CELEX: 51998PC0406
Language: en
Date: 1998-07-15
Title: 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

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)
 ---pagebreak---  ---pagebreak---                              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.
 ---pagebreak---         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.
 ---pagebreak---                                             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.
 ---pagebreak---                                          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
 ---pagebreak---                                                  ANNEX
ARRANGEMENT ON GUIDELINES FOR OFFICIALLY SUPPORTED
                 EXPORT CREDITS
 ---pagebreak---                                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
 ---pagebreak--- 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
 ---pagebreak--- 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
 ---pagebreak---                                               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
 ---pagebreak---                             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.
 ---pagebreak--- 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
 ---pagebreak--- 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.
 ---pagebreak--- 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
 ---pagebreak---      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
 ---pagebreak---      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
 ---pagebreak---     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
 ---pagebreak--- 21.    COUNTRY RISK CLASSIFICATION METHODOLOGY
    a) Premium shall be risk based.
    b) To assess the risk and to establish a common reference classification of countries, they are
       scored according to the Quantitative Country Risk Model (the Model):
       -   the Model is based, for each country, on three groups of risk indicators: the payment
           experience of the Participants, the financial situation and the economic situation;
       -   the methodology of the Model consists of different steps including the assessment of the
           three groups of risk indicators, and the combination and flexible weighting of the risk
           indicator groups; and
       -   such scoring results in countries being classified into seven risk categories.
    c) In accordance with procedures agreed by the Participants, the quantitative outcome of the Model
       shall be considered country-by-country to integrate, in a qualitative way, the political risk and/or
       other risk factors not taken into account by the Model; if appropriate, this may lead to an
       adjustment to the Model classification to reflect the final assessment of the country credit risk.
22.    MINIMUM PREMIUM BENCHMARKS 7
    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.
 ---pagebreak---     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
 ---pagebreak--- 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
 ---pagebreak--- 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
 ---pagebreak---               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
 ---pagebreak---        -   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
 ---pagebreak--- 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
 ---pagebreak---      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
 ---pagebreak---     -   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
 ---pagebreak--- 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.
 ---pagebreak--- 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
 ---pagebreak--- 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
 ---pagebreak--- 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
 ---pagebreak---           -    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
 ---pagebreak--- 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
 ---pagebreak---        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
 ---pagebreak---           - 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
 ---pagebreak---      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
 ---pagebreak---     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
 ---pagebreak--- 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
 ---pagebreak---       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.
 ---pagebreak---     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
 ---pagebreak--- 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
 ---pagebreak---           -   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
 ---pagebreak--- 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
 ---pagebreak---             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
 ---pagebreak--- 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
 ---pagebreak---                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
 ---pagebreak---       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
 ---pagebreak--- 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
 ---pagebreak---     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
 ---pagebreak--- 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
 ---pagebreak--- 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
 ---pagebreak--- 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
 ---pagebreak--- 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
 ---pagebreak--- 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
 ---pagebreak--- 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
                               Large Aircraft     Category A        Category B         Category C
                1                     10                8                6                  5
               2                      9                 7                6                  5
               3                      8                 6                5                  4
               4                      7                 6                5                  4
               5 - 10                 6                 6                5                  4
               Over 10                5                 5                4                  3
              These terms shall be reviewed if the maximum repayment terms for new aircraft are changed.
     b) The Participants providing official financing support shall apply minimum interest rates; the
         Participants shall apply the relevant CIRR set out in Article 15 of the Arrangement.
29.       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
 ---pagebreak---           -   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
 ---pagebreak---                                             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                            Designation
                      Airbus                                  A 300
                      Airbus                                  A310
                      Airbus                                  A319
                      Airbus                                  A 320
                      Airbus                                  A321
                      Airbus                                  A 330
                      Airbus                                  A 340
                      Boeing                                  B737
                      Boeing                                  B747
                      Boeing                                  B757
                      Boeing                                  B767
                      Boeing                                  B777
                      Boeing                                  707, 727
                      British Aerospace                       RJ70
                      British Aerospace                       RJ85
                      British Aerospace                       RJ100
                      British Aerospace                       RJ115
                      British Aerospace                       Bael46
                      Fokker                                  F 70
                      Fokker                                  F 100
                       Lockheed                               L-100
                      McDonnell Douglas                       MD-80 series
                       McDonnell Douglas                      MD-90 series
                       McDonnell Douglas                      MD-11
                       McDonnell Douglas                      DC-10
                       McDonnell Douglas                      DC-9
                       Lockheed                               L-1011
                       Ramaero                                1.11-495
                                                   56
 ---pagebreak--- 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
 ---pagebreak--- CATEGORY B AIRCRAFT
Other turbine-powered aircraft, including helicopters.
     Aerospatiale                                       AS 332
     Agusta                                             A 109, A 119
     Beech                                              1900
     Beech                                              Super King Air 300
     Beech                                              Starship 1
     Bell Helicopter                                    206B
     Bell Helicopter                                    206L
     Bell Helicopter                                    212
     Bell Helicopter                                    230
     Bell Helicopter                                    412
     Bell Helicopter                                    430
     Bell Helicopter                                    214
     Bombardier / Canadair                              Global Express
     British Aerospace                                  BAe Jetstream 31
     British Aerospace                                  BAe 125
     British Aerospace                                  BAe 1000
     British Aerospace                                  BAe Jetstream Super 31
     Beech Aircraft Corpn d/b/a Raytheon   Aircraft Co. Hawker 1000
     Beech Aircraft Corpn d/b/a Raytheon   Aircraft Co. Hawker 800
     Beech Aircraft Corpn d/b/a Raytheon   Aircraft Co. King Air 350
     Beech Aircraft Corpn d/b/a Raytheon   Aircraft Co. Beechjet 400 series
     Beech Aircraft Corpn d/b/a Raytheon   Aircraft Co. Starship 2000A
     Bell                                               B407
     Canadair                                           Challenger 601-3A
     Canadair                                           Challenger 601-3R
     Canadair                                           Challenger 604
     Casa                                               C 212-200
     Casa                                               C 212-300
     Cessna                                             Citation
     Cessna                                             441 Conquest III and Caravan 208 series
     Claudius Dornier                                   CD2
     Dassault Breguet                                   Falcon
     Dornier                                            DO 228-200
     Embraer                                            EMB 110P2
     Embraer/FAMA                                       CBA 123
     Eurocopter                                         AS 350, AS 355, EC 120, AS 365, EC 135
     Eurocopter                                         B0105LS
     Fairchild                                          Merlin/300
     Fairchild                                          Metro 25
     Fairchild                                          Metro HI V
     Fairchild                                          Metro III
     Fairchild                                          Metro HI A
     Fairchild                                          Merlin IVC-41
     Gulfstream America                                 Gulfstream II, III, IV and V
     IAI                                                Astra SP and SPX
     IAI                                                Arava 101 B
                                                     58
 ---pagebreak--- Learjet                     31 A, 3 5A, 45 and 60 series
MBB                         BK117C
MBB                         BO 105 CBS
McDonnell Helicopter System MD 902, MD 520, MD 600
Mitsubishi                  Mu2 Marquise
Piaggio                     P 180
Pilatus Britten-Norman      BN2T Islander
Piper                       400 LS
Piper                       T1040
Piper                       PA-42-100 (Cheyenne 400)
Piper                       PA-42-720 (Cheyenne III A)
Piper                       Cheyenne II
Reims                       Cessna-Caravan II
SIAI-Marchetti              SF 600 Canguro
Short                       Tucano
Westland                    W30
etc.
 ---pagebreak---                           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                       derogation from Article 27
         49 a) 1)                 "long term" credit to a Category I country
         49 a) 2)                 "abnormal" payment practices
         49 a) 3)                 "long term" credit for a conventional power plant
         49 a) 4)                 "longer " credit for ships
          50, first tiret         identical matching of a derogation
          50 second tiret         non-identical matching of a derogation
          51, first tiret         identical matching of a permitted exception
          51, second tiret        non-identical matching of a permitted exception
          53                      matching terms offered by a non-Participant
          54                      derogation from Article 40
          55 and 56               aid financing, concessionality level/grant element less than
                                  50/80 per cent
          55 and 56               tied aid, concessionality level 50/80 per cent or more
          60                      matching of a transaction notified under Article 55
          60, first tiret         identical matching of a prior commitment of tied aid
          60, second tiret        matching by other means of a prior commitment of tied aid
          Annex II                under the Understanding on Export Credits for Nuclear Power Plant, or
          Annex III               under the Sector Arrangement for Civil Aircraft
4.        Country of buyer/borrower.
5.        Name, location and status (public/private) of buyer/borrower.
6.        Nature of project/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
 ---pagebreak---    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           I   up to 1 000 000 SDRs
      Category          II   from 1 000 000 to 2 000 000 SDRs
      Category         III   from 2 000 000 to 3 000 000 SDRs
      Category         IV    from 3 000 000 to 5 000 000 SDRs
      Category          V    from 5 000 000 to 7 000 000 SDRs
     Category          VI    from 7 000 000 to 10 000 000 SDRs
      Category        VII    from 10 000 000 to 20 000 000 SDRs
      Category       VIII    from 20 000 000 to 40 000 000 SDRs
     Category          IX    from 40 000 000 to 80 000 000 SDRs
     Category           X    from 80 000 000 to 120 000 000 SDRs
     Category          XI    from 120 000 000 to 160 000 000 SDRs
      Category        XII    from 160 000 000 to 200 000 000 SDRs
     Category        XIII    from 200 000 000 to 240 000 000 SDRs
     Category        XIV     from 240 000 000 to 280 000 000 SDRs
     Category         XV     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
 ---pagebreak---                                                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             I  up to 1 000 000 SDRs
            Category            II  from 1 000 000 to 2 000 000 SDRs
            Category           III  from 2 000 000 to 3 000 000 SDRs
            Category          IV    from 3 000 000 to 5 000 000 SDRs
            Category            V   from 5 000 000 to 7 000 000 SDRs
            Category          VI    from 7 000 000 to 10 000 000 SDRs
            Category         VII    from 10 000 000 to 20 000 000 SDRs
            Category        VIII    from 20 000 000 to 40 000 000 SDRs
            Category           IX   from 40 000 000 to 80 000 000 SDRs
            Category            X   from 80 000 000 to 120 000 000 SDRs
            Category           XI   from 120 000 000 to 160 000 000 SDRs
            Category          XII   from 160 000 000 to 200 000 000 SDRs
            Category         XIII   from 200 000 000 to 240 000 000 SDRs
            Category        XIV     from 240 000 000 to 280 000 000 SDRs
            Category         XV     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)
                                                   (>^
 ---pagebreak---     (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
 ---pagebreak---                  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
 ---pagebreak--- 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
 ---pagebreak---                                             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
 ---pagebreak---                                                                    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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