Council: Commerce should find way to revive Ex-Im

The Trade Finance Advisory Council recommended that the Trump administration consult with the Export-Import Bank to utilize ex officio members to get it fully functioning.    The Commerce Department Trade Finance Advisory Committee (TFAC) on Thursday approved a recommendation for the Commerce secretary to work with the Export-Import (Ex-Im) Bank to evaluate whether he, U.S. Trade Representative Robert Lighthizer and Deputy U.S. Trade Representative Jeffrey Gerrish may compose a provisional Ex-Im board as an absence in nominated board members persists.
   The recommendation is being forwarded to Commerce Secretary Wilbur Ross for consideration.
   President Donald Trump on Wednesday nominated Kimberly Reed, former president of the International Food Information Council Foundation, to lead the bank.
   Currently, none of the bank’s five board seats are filled. Ex-Im rules require only three seats to be filled to approve financing in amounts larger than $10 million.
   During the Thursday TFAC meeting, Caterpillar International Export Finance Director Timothy Gaul expressed uncertainty as to how Reed’s nomination could impact the bank’s fundamental functions, but noted she is a supporter of Ex-Im’s mission.
   Gerrish currently serves as acting chairman of the bank, and Lighthizer and Ross are ex officio board members.
   The council recommends that the three officials work with Ex-Im to evaluate whether they could constitute a functioning board that could review and approve or reject export transactions above $10 million that are awaiting authorization, as well as review suggested reforms to improve Ex-Im efficiency and competitiveness.
   Part of TFAC’s adopted Ex-Im recommendation is a suggestion for the bank to evaluate potential partnerships with the private market active in the field of export finance and for the bank to engage in such arrangements where found to add value in such activities as originating export transactions for support by Ex-Im, funding Ex-Im guaranteed transactions or reinsuring proportions of risk not associated with U.S. content.
   Gaul noted that in fiscal 2017, the bank approved a record low of $3.4 billion in medium/short-term export credit and working capital guarantees.
   Ex-Im Vice President for Policy Analysis Helene Walsh attended the meeting and said she would report the information discussed during the meeting to her Ex-Im colleagues.
   TFAC also adopted a recommendation including several suggestions to streamline Small Business Association (SBA) export financing.
   The council is formally suggesting that the SBA Office of International Trade assume full authority to originate and provide capital for export financing, as opposed to a current structure that requires funding to be provided by the SBA Office of Capital Access, which doesn’t “necessarily” have the training or personnel to understand the needs of exporting clients, according to a TFAC document.
   As part of its SBA recommendation, the council is calling for SBA to change its rules so that passive investors owning less than a 50 percent stake of a firm aren’t required to guaranty SBA export financing loans.
   SBA currently requires all owners of 20 percent or more of a company guaranty the loan.
   This can be especially problematic for small and medium-sized enterprises in the technology industry, in which high upfront costs drive some firms to raise funds from small groups of investors, some of whose ownership percentages exceed 20 percent, a TFAC document says.
   During the council’s meeting, SBA Office of International Trade Associate Administrator Peter Cazamias said that suggestion could be the “heaviest lift.”
   He noted that less than 5 percent of all users of trade finance have used an “SBA product,” in no small part because the agency has no export loan for manufacturers, no loan guaranty product that allows banks to earn money off of deals of $1 million or below and has several discrepancies in its standard operating procedures and loan documentation.
   “Each of these things we are addressing in turn,” Cazamias said. “The cause of all these things is that the authority to create the rules, to design the products, to choose the legislation and the lenders resides in an office that is not about trade finance. So we’re very grateful for these recommendations.”
   Revised SBA regulations should also specifically allow and facilitate longer-term loans, such as five to seven years, to provide for completion of longer-term projects and export contracts, the TFAC document says.