. Sec.  1493.80(b) and 1493.140(c) or if the 
Exporter fails to comply with the provisions of Sec.  1493.150 or Sec.  
1493.191(a). However, notwithstanding the foregoing, CCC will not 
cancel its Payment Guarantee, if it determines, in its sole discretion, 
that an Assignee had no knowledge of the Exporter's misstatement or 
noncompliance at the time of assignment of the Payment Guarantee.


Sec.  1493.192  Dispute resolution and appeals.

    (a) Dispute resolution. (1) The Director and the Exporter or the 
Assignee will attempt to resolve any disputes, including any adverse 
determinations made by CCC, arising under the GSM-102 program, this 
subpart, the applicable Program Announcements and notices to 
participants, or the Payment Guarantee.
    (2) The Exporter or the Assignee may seek reconsideration of a 
determination made by the Director by submitting a letter requesting 
reconsideration to the Director within 30 calendar days of the date of 
the determination. For the purposes of this section, the date of a 
determination will be the date of the letter or other means of 
notification to the Exporter or the Assignee of the determination. The 
Exporter or the Assignee may include with the letter requesting 
reconsideration any additional information that it wishes the Director 
to consider in reviewing its request. The Director will respond to the 
request for reconsideration within 30 calendar days of the date on 
which the request or the final documentary evidence submitted by the 
Exporter or the Assignee is received by the Director, whichever is 
later, unless the Director extends the time permitted for response. If 
the Exporter or the Assignee fails to request reconsideration of a 
determination by the Director, then the determination of the Director 
will be deemed final.
    (3) If the Exporter or the Assignee requests reconsideration of a 
determination by the Director pursuant to subparagraph (a)(2) of this 
section, and the Director upholds the original determination, then the 
Exporter or the Assignee may appeal the Director's final determination 
to the GSM in accordance with the procedures set forth in paragraph (b) 
of this section. If the Exporter or the Assignee fails to appeal the 
Director's final determination within 30 calendar days as provided in 
section 1493.192(b)(1), then the Director's decision becomes the final 
determination of CCC.
    (b) Appeal procedures. (1) An Exporter or Assignee that has 
exhausted the procedures set forth in paragraph (a) of this section may 
appeal to the GSM for a determination of the Director. An appeal to the 
GSM must be made in writing and filed with the office of the GSM no 
later than 30 calendar days following the date of the final 
determination by the Director. If the Exporter or Assignee requests an 
administrative hearing in its appeal letter, it shall be entitled to a 
hearing before the GSM or the GSM's designee.
    (2) If the Exporter or Assignee does not request an administrative 
hearing, the Exporter or Assignee must indicate in its appeal letter 
whether or not it will submit any additional written information or 
documentation for the GSM to consider in acting upon its appeal. This 
information or documentation must be submitted to the GSM within 30 
calendar days of the date of the appeal letter to the GSM. The GSM will 
make a decision regarding the appeal based upon the information 
contained in the administrative record. The GSM will issue his or her 
written decision within 60 calendar days of the latter of the date on 
which the GSM receives the appeal or the date that final documentary 
evidence is submitted by the Exporter or Assignee to the GSM.
    (3) If the Exporter or the Assignee has requested an administrative 
hearing, the GSM will set a date and time for the hearing that is 
mutually convenient for the GSM and the Exporter or Assignee. This date 
will ordinarily be within 60 calendar days of the date on which the GSM 
receives the request for a hearing. The hearing will be an informal 
procedure. The Exporter or Assignee and/or its counsel may present any 
relevant testimony or documentary evidence to the GSM. A transcript of 
the hearing will not ordinarily be prepared unless the Exporter or 
Assignee bears the costs involved in preparing the transcript, although 
the GSM may decide to have a transcript prepared at the expense of the 
Government. The GSM will make a decision regarding the appeal based 
upon the information contained in the administrative record. The GSM 
will issue his or her written decision within 60 calendar days of the 
latter of the date of the hearing or the date of receipt of the 
transcript, if one is to be prepared.
    (4) The decision of the GSM will be the final determination of CCC. 
The Exporter or Assignee will be entitled to no further administrative 
appellate rights.
    (c) Failure to comply with determination. If the Exporter or 
Assignee has violated the terms of this subpart or the Payment 
Guarantee by failing to comply with a determination made under this 
section, and the Exporter or Assignee has exhausted its rights under 
this section or has failed to exercise such rights, then CCC will have 
the right to take any measures available to CCC under applicable law.
    (d) Exporter's obligation to perform. The Exporter will continue to 
have an obligation to perform pursuant to the provisions of these 
regulations and the terms of the Payment Guarantee

[[Page 79282]]

pending the conclusion of all procedures under this section.


Sec.  1493.195  Miscellaneous provisions.

    (a) Officials not to benefit. No member of or delegate to Congress, 
or Resident Commissioner, shall be admitted to any share or part of the 
Payment Guarantee or to any benefit that may arise therefrom, but this 
provision shall not be construed to extend to the Payment Guarantee if 
made with a corporation for its general benefit.
    (b) OMB control number assigned pursuant to the Paperwork Reduction 
Act. The information collection requirements contained in this part (7 
CFR part 1493) have been approved by the Office of Management and 
Budget (OMB) in accordance with the provisions of 44 U.S.C. Chapter 35 
and have been assigned OMB Control Number 0551-0004.

    Dated: October 22, 2013.
Philip C. Karsting,
Administrator, Foreign Agricultural Service, and Vice President, 
Commodity Credit Corporation.
[FR Doc. 2013-29439 Filed 12-26-13; 8:45 am]
BILLING CODE 3410-10-P