# Export-Import Bank: Frequently Asked Questions > Briefs, arguments, decisions, and more. URL: https://www.frixlaw.com/law-library/documents/crs%3AR43671 ## Record - **Collection:** Congressional research report - **Document type:** CRS Report - **Published:** April 13, 2016 - **Citation:** R43671 ## Text Export-Import Bank: Frequently Asked Questions (name redacted), Coordinator Specialist in International Trade and Finance (name redacted) Legislative Attorney (name redacted) Analyst in Public Finance (name redacted) Section Head - ALD Section April 13, 2016 Congressional Research Service 7-.... www.crs.gov R43671 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) . Congressional Research Service 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 Congressional Research Service 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 Congressional Research Service 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. T 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 1 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). 2 12 U.S.C. §635(a)(1). 3 Ex-Im Bank’s website is accessible at http://www.exim.gov/. 4 12 U.S.C. §635k. 5 Information in this section draws from previously developed language by (name redacted), Specialist in International Trade and Finance. Congressional Research Service 1 Export-Import Bank: Frequently Asked Questions (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. 6 National Archives, “Records of the Export-Import Bank of the United States,” http://www.archives.gov/research/guide-fed-records/groups/275.html. 7 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. 8 12 U.S.C. §635a(b) and 12 U.S.C. §635a(c). Congressional Research Service 2 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 9 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. 11 For example, Ex-Im Bank has delegated authority for underwriting many short-term transactions directly to Ex-Im Bank-approved private sector lenders. 12 12 U.S.C. §635a(c). Ex-Im Bank, “Board of Directors,” http://www.exim.gov/about/leadership/board-of-directors. 10 Congressional Research Service 3 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. 13 12 U.S.C. §635a(d). Ex-Im Bank, “Advisory Committee,” http://www.exim.gov/about/leadership/advisorycommittee. 14 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. 15 12 U.S.C. §635(b)(9)(B)(iii). 16 12 U.S.C. §635a(c). Ex-Im Bank, “Board of Directors,” http://www.exim.gov/about/leadership/board-of-directors. 17 OMB, Budget of the United States Government, Fiscal Year 2017, Appendix, “Other Independent Agencies.” 18 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. Congressional Research Service 4 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. 19 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. 20 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. 21 WTO, Supply of Trade Finance, http://www.wto.org/english/thewto_e/coher_e/whatis_situation_e.htm/. Congressional Research Service 5 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 22 See CRS Report R41495, U.S. Government Agencies Involved in Export Promotion: Overview and Issues for Congress, coordinated by (name redacted) . 23 See CRS Report R43155, Small Business Administration Trade and Export Promotion Programs, by (name redacted) . 24 See CRS Report 98-567, The Overseas Private Investment Corporation: Background and Legislative Issues, by (name redacted) . 25 12 U.S.C. §635(a). 26 Ex-Im Bank, “Get Started,” http://exim.gov/get-started#what. 27 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. Congressional Research Service 6 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 28 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. 29 Ibid. 30 Ex-Im Bank, “Export Credit Insurance,” http://www.exim.gov/what-we-do/export-credit-insurance. 31 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 7 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 32 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. 33 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. 34 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. 35 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. 36 Ibid. Congressional Research Service 8 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 37 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). 38 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. 39 12 U.S.C. §635(b)(1)(B). 40 12 U.S.C. §635a-2; 12 U.S.C. §635(b)(1)(B); 12 U.S.C. §635(e). 41 12 U.S.C. §635i-5. Congressional Research Service 9 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 42 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. 44 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). 45 12 U.S.C. §635(b)(3). 46 12 U.S.C. §635g and 12 U.S.C. §635g-1. 47 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) . 48 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. 43 Congressional Research Service 10 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 49 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. 51 12 U.S.C. §635(b)(2); 12 U.S.C. §635(b)(5); and 12 U.S.C. §635(b)(10). 52 Ex-Im Bank, 2013 Competitiveness Report, June 2014, p. 88. 53 12 U.S.C. §635a-2. 54 12 U.S.C. §635(b)(1)(B). 55 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/. 56 12 U.S.C. §635(e)(2). 57 12 U.S.C. §635(e)(3). 50 Congressional Research Service 11 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: 58 Ex-Im Bank, 2014 Competitiveness Report, June 2015, p. 69. Ibid. 60 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. 61 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. 62 Ex-Im Bank, 2013 Competitiveness Report, June 2014, p. 41. 63 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). 64 12 U.S.C. §635i-5. 59 Congressional Research Service 12 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: 65 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. 67 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.” 68 For example, see the Consolidated Appropriations Act, 2016, §7080(3)(C) of P.L. 114-113. 66 Congressional Research Service 13 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). 69 The World Bank’s FY2015 is July 1, 2014, to June 30, 2015. 12 U.S.C. §635k. 71 12 U.S.C. §635(b)(1)(E)(v). 70 Congressional Research Service 14 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 72 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. 72 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.” 73 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. 74 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. 75 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 15 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 76 12 U.S.C. §635(b)(9)(A). 12 U.S.C. §635(b)(9)(B)(i). 78 12 U.S.C. §635(b)(9)(B)(iii). 79 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. 80 Ex-Im Bank, “Short-term content policy,” http://www.exim.gov/policies/content/short-term-content-policy. 81 Ex-Im Bank, 2014 Competitiveness Report, June 2015, p. 74. 82 Ibid., p. 75. 83 Ibid. 77 Congressional Research Service 16 Export-Import Bank: Frequently Asked Questions 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, 84 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. 85 Ibid. 86 12 U.S.C. §635(b)(6)(I). 87 12 U.S.C. §635 note. 88 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. 89 Ibid., p. 4. 90 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. 91 GAO, Export-Import Bank: Monitoring of Dual-Use Exports Should be Improved, GAO-15-611, June 2015, p. 5. Congressional Research Service 17 Export-Import Bank: Frequently Asked Questions 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 92 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) . 94 Ex-Im Bank, 2014 Competitiveness Report, June 2015, p. 83. 95 Ibid. 96 Ibid., p. 2. 97 Ibid., pp. 1-2. 98 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. 99 Ex-Im Bank, 2014 Competitiveness Report, June 2015, pp. 15-17. 93 Congressional Research Service 18 Export-Import Bank: Frequently Asked Questions  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. Congressional Research Service 19 Export-Import Bank: Frequently Asked Questions ($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. Congressional Research Service 20 Export-Import Bank: Frequently Asked Questions 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. Congressional Research Service 21 Export-Import Bank: Frequently Asked Questions   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. Congressional Research Service 22 Export-Import Bank: Frequently Asked Questions 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 Congressional Research Service 23 Export-Import Bank: Frequently Asked Questions 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. Congressional Research Service 24 Export-Import Bank: Frequently Asked Questions 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. Congressional Research Service 25 Export-Import Bank: Frequently Asked Questions 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 # $ mn # $ mn # $ mn # $7.2 2 $1,870.9 468 $0.0 0 $1,878.1 470 Short-term insurance $723.0 1,128 $4,403.4 1,853 $2.5 2 $5,128.9 2,983 Medium-term insurance $0.0 0 $38.3 20 $66.4 40 $104.7 60 $1,536.9 14 $1,509.2 41 $8,005.7 44 $11,051.8 99 $144.0 2 $0.0 0 $775.6 4 $919.6 6 $2,411.1 1,146 $7,821.8 2,382 $8,850.2 90 $19,083.1 3,618 12.6% 31.7% 41.0% 65.8% 46.4% 2.5% 100% 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. Congressional Research Service 26 Export-Import Bank: Frequently Asked Questions 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 Congressional Research Service 27 Export-Import Bank: Frequently Asked Questions 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. Congressional Research Service 28 Export-Import Bank: Frequently Asked Questions 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 69 41 $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 32 20 $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 Congressional Research Service 29 Export-Import Bank: Frequently Asked Questions 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) . Congressional Research Service 30 Export-Import Bank: Frequently Asked Questions  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 Congressional Research Service 31 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 Congressional Research Service 32 Export-Import Bank: Frequently Asked Questions 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] disburs [Text truncated at 120,000 characters. The full text is on the page linked above.] --- Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/crs%3AR43671. Public record. Not legal advice.