[World Trade]{.smallcaps} **G/SCM/N/1/BRA/2**

8 September 1997

[Organization]{.smallcaps}

(97-3575)

Original: English

**Committee on Subsidies**

**and Countervailing Measures**

[NOTIFICATION OF LAWS AND REGULATIONS]{.underline}

[UNDER ARTICLE 32.6 OF THE AGREEMENT]{.underline}

[BRAZIL]{.underline}

The following communication, dated 19 August 1997, has been received
from the Permanent Mission of Brazil.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

[TABLE OF CONTENTS]{.underline}

[Page]{.underline}

Title I Subsidies and Procedures for the Application of Countervailing
Measures 3

Chapter I Principles 3

Chapter II Subsidies 4

Section I Definition of a Subsidy 4

Section II Actionable Subsidies 4

Section III Non-Actionable Subsidies 6

Chapter III The Calculation of the Amount of Actionable Subsidy 7

Chapter IV Determination of Injury 10

Chapter V Definition of Domestic Industry 12

Chapter VI The Investigation 13

Section I Petitions 13

Section II Opening an Investigation 15

Section III Conduction the Investigation 17

Sub-section I Evidence 17

[Page]{.underline}

Sub-section II The Defence 18

Sub-section III Final Procedures Concerning the Conduction of

the Investigation 19

Section IV Provisional Countervailing Measures 19

Section V Undertakings 20

Section VI Concluding the Investigation 21

Chapter VII The Imposition and Collection of Countervailing Duties 22

Section I Imposition 22

Section II Collection 23

Section III Productions Subject to Provisional Measures 23

Chapter VIII The Duration and Review of Countervailing Measures and

Undertakings 25

Chapter IX Public Notice 26

Chapter X Formalities Related to Acts and Procedural Terms 26

Chapter XI The Decision Making Process 27

Title II Special Procedures 28

Chapter I Agricultural Products 28

Chapter II On-the-Spot Investigations 29

Chapter III Use of Information from Secondary Sources 29

Chapter IV General Provisions 30

Annex I Illustrative List of Export Subsidies 32

Annex II Guidelines on Consumption of Inputs in the Production Process
34

Annex III Guidelines in the Determination of Substitution Drawback
Systems as

Export Subsidies 36

Annex IV Developing Countries Members 38

Annex V List of Agricultural Products 39

Annex VI Domestic Support: The Basis for Exemption from the Reduction

Commitments 40

**DECREE Nº 1.751, 19 DECEMBER 1995.**

Regulates the norms which control

administrative procedures for the

application of countervailing measures.

**The VICE‑PRESIDENT OF THE REPUBLIC, acting as PRESIDENT OF THE
REPUBLIC**, by virtue of the powers that are vested in him by
Article 84, Sections IV and VI, of the Constitution, and taking into
consideration the provisions of the Agreement on Subsidies and
Countervailing Measures, the Agreement on Agriculture and the General
Agreement on Tariffs and Trade 1994 ‑ GATT 1994, approved by Legislative
Decree Nº 30, dated 15 December 1994, and, and promulgated by Decree
Nº 1.355 dated 30 December 1994, and by Law Nº 9.019, dated 30 March
1995,

**DECREES:**

**TITLE I**

**SUBSIDIES AND PROCEDURES FOR THE APPLICATION OF**

**COUNTERVAILING MEASURES**

**Chapter I**

**PRINCIPLES**

Article 1º. Countervailing measures may be applied with the objective of
compensation for subsidies that are granted, directly or indirectly, in
the exporting country, to the manufacture, production, export or
transport of any product, whose export to Brazil causes injury to
domestic industry.

§ 1º. Countervailing measures shall be applied in accordance with
investigations initiated and conducted according to the provisions of
this Decree. Agricultural products are also simultaneously subject to
the provisions of Chapter I of Title II.

§ 2º. In keeping with the provisions set forth in paragraph 5 of
Article VI of GATT/1994, the import of a product may not be subject
simultaneously to the application of countervailing measures and
anti‑dumping measures, which are referred to in the Agreement on the
Implementation of Article VI of GATT 1994, to compensate for the same
situation.

§ 3º. The term "exporting country" means the country of origin or
exportation to where the subsidy is granted. In case the products are
not exported directly to Brazil from the exporting Country, but from an
intermediate country, the procedures referred to in this Decree will be
applied, and the transactions in question will be considered to have
occurred between the exporting country and Brazil.

Article 2º. The Ministers of State of Industry, Trade, and Tourism and
of Finance, have the competence to apply, through a joint act,
provisional countervailing measures or definitive measures and ratify
undertakings, based on findings of the Secretariat of External
Trade ‑ SECEX. of the Ministry of Industry, Trade and Tourism, which
confirm the existence of subsidies and of injury arising therefrom.

Article 3º. SECEX is responsible for conducting the administrative
proceedings regulated by this Decree.

**Chapter II**

**SUBSIDIES**

***Section I***

***Definition of a Subsidy***

Article 4º. For purposes of this Decree, subsidy shall be considered to
exist when a benefit is conferred in function of the following
hypotheses:

I. If there is in the exporting country any form of income or price
support that contributes, directly or indirectly, to the increase or
decrease of exports of any product; or

II\. If there is financial contribution by the government or by a public
organ within the territory of the exporting country, henceforth referred
to as "government", where:

\(a\) the practice of the government involves a direct transfer of funds
(e.g. grants, loans and equity infusion), potential direct transfers of
funds or liabilities (e.g. loan guarantees);

\(b\) government revenue that is otherwise due is foregone or not
collected (e.g. fiscal incentives). In accordance with Article XVI of
GATT 1994 and Annexes I through III of the Agreement on Subsidies and
Countervailing Measures, the exemption of an exported product from
duties or taxes borne by the like product when destined for internal
consumption, or the remission of such duties or taxes in amounts not in
excess of those that have accrued, shall not be deemed to be a subsidy;

\(c\) the government provides goods or services other than general
infrastructure, or purchases goods;

\(d\) the government makes payments to a funding mechanism, or entrusts
or directs a private body to carry out one or more of the type of
functions illustrated in the previous paragraphs, which would normally
be vested in the government and the practice, in no real sense, differs
from practices normally followed by governments.

Sole paragraph. The term "like product" is to be understood as a product
identical in all aspects to the product that is being examined or in the
absence of such a product, another product that, although not exactly
the same, has characteristics closely resembling those of the product
under consideration.

***Section II***

***Actionable* *Subsidies***

Article 5º. For purposes of this Decree, a subsidy, as defined in the
previous Article, will be denominated actionable, subject to
countervailing measures, if the same is specific, with the exception of
those foreseen in Articles 11, 12, and 13.

Article 6º. A subsidy is specific where the granting authority, or the
legislation pursuant to which this authority operates, explicitly limits
access to this subsidy to an enterprise, or to a group of enterprises,
within the jurisdiction of that authority, here denominated "certain
enterprises".

 1º. Specificity will not occur when the granting authority, or the
legislation pursuant to which this authority operates, establishes
objective conditions or criteria that determine eligibility for
subsidies and the amounts to be granted, provided that the eligibility
is automatic and that such criteria are strictly adhered to. The
criteria and conditions stipulated by law, regulation or other normative
act, must be strictly respected and their verification shall be made.

§ 2º. The expression "conditions or objective criteria" means neutral
conditions or criteria that do not favour certain enterprises over
others, that are economic in nature and horizontal in application, such
as number of employees or the size of the enterprise.

§ 3º. In cases where there is not, apparently, specificity in the terms
of §§ 1º and 2°, but there are reasons to believe that the subsidy in
question is in fact specific, other factors may be taken into
consideration, such as: the use of a subsidy programme by a limited
number of certain enterprises, predominant use of a subsidy programme by
certain enterprises, the granting of disproportionately large amounts of
subsidy to certain enterprises, and the manner in which discretion has
been exercised by the granting authority in the decision to grant a
subsidy.

§ 4º. For purposes of § 3º, the following shall be taken into account:

\(a\) information about the frequency with which applications for
subsidies are refused or approved and the reasons which led to these
decisions;

\(b\) the diversification of economic activities within the jurisdiction
of the granting authority, as well as the period of time during which
the programme of subsidies was in force.

Article 7º. Subsidy will be specific if it is limited to certain
enterprises located inside a geographic region situated inside the
jurisdiction of the granting authority.

Sole paragraph. The setting or change of generally applicable tax rates
by all levels of the government with competence to do so, shall not be
deemed to be a specific subsidy.

Article 8º. Notwithstanding the provisions of Articles 6º and 7º,
subsidies will be specific, for purposes of investigation, if they fall
within the definition of prohibited subsidies, in the terms of Article 3
of the Agreement on Subsidies and Countervailing Measures, as follows:

I. Subsidies contingent, in law or in fact, whether solely or as one of
several other conditions, upon export performance, including those
illustrated in Annex I. This standard will be met when it is
demonstrated that the granting of a subsidy, without having been made
legally contingent upon export performance, is in fact tied to actual or
anticipated exportation or export earnings. The mere fact that subsidies
are granted to export enterprises, shall not for that reason alone be
considered as an export subsidy.

II\. Subsidies contingent, whether solely or as one of several other
conditions, upon the use of domestic over imported goods.

Article 9º. Any determination of specificity in accordance with the
provisions of this section, shall be clearly based on positive proof.

***Section III***

***Non‑Actionable Subsidies***

Article 10. For purposes of this Decree, a subsidy, as defined in
Article 4º, will be considered non‑actionable, not subject to
countervailing measures, when:

I. It is not specific as defined in articles 6º and 7º,

II\. It is specific as defined in Articles 6º and 7º, but meets the
conditions enumerated in Articles 11, 12, and 13.

Article 11. Assistance granted for purposes of research, with the
exception of that related to civil aircraft, is not subject to
countervailing measures, as defined in § 1º of this article, when
carried out by firms, or by higher education or research establishments
on a contract basis with firms if the Assistance covers up to a maximum
of 75% of the costs of industrial research, as defined in paragraph
§ 3º, or 50% of the costs of pre‑competitive development activities,
defined in § 4º. These permitted levels of non‑actionable Assistance
will be established by reference to the total eligible costs incurred
over the duration of a project and provided that such assistance is
limited exclusively to:

I. Personnel costs of those employed exclusively in the research
activity, such as researchers, technicians, and other supporting staff.

II\. Costs of instruments, equipment, land and buildings, used
exclusively and permanently for the research activity, except when
disposed of on a commercial basis.

III Costs of consultancy and equivalent services used exclusively for
the research activity, including bought‑in research, technical
knowledge, patents, etc.;

IV\. Additional overhead costs incurred directly as a result of the
research activity.

V. Other running costs, such as those of materials, supplies and the
like, incurred directly as a result of the research activity.

§ 1º. The term "research" does not include fundamental research
activities carried out independently by higher education or research
establishments.

§ 2º. The term "fundamental research" means an enlargement of
technical‑scientific knowledge not linked to industrial and commercial
objectives.

§ 3º. The term "industrial research" means planned research or
investigation aimed at the discovery of new knowledge that may be useful
to the development of new products, processes or services, or in
bringing about a significant improvement to existing products, processes
or services.

§ 4º. The term "pre‑competitive development activity" means the
translation of industrial research findings into a plans, blueprint or
design for new, modified or improved products, processes or services,
whether intended for sale or use, including the creation of a first
prototype which would not be capable of commercialization. It may
further include the conceptual formulation and design of products,
processes, or services alternatives and initial demonstration or pilot
projects, provided that the same projects cannot be converted or used
for industrial application or commercial exploitation. The term does not
include routine or periodic alterations to existing products, production
lines, manufacturing processes, services and other on‑going operations
even though those alterations may represent improvements.

§ 5º. In the case of programmes that span industrial research and
pre‑competitive development activity, the allowable levels of
non‑actionable assistance shall not exceed the simple average of the
allowable levels of non‑actionable assistance applicable to each one of
the two categories referred to in the caput of this article, calculated
on the basis of all eligible costs as set forth in items I to V of this
Article.

Article 12. Assistance to a disadvantaged region within the territory of
an exporting country pursuant to a general framework of regional
development and non‑specific, in accordance with the provisions of
Articles 6º and 7º, is not subject to countervailing measures provided
that:

I. Each disadvantaged region must be a clearly designated contiguous
geographical area with a definable economic‑administrative identity;

II\. The region is considered as disadvantaged on the basis of neutral
and objective criteria, clearly expressed in law, regulations or other
normative acts, in such a way as to permit verification, and that such
verification demonstrates that the difficulties arise out of more than
temporary circumstances.; and

III\. The criteria shall include a measurement of economic development
verified during a period of three years, and based on at least one of
the following indicators:

\(a\) one of either income per capita or household income per capita, or
GDP per capita, which must not be above 85% of the average for the
territory concerned;

\(b\) unemployment rate, which must be at least 110% of the average for
the territory under consideration.

§ 1º. The economic development measure referred to in item III, may also
be the result of a composite measure of the indicators referred to in
paragraphs "a", "b" and may also include others not mentioned.

§ 2º. "General framework of regional development" means that regional
subsidy programmes are part of an internally consistent and generally
applicable regional development policy and that regional development
subsidies are not granted to geographically isolated areas, without any
or almost no influence on the development of a region.

§ 3º. "Neutral and objective criteria" means criteria that do not favour
certain regions beyond what is necessary to eliminate or reduce regional
disparities, within the framework of the regional development policy.

§ 4º. For the purposes set forth in the previous paragraph, regional
subsidy programmes shall include ceilings on the amount of assistance
which can be granted to each subsidized programme which shall be
differentiated according to the different levels of development in each
assisted region, and must be expressed in terms of investment costs or
cost of job creation.

§ 5º. Within such ceilings, the assistance distribution shall be
sufficiently broad and even to avoid the predominant use of one subsidy
by , or the granting of disproportionately large amounts of subsidy to,
certain enterprises, in accordance with the provisions of Section II of
this Chapter.

Article 13. Assistance granted to promote the adaptation of facilities
in operation for at least two years before the imposition of new
environmental requirements imposed by law or regulations which result in
greater constraints and financial burden on firms are not subject to the
application of countervailing measures, provided that such assistance:

I. Is a one‑time non‑recurrent measure;

II\. Is limited to 20% of the cost of adaptation;

III\. Does not cover the cost of replacing and operating the assisted
investment, which must be fully borne by firms;

IV\. Is directly linked and proportionate to the reduction of nuisance
and pollution planned by the firm and does not cover any manufacturing
costs savings which may be achieved;

V. Is available to all firms which can adopt the new equipment and/or
production processes.

**Chapter III**

**THE CALCULATION OF THE AMOUNT OF ACTIONABLE SUBSIDY**

Article 14. In order to apply countervailing measures, the amount of the
actionable subsidy shall be calculated by unit of subsidized goods
exported to Brazil, based on the benefits utilized during the period of
investigation of actionable subsidies, as per § 1º of Article 35.

Sole paragraph. The term "subsidized product" will be understood as a
product that benefits from an actionable subsidy.

Article 15. The following shall not be considered as conferring a
benefit:

I. Government provision of equity capital, unless the investment
decision can be regarded as inconsistent with the usual investment
practice (including for the provision of risk capital) of private
investors in the territory of the exporting country;

II\. Government loans, unless there is a difference between the amount
that the firm receiving the loan pays on the government loan and the
amount the firm would pay on a comparable commercial loan that could
have been obtained on the market. In this case the benefit shall be the
difference between these two amounts.

III\. A loan guarantee by a government, unless there is a difference
between the amount that the firm receiving the guarantee pays on a loan
guaranteed by the government and the amount that the firm would pay on a
comparable commercial loan, without the government guarantee. In this
case, the benefit shall be the difference between the two amounts,
adjusted for any differences in fees.

IV\. The provision of goods or services or purchase of goods by the
government, unless the provision is made for less than adequate
remuneration, or the purchase for more than adequate remuneration. The
adequacy of remuneration shall be determined in relation to market
conditions prevailing for the good or service under consideration in the
country of provision or purchase, including price, quality,
availability, marketability, transportation, and other conditions of
purchase or sale.

Article 16. In the determination of the amount, the following items may
be deducted from the total:

I. Expenses incurred necessarily to qualify for the subsidy or to
benefit from it.

II\. Taxes to which the product has been submitted upon exportation to
Brazil, when specifically designed to neutralize subsidies.

Sole paragraph. When an interested party or government requests a
deduction, they have to present proof that the deduction is justified.

Article 17. When the subsidy is not granted on the basis of the
quantities manufactured, produced, exported, or transported, the amount
of actionable subsidy shall be calculated if appropriate, dividing in an
adequate way the total value of the subsidy by the volume manufactured,
produced, for sale or for export of the product which is referred to,
during the period of investigation during which subsidy existed.

Article 18. When the subsidy is granted for the present or future
acquisition of fixed assets, the amount of the actionable subsidy shall
be calculated and pro‑rated for a period that corresponds to the normal
depreciation of such assets in the industry which is being considered.
The amount thus calculated, relative to the period of investigation of
the existence of actionable subsidy, including the amount derived from
the acquisition of fixed assets in previous periods, it shall be divided
as per the previous article.

Sole paragraph. In case of assets not subject to depreciation, the
subsidy shall be considered a loan at zero interest rate and evaluated
as per the item II of Article 15.

Article 19. When the subsidy cannot be related to the acquisition of
fixed assets, the amount of assistance received during the investigation
of the existence of subsidy shall be attributed to this period and
divided as per Article 17, unless there exist exceptional circumstances
that justify attributing them to a different period.

Article 20. The general rule will be the determination of an individual
amount of actionable subsidy for each one of the known exporters, or
producers of the product under investigation.

§ 1º. In case the number of exporters, producers, importers known or
types of products or transactions under investigation be so expressive
that the determinations of the "caput" become impractical, the
examination may be limited to:

\(a\) a reasonable number of interested parties, transactions or
products, determined by a statistically valid sample based on the
information available at the time of selection; or

\(b\) to the largest volume of production, sale, or exportation, that is
representative and may be investigated taking into account the
determined deadlines.

§ 2º. Any selection of exporters, producers, importers, types of
products or transactions, which is made as per the previous paragraph,
shall be effected after the governments of the exporting countries, the
exporters, the producers or importers, have been consulted and their
approval has been obtained,

provided that they have provided information necessary for the selection
of a representative sample.

§ 3º. In case one or more of the selected enterprises do not provide the
information requested, another selection shall be made. If there is not
enough time to make a new selection or if the new firms selected also
fail to provide the requested information, the determination or decision
shall be based on the information available, pursuant to the provision
of Article 79.

§ 4º. The individual amount of actionable subsidy shall be determined
for each exporter or producer who was not included in the selection, but
who presents the necessary information in time for consideration during
the investigation, with the exception of situations in which the number
of exporters or producers is so expressive that the analysis of
individual cases would result in a disproportionate burden which would
impede the conclusion of the investigation within the designated time
limit. Voluntary replies shall be encouraged.

**Chapter IV**

**DETERMINATION OF INJURY**

Article 21. For the effects of this Decree, the term "injury" shall mean
material injury or threat of material injury to a domestic industry
already established or material retardation of the establishment of such
an industry.

§ 1º. Determination of injury shall be based on positive evidence and
shall include an objective examination of:

a\) the volume of imports of the subsidized product;

\(b\) its effect on the prices of the like Brazilian product;

\(c\) the consequent impact of these imports on the domestic industry.

§ 2º. With regard to the volume of imports of the subsidized product, it
shall be considered whether there has been a significant increase in
subsidized imports, either in absolute terms or relative to the
production or consumption in Brazil.

§ 3º. For purposes of this investigation, the term "negligible" shall
normally be understood to mean the volume of imports coming from a
specific country, less than 3% of the total imports of the like product,
unless the countries that account for, individually, less than 3%,
account for collectively, more than 7% of the total imports of the like
product.

§ 4º. For developing countries, negligible shall be understood to mean
the volume of imports when this accounts for less than 4% of the total
imports of the like product, unless these countries that account for,
individually, less than 4%, account for, collectively, more than 9% of
the total imports of the like product.

§ 5º. In regard to the effect of imports of subsidized products on the
prices of this product, it shall be considered whether there has been a
significant price undercutting by the subsidized imports as compared
with the price of a like product of Brazil, or whether the effect of
such imports is otherwise to depress prices to a significant degree or
to prevent price increases, which otherwise would have occurred.

§ 6º. None or several of these factors can necessarily give decisive
guidance.

§ 7º. When imports of a product originating from more than one country
are simultaneously investigated, the effects of such importations shall
be determined cumulatively, if it is determined that:

\(a\) the amount of subsidization established in relation to the imports
of each one of the countries, is not *de minimis*, and that the volume
of imports of each country is not negligible.

\(b\) the cumulative assessment of the effects of these imports is
appropriate in view of the conditions of competition between the
products imported and the conditions of competition between these
products and the like domestic product.

§ 8º. The amount of the actionable subsidy shall be considered as *de
minimis* when it is less than 1% *ad valorem*.

§ 9º. The amount of the actionable subsidy shall be considered as *de
minimis* for developing countries when the global level of actionable
subsidies granted for the product in question does not exceed 2% *ad
valorem*.

§ 10. For developing countries Members who have eliminated subsidies for
exports, before the period of eight years counting from the date the
Marrakesh Agreement Establishing of the World Trade Organization (WTO
Agreement) , the value mentioned in the previous paragraph shall be 3%
*ad valorem*. This provision shall be applied starting from the date of
notification of the elimination of the export subsidy to the Committee
on Subsidies of the WTO, and for the whole period in which export
subsidies have not been granted by the developing country Member which
has notified.

§ 11. The provisions of the previous paragraph shall expire eight years
after the WTO Agreement has entered in force.

§ 12. For developing countries Members, which are referred to in Annex
IV, the amount mentioned in § 9º shall be 3% *ad valorem*.

§ 13. The examination of the impact of imports of the subsidized product
on the domestic industry shall include evaluation of all relevant
economic factors and indices having a bearing on the state of the
industry, including actual and potential decline in output, sales,
market share, profits, productivity, return on investments, or
utilization of capacity, as well as factors that affect domestic prices,
actual and potential negative effects on cash flow, inventories,
employment, wages, growth, ability to raise capital or investments and,
in the case of agriculture, whether there has been an increased burden
on government assistance programmes.

§ 14. The list contained in the previous paragraph is not exhaustive,
nor can one or several of these factors necessarily give decisive
guidance.

Article 22. It's necessary to demonstrate de causal relationship between
imports of subsidized products and the injury to the domestic industry
based on an examination of:

I. Relevant evidence; and

II\. any known factors, other than the subsidized imports, which at the
same time are injuring the domestic industry , and the injuries caused
by these other factors will not be attributed to the subsidized imports.

1º. The relevant factors in this respect, include, among others, the
volumes and prices of non‑subsidized imports of the product in question,
the impact of the alterations in import tariffs on the domestic prices,
contraction in demand or changes in the patterns of consumption, trade
restrictive practices of and competition between foreign and domestic
producers, developments in technology and the export performance and
productivity of domestic industry.

§ 2º. When the available data permit the separate identification of
domestic industrial production of the like product, the effect of the
imports of the subsidized product shall be assessed on the basis of such
criteria as the production process, producer's sales and profits.

§ 3º. If such separate identification of that production is not
possible, the effects of imports on the subsidized product shall be
determined by an examination of the production of the narrowest group or
range of products, which includes the like product, for which the
necessary information can be provided.

Article 23. The determination of the existence of the threat of material
injury shall be based on facts and a convincing motive. The change in
circumstances which would create a situation in which the subsidy would
cause injury must be clearly foreseen and imminent.

§ 1º. In making the determination of the existence of threat of material
injury, the following factors, among others, shall be considered:

\(a\) the nature of the subsidy or subsidies in question and the trade
effects likely to arise therefrom.

\(b\) a significant rate of increase of subsidized imports, indicative
of the likelihood of a substantially increased importation;

\(c\) sufficient freely disposable, or an imminent, substantial increase
in, capacity of the exporter, that indicates the likelihood of
substantially increased subsidized exports to Brazil, taking into
consideration the availability of other possible markets that could
absorb the possible increase of exports.

\(d\) imports entering at prices that will have a significant depressing
or suppressing effect on domestic prices, and that will probably
increase the demand for imports.

\(e\) inventories of the product under investigation.

§ 2º. None of the factors of § 1º by itself shall give decisive
guidance, but the totality of the factors will lead to the conclusion
that additional imports of the subsidized products are imminent and that
unless protective action is taken, material injury will occur.

**Chapter V**

**DEFINITION OF DOMESTIC INDUSTRY**

Article 24. For the purposes of this Decree, the term "domestic
industry" shall be understood as referring to the domestic producers of
the like product, or to those whose collective output of the mentioned
product constitutes a major proportion of the total domestic production,
except when:

I. The producers are related to the importers or exporters or are
themselves importers of the allegedly subsidized product or a like
product originating in other countries. In this case, the expression
"domestic industry" shall be interpreted as referring to the rest of the
producers; or:

II\. In exceptional circumstances, Brazilian territory may be divided
into two or more competing markets, and the term "domestic industry"
shall be interpreted as the producers of one of those markets.

§1º. To apply the determination of item I, producers shall be considered
to be related to exporters or to importers only if:

\(a\) one of them, directly or indirectly, controls the other;

\(b\) both of them are, directly or indirectly, controlled by a third
party;

\(c\) together they control, directly or indirectly, a third party.

§ 2º. The situations of the previous paragraph shall only be considered
if there are grounds to believe or suspect that these relations may
cause the producer to behave differently from non‑related producers.

§ 3º. Control, for purposes of this paragraph, will be considered to
exist when the former is in legal or operational conditions to exercise
restraint or direction over the latter.

§ 4º. For purposes of that determined in item II, the producers in each
one of the markets, may be considered domestic industry when:

\(a\) the producers active in this market, sell all or almost all of
their production of the like product in question in this same market;
and

\(b\) the demand in this market is not to any substantial degree
supplied by producers of the like product located elsewhere in the
territory.

§ 5º. In the situation of § 4º of this article, the injury may be found
to exist even where a major portion of the total domestic industry is
not being injured, provided there is a concentration in that market of
the subsidized imports, and that these are causing injury to the
producers of all or almost all of the production within such market.

**Chapter VI**

**THE INVESTIGATION**

***Section I***

***Petitions***

Article 25. With the exception of that provided for in Article_33, the
investigation to determine the existence, the degree, and the effect of
any alleged subsidy, shall be requested by the domestic industry, or in
its behalf, by means of petition, in written form, in accordance with
the procedures established by SECEX.

§ 1º. The petition shall include evidence of the existence of a subsidy,
and if possible, the amount, the injury and the causal link between the
imports of the subsidized product and the injury alleged, and the
following data:

[(]{.underline}a) the identity of the petitioner, a description of the
volume and value of the domestic production by the petitioner, or in
case the petition has been presented on behalf of the domestic industry,
the name of the industry on whose behalf the petition was presented with
the name of the domestic producers represented as well as the volume and
value of the production accounted for by such producers.

\(b\) an estimate of the volume and value of the total national
production of the like product.

\(c\) a list of known domestic producers of the like product, which are
not represented in the petition, and as far as possible, an indication
of the volume and value of domestic production of the like product which
corresponds to those producers, as well as their position concerning the
presentation of the petition.

\(d\) a complete description of the product allegedly subsidized, the
name of the respective country or countries of origin or of export, the
identity of each known exporter or foreign producer, and a list of the
known importers of the product in question;

\(e\) a complete description of the product manufactured by the domestic
industry;

\(f\) evidence with regard to the existence, amount, and nature of the
subsidy in question;

\(g\) evidence of the evolution of the volume and value of imports of
the allegedly subsidized product, of the effects of such imports on
prices of the like product in the domestic market and the consequent
impact of the imports on domestic industry, as demonstrated by factors
and indices having a bearing on the state of the domestic industry.

§ 2º. In case the petition contains confidential information, the
provisions of Article 38 shall apply.

Article 26. A petition shall undergo a preliminary examination to
determine whether it is contains the necessary elements, or if
complementary information is necessary. The petitioner shall be informed
of the results of this examination within twenty days of filing the
petition.

§ 1º. When complementary information is requested, a new examination
shall take place to determine if new information is necessary or if the
petition is properly presented. The petitioner shall be informed of the
results of this examination within twenty days from the submission of
the complementary information.

§ 2º. Twenty days from the date of the presentation of the new
information, the petitioner shall be informed whether the petition is
properly presented or if it was considered definitively not acceptable.

§ 3º. The time limit for supplying complementary information or new
information shall be determined by SECEX, in accordance with the nature
of the information, and shall be communicated to the petitioner.

§ 4º The petitioner shall have ten days from the time of being informed
that the petition is proper, to present as many copies of the
non‑confidential summary of the petition and of the resume as per § 1º
of Article 38, as there are producers, known exporters, and governments
of exporting countries listed.

§ 5º. If the number of producers and exporters, referred to in § 4º, is
especially high, copies of the petition may be provided in a number
sufficient only for sending to governments of countries listed and the
corresponding representative associations.

***Section II***

***Opening an Investigation***

Article 27. As soon as possible after the acceptance of the petition, as
per Article 26 and, in any case, always before opening the
investigation, the governments, whose products may come to be subject of
the investigation, shall be invited for consultation with the aim of
clarifying the situation as to the matters referred to in Article_25 and
for arriving at a mutually satisfactory solution.

§ 1º. The government of the exporting country shall be notified of the
petition for the opening of the subsidies investigation and shall have a
time limit of ten days to manifest interest in holding consultations,
which shall take place within thirty days.

§ 2º. The deadlines referred to in this Article will be counted from the
date of the notification to the exporting countries concerning the
invitation for consultations.

Article 28. The evidence of both subsidy and injury shall be considered
simultaneously, in the decision whether or not to initiate an
investigation.

§ 1º. The accuracy and adequacy of the evidence contained in the
petition shall be examined based on information from other sources
readily available in order to determine the existence of sufficient
motives to justify the initiation of an investigation.

§ 2º. SECEX shall proceed with the examination of the degree of support
or opposition to the petition expressed by the other domestic producers
of the like product, with the objective of determining if the petition
was presented by or on behalf of the domestic industry. In the case of
fragmented industries involving an exceptionally high number of
producers, support or opposition may be determined through the use of
statistically valid sampling techniques.

§ 3º. A petition shall be considered to have been presented "by or on
behalf of the domestic industry" if presented by producers responsible
for more than 50% of the total domestic production of the like product
made by the portion of domestic industry that had expressed support or
opposition to the petition.

Article 29. An investigation may be opened with a view to verifying if
the alleged subsidies are specific in terms of Articles 6º and 7º, or in
case they are related to research activities, regional development, or
environmental requirements, if they meet the requirements established in
Articles 12, 13, or 14, respectively.

§ 1º. An investigation will not be opened when the subsidy has been
granted in the context of a programme considered non‑actionable by the
exporting country, which has notified it in advance to the Committee on
Subsidies and Countervailing Measures of the WTO.

§ 2º. The exception covered by the previous paragraph will not be
applied, however, to cases in which the competent body of the WTO, or
procedures of the Committee on Subsidies and Countervailing Measures,
conclude that a violation of the provisions contained in Section III of
Chapter II of this Decree exists.

Article 30. The petitioner will be notified of a positive or negative
determination regarding initiation of an investigation within fifty days
following the date of dispatch of the determination that the petition is
properly presented.

§ 1º. The petition shall be rejected and the case closed, when

\(a\) there is no sufficient evidence of existence of a subsidy, or of
injury caused by it, that justifies the initiation of an investigation;

\(b\) the petition has not been presented by or on behalf of the
domestic industry; or

\(c\) the domestic producers, who support the petition, account for less
than 25% of the total production of the like product produced by the
domestic industry.

§ 2º. In the case of a positive determination, the investigation shall
be opened and an act containing such determination shall be published in
the "Diario Oficial" (Official Gazette). The interested parties and
governments shall be notified and given a time limit of twenty days,
counting from the date of publication of this determination, in order to
request qualification of other parties who manifest interest, along with
their legal representatives, as per the pertinent legislation.

§ 3º. For effects of this Decree, interested parties shall be
considered:

\(a\) the domestic producers of the like product or the association
which represents them;

\(b\) the importers or consignees of the goods which are the object of
investigation or the associations which represent them.

\(c\) the exporters or foreign producers of the goods referred to or the
associations which represent them;

\(d\) other parties, national or foreign, considered by SECEX as
interested parties.

§ 4º. As soon as the investigation is initiated, the complete text of
the petition shall be provided to the known producers and exporters, and
to the authorities of the exporting country, and, shall, if so
requested, be placed at the disposal of other interested parties
involved in the investigation. In case the number of producers and
exporters is especially large, the non‑confidential version of the
petition shall be provided only to the authorities of the exporting
country and to the corresponding representative association. Due regard
shall be paid to the protection of confidential information.

Article 31. The initiation of the investigation shall be communicated by
SECEX to the Secretariat of the Federal Revenue of the Ministry of
Finance, so that it may take the appropriate steps which, shall it be
the case, will provide for the imposition of the definitive
countervailing measures to the imports of the product which is the
object of the investigation, as per Article_64.

Sole paragraph. The arrangements adopted by the Secretariat of the
Federal Revenue, as per this article, shall not hinder the procedures of
customs clearance.

Article 32. Before the initiation of the investigation, the existence of
the petition will not be publicized, except as per the directives of
Article 27.

Article 33. In exceptional circumstances, the Federal Government, ex
officio, may initiate an investigation, as long as there is sufficient
evidence of the existence of a subsidy, of injury, and of a causal
relationship between them, that justify the initiation.

***Section III***

***Conduction of the Investigation***

Article 34. In the course of the investigation, opportunity shall be
given to the countries whose products are the object of the
investigation, to hold consultations with a view to elucidate the facts
and reach a mutually satisfactory solution.

Article 35. The evidence of the existence of the actionable subsidy and
of the injury shall be considered simultaneously during the
investigation.

§ 1º. The period of investigation of the existence of the actionable
subsidy shall include the twelve month period immediately preceding the
date of the initiation of the investigation. It may retroact up to the
beginning of most recently concluded fiscal year of the recipient for
which trustworthy financial information and other relevant data are
available. Under exceptional circumstances, the period of investigation
can be of less than twelve months, but never less than six.

§ 2º. The period of investigation of the existence of injury shall be
sufficiently representative to permit the analysis to which Chapter IV
refers to and shall not be of less than three years and will necessarily
include the period of investigation of the existence of the actionable
subsidy.

***Sub‑section I***

***Evidence***

Article 36. The interested parties and governments and the parties in
the investigation to be interested shall be given notice with regard to
the required information and shall have ample opportunity to present in
writing the evidence they consider relevant with respect to the
investigation being considered.

Sole paragraph. Whatever difficulties the interested parties, especially
small enterprises, have in supplying the requested information, will be
taken into consideration, and they will be given any assistance
practicable.

Article 37. The interested parties and governments of the exporting
countries shall receive questionnaires destined for the investigation
and shall have a time limit of forty days to answer them, counting from
the day of their dispatch.

§ 1º. Requests for extension of the time limit of forty days shall be
considered, and in case necessity is demonstrated, the extension may be
granted, when practicable, for a period not to exceed thirty days,
taking into account the time limits established for the investigation.

§ 2º. Additional or complementary information may be requested or
accepted, in writing, during the course of the investigation. The time
limit for furnishing the requested information shall be stipulated in
function of their nature and may be extended by suitably justified
requests. The time limits for the investigation shall be taken into
account, for the supply of additional information, as well as for
consideration of the additional information presented.

§ 3º. In case either of the parties or governments refuse access to the
necessary information, do not provide it within the time limit
determined, or yet, impede the investigation, preliminary or final
determinations may be made based on the facts available, as per
Article 79, keeping in mind the time limits of the investigation.

Article 38. Information which is confidential by nature or is provided
on a confidential basis by parties and governments interested in the
investigation, shall be treated as such, if justified, and will not be
disclosed without express permission of the party supplying it.
Information classified as confidential will be the object of a separate
process.

§ 1º. Interested parties and governments which provide confidential
information, shall present a non‑confidential summary of the same, that
will permit a reasonable understanding of the information provided. In
cases in which it is not possible to present the summary, the parties or
governments shall justify such this situation in writing.

§ 2º. In case it is considered that the request for confidentiality is
not warranted, and if the supplier of the information refuses to make it
public in whole or in summary format, such information may be
disregarded, unless it is demonstrated in a convincing manner and from
appropriate sources that the information is correct.

Article 39. Opportunity shall be given to the industrial users of the
product under investigation, and representatives of consumer
organizations, in cases where the product is commonly sold at the retail
level, to provide information which is relevant to the investigation.
This information will be considered in the determinations or decisions.

Article 40. In the course of the investigation, the accuracy of the
information provided by the interested parties and governments will be
verified.

§ 1º. Investigations may be carried out in the territory of other
countries, if the governments have been duly notified and have not
objected. The enterprises located in other countries may also be equally
investigated and have their records examined, if their approval is
obtained, and the representatives of the government of the country in
question have been notified and do not object to the investigation. The
procedures described in Article 78 shall be applied in the
investigations of the enterprises.

§ 2º. Investigations may be carried out in the enterprises involved
which are located in Brazilian territory, if previous authorization has
been obtained.

§ 3º. The results of the investigations, carried out in accordance with
the provisions of paragraphs 1º and 2º of this article, shall be
attached to the process, with due regard being given to the right to
confidentiality.

***Sub‑section II***

***The Defence***

Article 41. During the investigation, the parties and the interested
governments shall have ample opportunity to defend their interests. In
case it is requested, within the time limit indicated in the act that
initiates the investigation, hearings will be held where opportunity
will be given to those who hold opposing views in such a way that
opposing interpretations and arguments may be expressed.

§ 1º. The parties or interested governments who have requested the
hearing shall provide, along with the request, a list of specific issues
that are to be discussed.

§ 2º. The interested parties and governments shall be informed of the
hearing, and of the aspects to be discussed, within a minimum of thirty
days previous to the meeting.

§ 3º. Attendance shall not be obligatory and absence of any party shall
not be used to against their interests.

§ 4º. The interested parties and governments shall indicate their legal
representatives who will be present in the hearing, at least five days
before it is held, and send in writing, at least ten days before it is
held, the arguments to be presented in the occasion. The interested
parties and governments, may, if adequately justified, present
additional information orally.

§ 5º. When appropriate, due account shall be given to the need to
protect confidentiality.

§ 6º. The fact that hearings are being held shall not impede SECEX from
reaching a preliminary or final determination.

Article 42. Whatever decision or determination is made shall be based
only on the information and documents that are part of the case and that
are available to all interested parties and governments, due account
having been given to the need to protect confidential information.

§ 1º. Information provided orally shall only be taken into consideration
if, within ten days, the same is reproduced in writing and placed at the
disposal of other interested parties and governments.

§ 2º. The interested parties and governments may request, in writing, to
see the information that is relevant to the legal proceedings, which
shall be placed at their disposition with the exception of confidential
information and the internal Government documents. Opportunity shall be
given for the parties to defend their interests, in writing, based on
such information.

***Sub‑section III***

***Final Procedures Concerning the Conduction of the Investigation***

Article 43. Before preparation of the opinion which will lead to the
final determination, SECEX will hold a hearing in which the interested
parties and governments will be informed of the essential facts under
examination that form the basis of the opinion. The interested parties
and governments will have fifteen days, counting from the date of the
hearing, to present their views in this regard.

§ 1º. The National Agricultural Confederation ("CNA"), the National
Industrial Confederation ("CNI"),the National Commercial Confederation
("CNC"), and the Brazilian Foreign Trade Association ("ABE") will be
equally informed of the essential facts under examination that forms the
basis of the SECEX opinion.

§ 2º. When the time limit determined in the "caput" has expired, the
conduction of the process will have been finalized and received later
shall not be considered in reaching the final determination.

§ 3º. The provisions contained in paragraphs_3º, 4º, and 5º of
Article_41 also apply to this Article.

***Section IV***

***Provisional Countervailing Measures***

Article 44. Provisional Countervailing Measures may only be applied if:

I. The investigation has been initiated as per the provisions of Section
II of Chapter VI, the act that contains the determination of the
initiation was published and the interested parties and governments have
been offered adequate opportunity to present their views;

II\. An affirmative preliminary determination has been made that an
actionable subsidy exists and that there is injury to the domestic
industry as a result of imports of the subsidized product;

III\. The authorities referred to in Article 2º have decided that such
measures are necessary to prevent injury during the investigation; and

IV\. At least sixty days have passed since the date of the initiation of
the investigation.

§ 1º. The amount of the provisional countervailing measure shall not
exceed the amount of the actionable subsidy previously calculated.

§ 2º. Provisional countervailing measures shall be applied in the form
of provisional measures guaranteed by cash deposit or bank guarantees.

§ 3º. Interested parties and governments shall be notified of the
decision to apply provisional countervailing measures and the act
containing such decision shall be published in the "Diario Oficial"
(Official Gazette).

§ 4º. The Secretariat of the Federal Revenue shall decide the form which
the guarantee shall take.

§ 5º. The release from customs of the goods which are the object of
provisional countervailing measures shall depend on the presentation of
the guarantee.

§ 6º. The validity of the provisional countervailing measures shall be
limited to a period which shall not exceed four months.

***Section V***

***Undertakings***

Article 45. The proceedings may be suspended without the application of
provisional countervailing measures or countervailing measures, if the
government of the exporting country agrees to eliminate or reduce the
subsidy, or adopts other measures concerning its effects, or if the
exporter accepts voluntarily satisfactory undertakings to revise the
prices of the exports destined for Brazil, if the authorities referred
to in Article 2º become convinced that the referred undertaking
eliminates the injurious effect of the subsidy.

§ 1º. The increase in prices in keeping with the undertaking with the
exporter shall not exceed that amount necessary to compensate the amount
of the actionable subsidy, and may be limited to that necessary to
remove the injury caused to the domestic industry.

§ 2º. The government of the exporting countries and the exporters shall
only propose or accept undertakings, after SECEX having arrived at an
affirmative preliminary determination of the existence of actionable
subsidy and of injury, and in the case of an undertaking from the
exporters, that they obtain consent of the government of the exporting
country.

§ 3º. The government of the exporting country and the exporters are not
obliged to propose undertakings, nor will they be forced to accept those
offered. These facts shall not harm the consideration of the case nor
shall they alter the preliminary determination which has been reached.

§ 4º. The right is granted to SECEX to refuse undertakings, if such
acceptation is considered inappropriate.

§ 5º. Where practicable, in case of refusal, the reasons for considering
inappropriate the acceptance of the undertaking shall be provided to the
governments and they shall be given an opportunity to make comments
thereon.

Article 46. Once the undertaking is accepted , the act which contains
its legal ratification shall be published in the "Diario Oficial"
(Official Gazette), and shall contain, depending on the case, the
decision as to continue or to suspend the investigation. Interested
parties and governments shall be notified.

Sole paragraph. The investigation of subsidy and injury shall proceed,
in case the government of the exporting country so desires or the
authorities referred to in Article 2º so decide.

Article 47. The government of the exporting country or the exporter with
whom the compromise agreement was established, shall provide,
periodically, if requested, information relative to compliance with the
agreement and permit the verification of the pertinent data.

Sole paragraph. The failure to comply with the terms of this Article
shall be considered a violation of the undertaking.

Article 48. In the case of a violation of the undertaking, actions may
be taken viewing immediate application, by the authorities referred to
in Article 2º, of provisional countervailing measures using the best
information available and the investigation that had been suspended
shall recommence immediately.

Sole paragraph. The interested parties and governments shall be notified
about the termination of the compromise agreement and the application of
provisional countervailing measures and the act containing such decision
shall be published in the "Diario Oficial" (Official Gazette).

***Section VI***

***Concluding the Investigation***

Article 49. Investigations shall be concluded within one year of
initiation, except in exceptional circumstances, when the time limit may
be up to eighteen months.

Article 50. The petitioner may, at any time, request the closing of the
case. If the request is accepted, the investigation shall be terminated.
If SECEX decides to continue the investigation, the petitioner shall be
informed in writing.

Article 51. The investigation shall be terminated, without the
application of countervailing measures, if:

I. There has not been sufficient evidence of the existence of an
actionable subsidy or of injury resulting therefrom;

II\. The amount of the actionable subsidy was *de minimis* as provided
in paragraphs 7º to 12 of Article 21;

III\. The volume of imports, actual or potential, of the subsidized
product or the injury caused was negligible, as per §§ 3º and 4º of
Article 21.

Article 52. The investigation shall be concluded with application of
measures, when SECEX completes the pertinent procedures of
consultations, arrives at a final determination of the existence of an
actionable subsidy, of injury and of a causal link between them.

Sole paragraph. The value of countervailing measures may not exceed the
amount of the actionable subsidy, as per the terms of Article 14.

Article 53. In a situation where the investigation is continued after
the acceptance of an undertaking:

I. The undertaking shall automatically lapse and the investigation
terminate, if SECEX arrives at a negative determination of actionable
subsidization or of injury resulting therefrom, except in cases where
such a determination is due in large part to the existence of an
undertaking. In such cases the undertaking may be maintained for a
reasonable period of time in conformity with the provisions of this
Decree;

II\. If the authorities referred to in Article 2º confirm the existence
of an actionable subsidy and injury resulting therefrom, based on the
SECEX opinion, the investigation shall be closed and the application of
definitive measures shall be suspended while the undertaking is in
effect, it being understood that the terms under which the undertaking
was established, and the provisions of this Decree, are respected.

§ 1º. For the purposes of this Article, the provisions of Article 47
apply.

§ 2º. In case of violation of the undertaking, action may be adopted
with a view to the immediate application, by the authorities referred to
in Article 2º, of countervailing measures having as a basis the
determination of the investigation that was carried out.

§ 3º. The interested parties and governments shall be notified about the
lapse of the undertaking and about the countervailing duty applied. The
act containing such decision shall be published in the "Diario Oficial"
(Official Gazette).

Article 54. The act that contains the determination or the decision to
close the investigation, in the cases foreseen in this Section, shall be
published in the "Diario Oficial" (Official Gazette). The interested
parties and governments shall be notified of the close of the
investigation.

Sole paragraph. In the case of a decision to conclude the investigation,
with the application of countervailing measures, the act containing such
a decision shall indicate the producer or producers of the product in
question, with the measures applicable to each one. In case the number
of producers is especially high, the act shall contain the names of the
producing countries involved, with the respective applicable measures.

**Chapter VII**

**THE IMPOSITION AND COLLECTION OF COUNTERVAILING DUTIES**

***Section I***

***Imposition***

Article 55. For the effects of this Decree, the expression
"countervailing measures" means the amount of money equal to or less
than the amount of actionable subsidy determined, calculated as per
Article 14 and applied in conformity with this article, with the
objective of removing the injury caused by the actionable subsidy.

§ 1. The countervailing measures, provisional or definitive, shall be
calculated by means of the application of ad valorem or specific duties
, fixed or variable, or by a combination of both.

§ 2. The *ad valorem* duties shall be applied to the customs value of
the merchandise, on the basis of the c.i.f. value, verified in terms of
the pertinent legislation.

§ 3. The specific duty shall be fixed in dollars of the United States of
America and converted into national currency, in terms of the pertinent
legislation.

Article 56. Countervailing measures, applied to imports originating from
known exporters or producers that have not been included in the
selection treated in Article 20, but who have provided the information
requested, may not exceed the weighted average of the subsidy amount
established for the selected group of exporters or producers.

§ 1. For purposes provided for in this article, zero amounts or de
minimus amounts will not be taken into account nor the amounts
established in the circumstances to which § 3º of Article 37 refers.

§ 2. The authorities referred to in Article 2 shall apply measures
calculated individually to the original imports of any exporter or
producer not included in the selection, who has provided the information
requested during the investigation, as provided in § 4º of Article 20.

Article 57. For purposes of application of the provisions of item II of
Article 24, countervailing measures shall be applicable only to products
destined for final consumption in the market that has been considered
domestic industry, for purposes of the investigation, in accordance with
§ 4º of Article 24.

***Section II***

***Collection***

Article 58. Countervailing measures applied to a product shall be
collected, independent of any other tax obligations relative to is
importation, in the appropriate amounts in each case, on a
non‑discriminatory basis, on the import of the product from all sources
which have been considered to be subsidized and causing injury to the
domestic industry, whatever may be its provenance.

§ 1. Measures will not be charged on imports proceeding from or
originating in countries that have renounced any subsidies in question,
or whose undertakings have been accepted.

§ 2. Customs clearance of goods which are the object of definitive
compensatory measures shall depend on their payment.

***Section III***

***Products subject to Provisional Measures***

Article 59. Except for the cases foreseen in this Section, provisional
countervailing measures may only be applied to products which have been
dispatched for consumption after the date of publication of the act that
contains the decisions foreseen in Articles 44 and 52.

Article 60. In the case of a final negative determination concerning the
existence of an actionable subsidy or of injury resulting therefrom, the
amount of the provisional countervailing measures, if guaranteed by
deposit, shall be refunded, or, in the case of bank guarantee, it shall
be annulled.

Article 61. In case the final determination is that there is threat of
injury or material retardation, without injury having occurred, the
amount of the provisional countervailing measures, if guaranteed by
deposit, shall be refunded, or in the case of bank guarantee, it shall
be annulled, unless it be verified that the subsidized imports, in the
absence of provisional countervailing measures, would have led to a
determination of injury, in which case the provisions of Articles 62 and
63 will apply.

Article 62. In case the final determination is that the actionable
subsidy exists and that it is resulting in injury, in the situation of
guarantee by deposit:

I. The excess amount shall be reimbursed when the value of the measures
applied by the final decision are less than the value of the provisional
measures guaranteed by deposit.

II\. The difference shall not be collected when the value of the
measures applied are more than the value of the measures provisionally
applied by deposit.

III\. The amount shall be automatically converted into definitive
measures when the value applied by the final decision is equal to the
value of the measures provisionally determined.

Article 63. In case the final determination confirms the existence of
the actionable subsidy and injury resulting therefrom, in the situation
of a bank guarantee:

I. The amount corresponding to the guaranteed value shall be immediately
collected when the value of the definitive measures is greater than or
equal to the value of the measures provisionally determined.

II\. Only the amount equivalent to the value determined by final
decision will be collected when this value is less than the value of the
measures provisionally determined.

Sole paragraph. The collection of the amounts referred to in the opening
paragraph will lead to the consequent extinction of the guarantee. In a
situation of breach of contract, the guarantee shall be automatically
executed, independently of judicial or extrajudicial notice, in
accordance with the pertinent legislation.

Article 64. Definitive countervailing measures may be collected for
subsidized imported products that have been dispatched for consumption
up to ninety days previous to the date of the application of provisional
countervailing measures, whenever it is determined that, with relation
to the product in question, that the injury is caused by massive
imports, within a relatively short period of time, and will lead to the
recurrence of such injury.

Sole paragraph. Measures will not be collected for products which have
been dispatched for consumption before the opening date of the
investigation.

Article 65. In cases of violation of undertakings, definitive
countervailing measures may be charged on imported products dispatched
for consumption up to ninety days before the application of provisional
countervailing measures, foreseen in Article 48, except for the products
which had been dispatched before the violation of the agreement.

**Chapter VIII**

**THE DURATION AND REVIEW OF COUNTERVAILING**

**MEASURES AND UNDERTAKINGS**

Article 66. Countervailing measures and undertakings may only remain in
force as long as and to the extent necessary to counteract the
actionable subsidy which is causing the injury and shall be terminated
within a maximum period of five years, after application or after the
conclusion of the most recent revision which has considered the
actionable subsidy and the resulting injury.

Article 67. The time limit for the action to which the previous Article
refers may be extended after revision, by means of petition formulated
by the domestic industry or on its behalf, by organs or entities of the
Federal Public Administration, or by initiative of SECEX, if it is
demonstrated that the withdrawal of the measures would lead to
continuation or recurrence of subsidization and injury.

§ 1º. The petition referred to in the opening paragraph shall be
presented within a time limit of five months before the end of the
application period of measures referred to in Article 66. The same time
limit will apply when the initiative is taken by SECEX.

§ 2º. If it is confirmed that there is evidence that would justify a
revision, it shall be initiated and will follow the provisions of
Section III of Chapter VI and shall be concluded within a period of 12
months counting from the date of initiation. The acts which contain the
determination to initiate and the conclude the revision shall be
published in the "Diario Oficial" (Official Gazette) and the interested
parties and governments shall be notified.

§ 3º. The measures and undertakings shall remain in force pending the
outcome of the revision.

Article 68. A revision of part or of all of the elements of decision
relative to the application of countervailing measures will be conducted
at the request of the interested parties or governments, or of an organ
or entity of the Federal Public Administration, or SECEX, as long as a
minimum period of one year has elapsed from the date of imposition of
definitive countervailing measures and sufficient evidence has been
presented that:

I. The application of measures ceased to be necessary to offset the
actionable subsidy;

II\. It is unlikely that the injury will continue or recur if the
measures were removed or varied; or

III\. The existing measures are not or have ceased to be sufficient to
offset the actionable subsidy causing the injury.

§ 1º. In exceptional cases of substantial change of circumstances, or
when in the national interest, revisions may be made at shorter
intervals, at the request of the interested parties or governments, or
of an organ or entity of the Federal Public Administration, or by SECEX.

§ 2º. If it is confirmed that there is evidence that justifies the
revision, it shall be initiated and the act which contains such
determination shall be published in the "Diario Oficial" (Official
Gazette) and the interested parties and governments shall be notified.

§ 3º. The revision shall be concluded within twelve months counting from
its initiation and shall follow the provisions of Section III of Chapter
VI.

§ 4º. The measures shall be maintained in force pending the outcome of
the revision.

§ 5º. The authorities referred to in Article_2º, based on the results of
the revision and in conformity with the evidence collected in the course
of the revision, may terminate, maintain, or alter the countervailing
measures. If it is found that the measures in force are greater than
what is necessary to offset the injury to the domestic industry or are
no longer justified, adequate reimbursement shall be determined.

§ 6º. The act which contains the determination to terminate the revision
shall be published in the "Diario Oficial" (Official Gazette) and the
interested parties and governments shall be notified.

§ 7º. The provisions of this Article_apply to the undertakings accepted
in conformity with Section V of Chapter VI.

Article 69. When a product is subject to countervailing measures, if
requested, an expedited review shall be instituted immediately to in
order for individual countervailing measures to be promptly established
for any exporters or producers that have not in fact been investigated
for reasons other than the refusal to cooperate with the investigation.

Article 70. Countervailing measures may be suspended, on the basis of a
technical opinion, for a period of one year, which can be extended for
an equal period, in case temporary alterations occur in market
conditions, as long as the injury does not recur or does not subsist as
a result of the suspension and as long as domestic industry has
expressed its views.

Sole paragraph. The measures may be reapplied, at any moment, if the
suspension is no longer justified.

**Chapter IX**

**PUBLIC NOTICE**

Article 71. The acts resulting from the decisions of the authorities
referred to in Article 2º, and the determinations of SECEX, shall be
published in the "Diario Oficial" (Official Gazette) and shall contain
detailed information about the conclusions reached regarding each matter
of fact and of law considered pertinent, in keeping with the terms of
Article 22 of the Agreement on Subsidies and Countervailing Measures.

Sole paragraph. \_For purposes of notification, a copy of the acts
mentioned in the first paragraph of this Article shall be sent to the
government of the country or countries that export the products that
have been the object of investigation, and also to other the known
interested parties.

**Chapter X**

**FORMALITIES RELATED TO ACTS AND PROCEDURAL TERMS**

Article 72. The interested parties and governments shall observe the
norms of this Decree and the instructions of SECEX in the elaboration of
petitions and documents in general, since documents will not be attached
to the process in case of disregard of norms and instructions..

§ 1º. The only instructions that must be observed are those that have
been made public before the beginning of the procedural process or have
been specified in communications directed to the parties.

§ 2º. The acts and procedural terms shall be written and the hearings
and consultations reduced to written terms. The translation to
Portuguese, by an official translator, of texts in other languages is
mandatory.

§ 3º. The procedural acts are public and the right to consult the
minutes and to request certificates about the proceedings is restricted
to the parties, to governments and their attorneys, with due
consideration being given to the provisions of the sole paragraph of
Article 42, which regard the respect for confidentiality of information
and internal documents of the Government.

§ 4º. Requests for certificates related to the proceedings will only be
accepted thirty days after the opening of the investigation or from the
last request for a certificate by the same party.

**Chapter XI**

**THE DECISION MAKING PROCESS**

Article 73. The determinations or decisions, preliminary or final,
relative to the investigation, shall be adopted based on the findings of
SECEX.

§ 1º. SECEX shall publish, within twenty days from the date of reception
of the findings by the Foreign Trade Secretary, an act the contains the
determination to (a) open an investigation; (b) extend the time limit of
an investigation; (c) terminate a case by request of the petitioner; (d)
initiate a revision process of definitive measures, or undertakings; or
(e) terminating an investigation without the application of measures.

§ 2º. An act shall be published, within twenty days from reception of
the findings by the Ministers of State of Industry, Trade, Tourism, and
of Finance, which contains the decision to (a) apply provisional
countervailing measures; (b) accept or reject an undertaking; (c)
terminate an investigation with the application of measures; (d)
suspension of definitive measures; (e) the result of a revision of
definitive measures or undertakings.

§ 3º. In exceptional circumstances, notwithstanding evidence of the
existence of an actionable subsidy and injury resulting therefrom, the
authorities referred to in Article 2º may decide, for reasons of
national interest, to suspend the application of measures or not to
ratify undertakings, or even, in accordance with the provisions of the
sole paragraph of Article 52, to apply measures at a amount from that
which was recommended, and, in this case the act shall contain the
grounds for their decision.

**TITLE II**

**SPECIAL PROCEDURES**

**Chapter I**

**AGRICULTURAL PRODUCTS**

Article 4. The provisions of this Chapter apply to agricultural
products, included in Annex V, during a period of nine years beginning
on 1 January 1995.

Sole paragraph. In the case of developing countries, the period is of
ten years.

Article 75. Non‑actionable subsidies are those measures of domestic
support that meet the criteria established in Annex VI, which may be
verified by opening an investigation to determine if they are in
complete conformity with that Annex.

Article 76. In order to initiate an investigation of actionable
subsidies, it shall be verified if they are in conformity to the
reduction commitments, in terms of domestic support and export
subsidies, as specified in Part IV of the list of each country and in
other documentation annex to the Agreement on Agriculture.

Sole paragraph. In the initiation of investigations to examine
actionable subsidies for agricultural products, which fall within the
provisions of the caput or the criteria for exemption of reduction
commitments, the provisions of Article 13 of the Agreement on
Agriculture will be observed.

Article 77. The following are export subsidies subject to the reduction
commitments:

I. The provision by governments or their agencies of direct subsidies,
including payments‑in‑kind, to a firm, to an industry, to producers of
an agricultural product, to a cooperative or other association of such
producers, or to a marketing board, contingent on export performance.

II\. The sale or disposal for export by governments or their agencies of
non‑commercial stocks of agricultural products at a price lower than the
comparable price charged for the like product to buyers in the domestic
market;

III\. Payments on the export of an agricultural product that are
financed by virtue of governmental action, whether or not a charge on
the public account is involved, including payments that are financed
from the proceeds of a levy imposed on the agricultural product
concerned or on an agricultural product from which the export product is
derived;

IV\. The provision of subsidies to reduce the costs of marketing exports
of agricultural products (other than the widely available export
promotion and advisory services) including handling, upgrading and other
processing costs, and the costs of international transport and freight;

V. Internal transport and freight charges on export shipments, provided
or mandated by governments, on terms more favourable than for domestic
shipping;

VI\. Subsidies on agricultural products contingent on their
incorporation in exported products.

**Chapter II**

**ON‑THE‑SPOT INVESTIGATIONS**

Article 78. Once the investigation is initiated, the authorities of the
exporting country shall be informed of the intention to carry out
on‑the‑spot investigations, as per § 1º of Article 40.

§ 1º. In exceptional circumstances, when there is the intention of
including non‑governmental experts in the investigation team, the
authorities of the exporting country and the interested enterprises
shall be informed. The non‑governmental experts will be subject to the
sanctions provided for in Article 325 of the Brazilian Penal Code.

§ 2º. Explicit agreement shall be obtained from the enterprises
concerned in the exporting country, before the visit is made.

§ 3º. After obtaining the agreement referred to in the previous
paragraph, the authorities of the exporting country shall be immediately
notified of the names and addresses of the enterprises to be visited, as
well as the dates agreed on.

§ 4º. The enterprises involved shall be notified of the visit with
sufficient advance notice.

§ 5º. Visits with the purpose of explaining the questionnaire can only
take place at the request of the producer or exporter firm, and this may
only occur if SECEX notifies the representative of the government in
question and there are no objections to the visit.

§ 6º. Visits shall be made after the return of the questionnaire, unless
the enterprise agrees otherwise and the government of the exporting
country has been previously notified and has not objected.

§ 7º. Before the visit, the general nature of the information requested
shall be brought to the attention of the enterprises involved and the
answers to the requests for information or questions formulated by the
authorities or enterprises of the exporting country, essential for the
good result of the on‑the‑spot investigation shall, whenever possible,
be provided, before the visit takes place.

§ 8º. Requests for supplementary clarification may be made during the
visit, based on the information obtained.

**Chapter III**

**USE OF INFORMATION FROM SECONDARY SOURCES**

Article 79. As soon as the investigation is initiated, and whenever
necessary, the information requested of the interested parties and
governments shall be specified in detail, as well as the time limits for
response and the form in which the information shall be structured in
the reply.

§ 1º. The parties and governments shall also be notified that the
failure to provide the requested information or the partial submission
of information requested, within the time limits established, will allow
for determinations to be made on the basis of available facts and that
the results obtained may be less favourable to that party, than they
would have been if the party had cooperated.

§ 2º. SECEX may request that part of the reply be provided in computer
language.

§ 3º. Whenever a party does not maintain computerized accounting, or the
delivery of the replies in such form would represent an additional
burden, with unjustified increase in costs and difficulties, this party
may be exempt from the obligation to present the replies in the form
mentioned in the previous paragraph.

§ 4º. Whenever SECEX does not have specific means to process the
information, by having received it in a computer language incompatible
with its operational system, the information shall be provided in
written form.

§ 5º. In formulating determinations, verifiable information that has
been presented within schedule, but which is not, however, in all
aspects adequate, may be used.

§ 6º. In case SECEX does not accept certain information, it shall
communicate immediately to the party the motive for the refusal, so that
the party may supply clarifications, within the time limits established,
keeping within the limit established for the investigation. In case the
additional clarifications are not satisfactory, the reasons for refusal
shall figure in the acts that contain any determination or decision.

§ 7º. In a situation in which it is proved that the information is false
or tendentious, the information shall be rejected and the determinations
shall be based on the available facts.

§ 8º. In the formulation of determinations, if secondary sources of
information are used, including those provided in the petition,
independent sources of information and information from other parties
shall be used for comparative purposes.

**Chapter IV**

**GENERAL PROVISIONS**

Article 80. The provisions of the Agreement on Subsidies and
Countervailing Measures relative to prohibited and actionable subsidies,
contained in Parts II and III respectively, may be invoked
simultaneously with those relative to countervailing measures treated in
this Decree.

Sole paragraph. In regard to the effects of a subsidy on the domestic
market, only one form of compensation may be applied, or a
countervailing measure, if the necessary requisites are met, or a remedy
falling within the scope of Articles 4º and 7º of the Agreement on
Subsidies and Countervailing Measures.

Article 81. The provisions of the Agreement on Agriculture shall be
applied simultaneously with those of this Decree.

Article 82. The time limits foreseen in this present Decree, shall be
calculated in calendar days and may be extended for one additional equal
period, except for those which already have an extension established.

Article 83. Acts practised contrary with the provisions of this Decree,
shall be null under law.

Article 84. The procedures established in this Decree shall not impede
the competent authorities for acting expeditiously in relation to any
decisions and determinations and shall not hinder customs clearance.

Article 85. For effects of this Decree, the term "industry" also
includes activities related to agriculture.

Article 86. The provisions of this Decree shall be applied to
investigations and revisions initiated after 30 December 1994.

Article 87. The Ministers of State of Industry, Trade and Tourism and of
Finance shall issue the complementary norms for the execution of this
Decree.

Article 88. This Decree shall enter into force on the date of its
publication.

Brasilia, 19 December 1995; 174th of Independence and 107th of the
Republic.

MARCO ANTONIO DE OLIVEIRA MACIEL

Sebastião do Rego Barros Netto

Pedro Malan

José Eduardo de Andrade Viera

Dorothea Werneck

Andreia Sandro Calabi

**ANNEX I**

**ILLUSTRATIVE LIST OF EXPORT SUBSIDIES**

\(a\) The provision by governments of direct subsidies to a firm or to
an industry contingent upon export performance.

\(b\) Currency retention schemes or any similar practices which involve
a bonus on exports.

\(c\) Internal transport and freight charges on export shipments,
provided or mandated by governments, on terms more favourable than for
domestic shipments.

\(d\) The provision by governments or their agencies either directly or
indirectly through government‑mandated schemes, of imported or domestic
products or services for the use in the production of exported goods, on
terms or conditions more favourable than for provision of like or
directly competitive products or services for use in the production of
goods for domestic consumption, if ( in the case of products) such terms
or conditions are more favourable than those commercially available on
world markets for their exporters.

The term "commercially available" means that the choice between domestic
and imported products is unrestricted and depends only on commercial
considerations.

\(e\) The full or partial exemption or remission or deferral
specifically related to exports, of direct taxes, or social welfare
charges paid or payable by industrial or commercial enterprises.

"Remission" of taxes includes the refund or rebate of taxes.

Deferral need not amount to an export subsidy when, for example,
appropriate interest charges are collected.

The term "direct taxes" means taxes on wages, profits, interests, rents,
royalties, and all other forms of income, and taxes on the ownership of
real property.

Prices for goods in transactions between exporting enterprises and
foreign buyers under their or under the same control should, for tax
purposes, be the prices which would be charged between independent
enterprises acting at arm's length.

This item does not include measures that avoid double taxation of
foreign‑source income.

\(f\) The allowance of special deductions directly related to exports or
to export performance, over and above those granted in respect to
production for domestic consumption, in the calculation of the base on
which direct taxes are charged.

\(g\) The exemption or remission, in respect of the production and
distribution of exported products, of indirect taxes in excess of those
levied in respect of the production and distribution of like products
when sold for domestic consumption.

The term "indirect taxes" means taxes on sales, excise, turnover, value
added, franchise, stamp, transfer, inventory and equipment taxes, border
taxes, and all taxes other than direct taxes, referred to in letter "e"
and import charges, referred to in letter "i".

\(h\) The exemption, remission or deferral of prior‑stage cumulative
indirect taxes on goods or services used in the production of exported
products in excess of the exemption, remission or deferral of like
prior‑stage cumulative indirect taxes on goods and services used in the
production of like products when sold for domestic consumption;
provided, however, that prior‑stage cumulative indirect taxes may be
exempted, remitted or deferred on exported products even when not
exempted, remitted or deferred on like products when sold for domestic
consumption, if the prior‑stage cumulative indirect taxes are levied on
inputs that are consumed in the production of the exported product
(making normal allowance for waste). This item shall be interpreted in
accordance with the guidelines on consumption of inputs in the
production process contained in Annex II. The provisions of this item
does not apply to value‑added tax systems and border‑tax adjustment in
lieu thereof; the problem of excessive remission of value‑added taxes is
exclusively covered by item "g".

"Prior‑stage" indirect taxes are those levied on goods or services used
directly or indirectly in the making of a product. "Cumulative" indirect
taxes are multi‑staged taxes levied where there is no mechanism for
subsequent crediting of the tax if the goods or services subject to tax
at one stage of production are used in a succeeding stage of production.

\(i\) The remission or drawback of import charges in excess of those
levied on imported inputs that are consumed in the production of the
exported product (making normal allowance for waste); provided, however,
that in particular cases a firm may use a quantity of home market inputs
equal to, and having the same quality and characteristics as, the
imported inputs as a substitute for them in order to benefit form this
provision if the import and the corresponding export operations both
occur within a reasonable period of time, not to exceed two years. This
item shall be interpreted in accordance with the guidelines on
consumption of inputs in the production process contained in Annex II
and the guidelines in the determination of substitution drawback systems
as export subsidies contained in Annex III.

\"Remission or drawback" includes the full or partial exemption or
deferral of import charges.

The term " import charges" means tariffs, duties, and other fiscal
charges not elsewhere enumerated in this Annex that are levied on
imports

\(j\) The provision by governments (or special institutions controlled
by governments) of export credit guarantee or insurance programmes, of
insurance or guarantee programmes against increases in the cost of
exported products or of exchange risk programmes, at premium rates which
are inadequate to cover the long‑term operating costs and losses of the
programmes.

\(k\) The grant by governments (or special institutions controlled by
and/or acting under the authority of governments) of export credits at
rates below those which they actually have to pay for the funds so
employed (or would have to pay if they borrowed on international capital
markets in order to obtain funds of the same maturity and other credit
terms and denominated in the same currency as the export credit), or the
payment by them of all or part of the costs incurred by exporters or
financial institutions in obtaining credits, in so far as they are used
to secure a material advantages in the field of export credit terms.

Provided, however, that if a Member of the WTO is a party to an
international undertaking on official export credits to which at least
twelve original Members to the Agreement on Subsidies and Countervailing
Measures are parties as of 1 January 1979 (or a successor undertaking
which has been adopted by those original Members), or if in practice a
Member country applies the interest rates provisions of the relevant
undertaking, an export credit practice which is in conformity with those
provisions shall not be considered a prohibited export subsidy.

\(l\) Any other charge on the public account constituting an export
subsidy in the sense of Article XVI of GATT 1994.

**ANNEX II**

**GUIDELINES ON CONSUMPTION OF INPUTS IN THE PRODUCTION PROCESS**

\(A\) Inputs consumed in the production process are those incorporated
physically, energy, fuels and oils used in the production process and
catalysts which are consumed in the course of their use to obtain the
exported product.

\(b\) Indirect tax rebate schemes can allow for exemption, remission, or
deferral of prior‑stage cumulative indirect taxes levied on inputs that
are consumed in the production of the exported product (making normal
allowance for waste ). Similarly, drawback schemes can allow for the
remission or drawback of import charges levied on inputs that are
consumed in the production of the exported product (making normal
allowance for waste ).

\(c\) The Illustrative List of Export Subsidies in Annex I makes
reference, in items "h" and "I", to the term "inputs consumed in the
production of the exported product". Pursuant to item "h", indirect tax
rebate schemes can constitute an export subsidy to the extent that they
result in exemption, remission, or deferral of prior‑stage cumulative
indirect taxes in excess of the amount of such taxes actually levied on
inputs that are consumed in the production of the exported product.
Pursuant to item "i", drawback schemes can constitute an export subsidy
to the extent that they result in a remission or drawback of import
charges in excess to those actually levied on inputs that are consumed
in the production of the exported product. Normal allowance for waste
will be made in findings regarding consumption of inputs in the
production of the exported product. In the case foreseen in item "i",
substitution may be made when appropriate.

\(d\) for purposes of subsidy investigations, SECEX will proceed in the
following manner when examining the mechanism of rebate:

(d.1) where it is alleged that an indirect tax rebate scheme, or a
drawback scheme, conveys as subsidy by reason of over‑rebate or excess
drawback of indirect taxes or import charges on inputs consumed in the
production of the exported product, SECEX will first determine whether
the government of the exporting Member has in place and applies a system
or procedure to confirm which inputs are consumed in the production of
the exported product and in what amounts. Where such system or procedure
is determined to be applied, SECEX will then examine the system or
procedure to see whether it is reasonable, effective for the purpose
intended, and based on generally accepted commercial practices in the
country of export. SECEX may consider it necessary to realize, in
accordance with paragraph 1 of Article 40 of the Decree that regulates
the norms of application of countervailing measures, certain practical
tests in order to verify information and certifying that the system or
procedure is being effectively applied.

(d.2) when such a system or procedure does not exist, or when it is not
reasonable, or when though it exists, it is not being applied or not
applied effectively, a further examination by the exporting Member based
on the actual inputs involved would need to be carried out in the
context of determining whether an excess payment occurred. If SECEX
considers it necessary, a further examination will be carried out, in
accordance with the previous item.

(d.3) SECEX shall treat inputs as physically incorporated if such inputs
are used in the production process and physically present in the
exported product. It is not necessary that the input be present in the
final product in the same form in which it entered the production
process.

(d.4) in determining the amount of a specific input that is consumed in
the production of the exported product, a "normal allowance for waste"
should be taken into account, and such waste should be treated as
consumed in the production of the exported product. The term "waste"
refers to that portion of the particular of a given input which does not
serve an independent function in the production process, is not consumed
in the production of the exported product (for reasons such as
inefficiencies), and is not recovered, used or sold by the same
manufacturer.

(d.5) on determining whether the claimed allowance for waste is
"normal", SECEX will take into account the production process, the
average experience of the industry in the exporting country, and other
technical factors, as appropriate. SECEX will take into account that an
important question is whether the authorities of the exporting country
have calculated reasonably the amount of waste, when such an amount is
intended to be included in the tax or duty rebate or remission.

**ANNEX III**

**GUIDELINES IN THE DETERMINATION OF SUBSTITUTION**

**DRAWBACK SYSTEMS AS EXPORT SUBSIDIES**

\(a\) Drawback systems can allow for the refund or drawback of import
charges on inputs which are consumed in the production process of
another product and where the export of this latter product contains
domestic inputs having the same quality and characteristics as those
substituted for the imported ones. Pursuant to item "i" of the
Illustrative List of Export Subsidies in Annex I, substitution drawback
systems can constitute an export subsidy to the extent that they result
in an excess drawback of the import charges levied initially on the
imported inputs for which drawback is being claimed..

\(b\) For purposes of subsidy investigations, SECEX will proceed in the
following manner to examine any substitution drawback system:

(b.1) Item "i" of the Illustrative List stipulates that home market
inputs may be substituted for imported inputs in the production of a
product for export provided such inputs are equal in quantity to, and
have the same quality and characteristics as, the imported inputs being
substituted. The existence of a verification system or procedure is
important because it enables the government of the exporting Member to
ensure and demonstrate that the quantity of exports for which drawback
is claimed does not exceed the quantity of similar products exported, in
whatever form, and that there is not drawback of import charges in
excess of those originally levied on the imported inputs in question.

(b.2) where it is alleged that a substitution drawback conveys a
subsidy, SECEX will first proceed to determine whether the government of
the exporting Member has in place and applies a system or procedure of
verification. Where such a system or procedure is determined to be
applied, SECEX will examine the system or procedures of verification to
establish if these are reasonable, effective for the purpose intended
and based on generally accepted commercial practices of the exporting
country. To the extent these procedures are determined to meet this test
and are effectively applied, no subsidy shall be presumed to exist. It
may be deemed necessary for SECEX to carry out, in accordance with
paragraph 1 of Article 40 of the Decree which regulates the application
of countervailing measures, certain practical tests to verify
information or to certify that the verification procedures are being
effectively applied.

(b.3) when there are no procedures of verification, or when they are not
reasonable, or yet, when the procedures exist and were considered
reasonable, but have not been actually applied or with effectively,
there may be a subsidy. In such situations it shall be necessary for the
exporting country to carry out a further examination based on the actual
transactions involved in order to determine if there have been excessive
payments. If SECEX deems it necessary, a further examination will be
carried out in accordance with the previous item.

(b.4) The existence of a substitution drawback provision under which
exporters are allowed to select particular import shipments on which
drawback is claimed should not of itself be considered to convey a
subsidy.

(b.5) An excess drawback of import charges in the sense of item "I" of
Annex I will be deemed to exist where governments paid interest on any
monies refunded under their drawback schemes, to the extent of the
interest actually paid or payable.

**ANNEX IV**

**DEVELOPING COUNTRIES MEMBERS**

Developing countries Members which are referred to in paragraph 12 of
Article 21 of the Decree which regulates the norms for the application
of countervailing measures, are the following:

\(a\) Least‑developed countries designated as such by the United
Nations, that are members of the World Trade Organization.

\(b\) Each of the following developing countries which are Members of
the WTO shall not be subject to the provisions of this Annex when GNP
per capita has reached \$1,000 per annum: Bolivia, Cameroon, Congo, Côte
d'Ivoire, Dominican Republic, Egypt, Ghana, Guatemala, Guyana India,
Indonesia, Kenya, Morocco, Nicaragua, Nigeria, Pakistan, Philippines,
Senegal, Sri Lanka and Zimbabwe.

**ANNEX V**

**LIST OF AGRICULTURAL PRODUCTS**

01 Products in Chapters 1 to 24 of the Harmonized System ("HS"), less
fish and fish products, plus

  ---- -------------------- ---------------- ------------------------------
  02   HS Code              2905.43          (mannitol)

       HS Code              2905.44          (sorbitol)

       HS Heading           33.01            (essential oils)

       HS Headings          35.01 to 35.05   (albuminoidal substances,
                                             modified starches, glues)

       HS Code              3809.10          (finishing agents)

       HS Code              3823.60          (sorbitol n.e.p)

       HS Headings          41.01 to 41.03   (hides and skins)

       HS Heading           43.01            (raw fur skins)

       HS Headings          50.01 to 51.03   (raw silk and silk waste)

       HS Headings          51.01 to 51.03   (wool and animal hair)

       HS Headings          52.01 to 52.03   (raw cotton, waste and cotton
                                             carded or combed)

       HS Heading           53.01            (raw flax)

       HS Heading           53.02            (raw hemp)
  ---- -------------------- ---------------- ------------------------------

The product description in round brackets are not necessarily
exhaustive. The valid descriptions are to be found in the Mercosur
Common Nomenclature.

**ANNEX VI**

**DOMESTIC SUPPORT: THE BASIS FOR EXEMPTION**

**FROM THE REDUCTION COMMITMENTS**

1\. Domestic support measures for which exemption from the reduction
commitments shall meet the fundamental requirement that they have no, or
at most minimal, trade distorting effects or effects on production.
Accordingly, all measures for which exemption is claimed shall conform
to the following basic criteria:

\(a\) the support in question shall be provided through a
publicly‑funded government programme (including government revenue
foregone) not involving transfers from consumers; and

\(b\) the support in question shall not have the effect of providing
price support to producers.

Besides the basic criteria, the measures shall meet the criteria and the
conditions relative to specific governmental policies, as follows:

2\. General Services

Policies in this category involve expenditures (or revenue foregone) in
relation to programmes which provide services or benefits to agriculture
or to the rural community. They shall not involve direct payments to
producers or processors. Such programmes, which include but are not
restricted to the following list, shall meet the general criteria
mentioned in item 1 and the conditions relative to specific policies in
the following cases:

\(a\) research, including general research, research in connection with
environmental programmes, and research programmes relating to particular
products.

\(b\) control of pest and disease, including general and
product‑specific pest and disease control measures, such as early
warning systems, quarantine and eradication;

\(c\) training services, including both general and specialist training
facilities.

\(d\) extension and advisory services, including the provision of means
to facilitate the transfer of information and the results of research to
producers and consumers.

\(e\) inspection services, including general inspection services and the
inspection of particular products, for health, safety, grading or
standardization purposes.

\(f\) marketing and promotion services, including market information,
advice and promotion relating to particular products but excluding
expenditure for unspecified purposes that could be used by sellers to
reduce their selling price or confer direct economic benefit to
purchasers; and

\(g\) infrastructural services, including: electricity reticulation,
roads or other means of transport, market and dock facilities, water
supply facilities, dams and drainage schemes, and infrastructural works
associated with environmental programmes. In all cases the expenditure
shall be directed to the provision or construction of capital works only
and will exclude the subsidized provision of on‑farm facilities other
than the reticulation of generally available public utilities. It shall
not include subsidies to inputs or operating costs, or preferential user
charges.

3\. Public stockholding for food security purposes

Expenditures (or revenue foregone) in relation to the accumulation and
holding of stocks of products which form an integral part of a programme
of food security identified in national legislation. This may include
governmental aid to private storage of products as part of such
programme.

The volume and accumulation of such stocks shall correspond to
predetermined targets related solely to food security. The process of
stock accumulation and disposal shall be financially transparent. The
purchase of food by the government shall be made at current market
prices and sales from food security stocks shall be made at no less than
the current domestic market price for the product and quality in
question.

Governmental stockholding for food security purposes in developing
countries whose operation is transparent and conducted in accordance
with officially published objective criteria shall be considered to be
in conformity withe the provisions of this item, including programmes
under which stocks of foodstuffs for food security purposes are acquired
and released at administered prices, provided that the difference
between the price of acquisition and the price of external reference is
accounted for in the AMS, as determined by Annex 3 of the Agreement on
Agriculture.

4\. Domestic food aid

Expenditures (or revenue foregone) in relation to the provision of
domestic food aid to section of the population in need.

Eligibility to receive food aid shall be subject to clearly defined
criteria related to nutritional objectives. Such aid shall be in the
form of direct provision of food to those concerned or the provision of
means to allow eligible recipients to buy food either at market or at
subsidized prices. Food purchases by the government shall made be at
current market prices and the financing and administration of the aid
shall be transparent.

For purposes of items 3 and 4 of this annex, the provision of foodstuffs
at subsidized prices with the objective of meeting food requirements of
the rural and urban poor in developing countries on a regular basis at
reasonable prices shall be considered in conformity with the provisions
of this paragraph.

5\. Direct payments to producers

Support provided through direct payments (or revenue foregone, including
payments in kind) to producers for which exemption from reduction
commitments is claimed shall meet the basic criteria established in item
1, plus specific criteria applying to individual types of direct payment
as set out in items 6 through 13. Where exemption from reduction is
claimed for any existing or new type of direct payment other than those
specified in items 6 through 13, it shall conform to criteria specified
in items "b" to "e" of item 6, in addition to the general criteria
established in item 1.

6\. Decoupled income support

\(a\) Eligibility for such payments shall be determined by clearly
defined criteria such as income, status as a producer or landowner,
factor use or the level of production in a defined and fixed base
period.

\(b\) The amount of such payments in any given year shall not be related
to , or based on, the type or volume of production (including livestock
units ) undertaken by the producer in any year after the base period.

\(c\) The amount of such payments in any given year shall not be related
to, or based on, the prices, domestic or international, applying to any
production undertaken in any year after the base period.

\(d\) The amount of such payments in any given year shall be related to,
or based on, the factors of production employed in any year after the
base period.

\(e\) No production shall be required in order to receive such payments.

7\. Government financial participation in income insurance and income
safety‑net programmes

\(a\) Eligibility for such payments shall be determined by an income
loss, taking account only income derived from agriculture, which exceeds
30% of average gross income or the equivalent in net income terms
(excluding any payments from the same or similar schemes) in the
preceding three year period or a three year average based on the
preceding five year period, excluding the highest and lowest entry. Any
producer meeting this condition shall be eligible to receive the
payments.

\(b\) The amount of such payments shall compensate for less than 70% of
the producer's income loss in the year the producer becomes eligible to
receive the assistance.

\(c\) The amount of any such payments shall related solely to income; it
shall not relate to the type or volume of production (including
livestock units) undertaken by the producer; or to the prices, domestic
or international, applying to such production; or to the factors of
production employed.

\(d\) Where a producer receives in the same year payments described in
this item and in item 8 (relief from natural disasters), the total of
such payments shall be less than 100% of the total loss of the producer.

8\. Payments (made either directly or by way of government financial
participation in crop insurance schemes) for relief from natural
disasters.

\(a\) Eligibility to receive such payments shall arise only following a
formal recognition by government authorities that a natural or like
disaster ( including disease outbreaks, pest infections, nuclear
accidents, and war on the territory of the Member concerned) has
occurred or is occurring; and shall be determined by a production loss
which exceeds thirty per cent of the average of production in the
preceding three‑year period or a three‑year average based on the
preceding five‑year period, excluding the highest and the lowest entry.

\(b\) Payments made following a disaster shall be applied only in
respect of losses of income, livestock (including payments in connection
with the veterinary treatment of animals), land or other production
factors due to the natural disaster in question.

\(c\) Payments shall compensate for not more that the total cost of
replacing such losses, and shall not require or specify the type or
quantity of future production.

\(d\) Payments made during a disaster shall not exceed the level
required to prevent or alleviate further loss as defined in the criteria
established in "b" of this item.

\(e\) Where a producer receives in the same year payments described in
this item and in the previous item (income insurance and income
safety‑net programmes), the total of such payments shall be less than
100% of the total loss of the producer.

9\. Structural adjustment assistance provided through producer
retirement programmes

\(a\) Eligibility for such payments shall be determined by reference to
clearly defined criteria in programmes designed to facilitate the
retirement of persons engaged in marketable agricultural production, or
their movement to non‑agricultural activities.

\(b\) Payments shall be conditional upon the total and permanent
retirement of the recipients from marketable agricultural production.

10\. Structural adjustment assistance provided through resource
retirement programmes

\(a\) Eligibility for such payments shall be determined by reference to
clearly defined criteria in programmes designed to remove land or other
resources, including livestock, from marketable agricultural production.

\(b\) Payments shall be conditional upon the retirement of land from
marketable agricultural production for a minimum of three years, and in
the case of livestock, on its slaughter or definitive permanent
disposal.

\(c\) Payments shall not require or specify any alternative use for such
land or other resources which involves the production of marketable
agricultural products.

\(d\) Payments shall not be related to either the type or quantity of
production or to the prices, domestic or international, applying to
production undertaken using the land or other resources remaining in
production.

11\. Structural adjustment assistance provided through investment aids

\(a\) Eligibility for such payments shall be determined by reference to
clearly defined criteria in government programmes designed to assist in
the physical or financial restructuring of a producer operations in
response to objectively demonstrated structural disadvantages.
Eligibility for such programmes may also be based on a clearly defined
government programme for the reprivatization of agricultural land.

\(b\) The amount of such payments in any given year shall be related to,
or based on, the type or volume of production (including livestock
units), undertaken by the producer in any year after the base period,
except for that provided for in by "e" below.

\(c\) The amount of such payments in any given year shall not be
related, or based on, the prices, domestic or international, applying to
any production undertaken in any year after the base period.

\(d\) Payments shall be given only for the period of time necessary for
the realization of the investment in respect of which they are provided.

\(e\) The payments shall not mandate or in any way designate the
agricultural products to be produced by the recipients except to require
them not to produce a particular product.

\(f\) The payments shall be limited to the amount required to compensate
for the structural disadvantage.

12\. Payments under environmental programmes:

\(a\) Eligibility for such payments shall be determined as part of a
clearly defined government environmental or conservation programme and
be dependent on the fulfilment of specific conditions under the
government programme, including conditions related to production methods
or inputs.

\(b\) The amount of payment shall be limited to the extra costs or loss
of income involved in complying with the government programme.

13\. Payments under regional assistance programmes

\(a\) Eligibility for such payments shall be limited to producers in
disadvantaged regions. Each such region must be a clearly designated
contiguous geographical area with definable economic and administrative
identity, considered as disadvantaged on the basis of neutral and
objective criteria clearly spelt out in law or regulation and indicating
that the region's difficulties arise out of more than temporary
circumstances;

\(b\) The amount of such payments in any given year shall not be related
to, or based on, the type or volume of production (including livestock
units), undertaken by the producer in any year after the base period
other than to reduce that production;

\(c\) The amount of such payments in any given year, shall not be
related to, or based on, the prices, domestic or international, applying
to any production undertaken in any year after the base period;

\(d\) Payments shall be available only to producers in eligible regions
but generally available to all producers within such regions;

\(e\) Where related to production factors, payments shall be made at a
digressive rate above a threshold level for the factor concerned;

\(f\) The payments shall be limited to the extra costs or loss of income
involved in undertaking agricultural production in the prescribed area.