WORLD TRADE  
ORGANIZATION  TN/RL/GEN/93 
18 November 2005 
 (05-5452) 
Negotiating Group on Rules Original:   English 
  
 
COUNTERVAILING MEASURES 
 
Paper from the European Communities
 
  
 The following communication, dated 15 November 2005, is being circulated at the request of 
the Delegation of the European Commission.   The submitting delegation has requested that th is paper, which was submitted to the Rules 
Negotiating Group as an informal document (JOB(05)/ 296), also be circulated as a formal document. 
 
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Introduction  
 In its first submission to the Rules Group of  21 November 2002 (TN/RL/W/30),  the European 
Communities (the EC) presented a first assessment of the operation of the Agreement on Subsidies 
and Countervailing Measures (ASCM) disciplines as designed during the Uruguay Round and identified a number of areas where these disciplines could be usefully improved or clarified.  Subsequent discussions in the Group have highlighted the fact that several issues, which until now 
have only been addressed in the anti-dumping contex t, need to be incorporated into the ASCM 
Agreement either, as they stand or adapted to the specific needs of that Agreement. 
  The EC sets out below the issues which it consider s fall into this category so that they can be 
discussed in the Group.  Where appropriate specific text is also proposed in line with the general wish 
that negotiations are moved on to a more proactive and advanced phase. 
 
1. The use of facts available (Article 12.7 of ASCM) 
 Unlike the Anti-Dumping Agreement (ADA - Anne x II), the ASCM contains no discipline on 
the use of facts available referred to in Article 12.7 ASCM. In the EC’s view, Annex II of the ADA 
has proved an important tool to discipline the circ umstances and conditions in which facts available 
may be used.  The EC considers that similar discipline should be introduced for the use of facts 
available in countervailing investigations, due acc ount being taken of the specificities of such 
investigations, in particular the examination of the existence of subsidization.   In this respect it is considered that the exis ting rules for ADA, or any such revised rules, 
would probably form an adequate basis for the AS CM without prejudice to further improvements that 
might be brought to the text of the Annex in th e context of the ADA negotiations.  Furthermore, the 
EC reserves the right to come back on this issue as consideration is still being given to the fact that 
often in cases of non-cooperation more precise info rmation is available to investigating authorities on 
subsidies than on dumping and some recognition may have to be given to that fact in any new rules.   
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  In any event the EC consider s that the existing AD rules on “facts available” (or any amended 
rules) should be included in the ASCM Agreement – a text of the existing rules amended for inclusion 
in the ASCM is set out at Annex 1.  
2. Article 21 - reviews of countervailing measures 
 Article 21.1 provides that a countervailing dut y shall remain in force only as long as and to 
the extent necessary to counteract subsidization wh ich is causing injury. Article 21.3 states that 
countervailing measures will expire after five years, un less it is demonstrated that the expiry would be 
likely to lead to continuation or recurrence of s ubsidization and injury.  Article 21.3 of the ASCM 
mirrors Article 11.3 of the ADA. Article 21.2 provides  for “interim” reviews within the 5 year period 
in case of changed circumstances.  
 (a) Concepts of “continuation” and “recurrence” in CVD cases   The concepts of “continuation” and “recurrence”,  which were negotiated in the context of the 
ADA, need to be specifically defined for applicati on under the ASCM.  This is warranted by the clear 
differences between dumping and subsidization.  Dumping depends essentially on the pricing strategy 
of private companies and this can be sporadic a nd inevitably can vary sometimes sharply over time.  
As a result, the duration of the dumping practice is more difficult to predict and a determination of a 
likelihood of continuation or recurrence of dumpi ng will very often entail a complex prospective 
assessment about the future market behaviour, in cluding that relating to pricing and volumes of 
exporters.  
  However, the same is not necessarily true fo r subsidization where often a precise calculation 
can be made with respect to future trends.  Th e subsidy may, for instance, have a predetermined 
period of validity or have a period  of validity attributed to it by th e investigating authority (e.g. when 
determining levels of duty).  In such circumst ances, specific account should be taken of such 
allocation periods in any review which requires a determination on continuation or recurrence of 
subsidization.  This means that, in the context of a review, measures should be terminated once the 
end of such allocation periods has been reached.  In  such situations, there should be no finding of 
likelihood of continuation or r ecurrence of subsidization unless ev idence exists that the expired 
programme(s) has been, or is likely to be renewed or replaced by other forms of subsidization.  
 
 Furthermore, in any review, investigating author ities should be explicitly required to take full 
account of events subsequent to the imposition of th e original measure, such  as changes in ownership 
or changes in subsidy programmes.  
(b) Level of measures 
  Moreover, when the subsidy amount is a llocated over time, the decision to impose a 
countervailing duty should duly reflect the methodology  used and provide, where appropriate, for an 
automatic adjustment of the countervaili ng measures in line with that methodology. 
 
(c) Initiation of sunset reviews 
  Another important issue is whether “sunset ” reviews should only be permitted upon the 
submission of a justified request by the domestic i ndustry.  In this respect, the EC favours such 
requests and in particular in cases where existing leve ls of subsidization are significantly lower than 
when measures were imposed.  Account must be  taken of any subsidies which have reached 
de minimis  levels either in the context of sunset  reviews or any other type of reviews. 
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  In this context, the EC has consid erable sympathy with Canada’s proposal1 that any “sunset” 
reviews should be carried out before the end of the period of validity of 5 years – currently the 
measures remain in force beyond the 5 year period pending the outcome of the review.  There might 
however be administrative constraints (including ti me constraints) preventing the completion of a 
fully-fledged sunset review covering both injury and subsidization by the fifth anniversary date of the 
measures.  This issue deserves thorough discussion in the Group. 
 (d) Proposal   To take account of all the above-mentioned fact ors, the EC proposes the following text which 
would modify Article 21.3 of the ASCM Agreement – see Annex 2. 
 
3. Use of sampling techniques 
 Although the ASCM implicitly recognises that not all the exporters have to be systematically 
investigated and that, therefore, not  all exporters have to be individually investigated, the ASCM lacks 
specific sampling provisions such as provided for in Article 6.10 of the ADA.  Given that in some 
circumstances (such as for instance highly fragm ented industries), the obligation to calculate 
individual duty rates is simply unmanageable, a clear provision must be made for the use of sampling techniques similar to those existing in th e context of anti-dumping investigations. 
  In this context, account should also be taken of the differences between dumping and 
subsidies in determining the appropriate amount of  measures for those companies which cooperate in 
an investigation but are not included in the sample. In  the case of subsidies, for example, the subsidies 
given are often generally available to all exporters of that product on an equal basis, i.e. the criteria for 
granting is the same for all exporters. Moreover, unlike anti-dumping, there exist various types of 
subsidy programmes and account must be taken of this.  Finally, c onsideration should be given to 
applying the average of the sample to all producers, including those sampled. 
  To take account of the above the EC proposes the following text for inclusion in the ASCM 
Agreement – see Annex 3.  
4. Newcomer reviews 
 The EC is of the view that “newcomer” provisi ons currently set out in the ASCM need to be 
re-examined.  There appears to be a need to bette r adjust them to the specificities of countervailing 
investigations.  For instance, the fact that s ubsidy programmes are widely available to all the 
companies producing the product concerned, including  newcomers, should be taken into account e.g. 
for the definition of the notion of “newcomer”.  In th is regard, the fact that a new exporter has not yet 
claimed any benefit under the available subsidy schem es is not, by itself, sufficient reason to give a 
new exporter a zero rate, if the exporter contin ues to be eligible for benefits under subsidy 
programmes in the future.  This is particularly tr ue if the new exporter has only exported small or 
even negligible quantities.   It is clear, of course, that individual treat ment is justified for ne w exporters which have 
exported significant quantities, and have establishe d a track record as non-claimants of subsidy 
programmes which led to the imposition of measures.   However, for exporters falling short of that  standard, alternative solutions should be 
envisaged.  One possibility would be that instead of calculating an individual duty rate for a so-called 
newcomer, these newcomers could be given a weighted average duty rate of the investigated 
                                                     
 
 1 TN/RL/GEN/61.  TN/RL/GEN/93 
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 exporters.  This could actually be done via a simp le request by the exporter thus saving them the 
trouble and expense of producing the normal evidence both for initiation and subsequent 
investigation.   To take account of the above the EC proposes the following text for inclusion in the ASCM 
Agreement – see Annex 4.  This text, which is based on that of the ADA and better reflects the 
specificities of countervailing investigations, w ould replace the second sentence of Article 19.3 
ASCM.  
5. Constructive remedies for developing countries 
 Unlike the AD Agreement, the ASCM does not contain any requirement that the special 
situation of developing country members should be  taken into account when  adopting countervailing 
measures (cf. Article 15 of the AD Agreement).  Th e EC considers that the Negotiating Group should 
consider the incorporation of such provisions into Article 27 of the ASCM.  This would be in addition 
to the existing special and differential treat ment already provided for in Article 27. 
 
 In this respect, further thought should be given to the type of “constructive remedies” which could be envisaged under such a provision.  Within  the context of the AD Agreement, up until now 
the only remedies which have been considered in this context are undertakings and the Group should 
give thought to whether other forms of remedy coul d not be considered to give more meaning to the 
concept of special and differential treatment. 
 
 To take account of the above the EC proposes the following text for inclusion in the ASCM 
Agreement – see Annex 5.  
Conclusion 
  Although the discussions in the Group on genera l subsidies discipline have been so far less 
animated than in the area of anti-dumping, there is already a large number of complex and potentially contentious issues on the table, and more will most likely come.  The EC considers that time is now 
ripe for addressing some of those issues in more detail in the appropriate format.  The EC would 
therefore support any process that would enable pr ogress to be made in the examination of those 
issues.  This would include any or all of the various types of initiatives put forward in the ADA 
negotiations, more text based proposals, plurila teral groups, or the use of facilitators, etc. 
  TN/RL/GEN/93 
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 ANNEX 1 
 
BEST INFORMATION AVAILABLE IN TERMS OF PARAGRAPH 7 OF ARTICLE 12 
 
1. As soon as possible after the initiation of the investigation, the investigating authorities 
should specify in detail the information required fro m any interested party, and the manner in which 
that information should be structured by the inte rested party in its response.  The authorities should 
also ensure that the party is aware that if info rmation is not supplied within a reasonable time, the 
authorities will be free to make determinations on the basis of the facts available, including those 
contained in the application for the initiation of the investigation by the domestic industry. 
 
2. The authorities may also request that an inter ested party provide its response in a particular 
medium (e.g. computerized response).  Where such a request is made, the authorities should consider 
the reasonable ability of the interested party to  respond in the preferred medium, and should not 
request the party to use for its response a computer system other than that used by the party.  The 
authority should not maintain a request for a com puterized response if the interested party does not 
maintain computerized accounts and if presenting the response as requested would result in an 
unreasonable extra burden on the interested party, e. g. it would entail unreasonable additional cost and 
trouble.  The authorities should not maintain a request for a response in a particular medium if the interested party does not maintain its computerized accounts in such medium and if presenting the response as requested would result in an unreasonable extra burden on the interested party, e.g. it 
would entail unreasonable additional cost and trouble. 
 3. All information which is verifiable, which is a ppropriately submitted so that it can be used in 
the investigation without undue difficulties, which is supplied in a timely fashion, and, where 
applicable, which is supplied in a medium requested by the authoriti es, should be taken into account 
when determinations are made.  If a party do es not respond in the preferred medium but the 
authorities find that the circumstance s set out in paragraph 2 have been  satisfied, the failure to respond 
in the preferred medium should not be consider ed to significantly impede the investigation. 
 4. Where the authorities do not have the ability to process information if provided in a particular 
medium, the information should be supplied in th e form of written material or any other form 
acceptable to the authorities. 
 5. Even though the information provided may not be  ideal in all respects, this should not justify 
the authorities from disregarding it, provided the inter ested party has acted to the best of its ability. 
 
6. If evidence or information is not accepted, the supplying party should be informed forthwith 
of the reasons therefore, and should have an opport unity to provide further explanations within a 
reasonable period, due account being taken of the time-l imits of the investigation.  If the explanations 
are considered by the authorities as not being satis factory, the reasons for the rejection of such 
evidence or information should be gi ven in any published determinations. 
 
7. If the authorities have to base their findings, in cluding those with respect to the existence of a 
subsidy
2, on information from a secondary source, in cluding the information supplied in the 
application for the initiation of the investigation, th ey should do so with special circumspection.  In 
such cases, the authorities should,  where practicable, check the information from other independent 
sources at their disposal, such as published price lists , official import statistics and customs returns, 
and from the information obtained from other interested  parties during the investigation.  It is clear, 
however, that if an interested party does not cooperate  and thus relevant inform ation is being withheld 
                                                      
2 It is understood that the Investigating Author ity will only resort to secondary sources in the 
case of  inadequate co-operation from the granting government. TN/RL/GEN/93 
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 from the authorities, this situation could lead to a result which is less favourable to the party than if 
the party did cooperate.   
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 ANNEX 2 
 
Article 21 
 
Duration and Review of Countervailing Duties and Undertakings 
  
21.1 A countervailing duty shall remain in force only as long as and to the extent necessary to 
counteract subsidization which is causing injury.  
21.2 The authorities shall review the need fo r the continued imposition of the duty, where 
warranted, on their own initiative or, provided that  a reasonable period of time has elapsed since the 
imposition of the definitive countervailing duty, upon  request by any interested party which submits 
positive information substantiating the need for a revi ew.  Interested parties shall have the right to 
request the authorities to examine whether the con tinued imposition of the duty is necessary to offset 
subsidization, whether the injury would be likely to  continue or recur if the duty were removed or 
varied, or both.  If, as a result of the review under this paragraph, the authorities determine that the 
countervailing duty is no longer warranted, it shall be terminated immediately. 
 21.3 Notwithstanding the provisions of paragraphs 1 and 2, any de finitive countervailing duty shall 
be terminated on a date not later than five year s from its imposition (or from the date of the most 
recent review under paragraph 2 if that review has covered both subsidization and injury, or under this 
paragraph)  or, in cases where, during an investigation under Article 11 or a review under 
paragraph 2 of this Article, it was found that the subsidy expires after, or has been allocated 
over, a certain time period, at the end of the said time period , unless the authorities determine, in a 
review initiated before that date  upon a duly substantiated request made by or on behalf of the 
domestic industry within a reasonabl e period of time prior to that date, that the expiry of the duty 
would be likely to lead to continua tion or recurrence of subsidization,  beyond 
de-minimis  levels, and 
injury.3 The duty may remain in force pending the outcome of such a  review. 
  
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3 When the amount of the countervailing duty is assessed on a retrospective basis, a finding in the most 
recent assessment proceedin g that no duty is to be le vied shall not by itself require  the authorities to terminate 
the definitive duty. TN/RL/GEN/93 
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 ANNEX 3 
 
 
Sampling
 
 
 The authorities shall, as a rule, determine an  individual margin of subsidization for each 
known exporter or producer concerned of the product under investigation.  In cases where the number of exporters, producers, importers or types of pr oducts involved is so large as to make such a 
determination impracticable, the authorities may lim it their examination either to a reasonable number 
of interested parties or products by using samp les which are statistically valid on the basis of 
information available to the authorities at the time of  the selection, or to the largest percentage of the 
volume of the exports from the country in qu estion which can reasonably be investigated,  due 
account being taken of the type and nature of the alleged subsidies . 
  Any selection of exporters, producers, importe rs or types of products made under this 
paragraph shall preferably be chosen in consulta tion with and with the consent of the exporters, 
producers or importers concerned and the authority shall provide an adequate explanation for its 
decision.   Level of duty
 
 
 When the authorities have limited their exam ination in accordance with the second sentence 
of [Sampling provisions], th e countervailing duty applied to the imported product shall correspond 
to the weighted average margin of subsidiz ation established with respect to the selected 
exporters or producers which should be grante d to any producers or exporters upon simple 
request. 
 
 
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 ANNEX 4 
  
Newcomer exporters or producers
 
 
(1) If a product is subject to countervailing duties in an importing Member, the authorities shall 
promptly carry out a review for the purpose of de termining individual margins of subsidization for 
any exporters or exporting producers in the exporting country in question who have not exported the 
product to the importing Member during the period of investigation, provided that these exporters or 
producers can show: 
 
(i) that they are not related to any of the expor ters or producers in the exporting country who are 
subject to the countervailing duties on the product, and 
 
(ii) that they have exported representative quantities after the period of investigation. 
 (2) Such a review shall be initiated and carried out on an accelerated basis, compared to normal 
duty assessment and review proceedings in the impor ting Member.  No countervailing duties shall be 
levied on imports from such exporters or producer s while the review is being carried out.  The 
authorities may, however, withhold appraisement a nd/or request guarantees to ensure that, should 
such a review result in a determination of subsid ization in respect of such producers or exporters, 
countervailing duties can be levied retroactively to the date of the initiation of the review.  
 
(3) If the conditions laid out in paragraphs (1) (i) and (ii) are fulfilled, the individual margin 
of subsidization will correspond to the weight ed average of the margins established for 
investigated producers which may be applied upo n simple request by the exporter or producer 
concerned.  
 
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 ANNEX 5 
  
Article 27, new paragraph
 
 
 It is recognized that special regard must be given by developed country Members to the 
special situation of developing country Members wh en considering the application of countervailing 
measures under Part V of this Agreement.  Possib ilities of constructive remedies shall be explored 
before applying countervailing duties where they woul d affect the essential interests of developing 
country Members. 
 
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