2001D0076 — EN — 03.08.2002 — 001.001 — 1
This document is meant purely as a documentation tool and the institutions do not assume any liability for its contents
►B COUNCILDECISION
of22December 2000
replacing theDecision of4 April 1978onthe application ofcertain guidelinesinthe field ofoffi-
cially supportedexportcredits
(2001/76/EC)
(OJ L 32, 2.2.2001, p. 1)
Amended by:
Official Journal
No page date
►M1Council Decision 2002/634/EC of 22 July 2002 L 206 16 3.8.2002
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COUNCILDECISION
of22December 2000
replacingtheDecisionof4April1978ontheapplicationofcertain
guidelinesinthefieldofofficially supportedexportcredits
(2001/76/EC)
THE COUNCIL OF THE EUROPEAN UNION,
Having regard to the Treaty establishing the European Community, and
in particular Article 133 thereof,
Having regard to the proposal from the Commission,Whereas:
(1)The Community isparty to the OECD Arrangement on guide-
lines for officially supported export credits, hereinafter referredto as‘the Arrangement’;
(2)The Arrangement is the subject of a Council Decision of 4 April1978, which wasextended by Decis ion 93/112/EEC(
1) and last
amended by Decision 97/530/EC(2);
(3)The participantsin the Arrangement have drawn up a newconsolidated text which comprises all the amendments approvedby them since the revision of the Arrangement, which was madeapplicable by Decision 93/112/EEC;
(4)In accepting the amendmentsand additionsto the Arrangementmade by Decision 97/530/EC, the Community had inter aliasubscribed to a statement of principle by the participants in theArrangement in which they expressed their intention to investi-gate guiding principleswith a view to producing convergence
among export credit premiums;
(5)The participantsin the Arrangement drew up a s eriesof addi-
tional guiding principles covering the establishment ofminimum benchmarks for sovereign risk and country risk in
connection with the premiumsattached to officially s upported
export credits; those guiding principles were incorporated intothe new consolidated text of the Arrangement in a manner andform compatible with the Arrangement;
(6)The text contained in the Annex to the Decision of 4 April 1978should therefore be replaced by the consolidated text of theArrangement; that Decision, Decision 93/112/EEC and Decision97/530/EC should consequently be repealed,
HAS ADOPTED THIS DECISION:
Article 1
The guidelinescontained in the Arrangement annexed to thisDecis ion
shall apply in the Community.
Article 2
The Decision of 4 April 1978 and the Annex thereto shall be replaced
by thisDecis ion and itsAnnex.
Consequently, the Decision of 4 April 1978, Decision 93/112/EEC and
Decision 97/530/EC shall be repealed.
Article 3
This Decision is addressed to the Member States.2001D0076 — EN — 03.08.2002 — 001.001 — 2
(1) OJ L 44, 22.2.1993, p. 1.
(2) OJ L 216, 8.8.1997, p. 77.
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ANNEX
(TRANSLATION)
ARRANGEMENT ON GUIDELINES FOR OFFICIALLY SUPPORTED
EXPORTCREDITS
TABLE OF CONTENTS
INTRODUCTION ..............................................................
CHAPTER I: SCOPE OF THE ARRANGEMENT ..............................
1. Participation ..............................................................2. Scope of application......................................................
3. Special sectoral applications and exclusions...............................
4. Review ...................................................................5. Withdrawal ...............................................................
6. Monitoring...............................................................
CHAPTER II: PROVISIONS FOR EXPORT CREDITS........................
7. Cash payments...........................................................8. Repayment terms.........................................................9. Starting point of credit...................................................
10. Maximum repayment term ...............................................
11. Special termsfor power plant other than nuclear power plant............12. Classification of countries for maximum repayment terms ................
13. Repayment of principal ..................................................
14. Payment of interest ......................................................
15. Minimum interest rates..................................................
16. Construction of CIRRs..................................................
17. Application of CIRRs...................................................18. Cosmetic interest rates..................................................
19. Official support for cosmetic interest rates...............................
20. Minimum premium ......................................................21. Country risk classification methodology.................................
22. Minimum premium benchmarks.........................................
23. Related conditions .......................................................
24. Premium feedback tools.................................................25. Local costs ..............................................................
26. Validity period for export credits........................................
27. No derogation engagement for export credits............................28. Action to avoid or minimise losses......................................
29. Matching ................................................................
CHAPTER III. PROVISIONS FOR TRADE-RELATED AID ...................
30. General principlesfor tied aid...........................................31. Definition of tied aid....................................................32. Formsof tied aid ........................................................
33. Associated financing....................................................
34. Country eligibility for tied aid...........................................2001D0076 — EN — 03.08.2002 — 001.001 — 3
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35. Project eligibility for tied aid............................................
36. Exemptionsfrom eligibility rules ........................................37. Definition of concessionality level of tied aid ............................38. Calculation of concessionality level of tied aid ...........................
39. Validity period for tied aid..............................................
40. No derogation engagement for tied aid..................................41. Matching ................................................................
CHAPTER IV: PROCEDURES................................................Section1:Commonprovisionsforexportcreditsandtrade-related aid .....
42. Commitment............................................................43. Firm undertaking........................................................44. Period for replies ........................................................
45. Standard form for all notifications.......................................
46. Information on official support..........................................
Section2:Notificationproceduresforexportcredits .........................
47. Derogations: prior notification with discussion...........................48. Permitted exceptions: prior notification with discussion..................
49. Permitted exceptions: prior notification without discussion...............
50. Matching of derogations.................................................51. Matching of permitted exceptions ........................................
52. Matching of non-conforming termsand conditionsnot notified ...........
53. Matching of termsand conditionsoffered by a non-participant...........
Section3:Notificationproceduresfortrade-relatedaid ......................
54. Derogations: prior notification with discussion...........................
55. Prior notification........................................................56. Prompt notification......................................................57. Exemptionsfor untied aid...............................................
58. Exemptions for technical assistance and small projects...................
59. Tying status of aid......................................................60. Matching of prior notifications..........................................61. Matching of prompt notifications........................................
Section4:Consultationproceduresfortrade-related aid .....................
62. Purpose of consultations .................................................
63. Scope and timing of consultations.......................................
64. Consultation procedures for large projects...............................65. Outcome of consultations ................................................
Section 5: Information exchange procedures for export credits and trade-
related aid ....................................................................
66. Contact points ...........................................................
67. Scope of enquiries......................................................68. Scope of responses......................................................
69. Face-to-face consultations...............................................
70. Common lines ...........................................................
71. Proceduresand format of common lines .................................2001D0076 — EN — 03.08.2002 — 001.001 — 4
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72. Responses to common line proposals....................................
73. Acceptance of common lines............................................
74. Disagreement on common lines ..........................................
75. Effective date of common line ...........................................
76. Validity of common lines...............................................
77. Deviation from a common line..........................................
Section 6: Operational provisions for the communication of minimum
interestrates(CIRRs) .........................................................
78. Communication of minimum interest rates...............................
79. Effective date for application of interest rates ............................80. Immediate changesin interes t rates ......................................
Section 7: Operational provisions for the exchange of information for
premium ......................................................................
81. Electronic exchange of information for premium (EEI) ...................
Section8:Reviews ............................................................
82. Annual review..........................................................
83. Review of minimum interest rates.......................................84. Review of minimum premium benchmarks and related issues............
CHAPTER V: FUTURE WORK...............................................
85. Global untying..........................................................86. Market windows........................................................
87. Sectors..................................................................
88. Differencesof interpretation.............................................
ANNEX I: SECTOR UNDERSTANDING ON EXPORT CREDIT FOR SHIPS .
ANNEX II: SECTOR UNDERSTANDING ON EXPORT CREDITS FOR
NUCLEAR POWER PLANT ...................................................
ANNEX III: SECTOR UNDERSTANDING ON EXPORT CREDITS FOR
CIVIL AIRCRAFT .............................................................
APPENDIX — ILLUSTRATIVE LIST .........................................ANNEX IV: STANDARD FORM FOR NOTIFICATIONS.....................
ANNEX V: STANDARD FORM FOR NOTIFICATION OF PERMITTED
EXCEPTIONS FROM MINIMUM PREMIUM BENCHMARKS ................
ANNEX VI: CHECKLIST OF DEVELOPMENTAL QUALITY................
ANNEX VII: ELECTRONIC EXCHANGE OF INFORMATION (EEI).........2001D0076 — EN — 03.08.2002 — 001.001 — 5
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INTRODUCTION
Purpose and Application
The main purpose of the Arrangement on Guidelines for Officially Supported
Export Credits, referred to throughout this document as the Arrangement, is to
provide a framework for the orderly use of officially supported export credits.
The Arrangement seeks to encourage competition among exporters from the
OECD-exporting countries based on quality and price of goods and services
exported rather than on the most favourable officially supported terms.
The Arrangement appliesto officially s upported export creditswith repayment
termsof two yearsor more, relating to exportsof goodsand/or s ervicesor to
financial leases, i.e. a lease equivalent in effect to a contract of sale. The
Arrangement also addresses the circumstances in which official support in the
form of trade-related tied and partially untied aid — referred to throughout as
tied aid — may be given and/or mixed with officially supported export credits.
‘Official support’(1) can take the form of direct credits/financing, refinancing,
interest rate support, aid financing (credits and grants), export credit insurance
and guarantees. Direct credits/financing, refinancing and interest rate support
are referred to asofficial financing s upport.
The Arrangement placeslimitationson the termsand conditionsof export
creditsthat benefit from official s upport. Such limitationsinclude minimum
premium benchmarks, the minimum cash payments to be made at or before the
starting point of credit, maximum repayment terms and minimum interest rates
which benefit from official financing support. There are also restrictions on the
provision of tied aid. Finally, the Arrangement includes procedures for deroga-
tions from and possible exceptions to these restrictions, as well as procedures
for prompt and prior notification, consultation, exchange of information and
review.
Military equipment and agricultural commoditiesare excluded from the applica-
tion of the Arrangement. Special guidelines apply to ships, nuclear power plant
and aircraft.
Best Endeavours
The Arrangement sets out the most generous repayment terms and conditions
that may be supported. All Participants recognise the risk that over time, these
maximum repayment termsand conditionsmay come to be regarded asnormal
practice. They therefore undertake to take the necessary steps to prevent this risk
from materialising.
Traditionally, certain trade or industrial sectors may also have enjoyed less
generousrepayment termsand conditionsthan the maximum allowed under the
Arrangement. The Participants shall continue to respect such customary terms
and conditions and shall do everything in their power to maintain the customary
credit termsand conditions .
Status
The Arrangement, developed within the OECD framework, came into being in
April 1978 following agreement among itsParticipants . The Arrangement isa
‘Gentlemen'sAgreement’ among the Participants . The Arrangement isnot an
OECD Act, although it receives the administrative support of the OECD Secre-
tariat (the Secretariat).2001D0076 — EN — 03.08.2002 — 001.001 — 6
(1) See Article 88 (Future Work).
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CHAPTER I
SCOPEOFTHEARRANGEMENT
1. PARTICIPATION
(a) The Participantsto the Arrangement are: Aus tralia, Canada, the European
Community (which includes the following countries: Austria, Belgium,
Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,
the Netherlands, Portugal, Spain, Sweden, and the United Kingdom),
Japan, Korea, New Zealand, Norway, Switzerland and the United States;
(b) the Participantsagree to res pect and to apply the termsof the Arrange-
ment. Other countrieswilling to apply thes e Guidelinesmay become
Participants following prior invitation of the existing Participants.
2. SCOPE OF APPLICATION
The Arrangement shall apply to all official support for exports of goods and/
or services, or to financial leases, which have repayment terms (as defined in
Article 8) of two yearsor more. Thisisregardles sof whether the official
support for export credits is given by means of direct credits/financing, refi-
nancing, interest rate support, guarantee or insurance. The Arrangement shall
also apply to official support in the form of tied aid.
3. SPECIAL SECTORAL APPLICATIONS AND EXCLUSIONS
The Participants shall apply special guidelines to the following sectors:
(a) Ships
The Arrangement shall apply to ships not covered by the Sector Under-
standing on Export Credits for Ships, which has been adopted by all
Participantsto the Arrangement asan Annex to the Arrangement (Annex
I). For the Participantsto the Sector Unders tanding, the Arrangement
shall apply to ships covered by that Understanding, except that where a
corresponding provision exists in the Sector Understanding, which
complements the Arrangement, the Sector Understanding shall prevail.
(b) Nuclear Power Plant
The Arrangement shall apply, except that where a corresponding provi-
sion exists in the Sector Understanding on Export Credits for Nuclear
Power Plant (Annex II), which complementsthe Arrangement, the Sector
Understanding shall prevail. The Arrangement shall apply to official
support provided for the decommissioning of nuclear power plant, i.e.
the closing down or dismantling of nuclear power plant.
(c) Aircraft
The Arrangement shall apply, except that where a corresponding provi-
sion exists in the Sector Understanding on Export Credits for Civil
Aircraft (Annex III), which complementsthe Arrangement, the Sector
Understanding shall prevail.
(d) Exclusions
The Arrangement doesnot apply to official s upport relating to exports
of:
— Military Equipment, or
— Agricultural Commodities.
4. REVIEW
The Participants shall review, at least annually, the functioning of the
Arrangement. Its provisions can be revised by review as set out in Articles
82, 83 and 84.
5. WITHDRAWAL
The Arrangement isof indefinite duration, nevertheles sa Participant may
withdraw by notifying the other Participantsin writing by meansof ins tant
communication, e.g. the OECD Online Information System (OLIS), telex,
telefax. The withdrawal takeseffect s ixty calendar daysafter receipt of the
notification by the Participants.2001D0076 — EN — 03.08.2002 — 001.001 — 7
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6. MONITORING
The Secretariat shall monitor the implementation of the Arrangement.
CHAPTER II
PROVISIONSFOREXPORTCREDITS
7. CASH PAYMENTS
(a) The Participants shall require purchasers of goods and services which
are the subject of official support to make cash payments of a minimum
of 15 per cent of the export contract value at or before the starting point
of credit asdefined in Article 9;
(b) the export contract value isthe total amount to be paid by or on behalf
of the purchaser for goods and/or services exported, i.e. excluding localcosts as defined in Article 25 and also interest. In the case of a lease, it
excludes the portion of the lease payment that is equivalent to interest;
(c) official support for such cash payments can only take the form of insur-
ance and guarantees, i.e. pure cover, against the usual pre-credit risks;
(d) for the assessment of cash payments, the export contract value may be
reduced proportionally if the transaction includes goods and services
from a third country which are not officially supported;
(e) retention paymentsmade after the s tarting point of credit are not
regarded ascas h paymentsin thiscontext.
8. REPAYMENT TERMS
The repayment term isthe period beginning at the s tarting point of credit, as
defined in Article 9, and ending on the contractual date of the final
payment.
9. STARTING POINT OF CREDIT
The definition in the Arrangement isbas ed on the Berne Union definition of
the term ‘starting point of credit’:
(a) in the case of a contract for the sale of capital goods consisting of indi-
vidual items useable in themselves (e.g. locomotives), the starting point
is the mean date or actual date when the buyer takes physical posses-
sion of the goods in his own country;
(b) in the case of a contract for the sale of capital equipment for complete
plant or factories where the supplier has no responsibility for commis-
sioning, the starting point is the date at which the buyer is to take
physical possession of the entire equipment (excluding spare parts)
supplied under the contract;
(c) in the case of construction contracts where the contractor has no respon-
sibility for commissioning, the starting point is the date when
construction has been completed;
(d) in the case of any contract where the supplier or contractor has a
contractual responsibility for commissioning the plant, the starting point
is the date when, after installation or construction, preliminary tests to
ensure that it is ready for operation have been completed. This applies
whether or not it ishanded over to the buyer at that time in accordance
with the termsof the contract and irres pective of any continuing
commitment which the supplier or contractor may have (e.g. for guaran-
teeing itseffective functioning or training local pers onnel);
(e) in the cases of the subparagraphs (b)—(d) above, where the contract
involvesthe s eparate execution of individual partsof a project, the
date of the starting point is the date of the starting point for each sepa-
rate part, or the mean date of those starting points, or, where the
supplier has a contract, not for the whole project but for an essential
part of it, the starting point may be that appropriate to the project as a
whole.
10. MAXIMUM REPAYMENT TERM
The maximum repayment term varies according to the classification of the
country of destination determined by the criteria in Article 12.
(a) For Category I countries, the maximum repayment term is five years,
with the possibility of agreeing eight-and-a-half years when the proce-
duresfor prior notification s et out in Article 49 are followed;
(b) for Category II countries, the maximum repayment term is ten years;2001D0076 — EN — 03.08.2002 — 001.001 — 8
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(c) official support shall not be provided if there is clear evidence that the
contract has been structured with a purchaser in a country which is not
the final destination of the goods exclusively with the aim of obtaining
more favourable repayment terms;
(d) in the event of a contract involving more than one country of destina-
tion the Participants should seek to establish a common line in
accordance with the proceduresin Articles71 to 77 to reach agreement
on appropriate terms.
11. SPECIAL TERMS FOR POWER PLANT OTHER THAN NUCLEAR
POWER PLANT
(a) For power plant other than nuclear power plant, the maximum repay-
ment term shall be twelve years. If a Participant intends to support a
repayment term longer than five yearsfor Category I countriesor a
repayment term longer than ten yearsfor Category II countries , the
Participant shall give prior notification in accordance with the procedure
in Article 49;
(b) power plant other than nuclear power plant are complete power stations,
or partsthereof, not fuelled by nuclear power; they include all compo-
nents, equipment, materials, and services (including the training ofpersonnel) directly required for the construction and commissioning of
such non-nuclear power stations. This does not include items for which
the buyer is usually responsible, e.g. costs associated with land develop-
ment, roads, construction villages, power lines, and switchyard and
water supply; as well as costs arising from official approval procedures
(e.g. site permits, construction permits, fuel loading permits) in the
buyer'scountry.
12. CLASSIFICATION OF COUNTRIES FOR MAXIMUM REPAYMENT
TERMS
(a) Category I countriesare thos e which are on the World Bank'sgradua-
tion list(
1). All other countriesare in Category II. The World Bank
graduation level is recalculated on an annual basis. A country will
change category only after itsWorld Bank category hasremained
unchanged for two consecutive years;
(b) the following operational criteria and procedures apply when classifying
countries;
1. classification for Arrangement purposes is determined by per capita
GNP ascalculated by the World Bank for the purpos esof the World
Bank classification of borrowing countries;
2. in cases where the World Bank does not have enough information to
publish per capita GNP data, the World Bank shall be asked to esti-
mate whether the country in question has a per capita GNP above or
below the current threshold. The country shall be classified
according to the estimate unless the Participants decide to act other-
wise;
3. if a country is reclassified in accordance with Article 12(a) the
reclassification will take effect two weeks after the conclusions
drawn from the abovementioned data from the World Bank have
been communicated to all Participantsby the Secretariat;
4. in cases where the World Bank revises figures, such revisions shall
be disregarded in relation to the Arrangement. Nevertheless, the clas-
sification of a country may be changed by way of a common line
and Participantswould favourably cons ider a change due to errors
and omissions in the figures subsequently recognised in the same
calendar year in which the figures were first distributed by the Secre-
tariat.
13. REPAYMENT OF PRINCIPAL
(a) The principal sum of an export credit shall normally be repaid in equal
and regular instalments not less frequently than every six months, with
the first instalment to be made no later than six months after the starting
point of credit;
(b) in the case of leases, this profile of repayments may be applied either
for the amount of principal only, or for the amount of principal and
interest combined;2001D0076 — EN — 03.08.2002 — 001.001 — 9
(1) For example using 1996 data, those countries with a GNP per capita above $5 435.
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(c) prior notification according to Article 49 isrequired if a Participant
doesnot intend to follow thispractice.
14. PAYMENT OF INTEREST
(a) Interest shall not normally be capitalised during the repayment period,
but shall be payable not less frequently than every six months, with
the first payment to be made no later than six months after the starting
point of credit;
(b) prior notification in accordance with Article 49 isrequired if a Partici-
pant doesnot intend to follow thispractice;
(c) interest excludes:
— any payment by way of premium or other charge for insuring or
guaranteeing supplier credits or financial credits. Where official
support is provided by means of direct credits/financing or refinan-
cing, the premium either may be added to the face value of the
interest rate or may be a separate charge; both components are to
be specified separately to the Participants,
— any other payment by way of banking fees or commissions relating
to the export credit other than annual or semi-annual bank charges
that are payable throughout the repayment period, and
— withholding taxesimpos ed by the importing country.
15. MINIMUM INTEREST RATES
The Participants providing official financing support through direct credits/
financing, refinancing, or interest rate support shall apply minimum interest
rates; the Participants shall apply the relevant Commercial Interest Refer-
ence Rates (CIRRs). CIRRs are interest rates established according to the
following principles:
— CIRRs should represent final commercial lending interest rates in the
domestic market of the currency concerned,
— CIRRs should closely correspond to the rate for first-class domestic
borrowers,
— CIRRs should be based, where appropriate, on the funding cost of fixed
interest-rate finance over a period of no less than five years,
— CIRRs should not distort domestic competitive conditions, and— CIRRs should closely correspond to a rate available to first-class foreign
borrowers.
16. CONSTRUCTION OF CIRRs
(a) With the principles in Article 15 in mind, CIRRs shall be set at a fixed
margin of 100 basis points above their respective base rates unless
Participantshave agreed otherwis e;
(b) each Participant shall initially select one of the following two base rate
systems for its national currency:
— three-year government bond yieldsfor repayment termsof up to and
including five years; five-year government bond yields for over five
and up to and including eight-and-a-half years; and seven-year
government bond yieldsfor over eight-and-a-half years , or
— five-year government bond yieldsfor all maturities .
Exceptions to the base rate system shall be agreed by the Participants.
(c) the exceptions to the base rate system are the Yen CIRR, which is
based on the LTPR (Long-Term Prime Rate) minus 20 basis points for
all maturities; and the euro CIRR, which is based on the secondary
market yield on medium term euro bondsin the Luxembourg s tock
exchange plus 50 basis points;
(d) other Participants shall use this selection should they decide to finance
in that currency;
(e) a Participant may change its base rate system after giving six months'
advance notice and with the counsel of the Participants;
(f) a Participant which wishes to provide official support in the currency of
a country which isnot a Participant may make a propos al for the
construction of the CIRR in that currency using common line proce-
duresin accordance with Articles70 to 77.
17. APPLICATION OF CIRRs
(a) The interest rate applying to a transaction shall not be fixed for a period
longer than 120 days. A margin of 20 basis points shall be added to the2001D0076 — EN — 03.08.2002 — 001.001 — 10
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CIRR if the termsof the official financing s upport are fixed before the
contract date;
(b) where official financing support is provided for floating rate loans,
banks and other financing institutions shall not be allowed to offer the
option of the lower of either the CIRR (at time of the original contract)
or the short-term market rate throughout the life of the loan.
18. COSMETIC INTEREST RATES
Cosmetic interest rates are rates below the relevant CIRR which benefit
from official support, and which may involve a compensatory measure
including a corresponding increase in the contract value or other contractual
adjustment.
19. OFFICIAL SUPPORT FOR COSMETIC INTEREST RATES
(a) Official financing support by means of direct financing shall not be
provided at ratesbelow the relevant CIRR;
(b) official support may be provided by the following means:
— official financing support, other than specified above, as long as
such support is not offered at cosmetic interest rates, and/or
— official support in the form of insurance and guarantees, i.e. pure
cover;
(c) if there isan enquiry from another Participant about a trans action, the
Participant which intends to support the transaction should use its best
endeavours to clarify the financial terms and mechanisms, including the
compensatory measure;
(d) a Participant with information which suggests that non-conforming
terms may have been offered by another Participant shall make reason-
able effortsto determine whether or not the trans action benefitsfrom
official financing support, and whether or not the terms of this support
conform to the provisions of Article 15 of the Arrangement. This Parti-
cipant will be considered to have made such reasonable efforts if it has
informed, by meansof ins tant communication, the other Participant
assumed to have offered such non-conforming terms, of its intention to
match. Unless the Participant allegedly offering the non-conforming
termsdeclareswithin three working daysthat the trans action doesnot
benefit from official financing support or that the terms of the official
financing support conform to the provisions of Article 15 of the
Arrangement, the matching Participant hasthe right to match thes e
termsaccording to the procedure in Article 50.
20. MINIMUM PREMIUM
(a) The Participants providing official support through direct credits/finan-
cing, refinancing, export credit insurance and guarantees, shall charge
no less than the minimum premium benchmarks for the sovereign credit
risk and the country credit risk, irrespective of whether the buyer/
borrower isa private or public entity;
(b) sovereign credit risk is the full faith and credit of the State, e.g. the
Ministry of Finance or the Central Bank;
(c) country credit risk is the assessment of whether a country will service
its external debts. The five elements of country credit risk are:
— general moratorium on repaymentsdecreed by the buyer's /
borrower's/guarantor's government or by that agency of a country
through which repayment iseffected,
— political events and/or economic difficulties arising outside the
country of the notifying Participant or legislative/administrative
measures taken outside the country of the notifying Participant
which prevent or delay the transfer of funds paid over in respect of
the credit,
— legal provisions adopted in the buyer's/borrower's country declaring
repaymentsmade in local currency to be a valid dis charge of the
debt, notwithstanding that, as a result of fluctuations in exchange
rates, such repayments, when converted into the currency of the
credit, no longer cover the amount of the debt at the date of the
transfer of funds,
— any other measure or decision of the government of a foreign
country which preventsrepayment under a credit, and
— cases of force majeure occurring outside the country of the notifying
Participant, i.e. war (including civil war), expropriation, revolution,
riot, civil disturbances, cyclones, floods, earthquakes, eruptions,
tidal wavesand nuclear accidents ;2001D0076 — EN — 03.08.2002 — 001.001 — 11
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(d) the minimum premium benchmarks shall be established in accordance
with the principless et out in Articles21 to 23;
(e) the Participantsmay charge at a level above the minimum premium
benchmarks.
21. COUNTRY RISK CLASSIFICATION METHODOLOGY
(a) Premium shall be risk based;
(b) to assess the risk and to establish a common reference classification of
countries, they are scored according to the Quantitative Country Risk
Model (the Model):
— the Model is based, for each country, on three groups of risk indica-
tors: the payment experience of the Participants, the financial
situation and the economic situation,
— the methodology of the Model consists of different steps including
the assessment of the three groups of risk indicators, and the combi-
nation and flexible weighting of the risk indicator groups, and
— such scoring results in countries being classified into seven risk
categories;
(c) in accordance with proceduresagreed by the Participants , the quantita-
tive outcome of the Model shall be considered country-by-country to
integrate, in a qualitative way, the political risk and/or other risk factors
not taken into account by the Model; if appropriate, thismay lead to an
adjustment to the Model classification to reflect the final assessment of
the country credit risk.
22. MINIMUM PREMIUM BENCHMARKS(1)
(a) Premium shall converge. To ensure convergence, minimum premium
benchmarks, consistent with the level of risk, not inadequate to cover
long term operating costs and losses and taking into account a set of
standard related conditions, shall be determined as follows:
— minimum premium benchmarks are established for each of the
seven risk categories,
— the standard product to which the minimum premium benchmarks
relate shall be insurance with 95 per cent cover, proportionately
adjusted for the amount at risk, with cover of interest during the
claims waiting period of six months without a separate premium
surcharge, and
— direct credits/financing shall be considered as standard products for
100 per cent cover;
(b) the ‘High Income OECD countries’ (as defined by the World Bank)(2)
as well as other countries with similar risks shall not be subject to the
application of minimum premium benchmarkswith the unders tanding
that the pricing of the private market shall not be undercut;
(c) the ‘highest risk’ countries in Category seven shall, in principle, be
subject to appropriate premium surcharges to the minimum premium
benchmarks established for that Category; any such surcharges shall be
set by the Participant providing official support;
(d) there shall be differentiated minimum premium benchmarks for sover-
eign credit risk and country credit risk;
(e) the minimum premium benchmarks for sovereign credit risk shall be the
minimum rates for public sector risk and private sector risk where both
the country risk and the buyer/borrower risk are covered;2001D0076 — EN — 03.08.2002 — 001.001 — 12
(1) The application of the minimum premium benchmarks is subject to the Transition
Period:
— the Transition Period shall end on 31 March 1999 following which the Guiding
Principless hall be immediately implemented;
— premium rates which have been fixed during the Transition Period shall not be
valid beyond three monthsfrom 31 March 1999, i.e. 30 June 1999;
— during the Transition Period, there shall be best endeavours not to reduce premium
rates below the initial minimum premium benchmarks, except in the case ofmatching;
— Korea:
— the Transition Period for Korea shall end on 31 March 2002,
— by 1 April 1999, Korea shall apply at least 40 per cent of the initial minimum
premium benchmarks; by 1 April 2000, Korea shall apply 60 per cent of theminimum premium benchmarks; by 1 April 2001, Korea shall apply 80 percent of the minimum premium benchmarks; and by 1 April 2002, Korea shallapply 100 per cent of the benchmarks.
(
2) For example using 1996 data, those countries with a GNP per capita above $ 9 635.
▼B
(f) in situations where the buyer/borrower risk is excluded, the minimum
country credit risk premium benchmark shall be set at 90 per cent of
the minimum sovereign credit risk premium benchmark, i.e. a discount
of 10 per cent from the minimum sovereign credit risk premium bench-
mark may be applied;
(g) minimum premium benchmarks are expressed in percentages of the
principal value of the credit asif premium were collected in full at the
date of the credit, insurance or guarantee as illustrated in the Electronic
Exchange of Information (EEI) referred to in Annex VII.
23. RELATED CONDITIONS
(a) To accommodate the differing quality of productsprovided by the Parti-
cipants, the minimum premium benchmarks shall be adjusted to take
account of the related conditions. The treatment of related conditions
shall be based on the exporter's perspective (i.e. to neutralise the
competitive effect arising from the differing qualities of product
provided to the exporter/financial institution), and three related condi-
tions:
— the percentage of cover,
— the claimswaiting period, i.e. the period between the due date of
payment by the buyer/borrower and the date that the insurer/guar-
antor is liable to reimburse the exporter/financial institution, and
— the cover of interest during the claims waiting period without
surcharge;
(b) to take account of non-standard related conditions, the minimum
premium benchmarks are adjusted upwards or downwards. All existing
products of the Participants shall be classified into one of the three
product categorieswhich are:
— below standard product, i.e. insurance without cover of interest
during the claimswaiting period and ins urance with cover of
interest during the claims waiting period with an appropriate
premium surcharge,
— standard product, i.e. insurance with cover of interest during the
claimswaiting period without an appropriate premium s urcharge
and direct credits/financing, and
— above standard product, i.e. unconditional guarantees;
(c) pricing differentialss hall reflect the quality differencesof all three
product categories; these pricing differentials shall attribute surcharges
in the case of above standard products and premium discounts in the
case of below standard products;
(d) minimum premium benchmarks shall be adjusted for each percentage of
cover, above and below the standard percentage of cover, i.e. 95 per
cent.
24. PREMIUM FEEDBACK TOOLS
(a) Premium shall not be inadequate to cover long term operating costs and
losses. To ensure the adequacy of premium benchmarks and to allow, if
necessary, for adjustments, either upwards or downwards:
— three Premium Feedback Tools (PFTs), shall be used in parallel to
monitor and adjust the minimum premium benchmarks, and
— the PFTsare the accrualsand cas hflow accounting approaches
collated on an aggregate Participants' level and, where appropriate,
private market indicators;
(b) it isunders tood that:
— the use of the PFTs shall not require the Participants to change their
existing accounting systems and practices,
— all officially supported export credits which take the form of direct
credits/financing, refinancing, export credit insurance or guarantees
to which the Arrangement appliess hall be reported,
— only sovereign and country credit risk shall be reported, irrespective
of whether the buyer risk is covered,
— the PFTs shall use a common start date, and
— the concept of claims shall encompass refinanced debts under direct
credits/financing, refinancing, export credit insurance or guarantees;
it shall also encompass rolled-over, overdue and defaulted loans.2001D0076 — EN — 03.08.2002 — 001.001 — 13
▼B
25. LOCAL COSTS
(a) Local Costs consist of expenditure for goods and services in the buyer's
country, that are necessary either for executing the exporter's contract or
for completing the project of which the exporter'scontract formsa part.
These exclude commission payable to the exporter's agent in the buying
country;
(b) official Support shall not be provided for more than 100 per cent of the
value of the goods and services exported, including those supplied by
third countries, but excluding local costs. In consequence, the amount
of local costs supported on credit terms shall not exceed the amount of
the cash payment. Official support for local costs shall not be provided
on more favourable termsthan agreed for the related exports ;
(c) for Category I countries official support for local costs shall be confined
to insurance and guarantees, i.e. pure cover, and shall not involve offi-
cial financing support.
26. VALIDITY PERIOD FOR EXPORT CREDITS
Credit termsand conditionsfor an individual export credit or line of credit
shall not be fixed for a period exceeding six months. A line of credit is a
framework, in whatever form, for export creditsthat coversa s eriesof
transactions which may or may not be linked to a specific project.
27. NO DEROGATION ENGAGEMENT FOR EXPORT CREDITS
(a) The Participants shall not derogate from maximum repayment terms,
minimum interest rates, minimum premium benchmarks (after adjust-
ment for related conditions), the six-month limitation on the validity
period for export credit termsand conditions , or extend the repayment
term by extending the repayment date of the first instalment of principal
set out in Article 13(a);
(b) notwithstanding subparagraph (a) above, a Participant may, subject to
the proceduress et out in Article 48, apply a premium benchmark below
the minimum benchmark (after adjustment for related conditions) when
the country credit risk (as detailed in Article 20) is either externalised/
removed or limited/excluded for the entire life of the debt repayment
obligation, asfollows :
— if a Participant isable to externalis e/remove the five elementsof
country credit risk (for the entire life of the debt repayment obliga-
tion) asdetailed in Article 20, the minimum premium benchmark
shall be determined by the country credit risk of the jurisdiction to
which the risk has been transferred,
— if a Participant isable to limit/exclude any of the five elementsof
country credit risk (for the entire life of the debt repayment obliga-
tion), the Participant may apply an appropriate discount to the
minimum premium benchmark. The expectation isthat any dis count
where the transfer risk, as set out in the first and second indent of
Article 20(c) isexcluded, s hould not exceed 50 per cent of the
minimum premium benchmark,
— each Permitted Exception to the minimum premium benchmarks
shall be on a case by case basis and shall not be taken as a prece-
dent for any future case by any Participant.
28. ACTION TO AVOID OR MINIMISE LOSSES
The Arrangement doesnot prevent export credit ins urance authoritiesor
financing institutions from agreeing more favourable terms and conditions
than permitted if such action is taken after the contract award (when the
export credit agreement and ancillary documentshave already become
effective) and where the intention is solely to avoid or minimise loss from
events which could give rise to non-payment or claims.
29. MATCHING
(a) The Participantsmay match credit termsand conditionsnotified
according to the proceduresin Articles47, 48 and 49, aswell ascredit
terms and conditions not notified or those supported by non-Partici-
pants. The matching support may not extend beyond the validity
period of the credit termsand conditionsbeing matched;
(b) the Participants shall match credit terms and conditions by supporting
termsthat comply with the Arrangement, unles sthe initiating offer
itself does not comply with the Arrangement. Where matching involves
minimum premium benchmarks, the Participants shall be free to match
the rate only if it is providing support on the basis of a similar quality2001D0076 — EN — 03.08.2002 — 001.001 — 14
▼B
risk, also taking into account product quality. A Participant intending to
match credit termsand conditions :
— notified by another Participant shall follow the procedures in Arti-
cles50 or 51 asappropriate,
— not notified by a Participant shall follow the procedures in Article
52, or
— supported by a non-Participant shall follow the procedures in Article
53.
CHAPTER III
PROVISIONSFORTRADE-RELATEDAID
30. GENERAL PRINCIPLES FOR TIED AID
(a) The Participantshave agreed to the general principle that they s hould
have complementary policiesfor export creditsand tied aid. Export
credit policies should be based on open competition and the free play
of market forces. Tied aid policies should provide needed external
resources to countries, sectors or projects with little or no access to
market financing. Tied aid policies should ensure best value for money,
minimise trade distortion, and contribute to developmentally effective
use of these resources;
(b) the tied aid provisions of the Arrangement do not apply to the aid
programmes of multilateral or regional institutions;
(c) these principles do not prejudge the views of the Development Aid
Committee (DAC) on the quality of tied and untied aid.
31. DEFINITION OF TIED AID
(a) Tied aid, which includes loans, grants or associated financing packages
with a concessionality level greater than zero per cent, is defined as aid
which isin effect (in law or in fact) tied to the procurement of goods
and/or services from the donor country and/or a restricted number of
countries;
(b) thisdefinition applieswhether the ‘tying’ isby formal agreement or by
any form of informal understanding between the recipient and the donor
country, or whether a package includescomponentsfrom the lis t in
Article 32 below that are not freely and fully available to finance
procurement from the recipient country, substantially all other devel-
oping countriesand from the Participants , or if it involvespractices
that the DAC or Participants consider equivalent to such tying;
(c) if there isuncertainty asto whether a certain financing practice falls
within the scope of this definition, the donor country shall furnish
evidence in support of any claim to the effect that the aid is in fact
‘untied’, i.e. aid which includesloansor grantswhos e proceedsare
fully and freely available to finance procurement from substantially all
developing countriesand from OECD countries .
32. FORMS OF TIED AID
Tied aid can take the form of:
— Official Development Assistance (ODA) loans as defined in the ‘DAC
Guiding Principles for Associated Financing and Tied and Partially
Untied Official Development Assistance (1987)’,
— ODA grants as defined in the ‘DAC Guiding Principles for Associated
Financing and Tied and Partially Untied Official Development Assis-
tance (1987)’,
— Other Official Flows(OOF), which includesgrantsand loansbut
excludesofficially s upported export creditsthat are in conformity with
the Arrangement, or
— any association, e.g. mixture, in law or in fact, within the control of the
donor, the lender or the borrower involving two or more of the
preceding, and/or the following financing components:
— an export credit that is officially supported by way of direct credits/
financing, refinancing, interest rate support, guarantee or insurance
to which the Arrangement applies;
— other funds at or near market terms, or cash payments from the
purchaser.2001D0076 — EN — 03.08.2002 — 001.001 — 15
▼B
33. ASSOCIATED FINANCING
(a) Associated financing may take various forms including mixed credits,
mixed financing, joint financing, parallel financing or single integrated
transactions. The main characteristics are that they all feature:
— a concessional component that is linked in law or in fact to the non-
concessional component,
— either a single part or all of the financing package that is, in effect,
tied aid, and
— concessional funds that are available only if the linked non-conces-
sional component is accepted by the recipient;
(b) association or linkage ‘in fact’ is determined by such factors as:
— the existence of informal understandings between the recipient and
the donor authorities,
— the intention by the donor to facilitate the acceptability of a finan-
cing package through the use of ODA,
— the effective tying of the whole financing package to procurement in
the donor country,
— the tying status of ODA and the means of tendering for or
contracting of each financing transaction, or
— any other practice, identified by the DAC or the Participantsin
which a de facto liaison exists between two or more financing
components;
(c) the following practices shall not prevent the determination of an asso-
ciation or linkage ‘in fact’:
— contract splitting through the separate notification of the component
partsof one contract,
— splitting of contracts financed in several stages,
— non-notification of interdependent partsof a contract, and/or
— non-notification because part of the financing package is untied.
34. COUNTRY ELIGIBILITY FOR TIED AID
(a) There shall be no tied aid to countries whose per capita GNP would be
sufficient to make them ineligible for 17 year loans from the World
Bank(1). The World Bank recalculatesthe thres hold for thiscategory
on an annual basis. A country will be reclassified only after its World
Bank category has been unchanged for two consecutive years;
(b) the following operational criteria and procedures apply when classifying
countries:
1. classification for Arrangement purposes is determined by per capita
GNP ascalculated by the World Bank for the purpos esof the World
Bank classification of borrowing countries;
2. in cases where the World Bank does not have enough information to
publish per capita GNP data, the World Bank shall be asked to esti-
mate whether the country in question has a per capita GNP above or
below the current threshold. The country shall be classified
according to the estimate unless the Participants decide to act other-
wise;
3. if a country'seligibility for tied aid doeschange in accordance with
Article 34(a) the reclassification shall take effect two weeks after the
conclusions drawn from the abovementioned World Bank data have
been communicated to all Participantsby the Secretariat. Before the
effective date of reclassification no tied aid financing for a newly
eligible country may be notified; after that date, no tied aid financing
for a newly promoted country may be notified, except that individual
transactions covered under a prior committed credit line may be noti-
fied until the expiry of the credit line (which shall be no more than
one year from the effective date);
4. in cases where the World Bank revises figures such revisions shall
be disregarded in relation to the Arrangement. Nevertheless, the clas-
sification of a country may be changed by way of a common line, in
accordance with the appropriate proceduresin Articles71(c), 72(a)
and (b), 73(a), (b) and (d), 74, 75 and 76(a), and the Participants
would favourably consider a change due to errors and omissions in
the figures subsequently recognised in the same calendar year as
the figures were first distributed by the Secretariat;2001D0076 — EN — 03.08.2002 — 001.001 — 16
(1) For example using 1996 data, those countries with a GNP per capita above $ 3 115.
▼B
5. notwithstanding the classification of countries ineligible or eligible to
receive tied aid, the provision of tied aid to Bulgaria, Czech
Republic, Hungary, Poland, Romania and the Slovak Republic is
covered by the Participants' agreement to try to avoid such credits
other than outright grants, food aid and humanitarian aid, as long as
such agreement is in force. The OECD Ministers endorsed this
policy in June 1991(1).
35. PROJECT ELIGIBILITY FOR TIED AID
(a) Tied aid shall not be extended to public or private projects that
normally should be commercially viable if financed on market or
Arrangement terms;
(b) the key tests for such aid eligibility are:
— whether the project isfinancially non-viable, i.e. doesthe project
lack capacity with appropriate pricing determined on market princi-
ples, to generate cash flow sufficient to cover the project's operating
costs and to service the capital employed, i.e. the first key test, or
— whether it is reasonable to conclude, based on communication with
other Participants, that it is unlikely that the project can be financed
on market or Arrangement terms, i.e. the second key test;
(c) the key tests under subparagraph (b) above are intended to describe how
a project should be evaluated to determine whether it should be
financed with such aid or with export credits on market or Arrangement
terms. Through the consultation process in Articles 62 and 65, a body
of experience isexpected to develop over time that will more precis ely
define, for both export credit and aid agencies, ex ante guidance as to
the line between the two categoriesof projects .
36. EXEMPTIONS FROM ELIGIBILITY RULES
(a) The provisions of Articles 34 and 35 do not apply to tied aid where the
concessionality level is 80 per cent or more except for tied aid that
forms part of an associated financing package, described in Article 33;
(b) the provisions of Article 35 do not apply to tied aid with a value of less
than two million Special Drawing Rights(SDRs ) except for tied aid that
forms part of an associated financing package, described in Article 33;
(c) derogation from the rules in this Chapter shall be possible if the Partici-
pants so agree through the common line procedures set out in Articles
71 to 77. The Participantsmay als o derogate from the rulesin Articles
34 and 35 in accordance with the proceduress et out in Article 40(c);
(d) tied aid for Least Developed Countries (LLDCs) as defined by the
United Nations is not subject to the provisions of Articles 34 and 35.
37. DEFINITION OF CONCESSIONALITY LEVEL OF TIED AID
The concessionality level of tied aid is similar to the ‘grant element’
concept used by the DAC. In the case of grants the concessionality level is
100 per cent. In the case of loans, the concessionality level is the difference
between the nominal value of the loan and the discounted present value of
the future debt service payments to be made by the borrower. This differ-
ence is expressed as a percentage of the nominal value of the loan.
38. CALCULATION OF CONCESSIONALITY LEVEL OF TIED AID
The concessionality level of tied aid is calculated using the same method as
for the grant element used by the DAC, except that:
(a) the discount rate used to calculate the concessionality level of a loan in
a given currency, i.e. the Differentiated Discount Rate (DDR), is subject
to annual change on 15 January and iscalculated asfollows :
— The average of the CIRR + Margin2001D0076 — EN — 03.08.2002 — 001.001 — 17
(1) Notwithstanding classification of countries ineligible or eligible to receive tied aid, tied
aid policy for Belarus, Estonia, Latvia, Lithuania, the Russian Federation, Slovenia and
Ukraine iscovered by the Participants ' agreement to try to avoid s uch creditsother thanoutright grants, food aid and humanitarian aid. The prolongation of this agreement is tobe decided on an annual basis, normally in the fourth quarter of the year.For the purposes of the soft ban, the decommissioning of nuclear power plant for emer-
gency or safety reasons can be regarded as ‘humanitarian aid’.
▼B
Margin (M) dependson repayment terms(R) asfollows :
RM
less than 15 years 0,75
from 15 yearsup to, but not including 20 years 1,00from 20 yearsup to but not including 30 years 1,15
from 30 yearsand above 1,25
— for all currenciesthe average of the CIRR iscalculated taking an
average of the monthly CIRRsvalid during the s ix-month period
between 15 August of the previous year and 14 February of the
current year. The calculated rate, including the margin, isrounded
to the nearest 10 basis points. If there is more than one CIRR for
the currency, the CIRR for the longest maturity as set out in Article
16(b), shall be used for this calculation;
(b) the base date for the calculation of the concessionality level is the
starting point of credit as set out in Article 9;
(c) for the purpose of calculating the overall concessionality level of an
associated financing package, the concessionality levels of the following
credits, funds and payments are considered to be zero:
— export creditsthat are in conformity with the Arrangement,
— other fundsat or near market rates ,— other official funds with a concessionality level of less than the
minimum permitted under Article 40(a), except in cases of
matching, and
— cash payments from the purchaser.
Payments on or before the starting point of credit that are not consid-
ered cash payments shall be included in the calculation of the
concessionality level.
(d) the discount rate in matching: in matching aid, identical matching
means matching with an identical concessionality level that is recalcu-
lated with the discount rate in force at the time of matching;
(e) local costs and third country procurement shall be included in the calcu-
lation of concessionality level only if they are financed by the donor
country;
(f) the overall concessionality level of a package is determined by multi-
plying the nominal value of each component of the package by the
respective concessionality level of each component, adding the results,
and dividing thistotal by the aggregate nominal value of the compo-
nents;
(g) the discount rate for a given aid loan is the rate in effect at the time of
notification. However, in cases of prompt notification, the discount rate
isthe one in effect at the time when the termsand conditionsof the aid
loan were fixed. A change in the discount rate during the life of a loan
does not change its concessionality level;
(h) if a change of currency ismade before the contract isconcluded, the
notification shall be revised. The discount rate used to calculate the
concessionality level will be the one applicable at the date of revision.
A revision is not necessary if the alternative currency and all the neces-
sary information for calculation of the concessionality level are
indicated in the original notification;
(i) notwithstanding subparagraph (g), the discount rate used to calculate the
concessionality level of individual transactions initiated under an aid
credit line shall be the rate that was originally notified for the credit
line.
39. VALIDITY PERIOD FOR TIED AID
(a) The Participantss hall not fix termsand conditionsfor tied aid, whether
thisrelatesto the financing of individual trans actionsor to an aid
protocol, an aid credit line or to a similar agreement, for more than
two years. In the case of an aid protocol, an aid credit line or similaragreement, the validity period shall commence at the date of its signa-
ture, to be notified in accordance with Article 56; the extension of a
credit line shall be notified as if it were a new transaction with a note
explaining that it isan extens ion and that itisrenewed at termsallowed
at the time of the notification of the extension. In the case of individual
transactions, including those notified under an aid protocol, an aid credit
line or similar agreement, the validity period shall commence at the2001D0076 — EN — 03.08.2002 — 001.001 — 18
▼B
date of notification of the commitment in accordance with Article 55 or
56, asappropriate;
(b) when a country hasbecome ineligible for s eventeen year World Bank
Loans for the first time, the validity of existing and new tied aid proto-
cols and credit lines notified shall be restricted to one year after the date
of the potential reclassification in accordance with procedures in Article
34(b);
(c) renewal of such protocols and credit lines is possible only on terms
which are in accordance with the provisions of Articles 34 and 35 of
the Arrangement following:
— reclassification of countries, and
— a change in the provisions of the Arrangement.
In these circumstances, the existing terms and conditions can be main-
tained notwithstanding a change in the discount rate set out in Article
38.
40. NO DEROGATION ENGAGEMENT FOR TIED AID
(a) The Participantss hall not provide tied aid that:
— has a concessionality level of less than 35 per cent, or 50 per cent if
the beneficiary country isan LLDC, or
— doesnot conform with the provis ionson eligibility for aid in Article
34 apart from the exemptionss et out in Article 36;
(b) notwithstanding the first indent of Article 40(a), the restrictions on the
minimum concessionality level do not apply to technical assistance as
set out in the first indent of Article 58;
(c) notwithstanding the second indent of Article 40(a), a Participant may
proceed with a non-conforming offer by one of the following means:
— the common line procedure outlined in Articles71 to 77, or
— justification on aid grounds through support by a substantial body of
the Participantsasdes cribed in Articles62 and 63, or
— a letter to the Secretary-General, in accordance with the procedures
in Article 65, which the Participantsexpect will be unus ual and
infrequent.
41. MATCHING
(a) The Participantsmay match termsand conditionsnotified according to
proceduresin Articles55 or 56 asappropriate. The matching s upport
may not extend beyond the validity period of the termsand conditions
being matched;
(b) the Participants shall match by supporting terms and conditions that
comply with the Arrangement unless the initiating offer itself does not
comply with the Arrangement. A Participant intending to match terms
and conditionsnotified by another Participant s hall follow the proce-
duresin Articles60 or 61 asappropriate;
(c) a Participant which intendsto match non-conforming termsand condi-
tionsoffered by a non-Participant s hall follow the proceduresin Article
53.
CHAPTER IV
PROCEDURES
Section1: Commonprovisionsforexportcreditsandtrade-relatedaid
42. COMMITMENT
Commitment refersto any s tatement, in whatever form, whereby the will-
ingness or intention to provide official support is communicated to the
recipient country, the buyer, the borrower, the exporter or the financial insti-
tution.
43. FIRM UNDERTAKING
In keeping with the best endeavours undertaking referred to in the Introduc-
tion and recognising the advantage which can accrue if a clearly defined2001D0076 — EN — 03.08.2002 — 001.001 — 19
▼B
common attitude towardsthe credit termsand conditionsfor a particular
transaction can be achieved, the Participants firmly undertake:
— to respect strictly the procedures for notification and, in particular, to
give prior notification at the latest at the stipulated moment before
making a commitment,
— to supply all the information in the form in Annexes IV and V as appro-
priate,
— to respond promptly to enquiries made in accordance with Articles 67 to
68,
— to exchange information at the earliest stage in accordance with Articles
70 to 77 to reach agreement on a common line on credit termsand
conditions for particular transactions,
— to give favourable consideration to requests for face-to-face consulta-
tions, and
— not to act in such a way that the consultation and notification procedures
would be rendered meaningless by leaving insufficient time for the
Participants to discuss the transaction.
44. PERIOD FOR REPLIES
In an exchange of information in accordance with Articles67 to 70, a Parti-
cipant shall inform the other Participants of the credit terms and conditions
that it envisages supporting for a particular transaction and may request
similar information from the other Participants. If the enquiring Participant
has not received a reply within seven calendar days, it may assume that the
other Participants will support the transaction on the most favourable credit
termsand conditionspermitted by the Arrangement. In cas esof particular
urgency, the enquiring Participant may request a more rapid reply.
45. STANDARD FORM FOR ALL NOTIFICATIONS
The notificationscalled for by the proceduresin the Arrangement s hall be
made in accordance with, and include the information contained in the Stan-
dard Form in AnnexesIV and V asappropriate, and s hall be copied to the
Secretariat.
46. INFORMATION ON OFFICIAL SUPPORT
As soon as a Participant commits the official support which it has notified
in accordance with the proceduresin Articles47 to 56, 60 and 61, it s hall in
all cases inform all other Participants accordingly by including the notifica-
tion reference number on the relevant Creditor Reporting System (CRS) 1c
form.
Section2: Notificationproceduresforexportcredits
47. DEROGATIONS: PRIOR NOTIFICATION WITH DISCUSSION
(a) It isexpected that the Participantswill not break the No-Derogations
Engagement set out in Article 27 nor otherwise depart from the rules
of the Arrangement. However, if in the most extreme circumstances a
Participant intendsto take the initiative to s upport termsand conditions
that derogate from the Arrangement, the Participant shall notify all
other Participantsof the termsand conditionsit intendsto s upport at
least ten calendar days before issuing any commitment. If any other
Participant requests a discussion during this period, the initiating Parti-
cipant shall wait an additional ten calendar days before issuing any
commitment on such terms. Normally, this discussion will be by means
of instant communication, e.g. OLIS;
(b) if the initiating Participant moderatesor withdrawsitsintention to
support the notified non-conforming terms and conditions, it shall
immediately inform all other Participantsaccordingly.
48. PERMITTED EXCEPTIONS: PRIOR NOTIFICATION WITH DISCUS-
SION
(a) A Participant shall notify all other Participants at least ten calendar days
before issuing any commitment if it intends to apply a premium rate
below the minimum premium benchmark (after adjustment for related
conditions) when the country credit risk is either externalised/removed
or limited/excluded for the entire life of the debt repayment obligation
in accordance with Article 27(b). The notification shall include explana-
tion and justification in accordance with point 9 of Annex V. If any
other Participant requests a discussion during this period, the initiating
Participant shall wait an additional ten calendar days. If the discount to2001D0076 — EN — 03.08.2002 — 001.001 — 20
▼B
the minimum premium benchmark is25 per cent or more, the notifying
Participant shall notify all other Participants at least twenty calendar
days before issuing any commitment (1).
49. PERMITTED EXCEPTIONS: PRIOR NOTIFICATION WITHOUT
DISCUSSION
(a) A Participant shall notify all other Participants at least ten calendar days
before issuing any commitment if it intends:
1. to support repayment terms of more than five but not exceeding
eight-and-a-half yearsto a Category 1 country;
2. not to follow normal payment practiceswith res pect to the principal
or interest referred to in Articles 13(a), (b) and 14(a);
3. to provide support for a power plant, other than a nuclear power
plant, with a repayment longer than the relevant maximum in Article
10, but not exceeding twelve yearsass tipulated in Article 11(a);or
5. to apply a discount to the minimum sovereign credit risk premium
benchmark in accordance with Article 22(f);
(b) If the initiating Participant moderatesor withdrawsitsintention to
provide support for the notified exceptions, it shall immediately inform
all other Participants.
50. MATCHING OF DEROGATIONS
A Participant intending to match notified derogationss hall follow the proce-
duress et out below.
Unless the initiating Participant has sent notice that it has withdrawn its
intention to derogate, Participantscan, once the appropriate waiting period
stipulated in Article 47 has expired, provide support as follows:
— for ‘identical matching’, i.e. termsand conditionsthat include the iden-
tical derogating element but that otherwise conform to the Arrangement,
the matching Participant shall give notification of its intention to match
asearly aspos s ible, or
— for ‘non-identical matching’ prompted by the initial derogation, i.e. any
other element of the terms and conditions subject to the restrictions of
Article 29, the matching Participant shall notify a fresh derogation,
initiate a five calendar day prior notification and five calendar day
discussion procedure and await its completion. This period can run
concurrently with that of the prior notification and discussion procedure
initiated by the originally notifying Participant but cannot elapse before
the end of the applicable ten or twenty calendar day period referred to in
Article 47(a).
51. MATCHING OF PERMITTED EXCEPTIONS
A Participant intending to match a permitted exception shall follow the
proceduress et out below.
Unless the initiating Participant has sent notice that it has withdrawn its
intention of supporting terms and conditions which constitute a permitted
exception Participantscan, once the waiting period s tipulated in Articles
48 or 49 as appropriate has expired, provide support as follows:
— for ‘identical matching’, i.e. termsand conditionsthat include the iden-
tical element of the permitted exception but that otherwise conform to
the Arrangement, the matching Participant shall give notification of its
intention to match as early as possible, or
— for ‘non-identical matching’ prompted by the initial notification, i.e. any
other element of the terms and conditions subject to the restriction in
Article 29, the matching Participant shall introduce a fresh notification,
initiate a five calendar day prior notification and await itscompletion.2001D0076 — EN — 03.08.2002 — 001.001 — 21
(1) During the Transition Period for the application of the minimum premium benchmarks:
— the Participants, on a voluntary basis and with best endeavours, shall notify
promptly cases where the country credit risks are externalised/removed or limited/
excluded for the entire life of the debt repayment obligations,
— a body of experience of these cases is expected to be established and be subject to
review at the end of the Transition Period with the aim of establishing a list whichshall include e.g. unconditional third country guarantees, escrow accounts andasset-based financing. This body of experience may also give guidance on the
appropriate levelsof dis count.▼M1
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Thisperiod can run concurrently with that of the prior notification made
by the initiating Participant but cannot elapse before the end of the
applicable ten day period referred to in Articles48 or 49 asappropriate.
The Secretariat shall retain details of individual matching notifications in
respect of minimum premium benchmarks on the EEI.
52. MATCHING OF NON-CONFORMING TERMS AND CONDITIONS
NOT NOTIFIED
(a) A Participant intending to match alleged non-conforming termsand
conditionswhich have not been notified by another Participant, invol-
ving either an individual transaction or a credit line, shall make
reasonable efforts to determine whether such terms and conditions will
be offered. The matching Participant will be considered to have made
reasonable efforts, and thus be entitled to match, if it has informed the
other Participant by meansof ins tant communication, e.g. OLIS, of its
intention to match but received no confirmation within three working
days(exclus ive of the day of receipt) that the non-conforming terms
and conditionswill not apply;
(b) a credit line may be matched by an individual transaction or by a credit
line: in both cases, the matching offer shall expire no later than the
credit line being matched;
(c) a Participant intending to match another Participant'snon-conforming
termsand conditionss hall:
— in a case of ‘identical matching’, follow the procedures set out in
the first indent of Articles 50 or 51 as appropriate, and
— in a case of ‘non-identical matching’, follow the procedures set out
in the second indent of Articles 50 or 51 as appropriate.
53. MATCHING OF TERMS AND CONDITIONS OFFERED BY A NON-
PARTICIPANT
(a) Before matching non-conforming terms and conditions assumed to be
offered by a non-Participant, a Participant shall make every effort to
verify that these terms and conditions are officially supported. The
Participant shall inform all other Participants of the nature and outcome
of these efforts;
(b) a Participant which intendsto match non-conforming termsand condi-
tionsoffered by a non-Participant s hall follow the prior notification and
discussion procedure in Article 47(a).
Section3: Notificationproceduresfortrade-relatedaid
54. DEROGATIONS: PRIOR NOTIFICATION WITH DISCUSSION
(a) It isexpected that the Participantswill not break the No Derogations
Engagement set out in Article 40 nor otherwise depart from the rules
of the Arrangement. However, if in the most extreme circumstances a
Participant intendsto take the initiative to s upport termsand conditions
that derogate from the Arrangement, the Participant shall notify all the
other Participants of the terms and conditions it intends to support using
the proceduress et out in Articles55 and 56. Thisiswithout prejudice
to the procedures and circumstances set out in Article 40(b);
(b) if the initiating Participant moderatesor withdrawsitsintention to
support the notified non-conforming terms and conditions, it shall
immediately inform all other Participantsaccordingly.
55. PRIOR NOTIFICATION
(a) A Participant shall give prior notification if it intends to provide official
support for:
— trade-related untied aid with a value of two million SDRsor more,
and a concessionality level of less than 80 per cent,
— trade-related untied aid with a value of less than two million SDRs
and a grant element (asdefined by the DAC) of les sthan 50 per
cent,
— trade-related tied aid with a value of two million SDRsor more and
a concessionality level of less than 80 per cent, or
— trade-related tied aid with a value of less than two million SDRs and
a concessionality level of less than 50 per cent;
(b) prior notification shall be made at the latest thirty working days before
the bid closing or commitment date, whichever is the earlier;2001D0076 — EN — 03.08.2002 — 001.001 — 22
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(c) prior notification made in accordance with the third indent of Article
55(a) above which relatesto a project larger than SDR 50 million s hall
include additional project information explaining why the notifying
Participant considers the project eligible for tied aid under the key tests
set out in Article 35(b) above;
(d) if the initiating Participant moderatesor withdrawsitsintention to
support the notified non-conforming terms and conditions, it shall
immediately inform all other Participantsaccordingly;
(e) the provision of this Article shall apply to tied aid that forms part of an
associated financing package, as described in Article 33.
56. PROMPT NOTIFICATION
A Participant shall promptly notify all other Participants, i.e. within two
working daysof the commitment, if it providesofficial s upport for trade-
related tied aid with a value of either:
— two million SDRs or more and a concessionality level of 80 per cent or
more, or
— less than two million SDRs and a concessionality level of 50 per cent or
more.
A Participant shall also promptly notify all other Participants when an aid
protocol, credit line or similar agreement is signed.
57. EXEMPTIONS FOR UNTIED AID
Notification isnot required for untied aid financing with a value of either:
— two million SDRs or more and a concessionality level of 80 per cent or
more, or
— less than two million SDRs and a grant element (as defined by the
DAC) of 50 per cent or more.
58. EXEMPTIONS FOR TECHNICAL ASSISTANCE AND SMALL
PROJECTS
The notification proceduresin Articles55 and 56 do not apply to the
following:
— technical assistance: tied aid where the official development aid
component consists solely of technical cooperation that is less than
either three per cent of the total value of the transaction or one million
US dollars, whichever is lower, and
— small projects: capital projects of less than one million US dollars that
are funded entirely by development assistance grants.
59. TYING STATUS OF AID
A Participant may request additional information relevant to the tying status
of any form of aid in accordance with Article 31(c).
60. MATCHING OF PRIOR NOTIFICATIONS
A Participant intending to match prior notified tied aid shall follow the
proceduress et out below.
Unless the initiating Participant has sent notice that it has withdrawn its
intention to provide aid, Participantscan s upport the tied aid asfollows
once the thirty working daysperiod referred to in Article 55(b) hasexpired:
— for ‘identical matching’, i.e. termsand conditionsthat lead to the s ame
concessionality level, the matching Participant shall give notification of
itsintention to match asearly aspos s ible, or
— for ‘non-identical matching’, prompted by the initial notification, i.e.
any other non-conforming element of the terms subject to the restric-
tionsof Article 41, the matching Participant s hall initiate a five
calendar day prior notification period and await itscompletion. This
period can run concurrently with that of the prior notification and
discussion procedure initiated by the original notifying Participant but
it cannot elapse before the end of the applicable thirty working day
period referred to in Article 55(b).
61. MATCHING OF PROMPT NOTIFICATIONS
Prior notification need not be given if a Participant intendsto match terms
and conditionsthat were s ubject to a prompt notification in accordance with
Article 56.2001D0076 — EN — 03.08.2002 — 001.001 — 23
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Section4: Consultationproceduresfortrade-related aid
62. PURPOSE OF CONSULTATIONS
(a) A Participant seeking clarification about possible trade motivation for
tied aid may request that a full Aid Quality Assessment (detailed in
Annex VI) be supplied;
(b) furthermore, a Participant may request consultations with other Partici-
pants, in accordance with Article 63. These include face-to-face
consultations as outlined in Article 69 in order to discuss:
— first, whether an aid offer meets the requirements of Articles 34 and
35 above, and
— if necessary, whether an aid offer is justified even if the require-
mentsof Articles34 and 35 are not met.
63. SCOPE AND TIMING OF CONSULTATIONS
(a) During consultations, a Participant may request, among other items, the
following information:
— the assessment of a detailed feasibility study/project appraisal,
— whether there is a competing offer with non-concessional or aid
financing,
— the expectation of the project generating or saving foreign currency,
— whether there is cooperation with multilateral organisations such as
the World Bank,
— the presence of International Competitive Bidding (ICB), in parti-
cular if the donor country's supplier is the lowest evaluated bid,
— the environmental implications,
— any private sector participation, and— the timing of the notifications (e.g. six months prior to bid closing
or commitment date) of concessional or aid credits;
(b) the consultation shall be completed and the findings on both questions
in Article 62 notified by the Secretariat to all Participantsat leas t ten
working daysbefore the bid clos ing date or commitment date, which-
ever comes first. If there is disagreement among the consulting parties,
the Secretariat shall invite other Participants to express their views
within five working days. It shall report these views to the notifying
Participant, which should reconsider going forward if there appears to
be no substantial support for an aid offer.
64. CONSULTATION PROCEDURES FOR LARGE PROJECTS
If a Participant is not satisfied with the additional project information —
supplied in accordance with Article 55(c), it may request additional infor-
mation. A Participant may subsequently request a consultation in
accordance with Article 63. In any such consultation special weight shall
be given to the expected availability of financing at market or Arrangement
terms when considering the appropriateness of such aid.
65. OUTCOME OF CONSULTATIONS
(a) A donor which wishes to proceed with a project despite the lack of
substantial support shall provide prior notification of its intentions to
other Participants, no later than sixty calendar days after the completion
of the Consultation, i.e. acceptance of the Chairman's conclusion. The
donor shall also write a letter to the Secretary-General of the OECD
outlining the results of the consultations and explaining the overriding
non-trade related national interest that forces this action. The Partici-
pants expect that such an occurrence will be unusual and infrequent;
(b) the donor shall immediately notify the Participants that it has sent a
letter to the Secretary-General of the OECD, a copy of which shall be
included with the notification. Neither the donor nor any other Partici-
pant shall make a tied aid commitment until ten working days after this
notification to Participants has been issued. For projects for which
competing commercial offerswere identified during the cons ultation
process, the aforementioned ten working day period shall be extended
to fifteen days;
(c) the Secretariat shall monitor the progress and results of consultations.2001D0076 — EN — 03.08.2002 — 001.001 — 24
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Section 5: Information exchange procedures for export credits and
trade-relatedaid
66. CONTACT POINTS
All communications shall be made between the designated contact points in
each country by means of instant communication, e.g. OLIS, and shall be
treated in confidence.
67. SCOPE OF ENQUIRIES
(a) A Participant may ask another Participant about the attitude it takes
with respect to a third country, an institution in a third country or a
particular method of doing business;
(b) a Participant which hasreceived an application for official s upport may
address an enquiry to another Participant, giving the most favourable
credit termsand conditionsthat the enquiring Participant would be
willing to support;
(c) a Participant which hasreceived allegationsthat another Participant has
offered official support that derogates from the Arrangement may
address an enquiry to that Participant, stating the details of any such
allegation;
(d) if an enquiry is made to more than one Participant, it shall contain a list
of addressees;
(e) a copy of all enquiries shall be sent to the Secretariat.
68. SCOPE OF RESPONSES
(a) The Participant to which an enquiry is addressed shall respond within
seven calendar days and provide as much information as possible. The
reply shall include the best indication that the Participant can give of
the decision it is likely to take. If necessary, the full reply shall follow
as soon as possible. Copies shall be sent to the other addressees of the
enquiry and to the Secretariat;
(b) if an answer to an enquiry subsequently becomes invalid for any reason,
because for example:
— an application hasbeen made, changed or withdrawn, or
— other termsare being cons idered,
a reply shall be made without delay and copied to all other addressees
of the enquiry and to the Secretariat.
69. FACE-TO-FACE CONSULTATIONS
(a) The Participants agree to respond favourably to requests for early face-
to-face consultations, i.e. within five working days, particularly when
existing exchange of information procedures may be perceived to be
inadequate;
(b) all Participants shall be advised of any request for face-to-face consulta-
tions. The consultations shall take place as soon as possible after the
expiry of the five working day period;
(c) the Participant requesting consultation shall chair and be responsible for
finding a mutually agreeable time and place for the meeting. Other
Participantss hall be informed accordingly;
(d) in cases where the transaction consulted upon has already taken place,
the Chairman will be chosen by the parties involved. If the consultation
doesnot take place at OECD headquartersin Paris , the Participant
requesting the consultation shall provide secretariat services, including
interpretation if necessary;
(e) the Secretariat shall promptly circulate the outcome of the consultation
to all Participants. If the Secretariat is unable to attend a meeting held
away from OECD headquarters, the Chairman shall ensure that it is
informed of the outcome;
(f) the Chairman shall coordinate with the Secretariat on any necessary
follow-up action;
(g) an information exchange or face-to-face consultations may lead to a
common line.
70. COMMON LINES
A common line isan unders tanding between the Participantsto agree the
basis for official support in a given transaction or in specific circumstances.2001D0076 — EN — 03.08.2002 — 001.001 — 25
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It may contain termsand conditionsthat are more or les sfavourable than
termsand conditionsallowed under the Arrangement. The rulesof an
agreed common line supersede the rules of the Arrangement only for the
transaction or in the circumstances specified in the common line.
71. PROCEDURES AND FORMAT OF COMMON LINES
(a) Common line proposals are addressed only to the Secretariat. A
proposal for a common line shall be sent to all Participants and, where
tied aid isinvolved, all DAC contact pointsby the Secretariat. The
identity of the initiator isnot revealed on the Common Line Regis ter
on the Bulletin Board of the OLIS. However, the Secretariat may orally
reveal the identity of the initiator to a Participant or DAC member on
demand. The Secretariat shall keep a record of such requests;
(b) the common line proposal shall be dated and shall be in the following
format:
— reference number, followed by ‘Common Line’,
— name of the importing country and buyer,— name or description of the project as precise as possible to clearly
identify the project,
— termsand conditionsfores een by the initiating country,— common line proposal,— nationality and namesof known competing bidders ,— commercial and financial bid closing date and tender number to the
extent it isknown, and
— other relevant information, including reasons for proposing the
common line, availability of studies of the project and/or special
circumstances;
(c) a common line proposal put forward in accordance with Article 34(b)(4)
shall be addressed to the Secretariat and copied to other Participants.
The Participant making the common line proposal shall provide a full
explanation of the reasons why it considers that the classification of a
country should differ from the procedure set out in Article 34(b).
72. RESPONSES TO COMMON LINE PROPOSALS
(a) Responses shall be made within twenty calendar days, although the
Participants are encouraged to respond to a common line proposal as
quickly as possible;
(b) a response may be a request for additional information, acceptance,
rejection, a proposal for modification of the common line or an alterna-
tive common line proposal;
(c) a Participant which advises that it has no position because it has not
been approached by an exporter, or by the authoritiesin the recipient
country in case of aid for the project, shall be deemed to have accepted
the common line proposal. If this Participant is subsequently
approached after the common line hasgone into effect, it may apply
the procedures in Article 77(a) to (d) if it wishes to extend softer terms
and conditions than those stipulated in the common line.
73. ACCEPTANCE OF COMMON LINES
(a) After a period of twenty calendar days, the Secretariat shall inform all
Participants of the status of the common line proposal. If not all Parti-
cipantshave accepted the common line, but no Participant hasrejected
it, the proposal shall be left open for a further period of eight calendar
days;
(b) after thisfurther period, a Participant which hasnot explicitly rejected
the common line proposal shall be deemed to have accepted the
common line. Nevertheless, a Participant, including the initiating Parti-
cipant, may make itsacceptance of the common line conditional on the
explicit acceptance by one or more Participants;
(c) if a Participant doesnot accept one or more elementsof a common line
it implicitly acceptsall other elementsof the common line. It isunder-
stood that such a partial acceptance may lead other Participants to
change their attitude towardsa propos ed common line. All Participants
are free to offer or match termsand conditionsnot covered by a
common line;
(d) a common line which has not been accepted may be reconsidered using
the procedures in Articles 71 and 72. In these circumstances, the Parti-
cipantsare not bound by their original decis ion.2001D0076 — EN — 03.08.2002 — 001.001 — 26
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74. DISAGREEMENT ON COMMON LINES
If the initiating Participant and a Participant which haspropos ed a modifi-
cation or alternative cannot agree on a common line within the additional
eight calendar day period, thisperiod can be extended by their mutual
consent. The Secretariat shall inform all Participants of any such extension.
75. EFFECTIVE DATE OF COMMON LINE
The Secretariat shall inform all Participants either that the common line will
go into effect or that it hasbeen rejected; the common line will take effect
three calendar daysafter thisannouncement. The Secretariat s hall make
available on OLIS a permanently updated record of all common lineswhich
have been agreed or are undecided.
76. VALIDITY OF COMMON LINES
(a) A common line, once agreed, shall be valid for a period of two years
from itseffective date, unles sthe Secretariat isinformed that it isno
longer of interest, and that this is accepted by all Participants. A
common line shall remain valid for a further two year period if a Parti-
cipant seeks an extension within fourteen calendar days of the original
date of expiry. Subsequent extensions may be agreed through the same
procedure. A common line agreed in accordance with Article 34(b)(4)
shall be valid until World Bank data for the following year is available;
(b) the Secretariat shall monitor the status of common lines and shall keep
the Participantsinformed accordingly, through the maintenance of the
listing ‘The Status of Valid Common Lines’ on OLIS. Accordingly,
the Secretariat, inter alia, shall:
— add new common lineswhen thes e have been accepted by the Parti-
cipants,
— update the expiry date when a Participant requests an extension,
— delete common lineswhich have expired, and— issue, on a quarterly basis, a list of common lines due to expire in
the following quarter.
77. DEVIATION FROM A COMMON LINE
(a) A Participant which intendsto s upport termsand conditionsthat are
more favourable than those agreed in the common line shall notify all
Participants and the Secretariat at least sixty calendar days before
making any commitment;
(b) this notification shall include an explanation of the reason why it
intendsto s upport termsand conditionsthat are more favourable than
the common line, aswell asa jus tification of how they will not res ult
in a purchasing decision (possibly including the outcome of an Interna-
tional Competitive Bid (ICB) procedure) which isinfluenced by the
availability of aid;
(c) if a Participant interested in the specific transaction so requests, the
Secretariat shall organise a face-to-face consultation;
(d) unless an alternative common line is established at the face-to-face
consultation, the Participants shall refrain from making a commitment
until twenty-eight calendar daysafter the face-to-face cons ultation, or
sixty calendar days after notification, whichever is the later;
(e) a Participant can reserve the right to match an offer which is more
favourable than that agreed to in the common line in accordance with
Articles50, 53, 60 and 61.
Section 6: Operational provisions for the communication of minimum
interestrates(CIRRs)
78. COMMUNICATION OF MINIMUM INTEREST RATES
(a) CIRRsfor currenciesthat are determined according to the provis ionsof
Article 16 shall be sent by means of instant communication at least
monthly to the Secretariat for circulation to all Participants;
(b) such notification shall reach the Secretariat no later than five days after
the end of each month covered by thisinformation. The Secretariat s hall
then inform immediately all Participantsof the applicable rates .2001D0076 — EN — 03.08.2002 — 001.001 — 27
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79. EFFECTIVE DATE FOR APPLICATION OF INTEREST RATES
Any changes in interest rates shall enter into effect on the fifteenth day after
the end of each month.
80. IMMEDIATE CHANGES IN INTEREST RATES
When market developmentsrequire the notification of an amendment to a
CIRR during the course of a month, the amended rate shall be implemented
ten daysafter notification of thisamendment hasbeen received by the
Secretariat.
Section 7: Operational provisions for the exchange of information for
premium
81. ELECTRONIC EXCHANGE OF INFORMATION FOR PREMIUM (EEI)
The Participantss hall provide the information outlined in Annex VII to
facilitate the implementation of the provisions of the Arrangement in rela-
tion to the minimum premium benchmarks.
Section8: Reviews
82. ANNUAL REVIEW
(a) The Participants shall review, at least annually, the functioning of the
Arrangement. The review will normally take place in the second quarter
of each year. In the review, the Participantss hall examine, inter alia,
notification procedures, derogations, implementation and operation of
the DDR system, rules and procedures on tied aid, questions of
matching, prior commitments, practices on credits for agricultural
commodities and possibilities of wider participation in the Arrange-
ment;
(b) this review shall be based on information of the Participants' experience
and on their suggestions for improving the operation and efficacy of the
Arrangement. The Participantss hall take into account the objectivesof
the Arrangement and the prevailing economic and monetary situation.
The information and suggestions that Participants wish to put forward
for thisreview s hall reach the Secretariat no later than forty-five days
before the date of review.
83. REVIEW OF MINIMUM INTEREST RATES
(a) The Participants shall periodically review the system for setting CIRRs
in order to ensure that the notified rates reflect current market condi-
tions and meet the aims underlying the establishment of the rates in
operation. Such reviews shall also cover the margin to be added when
these rates are applied;
(b) a Participant may submit to the Chairman of the Participants a substan-
tiated request for an extraordinary review in case this Participant
considers that the CIRR for one or more than one currency no longer
reflect current market conditions.
84. REVIEW OF MINIMUM PREMIUM BENCHMARKS AND RELATED
ISSUES
The Participants shall regularly, and at least annually, monitor and review
all aspects of the premium rules and procedures. This shall include:
— the methodology for the Country Risk Model to review its validity in
the light of experience,
— the premium benchmarks to adjust them over time to ensure that they
remain an accurate measure of risk, taking into account the three
PFT's: the cash flow and accruals approaches and, where appropriate,
private market indicators,
— the system of related conditions, and— the body of experience of the circumstances under which discounts to
the minimum premium benchmarksmay be applicable and the appro-
priate level of such discounts. To assist the review the Secretariat shall
provide reportsof all notifications .2001D0076 — EN — 03.08.2002 — 001.001 — 28
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CHAPTER V
FUTUREWORK
85. GLOBAL UNTYING
The Participantsconfirm their res olve to cooperate with the Working Party
on Financial Aspects of Development Assistance (DAC/FA) to develop
targetsfor untying aid and more precis ely define untied and tied aid. They
will follow closely the DAC/FA's progress in this domain. They agree to
invite the DAC/FA to consider how to strengthen discipline and transpar-
ency, asfollows :
(a) discipline: the Participants will engage urgently in a discussion with
the DAC/FA to agree on targetsfor untying aid;
(b) transparency: the modalities of the following measures for improving
transparency need to be worked out in conjunction with DAC/FA:
— notification of specified untied aid at the latest before commence-
ment of the bidding procedure, or within, e.g. forty-five calendar
days, of the date of signing the financial contract, whichever is
the earlier, giving reasonable time and project information for
bidsto be prepared within tender deadlines , and
— immediate ex-post notification of the name and nationality of the
company being awarded the contract of specific untied aid.
The Secretariat shall create and update a register of such notifications
on OLIS. The above information shall be unclassified.
86. MARKET WINDOWS
The Participants undertake to investigate further both the issue of transpar-
ency and the definition of market window operationsin order to prevent
distortion of competition.
87. SECTORS
(a) The Participantsundertook to s tart negotiationsin 1994 on complemen-
tary guidelineson Export Creditson agricultural products . An Experts
Group was established and held its first meeting in April 1995;
(b) the need for further or complementary guidelinesin the Arrangement
for Steel Plant and Equipment will be considered when the outcome of
the negotiationsin the Multilateral Steel Agreement context isknown.
88. DIFFERENCES OF INTERPRETATION
It has not proved possible to reach total agreement on the definition of offi-
cial support in the light of differences between long-established national
export credit systems. It is understood that efforts will be made to resolve
differencesof interpretation asa matter of urgency. Until agreement is
reached, the current wording in the Arrangement doesnot prejudice pres ent
interpretations.2001D0076 — EN — 03.08.2002 — 001.001 — 29
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ANNEX I
SECTOR UNDERSTANDING ON EXPORT CREDITS FOR SHIPS
CHAPTER I
SCOPEOFTHESECTORUNDERSTANDING
1.Participation
The Participants to the Sector Understanding are: Australia, the European
Community (which includes the following countries: Austria, Belgium,
Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg,
the Netherlands, Portugal, Spain, Sweden, and the United Kingdom), Japan,
Korea, Norway, Poland and the Slovak Republic.
2.Scopeofapplication
This Sector Understanding, which complements the Arrangement, sets out
specific guidelines for officially supported export credits relating to export
contractsof:
2.1. Any new sea-going vessel of 100 gt and above used for the transportation
of goods or persons, or for the performance of a specialised service (for
example, fishing vessels, fish factory ships, ice breakers and as dredgers,
that present in a permanent way by their means of propulsion and direction
(steering) all the characteristics of self-navigability in the high sea), tugs of
365 kW and over and to unfinished shells of ships that are afloat and
mobile. The Sector Understanding does not cover military vessels. Floating
docksand mobile offs hore unitsare not covered by the Sector Under-
standing, but should problems arise in connection with export credits for
such structures, the Participants to the Sector Understanding (hereinafter
the Participants), after consideration of substantiated requests by any Parti-
cipant, may decide that they shall be covered.
2.2. Any conversion of a ship. Ship conversion means any conversion of sea-
going vessels of more than 1 000 gt on condition that conversion operations
entail radical alterationsto the cargo plan, the hull or the propuls ion
system.
2.3. (i) Although hovercraft-type vessels are not included in the Sector Under-
standing, Participants are allowed to grant export credits for hovercraft
vessels on equivalent conditions to those prevailing in the Sector
Understanding. They commit themselves to apply this possibility
moderately and not to grant such credit conditions to hovercraft
vessels in cases where it is established that no competition is offered
under the conditionsof the Sector Unders tanding.
(ii) In the Sector Understanding, the term ‘hovercraft’ is defined as
follows: an amphibious vehicle of at least 100 tons designed to be
supported wholly by air expelled from the vehicle forming a plenum
contained within a flexible skirt around the periphery of the vehicle
and the ground or water surface beneath the vehicle, and capable of
being propelled and controlled by aircrewsor ducted air from fansor
similar devices.
(iii) It isunders tood that the granting of export creditsat conditions
equivalent to those prevailing in this Sector Understanding should be
limited to those hovercraft vessels used on maritime routes and non-
land routes, except for reaching terminal facilities standing at a
maximum distance of one kilometre from the water.
CHAPTER II
PROVISIONSFOREXPORTCREDITSANDTIEDAID
3.Maximumrepaymentterm
The maximum repayment term, irrespective of country classification, is 12
yearsafter delivery.
4.Cashpayments
The Participants shall require a minimum cash payment of 20 % of the
contract price by delivery.2001D0076 — EN — 03.08.2002 — 001.001 — 30
▼M1
5.Repaymentofprincipal
The principal sum of an export credit shall be repaid in equal instalments at
regular intervals of normally six months and a maximum of 12 months.
6.Minimumpremium
The provisions of the Arrangement in relation to minimum premium bench-
marks shall not be applied until such provisions have been further reviewed
by the Participantsto thisSector Unders tanding.
7.Aid
Any Participant desiring to provide aid must, in addition to the provisions of
the Arrangement, confirm that the ship is not operated under an open registry
during the repayment term and that appropriate assurance has been obtained
that the ultimate owner resides in the receiving country, is not a non-opera-
tional subsidiary of a foreign interest and has undertaken not to sell the ship
without hisgovernment'sapproval.
CHAPTER III
PROCEDURES
8.Notification
For the purpose of transparency each Participant shall, in addition to the
provisions of the Arrangement and the IBRD/Berne Union/OECD Creditor
Reporting System, provide annually information on its system for the provi-
sion of official support and of the means of implementation of this Sector
Understanding, including the schemes in force.
9.Review
(a) The Sector Understanding shall be reviewed annually or upon request by
any Participant within the context of the OECD Working Party on Ship-
building, and a report made to the Participantsto the Arrangement.
(b) To facilitate coherence and consistency between the Arrangement and
this Sector Understanding and taking into account the nature of the ship-
building industry, the Participants to this Sector Understanding and to the
Arrangement will consult and coordinate as appropriate.
(c) Upon a decision by the Participants to the Arrangement to change the
Arrangement, the Participantsto thisSector Unders tanding (the Partici-
pants) will examine such a decision and consider its relevance to thisSector Understanding. Pending such consideration the amendments to
the Arrangement will not apply to this Sector Understanding. In case
the Participantscan accept the amendmentsto the Arrangement they
shall report this in writing to the Participants to the Arrangement. In
case the Participants cannot accept the amendments to the Arrangement
asfar astheir application to s hipbuilding isconcerned they s hall inform
the Participantsto the Arrangement of their objectionsand enter into
consultations with them with a view to seeking a resolution of the issues.
In case no agreement can be reached between the two groups, the views
of the Participantsasregardsthe application of the amendmentsto s hip-
building shall prevail.
(d) Upon entry into force of the ‘Agreement Respecting Normal Competitive
Conditionsin the Commercial Shipbuilding and Repair Indus try’ this
Sector Understanding shall cease to apply for those Participants who are
legally required to apply the 1994 Understanding on Export Credits for
Ships(C/WP6(94)6). Such Participantss hall work for an immediate
review to bring the 1994 Understanding in accordance with this Sector
Understanding.2001D0076 — EN — 03.08.2002 — 001.001 — 31
▼M1
Attachment
COMMITMENTS FOR FUTURE WORK
In addition to the future work of the Arrangement, the Participantsto thisSector
Understanding agree:
(a) to develop an illustrative list of types of ships which are generally consid-
ered non-commercially viable, taking into account the disciplines on tied aid
set out in the Arrangement;
(b) to review the provisions of the Arrangement in relation to minimum
premium benchmarkswith a view to incorporating them into thisSector
Understanding;
(c) to discuss, subject to the developments in relevant international negotiations,
the inclusion of other disciplines on minimum interest rates including a
special CIRR and floating rates;
(d) to discuss the applicability of yearly instalments of repayment of principal.2001D0076 — EN — 03.08.2002 — 001.001 — 32
▼B
ANNEX II
SECTOR UNDERSTANDING ON EXPORT CREDITS FOR NUCLEAR
POWER PLANT
CHAPTER I
SCOPEOFTHESECTORUNDERSTANDING
1.ScopeofApplication
(a) ThisSector Unders tanding, which complementsthe Arrangement:
— sets out the special guidelines which apply to officially supported
export creditsrelating to contractsfor the export of complete nuclear
power stations or parts thereof, comprising all components, equip-
ment, materials and services, including the training of personnel,
directly required for the construction and commissioning of such
nuclear power stations. It also sets out the terms which apply to
support for nuclear fuel,
— does not apply to items for which the buyer is usually responsible, in
particular, costs associated with land development, roads, construc-
tion village, power lines, switchyard and water supply, as well as
costs arising in the buyer's country from official approval procedures
(e.g. site permit, construction permit, fuel loading permit);
(b) the terms of the Arrangement rather than the Sector Understanding shall
apply to official support provided for the decommissioning of nuclear
power plant. Decommissioning is defined as the closing down, or
dismantling of a nuclear power plant. The common line procedures set
out in Articles 70 to 77 of the Arrangement provide the possibility to
restrict or extend repayment terms.
2.Review
The Participants shall review the provisions of the Sector Understanding
annually.
CHAPTER II
PROVISIONSFOREXPORTCREDITSANDTIEDAID
3.MaximumRepaymentTerm
The maximum repayment term, irrespective of the country classification, is
fifteen years.
4.MinimumInterestRates
(a) A Participant providing official financing support through direct finan-
cing, refinancing or interest rate support shall apply minimum interest
rates; the Participant shall apply the relevant Special Commercial Interest
Reference Rate (SCIRR). Where the fixed SCIRR commitment islimited
initially to a maximum period which doesnot exceed fifteen years
starting from the date of contract award, any official support for the
remaining period of the loan shall also be limited to guarantees or
interest rate support at the relevant SCIRR prevailing at the time of
roll-over;
(b) where official financing support is provided for equipment for the partial
supply of nuclear power plant for which the supplier has no responsi-
bility for commissioning, the minimum interest rate shall be the SCIRR
in accordance with Article 3 of thisSector Unders tanding. Alternatively,
a Participant may offer the relevant CIRR in accordance with Article 16
of the Arrangement, provided that the maximum period from the date of
contract award to the date of final repayment doesnot exceed ten years .
5.ConstructionofSCIRRs
SCIRRs shall be set at a fixed margin of seventy-five basis points above the
CIRR for the currency in question, except that for the Japanese yen, the
margin shall be 40 basis points. For those currencies which have more than
one CIRR rate, in accordance with the first indent of Article 16(b) of the
Arrangement, the CIRR for the longest term shall be used for constructing
the SCIRR.2001D0076 — EN — 03.08.2002 — 001.001 — 33
▼B
6.LocalCostsandCapitalisationofInterest
The provisions of Article 25 of the Arrangement do not apply where official
financing support is provided on the basis of the SCIRR. Official financing
support at rates other than SCIRRs for both local costs and capitalisation of
interest accruing before the starting point taken together shall not cover an
amount exceeding 15 per cent of the export value.
7.Official SupportforNuclearFuel
(a) The maximum repayment term for the initial fuel load shall not exceed
four yearsfrom delivery. A Participant providing official financing
support for the initial fuel load shall apply minimum interest rates; the
Participant shall apply the relevant CIRR. The initial fuel load shall
consist of no more than the initially installed nuclear core, plus two
subsequent reloads, together consisting of up to two-thirds of a nuclear
core;
(b) the maximum repayment term for subsequent reloads of nuclear fuel is
six months. If in exceptional circumstances longer terms, but in any
case not exceeding two years, are considered appropriate the procedures
set out in Article 47 shall apply. A Participant providing official finan-
cing support for the subsequent reload of nuclear fuel shall apply
minimum interest rates; the Participant shall apply the relevant CIRR;
(c) official support for the separate provision of Uranium Enrichment
Services shall not be provided on terms more favourable than those
which apply to nuclear fuel;
(d) reprocessing and spent fuel management (including waste disposal) shall
be paid for on a cash basis;
(e) the Participants shall not provide free nuclear fuel or services.
8.Aid
The Participants shall not provide aid support, unless this is in the form of an
untied grant.
CHAPTER III
PROCEDURES
9.Prior Consultation
Recognising the advantages which can accrue if a common attitude towards
termscan be achieved for nuclear power plant, the Participantsagree to
engage in prior consultation in all cases where there is an intention to
provide official support.
10.Prior Notification
(a) The Participant initiating a prior consultation shall notify all other Parti-
cipants at least ten days before taking a final decision of the terms it
intends to support specifying, inter alia, the following details:
— cash payments,
— repayment term (including the starting point of credit, frequency of
instalments for repaying principal, and whether these instalments
will be equal in amount),
— currency and value rating of the contract, in accordance with para-
graph 7 of Annex IV,
— interest rate,
— support for local costs, including the total amount of local costs
expressed as a percentage of the export contract value, the terms of
payment, the nature of the support to be given,
— the portion of the project to be financed, with separate information
for initial fuel load, where appropriate,
— any other relevant information including references to related cases;
(b) other Participants shall not take a final decision on the terms it will
support during the ten day period specified in subparagraph (a) above
but shall within five days exchange information with all other Partici-
pantsin the cons ultation on the appropriate credit termsfor the
transaction with the objective of achieving a common attitude on such
terms;
(c) if a common attitude isnot achieved through thes e meanswithin the ten
day period after receipt of the initial notification the final decision of
each Participant in the consultation shall be delayed for an additional2001D0076 — EN — 03.08.2002 — 001.001 — 34
▼B
ten daysduring which period further effortsto achieve a common atti-
tude shall be made at face-to-face consultations.2001D0076 — EN — 03.08.2002 — 001.001 — 35
▼B
ANNEX III
SECTOR UNDERSTANDING ON EXPORT CREDITS FOR CIVIL
AIRCRAFT
PART 1
NEWLARGEAIRCRAFTANDENGINESFORSUCHAIRCRAFT
CHAPTER I
SCOPE
1.FormandScopeofApplication
Part 1 of the Sector Understanding, which complements the Arrangement,
sets out the special guidelines which apply to officially supported export
credits relating to the sale or lease of new large civil aircraft, listed in
Appendix I, and the engines installed in such aircraft. The terms of Chapter
1 also apply to engines and spare parts when contemplated as part of the
original aircraft order, subject to the provisions of Article 29 of Part 3 of
this Sector Understanding. It does not apply to flight simulators, which are
subject to the terms of the Arrangement.
2.Objective
The objective of this Part of the Sector Understanding is to establish a
balanced equilibrium that on all markets:
— equalises competitive financial conditions between the Participants,
— neutralises finance among the Participants as a factor in the choice among
competing aircraft, and
— avoidsdis tortionsof competition.
CHAPTER II
PROVISIONSFOREXPORTCREDITSANDAID
3.CashPayments
(a) The Participants shall require a minimum cash payment of 15 per cent
of the total price of the aircraft, which includesthe price of the
airframe, any installed engines plus the spare engines and spare parts
to the extent referred to in Article 29 of Part 3 of thisSector Under-
standing;
(b) official support for such cash payments can only take the form of insur-
ance and guarantees, i.e. pure cover, against the usual pre-credit risks.
4.MaximumRepaymentTerm
The maximum repayment term istwelve years .
5.EligibleCurrencies
The currencieswhich are eligible for official financing s upport, asdefined
in the Introduction to the Arrangement, are US Dollars, German Marks,
French Francs, UK Pounds, euro and Dutch Guilders.
6.MinimumInterestRates
(a) The Participants providing official financing support, which shall not
exceed 85 per cent of the total price of the aircraft referred to in subpar-
agraph (a) of Article 3 above, shall apply minimum interest rates up to
a maximum of 62,5 per cent of the total price of the aircraft asfollows :
— on repayment termsup to and including ten years— TB10 + 120
basis points,
— on repayment termsof over ten to twelve years— TB10 + 175
basis points,
— where TB10 meansthe ten year government bond yield for the rele-
vant currency (except the euro at the constant maturity averaged
over the previous two calendar weeks. In the case of the euro,
TB10 meansthe long-term ECU bond yield aspublis hed by the
Luxembourg Stock Exchange, long-term bond series, averaged over2001D0076 — EN — 03.08.2002 — 001.001 — 36
▼B
the previous two calendar weeks minus 20 basis points. For all
currencies a margin as specified above shall be applied;
(b) the maximum percentage of the aircraft total price that may be financed
at the fixed minimum interest rates specified in subparagraph (a) above
shall be limited to 62,5 per cent when repayment of the loan is spread
over the entire life of the financing and 42,5 per cent when repayment
of the loan is spread over the later maturities. The Participants are free
to use either repayment approach, subject to the ceiling applicable to
that pattern. A Participant offering such a tranche shall notify the other
Participantsof the amount, the interes t rate, the date on which the
interest rate is set, the validity period for the interest rate and the
pattern of repayment. The Participantss hall review the two ceilingsat
the time of each review in accordance with Article 17 to examine
whether one ceiling providesmore advantagesthan the other with a
view to adjusting the more advantageous so that a balance is more
evenly struck;
(c) subject to the 85 per cent threshold specified in subparagraph (a) above,
1. the Participantsmay additionally provide official financing s upport
in a manner comparable with that provided by the Private Export
Funding Corporation (PEFCO). Fortnightly information on PEFCO's
borrowing costs and applicable lending rates, exclusive of official
guarantee fees, on fixed rate finance for immediate disbursements
over a series of dates, for contract offers and for bid offers, shall be
communicated to the other Participants on a regular basis. A Partici-
pant offering such a tranche shall notify the other Participants of the
amount, the interest rate, the date on which the interest rate is set,
the validity period for the interest rate and the pattern of repayments.
Any Participant matching such financing offered by another Partici-
pant shall match it in all of its terms and conditions other than the
validity period of offersof commitment ass et out in Article 8 below,
2. these rates as notified shall be applied by all Participants as long as
the twenty-four month disbursement interest rate does not exceed
225 basis points above TB10. In the event that the twenty-four
month rate exceeds 225 basis points, the Participants are free to
apply the rate of 225 basis points for the twenty-four month disbur-
sement and all the corresponding rates and shall consult immediately
with a view to finding a permanent solution;
(d) the minimum interest rates are inclusive of credit insurance premium
and guarantee fees. However, commitment and management fees are
not included in the interest rate.
7.InterestRateAdjustments
The minimum interest rates set out in Article 6 above shall be reviewed
every two weeks. If the average of the government bond yield for the rele-
vant currency at constant maturity, or the long-term euro bond yield, differs
by 10 basis points or more at the end of any two week period, such
minimum interest rates will be adjusted by the same basis points difference
noted above and the recalculated rate rounded to the nearest 5 basis points.
8.ValidityPeriodforExportCredits/InterestRateOffers
The duration of minimum interest rate offers set in accordance with Article
6 shall not exceed three months.
9.DeterminationofInterestRateOffersandSelection ofInterestRates
(a) The Participantsmay provide official financing s upport in accordance
with Articles6 and 7 above at an interes t rate applying on the date an
interest rate offer is made for the relevant aircraft, provided that the
offer isaccepted within itsvalidity period in accordance with Article
8. If the interest rate offer is not so accepted, further interest rate offers
may be made up to, but no later than, the date of delivery of the rele-
vant aircraft;
(b) an interest rate offer may be accepted and the interest rate selected at
any time between contract signature and the date of delivery of the rele-
vant aircraft. The rate selected by the borrower shall be irrevocable.
10.PureCoverSupport
The Participants may provide official support by way of guarantee or insur-
ance only, i. e. pure cover, subject to the 85 per cent threshold specified in
Article 6(a) above. Any Participant providing such support shall notify other2001D0076 — EN — 03.08.2002 — 001.001 — 37
▼B
Participantsof the amount, term, currency and pattern of repaymentsand
interest rates.
11.CompetitionReference Point
In the event of officially supported competition, aircraft that are in the list
of large civil aircraft in Appendix 1 to thisSector Unders tanding and that
compete with other aircraft may benefit from the same credit terms and
conditions.
12.SecurityfortheRepaymentRisk
The Participantsmay decide upon the s ecurity which they deem acceptable
to secure the repayment risk without reference to other Participants.
However, they agree to provide details of such security if requested by other
Participants, or when deemed appropriate.
13.ModelChanges
The Participantsagree that when a fixed interes t rate offer hasbeen made or
hasbeen concluded on one type of aircraft, the termscontained therein
cannot be transferred to another type bearing a different model designation.
14.Leases
The Participantsmay, s ubject to the other termsof Part 1 of the Sector
Understanding, provide support for a financial lease on the same basis as a
contract of sale.
15.Aid
The Participants shall not provide aid support, unless this is in the form of
an untied grant. However, Participants shall consider sympathetically any
requests for a common line for tied aid for humanitarian purposes.
CHAPTER III
PROCEDURES
16.Prior Notification,MatchingandInformationExchange
The proceduresfor prior notification, matching and information exchange
set out in the Arrangement shall apply to this Part of the Sector Under-
standing. Furthermore, the Participants may request a consultation if there
isany reas on to believe that another Participant isoffering an officially
supported credit on terms and conditions that do not conform to the Sector
Understanding. The consultation shall be held within ten days, but otherwise
follow the proceduress et out in Article 69 of the Arrangement.
17.Review
The Participants shall review the procedures and provisions of this Sector
Understanding annually to bring them closer to market conditions.
However, if market conditionsor cus tomary financing practiceschange
considerably, a review may be requested at any time.
PART 2
ALLNEWAIRCRAFTEXCEPTLARGEAIRCRAFT
CHAPTER IV
SCOPE
18.FormandScopeofApplication
Part 2 of the Sector Understanding, which complements the Arrangement,
sets out the special guidelines which apply to officially supported export
credits for the sale or lease of new aircraft not covered by Part 1 of this
Sector Understanding. It does not apply to hovercraft nor to flight simula-
torswhich are s ubject to the termsof the Arrangement.
19.BestEndeavours
The provisions of this Chapter represent the most generous terms that Parti-
cipants may offer when providing official support. The Participants shall,2001D0076 — EN — 03.08.2002 — 001.001 — 38
▼B
however, continue to respect customary market terms for different types of
aircraft and shall do everything in their power to prevent these terms from
being eroded.
20.CategoriesofAircraft
The Participantshave agreed on the following categoris ation of aircraft:
— Category A: turbine powered aircraft, including helicopters, (e.g. turbo
jet, turbo prop and turbo fan aircraft) with generally
between thirty to seventy seats,
— Category B: other turbine powered aircraft, including helicopters,— Category C: other aircraft, including helicopters.
An illustrative list of aircraft in categories A and B is set out in Appendix I.
CHAPTER V
PROVISIONSFOREXPORTCREDITSANDAID
21.MaximumRepaymentTerm
The maximum repayment term variesaccording to the aircraft categoris a-
tion which shall be determined by the criteria set out in Article 20 above:
(a) for category A aircraft the maximum repayment term isten years ;
(b) for category B aircraft the maximum repayment term is seven years;
(c) for category C aircraft the maximum repayment term isfive years .
22.MinimumInterestRates
The Participants providing official financing support shall apply minimum
interest rates; the Participants shall apply the relevant CIRR set out in
Article 15 of the Arrangement.
23.InsurancePremium andGuaranteeFees
The Participants shall not waive in part or in total, insurance premium or
guarantee fees.
24.Aid
The Participants shall not provide aid support, unless this is in the form of
an untied grant. However, Participants shall consider sympathetically any
requests for a common line for tied aid for humanitarian purposes.
CHAPTER VI
PROCEDURES
25.Prior Notification,MatchingandInformationExchange
In the event of officially supported competition for a sale or lease, aircraft
competing with those from another category or with those covered by other
Parts of the Sector Understanding shall, for that specific sale or lease, be
able to benefit from the same terms and conditions as those other aircraft.
The proceduresfor prior notification, matching and information exchange
set out in the Arrangement shall apply to this Part of the Sector Under-
standing. Furthermore, the Participants may request a consultation if there
isany reas on to believe that another Participant isoffering an officially
supported credit on terms that do not conform to the Sector Understanding.
The consultation shall be held within ten days, but otherwise follow the
proceduress et out in Article 69 of the Arrangement.
26.Review
The Participants shall review the procedures and provisions of this Sector
Understanding annually in order to bring them closer to market conditions.
However, if market conditionsor cus tomary financing practiceschange
considerably, a review may be requested at any time.2001D0076 — EN — 03.08.2002 — 001.001 — 39
▼B
PART 3
USEDAIRCRAFT, SPARE ENGINES, SPARE PARTS, MAINTENANCE
ANDSERVICECONTRACTS
CHAPTER VII
SCOPE
27.FormandScopeofApplication
Part 3 of the Sector Understanding, which complements the Arrangement,
sets out the special guidelines which apply to officially supported export
credits relating to the sale or lease of used aircraft; and of spare engines,
spare parts, maintenance and service contracts in conjunction with both
new and used aircraft. It does not apply to hovercraft nor to flight simula-
tors, which are subject to the terms of the Arrangement. The relevant
provisions of Parts 1 and 2 of the Sector Understanding apply except as
follows.
28.Usedaircraft
The Participants shall not support credit terms more favourable than those
set out in the Sector Understanding for new aircraft. The following rules
apply specifically to used aircraft.
(a)
Age of aircraft
(years)Normal Maximum Repayment Term
Large aircraft Category A Category B Category C
11 08 6 5
29765
38654
47654
5-1 0 6 6 5 4
Over 10 5 5 4 3
These terms shall be reviewed if the maximum repayment terms for
new aircraft are changed.
(b) the Participants providing official financing support shall apply
minimum interest rates; the Participants shall apply the relevant CIRR
set out in Article 15 of the Arrangement.
29.SpareEnginesandSpareParts
(a) The financing of these items when contemplated as part of the original
aircraft order may be on the same terms as for the aircraft. However, in
such cases the Participants shall also take account of the size of the
fleet of each aircraft type, including aircraft being acquired, aircraft
already the subject of a firm order or already owned, on the following
basis:
— for the first five aircraft of the type in the fleet: 15 per cent of the
aircraft price, i.e. the price of the airframe and installed engines,
— for the sixth and subsequent aircraft of that type in the fleet: 10 per
cent of the aircraft price, i.e. the price of the airframe and installed
engines;
(b) when these items are not ordered with the aircraft, the maximum repay-
ment terms shall be five years for new spare engines and two years for
other spare parts;
(c) notwithstanding subparagraph (b) above for new spare engines for large
aircraft, the Participantsmay exceed the maximum repayment term of
five yearsby up to three years ;
— where the transaction has a minimum contract value of more than
US $20 million,
— or includes a minimum of four new spare engines.
The contract value shall be reviewed every two years and adjusted for
price escalation accordingly.2001D0076 — EN — 03.08.2002 — 001.001 — 40
▼B
(d) the Participantsres erve the right to change their practice and match the
practicesof competing Participantsin relation to the timing of the firs t
repayment of principal with respect to spare engines and spare parts.
30.MaintenanceandService Contracts
Participantsmay offer official financing s upport with a repayment term of
up to two years for maintenance and service contracts.
CHAPTER VIII
PROCEDURES
31.Prior Notification,MatchingandInformationExchange
The proceduresfor prior notification, matching and information exchange
set out in the Arrangement shall apply to this Part of the Sector Under-
standing. Furthermore, the Participants may request a consultation if there
isany reas on to believe that another Participant isoffering an officially
supported credit on terms that do not conform to the Sector Understanding.
The consultation shall be held within ten days, but otherwise follow the
proceduress et out in Article 69 of the Arrangement.
32.Review
The Participants shall review the procedures and provisions of this Sector
Understanding annually in order to bring them closer to market conditions.
However, if market conditionsor cus tomary financing practiceschange
considerably, a review may be requested at any time.2001D0076 — EN — 03.08.2002 — 001.001 — 41
▼B
Appendix
ILLUSTRATIVELIST
All other similar aircraft that may be introduced in the future shall be covered
by this Sector Understanding and shall be added to the appropriate list in due
course. These lists are not exhaustive and serve only to indicate the type of
aircraft to be included in the different categorieswhere doubtscould aris e.
Largecivil aircraft
Manufacturer Designation
AirbusA 300
AirbusA 310
AirbusA 319
AirbusA 320
AirbusA 321
AirbusA 330
AirbusA 340
Boeing B 737
Boeing B 747
Boeing B 757
Boeing B 767
Boeing B 777
Boeing 707, 727
British Aerospace RJ70
British Aerospace RJ85
British Aerospace RJ100
British Aerospace RJ115
British Aerospace Bae146
Fokker F 70
Fokker F 100
Lockheed L-100
McDonnell DouglasMD-80 s eries
McDonnell DouglasMD-90 s eries
McDonnell DouglasMD-11
McDonnell DouglasDC-10
McDonnell DouglasDC-9
Lockheed L-1011
Ramaero 1.11-4952001D0076 — EN — 03.08.2002 — 001.001 — 42
▼B
CategoryAaircraft
Turbine-powered aircraft — including helicopters— (e.g. turbo jet, turbo-prop
and turbo-fan aircraft), with generally between thirty and seventy seats. In case
a new large turbine-powered aircraft with over seventy seats is being developed,
immediate consultations shall be held upon request with a view to agree on the
classification of such an aircraft in this Category or in Part 1 of this Under-
standing in view of the competitive situation.
Manufacturer Designation
Aeritalia G 222
Aeritalia/Aérospatiale ATR 42
Aeritalia/Aérospatiale ATR 72
Aérospatiale/MBB C 160 Transall
De Havilland Dash 8
De Havilland Dash 8-100
De Havilland Dash 8-200
De Havilland Dash 8-300
Boeing Vertol 234 Chinook
Broman (U.S.) BR 2000
British Aerospace BAe ATP
British Aerospace BAe 748
British Aerospace BAe Jetstream 41
British Aerospace BAe Jetstream 61
Canadair CL 215T
Canadair CL 415
Canadair RJ
Casa CN235
Dornier DO 328
EH Industries EH-101
Embraer EMB 120 Brasilia
Embraer EMB 145
Fokker F 50
Fokker F 27
Fokker F 28
Gulfstream America Gulfstream I-4
LET 610
Saab SF 340
Saab 2000
Short SD 3-30
Short SD 3-60
Short Sherpa
etc.2001D0076 — EN — 03.08.2002 — 001.001 — 43
▼B
CategoryBaircraft
Other turbine-powered aircraft, including helicopters.
Manufacturer Designation
Aérospatiale AS 332
Agusta A 109, A 119
Beech 1900
Beech Super King Air 300
Beech Starship 1
Bell Helicopter 206B
Bell Helicopter 206L
Bell Helicopter 212
Bell Helicopter 230
Bell Helicopter 412
Bell Helicopter 430
Bell Helicopter 214
Bombardier/Canadair Global Express
British Aerospace BAe Jetstream 31
British Aerospace BAe 125
British Aerospace BAe 1000
British Aerospace BAe Jetstream Super 31
Beech Aircraft Corpn d/b/a Raytheon
Aircraft Co.Hawker 1000
Beech Aircraft Corpn d/b/a Raytheon
Aircraft Co.Hawker 800
Beech Aircraft Corpn d/b/a Raytheon
Aircraft Co.King Air 350
Beech Aircraft Corpn d/b/a Raytheon
Aircraft Co.Beechjet 400 series
Beech Aircraft Corpn d/b/a Raytheon
Aircraft Co.Starship 2000A
Bell B 407
Canadair Challenger 601-3A
Canadair Challenger 601-3R
Canadair Challenger 604
Casa C 212-200
Casa C 212-300
Cessna Citation
Cessna 441 Conquest III and Caravan 208
series
ClaudiusDornier CD2
Dassault Breguet Falcon
Dornier D0 228-200
Embraer EMB 110 P2
Embraer/FAMA CBA 123
Eurocopter AS 350, AS 355, EC 120, AS 365,
EC 135
Eurocopter B0105LS
Fairchild Merlin/300
Fairchild Metro 25
Fairchild Metro III V
Fairchild Metro III
Fairchild Metro III A
Fairchild Merlin IVC-41
Gulfstream America Gulfstream II, III, IV and V
IAI Astra SP and SPX
IAI Arava 101 B
Learjet 31A, 35A, 45 and 60 series
MBB BK 117 C
MBB BO 105 CBS
McDonnell Helicopter System MD 902, MD 520, MD 600
Mitsubishi Mu2 Marquise
Piaggio P 180
PilatusBritten-Norman BN2T Is lander
Piper 400 LS
Piper T 1040
Piper PA-42-100 (Cheyenne 400)
Piper PA-42-720 (Cheyenne III A)
Piper Cheyenne II
Reims Cessna-Caravan II
SIAI-Marchetti SF 600 Canguro
Short Tucano
Westland W30
etc.2001D0076 — EN — 03.08.2002 — 001.001 — 44
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ANNEX IV
STANDARD FORM FOR NOTIFICATIONS
Information to be included in each and every notification:
1. Name of authority/agency responsible under the Arrangement for making
notifications.
2. Reference number (country indication, serial number, year).3. The Arrangement Article under which the authority/agency isnotifying:
47 derogation from Article 27
49(a)(1) ‘long term’ credit to a Category I country
49(a)(2) ‘abnormal’ payment practices49(a)(3) ‘long term’ credit for a conventional power plant
49(a)(4) ‘longer’ credit for ships
50, first indent identical matching of a derogation50, second indent non-identical matching of a derogation
51, first indent identical matching of a permitted exception
51, second indent non-identical matching of a permitted exception53 matching termsoffered by a non-Participant
54 derogation from Article 40
55 and 56 aid financing, concessionality level/grant element less than 50/
80 per cent
55 and 56 tied aid, concessionality level 50/80 per cent or more60 matching of a transaction notified under Article 55
60, first indent identical matching of a prior commitment of tied aid
60 second indent matching by other means of a prior commitment of tied aidAnnex II under the Understanding on Export Credits for Nuclear Power
Plant, or
Annex III under the Sector Arrangement for Civil Aircraft.
4. Country of buyer/borrower.
5. Name, location and status (public/private) of buyer/borrower.6. Nature of project/goodsto be exported; location of project; clos ing date of
tender if relevant; expiry date of credit line.
7. Contract value; value of the credit or credit line; value of exporter'snational
share; minimum contract value of credit line.
These values shall be stated as follows:
— the exact amount in the denominated currency for a line of credit,
— the value of an individual project or contract in termsof value ratingsin
accordance with the following scale in Special Drawing Rights (SDRs):
Category I: up to 1 000 000 SDRs
Category II: from 1 000 000 to 2 000 000 SDRsCategory III: from 2 000 000 to 3 000 000 SDRs
Category IV: from 3 000 000 to 5 000 000 SDRs
Category V: from 5 000 000 to 7 000 000 SDRsCategory VI: from 7 000 000 to 10 000 000 SDRs
Category VII: from 10 000 000 to 20 000 000 SDRs
Category VIII: from 20 000 000 to 40 000 000 SDRsCategory IX: from 40 000 000 to 80 000 000 SDRs
Category X: from 80 000 000 to 120 000 000 SDRs
Category XI: from 120 000 000 to 160 000 000 SDRs2001D0076 — EN — 03.08.2002 — 001.001 — 45
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Category XII: from 160 000 000 to 200 000 000 SDRs
Category XIII: from 200 000 000 to 240 000 000 SDRs
Category XIV: from 240 000 000 to 280 000 000 SDRs
Category XV: exceeding 280 000 000 SDRs(*)
(*) Indicate actual level within multiplesof 40 000 000 SDRs .
When using this scale please indicate currency of the contract.
8. Credit terms which reporting organisation intends to support (or has
supported):
— cash payments,
— repayment term (including starting point of credit, frequency of instal-
mentsfor repaying principal amount of credit, and whether thes e
instalments will be equal in amount),
— interest rate,— support for local costs (including the total amount of local costs
expressed as a percentage of the total value of goods and services
exported, the termsof repayment, and the nature of the s upport to be
given).
9. Any other relevant information including referencesto related cas esand
where relevant:
— justification for matching (specify reference number of notification
matched or other references) or granting long term credits for Category
I countriesor conventional power plants , etc.,
— the overall concessionality level of the tied and partially untied aid finan-
cing calculated in accordance with Article 38 and the discount rate used
to calculate that concessionality level,
— treatment of cash payments in the calculation of the concessionality level,— development aid or premixed credit or associated finance,— restrictions on use of credit lines.2001D0076 — EN — 03.08.2002 — 001.001 — 46
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ANNEX V
STANDARD FORM FOR NOTIFICATION OF PERMITTED EXCEPTIONS
FROM MINIMUM PREMIUM BENCHMARKS
Pointsto be covered in each and every notification:
1. Name of authority/agency responsible under the Arrangement for making
notifications.
2. Reference number (country identification, serial number, year).
3. The Arrangement Article under which the authority/agency isnotifying:
48 Permitted Exceptions: Prior Notification With Discussion
49 Permitted Exceptions: Prior Notification Without Discussion
4. Country of buyer/borrower.
5. Name, location and status (public/private) of buyer/borrower.6. Nature of project/goodsto be exported; location of project; clos ing date of
tender if relevant.
7. (a) Contract value
(b) Value of credit
These values shall be stated by category according to the following
scale for Special Drawing Rights (SDRs):
Category I: up to 1 000 000 SDRs
Category II: from 1 000 000 to 2 000 000 SDRs
Category III: from 2 000 000 to 3 000 000 SDRs
Category IV: from 3 000 000 to 5 000 000 SDRsCategory V: from 5 000 000 to 7 000 000 SDRs
Category VI: from 7 000 000 to 10 000 000 SDRs
Category VII: from 10 000 000 to 20 000 000 SDRsCategory VIII: from 20 000 000 to 40 000 000 SDRs
Category IX: from 40 000 000 to 80 000 000 SDRs
Category X: from 80 000 000 to 120 000 000 SDRsCategory XI: from 120 000 000 to 160 000 000 SDRs
Category XII: from 160 000 000 to 200 000 000 SDRs
Category XIII: from 200 000 000 to 240 000 000 SDRsCategory XIV: from 240 000 000 to 280 000 000 SDRs
Category XV: exceeding 280 000 000 SDRs(*)
(*) Indicate actual level within multiplesof 40 000 000 SDRs .
When using this scale please indicate the currency of the contract.
(c) credit terms (including the length of the disbursement period).
8. (a) Proposed premium rate (after adjustment for related conditions)
(b) OECD premium benchmark (after adjustment for related conditions)
(c) Actual discount applied to OECD premium benchmark (in percentage
terms) after adjustment for related conditions
9. A full explanation of what country credit risks have either been externa-
lised/removed or limited/excluded in the individual transaction, as well as
an explanation of how such externalisation/removal or limitation/exclusion
of the country credit risks justify the alternative benchmark or discount
applied.
10. In cases of matching, full information of the terms supported by a Partici-
pant or non-Participant which are being matched.2001D0076 — EN — 03.08.2002 — 001.001 — 47
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ANNEX VI
CHECKLIST OF DEVELOPMENTAL QUALITY
A number of criteria have been developed in recent yearsby the DAC to ens ure
that projectsin developing countriesthat are financed totally or in part by offi-
cial development assistance (ODA), contribute to development. They are
essentially contained in the:
— DAC Principlesfor Project Apprais al, 1988,
— DAC Guiding Principles for Associated Financing and Tied and Partially
Untied Official Development Assistance, 1987, and
— Good Procurement Practices for Official Development Assistance, 1986.
Consistency of the project with the recipient country's overall investment
priorities(project selection)
Isthe project part of inves tment and public expenditure programmesalready
approved by the central financial and planning authoritiesof the recipient
country?
(Specify policy document mentioning the project, e.g. public investment
programme of the recipient country).
Isthe project being co-financed with an international development finance ins ti-
tution?
Does evidence exist that the project has been considered and rejected by an
international development finance institution or another DAC Member on
groundsof low developmental priority?
In the case of a private sector project, has it been approved by the government
of the recipient country?
Isthe project covered by an intergovernmental agreement providing for a
broader range of aid activitiesby the donor in the recipient country?
Projectpreparationandappraisal
Has the project been prepared, designed and appraised against a set of standards
and criteria broadly consistent with the DAC Principles for Project Appraisal
(PPA)? Relevant principlesconcern project apprais al under:
(a) economic aspects (paragraphs 30 to 38 PPA);
(b) technical aspects (paragraph 22 PPA);
(c) financial aspects (paragraphs 23 to 29 PPA).
In the case of a revenue producing project, particularly if it is producing for a
competitive market, has the concessionary element of the aid financing been
passed on to the end-user of the funds? (paragraph 25 PPA).
(a) Institutional assessment (paragraphs 40 to 44 PPA);
(b) social and distributional analysis (paragraphs 47 to 57 PPA);
(c) environmental assessment (paragraphs 55 to 57 PPA).
Procurementprocedures
What procurement mode will be used among the following? (For definitions, see
Principleslis ted in Good Procurement Practicesfor ODA).
(a) International competitive bidding (Procurement Principle III and itsAnnex
2: Minimum conditionsfor effective international competitive bidding);
(b) national competitive bidding (Procurement Principle IV);
(c) informal competition or direct negotiations(Procurement PrinciplesV A or
B).
Is it envisaged to check price and quality of supplies (paragraph 63 PPA)?2001D0076 — EN — 03.08.2002 — 001.001 — 48
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ANNEX VII
ELECTRONIC EXCHANGE OF INFORMATION (EEI)
1. The EEI shall include the following items:
— for the Model
— Country Risk Reports (Payments Experience)
— Adjustments to the Quantitative Model Classification— List of Country Classifications— Procedure for Disagreement Amongst Country Risk Experts
— for Premium Convergence
— Bulletin Board
— Sample Premium Calculations— Table of Minimum Premium Benchmarks
— for Related Conditions
— Information Fact Sheets (Basic Related Conditions)
— Classification of Products
— for Financial Aspects
— Figuresfor the PFTs
— for Permitted Exceptions
— Prior Notifications
— Matching Notifications.
The development of the EEI is necessary to assist the monitoring and review
of the Guiding Principles.2001D0076 — EN — 03.08.2002 — 001.001 — 49