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Proposed Rules
Federal Register
_______________________________________________________________

This section of the FEDERAL REGISTER contains notices to the public of
the proposed issuance of rules and regulations. The purpose of these
notices is to give interested persons an opportunity to participate in
the rule making prior to the adoption of the final rules.

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Federal Register / Vol. 76, No. 144 / Wednesday, July 27, 2011 /
Proposed Rules

[[Page 44836]]

DEPARTMENT OF AGRICULTURE

Commodity Credit Corporation

7 CFR Part 1493

RIN 0551-AA74

CCC Export Credit Guarantee (GSM-102) Program

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

ACTION: Proposed rule.

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SUMMARY: This proposed rule would revise and amend the regulations that
administer the Export Credit Guarantee (GSM-102) Program. Changes in
this proposed rule incorporate program operational changes and
information from press releases and notices to participants that have
been implemented since the publication of the current rule, and include
other administrative revisions to enhance clarity and program
integrity. These changes should increase program availability to all
participants and enhance access and encourage sales for smaller U.S.
exporters. The proposed rule would eliminate provisions for the
Intermediate Export Credit Guarantee (GSM-103) Program, consistent with
the repeal of authority to operate this program in the Food,
Conservation, and Energy Act of 2008 (2008 Act).

DATES: Comments concerning this proposed rule must be received by
September 26, 2011 to be assured consideration.

ADDRESSES: Comments may be submitted by any of the following methods:
Federal eRulemaking Portal: Go to http://www.regulations.gov.
Follow the online instructions to submit comments.
E-Mail: GSMregs@fas.usda.gov.
Fax: (202) 720-2495, Attention: "GSM102 Proposed Rule
Comments''.
Hand Delivery, Courier, or U.S. Postal delivery:
Amy Slusher, Deputy Director, Credit Programs Division,
c/o Public Affairs
Division, Foreign Agricultural Service,
U.S. Department of Agriculture,
1400 Independence Ave., SW., Stop 1004, Room 5076,
Washington, DC
20250-1004.
Comments may be inspected at 1400 Independence Avenue, SW.,
Washington, DC, between 8 a.m. and 4:30 p.m., Monday through Friday,
except holidays. A copy of this proposed rule is available through the
Foreign Agricultural Service (FAS) homepage at:
http://www.fas.usda.gov/excredits/exp-cred-guar-new.asp.

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

SUPPLEMENTARY INFORMATION:

Background

The Commodity Credit Corporation's (CCC) Export Credit Guarantee
(GSM-102) Program is administered by the Foreign Agricultural Service
(FAS) of the U.S. Department of Agriculture (USDA) on behalf of CCC,
pursuant to program regulations codified at 7 CFR Part 1493 and through
the issuance of "Program Announcements'' and "Notices to
Participants'' that are consistent with this program regulation. The
current regulations became effective on November 18, 1994. Since that
time, CCC has implemented numerous operational changes to improve the
efficiency of the program, including an automated, Internet-based
system for participants and revised program controls to improve program
quality, reduce costs, and protect against waste and fraud. Also since
that time, agricultural trade and finance practices have evolved. This
proposed rule is intended to reflect these changes and to enhance the
overall clarity and integrity of the program. In addition, the 2008 Act
repealed the authority to operate the GSM-103 Program, and this change
is reflected in the proposed rule.
On December 17, 2008, CCC published an advance notice of proposed
rulemaking (ANPR) in the Federal Register (73 FR 76568). This notice
was intended to solicit comments on improvements and changes to be made
in the implementation and operation of the GSM-102 program, with the
intent of improving the GSM-102 program's effectiveness and efficiency.
In addition to incorporating some of the comments received in response
to the ANPR, this proposed rule incorporates several previous
operational requirements announced by FAS through notices to
participants. Other supplemental notices to participants were issued as
reminders of various program requirements or contained informational
requirements for specific commodities. These notices are not
appropriate for inclusion in the regulations for the GSM-102 program
but nevertheless remain in effect.

Section-by-Section Analysis

The numbering system of this proposed rule differs from that in the
current regulation. Several sections have been added, some sections
have been deleted and others have been reordered. For the purposes of
this discussion, the numbering of the proposed rule will be used,
except where otherwise indicated.

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

In accordance with section 202 of the Agricultural Trade Act of
1978 (7 U.S.C. 5622), as amended by section 3101 of the 2008 Act, this
proposed rule would eliminate provisions for intermediate-term credit
guarantees, also known as the GSM-103 program. Reference has been added
to the Facility Guarantee Program (FGP), authorized by section 1542 of
the Food, Agriculture, Conservation, and Trade Act of 1990 (7 U.S.C.
5622 note) (as amended), to reflect the fact that the restrictions and
criteria in subpart A apply to the FGP. The regulations for the FGP are
found at subpart C of 7 CFR Part 1493.
In section 1493.4, "Criteria for country and regional
allocations,'' CCC proposes to include regional allocations. CCC
currently announces allocations by both country and region. The
addition of the regional program concept to the proposed rule is
therefore reflective of current program operations and appears
throughout the proposed rule.

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

Section 1493.20 Definition of Terms

Numerous definitions are proposed to be added to this section.
Certain definitions would be added to provide greater clarity to
program participants, and other definitions appearing in this section
have been moved from other parts of the regulation.

[[Page 44837]]

In section 1493.20(j), a definition of "Director'' has been added.
In certain sections throughout the proposed rule, "CCC'' has been
changed to "Director.'' This change was made to provide participants
transparency regarding the specific official authorized to make certain
program decisions.
Section 1493.20(l) would modify the definition of "eligible
interest'' contained in the current rule to be consistent with the
interest coverage currently specified on the payment guarantee. CCC's
coverage of interest will always be limited to the lesser of the amount
calculated using the interest rate specified between the exporter or
exporter's assignee and the foreign financial institution or the amount
calculated using the Treasury bill investment rate specified on the
face of the payment guarantee. In addition, to clarify the various
types of interest associated with CCC's coverage, definitions have been
added for "CCC late interest'' (e), "ordinary interest'' (dd), and
"post-default interest'' (gg).
A definition of the "FAS Web site'' would be added in section
1493.20(p). This Web site will contain all program-related information
and details on where and by what means participants must submit
information required by this subpart. CCC proposes no longer to
announce these details through a Notice to Participants. The "Contacts
P/R'' found in section 1493.20(c) of the current rule would be deleted.
Section 1493.20(r) would add a definition of a "firm export sales
contract.'' The current rule, at section 1493.40, requires that "a
firm export sale must exist before an exporter may submit an
application for a payment guarantee.'' CCC proposes to add this
definition to clarify to participants both what constitutes a "firm
export sale'' and the specific information needed to meet this
requirement.
A new definition of "foreign financial institution'' would be
added in section 1493.20(s). A foreign financial institution is not
defined in the current rule, but is referenced throughout the current
rule as a "foreign bank'' that is able to issue an irrevocable letter
of credit. The new definition would clarify the basic requirements for
foreign institutions to be eligible to apply for participation in the
program, and also would permit non-bank foreign institutions to apply.
The definition of "importer'' would be revised in section
1493.20(y) to require that the importer be physically located in the
country or region of destination. Although not specified in the current
rule, CCC now permits an importer to have a "presence of business'' in
the country or region to meet the requirement that the "agricultural
commodities * * * be shipped from the United States to the foreign
buyer.'' Under this "presence of business'' concept, the importer need
not be located in the country or region but may contract with another
party (such as an agent) in the country or region of destination to
receive and sell the goods. Due to the difficulty in confirming whether
an importer has a legitimate "presence of business'' to act on its
behalf, CCC proposes to eliminate this practice and would now require
the importer to be physically located in the country or region of
destination.
CCC proposes to add a definition for "letter of credit account
party'' in section 1493.20(aa). CCC currently permits an entity other
than the importer to request the foreign financial institution letter
of credit be opened, but in such cases the exporter is required to
notify CCC on the application for payment guarantee. The "letter of
credit account party'' would now be added as a required field on the
application for payment guarantee (section 1493.70(a)(3)), if this
entity is other than the importer.

Section 1493.30 Information Required for Exporter Participation

An exporter seeking to participate in the GSM-102 program would be
required to submit with its application for program participation,
pursuant to section 1493.30(a)(ii) and (iii), its Dun and Bradstreet
(DUNS) number and its Employer Identification Number (EIN) issued by
the Internal Revenue Service. The DUNS number would be utilized by CCC
to report on entities that are awarded federal grants, loans,
contracts, and other forms of assistance as required by the Federal
Funding Accountability and Transparency Act (FFATA). CCC would utilize
the EIN to confirm that the exporter, as a recipient of Federal
financial assistance, does not owe an outstanding Federal nontax debt
that is in delinquent status, consistent with the Debt Collection
Improvement Act of 1996 and the associated requirements found in 31 CFR
285.13.
Pursuant to section 1493.30(a)(4), each exporter would be required
to provide a description of the exporter's business. The exporter would
also be required to advise CCC whether or not it meets the definition
of a small or medium enterprise (SME), as defined on the FAS Web site.
Although this information will not be utilized to determine an
exporter's eligibility for program participation, CCC will utilize it
to help target specific countries, regions and commodities under the
program, and to track new-to-export businesses and the number of SMEs
assisted by the program. This information will assist in justifying
budgetary requests and targeting outreach efforts.
Pursuant to section 1493.30(c), exporters that have previously
qualified to participate but have not submitted an application for a
payment guarantee for two consecutive fiscal years would be required to
resubmit all information required for participation. This requirement
will assist CCC in maintaining accurate exporter records.

Section 1493.40 Information Required for U.S. Financial Institution
Participation and Section 1493.50 Information Required for Foreign
Financial Institution Participation

Under the proposed rule, these sections would be new provisions.
Currently, requirements for U.S. and foreign financial institutions are
specified on the FAS Web site; however, CCC has determined that these
requirements are more appropriately addressed in the rulemaking
process. Similar to the requirements for exporter participation, both
U.S. and foreign financial institutions would be required to re-apply
if they do not utilize the program for two consecutive fiscal years.
U.S. financial institutions, like exporters, would be required to
provide their DUNS and EIN numbers for purposes of compliance with
FFATA and the Debt Collection Improvement Act of 1996.

Section 1493.60 Certifications Required for Program Participation

This section would revise the certifications required of all
exporters and U.S. and foreign financial institution program
participants, to make them consistent with U.S. Government
requirements. OMB Guidelines to Agencies on Government-wide Debarment
and Suspension (Nonprocurement) (2 CFR 180.335) require all
participants in the primary tier of a covered transaction to provide
certain information to a Federal agency before entering into a
transaction with that agency. Such required information would now be
reflected in the certifications set forth in section 1493.60(a)(1)
through (4). Proposed new certifications in section 1493.60(a)(5)
through (7) would assist in meeting the requirements of 31 CFR 285.13
("Barring delinquent debtors from obtaining Federal loans or loan
insurance or guarantees''). Exporters and U.S. and foreign financial
institutions would certify that they do not have any outstanding nontax
debt to

[[Page 44838]]

the United States that is in delinquent status, nor do any persons
controlling or controlled by the applicant.
Under the proposed rule, U.S. and foreign financial institutions
would be required to make two additional certifications (section
1493.60(b)) asserting their compliance with all regulatory requirements
and U.S. anti-money laundering and terrorist financing statutes. The
purpose of these certifications is to ensure that CCC is dealing only
with responsible entities that are in compliance with all relevant U.S.
laws and regulations.
Exporters and U.S. and foreign financial institution program
participants would also be required to re-assert these certifications
when submitting documentation to CCC under this subpart.

Section 1493.80 Certification Requirements for Obtaining the Payment
Guarantee

The proposed rule sets forth a new certification at section
1493.80(d) to require the exporter to confirm that the importer (and
intervening purchaser, if applicable) in the transaction is not
excluded or disqualified from participation in U.S. government programs
through either the Excluded Parties List System (EPLS) or the Specially
Designated Nationals list of the Office of Foreign Assets Control
(OFAC) of the U.S. Department of the Treasury. These lists are defined
(including Web site addresses) at sections 1493.20(m) and (cc),
respectively, and contain individuals and entities that are not
eligible to participate in U.S. government procurement and non-
procurement programs or are otherwise excluded based on applicable
federal laws. Pursuant to 2 CFR 417.222(a), concerning U.S. Department
of Agriculture nonprocurement debarment and suspension, "the U.S.
exporter or U.S. financial institution would be prohibited from
entering into, at the first lower tier, an agreement with an importer
(or intervening purchaser) or foreign bank * * * with an entity that
appears on the EPLS as excluded or disqualified.'' To meet this
requirement, and to ensure that the exporter or U.S. financial
institution does not enter into a transaction with a prohibited entity
on the OFAC list, the exporter must certify at the time of application
that neither the importer nor intervening purchaser is excluded by
either list. This will necessarily require the exporter to check both
the EPLS and OFAC lists to ensure these entities are not listed.

Section 1493.90 Terms and Requirements of the Foreign Financial
Institution Letter of Credit and Related Obligation

Under the proposed rule, this section would be a new provision. In
section 1493.90(a), CCC describes requirements applicable to the
foreign financial institution letter of credit. In recent foreign
financial institution defaults, CCC's ability to recover has, on
occasion, been adversely affected because GSM-102 guaranteed debt was
determined, in foreign jurisdictions of certain defaulting obligors,
not to be "trade finance'' and therefore subject to less favorable
restructuring terms. In an attempt to bolster CCC's position in future
restructurings, section 1493.90(a)(1) would now require the letter of
credit to contain a specific statement describing the obligation as
trade finance debt. Similar language has been adopted by export credit
agencies in other countries that have faced similar treatment in recent
foreign bank debt restructurings.
Additionally, it has been necessary for CCC to accelerate claims
payment to U.S. financial institutions and exporters so that CCC could
negotiate restructuring terms for all GSM-102 debt directly with the
foreign obligors. To ensure that there is no future issue affecting
CCC's ability to accelerate claims payments, the letter of credit or
related obligation would now be required to include an acceleration
clause, as provided in section 1493.90(a)(2).
CCC has determined that the documents submitted for payment under
the foreign financial institution letter of credit and/or related
obligation should be consistent with the requirements of such foreign
financial institution letter of credit and/or related obligation, to
ensure that the default was not based on failure to comply with the
underlying terms of the sale. CCC has added this requirement in section
1493.90(a)(3).

Section 1493.100 Terms and Requirements of the Payment Guarantee

Several modifications have been made to this section in the
proposed rule. The reference to "final date to export'' has been
converted to a definition and now appears in section 1493.20(q). CCC
proposes to eliminate the "grace period'' that currently extends this
date one month past the contractual shipping deadline. Over the past
several years, CCC has reduced the maximum shipping period allowed in
an attempt to reduce the problem of exporters over-registering
immediately after allocations are announced. By reducing the shipping
period CCC hopes to maintain availability of allocations throughout the
fiscal year, thus increasing program availability to all participants.
In this context, CCC believes the one month grace period is
unnecessary, and it would be eliminated.
In section 1493.100(d), CCC proposes to limit reserve coverage to a
maximum of five (5) percent of the transaction's port value to
accommodate the upward loading tolerance. Exporters have increasingly
been reserving coverage for larger amounts, which encumbers the
allocation and reduces the amount available to other participants.
Further, the delay in determining whether reserve coverage will be
utilized or released back to the allocations creates delays in
determining CCC's exact liability under a guarantee. Therefore, in
addition to capping the amount of reserve coverage that will be
granted, CCC proposes to require exporters to file an amendment to the
payment guarantee to utilize such coverage within 15 calendar days of
the last export under the payment guarantee. If such amendment is not
filed within this timeframe, CCC would automatically cancel the reserve
coverage.
The proposed rule would add new section 1493.100(e) on "Prohibited
transactions.'' In general, these prohibitions follow the certification
requirements found in section 1493.80. The purpose of this new section
is to give additional legal recourse to CCC if an exporter violates any
of the required certifications. CCC would specifically prohibit
coverage of transactions that have already been guaranteed by CCC under
another payment guarantee (section 1493.100(e)(6)). Although this
prohibition is implicit in the current rule, CCC has determined to make
such prohibition explicit. If a default were to occur under this
scenario, CCC could receive identical claims for payment from multiple
exporters or assignees. Section 1493.100(e)(6) is specifically intended
to avoid this result.
Section 1493.100(f) would institute a new requirement that the
foreign financial institution letter of credit be issued within 30
calendar days following the date of export under a payment guarantee.
It has become an increasingly common practice under the GSM-102 Program
for exporters to obtain a payment guarantee without a foreign financial
institution letter of credit in place in connection with the sale for
an extended period of time after exports have occurred. This is often
an indication that an exporter has not confirmed that the foreign
financial institution is willing to issue the letter

[[Page 44839]]

of credit underlying the transaction, and is instead submitting the
registration to garner a portion of the allocation. CCC expects that
prior to registering an export sale the exporter has worked with the
importer and foreign financial institution on the details of the
financing, even though the letter of credit may not be in place at that
time. CCC has surveyed financial institutions on this issue and has
determined that 30 calendar days from the date of export is a
reasonable timeframe for issuance of the letter of credit. CCC would
annul coverage for any exports where this requirement is not met.
In response to the large number of amendment requests routinely
submitted to CCC, section 1493.100(h) has been modified to permit CCC
to charge a fee for amendments over and above the normal guarantee fee
to offset the administrative costs of processing amendments. CCC also
may, at its discretion, request documentation from the exporter to
justify the amendment, with a view to reducing what CCC considers
unwarranted amendment requests. Additionally, consistent with the new
certification requirements related to the EPLS and OFAC lists,
exporters (or their assignees) will be required to resubmit these
certifications any time the payment guarantee is amended to change the
foreign financial institution.

Section 1493.110 Guarantee Fees

In response to the problems associated with high demand for certain
GSM-102 country and region allocations, several participants have
suggested that CCC implement a competitive process, akin to an auction,
whereby exporters would be required to bid on coverage. CCC agrees that
such a process may be an economically efficient way to allocate
coverage when demand for coverage exceeds supply. Therefore, proposed
section 1493.110(a)(2) would include this option for determining fees.
If operational, details of this process would be made available on the
FAS Web site. CCC could implement this option at its discretion and
would notify participants via the FAS Web site if it chose to apply
this optional method.
CCC also proposes to modify its policy on fee refunds. Currently,
once CCC advises an exporter of acceptance of its application(s) (prior
to processing the applications and providing the exporter a GSM
number), the exporter can determine not to utilize the coverage and CCC
will refund the exporter's fees. It has become increasingly common for
exporters to apply for coverage and then subsequently cancel large
portions of their submitted applications. In such instances this
coverage could have been utilized by other exporters, and CCC loses the
opportunity to support additional export sales. In an attempt to
curtail this practice, once CCC has notified an exporter that its
application has been accepted, CCC will not refund the fees on such
application if the exporter elects to withdraw it.

Section 1493.120 Assignment of the Payment Guarantee

Under section 1493.120(c), assignees would now be required to make
two certifications when submitting the notice of assignment: (1) The
foreign financial institution is not excluded or otherwise disqualified
from program participation, and (2) the information provided to CCC at
the time of qualification as an assignee has not changed. The
certification on the foreign financial institution found in section
1493.120(c)(1) is consistent with the requirement of the exporter to
make a similar certification related to the importer (see discussion of
section 1493.80). Further, as is the case with the requirement for
exporters, CCC believes it is appropriate that the U.S. financial
institution certify with each assignment that the information and
certifications provided to CCC at time of approval for participation
are accurate.
CCC proposes to modify some of the bases for a determination that a
U.S. financial institution may be ineligible to receive assignment of a
payment guarantee. The proposed rule would delete the current provision
of section 1493.140(b)(1) that requires the financial institution to be
in sound financial condition. The underlying statutory requirement
imposing such ineligibility was repealed in the Federal Agriculture
Improvement and Reform Act of 1996 (Pub. L. 104-127). CCC proposes to
make a U.S. financial institution ineligible to receive an assignment
if it does not meet the qualification requirements found in section
1493.40(a) and certified in 1493.120(c)(2) at the time of the
assignment.
At the request of U.S. financial institution participants, CCC
proposes to add a provision to allow the assignee (or exporter, if the
payment guarantee is unassigned) to include obligations guaranteed by
CCC in a repurchase agreement (section 1493.120(f) and as defined in
section 1493.20(kk)). Permitting the sale of these obligations as part
of a repurchase agreement would allow the assignee to temporarily
improve its liquidity position and thus increase the amount of credit
available for the assignee to support additional U.S. exports. Although
CCC will not approve repurchase agreements, the assignee (or exporter)
must notify CCC when CCC-guaranteed obligations are included in a
repurchase agreement by supplying the information specified in section
1493.120(f)(2). Failure of the assignee (or exporter) to comply with
the requirements in section 1493.120(f) will result in CCC annulling
coverage under the payment guarantee.

Section 1493.130 Evidence of Export

CCC proposes to make several modifications to the requirements for
evidence of export (EOE) reports. Several items that are currently
contained in notices to participants have been incorporated into
section 1493.130(a). CCC also proposes to add "destination country''
as required information in the EOE. Collection of this information will
provide CCC data on the specific countries to which GSM-102 commodities
are shipped under regional programs, thus assisting in targeting of
programming and prioritizing of CCC activities.
The time limit for submission of EOE reports would be modified, and
CCC proposes to add new rules regarding failure to submit EOEs on time.
It has become increasingly important for CCC to receive EOEs in a
timely manner for both budgetary and policy purposes. However, it has
also become increasingly common for exporters to fail to submit EOEs
within the timeframe specified in the current regulations. Therefore,
CCC would now require that all EOEs be submitted to CCC within 10
calendar days of the date of export (section 1493.130(b)(1)). CCC also
proposes to add a requirement that the exporter must notify CCC no
later than the final date to export if the exporter determines not to
make any shipments under the payment guarantee (section
1493.130(b)(2)). Because there are sometimes legitimate circumstances
that prevent an exporter from meeting these filing deadlines, CCC
proposes in section 1493.130(b)(3) to allow the exporter to request an
extension of the filing deadline. Any extension must be requested prior
to the filing deadline and must be accompanied by an explanation as to
why the extension is needed.
Given the importance of CCC receiving EOEs in a timely manner, CCC
proposes to impose new consequences for failure to submit EOEs within
the required timeframe. Under section 1493.130(c), exporters who do not
submit EOE reports as required would be prohibited from receiving any
new payment guarantees until they are fully

[[Page 44840]]

in compliance with the requirements of section 1493.130(b).

Section 1493.140 Certification Requirements for the Evidence of Export

CCC proposes several changes to the certifications required with
submission of the evidence of export report (EOE). The certification
found in section 1493.90(b) of the current regulation, to attest that
"agricultural commodities of the grade, quality and quantity called
for in the exporter's contract with the importer have been exported to
the country specified on the payment guarantee'' would be removed, and
as noted in the explanation of section 1493.90, a requirement added
that the commodity grade and quality specified in the foreign financial
institution letter of credit be consistent with the commodity grade and
quality specified in the firm export sales contract. CCC would also
eliminate the certification currently in section 1493.90(c) specifying
that "a letter of credit has been opened in favor of the exporter by
the foreign bank shown in the payment guarantee to cover the port value
of the commodity exported.'' This certification often keeps exporters
from submitting EOEs on time, if the letter of credit has not been
opened and therefore the exporter cannot make this certification. CCC
has removed this certification to avoid delays in submitting EOE
reports. As explained previously, CCC proposes no longer to provide
coverage of any exports where the foreign financial institution letter
of credit is issued more than 30 calendar days after the date of export
(section 1493.100(f)(3)). Given this new requirement, the certification
related to the letter of credit would no longer be necessary.
CCC proposes to add a new certification in section 1493.140(c): if
the payment guarantee has not been assigned to an approved U.S.
financial institution by the time of submission of the EOE, the
exporter would be required to certify that the foreign financial
institution issuing the letter of credit is not excluded or
disqualified from participation in U.S. government programs through
either the EPLS or OFAC Specially Designated Nationals (SDN) lists.
There is no requirement for an exporter to assign the payment
guarantee. Because this certification is required of the U.S. financial
institution when submitting the notice of assignment, including it with
the EOE certifications will ensure that this certification is made even
when the exporter determines not to assign the payment guarantee.

Section 1493.160 Notice of Default

CCC proposes to change the timeframe for the exporter or exporter's
assignee to submit a notice of default (NOD) to CCC, reducing it from
the current ten (10) calendar days to five (5) business days. By
reducing this timeframe CCC hopes to mitigate the impact of any
defaults, as the primary purpose of the NOD is to allow CCC to
immediately prohibit additional transactions with the foreign financial
institution in default. CCC also proposes to require two additional
pieces of information with the notice of default: (1) A copy of the
foreign financial institution's repayment schedule (section
1493.160(a)(5)) and (2) any correspondence with the foreign financial
institution regarding the default (section 1493.160(a)(7)). The
repayment schedule will give CCC an accurate accounting of when future
payments are coming due (and hence, when additional defaults may be
expected), and the correspondence may provide CCC additional
information that is helpful in restructuring the debt with the
defaulting institution.
Under the proposed rule, CCC would add new section 1493.160(c),
"Impact of a default on other existing payment guarantees.'' The
existing regulation is silent on potential CCC actions related to
outstanding payment guarantees once a foreign financial institution
defaults. As a result, exporters may obtain a letter of credit or
continue to export under an existing guarantee even after the foreign
financial institution issuing the letter of credit has defaulted, thus
potentially increasing CCC's exposure. The proposed rule therefore
would prescribe a specific policy that CCC will notify the impacted
exporters and withdraw coverage of any shipments that occur after the
exporter receives this notification where the letter of credit has been
or will be issued by the defaulting foreign financial institution. The
exporter will be given the option to find another foreign financial
institution to issue a letter of credit for the balance of the
guarantee, or CCC would cancel that portion of the guarantee allocable
to unshipped amounts and refund that portion of the guarantee fee to
the exporter.

Section 1493.170 Claims for Default

As would similarly be required in conjunction with a notice of
default, CCC also proposes to require, under section 1493.170(a)(3), a
copy of the foreign financial institution's repayment schedule as a
claims document. Under section 1493.170(a)(4), CCC would also require
the claimant to provide a description of any payments received prior to
claim and any insurance proceeds, securities or collateral arrangements
that may be realized upon that are in any way associated with the debt
with respect to which the claim is filed. Because any such payments or
instruments are deemed recoveries and must be remitted to CCC for pro-
rata sharing, CCC proposes to require them to be declared concurrently
with submission of any claim.
Proof of entry, as defined in section 1493.150, would be added as a
required claims document. Although CCC already has the authority to
request proof of entry documentation from the exporter, the
proliferation of regional programs under GSM-102 has raised concerns as
to the entry point of the commodities covered by the payment guarantee.
Rather than request this documentation from exporters on an ad hoc
basis, CCC proposes to require it with all submitted claims. Failure to
demonstrate proof of entry into the country or region specified on the
payment guarantee would result in denial of the claim by CCC.
CCC also proposes to add new section 1493.170(b), "Additional
documents.'' At times, the required claims documents may not provide
sufficient information for CCC to determine that a claim is in "good
order,'' and the claim may therefore be denied. This provision would
give the exporter or the exporter's assignee the right to submit
additional documentation to CCC to support a claim if the claim has
been denied.

Section 1493.180 Payment for Default

In section 1493.180(b), CCC would clarify that its liability with
respect to any defaulted payments will be reduced by any payments
received or funds realized from insurance, security or collateral
arrangements prior to claim by the exporter or the exporter's assignee.
Although this is inherent under the current terms of the guarantee, it
is not specifically stated in the current regulation.
In section 1493.180(c), CCC proposes to modify the time requirement
for making claims payments. The proposed rule would allow CCC 15
business days (from the date of receiving a claim in good order) to
make a claim payment before late interest would begin to accrue in
favor of the exporter or the exporter's assignee. Upon receipt of a
claim, CCC must review all of the claims documents to ensure they are
compliant with the program regulations; enter the claims data into
CCC's GSM System; provide final claims documents to a CCC Certifying
Officer for review and

[[Page 44841]]

certification; and disburse the payment to the claimant. It is not
possible for CCC to complete all of these tasks within the one day
currently required in the regulations--resulting in payment of late
interest by CCC on every claim. The U.S. Office of Management and
Budget's final rule on, and codification of, Prompt Payment Act
regulations (5 CFR Part 1315), only requires, unless otherwise
specified, Federal agencies to pay their bills within 30 days of the
date of receipt of a proper invoice.
CCC proposes to modify the provision on accelerated payments in
section 1493.180(d). In order for CCC to accelerate a claim payment to
the exporter or assignee, the exporter or assignee must accelerate the
payments due from the foreign financial institution and file all claims
documents required in section 1493.170(a). Although this is currently
understood and practiced by claimants, CCC believes it is appropriate
to specify these requirements as part of the regulation.

Section 1493.190 Recovery of Defaulted Payments

In section 1493.190(b), CCC proposes to exclude from the meaning of
the term "recoveries'' the transfer of funds between CCC, the exporter
and the exporter's assignee. Under certain circumstances, the U.S.
financial institution taking assignment of the GSM-102 payment
guarantee may be unwilling to take risk on the uncovered portion of the
transaction. As a result, under such circumstances, the exporter may
retain this risk. The current regulation, by use of the phrase "or any
source whatsoever,'' dictates that the flow of funds between the
exporter and the assignee under such an arrangement must occur prior to
a default, because any transfer of funds after a default is considered
a "recovery.''
CCC's primary interest is in maintaining a risk-share partner in
the GSM-102 transaction such that either the exporter or exporter's
assignee carries the risk for the uncovered portion of the export sale.
It is irrelevant to CCC when any proceeds are shared between these
parties. Therefore, CCC proposes to add a clarification that payments
between CCC, the exporter, or the exporter's assignee are not
considered recoveries and therefore need not be paid to CCC. This
change would allow the exporter and the assignee greater flexibility in
structuring the transaction between themselves in instances where the
assignee does not wish to take risk on the uncovered portion of the
transaction.
Consistent with the proposed new section 1493.170(a)(4), which
would require the claimant to provide a description of any payments
received prior to claim or any insurance, securities or collateral
arrangements that may be realized upon that are in any way associated
with the debt with respect to which the claim is filed. CCC proposes to
clarify in section 1493.190(b)(1) that any monies derived through
payments of insurance or the liquidation of any securities or
collateral are also considered recoveries and must be paid to CCC.
CCC has added examples of what actions by the exporter or the
exporter's assignee constitute "cooperation'' in recoveries in section
1493.190(f). Although these actions are not precluded under the current
regulation, they have been added in the proposed rule to provide
exporters and assignees an illustration of possible cooperative efforts
that may be required of participants in the course of recoveries.

Section 1493.200 Dispute Resolution and Appeals

CCC proposes to add this new section. As previously noted, the
proposed rule would clarify instances throughout the regulation in
which the Director of the Credit Programs Division, FAS, is authorized
to make determinations with respect to the GSM-102 program. In
conjunction with this change, CCC proposes to add specific procedures
pursuant to which program participants may appeal decisions made by the
Director. In addition to affording specific appeal rights to
participants, this section also specifies certain responsibilities of
participants during and after the appeal process. The addition of these
procedures will provide clarity to participants regarding their rights
to appeal adverse decisions.

Executive Order 12866

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

Executive Order 12988

This rule has been reviewed in accordance with Executive Order
12988. This rule would not preempt State or local laws, regulations, or
policies unless they present an irreconcilable conflict with this rule.
Before any judicial action may be brought concerning the provisions of
this rule, the appeal provisions of 7 CFR 1493.200 would need to be
exhausted. This rule would not be retroactive.

Executive Order 12372

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

Executive Order 13132

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

Executive Order 13175

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

Regulatory Flexibility Act

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

Environmental Assessment

CCC has determined that this proposed rule does not constitute a
major State or Federal action that would significantly affect the human
or natural environment. Consistent with the National Environmental
Policy Act (NEPA), 40 CFR 1502.4, "Major Federal Actions Requiring the
Preparation of Environmental Impact Statements'' and

[[Page 44842]]

the regulations of the Council on Environmental Quality, 40 CFR Parts
1500-1508, no environmental assessment or environmental impact
statement will be prepared.

Unfunded Mandates

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

Paperwork Reduction Act of 1995

In accordance with the Paperwork Reduction Act of 1995, CCC is
requesting comments from all interested individuals and organizations
on a proposed revision to the currently approved information collection
for this program. This revision includes the proposed change in
information collection activities related to the regulatory changes in
this proposed rule.
Title: CCC Export Credit Guarantee Program (GSM-102).
OMB Control Number: 0551-0004.
Type of Request: Revision of a currently approved information
collection.
Abstract: This information collection is required to support the
existing regulations and proposed changes to 7 CFR Part 1493, subpart
B, "CCC Export Credit Guarantee (GSM-102) Program Operations,'' which
establishes the requirements for participation in CCC's GSM-102
program. This revised collection incorporates the additional estimated
burden to program participants as a result of certain new requirements
in this proposed rule for (1) Exporter, U.S. and foreign financial
institution qualification; (2) applications for payment guarantees; (3)
notices of assignment; (4) repurchase agreements; (5) evidence of
export reports; (6) submission of claims for default; and (7) appeals.
This revision also reflects an increase in program activity since the
last approval. This information collection is necessary for CCC to
manage, plan and evaluate the program and to ensure the proper and
judicious use of government resources.
Estimate of Burden: The public reporting burden for this collection
of information is estimated to average 0.47 hours per response.
Respondents: U.S. exporters, U.S. financial institutions, and
foreign financial institutions.
Estimated Number of Respondents: 180 per year.
Estimated Number of Responses per Respondent: 40 per year.
Estimated Total Annual Burden on Respondents: 3,377 hours.
Comments on this information collection may be submitted to CCC in
accordance with the instructions for submitting comments to this
proposed rule. All comments received in response to this notice will be
a matter of public record.

E-Government Act Compliance

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

Title 7--Agriculture

List of Subjects in 7 CFR Part 1493

Agricultural commodities, Exports.

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

PART 1493--CCC EXPORT CREDIT GUARANTEE PROGRAMS

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

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

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

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


Sec. 1493.1 General statement.

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


Sec. 1493.2 Purposes of programs.

CCC may use payment guarantees:
(a) To increase exports of U.S. agricultural commodities and expand
access to trade finance;
(b) To compete against foreign agricultural exports;
(c) To assist countries, particularly developing countries and
emerging markets, in meeting their food and fiber needs;
(d) To establish or improve facilities and infrastructure in
emerging markets to expand exports of U.S. agricultural commodities;
and
(e) For such other purposes as the Secretary of Agriculture
determines appropriate.


Sec. 1493.3 Restrictions on programs and cargo preference statement.

(a) Restrictions on use of payment guarantees. (1) Payment
guarantees authorized under these regulations shall not be used for
foreign aid, foreign policy, or debt rescheduling purposes.
(2) CCC shall not make payment guarantees available in connection
with sales of agricultural commodities to any country that the
Secretary determines cannot adequately service the debt associated with
such sales.
(b) Cargo preference laws. The provisions of the cargo preference
laws do not apply to export sales with respect to which payment
guarantees are issued under this program.


Sec. 1493.4 Criteria for country and regional allocations.

The criteria considered by CCC in reviewing proposals for country
and regional allocations will include, but not be limited to, the
following:
(a) Potential benefits that the extension of payment guarantees
would provide for the development, expansion, or maintenance of the
market for particular U.S. agricultural commodities in the importing
country;
(b) Financial and economic ability and/or willingness of the
country whose financial institution obligation is guaranteed by CCC
("country of obligation'') to adequately service CCC guaranteed debt;
(c) Financial status of participating financial institutions in the
country of obligation as it would affect their ability to adequately
service CCC guaranteed debt;
(d) Political stability of the country of obligation as it would
affect its ability

[[Page 44843]]

and/or willingness to adequately service CCC guaranteed debt; and
(e) Current status of debt either owed by the country of obligation
or by the participating foreign financial institutions to CCC or to
lenders protected by CCC's guarantees.


Sec. 1493.5 Criteria for agricultural commodity allocations.

The criteria considered by CCC in determining U.S. commodity
allocations within a specific country or regional allocation will
include, but not be limited to, the following:
(a) Potential benefits that the extension of payment guarantees
would provide for the development, expansion or maintenance of the
market in the importing country for the particular U.S. agricultural
commodity under consideration;
(b) The best use to be made of the payment guarantees in assisting
the importing country in meeting its particular needs for food and
fiber, as may be determined through consultations with private buyers
and/or representatives of the government of the importing country;
(c) Evaluation, in terms of program purposes, of the relative
benefits of providing payment guarantee coverage for sales of the U.S.
agricultural commodity under consideration compared to providing
coverage for sales of other U.S. agricultural commodities.
3. Subpart B is revised to read as follows:
Subpart B--CCC Export Credit Guarantee (GSM-102) Program Operations
Sec.
1493.10 General statement.
1493.20 Definition of terms.
1493.30 Information required for exporter participation.
1493.40 Information required for U.S. financial institution
participation.
1493.50 Information required for foreign financial institution
participation.
1493.60 Certification requirements for program participation.
1493.70 Application for payment guarantee.
1493.80 Certification requirements for obtaining payment guarantee.
1493.90 Terms and requirements of the foreign financial institution
letter of credit and related obligation.
1493.100 Terms and requirements of the payment guarantee.
1493.110 Guarantee fees.
1493.120 Assignment of the payment guarantee.
1493.130 Evidence of export.
1493.140 Certification requirements for the evidence of export.
1493.150 Proof of entry.
1493.160 Notice of default.
1493.170 Claims for default.
1493.180 Payment for default.
1493.190 Recovery of defaulted payments.
1493.192 Dispute resolution and appeals.
1493.195 Miscellaneous provisions.

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


Sec. 1493.10 General statement.

(a) Overview. This subpart contains the regulations governing the
operations of the Export Credit Guarantee (GSM-102) Program. The GSM-
102 program of the Commodity Credit Corporation (CCC) was developed to
expand U.S. agricultural exports by making available payment guarantees
to encourage U.S. private sector financing of foreign purchases of U.S.
agricultural commodities on credit terms. The payment guarantee issued
under GSM-102 is an agreement by CCC to pay the exporter, or the U.S.
financial institution that may take assignment of the payment
guarantee, specified amounts of principal and interest in case of
default by the foreign financial institution that issued the letter of
credit for the export sale covered by the payment guarantee. Under GSM-
102, payment guarantees are issued for terms of up to three years. The
program operates in a manner intended not to interfere with markets for
cash sales and is targeted toward those countries that have sufficient
financial strength so that foreign exchange will be available for
scheduled payments. In providing this program, CCC seeks to expand and/
or maintain market opportunities for U.S. agricultural exporters and
assist long-term market development for U.S. agricultural commodities.
(b) Program administration. The GSM-102 program will be
administered under the direction of the General Sales Manager and Vice
President, CCC, pursuant to this part and any Program Announcements
issued by CCC pursuant to, and not inconsistent with, this part. From
time to time, CCC may issue a Notice to Participants on the FAS Web
site reminding participants of the requirements of this subpart, or
clarifying provisions of this subpart. Information regarding specific
points of contact for the public, including names, addresses, and
telephone and facsimile numbers of particular USDA or CCC offices, will
be available on the Foreign Agricultural Service (FAS) Web site.
(c) Country and regional program announcements. From time to time,
CCC will issue a Program Announcement on the FAS Web site to announce a
GSM-102 program for a specific country or region. The Program
Announcement for a country or region will designate specific U.S.
agricultural commodities or products thereof, or designate that all
eligible commodities are available under the announcement. The Program
Announcement will contain any requirements applicable to that country
or region as determined by CCC.


Sec. 1493.20 Definition of terms.

Terms set forth in this part, on the FAS Web site (including in
Program Announcements and Notices to Participants), and in any CCC-
originated documents pertaining to the GSM-102 program will have the
following meanings:
(a) Affiliate. Entities or persons are affiliates of each other if,
directly or indirectly, either one controls or has the power to control
the other or a third person controls or has the power to control both.
Control may include, but is not limited to: interlocking management or
ownership; identity of interests among family members; shared
facilities and equipment; common use of employees; or a business entity
which has been organized following the exclusion of a person from
eligibility to enter into certain procurement or non-procurement
transactions with the U.S. Government that has the same or similar
management, ownership, or principal employees as the excluded person.
(b) Assignee. A U.S. financial institution that has obtained the
legal right to make claim and receive the payment of proceeds under the
payment guarantee.
(c) Business day. Days during which employees of the U.S.
Department of Agriculture in the Washington, DC., metropolitan area are
on official duty during normal business hours.
(d) CCC. The Commodity Credit Corporation, an agency and
instrumentality of the United States within the Department of
Agriculture, authorized pursuant to the Commodity Credit Corporation
Charter Act (15 U.S.C. 714 et seq.), further specifically authorized to
carry out the GSM-102 Program pursuant to section 202 of the
Agricultural Trade Act of 1978, as amended, and subject to the general
supervision and direction of the Secretary of Agriculture.
(e) CCC late interest. Interest payable by CCC pursuant to Sec.
1493.180(c).
(f) Cost and Freight (CFR). A customary trade term, as defined by
the International Chamber of Commerce, Incoterms (current revision),
indicating that the seller delivers when the goods pass the ship's rail
in the port of shipment, and the seller pays the cost and freight
necessary to bring the goods to the named port of destination.

[[Page 44844]]

(g) Cost Insurance and Freight (CIF). A customary trade term, as
defined by the International Chamber of Commerce, Incoterms (current
revision), indicating that the seller delivers when the goods pass the
ship's rail in the port of shipment, and the seller pays the cost and
freight necessary to bring the goods to the named port of destination,
as well as the marine insurance.
(h) Date of export. One of the following dates, depending upon the
method of shipment: the on-board date of an ocean bill of lading or the
on-board ocean carrier date of an intermodal bill of lading; the on-
board date of an airway bill; or, if exported by rail or truck, the
date of entry shown on an entry certificate or similar document issued
and signed by an official of the Government of the importing country.
(i) Date of sale. The earliest date on which a firm export sales
contract exists between the exporter, or an intervening purchaser, if
applicable, and the importer.
(j) Director. The Director, Credit Programs Division, Office of
Trade Programs, Foreign Agricultural Service, or designee.
(k) Discounts and allowances. Any consideration provided directly
or indirectly, by or on behalf of the exporter or an intervening
purchaser, to the importer in connection with a sale of an agricultural
commodity, above and beyond the commodity's value, stated on the
appropriate FOB, FAS, CFR or CIF basis. Discounts and allowances
include, but are not limited to, the provision of additional goods,
services or benefits; the promise to provide additional goods, services
or benefits in the future; financial rebates; the assumption of any
financial or contractual obligations; commissions where the buyer
requires the exporter to employ and compensate a specified agent as a
condition of concluding the export sale; the whole or partial release
of the importer from any financial or contractual obligations; or
settlements made in favor of the importer for quality or weight.
(l) Eligible interest. The amount of interest that CCC agrees to
pay the exporter or the exporter's assignee in the event that CCC pays
a claim for default of ordinary interest. Such amount of interest that
CCC agrees to pay equals the lesser of:
(1) The amount calculated using the interest rate specified between
the exporter or exporter's assignee and the foreign financial
institution; or
(2) The amount calculated using the specified percentage of the
Treasury bill investment rate set forth on the face of the payment
guarantee.
(m) EPLS (Excluded Parties List System). The electronic version of
the Lists of Parties Excluded from Federal Procurement and
Nonprocurement Programs, which identifies those parties excluded
throughout the U.S. Government (unless otherwise noted) from receiving
Federal contracts or certain subcontracts and excluded from certain
types of Federal financial and nonfinancial assistance and benefits.
The EPLS can be found at www.epls.gov.
(n) Exported value. (1) Where CCC announces coverage on a FAS or
FOB basis and:
(i) Where the commodity is sold on a FAS or FOB basis, the value,
FAS or FOB basis, U.S. point of export, of the export sale, reduced by
the value of any discounts or allowances granted to the importer in
connection with such sale; or
(ii) Where the commodity was sold on a CFR or CIF basis, point of
entry, the value of the export sale, FAS or FOB, point of export, is
measured by the CFR or CIF value of the agricultural commodity less the
cost of ocean freight, as determined at the time of application and, in
the case of CIF sales, less the cost of marine and war risk insurance,
as determined at the time of application, reduced by the value of any
discounts or allowances granted to the importer in connection with the
sale of the commodity; or
(2) Where CCC announces coverage on a CFR or CIF basis, and where
the commodity is sold on a CFR or CIF basis, point of entry, the total
value of the export sale, CFR or CIF basis, point of entry, reduced by
the value of any discounts or allowances granted to the importer in
connection with the sale of the commodity.
(3) When a CFR or CIF commodity export sale involves the
performance of non-freight services to be performed outside the United
States (e.g., services such as bagging bulk cargo) which are not
normally included in ocean freight contracts, the value of such
services and any related materials not exported from the U.S. with the
commodity must also be deducted from the CFR or CIF sales price in
determining the exported value.
(o) Exporter. A seller of U.S. agricultural commodities or products
thereof that is both qualified in accordance with the provisions of
Sec. 1493.30 and the applicant for the payment guarantee.
(p) FAS Web site. Location of information related to the GSM-102
program, including program announcements, press releases, notices to
participants, program contact information, eligible U.S. and foreign
financial institutions, eligible commodities, etc. The Web site also
provides details on where and by what method participants may submit
documentation required by this subpart. The current Web site is http://www.fas.usda.gov/excredits/exp-cred-guar-new.asp.
(q) Final date to export. The final allowable date to export as
shown on the payment guarantee.
(r) Firm export sales contract. The written sales contract entered
into between the exporter and the importer (or, if applicable, the
written sales contracts between the exporter and the intervening
purchaser and the intervening purchaser and the importer) which sets
forth the terms and conditions of a sale of the eligible commodity from
the exporter to the importer (or, if applicable, the sale of the
eligible commodity from the exporter to the intervening purchaser and
the intervening purchaser and the importer). Written evidence of a sale
may be in the form of a signed sales contract, a written offer and
acceptance between parties, or other documentary evidence of sale. The
written evidence of sale for the purposes of the GSM-102 program must,
at a minimum, document the following information: The eligible
commodity, quantity, quality specifications, delivery terms (FOB, C&F,
etc.) to the eligible country or region, delivery period, unit price,
payment terms, date of sale, and evidence of agreement between buyer
and seller. The sales contract between the exporter and the importer
(or, if applicable, between the exporter and the intervening purchaser
and between the intervening purchaser and the importer) may be
conditioned upon CCC's approval of the exporter's payment guarantee
application.
(s) Foreign financial institution. A financial institution:
(1) Organized under the laws of a jurisdiction outside the United
States;
(2) Not domiciled in the United States; and
(3) Subject to the banking or other financial regulatory authority
of a foreign jurisdiction.
(t) Foreign financial institution letter of credit. An irrevocable
documentary letter of credit, subject to the current revision of the
Uniform Customs and Practices for Documentary Credits (International
Chamber of Commerce Publication No. 600, or latest revision), providing
for payment in U.S. dollars against stipulated documents and issued in
favor of the exporter by a CCC-approved foreign financial institution.
For the purpose of the GSM-102 program, CCC will consider applications
for payment guarantees to finance

[[Page 44845]]

export sales of U.S. agricultural commodities where the payment for the
agricultural commodities will be made in one of the two following ways:
(1) An irrevocable documentary letter of credit issued by a foreign
financial institution specifically stating the deferred payment terms
under which the foreign financial institution is obligated to make
payments to the exporter, or the exporter's assignee, in U.S. dollars
as such payments become due; or
(2) An irrevocable documentary letter of credit issued by a foreign
financial institution that is supported by a related obligation
specifically stating the deferred payment terms under which the foreign
financial institution is obligated to make payment to the exporter, or
the exporter's assignee, in U.S. dollars as such payments become due.
(u) Free Alongside Ship (FAS). A customary trade term, as defined
by the International Chamber of Commerce, Incoterms (current revision),
indicating that the seller delivers when the goods are placed alongside
the vessel at the named port of shipment, and the buyer bears all costs
and risks of loss of or damage to the goods from that moment.
(v) Free on Board (FOB). A customary trade term, as defined by the
International Chamber of Commerce, Incoterms (current revision),
indicating that the seller delivers when the goods pass the ship's rail
at the named port of shipment, and the buyer bears all costs and risks
of loss of or damage to the goods from that moment.
(w) GSM. The General Sales Manager, Foreign Agricultural Service
(FAS), USDA, acting in his or her capacity as Vice President, CCC, or
designee.
(x) Guaranteed value. The maximum amount, exclusive of interest,
that CCC agrees to pay the exporter or assignee under CCC's payment
guarantee, as indicated on the face of the payment guarantee.
(y) Importer. A foreign buyer, physically located in the country or
region of destination specified in the payment guarantee that enters
into a firm export sales contract with an exporter or with an
intervening purchaser for an export sale of agricultural commodities to
be shipped from the United States to the foreign buyer. A foreign buyer
that is not physically located in the country or region of destination
but has an agent or other entity in the country or region of
destination to act on the foreign buyer's behalf does not satisfy the
criteria of this definition.
(z) Intervening purchaser. A party that is not located in the
country or region of destination specified in the payment guarantee and
that enters into a firm export sales contract to purchase U.S.
agricultural commodities from an exporter and sell the same
agricultural commodities to an importer.
(aa) Letter of credit account party. An entity on whose behalf a
foreign financial institution letter of credit is opened in favor of
the exporter.
(bb) Notice to participants. A notice issued by CCC on the FAS Web
site to remind participants of the requirements of the program or to
clarify the program requirements contained in these regulations in a
manner not inconsistent with this subpart.
(cc) OFAC. The Office of Foreign Assets Control of the U.S.
Department of Treasury, which administers and enforces economic
sanctions programs primarily against countries and groups of
individuals such as terrorists and narcotics traffickers. OFAC's
Specially Designated National's list can be found at http://www.ustreas.gov/offices/enforcement/ofac/sdn/index.shtml.
(dd) Ordinary interest. Interest charged on the principal amount
identified in the foreign financial institution's letter of credit or
related obligation, other than post default interest.
(ee) Payment guarantee. An agreement under which CCC, in
consideration of a fee paid, and in reliance upon the statements and
declarations of the exporter, subject to the terms set forth in the
written guarantee, this subpart, and any applicable Program
Announcements, agrees to pay the exporter or the exporter's assignee in
the event of a default by a foreign financial institution on its
payment obligation under the foreign financial institution letter of
credit issued in connection with a guaranteed sale or under the foreign
financial institution's related obligation.
(ff) Port value. (1) Where CCC announces coverage on a FAS or FOB
basis and:
(i) Where the commodity is sold on a FAS or FOB basis, U.S. point
of export, the value, FAS or FOB basis, U.S. point of export, of the
export sale, including the upward loading tolerance, if any, as
provided by the export sales contract, reduced by the value of any
discounts or allowances granted to the importer in connection with such
sale; or
(ii) Where the commodity was sold on a CFR or CIF basis, point of
entry, the value of the export sale, FAS or FOB, point of export,
including the upward loading tolerance, if any, as provided by the
export sales contract, is measured by the CFR or CIF value of the
agricultural commodity less the value of ocean freight and, in the case
of CIF sales, less the value of marine and war risk insurance, reduced
by the value of any discounts or allowances granted to the importer in
connection with the sale of the commodity; or
(2) Where CCC announces coverage on a CFR or CIF basis and where
the commodity was sold on CFR or CIF basis, point of entry, the total
value of the export sale, CFR or CIF basis, point of entry, including
the upward loading tolerance, if any, as provided by the export sales
contract, reduced by the value of any discounts or allowances granted
to the importer in connection with the sale of the commodity.
(3) When a CFR or CIF commodity export sale involves the
performance of non-freight services to be performed outside the United
States (e.g., services such as bagging bulk cargo), which are not
normally included in ocean freight contracts, the value of such
services and any related materials not exported from the U.S. with the
commodity must also be deducted from the CFR or CIF sales price in
determining the port value.
(gg) Post default interest. Interest charged on amounts in default,
as specified in the foreign financial institution letter of credit or
related obligation that begins to accrue upon default of payment.
(hh) Principal. An officer, director, owner of five percent or more
of stock, partner, or person having primary management or supervisory
responsibility within a business entity (e.g., general manager, plant
manager, head of a subsidiary division, or business segment).
(ii) Program announcement. An announcement issued by CCC on the FAS
Web site that provides information on specific country and regional
programs and may identify eligible agricultural commodities and
countries, length of credit periods which may be covered, and other
information.
(jj) Related obligation. A contractual commitment by the foreign
financial institution issuing the letter of credit in connection with
an export sale to make payment(s) on principal amount(s), plus any
ordinary and post-default interest, in U.S. dollars, to an exporter or
U.S. financial institution on deferred payment terms consistent with
those permitted under CCC's payment guarantee. The U.S. financial
institution (or exporter) is entitled to such payments because it has
financed the obligation arising under such letter of credit.
(kk) Repurchase agreement. A written agreement under which the
holder of CCC's payment guarantee, either the exporter or exporter's
assignee,

[[Page 44846]]

whichever is applicable, may from time to time enter into transactions
in which the exporter or exporter's assignee agrees to sell to another
party foreign financial institution letter(s) of credit and/or related
obligation(s) secured by CCC's payment guarantee, and repurchase the
same foreign financial institution letter(s) of credit and/or related
obligation(s) secured by CCC's payment guarantee, on demand or date
certain at an agreed upon price.
(ll) United States or U.S. Each of the States, the District of
Columbia, Puerto Rico, and the territories and possessions of the
United States.
(mm) U.S. agricultural commodity. (1)(i) An agricultural commodity
or product entirely produced in the United States; or
(ii) A product of an agricultural commodity--
(A) 90 percent or more of the agricultural components of which by
weight, excluding packaging and added water, is entirely produced in
the United States; and
(B) That the Secretary determines to be a high value agricultural
product.
(2) For purposes of this definition, fish entirely produced in the
United States include fish harvested by a documented fishing vessel as
defined in title 46, United States Code, in waters that are not waters
(including the territorial sea) of a foreign country.
(nn) USDA. United States Department of Agriculture.
(oo) U.S. financial institution. A financial institution:
(1) Organized under the laws of a jurisdiction within the United
States;
(2) Domiciled in the United States; and
(3) Subject to the banking or other financial regulatory authority
jurisdiction within the United States.


Sec. 1493.30 Information required for exporter participation.

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


Sec. 1493.40 Information required for U.S. financial institution
participation.

Before CCC will permit a U.S. financial institution to participate
under the GSM-102 program, the U.S. financial institution must qualify
for participation in this program.
(a) Qualification requirements. In order to qualify for
participation in the GSM-102 program, a U.S. financial institution must
submit the following information to CCC in the manner specified on the
FAS Web site:
(1) Legal name and address of the applicant;
(2) Dun and Bradstreet (DUNS) number;
(3) Employer Identification Number (EIN--also known as a Federal
Tax Identification Number);
(4) Year end audited financial statements for the applicant's most
recent fiscal year; and

[[Page 44847]]

(5) Breakdown of the U.S. financial institution's ownership as
follows:
(i) Ten largest individual shareholders and ownership percentages;
(ii) Percentage of government ownership, if any; and
(iii) Identity of the legal entity or person with ultimate control
or decision making authority, if other than the majority shareholder.
(6) Organizational structure (independent, or a subsidiary,
affiliate, or branch of another financial institution);
(7) Documentation from the applicable United States Federal or
State agency demonstrating that the applicant is either licensed or
chartered to do business in the United States;
(8) Name of the agency that regulates the applicant and the name
and telephone number of the primary contact for such regulator; and
(9) A statement that: "All Sec. 1493.60 certifications are being
made in this application'' which, when included in the application,
will constitute a certification that the applicant is in compliance
with all of the requirements set forth in Sec. 1493.60. The U.S.
financial institution will be required to provide further explanation
or documentation with regard to applications that do not include this
statement.
(b) Qualification notification. CCC will notify applicants that
have submitted information required by this section whether they have
qualified to participate in the program or whether further information
is required by CCC. Any applicant failing to qualify will be given an
opportunity to provide additional information for consideration by the
Director.
(c) Previous qualification. Any U.S. financial institution not
participating in the GSM-102 program for two consecutive fiscal years
must resubmit the information and certifications requested by paragraph
(a) of this section to CCC. If at any time the information required by
paragraph (a) of this section changes, the U.S. financial institution
must promptly notify CCC to update this information and certify that
the remainder of the information previously provided under paragraph
(a) has not changed.
(d) Ineligibility for program participation. A U.S. financial
institution may be ineligible to participate in the GSM-102 program at
time of application or any time thereafter if such applicant cannot
provide all of the information and certifications required in
1493.40(a).


Sec. 1493.50 Information required for foreign financial institution
participation.

Before CCC will permit a foreign financial institution to
participate under the GSM-102 program, the foreign financial
institution must qualify for participation in this program.
(a) Qualification requirements. In order to qualify for
participation in the GSM-102 program, a foreign financial institution
must submit the following information to CCC in the manner specified on
the FAS Web site:
(1) Legal name and address of the applicant;
(2) Year end, audited financial statements for the applicant's
three most recent fiscal years;
(3) Breakdown of applicant's ownership as follows:
(i) Ten largest individual shareholders and ownership percentages;
(ii) Percentage of government ownership, if any; and
(iii) Identity of the legal entity or person with ultimate control
or decision making authority, if other than the majority shareholder.
(4) Organizational structure (independent, or a subsidiary,
affiliate, or branch of another legal entity);
(5) Name of foreign government agency that regulates the applicant;
and
(6) A statement that: "All Sec. 1493.60 certifications are being
made in this application'' which, when included in the application,
will constitute a certification that the applicant is in compliance
with all of the requirements set forth in Sec. 1493.60. The foreign
financial institution will be required to provide further explanation
or documentation with regard to applications that do not include this
statement.
(b) Qualification notification. CCC will notify applicants that
have submitted information required by this section whether they have
qualified to participate in the program or whether further information
is required by CCC. Any applicant failing to qualify will be given an
opportunity to provide additional information for consideration by the
Director.
(c) Participation limit. If, after review of the information
submitted and other publicly available information, CCC determines that
the foreign financial institution is eligible for participation, CCC
will establish a dollar participation limit for the institution. This
limit will be the maximum amount of exposure CCC agrees to undertake
with respect to this foreign financial institution at any point in
time. CCC may change or cancel this dollar participation limit at any
time based on any information submitted or any publicly available
information.
(d) Previous qualification and submission of annual financial
statements. Each qualified foreign financial institution shall submit
annually to CCC its audited fiscal year-end financial statements so
that CCC may determine the continued ability of the foreign financial
institution to adequately service CCC guaranteed debt. Failure to
submit this information annually may cause CCC to decrease or cancel
the foreign financial institution's dollar participation limit.
Additionally, if at any time the information required by paragraph (a)
of this section changes, the foreign financial institution must
promptly contact CCC to update this information and certify that the
remainder of the information previously provided under paragraph (a)
has not changed.
(e) Ineligibility for program participation. A foreign financial
institution may be ineligible to participate in the GSM-102 program at
time of application or any time thereafter if:
(1) Such applicant cannot provide all of the information and
certifications required in Sec. 1493.50(a); or
(2) Based upon information submitted by the applicant or other
publicly available sources, CCC determines that the applicant cannot
adequately service the debt associated with the payment guarantees
issued by CCC.


Sec. 1493.60 Certifications required for program participation.

(a) When making the statement required by Sec. Sec. 1493.30(a)(7),
1493.40(a)(9), or 1493.50(a)(6), each exporter, U.S. financial
institution and foreign financial institution applicant for program
participation is certifying that, to the best of its knowledge and
belief:
(1) The applicant and any of its principals or affiliates are not
presently debarred, suspended, proposed for debarment, declared
ineligible, or excluded from covered transactions by any U.S. Federal
department or agency;
(2) The applicant and any of its principals or affiliates have not
within a three-year period preceding this application been convicted of
or had a civil judgment rendered against them for commission of fraud
or a criminal offense in connection with obtaining, attempting to
obtain, or performing a public (Federal, State, or local) transaction
or contract under a public transaction; violation of Federal or State
antitrust statues or commission of embezzlement, theft, forgery,
bribery, falsification or destruction of records,

[[Page 44848]]

making false statements, or receiving stolen property;
(3) The applicant and any of its principals or affiliates are not
presently indicted for or otherwise criminally or civilly charged by a
governmental entity (Federal, State or local) with commission of any of
the offenses enumerated in paragraph (a)(2) of this section;
(4) The applicant and any of its principals or affiliates have not
within a three-year period preceding this application had one or more
public transactions (Federal, State or local) terminated for cause or
default;
(5) The applicant does not have any outstanding nontax debt to the
United States that is in delinquent status as provided in 31 CFR
285.13;
(6) The applicant is not controlled by a person owing an
outstanding nontax debt to the United States that is in delinquent
status as provided in 31 CFR 285.13 (e.g., a corporation is not
controlled by an officer, director, or shareholder who owes a debt);
and
(7) The applicant does not control a person owing an outstanding
nontax debt to the United States that is in delinquent status as
provided in 31 CFR 285.13 (e.g., a corporation does not control a
wholly-owned or partially-owned subsidiary which owes a debt).
(b) Additional certifications for U.S. and foreign financial
institution applicants. When making the statement required by Sec.
1493.40(a)(9) or Sec. 1493.50(a)(6), each U.S. and foreign financial
institution applicant for program participation is certifying that, to
the best of its knowledge and belief:
(1) The applicant and any of its principals are in compliance with
all requirements, restrictions and guidelines as established by the
applicant's regulators; and
(2) All U.S. operations of the applicant and any of its U.S.
principals are in compliance with U.S. anti-money laundering and
terrorist financing statutes including, but not limited to, the USA
Patriot Act of 2001.


Sec. 1493.70 Application for payment guarantee.

(a) A firm export sales contract must exist before an exporter may
submit an application for a payment guarantee. Upon request by CCC, the
exporter must provide evidence of a firm export sales contract. An
application for a payment guarantee must be submitted in writing to CCC
in the manner specified on the FAS Web site. An application must
identify the name and address of the exporter and include the following
information:
(1) Name of the destination country or region.
(2) Name and address of the importer.
(3) Name and address of the letter of credit account party, if
other than the importer.
(4) Name and address of the intervening purchaser, if any, and a
statement that the commodity will be shipped directly to the importer
in the destination country or region.
(5) Date of sale.
(6) Exporter's sale number.
(7) Delivery period as agreed between the exporter and the
importer.
(8) A full description of the commodity (including packaging, if
any).
(9) Mean quantity, contract loading tolerance and, if necessary, a
request for CCC to reserve coverage up to the maximum quantity
permitted.
(10) Unit sales price of the commodity, or a mechanism to establish
the price, as agreed between the exporter and the importer. If the
commodity was sold on the basis of CFR or CIF, the actual (if known at
the time of application) or estimated value of freight and, in the case
of sales made on a CIF basis, the actual (if known at the time of
application) or estimated value of marine and war risk insurance, must
be specified.
(11) Description and value of discounts and allowances, if any.
(12) Port value (includes upward loading tolerance, if any).
(13) Guaranteed value.
(14) Guarantee fee, either as announced on the Web site per Sec.
1493.110(a)(1), or the competitive fee bid per Sec. 1493.110(a)(2),
depending on the type of fee charged by CCC for the country or region.
(15) Name and location of the foreign financial institution issuing
the letter of credit and, upon request by CCC, written evidence that
the foreign financial institution has agreed to issue the letter of
credit.
(16) The term length for the credit being extended and the
intervals between principal payments for each shipment to be made under
the export sale.
(17) A statement indicating whether any portion of the export sale
for which the exporter is applying for a payment guarantee is also
being used as the basis for an application for participation in USDA's
Dairy Export Incentive Program (DEIP). The number of the Agreement
assigned by USDA under the DEIP should be included, as applicable.
(18) The exporter's statement, "ALL Sec. 1493.80 CERTIFICATIONS
ARE BEING MADE IN THIS APPLICATION'' which, when included in the
application by the exporter, will constitute a certification that it is
in compliance with all the requirements set forth in Sec. 1493.80.
(b) An application for a payment guarantee may be approved as
submitted, approved with modifications agreed to by the exporter, or
rejected by the Director. In the event that the application is
approved, the Director will cause a payment guarantee to be issued in
favor of the exporter. Such payment guarantee will become effective at
the time specified in Sec. 1493.100(b). If, based upon a price review,
the unit sales price of the commodity does not fall within the
prevailing commercial market level ranges, as determined by CCC, the
application will not be approved.


Sec. 1493.80 Certification requirements for obtaining payment
guarantee.

By providing the statement in Sec. 1493.70(a)(18), the exporter is
certifying that the information provided in the application is true and
correct and, further, that all requirements set forth in this section
have been met. The exporter will be required to provide further
explanation or documentation with regard to applications that do not
include this statement. If the exporter makes false certifications with
respect to a GSM-102 payment guarantee, CCC will have the right, in
addition to any other rights provided under this subpart or otherwise
as a matter of law, to revoke guarantee coverage for any commodities
not yet exported and/or to proceed against the exporter. The exporter,
in submitting an application for a payment guarantee and providing the
statement set forth in Sec. 1493.70(a)(18), certifies that:
(a) The agricultural commodity or product covered by the payment
guarantee is a U.S. agricultural commodity;
(b) There have not been any corrupt payments or extra sales
services or other items extraneous to the transaction provided,
financed, or guaranteed in connection with the transaction, and that
the transaction complies with applicable United States law, including
the Foreign Corrupt Practices Act of 1977 and other anti-bribery
measures;
(c) If the agricultural commodity is vegetable oil or a vegetable
oil product, that none of the agricultural commodity or product has
been or will be used as a basis for a claim of a refund, as drawback,
pursuant to section 313 of the Tariff Act of 1930, 19 U.S.C. 1313, of
any duty, tax or fee imposed under Federal law on an imported commodity
or product;

[[Page 44849]]

(d) At the time of submission of the application for payment
guarantee, the importer and the intervening purchaser, if applicable,
are not excluded or disqualified from participation in U.S. government
programs through either the EPLS or OFAC Specially Designated Nationals
(SDN) lists; and
(e) The information provided pursuant to Sec. 1493.30 has not
changed and the exporter still meets all of the qualification
requirements of Sec. 1493.30.


Sec. 1493.90 Terms and requirements of the foreign financial
institution letter of credit and related obligation.

(a) Foreign financial institution letter of credit. (1) The foreign
financial institution letter of credit must contain the following
language: "Issuer acknowledges that issuer has arranged funding for
the purpose of financing the trade transaction covered by this Letter
of Credit. Issuer confirms the underlying transaction is a bona fide
trade transaction and, consequently, this Letter of Credit will be
booked by issuer as trade finance debt.''
(2) The foreign financial institution letter of credit or related
obligation must also contain a provision permitting the exporter and
the exporter's assignee, if any, to declare all or any part of the
debt, including accrued interest, immediately due and payable, in the
event a payment default occurs under the obligation to which the
payment guarantee(s) applies.
(3) The commodity grade and quality specified in the foreign
financial institution letter of credit must be consistent with the
commodity grade and quality specified in the firm export sales
contract.
(b) Related obligation. The related obligation must be demonstrated
in one of the following ways:
(1) The related obligation, including a specific promise to pay on
deferred payment terms, may be contained in the letter of credit as a
special instruction from the issuing financial institution directly to
the U.S. financial institution to refinance the amounts paid by the
U.S. financial institution for obligations financed according to the
tenor of the letter of credit; or
(2) The related obligation may be memorialized in a separate
document(s) specifically identified and referred to in the letter of
credit as the agreement under which the foreign financial institution
is obliged to repay the exporter or U.S. financial institution on
deferred payment terms; or
(3) The foreign financial institution letter of credit payment
obligations may be specifically identified in a separate document(s)
setting forth the related obligation, or in a duly executed amendment
thereto, as having been financed by the U.S. financial institution
pursuant to, and subject to repayment in accordance with the terms of,
such related obligation; or
(4) The related obligation may be memorialized in the form of a
promissory note executed by the foreign financial institution issuing
the foreign financial institution letter of credit in favor of the U.S.
financial institution.


Sec. 1493.100 Terms and requirements of the payment guarantee.

(a) CCC's obligation. The payment guarantee will provide that CCC
agrees to pay the exporter or the exporter's assignee an amount not to
exceed the guaranteed value, plus eligible interest, in the event that
the foreign financial institution fails to pay under the foreign
financial institution letter of credit or the related obligation.
Payment by CCC will be in U.S. dollars.
(b) Period of guarantee coverage. The payment guarantee becomes
effective on the date(s) of export(s) of the agricultural commodities
or products thereof specified in the exporter's application for a
payment guarantee. The payment guarantee will apply to the period
beginning with the date(s) of export(s) and will continue during the
credit term specified in the payment guarantee or amendments thereto.
(c) Terms of the CCC payment guarantee. The terms of CCC's coverage
will be set forth in the payment guarantee, as approved by CCC, and
will include the provisions of this subpart, which may be supplemented
by any Program Announcements and Notices to Participants in effect at
the time the payment guarantee is approved by CCC.
(d) Reserve coverage for loading tolerances. The exporter may apply
for a payment guarantee and, if coverage is available, pay the
guarantee fee, based at least on, the amount of the lower loading
tolerance of the export sales contract; however, the exporter may also
request that CCC reserve additional guarantee coverage to accommodate
up to the amount of the upward loading tolerance specified in the
export sales contract. The amount of coverage that can be reserved to
accommodate the upward loading tolerance is limited to five (5) percent
of the port value of the sale. If such additional guarantee coverage is
available at the time of application and the Director determines to
make such reservation, CCC will so indicate to the exporter. In the
event that the exporter ships a quantity greater than the amount on
which the guarantee fee was paid (i.e., lower loading tolerance), it
may obtain the additional coverage from CCC, up to the amount of the
upward loading tolerance, by filing for an application for amendment to
the payment guarantee, and by paying the additional amount of fee
applicable. If such application for an amendment to the payment
guarantee is not filed with CCC by the exporter or the additional fee
not received by CCC within 15 calendar days after the date of the last
export against the sales contract, CCC will cancel the reserve coverage
originally set aside for the exporter.
(e) Prohibited transactions. An export transaction is ineligible
for GSM-102 coverage if at any time it is determined that:
(1) The commodity is not a U.S. agricultural commodity; or
(2) The export sale includes corrupt payments or extra sales or
services or other items extraneous to the transactions provided,
financed, or guaranteed in connection with the transaction; or
(3) The export sale does not comply with applicable U.S. law,
including the Foreign Corrupt Practices Act of 1977 and other anti-
bribery measures; or
(4) If the agricultural commodity is vegetable oil or a vegetable
oil product, any of the agricultural commodity or product has been or
will be used as a basis for a claim of a refund, as drawback, pursuant
to section 313 of the Tariff Act of 1930, 19 U.S.C. 1313, of any duty,
tax or fee imposed under Federal law on an imported commodity or
product; or
(5) Either the importer or the intervening purchaser, if
applicable, is excluded or disqualified from participation in U.S.
government programs; or
(6) The export transaction has been guaranteed by CCC under another
payment guarantee.
(f) Ineligible exports. The following exports are ineligible for
GSM-102 guarantee coverage except where it is determined by the
Director to be in the best interest of CCC to provide guarantee
coverage on such commodities:
(1) Commodities with a date of export prior to the date of receipt
by CCC of the exporter's written application for a payment guarantee;
(2) Commodities with a date of export made after the final date to
export shown on the payment guarantee or any amendments thereof; or
(3) Commodities where the date of issuance of a foreign financial
institution letter of credit is more than 30 calendar days after the
date of export.
(g) Additional requirements. The payment guarantee may contain such
additional terms, conditions, and

[[Page 44850]]

limitations as deemed necessary or desirable by the Director. Such
additional terms, conditions or qualifications as stated in the payment
guarantee are binding on the exporter or the exporter's assignee.
(h) Amendments. A request for an amendment of a payment guarantee
may be submitted only by the exporter, with the written concurrence of
the assignee, if any. The Director will consider such a request only if
the amendment sought is consistent with this subpart and any applicable
Program Announcements and sufficient budget authority exists. Any
amendment to the payment guarantee, particularly those that result in
an increase in CCC's liability under the payment guarantee, may result
in an increase in the guarantee fee. CCC reserves the right to request
additional information from the exporter to justify the request and to
charge a fee for amendment requests. Such fees will be announced and
available on the FAS Web site. Any amendment to the foreign financial
institution will require that the exporter or the exporter's assignee,
if applicable, resubmit to CCC the certifications in Sec.
1493.120(c)(1) or Sec. 1493.140(c).


Sec. 1493.110 Guarantee fees.

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


Sec. 1493.120 Assignment of the payment guarantee.

(a) Requirements for assignment. The exporter may assign the
payment guarantee only to a U.S. financial institution approved for
participation by CCC. The assignment must cover all amounts payable
under the payment guarantee not already paid, may not be made to more
than one party, and may not, unless approved in advance by CCC, be:
(1) Made to one party acting for two or more parties, or
(2) Subject to further assignment to another U.S. financial
institution approved by CCC.
(b) Submission of assignment. A notice of assignment signed by the
parties thereto must be filed by the assignee with CCC in the manner
specified on the FAS Web site. The name and address of the assignee
must be included on the written notice of assignment.
(c) Required certifications. (1) The U.S. financial institution
must include the following certification on the notice of assignment:
"I certify, to the best of my knowledge and belief, that:
(i) [Name of assignee] has verified that the foreign financial
institution, at the time of submission of the notice of assignment, is
not excluded or disqualified from participation in U.S. government
programs through either the EPLS or OFAC Specially Designated Nationals
(SDN) lists; and
(ii) The information provided pursuant to Sec. 1493.40 has not
changed and [name of assignee] still meets all of the qualification
requirements of Sec. 1493.40.''
(2) If the assignee makes false certifications with respect to a
GSM-102 payment guarantee, CCC will have the right, in addition to any
other rights provided under this subpart or otherwise as a matter of
law, to revoke the assignment and/or to proceed against the assignee.
(d) Notice of eligibility to receive assignment. In cases where a
U.S. financial institution is determined to be ineligible to receive an
assignment, in accordance with paragraph (e) of this section, CCC will
provide notice thereof to the U.S. financial institution and to the
exporter issued the payment guarantee.
(e) Ineligibility of U.S. financial institutions to receive an
assignment and proceeds. A U.S. financial institution will be
ineligible to receive an assignment of a payment guarantee or the
proceeds payable under a payment guarantee approved by CCC if such U.S.
financial institution:
(1) At the time of assignment of a payment guarantee, is not in
compliance with all requirements of 1493.40(a); or
(2) Is the branch, agency, or subsidiary of the foreign financial
institution issuing the letter of credit; or
(3) Is owned or controlled by an entity that owns or controls the
foreign financial institution issuing the letter of credit; or
(4) Is the U.S. parent of the foreign financial institution issuing
the letter of credit; or
(5) Is owned or controlled by the government of a foreign country
and the payment guarantee has been issued in connection with export
sales of agricultural commodities to importers located in such foreign
country.
(f) Repurchase agreements. An exporter who holds a CCC payment
guarantee or an assignee may enter into a repurchase agreement.
(1) The exporter or exporter's assignee in the repurchase agreement
must comply with the following:
(i) Any repurchase under a repurchase agreement by the exporter or
exporter's assignee must be for the entirety of outstanding balance
under the GSM-102 related foreign financial institution letter of
credit and/or related obligation;
(ii) In the event of default with respect to the obligation subject
to a repurchase agreement, the exporter or exporter's assignee, as
applicable, must immediately effect such repurchase;
(iii) The exporter or exporter's assignee must maintain full
servicing of the foreign financial institution letter of credit and/or
related obligation covered by the CCC payment guarantee at all times;
and
(iv) The exporter or exporter's assignee must file all
documentation required by Sec. 1493.160 and 1493.170 in case of
default by the foreign financial institution under the payment
guarantee; and
(v) The exporter or exporter's assignee must include the following
clause in the repurchase agreement: "If during the

[[Page 44851]]

tenor of this repurchase agreement the foreign financial institution
issuing the underlying letter of credit in the GSM-102 transaction
fails to make payment pursuant to the terms of such letter of credit
and/or related obligation, [Name of exporter or exporter's assignee,
whichever is applicable] shall repurchase the same letter of credit
and/or related obligation transferred to [name of other party to the
repurchase agreement] under this repurchase agreement prior to filing a
notice of default to the Commodity Credit Corporation, pursuant to 7
CFR part 1493.160.''
(2) An exporter who holds a CCC payment guarantee or an assignee
shall, within five business days of execution of the repurchase
agreement, notify CCC of the repurchase agreement in writing in the
manner specified on the FAS Web site. Such notification must include
the following information:
(i) Name and address of the other party to the repurchase
agreement; and
(ii) A statement indicating whether the repurchase agreement is for
a fixed tenor or if it is terminable upon demand. If fixed, provide the
purchase date and repurchase date agreed to in the repurchase
agreement. If terminable on demand, provide the purchase date only; and
(iii) The following written certification: "[Name of exporter or
assignee] has entered into a repurchase agreement that meets the
provisions of 7 CFR 1493.120(f)(1) and, prior to entering into this
agreement, verified that [name of other party to the repurchase
agreement] is not excluded or disqualified from participation in U.S.
government programs through either the EPLS or OFAC Specially
Designated Nationals (SDN) lists.''
(3) Failure of the exporter or assignee to comply with any of the
provisions of Sec. 1493.120(f) will result in CCC annulling coverage
on the foreign financial institution letter of credit and/or related
obligation covered by the payment guarantee.


Sec. 1493.130 Evidence of export.

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


Sec. 1493.140 Certification requirements for the evidence of export.

By providing the statement contained in Sec. 1493.130(a)(12), the
exporter is certifying that the information provided in the evidence of
export report is true and correct and, further, that all requirements
set forth in this section have been met. The exporter will be required
to provide further explanation or documentation with regard to reports
that do not include this statement. If the exporter makes false
certifications with respect to a GSM-102 payment guarantee, CCC will
have the right, in addition to any other rights provided under this
subpart or otherwise as a matter of law, to annul guarantee coverage
for any commodities not yet exported and/or to proceed against the
exporter. The exporter, in submitting the evidence of export and
providing the statement set forth in Sec. 1493.130(a)(12), certifies
that:
(a) The agricultural commodity or product exported under the
payment guarantee is a U.S. agricultural commodity;
(b) There have not been any corrupt payments or extra sales
services or other items extraneous to the transaction provided,
financed, or guaranteed in connection with the transaction, and that
the transaction complies with applicable United States law, including
the Foreign Corrupt Practices Act of 1977 and other anti-bribery
measures;
(c) If the exporter has not assigned the payment guarantee to a
U.S. financial institution, the exporter has verified that the foreign
financial institution, at the time of submission of the evidence of
export report, is not excluded or disqualified from participation in
U.S. government programs through either the EPLS or OFAC Specially
Designated Nationals (SDN) lists; and

[[Page 44852]]

(d) The information provided pursuant to Sec. 1493.30 and Sec.
1493.70 has not changed (except as agreed to and amended by CCC) and
the exporter still meets all of the qualification requirements of Sec.
1493.30.


Sec. 1493.150 Proof of entry.

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


Sec. 1493.160 Notice of default.

(a) Notice of default. If the foreign financial institution issuing
the letter of credit fails to make payment pursuant to the terms of the
foreign financial institution letter of credit or related obligation,
the exporter or the exporter's assignee must submit a notice of default
to CCC as soon as possible, but not later than 5 business days after
the date that payment was due from the foreign financial institution
(the due date). A notice of default must be submitted in writing to CCC
in the manner specified on the FAS Web site and must include the
following information:
(1) Payment guarantee number;
(2) Name of the country or region as shown on the payment
guarantee;
(3) Name of the defaulting foreign financial institution;
(4) Payment due date;
(5) Total amount of the defaulted payment due, indicating
separately the amounts for principal and ordinary interest, and
including a copy of the repayment schedule with due dates, principal
amounts and ordinary interest rates for each installment;
(6) Date of foreign financial institution's refusal to pay, if
applicable;
(7) Reason for foreign financial institution's refusal to pay, if
known, and copies of any correspondence with the foreign financial
institution regarding the default.
(b) Failure to comply with time limit for submission. If the
exporter or the exporter's assignee fails to notify CCC of a default
within 5 business days, CCC may deny the claim for that default.
(c) Impact of a default on other existing payment guarantees. (1)
If a foreign financial institution defaults under a CCC payment
guarantee, upon receipt of notice by the exporter from CCC, CCC will
immediately withdraw coverage of any shipments where:
(i) The foreign financial institution letter of credit has been or
will be issued by the foreign financial institution in default, and
(ii) The date of export is to be later than the date of receipt of
CCC's notification to the exporter.
(2) If CCC withdraws coverage for any such shipments, CCC will
permit the exporter (with concurrence of the assignee, if any) to
utilize another approved foreign financial institution for the balance
of the transaction covered by the payment guarantee. If no alternate
foreign financial institution can be found, CCC will cancel the portion
of the payment guarantee corresponding to any unshipped amounts plus
any shipped amounts with a date of export later than the date of the
first default by the foreign financial institution and refund the
guarantee fees corresponding to these amounts.


Sec. 1493.170 Claims for default.

(a) Filing a claim. A claim by the exporter or the exporter's
assignee for a defaulted payment will not be paid if it is made later
than 180 calendar days from the due date of the defaulted payment. A
claim must be submitted in writing to CCC in the manner specified on
the FAS Web site. The claim must include the following information and
documents:
(1) Payment guarantee number;
(2) A certification that the scheduled payment has not been
received;
(3) A certification of the total amount of the defaulted payment
due, indicating separately the amounts for principal and ordinary
interest, and including a copy of the repayment schedule with due
dates, principal amounts and ordinary interest rates for each
installment;
(4) A description of:
(i) Any payments from or on behalf of the defaulting party or
otherwise related to the defaulted payment that were received by the
exporter or the exporter's assignee prior to submission of the claim
(excluding scheduled payments received under the letter of credit and/
or related obligation prior to the initial default); and
(ii) Any security, insurance, or collateral arrangements, whether
or not any payment has been realized from such security, insurance, or
collateral arrangement as of the time of claim, from or on behalf of
the defaulting party or otherwise related to the defaulted payment.
(5) A copy of each of the following documents, with a cover
document containing a signed certification by the exporter or the
exporter's assignee that all documents are true and correct copies:
(i)(A) the foreign financial institution letter of credit securing
the export sale; and
(B) If applicable, the document(s) evidencing the related
obligation owed by the foreign financial institution to the exporter or
the exporter's assignee.
(ii) Depending upon the method of shipment, the negotiable ocean
carrier or intermodal bill(s) of lading signed by the shipping company
with the onboard ocean carrier date for each shipment, the airway bill,
or, if shipped by rail or truck, the bill of lading and the entry
certificate or similar document signed by an official of the importing
country;
(iii) Proof of entry documentation as required by Sec. 1493.150;
(iv)(A) the exporter's invoice showing, as applicable, the FAS,
FOB, CFR or CIF values; or
(B) If there was an intervening purchaser, both the exporter's
invoice to the intervening purchaser and the intervening purchaser's
invoice to the importer;
(v) An instrument, in form and substance satisfactory to CCC,
subrogating to CCC the respective rights of the exporter and the
exporter's assignee, if applicable, to the amount of payment in default
under the applicable

[[Page 44853]]

export sale. The instrument must reference the applicable foreign
financial institution letter of credit and the related obligation, if
applicable; and
(vi) A copy of the evidence of export report(s) previously
submitted by the exporter to CCC pursuant to Sec. 1493.130(a), or
evidence that the report was submitted to CCC electronically.
(b) Additional documents. If a claim is denied by CCC, the exporter
or exporter's assignee may provide further documentation to CCC to
establish that the claim is in good order.
(c) Subsequent claims for defaults on installments. If the initial
claim is found in good order, the exporter or an exporter's assignee
need only provide all of the required claims documents with the initial
claim relating to a covered transaction. For subsequent claims relating
to failure of the foreign financial institution to make scheduled
installments on the same export shipment, the exporter or the
exporter's assignee need only submit to CCC a notice of such failure
containing the information stated in paragraph (a)(1), (2), and (3) of
this section; an instrument of subrogation as per paragraph (a)(5)(v)
of this section, and including the date the original claim was filed
with CCC.
(d) Alternative satisfaction of payment guarantees. CCC may
establish procedures, terms and/or conditions for the satisfaction of
CCC's obligations under a payment guarantee other than those provided
for in this subpart if CCC determines that those alternative
procedures, terms, and/or conditions are appropriate in rescheduling
the debts arising out of any transaction covered by the payment
guarantee and would not result in CCC paying more than the amount of
CCC's obligation.


Sec. 1493.180 Payment for default.

(a) Determination of CCC's liability. Upon receipt in good order of
the information and documents required under Sec. 1493.170, CCC will
determine whether or not a default has occurred for which CCC is liable
under the applicable payment guarantee. Such determination shall
include, but not be limited to, CCC's determination that all
documentation conforms to the specific requirements contained in this
subpart, and that all documents submitted for payment conform to the
requirements of the letter of credit and/or related obligation. If CCC
determines that it is liable to the exporter and/or the exporter's
assignee, CCC will pay the exporter or the exporter's assignee in
accordance with paragraphs (b) and (c) of this section.
(b) Amount of CCC's liability. CCC's maximum liability for any
claims submitted with respect to any payment guarantee, not including
any CCC late interest payments due in accordance with paragraph (c) of
this section, will be limited to the lesser of:
(1) The guaranteed value as stated in the payment guarantee, plus
eligible interest, less any payments received or funds realized from
insurance, security or collateral arrangements prior to claim by the
exporter or the exporter's assignee from or on behalf of the defaulting
party or otherwise related to the obligation in default (other than
payments between CCC, the exporter or the exporter's assignee); or
(2) The guaranteed percentage (as indicated in the payment
guarantee) of the exported value indicated in the evidence of export,
plus eligible interest, less any payments received or funds realized
from insurance, security or collateral arrangements prior to claim by
the exporter or the exporter's assignee from or on behalf of the
defaulting party or otherwise related to the obligation in default
(other than payments between CCC, the exporter or the exporter's
assignee).
(c) CCC late interest. If CCC does not pay a claim within 15
business days of receiving the claim in good order, late interest will
accrue in favor of the exporter or the exporter's assignee beginning
with the sixteenth business day after the day of receipt of a complete
and valid claim found by CCC to be in good order and continuing until
and including the date that payment is made by CCC. CCC late interest
will be paid on the guaranteed amount, as determined by paragraphs
(b)(1) and (2) of this section, and will be calculated at a rate equal
to the average investment rate of the most recent Treasury 91-day bill
auction as announced by the Department of Treasury as of the due date.
If there has been no 91-day auction within 90 calendar days of the date
CCC late interest begins to accrue, CCC will apply an alternative rate
in a manner to be described on the FAS Web site.
(d) Accelerated payments. CCC will pay claims only on amounts not
paid as scheduled. CCC will not pay claims for amounts due under an
accelerated payment clause in the export sales contract, the foreign
financial institution's letter of credit, or any obligation owed by the
foreign financial institution to the exporter and/or the exporter's
assignee which is related to the foreign financial institution's letter
of credit issued in favor of the exporter, unless it is determined to
be in the best interests of CCC. Notwithstanding the foregoing, CCC at
its option may declare up to the entire amount of the unpaid balance,
plus accrued ordinary interest, in default, require the U.S. financial
institution (or exporter) to invoke the acceleration provision in the
foreign financial institution letter of credit, require submission of
all claims documents specified in Sec. 1493.170, and make payment to
the exporter or the exporter's assignee in addition to such other
claimed amount as may be due from CCC.
(e) Action against the assignee. Notwithstanding any other
provision in this subpart to the contrary, with regard to commodities
covered by a payment guarantee, CCC will not hold the assignee
responsible or take any action or raise any defense against the
assignee for any action, omission, or statement by the exporter of
which the assignee has no knowledge, provided that:
(1) The exporter complies with the reporting requirements under
Sec. 1493.130 and Sec. 1493.140, excluding post-export adjustments
(i.e., corrections to evidence of export reports); and
(2) The exporter or the exporter's assignee furnishes the
statements and documents specified in Sec. 1493.160 and Sec.
1493.170.


Sec. 1493.190 Recovery of defaulted payments.

(a) Notification. Upon claim payment to the exporter or the
exporter's assignee, CCC will notify the foreign financial institution
of CCC's rights under the subrogation agreement to recover all monies
in default.
(b) Receipt of monies. (1) In the event that monies related to the
obligation in default are recovered by the exporter or the exporter's
assignee from or on behalf of the defaulting party, the importer, or
any source whatsoever (excluding payments between CCC, the exporter and
the exporter's assignee), such monies shall be immediately paid to CCC.
Any monies derived from insurance or through the liquidation of any
security or collateral after the claim is filed with CCC shall be
deemed recoveries that must be paid to CCC. If such monies are not
received by CCC within 15 business days from the date of recovery by
the exporter or the exporter's assignee, the exporter or the exporter's
assignee will owe to CCC interest from the date of recovery to the date
of receipt by CCC. This interest will be calculated at a rate equal to
the latest average investment rate of the most recent Treasury 91-day
bill auction, as announced by the Department of Treasury, in effect on
the date of recovery and will accrue from such date to the date of
payment by the exporter

[[Page 44854]]

or the exporter's assignee to CCC. Such interest will be charged only
on CCC's share of the recovery. If there has been no 91-day auction
within 90 calendar days of the date interest begins to accrue, will
apply an alternative rate in a manner to be described on the FAS Web
site.
(2) If CCC recovers monies that should be applied to a payment
guarantee for which a claim has been paid by CCC, CCC will pay the
holder of the payment guarantee its pro rata share immediately,
provided that the required information necessary for determining pro
rata distribution has been furnished. If payment is not made by CCC
within 15 business days from the date of recovery or 15 business days
from receiving the required information for determining pro rata
distribution, whichever is later, CCC will pay interest calculated at a
rate equal to the latest average investment rate of the most recent
Treasury 91-day bill auction, as announced by the Department of
Treasury, in effect on the date of recovery and such interest will
accrue from such date to the date of payment by CCC. The interest will
apply only to the portion of the recovery payable to the holder of the
payment guarantee.
(c) Allocation of recoveries. Recoveries made by CCC from the
importer or the foreign financial institution, and recoveries received
by CCC from the exporter, the exporter's assignee, or any source
whatsoever that are related to the obligation in default will be
allocated by CCC to the exporter or the exporter's assignee and to CCC
on a pro rata basis determined by their respective interests in such
recoveries. The respective interest of each party will be determined on
a pro rata basis, based on the combined amount of principal and
interest in default. Once CCC has paid out a particular claim under a
GSM-102 payment guarantee, CCC pro rates any collections it receives
and shares these collections proportionately with the holder of the
guarantee until both CCC and the holder of the guarantee have been
reimbursed in full.
(d) Liabilities to CCC. Notwithstanding any other terms of the
payment guarantee, under the following circumstances the exporter or
the exporter's assignee will be liable to CCC for any amounts paid by
CCC under the payment guarantee:
(1) The exporter will be liable to CCC when and if it is determined
by CCC that the exporter has engaged in fraud, or has been or is in
material breach of any contractual obligation, certification or
warranty made by the exporter for the purpose of obtaining the payment
guarantee or for fulfilling obligations under GSM-102;
(2) The exporter's assignee will be liable to CCC when and if it is
determined by CCC that the exporter's assignee has engaged in fraud or
otherwise violated program requirements.
(e) Good faith. The willful violation by an exporter of the
certifications in Sec. 1493.80(b) and Sec. 1493.140(b) or the failure
of an exporter to comply with the provisions of Sec. 1493.150 or Sec.
1493.210(a) will not affect the validity of any payment guarantee with
respect to an assignee which had no knowledge of such violation or
failure to comply at the time such exporter applied for the payment
guarantee or at the time of assignment of the payment guarantee.
(f) Cooperation in recoveries. Upon payment by CCC of a claim to
the exporter or the exporter's assignee, the exporter or the exporter's
assignee will cooperate with CCC to affect recoveries from the foreign
financial institution and/or the importer. Cooperation may include, but
is not limited to, submission of documents to the foreign financial
institution (or its representative) to establish a claim; participation
in discussions with CCC regarding the appropriate course of action with
respect to a default; actions related to accelerated payments as
specified in Sec. 1493.180(d); and other actions that do not increase
the obligation of the exporter or exporter's assignee under the payment
guarantee.


Sec. 1493.192 Dispute resolution and appeals.

(a) Dispute resolution. (1) The Director and the exporter or the
exporter's assignee will attempt to resolve any disputes, including any
adverse determinations made by CCC, arising under the GSM-102 program,
this subpart, the applicable Program Announcements and Notices to
Participants, or the payment guarantee.
(2) The exporter or the exporter's assignee may seek
reconsideration of a determination by the Director by submitting a
letter requesting reconsideration to the Director within 30 calendar
days of the date of the determination. For the purposes of this
section, the date of a determination will be the date of the letter or
other means of notification to the exporter or the exporter's assignee
of the determination. The exporter or the exporter's assignee may
include with the letter requesting reconsideration any additional
information that it wishes the Director to consider in reviewing its
request. The Director will respond to the request for reconsideration
within 30 calendar days of the date on which the request or the final
documentary evidence submitted by the exporter or the exporter's
assignee is received by him or her, whichever is later, unless the
Director extends the time permitted for response. If the exporter or
the exporter's assignee fails to request reconsideration of a
determination by the Director, then the determination of the Director
is final.
(3) If the exporter or the exporter's assignee requested
reconsideration of a determination by the Director pursuant to
subparagraph (a)(2) of this section, and the Director upheld the
original determination, then the exporter or the exporter's assignee
may appeal the Director's final determination to the GSM in accordance
with the procedures set forth in paragraph (b) of this section. If the
exporter or the exporter's assignee fails to appeal the Director's
final determination within 30 calendar days, as provided in section
1493.200(b)(1), then the Director's decision becomes the final
determination of CCC.
(b) Appeal procedures. (1) An exporter or exporter's assignee that
has exhausted the procedures set forth in paragraph (a) of this section
may appeal to the GSM a determination of the Director. An appeal to the
GSM must be in writing and filed with the office of the GSM no later
than 30 calendar days following the date of the final determination by
the Director. If the exporter or the exporter's assignee requests an
administrative hearing in its appeal letter, it shall be entitled to a
hearing before the GSM or the GSM's designee.
(2) If the exporter or the exporter's assignee does not request an
administrative hearing, the exporter or the exporter's assignee must
indicate in its appeal letter whether or not it will submit any
additional written information or documentation for the GSM to consider
in acting upon its appeal. This information or documentation must be
submitted to the GSM within 30 calendar days of the date of the appeal
letter to the GSM. The GSM will make a decision regarding the appeal
based upon the information contained in the administrative record. The
GSM will endeavor to issue his or her written decision within 60
calendar days of the date on which the GSM receives the appeal or the
date that final documentary evidence is submitted by the exporter or
the exporter's assignee to the GSM, whichever is later.
(3) If the exporter or the exporter's assignee has requested an
administrative hearing, the GSM will set a date and time for the
hearing that is mutually convenient for the GSM and the exporter or the
exporter's assignee. This date will ordinarily be within 60

[[Page 44855]]

calendar days of the date on which the GSM receives the request for a
hearing. The hearing will be an informal procedure. The exporter or the
exporter's assignee and/or its counsel may present any relevant
testimony or documentary evidence to the GSM. A transcript of the
hearing will not ordinarily be prepared unless the exporter or the
exporter's assignee bears the costs involved in preparing the
transcript, although the GSM may decide to have a transcript prepared
at the expense of the Government. The GSM will make a decision
regarding the appeal based upon the information contained in the
administrative record. The GSM will endeavor to issue his or her
written decision within 60 calendar days of the date of the hearing or
the date of receipt of the transcript, if one is to be prepared,
whichever is later.
(4) The decision of the GSM will be the final determination of CCC.
The exporter or the exporter's assignee will be entitled to no further
administrative appellate rights.
(c) Failure to comply with determination. If the exporter or the
exporter's assignee has violated the terms of this subpart or the
payment guarantee by failing to comply with a determination made under
this section, and the exporter or the exporter's assignee has exhausted
its rights under this section or has failed to exercise such rights,
then CCC will have the right to take any measures available to CCC
under applicable law.
(d) Exporter's obligation to perform. The exporter will continue to
have an obligation to perform pursuant to the provisions of these
regulations and the terms of the payment guarantee pending the
conclusion of all procedures under this section.


Sec. 1493.195 Miscellaneous provisions.

(a) Maintenance of records and access to premises. For a period of
five years after the date of expiration of the coverage of a payment
guarantee, the exporter or the exporter's assignee, as applicable, must
maintain and make available all records pertaining to sales and
deliveries of and extension of credit for agricultural commodities
exported in connection with a GSM-102 payment guarantee, including
those records generated and maintained by agents, intervening
purchasers, and related companies involved in special arrangements with
the exporter. The Secretary of Agriculture and the Comptroller General
of the United States, through their authorized representatives, must be
given full and complete access to the premises of the exporter or the
exporter's assignee, as applicable, during regular business hours from
the effective date of the payment guarantee until the expiration of
such five-year period to inspect, examine, audit, and make copies of
the exporter's, exporter's assignee's, agent's, intervening purchaser's
or related company's books, records and accounts concerning
transactions relating to the payment guarantee, including, but not
limited to, financial records and accounts pertaining to sales,
inventory, processing, and administrative and incidental costs, both
normal and unforeseen. During such period, the exporter or the
exporter's assignee may be required to make available to the Secretary
of Agriculture or the Comptroller General of the United States, through
their authorized representatives, records that pertain to transactions
conducted outside the program, if, in the opinion of the Director, such
records would pertain directly to the review of transactions undertaken
by the exporter in connection with the payment guarantee.
(b) Responsibility of program participants. It is the
responsibility of all exporters, U.S. and foreign financial
institutions to review, and fully acquaint themselves with, all
regulations, Program Announcements, and Notices to Participants
relating to the GSM-102 program, as applicable. All exporters, U.S. and
foreign financial institutions participating in this program are hereby
on notice that they will be bound by this subpart and any terms
contained in the payment guarantee and in applicable Program
Announcements.
(c) Submission of documents by principal officers. All required
submissions, including certifications, applications, reports, or
requests (i.e., requests for amendments), by exporters or exporters'
assignees under this subpart must be signed by a principal of the
exporter or exporter's assignee or their authorized designee(s). In
cases where the designee is acting on behalf of the principal, the
signature must be accompanied by: wording indicating the delegation of
authority or, in the alternative, by a certified copy of the delegation
of authority; and the name and title of the authorized person or
officer. Further, the exporter or exporter's assignee must ensure that
all information/reports required under these regulations are submitted
within the required time limits.
(d) Officials not to benefit. No member of or delegate to Congress,
or Resident Commissioner, shall be admitted to any share or part of the
payment guarantee or to any benefit that may arise there from, but this
provision shall not be construed to extend to the payment guarantee if
made with a corporation for its general benefit.
(e) OMB control number assigned pursuant to the Paperwork Reduction
Act. The information collection requirements contained in this part (7
CFR Part 1493) have been approved by the Office of Management and
Budget (OMB) in accordance with the provisions of 44 U.S.C. Chapter 35
and have been assigned OMB Control Number 0551-0004.

Dated: June 24, 2011.
Suzanne E. Heinen,
Acting Executive Vice President, Commodity Credit Corporation and
Acting Administrator, Foreign Agricultural Service.
[FR Doc. 2011-18403 Filed 7-26-11; 8:45 am]
BILLING CODE 3410-10-P