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SECTOR UNDERSTANDING ON EXPORT CREDITS FOR CIVIL AIRCRAFT PART 1 GENERAL PROVISIONS 1. PURPOSE a) The purpose of this Sector Understanding is to provide a framework for the predictable, consistent and transparent use of officially supported export credits for the sale or lease of aircraft and other goods and services specified in Article 4 a) below. This Sector Understanding seeks to foster a level playing field for such export credits, in order to encourage competition among exporters based on quality and price of goods and services exported rather than on the most favourable officially supported financial terms and conditions. b) This Sector Understanding sets out the most favourable terms and conditions on which officially supported export credits may be provided.

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

2. STATUS 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.

3. PARTICIPATION

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.

4. SCOPE OF APPLICATION a) This Sector Understanding shall apply to all official support provided by or on behalf of a government, and which has a repayment term of two years or more, for the export of: 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. b) Official support may be provided in different forms: 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.

5. INFORMATION AVAILABLE TO NON-PARTICIPANTS 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.

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

7. ACTIONS TO AVOID OR MINIMISE LOSSES

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 CHAPTER I COVERAGE 8. 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. b) Notwithstanding the provisions of paragraph a) above, a Participant may support terms appropriate to new aircraft for transactions where, with the prior knowledge of that Participant, interim financing arrangements had been put in place because the provision of official support had been delayed; such delay shall not be longer than 18 months. In such cases, the repayment term and the final repayment date shall be the same as if the sale or lease of the aircraft would have been officially supported from the date the aircraft was originally delivered. CHAPTER II FINANCIAL TERMS AND CONDITIONS

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.

9. ELIGIBLE CURRENCIES 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.

10. DOWN PAYMENT AND MAXIMUM OFFICIAL SUPPORT a) For transactions with buyers/borrowers classified in Risk Category 1 (as per Table 1 of Appendix II), the Participants shall: 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. b) For transactions with buyers/borrowers classified in Risk Categories 2 to 8 (as per Table 1 of Appendix II), the Participants shall: 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.

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

11. MINIMUM PREMIUM RATES a) The Participants providing official support shall charge, for the credit amount officially supported, no less than the minimum premium rate set out in accordance with Appendix II. b) The Participants shall use, whenever necessary, the agreed premium rate conversion model to convert between per annum spreads calculated on the outstanding amount of the official support and single up-front premium rates calculated on the original amount of the official support.

12. MAXIMUM REPAYMENT TERM a) The maximum repayment term shall be 12 years for all new aircraft.

b) On an exceptional basis, and with a prior notification, a maximum repayment term of up to 15 years shall be allowed. In this case, a surcharge of 35 % to the minimum premium rates calculated in accordance with Appendix II shall apply. c) There shall be no extension of the repayment term by way of sharing of rights in the security on a pari passu basis with commercial lenders for the officially supported export credit.

13. REPAYMENT OF PRINCIPAL AND PAYMENT OF INTEREST a) The Participants shall apply a profile of repayment of principal and payment of interest as specified in subparagraph 1) or 2) below ()

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