Export Finance and Insurance Corporation Act 1991 - Determination under section 67(1) (04/07/2007)

Overview

The Export Finance and Insurance Corporation Act 1991 (EFIC Act) was enacted by the Australian Parliament to facilitate and support the export of Australian goods and services by providing export finance and insurance. The Act was intended to address the gap in financing and insurance mechanisms that could potentially hinder Australian exporters. The responsible Minister, as stated in the Act, has the authority to determine principles for the payment of a subsidy by the Commonwealth to the Export Finance and Insurance Corporation (EFIC) for certain export-related activities. In 2006, the Australian Government reviewed EFIC's funding arrangements and concluded that the previous subsidy related to Loan Arrangement and Management Fees was no longer necessary. Consequently, the new Determination under section 67(1) of the EFIC Act establishes a revised subsidy regime where the Commonwealth compensates EFIC for the excess of interest paid over interest received on loans and for interest rate make-up amounts on indemnities and guarantees, in line with the minimum fixed interest rates prescribed by the OECD Arrangement on Officially Supported Export Credits. This revised approach ensures that EFIC can continue to comply with Australia's international obligations while receiving appropriate financial support.

Scope and Application

The Export Finance and Insurance Corporation Act 1991 Determination under section 67(1) applies to the Export Finance and Insurance Corporation (EFIC) as the entity to which the Commonwealth provides a subsidy for certain activities. This legislation pertains to the financial arrangement between the Commonwealth and EFIC concerning the subsidies paid for eligible export transactions. The subsidy is designed to compensate EFIC for the excess of interest paid over interest received on loans and interest rate make-up amounts on indemnities and guarantees provided, in compliance with the minimum fixed interest rates prescribed by the OECD Arrangements on Officially Supported Export Credits (OECD Arrangement). The Act is applicable nationally, given the Commonwealth's jurisdiction and EFIC's role in facilitating export finance and insurance across Australia. The Determination revokes prior Ministerial determinations and establishes a new regime, ensuring that the Commonwealth's support aligns with Australia's international obligations under the OECD Arrangement. The legislation also extends its application through subordinate instruments as required for implementing the subsidy arrangements effectively.

Key Provisions

The key operative sections of the Determination (F2007L02148) under the Export Finance and Insurance Corporation Act 1991 (EFIC Act) are principally concerned with establishing the new principles governing the subsidy the Commonwealth pays to EFIC for eligible export transactions. Section 67(1) of the EFIC Act allows the Minister for Trade to determine these principles, and this Determination revokes previous arrangements to introduce a new regime. This new regime compensates EFIC for any excess of interest paid over interest received on loans and interest rate make-up amounts on indemnities and guarantees, in line with the minimum fixed interest rates prescribed by the OECD Arrangement on Officially Supported Export Credits. The Determination ensures that EFIC is compensated for complying with Australia's international obligations as a participant in the OECD Arrangement. The obligations and requirements imposed by the Determination on the parties involved are primarily centred on ensuring that EFIC can operate within the prescribed parameters of the OECD Arrangement while receiving the necessary subsidies from the Commonwealth. EFIC must adhere to the minimum fixed interest rates set out by the OECD Arrangement, and the Commonwealth must compensate EFIC for any excess of interest paid over interest received and interest rate make-up amounts on indemnities and guarantees. This ensures that EFIC can continue to support eligible export transactions without bearing the full financial burden of the interest differentials and interest rate make-up. The Determination also requires consultation with key government departments, including the Department of Foreign Affairs and Trade, the Treasury, and the Department of Finance and Administration, to ensure the policy aligns with broader governmental objectives and international commitments. Under the Determination, there are no specific offences, penalties, or civil or criminal consequences outlined for breaches of the provisions. However, non-compliance with the OECD Arrangement or failure to adhere to the prescribed interest rates could potentially have broader implications for Australia's standing in international forums and its ability to engage in officially supported export credit arrangements. The primary focus of the Determination is to ensure that EFIC can operate effectively and that the Commonwealth provides the necessary support to facilitate this. The Determination itself operates as a legislative instrument under the Legislative Instruments Act 2003, which provides a framework for the creation and management of legislative instruments in Australia.