WORLD TRADE  
ORGANIZATION  G/SCM/Q4/PNG/6 
9 November 2006 
 
 (06-5379) 
Committee on Subsidies and 
Countervailing Measures Original:   English 
 
 
 
PROCEDURES FOR EXTENSIONS UNDER  
ARTICLE 27.4 OF THE AGREEMENT ON SUBSIDIES  
AND COUNTERVAILING MEASURES 
 
Replies to Questions Posed by PERU1 
 
 
 The following communication, dated 6 November 2006, is being circulated at the request of 
the Delegation of Papua New Guinea 
 
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Q1.  Do the co-sponsors of proposal G/SCM/W/535 intend to extend only the programmes 
which have been notified to date under Ar ticle 27.4 of the Agreement on Subsidies and 
Countervailing Measures and which are included in Annex A of their proposal or do they 
intend to include any other export subsidy pr ogramme which fulfils the criteria under 2 in 
document G/SCM/39? 
 
Reply  
 
 The proposal contained in G/SCM/W/535 refers only to the amendment of paragraph 1(e) of 
G/SCM/39.  Hence, the intention of the sponsors of  the document is to continue benefiting from the 
extension until the end of 2018.    In line with our ‘transparenc y’ and ‘standstill’ obligations specified in G/SCM/39 it would 
clearly be impossible to make modifications to the subsidy programme that has been notified or 
include any further subsidy programmes.  
Q2. Under what laws and enabling regulations are the programmes listed in Annex A of the 
proposal implemented? 
 
Reply
 
  The subsidy in question is an export incentiv e provided by the Government of Papua New 
Guinea to manufacturing companies under Section 45B Division 1A – Export Incentives of the 
Income Tax Act of Papua New Guinea. 
  The incentive programme is administered by  the Papua New Guinea’s Internal Revenue 
Commission (IRC), which is the government agency responsible for taxation and customs matters in 
Papua New Guinea.  
                                                     
 
1 G/SCM/Q4/PNG/4 G/SCM/Q4/PNG/6 
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  Q3. Which sectors and products benefit from the programmes? 
 
Reply
 
  The incentive is available and can be utilized  by those companies engaged in manufacturing 
for exports, thus the incentive is contingent on ‘qua lifying’ goods as prescribed in Regulation 10A of 
the Income Tax Act and these goods include:  
Activated carbon 
Artifacts  
Beverages ready for consumption 
Biscuits Canned fruit and vegetables Canned, loined & smoked fish Cement & concrete products 
Ceramics 
Fabricated steel Fibre-glass products Fishing nets Flexible packaging materials Flour 
Foam products 
Founded & manufactured metal products Glass products Hand tools Industrial & medical gases  
Instant coffee 
Instant full cream milk Instant noodles Jewellery Livestock feeds 
Matches 
Motor vehicles Non-dairy creamer Chopsticks 
Cigarettes 
Clothing & manufactured textiles 
Confectionary Dairy products Dry cell batteries Electrical appliances 
Essential oils /oleoresins 
Paint Paper products Plastic products Powdered cocoa beverages  Powdered coconut milk 
Processed & canned meat products 
Processed ginger Refined petroleum Rubber products Sawn timber, moldings, plywood & laminated 
products 
Ship & boat building & repairing Soap Treated & processed Crocodile skins Wood pulp 
Wooden furniture 
  Although, the subsidy programme covers a wi de range of products and sectors, only one 
company, Ramu Nickel/Cobalt Project to-date has been  granted the use of this incentive by the Papua 
New Guinea Government.  This project remain s under development and has not reached full 
production capacity and as such the incentive is yet to be fully utilized by the developer of the Ramu 
Nickel/ Cobalt Project, as well as other companies.  
 The government of  Papua New Guinea believ es that such export incentives are necessary to 
nurture and further develop its export industries a nd hence considers an extension of the programme 
to be important in allowing a  full coverage of pr oducts and sectors as originally notified, to avail of 
the benefits of the programme  Q4. What amount is dispersed by the St ate to the programmes listed in Annex A? 
 
Reply
 
  Section 45B of the Income Tax Act is provi ded as a tax exemption to companies who are 
contingent on exporting those goods lis ted in Regulation 10A of the Act.  The company tax in Papua  G/SCM/Q4/PNG/6 
 Page 3 
 
 
  New Guinea is 25 per cent (25%), thus this export in centive is the exemption of 25% from net profits 
derived from export sales.  The tax exemption is given for up to 100% of net income derived from 
export sales of a variety of goods for three years.  After this period, any export income which is in excess of the average of the prior years can be treated as exempt income, up to and including the 
seventh year. 
 
 Hence , the Government does not directly provide subsidy payments to the exporters but does provide tax exemption as incentives for companies to manufacture products for exports.   
Q.5  In the case of Members, other than the co-sponsors of G/SCM/W/535 that are seeking 
extensions to their programmes, questions 1–4, adapted to the programmes for which extensions 
are requested, will apply. 
 
Reply
 
 
 From the way this question is phrased, Papua  New Guinea views that no reply is required 
because the question refers to members other than  the co-sponsors of document ‘G/SCM/W/535’.  
Otherwise, Papua New Guinea seeks further clarification on the question to be able to provide appropriate responses.  
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