RESTRICTEDWORLD TRADE
ORGANIZATIONG/SCM/W/511
1 May 2002
(02-2481)
Committee on Subsidies
and Countervailing MeasuresOriginal:  English
IMPLEMENTATION-RELATED ISSUES REFERRED
TO THE COMMITTEE BY MINISTERS
Replies to Questions from the UNITED STATES to BRAZIL1 Regarding Tiret 80 Proposals
Involving ASCM Article 14 and De Minimis2
The following communication, dated 29 April 2002, has been received from the Permanent
Mission of Brazil.
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In this document Brazil provides answers to questions posed by the United States referring to
the proposals circulated by Brazil in document G/SCM/W/464, as well as to the Brazilian replies toquestions posed by several Members circulated in document G/SCM/W/483, specifically in
connection with Article 14 of the Agreement on Subsidies and Countervailing Measures.
1. That the “chapeau” of Article 14 of the SCM be interpreted to require Members to
include in their national legislation or impl ementing regulation any methods used by the
investigating authorities to calculate the amount  of the benefit of the recipient (G/SCM/W/464,
para. 4 & 5).
2. That the calculation of the amount of the benefit be based on the benefit to the exporter
(G/SCM/W/464, para. 4 & 6).
Please provide a concrete example in which “the amount of the subsidy is calculated by
product, but not on the basis of the benefit co nferred to the producer/exporter of that same
product”.
Reply
In Brazil's view, for the purpose of applying countervailing measures, investigating
authorities should calculate the amount of the subsidy in terms of the benefit conferred to the recipient
(producer/exporter), and do so on a per-product unit basis.
With regard to the US request for concrete examples, it is sufficient to say that presently some
Members' legislations establish that the amount of the subsidy shall be calculated on the basis of its
cost for the Government, and not on the basis of the subsidy conferred to the recipient. In our view,
this type of provision should be explicitly ruled out in the SCM Agreement.
                                                     
1 G/SCM/W/507
2 G/SCM/W/464, G/SCM/W/465, G/SCM/W/483.G/SCM/W/511
Page 2
3. Expenses incurred by the exporting countr y in order to obtain the subsidy (e.g.
administrative charges) should be deducted from  the amount of the subsidy.  Export taxes that
are applicable to the operation object of the subsidy shall also be deducted from the amount of
the subsidy (G/SCM/W/464, para. 7(e)).
What would the criteria be for determining whether an export tax is “intended to offset
the level of the subsidy”?
Reply
In Brazil's view, when an export tax is levied on a product whose producer has been
demonstrated to benefit from an actionable subsidy, the export tax should be deducted from the total
amount of the benefit to the exact extent that it offsets the subsidy conferred.
Notwithstanding the need for further discussion on the relevant issue raised by the US
delegation, Brazil considers that the essential requirement for the deduction to be made should be thatthe exporting Member or the company (ies) under investigation clearly demonstrate that the export tax
offsets the subsidy conferred and indicate the exact extent to which it does so.
Moreover, in the course of the investigation, authorities should verify whether the export tax
and the subsidy refer exactly to the same product and whether the collection of the duty and thereceipt of the benefit occurred in the same period.
Insofar the legislations of some Members already provide for the abovementioned deduction,
their contribution to the debate would be highly appreciated by Brazil.
4. For subsidies not granted based on quantities produced, exported or transported, the
subsidy amount shall be calculated by determin ing the corresponding prop ortion of the subsidy
amount that is related to the production, sale or export of the good (G/SCM/W/464, para. 7(f)).
What specific criteria would be used to determine that a particular subsidy is “related
to” a particular product or market?
Reply
As already mentioned in Brazil's previous answers, where the concession of the subsidy is not
tied to the quantity produced, exported or transported, the amount of the per-product unit subsidy shall
be calculated by dividing the total amount of the subsidy by the quantity produced, exported ortransported.
It is important to note that the proposed methodology requires that, in the course of the
investigation, authorities determine the procedures fo llowed for the concession of the subsidy, such as
whether it is tied to a particular product that has been produced, exported or transported. Authoritiesshould also examine some characteristics of the company (ies) under investigation, such as whether it
produces one single product; whether the product under investigation is among the products benefited
by the subsidy; and whether sales of the product under investigation are directed to the domestic
and/or foreign market.
5. In case the subsidy is granted to acquire capital goods, the amount of the actionable
subsidy shall be calculated according to the ru les for depreciation of the good in the industry
concerned and with the volume of production, sale or export of the product (G/SCM/W/464,
para. 7(g)).G/SCM/W/511
Page 3
If a government forgave a particularly large debt which was not necessarily related to
the acquisition of fixed assets, is Brazil suggesting that the benefit from this debt forgiveness
could be attributable entirely to the year in which it was granted?
Reply
Brazil's proposal relates to subsidies conferred for the acquisition of capital goods or other
fixed assets. Therefore the situation mentioned by the US is not related to the subject referred to in our
proposal.
The objective of the Brazilian proposal is simply to clarify Article 14 with regard to the
calculation of the amount of the subsidy in terms of the benefit conferred to the producer/exporter of a
particular product. In our view further discussion on this issue is required. Brazil would highly
appreciate contributions to the debate from other Members, especially ideas on other possible
methodologies for the calculation of the amount of the subsidy.
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