1. For any contract relating to any new ship to be negotiated from 1st July, 1974 onwards, governments participating in this Understanding agree to abolish existing official facilities[1] and to introduce no new official facilities for export credits for ships on terms providing:

(i) a maximum duration exceeding 7 years from delivery and repayment other than by equal instalments at regular intervals of normally six months and a maximum of 12 months;

(ii) payment by delivery of less than 30 per cent of contract price;

(iii) an interest rate of less than 8 per cent, net of all charges[2].

2. This minimum interest rate of 8 per cent will apply to the credit granted with official support by the shipbuilder to the buyer (in a supplier credit transaction) or by a bank or any other party in the shipbuilder’s country to the buyer or any other party in the buyer’s country (in a buyer credit transaction), whether the official support is given for the whole amount of the credit or only part of it.

3. The minimum interest rate will also apply to the credit granted with support by governments participating in the Understanding, in the shipbuilder’s country to the shipbuilder or to any other party, to enable credit to be given to the shipowner or to any other party in the shipowner’s country, whether this official support is given for the whole amount of the credit or only part of it.

4. Insofar as other public bodies participate in measures to promote exports, participating governments agree to use all possible influence to prevent the financing of ship exports on terms which contravene the above principles.

5. Participating governments, recognising that it is highly desirable to set a limit to credit terms for export of ships, also agree to make their best endeavours to ensure that no more favourable terms than set out above will be offered to buyers by any other means.

“6. Any Government participating in the Understanding which wishes, for genuine aid reasons, to concede more favourable terms in a particular case is not precluded from doing so, provided that adequate notice of this decision is given to all the parties to the Understanding in accordance with the procedure established for this purpose. For these cases 'adequate notice' shall be interpreted as requiring that notification be made to all participating Governments if possible at least six weeks before a promise is given, at any stage of the negotiations, to commit the use of funds for that purpose, and in any case at least six weeks before authorisation is given so to commit them."

7. Adequate notice shall also be given of any decision, taken for exceptional reasons other than those specified in Clause 6, to support terms more favourable in any way than those of the Understanding. In this case, "adequate notice" shall be interpreted as requiring that notification of such a decision be made to all other participating governments before an order has been finally placed[3] and in time for them to be able to compete effectively on these terms. In cases where tenders are invited, notice must be given at least seven days before the closing date for tenders. Support (including the provision of aid) will be refused for any order finally placed³ on more favourable terms before all other governments participating in the Understanding have been given notice as provided in this Clause and, in case of aid, as provided in the above Clause 6.

8. Any government participating in the Understanding may, provided that the maximum possible notice of its decision is given to all other participating governments, support more favourable terms in a particular substantiated case to match terms of officially supported transactions or contravention of the above terms by other participating governments, or competition from non-participating countries.

9. Any government participating in the Understanding may obtain information from any other participating government on the terms of any official support for a ship export contract in order to ascertain whether the terms contravene this Understanding.

Participating governments undertake to supply all possible information requested with all possible speed. According to the rules and practices of the OECD, any participating government may as the Secretary-General to act on its behalf in the aforementioned matter and to circulate the information obtained to all participants in the Understanding.

10. Each participating government will submit to the Secretary-General a protocol describing its system for the provision of official support for ship export transactions and the means by which it proposes to implement the Understanding. If there is no objection from any government participating in the Understanding, these implementation protocols will be annexed to the Understanding and will form an integral part of it. Each participating government undertakes to notify the Secretary-General of any change in its system for the provision of official support and the means of implementation of the Understanding.

III

11. This Understanding becomes effective as soon as all Members of working Party No. 6 have notified the Secretary-General of their adherence to it or, as soon as governments having so notified the Secretary-General, decide that they constitute a representative majority of Members of Working Party No. 6; any government which disagrees as to what constitutes a representative majority would not be bound by the others' decision. The Understanding is open to other Member countries of the OECD.

12. This Understanding shall be subject to review as often as requested by participating governments, and in any case at intervals not exceeding one year. Any participating government may withdraw from this Understanding upon giving to its partners three calendar months' notice of its intention to do so. Within this period, at the request of any of these partners, there shall be a meeting of Working Party No. 6 to review this Understanding, and any other participating government, on notification to its partners, may withdraw from this Understanding at the same effective date as the government which first gave notice.