Zircaloy clad oxide fuel rods are subjected to a variety of core power transients. One of these, an up-power transient, can place a severe burden on the fuel rod cladding that would potentially lead to rupture if not properly allowed for during the fuel rod design and plant operation. The cladding stress during such a transient can be increased by the presence of fuel chips between the oxide fuel pellet and the cladding. An analysis procedure based on mechanical tests of fuel and cladding was developed that permits calculation of the stress increase due to chips, so that the stress penalty can be accommodated without unnecessary penalties to fuel rod performance. The method of evaluating the maximum cladding bending tensile stress near the chip is described and test data are presented to support the analysis method.