Regulation (EU) No 1233/2011 of the European Parliament and of the Council of 16 November 2011 on the application of certain guidelines in the field of officially supported export credits and repealing Council Decisions 2001/76/EC and 2001/77/EC

Article 1

Application of the Arrangement

The guidelines contained in the Arrangement on Officially Supported Export Credits (‘the Arrangement’) shall apply in the Union. The text of the Arrangement is annexed to this Regulation.

Article 2

Delegation of power

The Commission shall adopt delegated acts in accordance with Article 3 to amend Annex II as a result of amendments to the guidelines agreed upon by the Participants to the Arrangement.

Where, in the case of amendments to Annex II as a result of amendments to the guidelines agreed upon by the Participants to the Arrangement, imperative grounds of urgency so require, the procedure provided for in Article 4 shall apply to delegated acts adopted pursuant to this Article.

Article 3

Exercise of the delegation

Article 4

Urgency procedure

Article 5

Transparency and reporting

The transparency and reporting measures to be applied in the Union are set out in Annex I.

Article 6

Repeal

Decisions 2001/76/EC and 2001/77/EC are hereby repealed.

Article 7

Entry into force

This Regulation shall enter into force on the day following its publication in the Official Journal of the European Union.

This Regulation shall be binding in its entirety and directly applicable in all Member States.

ANNEX I

• 1.Without prejudice to the prerogatives of the Member States' institutions exercising the supervision of the national export credit programs, each Member State shall make available to the Commission an Annual Activity Report in order to step up transparency at Union level. Member States shall report, in accordance with their national legislative framework, on assets and liabilities, claims paid and recoveries, new commitments, exposures and premium charges. Where contingent liabilities might arise from officially supported export credit activities, those activities shall be reported as part of the Annual Activity Report.

• 2.In the Annual Activity Report, Member States shall describe how environmental risks, which can carry other relevant risks, are taken into account in the officially supported export credit activities of their ECAs.

• 3.The Commission shall produce an annual review for the European Parliament based on this information, including an evaluation regarding the compliance of ECAs with Union objectives and obligations.

• 4.The Commission, according to its competencies shall provide to the European Parliament an annual report on negotiations undertaken, where the Commission has negotiating authorisation in the various forums of international cooperation, to establish global standards in the field of officially supported export credits.

• The first reporting period, under the scope of this Regulation, covers the year 2011.

ANNEX II

TABLE OF CONTENTS	TABLE OF CONTENTS
CHAPTER I:	GENERAL PROVISIONS
1.	PURPOSE
2.	STATUS
3.	PARTICIPATION
4.	INFORMATION AVAILABLE TO NON-PARTICIPANTS
5.	SCOPE OF APPLICATION
6.	PROHIBITIONS ON ARRANGEMENT SUPPORT
7.	SECTOR UNDERSTANDINGS
8.	WITHDRAWAL
9.	MONITORING
CHAPTER II:	FINANCIAL TERMS AND CONDITIONS FOR EXPORT CREDITS
10.	CLASSIFICATION OF COUNTRIES FOR LOCAL COSTS SUPPORT
11.	DOWN PAYMENT, MAXIMUM OFFICIAL SUPPORT AND LOCAL COSTS
12.	MAXIMUM REPAYMENT TERMS
13.	REPAYMENT OF PRINCIPAL AND PAYMENT OF INTEREST
14.	INTEREST RATES, PREMIUM RATES AND OTHER FEES
15.	VALIDITY PERIOD FOR EXPORT CREDITS
16.	ACTION TO AVOID OR MINIMISE LOSSES
17.	MATCHING
18.	MINIMUM FIXED INTEREST RATES UNDER OFFICIAL FINANCING SUPPORT
19.	CONSTRUCTION AND APPLICATION OF CIRRs
20.	PREMIUM FOR CREDIT RISK
21.	MINIMUM PREMIUM RATES FOR CREDIT RISK
22.	COUNTRY RISK CLASSIFICATION
23.	SOVEREIGN RISK ASSESSMENT
24.	BUYER RISK CLASSIFICATION
25.	PERCENTAGE AND QUALITY OF OFFICIAL EXPORT CREDIT COVER
26.	COUNTRY RISK MITIGATION TECHNIQUES
27.	BUYER RISK CREDIT ENHANCEMENTS
28.	VALIDITY OF THE MINIMUM PREMIUM RATES FOR CREDIT RISK
CHAPTER III:	PROVISIONS FOR TIED AID
29.	GENERAL PRINCIPLES
30.	FORMS OF TIED AID
31.	ASSOCIATED FINANCING
32.	COUNTRY ELIGIBILITY FOR TIED AID
33.	PROJECT ELIGIBILITY
34.	MINIMUM CONCESSIONALITY LEVEL
35.	EXEMPTIONS FROM COUNTRY OR PROJECT ELIGIBILITY FOR TIED AID
36.	CALCULATION OF CONCESSIONALITY LEVEL OF TIED AID
37.	VALIDITY PERIOD FOR TIED AID
38.	MATCHING
CHAPTER IV:	PROCEDURES
SECTION 1:	COMMON PROCEDURES FOR EXPORT CREDITS AND TRADE-RELATED AID
39.	NOTIFICATIONS
40.	INFORMATION ON OFFICIAL SUPPORT
41.	PROCEDURES FOR MATCHING
42.	SPECIAL CONSULTATIONS
SECTION 2:	PROCEDURES FOR EXPORT CREDITS
43.	PRIOR NOTIFICATION WITH DISCUSSION
44.	PRIOR NOTIFICATION
SECTION 3:	PROCEDURES FOR TRADE-RELATED AID
45.	PRIOR NOTIFICATION
46.	PROMPT NOTIFICATION
SECTION 4:	CONSULTATION PROCEDURES FOR TIED AID
47.	PURPOSE OF CONSULTATIONS
48.	SCOPE AND TIMING OF CONSULTATIONS
49.	OUTCOME OF CONSULTATIONS
SECTION 5:	INFORMATION EXCHANGE FOR EXPORT CREDITS AND TRADE-RELATED AID
50.	CONTACT POINTS
51.	SCOPE OF ENQUIRIES
52.	SCOPE OF RESPONSES
53.	FACE-TO-FACE CONSULTATIONS
54.	PROCEDURES AND FORMAT OF COMMON LINES
55.	RESPONSES TO COMMON LINE PROPOSALS
56.	ACCEPTANCE OF COMMON LINES
57.	DISAGREEMENT ON COMMON LINES
58.	EFFECTIVE DATE OF COMMON LINE
59.	VALIDITY OF COMMON LINES
SECTION 6:	REVIEWS
60.	REGULAR REVIEW OF THE ARRANGEMENT
61.	REVIEW OF MINIMUM INTEREST RATES
62.	REVIEW OF MINIMUM PREMIUM RATES AND RELATED ISSUES
63.	REVIEW OF OFFICIAL SUPPORT FOR LOCAL COSTS
64.	REVIEW OF REPAYMENT PROFILES AND TERMS
ANNEX I:	SECTOR UNDERSTANDING ON EXPORT CREDITS FOR CLIMATE CHANGE
ANNEX II:	SECTOR UNDERSTANDING ON EXPORT CREDITS FOR NUCLEAR POWER PLANTS
ANNEX III:	SECTOR UNDERSTANDING ON EXPORT CREDITS FOR CIVIL AIRCRAFT
PART 1:	GENERAL PROVISIONS
1.	PURPOSE
2.	STATUS
3.	PARTICIPATION
4.	SCOPE OF APPLICATION
5.	INFORMATION AVAILABLE TO NON-PARTICIPANTS
6.	AID SUPPORT
7.	ACTIONS TO AVOID OR MINIMISE LOSSES
PART 2:	NEW AIRCRAFT
CHAPTER I:	COVERAGE
8.	NEW AIRCRAFT
CHAPTER II:	FINANCIAL TERMS AND CONDITIONS
9.	ELIGIBLE CURRENCIES
10.	DOWN PAYMENT AND MAXIMUM OFFICIAL SUPPORT
11.	MINIMUM PREMIUM RATES
12.	MAXIMUM REPAYMENT TERM
13.	REPAYMENT OF PRINCIPAL AND PAYMENT OF INTEREST
14.	MINIMUM INTEREST RATES
15.	INTEREST RATE SUPPORT
16.	FEES
17.	CO-FINANCING
PART 3:	USED AIRCRAFT, SPARE ENGINES, SPARE PARTS, MAINTENANCE AND SERVICE CONTRACTS
CHAPTER I:	COVERAGE
18.	USED AIRCRAFT AND OTHER GOODS AND SERVICES
CHAPTER II:	FINANCIAL TERMS AND CONDITIONS
19.	SALE OF USED AIRCRAFT
20.	SPARE ENGINES AND SPARE PARTS
21.	CONTRACTS FOR CONVERSION/MAJOR MODIFICATION/REFURBISHING
22.	MAINTENANCE AND SERVICE CONTRACTS
23.	ENGINE KITS
PART 4:	TRANSPARENCY PROCEDURES
24.	INFORMATION ON OFFICIAL SUPPORT
25.	REQUESTS FOR INFORMATION
26.	FACE-TO-FACE CONSULTATIONS
27.	SPECIAL CONSULTATIONS
28.	PROCEDURES AND FORMAT OF COMMON LINES
29.	RESPONSES TO COMMON LINE PROPOSALS
30.	ACCEPTANCE OF COMMON LINES
31.	DISAGREEMENT ON COMMON LINES
32.	EFFECTIVE DATE OF COMMON LINE
33.	VALIDITY OF COMMON LINES
34.	MATCHING
PART 5:	MONITORING AND REVIEW
35.	MONITORING
36.	REVIEW
37.	FUTURE WORK
PART 6:	FINAL PROVISIONS
38.	ENTRY INTO FORCE
39.	WITHDRAWAL
APPENDIX I	PARTICIPATION IN THE AIRCRAFT SECTOR UNDERSTANDING
APPENDIX II	MINIMUM PREMIUM RATES
ANNEX 1:	QUALIFYING DECLARATIONS
ANNEX 2:	CAPE TOWN CONVENTION QUESTIONNAIRE
APPENDIX III	MINIMUM INTEREST RATES
APPENDIX IV	REPORTING FORM
APPENDIX V	LIST OF DEFINITIONS
ANNEX IV:	SECTOR UNDERSTANDING ON EXPORT CREDITS FOR SHIPS
ANNEX V:	INFORMATION TO BE PROVIDED FOR NOTIFICATIONS
ANNEX VI:	CALCULATION OF THE MINIMUM PREMIUM RATES FOR COUNTRY RISK CATEGORY 1-7 TRANSACTIONS
ANNEX VII:	PREMIUM BENCHMARKS FOR MARKET BENCHMARK TRANSACTIONS
ANNEX VIII:	CRITERIA AND CONDITIONS GOVERNING THE APPLICATION OF A THIRD-PARTY REPAYMENT GUARANTEE AND THE CRITERIA FOR ASSESSING MULTILATERAL OR REGIONAL INSTITUTIONS
ANNEX IX:	BUYER RISK CATEGORIES QUALITATIVE DESCRIPTIONS
ANNEX X:	CRITERIA AND CONDITIONS GOVERNING THE APPLICATION OF COUNTRY RISK MITIGATION TECHNIQUES AND BUYER RISK CREDIT ENHANCEMENTS
ANNEX XI:	CHECKLIST OF DEVELOPMENTAL QUALITY
ANNEX XII:	COMMERCIAL INTEREST REFERENCE RATE (CIRR) PROVISIONS
ANNEX XIII:	LIST OF DEFINITIONS

CHAPTER I

GENERAL PROVISIONS

1. PURPOSE

• a) The main purpose of the Arrangement on 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.

• b) The Arrangement seeks to foster a level playing field for official support, as defined in Article 5 a), 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.

2. STATUS

The Arrangement, developed within the OECD framework, initially came into effect in April 1978 and is of indefinite duration. The Arrangement is a Gentlemen’s Agreement among the Participants; it is not an OECD Act ([^E0001]), although it receives the administrative support of the OECD Secretariat (hereafter: ‘the Secretariat’).

3. PARTICIPATION

The Participants to the Arrangement currently are: Australia, Canada, the European Union, Japan, Korea, New Zealand, Norway, Switzerland, Türkiye, the United Kingdom and the United States. Other OECD Members and non-members may be invited to become Participants by the current Participants.

4. INFORMATION AVAILABLE TO NON-PARTICIPANTS

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

• b) 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.

5. SCOPE OF APPLICATION

The Arrangement shall apply to all official support provided by or on behalf of a government for export of goods and/or services, including financial leases, which have a repayment term of two years or more.

• a) Official support may be provided in different forms:
• 1. Export credit guarantee or insurance (pure cover).
• 1. Official financing support:
• — direct credit/financing and refinancing, or
• — interest rate support.
• 1. Any combination of the above.

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

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

• d) 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.

6. PROHIBITIONS ON ARRANGEMENT SUPPORT

Participants shall not provide officially supported export credits or tied aid for:

• a) 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.

• b) The export supply of equipment to existing coal-fired electricity generation plants, unless all the following conditions are met:
• i. The purpose of the equipment supplied is air pollution abatement, water pollution abatement, or CO2 emissions abatement.
• ii. The equipment supplied induces neither an extension of the useful lifetime of the plant nor a capacity increase.

• c) 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 B, Type 1 of Appendix I to Annex I.

• d) 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.

• e) The provisions set out in paragraphs a) through d) above shall be reviewed no later than 31 December 2022, in order to contribute to the common goal of addressing climate change, taking into account:
• i. The most recent reports on climate science and the implications for global infrastructure investment decisions of holding the increase in the global average temperature to well below 2 degrees Celsius above pre-industrial levels and pursuing efforts to limit the temperature increase to 1.5 degrees Celsius above pre-industrial levels;
• ii. Officially supported export credits or tied aid support to other coal related projects;
• iii. Availability of CCUS technology; and
• iv. Availability of non-CCUS CO2 abatement technologies.

7. SECTOR UNDERSTANDINGS

• a) The following Sector Understandings are part of the Arrangement:
• — Climate Change (Annex I)
• — Nuclear Power Plants (Annex II)
• — Civil Aircraft (Annex III)
• — Ships (Annex IV)

• b) A Participant to either Annex I, II, or IV may apply the respective provisions for official support for export of goods and/or services covered by the relevant Sector Understandings. For Annex I or II, where the 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.

• c) 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.

8. WITHDRAWAL

A Participant may withdraw by notifying the Secretariat in writing by means of instant communication, e.g. using the electronic mail system that is maintained by the Secretariat to facilitate communications amongst Participants and the Secretariat. The withdrawal takes effect 180 calendar days after receipt of the notification by the Secretariat.

9. MONITORING

The Secretariat shall monitor the implementation of the Arrangement.

CHAPTER II

FINANCIAL TERMS AND CONDITIONS FOR EXPORT CREDITS

Financial terms and conditions for export credits encompass all the provisions set out in this Chapter which shall be read in conjunction one with the other. The Arrangement sets out limitations on terms and conditions that may be officially supported. The Participants recognise that more restrictive financial terms and conditions than those provided for by the Arrangement traditionally apply to certain trade or industrial sectors. The Participants shall continue to respect such customary financial terms and conditions, in particular the principle by which repayment terms do not exceed the useful life of the goods and services.

10. CLASSIFICATION OF COUNTRIES FOR LOCAL COSTS SUPPORT

• a) Category I countries are High Income ([^E0002]) OECD Countries. All other countries are in Category II.

• b) The following operational criteria and procedures apply when classifying countries:
• 1. Classification for Arrangement purposes is determined by per capita GNI as calculated by the World Bank for the purposes of the World Bank classification of borrowing countries.
• 1. In cases where the World Bank does not have enough information to publish per capita GNI data, the World Bank shall be asked to estimate whether the country in question has per capita GNI above or below the current threshold. The country shall be classified according to the estimate unless the Participants decide to act otherwise.
• 1. If a country is reclassified in accordance with Article 10 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.
• 1. 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 recognised in the same calendar year in which the figures were first distributed by the Secretariat.

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

11. DOWN PAYMENT, MAXIMUM OFFICIAL SUPPORT AND LOCAL COSTS

• a) 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 XIII. 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.

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

• c) 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.

• d) The Participants may provide official support for local costs, under the following conditions:
• 1. The maximum amount of official support for local costs shall not exceed:
• — For Category I countries, 40 % of the export contract value.
• — For Category II countries, 50 % of the export contract value.
• 1. Official support for local costs shall not be provided on terms more favourable/less restrictive than those agreed for the related exports.
• 1. Where official support for local costs exceeds 15 % of the export contract value, such official support shall be subject to prior notification, pursuant to Article 44, specifying the nature of the local costs being supported.

12. MAXIMUM REPAYMENT TERMS

• a) The repayment term shall not exceed the useful life of the goods and services exported or, as appropriate, the useful life of the project to which goods and services are being exported.

• b) Notwithstanding Article 12 a), the maximum repayment term is 15 years.

• c) Notwithstanding Article 12 b), the maximum repayment term for any power plant ([^E0003]) that is not eligible to be supported under Annex I or II is 12 years.

• d) The Participant shall give prior notification in accordance with Article 44 when official support will be provided for any transaction with a repayment term of greater than 10 years and that has a credit value of SDR 10 million or more.

13. REPAYMENT OF PRINCIPAL AND PAYMENT OF INTEREST

• a) The principal sum of an export credit shall normally be repaid in equal and regular 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.

• b) Principal shall be repaid no less frequently than annually and the first instalment of principal shall be made no later than one year after the starting point of credit.

• c) 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. In the case of annual repayments of principal, interest shall be paid no less frequently than every 12 months and the first payment of interest shall be made no later than 12 months after the starting point of credit.

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

• e) When duly justified by an imbalance between the timing of funds available to the obligor and the debt service profile permitted according to the parameters set out in paragraphs a) and b) above, or when the amortization schedule does not match the obligor or project’s free cash flow, export credits may be provided within the following constraints:
• 1. No single repayment of principal or series of principal payments within a six-month period shall exceed 30 % of the principal sum of the credit.
• 1. The first repayment of principal shall be made no later than 24 months after the starting point of credit.
• 1. The maximum weighted average life of the repayment period is the greater of 65 % of the repayment term of the transaction or 6 years.

• f) The Participant shall give prior notification in accordance with Article 44 when official support is provided according to Article 13 e) above for any transaction with a credit value of SDR 10 million or more. In such notifications, Participants shall, inter alia, provide:
• 1. detailed information on the repayment profile supported and an explanation of the reasons why there is an imbalance between the timing of funds available to the obligor and the debt service profile permitted according to Articles 13 a) and 13 b), and
• 1. for transactions with a repayment profile that does not match the free cash flow, a detailed and adequate justification of the repayment profile supported.

14. INTEREST RATES, PREMIUM RATES AND OTHER FEES

• a) Interest excludes:
• 1. any payment by way of premium or other charge for insuring or guaranteeing supplier credits or financial credits;
• 1. any 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
• 1. withholding taxes imposed by the importing country.

• b) 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.

15. VALIDITY PERIOD FOR EXPORT CREDITS

Financial terms and conditions for an individual export credit or line of credit, other than the validity period for the Commercial Interest Reference Rates (CIRRs) set out in Annex XII, shall not be fixed for a period exceeding six months prior to final commitment.

16. ACTION TO AVOID OR MINIMISE LOSSES

The Arrangement does not prevent export credit authorities or financing institutions from agreeing to less restrictive financial terms and conditions than those provided for by the Arrangement, if such action is taken after the contract award (when the export credit agreement and ancillary documents have already become effective) and is intended solely to avoid or minimise losses from events which could give rise to non-payment or claims.

17. MATCHING

Taking into account a Participant’s international obligations and consistent with the purpose of the Arrangement, a Participant may match, according to the procedures set out in Article 41, financial terms and conditions offered by a Participant or a non-Participant. Financial terms and conditions provided in accordance with this Article are considered to be in conformity with the provisions of Chapters I, II and, when applicable, Annexes I, II, III, and IV.

18. MINIMUM FIXED INTEREST RATES UNDER OFFICIAL FINANCING SUPPORT

• a) 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:
• 1. CIRRs should represent final commercial lending interest rates in the domestic market of the currency concerned;
• 1. CIRRs should closely correspond to the rate for first class domestic borrowers;
• 1. CIRRs should be based on the funding cost of fixed interest rate finance;
• 1. CIRRs should not distort domestic competitive conditions; and
• 1. CIRRs should closely correspond to a rate available to first class foreign borrowers.

• b) 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 20.

19. CONSTRUCTION AND APPLICATION OF CIRRs

The CIRR for official financing support provided under the Arrangement and all of its Annexes other than the Sector Understanding on Export Credits for Civil Aircraft (Annex III) and the Sector Understanding on Export Credits for Ships (Annex IV) is determined and applied according to the provisions of Annex XII.

20. PREMIUM FOR CREDIT RISK

The Participants shall charge premium, in addition to interest charges, to cover the risk of non-repayment of export credits. The premium rates charged by the Participants shall be risk-based, shall converge and shall not be inadequate to cover long-term operating costs and losses.

21. MINIMUM PREMIUM RATES FOR CREDIT RISK

The Participants shall charge no less than the applicable Minimum Premium Rate (MPR) for Credit Risk.

• a) The applicable MPR is determined according to the following factors:
• — the applicable country risk classification;
• — the time at risk (i.e. the Horizon of Risk or HOR);
• — the selected buyer risk category of the obligor;
• — the percentage of political and commercial risk cover and quality of official export credit product provided;
• — any country risk mitigation technique applied; and
• — any buyer risk credit enhancements that have been applied.

• b) 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 VI.

• c) 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 ([^E0004]), 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 ([^E0005]) 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:
• 1. Where a Participant provides official support as part of a syndicated loan package that is structured as either an asset-backed ([^E0006]) or project finance ([^E0007]) transaction, then:
• — the all-in cost of the direct lending portion shall be no less than the all-in cost charged by the commercial market participant(s) in the syndicate;
• — the premium charged for pure cover shall be no less than the translated equivalent premium rate charged by the commercial market participant(s) and no less than the applicable Minimum Actuarial Premium rate; and
• — the Participant applying a premium rate based on a syndicated loan package shall give prior notification according to Article 44. To qualify as a syndicated loan package, all of the following conditions must be met:
• — At least 25 % of the syndicate is commercial market loan(s)/guarantee(s), without any bilateral or multilateral support (e.g., ECA, DFI, IFI or MDB) ([^E0008]), where all parties to the financing are on pari passu terms on all financial terms and conditions, including security package; and
• — The transaction financial terms and conditions are fully compliant with the Arrangement, as modified by these provisions of Market Benchmark pricing in syndicated loans/guarantees transactions.
• 1. For all other Market Benchmark Transactions, the following procedures shall apply:
• — Taking into consideration the availability of market information and the characteristics of the underlying transaction, Participants shall determine the premium rate to be applied by benchmarking against one or more of the market benchmarks set forth in Annex VIII, choosing the benchmark(s) deemed most appropriate for the specific transaction.
• — Notwithstanding the preceding paragraph, Participants may not charge a premium rate that is lower than the corresponding premium determined by the Through the Cycle Market Benchmark (TCMB) model, based on the risk classification and total term (WAL of the whole transaction) of the transaction unless the market benchmark is derived from a Name-Specific or Related Entity (i) secondary market bond or (ii) Credit Default Swap (CDS). A Participant charging a premium rate lower than the corresponding premium determined by the TCMB model, based on the Accredited Credit Rating Agency ([^E0009]) (CRA) rating of the Name-Specific market benchmark ([^E0010]) shall give prior notification in accordance with Article 44. However, the premium charged may not be less than the corresponding Minimum Actuarial Premium.
• — In determining the premium rate, a Participant shall determine a risk rating for the ultimate obligor/guarantor, including whether the obligor/guarantor is rated by an Accredited CRA. A Participant may set a rating one notch better (on the Accredited CRA’s scale) than that provided by an Accredited CRA. If there is no Accredited CRA rating, the risk classification may not exceed (be more favourable than) the CRA rating of the sovereign in the obligor/guarantor’s domicile by more than two notches. Participants must give prior notification in accordance with Article 44 in the following scenarios: — Where a Participant classifies the obligor/guarantor as better than the best rating from an Accredited CRA, or — If there is no Accredited CRA rating, where a Participant classifies a transaction as CC2 or better, or a credit rating letter equivalent to AAA to A-, or equal to or more favourable than the best Accredited CRA rating of the sovereign in the obligor’s/guarantor’s domicile.

• d) 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.

• e) 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 ([^E0011]), 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. ([^E0012])

• f) 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 VIII.

• g) 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.

• h) 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 43.

22. COUNTRY RISK CLASSIFICATION

With the exception of High Income OECD countries and High Income Euro Area countries, countries shall be classified according to the likelihood of whether they will service their external debts (i.e. country credit risk).

• a) The five elements of country credit risk are:
• — general moratorium on repayments decreed by the obligor’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 in respect of the credit;
• — legal provisions adopted in the obligor’s/guarantor’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.

• b) 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.

• c) The classification of countries ([^E0013]) is achieved through the Country Risk Classification Methodology, which is comprised of:
• — The Country Risk Assessment Model (the Model), which produces a quantitative assessment of country credit risk which 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.
• — The qualitative assessment of the Model results, considered country-by-country to integrate the political risk and/or other risk factors not taken into account in full or in part by the Model. If appropriate, this may lead to an adjustment to the quantitative Model assessment to reflect the final assessment of the country credit risk.

• d) Country Risk Classifications shall be monitored on an on-going 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.

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

23. SOVEREIGN RISK ASSESSMENT

• a) For all countries classified through the Country Risk Classification Methodology according to Article 22 d), the risk of the sovereign shall be assessed in order to identify, on an exceptional basis, those sovereigns:
• — that are not the lowest-risk obligor in the country and;
• — whose credit risk is significantly higher than country risk.

• b) 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.

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

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

24. BUYER RISK CLASSIFICATION

Obligors and, as appropriate, guarantors in countries classified in Country Risk Categories 1-7 shall be classified into one of the buyer risk categories that have been established in relation to the country of the obligor/guarantor ([^E0014]). The matrix of buyer risk categories into which obligors and guarantors shall be classified is provided in Annex VI. Qualitative descriptions of the buyer risk categories are provided in Annex IX.

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

• b) Notwithstanding paragraph a) above, 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.

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

• d) On an exceptional basis, non-sovereign obligors and guarantors may be classified in the ‘Better than Sovereign’ (SOV+) buyer risk category if ([^E0015]):
• — the obligor/guarantor has a foreign currency rating from an Accredited CRA that is better than the foreign currency rating (from the same CRA) of their respective sovereign, or
• — the obligor/guarantor’s is located in a country in which sovereign risk has been identified as being significantly higher than country risk.

• e) The Participants shall give prior notification according to Article 44 for transactions:
• — with a non-sovereign obligor/guarantor where the premium charged is below that set by Buyer Risk Category CC1, i.e. CC0 or SOV+;
• — with a non-sovereign obligor/guarantor where a Participant assesses a buyer risk rating for a non-sovereign obligor/guarantor that is rated by an Accredited CRA, and the buyer risk rating assessed is better than the Accredited CRA rating ([^E0016]).

• f) 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.

25. PERCENTAGE AND QUALITY OF OFFICIAL EXPORT CREDIT COVER

The MPRs are differentiated to take account of the differing quality of export credit products and percentage of cover provided by the Participants as set out in Annex VI. The differentiation is based on the exporter’s perspective (i.e. to neutralise the competitive effect arising from the differing qualities of product provided to the exporter/financial institution).

• a) 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.

• b) All existing export credit products offered by 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 credit/financing; and
• — Above standard product, i.e. guarantees.

26. COUNTRY RISK MITIGATION TECHNIQUES

• a) The Participants may apply the following country risk mitigation techniques, the specific application of which is set out in Annex X:
• — Offshore Future Flow Structure Combined with Offshore Escrow Account
• — Local Currency Financing

• b) The Participant applying an MPR reflecting the use of country risk mitigation shall give prior notification according to Article 43.

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

27. BUYER RISK CREDIT ENHANCEMENTS

• a) 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:
• — Assignment of Contract Proceeds or Receivables
• — Asset Based Security
• — Fixed Asset Security
• — Escrow Account

• b) 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 X.

• c) BRCEs may be used alone or in combination with the following restrictions:
• — The maximum CEF that can be achieved through the use of the BRCEs is 0,35 for Category 1-7 transactions. For Market Benchmark transactions, a maximum discount of 25 % may be applied to the Market Benchmark MPR, but the premium charged may not be lower than the applicable Minimum Actuarial Premium rate.
• — ‘Asset Based Security’ and ‘Fixed Asset Security’ cannot be used together in one transaction.
• — In a Category 1-7 transaction where the applicable country risk classification has been improved through the use of ‘Offshore Future Flow Structure Combined with Offshore Escrow Account’, no BRCEs may be applied.

• d) The Participants shall give prior notification according to Article 44 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.

28. VALIDITY OF THE MINIMUM PREMIUM RATES FOR CREDIT RISK

• a) 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.

• b) 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.

CHAPTER III

PROVISIONS FOR TIED AID

29. GENERAL PRINCIPLES

• a) 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.

• 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 Assistance Committee (DAC) on the quality of tied and untied aid.

• d) 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 XIII, 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 XIII.

30. FORMS OF TIED AID

Tied aid can take the form of:

• a) Official Development Assistance (ODA) loans as defined in the ‘DAC Guiding Principles for Associated Financing and Tied and Partially Untied Official Development Assistance (1987)’;

• b) ODA grants as defined in the ‘DAC Guiding Principles for Associated Financing and Tied and Partially Untied Official Development Assistance (1987)’; and

• c) Other Official Flows (OOF), which includes grants and loans but excludes officially supported export credits that are in conformity with the Arrangement; or

• d) 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:
• 1. an export credit that is officially supported by way of direct credit/financing, refinancing, interest rate support, guarantee or insurance to which the Arrangement applies; and
• 1. other funds at or near market terms, or down payment from the purchaser.

31. 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 those 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.

32. COUNTRY ELIGIBILITY FOR TIED AID

• a) 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 ([^E0017]). 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 GNI as calculated by the World Bank for the purposes of the World Bank classification of borrowing countries; this classification shall be made public by the Secretariat.
• 1. In cases where the World Bank does not have enough information to publish per capita GNI data, the World Bank shall be asked to estimate whether the country in question has per capita GNI above or below the current threshold. The country shall be classified according to the estimate unless the Participants decide to act otherwise.
• 1. If a country’s eligibility for tied aid does change in accordance with paragraph a) above, 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).
• 1. 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 54 to 59, and the Participants would favourably consider a change due to errors and omissions in the figures subsequently recognised in the same calendar year as the figures that were first distributed by the Secretariat.

33. PROJECT ELIGIBILITY

• 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.

• 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. In respect of projects larger than SDR 50 million special weight shall be given to the expected availability of financing at market or Arrangement terms when considering the appropriateness of such aid.

• c) 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 47 to 49, 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.

• d) Any Participant desiring to provide aid for goods and/or services covered by the Sector Understanding on Export Credits for Ships must confirm that the ship is not operated under an open registry during the repayment term and that appropriate assurance has been obtained that the ultimate owner resides in the receiving country, is not a non-operational subsidiary of a foreign interest and has undertaken not to sell the ship without its government’s approval.

34. MINIMUM CONCESSIONALITY LEVEL

The Participants shall not provide tied aid that has a concessionality level of less than 35 %, or 50 % if the beneficiary country is a Least Developed Country (LDC), except for the cases set out below, which are also exempt from the notification procedures set out in Articles 45 a) and 46 a):

• a) 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

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

35. EXEMPTIONS FROM COUNTRY OR PROJECT ELIGIBILITY FOR TIED AID

• a) The provisions of Articles 32 and 33 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 31.

• b) The provisions of Article 33 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 31.

• c) Tied aid for LDCs as defined by the United Nations is not subject to the provisions of Articles 32 and 33.

• d) The Participants shall give favourable consideration to an acceleration of tied aid procedures in line with the specific circumstances:
• — a nuclear or major industrial accident that causes serious transfrontier pollution, where any affected Participant wishes to provide tied aid to eliminate or mitigate its effects, or
• — the existence of a significant risk that such an accident may occur, where any potentially affected Participant wishes to provide tied aid to prevent its occurrence.

• e) Notwithstanding Articles 32 and 33, a Participant may, exceptionally, provide support by one of the following means:
• — the Common Line procedure as defined in Annex XIII and described in Articles 54 to 59; or
• — the justification on aid grounds through support by a substantial body of the Participants as described in Articles 47 and 48; or
• — a letter to the OECD Secretary-General, in accordance with the procedures in Article 49, which the Participants expect will be unusual and infrequent.

36. 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 ([^E0018]):
• — The average of the CIRR using seven-year government bond yields + Margin Margin (M) depends on the repayment term (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 30 years and above 1,25
• — For all currencies the average of the CIRR using seven-year government bond yields is calculated taking an average of the monthly rates valid during the six-month period between 15 August of the previous year and 14 February of the current year, as determined according to the provisions of Annex XII. The calculated rate, including the Margin, is rounded to the nearest ten basis points.

• b) The base date for the calculation of the concessionality level is the starting point of credit as set out in Annex XIII.

• 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 34 except in cases of matching; and
• — down payment from the purchaser. 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.

• 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 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.

37. 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 46; 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 45 or 46, as appropriate.

• b) 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 32 b).

• c) Renewal of such protocols and credit lines is possible only on terms which are in accordance with the provisions of Articles 32 and 33 of the Arrangement following:
• — the 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 36.

38. MATCHING

Taking into account a Participant’s international obligations and consistent with the purpose of the Arrangement, a Participant may match, according to the procedures set out in Article 41, financial terms and conditions offered by a Participant or a non-Participant.

CHAPTER IV

PROCEDURES

SECTION 1

COMMON PROCEDURES FOR EXPORT CREDITS AND TRADE-RELATED AID

39. NOTIFICATIONS

The notifications set out by the procedures in the Arrangement shall be made in accordance with, and include the information contained in Annex V, and shall be copied to the Secretariat.

40. INFORMATION ON OFFICIAL SUPPORT

• a) As soon as a Participant commits the official support which it has notified in accordance with the procedures in Articles 43 to 46, it shall inform all other Participants accordingly by including the notification reference number on the relevant ex-post reporting form.

• b) In an exchange of information in accordance with Articles 51 to 53, 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.

• c) In addition to the information stipulated in Annex V that is provided for transactions that have been prior-notified under Article 43 or 44, Participants shall provide, in the relevant ex-post reporting form:
• 1. for all transactions supported, information related to the actual repayment term and repayment profile on an ex-post basis, including, inter alia, the following items: (1) the length of the repayment term, (2) the repayment profile, (3) the frequency of principal repayments, (4) the frequency of interest payments, (5) the length of time between the starting point of credit and the first repayment of principal, and where relevant, (6) the weighted average life of the repayment period, (7) percentage of principal repaid by the mid-point of the credit, (8) maximum single instalment, (9) explanation of imbalance between timing of funds available and the debt service profile used, and (10) detailed and adequate justification of repayment profile supported if the repayment profile does not match the free cash flow.
• 1. in addition, for transactions supported under Article 13 e) that have not been prior-notified, Participants shall also provide:
• — an explanation of the reasons why there is an imbalance between the timing of funds available to the obligor and the debt service profile permitted according to Articles 13 a) and 13 b), and
• — for transactions with a repayment profile that does not match the free cash flow, a detailed and adequate justification of the repayment profile supported.

41. PROCEDURES FOR MATCHING

• a) Before matching financial terms and conditions assumed to be offered by a Participant or a non-Participant pursuant to Articles 17 and 38, a Participant shall make every reasonable effort, including as appropriate by use of the face-to-face consultations described in Article 53, to verify that these terms and conditions are officially supported and shall comply with the following:
• 1. The Participant shall notify all other Participants of the terms and conditions it intends to support following the same notification procedures required for the matched terms and conditions. In the case of matching a non-Participant, the matching Participant shall follow the same notification procedures that would have been required had the matched terms been offered by a Participant.
• 1. Notwithstanding subparagraph 1) above, if the applicable notification procedure would require the matching Participant to withhold its commitment beyond the final bid closing date, then the matching Participant shall give notice of its intention to match as early as possible.
• 1. If the initiating Participant moderates or withdraws its intention to support the notified terms and conditions, it shall immediately inform all other Participants accordingly.

• b) A Participant intending to offer identical financial terms and conditions to those notified according to Articles 43 and 44 may do so once the waiting period stipulated therein has expired. This Participant shall give notification of its intention as early as possible.

42. SPECIAL CONSULTATIONS

• a) 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.

• b) 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.

• c) 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.

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

SECTION 2

PROCEDURES FOR EXPORT CREDITS

43. PRIOR NOTIFICATION WITH DISCUSSION

• a) A Participant shall notify all other Participants at least ten calendar days before issuing any commitment with a credit value of greater than SDR 10 million in accordance with Annex V if:
• — the applicable country risk classification and buyer risk category used to calculate the MPR is that of a third party guarantor located outside of the obligor’s country [i.e. determined according to Article 21 e)]; or
• — the applicable MPR has been decreased through the application of a country risk mitigation technique listed in Article 26.

• b) A Participant shall notify all other Participants at least ten calendar days before issuing any commitment with a credit value of greater than SDR 10 million in accordance with Annex V if the support is extended under Article 6 a) 2) of Annex I.

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

• d) 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 62. The Participants shall maintain records of their experience with regard to premium rates notified in accordance with paragraph a) above.

44. PRIOR NOTIFICATION

• a) A Participant shall, in accordance with Annex V, notify all other Participants at least ten calendar days before issuing any commitment with a repayment term of greater than 10 years and with a credit value of greater than SDR 10 million.

• b) A Participant shall, in accordance with Annex V, notify all other Participants at least ten calendar days before issuing any commitment with a credit value of greater than SDR 10 million if the support is provided according to:
• 1. Article 13 f),
• 1. Article 5 of Annex II, or
• 1. Article 6 a) 1) of Annex I.