Stronger Emphasis on Market Development Needed in Agriculture's Export Credit Sales Program
ID-80-01: Published: Oct 26, 1979. Publicly Released: Oct 26, 1979.
- Full Report:
GAO reported on the need for stronger emphasis on market development in the Department of Agriculture's Export Credit Sales Program. This program, which was designed to supplement private export financing with interest-bearing government credits, has been self-supporting and has an excellent repayment record. However, it was found to need more active management to help maintain and develop markets for U.S. agricultural exports.
The administrative office for the program has been passively reviewing requests for credits case by case, making the program more vulnerable to secondary economical and political considerations. Little has been done to develop a country-by-country strategic market plan which would incorporate information on foreign competitors and establish the most effective combination of direct private sales, Government credits, and market promotion. The program does not have safeguards for avoiding the replacement of cash or privately financed sales with credits. A provision guarding against this was revoked. The program has been used to provide economic support to foreign countries rather than to develop foreign markets for U.S. agricultural goods. The program's compliance with administrative regulations has been good, except that U.S. exporters have not been providing documents evidencing entry of financed goods into destination countries. Also, exporters have been requesting numerous amendments to financing agreements, which are almost always approved without verification.
Recommendation for Executive Action
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Recommendation: The Secretary of the Department of Agriculture should direct the Office of the General Sales Manager to establish commodity and country priorities for export activities; develop specific overall U.S. market share goals for high priority commodities and countries; establish target levels within these overall goals for the Export Credit Sales Program; establish procedures to assure the systematic collection and analysis of competitor information in order to determine the market development role of the Export Credit Sales Program; survey U.S. exporters annually to obtain pertinent information such as foreign credit terms, problem areas, and suggestions for Program improvement; expand its annual request to the Agricultural Attaches to include analyses of foreign competition and credit information; reinstate the provision in the GSM-5 regulations which precluded the registration of sales made prior to the date that financing became available; review a statistical sample of exporters' sales contracts each year to verify whether sales were contingent on the availability of credit; establish a formal review system that will assist management in determining whether credits actually increased U.S. agricultural exports; emphasize to the major recipient governments that it is not the purpose of the Program to provide economic support of a country's domestic budget or balance of payments; determine whether the economic benefits of credits are being passed through to the end users in recipient countries; seek written assurances from those governments which control the use of credits that they will pass through the full credit benefits to end users; shorten the repayment terms of credits for those countries which continue to maintain significant differences between the terms of credits and the internal terms of payment; ensure entry documents are properly submitted; amend GSM-5 regulations to require entry documents for all shipments, including those for commodities financed for 12 months or less; establish and implement procedures to physically verify on a selected basis the entry of commodities into the designated country; develop and implement procedures, including examination of sales contracts and other pertinent documents, to verify exporters' reasons for requesting amendments before approving these amendments. The Economics, Statistics, and Cooperatives Service should initiate studies to evaluate the credit aspect of foreign competition.