RESTRICTEDWORLD TRADE
ORGANIZATIONG/SCM/W/464
11 September 2001
(01-4261)
Committee on Subsidies
and Countervailing MeasuresOriginal:  English
IMPLEMENTATION-RELATED ISSUES REFERRED TO THE
COMMITTEE AT THE REQUEST OF THE CHAIRMAN OF
THE GENERAL COUNCIL ON 31 JULY 2001
Review by the SCM Committee of the Provisions of the Agreement on Subsidies and Countervailing
Measures Regarding Countervailing Duty Investigations
Communication from Brazil
The following communication, dated 10 September 2001, has been received from the
Permanent Mission of Brazil.
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1. This paper is being presented as a contribution for the discussion, in the Committee on
Subsidies and Countervailing Measures”, of tiret 80 of the proposals on implementation.  The cited
tiret concerns the review of the provisions of the Agreement on Subsidies and Countervailing
Measures, regarding countervailing duty investigations.
2. In this text, Brazil covers four aspects of the Agreement that could be clarified or
strengthened: the calculation of the amount of the subsidy, facts available, “ de minimis ” provisions
and review procedures.
I. CALCULATION OF THE AMOUNT OF A SUBSIDY IN TERMS OF THE BENEFIT
TO THE RECIPIENT
3. Article 14 of the SCM Agreement (“Calculation of the Amount of a Subsidy in Terms of the
Benefit to the Recipient”) determines that  “...any method used by the investigating authority to
calculate the benefit to the recipient conferred pursuant to paragraph 1 of Article I shall be provided
for in the national legislation or implementing regulations of the Member concerned and itsapplication to each particular case shall be transparent and adequately explained”.  Moreover, some
guidelines are provided in the Article, to be observed as regards any such method.
4. There are four main elements that Brazil proposes to be addressed, as far as this Article is
concerned:
(a) that the “chapeau” of the Agreement 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
Page 2
(b) that the calculation of the amount of the benefit be based on the benefit to the
exporter;
(c) that additional guidelines be included in Article 14; and
(d) that a provision envisaging the possibility of the utilization of “sampling” be included
in the text of the Agreement.
5. As for the first point, the transparency obligation in the chapeau of Article 14 of the
Agreement is not so explicit so as to require Members to include in their national legislation or
implementing regulations methods for the calculation of the amount of  the benefit.  The expression
“the benefit to the recipient” may be interpreted (a nd, in fact, is being interpreted, in some instances)
in a restrictive way, in order to comprise only methods for the determination of the existence of the
benefit, and not the amount of the benefit.  Therefore, there is a margin for the utilization of non-
transparent methods for the calculation of the amount of this benefit, which may be, in certain cases,
arbitrary.
6. Directly linked to the first point raised is the question of the basis for the calculation of the
amount of the benefit. Brazil considers it more appropriate that the benefit be calculated based on the
benefit to the recipient, per unit of the product exported and per exporter, and not, for instance, based
on the cost to the Government.  The effective amount received by the exporter will reflect more
faithfully his benefit.
7. Brazil also proposes that guidelines should be included in Article 14 in addition to the four
elements already established in the Agreement.  Therefore, any method used by the investigating
authority to calculate the benefit to the recipient should be consistent with the following:
(...)(e) expenses incurred by the exporting company in order to obtain the subsidy (e.g.
administrative charges) shall be deducted from the 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;
(f) in case the subsidy is not granted according to the quantities that are produced,
exported or transported, the amount of the subsidy shall be calculated by determining
the corresponding proportion of the subsidy amount that is related to the production,
sale or export of the good;  and
(g) in case the subsidy is granted to acquire capital goods, the amount of the actionable
subsidy shall be calculated according to th e rules for depreciation of the good in the
industry concerned and with the volume of production, sale or export of the product.
8. Finally, there are cases in which there is a large number of exporters under investigation.  In
case where this number is so large as to make such a determination impracticable, the authorities
should be allowed to limit their examination either to a reasonable number of interested parties orproducts by using samples.  The use of samples shall obey specific criteria such as those mentioned in
Article 6.10 of the Anti-Dumping Agreement.G/SCM/W/464
Page 3
II. FACTS AVAILABLE
9. Article 12.7 of the SCM Agreement establishes that “In cases in which any interested
Member or interested party refuses access to, or otherwise does not provide, necessary information
within a reasonable period or significantly impedes the investigation, preliminary and final
determinations, affirmative or negative, may be made on the basis of the facts available”.
10. However, contrary to what exists in the Antidumping Agreement, the procedures related to
the utilization of these “facts available” are not detailed in the SCM Agreement.
11. The proposal in this regard would be to amend the SCM Agreement, so that it may include
provisions such as those of Annex II of the “Agreement on Implementation of Article VI of the
General Agreement on Tariffs and Trade 1994”, (the Anti-dumping Agreement).
III. “DE MINIMIS”
12. Article 11.9 of the SCM Agreement determines , inter alia, that “[t]here shall be immediate
termination [of an investigation] in cases where the amount of a subsidy is de minimis ”.  However,
when it comes to the imposition and collection of countervailing duties, as set forth in Article 19 of
the cited agreement, there is an omission of such a “ de minimis ” clause.  If, for a certain reason, the
amount of the subsidy is found to be less than the “ de minimis ” threshold for a specific exporter, the
text does not provide explicit guidance.  This lacuna in practice may be interpreted as allowing the
collection of duties even if the amount of the subsidy is below the “ de minimis ”.
13. Since the Agreement establishes that a “ de minimis ” amount of the subsidy should entail the
immediate termination of the investigation, it follow s that the same parameter should be respected as
regards the procedures related to the imposition and collection of the duties.
14. In this context, and for the sake of symmetry and coherence, a provision  should be added to
Article 19 establishing that, in case it is determined that the amount of subsidies effectively found is
below the “ de minimis ” threshold, there will be no collection of the duty.
IV. REVIEW PROCEDURES (ARTICLE 21- “DURATION AND REVIEW OF
COUNTERVAILING DUTIES AND UNDERTAKINGS”, AND ARTICLE 19.3 ASFAR AS EXPEDITED REVIEW IS CONCERNED)
15. Review procedures are treated in scant detail in the SCM Agreement.  Brazil suggests the
following amendments in order to correct these shortcomings.
16. Article 21.4 of the Agreement on Subsidies and Countervailing Measures establishes that
“The provisions of Article 12 regarding evidence and procedure shall apply to any review carried out
under this Article (...)”.  However, there is no requirement to observe, in the review procedures, the
provisions set forth in Articles 11 (“Initiation and Subsequent Investigation”) and 13
(“Consultations”) of the same Agreement. In this respect, two important lacunae in the text can be
identified:  (a) the omission as far as the review procedures are concerned of some kind of assessmentof the degree of support for the petition, contrary to what is foreseen in Article 11 and (b) the
omission of any reference to the need for notification of Members whose products may be subject to a
review, as soon as the application for the review is received.  There is no explicit obligation that these
Members shall be offered consultations prior to the beginning of the review and also throughout the
period of the review.G/SCM/W/464
Page 4
17. The initiation of any review, at the request of the domestic industry, should be contingent
upon the verification if the petitioner is representative. It is not logic that, on the occasion of the
reviews, exporting Members should receive treatment that is distinct from that which is given in the
investigation phase.  Both procedures have similar implications and may have an impact on the
amount of the CVD.  The same line of reasoning applies to the need for notification to the exportingMember.
18. Brazil proposes, therefore, that these two la cunae be addressed, by means of the review of
Article 21.4 of the ASCM in order to guarantee that the investigating authorities (a) verify that a
review will only be initiated if the petition is effectively supported by the domestic industry and (b)
notify the exporting Member government about the existence of the petition for the initiation of the
review, as soon as the application is accepted, and offer the interested parties consultations prior to theinitiation of the review and throughout the period of the review.
19. Additionally, Brazil believes that the provisions of Article 19.3 of the SCM Agreement, in
what concerns expedited review for new exporters, should be detailed.
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