20 March 2009 USDA Foreign Agricultural Service USDA Foreign Agricultural Service Office of Trade Programs GSM-102 Credit Guarantee Program

USE GSM-102 TO FACILITATE YOUR NEXT TRANSACTION Promote international commerce Encourage the extension of financing Meet competition’s selling terms Risk mitigation

Does not provide financing, but guarantees payments due from foreign banks under Letters of Credit to U.S. banks or exporters. GSM-102

Up to 98% guarantee on principal Interest variable coverage Credit terms up to 3 years Freight is generally covered Uses a Letter of Credit GSM-102

GSM-102 COMMODITIES 100% produced in USA Food, Feed or Fiber CCC “basket” of commodities High-Value products (90% U.S. Content)

GSM-102 Eligible Commodities Animal feed Cattle Hides Flour Soybean Meal Sweeteners fresh fruit, vegetables, meats, condiments, wine and beer, meats, frozen dinners, etc. Bulk Intermediate Consumer Ready Also: Seafood – Forest Products – Aquaculture - Fibers

GSM-102 PARTICIPANTS U.S. Exporter Importer Approved U.S. Bank Approved Foreign Bank

WHY SHOULD YOU USE THE GSM-102 PROGRAM? Since 98% of the loan and part of the interest is guaranteed, U.S Banks can offer attractive credit terms to eligible foreign banks.

BENEFITS TO IMPORTERS Increased buying capacity due to bank access to trade credit. Possible access to credit from local bank.

BENEFITS TO FOREIGN BANKS Access to trade finance with U.S. banks Increased credit lines from U.S. banks Ability to borrow longer term Lower funding costs (interest rates and fees) Ability to support and finance customers

How It Works U.S. Exporter qualifies for GSM on-line (two days approximate) U.S. exporter applies to CCC (pays a fee) for guarantee The buyer and seller negotiate a firm sales contract Importer approaches a CCC-approved bank in destination country/region and goes through the bank qualification process for credit if not already If importer qualifies, the bank in destination country/region opens a letter of credit under the terms of GSM-102 U.S. exporter (normally) assigns GSM-102 guarantee to a U.S. Bank

payment guarantee Deal flow chart (GSM) U.S. Bank CCC Importing bank Importing bank Importer Exporter sight three years 90 days contract Guarantee fee letter of credit LC application ship goods present docs annual payments

GSM-102 Registrations in U.S. Dollars $ Millions by Region $1.44B in 2007 $3.11B in 2008 *$2.8B in 2009 As of 6 March 09

GSM-102 Top Commodities in Dollars $ Millions by Registration Value $2.8B As of 23 March 09

Announced $3.5 Billion in Credit Guarantees For FY 2009! Announced $3.5 Billion in Credit Guarantees For FY 2009! 3.5

One-time fee. Included in price Included in price Financed as a part of the GSM credit Financed as a part of the GSM credit Cost of guarantee fee outweighed by lower-cost, longer- term financing package. Cost of guarantee fee outweighed by lower-cost, longer- term financing package. Cost of confirmation of L/C lower. Cost of confirmation of L/C lower. GUARANTEE FEE

Example Sales Transaction Importer wishes to buy U.S. feed grains Importer approaches U.S. embassy for list of interested U.S. exporters Importer checks USDA website for terms of the GSM-102 program in a press release Importer and exporter enter into a firm sales contract for feed grains

Example Sales Transaction Importer asks approved foreign bank to open an L/C in favor of the U.S. exporter under terms of the GSM-102 program Foreign bank issues the L/C and advises the L/C through a CCC approved U.S. Bank that it has a U.S. Dollar credit facility Exporter registers the sale with CCC and pays fee CCC issues U.S. exporter a GSM-102 payment guarantee U.S. exporter assigns the payment guarantee to a U.S. bank U.S. exporter ships goods to importer U.S. exporter presents shipping documents to the U.S. bank, including evidence of export report

Example Sales Transaction U.S. bank pays U.S. exporter for the port value of the shipping documents U.S. bank extends GSM-102 Payment Guarantee financing terms to the foreign bank Foreign bank determines terms to extend to importer

payment guarantee Deal flow chart (GSM) U.S. Bank CCC Importing bank Importing bank Importer Exporter sight three years 90 days contract Guarantee fee letter of credit LC application ship goods present docs annual payments

GSM-102 Regional Analysts EURASIA GSM Marketing Specialist Chris Williams GSM Bank SpecialistHal Taylor FAS Announcements of GSM-102 allocation are posted at: Export credit guarantee program information, such as risk- based fee schedules and country ratings, and commodities eligible:

CREDIT PROGRAMS DIVISION KEY CONTACTS CREDIT PROGRAMS DIVISION KEY CONTACTS Registration & Operations ( Application process) John Doster Branch Chief Risk & Asset Management ( Banking information) Teri Ryan Branch Chief Planning & Analysis ( Business Development) Lorie Jacobs Branch Chief