G/SCM/Q2/USA/74  
10 April 2018 
(18-2155) Page: 1/4 
Committee on Subsidies and Countervailing Measures  Original:  English  
 
  
SUBSIDIES  
RESPONSE OF THE UNIT ED STATES TO THE QUE STIONS1 FROM CHINA  
PURSUANT TO  ARTICLE 25.8 OF THE AGREEMENT  
The following communication, dated 9 April 2018, is being circulated at the request of the 
Delegation of the United States . 
 
_______________  
 
 
I. FEDERAL STEEL SUBSIDY POLICIES  
Question  1. Pension provided for steel enterprises by Pension Benefit Guaranty  Group  
Pension Benefit Guaranty  Group ("PBGC") is a non -profit company under the United 
States Department of Labor established based on the Employee Retirement Income 
Security Act of 1974 ("ERISA") . According to the law, PBGC currently provides 
29000  pension guarantee schemes for  47 million workers and retirees . Seen from 
individual enterprises, 4 of the 10 enterprises that received the most pension payments 
from PBGC were steel enterprises, namely Bethlehem Steel, LTV Steel, National Steel 
and Weirton Steel . PBGC paid US$ 3.7  billion , US$ 2.1  billion , US$  1.3 billion and US$ 
600 million  respectively or a total of US$ 7.7  billion  to the 15 single employer pension 
insurance programs of the above four enterprises, and the above insurance schemes 
have remained valid since 2003.  
From the oper ation and actual payment of PBGC's insurance program, the main 
beneficiaries of the program are primary metal manufacturing (mainly steel) and air 
transport sectors . Of the 10  enterprises that received the most pension payments, 
5 were from the air transpo rt sector, and  4 were from the steel sector . Therefore, the 
application of the program in steel and air transport sectors was suspected to constitute 
de facto specificity.  
Reply  
The PBGC is an insurance program to insure the pension payments of employers . The employers 
that participate in the program pay premiums to have their pension plans insured . If a plan does 
not have enough money to pay all of the pension benefits owed to participants and the employer is 
in financial distress – such as was the situation with the referenced steel companies - the employer 
may apply for a distress termination . The PBGC cannot grant the application, however, unless the 
employer proves to the PBGC or to a bankruptcy court that the employer cannot remain in 
business unless the plan is terminated . If the application is granted, the PBGC will normally take 
over the plan 's existing assets (established and funded over the years by the insured employer) as 
trustee of the plan and pay plan benefits, up to the legal limits . If a plan ends without sufficient 
assets to pay all benefits, the PBGC's insurance program will pay the b enefit provided by the 
pension plan . It is critical to understand that the PBGC 's financing comes entirely  from: (1) the 
premiums paid by employers to insure their plans ; (2) PBGC investments ; (3) the assets of the 
pension plans that the PBGC takes over as  trustee ; and (4) recoveries from the employers 
formerly responsible for the plans . The PBGC is not funded by taxes, and indeed, the PBGC has not 
                                                
1 G/SCM/Q2/USA/70 and Corr.1  G/SCM/Q2/USA/74  
- 2 - 
  received a single dollar of appropriate funds from the government . It is also important to note that 
PBGC pens ion insurance is available to all employers . Finally, a pension insurance program can 
facilitate the exit of a company from the market . Specifically, a pension insurance program can 
assure a company that its retirees will continue to be paid even it shuts capacity and stops 
production.  
Question  2. Subsidies provided by the Department of Homeland Security  
Since 2008, Customs and Border Protection under the United States Department of 
Homeland Security has paid the anti -dumping and countervailing duties levie d to eligible 
steel enterprises in the form of compensation in accordance with the Continued 
Dumping and Subsidy Offset Act of 2000 ("CDSOA") which was abolished in 2007 . In the 
fiscal years of 2008 -2015, Customs and Border Protection paid US$ 29.089  million, US$ 
23.625  million , USD$ 14.6  million  and US$  9.083  million of compensation to 
ArcelorMittal, US Steel, AK Steel and Nucor Steel respectively . In the fiscal years of 
2008, 2013 and 2014, Customs and Border Protection paid US$  258,000, US$  11,000, 
and U S$ 106,000 of compensation to Gallatin Steel (which was acquired by Nucor Steel 
afterwards) respectively.  
We hold that such compensations were only provided to specific enterprises and 
therefore constituted de jure specificity.  
Reply  
The Deficit Reduction Act – which includes a provision repealing the Continued Dumping and 
Subsidy Offset Act of 2000 – was enacted into law in February  2006, and subsection (a) of 
section  7601 of the Act provides that the CDSOA is repealed "effective upon  the date of enactment 
of this Act ". Furthermore, the Deficit Reduction Act does not permit the distribution of duties 
collected on goods entered after October  1, 2007, over ten years ago.  
II. STATE AND LOCAL SUBSIDIES  
Question 1. Subsidy provided by the Government of Kentucky to Gallatin Steel  
(a) For economic development programs with investments exceeding US$ 100,000 and 
more than 15 full -time jobs in specific regions, the state government may exempt 
specific enterprises from taxes according to the Kent ucky Rural Economic Development 
Finance Authority . According to this program, the state government exempted Gallatin 
Steel from US$ 140  million  of income tax and limited liability entity tax.  
Reply  
This program was notified in the United States ' subsidy notification covering 2013 -2014 
(see G/SCM/N/284/USA, p. 148 : "Kentucky Rural Economic Development Act "). 
(b) Bluegrass State Skills Corporation under Kentucky Cabinet for Economic 
Development supports eligible enterprise employees to participate in skills training in 
the form of "Grant in Aid" . In 2007 -2008, Gallatin Steel received US$ 100,000 of 
employee training grant each year.  
We hold that the above tax deduction and exemption program and the program 
supporting employee skills training were ai med at a specific region or a specific 
enterprise and therefore constituted de jure specificity.  
Reply  
The Bluegrass State Skills Corporation program is a general job training program widely available 
to (and also used by) many different industries through out Kentucky, and is therefore not specific 
to a region or enterprise . Information on this program from the Kentucky Cabinet for Economic 
Development states that all manufacturing and service companies are eligible . The purpose of this 
program is to improv e and promote employment opportunities for residents of Kentucky through G/SCM/Q2/USA/74  
- 3 - 
  training grants with business and industry . The program provides up to 50 % reimbursement of 
eligible costs to companies for approved training activities . Maximum annual funding is $25 ,000 
for companies with less than 500 employees and $50,000 for companies with 500 or more 
employees . A consortium may receive a grant up to a maximum of $75,000. 
(See http://t hinkkentucky.com/kyedc/pdfs/GIA_Fact_Sheet.pdf?01132017 ). 
Question 2. Subsidy provided to Nucor Steel by the State of North Carolina  
The government of North Carolina adopted the "Session Law 1998 -55, Senate Bill 1569 
in 1998" . According to the Bill, for the programs with investments exceeding 
US$ 150 million  and more than 155 full -time jobs or large -scale resource recycling 
programs in economic development zones and other specific regions, parts of the tax 
items levied will be returned within 10 -20 years following the implementation periods of 
the programs . Nucor invested US$ 300  million  to build a steel plant in Hertford, North 
Carolina . Through tax refunds, the program enabled Nucor to obtain a total of 
US$ 161 million  of government grant.  
We hold that t he tax returns were aimed at a specific region and therefore constituted 
de jure specificity.  
Reply  
This program is generally available for entities throughout North Carolina . There are no eligibility 
restrictions with respect to the type of industries or enterprises . Generally, eligibility is based on 
investment amounts and the number of jobs created . Nonetheless, enhanced benefits are available 
for businesses that are located in a development zone . One provision in the above -referenced law 
relates to "Large Recycling Facilities ." Pursuant to this provision, a recycling facility  qualifies for tax 
benefits if it is located in a tier one area and "invest(s) at least one  hundred  fifty million  dollars 
($150,000,000) in the facility and create(s) at least 155 ne w, full time jobs at the facility " that 
meets a certain wage standard.  
(See http://www.ncleg.net/EnactedLegislation/SessionLaws/PDF/1997 -1998/SL1998 -55.pdf ). 
Question 3. Subsidy provided to Nucor Steel by the State of Louisiana  
In 2010, Nucor received an accumulative to tal of US$ 255  million  subsidy from the state 
government, including state government grants and loans (US$ 160  million ), tax 
deduction, exemption or returns (US$ 55  million ), a 20 -year duty -free treatment, "the 
Quality Jobs Program"2 cash back (US$ 40  million), the performance grant provided to 
Nucor by Louisiana Economic Development (US$ 30  million ) and state bond (US$ 
30 million )3, etc.  
We hold that the above support measures were aimed at a specific region and therefore 
constituted de jure specificity.  
Reply 
Because this question refers only vaguely to "state government grants and loans " and "tax 
deduction, exemption or returns, " without citing specific programs, it is difficult to determine 
whether any benefits were provided under the referenced programs . According to publicly 
available sources, the state of Louisiana offered Nucor a $30  million  performance -based grant and 
a $30  million  bond for the construction of direct reduction iron facility . Nucor was also granted a 
local tax exemption of 20 years an d participated in the  state's Quality Jobs Program.  
(See https://www.opportunitylouisiana.com/case -studies/nucor  and 
http://www.nola.com/business/index.ssf/2010/09/nucors_iron_plant_in_st_james.html ). 
                                                
2 If a manufacturing industry in an area designated by the state government is able to provide high -
paying jobs or facilitate local economic development, the Board of Commerce & Industry under Louisiana 
Economic Development may return parts of wage payments , capital payments and investment taxes to the 
enterprise through the Quality Jobs Program.  
3 If Nucor completes the second -phase investment as scheduled, the US$ 30 million of state bond will 
be automatically converted into performance grant.  G/SCM/Q2/USA/74  
- 4 - 
  The two specific programs mentioned in the question – the Quality Jobs Program and a Louisiana 
Economic Development’s performance grant – are not specific to a region; they are offered to 
companies throughout the state of Louisiana that meet certain criteria.  For example, the Quality 
Jobs Program is available to the following industries throughout the state: bioscience, 
manufacturing, software , environmental technology, food technology, advanced materials or oil & 
gas field service.  As such, this program is not de jure  specific to a region or an enterprise or 
industry. The Louisiana Economic Development’s performance grant is also not specific to a region 
or an enterprise or industry. Rather, it is an incentive that the state offers to businesses across 
industries and throughout the state. (See https://www.opportunitylouisi ana.com/business -
incentives .) 
Question  4. Subsidy provided to the steel companies in Virginia by the State of Virginia  
According to Paragraph 18d of Article 22, Chapter 29 of the Code of West Virginia 
amended in  2003, the state government provided a grant of US$ 300,000 to the Putnam 
County Development Authority, and the grant was used in the new constructions and 
renovations of WV  Steel, Poca Facility, a steel company in West Virginia.  
The program was aimed at a specific enterprise and therefore constitute d de jure 
specificity.  
 
Reply  
 
We note that the support cited in this question is fifteen years old and that the West Virginia Steel 
Corporation is a small steel service center and fabricator, and not a steel mill producer . It does not 
melt steel and has no rolling operations . This is a link to the company website : 
http://www.wvsteelcorp.com/Default.aspx . We are unable to obtain any other information with 
respect to the fifteen year old support refere nced in the question . We submit however, that any 
potential benefit from the referenced support has now dissipated.  
 
 
__________