RESTRICTED
WORLD TRADE G/SCM/Q2/IDN/9
23May1997
ORGANIZATION(97-2162)
Original: English Committee onSubsidies
andCountervailing Measures
SUBSIDIES
Replies toQuestions posed byJAPAN1Concerning
theUpdating Notification ofINDONESIA2
Thefollowing communication, dated 13May1997, hasbeenreceived from thePermanent
Mission ofIndonesia.
_________________
1. Tax-holiday scheme
Question
Japan asked Indonesia toprovide information onthisscheme atthereview meeting. Could
Indonesia provide information onthecurrent situation ofthescheme? Isthescheme going to
benotified soon?
Answer
Theprovision determining forwhatconstitutes qualified industries isbeing prepared. Indonesia
isscheduled tosubmit newandfullnotifications pursuant totheSCM Agreement assoonastheyare
completed.
2. "The Granting ofImport Duty Relief toCertain Parts andAccessories ofMotor Vehicles for
theAssembling and/or Manufacturing ofMotor Vehicles" and"Development oftheNational
Automobile Industry"
Question
(i) Arethetwomeasure related toeachother? Could abeneficiary ofonemeasure
beabeneficiary oftheother measure?
1G/SCM/Q2/IDN/7
2G/SCM/N/16/IDNG/SCM/Q2/IDN/9
Page2
Answer
They areseparate programmes. They are"related" inthesense thattheyshare thepolicy
objective ofsupporting development ofthedomestic automotive industry. Companies which meet
theNational Carcriteria aresubject tothelatter measure; those which donotaresubject totheformer
measure.
Question
(ii) According tothePresidential Decree No.42,thecomplete vehicles imported from
Korea areexempted from theimposition oftheimport dutyandtheluxury tax.
DoesIndonesia recognize thatthese exemptions constitute subsidies inthemeaning
oftheSCM Agreement?
Answer
Yes.
Question
Thisbeing thecase, could Indonesia explain howthemeasure could bejustified
inthecontext ofconsistency withArticle 1oftheGATT?
Answer
Themeasure doesnotviolate GATT Article Ibecause itdoesnotdirect recipients ofthesubsidy
toimport automobiles fromanyparticular country. Private parties designated asnational carcompanies
arefreetoimport qualifying automobiles from anycountry.
Question
(iii) Themeasure mentioned inthenotification isrecognized asthesame measure as
theonethatIndonesia hadnotified under Article 5oftheTRIMs Agreement and
withdrew recently.
InJapan 'sviewthere isnoconflict toconsider ameasure asasubsidy andaTRIM
atthesame time. Moreover, Japan considers thattheSCM Agreement cannot
beusedtojustify aviolation under theTRIMs Agreement. Could Indonesia clarify
itsviewconcerning these matters?
Answer
Indonesia doesnotshare Japan'sview. Themeasure isasubsidy thatIndonesia ispermitted
tomaintain because Indonesia isadeveloping country. Themeasure isnotaTRIM.
Question
(iv) Could Indonesia explain whyitneeds toapply different conditions forthecars
produced bythe"Pioneer Companies" from those produced byother companies
interms ofimposition ofimport dutyandluxury tax?G/SCM/Q2/IDN/9
Page3
Answer
Indonesia needs toprovide subsidy measures toPioneer Companies inorder topromote the
overall development ofIndonesia 'sdomestic autoindustry.
Question
Could Indonesia explain therationale ofthemeasure andtheconsistency ofthe
measure withArticles I,IIIandXoftheGATT?
Answer
GOIconsiders thatthisCommittee isnottheappropriate forum inwhich toraiseandtoreply
tothisissue, however forthepurpose oftransparency andtoenlighten theJapanese delegation, we
would liketoexplain asfollows:
Themeasure isconsistent withGATT Article Ibecause theexemptions, based onthe
satisfaction oflocal-content requirements forIndonesian companies designated as"pioneer"
companies, constitute "financial contribution" within themeaning ofSCM Article 1andare
"specific" within themeaning ofArticle 2.
ByvirtueofGATT1994ArticleIII:8(b),providingasubsidyonlytodomesticproducers
ofautomobiles doesnotviolate thenational treatment obligation ofGATT 1994 Article III.
Themeasure isconsistent withArticle Xbecause Indonesia isadministering itina
uniform, impartial andreasonable manner, consistent withGATT 1994 Article X:3(a).