WORLD TRADE  
ORGANIZATION  G/STR/Q1/USA/11 
12 October 2006 
 
 (06-4902) 
Working Party on 
State Trading Enterprises Original:   English 
 
 
 
STATE TRADING 
 
Replies to Questions Posed by AUSTRALIA1 and 
the EUROPEAN COMMUNITIES2 Concerning the  
New and Full Article XVII Notification of the UNITED STATES3 
   The following communication, dated 11 October 2006, is being circulated at the request of the Delegation of the United States. 
 
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 AUSTRALIA
 
 Q1. The United States has provided some information on financing of CCC operations.  In particular, we note that the CCC may borrow funds from the US Treasury at the average 
interest rate of all outstanding marketable obligations.  Can the United States provide information on the other conditions of such bo rrowings, for example the term of the loan? 
 Reply
 
 
The CCC's daily non-credit reform operations  are funded through a $30 billion revolving line 
of credit.  The CCC borrows or makes repayment to the US Treasury based upon the Corporation’s 
daily net cash position.  The applicable interest ra te is the US Treasury published 1 year rate for 
Agency borrowings, which changes monthly.  
The CCC also borrows from the US Treasury un der provisions of certain programmes subject 
to appropriation and credit reform requirements.  Interest rates for such borrowings are at the US Treasury published rate for stated loan ma turities as of the date of the borrowing. 
 
Q2. We also note that interest may also be paid at a rate prescribed by the CCC on borrowings other than from the US Treasury.  Can the United States explain how the rates 
prescribed by the CCC itself are set?  Are these ba sed on market interest rates?  What are the 
terms of these loans? 
 Reply
 
 Currently, Treasury is the sole lender to CCC.  No  procedures have been est ablished to borrow from 
any other source. 
                                                     
 
1 G/STR/Q1/USA/10 
2 G/STR/Q1/USA/9 
3 G/STR/N/10/USA G/STR/Q1/USA/11 
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Q3. We thank the United States for the information provided in G/STR/Q1/USA8 in 
response to questions that Australia asked.  We  appreciate the US comment that possible future 
disciplines on food aid are under discussion in the Committee on Agriculture.  However, the 
CCC is indirectly involved in export sales through the donation of CCC stocks to other 
governments, private voluntary organisations and US cooperatives which are subsequently sold 
into commercial market as food.  In 2004 we sought data on the quantity and value of CCC stocks that have been sold in that manner.  We  consider that this question is directly relevant in 
the context of examination of the United St ates STE notification as it relates to CCC 
involvement in export sales.  We repeat our request for such data. 
 
Reply
 
  The United States looks carefully at the needs and market situations in recipient countries 
before providing food aid.  The United States review s the food needs and condu cts market analyses to 
assure that transactions do not affect local production or commercial sales and that the food aid 
adheres to the FAO Principles of Surplus Disposal .  The United States notifies all transactions in 
accordance with the requirements of the FAO Comm ittee on Surplus Disposal.  Those notifications 
are available through the FAO.  There is no requi rement that the United States or the Commodity 
Credit Corporation notifies its food aid under Article XVII. 
  
Q4. We note that the United States previously  responded to a question from Australia that 
the Capper-Volstead Act has no specific relation to import or export markets.  We note, 
however, that the US agricultural cooperatives th at benefit from the exemption from anti-trust 
laws afforded by the Capper-Volstead Act are involved in trading.  Can the United States explain why they consider that the antitrus t exemption that agriculture cooperatives get 
domestically is not a “special privilege” that wo uld impact on their trading activities within the 
meaning of Article XVII?    We note that the Un ited States has also said in its response that the 
Capper-Volstead Act itself prohibits a cooperative from monopolizing or restraining trade "to such an extent that the price of any agricultural product is unduly enhanced."  Can the United States explain how this prohibition works in practice?   
 Reply
 
  Section 2 of the Capper-Volstead Act protects the public and consumers from market abuse 
by a cooperative.  It directs the Secretary of Ag riculture to order a cooperative to cease monopolizing 
or restraining trade if the monopolization or restra int of trade results in undue price enhancement.  
Regulations spell out the procedures to be followe d in conducting an investigation under Section 2 
(see 7 CFR 1.160).  If the Secretary of Agricult ure were to find undue price enhancement, the 
Secretary would issue an order that the associati on cease monopolizing or restraining trade.  If the 
order were ignored or neglected, the Department  of Justice would be notified and would be 
responsible for enforcing the order.  
 In 1981, the Secretary of Agriculture delega ted oversight responsibility for Capper-Volstead 
to a committee consisting of the Assistant Secret ary for Economics, the Assistant Secretary for 
Marketing and Inspection Services, and the Genera l Counsel.  In 1995, following a Departmental re-
organization, the responsibilities were delegated to  the Chief Economist, the Under Secretary for 
Marketing and Regulatory Programmes, and the General Counsel.  The Capper-Volstead Committee 
has responsibilities to identify cases of restraint of trade or monopolization resulting in undue price 
enhancement by associations of producers and to res pond to complaints of undue price enhancement.   
  More broadly, the Department of Agricultu re has responsibilities to inform the public of 
avenues for redress regarding undue price enhancemen t.  The Department also has the responsibility  G/STR/Q1/USA/11 
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  to periodically review available data to discern whether such data would indicate the exercise of 
market power through elevated prices.  As appropr iate, the Department provides data to academic and 
research institutions to conduct econometric analy ses of industry and pricing trends to assist in 
ascertaining any pattern of undue price enhancement by agricultural cooperatives.  The Department 
cooperates with the Department of Justice and the Federal Trade Commission on agricultural antitrust 
issues through memoranda of understanding between the agencies.   
  The Department received complaints on eight cases between 1969 and 1981 but never 
formally charged a cooperative with undue price enha ncement.  (Nevertheless, the Department of 
Justice and the Federal Trade Commission have initiated a number of anti-trust cases against 
cooperatives over the years.)  The question of how mu ch price can be raised before it is “unduly” 
enhanced is a fact-specific one, which would depe nd on the markets, commodity, and circumstances 
of each allegation of undue price enhancement.  
 EUROPEAN COMMUNITIES
 
 
Q1. How is the U.S. Government involved in the export financing activities of the CCC and 
how does the United States assess any potential tr ade-distorting effects in this regard?   
 
Reply  
 
 The Commodity Credit Corporation is a fe derally-chartered corporation within the 
United States Department of Agriculture.  The e xport activities of the Commodity Credit Corporation 
enjoy the full faith and credit protection of the United States.     The United States believes that the matter of ‘a ny potential trade-distorting effects’ of export 
financing can best be addressed through the estab lishment of disciplines for these programmes in the 
Doha Agriculture negotiations as mandated  in the July 2004 Framework Agreement.  
 
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