Export-Import Bank of the United States

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Export-Import Bank of the United States

The Export-Import Bank of the United States (Ex-Im Bank) is an independent U.S. Government agency that helps finance the overseas sales of U.S. goods and services.

The Export-Import Bank of the United States (Ex-Im Bank) was created in 1934 and established under its present law in 1945 to aid in financing and to facilitate U.S. exports. Its creation was spurred by the economic conditions of the 1930’s when exports were viewed as a stimulus to economic activity and employment. A primary aim of Ex-Im Bank was to foster trade between the United States and the Soviet Union. During the post-World War II era, Ex-Im Bank helped U.S. companies participate in the reconstruction of Europe and Asia.

Ex-Im Bank is encouraged to supplement, but not compete with private capital. Over the years, the private sector, Congress and the executive branch have debated Ex-Im Bank’s role in a free market economy, where the private sector handles the majority of export financing. For example in 1953, the President virtually liquidated Ex-Im Bank in an effort to reduce government spending and to ease a turf battle with the World Bank, but Congress intervened to keep Ex-Im Bank open. According to supporters, Ex-Im Bank has historically filled gaps created when the private sector is reluctant to engage in export financing.

Today Ex-Im Bank faces many of the same challenges and opportunities that it encountered when it was first created. For example, the United States is renewing trade relations with the countries of the former Soviet Union and Eastern Europe. Increasingly, exports are seen as vital for sustaining U.S. economic growth. The U.S. economy is much more internationalized and exports form a larger share of the gross national product than in the 1930’s. In addition, around the world trading and financial systems are more interdependent and international competition is incomparibly more intense.

Ex-Im Bank provides guarantees of working capital loans for U.S. exporters, guarantees the repayment of loans or makes loans to foreign purchasers of U.S. goods and services and provides credit insurance against non-payment by foreign buyers for political or commercial risk. Ex-Im Bank must also balance its mandate, that there exists a reasonable assurance of repayment.

To carry out the Clinton Administration’s strategy for continuing export growth, the Bank is focusing on critical areas such as emphasizing exports to developing countries, aggressively countering trade subsidies of other governments, stimulating small business transactions, promoting the export of environmentally beneficial goods and services, and expanding project finance capabilities.

Ex-Im Bank is not an aid or development agency, but a government held corporation, managed by a Board of Directors consisting of a Chairman, Vice Chairman and three additional Board Members. Members serve for staggered terms and are chosen and serve at the discretion of the President of the United States.

Ex-Im Bank’s mission is to create jobs through exports. It provides guarantees of working capital loans for U.S. exporters, guarantees the repayment of loans or makes loans to foreign purchasers of U.S. goods and services. Ex-Im Bank also provides credit insurance that protects U.S. exporters against the risks of non-payment by foreign buyers for political or commercial reasons. Ex-Im Bank does not compete with commercial lenders, but assumes the risks they cannot accept. It must always conclude that there is reasonable assurance of repayment on every transaction financed.

Military Policy

Ex-Im Bank is prohibited by law from financing defense articles and defense services. In defining what is a “defense article” or “defense service”, Ex-Im Bank uses criteria based on the identity of the foreign end-user, the nature of the item, and the use to which the item will be put. If the items are sold to a military organization or designed primarily for military use, they are presumed to be defense articles unless proven otherwise.

Humanitarian items such as lifesaving, rescue and medical equipment (ambulances, hospital supplies, etc.) are not considered defense articles, even if sold to a military entity.

Small craft (marine vessels, small aircraft) used for routine border patrol, drug interdiction and natural resource monitoring are not considered defense articles, even if sold to a military entity.

There are two exceptions to this policy:

If the export item has “dual use” (both military and commercial or civilian applications), it is eligible for support if there exists convincing evidence that the item is non-lethal in nature and will be used primarily for civilian activities. Ex-Im Bank may require that the buyer or end-user provide certification to that extent. Specifically, Ex-Im Bank’s investigation must indicate that the item is non-lethal, that the end user has a legitimate civilian requirement which the dual-use item will meet, and that the primary motivation for the purchase is indeed based on the civilian requirement.

Under provisions of the US “Anti-Drug Abuse Act of 1988” as amended, if Ex-Im Bank determines that an item constitutes a defense article and is not eligible for financing, a limited waiver of the statutory prohibition against Ex-Im Bank support may be obtained. If the item in question is on the US munitions list and a “Presidential Determination of National Interest” is granted and obtained (through a request from the host government directed to the U.S. Department of State), which concludes that the item is to be used for drug interdiction purposes, then Ex-Im Bank may provide guarantee or insurance support for the defense article.

SOURCE: Exim Bank

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