Council Decision

of 22 December 2000

replacing the Decision of 4 April 1978 on the application of certain guidelines in the field of officially supported export credits

(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 is party to the OECD Arrangement on guidelines for officially supported export credits, hereinafter referred to as "the Arrangement";

(2) The Arrangement is the subject of a Council Decision of 4 April 1978, which was extended by Decision 93/112/EEC(1) and last amended by Decision 97/530/EC(2);

(3) The participants in the Arrangement have drawn up a new consolidated text which comprises all the amendments approved by them since the revision of the Arrangement, which was made applicable by Decision 93/112/EEC;

(4) In accepting the amendments and additions to the Arrangement made by Decision 97/530/EC, the Community had inter alia subscribed to a statement of principle by the participants in the Arrangement in which they expressed their intention to investigate guiding principles with a view to producing convergence among export credit premiums;

(5) The participants in the Arrangement drew up a series of additional guiding principles covering the establishment of minimum benchmarks for sovereign risk and country risk in connection with the premiums attached to officially supported export credits; those guiding principles were incorporated into the new consolidated text of the Arrangement in a manner and form compatible with the Arrangement;

(6) The text contained in the Annex to the Decision of 4 April 1978 should therefore be replaced by the consolidated text of the Arrangement; that Decision, Decision 93/112/EEC and Decision 97/530/EC should consequently be repealed,

HAS ADOPTED THIS DECISION:

Article 1

The guidelines contained in the Arrangement annexed to this Decision shall apply in the Community.

Article 2

The Decision of 4 April 1978 and the Annex thereto shall be replaced by this Decision and its Annex.

Consequently, the Decision of 4 April 1978, Decision 93/112/EEC and Decision 97/530/EC shall be repealed.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.

Done at Brussels, 22 December 2000.

For the Council

C. Pierret

The President

(1) OJ L 44, 22.2.1993, p. 1.

(2) OJ L 216, 8.8.1997, p. 77.

ANNEX

(TRANSLATION)

ARRANGEMENT ON GUIDELINES FOR OFFICIALLY SUPPORTED EXPORT CREDITS

TABLE OF CONTENTS

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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 applies to officially supported export credits with repayment terms of two years or more, relating to exports of goods and/or services or 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 as official financing support.

The Arrangement places limitations on the terms and conditions of export credits that benefit from official support. Such limitations include 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 derogations 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 commodities are excluded from the application 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 terms and conditions may come to be regarded as normal 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 generous repayment terms and conditions than 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 terms and conditions.

Status

The Arrangement, developed within the OECD framework, came into being in April 1978 following agreement among its Participants. The Arrangement is a "Gentlemen's Agreement" among the Participants. The Arrangement is not an OECD Act, although it receives the administrative support of the OECD Secretariat (the Secretariat).

CHAPTER I

SCOPE OF THE ARRANGEMENT

1. PARTICIPATION

(a) The Participants to the Arrangement are: Australia, 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 Participants agree to respect and to apply the terms of the Arrangement. Other countries willing to apply these Guidelines may 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 years or more. This is regardless of whether the official support for export credits is given by means of direct credits/financing, refinancing, 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 Understanding on Export Credits for Ships (Annex I). Where a Participant intends to support terms for a ship covered by the Understanding - and therefore not by this Arrangement - that would be more favourable than those terms permitted by this Arrangement, the Participant shall notify all other Participants of such terms. The appropriate procedures for notification are set out in Article 49.

(b) Nuclear Power Plant

The Arrangement shall apply, except that where a corresponding provision exists in the Sector Understanding on Export Credits for Nuclear Power Plant (Annex II), which complements the 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 provision exists in the Sector Understanding on Export Credits for Civil Aircraft (Annex III), which complements the Arrangement, the Sector Understanding shall prevail.

(d) Exclusions

The Arrangement does not apply to official support 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 is of indefinite duration, nevertheless a Participant may withdraw by notifying the other Participants in writing by means of instant communication, e.g. the OECD Online Information System (OLIS), telex, telefax. The withdrawal takes effect sixty calendar days after receipt of the notification by the Participants.

6. MONITORING

The Secretariat shall monitor the implementation of the Arrangement.

CHAPTER II

PROVISIONS FOR EXPORT CREDITS

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 as defined in Article 9;

(b) the export contract value is the total amount to be paid by or on behalf of the purchaser for goods and/or services exported, i.e. excluding local costs 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 insurance 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 payments made after the starting point of credit are not regarded as cash payments in this context.

8. REPAYMENT TERMS

The repayment term is the period beginning at the starting 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 is based 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 individual items useable in themselves (e.g. locomotives), the starting point is the mean date or actual date when the buyer takes physical possession 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 commissioning, 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 responsibility 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 is handed over to the buyer at that time in accordance with the terms of the contract and irrespective of any continuing commitment which the supplier or contractor may have (e.g. for guaranteeing its effective functioning or training local personnel);

(e) in the cases of the subparagraphs (b)-(d) above, where the contract involves the separate execution of individual parts of a project, the date of the starting point is the date of the starting point for each separate 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 procedures for prior notification set out in Article 49 are followed;

(b) for Category II countries, the maximum repayment term is ten years;

(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 destination the Participants should seek to establish a common line in accordance with the procedures in Articles 71 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 repayment term shall be twelve years. If a Participant intends to support a repayment term longer than five years for Category I countries or a repayment term longer than ten years for 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 parts thereof, not fuelled by nuclear power; they include all components, equipment, materials, and services (including the training of personnel) 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 development, 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's country.

12. CLASSIFICATION OF COUNTRIES FOR MAXIMUM REPAYMENT TERMS

(a) Category I countries are those which are on the World Bank's graduation list(2). All other countries are in Category II. The World Bank graduation level is recalculated on an annual basis. A country will change category only after its World Bank category has remained 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 as calculated by the World Bank for the purposes of 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 estimate 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 otherwise;

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 Participants by the Secretariat;

4. in cases where the World Bank revises figures, such revisions shall be disregarded in relation to the Arrangement. Nevertheless, the classification of a country may be changed by way of a common line and Participants would favourably consider 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 Secretariat.

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;

(c) prior notification according to Article 49 is required if a Participant does not intend to follow this practice.

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 is required if a Participant does not intend to follow this practice;

(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 refinancing, 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 taxes imposed 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 Reference 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 Participants have agreed otherwise;

(b) each Participant shall initially select one of the following two base rate systems for its national currency:

- three-year government bond yields for repayment terms of 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 yields for over eight-and-a-half years, or

- five-year government bond yields for 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 bonds in the Luxembourg stock 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 is not a Participant may make a proposal for the construction of the CIRR in that currency using common line procedures in accordance with Articles 70 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 the CIRR if the terms of the official financing support 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 rates below 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 is an enquiry from another Participant about a transaction, 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 reasonable efforts to determine whether or not the transaction benefits from official financing support, and whether or not the terms of this support conform to the provisions of Article 15 of the Arrangement. This Participant will be considered to have made such reasonable efforts if it has informed, by means of instant 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 terms declares within three working days that the transaction does not 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 has the right to match these terms according to the procedure in Article 50.

20. MINIMUM PREMIUM

(a) The Participants providing official support through direct credits/financing, 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 is a 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 repayments decreed by the buyer's/borrower's/guarantor's government or by that agency of a country through which repayment is effected,

- 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 repayments made in local currency to be a valid discharge 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 prevents repayment 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 waves and nuclear accidents;

(d) the minimum premium benchmarks shall be established in accordance with the principles set out in Articles 21 to 23;

(e) the Participants may 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 indicators: 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 combination and flexible weighting of the risk indicator groups, and

- such scoring results in countries being classified into seven risk categories;

(c) in accordance with procedures agreed by the Participants, the quantitative 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, this may lead to an adjustment to the Model classification to reflect the final assessment of the country credit risk.

22. MINIMUM PREMIUM BENCHMARKS(3)

(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)(4) as well as other countries with similar risks shall not be subject to the application of minimum premium benchmarks with the understanding 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 sovereign 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;

(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 benchmark may be applied;

(g) minimum premium benchmarks are expressed in percentages of the principal value of the credit as if 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 products provided by the Participants, 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 conditions:

- the percentage of cover,

- the claims waiting period, i.e. the period between the due date of payment by the buyer/borrower and the date that the insurer/guarantor 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 categories which are:

- below standard product, i.e. insurance without cover of interest during the claims waiting period and insurance 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 claims waiting period without an appropriate premium surcharge and direct credits/financing, and

- above standard product, i.e. unconditional guarantees;

(c) pricing differentials shall reflect the quality differences of 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 PFTs are the accruals and cashflow accounting approaches collated on an aggregate Participants' level and, where appropriate, private market indicators;

(b) it is understood 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 applies shall 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.

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's contract forms a 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 terms than 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 official financing support.

26. VALIDITY PERIOD FOR EXPORT CREDITS

Credit terms and conditions for 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 credits that covers a series of 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 adjustment for related conditions), the six-month limitation on the validity period for export credit terms and 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 procedures set 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, as follows:

- if a Participant is able to externalise/remove the five elements of country credit risk (for the entire life of the debt repayment obligation) as detailed 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 is able to limit/exclude any of the five elements of country credit risk (for the entire life of the debt repayment obligation), the Participant may apply an appropriate discount to the minimum premium benchmark. The expectation is that any discount where the transfer risk, as set out in the first and second indent of Article 20(c) is excluded, should 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 precedent for any future case by any Participant.

28. ACTION TO AVOID OR MINIMISE LOSSES

The Arrangement does not prevent export credit insurance authorities or 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 documents have 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 Participants may match credit terms and conditions notified according to the procedures in Articles 47, 48 and 49, as well as credit terms and conditions not notified or those supported by non-Participants. The matching support may not extend beyond the validity period of the credit terms and conditions being matched;

(b) the Participants shall match credit terms and conditions by supporting terms that comply with the Arrangement, unless the 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 quality risk, also taking into account product quality. A Participant intending to match credit terms and conditions:

- notified by another Participant shall follow the procedures in Articles 50 or 51 as appropriate,

- 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

PROVISIONS FOR TRADE-RELATED AID

30. GENERAL PRINCIPLES FOR TIED AID

(a) The Participants have agreed to the general principle that they should have complementary policies for export credits and 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 is in 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) this definition applies whether the "tying" is by formal agreement or by any form of informal understanding between the recipient and the donor country, or whether a package includes components from the list in Article 32 below that are not freely and fully available to finance procurement from the recipient country, substantially all other developing countries and from the Participants, or if it involves practices that the DAC or Participants consider equivalent to such tying;

(c) if there is uncertainty as to 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 includes loans or grants whose proceeds are fully and freely available to finance procurement from substantially all developing countries and 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 Assistance (1987)",

- Other Official Flows (OOF), which includes grants and loans but excludes officially supported export credits that 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.

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-concessional 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 financing 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 Participants in which a de facto liaison exists between two or more financing components;

(c) the following practices shall not prevent the determination of an association or linkage "in fact":

- contract splitting through the separate notification of the component parts of one contract,

- splitting of contracts financed in several stages,

- non-notification of interdependent parts of 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(5). The World Bank recalculates the threshold for this category 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 as calculated by the World Bank for the purposes of 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 estimate 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 otherwise;

3. if a country's eligibility for tied aid does change 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 Participants by 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 notified 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 classification of a country may be changed by way of a common line, in accordance with the appropriate procedures in Articles 71(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;

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(6).

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 is financially non-viable, i.e. does the project lack capacity with appropriate pricing determined on market principles, 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 is expected to develop over time that will more precisely define, for both export credit and aid agencies, ex ante guidance as to the line between the two categories of 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 Participants so agree through the common line procedures set out in Articles 71 to 77. The Participants may also derogate from the rules in Articles 34 and 35 in accordance with the procedures set 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 difference 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 is calculated as follows:

- The average of the CIRR + Margin

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- for all currencies the average of the CIRR is calculated taking an average of the monthly CIRRs valid during the six-month period between 15 August of the previous year and 14 February of the current year. The calculated rate, including the margin, is rounded 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 credits that are in conformity with the Arrangement,

- other funds at 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 considered 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 recalculated with the discount rate in force at the time of matching;

(e) local costs and third country procurement shall be included in the calculation of concessionality level only if they are financed by the donor country;

(f) the overall concessionality level of a package is determined by multiplying the nominal value of each component of the package by the respective concessionality level of each component, adding the results, and dividing this total by the aggregate nominal value of the components;

(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 is the one in effect at the time when the terms and conditions of 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 is made before the contract is concluded, 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 necessary 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 Participants shall not fix terms and conditions for tied aid, whether this relates to the financing of individual transactions or 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 similar agreement, the validity period shall commence at the date of its signature, 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 is an extension and that it is renewed at terms allowed 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 the date of notification of the commitment in accordance with Article 55 or 56, as appropriate;

(b) when a country has become ineligible for seventeen year World Bank Loans for the first time, the validity of existing and new tied aid protocols 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 maintained notwithstanding a change in the discount rate set out in Article 38.

40. NO DEROGATION ENGAGEMENT FOR TIED AID

(a) The Participants shall not provide tied aid that:

- has a concessionality level of less than 35 per cent, or 50 per cent if the beneficiary country is an LLDC, or

- does not conform with the provisions on eligibility for aid in Article 34 apart from the exemptions set 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 Articles 71 to 77, or

- justification on aid grounds through support by a substantial body of the Participants as described in Articles 62 and 63, or

- a letter to the Secretary-General, in accordance with the procedures in Article 65, which the Participants expect will be unusual and infrequent.

41. MATCHING

(a) The Participants may match terms and conditions notified according to procedures in Articles 55 or 56 as appropriate. The matching support may not extend beyond the validity period of the terms and 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 conditions notified by another Participant shall follow the procedures in Articles 60 or 61 as appropriate;

(c) a Participant which intends to match non-conforming terms and conditions offered by a non-Participant shall follow the procedures in Article 53.

CHAPTER IV

PROCEDURES

Section 1: Common provisions for export credits and trade-related aid

42. COMMITMENT

Commitment refers to any statement, in whatever form, whereby the willingness or intention to provide official support is communicated to the recipient country, the buyer, the borrower, the exporter or the financial institution.

43. FIRM UNDERTAKING

In keeping with the best endeavours undertaking referred to in the Introduction and recognising the advantage which can accrue if a clearly defined common attitude towards the credit terms and conditions for 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 appropriate,

- 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 terms and conditions for particular transactions,

- to give favourable consideration to requests for face-to-face consultations, 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 Articles 67 to 70, a Participant 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 terms and conditions permitted by the Arrangement. In cases of particular urgency, the enquiring Participant may request a more rapid reply.

45. STANDARD FORM FOR ALL NOTIFICATIONS

The notifications called for by the procedures in the Arrangement shall be made in accordance with, and include the information contained in the Standard Form in Annexes IV and V as appropriate, and shall 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 procedures in Articles 47 to 56, 60 and 61, it shall in all cases inform all other Participants accordingly by including the notification reference number on the relevant Creditor Reporting System (CRS) 1c form.

Section 2: Notification procedures for export credits

47. DEROGATIONS: PRIOR NOTIFICATION WITH DISCUSSION

(a) It is expected that the Participants will 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 intends to take the initiative to support terms and conditions that derogate from the Arrangement, the Participant shall notify all other Participants of the terms and conditions it intends to support at least ten calendar days before issuing any commitment. If any other Participant requests a discussion during this period, the initiating Participant 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 moderates or withdraws its intention to support the notified non-conforming terms and conditions, it shall immediately inform all other Participants accordingly.

48. PERMITTED EXCEPTIONS: PRIOR NOTIFICATION WITH DISCUSSION

(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 explanation 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 to the minimum premium benchmark is 25 per cent or more, the notifying Participant shall notify all other Participants at least twenty calendar days before issuing any commitment(7).

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 years to a Category 1 country;

2. not to follow normal payment practices with respect 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 years as stipulated in Article 11(a);

4. to support, for any kind of ship to which the Understanding on Export Credits for Ships applies, credit terms and conditions that would be more favourable than the credit terms and conditions permitted by the Arrangement; 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 moderates or withdraws its intention to provide support for the notified exceptions, it shall immediately inform all other Participants.

50. MATCHING OF DEROGATIONS

A Participant intending to match notified derogations shall follow the procedures set out below.

Unless the initiating Participant has sent notice that it has withdrawn its intention to derogate, Participants can, once the appropriate waiting period stipulated in Article 47 has expired, provide support as follows:

- for "identical matching", i.e. terms and conditions that include the identical derogating element 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 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 procedures set 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 Participants can, once the waiting period stipulated in Articles 48 or 49 as appropriate has expired, provide support as follows:

- for "identical matching", i.e. terms and conditions that include the identical 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 its completion. This period 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 Articles 48 or 49 as appropriate.

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 terms and conditions which have not been notified by another Participant, involving 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 means of instant communication, e.g. OLIS, of its intention to match but received no confirmation within three working days (exclusive of the day of receipt) that the non-conforming terms and conditions will 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's non-conforming terms and conditions shall:

- 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 intends to match non-conforming terms and conditions offered by a non-Participant shall follow the prior notification and discussion procedure in Article 47(a).

Section 3: Notification procedures for trade-related aid

54. DEROGATIONS: PRIOR NOTIFICATION WITH DISCUSSION

(a) It is expected that the Participants will 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 intends to take the initiative to support terms and 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 procedures set out in Articles 55 and 56. This is without prejudice to the procedures and circumstances set out in Article 40(b);

(b) if the initiating Participant moderates or withdraws its intention to support the notified non-conforming terms and conditions, it shall immediately inform all other Participants accordingly.

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 SDRs or 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 (as defined by the DAC) of less than 50 per cent,

- trade-related tied aid with a value of two million SDRs or 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;

(c) prior notification made in accordance with the third indent of Article 55(a) above which relates to a project larger than SDR 50 million shall 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 moderates or withdraws its intention to support the notified non-conforming terms and conditions, it shall immediately inform all other Participants accordingly;

(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 days of the commitment, if it provides official support 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 is not 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 procedures in Articles 55 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 procedures set out below.

Unless the initiating Participant has sent notice that it has withdrawn its intention to provide aid, Participants can support the tied aid as follows once the thirty working days period referred to in Article 55(b) has expired:

- for "identical matching", i.e. terms and conditions that lead to the same concessionality level, 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 non-conforming element of the terms subject to the restrictions of Article 41, the matching Participant shall initiate a five calendar day prior notification period and await its completion. 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 intends to match terms and conditions that were subject to a prompt notification in accordance with Article 56.

Section 4: Consultation procedures for trade-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 Participants, 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 requirements of Articles 34 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 particular 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 Participants at least ten working days before the bid closing date or commitment date, whichever 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 information. 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 Participants 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 Participant shall make a tied aid commitment until ten working days after this notification to Participants has been issued. For projects for which competing commercial offers were identified during the consultation process, the aforementioned ten working day period shall be extended to fifteen days;

(c) the Secretariat shall monitor the progress and results of consultations.

Section 5: Information exchange procedures for export credits and trade-related aid

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 has received an application for official support may address an enquiry to another Participant, giving the most favourable credit terms and conditions that the enquiring Participant would be willing to support;

(c) a Participant which has received allegations that 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 has been made, changed or withdrawn, or

- other terms are being considered,

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 consultations. 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 Participants shall 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 does not take place at OECD headquarters in 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 is an understanding between the Participants to agree the basis for official support in a given transaction or in specific circumstances. It may contain terms and conditions that are more or less favourable than terms and conditions allowed under the Arrangement. The rules of 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 is involved, all DAC contact points by the Secretariat. The identity of the initiator is not revealed on the Common Line Register 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,

- terms and conditions foreseen by the initiating country,

- common line proposal,

- nationality and names of known competing bidders,

- commercial and financial bid closing date and tender number to the extent it is known, 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 alternative 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 authorities in 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 has gone 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 Participants have accepted the common line, but no Participant has rejected it, the proposal shall be left open for a further period of eight calendar days;

(b) after this further period, a Participant which has not explicitly rejected the common line proposal shall be deemed to have accepted the common line. Nevertheless, a Participant, including the initiating Participant, may make its acceptance of the common line conditional on the explicit acceptance by one or more Participants;

(c) if a Participant does not accept one or more elements of a common line it implicitly accepts all other elements of the common line. It is understood that such a partial acceptance may lead other Participants to change their attitude towards a proposed common line. All Participants are free to offer or match terms and conditions not 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 Participants are not bound by their original decision.

74. DISAGREEMENT ON COMMON LINES

If the initiating Participant and a Participant which has proposed a modification or alternative cannot agree on a common line within the additional eight calendar day period, this period 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 has been rejected; the common line will take effect three calendar days after this announcement. The Secretariat shall make available on OLIS a permanently updated record of all common lines which 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 its effective date, unless the Secretariat is informed that it is no 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 Participant 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 Participants informed accordingly, through the maintenance of the listing "The Status of Valid Common Lines" on OLIS. Accordingly, the Secretariat, inter alia, shall:

- add new common lines when these have been accepted by the Participants,

- update the expiry date when a Participant requests an extension,

- delete common lines which 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 intends to support terms and conditions that 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 intends to support terms and conditions that are more favourable than the common line, as well as a justification of how they will not result in a purchasing decision (possibly including the outcome of an International Competitive Bid (ICB) procedure) which is influenced 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 days after the face-to-face consultation, 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 Articles 50, 53, 60 and 61.

Section 6: Operational provisions for the communication of minimum interest rates (CIRRs)

78. COMMUNICATION OF MINIMUM INTEREST RATES

(a) CIRRs for currencies that are determined according to the provisions of 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 this information. The Secretariat shall then inform immediately all Participants of the applicable rates.

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 developments require the notification of an amendment to a CIRR during the course of a month, the amended rate shall be implemented ten days after notification of this amendment has been received by the Secretariat.

Section 7: Operational provisions for the exchange of information for premium

81. ELECTRONIC EXCHANGE OF INFORMATION FOR PREMIUM (EEI)

The Participants shall provide the information outlined in Annex VII to facilitate the implementation of the provisions of the Arrangement in relation to the minimum premium benchmarks.

Section 8: 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 Participants shall 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 Arrangement;

(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 Participants shall take into account the objectives of the Arrangement and the prevailing economic and monetary situation. The information and suggestions that Participants wish to put forward for this review shall 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 conditions 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 substantiated 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 benchmarks may be applicable and the appropriate level of such discounts. To assist the review the Secretariat shall provide reports of all notifications.

CHAPTER V

FUTURE WORK

85. GLOBAL UNTYING

The Participants confirm their resolve to cooperate with the Working Party on Financial Aspects of Development Assistance (DAC/FA) to develop targets for untying aid and more precisely 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 transparency, as follows:

(a) discipline: the Participants will engage urgently in a discussion with the DAC/FA to agree on targets for 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 commencement 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 bids to 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 transparency and the definition of market window operations in order to prevent distortion of competition.

87. SECTORS

(a) The Participants undertook to start negotiations in 1994 on complementary guidelines on Export Credits on agricultural products. An Experts Group was established and held its first meeting in April 1995;

(b) the need for further or complementary guidelines in the Arrangement for Steel Plant and Equipment will be considered when the outcome of the negotiations in the Multilateral Steel Agreement context is known.

88. DIFFERENCES OF INTERPRETATION

It has not proved possible to reach total agreement on the definition of official support in the light of differences between long-established national export credit systems. It is understood that efforts will be made to resolve differences of interpretation as a matter of urgency. Until agreement is reached, the current wording in the Arrangement does not prejudice present interpretations.

(1) See Article 88 (Future Work).

(2) For example using 1996 data, those countries with a GNP per capita above $5435.

(3) 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 Principles shall be immediately implemented;

- premium rates which have been fixed during the Transition Period shall not be valid beyond three months from 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 of matching;

- 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 the minimum premium benchmarks; by 1 April 2001, Korea shall apply 80 per cent of the minimum premium benchmarks; and by 1 April 2002, Korea shall apply 100 per cent of the benchmarks.

(4) For example using 1996 data, those countries with a GNP per capita above $ 9635.

(5) For example using 1996 data, those countries with a GNP per capita above $ 3115.

(6) 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 is covered by the Participants' agreement to try to avoid such credits other than outright grants, food aid and humanitarian aid. The prolongation of this agreement is to be 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 emergency or safety reasons can be regarded as "humanitarian aid".

(7) 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 which shall include e.g. unconditional third country guarantees, escrow accounts and asset-based financing. This body of experience may also give guidance on the appropriate levels of discount.

ANNEX I

SECTOR UNDERSTANDING ON EXPORT CREDITS FOR SHIPS

I.

1. For any contract relating to any new sea-going ship or any conversion of a ship(1) to be negotiated from 1 December 1979 onwards, participants in this Understanding agree to abolish existing official facilities(2) and to introduce no new official facilities for export credits on terms providing:

(i) a maximum duration exceeding eight-and-a-half years(3) from delivery and repayment other than by equal instalments at regular intervals of normally six months and a maximum of twelve months;

(ii) payment by delivery of less than 20 per cent of the contract price;

(iii) an interest rate of less than 8 per cent, net of all charges(4).

2. This minimum interest rate of 8 per cent will apply to the credit granted with official support by the shipbuilder to the buyer (in a supplier-credit transaction) or by a bank or any other party in the shipbuilder's country to the buyer or any other party in the buyer's country (in a buyer-credit transaction) whether the official support is given for the whole amount of the credit or only part of it.

3. The minimum interest rate will also apply to the credit granted with support by governments participating in the Understanding, in the shipbuilder's country to the shipbuilder or to any other party, to enable credit to be given to the shipowner or to any other party in the shipowner's country, whether this official support is given for the whole amount of the credit or only part of it.

4. In so far as other public bodies participate in measures to promote exports, participants agree to use all possible influence to prevent the financing of exports on terms which contravene the above principles.

5. Participants, recognising that it is highly desirable to set a limit to credit terms for export, also agree to make their best endeavours to ensure that no more favourable terms than those set out above will be offered to buyers by any other means.

6. Any participant in the Understanding which wishes, for genuine aid reasons, to concede more favourable terms in a particular case is not precluded from doing so, provided that adequate notice of this decision is given to all the parties to the Understanding in accordance with the procedure established for this purpose. For these cases "adequate notice" shall be interpreted as requiring that notification be made to all participants if possible at least six weeks before a promise is given, at any stage of the negotiations, to commit the use of funds for that purpose, and in any case at least six weeks before authorisation is given so to commit them.

7. Prior notice shall also be given in accordance with the procedure agreed between the participants of any decision taken for exceptional reasons other than those specified in Clause 6, to support terms more favourable in any way than those of the Understanding. Support (including the provision of aid) will be refused for any order finally placed(5) on more favourable terms before all other participants in the Understanding have been given prior notice in accordance with the procedure agreed.

8. Any participant in the Understanding may, provided that it applies the procedures agreed between the participants, support more favourable terms in a particular substantiated case to match terms of officially supported transactions, or contravention of the above terms by other participants, or competition from non-participating countries.

II.

9. Any participant in the Understanding may obtain information from any other participant on terms of any official support for an export contract in order to ascertain whether the terms contravene this Understanding. Participants undertake to supply all possible information requested with all possible speed. According to the rules and practices of the OECD, any participant may ask the Secretary-General to act on its behalf in the aforementioned matter and to circulate the information obtained to all participants in the Understanding.

10. Each participant undertakes to notify the Secretary-General of its system for the provision of official support and of the means of implementation of the Understanding.

III.

11. This Understanding becomes effective as soon as all Members of Working Party No 6 have notified the Secretary-General of their adherence to it or as soon as participants having so notified the Secretary-General decide that they constitute a representative majority of Members of Working Party No 6; any participant which disagrees as to what constitutes a representative majority would not be bound by the others' decision. The Understanding is open to other Member countries of the OECD.

12. This Understanding shall be subject to review as often as requested by participants, and in any case at intervals not exceeding one year. Any participant may withdraw from this Understanding upon giving to its partners three calendar months' notice of its intention to do so. Within this period, at the request of any of these partners, there shall be a meeting of Working Party No 6 to review this Understanding, and any other participant, on notification to its partners, may withdraw from this Understanding at the same effective date as the participant which first gave notice.

(1) Ship conversion means any conversion of sea-going vessels of more than 1000 grt. on condition that conversion operations entail radical alterations to the cargo plan, the hull or the propulsion system.

(2) Official facilities are those which enable credits to be insured, guaranteed or financed by governments, by governmental institutions, or with any form of direct or indirect governmental participation.

(3) Given the special nature of the transactions for vessels transporting liquefied natural gas, the duration of authorised credit for this type of ship only is increased to ten years.

(4) Interest rate, net of all charges, means that part of the credit costs (excluding any credit insurance premia and/or any banking charges) which is paid at regular intervals throughout the credit period and which is directly related to the amount of credit.

(5) An order shall be deemed to have been finally placed as soon as the buyer has committed himself irrevocably under a written and signed Agreement to buy from the exporter and to pay according to specified terms, even if the Agreement is subject to reservations which can be withdrawn only by the exporter.

ANNEX II

SECTOR UNDERSTANDING ON EXPORT CREDITS FOR NUCLEAR POWER PLANT

CHAPTER I

SCOPE OF THE SECTOR UNDERSTANDING

1. Scope of Application

(a) This Sector Understanding, which complements the Arrangement:

- sets out the special guidelines which apply to officially supported export credits relating to contracts for the export of complete nuclear power stations or parts thereof, comprising all components, equipment, 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, construction 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

PROVISIONS FOR EXPORT CREDITS AND TIED AID

3. Maximum Repayment Term

The maximum repayment term, irrespective of the country classification, is fifteen years.

4. Minimum Interest Rates

(a) A Participant providing official financing support through direct financing, 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 is limited initially to a maximum period which does not 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 responsibility for commissioning, the minimum interest rate shall be the SCIRR in accordance with Article 3 of this Sector Understanding. 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 does not exceed ten years.

5. Construction of SCIRRs

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.

6. Local Costs and Capitalisation of Interest

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 Support for Nuclear Fuel

(a) The maximum repayment term for the initial fuel load shall not exceed four years from 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 financing support for the subsequent reload of nuclear fuel shall apply minimum interest rates; the Participant shall