A bill to reauthorise the charter of the US Export-Import Bank (US Exim) has been put before the House of Representatives ahead of the bank’s September expiration date.
The US Export Finance Agency Act was tabled last week with major reforms for the US export credit agency (ECA), including a longer charter life cycle and a larger financing capacity, as well as new lending parameters and reporting requirements.
The bill has bipartisan support and was introduced by Democrat congresswomen Maxine Waters, who became chair of the financial services committee in January, and Republican congressman Patrick McHenry, ranking member of the financial services committee.
Speaking earlier in the month ahead of a prior debate on the bank, Waters said:
“Failure to reauthorise and strengthen US Exim would result in the loss of tens of thousands of jobs, as US exporters suffer declining overseas sales. This includes thousands of small and medium-sized businesses across the country. Without a strong and competitive US Exim, companies may be forced to move jobs to locations where export credit is still available, and American workers will suffer.”
The proposed bill is set to be debated by the committee on June 26.
The Key Features of the Bill Include:
The renewal and extension of US Exim’s operating charter from September 2019 to September 2026.
The bank’s charter was previously only authorised for five years at a time.
An increase to US Exim’s lending cap from US$135bn to US$175bn incrementally over a seven-year period. In 2018, US Exim authorised US$3.3bn of financing for 2,389 transactions, to support an estimated US$6.8bn in US exports. It had about US$40bn in transactions pending board consideration. In 2014, when the ECA was last fully operational for the whole year, it authorised US$20.5bn for 3,746 transactions, to support US exports worth an estimated US$27.5bn.
Support for small businesses to be boosted by increasing US Exim’s small business mandate from 25% to 30% of its total annual transactions within three years.
A name change to the US Export Finance Agency.
New procedures to correct a flaw in its charter that allowed it to exist without a voting quorum of board members to authorise deals larger than US$10mn for four years. Prior to Kimberly Reed being approved as US Exim president and chair in May, the bank only had one operating board member for several years, which significantly limited its ability to assist US exporters and created a US$40bn backlog of unfinanced deals.
To avoid a repeat of this, the new bill proposes that if there is no board quorum for more than 90 days, a temporary board would be established.
The interim board would include any US Exim board members, the treasury secretary, the commerce secretary, and the US trade representative. It would have the authority to approve, on a unanimous basis, transactions up to US$25mn.
Additionally, the bill would create three new offices to focus on key areas of improvement. These include an office of minority and women inclusion and an office of financing for renewable energy, energy efficiency, and energy storage exports, the latter of which would receive 5% of the bank’s annual lending authority.
The third office aims to increase the bank’s support for exporting goods and services from Guam, Puerto Rico, and other US territories.
Resistance to US Exim
Despite scoring a victory in May with an overwhelming majority of the Senate approving Reed and some other US Exim board members to belatedly assume their seats, the ECA still faces fierce opposition, primarily from the Republican side of the aisle.
In order to appease opposition to what some in the Senate believe is “corporate welfare” offered by US Exim to exporters, the bill introduces new limitations, on certain lending and increases the requirements for it to disclose its exposure to its biggest lending partners.
The enhanced disclosure requirements will see US Exim’s President report on any exporter or lender that exceeds more than 20% of the bank’s lending authority in a fiscal year, to justify the need for the financing.
For any subsequent transaction over US$100mn involving that exporter or lender in the same fiscal year, US Exim must report to Congress on the economic impact analysis and the assessment of the need for financing the transaction.
Moreover, restrictions would be placed on US Exim’s ability to provide support for Chinese state-owned businesses.
Transactions of more than US$25mn to a Chinese state-owned entity would require the US trade representative to certify the transaction within 60 days before it can take effect.
Additionally, among a long list of restricted activities of Chinese state-owned entities that US Exim cannot support is an explicit ban on financing companies that “provides material or financial support” for China’s Belt and Road Initiative, or it’s military.
Finally, the bill would overtly step up America’s direct competition with China through the ‘program on China and transformational technology and renewable energy exports.
This would have a seven-year goal of using at least 20% of US Exim’s lending capacity to support US exports that compete directly with China’s (or other non-OECD countries’) exporters.
It will do this by providing financing that is “fully competitive” with the rates and terms offered by China’s or other non-OECD countries’ ECAs. The bill highlights several technology sectors and renewable energy as its priority areas to challenge China on.