Statutory Authority for Commodity Credit Corporation
Export Credit Guarantee Programs
Certain program s o f the C om m odity Credit C orporation, guaranteeing export credit sales of Amer
ican agricultural exports, are authorized by the C orporation’s charter act
March 26, 1982
MEMORANDUM FOR THE GENERAL COUNSEL,
DEPARTMENT OF AGRICULTURE
This memorandum responds to your request for our opinion regarding the
statutory authority for the Commodity Credit Corporation’s (CCC) Noncommer
cial Risk Assurance Program (GSM-101) and Export Credit Guarantee Program
(GSM -102).1 The question of statutory authority has arisen in the course of a
determination by your Office whether guarantees issued pursuant to these pro
grams are supported by the full faith and credit of the United States.2 We find
ample, clear statutory authority for these export guarantee programs. Your
determination regarding full faith and credit may properly rely on this finding.
‘ T h e D e p a r tm e n t o f A g r ic u ltu r e ’s re g u la tio n s g o v e rn in g th e s e tw o p ro g ra m s a p p e a r at 7 C . F R
§§ 1487-1487 15 and 7 C .F R §§ 1 4 9 3 -I4 9 3 .1 5 -(1 9 8 1 ), respectively.
2 Since 1973, it has been the policy o f the D epartm ent o f Justice to decline to issue formal op in io n s as to “ full
faith and c re d it” m atters unless there is draw n into question a serious issue o f law See EUiot L R ichardson,
A ttorney G eneral, M em orandum for H eads o f the Executive D epartm ents and C ounsel to the P resident (O ct 10,
1973) It has long been the position o f the A ttorney G eneral, however, that:
[T]here is no o rd er o f solem nity o f valid general obligations o f the U nited States and . n o legal
priority is afforded general obligations contracted pursuant to an express pledge of faith o r cred it over
those not so accom panied. It is enough to create an obligation of the U nited States if an ag en cy or
officer is validly authorized to incur such an obligation on its b eh a lf and validly exercises that pow er
41 O p A tt'y G en. 40 3 , 405 (1959). S e e a tso A l O p A tt’y G e n 417 (1969); 42 O p A tt’y G en. 3 41, 344 (1967); 42
Op. A tt’y G en. 323 (1966); 42 Op. A tt’y G en. 305, 308 (1965), 42 O p. A tt’y G en. 2 1 , 23—4 (1961). See generally
Perry v. Uniled Stales, 294 U S 330, 3*53-54 (1935); Lynch v United Slates, 292 U .S . 571, 5 8 0 (1934)
In an opinion h olding that the Sm all B usiness A dm inistration had authority to guarantee the sale o f certain
debentures ow ned by it, the A ttorney G eneral stated.
[T]he threshold question concerning the effect o f the proposed SB A g uaranties is not w h eth er the
statutory language expressly alludes to the “ faith” o r “ cred it” of the U nited S tates, but w h eth er the
statutory schem e authorizes the guaranties here proposed I f there is statutory authority fo r the
guaranties, ab sen t specific language to the contrary such guaranties w ould constitute o bligations of
the U nited S tates as fully backed by its faith and cred it as w ould be the case were those term s actually
used
Letter from John N M itchell. A ttorney G eneral, to T hom as S. K leppe, A dm inistrator, Sm all B usiness A dm inistra
tio n , at 3 - 4 (A pr 1 4 ,1 9 7 1 ) Sim ilarly, in this case, a guarantee by the C C C w ill be backed by the full faith and cred it
o f the U nited States if, and only if, the guarantee was issued pursuant to statutory authority.
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I. The GSM—1011 and GSM-102 Programs3
The purpose of the GSM-101 and GSM -102 programs is to promote United
States exports of agricultural commodities and products by shifting some of the
risks usually associated with export transactions from the American exporter to
the CCC. These risks, which include embargoes on imports, freezing of foreign
exchange, and similar acts o f state, as well as revolutions, wars, economic
collapse, and other noncommercial incidents, all operate as a barrier to United
States agricultural exports.
The GSM -101 and GSM-102 programs are similar in structure and operation.
Both programs seek to encourage U.S. agricultural exports at levels above those
which would exist without the guarantees.4 Under the programs, CCC promises
to reimburse the exporter, or the financing institution that is the exporter’s
assignee, for a portion of the exporter’s accounts receivable in the event of
nonpayment by the importer’s bank that issued the irrevocable letter of credit
pertaining to the export sale. In return, the exporter or assignee must assign to
CCC all rights in the defaulted payment.5 The total amount that CCC will
guarantee, and the portion o f the accounts receivable for which CCC will
reimburse the exporter or assignee, is determined by CCC in advance for each
country. Typically, the Corporation guarantees 98 percent of the principal amount
and 8 percent per annum interest.
II. Statutory Authority for the Programs*
15 U .S.C . § 714b7 sets out the general powers of the CCC. These include the
power to “ determine the character of and the necessity for its obligations and
expenditures and the manner in which they shall be incurred, allowed, and paid.”
3 T h e fo llo w in g d escrip tio n o f these p ro g ram s is based on discussio n s w ith m em bers o f yo u r O ffice, and upon a
m em o ran d u m attached to y o u r letter to m e dated N ovem ber 2 0 , 1981.
4 T h e m a jo r diffe re n ce betw een the tw o program s is that G S M -1 0 1 is lim ited to protecting o n ly against
n o n co m m ercial n s k s , w h ile G S M -102 c o v e rs all risks. Compare 1 C .F .R . §§ 1 4 8 7 .2 0 0 and 1 487.4(a), with 7
C .F .R . § 1493.4(a). U n d er the G SM -102 p ro g ra m , CC C relieves expo rters o r assignees o f com m ercial risk s w hich
m ay b e difficult for the ex p o rter or assignee to assess because o f lack o f fam iliarity w ith foreign leg al system s o r
b an k in g p ractice s, o r a lack o f adequate inform ation. C C C now relies exclusively on the G S M -1 0 2 p ro g ram and has
c e ase d issu in g new G S M -1 0 1 risk assurance agreem ents.
5 See 7 C .F .R . §§ 1 4 8 7 .2 -4 ; 1487.9(d); 1493.2; 1493.4; 1493.8(b)(3)(iv).
6 A q u e stio n related to th is o n e was prev io u sly addressed in a letter and m em orandum from this O ffice to Claude
C o ffm a n , D ep u ty G en eral C ounsel, D ep artm en t of A griculture (D ec. 3 , 1973). In th at co rresp o n d en ce, Leon
U lm a n , D e p u ty A ssista n t A ttorney General, expressed do u b t regarding C C C ’s authority to sell “ tim e d rafts” which
it in ten d ed to draw ag a in st ce rta in bank ob lig atio n s it po ssessed . T he ban k obligations w ere obtained u n d er a C C C
ex p o rt cre d it sales p ro g ram . Mr. Ulman s tated that “ although we w ant to co operate, w e are not yet persuaded that
C C C h as th e req u isite au thority [to sell its drafts].” T h e m em oran d u m em phasized that C C C lack ed specific
statu to ry au thority to sell secu rities or assets, and opined th a t th e “ n ecessary and ap p ro p riate" pow ers clause found
in its c h a rte r m ay not be used as authority to s e ll securities an d pledge the full faith and cred it o f the U nited States. Cf.
15 U .S .C . § 714b(m ).
T h e p resen t qu estio n relates to programs m a terially d iffe re n t from the A griculture D ep artm en t's p roposal in 1973
to sell “ tim e d ra fts.” T h e m o st decisive d iffe re n ce is that th e program s at issu e in the cu rren t m atter d o n ot involve
an y sale o f assets o w n ed b y C C C , or any g u aran tees fo r su ch sale. T h e re is, in o ther w ords, n o issue regarding
au thority to se ll g o v ern m en t obligations b a c k e d by the full faith and cred it o f the N ation. Rathei; the qu estion here
co n c e rn s C C C au thority to guarantee e x p o rt cred it sales o f A m erican agricultural exports.
7 It h as b ee n h eld that § 7 1 4 b — among o th e r grants o f authority to th e C C C — m u st b e broadly in terpreted. See
Hiatt Grain & Feed, Inc. v. Bergland. 44 6 F. Supp. 4 5 7 , 4 7 2 -7 3 (D . K an . 1978), affd. 602 F.2d 9 2 9 (10th Cir.
1979), cert, denied, 4 4 4 U .S . 1073 (1980).
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15U.S.C. § 714b(j). In addition, the CCC is vested with “ such powers as may be
necessary or appropriate for the exercise of the powers specifically vested in the
Corporation, and all such incidental powers as are customary in corporations
generally[.]” 15 U.S.C. § 714b(m). Finally, 15 U.S.C. § 714c provides:
the Corporation is authorized to use its general powers only to—
* * * * *
(f) Export or cause to be exported, or aid in the development of
foreign markets for, agricultural commodities.
Commenting upon § 714c, the Senate Report on the CCC charter act states:
It is believed that there should be available to American agri
culture an agency with the flexible authority vested in the Corpo
ration by this section. . . .
* * * * *
Subsection (f) authorizes the Corporation to export or cause to
be exported, or aid in the development of foreign markets for,
agricultural commodities. It is essential to the agricultural econo
my of the United States that it maintain and expand its markets
abroad for agricultural commodities. This subsection empowers
the Corporation to carry out operations to this end
S. Rep. No. 1022, 80th Cong., 2d Sess. 12-13, reprinted in 1948 U.S. Code
Cong. Serv. 2138, 2151.
The Department of Agriculture interprets these statutes as providing sound
authority for the GSM—101 and GSM-102 programs. See 43 Fed. Reg. 4033
(1978); 45 Fed. Reg. 64898 (1980). An agency’s interpretation of a statute it is
charged with implementing is entitled to substantial deference. See generally
Red Lion Broadcasting Co. v. FCC, 395 U.S. 367,381 (1969); Udall v. Tollman,
380 U.S. 1, 16 (1965); Lenkin v. D istrict c f Columbia, 461 F.2d 1215, 1227
(D.C. Cir. 1972).
Regardless of any deference due the Agriculture Department’s interpretation,
there is no doubt that the GSM-101 and GSM -102 programs are a valid exercise
of the CCC’s general power to “ determine the character of and the necessity for
its obligations . . . and the mannerin which they shall be incurred[.]” 15U.S.C.
§ 7 14b(j)- That general power has been exercised in this instance for the purpose
of promoting exports of United States agricultural commodities. See 7 C.F.R.
§§ 1487.1(a), 1493.1(a). This purpose is explicitly authorized by 15 U.S.C.
§ 714c(f). We therefore find support for these programs in the plain meaning of
these provisions. Furthermore, the broad language of the CCC charter act and its
legislative history both indicate that a variety of programs may—indeed should—
be developed by the CCC to assist in promoting American agricultural exports.
GSM-101 and GSM -102 are just such programs, and therefore are within the
ambit of authority provided the CCC in § 714.
T h eo d o r e B . O lson
Assistant Attorney General
Office c f Legal Counsel
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