The US government has formally completed the process to ratify the Cape Town Convention, an international treaty that will facilitate asset-based financing and leasing of large commercial aircraft and aircraft engines. US Ambassador Tony Hall has deposited the instrument of ratification for the treaty and the accompanying protocol on matters specific to aircraft equipment with Unidroit, the international organisation based in Rome, that is the depositary of the Cape Town Convention and aircraft protocol. The US is the fifth country to ratify the treaty and the aircraft protocol.
US Ex-Im Bank renewed its offer in August 2004 to reduce the bank’s exposure fee by one third on financings of new US-manufactured large commercial aircraft for buyers in countries that sign, ratify and implement the Cape Town Convention. Ex-Im Bank’s offer enables eligible foreign buyers to receive an Ex-Im exposure fee of as low as 2%, a one-third reduction of the current minimum 3% exposure fee on financings of new large commercial aircraft. More favourable financing terms also apply to asset-based financings of spare engines to such buyers. Ex-Im has extended the offer for approvals issued through fiscal year 2005, which will end on September 30, 2005.
“By ratifying the Cape Town Convention, the United States has taken a significant step to encourage other countries to adopt the legal framework that will facilitate large commercial aircraft transactions,” says Ex-Im Bank chairman Philip Merrill. “Ex-Im Bank strongly believes that the Cape Town Convention will reduce certain risks associated with cross-border sales, financings and leases of aircraft and aircraft engines.”
Ex-Im Bank’s vice-president of transportation Robert Morin adds: “The reduced risk will justify a reduction in our exposure fee for airlines based in countries that ratify and implement the treaty. The treaty is intended to make greater amounts of financing available to airlines on more attractive terms. Less costly financing will enable airlines to upgrade their fleets, thereby supporting jobs in the aerospace industry.”
Ex-Im is offering the one third reduction of its exposure fee (in connection with approvals issued through September 30, 2005) to buyers in any foreign country that has signed, ratified and implemented the treaty and the related aircraft protocol (including certain optional provisions).
The Cape Town Convention, which was concluded at an international diplomatic conference held in Cape Town, South Africa, in November 2001, establishes a commercially oriented, comprehensive international legal framework to protect security and leasing interests in aircraft equipment. The treaty has been signed by 28 countries, of which five countries already have ratified the treaty. The treaty entered into force on April 1, 2004, and will become effective as applied to aircraft and aircraft engines following the ratification of the aircraft protocol by eight countries.
The United States signed the Cape Town Convention in May 2003. The US Senate approved the treaty on July 22, 2004, and President Bush signed the implementing legislation on August 9, 2004. With the deposit of the instrument of ratification on October 28, 2004, the process of ratifying the Cape Town Convention and the related aircraft protocol by the US now has been duly completed.