Peruvian Rice Purchases Guaranteed by the Commodity Credit Corporation

NSIAD-84-116: Published: Jun 7, 1984. Publicly Released: Jun 11, 1984.

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Pursuant to a congressional request, GAO investigated rice purchases made by Peru in September 1983 under a U.S. Government guaranteed export credit, focusing on: (1) whether Peru passed up lower responsive bids during the procurement of the rice; and (2) what is required of recipient countries and the Department of Agriculture under Export Credit Guarantee Program legislation and implementing regulations.

GAO found that Peruvian officials: (1) had passed over two lots of lower priced rice from one offerer to purchase an equivalent amount of rice from other exporters at a premium of over $300,000; and (2) decided to split the purchase among several suppliers either because of the low offerer's deficient service on a prior purchase or to achieve supply security. Agriculture's Export Credit Guarantee Program is not administered under any specific underlying legislation, and regulations for the program impose no restrictions on the purchasing terms and conditions that a buying country can employ nor do they provide for Agriculture to have access to the importers' records. Agriculture officials stated that the importers, often private or quasi-private entities, should be able to choose which commodities to purchase since they must repay amounts borrowed to commercial banks within 3 years and, since the program is considered a commercial sales program, regulations do not require competitive bidding or the acceptance of lowest priced offers. GAO stated that implementing regulations similar to those governing the Public Law 480 concessional sales program would not necessarily eliminate the type of situation that occurred in Peru, and importing countries might be reluctant to subject themselves to tighter controls which could affect U.S. export levels.

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