RESTRICTED
WORLD TRADE G/SCM/Q2/CRI/3
3October 1996
ORGANIZATION(96-3991)
Original: English Committee onSubsidies andCountervailing Measures
SUBSIDIES
Questions from theEUROPEAN COMMUNITY Regarding theNew
andFullNotification ofCOSTA RICA1
Thefollowing communication, dated 19September 1996, hasbeenreceived fromthePermanent
Delegation oftheEuropean Community.
_______________
Thepresent analysis constitutes theCommission 'srequest toCosta Ricaforclarification on
thenotified programmes andexplanation ofreasons whyanumber ofmeasures havenotbeennotified,
inaccordance withtheprovisions ofArticle 25.8oftheSubsidies Agreement.
Costa Ricasubmitted on18August 1995 itsnotification ofsubsidy programmes totheWTO
pursuant toArticle XVI:1 GATT 1994andArticle 25oftheWTO Subsidies Agreement. Inthisrespect,
theEuropean Community would liketoobtain clarification onanumber ofissues onthenotified schemes
asdescribed below.
I. NOTIFIED SUBSIDY PROGRAMMES
(a) Exemption from company tax
Thisscheme provides foranexemption fromcompany taxforenterprises thatsigned
anexport contract before 3April 1992. These companies are100percentexempted from
taxonthenetprofits earned ontheexport ofproducts. Theprogramme aimstopromote exports
ofnon-traditional products andtoattract foreign investment. Theprogramme isadministered
bytheNational Council forInvestment andExport Promotion.
Theexport contract maybesigned byanynational orforeign natural orlegalperson
whoundertook toexport non-traditional goods tothirdmarkets providing theexport market
doesnotliewithin acountry where Costa Ricahasafree-trade agreement. Costa Ricaclaims
thatthere isnoinformation regarding theeffects ofthesubsidy.
Thisscheme seems tobecontingent uponexport performance sincetheexemption from
company taxisonlygranted forcompanies thathavesigned anexport contract. TheCommunity
would likeCosta Ricatocomment onthecompatibility oftheprogramme withitsobligations
under theSubsidies Agreement, andtoindicate whether there areanyplans tophase outthis
subsidy.
1G/SCM/N/3/CRI.
./.G/SCM/Q2/CRI/3
Page2
(b) TaxCredit Certificates (CATs)
CATs constitute asubsidy included inallexport contracts signed before
2December 1992. These certificates areissued bytheCentral Bank ofCosta Ricaandare
usedtopaydirect orindirect taxes. Thegranting oftheCATdepends onwhether theexporting
enterprise thathassigned theExport Contract hasaspecific percentage ofnational content
intheexported product. Thesystem works according totheprinciple "thehigher thenational
content, thehigher theamount ofCAT" (expressed asapercentage off.o.b.). According to
Costa Rica, thescheme isgeneral depending ontheonecriterion e.g.thesigning ofanexport
contract.
TheCommunity further examined thisscheme andfound thatthemajority ofthe
subsidies aredestined foragriculture. Thetotalamount ofCAT subsidies wasaccording to
CENPRO approximately $67.2 million. Therepartition isasfollows: 33percentfor
agriculture, 28.28 percentagro-industry, 27.3percentindustry, 6percenttextiles and4.9per
centother. Inaddition, thefollowing benefits areprocured totheexporting enterprises:
preferential harbour expense rates, accelerated depreciation andpreferential short-term bank
loans. Itisclearthattheprogramme iscontingent uponlocalcontent. TheCommunity requests
moredetailed information onthisprogramme anditstradeeffects. Inaddition, theCommunity
would likeCosta Ricatocomment onthecompatibility ofthescheme withitsliabilities under
theSubsidies Agreement, andtoindicate whether thereareanyplans tophase outthissubsidy.