follow-up report on export-import bank's economic impact

OFFICEOFINSPECTORGENERALEXPORT‐IMPORTBANKoftheUNITEDSTATES

Follow‐upReportonExport‐ImportBank’sEconomicImpactProcedures

September8,2015OIG‐EV‐15‐01

EXPORT‐IMPORTBANK–OFFICEOFINSPECTORGENERAL

FOLLOW‐UPREPORTOIG‐EV‐15‐01

The Export‐Import Bank of the United States (“Ex‐Im Bank”) is the official export‐credit agency of the United States. Ex‐Im Bank is an independent, self‐sustaining executive agency and a wholly‐owned US government corporation. Ex‐Im Bank’s mission is to support jobs in the United States by facilitating the export of US goods and services. Ex‐Im Bank provides competitive export financing and ensures a level playing field for US exports in the global marketplace.

The Office of Inspector General, an independent office within Ex‐Im Bank, was statutorily created in 2002 and organized in 2007. The mission of the Ex‐Im Bank Office of Inspector General is to conduct and supervise audits, investigations, inspections, and evaluations related to agency programs and operations; provide leadership and coordination as well as recommend policies that will promote economy, efficiency, and effectiveness in such programs and operations; and prevent and detect fraud, waste, abuse, and mismanagement. This evaluation was conducted in accordance with the 2012 Quality Standards for Inspection and Evaluation as defined by the Council of Inspectors General on Integrity and Efficiency. This report does not constitute a Government audit and therefore, it was not conducted following the Generally Accepted Government Auditing Standards (“GAGAS”).

To: DavidSena,SeniorVicePresident&ChiefFinancialOfficer

JamesCruse,SeniorVicePresident,OfficeofPolicy,PlanningandInternationalRelations

From: MarkThorum

AssistantInspectorGeneral,Inspections&Evaluations

Subject: Follow‐upReportonExport‐ImportBank’sEconomicImpactProcedures

Date: September8,2015

AttachedpleasefindthefinalevaluationFollow‐upReportonExport‐ImportBank’sEconomicImpactProcedures.ManagementagreedwiththetworecommendationscontainedinthisReport.Weconsidermanagement’scorrectiveactionstoberesponsive.Therecommendationswillbecloseduponcompletionandverificationoftheimplementationofthoseactions.

Weappreciatethecourtesiesandcooperationextendedtousduringtheevaluation.

cc: FredHochberg,ChairmanandPresidentC.J.Hall,EVPandChiefRiskOfficerMichaelMcCarthy,DeputyInspectorGeneralAngelaFreyre,SVP&GeneralCounselInciTonguch‐Murray,DeputyCFOHeleneWalsh,VPPolicyAnalysisDivisionJenniferFain,DeputyAIGIEParisaSalehi,CounseltotheIG

Attachment:Follow‐upReportonExport‐ImportBank’sEconomicImpactProcedures,OIG‐EV‐15‐01,September8,2015



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WhyWeDidThisEvaluation

Wecompletedafollow‐upreviewinregardtorecommendationsmadetoEx‐ImBankpertainingtoOIG’sSeptember2010evaluationreportontheBank’seconomicimpactprocedures(OIG‐EV‐10‐03).The2010evaluationdeterminedthatEx‐ImBankcouldimproveitseconomicimpactproceduresto(1)betterimplementtheintentofCongressasreflectedintheBank’sCharter,(2)improvetransparency,and(3)maketheprocessmoremanageableforUSexportersandotherparticipantsintheprocess.Theevaluationreportincludedatotaloffourfindingsand16recommendations.

Theobjectiveofthisfollow‐upreviewwastodeterminewhetherEx‐ImBankhadtakenappropriatecorrectiveactionstoaddressthereportedfindingsandrecommendationsmadeintheOIG’sSeptember2010evaluationreport.Duetocongressionalinterest,thereviewalsoevaluatedtheprocessthatEx‐ImBankusedtoreceiveinputfromexternalpartiesindevelopingthenewprocedures.

Ex‐ImBank’sCharterexpiredasofJune30,2015.IntheeventthattheBankweretobereauthorized,werecommendthefollowing:

1. Ex‐ImBankshoulddeviseamethodologytoperiodicallyverify(a)theeffectivenessofitseconomicimpactproceduresandmethodologicalguidelinesinimplementingthecongressionalmandate,and(b)theBankisfollowingthoseproceduresandguidelinesasitprocessesapplications.

2. Ex‐ImBankshouldissueaformalpolicystatementwithrespecttotheengagementofexternalpartiesandtheuseofthenoticeandcommentprocessinestablishingproceduresandguidelines.

EXECUTIVESUMMARY Follow‐upReportEconomicImpactProceduresOIG‐EV‐15‐01,September8,2015

For additional information, contact the Office of Inspector General at (202) 565-3908 or visithttp://www.exim.gov/about/oig.

WhatWeFound

Ex‐ImBankoperatesundervariouscongressionalmandates,whichincludesthestatutoryrequirementtodeterminewhethertheextensionofsupportintheformofadirectloanorfinancialguaranteeforaproposedtransactionwouldadverselyaffecttheUSeconomy.Section2(e)oftheBank’sChartercontainstwostatutoryprohibitionsthatprohibittheBankfromofferingfinancialsupportforUSexportswhoselikelyimpactwouldprovenegativeonUSindustriesandemployment.TheBankthroughitspubliclydisclosedEconomicImpactProceduresandMethodologicalGuidelinesandsupplementalguidanceimplementsthestatutoryrequirementandprohibitionsoftheCharterbytestingproposedtransactionsforadverseeconomicimpact.

WefoundthatEx‐ImBankhadmadesignificantprogressinimplementingtherecommendationsandaddressingtheconcernsidentifiedintheSeptember2010evaluationreport.Specifically,OIGfoundthattheBankhadcompletedcorrectiveactionstoaddressandclose15ofthe16recommendations.Withrespecttotheremainingrecommendationtovalidatetheresultsofitsprioreconomicimpactanalyses,OIGrecognizestheBank’scontinuedeffortstoidentifyafeasibleapproachtocarryoutthisanalysis.OIGalsorecognizestheinherentchallengesofundertakinganempiricalreviewgiventhepurportedlackofdataontherelevanteconomiccharacteristicsthatmakesitdifficulttoestablishthattheapprovedtransactioncausedorcontributedtosubstantialinjurytoUSproducersofanexportablegoodorrelatedemployment.

Nevertheless,OIGbelievesthatEx‐ImBank’seconomicimpactproceduresshouldbeverifiedperiodicallyforeffectivenesstoensurecompliancewiththestatutoryrequirementandtoenableimprovementtotheprocessesforassessingeconomicimpact.Consequently,OIGhasclosedandreformulatedrecommendationB3,withaviewtoallowtheBankmoreflexibilityindevisingamethodologytoverifytheeffectivenessofitseconomicimpactproceduresandmethodologicalguidelinesandensuretheyarebeingfollowed.

Finally,inassessingtheBank’sprocessfordevelopingandpublishingitscurrentproceduresforeconomicimpact,OIGobservedthatwhiletheBankreceivedinputandconsideredtheviewsofmultipleparties,theBankdoesnothaveaformalpolicystatementontheengagementofexternalpartiesandtheuseofthenoticeandcommentprocessinestablishingproceduresandguidance.AformalpolicywouldprovideawrittenframeworkanddirectionforBankstaffwhenengagingexternalpartiesandenhancetransparency.



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TABLE OF CONTENTS

INTRODUCTION ............................................................................................................................... 7

SCOPE AND METHODOLOGY .......................................................................................................... 7

BACKGROUND ................................................................................................................................. 8

Congressional Mandate ............................................................................................................ 8

Economic Impact Procedures and Guidelines .......................................................................... 9

Applications for Bank Support – 2010 to 2014 ....................................................................... 12

Prior Reports on Economic Impact Procedures ...................................................................... 13

RESULTS OF FOLLOW‐UP REVIEW ................................................................................................ 16

I. Evaluation Report on Economic Impact Procedures (OIG‐EV‐10‐03, September 17, 2010) ........................................................................................................ 16

II. Developing and Publishing Economic Impact Procedures .................................................. 22

CONCLUSION ................................................................................................................................. 27

APPENDIXES .................................................................................................................................. 28

Appendix A: Management Response and OIG Evaluation...................................................... 28

Appendix B: Ex‐Im Bank Flow Chart of Non‐Air Economic Impact Process ............................ 32

Appendix C: Ex‐Im Bank Management Responses and Status Updates – 2010 OIG Report ............................................................................................................... 34

Appendix D: Summary of Ex‐Im Bank Corrective Actions to Address Recommendations – 2010 OIG Report ............................................................................. 35

Appendix E: GAO Recommendations and Status – 2007 Report ........................................... 37

Appendix F: References .......................................................................................................... 38

ACKNOWLEDGEMENTS ................................................................................................................. 40



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LIST OF FIGURES AND TABLES

Figure 1: Ex‐Im Bank Flow Chart of Non‐Air Economic Impact Process ....................................... 32

Table 1: Ex‐Im Bank Economic Impact Analysis (“EIA”) ................................................................ 13

Table 2:Summary of Management’s Comments on the Recommendations .............................. 31

Table 3: Management Responses and Status Updates ................................................................ 34

Table 4: Summary of Corrective Actions ...................................................................................... 35

Table 5: GAO Recommendations and Status ................................................................................ 37



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INTRODUCTION

Wecompletedafollow‐upreviewregardingtherecommendationsmadetotheExport‐ImportBankoftheUnitedStates(“Ex‐ImBank”or“Bank”)intheOfficeofInspectorGeneral’s(“OIG”)evaluationreportontheBank’seconomicimpactproceduresissuedonSeptember17,2010.1Weinitiatedthereviewaspartofourannualworkplan.

Theobjectiveofthefollow‐upreviewwastodeterminewhetherEx‐ImBankhadtakenappropriateactionstoaddressthereportedfindingsandrecommendationsmadeintheOIG’sSeptember2010evaluationreport.Thereviewwasnotmeanttobeanevaluationoftheissuesraisedinthepreviousreport,butrathertoreviewandassesswhethertheBank’smanagementactionsinresponsetothe16recommendationshavebeenimplemented.Duetocongressionalinterest,thereviewalsoevaluatedtheprocessthatEx‐ImBankusedtoreceiveinputfromexternalpartiesindevelopingthenewprocedures.

SCOPE AND METHODOLOGY

Toachieveourobjective,wereviewedtheBank’sEconomicImpactProceduresandMethodologicalGuidelines,effectiveApril1,2013,2Proposal[for]EconomicImpactProceduresandMethodologicalGuidelines,datedSeptember27,2012,andEconomicImpactProcedures,effectiveApril2007.TheOIGalsoreviewedtheOIG’sSeptember2010EvaluationReportRelatingtoEconomicImpactProceduresandEx‐ImBank’sannualcompetitivenessreportsforcalendaryears2010to2014.WereviewedapplicablelawsandregulationssuchasTheCharteroftheExport‐ImportBankoftheUnitedStatesanditsenablinglegislation,theExport‐ImportBankReauthorizationActof2012.3,4WeinterviewedmanagementandstafffromEx‐ImBank’sOfficeofPolicy,PlanningandInternationalRelations(“PolicyandPlanningGroup”or“PPG”)togainanunderstandingoftheBank’seffortstoaddressthe16recommendationscontainedintheevaluationreport.WeinterviewedstafffromPPGandtheOfficeofGeneralCounseltogainanunderstandingoftheBank’sprocessesfordevelopingandpublishingthecurrenteconomicimpactprocedures.Wediscussedthestatusofouropenrecommendationsandthefollow‐upreviewwithGAO.WeobservedtheBank’seconomicimpactanalysisprocessbyattendingawalk‐throughoftheprocessprovidedbyPPGstaff.Wealsoreviewedvarioussupporting

1SeeEx‐ImBankOIG’sEvaluationReportRelatingtoEconomicImpactProcedures(OIG‐EV‐10‐03,datedSeptember17,2010)report,availableforinspectionathttp://www.exim.gov/sites/default/files//oig/reports/EIB_Report_Final_Complete_Web‐pdf‐uploaded‐via‐Bulk‐Upload‐at‐ts‐2012‐07‐17‐15‐40‐50.pdf.

2FormoreinformationonEx‐ImBank’sEconomicImpactProceduresandMethodologicalGuidelines,seehttp://www.exim.gov/policies/economic‐impact.

3SeeTheCharteroftheExport‐ImportBankoftheUnitedStatesathttp://www.exim.gov/sites/default/files//newsreleases/Updated_2012_EXIM_Charter_August_2012_Final.pdf.

4SeeExport‐ImportBankReauthorizationActof2012athttp://www.gpo.gov/fdsys/pkg/PLAW‐112publ122/pdf/PLAW‐112publ122.pdf.Pub.L.No.112‐122,126Stat.357(2012).



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documentationtodeterminethemeasurestakenbyEx‐ImBankmanagementtoimplementthe16recommendations.WeperformedourreviewatEx‐ImBank’smainlocationinWashington,DC.

Weconductedthefollow‐upreviewinaccordancewiththeQualityStandardsforInspectionandEvaluationissuedbytheCounciloftheInspectorsGeneralonIntegrityandEfficiency.5ThestandardsrequiretheEx‐ImBankOIG,asappropriate,tofollow‐upandensurerecommendationsmadetotheBankareadequatelyconsideredandagreed‐oncorrectiveactionsarefullyandproperlyimplemented.

BACKGROUND

Establishedin1934throughExecutiveOrder,andsubsequentlymadeanindependentagencyoftheUnitedStates(“US”)throughcongressionalCharterin1945,theEx‐ImBankisawholly‐ownedgovernmentcorporationwhosefundamentalmissionistoaidinthefinancingandtofacilitatetheexportofUSgoodsandservices,andtocontributetotheemploymentofUSworkers.Ex‐ImBank’sCharter,throughitsenablinglegislation,establishestheBank’soperationsandprogramsandisreauthorizedonaperiodicbasis.TheBank’scorefinancingprogramsincludedirectloansandguaranteestoforeignbuyers,exportcreditinsuranceforexportersandforeignbuyers,andworkingcapitalfinancetoUSsmallbusinessexporters.Ex‐ImBank’sCharterexpiredonJune30,2015.6FollowingalapseintheCharter,Section7authorizestheBanktoperformcertainfunctionsincluding“anyofitsfunctionssubsequenttosuchdateforthepurposesofanorderlyliquidation.”7

Congressional Mandate

Ex‐ImBankoperatesundervariouscongressionalmandates,whichincludethestatutoryrequirementtodeterminewhethertheextensionofBanksupportintheformofadirectcreditorfinancialguaranteeforaproposedtransactionwouldadverselyaffecttheUSeconomy.8TherequirementsforthiseconomicimpactdeterminationareoutlinedinSection2(e)ofEx‐ImBank’sCharterandprohibittheBankfromofferingfinancialsupportforUSexportswhoselikelyimpactwouldprovenegativeonUSindustriesoremployment.Ex‐ImBankistheonlyexportcreditagencyworldwidewithalegislatedmandateto

5FormoreinformationontheQualityStandardsforInspectionandEvaluation,seehttps://www.ignet.gov/sites/default/files/files/iestds12.pdf.

6Pub.L.No.113‐164,128Stat.1874(2014).

712USC§635f.Charter,supranote3at62.

8ThestatutoryrequirementforeconomicimpactanalysiswasaddedbyCongresstoEx‐ImBank’sCharterin1968andhasbeensubsequentlymodifiedthroughthecongressionalreauthorizationprocess[12USC§635(b)(1)(B)(ii);Pub.L.No.90‐267,82Stat.47.(1968)].TheBank’srequirementtoconsidertheadverseeffectsofloansandguaranteesonUSindustryandjobsiscodifiedattitle12USC§§635(b)(1)(B)(ii),635a‐2.



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conductaneconomicimpactanalysisasameansofdeterminingthepotentialadverseeffectofprovidingsupportfortheexportofacapitalgoodorservice.9

TherearetwostatutoryprohibitionsspecifiedinSection2(e)oftheCharterthatprohibitEx‐ImBankfromextendingfinancialsupportforatransaction.ForthefirststatutoryprohibitionunderSection2(e)(1)toapply,therearetwoconditionsthathavetobemetasdeterminedbytheBank.10Thefirstconditionisthat“thecommodityislikelytobeinsurplusontheworldmarketsatthetimetheresultingcommoditywillfirstbesold,[i.e.,termedstructuraloversupply];ortheresultingproductioncapacityisexpectedtocompetewithUSproductionofthesame,similar,orcompetingcommodity,[i.e.,termedtradeflowimpact].”Thesecondconditionisthatthetransaction“willcausesubstantialinjurytoUSproducersofthesame,similar,orcompetingcommodity.”AccordingtoSection2(e)4,substantialinjurycanoccuriftheextensionofBankfinancialsupportfortheexportofagoodorserviceresultsintheestablishmentoforincreaseinproductionequaltoorinexcessofonepercentofUSproduction.11ThefirststatutoryprohibitionmaybedisregardediftheexceptionunderSection2(e)3applies,whereby“inthejudgmentoftheBoard…theshort‐andlong‐termbenefitstoindustryandemploymentintheUSarelikelytooutweightheshort‐andlong‐terminjurytoUSproducersandemploymentofthesame,similar,orcompetingcommodity.”12

InregardtothesecondprohibitionofSection2(e)oftheCharter,Ex‐ImBankisprohibitedunderSection2(e)(2)fromextendingfinancialsupportif“theresultingproductionofsubstantiallythesameproduct”issubjecttoaspecifiedtrademeasureorpreliminaryaction(e.g.,anti‐dumpingorderand/orcountervailingduty),unlessthetransactionapplicantdemonstrates“extraordinaryharm”totheexporterand/orUSeconomy.13TheBoard’sapplicationofthisexceptiontothesecondstatutoryprohibitionissubjecttopublicnoticeandcommentintheFederalRegister.

Economic Impact Procedures and Guidelines

AlthoughEx‐ImBank’sCharterdoesnotprovideanexplicitmethodologyforeconomicimpactdeterminations,theBankisrequiredtoimplementregulationsandprocedurestominimizethepotentialadverseeffectofBanksupportonUSindustries.14Assuch,theBank’sPolicyandPlanningGroup(“PPG”)staffimplementthestatutoryrequirementandprohibitionsofSection2(e)oftheCharterthroughthepubliclydisclosedproceduresfor

9SeetheReporttotheUSCongressontheExport‐ImportBankoftheUnitedStatesandGlobalExportCreditCompetition for the Period January 1, 2013 throughDecember 31, 2013 (dated June 2014) at http://www.exim.gov/sites/default/files/newsreleases/US-Ex-Im-Bank-2012-Competitiveness-Report-to-Congress-Complete.pdf.

10Charter,supranote3at39.

11Charter,supranote3at41.

12Charter,supranote3at40‐41.

13Charter,supranote3at39‐40.

14Title12USC§635a‐2.Charter,supranote3at91.



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economicimpactandsupplementalguidance.TheprocedureswerelastupdatedpursuanttotheExport‐ImportBankReauthorizationActof2012(“ReauthorizationAct”),whichrequiredtheBankto“developandmakepubliclyavailablemethodologicalguidelinestobeusedbytheBankinconductingeconomicimpactanalysesorsimilarstudies”within180daysofenactment.15

The2012ReauthorizationActalsorequiredEx‐ImBankto(1)maintainsupportingdocumentationforitseconomicimpactanalysesandsimilarstudiesconsistentwiththeGAO’sStandardsforInternalControloftheFederalGovernment,16and(2)reportontheimplementationofrecommendationsinGAO’sSeptember2007evaluationreportontheBank’seconomicimpactanalysisprocess.17TherevisedEconomicImpactProceduresandMethodologicalGuidelines(“ProceduresandGuidelines”)wereapprovedbytheBank’sBoardonNovember19,2012,andbecameeffectiveApril1,2013.18

Purpose for Procedures and Guidelines

Intestingproposedtransactionsforadverseeconomicimpact,thepurposeoftheBank’sProceduresandGuidelinesareasfollows:

(1) Toensurethatalltransactionsarescreenedforeconomicimpactimplications;

(2) ToidentifythosetransactionsthataresubjecttoapplicabletrademeasuresorthatposeasignificantriskofpotentialsubstantialinjurytotheUSeconomy;and

(3) Toputonlythosecasesthatmeetthestandardsthroughamoreextensiveeconomicimpactanalyticalprocessthatisfair,consistent,andpubliclytransparent.19

TheBank’seconomicimpactproceduresarecomprisedoftwosections,Section1:EconomicImpactApplicabilityandSection2:MethodologicalGuidelines.Adiscussionofeachsectionandtheattendantmethodologyfollowbelow.

Section 1: Economic Impact Applicability

Section1consistsoffivestages,ofwhichthefirstthreestagesaredesignedtodeterminewhethertheassociatedexport(a)isanexportablegoodorservice(Stage1),(b)willresultintheproductionofagoodsubjecttoatrademeasure(Stage2),and(c)willestablishorexpandforeignproductioncapacityofanexportablegood(Stage3).20Asaproposedtransactionproceedsthroughthefirstthreestagesitcanbeeffectively“screened‐out”fromanalysis.Thismeansfurthereconomicimpactanalysisoftheproposedtransactionisnot

15Pub.L.No.112‐122,126Stat.357(2012).

16Formoreinformation,seehttp://www.gao.gov/assets/80/76455.pdf.

17SeeGAO’sExport‐ImportBank:ImprovementsNeededinAssessmentofEconomicImpact(GAO‐07‐1071,datedSeptember12,2007)report,availableforinspectionathttp://www.gao.gov/products/GAO‐07‐1071.

18ProceduresandGuidelines,supranote2.

19ProceduresandGuidelines,supranote2at2.

20ProceduresandGuidelines,supranote2at2‐7.



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required(e.g.,theexportdoesnotenabletheforeignbuyertoproduceanexportablegoodorservice)orthatEx‐ImBanksupportforthetransactionisprohibited(i.e.,theexportablegoodissubjecttoaspecifiedtrademeasure).UnderStage4,transactionsaredividedintooneofthreecategoriesforfurtheranalysisunderStage5.

CategoryA:Transactionsnotsubjecttospecifiedtradeordersorpreliminarytradeactions.

CategoryB:Transactionssubjecttospecifiedtradeorders. CategoryC:Transactionssubjecttospecifiedpreliminarytradeactions.

Stage5consistsofaseriesofcategoryspecificscreensandisdesignedtoidentifytransactionsinwhichthepotentialadverseimpactisprobableandthereforeadetailedeconomicimpactanalysisconductedbyPPGstaffiswarranted.

Section 2: Methodological Guidelines

Section2ofEx‐ImBank’seconomicimpactproceduresdescribethesetofassumptionsandanalysesappliedbyPPGstaffforthosetransactionswarrantingadetailedeconomicimpactanalysis.21RefertoAppendixAofthisReportforaFlowchartoftheNon‐AirEconomicImpactPolicyoftheExport‐ImportBankoftheUnitedStates.22InresponsetoadverseimpactconcernsvoicedbytheairlineindustryandinarelatedlawsuitabouttheBank’sapprovaloffinancialcommitmentsforforeignairlines,23PPGstaffdevelopedspecificscreeningproceduresandamethodologytobeappliedinanalyzingaircrafttransactions,AttachmentA:EconomicImpactforServices,Aircraft,oftheBank’sProceduresandGuidelines.24AccordingtoPPGstaff,themajorrevisionstotheeconomicimpactproceduresweretheadditionofSection2:MethodologicalGuidelinesandtheaforementionedAttachmentA.Otherchangestotheproceduresincludeddefiningthepurposeofsubjectingtransactionstoeconomicimpactpursuanttothecongressionalmandate,“codifyingprinciples”concerninginformationrequiredbytheBanktoperformadetailedeconomicimpactanalysis,anddefiningtechnicalterms(e.g.,“watchfuleye”and“structuraloversupply”).

Undertheframeworkdescribedabove,theBank’sPPGstaffreviewsalltransactionsforpotentialadverseeconomicimpact.Theevidencereviewedincludesprojectspecific


22TheflowchartwascreatedbyPPGstaffforinternalpurposesandisusedasatrainingtoolfornewemployees.

23TheplaintiffsinthereferencedlawsuitallegedthatEx‐ImBankviolatedtheSection2(e)requirementtoconsidertheadverseeffectandprohibitionsoftheCharterwhenitapprovedfinancialcommitmentstoaforeignairlinein2011.Theplaintiff’salsodisagreedwiththeBank’s“screening”(i.e.,exclusion)ofthecommitmentsfromdetailedeconomicimpactanalysisandclaimedthecommitments“causedthemcompetitiveinjury.”Formoreinformationseehttps://ecf.dcd.uscourts.gov/cgi‐bin/show_public_doc?2011cv2024‐55andhttp://law.justia.com/cases/federal/appellate‐courts/cadc/12‐5294/12‐5294‐2013‐06‐18.html,andtheBank’sresponsesonremandfromtheUSCourtofAppealsathttp://www.exim.gov/about/official‐notices‐and‐public‐comments.




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information(e.g.,newforeignproductionandcompetition)andglobalindustry‐specificinformation(e.g.,industrystudiesandhistoricaldata).ApplicantsarealsoaffordedtheopportunitytosubmitasupplementaltradeflowanalysisforBoardconsideration.Ex‐ImBankhasdevelopedsupplementalguidanceforapplicantsinregardtoinformationneededanditsusebytheBanktoconductadetailedeconomicimpactanalysisfortransactionsthatfacilitate(1)foreignproductionofanexportablegood,25or(2)foreignpassengeraircraftservices.26

TheresultsofPPG’seconomicimpactanalysisaredocumentedinamemorandum.ThememorandumandsupportingevidenceareprovidedtoEx‐ImBank’sBoardofDirectorswhoisresponsibleformakingthefinaldecisionastowhetheratransactionwillorwillnotproceedthroughtheloanoriginationprocessandreceiveEx‐ImBanksupport.IftheBankdeterminesthatatransactionmeetsthelegislativespecifiedprohibitions,theneconomicimpactcanbethebasisfordenialofsupport.Conversely,theBoardcanexercisetheSection2(e)exceptionstothestatutoryprohibitions(e.g.,thebenefitstoUSindustryandemploymentoutweighthecosts)andapproveatransactionforsupportasmentionedpreviously.

Applications for Bank Support – 2010 to 2014

From2010to2014,Ex‐ImBank“actedon”atotalof1,429medium‐andlong‐termtransactions.ThismeanstheBank“authorized,deniedorwithdrew”thosetransactions.27Ofthe1,429transactions,PPGstaffreviewed557transactions(39.0percent)foreconomicimpactbecausethetransactioninvolvedanexportablecapitalgoodorservice(i.e.,Stage1).Throughfurtherscreeningatotalof34transactions(2.4percent)weresubjectedtoadetailedeconomicimpactanalysis(i.e.,Stages2through5).Atotalof27ofthe34casesyieldedanetpositiveeconomicimpactfindingandweresubsequentlyapprovedbyEx‐ImBank’sBoard.TheremainingsevencaseswerewithdrawnfromfurtherconsiderationforBanksupport.Forexample,anexporterwithdrewitsapplicationbecauseitdidnotwanttopursuetheexceptiontotheprohibitionunderSection2(e)(2)oftheCharter.Table1belowprovidessummarydataonapplicationsforBanksupportforcalendarsyears2010to2014.28

25Formoreinformation,seehttp://www.exim.gov/sites/default/files//Information‐Needed‐to‐Conduct‐a‐Detailed‐Economic‐Impact‐Analysis‐Goods%5B1%5D.pdf.

26Formoreinformationseehttp://www.exim.gov/sites/default/files//Information‐Needed‐to‐Conduct‐a‐Detailed‐Economic‐Impact‐Aircraft‐Passenger‐Services%5B1%5D.pdf.

27Formoreinformation,seetherespectivecompetitivenessreportathttp://www.exim.gov/news/reports/competitiveness‐reports.

28Summarydataoncommercialpassengeraircrafttransactionsisreportedinparenthesis.Forexample,27casesinvolvingcommercialpassengeraircraftwereaffectedbytheeconomicimpactmandatein2014.Priortothe2013ProceduresandGuidelines,transactionsinvolvinganincreaseinforeignserviceswerescreenedfromfurthereconomicimpactanalysis.



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Table 1: Ex‐Im Bank Economic Impact Analysis (“EIA”) Calendar Year 2010 2011 2012 2013 2014 Total

Total “Acted On” Medium‐ and Long‐Term Transactions

336 344 278 255(32) 216(27) 1,429(59)

Total Cases Directly Affected by Economic Impact Mandate

118 135 98 103(17) 103(27) 557(44)

Cases Subject to Detailed EIA

8 2 10 8(0) 6(1) 34(1)

Cases Subject to Detailed EIA Approved by the Board

7 2 7 7(0) 4(1) 27(1)

Source: Ex‐Im Bank’s Report to the US Congress on the Export‐Import Bank and Global Export Credit Competition for calendar years 2010 to 2014, http://www.exim.gov/news/reports/competitiveness‐reports

Prior Reports on Economic Impact Procedures

Ex‐ImBank’sstatutorymandatetoconsidertheadverseeffectofitssupportonproposedtransactionshasbeenthesubjectofcongressionalandpublicinterestsinceitsintroductionin1968.Witheachsubsequentreauthorization,theBank’srequirementtoconsiderthepotentialadverseeffectofprovidingsupportfortheexportofagoodorservicehasbeenmodifiedatotalofninetimes.Accordingly,boththeGeneralAccountabilityOffice(“GAO”)andtheEx‐ImBankOIGhaveconductedreviewsoftheBank’seconomicimpactprocessesandidentifiedopportunitiesforimprovement.

GAO Report (GAO‐07‐1071)

OnSeptember12,2007,GAOissueditsreportentitled,Export‐ImportBank:ImprovementsNeededinAssessmentofEconomicImpact.29Pursuanttoacongressionalrequest,GAOreviewedEx‐ImBank’s:(1)overallpoliciesandproceduresfordeterminingeconomicimpact;(2)theextenttowhichtheproceduresprovidefortheidentificationandappropriateanalysisofapplicationsthatcouldpotentiallycauseadverseeconomicimpact;and(3)theextenttowhichitspolicies,procedures,anddecisionsaretransparenttointerestedandaffectedparties.

GAOdeterminedthatEx‐ImBankhasproceduresthatidentifyproposedtransactionswiththe“greatestpotentialtoadverselyaffectUSindustry”andrequireadetailedeconomicimpactanalysisofthosetransactions.ThereportalsoacknowledgedchallengesandareasforimprovementintheBank’sscreeninganddetailedanalysisoftransactionsforeconomicanalysisandlimitationsinthetransparencyoftheeconomicimpactprocess.GAOmadeatotalofsixrecommendationstoimprove(1)theBank’sidentificationandanalysisofapplicationsforeconomicimpactand(2)thepublictransparencyoftheeconomicimpactprocessforinterestedandaffectedparties.AsofthedateofthisReport,allsixoftherecommendationsmadebyGAOareclosed.SeeAppendixEofthisReportforthesixrecommendations.

29Supranote17.



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Ex‐Im Bank OIG Report (OIG‐EV‐10‐03)

OnSeptember17,2010,Ex‐ImBankOIGissueditsreportentitled,EvaluationReportRelatingtoEconomicImpactProcedures.30ThereviewwasinitiatedbytheOIGasacontinuationofaspecialprojectcompletedbytheOIGinNovember2007.InConferenceReport109‐265,datedNovember2,2005,theOIGwasdirectedtoprovideawrittenanalysisofloanguaranteesprovidedbytheBankforanethanoldehydrationplantinTrinidadandTobago(“TrinidadProject”).31,32CongresswantedtoknowiftheBank“mettheconditions”ofSection2(e)(4)oftheCharterintestingtheproposedtransactionforsubstantialinjuryandtoreportontheusageof“valueadded”bytheBankinthattesting.33OIGwasalsodirectedtomakerecommendationsastotheappropriatenessof“valueadded”inmakingdeterminationswithrespecttoSection2(e)4oftheCharter.

OnNovember5,2007,theOIGissuedaletterresponsetotheHouseCommitteeonFinancialServicesthatconcluded(1)theTrinidadProjectmettheconditionsofSection2(e)4oftheCharterandotherrelatedprovisions,(2)the“valueadded”methodologyisnotroutinelyusedbytheBanktodeterminewhetherornotaproposedtransactionmeetsthestatutorytestofSection2(e)(4),and(3)theuseofthe“valueadded”methodologywithrespecttotheTrinidadProjectasexpressedintheBank’sJanuary2005reporttotheCongresswasnotappropriate.34TheOIGadvisedtheHouseCommitteeonFinancialServicesthatitwouldcontinueitsreviewoftheBank’seconomicimpactprocedurestofurtheraddresstheconceptualbasisofthe“valueadded”methodology,issuesidentifiedintheGAO’sSeptember2007report,andothermattersidentifiedbytheOIGintheanalysisoftheTrinidadProject.

TheobjectivesoftheOIG’s2010evaluationofEx‐ImBank’seconomicimpactprocedureswereto(1)independentlyevaluatetheBank’seconomicimpactproceduresaswellascritiquesandsuggestionsfortheirimprovementdeliveredbyGAO,membersoftheBank’sBoardofDirectorsandmanagement,transactionparticipants,CongressandotherUSgovernmentagencieshavingaroleintheeconomicimpactreviewprocess;and(2)identifyopportunitiestoimprovetheefficiencyandeffectivenessoftheeconomicimpactprocedureswithintheconstraintsofexistingstatutoryrequirements,therequirementsoftransactionproponents,andtheresourcesavailabletoEx‐ImBank.

30Supranote1.

31Formoreinformation,seehttp://www.gpo.gov/fdsys/pkg/CRPT‐109hrpt265/pdf/CRPT‐109hrpt265.pdf.

32CongressauthorizedtheEx‐ImBankOIGin2002(Pub.L.No.107‐189),amendingtheInspectorGeneralActof1978.TheOIGcommencedoperationsinAugust2007.

33TheConsolidatedAppropriationsActof2005(Pub.L.No.108‐447)requiredEx‐ImBanktosubmitareporttoCongresson(1)theeconomicimpactofBanksupportfortheTrinidadProjectonUSproducersofethanoland(2)whethertheextensionofsupportwouldresultinsubstantialinjurytothoseproducerspursuanttoSection2(e)(4).TheBankappliedthe“valueadded”methodologyinanalyzingtheeconomicimpactoftheTrinidadProject.

34AppendixGoftheOIG’sSeptember2010evaluationreportincludesthelettertotheHouseCommitteeonFinancialServices.Ex‐ImBankOIG,supranote1atG‐1toG‐14.



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TheevaluationdeterminedthatEx‐ImBankcouldimproveitseconomicimpactproceduresto(1)betterimplementtheintentofCongressasreflectedintheBank’sCharter,(2)improvetransparency,and(3)maketheprocessmoremanageableforUSexportersandotherparticipantsintheprocess,includingtheBoardofDirectors,Congress,USgovernmentagenciesthatreviewtheBank’sactionsinthisareaandobserversinrelevantUSindustries.Specifically,16recommendationsforcorrectiveactionweremadefortheBankto:

BettersupporttheBoard’scongressionallymandatedroleindecidingeconomicimpactcases(FindingA),

GuidetheBoardandstaffindecidingeconomicimpactcases(FindingB), ImprovethetransparencyoftheBank’seconomicimpactproceduresandrelated

determinations(FindingC),and ImprovetheefficiencyandresponsivenessoftheBank’seconomicimpact

proceduresbysimplifyingtheprocessandreallocatingresources(FindingD).

OnSeptember10,2010,Ex‐ImBankmanagementprovideditsresponsetothedraftevaluationreportandagreedthatthe“currenteconomicimpactprocedures(includingmethodology)shouldbeimproved,includingenhancedtransparencyandconsistencyacrossanalyses.”TheBankrefrainedfromprovidingplannedcorrectiveactionstoaddressthefindingsandrelatedrecommendationsnotingthat“anysignificantadjustments”totheeconomicimpactprocedureswouldcoincidewiththe2011congressionalreauthorizationoftheCharter.Ex‐ImBankindicatedthatitwouldconsiderthefindingsandrecommendationsofboththe2007GAOandthe2010OIGreportsaspartofits“fullreviewandlikelyoverhaul”ofitsprocedures.Ex‐ImBank’smanagementresponsesandstatusupdatestoOIG’s2010evaluationreportareincludedinAppendixC.



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RESULTS OF FOLLOW‐UP REVIEW

I. Evaluation Report on Economic Impact Procedures (OIG‐EV‐10‐03, September 17, 2010)

Finding A: Improve economic procedures and reports to better support the Board’s congressionally mandated role in deciding economic impact cases.

Inthe2010evaluationreport,Ex‐ImBankOIGconcludedthattheBoard’sabilitytodecideeconomicimpactcasesbetween2002and2009hadbeenimpairedbytheeconomicimpactanalysisreportsusedbytheBoardaspartofthedecision‐makingprocess.

ToaddressthepotentialimpairmenttotheBoard’sdecisionalprocessforeconomicimpactcases,theOIGmadethreerecommendations:

A1.ThePPGstaff’seconomicimpactreportsshouldpresenttheavailablequantitativeandqualitativeinformationobtainedbythePPGstaffthatismaterialandrelevanttothedeterminationofeconomicimpactinaconcisebalancingformatthataddresseseachoftheelementsoftheeconomicimpactcontemplatedbytheCharterandwhichwillsupporttheBoard’sdecisionalprocessundersection2(e)(3)oftheCharter.

A2.Economicimpactreports, supplementedbytheBank’spubliclyavailableeconomicimpactprocedures,shouldbewrittentoreasonablyinformthereaderofthelimitationsandqualificationsofthedata,assumptions,estimates,methodsandanalysisrelieduponbythePPGstaffandthesensitivityoftheconclusionsexpressedbythePPGstafftopossiblechangesinassumptionsorestimatesthatcanbereasonablyanticipated.ThePPGstaffshouldconsiderguidanceprovidedbytheOfficeofManagementandBudget(OMB)indevelopingspecificationsforitsanalysisandreportstotheBoard.

A3.RelianceontradeflowanalysisoranyotherquantitativemethodsusedbythePPGstaffthateffectivelydecideeconomicimpactcasesshouldbemadesubjecttoBoardapprovalandsubsequentperiodicreaffirmation.

Assessment of Corrective Actions ‐ Recommendations A1 to A3

Basedonourassessment,Ex‐ImBanktookadequatecorrectiveactionstosatisfactorilyaddressthethreerecommendationsmadeintheOIG’s2010evaluationreport.OnNovember19,2012,theBoardapprovedtheBank’srevisedEconomicImpactProceduresandMethodologicalGuidelines,effectiveApril1,2013.TheApril2013ProceduresandGuidelines,supplementalguidance,andrelatedmemorandareflectthischangeinmethodology.AppendixDofthisReportcontainsasummaryoftheBank’scorrectiveactions.



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TheOIGhasclosedrecommendationsA1,A2,andA3basedonourassessmentoftheBank’scorrectiveactions.

Finding B: Develop improved criteria to guide the Board and staff in deciding economic impact cases.

Inthe2010evaluationreport,Ex‐ImBankOIGconcludedthatrelianceonquantitative“tradeflow”analysistoguidethePPGstaff’srecommendationforapprovalordisapprovalofeconomicimpactcasesbytheBoardwasresponsibleformuchofthecriticismoftheeconomicimpactprocessbytheBoardofDirectorsandtheReviewingAgencies.35Andthattradeflowanalysis,asappliedduringtheperiodaddressedinthe2010evaluationreport,appearedtobeinconsistentwiththerequirementsoftheBank’sCharter.

ToaddressconcernsinregardtotheBank’srelianceonandapplicationof“tradeflow”analysisindecidingeconomicimpactcases,theOIGmadefourrecommendations:

B1.WhilethedatasupportingtradeflowanalysisandtheconclusionsthatmaybedrawnfromthatdataandanalysishaverelevancetotheBoard’sconsiderationanddeterminationofeconomicimpactcases,tradeflowanalysisshouldnotbethesoleorprimarycriterionfordecidingeconomicimpactcasesaddressedinthePPGstaff’seconomicimpactreports,anditshouldnotbedeterminativeofthePPGstaff’srecommendation,ortheBoard’sdecision,ineconomicimpactcases.

B2.ThePPGstaffshoulddevelopadditionalcriteriaforanalysisofeconomicimpactthatareconsistentwiththeBank’sCharterandcongressionalintenttoassisttheBoardindecidingeconomicimpactcases.ThesecriteriashouldfocusonthesortofmacroeconomictrendsthatwerecharacteristicoftheUSindustriesthatwerecitedasexperiencingsubstantialeconomicinjuryatthehandsofforeigncompetitorsincongressionalhearingsprecedingtheenactmentofthecurrenteconomicimpactrequirementsexpressedinSection2(e)oftheBank’sCharter.

B3.ItissuggestedthattheBank’sEconomicImpactProceduresprovideforaperiodicbackwardlookingempiricalreviewtodeterminewhetheritappearsthattransactionsapprovedhaveinfactcausedorcontributedtoanysubstantialinjurytoUSproducersofanExportableGoodorrelatedemploymentunderthecriteriarelieduponbythePPGstaffandtheBoard,andwhetheranyprojectedbenefitstotheUSeconomyandemploymentofapproving,ordisapproving,specifictransactionswereinfactrealized.

35TheReviewingAgenciesincludetheDepartmentsofCommerce,StateandtheTreasury,USTradeRepresentativeandtheOfficeofManagementandBudget.



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B4.ItissuggestedthatinviewofthesuggestionsaboveatA1,2,and3andB1and2,thePPGstaffshouldreevaluatethe“sensitivecommercialsectorslist”promulgatedbytheBankpursuanttoSection2(e)(5)oftheCharter.Inparticular,itissuggestedthattheBankfurtherrefineoromitreferenceto“ProductsassociatedwithprojectswhereasignificantportionoftheoutputdirectlyproducedbytheprojectisdestinedfortheUSmarketandwillcompetedirectlywithUSproduction,”whichisbasedon“likelynetnegativetradeflowimplication.”ItisalsosuggestedthattheBoardbeconsultedbeforethesensitivesectorlistispublishedtoconfirmthattheyareingeneralaccordwithitinordertoavoidtheBank’sPresidenteffectivelymisrepresenting,andtherebyusurping,theBoard’sfinalauthoritytodecideeconomicimpactcases.

Assessment of Corrective Actions – Recommendations B1, B2 and B4

Basedonourassessment,Ex‐ImBanktookadequatecorrectiveactionstosatisfactorilyaddressrecommendationsB1andB2.TheApril2013ProceduresandGuidelines,supplementalguidance,andrelatedmemorandareflectthischangeinmethodology.AsforrecommendationB4,weareclosingtherecommendationbasedontheBank’sresponseandclarificationsprovided.36AppendixDofthisReportcontainsasummaryoftheBank’scorrectiveactions.

TheOIGhasclosedrecommendationsB1,B2andB4basedonourassessmentoftheBank’scorrectiveactions.

Assessment of Corrective Actions – Recommendation B3

InregardtorecommendationB3,OIGrecognizesEx‐ImBank’scontinuedeffortstoidentifyanapproachtoretrospectivelyassessthevalidityofkeyassumptionsappliedwhenconductinganeconomicimpactanalysis(seeAppendixD,June2014StatusUpdate).Duringmeetingstodiscussthestatusoftherecommendation,PPGstaffexpressedtheirongoingconcerntotheOIGabouttheusefulnessandfeasibilityoftherecommendationgiventhelackofinformationto“lookback”andreviewatransaction.Further,asexplainedbyPPGstafftheprocessforadetailedanalysisofaproposedtransaction“isnotatechnicalevaluationofthelikelyimpact.”Rather,theBank’smethodologicalprocessentails“ahypotheticalscenarioofapotentialworstcaseimpact.”AccordingtoPPGstaff,“Whenatransactionposesathreatofasubstantialinjury,theBank’seconomicimpactmethodologyappliesassumptionsthatyieldanextremeworsecaseoutcome.Forexample,oneoftheassumptionsisthatdisplacedUSproductioncannotbesoldtoanybuyeratanyprice.Hence,performing‘backward’lookinganalysestoverifytheresultsofahypotheticalanalysisthatisnotintendedtopredictthelikelyimpactwouldnotinformfutureanalyses.”

36OIGnotesthatEx‐ImBank’sApril2013ProceduresandGuidelinespostedontheBank’swebsiteathttp://www.exim.gov/policies/economic‐impactcontainalinktotheBank’sSensitiveSectorList.Seealsohttp://www.exim.gov/policies/economic‐impact/sensitive‐commercial‐sectors.



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IntheFebruary2013statusupdate,theBankcommentedontheaimofthemandateforeconomicimpact“tocapturetheprevailingpoliticalsentimentandtechnicalconsiderationsatthetimetheBankauthorizesuniquelydefinedtransactions,[andthat]checkingtheaccuracyofpreviousassumptionsonpasttransactionswouldnotlikelyinformsuchissues.”TheBankstatedfurther“thereisnopractical(ifany)waytoactuallylookbackanddeterminethevalidityofkeyanalyticalassumptions(e.g.,wereUSproducersdisplacedbyproductsfromtheEx‐ImBank‐supportedforeignproject?).”

AlthoughOIGdoesnotexpressanopinionontheavailabilityofdata,weunderstandEx‐ImBank’sconcernswithrespecttotheavailabilityofdataoneconomiccharacteristicsandthechallengeofdistinguishingbetweenchangesineconomicimpactattributabletotherespectivetransactionfromchangesattributabletootherexternalfactors(e.g.policiesandcustomsoftheforeigngovernment)thatarenotwithintheBank’spurview.Aspreviouslynoted,theBank’sdetailedanalysisofeconomicimpactispredicatedonaworstcasescenarioversusapredictionofalikelyscenario.TheOIG’s2010evaluationreportrecognizedsimilardifficultiesinachievingtheobjectiveofaneconomicimpactanalysissuchaslimitationsindata,timeandresources.37TheselimitationsmakeitdifficultinthecontextofanempiricalreviewtoestablishthattheapprovedtransactioncausedorcontributedtosubstantialinjurytoUSproducersofanexportablegoodorrelatedemployment.

Nevertheless,OIGbelievesthatEx‐ImBankshouldperiodicallyvalidateitsproceduresandguidelinesforeconomicimpactdeterminationsandrelatedanalyses.AsprescribedinOMBCircularA‐123Revised,Management’sResponsibilityforInternalControl,Ex‐ImBankmanagementhasa“fundamentalresponsibilitytodevelopandmaintaineffectiveinternalcontrol.”38InternalcontrolisaprocesseffectedbyEx‐ImBank’sBoardofDirectorsandmanagement,designedtoprovidereasonableassuranceabouttheachievementoftheBank’smissionandobjectivesinregardtoeffectivenessandefficiencyofoperations,reliabilityoffinancialreporting,andcompliancewithlawsandregulations.AsstatedintheGAO’sStandardsforInternalControlintheFederalGovernment,“controlactivitiesarethepolicies,procedures,techniques,andmechanismsthatenforcemanagement’sdirectives.”39BoththeOMBCircularandGAOstandardsprescribeseparateandongoingevaluationsofinternalcontrolactivitiesaspartofmonitoringbyfederalagencies.

WithrespecttoEx‐ImBank,CongresshasdirectedtheBanktodeterminewhethertheextensionofsupportintheformofadirectcreditorfinancialguaranteeforaproposed

37Inthe2010evaluationreport,OIGconcluded:“Whiletheobjectiveofeconomicimpactreviewcanbestatedsimply,itisdifficultinpracticetoachieveduetolimitationsindata,timeandresources,theneedtorelyonpotentiallyconflictingdataandopinionsregardingfuturerelationshipsofsupply,demand,pricesandtermsofinternationaltradeinchangingmarkets,andthepotentiallyconflictinginterestsofdifferentsegmentsoftheUSeconomy.”Ex‐ImBankOIG,supranote1ati.

38Formoreinformationseehttp://www.whitehouse.gov/omb/circulars_a123_rev.

39GAO,supranote16.



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transactionwouldadverselyaffectUSindustryandemployment.40Accordingly,theBankhasimplementedproceduresandmethodologicalguidelinesforitseconomicimpactdeterminationstoensureBankpersonnelcarryoutouttheanalyticalprocessinaccordancewiththecongressionalmandate.ControlactivitiessuchasthoseestablishedbyEx‐ImBankforeconomicimpactshouldbeverifiedperiodicallytoensurecompliancewiththestatutoryrequirement,andtoenableimprovementtotheprocessesforassessingeconomicimpact.TheresultsofthisverificationarenotonlyimportantforBankmanagementtoknowtheeffectivenessofthecontrolactivity,butalsotoestablishcreditabilityoftheanalyticalprocessappliedandkeyassumptionsmadeandtoinformfuturedecisionsastotheevolutionoftheeconomicimpactrequirement.Asmentionedpreviously,Ex‐ImBank’seconomicimpactrequirementhasbeensubjecttoninemodificationssinceitsadditiontotheCharterin1968.

Consequently,OIGclosedandreformulatedrecommendationB3intoanewrecommendationwithinthisReporttoreflecttheaboveconsiderations.WereformulatedtherecommendationwithaviewtoallowtheBankmoreflexibilityindevisingamethodologytoverifytheeffectivenessofitseconomicimpactproceduresandmethodologicalguidelinesandtoensurethoseproceduresandguidelinesarebeingfollowedbytheBankasitprocessesapplications.

TheOIGclosedandreformulatedrecommendationB3,andissuedanewrecommendationinthisReport.

RECOMMENDATION 1

Ex‐ImBank’sreauthorizationexpiredasofJune30,2015.IntheeventthattheBankweretobereauthorized,werecommendthefollowing:

ToensurecompliancewiththecongressionalmandateandtoenableimprovementstoEx‐ImBank’sprocessesforassessingproposedtransactionsforadverseeconomicimpact,OIGrecommendsthattheBankdeviseamethodologytoperiodicallyverify(a)theeffectivenessofitseconomicimpactproceduresandmethodologicalguidelinesinimplementingthecongressionalmandate,and(b)theBankisfollowingthoseproceduresandguidelinesasitprocessesapplications.

Management Response:

PleaseseeAppendixA,ManagementResponseandOIGEvaluation.

40Section2(b)(1)(B)oftheBank’sCharterrequiresthat,“theBoardofDirectorsshalltakeintoaccountanyseriousadverseeffectofsuchloanorguaranteeonthecompetitivepositionofUnitedStatesindustry…andemployment….”Charter,supranote3at12‐13.



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Finding C: The Bank should improve the transparency of its economic impact procedures and its economic impact determinations.

Inthe2010evaluationreport,Ex‐ImBankOIGconcludedthattheresultsofeconomicimpactreviewswereexpressedinrelativelybriefwrittenreportspreparedbytheBank’sPPGstaffandinminutesofmeetingsoftheBoardofDirectors,noneofwhicharepubliclydisclosedorthereaftereasilyaccessiblebytheBank’sBoardandmanagement.ThePPGstaff’sinternalproceduresforproducingeconomicimpactreportsrelytoasignificantextentonthePPGstaff’sexperienceandpracticeinproducingprioreconomicimpactreportsandarenotthoroughlydocumented.

ToaddressconcernsinregardtothetransparencyoftheBank’seconomicimpactproceduresandrelateddeterminations,theOIGmadethreerecommendations:

C1.RevisingtheeconomicimpactprocedurestoincludemoreinformationaboutthePPGstaff’smethodologyandpublishingtheexpandeddescriptionontheBank’swebsite.

C2.RevisingtheBank’sinternalprocedurestomorefullyandaccuratelydescribethePPGstaff’smethodologyinpreparingeconomicimpactreports.

C3.Makingeconomicimpactreportspubliclyavailableafterredactingthem,ordelayingtheirrelease,toprotectsensitivebusinessconfidentialinformationofthetransactionproponents.

Assessment of Corrective Actions – Recommendations C1 to C3

Basedonourassessment,Ex‐ImBanktookadequatecorrectiveactionstosatisfactorilyaddressrecommendationsC1,C2andC3.TheApril2013ProceduresandGuidelines,supplementalguidance,andrelatedmemorandareflectthischangeinmethodology.AppendixDofthisReportcontainsasummaryoftheBank’scorrectiveactions.

TheOIGhasclosedrecommendationsC1,C2andC3basedonourassessmentoftheBank’scorrectiveactions.

Finding D: The Bank should improve the efficiency and responsiveness of the economic impact procedures by simplifying the process and reallocating resources.

Inthe2010evaluationreport,Ex‐ImBankOIGconcludedthatotherUSgovernmentagenciesthatevaluatetheimpactontheUSeconomyofspecifiedtransactionsordevelopmentsapplyanumberofstrategiestoadvancethegoalsofachievingtransparency,reasonablyaccuratedeterminationsandresponsivenesstotheinterestsofthepublic,transactionparticipantsandotherstakeholdersthathavenotbeenfullyevaluatedorappliedinthecontextofEx‐ImBank’seconomicimpactprocedures.



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ToaddressconcernsinregardtotheefficiencyandresponsivenessoftheBank’seconomicimpactprocedures,theOIGmadesixrecommendations:

D1.Developingandmakingpublicamethodologytoidentifyatanearlystagetransactionswherethereappearstobelittleriskofadverseeconomicimpactinordertoallowexpeditedhandlingofthosecases.

D2.Requestingexportersofcapitalequipmenttoproviderelevantdatathatisreasonableavailabletothem,withoutundueburden,duringtheapplicationprocesstosupportanacceleratedreviewbythePPGstaff.

D3.Inviting(butnotrequiring)proponentsoftransactionssubjecttoformaleconomicimpactreviewtosubmitwhitepaperanalysesaddressingeconomicimpactconcernsthatmightberaisedbythetransaction.

D4.ProvidingearliernoticetoCongressandtheReviewingAgenciesoftheinitiationofasubstantiveeconomicimpactreview,afteraninitialscreeningreviewbutbeforePPGstaffhaspreparedacompleteeconomicimpactreport.

D5.ProvidingearliernoticetoCongressandtheReviewingAgenciesoftheinitiationofasubstantiveeconomicimpactreview,afteraninitialscreeningreviewbutbeforePPGstaffhaspreparedacompleteeconomicimpactreport.

D6.Hiring,orcontractingfortheservicesof,atrainedeconomistwithabackgroundinmacroeconomicmarketanalysisofthesortrequiredbyeconomicimpactreviewtoassistinimplementingtheimprovementssuggestedinthisreport.

Assessment of Corrective Actions – Recommendations D1 to D6

Basedonourassessment,Ex‐ImBanktookadequatecorrectiveactionstosatisfactorilyaddressandcloserecommendationsD1toD6.TheApril2013ProceduresandGuidelines,supplementalguidance,andrelatedmemorandareflectthischangeinmethodology.AppendixDofthisReportcontainsasummaryoftheBank’scorrectiveactions.

TheOIGhasclosedrecommendationsD1toD6basedonourassessmentoftheBank’scorrectiveactions.

II. Developing and Publishing Economic Impact Procedures

Ex‐ImBank’seconomicimpactprocedureshavebeenthesubjectofscrutinybyCongressandbyaffectedexternalparties,particularlyinrelationtofinancingofwide‐bodyaircraft.USairlines,particularlyDeltaAirLines(“Delta”),havepursuedlitigationchallengingtheBank’sapplicationofeconomicimpactprocedures,andaUSproducerofwide‐bodyaircraft,Boeing,isaffectedbyeconomicimpactproceduresappliedtoaircrafttransactions.PublishedreportsinMarch2015statedthatEx‐ImBankandBoeinghadcommunicatedregardingdevelopmentofeconomicimpactprocedures



23

relatedtoaircraftfinancing,promptingcongressionalconcerns.41Toaddresstheseconcerns,ourreviewalsoevaluatedtheprocessthatEx‐ImBankusedtoreceiveinputfromexternalpartiesindevelopingthenewprocedures.

Ex‐ImBank’sproceduresforeconomicimpactwerelastupdatedpursuanttothe2012ReauthorizationAct,whichrequiredtheBankto“developandmakepubliclyavailablemethodologicalguidelinestobeusedbytheBankinconductingeconomicimpactanalysesorsimilarstudies”within180daysofenactment.42TheAct,however,didnotrequireEx‐ImBanktoamendtheproceduresforeconomicimpactineffectsince2007.TheBankwasonlyrequiredbytheActtomakeitsmethodologyforconductingdetailedeconomicimpactanalysespubliclyavailable.

Inadditiontopublishingthemethodologyasrequiredbythe2012reauthorization,theBankalsodevelopedadditionalprocedurestoaddressadverseimpactconcernsvoicedbytheairlineindustryandinarelatedlawsuitabouttheBank’sapprovaloffinancialcommitmentsforforeignairlines.43Ex‐ImBankdevelopedspecificscreeningproceduresandamethodologytobeappliedinanalyzingaircrafttransactions,AttachmentA:EconomicImpactforServices,Aircraft(“AttachmentA”).44Underthepriorproceduresforeconomicimpact,transactionsinvolvingtheexportofagoodorservicethatwouldresultinanincreaseinaforeignservicewasremoved(i.e.,screened)fromfurthereconomicimpactanalysis.45AccordingtoPPGstaff,themajorrevisionstotheeconomicimpactproceduresweretheadditionofSection2:MethodologicalGuidelinesandtheaforementionedAttachmentA.TherevisedProceduresandGuidelinesforeconomicimpactwereapprovedbytheBank’sBoardonNovember19,2012,andbecameeffectiveonApril1,2013.

Inrevisingtheproceduresforeconomicimpact,Ex‐ImBankreceivedinputandconsideredtheviewsofmultipleparties,includingtherecommendationsfromGAOandEx‐ImBankOIG,seniormanagement,apanelofexpertsininternationaltrade,exportsand/oreconomics,otherUSgovernmentagenciesinvolvedininternationalmonetaryandfinancialpoliciesandtheReviewAgencies(“USgovernmentagencies”).46Indevelopingthescreeningproceduresandmethodologyforaircrafttransactions,Ex‐ImBankconsideredtheviewsofDeltaobtainedthroughcorrespondenceandtheongoinglitigation.TheBankalsosoughtinputandinformationfromBoeingasdisclosedinanarticleinTheWallStreetJournal(“WSJ”),BoeingHelpedCraftOwnLoanRule,published

41Forexample,seehttp://www.wsj.com/articles/boeing‐helped‐craft‐own‐loan‐rule‐1426203934.

42Seesupranote15.

43Seesupranote23.


45TheBankdecidedthattransactionsinvolvingservicesectors,suchasaircraft,whereinterestedpartieshavepresentedconcernsofpotentialadverseimpacttotheBankshouldbesubjecttofurtherreviewforeconomicimpact.

46Seesupranote35.



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onMarch12,2015.47ThroughaFreedomofInformationActrequesttoEx‐ImBank,theWSJobtainedcopiesofemailsexchangedbetweentheBankandBoeingin2012concerningtheproposedProceduresandGuidelinesforeconomicimpact.AccordingtoBankstaff,astheonlywide‐bodyaircraftmanufacturerintheUS,Boeingwascontactedtoobtainpertinentdataandinformationaboutthemanufacturingandsalesoftheseaircraft(e.g.,deliveries,routeplans,andelasticityofdemandbysector)foruseindevelopingtheproceduresandmethodologyoutlinedinAttachmentA.

Althoughnotrequired,theBanksolicitedpubliccommentsontheProposedEconomicProceduresandMethodologicalGuidelinesthroughtheFederalRegisteronSeptember27,2012,andinapartiallyopenmeetingoftheBoardofDirectorsonNovember19,2012.48TheproposedProceduresandGuidelineswerealsoaccessibletothepublicontheBank’swebsite.

OIGnotesthattheAdministrativeProcedureAct’s(“APA”)informal(“noticeandcomment”)rulemakingrequirementsdidnotapplytotheBank’sdevelopmentoftheseprocedures.49Title12USC§§635(e)(7)(F)and635a‐2excludetheBankfromthenoticeandcommentrequirementsof“subchapterIIofchapter5oftitle5”(i.e.,APA)fordevelopmentofeconomicimpactprocedures.Under§635(e)(7)(B)(i)and(iii)(I),noticeandcommentintheFederalRegisterisonlyrequiredbystatuteif(1)theBank“intends”toconductadetailedeconomicimpactanalysisofaproposedtransactionor(2)thereisa“materialchange”toanapplicationwherenoticehasbeenprovidedbytheBankofitsintentiontoconductadetailedeconomicimpactanalysis.50BankstaffconfirmedthatAPA’snoticeandcommentrequirementsdonotapplywithrespecttodevelopingproceduresforeconomicimpact.However,thenoticeandcommentprocessprovidestheBankwithasystematicapproachtoobtainpublicinputandvetparticipants’interests,andprovidesforasubstantiverecordforanalysis.Bankstaffexplainedhadtheynotprovidedfornoticeandcomment,theBankwouldhavebeensubjecttomorequestionsandcomplaints.

InresponsetotheFederalRegisternotice,Ex‐ImBankreceivedcommentsfromexternalparties,includingindividualandjointsubmissionsfromtradeassociationsrepresentingvariousUSindustries(e.g.,aviation,aerospace,manufacturing,ironandsteel,nuclear,andsatellite),internationaltransactionbankingandprivatesectorbusinessenterprises.Publiccommentswerealsoreceivedfrompubliclytraded

47Seesupranote41.

48Formoreinformation,seehttp://www.gpo.gov/fdsys/pkg/FR‐2012‐09‐27/pdf/2012‐23866.pdfandhttp://www.gpo.gov/fdsys/pkg/FR‐2012‐11‐09/pdf/2012‐27421.pdf.

49Title5USCSubchapterII;Pub.L.No.79‐404,60Stat.237(1946).

50TheUnitedStatesDistrictCourtfortheDistrictofColumbiahasheldinmultiplecasesinvolvingtheBankandtheairlineindustrythattheAPArulemakingrequirementsdonotapplytothedevelopmentofeconomicimpactprocedures.Forexample,seehttps://ecf.dcd.uscourts.gov/cgi‐bin/show_public_doc?2011cv2024‐55andhttps://ecf.dcd.uscourts.gov/cgi‐bin/show_public_doc?2013cv0192‐54.



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corporations(e.g.,BoeingandDelta),51aprivatelyheldcompany,amemberofCongress,tradeunions(e.g.,InternationalAssociationofMachinistsandAerospaceWorkers),andadvocacygroupsrepresentingUSbusinessesandexporters(e.g.,USChamberofCommerce).TofacilitatethereviewprocessofthecommentsreceivedontheproposedProceduresandGuidelines,Ex‐ImBankengagedapanelofexpertsininternationaltrade,exportsand/oreconomics.ThethreeexpertsengagedbytheBankwereresponsibleforreviewingandprovidingcommentsontheproposedProceduresandGuidelinesandpubliccommentsreceivedinresponsetothenoticeintheFederalRegisterandfromUSgovernmentagencies.

InreviewingthecommentsreceivedontheBank’sproposedProceduresandGuidelines,OIGnotesthegeneralconsensuswassupportiveoftheBank’seffortstoprovidegreatertransparencyandclaritytoitsproceduresforeconomicimpact.Eventhoughanumberofcommentersquestionedtheextensionoftheprocedurestoaircrafttransactions,theyalsoprovidedrecommendationstoimprovetheProceduresandGuidelines,includingAttachmentA.Forexample,commentersdisagreedontheBank’sproposed$200millionthresholdfordeterminingwhetheranaircrafttransaction(i.e.,termed“evaluatedtransaction”)warrantsfurthereconomicimpactreview.Onecommenter,Boeing,notedthatthethresholdistoolow,whileanothercommenter,Delta,saidthethresholdistoohigh.AlthoughEx‐ImBankretainedthe$200millionthresholdforaircrafttransactions,theBankdefinedwhatconstitutesan“evaluatedtransaction”withrespecttothethresholdanddescribedhowthesubstantialinjurytest(i.e.,onepercent)ismetinthefinalProceduresandGuidelines.52

AdditionalchangestotheProceduresandGuidelinesbasedontheBank’sconsiderationofcommentsreceivedincludedclarifyingthesetofassumptionsandanalysesappliedinSection2:MethodologicalGuidelines.Forexample,theBankclarifiedtherequirementforsubmissionofinformationbyapplicantsforuseinthestructuraloversupplyandtradeflowanalysesforlargetransactionsversussmalltransactionsandnotedthatitwouldincludetheexistenceofcompetitionfromotherECAsintheBank’seconomicimpactanalysesforBoardreference.53TheBankalsoreducedtheproposedthresholdwhenproportionalityappliesfrom20to10percentfortransactionsinwhichtheBank’sfinancingis“deminimus”54andclarifiedtheproceduresforconductinga“costanalysis”foralltransactionsundertradeflowanalysis.55

ThefactthattheBankreceivedinputfromandhadcommunicationswithexternalpartiesduringthedevelopmentofthenewprocedures,priortopublicationoftheproposedproceduresandformalsolicitationofcomments,maycreateanappearanceof

51OIGnotesthatDelta’scommentsweresubmittedjointlywiththeAirlinePilotsAssociation,International.


53ProceduresandGuidelines,supranote2at8and9.

54ThatistheBank’sfinancingrepresents10percentorlessofthetotalprojectcostforaproposedtransaction.

55ProceduresandGuidelines,supranote2at9and10.



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preferentialtreatmentforcertainexternalparties.OIGobservedthatEx‐ImBankdoesnothaveaformalpolicyforcommunicatingwithandobtaininginformationfromexternalparties.Althoughnotrequiredbystatute,Ex‐ImBankdidprovideforanoticeandcommentperiodwithrespecttotheproposedProceduresandGuidelinesforeconomicimpact.However,theBankstaffhadadditionalcommunicationswithBoeingoutsidethisframeworkasevidencedbythee‐mailcorrespondence,andcraftedtheproceduresinresponsetoconcernsraisedbyDelta.

BasedonourreviewofdocumentsandinterviewswithBankstaff,theOIGdidnotfindevidencethatBoeingoranyotheroutsidepartyexercisedundueinfluencewithrespecttotheformulationofthescreeningproceduresandmethodologyforanalyzingaircrafttransactions.Ex‐ImBankstaffconfirmedthattheyconsideredtheinputreceivedfromseveraloutsidepartiesindevelopingtheProceduresandGuidelinesforeconomicimpact.Further,theynotedthatthefinalpoliciesthatwereadopteddidnotincludecertainchangesproposedbyBoeing.Forexample,aBankstaffmembercitedBoeing’scommentthattheBankshouldnotimplementtheeconomicimpactproceduresforaircrafttransactionsasitwasnotacongressionalrequirement.TheBankdidnotagreewithBoeing’scommentastheproceduresandmethodologytobeappliedinanalyzingaircrafttransactionswereapprovedandimplemented.Conversely,initsfinalpolicy,theBankchangedhowitdetermineswhetherthesubstantialinjurytestforaircrafttransactionsismetbasedoncommentsreceivedfromDeltathat“mosttransactionswouldfailtheproposed1%test”andtherefore,notbesubjecttoadetailedeconomicimpactanalysis.Ex‐ImBankrevisedthedenominatorinthemetricusedforcalculatingthethresholdtodistinguishbetweenwide‐bodyandnarrow‐bodyaircraft.Bydoingso,theBankloweredthethresholdfortransactionstoqualifyfordetailedanalysis.Further,themetricusedtocalculatesubstantialinjurywasincludedinthefinalpolicy.

AlthoughourreviewoftheprocessfindsthatEx‐ImBankconsideredinputfromarangeofsourcesindevelopingitsrevisedProceduresandGuidelinesforeconomicimpact,includingapublicnoticeandcommentprocess,OIGalsofindsthatimportantinputwasreceivedthroughinformalmethodsthatwerenotcapturedinthepublicrecord,andthepublicnoticeandcommentprocesswasinitiatedatthediscretionoftheBank.Intheinterestofgreatertransparencyandclarity,Ex‐ImBankshouldissueaformalpolicystatementwithrespecttotheengagementofexternalpartiesandtheuseofthenoticeandcommentprocessinestablishingproceduresandguidance.AformalpolicywouldprovideawrittenframeworkanddirectionforBankstaffwhenengagingexternalpartiesandenhancetransparency.ThispolicystatementwouldnotnecessarilybindtheBanktoproceedthroughnoticeandcommentforanyparticularactionthatisexplicitlyexemptbytheCharterorthroughstatute.

RECOMMENDATION 2

Ex‐ImBank’sreauthorizationexpiredasofJune30,2015.IntheeventthattheBankweretobereauthorized,werecommendthefollowing:

Intheinterestofgreatertransparencyandclarity,Ex‐ImBankshouldissueaformalpolicystatementwithrespecttotheengagementofexternalpartiesandtheuseofthenoticeandcommentprocessinestablishingproceduresandguidelines.



27

Management Response:

PleaseseeAppendixA,ManagementResponseandOIGEvaluation.

CONCLUSION

Ex‐ImBankhasmadesignificantprogressinimplementingtherecommendationsandaddressingtheconcernsidentifiedintheOIG’sSeptember2010EvaluationReportRelatingtoEconomicImpactProcedures.Specifically,wefoundthattheBankhadcompletedcorrectiveactionstoaddressandclose15ofthe16recommendations.However,Ex‐ImBankhadyettoaddressrecommendationB3whichsuggestedthattheBankprovideaperiodicempiricalreviewtovalidatetheresultsofitseconomicimpactanalyses.

OIGrecognizesEx‐ImBank’scontinuedeffortstoaddresstherecommendation.WealsorecognizetheinherentchallengesinundertakinganempiricalreviewgiventhepurportedlackoftimeseriesdataontherelevanteconomiccharacteristicsthatmakesitdifficulttoestablishthattheapprovedtransactioncausedorcontributedtosubstantialinjurytoUSproducersofanexportablegoodorrelatedemployment.Nevertheless,OIGbelievesthatEx‐ImBank’seconomicimpactproceduresshouldbeverifiedperiodicallytoensurecompliancewiththestatutoryrequirementandtoenableimprovementtotheprocessesforassessingeconomicimpact.Therefore,OIGclosedandreformulatedrecommendationB3withaviewtoallowtheBankmoreflexibilityindevisingamethodologytoverifytheeffectivenessofitseconomicimpactproceduresandmethodologicalguidelinesandensurethoseproceduresandguidelinesarebeingfollowedbytheBankasitprocessesapplications.

InassessingtheBank’sprocessfordevelopingandpublishingthecurrentproceduresforeconomicimpact,OIGobservedthattheBankdoesnothaveaformalpolicystatementontheengagementofexternalpartiesandtheuseofthenoticeandcommentprocessinestablishingproceduresandguidance.AformalpolicywouldprovideawrittenframeworkanddirectionforBankstaffwhenengagingexternalpartiesandenhancetransparency.

Finally,Ex‐ImBank’sCharterexpiredasofJune30,2015.OIGrecognizesthatimplementationoftherecommendationsinthisReportissubjecttoreauthorization.



28

APPENDIXES

Appendix A: Management Response and OIG Evaluation



29



30

OIG Evaluation

OnAugust31,2015,Ex‐ImBankprovideditsmanagementresponsetoadraftofthisReport,agreeingwiththetworecommendations.TheresponseidentifiedtheBank’sactionstoaddresstherecommendation.OIGconsiderstheBank’sactionssufficienttoresolvethereportedrecommendations,whichwillremainopenuntilOIGdeterminesthattheagreeduponcorrectiveactionsarecompletedandresponsivetothereportedrecommendations.TheBank’smanagementresponsetothereportedrecommendationsandOIG’sassessmentoftheresponseareasfollows:

RECOMMENDATION 1

Recommendation 1: ToensurecompliancewiththecongressionalmandateandtoenableimprovementstoEx‐ImBank’sprocessesforassessingproposedtransactionsforadverseeconomicimpact,OIGrecommendsthattheBankdeviseamethodologytoperiodicallyverify(a)theeffectivenessofitseconomicimpactproceduresandmethodologicalguidelinesinimplementingthecongressionalmandate,and(b)theBankisfollowingthoseproceduresandguidelinesasitprocessesapplications.

Management Response:Ex‐ImBankconcurswiththeOIGrecommendation.Ex‐ImBank’sreauthorizationexpiredasofJune30,2015.IntheeventthattheBankweretobereauthorized,weagreetothefollowing.Inresponse,theBankwillexplorethefeasibilityofdevisingamethodologytoperiodicallyverifytheeffectivenessofandadherencetotheBank’sEconomicImpactProceduresandMethodologicalGuidelines(EIProcedures).Thedevisedmethodologywillbeconstructedwithaviewtoensurethattheproceduresadequatelyandtransparentlycomplywiththestatutoryrequirement,aswellasfacilitatepossibleimprovementsintheBank’sprocesseswithrespecttoimplementationoftheEIProcedures.

Evaluation of Management’s Response:Management’sactionsareresponsive;therefore,therecommendationisresolvedandwillbecloseduponcompletionandverificationthattheactionshavebeenimplemented.

RECOMMENDATION 2

Recommendation 2: Intheinterestofgreatertransparencyandclarity,Ex‐ImBankshouldissueaformalpolicystatementwithrespecttotheengagementofexternalpartiesandtheuseofthenoticeandcommentprocessinestablishingproceduresandguidelines.

Management Response:Ex‐ImBankconcurswiththeOIGrecommendation.Ex‐ImBank’sreauthorizationexpiredasofJune30,2015.IntheeventthattheBankweretobereauthorized,weagreethattheBankshallissueaformalpolicystatementwithrespecttoengagementofrelevantexternalpartiesandtheuseofthenoticeandcommentprocessinestablishingproceduresandguidelinesrelatedtotheeconomicimpactofBanktransactions.Indevelopingsuchastatement,theBankwillseektomaximizetransparencyandstakeholderinputinthedevelopmentofproceduresandguidelinesthatinfluenceEx‐ImBankrequirementsregardingeconomicimpact.



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Evaluation of Management’s Response:Management’sactionsareresponsive;therefore,therecommendationisresolvedandwillbecloseduponcompletionandverificationthattheactionshavebeenimplemented.

Table 2: Summary of Management’s Comments on the Recommendations

Rec. No.

Corrective Action: Taken or Planned56

Expected Completion

Date57

Resolved: Yes or No58

Open or Closed59

1. TheBankwillidentifyoptionstoperiodicallyverifytheeffectivenessofitsEIproceduresandguidelinesforadherencetothoseprocedures.TherecommendedcourseofactionistobepresentedtotheBank’sExecutiveWorkingGroup(“EWG”)andthenimplemented.

06/17/2016 Yes Open

2. TheBankwillidentifyoptionsforissuingapolicystatementwithrespecttotheengagementofexternalpartiesandtheuseofthenoticeandcommentprocessinestablishingEIproceduresandguidelines.TherecommendedcourseofactionistobepresentedtotheEWGandthenimplemented.

07/29/2016 Yes Open

56Ex‐ImBankprovidedanimplementationplanwithdetailedcorrectiveactionsandtargetcompletiondatestoadraftofthisReport.

57Ex‐ImBankOIGhasrequestedtargetcompletiondatesforeachoftheoutstandingrecommendations.

58“Resolved”meansthat(1)Managementconcurswiththerecommendation,andtheplanned,ongoingandcompletedcorrectiveactionisconsistentwiththerecommendation;or(2)Managementdoesnotconcurwiththerecommendation,butalternateactionmeetstheintentoftherecommendation.

59UpondeterminationbyEx‐ImBankOIGthattheagreeduponcorrectiveactionhasbeencompletedandisresponsivetotherecommendation,therecommendationcanbeclosed.



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Appendix B: Ex‐Im Bank Flow Chart of Non‐Air Economic Impact Process



33



34

Appendix C: Ex‐Im Bank Management Responses and Status Updates – 2010 OIG Report

Table 3: Management Responses and Status Updates

Date Details September 10, 2010

ManagementResponse:Ex‐Im Bank’smanagementagreed“itscurrenteconomicimpactprocedures(includingmethodology)shouldbeimproved,includingenhancedtransparencyandconsistencyacrossanalyses.”However,Bankmanagementdecidedthatanyrevisiontoitsprocedureswouldcoincidewiththe2011congressionalreauthorizationprocessoftheBank’sCharter.TheBankplannedto“initiateafullreviewandlikelyoverhaul”ofitsprocedures,consideringthe2007GAOand2010OIGreportedfindingsandrecommendations.

July 5, 2011 StatusUpdate:TheBankadvisedthatithadestablishedatimeframeforacomprehensivereviewoftheeconomicimpactprocedures.TheBankreaffirmeditsplantoconsidertheGAOandOIGreports.ThereviewwouldalsoconsidertheBank’sownassessmentoftheproceduresforeconomicimpactsince2001.TheBankplannedtostartthereviewinJuly2011andcompletethereviewbytheendofthecalendaryear.

September 18, 2012

StatusUpdate:TheBankadvisedthatacomprehensivereviewoftheeconomicimpactprocedureshadcommenced.Thereviewprocesswouldincludeinputfromthepublic,otherUSagenciesandindependentconsultantswithbackgroundsinpublicpolicyandinternationaltradeissues.

February 12 and 15, 2013

ManagementResponse:TheBank’sresponse cited fourkeythemesbasedonitsinterpretationofthe2010OIGevaluationreport:1. TheOIGviewstheeconomicimpactmandateasrequiringtheBanktosupport

oneUSfirm/sectoroveranother.Assuch,thesedecisionsneedtobemadeatthepoliticallevelwithinEx‐ImBank(thatis,attheBoardofDirectorslevel).Economicimpact‐relateddecisionsarefundamentalconsiderationsofrelativenationalbenefit.

2. TheOIGbelievestheBankhasinappropriatelytakenthedecisionalrolefromtheEx‐ImBankBoardofDirectors(Board)byusinganalyticalapproachesthateffectivelydecidetheoutcome.AccordingtotheOIGreport,suchstaffpractices“usurpthedecisionalrolethatCongressintendedtheBoardtoexercise.”

3. TheOIGbelievesthatEconomicimpactanalysesshould:(a)bemoreobjective;and(b)providemoreperspectivefromawidersetofinterestedpartiessothattheBoardhasthebenefitofthisinformationinitsdecisionmakingcapacity.

4. TheOIGisconcernedthatthecurrentprocesslackstransparencywithrespecttoboth:(a)methodology;and(b)resultsoftheanalyticalprocess.

Withtheexceptionofthemetwo,theBankagreedwiththeconcernsoutlinedinthe2010evaluationreportandincorporatedanumberoftheOIG’ssuggestionsinitsrevisedeconomicimpactprocedures.TheBankrespondedtoeachofthe16recommendations.

June 17, 2014 StatusUpdate:OnJune17,2014,Ex‐ImBankprovidedastatusupdateforeachofthe16recommendations,whichincludedinformationfromtheFebruary2013managementresponse.AsummaryoftheBank’scorrectiveactionstoaddressthe16recommendationsisprovidedinAppendixDbelow.



35

Appendix D: Summary of Ex‐Im Bank Corrective Actions to Address Recommendations – 2010 OIG Report

Table 4: Summary of Corrective Actions

No. Details A1. Ex‐ImBank’sApril2013EconomicImpactProcedures and MethodologicalGuidelines

(“ProceduresandGuidelines”)assignresponsibilitytotheBank’sPolicyandPlanningGroup(“PPG”)staffforconductingeconomicimpactanalysis(“EIA”),includingtheanalyticfindingsandrecommendations.ThePPGprovidessupportingmaterialtotheBoard,includingindependentstudiesandtheapplicant’ssubmittedinformation,addressingbothtechnicalandfinancingcompetition.Finally,theproceduresandguidelinesclarifythattheBoardretainstheresponsibilityforapprovingatransaction,despiteadversefindingspresentedbythePPG,ifthe“overallbenefitsexceedthecosts.”

A2. TheApril2013ProceduresandGuidelines,whichare posted ontheBank’swebsite,describethemethodologyindetail,aswellasthePPGstaff’sassumptionsfortheanalysisofeconomicimpact.

A3. TheEx‐ImBankBoardhasapprovedallproceduresandguidelines,includingtheApril2013ProceduresandGuidelinesthatexpandedtheinformationandanalysesavailableforBoarddeterminations.Thisadditionalmaterialcanbeprovidedbyapplicants,orobtainedfromindependentmarketorindustryexperts,andincludesinformationaboutcompetition,pricingmechanisms,anddisplacement.

B1. TheEx‐ImBankBoardconsidersotherfactorsinadditiontotradeflowimpactintheEIA:(1)structuraloversupplyrelevance;(2)potentiallyaffectedparties’comments;and(3)interagencyviews(i.e.,ReviewingAgencies).TheProceduresandGuidelinesexpandedthetypesofinformationavailablefortheEIA,includinginformationaboutcompetition,pricingadvantage,proportionality,andmarket‐basedpricing.Inaddition,certainassumptionscanbechangedforcomparisonpurposesintheanalysis.

B2. Ex‐ImBankexpandeditsEIAmethodologyguidelines.Forexample,theguidelinesnowallowconsiderationundercertainconditionsofthenewforeignproductionimpactfromtheBank’sproportionalshareoftheproject.TheBankalsowillconsideralternatetradeflowanalysesfortransactionsinindustrieswithrobustUSproducers.

B3. Ex‐ImBankisconsideringfurtherwhetherthereisafeasibleandusefulapproachtoretrospectivelyassessthevalidityofkeyassumptionsintheanalysisofeconomicimpact.

B4. Ex‐ImBankassertsthat“US marketorientation”isacriticalfactorbecauseofthepotentialforsignificantdisplacementinUSproductionandthusthefactorshouldremainontheSensitiveSectorsList.TheBankalsoassertsthattheCharteronlyprovidesfortheList’sapprovalbytheBank’sPresidentandnottheBoard.BasedonthispositionaboutthePresident’sandtheBoard’srespectiveroles,theBankstatesthattheListshouldnotbeaddedtotheeconomicimpactproceduresandguidelinesfortheBoard’sreviewandapproval.

C1. Ex‐ImBank’sApril2013ProceduresandGuidelinesprovidetheBank’sEIAmethodsandarepostedonitswebsite.



36

No. Table 4. Summary of Corrective Actions

DetailsC2. Ex‐ImBank’sinternalprocedures (i.e.,April2013ProceduresandGuidelines),which

describeitsEIAmethods,havebeenfinalizedandarepubliclyavailable.

C3. Ex‐ImBankfollowstheconditionsinSection2(e)(7)(d)and3(c)(10)(F)oftheBank’sCharterinmakingeconomicimpactreportspublicallyavailable.

D1. Ex‐ImBankisdeterminingwhetheritwouldbeappropriatetoaddsectorstoitslistofsectionsin“undersupply.”

D2. Ex‐ImBankrequiresapplicantstoprovide,ifpossible,independentdataorindustryreports,oralternativelythebestavailablemarketinformation,toinformtheanalysis,whichinturnhelpsexpeditetheapplicationprocesstime.

D3. Ex‐ImBankprovidesbyFederalRegisternoticetheopportunityforaffectedpartiestosubmitwhitepapersandstudiesfortheBank’sconsiderationintheEIA.

D4. AtthesametimeEx‐ImBankprovidesnotificationofanapplicationintheFederalRegister,itnotifiesthecongressionaloversightcommitteesoftransactionsrequiringadetailedEIA.TheBankalsoassertsthatitinitiatesearlycommunicationswithrelevantcongressionalrepresentativesabouttransactions,andcontinuesitspracticeofsubmittingmonthlyreportstotheReviewingAgencies.

D5. BytheApril2013ProceduresandGuidelines,Ex‐ImBankprovides14daysfortheinteragencygrouptoreviewandcommentonthedraftEIA.

D6. Ex‐ImBankhiredaneconomistinJuly2013withadditionalexpertiseforthePPG’seconomicimpactteam.



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Appendix E: GAO Recommendations and Status – 2007 Report

Table 5: GAO Recommendations and Status

No. Details

1.

Closed–Implemented:ToimproveEx‐Im’sidentificationandanalysisofapplicationsforeconomicimpact,theChairmanoftheExport‐ImportBankoftheUnitedStatesshouldreviewthe$10millionthresholdtodeterminewhetheradditionalstepsareneededtomitigatetheriskofexemptingfrommoredetailedreviewapplicationsthatcouldmeetthedefinitionofsubstantialinjury.Theadditionalstepscouldinclude,forexample,selectivelyreviewingtransactionsthatwouldaffectrelativelysmallUSindustriesorsensitivesectors.

2.

Closed–Implemented:ToimproveEx‐Im’s identificationandanalysisofapplicationsforeconomicimpact,theChairmanoftheExport‐ImportBankoftheUnitedStatesshouldcreatespecificmethodologicalguidelinesforstaffanalyzingapplicationsforeconomicimpact,bearinginmindrelevantOfficeofManagementandBudgetguidancewhereappropriate.

3.

Closed–Implemented:ToimproveEx‐Im’sidentificationandanalysisofapplicationsforeconomicimpact,theChairmanoftheExport‐ImportBankoftheUnitedStatesshouldreviewandstrengtheninternalcontrolsconcerningtheeconomicimpactanalysistoensure,forexample,thatstaffmembersconductingtheanalyseshavesufficienttrainingandguidanceinEx‐Im’seconomicimpactmethodology,thatrelevantEx‐Imstaffverifyandapprovetheanalyses,andthatsufficientdocumentationismaintainedtorecordkeyinformation.

4.

Closed–Implemented:Toimprovethepublictransparencyoftheeconomicimpactprocessforinterestedandaffectedparties,theChairmanoftheExport‐ImportBankoftheUnitedStatesshouldclarifypubliclyavailableproceduresbyincludingmoreinformationregardingEx‐Im’smethodologyforanalyzingapplications,suchasdefininghowitincorporates“oversupply”determinationsinitsanalysisandwhatmeasuresitusesandspecifyingunderwhatconditions"proportionality"wouldbeused.

5.

Closed–NotImplemented:Toimprovethepublictransparencyoftheeconomicimpactprocessforinterestedandaffectedparties,theChairmanoftheExport‐ImportBankoftheUnitedStatesshouldinforminterestedpartiesaboutthesensitivesectorlistbyincludingareferencetothelistintheeconomicimpactprocedures.

6.

Closed–NotImplemented:Toimprovethepublictransparencyoftheeconomicimpactprocessforinterestedandaffectedparties,theChairmanoftheExport‐ImportBankoftheUnitedStatesshouldpublisheitherindividually,orinthepubliclyavailableboardminutes,thefinaldeterminationsregardingwhetheraprojectwouldhaveapositiveornegativeimpact.

Source: GAO’s Export‐Import Bank: Improvements Needed in Assessment of Economic Impact (GAO‐07‐1071, dated September 12, 2007) report, “Recommendations” tab at http://www.gao.gov/products/GAO‐07‐1071



38

Appendix F: References

AirTransportAssociationofAmerica,etal.v.Export‐ImportBankoftheUnitedStates,878F.Supp.2d42,(D.D.C.,2012).Retrievedfromhttps://ecf.dcd.uscourts.gov/cgi‐bin/show_public_doc?2011cv2024‐55

CounciloftheInspectorsGeneralonIntegrityandEfficiency.(2012,January).Qualitystandardsforinspectionandevaluation.Retrievedfromhttps://www.ignet.gov/sites/default/files/files/committees/inspect‐eval/iestds12r.pdf

DeltaAirLines,Inc.v.Export‐ImportBankoftheUnitedStates,718F.3d974(D.C.Cir.2013).Retrievedfromhttp://law.justia.com/cases/federal/appellate‐courts/cadc/12‐5294/12‐5294‐2013‐06‐18.html

DeltaAirLines,Inc.,etal.v.Export‐ImportBankoftheUnitedStates,13‐CV‐0192‐RC,(D.C.Cir.2015).Retrievedfromhttps://ecf.dcd.uscourts.gov/cgi‐bin/show_public_doc?2013cv0192‐54



ExecutiveOrder6581CreatingtheExport‐ImportBankofWashington.(1934,February2).Retrievedfromhttp://www.presidency.ucsb.edu/ws/?pid=14772

ExecutiveOrder6638AuthorizingtheFormationofaBankingCorporationtoBeKnownasSecondExport‐ImportBankofWashington,DC.(1934,March9).Retrievedfromhttp://www.fdrlibrary.marist.edu/_resources/images/eo/eo0018.pdf

Export‐ImportBankoftheUnitedStates.(2013,May15).Detailedeconomicimpactanalysisfortransactionsthatenableforeignproductionofanexportablegood,informationneededtoconductandanalysis.Retrievedfromhttp://www.exim.gov/sites/default/files//Information‐Needed‐to‐Conduct‐a‐Detailed‐Economic‐Impact‐Analysis‐Goods%5B1%5D.pdf

Ex‐ImBank.(2013,May15).Economicimpactanalysisfortransactionsthatenableforeignairlineservices,informationneededtoconductananalysis.Retrievedfromhttp://www.exim.gov/sites/default/files//Information‐Needed‐to‐Conduct‐a‐Detailed‐Economic‐Impact‐Aircraft‐Passenger‐Services%5B1%5D.pdf

Ex‐ImBank.(2007,April).Economicimpactprocedures.

Ex‐ImBank.(2013,April).Economicimpactproceduresandmethodologicalguidelines.Retrievedfromhttp://www.exim.gov/policies/economic‐impact

Ex‐ImBank.(2005,June).Policyhandbook:Economicimpact.

Ex‐ImBank.(2012,September27).Proposaleconomicimpactproceduresandmethodologicalguidelines.

Ex‐ImBank.(2014,June),ReporttotheUSCongressontheExport‐ImportBankoftheUnitedStatesandglobalexportcreditcompetitionfortheperiodJanuary1,2013throughDecember31,2013.Retrievedfromhttp://www.exim.gov/sites/default/files/newsreleases/US-Ex-Im-Bank-2012-Competitiveness-Report-to-Congress-Complete.pdf

Ex‐ImBank.(n.d.)ResponseonremandfromtheUnitedStatesCourtofAppealsfortheDistrictofColumbiaCircuitDeltaAirlines,Inc.v.Export‐ImportBankoftheUnitedStates(June18,2013):



39

Responseone.Retrievedfromhttp://www.exim.gov/sites/default/files//newsreleases/Option‐1‐Memo‐OGC‐11‐22‐13cd‐accessible‐v2.pdf

Ex‐ImBank.(n.d.)ResponseonremandfromtheUnitedStatesCourtofAppealsfortheDistrictofColumbiaCircuitDeltaAirlines,Inc.v.Export‐ImportBankoftheUnitedStates(June18,2013):Responsetwo.Retrievedfromhttp://www.exim.gov/sites/default/files//newsreleases/Option_2_Memo‐OGC‐11‐22‐13‐accessible.pdf

Ex‐ImBankEconomicImpactPolicy,77Fed.Reg.59397(2012,September27).Retrievedfromhttp://www.gpo.gov/fdsys/pkg/FR‐2012‐09‐27/pdf/2012‐23866.pdf

Ex‐ImBankSunshineActMeeting,77Fed.Reg.67363(2012,November9).Retrievedfromhttp://www.gpo.gov/fdsys/pkg/FR‐2012‐11‐09/pdf/2012‐27421.pdf

Export‐ImportBankOfficeofInspectorGeneral.(2010,September17).Evaluationreportrelatingtoeconomicimpactprocedures(PublicationNo.OIG‐EV‐10‐03).Retrievedfromhttp://www.exim.gov/sites/default/files//oig/reports/EIB_Report_Final_Complete_Web‐pdf‐uploaded‐via‐Bulk‐Upload‐at‐ts‐2012‐07‐17‐15‐40‐50.pdf

Export‐ImportBankReauthorizationActof2012,Pub.L.No.112‐122,126Stat.350‐364.(2012,May30).Retrievedfromhttp://www.gpo.gov/fdsys/pkg/PLAW‐112publ122/pdf/PLAW‐112publ122.pdf

Mullins,B.(2015,March12).Boeinghelpedcraftownloanrule.TheWallStreetJournal.Retrievedfromhttp://www.wsj.com/articles/boeing‐helped‐craft‐own‐loan‐rule‐1426203934

OfficeofManagementandBudget.(2004,December21).Management’sresponsibilityforinternalcontrol(PublicationNo.OMBCircularA‐123Revised).Retrievedfromhttp://www.whitehouse.gov/omb/circulars_a123_rev

TheCharteroftheExport‐ImportBankoftheUnitedStates.(2012,August30).Retrievedfromhttp://www.exim.gov/sites/default/files//newsreleases/Updated_2012_EXIM_Charter_August_2012_Final.pdf

USGovernmentAccountabilityOffice.(2007,September12).Export‐ImportBank:Improvementsneededinassessmentofeconomicimpact(PublicationNo.GAO‐07‐1071).Retrievedfromhttp://www.gao.gov/products/GAO‐07‐1071

USGAO.(1999,November).Standardsforinternalcontrolinthefederalgovernment(PublicationNo.GAO/AMD‐00‐21.3.1).Retrievedfromhttp://www.gao.gov/assets/80/76455.pdf



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Acknowledgements ThisReportwaspreparedbytheOfficeofInspectionsandEvaluations,OfficeofInspectorGeneralfortheExport‐ImportBankoftheUnitedStates.SeveralindividualscontributedtothisReportincludingJenniferFain,DeputyAIGIEandMarkThorum,AIGIE.

OfficeofInspectorGeneralExport‐ImportBankoftheUnitedStates811VermontAvenue,NWWashington,DC20571202‐565‐3908www.exim.gov/about/oig

follow-up report on export-import bank's economic impact

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