## Statutory Authority for Commodity Credit Corporation

Export Credit Guarantee Programs

Certain programs of the Com m odity Credit Corporation, guaranteeing export credit sales of American agricultural exports, are authorized by the Corporation’s charter act



### March 26, 1982

MEMORANDUM FOR THE GENERAL COUNSEL,
DEPARTMENT OF AGRICULTURE

This memorandum responds to your request for our opinion regarding thestatutory authority for the Commodity Credit Corporation’s (CCC) Noncommercial Risk Assurance Program (GSM-101) and Export Credit Guarantee Program (GSM-102).1 The question of statutory authority has arisen in the course of adetermination by your Office whether guarantees issued pursuant to these programs are supported by the full faith and credit of the United States.2 We find ample, clear statutory authority for these export guarantee programs. Your determination regarding full faith and credit may properly rely on this finding.

‘ T h e D ep artm en t o f A g ric u ltu re ’s reg u la tio n s g o v ern in g th e se tw o p ro g ram s a p p e ar at 7 C .F R §§ 1487-1487 15 and 7 C .F R §§ 1493-I493.15-(1981), respectively. 2 Since 1973, it has been the policy o f the D epartm ent o f Justice to decline to issue formal opinions as to “ full faith and cred it” m atters unless there is drawn into question a serious issue of law See EUiot L Richardson, Attorney G eneral, M em orandum for H eads o f the Executive D epartm ents and Counsel to the President (O ct 10, 1973) It has long been the position o f the Attorney G eneral, however, that:

[T]here is no o rder o f solem nity o f valid general obligations o f the United States and . no legal priority is afforded general obligations contracted pursuant to an express pledge of faith or credit over those not so accom panied. It is enough to create an obligation of the United States if an agency or officer is validly authorized to incur such an obligation on its behalf and validly exercises that power

41 O p A tt'y Gen. 403, 405 (1959). Seea tso A l O p A tt’y G en 417 (1969); 42 O p A tt’y G en. 341, 344 (1967); 42 Op. A tt’y G en. 323 (1966); 42 Op. A tt’y G en. 305, 308 (1965), 42 Op. A tt’y G en. 2 1 , 23—4 (1961). See generally Perry v. Uniled Stales, 294 U S 330, 3*53-54 (1935); Lynch v United Slates, 292 U .S. 571, 580 (1934) In an opinion holding that the Small Business Administration had authority to guarantee the sale of certain debentures ow ned by it, the A ttorney G eneral stated.

[T]he threshold question concerning the effect of the proposed SBA guaranties is not w hether the statutory language expressly alludes to the “ faith” o r “ credit” of the United States, but w hether the statutory schem e authorizes the guaranties here proposed I f there is statutory authority for the guaranties, absent specific language to the contrary such guaranties would constitute obligations of the United States as fully backed by its faith and credit as would be the case were those terms actually
used

Letter from John N M itchell. A ttorney G eneral, to Thom as S. K leppe, Administrator, Small B usiness A dm inistration, at 3 -4 (A pr 14,1971) Similarly, in this case, a guarantee by the C C C will be backed by the full faith and credit of the United States if, and only if, the guarantee was issued pursuant to statutory authority.

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### I. The GSM—1011 and GSM-102 Programs3

The purpose of the GSM-101 and GSM-102 programs is to promote United States exports of agricultural commodities and products by shifting some of the risks usually associated with export transactions from the American exporter to the CCC. These risks, which include embargoes on imports, freezing of foreign exchange, and similar acts of state, as well as revolutions, wars, economic collapse, and other noncommercial incidents, all operate as a barrier to United States agricultural exports. The GSM-101 and GSM-102 programs are similar in structure and operation. Both programs seek to encourage U.S. agricultural exports at levels above those which would exist without the guarantees.4 Under the programs, CCC promises to reimburse the exporter, or the financing institution that is the exporter’s assignee, for a portion of the exporter’s accounts receivable in the event of nonpayment by the importer’s bank that issued the irrevocable letter of credit pertaining to the export sale. In return, the exporter or assignee must assign to CCC all rights in the defaulted payment.5 The total amount that CCC will guarantee, and the portion of the accounts receivable for which CCC will reimburse the exporter or assignee, is determined by CCC in advance for each country. Typically, the Corporation guarantees 98 percent of the principal amount and 8 percent per annum interest.

II. Statutory Authority for the Programs*

15 U.S.C. § 714b7 sets out the general powers of the CCC. These include the power to “ determine the character of and the necessity for its obligations and expenditures and the manner in which they shall be incurred, allowed, and paid.”

3 T h e follow ing description o f these program s is based on discussions w ith mem bers of your O ffice, and upon a m em orandum attached to your letter to m e dated N ovem ber 20, 1981. 4 T h e m ajor difference between the tw o program s is that G SM -101 is limited to protecting only against noncom m ercial n sk s, w hile G SM -102 co v ers all risks. Compare 1 C .F.R . §§ 1 4 87.200 and 1487.4(a), with 7 C .F .R . § 1493.4(a). U nder the G SM -102 p ro g ram , CCC relieves exporters or assignees of com m ercial risks which m ay b e difficult for the exporter or assignee to assess because o f lack o f fam iliarity w ith foreign legal system s or banking practices, o r a lack o f adequate inform ation. CCC now relies exclusively on the G S M -102 program and has ceased issuing new G SM -101 risk assurance agreem ents.
5 See 7 C .F .R . §§ 1 4 8 7 .2 -4 ; 1487.9(d); 1493.2; 1493.4; 1493.8(b)(3)(iv). 6 A question related to this one was previously addressed in a letter and m em orandum from this Office to Claude C offm an, D eputy G eneral C ounsel, D epartm ent of A griculture (D ec. 3, 1973). In that correspondence, Leon U lm an, D eputy A ssistant A ttorney General, expressed doubt regarding C C C ’s authority to sell “ tim e drafts” which it intended to draw against certain bank obligations it possessed. The bank obligations were obtained under a CCC export cred it sales program . Mr. Ulman stated that “ although we w ant to cooperate, w e are not yet persuaded that C C C has the requisite authority [to sell its drafts].” T he m em orandum em phasized that CCC lacked specific statutory authority to sell securities or assets, and opined that the “ necessary and appropriate" powers clause found in its ch arter m ay not be used as authority to se ll securities and pledge the full faith and credit o f the U nited States. Cf. 15 U .S .C . § 714b(m ). T h e p resent question relates to programs m aterially different from the A griculture D epartm ent's proposal in 1973 to sell “ tim e drafts.” T h e m ost decisive difference is that the program s at issue in the current matter do not involve any sale o f assets ow ned by C C C , or any guarantees fo r such sale. There is, in other w ords, no issue regarding authority to sell governm ent obligations back ed by the full faith and credit o f the N ation. Rathei; the question here concerns C C C authority to guarantee export credit sales o f A m erican agricultural exports. 7 It has been held that § 714b— among o th e r grants o f authority to the C C C — m ust be broadly interpreted. See Hiatt Grain & Feed

, Inc. v. Bergland. 446 F. Supp. 4 57, 4 7 2 -7 3 (D . K an. 1978), affd. 602 F.2d 929 (10th Cir. 1979), cert, denied, 444 U .S . 1073 (1980).



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### 15U.S.C. § 714b(j). In addition, the CCC is vested with “ such powers as may be necessary or appropriate for the exercise of the powers specifically vested in the Corporation, and all such incidental powers as are customary in corporations generally[.]” 15 U.S.C. § 714b(m). Finally, 15 U.S.C. § 714c provides: the Corporation is authorized to use its general powers only to—

*****


### (f) Export or cause to be exported, or aid in the development of foreign markets for, agricultural commodities. Commenting upon § 714c, the Senate Report on the CCC charter act states:It is believed that there should be available to American agriculture an agency with the flexible authority vested in the Corporation by this section. . . .

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Subsection (f) authorizes the Corporation to export or cause to be exported, or aid in the development of foreign markets for,agricultural commodities. It is essential to the agricultural economy of the United States that it maintain and expand its markets abroad for agricultural commodities. This subsection empowers the Corporation to carry out operations to this end S. Rep. No. 1022, 80th Cong., 2d Sess. 12-13, reprinted in 

### 1948 U.S. Code Cong. Serv. 2138, 2151. The Department of Agriculture interprets these statutes as providing sound authority for the GSM—101 and GSM-102 programs. See 

### 43 Fed. Reg. 4033 (1978); 45 Fed. Reg. 64898 (1980). An agency’s interpretation of a statute it is charged with implementing is entitled to substantial deference. See generally Red Lion Broadcasting Co. 

### v. FCC, 

### 395 U.S. 367,381 (1969); Udall 

### v. Tollman, 

### 380 U.S. 1, 16 (1965); Lenkin 

### v. District cf Columbia, 

### 461 F.2d 1215, 1227 (D.C. Cir. 1972). Regardless of any deference due the Agriculture Department’s interpretation, there is no doubt that the GSM-101 and GSM-102 programs are a valid exercise of the CCC’s general power to “ determine the character of and the necessity for its obligations . . . and the mannerin which they shall be incurred[.]” 15U.S.C. § 7 14b(j)- That general power has been exercised in this instance for the purpose of promoting exports of United States agricultural commodities. See 

### 7 C.F.R. §§ 1487.1(a), 1493.1(a). This purpose is explicitly authorized by 15 U.S.C. § 714c(f). We therefore find support for these programs in the plain meaning of these provisions. Furthermore, the broad language of the CCC charter act and its legislative history both indicate that a variety of programs may—indeed should— be developed by the CCC to assist in promoting American agricultural exports. GSM-101 and GSM-102 are just such programs, and therefore are within the ambit of authority provided the CCC in § 714.

T h e o d o r e B . O l s o n Assistant Attorney General Office c f Legal Counsel



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