WORLD TRADE  
ORGANIZATION  G/SCM/Q2/KOR/37 
15 October 2010 
 (10-5301) 
Committee on Subsidies and 
Countervailing Measures Original:   English 
 
 
 
SUBSIDIES 
 
Replies to Questions from the UNITED STATES1 Regarding the   
New and Full Notification of the REPUBLIC OF KOREA2 
 
  The following communication, dated 13 October 2010, is being circulated at the request of the Delegation of Korea.  
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Question 1 
 
 According to publicly available sources, the Korea Fisheries Association said the fuel 
subsidy provided by the government to the fish ing industry is the most important program, 
accounting for up to 50 per cent of total fisheries  subsidies.  Please describe the nature and 
operation of this program, and the amounts provided under the program during the period covered by the new and full notification.  
Reply
 
  The following information is without prejudi ce to whether the program is covered by 
Article 25.2 of the SCM Agreement.  For the natu re and operation of the program, Article 106-2 of 
the Act on the Restriction of Special Tax Treatment provides as follows.  
Article 106-2  (Abatement or Exemption of Value-Adde d Tax, etc. on Petroleum Products for 
Agriculture, Forestry, Fisheries, and Coastal Passenger Ships) 
  (1) Among the following petroleum products (referring to the petroleum products under 
the Petroleum and Petroleum Substitute Fuel Busin ess Act; hereafter referred to as "tax-free 
petroleum" in this Article), the value-added tax on the supplies delivered on or before 
June 30, 2012 and the individual consumption tax, the traffic, energy and environment tax, 
the education tax, and the driving tax on the supplies released from a manufacturing place or 
a bonded area on or before the afore-stated date shall be reduced or exempted as prescribed 
by Presidential Decree, while the value-added ta x on the supplies delivered during the period 
between July 1, 2012 and December 31, 2012 and the individual consumption tax, the traffic, 
energy and environment tax, the education tax, and the driving tax on the supplies released from a manufacturing place or a bonded area durin g the afore-stated period shall be abated 
by 75/100 of each tax under the conditions  as prescribed by Presidential Decree: 
 
                                                     
 
1 G/SCM/Q2/KOR/34. 
2 G/SCM/N/186/KOR. G/SCM/Q2/KOR/37 
Page 2  
 
  1. Petroleum products required by a fa rmer, a forestry person, or a fishery 
person specified by Presidential Decree (hereafter referred to as "farmer, 
forester, or fisherman" in this Artic le) for the purposes of agriculture, 
forestry, or fisheries, which are prescribed by Presidential Decree; and  
 
2. Petroleum products supplied directly  to the Korea Shipping Association 
established pursuant to the Korea Shipping Association Act for the use in passenger ships operating on coastal waters.  
  (2) In cases where certain petroleum produc ts delivered to a petroleum distributor 
(hereafter referred to as a "petroleum distributor " in this Article) prescribed by Presidential 
Decree, including a gas station, with the value-added tax, the individual consumption tax, the traffic, energy and environment tax, the educa tion tax, and the driving tax already levied 
thereon and supplied to a farmer, forester, or fisher falls under paragraph (1) 1, the 
petroleum distributor may file an applicatio n under the conditions as prescribed by 
Presidential Decree to have the refund of the ta x amount otherwise exempted or have the tax 
amount payable or collectible reduced by the amount.  
  (3)  A farmer, forester, or fisherman who desires to have tax-free petroleum supplied 
shall file a report on the current status of agric ultural machines, forestry  machines, or ships 
and facilities prescribed by Presidential Decre e in possession (hereafter referred to as 
"agricultural machines, etc." in this Article ) and the fact that the person has engaged in 
agriculture, forestry, or fisheries, under the cond itions as prescribed by Presidential Decree, 
with a cooperative under the Agricultural Coop eratives Act Agricultural Cooperatives Act, a 
cooperative under the Forestry C ooperatives Act Forestry Cooperatives Act, or a cooperative 
under the Fisheries Cooperatives Act Fisheries Cooperatives Act(hereafter referred to as a 
"cooperative acting as an institution responsible for control of tax-free petroleum" in this 
Article), and shall also file a report on a change within 30 days from the day on which such a 
change occurs, if any change in the reported matters occurs, such as the acquisition or 
transfer of an agricultural machine, etc., the de ath of the farmer, forester, or fisher, and 
giving up the agricultural, fo restry, or fishery business.  
 
 (4)  A farmer, forester, or fisher who desi res to have tax-free petroleum supplied shall 
obtain a card for purchasing tax-free petrol eum or a delivery order prescribed by the 
Presidential Decree and issued by a coopera tive acting as an institution responsible for 
control of tax-free petroleum (hereafter referred  to as "tax-free petroleum purchase cards, 
etc." in this Article). 
 
 The total amount of fuel subsidy provided to the fishing industry was 788 billion won in 2007 
and 614 billion won in 2008. 
 
Question 2  
 The Korean press has reported that Korea  plans to allocate 7.09 trillion won 
(US$6.24 billion) in investment funds and loans to  the Korean fisheries industry.  The Ministry 
for Food, Agriculture, Forestry and Fisheries stat ed that it would also launch 38 new long-range 
fishing vessels to replace old boats and that up to  1,085 fishing boats will be given light-emitting 
diodes as fish-luring lights.  Please provide fu rther details on these plans and the proposed 
terms and conditions on the investment funds and loans. 
  G/SCM/Q2/KOR/37 
 Page 3 
 
 
  Reply  
  The following reply contains information for the period not covered by 2009 new and full subsidy notifications which had been circulated in the G/SCM/N/186 … series.  
 Total amount of funds and loans for the five-year period between 2010 and 2014 was set 
at 7.12 trillion won including 1.39 trillion won in 2 010 (fixed), 1.39 trillion won for 2011, 1.44 trillion 
won for 2012, 1.44 trillion won for 2013 and 1.46 trillion won for 2014 (estimated and subject to 
change depending on the final nati onal budget plan of each year). 
 
 Under the Old Fishing Vessel Replacemen t Program, the Korean government provided 
16.4 billion won of loan for replacing two vessels in  2010 with condition of 4 per cent interest rate 
and repayment for seven years after a lapse of three y ears.  The limit of loan was set at 70 per cent of 
the total construction cost.  The other 36 vessel s are planned to be replaced during 2011-2014. 
 
 "The Program to Support Vessels to Install LED Lights" aims at energy saving and carbon 
emission reduction.  In the program, it is planned to grant 6.5 billion won to 1,085 vessels which will 
be equipped with LED lights from 2009 to 2013.  Each year 1.3 billion is granted to 217 vessels.  The 
government grant is provided to cover 40 per cent of the total installing cost. 
 
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