[Federal Register Volume 61, Number 127 (Monday, July 1, 1996)]
[Rules and Regulations]
[Pages 33825-33839]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 96-16674]



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

[[Page 33825]]



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 OMB-assigned 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

[[Page 33826]]

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, 
Sec. 1493.450, Payment guarantee. Also, CCC has modified Sec. 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

[[Page 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

[[Page 33828]]

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 cost-effectiveness 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 Sec. 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 Sec. 1493.410(n), comments 
were received on Sec. 1493.470, Importer obligation of the proposed 
rule (see Section-by-Section Analysis of Subpart D, Sec. 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 
Sec. 1493.470 Importer Obligation, from the interim rule.
    Three respondents made comments regarding Sec. 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 Sec. 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 Sec. 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

[[Page 33829]]

eligible applicants, where questions of program compliance or control 
arise.
    Three comments were received regarding Sec. 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 Sec. 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 Sec. 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 intra-company 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 Sec. 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 Sec. 1493.430(b), and the price of the commodity 
reported by the exporter in the evidence of export report has not 
changed (Sec. 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 
Sec. 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

[[Page 33830]]

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 Sec. 1493.410, Definition of Terms, of the Section-by-
Section Analysis of Subpart D, CCC has determined to delete 
Sec. 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 Sec. 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 Sec. 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 Sec. 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 Sec. 1494.500(b)). If traditional forms of 
entry documentation are unobtainable, Sec. 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 Sec. 1493.500, Notice of default 
and claims for loss (of the interim rule). This commenter suggested 
that CCC pre-approve 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

[[Page 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 Secs. 1493.510 (b) and 
(e), CCC has revised these provisions to be consistent with the changes 
made in Sec. 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 Sec. 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 Sec. 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 Sec. 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 Sec. 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


Sec. 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 long-term 
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 Sec. 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 Sec. 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

[[Page 33832]]

telephone and facsimile numbers of particular USDA or CCC offices, will 
be announced by a public press release (see Sec. 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.


Sec. 1493.410  Definition of terms.

    Terms set forth in this subpart and in CCC Program Announcements, 
Notices to Participants, and any other CCC-originated 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 
on-board 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-and-cent 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 
Sec. 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).

[[Page 33833]]

    (o) Incoterms. The following customary terms, as defined by the 
International Chamber of Commerce, Incoterms <Copyright> 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.


Sec. 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

[[Page 33834]]

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, Sec. 1493.30 is qualified under this section to submit 
applications for a SCGP payment guarantee, and the information provided 
by the exporter pursuant to Sec. 1493.30 will be deemed to also have 
been provided under this section. Each application must include the 
statement required by Sec. 1493.430(a)(17) incorporating the 
certifications of Sec. 1493.440, including the certification in 
Sec. 1493.440(e) that the information previously provided pursuant to 
Sec. 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.


Sec. 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 Sec. 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 Sec. 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.


Sec. 1493.440  Certification requirements for payment guarantee.

    By providing the statement in Sec. 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 Sec. 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 Sec. 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

[[Page 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 Sec. 1493.420 has not 
changed, the exporter still meets all of the qualification requirements 
of Sec. 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.


Sec. 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 Sec. 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.)


Sec. 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.


Sec. 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;

[[Page 33836]]

    (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 Sec. 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.


Sec. 1493.480  Certification requirements for the evidence of export.

    By providing the statement contained in Sec. 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 Sec. 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 Sec. 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 Sec. 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 Sec. 1493.420 has not 
changed, the exporter still meets all of the qualification requirements 
of Sec. 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.


Sec. 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 
Sec. 1493.500(b)(4)(ii).)


Sec. 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.

[[Page 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 Sec. 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.


Sec. 1493.510  Payment for loss.

    (a) Determination of CCC's liability. Upon receipt in good order of 
the information and documents required under Sec. 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 
Sec. 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 Sec. 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 
Secs. 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 Sec. 1493.500.


Sec. 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

[[Page 33838]]

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 Sec. 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 Secs. 1493.440(b) and 1493.480(d) or the failure of an exporter to 
comply with the provisions of Secs. 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 Sec. 1493.520--Illustration of Pro Rata Allocation of 
Recoveries

    The following example illustrates CCC's policy, as set forth in 
Sec. 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, Sec. 1493.520(b) would apply.


Sec. 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

[[Page 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 
Sec. 1493.490(b), and must provide access to such documentation if 
requested by the Secretary of Agriculture or his authorized 
representative for the five-year 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 self-addressed 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