WORLD TRADE  
ORGANIZATION   
G/SCM/Q2/USA/58 
2 October 2012 
 (12-5333) 
Committee on Subsidies and  
Countervailing Measures Original:   English 
 
 
 
SUBSIDIES 
 
Replies to Questions posed by CANADA1 regarding the New and 
Full Notification of the UNITED STATES2 
  
 The following communication, dated 25 September 2012, is being circulated at the request of 
the Delegation of the United States. 
 
_______________ 
 
 
AGRICULTURE 
 
Export Assistance Programmes 
 
The Dairy Export Incentive Programme (DEIP) 
 Question 1 
 
 According to the notification, the Un ited States provides bonuses through the 
Commodity Credit Corporation (CCC) intended to  enable exporters to compete at commercial 
prices in selected foreign markets.  The full amount of this subsid y in 2009 equalled over 
21 million dollars in budgetary outlays.  Could the United States identify the criteria used to determine whether an exporter requires assistan ce to be competitive in selected foreign 
markets? Are any foreign markets specif ically targeted by this programme?  
 
Reply 
  The amount of subsidy under the DEIP is de termined on a competitive bid basis.  A firm 
export sale must exist and the details of the sale, inclusive of product specifications, export pricing 
and delivery period, are reviewed against the prev ailing world market and the domestic U.S. market 
for like products.  Only sales that meet or exc eed acceptable export pricing are reviewed.  An 
acceptable subsidy or bonus level is based on the difference between the acceptable export sales price 
and the U.S. domestic price for like products.  
 
 Criteria for selection of markets include but ar e not limited to the following considerations:  
1) contribution in furthering U.S. trade policy objectives and countering unfair trade practices; 
2) contribution to meeting U.S. export goals and developing, maintain ing or expanding export 
markets;  3) effect of the program on non-subsidi zed exporters, and 4) a cost/benefit review.    
 
                                                      
1 G/SCM/Q2/USA/54. 
2 G/SCM/N/220/USA.   G/SCM/Q2/USA/58 
Page 2 
 
 
  Agricultural domestic support programmes 
 
Agriculture Income Support and Marketin g Assistance for Covered Commodities   
 
Question 2 
 
 The United States reports several programm es and also large amounts of support under 
the title Agriculture Income Support and Mark eting Assistance for Covered Commodities and 
states that "It is difficult to determine to what  extent, if any, these programmes have affected 
trade, given the existence of other policy instruments that affect agricultural trade".  What are 
the other instruments that affect agricultu ral trade and where are they reported?    
 Reply 
 
 This is a general reference to other factors th at affect agricultural trade, including changes in 
exchange rates, economic growth rates, other countries' subsidies and import tariffs, etc. 
 
Question 3 
 
 Regarding Direct Payments, Counter-Cy clical Payments, Non-Recourse Marketing 
Assistance Loans and Loan Deficiency Payments, and Average Crop Revenue Election, what 
are the amounts for each individual commodity that make up the reported total amounts?  
 
Reply 
  The United States refers Canada to its domes tic support notifications in G/AG/N for various 
years. Note that each program operates under different  criteria.  Some payments are based on current 
production and some are based on historical produc tion, which we do not report as product-specific 
support. 
 
Crop Insurance  
 
Question 4  
  The United States reports a revised am ount for 2008 comprising only premium 
subsidies. We appreciate the transparency provi ded through this revision.  We understand large 
amounts are also provided to insurance companies in the form of "underwriting gains".  Where 
are those subsidies notified?    
 Reply 
 
 The United States reported "underwriting gains to insurers" in G/AG/N/USA/80 for 2009 and 
in G/AG/N/USA77/Rev.1 for 2008.   G/SCM/Q2/USA/58 
 Page 3 
 
 
  FISHERIES 
 
Fisheries Finance Program (FFP)   
Question 5 
 
 Canada notes that under the Fisheries Finance Program (FFP), loans are provided 
directly to individuals or business enterprises that  have qualified projects.  Could the United 
States elaborate on the criteria for qualified project s to be eligible to receive support under this 
programme? 
 
Reply 
 
 Qualified projects for FFP financing are, in gene ral:  (a) aquaculture facilities;  (b) fisheries 
facilities;  (c) fishing vessels, excluding the c onstruction of new vessels or reconstruction that 
increases harvesting capacity; and (d) certain defined individual fishing quota shares.  Each individual 
project must then meet standard credit and co llateral tests to be eligible for approval. 
 SHIPYARDS  Assistance to Small Shipyards Grant Programme 
 
Question 6  
 The notification states that the SSGP provides grants for capital and related 
improvements to qualified small shipyard faciliti es, and that small shipyards fall into two 
categories: those with fewer than 600 empl oyees, and those with between 600 and 1200 
employees.  Could the United States elaborate on th e criteria for small shipyards to be eligible to 
receive support under this programme?  The noti fication provides information concerning the 
starting date of the programme.  Could the United States confirm the expected ending date of 
the programme?     
Reply 
 
The shipyard facility for which a grant is sought  must be in a single geographical location, 
located in or near a maritime community, and may not have more than 1200 production employees. 
The applicant must be the operating company of th e shipyard facility.  The shipyard facility must 
construct, repair, or reconfigure vessels 40 ft. in le ngth or greater, for commercial or government use.  
Eligible projects include capital and related improve ment projects that will be effective in fostering 
efficiency, competitive operations, and quality ship construction, repair, a nd reconfiguration; and 
training projects that will be effective in foster ing employee skills and enha ncing productivity.  For 
capital improvement projects, all items proposed fo r funding must be new and to be owned by the 
applicant.  For both capital improvement and tr aining projects, all project costs, including the 
recipient's share, must be incurred after the date of the grant agreement. 
 
 Each year in which there is funding for Small Shipyard Grants, the Department of 
Transportation's Maritime Administration places a noti ce in the Federal Register with details of the 
program and dates for that year's grants.  (See:  March 4, 2009, Volume 74, Number 41, pp. 9474-
9475; 2 April 2009, Volume 74, Number 62, pp.15049-15050; 13 April 2009, Volume 74, 
Number 69, p. 16912; 13 January 2010, Volume 75, Number 8, pp. 1832-1834; 29 April 2011, 
Volume 76, Number 83, pp. 24082-24084; and 12December, 2011, Volume 76, Number 238, pp. 77307 – 77308.)  Future funding is unclear.  G/SCM/Q2/USA/58 
Page 4 
 
 
  OTHER 
 
New Markets Tax Credit  
Question 7 
 
 Could the United States provide any eligibility criteria for this programme in addition to 
making an equity investment in a CDE programme?  Could the United States elaborate on the criteria to be considered a CDE? Specifically, how is a domestic enterprise's "primary mission 
to serve or provide investment capital for low- income communities or individuals" defined?  
Could the United States specify which companie s or types of companies have received support 
under this programme? 
 Reply 
  The new markets tax credit provides a tax credit to investors who make qualified equity 
investments in privately-managed investment vehicles called community development entities (CDEs).  A qualified CDE is any domestic corpora tion or partnership:  (1) the primary mission of 
which is serving or providing investment capital fo r low-income communities or low-income persons; 
(2) that maintains accountability to residents of low-income communities thr ough their representation 
on any governing board of or any advisory board to the CDE;  and (3) that is certified by the Treasury 
Department's Community Development Financial In stitutions Fund (CDFI Fund) as being a qualified 
CDE.  To be certified an entity must direct at least 60 per cent of its activities towards low-income 
communities or low-income persons.  Details on the CDE certification process are found at 
http://www.cdfifund.gov/what_we_do/programs_id.asp?programID=10 .   
 
 A qualified equity investment means stock (oth er than nonqualified preferred stock) in a 
corporation or a capital interest in a partnership that is acquired directly from a CDE for cash, and 
includes an investment of a subsequent purchaser  if such investment was a qualified equity 
investment in the hands of the prior holder.  Substa ntially all of the investment proceeds must be used 
by the CDE to make qualified "low-income commun ity" investments.  For this purpose, qualified 
low-income community investments include: (1) cap ital or equity investments in, or loans to, 
qualified active low-income community businesses ; (2) certain financial counselling and other 
services to businesses and residents in low-income  communities; (3) the purchase from another CDE 
of any loan made by such entity that is a qualif ied low-income community investment;  and (4) an 
equity investment in, or loan to, another CDE. 
  A "low-income community" is a population census tract with either (1) a poverty rate of at 
least 20 per cent or (2) median family income wh ich does not exceed 80 per cent of the greater of 
metropolitan area median family income or stat ewide median family income (for a nonmetropolitan 
census tract, does not exceed 80 per cent of statewid e median family income).  In the case of a 
population census tract located within a high migration rural county, low-income is defined by 
reference to 85 per cent (as opposed to 80 per cent) of statewide median family income.  For this 
purpose, a high migration rural county is any county that, during the 20-year period ending with the 
year in which the most recent census was conducted,  has a net outmigration of inhabitants from the 
county of at least 10 per cent of the population of the county at the beginning of such period. 
 
 A qualified active low-income community busi ness (QALICB) is defined as a business that 
satisfies, with respect to a taxable year, the following requirements:  (1) at least 50 per cent of the total 
gross income of the business is derived from the active conduct of trade or business activities in any 
low-income community;  (2) a substantial portion of the tangible property of the business is used in a 
low-income community;  (3) a substantial portion of  the services performed for the business by its 
employees is performed in a low-income community;  a nd (4) less than five per cent of the average of  G/SCM/Q2/USA/58 
 Page 5 
 
 
  the aggregate unadjusted bases of the property of th e business is attributable to certain financial 
property or to certain collectibles. 
  Through fiscal year 2010, real estate QALICBs have received 60 per cent of NMTC 
financing.  Another 37 per cent of NMTC fina ncing went to non-real estate QALICBs.  The 
remaining 3 per cent of NMTC financing went to ot her CDEs.  A detailed list of the QALICBs that 
have received NMTC financing is available at http://www.cdfifund.gov/news_events/CDFI-2011-26-
CDFI-Fund-Releases-Data-Related-to-NMTC-Program-Projects-Financed-Through-2010.asp . 
 
Attachment 1 – Sub-federal Programmes 
 Tennessee 
 
Question 8  
 It is our understanding that in 2010, government support was provided for the 
establishment of a new manufacturing facility of Electrolux in Memphis
3. Could the 
United States specify whether this support was provided under one of the notified programmes? 
If not, could the United States explain why this programme was not notified?   
Reply 
  Identification of particular recipients is  not required by the Subsidies Agreement.  
 
USVI and Puerto Rico 
 
Question 9 
  Canada notes that support measures that  favour United States Virgin Island and 
Puerto Rico rum producers were not notified, in particular the molasses subsidy and the federal 
excise taxes on rum that are returned to the trea suries of the United States Virgin Islands and 
Puerto Rico.  Could the United States provide information on the molasses subsidy indicating 
the amount of the subsidy and the enterprises that  have benefited from this subsidy?  Could the 
United States indicate the amount of the federa l excise taxes on rum that were returned to the 
treasuries of the United States Virgin Islands and Puerto Rico?  Could the United States 
indicate the current status of the molasses subsidy program and the federal excise tax 
reimbursement program for rum? 
 Reply 
  Under existing contracts, a payment is made to certain rum producers in the United States Virgin Islands (USVI) equal to the difference be tween $0.16 per gallon of molasses used to produce 
bulk rum at a USVI facility (see 33 USVI Code Section 3036) and the producer's total cost per 
gallon.  The Subsides Agreement does not require the identification of specific beneficiaries. 
  The United States imposes an excise tax of $13.50 per proof gallon under section 5001(a)(1) 
of the Internal Revenue Code of 1986 on distilled sp irits, including rum, produced in or imported into 
the United States.  The Caribbean Basin Economic Recovery Act (CBERA) required that excise taxes 
(less the estimated amount necessary for payment of refunds and drawbacks) on all rum imported into 
                                                      
 3http://news.tn.gov/node/6486 , and 
http://www.cityofmemphis.org/framework.aspx?page=5 70&search?q=electrolux&btnG=Search&site=my_colle
ction&client=my_collection&proxystylesheet=my_collection&output=xml_no_dtd  G/SCM/Q2/USA/58 
Page 6 
 
 
  the United States, including rum from any foreign c ountry, be transferred (or "covered over") to the 
treasuries of Puerto Rico and the U.S. Virgin Islands (USVI).   
  Since 1999, Congress has periodically set the c over-over rate at $13.25 and recently passed 
legislation approving that rate for rum brought  into the United States after 31 December 2011 and 
before 1 January 2014.  In FY2011, Puerto Rico received $452 million and the USVI received $133.5 
million from cover over revenue.    
  The cover-over provisions for rum extend back to 1917 for Puerto Rico and 1954 for the 
USVI.  There are no restrictions on how the govern ments of Puerto Rico and the USVI use the 
transferred funds.  The United States considers th ese payments to be general revenue sources for the 
two territories, rather than a subsidy.  Delaware   
Title of Programme: Gross Receipt Tax Reduction s for targeted industries locating within a 
targeted area  
Question 10 
  Could the United States specify what  the targeted industries are?   
 Reply 
  The industries that qualify for Gross Receipt Tax Reductions are as follows: manufacturing, 
including clean technology device manufacturing; w holesaling; scientific, agricultural or industrial 
research, development or testing; computer processing or data preparation or processing services; 
engineering services; consumer credit reporting servi ces, including adjustment and collection services 
and credit reporting services; aviation services; non-custom computer software; telecommunications 
services; any combination of the activities described above; or, the administration, management or 
support operations (including marketing)  of any activity described above.  
 Title of Programme: Gross Receipt T ax Reductions for targeted industries 
 Question 11 
 
 Could the United States specify wh at the targeted industries are?  
 
Reply 
 
 The industries that qualify for Gross Receipt Ta x Reductions are the same as for the program 
referred to above in Question 10. 
 New York   Title of the Programme: Qualified Empire Zone Enterprise Initiatives 
 
Question 12  
 Could the United States elaborate on the criteria to be considered a "qualified business" 
to be eligible to receive support under this programme?   G/SCM/Q2/USA/58 
 Page 7 
 
 
  Reply 
 
 In order to become a Qualified Empire Zone Enterprise (QEZE) under this program, a business must first be certified by the Commissioner of Economic Development in accordance with 
criteria set forth in the General Municipal Law, und er Article 18-B at §959(a)(iii).  While the all of 
the criteria are too extensive to duplicate here, in gene ral they pertain to whether, and to what extent, 
the business creates, adds or retains jobs in a designa ted Empire Zone within the state.  In order to 
qualify for the tax incentives under the program, a Q EZE must also meet employment tests for the 
relevant tax period.  The test parameters are set forth under the Tax Law at §14(b).  Complete 
information regarding the qualifications and incen tives under this program is available online through 
publications from the New York Depart ment of Taxation and Finance at 
http://www.tax.ny.gov/bus/multi/empire_zone.htm . 
 
South Carolina  
 
Title of the Programme: Economic Development General Obligation Bond 
 
Question 13  
 
 Could the United States specify which indus tries or types of industries have received 
support under this programme? Could the United States specify the amount of grant money 
disbursed under this programme?  
Reply 
  In South Carolina, Economic Development General Obligation Bonds (ED Bonds) may be 
issued to fund the development of infrastructure associated with an economic development project 
within the State.  Upon the sale of the ED Bonds, the proceeds are applied by  the State to the purposes 
for which they were issued and may only be expend ed for the purpose of pr oviding infrastructure.  
The following are qualified economic development projects: 
 
 A project in any industry that has at least $400 million invested and at least 400 new 
jobs created within eight years.   
 
 A project that is a life sciences facility and has at least $100 million invested and at 
least 200 new jobs, which have an average a nnual cash compensation level of at least 
twice the annual per capita income in the St ate, created at the project within eight 
years.  A life sciences facility is defined as a business engaged in pharmaceutical, medicine, and related laboratory instrume nt manufacturing, processing, or research 
and development, 
 
 A project that includes a training and resea rch facility and the necessary equipment, 
owned by the State or any agency, instru mentality, or political subdivision, for 
purposes of providing the necessary trained personnel to support the State's economically vital tourism industry.  
 
 A project that includes a national and intern ational convention and trade show center 
in the State, owned by the State or any agency, instrumentality, or political subdivision thereof.  A "national and inte rnational convention and trade show center" 
means a not less than 200,000 sq. ft. facility consisting of meeting and exhibit space 
at which are held major conventions, trad e shows, and special events that bring G/SCM/Q2/USA/58 
Page 8 
 
 
  delegates into the State and community including, but not limited to, consumer 
shows, sporting events, and other meetings.  
  To date, ED Bonds have been issued to support manufacturing, research and development, 
and service industries. 
 Title of the Programme: Fee-in-lieu of Local Property Taxes 
 
Question 14 
 
 Could the United States elaborate on th e criteria to be considered a "qualifying 
investment" to be eligible to receive support  under this programme? Could the United States 
specify which industries or types of industri es have received support under this programme? 
 
Reply 
  A Fee-in-Lieu of Local Property Taxes may be offered at the discretion of a county for companies with a total investment of $2.5 million or greater on new buildings and equipment. 
Property that has previously been subject to South Carolina property taxes is not eligible for the fee 
unless a company is investing an additional $45 million in the project beyond the price of the 
property. 
 
 A Fee-in-Lieu of Local Property Taxes is not limited to any particular type of business or 
industry.  Counties in South Carolina have offered Fees-in-Lieu of Local Property Taxes to companies 
in various different industries.  Because this incentive is offered by local governments on a case-by-
case basis, a list of all the different industri es across all counties is not readily available. 
 
Title of the Programme: Jobs Development Credit 
 
Question 15 
 
 Canada understands that this tax credit is discretionary. Could the United States specify 
which industries or types of industries have received support under this programme? Could the 
United States specify if any revenue has been foregone? Can the tax credit granted under this programme be provided in addition to the t ax credit under the Jobs Tax Credit for New Job 
Creation programme?  
Reply 
  Job Development Credits are available to ta xpayers that operate manufacturing, tourism, 
processing, warehousing, distribution, research and development, corporate office, qualifying service-
related, agribusiness, extraordinary retail or qualif ying technology intensive facilities or banks.  Such 
credits are therefore not limited to certain industries,  as evidenced by the fact that, since the program's 
inception, the Coordinating Council for Economic  Development has awarded Job Development 
Credits to 1,394 projects in approximately 80 different industries.    
 Job Development Credits are a refund of a portion of withholding tax payments that South 
Carolina would otherwise have retained.   A company may receive both a Job Development Credit, which is a refund of a portion of withholding tax pa yments, and a Jobs Tax Credit, which is a credit 
against income tax liability. 
  G/SCM/Q2/USA/58 
 Page 9 
 
 
  Texas  
 
Title of the Programme: Product/Business Fund  
Question 16 
 
 Could the United States provide information with respect to these loans, such as the 
interest rate, term, etc.?  Could the United Stat es specify which industries or types of industries 
have received support under this programme? 
 
Reply 
 
 The terms of Texas Product/Business Fund loans ar e individually set by the program's Board 
of Directors, taking account of the details of the specif ic project.  Interest rates are variable rates, set 
at LIBOR plus a spread determined on a project-specific basis.  As a general matter, the program 
supports industries in technology-related fields, includ ing (as mentioned in the original notification) a 
statutory preference for the advanced tec hnology areas of semiconductor, nanotechnology, 
biotechnology and biomedicine.  However, the pr ogram's Board of Directors will also entertain 
technology-related agricultural projects, as well as advanced manufacturing and renewable energy 
projects.    
__________