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