RESTRICTED  WORLD TRADE  
ORGANIZATION  G/SCM/M/65 
18 August 2008 
 (08-3901) 
Committee on Subsidies  
and Countervailing Measures  
 
 
MINUTES OF THE REGULAR MEETING  
HELD ON 29 APRIL 2008 
 
Chairman:  Mr. Pablo Klein (Mexico )  
 
 
1. The Committee on Subsidies and Countervailing Measures ("the Committee") held a regular 
meeting on 29 April 2008.   
2. The Committee adopted  the agenda proposed in WTO/AIR/3181, dated 18 April 2008: 
A. NATIONAL LEGISLATION – REVIEW OF NOTIFICATIO NS OF NEW OR AMENDED 
LEGISLATION OR REGULATIONS NOT PREVIOUSLY REVIEWED BY THE COMMITTEE 
(INCLUDING SUPPLEMENTAL NOTIFICATIONS OF EXISTING PROVISIONS NOT 
PREVIOUSLY REVIEWED ).............................................................................................................1  
1. Albania........................................................................................................................ ...............2  
2. Costa Rica, Guatemala and Nicaragua...................................................................................2  
B. NATIONAL LEGISLATION - CONTINUED REVIEW OF PREVIOUSLY REVIEWED 
NOTIFICATIONS OF COUNTERVAILING DUTY LAWS AND /OR REGULATIONS ................................2  
C. SEMI -ANNUAL REPORTS OF COUNTERVAILING DUTY ACTIONS (G/SCM/N/170) ..........................3  
D. NOTIFICATIONS OF PRELIMINARY AND FINAL COUNTERVAILING DUTY ACTIONS .......................3  
E. CONSTANT DOLLAR  METHODOLOGY FO R GRADUATION FROM SCM ANNEX VII (B) ....................6  
F. PERMANENT GROUP OF EXPERTS .................................................................................................6  
G. OTHER BUSINESS .........................................................................................................................7  
H. DATE OF NEXT REGULAR MEETING ..............................................................................................7  
I. ELECTION OF OFFICERS ...............................................................................................................7  
 
 A. 
NATIONAL LEGISLATION – REVIEW OF NOTIFICATIONS OF NEW OR AMENDED LEGISLATION OR 
REGULATIONS NOT PREVIOUSLY  REVIEWED BY THE COMMITTEE (INCLUDING SUPPLEMENTAL 
NOTIFICATIONS OF EXISTING PROVISIONS NOT PREVIOUSLY REVIEWED ) 
3. The Chairman  stated that this item of the agenda pr ovided for a review of notifications of 
countervailing duty laws and/or regulations pursuant to the procedures that the Committee had 
adopted at a special meeting in April 1996 (G/SCM/W/293).  These procedures provided inter alia  
that at each regular meeting the Committee woul d consider notifications of new or amended 
countervailing duty laws and/or re gulations not previously reviewed by the Committee if such 
notifications had been circulated to Members in a ll three working languages at least six weeks prior to 
the scheduled date of the meeting.  Under these procedures the Committee would consider at this G/SCM/M/65 
Page 2  
 
  meeting notifications of countervailing duty laws  and/or regulations received from Albania, 
Costa Rica, Guatemala and Nicaragua.  
1. Albania 
4. The Chairman
 drew the Committee's attention to a notification from Albania, circulated in 
document G/SCM/N/1/ALB/2 of 3 December 2007.  This  notification contained the text of a Law on 
Anti-Dumping and Countervailing Measures that had been adopted by the Albanian Parliament on 
23 July 2007.  Albania had recently submitted a revi sed version of this notification that corrected 
certain translation errors.1  The Committee had received questions on this notification from the 
European Communities, the United States and the Separate Custom s Territory of Taiwan, Penghu, 
Kinmen & Matsu in documents G/SCM/Q1/ALB/4-6.  Albania had replied to these questions in the 
Committee on Anti-Dumping Practices.2   
5. There were no comments or questions on Albania's notification.   
2. Costa Rica, Guatemala and Nicaragua  
6. The Committee had before it in documents  G/SCM/N/1/CRI/3, dated 22 January 2008, 
G/SCM/N/1/GTM/3, dated 22 February 2008, an d G/SCM/N/1/NIC/2, dated 23 January 2008, 
notifications received from Costa Rica, Guatemala and Nicaragua regarding the Central American 
Regulations on Unfair Business Practices, as amended in May 2007.  The United States, the Separate Customs Territory of Taiwan, Penghu, Kinmen & Ma tsu, and Chile had submitted questions on these 
notifications, which had been circulated in documents G/SCM/Q1/CRI/7-9, G/SCM/Q1/GTM/8-10 
and G/SCM/Q1/NIC/1-3.   
7. The delegates of Costa Rica
 and Guatemala  stated that they had already replied orally in the 
Committee on Anti-Dumping Practices to the questi ons posed by the United States, the Separate 
Customs Territory of Taiwan, Penghu, Kinmen & Ma tsu, and Chile and that they would shortly 
submit their replies in writing.3   
8. The Chairman  stated that, if necessary, the Committee would revert to these notifications at 
its next regular meeting.   
9. The delegate of El Salvador  stated that his delegation had also submitted a notification 
concerning the Central American Regulations on Unfair Business Practices.4  
10. The Committee took note  of the statements.   
B. NATIONAL LEGISLATION - CONTINUED REVIEW OF PREVIOUS LY REVIEWED NOTIFICATIONS OF 
COUNTERVAILING DUTY LAWS AND /OR REGULATIONS  
11. The Chairman  drew the Committee's attention to questi ons posed by China with respect to the 
countervailing duty laws and/or regulations of Canada, the United States and the European 
Communities, which had been circulated in G/SCM/Q1/CAN/14, G/SCM/Q1/USA/25 and 
                                                      
1 G/SCM/N/1/ALB/2/Rev.1, dated 8 May 2008.  
2 Albania's written replies to these questions have been circulated in G/SCM/Q1/ALB/7, dated 
25 April 2008, and in G/SCM/Q1/ALB/7/Suppl.1, dated 13 May 2008.   
3 See documents G/SCM/Q1/CRI/10-12, dated 17 June 2008 and G/SCM/Q1/GTM/11-13, dated 
20 June 2008.  Written replies submitted by Nicaragua have been circulated in documents G/SCM/Q1/NIC/4-6, dated 20 June 2008.   
4 See document G/SCM/N/1/SLV/3, dated 8 April 2008.   G/SCM/M/65 
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  G/SCM/Q1/EEC/27).  Canada, the United States and the European Communities had submitted 
answers to these questions in G/SCM/Q1/CAN/15, G/SCM/Q1/USA/26 and G/SCM/Q1/EEC/28.  
12. The delegate of China  thanked Canada, the European Communities and the United States for 
their written replies.  As his authorities were still stud ying these replies, China might wish to revert to 
them at the next meeting.   
13. The Committee took note  of the statements.  
C. SEMI -ANNUAL REPORTS OF COUNTERVAILING DUTY ACTIONS (G/SCM/N/170)   
14. The Chairman  stated that a request to submit se mi-annual reports for the period 1 July – 
31 December 2007, to be submitted not later than 7 March 2008, had been circulated in document 
G/SCM/N/170, dated 9 January 2008 .  Canada, the European Communities, Peru, South Africa and 
the United States had submitted semi-annual reports on countervailing duty acti ons taken during this 
period.  These semi-annual reports were contained in addenda to G/SCM/N/ 170.  Members which had 
notified that they had not taken any countervaili ng duty action during the second half of 2007 were 
listed in paragraph 2 of document  G/SCM/N/170/Add.1, dated 22 April 2008.  The Secretariat had 
informed him that Singapore should be added to this list.  As reflected in paragraph 3 of the same 
document, there remained a large number of Me mbers that had not submitted a semi-annual report 
and that thus failed to comply with th is important notification requirement.   
15. There were no comments or question on any of the semi-annual reports.  
D. NOTIFICATIONS OF PRELIMINARY AND FINAL COUNTERVAILING DUTY ACTIONS  
16. The Chairman  stated that Article 25.11 of the SCM Agreement required Members to submit 
reports of any preliminary and/or final countervaili ng duty actions taken.  Since the last regular 
meeting, the Committee had received such reports from Canada, the European Communities, South 
Africa and the United States.  These notifications  had been listed in documents G/SCM/N/168-169 
and G/SCM/N/171-174.  
17. The delegate of China  stated that in a recent countervailing duty investigation of oil and gas 
well casings from China, the Canadian Border Servi ces Agency (CBSA) had made a serious error in 
the identification of certain subsidy programmes a nd in the determination of the benefit of the 
subsidy, particularly with regard to a debt-to- equity swap programme.  The CBSA had argued that it 
could not find an appropriate, commercially availabl e internal benchmark for comparison and that the 
debt-to-equity swap was not a normal commercial tran saction due to the lack of risk appraisement on 
this programme.  The CBSA had therefore determin ed that the debt-to-equity swap constituted a 
government grant in fact and, as a result, the to tal amount of the debt-to-equity swap had been 
considered to be a benefit, which had greatly escalated the s ubsidy amount and the countervailing 
duty rate.  Though the Government of China a nd the Chinese asset management companies had 
presented a substantial amount of evidence during th e investigation and on the occasion of the on-site 
verification proving that the debt-to-equity swaps were carried out in normal commercial terms and 
that the debt restructuring of the Chinese compan ies was dealt with in a manner consistent with 
prevailing international practices , the CBSA had simply refused to consider this evidence and 
argument.  Therefore, China questioned whether th e CBSA determination in this regard was based on 
sufficient factual findings and an objective examination.   
18. The delegate of Canada  stated that Canada's counterva iling duty law and practice were 
consistent with Canada's intern ational rights and obligations under the WTO Agreement and that in 
the investigation at issue the CBSA had provided a full explanation of the factual basis of its 
determination.  CBSA research had identified as potential subsidies certain debt-to-equity swap G/SCM/M/65 
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  transactions made between asset management companies (AMCs) established by China's state 
Council and various state-owned enterprises.  The AMCs had been established to purchase non-
performing loans from state-owned banks as part of a government financial restructurings initiative of 
those banks.  As part of the restructuring, the AMCs, acting as creditors, conducted debt-to-equity 
swap transactions with state-owned enterprises wherein the AMCs forgave some or all of the 
enterprises' debt in exchange for equity in the company.  The CBSA had conducted an analysis of the 
debt-to-equity swap transactions in accordance with the terms of the SCM Agreement  and had found 
that the debt-to-equity swap transactions were actionable subsidies as defined by the SCM Agreement .   
19. First, the debt-to-equity swap transactions constituted financial contributions by government 
since there had been both a direct transfer of funds from a government agency to the recipient 
enterprises (in accordance with Article 1.1(a)(1)(i )) and revenue that was otherwise due to the 
government-owned asset management companie s had been foregone (in accordance with 
Article 1.1(a)(1)(ii)).   
20. Second, a benefit had been conferred on the recipient enterprises.  This accorded with 
Article 14(a) of the SCM Agreement , which provided that the government provision of equity capital 
should only be considered a benefit if it was inconsistent with the us ual investment practice of private 
investors in China's territory.  In this respect, the CBSA research had found that government approved 
debt-to-equity swaps were part of a government initiative to financially restructure China's state-
owned banks and thus were not in the nature of private invest ment, nor were they within the financial 
capacity of private investors.   
21. Third, information received by the CBSA indicated that government AMCs provided debt-to-
equity swaps predominantly (if not exclusively) to  a limited number of state-owned enterprises.  
China's Protocol of Accession specifically provided that subsidies provided to state-owned enterprises 
were to be considered specific if state-owned en terprises were the predominant recipients of such 
subsidies.  The debt-to-equity swap transactions  were thereby considered specific subsidies in 
accordance with Article 2.1(c) of the SCM Agreement .   
22. In sum, the CBSA's analysis had been c onducted in accordance with the terms of the SCM 
Agreement .  The evidence provided to the CBSA indicated that the transactions constituted a financial 
contribution, conferred a benefit on the recipien t and were specific.  The CBSA had correctly 
identified the debt-to-equity swap transactions as actionable subsidies under the SCM Agreement .  
Further details regarding the BSA's analysis of debt -to-equity swap agreemen ts and all other subsidy 
programmes investigated in this case could be f ound in Appendix 3 of the Summary of Findings for 
the Final Determination for Steel and Oil Gas Casing.  
23. The delegate of China
 stated that since the end of 2006, the United States Department of 
Commerce ("USDOC") had initiated nine comb ined anti-dumping and countervailing duty 
investigations against Chinese exports and that US DOC was currently considering the initiation of 
such investigations in two cases.  The initiation of  such a large number of countervailing duty cases 
within such a short period of time was unpreceden ted in the history of GATT and the WTO and 
constituted a de facto  abuse of WTO trade remedy rules.  He then raised four areas of specific concern 
to China with regard to these recent countervailing duty actions taken by the United States regarding 
imports from China.  
24. First, the particular practice and method applied by the United States in the anti-
dumping/countervailing duty investigations on Ch inese exports gave rise to double counting and a 
double remedy.  Because USDOC did not recognize China as a market economy country, it 
determined the normal value for the companies conc erned on a constructed basis by using surrogate 
values of a third country to replace the prices of fa ctors or elements that the Chinese exporters had 
actually paid for producing and selling the like produc t in the home market.  In China's view, this  G/SCM/M/65 
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  surrogate value methodology applied in anti-dumping investigations already contained elements or 
items that were subsidy-free.  If at the same time in the companion countervailing duty investigation 
the subsidy was calculated based upon the so-called subsidy free external benchmark, this obviously 
would result in double counting of the amount of the countervailable subsidies.  If a countervailing 
duty was imposed on this basis, this actually pr ovided double remedies to the domestic industry and 
overprotected the domestic industry.  This was obvi ously inconsistent with the provisions of the SCM 
Agreement  and the Anti-Dumping Agreement .   
25. Second, the practice of USDOC regarding the determination of specificity, particularly de 
facto  specificity was biased and could not be justified.  For example, the fact that there was only a 
limited number of industrial sectors as downstream users of the product under consideration should 
not automatically lead to a determination of de facto  specificity, bearing in mind that a product could 
not be used by all industrial sectors. 
26. Third, in some cases the United States had not fully performed the obligation to examine the 
accuracy and adequacy of the evidence submitted by th e petitioners to ensure that the initiation of the 
investigation was justifiable.  For example, in formation regarding the alleged subsidy programmes 
had sometimes been downloaded fro m websites, abstracted from newspapers or simply copied from 
other cases.  Furthermore, during the course of the investigations, USDOC had added new subsidy 
programmes that had not been listed in the applic ation and in the public notice of initiation of an 
investigation.  The number of such newly added programmes was sometimes much larger than the 
number of programmes identified in the application f iled by the domestic industry.  This called into 
question the basis for the initiation of such investigations. 
27. Finally, the USDOC provided opportunities for consultation only with respect to the alleged 
subsidy programmes identified in the application at  the pre-initiation stage.  Regarding newly added 
programmes that were included during the course of the investigation, USDOC never offered 
opportunities for consultation.  Obviously, this was in consistent with the principle of due process in 
countervailing duty investigations.   
28. The delegate of the United States  stated that the double counting or double remedy issue had 
been a hotly contested issue in all the countervailing duty cases involving imports from China in which there was a companion anti-dumping case.  As a general matter, USDOC accepted all comments with respect to this issue in the course of  the investigation and explained itself fully in its 
preliminary and final determinati ons.  USDOC had directly answered comments with respect to the 
double remedy issue normally in the context of the anti-dumping companion case.  Under the SCM 
Agreement  and the WTO rules more generally, a nd under US domestic law, USDOC had an 
obligation to adjust dumping margins to account  for export subsidies identified in companion 
countervailing duty cases and this was something the US DOC did on a regular basis.  More generally 
with respect to allegations or arguments that there was a double remedy, USDOC was always willing 
to examine whether further adjust ments were warranted beyond those relating to export subsidies.  
However, the USDOC had so far determined, or ha d not been presented with any empirical evidence, 
that there was no double remedy being provided a nd therefore had determined to date that no 
adjustment was needed. 
29. With respect to the specificity issue, the delega te of the United States said that in essence this 
was a difficult line-drawing exercise.  USDOC had looked at the number of users or purchasers of inputs from state-owned enterprises and had determin ed that there was a limited number of such 
enterprises that bought inputs from state-owned enterp rises, and had made a specificity determination 
on that basis.   
30. With respect to the adequacy and accuracy of  information in the USDOC's initiation notices, 
the delegate of the United States stated that this was another sometimes difficult area.  Under G/SCM/M/65 
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  USDOC's procedures, it had 20 days from the filing of a case to determine whether or not to start an 
investigation.  Twenty days was not a very long  period of time and it was certainly not long enough to 
conduct a full-blown investigation.  The informati on available to the US domestic industry was often 
limited to information from websites or newspaper articles or prior determinations.  The initiation 
decision involved a judgement determination that th e USDOC had to make within a relatively short 
period of time.   
31. With respect to new programmes, it was his understanding that this issue pertained to new 
programme allegations that were made by the domestic industry after the commencement of an 
investigation, or after the initiation of the case.  This was not unusual to Ch ina and had happened in 
other countervailing duty proceedings as well.  When presented with such allegations with respect to 
new programmes, USDOC would look at the allegati ons and determine whether there was a sufficient 
basis to include the programme in the investigation.  Thus USDOC would look at whether there was 
evidence of a financial contribution, evidence of benefit and evidence of specificity.   
32. Finally, on the point raised by China with respect to consultations on new programmes, China 
would appear to argue that if there was a new pr ogramme that was alleged after the initiation of a 
case, there should be consultations held prior to  the inclusion of that new programme in the 
investigation.  As a general matter, when a ne w programme allegation was submitted to USDOC, at 
the same time the same information would go to the embassy of the relevant country, so there was full 
notice provided immediately with respect to any ne w programme allegations.  In addition, USDOC, in 
conducting countervailing duty investigations, ha d an open-door policy and any country, any 
company, could request a meeting.  Given the fact  that the door at USDOC was always open, it was 
not necessary to get into an argument about whethe r technically consultati ons were required under 
these circumstances. 
33. The Committee took note
 of the statements.  
E. CONSTANT DOLLAR  METHODOLOGY FO R GRADUATION FROM SCM ANNEX VII (B)  
34. The Chairman  stated that under this agenda item,  he wished to remind Members that, 
pursuant to the Doha Ministerial Decision on Impl ementation-Related Issues and Concerns (document 
WT/MIN(01)/17, para. 10.1) - in which Ministers ha d agreed that Annex VII(b) to the Agreement on 
Subsidies and Countervailing Measures included the Members that are listed therein until their GNP per capita reaches US$1,000 in constant 1990  dollars for three consecutive years - as of 
1 January 2003, the methodology set forth in G/SCM/38, Appendix 2 applied.  In 2003, 2004, 2005, 2006 and 2007, the Secretariat had circulated Notes updating
 GNP per capita for Members listed in 
Annex VII(b).  Those notes are contained in documents G/SCM/110 & /Add.1, 2 and 3 and Corr.1 
and Add.4.  The Secretariat would circulate new updated calculations when the necessary World Bank 
data became available.  
35. The Committee took note  of the Chairman's statement.  
F. PERMANENT GROUP OF EXPERTS  
36. The Chairman  stated that, in light of informal cons ultations that he had recently held, he 
understood that Members agreed that the Committee would proceed as follows regarding the election 
of new experts to the Permanent Group of Experts.   
• "The Committee instructs the Secretariat to  issue a notice inviting Members to make 
suggestions (by 16 June 2008) for candidates for election to the PGE to replace the three 
experts whose terms expired in 2006, 2007 and 2008.    G/SCM/M/65 
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  • Once the Committee has received the suggestions made by Members, informal consultations 
will be held with a view to enabling the Chair to submit a proposal for a decision by the Committee in July 2008.  The two candidates who were proposed in March 2005 by Chile 
(Mr. Sebastian Saez) and Chinese Taipei (Mr. Chang Fa-Lo) may also be considered for 
appointment to these three vacant positions.
5  
• These procedures are without prejudice to any furt her proposal by the Chair with respect to 
the expert whose term expired in March 2005.   Any candidate proposed for the 2006-2008 
vacancies may also be considered by the Committee for the 2005 vacancy.  
• The Committee will hold informal consultations with a view to resolving not later than 
July 2008 the issue of the appointment of all the experts.   
• The appointments of the four experts will take  effect as of, respectively, Spring 2005, 
Spring 2006, Spring 2007 and Spring 2008." 
37. The Committee took note  of the Chairman's statement.  
G. OTHER BUSINESS  
38. No issues were raised under Other Business.  
H. DATE OF NEXT REGULAR MEETING  
39. The Chairman  proposed that the next regular meet ing of the Committee take place in the 
week of 27 October 2008.  It was so agreed .  
I. ELECTION OF OFFICERS  
40. The Chairman  stated that as Members are aware, the Chairman of the Council for Trade in 
Goods had completed informal c onsultations on the nomination of Chairpersons for the different 
bodies operating under the auspices of the Council for Trade in Goods.  As concerns this Committee, 
the Chairman of the Goods Council proposed the nomination of Mr. Jun Kazeki of Japan.   
41. The Committee elected Mr. Kazeki (Japan) as Chair, by acclamation.   
42. The Chairman  proposed that as he had not had the opportunity to consult with Members on 
the election of a vice-chairperson,  this matter be  taken up by the new Chairman.  It was so agreed .  
 
__________ 
 
                                                      
5 It is understood that Chile and Chinese Taipei  will submit updated CVs of these candidates.