Proposal for a COUNCIL DECISION amending Decision 2001/76/EC in respect of export credits for ships

(presented by the Commission)

EXPLANATORY MEMORANDUM

The Community is a participant in the Arrangement on Guidelines for Officially Supported Export Credits [1] (OECD Arrangement). The Arrangement was incorporated into Community law by a Council Decision of 4 April 1978, extended for an indefinite period by a Decision of 14 December 1992 and last amended by two Council Decisions of 22 December 2000, one consolidating all the amendments made to the Arrangement since its last revision in December 1992 and the other incorporating specific rules on export credits for project finance.

[1] The participants in the Arrangement are: Australia, Canada, European Community (comprising: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, Sweden and United Kingdom), Japan, South Korea, New Zealand, Norway, Switzerland and the United States.

1. The discipline applicable to export credits for ships is that set out in the 1981 Understanding on export credits for ships concluded within the OECD and annexed to the OECD Arrangement. The discipline has never been revised and is now obsolete.

2. The part on export credits in the 1994 Agreement respecting Normal Competitive Conditions in the Commercial Shipbuilding and Repair industry, which was concluded within the OECD framework by the European Community and certain other countries, and which updated the existing discipline, was to replace the 1981 Uunderstanding but never entered into force as it was not ratified by the United States of America.

3. Although it did not enter into force, the 1994 discipline was applied by certain participants while the others continued to apply the 1981 discipline, so creating potential for distortions of competition. The participants in Working Party No 6 on shipbuilding therefore appointed a subgroup of experts to propose the text of a new sector understanding to clarify matters and provide the sector with up-to-date rules on export credits. The solution had to be feasible without any need for the participation of the United States (which does not export ships anyway) since it was no more interested in being involved in this process than in ratifying the 1994 Agreement.

4. The subgroup considered three different options: adoption of the 1994 Agreement as it stood, the adoption of the 1994 Agreement supplemented by the amendments which had been made to the Arrangement in the meantime, or the adoption of a new sector annex to the Arrangement. On 14 September 2001 the subgroup agreed to propose a discipline on export credits which would take the form of an annex to the Arrangement from the very outset.

5. Following its formal approval on 21 December 2001 by OECD Working Party No 6, [2] the replacement of the text of former Annex I by the text of the new sector understanding was approved by the participants in the Arrangement.

[2] The full members of working group No 6 are: European Community (comprising: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Portugal, Spain, Sweden and United Kingdom), Japan, Mexico, Norway, Poland, Slovakia, South Korea and the United States; Canada, Romania, the Russian Federation and Turkey have observer status.

6. The main objective of the Arrangement on guidelines for officially supported export credits is to regulate governments' role in export credits, so that exports reflect quality and prices rather than the most heavily-subsidised financing, and hence to establish equal conditions of competition among exporters. The Arrangement is the international frame of reference governing official support for export credits. It therefore makes sense to subject ships to the same discipline as other exportable capital goods, confining differentiated treatment solely to technical issues specific to this sector, as in the case of nuclear power plants and aircraft.

The Commission considers that the Arrangement has introduced an effective international discipline that is manifestly exerting downward pressure on subsidies. The Arrangement has helped to prevent distortions of competition linked with officially supported export credits and guarantees. The Commission is therefore in favour of introducing the new discipline on export credits for ships into the Arrangement as one more step towards eliminating distortions of competition from world trade.

The Commission would therefore request the Council to adopt the draft decision approving the new Annex I to the Arrangement and ensuring its application in Community law.

2002/0091 (ACC)

Proposal for a COUNCIL DECISION amending Decision 2001/76/EC in respect of export credits for ships

THE COUNCIL OF THE EUROPEAN UNION,

Having regard to the Treaty establishing the European Community, and in particular Article 133 thereof,

Having regard to the proposal from the Commission,

Whereas:

(1) The Community is a party to the Arrangement on guidelines for officially supported export credits concluded within the OECD, hereinafter referred to as "the Arrangement".

(2) By virtue of the Council Decision of 22 December 2000 replacing the Decision of 4 April 1978 on the application of certain guidelines on officially supported export credits, [3] the guidelines of the Arrangement, which is annexed to the Decision, apply in the Community.

[3] OJ L 32, 02.02.2001, p. 1.

(3) The participants in the Arrangement, in conjunction with the participants in OECD Working Party No 6 on shipbuilding, have decided to update the specific guidelines on export credits applicable to this sector, as laid down in Annex I to the Arrangement. The participants in the Arrangement have, in the framework of the OECD, approved the new sector Understanding on export credits for ships.

(4) The Arrangement continues to apply to ships not covered by the sector Understanding, and also to ships that are covered insofar as the Understanding does not specifically provide otherwise.

(5) Decision 2001/76/EC should be amended accordingly,

HAS ADOPTED THIS DECISION:

Article 1

The Annex to Decision 2001/76/EC is amended as follows:

1) Article 3(a) is replaced by the following:

"The Arrangement shall apply to ships not covered by the sector Understanding on export credits for ships (Annex 1). The Arrangement shall apply to participants in the Understanding and ships covered by the Understanding, except that where the Understanding contains a provision complementing the Arrangement, the Understanding shall prevail."

2) Article 49(a)( 4) is deleted.

3) Annex I is replaced by the text annexed to this Decision.

Article 2

This Decision is addressed to the Member States.

Done at Brussels, [...]

For the Council

The President

[...]

"ANNEX I

SECTOR UNDERSTANDING ON EXPORT CREDITS FOR SHIPS

CHAPTER I: SCOPE OF THE SECTOR UNDERSTANDING

1. Participation

The Participants to the Sector Understanding are: Australia, the European Community (which includes the following countries: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal, Spain, Sweden, and the United Kingdom), Japan, Korea, Norway, Poland and the Slovak Republic.

2. Scope of Application

This Sector Understanding, which complements the Arrangement, sets out specific guidelines for officially supported export credits relating to export contracts of:

2.1 Any new sea-going vessel of 100 gt and above used for the transportation of goods or persons, or for the performance of a specialised service (for example, fishing vessels, fish factory ships, ice breakers and as dredgers, that present in a permanent way by their means of propulsion and direction (steering) all the characteristics of self-navigability in the high sea), tugs of 365 Kw and over and to unfinished shells of ships that are afloat and mobile. The Sector Understanding does not cover military vessels. Floating docks and mobile offshore units are not covered by the Sector Understanding, but should problems arise in connection with export credits for such structures, the Participants to the Sector Understanding (hereinafter the "Participants"), after consideration of substantiated requests by any Participant, may decide that they shall be covered.

2.2 Any conversion of a ship. Ship conversion means any conversion of sea-going vessels of more than 1 000 gt on condition that conversion operations entail radical alterations to the cargo plan, the hull or the propulsion system.

2.3. (i) Although hovercraft-type vessels are not included in the Sector Understanding, Participants are allowed to grant export credits for hovercraft vessels on equivalent conditions to those prevailing in the Sector Understanding. They commit themselves to apply this possibility moderately and not to grant such credit conditions to hovercraft vessels in cases where it is established that no competition is offered under the conditions of the Sector Understanding.

(ii) In the Sector Understanding, the term "hovercraft" is defined as follows: an amphibious vehicle of at least 100 tons designed to be supported wholly by air expelled from the vehicle forming a plenum contained within a flexible skirt around the periphery of the vehicle and the ground or water surface beneath the vehicle, and capable of being propelled and controlled by aircrews or ducted air from fans or similar devices.

(iii) It is understood that the granting of export credits at conditions equivalent to those prevailing in this Sector Understanding should be limited to those hovercraft vessels used on maritime routes and non land routes, except for reaching terminal facilities standing at a maximum distance of 1 kilometre from the water.

CHAPTER II : PROVISIONS FOR EXPORT CREDITS AND TIED AID

3. Maximum Repayment Term

The maximum repayment term, irrespective of country classification, is 12 years after delivery.

4. Cash payments

The Participants shall require a minimum cash payment of 20 per cent of the contract price by delivery.

5. Repayment of Principal

The principal sum of an export credit shall be repaid in equal installments at regular intervals of normally six months and a maximum of 12 months.

6. Minimum Premium

The provisions of the Arrangement in relation to minimum premium benchmarks shall not be applied until such provisions have been further reviewed by the Participants to this Sector Understanding.

7. Aid

Any Participant desiring to provide aid must, in addition to the provisions of the Arrangement, confirm that the ship is not operated under an open registry during the repayment term and that appropriate assurance has been obtained that the ultimate owner resides in the receiving country, is not a non-operational subsidiary of a foreign interest and has undertaken not to sell the ship without his government's approval.

CHAPTER III : PROCEDURES

8. Notification

For the purpose of transparency each Participant shall, in addition to the provisions of the Arrangement and the IBRD/Berne Union/OECD Creditor Reporting System, provide annually information on its system for the provision of official support and of the means of implementation of this Sector Understanding, including the schemes in force.

9. Review

a) The Sector Understanding shall be reviewed annually or upon request by any Participant within the context of the OECD Working Party on Shipbuilding, and a report made to the Participants to the Arrangement.

b) To facilitate coherence and consistency between the Arrangement and this Sector Understanding and taking into account the nature of the shipbuilding industry, the Participants to this Sector Understanding and to the Arrangement will consult and co-ordinate as appropriate.

c) Upon a decision by the Participants to the Arrangement to change the Arrangement, the Participants to this Sector Understanding (the Participants) will examine such a decision and consider its relevance to this Sector Understanding. Pending such consideration the amendments to the Arrangement will not apply to this Sector Understanding. In case the Participants can accept the amendments to the Arrangement they shall report this in writing to the Participants to the Arrangement. In case the Participants cannot accept the amendments to the Arrangement as far as their application to shipbuilding is concerned they shall inform the Participants to the Arrangement of their objections and enter into consultations with them with a view to seeking a resolution of the issues. In case no agreement can be reached between the two groups, the views of the Participants as regards the application of the amendments to shipbuilding shall prevail.

d) Upon entry into force of the "Agreement Respecting Normal Competitive Conditions in the Commercial Shipbuilding and Repair Industry" this Sector Understanding shall cease to apply for those Participants who are legally required to apply the 1994 Understanding on Export Credits for Ships [C/WP6(94)6]. Such Participants shall work for an immediate review to bring the 1994 Understanding in accordance with this Sector Understanding.

ATTACHMENT COMMITMENTS FOR FUTURE WORK

In addition to the Future Work of the Arrangement, the Participants to this Sector Understanding agree:

a) To develop an illustrative list of types of ships which are generally considered non-commercially viable, taking into account the disciplines on tied aid set out in the Arrangement.

b) To review the provisions of the Arrangement in relation to minimum premium benchmarks with a view to incorporating them into this Sector Understanding.

c) To discuss, subject to the developments in relevant international negotiations, the inclusion of other disciplines on minimum interest rates including a special CIRR and floating rates.

d) To discuss the applicability of yearly installments of repayment of principal."