Export-Import Bank: Overview and
Reauthorization Issues
Shayerah Ilias Akhtar
Specialist in International Trade and Finance
June 30, 2014
Congressional Research Service
7-5700
www.crs.gov
R43581
Export-Import Bank: Overview and Reauthorization Issues
Summary
The Export-Import Bank of the United States (Ex-Im Bank or the Bank), an independent federal
government agency, is the official export credit agency (ECA) of the United States. It operates
under a renewable charter, the Export-Import Bank Act of 1945 (P.L. 79-173), as amended. Ex-Im
Bank helps finance U.S. exports of manufactured goods and services, with the objective of
contributing to U.S. employment, in circumstances when alternative financing is not available or
to assist U.S. exporters to meet foreign, government-backed sponsored, export credit competition.
Its main programs are direct loans, loan guarantees, working capital finance, and export credit
insurance. Its transactions are backed by the full faith and credit of the U.S. government.
Legislation was enacted in the 112th Congress to extend Ex-Im Bank’s authority through the close
of business on September 30, 2014 (P.L. 112-122) and to raise its exposure cap (total amount of
outstanding credit and insurance authority) to $140 billion by FY2014. Currently, Congress is
debating whether to renew Ex-Im Bank’s authority and, if so, for how long and under what terms.
Background
Congress sets statutory requirements for Ex-Im Bank’s support in its charter, under which the
Bank’s financing must have a reasonable assurance of repayment and must supplement, and not
compete with, private capital. Ex-Im Bank also abides by international rules for governmentbacked export credit activity as a participant to the Organization for Economic Co-operation and
Development (OECD) Arrangement on Officially Supported Export Credits.
In FY2013, Ex-Im Bank approved 3,842 transactions of finance and insurance support, which
amounted to $27.3 billion in approved commitments, estimated by Ex-Im Bank to support $37.4
billion in U.S. exports of goods and services. Its overall portfolio exposure level in FY2013 was
$113.8 billion—below the $130 billion statutory cap for that year. Following the 2008-2009
financial crisis, the Bank’s exposure level has increased.
Ex-Im Bank uses offsetting collections to cover costs of its operations. As part of the annual
appropriations process, Congress sets an upper limit on the level available to the Bank for
operations and provides a direct appropriation for its Office of Inspector General (OIG). In terms
of operating expenses, Ex-Im Bank has been “self-sustaining” for appropriations purposes since
FY2008. For FY2014, Congress set an upper limit of $115.5 million for the Bank’s administrative
expenses, provided $5.1 million for its OIG, and allowed carryover funds of up to $10 million to
remain available through FY2016. Ex-Im Bank provided $1.1 billion to the U.S. Treasury in
FY2013 after covering operating expenses and loan loss reserves. Ex-Im Bank assesses credit and
other risks of proposed transactions, monitors current commitments for risks, and maintains
reserves against potential losses. Ex-Im Bank reports that its overall default rate as of March 31,
2014, was 0.211% and that, since 1992, its recovery rate has been 50 cents on the dollar on
average for transactions in default.
Issues for Congress
Members of Congress hold a range of views on Ex-Im Bank. Proponents assert that the Bank
supports U.S. exports by addressing market failures that dampen export levels and helps U.S.
exporters compete against foreign companies backed by their governments’ ECAs. Critics oppose
the use of taxpayer funds for private benefit, whether for large or small businesses, and contend
Congressional Research Service
Export-Import Bank: Overview and Reauthorization Issues
that the private sector is more efficient in financing exports. The Ex-Im Bank reauthorization
issues facing Congress are two-fold. The first issue is whether to renew the Bank in its current
form, or pursue alternatives, such as allowing its authority to expire or reorganizing its functions.
In April 2014, the Obama Administration submitted a legislative proposal to Congress requesting
a reauthorization of Ex-Im Bank. Second, should Congress choose to renew Ex-Im Bank’s
authority, specific reauthorization issues could include the following:
•
For how long should Ex-Im Bank be reauthorized? A shorter renewal period, as
provided in 2012, could allow for more active congressional oversight of Ex-Im
Bank. A longer renewal, such as four to five years, typical of past
reauthorizations, could enhance Ex-Im Bank’s long-term planning and provide
more assurance to those involved in Ex-Im Bank-supported transactions. The
Administration’s legislative proposal calls for a five-year renewal of the Bank’s
authority.
•
Should Ex-Im Bank’s exposure cap be adjusted and if so, by what amount?
Congress has periodically raised the Bank’s exposure cap. Given growing
demand for Ex-Im Bank’s services, some call for an increase in the Bank’s
exposure limit. Critics have, in part, opposed raising the cap based on concerns
about Ex-Im Bank’s risk management practices, and may favor maintaining or
lowering the cap. The Administration’s legislative proposal asks for the cap to be
raised incrementally to $160 billion by FY2018.
•
What revisions should be made to Ex-Im Bank’s policies, if any? Debate could
center on the Bank’s effectiveness and efficiency in meeting its core export and
jobs mission and other statutory requirements, as well as international concerns,
including the policies of foreign ECAs. Concerns about the competitiveness of
the Bank’s policies relative to foreign ECAs may be weighed against the Bank’s
efforts to balance a range of stakeholder interests, including those representing
business, labor, and environmental concerns.
•
How well does the Bank manage the risks associated with its portfolio? Focus on
the Bank’s risk management practice has grown since the financial crisis, as its
exposure level has increased. Key areas of focus include the Bank’s analytic tools
for risk management, as well as its operational capacity to manage its growing
portfolio prudentially. Questions also may be raised about whether the cost of
federal credit is priced appropriately.
•
How should the United States approach international disciplines to guide
government-backed export credit activity? For some stakeholders, the growth in
unregulated financing by U.S. trading partners has raised questions about the
effectiveness of the OECD Arrangement and what role the World Trade
Organization may play in establishing export credit disciplines. It also has
prompted consideration of efforts to bring China and other non-OECD countries
into the Arrangement, as well as U.S. efforts to negotiate separate export credit
disciplines with China. Others call for enhanced U.S. efforts to eliminate all
international government-backed export financing through negotiations in the
OECD and other venues.
Congressional Research Service
Export-Import Bank: Overview and Reauthorization Issues
Contents
Background ...................................................................................................................................... 1
Overview of Ex-Im Bank Policies ............................................................................................. 1
Financial Products ..................................................................................................................... 4
Direct Loans ........................................................................................................................ 4
Medium- and Long-Term Loan Guarantees ........................................................................ 5
Working Capital Financing ................................................................................................. 6
Export Credit Insurance ...................................................................................................... 7
Specialized Finance Products .............................................................................................. 8
Activity Level ............................................................................................................................ 9
Focus Areas ......................................................................................................................... 9
Authorizations ................................................................................................................... 10
Portfolio Exposure............................................................................................................. 12
Ex-Im Bank Budget ................................................................................................................. 14
Risk Management .................................................................................................................... 16
Ex-Im Bank in an International Context ........................................................................................ 17
International Rules on Official Export Credit Activity............................................................ 18
Growth in Unregulated Financing ........................................................................................... 19
Developments in International Export Credit Negotiations .................................................... 22
Selected Issues for Congress.......................................................................................................... 23
Status of Ex-Im Bank Authority .............................................................................................. 23
Renewal of Authority ........................................................................................................ 23
Lapse in Authority ............................................................................................................. 24
Reorganization of Functions ............................................................................................. 26
Exposure Limit ........................................................................................................................ 26
Ex-Im Bank Policies ................................................................................................................ 27
Domestic Content .............................................................................................................. 28
Economic Impact Analysis ................................................................................................ 30
Environmental Impact Analysis ........................................................................................ 31
Shipping ............................................................................................................................ 32
Co-Financing ..................................................................................................................... 33
Tied Aid ............................................................................................................................. 33
Mandates Targeting Ex-Im Bank Activity to Specific Sectors .......................................... 34
Risk Management and Financial Accounting .......................................................................... 35
Effectiveness of International Rules on Government-Backed Export Credit Activity ............ 38
Congressional Outlook .................................................................................................................. 39
Figures
Figure 1. Ex-Im Bank Direct Loan Structure................................................................................... 5
Figure 2. Ex-Im Bank Loan Guarantee Structure ............................................................................ 6
Figure 3. Ex-Im Bank Exporter Insurance Structure ....................................................................... 8
Figure 4. Ex-Im Bank Authorizations, FY1997-FY2013 .............................................................. 11
Congressional Research Service
Export-Import Bank: Overview and Reauthorization Issues
Figure 5. Ex-Im Bank Exposure Level by Program, Geographic Region, and Economic
Sector, FY2013 ........................................................................................................................... 13
Figure 6. Ex-Im Bank Exposure Levels and Exposure Cap, FY1997-FY2013 ............................. 14
Figure 7. Global Government-Backed Export Support, 2013 ....................................................... 20
Figure 8. New Medium- and Long-Term Official Export Financing Volumes for Selected
ECAs, 2013................................................................................................................................. 21
Tables
Table 1. Overview of Major Statutory and Policy Requirements for Ex-Im Bank .......................... 2
Table 2. Ex-Im Bank’s Credit and Insurance Authorizations, FY2012-FY2013 ........................... 12
Table 3. Budget of the Export-Import Bank, FY2011-FY2015 ..................................................... 16
Table 4. Selected Risks Faced by Ex-Im Bank .............................................................................. 17
Table 5. Legislative Changes to the Export-Import Bank’s Limit on Outstanding
Aggregate Credit and Insurance Authority ................................................................................. 27
Table 6. Foreign Content Requirements of Selected Country ECAs ............................................. 29
Table 7. Risk Management: GAO Studies and Ex-Im Bank Action .............................................. 36
Table A-1.New Medium- and Long-Term Official Export Financing Volumes for Selected
ECAs, 2007-2013 ...................................................................................................................... 40
Appendixes
Appendix. International Government-Backed Export Credit Activity .......................................... 40
Contacts
Author Contact Information........................................................................................................... 41
Acknowledgments ......................................................................................................................... 41
Congressional Research Service
Export-Import Bank: Overview and Reauthorization Issues
T
he Export-Import Bank of the United States (Ex-Im Bank or the Bank) is an independent
U.S. government executive agency and a wholly-owned U.S. government corporation.1 It
is the official export credit agency (ECA) of the United States, and is charged with
financing and promoting exports of U.S. manufactured goods and services, with the objective of
contributing to the employment of U.S. workers. Ex-Im Bank is among the federal government
agencies involved in promoting U.S. exports of goods and services.2
The Bank operates under a renewable charter, the Export-Import Bank Act of 1945, as amended
(P.L. 79-173; 12 U.S.C. §635 et seq.). In 2012, Congress debated and ultimately reauthorized ExIm Bank through the close of business on Reauthorization Issues
March 25, 2015
(R43581)
Summary
The Export-Import Bank of the United States (Ex-Im Bank or the Bank), a wholly owned U.S. government corporation, is the official export credit agency (ECA) of the United States. Its mission is to assist in the financing of U.S. exports of goods and services to support U.S. employment. The FY2015 continuing resolution (§147 of P.L. 113-164) extends its general statutory charter (Export-Import Bank Act of 1945, as amended, 12 U.S.C. §635 et seq.) through June 30, 2015. The 114th Congress may debate whether to renew Ex-Im Bank's authority; if so, for how long and under what terms; and if not, other policy alternatives.
Under its charter, Ex-Im Bank's financing must have a "reasonable assurance of repayment" and should supplement, and not compete with, private capital, among other requirements. The Bank also abides by international rules for government-backed export credit activity under the Organization for Economic Co-operation and Development (OECD).
In FY2014, Ex-Im Bank reported authorizing about $20.5 billion for 3,746 transactions of finance and insurance, to support an estimated $27.5 billion in U.S. exports of goods and services and 164,000 U.S. jobs. Its overall portfolio exposure level in FY2014 was $112 billion—below the $140 billion statutory cap for that year. Ex-Im Bank assesses credit and other risks of proposed transactions, monitors current commitments for risks, and maintains reserves against potential losses. It reported a default rate of 0.175% as of September 2014 (provided quarterly to Congress) and, since 1992, an average recovery rate of 50% for transactions in default.
Ex-Im Bank uses offsetting collections to cover costs of its operations. FY2015 appropriations legislation set an upper limit of $106.3 million for the Bank's administrative expenses, provided $5.8 million for its Office of Inspector General (OIG), and allowed carryover funds of up to $10 million to remain available until September 30, 2018.
Members of Congress hold a range of views on Ex-Im Bank. Proponents assert that the Bank supports U.S. exports by addressing market failures that dampen export levels and helping U.S. exporters compete against foreign companies backed by their governments' ECAs. Critics oppose the use of taxpayer funds for private benefit, whether for large or small businesses, and contend that the private sector is more efficient in financing exports. The reauthorization issues facing Congress are two-fold. The first issue is whether to renew Ex-Im Bank's authority. Scenarios include renewal in a "clean" manner or with reforms; a sunset in authority; and a reorganization of its functions. Second, should Congress choose to renew its authority, specific issues include
- For how long should Ex-Im Bank be reauthorized?
- Should Ex-Im Bank's exposure cap be adjusted and if so, by what amount?
- What revisions should be made to Ex-Im Bank's policies, if any?
- How well does the Bank manage the risks associated with its portfolio?
- How should the United States approach international disciplines to guide government-backed export credit activity?
Export-Import Bank: Overview and Reauthorization Issues
The Export-Import Bank of the United States (Ex-Im Bank or the Bank), a wholly owned U.S. government corporation,1 is the official export credit agency (ECA) of the United States. Its mission is to assist in the financing of U.S. exports of goods and services to support U.S. employment. Ex-Im Bank is among the federal government agencies involved in promoting U.S. exports of goods and services.2
It operates under a general statutory charter, the Export-Import Bank Act of 1945, as amended (P.L. 79-173; 12 U.S.C. §635 et seq.). A FY2015 continuing resolution (§147 of P.L. 113-164) includes a provision extending Ex-Im Bank's authority through June 30, 2015. Ex-Im Bank previously was authorized through September 30, 2014 (P.L. 112-122
). The 114th Congress may debate). Currently,
Congress is considering whether to renew Ex-Im Bank
’'s authority and
, if so, for how long and
under what terms
.
; and if not, the possibility of other policy options.
This report provides (1) a general background of Ex-Im Bank; (2) a discussion of the
international context of the Bank; (3) analysis of key issues that Congress may consider in a
reauthorization debate; and (4) the congressional outlook on Ex-Im Bank.
Background
Ex-Im Bank seeks to (1) correct market failures by assuming the risks of financing exports that
the private sector is unwilling, or unable, to undertake alone at competitive terms; and/or (2) meet
Other CRS resources on Ex-Im Bank include CRS Report R43671, Export-Import Bank Reauthorization: Frequently Asked Questions, coordinated by [author name scrubbed]; CRS Report IF10017, Export-Import Bank (Ex-Im Bank) Reauthorization, by [author name scrubbed]; and CRS Report IF00039, Export-Import (Ex-Im) Bank and the Federal Budget (In Focus) (pdf), by [author name scrubbed].
Background
On a demand-driven basis, Ex-Im Bank seeks to provide financing (1) when the private sector is unwilling, or unable, to undertake alone such financing at commercially viable terms; and/or (2) to meet foreign competition by countering government-backed financing offered by other countries to
their companies.
3
3 The rationales behind Ex-Im Bank's activities are subject to congressional debate.
Overview of Ex-Im Bank Policies
Congress sets statutory requirements for Ex-Im Bank
’'s activity in its charter (see Table 1 for
summary). Under the charter, Ex-Im Bank
’'s financing must
have a offer a "reasonable assurance of
repayment repayment" and must supplement, not compete with, private sources of financing.
4 The charter also
includes other statutory requirements that serve as the basis for Ex-Im Bank
’'s policies, for
example, with respect to providing terms that are fully competitive with other ECAs, economic
and environmental considerations, and focusing on supporting specific types of exports.
Ex-Im Bank also abides by the Organization for Economic
CooperationCo-operation and Development
(OECD) Arrangement on Officially Supported Export Credits (the
“Arrangement”"Arrangement"), which
establishes terms and conditions for the export credit agencies of the United States and other
participants (discussed later).
1
A U.S. government corporation is a government agency established by Congress to provide market-oriented public
services and to produce revenues that meet or approximate expenditures. See CRS Report RL30365, Federal
Government Corporations: An Overview, by Kevin R. Kosar.
2
For more information, see CRS Report R41495, U.S. Government Agencies Involved in Export Promotion: Overview
and Issues for Congress, coordinated by Shayerah Ilias Akhtar.
3
Ex-Im Bank, Annual Report 2013 of the Export-Import Bank of the United States (hereinafter Ex-Im Bank, FY2013
Annual Report), http://www.exim.gov/about/library/reports/annualreports/2013/.
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Export-Import Bank: Overview and Reauthorization Issues
Table 1. Overview of Major Statutory and Policy Requirements for Ex-Im Bank
Requirement
Description
Statutory Basis
OVERALL
Mandate
Ex-Im Bank’s mandate is to support financing and to facilitate U.S.
exports of goods and services and, in doing so, contribute to the
employment of U.S. workers.
12 U.S.C. 635(a)(1)
Private Capital
The Bank must supplement and encourage, and not compete with,
private capital.
12 U.S.C. 635(b)(1)(B)
Reasonable
Assurance of
Repayment
All Ex-Im Bank transactions must have a reasonable assurance of
repayment.
2 U.S.C. 635(b)(1)(B)
Rates, Terms, and
Conditions
Ex-Im Bank loans must be at rates and on terms and conditions
which are fully competitive with exports of other countries, and
consistent with international agreements.
12 U.S.C 635(b)(1)(B)
Fees
The Bank is authorized to charge fees and premiums commensurate
with the risks covered in connection with its contractual liability for
its financing.
12 U.S.C. 635(c)(1)
Due Diligence
The Bank is required to set due diligence standards for its lender
partners and participants.
12 U.S.C. 635(i)
Exposure Cap
Congress sets a limitation on the total amount of outstanding loans,
guarantees, and insurance Ex-Im Bank can have any one time. For
FY2014, the exposure cap is $140 billion.
12 U.S.C. 635e(F)(ii)
Default Rate
Ex-Im Bank must monitor its default rate; report quarterly to
Congress on its default rate; and, if the default rate exceeds 2%,
submit a report to Congress on a plan to reduce it to below 2%.
12 U.S.C. 635g(g)
TRANSACTION-SPECIFIC
Content
Content is the amount of domestic and foreign costs from labor,
materials, overhead, and other inputs associated with the
production of an export. Based on its jobs mandate, the Bank
finances the U.S. content of U.S. exports, which the agency
considers to be a proxy for U.S. jobs. For medium- and long-term
transactions, Ex-Im Bank limits its support to the lesser of: (1) 85%
of the value of all goods and services contained within a U.S. supply
contract or; (2) 100% of the U.S. content of an export contract. In
effect, in order to receive full Ex-Im Bank financing for an export
transaction, the minimum domestic content is 85% and the
maximum foreign content allowance is 15%. If the foreign content
exceeds 15%, then the Bank's support would be reduced
proportionally. For short-term transactions, the minimum U.S.
content required for full financing is generally 50%.
Ex-Im Bank policy
Local Cost
Local costs are the project-related costs for goods and services that
are incurred in the buyer’s country. When Ex-Im Bank provides
medium- or long-term financing for U.S. exports for foreign
projects, it may also provide local cost support. Specifically, the
Bank can support up to 30% of the value of the U.S. exports for
goods and services that are originated and/or manufactured in the
buyer’s country, subject to certain requirements.
Ex-Im Bank policy
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Export-Import Bank: Overview and Reauthorization Issues
Requirement
Description
Statutory Basis
Economic Impact
The Bank is required to have regulations and procedures to insure
that full consideration is given to the extent that any loan or
guarantee is likely to have an adverse effect on industries and
employment in the United States. [12 U.S.C. 635a-2] These
regulations and procedures are in support of the congressional
policy that in authorizing any loan or guarantee the Board of
Directors shall take into account any serious adverse effect of such
loan or guarantee. [12 U.S.C. 635(b)(1)(B)] Furthermore, the Bank
is prohibited from extending any loan or guarantee that would
establish or expand the production of any commodity for export by
any other country if the commodity is likely to be in surplus on
world markets or the resulting production capacity will compete
with U.S. production of a similar commodity and will cause
“substantial injury” to U.S. producers of a similar commodity [12
U.S.C. 635(e)(1)]. The Bank defines risk of substantial injury as the
extension of a loan or guarantee that will enable a foreign buyer to
establish or expand foreign production by an amount that is equal
to or greater than 1% of U.S. production. The same prohibition
applies to loans or guarantees subject to U.S. trade measures, such
as anti-dumping or countervailing duties. [12 U.S.C. 635(e)(2)]
However, these prohibitions shall not apply if the Board of
Directors determines that the proposed transaction’s short- and
long-term benefits to U.S. industry and U.S. employment are likely
to outweigh the injury to U.S. producers and U.S. employment of
similar commodities. [12 U.S.C. 635(e)(3)]
12 U.S.C. 635a-2;
12 U.S.C. 635(b)(1)(B);
12 U.S.C. 635(e)(1);
12 U.S.C. 635(e)(2); 12
U.S.C. 635(e)(3)
Environmental
Impact
The Bank considers the potential beneficial or adverse
environmental effects of proposed transactions. The Bank is
authorized to grant or withhold financing support after taking into
account the environmental impact of the proposed transaction.
12 U.S.C. 635i-5
U.S. Flag Shipping
Products supported by Ex-Im Bank exported via ships must be
transported exclusively on U.S. flagged vessels. This requirement
applies to any shipped exports receiving a direct loan from Ex-Im
Bank, or any shipped export over $20 million that receives an Ex-Im
Bank guarantee. Under limited conditions, a waiver on this
condition may be granted by the Maritime Administration
(MARAD).
Public Resolution 17 of
the 73rd Congress; P.L.
109-304
Noncommercial or
Nonfinancial
Considerations
The Bank should deny applications for credit on the basis of
nonfinancial and noncommercial considerations only in cases where
the President, in consultation with the House Financial Services
Committee and Senate Banking, Housing and Urban Affairs
Committee, determines that the denial of such applications would
advance U.S. national interests in areas such as international
terrorism, nuclear proliferation, environmental protection, and
human rights. The power to make a national interest determination
has been delegated to the Secretary of State.
12 U.S.C. 635(b)(1)(B)
Cofinancing
Ex-Im Bank supports financing with ECAs in other countries
through “one-stop-shop” co-financing facilities, which are
arrangements that allow for Ex-Im Bank to support the U.S. content
of an export, while allowing a foreign ECA to support its portion of
the export, thereby providing greater financial coverage for the
exporter and foreign buyer through a single ECA financing package.
Ex-Im Bank policy
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Export-Import Bank: Overview and Reauthorization Issues
Requirement
Description
Statutory Basis
EXPORT FOCUS AREAS AND LIMITATIONS
Small Businesses
Congress directs the Bank to make available not less than 20% of its
aggregate loan, guarantee, and insurance authority to finance
exports directly by U.S. small businesses.
12 U.S.C.
635(b)(1)(E)(v)
Renewable Energy
Congress directs the Bank to promote the export of U.S. goods
and services related to renewable energy sources. Appropriations
language further has specified the Bank should make available not
less than 10% of its aggregate authority to finance exports of
renewable energy technologies or energy efficient end-use
technologies.
12 U.S.C. 635(b)(1)(K)
Sub-Saharan Africa
Congress directs the Bank to promote the expansion of its financial
commitments in sub-Saharan Africa, in consultation with the Trade
Promotion Coordinating Committee (TPCC). No quantitative
target is specified.
12 U.S.C. 635(b)(9)(A)
Country
Restrictions
The Bank generally is prohibited from extending credit and
insurance to certain countries, including but not limited to those
that are in armed conflict with the United States, those with balance
of payment problems, or those for which a Presidential
determination has been issued.
12 U.S.C. 635(b)(2)
Military Exports
Ex-Im Bank is prohibited from financing defense articles and defense
services with certain limited exceptions.
12 U.S.C. 635(b)(6)(A)
Source: CRS analysis of Ex-Im Bank charter (12 U.S.C. 635 et. seq.) and policy documents.
Financial Products
Ex-Im Bank groups its financial products into four main categories: (1) direct loans; (2) loan
guarantees; (3) working capital finance; and (4) export credit insurance (see text box at end of
section for examples of transactions).4 Its commitments and repayment periods can range from
short-term (less than one year); medium-term (one to seven years); and long-term (more than
seven years). The Bank may determine repayment terms based on variables such as buyer,
industry, and country conditions; common repayment terms that the market gives such products;
terms of international rules on export credit activity; and the matching of terms offered by foreign
ECAs. Ex-Im Bank, a demand-driven agency, charges interest, risk premia, and other fees for its
services.
Direct Loans
Ex-Im Bank provides direct loans to foreign buyers of U.S. goods and services, usually for U.S.
participants (discussed later).
Table 1. Overview of Major Statutory and Policy Requirements for Ex-Im Bank
Requirement
|
Description
|
Statutory Basis
|
OVERALL
|
Mandate
Ex-Im Bank's mandate is to support financing and to facilitate U.S. exports of goods and services and, in doing so, contribute to the employment of U.S. workers.
|
12 U.S.C. 635(a)(1)
|
Private Capital
|
The Bank should "supplement and encourage, and not compete with, private capital."
|
12 U.S.C. 635(b)(1)(B)
|
Reasonable Assurance of Repayment
|
All Ex-Im Bank transactions must offer a "reasonable assurance of repayment."
|
12 U.S.C. 635(b)(1)(B)
|
Rates, Terms, and Conditions
|
Ex-Im Bank loans must be "at rates and on terms and conditions which are fully competitive with exports of other countries, and consistent with international agreements."
|
12 U.S.C 635(b)(1)(B)
|
Fees
The Bank is authorized to charge fees and premiums "commensurate... with risks covered in connection with the contractual liability that the Bank incurs" for its financing.
|
12 U.S.C. 635(c)(1)
|
Due Diligence
|
The Bank is required to "set due diligence standards for its lender partners and participants, which should be applied across all programs consistently."
|
12 U.S.C. 635(i)
|
Exposure Cap
|
There is a limitation on Ex-Im Bank's total exposure—the total authorized outstanding and undisbursed principal balance of loans, guarantees, and insurance, as well as unrecovered balance of payments made on claims submitted to Ex-Im Bank as guarantor or insurer under its programs. For FY2014, the exposure cap is $140 billion.
|
12 U.S.C. 635e(a)
|
Default Rate
Ex-Im Bank must monitor its default rate; report quarterly to Congress on its default rate; and, if the default rate equals or exceeds 2%, submit a report to Congress on a plan to reduce it to below 2%.
|
12 U.S.C. 635g(g)
|
TRANSACTION-SPECIFIC
|
Content
Content is the amount of domestic and foreign costs from labor, materials, overhead, and other inputs associated with the production of an export. Based on its jobs mandate, the Bank finances the U.S. content of U.S. exports, which the agency considers to be a proxy for U.S. jobs. For medium- and long-term transactions, Ex-Im Bank limits its support to the lesser of (1) 85% of the value of all goods and services contained within a U.S. supply contract or; (2) 100% of the U.S. content of an export contract. In effect, in order to receive full Ex-Im Bank financing for an export transaction, the minimum domestic content is 85% and the maximum foreign content allowance is 15%. If the foreign content exceeds 15%, then the Bank's support would be reduced proportionally. For short-term transactions, the minimum U.S. content required for full financing is generally 50%.
|
Ex-Im Bank policy
|
Local Cost
|
Local costs are the project-related costs for goods and services that are incurred in the buyer's country. When Ex-Im Bank provides medium- or long-term financing for U.S. exports for foreign projects, it may also provide local cost support. Specifically, the Bank can support up to 30% of the value of the U.S. exports for goods and services that are originated and/or manufactured in the buyer's country, subject to certain requirements.
|
Ex-Im Bank policy
|
Economic Impact
The Bank is required to have "regulations and procedures ... to insure that full consideration is given to the extent that any loan or guarantee is likely to have an adverse effect on industries ... and employment in the United States.... " [12 U.S.C. 635a-2] These regulations and procedures are in support of the congressional policy that in authorizing any loan or guarantee the Board of Directors shall take into account any serious adverse effect of such loan or guarantee. [12 U.S.C. 635(b)(1)(B)] Furthermore, the Bank is prohibited from extending any loan or guarantee "for establishing or expanding production of any commodity for export by any other country" if "the commodity is likely to be in surplus on world markets at the time the resulting commodity will first be sold" or "the resulting production capacity is expected to compete with [U.S.] production of the same, similar, or competing commodity" and "may cause substantial injury to [U.S.] producers of the same, or a similar commodity." [12 U.S.C. 635(e)(1)] The Bank defines risk of substantial injury as the extension of a loan or guarantee that will enable a foreign buyer to establish or expand foreign production by an amount that is equal to or greater than 1% of U.S. production. The same prohibition applies to loans or guarantees subject to U.S. trade measures, such as anti-dumping or countervailing duties. [12 U.S.C. 635(e)(2)] However, these prohibitions shall not apply if the Board of Directors determines that the proposed transaction's "short- and long-term benefits to industry and employment in the United States are likely to outweigh the short- and long-term injury to [U.S.] producers and employment of the same, similar, or competing commodity." [12 U.S.C. 635(e)(3)]
|
12 U.S.C. 635a-2; 12 U.S.C. 635(b)(1)(B); 12 U.S.C. 635(e)(1); 12 U.S.C. 635(e)(2); 12 U.S.C. 635(e)(3)
Environmental Impact
The Bank considers the potential beneficial or adverse environmental effects of proposed transactions. The Bank is authorized to grant or withhold financing support after taking into account the environmental impact of the proposed transaction. The Bank must conduct an environmental review of all transactions for which long-term support of $10 million or more is requested from the Bank.
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12 U.S.C. 635i-5
|
U.S. Flag Shipping
Products supported by Ex-Im Bank exported via ships must be transported exclusively on U.S. flagged vessels. This requirement applies to any shipped exports receiving a direct loan from Ex-Im Bank, or any shipped export over $20 million that receives an Ex-Im Bank guarantee. Under limited conditions, a waiver on this condition may be granted by the Maritime Administration (MARAD).
|
Public Resolution 17 of the 73rd Congress; P.L. 109-304
|
Noncommercial or Nonfinancial Considerations
The Bank should deny applications for credit on the basis of "nonfinancial and noncommercial considerations" only "in cases where the President, after consultation with the Committee on Financial Services of the House and the Committee on Banking, Housing and Urban Affairs of the Senate, determines" that the denial of such applications would advance U.S. national interests in areas such as international terrorism, nuclear proliferation, environmental protection, and human rights. The power to make a national interest determination has been delegated to the Secretary of State.
|
12 U.S.C. 635(b)(1)(B)
|
Cofinancing
|
Ex-Im Bank supports financing with ECAs in other countries through "one-stop-shop" co-financing facilities, which are arrangements that allow for Ex-Im Bank to support the U.S. content of an export, while allowing a foreign ECA to support its portion of the export, thereby providing greater financial coverage for the exporter and foreign buyer through a single ECA financing package.
|
Ex-Im Bank policy
|
EXPORT FOCUS AREAS AND LIMITATIONS
|
Small Businesses
The Bank is to make available not less than 20% of its "aggregate loan, guarantee, and insurance authority to finance exports directly" by U.S. small businesses each fiscal year.
|
12 U.S.C. 635(b)(1)(E)(v)
|
Renewable Energy
The Bank should "promote the export of U.S. goods and services related to renewable energy sources." Since FY2008, appropriations language has specified the Bank should make available not less than 10% of its aggregate authority to finance renewable energy exports. The specific language used for the 10% target has varied; FY2015 appropriations language refers to "renewable energy technologies or energy efficiency technologies" for the target.
|
12 U.S.C. 635(b)(1)(K)
|
Coal-Fired Power Plants
|
The use of Ex-Im Bank funds is prohibited, through September 30, 2015, under certain conditions, for the enforcement of any rule, regulation, policy, or guidelines implemented pursuant to Ex-Im Bank's Supplemental Guidelines for High-Carbon Projects in December 2013. The Supplemental Guidelines state that "the Bank will not provide support for exports of high carbon intensity plants, except for high carbon intensity plants that (a) are located in the world's poorest countries, utilize the most efficient coal technology available and where no other economically feasible alternative exists, or (b) deploy carbon capture and sequestration (CCS), in each case, in accordance with the requirements set forth in these Supplemental Guidelines."
|
Sec. 7086(4)(C) of FY2015 appropriations act (P.L. 113-235)
|
Sub-Saharan Africa
The Bank should "promote the expansion" of its "financial commitments in sub-Saharan Africa under the loan, guarantee, and insurance programs of the Bank," in consultation with the Trade Promotion Coordinating Committee (TPCC). No quantitative target is specified.
|
12 U.S.C. 635(b)(9)(A)
|
Country Restrictions
The Bank generally is prohibited from extending credit and insurance to a country identified as "Marxist-Leninist" unless the President determines that the country has ceased to be Marxist-Leninist or the President determines that providing financing to the country would be in the U.S. national interest. The Bank also is prohibited from providing credit and insurance in connection with a country that is in armed conflict with the United States, to assist certain countries with balance of payment financing, or those for which a presidential determination has been issued.
|
12 U.S.C. 635(b)(2); 12 U.S.C. 635(b)(5);12 U.S.C. 635(b)(10)
Military Exports
Ex-Im Bank is prohibited from financing defense articles and defense services with certain limited exceptions.
|
12 U.S.C. 635(b)(6)
|
Source: CRS analysis of Ex-Im Bank charter (12 U.S.C. 635 et. seq.) and policy documents.
Note: Descriptions provide summaries of the requirements and may not be comprehensive. Refer to relevant statutes for full treatment.
Financial Products
Ex-Im Bank groups its financial products into four main categories: (1) direct loans; (2) loan guarantees; (3) working capital finance; and (4) export credit insurance.5 Its commitments and repayment periods can range from short-term (less than one year); to medium-term (one to seven years); to long-term (more than seven years). The Bank may determine repayment terms based on variables such as buyer, industry, and country conditions; common repayment terms that the market gives such products; terms of international rules on export credit activity; and the matching of terms offered by foreign ECAs. Ex-Im Bank, a demand-driven agency, charges interest, risk premia, and other fees for its services.
Direct Loans
Ex-Im Bank provides direct loans to foreign buyers of U.S. goods and services, usually for U.S. capital equipment and services (see Figure 1). Direct loans have no minimum or maximum size,
but generally involve amounts of more than $10 million. The Bank extends to the U.S. company
’s
's foreign customer a loan covering up to 85% of the U.S. contract value. Direct loans are available
for medium- and long-term transactions, but most commonly are offered on a long-term basis.
The direct loans carry fixed interest rates and generally are made at terms that are the most
4
Information drawn from Ex-Im Bank, http://www.exim.gov/.
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Export-Import Bank: Overview and Reauthorization Issues
attractive allowed under the provisions of the OECD Arrangement. The specific rates charged by
Ex-Im Bank are based on the Commercial Interest Reference Rates (CIRR).
5
6
Figure 1. Ex-Im Bank Direct Loan Structure
Source: CRS, based on Ex-Im Bank information.
Notes: This diagram is a general representation of Ex-Im Bank direct loans. Specifics vary by transaction.
Prior to 1980, Ex-Im Bank
’'s direct lending program was its chief financing vehicle. Both the
budget authority requested by the Administration and the level approved by Congress for direct
lending dropped sharply during the 1980s, reportedly as a target of budget cuts.
67 In the past
decade, demand for Ex-Im Bank direct loans has been limited, because commercial interest rates
were low.
78 According to the Bank, demand for direct loans increased significantly with the
international financial crisis of 2008-2009, as banking problems limited the ability of commercial
banks to originate export finance transactions at competitive rates.
8
9
Medium- and Long-Term Loan Guarantees
Ex-Im Bank provides medium- and long-term guarantees of loans made by a lender to a foreign
buyer of U.S. goods and services, promising to pay the lender, if the buyer defaults, the
5
Commercial Interest Reference Rates (CIRRs) are the official lending rates of ECAs. They are calculated monthly and
based on government bonds issued in the country’s domestic market for its currency. For the U.S. dollar, the CIRR is
based on the U.S. Treasury bond rate. Ex-Im Bank, “Commercial Interest Reference Rates,” http://www.exim.gov/
tools/commercialinterestreferencerates/index.cfm/.
6
Ex-Im Bank, Office of the Inspector General (OIG), Export-Import Bank’s Management of Direct Loans and Related
Challenges, OIG-AR-13-05, September 26, 2013, p. 1, http://www.exim.gov/oig/upload/OIG-Final-Report-Audit-ofEx-Im-Bank-s-Management-of-Direct-Loans-and-Related-Challenges-09-26-13-2.pdf.
7
Ibid.
8
Ex-Im Bank, Report to the U.S. Congress on Export Credit Competition and the Export-Import Bank of the United
States, For the Period January 1, 2012 through December 31, 2012, Washington, DC, June 2013, p. 45,
http://www.exim.gov/about/library/reports/competitivenessreports/upload/US-Ex-Im-Bank-2012-CompetitivenessReport-to-Congress-Complete.pdf (hereinafter Ex-Im Bank, 2012 Competitiveness Report, June 2013).
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Export-Import Bank: Overview and Reauthorization Issues
outstanding principal and accrued interest on the loan (see Figure 2). Loan guarantees are
buyer of U.S. goods and services, promising to pay the lender, if the buyer defaults, the outstanding principal and accrued interest on the loan (see Figure 2).
Figure 2. Ex-Im Bank Loan Guarantee Structure
Source: CRS, based on Ex-Im Bank information.
Notes: This diagram is a general representation of Ex-Im Bank loan guarantees. Specifics vary by transaction.
|
Loan guarantees are intended to cover repayment risk. Medium- and long-term loan guarantees are typically used to
finance purchases of U.S. capital equipment and services. Unlike insurance (discussed below),
loan guarantees are
unconditionalunconditional—representing Ex-Im Bank
’'s commitment to a commercial
bank for full repayment in the event of a default. There is no limit on the transaction size for a
loan guarantee. Ex-Im Bank provides a guarantee of up to 85% or 100% of the U.S. content,
whichever is lower, with a minimum 15% down payment required from the buyer. It provides
coverage for 100% of the commercial and political risks of borrower repayment.
Figure 2. Ex-Im Bank Loan Guarantee Structure
Source: CRS, based on Ex-Im Bank information.
Notes: This diagram is a general representation of Ex-Im Bank loan guarantees. Specifics vary by transaction.
Working Capital Financing
Ex-Im Bank
’'s working capital program is intended to facilitate finance for businesses, primarily
small businesses, which have exporting potential but need working capital funds (e.g., to buy raw
materials or supplies) to produce or market their goods or services for export.
Working capital guarantees provide repayment guarantees to lenders (primarily commercial
banks) on secured, short- and medium-term working capital loans made to qualified exporters.
They can be for a single loan or a revolving line of credit, and typically are for one year, but can
be extended to up to three years. Working capital guarantees cover up to 90% of the principal and
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Export-Import Bank: Overview and Reauthorization Issues
interest on a loan made to an exporter by a private lender for export-related accounts receivables,
and up to 75% for export-related inventory. Generally, each product must have more than 50%
U.S. content based on all direct and indirect costs for eligibility. The interest rates for working
capital loans guaranteed by Ex-Im Bank are set by the commercial lender. The working capital
guarantees are secured by export-related accounts receivable and inventory (including work-
inprocessin-process). The collateral requirement under the guaranteed loan to issue letters of credit is 25% of
the face value of the letter of credit, compared with the standard 100% cash collateral generally
required by the private sector. On a case-by-case basis, the letter of credit collateral requirement
may be lowered to 10%.
Working capital loans are fixed-rate lines of credit to small business
exporters of up to $500,000 for a 6-month or 12-month period.
Export Credit Insurance
Ex-Im Bank provides insurance policies to exporters and lenders to protect against losses of
nonrepaymentnon-repayment for commercial and political reasons. Like loan guarantees, insurance is intended to
reduce the risks involved in exporting by protecting against commercial or political uncertainty.
However, in contrast, insurance is
conditionalconditional on the fulfillment of various requirements for
ExImEx-Im Bank to pay a claim (e.g., compliance with underwriting policies, deadlines for filing claims,
payment of premiums and fees, and submission of proper documentation).
9
10
The Bank issues short-term insurance policies to U.S. exporters to reduce their risk of
nonpayment by the foreign buyer. Insurance, for example, could allow the exporter to extend
more competitive terms of credit to foreign buyers (see Figure 3) and/or provide additional
working capital to increase the exporter
’'s borrowing base. Short-term exporter insurance is
available for products shipped from the United States and with at least 50% U.S. content
(excluding mark-up). Ex-Im Bank offers a renewable one-year policy that generally covers up to
180-day terms, but can be extended up to 360 days for qualifying transactions. It also maintains
short-term insurance policies for lenders. Depending on the policy, the Bank will cover 90
%-95%
of nonpayment losses due to commercial and political risks.
9
U.S. Government Accountability Office (GAO), Export-Import Bank: Recent Growth Underscores Need for
Continued Improvements in Risk Management, GAO-13-303, March 2013, p. 41, http://www.gao.gov/products/GAO13-303.
Congressional Research Service
7
Export-Import Bank: Overview and Reauthorization Issues
Figure 3. Ex-Im Bank Exporter Insurance Structure
Figure 3. Ex-Im Bank Exporter Insurance Structure
Source: CRS, based on Ex-Im Bank information.
Notes: This diagram is a general representation of Ex-Im Bank exporter insurance. Specifics vary by transaction.
Ex-Im Bank can extend medium-term insurance, generally up to five years and with a maximum
cover of $10 million,
to both exporters and lenders, covering one or a series of shipments. The
Bank will insure up to 85% of the contract price prior to delivery. If the foreign content is more
than 15%, it will only support the U.S. portion. It requires the buyer to make cash payment to the
exporter equal to 15% of the net U.S. contract value. It covers 100% of nonpayment due to
commercial and political risk.
Specialized Finance Products
Ex-Im Bank
’'s programs include specialized finance
products10,products,11 such as:
•
project finance, which is limited recourse
project finance to newly created
companies, usually in amounts greater than $10 million. Project finance typically
covers large, long-term infrastructure and industrial projects (e.g., airport
construction, oil and gas power sector projects, wind turbines), involving
multiple contracts for completion and operation. Sponsor support during
construction, combined with the project
’'s future cash flows, form the basis for
the Bank
’'s analysis of the creditworthiness of the project, as well as its source of
repayment (rather than repayments by foreign governments, financial institutions,
or established corporations). Repayment terms are generally up to 14 years, but
can be up to 18 years for renewable energy projects.
•
structured finance, which is finance to existing companies located overseas,
based on their balance sheets and other sources of collateral or security
enhancements. Through structured finance, Ex-Im Bank has financed fiber-optic
10
The specialized finance products summarized in this section are classified under Ex-Im Bank’s loan guarantee
program on the agency’s website (http://www.exim.gov/), but may include direct loan and/or insurance support as well.
Congressional Research Service
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Export-Import Bank: Overview and Reauthorization Issues
cable, oil and gas projects, air traffic control systems, satellites, and
manufacturing equipment. Repayment terms generally are for up to 10 years, but
can be up to 12 years for power transactions.
•
transportation finance, including for aircraft, ship, and railroad exports, based
on the guidelines set by specific sector understanding under the OECD
Arrangement.
Examples of Ex-Im Bank Transactions
Direct Loans
In May 2012, Ex-Im Bank provided a $48.6 million direct loan to Gas Verde, S.A. for a biogas project in Brazil for the
export of U.S. renewable energy technologies from FirmGreen, a small U.S. business based in California, and other
U.S. suppliers.
In January 2013, Ex-Im Bank authorized a $155.4 million direct loan to Ghana to finance the design and construction
of a hospital expansion, which will support U.S. exports of engineering and construction services and medical
appliances by Americaribe Inc. (Miami, FL).
In September 2013, Ex-Im Bank authorized two direct loans totaling $33.6 million to Abengoa, a Spanish multinational
company, to support the export of U.S. heat-transfer fluid produced by The Dow Chemical Company for use in solar
projects in Spain and South Africa.
Loan Guarantees
In March 2013, Ex-Im Bank approved a final commitment of a $1.1 billion loan guarantee to finance the export of a
fleet of Boeing aircraft to Lion Air, a privately-owned airline in Indonesia. Apple Bank for Savings (New York)
provided the financing, with the possibility of additional funding provided by capital market investors through an Ex-Im
Bank-guaranteed bond.
In June 2013, Ex-Im Bank authorized a $19.9 million loan guarantee extended by HSBC Bank to a Nigerian company
to facilitate the export of one used liftboat provided by Offshore Liftboats LLC, a U.S. small business based in
Louisiana.
Export Credit Insurance
In September 2012, Ex-Im Bank authorized $900,000 in export credit insurance to support the export of agricultural
aircraft by Air Tractor Inc. to Brazil.
Project Finance Direct Loan
In December 2013, Ex-Im Bank authorized a $694.4 million loan to Roy Hill Holdings (Australia) contingent on the
purchase U.S. mining and rail equipment from Caterpillar Inc., General Electric, and Atlas Copco. Ex-Im Bank financing
was part of a $7.2 billion long-term financing agreement to fund a $10 billion, 55-million metric tons per year iron ore
mining project by Roy Hill. The financing agreement consists of loans and guarantees from five export credit agencies
from the United States, Japan, and South Korea and a consortium of 19 commercial banks from Australia, Japan,
Europe, China, Korea and Singapore.
Source: Various Ex-Im Bank and other press releases.
Activity Level
Focus Areas
on the guidelines set by specific sector understanding under the OECD Arrangement. Activity Level
Focus Areas
While Ex-Im Bank is a demand-driven agency, it has certain focus areas.
As previously discussed,
Congress requires Ex-Im Bank to support certain types of exports, that is, exports by U.S. small
businesses, U.S.
exports related to renewable energy
exportssources, and U.S. exports to sub-Saharan Africa. The Bank
also seeks to support U.S. exports based on Administration goals and policy initiatives. For
example, under the Obama Administration, Ex-Im Bank has been involved in efforts to boost U.S.
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Export-Import Bank: Overview and Reauthorization Issues
exports worldwide under exports worldwide as part of the National Export Initiative, as well as regional initiatives
focused on
for sub-Saharan Africa and the Asia-Pacific region. Key focus areas for the Bank include the
following.
•
Geographical focus: The Bank is open to
supportsupporting buyers of U.S. exports in
175
around 190 countries around the world.
12 Congress has identified sub-Saharan Africa as a
priority region. Countries subject to U.S. sanctions are ineligible for Ex-Im Bank
support, as well as certain other countries
, including those under the charter
’s current MarxistLeninist prohibition.
•
's current Marxist-Leninist prohibition.13
Sectoral focus: Ex-Im Bank has identified several industries with high potential
for U.S. export growth: oil and gas, mining, agribusiness, renewable energy,
medical equipment and services, construction equipment and services, aircraft,
and power generation and related services. Infrastructure development
in emerging economies is a major
focus of the Bank
’'s financing. Military or defense items, as well as sales to
military buyers, generally are ineligible for support, with certain exceptions.
•
Focus on specific types of exporters: Ex-Im Bank has a long-standing focus on
supporting exports of U.S. small- and medium-sized enterprises (SMEs).
Authorizations
In FY2013, Ex-Im Bank approved 3,842 transactions of credit and insurance support, which
amounted to $27.3 billion in approved commitments. U.S. small businesses account for the
majority of Ex-Im Bank’s transactions by number (89% in FY2013), while larger companies
represent the majority by dollar amount. Ex-Im Bank reported that 42% of its total authorizations
for FY2013 supported infrastructure projects.11 The number of transactions authorized in FY2013
reached a record high. However, in terms of authorization value, after several years of record
highs, the amount authorized in FY2013 declined (see Figure 4). The dynamics could reflect
recovery of the financial markets in some areas; increased focus on supporting small business
export transactions (high in number, but of lower value than larger transactions); and the absence
of certain large transactions in certain markets, such as for aircraft.
11
Ex-Im Bank, FY2013 Annual Report, p. 4.
Congressional Research Service
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Export-Import Bank: Overview and Reauthorization Issues
Figure 4. Ex-Im Bank Authorizations, FY1997-FY2013
Billions of U.S. Dollars
Source: CRS, from Ex-Im Bank annual reports.
Ex-Im Bank has met its small business mandate from Congress in some years, but has fallen short
in other years (see Table 2). At the same time, the number of small business transactions
supported by the Bank continues to increase. For environmentally beneficial exports, the Bank
has been consistently well below the 10% target, closer to 2%, possibly due, in part, to limitations
in the U.S. supply of renewable energy exports.12 Nevertheless, the Bank’s authorization amounts
for renewable energy exports have increased. Ex-Im Bank’s support for sub-Saharan Africa also
reflects an overall uptick in activity, compared to previous years. While the Bank seeks to support
these export goals, its actual activity depends on alignment with commercial interests as it is
demand-driven.
12
GAO, Export-Import Bank: Reaching New Targets for Environmentally Beneficial Exports Presents Major
Challenges for Bank, GAO-10-682, July 14, 2010, http://www.gao.gov/products/GAO-10-682.
Congressional Research Service
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Export-Import Bank: Overview and Reauthorization Issues
Table 2. Ex-Im Bank’s Credit and Insurance Authorizations, FY2012-FY2013
Program
Total Authorizations
Loans
Loan Guarantees
Insurance
Number of Authorizations
Amount Authorized ($ millions)
2012
2013
2012
2013
3,796
3,842
$35,784
$27,347
24
71
$11,765.7
$6,893.8
744
674
$18,319.3
$14,911.8
3,028
3,097
$5,699.3
$5,542.0
Authorizations of Credit and Insurance Support by Ex-Im Bank
In the context of Ex-Im Bank's activities, its authorizations are the new commitments for credit and insurance that the agency approves each year. Ex-Im Bank authorized 3,746 transactions in the amount of $20.5 billion in FY2014, down from 3,842 transactions totaling $27.3 billion in FY2013 (see Figure 4). Following several years of record highs in authorizations since the 2008-2009 financial crisis, Ex-Im Bank's authorizations have declined over the past couple of years with improvements in the lending environment, among other factors.14 U.S. small businesses account for the majority of Ex-Im Bank's transactions by number (89% in FY2014), while larger companies represent the majority by dollar amount. Ex-Im Bank reported that almost 56% of its total authorizations for FY2014 supported infrastructure projects.15
Ex-Im Bank has met its 20% small business target from Congress in some years, but has fallen short in other years, based on authorization amount (see Table 2). At the same time, small business transactions supported by the Bank constitute the majority of Ex-Im Bank's transactions by number. The Bank's support for renewable energy exports, while increasing, has been below the 10% target, possibly due, in part, to market limitations.16 Ex-Im Bank's support for sub-Saharan Africa also reflects an overall uptick in activity, compared to previous years. While the Bank seeks to support these export goals, its actual activity depends on alignment with commercial interests, as it is demand-driven.
For FY2014, Ex-Im Bank estimates that its authorizations of $20.5 billion are in support of $27.5 billion of U.S. exports and 164,000 U.S. jobs.17 Ex-Im Bank finances around 2% of U.S. exports annually, but possibly a higher percentage for certain sectors of the U.S. economy.
Figure 4. Ex-Im Bank Authorizations, FY1997-FY2014
Billions of U.S. Dollars
Source: CRS, from Ex-Im Bank annual reports.
|
Table 2. Ex-Im Bank's Credit and Insurance Authorizations, FY2013-FY2014
Program
|
Number of Authorizations
|
Amount Authorized ($ millions)
|
2013
|
2014
|
2013
|
2014
|
Total Authorizations
|
3,842
|
3,746
|
$27,347.6
|
$20,467.9
|
Loans
|
71
|
69
|
$6,893.8
|
$1,947.8
|
Loan Guarantees
|
674
|
540
|
$14,911.8
|
$13,314.0
|
Insurance
|
3,097
|
3,13l7
|
$5,542.0
|
$5,206.1
|
Authorizations for Specific Types of Exports (Congressional Mandate)
Exports by Small Business
(20% target for amount)
3,313
3,413
$6,123
$5,223
Percent of Total
87.3%
88.8%
17.1%
19.1%
149
143
$615
$433
3.9%
3.7%
1.7%
1.6%
163
188
$1,522
$604
4.3%
4.9%
4.3%
2.2%
Environmentally Beneficial Exports
(10% target for amount)
Percent of Total
Exports to Sub-Saharan Africa
(increased focus, no % target)
Percent of Total
Source: Ex-Im Bank Annual Reports data adapted by CRS.
Ex-Im Bank estimates that its FY2013 authorizations supported $37.4 billion in U.S. exports of
goods and services and 205,000 U.S. jobs.13 Ex-Im Bank finances around 2% of U.S. exports
annually, but possibly a higher percentage for certain sectors of the U.S. economy.
Portfolio Exposure
Congress sets limitations in Ex-Im Bank’s charter on the aggregate amounts of loan, guarantees,
and insurance that the Bank can have outstanding at any one time (oftentimes referred to as the
Bank’s exposure cap/ceiling/limit).14 The outstanding principal amount of all loans made,
guaranteed, or insured by Ex-Im Bank is charged at the full value against the limitation.
In FY2013, the Bank reported a total portfolio exposure of $113.8 billion—below the $130
billion statutory cap for that year. Its portfolio is distributed across its financial products, as well
as geographical regions (20% target for amount)
3,413
|
3,347
|
$5,223.0
|
$5,050.2
|
Percent of Total
|
88.8%
|
89.3%
|
19.1%
|
24.7%
|
Renewable Energy Exports(10% target for amount)
32
|
32
|
$257.0
|
$186.8
|
Percent of Total
|
0.83%
|
0.85%
|
0.94%
|
0.91%
|
Exports to Sub-Saharan Africa(increased focus, no % target)
188
|
192
|
$604.0
|
$2,055.1
|
Percent of Total
|
4.9%
|
5.1%
|
2.2%
|
10.0%
|
Source: Ex-Im Bank Annual Reports data adapted by CRS.
Portfolio Exposure
Ex-Im Bank's charter places a statutory limit on the aggregate amounts of loan, guarantees, and insurance that the Bank can have outstanding at any one time (oftentimes referred to as the Bank's exposure cap/ceiling/limit).18 The outstanding principal amount of all loans made, guaranteed, or insured by Ex-Im Bank is charged at the full value against the limitation.
In FY2014, Ex-Im Bank reported an exposure of $112.0 billion—below the $140 billion statutory cap for that year—distributed across financial products, geographic regions, and economic sectors (see Figure 5
). This represents a decrease following recent years of record highs in Ex-Im Bank's exposure level. Prior years' growing levels of exposure were). Ex-Im Bank’s exposure level has
been at record highs in recent years (see Figure 6), associated largely with increased demand for
Ex-Im Bank
’'s services during the financial crisis as commercial lending declined
. Other possible
drivers could be, as well as possibly greater demand in emerging markets for U.S. exports; increased usage of the
Bank by key customers, such as those in the satellite sector; and greater Ex-Im Bank outreach
to
small businesses and exporters in key markets.15 For FY2014, the Bank’s statutory exposure limit
is $140 billion.
13
Ibid., p. 5.
12 U.S.C §635e.
15
GAO, Export-Import Bank: Recent Growth Underscores Need for Continued Improvements in Risk Management,
GAO-13-303, March 2013, pp. 14-20.
14
Congressional Research Service
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Export-Import Bank: Overview and Reauthorization Issues
Figure 5.19
Figure 5. Ex-Im Bank Exposure Levels and Exposure Cap, FY1997-FY2014
Billions of U.S. Dollars
Source: CRS analysis of data from Ex-Im Bank annual reports.
|
Figure 6. Ex-Im Bank Exposure Level by Program, Geographic Region, and
Economic
Sector, FY2013
Billions of U.S. Dollars
Economic Sector, FY2014
Billions of U.S. Dollars
Source: CRS, based on data from Ex-Im Bank annual reports.
Congressional Research Service
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Export-Import Bank: Overview and Reauthorization Issues
Figure 6. Ex-Im Bank Exposure Levels and Exposure Cap, FY1997-FY2013
Billions of U.S. Dollars
Source: CRS analysis of data from Ex-Im Bank annual reports.
Ex-Im Bank Budget
Beginning with FY1992, Ex-Im Bank’s operations
Ex-Im Bank Budget20
As with other federal credit programs, beginning with FY1992, Ex-Im Bank's activities have been subject to the Federal Credit
Reform Act of 1990 (FCRA, P.L. 101-508), which was intended to measure more accurately the
cost of federal credit programs and to make the cost of such credit programs more comparable to
direct federal outlays
.16 for budgetary purposes.21 For a given fiscal year, under FCRA, the cost of federal credit activities,
including those of Ex-Im Bank, is reported on an accrual basis equivalent with other federal
spending, rather than on a cash flow basis, as used previously. Under FCRA
’'s rules,
budget
credit subsidy estimates are calculated by discounting them using the rates on U.S. Treasury securities with
similar terms to maturity—which traditionally have been considered to be risk-free—and are
below the rates of commercial loans.
The Bank’s estimates now allocate budgetary resources to
reserve against its estimated risk of loss.17
22
Between 1992 and 2008, the Bank received direct appropriations for its administrative expenses
and credit subsidy. Since 2008, Congress has recognized Ex-Im Bank as a “self-sustaining”
agency with a “net appropriations of zero” for appropriations purposes. In 2008, Congress gave
and FCRA credit subsidy for those years in which the subsidy was estimated to be positive. Since 2008, Congress and the President gave the Bank permission to use its offsetting collections (e.g., interest, premia, and other fees charged
for activities) to fund its administrative and program expenses and to retain its carryover negative
subsidy (“profit”) for a certain amount of time. Since then, for each year, the President has
requested, and Congress has approved, that offsetting collections would count against the
appropriation of operating expenses from the General Fund and that the net appropriation is
16
Ex-Im Bank, FY2013 Annual Report.
Presently, there is a debate about whether the cost of federal credit is appropriately priced under the Federal Credit
Reform Act (FCRA), or if fair value accounting (discussed in the “Selected Issues for Congress” section) is a more
appropriate measure. For more information, see Deborah Lucas and Marvin Phaup, “Reforming Credit Reform,” Public
Budgeting & Finance, Winter 2008.
17
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Export-Import Bank: Overview and Reauthorization Issues
expected to be $0. As part of the annual appropriations process, Congress sets an upper limit on
the level available to the Bank for operations and provides a direct appropriation for its Office of
Inspector General (OIG).
for activities) to fund its administrative and program expenses and to retain a limited amount of any excess collections ("carryover funds") for a certain amount of time. The appropriations language stipulates that the receipts collected by Ex-Im Bank are credited as offsetting collections in the federal budget and are intended to cover the cost of the Bank's operations. Therefore, the offsetting collections are intended to reduce the appropriations from the General Fund to $0.
At the start of the fiscal year, the U.S. Treasury provides Ex-Im Bank with an
“appropriation
warrant” for program"appropriation warrant" for operating costs and administrative expenses. The amount of the warrant is established
by the spending limits set by Congress
in the appropriations process. The Bank retains the fees
that it collects during the year that are in excess of expected losses, andand agreed to by the President in the appropriations process. According to Ex-Im Bank, it uses these offsetting
collections to repay the warrant
, resulting in an expected net appropriation of $0..23 Thus, Ex-Im
Bank can receive Bank initially receives funds from the U.S. Treasury and
repaysubsequently repays those funds as offsetting collections
come in.
Borrowings
In addition, borrowings from the U.S. Treasury are used to finance medium- and long-term loans, and carry a
fixed interest rate. Ex-Im Bank repays these borrowings primarily
with the repayments of
medium- and long-term loans.18
For FY2014, Congress set a limit of $115.5 million for Ex-Im Bank’s administrative expenses
and provided $5.1 million for itsas repayments are received from recipients of its medium- and long-term loans.24
As part of the annual appropriations process, Congress and the President set an upper limit on the level available to the Bank for its activities and provide a direct appropriation for its Office of Inspector General (OIG). FY2014 appropriations legislation set an upper limit of $115.5 million for Ex-Im Bank's administrative expenses and provided $5.1 million for the Bank's OIG (see Table 3
). No additional appropriation was needed as the credit subsidy calculated under FRCA was estimated to be negative for FY2014.25 Congress also ). Congress did not appropriate any program
funds, as the Bank forecasted that all new authorizations will be either zero or negative subsidy
for FY2014, and did not request any positive subsidy for its program expenses.19 Congress also
allowed carryover funds of up to $10 million to remain available until September 30, 2017.
18
The charter limits the aggregate amount of Ex-Im Bank’s obligations outstanding (e.g., notes, debentures, and bonds)
from the U.S. Treasury to $6 billion at any one time. FCRA has introduced changes to the Bank’s funding process, and
the Bank has proposed eliminating the corresponding language in its charter.
19
Subsidy refers to program activities (the cost of direct loans, loan guarantees, insurance, and tied aid) conducted by
Ex-Im Bank.
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Table 3. Budget of the Export-Import Bank, FY2011-FY2015
Millions of U.S. Dollars
Category
FY2011
FY2012
FY2013
FY2014
Est.
FY2015
Req.
3
4
4.4
5.1
5.75
Inspector General Amount Appropriated
2.5
4
4
5.1
––
Total Subsidy Requested
93
76
38
––
––
Total Subsidy Appropriated
58
58
58
––
––
106
125
104
114.9
115.5
––
Appropriations
Inspector General Amount Requested
Total Administrative Budget Requested
84
90
90
115.5a
Total Administrative Budget Appropriated
1,829
1,572
1,455
1,820
356
Budget Authority (net)
443
393
624
1,412
––
Outlays (net)
158
713
939
1,491
14
Total Budgetary Resources Available
Source: Office of Management and Budget, For FY2015, the Bank has an upper limit of $106.3 million for administrative expenses, funding of $5.8 million for the OIG, and up to $10 million in carryover authority until September 30, 2018.
Ex-Im Bank states that it contributes regularly to the U.S. Treasury. In FY2014, Ex-Im Bank reported transferring $674.7 million to the Treasury after covering operating expenses. This amount is on a cash basis, and is different than the amount calculated on a budgetary basis.26
Table 3. Export-Import Bank Appropriations, FY2011-FY2015
Millions of U.S. Dollars
Category
|
FY2011
|
FY2012
|
FY2013a
FY2014
|
FY2015
|
Inspector General Amount Requested
|
3.0
|
4.0
|
4.4
|
5.1
|
5.8
|
Inspector General Amount Appropriated
|
2.5
|
4.0
|
4.0
|
5.1
|
5.8
|
Total Credit Subsidy Requested
|
92.7
|
76.4
|
38.0
|
––
|
––
|
Total Credit Subsidy Appropriated
|
58.0
|
58.0
|
58.0
|
––
|
––
|
Total Administrative Budget Requested
|
105.6
|
124.6
|
103.9
|
114.9
|
117.7
|
Total Administrative Budget Appropriated
|
83.9
|
89.9
|
89.9
|
115.5b
106.3
|
Source: Office of Management and Budget (OMB), Budget of the United States Government
, various years; appropriations legislation, various years; and Ex-Im Bank documents. Differences in amounts requested and appropriated may vary due to different assumptions used in estimating credit subsidies by OMB and the Congressional Budget Office (CBO).
Note: Credit subsidy refers to program activities (the cost of direct loans, loan guarantees, insurance, and tied aid) conducted by Ex-Im Bank, as estimated for budgetary purposes under the Federal Credit Reform Act (FCRA). Subsidy costs are subject to reestimates.
a. Sequestration and across-the-board rescissions pursuant to Section 3004 in Division G, P.L. 113-6, are not reflected in enacted amounts.
b. This amount includes a one-time appropriation of $10.5 million for the Bank's renovation expenses to its headquarters.
Risk Management
, various issues.
Note: Subsidy refers to program activities (the cost of direct loans, loan guarantees, insurance, and tied aid)
conducted by Ex-Im Bank. Reestimates of subsidy costs refer to reestimates of direct loan and loan guarantee
subsidies and the interest on those reestimates. For FY2014 and FY2015, Ex-Im Bank forecasted that all new
authorizations will be zero or negative subsidy, and did not request any positive subsidy for program expenses.
a.
This amount includes a one-time appropriation of $10.5 million for the Bank’s renovation expenses to its
headquarters.
For FY2015, the President requested a limit of $115.5 million for Ex-Im Bank’s administrative
expenses and funding of $5.75 million for its OIG. The President also requested that Ex-Im Bank
be allowed carryover funds of up to $10 million to remain available until September 30, 2018.
The President’s budget request estimates that the Bank’s export credit support will total $37.6
billion, and will be funded entirely by receipts collected from the Bank’s customers. The Bank
estimates it will collect $1.2 billion in 2015 in receipts in excess of expected losses on
transactions authorized in 2015 and prior years.
Ex-Im Bank regularly contributes to the U.S. Treasury. In FY2013, Ex-Im Bank transferred $1.1
billion to the Treasury’s General Fund after covering operating expenses and loan loss reserves.
Risk Management
Ex-Im Bank seeks to manage the risks it faces in its transactions (see Table 4
). Its charter requires a reasonable assurance of repayment for). The basis for its
risk management function is in the Bank’s charter, which requires that all transactions supported
by the Bank have a reasonable assurance of repayment and that the Bank maintains reasonable
by the Bank and for the Bank to have reasonable provisions for losses. The Bank has a system in place to mitigate risks through credit
underwriting and due diligence of potential transactions, as well as monitoring risks of current
transactions. If a transaction has credit weaknesses, the Bank will try to restructure it to help
prevent defaults and increase the likelihood of higher recoveries if the transaction does default.
Ex-Im Bank also has a claims and recovery process for transactions in default.
Congressional Research Service
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Export-Import Bank: Overview and Reauthorization Issues
Ex-Im Bank’ The effectiveness of Ex-Im Bank's risk management is subject to congressional debate (see discussion in "Selected Issues for Congress").
Ex-Im Bank's reserves for loan losses total more than $4 billion.
In recent years, the Bank’s
default rate has been less than 1%, and historically, it has been less than 2%.20 The Bank’s default
rate as of March 31, 2014, was 0.211%.21The Bank reported a default rate of 0.175% as of September 2014, which it provides quarterly to Congress.27 According to a non-partisan Government
Accountability Office (GAO) study, the ultimate impact of Ex-Im Bank
’'s recent business on
default rates is not yet known as it contains a large volume of transactions that have not reached
their peak default periods.
2228 GAO also has stated that trends in Ex-Im Bank
’'s default rate should
be viewed with caution because of limitations in the agency
’'s analysis of its financial
performance.
23
29
Since 1992, Ex-Im Bank has been able to recover 50 cents on the dollar on average for
transactions in default.
2430 Backed by the U.S. government, Ex-Im Bank can take legal action
against obligors for transactions in default. It is also able to recover assets because its loans are
heavily collateralized, as a high percentage of its transactions are asset-backed (e.g., aircraft).
Table 4. Selected Risks Faced by Ex-Im Bank
Risk
Definition
Repayment
Risk
|
Definition
|
Repayment
|
The risk that a borrower will not pay according to the original agreement and the Bank may
eventually have to write-off some or all of the obligation because of credit or political reasons.
Concentration
Concentration
|
Risk stemming from the composition of the credit portfolio as opposed to the risks related to
specific obligors. Ex-Im Bank faces concentration risks in terms of the composition of its portfolio
by geographic region, industry, and obligor.
Foreign
Currency
Foreign Currency
|
Risk stemming from an appreciation or depreciation in the value of a foreign currency in relation
to the U.S. dollar in Ex-Im Bank transactions denominated in that foreign currency.
Operational
Operational
|
The risk of material losses resulting from human error, system deficiencies, and control
weaknesses.
Interest Rate
Interest Rate
|
Ex-Im Bank makes fixed-rate loan commitments prior to borrowing to fund loans and takes
the
risk that it will haveon the risk of having to borrow funds at an interest rate greater than the rate charged on the
credit.
Source: CRS, based on Ex-Im Bank annual reports.
Ex-Im Bank in an International Context
As international trade has grown, trade finance has expanded. Some 80
%-90% of world trade relies
on trade finance, and the global market for trade finance is estimated to be at around $10 trillion a
year.
25 In addition to financing through government-backed ECAs, the private sector also
20
Ex-Im Bank calculates its default rate as a “total amount of required payments that are overdue (claims paid on
guarantees and insurance transactions plus loans past due) divided by a total amount of financing involved
(disbursements).” Ex-Im Bank, FY2013 Annual Report, p. 48.
21
CRS electronic communication with Ex-Im Bank, May 30, 2014.
22
GAO, Export-Import Bank: Recent Growth Underscores Need for Continued Improvements in Risk Management,
GAO-13-303, March 2013, p. 31.
23
GAO, Export-Import Bank: Recent Growth Underscores Need for Continued Improvements in Risk Management,
GAO-13-703T, June 13, 2013, p. 6.
24
Ex-Im Bank, FY2013 Annual Report.
25
World Trade Organization, “Trade Finance: The Challenges of Trade Financing,” http://www.wto.org/english/
thewto_e/coher_e/challenges_e.htm.
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Export-Import Bank: Overview and Reauthorization Issues
31 In addition to financing through government-backed ECAs, the private sector also provides export financing, including through commercial backs, capital markets, lessors, and
manufacturing self-financing. While the private sector is the leading source of export finance,
ECAs are considered in the trade finance community to play an important role in certain niches.
Most developed countries and many developing countries have ECAs.
Outside of the United
States, upwards of 60 ECAs exist in foreign countries.
An estimated 60 ECAs exist worldwide.32
The relative attractiveness of seeking export financing through the private sector, ECAs, or a
combination of both can change depending on credit market conditions in the private sector, as
well as how ECA financing terms may change or respond to these market conditions.
In recent
years, theThe role of ECAs may
have becomebe more prominent, in part, due to tight credit market
conditions associated with the
2008-2009 international financial crisis and the regulatory impact of Basel III
on commercial banks.
2633 Private lenders and insurers conduct the majority of short-term export
financing, though ECAs may play an active role in supporting certain sectors, such as taking on
risks of financing small business exports. ECAs also appear to be more heavily involved in
longer-term export financing, including financing for complex, multi-billion dollar sales such as
aircraft and infrastructure projects. In such sectors, the private sector plays an active role, but in
certain cases, ECA support can help make transactions more commercially attractive by
mitigating risks of financing or by providing
an additionalanother source of funding to diversify risks
of
financing.
.
International Rules on Official Export Credit Activity
The Organization for Economic
CooperationCo-operation and Development (OECD) Arrangement on
Officially Supported Export Credits (the
“"OECD Arrangement
”") guides the scope of certain
financing activities of Ex-Im Bank and other participating foreign ECAs (generally developed
countries).
2734 The United States generally opposes subsidies for exports of commercial products.
Since the 1970s, the United States has led efforts within the OECD to adopt international
protocols which reduce the subsidy level in export credits by raising the interest rates on
government-provided export credits to reflect market levels more closely.
The OECD Arrangement, which came into effect in April 1978, establishes minimum interest
rates and premiums, maximum repayment terms, guidelines for classifying risk, and other terms
and conditions for government-backed export financing. The Arrangement has been revised a
number of times over the years. For example, participants agreed to tighten restrictions on the use
of tied aid (see text box
).35).28 In addition, sector understandings govern the terms and conditions of
exports of, for example, civilian aircraft, ships, nuclear power plants, renewable energy, and
railway infrastructure.
26
Ex-Im Bank, Report to the U.S. Congress on Export Credit Competition and the Export-Import Bank of the United
States, For the Period January 1, 2013 through December 31, 2013, June 2014, pp. 12-14, http://www.exim.gov/about/
library/reports/competitivenessreports/upload/Ex-Im-Bank-2013-Competitiveness-Report-to-Congress-Complete.pdf
(hereinafter Ex-Im Bank, 2013 Competitiveness Report, June 2014). For more information, see CRS Report R42744,
U.S. Implementation of the Basel Capital Regulatory Framework, by Darryl E. Getter.
27
For more information, see CRS Report RS21128, The Organization for Economic Cooperation and Development, by
James K. Jackson.
28
According to Ex-Im Bank, tied aid is a “concessional, trade-related aid credit provided by a donor government to
induce the borrower to purchase equipment from suppliers in a donor’s country,” and “can distort trade flows when the
recipient country makes its purchasing decisions on the bidder offering the cheapest financing rather than the best price,
quality or service.” Ex-Im Bank, 2013 Competitiveness Report, June 2014, p. 69.
Congressional Research Service
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Export-Import Bank: Overview and Reauthorization Issues
Tied Aid
railway infrastructure.
OECD member countries also have agreed to other guidelines for official export credit. For example, in 2007, members agreed to revise guidelines on environmental procedures, referred to as "Common Approaches on Environment and Officially Supported Export Credits." These guidelines call for member governments to review projects for potential environmental impacts; to assess them against international standards, such as those of the World Bank; and to provide more public disclosure for environmentally sensitive projects. The OECD also adopted new guidelines on sustainable lending principles that aim to help developing countries avoid a renewed build-up of debt after receiving debt relief, as well as an anti-bribery agreement.
Tied Aid
Ex-Im Bank has a Tied Aid Capital Projects Fund (TACPF), often referred to as the tied aid
“"war chest,
”" to counter
specific projects that are receiving foreign officially
- subsidized export financing. The 1986 Ex-Im Bank reauthorization
act (P.L. 99-472) required the Bank to establish the tied aid fund. The Bank may conduct tied aid transactions to
counter attempts by foreign governments to sway purchases in favor of their exporters solely on the basis of
subsidized financing, rather than on market conditions (price, quality, etc.). The United States ties substantial amounts
of its agricultural and military aid to purchases of U.S. goods, but generally has avoided using such financing to
promote American capital goods exports.
The amount of funds in the TACPF was $179 million at the end of 2013. Funds for the tied aid war chest are available
to the Bank. Applications for the tied aid fund are subject to review by the Treasury Department. Between 2008 and
2012, Ex-Im Bank approved two tied aid transactions, one for a waste water treatment plant in sub-Saharan Africa in
2010 and the other for the sale of fire trucks to Indonesia in 2011.
Ex-Im Bank abides by the
“"Helsinki Disciplines,
”" which are rules on tied aid agreed to by OECD Arrangement
participants and include notification requirements for tied aid activity. In 2013, there were 109 Helsinki-type tied aid
notifications totaling approximately $4.4 billion.
Source: Ex-Im Bank,
20132013 Competitiveness Report
, June 2014, pp. 73 and 75.
, June 2014, pp. 73 and 75.
OECD member countries also have agreed to other guidelines for official export credit. For
example, in 2007, members agreed to revise guidelines on environmental procedures, referred to
as “Common Approaches on Environment and Officially Supported Export Credits.” These
environmental guidelines call for member governments to review projects for potential
environmental impacts; to assess them against international standards, such as those of the World
Bank; and to provide more public disclosure for environmentally-sensitive projects. The OECD
also adopted new guidelines on sustainable lending principles that aim to help developing
countries avoid a renewed build-up of debt after receiving debt relief, as well as an anti-bribery
agreement.
Export credit financing that is covered by the OECD Arrangement generally is exempt from the
World Trade Organization (WTO) Agreement on Subsidies and Countervailing Measures (SCM),
which disciplines the use of export subsidies and the actions countries can take to counter the
effects of these subsidies. The SCM Agreement is interpreted to indicate that, for non-agricultural
products, an export credit practice in conformity with the OECD Arrangement on export credits
shall not be considered as an export subsidy prohibited by the SCM Agreement.
29
36
Growth in Unregulated Financing
The OECD Arrangement does not cover all officially supported export credit activity. According
to Ex-Im Bank, in 2013, traditional OECD export financing support represented 34% of total
government-backed trade-related support (see Figure 7
).37).30 Sources of government-backed export
financing support that are unregulated by the OECD Arrangement are (1) emerging economies
that are not a part of the OECD providing export financing through their ECAs; and (2) OECD
members providing forms of export financing that are not regulated by the OECD Arrangement.
29
The relationship between the OECD Arrangement and the SCM Agreement is established by Section (k) of Annex I
to the SCM. See http://www.wto.org/english/res_e/booksp_e/analytic_index_e/subsidies_05_e.htm.
30
Ex-Im Bank, 2013 Competitiveness Report, June 2014, pp. 20-21.
Congressional Research Service
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Export-Import Bank: Overview and Reauthorization Issues
Figure 7. Global Government-Backed Export Support, 2013
Billions of U.S. Dollars
Source: Ex-Im Bank, Report to the U.S. Congress on Export Credit Competition and the Export-Import Bank of the
United States, For the Period January 1, 2013 through December 31, 2013, June 2014, pp. 20-21.
Emerging markets such as China, Brazil, and India are not members of the OECD, but are
increasingly active providers of government-backed export credit financing.
3138 In 2013, new
medium- and long-term government-backed export financing conducted by the 34 members of
the OECD as a whole stood at $97.9 billion, down about 22% from 2012 (see Figure 8
; see Appendix ; see
Appendix for expanded data). U.S. new medium- and long-term support totaled $14.5 billion in
2013. In contrast, the combined new medium- and long-term financing provided by
China, Brazil,
and Indiaselected emerging markets was $55.4 billion, up a little over 10% from
20132012. Notably, China alone accounted for
at least $45 billion of new official medium- and long-term export credit financing in 2013.32
31
These emerging markets, while not members of the OECD, may have observer status during some OECD meetings.
The OECD has offered them “enhanced engagement” with a view towards possible accession. Brazil, furthermore, is a
member of the OECD Aircraft Sector Understanding.
32
Ex-Im Bank, 2013 Competitiveness Report, Washington, DC, June 2014.
Congressional Research Service
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Export-Import Bank: Overview and Reauthorization Issues
at least $45 billion of such financing in 2013.39
Figure 7. Global Government-Backed Export Support, 2013
Billions of U.S. Dollars
Source: Ex-Im Bank, Report to the U.S. Congress on Export Credit Competition and the Export-Import Bank of the United States, For the Period January 1, 2013 through December 31, 2013, June 2014, pp. 20-21.
|
Figure 8. New Medium- and Long-Term Official Export Financing Volumes for
Selected ECAs, 2013
Billions of U.S. Dollars
Source: Ex-Im Bank, Report to the U.S. Congress on Export Credit Competition and the Export-Import Bank of the
United States, For the Period January 1,
20132013 through December 31,
20132013, June 2014.
Notes: The OECD amount totaled $
119.697.9 billion, and the emerging market amount totaled $
58.355.4 billion. Data
subject to analytic assumptions and limited by availability of information.
The government-backed export credit activities of these non-OECD countries may not comply
with international export credit standards.
11 China, Brazil, and India may offer below-market and
concessionary financing alternatives with which it is difficult for ECAs of OECD members to
compete (see text box). For example, in 2011, Brazil
’'s largest landline telephone company
reportedly chose to purchase network equipment from China
’'s Huawei Technologies because of
access to China Development Bank
’'s $30 billion credit line, a two-year grace period on
payments, and an interest rate of two percentage points below the London interbank offered rate
(LIBOR).
3340 Officially
- backed export credit activity by emerging economies may increase in
strategic markets, such as oil and gas, renewable energy, and natural resources extraction. For
instance, Chinese ECAs
“"have shown strong signs of growing usage of export credits for export
promotion purposes, especially in Africa, where they were offering preferential loans either in
exchange for much needed resources (e.g., oil) or low cost loans on very extended repayment
terms on projects in order to gain market share.”34
33
Gary Clyde Hufbauer, Meera Fickling, and Woan Foong Wong, Revitalizing the Export-Import Bank, Peterson
Institute for International Economics (IIE), Number PB11-6, May 2011, http://www.iie.com/publications/pb/pb1106.pdf. “Huawei’s $30 Billion China Credit Opens Doors in Brazil, Mexico,” Bloomberg, April 24, 2011.
34
Ex-Im Bank, Report to the U.S. Congress on Export Credit Competition and the Export-Import Bank of the United
States, For the Period January 1, 2009 through December 31, 2009, Washington, DC, June 2010.
Congressional Research Service
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Export-Import Bank: Overview and Reauthorization Issues
Comparison of Repayment Terms for Rail Exports
The new terms on projects in order to gain market share."41 In November 2013, the Export-Import Bank of China announced that Chinese state-owned banks would be providing about $1 trillion in financing through 2025 for transportation infrastructure projects in Africa.42
Comparison of Repayment Terms for Rail Exports
The OECD Rail Sector Understanding, concluded in September 2013, sets guidelines for railway infrastructure
exports. It provides repayment terms up to 12 years for transactions in high-income OECD countries, subject to
conditions aimed at complementing the private sector, and up to 14 years for transactions in all other countries. The
guidelines are applicable to a market expected to exceed $120 billion annually over the 2015-2017 period.
35 In
43 In contrast to OECD repayment terms, various studies suggest that China
’'s repayment terms for its rail exports, such as
for infrastructure projects in sub-Saharan Africa, can exceed 20 years.
36
44
The ECAs of OECD member countries also conduct export credit financing and other activities
that fall outside of the Arrangement. One form of unregulated financing is the
“"market window,
”
" which is a government-owned entity or program that offers export credits on market terms.
Market windows generally do not operate on purely commercial terms, as they tend to receive
benefits from their government status that commercial lenders cannot access. Many ECAs operate
market windows, such as Canada, Germany, and Italy; Ex-Im Bank does not have a market
window. It is difficult to obtain data on market window operations of foreign countries. Another
form of unregulated financing is untied lending support, which is credit support extended by a
government entity to a recipient for the purpose of providing credit for strategic interests of the
donor country. Because the untied loan is not tied to exports, it is not subject to the OECD export
credit guidelines.
Developments in International Export Credit Negotiations
As stated previously, the United States historically has led efforts to impose international
disciplines on government-backed export credit activity. The 2012 Ex-Im Bank reauthorization
act went further, directing the Secretary of the Treasury (which takes the lead on U.S.
international export credit negotiations) to negotiate to reduce and eliminate government-backed
ECA financing altogether. Congress also required the Secretary of the Treasury to negotiate with
all countries that finance air carrier aircraft through funds from a state-sponsored entity to reduce
and eliminate aircraft export credit financing for all aircraft covered by the 2007 OECD Aircraft
Sector Understanding. These efforts reportedly have run into difficulty in the OECD. While
exports play an important role in the U.S. economy, the economies of other countries are far more
reliant on exports, constituting a larger share of their respective gross domestic product (GDP).
Moreover, other OECD countries presumably would be reluctant to terminate their export credit
programs while countries outside of the OECD, such as China, Brazil, and India, could continue
their financing programs.
Separately, the United States has engaged in efforts to negotiate export credit guidelines with
China. During Chinese Vice President Xi Jinping’s visit to the United States in February 2012, the
United States and China announced that they would establish an International Working Group on
Export Credits composed of export financing providers, with the goal of completing a new set of
35
OECD, “New export credit rules will boost railway development and help countries achieve greener growth, OECD
says,” press release, September 1, 2014, http://www.oecd.org/trade/new-export-credit-rules-will-boost-railwaydevelopment-and-help-countries-achieve-greener-growth-oecd-says.htm.
36
AidData, Tracking Chinese Development Finance to Africa; Kevin P. Gallagher, Amos Irwin, and Katherine
Koleski, The New Banks in Town: Chinese Finance in Latin America, Inter-American Dialogue, March 2012,
http://www.thedialogue.org/PublicationFiles/TheNewBanksinTown-FullTextnewversion.pdf.
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Export-Import Bank: Overview and Reauthorization Issues
export credit guidelines by 2014.37 Since November 2012, the International Working Group has
met several times. Discussions have focused on negotiating new guidelines for the ships and
medical equipment sectors that would form the basis for horizontal, broadly-applicable
guidelines; information exchanges on working group members’ export credit practices and
policies; and discussion on members’ negotiating positions.38 Given the complexity of the issues
at hand, there is speculation over whether the 2014 goal will be met.
Selected Issues for Congress
Status of Ex-Im Bank Authority
Over time, Congress has debated the acceptability of federal support for U.S. exports, with the
debate growing more complex as the global marketplace has become more competitive. Members
of Congress hold a range of views regarding how to address the status of Ex-Im Bank’s authority,
which is set to expire at the close of business on September 30, 2014, unless Congress takes
action. Certain policy options are discussed below.
Renewal of Authority
Some Members of Congress have called for reauthorization of Ex-Im Bank in its current form—
as an independent federal government agency that serves as the official ECA of the United States.
Among those that favor a renewal of the Bank’s charter, some may call for a “clean
reauthorization,” while others may support a reauthorization that includes certain reforms to the
Bank, such as to its policies or risk management practices (see discussion below).39
Proponents of Ex-Im Bank reauthorization hold that the Bank is critical in supporting U.S. jobs
and U.S. exports by addressing market failures (such as imperfect information and barriers to
entry) and leveling the playing field by countering foreign government-backed export financing
activity. They say that U.S. government backing of Ex-Im Bank activity can make certain
transactions (e.g., for large, infrastructure projects or for small business exports) more
commercially attractive by mitigating and diversifying risks, as well as provide the Bank leverage
to guarantee repayment or recover assets in a way not available to the private sector. The
Administration’s legislative proposal submitted in April 2014 requests a five-year renewal of the
Bank’s current authority.
37
Australia, Brazil, Canada, China, the European Union, India, Indonesia, Israel, Japan, New Zealand, Norway, South
Africa, South Korea, Switzerland, Turkey, Russia, and the United States.
38
Treasury Report to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on
Financial Services of the House of Representatives on Export Credit Negotiations, December 2013.
39
For example, H.R. 4950 (Heck), introduced in the 113th Congress, would renew Ex-Im Bank’s authority for seven
years and increase its exposure cap incrementally to $175 billion for FY2021. Also, in the 113th Congress, draft
legislation introduced for the purposes of discussion (Campbell) in the House would renew Ex-Im Bank’s authority for
three years; reduce its exposure cap incrementally to $95 billion for FY2017; and institute a number of reforms to the
Bank’s structure, policies, and practices with the goal of reducing U.S. taxpayer exposure, improving risk management,
and ensuring that the Bank remains a “lender of last resort.” See http://campbell.house.gov/uploads/
CAMPBE_016_xml%20Second%20Draft.pdf.
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Critics of Ex-Im Bank may concede that the Bank’s programs can help individual firms, but hold
that its programs shift production among sectors within the economy and do not add permanently
to the overall level of U.S. exports.40 They contend that the Bank competes with, or crowds out,
private sector activity; the Bank picks “winners and losers” through its support and operates as a
form of “corporate welfare;” poses a risk to taxpayers through its activities; and that the private
sector is more efficient and better suited than the federal government to finance exports. Critics of
the Bank also may call for intensified U.S. efforts through the OECD, as well as other venues, to
eliminate all government-backed export credit activity internationally.
If Congress chooses to reauthorize Ex-Im Bank, a related issue is the length of time to extend the
Bank’s authority. A shorter renewal period, requiring reauthorizations more often, could provide
more opportunity for more active congressional oversight of the Bank’s activities (though
Congress can weigh in on Ex-Im Bank anytime). In contrast, a longer renewal period or a
permanent extension of authority could enhance the Bank’s ability for long-term planning and
provide more assurance to U.S. exporters, foreign buyers, and lenders of Ex-Im Bank’s services.
In the most recent reauthorization, passed in 2012 (P.L. 112-122), Congress extended the Bank’s
authority for about two years through FY2014. The length of recent longer-term reauthorizations
was typically four or five years.41
Lapse in Authority
Some Members of Congress support allowing Ex-Im Bank’s authority to expire. Some may favor
a temporary expiration until consensus is reached on certain reforms that should be required of
the Bank, while others may call for a permanent expiration. Congress could allow Ex-Im Bank’s
authority to expire by taking no action, or alternatively, by passing legislation that, for instance,
sets specific parameters for a wind-down in its functions.42 Uncertainty over whether Congress
will renew Ex-Im Bank’s authority reportedly has led, in some instances, to foreign buyers
selecting other suppliers over U.S. suppliers for certain export contracts, out of concern about
financing.43
Generally speaking, according to Ex-Im Bank, if its authority were to lapse, no new commitments
(including new loan, guarantee, or insurance transactions) could be approved by its Board of
Directors or under delegated authority, but prior obligations (including disbursements on alreadyapproved final commitments) would continue. The Bank would continue to make expenditures in
its operations (including salary, rent, etc.), while developing a plan for orderly liquidation.44 It is
unclear what form a liquidation plan would take. The primary statutory basis for Ex-Im Bank’s
Separately, the United States and China announced that they would establish an International Working Group on Export Credits (IWG) to develop a new set of international guidelines for official export credit support. The IWG reportedly has met six times as of November 2014.45 Past discussion has included a focus on developing guidelines for the ships and medical equipment sectors, and future discussions may include a focus on developing horizontal, broadly applicable guidelines.46
Selected Issues for Congress
Status of Ex-Im Bank Authority
Over time, Congress has debated the acceptability of federal support for U.S. exports, with the debate growing more complex as the global marketplace has become more competitive. Ex-Im Bank's authority has been extended through June 30, 2015, by the FY2015 continuing resolution (CR) (§147 of P.L. 113-164).
As Ex-Im Bank's new sunset date nears, Congress may take up consideration of Ex-Im Bank's authority. The Administration's legislative proposal submitted in April 2014 requested, among other things, an extension of Ex-Im Bank's authority through FY2019 and an incremental increase in its exposure to $160 billion by FY2018. Members of Congress hold a range of views regarding how to address the status of Ex-Im Bank's authority. In the 114th Congress, legislation related to Ex-Im Bank reauthorization includes the following.
- H.R. 597 (Fincher) would extend Ex-Im Bank's authority through FY2019 and reduce its exposure cap to $130 billion. It also would provide for certain reforms, such as on ethics, fraud controls, requirements for applicants to demonstrate inability to obtain credit elsewhere, auditing, earnings retention for possible losses, risk sharing, and loan terms; negotiations with the possible goal of eliminating export credit financing; and negotiations with non-OECD members to bring those countries into a multilateral export credit agreement, among other provisions.
- H.R. 1031 (Waters) would extend Ex-Im Bank's authority through FY2022 and incrementally raise its exposure cap to $160 billion by FY2022, subject to certain conditions. It also would include certain reforms, such as on ethics, fraud controls, auditing, due diligence, and risk sharing; negotiations with non-OECD members to bring those countries into a multilateral export credit agreement; and identification of non-OECD Arrangement countries not in compliance with the WTO Agreement on Subsidies and Countervailing Measures, among other provisions.
- H.R. 1605 (Amash) would abolish Ex-Im Bank. It reportedly is the same as a bill introduced in the 113th Congress (H.R. 2263), which included specifications for Ex-Im Bank's wind-down.
- S. 819 (Kirk) would extend Ex-Im Bank's authority through FY2019 and reduce its exposure cap to $135 billion for each of FY2015-FY2019, subject to certain conditions. It also would include certain reforms, such as on loan loss reserves, fraud controls, ethics, risk management, auditing, the small business financing target, and loan terms; international negotiations with the possible goal of eliminating export credit financing; and negotiations with non-OECD members to bring those countries into a multilateral export credit agreement, among other provisions.
- S. 824 (Shaheen) would extend Ex-Im Bank's authority through FY2022 and incrementally raise its exposure cap to $160 billion by FY2022, subject to certain conditions. It also would include certain reforms, such as on the small business financing target, risk sharing, ethics, fraud controls, auditing, project monitoring, and due diligence; negotiations with non-OECD members to bring those countries into a multilateral export credit agreement; and identification of non-OECD Arrangement countries not in compliance with the WTO Agreement on Subsidies and Countervailing Measures, among other provisions.
Certain policy options are discussed below.
"Clean Renewal" or Renewal with Limited Changes
Options for a renewal of Ex-Im Bank's charter include a "clean reauthorization," extending its termination date, or reauthorization with limited changes, such as revising its exposure cap. Some Members of Congress have called for reauthorization of Ex-Im Bank in its current form—as an independent federal government agency that serves as the official ECA of the United States. Among those that favor a renewal of the Bank's charter, some may call for a "clean reauthorization" or renewal with limited changes, while others may support a reauthorization that includes certain reforms to the Bank, such as to its policies or risk management practices (see discussion below).
Proponents of Ex-Im Bank reauthorization hold that the Bank is critical in supporting U.S. jobs and U.S. exports by addressing market failures (such as imperfect information and barriers to entry) and leveling the playing field by countering foreign government-backed export financing activity. They say that U.S. government backing of Ex-Im Bank activity can make certain transactions (e.g., for large infrastructure projects or for small business exports) more commercially attractive by mitigating and diversifying risks, as well as provide the Bank leverage to guarantee repayment or recover assets in a way not available to the private sector.
Critics of Ex-Im Bank may concede that the Bank's programs can help individual firms, but hold that its programs shift production among sectors within the economy and do not add permanently to the overall level of U.S. exports.47 They contend that the Bank competes with, or crowds out, private sector activity; the Bank picks "winners and losers" through its support and operates as a form of "corporate welfare"; poses a risk to taxpayers through its activities; and that the private sector is more efficient and better suited than the federal government to finance exports. Critics of the Bank also may call for intensified U.S. efforts through the OECD, as well as other venues, to eliminate all government-backed export credit activity internationally.
An issue related to renewal of Ex-Im Bank is the length of time to extend the Bank's authority. Shorter extensions of authority in the past arguably have given Congress the opportunity to weigh in on Ex-Im Bank operations more frequently through the lawmaking process, while a longer extension could enhance the Bank's long-term planning ability and provide more assurance to clients of its viability. The most recent stand-alone renewal of Ex-Im Bank's authority, which occurred in 2012, was for about two years and four months (P.L. 112-122). Recent longer-term extensions have been around four to five years and, going further back in the Bank's history, as long as approximately six to seven years. Congress also has extended Ex-Im Bank's authority on a short-term basis, including provisions in continuing resolutions. For instance, the FY2015 continuing resolution (P.L. 113-164), passed in the 113th Congress, includes a provision extending Ex-Im Bank's authority through June 30, 2015.
Renewal with Substantive Reforms
Renewal of Ex-Im Bank's charter could include more substantive reforms, such as to its authorities, policies, and risk management practices (discussed further below). Such reforms could be motivated by a range of reasons, including enhancing Ex-Im Bank's ability to fill in gaps in private sector financing and offsetting competition from foreign ECAs; limiting the size and scope of its activities and its exposure to U.S. taxpayers; and furthering efforts to eliminate all ECA activity. Proposed reforms may raise, among other things, issues regarding the extent to which such changes would balance Ex-Im Bank's core mission to boost U.S. and jobs with supporting other policy interests.
Lapse in Authority
Some Members of Congress support allowing Ex-Im Bank's authority to expire. Some may favor a temporary expiration until consensus is reached on certain reforms to require of the Bank, while others may call for a permanent expiration. Congress could allow Ex-Im Bank's authority to expire by taking no action, or alternatively, by passing legislation that, for instance, sets specific parameters for a wind-down in its functions. Uncertainty over whether Congress would renew Ex-Im Bank's authority in 2014 reportedly led, in some instances, to foreign buyers selecting other suppliers over U.S. suppliers for certain export contracts, out of concern about financing.48
Generally speaking, according to Ex-Im Bank, if its authority were to lapse, no new commitments (including new loan, guarantee, or insurance transactions) could be approved by its Board of Directors or under delegated authority, but prior obligations (including disbursements on already-approved final commitments) could continue. The Bank could continue to make expenditures in its operations (including salary, rent, etc.), while developing a plan for orderly liquidation.49 It is unclear what form a liquidation plan would take. The primary statutory basis for Ex-Im Bank's activities under a lapse in authority is found in its charter in 12 U.S.C. §635f (see
text box).
12 U.S.C. §635f. Termination date of Bank's functions; exceptions; liquidation
text box).
40
Critics may point to a combination of domestic macroeconomic factors and global economic developments that
influence a nation’s export levels in the long-run, in other words, supply and demand, reflecting world economic
forces.
41
For example, the 2002 reauthorization act (P.L. 107-189) extended Ex-Im Bank’s authority for four years through
FY2006, and the 2006 reauthorization act (P.L. 109-438) renewed its authority for five years through FY2011.
42
For example, H.R. 2263 (Amash) and S. 1102 (Lee), introduced in the 113th Congress, propose a termination of the
Bank three years after the act’s enactment.
43
Lauren Airey, “Manufacturers Testify Before House Ex-Im Panel,” National Association of Manufacturers (NAM),
April 9, 2014, http://www.shopfloor.org/2014/04/manufacturers-testify-before-house-ex-im-panel/31055.
44
CRS electronic communication with Ex-Im Bank, May 1, 2014.
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Export-Import Bank: Overview and Reauthorization Issues
12 U.S.C. §635f.Termination date of Bank’s functions; exceptions; liquidation
Export-Import Bank of the United States shall continue to exercise its functions in connection with and in furtherance
of its objects and purposes until the close of business on September 30, 2014, but the provisions of this section shall
not be construed as preventing the bank from acquiring obligations prior to such date which mature subsequent to
such date or from assuming prior to such date liability as guarantor, endorser, or acceptor of obligations which
mature subsequent to such date or from issuing, either prior or subsequent to such date, for purchase by the
Secretary of the Treasury or any other purchasers, its notes, debentures, bonds, or other obligations which mature
subsequent to such date or from continuing as a corporate agency of the United States and exercising any of its
functions subsequent to such date for purposes of orderly liquidation, including the administration of its assets and
the collection of any obligations held by the bank.
Beyond the specific impact of a lapse on Ex-Im Bank
’'s day-to-day functions, there is broader
debate about its implications for the U.S. economy in the long
- term, with stakeholders
’' positions
based on their views of the validity of Ex-Im Bank
’'s rationales,
i.e.that is, to fill in gaps in private
sector financing and offset competition from foreign ECAs. From one perspective, the absence of
Ex-Im Bank financing could adversely affect particular U.S. firms or their employees that use
ExImEx-Im Bank support in cases where they face difficulty accessing financing from the private sector at
competitive terms.
4550 From another perspective, there are doubts over whether the absence of
ExImEx-Im Bank support would affect the overall level of exports and employment in the United States.
46
51 Given the various factors that affect U.S. export and employment levels, it may be difficult to
determine the precise impact of the presence or absence of Ex-Im Bank financing on the U.S.
economy in the long
- run.
In terms of competitiveness, supporters of the Bank argue that, without Ex-Im Bank financing, it
may be difficult for certain U.S. companies to compete for export contracts on a
“"level playing
field” field" with foreign competitors that receive support from their government-backed ECAs or may
lead to U.S. sourcing in overseas markets. They argue that a lapse in Ex-Im Bank
’'s authority
would amount to
“"unilateral disarmament,
”" given continued operations by other countries of their
ECA programs—for many of whom exports constitute a larger part of the national economy and
ECAs are a core part of their national export strategies.
4752 Critics argue that allowing the Bank
’s
's authority to lapse would provide the United States with an opportunity to lead by example in
efforts to eliminate government-backed ECA programs internationally, and enable the United
States to focus on what they view as more effective ways to boost U.S. exports, such as through
U.S. tax reform or the negotiation and enforcement of international trade agreements.48
45
For example, see discussion in U.S. Congress, Senate Committee on Banking, Housing, and Urban Affairs,
Continuing Oversight of the Recent Activities of the Export-Import Bank and the Critical Need to Reauthorize the
Bank’s Charter, 112th Cong., 2nd sess., April 17, 2012, S. Hrg. 112-585.
46
For example, see Heritage Action for America publications, such as Zack Slingsby, Export-Import Bank
Authorization, Heritage Action for America, April 10, 2014, http://heritageaction.com/2014/04/export-import-bankreauthorization/.
47
U.S. Chamber of Commerce, The Export-Import Bank of the United States: Its Impact on U.S. Competitiveness,
Exports, and Jobs, October 2013, https://www.uschamber.com/file/8234/download.
48
For instance, see Sallie James, Ending the Export-Import Bank, CATO Institute, October 2012,
http://www.downsizinggovernment.org/export-import-bank.
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Export-Import Bank: Overview and Reauthorization Issues
U.S. tax reform or the negotiation and enforcement of international trade agreements.53
Reorganization of Functions
Reorganization of Ex-Im Bank
’'s functions may be considered as an alternative to reauthorization
or a lapse in authority. Motivations could include an interest in increasing the effectiveness and
efficiency of government export promotion services, reducing their costs, and eliminating
duplicative activities.
4954 Various reorganization proposals have been considered over time. These
have included proposals to consolidate certain trade and export finance functions of various
government agencies into a
“"Department of Trade.
”" In recent years, the reorganization debate has
been renewed with President Obama
’'s proposal in 2012 to reorganize the business- and
traderelatedtrade-related functions of Ex-Im Bank and certain other federal entities into one department, a proposal
reiterated in the President
’s FY2015's FY2016 budget request.
50
55
Trade reorganization discussions have rekindled policy debates about whether reorganization
would reduce costs and improve the effectiveness of trade policy programs, or undermine the
effectiveness of federal agencies, given their differing missions, and result in the creation of
larger, more costly bureaucracy. While some stakeholders argue that consolidation of trade
functions would result in more streamlined federal export assistance, others contend that it may
result in federal services that are not responsive to the specific needs of certain exporter groups.
Reorganization discussions also have renewed debates about whether overlap in services
provided by federal government agencies constitutes duplication or the use of the same or similar
tools to meet different goals.
Exposure Limit
Exposure Limit
If Congress decides to reauthorize Ex-Im Bank, it may consider whether to revise the Bank
’s
's exposure cap. When Congress established the Bank as an independent agency in 1945, it
authorized a limit on the Bank
’'s outstanding aggregate credit and insurance authority that was no
greater than three and one-half times the Bank
’'s authorized stock of $1 billion.
5156 Since then,
Congress has periodically raised the Bank
’'s exposure cap (see Table 5
). The 2012 reauthorization act increased the Bank's exposure cap from the previous limitation of $100 billion incrementally to $140 billion in FY2014, with the increase in the exposure cap contingent on the Bank maintaining a default rate on payment obligations under its financing of less than 2% and on meeting various reporting requirements.
Some stakeholders favor increasing Ex-Im Bank's exposure cap, based on the Bank's role in supporting U.S. exports. Others support maintaining or reducing the exposure cap, based on concerns over Ex-Im Bank's ability to prudentially manage its portfolio (see discussion below). The Administration's legislative proposal submitted in April 2014 to reauthorize the Bank requested an incremental increase of the Bank's exposure cap to $160 billion by FY2018. Legislation introduced in Congress has varied (see "Status of Ex-Im Bank Authority" section above).
Table 5. Legislative Changes to the Export-Import Bank's Limit on Outstanding Aggregate Credit and Insurance Authority
Year
|
Legislation
|
New Limit Resulting from Legislation
|
1945
|
P.L. 79-173
|
Three and one-half times the authorized stock of $1 billion
|
1951
|
P.L. 82-158
|
Four and one-half times the authorized stock of $1 billion
|
1954
|
P.L. 83-570
|
$5 billion
|
1958
|
P.L. 85-424
|
$7 billion
|
1963
|
P.L. 88-101
|
$9 billion
|
1968
|
P.L. 90-267
|
$13.5 billion
|
1971
|
P.L. 92-126
|
$20 billion
|
1975
|
P.L. 93-646
|
$25 billion
|
1978
|
P.L. 95-630
|
$40 billion
|
1992
|
P.L. 102-429
|
$75 billion
|
2002
|
P.L. 107-189
|
Incremental increases in limit to $100 billiona
2012
|
P.L. 112-122
|
Incremental increase in limit to $140 billion, contingent on certain requirementsb
Source: ).
49
For a general discussion of the issue, see CRS Report R42555, Trade Reorganization: Overview and Issues for
Congress, by Shayerah Ilias Akhtar. For an example of possible duplication concerns with respect to Ex-Im Bank, see
CRS Report R43155, Small Business Administration Trade and Export Promotion Programs, by Sean Lowry.
50
The White House, “Government Reorganization Fact Sheet,” press release, January 13, 2012,
http://www.whitehouse.gov/the-press-office/2012/01/13/government-reorganization-fact-sheet; and Office of
Management and Budget (OMB), Budget of the United States Government, Fiscal Year 2015, “Creating a 21st Century
Government” section, p. 39, http://www.whitehouse.gov/omb/budget/Overview.
51
Ex-Im Bank initially was capitalized with a stock of $1 billion in 1934.
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Export-Import Bank: Overview and Reauthorization Issues
Table 5. Legislative Changes to the Export-Import Bank’s Limit on Outstanding
Aggregate Credit and Insurance Authority
Year
Legislation
New Limit Resulting from Legislation
1945
P.L. 79-173
Three and one-half times the authorized stock of $1 billion
1951
P.L. 82-158
Four and one-half times the authorized stock of $1 billion
1954
P.L. 83-570
$5 billion
1958
P.L. 85-424
$7 billion
1963
P.L. 88-101
$9 billion
1968
P.L. 90-267
$13.5 billion
1971
P.L. 92-126
$20 billion
1975
P.L. 93-646
$25 billion
1978
P.L. 95-630
$40 billion
1992
P.L. 102-429
$75 billion
2002
P.L. 107-189
Incremental increases in limit to $100 billiona
2012
P.L. 112-122
Incremental increase in limit to $140 billion, contingent on certain requirementsb
Source: U.S. Code notes; Lexis Nexis; and Jordan Jay Hillman, The Export-Import Bank at Work (Westport 1982).
a.
a. The 2002 reauthorization (P.L. 107-189) increased the Bank
’'s exposure cap to $80 billion in FY2002,
$85 billion in FY2003, $90 billion in FY2004, $95 billion in FY2005, and $100 billion in FY2006.
b.
b. The 2012 reauthorization
act (bill (P.L. 112-122) increased the
Bank’bank's exposure cap to $120 billion in FY2012,
$130 billion in FY2013, and $140 billion in FY2014—with the increases for FY2013 and FY2014 contingent
on the
Bankbank maintaining a
“"default rate
” of less than 2% and on submitting various reports.
The 2012 reauthorization act increased the Bank’s exposure cap from the previous limitation of
$100 billion incrementally to $140 billion in FY2014, with the increase in the exposure cap
contingent on the Bank maintaining a default rate of less than 2% and on meeting various
reporting requirements. The Administration’s legislative proposal submitted in April 2014 to
reauthorize the Bank requests an incremental increase of the Bank’s exposure cap to $160 billion
in FY2018. Some stakeholders favor increasing Ex-Im Bank’s exposure cap, based on its role in
supporting U.S. exports. Others favor maintaining or reducing the exposure cap, based on
concerns over Ex-Im Bank’s ability to prudentially manage its growing portfolio (see discussion
below).
" of less than 2% and on submitting various reports.
Ex-Im Bank Policies
Ex-Im Bank
’'s policies could be part of the reauthorization debate. Congress could choose to pass
a “ a "clean reauthorization
”" that introduces no major changes to the Bank
’'s policies. Proponents
may argue that Congress has struck a fair balance among the various stakeholder interests—such
as business and labor interests—in its present requirements of Ex-Im Bank and that adjustments
to this balance are unwarranted. However, a number of long-standing debates concerning the
Bank’ Bank's policies remain. Should Congress consider revisions to Ex-Im Bank
’'s policies, at issue is
the extent to which potential changes would
: (1) balance Ex-Im Bank
’'s core mission to boost U.S.
exports and jobs with supporting other policy interests; and (2) compare to the policies of foreign
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Export-Import Bank: Overview and Reauthorization Issues
ECAs, which may have different mandates and priorities, but nevertheless serve as competitors to
Ex-Im Bank. Certain policies that may be debated are summarized below.
Domestic Content
The OECD Arrangement contains no specific guidelines regarding content requirements, which
relate
Content
"Content" relates to the amount of domestic and foreign content (e.g., labor, materials, and overhead costs)
associated with the production of an export.
The OECD Arrangement contains no specific guidelines regarding content requirements. Each ECA generally establishes its own guidelines in
this area.
Ex-Im Bank
bases its content policy's content policy is based on its congressional mandate to support U.S. jobs
and views
, viewing content to be
“"a proxy to evidence support for U.S. jobs.
”52"57 The policy is intended to encourage
U.S. companies to maximize their sourcing of U.S. content. However, Ex-Im Bank recognizes
that U.S. export contracts may contain goods and services that are foreign-originated
, and
it
allows financing support for such contracts, subject to certain restrictions and limitations. Under
its content policy, for all medium- and long-term transactions, Ex-Im Bank limits its support to
the lesser of: the lesser of (1) 85% of the value of all goods and services contained within a U.S. supply
contract; or
(2) 100% of the U.S. content of an export contract.
In effect, the Bank requires a
minimum of 85% U.S. content and a maximum of 15% foreign content for an export contract to
receive the fullest extent of financing available by the Bank. IfThus, if the foreign content exceeds 15%,
the Bank
’'s support would be reduced proportionally.
5358 For short-term export contracts, the
minimum U.S. content requirement for full Ex-Im Bank financing is generally 50%.
In contrast to Ex-Im Bank, foreign ECAs generally have lower domestic content requirements
, and some even have no domestic content requirements. ECAs of other countries have revised
their content policies to reflect the changing nature of manufacturing, including the rise of global
supply chains and the sourcing of inputs from multiple countries (see Table 6
).
Table 6. Content Policies of Selected ECAs: Medium- and Long-Term Financing
ECACountry
Amount of Domestic Content Required to Qualify for ECA Cover
|
Foreign Content Limitation for ECA Cover
|
Canada
|
No minimum
|
No limit; support will be given if transaction benefits national interest
|
Germany
|
30%-70%, based on a three-tiered policy
|
30%-49%, but may allow more foreign content in exceptional, well-founded cases
|
Italy
|
No minimum
|
No limit; support will be given if transaction benefits national interest
|
Japan
|
30%
|
70%, but may allow more foreign content on a case-by-case basis
|
United States
|
Support for the lesser of 85% of eligible U.S. export contract or 100% of U.S. content
|
Cover will be reduced commensurate with foreign content greater than 15%
|
United Kingdom
|
20%
|
80%, but may allow more foreign content in transactions that advance strategic/national interests
|
Sources: Ex-Im Bank, Report to the U.S. Congress on Export Credit Competition and the Export-Import Bank of the United States, for the Period January 1, 2013 Through December 31, 2013, June 2014; foreign export credit agency websites and documents; Government Accountability Office, U.S. Export-Import Bank: Actions Needed to Promote Competitiveness and International Cooperation, GAO-12-294, February 2012. Robert Z. Lawrence and Matthew J. Slaughter, U.S. Exporters, Global Supply Networks, and Competitive Export-Import Bank Financing, Coalition for Employment through Exports, June 2013.
Notes: These data should not be considered definitive; rather, they are intended to give an idea of the range of ECA content requirements. ECAs may not apply their content requirements on an absolute basis, and may consider requests for export financing on a case-by-case basis or may apply flexibility to their content rules, for example, in terms of definition, percentage of foreign content, or interpretation of national benefit. According to the Organization for Economic Co-operation and Development (OECD) Arrangement on Officially Supported Export Credits, participants are not to provide official support in excess of 85% of the export value, including third-country supply but excluding local costs.
In the 2012 reauthorization legislation, Congress required Ex-Im Bank to review its domestic content policy for medium- and long-term transactions to "examine and evaluate the effectiveness of the Bank's policy in maintaining and creating jobs in the [United States]; and in contributing to a stronger national economy through the export of goods and services" by taking into account various factors, including U.S. employment considerations and competitiveness to foreign ECAs. Following the review, Ex-Im Bank announced certain policy updates. For example, in an effort to increase U.S. services exporters' access to its financing, Ex-Im Bank provided clarification on how its content policy determines the eligibility of a U.S. services provider and a U.S. services contract, as well as how foreign-developed technology and the tools or equipment used to execute a services contract are treated on a content basis.59 According to Ex-Im Bank, it made no changes to its underlying content policy with these clarifications.
In the past, some stakeholders have argued that the Bank's definition of national content does not take into account "the high value U.S. jobs in R&D [research and development], supply chain management, software design engineering, business development, and marketing, IP [intellectual property] support, branding, and profit,"60 which have been considered as limitations to U.S. service providers' ability to use Ex-Im Bank financing. On the one hand, given the proliferation of global supply chains and foreign ECA policies, U.S. exporters have called for greater flexibility in Ex-Im Bank's content policy. For example, industry proposals have included recommendations that Ex-Im Bank lower its domestic content requirement, such as to 50% (the policy for short-term financing); match the average among OECD countries; adopt a policy similar to the European Union ECAs and "automatically cover non-U.S. content for U.S. FTA [free trade agreement] partners who offer reciprocity for U.S. content under their export credit agencies"; or expand the definition of domestic content to include, for instance, R&D or other elements that support high-value additions to the U.S. economy.61 On the other hand, labor groups tend to be concerned about the impact that lowering domestic content requirements may have on employment in the home country. From their point of view, reducing these requirements may result in an outsourcing of labor to other countries. Others counter that the current requirements may induce firms to use other ECAs for alternative sources of financing, which may cause them to shift production overseas.
Economic Impact Analysis
Ex-Im Bank is required to have regulations and procedures to insure that full consideration is given to the extent that any loan or guarantee is likely to have an adverse effect on U.S. industries and U.S. employment.62 These regulations and procedures are in support of the congressional policy that, in authorizing any loan or guarantee, the Board of Directors must take into account any serious adverse effect of such loan or guarantee.63 Furthermore, the Bank is prohibited from extending any loan or guarantee that would establish or expand the production of any commodity for export by any other country if the commodity is likely to be in surplus on world markets or the resulting production capacity will compete with U.S. production of a similar commodity and will cause "substantial injury" to U.S. producers of a similar commodity.64 The Bank defines risk of substantial injury as the extension of a loan or guarantee that will enable a foreign buyer to establish or expand foreign production by an amount that is equal to or greater than 1% of U.S. production.65 The same prohibition applies to loans or guarantees subject to U.S. trade measures, such as anti-dumping or countervailing duties.66 However, these prohibitions do not apply if the Board of Directors determines that the proposed transaction's short- and long-term benefits to U.S. industry and U.S. employment are likely to outweigh the injury to U.S. producers and U.S. employment of similar commodities.67
Like Ex-Im Bank, other G-7 ECAs have a broad mandate to support transactions that benefit their domestic economy, and base their decision to provide support on economic impact. However, in contrast to foreign ECAs, Ex-Im Bank is required by law to use an economic impact analysis to assess each transaction for potential adverse impact on U.S. industry, which can lead to a denial of financing.68
Among the key issues in the 2012 reauthorization debate was whether Ex-Im Bank's economic impact analysis sufficiently analyzes the potential impacts to U.S. industry of Ex-Im Bank transactions, including downstream effects. The 2012 reauthorization act required Ex-Im Bank to develop and make publicly available methodological guidelines to be used by the Bank in conducting economic impact analyses. In April 2013, Ex-Im Bank published revised economic impact analysis procedures and guidelines, including for aircraft exports.
Supporters of Ex-Im Bank maintain that the economic impact analysis requirements ensure that the Bank meets its congressional mandate. At the same time, some U.S. exporters are concerned that the economic impact policies may be overly burdensome, detract from its core mission to support U.S. exports and jobs, and not be competitive to the policies of other ECAs. Other critics continue to be concerned that the economic impact policy does not adequately take into account downstream effects of Ex-Im Bank support.
Environmental Policy
Ex-Im Bank's charter authorizes the Bank to grant or withhold financing support after taking into account the potential beneficial and adverse environmental effects of goods and services for which Ex-Im Bank direct lending and guarantee support is requested. The Bank must conduct an environmental review of all transactions greater than $10 million. Recent developments in Ex-Im Bank's environmental policies related to high-carbon projects, including support for exports for coal-fired power plants, have).
In the 2012 reauthorization legislation, Congress required Ex-Im Bank to review its domestic
content policy for medium- and long-term transactions to “examine and evaluate the effectiveness
of the Bank’s policy in maintaining and creating jobs in the [United States]; and in contributing to
a stronger national economy through the export of goods and services” by taking into account
various factors, including U.S. employment considerations and competitiveness to foreign ECAs.
Following the review, Ex-Im Bank announced certain policy updates. For example, in an effort to
increase U.S. services exporters’ access to its financing, Ex-Im Bank provided clarification on
how its content policy determines the eligibility of a U.S. services provider and a U.S. services
contract, as well as how foreign-developed technology and the tools or equipment used to execute
a services contract are treated on a content basis. According to Ex-Im Bank, it made no changes
to its underlying content policy with these clarifications.
In the past, some stakeholders have argued that the Bank’s definition of national content does not
take into account “the high value U.S. jobs in R&D [research and development], supply chain
management, software design engineering, business development, and marketing, IP [intellectual
52
Ex-Im Bank, 2013 Competitiveness Report, June 2014, p. 92.
See Ex-Im Bank’s content policies for more details: http://www.exim.gov/products/policies/foreign_mediumlong.cfm.
53
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property] support, branding, and profit,”54 which have been considered as limitations to U.S.
service providers’ ability to use Ex-Im Bank financing.
Table 6. Foreign Content Requirements of Selected Country ECAs
Maximum Allowable Foreign Content to Receive
Full Medium- and Long-Term Financing
Country
Australia
15%
Canada
Support will be given if the transaction benefits national interest
France
40%; however, may allow more foreign content in transactions that advance
strategic/national interests
Germany
30% combined local and foreign (non-domestic) content; however may allow more
non-domestic content in transactions that advance strategic/national interests
Italy
Support will be given if the transaction benefits national interest
Japan
70%; however, foreign content may be higher on a case-by-case basis
United States
15%
United Kingdom
80%; however, may allow more foreign content in transactions that advance
strategic/national interests
Sources: Ex-Im Bank, Report to the U.S. Congress on Export Credit Competition and the Export-Import Bank of the
United States, For the Period January 1, 2013 through December 31, 2013, June 2014; meeting with Ex-Im Bank
officials, May 5, 2011; House Committee on Financial Services, Subcommittee on International Monetary Policy
and Trade, The Role of the Ex-Im Bank in U.S. Competitiveness and Job Creation, opening statement by Chairman
Gary Miller, 112th Cong., 1st sess., March 10, 2011; OECD, Export Credit Financing Systems in OECD Member
Countries and Non-Member Economies, May 1, 2008; and Coalition for Exports through Employment document.
Notes: These data should not be considered definitive; rather, they are intended to give an idea of the range of
ECA content requirements. ECAs may not apply their content requirements on an absolute basis, and may
consider requests for export financing on a case-by-case basis or may apply flexibility to their content rules, for
example, in terms of definition, percentage of foreign content, or interpretation of national benefit.
Given the proliferation of global supply chains and foreign ECA policies, many U.S. businesses
continue to call for additional flexibility in Ex-Im Bank’s content requirements. For example,
industry proposals have included recommendations that Ex-Im Bank lower its domestic content
requirement, such as to 50% (the policy for short-term financing); match the average among
OECD countries; or adopt a policy similar to the European Union ECAs and “automatically cover
non-U.S. content for U.S. FTA [free trade agreement] partners who offer reciprocity for U.S.
content under their export credit agencies.”55 Other industry recommendations include Ex-Im
Bank expanding the definition of domestic content to include, for instance, R&D or other
elements that support high-value additions to the U.S. economy. However, labor groups tend to be
concerned about the impact that lowering national content requirements may have on
employment in the home country. From their point of view, reducing these requirements may
result in an outsourcing of labor to other countries. Others counter that the current requirements
54
U.S. Congress, House Committee on Financial Services, Subcommittee on International Monetary Policy and Trade,
Statement for the Record from the Coalition for Employment through Exports, 112th Cong., 1st sess., March 10, 2011.
55
U.S. Congress, House Committee on Financial Services, Subcommittee on International Monetary Policy and Trade,
Statement of Karan Bhatia, Vice President & Senior Counsel, International Law & Policy, General Electric, 112th
Cong., 1st sess., March 10, 2011. Also see Gary Clyde Hufbauer, Meera Fickling, and Woan Foong Wong, Revitalizing
the Export-Import Bank, IIE, Number PB11-6, May 2011.
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may induce firms to use other ECAs for alternative sources of financing, which may cause them
to shift production overseas.
Economic Impact Analysis
Ex-Im Bank is required to have regulations and procedures to insure that full consideration is
given to the extent that any loan or guarantee is likely to have an adverse effect on U.S. industries
and U.S. employment.56 These regulations and procedures are in support of the congressional
policy that in authorizing any loan or guarantee the Board of Directors shall take into account any
serious adverse effect of such loan or guarantee.57 Furthermore, the Bank is prohibited from
extending any loan or guarantee that would establish or expand the production of any commodity
for export by any other country if the commodity is likely to be in surplus on world markets or
the resulting production capacity will compete with U.S. production of a similar commodity and
will cause “substantial injury” to U.S. producers of a similar commodity.58 The Bank defines risk
of substantial injury as the extension of a loan or guarantee that will enable a foreign buyer to
establish or expand foreign production by an amount that is equal to or greater than 1% of U.S.
production.59 The same prohibition applies to loans or guarantees subject to U.S. trade measures,
such as anti-dumping or countervailing duties.60 However, these prohibitions shall not apply if the
Board of Directors determines that the proposed transaction’s short- and long-term benefits to
U.S. industry and U.S. employment are likely to outweigh the injury to U.S. producers and U.S.
employment of similar commodities.61
Like Ex-Im Bank, other G-7 ECAs have a broad mandate to support transactions that benefit their
domestic economy, and base their decision to provide support on economic impact. However, in
contrast to foreign ECAs, Ex-Im Bank is required by law to use an economic impact analysis to
assess each transaction for potential adverse impact on U.S. industry, which can lead to a denial
of financing.62
Among the key issues in the 2012 reauthorization debate was whether Ex-Im Bank’s economic
impact analysis sufficiently analyzes the potential impacts to U.S. industry of Ex-Im Bank
transactions, including downstream effects (see text box). The 2012 reauthorization act required
Ex-Im Bank to develop and make publicly available methodological guidelines to be used by the
Bank in conducting economic impact analyses. In April 2013, Ex-Im Bank published revised
economic impact analysis procedures and guidelines, including for aircraft exports.
Supporters of Ex-Im Bank maintain that the economic impact analysis requirements ensure that
the Bank meets its congressional mandate. At the same time, some U.S. exporters are concerned
that the economic impact policies may be overly burdensome, detract from its core mission to
support U.S. exports and jobs, and not be competitive to the policies of other ECAs. Other critics
56
12 U.S.C. 635a-2.
12 U.S.C. 635(b)(1)(B).
58
12 U.S.C. 635(e)(1).
59
See Ex-Im Bank, Economic Impact Procedures and Methodological Guidelines, April 2013, http://www.exim.gov/
generalbankpolicies/economicimpact/.
60
12 U.S.C. 635(e)(2).
61
12 U.S.C. 635(e)(3).
62
Ex-Im Bank, 2013 Competitiveness Report, June 2014, p. 91.
57
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continue to be concerned that the economic impact policy does not adequately take into account
downstream effects of Ex-Im Bank support.
U.S. Airlines’ Lawsuits Against the Ex-Im Bank
Debate about the economic impact of Ex-Im Bank activities has been driven in part by a charge by Delta Airlines,
Hawaiian Airlines, and the Airline Pilots Association that Ex-Im Bank financing for Boeing aircraft exports to India and
other countries has resulted in to an oversupply of airline seats that has had an adverse effect on their businesses.
The group also has charged that Ex-Im Bank’s economic impact analysis procedures are inconsistent with the Bank’s
charter. In 2011, operating through the Air Transport Association of America (ATAA), but with the express
exclusion of most of the members of that association, Delta filed a legal challenge against Ex-Im Bank seeking an
injunction on Ex-Im Bank loan guarantees to Air India. In July 2013, a federal appeals court rejected the airlines’
request, but required Ex-Im Bank to explain how its approval of the transactions has complied with its statutory
mandate.
According to Ex-Im Bank, its economic impact analysis adequately takes into account U.S. economic effects of
transactions. From the Bank’s perspective, a lack of Ex-Im Bank financing for an aircraft export contract may not
deter a foreign airline carrier from buying aircraft; however, in the absence of Ex-Im Bank financing, a foreign aircraft
manufacturer may win the deal over a U.S. aircraft manufacturer.
Delta, Hawaiian and APA filed three subsequent lawsuits against the Bank, all of which are currently pending. Initially,
the plaintiffs claimed that Ex-Im Bank financing support for the purchase of U.S.-manufactured aircraft by foreign
airlines provided more favorable financing terms than were available to U.S. airlines. The later lawsuits dropped this
assertion and instead claimed that Ex-Im Bank financing provides more favorable financing terms than might otherwise
be available to the foreign airlines, but not necessarily better than financing terms available to U.S. airlines.
U.S. companies may obtain financing from the ECAs of other countries. For example, Delta has used governmentbacked export financing for its purchases of airplanes, such as from Canada’s Bombardier Inc. or Brazil’s Embraer S.A.
Sources: “Airlines Press Ahead With Ex-Im Bank Lawsuit After Judge Denies Injunction,” Inside U.S. Trade's World
Trade Online, February 9, 2012; Josh Mitchell and Corey Boles, “Boeing, Delta Clash on Exports,” The Wall Street
Journal, March 16, 2012; Ted Reed, “Delta, Leader Of The U.S. Airline Industry, Challenges Boeing And ExportImport Bank,” Forbes, April 13, 2014; and Ex-Im Bank.
Environmental Impact Analysis
Ex-Im Bank’s charter authorizes the Bank to grant or withhold financing support after taking into
account the potential beneficial and adverse environmental effects of goods and services for
which Ex-Im Bank direct lending and guarantee support is requested. The Bank must conduct an
environmental review of all transactions greater than $10 million. Recent developments in Ex-Im
Bank’s environmental policies related to high-carbon projects, including support for exports for
coal-fired power plants, has been subject to congressional action (see text box). According to
ExImEx-Im Bank, its Environmental and Social Due Diligence Procedures and Guidelines, Supplemental
High Carbon Guidelines, and public disclosure requirements (e.g., tracking and publishing
greenhouse gas emission data associated with projects) have expanded over time and remain
more comprehensive than those of other OECD ECAs.
6369 In addition, Ex-Im Bank faces
competition from ECAs outside of the OECD, such as China, which tend to be less rigorous in
their environmental requirements for financing than OECD countries.
Supporters of Ex-Im Bank
’'s environmental policy argue that the Bank must balance U.S.
exporting interests with environmental policy considerations, per its mandate. However, some
63
Ex-Im Bank, 2012 Competitiveness Report, June 2013, p. 75; and Ex-Im Bank, 2013 Competitiveness Report, June
2014, p. 59.
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U.S. exporters are concerned that Ex-Im Bank
’'s environmental impact policies may be overly
burdensome and detract from its core mission to support U.S. exports and jobs. From this
standpoint, situations in which Ex-Im Bank denies financing for projects that do not meet
environmental requirements are contrary to its mission because it may result in lost export and
employment opportunities.
Recent Developments
Ex-Im Bank Financing for Coal-Fired Power Plant Projects
Following the announcement of President Obama
’'s Climate Action Plan, Ex-Im Bank
’'s Board of Directors approved
revisions to the Bank
’'s Supplemental Guidelines for High-Carbon Projects In December 2013. As revised, the
Supplemental Guidelines state that
“"the Bank will not provide support for exports of high carbon intensity plants,
except for high carbon intensity plants that (a) are located in the world
’'s poorest countries, utilize the most efficient
coal technology available and where no other economically feasible alternative exists, or (b) deploy carbon capture
and sequestration (CCS), in each case, in accordance with the requirements set forth in these Supplemental
Guidelines.
” However," Section
70817086(4)(C) of the
FY2014FY2015 appropriations act (P.L. 113-
76) prohibits235) prohibits, through September 30, 2015, the use of Ex-Im
Bank funds,
until September 30, 2014, and under certain conditions, for the enforcement of any rule, regulation,
policy, or
guidelineguidelines implemented pursuant to the Supplemental Guidelines.
The prohibition was included in the FY2014 appropriations act (Section 7081(4)(C) of P.L. 113-76) and has since been extended. The prohibition varies based on countries' classification under the World Bank.
While some stakeholders may be critical
of the appropriations language from an environmental perspective, others may argue that it provides greater flexibility
for Ex-Im Bank to more effectively meet its export and jobs mandate while also contributing to U.S. foreign policy
goals with respect to development in the world
’'s poorest countries.
Shipping
Ex-Im Bank’ In the 114th Congress, legislation has been introduced, for example, to prohibit the Bank from supporting certain high carbon intensity projects (H.R. 222, Huffman); extend the suspension of the Supplemental Guidelines in the FY2014 appropriations act through September 30, 2019 (H.R. 597, Fincher); and require Ex-Im Bank to develop a strategic plan to promote renewable energy exports (H.R. 1031, Waters; S. 824, Shaheen).
Shipping
Ex-Im Bank's seaborne shipping policy is based on Public Resolution 17 (PR-17, approved
March 26, 1934, by the
73rd73rd Congress), whose purpose is to
“"support the U.S. strategic objective
of maintaining a merchant marine sufficient to carry a substantial portion of its waterborne export
and import foreign commerce.
”64"70 Under the shipping policy, most products supported by the
ExImEx-Im Bank must be transported exclusively on U.S. vessels (e.g., direct loans of any amount,
guarantees above $20 million, and products with repayment periods of more than seven years).
Under limited conditions, a waiver on this requirement may be granted on a case-by-case basis by
the U.S. Maritime Administration (MARAD).
Supporters contend that maintaining U.S. flag vessels is
“"critical to U.S. national security
”" and
“ "essential to maintaining a commercial U.S.-flag merchant marine.
”65"71 They argue that, from a
budgetary standpoint, cargo preference is a
“"highly cost efficient way
”" to support a
privatelyownedprivately owned U.S.-flag commercial fleet. Because the goods will be shipped regardless of which ship
carries them, and therefore the cost will be incurred regardless,
“"requiring that some of the
cargoes be shipped on U.S.-flag vessels leverages that basic transportation expense to provide
other benefits to the nation at a fraction of direct cost purchase.
”" The concern under this view is
that otherwise, the U.S. government would have to
“"duplicate sealift capacity at enormous
expense with government-owned vessels.
”66 These merchant U.S.-flag vessels are then available
64
Ex-Im Bank, Ex-Im Bank Policies: Shipping Requirements (MARAD), http://www.exim.gov/products/policies/
shipping.cfm. Maritime Administration, U.S.-Flag Waterborne Domestic Trade and Related Programs,
http://www.marad.dot.gov/ships_shipping_landing_page/domestic_shipping/Domestic_Shipping.htm. Codified as 46
U.S.C. 55304, by P.L. 109-304, October 6, 2006.
65
U.S. Congress, House Committee on Financial Services, Subcommittee on International Monetary Policy and Trade,
Statement of USA Maritime, Hearing on the Role of the Export-Import Bank in U.S. Competitiveness and Job Creation,
112th Cong., 1st sess., March 11, 2011.
66
Ibid.
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"72 These merchant U.S.-flag vessels are then available to transport U.S. troops and military equipment. Proponents also argue that the cargo preference
requirements help to support the U.S. shipping industry and the employment of shipboard crew.
Critics of the shipping policy argue that
“"both U.S. strategic requirements and the global shipping
market have changed dramatically.
”67"73 U.S. business groups contend that the shipping
requirements can make U.S. goods less competitive relative to foreign goods for a host of
reasons. While one or more countries used to have similar shipping requirements in the past, the
United States appears to be the only country that continues to impose such requirements.
6874 There
may also be capacity constraints because there are a limited number of U.S. bulk cargo carriers.
According to lenders and exporters, the higher rates and the route scheduling challenges
associated with shipping with U.S.-flagged vessels can make it difficult for them to use Ex-Im
Bank support. For example, in one transaction with Ex-Im Bank, the cost of U.S. shipping
reportedly was five times the cost of non-U.S. shipping,69 raising competitiveness concerns. In
Bank support. In addition, some businesses express concern about processing time and outcomes.
70
Co-Financing
75
Co-Financing
Ex-Im Bank introduced the co-financing program in 2001.
76 Co-financing arrangements enable
export credit financing from multiple ECAs. They allow goods and services from two or more
countries to be marketed to a buyer under a single ECA financing package. According to U.S.
exporters and lenders, co-financing arrangements allow Ex-Im Bank to participate with other
ECAs on the non-U.S. content portion of an export contract. Otherwise, Ex-Im Bank would be
limited to supporting the U.S. portion of the export contract and, from this view, the U.S. exporter
may not win the sale because the ECA supported portion was insufficient or the terms and
conditions were disadvantageous. In 2013, Ex-Im Bank conducted 51 co-financed transactions.
According to the Bank, 99% of the volume, approximately $5 billion, involved some type of
aircraft, with the exception of a medical equipment sale and a power transaction. The Bank states
that, in most aircraft transactions, without co-financing, the exporter would not have been able to
offer the maximum 85% support to its customers in one financing package.
71
77
Following a review of its content policy, Ex-Im Bank announced changes to its co-financing
arrangements. Under the revised co-financing policy, the Bank is willing to co-finance export
contracts with a range of ECAs, if the proposed transaction complies with its statutory and policy
requirements and benefits the U.S. economy. Some
supportersstakeholders call for more
flexibilitiesflexibility in Ex-Im
Bank’ Bank's co-financing arrangements.
Tied Aid
Tied Aid
Some U.S. exporters and lenders believe that Ex-Im Bank
’'s tied aid policies may place them at a
competitive disadvantage. U.S. exporters have expressed concern that increased tied aid activity
by other countries, coupled with the more flexible tied aid rules of other ECAs, has threatened
67
Coalition for Employment through Exports (CEE), Ex-Im Bank 2011 Reauthorization: CEE Position Paper.
Ex-Im Bank, 2012 Competitiveness Report, June 2013, p. 127.
69
U.S. Congress, House Committee on Financial Services, Subcommittee on International Monetary Policy and Trade,
Statement for the Record from the Coalition for Employment through Exports, 112th Cong., 1st sess., March 10, 2011.
70
Ex-Im Bank, 2012 Competitiveness Report, June 2013, p. 131.
71
Ex-Im Bank, 2013 Competitiveness Report, June 2014, p. 50.
68
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certain U.S. exporter sales prospects. Some groups argue that the tied aid war chest funds should
be increased and that the Bank should have more flexibility and authority in initiating tied aid to
compete with foreign ECAs for export contracts, rather than limiting its use to a defensive tool. In
some cases, it may be difficult for exporters and lenders to make a case for receiving matching
support to counter foreign tied aid competition, because of challenges in
“"obtaining credible
evidence of case-specific financing terms from non-OECD ECA competitors.
”72
"78
Mandates Targeting Ex-Im Bank Activity to Specific Sectors
Congressional mandates that require the Bank to focus support on specific exports may raise a
number of questions, including the following.
Should Congress mandate that Ex-Im Bank seek to finance specific types of exports? On one
hand, congressional mandates may enable Ex-Im Bank to support strategic, high-growth U.S.
economic sectors; U.S. exporters that may need the financing assistance the most (e.g., small
businesses); and sectors where federal support can make the most difference (e.g., for renewable
energy exports that rely on newer forms of technology and for which commercial banks may be
unwilling to provide financing on their own because of actual or perceived risks). On the other
hand, such targeted forms of export assistance may be viewed as a mechanism whereby the
federal government determines
“"winners and losers
”" in the market, and, from this standpoint, may
lead to economic distortions and harm other productive U.S. firms. Although such requirements
give Congress a greater role in guiding Ex-Im Bank
’'s activities, under this view, they may
obscure the Bank
’'s core mandate to support U.S. exports and employment.
To what extent has Ex-Im Bank been able to fulfill congressional mandates? On one hand,
there is concern that the Bank has not been able to consistently meet its congressional mandates
to support specific exports. Some critics express concern that Ex-Im Bank’s prioritization of
activities, allocation of resources to support policy goals, policies, and application process and
approval system may limit its support for such policy goals. On the other hand, some stakeholders
express concern that such mandates may not be feasible to achieve, based on market limitations,
such as for renewable energy.73 Given its demand-driven nature, Ex-Im Bank can make financing
available for certain purposes, but its actual composition of financing portfolio depends on
commercial interest and demand.
To what extent has Ex-Im Bank fulfilled congressional mandates? Given the demand-driven nature of Ex-Im Bank activities, congressional mandates for Ex-Im Bank to support particular types of U.S. exports can be viewed as statutory "targets." Ex-Im Bank can make financing available for certain purposes, but the actual composition of its financing portfolio depends on commercial interest and demand. Ex-Im Bank has met its 20% small business target from Congress in some years, but fallen short in other years. The Bank's support for renewable energy exports has been below the 10% target, possibly due, in part, to market limitations.79 Ex-Im Bank's support for sub-Saharan Africa reflects an overall uptick in activity.80 Notwithstanding Ex-Im Bank's demand-driven nature and market limitations, some stakeholders express concern that Ex-Im Bank's prioritization of activities, allocation of resources, policies, and operations (e.g., application process and approval system) may limit its ability to consistently meet its congressional mandates to support specific exports.
What is the appropriate measure of success? Debates over whether Ex-Im Bank is fulfilling its
congressional mandates often
hashave centered on small businesses. Some stakeholders may argue
that the focus on the dollar value of Ex-Im Bank support to small businesses is misleading,
because larger corporations naturally conduct business
activity requiring greater amounts of
support. In addition, the data may not reflect all of the small businesses who benefit from Ex-Im
Bank services through their role in the supply chain, such as by supplying parts and services to
larger companies that are the direct beneficiaries of Ex-Im Bank financing, or by operating at
sublevelssub-levels of the supply chain and serving as
“"suppliers to the suppliers.
”74 Others express concern
72
Ex-Im Bank, 2012 Competitiveness Report, June 2013, p. 105.
For instance, see U.S. Congress, House Committee on Financial Services, Ex-Im Bank Oversight: The Role of Trade
Finance in Doubling Exports over Five Years, Fred P. Hochberg, President and Chairman of the Export-Import Bank,
111th Cong., September 29, 2010.
74
For example, see U.S. Chamber of Commerce Coalition Letter to Members of the United States Congress on Ex-Im
Bank, February 13, 2012, https://www.uschamber.com/letter/coalition-letter. See also Coalition for Employment
(continued...)
73
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"81 Others express concern over the amount of Ex-Im Bank financing, by dollar value, that has been directed to large U.S.
corporations that they believe are capable of shouldering the risks of exporting to developing
countries.
7582 For instance, some have criticized the fact that Boeing Corporation, a U.S. aerospace
company, historically has been the single largest beneficiary of its support.
76 In addition, some
critics do not make a distinction between large and small business support, remaining opposed to
taxpayer funds being directed toward private benefits.
Risk Management and Financial Accounting
Congressional
interestconcern in Ex-Im Bank
’'s financial soundness and risk management has been
longstanding. It has been motivated, in part, by interest in the impact of Ex-Im Bank’s activity on
U.S. taxpayers, given that the Bank’s longstanding. U.S. taxpayer interests are implicated by Ex-Im Bank because its activities are backed by the full faith and credit of
the U.S.
government. In recent years, Ex-Im Bank’s growing exposure levels have heightened
congressional scrutiny in itsU.S. government and its exposure levels have grown. Such dynamics draw attention to Ex-Im Bank's financial soundness and risk management practices.
The 2012 reauthorization act
, among other things, required Ex-Im Bank to monitor its default rate, report it on a
quarterly basis to Congress, and
to develop a plan to reduce the default rate if it
equals or exceeds 2%
(sometimes called
“"the 2% rule
”). The Bank’s default rate as of March 31, 2014, was 0.211%.77
Among other things, the 2012 act also required Ex-Im Bank to submit a written report to
Congress and the Comptroller General containing: (1) a Business Plan estimating appropriate
exposure limits for 2012, 2013, and 2014; and (2) an analysis of the potential for increased or
decreased risk of loss to the Bank as a result of the estimated exposure limit.
").83 Pursuant to the 2012 reauthorization act,
the Government Accountability Office (GAO)GAO published
reports in March 2013 and May 2013 that reviewed Ex-Im Bank
’'s risk management and reporting
practices.
The84 GAO found that Ex-Im Bank is moving toward a more comprehensive risk
management framework and has made certain improvements over time, including enhancing
credit loss modeling with qualitative factors. At the same time, the GAO also identified remaining
weaknesses, considered further improvement to be needed based on the Bank’s growing exposure
level, and provided recommendations to Ex-Im Bank—all of which the Bank has reported
accepting and working to implement (see Table 7). The Bank also notes other changes it has
made in recent years, including appointing a Chief Risk Officer in 2013 to ensure prudential risk
management, as well as establishing an Enterprise Risk Committee, modernizing its credit
monitoring, creating a Special Assets unit to address emerging credit issues, expanding pro-active
monitoring efforts, and improvement underwriting criteria.78
(...continued)
through Exports, Supplier Study of 2011, which analyzed the supply chains of five large companies (Bechtel, Boeing,
Case New Holland, General Electric, and Siemens Power Corporation) that are the “exporters of record” for Ex-Im
Bank, and identified more than 33,000 SMEs that supplied parts and services to these large companies for their exports.
75
For example, see Sallie James, Time to X Out the Ex-Im Bank, CATO Institute, July 6, 2011, http://www.cato.org/
publications/trade-policy-analysis/time-x-out-exim-bank.
76
In FY2013, about 65% of Ex-Im Bank’s authorizations of long-term guarantees, by dollar value, were for the sale of
Boeing aircraft to foreign countries. CRS analysis of data in Ex-Im Bank annual reports.
77
CRS electronic communication with Ex-Im Bank, May 30, 2014.
78
U.S. Congress, Senate Committee on Banking, Housing, and Urban Affairs, Oversight and Reauthorization of the
Export-Import Bank of the United States, Written Testimony of Fred P. Hochberg - President and Chairman of Ex-Im
Bank, 113th Cong., 2nd sess., January 28, 2014.
Congressional Research Service
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Export-Import Bank: Overview and Reauthorization Issues
Table 7. Risk Management: GAO Studies and Ex-Im Bank Action
Area
GAO Finding
GAO Recommendation
Ex-Im Bank Response
Exposure
Forecasting
Ex-Im Bank’s justification that the
exposure limits it forecast in its 2012
Business Plan were appropriate has
weaknesses, because the model is
sensitive to key assumptions.
Forecasting errors could have more
significance since the Bank’s
exposure level is closer to its cap
than historically, and could require,
for example, the Bank to delay
financing for projects, to avoid
exceeding the limit.
The Bank should: (1) compare
previous forecasts and key
assumptions to actual results
and adjust its forecast models
to incorporate previous
experiences; and (2) assess the
sensitivity of the exposure
forecast model to key
assumptions and estimates and
identify and report the range
of forecasts based on its
analysis.
The Bank agreed with the
recommendation and
stated it would
incorporate these steps
into preparation of
updated and revised
forecasts provided to
Congress by September
30, 2013.
Stress
Testing
The Bank has begun addressing the
OIG’s recommendations on portfolio
stress testing, thresholds for
portfolio concentrations, and risk
management.
The Bank should report these
findings to Congress.
The Bank agreed with the
recommendation and
intends to report stress
test scenarios and results
quarterly to Congress.
Risk
Modeling
Improvements could be made in ExIm Bank’s risk modeling, which uses
historical data but may not use “best
available data.” The Bank’s portfolio
contains a large volume of recent
transactions that have not reached
their peak default periods.
Ex-Im Bank should assess
whether it is using the “best
available data” for adjusting
loss estimates for longer-term
transactions.
Ex-Im Bank agreed with
the recommendation and
said it would conduct an
assessment as part of its
2013 reevaluation of its
loss estimation model.
Financial
Performance
of Portfolio
Improvements could be made in the
Bank’s analysis of financial
performance. For instance, the Bank
does not have point-in-time
performance data to compare
performance of newer books of
business with more seasoned books
at comparable points in time.
Ex-Im Bank should retain
point-in-time performance data
to compare performance of
newer and older business and
enhance loss modeling.
Ex-Im Bank agreed to the
recommendation and said
it has begun retaining such
data.
Sub-portfolio
Reporting
Improvements could be made in the
Bank’s reporting of performance of
sub-portfolios subject to
congressional mandates (e.g., small
business, renewable energy, and subSaharan Africa).
Ex-Im Bank should routinely
report financial performance of
subportfolios supporting
congressional mandates.
Ex-Im Bank agreed with
the recommendation and
began reporting such
information with its June
30, 2013, report to
Congress.
Operational
Risks
Ex-Im Bank faces potential
operational risks because
administrative budgets and staff levels
have not kept pace with growth in
portfolio.
The Bank should develop
benchmarks to monitor and
manage workload levels and
provide Congress with
additional information on
resources associated with
meeting mandated targets.
Ex-Im Bank concurred
with both
recommendations.
Source: CRS analysis of GAO, Export-Import Bank: Recent Growth Underscores Need for Continued Improvements in
Risk Management, GAO-13-303, March 2013; and GAO, Export-Import Bank: Additional Analysis and Information
Could Better Inform Congress on Exposure, Risk, and Resources, GAO-13-620, May 2013.
Notes: The findings and recommendations listed in this table are those of GAO. CRS does not take any position
on these.
Congressional Research Service
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Export-Import Bank: Overview and Reauthorization Issues
Nevertheless, debate continues over Ex-Im Bank’s risk management and accounting practices,
with key questions including the following.
credit loss modeling with qualitative factors. At the same time, GAO considered further improvement to Ex-Im Bank's risk management practices necessary and provided recommendations to Ex-Im Bank to addressing remaining weaknesses. Ex-Im Bank reported accepting all of GAO's recommendations. To date, according to GAO, Ex-Im Bank has addressed recommendations in the areas of collecting data for estimating losses of transactions; managing financial risks through stress testing and monitoring default rates of sub-portfolios;85 and forecasting exposure levels. Ex-Im Bank has begun addressing other GAO recommendations regarding its workload and associated operational risks.86
The Bank also notes other changes it has made in recent years, including appointing a Chief Risk Officer in 2013 to ensure prudential risk management, as well as establishing an Enterprise Risk Committee, modernizing its credit monitoring, creating a Special Assets unit to address emerging credit issues, expanding pro-active monitoring efforts, and improving underwriting criteria.87
At the same time, debate continues over Ex-Im Bank's risk management and accounting practices, with key questions including the following.
Does Ex-Im Bank manage its risk adequately and balance it properly with other
considerations? considerations? Supporters of Ex-Im Bank contend that the Bank has adequate systems and
staffing in place to manage its risk and poses low risk to U.S. taxpayers. They argue that the Bank
has a strong
mandate to manage riskrisk management mandate under its charter, which requires the Bank
’'s transactions to
have a
“"reasonable assurance of repayment
”" and for the Bank to have reasonable provisions for
losses. They further note Ex-Im Bank
’'s low default rate and high recovery rate.
7988 Critics hold that
there are weaknesses in the Bank
’'s risk governance and question the methodology used to
calculate Ex-Im Bank
’'s expected losses and contributions to the Treasury. They express concern
that the Bank
’'s growing exposure and concentrations in that exposure, such as in aircraft, pose a
risk to U.S. taxpayers and the federal budget, and point to certain findings in studies by the GAO
and Ex-Im Bank
’'s own Office of Inspector General (OIG) over time.
80
89
Other stakeholders caution that the Bank may be becoming too risk-averse. Of particular interest
has been heightened credit standards
, including (e.g., higher collateral requirements
,) introduced by
ExImEx-Im Bank for its medium-term program, whose default rate is higher than that of Ex-Im Bank
’s
's overall portfolio.
8190 These tighter standards have been associated with a decrease in Ex-Im Bank
medium-term lending in recent years,
8291 and have raised concerns about the appropriate balance in
Ex-Im Bank
’'s risk management with its overall mandate to support U.S. exports.
Does Ex-Im Bank have adequate human capital to prudentially manage its growing
portfolio? Supporters contend that the Bank, with around 400 full-time equivalents in
FY2013, is
FY2014, is effective and efficient, and that in areas where weaknesses in risk management have been
identified, the Bank is taking corrective measures, such as increasing resources devoted to due
diligence and asset monitoring. Critics argue that the Bank does not have enough expertise
devoted to underwriting and due diligence. They point to an assertion by Ex-Im Bank
’'s OIG in
2012 that,
“"Ex-Im Bank
’'s current risk management framework and governance structure are not
commensurate with the size, scope, and strategic ambitions of the institution.
”83
"92
Is the cost of federal credit by Ex-Im Bank appropriately priced?
Some stakeholders argue
that rules under the Federal Credit Reform Act (FCRA) may understate the cost of loan programs
managed by federal credit agencies, and express interest in moving to a fair value system of
accounting. As previously noted, under FCRA
’'s rules, budget estimates are calculated by
discounting them using the rates on U.S. Treasury securities with similar terms to maturity—
which traditionally have been considered risk-free—and are below rates on commercial loans. In
79
For example, see NAM, Facts on the Export-Import (Ex-Im) Bank, http://www.nam.org/~/media/
5AF9A722407E46D6A1264820B2208860.ashx.
80
For example, see Diane Katz, U.S. Export-Import Bank: Corporate Welfare on the Backs of Taxpayers,” The
Heritage Foundation, April 11, 2014, http://www.heritage.org/research/reports/2014/04/us-exportimport-bankcorporate-welfare-on-the-backs-of-taxpayers.
81
GAO, Export-Import Bank: Additional Analysis and Information Could Better Inform Congress on Exposure, Risk,
and Resources, GAO-13-620, May 2013, p. 22.
82
Based on data from Ex-Im Bank annual reports.
83
Ex-Im Bank, OIG, Semiannual Report to Congress, April 1, 2013 to September 30, 2013, p. 11,
http://www.exim.gov/oig/upload/OIG_Report_FA13_508.pdf.; and Ex-Im Bank, OIG, Report on Portfolio Risk and
Loss Reserve Allocation Policies, OIG-INS-12-02, September 28, 2012, http://www.exim.gov/oig/upload/Final20Report-20Complete-20Portfolio-20Risk-20120928-1.pdf.
Congressional Research Service
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Export-Import Bank: Overview and Reauthorization Issues
which traditionally have been considered risk-free—and are below rates on commercial loans. In contrast, fair value accounting would factor in the market risk, which the non-partisan
Congressional Budget Office (CBO) says
“"provides a more comprehensive measure of federal
costs.” On a fair value basis, Ex-Im Bank’s programs may be less profitable than under FCRA
rules. According to CBO’s analysis, in FY2013, under FCRA, Ex-Im Bank generated a negative
subsidy of $1 billion (i.e., “profit”). In contrast, under fair value, the negative subsidy is estimated
to be much lower, at $0.1 billion.84 In a separate study, CBO estimated that between FY20152024, Ex-Im Bank’ costs." CBO estimated that between FY2015 and FY2024, Ex-Im Bank's activities would generate a negative subsidy of $14 billion under FCRA (i.e.,
budgetary savings), but would generate $2 billion in positive subsidy during this period on a fair
value basis (i.e., budgetary costs).
8593 However, some stakeholders question
the assumptions used
by CBO in its methodologyCBO's assumptions, including for risk, and assert that CBO
’'s assumptions overlook
ExImEx-Im Bank
’'s actual record, for example, in terms of its contributions to the U.S. Treasury and low
default rate.
86
94
Effectiveness of International Rules on Government-Backed
Export Credit Activity
Export Credit Activity
Stakeholders have debated whether the OECD Arrangement on Officially Supported Export
Credits is effective in leveling the playing field for exporters in the current trading environment.
By some estimates, the OECD Arrangement has saved U.S. taxpayers $800 million annually.
According to the Office of the U.S. Trade Representative, the minimum interest rate rules set by
the OECD Arrangement limit subsidized export financing and reduce competition based on
According to the Office of the U.S. Trade Representative (USTR), the OECD Arrangement has saved U.S. taxpayers about $800 million annually, with its minimum interest rate rules limiting subsidized export financing and reducing competition based on below-cost interest rates and long repayment terms by ECAs, and
theits minimum exposure fees for
country risks also
reducereducing costs. The
USTR also states that the further leveling of the playing field created by the OECD tied
aid disciplines
is estimated by USTR to havehas boosted U.S. exports by $1 billion a year.
87
At the same time, there are growing questions about the relevance of the OECD Arrangement and
its effectiveness, particularly in light of the growing95
At the same time, questions about the OECD Arrangement's effectiveness are growing, particularly with the increasing official export credit activity of non-OECD
members such as China, Brazil, and India
, who are not obligated to comply with the OECD
limitations on the terms and conditions of export credit activity and may not be “playing by the
rules.”88.96 To the extent that the ECAs of
China and otherthese non-OECD countries provide financing
on terms that are more advantageous than those
allowed withinunder the OECD Arrangement, Ex-Im
Bank and other OECD export credit agencies may find it difficult to compete with such export
credit programs. Concerns about the effectiveness of the OECD Arrangement are further
heightened due to unregulated financing being conducted by OECD member countries, such as
through market windows, which are not subject to the Arrangement.
84
Congressional Budget Office (CBO), Fair-Value Estimates of the Cost of Federal Credit Programs in 2013, June
2012, http://www.cbo.gov/sites/default/files/cbofiles/attachments/06-28-FairValue.pdf.
85
CBO, Fair-Value Estimates of the Costs of Selected Federal Credit Programs for 2015 to 2024, May 2014,
http://www.cbo.gov/sites/default/files/cbofiles/attachments/45383-FairValue.pdf.
86
For example, see Gary Clyde Hufbauer, “The [Export-Import] Bank Loses Almost $200 Million a Year.” Really?,
IIE, RealTime Economic Issues Watch, May 13, 2014, http://blogs.piie.com/realtime/?p=4311; and Christopher Wenk,
A Fair Accounting of the Ex-Im Bank’s Benefits and Costs, U.S. Chamber of Commerce, May 29, 2014,
https://www.uschamber.com/blog/fair-accounting-ex-im-bank-s-benefits-and-costs.
87
Office of the U.S. Trade Representative, The Organization for Economic Cooperation and Development (OECD),
http://www.ustr.gov/trade-agreements/wto-multilateral-affairs/oecd.
88
Thought not a member of the OECD, Brazil is a participant of the OECD Aircraft Sector Understanding.
Congressional Research Service
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Export-Import Bank: Overview and Reauthorization Issues
Congress could examine and seek to strengthen the international disciplines guiding ECA activity,
to reflect current trends in ECA activity by both developed and developing countries. For
through market windows, which are not subject to the Arrangement.
To address concerns about the OECD Arrangement, one possible approach is to focus on strengthening the international disciplines guiding ECA activity. For example, Congress could direct the United States to encourage greater engagement by the OECD
with non-OECD emerging market economies on official export credit activity; negotiate rules in
the OECD that limit government-backed export credit financing in other developed countries; or
pursue a greater role for the
WTOWorld Trade Organization (WTO) in disciplining international ECA activity. On one hand, such
efforts may help to level the playing field for U.S. exporters by reducing trade-distorting export
credit competition and associated economic losses. On the other hand, changes to the
international export credit rules, if achieved, may be slow to materialize, given the complex
nature of multilateral and plurilateral negotiations. In addition, developing high-standard,
comprehensive rules that cover both developed and developing countries may be a challenge.
Rather than strengthening international rules,
others have called for renewedanother possible approach is to renew efforts by the U.S.
Treasury to negotiate to eliminate all government-backed export financing internationally.
8997 This
perspective often is found with critics of Ex-Im Bank, while supporters of the Bank contend that
even if all countries agree to eliminate government-backed export credit activity, there would still
be a need for Ex-Im Bank to fill in gaps in private sector financing due to market failures.
Congressional Outlook
While congressional views on Ex-Im Bank differ, historically, Congress has reauthorized Ex-Im
Bank on a bipartisan basis, including by voice vote in the House and unanimous consent in the
Senate and with support from both Republican and Democrat Administrations. In the 112th
Congress, discussion of whether to reauthorize Ex-Im Bank and raise its exposure cap, among
other issues,
Congressional Outlook
In recent years, discussion of whether to reauthorize Ex-Im Bank, revise its exposure cap, and make policy and operational adjustments to it, among other issues, has dovetailed with debates about the agency
’'s role in supporting U.S. exports and the
appropriate size and scope of the U.S. government. The changing export finance landscape,
including the
2008-2009 international financial crisis and the growth of government-backed export financing
being conducted by emerging markets, as well as increased questions about Ex-Im Bank
’s
's financial soundness and risk management, have intensified congressional interest in Ex-Im Bank.
Many of these issues
continue tomay be focal points in
the Ex-Im Bank reauthorization debate in the
113th Congress.
89
Recent developments in U.S. Treasury export credit negotiations are detailed in Treasury Report to the Committee on
Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of
Representatives on Export Credit Negotiations, December 2013.
Congressional Research Service
39
Export-Import Bank: Overview and Reauthorization Issues
any Ex-Im Bank reauthorization debate in the 114th Congress.
Appendix. International Government-Backed
Export Credit Activity
Table A-1.
New Medium- and Long-Term Official Export Financing Volumes for
Selected ECAs,
2007-2013
Billions of U.S. Dollars
Country
2007
2008
2009
2010
OECD ECAs
G-7 Countries
2011
2012
2013
110.7
126.0
97.9
34.6
43.7
64.0
70.2
74.0
80.2
60.0
Canada
0.5
1.5
2.0
2.6
1.9
1.9
1.9
France
10.1
8.6
17.8
17.4
15.9
13.0
9.5
Germany
8.9
10.8
12.9
22.5
16.7
21.6
22.6
Italy
3.5
7.6
8.2
5.8
8.0
5.4
5.4
Japan
1.8
1.5
2.7
4.9
5.9
3.9
2.1
United Kingdom
1.6
2.7
3.4
4.1
4.2
2.9
3.9
United States
8.2
11.0
17.0
13.0
21.4
31.3
14.5
32.5
41.1
33.4
Austria
0.7
1.4
1.1
Denmark
2.2
3.9
3.8
Finland
3.1
1.8
2.3
Netherlands
2.9
2.2
3.2
Norway
3.0
2.2
2.8
South Korea
9.8
22.6
14.8
Spain
4.4
2.0
1.2
Sweden
6.3
5.1
4.2
Other OECD ECAs (Estimated)
4.2
4.7
4.5
Selected Other OECD ECAs
Emerging Economies (non-OECD)
ECAs
n/a
33.0
51.0
40.0
47.0
50.1
55.4
Brazil
0.6
0.2
6.1
3.5
4.8
2.7
4.1
China
n/a
24.0
40.4
31.3
36.0
42.2
45.5
India
8.4
8.8
4.5
5.4
6.2
5.3
5.1
Russia
n/a
n/a
n/a
n/a
0.0
0.0
0.7
Source:
Billions of U.S. Dollars
Country
|
2007
|
2008
|
2009
|
2010
|
2011
|
2012
|
2013
|
OECD ECAs
|
110.7
|
126.0
|
97.9
|
G-7 Countries
|
34.6
|
43.7
|
64.0
|
70.2
|
74.0
|
80.2
|
60.0
|
Canada
|
0.5
|
1.5
|
2.0
|
2.6
|
1.9
|
1.9
|
1.9
|
France
|
10.1
|
8.6
|
17.8
|
17.4
|
15.9
|
13.0
|
9.5
|
Germany
|
8.9
|
10.8
|
12.9
|
22.5
|
16.7
|
21.6
|
22.6
|
Italy
|
3.5
|
7.6
|
8.2
|
5.8
|
8.0
|
5.4
|
5.4
|
Japan
|
1.8
|
1.5
|
2.7
|
4.9
|
5.9
|
3.9
|
2.1
|
United Kingdom
|
1.6
|
2.7
|
3.4
|
4.1
|
4.2
|
2.9
|
3.9
|
United States
|
8.2
|
11.0
|
17.0
|
13.0
|
21.4
|
31.3
|
14.5
|
Selected Other OECD ECAs
|
32.5
|
41.1
|
33.4
|
Austria
|
0.7
|
1.4
|
1.1
|
Denmark
|
2.2
|
3.9
|
3.8
|
Finland
|
3.1
|
1.8
|
2.3
|
Netherlands
|
2.9
|
2.2
|
3.2
|
Norway
|
3.0
|
2.2
|
2.8
|
South Korea
|
9.8
|
22.6
|
14.8
|
Spain
|
4.4
|
2.0
|
1.2
|
Sweden
|
6.3
|
5.1
|
4.2
|
Other OECD ECAs (Estimated)
|
4.2
|
4.7
|
4.5
|
Selected Non-OECD ECAs
|
n/a
|
33.0
|
51.0
|
40.0
|
47.0
|
50.1
|
55.4
|
Brazil
|
0.6
|
0.2
|
6.1
|
3.5
|
4.8
|
2.7
|
4.1
|
China
|
n/a
|
24.0
|
40.4
|
31.3
|
36.0
|
42.2
|
45.5
|
India
|
8.4
|
8.8
|
4.5
|
5.4
|
6.2
|
5.3
|
5.1
|
Russia
|
n/a
|
n/a
|
n/a
|
n/a
|
0.0
|
0.0
|
0.7
|
Source: Data on export credit volumes from Ex-Im Bank, Report to the U.S. Congress on Export Credit Competition
and the Export-Import Bank of the United States, For the Period January 1,
20132013 through December 31,
20132013, June
2014.
Notes: 2014.
Notes: Data subject to analytic assumptions and limited by availability of information. Unregulated financing
conducted by OECD ECAs may be omitted. Ex-Im Bank Competitiveness Reports have included data for G-7
ECAs for many years, and in 2012, expanded the scope of OECD ECAs assessed beyond the G-7 ECAs. Further
refinements could occur.
Congressional Research Service
40
Export-Import Bank: Overview and Reauthorization Issues
Author Contact Information
Shayerah Ilias Akhtar
Specialist in International Trade and Finance
siliasakhtar@crs.loc.gov, 7-9253
Acknowledgments
The author would like to acknowledge Jamie Hutchinson’s assistance with several of the graphics in this
report.
Congressional Research Service
41
refinements could occur.
Acknowledgments
The author would like to acknowledge Jamie Hutchinson's assistance with several of the graphics in this report.
Footnotes
1.
|
12 U.S.C. §635(a)(1). A U.S. government corporation is a government agency established by Congress to provide market-oriented public services and to produce revenues that meet or approximate expenditures. See CRS Report RL30365, Federal Government Corporations: An Overview, by [author name scrubbed].
|
2.
|
For more information, see CRS Report R41495, U.S. Government Agencies Involved in Export Promotion: Overview and Issues for Congress, coordinated by [author name scrubbed].
|
3.
|
Export-Import Bank of the United States Annual Report 2014, http://www.exim.gov/about/library/reports/annualreports/2014/.
4.
|
12 U.S.C. §635(b)(1)(B).
|
5.
|
Information drawn from Ex-Im Bank, http://www.exim.gov/. For examples of transactions, see Ex-Im Bank's annual reports, accessible at http://www.exim.gov/about/library/reports/annualreports/, and news releases, accessible at http://www.exim.gov/newsandevents/releases/index.cfm.
6.
|
Commercial Interest Reference Rates (CIRRs) are the official lending rates of ECAs. They are calculated monthly and based on government bonds issued in the country's domestic market for its currency. For the U.S. dollar, the CIRR is based on the U.S. Treasury bond rate. Ex-Im Bank, "Commercial Interest Reference Rates," http://www.exim.gov/tools/commercialinterestreferencerates/index.cfm/.
7.
|
Ex-Im Bank, Office of the Inspector General (OIG), Export-Import Bank's Management of Direct Loans and Related Challenges, OIG-AR-13-05, September 26, 2013, p. 1, http://www.exim.gov/oig/upload/OIG-Final-Report-Audit-of-Ex-Im-Bank-s-Management-of-Direct-Loans-and-Related-Challenges-09-26-13-2.pdf.
|
8.
|
Ibid.
|
9.
|
Ex-Im Bank, Report to the U.S. Congress on Export Credit Competition and the Export-Import Bank of the United States, For the Period January 1, 2012 through December 31, 2012, Washington, DC, June 2013, p. 45, http://www.exim.gov/about/library/reports/competitivenessreports/upload/US-Ex-Im-Bank-2012-Competitiveness-Report-to-Congress-Complete.pdf (hereinafter Ex-Im Bank, 2012 Competitiveness Report, June 2013).
|
10.
|
U.S. Government Accountability Office (GAO), Export-Import Bank: Recent Growth Underscores Need for Continued Improvements in Risk Management, GAO-13-303, March 2013, p. 41, http://www.gao.gov/products/GAO-13-303.
|
11.
|
The specialized finance products summarized in this section are classified under Ex-Im Bank's loan guarantee program on the agency's website (http://www.exim.gov/), but may include direct loan and/or insurance support as well.
12.
|
For information on where Ex-Im Bank is operating, see Ex-Im Bank, "Country Limitation Schedule," http://www.exim.gov/tools/countrylimitationschedule/.
13.
|
For example, Ex-Im Bank is active in China, although Ex-Im Bank's charter, in 12 U.S.C. §635(b)(2)(B), identifies China as a "Marxist-Leninist" country. In 1980, President Carter determined that providing financial assistance to China would be in the national interest, sufficient to satisfy the requirements in Ex-Im Bank's charter. See Presidential Determination No. 80-15, April 2, 1980, http://history.state.gov/historicaldocuments/frus1977-80v13/d307.
|
14.
|
Export-Import Bank of the United States Annual Report 2014, p. 50.
|
15.
|
Export-Import Bank of the United States Annual Report 2014, p. 29.
|
16.
|
GAO, Export-Import Bank: Reaching New Targets for Environmentally Beneficial Exports Presents Major Challenges for Bank, GAO-10-682, July 14, 2010, http://www.gao.gov/products/GAO-10-682.
|
17.
|
Export-Import Bank of the United States Annual Report 2014, p. 50.
|
18.
|
12 U.S.C §635e. For its financial statements, Ex-Im Bank defines exposure as "the authorized outstanding and undisbursed principal balance of loans, guarantees, and insurance," and "the unrecovered balance of payments made on claims that were submitted to Ex-Im Bank in its capacity as guarantor or insurer under the export guarantee and insurance programs." Export-Import Bank of the United States Annual Report 2014, p. 61.
|
19.
|
GAO, Export-Import Bank: Recent Growth Underscores Need for Continued Improvements in Risk Management, GAO-13-303, March 2013, pp. 14-20, http://www.gao.gov/products/GAO-13-303 (hereinafter GAO-13-303, March 2013).
|
20.
|
For information, see CRS Report IF00039, Export-Import (Ex-Im) Bank and the Federal Budget (In Focus), by [author name scrubbed].
|
21.
|
Export-Import Bank of the United States Annual Report 2014, p. 29.
|
22.
|
Presently, there is a debate about whether the cost of federal credit is appropriately priced under the Federal Credit Reform Act (FCRA), or if fair value accounting (discussed in the "Selected Issues for Congress" section) is a more appropriate measure. For more information, see Deborah Lucas and Marvin Phaup, "Reforming Credit Reform," Public Budgeting & Finance, Winter 2008.
|
23.
|
Export-Import Bank of the United States Annual Report 2014, p. 54.
|
24.
|
The charter limits the aggregate amount of Ex-Im Bank's obligations outstanding (e.g., notes, debentures, and bonds) from the U.S. Treasury to $6 billion at any one time. FCRA has introduced changes to the Bank's funding process, and the Bank has proposed eliminating the corresponding language in its charter.
|
25.
|
Subsidy refers to program activities (the cost of direct loans, loan guarantees, insurance, and tied aid) conducted by Ex-Im Bank.
|
26.
|
For more information, see CRS Report IF00039, Export-Import (Ex-Im) Bank and the Federal Budget (In Focus) (pdf), by [author name scrubbed].
|
27.
|
Ex-Im Bank calculates its default rate as a "total amount of required payments that are overdue (claims paid on guarantees and insurance transactions plus loans past due) divided by a total amount of financing involved (disbursements)." Export-Import Bank of the United States Annual Report 2014, p. 60.
|
28.
|
GAO, Export-Import Bank: Recent Growth Underscores Need for Continued Improvements in Risk Management, GAO-13-303, March 2013, p. 31.
|
29.
|
GAO, Export-Import Bank: Recent Growth Underscores Need for Continued Improvements in Risk Management, GAO-13-703T, June 13, 2013, p. 6.
|
30.
|
Export-Import Bank of the United States Annual Report 2013, p. 5; and Export-Import Bank of the United States Annual Report 2014, p. 51.
|
31.
|
World Trade Organization, "Trade Finance: The Challenges of Trade Financing," http://www.wto.org/english/thewto_e/coher_e/challenges_e.htm.
|
32.
|
Export-Import Bank of the United States Annual Report 2014, p. 12.
|
33.
|
Ex-Im Bank, Report to the U.S. Congress on Export Credit Competition and the Export-Import Bank of the United States, For the Period January 1, 2013 through December 31, 2013, June 2014, pp. 12-14, http://www.exim.gov/about/library/reports/competitivenessreports/upload/Ex-Im-Bank-2013-Competitiveness-Report-to-Congress-Complete.pdf (hereinafter Ex-Im Bank, 2013 Competitiveness Report, June 2014). For more information, see CRS Report R42744, U.S. Implementation of the Basel Capital Regulatory Framework, by [author name scrubbed].
|
34.
|
See CRS Report RS21128, The Organization for Economic Cooperation and Development, by [author name scrubbed].
|
35.
|
According to Ex-Im Bank, tied aid is a "concessional, trade-related aid credit provided by a donor government to induce the borrower to purchase equipment from suppliers in a donor's country," and "can distort trade flows when the recipient country makes its purchasing decisions on the bidder offering the cheapest financing rather than the best price, quality or service." Ex-Im Bank, 2013 Competitiveness Report, June 2014, p. 69.
|
36.
|
The relationship between the OECD Arrangement and the SCM Agreement is established by Section (k) of Annex I to the SCM. See http://www.wto.org/english/res_e/booksp_e/analytic_index_e/subsidies_05_e.htm.
|
37.
|
Ex-Im Bank, 2013 Competitiveness Report, June 2014, pp. 20-21.
|
38.
|
These emerging markets, while not members of the OECD, may have observer status during some OECD meetings. The OECD has offered them "enhanced engagement" with a view towards possible accession. Brazil, furthermore, is a member of the OECD Aircraft Sector Understanding.
|
39.
|
Ex-Im Bank, 2013 Competitiveness Report, June 2014, pp. 17-18.
|
40.
|
Gary Clyde Hufbauer, Meera Fickling, and Woan Foong Wong, Revitalizing the Export-Import Bank, Peterson Institute for International Economics (IIE), Number PB11-6, May 2011, http://www.iie.com/publications/pb/pb11-06.pdf. "Huawei's $30 Billion China Credit Opens Doors in Brazil, Mexico," Bloomberg, April 24, 2011.
|
41.
|
Ex-Im Bank, Report to the U.S. Congress on Export Credit Competition and the Export-Import Bank of the United States, For the Period January 1, 2009 through December 31, 2009, Washington, DC, June 2010.
|
42.
|
Toh Hah Shih, "China to Provide Africa with US$1tr financing," South China Morning Post, November 18, 2013, http://www.scmp.com/business/banking-finance/article/1358902/china-provide-africa-us1tr-financing.
|
43.
|
OECD, "New export credit rules will boost railway development and help countries achieve greener growth, OECD says," press release, September 1, 2014, http://www.oecd.org/trade/new-export-credit-rules-will-boost-railway-development-and-help-countries-achieve-greener-growth-oecd-says.htm.
|
44.
|
AidData, Tracking Chinese Development Finance to Africa; Kevin P. Gallagher, Amos Irwin, and Katherine Koleski, The New Banks in Town: Chinese Finance in Latin America, Inter-American Dialogue, March 2012, http://www.thedialogue.org/PublicationFiles/TheNewBanksinTown-FullTextnewversion.pdf.
|
45.
|
White House, "White House Fact Sheet on U.S.-China Economic Relations," press release, November 12, 2014, http://www.whitehouse.gov/the-press-office/2014/11/12/fact-sheet-us-china-economic-relations/.
46.
|
Ibid; and Treasury Report to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives on Export Credit Negotiations, December 2013.
|
47.
|
Critics may point to a combination of domestic macroeconomic factors and global economic developments that influence a nation's export levels in the long-run, in other words, supply and demand, reflecting world economic forces.
|
48.
|
For example, FirmGreen says that it lost a $57 million export contract in the Philippines to a Korean competitor because of reauthorization uncertainty. U.S. Congress, House Committee on Financial Services, Testimony of Steve P. Wilburn, Chief Executive Officer of FirmGreen Inc., hearing entitled, "Examining Reauthorization of the Export-Import Bank: Corporate Necessity or Corporate Welfare?" 113th Cong., 2nd sess., June 25, 2014.
|
49.
|
CRS electronic communication with Ex-Im Bank, May 1, 2014.
|
50.
|
For example, see discussion in U.S. Congress, Senate Committee on Banking, Housing, and Urban Affairs, Continuing Oversight of the Recent Activities of the Export-Import Bank and the Critical Need to Reauthorize the Bank's Charter, 112th Cong., 2nd sess., April 17, 2012, S. Hrg. 112-585.
|
51.
|
For example, see Heritage Action for America publications, such as Zack Slingsby, Export-Import Bank Authorization, Heritage Action for America, April 10, 2014, http://heritageaction.com/2014/04/export-import-bank-reauthorization/.
52.
|
U.S. Chamber of Commerce, The Export-Import Bank of the United States: Its Impact on U.S. Competitiveness, Exports, and Jobs, October 2013, https://www.uschamber.com/file/8234/download.
|
53.
|
For instance, see Sallie James, Ending the Export-Import Bank, CATO Institute, October 2012, http://www.downsizinggovernment.org/export-import-bank.
|
54.
|
For a general discussion of the issue, see CRS Report R42555, Trade Reorganization: Overview and Issues for Congress, by [author name scrubbed]. For an example of possible duplication concerns with respect to Ex-Im Bank, see CRS Report R43155, Small Business Administration Trade and Export Promotion Programs, by [author name scrubbed].
|
55.
|
White House, "Government Reorganization Fact Sheet," press release, January 13, 2012, http://www.whitehouse.gov/the-press-office/2012/01/13/government-reorganization-fact-sheet; and Office of Management and Budget (OMB), Budget of the United States Government, Fiscal Year 2016, "A Government of the Future" section, p. 81, http://www.gpo.gov/fdsys/pkg/BUDGET-2016-BUD/pdf/BUDGET-2016-BUD-4.pdf.
|
56.
|
Ex-Im Bank initially was capitalized with a stock of $1 billion in 1934.
|
57.
|
Ex-Im Bank, 2013 Competitiveness Report, June 2014, p. 92.
|
58.
|
See Ex-Im Bank's content policies for more details: http://www.exim.gov/products/policies/foreign_medium-long.cfm.
|
59.
|
Ex-Im Bank, "Services Content Policy," http://www.exim.gov/generalbankpolicies/content/Services-Content-Policy.cfm.
|
60.
|
U.S. Congress, House Committee on Financial Services, Subcommittee on International Monetary Policy and Trade, Statement for the Record from the Coalition for Employment through Exports, 112th Cong., 1st sess., March 10, 2011.
|
61.
|
Ex-Im Bank, 2013 Competitiveness Report, June 2014, pp. 91-95; U.S. Congress, House Committee on Financial Services, Subcommittee on International Monetary Policy and Trade, Statement of Karan Bhatia, Vice President & Senior Counsel, International Law & Policy, General Electric, 112th Cong., 1st sess., March 10, 2011. Also see Gary Clyde Hufbauer, Meera Fickling, and Woan Foong Wong, Revitalizing the Export-Import Bank, IIE, Number PB11-6, May 2011.
|
62.
|
12 U.S.C. 635a-2.
|
63.
|
12 U.S.C. 635(b)(1)(B).
|
64.
|
12 U.S.C. 635(e)(1).
|
65.
|
See Ex-Im Bank, Economic Impact Procedures and Methodological Guidelines, April 2013, http://www.exim.gov/generalbankpolicies/economicimpact/.
66.
|
12 U.S.C. 635(e)(2).
|
67.
|
12 U.S.C. 635(e)(3).
|
68.
|
Ex-Im Bank, 2013 Competitiveness Report, June 2014, p. 91.
|
69.
|
Ex-Im Bank, 2012 Competitiveness Report, June 2013, p. 75; and Ex-Im Bank, 2013 Competitiveness Report, June 2014, p. 59.
|
70.
|
Ex-Im Bank, Ex-Im Bank Policies: Shipping Requirements (MARAD), http://www.exim.gov/products/policies/shipping.cfm. Maritime Administration, U.S.-Flag Waterborne Domestic Trade and Related Programs, http://www.marad.dot.gov/ships_shipping_landing_page/domestic_shipping/Domestic_Shipping.htm. Codified as 46 U.S.C. 55304, by P.L. 109-304, October 6, 2006.
|
71.
|
U.S. Congress, House Committee on Financial Services, Subcommittee on International Monetary Policy and Trade, Statement of USA Maritime, Hearing on the Role of the Export-Import Bank in U.S. Competitiveness and Job Creation, 112th Cong., 1st sess., March 11, 2011.
|
72.
|
Ibid.
|
73.
|
Coalition for Employment through Exports (CEE), Ex-Im Bank 2011 Reauthorization: CEE Position Paper.
|
74.
|
Ex-Im Bank, 2012 Competitiveness Report, June 2013, p. 127.
|
75.
|
Ibid., p. 131.
|
76.
|
Ex-Im Bank has signed co-financing agreements with ECAs of Australia, Canada, Denmark, France, Germany, Israel, Italy, Japan, the Netherlands, South Korea, and the United Kingdom. Additionally, Ex-Im Bank has approved case-specific co-financing arrangements with OECD ECAs with which it does not have overall co-financing framework agreements. Ex-Im Bank, 2013 Competitiveness Report, June 2014, p. 50.
|
77.
|
Ex-Im Bank, 2013 Competitiveness Report, June 2014, p. 50.
|
78.
|
Ex-Im Bank, 2012 Competitiveness Report, June 2013, p. 105.
|
79.
|
For instance, see U.S. Congress, House Committee on Financial Services, Ex-Im Bank Oversight: The Role of Trade Finance in Doubling Exports over Five Years, Fred P. Hochberg, President and Chairman of the Export-Import Bank, 111th Cong., September 29, 2010.
|
80.
|
Based on review of data in Ex-Im Bank annual reports, various years.
|
81.
|
For example, see U.S. Chamber of Commerce Coalition Letter to Members of the United States Congress on Ex-Im Bank, February 13, 2012, https://www.uschamber.com/letter/coalition-letter. See also Coalition for Employment through Exports, Supplier Study of 2011, which analyzed the supply chains of five large companies (Bechtel, Boeing, Case New Holland, General Electric, and Siemens Power Corporation) that are the "exporters of record" for Ex-Im Bank, and identified more than 33,000 SMEs that supplied parts and services to these large companies for their exports.
|
82.
|
For example, see Sallie James, Time to X Out the Ex-Im Bank, CATO Institute, July 6, 2011, http://www.cato.org/publications/trade-policy-analysis/time-x-out-exim-bank.
|
83.
|
Ex-Im Bank reported a default rate of 0.175% as of September 2014. Export-Import Bank of the United States Annual Report 2014, p. 60.
|
84.
|
GAO-13-303, March 2013; and GAO, Export-Import Bank: Additional Analysis and Information Could Better Inform Congress on Exposure, Risk, and Resources, GAO-13-620, May 2013.
|
85.
|
Ex-Im Bank subportfolios could be, for example, by industry, products, markets, and congressional mandates. See GAO, Export-Import Bank: Additional Analysis and Information Could Better Inform Congress on Exposure, Risk, and Resources, GAO-13-620, May 2013, p. 23.
|
86.
|
Ibid; and GAO, Export-Import Bank: Status of GAO Recommendations on Risk Management Exposure Forecasting, and Workload Issues, GAO-14-708T, June 25, 2014, http://www.gao.gov/products/GAO-14-708T.
|
87.
|
U.S. Congress, Senate Committee on Banking, Housing, and Urban Affairs, Oversight and Reauthorization of the Export-Import Bank of the United States, Written Testimony of Fred P. Hochberg - President and Chairman of Ex-Im Bank, 113th Cong., 2nd sess., January 28, 2014.
|
88.
|
For example, see NAM, Facts on the Export-Import (Ex-Im) Bank, http://www.nam.org/~/media/5AF9A722407E46D6A1264820B2208860.ashx.
|
89.
|
For example, see Diane Katz, U.S. Export-Import Bank: Corporate Welfare on the Backs of Taxpayers," The Heritage Foundation, April 11, 2014, http://www.heritage.org/research/reports/2014/04/us-exportimport-bank-corporate-welfare-on-the-backs-of-taxpayers.
|
90.
|
GAO, Export-Import Bank: Additional Analysis and Information Could Better Inform Congress on Exposure, Risk, and Resources, GAO-13-620, May 2013, p. 22.
|
91.
|
Based on data from Ex-Im Bank annual reports.
|
92.
|
Ex-Im Bank, OIG, Semiannual Report to Congress, April 1, 2013 to September 30, 2013, p. 11, http://www.exim.gov/oig/upload/OIG_Report_FA13_508.pdf.; and Ex-Im Bank, OIG, Report on Portfolio Risk and Loss Reserve Allocation Policies, OIG-INS-12-02, September 28, 2012, http://www.exim.gov/oig/upload/Final-20Report-20Complete-20Portfolio-20Risk-20120928-1.pdf.
|
93.
|
CBO, Fair-Value Estimates of the Costs of Selected Federal Credit Programs for 2015 to 2024, May 2014, http://www.cbo.gov/sites/default/files/cbofiles/attachments/45383-FairValue.pdf.
|
94.
|
For example, see Gary Clyde Hufbauer, "The [Export-Import] Bank Loses Almost $200 Million a Year." Really?, IIE, RealTime Economic Issues Watch, May 13, 2014, http://blogs.piie.com/realtime/?p=4311; and Christopher Wenk, A Fair Accounting of the Ex-Im Bank's Benefits and Costs, U.S. Chamber of Commerce, May 29, 2014, https://www.uschamber.com/blog/fair-accounting-ex-im-bank-s-benefits-and-costs.
|
95.
|
Office of the U.S. Trade Representative, The Organization for Economic Cooperation and Development (OECD), http://www.ustr.gov/trade-agreements/wto-multilateral-affairs/oecd.
|
96.
|
Thought not a member of the OECD, Brazil is a participant of the OECD Aircraft Sector Understanding.
|
97.
|
Developments in the U.S. Treasury export credit negotiations are detailed in Treasury Report to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on Financial Services of the House of Representatives on Export Credit Negotiations, December 2013.
|