U.S. EXPORT-IMPORT 

BANK

Actions Needed to 

Promote 

Competitiveness and 

International 

Cooperation

Report to Congressional Requesters

February 2012

GAO-12-294

United States Government Accountability Office

GAO
United States Government Accountability Office

Highlights of GAO-12-294, a report to

congressional requesters 

February 2012 

U.S. EXPORT-IMPORT BANK

Actions Needed to Promote Competitiveness and 

International Cooperation

Why GAO Did This Study

The U.S. Export-Import Bank (Ex-Im), 

the United States’ official export credit 

agency (ECA), helps U.S. firms export 

goods and services by providing a 

range of financial products. Ex-Im, 

whose primary mission is to support 

jobs through exports, has a range of 

policy requirements, including support 

of small business. The Organisation for 

Economic Cooperation and 

Development (OECD) Arrangement 

governs aspects of U.S. and some 

foreign countries’ ECAs. GAO 

examined (1) Ex-Im’s mission and 

organization compared with ECAs from 

other Group of Seven (G-7) countries 

(major industrialized countries that 

consult on economic issues), (2) ExIm’s policy requirements compared 

with other G-7 ECAs, (3) Ex-Im’s 

domestic content policy compared with 

other G-7 ECAs, and (4) the OECD 

Arrangement’s role in governing ECA 

activities.

What GAO Recommends

GAO recommends (1) that Ex-Im 

conduct a systematic review to assess 

how well its domestic content policy 

continues to support Ex-Im’s mission, 

and (2) that the Department of the 

Treasury, with Ex-Im and international 

counterparts, develop strategies for 

further engagement on export credit 

issues with emerging economy 

countries. Ex-Im stated it considers 

content policy in its annual 

competitiveness assessments, but did 

not comment directly on the 

recommendation. Treasury stated it 

supports encouraging emerging market 

economies’ participation concerning 

export credit issues and is engaged in 

that activity, but did not state whether it 

agreed with the recommendation. 

What GAO Found

The United States and other G-7 countries have ECAs that support domestic 

exports, but Ex-Im differs from other ECAs in several important ways, including 

its explicit mission to promote domestic employment. The G-7 ECAs range from 

government agencies to private companies contracted by governments. Most of 

these ECAs, including Ex-Im, are expected to supplement, not compete with, the 

private market. Ex-Im offers direct loans, which were increasingly utilized during 

the recent financial crisis, while European ECAs do not.

Ex-Im has specific mandates in areas where other G-7 ECAs have broad 

directives. Ex-Im has specific mandates to support small business and 

environmentally beneficial exports, while other ECAs are broadly directed to 

support such exports. In addition, Ex-Im has other mandates and legal 

requirements, such as shipping certain exports on U.S.-flagged carriers and 

conducting economic impact assessments for large transactions, which other G-7 

ECAs do not. 

Ex-Im’s requirements for the level of domestic content in the exports it fully 

finances are higher and generally less flexible than those of other G-7 ECAs. ExIm requires 85 percent domestic content for medium- and long-term transactions 

to receive full financing, while other ECAs’ domestic content requirements 

generally range between zero and 51 percent. Ex-Im’s policy on supporting local

costs can result in more foreign content support in some transactions. While ExIm has modified its method for calculating domestic content, its threshold for 

receiving full financing for medium- and long-term transactions has not changed 

since 1987, and the policy and its overall impact on jobs has not been studied 

systematically. Other ECAs have modified their policies in recent years, citing 

increasing global content of industrial production. In its charter, Ex-Im is directed 

to provide financing competitive with that of other ECAs, as well as to support 

U.S. jobs.

The OECD Arrangement has expanded to regulate additional aspects of officially 

supported export credits, but increasing activity of nonmembers threatens its 

ability to provide a level playing field for exporters. Several agreements have 

been made that decrease subsidies and increase transparency among ECAs. 

However, these agreements apply only to participant ECAs, and important 

emerging countries, including China, are not part of the Arrangement. Officials 

from several G-7 ECAs and other institutions identified effective engagement with 

these countries on export credit issues as being increasingly important and 

presenting challenges for the OECD Arrangement and its participants. 

View GAO-12-294. For more information, 

contact Loren Yager at (202) 512-4347 or 

yagerl@gao.gov. 
Page i GAO-12-294 Export-Import Bank

Letter 1 

Background 3

Ex-Im Differs from the Other G-7 ECAs in Several Important Ways, 

Including Its Explicit Mission to Promote Domestic Employment 11

Ex-Im Has Specific Mandates and Operates under More Policy 

Requirements than Other ECAs 17

Ex-Im’s Domestic Content Requirements Are Generally Higher and 

Less Flexible than Those of Other ECAs 24

The OECD Arrangement Has Decreased Export Credit Subsidies, 

but the Increasing Importance of Nonmembers Threatens Its 

Future Effectiveness 35

Conclusions 42

Recommendations for Executive Action 43

Agency Comments and Our Evaluation 43

Appendix I Objectives, Scope, and Methodology 46

Appendix II Comments from the U.S. Export-Import Bank 49

Appendix III GAO Contact and Staff Acknowledgments 51

Tables

Table 1: Missions and Related Characteristics of the G-7 ECAs 12

Table 2: Domestic Content Policies of the G-7 ECAs, Including 

Minimum Domestic Content to Receive Full Medium- and 

Long-Term Support 26

Figures

Figure 1: Official Export Credit Agencies of the G-7 Countries 5

Figure 2: New Business by G-7 Export Credit Agency, 2010 7

Figure 3: Medium- and Long-Term Official Export Credits, 2006-

2010 9

Figure 4: Comparison of Selected Products Offered by G-7 ECAs 15

Figure 5: Ex-Im Direct Lending, 1998-2011 16

Contents
Page ii GAO-12-294 Export-Import Bank

Figure 6: G-7 ECAs with External Directives to Support Small 

Business Exporters and Environmentally Beneficial 

Exports 17

Figure 7: G-7 ECAs with Select External Requirements 21

Figure 8: Domestic Content Share of Manufacturing Exports 

among G-7 Countries, 2005 29

Figure 9: Domestic Content of Select U.S. Exports, 1995 to 2005 31

Figure 10: Average Domestic Content for Ex-Im’s Medium- and 

Long-term Transactions Containing Foreign Content, 1997 

through 2010 32

Figure 11: Estimated Medium- and Long-Term Official Export 

Credits, 2006-2010 39

Figure 12: Estimated Activity Levels for Export-Import Banks of 

China, India, and the United States, 2000 and 2010 40
Page iii GAO-12-294 Export-Import Bank

Abbreviations

CEO chief executive officer

CIRR Commercial Interest Reference Rate

Coface Compagnie Française d’Assurance pour le Commerce

 Extérieur

CRS Congressional Research Service

ECA export credit agency

ECGD Export Credits Guarantee Department

EDC Export Development Canada

EU European Union

G-7 Group of Seven

GDP gross domestic product

JBIC Japanese Bank for International Cooperation

KfW KfW Bankengruppe

NEXI Nippon Export and Investment Insurance

OECD Organisation for Economic Cooperation and Development

OPIC Overseas Private Investment Corporation

SACE Servizi Assicurativi del Commercio Estero

SBA Small Business Administration

SIMEST Societa Italiana per le Imprese all’Estero

UK United Kingdom

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Page 1 GAO-12-294 Export-Import Bank

United States Government Accountability Office

Washington, DC 20548

February 7, 2012

The Honorable Gary Miller

Chairman

International Monetary Policy and Trade Subcommittee

The Honorable Judy Biggert

Chairman

Insurance, Housing and Community Opportunity Subcommittee

Committee on Financial Services

House of Representatives

The Honorable Gregory Meeks

House of Representatives

As the nation’s official export credit agency (ECA), the U.S. Export-Import 

Bank (Ex-Im) supports U.S. exporters by providing loans, guarantees, 

and insurance, particularly during times of economic crisis when private 

financing is not available. Ex-Im’s primary mission is to create U.S. jobs 

through exports. In addition, Ex-Im has a variety of other policy 

requirements, including congressional mandates to support small 

businesses and promote environmentally beneficial exports, as well as 

policies regarding the amount of U.S. content in the exports it finances. In 

its charter, Ex-Im is directed to provide financing competitive with the 

rates, terms, and other conditions available from other ECAs.

An international agreement, the Organisation for Economic Cooperation 

and Development (OECD) Arrangement on Officially Supported Export 

Credits (the Arrangement), governs various aspects of U.S. and other 

member countries’ ECAs.1

 

1

The OECD is an organization of 34 industrialized countries, operating by consensus, that 

fosters dialogue among members to discuss, develop, and refine economic and social 

policies and provides an arena for establishing multilateral agreements. 

The Arrangement aims to promote a level 

playing field where exporters compete on the basis of price and quality 

rather than export credit support, including any subsidies. The Group of 

Seven (G-7) major industrialized countries are all participants in the 

Arrangement. However, some countries with substantial export credit 

activity—including China, India, and Brazil—are not participants in this 

agreement.

 
 

Page 2 GAO-12-294 Export-Import Bank

In the context of Ex-Im’s latest reauthorization, Congress asked GAO to 

examine how Ex-Im’s export credit support and policy requirements 

compare with those of other export credit agencies in developed 

countries. This review examines (1) Ex-Im’s mission, organization, market 

orientation, and product offerings compared with those of the other G-7 

ECAs; (2) Ex-Im’s policy requirements compared with those of the other 

G-7 ECAs; (3) Ex-Im’s domestic content policy compared with those of 

the other G-7 ECAs; and (4) the role of the OECD Arrangement in 

governing ECA activities.

To address these objectives, we reviewed relevant documentation related 

to Ex-Im and the other G-7 ECAs, including legislation, annual reports, 

OECD and academic reports, and Ex-Im’s annual Competitiveness 

Reports. We met with officials from the following ECAs: Export 

Development Canada (EDC) in Canada, Coface in France, Export Credits 

Guarantee Department (ECGD) in the United Kingdom, Servizi 

Assicurativi del Commercio Estero (SACE) in Italy, and Hermes in 

Germany. We also met with officials from oversight organizations in G-7 

countries, as well as the OECD and the Berne Union, an association of 

export credit and investment insurance providers. We spoke via 

telephone with officials from the Japanese ECAs, the Japanese Bank for 

International Cooperation (JBIC) and Nippon Export and Investment 

Insurance (NEXI). We interviewed Ex-Im officials from various divisions of 

the organization. We also spoke with officials from other U.S. government 

agencies, including the Departments of the Treasury and State, as well as 

the Small Business Administration. We interviewed a variety of experts on 

China’s export credit activities, including experts at American University 

and the Brookings Institution. Appendix I provides more information on 

our scope and methodology.

We conducted this performance audit from February 2011 to February 

2012 in accordance with generally accepted government auditing 

standards. Those standards require that we plan and perform the audit to 

obtain sufficient, appropriate evidence to provide a reasonable basis for 

our findings and conclusions based on our audit objectives. We believe 

that the evidence obtained provides a reasonable basis for our findings 

and conclusions based on our audit objectives.
 

Page 3 GAO-12-294 Export-Import Bank

Export credits are financing arrangements designed to mitigate risks to 

buyers and sellers associated with international transactions.2 Export 

credits generally take the form of direct loans, loan guarantees, and 

export credit insurance, and may be short-term (0-1 year), medium-term 

(1-7 years), and long-term (7 plus years).3

ECA Export Credit Products Defined

(See textbox below.) Buyers 

and sellers in international transactions face unique risks, such as foreign 

exchange risk, difficulties in settling disputes when damages to shipments 

occur, or instability in the buyer’s country. For these reasons, lenders may 

be reluctant to finance a buyer’s purchase of foreign goods. Export credit 

products are meant to facilitate international transactions by mitigating 

these risks. Official ECAs are organizations that provide export credits 

with explicit government backing, where either the government, or the 

government-owned ECA, assumes the risk and is financially liable for 

reimbursing the exporter or the lending institution if the buyer fails to pay.

• Export credit insurance: An insurance policy that protects the exporter from the risk of 

nonpayment by foreign buyers for commercial and political reasons.

• Loan guarantee: An ECA guarantees a lender’s financing to an international buyer of 

goods or services, promising to pay the lender if the buyer defaults.

• Direct loan: The ECA makes a fixed-rate loan directly to an international buyer of 

goods and services.

• Interest make-up: In lieu of making direct loans, an ECA pays a lender the difference 

between the OECD minimum interest rate and commercial interest rates. 

Ex-Im, the official export credit agency of the United States, is an 

independent government agency operating under the Export-Import Bank 

Act of 1945, as amended. Ex-Im currently has about 400 employees. Its 

mission is to support U.S. exports and jobs by providing export financing 

on terms that are competitive with those of official export credit support 

offered by other governments. Since fiscal year 2008, Ex-Im has been 

“self-sustaining” for appropriations purposes, financing its operations from 

 

2

They can take the form of “supplier credits,” extended by the exporter, or “buyer credits,” 

where the exporter’s bank or financial institution lends to the buyer or to the buyer’s bank. 

3

These are Ex-Im’s definitions. Ex-Im and OECD officials noted that there are not 

consistent definitions for “short-term,” “medium-term,” and “long-term.” 

Background
 

Page 4 GAO-12-294 Export-Import Bank

receipts collected from its borrowers.4

The other G-7 countries, which include some of the largest exporters, all 

have at least one ECA. See figure 1.

 Ex-Im provides export credit 

insurance, direct loans, and loan guarantees in support of U.S. exports. In 

fiscal year 2011, Ex-Im authorized $32.7 billion: $7.0 billion in export 

credit insurance, $6.3 billion in direct loans, and $19.4 billion in loan 

guarantees. Ex-Im has a risk exposure limit of $100 billion, meaning that 

the total outstanding value of all loans, guarantees, and insurance 

contracts cannot exceed this number; at the end of fiscal year 2011, ExIm had a total exposure of $89.2 billion.

 

4

Ex-Im’s budget includes its program subsidy and its administrative expenses. Program 

subsidy refers to budgetary resources that must be allocated annually to reserve against 

any estimated costs to the government of Ex-Im’s activities (such as due to defaults) not 

covered by fees and other payments, on a net present value basis. The fees charged by 

Ex-Im have covered its annual subsidy and administrative costs in recent years. Congress 

retains oversight of Ex-Im’s budget by setting annual limits on Ex-Im’s use of its funds for 

program subsidy and administrative expenses. 
 

Page 5 GAO-12-294 Export-Import Bank

Figure 1: Official Export Credit Agencies of the G-7 Countries

aFrance, Italy, and Germany each have an additional government or government-directed institution 

that offers products that could be characterized as officially supported export credits. Societa Italiana 

per le Imprese all’Estero (SIMEST) in Italy and Natixis in France have interest make-up programs. 

KfW IPEX-Bank in Germany offers loans at the OECD minimum interest rate in support of exportrelated transactions. 

G-7 ECAs differ in the magnitude and types of their activities. All offer 

medium- and long-term officially supported export credits. According to 

Ex-Im, this financing is subject to the most intense international 

competition, where the support of an ECA can influence who wins 

overseas deals. Ex-Im’s annual competitiveness reports compare ECAs 

on the basis of their medium- and long-term export credit support 
 

Page 6 GAO-12-294 Export-Import Bank

programs. ECAs also can provide other products and services in addition 

to these medium- and long-term officially supported export credits; some 

of the G-7 ECAs offer short-term export credits, market-based export 

credits (called “market windows”), and other non-export credit products 

such as investment insurance. This can complicate comparisons among 

institutions, as some ECAs offer products that are also offered by other 

types of institutions, such as development or finance institutions, in other 

countries. ECAs do not typically compete with one another in the area of 

short-term credits.

Figure 2 shows each ECA’s total new business in 2010, providing a 

comparison between medium- and long-term officially supported export 

credits and other new business in that same year. Germany was the 

largest provider of medium- and long-term export credits, followed by 

France and the United States. Japan’s two ECAs, combined, had the 

largest amount of total new business in 2010, but only a very small 

portion was for officially supported medium- and long-term export credits; 

the remainder included other products such as overseas investment 

loans, untied loans, and overseas untied loan insurance.5

 

5

Overseas investment loans (loans to help domestic firms invest abroad) and untied loans 

(loans extended to foreign governments or companies for the purpose of providing credit 

for strategic reasons) are offered by JBIC. Overseas untied loan insurance, which protects 

Japanese companies and banks from losses associated with providing untied loans, is 

provided by NEXI. 

This was also 

true of Canada’s ECA, EDC, which had the second highest volume of 

total new business. A large proportion of the new business was 

attributable to short-term credit insurance.
 

Page 7 GAO-12-294 Export-Import Bank

Figure 2: New Business by G-7 Export Credit Agency, 2010

Notes: “Other new business” is calculated as the difference between “total new business” and new 

medium- and long-term export credits. “Total new business” is reported differently depending on the 

ECA. For the United States, data are for total authorizations. For Canada, it represents financial 

arrangements facilitated. For France, Germany, Italy, and the United Kingdom, it means new 

guarantees. For Japan, it is loan, guarantee, and investment commitments from JBIC, as well as the 

total underwritten amount from NEXI. 

The “total new business” number for Japan is for fiscal year 2010 (April 2010-March 2011), while the 

number for medium- and long-term official export credits is an Ex-Im estimate for calendar year 2010. 

For the United Kingdom, the “total new business” number is for fiscal year 2010 (April 2010-March 

2011), while the number for medium- and long-term official export credits is for calendar year 2010. 

The G-7 ECAs have historically accounted for the majority of mediumand long-term officially supported export credits, according to Ex-Im. The 

share of national exports financed by official export credit agencies is not 

large; on average, medium- and long-term ECA financing as a share of 

total exports for each of the G-7 countries in 2008 was 0.6 percent. The 

United Kingdom’s (UK) share was lowest at 0.1 percent, and Italy’s was 
 

Page 8 GAO-12-294 Export-Import Bank

the highest at 1.2 percent; the remaining G-7 countries ranged between 

those values.

6 However, ECAs do play a large role in certain sectors, 

such as aircraft. According to Ex-Im, at its peak in 2009, ECA financing 

represented about 40 percent of the total worldwide market for aircraft 

financing. In addition, the recent financial crisis has increased the amount 

of ECA support for exports; most G-7 ECAs saw notable increases in the 

volume of their medium- and long-term officially supported export credits 

starting in 2008 or 2009 because private sector lenders and insurers were 

either unwilling or unable to support transactions on their own. See figure 

3 for estimates of the volume of medium- and long-term officially 

supported export credits provided by each G-7 country over the past 5 

years.7

 

6

Specifically, the remaining G-7 countries had the following shares: United States: 0.6 

percent, Canada: 0.3 percent, France: 1.1 percent, Germany: 0.6 percent, Japan: 0.2 

percent. 

7

We found that the data presented in Ex-Im’s Report to the U.S. Congress on Export 

Credit Competition and the Export-Import Bank of the United States, period January 2010 

through December 2010 (Ex-Im 2010 Competitiveness Report) provide the best available 

estimate of the G-7 ECAs’ medium- and long-term officially supported export credits. The 

amounts are estimated because some ECAs do not specifically report this information. 

Rather, they report on their total business, only a subset of which can be considered 

“officially supported” export credits. This makes it very difficult to obtain the information 

shown in figure 3 from ECA annual reports. 
 

Page 9 GAO-12-294 Export-Import Bank

Figure 3: Medium- and Long-Term Official Export Credits, 2006-2010

Note: Data represent the medium- and long-term officially supported export credits issued each year 

by country. U.S. data are presented on a calendar-year basis. Data for Canada exclude market 

window and domestic financing. For France, figures have been adjusted to exclude defense. Data for 

Italy exclude untied or domestic activity. Figures for Japan reflect an aggregation of JBIC export loans 

and an estimate of NEXI medium- and long-term official export cover; the 2010 figure for Japan is an 

Ex-Im estimate (data were not available). 

The OECD Arrangement on Officially Supported Export Credits is a set of 

nonbinding rules among some OECD countries concluded in 1978 amid 
 

Page 10 GAO-12-294 Export-Import Bank

increases in ECAs’ provision of officially supported export credits. The 

purpose of the Arrangement is to provide a framework for the use of 

officially supported export credits; to promote a level playing field, where 

competition is based on the price and quality of the exported goods and 

not the financial terms provided; and to provide transparency over 

programs and transactions. Participants to the Arrangement are Australia, 

Canada, the European Union (EU),

8

The Arrangement applies to officially supported export credits with 

repayment terms of 2 years or more. It places limitations on the terms and 

conditions, such as interest rates, length of repayment terms, and risk 

fees, of export credits that benefit from official support, and it also 

contains a variety of reporting requirements to ensure transparency.

Another requirement is a down payment of 15 percent of an export 

contract’s value.

Japan, South Korea, New Zealand, 

Norway, Switzerland, and the United States. Other countries may join 

following invitation and OECD membership is not required. In addition, 

countries may belong to one or more of the Arrangement’s sector 

agreements—for example, Brazil is a member of the Aircraft Sector 

Understanding—without being a full-fledged participant.

9 The Arrangement and its various sector agreements are 

negotiated among participants and updated on an as-needed basis.10

In addition to the OECD Arrangement, another export credit committee at 

the OECD, the Working Party on Export Credits and Credit Guarantees 

(Export Credit Group), was set up in 1963. Its general objectives are to 

evaluate export credit policies, identify and resolve problems by 

multilateral discussion, work out common guiding principles, and improve 

cooperation between countries. To date, the Export Credit Group has 

been the venue for important export credit agreements on antibribery, 

 

8

The European Union is an economic and political partnership among 27 European 

countries. Austria, Belgium, Bulgaria, Cyprus, the Czech Republic, Denmark, Estonia, 

Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, 

Luxembourg, Malta, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, 

Spain, Sweden, and the United Kingdom are members. 

9

The Arrangement also governs the use of “tied aid”—aid conditioned on the purchase of 

goods and services from the donor country.

10The latest version of the Arrangement dates from September 2011. An important 

change was the introduction of new buyer risk (commercial) premium rates, which came 

into effect on September 1, 2011. 
 

Page 11 GAO-12-294 Export-Import Bank

environmental screening, and sustainable lending. All OECD countries 

except Chile and Iceland are members.

The U.S. Department of the Treasury’s Office of Trade Finance has lead 

responsibility within the U.S. government for the development, 

implementation, and enforcement of international trade and aid finance 

policy, and its primary goal is to create and maintain a market-based, 

competitive environment in which governments’ financing of national 

exports contains minimal subsidies. The Office of Trade Finance leads 

the U.S. delegation to the OECD Arrangement. Other members of the 

delegation include Ex-Im, the Departments of Commerce and State, the 

Office of the U.S. Trade Representative, the U.S. Agency for International 

Development, the U.S. Trade and Development Agency, and other 

agencies whose programs or roles might be affected by the negotiations.

Ex-Im is different from other G-7 ECAs in several significant ways, 

including its mission, which is explicitly focused on creating domestic jobs 

through exports. It is similar in its role as a lender/insurer of last resort to 

four other ECAs, while Canada and Italy have commercial market 

orientations and are not restricted from competing with the private market.

As an independent government agency, Ex-Im’s governance and 

organization type differ from those of other ECAs, which range from 

government departments to private companies contracted by 

governments. Ex-Im and other G-7 ECAs offer a different mix of export 

credit and other financing products, which provides them with different 

tools to help exporters. Ex-Im has an advantage over some of the other 

ECAs because it offers direct loans, which were useful during the 

financial crisis.

Ex-Im’s mission strongly emphasizes supporting domestic jobs through 

exports, which is unique among the G-7 ECAs (see table 1). This aim 

underlies certain Ex-Im policies, such as its economic impact analysis 

requirement and its domestic content policy. Other ECA missions range 

from promoting and supporting domestic exports to securing natural 

resources.

Along with its mission is the ECA’s “market orientation”—whether an 

export credit agency supplements or competes with private markets for 

export credit support. Most G-7 ECAs are directed to supplement the 

private market; that is, they play a role as a “lender or insurer of last 

resort,” providing financing, guarantees, or insurance for transactions that 

Ex-Im Differs from 

the Other G-7 ECAs in 

Several Important 

Ways, Including Its 

Explicit Mission to 

Promote Domestic 

Employment

ECAs Differ in Their 

Missions and Organization 

Types
 

Page 12 GAO-12-294 Export-Import Bank

are too risky or are undesirable for commercial support. In addition, 

according to G-7 ECA officials, European ECAs must abide by EU law 

prohibiting them from supporting short-term export credits to other EU 

member states and most OECD countries—transactions that the private 

market is willing to support. Ex-Im’s role as a lender of last resort is 

emphasized in its charter. It must report the purpose for each transaction 

it supports, either to provide financing where private sector financing is 

unavailable or to meet foreign competition. Canada’s ECA, in contrast, 

has a commercial market orientation and is not restricted from competing 

with the private sector. Italy’s ECA, while having to abide by EU law, also 

has a commercial market orientation, according to Italian officials.

G-7 export credit agencies range from government agencies to private 

companies contracted by governments, with different organization types, 

governing structures, and processes for approving transactions (see table 

1). The ECAs that are managed by private companies, such as those in 

France and Germany, experience more direct political oversight, as their 

governments take a more direct role in approving transactions and can 

take policy considerations into account on an individual transaction basis.

Table 1: Missions and Related Characteristics of the G-7 ECAs

Country: ECA Stated mission

General market 

orientation

ECA organization 

type

ECA governance and decisionmaking authority

United States: 

Ex-Im

Supports U.S. domestic jobs 

through exports by providing 

export financing that is 

competitive with support 

offered by other governments

Lender /insurer of 

last resort

Independent 

government agency

Ex-Im has a board of directors 

appointed by the President and 

confirmed by the Senate. The board 

approves transactions above $10 

million.a

Canada: EDC Supports and develops 

Canada’s domestic and export 

trade and Canadian capacity to 

respond to domestic and 

international business 

opportunitiesb

Commercial market 

orientation

Company wholly 

owned by the 

government 

(Canadian Crown 

Corporation)

A board of directors, appointed by 

the Minister for International Trade 

and composed of representatives 

primarily from the private sector, 

governs EDC and approves 

transactions.c

 

France: Coface Promotes and supports French 

exports and foreign 

investments in the medium and 

long terms 

Insurer of last resort Private company 

contracted by the 

government

In addition to its private sector 

activities, Coface manages a 

separate account for state export 

credits and reports to the Ministry of 

Finance, which takes decisions on 

the largest and most important 

transactions. 
 

Page 13 GAO-12-294 Export-Import Bank

Country: ECA Stated mission

General market 

orientation

ECA organization 

type

ECA governance and decisionmaking authority

Germany: 

Hermes

Promotes German exports; 

insures against the risk of 

nonpayment for commercial 

and political reasons; opens 

new markets, especially in 

emerging countries; and 

supports foreign countries, 

particularly those in difficult 

phases of development and 

restructuring 

Insurer of last resort Consortium of two 

private companies 

contracted by the 

government

The consortium manages export 

credits on behalf of the government, 

but an Interministerial Committee 

made up of the Ministries of 

Economics and Technology, 

Finance, Economic Cooperation and 

Development, and the Federal 

Foreign Office, make the approval 

decisions on transactions over 5 

million euros. 

Italy: SACE Supports Italian exporters and 

the internationalization of 

Italian companies and banks 

Commercial market 

orientation

Joint stock company 

with shares owned by 

the Ministry of 

Economy and 

Finance

A board of directors is appointed by 

the Ministry of Economy and Finance 

in agreement with the Ministry for 

Economic Development. Decisions 

on SACE’s activity are made by the 

Board of Directors, which also 

provides the Chairman and the Chief 

Executive Officer (CEO) with specific 

powers of attorney. 

Japan: JBIC 

and NEXI

JBIC: Secures natural 

resources, ensures 

competitiveness of Japanese 

companies, responds to 

disruptions in the international 

economy, and improves the 

environment;

NEXI: Contributes to Japan’s 

economy by anticipating 

changes in the market, 

responding to customer needs, 

and conducting insurance 

business in covering risks that 

arise in international 

transactions but are not 

covered by regular commercial 

insurance

JBIC: lender of last 

resort/ NEXI: 

somewhere 

between an insurer 

of last resort and 

commercial market 

orientationd

Companies whose 

shares are owned by 

the Ministry of 

Finance (JBIC) and 

the Ministry of 

Economy, Trade and 

Industry (NEXI)

JBIC: JBIC’s parent institution, Japan 

Finance Corporation, has a governor 

who approves transactions over a 

certain threshold. JBIC’s CEO or 

other executives approve all other 

transactions.

NEXI: The Ministry of Economy, 

Trade and Industry approves 

transactions over a certain threshold. 

NEXI’s Chairman or a Director 

approves all other transactions. The 

Board of Directors is an advisory 

body rather than a decision-making 

body. 

United 

Kingdom: 

ECGD

Complements the private 

market by providing assistance 

to exporters and investors, 

principally in the form of 

insurance and guarantees to 

banks

Insurer of last resort Department of the 

government

An Executive Committee composed 

of ECGD Directors advises the Chief 

Executive on the management of 

ECGD’s business. A 

subcommittee—Risk Committee—

approves transactions. 

Source: GAO analysis of ECA documents and interviews with ECA officials.

aAccording to Ex-Im, the threshold for board approval for medium- and long-term transactions is 

generally $10 million. However, there are exceptions to this general rule. For example, all nuclearrelated transactions, irrespective of transaction value, must go to the board for approval after an intraagency clearance and congressional review process. For other products, such as short-term 

insurance and working capital guarantees, the approval threshold varies depending on the specific 

product. 

b

EDC’s mandate was temporarily expanded to include a domestic component in 2009. 
 

Page 14 GAO-12-294 Export-Import Bank

c

The Chairperson of the board is appointed by the Governor in Council. 

d

NEXI officials said that while NEXI has a complementary relationship with the private sector, NEXI 

does not have a clear role as an insurer of last resort. Rather, NEXI sees itself as somewhere 

between an insurer of last resort and competing with the private market. 

G-7 ECAs each offer a different mix of export credit and other financial 

products. In general, a greater mix of products allows an ECA more 

flexibility in responding to its customers’ needs, particularly during an 

economic crisis. Most ECAs offer standard export credit products such as 

export credit insurance and loan guarantees. However, ECAs may offer 

additional export credit products, such as direct loans (United States, 

Japan, and Canada) and interest make-up programs, where the ECA 

pays the difference between commercial lending rates and fixed OECD 

minimum rates (Italy, France). ECAs also may offer products that are not 

technically “export-related,” but that, according to Ex-Im, could possibly 

be used in lieu of or in addition to standard export credits, such as 

investment insurance and untied lending. Figure 4 shows a comparison of 

selected export credit and other financial products offered by G-7 ECAs.

Ex-Im and Other G-7 ECAs 

Offer Different 

Combinations of Export 

Credit Support Products
 

Page 15 GAO-12-294 Export-Import Bank

Figure 4: Comparison of Selected Products Offered by G-7 ECAs

a

Provided by other institutions working in concert with these ECAs. 

b

France and Germany only offer loan guarantees for exports of Airbus aircraft. 

c

Germany only offers interest make-up with regard to ECA-covered ships that have been ordered 

from a German shipyard. 

Ex-Im’s provision of direct loans proved to be useful during the financial 

crisis, when commercial financing was expensive or unavailable. While its 

direct lending program was little used in the early 2000s, Ex-Im 

experienced a surge in demand for direct loans over recent years, from 

$350 million in fiscal year 2008 (3 percent of its total authorizations) to 

$6.3 billion in fiscal year 2011 (19 percent of its total authorizations). See 

figure 5. 
 

Page 16 GAO-12-294 Export-Import Bank

Figure 5: Ex-Im Direct Lending, 1998-2011

Note: The percentage of total authorizations is calculated in terms of the dollar value of 

authorizations. 

The Japanese and Canadian direct loan programs also experienced 

increases.11 The G-7 European ECAs, which do not have direct loan 

programs, sought alternative solutions to mitigate the lack of such 

financing.12 Several U.S. officials and a G-7 official stated that Ex-Im’s 

direct loan program gave it an advantage in responding to the needs of 

exporters and their customers during the crisis.

 

11Canada experienced a large increase in 2009, which is largely related to restructuring of 

the automotive sectors in Canada and the United States. 

12As shown in figure 4, some of the European ECAs have interest make-up programs, 

which are designed to facilitate fixed-rate lending and provide an alternative to direct 

loans. However, according to Ex-Im and Treasury officials, because of the reliance of such 

programs on commercial banks as intermediaries and a lack of liquidity during the 

financial crisis, Ex-Im’s direct loan product was more competitive. 
 

Page 17 GAO-12-294 Export-Import Bank

Ex-Im receives specific mandates from Congress and generally operates 

under more policy requirements than other G-7 ECAs. Ex-Im’s mandates 

include specific targets from Congress for small business and 

environmentally beneficial exports. Other G-7 ECAs may have broad 

directives from their governments or ministries to focus on these areas. 

Ex-Im also faces additional mandates and legal requirements that other 

ECAs generally do not. For example, Ex-Im is statutorily required to 

perform an economic impact analysis to assess whether a project will 

negatively affect U.S. industries.

Ex-Im receives mandates from Congress that include specific targets in 

the areas of small business and environmentally beneficial exports, 

whereas some other G-7 ECAs have been given broad directives to focus 

on these areas by their governments or ministries. Specifically, four G-7 

ECAs have received external directives to encourage small business 

exporters, and two ECAs have received external directives to support 

environmentally beneficial exports (fig. 6). According to OECD officials, 

Ex-Im is unique in that Congress gives it explicit policy goals to pursue in 

addition to its general mandate to support domestic exports. By contrast, 

other ECAs generally receive limited specific policy guidance from their 

respective legislatures and oversight ministries.

Figure 6: G-7 ECAs with External Directives to Support Small Business Exporters 

and Environmentally Beneficial Exports

Ex-Im Has Specific 

Mandates and 

Operates under More 

Policy Requirements 

than Other ECAs

Ex-Im Has Specific 

Mandates on Small 

Business and 

Environmentally Beneficial 

Exports where Other G-7 

ECAs Have Broad 

Directives
 

Page 18 GAO-12-294 Export-Import Bank

Since the 1980s, Congress has required that Ex-Im make available a 

certain percentage of its export financing for small business.13

From fiscal years 2006 to 2010, Ex-Im met the 20 percent small business 

financing target, but did not in 2011. Ex-Im’s small business financing 

percent ranged from about 27 percent in fiscal year 2007 to 18.4 percent 

in fiscal year 2011.

In 2002, 

Congress established several new requirements for Ex-Im relating to 

small business, including increasing the small business financing 

requirement from 10 to 20 percent. Related congressional directives have 

included requirements to create a small business division and to define 

standards to measure the bank’s success in financing small businesses.

14 Because of the sharp increase in overall Ex-Im 

financing in 2009 and 2010, meeting the 20 percent target has meant 

large annual increases in small business financing. For example, Ex-Im 

small business financing increased by about 58 percent between 2008 

and 2010.15 According to Ex-Im officials, the bank allocates significant 

resources to meeting its small business mandate. About 27 staff work 

exclusively on small business marketing, primarily in regional offices, 

according to Ex-Im officials.16

In 2010, Ex-Im developed and improved products to increase financing 

options for small business, and to simplify application processes and 

shorten turnaround time. For example, Ex-Im designed an express 

insurance product to streamline the application process for short-term 

export credit insurance. Other new products include ones aimed at 

providing competitively priced working capital finance to U.S. suppliers of 

U.S. exporters, and reinsurance to increase the capacity of insurance 

 

13Ex-Im interprets the term “make available” as a target that the bank is expected to meet. 

14In fiscal years 2002-2005, Ex-Im did not reach the goal, with its small business financing 

share ranging from 16.9 percent to 19.7 percent.

15In terms of total number of transactions, transactions involving small business directly 

account for the bulk of Ex-Im financing because they are on average much smaller in 

value than transactions that directly involve larger businesses. In 2010, about 88 percent 

of the total number of Ex-Im’s transactions directly benefited small business and about 25 

percent were made available to non-small business. (The percentages do not sum to 100 

because some individual transactions could be used to directly benefit multiple parties, 

including both small and non-small businesses.)

16Ex-Im officials said they requested funding in fiscal year 2011 for expanding small 

business outreach efforts, but that funding was not included in their final budget. 
 

Page 19 GAO-12-294 Export-Import Bank

companies to offer insurance to small business exporters that have had 

difficulty obtaining short-term export credit since the financial crisis.

Congress also mandates Ex-Im to support environmentally beneficial 

exports and provides specific targets for such exports. However, specific 

targets in this area have greatly exceeded Ex-Im financing. In fiscal year 

2008, Congress directed Ex-Im to allocate 10 percent of its annual 

financing to renewable energy and environmentally beneficial products 

and services. For fiscal years 2009 and 2010, Congress directed Ex-Im to 

allocate 10 percent to a subset of those exports—renewable energy and 

energy efficient end-use technologies. We previously reported that Ex-Im 

had not come close to meeting this 10 percent target when it is applied to 

all of its environmentally beneficial financing.17

In contrast to Ex-Im’s mandates, some ECAs are broadly directed by their 

governments or ministries to support small business exports and 

environmentally beneficial exports with, generally, no specific targets to 

meet, according to G-7 officials. Specifically:

 Ex-Im has reported 

significant increases in its renewable energy financing, from $101 million 

in 2009 to $332 million in 2010. In 2011, Ex-Im authorized about $889 

million in environmentally beneficial exports, of which about $721 million 

was for renewable energy.

• The British government asks the Export Credits Guarantee 

Department to promote small and medium-sized exporters, but the 

guidance ECGD receives is suggestive, rather than a specific 

directive, according to officials at the ECA.

• The French Ministry of Finance provided a target for its export credit 

agency, Coface, to support 10,000 small and medium-sized exporters 

by 2012, according to Coface officials. However, officials stated that 

this target only applies to one product—market survey insurance—

and there are many other products that Coface uses to promote 

 

17Ex-Im’s financing of exports it identified as environmentally beneficial was 1.3 percent of 

its total financing from fiscal year 2003 through the first half of fiscal year 2010. Its 

financing of the more narrowly defined category of renewable energy and energy-efficient 

technologies would be much smaller than 1.3 percent of its total financing. We found that 

Ex-Im could improve its planning and use of resources in this area, although the difficulty 

of meeting these targets with existing resources remained to be seen. GAO, Export-Import 

Bank: Reaching New Targets for Environmentally Beneficial Exports Presents Major 

Challenges for Bank, GAO-10-682 (Washington, D.C.: July 14, 2010). 
 

Page 20 GAO-12-294 Export-Import Bank

exports of small businesses that are not associated with specific 

external targets.

• Japan’s Parliament also asks JBIC to support small and mediumsized businesses, but provided a general directive to support such 

exporters and did not include specific targets, according to JBIC 

officials.

• Italy’s ECA, SACE, is directed by an interministerial decree to 

designate renewable energy exports as a strategic sector, but no 

specific targets are provided, according to SACE officials.

Some ECAs that do not have external directives from their governments 

to support small businesses and environmentally beneficial exports have 

developed internal initiatives to support such exports. For example, in 

January 2011, Germany’s ECA introduced a new product that provides a 

fast-tracked application process allowing exporters to receive export 

credit coverage for transactions of up to 5 million euros in 4 days.

Additionally, Canada’s ECA has developed internal initiatives to support 

environmentally beneficial exports. For example, a team within Export 

Development Canada has been tasked by EDC executives to come up 

with a clean technology strategy, and the team is in the early stages of 

putting a strategy in place, according to EDC officials.

Ex-Im has additional mandates and legal requirements that other ECAs 

generally do not. These include (1) promotion of exports to sub-Saharan 

Africa, (2) requirements to ship certain exports on U.S. flag carriers, (3) 

carbon policy, (4) economic impact analysis, and (5) congressional 

notification.18

 

18Ex-Im has additional requirements. They include, for example, annual reporting 

requirements on its small business activities and the requirement to develop a program for 

providing support with respect to the export of high technology items to countries making 

the transition to market-based economies. 

All of these requirements, except for the carbon policy, are 

the result of congressional mandates. Although most ECAs do not have 

similar requirements (see fig. 7), as noted above, ECAs have different 

organizational and governance structures. These differences can affect 

how a government exercises policy considerations through its ECA. For 

example, Germany has an interministerial board that approves individual 

transactions and takes into account policy considerations on a case-byEx-Im Has Additional 

Mandates and Legal 

Requirements that Other 

ECAs Generally Do Not 

Have
 

Page 21 GAO-12-294 Export-Import Bank

case basis; in contrast, Ex-Im is an independent agency and Congress 

exercises policy considerations through programmatic mandates, 

according to a Treasury official.

Figure 7: G-7 ECAs with Select External Requirements

Note: France’s ECA, Coface, stated that while it does not have a specific shipping requirement, it 

treats shipping costs associated with shipment on non-EU vessels as foreign content. 

Specifically, Ex-Im must consider the following mandates and legal 

requirements when financing transactions:

• Promoting exports to sub-Saharan Africa. Congress mandates that 

Ex-Im promote the expansion of its financial commitments in subSaharan Africa under Ex-Im’s loan, guarantee, and insurance 

programs. No other G-7 ECAs have specific external requirements to 

support exports to sub-Saharan Africa. In 2010, Ex-Im financed 132 

transactions totaling $812 million in 20 sub-Saharan African countries. 

Ex-Im dedicates two full-time employees to promoting exports to subSaharan Africa; others work part-time on the issue.
 

Page 22 GAO-12-294 Export-Import Bank

• Requirement to ship certain exports on U.S.-flagged carriers.

Congress mandates that certain oceanborne cargo supported by U.S. 

government credit entities must be transported on U.S. flag vessels 

unless the requirement is waived by the U.S. Maritime Administration. 

Ex-Im interprets this legislation to mean that exports financed through 

its direct loan and long-term guarantee programs are subject to the 

U.S. flag vessel requirement.19

• Carbon policy. Ex-Im is the only G-7 ECA legally required to adopt an 

official carbon policy.

In calendar year 2010, Ex-Im 

authorized 14 transactions valued at $2.9 billion that were subject to 

this requirement.

20

 19To be eligible for Ex-Im support, Ex-Im requires that certain transactions be shipped 

exclusively on U.S.-flagged vessels if the cargo is oceanborne. These transactions include 

(1) direct loans, regardless of the amount, and (2) guarantee transactions with either (a) a

financed amount greater than $20 million or (b) a repayment period greater than 7 years. 

Other ECAs have adopted certain common 

environmental guidelines through the OECD. However, specific 

conditions on carbon emissions are unique to Ex-Im. Ex-Im’s carbon 

policy, implemented in 2010, was developed in response to a lawsuit 

challenging Ex-Im’s compliance with provisions of the National 

Environmental Policy Act. The carbon policy (1) promotes renewable 

energy exports where carbon dioxide emission levels are very low to 

zero, (2) establishes a $250 million facility to promote renewable 

energy, and (3) calls for increased transparency in the tracking and 

reporting of carbon dioxide emissions. In 2010, Ex-Im authorized 1 

20In 2002, Ex-Im’s energy financing, specifically its financing for fossil fuel projects, was 

the subject of a lawsuit brought against the bank and the Overseas Private Investment 

Corporation by environmental nongovernmental organizations and four U.S. cities. Friends 

of the Earth, Inc., et al. v. Spinelli, et al. (Civ. No. 02-4106, N.D. Cal.) The lawsuit asserted 

that Ex-Im and the Overseas Private Investment Corporation (OPIC) provided assistance 

for fossil fuel projects that caused greenhouse gas emissions without complying with 

provisions of the National Environmental Policy Act requiring assessments of their 

projects’ impacts on the U.S. environment resulting from their emissions. The lawsuit was 

settled in 2009 with Ex-Im agreeing to develop and implement a carbon policy for Ex-Im’s 

financing; provide the Board of Directors with additional information about carbon dioxide 

emissions associated with potential fossil fuel transactions; and take a leadership role in 

consideration of climate change issues, promoting emissions mitigation measures within 

the Organisation for Economic Cooperation and Development and among export credit 

agencies. 
 

Page 23 GAO-12-294 Export-Import Bank

transaction valued at $887 million that was subject to the enhanced 

due diligence review.21

• Economic impact analysis. Congress requires Ex-Im to perform an 

economic impact analysis to assess whether a project will negatively 

affect U.S. industries either by reducing demand for goods produced 

in the United States or by increasing imports to the United States. 

Other G-7 ECAs do not have similar requirements, according to G-7 

ECA officials. As we have previously reported, Ex-Im uses a 

screening process to identify projects with the most potential to have 

an adverse economic impact, and then subjects the identified projects 

to a detailed analysis. Of medium- and long-term transactions Ex-Im 

authorized in 2010, 82 transactions, valued at $2.8 billion, were 

subject to Ex-Im’s economic impact analysis, with a small percentage 

of those subject to detailed analysis. 22

• Congressional notification. Congress requires Ex-Im to submit a 

detailed statement describing and explaining a transaction to 

Congress prior to the Board of Directors’ final approval if the 

transaction is (1) in an amount equal to or greater than $100,000,000 

or (2) related to nuclear power or heavy water production facilities.23

According to Hermes officials, Germany also sends a notification to 

the German parliament’s Committee on Budgets for transactions 

exceeding 1 billion euros. According to Ex-Im, 38 transactions valued 

at about $16 billion in 2010 were sent to Congress before the Board of 

Directors’ final approval of the transactions.

 

21The enhanced due diligence process is an early review by Ex-Im’s Board of highcarbon-intensity projects, such as coal-fired power plants, which includes a requirement 

for verifiable offsets to reduce the carbon dioxide intensity of projects in the highest 

category. 

22For information on Ex-Im’s economic impact assessment process, see GAO, ExportImport Bank: Improvements Needed in Assessment of Economic Impact, GAO-07-1071

(Washington, D.C.: Sept. 12, 2007). 

23Specifically, congressional notification is required if the transaction is for the export of 

technology, fuel, equipment, materials, or goods or services to be used in the 

construction, alteration, operation, or maintenance of nuclear power, enrichment, 

reprocessing, research, or heavy water production facilities. 
 

Page 24 GAO-12-294 Export-Import Bank

Ex-Im’s domestic content requirements are generally higher and less 

flexible than those of other ECAs. To fully finance a medium- or long-term 

transaction, Ex-Im requires that 85 percent of the value of the transaction 

be supplied domestically. Other G-7 ECAs generally require between 

zero to 51 percent domestic content. Additionally, key elements of ExIm’s domestic content policy have remained relatively unchanged over 

two decades; at the same time, manufacturing patterns have evolved 

toward greater integration in production and data show that the domestic 

content of exports has decreased. Several ECAs have modified their 

policies in recent years, often citing the increasingly global content of 

industrial production as a primary reason for the change.

Ex-Im’s domestic content policy places limits on the amount of foreign 

goods and services making up the exports it finances. Domestic content 

refers to the portion of an exported good or service that is sourced 

domestically. Ex-Im’s policy is not the result of a statutory requirement; 

according to Ex-Im, the policy reflects an attempt to balance the interests 

of multiple stakeholders and Ex-Im’s mission to support U.S. jobs through 

export financing. Ex-Im’s domestic content policy for medium- and longterm transactions limits its level of support to the lesser of (1) 85 percent 

of the total value of all eligible goods and services in the U.S. export 

transaction,24 or (2) 100 percent of the U.S. content in all eligible goods 

and services in the U.S. export transaction.25 In effect, Ex-Im requires 85 

percent domestic content to receive full financing for medium- and longterm transactions but does not require a minimum amount of domestic 

content to receive a portion of financing. See the sidebar for two 

examples of how the domestic content policy affects the level of support 

Ex-Im can provide.

 

24Financing 85 percent of the total value of a transaction is considered full financing 

because of the provision under the OECD Arrangement that ECAs can finance only 85 

percent of a transaction’s value. 

25Thus, the domestic content percentage of a transaction is calculated as a fraction of the 

total value of the transaction, including direct costs, indirect costs, and profit.

Ex-Im’s Domestic 

Content Requirements 

Are Generally Higher 

and Less Flexible than 

Those of Other ECAs

Ex-Im’s Current Policy 

Limits the Amount of 

Foreign Content in the 

Exports It Finances
 

Page 25 GAO-12-294 Export-Import Bank

Ex-Im has separate domestic content requirements for short-term 

transactions—the percentage required to receive maximum coverage is 

lower than for medium- and long-term transactions and the calculation 

method differs. The short-term policy is generally more lenient for small 

businesses than for other exporters. For example, small businesses can 

satisfy the short-term domestic content requirement based on 

aggregating all of the products in an export contract, while non-small 

businesses must meet the minimum domestic content threshold on a 

product-by-product basis. In addition, small businesses include indirect 

costs in the calculation of domestic content.26 According to Ex-Im, the 

difference reflects Ex-Im’s directive to consider the unique business 

requirements of small businesses.

 26For small businesses’ short-term transactions, Ex-Im requires that the aggregate U.S. 

content of all products in an export transaction must be more than 50 percent. The amount 

of foreign content is calculated from the exporter’s total direct and indirect costs, excluding 

profit. For non-small businesses, Ex-Im requires that each product in an export transaction 

have at least 50 percent U.S. content. In addition, the amount of foreign content is 

calculated from the exporter’s direct cost only. 
 

Page 26 GAO-12-294 Export-Import Bank

Other G-7 ECAs have lower domestic content requirements than Ex-Im, 

generally requiring between zero and 51 percent domestic content (see 

table 2). Some ECAs with domestic content polices have more flexibility 

in implementing their policies by allowing for exceptions to their minimum 

domestic content requirements on a transaction-by-transaction basis. For 

example, according to Japanese officials, Japan’s ECAs require a 

minimum of 30 percent domestic content, but the institutions can make 

exceptions for projects deemed to be of strategic importance. Ex-Im 

makes no exceptions to its content policy for specific transactions, except 

for those involving tied aid or raw materials.27

Table 2: Domestic Content Policies of the G-7 ECAs, Including Minimum Domestic 

Content to Receive Full Medium- and Long-Term Support

According to Canadian and 

Italian officials, Canada and Italy do not require a certain level of domestic 

content; rather, both consider domestic content in the context of a broad 

range of factors to determine whether supporting a transaction benefits 

national interest.

Country

Domestic content policies of the G-7 ECAs, for medium- and 

long-term support

United States Eighty-five percent domestic content requirement to receive full 

financing. If less than 85 percent, Ex-Im will finance the domestic 

content portion. 

Canada No minimum domestic content requirement. National Benefits 

policy first considers the gross domestic product and employment 

impacts of the transaction and then takes into account other 

factors, such as increased access to global markets. 

France Twenty percent domestic content requirement for a transaction to 

be considered.a

 

Germany Three-tier policy: 70 percent and 51 percent minimum domestic 

content for the first two tiers, respectively. For the third tier, 

transactions with less than 51 percent domestic content can be 

supported if there is a justification from the exporter and 

Interministerial Committee approval.b

 27Ex-Im makes exceptions to its domestic content requirement for tied aid, which has 

been used by Ex-Im four times in the last 10 years. According to Ex-Im officials, in addition 

to tied aid, Ex-Im allows raw materials that originated outside the United States to be 

considered 100 percent U.S. content when the raw material is significantly transformed 

(i.e., loses its identity) and constitutes a minimal (small) portion of the value of the end 

product. 

Other ECAs Generally 

Have Lower and More 

Flexible Domestic Content 

Requirements than Ex-Im
 

Page 27 GAO-12-294 Export-Import Bank

Country

Domestic content policies of the G-7 ECAs, for medium- and 

long-term support

Italy No minimum domestic content requirement. The ECA supports 

exports that benefit the Italian economy and has internal 

considerations, such as a maximum exposure amount for a 

country. If the ECA is close to reaching this amount, it will try to 

maximize Italian content in the export. 

Japan Thirty percent domestic content requirement. The ECA can make 

exceptions to support projects with less than 30 percent domestic 

content if the project has strategic interests.

United Kingdom Twenty percent domestic content requirement to receive full 

support. If less than 20 percent, the ECA will support the domestic 

content portion of the transaction. 

Source: GAO analysis of ECA documents and interviews with officials.

Notes: ECAs from six of the seven G-7 countries, including the United States, stated that they 

calculate domestic content as a percentage of the total value of the export contract. They also stated 

that the domestic content amount is self-reported, or generally self-reported, by applicants. This table 

does not reflect differences in ECA policies for supporting local costs, which can affect the amount of 

foreign content supported in some transactions. Local costs are for goods and services manufactured 

or originated in the buyer’s country. 

a

French officials stated that going below 50 percent involves some restrictions. 

b

The second-tier level requires between 70 to 51 percent domestic content in certain situations, such 

as when the foreign content comes from EU countries, Switzerland, Japan, or Norway and at the 

same time from a third country; when it comes from German subsidiaries not located in the buyer’s 

country; or certain other situations. With respect to the third tier, according to German officials, 

support of such transactions is done on a limited basis. 

EDC’s Canadian Benefits policy considers the research and development 

spending by the company and the potential for increased access to global 

markets, among other factors, when deciding to finance a transaction 

(see textbox). According to Canadian officials, the Canadian Benefits 

model is designed to capture all benefits that accrue from Canadian 

companies’ involvement in international trade.
 

Page 28 GAO-12-294 Export-Import Bank

In addition to the domestic content policies presented in table 2, ECAs’ 

policies for supporting local costs can also affect the level of support they 

can provide related to goods and services that are not sourced 

domestically. Local costs are for goods and services manufactured or 

originated in the buyer’s country, such as on-site construction costs. ExIm’s policy allows it to support up to 30 percent of the value of the export 

contract in local costs, in addition to 15 percent foreign content.

28

 

28In 2007, the OECD Arrangement participants agreed to raise the proportion of local 

costs that may be officially supported in an export contract from 15 percent to 30 percent 

of the export contract value on a trial basis through the end of 2010. In 2008, Ex-Im 

increased its maximum local cost support to 30 percent. In January 2011, the local cost 

provision was made permanent in the Arrangement text. 

In 

contrast, according to Ex-Im, the other G-7 ECAs generally include local 

costs in their calculation of foreign content, and this can reduce the gap 

between the level of foreign content that Ex-Im can support and that of its 

foreign counterparts. Ex-Im reported that, in 2010, 21 percent of its nonIn the early 2000s, Export Development Canada implemented a national benefits policy rather than a domestic content requirement, 

referred to as the Canadian Benefits model. With this model, EDC measures its contribution to Canada’s economy through the 

economic benefits generated by the exports and investments it supports. EDC takes the following steps under the Canadian 

Benefits model:

1. Calculate economic benefits. The economic benefits are based on the amount of gross domestic product (GDP) in the exports it 

finances by determining the amount of Canadian content in the export. The Canadian content is provided by Statistics 

Canada’s Input/Output Model, which tracks the production chain of Canadian industries, and identifies and measures inputs 

and outputs.

2. Calculate base grade. EDC then calculates a base grade by dividing the level of GDP generated by the transaction by the 

amount of EDC support that was requested. EDC assigns letter grades A-F according to these support percentages.

3. Identify upgrades. Where a transaction generates a base grade of less than B, additional benefits are considered in order to 

upgrade the transaction. Each applicable secondary benefit boosts the base grade by one letter grade. (An F rating cannot 

receive upgrades.) Reasons for upgrades include the following:

• Above average research and development spending by the Canadian company.

• The transaction allows increased access to global markets.

• The transaction has an above average employment impact.

• The Canadian exporter is a small or medium-sized business.

• The transaction supports an environmentally beneficial product.

Although transactions rarely receive low final grades, low grades do not prevent EDC from financing the transaction, according to 

EDC officials. 
 

Page 29 GAO-12-294 Export-Import Bank

aircraft medium- and long-term transactions contained some local cost 

support.

The degree to which countries rely on domestic components in producing 

its exports differs. U.S. exports generally have higher domestic content 

than those of other G-7 countries. OECD data show that domestic content 

accounts for less than 75 percent of manufacturing exports for five of the 

seven G-7 countries, but accounts for over 80 percent of manufacturing 

exports for the United States, as well as in Japan.

Figure 8: Domestic Content Share of Manufacturing Exports among G-7 Countries, 

2005

Note: OECD uses input-output tables from each country to estimate the domestic content of exports. 

An input-output table is a means of presenting a detailed analysis of the process of production and 

the use of goods and services (products) and the income generated in that production. An inputoutput table shows the inputs that are used by each industry, including imports, to produce its output, 

the output of each industry, and the use of outputs of various industries by final consumers. Inputoutput analysis can be used to study changes in the structure of an economy. 
 

Page 30 GAO-12-294 Export-Import Bank

While Ex-Im has modified its method for calculating the amount of 

domestic content in a transaction, its minimum threshold for receiving full 

financing for medium- and long-term transactions has not changed since 

1987. Before 1987, Ex-Im financed only the domestic portion of mediumand long-term transactions. If less than 100 percent of an export’s content 

was domestic, the foreign part would be carved out and Ex-Im would 

finance 85 percent of the domestic portion.29

In 2001, Ex-Im modified its method of calculating the domestic content of 

exports in medium- and long-term transactions. Previously, Ex-Im 

required exporters to report the domestic content of individual items in a 

contract, line by line. In 2001, Ex-Im moved to a whole contract value 

calculation where exporters report the domestic content of the contract’s 

entire value, rather than item by item. This allowed Ex-Im to finance 

contracts that may have individual items that contain less than 85 percent 

domestic content as long as the total amount in the contract has 85 

percent or more domestic content. There have not been subsequent 

changes to the policy for medium- and long-term transactions. 

In 1987, Ex-Im adopted its 

current policy to allow transactions with up to 15 percent foreign content 

to receive 85 percent of the total contract value. Ex-Im’s rationale for 

allowing up to 15 percent foreign content was that the 15 percent down 

payment required by the OECD Arrangement would cover the portion of 

foreign content, according to Ex-Im officials.

Production patterns have changed in the past few decades as global 

manufacturing has become more integrated. Companies increasingly rely 

on parts sourced from other countries, and as a result, the domestic 

content in exported goods has declined. OECD data show that from 1995 

to 2005 the percentage of domestic content of manufactured U.S. exports 

declined from 87.4 percent to 82.4 percent, a 5 percentage point decline 

in 10 years (see fig. 9).

Ex-Im does not differentiate among sectors in its domestic content policy, 

although domestic content in U.S. exports varies by sector. Among 

manufactured exports, medical, precision and optical instruments showed 

a greater decline in domestic content, almost 6 percentage points, than 

 

29Thus, for a transaction with an export value of $100, of which $10 was foreign content, 

Ex-Im would have financed $76.50 before 1987 ($90 x 0.85) and would finance $85 under 

its current policy.

While Ex-Im Has Modified 

Its Method for Calculating 

Domestic Content, Its 

Threshold for Receiving 

Full Financing Has Not 

Changed since 1987

Domestic Content of U.S. 

Exports Has Generally 

Declined and Varies across 

Sectors
 

Page 31 GAO-12-294 Export-Import Bank

food products, beverages, and tobacco, which experienced a 3.6 

percentage point decrease. As figure 9 shows, as of 2005, the domestic 

content of U.S. exports of motor vehicles, trailers, and semitrailers was 

around 72 percent, and other transportation equipment, which includes 

aircraft, was 83.5 percent.

Figure 9: Domestic Content of Select U.S. Exports, 1995 to 2005

Note: The data are reported in 5-year intervals because of the availability of input-output tables for 

most countries. The most recent year for which OECD did this analysis is 2005. U.S. input-output 

tables use data collected every 5 years in an Economic Census done by the U.S. Census Bureau. 

“Other transport equipment” covers aircraft, a major product supported by Ex-Im financing. 

Given varying levels of domestic content by product and industry, Ex-Im 

may be unable to provide full financing for exports in certain industries if 

trends continue. Domestic content in Ex-Im transactions fluctuated from 

1997 to 2010, showing an overall downward trend. The average domestic 

content for medium- and long-term transactions containing foreign 

content was 91 percent in 1997 and 86 percent in 2010 (see figure 10). 
 

Page 32 GAO-12-294 Export-Import Bank

This value is near the 85 percent minimum domestic content required for 

a transaction to receive full Ex-Im financing.

Figure 10: Average Domestic Content for Ex-Im’s Medium- and Long-term 

Transactions Containing Foreign Content, 1997 through 2010

Exporters and lenders have expressed concerns about Ex-Im’s policy, 

although obtaining clear evidence about the policy’s impact is difficult. In 

cases where domestic content falls below 85 percent, Ex-Im’s policy 

could potentially have a negative impact on U.S. competitiveness by 

deterring exporters from using Ex-Im’s products. According to 

respondents of Ex-Im’s most recent survey concerning its 

competitiveness, Ex-Im’s content policy is the bank’s most significant 

impediment to competitiveness.30

 

30Congress requires Ex-Im to conduct an annual survey of exporters and lenders who 

have used Ex-Im’s medium- and long-term programs in the prior calendar year to 

determine their experience using the bank’s programs and to compare these programs 

with those of other ECAs. Ex-Im’s most recent report, published in June 2011, covers the 

period January 1, 2010, through December 31, 2010. 

Exporters have urged Ex-Im to expand 

its criteria for support beyond domestic content and to consider support 

based on national interests. Exporters and lenders have also suggested 

Concerns about Ex-Im’s 

Content Policy Exist 

among Exporters and 

Lenders
 

Page 33 GAO-12-294 Export-Import Bank

that Ex-Im should explore extending exceptions to its content policy to 

support priority sectors, such as environmentally beneficial projects.

According to Ex-Im officials, information on exporters that have not 

applied for Ex-Im financing because of its domestic content policy or 

deals that have been lost as a result of incomplete financing is not 

tracked.

Co-financing is a tool that some exporters can use to address financing 

challenges posed by domestic content requirements, but it is not available 

for all transactions. Co-financing arrangements allow an exporter to offer 

a single ECA support package to a buyer interested in procuring products 

from two or more countries. The G-7 ECAs have multiple framework 

agreements that govern co-financing among themselves. Ex-Im officials 

stated that co-financing is increasingly used in situations where foreign 

content exceeds 15 percent and there is a gap in Ex-Im’s financing 

coverage. In 2010, Ex-Im co-financed more than $6.5 billion in 

transactions, with the vast majority of transactions involving aircraft.

However, co-financing is not an option for all U.S. transactions, because it 

requires meeting the financing requirement of another country’s ECA, 

particularly the production of a product or service that would qualify as an 

export from that country.

Some ECAs have revised their domestic content policies to reflect 

changes in global production patterns. For example, following an 

evaluation 10 years ago, EDC and the Canadian government determined 

that EDC’s 50 percent domestic content rule had become onerous, and 

that the global marketplace had changed, with more production involving 

foreign content, according to Canadian officials. EDC adopted an 

“integrative trade model” to reflect multiple benefits brought to Canada 

from international transactions. As a result, EDC moved to the National 

Benefits policy discussed above, where exporters using little or no 

domestic content are eligible for support, as long as their export is 

determined to benefit Canada. According to UK officials, ECGD also 

substantially changed its policy in 2007, determining that its domestic 

content requirement of 60 percent was an artificial barrier and 

unnecessary restriction, in light of declines in the size of the UK 

manufacturing base, increased globalization, and multisourcing of goods 

under UK export contracts. It lowered the requirement to 20 percent. In 

2008, Germany moved from a 90 percent domestic content requirement 

to its current three-tier policy that attaches various limits to differing levels 

of domestic content. Germany’s federal government made these changes 

in response to the repeated appeals of German exporters, who 

Other ECAs Have Modified 

Their Domestic Content 

Policies to Reflect 

Changing Global 

Production Patterns
 

Page 34 GAO-12-294 Export-Import Bank

increasingly viewed the previous system as overly restrictive in light of 

international competition, according to Hermes documents and officials.

There are differing views on the ultimate impact of different domestic 

content requirements, and limited analytical evidence on which to base 

decisions is available. While lowering a domestic content requirement can 

increase the number and type of transactions that an ECA can support, it 

could lessen the incentive for some companies seeking ECA support to 

source goods and services domestically. The potential impact on U.S. 

employment of any changes in the policy would depend on the balance of 

job gains that might accrue from supporting additional transactions 

against any job losses from reduced domestic content.

As other ECAs have loosened their domestic content policies, Ex-Im’s 

policy remains relatively unchanged. Congress directs Ex-Im to provide 

financing that is fully competitive with the financing of its competitors.31

According to Ex-Im officials, Ex-Im reviews its domestic content policy on 

a regular basis to identify ways to increase flexibilities for exporters.

However, Ex-Im has not conducted a systematic review of its policy in 

recent years to assess to what extent the overall impact of the policy is 

consistent with Ex-Im’s mission of supporting U.S. jobs.

 

31According to Ex-Im’s charter, Congress directs Ex-Im to provide guarantees, insurance, 

and extensions of credit at rates and on terms and other conditions that are fully 

competitive with the government-supported rates and terms and other conditions available 

for the financing of exports of goods and services from the principal countries whose 

exporters compete with U.S. exporters. 
 

Page 35 GAO-12-294 Export-Import Bank

While the scope of the OECD Arrangement has expanded to cover 

additional aspects of officially supported export credit terms among 

member ECAs, the increasing activities of nonmembers, particularly 

China, threaten the future ability of the agreement to provide a level 

playing field for exporters. Several agreements establish guidelines for 

pricing and reporting on export credit support. However, these 

agreements apply only to officially supported activities of participant 

ECAs. Several countries, including Brazil, China, and India, have growing 

ECA financing activity but are not part of the Arrangement. Officials from 

several G-7 ECAs and other institutions identify engagement with these 

countries to increase transparency and promote broader discussion of 

export credit issues as a major challenge that must be addressed if the 

Arrangement is to remain effective.

The scope of the OECD Arrangement has expanded over time to regulate 

additional aspects of participating countries’ use of officially supported 

export credits, decreasing export subsidies in the process. Since the 

Arrangement was formed, in 1978, there have been several important 

agreements among member countries that have regulated pricing or other 

aspects of export credit support. These agreements include the following:

• Minimum interest rates. Arrangement members adopted a system of 

minimum interest rates, which has reduced the interest rate subsidy 

component in ECA support. These rates, called Commercial Interest 

Reference Rates (CIRR), are adjusted on a monthly basis to reflect 

commercial lending rates for borrowers in the domestic market of the 

relevant currency.

• Minimum premium rates (risk fees). Agreements on minimum 

premium rates, or risk fees, are designed to encourage convergence 

in pricing, further decreasing opportunities for subsidies among ECAs. 

The first agreement on risk-based premium rates, in 1997, established 

a set of minimum premium rates to reflect country credit risk. 

Countries were free to charge higher rates than these minimums. A 

new agreement, effective as of September 2011, expanded on this 

earlier agreement by including buyer credit (commercial), as well as 

country-based, aspects of risk. This agreement reduces ECAs’ 

flexibility in pricing commercial transactions, thus further narrowing 

differences in ECA financing terms.

• Tied aid. Two agreements have restricted the use of tied aid, that is, 

aid conditioned on the purchase of goods and services from the donor 

The OECD 

Arrangement Has 

Decreased Export 

Credit Subsidies, but 

the Increasing 

Importance of 

Nonmembers 

Threatens Its Future 

Effectiveness

The OECD Arrangement 

Has Expanded over Time 

to Regulate Additional 

Aspects of Official ECA 

Support
 

Page 36 GAO-12-294 Export-Import Bank

country. In 1987, Arrangement members agreed to raise the minimum 

concessionality level for tied aid permitted under the Arrangement to 

35 percent.32

• Sector agreements. Sector agreements have been reached for civil 

aircraft, nuclear power plants, renewable energies and water projects, 

and ships. Some of these agreements have different rules for 

minimum interest and premium rates and maximum repayments terms 

than those that apply to standard transactions through the 

Arrangement. The Aircraft Sector Understanding is especially 

significant because it regulates aircraft support terms for ECAs of 

major aircraft-exporting countries, including the United States, Brazil, 

Canada, France, Germany, and the United Kingdom. A large share of 

some countries’ ECA support is in the aircraft sector.

In 1991, a further agreement prohibited tied and partially 

untied aid to richer developing countries, as well as for projects that 

were considered commercially viable.

The Arrangement also has a variety of reporting requirements in 

conjunction with its overall and sector agreements that provide 

transparency about ECA activities to Arrangement members. ECAs must 

report all of their long-term officially supported export credit transactions 

to the OECD as they occur and, twice a year, report the amount of 

outstanding officially supported export credits. Further, separate reporting 

requirements apply with respect to minimum premium rates as well as the 

aircraft sector agreement. OECD officials said they are hoping to 

streamline these reporting requirements and are in the process of 

approving a new data-reporting directive.33

However, certain export credit transactions of member ECAs fall outside 

the Arrangement and its reporting requirements, which lessens the 

transparency of ECA activities. These include “market windows,” or 

support that an ECA provides on market terms. Canada’s ECA currently 

 

32Concessionality refers to the percentage of financing that is a grant or grant equivalent. 

33In the past, the OECD released an annual report containing aggregations of the data 

that ECAs reported on their export credit transactions. However, according to OECD 

officials, the last report issued was for 2005, and in recent years, their data collection 

mechanism has not allowed for sufficiently reliable reporting. The officials said they plan to 

begin releasing these data again in early 2012. They hoped this would coincide with the 

implementation of the new data reporting directive. 
 

Page 37 GAO-12-294 Export-Import Bank

provides this type of support.34 The use of market windows has 

historically been an issue of concern for the United States, because of 

limited transparency and the potential for unfair advantage stemming from 

an ECA’s government connection.35

A second type of transaction outside the scope of the Arrangement is 

non-export credit financing activities, such as untied lending and 

investment finance. A majority of G-7 ECAs offer untied lending, which 

takes the form of loans extended to other countries for strategic reasons.

While these loans are not directly linked to the purchase of exports from 

the lending country, the terms can take whatever form the two countries 

agree upon. For instance, Japan provided an untied loan to a commercial 

bank in Malaysia in order to provide long-term financing to Japanese 

companies located there, as well as local companies within their supply 

chain. Ex-Im officials have expressed concern about the growing use of 

this financing tool because of its potential linkage to exports and 

uncertainty about how its utilization could affect Ex-Im.

Official export credits from emerging economies such as China, India, 

and Brazil have experienced rapid growth. As nonparticipants in the 

OECD Arrangement, these countries can offer terms more favorable than 

terms under the Arrangement.36

 

34Italy’s ECA, SACE, operates a market window for some non-export credit activities. 

SACE officials emphasized that all of its export credit transactions fall under Arrangement 

terms. Germany’s KfW IPEX-Bank, owned by KfW Bankengruppe (KfW), also operates a 

market window. KfW was criticized as having an unfair advantage because it had access 

to cheaper funding for export lending and project finance activities because of its state 

backing. In 2002, as part of a settlement with the European Commission, Germany agreed 

to separate KfW’s commercial business from the rest of its activities, and in 2004, it began 

conducting much of its export credit and project finance activities through KfW IPEX-Bank. 

In 2008, KfW-IPEX-Bank became an independent legal entity. 

More favorable terms to buyers do not 

necessarily constitute subsidies—the terms may be market-based and 

compliant with World Trade Organization requirements—but can be more 

35Although the financing is market-based, the ECAs delivering it have a government 

connection and can enjoy benefits associated with that status, such as tax exemptions. In 

addition, one concern has been that ECAs with market windows might use profits from the 

market transactions to subsidize their transactions under the Arrangement. 

36Arrangement members are permitted, consistent with international obligations and the 

purpose of the Arrangement, to match financial terms and conditions offered by 

nonmembers. 

Export Credits from 

Countries Outside the 

OECD Arrangement Are 

Increasing
 

Page 38 GAO-12-294 Export-Import Bank

generous than those allowed by the Arrangement, according to Ex-Im.

However, since these countries are exempt from the Arrangement’s 

requirement to report each transaction, there is uncertainty regarding the 

terms that they offer.

As total exports from emerging economies have increased, so have their 

officially supported export credits. From 2006 to 2010, total exports from 

China, India, and Brazil increased over 60 percent, while medium- and 

long-term official export credits for China and Brazil are estimated to have 

more than doubled—and for India nearly doubled—during the same time 

period (see fig. 11). China is now estimated to be the largest supplier of 

medium- and long-term export credits.

37

 

37China has two official ECAs—China Ex-Im Bank and Sinosure. China Ex-Im Bank offers 

loans and loan guarantees; it also offers concessional loans that are comparable to what 

the OECD refers to as “official development assistance.” Sinosure is an export credit 

insurer and offers programs covering short-, medium- and long-term export credit 

insurance as well as foreign investment insurance. China Development Bank, a Chinese 

policy bank, does not consider itself to be an official ECA, but has offered export credit 

financing. In some projects it finances, it stipulates that a certain amount of materials and 

equipment have to be sourced from China.

 Ex-Im estimated that China 

offered $45 billion in official medium- and long-term export credits in 

2010, twice as much as Germany, the largest provider among G-7 ECAs.
 

Page 39 GAO-12-294 Export-Import Bank

Figure 11: Estimated Medium- and Long-Term Official Export Credits, 2006-2010

Note: Data represent the medium- and long-term officially supported export credits issued each year 

by country. Ex-Im notes the difficulties in obtaining comparable data from non-OECD ECAs because 

of the lack of information. Ex-Im used a variety of methods to collect and estimate the export credit 

volumes. Ex-Im notes that the figures for China, Brazil, and India likely overstate these countries’ 

activities. 

According to China Ex-Im Bank annual reports, it provided more than $36 

billion in total export credit support in 2010, more than five times the $4 

billion provided in 2000. India’s Ex-Im Bank experienced similar growth, 

increasing its activities from about $500 million in 2000 to $11 billion in 

2010. Over the same time period, U.S. Ex-Im’s financing increased from 

about $13 billion to $24.5 billion. Figure 12 compares the activities and 

relative growth of the Export-Import Banks of China, India, and the United 

States.
 

Page 40 GAO-12-294 Export-Import Bank

Figure 12: Estimated Activity Levels for Export-Import Banks of China, India, and 

the United States, 2000 and 2010

Notes: The loans from China Ex-Im Bank include seller and buyer credits. Seller credit is broadly 

defined as a line of credit and can be extended either in China’s currency, the renminbi, or foreign 

currencies. China Ex-Im Bank provides these credits to Chinese enterprises for financing their 

construction projects implemented in foreign countries, which may support the export of Chinese 

equipment, machinery, building materials, technology, and labor services. According to U.S. Ex-Im, 

the buyer credit offered by China Ex-Im Bank is the most similar to the type of transaction-specific 

long-term support made available by the G-7 ECAs. 

China Ex-Im Bank reports the amount disbursed while U.S. Ex-Im and India Ex-Im report the amount 

committed. 

Dollar amounts shown are in nominal terms. 

SINOSURE, China’s other ECA, also has experienced sharp growth.

SINOSURE stated in its 2010 annual report that it underwrote an 

aggregate amount of $196.4 billion for that year, an increase of 68.5 

percent over 2009. This follows a growth of 85.8 percent from 2008 to 

2009.

Given the increase in China’s officially supported export credits, officials 

from some G-7 countries have expressed interest in additional 
 

Page 41 GAO-12-294 Export-Import Bank

information about the terms and volume of China’s activities, but officials 

reported that obtaining such information is difficult. Some information on 

total volume of export credits is provided through annual reports, but in 

limited detail. As discussed above, China’s position outside the OECD 

Arrangement limits its reporting requirements relative to G-7 ECAs. Thus, 

determining the nature of its activities and the extent to which financing 

terms (in contrast to other factors, such as production cost) are the key 

reason for Chinese companies’ securing deals is difficult. An expert on 

China reported having obtained information on China’s export financing 

activities from recipient countries rather than from China. In addition, 

officials from several G-7 countries told us that they obtain anecdotal 

information on China’s activities from their exporters, who may be facing 

Chinese competition. One OECD official expressed the view that China 

will become more competitive with the G-7 ECAs over the next 10 years 

as the technology differential between Chinese and G-7 exports 

decreases.

According to officials from the OECD and several G-7 ECAs, engagement 

with emerging economies, especially China, on practices related to export 

credit financing is increasingly important and presents challenges for the 

OECD Arrangement and its participants. A senior OECD official stated 

that the rise of this export financing competition threatens the 

Arrangement’s ability to maintain a level playing field among exporting 

nations.

Various ECAs, governments, and the OECD have made efforts to engage 

China on export credit issues, including encouraging participation in 

various forums, but have generally reported limited success. For 

example, Canadian officials reported encouraging their Chinese 

counterparts to join multilateral forums. Japanese officials said they reach 

out to Chinese officials on a regular basis, including at meetings among 

Asian ECAs. U.S. Treasury officials noted that export credits were 

mentioned at the U.S.-China Strategic and Economic Dialogue, a highlevel forum between U.S. and Chinese government officials. They also 

reported that OECD and country officials have made attempts to invite 

China to export credit-related meetings. However, several ECA, 

government and OECD officials reported that China is often unwilling to 

attend or sends lower-level representatives to these meetings, such as a 

recent G-20 meeting in Paris.

In some cases, an ECA in an emerging economy will see an incentive to 

joining international agreements or institutions. In 2004, Brazil 

Engagement with China 

and Other Emerging 

Economies Presents 

Challenges for the OECD 

Arrangement
 

Page 42 GAO-12-294 Export-Import Bank

participated in the negotiations on the Aircraft Sector Understanding and 

in 2007 joined the actual agreement. One U.S. official points to Brazil’s 

interest in obtaining information on Canada, its primary competitor, and a 

desire to help shape the rules, as strong incentives that brought it to the 

negotiating table. Another institution, the Berne Union, which is an 

association of export credit and investment insurance providers, has a 

broad base of membership, including some of the ECAs from China, 

India, and Brazil. Through membership, they have agreed to follow 

certain principles, including a pledge not to subsidize exports. This 

institution may provide an additional venue by which these emerging 

economies can be engaged in discussions concerning export support and 

related issues. However, some ECA and other officials point to China’s 

current lack of incentive to engage. OECD and other officials have 

stressed to China one benefit of joining the Arrangement now: the 

opportunity to shape the rules by which their competitors must abide.

Established with a mission to support U.S. jobs and an explicit charge to 

provide export financing competitive with that of other governments, ExIm is expected to play a key role in increasing U.S. exports, be selfsustaining in terms of its budget, and fulfill a number of policy directives 

beyond those of other G-7 ECAs. In terms of its volume of export credit 

support, Ex-Im’s performance in recent years has been quite strong; the 

bank’s total authorizations have increased steadily as demand for its 

services has been high during a period of global financial turmoil. 

Whether Ex-Im will see an increasing tension across its mission and 

requirements remains to be seen, but there is some evidence of that now, 

as the bank’s small business financing share for fiscal year 2011 was 

below its 20 percent target for the first time in 5 years. Although small 

business financing grew in 2011, it grew less than Ex-Im’s overall 

financing.

Ex-Im’s domestic content requirement for receiving full medium- and longterm financing, which Ex-Im determines, is generally higher than that of 

other ECAs and less flexible. While other ECAs have loosened their 

domestic content policies in recent years, key elements of Ex-Im’s policy 

remain relatively unchanged. Ex-Im officials state that Ex-Im’s policy 

reflects its attempt to balance the interests of multiple stakeholders and 

its mission to support U.S. jobs. However, to what extent Ex-Im’s current 

policy affects its support of U.S. jobs is not clear-cut. It may provide an 

incentive for certain exporters to buy from U.S. suppliers. On the other 

hand, to the degree that the requirement limits the ability of a larger 

number of exporters to obtain full Ex-Im financing, it may deter foreign 

Conclusions
 

Page 43 GAO-12-294 Export-Import Bank

buyers from sourcing from U.S. firms. Given these factors, and trends 

toward increasing global economic production, a better understanding of 

how Ex-Im’s policy may affect U.S. exporters and jobs is needed.

Strong increases in export financing by several emerging countries 

present competitive challenges that Ex-Im alone cannot readily address.

The OECD Arrangement has made important strides toward decreasing 

subsidies in export credits and leveling the playing field for exporters.

However, emerging economies with rapidly growing export credit support 

levels that are outside the Arrangement are exempt from its reporting 

requirements and rules and can offer terms that are more generous than 

parties to the Arrangement can. Member countries have taken some 

steps within the OECD and beyond it to engage countries including Brazil, 

China, and India on export credit issues. However, some acknowledge 

that China is not currently motivated to join any type of agreement. There 

is concern that, in particular, the rise of China’s export financing threatens 

the Arrangement’s ability to support a level playing field among exporting 

nations.

To maintain Ex-Im’s competitiveness and enhance its ability to support 

U.S. exports, we recommend that the Ex-Im Bank conduct a systematic 

review of its domestic content policy in the context of changing production 

patterns to ensure this policy effectively serves the objective of creating 

U.S. jobs while also providing financing that is competitive with that of 

other ECAs.

To preserve and enhance the competitiveness of U.S. exports and to 

promote transparency, we recommend that the Secretary of the Treasury, 

in conjunction with Ex-Im and working with international counterparts, 

develop strategies to further encourage and increase engagement of 

emerging economy countries in discussions and agreements on export 

credit support.

Ex-Im and Treasury provided comments on a draft of this report. In its 

written comments, which are reproduced in appendix II, Ex-Im stated that 

GAO’s findings are generally consistent with Ex-Im’s findings in its 2010 

Competitiveness Report and that the lack of transparency from nonOECD ECAs is the major challenge to a level playing field globally. Ex-Im 

did not directly address GAO’s recommendation that it conduct a 

systematic review of its domestic content policy and its impacts but stated 

that it disagreed with GAO’s characterization of how Ex-Im has addressed 

Recommendations for 

Executive Action

Agency Comments 

and Our Evaluation
 

Page 44 GAO-12-294 Export-Import Bank

the issue of domestic content. Treasury provided a statement concerning 

its full support of engaging market economy countries on export credit 

issues, but did not state whether it agreed or disagreed with our 

recommendation.

With respect to its domestic content policy, Ex-Im stated that the policy 

should be considered in light of Ex-Im’s specific mandate to focus on 

jobs. Our report emphasizes that Ex-Im’s explicit mandate to support U.S. 

jobs is unique among G-7 ECAs. In addition, the report states that ExIm’s policy is the result of an attempt to balance the interests of multiple 

stakeholders with its mission to support U.S. jobs through export 

financing.

Ex-Im also stated that its co-financing and local cost policies are 

important in evaluating the competitiveness of its domestic content 

policies. In discussing foreign content policy, our report acknowledges the 

role of co-financing as a tool for some exporters, and explicitly notes that 

Ex-Im provided more than $6.5 billion for co-financing in 2010. With 

respect to local cost, we agree that the treatment of local cost financing is 

relevant to the discussion of foreign content, and we have added related 

information to the report.

Ex-Im stated it disagrees with the report’s characterization of how Ex-Im 

has addressed the issue of content, stating that it has regularly reviewed 

the policy as part of its annual competitiveness report, and has made 

changes. We do not believe that Ex-Im’s competitiveness reports 

constitute the systematic review of the content policy recommended in 

our report, and we maintain that a more comprehensive review, including 

its impact on U.S. jobs, is needed. Ex-Im’s competitiveness reports have 

consistently identified its content policy as a major competitive barrier, 

with Ex-Im stating in its latest report, published in June 2011, that “Ex-Im 

Bank’s content requirements and implementation of those requirements 

are significantly more restrictive than those of its G-7 counterparts” and 

that “in cases where foreign content exceeds 15 percent Ex-Im Bank’s 

policy and practice can have a negative impact on U.S. competitiveness 

because it may deter exporters from using Ex-Im’s products.” Ex-Im 

reported that its exporters and lenders identified foreign content as their 

“most significant impediment to competitiveness.” In terms of changes 

made to Ex-Im’s policy over time, our report states that Ex-Im last 

changed its level of minimum domestic content required for receiving full 

financing for medium- and long-term transactions (85 percent) in 1987 

and in 2001 changed its method for calculating the percentage of 

domestic content in a transaction. The report also clearly lays out Ex-Im’s 
 

Page 45 GAO-12-294 Export-Import Bank

content policy for short-term financing, including specific provisions for 

small businesses. We have clarified summary language regarding what 

aspects of the policy have not changed since 1987. Ex-Im also provided 

technical comments, which we incorporated as appropriate.

Treasury provided the following response: “Treasury fully supports and 

encourages emerging market economy countries with major 

medium/long-term export credit programs to join in discussions and 

agreements on export credit support, and is actively engaged in that 

endeavor.” We describe in the report that member countries, including the 

United States, have taken some steps within the OECD and beyond it to 

engage emerging market economy countries on export credit issues, and 

that the issue of export credits was raised at the U.S.-China Strategic and 

Economic Dialogue, a high-level forum between U.S. and Chinese 

government officials, including the Treasury Secretary. However, we 

believe it is important that Treasury take further steps to encourage and 

increase engagement of these countries on export credit issues. We 

slightly modified the wording of the recommendation to reflect this.

We will send copies of this report to the appropriate congressional 

committees as well as the Chairman of the Export-Import Bank and the 

Secretaries of State and Treasury. If you or your staff have any questions 

about this report or need additional information, please contact me at 

(202) 512-4347 or yagerl@gao.gov. Contact points for our Offices of 

Congressional Relations and Public Affairs may be found on the last page 

of this report. GAO staff who made major contributions to this report are 

listed in appendix III.

Loren Yager

Managing Director, International Affairs and Trade
Appendix I: Objectives, Scope, and 

Methodology

Page 46 GAO-12-294 Export-Import Bank

The objectives of this report were to examine (1) Ex-Im’s mission, 

organization, market orientation, and product offerings compared with 

those of other Group of Seven (G-7) export credit agencies (ECAs), (2) 

Ex-Im’s policy requirements compared with those of other G-7 ECAs, (3) 

Ex-Im’s domestic content policy compared with those of the other G-7 

ECAs, and (4) the role of the Organisation for Economic Cooperation and 

Development (OECD) Arrangement in governing ECA activities.

To assess how Ex-Im’s mission, organization, market orientation, and 

product offerings compared with those of other G-7 ECAs, we reviewed 

relevant documents, including ECA annual reports and other publications, 

such as Ex-Im’s annual Competitiveness Reports, OECD reports, and 

legislation authorizing various ECAs. We also reviewed ECAs’ websites 

for additional information regarding product offerings. We interviewed 

officials from each of the G-7 ECAs and government organizations that 

have oversight over the ECAs. These organizations included Ex-Im in the 

United States; Export Development Canada (EDC), Department of 

Foreign Affairs and International Trade and Department of Finance in 

Canada; Coface and the Ministry of Economy, Finance and Industry in 

France; Euler Hermes, PricewaterhouseCoopers and the Interministerial 

Council, represented by the Federal Ministry of Economics and 

Technology, in Germany; Servizi Assicurativi del Commercio Estero 

(SACE) and the Ministry of Economic Development in Italy; Japan Bank 

for International Cooperation (JBIC) and Nippon Export and Investment 

Insurance (NEXI) (via telephone) in Japan; and the Export Credits 

Guarantee Department (ECGD) in the United Kingdom. We also 

interviewed officials from the U.S. Departments of Treasury and State, as 

well as the OECD and the Berne Union. In addition, we spoke with 

several institutions that work in conjunction with official ECAs: Societa 

Italiana per le Imprese all’Estero (SIMEST) in Italy and KfW IPEX-Bank in 

Germany.

To assess how Ex-Im’s policy requirements compared with those of the 

other G-7 ECAs, we first examined Ex-Im’s policy requirements by 

reviewing Ex-Im annual reports; Ex-Im Competitiveness Reports; Ex-Im’ 

2010-2015 Strategic Plan; GAO reports on Ex-Im’s small business 

mandate, environmentally beneficial mandate, and economic impact 

Appendix I: Objectives, Scope, and 

Methodology 
Appendix I: Objectives, Scope, and 

Methodology

Page 47 GAO-12-294 Export-Import Bank

analysis requirement;

1

To examine how Ex-Im’s domestic content policy compares with those of 

other G-7 ECAs, we first collected information on Ex-Im’s policy from its 

competitiveness reports and website. We reviewed testimony transcripts 

from congressional hearings and literature on domestic content of exports 

and global manufacturing production patterns. We also interviewed Ex-Im 

officials responsible for administering the policy, as well as officials at the 

Treasury Department and the Coalition for Employment through Exports, 

an advocacy organization on matters affecting U.S. government export 

finance. To obtain information on other G-7 ECAs’ domestic content 

policies, we reviewed their annual reports. We interviewed G-7 ECA 

Congressional Research Service (CRS) reports; 

testimony from congressional hearings; and academic articles. We also 

interviewed Ex-Im officials to talk about the various policy requirements, 

and we interviewed officials from the Small Business Administration 

(SBA) to discuss Ex-Im’s small business mandate. To examine the other 

G-7 ECAs’ policy requirements and how they compared with those of ExIm, we interviewed officials from the G-7 ECAs, as well as any 

government organizations that play an oversight role for these ECAs. We 

asked them directly whether they shared any of Ex-Im’s policy 

requirements, and more generally, whether they had other policy 

requirements, such as requirements to focus on promoting certain types 

of exports, export destinations, or exporters, and whether this resulted 

from external directives or internal decisions. We also asked about the 

nature of their relationships with oversight organizations and the extent to 

which they received external policy guidance from these organizations or 

their legislatures. In cases where ECA officials told us that there was 

legislation that authorized or otherwise governed their activities, and there 

were English versions available, we reviewed this legislation. We also 

reviewed ECA annual reports. We sent follow-up questions to all of the 

ECAs to confirm the information they had given us during interviews 

regarding their policy requirements. We also provided ECAs the 

opportunity to provide technical comments on portions of the report that 

contain information pertaining to the ECA.

 

1

See GAO, Export-Import Bank: Performance Standards for Small Business Assistance 

Are in Place but Ex-Im Is in the Early Stages of Measuring Their Effectiveness, 

GAO-08-915 (Washington, D.C.: July 2008); Export-Import Bank: Reaching New Targets 

for Environmentally Beneficial Exports Presents Major Challenges for Bank, GAO-10-682

(Washington, D.C.: July 2010); and Export-Import Bank: Improvements Needed in 

Assessment of Economic Impact, GAO-07-1071 (Washington, D.C.: September 2007).
Appendix I: Objectives, Scope, and 

Methodology

Page 48 GAO-12-294 Export-Import Bank

officials, who explained their policies and provided additional 

documentation. We analyzed global manufacturing production trends 

using OECD data on the foreign content of the United States’ and other 

countries’ exports by sector, from the mid-1990s to the mid-2000s. To 

assess the reliability of the OECD data, we reviewed the data 

documentation, tested for internal consistency of the data, and compared 

the trends with other sources. We found that the data were sufficiently 

reliable for the purposes of presenting global manufacturing trends, 

demonstrating country and sector variances. We collected data from ExIm on the percentage of foreign content in the exports it finances. Ex-Im 

reports this data annually in its Competitiveness Report. We found that 

the data were sufficiently reliable for the purposes of presenting the 

amount of foreign versus domestic content in exports it finances.

To analyze the role of the OECD Arrangement in governing ECA 

activities, we reviewed the text of the OECD Arrangement as well as a 

variety of OECD and other reports on the Arrangement, Export Credit 

Group, and export credit activities. We interviewed OECD officials, as well 

as G-7 ECA officials, to discuss the history and evolving role of the 

Arrangement as well as current challenges. We conducted a literature 

search and reviewed academic literature on the Arrangement and ECAs.

To obtain information on China’s export credit activities, we met with U.S. 

Treasury and State Department officials in Washington and Beijing and 

interviewed experts, including academic experts at American University 

and the Brookings Institution. We also discussed China’s activities with G7 ECA and other officials. To obtain data on China’s, India’s, and Brazil’s 

ECA activities, we reviewed information from the International Monetary 

Fund, ECA annual reports, and Ex-Im’s 2010 Competitiveness Report.

We also used data published in the annual reports from China’s and 

India’s Ex-Im Banks to compare the growth of export financing from China 

and India to that of the U.S. Ex-Im Bank. We found the data were 

sufficiently reliable for the purpose of comparing levels of growth.

We conducted this performance audit from February 2011 to February 

2012 in accordance with generally accepted government auditing 

standards. Those standards require that we plan and perform the audit to 

obtain sufficient, appropriate evidence to provide a reasonable basis for 

our findings and conclusions based on our audit objectives. We believe 

that the evidence obtained provides a reasonable basis for our findings 

and conclusions based on our audit objectives.
Appendix II: Comments from the U.S. ExportImport Bank

Page 49 GAO-12-294 Export-Import Bank

Appendix II: Comments from the U.S. ExportImport Bank
Appendix II: Comments from the U.S. ExportImport Bank

Page 50 GAO-12-294 Export-Import Bank
Appendix III: GAO Contact and Staff 

Acknowledgments

Page 51 GAO-12-294 Export-Import Bank

Loren Yager, (202) 512-4347 or YagerL@gao.gov

In addition to the person named above, José Alfredo Gómez (Acting 

Director), Celia Thomas (Assistant Director), Jennifer Young, Vaughn 

Baltzly, Ming Chen, Laura Erion, and Arthur Lord made key contributions 

to this report. Also contributing to this report were Lynn Cothern, David 

Dornisch, and Ernie Jackson. 

Appendix III: GAO Contact and Staff 

Acknowledgments 

Contact

Staff 

Acknowledgments

(320833)
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