RESTRICTED
WORLD TRADE G/SCM/Q2/CYP/7
23July1997
ORGANIZATION(97-3112)
Original: English Committee onSubsidies
andCountervailing Measures
SUBSIDIES
Replies toQuestions posed byARGENTINA, JAPAN andtheUNITED STATES1
Regarding theNewandFullNotification ofCYPRUS2
Thefollowingcommunication,dated17July1997,hasbeenreceivedfromthePermanentMission
ofCyprus.
_______________
Questions from Argentina
Q1. Cyprus hasnotified aidgranted totheexport ofbulk wine, dried grapes (raisins),
groundnuts andpigmeat.
Q1.1. What willbetheduration oftheprogrammes?
Q1.2. Does Cyprus have atimetable tophase outthese export subsidies?
Answer
A1. Cyprus hasundertaken export subsidy commitments foragricultural products initsschedule
CVII withtheWTO amounting toC£8.474 million in1995; these include wine alcohol andother
grapeproductsamountingtoC£1.327million,andpigmeatforanamountofC£0.589million.Subsidies
forgroundnuts amounting toC£62,000 werepaidin1995butwereapproved andconcerned year1993.
A1.1 Export subsidies commitments foragricultural products willbereduced progressively from
thecommited levelofC£8.474 million in1995 toC£6.599 million by2004.
A1.2 Nospecific timetable hasbeenscheduled forthismatter; itwillbedecided uponinthefuture.
Q2. With respect totheprogramme designed toimprove thecompetitiveness oftheclothing
industry, canCyprus specify thecriteria which thecompanies must fulfil inorder toqualify for
aid?
1G/SCM/Q2/CYP/2, G/SCM/Q2/CYP/4, G/SCM/Q2/CYP/3
2G/SCM/N/3/CYP-G/SCM/N/16/CYPG/SCM/Q2/CYP/7
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A2. TheGovernment oftheRepublic ofCyprus hasdecided togrant anamount ofC£694,000 to
theAssociation ofClothing Manufacturers fortheestablishment ofaresource centre fortheclothing
industry. Thegrant willcover capital expenditure andpartoftherunning expenses forthefirst5years
ofitsoperation.
Itisexpected thatafterthefifthyearofitsoperation thecentre willbecome self-sufficient and
abletocover itsownexpenditure frommembership subscriptions andfeescharged forservices rendered.
Theresource centre, which wasestablished inJune1996, withtheaimofassisting theclothing
sector toregain itscompetitiveness, willeventually havethree departments:
(a) fashion
(b) technical, and
(c) marketing andwillprovide consultancy services tothelocalindustry.
Advice willbegiven onthelatest trends, along withmarket-related information. There willalsobe
afullycomputer-aided design section andalibrary. Atalaterstage itisexpected thatthecentre will
offer quality control services aswell.
Anyclothing industrialist willbeabletosubscribe tothecentre iftheysowishwithout any
specific criteria. Subscribers willbeabletoobtain information from thecentre atlower ratesthan
non-members.
Q3. With respect totheprogramme fortheestablishment ofindustrial estates, could Cyprus
specify thedateonwhich itwillend?
A3. Theestablishment andoperation ofIndustrial Estates isalong-term policy oftheMinistry which
isnotenvisaged tobeterminated asthere areconstant needs forlocation andrelocation ofindustrial
units. Decisions concerning thecreation ofnewestates aremade from timetotime, depending on
theneeds.
Q4. Intheprogramme ofassistance tomanufacturing industries toestablish pollution control
systems, doesCyprus consider thatitwould befulfilling therequirements ofArticle 8.2(c) ofthe
Subsidies Agreement?
A.4 TheGrant Scheme which provides financial assistance tofirms ofthemanufacturing sector
toinstall pollution control systems iscompatible withArticle 8.2(c) oftheAgreement onSubsidies
andCountervailing Measures.
More specifically, there isfullcompliance withprovisions (i)and(ii)oftheArticle.
Asregards provision 8.2.C.ii, itisclarified thatthegrant provided under theScheme islimited
to30%fortheinitial C£250,000 andcould beextended to(subject totheapproval ofthecompetent
Ministerial Committee) anadditional 15%fortherestoftherelevant cost.
With relation totheprovision (iv)ofArticle 8.2(c) thisScheme ismore strict andisdirectly
related toafirm'sprescribed reduction levelofnuisance andpollution.
TheScheme isavailable toallfirms engaged inmanufacturing sector activities.G/SCM/Q2/CYP/7
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Q5. Various programmes encouraging exports have been notified asgeneral subsidies.
5.1 CanCyprus specify ifitwillrespect thetime-limit setdown inArticle 27.4oftheSubsidies
Agreement fortheelimination ofthesubsidies?
A5.1 Cyprus willrespect theprovisions setdown inArticle 27.4oftheSubsidies Agreement for
theelimination ofsubsidies. Wehave, however, some doubts astowhether some oftheexport
promotion programmes fallwithin thedefinition ofasubsidy orwhether theyarespecific under the
Agreement onSubsidies andCountervailing Measures. Theprogrammes encompassing incentives,
grants orfinancial assistance, which arenotconsidered assubsidies arebeing notified fortransparency
purposes.
Q5.2 Does Cyprus haveatimetable tophase outthesubsidies, inaccordance withArticle 27.4
oftheSubsidies Agreement?
A5.2 Cyprus doesnothaveatimetable tophase outthe"subsidies".
Q5.3 DoesCyprus consider itnecessary tomaintain anyprogramme ofencouragement toexports
inforce beyond theeight-year limit specified bytheAgreement?
A5.3 Cyprus, asmany othercountries, considers itnecessary tomaintain acertain generic programme
forthepromotion ofexports.
Questions from Japan
1. B.(v) Resource Centre fortheClothing Industry, B.(vi) Encouragement ofEstablishment
orExpansion ofManufacturing Industries inRural Areas, B.(vii) Establishment of
Industrial Estates andB.(x) Duty Relief forSelected Industries
1. Could Cyprus explain thedetails ofeligibility foreachprogramme?
2. Dothese programmes constitute anyoftheprohibited subsidies within themeaning of
Article 3oftheSCM Agreement?
3. That being thecase, could Cyprus explain when these programmes would bephased out?
4. That notbeing thecase, could Cyprus explain thereason?
Answer B(v)
1. Allclothing industrialists inCyprus willbeabletosubscribe totheResource Centre ifthey
sowishwithout anyspecific criteria. Subscribers willbeabletoobtain information atlower rates
thannon-members. Thecentre willprovide consultancy toindustry onmatters concerning fashion
andfashion trends along withmarket related information. Inaddition there willbeavailable afully
computer aided design section, alibrary, atechnology information department andatalaterstage a
quality control section.
2. NoG/SCM/Q2/CYP/7
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3. Theassistance provided through thisprogramme isnotcontingent upon export performance,
norontheuseofdomestic overimported goods.
4. Theassistance aimsatthesetting upofaresource centre, which willhelptheclothing industry
upgrade itscapability intheareaofdesign, technology andquality.
Answer B(vi)
1. Eligibility criteria arethefollowing:
(1) Theproposed activity must bewithin theprovisions oftheInternational Industrial
Classification forallEconomic Activities -1968 (Code 3-INDUSTRY).
(2) Theprogramme isopentoanymanufacturing unitprovided itisprepared torelocate
orexpand itsactivities inspecified rural areas.
(3) Theplanorproject hastobefeasible andwithin theframework oftheState
DevelopmentPolicywithspecialemphasisgivenonRural,IndustrialandEnvironmental
policy.
(4) Theunithastoemploy atleastseven (7)persons.
(5) Theplanorproject should aimtoutilize excess working force andrawmaterials of
theareainwhich theunitshould beestablished.
2. No.
3. Theassistance provided through thisprogramme isnotcontingent uponexport performance,
norontheuseofdomestic overimported goods.
4. Theobjectives oftheprogramme arefocused onregional development.
Answer B(vii)
1. Alltheindustries engaged inthemanufacturing ofvarious industrial products areeligible to
apply forindustrial plots intheIndustrial Estates. Theapplications areexamined bytheAdvisory
Committee forIndustrial Estates which makes recommendations totheMinister ofCommerce, Industry
andTourism astotheindustries towhich industrial places aretobeleased, initially for33years with
therighttorenew thelease foranother twoconsecutive 33yearperiods.
TheAdvisory Committee forIndustrial Estates which examines theapplications forindustrial
plots takes intoaccount thefollowing criteria:
- Theviability oftheproject
- Theproposed production methods
- Theemployment opportunities tobecreated
- Therequested utility loads inrelation totheavailability capacity
- Environmental impact
2. No.
3. Notapplicable.G/SCM/Q2/CYP/7
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4. Theassistance provided through thisprogramme isnotcontingent upon export performance,
norontheuseofdomestic overimported goods.
Answer B(x)
1. According totheprovisions oftheexisting Customs Legislation rawmaterials which arenot
produced locally areimported bymanufacturing firms freeofimport duty. Therelief isrestricted
tospecified materials andeligible aremanufacturing unitsofaspecified sector ofindustry, irrespective
ofwhether theirproducts aredestined forhome consumption orexports. Theextent ofrelief covers
import dutyandexcise duty, butinpractice isrestricted toimport dutysince rawmaterials arenot
levied withexcise duty.
Formore details regarding theoperation ofthescheme please refertoArticles 10and11and
theFourth Schedule totheCustoms andExcise Duties Law, 1997, copies ofwhich arebeing sentto
theWTO Secretariat.
2. Theoperation oftheimport dutyrelief scheme covers allmanufacturing unitsofaspecified
sector irrespective ofwhether theunit'sproducts aredestined forhome consumption orexport.
Consequently thisscheme doesnotfallunder theprohibited subsidies, within themeaning ofArticle 3
oftheSCM Agreement.
3. According totheprovisions oftheCyprus-European Union Customs Agreement, Cyprus has
theobligation toreduce theimport duties onalmost allimported industrial products andrawmaterials
within the10yearperiod 1987-1997, andapply theEuropean Community Common Customs Tariff
asfrom 1January 1998.
Indeed,CypruswillapplytheCommonCustomsTariffasfrom1January1998andconsequently
thesignificance oftheDuty Relief Scheme willbedrastically reduced.
Q2. B.(viii) Industrial FreeZone, C.(xv) Exemption from Taxation ofProfits Derived From
theExportation ofLocally Manufactured/Produced Goods, andC.(xvi) Export Credit
Insurance Scheme
- Onpage8ofthenotification, thepolicy objective ofIndustrial FreeZone (B.(viii))
isstated as"toprovide incentives fortheestablishment ofexporting manufacturing
companies inCyprus". AstoC.(xv), onpage14ofthenotification, theeligibility
isexplained asfollows: "Itisprovided totheexporters provided thatprofits from
theexportation oflocally manufactured/produced goods aretransferred back to
theRepublic ofCyprus". AstoC.(xvi), onpage15ofthenotification, theeligibility
isdescribed as"toallCypriot interested manufacturers/exporters". Does Cyprus
consider thatthese subsidies constitute export subsidies?
- Thatbeing thecase,could Cyprus explain when these programmes would bephased
out?
- That notbeing thecase, could Cyprus explain thereasons with thedetails of
eligibility foreachprogramme?G/SCM/Q2/CYP/7
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Answer B(viii)
There isnosubsidy programme applicable tocompanies located within theLarnaca FreeZone
(LFZ). Industrial unitsoperating within theLFZenjoy thesame fiscal status withthelocalcompanies
located outside theFreeZone. Therental covers fullcosts i.e.costofland, itsdevelopment costs
andcosts ofservices.
Answer C(xv)
Please notethatthereply tothisquestion willbesubmitted shortly.
Answer C(xvi)
TheExport Credit Insurance Scheme (E.C.I.S.) doesnotprovide anysubsidy forexports but
onlycovers political andcommercial risksincasethebuyers cannot payforthegoods exported. All
Cypriot interested manufacturers/exporters canjointheE.C.I.S. provided theValue Added ofthegoods
tobeexported isover25%andthebuyers areaccepted bytheE.C.I.S. Members tothescheme pay
anamount ofC£1foreverforevery C£1,000 expected tobeexported foreachyearandadditionally
bytheendofeachmonth theypaypremiums based ontheterms ofpayment fortheirexports.
Questions from theUnited States
1. Please provide further information regarding specific “incentives ”offered under the
Industrial FreeZone subsidy programme, e.g:
(a) What sortoftaxincentives andlandlease benefits areprovided?
(b) Could youidentify more specifically which sectors orindustries participate?
(c) Arethere anyexport performance requirements orconsiderations attached tothe
receipt ofthese incentives andbenefits?
Answer
(a) There isnosubsidy programme applicable tocompanies located within theLarnaca FreeZone
(LFZ). Industrial unitsoperating within theLFZenjoy thesame fiscal status withthelocal
companies located outside theFreeZone. Therental covers fullcosts i.e.costofland, its
development costs andcosts ofservices.
(b) According totheFreeZones Law(N.69/75) theMinister ofCommerce, Industry andTourism
haspower, afterconsultation withtheMinister ofFinance, togrant orrefuse togrant toany
person alicence authorizing them tocarry onwithin theFreeZone ofanytrade, business or
manufacture. Anyperson mayapply totheMinister forthegrant ofalicence. Thecriteria
which aretaken intoconsideration inassessing theapplications arethefollowing:
- Theviability oftheproject (afeasibility study isrequested inallcases)
- Thepercentage value added tothefinished product
- Theemployment opportunities tobecreated
- Theproposed production methods (priority isgiven toprojects utilizing advanced
technologies)
- Therequested utility loads inrelations totheavailable capacityG/SCM/Q2/CYP/7
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- Environmental impact
- Useofrawmaterials andequipment from localsources
- Theimpact onthelocalindustry.
Itshould benoted, however, thattheabove criteria carry different weights andeachproject
isexamined onacase-to-case basis.
(c) There arenoexport performance requirements orconsiderations attached tothereceipt ofthese
incentives andbenefits.