RESTRICTED  WORLD TRADE  
ORGANIZATION  G/SCM/M/54 
20 March 2006 
 (06-1240) 
Committee on Subsidies 
and Countervailing Measures  
 
 
 
MINUTES OF THE REGULAR MEETING  
HELD ON 27 OCTOBER 2005 
 
Chairperson:  Ms Victoria Campeanu (Romania) 
 
  
1. The Committee on Subsidies and Countervailing Measures ("the Committee") held a regular 
meeting on 27 October 2005.  
2. The proposed agenda for this meeting was contained in WTO/AIR/2696 and Corr.1.  The 
Committee adopted 
the following agenda: 
A. ALBANIA – REVIEW OF NEW LEGISLATIVE NOTIFICATION ...........................................................2  
B. SOUTH AFRICA (G/SCM/N/1/ZAF/2/ ADD.1)..............................................................................2  
C. SEMI -ANNUAL REPORTS OF COUNTERVAILING ACTIONS (ARTICLE 25.11)..................................2  
D. NOTIFICATIONS OF PRELIMINARY AND FINAL COUNTERVAILING DUTY ACTIONS .......................3  
E. SUBSIDY NOTIFICATIONS .............................................................................................................3  
1. Review of 2003 new and full and updating notifications received too late to be 
reviewed under previously  agreed procedures.......................................................................3  
F. TRANSITION REVIEW UNDER PARAGRAPH 18 OF THE PROTOCOL OF ACCESSION OF THE 
PEOPLE 'S REPUBLIC OF CHINA TO THE WORLD TRADE ORGANIZATION .......................................3  
G. ARTICLE 27.4  PROCESS ..............................................................................................................15  
1. Review of transparency and standstill obligations in the decisions in G/SCM/50-
92 and addenda, G/SCM/93-94 and addenda and G/SCM/95-102 relating to the Article 27. 4 process ........................................................................................................... ......15
 
2. Committee decisions in respect of the co ntinuation of extensions for certain 
developing country Members for 2005 .................................................................................19  
3. Procedure for 2006 Committee review of tr ansparency and standstill obligation 
in the decisions in G/SCM/50-102 relating to the Article 27.4 process ..............................22  
H. PERMANENT GROUP OF EXPERTS – ELECTION OF AN EXPERT ...................................................22  
I. OTHER BUSINESS .......................................................................................................................23  
1. Venezuelan countervailing measures regardi ng potato starch originating in the 
European Communities..........................................................................................................2 3 
J. DATE OF NEXT REGULAR MEETING ............................................................................................24  
K. ANNUAL REPORT TO THE COUNCIL FOR THE TRADE IN GOODS .................................................24  G/SCM/M/54 
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A. 
ALBANIA – REVIEW OF NEW LEGISLATIVE NOTIFICATION  
3. The Chairperson  recalled that Items A and B of the agenda for this meeting dealt with the 
review of new notifications of countervailing duty legislation and/or regulations in accordance with 
the procedures adopted by the Committee at its special meeting in April 1996.1  These procedures 
provided that at each regular meeting the Committee would consider notificati ons of new or amended 
legislations not previously reviewed by the Comm ittee circulated to Members in all three working 
languages at least six weeks prior to the scheduled date of the meeting.  Pursuant to this provision, the 
Committee had before it at this meeting new legisla tive notifications of Albania and South Africa.  
She recalled that questions concerning these new notif ications were to have been submitted to the 
Member concerned and to the Secretariat no later than 12 October 2005.  As provided for in the 
agreed procedures, Members receiving  written quest ions were to respond orally to timely submitted 
questions during the meeting.  They were also to  subsequently submit wri tten versions of their 
answers to all written questions received.  If a Member posed a follow-up question and wished to 
receive a written answer, the follow-up question had to be submitted in writing no later than 
11 November 2005.  Written answers to all written questions should be  submitted to the Secretariat no 
later than 9 January 2006.  The Chairperson also noted  that certain of the notifications referred to on 
the agenda of this meeting, and questions posed with  respect to their review, were also on the agenda 
of the meeting of the Committee on Anti-Dumping Pr actices that would take place on 31 October.  
4. The Chairperson then turned to the new legi slative notification received from the delegation 
of Albania , circulated in document G/SCM/N/1/ALB/1, dated 21 March 2005.  The delegation of the 
European Communities had submitted written questions , circulated in document G/SCM/Q/1/ALB/1, 
dated 11 October 2005.   
5. The delegate of the European Communities  indicated that his delegation would raise the 
questions it had posed on Albania's notification in the Committee on Anti-Dumping Practices. 
B. SOUTH AFRICA (G/SCM/N/1/ZAF/2/ ADD.1) 
6. The Committee had before it in document G/ SCM/N/1/ZAF/2/Add.1, dated 21 April 2005, 
the text of Countervailing Regulations promulgate d by the South African Minister on Trade and 
Industry on 30 March 2005.  There were no comments on questions on this notification.  
7. The Chairperson  echoed the concerns expressed by her pr edecessors regarding the failure of 
some Members to submit any notification at all c oncerning legislation or re gulations relevant to 
countervailing duty measures.  For many, if not most, of these Members, it was likely that a single 
"nil" notification, indicating that there was no such legislation or regulation currently in effect, would 
be all that was required.  For those Members w ho conducted countervailing du ty investigations but 
had not yet notified their legislation, it was obvi ously important, from the point of view of all 
Members, that such legislation be notified, in the interest of transparency and better understanding.   
C. SEMI -ANNUAL REPORTS OF COUNTERVAILING ACTIONS (ARTICLE 25.11)   
8. The Chairperson  recalled that a request for semi-annual reports for the period  
1 January–30 June 2005, to be s ubmitted no later than 31 August 2005, had been circulated to the 
Members in document G/SCM/N/130, dated 6 July  2005.  Members who ha d submitted semi-annual 
reports of countervailing actions were identifie d in paragraph 1 of document G/SCM/N/130/Add.1 
dated 19 October 2005.  These Members were: Au stralia; Canada; the European Communities; 
                                                      
1 See document G/SCM/W/293.  G/SCM/M/54 
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  Mexico; South Africa; and the United States.  To the extent possible, the semi-annual reports had 
been translated and circulated to the Committee, and were included in the documents made available 
for this meeting.  Members who had notifie d the Committee that they had not taken any 
countervailing action during the firs t six months of 2005 were listed  in paragraph 2 of document 
G/SCM/N/130/Add.1.  More recently, the Philippines and Honduras had also informed the Secretariat 
that they had not taken any count ervailing action during this period.  Thus, 41 Members had not taken 
any action during the first six months of 2005.  Wh ile Members who took actions appeared generally 
to comply with the notification requirement contai ned in Article 25.11 of the SCM Agreement, there 
remained a significant number of Members (77) wh o had not responded to the request for semi-annual 
reports and had therefore failed to comply  with this important requirement.   
9. There were no comments or questions on any of the semi-annual reports.  
D. NOTIFICATIONS OF PRELIMINARY AND FINAL COUNTERVAILING DUTY ACTIONS  
10. The Committee had before it in documents G/SCM/N/127, 129 and 130-134 lists of the 
notifications of preliminary and final countervailing duty action that had been received since the last 
regular meeting from Canada, the European Communities and the United States.   
11. There were no comments or questions on any of these notifications.   
E. SUBSIDY NOTIFICATIONS  
1. Review of 2003 new and full and updating notifications received too late to be reviewed 
under previously agreed procedures 
12. The Committee had before it the 2003 new and full subsidy notification of Chinese Taipei 
(G/SCM/N/95/TPKM).  The Chairperson  recalled that the deadline for the submission of written 
questions on this notification was 21 September a nd that no such questions had been received.  
13. The delegate of the United States  stated that his delegation might wish to submit questions on 
this notification.  
14. The Committee took note  of the statements.   
F. TRANSITION REVIEW UNDER PARAGRAPH 18 OF THE PROTOCOL OF ACCESSION OF THE 
PEOPLE 'S REPUBLIC OF CHINA TO THE WORLD TRADE ORGANIZATION  
15. The Chairperson  recalled that Paragraph 18 of the Protocol of Accession of the People's 
Republic of China to the World Trade Organization pr ovided that all subsidiary bodies, including this 
Committee, "which have a mandate covering Ch ina's commitments under the WTO Agreement or 
[the] Protocol shall, within one year after accession, review, as appropriate to their mandate, the implementation by China of the WTO Agreement and of the related provisions of [the] Protocol."  
China was to provide relevant information in adva nce of the review, including information specified 
in Annex 1A to the Protocol.  China could also  raise issues relating to any reservations under 
Section 17 or to any other specific commitments made by other Members in the Protocol, in subsidiary bodies which have a relevant mandate.  This Committee had to report the results of the 
review promptly to the Council for Trade in Goods.  Review was to take place after accession in each 
year for eight years, with a final review in year  10 or at an earlier date decided by the General 
Council. 
16. The Chairperson noted that there were no proce dures set out in the Protocol for the conduct of 
the transition review, except that China was to provide  relevant information in advance of the review.  G/SCM/M/54 
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  In this regard, Annex 1A specified that China w as requested to provide information on the following 
to this Committee in accordance with Article 18.1 of its Accession Protocol:  "Pricing Policies": 
(a) "application of existing or any other price contro ls and the reason for their use";  and (b) "pricing 
mechanisms of China's state tradi ng enterprises for exported products".   China's notification, received 
on 26 October 2005, had been circulated as doc ument G/SCM/N/135.  Written questions and 
comments had been submitted in the context of this  transitional review by the European Communities 
(G/SCM/Q2/CHN/12), Japan (G/SCM/Q2/CHN/13) , the United States (G/SCM/Q2/CHN/14) and 
Canada, Mexico and the United States (G/SCM/Q2/ CHN/15).  Before proceeding to these questions, 
the Chairperson opened the floor for any general comments. 
17. The delegate of the United States
 said that the WTO was in the midst of its fourth annual 
transitional review of China's efforts to implement the commitments that it made in its Protocol of 
Accession to the WTO.  In the United States' view, the transitional review remained an important and 
useful mechanism serving both the interests of Chin a and the interests of other WTO Members.  The 
transitional review mechanism provided Members with the opportunity to seek clarifications regarding China's policies and practices.  China, in turn, had the opportunity to clarify its policies and 
practices with the goal to prevent misunderstandings that could lead to trade frictions.  The 
transitional review mechanism also allowed Member s to convey to China their views, expectations 
and concerns regarding China's efforts to comply  with its WTO obligations.  China then had the 
opportunity to explain its views and to inform Me mbers about how it had addressed their expectations 
and concerns.  In other words, the transitional review mechanism was an important and useful 
exercise in transparency, one of  the fundamental principles underlying the WTO Agreement.   
18. The purpose of the transitional review before this Committee was to review, on an annual 
basis, China's progress on implementing its obligatio ns under its Protocol of Accession and the SCM 
Agreement.  Unfortunately, as Members neared the end of China's fourth year as a Member of the 
WTO, it remained nearly impossible to evaluate the extent to which China's subsidies regime was in 
compliance with WTO disciplines.  Despite assuran ces China had given before the Council for Trade 
in Goods during the transitiona l review conducted in 2003 China had still not provided its long-
overdue subsidy notification as require d by Article 25 of the SCM Agreement.  In addition, more than 
one year ago, the United States had submitted a request to China under Article 25.8 of the SCM 
Agreement seeking detailed information on a number of subsidy programmes that had come to its 
attention (G/SCM/Q2/CHN/9).  Article 25.9 stated  that questions that a Member receives under 
Article 25.8 shall be answered as quickly as po ssible and in a comprehensive manner.  The 
programmes subject to the questions posed by the United States under Article 25.8 supported a wide 
range of industries in China including forest prod ucts, textiles, semi-conductors and agriculture.  
China, however, still had not provided any responses to that request.  The absence of a timely 
response was troubling.   
19. Even more troubling were the subsidy progra mmes that China appeared to maintain, as 
demonstrated by the growing number of questions that the United States and other Members had 
posed to China, both through the transitional revi ew mechanism and under Article 25.8 of the SCM 
Agreement.  Members continued to see evidence of  government support that China had committed to 
eliminate.  Based on available information, it appear ed that China continued to provide tax incentives 
and preferential bank financing to producers of agri cultural and industrial goods that were contingent 
upon export or the use of domestic over imported goods, despite a clear commitment by China four 
years ago to eliminate all prohibited subsidies upon its accession to the WTO.  It also appeared quite 
clear that China continued to provide subsidies to loss-making state-owned enterprises, despite 
making statements to this Committee in 2002 that  these subsidies had been eliminated in 2001 as 
China had indicated it would do in Annex 5 to its Pr otocol of Accession.  In past transitional reviews 
before this Committee, China had dismissed as basel ess the claims of the United States that these 
subsides continued, arguing that multiple media reports and websites were unreliable.  One new 
source could now be added to the long and varied list of publicly available sources describing China's  G/SCM/M/54 
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  continued subsidization of loss-making state-owned enterprises, the OECD's 2005 Economic Survey 
of China .  The United States again urged that China provide information on these subsidies.   
20. The delegate of the United States stated that it also appeared quite clear that the Chinese 
Government continued to provide  massive subsidies to state-owned banks and the state-owned 
enterprises to which they lent, d espite China's contention that th ese banks and enterprises operated on 
a commercial basis and were responsible for thei r own profits and losses.  For example, China 
claimed during last year's transitional review that  the Government's $45 billion capital infusions into 
the Bank of China and the China Construction Bank  in 2003 constituted investments, not subsidies, 
but this claim was exceedingly difficult to accept in light of those banks' financial performance in the 
previous five years, which had been characterized  by repeated capital injections by the Government 
and bad-debt transfers to government-owned asset ma nagement companies.  It  seemed clear that the 
Government was not seeking to invest in investme nt-worthy companies either in December 2003 or in 
prior years.  Rather, the Government was trying to  keep the banks afloat and the loss-making state-
owned enterprises they supported, regardless of cost.  An example of the type of lending that could 
result from these large and repeated infusions had received widespread attention recently when a 
state-owned oil and gas company had sought to acqui re a foreign competitor.  Two state-owned banks 
had offered what appeared to be billions of dol lars of preferential financing to facilitate the 
acquisition.  Even though the acquisition had not ta ke place, the United States found it objectionable 
that the terms and conditions under wh ich the financing was apparently offered were inconsistent with 
commercial considerations.  It was difficult to rec oncile the terms and conditi ons of this financing 
with China's repeated claim that  banks in China now extended loan s on a purely commercial basis and 
operated free from government influe nce and control.  The United States was very concerned about 
what these offers of non-commercial financing said about how credit was allocated in China.   
21. The United States also understood that stat e-owned banks were extending subsidized 
financing for large-scale investment projects in China which were designed to increase the competitiveness of state-owned enterprises, particularly  in the Northeast, in in dustries such as oil and 
gas, petrochemicals, iron and steel and ship-bui lding.  In the United States' view, continued 
intervention by the Chinese Govern ment in this manner thwarted the development of institutionalized 
market mechanisms in China.  It also made little sense from an economic restructuring point of view 
for the Government to support continued production by firms of products that were the primary cause 
of the region's problems.  Resources should be flowing out of and away from large inefficient state-owned enterprises in heavy industries to support th e growth and development of small and medium-
sized enterprises and new industries.  Unfortunately , the bank financing to state-owned enterprises in 
the Northeast was doing exactly the opposite, fru strating a more efficient allocation of scarce 
resources and sustaining obsolete state-owned ente rprises that continued to drain resources from the 
region and the rest of China's economy. While the United States did not take issue with China's goal 
of revitalizing the Northeast region, it had grav e concerns with the significant subsidization the 
pursuit of those objectives entailed and with the pote ntial adverse trade effects resulting directly or 
indirectly from this subsidization.   
22. The delegate of the United States considered th at similar concerns applied as well to China's 
recently released iron and steel industry development policy ("Steel Policy") and were highlighted in the joint submission from Canada, Mexico and th e United States for this transitional review 
(G/SCM/Q2/CHN/15).  This Steel Policy detailed a series of objectives and initiatives for managing 
the development of China's state-owned steel en terprises.  These objectives and initiatives included a 
broad range of very specific directives which demo nstrated the government's intention to intervene 
directly and extensively in key sectors of the econom y, such as steel.  In particular, the Steel Policy 
prescribed the number and size of steel producers in Ch ina, where they would be located, the types of 
products that would and would not be produced and the technology that would be used.  Subsidies 
were an integral part of the Steel Policy.  In pa rticular, Article 16 of the Steel Policy specifically 
provided for state support in the form of tax re funds, discounted interest rates, research and G/SCM/M/54 
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  development and other policy support from major iron and steel projects utilizing newly developed 
domestic equipment.  The United States agreed with the goal of an efficient rationalized steel industry 
envisioned by China's new steel policy but was con cerned about the implemen tation of this initiative 
to the extent that it relied on import substitution me asures, dictated industry outcomes, and involved 
governments making decisions that should be made by  the market place.  The likely outcome of the 
Steel Policy was more inefficiency and not less a nd greater distortions in world steel production and 
trade.  While the United States was aware that the steel policy might be intended in part to address 
China's ballooning production capacity and China's r ecent emergence as a net steel exporter, it had 
been the United States' experience th at subsidy-driven industrial polici es rarely resulted in expeditious 
or market restructuring.  Rather, they created a significant market distortion and exacerbated trade 
frictions.   
23. With regard to the area of countervailing m easures, the delegate of the United States 
commended China for taking an important step in notifying its count ervailing duty laws and 
regulations.  The United States had had an active a nd on-going exchange with China regarding these 
laws and regulations and was encouraged by the tran sparency that such an exchange promoted.  His 
delegation looked forward to Chin a's written responses to its most recent set of follow-up questions 
(G/SCM/Q1/CHN/57).  The United States remained concerned that China's current countervailing 
duty regulations lacked sufficient detail to make clear to interested parties what procedures the 
administrative authority would follow and conduct in c ountervailing duty cases. 
24. The delegate of the United States said that  one final area addressed in his delegation's 
submission for this transitional review involved pric e controls.  In this regard, the United States had 
asked a series of questions seeking clarification or  updates regarding the pricing of coal, rice, steel, 
copper scrap, fertilizer and water.   
25. The delegate of the United States concluded by saying that the United States' chief concern at 
the time of this year's transitional review eman ated from China's continuing and seemingly growing 
use of subsidies, including prohibited subsidies.  When coupled with China's on-going failure to 
submit a subsidy notification required of every WT O Member and answers to the questions posed by 
the United States under Article 25.8, this raised se rious questions about how  committed China was to 
meeting its obligations under its Protocol of A ccession and the SCM Agreement.  The United States 
appreciated the difficulties and sensitivities inherent in  many of the steps that China had to take to 
honour its WTO obligations.  However, other Member s faced similar challenges.   He therefore urged 
China to take immediate action to demonstrate its  commitment to the WTO subsidy disciplines.  The 
first step should be the submission of China's long- overdue subsidy notification and of answers to the 
Article 25.8 questions which the United States had submitted in 2003. 
26. The delegate of Japan
 stated that his delegation totally agreed with the view of the United 
States on the importance of the transitional review mechanism in the WTO system.  As reflected in 
the written questions submitted by  his delegation (G/SCM/Q2/CHN/12), Japan was interested in 
getting answers with regard to two aspects of China' s position in the subsidies area.  The first aspect 
was the notification of subsidies.  While the subs idy notifications required by Article 25 of the SCM 
Agreement were of great importance for the purpo se of improving transparency, China had not yet 
provided any further subsidy notification after its  accession to the WTO.  With reference to a 
statement by China at last year's Committee meeti ng that it was internally collecting information for 
its subsidy notification, he asked China to indicate the timing of its full subsidy notification.  Second, 
Japan was interested in China's VAT refund scheme for copper.  The Japanese industry, especially the 
smelting copper industry, had serious  concerns on this VAT refund scheme.  If, as China had stated, 
the refund scheme was WTO-consistent, any detaile d information or documen ts would be greatly 
appreciated in order that Japan could explain th e scheme to its industry and allay the industry's 
concerns regarding this scheme.  In light of statem ents made last year by China that it was reviewing  G/SCM/M/54 
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  the refund scheme and considering its possible abol ition, he asked whether there had been further 
developments in this regard.   
27. The delegate of Canada  shared the views of the United States and Japan on the importance of 
the transitional review mechanism.  Canada al so shared the concerns expressed by Japan, the 
United States and the European Communities, in writi ng, regarding the failure of China to fulfil its 
obligations by providing a new and full notification of its subsidies.  Canada therefore encouraged 
China to provide such a notification as soon as possible.   Canada was participat ing in this transitional 
review mechanism with a joint submission with Me xico and the United States regarding China's Steel 
Policy announced last July  (G/SCM/Q2/CHN/15).  Given the importance of China's steel production, 
this new policy could have repercussions on th e world market, including Canada's industry and 
markets.  Canada's concerns were centred on the degree of intervention of the Chinese Government in 
the direction and decision-making of its steel industr y, and Canada questioned the compliance of such 
intervention with the commitments undertaken by  China in the Accession Working Party Report.  
Canada was therefore looking forward to receiving cl arifications from the Government of China on 
the issues raised in the submission. 
28. The delegate of the European Communities  fully supported the statements made by the 
United States, Japan and Canada and shared all the concerns they had expressed.  He appealed to 
China to strictly comply with its obligations r esulting from the WTO membership, particularly in the 
area of subsides, including the provision of the long -outstanding subsidy notification.  He hoped that 
at the present meeting China would provide meaningf ul replies to questions posed by the European 
Communities and other Members.  While he realized that China, according to the agreed procedures, 
had no obligation to supply written replies, it would al ready be very helpful to have a room document 
with the properly prepared answers. 
29. The delegate of Mexico  stated that like the previous delegations, Mexico was concerned 
about the Steel Policy of China and was also expe cting the notifications on subsidies which China 
should have presented.  His delegation looked fo rward to receiving answers from China to the 
questions asked jointly by Canada, Mexico a nd the United States on China's Steel Policy.  
30. The delegate of China  stated that while he had taken note of the comments and concerns 
raised by Members with regard to the issue of Ch ina's subsidy notification, in previous years his 
delegation had repeatedly stressed the enormous di fficulties facing China in the information-gathering 
process for the preparation of such a notification.  China was firmly committed to the principle of 
transparency in this regard.  The serious practical  problems and difficulties raised by the preparation 
of the subsidy notification had been recorded dur ing the accession negotiations  in the Working Party 
Report and had also been recognized by many Memb ers in this Committee.  During the last three 
years, China had been educating and training officials in relevant government agencies and 
mobilizing them to review through hundreds of pieces of regulations, department rules and policies to 
examine whether they were relevant to the SCM Agre ement.  This process had so far concentrated on 
the central government level.  Questions raised by  Members on some specific policies and measures, 
including the questions raised by the United Stat es under Article 25.8 of the SCM Agreement, were 
all taken into account in this internal informa tion-gathering process.  There had been intense 
discussion on all the technical details of the inform ation gathered to determine whether particular 
measures fell within the scope of the notification obligation, in view of the fact that the SCM 
Agreement required only notification of subsidy pr ogrammes which were specific, as defined by the 
Agreement.  As a result of these efforts of the last  years, China was now in the process of finalizing a 
draft of its subsidy notification, which at this stage was still in Chinese.  China would submit this 
notification without prejudice to its position as to whether the policies and programmes to be notified 
were subsidies or whether they were specific, as defined in the SCM Agreement.  Subject to inter-
agency procedures and translation, which was extrem ely important and required absolute accuracy to 
reflect exactly what the policies were and to avoi d misunderstanding, China was prepared to submit G/SCM/M/54 
Page 8  
 
  the full subsidy notification to the Committee before the end of this y ear.  With this notification China 
would like to clarify as much as possible its policy in  this regard and reiterate its strong commitment 
to the fundamental WTO principle of transparency  to which China had always adhered since its 
accession.  
31. The delegate of China stated that on some of the questions raised by Members in their written 
questions, for example with respect to developmen ts in the financial sector, China had strong 
reservations as to whether they fell within the ma ndate of this Committee or whether they were 
subsidies or specific.  However, in a spirit of co -operation and professionalism, China had in the past 
few years provided information with regard to th e reform process of China's banking and financial 
sector and would continue to do so at the present mee ting.  The delegate of China also pointed to the 
fact that some Members had repeatedly raised the same questions, which had disturbed China's 
internal efforts to gather the in formation necessary for the submission of a subsidy notification.  On 
some of these questions, Members would find rele vant information in the minutes of previous 
Committee meetings. Some of the questions posed  by Members had only arrived at China's 
Permanent Mission very shortly in advance of th e meeting, which had caused great difficulties for 
China in preparing comprehensive and detailed answer s.  Nevertheless, in a spirit of co-operation and 
transparency, China had made every effort to coordi nate the relevant competent authorities to address 
these questions.  
32. The delegate of China then proceed to answer specific questions subm itted by the delegations 
of Canada, the European Communities, Jap an, Mexico and the United States.  
Countervailing duty legislation  
33. Regarding China's laws and regulations on c ountervailing measures, the delegate of China 
noted that the Foreign Trade Law, revised on 6 Ap ril 2004, which had been referred to by a Member 
as not being notified, had been notified to  the Committee on 22 November 2004 (document 
G/SCM/N/1/CHN/1/Suppl.4).  While there were no  "Anti-Subsidy Regulations" in China, it was 
possible that the Member had used this term to re fer to the regulations of the People's Republic of 
China on countervailing measures, which had b een revised on 31 March 2004 and which China had 
notified on 18 October 2004 (document G/SCM/N/1/C HN/1/Suppl.3).  In addition to the above laws 
and regulations, China's existi ng laws and regulations on count ervailing measures included:  
(1) provisional rules for initiation of c ountervailing investig ations, (document 
G/SCM/N/1/CHN/1/Suppl.1), which had come into force on 13 March 2002;  (2)  provisional rules on 
questionnaires in countervailing investigations (d ocument  G/SCM/N/1/CHN/Suppl.1), which had 
come into force on 15 April 2002;  (3) provisional rules for the conduct of public hearings in 
countervailing duty investigations  (document G/SCM/N/1/CHN/1/Suppl.1), which had come into 
force on 13 March 2002;  (4) provisional rules fo r on -the-spot verifications in countervailing 
investigations (document G/SCM/N/1/CHN/1/Suppl.1 ), which had come into force on 15 April 2002; 
and (5) rules on investigations and determinations  of industry injury for countervailing measures 
(document G/SCM/N/1/CHN/1/Suppl.2), which had en tered into force on 15 January 2003.  As the 
newly promulgated regulation was still under translati on, China would notify it to the Committee once 
the translation was finished.   
VAT refund scheme for imports of copper raw materials 
34. The delegate of China stated that China had provided detailed information on the VAT rebate 
scheme for copper raw materials in last year's tr ansitional review mechanis m of this Committee.  
Considering the crucial importance of copper on national economy and national security, the purpose 
of this VAT refund scheme was to improve the t echnology and management of the copper refinery 
industry.  China's imports of copper raw material  only accounted for a small proportion of the world's  G/SCM/M/54 
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  total trade in copper and would not distort the inte rnational market.  At present, the policy was under 
review. 
Preferential tax treatment of foreign-owned enterprises 
35. With regard to the preferential tax treatment of  foreign invested enterp rises, the delegate of 
China considered that such preferential treatme nt of foreign investment was a common practice 
internationally and was not specific in nature, as defined in the SCM Agreement.  Detailed 
information on the preferential tax  treatment of fo reign investment was alr eady contained in Annex 5 
of China's Accession Protocol.  To remain consiste nt with the existing notification, and to clarify 
further China's policies, China would include this  detailed information on preferential tax treatment 
for foreign investments in its forthcoming subsidy no tification.  Some of the specific provisions in the 
existing legislation were also being examined in  the context of China's tax reform, which was 
currently under preparation.  A major step to be taken in this reform was to unify the income tax 
system for domestic enterprises and enterprises with  foreign investment, following the principles of 
fair competition and national treatment.  In that pr ocess, consistency of China's tax policies with the 
SCM Agreement would also be stressed and observed. 
Measures applied by local governments  
36. The delegate of China stated that there we re great difficulties in collecting relevant 
information on policies applied at various levels of local government in China.  However, the 
available information indicated that the supportive policies of China's local governments referred to by a Member were of two types.  First, in orde r to promote and harmonize the economic development 
of under-developed areas and raise their agricultu ral productivity, local governments formulated 
policies to enhance the reconstruction of the agricu ltural infrastructure, to subsidize the introduction 
of new species, to promote new technology and technical training, to purify and upgrade the local superior species and to establish service systems, such as the prevention and cure for plant diseases 
and insect pests, the information supply system, the qua lity standard and testing systems, etc.  Second, 
some policies of local governments might be suppor ting the small and medium enterprises (SMEs), to 
explore international markets, such as supporting SMEs to attend overseas exhibitions, to acquire 
certifications from various quality or environmental management systems, to advertise and market 
overseas, to organize training and seminars as well as to bid for overseas projects.  Such measures to support SMEs were widely adopted by many Members.   The delegate of China pointed out that the 
reimbursement of export credit insurance fees refe rred to by a Member in its questions was not 
contingent on export performance.   
Northeast revitalization policies 
37. The delegate of China stated that the policy of  revitalization of the former industrial regions 
in Northeast China had been adopted in 2003, and ma inly included the following practices:  first, to 
start pilot projects on the perfection of urban and to wnship social security systems in the Northeast 
area.  Second, to expedite the bankruptcy process of  the state-owned enterprises.  Third, to reform 
investment systems in the Northeast to simplify and transfer to the lower levels, the process for the 
review and approval of investment projects.  Thes e policies were not so-called industrial policies, 
which might favour certain industries, but formed part  of a general policy meant to deepen the reform 
of the investment system and to establish the ur ban and township social security systems and thus 
speed up China's transformation to a market econom y.  With regard to the two examples of the 
revitalization programme raised by a Member, the delegate of China stated that the policy on the 
strategic restructuring and technical transformation of key enterprises in areas such as oil, 
petrochemical and iron in Northeast China, ca rried out by the Commission of State-Owned Assets 
Administration, was just a guideline focussing on the reform and reconstruction of the central 
enterprises and was not mandatory.  The enterprises were free to take their own decisions on their G/SCM/M/54 
Page 10  
 
  operations.  Regarding the example mentioned by a Member of the provision by branch of the Export-
Import Bank of RMB 5 billion of export credits to co mpanies in Northeast China, the delegate of 
China stated that the applicable interest rates were in conformity with the OECD Arrangement on 
Officially Supported Export Credits and that these export loans were not only granted to the 
enterprises in the Northeast but were granted to  enterprises all over the country under the same 
conditions.  
Financial sector reform 
38. The delegate of China stated that although her delegation did not consider that this Committee 
was the right venue to discuss China's ongoing financ ial sector reform, she would provide information 
in the interest of transparency.  China currently was engaged in a f undamental reform of its financial 
system, including simultaneously:  (1) the continuation of the reform of the stock-holding system of 
the commercial banks, such as the Bank of China, th e Construction Bank of China, the Industrial and 
Commercial Bank of China (ICBC) and the Bank of Communication;  (2) encouraging the 
commercial banks to attract strategic investment ;  (3) reform of the rural credit agencies;  
(4) strengthening of administration with regard to th e provision of social credit;  (5) improvement of 
the payment and settlement system; and (6) combating money laundering.  All these policies would 
create a solid commercial environment fo r the commercial banks in China.   
39. The reform of the stock-holding system of the commercial banks mainly involved two 
aspects, financial restructuring and the improvement of corporate governance.  Financial restructuring 
included resolution of the problem of non-perform ing loans and the introduction of certain paid-in 
capital .  Thus, as an example, she explained that the People's Bank of China had acquired ICBC's 
doubtful loans and transferred them to the financia l assets management companies by inviting public 
bidding.  According to the regulations on the financial assets management companies, these 
companies were not banks, but state-owned financia l institutions to acquire, manage, and dispose of 
the non-performing loans of the state-owned banks.  The bidding prices offered by the financial assets 
management companies were reasonable and close to  the real price of the non-performing loans.  On 
the other hand,  in April 2005 Huijin Investment Company had invested $15 billion into ICBC.  
China's financial supervisory organs  strictly supervised and examined ICBC in order to secure this 
paid-in capital and its reasonable re-pay.   
40. The delegate of China stated that while the financial restructuring was under way, the state-
owned commercial banks were improving their corp orate governance mainly by two means.  First, 
establishing a separate and healthy operation and f unction of the shareholders meeting, board of 
directors and board of the supervisors and enha ncing the effective monitoring and coordinated 
development of the three boards.  Second, diversifyi ng the shareholding struct ure.  For example, the 
Construction Bank of China had introduced Bank of America and Asia Financial Shareholding 
Company as its strategic investors.  These commercial banks were also seeking to become listed.  As 
the state-owned commercial banks were now transf ormed into shareholding commercial banks by 
means of the reform of their stockholding systems, they had become the real market players which 
were profit-oriented with the maximization of the shar eholders' interest as the goal of their operation.  
Therefore, the reformed state-owned commercial banks would issue loans in a market-oriented 
manner consistently with the principle of cost effi ciency.  Meanwhile, Chin a was also making efforts 
to develop the capital market, which would resu lt in the decline of the proportion accounted for by 
banks in the financing of enterprises.  The Governme nt was also experiencing a change of role in the 
administration of the banking sector during the process of the reform of these state-owned commercial 
banks stockholding system.  The Government di d not intervene in the operation and business 
decisions of the reformed banks, but focused on th e macro aspects, such as the establishment of the 
financial market and the supervision system, fina ncial stability and the prevention and handling of 
financial crises.   G/SCM/M/54 
 Page 11 
 
 
  State-owned enterprises 
41. The delegate of China stated that the subsidi es provided to certain state-owned enterprises 
which were running at a loss, as listed in Annex 5( b) of China's Accession Protocol, had been phased 
out in 2001.  The subsidy programme had not been  included in the Government's budget since 2001.  
The Chinese Government had never made the statemen t referred to in the news report cited by a 
Member.  The attempted acquisition by a Chinese state-owned enterprise referred to by a Member 
involved a business decision based on commercial cons iderations made by the enterprises and the 
banks.  In China, state-owned commercial banks and state-owned enterprises operated as independent 
market players, bearing full responsibilities of their own interests and losses.  They were eligible and 
able to negotiate and sign the financing contract according to their own risk evaluation.  In this 
respect, she stated that the allegation that a loan  to a state-owned enterprise in the energy sector 
referred to by a Member was inconsistent with comme rcial considerations was not verified.  To grant 
a loan not based on commercial considerations was not consistent with China's requirements in the 
reform of state-owned commercial banks and ot her state-owned enterprises.  China was very 
disappointed to see that this acquisition atte mpt of the Chinese comp any based on commercial 
considerations had not, in return, been treated  by the other party in accordance with commercial 
considerations.  
Price controls 
42. The delegate of China stated that the Law of  the People's Republic of China on Pricing did 
not contain a termination date or expiration date of China's pricing administration policy and that 
during the past year China had not issued new laws , regulations or other measures to eliminate or 
reduce the price controls listed in Annex 4 to its Protocol of Accession.  Among the products subject 
to the state guidance pricing list in Annex 4, the pr ices of grains, cotton and vegetable oil referred to 
the base price of the bidding and auction through wh ich the government sold its reserves of these 
products.  Regarding the products covered by Annex 4, changes had occurred in 2001 in that except 
for oil used by the army, the pri ces of lamp-kerosene, naphtha, and fuel oil in China were not subject 
to state guidance pricing anymore, and were now determined by the market.  Therefore, these 
products should be deleted from Annex 4.   
43. The delegate of China then provided informati on on particular goods and services subject to 
state guidance pricing.  Processed oil  was a scarce resource of crucial importance to the national 
economy and people's lives.  With regard to fertilizer , she said that at present, the fertilizer 
distribution system in China was based on the ma rket mechanism under the administration of the 
government.  China was presently establishing a pricing system on silkworm cocoons  which was 
mainly market-oriented under the government ad ministration.  China's transportation service  charges 
had not changed.  With regard to charges for professional services  and charges for commission agents' 
services , she stated that because China's professional servi ces market was still in the initial stage of its 
development, the degree of marketization was rather low.  This explained why the Government had to 
establish criteria and determine the scope of fluctuat ion of the services charges, while the exact charge 
of each service provided by the service provider was determined by the two parties themselves.  Regarding charges for settlement, clearing and transmission services
 of banks, she said that the 
service situation in China had now further improved,  as foreign banks had gr adually entered into the 
Chinese market. At present, with the exception of RMB basic settlement services, which were closely 
related to the general public, most of the charges of  the bank services were open to be decided by the 
market.  With respect selling prices and renting fees of residential apartments , she stated that prices of 
low-price residential apartments meant for the lo w income residents were still subject to state 
guidance pricing, whereas prices of other commercial residential apartments were decided by the market.   G/SCM/M/54 
Page 12  
 
  44. The delegate of China stated that China ha d not adopted any new price control measures 
during the past year on products and services not in cluded in Annex 4, including steel and steel-based 
scrap, copper and copper-based scrap. 
45. In accordance with China's existing pricing laws and policies, the price of coal was now 
determined in the market through negotiations be tween the suppliers and demanders.  China's long-
term development plan with respect to coal, el ectricity power and natural gas was reflected in 
documents that provided overall guidance rather than  mandatory instructions.  The State Development 
and Investment Corporation was engaged in many  industries, including the energy sector.  Its 
operations were completely based on market consider ations and in this respect this company was not 
different from other enterprises.  
46. Regarding the new pricing policy for electricity, th e delegate of China stated that by the end 
of last year the National Development and Refo rm Committee had adopted a policy which provided 
for the price of electricity to be adjusted in light of  the price of coal.  According to this new policy,  
the price of electricity per kilowatt had been raised by 2.5 cents RMB in April 2005.  
47. The delegate of China stated that the purpose of the reform of China's pricing policy on tap 
water was to address the problems of the lack of wate r resources in China, to save water, to enhance 
the efficiency of water usage and to improve the su stainable development of the water resources.  In 
recent years, the reform on pricing policies of the tap water had produced a significant effect.  From 2002 to 2004, the per capita senior residents usage of water had declined by approximately 10 per 
cent.  The major policy measures envisaged as part of  the further reform of the pricing policy of tap 
water, were to enlarge the scope of collecting th e water fees and to raise the price standard to a 
reasonable level; to gradually raise the tap water pr ice for water construction projects; to reasonably 
adjust the water price to the urban citizens; to try and take the disposal fee as the priority in reform; to 
reasonably decide the price of the re-used water; and sixth, to reform the calculation of the price of 
water. 
48. The delegate of China said that since 2004 th e price of grains, including rice, had been 
liberalized.  The fertilizer and grains protection f ee was consistent with China's commitment in its 
WTO Accession Protocol.  In recent years, the acq uiring price of grain in China had been decided 
mainly by the markets.  The Government establishe d the lowest acquiring price to protect the income 
of the farmers only when the decline in the grain ma rket had been too significant.  However, since 
2004, the market price of grain had been higher th an the acquiring price set by the Government and 
the lowest acquiring price had therefore not been used.   
49. With respect to fertilizer, China had adopt ed policies aiming to further develop the 
productivity of fertilizer production in China, to enha nce the distribution of fertilizer and to enhance 
the reserves of fertilizer.  In order to stabilize th e grain market China had adopted measures to adopt 
the lowest acquiring price on the grain, to encourage different kinds of enterprises to enter the market 
and acquire the grain, and to enhance the market evaluation of the price on grain.  These policies 
applied to the following products:  grain, wheat and corn.   
Steel policy  
50. Regarding China's recently announced Steel Policy, the delegate of China stated that in light 
of the changed situation and market  requirements of China's steel and ore industry, China had issued a 
steel and ore industry development policy in July 2005.  The Steel Policy mainly aimed at strengthening the whole industry through encouragi ng advanced techniques, structure adjustments, 
better distribution, system reform and changes of  growing method.  The policy provided for overall 
guidelines and did not involve compulsory regulations for individual enterprises.  It provided that the Chinese Government would encourage strategic convergence of the steel and ore industry with  G/SCM/M/54 
 Page 13 
 
 
  methods such as merging and acquisition, restructuring and mutual holdings.  Market rules played a 
major role during the merger and acquisition practi ce, so that each party could benefit from these 
processes.  Banks and firms operated on their own following the market mechanism.  Because of the nature of the Steel Policy as an overall guidelin e, the Chinese Government never demanded any 
specific bank service providing for firms during the merger and acquisition process.  Regarding the 
question raised on the provisions contained in Artic les 16 and 18 of the Steel Policy, the delegate of 
China stated that her delegation had already provid ed information in the transition review which had 
taken place in the Import Licensing Committee.  Sh e stressed that since the guidelines had been 
formulated, the Chinese Government had not provid ed any government support in any form for the 
use of domestic equipment.   
51. The Chairperson
 welcomed the announcement by China that it would shortly submit a 
subsidy notification.  
52. The delegate of the European Communities  stated that the need to  repeat certain questions 
was due to the lack of sufficiently detailed answer s from China.  In this respect, he reiterated his 
delegation's interest in knowing the exact legal provisions pursuant to which the VAT refund was 
applied and in detailed informati on on how the system worked.  Regarding the issue of preferential 
tax treatment of foreign-owned enterprises, he point ed out that Article 75(7) of the Rules for the 
Implementation of Income Tax of the People's Republic  of China clearly provided that companies that 
exported more than 70 per cent of their production would receive the benefit of 50 per cent reduction 
of the company tax.  He again asked China to indi cate whether this provision still existed, whether or 
not it had been eliminated, and how it was compatib le with the obligations of the SCM Agreement.  
The European Communities considered this to be a pr ohibited subsidy, which was specific by its very 
nature, even if available to all companies.  Hi s delegation was looking forward to China's subsidy 
notification.  If this preferential tax programme was mentioned in that notification, this would enable 
his delegation to ask written questions and receive written answers.   
53. With respect to the question of whether banking issues were within the competency of this 
Committee, the delegate of the United States  said that as a general matter it was widely recognized 
that state-owned banks were, in essence, acting as  the government when they were providing loans 
and that, to the extent that those loans were pref erential or below market rates, that constituted a 
subsidy.  He drew attention to certain paragra phs in the Working Party Report on China's accession.  
Paragraph 172 stated that "whe n state-owned enterprises, incl uding banks, provi de financial 
contribution they are doing so as government actors within the scope of Article 1.1(a)".  
Paragraph 173 stated that "Members of the Work ing Party have identified state support through the 
banking system, notably government-owned banks in the form of policy loans, the automatic roll-over 
of unpaid principle and interest, for given and non-performing loans and the selective use of below-
market interest rates".  The Report also stated that China was attempting to make government-owned 
banks operate on a commercial basis.  Thus the issues  that were discussed in the Working Party were 
the very same issues which Members continued to discuss in this Committee in  the context of this 
transitional review mechanism.   
54. The delegate of the United States echoed the views of the European Communities regarding 
the issue of tax benefits contingent upon exports.   It was somewhat disturbing to hear China's 
response that tax benefits that were provided only to exporters were widely available, and therefore 
were not specific, when in fact, according to the SCM Agreement, be nefits that were contingent upon 
export performance were deemed sp ecific.  These tax benefits that  were contingent upon export were 
prohibited subsidies and the United States looked to their termination in the near future.  
55. With respect to the statement of the delega te of China that the Government no longer 
intervened in bank operations and was only concer ned about the macro environment and about macro 
policy design, he recalled that when the Committe e discussed the Northeast revitalization programme G/SCM/M/54 
Page 14  
 
  in 2003 and when the point was made that many of th e bad debts of the state-ow ned enterprises in that 
region were being forgiven, the Chinese delegate ha d responded by saying that the settlement of those 
bad debts was a matter between the banks and the state-owned enterprises and that the Government 
was not involved.   The Chinese delegate had basically  stated that the banks recognized that the loans 
would not be repaid and were negotiating with the state-owned enterprises for any kind of cash 
repayment or any non-cash payment that the banks could extract from them.  In light of that response, 
he wondered why those banks would c ontinue to lend to the various st ate-owned enterprises that they 
had just had problems with in terms of these bad debt s.  In the absence of government intervention, it 
was hard to explain why a commercial bank would negotiate or settle bad debts with state-owned 
enterprises and then proceed to lend new money to them.   
56. The delegate of Japan
 agreed with the European Comm unities that China's response with 
regard to the VAT refund scheme for copper raw mate rials was not satisfactory because of its lack of 
detail.  Japan expected China to provide detailed doc umentation on this scheme.  He hoped that in its 
forthcoming subsidy notification China would as soon as possible provide all the information 
presented at this meeting in accordance w ith the agreed standard format.   
57. The delegate of Canada  stated that the task of delegates and interpreters would be simplified 
if China could make it answers available in writing.   His delegation looked forward to China's subsidy 
notification.  
58. The delegate of Mexico  reserved the right to have responses from China in writing and to 
raise further questions, especially in respect of the Steel Policy.  
59. The delegate of China  stated that he did not have much to add to the lengthy responses 
provided by his delegation.  Thus for example, with  regard to the follow-up question of the European 
Communities on specific provisions of China's exis ting legislation, his delegation had already 
indicated in its earlier intervention that these provisi ons were currently being examined in the context 
of China's tax reform and that China's forthcomi ng subsidy notification would contain information on 
China's preferential tax treatment of foreign invest ment.  His delegation had taken note of the issues 
raised in the follow-up questions and comments of various delegations and would take them into 
consideration in preparing China's subsidy notification.  
60. The delegate of the United States  rephrased his earlier question with respect to benefits that 
are contingent upon export.  It was the understanding  of the United States that there were several 
Chinese tax programmes that were contingent upon  exportation and which his delegation therefore 
considered to be prohibited subsidies.  He ask ed China if it would accept the interpretation that 
benefits received that were conti ngent upon exportation were specific and were export subsidies.  The 
delegate of the United States also reiterated his qu estion on the issue of whether or not there continued 
to be government involvement in the decisions of state-owned commercial banks.  He recalled in this 
respect that during the transitional review c onducted in 2003 when the United States had raised 
questions about debt forgiveness that was benefitin g large state-owned enterprises in the North-east 
region, the delegate of China had responded that th e debt forgiveness being granted to the state-owned 
enterprises was part of a private se ttlement negotiated between the banks  and those enterprises.  If one 
took that as given, it was very hard to explain why the same banks would continue to lend to the same 
enterprises to finance projects involving the upgrading the technology of those enterprises.  Thus the 
question was how those banks could continue to loan  to the state-owned enterprises in the North east 
region if in fact the Government did not inte rvene in the banks' decisions and operations. 
61. The delegate of the European Communities  stated that he concluded from the statement of the 
delegate of China that the specific provision wh ich he had mentioned regarding preferential tax 
treatment of foreign investment was still in force.    G/SCM/M/54 
 Page 15 
 
 
  62. The delegate of China  said that he was not in a position at this stage to respond to the specific 
question raised by the United States because of langua ge difficulties he had not been able to catch 
details of the question and that he would refer this question to his authorities.  
63. The Committee took note  of the statements made.  
64. The Chairperson  noted that the Protocol of China's accession to the WTO did not contain 
guidelines regarding the report to be provided by the Committee on the transitional review.  
Following the review conducted at the meeting in November 2004, her predecessor, acting on his own 
responsibility, had prepared a brief factual report with references to the documents concerned and 
attaching the portion of the minutes of the meeting which related to the transitional review.  She 
proposed that the Committee follow the sa me procedure again this year.   
65. The delegate of China  said that his delegation did not consider it necessary to attach the 
relevant portion of the minutes of this meeting to  the report but that it was not opposed to following 
the previous practice of the Committee. 
66. The delegate of the United States , the European Communities  and Japan  stated that the 
relevant portion of the minutes of th is meeting relating to the transiti onal review should continue to be 
attached to the report submitted to the Council for Trade in Goods.  
67. The Committee agreed  to proceed as proposed by the Chairperson.2  
G. ARTICLE 27.4  PROCESS  
1. Review of transparency and standstill obligations in the decisions in G/SCM/50-92 and 
addenda, G/SCM/93-94 and addenda and G/SCM/95-102 relating to the Article 27.4 process  
68. The Chairperson
 recalled that in 2002 the Committee had adopted decisions pursuant to 
Article 27.4 of the SCM Agreement extending the transition periods for certain export subsidy 
programmes of certain developing country Members.  These decisions could be broadly divided into 
two categories:  first, the so-called "fast-track" decisions3 adopted pursuant to the procedures in 
G/SCM/39 and, in respect of Colombia, paragraph 10.6 of the Doha Ministerial Decision on 
Implementation-Related Issues and Concerns ; and second, decisions based on Article 27.4 alone.4  In 
respect of the decisions based solely on the pr ocedures in G/SCM/N/39, the Committee had adopted 
further decisions in 2003 and 2004 by which the tr ansition periods for the programmes in question 
had been extended through the end of calendar ye ar 2004 and 2005, respectively.  In the case of 
Colombia, the Committee had adopted decisions in  2003 extending the transition periods for the 
programmes concerned through the end of 2004.  Fina lly, the decisions adopted in 2002 solely on the 
basis of Article 27.4 provided for an extension of  the transition period through the end of 2003, to 
which should be added the final tw o year period referred to in the last sentence of Article 27.4.  
69. The Chairperson  recalled that  all of the decisions (that is, the "fast-track" decisions as well as 
those based on Article 27.4 alone) contained st andstill and transparency obligations which the 
Committee must review this year.  Notifications  submitted by the Members concerned pursuant to 
these transparency obligations had been circulated in the G/SCM/N/128 document series.  In addition 
to reviewing these transparency and standstill obligat ions, the Committee also had to adopt decisions 
                                                      
2 The Chairperson's Report to the Council for Trade in Goods on Transitional Review of China  was 
circulated on 9 November 2005 in document G/SCM/118.  
3 Documents G/SCM/50-94. 
4 Documents G/SCM/95-102. G/SCM/M/54 
Page 16  
 
  in respect of the continuation of extensions for eligible programmes of cer tain developing country 
Members for 2006.  This item was intended to address in particular the continuation of the fast-track 
extensions (relating to the decisions in G/SCM/50-92 and Adds. 1 and 2) as foreseen in the procedures 
in G/SCM/39.  As provided in paragraph 1(e) of  those procedures, through the end of 2007, and 
"subject to annual reviews … to verify that the transparency and standstill requirements … are being 
fulfilled, Members of the Committee shall agree to c ontinue the extensions".  Thus, the Chairperson 
proposed that for those fast-track extensions where the Committee's re view in respect of standstill and 
transparency appeared to have been satisfactor ily completed, the Committee take decisions to 
continue the extensions for calendar year 2006.  Those decisions would be on the same basis and 
subject to the same requirements as the original  decisions.  She proposed that the Committee first 
review all of the notifications concerning fast-tr ack-extensions based on the procedures in G/SCM/39, 
and then consider the proposed decisions to contin ue those extensions, where it appeared that the 
Committee had completed its review of the transp arency and standstill obligations to Members' 
satisfaction.  After that "fast-track" review and decision-making process had been completed, the Committee would address the standstill and transparen cy review of the remaining programmes, in 
respect of which no Committee decisions were necessary.  This review would include, first, the two 
programmes of Colombia, which had been subject to decisions based on the procedures in G/SCM/39 
and paragraph 10.6 of the D oha Implementation Decision
5, and, second, those programmes subject to 
decisions based on Article 27.4 alone.6  
70. The Chairperson  recalled that the procedures cont ained in G/SCM/39 called for annual 
updating notifications to be provided by the Me mbers concerned, and to be reviewed by the 
Committee, to verify that the standstill and transpar ency requirements in respect of the programmes 
were being met.  All of the Members with "f ast-track" extensions had submitted the required 
notifications (G/SCM/N/128/...) and there had also  been an exchange of written questions and 
answers.  
71. The delegate of the United States  expressed appreciation for the written responses that 
delegations had provided to the questions posed by the United States.  His delegation considered, in 
this regard, that the Committee's review of the exte nsion decisions continued to work effectively.  
Although two delegations had not yet provided responses to hi s delegation's questions, the United 
States was ready to join a consensu s to decide to continue the extensions of the transition period in 
2006, on the understanding that those responses would be  provided by the end of the year.  He also 
noted that the responses to his delegation's questions  revealed that there were different approaches 
with respect to the phasing out of the programm es in question.  While some Members had already 
taken certain taken steps, other Members were still cons idering this matter.  It might be useful, in this 
respect, if the Secretariat prepared a document th at would contain a synopsis of the information 
provided by Members regarding the phasing out of pr ogrammes covered by the extension decisions.   
72. As suggested by the Chairperson,  the Committee then turned to th e review of the transparency 
and standstill commitments provided for in the decisions in G/SCM/50-92: 
Antigua & Barbuda ( G/SCM/N/128/ATG)7  
• Fiscal Incentive Act Cap 172 (December 1975) (G/SCM/50 and Adds. 1 and 2) 
• Free Trade and Processing Zone Act No. 12 of 1994 (G/SCM/51 and Adds. 1and 2) 
 
                                                      
5 Documents G/SCM/93 and Add.1 and G/SCM/94 and Add.1. 
6 Documents G/SCM/95-102. 
7 Written questions had been received in  documents G/SCM/ Q3/ATG/9 and 10.     G/SCM/M/54 
 Page 17 
 
 
  Barbados ( G/SCM/N/BRB/128)8 
• Fiscal Incentive Program (G/SCM/52 and Adds. 1 and 2) 
• Export Allowance (G/SCM/53 and Adds. 1and 2) 
• Research & Development Allowan ce (G/SCM/54 and Adds. 1and 2) 
• International Business Incentives (G/SCM/55 and Adds. 1 and 2) 
• Societies With Restricted Liability(G/SCM/56 and Adds. 1 and 2) 
 
Belize (G/SCM/N/128/BLZ)9 
• Export Processing Zone Act (G/SCM/58/ and Adds. 1 and 2) 
• Commercial Free Zone Act (G/SCM/59 and Adds. 1 and 2) 
• Conditional Duty Exemptions Facility unde r Treaty of Chaguaramas (G/SCM/60 and 
Adds. 1 and 2) 
 
Costa Rica ( G/SCM/N/128/CRI)10 
• Duty Free Zone Regime (G/SCM/61 and Adds. 1 and 2) 
• Inward Processing Regime (G/SCM/62 and Adds. 1 and 2) 
 
Dominica G/SCM/N/128/DMA  
• Fiscal Incentives Program(G/SCM/63 and Add. 1) 
 
Dominican Republic ( G/SCM/N/128/DOM)11 
• Law No. 8-90 to "Promote the Establishment of New Free Zones and Expand Existing Ones" 
(G/SCM/64 and Adds. 1 and 2) 
 
El Salvador ( G/SCM/N/128/SLV)12 
• Export Processing Zones and Marketing Act, as amended (G/SCM/65 and Adds. 1 and 2)  
 
Fiji ( G/SCM/N/128/FJI)13 
• Short-Term Export Profit Deduction (G/SCM/66 and Add. 1) 
• Export Processing Factories/Export Processing Zones Scheme (G/SCM/67 and Adds. 1 and 2) 
• The Income Tax Act (Film Making and Audio Visual Incentive Amendment Decree 2000) 
(G/SCM/68 and Adds. 1 and 2) 
 Grenada ( G/SCM/N/128/GRD)
14 
• Fiscal Incentives Act No. 41 of 1974 (G/SCM/69 and Adds. 1 and 2)  
• Statutory Rules and Orders No. 37 of 11149 (G/SCM/70 and Adds. 1 and 2)  
• Qualified Enterprises Act No. 18 of 1978 (G/SCM/71 and Adds. 1 and 2)  
 
 The Chairperson  stated that it was understood that Grenada would provide written responses 
to the questions that had been raised by the United States.  
 
                                                      
8 Written questions and answers had been received in documents G/SCM/Q/BRB/12 and 13. 
9 Written questions and answers had been received in documents G/SCM/Q3/BLZ/9 and 10. 
10 Written questions and answers had been received in documents G/SCM/Q3/CRI/8 and 9.  
 11 Written questions and answers had been received in documents G/SCM/Q3/DOM/12 and 13.  
12 Written questions and answers had been received in documents G/SCM/Q3/SLV/10 and 11.  
13 Written questions had been receive d in document G/SCM/Q3/FJI/16.   Responses to these questions, 
received in December 2005, have been circulated in  document G/SCM/Q3/FJI/17, dated 6 January 2006.  
 14 Written questions had been receive d in documents G/SCM/Q3/GRD/10 .  G/SCM/M/54 
Page 18  
 
  Guatemala ( G/SCM/N/128/GTM)
15 
• Exemption from Company Tax, Customs Duties and Other Import Taxes for Companies 
under Special Customs Regimes (G/SCM/72 and Adds. 1 and 2) 
• Exemption from Company Tax, Customs Duties and Other Import Taxes for the Production 
Process Relating to Activities of Managers a nd Users of Free Zones (G/SCM/73 and Adds. 1 
and 2) 
• Exemption from Company Tax, Customs Duties and Other Import Taxes for the Production 
Process of Commercial and Industrial Enterprises Operating in the Industrial and free Trade 
Zone (G/SCM/74 and Adds. 1 and 2) 
 
Jamaica ( G/SCM/N/128/JAM)16 
• Export Industry Encouragement Act (G/SCM/75 and Adds. 1 and 2) 
• Jamaica Export Free Zone Act (G/SCM/76 and Adds. 1 and 2) 
• Foreign Sales Corporation Act (G/SCM/77 and Adds. 1 and 2)  
• Industrial Incentives (Factory Constructi on) Act (G/SCM/78 and Adds. 1 and 2)  
 
Jordan ( G/SCM/N/128/JOR)17 
• Partial or Total Exemption from Income Ta x of Profits Generated from Exports under 
Law No. 57 of 1985, as amended (G/SCM/79 and Adds. 1 and 2)  
 Mauritius ( G/SCM/N/128/MUS)
18 
• Export Enterprise Scheme (G/SCM/80 and Adds. 1 and 2) 
• Pioneer Status Enterprise Scheme (G/SCM/81 and Adds. 1 and 2) 
• Export Promotion (G/SCM/82 and Adds. 1 and 2) 
• Freeport Scheme (G/SCM/ 83 and Adds. 1 and 2) 
 
Panama (G/SCM/N/128/PAN)19 
• Official Industry Register (G/SCM/84 and Adds. 1 and 2) 
• Export Processing Zones (G/SCM/85 and Adds. 1 and 2) 
  The delegate of Panama
 noted that the date in the third line of the first paragraph in document 
G/SCM/Q3/PAN/17 should be "22 November 2002".   
Papua New Guinea ( G/SCM/N/128/PNG and Suppl.1)  
• Section 45 of the Income Tax (G/SCM/86 and Adds. 1 and 2) 
 
St. Kitts & Nevis ( G/SCM/N/128/KNA)
20  
• Fiscal Incentives Act No. 17 of 1974 (G/SCM/90 and Adds. 1 and 2)  
 
                                                      
15 Written questions and answers had been rece ived in documents G/SCM/Q3/GTM/13 and 14. 
16 Written questions and answers had been received in documents G/SCM/Q3/JAM/11 and 12.  
 17 Written questions and answers had been received in documents G/SCM/Q3/JOR/12 and 13.  
 18 Written questions and answers had been received in documents G/SCM/Q3/MUS/11 and 12. 
19 Written questions and answers had been received in documents G/SCM/Q3/PAN/16 and 17.  
 20 Written questions and answers had been received in documents G/SCM/Q3/KNA/10 and 11.   G/SCM/M/54 
 Page 19 
 
 
  St. Lucia ( G/SCM/N/128/LCA/Rev. 1) 21 
• Fiscal Incentives Act No. 15 of 1974 (G/SCM/87 and Adds. 1 and 2) 
• Free Zone Act, No. 10 of 1999 (G/SCM/88 and Adds. 1 and 2) 
• Micro and Small Scale Business Enterprises Act,  No. 19 of 1998 (G /SCM/89 and Adds. 1 
and 2) 
 St. Vincent & Grenadines ( G/SCM/N/128/VCT)  
• Fiscal Incentives Act No. 5 of 1982, as amended (G/SCM/91 and Adds. 1 and 2)  
 
Uruguay ( G/SCM/N/128/URY)  
• Automotive Industry Export Promotion Regime  (G/SCM/92 and Adds. 1 and 2) 
 73. The Chairperson
 thanked delegations for their constr uctive participation in this review 
process.  The full and open engagement of all dele gations concerned went a long way to fulfil not 
only the letter, but also the spirit, of the procedures agreed by Ministers at Doha.  Based upon this 
valuable exchange, and given the very few questions  that remained outstanding, it was her perception 
that the Committee had now completed its required tran sparency and standstill review in respect of all 
of the programmes just discussed.  While two dele gations (Fiji and Grenada) had yet to respond to 
questions raised by the United States, they had i ndicated to the Secretariat that they would submit 
such responses in the near future.22  She noted that, in any event, these delegations had complied with 
their obligation to submit an updating notification.   
2. Committee decisions in respect of the continua tion of extensions for certain developing 
country Members for 2005 
74. The Chairperson stated that a draft decision text was available in the room for each of the fast 
track extensions concerned.  The text of this draf t decision was based on the generic text that had been 
sent to delegations by fax on 29 September and that had been discussed at open-ended informal 
consultations held on 7 October.  This text was al most verbatim that of the decisions taken in 2004, 
except for (i) the substitution of "2 005" for "2004" in the penultimate  paragraph, (ii) the substitution 
of "2006" for "2005" in the last paragraph, and ( iii) the insertion of "&Add. 2" in the first and second 
sentences of the last paragraph.  In addition, the references in the footnotes had been updated to take 
account of recent notifications and written answers to questions.  
75. The Committee adopted  the following decisions:23  
Antigua & Barbuda  
• Fiscal Incentive Act Cap 172 (December 1975)  (in draft document G/SCM/50/Add.3); 
• Free Trade and Processing Zone Act No. 12 of 1994 (G/SCM/51/Add. 3) 
 
Barbados 
• Fiscal Incentive Program (G/SCM/52/Add. 3) 
• Export Allowance (G/SCM/53/Add. 3) 
• Research & Development Allowance (G/SCM/54/Add. 3) 
• International Business Incentives (G/SCM/55/Add. 3) 
• Societies With Restricted Liability(G/SCM/56/Add. 3) 
                                                      
21 Written questions and answers had been received in documents G/SCM/Q3/LCA/8 and 9. 
22 The delegation of Fiji has provided written responses in document G/SCM/Q3/FJI//17, dated 6 
January 2006.   
23 These decisions (G/SCM/50/Add.3-G/SCM/92/Add.3) are dated 27 October 2005 and have been 
circulated on 31 October 2005.   G/SCM/M/54 
Page 20  
 
   
Belize 
• Fiscal Incentives Act (G/SCM/57/Add. 3) 
• Export Processing Zone Act (G/SCM/58/Add. 3) 
• Commercial Free Zone Act (G/SCM/59/Add. 3) 
• Conditional Duty Exemptions Facility under Treaty of Chaguaramas 
(G/SCM/60/Add. 3) 
•  
Costa Rica 
• Free Zone Regime (G/SCM/61/Add. 3) 
• Inward Processing Regime (G/SCM/62/Add. 3) 
 
Dominica 
• Fiscal Incentives Program(G/SCM/63/Add. 3)  
 
Dominican Republic 
• Law No. 8-90 to "Promote the Establishm ent of New Free Zones and Expand Existing 
Ones" (G/SCM/64/Add. 3) 
•  
El Salvador 
• Export Processing Zones and Marketing Act, as amended (G/SCM/65/Add. 3)  
 
Fiji  
• Short-Term Export Profit Deduction (G/SCM/66/Add. 3)  
• Export Processing Factories/Export Processing Zones Scheme (G/SCM/67/Add. 3) 
• The Income Tax Act (Film Making and Audio Visual Incentive Amendment Decree 
2000) (G/SCM/68/Add. 3) 
 
Grenada 
• Fiscal Incentives Act No. 41 of 1974 (G/SCM/69/Add. 3)  
• Statutory Rules and Orders No. 37 of 1999 (G/SCM/70/Add. 3)  
• Qualified Enterprises Act No. 18 of 1978 (G/SCM/71/Add. 3)  
 
Guatemala 
• Exemption from Company Tax, Customs Duties and Other Import Taxes for Companies under 
Special Customs Regimes (G/SCM/72/Add. 3) 
• Exemption from Company Tax, Customs Duties and Other Import Taxes for the Production 
Process Relating to Activities of Managers a nd Users of Free Zones (G/SCM/73/Add. 3) 
• Exemption from Company Tax, Customs Duties and Other Import Taxes for the Production 
Process of Commercial and Industrial Enterprises Operating in the Industrial and Free Trade 
Zone (G/SCM/74/Add. 3) 
 
Jamaica 
• Export Industry Encouragement Act (G/SCM/75/Add. 3 and Corr.1) 
• Jamaica Export Free Zone Act (G/SCM/76/Add. 3 and Corr.1) 
• Foreign Sales Corporation Act (G/SCM/77/Add. 3 and Corr.1)  
• Industrial Incentives (Factory Constructi on) Act (G/SCM/78/Add. 3 and Corr.1)  
 
Jordan 
• Partial or Total Exemption from Income Ta x of Profits Generate d from Exports under 
Law No. 57 of 1985, as amended (G/SCM/79/Add. 3)   G/SCM/M/54 
 Page 21 
 
 
   
Mauritius 
• Export Enterprise Scheme (G/SCM/80/Add. 3) 
• Pioneer Status Enterprise Scheme (G/SCM/81/Add. 3) 
• Export Promotion (G/SCM/82/Add. 3) 
• Freeport Scheme (G/SCM/83/Add. 3) 
 
Panama 
• Official Industry Register (G/SCM/84/Add. 3) 
• Export Processing Zones (G/SCM/85/Add. 3) 
 
Papua New Guinea  
• Section 45 of the Income Tax (G/SCM/86/Add. 3)  
 
St. Lucia 
• Fiscal Incentives Act No. 15 of 1974 (G/SCM/87/Add. 3) 
• Free Zone Act, No. 10 of 1999 (G/SCM/88/Add. 3) 
• Micro and Small Scale Business Enterprises Ac t, No. 19 of 1998 (G/SCM/89/Add. 3) 
 
St. Kitts & Nevis  
• Fiscal Incentives Act No. 17 of 1974 (G/SCM/90/Add. 3)  
 
St. Vincent & Grenadines 
• Fiscal Incentives Act No. 5 of 1982, as amended (G/SCM/91/Add. 3 and Corr.1)  
 
Uruguay 
• Automotive Industry Export Promotion Regime  (G/SCM/92/Add. 3)   
 
76. The Committee then turned to  the review of the standstill and transparency and other 
commitments undertaken in the decisions adopted in  2003 with respect to Colombia pursuant to the 
procedures in G/SCM/39 and paragraph 10.6 of  the Ministerial Decision on Implementation.24   
77. The Chairperson  drew the Committee's attention to a notification by Colombia in document 
G/SCM/N/128/COL and recalled that, pursuant to th e terms of the existing decisions, Colombia's 
extension had entered into the final two-year period in Article 27.4 at the end of 2004.  Therefore, 
beyond the mandated review, the Committee was not ca lled upon to take any further action in respect 
of the programmes of Colombia.  She then inv ited comments on Colombia's programmes, the Free-
Zone Regime (G/SCM/93 and Add.,1) and the Speci al Import-Export System for Capital Goods and 
Spare Parts (SIEX) (G(SCM(94 and Add.1).   
78. There were no comments or questions on these programmes. 
79. The Committee then turned to the required transparency and standstill review of the 
extensions granted in  2002 based on Article 27.4 alone.   
80. The Chairperson  recalled that the Committee had granted extensions of the transition period 
for certain programmes of four Members (Barbados, El Salvador, Panama and Thailand) on the basis 
of a "one plus two approach" , w ith the "one" being an extension for calendar year 2003 and the "two" 
being the final two year phase-out period referred to  in Article 27.4.  The Committee was called upon 
to carry out a review, in respect of 2005, of the standstill and transparency commitments provided for 
                                                      
24 These decisions are contained in documents G/SCM/93 and Add.1 and G/SCM/94 and Add.1.  G/SCM/M/54 
Page 22  
 
  in these decisions.  She then invited comments on the notifications made by the four Members 
concerned in respect of the programm es covered by the extension decisions. 
Barbados ( G/SCM/N/128/BRB)
25 
• Export Grant and Incentive Scheme (G/SCM/95)  
• Export Rediscount Facility (G/SCM/96) 
• Export Credit Insurance Scheme (G/SCM/97)  
• Export Finance Guarantee Scheme (G/SCM/98) 
 
El Salvador ( G/SCM/N/128/SLV)  
• Export Reactivation Law (G/SCM/99) 
Panama ( G/SCM/N/128/PAN) 
• Tax Credit Certificate (G/SCM/100) 
 
Thailand (G/SCM/N/128/THA) 
• Industrial Estate Authorit y of Thailand (G/SCM/101) 
• Board of Investment Programme (G/SCM/102) 
 
81. There were no comments or questions on these notifications.  
3. Procedure for 2006 Committee review of transp arency and standstill obligation in the 
decisions in G/SCM/50-102 relating to the Article 27.4 process  
82. The Chairperson  proposed that for 2006, the Co mmittee follow the same deadlines and 
procedures as had been used in the Articles 27.4 process in 2003-2005.  Thus, the required 
notifications in respect of all programmes covere d by the Article 27.4 extensions, which included 
those programmes in the final two-year phase- out period, would be submitted no later than 
30 June 2006 .  Any questions pertaining to such notifications would be submitted by 
1 September 2006 , and the answers would be submitted by 6 October 2006 .  The review of 
transparency and standstill thus would take place at the Committee's Autumn 2005 regular meeting.   
83. It was so agreed .  
H. PERMANENT GROUP OF EXPERTS – ELECTION OF AN EXPERT  
84. The Chairperson  recalled that the Committee had to elect a new member of the Permanent 
Group of Experts, following the expiry in Spring 2005 of the term of Mr. Hyung-Jin Kim.  As discussed at the meeting in April, there were tw o candidates to replace Mr. Kim, namely Mr. Chang 
Fang Lo, suggested by Chinese Taipei, and Mr. Se bastian Saez, suggested by Chile.  However, 
because very few delegations had expressed a view on this matter, the Committee had not been in a 
position at its April meeting to take a decision on the appointment of a new member.  Unfortunately, 
while Members had recently again been invited to express their views on this matter, only three 
delegations had responded to this i nvitation.  In this situation, she considered that, as had been 
suggested at the informal meeting on 7 October,  the most pragmatic approach was to decide to 
appoint one of the two candidates to replace Mr. Kim and to appoint the other candidate to replace the 
member whose term would expire in Spring 2006 (Mr.  Terence P. Stewart).  Thus, she proposed that 
the Committee decide to appoint Mr. Sebastian Saez (C hile) in the position that had been vacant since 
                                                     
 
25 Written questions and answers had been receive d in documents G/SCM/ Q3/BRB/12 and 13 with 
respect to the Export Grant and Incentive Scheme. 
  G/SCM/M/54 
 Page 23 
 
 
  Spring 2005 following the expiry of Mr. Kim's term ; and to appoint Mr. Chang Fang Lo to replace 
Mr. Stewart upon the expiry of Mr. Stewart's term in Spring 2006. 
85. The delegate of China  indicated that his delegation was not in a position to support a decision 
on this matter at the present meeting and suggested th at the Committee revert to this issue at its next 
meeting. 
86. It was so agreed .   
I. OTHER BUSINESS  
1. Venezuelan countervailing measures regarding  potato starch originating in the 
European Communities  
87. The delegate of the European Communities  stated that countervailing measures adopted by 
Venezuela in June 2004 on potato starch originati ng in the European Communities were in clear 
breach of the SCM Agreement.  First, the Venezu elan authorities had treated potato starch produced 
in the European Communities and the yucca starch produced by the Venezuelan domestic industry as 
"like products" within the meaning of footnote 46 to Article 15.1 of the SCM Agreement.  The European Communities considered that these two produc ts could not be considered alike for a number 
of reasons, e.g. different tariff heading codes, di ssimilar technical and chemical characteristics, 
different physical features, different production ma chinery, dissimilar areas of application and the 
significant difference in price.  Secondly, acco rding to recent WTO ju risprudence, notably United 
States – Final Countervailing Duty Determinations With Respect to Certain Softwood Lumber from 
Canada,  an investigating authority could not simply assume that a subsidy granted to the upstream 
producers of a product (in this case farmers) auto matically benefited the downstream producers of 
another product, resulting from the transformation of the former (in this case potato starch producers), 
especially when the transactions between the ups tream producers and the dow nstream producers were 
at arms-length conditions.  On the contrary, the inv estigating authority had to examine whether, and, 
to what extent, the subsidy granted to the up stream producers conferred a benefit and to the 
downstream producers.  In the subject investigation,  the Venezuelan authorities had failed to properly 
examine who the actual beneficiary of the aid was and to what extent the aid passed through from one 
producer to the other, i.e. in this case, form the pot ato producer to the potato starch producer.  Thirdly, 
the Venezuelan authorities had not properly analyzed  known factors other than the alleged subsidized 
imports that could have caused the alleged injury  to the domestic industry.  They had simply 
attributed all the alleged damage suffered by dom estic producers to the imports form the European 
Communities.  In particular, the effective impact of  imports from one particular third country on the 
domestic market had not been examined despite the fact that the volume of these imports was 
substantial and that the prices of these imports we re even lower than the prices of imports from the 
European Communities.   
88. The delegate of the European Communities stated that the European Communities had 
repeatedly raised its concerns with the Venezuel an authorities throughout the investigation and after 
the imposition of the measures.  While the Eu ropean Communities appreciated the open and 
transparent approach so far taken by Venezuela wh en discussing this matter bilaterally, this had not 
helped to solve the problem.  Measures that the European Consid ered as fully incompatible with 
WTO rules had been applied and were  currently in force causing considerable damage to exporters in 
the European Communities.  The European Communities looked forward to Venezuela's reaction and 
hoped that an amicable solution could be found swiftly.  
89. The delegate of Venezuela
 stated that in June 2004 Venezuela had submitted a notification 
under Article 25.11 of the SCM Agreement of the c ountervailing measure on imports of potato starch G/SCM/M/54 
Page 24  
 
  from the European Union.
26  The measure consisted in  the application of an ad valorem  duty of 50 per 
cent on the c.i.f. customs value and had been adopt ed by a decision of the Venezuelan Commission on 
Anti-dumping and Subsidies of 7 June 2004, published in the official gazette of Venezuela on 8 June 2004.  The investigation resulting in the adoption of this  measure had been initiated on 
31 March 2003.  The imposition of this counter vailing measure was based on various subsidy 
programmes that were prohibited because they were either conditional upon the use of domestic over 
imported potatoes or contingent  upon export performance.  A meeting had taken place at the 
beginning of 2005 in Caracas between officials of  the European Communities and of Venezuela in 
which Venezuela had responded to a ll questions raised by the Europ ean Communities.  Subsequently, 
the European Communities had not sought any additi onal information.  His delegation was surprised 
that the European Communities had not pursued this  matter bilaterally and had decided suddenly to 
raise this issue in the Committee under "Other Busi ness".  He invited the European Communities to 
enter into a bilateral dialogue with Venezuela to  clear up any misunderstanding that might exist with 
respect to this countervailing measure.  
90. The delegate of the European Communities
 stated that his delegation had not raised this issue 
in the Committee because of a lack  of information but because it di sagreed in substance with the 
determination made by Venezuela.  His delegation would seek further bilate ral consultations with 
Venezuela, which he hoped would lead to a mutually satisfactory solution.   
91. The Committee took note  of the statements. 
J. DATE OF NEXT REGULAR MEETING  
92. The Chairperson  recalled that the Committee had agreed at its meeting of 21 February 1995 
that regular meetings normally woul d be held in the last week of April and in the last week of 
October.  She therefore proposed that the next mee ting of the Committee take place in the week of 24 
April 2006. 
93. It was so agreed .  
K. ANNUAL REPORT TO THE COUNCIL FOR THE TRADE IN GOODS  
94. The Committee adopted  its annual report to the Council for Trade in Goods under Article 
32.7 of the SCM Agreement.27   
__________ 
                                                      
26 Document G/SCM/N/116. 
27 Document G/L/754 (31 October 2005).