This section of the FEDERAL REGISTER

contains regulatory documents having general

applicability and legal effect, most of which

are keyed to and codified in the Code of

Federal Regulations, which is published under

50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by

the Superintendent of Documents. Prices of

new books are listed in the first FEDERAL

REGISTER issue of each week.

Rules and Regulations Federal Register

33825

Vol. 61, No. 127

Monday, July 1, 1996

DEPARTMENT OF AGRICULTURE

Commodity Credit Corporation

7 CFR Part 1493

RIN 0551–AA30

Commodity Credit Corporation

Supplier Credit Guarantee Program

AGENCY: Commodity Credit Corporation,

USDA.

ACTION: Interim final rule with request

for comments.

SUMMARY: The Commodity Credit

Corporation (CCC) is issuing this

interim rule which amends the

regulations for the Commodity Credit

Corporation’s (CCC) Export Credit

Guarantee Program (GSM–102) and the

Intermediate Export Credit Guarantee

Program (GSM–103) by adding a new

subpart D, Supplier Credit Guarantee

Program (SCGP). The SCGP is designed

to assist exporters of U.S. agricultural

commodities who wish to provide

relatively short term (up to 180 days)

credits to their foreign buyers. Under

SCGP, CCC will guarantee payment of

such credits by the foreign buyer, and

the exporter may assign such guarantees

to an eligible U.S. financial institution.

This program will be administered by

the Office of the General Sales Manager

(GSM), U.S. Department of Agriculture,

on behalf of CCC.

DATES: The provisions of this interim

rule are effective August 30, 1996;

comments must be submitted on or

before December 30, 1996.

FOR FURTHER INFORMATION CONTACT: L.T.

McElvain, Director, CCC Operations

Division, Foreign Agricultural Service,

U.S. Department of Agriculture (USDA),

Ag. Box 1035, Washington, DC 20250–

1035; telephone (202) 720–6211; FAX

(202) 720–2949. The USDA prohibits

discrimination in its programs on the

basis of race, color, national origin, sex,

religion, age, disability, political beliefs

and marital or familial status. Persons

with disabilities who require alternative

means for communication of program

information (braille, large print,

audiotape, etc.) should contact the

USDA Office of Communications at

(202) 820–5881 (voice) or (202) 720–

7808 (TDD).

SUPPLEMENTARY INFORMATION:

Executive Order 12866

This rule has been determined to be

economically significant and was

reviewed by the Office of Management

and Budget (OMB) under Executive

Order 12866.

Regulatory Flexibility Act

It has been determined that the

Regulatory Flexibility Act is not

applicable to this interim rule because

CCC is not required by 5 U.S.C. 553 or

any other provision of law to publish a

notice of rulemaking with respect to the

subject matter of this rule.

Executive Order 12372

This program is not subject to the

provisions of Executive Order 12372,

which requires intergovernmental

consultation with state and local

officials. See the notice related to 7 CFR

part 3015, subpart V, published at 48 FR

29115 (June 24, 1983).

Paperwork Reduction Act

The paperwork requirements that

would be imposed by this interim rule

were described in the proposed rule and

approved by the Office of Management

and Budget (OMB) under the Paperwork

Reduction Act of 1980. The OMBassigned number for those requirements

is OMB No. 0551–0037. The public

reporting burden for these collections is

estimated to average 0.18 hours per

response, including time for reviewing

instructions, searching existing sources,

gathering and maintaining the data

needed, and completing and reviewing

the collection of information. Send

comments regarding this burden

estimate or any other aspects of this

collection, including suggestions for

reducing this burden, to Department of

Agriculture, Clearance Officer, OIRA,

Room 404–W, Washington DC 20250;

and to the OMB, Paperwork Reduction

Project # 0551–0037, Washington, DC

20503.

Executive Order 12778

This interim rule has been reviewed

under the Executive Order 12778, Civil

Justice Reform. The interim rule would

have preemptive effect with respect to

any state or local laws, regulations, or

policies which conflict with such

provisions or which otherwise impede

their full implementation. The rule

would not have retroactive effect. The

interim rule requires that certain

administrative remedies be exhausted

before suit may be filed.

The USDA is committed to carrying

out its statutory and regulatory

mandates in a manner that best serves

the public interest. Therefore, where

legal discretion permits, the Department

actively seeks to promulgate regulations

that promote economic growth, create

jobs, are minimally burdensome and are

easy for the public to understand, use or

comply with. In short, the Department

is committed to issuing regulations that

maximize net benefits to society and

minimize costs imposed by those

regulations.

Background

In the Federal Register of July 19,

1995 (60 FR 37025), CCC issued a

proposed rule to amend the regulations

for the CCC Export Credit Guarantee

Programs (GSM–102/103), codified at 7

CFR part 1493, by adding a new subpart

D. Subpart D establishes the terms and

conditions for the Supplier Credit

Guarantee Program (SCGP). The

deadline for comments on the proposed

rule was September 18, 1995. Comments

were received from six U.S. exporters,

one importer, three producer

associations, seven agribusiness

associations, one U.S. financial

institution, and one U.S. Government

agency (USDA Office of Inspector

General). These nineteen parties made

approximately 88 separate and

significant comments regarding either

the proposed rule, the Preliminary

Economic Impact Analysis, or the policy

issues involved in administering the

SCGP.

Reason for Issuing an Interim Rather

Than Final Rule

CCC is issuing this rule on an interim

rather than a final basis because, based

on comments received on the proposed

rule, it has made several significant

changes and is providing the public

with an additional opportunity for
33826 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

comment. Specifically, CCC is

establishing a condition on its payment

of a claim that results from a default

under a guaranteed promissory note.

CCC will pay claims unless it

determines that the guaranteed portion

of port value exceeds the prevailing U.S.

market value of the agricultural

commodity or product exported. The

reasons for this change are discussed

below under the General Comments

section, Other general comments, and

under the Section-by-Section Analysis

of Subpart D, § 1493.450, Payment

guarantee. Also, CCC has modified

§ 1493.510, Payment for loss, to remove

the immunity of assignees from the

effects of determinations by CCC not to

pay claims based on the new exception.

CCC is publishing this interim rule, but

will establish a comment period of 120

days from the rule’s effective date to

permit program participants an

opportunity to provide views based, if

possible, on actual program experience.

Interim Economic Impact Analysis

Two of the commenters addressed, in

part, the Preliminary Economic Impact

Analysis (PEIA). One commenter felt

that each program option, considered by

CCC and briefly discussed in the PEIA,

‘‘should be implemented as each

addresses a different need.’’ The same

commenter also questioned why the

SCGP was selected as the preferred

option, in that the PEIA did not discuss

why the other options were ruled out.

CCC concurs that the other program

options considered have merit, although

the reasons for selecting the SCGP

option were given. CCC may, in the

future, incorporate features of the other

options into, the SCGP (subpart D), the

GSM–102/103 programs (subpart B), or

additional programs that could be

developed.

Another commenter stated that CCC

may want to ‘‘reassess the estimated

$3.1 million subsidy level’’ determined

for the SCGP. The commenter felt that

this estimate may be too low and

enclosed a news article discussing

difficulties by some U.S. exporters in

collecting payments from importers.

CCC by itself does not determine the

methodology used in estimating the

subsidy level for its export credit

guarantee programs. The model for

estimating the subsidy amount was

developed by the Office of Management

and Budget (OMB). Country risk ratings

which are an important component in

determining the subsidy estimate are

developed by a U. S. Government

interagency group which is chaired by

OMB. After assessing the results of the

initial phase of operating the SCGP, CCC

may propose changes in the subsidy

model, or in the model inputs, to more

accurately determine appropriate

subsidy levels for the program.

The interim Economic Impact

Analysis of the SCGP is available upon

request from Mary T. Chambliss, Deputy

Administrator, Export Credits, FAS/

USDA, Ag. Box 1030, Washington DC

20250–1030; telephone (202) 720–6301;

FAX (202) 690–0727.

General Comments

Eighteen commenters commended

CCC on its efforts to design a new

program to promote the sale of U.S.

agricultural products. They generally

agreed that the program had potential

for reducing export financing costs,

allowing importers to enjoy the benefits

of CCC credit guarantees more directly

than is possible under the GSM–102/

103 programs, and increasing the

competitiveness of U.S. agricultural

products overseas. One commenter

neither supported nor opposed the

program.

Guarantee Coverage

Eighteen respondents commented on

CCC’s proposal to inaugurate the

program with maximum coverage of 50

percent of principal (defined as port

value), with no coverage of interest. One

commenter agreed that the structure of

the SCGP entails certain financial risks

for CCC that justify lower levels of

coverage. Another commenter thought

the proposed coverage may be a starting

point, but adjustments would have to be

made if the program is to gain wide

acceptance, particularly from the

banking sector. Sixteen of the

commenters contended that the

proposed coverage was too low to

provide an incentive to exporters to use

the program. One commenter asserted

that the proposed coverage would be

unattractive to exporters and the

assignee bank, and that the added risk

would increase the cost of the

transaction to the importer. Two

commenters suggested that CCC vary its

level of coverage based on the past

performance of the importer. They also

suggested that the exporter be required

to furnish information on the importer

which, under criteria to be established,

could permit a higher level of coverage.

Suggestions for the level of coverage of

principal ranged from 70 percent to 98

percent, depending on whether or not

interest and/or freight would be

included in the coverage.

After considering these comments,

CCC has determined that during the

initial phase of the program, CCC’s

coverage will normally be limited to 50

percent of principal. This level of

coverage will provide an incentive to

U.S. exporters and their assignees to

evaluate carefully the credit risks posed

by importers while still permitting an

expansion of export sales of targeted

commodities and products. The

suggestion that CCC vary its level of

coverage based on the past performance

of the importer or other information

furnished by the exporter on the

importer may have merit. However, CCC

will be in a better position to assess this

approach after gaining experience

operating the program. The amount of

guaranteed coverage is not specified in

the regulation because CCC wishes to

retain the ability to adjust coverage, as

necessary, to make the program

workable, efficient, and responsive to

market conditions.

Freight Coverage

Six comments were received

regarding the inclusion of freight costs

in the value on which guarantee

coverage is based. Five commenters

argued that, with freight excluded,

coverage would be too low. Two

commenters felt that, with freight

coverage, exporters would be more

likely to use the SCGP. One commenter

suggested that when freight costs are

more than 20 percent of export value,

the level of coverage should be

increased.

CCC recognizes the validity of the

concerns expressed. In cost and freight

(CFR) and cost, insurance and freight

(CIF) transactions where freight costs

are a high percentage of total export

value, CCC coverage of 50% of

commodity value would result in

overall coverage of substantially less

than 50 percent of transaction value.

CCC therefore will retain the flexibility

through Program Announcements to

determine whether, and to what extent,

to provide coverage on a free on board

(FOB), free alongside ship (FAS), CFR,

or CIF basis.

Guarantee Fees

Thirteen respondents commented on

CCC’s intention to set the guarantee fee

‘‘in the midpoint of the range of

insurance premiums for good risk

countries charged by Eximbank’’

(recently about 95 cents per $100.00 of

guaranteed coverage). One commenter

agreed that the benefits offered by the

SCGP entail corresponding financial

risks for CCC and, therefore, justify

higher fees. Another thought that the

proposed fee may be a starting point,

but that adjustments would have to be

made if the program is to gain wide

acceptance. Ten commenters felt the

proposed fee was too high given the

proposed level of guaranteed coverage.

In general, their additional comments
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 33827

can be summarized as follows: (1) Fees

should be at or close to the GSM–102

(subpart B) fee levels; (2) fees should be

reasonable because fees add to the

overall financial exposure of the

exporter; and (3) high fees could be a

disincentive for program participation.

Two commenters suggested that CCC

vary its fees based on the past

performance record of the importer.

They also suggested that the exporter be

required to furnish information on the

importer which, under criteria to be

established, could permit lower fees.

One commenter stated that the

Foreign Credit Insurance Association

varies its fees according to where

exports are shipped, how shipments

occur, the payment history of customer,

and the payment collection history

experienced by the exporter with the

importer.

CCC appreciates these comments. To

avoid a possible misconception

concerning the proposed fee structure

for the SCGP, CCC provides the

following clarification: the fee would be

assessed only on the value of actual CCC

coverage, (e.g., 50 percent of the port

value), not on the total port value

registered. CCC recognizes that the 95

cents per $100.00 fee on covered value

is high in comparison to the fees

charged for credits of up to 180 days

duration under the GSM–102 (subpart

B) program. However, under subpart B,

CCC is insuring risks of eligible foreign

banks; under SCGP (subpart D), foreign

buyer risk is likely to be higher.

Exporters will have a greater incentive

to investigate the creditworthiness of an

importer if they have a larger degree of

financial risk in the export sales

transaction. Also, a higher fee may

dissuade exporters from entering into

speculative transactions because the fee

will not normally be refundable if the

transaction is not completed. Thus, CCC

intends to initiate the SCGP with the fee

policy it described in the proposed rule.

Adjustments in fee schedules can be

made in light of experience in operating

the program.

Regarding the comment that CCC

reduce its fee on transactions with

importers who have a proven

performance record, CCC has

determined initially to have a single fee

for all countries and commodities.

However, a sliding fee scale based on

the importer’s past performance and

other factors may have merit and

remains an option as CCC gains

experience operating the program. The

level of the registration fee is not

specified in the regulation, giving CCC

flexibility in this matter.

Clarification

One respondent questioned what CCC

meant by the statement in the

background of the proposed rule that

CCC does not intend to routinely

conduct independent evaluations of the

creditworthiness of individual

importers.

Although CCC does not at this time

intend to make such evaluations

routinely, the proposed rule provides

that CCC may request that the exporter

submit information/documentation on

the importer as a condition to CCC’s

approval of the exporter’s application of

a payment guarantee. Such instances

will, at the outset, be determined on a

case-by-case basis and will be related to

the degree of experience CCC has with

the parties to the transaction, or to other

pertinent credit risk-related factors.

Country and Commodity Selection

Four respondents commented on the

selection of countries and commodities

under the SCGP. One commenter felt

that it would be a mistake to direct

SCGP primarily towards high value

products and that the program should

be available for all U.S. agricultural

commodities. One commenter felt that

the best way to determine where, and

for what commodities, the program

should be used would be to begin

operation of the SCGP. The response of

the financial and commodity markets

would act as the ‘‘best barometer’’ for

the size and scope of the program.

Another respondent, an importer, urged

CCC to include poultry to the

Commonwealth of Independent States

under the SCGP. The importer stated

that the cost of obtaining a letter of

credit in Russia was high and further

required payment in full to the bank in

30 days. By using SCGP, the importer

could have the certainty of financing

and could proceed with plans for

building a facility in Russia to process

U.S. poultry. One commenter urged that

country allocations for GSM–102/103

(subpart B) and the SCGP be made

separately.

CCC has given careful consideration

to the issues of programming countries

and commodities under the SCGP. CCC

intends initially to program countries

and commodities and/or products

which it considers may benefit from the

SCGP and may not have benefitted from

GSM–102. Commodity and country

selections will be made separately from

the GSM–102/103 (subpart B) program,

but will follow the same criteria

specified in 7 CFR 1493.5. CCC will

retain the flexibility, through Program

Announcements, to revise the SCGP

country and commodity allocations, as

necessary, to ensure the most effective

use of the program.

Other General Comments

One commenter, a government

agency, recommended that the

provisions of the Office of Management

and Budget (OMB) Circular A–129,

‘‘Policies for Federal Credit Programs

and Non-Tax Receivables,’’ be applied

to the SCGP. The commenter

recommended that: (1) Fees should be

high enough to cover the cost of making

the loan guarantee, including

administrative costs, default and other

subsidy costs; (2) in view of budget

constraints, the maximum fee permitted

by law (7 U.S.C. 5641(b)(1)(B)), $1.00

per $100, should be charged; (3) lower

fees may be justified in instances where

borrowers (importers) prepay part of the

shipment because the risk of default

would be reduced; (4) riskier buyers

should be charged more in fees than

those who pose less risk; and (5) fees

should be set on a sliding scale

reflecting country and commercial risk

factors. According to this commenter,

such factors should include the strength

of the country’s central bank and

whether or not the country subscribes to

uniform commercial code agreements

that govern international commerce.

The commenter further suggested that

CCC require exporters to certify and

document that they cannot obtain credit

from private sources, and that CCC

determine whether the applicant is

delinquent on any Federal debt,

including tax debt, before approving the

guarantee. This commenter also

suggested that CCC should require

exporters to follow due diligence in

collecting past due accounts and in

using litigation to enforce payment on

guaranteed credits. The commenter

recommended that CCC require that the

export sales contract state that CCC will,

in the event of nonpayment, assess

interest, penalties, and administrative

charges against the importer. The

commenter further recommended that

all accounts due CCC that are six

months or more past due be turned over

to a collection contractor unless CCC is

involved in litigation.

Although applicable statutes do not

require the CCC to apply the provisions

of OMB Circular No. A–12, CCC agrees

that program rules should operate not

only to lower CCC’s risk, but also to

assure that CCC and exporters are

sharing the risk of loan defaults. The

proposed rule includes certain

provisions, i.e. lower level of coverage

and higher fees, that are intended to

encourage exporters to evaluate

carefully importer creditworthiness.

However, the provisions of the proposed
33828 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

rule may not adequately ensure that (1)

the risk sharing objectives outlined in

the Background section of the proposed

rule (part C, How certain SCGP

provision differ from GSM–102) will be

achieved, or (2) CCC would be protected

from paying excessive claims stemming

from export transactions with prices

inflated far above prevailing market

levels. Therefore, CCC is establishing a

condition on its payment of a claim to

address these two concerns. This new

provision and required related

modifications are discussed below

under Section-by-Section Analysis of

Subpart D, Section 1493.450, Payment

guarantee.

The other suggestions of the

commenter have also been considered

carefully and evaluated in terms of costeffectiveness and relevance to protecting

the financial interests of CCC. Many of

the suggestions of the commenter could

be implemented as a matter of policy

under the rule as proposed. CCC has

therefore determined not to incorporate

the suggestions into this interim rule,

but will continue to review them in

light of experience gained in operating

the SCGP.

Other commenters addressed issues

other than the proposed regulations.

CCC has determined not to discuss these

unrelated comments. CCC will,

however, take these additional views

into consideration as they relate to

CCC’s other commercial export

programs.

Section-by-Section Analysis of Subpart

D

The numbering system of the interim

rule differs somewhat from that of the

proposed rule. One section was deleted.

For the purposes of this discussion, the

numbering system of the interim rule

will be used, except where otherwise

indicated.

Section 1493.400 General Statement

Two respondents commented on

§ 1493.400(a), Overview. One

commenter felt that the proposed 180

day maximum terms are adequate for

single transactions. However, this

commenter suggested that to better

coincide with existing trade practices,

CCC should guarantee lines of credit,

rather than single transactions. This

commenter also thought that annual (or

shorter) revolving credit guarantees

would reduce administrative costs for

the exporter, importer, and CCC without

reducing the ability of CCC to manage

its risk. The commenter stated that

established buyers would have better

procurement planning and control

under a line of credit. The second

commenter felt that because of small

profit margins on cotton, exporters

would not find open accounts for up to

180 days a viable business practice. The

commenter added that some countries

under GSM–102/103 operate with strict

central bank guidelines regarding

foreign exchange that require letters of

credit to make the import purchases.

The commenter wondered how the

SCGP could be successful in such

countries.

CCC recognizes that the SCGP may

not work effectively for all commodities

in all countries. Exporters who have

successfully used the GSM–102 program

may continue to rely on that program.

Regarding revolving lines of credit,

CCC finds this an interesting concept

and will continue to assess its merits.

However, at this time the budget

allocation and subsidy funding for

SCGP are not based on revolving lines

of credit. A revolving line of credit

would require fundamental changes in

CCC accounting and computer database

systems. CCC will not be in a position

to consider implementing revolving

lines of credit guarantees until these and

other issues are resolved.

Section 1493.410 Definition of Terms

Although no public comment was

received specifically regarding the

definition of Importer obligation, found

at § 1493.410(n), comments were

received on § 1493.470, Importer

obligation of the proposed rule (see

Section-by-Section Analysis of Subpart

D, § 1493.470 Importer Obligation).

Based on those comments, CCC revised

the definition to read: ‘‘A promissory

note or notes that conform(s) with the

requirements for such note(s) specified

in the applicable country or regional

Program Announcement(s).’’ By

specifying the provisions of the

promissory note(s) in the Program

Announcement, CCC will retain

flexibility to specify provisions for a

particular country or region and, if

necessary, to make changes in such

provisions in light of changing

circumstances. In addition to specifying

the form of the promissory note in

Program Announcement, CCC will refer

to the particular form of promissory

note in the special terms and conditions

described on the face of the guarantee

and attach the required form of the

promissory note to the guarantee. This

change requires deletion of § 1493.470

Importer Obligation, from the interim

rule.

Three respondents made comments

regarding § 1493.410(x), the definition

of a U.S. agricultural commodity. Two

commenters stated that for the SCGP to

be effective and increase sales of high

value or value added products, changes

would be needed regarding permissible

levels of foreign-origin agricultural

components in such products. One

commenter stated that Congress should

better define the term ‘‘U.S. origin’’ or

provide a tolerance for foreign

components.

The Department of Agriculture agrees

with these comments and supports

legislation to change the definition of

‘‘product of an agricultural commodity’’

now contained in section 102(7)(B) of

the Agricultural Trade Act of 1978, as

amended, (7 U.S.C. 5602)(7)(B)). Until

such legislative action, the definition

contained in the proposed rule must be

retained.

Section 1493.420 Information

Required for Program Participation

No public comments were received on

this section. No changes have been

made in this section of the interim rule.

Section 1493.430 Application for

Payment Guarantee

Two respondents made comments

regarding § 1493.430(a), which requires

that a firm export sale exist before an

exporter may submit an application for

a payment guarantee. Both commenters

suggested that this requirement be

changed to allow the export sale to be

contingent upon approval of the

payment guarantee. The commenters

advocated that an exporter and importer

should agree on the terms of the sale

but, if the payment guarantee is not

obtained, cancellation of the sale should

be allowed. One commenter

recommended that CCC require a copy

of the sales contract be submitted at the

time the payment guarantee is

requested. The commenter believed that

the list of the 17 requested items could

be reduced if the sales contract was

provided.

The ‘‘firm’’ sale requirement of

§ 1493.430(a) does not preclude a sales

contract from being contingent on

approval by CCC of a payment

guarantee. At a minimum, this rule

requires that the exporter and importer

be in agreement regarding the terms and

conditions required to be reported in an

application for a payment guarantee.

Regarding the comment that CCC

require exporters to submit sales

contracts, CCC disagrees that the

suggestion would save time. Sales

contracts often contain terms and

conditions that CCC does not need to

review. CCC does not want the burden

of reviewing and safeguarding a large

quantity of business confidential and

sensitive private documents where that

is unnecessary. CCC reserves the right to

request an exporter’s sales contract in

reviewing applications from newly
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 33829

eligible applicants, where questions of

program compliance or control arise.

Three comments were received

regarding § 1493.430(16). These

concerned the statement that CCC

would reserve the right to require

exporters to submit additional

information about the importer. One

respondent was concerned about the

nature of the information. If CCC

requested proprietary information,

would CCC protect the information from

public disclosure? The respondent felt

that exporters may be reluctant to

provide importer information unless

there are clear protections against its

release. Another commenter felt that

providing information regarding the

importer could be a potential paperwork

burden. The third respondent suggested

that information be requested for all

first-time applicants of the program.

This commenter suggested that the

information requested should, at a

minimum, include credit rating, trade

references, and bank references and

should be submitted before CCC

approves the payment guarantee.

As stated in the background section of

the proposed rule (part C(5),

Application), CCC will not routinely

conduct independent evaluations of the

creditworthiness of individual

importers, but will reserve the right to

require exporters, in the application

process, to provide additional

information concerning the importer.

Such information may include the

importer’s credit and payment history

with the applicant, and any credit

analysis the exporter has done regarding

the importer. CCC will protect any

proprietary information submitted by

exporters to the extent permitted by law.

Three comments were received

regarding CCC’s price review process

established under § 1493.430(b). Two

commenters asked whether the SCGP

would be subject to price review. One

commenter stated that elimination of

price review would save time and

reduce paperwork. The commenter also

felt that if price review were included

in the SCGP, it would make the program

unattractive. Another commenter

wondered how prices would be

reviewed because for short term credit

transactions it is a common commercial

practice to build interest into the sales

price. One commenter noted that the

rule does not contain a detailed

discussion of price review and urged

CCC to be as flexible as possible in the

administration of this function. The

respondent noted that for fresh produce,

price review must be sensitive to prices

which can vary from hour to hour.

To the extent that SCGP transactions

may be subject to price review, CCC

may choose to price review different

commodities differently or exempt some

commodities from price review.

Although CCC does not intend to

provide guarantee coverage for interest

risk separately, CCC realizes that, under

SCGP, exporters may build interest into

their sales prices. If CCC were to subject

the SCGP to price review, CCC could

take this into account.

Four respondents commented on

§ 1493.430(c), Ineligible Exporter. One

commenter felt strongly that no

financial or ownership connection

should exist between exporter and

importer. The commenter indicated that

if such a connection existed, defaults

would be encouraged and make the

program unworkable. Another

commenter felt that restrictions on

relationships between importers and

exporters would dissuade many

potential participants. In particular it

would restrict many smaller import/

export companies because the U.S.-

based exporter may be related to the

importer. One commenter felt that CCC

may be increasing its export risk, in

some cases, with its prohibition against

within-company and joint venture

transactions. This commenter agreed

that taxpayers should not finance intracompany sales. However, in some

instances, particularly common-owner

or joint-venture sales, such restrictions

would force export sales to competing

foreign suppliers. The commenter

requested greater flexibility to allow

CCC to choose export transactions

benefiting U.S. agriculture.

The ‘‘ineligible exporter’’ provision is

intended to avoid the situation in which

CCC would receive a claim for loss from

an exporter that directly or indirectly

owns or controls, or is owned or

controlled by, the importer responsible

for the default. CCC has determined not

to change this provision.

One commenter felt that any exporter

who has three defaults under the

program in five years should be

considered ineligible for further

participation. With respect to this

comment, CCC does not wish to qualify

exporters based upon the performance

of importers. However, CCC will

continue to evaluate whether program

modifications may be needed to provide

incentives/disincentives to exporters

based on program participation

experience.

Section 1493.440 Certification

Requirements for a Payment Guarantee

No public comments were received on

this section. No changes have been

made in this section of the interim rule.

Section 1493.450 Payment Guarantee

To address the risk issues raised by

comments from a government agency

(see General Comments, Other general

comments), CCC has revised the first

sentence of § 1493.450(a) to read: ‘‘The

payment guarantee will provide that

CCC agrees to pay the exporter or the

exporter’s assignee an amount not to

exceed the guaranteed value, plus

eligible interest, in the event that the

importer fails to pay under the importer

obligation unless CCC determines, with

respect to the particular transaction and

claim, that the guaranteed portion of the

port value exceeded the prevailing U. S.

market value for the same, or same type

of, agricultural commodity or product.

In making this determination, CCC will

adjust the prevailing U.S. market value

for estimated freight and/or insurance

costs if the export sale was made on a

CFR or CIF basis.’’

CCC recognizes that determining a

prevailing U.S. market value may be

difficult for some products, particularly

for some high value and value added

products. CCC will, therefore, utilize

information from all available sources

including, when appropriate,

information furnished by participants to

the transaction to support the validity of

the claim. Exporters using normal

pricing practices, i.e., pricing at or near

the market without excessive markups

intended to shift to CCC all risk of loss,

need not be concerned that the new

claim review provision will result in a

denial of a claim should a default occur.

In instances where CCC has reviewed

the unit price of the commodity in the

process of approving an exporter’s

application for a payment guarantee

pursuant to § 1493.430(b), and the price

of the commodity reported by the

exporter in the evidence of export report

has not changed (§ 1493.470(a)(7)), CCC

will not conduct another review of the

price of the transaction as a condition

for paying a claim. Although CCC may

conduct some price reviews pursuant to

§ 1493.430(b) as it deems desirable, it

does not intend to do so with respect to

all exporter applications. Such price

reviews will be done entirely at CCC’s

discretion, and nothing in the SCGP

regulations provides exporters the right

to demand or expect that such price

reviews take place prior to issuing a

payment guarantee.

This new provision is intended to

ensure that there will be substantial risk

sharing on the part of the exporter, and

that CCC will not pay claims inflated by

transaction prices far above prevailing

market levels. CCC has no intention of

avoiding payment of normal claims, nor

does it intend to regulate or control
33830 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

exporters’ profit margins. CCC’s sole

intention is to enhance the integrity of

the SCGP. CCC encourages and

welcomes any comments regarding this

provision.

Section 1493.460 Guarantee Rates and

Fees

No public comments were received on

this section. No changes have been

made in this section of the interim rule.

Section 1493.470 Importer Obligation

(as in the Proposed Rule)

As stated in § 1493.410, Definition of

Terms, of the Section-by-Section

Analysis of Subpart D, CCC has

determined to delete § 1493.470. Three

comments were received regarding this

section. One commenter thought that

the terms of the promissory note were

too onerous. Another commenter felt

that use of a promissory note as

evidence of indebtedness was a step in

the right direction. However, the

commenter was concerned that not

enough is known about the legal

enforceability of the promissory note in

countries whose commercial code is

different from ours. Having a foreign

bank aval or guarantee would mitigate

the risk of possibly having a legally

unenforceable document. The

commenter also recommended that the

optional provision regarding late

interest under § 1493.470(d)(1), be made

a requirement since it is customary

business practice to charge late interest

when payments are not made on the due

date. The commenter felt that this

would also provide CCC with a

mechanism to be paid interest on

outstanding claims. Another commenter

felt the promissory note may need to

include a ‘‘sound product provision.’’

This commenter suggested that if there

were quality problems upon arrival, it

may be appropriate to be flexible in

adjusting the value of the promissory

note.

CCC’s decision to retain flexibility in

adapting the provisions of the

promissory note should partially

address the concerns expressed that the

note contained in the proposed rule

would be too onerous and may not be

legally enforceable in some countries.

Although CCC continues to believe that

the previously proposed promissory

note, or one substantially similar to it,

will be the basic instrument required by

most Program Announcements in the

initial implementation of the SCGP,

CCC will make adaptations, including

adaptations specific to a particular

country or region, if they appear

necessary to enhance the likelihood of

enforceability. Similarly, if experience

demonstrates that the terms of the

proposed note are too onerous,

modifications will be considered that

are consistent with overall program

goals and criteria.

CCC’s intention to make adaptations,

as necessary, in the form of the required

promissory note would be compatible

with the objectives stated by other

commenters. For example, CCC could

adopt a note permitting a foreign bank

aval or a guarantee. For now, however,

CCC has determined not to make this a

program requirement because one of the

primary intentions of the SCGP is to

remove the foreign bank’s mandatory

involvement in the transaction.

Additionally, CCC could choose to

incorporate a provision regarding late

interest into the importer’s promissory

note. Regarding a ‘‘sound product

provision,’’ value adjustments could be

agreed to by exporters and importers. In

the event the promissory note had

already been executed prior to

establishing the actual export value, a

substitute promissory note might need

to be executed. If the exporter had

submitted an Evidence of Export (EOE)

before the value adjustment is made, the

exporter would have to file an amended

EOE with CCC. In any event, CCC’s

principal coverage would be limited to

the lower of the value of the export

transaction established by the EOE or

the principal amount of the promissory

note.

Section 1493.470 Evidence of Export

One comment was received regarding

§ 1493.470(b), Time limit for submission

of the EOE (of the interim rule). The

respondent suggested that CCC allow a

standard 60 days to submit the EOE.

The respondent thought exporters

would be seeking extensions of the

proposed 30-day period in order to

obtain a fully executed promissory note

from the importer.

Under the proposed rule, EOEs must

be filed in 30 days if export is by vessel,

and 60 days if export is by truck or rail.

Experience under the GSM–102/103

programs has not shown a need to

increase the 30 day filing requirement

for EOEs on vessels. However, under the

proposed rule, an exporter needing

additional time to file an EOE may

request that the General Sales Manager

extend the time limit for filing. CCC has

determined not to change the time limit

for filing the EOE, but to assess the need

for such a change after the SCGP has

been in operation. Timely submission of

the EOEs will be important to permit

CCC to keep accurate program data for

release to the public as well as for

internal program monitoring and

controls.

Section 1493.480 Certification

Requirements for Evidence of Export

No public comments were received on

this section. No changes have been

made in this section of the interim rule.

Section 1493.490 Proof of Entry

One comment was received regarding

§ 1493.490(b), Records of proof of entry

(of the interim rule). From the

viewpoint of the commenter, the

requirement that exporters obtain

written proof that the exported goods

entered the country would be

particularly problematic for fresh

produce exporters. Traditionally, once

the product leaves the dock the exporter

ceases to have any control or liability for

the goods. It is not currently a practice

in the produce industry to provide proof

the goods actually left the U.S. The

commenter requested that CCC seek an

alternate approach which will satisfy

the requirements of the program, but be

practical for fresh produce exporters.

CCC has determined to make no

changes in this section. The requirement

that exporters maintain records of an

official or customary commercial nature,

or other documents to verify the arrival

in the foreign country of the agricultural

commodity exported, is mandated by

section 401(a)(1) of the Agricultural

Trade Act of 1978, as amended (7 U.S.C.

5661(a)(1)). Furthermore, if a default

occurred under a guaranteed transaction

in which the commodity was exported

by truck or rail, the entry certificate or

similar document would be included

when filing a claim for loss (see

§ 1494.500(b)). If traditional forms of

entry documentation are unobtainable,

§ 1494.490(b) permits CCC to consider

other types of documents which can be

deemed acceptable by the General Sales

Manager. CCC believes that these

provisions are flexible enough to meet

the concerns raised by the commenter.

Section 1493.500 Notice of Default

and Claims for Loss

One comment was received regarding

§ 1493.500, Notice of default and claims

for loss (of the interim rule). This

commenter suggested that CCC preapprove documents that are normally

submitted in the claim procedure. The

respondent stated that there is a need

for greater certainty in the approval of

documentation in case of a default, and

that exporters would be willing to pay

a fee to cover the cost of pre-approval.

Partly because of the added

administrative burden that pre-approval

of documents would place on CCC, this

suggestion will not be adopted at this

time. However, CCC will continue to

consider this issue which is also
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 33831

relevant to the GSM–102/103 (subpart

B) programs.

This same commenter suggested that

CCC provide an example of subrogation

language in an addendum to its

regulations. Since exporters are not

banks, they require specific language to

fulfill their responsibility in the event of

a default. CCC agrees with the comment

and will make available an example of

language for an Instrument of

Subrogation and Assignment.

Section 1493.510 Payment for Loss

Although no comments were received

regarding §§ 1493.510 (b) and (e), CCC

has revised these provisions to be

consistent with the changes made in

§ 1493.450(a), CCC’s obligation.

Section 1493.510(b), Amount of CCC’s

liability, is revised to read in part:

‘‘Subject to a determination by CCC

with respect to prevailing U.S. market

value pursuant to § 1493.450(a), of this

part, CCC’s maximum liability for any

claims for loss * * * .’’

Section 1493.510(e), Action against

the assignee, is revised to read:

‘‘Notwithstanding * * *. CCC will not,

except pursuant to a determination

under § 1493.450(a) of this part, hold

the assignee responsible or take any

action or raise any defense against the

assignee for any action, omission, or

statement by the exporter of which the

assignee has no knowledge provided

that:’’

Section 1493.520 Recovery of Losses

No public comments were received on

this section. No changes have been

made in this section of the interim rule.

Section 1493.530 Miscellaneous

Provisions

One comment was received regarding

§ 1493.530(a), Assignment (of the

interim rule). The commenter suggested

that greater flexibility is needed in the

assignment of proceeds, including the

sub-assignment to more than one party.

The commenter felt this would bring the

transaction in line with standard

practice for similar financial

instruments.

CCC has traditionally not allowed

assignment of a payment guarantee to

more than one party. However the

proposed rule permits further

assignment if ‘‘ * * * approved in

advance by CCC.’’ Therefore, CCC has

determined it is not necessary at this

time to change § 1494.530(a).

List of Subjects in 7 CFR Part 1493

Administrative practice and

procedures, Agriculture, Agricultural

commodities, Credits, Exports,

Guarantees, Reporting and

recordkeeping requirements.

PART 1493—[AMENDED]

Accordingly, part 1493 of title 7 is

amended by adding and reserving

subpart C and adding subpart D reading

as follows:

Subpart C—[Reserved]

Subpart D—CCC Supplier Credit Guarantee

Program Operations

Sec.

1493.400 General statement.

1493.410 Definition of terms.

1493.420 Information required for program

participation.

1493.430 Application for a payment

guarantee.

1493.440 Certification requirements for a

payment guarantee.

1493.450 Payment guarantee.

1493.460 Guarantee rates and fees.

1493.470 Evidence of export.

1493.480 Certification requirements for the

evidence of export.

1493.490 Proof of entry.

1493.500 Notice of default and claims for

loss.

1493.510 Payment for loss.

1493.520 Recovery of losses.

1493.530 Miscellaneous provisions.

Authority: 7 U.S.C. 5602, 5622, 5661, 5662,

5663, 5664, 5676; 15 U.S.C. 714b(d), 714c(f).

Subpart C—[Reserved]

Subpart D—CCC Supplier Credit

Guarantee Program Operations

§ 1493.400 General statement.

(a) Overview. (1) This subpart

contains the regulations governing the

operations of the Supplier Credit

Guarantee Program (SCGP). The

restrictions and criteria set forth at

subpart A for the Commodity Credit

Corporation (CCC) Export Credit

Guarantee Program (GSM–102) and the

Intermediate Credit Guarantee Program

(GSM–103) will apply to this subpart.

The SCGP was developed to expand

U.S. agricultural exports by making

available payment guarantees to

encourage U.S. exporters to extend

financing on credit terms of not more

than 180 days to importers of U.S.

agricultural commodities.

(2) The SCGP operates in cases where

credit is necessary to increase or

maintain U.S. exports to a foreign

market and where private U.S. exporters

would be unwilling to provide financing

without CCC’s guarantee. The program

is operated in a manner intended not to

interfere with markets for cash sales.

The program is targeted toward those

countries where the guarantees are

necessary to secure financing of the

exports but which have sufficient

financial strength so that foreign

exchange will be available for scheduled

payments. In providing this credit

guarantee facility, CCC seeks to expand

market opportunities for U.S.

agricultural exporters and assist longterm market development for U.S.

agricultural commodities.

(3) The credit facility created by this

program is the SCGP payment guarantee

(payment guarantee). The payment

guarantee is an agreement by CCC to pay

the exporter, or the U.S. financial

institution that may take assignment of

the exporter’s right to proceeds,

specified amounts of principal and,

where applicable, interest due from, but

not paid by, the importer incurring the

obligation in connection with the export

sale to which CCC’s guarantee coverage

pertains. By approving an exporter’s

application for a payment guarantee,

CCC encourages private sector, rather

than government, financing and incurs

a substantial portion of the risk of

default by the importer. CCC assumes

this risk, in order to be able to operate

the program for the purposes specified

in § 1493.2.

(b) Credit facility mechanism. (1) For

the purpose of the SCGP, CCC will

consider applications for payment

guarantees only in connection with

export sales of U.S. agricultural

commodities where the payment for the

agricultural commodities will be made

under an unconditional and irrevocable

importer obligation to a U.S. exporter

payable in U.S. dollars, as defined in

§ 1493.410(n).

(2) The exporter may assign the right

to proceeds under the importer

obligation to a U.S. bank or other

financial institution so that the exporter

may realize the proceeds of the sale

prior to the deferred payment date(s) as

set forth in the importer obligation.

(3) The SCGP payment guarantee is

designed to protect the exporter or the

exporter’s assignee against those losses

specified in the payment guarantee

resulting from defaults, whether for

commercial or noncommercial reasons,

by the importer under the importer’s

obligation.

(c) Program administration. The SCGP

will be administered pursuant to

subpart A and this subpart and any

Program Announcements and Notices to

Participants issued by CCC pursuant to,

and not inconsistent with, this subpart.

This program is under the general

administrative responsibility of the

General Sales Manager (GSM), Foreign

Agricultural Service (FAS/USDA). The

review and payment of claims for loss

will be administered by the Office of the

Controller, CCC. Information regarding

specific points of contact for the public,

including names, addresses, and
33832 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

telephone and facsimile numbers of

particular USDA or CCC offices, will be

announced by a public press release (see

§ 1493.410(c), ‘‘Contacts P/R’’).

(d) Country allocations and program

announcements. From time to time,

CCC will issue a Program

Announcement to announce a SCGP

allocation for a specific country. The

Program Announcement for a country

allocation will designate specific

allocations for U.S. agricultural

commodities or products thereof, will

indicate the form of promissory note

required by CCC, and will provide other

pertinent information. Exporters may

negotiate export sales to importers in

that country for one of the commodities

specified in the Program Announcement

and seek payment guarantee coverage

within the dollar amounts of specified

coverage for that commodity. The

Program Announcement will contain a

requirement that the exporter’s sales

contract contain a shipping deadline

within the applicable program year. The

final date for a contractual shipping

deadline will be stated in the Program

Announcement. Program

Announcements may also contain a

specified ‘‘undesignated’’ or

‘‘unallocated’’ dollar amount for the

purpose that if dollar amounts specified

for a specific commodity for a country

become fully used, an additional

allocation from the ‘‘unallocated’’ or

‘‘undesignated’’ portion of the total

country allocation may then be

designated for a specific commodity.

Program Announcements that include

an ‘‘unallocated’’ or ‘‘undesignated’’

dollar amount will contain further

information on the ‘‘unallocated’’ or

‘‘undesignated’’ portion of the country

allocation.

§ 1493.410 Definition of terms.

Terms set forth in this subpart and in

CCC Program Announcements, Notices

to Participants, and any other CCCoriginated documents pertaining to the

SCGP will have the following meanings:

(a) Assignee. A financial institution in

the United States which, for adequate

consideration given, has obtained the

legal rights to receive the payment of

proceeds under the payment guarantee.

(b) CCC. The Commodity Credit

Corporation, an agency and

instrumentality of the United States

within the Department of Agriculture,

authorized pursuant to the Commodity

Credit Corporation Charter Act of 1948

(15 U.S.C. 714 et seq.), and subject to

the general supervision and direction of

the Secretary of Agriculture.

(c) Contacts P/R. A notice issued by

FAS/USDA by public press release

which contains specific names,

addresses, and telephone and facsimile

numbers of contacts within FAS/USDA

and CCC for use by persons interested

in obtaining information concerning the

operations of the SCGP. The Contacts P/

R also contains details about where to

submit information required to qualify

for program participation, to apply for

payment guarantees, to request

amendments of payment guarantees, to

submit evidence of export reports, and

to give notices of default and file claims

for loss.

(d) Date of export. One of the

following dates, depending upon the

method of shipment: the on-board date

of an ocean bill of lading or the onboard ocean carrier date of an

intermodal bill of lading; the on-board

date of an airway bill; or, if exported by

rail or truck, the date of entry shown on

an entry certificate or similar document

issued and signed by an official of the

Government of the importing country.

(e) Date of sale. The earliest date on

which a contractual obligation exists

between the exporter, or an intervening

purchaser, if applicable, and the

importer under which a firm dollar-andcent price for the sale of agricultural

commodities to the importer has been

established or a mechanism to establish

such price has been agreed upon.

(f) Discounts and allowances. Any

consideration provided directly or

indirectly, by or on behalf of the

exporter, or an intervening purchaser, to

the importer in connection with a sale

of an agricultural commodity, above and

beyond the commodity’s value, stated

on the appropriate FOB, FAS, CFR or

CIF basis. Discounts and allowances

include, but are not limited to, the

provision of additional goods, services

or benefits; the promise to provide

additional goods, services or benefits in

the future; financial rebates; the

assumption of any financial or

contractual obligations; the whole or

partial release of the importer from any

financial or contractual obligations; or

settlements made in favor of the

importer for quality or weight.

(g) Eligible interest. The maximum

amount of interest, based on the interest

rate indicated in CCC’s payment

guarantee or any amendments to such

payment guarantee, which CCC agrees

to pay the exporter or the exporter’s

assignee in the event that CCC pays a

claim for loss. The maximum interest

rate stated in the payment guarantee,

when determined or adjusted by CCC,

will not exceed the average investment

rate of the most recent Treasury 52-week

bill auction in effect at that time.

(h) Exported value. (1) Where CCC

announces coverage on a FAS or FOB

basis and:

(i) Where the commodity is sold on a

FAS or FOB basis, the value, FAS or

FOB basis, U.S. point of export, of the

export sale, reduced by the value of any

discounts or allowances granted to the

importer in connection with such sale;

or

(ii) Where the commodity was sold on

a CFR or CIF basis, point of entry, the

value of the export sale, FAS or FOB,

point of export, is measured by the CFR

or CIF value of the agricultural

commodity less the cost of ocean

freight, as determined at the time of

application and, in the case of CIF sales,

less the cost of marine and war risk

insurance, as determined at the time of

application, reduced by the value of any

discounts or allowances granted to the

importer in connection with the sale of

the commodity; or

(2) Where CCC announces coverage

on a CFR or CIF basis, and where the

commodity is sold on a CFR or CIF

basis, point of entry, the total value of

the export sale, CFR or CIF basis, point

of entry, reduced by the value of any

discounts or allowances granted to the

importer in connection with the sale of

the commodity.

(3) When a CFR or CIF commodity

export sale involves the performance of

non-freight services to be performed

outside the United States (e.g., services

such as bagging bulk cargo) which are

not normally included in ocean freight

contracts, the value of such services and

any related materials not exported from

the U.S. with the commodity must also

be deducted from the CFR or CIF sales

price in determining the exported value.

(i) Exporter. A seller of U.S.

agricultural commodities or products

thereof that has qualified in accordance

with the provisions of § 1493.420.

(j) FAS/USDA. The Foreign

Agricultural Service, U.S. Department of

Agriculture.

(k) GSM. The General Sales Manager,

FAS/USDA, acting in his capacity as

Vice President, CCC, or his designee.

(l) Guaranteed value. The maximum

amount, exclusive of interest, that CCC

agrees to pay the exporter or assignee

under CCC’s payment guarantee, as

indicated on the face of the payment

guarantee.

(m) Importer. A foreign buyer that

enters into a contract with an exporter,

or with an intervening purchaser, for an

export sale of agricultural commodities

to be shipped from the U.S. to the

foreign buyer.

(n) Importer obligation. A promissory

note or notes that conform(s) with the

requirements for such note(s) specified

in the applicable country or regional

Program Announcement(s).
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 33833

(o) Incoterms. The following

customary terms, as defined by the

International Chamber of Commerce,

Incoterms  current revision):

(1) Free Alongside Ship (FAS);

(2) Free on Board (FOB);

(3) Cost and Freight (CFR, or

alternatively, C&F, C and F, or CNF);

and

(4) Cost Insurance and Freight (CIF).

(p) Intervening purchaser. A party

that agrees to purchase U.S. agricultural

commodities from an exporter and sell

the same agricultural commodities to an

importer.

(q) Late interest. Interest, in addition

to the interest due under the payment

guarantee, which CCC agrees to pay in

connection with a claim for loss,

accruing during the period beginning on

the first day after receipt of a claim

which CCC has determined to be in

good order and ending on the day on

which payment is made on such claim

for loss.

(r) Notice to participants. A notice

issued by CCC by public press release

which serves one or more of the

following functions: to remind

participants of the requirements of the

program; to clarify the program

requirements contained in these

regulations in a manner which is not

inconsistent with the regulations; to

instruct exporters to provide additional

information in applications for payment

guarantees under specific country and/

or commodity allocations; and to

supplement the provisions of a payment

guarantee, in a manner not inconsistent

with these regulations, before the

exporter’s application for such payment

guarantee is approved.

(s) Payment guarantee. An agreement

under which CCC, in consideration of a

fee paid, and in reliance upon the

statements and declarations of the

exporter, subject to the terms set forth

in the written guarantee (including the

required form of promissory note), this

subpart, and any applicable Program

Announcements or Notices to

Participants, agrees to pay the exporter

or the exporter’s assignee in the event of

a default by an importer under the

importer obligation.

(t) Port value. (1) Where CCC

announces coverage on a FAS or FOB

basis and:

(i) Where the commodity is sold on a

FAS or FOB basis, U.S. point of export,

the value, FAS or FOB basis, U.S. point

of export, of the export sale, including

the upward tolerance, if any, as

provided by the export sales contract,

reduced by the value of any discounts

or allowances granted to the importer in

connection with such sale; or

(ii) Where the commodity was sold on

a CFR or CIF basis, point of entry, the

value of the export sale, FAS or FOB,

point of export, including the upward

tolerance, if any, as provided by the

export sales contract, is measured by the

CFR or CIF value of the agricultural

commodity less the value of ocean

freight and, in the case of CIF sales, less

the value of marine and war risk

insurance, reduced by the value of any

discounts or allowances granted to the

importer in connection with the sale of

the commodity; or

(2) Where CCC announces coverage

on a CFR or CIF basis and where the

commodity was sold on CFR or CIF

basis, point of entry, the total value of

the export sale, CFR or CIF basis, point

of entry, including the upward

tolerance, if any, as provided by the

export sales contract, reduced by the

value of any discounts or allowances

granted to the importer in connection

with the sale of the commodity.

(3) When a CFR or CIF commodity

export sale involves the performance of

non-freight services to be performed

outside the United States (e.g., services

such as bagging bulk cargo), which are

not normally included in ocean freight

contracts, the value of such services and

any related materials not exported from

the U.S. with the commodity must also

be deducted from the CFR or CIF sales

price in determining the port value.

(u) Program announcement. An

announcement issued by CCC which

provides information on specific

country and commodity allocations and

may identify eligible agricultural

commodities and countries, length of

credit periods which may be covered,

specify dollar limitations for CCC

exposure in particular countries, the

form of promissory note required for a

particular country or region, and

include other information and

requirements.

(v) SCGP. The Supplier Credit

Guarantee Program described by this

subpart.

(w) United States or U.S. All of the 50

states, the District of Columbia, and the

territories and possessions of the United

States.

(x) U.S. agricultural commodity. (1)

With respect to any agricultural

commodity other than a product of an

agricultural commodity, an agricultural

commodity entirely produced in the

United States; and

(2) With respect to a product of an

agricultural commodity:

(i) A product all of the agricultural

components of which are entirely

produced in the United states; or

(ii) Any other product the Secretary

may designate that contains any

agricultural component that is not

entirely produced in the United States

if:

(A) Such component is an added, de

minimis component;

(B) Such component is not

commercially produced in the United

States; and

(C) There is not acceptable substitute

for such component that is

commercially produced in the United

States (For purposes of this paragraph,

fish entirely produced in the United

States include fish harvested by a

documented fishing vessel as defined in

title 46, United States Code, in waters

that are not waters [including the

territorial sea] of a foreign country).

(y) USDA. United States Department

of Agriculture.

§ 1493.420 Information required for

program participation.

Before CCC will accept an application

for a payment guarantee under the

SCGP, the applicant must qualify for

participation in this program. Based

upon the information submitted by the

applicant and other publicly available

sources, CCC will determine whether

the applicant is eligible for participation

in the program.

(a) Submission of documentation. In

order to qualify for participation in the

SCGP, an applicant must submit to CCC,

at the address specified in the Contacts

P/R, the following information:

(1) The address of the applicant’s

headquarters office and the name and

address of an agent in the U.S. for the

service of process;

(2) The legal form of doing business

of the applicant, e.g., sole

proprietorship, partnership,

corporation, etc.;

(3) The place of incorporation of the

applicant, if the applicant is a

corporation;

(4) The name and U.S. address of the

office(s) of the applicant, and statement

indicating whether the applicant is a

U.S. domestic corporation, a foreign

corporation or another foreign entity. If

the applicant has multiple offices, the

address included in the information

should be that which is pertinent to the

particular export sale contemplated by

the applicant under this subpart;

(5) A certified statement describing

the applicant’s participation, if any,

during the past three years in U.S.

Government programs, contracts or

agreements; and

(6) A certification that: ‘‘I certify, to

the best of my knowledge and belief,

that neither [name of applicant] nor any

of its principals has been debarred,

suspended, or proposed for debarment

from contracting with or participating in
33834 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

programs administered by any U.S.

Government agency. [’’Principals,’’ for

the purpose of this certification, means

officers; directors; owners of five

percent or more of stock; partners; and

persons having primary management or

supervisory responsibility within a

business entity (e.g., general manager,

plant manager, head of a subsidiary

division, or business segment, and

similar positions).] I further agree that,

should any such debarment,

suspension, or notice of proposed

debarment occur in the future, [name of

applicant] will immediately notify

CCC.’’

(b) Previous qualification. Any

exporter that is qualified under subpart

B, § 1493.30 is qualified under this

section to submit applications for a

SCGP payment guarantee, and the

information provided by the exporter

pursuant to § 1493.30 will be deemed to

also have been provided under this

section. Each application must include

the statement required by

§ 1493.430(a)(17) incorporating the

certifications of § 1493.440, including

the certification in § 1493.440(e) that the

information previously provided

pursuant to § 1493.420 has not changed.

If the exporter is unable to provide such

certification, such exporter must update

the information required by paragraph

(a) of this section which has changed

and certify that the remainder of the

information previously provided has not

changed.

(c) Additional submissions. CCC will

promptly notify applicants that have

submitted information required by this

section whether they have qualified to

participate in the program. Any

applicant failing to qualify will be given

an opportunity to provide additional

information for consideration by CCC.

(d) Ineligibility for program

participation. An applicant may be

ineligible to participate in the SCGP if:

(1) Such applicant is currently

debarred, suspended, or proposed for

debarment from contracting with or

participating in any program

administered by a U.S. Government

agency; or

(2) Such applicant is controlled or can

be controlled, in whole or in part, by

any individuals or entities currently

debarred, suspended or proposed for

debarment from contracting with or

participating in programs administered

by any U.S. Government agency.

§ 1493.430 Application for a payment

guarantee.

(a) A firm export sale must exist

before an exporter may submit an

application for a payment guarantee. An

application for a payment guarantee

may be submitted in writing or may be

made by telephone, but, if made by

telephone, it must be confirmed in

writing to the office specified in the

Contacts P/R. An application must

identify the name and address of the

exporter and include the following

information:

(1) Name of the destination country;

(2) Name and address of the importer;

(3) Name and address of the

intervening purchaser, if any, and a

statement that the commodity will be

shipped directly to the importer in the

destination country;

(4) Date of sale;

(5) Exporter’s sale number;

(6) Delivery period as agreed between

the exporter and the importer;

(7) A full description of the

commodity (including packaging, if

any);

(8) Mean quantity, contract loading

tolerance and, if the exporter chooses, a

request for CCC to reserve coverage up

to the maximum quantity permitted by

the contract loading tolerance;

(9) Unit sales price of the commodity,

or a mechanism to establish the price,

as agreed between the exporter and the

importer. If the commodity was sold on

the basis of CFR or CIF, the actual (if

known at the time of application) or

estimated value of freight and, in the

case of sales made on a CIF basis, the

actual (if known at the time of

application) or estimated value of

marine and war risk insurance, must be

specified;

(10) Description and value of

discounts and allowances, if any;

(11) Port value (includes upward

loading tolerance, if any);

(12) Guaranteed value;

(13) Guarantee fee;

(14) The term length for the credit

being extended and the intervals

between principal payments for each

shipment to be made under the export

sale;

(15) A statement indicating whether

any portion of the export sale for which

the exporter is applying for a payment

guarantee is also being used as the basis

for an application for participation in

any of the following CCC or USDA

export programs: Export Enhancement

Program, Dairy Export Incentive

Program, Sunflowerseed Oil Assistance

Program, or Cottonseed Oil Assistance

Program. The number of the Agreement

assigned by USDA under one of these

programs should be included, as

applicable;

(16) Other information as requested

by CCC or specified in Program

Announcements and Notices to

Participants, as applicable; and

(17) The exporter’s statement, ‘‘ALL

SECTION 1493.440 CERTIFICATIONS

ARE BEING MADE IN THIS

APPLICATION’’ which, when included

in the application by the exporter, will

constitute a certification that it is in

compliance with all the requirements

set forth in § 1493.440.

(b) An application for a payment

guarantee may be approved as

submitted, approved with modifications

agreed to by the exporter, or rejected by

the GSM. In the event that the

application is approved, the GSM will

cause a payment guarantee to be issued

in favor of the exporter. Such payment

guarantee will become effective at the

time specified in § 1493.450(b). If, based

upon a price review, the unit sales price

of the commodity does not fall within

the prevailing commercial market level

ranges, as determined by CCC, the

application will not be approved.

(c) Ineligible exporter. An exporter

will be ineligible to obtain a payment

guarantee if such exporter:

(1) Directly or indirectly owns or

controls the importer;

(2) Is directly or indirectly owned or

controlled by the importer; or

(3) Is directly or indirectly owned or

controlled by a person(s) or entity(ies)

which also owns or controls the

importer.

§ 1493.440 Certification requirements for

payment guarantee.

By providing the statement in

§ 1493.430(a)(17), the exporter is

certifying that the information provided

in the application is true and correct

and, further, that all requirements set

forth in this section have been or will

be met. The exporter will be required to

provide further explanation or

documentation with regard to

applications that do not include this

statement. The exporter, in submitting

an application for a payment guarantee

and providing the statement set forth in

§ 1493.430(a)(17), certifies that:

(a) The agricultural commodity or

product to be exported under the

payment guarantee is a United States

agricultural commodity or a product

thereof, as defined in § 1493.410(x);

(b) There have not been and will not

be any corrupt payments or extra sales

services or other items extraneous to the

transaction provided, financed, or

guaranteed in connection with the

transaction, and that the transaction

complies with applicable United States

law;

(c) If the agricultural commodity is

vegetable oil or a vegetable oil product,

that none of the agricultural commodity

or product has been or will be used as

a basis for a claim of a refund, as

drawback, pursuant to section 313 of the

Tariff Act of 1930, 19 U.S.C. 1313, of
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 33835

any duty, tax or fee imposed under

Federal law on an imported commodity

or product;

(d) No person or selling agency has

been employed or retained to solicit or

secure the payment guarantee, and that

there is no agreement or understanding

for a commission, percentage, brokerage,

or contingent fee, except in the case of

bona fide employees or bona fide

established commercial or selling

agencies maintained by the exporter for

the purpose of securing business; and

(e) The information provided

pursuant to § 1493.420 has not changed,

the exporter still meets all of the

qualification requirements of

§ 1493.420, and the exporter will

immediately notify CCC if there is a

change of circumstances which would

cause it to fail to meet such

requirements. If the exporter breaches or

violates these certifications with respect

to a SCGP payment guarantee, CCC will

have the right, notwithstanding any

other rights provided under this

subpart, to annul guarantee coverage for

any commodities not yet exported and/

or to proceed against the exporter.

§ 1493.450 Payment guarantee.

(a) CCC’s obligation. The payment

guarantee will provide that CCC agrees

to pay the exporter or the exporter’s

assignee an amount not to exceed the

guaranteed value, plus eligible interest,

in the event that the importer fails to

pay under the importer obligation.

unless CCC determines with respect to

the particular transaction and claim that

the guaranteed portion of the port value

exceeded the prevailing U.S. market

value for the same, or same type of

agricultural commodity or product. In

making this determination, CCC will

adjust the prevailing U.S. market value

for estimated freight and/or insurance

costs if the export sale was made on a

CFR or CIF basis. Payment by CCC will

be in U.S. dollars.

(b) Period of guarantee coverage. The

payment guarantee will apply to a credit

period not exceeding 180 days

beginning either on the date(s) of

export(s) or from the date when interest

begins to accrue whichever is earlier,

and will continue during the credit term

specified in the payment guarantee or

amendments thereto. However, the

payment guarantee becomes effective on

the date(s) of export(s) of the

agricultural commodities or products

thereof specified in the exporter’s

application for a payment guarantee.

(c) Terms of the CCC payment

guarantee. The terms of CCC’s coverage

will be set forth in the payment

guarantee, as approved by CCC, and will

include the provisions of this subpart,

which may be supplemented by any

Program Announcements and/or

Notices to Participants in effect at the

time the payment guarantee is approved

by CCC.

(d) Final date to export. The final date

to export shown on the payment

guarantee will be one month, as

determined by CCC, after the

contractual deadline for shipping.

(e) Reserve coverage for loading

tolerances. The exporter may apply for

a payment guarantee and, if coverage is

available, pay the guarantee fee, based at

least on, the amount of the lower

loading tolerance of the export sales

contract; however, the exporter may also

request that CCC reserve additional

guarantee coverage to accommodate up

to the amount of the upward loading

tolerance specified in the export sales

contract. If such additional guarantee

coverage is available at the time of

application and CCC determines to

make such reservation, it will so

indicate to the exporter. In the event

that the exporter ships a quantity greater

than the amount on which the guarantee

fee was paid (i.e., lower loading

tolerance), it may obtain the additional

coverage from CCC, up to the amount of

the upward loading tolerance, by filing

for an amendment to the payment

guarantee, and by paying the additional

amount of fee applicable. If such

amendment to the payment guarantee is

not filed with CCC by the exporter

within 30 days after the date of the last

export against the sales contract, CCC

may determine not to reserve the

coverage originally set aside for the

exporter.

(f) Ineligible exports. Commodities

with a date of export prior to the date

of receipt by CCC of the exporter’s

telephonic or written application for a

payment guarantee, or with a date of

export made after the final date for

export shown on the payment guarantee

or any amendments thereof, are

ineligible for guarantee coverage under

this subpart, except where it is

determined by the GSM to be in the best

interests of CCC to provide guarantee

coverage on such commodities.

(g) Foreign agricultural component.

CCC may approve payment guarantees

under this subpart only in connection

with sales of United States agricultural

commodities as defined in

§ 1493.410(x). CCC may not provide

guarantee coverage under this subpart

on credit extended for the value of any

foreign agricultural component.

(h) Additional requirements. The

payment guarantee may contain such

additional terms, conditions, and

limitations as deemed necessary or

desirable by the GSM. Such additional

terms, conditions or qualifications, as

stated in the payment guarantee are

binding on the exporter or the exporter’s

assignee.

(i) Amendments. A request for an

amendment of a payment guarantee may

be submitted only by the exporter (with

the concurrence of the assignee, if any).

CCC will consider such a request only

if the amendment sought is consistent

with this subpart and any applicable

Program Announcements and Notices to

Participants. Amendments may include,

but will not be limited to, a change in

the credit period and an extension of

time to export. Any amendment to the

payment guarantee, particularly those

that result in an increase in CCC’s

liability under the payment guarantee,

may result in an increase in the

guarantee fee. (Technical corrections or

corrections of a clerical error which may

be submitted by the exporter or the

exporter’s assignee are not viewed as

amendments.)

§ 1493.460 Guarantee rates and fees.

(a) Guarantee fee rates. The current

payment guarantee fee rate(s) will be

available by Program Announcement.

(b) Calculation of fee. The guarantee

fee will be computed by multiplying the

guaranteed value by the guarantee fee

rate.

(c) Payment of fee. The exporter shall

remit, with his written application, the

full amount of the guarantee fee.

Applications will not be approved until

the guarantee fee has been received by

CCC. The exporter’s check for the

guarantee fee shall be made payable to

CCC and mailed or delivered by courier

to the office specified in the Contacts P/

R.

(d) Refunds of fee. Guarantee fees

paid in connection with approved

applications will ordinarily not be

refundable. CCC’s approval of the

application will be final and refund of

the guarantee fee will not be made after

approval unless the GSM determines

that such refund will be in the best

interest of CCC. If the application for a

payment guarantee is not approved or is

approved only for a part of the

guarantee coverage requested, a full or

pro rata refund of the fee remittance will

be made.

§ 1493.470 Evidence of export.

(a) Report of export. The exporter is

required to provide CCC an evidence of

export report for each shipment made

under the payment guarantee. This

report must include the following:

(1) Payment guarantee number;

(2) Date of export;

(3) Exporter’s sale number;

(4) Exported value;
33836 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

(5) Quantity;

(6) A full description of the

commodity exported;

(7) Unit sales price received for the

commodity exported and the basis (e.g.,

FOB, CFR, CIF). Where the unit sales

price at export differs from the unit

sales price indicated in the exporter’s

application for a payment guarantee, the

exporter is also required to submit a

statement explaining the reason for the

difference;

(8) Description and value of discounts

and allowances, if any;

(9) Number of the Agreement assigned

by USDA under any other program if

any portion of the export sale was also

approved for participation in any of the

following CCC or USDA export program:

Export Enhancement Program, Dairy

Export Incentive Program,

Sunflowerseed Oil Assistance Program,

or Cottonseed Oil Assistance Program;

and

(10) The exporter’s statement, ‘‘ALL

SECTION 1493.480 CERTIFICATIONS

ARE BEING MADE IN THIS EVIDENCE

OF EXPORT’’ which, when included in

the evidence of export by the exporter,

will constitute a certification that it is in

compliance with all the requirements

set forth in § 1493.480.

(b) Time limit for submission of

evidence of export. The exporter must

provide a written report to the office

specified in the Contacts P/R within 60

calendar days if the export was by rail

or truck; or 30 calendar days if the

export was by any other carrier. The

time period for filing a report of export

will commence upon each date of

export of the commodity covered under

a payment guarantee. If the evidence of

export report is not received by CCC

within the time period for filing, the

payment guarantee will become null

and void only if and only to the extent

that failure to make timely filing

resulted, or would be likely to result, in:

(1) Significant financial harm to CCC;

(2) The undermining of an essential

regulatory purpose of the program;

(3) Obstruction of the fair

administration of the program; or

(4) A threat to the integrity of the

program. The time limit for submission

of an evidence of export report may be

extended if such extension is

determined by the GSM to be in the best

interests of CCC.

(c) Export sales reporting. Exporters

may have a mandatory reporting

responsibility under section 602 of the

Agricultural Trade Act of 1978, as

amended (7 U.S.C. 5712) for exports of

wheat and wheat flour, feed grains,

oilseeds, cotton, and other agricultural

commodities and products thereof.

§ 1493.480 Certification requirements for

the evidence of export.

By providing the statement contained

in § 1493.470(a)(10), the exporter is

certifying that the information provided

in the evidence of export report is true

and correct and, further, that all

requirements set forth in this section

have been or will be met. The exporter

will be required to provide further

explanation or documentation with

regard to reports that do not include this

statement. If the exporter breaches or

violates these certifications with respect

to a SCGP payment guarantee, CCC will

have the right, notwithstanding any

other rights provided under this

subpart, to annul guarantee coverage for

any commodities not yet exported and/

or to proceed against the exporter. The

exporter, in submitting the evidence of

export and providing the statement set

forth in § 1493.470(a)(10), certifies that:

(a) The agricultural commodity or

product exported under a payment

guarantee is a United States agricultural

commodity or product thereof, as

defined in § 1493.410(x);

(b) Agricultural commodities of the

grade, quality and quantity called for in

the exporter’s sales contract with the

importer have been exported to the

country specified in the payment

guarantee;

(c) There is an importer obligation as

defined in § 1493.410(n) to cover the

exported value of the commodity

exported;

(d) There have not been and will not

be any corrupt payments or extra sales

services or other items extraneous to the

transaction provided, financed, or

guaranteed in connection with the

transaction, and that the transaction

complies with applicable United States

law; and

(e) The information provided

pursuant to § 1493.420 has not changed,

the exporter still meets all of the

qualification requirements of § 1493.420

and the exporter will immediately

notify CCC if there is a change of

circumstances which would cause it to

fail to meet such requirements.

§ 1493.490 Proof of entry.

(a) Diversion. The diversion of

commodities covered by a SCGP

payment guarantee to a country other

than that shown on the payment

guarantee is prohibited, unless

expressly authorized by the GSM.

(b) Records of proof of entry.

Exporters must obtain and maintain

records of an official or customary

commercial nature and grant authorized

USDA officials access to such

documents or records as may be

necessary to demonstrate the arrival of

the agricultural commodities exported

in connection with the SCGP in the

country that was the intended country

of destination of such commodities.

Records demonstrating proof of entry

must be in English or be accompanied

by a certified or other translation

acceptable to CCC. Records acceptable

to meet this requirement include an

original certification of entry signed by

a duly authorized customs or port

official of the importing country, by the

importer, by an agent or representative

of the vessel or shipline which

delivered the agricultural commodity to

the importing country, or by a private

surveyor in the importing country, or

other documentation deemed acceptable

by the GSM showing:

(1) That the agricultural commodity

entered the importing country;

(2) The identification of the export

carrier;

(3) The quantity of the agricultural

commodity;

(4) The kind, type, grade and/or class

of the agricultural commodity; and

(5) The date(s) and place(s) of

unloading of the agricultural commodity

in the importing country. (Records of

proof of entry need not be submitted

with a claim for loss, except as may be

provided in § 1493.500(b)(4)(ii).)

§ 1493.500 Notice of default and claims for

loss.

(a) Notice of default. If the importer

fails to make payment pursuant to the

terms of the importer obligation, the

exporter or the exporter’s assignee must

submit a notice of default to CCC as

soon as possible, but not later than 10

calendar days after the date that

payment was due from the importer (the

due date). A notice of default must be

submitted in writing to the Treasurer,

CCC, at the address specified in the

Contacts P/R. If the exporter or the

exporter’s assignee fails to promptly

notify CCC of defaults in accordance

with this paragraph, CCC may make the

payment guarantee null and void with

respect to any payment(s) applicable to

such default. This time limit may be

extended only under extraordinary

circumstances and if such extension is

determined by the Controller, CCC, to be

in the best interests of CCC. The notice

of default must include:

(1) Payment guarantee number;

(2) Name of the country;

(3) Name of the defaulting importer;

(4) Due date;

(5) Total amount of the defaulted

payment due, indicating separately the

amounts for principal and interest;

(6) Date of importer’s refusal to pay,

if applicable; and

(7) Reason for importer’s refusal to

pay, if known.
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 33837

(b) Filing a claim for loss. A claim for

a loss by the exporter or the exporter’s

assignee will not be paid if it is made

later than six months from the due date

of the defaulted payment. A claim for

loss must be submitted in writing to the

Treasurer, CCC, at the address specified

in the Contacts P/R. The claim for loss

must include the following information

and documents:

(1) Payment guarantee number;

(2) A certification that the scheduled

payment has not been received;

(3) A certification of the amount of

accrued interest in default, the date

interest began to accrue, and the interest

rate on the importer obligation

applicable to the claim;

(4) A copy of each of the following

documents, with a cover document

containing a signed certification by the

exporter or the exporter’s assignee that

each page of each document is a true

and correct copy:

(i) The importer obligation;

(ii) Depending upon the method of

shipment, the negotiable ocean carrier

or intermodal bill(s) of lading signed by

the shipping company with the onboard

ocean carrier date for each shipment,

the airway bill, or, if shipped by rail or

truck, the entry certificate or similar

document signed by an official of the

importing country;

(iii)(A) The exporter’s invoice

showing, as applicable, the FAS, FOB,

CFR or CIF values; or

(B) If there was an intervening

purchaser, both the exporter’s invoice to

the intervening purchaser and the

intervening purchaser’s invoice to the

importer;

(iv) An instrument, in form and

substance satisfactory to CCC,

subrogating to CCC the respective rights

of the exporter and the exporter’s

assignee, if applicable, to the amount of

payment in default under the applicable

export sale. The instrument must

reference the applicable importer

obligation; and

(v) A copy of the report(s) of export

previously submitted by the exporter to

CCC pursuant to § 1493.470(a).

(c) Subsequent claims for defaults on

installments. If the initial claim is found

in good order, the exporter or an

exporter’s assignee need only provide

all of the required claims documents

with the initial claim relating to a

covered transaction. For subsequent

claims relating to failure of the importer

to make scheduled installments on the

same export shipment, the exporter or

the exporter’s assignee need only submit

to CCC a notice of such failure

containing the information stated in

paragraph (b) (1), (2), and (3) of this

section; an instrument of subrogation as

per paragraph (b)(4)(iv) of this section,

and including the date the original

claim was filed with CCC.

§ 1493.510 Payment for loss.

(a) Determination of CCC’s liability.

Upon receipt in good order of the

information and documents required

under § 1493.500, CCC will determine

whether or not a loss has occurred for

which CCC is liable under the

applicable payment guarantee, this

subpart and any applicable

supplemental Program Announcements

and Notices to Participants. If CCC

determines that it is liable to the

exporter and/or the exporter’s assignee,

CCC will pay the exporter or the

exporter’s assignee in accordance with

paragraphs (b) and (c) of this section.

(b) Amount of CCC’s liability. Subject

to a determination by CCC with respect

to prevailing U.S. market value pursuant

to § 1493.450(a) of this part, CCC’s

maximum liability for any claims for

loss submitted with respect to any

payment guarantee, not including any

late interest payments due in

accordance with paragraph (c) of this

section, will be limited to the lesser of:

(1) The guaranteed value as stated in

the payment guarantee, plus eligible

interest; or

(2) The guaranteed percentage (as

indicated in the payment guarantee) of

the exported value indicated in the

evidence of export, plus eligible

interest.

(c) Late interest payment. If a claim is

not paid within one day of receipt of a

claim which CCC has determined to be

in good order, late interest will accrue

in favor of the exporter or the exporter’s

assignee beginning with the first day

after the day of receipt of a claim found

by CCC to be in good order and

continuing until and including the date

that payment is made by CCC. Late

interest will be paid on the guaranteed

amount, as determined by paragraphs

(b)(1) and (2) of this section, and will be

calculated based on the average

investment rate of the most recent

Treasury 91-day bill auction as

announced by the Department of

Treasury as of the due date.

(d) Accelerated payments. CCC will

pay claims only for losses on amounts

not paid as scheduled. CCC will not pay

claims for amounts due under an

accelerated payment clause in the

export sales contract or the importer

obligation unless it is determined to be

in the best interests of CCC by the

Controller, CCC. Notwithstanding the

foregoing, CCC at its option may declare

the entire amount of the unpaid balance,

plus accrued interest, in default and

make payment to the exporter or the

exporter’s assignee in addition to such

other claimed amount as may be due

from CCC.

(e) Action against the assignee.

Notwithstanding any other provision in

this subpart to the contrary, with regard

to commodities covered by a payment

guarantee, CCC will not, except

pursuant to a determination under

§ 1493.450(a) of this part, hold the

assignee responsible or take any action

or raise any defense against the assignee

for any action, omission, or statement by

the exporter of which the assignee has

no knowledge, provided that:

(1) The exporter complies with the

reporting requirements under

§§ 1493.470 and 1493.480, excluding

post-export adjustments (i.e.,

corrections to evidence of export

reports); and

(2) The exporter or the exporter’s

assignee furnishes the statements and

documents specified in § 1493.500.

§ 1493.520 Recovery of losses.

(a) Notification. Upon payment of loss

to the exporter or the exporter’s

assignee, CCC will notify the importer of

CCC’s rights under the subrogation

agreement to recover all moneys in

default.

(b) Receipt of monies. (1) In the event

that monies for a defaulted payment are

recovered by the exporter or the

exporter’s assignee from the importer or

any other source whatsoever, such

monies shall be immediately paid to the

Treasurer, CCC. If such monies are not

received by CCC within 15 business

days from the date of recovery by the

exporter or the exporter’s assignee, the

exporter or the exporter’s assignee will

owe to CCC interest from the date of

recovery to the date of receipt by CCC.

This interest will be calculated based on

the latest average investment rate of the

most recent Treasury 91-day bill

auction, as announced by the

Department of Treasury, in effect on the

date of recovery and will accrue from

such date to the date of payment by the

exporter or the exporter’s assignee to

CCC. Such interest will be charged only

on CCC’s share of the recovery.

(2) If CCC recovers monies that should

be applied to a payment guarantee for

which a claim has been paid by CCC,

CCC will pay the holder of the payment

guarantee its pro rata share

immediately, provided that the required

information necessary for determining

pro rata distribution has been furnished.

If payment is not made by CCC within

15 business days from the date of

recovery or 15 business days from

receiving the required information for

determining pro rata distribution,

whichever is later, CCC will pay interest
33838 Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations

calculated on the latest average

investment rate of the most recent

Treasury 91-day bill auction, as

announced by the Department of

Treasury, in effect on the date of

recovery and such interest will accrue

from such date to the date of payment

by CCC. The interest will apply only to

the portion of the recovery payable to

the holder of the payment guarantee.

(c) Allocation of recoveries.

Recoveries made by CCC from the

importer, and recoveries received by

CCC from the exporter, the exporter’s

assignee, or any other source

whatsoever, will be allocated by CCC to

the exporter or the exporter’s assignee

and to CCC on a pro rata basis

determined by their respective interests

in such recoveries. The respective

interest of each party will be determined

on a pro rata basis, based on the

combined amount of principal and

interest in default. Once CCC has paid

out a particular claim under a payment

guarantee, CCC pro rates any collections

it receives and shares these collections

proportionately with the holder of the

guarantee until both CCC and the holder

of the guarantee have been reimbursed

in full. Appendix A to § 1493.520—

Illustration of Pro Rata Allocation of

Recoveries—provides an example of the

methodology used by CCC in applying

this paragraph (c).

(d) Liabilities to CCC.

Notwithstanding any other terms of the

payment guarantee, the exporter may be

liable to CCC for any amounts paid by

CCC under the payment guarantee when

and if it is determined by CCC that the

exporter has engaged in fraud, or has

been or is in material breach of any

contractual obligation, certification or

warranty made by the exporter for the

purpose of obtaining the payment

guarantee or for fulfilling obligations

under SCGP. Further, the exporter’s

assignee may be liable to CCC for any

amounts paid by CCC under the

payment guarantee when and if it is

determined by CCC that the exporter’s

assignee has engaged in fraud or

otherwise violated program

requirements.

(e) Good faith. The violation by an

exporter of the certifications in

§§ 1493.440(b) and 1493.480(d) or the

failure of an exporter to comply with the

provisions of §§ 1493.490 or 1493.530(e)

will not affect the validity of any

payment guarantee with respect to an

assignee which had no knowledge of

such violation or failure to comply at

the time such exporter applied for the

payment guarantee or at the time of

assignment of the payment guarantee.

(f) Cooperation in recoveries. Upon

payment by CCC of a claim to the

exporter or the exporter’s assignee, the

exporter or the exporter’s assignee will

cooperate with CCC to effect recoveries

from the importer.

Appendix A to § 1493.520—Illustration

of Pro Rata Allocation of Recoveries

The following example illustrates CCC’s

policy, as set forth in § 1493.520(c), regarding

pro rata sharing of recoveries made for claims

filed under the SCGP. A typical case might

be as follows:

1. The U.S. exporter enters into a $200,000,

180 day credit arrangement with the importer

calling for two equal payments of principal

and two equal payments of interest at a rate

of 10 percent per annum and a penalty

interest rate of 12 percent per annum (basis

360 days) on overdue amounts until the

overdue amount is paid. (Basis for interest

calculation may be 360 or 365 days.)

2. The importer fails to make the final

principal payment of $100,000 and an

interest payment of $2,500.00 (10% per

annum for 90 days on $100,000), both due on

January 31.

3. On February 10, the U.S. exporter files

a claim in good order with CCC.

4. CCC’s guarantee states that CCC’s

maximum liability is limited to 60 percent of

the principal amount due ($60,000) and

interest at a rate of 8 percent per annum

(basis 365 days) on 60 percent of the

principal outstanding ($1,183.56) (8% per

annum for 90 days on $60,000). (CCC’s basis

for interest calculation is 365 days.)

5. CCC pays the claim on February 22.

6. The average investment rate of the most

recent 91-day Treasury Bill auction average

which has been published by the Department

of Treasury in effect on the date of

nonpayment by CCC (January 31) is 7

percent. (CCC’s late interest rate.)

Computation of Obligations

Using the above case, CCC’s payment to the

holder of the payment guarantee would be

computed as follows:

1. CCC’s Obligation under the Payment Guarantee:

(a) Principal coverage—(60% $100,000) .................................................................................................................................... $60,000.00

(b) Interest coverage—(8% per annum for 90 days on $60,000, basis 365 days) .................................................................... 1,183.56

$61,183.56

(c) Late interest due from CCC (7% per annum for 11 days on $61,183.56, basis 365 days) ................................................ 129.07

(d) Amount paid by CCC on February 22 .................................................................................................................................. $61,312.63

2. Importer’s obligation under the importer obligation:

(a) Principal due January 31 ....................................................................................................................................................... $100,000.00

Interest due January 31 ........................................................................................................................................................

(10% per annum for 90 days on $100,000, basis 360 days) .............................................................................................. 2,500.00

Amount owed by importer as of January 31 ...................................................................................................................... $102,500.00

(b) Penalty interest due (12% per annum for 22 days on $102,500.00, basis 360 days) ........................................................ 751.67

(c) Amount owed by importer as of February 22 ...................................................................................................................... $103,251.67

3. Amount of importer’s obligation not covered by CCC’s payment guarantee: $41,939.04 ($103,251.67–$61,312.63).

Computation of Pro Rata Sharing in

Recovery of Losses

In establishing each party’s respective

interest in any recovery of losses, the total

amount due under the importer obligation

would be determined as of the date the claim

is paid by CCC (February 22). Using the

above example in which the amount owed by

the importer is $103,251.67, CCC would be

entitled to 59.38 percent ($61,312.63 divided

by $103,251.67) and the holder of the

payment guarantee would be entitled to

40.62 percent ($41,939.04 divided by

$103,251.67) of any recoveries of losses after

settlement of the claim. Since in this

example, the losses were recovered after the

claim has been paid by CCC, § 1493.520(b)

would apply.

§ 1493.530 Miscellaneous provisions.

(a) Assignment. (1) The exporter may

assign the proceeds which are, or may

become, payable by CCC under a

payment guarantee or the right to such

proceeds only to a financial institution

in the U.S. The assignment must cover

all amounts payable under the payment

guarantee not already paid, may not be

made to more than one party, and may

not, unless approved in advance by

CCC, be:

(i) Made to one party acting for two

or more parties; or

(ii) Subject to further assignment.

(2) An original and two copies of the

written notice of assignment signed by

the parties thereto must be filed by the
Federal Register / Vol. 61, No. 127 / Monday, July 1, 1996 / Rules and Regulations 33839

assignee with the Treasurer, CCC, at the

address specified in the Contacts P/R.

(3) Receipt of the notice of assignment

will ordinarily be acknowledged to the

exporter and its assignee in writing by

an officer of CCC. In cases where a

financial institution is determined to be

ineligible to receive an assignment, in

accordance with paragraph (b) of this

section, CCC will provide notice thereof,

to the financial institution and to the

exporter issued the payment guarantee,

in lieu of an acknowledgment of

assignment.

(4) The name and address of the

assignee must be included on the

written notice of assignment.

(b) Ineligibility of financial

institutions to receive an assignment. A

financial institution will be ineligible to

receive an assignment of proceeds

which may become payable under a

payment guarantee if, at the time of

assignment, such financial institution:

(1) Is not in sound financial

condition, as determined by the

Treasurer of CCC;

(2) Owns or controls the entity issuing

the importer obligation; or

(3) Is owned or controlled by an entity

that owns or controls the entity issuing

the importer obligation.

(c) Ineligibility of financial

institutions to receive proceeds. A

financial institution will be ineligible to

receive proceeds payable under a

payment guarantee approved by CCC if

such financial institution:

(1) At the time of assignment of a

payment guarantee, is not in sound

financial condition, as determined by

the Treasurer of CCC;

(2) Owns or controls the entity issuing

the importer obligation; or

(3) Is owned or controlled by an entity

that owns or controls the entity issuing

the importer obligation.

(d) Alternative satisfaction of

payment guarantees. CCC may, with the

agreement of the exporter (or if the right

to proceeds payable under the payment

guarantee has been assigned, with the

agreement of the exporter’s assignee),

establish procedures, terms and/or

conditions for the satisfaction of CCC’s

obligations under a payment guarantee

other than those provided for in this

subpart if CCC determines that those

alternative procedures, terms, and/or

conditions are appropriate in

rescheduling the debts arising out of any

transaction covered by the payment

guarantee and would not result in CCC

paying more than the amount of CCC’s

obligation.

(e) Maintenance of records and access

to premises. (1) For a period of five

years after the date of expiration of the

coverage of a payment guarantee, the

exporter or the exporter’s assignee, as

applicable, must maintain and make

available all records pertaining to sales

and deliveries of and extension of credit

for agricultural commodities exported in

connection with a payment guarantee,

including those records generated and

maintained by agents, intervening

purchasers, and related companies

involved in special arrangements with

the exporter. The Secretary of

Agriculture and the Comptroller General

of the United States, through their

authorized representatives, must be

given full and complete access to the

premises of the exporter or the

exporter’s assignee, as applicable,

during regular business hours from the

effective date of the payment guarantee

until the expiration of such five-year

period to inspect, examine, audit, and

make copies of the exporter’s, exporter’s

assignee’s, agent’s, intervening

purchaser’s, or related company’s books,

records and accounts concerning

transactions relating to the payment

guarantee, including, but not limited to,

financial records and accounts

pertaining to sales, inventory,

processing, and administrative and

incidental costs, both normal and

unforeseen. During such period, the

exporter or the exporter’s assignee may

be required to make available to the

Secretary of Agriculture or the

Comptroller General of the United

States, through their authorized

representatives, records that pertain to

transactions conducted outside the

program, if, in the opinion of the GSM,

such records would pertain directly to

the review of transactions undertaken

by the exporter in connection with the

payment guarantee.

(2) The exporter must maintain the

proof of entry required by § 1493.490(b),

and must provide access to such

documentation if requested by the

Secretary of Agriculture or his

authorized representative for the fiveyear period specified in paragraph (e)(1)

of this section.

(f) Responsibility of program

participants. It is the responsibility of

all program participants to review, and

fully acquaint themselves with, all

regulations, Program Announcements,

and Notices to Participants issued

pursuant to this subpart. Applicants for

payment guarantees are hereby on

notice that they will be bound by any

terms contained in applicable Program

Announcements or Notices to

Participants issued prior to the date of

approval of a payment guarantee.

(g) Submission of documents by

principal officers. All required

submissions, including certifications,

applications, reports, or requests (i.e.,

requests for amendments), by exporters

or exporters’ assignees under this

subpart must be signed by a principal or

officer of the exporter or exporter’s

assignee or their authorized designee(s).

In cases where the designee is acting on

behalf of the principal or the officer, the

signature must be accompanied by:

Wording indicating the delegation of

authority or, in the alternative, by a

certified copy of the delegation of

authority; and the name and title of the

authorized person or officer. Further,

the exporter or exporter’s assignee must

ensure that all information/reports

required under these regulations are

submitted within the required time

limits. If requested in writing, CCC will

acknowledge receipt of a submission by

the exporter or the exporter’s assignee.

If acknowledgment of receipt is

requested, the exporter or exporter’s

assignee must submit an extra copy of

each document and a stamped selfaddressed envelope for return by U.S.

mail. If courier services are desired for

the return receipt, the exporter or

exporter’s assignee must also submit a

self-addressed courier service order

which includes the recipient’s billing

code for such service.

(h) Officials not to benefit. No

member of or delegate to Congress, or

Resident Commissioner, shall be

admitted to any share or part of the

payment guarantee or to any benefit that

may arise therefrom, but this provision

shall not be construed to extend to the

payment guarantee if made with a

corporation for its general benefit.

(i) OMB control number assigned

pursuant to the Paperwork Reduction

Act. The information requirements

contained in this part (7 CFR part 1493,

subpart D) have been approved by the

Office of Management and Budget

(OMB) in accordance with the

provisions of 44 U.S.C. Chapter 35 and

have been assigned OMB Control

Number 0551–0037.

Signed this 25th day of June 1996 at

Washington, DC.

Mary T. Chambliss,

Acting General Sales Manager, Foreign

Agricultural Service and Acting Vice

President, Commodity Credit Corporation.

[FR Doc. 96–16674 Filed 6–28–96; 8:45 am]

BILLING CODE 3410–10–P