The United States and Brazil yesterday announced the settlement of the long-running cotton dispute. The dispute began a decade ago, when Brazil brought action against the United States at the World Trade Organization (WTO).

Brazil’s complaint alleged that certain aspects of the U.S. domestic cotton support program (marketing loans and countercyclical payments) and GSM-102 export credit guarantees were violations of U.S. commitments under the WTOand the WTO found in Brazil’s favor. The United States and Brazil have since been negotiating a settlement. 

Yesterday’s announcement brings this process to a close and removes a longstanding irritant in the U.S.-Brazil agricultural relationship.

While the now-resolved case was focused on cotton, the GSM-102 program has implications for export financing across many agricultural sectors. It is used for a wide range of commodities including corn, sorghum, barley and their co-products, which accounted for approximately 14 percent of the total value of guarantees in 2013.

The settlement limits GSM-102 tenors to a maximum of 18 months; requires that the United States charge risk-based fees that cover the program’s long-term operating costs and losses; and establishes minimum fee levels linked to the Organization for Economic Cooperative and Development (OECD) minimum premia rate (MPR) that corresponds to the U.S. country risk grade.

The U.S. Grains Council will work with buyers who have utilized this program to adjust to the new rules.