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Economic Impact

What is Economic Impact?

Ex-Im Bank's Charter requires Ex-Im Bank to assess whether the extension of its financing support is likely to yield a net adverse economic impact on U.S. production and employment or would result in the production of substantially the same product that is the subject of specified trade measures. If a transaction is deemed by Ex-Im Bank to meet the legislatively specified standards, then economic impact can be the basis for denial of Ex-Im Bank support. The purposes of Ex-Im Bank's Economic Impact Procedures are to: 1) ensure that all transactions are screened for economic impact implications; 2) identify those transactions that are subject to applicable trade measures or that pose a risk of substantial injury to the U.S. economy; and 3) put only those cases that require further economic impact analysis through a more extensive process that is fair, consistent, and publicly transparent.

The Economic Impact Procedures.

Ex-Im Bank implements the requirement to analyze the economic impact of transactions it is asked to support through its Economic Impact Procedures. Transactions are subject to screens designed to: (i) identify those transactions associated with specific legislative prohibitions; and (ii) determine the potential of a transaction to cause substantial injury to the U.S. economy. The Economic Impact Procedures consist of three stages, which are analyzed consecutively.

Stage I: Transactions that Establish or Expand Production Capacity. The first stage of the Economic Impact Procedures is to determine if a transaction supports the export of capital goods that will enable a foreign buyer to establish or expand production capacity of an exportable good. Only these transactions are subject to further economic impact analysis in Stages II and III. 

Stage II: Categorization of Transactions. The second stage of the Economic Impact Procedures divides transactions into one of three categories for further analysis. These three categories are:

• Category I: Transactions Not Subject to the Final or Preliminary Trade Actions Contained in Categories II and III.
• Category II: Transactions Subject to Specified Final Trade Measures.       
  (i)   Final anti-dumping or countervailing duty orders
     
(ii)  Suspension agreements arising from anti-dumping or countervailing duty investigations     
(iii) Section 201 injury determinations
• Category III: Transactions Subject to Specified Preliminary Trade Actions.       
  (i)  Preliminary anti-dumping or countervailing duty injury determinations
     
(ii) Section 201 investigations initiated by the Executive or Legislative Branch

Stage III: Analysis of the Economic Impact of Transactions by Categories. The third stage of the Economic Impact Procedures consists of screens to determine whether a transaction requires a detailed economic impact analysis (summarized below). 

• Category I: Transactions Not Subject to Specified Final or Preliminary Trade Actions.
  Transactions in this category are subject to a detailed economic impact analysis if the transaction: (1) is for more than $10 million in Ex-Im Bank financing ¹; and (2) poses the risk of substantial injury. Pursuant to Ex-Im Bank's Charter, the standard for substantial injury is met if the foreign production capacity established or expanded by the Ex-Im Bank financing equals or exceeds 1% of U.S. production.
• Category II: Transactions Subject to Specified Final Trade Measures.
  Transactions in this category are subject to automatic prohibition under Ex-Im Bank's Charter. A detailed economic impact analysis is not performed. An exception to this automatic prohibition may be granted by Ex-Im Bank's Board if an applicant shows that the exporter and/or the U.S. economy will be extraordinarily harmed by denial of Ex-Im Bank support. A 14-day notice and comment period is required prior to Board action on such a transaction.
• Category III: Transactions Subject to Specified Preliminary Trade Measures. 
  For transactions in this category, a 14-day public notice and comment period will be provided on all transactions over $5 million that are subject to a preliminary anti-dumping or countervailing duty injury determination ² and on all transactions over $10 million that are subject to a Section 201 investigation initiated at the request of the executive or legislative branch. Ex-Im Bank conducts a detailed economic impact analysis if Ex-Im Bank staff determines, based on comments received during the 14-day comment period and other available information, that the transaction poses the risk of substantial injury.

Economic Impact Analysis.

If a transaction requires a detailed economic impact analysis, Ex-Im Bank staff will assess: (i) the global supply and demand for the product in question (e.g., by considering indicators of oversupply such as price trends, U.S. employment trends, bankruptcy, and merger activity); and (ii) the broad competitive impacts on U.S. industry arising from the new foreign production (e.g., whether U.S. production could be directly or indirectly displaced as a result of the new foreign production). In addition, a detailed economic impact analysis will include a 14-day public notice and comment period and will report on the views of interested parties, including the views of other U.S. government agencies. All of the information gathered, including the beneficial impact of the export on the U.S. economy, will be presented to the Ex-Im Bank Board of Directors for its consideration in determining the net impact of the transaction on the U.S. economy.

For more information, a copy of Ex-Im Bank's Revised Economic Impact Procedures is available at: Revised Economic Impact Procedures.

1. If Ex-Im Bank financing is $10 million or less, exclusive of the exposure fee, a transaction is not subject to further economic impact analysis. However, these transactions are aggregated by both buyer and product for economic impact analysis in Ex-Im Bank's annual review.
    
2. To ensure the efficient processing of small business transactions, a $10 million threshold will apply to working capital and short-term insurance transactions subject to a preliminary AD/CVD injury determination.