Export-Import Bank Approves “Make More In America” Domestic Financing Program – Energy and Natural Resources


United States:

Export-Import Bank Approves “Make More In America” Domestic Financing Program


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Highlights

  • The board of directors of the Export-Import Bank of the United
    States (EXIM) approved the “Make More in America
    Initiative,” an expansion of its medium- and long-term buyer
    financing programs to include domestic transactions.

  • The financing program – which is a significant expansion
    of EXIM’s financing capabilities – would support the
    establishment and expansion of U.S. manufacturing facilities and
    infrastructure projects that would facilitate U.S. exports.

  • Financing priority will be given to environmentally beneficial
    projects, small businesses and transformational export area
    transactions, including renewable energy, energy storage,
    semiconductors, biotech and biomedical products.

  • EXIM is taking applications now for financing under the new
    program, although longer processing timelines and some growing
    pains are expected as the program gets up and running.

In a move to strengthen U.S. supply chain resiliency, the board
of directors of the Export-Import Bank of the United States (EXIM)
unanimously approved a new domestic financing program, “Make
More in America Initiative,” on April 14, 2022. The program
will support the establishment and expansion of U.S. manufacturing
facilities and infrastructure projects that would facilitate U.S.
exports. This is a significant expansion of EXIM’s financing
capabilities – one that has been requested by U.S. companies
for many years and most recently by the White House. As the U.S.
faces urgent supply chain issues in critical industries, the
program offers a new funding option for U.S. manufacturers in
critical areas such as renewable energy, energy storage,
semiconductors and wireless communications equipment, as well as
ports and other domestic infrastructure projects that would help
facilitate exports.

In announcing the new program, EXIM Chair Reta Jo Lewis
stated:

“The Make More in America Initiative will create new
financing opportunities that spur manufacturing in the United
States, support American jobs and boost America’s ability to
compete with countries like China. The global pandemic and other
recent events have exposed supply chain gaps in critical sectors
like advanced manufacturing and renewable energy. EXIM’s Make
More in America Initiative will be a key tool in tackling these
issues, and it will ultimately help America manufacture more and
export more.”

Interested companies may start applying for financing under the
new program immediately. EXIM will use existing application forms
with supplemental information required. Longer processing timelines
and some growing pains are expected as the program gets up and
running.

Background

Pursuant to Executive Order 14017:
America’s Supply Chains
, in June 2021, the White House
released Building Resilient
Supply Chains, Revitalizing American Manufacturing, and Fostering
Broad-Based Growth
, a report on the 100-day interagency supply
chain review. The report recommended that EXIM “develop a
proposal for Board consideration regarding whether and how to
implement a new Domestic Financing Program to support the
establishment and/or expansion of U.S. manufacturing facilities and
infrastructure projects in the United States that would support
U.S. exports. The proposal would support and facilitate U.S.
exports while rebuilding U.S. manufacturing capacity.” On Dec.
23, 2021, EXIM published a notice seeking public
comment
on a draft domestic financing proposal.

Key Terms of the Domestic Financing Program

The standard EXIM terms, conditions and requirements, such as
reasonable assurance of repayment, additionality (that EXIM’s
financing is not competing with private sector financing), due
diligence and underwriting, will apply to domestic projects
financed under the new program. Key terms of the new program that
would be different from the existing terms of EXIM’s medium-
and long-term overseas financing programs are detailed below.

  • General Eligibility: The domestic financing
    program will be open to all sectors, with priority given to
    environmentally beneficial projects, small businesses and transformational export
    area transactions
    , including renewable energy, energy storage,
    semiconductors, biotech and biomedical products.

  • Export Nexus: All transactions under the
    domestic financing program must meet an export nexus threshold
    – a percentage of a project’s production (such as goods
    produced in a factory) or capacity (such as traffic at a port) that
    would need to be for export.

    • For small businesses (including minority- and women-owned
      businesses), transformational export areas and climate-related
      transactions, the required nexus is 15 percent.

    • For projects in other sectors, the required nexus is 25
      percent.

    • The export nexus may be met by reaching back in the supply
      chain to count indirect exports. For example, if a company sells 50
      percent of its output to a domestic company, which in turn uses 50
      percent of the supplier’s inputs for exports, this transaction
      would meet the 25 percent threshold.


  • Jobs Supported: Instead of the traditional
    U.S. content requirement, EXIM will use the number of jobs
    supported by a project to determine the amount of eligible
    financing, with the amount based on the number of U.S. jobs
    supported during construction and over the life of EXIM’s
    financing. Each job-year (e.g., one job over five years is five
    job-years) allows for up to $189,242 in financing.

  • U.S. Flag Shipping: EXIM will require use of
    U.S. flagged shipping for any EXIM-supported imports for a
    project.

  • Limit on EXIM Support: EXIM will support up to
    80 percent of a project’s financing requirements.

  • Pricing: Because this program would not be
    official export financing, the Organization for Economic
    Cooperation and Development (OECD) Arrangement pricing terms and
    conditions would not apply. EXIM has proposed two pricing
    approaches that would meet its statutory and World Trade
    Organization (WTO) pricing obligations:

    • Direct Market Proxy: There are several
      options, including lending on identical terms and conditions (or
      provide cover so that the buyer faces identical all-in pricing on
      both covered and uncovered tranches) as part of a syndicate, price
      using issuer specific credit default swaps (CDS) or price using
      comparable public bond information.

    • Implicit Market Benchmark: In cases where
      there is no direct market benchmark (e.g., no debt of a comparable
      term exists), EXIM may as a back-up utilize the OECD “Through
      the Cycle Market Benchmark” pricing methodology. This
      methodology uses commercial pricing information to generate market
      reflective pricing for a wide range of tenors and credit
      ratings.


  • Transparency Measures:

    • All domestic financing transactions, regardless of size, as
      well as any modifications to the program itself, will require
      approval from EXIM’s board of directors.

    • EXIM will provide advance notification to Congress of any
      domestic finance transactions above $50 million. 

    • EXIM will provide annual reporting on aggregate export and jobs
      performance.

    • Finance agreements will contain contractual recourse measures
      should projects fail to meet export nexus and/or jobs
      standards. 

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