WORLD TRADE  
ORGANIZATION  G/SCM/Q2/USA/38 
6 April 2010 
 (10-1796) 
Committee on Subsidies and  
Countervailing Measures Original:   English 
 
 
 
SUBSIDIES 
 
Replies to Questions Posed by CANADA1 Regarding the New  
and Full Notification of the UNITED STATES2 
 
  The following communication, dated 30 March 2010, is being circulated at the request of the Delegation of the United States.    
_______________ 
 
 
Question 1 
 
US R&D programmes for renewable and fossil fuel energy sources (various programmes 
on pages 14-21)  
Canada would like to know if the eligibilit y for each programme is restricted to 
US organizations and companies only.  Also, wh at is the nature of the processes related to 
applying for support from these programmes?   
 
Reply
 
  DOE issues open and competitive funding opportu nities;  it does not restrict eligibility to 
US organizations.  As noted, and previously expl ained, most funding is through competitive funding 
opportunities, or solicitations.  Each funding oppor tunity announcement is publicly available and 
includes the specific criteria by which applications will be evaluated.  Criteria often depend on the 
technical topic area.  A merit review committee co mposed of independent t echnical experts reviews 
each application and provides recommendations fo r award to DOE.  Based on the merit review 
committee's recommendations, a DOE selection official makes the final selections for award.    Question 2 
 
Excess of Percentage over Cost Depletion for Oil, Gas and Other Fuels (page 23) 
 
 In the "Background and authority" section, it  is stated that 100 per cent of net income 
limitation has been suspended for domestic pro duction from marginal wells for taxable years 
ending before 1 January 2008, or in 2009.  Cana da would be interested in having more details 
on the reasons of the suspension.  Also, could the United States explain what is considered to be 
a small-scale producer?   
 
                                                     
 
1 G/SCM/Q2/USA/37.   
2 G/SCM/N/155/USA.   G/SCM/Q2/USA/38 
Page 2  
 
  Reply
 
  Taxpayers are allowed a deduction for depleti on of oil and gas wells.  Non-integrated (or 
independent) oil and gas producers and royalty owners  may determine part or all of this deduction 
using the percentage depletion method.  For any taxable year, the amount deducted under the 
percentage depletion method with respect to an  oil or gas property generally may not exceed 
100 per cent of the net income from the property.  For domestic production from marginal wells, however, the 100-per cent-of-net-income limitation has been suspended for taxable years beginning 
after 31 December 1997 and before 1 January 2008 or in 2009.  A temporary suspension of the 
100 per cent of net income limitation was first enac ted during a period of very low oil prices.  The 
suspension has been extended several times by subsequent legislation.   
 
 Marginal well property includes property where the average daily production of domestic 
crude oil and natural gas is the equivalent of 15 ba rrels or less.  Marginal well property also includes a 
property where substantially all of the production is  heavy oil.  Heavy oil means domestic crude oil 
produced from any property is such crude oil had a weighted average gravity of 20 degrees API or 
less (corrected to 60 degrees Fahrenheit).     "Small-scale producer" is not a relevant concept in this context.    
Question 3 
 
Alternative fuel promotion programmes (e.g. Alcohol Fuel Credit on page 28 and Biodiesel 
Credit on page 29) 
 
 Canada notes that certain US programmes d esigned to promote the use of alternative 
fuels are sometimes used in ways that are unint ended and have the potential to significantly 
distort trade (e.g. US pulp producers recent use of "black liquor" fuel mixtures to qualify for 
the Alternative Fuel Mixture Credit).  Canada is interested to know if the US has considered 
ways in which to prevent or limit the effect of similar practices under the notified programmes 
and/or new programmes such as the Biomass Crop Assistance Programme and the Renewable 
Electricity Production Credit (e.g. strict eligibility criteria, defined spending caps).   
 
Reply
 
  The "black liquor" issue was the product of a very unique confluence of legislative amendments over a period of years.  Once discove red, immediate efforts were made to address the 
issue.  The United States is aware of the other situa tions that could raise a similar issue and is tracking 
those matters closely.    
Question 4 
 
Saltonstall-Kennedy Grant Programme:  Fisheries R&D (page 38) 
 
In an answer to Canada's question regardi ng the previous US notification, the 
United States mentioned that duties on fishery imports have increased over the past five years, 
meaning that the funding from other sources wa s not necessary.  Canada would like to know if 
it is still the case, i.e. is duty revenue still sufficient to fund the programme?    G/SCM/Q2/USA/38 
 Page 3 
 
 
  Reply  
  Yes.  The programme is capitalized through annu al transfers by the S ecretary of Agriculture 
to the Secretary of Commerce equal to 30 per cent of the gross receipts co llected under the customs 
laws on imports of fish and fish products.   
 
Question 5 
 Empowerment Zones, Enterprise, Enterpri se Communities and Renewal Communities 
(page 54) 
 
Canada would be interested in knowing where these empowerment zones are located 
and have the number of empowerment zones increased  or decreased?  Also, as it is stated that 
the programme is supposed to end in Decemb er 2009, Canada would like to know if there was 
an extension.   
 
Reply
 
  Round I empowerment zones were designate d in December 1994, Round II empowerment 
zones were designated in December 1998, and Ro und III empowerment zones were designated in 
January 2002.  The Round I empowerment zone in A tlanta, Georgia became a renewal community.  A 
replacement zone was designated in Round III.  Al l other zones maintained their designation as an 
empowerment zone until tax benefits  for all of the empowerment zones expired at the end of 2009.  
These benefits have not yet been extended.  Ma ps for each empowerment zone can be found at 
http://www.hud.gov/offices/cpd/economicdevel opment/programs/rc/tour/roundnumber.cfm
.   
 Question 6  Several sub-national programmes 
 
 Canada would be interested in having either  the subsidy per unit, the total amount of 
the grant, or the annual amount budget ed for the following programmes:   
 
o Alabama's Delta Regional Authority (page 60) 
o Delaware Strategic Fund (page 89) 
o Florida's Quick Response Training Programme (page 96) 
o Florida's Rural Community Development Revolving Loan (page 99) 
o Illinois' Coal Developm ent Programme (page 105) 
o Kentucky's High-tech construction & investment pool (page 112) 
o One North Carolina Fund (page 156) 
o Utah's Corporate Loan Programme (page 183) 
o Utah's Industrial Assistance Fund (page 183) 
o Virginia's Solar Photovoltaic Manufacturing Grants (page 190) 
 
Reply
 
 
o Alabama's Delta Regional Authority (page 60) 
The Delta Regional Authority's grant programme funded 385 projects during its first 
six years, using $56 million of DRA funds.   
 
o Delaware Strategic Fund (page 89) 
For businesses considering locating in the State of Delaware, financial assistance may be 
provided in the form of low interest loans, gr ants, or other creative instruments to support the G/SCM/Q2/USA/38 
Page 4  
 
  attraction of businesses that pay sustainable wages. Assistance terms are negotiated specific to 
each firm's individual needs and situation.  Due to the variety of possible assistance, the 
benefit level (if any) under the Subsidi es Agreement is difficult to quantify.   
 
o Florida's Quick Response Training Programme (page 96) 
The total amount budgeted for the programme is $5,000,000.   
 
o Florida's Rural Community Development Revolving Loan (page 99) 
The total amount budgeted for the progra mme is $900,000 (funded from the Economic 
Development Trust Fund).   
 
o Illinois' Coal Development Programme (page 105) 
$1.4 million was awarded under this programme  for 16 research projects in FY 2006.  
$2.1 million was awarded in FY 2006 for 13 development projects.   
 
o Kentucky's High-tech construction & investment pool (page 112) 
The FY 2006 budget totaled $11,485,000.   
 
o One North Carolina Fund (page 156) 
 Disbursements in 2005 totaled $4,426,772.    Disbursements in 2006 totaled $3,922,750. 
 
o Virginia's Solar Photovoltaic Manufacturing Grants (page 190) 
The Virginia Solar Photovoltaic Manufacturing Gr ants programme was not used in the period 
of 1 October 2004 through 30 September 2006.   
 
o Utah's Corporate Loan Programme (page 183) 
Utah no longer maintains the Corporate Loan  Programme.  The Department of Community 
and Economic Development was absorbed in to the Governor's Office of Economic 
Development (GOED) effective 1 July 2005.  The GOED has not admini stered any awards 
under this programme since that date.   
 
o Utah's Industrial Assistance Fund (page 183) 
The FY 2005 budget totaled $4,442,800 and the FY 2006 budget totaled $3,479,400.   
 
Question 7 
 
Alabama ThyssenKrupp Steel Plant Project (page 65) 
 
Canada notes that the US federal government  frequently expresses concern in various 
international for a, including the OECD, with su bsidies to the steel sector, particularly those 
that expand capacity.  Canada shares this concer n.  Given the size and ongoing nature of this 
incentive package, as well as the number of additional state-level steel subsidies included in this 
notification, Canada is interested to know if the federal government has made, or plans to 
undertake, efforts to inform its states about th e rationale underlying the federal position on 
subsidies to this sector and to discourage such support whenever possible.   
 
Reply
 
 
 The Federal Government of the United Stat es does not maintain programmes to promote 
investment for new capacity in the steel sector.  That said, as in many Members' economies with 
federal systems of government, including Canada, so me US states and loca lities maintain programmes 
within their own jurisdictions and have authorities that provide assistance to promote investment in  G/SCM/Q2/USA/38 
 Page 5 
 
 
  local economic development.  Typically, US state governments compete for major new investments to 
be built in their states, after new investment d ecisions are announced by the private sector.  These 
"locational" incentive packages have generally in cluded state tax and othe r benefits which are 
disbursed over time and have be nefitted foreign as well as US steel  investors.  The United States 
remains a large net importer of steel.  It is critical to note that  these sub ‐federal programmes have not 
created significant new capacity in the United Stat es that would not have otherwise been created;  
rather, as various studies indicate, state programmes only influence where  within the United States the 
new capacity will be built, generally after a co mpany announces a major commitment of private 
investment for a new facility to be built somewhere within the United States.   
 
The US Government remains committed to addressing market ‐distorting practices in the 
global steel sector that contribute to excess capacity and production, including subsidies, border 
measures, and other trade ‐distorting policies.  We appreciate the opportunity to work together with 
Canada and other like ‐minded Members on these difficult issues.   
 
Question 8 
 
Alaska's Commercial Fishing Revolving Loan Fund (page 65) 
 
While it is stated that this fund provides long-term, low interest loans to commercial 
fishing businesses, details are not provided as to the exact type of fishing activities financed by this programme.  Please provi de details or examples.   
 Reply
 
  While Article 25 does not require the level of de tail asked for in the question, for transparency 
purposes, the United States provides the following answer.  The Commercial Fishing Revolving Fund 
funds a variety of activities related to commercial fishing. Loans are made for purchasing gear and 
quota shares for Halibut and Sablefish.  The state also  makes loans to help fisherman satisfy past due 
federal tax obligations;  makes loans to qualifie d Community Quota Entity communities to purchase 
quota shares;  and makes loans for the purpose of  improving the quality of seafood products.   
 
Question 9 
 
California's Old Growth Diversification Revolving Loan Fund (page 74)  
According to the notification, this progra mme was discontinued on 30 June 2003.  
Canada would like to know if any disbursement s were made since 2003.  If so, could the US 
provide details in that regard?   
 Reply
 
 
 The programme was gradually transferred to th e three regional organizations that contracted 
with California's Technology, Trade and Commerce Agency (TTCA).  However, the programme has 
since come under the oversight of the US Forest  Service and the California has not been involved 
since 2003.  G/SCM/Q2/USA/38 
Page 6  
 
  Question 10 
 New York's Qualified Emerging Technology Company (QETC) Tax Credits (page 154) 
 
For this programme, it is mentioned that Pa rt 3 QETC Facilities, Operations, Training 
Credit will expire at the end of 2011.  Canada would be interested in knowing when the 
two other parts, i.e. Part 1 QETC Employment Credit and Part 2 QETC Capital Tax Credit, are supposed to end.    
Reply
 
 
 With regard to the QETC Employment Credit a nd QETC Capital Tax Credit, neither of these 
currently have sunset dates.   
 
Question 11 
 
Tax Credit and Tax Exemption programmes by  North Dakota for agricultural processing 
industries (page 157) 
 
Canada would be interested in having more de tails with respect to the exact amount of 
money given under each programme.  Also, coul d the US specify how many businesses have 
benefited from these programmes?    
Reply
 
  As a general matter, we note that Article 25 does not require that the number of businesses 
that have participated in a programme be specified .  However, for transparency purposes, we provide 
the following answer.     Under the North Dakota agricultural commod ity processing facility investment tax credit
 
(under N.D.C.C. ch. 57-38.6), for the 2005 and 2006 calendar years:    
• 5 agricultural commodity processing facilities used the programme during the two years 
• Total investments made in the 5 businesses:  $21,826,888.50 
• Total income tax credits allowed for the investments:  $5,029,466.55 
  It is important to note that under this incen tive, the businesses using the programme are not 
the direct beneficiaries.  Rather, the investors in the businesses receive th e income tax credit.   
  For the agricultural processing plant sales tax exemption
, the number of companies that have 
used the programme and the applicable tax savings is as follows:   
 
Calendar Year 2005 
• Number of companies  29 
• Tax    $ 3,302,926 
 
Calendar Year 2006 
• Number of companies  25 
• Tax    $ 4,682,690  G/SCM/Q2/USA/38 
 Page 7 
 
 
  Question 12 
 Ohio's Enterprise Zones (page 158) 
 
According to the details provided in the no tification, this programme was supposed to 
sunset in October 2009. Canada would like to know if there was an extension.  If not, are there 
applications pending under this programme and co uld the US provide details as to any ongoing 
disbursements?   
 
Reply
 
 
 Ohio's Enterprise Zone programme was extended to 15 October 2010 pursuant to Ohio Revised Code Sections 5709.62, 5709.63 and 5709.632.    
Question 13 
 
Oregon's Strategic Reserve Fund (page 167) 
 
Canada would be interested in knowing wh ich "key industries" benefited from this 
programme.  Also, could the US provide the exact conditions that must be met in order to be able to benefit from this programme?   
 
Reply
 
  The SRF was designed to catalyze economic and industry cluster development across the state, and it is in this context that Oregon recognizes "key industries".  Oregon defines clusters as 
groups of companies that interact based on inherent business relationships among firms and 
organizations in a region.  These relationships are based on common or complementary products, 
production processes, core technologies, natural resource requirements, skill requirements and distribution channels.  Clusters also typically represent the social and cultural values of their 
communities.  Oregon has identified the following clusters:    
• Business services (creative and d esign services, architecture, etc.) 
• Wood/other forest products 
• Electronics and advanced materials (semiconductor, electronic manufacturing, etc.) 
• Logistics and distribution (transportation ser vice providers, warehousing, storage services, 
etc.) 
• Processed food and beverage products 
• Agricultural products (crop production, livestock) 
• Metals and machinery manufacturing 
• Transportation equipment and parts 
• Information technology (software publishers, te lecommunications companies, Internet service 
providers) 
• Apparel, sporting goods design and manufacturing 
• Communication equipment (computer equipment manufacturing, audio/video manufacturing, 
magnetic/optic manufacturing) 
• Medical products (medical equipmen t, pharmaceuticals manufacturing) 
 
 Information regarding which specific key industries benefited under the SRF during the 
reporting period is not readily available.  To tal expenditures under the SRF have averaged 
approximately $2.5 million per year.    G/SCM/Q2/USA/38 
Page 8  
 
  Question 14 
 
Tax Refund programme by South Dakota for ag ricultural processing facilities (page 173) 
 
Canada would be interested in knowin g the total amount refunded under this 
programme, and who were the beneficiaries.    
Reply
 
  Total amounts refunded for the reporting peri od were as follows:  2005 = $3,379,986, 2006 = 
$1,840,364.  The name of beneficiaries is not requi red by Article 25, nor is such information provided 
by Canada or other Members in their subsidy notifications.    
Question 15 
 
Several Vermont's programmes (page 185 and 186)  
 Several programmes simply state "eligible comp anies" or "eligible facilities" as being 
the beneficiaries.  Canada would like to h ave more details about the sectors in which they 
operate for the following Vermont's programmes:    
o Economic Advancement Tax Incentive 
o Industrial Development Bonds 
o R&D Sustainable Technology Tax Credits 
o Vermont Employment Growth Incentive 
 Reply
 
  The sectors in which these programmes operate are as follows:    
o Economic Advancement Tax Incentive:  No sectoral limitation. 
o Industrial Development Bonds:  No sectoral limitation. 
o R&D Sustainable Technology Tax Credits:  biomass, geothermal, methane, solar, or wind 
power and heating companies.   
o Vermont Employment Growth Incentive:  No sect oral limitation, although benefit levels vary 
depending on the impact on employment.   
 
 
 
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