2011 508 accessible version - Export-Import Bank of the United States

Chapter 6: Public Policies – Stakeholder ConsiderationsSection C: Foreign Content and Local CostsIntroductionEx-Im Bank’s conte nt policies can be grou ped into three general categories: U.S.content, foreign content, and local costs. U.S. content is the portion of an export thatoriginated in the United States. Foreign c ontent is t he portion of an ex port thatoriginated outside the seller’s and the buye r’s countries, and loca l costs are goods andservices manufactured or originated in the buyer’s country.For many years, eligibility and cover criteria for foreign content have been identified bymany exporters as the ir number one concern. In 2011, concerns regarding Ex-Im Bankcontent policies increased in tand em with the spike in demand fo r Ex-Im Bank directloan financing, which was prompted by the liquidity constraints caused by the 2008financial crisis, the Eurozone crisis, and the new regulatory environment resulting frombanks preparing to implement Basel III requirements. For more information about thefinancial crisis please refer to Chapter 2.As such, there is a gro wing interest in introducing flexibility into t he domestic contentrules because they are not governed by in ternational agreement. That is, each ECAestablishes its own guidelines. T hus, exporters have most frequently identified foreigncontent as an area where ECA policies and practices substantially diverge as they aredriven by the politic al and eco nomic environment in which each ECA operates. B ycontrast, the OECD Arrangement sets the basic parameters on official local cost supportand, as a result, ECA policies appear to be more closely aligned.Ex-Im Bank’s Foreign Content Policy and Practice in 2011In keeping with its mandate t o maintain or increase U.S. em ployment through thefinancing of U.S. expo rts, Ex-Im Bank’s fore ign content policy en sures that its exportfinancing targets U.S. content that is dire ctly associated with goods and servicesexported from the United States. Ex-Im Bank relies on U.S. content as a proxy toevidence support for U.S. jobs. During fiscal year 2011, the Bank reported $32.7 billionin export financing that supported $41.3 billion worth of American exports andsupported an estimat ed 288,000 jobs. Thus , the content policies aim to provideincentives to maximize sourcing of U.S. con tent. Nevertheless, in some situations U.S.export contracts contain essential goods and services that are f oreign-originated. Toaccommodate these g oods and services, Ex -Im Bank’s policy allows the inclusion o fsome foreign conten t in the U.S. export contract with cert ain restrictions andlimitations.Ex-Im Bank’s foreign content policy is consis tent with the objectives mandated in itsCharter; however, there are no specific statu tory requirements per se relating to foreigncontent. Rather, the policy reflects a conce rted attempt to balance the interests ofmultiple stakeholders.91