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71–164 PDF 2011

S. HRG. 112–141 

OVERSIGHT AND REAUTHORIZATION OF THE 

EXPORT–IMPORT BANK OF THE UNITED STATES 

HEARING 

BEFORE THE

COMMITTEE ON 

BANKING, HOUSING, AND URBAN AFFAIRS 

UNITED STATES SENATE 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

ON 

EXAMINING THE OVERSIGHT AND REAUTHORIZATION OF THE EXPORT– 

IMPORT BANK OF THE UNITED STATES 

MAY 17, 2011 

Printed for the use of the Committee on Banking, Housing, and Urban Affairs 

( 

Available at: http://www.fdsys.gov/ 

COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS 

TIM JOHNSON, South Dakota, Chairman 

JACK REED, Rhode Island 

CHARLES E. SCHUMER, New York 

ROBERT MENENDEZ, New Jersey 

DANIEL K. AKAKA, Hawaii 

SHERROD BROWN, Ohio 

JON TESTER, Montana 

HERB KOHL, Wisconsin 

MARK R. WARNER, Virginia 

JEFF MERKLEY, Oregon 

MICHAEL F. BENNET, Colorado 

KAY HAGAN, North Carolina 

RICHARD C. SHELBY, Alabama 

MIKE CRAPO, Idaho 

BOB CORKER, Tennessee 

JIM DEMINT, South Carolina 

DAVID VITTER, Louisiana 

MIKE JOHANNS, Nebraska 

PATRICK J. TOOMEY, Pennsylvania 

MARK KIRK, Illinois 

JERRY MORAN, Kansas 

ROGER F. WICKER, Mississippi 

DWIGHT FETTIG, Staff Director 

WILLIAM D. DUHNKE, Republican Staff Director 

CHARLES YI, Chief Counsel 

PAT GRANT, Counsel 

LAURA SWANSON, Policy Director 

LEVON BAGRAMIAN, Legislative Assistant 

GREGG RICHARD, Republican Professional Staff Member 

JOHN O’HARA, Republican Senior Investigative Counsel 

DAWN RATLIFF, Chief Clerk 

WILLIAM FIELDS, Hearing Clerk 

SHELVIN SIMMONS, IT Director 

JIM CROWELL, Editor 

(II)

C O N T E N T S 

TUESDAY, MAY 17, 2011 

Page 

Opening statement of Chairman Johnson ............................................................. 1 

Prepared statement .......................................................................................... 15 

Opening statements, comments, or prepared statements of: 

Senator Crapo ................................................................................................... 2 

WITNESS 

Fred P. Hochberg, President and Chairman, Export–Import Bank of the 

United States ........................................................................................................ 3 

Prepared statement .......................................................................................... 15 

Responses to written questions of: 

Senator Menendez ..................................................................................... 21 

Senator Bennet .......................................................................................... 26 

Senator Wicker .......................................................................................... 30 

(III)

(1) 

OVERSIGHT AND REAUTHORIZATION OF THE 

EXPORT–IMPORT BANK OF THE UNITED 

STATES 

TUESDAY, MAY 17, 2011 

U.S. SENATE, 

COMMITTEE ON BANKING, HOUSING, AND URBAN AFFAIRS, 

Washington, DC. 

The Committee met at 10:03 a.m., in room SD–538, Dirksen Senate Office Building, Hon. Tim Johnson, Chairman of the Committee, presiding. 

OPENING STATEMENT OF CHAIRMAN TIM JOHNSON 

Chairman JOHNSON. Good morning. I will call this hearing to 

order. 

Today, the Committee welcomes the Chairman and President of 

the Export-Import Bank of the U.S., Fred Hochberg. This hearing 

will allow us to continue our ongoing oversight of the Bank’s recent 

activities. In addition, we will hear from the Chairman about the 

Bank’s ideas for reauthorization. 

The Bank’s current authorization expires on September 30, 2011, 

and it is my goal to work with Ranking Member Shelby, Senator 

Crapo, and other Members of the Committee to reauthorize the 

Bank. 

I want to thank all Members of this Committee for their support 

of Wanda Felton and Sean Mulvaney last week. It is imperative 

that the Senate confirm these nominees as quickly as possible. 

The Export-Import Bank is the official export credit agency of the 

U.S., and it assists in financing the export of U.S. goods and services to international markets. Following the financial crisis, the 

Bank experienced a dramatic increase in its activities as many 

companies struggled to find financing in the private market. In fiscal year 2010, the Bank saw a 70-percent increase in authorizations from 2008. In fact, last year the Bank committed almost $25 

billion in support of U.S. exports—a record. 

The Bank is one of the few Federal agencies that actually makes 

money for the U.S. and, since 2008, has been self-funding. This is 

a testament to the Bank’s leadership under Chairman Hochberg, as 

well as the good work of the dedicated staff and Board of the Bank. 

All of the Bank’s transactions are backed by the full faith and 

credit of the United States. Therefore, it is important for this Committee to make sure that the Bank is working as efficiently and effectively as possible to protect the taxpayers. 

2 

Equally important is the Bank’s goal to use exports to help create and maintain jobs here at home. This mission, embodied in the 

Bank’s charter, is at the very core of what Congress intended the 

Bank to do. I believe that while the Bank is doing a good job, it 

can—and must—do more. 

Over the next several years, the Bank will face some challenges. 

After weathering the financial crisis, the Bank may see a shift in 

the types of deals it is asked to finance as the economy recovers. 

In addition, the President has called for the doubling of our exports 

by 2015 in an effort to create as many as 2 million American jobs. 

As the Nation’s official export credit agency, the Bank will play a 

critical role if we are to meet that goal. 

I am eager to hear from Chairman Hochberg about the Bank’s 

recent activities and his ideas for reauthorization. 

I now turn to Senator Crapo for any opening remarks he may 

have. Senator Crapo. 

STATEMENT OF SENATOR MIKE CRAPO 

Senator CRAPO. Thank you very much, Mr. Chairman, and welcome, Mr. Hochberg. We appreciate you being here today. 

As you have noted, Mr. Chairman, the President declared in his 

State of the Union address that he hopes to double the American 

exports in 5 years, and he has identified the Export-Import Bank 

of the United States as one of the leading Government agencies to 

help accomplish that goal. 

Financing is a key element in global trade competition, and extending the Bank’s programs is a vital and integral component in 

supporting the export of American-made goods and American-provided services for both small and large companies. 

In 2006, I had the privilege of working with my colleagues on the 

Banking Committee and then-Export-Import Bank Chairman Jim 

Lambright to reauthorize and reform the Export-Import Bank in a 

process that reflected broad bipartisan agreement. 

The last reauthorization changed the Economic Impact Procedures to ensure that the Bank’s support for transactions not only 

helps U.S. exporters but does not negatively impact domestic companies. Since the Bank was not meeting its 20-percent small business mandate, the legislation made structural changes to make 

sure that the small business community has advocates to advance 

its needs and to address its concerns. And while it is appropriate 

to review the content requirements, tied aid requirements, and 

funding limits, we should be mindful that the Bank’s authorization 

expires in just a few months. 

We need to quickly assess the results of these changes from 2006 

and determine if there are any other reforms to the Bank’s operations that are needed to maintain or improve its competitiveness 

with export financing while not negatively impacting domestic 

business. 

There are literally billions of potential global consumers, both established and emerging, in the markets for goods and services 

made in America. Getting these American goods and services into 

consumers’ hands worldwide is the key to our export challenge. 

And one of the challenges the Bank and our exporters face is 

that other nations also use very aggressive export policies, which 

3 

often limit the attractiveness of our export market to foreign buyers if we do not deal with them. Hopefully today’s testimony will 

shed some light on these issues and contribute to our speedy reauthorization process. 

Thank you, Mr. Chairman. 

Chairman JOHNSON. Are there any Members who wish to make 

opening statements? 

[No response.] 

Chairman JOHNSON. If not, today’s witness, Fred Hochberg, is 

the 23rd President of the Export-Import Bank, the U.S. Government’s official export credit agency. In this capacity, he also serves 

as Chairman of the Board. 

Mr. Hochberg, thank you for being here today. You may proceed 

with your testimony. 

STATEMENT OF FRED P. HOCHBERG, PRESIDENT AND 

CHAIRMAN, EXPORT–IMPORT BANK OF THE UNITED STATES 

Mr. HOCHBERG. Thank you, Chairman Johnson and Senator 

Crapo and distinguished Members of the Committee. Thank you for 

the opportunity to testify today about the Export-Import Bank and 

our reauthorization. 

The Export-Import Bank of the United States helps U.S. companies and workers compete in the global marketplace. In 2010, at 

Ex-Im Bank’s annual conference, President Obama kicked off the 

National Export Initiative with the goal of energizing our export 

base and creating jobs through a doubling of exports by 2015. 

The Export-Import Bank is our Nation’s official credit agency, export credit agency. Our mission is to enable American companies, 

large and small, to compete for sales that help maintain and create 

U.S. jobs. 

In 2008, as the financial crisis unfolded, Ex-Im Bank stepped in 

to assist businesses when the private sector was unable or unwilling to provide financing. This ensured that American businesses 

and their employees were able to compete for sales that helped 

their companies and their workers weather the tough economic 

times. 

The Bank fulfilled its mission with reasonable assurance of repayment by providing export financing through its loan, guarantee, 

and insurance programs. This is something that Ex-Im Bank has 

been doing since it was established in 1934. Ex-Im Bank helps U.S. 

companies compete with foreign competitors that receive support 

from their export credit agencies. In short, we help level the playing field so that U.S. businesses can compete based on quality and 

price of their products and services and not be undercut by overly 

aggressive use of export financing. We provide our exporters and 

the workers with a competitive edge. 

In fiscal year 2010, Ex-Im Bank authorized a record $24.5 billion 

worth of financing which supported more than $34 billion worth of 

U.S. exports and 227,000 U.S. jobs at more than 3,300 companies. 

We proudly added more than 500 businesses over our fiscal year 

2009 levels. 

We are now halfway through fiscal year 2011, and I am confident 

we will have another record-breaking year. We are already ahead 

4 

of where we were mid-year 2010. And I would like to note that we 

do this work at no cost to the American taxpayer. 

Since October of 2007, Ex-Im Bank has operated as a self-sustaining Federal agency. Given the importance of lowering our Nation’s deficit, I am pleased to report that over the past 5 years our 

agency has generated $3.4 billion for the U.S. Treasury. 

Ex-Im Bank helps businesses, large and small, sharpen their 

competitive edge in every part of the country. Mr. Chairman, in your State we have supported nearly $18.5 

million in exports since 2007. I have results for Senator Shelby. Let 

me continue. In fact, for all Members of this Committee, total exports supported more than $19 billion, of which more than 40 percent was for small business, and that is since 2007. 

Let me briefly touch on three issues that we are particularly 

proud of at Ex-Im Bank: our support of small businesses, our support of renewable energy projects, and our support of Sub-Saharan 

Africa projects. 

First, the Bank dedicates substantial resources to assisting small 

businesses, and it is paying dividends. More than 85 percent of all 

transactions at the Bank assist small companies. Our total for 

small business transactions have increased from $3.2 billion in fiscal year 2008 to $5.1 billion in 2010, which was a record for the 

Bank. We have been able to meet our 20-percent small business 

mandate even as our total authorizations grew 70 percent in the 

past 2 years. In fact, in 43 of 50 States, we are well above the 20- 

percent small business mandate. 

In order to reach more small businesses, we are partnering with 

the U.S. Chamber of Commerce, the National Association of Manufacturers, and several financial institutions to leverage their networks. 

In January of 2011, Ex-Im Bank launched a new initiative called 

Global Access for Small Business because for small businesses to 

compete they need access to capital and liquidity. It includes new 

financing products for small exporters and concrete goals to double 

small business financings to $9 billion by 2015, as well as add 

5,000 more of these companies to our portfolio. 

Ex-Im Bank along with these partners has already organized 

nine Global Access Forums across the country. As I mentioned to 

Senator Hagan just before, we will be doing one in North Carolina 

in early June. We plan to hold 20 in the course of this year. 

Second, I want to share with you the strong results we are 

achieving in financing renewable exports. In fiscal year 2008, the 

Bank authorized $30.4 billion in renewable energy exports. That 

grew more than tenfold by 2010 when we authorized $332 million 

in renewable energy exports. We are optimistic that for fiscal year 

2011 we will have doubled last year’s numbers, which would set 

another record for renewable energy exports in 2011. 

Third, we are breaking records with our work in Sub-Saharan 

Africa. For fiscal year 2009, the Bank supported $412 million 

across 20 countries. In fiscal year 2010, that grew to $812 million, 

a new record, and it represents 5 percent of all U.S. exports for the 

region, more as a percentage than any other region of the world. 

In fiscal year 2011, Ex-Im Bank expects to top $1 billion in SubSaharan African authorizations. 

5 

Last, let me take a moment to discuss our reauthorization legislation that was sent to you yesterday. Our legislation extends ExIm Bank’s authorization through September 30, 2015. We clean up 

outdated language that references programs we no longer need and 

countries like Yugoslavia which no longer exist. 

The final highlight of our language is that we gradually increase 

our existing exposure cap from $100 billion to $140 billion over 4 

years. This will enable the Bank to continue to support U.S. exports and meet the President’s goal of doubling them by 2015. 

I am proud of the excellent work that the 400 strong Ex-Im Bank 

staff is doing to create jobs, and, again, this is at no cost to the taxpayer. 

I look forward to working with you on our reauthorization. This 

will allow the Bank to continue to help grow exports and jobs while 

at the same time making American businesses more competitive in 

the global markets. 

I thank you for this opportunity to testify. I look forward to your 

questions. 

Chairman JOHNSON. Thank you for your testimony. 

As we begin questioning the witness, I will ask the clerk to put 

5 minutes on the clock for each Member’s questions. 

In large part due to the economic crisis, the Export-Import Bank 

has seen a 70-percent increase in its authorized transactions over 

the last 2 years. As the economy continues to recover, how do you 

think the Bank will be affected? 

Mr. HOCHBERG. Senator, thank you for that question. I am very 

proud of the fact that we have stepped in to the financial crisis and 

increased our authorizations over 70 percent. 

That said, although the financial crisis and the banking crisis is 

subsiding, we still see a need for extensive export assistance partly 

to address foreign competition. Our companies are facing brutal 

competition, and it is important that we continue to create jobs 

here in the United States through exports. 

Second, more and more exports are going to emerging economies 

which have less access to the capital markets, less access to banking, and, therefore, there is still a great need for our services. 

Chairman JOHNSON. The President has announced a National 

Export Initiative to double exports by 2015, which could create 2 

million new jobs. How can the Bank best advance the goals of this 

initiative? 

Mr. HOCHBERG. Chairman Johnson, the best way that we can address those is by making sure that when American companies are 

competing for orders, competing for sales overseas, that financing 

is never an impediment to making that sale. So we are helping 

companies, large and small, make sure that they have the financial 

resources—small companies primarily through access to liquidity 

and insurance on receivables, large companies making sure they 

have a competitive financing offer so that they can meet the foreign 

competition. 

Chairman JOHNSON. At the close of fiscal year 2010, the Bank 

had $75 billion in total obligations outstanding. The Bank is prohibited from exceeding $100 billion in outstanding obligations. If 

Congress were to raise this cap, what impact would that have? 

6 

Mr. HOCHBERG. Senator, we are increasing our authorizations 

each year. So far this year we have authorized $13.4 billion, and 

I expect this year we will in all likelihood top last year’s record of 

$24.5 billion. So each time we add to those authorizations, we need 

to add to our portfolio. Roughly speaking, we added $20 billion; 

about $10 billion stays on the portfolio because they are longerterm deals, and the balance will be paid off for the short term. So 

we need an increase in the exposure cap to continue to support 

American companies as they compete overseas and compete for jobs 

here at home. 

Chairman JOHNSON. The Bank is required to ensure that at least 

20 percent of its annual authorizations goes toward small business. 

Under your leadership the Bank has met this goal this year. Can 

you talk about how the Bank works to meet and possibly exceed 

this mandate? 

Mr. HOCHBERG. Senator, I think that one of the reasons that 

President Obama asked me to take this position was my work at 

the Small Business Administration under President Clinton as the 

Deputy and the fact that I ran a company that was once small for 

20 years, a family business called Lillian Vernon. 

The key to our growth in this economy is small business, and it 

is central to our work and central to my work at Ex-Im Bank. We 

have launched a number of these Global Access Forums around the 

country. I know that you and are working to find a date in South 

Dakota, for example. Most of this is about information. We do need 

resources to meet small business owners. They frequently do not 

understand how we can be a resource and help them grow their 

businesses. So resources are critical, and that is a separate matter 

in terms of appropriation. 

We have also added new products, Express Insurance and a 

number of fast products to improve turnaround time to make sure 

that small companies get answers and get answers quickly. 

But it is a real challenge to meet the 20-percent threshold each 

and every year based on the resources that we have. 

Chairman JOHNSON. The Bank limits foreign content in many of 

the transactions it approves. Can you explain how the Bank calculates domestic content for the products and services it supports? 

Mr. HOCHBERG. We work with our exporters. We have an engineering department that will certify, working with their self-certification and reviewing that, to ensure that in the case of full support 

85 percent of the content is U.S. made and domestic. 

To the extent that content is less than 85-percent U.S. content, 

we simply adjust the amount of credit facilities or insurance to be 

commensurate with the amount of U.S. content in those transactions. 

Chairman JOHNSON. Senator Crapo. 

Senator CRAPO. Thank you very much, Mr. Chairman. 

Chairman Hochberg, the last reauthorization changed the Economic Impact Procedures to ensure that support for transactions 

not only helps U.S. exporters but does not negatively impact domestic companies. Has the Sensitive Sectors List succeed in making the process more predictable about financing that is unlikely to 

be provided while still allowing the transactions to proceed? 

7 

Mr. HOCHBERG. Senator, we have the Sensitive Sectors List that 

we look to and that is a guide to exporters to understand that there 

is particular heightened scrutiny on those particular transactions. 

It is a process that we review each time, and sometimes it requires 

outside of that area more in-depth analysis depending on the nature of the industry or the nature of the product. But the Sensitive 

Sectors List has not changed since the last reauthorization. 

Senator CRAPO. So do you feel that there is an adequate focus 

on the part of the Bank’s operators and those who implement its 

processes to making sure that we focus on the possible negative impacts on domestic companies? 

Mr. HOCHBERG. Without question. We take that very seriously. 

Senator CRAPO. All right. Thank you. 

Also, in the last reauthorization we made structural changes to 

make sure that the small business community has an advocate to 

advance its needs and required the Ex-Im Bank to authorize banks 

to process medium-term transactions on behalf of Ex-Im Bank to 

facilitate the approval of such transactions. Do you think these initiatives have been successful? And are we meeting our small business targets effectively? 

Mr. HOCHBERG. We are meeting our small business targets. I will 

tell you that, despite enormous effort, it is a large challenge. Small 

business owners need much more one-on-one contact and one-onone work on those transactions. They do pay dividends and they do 

bear fruit, but it is labor intensive at this time. 

We have brought in a new Senior Vice President of Small Business, someone I actually worked with at the Small Business Administration. I personally put—a majority of my time is spent on 

working with the small business community. 

Senator CRAPO. All right. Thank you for that. 

My last question is, as you know very well, gaining an edge in 

financing is critical in terms of export competition, and last year, 

the Bank invoked an almost never used provision in the charter to 

level the playing field, so to speak, in a transaction involving American and Chinese locomotives. 

What changes to U.S. export credit financing generally do you 

see necessary to help us level the playing field? 

Mr. HOCHBERG. This was a sea change for the U.S. Government. 

We had evidence that the Chinese were offering financing assistance to a Chinese manufacturer that did not comply with OECD 

guidelines that the other 31 industrialized countries follow. China 

now is the largest exporter in the world and the second largest 

economy, and yet they do not follow the same rules and protocols 

that the other industrialized countries do. 

As a result, having that evidence, we worked with the White 

House and the Treasury Department, and we were able to come up 

with a competitive financing arrangement. We informed the OECD 

that we were going to do so and have offered that to the exporters 

to make sure that when the Pakistan Rail Authority makes a decision, it can be based on the products, the attributes, service, and 

price and not on financing terms. We are still waiting for that 

transaction to be resolved. 

8 

Senator CRAPO. Do you think we need to change anything in the 

law in order to facilitate your ability to achieve these kinds of efforts to level the playing field? 

Mr. HOCHBERG. I think the most important thing we need to do 

is make sure that the exporting community realizes that and does 

not give up on competing against China because they feel they are 

such a formidable competitor. So I think we have the tools, and I 

am looking to make sure that other exporters in other sectors realize that we will back them fully to make sure that we protect U.S. 

jobs and are competitive and go toe to the toe with the Chinese or 

any competitor that is trying to make sales in the global marketplace. 

Senator CRAPO. Well, thank you, and I appreciate your attention 

to these issues. 

Thank you, Mr. Chairman. 

Chairman JOHNSON. Senator Reed. 

Senator REED. Thanks very much, Chairman Johnson, and, 

Chairman Hochberg, thank you for your leadership not only at the 

Ex-Im Bank but, as you indicated before, at the SBA. You bring 

great experience and great energy to this effort. 

One of the impressions I have is there are a lot of particularly 

small businesses throughout the country that could be in the export sector but are not for many reasons. What are you doing 

proactively along with your other colleagues in the Administration, 

the Department of Commerce, et cetera, to get potential export companies, small business companies, in the game? 

Mr. HOCHBERG. Senator, actually we are going to be in your 

State in early June with Congressman David Cicilline. Perhaps you 

can join us as well. We are going to be doing one of our Global Access Forums, along with Karen Mills, because we frequently do 

these with the SBA or the Commerce Department. 

One of the most effective tools we have are these Global Access 

Forums where we bring in small companies and explain to other 

small business owners how they have successfully exported, created 

jobs, and actually created sales and profits through that. 

The best way we can do that, candidly, is with Members of this 

Committee who can help bring the business community to the 

table, and we will do that education. 

Part of this, again, this is not an appropriation hearing, but this 

is about resources. These are labor intensive and time intensive, 

and we are at the same level as the CR, which has not increased 

our appropriation in any way, to take an account for additional volume or outreach to small businesses. 

We have a greater Web presence. We are doing webinars on a 

monthly basis. And, importantly, we are also changing our products. I have been challenging the agency to streamline our operations to get exporters quicker answers. We launched a product 

called Express Insurance where we are giving an answer to an exporter, a quote on insurance within 5 days, and frequently better 

than that. 

So those are some of the tools, but a lot of it is also communications. 

Senator REED. Let me ask a question, because you raised this in 

the context particularly of very constrained budgets, you have got 

9 

to be able to show that you are adding value to the process. And 

in terms of what Ex-Im Bank is doing, some critics have suggested 

it merely sort of does not increase overall economic activity, it just 

reallocates it to the export sector. 

Do you have measurements and metrics that show, you know, 

jobs are growing in this country, particularly in the small business 

community, that otherwise would not? 

Mr. HOCHBERG. Well, what we do, Senator, is we work with the 

Department of Commerce and have made an estimate that about 

7,400 jobs are created for every $1 billion worth of exports that we 

support, and that is looking at the entire supply chain. You cannot 

just look at the company that actually ultimately ships the goods. 

You have to look at all the equipment and material that work to 

get it to that point. So we use that number of 7,400 jobs per $1 

billion of exports, and by that calculation, last year we either created or sustained 227,000 jobs through the financings that we did. 

I would just add one more thing. American companies are continually facing a very, very tough competitive environment. The Senator referred to the transaction on Pakistan where we are competing against the Chinese. We compete against the Koreans, the 

Germans, the Japanese, the French, the Italians, and many, many 

other countries. And sometimes if it were not for the financing we 

offer, comparable financing, those sales would be lost and those 

products would be made by workers in those countries versus workers in America. 

Senator REED. I think your goals are not only laudable but actually essential to the success of the country going forward. As we all 

know, the President has pledged to do everything they can to double exports. As you look at that challenge, what do you have to do 

more, what do we have to do more to try to reach that goal of double exports? 

Mr. HOCHBERG. Well, we are actually on a good track. Exports 

are up 17 percent in 2010. January was a record month of exports 

for the United States, and then that record was broken again in 

March. So we are actually on a good trajectory in terms of increasing exports. 

It takes greater dedication to manufacturing, a greater dedication to services, which actually we run a trade surplus in, and ag 

products as well. Secretary Vilsack is working very hard on making 

sure we increase our agriculture exports as well. 

I think that it requires the resources at Ex-Im Bank and the 

Commerce Department because we are clearly outgunned when it 

comes to foreign competition. My competitor export credit agencies 

have offices throughout the world. The Chinese have offices, the 

Japanese have offices, the Canadians have offices. You know, I 

would give you one example. Our offices are in the United States, 

and our appropriation is somewhat limited right now. 

Senator REED. Thank you very much, Mr. Hochberg. 

Thank you, Mr. Chairman. 

Chairman JOHNSON. Senator Moran. 

Senator MORAN. Thank you, Chairman Johnson. 

Mr. Chairman, thank you. My first opportunity to extend an— 

an opportunity to say hello to you and get acquainted, and I appreciate that very much. 

10 

I want to just follow up on your last response to what you were 

saying to Senator Reed. Tell me about the competitors. If we are 

doing OK, and you say we are on the right trajectory, what do we 

see our competitors doing, particularly as it relates to access to 

credit, assisting their exports? You talked about offices around the 

world. Tell me more about what they have that we do not have. 

Mr. HOCHBERG. I would say primarily what some countries—and 

I will name China, for example. There is a lot of support before a 

company exports, either free facilities, a tax holiday, 1-percent or 

no-percent interest loans. There are a number of those kind of programs that actually assist their manufacturing base and then make 

them very formidable competitors on price as well. So that is something that some foreign competitors are doing. China is particularly 

noteworthy in that particular area. 

Senator MORAN. Before we ever get to the export market, they 

are subsidizing the production of manufactured goods, for example. 

We see that in agriculture in which part of what we do is support 

the production of agricultural commodities, but part of what we do 

is try to encourage their sale abroad. And so we may not be competing well in the support for the industry. Tell me about the access to credit. How are we different than other countries? And what 

disadvantages do we have? 

Mr. HOCHBERG. Well, actually, we have a number of advantages. 

One of the things we do is we can make a direct loan when a guaranteed loan does not work. Most of our foreign competition, the traditional OECD, you known, the European countries, cannot do direct lending. So that actually gives us an advantage. 

We have employed a number of new financing products—that is 

something called a take-out option—that if there a material adverse condition, we will take a loan away from a bank if they would 

like to send it back to us so that they can no longer service it. 

So there are a number of programs like that that we have put 

in place, and I would say with pride we have taken the small business mandate far more seriously than our competition has. 

Senator MORAN. Thank you, Mr. Chairman. 

Chairman JOHNSON. Senator Warner. 

Senator WARNER. Thank you, Mr. Chairman. And let me welcome my friend, Chairman Hochberg, whom I have had the opportunity to know and work with back to the days when he was in the 

private sector. Congratulations on your success at Ex-Im Bank. 

I want to follow up on both Senator Moran’s comments and Senator Crapo’s comments in terms of competition with the other export credit agencies. 

I guess the first point I want to make is that clearly China is 

not playing by the same rules that all the other participating 

OECD countries are playing by. Is there any coordinated effort, 

since China does these enormous subsidies and has a very, very 

low cost of capital, where, you know, the rest of the world is playing by one set of rules, is going to have some kind of united action 

vis-a-vis these kind of outside-the-fair-boundaries rules that China 

is playing with? 

Mr. HOCHBERG. I have been with Secretary Geithner and Secretary Clinton, who have advocated China to more comply with the 

rules and protocols that other export agencies do. Last week, there 

11 

was the China Strategic and Economic Dialogue, and that was one 

of the central themes that was discussed with the Chinese. 

I was at a G-11 meeting, which was the G-7 plus the BRICs, so 

the Chinese were with us last week, and I had a meeting in Europe 

and discussed at length having them move closer toward OECD 

protocols so that they would be providing financing on the same 

terms that the United States and other exporters do. 

Senator WARNER. Are other OECD countries putting that same 

kind of pressure on as well? Is there any kind of coordinate action? 

Mr. HOCHBERG. It is coordinated. I would say that we have to 

take the lead. As the United States, people look to us to take a 

leadership role. I think we did that in our financing of the rail for 

Pakistan. Offering that was a clear statement that until you comply, we will not sit idly and let orders go away because you have 

better financing than we do. 

Senator WARNER. We would look toward, as we look at the reauthorization, how we make sure we have got those tools. 

Now, in terms of some of the other export credit agencies, obviously, you mentioned, they are more aggressive. We have got a deal 

in our State, the iridium deal, which I am sure you are familiar 

with, where France came in and topped us out and, you know, I 

just was curious. How can we make sure some of these areas, satellite technology, something that we have an advantage on, that we 

can stay competitive? 

Mr. HOCHBERG. I would say there is one other area I should 

mention that also Ambassador Kirk is taking the lead on, as well 

as Secretaries Clinton and Geithner, and that is on a level playing 

field, to make sure that when American companies—I am convinced that American companies will compete and win their fair 

share of orders when there is a level playing field and the bidding 

is truly open to all competitors, not simply State-owned enterprises 

or local companies. 

That is something that we are continually working toward, and 

it is a challenge for American companies when they are bidding, be 

it in—not just in China but in Asia and Latin America, to make 

sure that American companies can bid on the same terms as local 

companies. 

Senator WARNER. But if my information is correct, Ex-Im did not 

even make an offer on the iridium circumstance. 

Mr. HOCHBERG. On the iridium transaction, they ultimately did 

not even make an application to us in the end, and from the preliminary data, we felt that the risk profile in that transaction was 

looking outside of the level that we were comfortable financing. 

And as a result, we never actually did receive an application. 

Senator WARNER. Mr. Chairman, one of the things I hope that 

we will have a chance to look at as we work through this reauthorization—and I look forward to working with you since this falls in 

our Subcommittee, and I would like the Chairman’s comments on 

any proposed changes to the content rules. Obviously, content rule 

in terms of what type of activity you can help finance. We have had 

a lot of changes in the 50 years since, I believe, the content rules 

originally were laid out in terms of global supply chain, a lot more 

move toward technology products and services where—and, again, 

I commend your efforts on the small businesses, but particularly a 

12 

lot of small businesses are in that technology and supply chain, 

service in the supply chain as well. 

Do you have any comments for the Committee in terms of proposals that you would want to see changes in the content rules? 

Mr. HOCHBERG. The content rules now require that as long as 

the content is 85 percent, we will fully support the export. If the 

U.S. content is 50 or 60 percent, we will provide 50 or 60 percent 

of the financing. So we adjust our financial support based on the 

U.S. content. 

With close to—well, actually, we are back at 9-percent unemployment, I find it very—it is hard to justify dropping the content as 

a way of increasing employment. We use content as a proxy for 

American workers and American labor. So I think the content 

rules, as we currently enforce them, are the best way we can help 

increase employment. 

Senator WARNER. Even as we look on the service side and kind 

of—— 

Mr. HOCHBERG. On the service side, we can support services. 

About 10 percent, Senator, of our exports last year were on the 

service side. We are working with Black & Veatch, a company in 

Kansas, that is 100-percent service export. So the service side we 

can support, be it engineering, architectural, legal, insurance. 

Technology companies are the ones that present somewhat of a 

challenge, and that is really—we need the product to be shipped 

from the United States to be a true export, and we need 

verification that it was create by U.S. workers. In that case we can 

support it. 

Senator WARNER. Well, I would just like to look at kind of—since 

on technology so much of where it is shipped from may be one indication, but there are so many different parts along the way. I look 

forward to working with you on that. 

Thank you, Mr. Chairman. 

Chairman JOHNSON. Senator Merkley. 

Senator MERKLEY. Thank you very much, Mr. Chair. 

Thank you for your testimony. I wanted to start by asking about 

the economic impact studies on productive machinery. I believe you 

do a couple a year or you pick out topics. How do you decide what 

to choose to explore in those studies? 

Mr. HOCHBERG. For economic impact? 

Senator MERKLEY. Yes. 

Mr. HOCHBERG. It is on a transaction-by-transaction basis. When 

we get a transaction that would be of capital equipment that, 

therefore, might impact or hurt American competitive businesses 

and American companies, we will at that point do an economic impact study to ascertain whether this would be harmful or not to the 

U.S. economy. So it is really on each transaction. 

Senator MERKLEY. So, for example, in the Pacific Northwest, we 

have lost a lot of paper manufacturers to low-cost paper coming 

from China, and I know that China has shipped in major production machinery from around the world, I believe including U.S. machines. I do not know if they were subsidized at all by the ExportImport Bank, but is that the type of issue you would explore? And 

have you explored that specific issue? 

13 

Mr. HOCHBERG. I have not explored that specific issue, but what 

we would—the way we would approach situations like that, if there 

was an export of paper-making equipment that we were being 

asked to finance, we would look at that export of paper-making 

equipment and see whether that would hurt American competitiveness by producing paper and giving capacity and capability to a foreign company in a foreign country. So it is more on the export of 

the capital equipment that we would be making that assessment. 

Senator MERKLEY. Do those studies come in advance or are they 

backward-looking? 

Mr. HOCHBERG. Well, they are both backward-looking and, as 

best we can, making a forecast of what would this additional capacity on the part of a foreign company and could that compete in a 

material way with the marketplace for American goods and services. 

Senator MERKLEY. When you are guaranteeing loans to foreign 

companies to buy American products and those companies do not 

pay up in a certain amount of time—I do not know if it is 60 days 

or 90 days—how do you go about essentially holding those companies accountable? 

Mr. HOCHBERG. Senator, I think that is one of the key reasons 

why American companies work with us, and they work with us in 

challenging environments. We have at our disposal—frankly, the 

United States Embassy is very helpful. We do a thorough review 

of the creditworthiness before we get there. So our write-off rates 

average about 1.5 percent, which, if you look at it on a commercial 

basis, is actually very strong and a low write-off basis. And we are 

dealing with far more challenging credits than the average bank. 

Senator MERKLEY. Certainly any private lender would be envious 

of that write-off rate. Are there private lenders that find that there 

is enough business in the export world that you are not attending 

to that you have the complement of private financiers in this sector? 

Mr. HOCHBERG. Oh, without question. I mean, the United States 

Export-Import Bank finances or is engaged with about 1.5 percent 

of U.S. exports—frankly, a low-intensity level, lower than most 

other developed countries. So we really as the United States far 

more on the private sector to support trade finance than almost 

any other country. 

Senator MERKLEY. I really think of the Bank as serving in that 

role where the private market does not attend because of the fact 

that it is too risky, the buyer is too uncertain, et cetera. And yet 

with a write-off rate of only 1.5 percent, that is quite remarkable. 

Are there a lot of loans that you simply turn down guarantees for 

or turn down direct loans for because they are too high of a risk? 

Mr. HOCHBERG. Well, first let me say one thing. Companies and 

countries do not like to default on the U.S. Government. It is not 

a good idea. We are a very good ally and a good friend and not 

someone you want to make an enemy of. So that helps in our ability to collect. 

Frequently a transaction will—people will work with the Bank, 

and if we feel that it is not creditworthy enough, we may not even 

see the application maybe early enough. 

14 

That said, the instruction I have given to our Bank is that I want 

to find a way to get to yes, and if that means perhaps a slightly 

higher fee or instead of guaranteeing 85 percent we might only 

guarantee 80 or 75 percent, or ask the exporter to take on some 

other risk, we want to find a way that we can help a U.S. exporter 

so that they can make that sale. And we will either look at the 

pricing or the coverage ratio as a way of getting to yes in one way 

or another. 

Senator MERKLEY. Thank you. 

Chairman JOHNSON. Thank you, Chairman Hochberg, for your 

testimony today. 

We will leave the record open for 7 days so that Members can 

submit additional questions. Chairman Hochberg, please submit 

your answers to us as soon as possible. 

This hearing is adjourned. 

[Whereupon, at 10:46 a.m., the hearing was adjourned.] 

[Prepared statements and responses to written questions supplied for the record follow:] 

15 

PREPARED STATEMENT OF CHAIRMAN TIM JOHNSON 

Today, the Committee welcomes the Chairman and President of the Export-Import Bank of the United States, Fred Hochberg. This hearing will allow us to continue our ongoing oversight of the Bank’s recent activities. In addition, we will hear 

from the Chairman about the Bank’s ideas for reauthorization. 

The Bank’s current authorization expires on September 30, 2011, and it is my 

goal to work with Ranking Member Shelby and other Members of the Committee 

to reauthorize the Bank. 

I want to thank all Members of this Committee for their support of Wanda Felton 

and Sean Mulvaney last week. It is imperative that the Senate confirm these nominees as quickly as possible. 

The Export-Import Bank is the official export credit agency of the United States 

and it assists in financing the export of U.S. goods and services to international 

markets. Following the financial crisis, the Bank experienced a dramatic increase 

in its activities as many companies struggled to find financing in the private market. In Fiscal Year 2010, the Bank saw a 70-percent increase in authorizations from 

2008. In fact, last year the Bank committed almost $25 billion in support of U.S. 

exports—a record. 

The Bank is one of the few Federal agencies that actually makes money for the 

U.S. and, since 2008, has been self-funding. This is a testament to the Bank’s leadership under Chairman Hochberg, as well as the good work of the dedicated staff 

and Board of the Bank. 

All of the Bank’s transactions are backed by the full faith and credit of the United 

States. Therefore, it is important for this Committee to make sure that the Bank 

is working as efficiently and effectively as possible to protect the taxpayers. 

Equally important is the Bank’s goal to use exports to help create and maintain 

jobs here at home. This mission, embodied in the Bank’s Charter, is at the very core 

of what Congress intended the Bank to do. I believe that while the Bank is doing 

a good job, it can—and must—do more. 

Over the next several years, the Bank will face some challenges. After weathering 

the financial crisis, the Bank may see a shift in the types of deals it is asked to 

finance as the economy recovers. In addition, the President has called for the doubling of our exports by 2015 in an effort to create as many as 2 million American 

jobs. As the Nation’s official export credit agency, the Bank will play a critical role 

if we are to meet that goal. 

I am eager to hear from Chairman Hochberg about the Bank’s recent activities 

and his ideas for reauthorization. 

PREPARED STATEMENT OF FRED P. HOCHBERG 

PRESIDENT AND CHAIRMAN, EXPORT–IMPORT BANK OF THE UNITED STATES

MAY 17, 2011 

The Export-Import Bank of the United States (‘‘Ex-Im Bank’’ or ‘‘Bank’’) is the official export credit agency of the United States. The mission of Ex-Im Bank is to 

enable U.S. companies—large and small—to turn export opportunities into real 

sales that help maintain and create U.S. jobs which contribute to a stronger national economy. The Bank achieves this mission by providing export financing 

through its loan, guarantee, and insurance programs in cases where the private sector is unable or unwilling to provide financing. Ex-Im Bank also provides support 

when export financing is necessary to level the playing field due to financing provided by foreign governments to their exporters that are in competition for export 

sales with U.S. exporters. 

All Ex-Im Bank products carry the full faith and credit of the U.S. Government 

and are only provided if the Bank is convinced that there is reasonable assurance 

of repayment. As a result of our diligent review and management of credit, the Bank 

has a loan loss rate of roughly 1.5 percent—well below most commercial banks. 

Since FY2008, Ex-Im Bank has operated in self-sustaining financial status at no 

cost to the taxpayer, while achieving its mission. 

Over the past 2 years, Ex-Im Bank addressed the market contractions caused by 

the financial crisis by stepping in where private banks and other lending institutions were unwilling or unable to meet the trade finance needs. In recent years, the 

Bank has supported a level of authorizations that is far higher than historical averages. 

In FY2008, Ex-Im authorized $14.4 billion to support transactions that resulted 

in roughly $19.6 billion in U.S. exports. Just 2 years later, in FY2010, Ex-Im authorized a record $24.5 billion in export financing which supported roughly $34.3 

16 

billion worth of U.S. exports and 227,000 U.S. jobs at more than 3,300 U.S. companies. 

I am proud to say that we have accomplished all of this work at no cost to the 

U.S. taxpayer. Ex-Im Bank more than covers our administrative and program expenses through the fees that we charge to borrowers of the U.S. exports Ex-Im Bank 

helps to support. In the past 5 years, we have sent $3.4 billion to the U.S. Treasury. 

Ex-Im Bank offers three financial programs to keep the U.S. competitive in the 

world markets: direct loans, guarantees, and insurance. There are various products 

within these programs, such as Working Capital Guarantees and Export Credit Insurance, which primarily benefit small businesses. 

Direct loans provide financing directly to foreign buyers of U.S. goods and service 

and cover up to 85 percent of the U.S. contract value or 100 percent of the U.S. 

content, whichever is less. 

Loan guarantees cover the repayment risks on the foreign buyer’s debt obligations 

incurred to purchase U.S. exports. Ex-Im Bank guarantees to a lender that, in the 

event of a payment default by the borrower, it will pay to the lender the outstanding 

principal and interest on the loan. We provide support up to 85 percent of the U.S. 

contract value or 100 percent of the U.S. content, whichever is less. 

Working Capital Guarantees provide repayment guarantees to lenders on secured, 

short-term working capital loans made to qualified exporters. The working capital 

guarantee may be approved for a single loan or a revolving line of credit. Ex-Im 

Bank’s working capital guarantee protects the lender from default by the exporter 

for 90 percent of the loan. 

Export credit insurance helps U.S. exporters sell their goods overseas by protecting them against the risk of foreign buyer or other foreign debtor default for political or commercial reasons, allowing them to extend credit to their international 

customers. Insurance policies may apply to shipments to one buyer or many buyers, 

insure comprehensive (commercial and political) credit risks or only political risks, 

and support short-term or medium-term sales. 

By utilizing these various products, Ex-Im Bank levels the playing field for U.S. 

exporters and workers so U.S. jobs are not lost to foreign competitors. 

To ensure that the needs of small businesses are met, Congress mandates that 

20 percent of our authorizations directly benefit small businesses. I am happy to report that we are meeting this mandate. Our totals for small business transactions 

have increased from $3.2 billion in FY2008, to $5.1 billion in FY2010, which reflects 

a 58-percent increase over the 2-year period. We have been able to maintain the 20- 

percent small business mandate over the last 2 years, in a time that has seen our 

total business grow from $14.4 billion in FY2008 to $24.5 billion in FY2010, a 70- 

percent increase. 

We recently submitted our 2011 Small Business Report to Congress on March 

31st which details our small business activity for fiscal year 2010 and the plans that 

we have already initiated for 2011 to continue growing our small business portfolio. 

While we have met our 20-percent Congressional mandate and we continue to implement new programs and strategies to grow that percentage, it is increasingly difficult to do given our limited administrative budget and our inability to deliver the 

highest level of quality customer service as a result of our aging Information Technology (IT) infrastructure. The Bank utilizes its various products to respond to the 

needs of the market and as such, we provide financing based on what business is 

coming in at any given time. We continue to aggressively pursue small business 

transactions, but ultimately our percentage of the total portfolio is a function of the 

sectors that need Ex-Im financing at any given time. Small business transactions 

account for more than 85 percent of our total transactions at the Ex-Im Bank but 

are just over 20 percent of the authorization dollars. Meeting our 20-percent small 

business mandate is something that is highly labor intensive and requires significant resources. To maintain and grow our small business percentage, we will need 

an increase in our administrative budget. 

In order to further expand the small business activity, Ex-Im has initiated the following initiatives: 

• Global Access for Small Business Initiative. Earlier this year, I was joined by 

Tom Donohue from the Chamber of Commerce and Jay Timmons from the National Association of Manufacturers in announcing Ex-Im Bank’s Global Access 

for Small Business Initiative. Ex-Im Bank is sponsoring a series of 20 forums 

across the country to assist small business exporters in understanding how the 

Bank’s programs and programs at the Small Business Administration (SBA) 

and Department of Commerce can help them begin exporting or increase their 

international sales. In addition to presentations by successful small business exporters, the Global Access forums include panels of Ex-Im, SBA, and DepartVerDate Nov 24 2008 11:43 Nov 28, 2011 Jkt 048080 PO 00000 Frm 00020 Fmt 6621 Sfmt 6621 S:\DOCS\71164.TXT JASON
17 

ment of Commerce staff based in local United States Export Assistance Centers 

(USEACs) as well as one-one-one counseling by Ex-Im Bank Export Finance 

Managers and other Federal agency representatives. These half-day events are 

free for attendees and held in collaboration with elected officials, representatives from Federal and local government agencies, lenders, and insurance brokers involved with supporting exporters. We also provide small business owners 

as panelists who highlight their success in using Ex-Im Bank products to start 

or grow their exporting and we provide one-on-one counseling for businessmen 

and women at the event. 

• Expanded Bank and Broker Training. Ex-Im Bank has expanded its lender and 

broker training options to include monthly trainings around the country. 

Webinars have also been added to the training curriculum to help exporters, 

lenders and insurance brokers learn how to use Ex-Im products and services. 

• Supply Chain Finance Guarantee. The Supply Chain Finance Guarantee provides competitively priced working capital financings to businesses that supply 

products or services to larger U.S. exporters. These businesses are considered 

indirect exporters. The product works through approved lenders with an existing supply chain finance program. 

It enables the lender to purchase accounts receivable from small business 

suppliers whose goods will be part of an export. The suppliers are paid for 

their goods in approximately 5 days which improves their cash flow and liquidity. Ex-Im Bank provides the lenders with a 90-percent guarantee of 

repayment by the manufacturers. In turn, the Bank requires that at least 

50 percent of the credit be to small-business suppliers. 

• Reinsurance. Reinsurance assists private-sector insurers that provide shortterm export-credit insurance covering foreign receivables to predominantly U.S. 

small business exporters. This new product will increase the capacity of insurance companies to offer insurance to small business exporters that have had difficulty obtaining short-term export credit since the financial crisis. The Bank’s 

reinsurance product will mitigate risks for private insurers and enable them to 

expand their underwriting capacity for short-term small business credits. It will 

also help Ex-Im Bank achieve economies of scale in originating, underwriting, 

and servicing these credits—accomplishing substantially more for small businesses with fewer resources by expanding the reach of private-sector insurers. 

• Express Insurance. In response to the requests of exporters and Ex-Im Bank 

broker-partners, Ex-Im is adding a new program to its flagship Trade Credit Insurance product—Express Insurance. Express Insurance specifically targets 

small businesses. Ex-Im Bank has designed an express insurance product that 

streamlines the application process for the Bank’s short-term export credit insurance. The target turnaround time for a quote is 5 days, down from the current average of 15. Cutting the processing time by 2⁄3 and cutting the length 

of the actual application from 4 pages down to 2 pages and using credit scoring 

in the processing of new applications and renewals reduces the time frame and 

the complexity of insurance that small businesses need to protect their export 

receivables from foreign buyer and country risk. 

Authorizations—Small business authorizations in FY2010 increased 15.9 percent 

to just over $5 billion as compared with new small business authorizations for 

FY2009 of roughly $4.4 billion and FY2008 of roughly $3.2 billion. In FY2010, 

small-business authorizations represented 20.7 percent of total authorizations. During FY2010, the number of transactions that were made available for the direct benefit of small-business exporters increased by 21.7 percent to 3,091 transactions compared to 2,540 in 2009. 

As referred to earlier, Ex-Im Bank offers two products that primarily benefit 

small businesses: Working Capital Guarantees and Export Credit Insurance. In fiscal year 2010, Ex-Im Bank authorized roughly $1.5 billion in Working Capital Guarantees to small businesses compared to $1.2 billion in 2009. In fiscal year 2010, ExIm Bank authorized more than $2.6 billion in Export Credit Insurance to small 

businesses. 

Increased Lender and Broker Participation—Ex-Im Bank leverages its resources 

on behalf of small businesses by working with private-sector lenders, insurance brokers and other financial and trade institutions. In fiscal year 2010, 18 new lenders 

received Delegated Authority to provide working capital guarantees. Delegated Authority provides lenders a preapproved credit line which allows them to approve 

loans and receive Ex-Im Bank’s guarantee without having to submit individual applications for approval. An additional 14 brokers serving small businesses trade insurance needs were added to the roster. At the fiscal year’s end, Ex-Im Bank had 

18 

a total of 100 delegated authority lenders and 194 registered brokers helping deliver 

the Bank’s small-business products. While these numbers are significant, we continue to seek additional brokers and lenders to partner with Ex-Im Bank. 

Export Initiative With State and Local Constituencies—One effective approach to 

developing strong partnerships is our initiatives with our City/State Partners. More 

than 60 Ex-Im City/State Partners in 40 States work with Ex-Im Bank and report 

their activity annually. Their mission is the promotion, creation and expansion of 

businesses in a given region by making available financing assistance and entrepreneurial services. Examples of eligible partners include: State, County, City Governments—either directly or indirectly funded; local nonprofit economic development 

entities funded through universities and colleges; and Small Business Development 

Centers. 

Many of the small business owners are veterans, women, and minorities. Ex-Im 

Bank wants to do more to reach these key groups which historically are less likely 

to approach the Bank for financing. In an effort to increase our interaction with 

these groups, Ex-Im Bank has worked with the Department of Commerce and other 

sources to increase our outreach. I would also ask Members of this Committee and 

your colleagues to provide suggestions of organizations, constituencies, and events 

that you think we should be participating in so we can grow participation among 

veterans, women, and minorities. 

Ex-Im Bank recently created a new position of Director of Veterans’ Relations to 

better reach out to all veterans groups and to connect export finance opportunities 

with their knowledge of foreign cultures, people, and businesses. Ex-Im Bank hosted 

the Vet-Force meeting for Veteran Owned Business (VOB’s), Veteran Community 

Organizations (VCO’s) and various Government agencies to introduce veterans to 

export financing. In coordination with SBA’s Georgia District Office Ex-Im’s Director 

of Veterans’ Relations was the keynote speaker at the first ever Veteran’s Export 

Symposium. 

In fiscal year 2010, Ex-Im Bank authorized $481 million to support exports by 

U.S. small businesses known to be minority-owned and woman-owned (this information can be volunteered on applications, but we cannot require it). In fiscal 2009, 

Ex-Im Bank authorized $492.7 million to support exports by U.S. small businesses 

known to be minority-owned and woman-owned. Although support for minority and 

woman-owned small business declined slightly, the total support increased by $65.2 

million when taking into account medium and large exporters in this group. 

(Millions) 2008 2009 2010 

Minority and Woman Owned 

Medium/Large Business ............................................................................................................ $80 $70.3 $147.2 

Small Business ......................................................................................................................... $386 $492.7 $481.0 

Total ................................................................................................................................. $466 $563.0 $628.2 

Significant emphasis is placed on events attended by small business exporters, as 

well as minority, rural, and woman-owned entrepreneurs. During 2010, staff from 

within the Small Business Group at the Bank attended 85 outreach events reaching 

approximately 5,500 Minority and Woman-Owned Business exporters and intermediaries. Ex-Im Bank made presentations at 75 percent of the events attended in 

2010. 

Significant steps are being taken to boost this segment of the Ex-Im Bank business. First and foremost, during 2010, Ex-Im Bank hired as our new Senior Vice 

President of the Small Business Group a former banker with 20 years in community 

development and minority lending and investment experience. In addition, we hired 

a Vice President of Marketing and Sales, a Community Reinvestment Act professional from a major bank. In addition to their managerial responsibilities, these two 

officers will further expand Minority and Woman-Owned Business Outreach activities. We have also reallocated resources to achieve our 20-percent small business 

mandate. 

In order to expand the reach and service to small businesses, Ex-Im is doing the 

following: 

• Global Access Events. Developing at least 4 Global Access media and training 

events specifically for Minority and Woman-Owned Businesses. 

• Community Development Financial Institutions. The Small Business Group attends the conferences for the National Federation of Community Development 

19 

Credit Unions, Opportunity Finance Network, National Community Reinvestment Coalition, and events sponsored by Federal regulators concerning Community Reinvestment Act initiatives. The chief objective is to expand the number 

of local and community development banks and other intermediaries using the 

Ex-Im Bank trade credit and working capital products and services. 

• Direct Calling on Minority and Woman-Owned Exporters. In order to expedite 

the communication with the exporter, Ex-Im has established a ‘‘smart database’’ program. The program, which includes exporter names from the Trade 

Promotion Coordinating Committee (TPCC), is designed to support direct outreach to minority and woman-owned exporters through systematic cold calling 

by experienced Ex-Im Bank export finance officers. While targeting the use of 

Ex-Im Bank’s trade credit insurance, the officers are also trained and encouraged to refer exporters to the appropriate Department of Commerce and SBA 

functions as reflected by the exporter’s needs. 

The global marketplace is brutally competitive for businesses small and large. At 

Ex-Im we have seen a decrease in sovereign loans and an increase from the private 

sector in emerging markets. And commercial lenders routinely limit the amount of 

exposure a company can have in particular regions and consequently those businesses are coming to Ex-Im Bank for financing. 

Businesses in the United States are second to none when it comes to manufacturing. The U.S. is the number one manufacturer in the world. We make more goods 

than China, Germany, and Japan. 

However, when it comes to selling overseas, we fall to number three behind China 

and Germany, which is unacceptable. There is nothing third-rate about American 

products and American business and there should be nothing stopping us from selling more of the products and services we make into the global marketplace. 

By ensuring that more American companies—big and small—go after our share 

of this global business, Ex-Im Bank is helping build the type of export powerhouse 

that is at the heart of President Obama’s plan to win the future and double exports 

by 2015. At Ex-Im, our goal is to provide the financing to make this a reality. 

We have targeted nine emerging markets in Brazil, Colombia, India, Indonesia, 

Mexico, Nigeria, South Africa, Turkey, and Vietnam. Let me provide examples of the 

work Ex-Im Bank is doing to support exports to a couple of these countries. 

India plans to spend $1 trillion on infrastructure between 2012 and 2017, which 

is double what they spent in the previous 5 years. 

As part of these investments, India needs to build one million square miles of new 

paved roads and roughly 4,600 miles of new metros and subways. That rail system 

and those roads mean billions of dollars worth of capital goods and services—from 

trains to rails to engineering services to paving equipment. 

In addition to infrastructure demands, India also has growing power needs. 

Today, nearly 400 million people in India have never seen a light bulb. India is 

powering up and they are working to do it responsibly. India recently announced 

its National Solar Mission, a far-reaching plan to add 20,000 megawatts of solar 

power by 2020. That is enough to power nearly 10 million homes with renewable 

energy. 

At Ex-Im, we are working with U.S. solar companies to make sure they have the 

competitive financing they need to be part of these projects. One of these companies 

is Infinia, which is based in Washington State. Ex-Im recently authorized a $30 million direct loan to finance a solar project in Rajasthan, India. The project is using 

Infinia’s PowerDish technology. This was Infinia’s first major sale for foreign delivery and their largest sale to date. 

Brazil is another market that we are targeting due to its forecasted growth in the 

coming years. With the World Cup in 2014 and the Olympics just 2 years later, 

boosting power production and building out infrastructure are two of the country’s 

critical priorities. Brazil will invest more than $200 billion on everything from roads 

and public transportation, to airports and sports stadiums. 

Ex-Im will support American companies—and American workers—exporting to 

these projects. That’s why just a few weeks ago, President Obama announced a $1 

billion credit facility in Ex-Im financing for the State of Rio de Janeiro. Its purpose 

is to finance the purchase of more American-made goods and services. All around 

the world we are seeing similar opportunities for American companies. 

In many cases, Ex-Im Bank’s financing levels the playing field when it comes to 

international competition. Let me give you an example. General Electric (GE) was 

recently bidding on a $500 million rail project to supply 150 diesel-electric locomotives to Pakistan. These locomotives are critical to building the infrastructure of 

Pakistan’s economy, so products and commodities can get to market. 

20 

GE was told by Pakistani officials that they preferred GE locomotives and they 

were willing to pay a premium for their high-quality and dependability. However, 

there was only one sticking point and it was financing. The Chinese government offered financing that did not conform to international standards and practices. The 

intended was to provide Chinese manufacturers an advantage that GE could not 

make up in quality, price or service. This put the entire sale and more than 700 

jobs in Erie, Pennsylvania, at risk. 

To remedy this, the Administration put together a matching financing package. 

And for the first time, we went to the OECD, the organization that governs global 

export financing, to inform them of our decision to match China. While the final 

deal is not yet completed, this significant policy change signals to foreign competitors that Ex-Im will compete on financing, allowing American companies to compete 

solely on the quality and value of its products—and the service it provides. 

Let me share with you exciting results we have accomplished in financing renewable energy. The Ex-Im Bank has made significant strides when it comes to increasing financing of renewable energy products. In FY2008 the Bank authorized $30.4 

million in renewable energy exports. That grew to $101 million in FY2009. We tripled our previous year’s totals by authorizing $332 million for renewable energy exports in FY2010. To put this number in perspective, according to data gathered by 

the Department of Commerce, the U.S. exported a total of $2.1 billion in renewable 

energy products in 2009. Ex-Im Bank is playing a major role in supporting U.S. renewable energy exports. In FY2011 we are projecting to more than double our authorizations from FY2010. 

We are also breaking records with our work in Sub-Saharan Africa. For FY2009, Ex-Im Bank supported 109 transactions totaling $412 million across 20 Sub-Sahara 

African countries. In FY2010 those totals grew to 132 transactions totaling $812 

million in 20 Sub-Saharan African countries, which represents nearly 5 percent of 

all U.S. exports for the region. In FY2011, Ex-Im Bank expects to top $1 billion in 

Sub-Saharan African authorizations. 

We are supporting U.S. exports and transactions across various economic sectors 

including: power, aviation, transportation, construction, agriculture, and mining. 

Ex-Im Bank is providing a key service to businesses large and small in the United 

States. In order for us to continue helping to grow and sustain jobs through exports, 

the Bank needs to be reauthorized. 

Our legislation provides for a gradual increase in our exposure limit over 4 years from the existing $100 billion to $140 billion in FY2015, removes outdated references from our Charter—such as removing references to the former Yugoslavia 

which disbanded in the 1990s, and provides for a 4 year reauthorization which allows the Ex-Im Bank to continue operations through September 30, 2015. 

The President’s FY2012 Budget continues the Bank’s self-sustaining status, which 

was achieved for the first time in FY2008. I want to emphasize this point: self-sustaining status allows for funding of the Bank’s operations, including program budget 

and administrative expenses, entirely from fees collected from the Bank’s borrowers. 

As a result, the Bank does not rely on taxpayer resources to fund operations, which 

is critical in a tight budgetary environment. Congress will continue its oversight of 

Ex-Im Bank’s budget, setting annual limits on its use of funds for program subsidy 

and administrative expense obligations. 

Ex-Im Bank and our employees are making a significant contribution to the U.S. 

economy. Our employees at the Bank have helped increase business by 70 percent 

since 2008 while implementing new technologies and programs like Express Insurance and Supply Chain Finance which are detailed in my written testimony. At the 

same time, we have received only a 7.6-percent increase in our administrative expense appropriation since 2008 and have only increased staffing by 13 FTEs or full 

time equivalent staff. Simply put, we have become leaner and more productive. This 

is something that every business strives to achieve. While Ex-Im’s staffing and 

budget have remained relatively flat, we have generated billions in funds for the 

U.S. Treasury. But, in order to meet our goal of doubling exports by 2015, we must 

be able to increase our administrative budget. 

I ran a business for 20 years and I know that we need to continue to invest in 

capital and human resources in order to grow business. The President has proposed 

an increase in our budget for Fiscal Year 2012. This increase includes $124.6 million 

for our administrative budget which would allow Ex-Im Bank to increase staffing 

for outreach to small businesses. Additionally, it will provide resources to improve 

our IT systems to help expedite applications and provide better customer service. 

While I realize this is our authorizing committee and not our appropriating committee, I would encourage you all strongly to consider the President’s request for 

increased funding levels for the Bank. Let me be clear—this increase in our administrative budget is simply allowing Ex-Im Bank to use more of the money it genVerDate Nov 24 2008 11:43 Nov 28, 2011 Jkt 048080 PO 00000 Frm 00024 Fmt 6621 Sfmt 6621 S:\DOCS\71164.TXT JASON
21 

erates for administrative expenses, which in turn will help sustain and create more 

jobs and generate more funds for the taxpayers of our country. The President’s 

Budget still estimates—even with the increase in administrative budget—that the 

Export-Import Bank will generate excess funds in the amount of $212.9 million in 

FY2012. 

Thank you very much and we look forward to working with you on the reauthorization process. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR MENENDEZ 

FROM FRED P. HOCHBERG 

Q.1. My understanding is that it is in Ex-Im Bank’s charter to create U.S. jobs and according to the Ex-Im Bank Web site in 2009 

for every $1 billion in exports the Bank created 7,400 jobs and for 

every $1 billion in export financing you created 9,265 jobs. But 

based on discussions my staff has had with Ex-Im Bank, it seems 

that the Kusile coal project in Africa will create 1,049 jobs over 5 

years (or just over 200 jobs per year) for an $800 million loan. This 

is a ratio of $1 billion in export financing creating 1,311 jobs (or 

250 jobs per year). Do you think this ratio of jobs to a loan is good 

enough? Should we have a target or even a flexible requirement 

that a certain number of jobs are created per dollar of loan? 

A.1. All jobs are important as far as Ex-Im Bank is concerned no 

matter how few. The Bank is there to support U.S. exports that, 

in turn, sustain and support U.S. jobs. Moreover, not only were 

there benefits to Ex-Im Bank being involved in the transaction in 

terms of exports and jobs but also because the project itself was improved along environmental grounds. 

Q.2. I have also heard complaints that loan applicants and Ex-Im 

Bank loan officers do not under the laws governing U.S. shipping 

requirements. What are you doing to ensure that Ex-Im Bank employees and Ex-Im applicants know they are required to use U.S. 

flagged ships with U.S. merchant marines unless certain circumstances arise? 

A.2. Ex-Im Bank staff are made aware of the shipping requirements as part of their ongoing training. In addition, the Bank’s 

policies are also posted on our internal and external Web sites for 

easy reference. (See: http://www.exim.gov/products/policies/shipping.cfm). The U.S. shipping requirement is also contained in the 

internal and external fact sheets of those programs in which the 

shipping requirement applies. (See: http://www.exim.gov/products/loanguar.cfm, and http://www.exim.gov/products/ 

directloan.cfm). Finally, our Policy Group is readily available for 

further information, explanations, or interpretation to staff and external participants. 

Q.3. Are you aware that some proposed project sponsors effectively 

pay their shipping managers a bonus if they lower transportation 

costs by outsourcing to foreign shipping companies? Can you guarantee that the Bank is not funding projects sponsored by companies that do business this way? 

A.3. Ex-Im Bank ensures that transactions receiving Ex-Im Bank 

loans or guarantees fully comply with U.S. shipping requirements 

under Public Resolution 17. If a transaction is not in compliance, 

22 

Ex-Im Bank will not fund or guarantee financing for the shipments. 

Ex-Im Bank’s shipping regulations are subject to Public Resolution 17 of the 73rd Congress (PR-17). The following transactions 

are subject to the provisions of PR-17, and Ex-Im Bank supported 

goods must be shipped exclusively on U.S. vessels or pursuant to 

a waiver granted by the Maritime Administration of the Department of Transportation (MARAD): 

1. Direct loans regardless of term or amount; and 

2. Guarantees in excess of $20,000,000 (excluding Ex-Im Bank 

Exposure Fee) or the repayment period of greater than seven 

(7) years or the term permitted under Ex-Im Bank’s Environmental Exports Program, Transportation Security Export Program, or Medical Equipment Initiative. 

Requests for waivers of PR-17 can be obtained for a variety of 

reasons (e.g., if a U.S. vessel is unavailable or unsuitable, etc.); 

however, obtaining a waiver may be difficult as MARAD explicitly 

tries to keep waiver issuances to a minimum. If a waiver is obtained, goods shipped on vessel of non-U.S. registry are eligible for 

financing by Ex-Im Bank. 

Q.4. I understand from a letter you sent to Transportation Secretary LaHood that you have met with several companies who have 

claimed hardship when it comes to U.S. shipping requirements. 

Could you provide the Committee a list of the companies and the 

projects where you have found hardship in complying with U.S. 

shipping requirements? 

A.4. The estimated impact on Ex-Im Bank is in excess of $4 billion. 

On overall U.S. exports, the estimated impact is less but substantial—$1.5 to $3 billion. These figures are imprecise in that Ex-Im 

Bank does not hear about all of the cases that don’t come in to us 

due to MARAD requirements. 

The Impact of U.S. Shipping Requirements on the ExportImport Bank of the United States (Ex-Im Bank) 

Prepared by the Ex-Im Bank Structured Finance Division, July 

2011 

Ex-Im Bank is the only export credit agency (ECA) that requires 

buyers to use domestic (e.g., U.S.-flagged) shipping as a condition 

of financing eligibility, placing (a) Ex-Im Bank at a comparative 

disadvantage to other ECAs and, (b) all else being equal, U.S. exporters at a competitive disadvantage relative to foreign competitors. 

Exporters and foreign buyers have informed Ex-Im Bank’s Structured Finance Division that the requirement to use U.S.-flagged 

vessels has: 

1. Complicated, delayed, and increased the cost of U.S. goods 

and services supported by Ex-Im Bank; 

2. Reduced the amount of Ex-Im Bank support provided to U.S. 

exporters; and 

3. Led to lower U.S. exports. 

23 

The following examples on a number of important deals, as reported to the Structured Finance Division, demonstrate these 

points. Please note that names of companies involved and other 

identifying facts have been withheld due to confidentiality concerns. 

1. Complications, Delays, and Increased Transactions Costs 

On several deals, U.S. exporters and foreign borrowers have had 

to perform extra work to secure U.S. vessels or seek waivers to 

qualify for Ex-Im Bank financing or hire experts at their own expense to comply with U.S. shipping requirements. Some of these 

experiences have led foreign buyers to inform Ex-Im Bank of their 

intention to forgo working with Ex-Im Bank. Examples include: 

• A Middle Eastern company, which had difficulty complying 

with shipping rules before obtaining finance on a infrastructure deal, ultimately requiring the retention of a shipping expert to support future transactions with Ex-Im Bank. 

• A project in Latin America, in order to meet shipping requirements and qualify for Ex-Im Bank financing, had to aggregate 

shipments. The borrower also had to transship through other 

countries in Latin America, and then ship on a MARAD-specified foreign vessel. The process led to cost increases, project 

delays, and was blamed for damages to the equipment. 

• Several borrowers in Brazil consider compliance with U.S. 

shipping requirements to be difficult and costly. Even though 

MARAD ultimately granted one of the companies a waiver, at 

the time the company stated that they would forgo using ExIm Bank again until the shipping requirements are eliminated 

or substantially changed. 

• Ex-Im Bank’s financing for a project in the Middle East was 

delayed by approximately 1 year due to the company’s initial 

unwillingness to pay the cost of a compensatory waiver required for U.S. goods shipped on non-U.S. vessels—ultimately 

the buyer paid the costs associated with the compensatory 

waiver. 

2. Reduction in Ex-Im Bank Support for Exports 

On certain transactions, foreign borrowers have also reduced the 

amount of Ex-Im Bank financing on certain transactions, reportedly due to U.S. shipping requirements. While these reductions 

might not ’directly and immediately lead to less U.S. exports, reduced support levels impair Ex-Im Bank’s ability to fulfill its mission to level the playing field for U.S. exporters compared to foreign 

competitors. 

Reduced support on one deal can also lower the chance that a 

borrower will elect to award a U.S. exporter a future sale. Based 

on the information received by Ex-Im Bank from exporters and foreign buyers, Structured Finance Division estimates broadly the 

amount of its financing lost due to U.S. shipping requirements to 

be about $4 billion between 2004 and 2010 or about $600–$700 million per year. 

Examples where borrowers and exporters have informed Ex-Im 

Bank that their inability or unwillingness to comply with shipping 

24 

1 Note that U.S. carriers believe that the terms of foreign competition were unclear, but this 

does not change the fact that Ex-Im Bank finance of $18 million was canceled. 

requirements has caused parties to reduce Ex-Im Bank financing 

include: 

• As a result of having to pay the costs associated with a compensatory waiver on a transaction cited above, the foreign company recently chose not to pursue Ex-Im Bank finance for a 

transaction for $900 million. 

• A total of $50 million in gas production equipment exports 

were excluded from Ex-Im Bank financing approved in 2004 

because of inability to comply with U.S. shipping requirements. 

• A Latin American company canceled a long-term transaction 

due to U.S. shipping requirements. The company later sought 

and received a large Preliminary Commitment from Ex-Im, but 

allowed the facility to expire, in part, because of concerns 

about higher shipping costs for U.S. vessels. 

• A total of $25 million of Ex-Im Bank financing for a U.S.-made 

equipment was canceled because U.S. flag carrier shipping 

costs were two times that of foreign carriers and parties chose 

not to pay the additional costs. 

• A company reduced its financing request from $1 billion as a 

result of U.S. flag carrier shipping costs. Ultimately, the transaction entailed Ex-Im Bank support for less than $400 million, 

a reduction of over $600 million compared to the initial estimate. 

• An Asian company chose to ship U.S. goods on a foreign flag 

vessel rather than on U.S. vessels that were two times more 

expensive and thus had to cancel a significant portion of its 

Ex-Im Bank commitment. 1

• An Asian company reduced its financing on a 2011 transaction 

by about $25 million to avoid paying transportation rates that 

were two times as expensive as foreign options. The company 

did agree to pay shipping costs two times those of foreign carriers to maintain the possibility of Ex-Im Bank finance for 

other equipment equal to about $50 million of finance. 

• A Latin American company sought Ex-Im Bank financing to 

support a U.S. contract worth about $150 million, but canceled 

the Ex-Im Bank finance because of concerns that about 1⁄3 of 

this $150 million in equipment was not shipped on U.S. flag 

vessels or pursuant to a MARAD waiver, was unable to obtain 

a waiver, and thus was not eligible for Ex-Im financing. 

• An application for finance of $61 million for an electricity company was withdrawn because the company had shipped goods 

on non-U.S. vessels and was unable to obtain a compensatory 

or other waiver from MARAD. 

• Ex-Im Bank was not able to support a transaction for a sale 

of $50 million from a U.S. manufacturer to a borrower in Latin 

America because of a lack of shipments on U.S. vessels and 

failure to obtain a MARAD waiver. 

• A project finance advisor in Latin America informed Ex-Im 

Bank that, because of U.S. shipping requirements, the project 

25 

sponsor would not pursue Ex-Im Bank financing for the project 

even though the project could include about $240 million in ExIm Bank eligible U.S. goods and services. 

• Ex-Im Bank approved its first-ever merchant power project finance transaction for borrower in Asia. However, the loan for 

canceled due to U.S. shipping requirements. Ex-Im Bank was 

informed that U.S. shipping costs were more than four times 

greater than those of foreign carriers and one-sixth of the total 

amount of Ex-Im Bank finance. The borrower and exporter 

chose a foreign carrier, were unable to obtain a waiver, and ultimately canceled the transaction. Executives from the company raised this again in a recent meeting with the Chairman 

of Ex-Im Bank. 

3. Reduction in U.S. Exports 

In comparison to the impact on Ex-Im Bank financings, making 

estimates about the effect of U.S. shipping rules on U.S. exports is 

more difficult. In nearly all cases, if borrowers make decisions not 

to ‘‘buy U.S.’’ as a result of U.S. shipping requirement—Ex-Im 

Bank does not learn about this decision until after the transaction 

has been finalized. In most cases the U.S. exporter does not know 

that U.S. shipping requirement negatively affected their sales opportunity, only that it lost a sale. 

In a few cases foreign borrowers have informed Ex-Im Bank that 

U.S. shipping requirements and associated costs have resulted in 

decisions to shift sourcing choices from the U.S. In other cases, 

EPC contractors have informed Ex-Im Bank of decisions to shift 

production to foreign suppliers as a result of U.S. shipping requirements. 

Additionally, we have seen the emergence of bidding requirements and other rules that expressly forbid the concept of cargo 

preference. Based on reports, Ex-Im Bank believes that over the 

last 5–10 years U.S. shipping requirements have resulted in a reduction of $1.5 to $3 billion in U.S. exports. In a competitive, global 

economy where financial decisions for hundreds of millions of dollars are made on basis points and the ability to meet project deadlines is critical, there is a plausible basis to conclude that the negative impact of U.S. shipping could be potentially even greater. 

While hard quantitative data on ‘‘lost sales’’ is limited, the evidence 

points to of a financial loss to U.S. exporters. 

The following examples illustrate where parties have informed 

Ex-Im Bank that U.S. shipping rules have curtailed U.S. exports. 

• Wind Power Project. In 2010, a U.S. exporter lost a sale to a 

significant wind power project in Asia to Chinese competitors 

in part due to U.S. shipping requirements. 

• Wind Power Project. Earlier this year, on a wind power project 

in Sub-Saharan Africa, a U.S. wind turbine manufacturer decided to shift production to serve this project from its U.S. facilities to facilities in Germany, because U.S. vessel shipping 

cost was significantly greater than foreign carrier costs. 

• Uruguay Project. U.S. manufacturers and Ex-Im were excluded 

from the opportunity to participate in a follow up bid on a folVerDate Nov 24 2008 11:43 Nov 28, 2011 Jkt 048080 PO 00000 Frm 00029 Fmt 6621 Sfmt 6602 S:\DOCS\71164.TXT JASON
26 

low-up transaction to a Uruguay project because tender documents specifically required ‘‘no shipping restrictions.’’ 

• Supply Shifting. ‘‘Supply shifting’’ has emerged on a number of 

transactions, including a Latin American mining project and a 

Middle Eastern power project where Ex-Im Bank financing 

was rejected. Based on information from exporters, Ex-Im 

Bank estimates this supply shifting to be several hundred million dollars. 

• Latin American Oil and Gas. A Latin American oil and gas 

company decided to source an $80 million contract with a U.S. 

oil and gas company mainly from its facilities in Europe rather 

than sourcing at least half from the U.S. as had been originally 

envisioned. The stated reason was that U.S. shipping costs 

were too great, so it approached a European ECA for financing 

for about $70 million and Ex-Im Bank for only about $10 million. 

• Integrated Water & Power Project. A U.S. power generation 

equipment company appears to have lost a sale for $400–$500 

million for an Integrated Water & Power Project located in the 

Middle East. The Middle Eastern power company making the 

purchasing decision informed Ex-Im Bank that it preferred the 

U.S. equipment but before making the decision wanted to 

know if it could obtain a waiver from U.S. shipping requirements. In the absence of an application for Ex-Im Bank finance, Ex-Im Bank believes that this sale was lost. 

• Indian Company. As a result of its experience paying more for 

U.S. vessels, an Indian company has informed Ex-Im Bank 

that it would be shifting sales from the U.S. to other countries. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR BENNET 

FROM FRED P. HOCHBERG 

Q.1. In Colorado, we’re fortunate to be home to many innovative 

companies that research, invent, and manufacture clean energy 

technologies. What role does the Export-Import Bank play in promoting the export of these technologies? How does the Bank support the growth of our domestic renewable energy sector? 

A.1. Ex-Im Bank plays a critical role in supporting clean energy exporters in Colorado, and throughout the United States. Financing 

is often the most critical element in winning an export sales order. 

Ex-Im Bank can support clean energy exporters in a number of 

ways ranging from using Ex-Im Bank’s Short-Term Insurance Program to offer open account financing for international customers 

for both goods and services up to 360 days—this is much less complicated and lower cost method than having the foreign buyer pay 

by letter of credit—to our medium- and long-term direct loan and 

loan guarantee program that can support repayment terms of up 

to 18 years for renewable energy systems transactions over 

$350,000. Ex-Im Bank financing is usually the most cost-effective 

source of financing for international customers to purchase U.S.- 

made products and services. 

Earlier this year, Ex-Im Bank approved an 18-year loan guarantee under its Renewable Energy Express program for a solar 

27 

power project in Canada, which made possible an $800,000 sale of 

solar inverters by Advanced Energy Inc. of Fort Collins, CO. The 

fact that Ex-Im Bank can support loans and loan guarantees with 

repayment terms of up to 18 years has enabled U.S. exporters to 

compete in markets where host governments have created incentives for renewable energy, such as Italy, Canada, and India. 

Ex-Im Bank’s working capital guarantee can also be an invaluable resource for U.S. exporters seeking to finance the manufacture 

of goods for export sales. This program enables commercial lenders 

to make working capital loans to U.S. exporters for various exportrelated activities by substantially reducing the risks associated 

with these loans. The exporter may use the program to purchase 

raw materials and finished goods for export, to pay for materials, 

labor, and overhead to produce goods for export, and to cover 

stand-by letters of credit, and bid and performance bonds. In September 2010, Ex-Im Bank approved a $10 million working 

capital guarantee to support export sales for Abound Solar, Inc. of 

Loveland, CO. Abound Solar is also benefiting from several pending 

Ex-Im Bank loans to buyers in India that will expand to India for 

Abound. 

Since 1992, Ex-Im Bank has had a special Congressional mandate in its Charter to increase its support for environmental exports. In recognition of this mandate, Ex-Im Bank established its 

Environmental Exports Program in 1994, to expand support for 

U.S. exports of environmentally beneficial goods and services, and, 

at the behest of a Congressional request in 2006, Ex-Im Bank created the Office of Renewable Energy and Environmental Exports 

(Office) in 2008. The Office serves as the primary point of contact 

for environmental exporters, as well as international customers. 

The Office is charged with promoting the Bank’s Environmental 

Exports Program that includes renewable energy. 

A major focus of the Office, as the means to achieve the goal of 

increased support for renewable energy and other environmental 

exports, is increased outreach to the environmental industry. The 

Office seeks to accomplish this through a robust calling plan to 

visit renewable energy exports, representation at trade shows, emailings, and overseas trade missions. The Office makes a major 

effort to establish and maintain relationships with U.S. environmental exporters. By increasing the knowledge among environmental exporters of how to include Ex-Im Bank financing as part 

of their package of technology and services, Ex-Im Bank stands to 

gain significant numbers of repeat customers who will serve to create a pipeline of Ex-Im Bank deals. We are already seeing the 

fruits of our labor with a number of deals inhouse, as well as a 

strong project pipeline. In addition to outreach to customers, the 

Office works with the exporters to generate applications to Ex-Im 

Bank. In Colorado, Ex-Im Bank has visited the offices of Abound 

Solar (one of our staff attending the ribbon-cutting ceremony of the 

new factory), Ascent Solar, Advanced Energy Inc., CH2MHill, Community Power Corp., Coolerado, ReflecTechSolar, SkyFuel, Inc., 

and Solix Biofuels. 

In addition to the business development staff, the Bank created 

a ‘‘renewable energy finance team’’ of three loan officers within the 

Office to develop expertise at underwriting renewable energy transVerDate Nov 24 2008 11:43 Nov 28, 2011 Jkt 048080 PO 00000 Frm 00031 Fmt 6621 Sfmt 6602 S:\DOCS\71164.TXT JASON
28 

actions. This team currently handles all renewable energy transactions under $10 million, and often larger transactions as well, 

with transactions over $10 million handled by the Structured and 

Project Finance Division. 

Over the past few years, Ex-Im Bank has experienced a significant growth in financing renewable energy exports. We’re on track 

to more than double our authorizations for financing renewable energy in FY2011 to over $700 million vs. authorizations in FY2010 

of $330 million, compared to our FY2009 authorizations of $100.4 

million, and FY2008 authorizations of $30.4 million. 

This surge in activity has been driven by the growth of the industry combined with our increased efforts at promoting Ex-Im 

Bank to the industry, particularly new companies in the industry 

such as Clipper and Suniva. Also, the ongoing turmoil in financial 

markets in which commercial banks are constrained in funding 

loans with 18-year tenors has driven a greater interest in Ex-Im 

Bank financing for renewable energy projects in the EU and Canada where the longer-term Ex-Im Bank financing is helping U.S. 

solar suppliers compete with cheaper Chinese-made solar panels. 

Q.2. As you know, the Export-Import Bank has a congressional 

mandate to use 10 percent of its financing to support renewable energy and energy efficient end use technologies. Yet according to a 

July 2010 Government Accountability Office (GAO) report, it continually falls well short of this mandate. Given the importance of 

the renewable energy and energy efficiency sector to the U.S. and 

Colorado economy, what steps is the Export-Import Bank taking to 

improve in this area? Does the Bank have a timetable to comply 

fully with the mandate? As the Bank implements the President’s 

National Export Initiative, what plans does it have to ensure that 

it complies with its renewable energy and energy efficient end use 

technologies mandate? 

A.2. Ex-Im Bank is uniquely positioned to help achieve President 

Obama’s vision for the U.S. to be a leader in the export of renewable energy technology. Ex-Im Bank has developed close working 

relationships with most of the major renewable exporters, industry 

trade associations, and a number of key foreign buyers and international project sponsors. Already in FY2011 the Office of Renewable Energy has brought in $540 million in pending applications for 

renewable energy projects. 

Ex-Im Bank has put in place a Business Development Strategy 

to proactively increase its support for renewable energy exports. As 

the market for renewable energy and clean technology continues to 

be dynamic, Ex-Im Bank’s Business Development Strategy also will 

be dynamic with adjustments and updates made as needed. The 

highlights of the Bank’s Strategy are: 

1. Create a robust calling program to visit companies at their offices, as well as visit companies and meet with their customers at the major industry trade shows. Importantly, maintain and strengthen relationships with the top 20 firms in the 

industry that generate an estimated 90 percent of U.S. renewable energy exports. Expand the calling program to include 

venture capital firms with significant clean tech portfolios. 

29 

2. Continue to build the Ex-Im Bank ‘‘brand’’ in the industry by 

issuing press releases of success stories, running ads that 

highlight our programs in targeted industry publications, 

speaking and having a presence at major conferences, and selectively engaging in key international markets, and in participating in international trade missions. 

3. Creation of the Renewable Energy Finance Team within the 

Bank, comprised of three Loan Officers, solely dedicated to the 

expedited processing of renewable energy transactions under 

$10 million. 

4. Creation of a Renewable Energy Express Program Finance 

Team to process transactions under $10 million in 60 days or 

less. 

Q.3. Independent accountability mechanisms that evaluate and report on agency compliance with environmental and social policies, 

and that provide problem-solving services are increasingly the 

norm at public finance institutions, and exist at the U.S. Overseas 

Private Investment Corporation (OPIC), several export credit agencies, the World Bank Group, and elsewhere. Do you support the establishment of a similar independent accountability mechanism at 

Ex-Im Bank? 

A.3. We believe that independent accountability mechanisms are 

quite appropriate for many international financial institutions, and 

can be valuable in ensuring that the projects financed by those institutions are in compliance with their environmental and social 

policies. This is especially true in the case of financial institutions 

that have developmental mandates, such as the multilateral development banks and OPIC, which have provided significant investments in less developed countries, many of which have weak governance structures. 

In the case of Ex-Im Bank, however, our mandate is trade related—to support U.S. jobs through the financing of exports. Ex-Im 

Bank has historically been a leader among export credit agencies 

with respect to environmental and social stewardship, and we have 

an especially strong legacy with respect to transparency in the administration of our environmental and social policies as they relate 

to our financial support of foreign projects. The divisions within the 

Bank that administer these policies, most notably our Engineering 

and Environment Division, have always taken very seriously any 

concerns expressed by the stakeholders of projects we finance, or 

problems brought to our attention by environmental groups. Moreover, I have an open door policy when it comes to any Ex-Im Bank 

stakeholder wishing to express an opinion on our policies or issues 

associated with projects we finance. 

Finally, any action to establish a formal social and environmental accountability mechanism within Ex-Im Bank would require additional staff and administrative resources, which would 

have the effect of diverting resources away from activities related 

to the core objectives of the Bank, the support of U.S. exporters, 

especially small business exporters and exporters of renewable energy and environmentally beneficial goods and services. We only 

provide financing for foreign projects that are in compliance with 

our environmental and social guidelines, and we scrupulously monVerDate Nov 24 2008 11:43 Nov 28, 2011 Jkt 048080 PO 00000 Frm 00033 Fmt 6621 Sfmt 6602 S:\DOCS\71164.TXT JASON
30 

itor those projects to ensure that they remain in compliance. I do 

not believe that the establishment of a formal accountability grievance mechanism within Ex-Im Bank would represent a productive 

or constructive action, nor do I believe that it would necessarily 

contribute to the environmental performance of the foreign projects 

that we support. 

RESPONSES TO WRITTEN QUESTIONS OF SENATOR WICKER 

FROM FRED P. HOCHBERG 

Q.1. With the ability to offer such attractive rates, often for transactions that would have happened anyway, do you feel that private 

lenders are being put at a competitive disadvantage? 

A.1. Ex-Im Bank does not compete with the private sector. In fact, 

Sec. 2(b)(1)(B) of the Bank’s charter states: ‘‘It is also the policy of 

the United States that the Bank in the exercise of its functions 

should supplement and encourage, and not compete with private 

capital . . . .’’ Thus, Ex-Im believes we do not put private lenders 

at a competitive disadvantage. Ex-Im is very mindful of its role and 

makes a concerted effort to not compete with, but instead supplement the private sector. Ex-Im has a basic litmus test which is 

known as additionality. Ex-Im support is contingent upon a clear 

need for our participation in a transaction or project with the basic 

reason being to address certain market imperfections such as 

heightened perceptions of risk and/or foreign ECA competitive financing. If a private lender is willing and able to assume the foreign credit risks on their own, then they need not come to Ex-Im 

and won’t because of the cost and profit factors, if nothing else. 

And if a private lender can offer financing terms (interest rates, repayment terms) on comparable footing as the foreign competitors 

are offering and meet their own internal objectives, then they will 

and should do it independently of Ex-Im. 

However, if the private lender cannot accept the risks or offer the 

financing terms to support the U.S. export, especially on the same 

or similar terms as its foreign competitor, then Ex-Im stands ready 

to supplement their support and facilitate the sale. Simply put, ExIm Bank’s financial involvement is countercyclical in nature and 

has an inverse relationship with the market: when the private sector has a robust capability and willingness to extend foreign credit 

on their own, the need and demand for Ex-Im declines and vice 

versa. Hence, Ex-Im finances deals that, but for Ex-Im, would not 

otherwise go forward. In other words, Ex-Im Bank fills a very important niche and gap in private capital financing. 

The recent global financial and liquidity crisis has illustrated the 

role of ECAs generally and for Ex-Im in particular. Since 2008, the 

global private lending community shut down for all intents and 

purposes. Ex-Im Bank was asked to step in by the lending and exporting community to ensure that critical trade flows continued 

ranging from short-term trade finance, up through medium- and 

long-term export finance. During this period, it is safe to say that 

Ex-Im was not a competitor to private lenders whatsoever, but 

rather has bridged the gap for the private lending community until 

they have been able and willing to reengage. In fact, Ex-Im created 

a ‘‘safety net’’ program to encourage private lenders to stay inVerDate Nov 24 2008 11:43 Nov 28, 2011 Jkt 048080 PO 00000 Frm 00034 Fmt 6621 Sfmt 6602 S:\DOCS\71164.TXT JASON
31 

volved but, in the event market conditions deteriorated and they 

stood to incur financial losses, Ex-Im Bank would ‘‘take-out’’ their 

loan, thereby at least minimizing losses for private lenders, if not 

avoiding them altogether. 

During less volatile, more interest-rate stable periods, Ex-Im believes that the all-in-cost of Ex-Im Bank support (including the risk 

premium and other fees) when compared to what a private lender’s 

cost would be, any cost advantage with interest rates that Ex-Im 

might have is offset by the cost of Ex-Im participation. Therefore, 

unless Ex-Im Bank is truly needed in a transaction, borrowers 

would prefer to finance their deals on their own with private sector 

support. 

It is also important to note that when Ex-Im Bank does provide 

a direct loan, the interest rates we charge are in full compliance 

with the OECD Arrangement and the WTO commitments and 

these rates do reflect marketing pricing. 

Q.2. I understand that the Export-Import Bank is more active than 

ever before in its efforts to promote U.S. exports. Would you tell 

me what portion of the Ex-Im Bank’s loans and guarantees currently outstanding directly benefit businesses and workers in the 

State of Mississippi? 

A.2. Ex-Im Bank has $54 million in exposure outstanding that directly benefits businesses and workers in the State of Mississippi. 

Q.3. The board of directors of the Export-Import Bank recently 

granted preliminary approval for an $805.6 million direct loan to 

South Africa’s state-owned electric power utility, Eskom, Ltd. How 

does this align with the Charter’s mandate to promote renewable 

energy? 

A.3. The recent Ex-Im Bank $805.6 authorization to finance the export of engineering services and other goods and services for 

Eskom’s, Kusile, coal-fired power plant is not inconsistent with ExIm Bank’s directive to supporting renewable energy. In FY2010, 

Ex-Im Bank adopted a carbon policy under which it implemented 

measures to expand its support for renewable energy projects, and 

subsequently the Board of Directors approved a revision to the 

Bank’s Environmental Guidelines that placed added requirements 

on high carbon intensity projects (such as the Kusile power plant) 

that address the project’s level of greenhouse gas emissions. (These 

revised Guidelines for high carbon intensity projects are set forth 

in Annex ‘‘G’’ of the Bank’s Environmental Procedures and Guidelines.) 

Concurrently, Ex-Im Bank maintains a robust and growing program for the support of renewable energy. Since 2008, it has increased its authorizations for renewable energy from $30 million in 

2008, to over $100 million in 2009, to $332 million in 2010, and 

we’re on track and expect our support of renewable energy transactions in FY2011 to total over $800 million. To encourage exports 

of renewable energy, Ex-Im Bank provides incentives for renewable 

energy transactions consisting of up to 18-year repayment terms 

and capitalization of interest during project construction (loan 

draw-down) that is not available to fossil fuel power projects. 

South Africa’s Eskom project met the requirements of our revised 

guidelines for high carbon intensity projects. It is consistent with 

32 

South Africa’s long term strategy for lowering its carbon production, which by 2025 is projected to decline. The Kusile plant uses 

boilers incorporating super-critical technology for high efficiency, 

and it is ‘‘carbon capture and sequestration ready’’ reflecting an investment by Eskom to mitigate the project’s greenhouse gas production when the technology becomes technically viable. The plant 

is also the first in South Africa to incorporate into its design equipment to reduce the level of sulfur pollution through the use of S02 

scrubbers. 

Ex-Im Bank’s mission is to support U.S. exports, and the jobs 

that create those exports for all foreign projects that meet its environmentally guidelines, and which are considered to be environmentally responsible. High carbon intensity projects such as the 

Kusile project are urgently needed by foreign buyers to meet their 

country’s electric power demands, and they represent a bridge between high carbon intensity plants and future projects that will 

draw from renewable and low carbon technologies. Moreover, the 

participation in these projects by U.S. suppliers lead to U.S. employment. Ex-Im Bank offers initiatives for the financing of renewable energy projects consisting of repayment terms of 18 years, and 

capitalization of interest during the construction of the renewable 

energy projects, incentives that are not given to conventional fossil 

fuel plants. 

Q.4. Do you believe that the Administration would support the construction of an identical coal-burning power plant in the United 

States? 

A.4. This question relating to the domestic policies for coal-burning 

power plants would be best posed to the U.S. DOE and the EPA. 

While we understand that the Administration is discouraging the 

construction of plants that produce high levels of greenhouse gases 

in favor of renewable, nuclear, and low carbon alternatives, we believe that Ex-Im Bank’s carbon policy responsibly addresses the legitimate realties posed by the increasing demands for electric 

power in South Africa and other developing countries as they embark on paths to transition from carbon producing plants to alternative energy sources.