Commission Delegated Regulation (EU) 2023/262 of 7 September 2022 amending Annex II to Regulation (EU) No 1233/2011 of the European Parliament and of the Council on the application of certain guidelines in the field of officially supported export credits

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

The provisions of Article 8 and of Annex VI to the Arrangement shall not be applied until such provisions have been further reviewed by the Participants to this Sector Understanding.

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

CHAPTER III

Procedures

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

Attachment

Commitments for future work

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

— the date of the first instalment of principal; — the Weighted Average Life concept may be used in relation to the repayment profile contained in Article 5 of this Sector Understanding.

ANNEX II

SECTOR UNDERSTANDING ON EXPORT CREDITS FOR NUCLEAR POWER PLANTS

CHAPTER I

Scope of the sector understanding

1) The export of complete nuclear power stations or parts thereof, comprising all components, equipment, materials and services, including the training of personnel directly required for the construction and commissioning of such nuclear power stations. 2) The modernisation of existing nuclear power plants in cases where both the overall value of the modernisation is at or above SDR 80 million and the economic life of the plant is likely to be extended by at least the repayment period to be awarded. If either of these criteria is not met, the terms of the Arrangement apply. 3) The supply of nuclear fuel and enrichment. 4) The provision of spent fuel management.

1) Items located outside the nuclear power plant site boundary for which the buyer is usually responsible, in particular costs associated with land development, roads, construction village, power lines, switchyard (¹⁹) and water supply, as well as costs arising in the buyer’s country from official approval procedures (e.g. site permit, construction permit, fuel loading permit). 2) Sub-stations, transformers and transmission lines located outside the nuclear power plant site boundary. 3) Official support provided for the decommissioning of a nuclear power plant.

CHAPTER II

Provisions for export credits and trade-related aid

1) Repayment of principal shall be made in equal instalments. 2) Repayment of principal and payment of interest combined shall be made in equal instalments.

1) The maximum repayment term shall be 15 years. 2) 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. 3) Principal shall be repaid no less frequently than every 12 months. The first repayment of principal shall be made no later than 12 months after the starting point of credit and no less than 2 % of the principal sum of the credit shall have been repaid 12 months after the starting point of credit. 4) 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. 5) The maximum weighted average life of the repayment period shall not exceed nine years.

Without prejudice to the provisions of Article 5 of this Sector Understanding, the Participants shall not provide free nuclear fuel or services.

The Participants shall not provide aid support.

CHAPTER III

Procedures

CHAPTER IV

Review

The Participants agree to examine the following issues:

The Participants shall review regularly the provisions of the Sector Understanding and at the latest by the end of 2023.

ANNEX III

SECTOR UNDERSTANDING ON EXPORT CREDITS FOR CIVIL AIRCRAFT

PART 1

GENERAL PROVISIONS

1) Equalises competitive financial conditions between the Participants, 2) Neutralises official support among the Participants as a factor in the choice among competing goods and services specified in Article 4 a) below, and 3) Avoids distortion of competition among the Participants to this Sector Understanding and any other sources of financing.

This Sector Understanding is a Gentlemen’s Agreement among its Participants and is Annex III to the Arrangement; it forms an integral part of the Arrangement and it succeeds the Sector Understanding, which came into effect in July 2007.

The Participants currently are: Australia, Brazil, Canada, the European Union, Japan, Korea, New Zealand, Norway, Switzerland, the United Kingdom and the United States. Any non-Participant may become a Participant in accordance with the procedures set out in Appendix I.

1) New civil aircraft and engines installed thereon, including buyer furnished equipment. 2) Used, converted, and refurbished civil aircraft and engines installed thereon, including, in each case, buyer furnished equipment. 3) Spare engines. 4) Spare parts for civil aircraft and engines. 5) Maintenance and service contracts for civil aircraft and engines. 6) Conversion, major modifications and refurbishment of civil aircraft. 7) Engine kits.

1) Export credit guarantee or insurance (pure cover). 2) Official financing support: — direct credit/financing and refinancing or — interest rate support. 3) Any combination of the above.

1) The exports of new or used military aircraft and related goods and services listed in paragraph a) above, including when used for military purposes. 2) New or used flight simulators.

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.

The Participants shall not provide aid support, except for humanitarian purposes, through a Common Line procedure.

This Sector Understanding does not prevent its Participants from agreeing to less restrictive financial terms and conditions than those provided for by this Sector Understanding, if such action is taken after 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. A Participant shall notify all other Participants and the OECD Secretariat (the Secretariat), within 20 working days following the Participant’s agreement with the buyer/borrower, of the modified financial terms and conditions. The notification shall contain information, including the motivation, on the new financial terms and conditions, using the reporting form set out in Appendix IV.

PART 2

NEW AIRCRAFT

1) An aircraft, including buyer furnished equipment, and the engines installed on such aircraft owned by the manufacturer and not delivered nor previously used for its intended purpose of carrying passengers and/or freight and 2) Spare engines and spare parts when contemplated as part of the original aircraft order in accordance with the provisions of Article 20 a) below.

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 currencies, which are eligible for official financing support, are euro, Japanese yen, UK pound sterling, US dollar, and other fully convertible currencies for which data are available to construct the minimum interest rates mentioned in Appendix III.

1) Require a minimum down payment of 20 % of the net price of the aircraft at or before the starting point of credit; 2) Not provide official support in excess of 80 % of the net price of the aircraft.

1) Require a minimum down payment of 15 % of the net price of the aircraft at or before the starting point of credit; 2) Not provide official support in excess of 85 % of the net price of the aircraft.

1) Repayment of principal and payment of interest combined shall be made in equal instalments: — Instalments shall be made no less frequently than every three months and the first instalment shall be made no later than three months after the starting point of credit. — Alternatively, and subject to a prior notification (unless it is a de minimis transaction), instalments shall be made every six months and the first instalment shall be made no later than six months after the starting point of credit. In this case, a surcharge of 15 % to the minimum premium rates calculated in accordance with Appendix II shall apply. — In the case of a floating rate transaction, the principal amortising profile shall be set for the entire term, no more than five business days prior to the disbursement date, based on the floating or swap rate at that time. 2) Repayment of principal shall be made in equal instalments with interest payable on declining balances: — Instalments shall be made no less frequently than every three months and the first instalment shall be made no later than three months after the starting point of credit. — Alternatively, and subject to a prior notification (unless it is a de minimis transaction), instalments shall be made every six months and the first instalment shall be made no later than six months after the starting point of credit. In this case, a surcharge of 15 % to the minimum premium rates calculated in accordance with Appendix II shall apply.

The Participants providing interest rate support shall comply with the financial terms and conditions of this Sector Understanding and shall require any bank or any other financial institution which is a party to the interest supported transaction to participate in that transaction only on terms that are consistent in all respects with the financial terms and conditions of this Sector Understanding.

1) For the first six months of the holding period: zero basis points per annum. 2) For the second six months of the holding period: 12,5 basis points per annum. 3) For the third and final six months of the holding period: 25 basis points per annum.

1) Arrangement/Structuring fee: 25 basis points on the disbursed amount payable at the time of each disbursement. 2) Commitment and premium holding fee: 20 basis points per annum on the un-drawn portion of the officially supported export credit to be disbursed, during the premium holding period, payable in arrears. 3) Administration fee: five basis points per annum on the amount of official support outstanding payable in arrears. Alternatively, the Participants may elect to have this fee payable as an upfront fee, on the amount disbursed, at the time of each disbursement pursuant to the provisions of Article 11 b) above.

Notwithstanding Articles 14 and 16 above, in a co-financing where official support is provided by way of direct credit and pure cover, and where pure cover represents at least 35 % of the officially supported amount, the Participant providing direct credit shall apply the same financial terms and conditions, including fees, as those provided by the financial institution under pure cover, to generate an all-in cost equivalence between the pure cover provider and the direct lender. In such circumstances, the Participant providing such support shall report the financial terms and conditions supported, including fees, in accordance with the reporting form set out in Appendix IV.

PART 3

USED AIRCRAFT, SPARE ENGINES, SPARE PARTS, MAINTENANCE AND SERVICE CONTRACTS

This Part of the Sector Understanding shall apply to used aircraft and to spare engines, spare parts, conversion, major modification, refurbishing, maintenance and service contracts in conjunction with both new and used aircraft and engine kits.

The financial terms and conditions to be applied, other than the maximum repayment term, shall be in accordance with the provisions set out in Part 2 of this Sector Understanding.

Age of aircraft (years since the date of original manufacture) Maximum repayment terms for asset-backed or sovereign transactions (years) Maximum repayment terms for transactions neither asset-backed nor sovereign (years) 1 10 8,5 2 9 7,5 3 8 6,5 4 7 6 5–8 6 5,5 Over 8 5 5

Maximum repayment terms for asset-backed converted aircraft (years) Period of time since the date of conversion (years) Age of aircraft (years since the date of original manufacture) 1 2 3 4 5–8 Over 8 0 (Newly converted) 10 9 8 8 8 8 1 10 9 8 7 7 7 2 9 8 7 6 6 3 or more

8 7 6 5

1) Five years with a contract value of USD 5 million or more. 2) Two years with a contract value of less than USD 5 million.

1) Is valued at USD 5 million or more, and — Meets all the requirements of Article 19 of Appendix II, a Participant may offer official support with a repayment term of up to eight years. — Does not meet all the requirements of Article 19 of Appendix II, a Participant may offer official support with a repayment term of up to five years. 2) Is valued at less than USD 5 million, a Participant may offer official support with a repayment term of up to two years.

1) Five years if the contract value is USD 5 million or more; 2) Two years, if the contract value is less than USD 5 million.

The Participants may offer official support with a repayment term of up to three years.

The Participants may offer official support with a repayment term of up to five years.

PART 4

TRANSPARENCY PROCEDURES

All communications shall be made between the designated contact points in each Participant country 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. Unless otherwise agreed, all information exchanged under this Part of the Sector Understanding shall be treated by all Participants as confidential.

1) Reference number, followed by Common Line. 2) Name of the importing country and buyer/borrower. 3) Name or description of the transaction as precise as possible to clearly identify the transaction. 4) Common Line proposal for the most generous terms and conditions to be supported. 5) Nationality and names of known competing bidders. 6) Bid closing date and tender number to the extent it is known. 7) Other relevant information, including reasons for proposing the Common Line and as appropriate, special circumstances.

The Secretariat shall inform all Participants either that the Common Line will go into effect or that it has been rejected; the agreed Common Line will take effect three calendar days after this announcement.

1) The matching Participant shall make every effort to verify such terms and conditions. 2) The matching Participant shall inform the Secretariat and all other Participants of the nature and outcome of such efforts, as well as of the terms and conditions it intends to support, at least ten calendar days before issuing any commitment. 3) If a competing Participant requests a discussion during this ten calendar-day period, the matching Participant shall wait an additional ten calendar days before issuing any commitment on such terms.

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

PART 5

MONITORING AND REVIEW

The Secretariat shall monitor the implementation of this Sector Understanding and report to the Participants on an annual basis.

The Participants shall review the procedures and provisions of this Sector Understanding, against the criteria, and at the times, set out in paragraphs a) and b) below.

1) In calendar year 2019 and every fourth year thereafter, in each case with three months prior notice given by the Secretariat. 2) At the request of a Participant after due consultation, provided that three months prior notice has been given by the Secretariat and the requesting Participant provides a written explanation of the reason for, and objectives of, the review as well as a summary of the consultations preceding its request. 3) Modalities of update of minimum premium rates and minimum interest rates are set out in Appendices II and III respectively. 4) Fees set out in Article 16 shall be part of reviews.

1) The extent to which the purposes of this Sector Understanding, as set out in Article 1 above, have been achieved and any other issue a Participant may wish to bring forward for discussion. 2) In view of the elements in subparagraph b) 1) above, whether amendments to any aspect of this Sector Understanding are justified.

Consideration will be given to:

g) The definition of “Interested Participant”.

PART 6

FINAL PROVISIONS

The effective date of this Sector Understanding is 1 February 2011.

A Participant may withdraw from this Sector Understanding by notifying the Secretariat in writing by means of instant communication, e.g. electronic mail. The withdrawal takes effect six months after receipt of the notification by the Secretariat. Withdrawal will not affect agreements reached on individual transactions entered into prior to the effective date of the withdrawal.

Appendix I

Participation in the aircraft sector understanding

1.The Participants encourage non-Participants that are developing a manufacturing capacity for civil aircraft to apply the disciplines of this Sector Understanding. In this context the Participants invite non-Participants to enter into a dialogue with them regarding the conditions of joining the ASU.

2.The Secretariat should ensure that a non-Participant interested in participating in this Sector Understanding is provided with full information on the terms and conditions associated with becoming a Participant to this Sector Understanding.

3.The non-Participant would then be invited by the Participants to take part in the activities in pursuance of this Sector Understanding and to attend, as an observer, the relevant meetings. Such an invitation would be for a maximum of two years and could be renewed once for a further two years. During this period the non-Participant shall be invited to provide a review of its export credit system, especially for the export of civil aircraft.

4.At the end of that period, the non-Participant shall indicate whether it wishes to become a Participant in this Sector Understanding and to follow its disciplines; in the case of such confirmation, the non-Participant shall contribute, on an annual basis, to the costs associated with the implementation of this Sector Understanding.

5.The interested non-Participant shall be considered a Participant 30 working days after the confirmation referred to in Article 4 of this Appendix.

Appendix II

Minimum premium rates

This Appendix sets out the procedures to be used when determining the pricing of official support for a transaction subject to this Sector Understanding. Section 1 sets out the risk classification procedures; Section 2 sets out the minimum premium rates to be charged for new and used aircraft, and Section 3 sets out the minimum premium rates to be charged for spare engines, spare parts, conversion/major modification/refurbishing, maintenance and service contracts, and engine kits.

Section 1

Procedures for risk classification

1.The Participants have agreed on a list of risk classifications (the List) for buyers/borrowers; such risk classifications reflect the senior unsecured credit rating of buyers/borrowers using a common rating scale such as that of one of the credit rating agencies (CRA).

2.The risk classifications will be made by experts nominated by the Participants against the risk categories set out in Table 1 of this Appendix.

3.The List shall be binding at any stage of the transaction (e.g. campaign and delivery), subject to the provisions of Article 15 of this Appendix.

4.The List shall be developed and agreed among the Participants prior to the entry into force of this Sector Understanding; it shall be maintained by the Secretariat and made available to all the Participants on a confidential basis.

5.Upon request, the Secretariat may, on a confidential basis, inform an aircraft-producing non-Participant of the risk classification of a buyer/borrower; in this case, the Secretariat shall inform all Participants of the request. A non-Participant may, at any time, propose additions to the List to the Secretariat. A non-Participant proposing an addition to the List may participate in the risk-classification procedure as if it were an interested Participant.

6.Subject to the provisions of Article 15 of this Appendix, the List may be updated on an ad hoc basis in the event that either a Participant signals, in any form, its intention to apply another risk classification than that on the List, or a Participant needs a risk classification for a buyer/borrower that is not yet on the List (²¹) (²²).

7.Any Participant shall, before any use of an alternative or new risk classification, send a request to the Secretariat for updating the List on the basis of an alternative or new risk classification. The Secretariat will circulate this request to all Participants within two working days, without mentioning the identity of the Participant who submitted the request.

8.A period of ten (²³) working days is allowed for interested Participants either to agree to or to challenge any proposed change to the List; a failure to respond within this period is considered as an agreement to the proposal. If at the end of the ten-day period, no challenge has been made to the proposal, the proposed change in the List is deemed to have been agreed. The Secretariat will modify the List accordingly and send a message via electronic mail within five working days; the revised List shall be binding from the date of that message.

9.In the event of a challenge to a proposed risk classification, interested Participants shall, at an expert level, make their best efforts to come to an agreement on the risk classification within a further period of ten working days after notification of a disagreement. All means necessary to resolve the disagreement should be explored, with the assistance of the Secretariat if necessary (e.g. conference calls or face-to-face consultations). If interested Participants agree to a risk classification within this ten working-day period, they shall inform the Secretariat of the outcome upon which the Secretariat will update the List accordingly and send a message via electronic mail in the following five working days. The adjusted List shall be binding from the date of that message.

10.In case the disagreement is not resolved among the experts within ten working days, the issue will be referred to the Participants for decision on an appropriate risk classification, in a period that shall not exceed five working days.

11.In the absence of a final agreement, a Participant may have recourse to a CRA to determine the risk classification of the buyer/borrower. In such cases, the Chairman of the Participants shall address a communication on behalf of the Participants to the buyer/borrower, within ten working days. The communication shall include the terms of reference for the risk assessment consultation as agreed among the Participants. The resulting risk classification will be registered in the List and become binding immediately following the Secretariat’s message to finalise the update procedure within five working days.

12.Unless otherwise agreed, the cost of such recourse to a CRA shall be borne by the interested buyer/borrower.

13.During the procedures set out in Articles 9 to 11 of this Appendix, the prevailing risk classification (when available on the List) shall remain applicable.

14.The valid risk classifications are the prevailing risk classifications as recorded in the List maintained by the Secretariat; indications and commitments of premium rates shall only be made in accordance with those risk classifications.

15.Risk classifications have a 12-month maximum validity period from the date recorded in the List by the Secretariat for the purpose of the Participants providing indication and final commitments of premium rates; the validity period for a specific transaction may be extended by an additional 18 months once a commitment or a final commitment has occurred and premium holding fees are charged. Risk classifications may be subject to revision during the 12-month validity period in case of material changes to the risk profile of the buyer/borrower, such as a modification of a rating delivered by a CRA.

16.Unless any Participant requests its update, at least 20 working days before the end of the relevant risk classification validity period, the Secretariat shall remove that risk classification from the next succeeding updated List. The Secretariat will circulate this update request to all Participants within two working days, without mentioning the identity of the Participant who submitted the request, and the procedures set out in Articles 9 to 11 of this Appendix shall apply.

17.If, at the campaign stage, a buyer/borrower requests an indication of its risk classification and if it is not yet on the List, that buyer/borrower may ask for an indicative risk classification from a CRA at its own expense. This risk classification shall not be included in the List; it may be used by the Participants as a basis for their own risk assessment.

Section 2

Minimum premium rates for new and used aircraft

18.Articles 19 to 60 of this Appendix set out the minimum premium rates corresponding to the risk classification of a buyer/borrower (or, if a different entity, the primary source of repayment of the transaction).

19.The Participants may provide official support at or above the minimum premium rate provided that all the conditions below are fulfilled:

1) A first priority security interest on or in connection with the aircraft and engines. 2) In the case of a lease structure, assignment and/or a first priority security interest in connection with the lease payments. 3) Cross default and cross collateralisation of all aircraft and engines owned legally and beneficially by the same parties under the proposed financing, whenever possible under the applicable legal regime.

Table 1 Risk mitigants ASU Risk Category Risk Ratings Risk Mitigants TOTAL Of which at least “A” 1 AAA to BBB- 0 0 2 BB+ and BB 0 0 3 BB- 1 1 4 B+ 2 1 5 B 2 1 6 B- 3 2 7 CCC 4 3 8 CC to C 4 3

20.For purposes of Article 19 of this Appendix:

“A” risk mitigants: 1) Reduced advance rate: each reduction of five percentage points from the advance rates referred to in Articles 10 a) and b) of this Sector Understanding is equivalent to one “A” risk mitigant. In this case, the Participant shall not provide official support in any form in excess of the reduced advance rate. 2) Straight line amortisation: repayment of principal in equal instalments is equivalent to one risk mitigant. 3) Reduced repayment term: a repayment term that does not exceed 10 years is equivalent to one risk mitigant, irrespective of the maximum repayment term allowed. “B” risk mitigants: 1) Security deposit: each security deposit in an amount equal to one quarterly instalment of principal and interest is equivalent to one risk mitigant. The security deposit can be in the form of cash or a standby letter of credit. 2) Lease payments in advance: lease payments in an amount equal to one quarterly instalment of principal and interest shall be paid one quarter in advance of each repayment date. 3) Maintenance reserves in a form and amount reflective of market best practices.

21.Minimum premium rates to be applied to a transaction can be set prior to delivery, either at commitment, final commitment or otherwise at the commencement of a premium holding period with a defined duration. Final upfront premium rate, per annum spread, or a combination thereof to be applied to the transaction will comply with the minimum premium rate so established as well as mandatory risk mitigants prescribed in Article 19 b) of this Appendix as of the date on which the minimum premium rates were set. Such terms shall apply for the full length of the premium holding period and may only be revised following the expiry of that period, at which time the minimum premium rates and mandatory risk mitigants prescribed by the ASU then in force will apply and may be set for a subsequent premium holding period.

22.Pursuant to Article 11 of this Sector Understanding, the minimum premium rates to be applied are composed of minimum risk-based rates (RBR) to which a market reflective surcharge (MRS) shall be added, in accordance with Articles 23 to 35 below.

23.As of the entry into force of this Sector Understanding, the RBRs are:

ASU Risk Category	Spreads (bps)	Upfront (%)
1	89	4,98
2	98	5,49
3	116	6,52
4	133	7,49
5	151	8,53
6	168	9,51
7	185	10,50
8	194	11,03

24.The RBRs rates shall be reset on an annual basis, based on 4-year moving average of the annual Moody’s Loss Given Default (LGD). The appropriate LGD for this reset is based on the 1st Lien Senior Secured Bank Loans, and shall be calculated as follows:

LGD Mapping
4-year Moving Average	LGD Considered
>= 45 %	25 %
>= “35 %” < 45 %	23 %
>= “30 %” < 35 %	21 %
< 30 %	19 %

25.A RBR adjustment factor shall be determined as follows:

LGD Considered = RBR adjustment factor

19 %

26.The RBR adjustment factor shall be multiplied by the RBRs set out in Table 2 above, in order to determine the reset RBRs.

27.The RBRs resulting from the reset processes listed above will be effective as of 15 April of each following year. Once the RBRs resulting from the annual reset have been determined, the Secretariat shall inform immediately all Participants of the applicable rates and make them publicly available.

28.For each risk category, a Market Reflective Surcharge shall be calculated as follows:

MRS = B[(0,5MCS)-RBR]

where:

— B is a blend coefficient varying from 0,7 to 0,35 according to each risk category as per Table 4 below.

— MCS is a 90-day moving average of Moody’s Median Credit Spreads (MCS) with an average life of 7 years.

29.Where risk categories include more than one risk rating, the spreads shall be averaged. In risk category 1, the BBB- spread shall be used.

30.The MCS spreads shall be discounted by 50 % to account for the asset-security. The MCS discounted spreads shall then be adjusted by a blend factor ranging from 70 % to 35 % as per Table 4 below, applied on the difference between the MCS discounted spreads and the RBR. Any negative spreads resulting from the blending shall not be deducted.

Risk-Ratings	ASU Risk Category	Blend Factor (%)
AAA	1	70
AA	1	70
A	1	70
BBB+	1	70
BBB	1	70
BBB-	1	70
BB+	2	65
BB	2	65
BB-	3	50
B+	4	45
B	5	40
B-	6	35
CCC	7	35
CC	8	35
C	8	35

31.The MRS shall be updated on a quarterly basis and the resulting MCS shall become effective respectively on 15 January, 15 April, 15 July and 15 October of each year. Following each update, the Secretariat shall inform immediately all Participants of the applicable MRS and the resulting minimum rates and make them available to Participants prior to the date these rates become effective.

32.The increase in minimum premium rates resulting from the MRS update shall be capped at 10 % of the previous quarterly minimum premium rates. Therefore, the minimum premium rates (which result from adding the RBRs and the MRS) shall be capped at 200 % of the RBRs and floored at 100 % of the RBRs.

33.The premium rates resulting from the application of Article 32 for risk categories 2–8 shall be adjusted, if necessary, to ensure that the premium rate for each risk category is no lower than the premium rate for the risk category that immediately precedes it (i.e. the premium rate for category “x” that is lower than the premium rate for category “x-1” will be adjusted upwards to the level of the premium rate for category “x-1”).

34.In order to determine the minimum premium rates:

— The following formula shall be used: Net MPR = MPR(1+RTAS)(1+RFAS)(1+RMRS)(1-CTCD)*(1+NABS) – CICD Where: — RTAS represents the repayment term adjustment surcharge set out in Article 12 b) of this Sector Understanding. — RFAS represents the repayment frequency adjustment surcharge set out in Articles 13 a) 1) and 2) of this Sector Understanding. — RMRS represents the risk mitigant replacement surcharge set out in Article 20 b) of this Appendix. — CTCD represents the Cape Town Convention Discount set out in Article 38 of this Appendix. — NABS represents the non-asset-backed surcharge set out in Articles 57 a) 4), 57 b) and 59 b) of this Appendix, as applicable. — CICD represents the conditional insurance coverage discount set out in Article 56 a) of this Appendix.

— Premium may be paid either upfront or, over the life of the facility, as spreads expressed in basis points per annum, or in any combination of upfront rates and spreads. The upfront rates and spreads shall be calculated using the premium rate conversion model (PCM) so that the premium payable for a given transaction has the same NPV whether payable upfront, as a spread over the life of the facility, or a combination thereof. In transactions where, prior to the commencement of cover, terms are agreed or stipulated, which entail a reduction in the weighted average life, an upfront rate (calculated using the PCM) may be charged, which in terms of the resulting premium payable, corresponds to that payable in NPV terms under the spreads.

35.The applicable minimum premium rates are published on the OECD website, using the format set out in Table 5 below.

Risk category	Risk classification	Minimum premium rates
Per annum spreads (bps)	Up-front (%)
1	AAA to BBB-
2	BB+ and BB
3	BB-
4	B+
5	B
6	B-
7	CCC
8	CC to C

36.Subject to the provisions of Article 37 of this Appendix, a reduction of the minimum premium rates established in accordance with sub-Section I above shall be allowed if:

37.The reduction of the minimum premium rates established in accordance with sub-Section I above shall not exceed 10 % of the applicable minimum premium rate.

38.In order to be included on the Cape Town List, a State shall:

39.To qualify under Article 36 of this Appendix, a territorial unit shall:

40.An initial agreed Cape Town List shall be provided by the Participants to the Secretariat prior to the entry into force of this Sector Understanding. Updates to the Cape Town List shall be made in accordance with Articles 41 to 53 of this Appendix.

41.Any Participant or non-Participant that provides official support for aircraft may propose to the Secretariat the addition of a State to the Cape Town List. Such proposal shall include, with respect to such State:

ii) 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; iii) 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 (²⁴); and iv) The date on which the CTC Questionnaire has been completed.

42.The Secretariat shall circulate a message via electronic mail within five working days containing the proposal.

43.Any Participant or non-Participant which provides official support for aircraft may propose that a State be removed from the Cape Town List if they are of the view that such State has taken actions that are inconsistent with, or failed to take actions that are required by virtue of, that State’s Cape Town Convention commitments. To that end, the Participant or non-Participant shall include in a proposal for removal from the Cape Town List, a full description of the circumstances that have given rise to the proposal for deletion, such as any State actions that are inconsistent with its Cape Town Convention commitments, or any failure to maintain or enforce legislation required by virtue of that State’s Cape Town Convention commitments. The Participant or non-Participant who submits the proposal for removal from the Cape Town List shall provide any supporting documentation that may be available, and the Secretariat shall circulate a message via electronic mail within five working days containing such proposal.

44.Any Participant or non-Participant which provides official support for aircraft may propose the reinstatement of a State that has been previously removed from the Cape Town List, where such reinstatement is justified by subsequent corrective actions or events. Such a proposal shall be accompanied by a description of the circumstances that gave rise to the removal of the State as well as a report of the subsequent corrective actions in support of reinstatement. The Secretariat shall circulate a message via electronic mail within five working days containing such proposal.

45.The Participants may either agree to or challenge a proposal brought forward under Articles 41 to 44 of this Appendix within 20 working days from the date of submission of the proposal (“Period 1”).

46.If at the end of Period 1, and in the case of Article 43 of this Appendix unless the proposal has been withdrawn by the proposing Participant or non-Participant providing evidence of corrective actions or events, no challenge has been made to the proposal, the proposed update to the Cape Town List is deemed to have been accepted by all Participants. The Secretariat will modify the Cape Town List accordingly and send a message via electronic mail within five working days. The updated Cape Town List shall take effect on the date of that message.

47.In the event of a challenge to the proposed update of the Cape Town List, the challenging Participant or Participants shall, within Period 1, provide a written explanation of the basis of the challenge. Following circulation by the OECD Secretariat to all Participants of the written challenge, the Participants shall make best efforts to come to an agreement within a further ten-working day period (“Period 2”).

48.The Participants shall inform the Secretariat of the outcome of their discussions. If an agreement is reached during Period 2, the Secretariat will, if necessary, update the Cape Town List accordingly and send a message via electronic mail in the following five working days. The updated Cape Town List shall take effect on the date of that message.

49.If no agreement is reached during Period 2, the Chairman of the Participants to this Sector Understanding (hereafter “the Chairman”) will make her/his best efforts to facilitate a consensus between the Participants, within 20 working days (“Period 3”) immediately following Period 2. If at the end of Period 3, no consensus is reached, a final resolution shall be achieved through the following procedures:

50.If, following a proposal submitted under Article 41 of this Appendix, the Participants or Chairman has determined that a State is not eligible to be added to the Cape Town List, a Participant or non-Participant may submit another proposal requesting that the Participants reconsider the State’s eligibility. The proposing Participant or non-Participant shall address the reasons substantiating the original determination of ineligibility. The proposing Participant or non-Participant shall also obtain and provide an updated CTC questionnaire. This new proposal shall be subject to the process set out in Articles 45 to 51 of this Appendix.

51.In the event of any change to the list of qualified countries pursuant to the procedures set out in Article 49 of this Appendix, the Secretariat shall issue a message via electronic mail containing the updated Cape Town List within five working days of such change. The updated Cape Town List shall take effect on the date of that message.

52.The addition, withdrawal or reinstatement of a State to the Cape Town List after disbursement in respect of an aircraft shall not affect MPRs established regarding such aircraft.

53.In the context of the process set out in Articles 41 to 51 of this Appendix, the Participants shall not disclose any information relating to views or positions expressed.

54.The Participants shall monitor the implementation of Articles 41 to 53 of this Appendix and review it annually or upon the request of any Participant.

55.For new and used aircraft, the following adjustments to the applicable minimum premium rates may be applied:

56.Notwithstanding the provisions of Article 19 a) of this Appendix, the Participants may provide officially supported export credits for non-asset backed transactions, provided either of the following conditions is fulfilled:

1) The maximum value of the export contract receiving official support is USD 15 million. 2) The maximum repayment term shall be 10 years, 3) No third party has a security interest in the assets being financed, and 4) A minimum surcharge of 30 % shall be applied to the minimum premium rates established in accordance with sub-Section I above.

Table 6 Risk Category Surcharge (%) 1 0 2 0 3 0 4 10 5 15 6 15 7 25 8 25

57.The provisions of Articles 36 to 52 of this Appendix do not apply to officially supported export credits provided pursuant to Article 56 of this Appendix.

Section 3

Minimum premium rates for goods and services other than used aircraft covered by Part 3 of this sector understanding

58.When providing official support for all goods and services other than used aircraft covered by Part 3 of this Sector Understanding, the minimum premium rates shall be as follows:

59.The provisions of Articles 36 to 52 of this Appendix shall apply to official support for asset backed spare engines covered by Article 20 a) and c) of this Sector Understanding and support under the first tiret of Article 21 a) 1) of this Sector Understanding.

60.The provision of Article 55 of this Appendix shall also apply to official support for all goods and services other than used aircraft covered by Part 3 of this Sector Understanding.

ANNEX 1

QUALIFYING DECLARATIONS

1.For the purpose of Section 2 of Appendix II, the term “qualifying declarations”, and all other references thereto in this Sector Understanding, means that a Contracting party to the Cape Town Convention (Contracting Party):

2.The declarations for the purpose of Article 1 a) of this Annex are:

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

1) The remedies specified in Articles 13(1)(a), (b) and (c) of the Convention (preservation of the aircraft objects and their value; possession, control or custody of the aircraft objects; and immobilisation of the aircraft objects), not more than that equal to ten calendar days; and 2) The remedies specified in Articles 13(1)(d) and (e) of the Convention (lease or management of the aircraft objects and the income thereof and sale and application of proceeds from the aircraft equipment), not more than that equal to 30 calendar days.

3.The declarations referred to in Article 1 b) of this Annex are the following:

4.Regarding Article XI of the Aircraft Protocol, for Member States of the European Union, the qualifying declaration set out in Article 2 a) of this Annex shall be deemed made by a Member State, for purposes hereof, if the national law of such Member State was amended to reflect the terms of Alternative A under Article XI of the Aircraft Protocol (with a maximum 60 calendar days waiting period). As regards the qualifying declarations set out in Articles 2 c) and e) of this Annex, these shall be deemed satisfied, for the purpose of this Sector Understanding, if the laws of the European Union or the relevant Member States are substantially similar to that set out in such Articles of this Annex. In the case of Article 2 c) of this Annex, the laws of the European Union (Regulation (EC) No 593/2008 on the Law Applicable to Contractual Obligations) are agreed to be substantially similar to Article VIII of the Aircraft Protocol.

ANNEX 2

CAPE TOWN CONVENTION QUESTIONNAIRE

I. PRELIMINARY INFORMATION

Please provide the following information:

4. The date on which this questionnaire was completed.

II.   QUESTIONS

1.1.Has the State (²⁶) made each of the qualifying declarations in accordance with the requirements of Annex 1 to Appendix II of the Sector Understanding on Export Credits for Civil Aircraft (“ASU”) (each a “Qualifying Declaration”)? In particular, regarding the declarations concerning “Method for Exercising Remedies” [Article 2 d)] and “Timely Remedies” [Article 2 e)], please specify if one or both of these have been made.

1.2.Please describe the way in which the declarations made differ, if at all, from the requirements referred to in Question 1.1.

1.3.Please confirm that the State has not made any of the declarations listed in Article 3 of Annex 1 to Appendix II of the ASU.

1.1.Has the State ratified, accepted, approved or acceded to the Cape Town Convention and Aircraft Protocol (“Convention”)? Please could you state the date of ratification/accession and briefly describe the State’s process of accession to or ratification of the Convention?

1.2.Do the Convention and Qualifying Declarations (“QD”) made have the force of law in the whole territory of the State without any further act, implementing legislation or the passing of any further law or regulation?

1.3.If so, please briefly explain the process that gives the Convention and QDs the force of law.

1.1.Describe and list, if applicable, the implementing legislation and regulation(s) with respect to the Convention and each QD made by the State.

1.2.Would the Convention and QDs made, as translated into national law (²⁷) (“Convention and QDs”), overrule or have priority over any conflicting national law, regulation, order, judicial precedent or regulatory practice. If so, please describe the process by which this happens (²⁸), and if not, please provide details.

1.3.Are there any existing gaps in the implementation of the Convention and QDs? If so, please describe (²⁹).

1.1.Please describe any matters, including judicial, regulatory, or administrative practice which could be expected to result in the courts, authorities or administrative bodies failing to give full force and effect to the Convention and QDs (³⁰) (³¹).

1.2.To your knowledge, has there been any judicial or administrative enforcement action taken by a creditor under the Convention? If so, please describe the action and indicate whether it was successful.

1.3.To your knowledge, since ratification/implementation, have the courts in that State refused in any instance to enforce loan obligations of a debtor or guarantor in the State contrary to the Convention and QDs?