COMMISSION OF THE EUROPEAN COMMUNITIES 
Brussels, 15.07.1998 
COM(1998) 406 final 
98/0223 (ACQ 
Proposal for a 
COUNCIL DECISION 
amending the Decision of 4 April 1978 on the application of certain guidelines in the field of 
officially supported export credits 
(presented by the Commission) 

EXPLANATORY MEMORANDUM 
The Community is a participant1 in the Arrangement on Guidelines for Officially Supported 
Export Credits (the OECD Consensus). The Arrangement was incorporated into Community 
law by a Council Decision of 4 April 1978, amended by a Decision of 14 December 1992 
which applied the April 1978 Decision indefinitely. Initial amendments to the Arrangement 
were incorporated into Community law by the Decision of 14 December 1992, and Decisions 
of 3 March and 24 July 1997 made further amendments and additions. 
1. Finding the text to be badly structured and difficult to use, the participants set up an 
OECD expert group to redraft the Arrangement and make it more user-friendly 
without making changes to its substance. The new text covers all the amendments 
made to the Arrangement since it was last revised in December 1992, including those 
dealt with in the Council Decisions of 3 March and 24 July 1997. 
2. The main purpose of the Arrangement is to regulate government intervention in the 
field of export credits, to ensure that credits are awarded on the basis of quality and 
price, rather than the most generous level of official support available. This would 
enable exporters to compete on equal terms. The Arrangement is the international 
reference framework for officially-supported export credits, and as such deals only 
with the credits themselves, not with the associated insurance or guarantees (or the 
premiums for that cover), which can play a major role in distorting competition. 
In 1994, when the measures amending and extending the Arrangement (incorporated 
into Community law by Decision 97/530/EC) were discussed, the participants adopted 
a statement of principle acknowledging that the guarantee premiums and conditions 
attached to export credits were an important issue to be given priority. In the absence 
of any discipline governing these matters, they decided to examine guiding principles 
for a convergence of premiums. In line with their international obligations, they 
determined that premium levels should not be inadequate to cover long-term operating 
costs and losses, and endorsed the idea of premiums calculated according to risk. 
An OECD group of experts began discussing the technical issues in 1994. Official 
negotiations followed in the spring of 1997. The Commission based its contributions 
to those negotiations on the negotiating directives for which it had received 
authorization from the Council (on 17 March 1997) and the opinion of an ad-hoc 
Article 113 Committee. 
On 20 June 1997, the participants in the Arrangement reached agreement on 
Guiding Principles for setting minimum premium benchmarks for sovereign and 
country risk. They will be applied to export credits receiving official support whether 
in the form of direct credits/financing, refinancing, export credit insurance or export 
credit guarantees. The Guiding Principles will enter into force on 1 April 1999 for all 
the participants in the Arrangement except Korea, which has an additional 
The participants in the Arrangement are Australia, Canada, the European Community 
(Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the 
Netherlands, Portugal, Spain, Sweden and the United Kingdom), Korea, Japan, New Zealand, 
Norway, Switzerland and the United States. 
transition period running until 1 April 2002 in which to phase in the minimum 
premium benchmarks. 
The Guiding Principles specify: a Quantitative Country Risk Model which puts buyer 
countries into one of seven categories; the establishment of minimum premium 
benchmarks which take account of product-quality differences between the 
Participants (related conditions); details of the derogations allowed, plus premium 
feedback tools to ensure that premium levels are matched to their intended purposes 
where the main principle is that the level of premium is not inadequate to cover 
long-term operating costs and losses. 
The Guiding Principles have been incorporated into the new consolidated text of the 
Arrangement, which was approved by the Participants in 1997, keeping their terms 
and form compatible with that Arrangement. 
The Commission has found that the Arrangement provides an effective international 
discipline, clearly exerting downward pressure on the level of subsidies and helping to 
prevent distortions of competition connected with officially supported export credits and 
guarantees. The Commission therefore backs the adoption of the new consolidated and more 
user-friendly version of the Arrangement, with its new rules constituting a new stage in the 
elimination of distortions of competition in world trade. 
The Commission therefore proposes that the Council adopt the draft decision approving the 
new consolidated version of the Arrangement (which includes the new additional rules 
adopted by the participants) and incorporating it into Community law. 
Proposal for a 
COUNCIL DECISION 
amending the Decision of 4 April 1978 on the application of certain guidelines in the field of 
officially supported export credits 
THE COUNCIL OF THE EUROPEAN UNION, 
Having regard to the Treaty establishing the European Community, and in particular 
Article 113 thereof, 
Having regard to the proposal from the Commission2, 
Whereas the Community is party to the OECD Arrangement on guidelines for officially 
supported export credits, hereinafter referred to as "the Arrangement"; 
Whereas the Arrangement is the subject of the Council Decision of 4 April 1978, as last 
amended by Decision 97/530/EC3; 
Whereas the participants in the Arrangement have drawn up a new consolidated text which 
comprises all the amendments approved by the participants since the revision of the 
Arrangement, which was made applicable by Decision 93/112/EEC4; 
Whereas 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 examine 
guiding principles to bring about a convergence of export credit premiums; 
Whereas 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; whereas those 
guiding principles were incorporated into the new consolidated text of the Arrangement in a 
manner and form compatible with the Arrangement; 
Whereas the text contained in the Annex to the Decision of 4 April 1978 should therefore be 
replaced by the consolidated text of the Arrangement, 
HAS ADOPTED THIS DECISION: 
Article 1 
The guidelines contained in the Arrangement attached to this Decision shall apply in the 
European Community. 
2 OJC 
3 OJL 216, 8.8.1997, p. 77 
4 OJL 44, 22.2.1993, p. 1. 
Article 2 
The Annex to the Decision of 4 April 1978 is hereby replaced by the Annex to this Decision. 
Article 3 
This Decision is addressed to the Member States. 
Done at Brussels, For the Council 
The President 
ANNEX 
ARRANGEMENT ON GUIDELINES FOR OFFICIALLY SUPPORTED 
EXPORT CREDITS 
TABLE OF CONTENTS 
INTRODUCTION 10 
CHAPTER I: SCOPE OF THE ARRANGEMENT 11 
1. PARTICIPATION 11 
2. SCOPE OF APPLICATION 11 
3. SPECIAL SECTORAL APPLICATIONS AND EXCLUSIONS 11 
4. REVIEW 12 
5. WITHDRAWAL 12 
6. MONITORING 12 
CHAPTER II: PROVISIONS FOR EXPORT CREDITS 12 
7. CASH PAYMENTS 12 
8. REPAYMENT TERMS 13 
9. STARTING POINT OF CREDIT 13 
10. MAXIMUM REPAYMENT TERM 13 
11. SPECIAL TERMS FOR POWER PLANT OTHER THAN NUCLEAR POWER PLANT 14 
12. CLASSIFICATION OF COUNTRIES FOR MAXIMUM REPAYMENT TERMS 14 
13. REPAYMENT OF PRINCIPAL 14 
14. PAYMENT OF INTEREST 15 
15. MINIMUM INTEREST RATES , 15 
16. CONSTRUCTION OF CIRRs 15 
17. APPLICATION OF CIRRs 16 
18. COSMETIC INTEREST RATES 16 
19. OFFICIAL SUPPORT FOR COSMETIC INTEREST RATES 16 
20. MINIMUM PREMIUM 17 
21. COUNTRY RISK CLASSIFICATION METHODOLOGY 18 
22. MINIMUM PREMIUM BENCHMARKS 18 
23. RELATED CONDITIONS 19 
24. PREMIUM FEEDBACK TOOLS 20 
25. LOCAL COSTS 20 
26. VALIDITY PERIOD FOR EXPORT CREDITS 20 
27. NO DEROGATION ENGAGEMENT FOR EXPORT CREDITS 21 
28. ACTION TO AVOID OR MINIMIZE LOSSES 21 
29. MATCHING 21 
CHAPTER III: PROVISIONS FOR TRADE-RELATED AID 22 
30. GENERAL PRINCIPLES FOR TIED AID 22 
31. DEFINITION OF TIED AID 22 
32. FORMS OF TIED AID 22 
33. ASSOCIATED FINANCING 23 
34. COUNTRY ELIGIBILITY FOR TIED AID 24 
35. PROJECT ELIGIBILITY FOR TIED AID 24 
36. EXEMPTIONS FROM ELIGIBILITY RULES 25 
37. DEFINITION OF CONCESSIONALITY LEVEL OF TIED AID 25 
38. CALCULATION OF CONCESSIONALITY LEVEL OF TIED AID 25 
39. VALIDITY PERIOD FOR TIED AID 27 
40. NO DEROGATION ENGAGEMENT FOR TIED AID 27 
41. MATCHING 28 
CHAPTER IV: PROCEDURES 28 
SECTION 1: COMMON PROVISIONS FOR EXPORT CREDITS AND TRADE-RELATED AID 28 
42. COMMITMENT 28 
43. FIRM UNDERTAKING 28 
44. PERIOD FOR REPLIES 29 
45. STANDARD FORM FOR ALL NOTIFICATIONS 29 
46. INFORMATION ON OFFICIAL SUPPORT 29 
SECTION 2: NOTIFICATION PROCEDURES FOR EXPORT CREDITS 29 
47. DEROGATIONS: PRIOR NOTIFICATION WITH DISCUSSION 29 
48. PERMITTED EXCEPTIONS : PRIOR NOTIFICATION WITH DISCUSSION 29 
49. PERMITTED EXCEPTIONS: PRIOR NOTIFICATION WITHOUT DISCUSSION 30 
50. MATCHING OF DEROGATIONS 30 
51. MATCHING OF PERMITTED EXCEPTIONS 31 
52. MATCHING OF NON-CONFORMING TERMS AND CONDITIONS NOT NOTIFIED 31 
53. MATCHING OF TERMS AND CONDITIONS OFFERED BY A NON-PARTICIPANT 32 
SECTION 3: NOTIFICATION PROCEDURES FOR TRADE-RELATED AID 32 
54. DEROGATIONS: PRIOR NOTIFICATION WITH DISCUSSION 32 
55. PRIOR NOTIFICATION 32 
56. PROMPT NOTIFICATION 33 
57. EXEMPTIONS FOR UNTIED AID 33 
58. EXEMPTIONS FOR TECHNICAL ASSISTANCE AND SMALL PROJECTS 33 
59. TYING STATUS OF AID 33 
60. MATCHING OF PRIOR NOTIFICATIONS 33 
61. MATCHING OF PROMPT NOTIFICATIONS 34 
SECTION 4: CONSULTATION PROCEDURES FOR TRADE-RELATED AID 34 
62. PURPOSE OF CONSULTATIONS 34 
63. SCOPE AND TIMING OF CONSULTATIONS 34 
64. CONSULTATION PROCEDURES FOR LARGE PROJECTS 35 
65. OUTCOME OF CONSULTATIONS 35 
SECTION 5: INFORMATION EXCHANGE PROCEDURES FOR EXPORT CREDITS AND TRADE-
RELATED AID : 35 
66. CONTACT POINTS 35 
67. SCOPE OF ENQUIRIES 35 
68. SCOPE OF RESPONSES 36 
69. FACE-TO-FACE CONSULTATIONS 36 
70. COMMON LINES 37 
71. PROCEDURES AND FORMAT OF COMMON LINES 37 
72. RESPONSES TO COMMON LINE PROPOSALS 37 
73. ACCEPTANCE OF COMMON LINES 38 
74. DISAGREEMENT ON COMMON LINES 38 
75. EFFECTIVE DATE OF COMMON LINE 38 
76. VALIDITY OF COMMON LINES 38 
77. DEVIATION FROM A COMMON LINE 39 
SECTION 6: OPERATIONAL PROVISIONS FOR THE COMMUNICATION OF MINIMUM INTEREST 
RATES (CIRRS) 39 
78. COMMUNICATION OF MINIMUM INTEREST RATES 39 
79. EFFECTIVE DATE FOR APPLICATION OF INTEREST RATES 39 
80. IMMEDIATE CHANGES IN INTEREST RATES 40 
SECTION 7: OPERATIONAL PROVISIONS FOR THE EXCHANGE OF INFORMATION FOR 
PREMIUM. 40 
81. ELECTRONIC EXCHANGE OF INFORMATION FOR PREMIUM (EEI) 40 
SECTION 8: REVIEWS 40 
82. ANNUAL REVIEW 40 
83. REVIEW OF MINIMUM INTEREST RATES 40 
84. REVIEW OF MINIMUM PREMIUM BENCHMARKS AND RELATED ISSUES 40 
CHAPTER V: FUTURE WORK 41 
85. GLOBAL UNTYING 41 
86. MARKET WINDOWS 41 
87. SECTORS 41 
88. DIFFERENCES OF INTERPRETATION 42 
ANNEX I: SECTOR UNDERSTANDING ON EXPORT CREDITS FOR SHIPS 43 
ANNEX II: SECTOR UNDERSTANDING ON EXPORT CREDITS FOR NUCLEAR POWER PLANT45 
ANNEX III: SECTOR UNDERSTANDING ON EXPORT CREDITS FOR CIVIL AIRCRAFT 48 
APPENDIX I ILLUSTRATIVE LIST 56 
ANNEX IV: STANDARD FORM FOR NOTIFICATIONS 60 
ANNEX V: STANDARD FORM FOR NOTIFICATION OF PERMITTED EXCEPTIONS FROM 
MINIMUM PREMIUM BENCHMARKS 62 
ANNEX VI: CHECKLIST OF DEVELOPMENTAL QUALITY 64 
ANNEX VII: ELECTRONIC EXCHANGE OF INFORMATION (EEI) 66 
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"5 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 recognize 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 materializing. 
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). 
See Article 88 (Future Work) 
10 
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 On-line Information 
System (OLIS), telex, telefax. The withdrawal takes effect 60 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. 
12 
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 sub-paragraphs 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 10 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 10 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 list6. 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 above-mentioned 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 recognized 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 nrincipal 
only, or for the amount of principal and interest combined. 
ample Ubing 1996 data, those countries with a GNP per capita above $5 435. 
14 
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 capitalized 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. 
15 
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 ECU CIRR, which is based on 
the secondary market yield on medium term ECU 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 CERRs 
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. 
16 
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. 
17 
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 BENCHMARKS7 
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)8 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. 
The application of the minimum premium benchmarks is subject to the Transition Period: 
- The Transition Period shall end on 31st 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 31st March 1999, i.e. 30th 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 st March 2002. 
* By 1st April 1999, Korea shall apply at least 40 per cent of the initial minimum premium 
benchmarks; by 1st April 2000, Korea shall apply 60 per cent of the minimum premium 
benchmarks; by 1st April 2001, Korea shall apply 80 per cent of the minimum premium 
benchmarks; and by 1st April 2002, Korea shall apply 100 per cent of the benchmarks. 
For example using 1996 data, those countries with a GNP per capita above $ 9 635. 
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 neutralize 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. 
19 
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. 
20 
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 13a). 
b) Notwithstanding sub paragraph 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 
externalized/removed or limited/excluded for the entire life of the debt repayment obligation, 
as follows: 
- if a Participant is able to externalize/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 tiret 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 MINIMIZE 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 minimize 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 
21 
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, minimize 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)"; 
22 
- 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. 
23 
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 Bank9. 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 above 
mentioned 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 recognized 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 1991.10 
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. 
For example using 1996 data, those countries with a GNP per capita above $3 115. 
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". 
24 
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 sub-paragraph 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: 
25 
- The average of the CIRR + Margin 
Margin (M) depends on repayment terms (R) as follows: 
R M 
less than 15 years 0.75 
from 15 years up to, but not including 20 years 1.00 
from 20 years up to but not including 30 years 1.15 
from 3 0 years and above 1.25 
- 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 sub-paragraph 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. 
26 
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 17 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 tiret of Article 40 a), the restrictions on the minimum concessionality 
level do not apply to technical assistance as set out in the first tiret of Article 58. 
c) Notwithstanding the second tiret 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 recognizing 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 rendered 
meaningless by leaving insufficient time for the Participants to discuss the transaction. 
28 
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) lc form. 
SECTION 2: NOTIFICA TION 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 10 calendar days before issuing any 
commitment. If any other Participant requests a discussion during this period, the initiating 
Participant shall wait an additional 10 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 Participant shall notify all other Participants at least 10 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 externalized/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 10 calendar days. If the 
29 
discount to the minimum premium benchmark is 25 per cent or more, the notifying Participant shall notify 
all other Participants at least 20 calendar days before issuing any commitment. " 
49. PERMITTED EXCEPTIONS: PRIOR NOTIFICATION WITHOUT DISCUSSION 
a) A Participant shall notify all other Participants at least 10 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 
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 externalized/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 discounts. 
30 
- 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 10 or 20 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 10 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 tiret of Articles 50 
or 51 as appropriate; and 
- in a case of "non-identical matching", follow the procedures set out in the second tiret of 
Articles 50 or 51 as appropriate. 
31 
53. MATCHING OF TERMS AND CONDITIONS OFFERED BY A NON-PARTICIPÀNT 
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 30 working days before the bid closing or 
commitment date, whichever is the earlier. 
c) Prior notification made in accordance with the third tiret 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. 
32 
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 co-operation 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 30 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 
33 
- 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 30 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 co-operation with multilateral organizations 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. 
34 
b) The consultation shall be completed and the findings on both questions in Article 62 notified by 
the Secretariat to all Participants at least 10 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 60 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. yNeither the donor 
nor any other Participant shall make a tied aid commitment until 10 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 10 working day period shall 
be extended to 15 days. 
c) The Secretariat shall monitor the progress and results of consultations. 
SECTION5: 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. 
35 
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 co-ordinate with the Secretariat on any necessary follow-up action. 
g) An information exchange or face-to-face consultations may lead to a common line. 
36 
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 20 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. 
37 
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 20 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 14 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 60 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 organize 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 28 calendar days after the face-to-face 
consultation, or 60 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: OPERA TIONAL PROVISIONS FOR THE COMMUNICA TION 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. 
39 
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 10 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 Participants1' 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 45 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; 
40 
- 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 co-operate 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. 45 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. 
41 
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. 
42 
ANNEX I: SECTOR UNDERSTANDING ON EXPORT CREDITS FOR SHIPS 
1. For any contract relating to any new sea-going ship or any conversion of a ship12 to be negotiated 
from 1 December 1979 onwards, participants in this Understanding agree to abolish existing official 
facilities and to introduce no new official facilities for export credits on terms providing: 
i) a maximum duration exceeding eight-and-a-half years14 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 charges15. 
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. Insofar 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, recognizing 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 authorization is 
given so to commit them. 
Ship conversion means any conversion of sea-going vessels of more than 1.000 grt. on condition that 
conversion operations entail radical alterations to the cargo plan, the hull or the propulsion system. 
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. 
Given the special nature of the transactions for vessels transporting liquefied natural gas, the duration of 
authorized credit for this type of ship only is increased to ten years. 
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. 
43 
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 placed16 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 
competitive 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. 
Ill 
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. 
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. 
44 
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 AH) 
3. Maximum Repayment Term 
The maximum repayment term, irrespective of the country classification, is 15 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 15 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. 
45 
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 10 years. 
5. Construction of SCIRRs 
SCIRRs shall be set at a fixed margin of 75 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 tiret of Article 16 b) of the Arrangement, the CIRR 
for the longest term shall be used for constructing the SCIRR. 
6. Local Costs and Capitalization 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 
capitalization 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 apply the relevant CIRR. 
c) Official support for the separate provision of Uranium Enrichment Services shall not be provided 
on terms more favourable than those which apply to nuclear fuel. 
d) Reprocessing and spent fuel management (including waste disposal) shall be paid for on a cash 
basis. 
e) The Participants shall not provide free nuclear fuel or services. 
8. Aid 
The Participants shall not provide aid support, unless this is in the form of an untied grant. 
46 
CHAPTER III: PROCEDURES 
9. Prior Consultation 
Recognizing the advantages which can accrue if a common attitude towards terms can be achieved for 
nuclear power plant, the Participants agree to engage in prior consultation in all cases where there is an 
intention to provide official support. 
10. Prior Notification 
a) The Participant initiating a prior consultation shall notify all other Participants at least ten days 
before taking a final decision of the terms it intends to support specifying, inter alia, the 
following details: 
- cash payments; 
- repayment term (including the starting point of credit, frequency of instalments for repaying 
principal, and whether these instalments will be equal in amount); 
- currency and value rating of the contract, in accordance with paragraph 7 of Annex IV; 
- interest rate; 
- support for local costs, including the total amount of local costs expressed as a percentage of 
the export contract value, the terms of payment, the nature of the support to be given; 
- the portion of the project to be financed, with separate information for initial fuel load, 
where appropriate; 
- any other relevant information including references to related cases. 
b) Other Participants shall not take a final decision on the terms it will support during the ten day 
period specified in sub paragraph a) above but shall within five days exchange information with 
all other Participants in the consultation on the appropriate credit terms for the transaction with 
the objective of achieving a common attitude on such terms. 
c) If a common attitude is not achieved through these means within the ten day period after receipt 
of the initial notification the final decision of each Participant in the consultation shall be 
delayed for an additional 10 days during which period further efforts to achieve a common 
attitude shall be made at face-to-face consultations. 
47 
ANNEX III: SECTOR UNDERSTANDING ON EXPORT CREDITS FOR CIVIL AIRCRAFT 
PART 1. NEW LARGE AIRCRAFT AND ENGINES FOR SUCH AIRCRAFT 
CHAPTER I: SCOPE 
1. Form and Scope of Application 
Part 1 of the Sector Understanding, which complements the Arrangement, sets out the special guidelines 
which apply to officially supported export credits relating to the sale or lease of new large civil aircraft, 
listed in Appendix I, and the engines installed in such aircraft. The terms of Chapter 1 also apply to 
engines and spare parts when contemplated as part of the original aircraft order, subject to the provisions 
of Article 29 of Part 3 of this Sector Understanding. It does not apply to flight simulators, which are 
subject to the terms of the Arrangement. 
2. Objective 
The objective of this Part of the Sector Understanding is to establish a balanced equilibrium that on all 
markets: 
- equalizes competitive financial conditions between the Participants; 
- neutralizes finance among the Participants as a factor in the choice among competing 
aircraft; and 
- avoids distortions of competition. 
CHAPTER II: PROVISIONS FOR EXPORT CREDITS AND AID 
3. Cash Payments 
a) The Participants shall require a minimum cash payment of 15 per cent of the total price of the 
aircraft, which includes the price of the airframe, any installed engines plus the spare engines 
and spare parts to the extent referred to in Article 29 of Part 3 of this Sector Understanding. 
b) 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. 
4. Maximum Repayment Term 
The maximum repayment term is 12 years. 
48 
5. Eligible Currencies 
The currencies which are eligible for official financing support, as defined in the Introduction to the 
Arrangement, are US Dollars, German Marks, French Francs, UK Pounds, ECUs and Dutch Guilders. 
6. Minimum Interest Rates 
a) The Participants providing official financing support, which shall not exceed 85 per cent of the 
total price of the aircraft referred to in sub paragraph a) of Article 3 above, shall apply minimum 
interest rates up to a maximum of 62.5 per cent of the total price of the aircraft as follows: 
- on repayment terms up to and including 10 years - TB10 + 120 basis points, 
- on repayment terms of over 10 to 12 years - TB10 + 175 basis points, 
- where TB10 means the 10 year government bond yield for the relevant currency (except the 
ECU) at the constant maturity averaged over the previous two calendar weeks. In the case of 
the ECU, TB10 means the long-term ECU bond yield as published by the Luxembourg Stock 
Exchange, long-term bond series, averaged over the previous two calendar weeks minus 20 
basis points. For all currencies a margin as specified above shall be applied. 
b) The maximum percentage of the aircraft total price that may be financed at the fixed minimum 
interest rates specified in sub-paragraph a) above shall be limited to 62.5 per cent when 
repayment of the loan is spread over the entire life of the financing and 42.5 per cent when 
repayment of the loan is spread over the later maturities. The Participants are free to use either 
repayment approach, subject to the ceiling applicable to that pattern. A Participant offering such 
a tranche shall notify the other Participants of the amount, the interest rate, the date on which the 
interest rate is set, the validity period for the interest rate and the pattern of repayment. The 
Participants shall review the two ceilings at the time of each review in accordance with Article 
17 to examine whether one ceiling provides more advantages than the other with a view to 
adjusting the more advantageous so that a balance is more evenly struck. 
c) Subject to the 85 per cent threshold specified in sub paragraph a) above, 
1) the Participants may additionally provide official financing support in a manner comparable 
with that provided by the Private Export Funding Corporation (PEFCO). Fortnightly 
information on PEFCO's borrowing costs and applicable lending rates, exclusive of official 
guarantee fees, on fixed rate finance for immediate disbursements over a series of dates, for 
contract offers and for bid offers, shall be communicated to the other Participants on a regular 
basis. A Participant offering such a tranche shall notify the other Participants of the amount, 
the interest rate, the date on which the interest rate is set, the validity period for the interest 
rate and the pattern of repayments. Any Participant matching such financing offered by 
another Participant shall match it in all of its terms and conditions other than the validity 
period of offers of commitment as set out in Article 8 below. 
2) these rates as notified shall be applied by all Participants as long as the 24 month 
disbursement interest rate does not exceed 225 basis points above TB10. In the event that the 
24 month rate exceeds 225 basis points, the Participants are free to apply the rate of 225 
basis points for the 24 months disbursement and all the corresponding rates and shall consult 
immediately with a view to finding a permanent solution. 
d) The minimum interest rates are inclusive of credit insurance premium and guarantee fees. 
However, commitment and management fees are not included in the interest rate. 
49 
7. Interest Rate Adjustments 
The minimum interest rates set out in Article 6 above shall be reviewed every two weeks. If the average of 
the government bond yield for the relevant currency at constant maturity, or the long term ECU bond 
yield, differs by 10 basis points or more at the end of any two week period, such minimum interest rates 
will be adjusted by the same basis points difference noted above and the recalculated rate rounded to the 
nearest five basis points. 
8. Validity Period for Export Credits/Interest Rate Offers 
The duration of minimum interest rate offers set in accordance with Article 6 shall not exceed three 
months. 
9. Determination of Interest Rate Offers and Selection of Interest Rates 
a) The Participants may provide official financing support in accordance with Articles 6 and 7 
above at an interest rate applying on the date an interest rate offer is made for the relevant 
aircraft, provided that the offer is accepted within its validity period in accordance with 
Article 8. If the interest rate offer is not so accepted, further interest rate offers may be made up 
to, but no later than, the date of delivery of the relevant aircraft. 
b) An interest rate offer may be accepted and the interest rate selected at any time between contract 
signature and the date of delivery of the relevant aircraft. The rate selected by the borrower shall 
be irrevocable. 
10. Pure Cover Support 
The Participants may provide official support by way of guarantee or insurance only, i. e. pure cover, 
subject to the 85 per cent threshold specified in Article 6 a) above. Any Participant providing such 
support shall notify other Participants of the amount, term, currency and pattern of repayments and interest 
rates. 
11. Competition Reference Point 
In the event of officially supported competition, aircraft that are in the list of large civil aircraft in 
Appendix 1 to this Sector Understanding and that compete with other aircraft may benefit from the same 
credit terms and conditions. 
12. Security for the Repayment Risk 
The Participants may decide upon the security which they deem acceptable to secure the repayment risk 
without reference to other Participants. However, they agree to provide details of such security if 
requested by other Participants, or when deemed appropriate. 
13. Model Changes 
The Participants agree that when a fixed interest rate offer has been made or has been concluded on one 
type of aircraft, the terms contained therein cannot be transferred to another type bearing a different model 
designation. 
50 
14. Leases 
The Participants may, subject to the other terms of Part 1 of the Sector Understanding, provide support for 
a financial lease on the same basis as a contract of sale. 
15. Aid 
The Participants shall not provide aid support, unless this is in the form of an untied grant. However, 
Participants shall consider sympathetically any requests for a common line for tied aid for humanitarian 
purposes. 
CHAPTER III: PROCEDURES 
16. Prior Notification, Matching and Information Exchange 
-*• 
The procedures for prior notification, matching and information exchange set out in the Arrangement shall 
apply to this Part of the Sector Understanding. Furthermore, the Participants may request a consultation if 
there is any reason to believe that another Participant is offering an officially supported credit on terms 
and conditions that do not conform to the Sector Understanding. The consultation shall be held within 
10 days, but otherwise follow the procedures set out in Article 69 of the Arrangement. 
17. Review 
The Participants shall review the procedures and provisions of this Sector Understanding annually to bring 
them closer to market conditions. However, if market conditions or customary financing practices change 
considerably, a review may be requested at any time. 
51 
PART 2 : ALL NEW AIRCRAFT EXCEPT LARGE AIRCRAFT 
CHAPTER IV: SCOPE 
18. Form and Scope of Application 
Part 2 of the Sector Understanding, which complements the Arrangement, sets out the special guidelines 
which apply to officially supported export credits for the sale or lease of new aircraft not covered by Part 1 
of this Sector Understanding. It does not apply to hovercraft nor to flight simulators which are subject to 
the terms of the Arrangement. 
19. Best Endeavours 
The provisions of this Chapter represent the most generous terms that Participants may offer when 
providing official support. The Participants shall, however, continue to respect customary market terms 
for different types of aircraft and shall do everything in their power to prevent these terms from 
being eroded. 
20. Categories of Aircraft 
The Participants have agreed on the following categorization of aircraft: 
- Category A: turbine powered aircraft, including helicopters, (e.g. turbo jet, turbo prop and 
turbo fan aircraft) with generally between 30 to 70 seats. 
- Category B: other turbine powered aircraft, including helicopters. 
- Category C: other aircraft, including helicopters. 
An illustrative list of aircraft in categories A and B is set out in Appendix I. 
CHAPTER V: PROVISIONS FOR EXPORT CREDITS AND AID 
21. Maximum Repayment Term 
The maximum repayment term varies according to the aircraft categorization which shall be determined by 
the criteria set out in Article 20 above. 
a) For category A aircraft the maximum repayment term is ten years. 
b) For category B aircraft the maximum repayment term is seven years. 
c) For category C aircraft the maximum repayment term is five years. 
22. Minimum Interest Rates 
The Participants providing official financing support shall apply minimum interest rates; the Participants 
shall apply the relevant CIRR set out in Article 15 of the Arrangement. 
52 
23. Insurance Premium and Guarantee Fees 
The Participants shall not waive in part or in total, insurance premium or guarantee fees. 
24. Aid 
The Participants shall not provide aid support, unless this is in the form of an untied grant. However, 
Participants shall consider sympathetically any requests for a common line for tied aid for humanitarian 
purposes. 
CHAPTER VI: PROCEDURES 
25. Prior Notification, Matching and Information Exchange 
In the event of officially supported competition for a sale or lease, aircraft competing with those from 
another category or with those covered by other Parts of the Sector Understanding shall, for that specific 
sale or lease, be able to benefit from the same terms and conditions as those other aircraft. The procedures 
for prior notification, matching and information exchange set out in the Arrangement shall apply to this 
Part of the Sector Understanding. Furthermore, the Participants may request a consultation if there is any 
reason to believe that another Participant is offering an officially supported credit on terms that do not 
conform to the Sector Understanding. The consultation shall be held within 10 days, but otherwise follow 
the procedures set out in Article 69 of the Arrangement. 
26. Review 
The Participants shall review the procedures and provisions of this Sector Understanding annually in order 
to bring them closer to market conditions. However, if market conditions or customary financing practices 
change considerably, a review may be requested at any time. 
53 
PART 3: USED AIRCRAFT, SPARE ENGINES, SPARE PARTS, MAINTENANCE AND 
SERVICE CONTRACTS 
CHAPTER VII: SCOPE 
27. Form and Scope of Application 
Part 3 of the Sector Understanding, which complements the Arrangement, sets out the special guidelines 
which apply to officially supported export credits relating to the sale or lease of used aircraft; and of spare 
engines, spare parts, maintenance and service contracts in conjunction with both new and used aircraft. It 
does not apply to hovercraft nor to flight simulators, which are subject to the terms of the Arrangement. 
The relevant provisions of Parts 1 and 2 of the Sector Understanding apply except as follows. 
28. Used Aircraft 
The Participants shall not support credit terms more favourable than those set out in the Sector 
Understanding for new aircraft. The following rules apply specifically to used aircraft. 
a) 
Age of aircraft (years) Normal Maximum Repayment Term 
1 
2 
3 
4 
5- 10 
Over 10 Large Aircraft 
10 
9 
8 
7 
6 
5 Category A 
8 
7 
6 
6 
6 
5 Category B 
6 
6 
5 
5 
5 
4 Category C 
5 
5 
4 
4 
4 
3 
These terms shall be reviewed if the maximum repayment terms for new aircraft are changed. 
b) The Participants providing official financing support shall apply minimum interest rates; the 
Participants shall apply the relevant CIRR set out in Article 15 of the Arrangement. 
29. Spare Engines and Spare Parts 
a) The financing of these items when contemplated as part of the original aircraft order may be on 
the same terms as for the aircraft. However, in such cases the Participants shall also take account 
of the size of the fleet of each aircraft type, including aircraft being acquired, aircraft already the 
subject of a firm order or already owned, on the following basis: 
- for the first five aircraft of the type in the fleet: 15 per cent of the aircraft price, i.e. the price 
of the airframe and installed engines. 
54 
- for the sixth and subsequent aircraft of that type in the fleet: 10 per cent of the aircraft price, 
i.e. the price of the airframe and installed engines. 
b) When these items are not ordered with the aircraft, the maximum repayment terms shall be five 
years for new spare engines and two years for other spare parts. 
c) Notwithstanding sub paragraph b) above for new spare engines for large aircraft, the Participants 
may exceed the maximum repayment term of five years by up to three years 
- where the transaction has a minimum contract value of more than US $20 million; 
- or includes a minimum of four new spare engines. 
The contract value shall be reviewed every two years and adjusted for price escalation 
accordingly. 
d) The Participants reserve the right to change their practice and match the practices of competing 
Participants in relation to the timing of the first repayment of principal with respect to spare 
engines and spare parts. 
30. Maintenance and Service Contracts 
Participants may offer official financing support with a repayment term of up to two years for maintenance 
and service contracts. 
CHAPTER VIII: PROCEDURES 
31. Prior Notification, Matching and Information Exchange 
The procedures for prior notification, matching and information exchange set out in the Arrangement shall 
apply to this Part of the Sector Understanding. Furthermore, the Participants may request a consultation if 
there is any reason to believe that another Participant is offering an officially supported credit on terms 
that do not conform to the Sector Understanding. The consultation shall be held within 10 days, but 
otherwise follow the procedures set out in Article 69 of the Arrangement. 
32. Review 
The Participants shall review the procedures and provisions of this Sector Understanding annually in order 
to bring them closer to market conditions. However, if market conditions or customary financing practices 
change considerably, a review may be requested at any time. 
55 
APPENDIX I 
ILLUSTRATIVE LIST 
All other similar aircraft that may be introduced in the future shall be covered by this Sector 
Understanding and shall be added to the appropriate list in due course. These lists are not exhaustive and 
serve only to indicate the type of aircraft to be included in the different categories where doubts 
could arise. 
LARGE CIVIL AIRCRAFT 
Manufacturer 
Airbus 
Airbus 
Airbus 
Airbus 
Airbus 
Airbus 
Airbus 
Boeing 
Boeing 
Boeing 
Boeing 
Boeing 
Boeing 
British Aerospace 
British Aerospace 
British Aerospace 
British Aerospace 
British Aerospace 
Fokker 
Fokker 
Lockheed 
McDonnell Douglas 
McDonnell Douglas 
McDonnell Douglas 
McDonnell Douglas 
McDonnell Douglas 
Lockheed 
Ramaero Designation 
A 300 
A310 
A319 
A 320 
A321 
A 330 
A 340 
B737 
B747 
B757 
B767 
B777 
707, 727 
RJ70 
RJ85 
RJ100 
RJ115 
Bael46 
F 70 
F 100 
L-100 
MD-80 series 
MD-90 series 
MD-11 
DC-10 
DC-9 
L-1011 
1.11-495 
56 
CATEGORY A AIRCRAFT 
Turbine-powered aircraft - including helicopters - (e.g. turbo jet, turbo-prop and turbo-fan aircraft), with 
generally between 30 and 70 seats. In case a new large turbine-powered aircraft with over 70 seats is 
being developed, immediate consultations shall be held upon request with a view to agree on the 
classification of such an aircraft in this Category or in Part 1 of this Understanding in view of the 
competitive situation. 
Manufacturer Designation 
Aeritalia G 222 
Aeritalia/Aerospatiale ATR 42 
Aeritalia/Aerospatiale ATR 72 
Aerospatiale/MBB C160 Transall 
De Havilland Dash 8 
DeHavilland Dash 8-100 
De Havilland Dash 8 - 200 
De Havilland Dash 8-300 
Boeing Vertol 234 Chinook 
Broman(U.S.) BR 2000 
British Aerospace BAe ATP 
British Aerospace BAe 748 
British Aerospace BAe Jetstream 41 
British Aerospace BAe Jetstream 61 
Canadair CL215T 
Canadair CL415 
Canadair RJ 
Casa CN235 
Dornier DO 328 
EH Industries EH-101 
Embraer EMB 120 Brasilia 
Embraer EMB 145 
Fokker F 50 
Fokker F 27 
Fokker F 28 
Gulfstream America Gulfstream 1-4 
LET 610 
Saab SF 340 
Saab 2000 
Short SD 3-30 
Short SD 3-60 
Short Sherpa 
etc. 
57 
CATEGORY B AIRCRAFT 
Other turbine-powered aircraft, including helicopters. 
Aerospatiale 
Agusta 
Beech 
Beech 
Beech 
Bell Helicopter 
Bell Helicopter 
Bell Helicopter 
Bell Helicopter 
Bell Helicopter 
Bell Helicopter 
Bell Helicopter 
Bombardier / Canadair 
British Aerospace 
British Aerospace 
British Aerospace 
British Aerospace 
Beech Aircraft Corpn d/b/a Raytheon Aircraft Co. 
Beech Aircraft Corpn d/b/a Raytheon Aircraft Co. 
Beech Aircraft Corpn d/b/a Raytheon Aircraft Co. 
Beech Aircraft Corpn d/b/a Raytheon Aircraft Co. 
Beech Aircraft Corpn d/b/a Raytheon Aircraft Co. 
Bell 
Canadair 
Canadair 
Canadair 
Casa 
Casa 
Cessna 
Cessna 
Claudius Dornier 
Dassault Breguet 
Dornier 
Embraer 
Embraer/FAMA 
Eurocopter 
Eurocopter 
Fairchild 
Fairchild 
Fairchild 
Fairchild 
Fairchild 
Fairchild 
Gulfstream America 
IAI 
IAI AS 332 
A 109, A 119 
1900 
Super King Air 300 
Starship 1 
206B 
206L 
212 
230 
412 
430 
214 
Global Express 
BAe Jetstream 31 
BAe 125 
BAe 1000 
BAe Jetstream Super 31 
Hawker 1000 
Hawker 800 
King Air 350 
Beechjet 400 series 
Starship 2000A 
B407 
Challenger 601-3A 
Challenger 601-3R 
Challenger 604 
C 212-200 
C 212-300 
Citation 
441 Conquest III and Caravan 208 series 
CD2 
Falcon 
DO 228-200 
EMB 110P2 
CBA 123 
AS 350, AS 355, EC 120, AS 365, EC 135 
B0105LS 
Merlin/300 
Metro 25 
Metro HI V 
Metro III 
Metro HI A 
Merlin IVC-41 
Gulfstream II, III, IV and V 
Astra SP and SPX 
Arava 101 B 
58 
Learjet 
MBB 
MBB 
McDonnell Helicopter System 
Mitsubishi 
Piaggio 
Pilatus Britten-Norman 
Piper 
Piper 
Piper 
Piper 
Piper 
Reims 
SIAI-Marchetti 
Short 
Westland 
etc. 31 A, 3 5A, 45 and 60 series 
BK117C 
BO 105 CBS 
MD 902, MD 520, MD 600 
Mu2 Marquise 
P 180 
BN2T Islander 
400 LS 
T1040 
PA-42-100 (Cheyenne 400) 
PA-42-720 (Cheyenne III A) 
Cheyenne II 
Cessna-Caravan II 
SF 600 Canguro 
Tucano 
W30 
ANNEX IV: STANDARD FORM FOR NOTIFICATIONS 
Information to be included in each and every notification: 
1. Name of authority/agency responsible under the Arrangement for making notifications. 
2. Reference number (country indication, serial number, year). 
3. The Arrangement Article under which the authority/agency is notifying: 
47 
49 a) 1) 
49 a) 2) 
49 a) 3) 
49 a) 4) 
50, first tiret 
50 second tiret 
51, first tiret 
51, second tiret 
53 
54 
55 and 56 
55 and 56 
60 
60, first tiret 
60, second tiret 
Annex II 
Annex III derogation from Article 27 
"long term" credit to a Category I country 
"abnormal" payment practices 
"long term" credit for a conventional power plant 
"longer " credit for ships 
identical matching of a derogation 
non-identical matching of a derogation 
identical matching of a permitted exception 
non-identical matching of a permitted exception 
matching terms offered by a non-Participant 
derogation from Article 40 
aid financing, concessionality level/grant element less than 
50/80 per cent 
tied aid, concessionality level 50/80 per cent or more 
matching of a transaction notified under Article 55 
identical matching of a prior commitment of tied aid 
matching by other means of a prior commitment of tied aid 
under the Understanding on Export Credits for Nuclear Power Plant, or 
under the Sector Arrangement for Civil Aircraft 
4. Country of buyer/borrower. 
5. Name, location and status (public/private) of buyer/borrower. 
6. Nature of project/goods to be exported; location of project; closing date of tender if relevant; 
expiry date of credit line. 
7. Contract value; value of the credit or credit line; value of exporter's national share; minimum 
contract value of credit line. 
These values shall be stated as follows: 
- The exact amount in the denominated currency for a line of credit; 
fiO 
The value of an individual project or contract in terms of value ratings in accordance with the 
following scale in Special Drawing Rights (SDRs): 
Category 
Category 
Category 
Category 
Category 
Category 
Category 
Category 
Category 
Category 
Category 
Category 
Category 
Category 
Category I 
II 
III 
IV 
V 
VI 
VII 
VIII 
IX 
X 
XI 
XII 
XIII 
XIV 
XV up to 
from 
from 
from 
from 
from 
from 1 000 000 SDRs 
1 000 000 to 2 000 000 SDRs 
3 000 000 SDRs 
5 000 000 SDRs 
7 000 000 SDRs 
10 000 000 SDRs 
20 000 000 SDRs 
40 000 000 SDRs 
80 000 000 SDRs 2 000 000 to 
3 000 000 to 
5 000 000 to 
7 000 000 to 
10 000 000 to 
from 20 000 000 to 
from 40 000 000 to 
from 80 000 000 to 120 000 000 SDRs 
from 120 000 000 to 160 000 000 SDRs 
from 160 000 000 to 200 000 000 SDRs 
from 200 000 000 to 240 000 000 SDRs 
from 240 000 000 to 280 000 000 SDRs 
exceeding 280 000 000 SDRs* 
* Indicate actual level within multiples of 40 000 000 SDRs 
When using this scale please indicate currency of the contract. 
Credit terms which reporting organization intends to support (or has supported): 
cash payments; 
repayment term (including starting point of credit, frequency of instalments for repaying 
principal amount of credit, and whether these instalments will be equal in amount); 
interest rate; 
support for local costs (including the total amount of local costs expressed as a percentage of 
the total value of goods and services exported, the terms of repayment, and the nature of the 
support to be given). 
Any other relevant information including references to related cases and where relevant: 
- justification for matching (specify reference number of notification matched or other 
references) or granting long term credits for Category I countries or conventional power 
plants, etc.; 
- the overall concessionality level of the tied and partially untied aid financing calculated in 
accordance with Article 38 and the discount rate used to calculate that concessionality level; 
- treatment of cash payments in the calculation of the concessionality level; 
- development aid or premixed credit or associated finance; 
- restrictions on use of credit lines. 
61 
ANNEX V: 
STANDARD FORM FOR NOTIFICATION OF PERMITTED EXCEPTIONS FROM 
MINIMUM PREMIUM BENCHMARKS 
Points to be covered in each and every notification: 
1. Name of authority / agency responsible under the Arrangement for making notifications. 
2. Reference number (country identification, serial number, year). 
3. The Arrangement Article under which the authority/agency is notifying : 
48 Permitted Exceptions: Prior Notification With Discussion 
49 Permitted Exceptions: Prior Notification Without Discussion 
4. Country of buyer/borrower. 
5. Name, location and status (public/private) of buyer/borrower. 
6. Nature of project/goods to be exported; location of project; closing date of tender if 
relevant. 
7. (a) Contract value 
(b) Value of credit 
These values shall be stated by category according to the following scale for Special 
Drawing Rights (SDRs): 
Category 
Category 
Category 
Category 
Category 
Category 
Category 
Category 
Category 
Category 
Category 
Category 
Category 
Category 
Category I 
II 
III 
IV 
V 
VI 
VII 
VIII 
IX 
X 
XI 
XII 
XIII 
XIV 
XV up to 
from 
from 
from 
from 
from 
from 1 000 000 SDRs 
1 000 000 to 2 000 000 SDRs 
3 000 000 SDRs 
5 000 000 SDRs 
7 000 000 SDRs 
10 000 000 SDRs 
20 000 000 SDRs 
40 000 000 SDRs 
80 000 000 SDRs 2 000 000 to 
3 000 000 to 
5 000 000 to 
7 000 000 to 
10 000 000 to 
from 20 000 000 to 
from 40 000 000 to 
from 80 000 000 to 120 000 000 SDRs 
from 120 000 000 to 160 000 000 SDRs 
from 160 000 000 to 200 000 000 SDRs 
from 200 000 000 to 240 000 000 SDRs 
from 240 000 000 to 280 000 000 SDRs 
exceeding 280 000 000 SDRs* 
* indicate actual level within multiples of 40 000 000 SDRs 
When using this scale please indicate the currency of the contract, 
(c) Credit terms (including the length of the disbursement period) 
(a) Proposed premium rate (after adjustment for related conditions) 
(b) OECD premium benchmark (after adjustment for related conditions) 
(>^ 
(c) Actual discount applied to OECD premium benchmark (in percentage terms) after 
adjustment for related conditions 
9. A full explanation of what country credit risks have either been externalized/removed or 
limited/excluded in the individual transaction, as well as an explanation of how such 
externalization/removal or limitation/exclusion of the country credit risks justify the 
alternative benchmark or discount applied. 
10. In cases of matching, full information of the terms supported by a Participant or non-
Participant which are being matched. 
63 
ANNEX VI: CHECKLIST OF DEVELOPMENTAL QUALITY 
CHECKLIST OF DEVELOPMENTAL QUALITY OF AID-FINANCED PROJECTS 
A number of criteria have been developed in recent years by the DAC to ensure that projects in 
developing countries that are financed totally or in part by official development assistance (ODA), 
contribute to development. They are essentially contained in the: 
- DAC Principles for Project Appraisal, 1988; 
- DAC Guiding Principles for Associated Financing and Tied and Partially Untied 
Official Development Assistance, 1987; and 
- Good Procurement Practices for Official Development Assistance, 1986. 
CONSISTENCY OF THE PROJECT WITH THE RECIPIENT COUNTRY'S OVERALL 
INVESTMENT PRIORITIES (PROJECT SELECTION) 
Is the project part of investment and public expenditure programmes already approved by the central 
financial and planning authorities of the recipient country? 
(Specify policy document mentioning the project, e.g. public investment programme of the 
recipient country). 
Is the project being co-financed with an international development finance institution? 
Does evidence exist that the project has been considered and rejected by an international 
development finance institution or another DAC Member on grounds of low developmental priority? 
In the case of a private sector project, has it been approved by the government of the 
recipient country? 
Is the project covered by an intergovernmental agreement providing for a broader range of aid 
activities by the donor in the recipient country? 
PROJECT PREPARATION AND APPRAISAL 
Has the project been prepared, designed and appraised against a set of standards and criteria broadly 
consistent with the DAC Principles for Project Appraisal (PPA)? Relevant principles concern project 
appraisal under: 
a) Economic aspects (paragraphs 30 to 38 PPA). 
b) Technical aspects (paragraph 22 PPA). 
c) Financial aspects (paragraphs 23 to 29 PPA). 
64 
In the case of a revenue producing project, particularly if it is producing for a competitive market, has 
the concessionary element of the aid financing been passed on to the end-user of the funds? 
(paragraph 25 PPA). 
a) Institutional assessment (paragraphs 40 to 44 PPA). 
b) Social and distributional analysis (paragraphs 47 to 57 PPA). 
c) Environmental assessment (paragraphs 55 to 57 PPA). 
PROCUREMENT PROCEDURES 
What procurement mode will be used among the following? (For definitions, see Principles listed in 
Good Procurement Practices for ODA). 
a) International competitive bidding (Procurement Principle III and its Annex 2: Minimum 
conditions for effective international competitive bidding). 
b) National competitive bidding (Procurement Principle IV). 
c) Informal competition or direct negotiations (Procurement Principles V A or B). 
Is it envisaged to check price and quality of supplies (paragraph 63 PPA)? 
65 
ANNEX VII: 
ELECTRONIC EXCHANGE OF INFORMATION (EEI) 
1. The EEI shall include the following items: 
• for the Model 
- Country Risk Reports (Payments Experience) 
- Adjustments to the Quantitative Model Classification 
- List of Country Classifications 
- Procedure for Disagreement Amongst Country Risk Experts 
• for Premium Convergence 
- Bulletin Board 
- Sample Premium Calculations 
- Table of Minimum Premium Benchmarks 
• for Related Conditions 
- Information Fact Sheets (Basic Related Conditions) 
- Classification of Products 
• for Financial Aspects 
- Figures for the PFTs 
• for Permitted Exceptions 
- Prior Notifications 
- Matching Notifications 
2. The development of the EEI is necessary to assist the monitoring and review of the 
Guiding Principles. 
66 
ISSN 0254-1475 
COM(98) 406 final 
DOCUMENTS 
EN 02 10 09 11 
Catalogue number : CB-C0-98-418-EN-C 
ISBN 92-78-37525-X 
Office for Official Publications of the European Communities 
L-2985 Luxembourg 
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