Ex-Im Bank shuts down amid congressional inaction

A federal program that’s helped generate $60 million in international sales by a dozen area manufacturers since 2007 is stuck in limbo – a victim of inaction by congressional leaders despite bipartisan support.

The Export-Import Bank of the United States is closed to new business for the summer.

Largely opposed as a type of corporate welfare for companies such as General Electric Co. (NYSE: GE) and Boeing Co. (NYSE: BA) – 2016 presidential candidates Sen. Ted Cruz, R-Texas, and Sen. Bernie Sanders, I-Vt., are among those who have opposed the bank – the measure garnered wide support for the 81-year-old program last month from senators. The Senate voted 64-29 on July 27 to approve an amendment to the reauthorize the bank. The measure was attached to a highway bill and awaited consideration from the House of Representatives, but leadership didn’t bring it to a vote before its summer recess.

Now, the measure won’t be considered again until Congress reconvenes next month.

The bank’s reauthorization bill was co-sponsored by Sen. Roy Blunt, R-Mo., and supported by Sen. Claire McCaskill, D-Mo.

According to Blunt’s office, over the past eight years, 129 Missouri exporters have directly benefited from the Ex-Im Bank assistance, including 83 small businesses.

“Missouri job creators and thousands of workers in our state benefit from Export-Import Bank loans. I’m glad to co-sponsor this bipartisan bill, which will help Missouri workers stay competitive in a global economy,” Blunt said in a statement on his website.

Since 1934, Ex-Im Bank has provided U.S. businesses with loan guarantees, direct loans and credit insurance when private lenders cannot or will not take on the risk, according to information provided by McCaskill’s office.

“I’ve traveled Missouri talking to businesses directly about the Export-Import Bank, and what they’ve told me time and again is that this is one of the most important tools available to help Missouri companies create jobs and succeed in an increasingly competitive global market,” McCaskill said in a statement provided to Springfield Business Journal.

Locally, Custom Metalcraft Inc. General Manager Scott Higgins said Ex-Im Bank allows the stainless-steel manufacturer to compete for goods and services in foreign markets. And the shutdown, he said, will be costly.

The company had budgeted for international sales of around $3 million this year – revenue supported by the up to 90 percent guarantee the bank provides on billed payments. Now, he’s expecting less than $1.5 million, and a lack of program reauthorization could be part of a perfect storm dropping international revenue by up to 70 percent, he said.

“We have two options: Either they pay us in advance or we don’t get any orders right now,” Higgins said. “It’s detrimental to a lot of us in the area and, well, all over the United States.”

During the past eight years, the bank supported $2 billion in sales from more than 100 exporters across Missouri, according to McCaskill’s office, and over the past 20 years, the bank charter has generated $7 billion in revenue for U.S. taxpayers.

“You really don’t give credit to international [customers] because it is too hard to go collect internationally,” Higgins said, adding that’s a problem European stainless-steel manufacturers, for example, don’t face with European clients.

He said a company office in Amsterdam was closed ahead of the shutdown to consolidate operations into a single facility in England. That move, according to Higgins, wasn’t made because of the threat of a shutdown, but it looks smart in retrospect.

“We’ve devoted all of our engineering and support to England right now, and good thing we did because it would really be crazy to have someone in Europe right now trying to move product and then we can’t do anything in the way of credit,” he said.

Higgins said a strong dollar has hurt sales, too.

“We definitely had an advantage over (European manufacturers) in the past because the cost of overhead is so much more and their labor rights are so much more expensive; now that’s changed also. So, there have been a couple of things to hurt international sales,” he said, adding new business in other areas is protecting jobs for now.  

According to an Aug. 12 letter written about the lapse by Ex-Im Bank Chairman and President Fred Hochberg, the bank ceased processing new applications on July 1, when its authorization ran out.

No new applications would be processed until the House of Representatives revives its charter.

“Last week, Congress adjourned for its August recess without reauthorizing Ex-Im. Both the Senate and the House of Representatives return to Washington on Sept. 8. This means that Ex-Im will focus on the management of our $107 billion portfolio of outstanding obligations until such time as Congress acts to reauthorize the bank,” Hochberg said in a public letter published on ExIm.gov. “The super majority vote in the U.S. Senate was a strong signal of bipartisan support for Ex-Im, and the businesses and workers that we have empowered in the past to grow their exports.”   

Springfield-based Digital Monitoring Products Inc. – which manufactures electronics security and monitoring products, such as panels, sensors and software – is among 12 area manufacturers to have utilized the bank charter’s services since 2007.

DMP Chief Financial Officer Chris Stange said the company had only just begun this year to utilize the Ex-Im Bank’s services.

He said as the business is growing into new markets in Asia and South Africa, it began to see the bank as a valuable tool for insuring international payments on ordered goods.

“We haven’t seen, up to this point, any financial impact or any other impact on us,” he said. “There is just an air of uncertainty for us as we bring on new international customers.

“We are fairly new to this game. It’s been kind of a shock to us.”

With no support from Ex-Im on new orders, DMP is forced into a game of chance until the bank comes back on or another alternative to mitigating risk is secured.

Higgins said he wants to see Congress resolve the matter expeditiously once lawmakers reconvene.

“We’re hoping that they get their crap together real quick,” Higgins said. “The stuff we are quoting right now is for quoting purposes only.

“We’re not talking any orders right now.”