1. USDA Foreign Agricultural Service GSM-102 Credit Guarantee Program
Office of Trade Programs
GSM-102 Credit Guarantee Program
20 March 2009 1

2. USE GSM-102 TO FACILITATE YOUR NEXT TRANSACTION
Promote international commerce
Encourage the extension of financing
Meet competition’s selling terms
Risk mitigation
Use Positive gestures. Avoid negative body language

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

4. 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
Avoid too much text.
Highlight key points with bullets
Limit bullets to no more than 7 points per slide
Use grpahics sparingly and as a method of association

5. GSM-102 COMMODITIES 100% produced in USA Food, Feed or Fiber
CCC “basket” of commodities
High-Value products (90% U.S. Content)
Grows in ground or lives in water then typically elgible.
Pet food
Wood chips

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

7. GSM-102 PARTICIPANTS U.S. Exporter Importer Approved U.S. Bank
Approved Foreign Bank 7

8. 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. 8

9. BENEFITS TO IMPORTERS
Increased buying capacity due to bank access to trade credit.
Possible access to credit from local bank.
With the working capital obtained through the GSM-102, issuing banks may be able to provide attractive terms to the importer
May encourage U.S. exporters’ interest in the market because of payment assurance

10. 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

11. 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

12. Deal flow chart (GSM) CCC Importer Exporter Importing bank U.S. Bank
payment guarantee
Guarantee fee
ship goods
Importer
Exporter
contract
present docs
sight
90 days
LC application
Participants of the program include U.S. exporters, importers located in eligible countries overseas; financial institutions in the United States; and approved foreign banks in eligible countries.
Major difference between normal commercial transaction and GSM transaction is longer payment terms and lower risk.
Also, the U.S. exporter can get paid at site by the U.S. bank after presenting proof of both export and payment of GSM fee.
USG involvement: Sales registration/fee payment, otherwise, given that this is a commercial program, the USG only becomes involved if importing bank defaults on payment to U.S. bank. USG is not involved if importer defaults on payment to importing bank.
If there is a default the U.S. bank must file Notice of default within 10 days, and file a claim within six months. Last fiscal year a claim was filed was FY 2004.
Importing
bank
letter of credit
U.S. Bank
three years
annual payments

13. GSM-102 Registrations in U.S. Dollars
by Region
$ Millions
$1.44B in 2007
$3.11B in 2008
*$2.8B in 2009
As of 6 March 09
Dollar value of program in total for major bulk commodities is up 190% dollar value over FY07 13

14. GSM-102 Top Commodities in Dollars
by Registration Value
$ Millions
Dollar value of program in total for major bulk commodities is up 190% dollar value over FY07
$2.8B
As of 23 March 09 14

15. Announced $3.5 Billion in Credit Guarantees
For FY 2009!
3.5 15

16. GUARANTEE FEE One-time fee. Included in price26
GUARANTEE FEE
One-time fee.
Included in price
Financed as a part of the GSM credit
Cost of guarantee fee outweighed by lower-cost, longer- term financing package.
Cost of confirmation of L/C lower.

17. 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

18. 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

19. 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

20. Deal flow chart (GSM) CCC Importer Exporter Importing bank U.S. Bank
payment guarantee
Guarantee fee
ship goods
Importer
Exporter
contract
present docs
sight
90 days
LC application
Participants of the program include U.S. exporters, importers located in eligible countries overseas; financial institutions in the United States; and approved foreign banks in eligible countries.
Major difference between normal commercial transaction and GSM transaction is longer payment terms and lower risk.
Also, the U.S. exporter can get paid at site by the U.S. bank after presenting proof of both export and payment of GSM fee.
USG involvement: Sales registration/fee payment, otherwise, given that this is a commercial program, the USG only becomes involved if importing bank defaults on payment to U.S. bank. USG is not involved if importer defaults on payment to importing bank.
If there is a default the U.S. bank must file Notice of default within 10 days, and file a claim within six months. Last fiscal year a claim was filed was FY 2004.
Importing
bank
letter of credit
U.S. Bank
three years
annual payments

21. GSM-102 Regional Analysts
EURASIA
GSM Marketing Specialist Chris Williams
GSM Bank Specialist Hal 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:

22. 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 22