The Export-Import Bank of the United States recently announced that it is seeking public input regarding proposed changes to its medium- and long-term content policy being considered in connection with the mandated establishment of the Bank’s new “Program on China and Transformational Exports.”
The program is the result of bipartisan legislation approved by Congress in 2019 that renewed the EXIM’s authorization for a period of seven years while providing it with a clear policy directive “to focus on the economic and national security challenges from China.”
U.S. stakeholders and financial institutions regularly identify the Bank’s content policy as the greatest challenge they face to obtaining EXIM support of their exports. EXIM says this concern has been further validated through extensive discussions with exporters across numerous sectors, including during the Bank’s “Strengthening American Competitiveness” outreach events held earlier this year, where more than 1,000 stakeholders participated.
Accordingly, EXIM is now considering “whether changes to its content policy would improve the competitiveness of American exporters, and, by definition, their workers, as they face intense competition in transformational export sectors from China.”
Program on China and Transformational Exports
The EXIM’s new lending initiative as mandated by Congress is intended to (1) directly neutralize export subsidies for competing goods and services financed by official export credit, tied aid, or blended financings provided by China, and (2) advance the comparative leadership of the U.S. with respect to China, or support U.S. innovation, employment, and technological standards, through direct exports in ten transformational export sectors.
These “transformational” sectors include artificial intelligence; biotechnology; biomedical sciences; wireless communications equipment (5G); quantum computing; renewable energy, energy efficiency, and energy storage; semiconductors and semiconductor machinery manufacturing; emerging financial technologies; water treatment & sanitation; and high-performance computing.
Possible Changes to EXIM’s Content Policy
In carrying out its mandate to support U.S. jobs, EXIM uses domestic “content” — i.e., the costs associated with the production of a U.S. export — as a proxy for U.S. jobs.
Under the existing content policy, for all medium- and long-term transactions, EXIM limits its support to the lesser of: 85% of the value of all goods and services contained within a U.S. supply contract; or 100% of the U.S. content of an export contract. If the foreign content exceeds 15%, the Bank’s support is lowered proportionally. For short-term export contracts, the minimum U.S. content for full EXIM financing is generally 50%.
Export credit agencies have traditionally operated as reactive “lenders-of-last-resort,” but in response to changes in the market following the last recession that imposed regulatory constraints on the international lending of commercial banks, they are increasingly operating proactively. Many ECAs have boosted their export financing programs, introduced or expanded the use of trade-related financing programs, and increased the number and flexibility of programs.
Increasing flexibility of “content” policies is one example of this move, including to decrease the level of domestic content required to obtain the maximum level of official ECA support (ranging from not requiring any in-country production to 30% domestic content), focusing more on “national interest” or “national benefit requirements,” broadening the definition of domestic content to include factors such as research and development expenses, and permitting more exceptions to their content policies for transactions that meet other aims.
Deadline & Submission Guidelines
To submit comments as required through Regulations.gov, enter Public Notice: EIB-2020-011 under the heading “Enter Keyword or ID” and select Search. Follow the instructions provided at the Submit a Comment screen. Be sure to include your name, company name (if any), and Public Notice: EIB-2020-0011 on any attached document.
Comments must be received on or before December 14, 2020, to be assured of consideration.
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