./.WORLD TRADE
ORGANIZATIONG/SCM/Q3/LCA/7
19 August 2002
(02-4498)
Committee on Subsidies
and Countervailing MeasuresOriginal:  English
SUBSIDIES
Requests Pursuant to Article 27.4 of the Agreement
on Subsidies and Countervailing Measures
Replies by ST. LUCIA to Follow-Up Questions
Posed by UNITED STATES1
The following communication, dated 19 August 2002, has been received from the Permanent
Mission of the St. Lucia.
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Fiscal Incentives Act No. 15 of 1974
Q1. Under this programme, local value added is defined as the amount realized from the
sales of the product after subtracting, among oth er things, the cost of imported raw materials,
components, parts of components, fuels and services .  We seek clarification, therefore, whether
the use of domestically sourced raw materials,  components and parts determines, in any way,
the duration of the incentives provided under this programme.
Reply
With respect to the continuing concerns expressed by the US regarding the local content
requirements under this programme we wish to reassure Members, even at the risk of belabouring thepoint, that no incentive is provided for the use of domestically sourced raw materials components or
parts over imported products.  No supplier or producer receives any benefit from the Government or
any agency of the Government for supplying or procuring local goods for any local manufacturing
process thereby creating a more favourable climate for locally obtained raw materials over similar
materials if imported.
As further indication that there is not inducement given to the enterprise to favour domestic
over imported inputs, approved enterprises are exempted from import duty on all inputs during the tax
holiday period (See Fiscal Incentives Act No. 15 of 1974 Section 7(1) – (2))
The issue is one of nomenclature.  ‘Local value added’ does not fall within the accepted
definition of local content requirements since the legislation is applied in accordance with domestic
norms and practices.  The suggestion of a legislative arithmetical formula for calculation of benefits –
which appears to underpin US concerns - is not applied in practice.  The provision has essentially
                                                     
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fallen into desuetude and benefits are, in fact, conferred on the basis of the prospective contribution of
the company to economic growth and development in terms of employment creation.
We are fully cognisant of the fact that the ex tension applied for is limited to the specified
programmes as covered by Article 27.4 of the SC M Agreement and the Doha Ministerial Decision.
That is to say, limited to subsidies falling within  Article 3.1(a) of the SCM Agreement.  Our request
does not extend to the provisions of Article 3.1(b) of the SCM Agreement prohibiting the use of
subsidies contingent, whether solely or as one of several other conditions, upon the use of domestic
over imported goods.  We recognise the continuing binding nature of the requirements of
Article 3.1(b) in the implementation of our Fiscal Incentives legislation and programme.
Q2. Please explain whether this programme coul d be modified to eliminate the local value
added requirement.
Reply
As indicated in our response to US question 1, the Government does not apply a local value
added requirement in such a manner as to provide an incentive for the use of domestic over imported
goods.  A local value added rule is applied with respect to services - in terms of employment creation
- and we view this as consistent with our WTO obligations.  As such, modification of the programme,
in light of concerns raised, would be to effect a change in nomenclature to provide greater clarity to
Members.  Legislative amendment – which is the only process through which this could be achieved –is a time consuming mechanism and, therefore, not a practicable option for modification of the
programme before the end of year 2002.
Significantly, whilst there are no immediate plans to amend the existing legislation the
Government is considering a full review of our Fisc al Incentives programmes in order to reflect the
nation's current development thrust.
Q3. Please provide the implementing legislation, and any relevant amendments, under this
programme.
Reply
Please note that copies of all relevant legislation have been provided to the SCM Committee.
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