Agricultural Export Assistance Update: Quarterly Report
June 2002 Summary

Public Law 104-127, the Federal Agriculture Improvement and Reform Act of 1996 (FAIR Act), was signed into law on April 4, 1996. The FAIR Act oriented programs toward greater market development, with increased emphasis on high-value and value-added products. It reauthorized and revised such longstanding export assistance programs as Public Law 480, short- and intermediate-term export credit guarantees (GSM-102 and GSM-103), the Export Enhancement Program, the Dairy Export Incentive Program, and the Market Access Program. The FAIR Act also provided for the creation of the Supplier Credit Guarantee Program and the Facility Guarantee Program.

The U.S. Department of Agriculture administers the export assistance programs contained in the FAIR Act, except for Titles II and III of the revised P.L. 480, which are assigned by law to the Agency for International Development. Within USDA, the Foreign Agricultural Service (FAS) is the leader in developing and executing these programs and initiatives.

Food Aid Programs

The FAIR Act reauthorized and added activities to one of the oldest U.S. export assistance programs--P.L. 480, also known as Food for Peace. As of May 15, fiscal year 2002 commodity allocations for food aid under P.L. 480 were estimated at $520 million, including $150 million for Title I (including Title I-funded Food for Progress) and $370 million for Title II (including Title II/World Food Program). The $520 million in P.L. 480 food assistance will support the shipment of approximately 2.5 million metric tons of commodities.

The FAIR Act reauthorized Title I government-to-government concessional sales and included the authority to sign agreements with private entities. It also modified the repayment terms for Title I credit, eliminating the minimum repayment period of 10 years and reducing the maximum grace period from 7 to 5 years. An agricultural trade organization will be allowed to carry out projects or programs in developing countries using funds from the sale of Title I commodities if the organization has a market development plan approved by the Secretary of Agriculture.

As of May 15, concessional sales and donations of about 775,000 metric tons of commodities valued at $150 million had been allocated to 11 countries under Title I and the Food for Progress program using Title I funds. This includes Title I-funded Food for Progress donations of about 110,000 metric tons of commodities valued at approximately $35 million.

The FAIR Act reauthorized the Title II emergency and private assistance donations program. It increased the maximum level of funding that can be provided as overseas administrative support from $13.5 million to $28 million and added intergovernmental organizations such as the World Food Program to the list of organizations eligible to receive these funds. For FY 2002, donations of about 1.7 million metric tons of commodities valued at an estimated $370 million have been allocated under Title II, including Title II donations through the World Food Program.

The FAIR Act reauthorized the Title III Food for Development program. This program provides government-to-government food assistance grants to least-developed countries. Local sales proceeds can be used to support a variety of economic development and related activities in recipient countries. As of May 15, no donations had been programmed under Title III.

Another program, Food for Progress, is carried out using commodities available for distribution under Section 416(b), funds available to the Commodity Credit Corporation (CCC), or funds appropriated under P.L. 480, Title I. This program provides commodities to needy countries as a reward for having undertaken economic or agricultural reform. The FAIR Act extended the authority for the Food for Progress program to provide assistance in the administration and monitoring of food assistance programs to strengthen private sector agriculture in recipient countries through 2002. The authority was also expanded to include intergovernmental organizations in Food for Progress programming, to make sales on credit terms to all eligible countries in addition to the former Soviet Union, and to include the provision of technical assistance for monetization programs.

As of May 15, a Food for Progress bilateral agreement using the Title I authority was planned with Indonesia totaling about 53,000 metric tons valued at about $15.9 million. In addition, Food for Progress agreements with private entities using the Title I authority are planned in Tajikistan and Uzbekistan totaling 57,000 metric tons of commodities valued at about $19 million. Food for Progress programs using CCC funds are planned in 26 countries totaling 312,000 metric tons valued at about $78 million. The Food for Progress program is limited by a global 500,000-metric-ton legislative ceiling and caps of $30 million on transportation costs and $10 million on administrative costs paid directly by CCC.

The FAIR Act reauthorized the Farmer-to-Farmer Program, which can include middle-income countries and emerging markets. FAIR also increased the minimum percentage of P.L. 480 funding for the Farmer-to-Farmer Program from 0.2 to 0.4 percent.

Section 416(b) of the Agricultural Act of 1949 provides for the donation to needy countries of eligible commodities held by the CCC. As of May 15, 1.7 million metric tons of commodities valued at approximately $429 million were planned to 56 countries under the Section 416(b) program. Of this total amount, 297,000 metric tons of commodities valued at approximately $63 million were planned to 28 countries under the Global Food for Education Initiative (GFE). The GFE is an international school feeding program to improve school enrollment, attendance, and performance in poor countries using commodities donated under the authority of the Section 416(b) program.

As of May 15, FY 2002 U.S. food assistance allocated under the programs administered by USDA (P.L. 480, Title I; the Food for Progress program; and the Section 416(b) program) totaled about 2.8 million metric tons valued at $657 million.

Commercial Export Credit Guarantee Programs

A minimum annual program level of $5.7 billion is available for the Export Credit Guarantee Program (GSM-102) and the Intermediate Export Credit Guarantee Program (GSM-103). The FAIR Act mandates a minimum annual program level of $5.5 billion for 

GSM-102 and GSM-103, but it allows flexibility in how much is made available for each program. Provisions of the Food, Agriculture, Conservation, and Trade (FACT) Act of 1990 mandate that a minimum of $1.0 billion be made available for direct credits or export credit guarantees to emerging markets during fiscal years 1996-2002. Under this mandate, $200 million is made available annually, increasing the minimum annual program level for GSM-102 and GSM-103 from $5.5 billion to $5.7 billion.

The GSM-102 program guarantees repayments of short-term credits (90 days to 3 years) extended by U.S. financial institutions to eligible banks in countries that purchase U.S. farm products. As of May 17, GSM-102 allocations of about $4.1 billion had been announced to

22 countries and 11 regions, including the Baltic, Caribbean, Central America, Central Europe, China/Hong Kong, East Africa, South America, Southeast Asia, Southeast Europe, Southern Africa, and West Africa regions. Under this availability, GSM-102 registrations totaled $1.9 billion for exports to nine countries and six regions.

Guarantees issued under the GSM-103 program can cover financing periods of more than 3 and up to 10 years. This program is designed to help developing nations make the transition from concessional financing to cash purchases. As of May 17, $165 million in intermediate credit guarantees had been made available for sales to eight countries and three regions, including the Central America, South America, and Southern Africa regions. No sales have been registered under this program in FY 2002.

The Supplier Credit Guarantee Program (SCGP) became operational in late FY 1996. This program is designed to encourage U.S. exporters to expand, maintain, and develop markets for U.S. agricultural products in areas where commercial financing may not be available without a CCC payment guarantee. The program can help U.S. exporters who wish to provide short-term credit (180 days or less) directly to their foreign buyers.

As of May 17, SCGP allocations totaled $1.0 billion in coverage for sales to 18 countries and 11 regions, including the Baltic, Caribbean, Central America, Central Europe, China/Hong Kong, South America, Southeast Asia, Southeast Balkans, Southeast Europe, West Africa, and Western Europe regions. Under the announced availability, registrations totaled $245.7 million to nine countries and nine regions.

The Facility Guarantee Program (FGP) was implemented in December 1997 to extend credit guarantees for export sales of U.S. capital goods and services to improve agriculture-related facilities in emerging markets. As of May 17, $285 million in coverage had been announced for sales to seven countries and seven regions. No sales have been registered under this program in FY 2002.

Export Enhancement and Dairy Export Incentive Programs

The Export Enhancement Program (EEP), announced by USDA on May 15, 1985, operates under the authority of the Agricultural Trade Act of 1978 as amended, the Uruguay Round Agreements Act, and the FAIR Act. The EEP permits USDA to provide bonuses to make U.S. commodities more competitive in the world marketplace and to offset the adverse effects of unfair trade practices or subsidies. The FAIR Act set maximum funding levels for CCC to make available for the EEP each fiscal year through 2002 as follows: FY 1996, $350 million; FY 1997, $250 million; FY 1998, $500 million; FY 1999, $550 million; FY 2000, $579 million; FY 2001, $478 million; and FY 2002, $478 million. No allocations have been announced under the EEP for FY 2002.

Section 148 of the FAIR Act extended the Dairy Export Incentive Program (DEIP) through FY 2002. Section 148 focuses the DEIP on market development, providing full authority and funding to reach the volume or spending limits consistent with U.S. obligations as a member of the World Trade Organization. The DEIP operates on a bid bonus system similar to EEP, with cash bonus payments. The DEIP program helps exporters of U.S. dairy products meet prevailing world prices and helps develop foreign markets for the targeted products.

Allocations under the current DEIP program for July 1, 2001- June 30, 2002, were announced on Aug. 2, 2001. DEIP allocations were announced for 68,201 metric tons of nonfat dry milk, 21,097 metric tons of butterfat, and 3,030 metric tons of cheeses. An invitation was issued for 68,201 metric tons of nonfat dry milk on Nov. 2, 2001. As of May 31, FY 2002 bonuses totaling $43.3 million had been awarded for 68,201 metric tons of nonfat dry milk. An invitation was issued on May 17, 2002, for 465 metric tons of cheese. This amount is a reallocation of tonnage that was canceled as of March 31, 2002. As of May 31, FY 2002 bonuses totaling $0.3 million had been awarded for 465 metric tons of cheese. The major markets being assisted in FY 2002 to date include the Caribbean and Central and South America, and Asia and the Former Soviet Union.

Market Development Programs

The Market Access Program (MAP) was authorized by Section 203 of the Agricultural Trade Act of 1978, as amended. This program is designed to encourage the creation, maintenance, and expansion of foreign markets for U.S. agricultural, fishery, and forestry products.  The MAP forms a public-private sector partnership to share the costs of eligible overseas marketing and promotional activities, using the experience of specialists deployed around the world.  This partnership links small U.S. businesses, U.S. agricultural cooperatives, nonprofit state-regional trade groups, nonprofit U.S. agricultural trade associations, and USDA.  Eligible activities include consumer promotions, market research, trade shows, and trade servicing.  On [June 26, 2002,] USDA announced FY 2002 MAP allocations of $90 million to 67 U.S. trade organizations for export promotion activities in foreign markets.  The Farm Security and Rural Investment Act of 2002 provides an additional $10 million for MAP for FY 2002, which will be allocated later in the year.

The Foreign Market Development Cooperator Program also provides cost-share assistance to eligible nonprofit agricultural trade organizations to conduct approved international market development activities. USDA enters into agreements with nonprofit U.S. trade organizations that have the broadest producer representation of the commodity being promoted. Priority is given to those organizations that are nationwide in membership and scope. Activities conducted under this program generally address long-term foreign import constraints and are designed to create, maintain, and expand long-term growth in demand for U.S. agricultural, fishery, and forestry products. On Nov. 30, 2001, USDA announced an FY 2002 Cooperator program level of $33.5 million, allocated among 24 U.S. trade organizations. Applications for the FY 2003 program were due by March 11, 2002, and allocations will likely be announced in the fall.

The Quality Samples Program (QSP) was established in 1999 to help U.S. agricultural trade organizations provide samples of U.S. agricultural products to potential importers in foreign markets. Focusing on industry and manufacturing uses, this program stimulates interest in U.S. products by giving potential customers the opportunity to test the products and discover U.S. quality.  The QSP is used to fund projects that broadly benefit agricultural industries rather than individual exporters.  Under the program, participants export samples of U.S. agricultural products to foreign buyers and provide technical demonstrations on how to properly use or further process the products.  When the project is completed, USDA reimburses the costs of procuring and exporting the samples.  On [June 26, 2002,] USDA announced that 17 organizations would share $1.34 million in funds made available under the FY 2002 QSP.  A second round of funding totaling $1.16 million is expected to be available for application in July.

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