WORLD TRADE
ORGANIZATIONG/SCM/Q2/POL/11
30 October 2003
(03-5779)
Committee on Subsidies
and Countervailing MeasuresOriginal:  English
SUBSIDIES
Replies to Questions Posed by the UNITED STATES1
Regarding the Updating Notification of POLAND2
The following communication, dated 28 October 2003, has been received from the Delegation
of Poland.
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Loans from EFSAL Funds
Q1. Please explain the meaning of the term “EFSAL.”
Reply
The acronym EFSAL stands for the Enterprise a nd Financial Sector Adjustment Loan.  This is
loan No. 3599/POL granted to Poland by the Intern ational Bank for Reconstruction and Development
under the loan agreement of 11 October 1993.
Q2. Are interest rates subsidized?  If so, what portion is subsidized?  For what amount of
time?
Reply
The terms of loans granted from budget funds under tranche I of the Bank's loan were more
favourable as compared with commercial loans (that is the rate was subsidized).  The interest rate was
between 1/3 and 0.8 of the refinance loan (in most cases 0.5).  Loans under tranche II are granted on
less favourable terms.  The interest rate may not be lower than the WIBOR rate.
Investment Tax Reductions
Q3. Please indicate the eligibility criteria you use to determine which areas qualify for this
programme.
                                                     
1 G/SCM/Q2/POL/10
2 G/SCM/N/60/POLG/SCM/Q2/POL/11
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Reply
The legal regulations concerning  tax reductions as described in this programme ceased to be
effective as of 1 January 1999.  Therefore in 1999 the right to reductions could be exercised only by
natural and legal persons who had acquired the entitlement to tax reductions by the end of 1998 andhad not made use thereof by the end of that period.  The legal regulations then in force determined the
requirements to be fulfilled for deductions of investment expenditure from taxable income for tax
payers who engaged in, and commenced activities in municipalities (called in Polish:  gminas  – the
lowest level of local self-government) threatened by structural unemployment, who used in whole
certain assets in those municipalities.  Another criterion enabling access to tax reductions was to
increase the level of employment.  The list of municipalities was published annually by the Council of
Ministers in a regulation.  The principal criterion was the rate of unemployment and its expectedincrease (however, there were no threshold values for the unemployment rate that would
automatically qualify a municipality to be included in the list of those threatened by structural
unemployment).
Credit Warrants from Funds of “Bank Gospodarstwa Krajowego”
Q4. Is the “Bank Gospodarstwa Krajowego”a government-owned and controlled bank?
Reply
Bank Gospodarstwa Krajowego is a state-owned bank.  The ownership functions are
exercised by the Minister of State Treasury who appoints the members of its Supervisory Board and
applies to the President of the Council of Ministers for appointment and dismissal of the Chairman of
the Supervisory Board.  In its operations, however, the Bank follows the provisions of the banking
law applicable to all banks and hence it is subject to control by the General Inspector of BankingSupervision which is an independent institution.
Restructuring Programme for Steel and Iron Industry
Q5. Were the costs that were paid, such as for retirement, costs that would normally be
incurred by the stee l and iron companies?
Reply
Welfare payments under the programme were set in the tri-partite agreement between the
Government, trade unions and employers.  In a "normal" situation, severance pays or retirement
payment are regulated in the applicable parliamentary acts.  The steelworks would of course bearthose costs but the amounts would be much lower.  Under the restructuring programme, the welfare
payments were so high that even though part of them was financed from national budget subsidies, the
steelworks nevertheless incurred expenses higher than indicated by their statutory obligations.  For
instance, the severance pay in group redundancies is (statutorily) three times the wages.  Under the
restructuring programme for the steel industry, the severance pay was up to 14 times the wages,50 per cent of which was covered from the steelworks' own resources.
Q6. Do individuals or companies pay a premium in  order to receive these payments?  If so,
what is the amount of that premium?  How often is the premium paid?
Reply
Neither individuals nor companies pay a premium in order to receive payments.G/SCM/Q2/POL/11
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Insurance System Supporting Export Contracts, Guaranteed by the Treasury
Q7. Is the Export Credits Insurance Corporat ion headed, owned, or controlled by the
government?  On what terms are these programmes offered?
Reply
KUKE S.A. (Export Credit Insurance Corporat ion) is a joint-stock company.  The main
shareholder is the State Treasury represented by the Minister of Finance (87 per cent).  The
shareholding of private shareholders does not exceed 3 per cent.  The activities of KUKE S.A.
concerning state-guaranteed export contracts are defined by the Committee for Export Insurance
Policy consisting of representatives of six ministries at the level of under-secretaries of state, and arepresentative of the National Bank of Poland (NBP).
KUKE S.A. provides insurance and guarantees on the account of the State Treasury,
following the rules set out in th e OECD Arrangement on Guidelines for Officially Supported Export
Credits and the Berne Union.  While insurance and guarantees provided by KUKE S.A. on its ownaccount are offered upon commercial terms under the Act of 28 July 1990 on insurance activities.
Investment Related Tax Rebate Connected with Results of Export Activities
Q9. How is the amount of ‘relief’ or rebate determined?
Reply
In 1999, taxpayers whose share of export in their total revenues in the fiscal year was in
excess of 50 per cent or their export revenues exceeded the equivalent of EUR 8 million, did not haveto – in order to use the allowance – demonstrate indicators of share of income (2, 4 or 8 per cent) in
their revenues as set for other taxpayers.  Furthermore, in 1999, the amount of tax deductible
investment expenditure for them was 30 per cent of the taxation base (for other taxpayers the
respective figure was 10 per cent).  It should be noted, however, that other groups of taxpayers were
entitled to such preferences too and exporters were not the only preferred group.
Financial Support for Sugar Export
Q10. Under what criteria was support under this programme offered?
Reply
Detailed criteria for support to sugar export are determined on the annual basis by the
regulation of the Council of Ministers which sets the production limits of quota A and B (quota A is
intended for export and covered by subsidies), and the regulation that sets the minimum price of sugar
for a given sugar-beet harvest.  Furthermore, the regulation of the Council of Ministers is issuedannually concerning the levels of charges collected from entities purchasing sugar to supply the
domestic market, intended as subsidies to the export of sugar.  Poland subsidizes the export of sugar
in the amounts and values that comply with the prov isions of the Polish concession list.  There are no
other criteria for entities to restrict access to the programme.
Q11. What types of ‘financial support’ were offered?G/SCM/Q2/POL/11
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Reply
Support is provided in the form of direct export surcharges.
Subsidizing of Interests on Banking Loans for Agricultural Purposes
Q12. Were all agricultural sectors eligible for aid under this programme?
Reply
The criterion for granting support under the programme was not a specific sector of
agricultural activities but the intended use of the loan.  Subsidies to interest rates applied to loansintended for:
- investment projects in agriculture, agriculture product and food processing and services to
agriculture,
- improvement of the agrarian structure,- projects to create new jobs in production outside agriculture, in services and trade on rural
areas.
Q13. What sectors received aid under this programme?
Reply
No data is available on that subject because the sector of activities was not the criterion for
granting support.
Q14. Does the amount of subsidization vary by sector?
Reply
No.
Q15. Under what criteria is the interest on bank loans subsidized?
Reply
There were no subject-based criteria under the programme.  Support was addressed upon
equal terms to farmers, business entities engaging in agriculture product and food processing andservices to agriculture and those starting up business in rural areas.  The levels of  subsidies were
difference for different credit lines and based on the intended use of the loan.  Details are provided in
the replies concerning two programmes below.
Working Capital Loans
Q16. Under what criteria is aid under this programme provided?
Reply
The Agency for Restructuring and Modernization of Agriculture (ARMA) provides subsidies
to interest rates on bank loans intended for:G/SCM/Q2/POL/11
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(a) purchase of means for agricultural production:
- mineral fertilizers, plant protection agents, fodder
- quality seed material (plant species defined in detail),
- breeding stock (species defined in detail)
- fuel for agricultural purposes.
The granting of support was conditioned in this case by:
- documenting the utilization of at least 80 per cent of the loan amount for purchases
made after the date of execution of the loan agreement or during a period of
2 months before the date of its execution,
- documenting the size of land under agricultural use in the farm and the making of
a declaration that the land is not and shall not be leased during the period for
which the subsidy is to be provided,
- in the case of lease of land (by borrower), submission of the lease agreement for at
least 10 months, including 8 months during the period for which the subsidy is to
be provided,
- borrower's representation concerning the amounts of loans taken from other banks
for the above-described purposes.
(b) purchase and storage of farm produce
- purchase from domestic agricultural producers and storage of domestic seed
material and certain plant species (specified in detail),
- storage of seasonal surpluses of certain products from domestic production
(specified in detail).
Subsidies could be provided only to:
- domestic entities with authorization to trade in and reproduce seeds or undertaking
work relating to technological preparation of seeds,
- domestic entrepreneurs engaging in food and pharmaceutical processing or
processing of fibre crops purchased from domestic agricultural producers or
engaging in storage of produce for such purposes if they possess certificated
storage facilities.
The granting of subsidy was also conditioned by:
- application to purchase of prices not lower than the minimum price with respect to
produce for which such price was set by the Council of Ministers,
- effecting the payment to suppliers within the time-limit stipulated in the contracts
or within a period not longer than 14 days of the date of receipt of invoice from thesupplier.
Q17. On what terms are the loans granted?  That is, for what period of time, with what
repayment terms?
Reply
It should be noted that support under the programme does not consist in granting loans but in
subsidizing interest rates on bank loans.  The terms of subsidies were as follows:
(a) loan for the purchase of means for agricultural production
Subsidies were provided for loans taken by domestic entities engaging in agricultural
activities on the domestic territory for a period not longer than 12 months of the date of execution of
the loan agreement.  In 1999, the level of subsidiz ed loans could not exceed a total of the equivalentG/SCM/Q2/POL/11
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of between 6 q to 10 q of rye per 1 ha of farmland at the prices applied to the calculation of the
agricultural tax.  The annual interest rate for the borrower was 0.4 of the rediscount rate of notes
received from banks for rediscount by the NBP per annum.
(b) loans for the purchase and storage of farm produceThe maximum period for the application of subsidies to the purchase and storage of farm
produce from 1999 crops was, from the date of execution of the loan agreement:
- 12 months for entrepreneurs engaging in food and pharmaceutical processing and the
processing of fibre crops,
- 6 months for entrepreneurs engaging in the storage of farm produce purchased,- 10 months for entities engaging in the storage of farm produce, purchasing grain from
1999 crops with subsidies to producers of grain under contracts with the Agricultural
Market Agency,
- 9 months for entities engaging in the purchase and storage of seed material and seasonal
surpluses.
At the same time, subsidies were granted under the condition that the repayment term did not
exceed 30 September of the following year.
The annual interest rate for the borrower was 0.4 of the rediscount rate of notes received from
banks for rediscount by the NBP per annum.
Q18. Are loans under this programme available to agricultural enterprises which produce
and sell for both domestic and export markets?
Reply
The use of farm production on the domestic market or its export was not a criterion of
accessibility to preferential working capital loans.
Investment Loans
Q19. Can you please describe on what basis you  determine the amount of interest subsidies
you will provide on each loan?
Reply
The Agency for Restructuring and Modernization of Agriculture (ARMA) provides subsidies
to interest on loans at the levels:
- half of the interest rate applied by banks (basic investment loan, job-creation loan),
- ¾ of the interest rate applied by banks (loans for projects under sectoral and regional
programmes),
- difference between the interest rate applied by banks and ¼ of the rediscount rate of notes
received from banks for rediscount by the NBP of 19 per cent as on 31.12.1999 (loan for
the purchase of farmland, loan to young farmers).
The figures in the table below illustrate the interest paid by the ARMA and the borrower as on
31.12.1999 for particular credit lines:
Credit line Interest paid by:
ARMA BorrowerG/SCM/Q2/POL/11
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IP, MP 10.92-11.87 10.93-11.88
BR, RE 16.39 – 17.81 5.46 – 5.94
KZ, MR 17.10 – 19.0 4.75
IP - loan for investment projects in agriculture, agricultural food processing and services to
agriculture,
MP - loan for investment projects to create new jobs outside agriculture in rural and urban/rural
municipalities that guarantee employment to rural population,
BR - loans for projects under sectoral programmes,
RE - loans for projects under regional programmes,
KZ - loan for the purchase of farmland,
MR - loan for establishing and organizing farms by persons who are below 40 years of age.
Intervention Purchase of Food and Agricultural  Products by the Agricultural Market Agency
(AMA)
Q20. Please indicate, for each sector, below which price the market must fall before an
intervention will take place.
Reply
Intervention purchases of agricultural produce and their products are effected when the
average market prices thereof are at the level of 90 per cent of the intervention price.  This ruleapplies to the market of agricultural produce on which the Agency undertakes intervention in
accordance with its programme of activities set for each calendar year.
Q21. How long does the market price have to be below the set price before the intervention
will take place?
Reply
Intervention purchases are undertaken when during 6 consecutive days the market price
remains at a certain level.
Q22. Are the sectors mentioned in the notification the only sectors which are eligible for
intervention?
Reply
The sectors specified in the notification are the only ones on which the Agency undertook
intervention in 1999.  Intervention activities are set in the annual programme of intervention activities
of the Agricultural Market Agency (AMA), approved by the Council of Ministers, that comprises the
list of basic agricultural products and semi-finished food products that are subject to the measures
undertaken by the Agency.
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