Proposal for a Council Decision amending Decision 2001/76/EC in respect of export credits for ships
Date: 2002-04-22
Institutions: European Commission
Subjects: EU aid, export, export credit, vessel

COMMISSION OF THE EUROPEAN COMMUNITIES

Brussels, 22.04.2002
COM(2002) 195 final

2002/0091 (ACC)

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 Credits1 (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
the amendments made to the Arrangement since its last revision in
consolidating all
December 1992 and the other incorporating specific rules on export credits for project
finance.

1.

2.

3.

4.

1

in the 1981
The discipline applicable to export credits for ships is that set out
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.

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.

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.

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.

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

Ireland,

2

5.

6.

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.

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
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.

is

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.

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.

3

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)

(2)

(3)

(4)

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".

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.

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.

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,

3

OJ L 32, 02.02.2001, p. 1.

4

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
that where the
Understanding and ships covered by the Understanding, except
the
a
Understanding
Understanding shall prevail."

the Arrangement,

complementing

provision

contains

2)

3)

Article 49(a)( 4) is deleted.

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
[…]

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“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

2.2

2.3.

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”), after consideration of substantiated requests by any Participant, may
decide that they shall be covered.

the Sector Understanding

the Participants

(hereinafter

to

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.

(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.

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It is understood that the granting of export credits at conditions equivalent to
(iii)
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
delivery.

4.

Cash payments

term,

irrespective of country classification,

is 12 years after

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

the
Any Participant desiring to provide aid must,
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.

in addition to the provisions of

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.

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9.

Review

a)

b)

c)

d)

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.

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.

such consideration the

Upon a decision by the Participants to the Arrangement
to change the
Arrangement, the Participants to this Sector Understanding (the Participants)
its relevance to this Sector
will examine such a decision and consider
to
Understanding. Pending
the
In case the
Arrangement will not apply to this Sector Understanding.
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.

amendments

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.

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ATTACHMENT

COMMITMENTS FOR FUTURE WORK

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

the Participants to this Sector

a)

b)

c)

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.

To review the provisions of the Arrangement
benchmarks with a view to incorporating them into this Sector Understanding.

in relation to minimum premium

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."

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