Source: Michael Fielding, MEATINGPLACE, 10/21/11

Just a week after Congress ratified the free-trade agreement with South Korea, the United States Department of Agriculture has authorized $675 million in credit guarantees to assist sales of U.S. agricultural commodities to the Asian nation.

USDA has authorized credit guarantee packages to help pave the way for a stronger trade relationship with the Republic of Korea, in addition to several other markets, including Mexico, South America and Southeast Asia.

On Wednesday USDA announced the allocation under the Commodity Credit Corporation’s Export Credit Guarantee Program (GSM-102) for fiscal year 2012. The GSM-102 program provides credit guarantees to encourage financing of commercial exports of U.S. agricultural products overseas while providing competitive credit terms. Under the program, the Commodity Credit Corporation (CCC) reduces the financial risk to lenders by guaranteeing payments due from approved foreign banks to exporters or financial institutions in the United States.

Under the program, once a firm sale exists the qualified U.S. exporter applies for a payment guarantee before the date of export. The U.S. exporter pays a fee calculated on the dollar amount guaranteed, based on a schedule of rates applicable to different lengths of credit periods. The CCC-approved foreign bank issues a dollar-denominated, irrevocable letter of credit in favor of the U.S. exporter, ordinarily advised or confirmed by the financial institution in the United States agreeing to extend credit to the foreign bank.
 

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