484-595-0100
Officially Launched: U.S. International Development Finance Corporation (DFC)

Officially Launched: U.S. International Development Finance Corporation (DFC)

U.S. International Development Finance Corporation Launches

The end-of-the-year appropriations deal struck by Congress and the Trump Administration brought a number of policy changes offering significant opportunities for U.S. export and investment growth overseas.

A new agency, the U.S. International Development Finance Corporation (called the DFC) began operations on January 2, 2020.  Created by the BUILD Act of 2018, the DFC begins its first year in operation having secured a working $299 million budget for 2020.

Along with the recent seven-year reauthorization of the EXIM Bank, the DFC represents a significant step by the United States in asserting a larger and more capable role in international trade and investment.

What Is the DFC?

The International Development Finance Corporation is a merger of the former Overseas Private Investment Corporation (OPIC) and the Development Credit Authority, formerly housed in the U.S. Agency for International Development, the DFC represents an effort to streamline and bolster American support for private-sector projects in low and lower-to-middle-income countries.

In emerging markets, the role of state-run and multilateral Development Financial Institutions (DFIs) are growing, raising calls for the U.S. to adapt and expand its efforts, while also countering the increasing economic role of China.  While China puts billions into emerging market projects, mainly in infrastructure development, its private-sector development finance role is emerging.  

EXIM Shipping Containers Miami Port

The DFC Brings New Changes

The DFC significantly expands the capacity of the U.S. government to support private-sector-led development projects.  The DFC now has a $60 billion investment cap, up from OPIC’s $29 billion cap.  But unlike OPIC, the DFC has a more explicit mandate to focus on low- and middle-income countries (though waivers can be obtained for high and middle-income country projects that meet U.S. national interest, or that specifically focus on poor and vulnerable populations.)

In addition to adopting OPIC’s debt financing and political risk insurance portfolios, the DFC is now able to fund project feasibility studies and technical assistance grants and can lend in local currency to hedge against currency risk.  The most notable change, however, is the DFC’s new capacity to take an equity stake in investments (Congress approved $150 million for 2020) allowing it to play a stronger role in projects chosen for financing.

The DFC will be allowed to take up to 30% position in any project.  The DFC will also adhere to OPIC’s lending standards for social and environmental risk and impact.  While OPIC was formerly tasked to work with companies that were either U.S. based or included a U.S. partner, the DFC has only a mandate to prioritize U.S. companies. 

Concerns raised since the passage of the BUILD Act in 2018 about the amount allocated for DFC equity investments (considered low), accounting rules about the budgetary treatment of equity investments, and a prohibition on the DFC’s use fees to offset its operating expenses were not addressed in the time between the passage of the BUILD Act and launch of the DFC, but are expected to be raised in the future by congressional supporters of the new agency.

For more information about the DFC, see https://www.dfc.gov/

About Securitas Global Risk Solutions

Since 2004, Securitas Global Risk Solutions (“Securitas”) has helped clients across the United States develop solutions to mitigate credit and investment risk across the world.  As a specialty insurance broker focused on developing trade credit and political risk insurance programs, Securitas is focused on developing solutions that meet the needs their clients.  See our Website at https://www.securitasglobal.com/ for more information, or contact us at:

Telephone: 484-595-0100

Fax: 484-582-0111

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EXIM Reauthorized Through 2026

EXIM Reauthorized Through 2026

Exporters Can Pursue Trade Goals with Confidence

Legislation passed just before the end of 2019 has reauthorized the Export-Import Bank of the United States (EXIM) for a seven-year period, until December 31, 2026, the longest authorization in the institutions history.  EXIM reauthorization was part of the nearly $1.4 trillion federal appropriations package passed by Congress and signed by President Trump on December 20, 2019. 

In addition to the seven-year authorization extension, the legislation also includes a process that allows EXIM to continue operations in the event that the bank’s Board of Directors lacks a quorum.  (EXIM’s quorum lapsed in 2015, significantly limiting the bank’s lending operations, and was only restored in mid-2019).   

EXIM’s authorization also includes a number of key policy changes critical to bipartisan congressional support as well as support from the administration.  These include: 

1. A goal of increasing small business exporters participation in EXIM projects, with a target of increasing small business exports to 30% (from the current 25%) of total EXIM supported exports by 2021.   

2. An additional goal for EXIM to reserve 5% of its exposure authority to support renewable energy, energy efficiency, and energy storage technology exports.   

3. A new initiative, called the “Program on China and Transformational Exports” which reserves 20% of EXIM exposure authority to assist American exporters to compete directly with Chinese exports and to assist exporters in innovative technologies, such as artificial intelligence, biotechnology and biomedical sciences, wireless communications, quantum computing and high performance computing, renewable energy, energy efficiency and storagesemiconductor manufacturing, emerging financial technologies, and water treatment and sanitation.  

4. A requirement that EXIM consult with the State Department to assess risk to national interest of any proposed transaction over $25 million in which the end user, obligor, or lender is controlled by, or a business entity of the Chinese government.  

With an extended period of authorization and full financing capacity, US exporters and their overseas clients can more confidently access and utilize EXIM’s services.  EXIM Chair Kimberly Reed noted, ““This legislation ensures EXIM’s authority to support jobs and keep America strong through exports for a long time to come.”  In addition to the initiatives noted above, the EXIM Bank helps support US exports through a range of programs, including guaranteeing loans to foreign buyers, credit insurance and some direct lending to foreign companies. To learn more about the range of products offered by the EXIM Bank, click here. 

As a active EXIM broker, Securitas has years of experience working with ExIm’s various trade credit insurance policies to ensure U.S. companies generate export-driven growth.  In 2015, Securitas was named EXIM Broker of The Year. 

Securitas is ready to help companies, particularly small businesses interested in pursuing an export strategy, learn how to access EXIM’s services. 

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What the Recent Trade Deals Mean for Exporters

What the Recent Trade Deals Mean for Exporters

Trade Policy Actions Offer Possibilities for Exporters

In the previous week, two trade policy announcements signaled movement on key trade priorities of the Trump Administration.  Both the renegotiation of the North American Free Trade Agreement (NAFTA), now called the US-Mexico-Canada Agreement or USMCA, and the tentative “Phase One” trade agreement between the US and China came closer to finality last week.  Both have the potential to bring about changes in 2020 that could benefit US exporters.

First, on Tuesday, December 10, after months of re-negotiation, the USMCA cleared the last hurdle to US ratification with Congressional negotiators signaling support for a revised draft.

The new draft revises the agreement originally signed by leaders of the three countries in November 2018 and notably includes stronger enforcement measures for worker rights and environmental protections, as well revisions to patent protections for certain pharmaceuticals.

Only a few days later on Friday, December 13, US Trade Representative (USTR) Robert Lighthizer announced completion of negotiations with Chinese counterparts on an “enforceable” first-stage trade agreement with China, mainly covering key areas of agriculture, technology, intellectual property, and financial services.  The agreement stalls an anticipated round of new tariffs on Chinese goods that were set to go into effect on December 15.

USMCA Seeks Stability, Fairness

Efforts to press Mexico for enforceable actions on worker rights and wages, underscore negotiators efforts to create a more level playing field for US manufacturing.  Critics of the 1994 NAFTA agreement claimed it incentivized manufacturing offshoring to Mexico, and failed to improve Mexican incomes and buying power.

In auto manufacturing specifically, the new deal will mandate an increase in the percentage of a vehicle’s value that must be sourced in North American (75%, up from 62.5%), the amount of North American steel and aluminum that must be used (70%), and the percentage of a vehicle’s value must be made by workers making at least $16 an hour.

Despite the new regulations, the American Automotive Policy Council, which represents the Big Three automakers, praised the deal, noting that it “will incentivize a $23 billion increase in US annual parts sales alone.”

As Canada and Mexico are the largest export markets for US agricultural goods, the agreement offers some stability for the sector.  With many Canadian and Mexican tariffs set to end in the new agreement, American producers, specifically in the pork and dairy sectors, are set to benefit.

The agreement ends a period of trade discord between the three countries.  With recent tit-for-tat tariffs set to end and an agreement likely ratified, the USMCA will offer US businesses greater policy stability and a favorable environment for increasing trade flows in 2020.

Overall, a US International Trade Commission report completed earlier this year estimated that the USMCA would increase US exports to Canada by 19.1 billion or 5.9% and to Mexico by $14.2 billion or 6.7%.

Automotive Manufacturers in the Trade Deal

China Agreement a First Step

The US-China agreement comes after nearly two years of disagreement over trade, and is being hailed by the US side as an initial step toward an overall effort to reach final comprehensive trade agreement in the future.  For its part, the US agreed to lower tariffs on an estimated $360 billion in goods from China, and cancelled tariffs on roughly $160 billion worth of consumer goods that were set to go into effect last weekend.

China agreed in return to cancel planned retaliatory tariffs on over 3,000 American products while agreeing to several concessions, such as a promise to stop requiring US companies to hand over proprietary technology to enter the Chinese market.  China has also agreed to buy $50 billion in agricultural products in 2020 and agreed to an additional increase in overall US exports of $200 billion over the next two years.  For example, in 2018, China purchased $9.3 billion in US agricultural products, and an overall total of $120.3 billion in US goods and services.

The US will keep 25% tariffs on a separate list of Chinese goods in place to be discussed in future follow-on negotiations.

US importers, particularly in the computer and retail industries will immediately benefit from the halting of expected new tariffs, which were set to hit Chinese-made electronics, toys, and garments.  For US exporters, the details of China’s pledge to increase purchases of US products remains to be worked out with initial language from the USTR noting broadly that increases will include “manufactured goods, food, agricultural and seafood products, energy products, and services.”

US soybean and pork sales are expected to increase, while US auto parts manufacturers will not be impacted by planned retaliatory tariffs that have now been called off by China.  Leading US exports to China include soybeans, integrated electronic circuits, automobiles, and aircraft.  Importantly, China also has agreed in general to a number of provisions to improve the overall environment of doing business in the country, including improved respect for intellectual property and removal of many existing barriers to its financial services sector.

While these promises are worth noting, China’s record on maintaining its economic commitments are questionable, at best.  USTR has noted that new agreement will be “totally enforceable,” details will become more available as the final text is worked out between the two countries.

Exporting to Mexico, Canada, China:  Tools for Exporters

Both trade agreements will hopefully introduce more certainty into cross-border trade and lead to increasing opportunities for US exporters.

The International Trade Administration (ITA), the U.S. Department of Commerce’s export promotion agency (www.export.gov) offers a range of services from general information about trade, to more detailed market and product data, to seminars and promotional events highlighting U.S. products. The US Commercial Service (USCS) can further provide companies with more tailored and detailed counseling and services – particularly small and medium-sized enterprises.  The USCS can be accessed at www.export.gov/locations while its Philadelphia office is at https://2016.export.gov/pennsylvania/philadelphia/.

 

For More Analysis of Both Agreements See the Following Sources:

USMCA

USTR Fact Sheet on USMCA; and USTR Industry Specific Fact Sheets

Wall Street Journal, “From Farms to Silicon Valley, U.S. Businesses Stand to Gain From USMCA,” December 10, 2019

Washington Post, “The USMCA is finally done. Here’s what is in it.” December 10, 2019

US – China “Phase One” Agreement

USTR Fact Sheet

Wall Street Journal, “U.S., China Agree to Limited Deal to Halt Trade War,” December 14, 2019

Reuters, “Factbox: What is actually in the U.S.-China ‘Phase One’ trade deal?,” December 16, 2019

 

About Securitas

Securitas Global Risk Solutions aids current and potential exporters through political risk and trade credit insurance, as well as a range of financial solutions to help clients protect their foreign sales, increase cash flows, and access global markets more securely and aggressively.

Based in the Philadelphia area, the team at Securitas is prepared to work with clients to understand their export goals and structure affordable risk solutions.  Securitas Global Risk Solutions is located at 900 West Valley Road, Suite 701, Wayne, PA 19087, by phone at 484-595-010, and at www.securitasglobal.com

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U.S. House Approves EXIM Reauthorization; Senate Approval Is the Next Step

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EXIM Bank Reauthorization on the Horizon

On Friday, November 15, the U.S. House of Representatives voted to reauthorize the Export-Import Bank of the United States (EXIM) for a 10-year period through 2029.  The House successfully passed H.R. 4863 United States Export Finance Agency Act of 2019 with a vote of 235-184.  In addition to a 10-year reauthorization of the EXIM’s operations and funding, the bill renames EXIM, the “United States Export Finance Agency,” and increases its lending authority from $135 billion to $175 billion over a seven-year period.

The bill is unlikely to be considered in the Senate, as both Senate Majority Leader Mitch McConnell and President Trump have indicated their opposition to the bill.  EXIM appears likely to continue its operations under another temporary budget continuing resolution (CR) to be considered before the current CR ends on November 21, 2019.

Despite broad support for EXIM reauthorization from both political parties, the White House, and a range of economic interests including the U.S. Chamber of Commerce and the AFL-CIO, differences over details of the House bill has divided support for the current reauthorization bill along partisan lines.  A June 2019 compromise draft authored by House Financial Services Committee Chairwoman Maxine Waters (D-California) and Ranking Member Patrick McHenry (R-North Carolina) fell apart in committee with some Republican committee members wanting greater constraints on EXIM financing for projects involving Chinese state-owned corporations, and some Democrat members seeking greater restrictions on financing for fossil-fuel related projects.

The House bill approved on Friday sought to address these concerns but only cleared committee on a partisan 30 – 27 vote, with McHenry and all Republican committee members withdrawing support because of concerns that the bill’s restrictions on China-related financing were not strong enough.  In the final House vote on H.R. 4863, only four Democrats voted no with only 13 Republicans voting yes with the majority.

A bipartisan bill to reauthorize EXIM (S. 2293) has also been introduced in the Senate but has yet to be considered by the Senate Banking Committee.

EXIM resumed full financing capacity in May 2019, when the U.S. Senate confirmed three Trump administration nominees to the EXIM board of directors, and re-established a lapsed quorum that had limited EXIM’s operations since 2015.

 

About EXIM Bank:

EXIM is an independent federal agency that promotes and supports American jobs by providing competitive and necessary export credit to overseas purchasers of U.S. goods and services. A robust EXIM can level the global playing field for U.S. exporters when they compete against foreign companies that receive support from their governments. EXIM also contributes to U.S. economic growth by helping to create and sustain hundreds of thousands of jobs in exporting businesses and their supply chains across the United States. In recent years, 90 percent of the total number of the bank’s authorizations has directly supported small businesses. Since 2000, EXIM has provided $14.8 billion to the U.S. Treasury after paying for all of its administrative and program expenses.

About Securitas:

As a certified EXIM broker, Securitas has decades of experience working with U.S. companies seeking to implement and understand EXIM’s guarantees and insurance policies to mitigate risk, finance international trade and achieve export-driven growth.  Because of the firm’s work in helping US companies increase exports and create jobs, Securitas was named EXIM Broker of The Year in 2015.

Securitas is ready to help businesses, particularly SMEs interested in pursuing an export strategy, learn how to access EXIM’s services.

 

 

 

 

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Securitas Partner Matthew Stewart Named to EXIM Bank 2019 Africa Advisory Committee

Securitas Partner Matthew Stewart Named to EXIM Bank 2019 Africa Advisory Committee

FOR IMMEDIATE RELEASE

The Export-Import Bank of the United States (EXIM Bank) yesterday announced the appointment of Securitas Partner Matthew Stewart to its 2019 Sub-Saharan Advisory Committee.  Stewart joins 10 other appointees on the committee, which is tasked with advising the EXIM Board of Directors “on the development and implementation of policies and programs designed to promote EXIM engagement in Sub-Saharan Africa.”  The committee was appointed by the EXIM Board of Directors at the conclusion of yesterday’s EXIM board meeting.

“My fellow EXIM board members and I congratulate the new members of the EXIM Sub-Saharan Africa Advisory Committee.  These advisory committee members bring important perspectives and expertise as we focus on increasing U.S. exports to the region.”

EXIM President and Chair Kimberley A. Reed  

The EXIM Bank is an independent federal agency that promotes and supports U.S. exports by providing competitive and necessary export credit to overseas purchasers of U.S. goods and services.  As EXIM works to boost U.S. trade and investment in Sub-Saharan Africa, Stewart brings valuable experience and expertise to the advisory committee.  A Securitas partner since 2011 Stewart has lead Securitas’ trade support expansion in Africa and the Middle East, with experience in the areas of debt financing, political risk insurance, as well as logistics, negotiation, and regulatory analysis for exporters and buyers.

Prior to joining Securitas, Matt worked over 15 years in commercial banking and has extensive experience in executing due diligence and underwriting credit for middle market clients. Stewart is a graduate of Baylor University with a bachelor’s degree in Business Administration and a double major in Accounting and Economics. He received the Omicron Delta Epsilon honor for Economics in 1996.

 

See also:
EXIM announces Members of the 2019 Africa Advisory Committee

https://www.exim.gov/news/exim-announces-members-2019-sub-saharan-africa-advisory-committee

 

About Securitas Global Risk Solutions

Since 2004, Securitas Global Risk Solutions (“Securitas”) has helped clients across the United States develop solutions to mitigate credit risk to achieve their financial goals.  As a specialty insurance broker focused on developing trade credit and political risk insurance programs, Securitas is focused on finding coverage for difficult credits to protect businesses from unexpected credit losses.  See our Website at https://www.securitasglobal.com/ for more information, or contact us at:

900 West Valley Road

Suite 701

Wayne, PA 19087

Telephone: 484-595-0100

Fax: 484-582-0111

info@securitasglobal.com