Export-Import Bank: Frequently Asked Questions

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Export-Import Bank: Frequently Asked Questions

Summary

The Export-Import Bank of the United States (Ex-Im Bank or the Bank), a wholly owned federal

government corporation, is the official export credit agency (ECA) of the U.S. government. Its

mission is to assist in financing and facilitating U.S. exports of goods and services to support U.S.

employment. Ex-Im Bank operates under a renewable general statutory charter (Export-Import

Bank Act of 1945, as amended). In the 114th Congress, Ex-Im Bank’s charter was extended

through September 30, 2019, by the Export-Import Bank Reform and Reauthorization Act of

2015 (Division E of P.L. 114-94, a surface transportation authorization measure). Enacted on

December 4, 2015, this act generally lowered Ex-Im Bank’s statutory lending authority

(“exposure cap” for outstanding portfolio) to $135 billion for each of FY2015-FY2019, and made

reforms to, among other things, Ex-Im Bank’s policies or operations in risk management, fraud

controls, and ethics, as well as the U.S. approach to international negotiations on export credit

financing. Ex-Im Bank’s reauthorization, ultimately on a bipartisan basis in Congress, was

preceded by active debate among Members about whether to renew Ex-Im Bank’s authority and if

so, for how long and under what terms.

Debate continues in Congress over Ex-Im Bank’s rationales. Proponents contend that the Bank

supports U.S. exports and jobs by filling gaps in private sector financing and helping U.S.

exporters compete against foreign companies backed by their ECAs. Critics contend that Ex-Im

Bank crowds out private sector activity, provides “corporate welfare,” and poses a risk to

taxpayers. Members also may consider other issues, particularly possible nominations of

members to Ex-Im Bank’s five-member Board of Directors. The Board, whose members are

appointed by the President and with the Senate’s advice and consent, is responsible for approving

Ex-Im Bank transactions for financing and insurance. Due to current vacancies on the Board, the

Board does not have a quorum and cannot approve financial commitments above $10 million.

Congress also may conduct oversight of Ex-Im Bank’s implementation of reforms required by the

2015 reauthorization act, as well as issues presented by the international context for ECA activity,

among other issues.

Congressional consideration of Ex-Im Bank raises a range of questions. This report addresses a

number of those questions that are frequently asked, including:



What is the Export-Import Bank and what is the debate over its reauthorization?

What is its leadership structure?

What are its programs, policies, and activities?

What is its international context?

How does its budget work?

How does it manage risk?

What are the implications of a sunset in authority for the Bank’s activities?

What are historical and current approaches to Ex-Im Bank reauthorization?

Additional CRS resources on Ex-Im Bank include CRS Report R43581, Export-Import Bank:

Overview and Reauthorization Issues, by (name redacted)

, and CRS In Focus IF10017,

Export-Import Bank of the United States (Ex-Im Bank), by (name redacted)

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Export-Import Bank: Frequently Asked Questions

Contents

Congressional Interest ..................................................................................................................... 1

What is the Export-Import Bank? ............................................................................................. 1

What are Ex-Im Bank’s origins and early history? ................................................................... 1

What is Congress’s role in relation to the Bank? ...................................................................... 2

What are the committees of jurisdiction? .................................................................................. 2

What is the policy debate over Ex-Im Bank and its recent reauthorization history? ................ 3

Organizational Structure and Management ..................................................................................... 3

Where is Ex-Im Bank located?.................................................................................................. 3

What is its leadership structure?................................................................................................ 3

Does Ex-Im Bank’s Board of Directors have a quorum to transact business? .......................... 4

How many employees does Ex-Im Bank have? ........................................................................ 4

Market Context and Ex-Im Bank Programs .................................................................................... 4

What role does export finance play in the market? ................................................................... 4

What are sources of export financing? ...................................................................................... 5

What financial products does Ex-Im Bank presently offer? ..................................................... 5

How does Ex-Im Bank fit into U.S. export promotion efforts? ................................................ 6

Does Ex-Im Bank finance U.S. imports? .................................................................................. 6

How long are repayment terms for Ex-Im Bank financing? ..................................................... 7

How does Ex-Im Bank finance its direct loans? ....................................................................... 7

What fees does Ex-Im Bank charge, and how are those determined? ....................................... 7

What is the approval process for Ex-Im Bank transactions?..................................................... 8

How do Ex-Im Bank and private sector financing compare? ................................................... 9

Statutory Requirements and Policies ............................................................................................... 9

What are Ex-Im Bank’s general statutory requirements and policies?...................................... 9

What international disciplines guide Ex-Im Bank activities? ................................................. 10

In what countries can (or cannot) Ex-Im Bank provide support? ............................................11

What is Ex-Im Bank’s economic impact policy? .....................................................................11

What is Ex-Im Bank’s environmental impact policy?............................................................. 12

What are limitations on Ex-Im Bank financing for coal-fired power plant projects? ............. 13

What is Ex-Im Bank’s small business statutory mandate? ...................................................... 14

What is Ex-Im Bank’s “renewable energy” statutory mandate? ............................................. 15

What is Ex-Im Bank’s sub-Saharan Africa statutory mandate? .............................................. 16

What is Ex-Im Bank’s foreign content policy? ....................................................................... 16

Does Ex-Im Bank support military or “dual-use” exports? .................................................... 17

What is Ex-Im Bank’s U.S.-flag shipping requirement? ......................................................... 17

International Context ..................................................................................................................... 18

What is the global ECA marketplace?..................................................................................... 18

How do export finance volumes of Ex-Im Bank and foreign ECAs compare? ...................... 19

How do Ex-Im Bank and foreign ECAs compare in their policies? ....................................... 20

How effective is the OECD Arrangement? ............................................................................. 21

What is the status of international negotiations on ECA financing? ....................................... 21

Activity .......................................................................................................................................... 22

What is Ex-Im Bank’s exposure level? ................................................................................... 22

How much credit and insurance does Ex-Im Bank authorize? ............................................... 24

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Export-Import Bank: Frequently Asked Questions

How does Ex-Im Bank work to ensure that its financing does not compete with the

private sector? ...................................................................................................................... 25

What amount of U.S. exports and number of U.S. jobs are associated with Ex-Im

Bank activity? ...................................................................................................................... 26

What is the opportunity cost of Ex-Im Bank activity to U.S. exports and jobs?..................... 27

How does Ex-Im Bank calculate its estimated jobs support? ................................................. 27

Has Ex-Im Bank fulfilled targets for support concerning small business, renewable

energy, and sub-Saharan Africa? .......................................................................................... 28

How can Ex-Im Bank’s support for small business be characterized? .................................... 29

Do Ex-Im Bank’s activities have a U.S. foreign policy focus? ............................................... 30

Is there a relationship between Ex-Im Bank and U.S. national security interests? ................. 30

Risk Management, Fraud Control, and Ethics ............................................................................... 32

What risks does Ex-Im Bank face in financing and insuring exports?.................................... 32

How does Ex-Im Bank seek to manage its risks? ................................................................... 32

How does Ex-Im Bank determine the level of funds necessary to cover future

projected claims?.................................................................................................................. 32

How much are in Ex-Im Bank’s loss reserves? ....................................................................... 33

What is Ex-Im Bank’s default rate? ........................................................................................ 33

What happens when Ex-Im Bank has to pay a claim? ............................................................ 34

What is Ex-Im Bank’s recovery rate? ..................................................................................... 34

What is the debate over Ex-Im Bank’s risk management practices?....................................... 34

What are Ex-Im Bank’s fraud control and ethics practices? ................................................... 35

Budget and Appropriations ............................................................................................................ 37

How does Ex-Im Bank fund its activities? .............................................................................. 37

How does Ex-Im Bank’s appropriations process work? ......................................................... 37

How are Ex-Im Bank’s activities accounted for under Federal Credit Reform Act of

1990 (FCRA)? ...................................................................................................................... 38

What is the relationship between Ex-Im Bank activity and the U.S. debt and deficit? ........... 39

What does Ex-Im Bank do with its excess revenues? ............................................................. 39

How would changes in federal credit accounting affect Ex-Im Bank? ................................... 40

Sunset in Authority ........................................................................................................................ 40

What are the implications of a sunset in Ex-Im Bank’s authority for the agency’s

activities? ............................................................................................................................. 40

What is an “orderly liquidation” for the purposes of Ex-Im Bank’s Charter? ........................ 42

What is the potential economic impact of a sunset on Ex-Im Bank’s authority? .................... 43

How did U.S. businesses respond to Ex-Im Bank’s lapse in authority in 2015? .................... 44

Historical and Current Approaches to Reauthorization ................................................................. 45

Historically, for how long has Congress extended Ex-Im Bank’s authority?.......................... 45

How have previous continuing resolutions addressed an imminent sunset of the

Bank’s authority? ................................................................................................................. 46

What provisions are in the Ex-Im Bank Reform and Reauthorization Act of 2015? .............. 47

What are scenarios for Ex-Im Bank’s authorization status?.................................................... 49

What were legislative developments in the 114th Congress related to Ex-Im Bank

reauthorization?.................................................................................................................... 49

Figures

Figure 1. General Ex-Im Bank Approval Process ........................................................................... 9

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Export-Import Bank: Frequently Asked Questions

Figure 2. New Medium- and Long-Term Export Financing Volumes for Selected ECAs,

2014 ............................................................................................................................................ 20

Figure 3. Ex-Im Bank Exposure Levels and Exposure Cap, FY1997-FY2015............................. 23

Figure 4. Ex-Im Bank Exposure Level Composition, FY2015 ..................................................... 24

Figure 5. Ex-Im Bank Authorizations for Credit and Insurance Commitments, FY1997FY2015 ....................................................................................................................................... 25

Figure B-1. Ex-Im Bank Direct Loan Structure ............................................................................ 52

Figure B-2. Ex-Im Bank Loan Guarantee Structure ...................................................................... 52

Figure B-3. Ex-Im Bank Exporter Insurance Structure ................................................................. 53

Tables

Table 1. Total Official Medium- and Long-Term Trade-Related Support, 2014 ........................... 19

Table 2. Purpose of Ex-Im Bank Transactions Authorized, 2014.................................................. 26

Table 3. Ex-Im Bank’s Credit and Insurance Authorizations, FY2014-FY2015 ........................... 29

Table 4. Overview of Export-Import Bank Reform and Reauthorization Act of 2015

(Division E, P.L. 114-94)............................................................................................................ 47

Table C-1.Original Act and Amendments to the Sunset Date of Export-Import Bank

Functions .................................................................................................................................... 55

Table C-2. Provisions Providing for the Continuation of Export-Import Bank Functions ............ 60

Appendixes

Appendix A. Selected CRS Resources .......................................................................................... 51

Appendix B. Examples of Ex-Im Bank Financial Product Structures........................................... 52

Appendix C. Laws and Final Legislative Action Related to the Sunset Date of Ex-Im

Bank Functions ........................................................................................................................... 54

Contacts

Author Contact Information .......................................................................................................... 67

Congressional Research Service

Export-Import Bank: Frequently Asked Questions

he Export-Import Bank of the United States (Ex-Im Bank or the Bank) operates under a

renewable general statutory charter (Export-Import Bank Act of 1945, as amended),

extended through September 30, 2019, by the Export-Import Bank Reform and

Reauthorization Act of 2015 (Division E of P.L. 114-94, a surface transportation authorization

measure). Enacted on December 4, 2015, this act generally lowered Ex-Im Bank’s statutory

lending authority (“exposure cap” for outstanding portfolio) to $135 billion for each of FY2015FY2019, and made reforms in a number of areas, including to Ex-Im Bank’s policies or

operations in risk management, fraud controls, and ethics, as well as to the U.S. approach to

international negotiations on export credit financing.

This report addresses frequently asked questions about Ex-Im Bank, grouped in the following

categories: (1) congressional interest; (2) organizational structure and management; (3) market

context and programs; (4) statutory requirements and policies; (5) international context; (6)

activity; (7) risk management, fraud control, and ethics; (8) budget and appropriations; (9) sunset

in authority; and (10) historical and current approaches to reauthorization. See Appendix A for a

summary of selected key CRS resources related to Ex-Im Bank.

Congressional Interest

What is the Export-Import Bank?

Ex-Im Bank, a wholly owned U.S. government corporation,1 is the official export credit agency

(ECA) of the United States. Its mission is to assist in financing and facilitating U.S. exports of

goods and services and, in doing so, to contribute to U.S. employment.2 On a demand-driven

basis, it seeks to finance exports that the private sector is unwilling or unable to undertake alone

at terms commercially viable for exporters; and/or to counter government-backed financing

offered by foreign countries through their ECAs.3 Ex-Im Bank’s main financial products are

direct loans, loan guarantees, working capital finance, and export credit insurance. Its activities

are backed by the full faith and credit of the U.S. government.4 Congress sets statutory

requirements for Ex-Im Bank’s activities. Ex-Im Bank also abides by international disciplines for

government-backed ECA activity under the Organization for Economic Cooperation and

Development (OECD) Arrangement on Officially Supported Export Credits (the “Arrangement”).

What are Ex-Im Bank’s origins and early history?5

Ex-Im Bank, established by the Export-Import Bank Act of 1945, as amended (P.L. 79-173; 12

U.S.C. Section 635 et seq.), has its origins in two predecessor banks, created as part of the

Roosevelt Administration’s New Deal response to the Great Depression. The first Export-Import

Bank was established on February 2, 1934 (Executive Order No. 6581), to assist in financing U.S.

trade with the Soviet Union. The Second Export-Import Bank was created on March 9, 1934

12 U.S.C. §635(a)(1). A U.S. government corporation is a government agency established by Congress to provide

market-oriented public services and to produce revenues that meet or approximate expenditures. See CRS Report

RL30365, Federal Government Corporations: An Overview, by (name redacted).

12 U.S.C. §635(a)(1).

Ex-Im Bank’s website is accessible at http://www.exim.gov/.

12 U.S.C. §635k.

Information in this section draws from previously developed language by (name redacted), Specialist in

International Trade and Finance.

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(Executive Order No. 6638), originally to assist in financing U.S. trade with Cuba. Its operations

were subsequently expanded to include trade financing to all other countries except the Soviet

Union. Both the first and second Bank had limited two-year charters. At the end of the two-year

period, the Second Export-Import Bank’s charter was allowed to lapse, with its functions

transferred to the first Bank. The charter for the first Bank was extended and, in 1945, it was

superseded by the present Ex-Im Bank.6

In the immediate post-war period, Ex-Im Bank participated in reconstruction efforts and was

viewed as part of the growing U.S. aid efforts. In the 1950s, it responded to requests from U.S.

exporters by shifting away from aid-related activities to offering export credit financing for

exports of goods and by confronting the competition U.S. exporters faced in the form of officially

financed, government-supported export credits. In the early 1960s, it further attempted to meet

the needs of U.S. exporters by offering export credit guarantees to insure against political and

exchange rate risk. In the 1970s, Ex-Im Bank funded large scale infrastructure projects in

numerous developing countries. By the early 1980s, small projects and capital goods and services

constituted an increasingly larger share of Ex-Im Bank’s business.7 Presently, Ex-Im Bank

provides direct loans, loan guarantees, and export credit insurance as a part of U.S. export

promotion efforts to contribute to U.S. employment, though its activities also may have foreign

policy implications (see “Market Context and Ex-Im Bank Programs” section).

What is Congress’s role in relation to the Bank?

Congress has a number of statutory responsibilities with respect to Ex-Im Bank. Congress

provides authority for Ex-Im Bank’s functions through its statutory charter, the Export-Import

Bank Act of 1945, as amended (P.L. 79-173; 12 U.S.C. Section 635 et seq.), for a period of time

that it chooses. While Congress does not approve individual Ex-Im Bank transactions, it sets

general statutory parameters for the agency’s activities. Congress also provides an annual

appropriation for the Bank, and conducts oversight of its activities. In addition, the Senate

approves nominations by the President of the United States to the positions of Ex-Im Bank’s

President, First Vice President, and Board of Directors.8

What are the committees of jurisdiction?

The committees to which legislation that would amend Ex-Im Bank’s statutory charter has been

referred previously are the House Committee on Financial Services and Senate Committee on

Banking, Housing, and Urban Affairs. In general, the Bank has been funded each fiscal year

through provisions in the State, Foreign Operations, and Related Programs Appropriations Act.

National Archives, “Records of the Export-Import Bank of the United States,”

http://www.archives.gov/research/guide-fed-records/groups/275.html.

Jordan Jay Hillman, The Export-Import Bank at Work: Promotional Financing in the Public Sector (Westport 1982);

and Ex-Im Bank, “80th Anniversary” history webpages,

http://archive.exim.gov/about/whoweare/anniversary/History/1930s.cfm.

12 U.S.C. §635a(b) and 12 U.S.C. §635a(c).

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Export-Import Bank: Frequently Asked Questions

What is the policy debate over Ex-Im Bank and its recent

reauthorization history?

Recent Reauthorization History

Debate over Ex-Im Bank is rooted in

underlying differences in views over the



Ex-Im Bank Reauthorization Act of 2012 (P.L.

112-122, enacted May 30, 2012): renewal through

appropriate role of the U.S. government in

September 30, 2014.

export promotion. Those in favor of Ex-Im



FY2015 continuing appropriations resolution

Bank assert that it supports U.S. exports and

(P.L. 113-164, enacted September 9, 2014): renewal

jobs by addressing shortfalls in private sector

through June 30, 2015.

financing and helping U.S. exporters compete



Lapse in authority for about 5 months (July 1against foreign companies backed by their

December 3, 2015) because Congress did not

governments’ ECAs. Critics assert that it

renew Ex-Im Bank’s charter.

crowds out private sector activity, picks



Ex-Im Bank Reform and Reauthorization Act of

winners and losers through its support,

2015 (Division E of Fixing America’s Surface

operates as a form of “corporate welfare,” and

Transportation Act, P.L. 114-94, enacted December

4, 2015): renewal through September 30, 2019.

poses a risk to taxpayers. While debate over

Ex-Im Bank has been long-standing, Congress

has renewed Ex-Im Bank’s authority many times, including on a bipartisan basis and under both

Republican and Democratic administrations (see text box for recent history and Appendix C for

more detailed history). The reauthorization debates in the 114th Congress focused on the role of

the U.S. government in supporting exports; the changing export finance landscape, including the

growth of ECA activity by emerging market ECAs; and Ex-Im Bank’s financial soundness and

risk management, among other policy issues.

Organizational Structure and Management

Where is Ex-Im Bank located?

Ex-Im Bank is headquartered in Washington, DC.9 It also maintains regional export finance

centers in 12 U.S. cities, which conduct outreach and provide assistance focused exclusively on

U.S. small businesses.10

What is its leadership structure?

Ex-Im Bank is led by a Board of Directors, which consists of the President of the Bank (who is

also the chairman of the Board), First Vice President (who is also the Vice Chairman), and three

additional directors. The Board authorizes the Bank’s transactions either directly or through

delegated authority.11 All Board members are appointed by the President of the United States with

the advice and consent of the Senate. Under Ex-Im Bank’s charter, not more than three members

of the five-person Board can be of any one political party.12

Ex-Im Bank, “Ex-Im Bank Headquarters,” http://www.exim.gov/contact/headquarters.

Ex-Im Bank, “Regional Export Finance Centers,” http://www.exim.gov/contact/regional-export-finance-centers; and

Export-Import Bank of the United States Annual Report 2013, p. 14 and p. 85.

For example, Ex-Im Bank has delegated authority for underwriting many short-term transactions directly to Ex-Im

Bank-approved private sector lenders.

12 U.S.C. §635a(c). Ex-Im Bank, “Board of Directors,” http://www.exim.gov/about/leadership/board-of-directors.

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Export-Import Bank: Frequently Asked Questions

Ex-Im Bank also has an Advisory Committee, which is required by its charter to consist of 17

members appointed by the Board of Directors on the recommendation of the President of the

Bank. Under its charter, the Advisory Committee’s members are required to be “broadly

representative of environment, production, commerce, finance, agriculture, labor, services, State

government, and the textile industry,” subject to certain limits.13

In addition, Ex-Im Bank has a Sub-Saharan Africa Advisory Committee, which is directed to

promote the expansion of the Bank’s financial commitments in that region.14 The Export-Import

Bank Reform and Reauthorization Act of 2015 extended the Sub-Saharan Africa Advisory

Committee’s termination date to September 30, 2019 (Sec. 54001(c) of P.L. 114-94).15

Does Ex-Im Bank’s Board of Directors have a quorum to transact

business?

A quorum of the Board of Directors consists of at least three members.16 With currently two

members, the Board lacks a quorum (at least three members) to transact business. Without a

quorum, it cannot approve transactions above $10 million. Nominations of members to the Board

would be subject to Senate approval.

How many employees does Ex-Im Bank have?

In FY2015, Ex-Im Bank had 420 full-time equivalents (FTEs) for its programs and 25 FTEs for

its Office of Inspector General (OIG).17

Market Context and Ex-Im Bank Programs

What role does export finance play in the market?

Export finance, which is used to cover the time between an export order being placed and

payment being made, is a means of facilitating international trade. Financing can play a role, for

instance, when exporters may need to protect against the higher risk of payment default by an

unknown buyer situated in a foreign legal system; because export orders often require more

working capital, relative to sales, than domestic orders and exporters may wait an average of

three to five months between shipment and payment;18 or buyers require funds from a financial

institution to purchase goods and services.

12 U.S.C. §635a(d). Ex-Im Bank, “Advisory Committee,” http://www.exim.gov/about/leadership/advisorycommittee.

12 U.S.C. §635(b)(9)(B). Ex-Im Bank, “Sub-Saharan Africa Advisory Committee,” http://www.exim.gov/about/

whoweare/leadership/sub-saharan-africa-advisory-committee.cfm.

12 U.S.C. §635(b)(9)(B)(iii).

12 U.S.C. §635a(c). Ex-Im Bank, “Board of Directors,” http://www.exim.gov/about/leadership/board-of-directors.

OMB, Budget of the United States Government, Fiscal Year 2017, Appendix, “Other Independent Agencies.”

Gary Clyde Hufbauer, Meera Fickling, and Woan Foong Wong, Revitalizing the Export-Import Bank, Peterson

Institute for International Economics, May 2011, p. 1, http://www.iie.com/publications/pb/pb11-06.pdf.

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Export-Import Bank: Frequently Asked Questions

According to the Bank of International Settlements (BIS), no comprehensive source exists for

measuring the size and composition of trade finance markets.19 The World Trade Organization

(WTO), based on its assumption that the largest share of global trade transactions are not paid in

cash and involve some form of finance, estimates that the market for trade finance (in its broadest

definition) exceeds $10 trillion annually.20

What are sources of export financing?

Export finance is available through both the public and private sector, including through:



Export credit agencies (ECAs), which are government-backed entities. Most

developed countries and many developing countries have ECAs.

Commercial banks and insurance companies, through which private insurers

and lenders finance exports on a commercial basis.

Capital markets, which provide financing through bond issuance, on a secured

or unsecured basis.

Manufacturer self-financing, through which companies, especially larger ones,

may self-finance certain exports to foreign buyers.

Commercial banks have been estimated to account for 80% of the trade finance market.21 Private

lenders and insurers conduct the majority of short-term export financing, though ECAs may play

a role in supporting certain sectors, such as taking on risks of financing small business exports.

With respect to longer-term financing, the market can play an active role, but in certain cases,

ECA support can help make transactions more commercially attractive by mitigating risks of

financing or by providing an additional source of funding to diversify risks of financing, for

example, for complex, multi-billion dollar sales such as aircraft and infrastructure projects.

What financial products does Ex-Im Bank presently offer?

Ex-Im Bank groups its financial products into the following four main categories:



direct loans with fixed interest rates made by Ex-Im Bank to foreign buyers of

U.S. goods and services;

medium- and long-term loan guarantees of loans made by lenders (usually

commercial banks) to foreign buyers of U.S. goods and services, with Ex-Im

Bank promising to repay the lender, if the buyer defaults, the outstanding

principal and accrued interest on the loan;

working capital finance, through loans and guarantees by Ex-Im Bank, to

facilitate finance for businesses, primarily small businesses, who have exporting

potential but need working capital funds (e.g., to buy raw materials or supplies)

to produce or market their goods and services for export; and

export credit insurance by Ex-Im Bank to exporters and lenders to protect

against losses of nonrepayment for commercial and political reasons.

Bank of International Settlements (BIS), “Trade Finance: Development and Issues,” Committee on the Global

Financial System (CGFS) Papers No. 50, January 2014, http://www.bis.org/publ/cgfs50.pdf.

World Trade Organization (WTO), Improving the Availability of Trade Finance in Developing Countries: An

Assessment of Remaining Gaps, Note by the Secretariat, February 2, 2015.

WTO, Supply of Trade Finance, http://www.wto.org/english/thewto_e/coher_e/whatis_situation_e.htm/.

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Export-Import Bank: Frequently Asked Questions

Ex-Im Bank also provides specialized finance products, such as project and structured finance,

which usually take the form of direct loans or loan guarantees. For examples of structures of

selected Ex-Im Bank financial products, see Appendix B.

How does Ex-Im Bank fit into U.S. export promotion efforts?

Ex-Im Bank is one of several federal government agencies involved in promoting U.S. exports of

goods and services.22 It focuses on financing U.S. exports of manufactured goods and services for

companies of all sizes. Other U.S. government agencies also offer financing for exports, among

other activities, including the U.S. Department of Agriculture (USDA), which finances U.S.

agricultural exports, and the Small Business Administration (SBA), which provides export

promotion-focused guarantee programs for small businesses.23 While Ex-Im Bank focuses on

supporting exports in support of U.S. commercial interests, the Overseas Private Investment

Corporation (OPIC) uses similar tools, but to support U.S. investment in developing and

emerging economies to support U.S. foreign policy objectives.24 At the same time, Ex-Im’s

activities can have U.S. foreign policy implications (see “Do Ex-Im Bank’s activities have a U.S.

foreign policy focus?”).

The existence of a range of federal government agencies that focus on export promotion has

prompted debate about whether any overlap in services provided by federal government agencies

constitutes duplication or the use of the same or similar tools to meet different goals.

Does Ex-Im Bank finance U.S. imports?

Ex-Im Bank’s name includes the word “import” and its formal statutory mission provides for

facilitating both exports and imports.25 However, according to Ex-Im Bank, it does not provide

support for imports.26 Historically speaking, Ex-Im Bank’s role in financing imports appears to

have been negligible.27

See CRS Report R41495, U.S. Government Agencies Involved in Export Promotion: Overview and Issues for

Congress, coordinated by (name redacted)

See CRS Report R43155, Small Business Administration Trade and Export Promotion Programs, by (name redacted)

See CRS Report 98-567, The Overseas Private Investment Corporation: Background and Legislative Issues, by

(name redacted)

12 U.S.C. §635(a).

Ex-Im Bank, “Get Started,” http://exim.gov/get-started#what.

See excerpt from Jordan Jay Hillman, The Export-Import Bank at Work, Westport: Quorum Books, 1982, pp. 31-32:

The era [1945 - 1953] cannot be brought to its conclusion without mention of imports—in name

and formal statutory status constituting one-half of [Ex-Im Bank’s] mission. Moreover, if tradeoriented exports were ever to be supported, this was the time. It was, after all, an era when a

dominant goal of foreign lending programs was to increase the dollar earning capacity of recipient

countries. Nevertheless, even in this period when imports were seen as a positive factor in reducing

an excessive U.S. trade surplus, [Ex-Im Bank’s] role in financing import trade, as such, was

negligible. In general, the Bank considered commercial bank credits adequate for transactions at

risk levels that the Bank itself was otherwise likely to undertake. Import trade, of course, involved

the financing of U.S. domestic buyers. They presented neither the credit information nor security

enforcement problems associated at the time with overseas credit. It thus remained the view of the

Bank that efforts to aid and facilitate foreign sales in the United States were best directed to

increasing the productive capabilities of foreign countries. Import trade transactions financed by

[Ex-Im Bank] were, and were to remain, negligible.

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Export-Import Bank: Frequently Asked Questions

How long are repayment terms for Ex-Im Bank financing?

Ex-Im Bank direct loans and loan guarantees can be:



short-term (up to one year);

medium-term (more than one year and up to seven years, and less than $10

million); and

long-term (more than seven years, and more than $10 million).28

Long-term financing includes structured finance transactions (repayment terms of 10 years, but

some up to 12 years); project finance transactions (repayment terms up to 14 years); and

renewable energy transactions (repayment terms up to 18 years).29

Ex-Im Bank insurance can be:



short-term (generally up to 180 days, but can be up to 360 days in exceptional

circumstances); and

medium-term (generally up to five years, but can be up to seven years in

exceptional circumstances, and more than $10 million).30

How does Ex-Im Bank finance its direct loans?

The main source of Ex-Im Bank’s current outstanding debt is borrowings from the U.S. Treasury.

Borrowings from the U.S. Treasury are used to finance medium-term and long-term loans, and

carry a fixed interest rate. U.S. Treasury borrowings are repaid primarily with the repayments of

medium-term and long-term loans. For further discussion, see “How does Ex-Im Bank fund its

activities?” in the “Budget and Appropriations” section.

What fees does Ex-Im Bank charge, and how are those determined?

Ex-Im Bank’s fees for medium- and long-term financing (which account for the bulk of its

exposure) generally are guided by the OECD Arrangement. They include the following:



Ex-Im Bank’s direct loans carry fixed interest rates. They generally are made at

terms that are the most attractive allowed under the OECD Arrangement, which

specifies a minimum interest charge of 1 percentage point above the U.S.

Treasury rate for a security of comparable length. The interest rate charged by

Ex-Im Bank for direct loans is the interest fixed at the Commercial Interest

Reference Rates (CIRR).31 In contrast, its loan guarantees usually carry a floating

U.S. Government Accountability Office (GAO), Export-Import Bank: Additional Analysis and Information Could

Better Inform Congress on Exposure, Risk, and Resources, GAO-13-620, May 2013, p. 5.

Ibid.

Ex-Im Bank, “Export Credit Insurance,” http://www.exim.gov/what-we-do/export-credit-insurance.

A CIRR is the official lending rates of ECAs. It is a market-related fixed rate calculated monthly using a

government’s borrowing cost plus a basis points spread (bps) that depends on the tenor of the transaction. A CIRR is

set for each currency based on the borrowing cost of the government of the government that uses that currency, i.e., it is

based on government bonds issued in the country’s domestic market for its currency. For the U.S. dollar, the CIRR is

based on the U.S. Treasury bond rate. CIRR rates are available at: http://www.exim.gov/tools-forexporters/commercial-interest-reference-rates/prior-cirr-rates.

Congressional Research Service

Export-Import Bank: Frequently Asked Questions



interest rate that is negotiated between the lender (e.g., the commercial bank) and

borrower, or set by the lender.

Risk premia, also known as “exposure fees,” are intended to cover the risk of

nonpayment for a transaction. Ex-Im Bank states that it charges risk premia for

sovereign and nonsovereign buyers in accordance with rules under the OECD

Arrangement. In doing so, Ex-Im Bank seeks to ensure that the premia collected

meet the U.S. government’s minimum budgetary requirements. Thus, in certain

cases (e.g., medium-term transactions), Ex-Im Bank says that it must charge fees

higher than the minimum fees required under the OECD premia system. 32

Ex-Im Bank charges commitment fees, which do not appear to be guided by the

OECD Arrangement.33

The OECD Arrangement does not cover fee structures for short-term financing products. The

Bank uses a combination of factors to determine the pricing structure for these products.

What is the approval process for Ex-Im Bank transactions?

Ex-Im Bank processing of transactions is a multi-step process (see Figure 1). Applications can be

submitted by U.S. exporters, foreign buyers, or commercial lenders depending on the situation

and transaction. The approval time for an application can vary, depending on the nature of the

transaction. Ex-Im Bank, based on statutory requirements, considers applications across multiple

criteria. Transactions require the approval of the Board of Directors directly or through delegated

authority.34 Ex-Im Bank monitors the performance of all medium-term direct loans, loan

guarantees, and insurance transactions and all long-term direct loans and loan guarantees above

$1 million to help contain risk.35 Monitoring can vary for short-term transactions.36

Ex-Im Bank, Report to the U.S. Congress on Global Export Credit Competition, for the period January 1, 2014,

through December 31, 2014), June 2015, p. 40 (hereinafter referred to as Ex-Im Bank, 2014 Competitiveness Report,

June 2015), http://www.exim.gov/sites/default/files/reports/EXIM%202014CompetReport_0611.pdf.

GAO, Export-Import Bank: Recent Growth Underscores Need for Continued Improvements in Risk Management,

GAO-13-303, March 2013, p. 27, http://www.gao.gov/assets/660/653373.pdf.

Export-Import Bank of the United States Annual Report 2014, p. 54. As an example of delegated authority, Ex-Im

Bank delegates the authority for underwriting most of short-term transactions directly to Ex-Im Bank-approved private

sector lenders. See GAO, Export-Import Bank: Recent Growth Underscores Need for Continued Improvements in Risk

Management, GAO-13-303, March 2013, pp. 7-8, http://www.gao.gov/products/GAO-13-303.

GAO, Export-Import Bank: Recent Growth Underscores Need for Continued Improvements in Risk Management,

GAO-13-303, March 2013, p. 40; and CRS meeting with Ex-Im Bank, April 7, 2014.

Ibid.

Congressional Research Service

Export-Import Bank: Frequently Asked Questions

Figure 1. General Ex-Im Bank Approval Process

Source: CRS, based on Ex-Im Bank information.

Notes: This diagram is a highly simplified representation of the Ex-Im Bank approval for a proposed transaction.

Specifics can vary by product type and transaction.

How do Ex-Im Bank and private sector financing compare?

It is difficult to compare the rates, terms, and conditions of Ex-Im Bank financing and private

sector financing for exports. The actual terms of an export contract are transaction-specific and

commercial bank loans are private transactions often with business confidential terms. Demand

for Ex-Im Bank financing relative to the private sector can be highly variable. At a macro level, it

may vary depending on market forces and regulatory policies. In recent years, the role of ECAs

may have become more prominent, in part due to tighter credit market conditions associated with

the international financial crisis and the regulatory impact of Basel III37 on commercial banks,

which requires U.S. banks to hold more capital to back trade finance.38 Changes in disciplines for

ECA activity, such as in the OECD Arrangement, also can affect ECA demand. At a micro level, a

commercial bank’s willingness to participate in a transaction may vary depending, for instance,

on available liquidity, perception of risk, international rates of return, and client relationships.

Statutory Requirements and Policies

What are Ex-Im Bank’s general statutory requirements and

policies?

Under its charter, Ex-Im Bank’s financing must have a reasonable assurance of repayment;

supplement, and not compete with, private capital; and be provided at terms competitive with

foreign ECAs.39 The Bank considers a proposed transaction’s potential U.S. economic impact40

and potential environmental impact,41 among other policy issues. Based on its mandate to support

The Basel III international regulatory framework is part of a series of evolving agreements among central banks and

bank supervisory authorities to standardize bank capital requirements, among other measures. See CRS Report R42744,

U.S. Implementation of the Basel Capital Regulatory Framework, by (name redacted).

Ex-Im Bank, Report to the U.S. Congress on Export Credit Competition and the Export-Import Bank of the United

States, For the Period January 1, 2013, through December 31, 2013, June 2014, pp. 12-14 (hereinafter referred to as

Ex-Im Bank, 2013 Competitiveness Report, June 2014), http://www.exim.gov/about/library/reports/

competitivenessreports/upload/Ex-Im-Bank-2013-Competitiveness-Report-to-Congress-Complete.pdf.

12 U.S.C. §635(b)(1)(B).

12 U.S.C. §635a-2; 12 U.S.C. §635(b)(1)(B); 12 U.S.C. §635(e).

12 U.S.C. §635i-5.

Congressional Research Service

Export-Import Bank: Frequently Asked Questions

U.S. employment, Ex-Im Bank currently requires a certain amount of U.S. content (85% for

medium- and long-term transactions) for an export contract to receive full financing from the

Bank.42 It also requires products to be shipped on U.S. flag vessels, with certain exceptions.43

Congress directs Ex-Im Bank to support certain types of exports. For example, congressional

requirements for Ex-Im Bank include to make available not less than 25% of its total authority to

finance small business exports, promote the export of goods and services related to renewable

energy sources, and promote financing to sub-Saharan Africa.44 While the Bank seeks to support

these export goals, it is demand-driven and its activity depends on alignment with commercial

opportunities. Additionally, Congress prohibits Ex-Im Bank from supporting certain types of

transactions subject to exceptions (detailed below).

Ex-Im Bank must submit proposed transactions of $100 million or more or transactions related to

nuclear power and heavy water production facilities through a congressional notification

process.45

Ex-Im Bank also is subject to various reporting requirements, including related to its operations;

small business support, default rate monitoring, categorization of loans and long-term guarantee

transactions by their stated purpose, and its competitiveness vis-à-vis foreign ECAs.46 The charter

also includes other statutory requirements.

What international disciplines guide Ex-Im Bank activities?

Ex-Im Bank abides by the Organization for Economic Cooperation and Development (OECD)

Arrangement on Officially Supported Export Credits (“the Arrangement”), a “Gentlemen’s

Agreement” negotiated by OECD members. Initially entering into effect in April 1978, the

Arrangement has been revised periodically.47 Its purpose is to provide a framework for the orderly

use of government-backed export financing, with the goal of encouraging competition among

exporters based on quality and price of goods and services rather than on the most favorable

government-backed financing terms and conditions. Among other things, it establishes:



limitations on the terms and conditions on government-backed export financing

(e.g., minimum interest rates, risk fees, and maximum repayment terms);

rules governing ECA activity in specific sectors through “sector understandings”

(ships, nuclear power plants, civil aircraft, renewable energy/climate change

mitigation adaption/ water projects, rail infrastructure, and coal-fired electricity

generation projects); and

reporting requirements.48

Ex-Im Bank’s content policy is based on its core jobs mandate, found in 12 U.S.C. §635(a)(1).

Public Resolution 17 of the 73rd Congress; P.L. 109-304.

Small business: 12 U.S.C. §635(b)(1)(E)(v); renewable energy: 12 U.S.C. §635(b)(1)(K); and Sub-Saharan Africa:

12 U.S.C. §635(b)(9)(A).

12 U.S.C. §635(b)(3).

12 U.S.C. §635g and 12 U.S.C. §635g-1.

See Organization for Economic Cooperation and Development (OECD), “The Arrangement on Export Credits,”

http://www.oecd.org/tad/xcred/arrangement.htm; and CRS Report RS21128, The Organization for Economic

Cooperation and Development, by (name redacted) .

The current participants to the OECD Arrangement are Australia, Canada, the European Union, Japan, New Zealand,

Norway, South Korea, Switzerland, and the United States. Brazil is a full participant to the Sector Understanding on

Export Credits for Civil Aircraft.

Congressional Research Service

Export-Import Bank: Frequently Asked Questions

Ex-Im Bank has many foreign counterparts. The countries of some of these foreign ECAs, such

as those of European countries, are members of the OECD; others, such as China, Brazil, and

India, are not. An increasing share of ECA activity globally falls outside of the scope of the

OECD Arrangement. For more information, see the “International Context” section below.

In what countries can (or cannot) Ex-Im Bank provide support?

The Bank is open to support buyers of U.S. exports in almost 200 countries around the world.49

The Bank generally is prohibited from extending credit and insurance to certain countries,

including but not limited to those that are in armed conflict with the United States, those subject

to U.S. sanctions, those with balance of payment problems, those under the charter’s current

Marxist-Leninist prohibition,50 or those for which a presidential determination has been issued.51

What is Ex-Im Bank’s economic impact policy?

Ex-Im Bank’s economic impact analysis provisions were first incorporated in its charter in 1968,

and have been modified multiple times since then.52 Ex-Im Bank is required to have “regulations

and procedures to insure that full consideration is given to the extent that any loan or guarantee is

likely to have an adverse effect” on U.S. industries and U.S. employment.53 These regulations and

procedures are in support of the congressional policy that, “in authorizing any loan or guarantee

the Board of Directors shall take into account any serious adverse effect of such loan or

guarantee” on the competitive position of U.S. industry, the availability of materials in short

supply, and employment in the United States.54 Furthermore, the Bank is prohibited from

extending any loan or guarantee that would establish or expand the production of any commodity

for export by any other country if “the commodity is likely to be in surplus on world markets at

the time the resulting commodity will first be sold” or “the resulting production capacity is

expected to compete with [U.S.] production of the same, similar, or competing commodity” and

will cause “substantial injury” to U.S. producers of a “same, similar, or competing commodity.”55

The same prohibition applies to loans or guarantees subject to U.S. trade remedy measures, such

as countervailing duties or anti-dumping orders.56 However, these prohibitions do not apply if the

Board of Directors determines that the proposed transaction’s “short- and long-term benefits to

[U.S.] industry and employment ... are likely to outweigh the short- and long-term injury to [U.S.]

producers and employment ... of the same, similar, or competing commodities.”57

Ex-Im Bank, “Country Limitation Schedule,” http://www.exim.gov/tools-for-exporters/country-limitation-schedule.

For example, Ex-Im Bank is active in China, although Ex-Im Bank’s charter, in 12 U.S.C. §635(b)(2)(B), identifies

China as a “Marxist-Leninist” country. In 1980, President Carter determined that providing financial assistance to

China would be in the national interest, sufficient to satisfy the requirements in Ex-Im Bank’s charter. See Presidential

Determination No. 80-15, April 2, 1980, http://history.state.gov/historicaldocuments/frus1977-80v13/d307.

12 U.S.C. §635(b)(2); 12 U.S.C. §635(b)(5); and 12 U.S.C. §635(b)(10).

Ex-Im Bank, 2013 Competitiveness Report, June 2014, p. 88.

12 U.S.C. §635a-2.

12 U.S.C. §635(b)(1)(B).

12 U.S.C. §635(e)(1). The Bank defines risk of substantial injury as the extension of a loan or guarantee that will

enable a foreign buyer to establish or expand foreign production by an amount that is equal to or greater than 1% of

U.S. production. See also, Ex-Im Bank, Economic Impact Procedures and Methodological Guidelines, April 2013,

http://www.exim.gov/generalbankpolicies/economicimpact/.

12 U.S.C. §635(e)(2).

12 U.S.C. §635(e)(3).

Congressional Research Service

Export-Import Bank: Frequently Asked Questions

Stakeholders hold different views on Ex-Im Bank’s economic impact policy. Supporters of the

policy argue that it meets the Bank’s statutory requirements while balancing the range of

stakeholder interests. Some users consider the economic impact policy to have a negative effect

on Ex-Im Bank’s competitiveness relative to foreign ECAs because no other ECA has a

comparable policy.58 They argue that the policy may contribute to “data requirements, processing

time, and complexity” and “increased uncertainty” for those that use Ex-Im Bank financing.59

Import-sensitive industries periodically have raised concerns about the economic impact of Ex-Im

Bank’s activities, which have led to certain changes in its charter. For instance, the Export-Import

Bank Reauthorization Act of 2002 (P.L. 107-189) added the prohibition for Bank support related

to countervailing duties and anti-dumping orders (see above).

Certain U.S. airline industry groups argue that Ex-Im Bank’s financing for U.S. aircraft exports to

foreign airlines adversely affects U.S. airlines and their employees, and that the Bank’s economic

impact analysis procedures are inconsistent with its charter, among other concerns.60 The Bank’s

support for foreign airlines’ purchases of wide-body aircraft has been a focal point.61 According to

Ex-Im Bank, its economic impact analysis adequately takes into account U.S. economic effects of

transactions. Following its 2012 reauthorization and based on the above concerns, Ex-Im Bank

stated that it revised its economic impact review of aircraft transactions to “assure a more

cautious review” of them.62 Aspects of this policy debate have been subject to litigation.63

What is Ex-Im Bank’s environmental impact policy?

In 1992, Congress amended Ex-Im Bank’s charter to mandate the establishment of environmental

procedures taking into account the environmental impacts associated with Ex-Im Bank-supported

projects (P.L. 102-429). Since then, Ex-Im Bank’s environmental policy has evolved. Presently,

the charter authorizes the Bank to grant or withhold financing support after taking into account

the potential beneficial and adverse environmental effects of goods and services for which Ex-Im

Bank direct lending and guarantee support is requested. The Bank must conduct an environmental

review of all long-term transactions for which Ex-Im Bank support is requested at or above a

certain threshold amount. Previously, the threshold was $10 million. The Export-Import Bank

Reform and Reauthorization Act of 2015 (Sec. 54002(d) of P.L. 114-94) modified the amount to

$25 million or, alternatively, if less than $25 million, then to a threshold established in accordance

with international agreements, including under the OECD.64

Ex-Im Bank has sought to take environmental considerations into account through:

Ex-Im Bank, 2014 Competitiveness Report, June 2015, p. 69.

Ibid.

Veronique de Rugy and Andrea Castillo, The US Export-Import Bank: A Review of the Debate over Reauthorization,

Mercatus Center at George Mason University, July 16, 2014, pp. 12-14, http://mercatus.org/sites/default/files/deRugyEx-ImReview.pdf; and U.S. Congress, House Committee on Financial Services, Testimony of Richard H. Anderson,

Chief Executive Officer of Delta Air Lines, Hearing entitled “Assessing Reauthorization at the Export-Import Bank:

Corporate Necessity or Corporate Welfare?”, 113th Cong., 2nd sess., June 26, 2014, p. 5,

http://financialservices.house.gov/uploadedfiles/hhrg-113-ba00-wstate-randerson-20140625.pdf.

For a general background, see GAO, Export-Import Bank: Information on Export Credit Agency Financing Support

for Wide-Body Jets, GAO-14-642R, July 8, 2014, http://www.gao.gov/products/GAO-14-642R.

Ex-Im Bank, 2013 Competitiveness Report, June 2014, p. 41.

See, e.g., Delta Air Lines, Inc. v. Export-Import Bank of the United States, 2015 U.S. Dist. LEXIS 40109 (D.D.C.

2015).

12 U.S.C. §635i-5.

Congressional Research Service

Export-Import Bank: Frequently Asked Questions



Reducing the carbon dioxide emissions associated with Ex-Im Bank-supported

projects65 through the promotion of renewable energy exports;

Environmental and Social Due Diligence Procedures and Guidelines, which

provide a framework to screen, classify, and review transactions based on the

likely environmental impact of the underlying project; and

a Carbon Policy and Supplemental Guidelines for High-Carbon Projects, which

includes a focus on transparency and reporting of carbon dioxide emissions and

efforts.

Supporters of Ex-Im Bank’s environmental policy argue that the Bank must balance U.S.

exporting interests with environmental policy considerations, per its mandate. However, some

U.S. exporters are concerned that Ex-Im Bank’s environmental impact policies may be overly

burdensome and detract from its core mission to support U.S. exports and jobs.66 (See next

question.)

What are limitations on Ex-Im Bank financing for coal-fired power

plant projects?

In recent years, Ex-Im Bank’s environmental policies related to high-carbon projects (e.g.,

support for exports for coal-fired power plants) have been a focal point for congressional interest.

After the announcement of President Obama’s Climate Action Plan in June 2013,67 Ex-Im Bank’s

Board of Directors approved revisions to the Bank’s Supplemental Guidelines for High-Carbon

Projects in December 2013. As revised, the Supplemental Guidelines state that “the Bank will not

provide support for exports of high carbon intensity plants, except for high carbon intensity plants

that (a) are located in the world’s poorest countries, utilize the most efficient coal technology

available and where no other economically feasible alternative exists; or (b) deploy carbon

capture and sequestration, in each case, in accordance with the requirements set forth in these

Supplemental Guidelines.”

Subsequently, FY2014-FY2016 appropriations legislation prohibited, in those fiscal years, the use

of Ex-Im Bank funds, under certain conditions, to enforce any rule, regulation, policy, or

guideline implemented pursuant to the Supplemental Guidelines.68 The prohibition varied based

on countries’ classification by the World Bank (see text box). According to Ex-Im Bank, the

impact of the appropriations language on the enforcement of rules under its Supplemental

Guidelines was as follows:

Ex-Im Bank, 2013 Competitiveness Report, June 2014, pp. 54 and 146-147.

For example, see Ex-Im Bank, 2014 Competitiveness Report, June 2015, p. 61.

The White House, “FACT SHEET: President Obama’s Climate Action Plan,” press release, June 25, 2013,

http://www.whitehouse.gov/the-press-office/2013/06/25/fact-sheet-president-obama-s-climate-action-plan; and CRS

Report R43120, President Obama’s Climate Action Plan, coordinated by (name redacted). The plan called for the

United States to “[lead] global sector public financing towards cleaner energy by calling for the end of U.S.

government support for public financing of new coal-fired powers plants overseas, except for the most efficient coal

technology available in the world’s poorest countries, or facilities deploying carbon capture and sequestration

technologies.”

For example, see the Consolidated Appropriations Act, 2016, §7080(3)(C) of P.L. 114-113.

Congressional Research Service

Export-Import Bank: Frequently Asked Questions



For IDA-only countries, the

World Bank Country Classifications

requirement is suspended through

International Development Association (IDA)-eligible

September 30, 2015, for the

countries, as classified by the World Bank, are those

transaction to involve the use of best

countries whose Gross National Income (GNI) per

capita is below a certain threshold, established at $1,215

appropriate technology available and

for FY2016.69 Some countries are eligible only for IDA

the requirement for alternatives

support, and are referred to as “IDA-only” countries.

analysis demonstrating no

Others are eligible for IDA support based on their GNI

economically feasible alternative

per capita income, but also are creditworthy for

exists.

borrowing through the International Bank for

Reconstruction and Development (IBRD); they are

For IDA-blend countries, the

referred to as “IDA-blend” countries. Currently, there

requirement is suspended through

are 59 countries classified by the World Bank as “IDASeptember 30, 2015, for the

only,” and 18 countries classified as “IDA-blend,” the

latter of which can borrow from both facilities. In

transaction to include carbon capture

addition, India graduated from IDA at the end of FY2014

and sequestration to reduce its carbon

but is receiving transitional support for FY2015-FY2017.

intensity to 500 grams of carbon

dioxide/kilowatt hours or less.

For all other countries, the requirement remains for the transaction to include

carbon capture and sequestration to reduce its carbon intensity to 500 grams of

carbon dioxide/kilowatt hours or less.

For all countries (IDA-only, IDA-blend, other), all other Ex-Im Bank

environmental reviews, guidelines, and requirements remain in place.

The Export-Import Bank Reform and Reauthorization Act of 2015 (Sec. 55001 of P.L. 114-94)

prohibits Ex-Im Bank from discriminating solely on the basis of industry for energy-related

projects (regardless of the energy source involved) in terms of denying applications or passing or

applying policies; the act applies this prohibition only to financing by the Bank for projects

“concerning the exploration, development, or export of energy sources and the generation or

transmission of electrical power, or combined heat and power, regardless of the energy source.”70

Such changes present possible issues about Ex-Im Bank’s ability to fulfill its overall mission to

support U.S. exports and jobs and also its interest in addressing environmental concerns.

What is Ex-Im Bank’s small business statutory mandate?

While Ex-Im Bank provides financing to companies of all sizes, its charter contains specific

mandates related to U.S. small business exports. The Export-Import Bank Reform and

Reauthorization Act of 2015 (Sec. 52001 of P.L. 114-94) directs the Bank to make available not

less than 25% of its aggregate loan, guarantees, and insurance authority to directly finance

exports by small businesses for FY2016 and each subsequent fiscal year.71 Congress has

increased the percentage associated with the small business target over time (see text box).

The World Bank’s FY2015 is July 1, 2014, to June 30, 2015.

12 U.S.C. §635k.

12 U.S.C. §635(b)(1)(E)(v).

Congressional Research Service

Export-Import Bank: Frequently Asked Questions

With respect to the quantitative target, the

Ex-Im Bank Small Business Target

Export-Import Bank Reauthorization Act of

Ex-Im Bank Act Amendments of 1983 (Sec. 618 of

2006 (P.L. 109-438) directed Ex-Im Bank to

P.L. 98-181): Directed Ex-Im Bank to encourage small

have a goal to increase the amount made

business participation in international commerce

available to finance exports by “socially and

including by making available a certain percentage of its

aggregate loan, guarantees, and insurance authority to

economically disadvantaged small business

finance exports by small business concerns—not less

concerns” and “small business concerns

than 6% for FY1984, not less than 8% for FY1985, and

owned by women.” Ex-Im Bank generally

not less than 10% for FY1986 and thereafter.

refers to these as minority- and women-owned

Ex-Im Bank Reauthorization Act of 2002 (Sec. 7 of

businesses.73 The 2006 act also established a

P.L. 107-189): Directed Ex-Im Bank to make available not

Small Business Division within the Bank, as

less than 20% of its aggregate authority to directly

finance exports by small business concerns.

well as an office in the new division that

Ex-Im Bank Reform and Reauthorization Act of

focuses on socially and economically

2015 (Sec. 52001 of P.L. 114-94): Increased the small

disadvantaged small businesses and womenbusiness target to 25% for FY2016 and each subsequent

owned small businesses. In addition, the 2006

fiscal year.

act directed the Bank to have small business

specialists throughout the agency and

established a Small Business Committee within its management structure.

What is Ex-Im Bank’s “renewable energy” statutory mandate?

Ex-Im Bank has a statutory requirement to “promote the export of goods and services related to

renewable energy resources,” which was added to its charter by the Export-Import Bank

Reauthorization Act of 2002 (P.L. 107-189).

Additionally, appropriations acts for certain years have included directives setting quantitative

targets for Ex-Im Bank’s renewable energy support. For instance, the FY1990 foreign operations

appropriations act (P.L. 101-167) directed Ex-Im Bank to seek to provide not less than 5% of the

financing it utilizes for supporting energy sector exports for renewable energy projects.74

Appropriations acts for FY2008-FY2015 directed Ex-Im Bank to make available not less than

10% of its aggregate credit and insurance authority for financing “renewable energy” exports.75

The FY2016 appropriations act does not include any such quantitative target for the Bank.

12 U.S.C. §635(b)(1)(E)(v) states: “... the Bank shall make available, from the aggregate loan, guarantee, and

insurance authority available to it, an amount to finance exports directly by small business concerns (as defined

under section 632 of title 15) which shall be not less than 20 percent of such authority for each fiscal year. From the

amount made available under the preceding sentence, it shall be a goal of the Bank to increase the amount made

available to finance exports directly by small business concerns referred to in section 635a(i)(1) of this title.” 12 U.S.C.

§635a(i) refers to “socially and economically disadvantaged small business concerns” and “small business concerns

owned by women.”

GAO, Export-Import Bank: Performance Standards for Small Business Assistance Are in Place but Ex-Im Is in the

Early Stages of Measuring Their Effectiveness, GAO-08-915, July 2008, p. 10 (footnote),

http://www.gao.gov/assets/280/278336.pdf.

GAO, Export-Import Bank: Reaching New Targets for Environmentally Beneficial Exports Presents Major

Challenges for the Bank, GAO-10,682, July 2010, http://www.gao.gov/assets/310/307160.pdf.

The specific terms used for the directive have varied. The FY2015 appropriations act, for example, referred to

“renewable energy technologies or energy efficiency technologies” for the quantitative target.

Congressional Research Service

Export-Import Bank: Frequently Asked Questions

What is Ex-Im Bank’s sub-Saharan Africa statutory mandate?

The Export-Import Bank Reauthorization Act of 1997 (P.L. 105-121) amended Ex-Im Bank’s

charter to include mandates related to sub-Saharan Africa. It required its Board of Directors to

take “prompt measures, consistent with the credit standards otherwise required by law, to promote

the expansion of the Bank’s financial commitments in sub-Saharan Africa” under the Bank’s loan,

guarantee, and insurance programs.76

Among other things, the 1997 reauthorization act also is the basis for the Bank’s Sub-Saharan

Africa Advisory Committee. The act required the Board of Directors to establish an advisory

committee to advise it on the development and implementation of policies and programs to

support this expansion of the Bank’s commitments in the region.77 The act included a termination

date for the advisory committee of four years after the enactment of the act. Subsequent

reauthorization acts have extended the Sub-Saharan Africa Advisory Committee’s termination

date, most recently to September 30, 2019 (Sec. 54001(c) of P.L. 114-94).78

What is Ex-Im Bank’s foreign content policy?

“Content” is the amount of domestic and foreign costs from labor, materials, overhead, and other

inputs associated with the production of an export. Ex-Im Bank bases its content policy on its

statutory mandate to support U.S. jobs. Under its content policy, for all medium- and long-term

transactions, Ex-Im Bank limits its support to the lesser of (1) 85% of the value of all goods and

services contained within a U.S. supply contract; or (2) 100% of the U.S. content of an export

contract. In effect, it requires a minimum of 85% U.S. content and a maximum of 15% foreign

content for an export contract to receive the full extent of financing that it offers. If the foreign

content exceeds 15%, the Bank’s support is lowered proportionally.79 For short-term export

contracts, the minimum U.S. content for full Ex-Im Bank financing is generally 50%.80

Content policies vary across ECAs globally, as the OECD Arrangement allows member countries

to develop their content policies based on their own domestic interests. Unlike Ex-Im Bank, a

number of other ECAs, such as those of Canada, France, Germany, Italy, Japan, and the United

Kingdom, do not automatically reduce their cover if the foreign content exceeds 15%.81 Further,

some foreign ECAs reportedly have allowed anywhere from 50% to 80% foreign content without

decreasing support.82

Stakeholder views on Ex-Im Bank’s content policy vary. With the proliferation of global supply

chains, the issue of content has become more actively debated. U.S. exporters and lenders

reportedly consider Ex-Im Bank’s overall content policy to be less competitive than foreign

ECAs, considering its “lack of flexibility” as a constraint to seeking Ex-Im Bank support.83 Some

U.S. businesses have called for greater flexibility in Ex-Im Bank’s content policy, such as

12 U.S.C. §635(b)(9)(A).

12 U.S.C. §635(b)(9)(B)(i).

12 U.S.C. §635(b)(9)(B)(iii).

Ex-Im Bank, 2014 Competitiveness Report, June 2015, p. 71; and Ex-Im Bank, “Medium- and long-term content

policy,” http://www.exim.gov/policies/content/medium-and-long-term.

Ex-Im Bank, “Short-term content policy,” http://www.exim.gov/policies/content/short-term-content-policy.

Ex-Im Bank, 2014 Competitiveness Report, June 2015, p. 74.

Ibid., p. 75.

Ibid.

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lowering the minimum amount of domestic content required to receive full Ex-Im Bank financing

or expanding the definition of domestic content to include, for instance, research and

development in the United States. However, labor groups tend to be concerned about the impact

that lowering domestic content requirements may have on employment in the home country.

From their point of view, reducing these requirements may result in an outsourcing of labor to

other countries. Others counter that the current requirements may induce firms to use other ECAs

for alternative sources of financing, which may cause them to shift production overseas.

Does Ex-Im Bank support military or “dual-use” exports?

Ex-Im Bank is prohibited from financing defense articles and defense services with certain

limited exceptions, such as a national interest determination by the President.84 According to ExIm Bank, its European ECA counterparts do not have the same restrictions on military finance.85

Other exceptions for Ex-Im Bank include its authority to finance certain “dual-use” exports that

have both civilian and military applications.86 This authority, established in 1994 (Section 1(c) of

P.L. 103-428), has been renewed periodically. The Export-Import Bank Reform and

Reauthorization Act of 2015 extended this authority through September 30, 2019 (Sec. 54001(b)

of P.L. 114-94).87 According to GAO, as of May 30, 2015, Ex-Im Bank financed a total of $1.67

billion in exports under its dual-use authority.88 Recent transactions include financing in FY2012,

totaling $1.03 billion, for U.S. exports of satellites to a French company and to the government of

Mexico, and of construction equipment to the government of Cameroon.89 Ex-Im Bank maintains

policies for monitoring the end-use of defense articles and defense services that it finances. GAO

reports annually on the end-uses of dual-use exports financing by Ex-Im Bank. An August 2014

GAO report identified some weaknesses in Ex-Im Bank’s documentation of required procedures

for dual-use monitoring and provided a recommendation for improving documentation.90 GAO

reported that Ex-Im Bank has addressed these weaknesses by revising and implementing its

guidance for monitoring dual-use items.91

What is Ex-Im Bank’s U.S.-flag shipping requirement?

Under Ex-Im Bank’s shipping policy, certain products supported by the Ex-Im Bank must be

transported exclusively on U.S. vessels (e.g., generally direct loans of any amount, guarantees

above $20 million, and products with repayment periods of more than seven years). Under limited

conditions, a waiver of this requirement may be granted on a case-by-case basis by the U.S.

Maritime Administration (MARAD). This policy is based on Public Resolution 17 (PR-17,

12 U.S.C. §635(b)(6). For a brief historical treatment, see U.S. Congress, House Committee on Foreign Affairs,

Subcommittee on Terrorism, Nonproliferation, and Trade, Written Testimony of Fred P. Hochberg - President and

Chairman, Export-Import Bank of the United States, Hearing on “Trade Promotion Agencies and U.S. Foreign Policy”,

114th Cong., 1st sess., May 19, 2015, p. 2.

Ibid.

12 U.S.C. §635(b)(6)(I).

12 U.S.C. §635 note.

GAO, Export-Import Bank: Monitoring of Dual-Use Exports Should be Improved, GAO-15-611, June 2015, p. 4,

http://gao.gov/assets/680/671002.pdf.

Ibid., p. 4.

GAO, Export-Import Bank: Status of Actions to Address GAO Recommendations since the Bank's 2012

Reauthorization, GAO-15-557T, April 15, 2015, p. 11.

GAO, Export-Import Bank: Monitoring of Dual-Use Exports Should be Improved, GAO-15-611, June 2015, p. 5.

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approved March 26, 1934, by the 73rd Congress),92 which is intended to “ensure a well-trained

merchant marine able to maintain the flow of waterborne domestic and foreign commerce during

wartime or national emergency.”93 Supporters of the U.S. flag shipping requirement may argue

that maintaining U.S. flag vessels is important to U.S. national security and note its role in

contributing to jobs in the U.S. shipping industry. Critics may counter that, because of changes in

U.S. strategic requirements and in the global shipping market, the requirement can make U.S.

goods less competitive relative to foreign goods, noting higher rates and delays associated with

shipping with U.S.-flagged vessels.94 Unlike Ex-Im Bank, no other ECAs require use of the

shipping vessels of their home countries.95

International Context

What is the global ECA marketplace?

According to Ex-Im Bank, the number of export credit agencies globally reached as many as 85

in 2014.96 Some ECA activity is regulated by the Organization for Economic Cooperation and

Development Arrangement on Officially Supported Export Credits (OECD Arrangement), but an

increasingly larger amount appears to be unregulated. Ex-Im Bank states that over half of ECAs

globally are operating programs that are not regulated by the OECD Arrangement.97 It can be

difficult to verify the full extent of unregulated activity, as it is not subject to the same

transparency standards that OECD regulated finance is.

Ex-Im Bank provides information and data on selected ECAs’ official medium- and long-term

“trade-related support.”98 “Trade-related support” includes ECA activities beyond export credit

activity directly tied to exports. Ex-Im Bank groups ECAs’ activities into three categories:



Support by OECD members that is regulated by the OECD Arrangement.

“Traditional” ECA activity is activity directly tied to exports (e.g., direct loans,

guarantees, and insurance products). It is regulated by the OECD Arrangement.

According to Ex-Im Bank, all of its medium- and long-term activity falls within

this sphere.99 Historically, ECA activity regulated by the OECD has accounted

for the majority of government-backed export financing. That share has

decreased over time.



Support by OECD members that is outside of the OECD Arrangement’s

scope. Certain OECD member countries provide financing through their ECAs

that is ungoverned by the OECD Arrangement. One form of unregulated

Codified as 46 U.S.C. 55304, by P.L. 109-304, October 6, 2006.

Ex-Im Bank, “Ex-Im Bank Policies: Shipping Requirements (MARAD),” http://www.exim.gov/policies/us-flagshipping-requirements; and Ex-Im Bank, 2014 Competitiveness Report, June 2015, p. 81. For background, see CRS

Report R44254, Cargo Preferences for U.S.-Flag Shipping, by (name redacted)

Ex-Im Bank, 2014 Competitiveness Report, June 2015, p. 83.

Ibid.

Ibid., p. 2.

Ibid., pp. 1-2.

According to Ex-Im Bank, it generally does not include analysis of short-term transactions because of “wide

disparities in countries’ practices in that sphere which render comparison of limited usefulness.” The OECD

Arrangement provides guidelines for official ECA support that has repayment terms of two years or more.

Ex-Im Bank, 2014 Competitiveness Report, June 2015, pp. 15-17.

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

financing is “market windows,” which are government-owned entities or

programs that offer export credits on market terms. Market windows generally do

not operate on purely commercial terms, as they tend to receive benefits from

their government status that commercial lenders cannot access. For example,

Canada’s ECA—Export Development Canada (EDC)—operates market window

programs. Ex-Im Bank does not have a market window. A second form of

unregulated financing is untied lending support, which is credit support extended

by a government entity to a recipient for the purpose of providing credit for

strategic interests of the donor country. Because the untied loan is not tied to

exports, it is not subject to the OECD export credit guidelines. A third form of

unregulated financing is investment support.100

Support by non-OECD members. Emerging markets, such as China, Brazil,

India, and Russia, which are not members of the OECD, are increasingly active

providers of government-backed export financing.101 This financing may not

comply with the OECD Arrangement, for example, by including below-market

terms, with which it is difficult for ECAs of OECD members to compete.

Table 1. Total Official Medium- and Long-Term Trade-Related Support, 2014

Amount

($ billion)

Share of Total Export

Support (%)

OECD Members: Activity Within OECD Arrangement Scope

$97

35%

OECD Members: Outside of OECD Arrangementa

$71

25%

Non-OECD Membersb

$112

40%

Total Export Support

$280

100%

ECA

Source: CRS, based on Ex-Im Bank, 2014 Competitiveness Report, June 2015, pp. 15-17

Notes:

a. This consists of market window, untied, and investment support.

b. This includes both export and investment support.

How do export finance volumes of Ex-Im Bank and foreign ECAs

compare?

ECA comparisons are available from Ex-Im Bank in the area of government-backed new

medium- and long-term export financing (see Figure 2). Based on data reported by Ex-Im Bank,

in 2014, the 34 members of the OECD (as a whole) provided an estimated $96.7 billion in such

financing, comparable to their volume in 2013 ($97.8 billion), but less than their volume in 2012

100

The United States provides certain investment support through a separate entity, the Overseas Private Investment

Corporation (OPIC). Some other countries provide export and investment support through the same entity. CRS Report

98-567, The Overseas Private Investment Corporation: Background and Legislative Issues, by (name redacted)

101

These emerging markets, while not members of the OECD, may have observer status during some OECD meetings.

The OECD has offered them “enhanced engagement” with a view towards possible accession. Brazil, furthermore, is a

member of the OECD Aircraft Sector Understanding.

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($126 billion).102 U.S. support through Ex-Im Bank accounted for 12.5% ($12.1 billion) of the

total volume by OECD countries in 2014.103

In contrast, also based on Ex-Im Bank data, in 2014, the combined new medium- and long-term

support provided by China, Brazil, India, and Russia was estimated to be $63.9 billion, up from

2013 ($50.5 billion) and 2012 ($43.4 billion).104 Notably, China alone accounted for at least $58

billion of such financing in 2014—a total that exceeds that of the G-7 countries combined.105

According to Ex-Im Bank, China was the single largest provider of export finance in 2014.106

Figure 2. New Medium- and Long-Term Export Financing Volumes for Selected

ECAs, 2014

Source: CRS, based on data from Ex-Im Bank, Report to the U.S. Congress on Global Export Credit Competition (for

the period January 1, 2014, through December 31, 2014, June 2015), pp. 18-19.

Notes: Data subject to analytic assumptions and limited by availability of information.

a. Ex-Im Bank specifically notes that the amount for “Other OECD ECAs” is estimated.

b. Ex-Im Bank reports the total amount for selected emerging markets as $63.9 billion. The amount provided

here, $64.8 billion, results from summing the individual volumes for the emerging market ECAs.

How do Ex-Im Bank and foreign ECAs compare in their policies?

Ex-Im Bank and other ECAs vary in their mandates, organizational structure, policies, focus

areas, and terms and conditions. This can complicate efforts to make comparisons across ECAs.

Among stakeholders, one view is that Ex-Im Bank’s policies—such as in its economic and

102

Ex-Im Bank, 2014 Competitiveness Report, June 2015, p. 18. ECA volumes for OECD countries reported by Ex-Im

Bank reflect activity that is regulated by the OECD Arrangement.

103

Ibid.

104

Ex-Im Bank, 2014 Competitiveness Report, June 2015, p. 19. ECA volumes for non-OECD countries reported by

Ex-Im Bank reflect what activity would be regulated by the OECD Arrangement.

105

The Group of Seven (G-7) countries consist of the United States, Canada, France, Germany, Italy, Japan, and the

United States.

106

Ex-Im Bank, 2014 Competitiveness Report, June 2015, p. 19.

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environmental impact, domestic content requirement, and U.S. flag shipping requirements—tend

to be more stringent than those of foreign ECAs. From a business perspective, some argue that

such policies can make Ex-Im Bank less competitive than foreign ECAs in supporting exporters.

Another view is that Ex-Im Bank, through its policies, must balance a range of stakeholder

interests, including those of businesses that benefit directly from Ex-Im Bank, other businesses

that may be affected by Ex-Im Bank support, labor concerns, and environmental concerns.

As required by Congress, Ex-Im Bank annually assesses how its policies, practices, and programs

compare with those of major foreign ECAs in its Annual Competitiveness Report to Congress. To

access the current year’s report, as well as prior years’ reports dating to 2001, see

http://www.exim.gov/news/reports/competitiveness-reports.

How effective is the OECD Arrangement?

Stakeholders have debated whether the OECD Arrangement is effective in “leveling the playing

field” for exporters in the current trading environment. By some estimates, the OECD

Arrangement reportedly has saved U.S. taxpayers about $800 million annually.107 According to

the Office of the U.S. Trade Representative, the minimum interest rate rules set by the OECD

Arrangement limit subsidized export financing and reduce competition based on below-cost

interest rates and long repayment terms by ECAs, and the minimum exposure fees for country

risks also reduce costs.108 The further leveling of the playing field created by the OECD tied aid

disciplines is estimated by USTR to have boosted U.S. exports by $1 billion a year.109

At the same time, there are questions about the effectiveness of the OECD Arrangement,

particularly in light of ECA activity by non-OECD members, who are not obligated to comply

with the OECD limitations on the terms and conditions of export credit activity. To the extent that

the ECAs of non-OECD countries provide financing for non-U.S. exporters on terms that are

more advantageous than those allowed within the OECD Arrangement, U.S. exporters may find it

difficult to compete with such export credit programs, including with Ex-Im Bank. Concerns

about the effectiveness of the OECD Arrangement are further heightened due to financing by

OECD members that is outside the Arrangement’s scope. See earlier question in this section,

“What is the global ECA marketplace?”.

What is the status of international negotiations on ECA financing?

The United States historically has led efforts to impose international disciplines on governmentbacked export credit activity. Building on the OECD Arrangement on Officially Supported Export

Credits, OECD members continue to negotiate further rules on ECA activity, for example, on

sector-specific disciplines.

Based on 2012 Ex-Im Bank reauthorization act, and as modified by the 2015 reauthorization act,

the President is directed to initiate and pursue negotiations with



other major exporting countries, including OECD members and non-OECD

members, to substantially reduce, with the possible goal of eliminating,

government-backed ECA financing within ten years after December 4, 2015;

107

Office of the U.S. Trade Representative, The Organization for Economic Cooperation and Development (OECD),

http://www.ustr.gov/trade-agreements/wto-multilateral-affairs/oecd.

108

Ibid.

109

Ibid.

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

non-OECD countries to bring those countries into a multilateral agreement

establishing rules and limitations on ECA financing; and

all countries that finance air carrier aircraft through funds from a state-sponsored

entity to reduce and eliminate aircraft export credit financing for all aircraft

covered by the 2007 OECD Aircraft Sector Understanding (ASU).110

Separately, an International Working Group on Export Credits (IWG) was established in 2012,

following a bilateral commitment between U.S. and Chinese leadership to work towards a new set

of international export credit guidelines.111 Discussions have evolved from comparing existing

export credit systems to a “text-based” discussion on the ship-building and medical equipment

sectors. This has set the stage for discussions on horizontal, broadly applicable guidelines to

reportedly begin at the October 2015 meeting of the IWG.112

The Department of the Treasury states that it has engaged in efforts to bring China and other large

emerging markets into a new rules-based international export credit framework, as well as

worked to reform the ASU to minimize distortions in the aircraft export credit market. It also

notes that it has engaged in efforts to improve the current OECD Arrangement to make it more

market-oriented, such as for interest rates.113 Some have criticized U.S. government efforts as

insufficient in terms of the statutory requirements on international export credit negotiations. For

example, a major U.S. airline contends that “there has been essentially no progress” with respect

to the mandate to negotiate with countries to substantially reduce, with the ultimate goal of

eliminating, aircraft export credit financing.114 Others note that while exports play an important

role in the U.S. economy, the economies of other countries are far more reliant on exports,

constituting a larger share of their respective gross domestic product. Moreover, other OECD

countries presumably would be reluctant to terminate their export credit programs while countries

outside of the OECD, such as China, Brazil, and India, continue their financing programs.

Activity

What is Ex-Im Bank’s exposure level?

Ex-Im Bank’s exposure level is the aggregate amount of loans, guarantees, and insurance that ExIm Bank has outstanding at any one time (“overall portfolio”). Statutory limits on its exposure

110

12 U.S.C. §635a-5(a). Aircraft finance historically has constituted a major part of Ex-Im Bank’s portfolio. The

Aircraft Sector Understanding (ASU) is an agreement among the United States, the EU, Canada, Brazil, and other

countries that sets terms and conditions for government-backed export financing for aircraft. It has been updated a

number of times, most recently in 2011, with the goal of leveling the playing field among ECA-supported aircraft

financing. GAO, Export-Import Bank: Information on Export Credit Agency Financing Support for Wide-Body Jets,

GAO-14-642R, July 8, 2014, http://www.gao.gov/products/GAO-14-642R.

111

The White House, “White House Fact Sheet on U.S.-China Economic Relations,” press release, November 12,

2014, http://www.whitehouse.gov/the-press-office/2014/11/12/fact-sheet-us-china-economic-relations/.

112

The White, “White House Fact Sheet on U.S.-China Economic Relations,” press release, September 25, 2015,

https://www.whitehouse.gov/the-press-office/2015/09/25/fact-sheet-us-china-economic-relations; and European

Commission, Annual Report on negotiations undertaken by the Commission in the field of export credits, in the sense of

Regulation (EU) No 1233/2011, October 20, 2015.

113

Treasury Report to the Committee on Banking, Housing, and Urban Affairs of the Senate and the Committee on

Financial Services of the House of Representatives on Export Credit Negotiations, December 2014.

114

See U.S. Congress, House Committee on Financial Services, Testimony of Richard B. Hirst, Executive Vice

President and Chief Legal Office, Delta Air Lines, Hearing entitled “Examining the Export-Import Bank’s

Reauthorization Request and the Government's Role in Export Financing”, 114th Cong., 1st sess., June 3, 2007, p. 3.

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level are established in Ex-Im Bank’s charter.115 In FY2015, Ex-Im Bank reported that its

exposure totaled $112.0 billion—below the $140 billion statutory cap for that year. This

represents a decrease following recent years of record highs in Ex-Im Bank’s exposure level (see

Figure 3). According to Ex-Im Bank, prior years’ growing levels of exposure were associated

largely with increased demand for Ex-Im Bank’s services during the financial crisis as

commercial lending declined, among other things.116 Ex-Im Bank’s portfolio is distributed across

its financial products, as well as geographical regions and economic sectors (see Figure 4). The

Export-Import Bank Reform and Reauthorization Act of 2015 (Sec. 51001 of P.L. 114-94)

decreases Ex-Im Bank’s exposure cap to $135 billion for each of FY2015 through FY2019.117

Figure 3. Ex-Im Bank Exposure Levels and Exposure Cap, FY1997-FY2015

Source: CRS analysis of data from Ex-Im Bank annual reports.

115

12 U.S.C. §635e(F)(ii).

GAO, Export-Import Bank: Recent Growth Underscores Need for Continued Improvements in Risk Management,

GAO-13-303, March 2013, pp. 14-20 (hereinafter GAO-13-303, March 2013).

117

The act provides that if Ex-Im Bank’s default rate is 2% or more for a quarter, then the Bank cannot exceed the

amount of loans, guarantees, and insurance outstanding on the last day of the quarter until the default rate is less than

2%.

116

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Figure 4. Ex-Im Bank Exposure Level Composition, FY2015

Source: CRS, based on data from Ex-Im Bank annual reports.

Notes: Ex-Im Bank reported its FY2015 exposure as $102.2 billion.

How much credit and insurance does Ex-Im Bank authorize?

In the context of Ex-Im Bank’s activities, its authorizations are the new commitments for credit

and insurance that the agency approves each year.118 Ex-Im Bank authorized 2,630 transactions in

the amount of $12.4 billion in FY2015, down from 3,746 transactions in the amount of $20.5

billion in FY2014 (see Figure 5). Following several years of record highs in authorizations since

the 2008 financial crisis, Ex-Im Bank’s authorizations have declined over the past couple of years

with improvements in the private sector lending environment.119

Ex-Im Bank provides annual reports that discuss its program activity levels and focus areas, as

well as its financial performance. The current year’s reports, as well as certain earlier years’

reports, are accessible at http://www.exim.gov/news/reports/annual-reports. The “Financial

Report” section of the annual report includes a summary of Ex-Im Bank’s overall authorizations

118

This usage of authorization is distinct from its usage in the budget process context, where it refers to the amount

authorized to be appropriated.

119

Export-Import Bank of the United States Annual Report 2014, p. 57.

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by financial product type; its overall authorizations by market; and its long-term loans and

guarantee authorizations by market.

Figure 5. Ex-Im Bank Authorizations for Credit and Insurance Commitments,

FY1997-FY2015

Source: CRS, from Ex-Im Bank annual reports.

How does Ex-Im Bank work to ensure that its financing does not

compete with the private sector?

The requirement that Ex-Im Bank transactions should “supplement and encourage, and not

compete with private capital” has been a longtime statutory requirement. The 2012 Ex-Im Bank

reauthorization act (Sec. 10 of P.L. 112-122) amended the Bank’s charter to require, in its annual

report to Congress, a categorization of each loan and long-term guarantee made by the Bank in

the fiscal year covered by the report according to the following purposes:

1. To assume commercial or political risk that the exporter or private financial

institutions are unwilling or unable to undertake.

2. To overcome maturity or other limitations in private sector export financing.

3. To meet competition from a foreign, officially sponsored, export credit

competition.

4. Not identified, and the reason why the purpose is not identified.

Ex-Im Bank applicants reportedly generally indicate the purpose for seeking Ex-Im Bank

support.120 For example, a section in Ex-Im Bank’s application for long-term loans and guarantees

(for amounts greater than $10 million) requires the applicant to list the reason for requesting Ex-

120

Ex-Im Bank, Report to the U.S. Congress on the Export-Import Bank of the United States and Global Export Credit

Competition, for the period January 1, 2013, through December 31, 2013, June 2014, p. 113.

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Im Bank support in terms of which factor is the most important.121 Additionally, a certification

section of the application requires the applicant to certify, under the penalty of perjury, “The

representations made and the facts stated in this application and its attachments are true and

Applicant has not misrepresented or omitted any material facts....” Ex-Im Bank states that it

verifies the certifications when warranted. Additionally, other aspects of its policies, such as its

underwriting, policy research, and Board approval process may support its efforts to ensure that

its financing does not compete with the private sector. The agency’s annual competitiveness

report provides an aggregation of the primary purpose of Ex-Im Bank transactions by calendar

year, by both dollar amount and number of transactions (see Table 2).

In the 114th Congress, debate centered on the circumstances in which Ex-Im Bank provides

support, the frequency of the Bank’s support to fill in gaps in private sector financing versus

offsetting foreign ECA competition, the Bank’s current practices for ensuring that it does not

compete with the private sector and fulfills its mandate, and appropriate reforms that may be

undertaken—with congressional and stakeholder views varying across these issues.

Table 2. Purpose of Ex-Im Bank Transactions Authorized, 2014

Private sector

unwilling to take

risks

Private sector

limitations

Potential

competition

ALL

TRANSACTIONS

$ mn

$7.2

$1,870.9

468

$0.0

$1,878.1

470

Short-term

insurance

$723.0

1,128

$4,403.4

1,853

$2.5

$5,128.9

2,983

Medium-term

insurance

$0.0

$38.3

$66.4

$104.7

$1,536.9

$1,509.2

$8,005.7

$11,051.8

$144.0

$0.0

$775.6

$919.6

$2,411.1

1,146

$7,821.8

2,382

$8,850.2

$19,083.1

3,618

12.6%

31.7%

41.0%

65.8%

46.4%

2.5%

100%

Working capital

guarantees

Medium- & longterm guarantees

Loans

Subtotal

% of all

transactions

Source: CRS, based on Ex-Im Bank, Report to the U.S. Congress on the Export-Import Bank of the United States and

Global Export Credit Competition (for the period January 1, 2014, through December 31, 2014), June 2015, p. 91.

Note: The data reflect the purpose of Ex-Im Bank transactions authorized in 2014, as provided by Ex-Im Bank in

the document cited above. Data in “All Transactions” reflect summations for each row and may vary slightly

from Ex-Im Bank-provided totals.

What amount of U.S. exports and number of U.S. jobs are

associated with Ex-Im Bank activity?

Ex-Im Bank estimates the amount of U.S. exports and number of U.S. jobs supported by its

activity. For FY2015, Ex-Im Bank estimates that its authorizations of $12.8 billion are in support

121

Ex-Im Bank, “Application for Long-Term Loan or Guarantee,” p. 7,

http://www.exim.gov/sites/default/files/forms/eib95-10all.pdf.

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of $17.1 billion in U.S. export value and 109,000 U.S. jobs.122 The Bank also maintains data

through an interactive map of the United States with its estimated export and jobs impact at the

state and congressional district levels. It is accessible at http://www.exim.gov/who-weserve/congressional.

It is important to note that various factors affect U.S. export and employment levels. As such,

while the role of Ex-Im Bank support at the individual firm level may be apparent, it may be

difficult to determine the precise impact of the presence or absence of Ex-Im Bank financing on

the U.S. economy in the long run.

What is the opportunity cost of Ex-Im Bank activity to U.S. exports

and jobs?

A limitation in demonstrating export and employment relationships is in trying to determine the

opportunity cost of Ex-Im Bank financing. Ex-Im Bank’s credit and insurance programs, in

supporting exports and employment, draw from the capital and labor resources within the

economy that would be available for other uses, such as alternative exports and employment. 123

Challenges arise in determining what impact the presence of Ex-Im Bank has on the allocation of

resources in the market, as well as whether, in the absence of Ex-Im Bank, the sales of exports

and resulting employment attributed to Ex-Im Bank would have occurred. For example, if Ex-Im

Bank financing was not available, would firms have used services and financing from the private

sector, perhaps at a higher cost, to export? Or would the private sector costs be too prohibitive

due to market failures, such as imperfect information, and discourage U.S. firms from exporting?

In that case, economic theory would predict that fewer jobs would be created in the export

industry, but more jobs would be created elsewhere in the economy, for no net loss in total

employment in the long run.

How does Ex-Im Bank calculate its estimated jobs support?

Ex-Im Bank uses an “input-output” approach based on data from the Bureau of Labor Statistics

(BLS) to estimate the number of U.S. jobs it supports through its export financing.124 BLS

develops a domestic employment requirements table (ERT) to calculate the number of direct and

indirect production-related jobs associated with $1 million of final demand for nearly 200

industries.125 Ex-Im Bank’s methodology is to (1) determine and apply the specific industry code

to each transaction that it finances; (2) determine the value of all exports it supports for each

industry; (3) multiply the export value by the jobs ratio from the ERT needed to support $1

million in exports in each industry; and (4) add together the estimate of jobs supported across all

122

Export-Import Bank of the United States Annual Report 2015, p. 28.

Theoretically, the value of any opportunity cost would rise the closer the economy gets to full employment.

124

An estimate of “jobs supported” by Ex-Im Bank financing of U.S. exports may be distinct from an estimate of “jobs

created” by such financing.

125

Bureau of Labor Statistics (BLS), Employment Outlook: 2012-2022, Layout and Description for 195-Order

Employment Requirements Tables: Historical 1993 through 2012,

http://www.bls.gov/emp/ep_data_emp_requirements.htm; and Export-Import Bank of the United States Annual Report

2014, p. 10. The Employment Requirements Table (E7RT) is based on the 2007 North American Industry

Classification System (NAICS).

123

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industries to get a total number of jobs supported.126 Under this methodology, Ex-Im Bank’s

FY2015 authorizations support 6,199 jobs per $1 billion of U.S. exports. This represents a

weighted average based on each industry’s relative jobs per $1 billion average at time of

calculation.127

Although the input-output approach is based on a commonly used methodology, it has certain

limitations and is sensitive to certain assumptions. Some of the limitations are specific to the

ERT. For instance, the ERT does not distinguish between jobs that were “newly created” and

“maintained”; because of this lack of detailed information and limitations, Ex-Im Bank reports

that jobs are “associated with” or “supported by its financing.” The ERT also treats full-time,

part-time, and seasonal jobs equally in its count of jobs. It further assumes average industry

relationships, though, in actuality, firms differ within an industry. In addition, it excludes any

“multiplier effects” of spending from income generated by jobs supported by Ex-Im Bank. Other

limitations are specific to Ex-Im Bank’s process for determining industry and export value.128

Alternative methodologies may address some limitations but have other drawbacks.129 As part of

a May 2013 study on Ex-Im Bank’s jobs calculation methodology, the Government

Accountability Office (GAO) recommended that Ex-Im Bank improve the transparency of its

methodology in terms of its limitations and assumptions.130 According to GAO, Ex-Im Bank

included greater detail on its job calculation methodology in its FY2013 annual report.131

Has Ex-Im Bank fulfilled targets for support concerning small

business, renewable energy, and sub-Saharan Africa?

Ex-Im Bank is a demand-driven agency. As such, Ex-Im Bank efforts to meet targets related to

small business, renewable energy, and Sub-Saharan Africa depend on alignment with commercial

interests, among other factors. Ex-Im Bank met its prior 20% small business target in FY2014

and FY2015 (see Table 3), but fell short of it in some other years, based on authorization amount.

At the same time, small business transactions supported by the Bank constitute the majority of

Ex-Im Bank’s transactions by number.132 During FY2008-FY2015, the Bank’s support for

renewable energy exports was below the 10% directive each year, possibly due, in part, to market

limitations.133 Although Ex-Im Bank’s support for sub-Saharan Africa (for which no quantitative

126

GAO, Export-Import Bank: More Detailed Information about Its Jobs Calculation Methodology Could Improve

Transparency, GAO-13-466, May 23, 2013, pp. 7-10 (hereinafter GAO-13-466, May 23, 2013). The Trade Promotion

Coordinating Committee (TPCC) designated this input-output approach based on BLS data to estimate jobs supported

as standard for U.S. government agencies. The TPCC is an interagency committee whose objective is to coordinate and

set priorities for federal agencies involved in export promotion and to propose a unified export promotion budget to the

President.

127

Export-Import Bank of the United States Annual Report 2015, p. 36.

128

GAO-13-466, May 23, 2013, pp. 10-13.

129

Ibid., pp. 15-17.

130

Ibid., p. 13.

131

Ibid., “Recommendations.”

132

As stated earlier, the 2015 Ex-Im Bank Reform and Reauthorization Act (Sec. 52001 of P.L. 114-94) changed the

small business target to 25% for FY2016 and subsequent fiscal years.

133

GAO, Export-Import Bank: Reaching New Targets for Environmentally Beneficial Exports Presents Major

Challenges for Bank, GAO-10-682, July 14, 2010, http://www.gao.gov/products/GAO-10-682. As stated earlier, the

FY2016 appropriations act does not include the 10% renewable energy directive for Ex-Im Bank.

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statutory target exists) has increased in recent years, it dipped in FY2015; Ex-Im Bank attributes

this to an economic slowdown in the region and a lapse in the Bank’s authority.134

Table 3. Ex-Im Bank’s Credit and Insurance Authorizations, FY2014-FY2015

Program

Number of Authorizations

Amount Authorized ($ millions)

FY2014

FY2015

FY2014

FY2015

3,746

2,630

$20,467.9

$12,383.0

Loans

$1,947.8

$72.7

Loan Guarantees

540

344

$13,314.0

$9,068.1

3,137

2,245

$5,206.1

$3,242.2

Total Authorizations

Insurance

Authorizations for Specific Types of Exports (Congressional Mandate)

Exports by Small Business (20%

target for amount

3,347

2,342

$5,050.2

$3,030.6

Percent of Total

89.3%

89.0%

24.7%

24.5%

Renewable Energy Exports

$186.8

$121.5

Percent of Total

0.85%

0.76%

0.91%

0.98%

192

142

$2,055.1

$396.5

5.1%

5.4%

10.0%

3.2%

Exports to Sub-Saharan Africa

Percent of Total

Source: Ex-Im Bank annual reports data adapted by CRS.

How can Ex-Im Bank’s support for small business be characterized?

Ex-Im Bank’s 25% (and prior 20%) directive for small business support focuses on direct

support. Some stakeholders say that this approach leads to an impression that Ex-Im Bank

supports fewer small businesses than it actually does.135 For example, a 2011 study of the supply

chains of five large companies (Bechtel, Boeing, Case New Holland, General Electric, and

Siemens Power Corporation) that are “exporters of record” for Ex-Im Bank, identified over

33,000 small- and medium-sized enterprises (SMEs) that serve as primary suppliers of parts and

services incorporated into these large companies’ exports; according to the study, these SMEs

also benefit from Ex-Im Bank financing.136 Other SMEs also operate at sub-levels of the supply

chain, serving as “suppliers to the suppliers.” For FY2015, Ex-Im Bank estimates that it

authorized $384.2 million in indirect small business support.137 Other stakeholders assert that

focusing on Ex-Im Bank’s indirect support for small businesses is not the original intention of ExIm Bank’s mandate. They express concern that allowing indirect support for small business to

count toward the small business target may adversely affect U.S. small business exporters by

making it easier for Ex-Im Bank to reach the goal and, thus, reducing incentives to seek small

134

Export-Import Bank of the United States Annual Report 2015, p. 15.

For example, see U.S. Chamber of Commerce Coalition Letter to Members of the United States Congress on Ex-Im

Bank, February 13, 2012, https://www.uschamber.com/letter/coalition-letter.

136

Coalition for Employment Through Exports (CEE), Supplier Study of 2011. CEE is a nonprofit advocacy

organization whose Board of Directors and members include Bechtel, Case New Holland, General Electric, and

Siemens Financial Services. See http://usaexport.org/.

137

Export-Import Bank of the United States Annual Report 2014, p. 34.

135

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business customers.138 At the same time, critics of Ex-Im Bank express disapproval over the

amount of Ex-Im Bank financing, by dollar value, that has been directed to a few large U.S.

corporations that they believe are capable of shouldering the risks of exporting to developing

countries.139

Do Ex-Im Bank’s activities have a U.S. foreign policy focus?

Ex-Im Bank’s activities focus on supporting U.S. commercial interests. However, Ex-Im Bank

activities also may support Administration goals and policy initiatives. For example, under the

Obama Administration, Ex-Im Bank has been involved in efforts to boost U.S. exports worldwide

under the National Export Initiative (NEI) and its successor NEI/NEXT, as well as regional

policy initiatives, such as the “rebalancing” towards the Asia-Pacific, the U.S. Strategy Towards

Africa, and the “Look South” initiative focused on Central & South America. Additionally,

statutory mandates for Ex-Im Bank, such as its directive to expand its support in sub-Saharan

Africa, may implicate U.S. foreign policy interests (see “What is Ex-Im Bank’s sub-Saharan

Africa statutory mandate?”).

Is there a relationship between Ex-Im Bank and U.S. national

security interests?

Ex-Im Bank’s activities may have national security implications in a number of ways.



Policies and requirements. According to Ex-Im Bank, its authority to support

dual-use exports and its U.S.-flag shipping requirements have direct national

security implications. Additionally, Ex-Im Bank contends that its financing of

commercial sales of U.S. manufacturers contributes indirectly to a skilled defense

workforce and supports the defense supply chain—based on the rationale that

industries involved in commercial and defense fields often utilize the same set of

employees and overlap in the suppliers and subcontractors that they use.140

Role in U.S. trade policy. The U.S. 2015 National Security Strategy highlights

U.S. trade policy as part of national security interests.141 U.S. trade policy goals

include supporting economic growth and prosperity and helping to shape the

global economic order. The 2015 Strategy characterizes the proposed TransPacific Partnership (TPP) free trade agreement (FTA), signed in February 2016,

and the potential Transatlantic Trade and Investment Partnership (T-TIP) FTA,

138

Letter from Todd McCracken, President and CEO of Small Business Exporters Association (SBEA), to The

Honorable Tim Johnson, Chairman of Senate Banking Committee; The Honorable Michael Crapo, Ranking Member of

Senate Banking Committee; The Honorable Jeb Hensarling, Chairman of House Financial Services Committee; and

The Honorable Maxine Waters, Ranking Member of House Financial Services Committee, May (assumed) 2014,

http://www.nsba.biz/wp-content/uploads/2014/05/SBEA_NSBA_Letter_Admin_SME_Ex-Im_Reauth-Proposal.pdf.

139

For example, see Veronique de Rugy, The Biggest Beneficiaries of the Ex-Im Bank, Mercatus Center, April 29,

2014.

140

U.S. Congress, House Committee on Foreign Affairs, Subcommittee on Terrorism, Nonproliferation, and Trade,

Written Testimony of Fred P. Hochberg - President and Chairman, Export-Import Bank of the United States, Hearing

on “Trade Promotion Agencies and U.S. Foreign Policy”, 114th Cong., 1st sess., May 19, 2015.

141

The White House, National Security Strategy, February 2015,

https://www.whitehouse.gov/sites/default/files/docs/2015_national_security_strategy.pdf. See also CRS Report

R44361, The Trans-Pacific Partnership (TPP): Strategic Implications, coordinated by (name re dacted) and (name red

acted) .

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

negotiations for which are ongoing, as a tool that “brings jobs to [U.S.] shores,

increases standards of living, strengthens [U.S.] partners and allies, and promotes

stability in critical regions.”142 Services provided by Ex-Im Bank could enhance

U.S. companies’ abilities to utilize U.S. FTAs by promoting U.S. exports to FTA

partner countries.

Geopolitical role. The growing role of China, Brazil, India, and other emerging

economies has transformed the global economy, presenting both opportunities

and challenges for the United States as it seeks to achieve its trade and economic

goals. Questions are raised about the extent to which emerging economies’

governments and institutions are involved in shaping “rules of the road” that may

be different from or detrimental to U.S. interests. Given that Ex-Im Bank has

many foreign counterparts, U.S. and emerging economies’ trade promotion

activities may enter into these power dynamics. Ex-Im Bank may play a role in

supporting U.S. interests as a form of commercial diplomacy.

Of congressional interest is the potential impact of Ex-Im Bank on U.S. national security

interests, though analysts and observers disagree on the impact. For example, during the latest

reauthorization debate, some former national security officials sent a letter to congressional

leaders calling for Ex-Im Bank’s reauthorization, observing “how commercial and economic

diplomacy have become critical elements of [U.S.] national security” and stating that the

“involvement of U.S. companies in emerging markets is fundamentally beneficial to the

American economy while helping to drive growth, prosperity, and political stability abroad.”143

Critics counter that Ex-Im Bank may adversely affect U.S. interests because of its support for the

purchase of U.S. exports in countries “that either have no place doing business with America or

actively undermine U.S. national security interests.”144

However, any national security impacts may be debatable in terms of magnitude. On one hand,

some may argue that Ex-Im Bank has slight or negligible effects on U.S. economic activity and,

in turn, foreign policy interests. For example, U.S. exports estimated to be supported by Ex-Im

Bank have represented a small share of total U.S. exports of goods and services. Some also may

note the smaller percentage of Ex-Im Bank transactions whose primary purpose was to offset

foreign competition, relative to purposes to address private sector gaps (see Table 2 in “How does

Ex-Im Bank work to ensure that its financing does not compete with the private sector?”). On the

other hand, Ex-Im Bank financing may be in higher-impact sectors that benefit the most from

government-backed financing and insurance, such as infrastructure-related goods and services,

and also that represent a significant share of the foreign country’s economic activity.

142

Ibid.

Krista Hughes, “Former top U.S. officials urge lifeline for export credit agency,” Reuters, February 12, 2015.

144

For example, an issue was previous Ex-Im Bank support to the state-owned Russian bank Vnesheconombank

(VEB), subject to U.S. economic sanctions as part of the broader U.S. response to Russia’s actions related to Ukraine.

Mark Pfeifle, “The Peculiar Use of a Taxpayer Bank,” The Wall Street Journal, April 26, 2015. For background, see

CRS Report R43895, U.S. Sanctions on Russia: Economic Implications, by (name redacted) .

143

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Export-Import Bank: Frequently Asked Questions

Risk Management, Fraud Control, and Ethics

What risks does Ex-Im Bank face in financing and insuring

exports?

Ex-Im Bank faces a number of risks in financing and insuring U.S. exports, including:



repayment risk, which is the risk that a borrower will not pay according to the

original agreement and the Bank may eventually have to write off some or all of

the obligation because of credit or political reasons;

concentration risk, which is the risk stemming from the composition of the

credit portfolio (e.g., concentration of portfolio by geographic region, industry,

and obligor), as opposed to the risks related to specific obligors;

foreign currency risk, which is the risk stemming from an appreciation or

depreciation in the value of a foreign currency in relation to the U.S. dollar in ExIm Bank transactions denominated in that foreign currency;

operational risk, which is the risk of material losses resulting from human error,

system deficiencies, and control weaknesses; and

interest rate risk, which stems from Ex-Im Bank making fixed-rate loan

commitments prior to borrowing to fund loans and there is a risk that it will have

to borrow funds at an interest rate greater than the rate charged on the credit.145

How does Ex-Im Bank seek to manage its risks?

The basis for Ex-Im Bank’s risk management function is its charter, which requires that all

transactions that it supports have a reasonable assurance of repayment146 and that the Bank

maintains reasonable provisions for losses.147 The Bank has a system in place to mitigate risks

through credit underwriting and due diligence of potential transactions, as well as monitoring

risks of current transactions. If a transaction has credit weaknesses, the Bank will try to

restructure it to help prevent defaults and increase the likelihood of higher recoveries if the

transaction does default. Ex-Im Bank also has a claims and recovery process.148

How does Ex-Im Bank determine the level of funds necessary to

cover future projected claims?

Because loan repayment prospects may change over time due to economic or other factors, Ex-Im

Bank’s credit losses on the outstanding balance of transactions are re-estimated annually. This reestimate indicates the appropriate level of funds necessary to cover projected future claims. On an

annual basis, the difference between the Bank’s financing accounts and the amount needed to

cover future estimated claims is reconciled through one of two processes. First, if the balance in

Ex-Im Bank’s financing accounts is greater than the re-estimates of credit losses, the surplus

145

Ex-Im Bank annual reports; and GAO-13-303, March 2013, p. 8.

12 U.S.C. §635(b)(1)(B).

147

12 U.S.C. §635(a)(1).

148

GAO-13-303, March 2013, p. 42.

146

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funds are transferred to a Treasury General Fund receipt account. It is not available to cover

future estimated claims. Second, if the balance in the financing accounts is less than the reestimated level of credit losses, a mandatory appropriation is made available in order for the Bank

to issue commitments for new loans and guarantees in excess of those receipts.149 These transfers

and appropriations, when they occur, do not affect the calculation of the budget deficit.150

How much are in Ex-Im Bank’s loss reserves?

Ex-Im Bank maintains reserves to protect against potential future losses from its activities.

According to Ex-Im Bank data, its reserves for loan losses totaled $4.0 billion in FY2015, which

represented 3.9% of its total exposure (disbursed and outstanding loans, guarantees, and

insurance) and 4.7% of its outstanding balance.151 The Export-Import Bank Reform and

Reauthorization Act of 2015 requires Ex-Im Bank to build and hold in its reserve to protect

against future losses an amount not less than 5% of the “aggregate amount of [its] disbursed and

outstanding loans, guarantees, and insurance,” effective one year after December 4, 2015 (Sec.

51002 of P.L. 114-94).

What is Ex-Im Bank’s default rate?

Ex-Im Bank calculates its default rate as a “total amount of required payments that are overdue

(claims paid on guarantees and insurance transactions plus loans past due) divided by a total

amount of financing involved (disbursements).”152 The 2012 reauthorization act required Ex-Im

Bank to monitor its default rate, report it on a quarterly basis to Congress, and to develop a plan

to reduce the default rate if it exceeded 2% (sometimes called “the 2% rule”).153 Ex-Im Bank

reported its default rate as 0.235% as of September 2015.154 According to Ex-Im Bank, its

historical default rate has been less than 1% since its inception.155

However, there is some debate about how the default rate should be interpreted. According to a

GAO study, the ultimate impact of Ex-Im Bank’s recent business on default rates is not yet

known as it contains a large volume of transactions that have not reached their peak default

periods.156 GAO also has stated that trends in Ex-Im Bank’s default rate should be viewed with

caution because of limitations in the agency’s analysis of its financial performance.157 GAO

149

Export-Import Bank of the United States Annual Report 2013, p. 51.

Financing accounts are nonbudget accounts associated with federal credit programs. Therefore, all transactions (i.e.,

cash flows) associated with these accounts are not reflected in total outlays, receipts, or the budget surplus/deficit.

151

Export-Import Bank of the United States Annual Report 2015, p. 41. Ex-Im Bank’s exposure includes both

outstanding and undisbursed loans, guarantees, and insurance.

152

Ibid., p. 48.

153

12 U.S.C. §635g(g).

154

Ex-Im Bank, Default Rate Report as of September 2015, p. 2. The default rate provided by Ex-Im Bank is different

from the default rate calculated by the Office of Management and Budget (OMB) to calculate the credit subsidy for

budgetary purposes. The default rate calculated by OMB is a lifetime default rate, and is typically higher than the one

that is reported quarterly.

155

Ibid., p. 11.

156

GAO-13-303, March 2013, p. 31.

157

GAO, Export-Import Bank: Recent Growth Underscores Need for Continued Improvements in Risk Management,

GAO-13-703T, June 13, 2013, p. 6.

150

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reported that Ex-Im Bank has implemented its recommendation in this area by retaining data

starting in 2013 to compare newer and older business and enhance loss modeling.158

What happens when Ex-Im Bank has to pay a claim?

Ex-Im Bank pays a claim when a loan that it has guaranteed or an insurance policy that it has

issued defaults. In the case of a loan guarantee, Ex-Im Bank will take the loan over from the bank

and pay the lending bank the full amount of the principal of the loan that it guaranteed, plus any

accrued interest. In addition, when Ex-Im Bank pays a claim for a loan guarantee that is

denominated in a foreign currency, it seeks to manage its foreign currency risk by purchasing the

foreign currency to pay the claim to the lender and then attempts recovery on the U.S. dollar

equivalent, which represents the obligor’s debt obligation—shifting the foreign currency risk to

the obligor after the claim has been paid.159 After Ex-Im Bank takes possession of a loan in

default, it engages in recovery efforts to minimize its losses (see next question).

What is Ex-Im Bank’s recovery rate?

Ex-Im Bank reports that, since 1992, it has been able to recover 50 cents on the dollar on average

for transactions in default.160 Backed by the U.S. government, Ex-Im Bank can take legal action

against obligors for transactions in default.161

What is the debate over Ex-Im Bank’s risk management practices?

Ex-Im Bank’s financial risk management practices present debates about addressing goals such as

allowing Ex-Im Bank to prudentially manage risk and minimize potential taxpayer losses, while

also enabling it to take on appropriate risks to meet its U.S. exports and jobs mandate. The

Export-Import Bank Act of 2012, among other things, required Ex-Im Bank to monitor its default

rate, report it on a quarterly basis to Congress, and to develop a plan to reduce the default rate if it

equals or exceeds 2% (sometimes called “the 2% rule”). Pursuant to the 2012 reauthorization act,

GAO published reports in March 2013 and May 2013 that reviewed Ex-Im Bank’s risk

management and reporting practices.162 GAO found that Ex-Im Bank had made certain

improvements in its risk management framework, including enhancing credit loss modeling with

qualitative factors. GAO also provided recommendations to Ex-Im Bank to address remaining

weaknesses in the areas of collecting data for estimating losses of transactions, managing

financial risks through stress testing and monitoring default rates of sub-portfolios,163 forecasting

exposure levels; and analyzing staff resources and associated operational risks—all of which

158

Ibid; and GAO, Export-Import Bank: Status of Actions to Address GAO Recommendations since the Bank’s 2012

Reauthorization, GAO-15-557T, April 15, 2015, pp. 6-7, http://www.gao.gov/products/GAO-15-557T.

159

GAO-13-303, March 2013, pp. 41-42; and CRS meeting with Ex-Im Bank, April 7, 2014.

160

U.S. Congress, House Committee on Oversight and Government Reform, Subcommittee on Health Care, Benefits,

and Administrative Rules, and House Committee on Financial Services, Subcommittee on Monetary Policy and Trade,

Written Testimony of Fred P. Hochberg, President and Chairman, Export-Import Bank of the United States, Hearing on

“Assessing Reforms at the Export-Import Bank,” 114th Cong., 1st sess., April 15, 2015.

161

Export-Import Bank of the United States Annual Report 2013, p. 5; and Export-Import Bank of the United States

Annual Report 2014, p. 51.

162

GAO-13-303, March 2013; and GAO, Export-Import Bank: Additional Analysis and Information Could Better

Inform Congress on Exposure, Risk, and Resources, GAO-13-620, May 2013.

163

Ex-Im Bank subportfolios could be, for example, by industry, products, markets, and congressional mandates. See

GAO-13-620, May 2013, p. 23.

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GAO states that Ex-Im Bank has implemented.164 The Bank also notes other changes it has made

in recent years, including appointing a Chief Risk Officer in 2013 to ensure prudential risk

management, as well as establishing an Enterprise Risk Committee, modernizing its credit

monitoring, creating a Special Assets unit to address emerging credit issues, expanding pro-active

monitoring efforts, and improving underwriting criteria.165

Supporters contend that it has adequate systems and staffing in place to manage its risk, and poses

low risk to U.S. taxpayers. They argue that the Bank has a strong mandate to manage risk under

its charter and has a strong record of risk management, noting the low default rate and high

recovery rate reported by Ex-Im Bank.166 Critics hold that there are weaknesses in the Bank’s risk

governance, and question its methodology to calculate expected losses and contributions to the

Treasury. Supporters may counter that GAO determined that Ex-Im Bank’s figures for amounts

sent to the Treasury were reasonable based on GAO’s analysis of Ex-Im Bank appropriations acts,

budget appendixes, and financial statements for the 1992-2012 period.167 Critics also express

concern that the Bank’s exposure growth and concentrations, such as in aircraft, pose a risk to

U.S. taxpayers and the federal budget, pointing to certain findings in studies by GAO and the

Bank’s Office of Inspector General.168 Critics further question Ex-Im Bank’s capacity for

underwriting and due diligence. Other stakeholders caution that the Bank may be becoming too

risk-averse, raising concerns about the appropriate balance in Ex-Im Bank’s risk management

with its overall mandate to support U.S. exports. Ex-Im Bank reauthorization proposals in the

114th Congress included a focus on Ex-Im Bank’s reserve requirements, organizational structure

for risk management, auditing, and risk-sharing agreements.

What are Ex-Im Bank’s fraud control and ethics practices?

Ex-Im Bank’s Office of Inspector General (OIG), statutorily created in 2002 and in operation

since 2007, is an independent office within the agency. Its mission is to “to conduct and supervise

audits, investigations, inspections, and evaluations related to agency programs and operations;

provide leadership and coordination as well as recommend policies that will promote economy,

efficiency, and effectiveness in such programs and operations; and prevent and detect fraud,

waste, abuse, and mismanagement.”169 OIG audits, inspections, and investigations of the agency

are available at http://www.exim.gov/about/oig.

164

GAO, Export-Import Bank: Status of Actions to Address GAO Recommendations since the Bank’s 2012

Reauthorization, GAO-15-557T, April 15, 2015; and Hochberg April 15, 2015, testimony.

165

U.S. Congress, Senate Committee on Banking, Housing, and Urban Affairs, Oversight and Reauthorization of the

Export-Import Bank of the United States, Written Testimony of Fred P. Hochberg - President and Chairman of Ex-Im

Bank, 113th Cong., 2nd sess., January 28, 2014.

166

For example, see NAM, Facts on the Export-Import (Ex-Im) Bank, http://www.nam.org/~/media/

5AF9A722407E46D6A1264820B2208860.ashx.

167

GAO-13-303, March 2013; and GAO, Export-Import Bank: Additional Analysis and Information Could Better

Inform Congress on Exposure, Risk, and Resources, GAO-13-620, May 2013, p. 35.

168

For example, see Diane Katz, U.S. Export-Import Bank: Corporate Welfare on the Backs of Taxpayers,” The

Heritage Foundation, April 11, 2014, http://www.heritage.org/research/reports/2014/04/us-exportimport-bankcorporate-welfare-on-the-backs-of-taxpayers.

169

U.S. Congress, House Committee on Oversight and Government Reform, Subcommittee on Health Care, Benefits,

and Administrative Rules, and House Committee on Financial Services, Subcommittee on Monetary Policy and Trade,

Statement of Michael T. McCarthy, Deputy Inspector General, Export-Import Bank of the United States, Hearing on

“Assessing Reforms at the Export-Import Bank,” 114th Cong., 1st sess., April 15, 2015, p. 9.

Congressional Research Service

Export-Import Bank: Frequently Asked Questions

To mitigate corruption and fraud, Ex-Im Bank staff conduct “risk-based due diligence” to

underwrite transactions; they screen and evaluate transactions for eligibility requirements and

conformity with the Bank’s credit risk policies, as well as determine the appropriate credit

structure for a proposed transaction.170 They conduct further due diligence after transactions are

authorized using a “risk-based sampling of authorized transactions” to identify possible

corruption and fraud, referring evidence of concern to the OIG.171 Pursuant to the 2012

reauthorization act, Ex-Im Bank implemented new standards and requirements to improve and

clarify its due diligence standards for lender partners.172 Specifically, on May 30, 2014, Ex-Im

Bank updated its “Know Your Customer” requirements and transaction due diligence standards

for its guaranteed and insured lender partners and participants173 (e.g., a commercial bank that

loans to a foreign buyer that Ex-Im Bank guarantees).174

Ex-Im Bank also has an ethics program for its employees, which includes mandatory ethics

training and responsibilities. It states that it works to “foster an environment where employees are

encouraged to ask questions and report suspected unethical behavior.”175

The Export-Import Bank Reform and Reauthorization Act of 2015 requires the U.S. Comptroller

General to conduct periodic reviews and reports of Ex-Im Bank’s fraud controls. It statutorily

established an Office of Ethics, a Chief Risk Officer, and a Risk Management Committee (while

terminating the existing Audit Committee). Additionally, among other things, it requires Ex-Im

Bank’s Inspector General to conduct an audit of Ex-Im Bank’s portfolio risk management

procedures, with associated reporting requirements. (Sections 51003-51007 of P.L. 114-94.)

Ex-Im Bank’s reauthorization in 2015 was preceded by debate in Congress over the adequacy of

Ex-Im Bank’s existing fraud control and ethics practices. Focus on Ex-Im Bank’s ethics practices

became more prominent due to certain OIG investigations,176 as well the fact that a former Ex-Im

Bank loan officer pleaded guilty to a bribery charge in federal court in April 2015.177 The OIG

states, “the most common fraud schemes we have encountered involve outside parties obtaining

170

GAO, Export-Import Bank: Enhancements Needed in Loan Guarantee Procedures and for Documenting Fraud

Processes, GAO-14-574, September 9, 2014, pp. 11-15 (hereinafter GAO-14-574, September 9, 2014); U.S. Congress,

Senate Committee on Banking, Housing, and Urban Affairs, Written Testimony of Fred P. Hochberg – President and

Chairman, Export-Import Bank of the United States, Hearing on “Oversight of the Export-Import Bank,” 114th

Congress, 1st sess., April 6, 2015.

171

Ibid.

172

12 U.S.C. §635(i). The 2012 reauthorization act requires Ex-Im Bank to “set due diligence standards for its lender

partners and participants, which should be applied across all programs consistently.”

173

Ex-Im Bank defines a “participant” as “any person or entity that is, or is seeking to be, an insured or guaranteed

party under any Ex-Im Bank program, and any applicant for Ex-Im support under any Ex-Im Bank program, any person

(including an arranger or advisor) that assists an applicant in seeking Ex-Im Bank support for any transaction, and any

party acting as an agent or trustee for Ex-Im Bank.

174

For more information, see Ex-Im Bank, “Requirements and Due Diligence Standards,”

http://www.exim.gov/policies/due-diligence-standards.

175

U.S. Congress, Senate Committee on Banking, Housing, and Urban Affairs, Written Testimony of Fred P. Hochberg

– President and Chairman, Export-Import Bank of the United States, Hearing on “Oversight of the Export-Import

Bank,” 114th Congress, 1st sess., April 6, 2015.

176

For discussion of outcomes of these investigations, see U.S. Congress, House Committee on Oversight and

Government Reform, Subcommittee on Health Care, Benefits, and Administrative Rules, and House Committee on

Financial Services, Subcommittee on Monetary Policy and Trade, Statement of Michael T. McCarthy, Deputy Inspector

General, Export-Import Bank of the United States, Hearing on “Assessing Reforms at the Export-Import Bank,” 114th

Cong., 1st sess., April 15, 2015.

177

Department of Justice, “Former Loan Officer at Export-Import Bank Pleads Guilty to Accepting Over $78,000 in

Bribes,” press release, April 22, 2015.

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loans or guarantees through false representations and submission of false documents,” prompting

OIG training for Ex-Im Bank employees and delegated lending institutions on fraud indicators.178

Ex-Im Bank asserts its ethics program is “fully compliant with all laws, regulations, and

policies...,”179 and notes that the OIG investigations send a signal of its “zero tolerance for waste,

fraud, and abuse.”180 For others, fraud allegations bolster the argument against reauthorization or

for focusing on reforms to Ex-Im Bank’s charter.181

Budget and Appropriations

How does Ex-Im Bank fund its activities?

Ex-Im Bank’s program revenues include the fees and premia charged for services, interest

generated from loans, and repayment of loan principals. For a given year, the Bank’s program

revenues that are in excess of the forecasted loss on those transactions (credit losses) are retained

as offsetting collections. These offsetting collections are used to fund new obligations during the

year, which include administrative costs, claim payments, loan disbursements, and prudent

reserves to cover future losses. Ex-Im Bank borrows from the Treasury to finance medium- and

long-term loans.

According to Ex-Im Bank, there is no limit on the total amount of offsetting collections that the

Bank can have. However, there are limits on how much and for how long the Bank can keep the

offsetting collections. Through the annual appropriations process, Ex-Im Bank receives authority

to spend its offsetting collections.

See “How does Ex-Im Bank determine the level of funds necessary to cover future projected

claims?” in the “Risk Management, Fraud Control, and Ethics” section.

How does Ex-Im Bank’s appropriations process work?

As a federal credit program, the activities of the Bank are subject to federal credit accounting

rules and the calculation of a credit subsidy. Ex-Im Bank’s credit subsidy was negative in FY2015

and is estimated to be negative in FY2016. Therefore, no appropriation is required to cover the

cost of the subsidy for budgetary purposes. However, if the credit subsidy calculation resulted in a

positive subsidy rate or if the methodology for calculating subsidies for federal credit programs

should change (i.e., to fair-value accounting) resulting in a positive subsidy rate, then an

178

U.S. Congress, Senate Committee on Banking, Housing, and Urban Affairs, Written Testimony of Fred P. Hochberg

– President and Chairman, Export-Import Bank of the United States, Hearing on “Oversight of the Export-Import

Bank,” 114th Congress, 1st sess., April 6, 2015.

179

U.S. Congress, Senate Committee on Banking, Housing, and Urban Affairs, Written Testimony of Fred P. Hochberg

– President and Chairman, Export-Import Bank of the United States, Hearing on “Oversight of the Export-Import

Bank,” 114th Congress, 1st sess., April 6, 2015.

180

U.S. Congress, House Committee on Financial Services, Written Testimony of Fred P. Hochberg – President and

Chairman, Export-Import Bank of the United States, Hearing on “Examining the Export-Import Bank’s

Reauthorization Request and the Government’s Role in Export Financing,” 114th Congress, 1st sess., June 3, 2015, p. 7.

181

For example, see U.S. Congress, House Committee on Oversight and Government Reform, Subcommittee on

Economic Growth, Job Creation and Regulatory Affairs, Mismanagement of Export-Import Bank Invites Fraud,

Testimony by Diane Katz, 113th Cong., 2nd sess., July 29, 2014.

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appropriation would be required to cover the credit subsidy amount for the fiscal year in which a

positive subsidy was calculated.182

Separately, an appropriation is provided for the activities of the Ex-Im Bank’s Office of Inspector

General (OIG) and sets an upper limit on its administrative expenses as part of the Department of

State, Foreign Operations, and Related Programs appropriations act. These expenses are not

included in the credit subsidy calculation, unlike the majority of the Bank’s activities, but are

recorded on a cash basis. Because Ex-Im Bank collects revenues from its customers, classified in

the federal budget as offsetting collections, it is able to reimburse the Treasury for the costs of

those expenses resulting in a net appropriation of zero.

For FY2016, appropriations legislation provided $6 million for Ex-Im Bank’s OIG, set an upper

limit of $106.3 million for the Bank’s administrative expenses, and allowed carryover funds of up

to $10 million to remain available until September 30, 2019.

How are Ex-Im Bank’s activities accounted for under Federal Credit

Reform Act of 1990 (FCRA)?

Beginning with FY1992, the Federal Credit Reform Act (FCRA, P.L. 101-508) required that the

reported budgetary cost of a credit program equal the estimated subsidy costs at the time the

credit is provided. FCRA defines the subsidy cost as “the estimated long-term cost to the

government of a direct loan or a loan guarantee, calculated on a net present value basis, excluding

administrative costs.”183 Before FY1992, the budgetary cost of a new loan or new loan guarantee

was reported as its net cash flow for that fiscal year. The change to FCRA places the cost of

federal credit programs on a budgetary basis that more closely matches other federal outlays.

The FCRA methodology described above resulted in an estimated budgetary impact for Ex-Im

Bank’s credit activities of FY2015 of -$456 million, or reduction in the budget deficit of $456

million. A negative subsidy indicates that the discounted present value of cash inflows exceeds

the discounted value of cash outflows over the life of the loans, resulting in a reduction in the

budget deficit for the fiscal year in which the subsidy estimate is made. This negative credit

subsidy is calculated based on the negative credit subsidy rate multiplied by the total dollar value

of loans and loan guarantees in that year. The estimated subsidy is -$473 million for FY2016 and

-$433 million for FY2017.184 Subsidy rates from federal credit programs are subject to reestimates in future years, resulting in new subsidy estimates that may be higher or lower

compared to the original estimate. For example, in FY2014, the original subsidy rate for Ex-Im

Bank’s direct loans was -3.36%. Currently, it has been re-estimated at -3.81%. The original credit

subsidy rate for loan guarantees in the same year was -2.13%, and it is re-estimated at -0.58%

currently.

182

During the 1990s and early 2000s, Ex-Im Bank’s credit subsidy was positive in most years. If positive subsidies

persisted over the long term, Ex-Im Bank could opt to charge higher fees or premia or restructure its products to

eliminate these positive subsidies.

183

For more information on the effect of FCRA on the budgetary cost of credit programs, see CRS Report R44193,

Federal Credit Programs: Comparing Fair Value and the Federal Credit Reform Act (FCRA), by (name redacted).

184

These subsidy estimates were taken from the President’s Budget documents prepared by the Office of Management

and Budget (OMB). The Congressional Budget Office (CBO) uses different models and assumptions when making

credit estimates for purposes of the appropriations process and CBO’s baseline estimates.

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What is the relationship between Ex-Im Bank activity and the U.S.

debt and deficit?

Beginning with FY1992, the FCRA required that the reported budgetary cost of a credit program

equal the estimated subsidy costs at the time the credit is provided. This methodology resulted in

an estimated budgetary impact of Ex-Im Bank’s activities of -$456 million in FY2015 and an

estimated -$473 million for FY2016.185 In other words, Ex-Im Bank’s activities in FY2015 were

estimated to reduce the budget deficit by $456 million in FY2015, and are estimated to reduce the

budget deficit by $473 million in FY2016.

The budgetary impact (the credit subsidy) of the Ex-Im Bank’s activities is different from its

impact on the federal debt. When the Bank issues a new direct loan or has to pay an obligation on

a loan guarantee, it borrows money from the U.S. Treasury, which is raised by the Treasury by

selling Treasury securities to the extent that the Bank does not have enough incoming revenue to

cover the obligation. That borrowing from the Treasury increases the size of the U.S. federal debt

in the amount borrowed on a dollar-for-dollar basis. Therefore, while the loan or loan guarantee

remains outstanding, the activities of the Bank increase the size of the U.S. debt. As these

obligations are repaid, the amount of debt outstanding to the U.S. Treasury declines, thereby

decreasing the size of the Ex-Im Bank’s contribution to the federal debt. The size of the credit

subsidy calculated for budgetary purposes should reflect the size of the long-term cost (or debt

burden) on the U.S. Treasury, though the estimates are inherently inexact. Outstanding borrowing

owed to the U.S. Treasury totaled $22.7 billion at the end of FY2015.186 (Any repayments to the

Treasury for outstanding debt do not directly affect Ex-Im Bank’s credit subsidy for budgetary

purposes.)

What does Ex-Im Bank do with its excess revenues?

Ex-Im Bank collects revenues from customers, from fees and premia and loan principal and

interest payments in the form of offsetting collections. Offsetting collections are defined as funds

collected by government agencies from other government agencies or from the public in

businesslike or market-oriented transactions that are credited to an expenditure account.

Offsetting collections in FY2015 were $548.7 million after setting funds aside for credit loss

reserves. Ex-Im Bank reported providing $431.6 million to the Treasury in FY2015 after covering

operating expenses. That amount is calculated on a cash basis and based on $548.7 million in

offsetting collections less $107.1 million in administrative expenses.187

The amount of excess revenue calculated on a cash basis, discussed above, is different than the

amount calculated on a budgetary basis. For budgetary purposes, the credit subsidy calculation

incorporates the expected costs as well as profits (i.e., excess cash). When a credit account

generates a negative subsidy rate, as is the case with the Ex-Im Bank, a negative credit subsidy is

recorded in the federal budget in the form of offsetting receipts and can be used to offset other

costs incurred by the Bank. The negative credit subsidy indicates that over the lifetime of the

obligations outstanding, Ex-Im Bank is projected to generate more in offsetting collections than

185

These subsidy estimates were taken from the President’s Budget documents prepared by OMB. CBO uses different

models and assumptions when making credit estimates for purposes of the appropriations process and CBO’s baseline

estimates.

186

Export-Import Bank of the United States Annual Report 2015, Notes to the Financial Statement, p. 66.

187

Ibid., p. 82.

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what was initially borrowed to provide the direct loan in present value terms. For FY2015, the

amount of the negative subsidy or budgetary impact was -$456 million.188

How would changes in federal credit accounting affect

Ex-Im Bank?

There have been some proposals introduced and considered in the past few Congresses to change

the methodology for scoring federal credit programs from an FCRA approach, based on Treasury

interest rates, to a fair value approach, based on market rates (i.e., higher interest rates to account

for market risk). In the 113th Congress, the Budget and Transparency Act of 2014 (H.R. 1872),

which passed the House but was not acted on in the Senate, would have made such a change.

CBO estimated that if this accounting change were to be made for federal credit programs, the

10-year cost of the Ex-Im Bank (FY2015-FY2024) would have increased from -$14 billion to

+$2 billion.189 This would mean that Ex-Im Bank’s budgetary impact would shift from reducing

the deficit to increasing it over the 10-year period. In this scenario, funds would have to be

appropriated to cover the projected positive subsidy for the fiscal year that it was calculated. In

the 114th Congress, separate bills have been introduced in the House (H.R. 119) and Senate (S.

399) that would also provide for fair value accounting of credit programs.

Sunset in Authority

What are the implications of a sunset in Ex-Im Bank’s authority for

the agency’s activities?190

Ex-Im Bank’s general statutory authority expired for about five months in 2015 (July 31December 3, 2015) when Congress did not take action to renew its charter.191 Generally when an

executive agency’s statutory charter expires, that agency “ceases to exist” and is no longer legally

authorized to perform any functions.192 However, Ex-Im Bank’s charter provides some exceptions

to that general rule of law by expressly authorizing the Bank to engage in certain activities, even

after its general statutory termination date.

188

In some years, the credit subsidy was positive.

CBO, Fair-Value Estimates of the Costs of Selected Federal Credit Programs for 2015 to 2024, May 2014,

http://www.cbo.gov/sites/default/files/cbofiles/attachments/45383-FairValue.pdf.

190

This portion of the report was written by (name redacted), Legislative Attorney.

191

12 U.S.C. §635f.

192

Civil Rights Commission, B-246541, 71 Comp. Gen. 378, 380 (1992) (“[O]nce a termination or sunset provision

becomes effective, the agency ceases to exist and no new obligations may be incurred after the termination date ...

Payment of obligations incurred prior to the termination date is usually made by a successor agency or by another

agency pursuant to an Economy Act, 31 U.S.C. Sec. 1535, agreement entered into prior to the termination date.”).

189

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Pursuant to 12 U.S.C. Section 635f, Congress has expressly authorized Ex-Im Bank to perform

certain functions before the statutory termination date that would create obligations that are

binding after the termination date.193 Specifically, Section 635f permits the Bank to

1. take on loans or similar obligations prior to its termination date that mature

subsequent to the termination date;

2. assume prior to the termination date liability as an insurer, guarantor, etc. of

obligations that mature subsequent to the termination date; and

3. issue prior to the termination date debt (in the form of “notes, debentures, bonds,

or other obligations which mature subsequent to the [termination] date”)

generally to be purchased by the U.S. Treasury.194

These provisions permit the Bank to perform its customary functions prior to the termination date

without structuring every loan, guarantee, or other financial or contractual instrument to address

the possibility that the Bank will terminate. Because of these three provisions, Ex-Im Bank has

debts, assets, and contractual duties that were entered into prior to the termination date that

remain valid and enforceable by and against the United States, if not the Bank itself, after the

termination date.195

Other provisions of Section 635f expressly authorize the Bank to continue to perform certain

functions after its termination. Most notably, Ex-Im Bank may “continu[e] as a corporate agency

of the United States” and exercise any of its functions “for purposes of an orderly liquidation,”

including (but apparently not limited to) administering its assets and collecting any obligations it

holds.196 Additionally, Section 147 of P.L. 113-164, the Continuing Appropriations Resolution,

2015, authorizes Ex-Im Bank to continue funding its permissible operations through FY2015.197

193

12 U.S.C. §635f, which is entitled “Termination date of Bank’s functions; exceptions; liquidation,” currently states,

in its entirety:

Export-Import Bank of the United States shall continue to exercise its functions in connection with

and in furtherance of its objects and purposes until the close of business on June 30, 2015, but the

provisions of this section shall not be construed as preventing the bank from acquiring obligations

prior to such date which mature subsequent to such date or from assuming prior to such date

liability as guarantor, endorser, or acceptor of obligations which mature subsequent to such date or

from issuing, either prior or subsequent to such date, for purchase by the Secretary of the Treasury

or any other purchasers, its notes, debentures, bonds, or other obligations which mature subsequent

to such date or from continuing as a corporate agency of the United States and exercising any of its

functions subsequent to such date for purposes of orderly liquidation, including the administration

of its assets and the collection of any obligations held by the bank.

194

This language, which seems to be modeled after 12 U.S.C. §635d, appears to authorize the Ex-Im Bank to issue

debt, generally to the U.S. Treasury.

195

See, e.g., Civil Rights Commission, B-246541, 71 Comp. Gen. 378, 380 (1992). The Bank’s insurance and

guarantees are explicitly backed by the full faith and credit of the United States. 12 U.S.C. §635k. (“All guarantees and

insurance issued by the Bank shall be considered contingent obligations backed by the full faith and credit of the

government of the United States of America.”).

196

12 U.S.C. §635f. Section 635f also permits Ex-Im Bank to issue debt after the termination date (in the form of

“notes, debentures, bonds, and other obligations”) generally for purchase by the Treasury.

197

P.L. 113-164 §147. Ex-Im Bank generally funds itself through revenues generated from its ongoing operations

rather than through appropriations, although legislation caps the Bank’s total administrative costs at $106.3 million for

FY2015. P.L. 113-235.

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What is an “orderly liquidation” for the purposes of Ex-Im Bank’s

Charter?198

Section 635f of the Bank’s charter offers little guidance as to what an “orderly liquidation” entails

in this context. For example, it does not address how long the Bank might continue to engage in

the specified permissible functions after its termination—a potentially significant omission given

that some of the Bank’s obligations have repayment periods of more than seven years.199 “Orderly

liquidation” is not a term of art with a discrete meaning under federal law. There does not appear

to be any case law interpreting this term as it applies specifically to Section 635f. Furthermore,

CRS is unaware of any formal Ex-Im Bank issued regulations, guidance, etc. interpreting this

provision or otherwise explaining how the Bank would administer its affairs for an “orderly

liquidation.”

One of the standard principles of statutory interpretation is that, in the absence of a statutory

definition, courts may “construe a statutory term in accordance with its ordinary or natural

meaning.”200 The everyday meanings of the terms orderly and liquidation, however, would

suggest that the Bank could undertake activities that it considers to be implicated in the

methodical settlement of its affairs.201 This likely would include the authority to, for the purposes

of orderly liquidation, continue to accept payments on, and otherwise administer loans,

guarantees, and other obligations and liabilities entered into prior to the termination date that had

not fully matured by the termination date.202 The Bank also likely would be legally permitted to

continue to pay employees needed to perform permissible functions.203 It is unclear, however,

how a prolonged lapse in its general statutory charter would affect Ex-Im Bank’s employees.204

Notably, because the acquisition of obligations and the assumption of liabilities are not among the

functions that the Bank is expressly authorized to perform after the termination date, it would

appear that the Bank could not enter into new loans or offer new loan guarantees after this date,

198

This portion of the report was written by (name redacted), Legislative Attorney.

See Export-Import Bank of the United States Annual Report 2013, at 12, Rev. Apr. 2014, available at

http://www.exim.gov/about/library/reports/annualreports/2013/annual-report-2013.pdf.

200

Fed Deposit Ins. Corp. v. Meyer, 510 U.S. 471, 476 (1994). Dictionary definitions are commonly used in

determining the ordinary or natural meaning. See, e.g., Asgrow Seed Co. v. Winterboer, 513 U.S. 179, 187 (1995)

(relying on the dictionary definition of “marketing” in construing the Plant Variety Protection Act); Commissioner v.

Soliman, 506 U.S. 168, 174 (1993) (similar, as to the definition of “principal” used to modify a taxpayer’s place of

business for purposes of an income tax deduction).

201

See, e.g., Merriam-Webster Dictionary, available at http://www.merriam-webster.com/dictionary/orderly (defining

orderly); Merriam-Webster Dictionary, available at http://www.merriam-webster.com/dictionary/liquidation (defining

liquidation).

202

As previously mentioned, it is unclear how long the Bank could administer its obligations and liabilities while still

complying with the “orderly liquidation” requirement of 12 U.S.C. §635f. For example, it is unclear whether or to what

extent the Bank would be required to treat a loan that matures two days after the statutory termination date differently

from one that matures seven years after such date.

203

P.L. 113-164 §147. Ex-Im Bank generally funds itself through revenues generated from its ongoing operations

rather than through appropriations, although legislation caps the Bank’s total administrative costs at $106.3 million for

FY2015. P.L. 113-235.

204

The Bank had more than 400 employees on the statutory termination date (June 30, 2015).

199

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except insofar as any new obligations205 or liabilities might be implicated in the “orderly

liquidation” of its functions.206

However, given the dearth of statutory, administrative, and judicial guidance on the meaning of

“orderly liquidation” pursuant to Section 635f, the Bank would appear to have considerable

discretion in structuring its “orderly liquidation” in the absence of any relevant statutory changes

to Section 635f (subject to the Bank generating sufficient revenue and receiving adequate

appropriations to fund the liquidation).207

In July 2015, six Senators wrote a letter to Ex-Im Bank’s Chairman and President requesting

“clarity on [Ex-Im Bank’s] plan for an orderly liquidation,” including a timeline for its

completion.208 In his response, Ex-Im Bank’s Chairman and President reportedly said that Ex-Im

Bank has “broad discretion” to wind down its operations and did not specify a timeline. 209 Since

the renewal of its authority, Ex-Im Bank reported that it was resuming its operations.210

What is the potential economic impact of a sunset on Ex-Im Bank’s

authority?

In general, Ex-Im Bank states that, under a lapse in its authority, no new loan, guarantee, or

insurance commitments can be approved by its Board or under delegated authority, but Ex-Im

Bank may continue administering and servicing existing obligations (including disbursements on

already-approved final commitments).211

Stakeholders and observers disagree on the economic implications of a lapse in Ex-Im Bank’s

authority. Some argue that Ex-Im Bank’s inability to extend new commitments could adversely

affect particular U.S. firms or their employees relying on its support when facing difficulty

accessing private sector financing at commercially viable terms.212 The impact also may extend to

businesses in Ex-Im Bank users’ supply chains, as well as “suppliers to the suppliers.” Others

contend that the sunset could boost export financing by the private sector. They argue that Ex-Im

Bank’s activities have opportunity costs, drawing capital and labor resources within the economy

otherwise available for alternative uses.213 Nevertheless, doubts remained over whether a sunset

would affect the overall level of U.S. exports and employment. A range of macroeconomic factors

205

As discussed in the previous question, the Bank also would continue to be authorized to issue “notes, bonds,

debentures, or other obligations.” 12 U.S.C. §635f.

206

For example, a contract is generally recognized as an obligation, and the Bank could potentially enter into a contract

with another government agency under the authority of the Economy Act (31 U.S.C. §1535) that would provide for that

agency to pay obligations that the Bank had incurred prior to the termination date.

207

For an understanding of how the Ex-Im Bank is funded, see the “Ex-Im Bank Budget” section of this report.

208

Letter from U.S. Senators Marco Rubio, Ted Cruz, Mike Lee, Ben Sasse, Pat Toomey, and Rand Paul to Fred

Hochberg, Ex-Im Bank Chair

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