WORLD TRADE  
ORGANIZATION  G/SCM/N/1/CRI/4 
5 February 2010 
 (10-0648) 
Committee on Subsidies and  
Countervailing Measures Original:   Spanish 
 
 
 
NOTIFICATION OF LAWS AND REGULATIONS UNDER 
ARTICLES 18.5 AND 32.6 OF THE AGREEMENTS 
 
COSTA RICA 
 
  The following communication, dated 2 February 20 10, is being circulated at the request of the 
delegation of Costa Rica.  
_______________ 
 
 
No. 35559-MEIC 
THE PRESIDENT OF THE REPUBLIC 
AND THE MINISTER OF THE ECONOMY, INDUSTRY AND TRADE 
 
  In application of the powers conferred by Article 140(3) and (18) and Article 146 of the 
Political Constitution;  Article 28.2(b) of the Ge neral Law on Public Administration, No. 6227 of 
2 May 1978;  the Agreement on Subsidies and C ountervailing Measures, Law Approving the Final 
Act Embodying the Results of the Uruguay Round of Multilateral Trade Negotiations, Law No. 7475 
of 20 December 1994 and the Central American Regu lations on Unfair Business Practices, Resolution 
No. 12-95 (COMRIEDRE-II) of 12 December 1995, as amended by Executive Decree 
No. 33809-COMEX-MEIC of 8 May 2007 issuing Resolution No. 193-2007 (COMIECO-XLIV) of 
24 April 2007.  
Whereas: 
 
1. The Marrakesh Agreement Establishing the World Trade Organization (WTO) sets forth, 
inter alia , rules and disciplines, the Agreement on Impl ementation of Article VI of the General 
Agreement on Tariffs and Trade 1994, the Agreement on Subsidies and Countervailing Measures, and 
the Agreement on Safeguards, so that Members of that Organization may take action in the event of 
unfair foreign trade practices, and adopt precautionary  measures and use adjustment mechanisms to 
address increased imports that cause or threaten to cause serious injury to domestic production. 
 2. According to Article 14 of the Agreemen t on Subsidies and Countervailing Measures, the 
method used to calculate the amount of a subsidy in  terms of the benefit to the recipient shall be 
provided for in the national legislation or implemen ting regulations of the Member concerned.  Such 
laws or regulations must be consistent  with the provisions of that Article. 
 3. In pursuance of the foregoing, this Administration intends to issue a regulation setting forth well-structured and clear provisions to establish and organize a methodology for the calculation of 
subsidies in the various proceedings c onducted by the Investigating Authority. 
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  4. Costa Rica intends to give official status to the method to be used for calculating injury 
caused by a subsidy in terms of the benefit to th e recipient, and to supplement the administrative 
procedure already made official in the document "Handbook of Procedures Office of Unfair Practices 
and Safeguard Measures".  
THEREFORE DECREE: 
 
Regulation on the Methodology for Calculating the Amount of Subsidies 
 
CHAPTER I 
 
General Provisions 
 
Article 1 - Purpose.   The purpose of this Executive Decree is  to regulate the method that Costa Rica 
will use to determine the total amount of a subsidy in terms of the benefit to the recipient, in 
accordance with Article 14 of the WTO Agreemen t on Subsidies and Countervailing Measures. 
 Article 2 - Definitions.   For the purposes of this Regulation, the term: 
  (a) Country  shall be understood as including all countries or separate customs territories 
Members of the World Trade Organization; 
 
 (b) Domestic industry
1 shall mean the domestic producers as a whole of the domestic like 
product or those of them whose collective output of that product constitutes a major 
proportion of the total domestic production of that product, except that when producers are related to the exporters or im porters or are themselves importers of the 
allegedly subsidized investigated product,  the term "Domestic industry" may be 
interpreted as referring to the rest of the producers.  For the purposes of this definition, producers shall be deemed to be related to exporters or importers only if: 
 
(i) One of them directly or indirectly controls the other;  or 
 
(ii) both of them are directly or indirectly controlled by a third person;  or 
 
(iii) together they directly or indirectly control a third person, provided that there 
are grounds for believing or suspecting that the effect of the relationship is such as to cause the producer concer ned to behave differently from 
non-related producers.  For the purposes of this definition, one shall be 
deemed to control another when the fo rmer is legally or operationally in a 
position to exercise restraint or direction over the latter; 
  (c) Domestic like product  shall mean the domestically pr oduced product which is a "like 
product" to the investigated product; 
 
 (d) Interested parties  shall mean: 
 
(i) The exporter(s) or foreign producer(s) of the investigated product; 
 
(ii) the importer(s) of the investigated product; 
 
                                                     
 
1 Article 16.2 of the SCM Agreement allows duties to be imposed in cases of injury to a regional 
industry.  G/SCM/N/1/CRI/4 
 Page 3 
 
 
  (iii) trade or business association(s) a ma jority of the members of which are 
producers, exporters or importers  of the investigated product; 
 
(iv) the government(s) of the exporting country(ies); 
 
(v) the producer(s) of the domestic like product in the Republic of Costa Rica; 
 
(vi) trade and business association(s) a ma jority of the members of which produce 
the domestic like product in the Republic of Costa Rica; 
 
 (e) Investigated product  shall mean the product subject to a countervailing measures 
investigation as described in the noti ce of initiation of the investigation; 
  (f) Investigating Authority  shall mean the Department of Trade Defence of the Ministry 
of the Economy, Industry and Trade, which shall be advised by the Economic Studies 
Directorate of the Legal Affairs Advisory Unit of the aforementioned Ministry, as the 
national administration in charge of administering the countervailing measures legislation of the Republic of Costa Rica; 
  (g) Like product  shall mean a product which is identical , i.e. alike in all respects to the 
investigated product, or in the absence of such a product, another product which, 
although not alike in all respects, has charact eristics closely resembling those of the 
investigated product; 
  (h) Rate of subsidization  from a subsidy or subsidy programme shall mean the 
ad valorem  subsidization of the investigated product; 
 
 (i) Total subsidy amount  shall mean the absolute monetary value, expressed in the 
currency deemed appropriate by the Investig ating Authority, of benefit received by a 
recipient from an investigated countervaila ble subsidy or subsidy programme, net of 
offsets or deductions as provided for in Article 11 of this Regulation; 
 
 (j) Positive evidence  shall mean that established in the Agreement on Subsidies and 
Countervailing Measures of the World Trade Organization. 
 Article 3 - Imposition of countervailing measures.   The Investigating Authority may impose 
countervailing measures on products imported into  the Republic of Costa Rica only when it 
determines, pursuant to an investigation initiate d and conducted in accordance with the provisions of 
this Regulation, that:   (a) The investigated product is subsidized within the meaning of "SECTION I" of this 
Regulation; 
 
 (b) there is injury to the industry of the Republic of Costa Rica;  and 
  (c) there is a causal link between the subsidi zed imports of the investigated product and 
the injury caused to the domestic industry. 
 
 No countervailing duty shall be imposed in ex cess of the total rate of subsidization of the 
investigated product from the subsidies and subsid y programmes determined to exist, calculated in 
accordance with the principles, approaches and methodologies set forth in this Regulation. 
 G/SCM/N/1/CRI/4 
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  CHAPTER II 
 
Determination of Subsidization 
 
SECTION I 
 
Countervailable Subsidies 
 
Article 4 - Definition of a Subsidy.   For the purpose of this Regulation, a subsidy shall be deemed to 
exist if: 
 
 (a) There is a financial contribution by a government or any public body within the 
territory of a country, i.e. where: 
 
(i) A government practice involves a direct transfer of funds (e.g. grants, loans, 
and equity infusion), potential direct transfers of funds or liabilities (e.g. loan 
guarantees); 
 
(ii) government revenue that is otherw ise due is foregone or not collected 
(e.g. fiscal incentives such as tax credits); 
 
(iii) a government provides goods or service s other than general infrastructure, or 
purchases goods; 
 
(iv) a government makes payments to a f unding mechanism, or entrusts or directs 
a private body to carry out one or more of the type of functions illustrated in 
(i) to (iii) above which would normally be vested in the government and the 
practice, in no real sense, differs from practices normally followed by governments;  or 
 
(v) there is any form of income or pric e support in the sense of Article XVI of 
GATT 1994;  and 
 
(vi) a benefit is thereby conferred. 
  Notwithstanding the provisions of Article 30 and Article 31, Annexes I to III of this 
Regulation and Article XVI of GATT 1994, the WT O "Agreement on Subsidies and Countervailing 
Measures", the exemption of an exported product fro m duties or taxes borne by the like product when 
destined for domestic consumption, or the remission  of such duties or taxes in amounts not in excess 
of those which have accrued, shall not be deemed to be a subsidy. 
  A subsidy as defined in this Article shall be countervailable only if such a subsidy is specific 
in accordance with the provisions of Article 5 of this Regulation. 
 
Article 5 - Specificity.   In order to determine whether a subsid y is specific to an enterprise or industry 
or group of enterprises or industries (hereinafter referred to as "certain enterprises") within the 
jurisdiction of the granting authority, the following principles shall apply:  
 (a) Where the granting authority, or the legislation pursuant to which the granting 
authority operates, explicitly limits access to a subsidy to certain enterprises, such 
subsidy shall be specific; 
  G/SCM/N/1/CRI/4 
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   (b) where the granting authority, or the legislation pursuant to which the granting 
authority operates, establishes objective crite ria or conditions governing the eligibility 
for, and the amount of, a subsidy, specificity shall not exist, provided that the eligibility is automatic and that such crite ria and conditions are strictly adhered to; 
 
(i) For the purpose of this Article, "objective criteria or conditions" mean criteria 
or conditions which are neutral, whic h do not favour certain enterprises over 
others, and which are economic  in nature and horizontal in application, such 
as number of employees or size of enterprise; 
 
(ii) the criteria or conditions must be clearly spelled out by law, regulation, or 
other official document, so as to be capable of verification; 
  (c) if, notwithstanding any appearance of non-specificity resulting from the application 
of the principles laid down in subparagraphs  (a) and (b) of this Article, there are 
reasons to believe that the subsidy may in fact be specific, other factors may be 
considered.  Such factors are:  use of a subsidy programme by a limited number of 
certain enterprises, predominant use by  certain enterprises, the granting of 
disproportionately large amounts of subsidy to certain enterprises, and the manner in which discretion has been exercised by the granting authority in the decision to grant 
a subsidy.  In this regard, information on the frequency with which applications for a 
subsidy are refused or approved and the reasons  for such decisions shall, in particular, 
be considered;  in applying the provisions  in this paragraph the Investigating 
Authority shall take account of the extent of diversification of economic activities within the jurisdiction of the granting authority, as well as of the length of time during which the subsidy programme has been in operation. 
 
 A subsidy which is limited to certain enterp rises located within a designated geographical 
region within the jurisdiction of the granting author ity shall be specific.  The setting or change of 
generally applicable tax rates by a ll levels of government entitled to do so shall not be deemed to be a 
specific subsidy for the purposes of this Regulation.  
 Notwithstanding the foregoing, the following subsidies shall be deemed to be specific: 
  (a) Subsidies contingent, in law or in fact, whether solely or as one of several other 
conditions, upon export performance, includi ng those illustrated in Annex I to this 
Regulation: 
 
(i) Subsidies shall be considered to  be contingent in fact upon export 
performance when the facts demonstrat e that the granting of a subsidy, 
without having been made legally con tingent upon export performance, is in 
fact tied to actual or anticipated exportation or export earnings; 
 
(ii) the mere fact that a subsidy is accord ed to enterprises which export shall not 
for that reason alone be considered to be an export subsidy within the 
meaning of this provision; 
  (b) subsidies contingent, in law or in fact , whether solely or as one of several other 
conditions, upon the use of domestic over imported goods. 
  Any determination of specificity under the provisions of this Article shall be clearly 
substantiated on the basis of positive evidence.  G/SCM/N/1/CRI/4 
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  SECTION II 
 
Principles 
 
Article 6 - Period of investigation for subsidy calculations.   The period of investigation for the 
purpose of subsidy calculations, referred to hereafte r as the "subsidy POI", shall be determined in 
accordance with the following provisions:   The Investigating Authority shall base its ass essments of subsidization on data relating to 
defined periods, which shall be the periods for which information is requested in questionnaires. 
 
 (a) The investigation period for the determin ation of subsidizatio n (the subsidy POI) 
normally shall be the most recently completed calendar or fiscal year, as relevant, preceding the initiation of the investigation. 
 
 (b) The investigation period for injury (the  "injury POI") normally shall cover a period of 
three years.  However, the Investigating Authority may select a shorter or longer period if it deems it appropriate in light of available information regarding the 
industry of [country] and the investigated product. 
  (c) Where different periods from those spec ified as the norms in subparagraphs (a) and 
(b) are used, the Investigating Authority sh all provide an explanation of the reasons 
therefor. 
 Article 7 - Benefit to the recipient.   The amount of countervailable subsidy received by the recipient 
shall be calculated in terms of the benefit conferred on the recipient. 
 
 Where the recipient is a state-owned enterprise,  which is subsequently privatized, it shall be 
presumed that a privatization at arm's-length and fo r fair market value extinguishes the benefit, except 
if it can be demonstrated, on the basis of positive evidence, that a benefit persists. 
 Article 8 - Methodological approach to calculat ing the rate of subsidization.   In calculating the 
total rate of subsidization of the investigated produc t for a given foreign producer or exporter, a rate 
of subsidization of that product for the producer or  exporter shall be calculated for each investigated 
subsidy or subsidy programme, in accordance with paragraph 2 of this Article.  The sum of the 
resulting per subsidy or per programme rates shall be the total rate of subsidization of the product for 
that producer or exporter. 
 
 The following methodology shall be applied in calculating the rate of subsidization: 
 Total ad valorem  Subsidization Rate = ∑ TSav
i 
 
Where: 
 
∑ TSav i = the sum of the ad valorem  subsidization rates for a producer  or exporter in investigation 
period i. 
  To calculate the rate of subsidization of th e investigated product for a foreign producer or 
exporter from a given investigated subsidy or subs idy programme.  The Investigating Authority shall 
first determine the total subsidy amount(s) received by  that producer or exporter from the subsidy or 
programme in question, in accordance  with the provisions of Article  10 of this Regulation, and the 
date(s) of receipt thereof, in accordance with the pr ovisions of Article 12 of this Regulation.  Second, 
the Investigating Authorit y shall determine, in accordance with th e provisions of Article 12 of this  G/SCM/N/1/CRI/4 
 Page 7 
 
 
  Regulation, the portion of the total subsidy amount that is attributable to the subsidy POI (the 
"subsidy POI amount").   Third, the Investigating Authority shall de termine, in accordance with the provisions of 
Article 15 of this Regulation, the total value during the subsidy POI of the relevant sales of the foreign 
producer or exporter to which the s ubsidy POI amount can be attributed. 
 SUM = ∑PEi - ∑Pesi 
 Where: 
 
SUM = Subsidy amount per currency unit in investigation period i.  PEi = Unsubsidized export price in investigation pe riod i, net of the deductions and offsets specified 
in Article 11 of this Regulation. 
 
PEsi = Subsidized export price in investigation period i.   Fourth, the Investigating Authority shall calculate the ad valorem  rate of subsidization from 
the subsidy or programme by dividing the subsidy POI amount by the relevant  sales value identified 
in the third step, and multiplying the result by 100. 
 
SAV = ∑ Si * 100 
 ∑ Vi 
 
Where: 
 SAV = Ad valorem  subsidization rate. 
 ∑ Si = The sum of all subsidization rates in inv estigation period i net of the deductions and offsets 
specified in Article 11 of this Regulation. 
 
∑ Vi = The sum of all sales in investigation period i. 
 Article 9 - Individual calculation of the amount of subsidization.   The Investigating Authority 
shall, as a rule, determine an individual amount of subsidization for each known foreign producer or 
exporter concerned of the product under investigation. 
  Notwithstanding paragraph 1 of this Artic le, in cases where the number of exporters, 
producers, importers or types of products involved is so large as to make it impracticable to determine 
an individual subsidization amount for each known foreign producer or exporter concerned of the 
investigated product, the Investigating Authority may limit its examination to a reasonable number of 
interested parties or investigated products by usi ng samples which are statistic ally valid on the basis 
of information available to the Investigating Authority  at the time of the selection, or to the largest 
percentage of the volume of the exports from th e country in question which can reasonably be 
investigated.  
 Any selection of exporters, producers, importers or types of products made under this Article 
shall be chosen after consultation with the exporters, producers or importers concerned. 
  In cases where the Investigating Authority h as limited its examination as provided for in 
paragraphs 2 and 3 of this Article, the Investig ating Authority shall nevertheless determine an G/SCM/N/1/CRI/4 
Page 8  
 
  individual subsidization amount for any foreign pro ducer or exporter who voluntarily submits the 
necessary information in time for that informati on to be considered during the course of the 
investigation.  Notwithstanding the foregoing, where the number of exporters or producers is so large 
that individual examinations would be unduly burde nsome to the Investigating Authority and prevent 
the timely completion of the investigation, the In vestigating Authority may decline to determine 
individual subsidization amounts on the basis of such  voluntary responses and limit its examination to 
the exporters and producers in the sample.  
SECTION III 
 
Calculation of the Total Subsidy Amount 
 
Article 10 – Determination of the total subsidy amount received.   The total subsidy amount, 
calculated in terms of the benefit to the recipient, shall be determined by the Investigating Authority 
on the basis of an appropriate methodology corresponding to the form of subsidy involved. 
 
 The total subsidy amount shall be net of an y deductions and offsets as provided for in the 
following Article.  Article 11 - Deductions and offsets.   In determining the total subsidy amount received by the 
recipient foreign producer or exporter under an in vestigated subsidy or programme, or the total 
ad valorem  subsidization rate of the product under inves tigation for that recipient, the following 
elements shall be deducted, as appropriate:   (a) Any application fee, or other costs necessar ily incurred in order to qualify for, or to 
obtain, the subsidy; 
 
 (b) export taxes, duties or other charges levied on the export of the product to the 
Republic of Costa Rica specifically intended to offset the subsidy or subsidies. 
 
SECTION IV 
 
Determination of the Subsidy Amount  Attributable to the Subsidy POI 
 
Article 12 - Principle.   The subsidy amount attributable to the subsidy POI ("subsidy POI amount") 
from an investigated subsidy or subsidy progra mme normally shall be the total subsidy amount 
received by the recipient from that subsidy or subsidy programme during that period. 
 
 Notwithstanding the first paragraph of this  Article, where the total subsidy amounts are 
allocated over a multi-year period, in accordance with the provisions of Article 13 below, the subsidy 
POI amount shall be the portion of the total subsid y amount of benefits allocated to that period. 
 Article 13 - Subsidies which are allocable over a multi-year period.   Where the Investigating 
Authority finds that a particular subsidy has one or  more of the characteristics referred to in the 
second paragraph of this Article, the subsidy amount may be allocated over the average useful life of 
the recipient's operational assets.   Subsidies to be so allocated ("allocab le subsidies") include subsidies that: 
 
 (a) Have been provided for the purpose of purchasing fixed assets;   (b) are non-recurring;   G/SCM/N/1/CRI/4 
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   (c) are oriented toward future production;  and/or 
  (d) are transferred forward in the recipient's accounting records. 
  Notwithstanding the above, small value grants, up  to 0.5 per cent of the recipients firm's 
relevant sales as determined in Section V of th is Regulation, during the subsidy POI, shall be 
attributed in full to the year of receipt ("expensed").   The Investigating Authority shall determine the subsidy amount to be attributed to the subsidy 
POI from an allocable subsidy by dividing the total subsidy amount by the number of years of average 
useful life of the recipient's operational assets, ("the allocation period"), applying the following 
formula:  SD = S
i  
ni 
 Where:  SD = The amount of the allocable subsidy.  S
i = Total subsidy amount for assets i. 
 
ni = Total number of years over which, according to table selected, the assets i will depreciate. 
  Where the number of years between the date of  receipt of the subsidy and the subsidy POI is 
greater than the average useful lif e of the assets, no subsidy amount shall be attributed to the subsidy 
POI. 
  The allocation prescribed in this Article sha ll be performed by dividing the subsidy amount 
over the number of years in the allocation period an d attributing the resulting amount to the subsidy 
POI.  
 Notwithstanding the provisions of the foregoing paragraphs, in the case of subsidies provided 
through long-term loans (i.e. with maturity of longer than one year), the allocation period shall be the 
life of the loan, and the methodology to be followed to calculate the subsidy POI amount is that set 
forth in the third paragraph of Article 24 of this Regulation. 
 
 Except as otherwise provided in this Regulation, the date on which the subsidy POI amount 
from an allocable subsidy shall be deemed to have been received shall be the anniversary date of the 
original date of receipt of the subsidy.  Article 14 - Average useful life of assets.   For purposes of determining the allocation period for a 
given foreign producer or exporter, the Investiga ting Authority shall normally calculate the average 
useful life of that producer's or exporter's assets as the ratio of the total average book value of its 
physical, depreciable assets to its average annual de preciation expense over the most recent relevant 
multi-year period.  In selecting a data source for th e calculation of the average useful life of assets, 
accounting data shall be prefe rred to tax depreciation data. 
 
 Where the Investigating Authority is satisfied  on the basis of positive evidence that a subsidy 
is tied to the purchase of a particular asset the Inv estigating Authority may use the average useful life 
of the asset to which the subsidy is tied as  the allocation period of that subsidy. 
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  SECTION V 
 
Determination of the Sales to Which th e Subsidy POI Amount is Attributable 
 
Article 15 - Principle.   The sales to which the POI subsidy amount shall be attributed are the 
recipient's total sales during that period, unless the In vestigating Authority is satisfied on the basis of 
positive evidence that a subsidy amount received by a foreign producer or exporter is tied to or 
designated to benefit a particular portion of the r ecipient's products or sales (e.g. production or sales 
of a particular product or products for a particular market or markets, etc.).  
Article 16 - Tied subsidies.   Where the Investigating Authority is satisfied on the basis of positive 
evidence that a subsidy amount received by a foreign producer or exporter is tied to or designated to 
benefit a particular portion of the recipient's pr oduction or sales, the Investigating Authority shall 
attribute the subsidy amount to the value of the relevant corresponding sales of the recipient during the subsidy POI.  In identifying such relevant corresponding sales the Investigating Authority shall 
apply the following guidelines: 
  (a) In the case of subsidies tied to the recipient's overall exports or export efforts, the 
relevant sales for attribution of the subsid y amount shall be the recipient's total export 
sales value during the subsidy POI; 
 
 (b) in the case of subsidies tied to production or sale of a particular product or products, 
the relevant sales for attribution of the s ubsidy amount shall be the recipient's total 
sales value of that/those product(s) during the subsidy POI; 
  (c) in the case of subsidies tied to a particular  market or markets, the relevant sales for 
attribution of the subsidy amount shall be th e recipient's total sales value to that/those 
market(s) during the subsidy POI; 
  (d) in the case of subsidies tied exclusively to production a nd/or sale of products, or for 
markets, other than exports of the investig ated product to the Republic of Costa Rica, 
no subsidy amount shall be attributed to those exports, that is, no amount of such 
subsidies shall be countervailed. 
 
SECTION VI 
 
Determination of the Total Rate of Subsidization of the Investigated Product 
 
Article 17 - Calculation of the ad valorem  rate of subsidization for a recipient from a subsidy or 
subsidy programme.   The Investigating Authority shall calculate the ad valorem  rate of subsidization 
for a foreign producer or exporter of the inves tigated product, from a given subsidy or subsidy 
programme, by dividing the subsidy POI amount dete rmined in accordance with Articles 12 and 13 of 
this Regulation by the appropriate value of sales determined in accordance with Article 15 of this 
Regulation, and multiplying the result by 100. 
 Article 18 - Calculation of the total ad valorem  subsidy rate for a recipient.   The Investigating 
Authority shall calculate the total ad valorem  subsidy rate for a foreign producer or exporter of the 
investigated product by summing the ad valorem  subsidy rates calculated for that producer or exporter 
for each of the subsidies or s ubsidy programmes investigated. 
 Article 19 - Inflationary countries.   In the case of allocable subsidies in high-inflation countries the 
Investigating Authority may adjust the ad valorem  subsidy rate for inflation. 
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   If such an adjustment is made it shall be performed by converting both the total subsidy 
amount and the value of sales for the POI into constant values of the currency used.   The adjustment may also be made by discounti ng the inflation as from the date of the start of 
the subsidy POI. 
 
 When the adjustment is made on the basis of another currency or a c onvertible currency, for 
the total amount of the subsidy, this shall be done by converting the total subsidy amount and the 
value of sales during the investigation period using th e following exchange rates:  for the total subsidy 
amount, the exchange shall be the rate prevailing on th e date when the subsidy is deemed to have been 
received, and for the value of sales for the POI the exchange rate shall be the average rate for the 
subsidy POI.   In cases where there are substantial variations in sales volumes over the POI this average rate 
may be weighted by the sales volume in appropriate sub-periods of the POI. 
 
Article 20 - Grants.   In the case of a grant no portion of the value of which is repaid to the 
government, the total subsidy amount shall be the am ount of the grant, determined in accordance with 
the provisions of Articles 10 and 11 of this Regulation.   The Investigating Authority sha ll normally consider the date of  receipt of the subsidy to be 
the date of receipt of the grant.  It shall determin e the amount of a grant that is attributable to the 
subsidy POI in accordance with the provisi ons of Article 13 of this Regulation. 
 Article 21 - Principles for calculating subsidy amounts from government loans.   A  l o a n  b y  a  
government shall only be considered  as conferring a benefit to the extent that there is a difference 
between the amount that the recipient pays in interest and any other charges or costs on the 
government loan, and the amount the recipient woul d have paid on a comparable commercial loan 
which it did or could have obtained on the market.  In this case the benefit shall be the difference 
between these two amounts.   In the case of deferral of principal or interest, the amount of the deferred principal and interest 
shall be considered as an interest free loan. 
  If all or part of a loan found to confer a bene fit is forgiven or defaulted on, the amount not 
repaid shall be treated as a grant in accordance with Article 20 of this Regulation, received on the date 
of default. 
 
Article 22 - Short-term loans.    For a government provided short-term loan, the Investigating 
Authority shall normally use as the basis of the comp arison referred to in Article 21 of this Regulation 
a comparable loan that the recipient has received from a private commercial lender at a similar point 
in time, for a similar amount, with a similar repayment period.  
 Where the recipient has no similar commercia l loan that can be used as the basis for 
comparison, the Investigating Authority may use inst ead a comparable private loan to a company in a 
similar financial situation, if possible in the same sector of the economy.   The Investigating Authority sha ll normally consider the date(s) of receipt of the subsidy to be 
the date(s) on which the recipient makes payment( s), or in the absence of such payments, on the 
date(s) on which payment(s) would have been due on the comparator commercial loan.  The Investigating Authority shall expense the subsidy amount from a short-term loan, in accordance with 
the provisions of the first paragraph of Article 12 of this Regulation. 
 G/SCM/N/1/CRI/4 
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   Short-term loans are considered to be all loans with a maturity of less than 365 days. 
 Article 23 - Debt forgiveness.   In the case of an assumption or forgiveness by the government of a 
firm's debt obligation, a benefit exists equal to the amount of principal and/or interest that the 
government has assumed or forgiven.  If the govern ment receives shares in a firm in return for 
eliminating or reducing the firm's  debt obligations, the Investiga ting Authority shall determine the 
existence of a benefit in accordance with the pr ovisions of Article 27 of this Regulation. 
  The Investigating Authority sha ll normally consider the date of  receipt of the subsidy to be 
the date on which the debt or interest was assumed or forgiven. 
 
Article 24 - Long-term loans.   For a government provided long-term loan, the Investigating 
Authority shall normally use as the basis of the comparison provided for in Article 21 of this 
Regulation a loan of comparable amount, maturity, a nd type (e.g. mortgage, fixed or floating interest 
rate, etc.) that the investigated firm has receive d from a private commercial lender during the year in 
which the terms of the governm ent loan were established. 
  In cases where the recipient has no similar commerc ial loan that can be used as the basis of 
comparison, the Investigating Authority may use inst ead a comparable private loan to a company in a 
similar financial situation, if possible in the same sector of the economy.  
 In the case of long-term loans, the subsidy bene fits calculated according to the provisions of 
this Regulation are deemed to arise on a year-by- year basis over the life of  the loan, in accordance 
with the provisions of the sixth paragraph of Ar ticle 13 of this Regulati on.  The benefits thus 
calculated for the subsidy POI shall be attributed to that period. 
 
 The Investigating Authority shall normally consid er the dates of receipt of the subsidy to be 
the dates on which the recipient makes payments, or in the absence of such payments, the dates on 
which payments would have been due on the comparable commercial loan. 
 Article 25 - Reimbursable grants and contingent liability loans.   Reimbursable grants and 
contingent liability loans (loans that are not payabl e until the occurrence of a specified future event), 
shall be treated as a series of short-term loans duri ng the period before any repayment is made.  The 
methodology used for calculating the amount of the s ubsidy shall be that described in Article 22 of 
this Regulation for short-term loans.  In the event of  a determination that such a grant or loan will not 
be repaid, the outstanding balance of the grant or loan as of that time shall be treated as a grant 
received on the date on which the obl igation to repay was extinguished. 
 
Article 26 - Loan guarantees.   A loan guarantee by a governme nt shall only be considered as 
conferring a benefit to the extent that there is a di fference between the amount that the recipient of the 
guarantee pays in interest and any other charges or  costs on the guaranteed loan and the amount that 
the firm would pay on a comparable commercial loan  absent the government guarantee.  In this case 
the benefit shall be the difference between these tw o amounts adjusted for any differences in fees. 
 
 In the case of a loan guarantee, the Investig ating Authority normally shall consider the 
subsidy to be received on the date(s) on which the re cipient makes loan payment(s), or in the absence 
of such payment(s), on the dates on which paymen t(s) would have been made on the comparator 
commercial loan.  The benefits from loan guarant ees attributable to the subsidy POI shall be 
determined in accordance with the relevant provisio ns of Article 22 or Article 24 of this Regulation, 
depending on the maturity of the guaranteed loan.   The calculation principles set forth in this Article also shall apply to credit guarantees. 
  G/SCM/N/1/CRI/4 
 Page 13 
 
 
  Article 27 - Equity infusions.   Government provision of equity capital shall only be considered as 
conferring a benefit to the extent that the govern ment's investment decisi on can be regarded as 
inconsistent with the usual investment practice (inc luding for the provision of risk capital) of private 
investors in the territory of the country where the equity infusion is made.  
 The Investigating Authority shall consider an equity infusion to be in consistent with usual 
investment practice if the price paid by the governme nt for newly issued equity shares is greater than 
the price paid by private investors for the same (or a similar) form of shares, at that time.  The amount 
of the subsidy shall be deemed to be the diffe rence between the price per share paid by the 
government and the price per share paid by the private investor, multiplied by the number of shares 
purchased by the government.  In calculating the fore going, the following formula shall be applied: 
 SAK   =   (PE
i-PMi) * n i 
 Where: 
 
SAK = Amount of the equity infusion subsidy.  PE
i = Price paid by the State for equity shares of issue i under investigation. 
 PM
i = (Market) price actually paid by priv ate investors for equity shares of issue i under investigation. 
 
ni = Total number of shares actually purchased by the State of issue i under investigation. 
  If there is no market price for shares of the co mpany receiving the equity infusion at the time 
that the government purchases its shares, or if this  market price is not representative of the usual 
investment practice, the Investigating Authority sh all examine whether the government had, at that 
time, a realistic expectation of a reasonable rate of  return on the equity infusion within a reasonable 
period.   In performing this analysis the Investigating Authority may request and examine any studies or analyses considered by the government in d eciding to provide the equity infusion.  If the 
Investigating Authority determines that the government 's decision to invest in the firm receiving the 
equity infusion was inconsistent with usual inv estment practice (including the provision of risk 
capital), the Investigating Authority may treat the equi ty infusion as a subsidy in the form of a grant or 
an interest-free loan, taking into account the financia l situation of the recipient and any other relevant 
information and circumstances.  The amount of the s ubsidy shall be reduced to take into account any 
dividends or income paid to the government duri ng the subsidy POI.  Once it has been determined 
under the above methodology that the equity infusi on provides a subsidy, the amount of the subsidy 
shall be calculated on a case-by-case basis, in a ccordance with the applicable provisions of this 
Regulation.   The Investigating Authority shall consider the date  of receipt of the subsidy to be the date of 
receipt of the equity infusion.  The Investigating Authority shall determine the amount of the subsidy 
that is attributable to the subsidy POI in accord ance with the provisions of Article 13 of this 
Regulation.  Article 28 - Direct taxes, indirect taxes and import charges.   For purposes of this Regulation, the 
term "direct taxes" shall mean taxes on wages, prof its, interest, rent, royalties, and all other forms of 
income, and taxes on the ownership of real property.  G/SCM/N/1/CRI/4 
Page 14  
 
   For purposes of this Regulation, the term "indir ect taxes" shall mean sales, excise, turnover, 
value added, franchise, stamp, transfer, inventor y and equipment taxes, border taxes and all taxes 
other than direct taxes and import charges.   For purposes of this Regulation, the term "impor t charges" shall mean tariffs, duties and other 
fiscal charges not elsewhere enumerated herein that are levied on imports. 
 Article 29 - Exemption, remission or forgiveness of direct taxes.   The exemption, remission or 
forgiveness of direct taxes constitutes a subsidy in  the amount of the difference between the amount 
of taxes exempted, remitted or not collected and the amount that the company otherwise would have 
paid absent the exemption, remission or forgiveness.  The Investigating Author ity shall consider the 
date of receipt of the subsidy to be the date on which the taxes exempted, rebated or forgiven 
otherwise would have been due.  The Investigating Authority shall expense the amount of the subsidy 
in accordance with the provisions of Article 12 of this Regulation.  
Article 30 - Tax deferrals.   In the case of a deferral of taxes (direct taxes, indirect taxes, import duties 
and charges, and similar fiscal charges) the Investig ating Authority shall consid er such tax deferral as 
a government loan in the amount of the taxes deferre d, and shall calculate the amount of any resulting 
subsidy in accordance with Articles 21, 22 and 24 of  this Regulation, as appropriate, depending on 
whether the deferral is for less than one year or for one year or more.  Tax deferral shall not be treated 
as conferring a subsidy if the government collects an  appropriate commercial ra te of interest on the 
deferred amount. 
 Article 31 - Exemption from indirect taxes or import charges.   In the case of a full or partial 
exemption from indirect taxes or import charges, th e Investigating Authority shall determine, subject 
to the second paragraph of Article 4 and except as  provided for in Articles 38, 39 and 40 of this 
Regulation, the amount of any resulting subsidy as the difference between the amount of indirect 
taxes or import charges paid by a firm and the am ount that would otherwise have been paid by the 
firm absent the exemption.  The Investigating Aut hority shall consider the date of receipt of the 
subsidy to be the date that the firm would have had to pay the exempted tax or charge. 
  The Investigating Authority shall expense th e amount of the subsidy in accordance with the 
provisions of Article 12 of this Regulation. 
 Article 32 - Rebate or remission of indirect taxes or import charges.   In the case of a full or partial 
rebate or remission of indirect taxes or import char ges, the Investigating Authority shall determine, 
subject to the second paragraph of Article 4 and ex cept as provided for in Articles 38, 39 and 40 of 
this Regulation, the amount of any resulting subsid y as the net amount of the taxes or charges paid 
after the rebate or remission, compared with the am ount that otherwise would have been paid absent 
the rebate or remission.  The Investigating Authorit y shall consider the date of receipt of the subsidy 
to be the date of receipt of the rebate or remiss ion, and shall expense the amount of the subsidy in 
accordance with the provisions of Article 12 of this Regulation.  
Article 33 - Provision of goods or services.   The provision of goods or services by a government 
shall only be considered as confe rring a benefit to the extent that the provision is made for less than 
adequate remuneration.   The adequacy of re muneration in the country of provision shall be 
determined in relation to prevailing market c onditions for the good or service in question in the 
country of provision (including price, quality, av ailability, marketability, transportation and other 
conditions of purchase or sale). 
  When determining the adequacy of remunerati on the Investigating Authority shall first seek 
to identify a price for the good or service in actual market transactions by private suppliers in the 
country of their provision.  If such a price cannot be identified, the authority may determine the  G/SCM/N/1/CRI/4 
 Page 15 
 
 
  adequacy of remuneration on the basis of whether th e price paid to the government is sufficient to 
cover total costs, including selling, general and administrative expenses, to provide the goods or 
services supplied, plus a reasonable amount for profit, or such other reasonable basis as may be determined.  
 The amount of the subsidy shall be the differen ce between the price paid by the firm for the 
government-provided goods or services and the adequate remuneration determined by the 
Investigating Authority.  The Inves tigating Authority shall consider th e date of receipt of the subsidy 
to be the date on which the firm pays or, in the absence of payment, would have had to pay for the 
government-provided goods or services.  The Investig ating Authority shall expense the amount of the 
subsidy in accordance with the provisio ns of Article 12 of this Regulation. 
 Article 34 - Purchase of goods.   The purchase of goods by a government shall only be considered as 
conferring a benefit to the extent that the purchase is  made for more than adequate remuneration.  The 
adequacy of remuneration shall be determined in relation to prevailing market conditions for the good 
in question in the country of its purchase (including price, quality, availability, marketability, 
transportation and other conditions of purchase or sale).   When determining the adequacy of remunerati on the Investigating Authority shall first seek 
to identify a price for the good charged by the inv estigated firm in actual market sales to private 
purchasers in the country of purchase. 
 
 If such a price cannot be determined, the Inv estigating Authority may determine the adequacy 
of remuneration by examining whether other firm s in that country have sold the same good on 
comparable terms and conditions to private purchasers .  In cases where no such comparator price is 
available the Investigating Authority may determin e the adequacy of remuneration on the basis of 
whether the price paid by the government is sufficient to cover the investigated firm's total cost of the 
good, including selling general and administrative expenses, plus a reasonable amount for profit. 
  The amount of the subsidy shall be the difference between the price paid by the government for the goods purchased and the adequate remunerati on determined by the Investigating Authority.  
The Investigating Authority shall consider date of re ceipt of the subsidy to be the date that on which 
government pays for the goods purchased.  The Inv estigating Authority shall expense the amount of 
the subsidy in accordance with the provisi ons of Article 12 of this Regulation. 
 Article 35 - Worker-related subsidies.   In the case of government assistance to workers, a benefit 
shall be deemed to exist to the extent that the as sistance relieves the employer firm of an obligation 
that it otherwise would incur.  The Investigating Au thority shall consider the date of receipt of the 
subsidy to be the date on which the government paymen t is made that relieves the firm of the relevant 
obligation.  The Investigating Authority shall e xpense the amount of the subsidy in accordance with 
the provisions of Article 12 of this Regulation.  Article 36 - Prior-stage cumulative indirect taxes.   For purposes of this Regulation, the term 
"prior-stage cumulative indirect taxes" shall mean  multi-staged taxes levied on goods or services used 
directly or indirectly in making a product, wher e there is no mechanism for subsequent crediting of 
the tax if the goods or services subject to tax at one stage of production of the product are used in a succeeding stage of production thereof.  
Article 37 - Inputs consumed in the production process.   For purposes of this Regulation, the term 
"inputs consumed in the production process" shall mean  inputs physically incorporated, energy, fuels 
and oil used in the production process, and catalysts which are consumed in the course of their use to 
obtain a product.  G/SCM/N/1/CRI/4 
Page 16  
 
  Article 38 - Exemption or remission in respect of exported products of indirect taxes other than 
prior-stage cumulative indirect taxes.   In the case of the exemption or remission of indirect taxes, 
other than prior-stage cumulative indirect taxes, in respect of the production and distribution of an 
exported product, the Investigating Authority shall c onsider that a subsidy exists only to the extent 
that it determines that the amount of the exemption or remission exceeds the amount levied with 
respect to the production and distribution of the like product when sold for domestic consumption. 
  The Investigating Authority shall consider the da te of receipt of the subsidy to be the date on 
which the excessive amount was remitted or the exempted taxes were otherwise due.  The 
Investigating Authority shall expense the amount of the subsidy in accordance with the provisions of 
Article 12 of this Regulation. 
 Article 39 - Exemption or remission in respect of export ed products of prior-stage cumulative 
indirect taxes.   In the case of the exemption or remission of prior-stage cumulative indirect taxes in 
respect of an exported product, the Investigating Aut hority shall consider that a subsidy exists only to 
the extent that it determines that the amount of  the exemption or remission exceeds the amount of 
such taxes levied on inputs consumed in the produc tion process, as provided for in Article 37 of this 
Regulation, making normal allowance for waste.  Th e provisions of Annex II of  this Regulation shall 
be followed in making this determination.   The Investigating Authority shall consider the da te of receipt of the subsidy to be the date on 
which the excessive amount was remitted or the exempted taxes were otherwise due.  The 
Investigating Authority shall expense the amount of the subsidy in accordance with the provisions of 
Article 12 of this Regulation.  Article 40 - Remission or drawback of import char ges in respect of exported products.   In the 
case of the remission or drawback of import ch arges in respect of an exported product, the 
Investigating Authority shall consider that a subsidy exists only to the extent that they determine that 
the amount of the remission or drawback exceeds the amount of import charges on imported inputs that are consumed in the production proc ess, making normal allowance for waste. 
  In determining the amount of the subsidy in the case of remission or drawback of import 
charges in respect of inputs consumed in the pr oduction of an exported product, the Investigating 
Authority shall take into account the provisions in Article 36 and Annex II of this Regulation. 
  In the case of remission or drawback of import ch arges in respect of in puts consumed in the 
production of an exported product, the Investigating Aut hority shall consider the date of receipt of the 
subsidy to be the date on which the excessive amount  was remitted or drawn back.  The Investigating 
Authority shall expense the amount of the subsidy in  accordance with the provisions of Article 12 of 
this Regulation.   The provisions of this Article shall also appl y to cases of substitution drawback, where a firm 
uses a quantity of home market inputs equal to, an d having the same quality and characteristics as, the 
imported inputs as a substitute for them.  In such  a case the Investigating Au thority shall only deem 
that a subsidy exists when:   (i) The import and the corresponding export operations did not both take place within a 
reasonable time period, of not more than two years;  or 
 
 (ii) the amount drawn back exceeds the amount  of the import charges levied initially on 
the imported inputs for which drawback is claimed. 
  G/SCM/N/1/CRI/4 
 Page 17 
 
 
   The Investigating Authority shall follow the provisions of Annex III of this Regulation in 
cases of substitution drawback.  
CHAPTER III 
 
Final Provisions 
 
Article 41 - Situations not specified in this Regulation.   The provisions of this Regulation shall not 
exclude any situation not specified herein that may arise and be deemed a subsidy within the meaning 
of the Agreement.  The Investigating Authority shall nonetheless explain in the determinations it 
publishes the method used and the factors counted in calculating the amount of the subsidy in 
question.  Article 42 - Annex I "Illustrative List of Export Subsidies", Annex II "Guidelines on Consumption of 
Inputs in the Production Process", and Annex III "G uidelines in the Determination of Substitution 
Drawback Systems as Export Subsidies", shall fo rm an integral part of this Regulation. 
 Article 43 - Validity.   This Executive Decree shall enter into force on the date of publication in the 
Official Journal La Gaceta . 
  Done at the Presidency of the Republic, San José, on 4 September 2009. 
 
 For publication.   ÓSCAR ARIAS SÁNCHEZ  Eduardo Sibaja Arias, Minister of the Economy, Industry and Trade. 
 G/SCM/N/1/CRI/4 
Page 18  
 
  ANNEX I 
 
ILLUSTRATIVE LIST OF EXPORT SUBSIDIES 
 
(a) The provision by governments of direct subsidies to a firm or an industry contingent upon 
export performance. 
 (b) Currency retention schemes or any simila r practices which involve a bonus on exports. 
 (c) Internal transport and freight charges on export shipments, provided or mandated by 
governments, on terms more favourable than for domestic shipments. 
 (d) The provision by governments or their agencies either directly or indirectly through 
government-mandated schemes, of imported or domestic products or services for use in the 
production of exported go ods, on terms or conditions more favourable than for provision of 
like or directly competitive products or services for use in the production of goods for 
domestic consumption, if (in the case of pr oducts) such terms or conditions are more 
favourable than those commercially available
2 on world markets to their exporters. 
 (e) The full or partial exemption remission, or de ferral specifically related to exports, of direct 
taxes
3 or social welfare charges paid or payable by industrial or commercial enterprises.4 
 
(f) The allowance of special deductions directly related to exports or export performance, over 
and above those granted in respect to productio n for domestic consumption, in the calculation 
of the base on which direct taxes are charged. 
 
(g) The exemption or remission, in respect of the production and distribution of exported 
products, of indirect taxes in excess of those levied in respect of the production and distribution of like products when sold for domestic consumption. 
 (h) The exemption, remission or deferral of pr ior-stage cumulative indirect taxes on goods or 
services used in the production of exported produc ts in excess of the exemption, remission or 
deferral of like prior-stage cumulative indirect taxes on goods or services used in the 
                                                     
 
2 The term "commercially available" means that the choice between domestic and imported products is 
unrestricted and depends only on commercial considerations. 
3 For the purpose of this Agreement: 
 The term "direct taxes" shall mean taxes on wage s, profits, interests, re nts, royalties, and all 
other forms of income, and taxes on the ownership of real property; 
 The term "import charges" shall mean tariffs,  duties, and other fiscal charges not elsewhere 
enumerated in this note that are levied on imports; 
 The term "indirect taxes" shall mean sales, excise, turnover, value added, franchise, stamp, 
transfer, inventory and equipment taxes, border taxes and all taxes other than direct taxes and import charges; 
 "Prior-stage" indirect taxes are those levied on goods or services used directly or indirectly in 
making the product; 
 "Cumulative" indirect taxes are multi-staged taxes levied where there is no mechanism for 
subsequent crediting of the tax if the goods or services subject to tax at one stage of 
production are used in a succeeding stage of production; 
 "Remission" of taxes includes the refund or rebate of taxes. 
4 It is recognized that deferral need not amount to  an export subsidy where,  for example, appropriate 
interest charges are collected.  The principle is reaffi rmed that prices for good s in transactions between 
exporting enterprises and foreign buyers under their or under the same control should for tax purposes be the 
prices which would be charged between independent enterprises acting at arm's length.  G/SCM/N/1/CRI/4 
 Page 19 
 
 
  production of like products when sold for domestic  consumption;  provided, however, that 
prior-stage cumulative indirect taxes may be exempted, remitted or deferred on exported 
products even when not exempted, remitted or deferred on like products when sold for 
domestic consumption, if the prior-stage cumula tive indirect taxes are levied on inputs that 
are consumed in the production of the e xported product (making normal allowance for 
waste).5  This item shall be interpreted in accord ance with the guidelines on consumption of 
inputs in the production process contained in Annex II. 
 (i) The remission or drawback of import charges in excess of those levied on imported inputs 
that are consumed in the production of the exported product (making normal allowance for 
waste);  provided, however, that in particular cases a firm may use a quantity of home market 
inputs equal to, and having the same quality and characteristics as, the imported inputs as a 
substitute for them in order to benefit from th is provision if the import and the corresponding 
export operations both occur within a reasonabl e time period, not to exceed two years.  This 
item shall be interpreted in accordance with the guidelines on consumption of inputs in the 
production process contained in Annex II and the guidelines in the determination of 
substitution drawback systems as export subsidies contained in Annex III. 
 (j) The provision by governments (or special in stitutions controlled by governments) of export 
credit guarantee or insurance programmes, of  insurance or guarantee programmes against 
increases in the cost of exported products or of exchange risk programmes, at premium rates 
which are inadequate to cover the long-term  operating costs and losses of the programmes. 
 (k) The grant by governments (or special ins titutions controlled by and/or acting under the 
authority of governments) of export credits at ra tes below those which they actually have to 
pay for the funds so employed (or would have to pay if they borrowed on international capital 
markets in order to obtain funds of the same maturity and other credit terms and denominated 
in the same currency as the export credit), or the payment by them of all or part of the costs incurred by exporters or financial institutions in obtaining credits, in so far as they are used to 
secure a material advantage in the field of export credit terms.  Provided, however, that if a country is a party to an international undertaki ng on official export credits, or if in practice a 
country applies the interest rates provisions of the relevant undertaking, an export credit 
practice which is in conformity with those provisions shall not be considered an export 
subsidy prohibited by this Regulation. 
 (l) Any other charge on the public account cons tituting an export subsidy in the sense of 
Article XVI of GATT 1994. 
                                                     
 
5 Paragraph (h) does not apply to value-added tax systems and border-tax adjustment in lieu thereof;  
the problem of the excessive remission of value-added taxes is exclusively covered by paragraph (g). G/SCM/N/1/CRI/4 
Page 20  
 
  ANNEX II 
 
GUIDELINES ON CONSUMPTION OF INPUTS IN THE 
PRODUCTION PROCESS
6 
 
I 
 
1. Indirect tax rebate schemes can allow for exemption, remission or deferral of prior-stage 
cumulative indirect taxes levied on inputs that ar e consumed in the production of the exported product 
(making normal allowance for waste).  Similarly, drawback schemes can allow for the remission or 
drawback of import charges levied on inputs that are consumed in the production of the exported 
product (making normal allowance for waste).  2. The Illustrative List of Export Subsidies in Annex I of this Regulati on makes reference to the 
term "inputs that are consumed in the production of the exported product" in pa ragraphs (h) and (i).  
Pursuant to paragraph (h), indirect tax rebate sch emes can constitute an expor t subsidy to the extent 
that they result in exemption, remission or deferra l of prior-stage cumulative indirect taxes in excess 
of the amount of such taxes actually levied on i nputs that are consumed in the production of the 
exported product.  Pursuant to paragraph (i), drawback schemes can  constitute an export subsidy to 
the extent that they result in a remission or draw back of import charges in excess of those actually 
levied on inputs that are consumed in the producti on of the exported product.  Both paragraphs 
stipulate that normal allowance for waste must be made in findings regarding consumption of inputs 
in the production of the exported product.  Para graph (i) also provides for substitution, where 
appropriate.  
II 
 
 In examining whether inputs are consumed in  the production of the exported product, as part 
of a countervailing duty investigation pursuant to th is Regulation, the investigating authority should 
proceed on the following basis:  1. Where it is alleged that an indirect tax re bate scheme, or a drawback scheme, conveys a 
subsidy by reason of over-rebate or excess drawback  of indirect taxes or import charges on inputs 
consumed in the production of the exported product, the investigating authority should first determine 
whether the government of the exporting country has in place and applies a system or procedure to 
confirm which inputs are consumed in the productio n of the exported product and in what amounts.  
Where such a system or procedure is determined to be applied, the investiga ting authority should then 
examine the system or procedure to see whether it is reasonable, effective for the purpose intended, 
and based on generally accepted commercial practices in the country of expor t.  The investigating 
authority may deem it necessary to carry out certain prac tical tests in order to verify information or to 
satisfy themselves that the system or procedure is being effectively applied.  2. Where there is no such system or procedure, where it is not reasonable, or where it is 
instituted and considered reasonable but is found not to  be applied or not to be applied effectively, a 
further examination by the exporting country based  on the actual inputs involved would need to be 
carried out in the context of determining whether an excess payment occurred.  If the investigating 
authority deemed it necessary, a further examin ation would be carried out in accordance with 
paragraph 1. 
 
                                                     
 
6 Inputs consumed in the productio n process are inputs physically in corporated, energy, fuels and oil 
used in the production process and catalysts which are cons umed in the course of thei r use to obtain the exported 
product.  G/SCM/N/1/CRI/4 
 Page 21 
 
 
  3. The investigating authority should treat inputs as physically incorporated if such inputs are 
used in the production process and are physically pr esent in the product exported.  An input need not 
be present in the final product in the same fo rm in which it entered the production process. 
 4. In determining the amount of a particular i nput that is consumed in the production of the 
exported product, a "normal allowance for waste"  should be taken into account, and such waste 
should be treated as consumed in the production of th e exported product.  The te rm "waste" refers to 
that portion of a given input which does not serve an independent function in the production process, 
is not consumed in the production of the exported product (for reasons such as inefficiencies) and is 
not recovered, used or sold by the same manufacturer. 
 
5. The investigating authority's determination of whether the claimed allowance for waste is 
"normal" should take into account the production pr ocess, the average experience of the industry in 
the country of export, and other technical factors,  as appropriate.  The investigating authority should 
bear in mind that an important question is whet her the authorities in the exporting country have 
reasonably calculated the amount of waste, when such  an amount is intended to be included in the tax 
or duty rebate or remission. G/SCM/N/1/CRI/4 
Page 22  
 
  ANNEX III 
 
GUIDELINES IN THE DETERMINATION OF SUBSTITUTION DRAWBACK 
SYSTEMS AS EXPORT SUBSIDIES 
 
I 
 
 Drawback systems can allow for the refund or  drawback of import charges on inputs which 
are consumed in the production process of another product and where the expor t of this latter product 
contains domestic inputs having the same quality and characteristics as those substituted for the 
imported inputs.  Pursuant to paragraph (i) of the Illustrative List of Export Subsidies in Annex I, 
substitution drawback systems can constitute an export subsidy to the extent that they result in an 
excess drawback of the import charges levied initially  on the imported inputs for which drawback is 
being claimed.  
II 
 
 In examining any substitution drawback system  as part of a countervailing duty investigation 
pursuant to this Agreement, the investigating authority should proceed on the following basis: 
 1. Paragraph (i) of the Illustrative List stipul ates that home market input s may be substituted for 
imported inputs in the production of a product for e xport provided such inputs are equal in quantity to, 
and have the same quality and characteristics as, th e imported inputs being subs tituted.  The existence 
of a verification system or procedure is important  because it enables the government of the exporting 
country to ensure and demonstrate that the quantit y of inputs for which drawback is claimed does not 
exceed the quantity of similar products exported, in wh atever form, and that there is not drawback of 
import charges in excess of those originally levied on the imported inputs in question. 
 2. Where it is alleged that a substitution drawback  system conveys a subsidy, the investigating 
authority should first proceed to determine whethe r the government of the exporting country has in 
place and applies a verification system or procedure.  Where such a system or procedure is determined to be applied, the investigating authority should  then examine the verification procedures to see 
whether they are reasonable, effective for the purpose intended, and b ased on generally accepted 
commercial practices in the country of export.  To the extent that the procedures are determined to 
meet this test and are effectively applied, no subs idy should be presumed to exist.  It may be deemed 
necessary by the investigating authority to carry out certain practical tests in order to verify 
information or to satisfy itself that the verifi cation procedures are being effectively applied. 
 
3. Where there are no verification procedures, where they are not reasonable, or where such procedures are instituted and considered reasonable but are found not to be actually applied or not 
applied effectively, there may be a subsidy.  In  such cases a further examination by the exporting 
country based on the actual transactions involved woul d need to be carried out to determine whether 
an excess payment occurred.  If the investigating authority deemed it necessary, a further examination 
would be carried out in accordance with paragraph 2. 
 4. The existence of a substitution drawback provision under which exporters are allowed to 
select particular import shipments on which drawback is claimed should not of itself be considered to 
convey a subsidy. 
 
5. An excess drawback of import ch arges in the sense of paragraph (i) would be deemed to exist 
where governments paid interest on any monies ref unded under their drawback schemes, to the extent 
of the interest actually paid or payable. 
__________