RESTRICTED
WORLD TRADE G/STR/Q1/USA/1
27June1996
ORGANIZATION(96-2460)
Original: English Working Party onState Trading Enterprises
REPLIES TOQUESTIONS FROM CANADA1,JAPAN2AND NEW ZEALAND3
ONTHE ARTICLE XVII NOTIFICATION OFTHE UNITED STATES4
Thefollowing communication, dated 18June1996, hasbeenreceived from thePermanent
Mission oftheUnited States.
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QUESTIONS FROM CANADA
1. Withregard totheUSnotification oftheCommodity Credit Corporation (CCC), nomention
ismade ofitsfishandseafood program. Weunderstand thattheCCCisauthorized tosupport
theprices ofagricultural andfishproducts through loans, purchases, payments andother
operations. Thelatter includes exports oraidindevelopment offoreign markets. Could the
USelaborate further ontheoperations ofthiscomponent oftheCCC'smandate?
FishandseafoodarenotsupportedthroughCCCdomesticpricesupportprogrammes.Purchases
offishandseafood fortheUSschool lunch programme aremade under theauthority oftheAgricultural
Actof1935, notunder theauthority oftheCCC. Fishandseafood havebeenpromoted under the
Market Promotion Programme (MPP), anexport market development programme.
2 TheUSprovided agreat dealofdetail ontheCCC, butitdidnotprovide specific answers
tothequestions listed inpartIIIofthequestionnaire. Could theUSprovide answers toeach
ofthose questions, orindicate which questions itdoesnotwishtoanswer?
Provided below isspecific information, relative tothequestions inPartIIIofthequestionnaire
which were notsufficiently covered intheUSnotification.
Whether theenterprise deals withexports orwithimports, orboth.
Asspecified intheUSnotification, CCC onlyengages inexport activities.
Whether private traders areallowed toimport orexport and,ifso,onwhatconditions. Whether
there isfreecompetition between private traders andtheState Trading Enterprise.
1G/STR/W/13,2G/STR/W/4,3G/STR/W/14.
4G/STR/N/1/USA.G/STR/Q1/USA/1
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Private traders arecompletely freetoengage intheimport orexport ofanycommodity that
isalsotraded bytheCCC. Private traders arefreetoengage insuchtrade onnormal commercial
terms. There iscompletely freecompetition between private traders andCCC.
Thecriteria usedfordetermining thequantities tobeexported andimported. Howexport prices
aredetermined. Howthemark-up onimported products isdetermined. Howexport prices andthe
re-sale prices ofimports compare withdomestic prices.
Thequantities exported aredetermined onanadhocbasis, andassuchtheprices varywhen
compared todomestic prices. WereferyoutotheUSnotification totheCommittee onSubsidies and
Countervailing Measures forspecifics onquantity andprice information. Asnoted above, CCC does
notengage inimports; assuch, information onimport mark-up isnotapplicable. With respect tothe
determination andrelative level ofprices forexported commodities under theprogrammes notified
totheSubsidies Committee, i.e.,theExport Enhancement Programme, Dairy Export Incentive
Programme, Sunflowerseed OilAssistance Programme andCottonseed OilAssistance Programme,
(EEP, DEIP, SOAP andCOAP, respectively), theprices andbonus amount aredetermined asfollows:
Allsales made under theabove programmes aremade bytheprivate sector, nottheUS
Government. Once aninvitation isissued, itisuptotheagricultural exporters tocontact prospective
buyers intheeligible countries andnegotiate asalescontract including price, quantity, quality, delivery
andother terms.
Eachprospective exporter submits abidtoUSDA requesting asubsidy, orbonus, thatwould
allow thesaletotakeplace attheagreed price. USDA reviews allbidsforthecompetitiveness of
theexport sales price andthebonus value requested, andcompares thebidswithoffers from other
USexporters andsalesofcompetitor countries. Upon acceptance ofabid,theexporter andtheCCC
enter intoanagreement. USDA thenannounces bidacceptances under theprogrammes. Thebonus
ispaidtotheUSexporter incash. Once anexporter furnishes USDA withevidence thatthespecified
commodity hasbeenexported tothetarget country under theterms oftheagreement, theexporter
canrequest payment.
Whether long-term contracts arenegotiated bytheState Trading Enterprises.
Whether State Trading methods areusedtofulfilcontractual obligations entered intobythe
government.
Long-termcontractsarenotapplicablewithrespecttotheseprogrammesoftheCCC. Regarding
contractualobligationsenteredintobythegovernment,CCC'sobligationsarecarriedoutinatransparent
manner andconsistent withusual commercial practice.
QUESTIONS FROM JAPAN
Weunderstand thattheproducts setoutinTable 1onpages 6and7ofthenotification show
theproduct coverage tobehandled bytheCommodity Credit Corporation (CCC). Could the
United States confirm thatTable 1covers allproducts handled bytheCCC?
Table 1onpages 6and7notified thecommodities inCCC inventory forfiscal 1992. Asof
1June1996, CCCinventories which arenon-zero included onlybutter, cheese, non-fat drymilk, barley,
corn, sorghum andwheat.G/STR/Q1/USA/1
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QUESTIONS FROM NEW ZEALAND
1. HowdoestheCCC determine theprice gapbetween theexporters 'costs ofacquisition and
thebonus paidunder theDEIP andEEP?
Thebonus paidtoexporters represents theestimated difference between procuring and
transporting USproducts toaspecific country orregion andtheworld market price prevailing inthat
country orregion. Inaccepting bids, prices arecarefully reviewed toensure thattheyareatlevels
thattheapproximate prices being offered competitors.
2. OntheMarket Promotion Programme, thenotification states thisprogramme isadministered
byFASthrough cooperative agreements between CCC andnon-profit agricultural trade
commodity groups. What isthenature ofthese groups? (Weassume these arenotreceiving
exclusive orspecial privileges.)
These non-profit agricultural producer organizations provide marketing andpromotion services
relating totheirparticular products. Duetothewideavailability andcompetitive nature oftheMarket
Promotion Programme, participants donotreceive anyexclusive orspecial privileges.
3. ForCCC inventories, howarethecosts ofstorage etc.accounted forintheprogramme?
Thevalue ofcommodities inCCC inventories reflects thecosts ofcommodity acquisition in
theyearthatthecommodity wasacquired. Itdoesnotreflect storage, interest, orother costs. Such
costs areinaseparate accounting category aspartofCCC'sdomestic operations.
4. Howaretheloanrates forCCC commodities set?
Theformulae forloanratesareestablished bystatute infive-year Farm Bills, buttheactual
loanrates areannounced bytheSecretary ofAgriculture each year. TheFederal Agriculture
Improvement andReform Actof1996 directs theSecretary tocalculate theloanrateat85percent
ofthepreceding five-year moving average market price, dropping highandlowpriceyears, thislevel
maynotexceed the1995 cropyearlevel. TheSecretary hasthediscretion toreduce thisratebyup
to10percent.
5. InTable 1,itwould beuseful tohaveclarification ofthevalues setout,particularly indairy
(e.g.butter totalproduction of625,000 t.withavalue of$1,238,000, yetCCC inventories
of300,400 t.arevalued at$646,109,000 -non-fat dried milkshow similar discrepancies.
There aretwotypographical errors inTable 1foreachofthethreeyears (1992, 1993and1994).
Thetabledenoting thevalue ofproduction forbutter andnon-fat drymilkshould bestated inmillions
ofdollars rather thanthousands ofdollars.