The Arrangement is a "gentlemen's agreement" amongst its Participants: Australia, Canada, the European Union, Japan, Korea, New Zealand, Norway, Switzerland, Turkey and the United States. The Arrangement first came into existence in 1978, building on the export credit “Consensus” agreed among a smaller number of OECD countries in 1976. Since then, it has been regularly developed and updated to reflect Participants’ needs and market developments.
The main purpose of the Arrangement is to provide a framework for the orderly use of officially supported export credits by fostering a level playing field in order to encourage competition among exporters based on quality and prices of goods and services exported rather than on the most favourable officially supported export credits.
To this end, the Arrangement places limitations on the financing terms and conditions (repayment terms, minimum premium rate, minimum interest rates) to be applied when providing officially supported export credits as well as on the use of tied aid by the Participants. The Arrangement contains various transparency provisions among Participant to ensure that these limitations are effectively applied.
The Arrangement applies to all officially supported export credits with a repayment term of two years or more. It does not, however, apply to military equipment or to agricultural commodities.
Sector Understandings
Some of the rules laid out in the Arrangement are sector-specific and are detailed in the sectoral annexes of the Arrangement (called “Sector Understandings”). There are currently six Sector Understandings that cover export credits in the area of (I) ships, (II) nuclear power plants, (III) civil aircraft, (IV) renewable energy, climate change mitigation and adaptation, and water projects, (V) rail infrastructure, and (VI) coal-fired electricity generation projects. The Ship Sector Understanding and the Aircraft Sector Understandings are special, as their Participants are different from those of the general Arrangement, which is not the case for the other sector understandings.
The current Arrangement on Officially Supported Export Credits is the January 2020 version. Compared to the previous version (January 2019), the following changes were made:
The SSU provides specific disciplines that may be applied to officially supported export credits relating to the export of sea-going vessels, ship conversions and hovercraft vessels. The SSU was initially agreed to in 1969 as a stand-along agreement; the prevailing version of the SSU can be found in Annex I of the Arrangement. The Participants to the SSU are: Australia, the European Union, Japan, Korea, New Zealand and Norway. The SSU is managed by the OECD Council Working Party on Shipbuilding (WP6).
The Aircraft Sector Understanding (ASU) is a self-contained agreement for officially supported export credits relating to civil aircraft. It operates with no recourse to any of the provisions of the Arrangement. The ASU is managed by its own Participants, which are Australia, Brazil, Canada, the European Union, Japan, Korea, New Zealand, Norway, Switzerland and the United States. See Annex III of the Arrangement and Aircraft Specific Rules.
The Nuclear Sector Understanding (NSU) (See Annex II of the Arrangement) was first included as an Annex to the Arrangement in 1984, and it was last updated in July 2009. It provides more flexible terms and conditions for the provision of officially supported export credits relating to nuclear power plants.
The Renewable Energy, Climate Change Mitigation and Adaptation and Water Projects Sector Understanding (CCSU) (See Annex IV of the Arrangement) was originally agreed with a more reduced scope (Renewable Energies and Water Projects) and included in the Arrangement as a permanent sector understanding. It was last updated in 2014. This annex provides more flexible terms and conditions for the provision of officially supported export credits relating to water projects, renewable energy projects, or climate change mitigation projects. Additional information on OECD works on Climate Finance (promoting good practice to scale up and better target public and private finance to support climate-friendly investment) is provided by the Environment Directorate of the OECD.
In November 2020, Participants agreed to extend the terms and conditions specific to climate change adaptation projects (for which the criteria is detailed in Appendix III) for another year (i.e. the sunset clause of Article 10e) will be updated to 31 December 2023 instead of 31 December 2020 in the 2021 version of the Arrangement).
The Rail Infrastructure Sector Understanding (RSU) (See Annex V of the Arrangement) was implemented in January 2014. This annex provides more flexible terms and conditions for the provision of officially supported export credits relating to new railway infrastructure projects to meet the variable needs of public authorities and exporters and to promote the use of rail as a viable alternative to road and air transportation, in the context of energy scarcity, fuel prices and climate change.
In November 2020, Participants agreed to extend the RSU for another three years and to maintain the syndication threshold of “less than 50%” for another three years as well (i.e. the sunset clauses of Articles 6d) and 6b) will be updated to 31 December 2023 instead of 31 December 2020 in the 2021 version of the Arrangement).
The Coal-Fired Electricity Generation Sector Understanding (CFSU) (See Annex VI of the Arrangement) was implemented in February 2016. This annex provides stricter terms and conditions for the provision of officially supported export credits relating to coal-fired electricity generation projects. This annex is meant to encourage both exporters and buyers of coal-fired power plants to move away from low-efficiency towards high-efficiency technologies by limiting export credit support for coal-fired power plants.
In July 2019, the review date of the CFSU was amended to 30 June 2020 (instead of 30 June 2019) and Article 7 (Transitional Arrangements) was deleted, these changes were reflected in the January 2020 version of the Arrangement.
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