RESTRICTEDWORLD TRADE
ORGANIZATIONG/SCM/Q2/ARG/19
14 April 1999
(99-1491)
Committee on Subsidies
and Countervailing Measures Original:  Spanish
SUBSIDIES
Replies to Questions from Chile1, the European Community2, Japan3, Mexico4
and the United States5 Regarding the New and Full Notification of Argentina6
The following communication, dated 22 March 1999, has been received from the Permanent
Mission of Argentina.
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FREE ZONES
Questions from Japan
(a) Does Argentina consider that the exemptio n from the taxes on the export of consumer
goods under the programme constitutes export subsidies within the meaning of Article 3.1(a) of
the SCM Agreement?
Reply
No.  Law No. 24,331 does not provide for the appl ication of prohibited subsidies within the
meaning of Article 3 of the SCM Agreement.
(b) That being the case, could Argentina provide the time schedule for phasing-out the
export tax exemption under the programme?
(c) That not being the case, could Argentina explain that the export tax exemption under
the programme does not constitute export subsid ies within the meaning of Article 3.1(a) of the
SCM Agreement?
Reply
Article 23 of Law No. 24,331 provides that, with the exceptions expressly provided for in the
Law, all provisions relating to tax, customs and fi nancial matters, including criminal provisions,
applying in the general customs territory shall apply in the Free Zones.
                                                     
1 G/SCM/Q2/ARG/17.
2 G/SCM/Q2/ARG/14.
3 G/SCM/Q2/ARG/18.
4 G/SCM/Q2/ARG/15.
5 G/SCM/Q2/ARG/16.
6 G/SCM/N/38/ARG.G/SCM/Q2/ARG/19
Page 2
The exemptions mentioned in Article 26 of Law No. 24,331 concern payment of domestic
taxes levied on basic services provided within the Free Zone.  These basic services – supply of
drinking water, electricity, telecommunications, gas and sewerage – are the responsibility of the
concessionaire operating the Free Zone.  The concession is granted through a national and
international call for tenders.
It should be stressed that the exemptions mentioned in the above paragraph apply to all
enterprises based in the Free Zones, without distinction as to the type of activity or any other criteria
apart from where they are based.
In addition, Article 30 of Law No. 24,331 states:  "No incentives shall be provided to the
removal of goods from the free zone to third countries other than the incentives consisting of therefund of taxes actually paid when such taxes are refundable to exporters within the general customs
territory.  Incentives established in accordance with international agreements signed by the Argentine
Republic shall also be applicable".
Hence, in response to the question on the specific issue of the Free Zone, the answer is that it
does not fall within the meaning of Article 3.1 as regards the treatment of prohibited subsidies as
defined by the WTO Agreement on Subsidies.
Questions from the United States
(a) Please explain what is meant by the "regional integration process".
Reply
This is presumably a reference to Article 4 of Law No. 24,331, second paragraph, which
states:  "The free zones shall function in accordance with national trade policy, shall contribute to the
growth and competiveness of the economy and shall be fully incorporated into the regional integration
process".
This paragraph sets out general principles and objectives.   Its purpose was to make it clear
that the adoption of this instrument was intended to be consistent with the policy of establishing
MERCOSUR, a process fully under way when the Law was adopted.
(b) Under which legislation was this subsidy granted?
Reply
The free zone regime is established by Law No. 24,331 itself, which has superior status
within the ranking of normative texts of the Argentine Republic.  In any event, the background
authority is the Argentine Customs Code (Law No. 22,415 of 1981, still in force) through two articles,
namely:
Article 590:  "A free zone is an area within which goods are not subject to the normal control
of the customs service and their entry and removal are not subject to the payment of taxes,
with the exception of those paid for such services as may be provided, nor covered by
prohibitions of an economic nature".
Article 591:  "A free zone must be established by law".
Law No. 24,331 was enacted pursuant to the latter Article and in order to enable the regime to
become operational, as it was only defined conceptually in the Customs Code.G/SCM/Q2/ARG/19
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Thus, in response to the question on this specific issue of the free zone, the answer is that it
does not fall within the meaning of Article 3.1 regarding the treatment of prohibited subsidies as
defined by the WTO Subsidies Agreement.
(c) Please describe what kind of services are rendered?
Reply
The services provided by the Free Zone concessionaire are set out in Article 20 of
Law No. 24,331.  The Article includes among the concessionaire's obligations that of carrying out
infrastructure work and providing connections for basic services:  provision of the basic services
mentioned, namely, supply of water, lighting, gas, electricity, telecommunications, power, heating,refrigeration or any other type of service necessary for free zone operations and activities.
(d) What is the total amount or annual amount budgeted for this programme?
Reply
The exemption from payment of domestic taxes for the basic services provided by the free
zone concessionaire is not a budgetary item.
Questions from Mexico
(a) What duration is established by Law No. 24,331 for the Free Zones Programme?
Reply
The Law does not establish any duration.
(b) Is any enterprise which does business in th e Free Zones eligible to receive subsidies or
must certain conditions be met and, if so, what are those conditions?
Reply
Article 21 of Law No. 24,331 establishes that "Users shall be national or foreign natural or
legal persons entitled to carry out activities within the free zone against payment of an agreed price".
No other requirement is laid down for eligibility for the treatment provided by the Law.
Questions from Japan and the European Union
(a) Does Argentina consider that exemption from  the taxes on the export of consumer goods
under the programme constitutes export subsidies within the meaning of Article 3.1(a) of the
SCM Agreement.
(b) According to the policy objective in Argent ina's notification, this programme appears to
be contingent upon export performance.  Could Argentina explain whether export activity is a
condition to be elegible for benefits under this programme?  If export activity is a requirement,
could Argentina provide the table of how this programme will be phased-out?G/SCM/Q2/ARG/19
Page 4
Reply
Law No. 24,331 does not impose as a condition any type of requirement relating to export,
which is one of the possible activities within the Free Zone.
The exemption from domestic taxes covers basic services provided by the Free Zone
concessionaire to all enterprises, regardless of their type of activity.
(c) Pursuant to Law 24,331 of 1994, the Argentinean authorities can establish one free zone
per province.  Have free trade zones been set up in the 23 provinces?
Reply
No.  At present only three free zones are in operation, in Buenos Aires, Tucumán and
San Luis.  The remainder are at one of the prior stages provided for by Law No. 24,331:  tendering
stage, construction stage etc.
(d) Could Argentina explain whether the Special Customs Area of Tierra del Fuego falls
within this programme?
Reply
These are two separate and distinct regimes.  The Special Customs Area of Tierra del Fuego
was established by Law No. 19,640 of 1972.  It should be noted that the initiation and approval of
formalities relating to new projects under this regime has been suspended since 1989 when the
Economic Emergency Act was passed.  This suspension was extended by Decrees 505/95 and
1927/93.
The benefits granted under Law No. 19,640 in the past were extended only in the case of
already covered and installed enterprises.
PATAGONIAN PORTS
Questions from the European Union and Chile
Argentina states that this programme will be gradually eliminated as from
31 December 1999.  Can Argentina confirm that this programme will phased-out by 2003?
In notification G/SCM/N/3/ARG it is stat ed that the Patagonian Ports Programme will
be terminated in the year 2007.  However, the current notification indicates that the programme
will be dismantled at a rate of one percentage point a year as from the end of 1999.
Consequently, will this export subsidy be maintained beyond the year 2003?
Reply
With regard to the time-limit of 2003 that is mentioned, if this is a reference to Article 27.2 of
the Subsidies Agreement, it should be pointed out that the Patagonian ports refund scheme does not
fall within the terms of Article 3.1(a) of the Agreem ent.  Hence, there is no obligation to eliminate it
within eight years.  It is a regional development programme.
The refund scheme for exports through Patagonian ports was established by Law No. 23,018
of 1983, with effect from 1984.  The Law provided for different reimbursement rates according to theG/SCM/Q2/ARG/19
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port used, and established a phasing-out timetable based on reducing these rates by one percentage
point annually as from 1 January 1995.
Law No. 24,490 adjusted the starting point for the phasing-out to bring it into line with its
own provisions with regard to the original regime.
FORESTRY ACTIVITIES
Question from the United States
Under forestry activities, how long will Decree No. 711/95 and Act No. 24,857 remain in
effect?
Reply
Decree No. 711/95 will remain in effect through the year 2000.
Law No. 24,857 concerns tax stability for the use of forests covered by Law No. 13,273 and
does not include a termination date.
MINING SECTOR
Question from the United States
Regarding "Mining", please provide the form of subsidy for Decrees 554/81, 2,686/93
and 779/95.
Reply
Decree No. 554/81 is no longer in force:  it  was repealed by Law No. 24,196 (Official Journal
of 24 May 1993).
Decree No. 2,686/93 establishing regulations under the Mining Investment Act No. 24,196
does not contain any provisions that would subsidize exports.  It grants the necessary legal security inorder to attract investment into the country.  For this purpose it establishes tax stability guaranteeing
that the rate of taxes levied on the investment may not be increased for a thirty-year period.  When
this benefit is granted there is no differentiation with respect to other production activities and it is not
necessary to export in order to be eligible for it.
Decree No. 2,686/93 establishes the system of accelerated depreciation for goods used and
acquired by a mining investor to carry out production activities.
Decree No. 779/95 does not involve an export subsidy.  Under this Decree, which covers all
production activities, the State finances the payment of value added tax on purchases of capital goods.
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