Facility Guarantee Program, 65509-65529 [2016-22367]

Agencies

• DEPARTMENT OF AGRICULTURE
• Commodity Credit Corporation

[Federal Register Volume 81, Number 184 (Thursday, September 22, 2016)]
[Rules and Regulations]
[Pages 65509-65529]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-22367]



[[Page 65509]]

Vol. 81

Thursday,

No. 184

September 22, 2016

Part III





Department of Agriculture





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Commodity Credit Corporation





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7 CFR Part 1493





Facility Guarantee Program; Final Rule

Federal Register / Vol. 81 , No. 184 / Thursday, September 22, 2016 / 
Rules and Regulations

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DEPARTMENT OF AGRICULTURE

Commodity Credit Corporation

7 CFR Part 1493

RIN 0551-AA73


Facility Guarantee Program

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

ACTION: Final rule with request for comments.

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SUMMARY: This final rule amends the regulations used to administer the 
Facility Guarantee Program (FGP). Under the FGP, the Commodity Credit 
Corporation (CCC) may issue payment guarantees in connection with sales 
of goods or U.S. services to establish or improve agricultural-related 
facilities in emerging markets to expand exports of U.S. agricultural 
commodities or products. This final rule incorporates statutory changes 
from the Food, Conservation, and Energy Act of 2008 and modifications 
intended to reduce the burden on participants and improve program 
efficiency and effectiveness. Certain revisions will ensure the FGP is 
operated in compliance with the Organisation for Economic Co-operation 
and Development (OECD) Arrangement on Officially Supported Export 
Credits. Additionally, this final rule incorporates significant changes 
previously made to the regulations for the Export Credit Guarantee 
Program (GSM-102) that are also applicable to the FGP.

DATES: This rule is effective September 22, 2016. In order to solicit 
views based on program experience, the Foreign Agricultural Service 
(FAS) is providing the public with an additional 180-day comment 
period. FAS will consider comments received and may issue a revised 
final rule based on the comments. To facilitate additional comment, FAS 
has included a list of questions for participants to consider and 
respond to (see ``Questions for Consideration'' section below). 
Comments concerning this final rule must be received by March 21, 2017 
to be assured consideration.

ADDRESSES: Comments may be submitted by any of the following methods:
    [ssquf] Federal eRulemaking Portal: Go to https://www.regulations.gov. Follow the online instructions to submit comments.
    [ssquf] Email: GSMregs@fas.usda.gov.
    [ssquf] Fax: (202) 720-2495, Attention: ``FGP Final Rule 
Comments''.
    [ssquf] 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 final rule is available through the Foreign 
Agricultural Service (FAS) homepage at: https://www.fas.usda.gov/topics/export-financing.

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) Facility Guarantee Program 
(FGP) 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; through the issuance 
of program announcements and notices to participants that are 
consistent with this regulation; and in compliance with the 
requirements of the Organisation for Economic Co-operation and 
Development (OECD) Arrangement on Officially Supported Export Credits, 
where applicable. Under the FGP, CCC provides payment guarantees to 
facilitate the financing of manufactured goods and U.S. services to 
improve or establish agriculture-related facilities in emerging 
markets. By supporting such facilities, the FGP is designed to enhance 
sales of U.S. agricultural commodities and products to emerging markets 
where the demand for such commodities and products may be limited due 
to inadequate storage, processing, handling, or distribution 
capabilities.

Regulatory History

    The previous FGP rule became effective on August 8, 1997. The Food, 
Conservation, and Energy Act of 2008 (Pub. L. 110-246) (2008 Act) 
modified the program by including a ``construction waiver'' that allows 
the Secretary of Agriculture to waive requirements related to the use 
of U.S. goods in the construction of a proposed facility if the 
Secretary determines that ``(A) goods from the United States are not 
available; or (B) the use of goods from the United States is not 
practicable.''
    On August 6, 2009, FAS published an advance notice of proposed 
rulemaking (ANPR) in the Federal Register (74 FR 39240). This document 
was intended to solicit comments on improvements to be made in the 
implementation and operation of the FGP program, with the intent of 
improving the FGP's effectiveness and efficiency and lowering costs. 
FAS received comments to the ANPR from five entities. One of the key 
comments was that program requirements, particularly the application 
process, were too burdensome on participants and effectively precluded 
use of the program. Further, program fees were consistent with those 
charged by the U.S. Export-Import Bank for similar products but 
coverage was inferior.
    FAS issued a proposed rule soliciting public comment on June 15, 
2015 (80 FR 34080). The comments received, as well as FAS's responses, 
are described below. No changes were made to the rule in response to 
these comments.

Summary of Comments Received on Proposed Rule

    Comment: An executive summary describing the program as a 
``product'' and listing its uses would generate more interest.
    Response: FAS included a summary of key program aspects in the 
preamble to this final rule.
    Comment: I assume agricultural equipment exports would be eligible 
for coverage. If so, USDA should highlight this fact.
    Response: In accordance with Section 1542(b)(1) of the Food, 
Agriculture, Conservation and Trade Act of 1990 (FACT Act), as amended 
by the 2008 Act (7 U.S.C. 5622 note), the Secretary of Agriculture must 
determine that the FGP payment guarantee will ``primarily promote the 
export of United States agricultural commodities. . . .'' This 
requirement is also found in this regulation at Sec.  1493.290(g)(4). 
CCC will only consider covering exports of agricultural equipment if 
the transaction would primarily benefit exports of U.S. agricultural 
commodities.
    Comment: CCC should be given the flexibility to waive domestic 
content rules if the project is otherwise qualified.
    Response: Pursuant to section 1542(b)(3) of the FACT Act, as 
amended (7 U.S.C. 5622 note), in certain circumstances ``The Secretary 
may waive any applicable requirements relating to the use of United 
States goods in the construction of a proposed facility . . . .'' This 
rule sets forth the requirements for requesting such a waiver in Sec.  
1493.290(f).

[[Page 65511]]

    Comment: The required 15 percent down payment should include the 
land value and other sufficient security.
    Response: Prior to CCC's issuance of a payment guarantee, the buyer 
is required to make a 15 percent initial payment (down payment) to the 
seller. The initial payment, at minimum, must equal 15 percent of the 
net contract value. The initial payment must be a cash payment from the 
buyer to the seller; it may not simply constitute the value of a 
portion of the project or a revocable security or pledge. The payment 
may be financed separately (outside of the FGP payment guarantee). CCC 
will provide guidance to sellers as needed regarding the initial 
payment.
    Comment: There are several projects in Africa that are excellent 
candidates for this type of program, as the United States is a high-
quality, least-cost producer.
    Comment: I support this program because it will assist U.S. dairy 
exporters in exporting our products.
    Comment: As a U.S. exporter of hardwood logs, lumber, and veneer, a 
line of credit, insurance or grant to open a warehouse in an importing 
country and fill it with our goods could potentially help grow our 
sales into that country.
    Comment: I support the continued use of the Federal Guarantee 
Program as it helps U.S. producers in their efforts to develop export 
business.
    Response: CCC will consider all transactions that meet program 
requirements, including that the proposed transaction will benefit the 
export of U.S. agricultural commodities and is destined for an eligible 
emerging market. FAS will make available on the USDA Web site a list of 
eligible emerging markets under the FGP.

Questions for Consideration

    CCC is providing program participants the opportunity to comment on 
this final rule. In particular, participants are encouraged to utilize 
the FGP and, based on that experience, provide input to CCC on 
potential program improvements and additional modifications to the 
rule. The questions below are designed to facilitate feedback; however, 
participants may comment on any aspect of the regulation or program 
operations.
    Question 1: Does the requirement for a letter of credit hinder the 
FGP program's effectiveness? If so, what other types of financing 
mechanism(s) would be appropriate for this program?
    Question 2: Have you submitted a transaction to CCC for FGP 
coverage (or do you intend to submit a transaction) in which you faced 
difficulties in obtaining alternative financing? If so, in what ways is 
the FGP program different--and potentially more useful--for your 
particular transaction?
    Question 3: Describe any risks you have faced--either under an FGP-
supported transaction or other past transactions--that prevented 
completion of the project. How can CCC assist with reducing or 
eliminating these risks?
    Question 4: If you have used or are familiar with other types of 
facility loan, guarantee or insurance programs, such as programs 
offered by the U.S. Export-Import Bank, the International Finance 
Corporation of the World Bank Group, or others, what are the benefits 
of using the FGP program over these other programs?
    Question 5: How do the FGP program terms (tenor, fees, coverage 
level, etc.) compare to other official government support programs you 
have used (including both U.S. and non-U.S. programs)?
    Question 6: Are the tenor (repayment term) restrictions dictated by 
the OECD Arrangement indicative of the needs in the market for project 
financing?
    Question 7: Would the FGP program be attractive if CCC offered 
coverage of less than 100 percent (or 85 percent after deduction of the 
initial payment)?
    Question 8: Is the required minimum initial payment of 15% an 
appropriate amount to demonstrate genuine interest in moving forward 
with an FGP program transaction--or a deterrent to participating?
    Question 9: Will the 50 percent U.S. content requirement hinder 
your participation in the FGP--even though you can request and receive 
a waiver of the requirement from CCC?
    Question 10: Are the potential participants in the FGP (sellers, 
U.S. financial institutions, and foreign financial institutions) the 
same as under CCC's GSM-102 program? If not, what avenues should CCC 
use to introduce the FGP to a broader or different set of potential 
program users?
    Question 11: Describe any difficulties you had in obtaining 
interest for an FGP transaction from one of CCC's approved U.S. or 
foreign financial institutions.
    Question 12: Has the FGP assisted you in finding new overseas 
buyers, or enhanced your sales with existing buyers? If yes, please 
explain.
    Question 13: How could CCC improve the letter of interest stage of 
the application process? Is there additional information CCC should 
collect from the seller during this stage? If you submitted a letter of 
interest for a transaction, was the feedback you received from CCC 
beneficial?
    Question 14: What suggestions do you have to streamline and 
simplify the payment guarantee application process?
    Question 15: In making the determination of whether a transaction 
will likely primarily benefit U.S. agricultural commodity exports, CCC 
relies on its own internal analysis and consultation with relevant 
external stakeholders. Should CCC request more information from the 
seller in making this determination?
    Question 16: Has your firm been required in the past to conduct an 
environmental and social risk assessment or impact analysis related to 
a project? If so, how did those requirements compare to the guidelines 
and requirements of the OECD and FGP Program?
    Question 17: Please describe any difficulties you faced in adhering 
to the FGP's environmental and social impact requirements--for example, 
in providing required information for the screening document; providing 
the environmental and social impact assessment; or monitoring and 
reporting. What modifications could CCC make to the program to 
alleviate these difficulties?
    Question 18: What suggestions do you have regarding how CCC could 
improve FGP program guidance--in ways that would make the program 
easier to understand and/or would attract additional participants?

Changes to the Final Rule

    CCC made a number of changes in the final rule (from the proposed 
rule), particularly related to environmental and social screening and 
review of projects. Primarily, the final rule includes a more detailed 
explanation of the requirements for submitting information on potential 
environmental and social impacts of a transaction, the timing for 
submitting this information, and related reporting requirements. Key 
aspects of the program and associated requirements in the final rule 
are discussed below. In some instances, the numbering system of this 
final rule differs from that in the proposed rule. For purposes of this 
discussion, the numbering of the final rule is used.

General Program Structure and Operation

    Following the effective date of this final rule, FAS will announce 
on the USDA Web site program allocations for FGP payment guarantees; a 
list of eligible emerging markets; approved U.S. and foreign financial 
institutions; and other relevant program information,

[[Page 65512]]

including (but not limited to) maximum guarantee coverage, maximum 
repayment terms, and guarantee fees. Initially, FAS may announce a 
limited allocation of payment guarantees to a limited number of 
emerging markets, and expand allocations and markets after assessing 
the effectiveness of the program in light of program use and comments 
from participants.
    Similar to the GSM-102 Export Credit Guarantee Program, the payment 
mechanism underlying the FGP transaction is a letter of credit issued 
by a CCC-approved foreign financial institution. The payment guarantee 
is an agreement by CCC to pay the seller, 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 in favor 
of the seller for the sale covered by the payment guarantee.

Credit Terms and Risk Coverage

    The United States is a participant in the OECD Arrangement on 
Officially Supported Export Credits (``the Arrangement''). The 
Arrangement seeks to foster a level playing field for official export 
credits and applies ``to all official support provided by or on behalf 
of a government for export of goods and/or services, including 
financial leases, which have a repayment term of two years or more.'' 
The Arrangement is updated periodically by OECD Participants. The most 
recent version can be found at https://www.oecd.org/tad/xcred/arrangement.htm.

Repayment Terms (Tenor)

    The Arrangement prescribes maximum tenor (repayment terms) based on 
the destination country of the transaction: OECD Category I (high-
income) countries are eligible for a maximum tenor of five years (with 
the possibility of 8.5 years in certain circumstances); Category II 
countries (all others) are eligible for a maximum tenor of 10 years. 
Because the FGP covers transactions in emerging markets, most program 
destination countries will fall into OECD Category II; however, CCC may 
prescribe shorter tenors for certain countries and obligors based on 
risk considerations.

Initial Payment

    The Arrangement requires a minimum down payment be made by the 
buyer to the seller prior to the start of the credit. The minimum 
amount of the required initial payment (as a percentage of the net 
contract value) will be specified on the USDA Web site. The current 
requirement under the Arrangement is 15 percent. The initial payment 
must be made, and documentation of such initial payment provided to 
CCC, before CCC will approve the seller's final application for a 
payment guarantee.

Coverage Level

    The Arrangement limits coverage to a maximum of 85 percent of the 
net contract value; therefore, CCC may offer coverage of up to 100 
percent of the balance of the transaction after the initial payment is 
deducted. This equates to 100 percent coverage of the sum of the net 
contract value and approved local costs, less the initial payment and 
any discounts and allowances. CCC may elect to offer a lower percentage 
of coverage. Maximum coverage will be specified on the USDA Web site.

Guarantee Fees

    The Arrangement prescribes minimum fees to be charged based on 
country risk, obligor risk, tenor, percentage of cover, and other 
factors. FGP guarantee fees will be available on the USDA Web site, 
will be consistent with the rules of the Arrangement, and will also 
reflect CCC's assessment of repayment risk. CCC will not issue a 
payment guarantee until the seller remits the full guarantee fee.

Participant Eligibility

U.S. Sellers

    All sellers must provide the information and meet the qualification 
requirements in Sec.  1493.220 before CCC will consider any FGP 
transactions. To reduce the burden on program participants, CCC 
eliminated FGP qualification requirements for sellers already qualified 
to participate in the GSM-102 Program. In accordance with Sec.  
1493.220(c), sellers who are qualified exporters under the GSM-102 
program are only required to submit additional information specific to 
the FGP.

U.S. and Foreign Financial Institutions

    All U.S. and foreign financial institutions must provide the 
information and meet the qualification requirements of Sec. Sec.  
1493.230 and 1493.240, respectively, before participating in FGP 
transactions. U.S. financial institutions qualified under the GSM-102 
program are automatically qualified to participate in the FGP. Due to 
the longer tenors and corresponding higher risk under the FGP, CCC will 
determine on a case-by-case basis whether foreign financial 
institutions already qualified under the GSM-102 Program are eligible 
for the FGP. There is no separate FGP qualification process for foreign 
financial institutions. CCC will advise interested foreign financial 
institutions of their dollar participation limit under the GSM-102 and 
FGP Programs.

Transaction Eligibility

Expanding U.S. Agricultural Commodity Exports

    The FACT Act, as amended, allows for the provision of export credit 
guarantees for ``(A) the establishment or improvement of facilities, or 
(B) the provision of services or United States products goods [sic], in 
emerging markets by United States persons to improve handling, 
marketing, processing, storage, or distribution of imported 
agricultural commodities and products thereof if the Secretary of 
Agriculture determines that such guarantees will primarily promote the 
export of United States agricultural commodities . . .'' (emphasis 
added). To meet this requirement, the seller must provide in the 
initial application for a payment guarantee (Sec.  1493.260(b)(7)) a 
list of agricultural commodities or products to be handled, marketed, 
stored or distributed following completion of the proposed transaction 
and a description of how the transaction will specifically benefit 
exporters of U.S. agricultural commodities.
    Rather than require the seller to provide an in-depth analysis and 
projection of future U.S. agricultural commodity exports, CCC will now 
conduct this analysis. CCC will seek input from other parts of USDA, 
commodity organizations, state and regional trade groups, commodity 
exporters, and other relevant governmental and private sector 
organizations to assist in collecting data, conducting this analysis, 
and determining a transaction's impact. CCC will not approve an 
application for a payment guarantee if CCC determines that the 
transaction is unlikely to primarily benefit U.S. agricultural 
commodity exports.

Environmental and Social Impacts

    The OECD ``Common Approaches for Officially Supported Export 
Credits and Environmental and Social Due Diligence'' provides 
guidelines for addressing environmental and social impacts related to 
exports of capital goods and/or services. These guidelines assist OECD 
members in preventing and mitigating adverse environmental and social 
impacts of projects receiving official support.
    Consistent with the OECD guidelines, CCC will screen all FGP 
payment

[[Page 65513]]

guarantee applications for any negative environmental and social 
impact. In accordance with Sec.  1493.260(b), sellers must submit a 
completed preliminary environmental and social screening document with 
each initial application for a payment guarantee (unless the screening 
document was previously submitted with a letter of interest and is 
unchanged). The screening document, which contains basic questions 
about the nature of the transaction/project and its location and 
proximity to environmentally or socially sensitive areas, is available 
on the USDA Web site. CCC will review the screening document to 
determine whether the transaction is likely to have significant adverse 
environmental and/or social impacts.
    If CCC determines that a transaction will have potential adverse 
impacts, the seller must submit an environmental and social impact 
assessment (ESIA), an in-depth report that identifies these risks and 
proposes measures to offset them. Sellers are encouraged to consider 
potentially adverse impacts early on in the project, as an ESIA can 
take several months to complete. The cost of the ESIA can be financed 
under the payment guarantee if the ESIA meets the definition of a 
``U.S. Service.'' If an ESIA is required, the seller must submit it 
with the final application for a payment guarantee. CCC will publish 
certain non-business confidential details of any transactions requiring 
an ESIA and provide the public with opportunity to comment. 
Additionally, certain transactions, including all transactions 
requiring an ESIA, will be subject to regular reporting throughout the 
life of the payment guarantee in accordance with Sec.  1493.260(f).
    CCC may reject an application for a payment guarantee if the 
transaction entails significant adverse environmental and/or social 
impacts that cannot be satisfactorily mitigated.

CCC Coverage and Guidelines for U.S. Content

    Sellers may request coverage of any of the following under the FGP:
    1. U.S. goods. U.S. goods are defined in Sec.  1493.210. U.S. goods 
may include imported components that are assembled, processed or 
manufactured into the goods. Imported raw materials and basic 
manufactured items (for example, steel, iron, nuts and bolts) that are 
processed, assembled or manufactured into U.S. goods are automatically 
included in CCC's coverage and are not counted as imported components. 
CCC will rely on commercial practice and communication with 
participants to resolve issues that arise regarding imported raw 
materials and basic manufactured items.
    2. U.S. services. Services are defined in Sec.  1493.210. Non-U.S. 
services are not eligible for coverage.
    3. Non-U.S. goods. Non-U.S. goods may be eligible for CCC coverage. 
The seller may request (in the initial application for a payment 
guarantee) a coverage waiver to allow for coverage for non-U.S. goods. 
CCC will only consider a coverage waiver to allow non-U.S. goods based 
on one of the justifications found at Sec.  1493.290(f)(2).
    4. Local costs. Local costs are defined in Sec.  1493.210 as 
``expenditures for goods in the destination country that are necessary 
for executing the firm sales contract and that are within scope of the 
firm sales contract.'' The OECD Arrangement prescribes a limit 
(currently 30 percent) on the maximum amount of official support for 
local costs. CCC will consider providing coverage for local costs 
within the limits of the Arrangement, but because local costs are non-
U.S. goods, the seller must request and receive from CCC a coverage 
waiver for these costs.
    The net contract value of the transaction is the basis for 
calculating the maximum amount of coverage (guaranteed value) that CCC 
will approve. The net contract value consists of the value of U.S. 
goods, cost of U.S. services, and value of non-U.S. goods (excluding 
local costs) that CCC has agreed to cover. Adding to the net contract 
value the value of approved local costs, then deducting the amount of 
the initial payment and any discount and allowances, and multiplying 
the result by the guaranteed percentage (100 percent, for example), 
generates the guaranteed value. The ``Sample Transaction'' below 
illustrates how to calculate net contract value, guaranteed value, and 
other required information.

U.S. Content Test and Coverage Waiver

    CCC will apply a U.S. content test to all transactions to determine 
the level of U.S. versus non-U.S. content. Specifically, CCC will 
calculate the sum of the value of imported components and value of 
eligible non-U.S. goods (including approved local costs) as a 
percentage of the total value of goods and cost of services CCC agrees 
to cover (i.e., the net contract value plus approved local costs). If 
the non-U.S. content accounts for less than 50 percent of the sum of 
the net contract value and approved local costs, or the seller is 
requesting coverage on only the U.S. content portion of the 
transaction, the transaction ``passes'' the U.S. content test. The 
``Sample Transaction'' below illustrates the calculation of U.S. 
content.
    If non-U.S. content accounts for 50 percent or more of the sum of 
the net contract value and approved local costs, the seller may request 
a coverage waiver. When requesting a coverage waiver, the seller must 
use one of the justifications found in Sec.  1493.290(f)(2).
    In making a determination regarding whether to grant a coverage 
waiver for non-U.S. goods or the U.S. content test, CCC will seek to 
validate the information that the seller provided to justify the 
inclusion of non-U.S. goods and/or imported components in U.S. goods. 
CCC will reach out to relevant companies, industry groups and 
government agencies to research the necessity of granting the waiver. 
Additionally, CCC will consider whether or not the non-U.S. goods and/
or imported components in U.S. goods are essential to the completion of 
the FGP transaction. By allowing the seller multiple bases upon which 
it may request a coverage waiver, CCC intends to provide maximum 
flexibility in approving goods, services and projects that will meet 
the requirement to primarily benefit the export of U.S. agricultural 
commodities.

Application Process

    There is one optional step (letter of interest) and two required 
steps (initial and final applications) in the FGP payment guarantee 
application process.

Letter of Interest

    In accordance with Sec.  1493.260(a), the seller may opt to submit 
a letter of interest to CCC describing a proposed transaction. The USDA 
Web site describes the information needed in the letter of interest. 
CCC will review the letter of interest and provide preliminary feedback 
on whether the proposed transaction may be eligible for FGP coverage. 
In doing so, CCC hopes to reduce the burden on participants by ruling 
out ineligible projects prior to the more in-depth application process. 
The letter of interest must be accompanied by a non-refundable fee 
(specified on the USDA Web site) that will be deducted from the final 
guarantee fee if the letter of interest ultimately results in issuance 
of a payment guarantee. If the seller opts to submit a letter of 
interest, it must be accompanied by a preliminary environmental and 
social screening document.

Initial Application

    CCC divided the payment guarantee application process into two 
steps, as the seller will be unable to provide all required information 
without receiving

[[Page 65514]]

certain feedback from CCC. The first step is the submission of an 
initial application. The initial application must include the details 
of the proposed export, project or facility as specified in Sec.  
1493.260(b), including a description of all goods and services for 
which coverage is sought. If not previously submitted with a letter of 
interest, or if the information has changed, the seller must submit a 
preliminary environmental and social screening document with the 
initial application. The seller must submit a non-refundable initial 
application fee, which will be deducted from the final guarantee fee if 
CCC issues a payment guarantee for the transaction.
    CCC will review the initial application to determine if the 
proposal meets program requirements and whether to approve any coverage 
waiver requests. At this time, CCC will also determine if the 
transaction entails potential negative environmental and/or social 
impacts, and, if so, will require the seller to submit an environmental 
and social impact assessment. If CCC approves the initial application, 
the seller must submit a final application for payment guarantee.

Final Application

    The seller will have at least 30 calendar days to submit the final 
application (Sec.  1493.260(d)). This timeframe will be based in part 
on whether the seller must provide an ESIA with the final application; 
if so, CCC will allow a longer timeframe. The seller must submit the 
full guarantee fee (less any letter of interest and initial application 
fees) with the final application. Upon CCC's review and approval of the 
final application, review and approval of the ESIA (if required), and 
receipt of the full guarantee fee, CCC will issue a payment guarantee 
in favor of the seller.

Performance Under the Payment Guarantee

    The seller may choose to assign the payment guarantee to an 
approved U.S. financial institution in accordance with Sec.  1493.310 
and be paid as performance occurs. A list of approved U.S. financial 
institutions is available on the USDA Web site.
    The seller is required to submit to CCC an evidence of performance 
report meeting the requirements of Sec.  1493.320 for all contractual 
events occurring under the payment guarantee. The seller must submit 
the evidence of performance within 30 calendar days of each date of 
performance unless CCC grants an extension to this timeframe.
    If the foreign financial institution fails to make payment under 
the letter of credit, the holder of the payment guarantee (either the 
seller or the U.S. financial institution) must submit a notice of 
default to CCC no later than 5 business days after the date the payment 
was due from the foreign financial institution. A claim for default 
must be submitted to CCC no later than 180 calendar days from the date 
of the defaulted payment.

Sample Transaction

    Assume a seller submits an initial application for a payment 
guarantee. The total value of the firm sales contract with the buyer is 
$2,200,000. The elements of the firm sales contract are as follows:

(a) U.S. goods = $1,500,000 (of which, $300,000 constitutes imported 
components used in the manufacture of the U.S. goods)
(b) Non-U.S. goods = $600,000 (of which, $100,000 constitutes local 
costs, which may be approved by CCC)
(c) U.S. services = $100,000

The seller requests CCC coverage based on the full $2.2 million firm 
sales contract value, and requests a coverage waiver for the $600,000 
in non-U.S. goods, which is granted. There are no discounts and 
allowances reported. The net contract value of the transaction is 
$2,100,000 (the total of all costs except local costs).
    CCC applies the U.S. content test to determine the percentage of 
U.S. content:

(d) Eligible non-U.S. goods = $600,000
(e) Imported components = $300,000
(f) Sum of (d) and (e) = $900,000
(g) Net contract value + approved local costs = $2,200,000
(h) Total non-U.S. content = $900,000/$2,200,000 = 41 percent

Because total non-U.S. content is only 41 percent of the total 
transaction, the transaction passes the U.S. content test. If the total 
non-U.S. content had been 50 percent or more, the seller would need to 
request a coverage waiver from CCC on the U.S. content test.
    CCC's coverage is calculated as follows. Note that local costs in 
this example are approximately 5 percent of the net contract value 
(less than the maximum allowable 30 percent) and are approved by CCC.

(i) Net contract value = $2,100,000
(j) Approved local costs = $100,000
(k) Amount of initial payment = $315,000 (15 percent of the net 
contract value)
(l) Guaranteed value = (net contract value + approved local costs-
initial payment) (100 percent coverage), or
Guaranteed value = ($2,100,000 + $100,000-$315,000) x 1.0 = $1,885,000

Executive Order 12866

    This final 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 final rule has been reviewed in accordance with Executive 
Order 12988. This final rule would not preempt State or local laws, 
regulations, or policies unless they present an irreconcilable conflict 
with this final rule. Before any judicial action may be brought 
concerning the provisions of this final rule, the appeal provisions of 
7 CFR part 1493.200 would need to be exhausted. This rulemaking 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 final rule has been reviewed under Executive Order 13132, 
``Federalism.'' The policies contained in this final 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 final 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 rule has been reviewed for compliance with E.O. 13175. 
The policies contained in this rule do not

[[Page 65515]]

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 final 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 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 final 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

    The information collection and record keeping requirements 
contained in this regulation have been submitted to OMB for approval in 
accordance with the Paperwork Reduction Act of 1995 under OMB Control 
Number 0551-0032.

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.

List of Subjects in 7 CFR Part 1493

    Agricultural commodities, Exports.

    For the reasons stated in the preamble, CCC amends 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, 5622 note, 5661-5664, 5676; 15 
U.S.C. 714b(d), 714c(f).


0
2. Subpart C is revised to read as follows:
Subpart C--CCC Facility Guarantee Program (FGP) Operations
Sec.
1493.200 General statement.
1493.210 Definition of terms.
1493.220 Information required for seller participation.
1493.230 Information required for U.S. financial institution 
participation.
1493.240 Information required for foreign financial institution 
participation.
1493.250 Certification requirements for program participation.
1493.260 Application for payment guarantee.
1493.270 Certifications required for obtaining payment guarantee.
1493.280 Special requirements of the foreign financial institution 
letter of credit and terms and conditions document, if applicable.
1493.290 Terms and requirements of the payment guarantee.
1493.300 Fees.
1493.310 Assignment of the payment guarantee.
1493.320 Evidence of performance.
1493.330 Certification requirements for the evidence of performance.
1493.340 Proof of entry.
1493.350 Notice of default.
1493.360 Claims for default.
1493.370 Payment for default.
1493.380 Recovery of defaulted payments.
1493.385 Additional obligations and requirements.
1493.390 Dispute resolution and appeals.
1493.395 Miscellaneous provisions.

Subpart C--CCC Facility Guarantee Program (FGP) Operations


Sec.  1493.200  General statement.

    (a) Overview. The FGP 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 
to establish or improve facilities or provide services or goods in 
emerging markets to improve handling, marketing, processing, storage, 
or distribution of imported agricultural commodities and products. Such 
guarantees will primarily promote the export of U.S. agricultural 
commodities. CCC will give priority to transactions that encourage 
privatization of the agricultural sector or that benefit private farms 
and cooperatives in emerging markets, and for which nongovernmental 
persons agree to assume a relatively larger share of costs. The payment 
guarantee issued under FGP is an agreement by CCC to pay the seller, 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 sale covered by the payment guarantee. The program 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 producers and assist 
long-term market development for U.S. agricultural commodities.
    (b) Program administration. The FGP is administered under the 
direction of the General Sales Manager and Vice President, CCC, 
pursuant to this subpart, subpart A of this part, any program 
announcements issued by CCC, and, as applicable, the Organisation for 
Economic Co-operation and Development's (OECD) Arrangement on 
Officially Supported Export Credits. From time to time, CCC may issue a 
notice to participants on the USDA Web site to remind participants of 
the requirements of the FGP or to clarify the program requirements 
contained in these regulations in a manner not inconsistent with this 
subpart and subpart A of this part. Program information, including 
available program amounts, eligible countries, and approved U.S. and 
foreign financial institutions, is available on the USDA Web site.


Sec.  1493.210  Definition of terms.

    Terms set forth in this part, on the USDA Web site (including in 
program announcements and notices to participants), and in any CCC-
originated documents pertaining to the FGP 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.
    Buyer. A foreign purchaser that enters into a firm sales contract 
with a seller

[[Page 65516]]

for the sale of goods to be shipped to the destination country and/or 
U.S. services to be provided in the destination country.
    Buyer's representative. An entity having a physical office that is 
either organized under the laws of or registered to do business in the 
destination country specified in the payment guarantee and that is 
authorized to act on the buyer's behalf with respect to the sale 
described in the firm sales contract.
    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.  
1493.370(c).
    Contractual event. A specific deliverable (activity or milestone) 
measured by objective or quantifiable methods within the firm sales 
contract which, when met by the seller, results in an obligation to 
make payment in accordance with the agreed contractual terms without 
recourse, and triggers the start of coverage under the payment 
guarantee. Such events may include, but are not limited to, exports of 
goods, completion of services, or commissioning date of equipment or a 
facility.
    Cost of services. The price for services as stipulated in the firm 
sales contract.
    Coverage waiver. A determination by CCC, upon request of the 
seller, to allow guarantee coverage of non-U.S. goods and/or to waive 
the U.S. content test in Sec.  1493.290(e).
    Date of performance. The date that a contractual event occurs in 
accordance with the firm sales contract. The date of performance may 
be, but is not limited to, an installation date, the date of completion 
of the service, the commissioning date of equipment or a facility, or 
the date of export of goods (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 sales contract 
exists between the seller and the buyer.
    Destination country. The emerging market (location) of the 
agricultural-related facility that will use the goods and/or services 
covered by the payment guarantee. If the payment guarantee covers goods 
not intended for a specific facility, then the country where the goods 
will be delivered and utilized.
    Director. The Director, Credit Programs Division, Office of Trade 
Programs, Foreign Agricultural Service, or designee.
    Discounts and allowances. Any consideration provided directly or 
indirectly, by or on behalf of the seller, to the buyer in connection 
with a sale of a good or service, above and beyond its value. Discounts 
and allowances include, but are not limited to, the provision of 
additional goods, services or benefits; the promise to 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 seller to employ and 
compensate a specified agent as a condition of concluding the sale; the 
whole or partial release of the buyer from any financial or contractual 
obligations; or settlements made in favor of the buyer for quality or 
weight.
    Eligible export sale. A transaction in which the obligation of 
payment for the portion registered under the FGP 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 imported components. Imported components in U.S. goods 
that are eligible for coverage because either:
    (1) The transaction meets the U.S. content test in Sec.  
1493.290(e); or
    (2) A coverage waiver of the U.S. content test has been requested 
by the seller and approved by CCC.
    Eligible non-U.S. goods. Goods, including local costs, that are not 
U.S. goods but for which a coverage waiver has been requested by the 
seller and approved by CCC.
    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 agreed by 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.
    Emerging market. Any country that CCC determines:
    (1) Is taking steps toward a market-oriented economy through the 
food, agriculture, or rural business sectors of the economy of the 
country; and
    (2) has the potential to provide a viable and significant market 
for U.S. agricultural commodities or products.
    Environmental and Social Impact Assessment (ESIA). A report that 
identifies the environmental and social risks and impacts of a project/
transaction and proposed measures to avoid, minimize, mitigate and/or 
offset adverse environmental and social impacts. The report must 
address the items set out in the most recent Organisation for Economic 
Co-operation and Development's ``Recommendation of the Council on 
Common Approaches for Officially Supported Export Credits and 
Environmental and Social Due Diligence.''
    Firm sales contract. The written sales contract entered into 
between the seller and the buyer which sets forth the terms and 
conditions of an eligible export sale from the seller to the buyer. 
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 firm sales contract between the 
seller and the buyer may be conditioned upon CCC's approval of the 
seller's application for a payment guarantee. The written evidence of 
sale for the purposes of the FGP must, at a minimum, document the 
following information:
    (1) Date of sale;
    (2) A complete description of all goods associated with the 
transaction. For goods to be covered by the payment guarantee, include 
the brand name and model number, country where the good was 
manufactured and country from which the good will be exported (if 
applicable), quantity, value, and Incoterms (if applicable);
    (3) A complete description of all services associated with the 
transaction. For services to be covered by the payment guarantee, 
include the supplier and cost;
    (4) The date of performance of each contractual event; and
    (5) Evidence of agreement between buyer and seller.
    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

[[Page 65517]]

the current revision of the Uniform Customs and Practices (UCP) for 
Documentary Credits (International Chamber of Commerce Publication No. 
600, or latest revision), and if electronic documents are to be 
utilized, the current revision of the Supplement to the Uniform Customs 
and Practice for Documentary Credits for Electronic Presentation 
(eUCP), providing for payment in U.S. dollars against stipulated 
documents and issued in favor of the seller by a CCC-approved foreign 
financial institution.
    GSM. The General Sales Manager, Foreign Agricultural Service (FAS), 
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. The guaranteed value is calculated by 
deducting the initial payment and any discounts and allowances from the 
net contract value and adding to that result the value of local costs 
that CCC has approved for coverage. The resulting figure is then 
multiplied by the guaranteed percentage (up to the maximum percentage 
allowable for that country).
    Holder of the payment guarantee. The seller 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.
    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 the seller in a sales contract.
    Initial payment. The minimum amount that the buyer is required to 
pay the seller prior to CCC's approval of the payment guarantee, 
expressed as a percentage (specified on the USDA Web site) of the net 
contract value.
    Letter of interest. Information that the seller may provide to CCC 
prior to applying for a payment guarantee to obtain feedback on the 
potential eligibility of a transaction. Information to be submitted in 
a letter of interest is set out on the USDA Web site.
    Local costs. Expenditures for goods in the destination country that 
are included in the firm sales contract.
    Net contract value. The aggregate value of goods and cost of 
services (exclusive of local costs) that are eligible for guarantee 
coverage and for which coverage is requested.
    North American Industry Classification System (NAICS). Standard 
used by Federal statistical agencies in classifying business 
establishments for the purpose of collecting, analyzing, and publishing 
statistical data related to the U.S. business economy.
    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 which CCC, in consideration 
of a fee paid, and in reliance upon the statements and declarations of 
the seller, 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.
    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.
    Preliminary environmental and social screening document or 
Screening document. A document in which the seller provides basic 
information about a transaction to allow CCC to determine whether the 
transaction may entail potentially adverse environmental and/or social 
impacts. The screening document is available on the USDA Web site.
    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 policies, procedures, specific 
country programs and other information relevant to the operation of the 
FGP.
    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 a 
seller 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.  1493.280.
    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.
    Seller. A supplier of goods and/or services that is both qualified 
in accordance with the provisions of Sec.  1493.220 and the applicant 
for the payment guarantee.
    Service. Any business activity classified in any of the 13 NAICS 
services sectors (NAICS chapters 22 and 48-49 through 81). For the 
shipment of goods, freight and insurance costs to the port of entry 
that are included in the price of the goods (in accordance with the 
specified Incoterms) are not considered services under this subpart.
    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 the special requirements 
specified in Sec.  1493.280.
    Total FGP transaction value. The aggregate value of goods and cost 
of services (including local costs) to be covered by the payment 
guarantee. It is the net contract value plus eligible local costs, less 
the initial payment and less any discounts and allowances.
    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

[[Page 65518]]

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.
    U.S. content test. A determination of the total value of eligible 
non-U.S. goods and value of imported components as a percentage of the 
sum of the net contract value and the value of approved local costs as 
specified in Sec.  1493.290(e).
    USDA. United States Department of Agriculture.
    U.S. financial institution. A financial institution (including 
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.
    U.S. goods. Goods that are assembled, processed or manufactured in, 
and exported from, the United States, including goods which contain 
imported raw materials or imported components. Minor or cosmetic 
procedures (e.g., affixing labels, cleaning, painting, polishing) do 
not qualify as assembling, processing or manufacturing.
    U.S. person. One of the following:
    (1) An individual who is a citizen or legal resident of the United 
States; or
    (2) An entity constituted or organized in the United States, 
including any corporation, trust partnership, sole proprietorship, 
joint venture, or other association with business activities in the 
United States.
    U.S. services. Services performed by U.S. persons, including those 
temporarily residing outside the United States. Costs for hotels, 
meals, transportation, and other similar services incurred in the 
destination country are not U.S. services.
    Value of components (also value of U.S. components, value of 
imported components). The price derived for components in goods, 
determined by:
    (1) The price stipulated in the firm sales contract or, if such 
price is not available;
    (2) The declared customs value or, if the customs value is not 
available; then
    (3) The fair market wholesale value in the United States.
    Value of goods (also value of U.S. goods, value of non-U.S. goods, 
or value of Eligible non-U.S. goods). The price derived for goods, 
determined by:
    (1) The price stipulated in the firm sales contract or, if such 
price is not available;
    (2) The declared customs value or, if the customs value is not 
available; then
    (3) The fair market wholesale value in the United States.


Sec.  1493.220  Information required for seller participation.

    (a) Qualification requirements. Sellers must apply and be approved 
by CCC to be eligible to participate in the FGP. To qualify for 
participation in the FGP, 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 FGP 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 or 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 (i.e., producer, service 
provider, trader, consulting firm, etc.);
    (ii) Explanation of the applicant's experience/history selling the 
goods or services to be sold under the FGP, including number of years 
involved in selling, types of goods or services sold, and destination 
of sales for the preceding three years;
    (iii) 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 
1493.250(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.  
1493.250(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 seller that is currently qualified 
under subpart B of this part, Sec.  1493.30, need only provide the 
information requested in Sec.  1493.220(a)(4). Once CCC receives that 
information, CCC will notify the seller that the seller is qualified 
under this section to submit applications for an FGP payment guarantee, 
and the other information provided by the seller pursuant to Sec.  
1493.30 will be deemed to also have been provided under this section. 
Any seller not submitting an application for a GSM-102 or FGP payment 
guarantee for two consecutive U.S. Government fiscal years must

[[Page 65519]]

resubmit a qualification application containing the information 
specified in Sec.  1493.220(a) to CCC to participate in the FGP. If at 
any time the information required by paragraph (a) of this section 
changes, the seller must promptly contact CCC to update this 
information and certify that the remainder of the information 
previously provided under paragraph (a) of this section has not 
changed.
    (d) Ineligibility for program participation. An applicant may be 
ineligible to participate in the FGP if such applicant cannot provide 
all of the information and certifications required in Sec.  
1493.220(a).


Sec.  1493.230  Information required for U.S. financial institution 
participation.

    (a) Qualification requirements. U.S. financial institutions must 
apply and be approved by CCC to be eligible to participate in the FGP. 
To qualify for participation in the FGP, 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 
1493.250 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.  1493.250. 
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 that is 
qualified under subpart B, Sec.  1493.40 is qualified under this 
section, and the information provided by the U.S. financial institution 
pursuant to Sec.  1493.40 will be deemed to also have been provided 
under this section. Any U.S. financial institution participating in 
neither the GSM-102 nor FGP programs for two consecutive U.S. 
Government fiscal years must resubmit the information and 
certifications specified in paragraph (a) of this section to CCC to 
participate in the FGP. If at any time the information required by 
paragraph (a) of this section changes, the U.S. financial institution 
must promptly notify CCC to update this information and certify that 
the remainder of the information previously provided under paragraph 
(a) of this section has not changed.
    (d) Ineligibility for program participation. A U.S. financial 
institution may be ineligible to participate in the FGP if such 
applicant cannot provide all of the information and certifications 
required in Sec.  1493.230(a).


Sec.  1493.240   Information required for foreign financial institution 
participation.

    (a) Qualification requirements. Foreign financial institutions must 
apply and be approved by CCC to be eligible to participate in the FGP. 
To qualify for participation in the FGP, 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 
1493.250 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.  1493.250. 
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 in the 
FGP, 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 the certifications in Sec.  1493.250 and 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

[[Page 65520]]

subject to a banking or other financial regulatory authority, it must 
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 
participating in neither the FGP nor 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) of this section has 
not changed.
    (e) Ineligibility for program participation. A foreign financial 
institution:
    (1) May be deemed ineligible to participate in the FGP if such 
applicant cannot provide all of the information and certifications 
required in Sec.  1493.240(a); and
    (2) Will be deemed ineligible to participate in the FGP if, 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.  1493.250   Certifications required for program participation.

    (a) When making the statement required by Sec. Sec.  
1493.220(a)(7), 1493.230(a)(9), or 1493.240(a)(6), each seller, 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 
statutes 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 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 such 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 such a debt).
    (b) Additional certifications for U.S. and foreign financial 
institution applicants. When making the statement required by Sec.  
1493.230(a)(9) or Sec.  1493.240(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.  1493.260  Application for payment guarantee.

    (a) Letter of interest. Prior to submitting an initial application 
for a payment guarantee in accordance with paragraph (b) of this 
section, the seller may, solely at the seller's option, submit a letter 
of interest to CCC describing a transaction for which FGP coverage may 
be sought. The letter of interest must contain all of the information 
specified on the USDA Web site and must be accompanied by a completed 
preliminary environmental and social screening document. A letter of 
interest fee, which will be specified on the USDA Web site, must 
accompany the letter of interest. CCC will review the letter of 
interest and provide preliminary feedback to the seller on whether the 
transaction may be eligible for coverage under the FGP. However, CCC's 
determination whether to issue a payment guarantee will be based on the 
seller's applications submitted pursuant to paragraphs (b) and (d) of 
this section.
    (b) Initial application for payment guarantee. A firm sales 
contract must exist before a seller may submit an initial application 
for a payment guarantee. An initial application for a payment guarantee 
must be submitted in writing to CCC in the manner specified on the USDA 
Web site, and be accompanied by the application fee in accordance with 
Sec.  1493.300(b). Each initial application for a payment guarantee 
must also include a completed Preliminary Environmental and Social 
Screening Document. If the seller previously submitted the screening 
document with a letter of interest, the seller is required to re-submit 
it with the initial application only if revisions are needed to the 
screening document. An initial application must identify the name and 
address of the seller and include the following information:
    (1) Destination country.
    (2) The name and address of the buyer. If the buyer is not 
physically located in the destination country, it must have a buyer's 
representative in the destination country taking receipt of the goods 
and services covered by the payment guarantee. If applicable, provide 
the name and address of the buyer's representative.
    (3) The name and address of the party on whose request the letter 
of credit is issued, if other than the buyer.
    (4) The name and address of the end-user of the goods or services, 
if other than the buyer.

[[Page 65521]]

    (5) The seller's sales number pertinent to the application and a 
copy of the firm sales contract.
    (6) A description (including location, i.e., address, city, port, 
and/or GPS coordinates, if available) of the agriculture-related 
facility that will use the goods and/or services to be covered by the 
payment guarantee and an explanation of how the goods and/or services 
will be used to improve handling, marketing, processing, storage, or 
distribution of U.S. agricultural commodities. If the payment guarantee 
covers goods not intended for a specific facility, describe where the 
goods will be delivered in the destination country.
    (7) List of all agricultural commodities or products (inputs) to be 
handled, marketed, processed, stored, or distributed by the proposed 
transaction after completion, and an explanation of why and how the 
facility or goods and/or services will specifically benefit exporters 
of U.S. agricultural commodities.
    (8) Total value of the firm sales contract.
    (9) A full description of each good to be covered by the payment 
guarantee. The goods specified in the seller's application for the 
payment guarantee must correspond with the description of the goods 
specified in the firm sales contract and the foreign financial 
institution letter of credit. The description must include each of the 
following:
    (i) Brand name and model number;
    (ii) Applicable 10-digit Harmonized System classification code;
    (iii) Description of the good;
    (iv) Country where the good was manufactured and from which the 
good will be exported;
    (v) For U.S. goods, the value of imported components used in the 
U.S. good's manufacture. If requesting guarantee coverage of only the 
U.S. components in U.S. goods, provide the value of U.S. components;
    (vi) For goods that are local costs, the name of the local 
supplier;
    (vii) Quantity;
    (viii) Value of the good; and
    (ix) Incoterms (if the sale of the goods is based on Incoterms 
delivery).
    (10) A full description of each U.S. service to be covered by the 
payment guarantee. The U.S. services specified in the seller's 
application for the payment guarantee must correspond with the 
description of the U.S. services specified in the firm sales contract 
and the foreign financial institution letter of credit. The description 
must include each of the following:
    (i) Description of the U.S. service;
    (ii) Supplier of the U.S. service;
    (iii) Cost of the U.S. service; and
    (iv) NAICS classification number.
    (11) A description and date of performance (or timeframe of 
performance if the exact date is unknown) of each contractual event, as 
specified in the firm sales contract.
    (12) Indication of whether a coverage waiver is requested in 
accordance with Sec.  1493.290(f). If a coverage waiver is requested, 
the applicant must indicate the nature of the waiver requested per 
Sec.  1493.290(f)(1) and provide the justification and explanation 
required by Sec.  1493.290(f)(2).
    (13) 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.
    (14) The term length of the credit being extended and the intervals 
between principal payments for each contractual event under the payment 
guarantee.
    (15) If applicable, a description of any arrangements or 
understandings with other U.S. or foreign government agencies, or with 
financial institutions or entities, private or public, providing 
guarantees or financing to the seller or other competing sellers in 
connection with this sale, whether or not the goods or services are of 
U.S. origin or would otherwise qualify for a payment guarantee under 
this subpart. Copies of any documents relating to such arrangements 
must be provided.
    (16) A statement of how this transaction may encourage 
privatization of the agricultural sector, or benefit private farms or 
cooperatives, in the destination country. Include in the statement the 
share of any private sector ownership in the transaction.
    (17) An estimate of how many U.S. persons will be or have been 
hired because of the firm sales contract and/or how many U.S. persons 
are required to fulfill the firm sales contract.
    (18) FGP tracking number assigned to previously submitted letter of 
interest, if applicable.
    (c) Review of initial application. (1) An initial application may 
receive conditional approval from CCC as submitted, be conditionally 
approved with modifications agreed to by the seller, or be rejected by 
CCC. CCC's review will include, but not be limited to, the following 
criteria:
    (i) CCC will only consider an initial application in connection 
with a transaction that CCC determines will benefit primarily exports 
of U.S. agricultural commodities.
    (ii) If, based upon a price review the unit sales price of any good 
and/or service(s) does not fall within the prevailing commercial market 
level ranges, as determined by CCC, the initial application will not be 
approved as submitted.
    (iii) CCC will review the preliminary environmental and social 
screening document submitted by the seller and, if necessary, request 
additional information from the seller to determine whether the 
transaction could have potentially significant adverse environmental 
and/or social impacts. If CCC determines that a transaction may have 
such significant adverse impacts, the seller must submit an 
Environmental and Social Impact Assessment (ESIA) with the final 
application for the payment guarantee. Alternatively, CCC may reject an 
initial application for payment guarantee based on the screening 
document and any additional information provided by the seller.
    (2) Once CCC indicates its approval of the initial application to 
the seller, the seller must submit a final application as specified in 
paragraph (d) of this section before CCC will make a final 
determination of whether to issue a payment guarantee.
    (d) Final application for payment guarantee. Once CCC approves an 
initial application, CCC must receive the seller's final application 
for a payment guarantee within the timeframe specified by CCC. This 
timeframe will be a minimum of 30 calendar days. The final application 
for payment guarantee must be submitted in writing to CCC in the manner 
specified on the USDA Web site and be accompanied by the full guarantee 
fee (less any previous letter of interest or initial application fees 
paid toward the payment guarantee) and the environmental and social 
impact assessment, if required by CCC. The final application must 
identify the name and address of the seller and include the following 
information:
    (1) FGP tracking number assigned by CCC.
    (2) Destination country.
    (3) The name and address of the buyer.
    (4) A description of each good and U.S. service, along with the 
value of the Good and Cost of the service, for which guarantee coverage 
is requested, based on CCC's feedback on the seller's initial 
application. If the seller is seeking guarantee coverage on only the 
U.S. components used in the assembly of U.S. goods, provide the value 
of the U.S. Components.
    (5) Net contract value.

[[Page 65522]]

    (6) Amount of the initial payment and evidence that the initial 
payment has been paid by the buyer to the seller.
    (7) Description and value of any discounts and allowances.
    (8) Value of approved local costs.
    (9) Total FGP transaction value.
    (10) Guaranteed value.
    (11) Guarantee fee.
    (12) The seller's statement, ``All certifications set forth in 
Sec.  1493.270 are hereby being made by the seller in this 
application'' which, when included in the application by the seller, 
will constitute a certification that it is in compliance with all the 
requirements set forth in Sec.  1493.270 with respect to both the 
initial and final applications.
    (e) Public comment. To provide the public opportunity to review and 
comment on the potential environmental and social impacts of a 
transaction, CCC will make available on its Web site a list of pending 
transactions for which an ESIA is required. Interested parties will 
have a minimum of 30 business days to request and provide input on an 
ESIA prior to CCC's final decision. CCC will not disclose any 
confidential business information associated with a transaction unless 
such disclosure is authorized by law.
    (f) Reporting. The seller may be required to submit reports to CCC 
on a quarterly, biannual, or annual basis to allow CCC to monitor 
transactions in which there is a potential for negative environmental 
and/or social impact. Reporting frequency will be based on the extent 
of the transaction's impact and any mitigation required. CCC and the 
seller will agree upon any reporting requirements, including the 
elements of reporting and the frequency, prior to issuance of a payment 
guarantee.
    (g) Approval of final application. A final application for a 
payment guarantee may be approved as submitted, approved with 
modifications agreed to by the seller, or rejected by CCC. CCC shall 
have the right to request the seller to furnish any other information 
and documentation it deems pertinent to the evaluation of the seller's 
application. In the event that the final application is approved, the 
Director will cause a payment guarantee to be issued in favor of the 
seller. Such payment guarantee will become effective at the time 
specified in Sec.  1493.290(b).


Sec.  1493.270  Certification requirements for obtaining payment 
guarantee.

    By providing the statement in Sec.  1493.260(d)(12), the seller is 
certifying that the information provided in the initial and final 
applications is true and correct and, further, that all requirements 
set forth in this section have been met. The seller will be required to 
provide further explanation or documentation with regard to final 
applications that do not include this statement. If the seller 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 
goods not yet exported and services not yet performed and/or to 
commence legal action and/or administrative proceedings against the 
seller. The seller, in submitting an application for a payment 
guarantee and providing the statement set forth in Sec.  
1493.260(d)(12), certifies that:
    (a) 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 Corrupt Practices Act of 1977 and other anti-bribery measures;
    (b) At the time of submission of the final application for payment 
guarantee, the buyer does not appear as an excluded party on the SAM 
list;
    (c) The seller is fully in compliance with the requirements of 
Sec.  1493.320(b) for all existing payment guarantees issued to the 
seller or has requested and been granted an extension per Sec.  
1493.320(b)(3); and
    (d) The information provided pursuant to Sec.  1493.220 has not 
changed and the seller still meets all of the qualification 
requirements of Sec.  1493.220.


Sec.  1493.280   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 sale to which CCC's payment guarantee pertains.
    (i) If the obligation to pay by the foreign financial institution 
is conditioned on shipment documentation, the letter of credit must 
stipulate presentation of at least one original clean on board bill of 
lading as a required document, unless:
    (A) The seller, or a related company previously reported to CCC by 
the seller pursuant to 1493.220(a)(5), is named as the shipper on the 
clean, on-board bill of lading. If the seller or a related company is 
named the shipper on the bill of lading, the letter of credit may 
stipulate a copy or photocopy of an original, clean, on-board bill of 
lading; or
    (B) The letter of credit stipulates presentation of electronic 
documents per paragraph (a)(1)(ii) of this section.
    (ii) If the letter of credit will allow for presentation of 
electronic documents, the letter of credit must so stipulate.
    (iii) If the obligation to pay by the foreign financial institution 
is conditioned on a contractual event requiring other than shipment 
documentation, the contractual event must be clearly stipulated in 
either the letter of credit or the terms and conditions 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

[[Page 65523]]

or, if applicable, the terms and conditions document; and
    (4) Post default interest terms.


Sec.  1493.290   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. The payment guarantee becomes 
effective on the Date(s) of Performance. For goods, the period of 
coverage will apply from the date on which interest begins to accrue, 
if earlier than the date of performance. The payment guarantee will 
apply to the period beginning with the Date(s) of Performance and will 
continue during the credit term specified in the payment guarantee or 
amendments thereto.
    (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 of performance. The final allowable date of 
performance will be specified on the payment guarantee.
    (e) U.S. content test. (1) Except as allowed under Sec.  
1493.290(f), CCC will issue a payment guarantee only if the following 
items collectively represent less than 50 percent of the sum of the net 
contract value and the value of approved local costs:
    (i) The value of eligible non-U.S. goods; and
    (ii) The value of imported components.
    (2) Imported raw materials and basic manufactured items (such as 
iron, steel, nuts, bolts, etc.) which are processed, assembled or 
manufactured in the United States are automatically included in CCC's 
coverage and are not counted as imported components for the purpose of 
determining U.S. content.
    (f) Coverage waiver. (1) The seller may request a coverage waiver 
for any of the following:
    (i) To allow for guarantee coverage of non-U.S. goods; and/or
    (ii) The U.S. content test, allowing for guarantee coverage of non-
U.S. goods and imported components in U.S. goods in excess of the value 
permitted under the U.S. content test.
    (2) To request a coverage waiver on one of the bases specified in 
paragraph (f)(1) of this section, the seller must submit with the 
initial application for a payment guarantee a justification of why the 
non-U.S. goods and/or imported components in U.S. goods are essential 
to the completion of the FGP transaction. This justification must be 
based on one of the following:
    (i) The goods and/or components are no longer manufactured in or 
provided by the United States;
    (ii) The use of U.S. goods and/or components is not cost effective; 
or
    (iii) U.S. goods and/or components are not compatible with the 
existing infrastructure in the destination country.
    (3) In determining whether to grant a coverage waiver, CCC will 
consider the following factors:
    (i) Whether information obtained by CCC from industry sources, 
government agencies, or any other sources supports the justification 
provided by the seller;
    (ii) Whether the non-U.S. goods (and/or imported components in U.S. 
goods) are essential to the completion of the transaction; and
    (iii) Any other information CCC determines is relevant.
    (g) Certain transactions are ineligible for payment guarantees. A 
transaction (or any portion thereof) is ineligible for payment 
guarantee coverage if at any time CCC determines that:
    (1) The sale includes corrupt payments or extra sales or services 
or other items extraneous to the transactions provided, financed, or 
guaranteed in connection with the transaction;
    (2) The sale does not comply with applicable U.S. law, including 
the Foreign Corrupt Practices Act of 1977 and other anti-bribery 
measures;
    (3) The buyer is excluded or disqualified from participation in 
U.S. government programs;
    (4) The goods, services, and/or facility being financed will not 
primarily benefit U.S. agricultural commodity exports;
    (5) The sale is not an eligible export sale.
    (h) Certain contractual events are ineligible for payment guarantee 
coverage. The following contractual events are ineligible for coverage 
under an FGP payment guarantee, except where it is determined by the 
Director to be in the best interest of CCC to provide guarantee 
coverage on such contractual events:
    (1) Contractual events with a date of performance prior to the date 
of receipt by CCC of the seller's written initial application for a 
payment guarantee;
    (2) Contractual events with a date of performance later than the 
final date of performance shown on the payment guarantee or any 
amendments thereof;
    (3) Contractual events where the date of issuance of a foreign 
financial institution letter of credit is later than the date of 
performance; or
    (4) Contractual events that have been guaranteed by CCC under 
another payment guarantee. If CCC determines that the contractual event 
has been guaranteed under multiple payment guarantees (or coverage has 
been requested under multiple payment guarantees), CCC will determine 
which payment guarantee (or application for payment guarantee), if any, 
corresponds to an eligible export sale.
    (i) 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 
seller and the assignee.
    (j) Amendments to the firm sales contract. Any amendments to the 
firm sales contract that impact contractual event(s) covered by the 
payment guarantee must be submitted to CCC for approval for coverage 
prior to the date of performance of the contractual event.
    (k) Amendments to the payment guarantee. A request for an amendment 
of a payment guarantee may be submitted only by the seller, with the 
written concurrence of the assignee, if any, and must be accompanied by 
the revised firm sales contract, if applicable. 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 
seller 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 certification in Sec.  1493.310(c)(1)(i) or Sec.  1493.330(d).


Sec.  1493.300  Fees.

    (a) Letter of interest fee. A letter of interest fee, as specified 
on the USDA Web site, must be received by CCC

[[Page 65524]]

before CCC will consider the seller's letter of interest.
    (b) Initial application fee. An initial application fee, as 
specified on the USDA Web site, must be received by CCC before CCC will 
consider the seller's initial application for a payment guarantee.
    (c) Guarantee fee rates. Guarantee fee rates will be based upon the 
length of the payment terms provided for in the firm sales contract, 
the degree of risk that CCC assumes, as determined by CCC, and any 
other factors that CCC determines appropriate for consideration.
    (d) Calculation of guarantee fee. The guarantee fee will be 
computed by multiplying the guaranteed value by the guarantee fee rate.
    (e) Payment of guarantee fee. The seller shall remit, with his 
final application, the full amount of the guarantee fee, less the 
previously paid letter of interest fee, if applicable, and the initial 
application fee. CCC will not issue a payment guarantee until the full 
amount of the guarantee fee has been received by CCC. The seller'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.
    (f) Refunds of fees. Letter of interest fees, initial application 
fees, and guarantee fees will ordinarily not be refundable unless the 
Director determines that such refund will be in the best interest of 
CCC.


Sec.  1493.310  Assignment of the payment guarantee.

    (a) Requirements for assignment. The seller 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, unless approved in advance by CCC, may not 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 certifications 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, 
does not appear as an excluded party on the SAM list; and
    (ii) To the best of my knowledge and belief, the information 
provided pursuant to Sec.  1493.230 has not changed and [name of 
Assignee] still meets all of the qualification requirements of Sec.  
1493.230.''
    (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 ineligibility to receive assignment. In cases where a 
U.S. financial institution is determined to be 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 
seller 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 Sec.  1493.230(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 sales of 
goods or services to buyers 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 outstanding balance 
under the associated repayment obligation;
    (ii) In the event of 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.  1493.350 and 1493.360 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 1493.310(f)(1) and, prior to entering into this 
agreement, verified that [name of other party to the repurchase 
agreement] does not appear as an excluded party on the SAM list.''
    (3) Failure of the holder of the payment guarantee to comply with 
any of the provisions of Sec.  1493.310(f) may result in CCC annulling 
coverage on the foreign financial institution letter of credit and 
Terms and Condition Document, if applicable, covered by the payment 
guarantee.


Sec.  1493.320  Evidence of performance.

    (a) Report of performance. The seller is required to provide CCC an 
evidence of performance report for each contractual event occurring 
under the payment guarantee. This report must include the following 
information:
    (1) Payment guarantee number;
    (2) Evidence of performance report number (e.g., Report 1, Report 
2) reflecting the report's chronological order of submission under the 
particular payment guarantee;
    (3) Date of performance;
    (4) Seller's firm sales contract number;
    (5) Detailed description of the contractual event. For goods, 
include the applicable 10-digit Harmonized System classification code 
and the quantity;

[[Page 65525]]

    (6) Net contract value of the contractual event covered by the 
payment guarantee;
    (7) Amount of initial payment corresponding to the contractual 
event;
    (8) Description and value of discounts and allowances, if any;
    (9) Value of approved local costs corresponding to the contractual 
event, if any;
    (10) Total FGP transaction value;
    (11) Guaranteed value of contractual event;
    (12) The seller's statement, ``All certifications set forth in 
Sec.  1493.330 are hereby made by the seller in this evidence of 
performance'' which, when included in the evidence of performance by 
the seller, will constitute a certification that it is in compliance 
with all the requirements set forth in Sec.  1493.330; and
    (13) In addition to all of the above information, the final 
evidence of performance report for the payment guarantee must include 
the following:
    (i) The statement ``All contractual events under the payment 
guarantee have been completed.''
    (ii) A statement summarizing the total value of all contractual 
events covered under the payment guarantee (i.e., the cumulative totals 
on all numbered reports).
    (b) Time limit for submission of evidence of performance. (1) The 
seller must provide a written report to CCC in the manner specified on 
the USDA Web site within 30 calendar days from the date of performance.
    (2) If at any time the seller determines that no contractual events 
are to occur under a payment guarantee, the seller is required to 
notify CCC in writing no later than the final date of performance 
specified on the payment guarantee by furnishing the payment guarantee 
number and stating ``No contractual events will occur under the payment 
guarantee.''
    (3) Requests for an extension of the time limit for submitting an 
evidence of performance report must be submitted in writing by the 
seller to the Director and must include an explanation of why the 
extension is needed. An extension of the time limit may be granted 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 a seller under 
Sec.  1493.260 until the seller is fully in compliance with the 
requirements of Sec.  1493.320(b) for all existing payment guarantees 
issued to that seller or has requested and been granted an extension in 
accordance with Sec.  1493.320(b)(3).


Sec.  1493.330   Certification requirements for the evidence of 
performance.

    By providing the statement contained in Sec.  1493.320(a)(12), the 
seller is certifying that the information provided in the evidence of 
performance report is true and correct and, further, that all 
requirements set forth in this section have been met. The seller will 
be required to provide further explanation or documentation with regard 
to reports that do not include this statement. If the seller 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 
contractual events that have not yet occurred and/or to commence legal 
action and/or administrative proceedings against the seller. The 
seller, in submitting the evidence of performance and providing the 
statement set forth in Sec.  1493.320(a)(12), certifies that:
    (a) The specifications and/or quantity of the contractual event 
conform with the information contained in the seller's application for 
payment guarantee and firm sales contract, or if different, CCC has 
approved such changes;
    (b) A foreign financial institution letter of credit has been 
opened in favor of the seller by the foreign financial institution 
shown on the payment guarantee to cover the dollar amount of the 
contractual event covered by the payment guarantee, less the initial 
payment and less discounts and allowances;
    (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 transaction, and that 
the transaction complies with applicable United States law, including 
the Foreign Corrupt Practices Act of 1977 and other anti-bribery 
measures;
    (d) If the seller has not assigned the payment guarantee to a U.S. 
financial institution, the seller has verified that the foreign 
financial institution, at the time of submission of the evidence of 
performance report, does not appear as an excluded party on the SAM 
list; and
    (e) The information provided pursuant to Sec. Sec.  1493.220 and 
1493.260 has not changed (except as agreed to and amended by CCC) and 
the seller still meets all of the qualification requirements of Sec.  
1493.220.


Sec.  1493.340  Proof of entry.

    (a) Diversion. The diversion of goods covered by an FGP payment 
guarantee to a destination country 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) Sellers must obtain and maintain 
records of an official or customary commercial nature that demonstrate 
the arrival of the goods sold in connection with the FGP in the 
destination country. At the Director's request, the seller 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 destination country, by an 
agent or representative of the vessel or shipline that delivered the 
goods to the destination country, or by a private surveyor in the 
destination country, or other documentation deemed acceptable by the 
Director showing:
    (i) That the good(s) entered the destination country;
    (ii) The identification of the export carrier;
    (iii) The quantity of the good(s);
    (iv) A description of the good(s); and
    (v) The date(s) and place(s) of unloading of the good(s) in the 
destination country.
    (2) Where shipping documents (e.g., bills of lading) clearly 
demonstrate that the goods were shipped to the destination country, 
proof of entry verification may be provided by the buyer.


Sec.  1493.350   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 destination country as shown on the payment 
guarantee;
    (3) Name of the defaulting foreign financial institution;
    (4) Payment due date;

[[Page 65526]]

    (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 foreign financial institution's refusal to pay, if 
applicable;
    (7) Reason for 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 under this subpart or under 7 CFR 1493, 
subpart B, CCC may declare that such foreign financial institution is 
no longer eligible to provide additional Letters of Credit under the 
FGP. If CCC determines that such defaulting foreign financial 
institution is no longer eligible for the FGP, CCC shall provide 
written notice of such ineligibility to all sellers 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 FGP 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 seller (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 transaction 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 seller's guarantee 
fees corresponding to any unutilized portion of the payment guarantee.


Sec.  1493.360  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 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 letter 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 
seller 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 defaulted payment has not been 
received (or, alternatively, specifying the portion of the scheduled 
payment that 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 
(a)(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 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 of the claim for 
default is submitted, provide estimates of such rates);
    (ii) (A) The foreign financial institution letter of credit 
securing the sale; and
    (B) If applicable, the terms and conditions document;
    (iii) For goods, depending upon the method of shipment, the 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 
destination country. If the transaction utilizes electronic bill(s) of 
lading (e-BL), a print-out of the e-BL from electronic system with an 
electronic signature is acceptable;
    (iv) The seller's invoice. For shipment of goods, the invoice must 
show the applicable Incoterms;
    (v) The evidence of performance report(s) previously submitted by 
the seller to CCC in conformity with the requirements of Sec.  
1493.320(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.  1493.310(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 contractual event, 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), (a)(1)(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.

[[Page 65527]]

Sec.  1493.370  Payment for default.

    (a) Determination of CCC's liability. Upon receipt in good order of 
the information and documents required under Sec.  1493.360, 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 
seller 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 seller or the assignee); or
    (2) The guaranteed percentage (as indicated in the payment 
guarantee) of the value of the contractual event indicated in the 
evidence of performance, plus eligible interest, less any payments 
received or funds realized from insurance, security or collateral 
arrangements prior to claim by the seller 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 seller 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 paragraph (b) 
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 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 as a result 
of the claimant invoking an accelerated payment clause in the firm 
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 seller, 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.  1493.360, 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 Sec.  1493.360 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 seller of which the assignee has no knowledge.


Sec.  1493.380  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 seller or the assignee from 
or on behalf of the defaulting party, the buyer, or any source 
whatsoever (excluding payments between CCC, the seller 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 by the seller and/or assignee to CCC. If such monies 
are not received by CCC within 15 business days from the date of 
recovery by the seller or the assignee, such party will also owe to CCC 
interest from the date of recovery of such funds to the date of CCC's 
receipt of such funds. 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 seller 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 out a particular claim under a payment guarantee, CCC prorates 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 seller or the 
assignee will be liable to CCC for any amounts

[[Page 65528]]

paid by CCC under the payment guarantee:
    (1) The seller will be liable to CCC when and if it is determined 
by CCC that the seller has engaged in fraud, or has been or is in 
material breach of any contractual obligation, certification or 
warranty made by the seller for the purpose of obtaining the payment 
guarantee or for fulfilling obligations under the FGP; 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 seller will cooperate with CCC to affect recoveries 
from the foreign financial institution and/or the buyer. 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.  1493.370(d); and other 
actions that do not increase the obligation of the holder of the 
payment guarantee or the seller under the payment guarantee.


Sec.  1493.385  Additional obligations and requirements.

    (a) Maintenance of records and 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 seller 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 goods and services sold in 
connection with a payment guarantee, including those records generated 
and maintained by agents and related companies involved in special 
arrangements with the seller. 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 seller 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 seller's, assignee's, agent's, or related company's 
books, records and accounts concerning transactions relating to the 
payment guarantee, including, but not limited to, financial records and 
accounts pertaining to sales, inventory, processing, and administrative 
and incidental costs, both normal and unforeseen. During such period, 
the seller 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 seller in connection with the payment 
guarantee.
    (b) Responsibility of program participants. It is the 
responsibility of all sellers 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 FGP, as applicable. All sellers and U.S. and foreign 
financial institutions participating in the FGP 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 sellers, assignees, or 
foreign financial institutions under this subpart must be signed by a 
principal of the seller, assignee, or foreign financial institution 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 seller, assignee, or 
foreign financial institution must ensure that all information and 
reports required under these regulations are timely submitted.
    (d) Misstatements or noncompliance by seller may lead to rescission 
of payment guarantee. CCC may cancel a payment guarantee in the event 
that a seller makes a willful misstatement in the certifications in 
Sec. Sec.  1493.270(a) and 1493.330(c) or if the seller fails to comply 
with the provisions of Sec.  1493.340 or Sec.  1493.385(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 seller's misstatement or noncompliance at the 
time of assignment of the payment guarantee.


Sec.  1493.390  Dispute resolution and appeals.

    (a) Dispute resolution. (1) The Director and the seller or the 
assignee will attempt to resolve any disputes, including any adverse 
determinations made by CCC, arising under the FGP, this subpart, the 
applicable program announcements and notices to participants, or the 
payment guarantee.
    (2) The seller 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 seller or the assignee of the determination. The 
seller 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 
seller or the assignee is received by the Director, whichever is later, 
unless the Director extends the time permitted for response. If the 
seller or the assignee fails to request reconsideration of a 
determination by the Director within 30 calendar days of the date of 
the determination, then the determination of the Director will be 
deemed final.
    (3) If the seller 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 
seller 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 seller or the assignee fails to appeal the 
Director's final determination within 30 calendar days, as provided in 
Sec.  1493.390(b)(1), then the Director's decision becomes the final 
determination of CCC.
    (b) Appeal procedures. (1) A seller or assignee that has exhausted 
the procedures set forth in paragraph (a) of this section may appeal a 
final determination of the Director to the GSM. 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 seller or the assignee requests an administrative 
hearing in its appeal letter, it shall be entitled to a hearing before 
the GSM or the GSM's designee.

[[Page 65529]]

    (2) If the seller or the assignee does not request an 
administrative hearing, the seller or the 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 seller or the assignee to the 
GSM.
    (3) If the seller 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 seller or the 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 seller or the 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 
seller or the 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 seller or the assignee will be entitled to no further 
administrative appellate rights.
    (c) Failure to comply with determination. If the seller or the 
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 seller or the assignee has exhausted its rights under 
this section or has failed to exercise such rights, then CCC will have 
the right to exercise any remedies available to CCC under applicable 
law.
    (d) Seller's obligation to perform. The seller will continue to 
have an obligation to perform pursuant to the provisions of these 
regulations and the terms of the payment guarantee pending the 
conclusion of all procedures under this section.


Sec.  1493.395  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 0551-0032.

    Dated: April 4, 2016.
Philip C. Karsting,
Administrator, Foreign Agricultural Service, and Vice President, 
Commodity Credit Corporation.

    Editorial note: This document was received at the Office of the 
Federal Register on September 13, 2016.

[FR Doc. 2016-22367 Filed 9-21-16; 8:45 am]
BILLING CODE 3410-10-P