The Participants undertake to share information with non-Participants on notifications related to official support as set out in Article 5 a).

A Participant shall, on the basis of reciprocity, reply to a request from a non-Participant in a competitive situation on the financial terms and conditions offered for its official support, as it would reply to a request from a Participant.

Official support may be provided in different forms:

The Arrangement shall apply to tied aid; the procedures set out in Chapter IV shall also apply to trade-related untied aid.

The Arrangement does not apply to exports of military equipment and agricultural commodities.

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, primarily with the aim of obtaining more favourable repayment terms.

The export of new coal-fired electricity generation plants or parts thereof, comprising all components, equipment, materials and services (including the training of personnel) directly required for the construction and commissioning of such power stations. The addition of a new coal-fired electricity generation unit to an existing plant is deemed to be a new coal-fired electricity generation plant.

The export supply of equipment to existing coal-fired electricity generation plants, unless all the following conditions are met:

The prohibitions set out in paragraphs a) and b) above do not apply to coal-fired electricity generation plants that operate with effective carbon capture utilisation and storage (CCUS) facilities or the retrofitting of existing coal-fired electricity generation plants to install CCUS, as provided for under Project Class A of Appendix II to Annex IV.

Participants agree to undertake a review, upon request by a Participant, of non-CCUS CO2 emission abatement technologies which may be developed in the future, for purposes of exceptions from paragraphs a) and b) above. The inclusion of any future exception shall be based on a consensus decision by the Participants.

This Article shall be reviewed no later than 31 December 2022, in order to contribute to the common goal of addressing climate change, taking into account:

The following Sector Understandings are part of the Arrangement:

A Participant to either Annex I, II, IV or V may apply the respective provisions for official support for export of goods and/or services covered by the relevant Sector Understandings. Where a Sector Understanding does not include a corresponding provision to that of the Arrangement, a Participant to that Sector Understanding shall apply the provision of the Arrangement.

For the export of goods and/or services covered by Annex III, the Participants that are also Participants to that Sector Understanding shall apply the provisions of that Sector Understanding.

The Participants may apply the terms and conditions set out in Annex VI to the export of goods and/or services for transactions that meet the criteria set out in Appendix 1 of Annex VI.

Paragraph a) above applies to the export of goods and services covered by the Sector Understanding on Export Credits for Nuclear Power Plants, the Sector Understanding on Export Credits for Renewable Energy, Climate Change Mitigation and Adaptation, and Water Projects, and the Sector Understanding on Export Credits for Rail Infrastructure.

Paragraph a) above does not apply to the export of goods and services covered by the Sector Understanding on Export Credits for Civil Aircraft or the Sector Understanding on Export Credits for Ships.

Category I countries are High Income ( 2 ) OECD countries. All other countries are in Category II.

The following operational criteria and procedures apply when classifying countries:

A country will change category only after its World Bank category has remained unchanged for two consecutive years.

The Participants shall require purchasers of goods and services, which are the subject of official support, to make down payments of a minimum of 15 % of the export contract value at or before the starting point of credit as defined in Annex XIV. For the assessment of down 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. Financing/insurance of 100 % of the premium is permissible. Premium may or may not be included in the export contract value. Retention payments made after the starting point of credit are not regarded as down payment in this context.

Official support for such down payments shall only take the form of insurance or guarantee against the usual pre-credit risks.

Except as provided for in paragraphs b) and d), the Participants shall not provide official support in excess of 85 % of the export contract value, including third country supply but excluding local costs.

The Participants may provide official support for local costs, under the following conditions:

For Category I countries, the maximum repayment term is eight-and-a-half years.

For Category II countries, the maximum repayment term is 10 years.

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 56 to 61 to reach agreement on appropriate terms.

For non-nuclear power plants, the maximum repayment term shall be 12 years. If a Participant intends to support a repayment term longer than that provided for in Article 13, the Participant shall give prior notification in accordance with the procedure in Article 46.

Non-nuclear power plants 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, in particular costs associated with land development, roads, construction villages, power lines, and switchyard and water supply located outside the power plant site boundary, as well as costs arising in the buyer’s country from official approval procedures (e.g. site permits, construction permit, fuel loading permits), except:

The principal sum of an export credit shall normally be repaid in equal instalments or, when appropriate (e.g. when support is provided for lease transactions or for the export of stand-alone machinery or equipment), equal repayments of principal and interest combined.

Principal shall be repaid and interest shall be paid no less frequently than every six months and the first instalment of principal and interest shall be made no later than six months after the starting point of credit.

On an exceptional and duly justified basis, export credits may be provided on terms other than those set out in paragraphs a) and b) above. The provision of such support shall be explained by an imbalance in the timing of the funds available to the obligor and the debt service profile available under an equal, semi-annual repayment schedule, and shall comply with the following criteria:

Interest due after the starting point of credit shall not be capitalised.

Interest excludes:

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.

The Participants providing official financing support for fixed rate loans shall apply the relevant CIRRs as minimum interest rates. CIRRs are interest rates established according to the following principles:

The provision of official financing support shall not offset or compensate, in part or in full, for the appropriate credit risk premium to be charged for the risk of non-repayment pursuant to the provisions of Article 22.

The applicable MPR is determined according to the following factors:

MPRs are expressed in percentages of the principal value of the credit as if premium were collected in full at the date of the first drawdown of the credit. An explanation of how to calculate the MPRs, including the mathematical formula, is provided in Annex VIII.

Irrespective of the destination country, the premium rates charged by Participants for Market Benchmark Transactions, i.e. transactions involving ultimate obligors/guarantors (i.e. credit risk entities) in Category 0 Countries, High Income OECD Countries and High Income Euro Area Countries ( 3 ), or involving a multilateral or regional institution that the Participants agree is generally exempt from the monetary control and transfer regulations of the country in which it is located ( 4 ) shall be determined on a case-by-case basis. In order to ensure that the premium rates charged for transactions involving obligors, and where appropriate guarantors, in such countries do not undercut private market pricing, the Participants shall adhere to the following procedures, using agreed conventions to translate the relevant benchmark pricing into premium rates:

The “highest risk” countries in Category 7 shall, in principle, be subject to premium rates in excess of the MPRs established for that Category; these premium rates shall be determined by the Participant providing official support.

In calculating the MPR for a transaction, the applicable country risk classification shall be the classification of the obligor’s country and the applicable buyer risk classification shall be the classification of the obligor ( 11 ), unless security in the form of an irrevocable, unconditional, on-demand, legally valid and enforceable guarantee of the total debt repayment obligation for the entire duration of the credit is provided by a third party that is creditworthy in relation to the size of the guaranteed debt. In the case of a third party guarantee, a Participant may choose to apply the country risk classification of the country in which the guarantor is located and the buyer risk category of the guarantor ( 12 ).

The criteria and conditions relating to the application of a third party guarantee according to the situations described in the first and second tirets of paragraph e) above are set out in Annex X.

The HOR convention used in the calculation of an MPR is one-half of the disbursement period plus the entire repayment period and assumes a regular export credit repayment profile, i.e. repayment in equal semi-annual instalments of principal plus accrued interest beginning six months after the starting point of credit. For export credits with non-standard repayment profiles, the equivalent repayment period (expressed in terms of equal, semi-annual instalments) is calculated using the following formula: equivalent repayment period = (average weighted life of the repayment period ‒ 0,25)/0,5.

The Participant choosing to apply an MPR associated with a third party guarantor located in a country other than that of the obligor shall give prior notification according to Article 45.

The five elements of country credit risk are:

Countries are classified into one of eight Country Risk Categories (0–7). MPRs have been established for Categories 1 through 7, but not for Category 0, as the level of country risk is considered to be negligible for countries in this Category. The credit risk associated with transactions in Category 0 countries is predominantly related to the risk of the obligor/guarantor.

The classification of countries ( 13 ) is achieved through the Country Risk Classification Methodology, which is comprised of:

Country Risk Classifications shall be monitored on an ongoing basis and reviewed at least annually and changes resulting from the Country Risk Classification Methodology shall be immediately communicated by the Secretariat. When a country is re-classified in a lower or higher Country Risk Category, the Participants shall, no later than five working days after the re classification has been communicated by the Secretariat, charge premium rates at or above the MPRs associated with the new Country Risk Category.

The country risk classifications shall be made public by the Secretariat.

For all countries classified through the Country Risk Classification Methodology according to Article 24 d), the risk of the sovereign shall be assessed in order to identify, on an exceptional basis, those sovereigns:

The identification of sovereigns meeting the criteria listed in paragraph a) above shall be undertaken according to the Sovereign Risk Assessment Methodology that has been developed and agreed by the Participants.

The list of sovereigns identified as meeting the criteria listed in paragraph a) above shall be monitored on an ongoing basis and reviewed at least annually and changes resulting from the Sovereign Risk Assessment Methodology shall be immediately communicated by the Secretariat.

The list of sovereigns identified under paragraph b) above shall be made public by the Secretariat.

Buyer-risk classifications shall be based on the senior unsecured credit rating of the obligor/guarantor as determined by the Participant.

Notwithstanding paragraph a) above, transactions supported according to the terms and conditions of Annex VI and transactions having a credit value of SDR 5 million or less may be classified on a transaction basis, i.e. after the application of any buyer risk credit enhancements; however, such transactions, regardless of how they are classified, are not eligible for any discounts for the application of buyer risk credit enhancements.

Sovereign obligors and guarantors are classified in buyer risk category SOV/CC0.

On an exceptional basis, non-sovereign obligors and guarantors may be classified in the “Better than Sovereign” (SOV+) buyer risk category if ( 15 ):

The Participants shall give prior notification according to Article 46 for transactions:

In the event of competition for a specific transaction, whereby the obligor/guarantor has been classified by competing Participants in different buyer risk categories, the competing Participants shall seek to arrive at a common buyer risk classification. If agreement on a common classification is not reached, the Participant(s) having classified the obligor/guarantor in a higher buyer risk classification are not prohibited from applying the lower buyer risk classification.

The quality of an export credit product is a function of whether the product is insurance, guarantee or direct credit/financing, and for insurance products whether cover of interest during the claims waiting period (i.e. the period between the due date of payment by the obligor and the date that the insurer is liable to reimburse the exporter/financial institution) is provided without a surcharge.

All existing export credit products offered by the Participants shall be classified into one of the three product categories which are:

The Participants may apply the following country risk mitigation techniques, the specific application of which is set out in Annex XII:

The Participant applying an MPR reflecting the use of country risk mitigation shall give prior notification according to Article 45.

No country risk mitigation shall be applied to Market Benchmark transactions.

The Participants may apply the following buyer risk credit enhancements (BRCE) which allow for the application of a Credit Enhancement Factor (CEF) greater than 0:

Definitions of the BRCE and maximum CEF values for both Category 1–7 obligors as well as Market Benchmark obligors are set out in Annex XII.

BRCEs may be used alone or in combination with the following restrictions:

The Participants shall give prior notification according to Article 45 for transactions with a non-sovereign obligor/guarantor where BRCEs result in the application of a CEF of greater than 0, or whenever BRCEs are used in a Market Benchmark transaction that result in pricing below the corresponding TCMB MPR.

To assess the adequacy of MPRs and to allow, if necessary, for adjustments, either upwards or downwards, Premium Feedback Tools (PFTs), shall be used in parallel to monitor and adjust the MPRs on a regular basis.

The PFTs shall assess the adequacy of the MPRs in terms of both the actual experience of institutions providing official export credits as well as private market information on the pricing of credit risk.

A comprehensive review of all aspects of the premium rules of the Arrangement, with a special emphasis on the Market Benchmark Pricing Rules, shall take place no later than 31 December 2019 ( 17 ).

The Participants have agreed to have complementary policies for export credits and tied aid. Export credit policies should be based on open competition and the free play of market forces. Tied aid policies should provide needed external resources to countries, sectors or projects with little or no access to market financing. Tied aid policies should ensure best value for money, minimise trade distortion, and contribute to developmentally effective use of these resources.

The tied aid provisions of the Arrangement do not apply to the aid programmes of multilateral or regional institutions.

These principles do not prejudge the views of the Development Assistance Committee (DAC) on the quality of tied and untied aid.

A Participant may request additional information relevant to the tying status of any form of aid. If there is uncertainty as to whether a certain financing practice falls within the scope of the definition of tied aid set out in Annex XIV, the donor country shall furnish evidence in support of any claim to the effect that the aid is in fact “untied” in accordance with the definition in Annex XIV.

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)”; and

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:

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:

Association or linkage “in fact” is determined by such factors as:

The following practices shall not prevent the determination of an association or linkage “in fact”:

There shall be no tied aid to countries whose per capita GNI, according to the World Bank data, is above the upper limit for lower middle income countries. The World Bank recalculates this threshold on an annual basis ( 18 ). A country will be reclassified only after its World Bank category has been unchanged for two consecutive years.

The following operational criteria and procedures apply when classifying countries:

Tied aid shall not be extended to public or private projects that normally should be commercially viable if financed on market or Arrangement terms.

The key tests for such aid eligibility are:

The key tests under 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 described in Articles 49 to 51, 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.

Technical assistance: tied aid where the official development aid component consists solely of technical cooperation that is less than either 3 % of the total value of the transaction or SDR 1 million, whichever is lower; and

Small projects: capital projects of less than SDR 1 million that are funded entirely by development assistance grants.

The provisions of Articles 34 and 35 do not apply to tied aid where the concessionality level is 80 % or more except for tied aid that forms part of an associated financing package, described in Article 33.

The provisions of Article 35 do not apply to tied aid with a value of less than SDR 2 million except for tied aid that forms part of an associated financing package, described in Article 33.

Tied aid for LDCs as defined by the United Nations is not subject to the provisions of Articles 34 and 35.

The Participants shall give favourable consideration to an acceleration of tied aid procedures in line with the specific circumstances:

Notwithstanding Articles 34 and 35, a Participant may, exceptionally, provide support by one of the following means:

The discount rate used to calculate the concessionality level of a loan in a given currency, i.e. the Differentiated Discount Rate (DDR), is subject to annual change on 15 January and is calculated as follows:

The base date for the calculation of the concessionality level is the starting point of credit as set out in Annex XIV.

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:

Payments on or before the starting point of credit that are not considered down payment shall be included in the calculation of the concessionality level.

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.

Local costs and third country procurement shall be included in the calculation of concessionality level only if they are financed by the donor country.

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.

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.

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.

Notwithstanding paragraph g) above, 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.

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 48; 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 47 or 48, as appropriate.

When a country has become ineligible for 17-year World Bank Loans for the first time, the validity period 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).

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:

In these circumstances, the existing terms and conditions can be maintained notwithstanding a change in the discount rate set out in Article 38.

As soon as a Participant commits the official support which it has notified in accordance with the procedures in Articles 45 to 48, it shall inform all other Participants accordingly by including the notification reference number on the relevant reporting form.

In an exchange of information in accordance with Articles 53 to 55, 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.

Before matching financial terms and conditions assumed to be offered by a Participant or a non-Participant pursuant to Articles 17 and 40, a Participant shall make every reasonable effort, including as appropriate by use of the face-to-face consultations described in Article 55, to verify that these terms and conditions are officially supported and shall comply with the following:

A Participant intending to offer identical financial terms and conditions to those notified according to Articles 45 and 46 may do so once the waiting period stipulated therein has expired. This Participant shall give notification of its intention as early as possible.

A Participant that has reasonable grounds to believe that financial terms and conditions offered by another Participant (the initiating Participant) are more generous than those provided for in the Arrangement shall inform the Secretariat; the Secretariat shall immediately make available such information.

The initiating Participant shall clarify the financial terms and conditions of its offer within two working days following the issue of the information from the Secretariat.

Following clarification by the initiating Participant, any Participant may request that a special consultation meeting of the Participants be organised by the Secretariat within five working days to discuss the issue.

Pending the outcome of the special consultation meeting of the Participants, financial terms and conditions benefiting from official support shall not become effective.

A Participant shall notify all other Participants at least ten calendar days before issuing any commitment with a credit value of greater than SDR 2 million in accordance with Annex VII if:

If any other Participant requests a discussion during this period, the initiating Participant shall wait an additional ten calendar days.

A Participant shall inform all other Participants of its final decision following a discussion to facilitate the review of the body of experience in accordance with Article 64. The Participants shall maintain records of their experience with regard to premium rates notified in accordance with paragraph a) above.

A Participant shall, in accordance with Annex VII, notify all other Participants at least ten calendar days before issuing any commitment with a credit value of greater than SDR 2 million if it intends to:

If the initiating Participant moderates or withdraws its intention to provide support for such transaction, it shall immediately inform all other Participants.

A Participant shall give prior notification in accordance with Annex VII if it intends to provide official support for:

Prior notification shall be made at the latest 30 working days before the bid closing or commitment date, whichever is the earlier.

If the initiating Participant moderates or withdraws its intention to support the notified terms and conditions, it shall immediately inform all other Participants accordingly.

The provision of this Article shall apply to tied aid that forms part of an associated financing package, as described in Article 33.

A Participant shall promptly notify all other Participants, i.e. within two working days of the commitment, in accordance with Annex VII, if it provides official support for tied aid with a value of either:

A Participant shall also promptly notify all other Participants when an aid protocol, credit line or similar agreement is signed.

Prior notification need not be given if a Participant intends to match financial terms and conditions that were subject to a prompt notification.

A Participant seeking clarification about possible trade motivation for tied aid may request that a full Aid Quality Assessment (detailed in Annex XIII) be supplied.

Furthermore, a Participant may request consultations with other Participants, in accordance with Article 50. These include face-to-face consultations as outlined in Article 55 in order to discuss:

During consultations, a Participant may request, among other items, the following information:

The consultation shall be completed and the findings on both questions in Article 48 notified by the Secretariat to all Participants at least ten working days before the bid closing date or commitment date, whichever comes first. If there is disagreement among the consulting parties, the Secretariat shall invite other Participants to express their views within five working days. It shall report these views to the notifying Participant, which should reconsider going forward if there appears to be no substantial support for an aid offer.

A donor that 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.

The donor shall immediately notify the Participants that it has sent a letter to the Secretary-General of the OECD, a copy of which shall be included with the notification. Neither the donor nor any other Participant shall make a tied aid commitment until ten working days after this notification to Participants has been issued. For projects for which competing commercial offers were identified during the consultation process, the aforementioned ten working-day period shall be extended to 15 days.

The Secretariat shall monitor the progress and results of consultations.

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.

A Participant that 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.

If an enquiry is made to more than one Participant, it shall contain a list of addressees.

A copy of all enquiries shall be sent to the Secretariat.

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.

If an answer to an enquiry subsequently becomes invalid for any reason, because for example:

a reply shall be made without delay and copied to all other addressees of the enquiry and to the Secretariat.

A Participant shall agree within ten working days to requests for face-to-face consultations.

A request for face-to-face consultations shall be made available to Participants and non-Participants. The consultations shall take place as soon as possible after the expiry of the ten working-day period.

The Chairman of the Participants shall coordinate with the Secretariat on any necessary follow-up action, e.g. a Common Line. The Secretariat shall promptly make available the outcome of the consultation.

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 electronic Bulletin Board maintained by the Secretariat on the OECD Network Environment. 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.

The Common Line proposal shall be dated and shall be in the following format:

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).

The Secretariat shall make publicly available the agreed Common Lines.

Responses shall be made within 20 calendar days, although the Participants are encouraged to respond to a Common Line proposal as quickly as possible.

A response may be a request for additional information, acceptance, and rejection, a proposal for modification of the Common Line or an alternative Common Line proposal.

A Participant that 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.

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.

After this further period, a Participant that 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.

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.

A Common Line that has not been accepted may be reconsidered using the procedures in Articles 56 and 57. In these circumstances, the Participants are not bound by their original decision.

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.

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 the electronic bulletin board. Accordingly, the Secretariat, inter alia, shall:

The Participants shall review regularly the functioning of the Arrangement. In the review, the Participants shall examine, inter alia, notification procedures, implementation and operation of the DDR system, rules and procedures on tied aid, questions of matching, prior commitments and possibilities of wider participation in the Arrangement.

This review shall be based on information of the Participants’ experience and on their suggestions for improving the operation and efficacy of the Arrangement. The Participants shall take into account the objectives of the Arrangement and the prevailing economic and monetary situation. The information and suggestions that Participants wish to put forward for this review shall reach the Secretariat no later than 45 calendar days before the date of review.

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.

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.

The Country Risk Classification and Sovereign Risk Assessment Methodologies to review their validity in the light of experience;

The level of the MPRs to ensure that they remain an accurate measure of credit risk, taking into account both the actual experience of institutions providing official export credits as well as private market information on the pricing of credit risk;

The differentiations in the MPRs which take account of the differing quality of export credit products and percentage of cover provided; and

The body of experience related to the use of country risk mitigation and buyer risk credit enhancements and the continued validity and appropriateness of their specific impact on the MPRs.

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

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

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

Interest shall be paid no less frequently than every six months and the first payment of interest shall be made no later than six months after the starting point of credit.

For export credits provided in support of lease transactions, equal repayments of principal and interest combined may be applied in lieu of equal repayments of principal as set out in paragraph a).

Interest due after the starting point of credit shall not be capitalised.

A Participant to this Sector Understanding intending to support a payment of interest on different terms than those set out in paragraph b) shall give prior notification at least ten calendar days before issuing any commitment, in accordance with Annex VII of the Arrangement.

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

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

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

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

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

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

To review the applicability to this Sector Understanding of provisions of the Arrangement in relation to Project Finance.

To discuss whether:

may be used in relation to the repayment profile contained in Article 5 of this Sector Understanding.

This Sector Understanding sets out the provisions which apply to officially supported export credits relating to contracts for:

This Sector Understanding does not apply to:

The maximum repayment term for goods and services included in the provisions of Articles 1 a) 1) and 2) of this Sector Understanding is 18 years.

The maximum repayment term for the initial fuel load is four years from delivery. The maximum repayment term for subsequent reloads of nuclear fuel is two years from delivery.

The maximum repayment term for spent fuel disposal is two years.

The maximum repayment term for enrichment and spent fuel management is five years.

The Participants shall apply a profile of repayment of principal and payment of interest as specified in subparagraph 1) or 2) below:

Principal shall be repaid and interest shall be paid no less frequently than every six months and the first instalment of principal and interest shall be made no later than six months after the starting point of credit.

On an exceptional and duly justified basis, official support for goods and services mentioned in Articles 1) a) 1) and 2) of this Understanding may be provided on terms other than those set out in paragraphs a) and b) above. The provision of such support shall be explained by an imbalance in the timing of the funds available to the obligor and the debt service profile available under an equal, semi-annual repayment schedule, and shall comply with the following criteria:

Interest due after the starting point of credit shall not be capitalised.

A Participant shall give prior notification in accordance with Article 46 of the Arrangement at least ten calendar days before issuing any commitment if it intends to provide support in accordance with the provisions of this Sector Understanding.

If the notifying Participant intends to provide support with a repayment term in excess of 15 years and/or in accordance with Article 3 c) of this Sector Understanding, it shall wait an additional ten calendar days if any other Participant requests a discussion during the initial ten calendar days.

A Participant shall inform all other Participants of its final decision following a discussion, to facilitate the review of the body of experience.

A minimum floating interest rate regime.

The maximum amount of official support for local costs.

The purpose of this Sector Understanding is to provide a framework for the predictable, consistent and transparent use of officially supported export credits for the sale or lease of aircraft and other goods and services specified in Article 4 a) below. This Sector Understanding seeks to foster a level playing field for such export credits, in order to encourage competition among exporters based on quality and price of goods and services exported rather than on the most favourable officially supported financial terms and conditions.

This Sector Understanding sets out the most favourable terms and conditions on which officially supported export credits may be provided.

To this aim, this Sector Understanding seeks to establish a balanced equilibrium that, on all markets:

The Participants to this Sector Understanding (the Participants) acknowledge that the provisions included in this Sector Understanding have been developed for the sole purpose of this Sector Understanding and such provisions do not prejudice the other parts of the Arrangement on Officially Supported Export Credits (the Arrangement) and their evolution.

This Sector Understanding shall apply to all official support provided by or on behalf of a government, and which has a repayment term of two years or more, for the export of:

Official support may be provided in different forms:

This Sector Understanding shall not apply to official support for:

For the purpose of this Sector Understanding, a new aircraft is:

Notwithstanding the provisions of paragraph a) above, a Participant may support terms appropriate to new aircraft for transactions where, with the prior knowledge of that Participant, interim financing arrangements had been put in place because the provision of official support had been delayed; such delay shall not be longer than 18 months. In such cases, the repayment term and the final repayment date shall be the same as if the sale or lease of the aircraft would have been officially supported from the date the aircraft was originally delivered.

For transactions with buyers/borrowers classified in Risk Category 1 (as per Table 1 of Appendix II), the Participants shall:

For transactions with buyers/borrowers classified in Risk Categories 2 to 8 (as per Table 1 of Appendix II), the Participants shall:

A Participant which applies Article 8 b) above shall reduce the maximum amount of official support by the amount of principal of the instalments deemed due from the starting point of the credit so as to ensure that, at the time of disbursement, the amount outstanding is the same as if such an officially supported export credit was provided at the time of delivery. In such circumstances, prior to delivery the Participant shall have received an application for official support.

The Participants providing official support shall charge, for the credit amount officially supported, no less than the minimum premium rate set out in accordance with Appendix II.

The Participants shall use, whenever necessary, the agreed premium rate conversion model to convert between per annum spreads calculated on the outstanding amount of the official support and single up-front premium rates calculated on the original amount of the official support.

The maximum repayment term shall be 12 years for all new aircraft.

On an exceptional basis, and with a prior notification, a maximum repayment term of up to 15 years shall be allowed. In this case, a surcharge of 35 % to the minimum premium rates calculated in accordance with Appendix II shall apply.

There shall be no extension of the repayment term by way of sharing of rights in the security on a pari passu basis with commercial lenders for the officially supported export credit.

The Participants shall apply a profile of repayment of principal and payment of interest as specified in subparagraph 1) or 2) below ( 20 ).

Notwithstanding paragraph a) above, and subject to a prior notification, the repayment of principal may be structured to include a final payment of all outstanding amounts on a specified date. In such case, repayments of principal prior to the final payment will be structured as set out in paragraph a) above, based on an amortisation period not greater than the maximum repayment term allowed for the goods and services being supported.

Notwithstanding paragraph a) above, repayment of principal may be structured on terms less favourable to the obligor.

Interest due after the starting point of credit shall not be capitalised.

The Participants providing official financing support shall apply either a minimum floating interest rate or a minimum fixed interest rate, in accordance with the provisions of Appendix III.

For jet aircraft of a net price of at least USD 35 million, official financing support on CIRR basis shall only be provided in exceptional circumstances. A Participant intending to provide such support shall notify all other Participants at least 20 calendar days before final commitment, identifying the borrower.

Interest rate excludes any payment by way of premium referred to in Article 11 above, and fees referred to in Article 16 below.

Subject to the limits of the premium holding period, the Participants providing official support in the form of pure cover shall charge a premium holding fee on the un-drawn portion of the official support during the premium holding period, as follows:

The Participants providing official support in the form of direct credit/financing shall charge the following fees:

Subject to paragraph b) below, the maximum repayment term for used aircraft shall be established in accordance with the age of the aircraft, as set out in the following table:

The maximum repayment term for aircraft that have undergone conversion, provided the transaction meets all the requirements of Article 19 of Appendix II and provided further that official support, if any, provided in respect of such conversion was not provided in accordance with Article 21 a) below, shall be established in accordance with the period of time since the date of conversion and the age of the aircraft, as set out in the following table:

When purchased, or ordered in connection with the engines to be installed on a new aircraft, the official support for spare engines may be provided on the same terms and conditions as for the aircraft.

When purchased with new aircraft, the official support for spare parts may be provided on the same terms and conditions as for the aircraft up to a maximum 5 % of the net price of the new aircraft and installed engines; paragraph d) below shall apply to official support for spare parts in excess of the 5 % limit.

When spare engines are not purchased with a new aircraft, the maximum repayment term shall be eight years. For spare engines with a unit value of USD 10 million or more, the repayment term may be increased to 10 years, provided the transaction meets all the requirements of Article 19 of Appendix II.

When other spare parts are not purchased with a new aircraft, the maximum repayment term shall be:

If a transaction for conversion:

If a transaction is for a major modification, or refurbishment, a Participant may offer official support with a repayment term of up to:

Within one month after the date of a final commitment, a Participant shall submit the information required in Appendix IV to all other Participants, with a copy to the Secretariat.

In order to establish the margin benchmark in accordance with Appendix III Article 8 b), information on pure cover margins, as outlined in Appendix III Articles 8 c) and d), shall be submitted to the Secretariat no later than five days after the end of each month.

A Participant may ask another Participant for information about the use of its officially supported export credits for the sale or lease of aircraft covered by this Sector Understanding.

A Participant that 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.

The Participant to which such an enquiry is addressed shall respond within seven calendar days and provide reciprocal information to the fullest extent 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 of all enquiries and responses shall be sent to the Secretariat.

In a competitive situation, a Participant may request face-to-face consultations with one or more Participants.

Any Participant shall agree within ten working days to such requests.

The consultations shall take place as soon as possible after the expiry of the ten working-day period.

The Chairman of the Participants shall coordinate with the Secretariat on any necessary follow-up action. The Secretariat shall promptly make available to all Participants the outcome of the consultation.

A Participant (the initiating Participant) that has reasonable grounds to believe that financial terms and conditions offered by another Participant (the responding Participant) are more generous than those provided for in this Sector Understanding shall inform the Secretariat; the Secretariat shall immediately make available such information to the responding Participant.

The responding Participant shall clarify the financial terms and conditions of the official support being considered within five working days following the issue of the information from the Secretariat.

Following clarification by the responding Participant, the initiating Participant may request that a special consultation with the responding Participant be organised by the Secretariat within five working days to discuss the issue.

The responding Participant shall wait for the outcome of the consultation which shall be determined on the day of such consultation before proceeding any further with the transaction.

Common Line proposals shall be addressed to the Secretariat only. The identity of the initiator is not revealed on the Common Line register on the electronic bulletin board maintained by the Secretariat on the OECD Network Environment. However, the Secretariat may orally reveal the identity of the initiator to a Participant on demand. The Secretariat shall keep a record of such requests.

The Common Line proposal shall be dated and shall be in the following format:

Responses shall be made within 20 calendar days, although the Participants are encouraged to respond to a Common Line proposal as quickly as possible.

A response may be acceptance, rejection, a request for additional information, a proposal for modification of the Common Line or an alternative Common Line proposal.

A Participant that remains silent or advises that it has no position shall be deemed to have accepted the Common Line proposal.

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.

After this further period, a Participant that 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.

If a Participant does not accept one or more elements of a Common Line it implicitly accepts all other elements of the Common Line.

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 mentioned in Article 30 above, this period can be extended by their mutual consent. The Secretariat shall inform all Participants of any such extension.

A Common Line that has not been accepted may be reconsidered using the procedures in Articles 28 to 30 above. In these circumstances, the Participants are not bound by their original decision.

Unless agreed otherwise, 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 such situation is accepted by all Participants.

If a Participant seeks an extension within 14 calendar days of the original date of expiry and in the absence of disagreement, a Common Line shall remain valid for a further two-year period; subsequent extensions may be agreed through the same procedure.

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 the electronic bulletin board. Accordingly, the Secretariat, inter alia, shall issue, on a quarterly basis, a list of Common Lines due to expire in the following quarter.

Upon the request of a non-Participant that produces competing aircraft, the Secretariat shall make available valid Common Lines to that non-Participant.

Taking into account a Participant’s international obligations, a Participant may match financial terms and conditions of official support offered by a non-Participant.

In the event of matching non-conforming terms and conditions offered by a non-Participant:

If a matching Participant modifies or withdraws its intention to support the notified terms and conditions, it shall immediately inform all other Participants accordingly.

The Participants shall undertake the review of this Sector Understanding as follows:

The review set out in subparagraph a) 1) above shall consider:

In recognition of the importance of the review process, to ensure that the terms and conditions of this Sector Understanding continue to meet the needs of the Participants, each Participant reserves the right to withdraw from this Sector Understanding in accordance with Article 40 below.

Examining Participants’ practices in providing official support before the starting point of credit.

The provisions applicable to indirect loans.

An extension of maximum repayments terms under Article 19 for used aircraft that have undergone significant refurbishment prior to sale.

An extension of maximum repayment terms under Article 21 for larger contract values.

The provisions applicable to “refurbishing” (Article 21) and “services” (Article 22).

The Cape Town eligibility process.

The definition of “Interested Participant”.

The transaction is asset-backed, meeting all of the following criteria:

The transaction is structured to include, as a minimum, risk mitigants as set out in Table 1 below:

The Participants may select from the following risk mitigants:

Subject to a prior notification, up to one of the “A” risk-mitigants may be replaced by a 15 % surcharge on the applicable minimum premium rate.

The asset-backed transaction relates to an aircraft object within the meaning of the Cape Town Protocol on Matters Specific to Aircraft Equipment,

The operator of the aircraft object (and, if different, the borrower/buyer or lessor if, in the view of the Participant providing the official support, the structure of the transaction so warrants) is situated in a State which, at the time of disbursement in respect of the aircraft object, appears on the list of States which qualify for the reduction of the minimum premium rates (“Cape Town List”), and where applicable, in a territorial unit of that State that qualifies under Article 39 of this Appendix, and

The transaction relates to an aircraft object registered on the International Registry established pursuant to the Cape Town Convention, and the Aircraft Protocol thereto (Cape Town Convention or CTC).

Be a Contracting Party to the Cape Town Convention;

Have made the qualifying declarations set out in Annex I to this Appendix; and

Have implemented the Cape Town Convention, including the qualifying declarations, in its laws and regulations, as required, in such a way that the Cape Town Convention commitments are appropriately translated into national law.

Be a territorial unit to which the Cape Town Convention has been extended;

Be a territorial unit in respect of which the qualifying declarations set out in Annex I to this Appendix apply; and

Have implemented the Cape Town Convention, including the qualifying declarations, in its laws and regulations, as required, in such a way that the Cape Town Convention commitments are appropriately translated into national law.

All the relevant information in respect of the date of deposit of the Cape Town Convention ratification or accession instruments with the Depositary;

A copy of the declarations made by the State which is proposed to be added to the Cape Town List;

All relevant information in respect of the date on which the Cape Town Convention and the qualifying declarations have entered into force;

An analysis which outlines the steps that the State which is proposed to be added to the Cape Town List has taken to implement the Cape Town Convention including the qualifying declarations in its laws and regulations, as required to ensure that the Cape Town Convention commitments are appropriately translated into national law; and

A duly completed questionnaire, the form of which is attached at Annex 2 of this Appendix (“CTC Questionnaire”) completed by at least one law firm qualified to give legal advice in relation to the relevant jurisdiction of the State which is proposed to be added to the Cape Town List. The completed CTC Questionnaire shall specify:

The Chairman shall make a written recommendation with respect to the proposed update of the Cape Town List. The Chairman’s recommendation shall reflect the majority view emerging from the views openly expressed by at least the Participants that provide official support for aircraft exports. In the absence of a majority view, the Chairman shall make a recommendation based exclusively on the views expressed by the Participants and shall set out in writing the basis for the recommendation, including in the case of ineligibility, the eligibility criteria that were not met.

The Chairman’s recommendation shall not disclose any information relating to Participants’ views or positions expressed in the context of the process set out in Articles 41 to 50 of this Appendix, and

The Participants shall accept the recommendation of the Chairman.

A discount of five basis points (per annum spreads) or 0,29 % (up-front) to the applicable minimum premium rates may be applied for officially supported transactions in the form of conditional insurance cover.

The minimum premium rates shall be applied on the covered principal amount.

In the case of non-sovereign transactions:

In the case of a transaction with a sovereign or backed by an irrevocable and unconditional sovereign guarantee, a minimum surcharge shall, in accordance with Table 6 below, be applied to the minimum premium rates set out in accordance with sub-Section I above.

In the case of asset-backed transactions, the minimum premium rates shall be equal to the prevailing minimum spreads established in accordance with sub-Section I above and, in the case of pure cover, converted to upfront fees using the conversion model and the appropriate tenor.

In the case of non asset-backed transactions, the minimum premium rates shall be equal to the prevailing minimum spreads established in accordance with sub-Section I above to which a surcharge of 30 % will be added, and, in the case of pure cover, converted to upfront fees using the conversion model and the appropriate tenor.

Has made the declarations in Article 2 of this Annex; and

Has not made the declarations in Article 3 of this Annex.

Insolvency: State Party declares that it will apply the entirety of Alternative A under Article XI of the Aircraft Protocol to all types of insolvency proceeding and that the waiting period for the purposes of Article XI (3) of that Alternative shall be no more than 60 calendar days.

Deregistration: State Party declares that it will apply Article XIII of the Aircraft Protocol.

Choice of Law: State Party declares that it will apply Article VIII of the Aircraft Protocol.

And at least one of the following (though both are encouraged):

Method for Exercising Remedies: State Party declares under Convention Article 54(2) that any remedies available to the creditor under any provision of the Convention which are not expressed under the relevant provisions thereof to require application to a court may be exercised without leave of the court (the insertion “without court action and” to be recommended (but not required) before the words “leave of the court”);

Timely Remedies: State Party declares that it will apply Article X of the Aircraft Protocol in its entirety (though clause 5 thereof, which is to be encouraged, is not required) and that the number of working days to be used for the purposes of the time-limit laid down in Article X (2) of the Aircraft Protocol shall be in respect of:

Relief Pending Final Determination: State Party shall not have made a declaration under Article 55 of the Convention opting out of Article 13 or Article 43 of the Convention; provided, however, that, if State Party made the declarations set out under Article 2 d) of this Annex, the making of a declaration under Article 55 of the Convention shall not prevent application of the Cape Town Convention discount.

Rome Convention: State Party shall not have made a declaration under Article XXXII of the Aircraft Protocol opting out of Article XXIV of the Aircraft Protocol; and

Lease Remedy: State Party shall not have made a declaration under Article 54(1) of the Convention preventing lease as a remedy.

The name and full address of the law firm completing the questionnaire.

The law firm’s relevant experience, which could include experience in legislative and constitutional processes as they relate to the implementation of international treaties in the State, and specific experience in CTC related issues including any experience in advising either a government on implementation and enforcement of the Cape Town Convention or the private sector, or enforcement of creditor’s rights in the State which is proposed to be added to the Cape Town List.

Whether the law firm is involved or intends to be involved in any transactions that may benefit from a reduction of minimum premium rates if the proposed State is added to the CTC list ( 25 ).

The date on which this questionnaire was completed.

The minimum floating interest rate shall be the relevant benchmark interest rate for the currency as specified by the currency’s benchmark administrator (“floating benchmark rate”) ( 32 ), and the maturity corresponding to the frequency of interest payment of officially supported export credit, to which a margin benchmark calculated in accordance with Article 8 of this Appendix, shall be added.

The floating interest rate setup mechanism shall vary according to the repayment profile chosen, as follows:

Where official financing support is provided for floating rate loans, buyers/borrowers may have the option to switch from a floating rate to a fixed rate provided that the following conditions are fulfilled:

The swap rate, concerning the relevant currency of the officially supported export credit and with a maturity equal to the interpolated rate for the two closest available annual periods to the weighted average life of the loan. The interest rate shall be set two business days prior to each drawdown date.

OR

The Commercial Interest Reference Rate (CIRR) established according to the provisions set out in Articles 3 to 7 of this Appendix,

A CIRR shall be published for the euro, the Japanese yen, the UK pound sterling, the US dollar and, pending the submission of a request by an Interested Participant, any of the eligible currencies set out in Article 9 of this Sector Understanding and calculated by adding a fixed margin of 120 basis points to one of the following three yields (the base rates):

CIRR shall be calculated monthly using data from the previous month and notified to the Secretariat, no later than five days after the end of each month. The Secretariat shall then inform immediately all Participants of the applicable rates and make them publicly available. CIRR shall take effect on the 15th day of each month.

A Participant or a non-Participant may request that a CIRR be established for the currency of a non-Participant. In consultation with the non-Participant, a Participant or the Secretariat on behalf of that non-Participant may make a proposal for the construction of the CIRR in that currency using the Common Line procedures set out in Articles 28 to 33 of this Sector Understanding.

Holding the CIRR: the CIRR applying to a transaction shall not be held for a period longer than six months from its selection (export contract date or any application date thereafter) to the credit agreement date. If the credit agreement is not signed within that limit, and the CIRR is reset for an additional six months, the new CIRR shall be committed at the rate prevailing at the date of reset.

After the credit agreement date, the CIRR shall be applied for drawing periods that do not exceed six months. After the first six-month drawing period, the CIRR is reset for the next six months; the new CIRR shall be the one prevailing at the first day of the new six-month period and cannot be lower than the CIRR originally selected (procedure to be replicated for each subsequent six-month period of drawings).

A three-month floating benchmark rate for US dollar margin benchmark shall be calculated monthly in accordance with paragraph b), using data notified to the Secretariat in accordance with paragraph c), and shall take effect on the 15th day of each month. Once calculated, the margin benchmark shall be notified by the Secretariat to the Participants and shall be made publicly available.

The three-month floating benchmark rate for US dollar margin benchmark shall be a rate equivalent to the average of the lowest 50 % of the margins over: (i) three-month floating benchmark rate for US dollar charged for floating rate transactions; and (ii) three-month floating benchmark rate for US dollar as interpolated by swapping the fixed rate issuance to a floating rate equivalent charged for fixed rate transactions or capital market issuances. In either case, the margins included in the monthly benchmark reports submitted by relevant Participants shall be those from the three full calendar months preceding the effective date set out in paragraph a) above. Transactions/issuances that are used in the calculation of the margin benchmark shall meet the following conditions:

Participants shall report a margin at the time it becomes known and that margin will remain on the Participant’s margin benchmark report for three full calendar months. In the case of individual transactions with multiple pricing events, there shall be no attempt to match subsequent pricing events to ex post notifications.

Participants shall notify transactions as of the date on which the long-term margin is realised. For bank mandated deals (including PEFCO), the date on which the margin is realised would be the earliest of the following: (i) issuance of a final commitment by the Participant; (ii) setting of the margin post-commitment; (iii) loan drawdown; and (iv) setting of the long-term margin post-drawdown. In the case of several drawdowns occurring under the same bank mandate at the same margin, notification shall only be made in respect of the first aircraft. For loans funded by way of capital market issuance, the date on which the margin is realised shall be the date on which the long term rate is set which is typically the bond issuance date. In the case of several drawdowns occurring under the same bond and at the same margin, notification shall only be made in respect of the first aircraft.

The three-month floating benchmark rate for US dollar margin benchmark shall be applicable to a floating rate transaction and shall be set no earlier than the date of the final commitment.

For a fixed rate transaction, the margin benchmark applicable to the transaction shall be determined by swapping the three-month floating benchmark rate for US dollar margin benchmark into an equivalent spread over the applicable fixed rate, as determined in Article 2 of this Appendix, no earlier than the final commitment date and shall be set no earlier than that date.

The Participants shall monitor the margin benchmark and shall review the margin benchmark mechanism upon the request of any Participant.

This Sector Understanding sets out the financial terms and conditions that apply to officially supported export credits relating to contracts in the eligible sectors listed in Appendix I of this Sector Understanding for:

This Sector Understanding does not apply to items located outside the power plant site boundary for which the buyer is usually responsible, in particular, water supply not directly linked to the power production plant, costs associated with land development, roads, construction villages, power lines and switchyard, as well as costs arising in the buyer’s country from official approval procedures (e.g. site permits, construction permit), except:

This Sector Understanding sets out the financial terms and conditions that apply to officially supported export credits relating to contracts in a sector listed in Appendix II of this Sector Understanding. This list of sectors and, when applicable, corresponding technology-neutral performance criteria used to define a project’s eligibility, may be modified over time in accordance with the review provisions set out in Article 10 of this Sector Understanding.

Such contracts shall relate to the export of complete projects or parts thereof, comprising all components, equipment, materials and services (including the training of personnel) directly required for the construction and commissioning of an identifiable project, providing that:

This Sector Understanding sets out the financial terms and conditions that apply to officially supported export credits relating to contracts for projects that meet the criteria set out in Appendix III of this Sector Understanding.

Such contracts shall relate to the export of complete projects or parts thereof, comprising all components, equipment, materials and services (including the training of personnel) directly required for the execution and commissioning of an identifiable project, providing that:

This Sector Understanding applies to the modernisation of existing projects, to take into consideration adaptation concerns, in cases where the economic life of the project is likely to be extended by at least the repayment period to be awarded. If this criterion is not met, the terms of the Arrangement apply.

Infrastructure for the supply of drinking water to municipalities, including to households and small businesses, i.e. water purification for the purpose of obtaining drinking water and distribution network (including leakage control).

Wastewater collection and treatment facilities, i.e. collection and treatment of household and industrial wastewater and sewage, including processes for the re-use or recycling of water and the treatment of sludge directly associated with these activities.

The modernisation of such facilities in cases where the economic life of the plant is likely to be extended by at least the repayment period to be awarded. If this criterion is not met, the provisions of the Arrangement apply.

For officially supported export credits relating to contracts in the sectors listed in Appendix I, and for water projects defined in Article 4 of this Sector Understanding, the maximum repayment term is 18 years.

For officially supported export credits relating to contracts of a value of at least SDR 10 million in the project classes listed in Appendix II, the maximum repayment term is set out as follows:

For officially supported export credits relating to contracts of a value of less than SDR 10 million in the project classes listed in Appendix II, the maximum repayment term is set out as follows:

For officially supported export credits relating to contracts of a value of at least SDR 10 million for projects supported in conformity with Appendix III, the maximum repayment term is 15 years.

The Participants shall apply a profile of repayment of principal and payment of interest as specified in subparagraph 1) or 2) below:

Principal shall be repaid and interest shall be paid no less frequently than every six months and the first instalment of principal and interest shall be made no later than six months after the starting point of credit.

On an exceptional and duly justified basis, official support may be provided on terms other than those set out in paragraphs a) and b) above. The provision of such support shall be explained by an imbalance in the timing of the funds available to the obligor and the debt service profile available under an equal, semi-annual repayment schedule, and shall comply with the following criteria:

Interest due after the starting point of credit shall not be capitalised.

A Participant intending to provide support in accordance with the provisions of this Sector Understanding, shall give prior notification at least ten calendar days before issuing any commitment, in accordance with:

For projects falling in the Project Classes listed in Appendix II of this Sector Understanding, such notifications shall include an enhanced description of the project in order to demonstrate how the project complies with the criteria for support, as set out in Article 2 b) of this Sector Understanding.

For projects supported in conformity with Appendix III of this Sector Understanding, such notification shall include:

Notwithstanding paragraph a) 1) above, if the notifying Participant intends to provide support with a repayment term in excess of 15 years and/or in accordance with Article 6 c) of this Sector Understanding, it shall give prior notification at least ten calendar days before issuing any commitment in accordance with Article 45 of the Arrangement.

A Participant shall inform all other Participants of its final decision following a discussion, to facilitate the review of the body of experience.

Term-adjusted risk-premia.

Conditions for low emission/high energy efficiency fossil fuel power plants including definition of CCUS-readiness.

Net zero energy buildings.

Fuel cell projects.

The Secretariat shall report annually on the implementation of this Sector Understanding.

The Participants shall regularly review the scope and other provisions of this Sector Understanding and at the latest by the end of 2020.

Appendix II of this Sector Understanding shall be reviewed at regular intervals, including upon the request of a Participant, with the view to assessing whether any Project Class and/or Type should be added to, or removed from, or whether any thresholds should be changed in, that Appendix. Proposals for new Project Classes and/or Types shall be supported by information on how projects within such a Class/Type should fulfil the criteria set out in Article 2 b) and shall follow the methodology set out in Appendix IV of this Sector Understanding.

The Participants shall undertake a review of Appendix III of this Sector Understanding by the end of 2020, with a view to assessing the international initiatives related to adaptation, market conditions, and the body of experience developed from the notification process to determine if the definitions, project criteria, terms and conditions should be continued and or amended.

After 31 December 2027, the terms and conditions related to Appendix III shall be discontinued unless the Participants agree otherwise.

Wind energy ( 34 ).

Geothermal energy.

Tidal and tidal stream power.

Wave power.

Osmotic power.

Solar photovoltaic power.

Solar thermal energy.

Ocean thermal energy.

Bio-energy: all sustainable landfill gas, sewage treatment plant gas, biogas energy or fuel derived from biomass energy installations. “Biomass” shall mean the biodegradable fraction of products, waste and residues from agriculture (including vegetal and animal substances), forestry and related industries, as well as the biodegradable fraction of industrial and municipal waste.

Hydro power.

Energy efficiency in Renewable Energies projects.

Climate change adaptation is the principal objective of the project, and it is explicitly indicated and explained as such in the project plan and supporting documents, as being fundamental to the design of the project.

The project’s proposal shall include an analysis and identification of specific and relevant climate change-related risks and vulnerabilities, and how the proposed measures or technologies will directly address them.

There is an independent third-party review conducted on the project, either separately or as an integral part of the project plan which is made publicly available, such as published on the website of the national authority. The review shall evaluate the specific and relevant climate change-related risks and vulnerabilities and how the proposed measures contained within the project will directly address them.

The useful life of the project exceeds 15 years.

An evaluation of the direct contribution of the Project Class or Type to climate change mitigation, including a comparison of the sector performance, based on measurable data regarding carbon emissions or CO2 equivalent and/or in high energy efficiency, with conventional and in-use newer technological approaches; this comparison shall, in all cases, be based on quantitative measures, such as a decrease in emissions per unit produced.

A description of the technical and performance standards of the Project Class or Type proposed sector, including information on any relevant, existing Best Available Techniques (BAT); if appropriate, this description shall explain how the technology is an improvement on the existing BAT.

A description of the financial barriers in the proposed Project Class or Type, including any financial needs and market conditions, and identify the provisions under this Sector Understanding that are expected to enable such projects to proceed.

This Sector Understanding sets out the financial terms and conditions that apply to officially supported export credits relating to contracts for rail and other specified track-bound transportation infrastructure assets essential to operating trains, including control (e.g. signalling and other IT) systems, electrification, tracks, overhead wires and cables, pylons, rolling stock, cable cars, trolley buses, and related construction work.

The specific types of track-bound transportation systems that are eligible for support according to the terms and conditions of this Annex are:

For officially supported export credits relating to contracts included within the scope of application of this Sector Understanding, the maximum repayment term is set out as follows:

To qualify for the repayment terms set out in paragraph a) above, the following conditions shall apply:

A Participant may request a waiver of the condition set out in paragraph b) 3) above, through use of a Common Line, in accordance with Articles 56 to 61 of the Arrangement. In such cases, the Participant proposing the Common Line shall provide, either in the proposed Common Line or in each individual transaction thereafter notified, a comprehensive explanation for the support, including specific data on pricing, and a rationale for the need to waive the provisions of paragraph b) 3) above.

For transaction in a Category I countries, six-and-a-quarter years; and

For transaction in a Category II countries, seven-and-a-quarter years.

A Participant shall give prior notification in accordance with Article 45 of the Arrangement at least ten calendar days before issuing any commitment if it intends to provide support for a transaction in a Category I country. Such notifications shall include a comprehensive explanation for the official support, including specific data on pricing.

A Participant shall give prior notification in accordance with Article 46 of the Arrangement at least ten calendar days before issuing any commitment if it intends to provide support for:

The Secretariat shall report annually on the implementation of this Sector Understanding.

After 31 December 2023, and subject to paragraph c) below, the less than 50 % syndication requirement set out in subparagraph ii) of the first tiret of Article 2 b) 3) of this Sector Understanding shall be replaced by a maximum 35 % syndication requirement unless the Participants agree otherwise.

The Participants shall undertake a review of this Sector Understanding by the end of 2023 with a view to assessing the market conditions and other factors to determine whether the terms and conditions should be continued and or amended.

After 31 December 2023, the terms and conditions of this Sector Understanding shall be discontinued unless the Participants agree otherwise.

This Annex sets out terms and conditions that Participants may support for project finance transactions that meet the eligibility criteria set out in Appendix 1.

Where no corresponding provision exists in this Annex, the terms of the Arrangement shall apply.

No single repayment of principal or series of principal payments within a six-month period shall exceed 25 % of the principal sum of the credit.

The first repayment of principal shall be made no later than 24 months after the starting point of credit and no less than 2 % of the principal sum of the credit shall have been repaid 24 months after the starting point of credit.

Interest shall be paid no less frequently than every 12 months and the first interest payment shall be made no later than six months after the starting point of credit.

The weighted average life of the repayment period shall not exceed seven-and-a-quarter years, except when official export credit support provided by the Participants comprises more than 35 % of the syndication for a project in a High Income OECD country, the weighted average life of the repayment period shall not exceed five-and-a-quarter years.

The Participant shall give prior notification according to Article 4 of this Annex.

The financing of a particular economic unit in which a lender is satisfied to consider the cash flows and earnings of that economic unit as the source of funds from which a loan will be repaid and to the assets of the economic unit as collateral for the loan.

Financing of export transactions with an independent (legally and economically) project company, e.g. special purpose company, in respect of investment projects generating their own revenues.

Appropriate risk-sharing among the partners of the project, e.g. private or creditworthy public shareholders, exporters, creditors, off-takers, including adequate equity.

Project cash flow sufficient during the entire repayment period to cover operating costs and debt service for outside funds.

Priority deduction from project revenues of operating costs and debt service.

A non-sovereign buyer/borrower with no sovereign repayment guarantee (not including performance guarantees, e.g. off-take arrangements).

Asset-based securities for proceeds/assets of the project, e.g. assignments, pledges, proceed accounts;

Limited or no recourse to the sponsors of the private sector shareholders/sponsors of the project after completion.

Participation in a loan syndication with private financial institutions that do not benefit from Official Export Credit Support, whereby:

Premium rates for any official support that do not undercut available private market financing and that are commensurate with the corresponding rates being charged by other private financial institutions that are participating in the syndication.

ECA providing insurance/guarantee support

ECA providing finance support