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25–418 2017

ACCOMPLISHMENTS AND CHALLENGES AT THE 

SBA’S OFFICE OF INTERNATIONAL TRADE 

HEARING 

BEFORE THE

COMMITTEE ON SMALL BUSINESS 

UNITED STATES 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FIFTEENTH CONGRESS 

FIRST SESSION 

HEARING HELD 

MAY 23, 2017 

Small Business Committee Document Number 115–021 

Available via the GPO Website: www.fdsys.gov 

SBREP-219A with DISTILLER


Congress.#13
(II) 

HOUSE COMMITTEE ON SMALL BUSINESS 

STEVE CHABOT, Ohio, Chairman 

STEVE KING, Iowa 

BLAINE LUETKEMEYER, Missouri 

DAVE BRAT, Virginia 

AUMUA AMATA COLEMAN RADEWAGEN, American Samoa 

STEVE KNIGHT, California 

TRENT KELLY, Mississippi 

ROD BLUM, Iowa 

JAMES COMER, Kentucky 

JENNIFFER GONZA ́ LEZ-COLO ́ N, Puerto Rico 

DON BACON, Nebraska 

BRIAN FITZPATRICK, Pennsylvania 

ROGER MARSHALL, Kansas 

RON ESTES, Kansas 

NYDIA VELA ́ ZQUEZ, New York, Ranking Member 

DWIGHT EVANS, Pennsylvania 

STEPHANIE MURPHY, Florida 

AL LAWSON, JR., Florida 

YVETTE CLARK, New York 

JUDY CHU, California 

ALMA ADAMS, North Carolina 

ADRIANO ESPAILLAT, New York 

BRAD SCHNEIDER, Illinois 

VACANT 

KEVIN FITZPATRICK, Majority Staff Director 

JAN OLIVER, Majority Deputy Staff Director and Chief Counsel 

ADAM MINEHARDT, Staff Director 

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(III) 

C O N T E N T S 

OPENING STATEMENTS 

Page 

Hon. Steve Chabot ................................................................................................... 1 

Hon. Nydia Vela ́zquez ............................................................................................. 3 

WITNESS 

Mr. Peter J. Cazamias, Associate Administrator, Office of International 

Trade, United States Small Business Administration, Washington, DC ........ 4 

APPENDIX 

Prepared Statement: 

Mr. Peter J. Cazamias, Associate Administrator, Office of International 

Trade, United States Small Business Administration, Washington, DC . 23 

Questions for the Record: 

None. 

Answers for the Record: 

None. 

Additional Material for the Record: 

SBA OIG Report ............................................................................................... 26 

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(1) 

ACCOMPLISHMENTS AND CHALLENGES AT 

THE SBA’S OFFICE OF INTERNATIONAL 

TRADE 

TUESDAY, MAY 23, 2017 

HOUSE OF REPRESENTATIVES, 

COMMITTEE ON SMALL BUSINESS, 

Washington, DC. 

The Committee met, pursuant to call, at 11:00 a.m., in Room 

2360, Rayburn House Office Building, Hon. Steve Chabot [chairman of the Committee] presiding. 

Present: Representatives Chabot, King, Luetkemeyer, 

Radewagen, Knight, Kelly, Blum, Comer, Bacon, Fitzpatrick, Marshall, Estes, Vela ́zquez, Evans, Murphy, Lawson, Clarke, Adams, 

Espaillat, and Schneider. 

Chairman CHABOT. The Committee will come to order. 

We want to thank everybody for being here today, and we would 

like to recognize somebody in our audience first, before we get to 

the business. I understand that we have a guest, Mr. Alex Bacon, 

from Omaha, who is the son of one of our newest and greatest 

members. Let us hear it for Alex. All right. 

Anybody else got any relatives here today that we want to embarrass? 

If not, we want to, again, thank everyone for being here to hear 

from the Small Business Administration’s Office of International 

Trade, the OIT. Increasing small business exports has been a top 

priority for this Committee over the years, and I am pleased to be 

receiving an update from the OIT on their efforts to better coordinate Federal resources and help small businesses looking to export. 

There is no question that foreign markets hold incredible opportunities for America’s small businesses. Ninety-five percent of all 

consumers live outside the borders of the United States, and yet, 

only 1 percent, approximately, of United States small businesses 

actually export—only about 300,000 of America’s small businesses 

out of the 26 million business that we have in this country. 

Unfortunately, many small businesses consider exporting to be 

out of reach. Some small businesses believe it is too expensive or 

too complicated to find potential customers. Other small businesses 

that start exploring the idea of exporting often just give up because 

the process becomes too confusing and/or too complicated. 

I believe that these are the real barriers to trade. If we want to 

unleash America’s most significant economic force, then we must 

make it easier for small businesses to participate in the global marketplace. It has become clear that we must compel the administraSBREP-219A with DISTILLER

2 

tion to continue its efforts to better coordinate Federal resources so 

they are more efficient, streamlined, and better prepared to help 

businesses navigate the export process. 

In recent years, my colleagues and I have taken steps to do just 

that. Congress moved to strengthen America’s small business export activities by expanding the SBA’s role in export promotion. 

OIT was directed to increase coordination efforts between Federal 

agencies engaged in export promotion, offer greater counseling and 

training to small businesses interested in expanding into foreign 

markets, and broaden its export finance counseling. Additionally, 

in 2015, Congress established the State Trade and Expansion Program, STEP. Replacing a 3-year pilot program, the STEP program 

awarded grants to States to strengthen their export agendas and 

assist small businesses looking to begin exporting or expand their 

existing export operations. Unfortunately, various Government Accountability Office and SBA Office of Inspector General Reports 

have identified a number of real shortcomings at OIT. Alarmingly, 

some recommendations made by GAO nearly 5 years ago still have 

not been addressed. 

The STEP Grant Program is of particular concern to this Committee. The OIT report released just this month found that the 

SBA was unable to provide consistent data regarding the program’s 

awards and expenditures and that the SBA has not been updating 

its data accurately. 

Furthermore, the report indicates that grant recipients left over 

25 percent of their awarded funds unused. This leads me to believe 

that there were probably opportunities for small business exporters 

that were completely missed. What good is allocating this grant 

money if it is not going to be administered properly, or worse, it 

goes completely unused? 

Finally, I would like to touch on another issue that has been 

raised in recent weeks, and that is the apparent lack of communication between the OIT and the Office of Advocacy. Last month, 

the United States and Argentina entered into a memorandum of 

understanding, MOU, on, and I quote, ‘‘joint cooperation or regulatory coherence and meaningful engagement with private sector.’’ 

I understand that the OIT did not make the Office of Advocacy 

even aware of the agreement or ask for input on it until the agreement was nearly finalized. I am seriously concerned by this information. As I made clear, one of the things OIT is tasked with is 

coordinating Federal agencies’ export promotion efforts. If they are 

unable to coordinate within their own agency, I am led to believe 

that the OIT may be incapable of following through on its fundamental responsibilities. 

So today, we will hear from OIT’s associate administrator, 

Peter—is it Cazamias? 

Mr. CAZAMIAS. Cazamias. 

Chairman CHABOT. Cazamias. I am going to mispronounce that 

again a couple times. 

Mr. CAZAMIAS. That is quite all right. 

Chairman CHABOT. I apologize. You can call me anything you 

want to. 

Mr. CAZAMIAS. Story of my life. 

Chairman CHABOT. Chabot, Chabot, Cabbott, Shabot. 

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3 

On how the SBA plans to address the recommendations from the 

GAO and OIG, as well as how they plan to more efficiently and effectively assist America’s small businesses hoping to join the global 

marketplace. 

And we again thank you for being here. And I would now like 

to yield to the ranking member, Ms. Vela ́zquez, for her opening remarks. 

Ms. VELA ́ ZQUEZ. Thank you, Mr. Chairman. And welcome, Mr. 

Cazamias. 

Year after year we are told that small businesses are the catalyst 

for the growth of the U.S. economy, and rightly so as they create 

nearly two-thirds of new jobs and are responsible for countless innovations. A critical subset of this group is small exporters. In fact, 

300,000 small businesses are sending their products across the 

world and three in five nonexporting firms are now interested in 

following suit. Firms that export grow faster, generate more jobs, 

and pay higher wages than other businesses. Clearly for our economy to continue gaining steam, it will increasingly depend on global commerce to fuel expansion. 

Despite the advantages that come with trade, it remains exceedingly difficult for small businesses to enter foreign markets. Just 

1 percent of small firms in this country are exporting their goods 

overseas, and even though small and medium-size businesses account for 97 percent of American exporting companies, their exports count for only a third of all U.S. goods shipped overseas. 

The challenges small firms face are multifaceted. It takes time 

to identify foreign markets, to target new customers, and to learn 

the ins and outs of the exporting process. Nearly 40 percent of 

small businesses say they do not export because they simply do not 

know where to start. Over half of small business exporters spend 

a minimum of 3 months and nearly 10 percent of their annual operating revenue just preparing to export. Compounding this obstacle is that they often have fewer resources to spend on developing 

a trade strategy or complying with complex regulations. As a result, they consistently enter fewer foreign markets than their larger counterparts with nearly 60 percent only entering one, while 

more than half of large firms export to five or more markets. 

These difficulties are something we must be mindful of as the administration works to negotiate NAFTA. In theory, balanced free 

trade agreements have the potential to be a significant driver of 

growth. By eliminating tariffs and other barriers to trade, they can 

help small firms expand sales globally and create jobs at home. 

In order for these benefits to be fully realized, however, we must 

hold our trading partners accountable for unfair trade practices 

and ensure that our small businesses receive the level playing field 

they were promised. Truth be told, small businesses often face 

challenges when it comes to competing with foreign imports produced in countries with lower labor and nonexistent environmental 

standards. Time and again we are told about new markets, but little discussion is given to the low-priced goods that will spill onto 

our domestic marketplace. Good for consumers? Maybe. Good for 

small businesses? Definitely no. Regardless of this larger debate, it 

is absolutely critical that small businesses are able to compete with 

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4 

their larger counterparts by participating in this global marketplace. 

I would like to thank our witness, and I look forward to hearing 

how SBA export promotions are serving our small businesses. 

Thank you, Mr. Chairman. I yield back. 

Chairman CHABOT. Thank you very much. 

If Committee members have opening statements prepared, we 

would ask they be submitted for the record. 

And I will take just a moment to explain our timing rules here, 

which is pretty simple. Five minutes. The yellow light will come on 

after you have gone 4 minutes and that will let you know you have 

got a minute to go, and then the red light will come on. Since we 

just have one witness here this morning, if you need a little bit 

more time, you know, we will understand that as long as it does 

not go on too long. And then we will all question you for 5 minutes. 

And I would now like to introduce our one witness here today, 

who is Peter Cazamias. He is the associate administrator for the 

Office of International Trade, OIT, at the Small Business Administration. Mr. Cazamias has extensive experience in international 

commerce having worked in the United Kingdom, Hong Kong, and 

India. Prior to serving at the SBA, he spent 7 years in the energy 

industry with FMC Technologies in Houston, Texas. Mr. Cazamias 

also served as a Marine, graduating from Officer Candidate School 

in 1997 and went on to the Basic School and Naval Justice School. 

And we thank you for your service. 

Associate Administrator Cazamias, you are recognized for 5 minutes. 

STATEMENT OF PETER CAZAMIAS, ASSOCIATE ADMINISTRATOR, OFFICE OF INTERNATIONAL TRADE, UNITED 

STATES SMALL BUSINESS ADMINISTRATION 

Mr. CAZAMIAS. Thank you, Chairman Chabot, Ranking Member 

Vela ́zquez, and esteemed members of the Subcommittee. I want to 

thank you for having me here to give my speech and to hear your 

important views. 

Three weeks ago, about 3 weeks ago, I was honored to accept Administrator McMahon’s appointment and begin my service as associate administrator for International Trade at the Small Business 

Administration, and today, I am honored to be able to meet with 

you and to listen to your important views on small business and 

trade. 

Since starting at the SBA, I have been familiarizing myself with 

the role of the Office of International Trade and its function in 

helping small business grow and thrive through exports and involvement in global commerce. 

Administrator McMahon believes that exporting is an essential 

component of small business growth because, as mentioned, 95 percent of the world’s consumers and over three-quarters of all existing purchasing power exists outside the U.S. border. 

Just a few weeks ago, I accompanied Administrator McMahon to 

the United Nations where she signed a proclamation naming June 

27th as Micro, Small, and Medium-Size Enterprise International 

Day, and in so doing, she helped bring about international recogniSBREP-219A with DISTILLER

5 

tion to the vital role of small businesses in producing innovation, 

creativity, and job growth. 

Today, among over our 28 million small businesses also as mentioned, a very small percentage can claim the title of exporter. The 

Office of International Trade is charged by statute to improve upon 

the 1 percent number cited. Its stated mission involves, one, increasing the number of U.S. small businesses that export; and two, 

increasing the dollar volume of U.S. small business exports. 

The SBA, under the leadership of Administrator McMahon, will 

address this dual mission by focusing on three critical needs small 

businesses have when attempting to export. 

First is the need for information. The SBA Office of International 

Trade recognizes that guidance and support for small businesses is 

crucial to achieving a foothold in the international marketplace. As 

such, OIT has a network of 21 export finance managers based in 

U.S. Export Assistance Centers who provide counseling on international payment risks and U.S. Government export financing options. 

Two is the need for capital. Small businesses cannot trade and 

export to these new markets unless they have access to capital. 

Specifically, trade finance. Small businesses are hardest hit by 

trade finance gaps and compliance challenges. In the United 

States, over one-third of all small businesses find financing harder 

to obtain for foreign sales than for domestic sales. Given this challenge, the SBA works with lenders to provide tailored trade finance 

loan guarantees so that small businesses can finance their foreign 

sales and growth where the private sector is unable or unwilling 

to act because of real or perceived risks. 

Three is the need among small businesses for overseas promotional products and market access. OIT emphasizes the importance of small business export promotion by strengthening its partnership with the State and territory governments through the 

State Trade Expansion Program, known as STEP, and through its 

chairmanship of the Trade Promotion Coordinating Committee’s 

Small Business Working Group. This is a group of interagency representatives dedicated to the mission of increasing the number of 

small business exporters. And OIT also ensures that the interests 

of small business are adequately represented in bilateral and multilateral trade negotiations, always pressing for transparency, flexibility, and coherence in trade agreements so that foreign trade regulations do not unnecessarily burden U.S. small business exporters. 

I am able to attest to the dynamic power of exporting and international trade and the effect it has on small businesses and local 

communities. I hail from the South Texas border city of Laredo. Located on the north bank of the Rio Grande, Laredo’s economy is 

virtually entirely based on international trade and it serves as one 

of the largest land ports in the United States. 

After graduating from Yale University, I served as an intern for 

the U.S. Commercial Service in Mexico City, where the negotiation 

of NAFTA was at the time a pressing issue. As a law student at 

the University of Texas, I studied and examined NAFTA’s dispute 

resolution mechanisms. And more recently in my professional life, 

I drove the Asia-Pacific financial operations as the regional CFO 

for Insituform Technologies, a U.S.-based pipeline company. I then 

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6 

lived in Delhi, India, and led the operational turnaround of 

Insituform’s flagship Asian operating company. 

I mention these background facts only to convey to you that I 

possess a longstanding interest in and familiarity with international trade and international business, and I intend to bring my 

practical, real-world business experience to bear in this role to help 

U.S. small businesses grow and prosper. 

To conclude, I wish to say that under the able leadership of Administrator McMahon, I will be committed to ensuring that our 

small business exporters find all the support they need to be able 

to expand into international markets. I furthermore will endeavor 

to effectively and efficiently administer the Office of International 

Trade. My goal is to enable OIT to expand the footprint of small 

businesses in the overseas marketplace, thereby spurring innovation and employment growth here at home. 

And with that, I wish to thank you for the opportunity to speak, 

and I look forward to answering your questions. 

Chairman CHABOT. Thank you very much. And I will recognize 

myself for 5 minutes to begin the questioning. 

Mr. Cazamias, as you mentioned, you have been in position all 

of 3 weeks now, so we obviously do not hold you responsible for 

anything that happened prior to you being there, unless, of course, 

you screwed something up in the 3 weeks you have been there. But 

as I mentioned in my opening statement, I do have real concerns 

regarding the OIT’s lack of coordination with the Office of Advocacy. 

As the associate administrator for the Office of International 

Trade, will you commit to us to notifying the Office of Advocacy of 

any future MOUs or other agreements relating to international 

regulatory cooperation and small businesses? Will you defer to the 

Office of Advocacy on those matters? 

Mr. CAZAMIAS. Chairman Chabot, thank you for the question. 

I say without qualification, yes, I will absolutely in my role endeavor to keep the Office of Advocacy engaged and check with them 

every time we are having an MOU on the horizon. 

Chairman CHABOT. Thank you. That was the right answer. We 

appreciate it. 

A recent OIG report raises concerns about the Office of International Trade’s oversight practices. Evidence suggested that four 

of the grants reviewed by OIG never received the required approvals from the associate administrator of OIT. How will OIT work to 

ensure that the STEP grant funds receive the proper approval 

going forward? 

Mr. CAZAMIAS. Thank you, Chairman Chabot. This is one of the 

issues that I have inherited. And we are taking a systematic approach to documentation oversight procedures. We have contracted 

already, the office has contracted a consultant, a Six Sigma lean 

operations consultant, to take a look at all of our processes, mapping the entire process out and identifying areas that are critical 

to quality, finding where there are gaps, reducing redundancies, 

and we hope that at the end of this process we are going to have 

a process that actually is more comprehensive and effective in 

being able to address some of the issues that have existed in the 

past. 

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7 

Chairman CHABOT. Thank you. 

The OIG reviewed the SBA’s STEP Grant Program to determine 

how funds were used. According to the OIG, the SBA was unable 

to provide consistent data for fiscal years 2011 through 2015. In 

fact, every office they met with provided different totals for each 

year. What steps will the OIT take to ensure more accurate and 

greater consistency in its financial reporting? 

Mr. CAZAMIAS. Thank you, Chairman Chabot. This, as I understand, is part of the old reporting structure before fiscal year 2014 

where discrepancies between various elements of the SBA were 

found. My understanding is that there is a new reporting structure 

in place. This, coupled with the approach we are now taking at 

mapping out processes and revamping our entire operational process for financial reporting and for documentation of milestone 

achievements, should produce the desired results. 

Chairman CHABOT. All right. Thank you. 

Congress authorized the STEP Grant Program to promote exports and expand trade opportunities at the State level. The OIG 

found that in more than half of the grants they reviewed the participants did not spend the majority of the funds. How will the OIT 

establish and document its oversight procedures so that STEP program managers can monitor the grant recipients’ progress more 

closely and help them meet their goals? 

Mr. CAZAMIAS. Thank you. This is an issue that is currently 

under investigation. I want the Committee to know that we are 

looking at all possibilities to understanding where the process may 

have failed in the past, whether it is an administrative issue—in 

year zero the applicants may have had certain needs, in year one 

they have changed. If this is the case and the reason for the gap, 

then we need to look at potentially creating new variation orders, 

change orders, and the like. However, maybe it is a problem of incentives. If that is the case, then the oversight process that is coming out of this new look at our procedures may very well answer 

the issue. 

The point is, I think that we are undertaking a comprehensive 

look at all of our processes, and we think that this is one of the 

things we are going to have in mind to be able to produce a more 

consistent result without those kind of gaps. 

Chairman CHABOT. Thank you. I think I have time to squeeze 

in one last question here. 

The Committee has heard concerns with the OIT’s grant management and administration practices. There are a variety of Federal 

agencies that manage much more complex grants. I am wondering, 

has anyone from the SBA consulted with other Federal agencies to 

identify more efficient ways to administer the STEP program? 

Mr. CAZAMIAS. Thank you, Chairman Chabot. This is a question I will take under advisement and I will provide an answer to 

your office as soon as I have one. 

Chairman CHABOT. All right. Thank you very much. My time 

has expired. 

The ranking member is recognized for 5 minutes. 

Ms. VELA ́ ZQUEZ. Thank you, Mr. Chairman. 

Exporting is a key component of small business growth. Yet, only 

1 percent of small businesses are currently exporting overseas. I 

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8 

have been here for 25 years. This is the list of all trade agreements 

that we have been able to get signed by the United States from 

Chile, Colombia, Jordan, Korea, NAFTA, CAFTA, Panama, Singapore, Peru, Trade Promotion Agreement, and every time that we 

have held hearings on trade agreements we always raise the issue 

about the potential, the economic potential of small exporters. And 

time and again we hear 1 percent. One percent of small exporters 

are doing business overseas with one customer. 

So my question to you is while free trade agreements have 

opened up new markets and have always been sold to us and to 

the American people as benefitting small businesses, it is clear that 

large corporations are the primary beneficiaries. It was 1 percent 

25 years ago when we were discussing trade agreements, and today 

it is only 1 percent. So what changes to free trade agreements will 

have the biggest impact on small firms? 

Mr. CAZAMIAS. Thank you, Ranking Member Vela ́zquez, for the 

question. 

Ms. VELA ́ ZQUEZ. And I hope that you are all evaluating and 

discussing what changes, because the president is committed to renegotiate NAFTA. So there you have it. 

Mr. CAZAMIAS. Yes, Ranking Member Vela ́zquez. Well, I will 

take the information you provided very seriously. What I can say 

is that it is clear that we are taking a look at all of our free trade 

agreements. I just came back last week from a Trade Deficit Panel 

where we were meeting with business owners from all over the 

United States—Colorado, North Carolina, and Maine—and we were 

looking at the legacy of our free trade agreements. And that legacy 

seems to be massive deficits. And the implication or the ramification of those massive deficits has been high unemployment and 

shuttered industries. 

Ms. VELA ́ ZQUEZ. I know all that. I want to know that now we 

are going to renegotiate the administration trade agreement. The 

chairman and I, we sit with a—— 

Mr. CAZAMIAS. Eye to eye? 

Ms. VELA ́ ZQUEZ. What is the name? Right, the HAGON Commission and we are going to be providing our input. So it will be 

helpful if you explain to us, what are the recommendations since 

you are traveling and listening to small exporters throughout the 

nation so that we could make those recommendations. 

Let us go to the STEP program. It was authorized in 2010, right? 

Mr. CAZAMIAS. That is my understanding. 

Ms. VELA ́ ZQUEZ. So the STEP program was authorized. There 

are matching funds that are provided to the states. How are you 

measuring whether this program is actually generating benefits to 

small firms? What metrics are you using to measure the program’s 

success? 

Mr. CAZAMIAS. Thank you for the question, Ranking Member 

Vela ́zquez. 

Only 3 weeks into the position, this is one of the issues I have 

to get my hands around. I do know that we use an ROI metric that 

involves the dollars of exports that were generated as a result of 

our programs touching the businesses versus the cost to administer, but I will get a more precise and more robust answer for you 

as soon as I can. 

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Ms. VELA ́ ZQUEZ. And can you tell the committee, and if we do 

not have time, would you please send to the committee what specific activities are authorized under this program? Otherwise, I will 

conclude that this is simply subsidizing state expenses. So those 

metrics are important and what type of activities are authorized to 

use the funds for. 

Mr. CAZAMIAS. OIT will provide that information summarily. 

Thank you. 

Chairman CHABOT. Thank you very much. The gentlelady’s 

time has expired. 

The gentleman from Missouri, Mr. Luetkemeyer, who is the vice 

chairman of this Committee, is recognized for 5 minutes. 

Mr. LUETKEMEYER. Thank you, Mr. Chairman. And thank Mr. 

Cazamias for being here today. 

Just to follow up on a couple things here. I think the chairman 

made comment in his earlier remarks that GAO indicated that the 

past administration over 5 years had not done anything to fulfill 

some of their recommendations and so also in here there is some 

collaboration and coordination things that have not been done. And 

so the bar is pretty low for you from a standpoint that we wonder 

why we do not have an economy that is growing and we have something like this, SBA, which is supposed to stimulate growth and 

here we have twiddled our thumbs for 5 years. 

Which brings me to the point, GAO also found that only 15 percent of some individuals’ time was being spent on the export promotion responsibilities. Can you tell me that these individuals who 

are spending 15 percent of the time doing their job, are they working on other jobs or are they watching movies on their screens or 

whatever else they are doing? Or what are we doing here? 

Mr. CAZAMIAS. Congressman, I take the message very clearly, 

and I will commit to examining this issue. 

Mr. LUETKEMEYER. Okay. Just kind of curious. We do have 

examples of some of the employees being caught, you know, playing 

games and watching videos and things on their tube, and so when 

GAO says this, is it something like that or do they actually just 

have overlapping duties that they are actually doing other things 

instead of doing their job? I mean, there are other things they 

could be doing productively, I assume. 

From your experience, with regards to exporting, what would you 

see as the barriers for small businesses to export that you can help 

them overcome with your new job? 

Mr. CAZAMIAS. Thank you for the question, Congressman 

Luetkemeyer. I think the three issues, the three areas where we 

are able to provide the most effective assistance is in information, 

especially for new exporters, so that we can give them an idea of 

how to go about internationalizing their business, as well as in capital, because the Office of International Trade does act in areas 

where there is a perceived or actual risk that the private sector 

does not wish to act in providing trade finance. So I think in providing that kind of liquidity is an area where we are able to assist. 

And then thirdly, in market access, in coordinating dual trade missions with businesses and connecting them with overseas markets 

is something we are committed to doing. 

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Mr. LUETKEMEYER. One of the things that Congress is looking 

at as well as the President has suggested is a border adjustment 

tax or some sort of leveling of the playing field fee whenever products come into the country. Have you seen the problem on exports 

going out where our companies have been hurt by the ability to 

compete because of the border adjustment tax of other countries? 

And have you discussed it with small folk yet with regards to them 

having a fee perhaps imposed on some of their inputs that they 

turn around and have to export? I mean, it is kind of a complicated 

situation, but I am just curious if you have looked at it at all or 

if you have any comments. 

Mr. CAZAMIAS. Congressman Luetkemeyer, I just got back last 

week from a Trade Deficit Panel at the Department of Commerce, 

and just as you alluded to, the datapoints, which are very few still, 

are mixed. It does seem that the idea of a border adjustment tax 

has been received with mixed feelings on the part of small businesses. In some cases, they support it even though it will make 

their products more expensive. In other cases, they believe that it 

is going to make their products more competitive with imports. 

So I think we are at the beginning of the process in terms of a 

listening tour and data gathering, and I hope to be able to synthesize that information and be able to provide a more robust answer at some point throughout my tenure. 

Mr. LUETKEMEYER. Okay. One last question here. With regards to trade agreements, you know, you were a director at the 

United Nations here recently. Are you, whenever they have trade 

negotiations, or the SBA director herself, at the table whenever 

these negotiations take place so that you can represent small businesses and their problems or concerns with these agreements? 

Mr. CAZAMIAS. The Office of International Trade does have 

trade specialists who do perform the commander’s guidance. So we 

have specialists who actually do this. 

Mr. LUETKEMEYER. Okay. So there is somebody representing 

the small business folks’ interests whenever a trade agreement is 

negotiated? 

Mr. CAZAMIAS. That is exactly true. 

Mr. LUETKEMEYER. Okay. And I assume that, you know, the 

agreements that we have have been in place for many, many years, 

and a lot of them probably just need to go back and retweak them 

and make sure that—are you a part of those negotiations or have 

you pointed those out to the President or the administration or the 

trade authorities? 

Mr. CAZAMIAS. Yes, Congressman. We are starting out with a 

commercial dialogue with a number of nations as we are taking a 

look at these trade agreements anew. 

Mr. LUETKEMEYER. Okay. Very good. Thank you, Mr. Chairman. 

Chairman CHABOT. The gentleman’s time is expired. 

The gentleman from Pennsylvania, Mr. Evans, who is the ranking member of the Subcommittee on Economic Growth, Tax, and 

Capital Access, is recognized for 5 minutes. 

Mr. EVANS. Thank you, Mr. Chairman. 

According to statistics from the U.S. Census, exports from the 

Commonwealth of Pennsylvania declined by 7.3 percent from 2015 

SBREP-219A with DISTILLER

11 

to 2016. There are a number of possible reasons for this decline but 

I am interested in supporting efforts of more small businesses to 

educate themselves and the possibility to seek customers outside 

the U.S. And to that end, most accounts of the Office of International Trade does a good job of helping businesses is my understanding. 

But I am concerned about the level of coordination between the 

U.S., Export-Import Bank, the Commerce Department, and other 

similar Federal agencies which assist. Could you please describe 

how you communicate with these other agencies being that you are 

only 3 weeks there, but in terms of your vision of coordinating with 

those other agencies? 

Mr. CAZAMIAS. Thank you for the question, Congressman 

Evans. 

Yes, as you mentioned, it is only 3 weeks, but to my understanding, we are involved with the TPCC, which is a group of interagency—different agencies that provide a common framework for 

all the tools the Federal Government has at its disposal to help 

small businesses export, and this is one of the main ways that we 

coordinate with other agencies through chairing the small working 

group at the TPCC. 

Mr. EVANS. So in terms of your own vision of it, I mean, I understand, what are your thoughts on it? 

Mr. CAZAMIAS. Well, my thoughts are that it is going to be very 

important that we run the Office of International Trade effectively 

and efficiently, and if that means that there are ways to streamline 

by coordinating with other agencies, that is something that we are 

all going to be for. It is much better to work in concert with other 

agencies than in a silo. 

Mr. EVANS. The internet and platforms such as eBay have broken down barriers for small firms. What can the Federal Government learn from these entries such as eBay has tried to convince 

more small firms to consider exporting? 

Mr. CAZAMIAS. We think the internet is a fabulous tool for innovation and growth, and so I can commit to you that it will be 

one of the very many different areas we look at to try and imitate 

in terms of innovation. 

Mr. EVANS. Do you have any specific ideas at this point? I 

know—— 

Mr. CAZAMIAS. I am sorry, Congressman. Only 3 weeks into the 

job I cannot say I have any fully formed ideas yet on this issue. 

Mr. EVANS. Okay, no problem. 

I yield back the balance of my time. 

Chairman CHABOT. Thank you. The gentleman yields back. 

The gentleman from Nebraska, the father of Alex Bacon, is recognized for 5 minutes. 

Mr. BECAN. Thank you very much. I really appreciate your 

transparency and jumping in the job like you have, and we wish 

you well. 

Mr. CAZAMIAS. Thank you, Congressman. 

Mr. BECAN. I wanted to make sure I understood the differences 

of what some of the other agencies are doing out there. I know the 

Import-Export Bank, for example, supports a lot of our small busiSBREP-219A with DISTILLER

12 

nesses in our district. Could you help distinguish how you all differ 

with them and how you support small business and exports? 

Mr. CAZAMIAS. Well, I think there are two areas where I could 

speak to that. One is in terms of the trade finance that we offer, 

but, more importantly, I think one of the greatest differentiators of 

the small business administration is that it is specifically focused 

on small businesses. It is our reason for being. And this is something that is important to keep in mind because by focusing on 

small businesses, it does help avoid the bang-for-the-buck approach 

that ends up creating an overconcentration of focus and resources 

on the larger entities. 

Mr. BECAN. Okay. Thank you. And one thing that intrigues me 

is the matchmaker program and how you match the small businesses up with folks who help them reach access in other countries. 

Can you talk a little bit more about how that program is working? 

I think it has not been in existence for a long time. How many of 

these forms have you had and how is it working? 

Mr. CAZAMIAS. Congressman, I do not have that information at 

my disposal at this moment, but I will get it for you and we will 

send it over to your office. 

Mr. BECAN. Okay. Thank you. 

Mr. Chairman, I yield back. 

Chairman CHABOT. The gentleman yields back. Thank you. 

The gentlelady from Florida, Ms. Murphy, who is the ranking 

member of the Subcommittee on Contracting and Workforce, is recognized for 5 minutes. 

Ms. MURPHY. Thank you for being here today. I appreciate your 

testimony. 

As you mentioned in your testimony, access to capital remains a 

significant barrier for small firms to access foreign markets. According to a recent survey by the National Small Business Association, only 40 percent of small businesses were even aware of the 

SBA export lending programs. 

So two questions for you. One, do you think that the existing export loan programs are enough to meet the financing needs? And 

then secondly, what SBA plans do you have to better educate small 

businesses about the availability of the export loan programs? 

Mr. CAZAMIAS. Thank you for the question, Congresswoman. 

This is definitely one of the largest challenges I have inherited 

is understanding how to broaden our reach so that more small 

businesses are aware of the levers at their disposal at the Small 

Business Association. What I can say is that even now, the Small 

Business Association is—Small Business Administration is undertaking dialogues with local small businesses in Illinois, where there 

is a listening tour going on with the National Association of Manufacturers to understand exactly where our best practices have lied, 

what has been helpful, what has not been helpful. This is intended 

to not only improve the quality of our outreach, but also the 

breadth of it. So we are undertaking efforts to do exactly this. 

Ms. MURPHY. Why just in Illinois? 

Mr. CAZAMIAS. Oh, this is the beginning. This is one of our first 

stops. This is going to continue throughout a number of different 

States. I know Texas is next and there will be many others on the 

way. 

SBREP-219A with DISTILLER

13 

Ms. MURPHY. Great. Do you know if Florida will be on your 

list? 

Mr. CAZAMIAS. I intend to put it on the list. 

Ms. MURPHY. Great. Thanks. 

Moving on to a different topic, you know, the theft of intellectual 

property has become a real major problem in global business environment, particularly for small firms, and this is because they 

often lack the knowledge and the resources needed to adequately 

protect their IP abroad. The U.S. Patent and Trademark Office 

found that only 15 percent of small firms conducting businesses 

overseas know that they need to file for IP protection abroad. And 

this is really concerning. What does SBA plan to do to help small 

business owners guard themselves against theft of their IP in overseas markets? 

Mr. CAZAMIAS. Thank you for the question. 

I think I can say that we are going to take this issue very seriously and incorporate it as to one of the points that we use when 

we counsel small businesses in exporting. 

Ms. MURPHY. So you intend to integrate it into the baseline 

training? 

Mr. CAZAMIAS. That is going to be something we are definitely 

going to look at. The message has been received very well and it 

is going to be something that we are going to have to look at more 

seriously. 

Ms. MURPHY. Great, thank you. And I will yield back the remainder of my time. 

Chairman CHABOT. The gentlelady yields back. 

The gentleman from Kansas, Dr. Marshall, is recognized for 5 

minutes. 

Mr. MARSHALL. Thank you, Chairman. 

I guess, tell me some examples, who is doing a great job working 

with you? Can you give us some examples of some small companies 

that you really think are working well with your people? 

Mr. CAZAMIAS. Thank you for the question, Dr. Marshall. 

I think in the fullness of time I will be able to provide more examples when I have more information at my hand. 

Mr. MARSHALL. Okay. All right. I represent some small businesses that make precision agriculture products. And if I would go 

back and visit with them and say this is what your branch of government can help them with, what would you tell them? What 

would you want me to tell them that you are going to help them— 

and they do have some access to some markets in Europe now, but 

boy, they could sure use a boost. 

Mr. CAZAMIAS. Thank you for the question, Dr. Marshall. 

I think that one of the functions of the OIT is to try and open 

up foreign markets and make introductions between our domestic 

companies and foreign markets. So a number of the export centers 

will be able to counsel some of these small businesses and promote 

dual trade missions overseas or get involved in the matchmaking 

program or even through the STEP program to try and enhance 

that market access. 

Mr. MARSHALL. Okay. I guess my last question, what can we 

do to help you do your job better? What can we do in Congress to 

empower you? 

SBREP-219A with DISTILLER

14 

Mr. CAZAMIAS. Thank you for the question. 

I could not presume to give you advice only 3 weeks in, but what 

I can commit to is that my office will have a virtuous information 

loop with your offices so that when we can do something, provide 

some sort of information that will help us be successful and help 

you be more successful, we will certainly provide that information. 

Mr. MARSHALL. Thank you. And I yield back. 

Chairman CHABOT. The gentleman yields back. 

The gentleman from New York, Mr. Espaillat, is recognized for 

5 minutes. 

Mr. ESPAILLAT. Thank you, Mr. Chairman, Ranking Member 

Vela ́zquez, for this hearing. Thank you for your testimony. 

As the borders of the global market keep expanding, it is crucial 

that small business can benefit from this expansion and be competitive in a variety of arenas, especially in the topics related to export. The Small Business Administration Office of International 

Trade is an essential part of the development initiatives that will 

enhance and are strictly focused on improving the chances that 

small businesses will succeed in their economic ventures. 

The Hamilton Project specifically relating to this discussion in a 

paper titled, ‘‘Minority and Women Entrepreneurs: Building Capital Networks and Skill,’’ has signaled that research shows that minority and women-owned businesses rely significantly more on investments of personal or family wealth rather than on outside debt 

or equity. This clearly sets some minority and women-owned businesses at a disadvantage, especially when their families do not 

have the wealth to help them start out and maintain a business. 

My questions will focus on the constraints of the trade deals that 

many U.S. small businesses could choose to engage with; the countries, mainly NAFTA and CAFTADR. I know that there are significant hurdles placed by those trade deals on even big businesses— 

packaging, transportation, the hygienic level of the products that 

they may want to export, intellectual property. These are issues 

that are very cumbersome and often very difficult for even big businesses to engage with. 

Are there any particular plans to help, particularly minority, 

women-owned, and veteran businesses, veteran-owned businesses, 

to overcome these major hurdles that even large corporations often 

have, you know, some difficulties with? Otherwise, there is not 

going to be a real opportunity for small businesses to engage in 

trade outside of the United States. Do you have any roadmap as 

to how you are going to assist them? 

Mr. CAZAMIAS. Thank you for the question, Congressman. 

Yes, I think there is a dual answer to your question or a twopart answer. The first is that the Office of International Trade, 

Small Business Administration, does have programs that are dedicated to veteran, to women-owned businesses, and to minorities for 

counseling. But moreover, even at the Office of International 

Trade, we will be negotiating. We have individuals who will be negotiating trade deals with the idea of transparency in mind because 

we understand fully, and I understand fully having lived in India 

and having done business in India, the difficulty of compliance 

costs even on medium-size businesses. The difficulty of having to 

SBREP-219A with DISTILLER

15 

repatriate capital back to the United States or register your business overseas. 

So yes, I could not agree with you more. It has a disproportionate 

impact on small businesses and we will be negotiating those trade 

agreements with the interests of small business in mind. 

Mr. ESPAILLAT. Okay. My last question is, is there a particular 

reason for which there has not been consistent with regards to the 

grant awards and expenditures in the past years? 

Mr. CAZAMIAS. I understand the question and I thank you. 

One of the things that I have learned as I have inherited this is 

that there were old reporting procedures that led to discrepancies. 

We are now taking a systematic approach, a look at our processes. 

Again, identifying areas that are critical to quality, identifying 

areas where there are redundancies. And we are going to map out 

an entirely new process taking a process-based approach that we 

think will have a more robust and effective end towards this issue. 

Mr. ESPAILLAT. Thank you. I yield back my time. 

Chairman CHABOT. Thank you. The gentleman yields back. 

The gentleman from Kansas, Mr. Estes, is recognized for 5 minutes. 

Mr. ESTES. Thank you, Mr. Chair. 

I guess I have more of a comment and maybe asking for a commitment for a longer term. In my district, we have a lot of involvement in trade. Most of that is with some of our larger manufacturing and aerospace companies, as well as a lot of the agriculture 

companies that are there. But we also have a lot of smaller businesses, particularly machine shops and other type product manufacturers in particular, and the message that I hear is the struggle 

to figure out what resources they have and how do they engage in 

that marketplace? And I know we were talking earlier about which 

one of us was newer on our roles, our respective roles, but I guess 

I would throw the challenge down to you and ask if you would 

strongly consider as you are developing your role how to support 

and work with those smaller businesses to help them get a better 

leg up and get as much of a percentage of the international marketplace as they do within the domestic market. 

Mr. CAZAMIAS. I commit to that without reservation, Congressman. That is, in fact, my mandate. 

Mr. ESTES. Thank you, Mr. Chair. I yield back my time. 

Chairman CHABOT. The gentleman yields back. 

The gentlelady from New York, Ms. Clarke, is recognized for 5 

minutes. 

Ms. CLARKE. I thank you, Mr. Chairman. And I thank our 

Ranking Member Vela ́zquez. 

Foreign markets offer new opportunities for small businesses entrepreneurs to unleash their creative talents. Whether it is a craft 

product on Etsy or an industrial component for an automobile, each 

stand to benefit from the untapped potential of consumer markets 

abroad. However, the United States trade deficit is over $40 billion. 

This means that foreign actors hold a large amount of American 

currency and exercise influence over its value. This impacts everything from the price of fruit in the local grocery store to the cost 

of consumer electronics and basic clothing expenses at big box 

stores. When trade imbalances exist, consumers, often working 

SBREP-219A with DISTILLER

16 

families, are the most affected. These two factors—foreign consumer and foreign influence over the value of our currency—are 

why it is so important for the SBA to help facilitate small business 

exports. 

So my questions are in that vein. The new administration, and 

Donald Trump’s budget, proposes cutting the SBA’s budget by 5 

percent. Have you examined how such a decrease could impact 

OIT’s ability to carry out its mission and promote America’s exports? And if so, how? 

Mr. CAZAMIAS. Thank you for the question, Congresswoman. 

The mantra at the SBA is to run this office effectively and efficiently. So we will see this as a great opportunity to be able to do 

more with less. 

Ms. CLARKE. I have been hearing more with less for the past 

decade and I have yet to see it produced, especially when you look 

at 1 percent. So let us try to use creativity and innovation. 

Do you think that existing SBA export loan programs are enough 

to meet the financing needs of small businesses or do gaps still remain? 

Mr. CAZAMIAS. Thank you for the question, Congresswoman. 

This is an issue that I will definitely have to get my hands 

around to understand exactly where the distribution of demand is, 

exactly where our supply is hitting, and where there are gaps. This 

is one of the primary initiatives that I hope to be able to fulfill in 

the near term in my role. 

Ms. CLARKE. Very well. And Congress is currently discussing 

ways of reforming the taxation of earned income abroad. How 

would a change in the treatment of foreign income impact OIT’s efforts, and what do you view as OIT’s role in training small businesses about changes to the tax code if they are made in order to 

assure these entrepreneurs and assure this Congress that there 

will be no undue hardship as a result? 

Mr. CAZAMIAS. Thank you, Congressman. 

The Office of International Trade has in its purpose to try to 

internationalize small businesses and make them exporters. If tax 

policy is something that becomes a critical component of being able 

to help small businesses export, I can only assume that our trade 

finance experts will be able to provide the necessary counseling so 

that they can become exporters because that is our purpose. 

Ms. CLARKE. And is that something that you would personally 

be examining to make sure that there are not any unintended consequences? 

Mr. CAZAMIAS. I can personally commit to ensuring that whatever tax policy implications will come down the pike, we will incorporate that or examine it very carefully and incorporate it into our 

counseling sessions as needed. 

Ms. CLARKE. Very well. I yield back the balance of my time, Mr. 

Chairman. 

Chairman CHABOT. Thank you. The gentlelady yields back. 

The gentlelady from American Samoa, Mrs. Radewagen, who is 

the chairman of the Subcommittee on Health and Technology, is 

recognized for 5 minutes. 

SBREP-219A with DISTILLER

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Mrs. RADEWAGEN. Talofa lava. Thank you, Mr. Chairman, and 

thank you, Ranking Member Vela ́zquez, for holding this hearing. 

Mr. Cazamias, thank you for testifying. 

Mr. CAZAMIAS. Thank you, Congresswoman. 

Mrs. RADEWAGEN. So Mr. Cazamias, what does the SBA estimate it spent on export promotion activities in fiscal year 2016? 

Does this include export financing, small business development 

centers export counseling, the export-related activities of the district offices, and STEP program? If not, how much did the SBA 

spend on the activities in fiscal year 2016? 

Mr. CAZAMIAS. Thank you, Congresswoman. 

My office does have the breakdown of those numbers and we will 

supply it to your office. 

Mrs. RADEWAGEN. Thank you very much. 

I yield back the balance of my time, Mr. Chairman. 

Chairman CHABOT. Thank you. The gentlelady yields back. 

The gentlelady from North Carolina, Ms. Adams, who is the 

ranking member of the Subcommittee on Investigations, Oversight, 

and Regulations, is recognized for 5 minutes. 

Ms. ADAMS. Thank you, Mr. Chairman. Thank you, Ranking 

Member Vela ́zquez, for hosting the hearing today. And Mr. 

Cazamias—is that correct? 

Mr. CAZAMIAS. Yes, that is correct. 

Ms. ADAMS. Thank you very much for your testimony. 

You talked a little bit about the small women-owned businesses, 

and, of course, I had a question, but I wanted to just add to that. 

You talked about what you all were going to do or what you think 

you might do. I wanted to add rural businesses to that as a part 

of that. I have a special interest in women-owned businesses, and 

those are the socially and economically disadvantaged, and making 

sure that there is equal opportunity in terms of this process, particularly the STEP proposals as they come across your desk, the 

weight that you give them. But I probably do not need to ask that 

question. It sounded like you are going to be focusing at least to 

some degree on that. 

But let me ask about the discretion that is provided to you by 

the trade facilitation and Trade Enforcement Act in helping to assist these disadvantaged communities. Do you find that that is 

going to be helpful to you? 

Mr. CAZAMIAS. Thank you, Congresswoman. 

This is something, whether it is going to be helpful, I do not have 

the information at hand, but I am sure I can tell you, I can assure 

you that the importance of minority-owned businesses and womenowned businesses is very high on the priority list of this administration, of this Small Business Administration. Knowing the identity of our administrator, Administrator McMahon, you can understand that she also finds it of the utmost importance, and I know 

that we, even last year, were awarding exporter lender of the year 

to entities and banks that have shown outstanding performance in 

making SBA loans to minority-owned businesses. So it is something that is very high on the visibility and that we have a commitment to. 

Ms. ADAMS. Great. Thank you. 

SBREP-219A with DISTILLER

18 

You know, when we look at the businesses that are growing the 

fastest, they are women-owned businesses, and more specifically, 

African-American women-owned businesses. 

But let me ask another question. Do you have any data available 

about STEP proposals that have been approved from rural, womenowned, and socially economic disadvantaged businesses that you 

may have taken a look at? 

Mr. CAZAMIAS. I will have my office take a look at that and 

provide it to yours. 

Ms. ADAMS. Okay, great. And a follow-up to that, I was interested in the percentages, and I know you are just getting started, 

and certainly, I wish you well, but also, in terms of the percentages 

that are submitted by rural, women-owned, and socially economic 

disadvantaged businesses, I am just curious about the data that 

has been kept and what those percentages might be, as well as not 

only what the numbers are but what the approval rate of those 

have been. 

Mr. CAZAMIAS. Thank you, Congresswoman. 

Whatever information we have in terms of the breakdown, we 

are going to provide it to your office. 

Ms. ADAMS. Thank you very much. 

Mr. Chairman, I am going to yield back the rest of my time. 

Thank you. 

Chairman CHABOT. Thank you. The gentlelady yields back. 

And I know the chair is not supposed to comment on these kind 

of things, but that is one beautiful hat, I think. 

Ms. ADAMS. And I thank you very much for saying that. It is 

one of my 1,094 in my collection and I am wearing this as far as 

my birthday celebration for this week. But thank you very much. 

Chairman CHABOT. All right. Well, happy birthday. Yeah, excellent. 

The gentlelady’s time is expired. 

The gentleman from Iowa, Mr. Blum, who is the chairman of the 

Subcommittee on Agriculture, Energy, and Trade, is recognized for 

5 minutes. 

Mr. BLUM. Thank you very much, Mr. Chairman Chabot. And 

I concur with you on my colleague’s hat. It is very beautiful. I was 

admiring that. 

And also, I was not aware, but that is a great statistic about female, minority-owned businesses growing amongst the fastest businesses. That is tremendous. Good to hear. 

Thanks for being with us today, Mr. Cazamias. 

Mr. CAZAMIAS. Yes, thank you. 

Mr. BLUM. Yes. Glad to hear you are from the private sector 

and you have had a tremendous amount of experience in international business as well, I have read. 

I would like to have your personal thoughts on TPP. With your 

international trade experience, you must have some thoughts on 

that agreement. 

Mr. CAZAMIAS. Well, Congressman, I think the current administration’s new approach of looking at trade agreements on a oneto-one basis is really badly needed. Clearly, it is important that we 

start reevaluating what our trade posture is so that we do not run 

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19 

the kinds of deficits we have historically and give a better chance 

to our domestic producers in being able to compete. 

Mr. BLUM. So I take it that you did not like TPP because of the 

framework, because it was not bilateral or—— 

Mr. CAZAMIAS. Well, I believe that a one-to-one, a one-to-one 

type of trade posture is going to be beneficial. 

Mr. BLUM. And what are your feelings on NAFTA? 

Mr. CAZAMIAS. Initially, of course, back in 1992, and I am from 

the, you know, border country, I was initially supportive of it. I saw 

the burgeoning growth that it had, the effect it had on my city. But 

after 25 years, we have a lot more datapoints. We have a lot more 

in the way of datapoints now, and I have, unfortunately, seen what 

the legacy of these trade deficits are, and they are shuttered industries and high unemployment. So it is high time we take a new 

look at our trade agreements. 

Mr. BLUM. EXIM Bank, they provide financing for export activities in the private sector as well. Does the OIT, Office of International Trade, work in conjunction with the EXIM Bank? Do they 

provide loans maybe to smaller businesses that EXIM Bank would 

not look at? Because one of the things when we debated reauthorization of EXIM Bank was, well, the majority of the funding or the 

benefits go to five companies, five mega corporations, and that you 

do not focus enough on small businesses. So do you work with 

them? How is that relationship? 

Mr. CAZAMIAS. The level of coordination between the two entities is something I am going to have to get back to you on, Congressman, but I will say, it speaks to what I was saying earlier 

about the differentiating value of the Small Business Administration being able to focus on small businesses so that we do not take 

that ‘‘bang for the buck’’ approach. 

Mr. BLUM. Do we track the revenues, the export revenues of 

small businesses? 

Mr. CAZAMIAS. We track—— 

Mr. BLUM. Do we have that number? Does the SBA have that 

number? 

Mr. CAZAMIAS. Yes. We track the export revenues that are a 

result of SBA counseling and SBA financing. 

Mr. BLUM. And what has that trend been? What are those numbers over the last 3 years? 

Mr. CAZAMIAS. Let me, before I take a guess, let me have my 

office provide those numbers so I can be specific. I do not wish to 

make a mistake in my testimony. 

Mr. BLUM. Because particularly in government, the Federal 

Government, we talk a lot, as opposed to the private sector, it 

seems like we are not so concerned about results sometimes. And 

I think we need to do a good job. I just would offer this advice to 

you of measuring things, and every time you testify here I am 

going to be asking you, you know, is that trend up? Is that trend 

in the right direction? Are our small businesses, in fact, exporting 

more to foreign countries than they were last year? 

Mr. CAZAMIAS. I sympathize with the sentiment, and I will be 

prepared. 

Mr. BLUM. What would you say are the main ways, the main 

methods that your office is going to help small businesses export? 

SBREP-219A with DISTILLER

20 

Mr. CAZAMIAS. I think there are, again, three ways that we are 

going to be able to help them export and that is, one, providing 

them the liquidity they need, especially for first-time exporters, but 

also for businesses who have been successful in exporting. We are 

going to be able to provide them international trade loans that are 

going to help them expand their PP&E. 

Secondly, in opening up the markets and making connections between our domestic businesses and foreign markets and foreign 

buyers of domestic products. 

Mr. BLUM. And I am a small business owner, and we are in the 

software business, and access to capital is important. I get that. 

But I think before the access to capital, you need the connections. 

You just mentioned that, connections. Can you talk to me in the 

29 seconds we have left about how is your office going to help small 

businesses connect with foreign entities that need their products? 

Mr. CAZAMIAS. Certainly, we have been coordinating with the 

States through the STEP program to conduct dual trade missions, 

joint trade missions, and to be able to have that kind of State cooperation so we can have those people who are closer to the businesses and understand what their needs are, make those connections to foreign entities. 

Mr. BLUM. Always remember that that connection is the first 

step. Before we need access to capital, they need that connection. 

They need a buyer, international buyer that is interested in their 

product. So I would hope you emphasize that. 

Mr. CAZAMIAS. Well received. 

Mr. BLUM. My time is over and I yield back the time I do not 

have, Mr. Chairman. 

Chairman CHABOT. The gentleman’s time is expired. That is 

right, the gentleman’s time has expired. 

The gentleman from Florida, Mr. Lawson, who is the ranking 

member of the Subcommittee on Health and Technology, is recognized for 5 minutes. 

Mr. LAWSON. Thank you, Mr. Chairman. And I want to thank 

you for being with us today. 

When I read the staff report, I thought it was very fascinating 

and very revealing to look at the report that said only 1 percent 

of small business was conducted in trade; and secondly, when they 

said that over 95 percent of people outside of this country were consumers. And I know that you have had a great deal of international experience in this particular area. 

So my question was centered around will it be financially feasible 

for small businesses to look more towards international trade, even 

though I have heard a lot of questions here this morning from a 

lot of the members about what we need, access to capital and so 

forth? But in 2017, when you see only 1 percent of small business 

in America not engaging in international trade, how do you respond to that? Is it financially feasible? Is it just something that 

we should not be involved in? I am not really sure. 

Mr. CAZAMIAS. Congressman Lawson, that is a terrific question 

and it is one of the challenges that we have to meet up to to be 

able to expand the number of U.S. businesses and the percentage 

of U.S. businesses that are exporting internationally. I think it is 

worthy of investigation to determine whether it is a perception 

SBREP-219A with DISTILLER

21 

issue, whether there is simply not the lack of awareness that it is 

important to diversify your customer base, to create new lines of 

revenue and find these international customers, or whether there 

is the perception that it is just too difficult, but I do believe that 

with the various trade financing options that exist at the Small 

Business Administration, we make it financially feasible. So perhaps it is something that we are going to have to investigate to understand if there is a perception or a lack of awareness, and if so, 

we need to figure out how to improve our outreach. 

Mr. LAWSON. As a follow-up, did you say at one time you were 

in India? 

Mr. CAZAMIAS. I lived in India for an entire year. 

Mr. LAWSON. Okay. And I was trying to understand how the 

people in India are able to do international trade in America in a 

lot of different areas, and technology and so forth, but we are not 

able to do the same kind. And that is what really, I am so glad that 

you have that experience because I look forward to working with 

you. And you might want to elaborate on that. 

Mr. CAZAMIAS. Congressman, I think it is related to what I was 

saying before. It is encouraging to know that we are taking a new 

look at our trade posture and that we are starting to look at oneon-one agreements because I think that this change of trade posture is going to have a measurable effect on what those trade balances are. So I look forward, as you do, I am sure, to see how this 

evolves over the next few years. 

Mr. LAWSON. Okay. Mr. Chairman, with that I yield back. 

Chairman CHABOT. Thank you. The gentleman yields back. 

And the ranking member is recognized to ask a question. 

Ms. VELA ́ ZQUEZ. Just one question. So we know that there are 

six federal agencies that share responsibility in providing export 

assistance to small businesses including: SBA, Commerce, USDA, 

and the EXIM Bank. You talk about liquidity and access to capital, 

so I hope that you do a better job at getting EXIM Bank to continue to do the job that they have done. Since they cannot make 

loans larger than $10 million now, you have seen an increase in 

lending for small businesses for the first time exceeded 50 percent. 

It used to be 20 percent. So you are the chair of the TPCC? 

Mr. CAZAMIAS. That is correct, Ranking Member Vela ́zquez. 

Ms. VELA ́ ZQUEZ. Okay. I hope that you will take upon yourself 

to clear issues over jurisdiction as it relates to all these six federal 

agencies. 

Mr. CAZAMIAS. I will absolutely take that under advisement, 

Congresswoman Vela ́zquez. 

Ms. VELA ́ ZQUEZ. Thank you. 

Chairman CHABOT. The gentlelady yields back. The gentlelady 

yields back. 

And we want to thank the witness for his testimony here, and 

the chair would like to commend members on both sides for their 

participation today and the incisiveness and the brevity of some of 

the questions as well. We have fit a lot in, I think, in an hour and 

8 minutes here. And so I think great attendance by both sides, and 

I think you did an admirable job for having been in the position 

no more than 3 weeks. Very impressive. 

Mr. CAZAMIAS. Thank you. 

SBREP-219A with DISTILLER

22 

Chairman CHABOT. And as you know, ensuring that America’s 

small businesses have every opportunity to export is essential, and 

I hope that this hearing encourages the OIT to continue improving 

its outreach and training efforts and better coordinate Federal resources for small businesses all across this country. 

And I would ask unanimous consent that members have 5 legislative days to submit statements and supporting materials for the 

record. 

Without objection, so ordered. 

And if there is no further business to come before the Committee, 

we are adjourned. Thank you. 

[Whereupon, at 12:11 p.m., the Committee was adjourned.] 

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23 

A P P E N D I X 

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~ ... ._._ ........ 

~ ...... W.SJ .. ~ •"IST'l P' 

U.S. Small Business Administration 

TESTIMONY of 

PETER CAZAMIAS 

Associate Administrator, Office of International Trade 

U.S. Small Business Administration 

House Small Business Committee 

Tuesday, May 23, 2017 
24 

Chairman Chabot, Ranking Member Velazquez, and other distinguished members of this committee; thank you for inviting me here 

to speak with you today. 

Three weeks ago, I was honored to accept Administrator 

McMahon’s appointment and begin my service as Associate Administrator for International Trade at the Small Business Administration (SBA). Today, I am honored to be able to meet with you and 

listen to your important views on small business and trade. 

Since starting at the SBA, I have been familiarizing myself with 

the role of the Office of International Trade (OIT), and its role in 

helping small businesses grow and thrive through exports and involvement in global commerce. 

Administrator McMahon believes that exporting is an essential 

component of small business growth, because 95% of the world’s 

consumers and over three quarters of all existing purchasing power 

are located outside the United States. 

Just a few weeks ago, I accompanied Administrator McMahon to 

the United Nations, where she signed a proclamation naming June 

27th as ‘‘Micro, Small & Medium-sized Enterprises International 

Day,’’ and in so doing, brought international recognition to the vital 

role small businesses play in promoting innovation, creativity and 

job growth. 

Yet today, among our over 28 million U.S. small businesses, less 

than 5% can claim the title of ‘‘exporter.’’ The Office of International Trade is charged, by statute, to improve upon this number. Its stated mission involves: (i) Increasing the number of U.S. 

small businesses that export, and (ii) Increasing the volume of exports by U.S. small businesses. The SBA, under the leadership of 

Administrator McMahon, will address this dual mission by focusing 

on three critical needs small business have when attempting to export: 

1. The need for information. The SBA OIT recognizes that 

guidance and support for small businesses is crucial to achieving a foothold in the international marketplace. As such, the 

Office of International Trade has a network of 21 Export Finance Managers, based in U.S. Export Assistance Centers, who 

provide counseling on international payment risks and U.S. 

government export financing options. 

2. The need for capital. Small businesses cannot trade and 

export to these new markets unless they have access to capital, 

specifically trade finance. Small businesses are hardest hit by 

trade finance gaps and compliance challenges. In the United 

States, over one-third of all small businesses find financing 

harder to obtain for foreign sales than for domestic sales. 

Given this challenge, SBA works with lenders to provide tailored trade finance loan guarantees so that small businesses 

can finance their foreign sales and growth. SBA’s three targeted export loan guarantee programs—Export Express, Export Working Capital and the International Trade Loan—are 

designed to support small businesses throughout the exporter 

life cycle, from developing new markets, to financing export 

SBREP-219A with DISTILLER

25 

transactions, to expanding plant and equipment due to exporting success. 

3. The need among small businesses for overseas promotional services and market access. The SBA OIT emphasizes 

the importance of ‘‘small business export promotion’’ by 

strengthening its partnership with state and territory governments through the State Trade Expansion Program (STEP) 

and its involvement chairing the Trade Promotion Coordinating Committee’s (TPCC) Small Business Working Group— 

a group of inter-agency representatives dedicated to the mission of increasing the number of small business exporters. 

And, because the Office of International Trade is also 

charged by statute with ensuring that the interests of small 

businesses are adequately represented in bilateral and multilateral trade negotiations, we actively participate in developing 

small business-beneficial trade commitments for transparency, 

flexibility, and evidence-based decision-making, so that foreign 

regulations do not unnecessarily burden U.S. small business 

exporters. 

Today, I am able to attest to the dynamic power exporting and 

international trade has on small businesses and local economies. I 

hail from the South Texas border city of Laredo. Located on the 

North bank of the Rio Grande, Laredo’s economy is virtually entirely based on international trade and it serves as one of the largest land ports in the United States. I witnessed the burgeoning 

growth that international trade had on my native city. 

After graduating from Yale University, I served as an intern for 

the U.S. Commercial Service in Mexico City, where the negotiation 

of the North American Free Trade Agreement (NAFTA) was at the 

time a pressing issue. As a law student at the University of Texas, 

I studied and examined NAFTA’s dispute resolution mechanisms. 

More recently in my professional life, I drove the Asia Pacific financial operations as a regional CFO for Insituform Technologies, an 

U.S.-based pipeline company. I then lived in Delhi, India and led 

a turnaround of Insituform’s flagship Asian operating company. I 

mention these background facts only to convey to you, that I possess a long-standing interest in and familiarity with international 

trade and international business issues, and intend to bring the 

benefit of my experience to bear to help small businesses in our 

country grow and prosper. 

To conclude, I wish to say that under the able leadership of Administrator McMahon, I will be committed to ensuring that our 

small business exporters find all the support they need to expand 

into international markets. I furthermore will endeavor to effectively and efficiently administer the Office of International Trade. 

My goal is to enable the SBA to help expand the footprint of small 

businesses in the overseas marketplace, thereby spurring innovation and employment growth. 

With that I wish to thank you for the opportunity to speak with 

you today, and I look forward to answering your questions. 

SBREP-219A with DISTILLER

26 

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EVALUATION REPORT 

REVIEW OF SBA's STATE TRADE AND 

EXPORT PROMOTION GRANT PROGRAM 

May 4, 2017 IU PORI NUMB! R 17-1! 
27 

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What OIG Reviewed 

The Small Business jobs Act of 2010 (the Act) 

authorized the State Trade and Export Promotion 

(STEP) grant program with the objectives to (1) 

increase the number of eligible small business 

concerns in the states that export, and (2) increase 

the export value of those eligible small businesses 

that already export. 

As required by the Trade Facilitation and Trade 

Enforcement Act of 2015, the SBA Office of the 

Inspector General (OIG) reviewed SBA's STEP 

grant program to determine how the funds were 

used. To answer our objective, we requested the 

grant award and expenditure totals from the 

Office of International Trade (OIT), Office of 

Grants Management (OGM), and the Office of the 

Chief Financial Officer (OCFO). We also queried 

STEP data from the USAspending.gov website. 

Additionally, we judgmentally selected 15 grant 

awards totaling $15.2 million. 

What OIG Found 

SBA could not provide consistent STEP grant 

award and expenditure data. The OIT, OGM, and 

OCFO provided different totals for the fiscal years 

(FYs) 2011, 2012, 2014, and 2015 grant awards 

and expenditures. Additionally, we compared the 

totals received from the three offices with 

USAspending.gov and found SBA did not update 

the website with complete and accurate award 

data. 

We also found SBA implemented new reporting 

requirements for the FY 2014 STEP program that 

significantly improved the quality of the grant 

recipients' performance and financial reports. As 

a result, FYs 2014 and 2015 grant recipients 

provided performance and financial reports that 

identified the amount spent for each designated 

export activity as stated in the grant program 

Report 

No, 17~11 

May4, 2017 

announcement However, we were unable to 

determine how the grant recipients spent the 

funds in the first 2 years of the program, FYs 2011 

and 2012, because SBA did not have defined 

program management procedures for the STEP 

grant program at that time. Additionally, we 

found that most of the grant recipients we 

reviewed did not expend all of the funds awarded. 

OIG Recommendations 

We provide three recommendations to improve 

SBA's oversight of its STEP program. We 

recommend that the Chief Financial Officer, the 

Associate Administrator for OIT, and the Chief 

Operating Officer implement corrective actions to 

ensure consistency in financial reporting within 

SBA. We also recommend that the Chief Financial 

Officer develop a process to ensure that SBA 

submits timely, complete, and accurate data in 

USAspending.gov. Additionally, we recommend 

that the Associate Administrator for OIT establish 

and document oversight procedures to ensure 

that the STEP program managers effectively 

monitor the grant recipient's progress in meeting 

targeted milestones. 

Agency Response 

SBA management's planned actions resolve the 

three recommendations. SBA plans to develop a 

process to ensure consistency in financial 

reporting for Federal assistance grants awards. 

SBA also will develop and implement a process to 

ensure that it submits timely, complete, and 

accurate data in USAspending.gov. Additionally, 

SBA will establish oversight procedures to 

effectively document and monitor grants 

recipients' performance in meeting their targeted 

milestones. 
28 

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U.S. SMALL BUSINESS ADMINISTRATION 

OFFICE OF INSPECTOR GENERAL 

WASHINGTON, D.C. 20416 

Final Report Transmittal 

Report Number: 17-11 

DATE: May4,2017 

TO: Linda E. McMahon 

Administrator 

(jfF 

FROM: Hannibal "Mike" Ware 

Acting Inspector General 

SUBJECT: Review ofSBA's State Trade and Export Promotion Grant Program 

This report presents the results of our Review ofSBA's State Trade and Export Promotion Grant 

Program. We conducted this evaluation in accordance with the Council of the Inspectors General an 

Integrity and Efficiency Quality Standards for Inspection and Evaluation. 

We considered management comments on a draft of this report when preparing the final report 

SBA agreed with all three recommendations. 

We appreciate the courtesies and cooperation that we received from your staff during our audit 

Please contact me at (202) 205-6586 or Riccardo Buglisi, Director, Business Development 

Programs, at (202) 205-7489 if you would like to discuss this report or any related issues. 

cc: Mary Anne Bradfield, Chief of Staff 

Peter). Cazamias, Associate Administrator for Office of International Trade 

Eugene Cornelius Jr., Deputy Associate Administrator for Office of International Trade 

joseph P. Loddo, Chief Operating Officer 

Timothy E. Gribben, Chief Financial Officer and Associate Administrator for 

Performance Management 

Eric S. Benders on, Acting General Counsel 

Martin Conrey, Attorney Advisor, Legislation and Appropriations 

LaNae Twite, Director, Office of Internal Controls 
29 

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Table of Contents 

Introduction ............................................................................................................................................................................... 1 

Prior Work. ............................................................................................................................................................................ 2 

Objective ................................................................................................................................................................................. 2 

Finding 1: SBA Provided Conflicting STEP Grant Award and Expenditure Data ......................................... 3 

Conclusion ............................................................................................................................................................................. 4 

Recommendations .............................................................................................................................................................. 4 

Finding 2: OIT Could Improve Its Oversight of Grant Recipients' Use of Funds ........................................... 5 

Conclusion ............................................................................................................................................................................. 8 

Recommendation ................................................................................................................................................................ 8 

Analysis of Agency Response ......................................................................................................................................... 8 

Summary of Actions Necessary to Close the Report ............................................................................................ 8 

Appendix I: Objective, Scope, and Methodology ........................................................................................................ 9 

Use of Computer-Processed Data ............................................................................................................................... 10 

Appendix I!: Agency Comments ..................................................................................................................................... 11 
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Introduction 

The Small Business jobs Act of 2010 (the Act) authorized the Small Business Administration (SBA) 

to establish the State Trade and Export Promotion (STEP) grant program as a 3-year pilot program. 

The objectives of the STEP grant program were to (1) increase the number of eligible small 

business concerns in the states that export and (2) increase the export value of those eligible small 

businesses that already export. The express purpose of the program was to award grants to states 

to execute export programs that assist eligible small business concerns in 

participation in a foreign trade mission, 

a foreign market sales trip, 

a subscription to services provided by the U.S. Department of Commerce, 

the payment of website translation fees, 

the design of international marketing media, 

a trade show exhibition, 

participation in training workshops, or 

• any other export initiative determined appropriate by the Associate Administrator 

for SBA's Office of International Trade (AA/OIT).l 

The Act defined the term "state" to include each of the 50 several states, the District of Columbia, 

the Commonwealth of Puerto Rico, the U.S. Virgin Islands, Guam, and America Samoa. Congress 

later added the Commonwealth of the Northern Mariana Islands as an eligible recipient in 2013. 2 

The Act required the AA/OIT to establish the STEP grant program and gave the AA/OIT the 

authority to award each of the eligible recipients no more than one grant per fiscal year (FY) on a 

competitive basis. 

Although Congress originally authorized funding of$30 million each year for FYs 2011,2012, and 

2013, it did not appropriate any funds for FY 2013.3 In FYs 2011 and 2012, SBA awarded grants to 

states with the goal of assisting eligible small business concerns with exporting. The STEP 

program's authorization expired at the end of FY 2013, but Congress appropriated $8 million for 

STEP in FY 2014 and $17.4 million for FY 2015.• 

1 Public Law 111-240, Small Business jobs Act of2010, section 1207(b) (September 20!0). 2 Public Law 112-239, National Defense Authorization Act of 2013, section 588 (January 2013). 3 Public Law 111-240, Small Business fobs Act of 2010, sections 170!(a)(3) and [4) [September 2010). 4 Public Law 113-76, Consolidated Appropriations Act, 2014 (January 2014) and Public Law 113·235 Consolidated and 

Further Continuing Appropriations Act, 2015 [December 2014 ). 

1 
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The following SBA program offices work individually and collaboratively to manage and process the 

STEP grant awards and reimbursement payments: 

• Manages the. STEP program 

• Deve!Qps program announcement 

• Re11iews and seleCts applications for award 

• Pr'avfd'es closeout Vefficaiion prpcedures 

• Makes grant awards 

• IsSueS: tnodificationS 

• Appr<>Ves advancement or reimbursement requests 

• Performs closeout procedures 

~ Execl!tes grant payments 

Source: OIG generated based on program offices explanation of the STEP grant award and management process. 

The Trade Facilitation and Trade Enforcement (TFTE) Act of2015 established a new export 

program, the State Trade and Expansion Program, ending the pilot STEP grant program.s The TFTE 

required the SBA Office of Inspector General (OIG) to submit a report to the Congressional 

Committees on Small Business regarding the use of amounts made available under the STEP grant 

program. 6 

Prior Work 

SBA OIG conducted a review of the pilot STEP grant program that identified weaknesses in SBA's 

management and oversight of the STEP grant program.? The report included nine 

recommendations to improve the SBA's management of the STEP grant program, including a 

recommendation to hold STEP grant recipients accountable for adhering to reporting requirements 

established in the notices of award and program announcements. Between May 2013 and 

September 2013, the OIT provided documentation to support the implementation of all nine 

recommendations. 

Objective 

Our objective was to determine how the funds for the STEP grant program were used. Specifically, 

we determined how much was awarded and expended and what the grant recipients spent the 

funds on. 

s Public Law 114·125, Trade Facilitation and Trade Enforcement Act of 2015, section 503 (February 2016). 6 Public Law 114-125, Trade Facilitation and Trade Enforcement Act of 2015 section 503 (S)(B) "Reports" (February 

2016). 

7 SBA OIG Report 12-21, The SBA Needs to Improve Its Management of the State Trade and Export Promotion Grant 

Program (September 2012). 

2 
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Finding 1: SBA Provided Conflicting STEP Grant Award and Expenditure 

Data 

We could not determine the exact amounts awarded and expended for the STEP grant program 

because of inconsistent financial data provided by SBA. Specifically, Office of the Chief Financial 

Officer (OCFO), Office of Grants Management (OGM), and Office of International Trade (OIT) 

provided different grant award and expenditure amounts for the STEP grant program FYs 2011, 

2012,2014, and 2015. Additionally, SBA reported incomplete and inaccurate grant award data in 

USAspending.gov. 

Inconsistent Grant Award and Expenditure Amounts 

The various program offices involved in managing and monitoring the grant program reported 

different STEP grant amounts awarded and expended (see Table 1). Office of Management and 

Budget requires agency management establish controls that ensure reliable financial reporting. a 

These variances indicate SBA did not implement effective control activities over the STEP grant 

program transactions to ensure that they were complete and accurate for reliable reporting. 

Table 1. STEP Program Award Amounts and Expenditures by Program Office 

SBA awards each STEP grant recipient a defined amount of program funds, as established in the 

notice of award. Therefore, each program office involved in the STEP grant process should report 

identical amounts. However, we found that the program offices reported disparities on the amount 

awarded for each FY. For example, for FY 2011, OCFO reported nearly $30 million of STEP grant 

awards, whereas OGM reported nearly $29 million, which was more than a $1 million difference. 

Additionally, the three program offices review the same financial form that the grant recipients 

submit for reimbursement, yet we found they were not consistent in reporting the amount 

expended. 9 For example, for FY 2011, OCFO reported over $24.8 million of STEP grant program 

expenditures, whereas OGM reported over $19.2 million, which was a difference of more than 

$5.5 million. O!T did not provide aggregate totals for the amount expended because they kept track 

of the amount expended for each grant and did not have summary data readily available. An OGM 

' Office of Management and Budget, Circular A-123, Management's Responsibility for Internal Control (December 2004 ). 

9 SF-270, Request for Advance or Reimbursement. 

3 
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official stated that reported differences were likely a result of a non-standardized closeout process 

as well as potential human error. 

Incomplete and Inaccurate Grant Award Data in USAspending.gov 

SBA did not provide complete and accurate financial reporting information in USAspending.gov. 

The Federal Funding Accountability and Transparency Act of 2006, amended in 2008, required 

Federal agencies to report all contract and grant awards in USAspending.gov. 10 The law mandates 

Federal agencies report every transaction for Federal contracts, grants, loans, and other financial 

assistance to the USAspending.gov website within 30 days. Grant award transactions include all 

modifications to the award including obligations and deobligations. OGM was responsible for 

reporting the grant awards, and subsequent modifications, in USAspending.gov. However, OGM did 

not adequately perform this requirement, and as a result, reported incomplete and inaccurate data 

in USAspending.gov for the STEP grant program. 

OGM reported incomplete and inaccurate data because they were not reconciling the data in the 

grants management system with the data in USAspending.gov. Further, grant specialists did not 

consistently enter the award information into the grants management system, and OGM did not 

require a secondary review to ensure the award documents were complete and accurate. As a 

result, grant closeout procedures lacked consistency and grant specialists did not always use the 

proper deobligation form to complete the closeout.u As of january 2017, OCFO moved the function 

of updating USAspending.gov from OGM to OCFO. 

Conclusion 

Multiple information sources within SBA reported different STEP grant award and expenditure 

amounts and are therefore unreliable. Further, SBA did not provide complete and accurate 

financial reporting information in USAspending.gov. This resulted in SBA not being transparent 

with the public on what it awarded for the STEP grant program and being inconsistent with the 

Federal Funding Accountability and Transparency Act of 2006. 

Recommendations 

We recommend that the Chief Financial Officer, the Associate Administrator for the Office of 

International Trade, and the Chief Operating Officer collaboratively: 

1. Implement corrective actions to ensure consistency in financial reporting within SBA. 

We recommend that the Chief Financial Officer: 

2. Develop and implement a process to ensure that SBA submits timely, complete, and 

accurate data in USAspending.gov. 

!O Public Law 109-282, The Federal Funding Accountability and Transparency Act of2006 (September 2006). 

u SBA Form 1223, Approval List. 

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Finding 2: OIT Could Improve Its Oversight of Grant Recipients' Use of 

Funds 

We reviewed 15 STEP grants and found the following: 

Eight grant recipients primarily spent program funds on export trade show exhibitions, 

foreign trade missions, other export initiatives, and non-activity related Federal expenses, 

but only three successfully reached OIT's spending threshold. 12•

13 

Seven grants lacked supporting documentation to determine how the grant recipients spent 

program funds.14 

The STEP grant program announcement required grant recipients provide quarterly and final 

reports to OIT. For the first 2 program years, OIT did not enforce this requirement or establish 

consistent reporting standards, as previously reported in SBA OlG report 12-21.15 Although OIT 

implemented improved reporting and monitoring procedures in FY 2014, OIT officials could better 

manage the grant recipient's progress in achieving the grant milestones and spending targets by 

increasing their oversight procedures. On average, grant recipients did not use over 25 percent of 

their awarded funds. By not expending the full amounts, grant recipients may have lost 

opportunities to increase the number of small businesses exporting or increasing small business 

export sales, thus not maximizing the potential of the STEP grant program. 

Grant Recipients' Use of Funds by Activity Category 

OIT's improved reporting requirements for the FY 2014 performance progress reports requires 

grant recipients to categorize their expenditures by eight designated export activities, as designated 

in the Act.t 6 For example, North Carolina spent 79 percent of its Federal funds on export trade 

show exhibitions. These activities included a Boat Show in Cartegena De lndias, Columbia, and an 

International Furniture Expo in Shanghai, China. North Carolina reported the Expo attendance 

resulted in a signed distributor contract to showcase their product in 400 stores. Another grant 

recipient, Mississippi, spent 63 percent of its funds on foreign trade missions. These activities 

included business development missions to Mexico, the Caribbean, South Africa, and Canada among 

other locations. Further, Hawaii spent 46 percent of its funds on other export initiatives, which 

included scholarships and cost sharing programs. (See Table 2 for itemized expenditure ratios.) 

While four of the grants we reviewed expended funds on other export initiatives, we found the 

grant files did not contain evidence of receiving the required prior approval from the AA/OITP 

According to OIT officials, the Director of OlT briefed the AA on the proposals prior to submitting 

the application packages to OGM for award. However, this meeting was informal and not 

documented. Therefore, SBA could not assure that funds spent by the grant recipients in this 

category received the required prior approval. 

12 SBA awarded the eight grants during FYs 2014 and 2015. 13 OIT program officials used a generally accepted spending threshold of at least 85 percent to measure whether a grant 

recipient successfully expended their Federal funds. 

14 SBA awarded the seven grants during FYs 2011 and 2012. 1' SBA OIG Report 12-ZL The SBA Needs to Improve Its Management of the State Trade and Export Promotion Grant 

Program (September 2012). 16 As required by the reporting requirements in the 2014 and 2015 program announcements Section VI and Public Law 

111-240, Small Business jobs Act of 2010, Section 1207 (b) (February 24, 2016). 17 As required by the reporting requirements in the 2014 and 2015 program announcements Section VI and Public Law 

111-240, Small Business jobs Act of2010, Section 1207(b)(8) (February 24, 2016). 

5 
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Table 2. !low States Expended Funds 

OIG also found that four of the grant recipients reported expending program funds for purposes 

other than the eight designated export activities. According to OIT officials, the non-activity related 

Federal expenses category encompasses personnel, fringe benefits, supplies, and travel. Minnesota 

spent 36 percent, Utah spent 22 percent, North Carolina spent 17 percent, and Mississippi spent 

11 percent of their awarded Federal funds on these types of expenses. According to OIT, not every 

state consistently reports personnel, fringe benefits, supplies, and travel; often these are included 

as part of the non-Federal matching contributions. 

Grant Recipients Are Not Fully Using Federal Funds Awarded 

Of the eight grants that had supporting documentation showing how the grant recipients spent 

program funds, only three grant recipients used more than 85 percent of the funds awarded. IS 

According to OlT officials, the program managers track each grant recipient's use of funds quarterly 

and provide feedback when the grant recipients are not reaching expenditure milestones. Despite 

this effort, for the four FY 2014 grants we reviewed, the grant recipients spent an average of 

68 percent of the Federal funds awarded. Likewise, for the four FY 2015 grants we reviewed, the 

grant recipients spent an average of78 percent (see Table 3). As a result, these grant recipients did 

not use over $1.1 million of their awarded funds. 

18 OIT program officials used a generally accepted spending threshold of at least 85 percent to measure whether a grant 

recipient successfully expended their Federal funds. 

6 
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Table 3. Percentage of Funds Used by State 

Grants with Undetermined Activity 

None of the seven FYs 2011 and 2012 STEP grant files that we reviewed had an entire year of 

quarterly reports available to determine how grant recipients used the funds. According to OIT 

officials, in FYs 2011 and 2012, SBA did not have defined program management procedures for the 

STEP grant program. Specifically, according to OJT officials, previous OIT program managers did 

not consistently monitor the grant recipient's performance. Additionally, OIT did not require grant 

recipients to use a standard reporting template for tracking quarterly reports during the first 

2 years of the program. 

OGM officials also explained that the grant files were incomplete because they lost documentation 

during OGM's implementation of an electronic records system. Therefore, we could not determine 

whether the grant recipients used the Federal funds for the intended purposes of the STEP grant 

program for FYs 2011 and 2012. 

We identified SBA's documentation and program management issues in our prior report ofSBA's 

management of the STEP program. 19 Based on our recommendations, the Agency implemented, 

among other things, a reporting mechanism to track how the grant recipients used the funds. 

Starting in FY 2014, SBA required the grant recipients to report how they expended Federal funds 

within nine cost categories.zo As a result, OIT officials monitored grant recipients' use of funds 

more consistently in FYs 2014 and 2015 as evidenced by available documentation. 

19 SBA OIG Report 12-21, The SBA Needs to Improve Its Management of the State Trade and Export Promotion Grant 

Program (September 2012). 20 The nine cost categories include the eight statutorily defined activities as well as the non-activity related Federal 

expenses. 

7 
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Conclusion 

Congress authorized the STEP grant program to assist states in promoting the export and 

expansion of trade opportunities. The award of those grant funds encourages states to create 

programs that include activities that assist eligible small businesses in achieving this goal. 

However, in five of the eight grants we reviewed that had supporting documentation showing how 

the grant recipients spent program funds, the grant recipients were unsuccessful in spending the 

majority of the funds. This indicates that the STEP grant program may not be fully meeting SBA's 

established performance goals for this program's success. 

Recommendation 

We recommend that the Associate Administrator for the Office of International Trade: 

3. Establish and document oversight procedures to ensure that the STEP program managers 

effectively monitor the grant recipient's progress in meeting targeted milestones. 

Analysis of Agency Response 

SBA management provided formal comments that are included in their entirety in Appendix II. SBA 

management agreed to implement the recommendations by October 1. 2017. 

Summary of Actions Necessary to Close the Report 

The following provides the status of the recommendations and the necessary action to close the 

recommendation. 

1. Resolved. The Chief Financial Officer, Chief Operating Officer, and Deputy Associate 

Administrator for OIT concurred with our recommendation and plan to complete final 

action on this recommendation by October 1. 2017. This recommendation can be closed 

when SBA provides evidence that it developed a process to ensure consistency in financial 

reporting in Federal assistance awards (grants). 

2. Resolved. The Chief Financial Officer concurred with our recommendation and plans to 

complete final action on this recommendation by October 1. 2017. This recommendation 

can be closed when SBA provides evidence it developed and implemented a process to 

ensure that SBA submits timely, complete, and accurate data in USAspending.gov. 

3. Resolved. The Deputy Associate Administrator for OIT concurred with our 

recommendation and plans to complete fmal action on this recommendation by 

October 1, 2017. This recommendation can be closed when SBA provides evidence that it 

has established and documented oversight procedures to ensure that the STEP program 

managers effectively monitor the grant recipient's progress in meeting targeted milestones. 

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Appendix 1: Objective, Scope, and Methodology 

The objective of our review was to determine how the funds for the STEP grant program were used. 

Our scope included all STEP grant awards for FYs 2011,2012, 2014, and 2015. To achieve our 

objective, we reviewed the STEP grant award and expenditure totals for the 4 program years 

provided by the OCFO, OGM, and OIT. We also queried USAspending.gov to determine the amount 

reported by SBA for the STEP grant program. In addition, we judgmentally selected 15 STEP grant 

awards. Specifically, our sample included three awards from FY 2011 and four awards each from 

FYs 2012,2014, and 2015, based on high dollar totals and assessed risk, to determine how the 

grant recipients used the Federal funds (see Table 4). 

Table 4. Judgmentally Selected Grant Award Recipients 

FIScal Year state Total Award 

2011 California $2,540,924 

2011 Washington $1,591,919 

2011 Pennsylvania $1,710,904 

2012 Michigan $2,186,907 

2012 Ohio $1,297,598 

2012 Illinois $1,069,279 

2012 New York $625,591 

2014 North Carolina $500,000 

2014 Minnesota $471,529 

2014 Mississippi $461,251 

2014 Utah $500,000 

2015 l:{awali $750,000 

2015 Wisconsin $712,000 

2015 Marvland $518.413 

2015 Puerto Rico $288,65Q 

Total Funds Awarded: $15,224,965.00 

Source: DIG generated list of judgmentally selected awards 

based on documentation provided by OIT. 

For each grant award selected, we reviewed the special terms and conditions; SBA Form 1222, 

Notice of Award; SF-PPR, Performance Progress Report; SBA Form 1223, Approval List, which 

serves as the obligation document; SF-270, Request for Advance or Reimbursement; SF-425, 

Federal Financial Report; and the closeout documentation for each of the judgmentally selected 

states. We also reviewed the STEP program announcements for each applicable FY. For each grant 

award, we compared the grant recipient's activities reported on the performance progress report to 

the designated export activities identified on the applicable program announcement. We did not 

review the supporting records for the grant expenditures, and we did not determine whether the 

expenditures were allowable, allocable, or reasonable. 

Additionally, we interviewed personnel from the OIT, OGM, OCFO, and Denver Finance Center to 

gain an understanding of the SBA grant process. We also obtained an understanding of laws, 

regulations, and SBA policies and procedures regarding in STEP grant program as a basis for our 

review. 

We conducted this review in accordance with the Council of the Inspectors General on Integrity and 

Efficiency's Quality Standards for Inspection and Evaluation. Those standards require that we 

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adequately plan and perform the evaluation to obtain sufficient, appropriate evidence to provide a 

reasonable basis for our findings and conclusions based on our objectives. We believe that the 

evidence obtained provides a reasonable basis for our conclusions based on our objective. 

Use of Computer-Processed Data 

Because of the inconsistencies in the financial reporting data, we were unable to rely on the 

computer-processed data that SBA generated from the payment system and the grants 

management system, as well as the data SBA reported in USAspending.gov. 21 

21 SBA uses Joint Accounting and Administrative Management System as their payment system. 

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Appendix II: Agency Comments 

SBA 

CHIEF FINANCIAL OFFICER, 

CHIEF OPERATING OFFICER, AND 

DEPUTY ASSOCIATE ADMINISTRATOR, 

OFFICE OF INTERNATIONAL TRADE 

RESPONSE TO EVALUATION REPORT 

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DATE: 

TO: 

FROM: 

SUBJECT: 

U.S. SMALL BUSINESS ADMINISTRATION 

WASHINGTON, D.C. 20416 

April 28, 2017 

Riccardo R. Buglisi 

Office of Inspector General (OIG) 

Timothy E. Gribben 

Chief Financial Officer 

Joseph P. Loddo 

Chief Operating Officer 

Eugene Cornelius, Jr. 

Deputy Associate Administrator for Office of International Trade 

Review of SBA 's State Trade and Export Promotion Grant Program 

Thank you for the opportunity to respond to the Draft Report of the State Trade and Export Promotion 

Grant Program (STEP). The objective of the Review was to determine whether STEP complied with 

grant requirements related to Federal expenditures and program performance. 

The Office of the Chief Operating Officer (OCOO), the Office of International Trade (OIT), and the 

Office of Chief Financial Officer (OCFO) concur with Office of Inspector General's recommendations. 

The COO, OIT and CFO will improve the internal controls, processes, and procedures to manage Federal 

assistance awards (grants). 

Below please find the Agency's response to each of the recommendations outlined in the Draft Report. 

Recommendation 1: Implement corrective actions to ensure consistency and financial reporting within 

SBA. 

Explanation of Proposed Action: 

Concur. The OCOO, OIT, and OCFO will develop a process to ensure consistency in financial reporting 

in Federal assistance awards (grants). 

Projected Completion Date: October I, 2017 

Recommendation 2: Develop and implement a process to ensure that SBA submits timeZv. complete and 

accurate data in USA Spending.gov. 

Explanation of Proposed Action: 

Concur. The OCFO will develop and implement a process to ensure that SBA submits timely, complete. 

and accurate data in USAspending.gov. 

Projected Completion Date: October 1, 2017 

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