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Export Trading Company Affairs (ETCA)
The Export Trade Certificate of Review Program - The Competitive Edge for U.S. Exporters
Agriculture & Title III
In its findings in consideration of the Export Trading Company Act, Congress specifically addressed the needs of agricultural producers. The Title III requirements pose few restrictions for agricultural producers who are or who wish to export. Consequently, agricultural exporters can be creative in their use of the antitrust protection provided by an Export Trade Certificate of Review. The definition of person within the Act if broad enough to include not only traditional agricultural exporters such as cooperatives but also trade associations and local or state government agencies such as agricultural commissions.
Agricultural exporters have had a number of different activities certified under Title III. Examples of certification have included discussion and sharing of export market information including export prices, selling strategies, projected demand, as well as information on export costs such as ocean freight, insurance, agent's commissions, and export sales financing.
Most agricultural exporters who have received certification for joint activities have organized an Export Trading Company (ETC) through which the certified activities are conducted. Typically the ETC is the applicant for a Certificate of Review covering the desired joint ventures and conduct. All the other participants in the joint venture are listed as members on the certificate to ensure that they receive the antitrust protection afforded by the Certificate.
II. Examples of Arrangements
Example 1 Producer with Outside Supply Agreements
In this example we consider a producer who exports their own products but that on occasion contacts outside sources including its competitors to fill large orders. By obtaining certification for such contacts the producer can eliminate any antitrust concerns that may have been raised by dealing with its competitors.
Contacts by producer ETCs with their competition have typically been certified if the ETCs enter into agreements with such competitors on a one-to-one basis. One Certificate that has been issued enables a producer's affiliated ETC to act as an export intermediary for several suppliers.
Example 2 Nonproducer ETC for Competing Producers
An example of this type of arrangement would be a group of producers that sell their products on an exclusive to a nonproducer ETC. The ETC is then responsible for marketing the products overseas. In one Certificate issued by Commerce the nonproducing ETC was the applicant and a group of producer cooperatives the members.
Example 3 ETC Composed of Competing Producers
In this example a group of producers organize an ETC which is then used as the exporting arm for the producers. The ETC applies for the Certificate while the producers are the members of the Certificate.
Several Certificates following this model have been issued to agricultural producers. In one certificate the producers certified collective selling of their products through their ETC. In another the members had certified their joint efforts to over come nontariff barriers in the Japanese market.
III. Cooperatives and Title III
The Capper-Volstead Act of 1922 (CVA) establishes the rights of agricultural producers to act together in cooperative marketing associations. Under Capper-Volstead cooperatives receive an limited antitrust exemption for their cooperative marketing activities. An Export Trade Certificate of Review can provide cooperatives with antitrust protection for certified export activities for which the applicability of the Capper-Volstead protection is uncertain or that are explicitly not exempt from a under Capper-Volstead:
1)The antitrust exemption provided by the Capper-Volstead Act is limited to activities and agreements among producers. If the cooperative enters into combinations with non-producers, the Capper-Volstead antitrust exemption will not apply. An Export Trade Certificate of Review would provide antitrust protection for all certified export activities of the cooperative including agreements with non-producers such as processors, freight forwarders, and export intermediaries. Title III can thus be used to protect an entire export arrangement.
2) Supplier cooperatives are not covered by Capper-Volstead Act, are eligible for and can receive the antitrust protection afforded by an Export Trade Certificate of Review.
3) Typically the antitrust protection provided Capper-Volstead Act extends only the members of an exempted cooperative. Non-members of the cooperative, even agricultural producers, are not covered by the umbrella of protection Capper-Volstead provides to the cooperative. Cooperative members can obtain Title III antitrust protection for their activities with nonmembers of the cooperative and the protection can be extended to the noncooperative firms.
4) Even cooperatives that have no uncertainty about the application of Capper-Volstead to their activities can benefit from the procedural safeguards conveyed by an Export Trade Certificate of Review.
A further discussion of agricultural uses of Title III is contained in the article, "Going Global", by Alan Borst.