Financing Arrangements and Other-We issue guarantees and banks and surety
companies issue, on our behalf, letters of credit and surety bonds to meet
various bid, performance, warranty, retention and advance payment obligations of
us or our affiliates. These instruments expire on various dates through 2022.
Additional guarantees of project performance for which there is no stated value
also remain outstanding. The stated values outstanding consisted of the
(In millions) Jun 30, 2013 Dec 31, 2012
Guarantees $ 366 $ 255
Letters of credit 1,376 1,474
Surety bonds 238 239
Included in guarantees and letters of credit described above were
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their current financial condition. All obligations were current at
June 30, 2013. At June 30, 2013and December 31, 2012, we had an estimated liability of $6 millionand $4 million, respectively, related to these guarantees and letters of credit. In 1997, we provided a first loss guarantee of $133 millionon $1.3 billionof U.S. Export-Import Bankloans (maturing in 2015) to the Brazilian Government related to IDS' System for the Vigilance of the Amazon (SIVAM) program. Loan repayments by the Brazilian Government were current at June 30, 2013. We have entered into industrial cooperation agreements, sometimes referred to as offset agreements, as a condition to obtaining orders for our products and services from certain customers in foreign countries. At June 30, 2013, the aggregate amount of our offset agreements had an outstanding notional value of approximately $5 billion. These agreements are designed to return economic value to the foreign country by requiring us to engage in activities supporting local defense or commercial industries, promoting a balance of trade, developing in-country technology capabilities, or addressing other local development priorities. Offset agreements may be satisfied through activities that do not require a direct cash payment, including transferring technology, providing manufacturing, training and other consulting support to in-country projects, and the purchase by third parties (e.g., our vendors) of supplies from in-country vendors. These agreements may also be satisfied through our use of cash for activities such as subcontracting with local partners, purchasing supplies from in-country vendors, providing financial support for in-country projects, and making investments in local ventures. Such activities may also vary by country depending upon requirements as dictated by their governments. We typically do not commit to offset agreements until orders for our products or services are definitive. The amounts ultimately applied against our offset agreements are based on negotiations with the customers and typically require cash outlays that represent only a fraction of the notional value in the offset agreements. Offset programs usually extend over several or more years and may provide for penalties in the event we fail to perform in accordance with offset requirements. We have historically not been required to pay any such penalties.