. /.   WORLD TRADE  
ORGANIZATION  G/SCM/Q2/BRA/22 
21 April 2008 
 (08-1842) 
Committee on Subsidies and 
Countervailing Measures Original:   English 
 
 
 
SUBSIDIES  
 
Replies to Questions Posed by  the SEPARATE CUSTOMS TERRITORY  
OF TAIWAN, PENGHU, KINMEN AND MATSU1 Regarding  
the New and Full Notification of BRAZIL2 
   The following communication, dated 18 April 2008,  is being circulated at the request of the 
Delegation of Brazil.   
 
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  Question 1  
 Concerning the Industrial & Agricultural/Cattle Technology Development Programme , we 
note that the amount of subsidy depends on th e value of machinery and equipment acquired for 
research and development purposes.  As we understand, many kinds of machinery and 
equipment have multiple and dual functions.  Fo r example, one machine may be used not only 
for manufacturing process but also for R&D purpose.  Therefore, which documents are 
required for applicants to assure the granting authority that the machinery and equipment is 
destined for R&D purpose only?  How does the au thority verify the documents before granting 
the subsidy, and after granting, does it regularly do on-site checking to see if the machinery and 
equipment is used for any other purpose beside R&D?    
Reply
 
 
 In order to benefit from the PDTA/PDTI progra mmes, all applicants had to present a detailed 
description of the R&D project, including an exhaus tive list of the machinery and equipment to be 
used in programme.3  Applicants were also obliged file a d eclaration stating the specific values to be 
spent on R&D during the programme.  All applicati ons were rigorously evaluated by the granting 
authority (the Ministry of Scie nce and Technology throug h FINEP) before approval.  In all cases, 
applicants were expressly informed that the provi sion of inaccurate or wrong information, as well 
wrongful use of the incentives, may have legal consequences.    
 The PDTA/PDTI programmes – almost all project s have a duration period of 5 years – are 
monitored by the granting authority during the implementation phase.  During this period, the 
beneficiaries are obliged to send biannual reports on their R&D activities to FINEP.  A representative 
from the granting authority pays a yearly visit to each beneficiary, in order to technically assess the 
                                                     
 
1 G/SCM/Q2/BRA/19.   
2 G/SCM/N/155/BRA.   
3 PDTI/PDTA were terminated on 1 January 2006.  Ongoing projects were authorised to keep 
benefiting from the programme until their completion.   G/SCM/Q2/BRA/22 
Page 2  
 
  implementation of the project, including the use of equipment and machinery.  After the project's 
conclusion, the granting authority also undertakes an "ex-post" review.    Question 2   With regard to the Amazon Development Authority and the Northeast Region 
Development Authority , the form of subsidy under this programme is "income tax exemption 
and reduction".  We would like to know:   
 
1) Are all enterprises in the Authority and Northeast Region qualified to apply for the subsidy programme and on what bases does the gr anting authority decides to exempt or reduce 
income tax?   
 2) Are there many enterprises in the Amazon  and Northeast Regions and what are the 
main products produced by them?   
 
Reply
 
 
In order to qualify for fiscal incen tives under ADA and ADENE, enterprises with 
undertakings in the Amazon or Northeast regions n eeded to have a development project approved by 
the referred to agencies.4  Only projects related to the insta llation, extension, modernisation or 
diversification of activities in sectors determined to be priorities for regional development in the 
Amazon and Northeast regions were considered for approval.  Presently, the government has defined 
as priorities for regional development projects in infra-structure, tourism, mineral extraction and 
general industry.   
 
 There are a large number of enterprises operating in the Amazon and Northeast regions of Brazil, approximately 10 per cent of which in th e industrial sector.  The products produced in both 
regions are widely diversified, but  usually related to the natural e ndowment of the regions, including 
such sectors as food, cosmetics, mineral and natu ral gas extraction, publishing, bottling, ceramics, 
among others.  The companies that were entitled to the exemption or reduction of corporate income 
tax under ADA/ADENE comprise about 1,4 per cent of the industrial companies in both regions.   
 
Question 3 
  Turning to the Programme for Diesel Oil Support , we would like to raise the question 
whether any owners of any kind of fishing vessels - no matter the size or fishing area the vessels 
are in or operate in - can qualify for this programme.   
 
Reply
 
  All fishing vessel owners and operators with a valid fishing license and boat registration at the 
Special Secretariat for Aquaculture Fisheries (SEA P) may qualify for the Programme for Diesel Oil 
Support, irrespectively of boat size.  It should be noted that fishing licenses and registration are only 
granted to fishing vessels that meet the criteria es tablished by law, including those related to safety 
and environmental standards.    
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4 On 3 January 2007, Complementary Laws 124 and 125 extinguished ADA and ADENE and 
reestablished SUDAM and SUDENE.