. /.   WORLD TRADE  
ORGANIZATION  TN/RL/GEN/130 
24 April 2006 
 
 (06-1908) 
Negotiating Group on Rules Original:   English 
  
 
ALLOCATION AND EXPENSING OF SUBSIDY BENEFITS 
 
Communication from the United States
 
  
 The following communication, dated 20 April 2006,  is being circulated at the request of the 
Delegation of the United States.   The submitting delegation has requested that th is paper, which was submitted to the Rules 
Negotiating Group as an informal document (JOB(06)/ 113), also be circulated as a formal document. 
 
_______________ 
 
  This paper follows up on the series of US papers (summarized in TN/RL/GEN/45, 3 June 2005) with respect to the allocation and expens ing of subsidy benefits.  The draft text is in the 
form of an annex to leave open for further discu ssion the issue of whether and, if so, how the 
allocation and expensing rules should be applie d to proceedings under Parts II and III of the 
Agreement on Subsidies and Countervailing Measures in addition to proceedings under Part V.  The 
purpose of the draft annex is to provide additional guidance as to the calculation of subsidy benefits 
once a measure has been found to be a subsidy and specific.  
 
Annex X 
Allocation and Expensing of Subsidy Benefits 
 
x.1 With the exception of benefits from loans and si milar debt instruments, subsidy benefits shall 
either be expensed in full in the year of receipt  ("expensed") or allocated over a period of years 
("allocated").  Expensed subsidies are deemed to be nefit the recipient by the full amount of the benefit 
in the year in which they are expensed, whereas allo cated subsidies are deemed to benefit the recipient 
throughout the allocation period.  Loan subsidies, a nd similar subsidized debt instruments, are deemed 
to benefit the recipient throughout the period in which the loan or debt instrument remains outstanding.  
 
x.2  Benefits from subsidies of the following types normally shall be expensed: direct tax exemptions and deductions; exemptions from and excessi ve rebates of indirect taxes or import duties; 
provision of goods and services for less than ad equate remuneration; price support payments; 
discounts on electricity, water, and other utilities; fre ight subsidies; export promotion assistance; early 
retirement payments; worker assistance; wo rker training; and wage subsidies. 
 x. 3 Benefits from subsidies of the following typ es normally shall be allocated: equity infusions; 
grants; plant closure assistance; debt forgiveness;  coverage for an operating loss; debt-to-equity 
conversions; provision of non-general infrastructure;  and provision of plant and equipment.    
 
x.4 In determining whether a subsidy listed in x.2 is more appropriately allocated, or  whether a 
subsidy listed in x.3 is more appr opriately expensed, and in determin ing whether a subsidy of a type TN/RL/GEN/130 
Page 2  
 
  not listed in either x.2 or x.3 should be allocated  or expensed, the following non-exhaustive list of 
factors shall be considered:  
(i) whether the subsidy is non-recurring ( e.g., one-time, exceptional, requiring express 
government approval) or recurring
1; 
 
(ii) the purpose of the subsidy2; and 
           
(iii) the size of the subsidy.3 
 x.5 The allocation period for allocated subsides normally should correspond to the average useful 
life of the depreciable, physical assets of the relevant industry or firm. 
 
x.6 Any method for measuring the amount of allocated subsidy benefits at a particular point in the 
allocation period shall reflect a reasonabl e measure of the time value of money. 
 x.7 Any public notice issued pursuant to paragra ph 3 of Article 22 shall include a full description 
and adequate explanation of the allo cation and expensing methodologies used. 
 
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1 The fact that a subsidy is non-recurring is indicative of allocation.  The fact that a subsidy is recurring 
is indicative of expensing. 
2 For example, the fact that a subsidy is tied to the capital assets or structure of the recipient is 
indicative of allocation.  The fact that a subsidy is tied to a firm’s regular, ongoing production and sales 
activities ( e.g., wages) is indicative of expensing. 
3 The fact that a subsidy is large is indicative of allo cation. The fact that a subsidy is small is indicative 
of expensing.