./.WORLD TRADE
ORGANIZATIONG/SCM/W/516
20 June 2002
(02-3430)
Committee on Subsidies
and Countervailing MeasuresOriginal:  English
IMPLEMENTATION RELATED ISSUES REFERRED
TO THE COMMITTEE BY MINISTERS
Questions for BRAZIL from CANADA1
The following communication, dated 18 June 2002, has been received from the Permanent
Mission of Canada.
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A. THE CHAPEAU OF ARTICLE 14
Brazil is proposing that the chapeau of Article 14 should be amended to provide, among other
things, that the amount of subsidy should be calculated on a "per exporter/producer basis".  However,
later on, Brazil is proposing rules for the use of sampling in countervailing duty investigations which,by its very nature, would result in some exporters/producers not receiving their own subsidy rate.
This seems to set-up some contradictory obligati ons. Could Brazil explain how these two proposals
could be reconciled?
B. A
DDITIONAL GUIDELINES TO ARTICLE 14
In Brazil's proposed subparagraph (g), reference is made to "the rules for the depreciation of
the good in the industry concerned...".  Could Brazil clarify the precise nature of the "rules" that it hasin mind?  Is Brazil referring to depreciation rules used for income tax purposes in the exporting
country or to GAAP (generally accepted accounting principles) in the country of export?
(ii) Appropriate Denominator for the Calculation of Subsidy Amount
In Example 3, it appears that Brazil is allocating an export subsidy received in 1987 to
subsidize exports to exports made in 1995, the period of investigation of the countervailing duty
investigation.  The allocation of the subsidy is being made on the basis of the useful life of assets.
However, it is not clear from this example why Brazil is allocating this subsidy over time rather than
expensing it in the year of receipt.  It would be useful if Brazil could explain why this was done andwhether Brazil has criteria as to when a subsidy should be expensed rather than allocated over time.  It
is understood that Brazil will allocate a subsidy over time when the use of the subsidy is for the
acquisition of capital goods, but in this example, there is no apparent reason for the allocation.  Please
explain.
                                                     
1 Concerning document G/SCM/W/516.G/SCM/W/516
Page 2
III.  PROPOSALS RELATED TO " DE MINIMIS "
We continue to find this proposal very difficult to understand. It would be useful if  Brazil
could provide some concrete examples of what it is  proposing in the context of both a retrospective
and prospective duty enforcement system.
For example, it would be interesting to obtain the Brazilian response to the following scenario which
could arise in the Canadian prospective system of duty enforcement:
Canada conducts a countervailing duty investigation in respect of a certain chemical product
from Country A and finds that there is an export subsidy and the amount of the subsidy is not de
minimis  (i.e. the amount of subsidy is greater than 1% expressed as a percentage of the value of the
subject goods exported during the period of investigation). An injury finding is made and definitiveduties are put in place.  The amount of subsidy for duty enforcement purposes is established at $10.00
per tonne.  There are two importers in Canada of the chemical product.  Importer X purchases in very
large quantities with few importations and, therefore, receives special volume pricing of $800 per
tonne.  Importer Y purchases in smaller quantities but in more frequent importations so its price is
$1100 per tonne.  However, over the course of a year, both importers end up purchasing the sameoverall quantity.  On a percentage basis in respect of each importation, the subsidy in respect of
Importer X is not de minimis  while the subsidy in respect of Importer Y is de minimis .  Therefore, is
Brazil suggesting that we should not collect any countervailing duties on importations made by
Importer Y, since the subsidy is de minimis  in relation to the value of each importation?
IV.  PROPOSALS RELATED TO REVIEW PROCEDURES
In paragraph 1, the Brazil proposes that the "standing" test in SCM Article 11.4 be expressly
linked to the initiation of expiry reviews as set fo rth in Article 21.3 of the SCM Agreement.  In this
context, could Brazil explain whether the authorities could initiate an expiry review on their owninitiative when domestic industry has brought an application for a review but failed to demonstrate
that they had satisfied the standing requirements?
In paragraph 4, Brazil proposes that the SCM Agreement should contain more detail
regarding the conduct of expedited reviews, particularly the time frame for the completion of suchreviews.  In this regard, Brazil makes reference to Article 9.5 of the Anti-dumping Agreement.  It
would be of interest if Brazil could also indicate if the other conditions outlined in Article 9.5
regarding the eligibility for an expedited review should also be adopted in the SCM Agreement for
purposes of the conduct of expedited reviews.  Also, Article 9.5 provides for the suspension of the
levying of anti-dumping duties while an expedited review is being carried out.  Would Brazil envisage
the same procedure in respect of expedited reviews for countervailing duty purposes?
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