RESTRICTEDWORLD TRADE
ORGANIZATIONG/SCM/W/479
16 January 2002
(02-0196)
Committee on Subsidies
and Countervailing MeasuresOriginal:  English
IMPLEMENTATION-RELATED ISSUES REFERRED
TO THE COMMITTEE BY MINISTERS
Questions from the United States to Brazil1 and India2
The following communication, dated 14 January 2002, has been received from the Permanent
Mission of the United States.
_______________
US QUESTIONS TO BRAZIL
Tiret 80 Proposals Involving ASCM Article 14 and De Minimis  (G/SCM/W/464, G/SCM/W/465)
1.  That the “chapeau” of Article 14 of the SCM be interpreted to require Members to include in
their national legislation or implementing regulation any methods used by the investigating
authorities to calculate the amount of the benefit to the recipient (G/SCM/W/464, paras. 4 & 5).
(a) To what extent would Brazil’s proposal require a change to the ASCM?  If a change
to the agreement is not required, please ex plain, in Brazil’s view, how this proposal
should be effectuated.
(b) Please explain the context and background behind this proposal.  For example, please
describe any actual instances where Article 14 was interpreted “in a restrictive way,”
leading to non-transparent and arbitrary methods of benefit calculation.
(c) What is the relationship, in Brazil’s view, between the evidence and procedure
provisions of Article 12, Article 21, and Article 22 and the chapeau of Article 14?
2.  That the calculation of the amount of the benefit be based on the benefit to the exporter
(G/SCM/W/464, paras. 4 & 6).
(a) To what extent would Brazil’s proposal require a change to the ASCM?  If a change
to the agreement is not required, please ex plain, in Brazil’s view, how this proposal
should be effectuated.
(b) Please explain the context and background behind this proposal and provide specific
examples of subsidy practices and how their treatment would differ under this
proposal from treatment under other approaches.
                                                     
1 G/SCM/W/464.
2 G/SCM/W/462.G/SCM/W/479
Page 2
3.  Expenses incurred by the exporting company in order to obtain the subsidy (e.g.
administrative charges) should be deducted from th e amount of the subsidy.  Export taxes that are
applicable to the operation object of the subsidy shall also be deducted from the amount of the
subsidy  (G/SCM/W/464, para. 7(e)).
(a) To what extent would Brazil’s proposal require a change to the ASCM?  If a change
to the agreement is not required, please ex plain, in Brazil’s view, how this proposal
should be effectuated.
(b) Please provide a detailed list of the types of deductions/expenses which should be
deducted under this proposal.
(c) Please describe under what circumstances an investigating authority should be
required to make certain deductions from the subsidy amount?
(d) Please explain the meaning of the phrase: “applicable to the operation object of the
subsidy”?
(e) Please discuss any differences between Brazil’s proposal and that suggested by India
in paragraph 23 of India’s Tiret 80 submission (G/SCM/W/462).
4.  For subsidies not granted based on quantities produced, exported or transported, the subsidy
amount shall be calculated by determining the corr esponding proportion of the subsidy amount that is
related to the production, sale or export of the good (G/SCM/W/464, para. 7(f)).
(a) To what extent would Brazil’s proposal require a change to the ASCM?  If a change
to the agreement is not required, please ex plain, in Brazil’s view, how this proposal
should be effectuated.
(b) Please explain the context of and circumstances behind this proposal, for example, by
describing any actual instances where subsidies were not calculated in proportion to
production, sale or export of the good.
(c) Please explain how the phrase “is related to” should be interpreted?
(d) Please provide a more detailed explanation of the type of calculation proposed,
including different examples reflecting different factual scenarios.
5.  In case the subsidy is granted to acquire capital goods, the amount of the actionable subsidy
shall be calculated according to the rules for depreciation of the good in the industry concerned and
with the volume of production, sale or export of the product (G/SCM/W/464, para. 7(g)).
(a) To what extent would Brazil’s proposal require a change to the ASCM?  If a change
to the agreement is not required, please ex plain, in Brazil’s view, how this proposal
should be effectuated.
(b) Under this proposal, would the depreciation rules be applicable in instances other
than where a subsidy is granted to acquire capital goods (e.g., large, one-time debtforgiveness, or the provision of equity capital not necessarily related or tied to, capital
goods)?  If not, what evidence should an investigating authority require to establish
whether subsidies were used to acquire capital goods?G/SCM/W/479
Page 3
(c) If the deprecation rules proposed by Brazil were to be applied with respect to other
subsidies, what are those other types?  If a very small subsidy is provided, and it is
related, or tied to, capital equipment, should the benefit still be allocated over the
relevant depreciation period?
(d) Often there is a difference between the depreciation rules for accounting purposes and
the depreciation rules for tax purposes.  Please explain whether, in Brazil’s view, one
is preferable over the other?
(e) How should investigating authorities address instances where the industry standard
depreciation rules reflect extraneous tax policy considerations (e.g., accelerated
depreciation) rather than the actual expected physical life of the assets?
(f) Under what circumstances should investigating authorities be allowed to use
company-specific depreciation rates?  Should the authorities be allowed to use
company-specific rates if they differed from the industry rates?
(g) How should investigating authorities address circumstances in which there are no set
rates for the particular industry at issue?
6.  Introduce sampling rules similar to those in the Antidumping Agreement where the number of
exporters under investigation is so large as to make a determination impracticable.  (G/SCM/W/464,
para. 8).
Is it Brazil’s view that the SCM does not allow for sampling in CVD investigations?
7.  Introduce provision in Article 19 establishing that no duty will be collected where the subsidy
amount is de minimis (G/SCM/W/464, para. 12 - 14).
Given the lack of express language in the ASCM regarding this issue, provide a more detail
explanation as to how, in Brazil’s view, the proposal could be effected by means of “interpretation of
lacunae in the text of the Agreement.”
US QUESTIONS TO INDIA
Tiret 80 Proposals Involving ASCM Article 14 and De Minimis  (G/SCM/W/462, G/SCM/W/466, and
G/SCM/W/470)
1.  The SCM Committee should clarify the provisions of the ASCM in Annex I (items h and i),
Annex II and Annex III so that any remission, exemption or drawback of duties and import charges to
the extent of those levied on inputs consumed is  not countervailed and only the amount of remission,
exemption or drawback of duties and import charge s in excess of those levied on inputs consumed
may be treated as a countervailable subsidy (G/SCM/W/462, para 14).
(a) The proposal appears to presume that the “excess” amount of remission, exemption or
drawback is calculable.  In many instances, however, this is not the case, or can only
be done with great difficulty.  Please discuss how the ASCM provisions regarding
remission, exemption or drawback of duties should be applied in situations where theamount of excess is either not calculable, or can only be calculated with great
difficulty and significant additional burden to the investigating authority and other
parties involved.G/SCM/W/479
Page 4
(b) In India’s view, is it not appropriate to countervail the entire amount of a payment
made by a government to an exporter where, although such payment is nominally
described as “remission, exemption or drawback of duties”, the government has not
examined the type and/or amount of inputs consumed in the manufacture of exported
merchandise and the taxes or import charges levied on such inputs in order to ensurea correlation between the payment and such taxes, or import charges?
2.  The SCM Committee should clarify that the ad dition of an amount for interest on the benefit
conferred during the investigation period is not in conformity with the object and purpose of the
ASCM.  In the alternative, the SCM Committee should clarify whether calculation of the interest
amount on a notional basis instead of calculating it from the date the benefit was conferred is a
reasonable method of calculating interest  (G/SCM/W/462, para 16).
(a) Please explain in more detail and by wa y of concrete examples, India’s objectives
with this proposal.  In particular, please explain what is meant by “calculation of the
interest amount on a notional basis instead of calculating it from the date the benefit
was conferred.”
(b) Please provide concrete examples of actual cases in which this practice has been
applied.
3.  The SCM should clarify that while determining the average useful life (AUL) of the asset, the
depreciation used for allocating the benefit should be based on the information available with the
individual firms receiving the subsidy. (G/SCM/W/462, para 18).
(a) To what extent would India’s proposal require a change to the ASCM?  If a change to
the agreement is not required, please explain, in India’s view, how this proposalshould be effectuated.
(b) Please clarify whether India is proposing  an AUL based on the normal depreciation of
assets in the industry concerned as suggested in G/SCM/W/462, para 17, or based on
the information available with the individual firms receiving the subsidies as
suggested in G/SCM/W/462, para 18.
(c) If India is proposing an industry based AUL:
(i) Under what circumstances should investigating authorities be allowed to use
company-specific depreciation rates if it differed from the industry rates?
(ii) How should investigating authorities address circumstances in which there
are no set rates for the particular industry at issue?
(iii) How should investigating authorities address instances where the industry
standard depreciation rules reflect extraneous tax policy considerations (e.g.,accelerated depreciation) rather than the actual expected physical life of the
assets?
(c) If India is proposing an AUL that is company-specific:
(i) Under what circumstances should investigating authorities be allowed to use
an industry-wide depreciation rate if it differed from the company-specific
one?G/SCM/W/479
Page 5
(ii) How should investigating authorities calculate the AUL if the company had
significant changes to its depreciation schedules during or immediately prior
to the investigation, e.g., asset write-downs?
(iii) Often there is a difference between the depreciation rules for accounting
purposes and the depreciation rules for tax purposes.  Please explain whether,
in India’s view, one is preferable over the other.
(d) In India’s view, to what other types of subsidies should the depreciation rules be
applied (e.g. , large, one-time debt forgiveness, or the provision of equity capital not
necessarily related, or tied to, capital goods)?
(e) If a very small subsidy is provided, and it is related, or tied to, capital equipment,
should the benefit still be allocated over the relevant depreciation period?
4.  The ASCM Committee should clarify that for a subsidy to be deemed to exist under
Article 1.1(a)(1)(ii) of the ASCM, the exporter concerned should have received the benefit of dutyforegone or not collected during the period of investigation (G/SCM/W/462, para 21).
(a) To what extent would India’s proposal require a change to the ASCM?  If a change to
the agreement is not required, please explain, in India’s view, how this proposal
should be effectuated.
(b) Please describe in greater detail when the benefit would accrue to the exporter under
India’s proposal.
(c) Are there any instances where India believes that the benefit can reasonably be
assumed to accrue before it is actually received?  For example, if all exporters are
automatically entitled to receive 10 per cent of the value of their exports in the form
of a government grant, would it be reasonable to calculate the amount of the benefit
as 10 per cent of the exporter’s export sales?
5.  The SCM Committee should review Article 14 of the ASCM and recommend certain
deductions from the subsidy amount which should be mandatorily taken into consideration by theinvestigating authorities while determining the level of countervailing duty.  The SCM Committee
should also clarify that such adjustments as required by the countervailable scheme should be taken
into account while determining the amount of subsidy.  (G/SCM/W/462, para 23).
(a) To what extent would India’s proposal require a change to the ASCM?  If a change to
the agreement is not required, please explain, in India’s view, how this proposal
should be effectuated.
(b) Please describe under what circumstances an investigating authority should be
required to make certain deductions from the subsidy amount.
(c) India has provided a list of the types of expenses to be deducted.  Is the list of
proposed deductions intended to be exhaustive or merely illustrative?  Are there any
circumstances under which these or similar expenses should not be deducted or
should all expenses incurred in obtaining the subsidy always be deducted?
(d) Please discuss any differences between India’s proposal and that suggested by Brazil
in paragraph 7(e) of Brazil’ s Tiret 80 submission (G/SCM/W/464).
__________