WORLD TRADE
ORGANIZATIONG/SCM/W/518
5 July 2002
(02-3762)
Committee on Subsidies
and Countervailing MeasuresOriginal:  English
IMPLEMENTATION RELATED ISSUES REFERRED TO THE
COMMITTEE BY MINISTERS
Replies from BRAZIL to Questions from CANADA
and the UNITED STATES on Tiret 80 Proposals
The following communication, dated 4 July 2002, has been received from the Permanent
Mission of Brazil.
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In this document, Brazil addresses the questions posed by Canada (doc. G/SCM/W/516) and
the United States (doc. G/SCM/W/512) on certain aspects of the proposals related to tiret 80.
Questions from Canada (G/SCM/W/516):
A. THE CHAPEAU OF ARTICLE 14:
Brazil is proposing that the chapeau of Arti cle 14 should be amended to provide, among
other things, that the amount of subsidy shou ld be calculated on a "per exporter/producer
basis".  However, later on, Brazil is proposin g rules for the use of sampling in countervailing
duty investigations which, by its very nature,  would result in some exporters/producers not
receiving their own subsidy rate.  This seems to set-up some contradictory obligations.
Could Brazil explain how these two proposals could be reconciled?
Reply
There is no contradiction in Brazil's proposal.  The general rule should be the calculation of
the amount of subsidy in terms of the benefit to each exporter under investigation.  Nevertheless, there
are cases in which the number of exporters under investigation is so large as to make such calculation
impracticable. In those cases, the investigating authorities could use samples.  This provision is
already present in the AD Agreement.  Furthermore, in order to avoid divergent practices among
Members, it is important that the utilisation of a sample in a countervailing duty investigation followsspecific criteria such as those mentioned in Article 6.10 of the Anti-Dumping Agreement.
B. A
DDITIONAL GUIDELINES TO ARTICLE 14:
In Brazil's proposed subparagraph (g), reference is made to "the rules for the
depreciation of the good in the industry concerned ...".  Could Brazil clarify the precise nature ofG/SCM/W/518
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the "rules" that it has in mind?  Is Brazil referr ing to depreciation rules used for income tax
purposes in the exporting country or to GAAP (g enerally accepted accounting principles) in the
country of export?
Reply
In subparagraph (g), Brazil is referring to de preciation rules in accordance with the generally
accepted accounting principles of the exporting country.
(ii) Appropriate Denominator for the Calculation of Subsidy Amount
In Example 3, it appears that Brazil is allocating an export subsidy received in 1987 to
subsidize exports to exports made in 1995, the pe riod of investigation of the countervailing duty
investigation.  The allocation of the subsidy is be ing made on the basis of the useful life of assets.
However, it is not clear from this example why Br azil is allocating this subsidy over time rather
than expensing it in the year of receipt.  It would be useful if Brazil could explain why this was
done and whether Brazil has criteria as to when a subsidy should be expensed rather thanallocated over time.  It is understood that Brazil will allocate a subsidy over time when the use
of the subsidy is for the acquisition of capital goods, but in this example, there is no apparent
reason for the allocation.  Please explain.
Reply
In example 3, the grant is tied to the acquisition of fixed assets to be used in the production of
the good to be exported.
III. PROPOSALS RELATED TO " DE MINIMIS "
We continue to find this proposal very diff icult to understand.  It would be useful if
Brazil could provide some concrete examples of what it is proposing in the context of both a
retrospective and prospective duty enforcement system. For example, it would be interesting to
obtain the Brazilian  response to the following scenario which could arise in the Canadian
prospective system of duty enforcement:
Canada conducts a countervailing duty investigation in respect of a certain chemical
product from Country A and finds that there is an export subsidy and the amount of the
subsidy is not “ de minimis ” (i.e. the amount of subsidy is g reater than 1 per cent expressed as a
percentage of the value of the subject goods expo rted during the period of investigation). An
injury finding is made and definitive duties are put in place.  The amount of subsidy for dutyenforcement purposes is established at $10.00 per tonne.  There are two importers in Canada of
the chemical product. Importer X purchases in very large quantities with few importations and,
therefore, receives special volume pricing of $ 800 per tonne. Importer Y purchases in smaller
quantities but in more frequent importations so its price is $1100 per tonne.  However, over the
course of a year, both importers end up purchasing the same overall quantity.  On a percentagebasis in respect of each importation, the subsid y in respect of Importer X is not de minimis
while the subsidy in respect of Importer Y is de minimis.  Therefore, is Brazil suggesting that we
should not collect any countervailing duties on importations made by Importer Y, since the
subsidy is de minimis in relation to the value of each importation?
Reply
The amount of a subsidy should be calculated per exporter.  In a retrospective system, the
actual duty to be collected is determined on the basis of the amount of the subsidy calculated for aG/SCM/W/518
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period after the imposition.  To evaluate if this amount is " de minimis ", the authority should consider
the average export price for each exporter in the ne w period following the application of the duty.  In
Brazil's view, if this new amount of subsidy is " de minimis " no duty should be collected.
In a prospective system, the countervailing duty would be revised and if the new amount
(calculated per exporter) is " de minimis " all the duty collected during the precedent period considered
for the review should be refunded.  If the duty co rresponding to the new amount is lower than the duty
previously applied, the excess should be refunded.  Based on the result of the review, a new duty
should be established for the future (zero if the amount is " de minimis ").
In Brazil's view, the situation presented by Canada does not imply a procedure different than
the one presented above. In that scenario, the authorities either "ex officio" or by request wouldconduct a review of the amount of subsidy and depending on its result there should be a refund to all
importers of the product exported by the exporter for which de minimis  or lesser amount of subsidy
was found.
IV. PROPOSALS RELATED TO REVIEW PROCEDURES
(a) In paragraph 1, Brazil proposes that the "standing" test in SCM Article 11.4 be
expressly linked to the initiation of expiry reviews as set forth in Article 21.3 of the SCM
Agreement.  n this context, could Brazil explain whether the authorities could initiate an expiry
review on their own initiative when domestic industry has brought an application for a reviewbut failed to demonstrate that they had satisfied the standing requirements?
Reply
Brazil understands that, in special circumstances, the authorities could initiate a review on
their own initiative, even in the situation described by Canada.  This situation could also arise in the
initiation of an investigation.
(b) In paragraph 4, Brazil proposes that the SCM Agreement should contain more detail
regarding the conduct of expedited reviews, particularly the time frame for the completion of
such reviews.  In this regard, Brazil makes reference to Article 9.5 of the Anti-dumping
Agreement.  It would be of interest if Brazil could also indicate if the other conditions outlinedin Article 9.5 regarding the eligibility for an ex pedited review should also be adopted in the
SCM Agreement for purposes of the conduct of expedited reviews.  Also, Article 9.5 provides
for the suspension of the levying of anti-dumping duties while an expedited review is being
carried out.  Would Brazil envisage the same procedure in respect of expedited reviews for
countervailing duty purposes?
Reply
Brazil's proposal does not include criteria regarding eligibility for an expedited review neither
provision for the suspension of the levying of anti-dumping duties.
Question from the United States (G/SCM/W/512) :
It is our understanding that Article 19.3 covers exporters who had exports during the
period of investigation, but whom were not actua lly investigated.  (This is in contrast to “new
shippers” – exporters who did not export during the period of investigation, but did export after
the period of investigation.)  Under US regu lations, exporters not covered by the originalG/SCM/W/518
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investigation may request an expedited review.  For such reviews, US regulations provide that,
under certain conditions, information from the original period of investigation may be used.
Is Brazil’s proposal with respect to expo rters that exported during the period of
investigation, but were not covered by the original investigation, or does Brazil’s proposal cover
exporters that did not export during the period of investigation?
Reply:
The Brazilian proposal relates to two main issues:  (a) how fast the investigating authorities
respond to a request for an expedited review and (b ) the duration of such a review.  Future provisions
clarifying the manner in which authorities should deal with both issues would apply to any exporter.
As to the type of exporters entitled to request an expedited review, the Brazilian proposal
should be read in conjunction with other suggestion we have made regarding sampling.  Since the
latter would guarantee the exporter who exported during the period of investigation the possibility of
requesting the determination of an individual amount of subsidy at the very outset of the investigation,it would be appropriate to reserve the right of requesting an expedited review for the new exporter
("new shipper").
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