Agricultural Export Assistance Update: Quarterly Report
FY 2002 Summary

Summary of Program Activity

The Farm Security and Rural Investment Act of 2002 was signed on May 13, 2002, as Public Law 107-171. The 2002 Farm Act reauthorized, revised, or otherwise addressed such longstanding programs as Public Law 480, Food for Progress, Section 416(b), the Farmer-to-Farmer Program, short- and intermediate-term export credit guarantees, the Supplier Credit Guarantee Program, the Facilities Guarantee Program, the Export Enhancement Program, the Dairy Export Incentive Program, the Market Access Program, and the Foreign Market Development Cooperator Program.

The 2002 Farm Act also authorized new food aid and market development programs, including Technical Assistance for Specialty Crops and the McGovern-Dole International Food for Education and Child Nutrition Program.

The U.S. Department of Agriculture (USDA) administers most of these trade-related programs. The exceptions are Titles II and III of P.L. 480, and the Farmer-to-Farmer Program, which are administered by the U.S. Agency for International Development (USAID). Within USDA, the Foreign Agricultural Service (FAS) has the lead responsibility for developing and managing food aid, export assistance, and export market development programs.

Food Aid Programs

The 2002 Farm Act extended one of the oldest U.S. food aid programs – P.L. 480, also known as Food for Peace. Each title of P.L. 480 has been extended through 2007. Fiscal year 2003 commodity programming for food aid under P.L. 480 is estimated at $991 million, including $122 million for Title I (including Title I-funded Food for Progress) and $869 million for Title II (including Title II/World Food Program). The $991 million in P.L. 480 food assistance supported the shipment of approximately 3.8 million metric tons of U.S. commodities.

P.L. 480, Title I, provides for U.S. government financing of sales of U.S. agricultural commodities to developing countries and private entities. Financing is provided on concessional terms, with credit terms up to 30 years and a grace period of up to five years. In FY 2003, allocations totaling about 253,000 metric tons of commodities valued at around $60 million went to two countries under Title I. Title I funds were also used to provide commodity donations under the Food for Progress program.

P.L. 480, Title II, is a donation program used for both emergency and developmental assistance. The 2002 Farm Act increased the minimum annual tonnage provided under Title II to 2.5 million metric tons from 2.025 million tons (all on a grain-equivalent basis). Title II programs may be carried out by a variety of entities, including private voluntary organizations (PVOs) and intergovernmental organizations such as the World Food Program. Government-to-government programs are authorized only for emergencies. For FY 2003, donations of about 3.2 million metric tons of commodities valued at an estimated $869 million were programmed under Title II, including Title II donations through the World Food Program.

The P.L. 480, Title III, Food for Development program provides government-to- government food assistance grants to least-developed countries to support development. Local sales proceeds can be used to support a variety of economic development and related activities in recipient countries. In FY 2003, no donations were programmed under Title III, and this program is likely to remain inactive.

The Food for Progress program is carried out using 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 an incentive or a reward for undertaking economic or agricultural reform. The 2002 Farm Act reauthorized the Food for Progress program through 2007 and set the minimum annual commodity tonnage at 400,000 metric tons. The legislation also increased the annual CCC funding cap for administrative costs to $15 million (from $10 million) and the annual cap for transportation and other noncommodity costs to $40 million (from $30 million). In FY 2003, Food for Progress donations totaling about 382,000 metric tons valued at around $96 million were programmed for 19 countries using CCC funds. In addition, Food for Progress donations using Title I funds were programmed for 13 countries, totaling 321,000 metric tons of commodities valued at about $62 million.

The Farmer-to-Farmer Program, managed by USAID, uses volunteer U.S. farmers and other U.S. agriculturalists to assists farmers, farm groups, and agribusinesses in developing, middle income, emerging market, Sub-Saharan African, and Caribbean Basin countries. The volunteers work directly with the recipients, passing on their expertise and technical skills in production and distribution. The 2002 Farm Act increased the minimum percentage of P.L. 480 funding for this program from 0.4 to 0.5 percent, while placing special emphasis on Sub-Saharan African and Caribbean Basin countries.

Section 416(b) of the Agricultural Act of 1949 provides for the donation to needy countries of eligible commodities held by the CCC. In FY 2003, Section 416(b) donations were programmed to 35 countries, totaling approximately 250,000 metric tons of nonfat dry milk valued at $159 million.

The McGovern-Dole International Food for Education and Child Nutrition Program, authorized by the 2002 Farm Act, is based on, and replaces, the pilot Global Food for Education initiative. This program is now a fourth USDA international food aid authority, in addition to P.L. 480, Section 416(b), and Food for Progress. It is designed to encourage education and deliver food to improve nutrition for preschoolers, school children, mothers, and infants in impoverished regions. The 2002 Farm Act authorized the McGovern-Dole International Food for Education and Child Nutrition Program from FY 2003 through FY 2007, providing for $100 million in CCC funding for FY 2003. Funding in subsequent years needs to be authorized through Congressional appropriations. Under FY 2003 programming, Food for Education donations were announced for 21 countries, totaling 131,000 metric tons of commodities valued at approximately $42 million.

In FY 2003, U.S. foreign food assistance allocated under the programs administered by USDA (P.L. 480, Title I; the Food for Progress program; the Section 416(b) program; and Food for Education) totaled about 1.3 million metric tons valued at $419 million.

Commercial Export Credit Guarantee Programs

The 2002 Farm Act mandates a minimum annual program level of $5.5 billion for the Export Credit Guarantee Program (GSM-102) and the Intermediate Export Credit Guarantee Program (GSM-103). The GSM-102 program guarantees repayments of short-term credits (90 days to 3 years) extended by U.S. exporters—or financial institutions that may take assignment of an exporter’s rights—to foreign banks that issue irrevocable letters of credit in connection with an export sale.

In FY 2003, GSM-102 allocations of about $4.5 billion were announced to 24 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 $2.5 billion for exports to 12 countries and five regions.

Guarantees issued under the GSM-103 program can cover financing periods of more than 3 years and up to 10 years. This program is designed to help developing nations make the transition from concessional financing to cash purchases. In FY 2003, GSM-103 allocations of $125 million were made available for sales to eight countries and three regions, including the Central America, South America, and Southern Africa regions. Under this availability, GSM-103 registrations totaled $7.6 million for exports to two countries (Tunisia and Turkey).

The Supplier Credit Guarantee Program (SCGP) is designed to encourage U.S. exporters to expand, maintain, or develop markets for U.S. agricultural products in areas where commercial financing may not be available without a CCC payment guarantee. This program can help U.S. exporters who wish to provide short-term credit directly to their foreign buyers. The 2002 Farm Act increased the maximum credit terms under the program to 360 days, subject to Congressional appropriation of funds to cover the additional costs of the portion of any guarantee beyond 180 days. This program currently provides coverage for up to 180 days.

In FY 2003, SCGP allocations totaling nearly $1.4 billion in coverage were made available for sales to 24 countries and 12 regions, including the Baltic, Caribbean, Central America, Central Europe, China/Hong Kong, East Africa, South America, Southeast Asia, Southeast Balkans, Southeast Europe, West Africa, and Western Europe regions. Under the announced availability, registrations totaled $670 million to 15 countries and nine regions.

The Facility Guarantee Program (FGP) extends credit guarantees for export sales of U.S. capital goods and services to improve agriculture-related facilities in emerging markets. In FY 2003, $222 million in coverage was announced for sales to eight countries and seven regions. No sales were registered under this program in FY 2003.

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 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 2002 Farm Act extended EEP through 2007 at the current funding authorization level of $478 million per year. It also expanded the definition of unfair trade practices to include trade-distorting subsidies, trade barriers such as labeling that restrict new technologies, unjustified sanitary and phytosanitary restrictions, and monopolistic state trading enterprises implementing noncommercial pricing practices. The EEP has been inactive in recent years, and no allocations were announced for FY 2003.

The 2002 Farm Act also extended the Dairy Export Incentive Program (DEIP) through FY 2007. The DEIP focuses 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.

Initial allocations under the current DEIP program for July 1, 2003-June 30, 2004, were announced on Aug. 15, 2003, for 22,733 metric tons of nonfat dry milk, 7,032 tons of butterfat, and 1,010 tons of cheese. For FY 2003, bonuses totaling $14.8 million were awarded for 73,883 metric tons of nonfat dry milk; bonuses of $15.5 million were awarded for 10,000 metric tons of butterfat; and bonuses of $1.2 million were awarded for 2,272 metric tons of cheese.

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 development, maintenance, and expansion of foreign markets for U.S. agricultural, fishery, and forestry products. The MAP forms a public-private sector cooperative arrangement to share the costs of eligible overseas marketing and promotional activities. This program links small U.S. businesses, U.S. agricultural cooperatives, nonprofit state-regional trade groups, nonprofit U.S. agricultural trade associations, and USDA. Activities eligible for USDA funding include consumer promotions, market research, trade shows, and trade servicing.

Under the 2002 Farm Act, MAP funding rises progressively each year to reach $200 million in 2006, up from $90 million a year under the previous farm act. For FY 2003, the legislation authorizes $110 million in funding. On June 6, 2003, USDA announced $110 million in MAP allocations to 65 U.S. trade organizations for export promotion activities.

The Foreign Market Development Cooperator Program was authorized by the Agricultural Trade Act of 1978. Like the MAP, this program 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.

The 2002 Farm Act specified that $34.5 million in funding shall be made available for this program each fiscal year, up from $27.5 million previously. Announced program levels may vary from authorized funding levels because of the carryover of unused funds from prior years. Under the FY 2003 program, a budget of $38.0 million was allocated among 23 U.S. trade organizations.

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 allowable costs of procuring and exporting the samples.

On July 3, 2003, USDA announced allocations of $1,424,100 under the FY 2003 QSP. A second round of FY 2003 funding was announced on Oct. 6, with additional allocations of $307,100. Altogether, 21 organizations shared more than $1.7 million in FY 2003 QSP funding.

The Technical Assistance for Specialty Crops (TASC) program was established by the 2002 Farm Act to address unique barriers that prohibit or threaten exports of U.S. fruits, vegetables, and other specialty crops. The legislation calls for $2 million in Commodity Credit Corporation resources to be provided each fiscal year through 2007 to assist organizations in removing, resolving, or mitigating phytosanitary or related technical barriers to U.S. specialty crops. These crops include all cultivated plants and their products produced in the United States, except wheat, feed grains, oilseeds, cotton, rice, peanuts, sugar and tobacco.

On Nov. 4, 2003, USDA announced allocations of $2 million in FY 2003 TASC funding to 19 organizations for projects to help address current or potential barriers that hinder trade in specialty crops.

The Emerging Markets Program was authorized by the Food, Agriculture, Conservation, and Trade Act of 1990, as amended. The legislation calls for $10 million in funding per year to assist public and private organizations in providing technical assistance to promote market development, improve market access, or assist in the development of emerging market economies. The goal is to foster growth in U.S. agricultural exports to low- and middle-income countries that offer viable growth markets. The program supports sector assessments, trade missions, nontariff trade dispute resolution, and research on new markets. It can also sponsor training and trade capacity building projects so potential buyers in emerging economies can use U.S. products profitably.

On July 15, 2003, USDA announced $10 million in funding under the FY 2003 Emerging Markets Program for 75 projects in Asia, Latin America, Africa, Eastern and Central Europe, and Russia.