U.S. pork and other agricultural entities are anxiously awaiting the opportunity to sell more product to South Korea now that the free-trade agreement is signed. That prospect moved even closer as USDA authorized $673 million in credit guarantees, which will assist South Korea in purchasing U.S. agricultural goods.
In fact, credit guarantee packages also will apply to other markets-- Mexico, South America and Southeast Asia.
USDA announced the allocation under the Commodity Credit Corporation’s Export Credit Guarantee Program (GSM-102) for fiscal year 2012. It allows credit guarantees to encourage financing of commercial exports of U.S. agricultural products overseas while providing competitive credit terms. The CCC reduces the financial risk to lenders by guaranteeing payments due from approved foreign banks to exporters or financial institutions in the United States.
Once a sale is completed, the qualified U.S. exporter applies for a payment guarantee before the export date. The U.S. exporter pays a fee calculated on the dollar amount guaranteed, based on a schedule of rates applicable to different credit lengths. 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.
Source: CCC, Meatingplace.com