Concerns are growing for US exporters as the country’s failure to vote on the Export Import Bank (US Exim) reauthorisation before its charter’s expiration has led to its closure.
All hopes of seeing US Exim reauthorised before the June 30 deadline vanished last Friday, when Congress went on a week-long summer break, having not even set a date for the vote. As a result, the US’ export credit agency closed on Tuesday, and uncertainty remains as to when or if it will be reauthorised.
In the meantime, the bank will continue to service all of its commitments and manage its portfolio until maturity, including collecting funds, processing claims and making payments where it is obligated to do so, at least until the end of the US government’s fiscal year on September 30.
But as long as the vote hasn’t happened, anything that would increase the agency’s exposure will be denied, putting American exporters at risk of losing business due to the long-term nature of international trade transactions and the uncertainty of the support they can get.
“It’s extremely disruptive. You have exporters here competing against European or Asian competitors. Those competitors are using their own country’s ECA for shipments that are meant to happen in, say, July or August, and the US exporter is not able to have the same certainty,” Gary Mendell, president of US trade finance company Meridian Finance Group, tells GTR.
While on the one hand it’s somewhat of a soft landing for those companies that already have a programme together with Exim, on the other hand the uncertainty is very disruptive. Gary Mendell, Meridian Finance Group
It is likely that the US Exim reauthorisation bill will be packaged with a bill on transportation infrastructure spending, the Highway Bill, which comes up regularly in the House of Representatives. If that’s the case, the agency could be reauthorised by the end of July, but this would limit exporters’ (particularly SMEs’) ability to secure new business for a month, and even prevent them from renewing existing business.
“If there’s an exporter with a 10-year-old relationship with a buyer overseas, who sells to them every month, maybe they could sweat it on their own for one month even if they can’t access financing from their bank. Maybe they’ll take that risk, but they will wonder ‘What am I going to be able to tell my customer in the long run, come September/October?’ While on the one hand it’s somewhat of a soft landing for those companies that already have a programme together with Exim, on the other hand the uncertainty is very disruptive,” adds Mendell.
While Congress needs to vote to reauthorise the bank, no action is necessary to close it, and its critics have been keen to simply let its charter expire. Within the House of Representatives, Financial Services Committee chairman Jeb Hensarling, a Republican, hasn’t allowed the reauthorisation topic to be discussed, therefore preventing it from reaching the floor for a vote.
Optimism remains about US Exim’s reauthorisation: a test vote within the Senate last week resulted in a two-to-one majority in favour of the bill, while over 200 members of the House have agreed to sponsor Exim legislation one way or another. The concern is over how long it will be reauthorised for, as the presidential election campaign could lead to yet another short-term charter, instead of the traditional five years.
UPDATE: As of Wednesday, July 1, the home page of US Exim’s website shows the following message: