RESTRICTEDWORLD TRADE
ORGANIZATIONG/SCM/Q2/PAN/5
13 April 1999
(99-1460)
Committee on Subsidies
and Countervailing MeasuresOriginal:  Spanish
SUBSIDIES
Replies to Questions from Mexico1, the United States2, and Japan3
Regarding the New and Full Notification of Panama4
The following communication, dated 19 March 1999, has been received from the Permanent
Mission of Panama.
_______________
QUESTIONS FROM MEXICO
Question
1. In the case of programme A, Granting of Ta x Credit Certificates (CAT), what goods are
considered "non-traditional"?  (page 1)
Reply
1. In the case of the programme for the Granting of Tax Credit Certificates (CAT),
non-traditional goods are considered to be those wholly or partly produced or processed in Panama, as
defined by the 1996 Harmonized System, with the following exceptions:
(a) Cane sugar;
(b) bananas and banana purée:
1. bananas;
2. banana purée;
(c) honey and cane molasses:
1. sugarcane honey;
2. cane molasses;
(d) cocoa beans;
(e) raw coffee (beans);(f) shrimps, fresh, chilled or frozen;
(g) bovine meat, fresh, chilled or frozen
5;
(h) bovine cattle leather, not tanned;
(i) wooden logs;
(j) bovine cattle, swine and horses:
                                                     
1G/SCM/Q2/PAN/3.
2G/SCM/Q2/PAN/2.
3G/SCM/Q2/PAN/4.
4G/SCM/N/38/PAN.
5Pursuant to Law No. 4 of 19 January 1993, bovine meat, fresh, chilled or frozen, is considered
non-traditional goods.G/SCM/Q2/PAN/5
Page 2
1. bovine cattle, other than pure-bred;
2. swine, other than pure-bred;
3. horses, other than pure-bred;
(k) fish flour;
(l) other oils of fish and marine mammals;(m) scrap metal;
(n) hawk-bill turtles, unworked;
(o) extracts of (citrus) fruit;
(p) petroleum and petroleum products;
(q) sales under bilateral, free or preferential trade agreements;
(r) minerals, metals and metal products.
Legal basis:  Articles 1 and 2, Chapter 1 of Law 108 of 30 December 1974, regulated by
Decree No. 5 of 8 February 1991, on Export Incentives and Law No. 4 of 19 January 1993.
QUESTIONS FROM THE UNITED STATES
The following is a question regarding the notification of Panama made pursuant to
Article XVI:1 of the GATT and Article 25 of the Agreement on Subsidies and Countervailing
Measures, in document G/SCM/N/38/PAN.
Question
1. Under "Granting of Tax Certificates" (CAT),  "non-traditional goods" is the term used
to describe the goods for which producers are eligible to receive benefits.  Please explain the
term "non-traditional goods" in more detail.
Reply
1. In the case of the programme for the Granting of Tax Credit Certificates (CAT),
non-traditional goods are considered to be those wholly or partly produced or processed in Panama, as
defined by the 1996 Harmonized System, with the following exceptions:
(a) Cane sugar;
(b) bananas and banana purée:
1. bananas;
2. banana purée;
(c) honey and cane molasses:
1. sugar cane honey;
2. cane molasses;
(d) cocoa beans;
(e) raw coffee (beans);
(f) shrimps, fresh, chilled or frozen;(g) bovine meat, fresh, chilled or frozen
6;
(h) bovine cattle leather, not tanned;
(i) wooden logs;
(j) bovine cattle, swine and horses:
1. bovine cattle, other than pure-bred;2. swine, other than pure-bred;
3. horses, other than pure-bred;
                                                     
6Pursuant to Law No. 4 of 19 January 1993, bovine meat, fresh, chilled or frozen, is considered
non-traditional goods.G/SCM/Q2/PAN/5
Page 3
(k) fish flour;
(l) other oils of fish and marine mammals;
(m) scrap metal;
(n) hawk-bill turtles, unworked;
(o) extracts of (citrus) fruit;(p) petroleum and petroleum products;
(q) sales under bilateral, free or preferential trade agreements;
(r) minerals, metals and metal products.
Legal basis:  Articles 1 and 2, Chapter 1 of Law 108 of 30 December 1974, regulated by
Decree No. 5 of 8 February 1991, on Export Incentives and Law No. 4 of 19 January 1993.
QUESTIONS FROM JAPAN
Granting of Tax Credit Certificates (CAT)Question
1. It is understood that Panama considers that the CAT constitutes an export subsidy
within the meaning of Article 3.1(a) of the SC M Agreement and therefore it would eliminate the
incentive as of 2003.  The programme, however, requires the enterprise to show a minimum
share of 20 per cent in national content and national value added and in this regard the CATalso seems to constitute subsidies contingent  upon the use of domestic over imported goods
within the meaning of Article 3.1(b) of the SC M Agreement.  Does Panama confirm that the
CAT will be eliminated by the end of this year in accordance with Article 27.3 of the
SCM Agreement?
That not being the case, can Panama demonstrate that the CAT does not constitute
subsidies within the meaning of Article 3.1(b) of the SCM Agreement?
Reply
1. Panama confirms that the CAT will be eliminated in accordance with what was agreed in its
accession negotiations.  Appropriate legislative measures have been taken to satisfy Article 13 ofLaw No. 28 of 20 June 1995 "Adopting measures for the universalization of tax incentives to
production and providing for other measures", and Article 31 of Executive Decree No. 274 of
29 December 1995 "Regulating Law 28 of 20 June 1995, regarding the universalization of tax
incentives".
Article 31 of Executive Decree No. 274 establishes that:  in accordance with Law 28 of
20 June 1995, until 31 December 2000, natural and legal persons exporting non-traditional goods
which are wholly or partly produced or processed in Panama may apply for Tax Credit Certificates
(CAT) equivalent to 20 per cent of the national value added of the exported goods.
From the 1 January 2001 until 31 December 2002, exporters of non-traditional goods will still
be entitled to ask for Tax Credit Certificates, but the value of the CAT will be reduced to 15 per cent
of the national value added of the exported goods.G/SCM/Q2/PAN/5
Page 4
Question
2. Is the CAT the only specific subsidy curren tly maintained by Panama which is to be
notified under the SCM Agreement?
Reply
2. The Tax Credit Certificate (CAT) is the only prohibited specific subsidy currently maintained
by Panama which has to be notified under the World Trade Organization's SCM Agreement.
__________