Order Code 98-568
Updated May 1, 2007
Export-Import Bank:
Background and Legislative Issues
Danielle Langton
Analyst in International Trade and Finance
Foreign Affairs, Defense, and Trade Division
Summary
The Export-Import Bank is the chief U.S. government agency that helps finance
American exports of manufactured goods.1 With a budget of around $200 million, the
Bank finances less than 1% of U.S. exports a year. Eximbank provides guarantees and
insurance to commercial banks to make trade credits available to U.S. exporters. The
Bank also offers direct financing to U.S. exporters on a limited basis, primarily to
counter subsidized trade credits offered to foreign exporters by their governments. On
June 12, 2006, the House approved H.R. 5522, the Foreign Operations, Export
Financing and Related Appropriations Act 2007, to provide $26.4 million for the Bank’s
subsidy costs and $75.2 million for administrative expenses. House and Senate
appropriators agreed to reduce the Bank’s administrative expenses by $6 million to $69
million. Eximbank’s appropriations have continued under P.L. 109-289 (H.R. 5631) as
amended by P.L. 110-5. On December 20, 2006, President Bush signed P.L. 109-438,
to reauthorize the Bank’s authority through September 30, 2011. This report will be
updated as events warrant.
Background
The Export-Import Bank (Eximbank) is an independent U.S. government agency that
is charged with financing and promoting exports of U.S. manufactured goods and
services. To accomplish these goals, Eximbank uses its authority and resources to:
assume commercial and political risks that exporters or private financial institutions are
unwilling, or unable, to undertake alone; overcome maturity and other limitations in
private sector export financing; assist U.S. exporters to meet foreign, officially sponsored,
export credit competition; and provide guidance and advice to U.S. exporters and
commercial banks and foreign borrowers. The Bank operates under a renewable charter,
the Export-Import Bank Act of 1945, as amended, and has been authorized through
September 30, 2011.
1 For additional information, see the Bank’s Internet site: [http://www.exim.gov]

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When it was initially established, the Bank was capitalized by an appropriation of
$1 billion from the U.S. Treasury. The Bank also is authorized to borrow up to $6 billion
directly from the Treasury, and it may draw upon a substantial line of credit with the
Federal Financing Bank (FFB). (The Federal Financing Bank is a part of the Department
of the Treasury and obtains its funds from regular Treasury issues.) Eximbank uses its
Treasury borrowings to finance its short-term needs, and repays the Treasury quarterly
from loan repayments and by borrowing from the FFB on a medium- and long-term basis.
The Bank’s authority to lend, guarantee, and insure is limited to a total of $100 billion.
Eximbank’s direct loans are charged at their full value against the $100 billion limitation,
while only 25% of guarantees and insurance are charged against the limit.
Under the terms of the Budget Enforcement Act of 1990, Congress appropriates the
estimated amount of subsidy the Bank expects to expend throughout all of its credit
programs, including direct loans, guarantees, and insurance, as indicated in Table 1. The
Bush administration did not request a subsidy appropriation for FY2008, to reduce the
possibility of a successful challenge of the Export-Import Bank in the World Trade
Organization as an illegal subsidy.2 Congress no longer sets separate limits on the amount
of loans, guarantees, and insurance the Bank can authorize, but the Bank continues to
provide estimates of the amounts of activity it expects to undertake.
Programs
Eximbank has three main programs it uses to finance U.S. exports: direct loans,
export credit guarantees, and export credit insurance. Prior to 1980, the Bank’s direct
lending program was its chief financing vehicle, which it used to finance such capital-
intensive exports as commercial aircraft and nuclear power plants. Both the budget
authority requested by the Administration and the limitation approved by the Congress
for the Bank’s direct lending were sharply curtailed during the 1980s.
Eximbank’s direct lending program is used primarily to aid U.S. exporters in
instances where they face a foreign competitor that is receiving officially subsidized
financing by a foreign government. These loans carry fixed interest rates and generally
are made at terms that are the most attractive allowed under the provisions of international
agreements. They are made primarily 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.), and to enforce internationally agreed upon
terms and conditions for export financing. The Bank also has an Intermediary Credit
Program it uses to offer medium- and long-term fixed-rate financing to buyers of U.S.
exports, but U.S. exporters also must face officially subsidized foreign competition to
qualify for this program.
As part of its direct lending program, the Bank has a tied aid “war chest” it uses to
counter specific projects that are receiving foreign officially subsidized export financing.
Tied aid credits and mixed credits are two of the primary methods whereby governments
provide their exporters with official assistance to promote exports. Tied aid credits
include loans and grants which reduce financing costs below market rates for exporters
and which are tied to the procurement of goods and services from the donor country.
2 “Bush Proposes Ending Appropriations for Ex-Im Bank,” Inside U.S. Trade, February 9, 2007.

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Mixed credits combine concessional government financing (funds at below market rates
or terms) with commercial or near-commercial funds to produce an overall rate that is
lower than market-based interest rates and carries more lenient loan terms. The United
States does tie substantial amounts of its agricultural and military aid to U.S. goods, but
it generally has avoided using such financing to promote American capital goods exports.
Table 1. Budget of the Export-Import Bank
(in millions of dollars)
FY02 FY03 FY04 FY05 FY06 FY07 FY08
Total Subsidy Requested
$633
$541
$0
$126
$187
$26

Total Subsidy Appropriated
727
513
0
60
100
NA
NA
Operating Expenses
1,256
433
583
661
353
507
163
-Direct Loan Subsidy
48
1
22

1
17
17
-Guarantee Loan Subsidy
678
317
247
227
185
170
64
-Loan Modifications
26
3
10
14
5
10
4
-Administrative Expenses
63
68
73
73
73
69
78
-Re-estimates of Subsidy Costs
441
44
231
347
189
482

Budget Authority (gross)
1,182
622
306
477
198
337
147
-Appropriated
740
577
72
132
109
95

-Other
442
45
234
345
89
242
147
Budget Resources
1,838
1,268
1,290
1,252
812
708
348
-Budget Authority (gross)
1,182
622
306
477
188
337
147
-Recoveries from previous years
118
89
149
70
22


-Unobligated resources start of year
514
557
835
705
592
371
201
-Unobligated resources end of year
557
835
705
591
371
201
185
Budget Authority (net)
1,181
621
305
476
198
336

Outlays (net)
1,245
645
718
681
318
456
81
Source: Office of Management and Budget. Budget of the United States Government, various issues.
Washington, U.S. Govt. Print. Off.
* Data for FY2008 are requested, or estimated amounts.
Funds for the tied aid war chest are available to the Bank from the Treasury
Department and are subtracted from the Bank’s direct credit resources. Applications for
the tied aid fund, however, are subject to review by the Treasury Department, which has
not approved a single tied aid request by the Bank since 2002.
Guarantees and insurance are the main programs the Bank uses to assist American
exporters. Both programs reduce some of the risks involved in exporting by insuring
against commercial or political uncertainty. There is an important distinction, however,
between the two programs. Insurance coverage carries with it various conditions that
must be met by the insured before the Bank will pay off a claim. A guarantee is an
ironclad commitment made to a commercial bank by the Export-Import Bank that
promises full repayment with few, if any, conditions attached. In addition, Eximbank has
a Working Capital Guarantee Program that it uses to aid small- and medium-sized
businesses. Businesses that qualify have exporting potential but need working capital
funds to produce or market their goods or services for export. Guarantees are offered to

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qualified lenders (primarily commercial banks) in order to facilitate loans to small
businesses. In FY2006, the Bank authorized $12.15 billion in loans and guarantees to
support an estimated $16.12 billion in U.S. exports. According to the Bank, this
represents 2,677 transactions of which 84% directly benefitted small business.
Recent Developments
In October 2004, Eximbank Chairman Phillip Merrill announced that the Bank had
signed an agreement with the Iraqi Ministry of Finance that allows the Bank to provide
credit insurance coverage in support of U.S. exports to Iraq. In 2004, the Bank also
approved an updated version of its Environmental Procedures and Guidelines that make
the Bank’s environmental provisions consistent with the guidelines for evaluating the
environmental impact of projects that was adopted by the Organization for Economic
Cooperation and Development (OECD) in December 2003. The term of former President
and Chairman of the Bank Phillip Merrill expired on January 20, 2005. James H.
Lambright presently is serving as the acting President and Chairman of the Bank. The
other two other members of the Board are Max Cleland and Linda Conlin. In addition,
Commerce Secretary Donald L. Evans and U.S. Trade Representative Susan Schwab
serve as ex officio members of the Board. The terms of Eximbank Board members can
be extended up to six months until the members are reappointed and reconfirmed or other
members are appointed and confirmed.
International Agreements
The United States generally opposes subsidies for exports of commercial products.
(Nevertheless, like most countries, the United States has in place procurement policies
that seek to assure that most foreign assistance funds are spent on U.S. goods and
services.) Since the 1970s, the United States has led efforts within the Organization for
Economic Cooperation and Development (OECD) to adopt international protocols which
reduce the subsidy level in export credits by raising the interest rates on government-
provided export credits to market levels.
Countries that signed the OECD Arrangement (all OECD countries except Turkey
and Iceland) on export finance, concluded in November 1991, agreed to tighten further
restrictions on the use of tied-aid. The participants agreed that projects that would be
financially viable, and commercial credits would be prohibited from using tied or partially
untied aid credits, except for credits to the least developed countries where per capita
income is below $2,465. Moreover, the agreement sets up tests and consultation
procedures to distinguish between projects that should be financed on market or official
export credit terms, and those that legitimately require such aid funds.
U.S. exporters and others have expressed doubts about the effectiveness of
international efforts to stem officially subsidized trade financing. While the OECD
agreement appears to be reducing most direct government subsidies to trade financing,
a number of countries have found a way around the agreement through market windows,
or subsidized trade financing through ostensibly private financial institutions that are not
subject to the agreement. The agreement also has a number of limitations, including the
difficulty of defining commercially viable projects; and the presence of an “escape clause”
that allows countries to proceed with a tied aid offer, despite objections by other

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participants, if that country claims that the project is in its national interest. Moreover,
the Agreement contains no explicit enforcement mechanism. The effectiveness of the
Agreement also depends on the accuracy and openness of tied aid offers reported to the
OECD, but the OECD does not confirm or verify the accuracy of the data provided by its
members.3
Legislative Issues
Congress does not directly approve individual Eximbank transactions, but has a
number of oversight responsibilities concerning the Bank and its activities. The Senate
confirms Presidential appointments to the Bank’s Board of Directors and Congress
authorizes the Bank’s legal charter for a period of time chosen by Congress. At times,
Congress has required an annual reauthorization of the Bank’s legal charter, and at other
times has authorized the Bank for periods that have varied from two to four years.
Congress also approves an annual appropriation for the Bank that sets an upper limit on
the level of the Bank’s financial activities. In addition, Congress can always amend or
alter the Bank’s governing legislation as it deems appropriate. Members of Congress and
Congressional Committees can request that the Bank’s President consult with them or
testify before committees, with some qualifications.
The 110th Congress has introduced two bills which would affect the Export-Import
Bank if they were passed and signed into law. S. 876, introduced on March 14, 2007,
would prohibit the Export-Import Bank from providing services to any individual who has
invested $1 million or more in any project that contributes to enhancing Cuba’s ability to
develop petroleum resources off its northern coast. H.R. 1886 was introduced on April
17, 2007, and it would prohibit the Export-Import Bank from providing its services to any
activity connected with an oil or gas project.
On June 14, 2002, President Bush signed P.L. 107-189, the Export-Import Bank
Reauthorization Act of 2002. Two of the most important provisions of the act include a
sense of Congress that requires the Bank to prepare a human rights impact assessment for
any project over $10 million, and a prohibition on supporting any project that is subject
to import relief measures or countervailing duty orders. Other major provisions of the
Reauthorization Act include establishing the Office of Inspector General within the Bank;
designating assisting U.S. job growth as the main purpose of the Bank’s programs;
extending Eximbank’s authority through 2006; authorizing the appropriation of $80
million in administrative expense to upgrade the Bank’s technological infrastructure;
increasing the Bank’s overall credit limitation; and extending the Office on Africa through
September 30, 2006.
President Bush signed P.L. 109-438, the Export-Import Bank Reauthorization Act
of 2006, on December 20, 2006. This act reauthorizes the Bank through September 30,
2011, and creates a Small Business Division within the Bank that is responsible for
conducting research, better tailoring products to small business needs, and increasing
loans to small business concerns. The measure also extends the authority of the Advisory
Committee on Sub-Saharan Africa through FY2011. In addition, the measure directs the
3 Competitor’s Tied Aid Practices Affect U.S. Exports. General Accounting Office. Report No.
GGD-94-81. May 1994. p. 19-21.

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Bank to submit annually to Congress a list of U.S. commercial sectors and products that
would suffer “adverse economic impact” due to Eximbank support of projects abroad.
The measure encourages the Bank to make greater use of its “tied aid” facility, but also
provides for the Secretary of the Treasury to oppose decisions made by the Bank’s board
of Directors to match an offer of tied aid by a foreign entity. The measure also requires
that the Bank determine if an entity that receives an Eximbank loan or guarantee could
circumvent requirements that the Bank’s programs not support projects abroad that could
compete with U.S. firms by assessing if the firm could produce products that would be
in addition to those that are specified in the application for a loan or guarantee.
Eximbank Debate
One rationale for the Export-Import Bank is the acknowledged competition among
nations’ official export financing agencies, but most economists doubt that a nation can
improve its welfare or level of employment over the long run by subsidizing exports.
Economic policies within individual countries are the prime factors which determine
interest rates, capital flows, and exchange rates, and the overall level of a nation’s exports.
As a result, subsidizing export financing merely shifts production among sectors within
the economy, but does not add to the overall level of economic activity, and subsidizes
foreign consumption at the expense of the domestic economy. Also, promoting exports
through subsidized financing or through government-backed insurance and guarantees
will not permanently raise the level of employment in the economy, but alters the
composition of employment among the various sectors of the economy.
Some opponents further argue that, by providing financing or insurance for exporters
that the market seems unwilling, or unable, to provide, Eximbank’s activities draw from
the financial resources within the economy that would be available for other uses. Such
“opportunity costs,” while impossible to estimate, could be potentially significant.
Another consideration is that subsidized export financing raises financing costs for all
borrowers by drawing on financial resources that otherwise would be available for other
uses, thereby possibly crowding out some borrowers from the financial markets. This
crowding-out effect might nullify any positive impact subsidized export financing may
have on the economy.
Some Eximbank supporters maintain that the Bank’s programs are necessary for U.S.
exporters to compete with foreign subsidized export financing and also to pressure foreign
governments to eliminate concessionary financing. As a result, Eximbank is required in
the Bank’s Act to provide U.S. exporters with financing terms that are “competitive” with
those offered by other official trade financing institutions. These, and other supporters
of the Bank, also stress that deficiencies in financial markets bias those markets against
exports of high value, long-term assets.