12 C.F.R. Subpart C—Export Trading Companies
Title 12 - Banks and Banking
Source: 66 FR 54374, Oct. 26, 2001, unless otherwise noted.
(a) Authority. This subpart is issued by the Board of Governors of the Federal Reserve System (Board) under the authority of the Bank Holding Company Act of 1956 (BHC Act) (12 U.S.C. 1841 et seq.), the Bank Export Services Act (title II, Pub. L. 97–290, 96 Stat. 1235 (1982)) (BESA), and the Export Trading Company Act Amendments of 1988 (title III, Pub. L. 100–418, 102 Stat. 1384 (1988)) (ETC Act Amendments). (b) Purpose and scope. This subpart is in furtherance of the purposes of the BHC Act, the BESA, and the ETC Act Amendments, the latter two statutes being designed to increase U.S. exports by encouraging investments and participation in export trading companies by bank holding companies and the specified investors. The provisions of this subpart apply to eligible investors as defined in this subpart. The definitions in §§211.1 and 211.2 of subpart A apply to this subpart, subject to the following: (a) Appropriate Federal Reserve Bank has the same meaning as in §211.21(c). (b) Bank has the same meaning as in section 2(c) of the BHC Act (12 U.S.C. 1841(c)). (c) Company has the same meaning as in section 2(b) of the BHC Act (12 U.S.C. 1841(b)). (d) Eligible investors means: (1) Bank holding companies, as defined in section 2(a) of the BHC Act (12 U.S.C. 1841(a)); (2) Edge and agreement corporations that are subsidiaries of bank holding companies but are not subsidiaries of banks; (3) Banker's banks, as described in section 4(c)(14)(F)(iii) of the BHC Act (12 U.S.C. 1843(c)(14)(F)(iii)); and (4) Foreign banking organizations, as defined in §211.21(o). (e) Export trading company means a company that is exclusively engaged in activities related to international trade and, by engaging in one or more export trade services, derives: (1) At least one-third of its revenues in each consecutive four-year period from the export of, or from facilitating the export of, goods and services produced in the United States by persons other than the export trading company or its subsidiaries; and (2) More revenues in each four-year period from export activities as described in paragraph (e)(1) of this section than it derives from the import, or facilitating the import, into the United States of goods or services produced outside the United States. The four-year period within which to calculate revenues derived from its activities under this section shall be deemed to have commenced with the first fiscal year after the respective export trading company has been in operation for two years. (f) Revenues shall include net sales revenues from exporting, importing, or third-party trade in goods by the export trading company for its own account and gross revenues derived from all other activities of the export trading company. (g) Subsidiary has the same meaning as in section 2(d) of the BHC Act (12 U.S.C. 1841(d)). (h) Well capitalized has the same meaning as in §225.2(r) of Regulation Y (12 CFR 225.2(r)). (i) Well managed has the same meaning as in §225.2(s) of Regulation Y (12 CFR 225.2(s)). (a) Amount of investments. In accordance with the procedures of §211.34, an eligible investor may invest no more than 5 percent of its consolidated capital and surplus in one or more export trading companies, except that an Edge or agreement corporation not engaged in banking may invest as much as 25 percent of its consolidated capital and surplus but no more than 5 percent of the consolidated capital and surplus of its parent bank holding company. (b) Extensions of credit—(1) Amount. An eligible investor in an export trading company or companies may extend credit directly or indirectly to the export trading company or companies in a total amount that at no time exceeds 10 percent of the investor's consolidated capital and surplus. (2) Terms. (i) An eligible investor in an export trading company may not extend credit directly or indirectly to the export trading company or any of its customers or to any other investor holding 10 percent or more of the shares of the export trading company on terms more favorable than those afforded similar borrowers in similar circumstances, and such extensions of credit shall not involve more than the normal risk of repayment or present other unfavorable features. (ii) For the purposes of this section, an investor in an export trading company includes any affiliate of the investor. (3) Collateral requirements. Covered transactions between a bank and an affiliated export trading company in which a bank holding company has invested pursuant to this subpart are subject to the collateral requirements of section 23A of the Federal Reserve Act (12 U.S.C. 371c), except where a bank issues a letter of credit or advances funds to an affiliated export trading company solely to finance the purchase of goods for which: (i) The export trading company has a bona fide contract for the subsequent sale of the goods; and (ii) The bank has a security interest in the goods or in the proceeds from their sale at least equal in value to the letter of credit or the advance. (a) General policy. Direct and indirect investments by eligible investors in export trading companies shall be made in accordance with the general consent or prior notice procedures contained in this section. The Board may at any time, upon notice, modify or suspend the general-consent procedures with respect to any eligible investor. (b) General consent—(1) Eligibility for general consent. Subject to the other limitations of this subpart, the Board grants its general consent for any investment an export trading company: (i) If the eligible investor is well capitalized and well managed; (ii) In an amount equal to cash dividends received from that export trading company during the preceding 12 calendar months; or (iii) That is acquired from an affiliate at net asset value or through a contribution of shares. (2) Post-investment notice. By the end of the month following the month in which the investment is made, the investor shall provide the Board with the following information: (i) The amount of the investment and the source of the funds with which the investment was made; and (ii) In the case of an initial investment, a description of the activities in which the export trading company proposes to engage and projections for the export trading company for the first year following the investment. (c) Filing notice—(1) Prior notice. An eligible investor shall give the Board 60 days' prior written notice of any investment in an export trading company that does not qualify under the general consent procedure. (2) Notice of change of activities. (i) An eligible investor shall give the Board 60 days' prior written notice of changes in the activities of an export trading company that is a subsidiary of the investor if the export trading company expands its activities beyond those described in the initial notice to include: (A) Taking title to goods where the export trading company does not have a firm order for the sale of those goods; (B) Product research and design; (C) Product modification; or (D) Activities not specifically covered by the list of activities contained in section 4(c)(14)(F)(ii) of the BHC Act (12 U.S.C. 1843(c)(14)(F)(ii)). (ii) Such an expansion of activities shall be regarded as a proposed investment under this subpart. (d) Time period for Board action. (1) A proposed investment that has not been disapproved by the Board may be made 60 days after the appropriate Federal Reserve Bank accepts the notice for processing. A proposed investment may be made before the expiration of the 60-day period if the Board notifies the investor in writing of its intention not to disapprove the investment. (2) The Board may extend the 60-day period for an additional 30 days if the Board determines that the investor has not furnished all necessary information or that any material information furnished is substantially inaccurate. The Board may disapprove an investment if the necessary information is provided within a time insufficient to allow the Board reasonably to consider the information received. (3) Within three days of a decision to disapprove an investment, the Board shall notify the investor in writing and state the reasons for the disapproval. (e) Time period for investment. An investment in an export trading company that has not been disapproved shall be made within one year from the date of the notice not to disapprove, unless the time period is extended by the Board or by the appropriate Federal Reserve Bank.
Title 12: Banks and Banking
PART 211—INTERNATIONAL BANKING OPERATIONS (REGULATION K)
Subpart C—Export Trading Companies
§ 211.31 Authority, purpose, and scope.
§ 211.32 Definitions.
§ 211.33 Investments and extensions of credit.
§ 211.34 Procedures for filing and processing notices.
