G/SCM/Q5/PER/2  
28 April 2016  
(16-2399)  Page: 1/6  
Committee on Subsidies and Countervailing Measures  Original: Spanish  
 
  COUNTERVAILING MEASURES 
REPLIES TO QUESTIONS FROM ARGENTINA1 
RELATING TO THE NOTIFICATION OF PERU2 
The following communication, dated 26 April 2016, is being circulated at the request of the 
delegation of Peru.  
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INVESTIGATION INTO ALLEGED SUBSID Y PRACTICES RELATING TO IMPORTS 
OF B100 BIODIESEL ORIGINATIN G IN THE ARGENTINE REPUBLIC 
Regarding the notification on the application by Peru of definitive countervailing duties 
on imports of B100 biodiesel originatin g in Argentina (document G/SCM/N/302 
of 16 March 2016), Argentina would be gratef ul for Peru's replies to the following 
questions: 
 
SUPPLY AGREEMENTS  
1. Argentina would like to know  why the Peruvian investigating authority consider that 
the supply agreements confer a benefit on companies exporting B100 biodiesel to Peru 
when the Argentine Government, through Law 26.093, prioritizes small and medium enterprises (chiefly those located far away  from the export centres), and limits the 
participation of the investigated companies, since in the absence of that regulation the 
companies exporting to Peru could themse lves easily cover the total demand for 
biodiesel on the domestic market? 
 
Reply 
 
The final determination report issued by the investigating authority explains that the subsidy 
granted by the Argentine Government for the prod uction of biodiesel in that country under the 
provisions of the Supply Agreement, confers a bene fit on Argentine biodiesel producers in relation 
to their domestic sales, not their export perfor mance. However, the information gathered during 
the investigation has shown that although the Supply Agreement regulates the domestic sale of 
biodiesel, it does not require Argentine producers to assign the total of their biodiesel production to the domestic market; indeed, in 2013, several Argentine biodiesel producers participating in the 
Supply Agreement not only engaged in domestic sale s, but exported biodiesel to various markets, 
including Peru. Nevertheless, in the investigation record, there is no information on government support for the production of Argentine biodiesel that is contingent upon this product's export 
to Peru. 
 In accordance with the information obtained during the investigation, the regulatory framework for the Argentine biodiesel industry, in effect in 2013, classifies companies producing this biofuel into 
four categories: large, large non-integrated, medium-sized and small. The list of Argentine 
biodiesel producers participating in the Supply Agreement in 2013 includes companies from each of these categories. As set out in the final report, the provisions of the Supply Agreement 
                                               
1 G/SCM/Q5/PER/1. 
2 G/SCM/N/302. G/SCM/Q5/PER/2 
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  determine different price conditions and domestic sales quotas for each company depending on the 
category to which it belongs. In this sense, all the Argentine biodiesel-producing companies participating in the Supply Agreement in 2013 obtained from the Argentine Government a benefit for the volume of their domestic sales of biodiesel that year, in accordance with the domestic sales 
quotas that were assigned to them under the Supply Agreement. 
 2. How can the residual and decreasing do mestic market share of the investigated 
companies be reconciled with the determination of subsidization and the profit margin 
put forward by INDECOPI?  Reply 
 The question posed by Argentina appears to connect, on the one hand, the particular characteristics of the participation of each Argentine biodiesel producer in the Supply Agreement 
with the determination of the existence of subsidie s reached by the Peruvian authority and, on the 
other hand, the characteristics of this participation with the determination of the amount of these subsidies. 
 
Regarding the first point, as explained in detail in the final report, a review of the information obtained during the investigation regarding the regulatory framework of the Argentine biodiesel industry makes it possible to affirm that, in accordance with the provisions of Articles 1 and 2 
of the Agreement on Subsidies and Countervailing Measures (ASCM), the Supply Agreement 
constitutes an actionable subsidy, since it involves a financial contribution that confers a benefit and is specific. Therefore, the determination of th e existence of subsidy practices deriving from the 
provisions of the Supply Agreement is reached on the basis of the legal analysis of those 
provisions, and is not related to the particular characteristics of each Argentine biodiesel producer's participation in the Supply Agreement. 
 
With regard to the second point, the final report explains that, in accordance with Article 14 of the 
ASCM, the amount of the subsidy granted by the Argentine Government to biodiesel production 
under the Supply Agreement was determined in terms of the benefit to the recipient. In this 
respect, it should be noted that the Supply Agreement confers a benefit on Argentine biodiesel 
producers in relation to their domestic sales. Indeed, by determining the domestic sales price of Argentine biodiesel and the domestic sales quotas for each producer, the Supply Agreement 
allows them to obtain more beneficial trading conditions than those they would obtain in the 
absence of the regulation. The price conditions and the size of domestic sales quotas differ for each producer depending on the category to which the producer belongs, i.e. according to whether 
the company is "large", "large non-integrated", "m edium-sized" or "small". Therefore, the amount 
of the subsidies calculated by the Peruvian authority in relation to each of the Argentine biodiesel producers participating in the investigation has been calculated according to the price conditions for each producer, the size of the domestic sales quotas they obtained from participating in the 
Supply Agreement, and the total volume of biodiesel produced by each producer in 2013. 
 3. How does Peru consider Resolution No. 011-2016/CDB-INDECOPI to be consistent 
with the ASCM when the INDECOPI Dumping and Subsidies Commission (CFD) itself 
recognizes that the sales that took plac e under the Supply Agreement are destined 
solely and exclusively for the domestic  market and not the export market? 
 
Reply 
 As explained in the final report and in the replies to questions 1 and 2, the provisions of the Supply 
Agreement constitute a "financial contribution" with in the meaning of ASCM Article 1. This financial 
contribution confers a benefit on the production of Argentine biodiesel, is specific, and causes injury to the domestic biodiesel industry, in the terms provided for in the ASCM. 
 
4. How can Peru maintain that biodiesel ex ports to Peru benefi ted from the alleged 
subsidies when the applicable legislatio n and the agreements concluded establish 
a control mechanism by the Law 26.093 implementing authority to ensure that the 
destination of the sales is in fact the do mestic market and not the export market? 
 G/SCM/Q5/PER/2 
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  Reply 
 
As explained in the final report, the provisions of the Supply Agreement constitute subsidies for the production of Argentine biodiesel, contingent upon the domestic sale of this biofuel. 
This means that by engaging in sales in the domestic market, Argentine biodiesel producers have 
access to the subsidy for producing biodiesel, and this production may be destined for the external market. The final report details the amount (in monetary units) received by Argentine biodiesel 
producers, determined on the basis of their sale s in the domestic market, and the amount of the 
subsidies for the production of Argentine biodiesel, calculated on the basis of total biodiesel production in the country in 2013, in accordance with the provisions of the ASCM.  
5. Bearing in mind the above questions, ho w does Peru justify the magnitude of the 
benefit determined by its investigating authority? 
 
Reply 
 
As described in question 4, the final report expl ains that, in accordance with Article 14 of the 
ASCM, the amount of the subsidy granted by the Argentine Government for biodiesel production 
under the Supply Agreement was determined in terms of the benefit to the recipient. In this respect, it should be noted that the Supply Agreement confers a benefit on Argentine biodiesel producers in relation to their domestic sales. Indeed, by determining the domestic sales price 
of Argentine biodiesel and the domestic sales quotas for each producer, the Supply Agreement 
enables them to obtain more beneficial trading conditions than those they would obtain in the absence of the regulation. The price conditions and the size of domestic sales quotas differ for 
each producer; therefore, the amount of the subs idies calculated by the Peruvian authority in 
relation to each of the Argentine biodiesel producers participating in the investigation, varies according to the price conditions for each of them, the size of the domestic sales quotas they 
obtained from their participation in the Supply Agreement, and the total volume of biodiesel 
produced by each producer in 2013.  6. Argentina would like to know whether, in calculating the alleged benefit, Peru took 
into consideration the accounting information provided by the investigated enterprises? 
If not, could Peru explain how and why the calculation of the amount of the alleged 
benefit is consistent with Article 14 of the ASCM? 
 
Reply 
 
The amount of the subsidy was calculated in term s of the benefit to the Argentine companies that 
participated in the investigation, on the basis of the information and documentation they provided throughout the process. The final report details th e methodology used by the Peruvian authority to 
determine the amount of the subsidies, as well as the information and documentation used to 
make this calculation. It should be noted that all the information and documentation submitted by 
the Argentine companies party to the proceedings has been taken into account, and was duly verified during the investigation, as established in the ASCM. 
 
PRESUMED MINIMUM PROFITS TAX  
7. INDECOPI found that in 2013 there was no budget allocation and hence, no tax 
expense relating to the presumed minimum profits tax under Law 26.093. At the same 
time, the Argentine Government submitted No te No. 70 from the Secretariat for Energy, 
in which the implementing au thority for the mentioned Law certified, at the request 
of INDECOPI itself, that the relevant  provision of Law 26.093 had not been 
implemented, and that consequently there we re no biodiesel producers in the territory 
of Argentina that received th e promotional concessions provided for therein. In view of 
the above, does Peru consider that the fi ndings of its investigating authority are 
consistent with the ASCM Article 12.5 obligation to "satisfy themselves as to the accuracy of the information supplied by inte rested Members or interested parties upon 
which their findings are based"? 
 G/SCM/Q5/PER/2 
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  Reply 
 
In the final report, the Peruvian authority evalua ted all the evidence supplied by the Argentine 
Government and the other parties in the investigation in relation to the existence of subsidies 
granted for the production of biodiesel in that  country within the framework of Law No. 26.093, 
in accordance with Article 12.5 of the ASCM.  
In this respect, on the basis of the evidence in the case record, the Peruvian authority determined 
that the benefit conferred by the Argentine Go vernment on the production of biodiesel in 
application of the provisions of Law No. 26.093 on  the presumed minimum profits tax, does not 
imply the Argentine Government giving up its po wer to collect fiscal revenue. However, it was 
determined that, on the basis of these provisio ns of Law No. 26.093, the Argentine Government 
provides Argentine biodiesel producers with greater financial resources, enabling them to enjoy enhanced liquidity and to improve their financial situation. The final report therefore determined 
that the provisions of Law No. 26.093 on the presumed minimum profits tax constitute a financial 
contribution within the meaning of Article 1.1(a )(1)(i) of the ASCM (direct transfer of funds). 
 
Furthermore, during the course of the inve stigation, the Argentine Government supplied 
information and documentation concerning th e implementation of Law No. 26.093 and the 
existence of beneficiaries of this Law. In this respect, during the final stage of the investigation, the Argentine Government and CARBIO stated that the implementation of the fiscal benefits of Law 
No. 26.093 required the approval of its regulations, as well as the creation of a register of those 
companies that, having met the set requirements, we re able to benefit from  that regime. However, 
the final report noted that a review of the text of Law No. 26.093 and of Decree No. 109/2007 
supplementing it, provided no indication that the implementation of this Law was contingent upon 
the approval of a different rule (regulation), nor th at it had been provided that the creation of any 
register was required in order to access the fiscal benefits contained in that Law. 
 
8. How does Peru consider its findings of a subsidy arising from the presumed minimum 
profit tax to be consistent with the ASCM when the record shows, without any positive 
evidence to the contrary from the petitioner or the Commission, that at least some of the 
cumulative preconditions required under Law 26.093 for the conferral of a possible 
benefit had not been met, for example: (1) a ccess to the tax quota; (2) prior approval of 
the project by the Secretariat for Energy; (3) prior existence of the register for access to 
tax benefits? 
 Reply 
 In accordance with Article 12.5 of the ASCM, in the final report the Peruvian authority evaluated the accuracy of the information supplied by the Argentine Government and the parties to the investigation, in relation to the existence of biodiesel production subsidies deriving from the 
application of Law No. 26.093. 
 During the course of the proceedings, the Argentine Government and CARBIO stated, in a general 
manner, that the Argentine companies participating in the investigation did not meet the 
requirements for access to the fiscal benefits of Law No. 26.093, but did not specify or prove which Argentine companies did not meet the conditions established in that Law. In particular, neither the 
Argentine Government nor CARBIO indicated which companies were not able to meet the 
requirements for access to the fiscal benefits de riving from Law No. 26.093, or which specific 
requirements each of them failed to meet in each case, aspects that were vital for properly evaluating such a claim. 
 
Furthermore, neither the Argentine Embassy in Peru, nor CARBIO, supplied any documentation that enabled the investigating authority to verify the requirements for access to fiscal benefits for 
each Argentine company participating in the proceedings, despite the fact that CARBIO 
encompasses Argentine biodiesel-producing companies, which is why it was in a position to provide the relevant supporting documents for due verification by the Commission. 
 G/SCM/Q5/PER/2 
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  INJURY 
 9. How can Peru's affirmative determination of injury to the domestic industry be 
reconciled with Article 15.4 of the ASCM give n that the petitioner's indicators either 
improved or, in some cases such as market sh are, remained stable during most of the 
period of the investigation to determine injury?  
Reply 
 
In accordance with WTO case law, the domestic industry's economic indicators must be evaluated taking into account the entire analysis period and the intervening trends recorded during that 
period, and paying special attention to what happe ned in the final part of that period, since the 
most recent data from the analysis period is more likely to reflect better the current condition of the domestic industry.
3 
 
In this respect, following the guidelines established in WTO case law, it was determined that, in a context of expanding domestic demand for biodiesel driven by an increase in the percentage of 
biodiesel mixed with diesel (from 2% to 5%) in 2011, the main domestic industry indicators and, 
in particular, those of special importance for measuring the economic performance of this industry in the domestic market (such as production, the utilization of installed capacity, domestic sales, market share, profits and inventories), showed an  unfavourable trend during the analysis period 
(January 2009-June 2014), having shown signs of notable deterioration in the final and most 
recent part of that period.  
More specifically, regarding the domestic industry's market share indicator, it should be noted that 
this indicator also experienced a downward trend during the analysis period. In 2010, the year in which Argentine biodiesel began entering the Peruvian market (attaining a 55.2% market share), 
the market share of the domestic industry stood at  5.8% - a fall of 2.3 percentage points from the 
level recorded in 2009 (8.1%). Between 2011 and 2013, the domestic industry's market share remained relatively steady, fluctuating between 5.5% and 5.8%; however, in the final and most 
recent part of the analysis period (January-June 2014), the domestic industry's market share once 
again recorded a downward trend, suffering a significant contraction that brought this indicator to 
its lowest level in the entire analysis period (around 1%). In contrast, towards the end of the analysis period, Argentina became practically the so le supplier of biodiesel to the domestic market. 
 
ABSENCE OF A CAUSAL RELATIONSHIP  
10. Does Peru consider that it has properly assessed all of the "other" factors brought to 
the attention of the investigating authority in  accordance with the standard established 
for Article 15.5 of the ASCM, and that it s affirmative determination of a causal 
relationship is consistent with that Articl e given the systematic and consensual way in 
which the leading refineries in Peru sh owed, and credibly de monstrated in the 
investigation, that far from being purely a matter of price, the real reason behind the 
preference for biodiesel of Argentine origin can be found in the objections regarding the 
quality of the product provided by the petitioner? 
 Reply 
 Article 15.5 of the ASCM establishes that in order to determine the existence of a causal relationship, the investigating authority is obliged, firstly, to verify that the subsidized imports have caused material injury to the domestic industry; and, secondly, to examine any known 
factors other than the subsidized imports, which at the same time may have injured the domestic 
industry.  
In this respect, once a causal relationship was found between the imports of biodiesel of Argentine 
origin and the deterioration observed in the main economic indicators of the domestic industry during the analysis period, other factors indicated in Article 15.5 of the ASCM that may have 
influenced the trends in these indicators were al so examined, as well as those presented by the 
parties during the proceedings. The volume and price of imports from third parties; domestic 
                                               
3 See Panel Reports in Mexico - Anti-Dumping Measures on Rice , paragraph 148; EC - Tube or Pipe 
Fittings , paragraph 7.316; and US - Hot-Rolled Steel , paragraphs 7.233 and 7.234. G/SCM/Q5/PER/2 
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  demand trends; the difference between the pric es of the main inputs used to manufacture 
Argentine biodiesel and domestic biodiesel; the exchange rate; tariffs; the technical specifications for biodiesel (B100) produced by the domestic indu stry; the impact of the fall in oil prices; the 
competitiveness of the domestic industry; and the loss of the domestic industry's main client were 
therefore analysed. However, no evidence was found to prove that these factors explain or 
contribute to the material injury suffered by the domestic injury during the analysis period. 
 As for the claims made by the importing companies Petroperú and Refinería La Pampilla regarding 
the existence of another injury factor consisting of alleged quality problems with the domestic industry's palm oil biodiesel that would affect the performance of blended fuels (B2 diesel and 
B5 diesel), these companies were responsible for proving their claims through evidence that could 
be verified by the investigating authority.
4 In this respect, the Commission examined all the 
evidence provided by both the parties concerned, as well as that gathered by the authority on its 
own initiative during the investigation, as no positive evidence had been identified that proved the 
existence of this other injury-causing factor alleged by the importing companies. 
 
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4 See Panel Reports in  EC - Countervailing Measures on DRAM Chips , paragraphs 7.415 to 7.417; and 
China - X-Ray Equipment , paragraph 7.300.