20 March 2009
USDAForeign Agricultural ServiceUSDAForeign Agricultural Service
Office of Trade Programs
GSM-102 Credit Guarantee ProgramGSM-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 feedCattle HidesFlourSoybean MealSweeteners
fresh fruit, vegetables, meats, condiments, wine and beer, meats, frozen dinners, etc.
Bulk
IntermediateConsumer Ready
Also: Seafood – Forest Products – Aquaculture - Fibers
GSM-102PARTICIPANTS
U.S. Exporter
Importer
Approved U.S. Bank
Approved Foreign Bank
WHY SHOULD YOU USE THEGSM-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 guarante
e
Deal flow chart (GSM)
U.S. BankU.S. Bank
CCCCCC
Importingbank
Importingbank
ImporterImporter ExporterExporter
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
0
100
200
300
400
500
600
700
C. Am
erica
Turke
y
Russia
Euras
ia
S. Am
erica
Korea
Caribbe
an
SE Asia
Mex
ico
2007 2008 2009
$ M
illio
nsby Region
$1.44B in 2007$3.11B in 2008
*$2.8B in 2009 As of 6 March 09
GSM-102 Top Commodities in Dollars
0
200
400
600
800
1000
1200
Feed g
rain
s
Oils
eeds
Poultr
y M
eat
Prote
in M
eal
Whe
at
Poultr
y Offa
ls
Cotton
Pork
Offals
Rice
2009*
$ M
illio
nsby Registration Value
$2.8B As of 23 March 09
Announced $3.5 Billion in Credit GuaranteesFor FY 2009!
Announced $3.5 Billion in Credit GuaranteesFor FY 2009!
1.44
3.11
0
1
1
2
2
3
3
4
2007
2008
2009
***
3.5
One-time fee.One-time fee. Included in priceIncluded in price Financed as a part of the GSM creditFinanced as a part of the GSM credit Cost of guarantee fee outweighed byCost of guarantee fee outweighed by lower-cost, longer- term financinglower-cost, longer- term financing
package.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 guarante
e
Deal flow chart (GSM)
U.S. BankU.S. Bank
CCCCCC
Importingbank
Importingbank
ImporterImporter ExporterExporter
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 202-720-7241
• GSM Bank Specialist Hal Taylor 202-690-1267
• FAS Announcements of GSM-102 allocation are posted at: http://www.fas.usda.gov/excredits/exp-cred-guar.asp
• Export credit guarantee program information, such as risk-based fee schedules and country ratings, and commodities eligible: http://www.fas.usda.gov/excredits/ecgp.asp
CREDIT PROGRAMS DIVISIONKEY CONTACTS
CREDIT PROGRAMS DIVISIONKEY CONTACTS
Registration & Operations(Application process)
John DosterBranch Chief
202-720-3277
Risk & Asset Management(Banking information)
Teri Ryan Branch Chief
202-720-0663
Planning & Analysis(Business Development)
Lorie JacobsBranch Chief
202-720-2074