WORLD TRADE G/SCM/N/16/USA
26September 1997
ORGANIZATION(97-4013)
Original: English Committee onSubsidies
andCountervailing Measures
SUBSIDIES
Updating Notifications Pursuant toArticle XVI:1 oftheGATT 1994
andArticle 25oftheAgreement onSubsidies andCountervailing Measures
UNITED STATES
Thefollowing communication, dated 17September 1997, hasbeenreceived fromthePermanent
Mission oftheUnited States.
_______________
Thefollowing notification constitutes theUnited States ’update notification forthecalendar
year1996 and,particularly where dataonbudgeted expenditures isconcerned, generally contains
information relevant tothefiscal year1996 (1October 1995 -30September 1996). Inthecaseof
previouslynotifiedprogrammes,thisnotificationgenerallyreportsonlycertainprogrammemodifications
andupdated information onexpenditures/subsidy perunit. Foradditional information onthese
programmes, Members should refertothe1995newandfullnotification oftheUnited States. Newly
notified programmes arereported infull,pursuant totheformat agreed upon inG/SCM/6.G/SCM/N/16/USA
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TABLE OFCONTENTS
Page
AEROSPACE AND AERONAUTICS ....................................5
Advanced Communications Technology Satellite (ACTS) Programme ...........5
TheDC-XA Programme .......................................5
TheX-33 Programme .........................................5
TheX-34 Programme .........................................5
High Speed Research Programme ..................................6
Advanced Subsonic Technology Programme ...........................6
AGRICULTURE .................................................6
Export Assistance Measures ..........................................6
TheExport Enhancement Programme (EEP) ...........................6
TheDairy Export Incentive Programme (DEIP) .........................7
Mandated Export Sales ofDairy Stocks ..............................8
TheSunflowerseed OilandCottonseed OilAssistance Programmes (SOAP &COAP) .8
Agricultural Price Support Programmes ...................................9
Support forWheat andFeed Grains (Corn, Grain, Sorghum, Barley, Oats, Rye) ....9
Support forRice ............................................13
Support forCotton -Upland andExtra Long Staple (ELS) ..................14
Support forOilseeds ..........................................16
Minor Oilseeds .............................................17
Support forPeanuts ...........................................18
Support forDairy Products ......................................18
Support forSugar ............................................19
Support forWool andMohair ....................................20
Support forHoney ...........................................21
Support forTobacco ..........................................22
Other Agricultural Programmes ........................................23
Conservation Reserve Programme ..................................23
Expensing ofCertain Capital Outlays Related toAgriculture .................24
Expensing ofMultiperiod Livestock andCrop Production Costs ...............25
TaxTreatment ofLoans Forgiven Solvent Farmers AsIfInsolvent .............26
Capital Gains Treatment ofCertain Agricultural Income ....................26
Farm UseExemption from Deficit Reduction Component ofGasoline Excise Tax....27
Exemption from Excise TaxforTobacco Products Supplied to
Tobacco Industry Employees ................................28
AUTOMOTIVES/ENGINES/MOTORS ...................................29
Partnership forNewGeneration ofVehicles (PNGV) ......................29
TheAlternative FuelVehicle Development Programme ....................29
TheMotor Challenge Programme ..................................29G/SCM/N/16/USA
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TheHeatEngines Programme ....................................29
TheElectric Hybrid Propulsion Programme ...........................30
BUILDING EQUIPMENT AND SYSTEMS ................................30
TheBuilding Equipment Programme ................................30
TheBuilding Systems Programme .................................30
TheBuilding Envelope Programme .................................30
CERAMICS &LIGHT-WEIGHT MATERIALS .............................31
TheLight-Weight Transportation Materials Programme ....................31
TheContinuous Fibre Ceramic Composite Programme ....................31
CHEMICALS &PETROCHEMICALS ...................................31
TheHydrogen Research &Development Programme ......................31
ENERGY &FUELS (ENERGY DEVELOPMENT, STORAGE AND TRANSPORTATION
&OTHER RELATED SECTORS .................................31
TheMembrane Programme ......................................31
TheGeothermal Energy Programme ................................32
TheEnergy Storage Systems Programme .............................32
TheProcess Heating andCooling Programme ..........................32
TheBiomass Power Programme ...................................32
TheAdvanced Turbine System Programme ............................33
TheIsotope Production andDistribution Programme ......................33
TheUranium Programmes Technology Partnerships Programme -
Non-Uranium Enrichment Applications .........................33
TheCoalResearch andDevelopment Programme ........................33
TheFuelCellforStationary Applications Programme .....................34
TheOilProgramme ..........................................34
TheNatural GasProgramme .....................................34
TheClean CoalTechnology Demonstration Programme ....................34
Expensing ofExploration andDevelopment (E&D) Costs forOil,Gas&Other Fuels .35
Excess ofPercentage Over CostDepletion forOil,GasandOther Fuels .........36
Alternative FuelProduction Credit .................................37
Capital Gains Treatment ofRoyalties onCoal ..........................38
Enhanced OilRecovery (EOR) Credit ...............................38
NewEnergy Technology Credit ...................................39
Alcohol FuelCredit andPartial Exemption from Federal Excise TaxonGasoline ....40
Credits forElectricity Production from Wind andBiomass ..................41
Exemption from theDeficit Reduction Component ofMotor FuelExcise Tax
forHelicopters Providing Transportation Services fortheDevelopment
orRemoval ofHard Minerals, OilorGas........................42G/SCM/N/16/USA
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FISHERIES ....................................................43
Commercial Fishing Exemption from Deficit Reduction RateComponent of
Excise TaxonMotor Fuels .................................43
LUMBER &TIMBER ..............................................44
Capital Gains Treatment ofCertain Timber Income .......................44
Expensing ofMultiperiod Timber Growing Costs ........................45
Investment Credit andSeven-Year Amortization forReforestation Expenses .......46
Exemption from theDeficit Reduction Component ofMotor FuelExcise Taxfor
Helicopters inLogging Operations andOther Timber-Related Activities .....46
METALS, MINERALS AND EXTRACTION (NON-FUEL) .....................47
Expensing forExploration andDevelopment Costs forNon-Fuel Minerals ........47
Excess ofPercentage Over CostDepletion forNon-Fuel Minerals .............48
Capital Gains Treatment ofIronOre................................49
Special Rules forMining Reclamation Reserves .........................50
Materials andMetals Processing Metals Initiative ........................51
TEXTILES &CLOTHING ...........................................51
TheAMTEX Programme .......................................51
TheTextile/Clothing Technology Corporation Programme (TC2) ..............51
TIMEPIECES ...................................................51
TheInsular Possessions Watch Programme ............................51
OTHER .......................................................53
Exemption from Off-Highway Usefrom theDeficit Reduction Rate
Component oftheMotor FuelExcise Tax .......................53
Empowerment Zones andEnterprise Communities .......................54
TheExport Credit Programmes oftheUSExport-Import Bank ...............55
APPENDIX ....................................................57
Statistics ofProduction, Consumption, Imports andExports .................57G/SCM/N/16/USA
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AEROSPACE &AERONAUTICS
Title: Advanced Communications Technology Satellite (ACTS) Programme
Period covered bythenotification
Theperiod covered isthefiscal year1996.
Amount
Theamount budgeted forthisprogramme forfiscal year1996 was$8.2million.
Title: TheDC-XA Programme
Period covered bythenotification
Theperiod covered isthefiscal year1996.
Amount
Theamount budgeted forthisprogramme forfiscal year1996 was$14.8 million.
Title: TheX-33 Programme
Period covered bythenotification
Theperiod covered isthefiscal year1996.
Amount
Theamount budgeted forthisprogramme forfiscal year1996 was$107.2 million.
Title: TheX-34 Programme
Period covered bythenotification
Theperiod covered isthefiscal year1996.
Policy objective and/or purpose
TheX-34 programme wasrestructured inthespring of1996. Thisrestructuring eliminates
theoriginal intention oftheprogramme tosupport development ofacommercially viable small launcher.
Theprogramme isnowlimited totheconstruction ofaflight demonstrator thatwilltestanumber of
newlaunchvehicletechnologiesincludingcompositestructuresandadvancedthermalprotectionsystems.
Although thisrestructuring oftheX-34 programme maywellalteritsstatus asanotifiable subsidy
under Article 25,thisinformation isbeing notified forthepurpose ofupdating thereport made for
1995 ontheX-34 programme asitwasthendesigned.G/SCM/N/16/USA
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Form
Contract.
Towhom andhowassistance isprovided
Thecompanyselected(throughanopen,arm’s-lengthcontractingprocess)producesthespecified
testvehicle under NASA supervision inexchange forcompensation.
Amount
Thebudgeted authority forthisprogramme amounted to$30million forfiscal year1996.
Trade effects
Inlightofthescope andnature oftheR&D activity being assisted, itisnotpossible todetermine
what, ifany,trade effects mayeverresult from thisprogramme.
Title: High Speed Research Programme
Period covered bythenotification
Theperiod covered isthefiscal year1996.
Amount
Theamount budgeted forthisprogramme forfiscal year1996 was$245.5 million.
Title: Advanced Subsonic Technology Programme
Period covered bythenotification
Theperiod covered isthefiscal year1996.
Amount
Theamount budgeted forthisprogramme forfiscal year1996 was$169.8 million.
AGRICULTURE
Export Assistance Measures
Title: TheExport Enhancement Programme (EEP)
Period covered bythenotification
Generally, theperiod covered isthefiscal year1995.G/SCM/N/16/USA
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Amount
Forfiscal year1995, theCommodity Credit Corporation (CCC) committed $339.5 million
inbonuses under EEP. Theprogramme isoperated onanadhocbasis, where varying levels ofbonuses
maybeoffered forarange ofdifferent agricultural commodities.
Duration
EEPwasreauthorized untilyear2001 intheUruguay Round Agreement Actof1994. The
Federal Agricultural Improvement andReform Actof1996(the1996Act), enacted on4April 1996,
further extends funding through year2002.
Trade Effects
TheCCC bonuses offered areintended toenable USexporters tocompete atcommercial prices
inselected foreign markets. Theeffect oftheprogramme istoenable exporters toofferprices that
arecompetitive withthose being offered byothercountries 'exporters intheseselected foreign markets.
Duringfiscalyear1995,awardsunderEEPtotalled13.9millionmetrictons(MT)ofwheat,310,000MT
ofwheat flour, 396,000 million MToffeedgrains, 113,000 MTofrice,40,000 MToffrozen poultry,
113,000 MTofbarley malt, 21,000 MTofpork, and63.8million dozen eggs. However, because
oftheadhocnature oftheprogramme andthevariations andrange ofcommodities exported under
theprogramme, itisnotpossible toprovide meaningful statistics ofthetypereferred tointheagreed
format fornotifications under Articles 25oftheSubsidies Agreement andXVI:1 oftheGATT 1994.
Title: TheDairy Export Incentive Programme (DEIP)
Period covered bythenotification
Generally, theperiod covered isthefiscal year1995.
Background andauthority
Section 153oftheFood Security Actof1985, asamended, mandates thattheCCC operate
theDEIP through 31December 2002.
Amount
Infiscal year1995, government expenditures onDEIP amounted to$140.2 million for
248,257 metric tonsofdairy products. Theprogramme isoperated onanadhocbasis, where varying
levels ofbonuses maybeoffered forseveral different kinds ofdairy products.
Duration
DEIP wasreauthorized untilyear2001 intheUruguay Round Agreement Actof1994. The
1996 Actfurther extends funding through CYyear2002.
Trade Effects
Infiscalyear1995,DEIPbonuseswereawardedtosupporttheexportof44,961MTofbutterfat,
3,425 MTofcheese (cheddar, mozzarella andprocessed American cheese), 186,898 MTofnonfatG/SCM/N/16/USA
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drymilkand19,384 MTofwhole milkpowder. (Statistics onproduction, consumption, imports and
exports arecontained intheAppendix.)
Title: Mandated Export Sales ofDairy Stocks
Period covered bythenotification
Generally, theperiod covered isthefiscal year1995.
Amount
Forfiscal year1995, subsidy onCCC sales amounted to$6,590, 489. Theprogramme is
operated onanadhocbasis, where varying amounts ofsubsidy occur forseveral different kinds of
dairy products.
Title: TheSunflowerseed OilandCottonseed OilAssistance Programmes (SOAP &COAP)
Period covered bythenotification
Generally, theperiod covered isthefiscal year1995 andpartoffiscal year1996.
Policy objective and/or purpose
Under the1990 FACT Act,asamended, theSecretary oftheDepartment ofAgriculture was
authorized touse$50million annually toencourage additional salesofcottonseed andsunflowerseed
oilexports. Funds forthisprogramme were made available under section 32oftheAgricultural
Adjustment Actof1935.
Background andauthority
Section 637oftheRural Development, Agriculture, andRelated Agencies Appropriations Act
of1988 required theoperation oftheSunflowerseed Assistance Programme (SOAP) through theend
offiscal year1989. TheFood, Agriculture, Conservation, andTrade Actof1990extended theoperation
oftheSOAP andtheCottonseed OilAssistance Programme (COAP) through thefiscal year1995,
withfunding nottoexceed $50million tobemade available fortheprogrammes, totheextent provided
inappropriations acts,ineachofthefivefiscal years. Infiscal year1996, SOAP andCOAP were
allocated $23,900,000, using funds available under Section 32oftheAgricultural Adjustment Actof
1935. However, during thefiscal years 1995 and1996 (todate) there have been noexports of
sunflowerseed oilorcottonseed oilunder SOAP orCOAP.
Amount
Programme-wide funding levels areindicated above. Theprogramme isoperated onanad
hocbasis, where varying levels ofbonuses maybeoffered forseveral different kinds ofexported
products.
Duration
TheSOAP andCOAP were eliminated bythe1996 Act.G/SCM/N/16/USA
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Trade Effects
There werenoexports ofsunflower andcottonseed oilunder SOAP andCOAP inFY1995.
Becauseoftheadhocnatureoftheprogramme,however,itisnotpossibletoprovidemeaningful
statistics ofthetypereferred tointheagreed format fornotifications under Articles 25oftheSubsidies
Agreement andXVI:1 ofGATT 1994.
Agricultural Price Support Programmes
(TheFood, Agriculture, Conservation, andTrade Actof1990
TheOmnibus Budget Reconciliation Actof1990)
Introduction
These programmes weredesigned to(1)stabilize, support andprotect farmincome andprices;
(2)assist inthemaintenance ofbalanced andadequate supplies ofquality food, feedandfibre; and
(3)aidintheorderly marketing offarmcommodities. Theprogrammes werefinanced byCCC and
administered bytheFarm Service Agency (FSA). TheFood, Agriculture, Conservation, andTrade
Actof1990(1990 Farm Bill)provided a5-year framework fortheadministration oftheseprogrammes.
Price support programmes forspecified commodities werefirstauthorized bytheAgricultural
Adjustment Actsof1933and1938andtheAgricultural Actof1949. Theprogrammes discussed herein
wereauthorized bytheAgricultural Adjustment Actof1938, theAgricultural Actof1949(1949 Act),
theCCC Charter Act,andtheFood, Agriculture, Conservation, andTrade Actof1990 (1990 Act).
Generally, the1990 Actamended the1949 Acttocover fivecropyears, 1991 to1995.
Thecommodity programmes were purely voluntary except fortobacco andpeanuts. They
were made available toallfarmers. Some chose nottoparticipate, preferring todepend onthe
mechanisms ofthefreemarket.
The1949 Actwasalsoamended bytheOmnibus Budget Reconciliation Actof1990 (the
Reconciliation Act)toreduce projected expenditures by$13billion overthefiscal year1991-95 period.
Theprimary source ofthesavings was"triple base," theelimination ofdeficiency payments on15%
ofthebaseacres ofwheat, feedgrains, upland cotton, andrice. Inaddition, theReconciliation Act
amendments imposed marketing assessments onproducers orfirstpurchasers ofsugar, honey, peanuts,
wool andmohair, andtobacco. Producers ofoilseeds would becharged aloanorigination feeand
milkproducers could receive areduction inprice. Theamendments alsosetminimum levels foracreage
reduction programmes.
Title: Support forWheat andFeed Grains (Corn, Grain Sorghum, Barley, Oats, Rye)
Period covered bythenotification
Period covered -fiscal years 1994-1995 (final).G/SCM/N/16/USA
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Form; towhom andhowassistance isprovided
Price Support Rates
Theprice support ratesforthese commodities wereestablished annually bytheSecretary of
Agriculture atlevels which would allow thecommodities tobecompetitively priced. Forexample,
in1986, theSecretary reduced thewheat andcornprice support ratesthefull20%permissible from
thebasic (statutory) levels. Thebasic wheat price support rateof$3.00 wasreduced to$2.40, and
thebasic cornprice support rateof$2.40 wasreduced to$1.92 tomaintain thecompetitiveness of
USexports. In1994, price support rateswere increased forallcrops.
National average price support loanratesperbushel were:
1993 1994 1995
(----------dollars----------)
Wheat 2.45 2.58 2.58
Corn 1.72 1.89 1.89
Barley 1.40 1.54 1.54
Oats 0.88 0.97 0.97
Sorghum 1.63 1.80 1.80
Rye 1.46 1.61 1.61
Thenational average pricesupport rateswereconverted intolocalpricesupport ratesforgrades
andqualities atspecified locations.
Target Prices
Thetarget priceforeachcommodity wasestablished annually. TheFood Security Actof1985
amended the1949 Acttoestablish minimum target prices forthe1986 through 1990 crops. Under
theAct,theSecretary ofAgriculture froze target prices in1986and1987atthe1985levelandreduced
target prices by2%in1988, 3%in1989 and5%in1990. TheFood, Agriculture, Conservation,
andTrade Actof1990amendments froze minimum target prices for1991-95 attheir1990levels This
resulted inthefollowing minimum target prices:
Wheat Corn1
(--dollars perbushel--)
1988 4.23 2.93
1989 4.10 2.84
1990 4.00 2.75
1991-95 4.00 2.75
1Target prices forsorghum, barley, andoatsweredetermined inrelation tocorn. There was
notarget price forrye.
Acreage Reduction
TheFood,Agriculture,Conservation,andTradeActof1990amendmentscontinuedtheauthority
oftheSecretary ofAgriculture torequire reductions intheacreage planted towheat andfeedgrains.
Acreage limitation orpaidlanddiversion programmes could beimplemented iftotalsupplies would
otherwise beexcessive. Anacreage limitation programme wascommonly called anacreage reductionG/SCM/N/16/USA
Page11
programme orARP. IfanARPwasineffect, producers hadtoparticipate intheARPasacondition
ofeligibility forwheat andfeedgrain loans, purchases anddeficiency payments.
When anARPwasannounced, producers hadtolimitplantings tonomore thanthebaseless
therequired reduction. Under anARP, apercentage ofeachfarm'sacreage hadtobedevoted to
conservation uses.
TheOmnibus Budget Reconciliation Actof1990 amendments setminimum ARPpercentage
levels forthe1992-95 crops ofwheat. Theminimum ARPpercentage was6%in1992, 5%in1993,
7%in1994 and5%in1995, buttheprovision didnotapply ifthestocks-to-use ratioofwheat was
lessthan34%. TheReconciliation Actamendments settheminimum ARPfor1992-95 crops ofcorn
at7.5% ifthestocks-to-use ratios ofthese crops exceeded 20%. Theminimum ARPlevels forwheat
andfeedgrains intheReconciliation Actdidnotapply iftheSecretary determined thatthequantity
ofsoybeans onhand onthefirstdayofthemarketing yearforthe1991 cropwould belessthan
325million bushels. TheARPpercentage levels forthe1992-95 crops ofwheat andfeedgrains were:
1992 1993 1994 1995
Wheat 5 0 0 0
Corn 5 10 0 7.5
Sorghum 5 5 0 0
Barley 5 0 0 0
Oats 0 0 0 0
Amount
Forfiscal year1994, $1.7billion (net)werespent onthewheat programme, and$0.9billion
(net)forfeedgrains. Forfiscal year1995, $0.8billion (net)were spent onthewheat programme,
and$2.4billion (net)forfeedgrains. Tables 1and2below provide information withrespect tothe
estimated amount perunit.
Table 1:USSupport andFarm Prices
Deficiency
Target Loan Average Payment
Grain Year Price Rate Farm Price Rate
______________________________________________________________________
(---------------dollars perbushel----------------)
Wheat 1993/94 4.00 2.45 2.97 1.03
1994/95 4.00 2.58 3.29 0.61
1995/96 4.00 2.58 4.25 0.00
Corn 1993/94 2.75 1.72 2.50 0.28
1994/95 2.75 1.89 2.26 0.57
1995/96 2.75 1.89 3.20 0.00
Sorghum 1993/94 2.61 1.63 2.31 0.25
1994/95 2.61 1.80 2.13 0.59
1995/96 2.61 1.80 3.25 0.00G/SCM/N/16/USA
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Barley 1993/94 2.36 1.40 1.99 0.67
1994/95 2.36 1.54 2.03 0.53
1995/96 2.36 1.54 2.85 0.00
Oats 1993/94 1.45 0.88 1.36 0.11
1994/95 1.45 0.97 1.22 0.23
1995/96 1.45 0.97 1.60 0.00
Rye 1993/94 none 1.46 2.55 none
1994/95 none 1.61 2.70 none
1995/96 none 1.61 3.00 none
Note: 1995/96 farmprices anddeficiency payment rateswere estimates asof12June1996.
Table 2:USProduction andGovernment Payments
Total
Total US Deficiency Government
Grain Year Production Payments Payments a/
_________________________________________________________________________
(million bushels) (----------million dollars-----------)
Wheat 1993/94 2,396 1,904 2,396
1994/95 2,321 1,146 1,637
1995/96 2,186 100 N/A
Corn 1993/94 6,336 1,520 1,815
1994/95 10,103 3,199 3,508
1995/96 7,374 81 368
Sorghum 1993/94 534 154 271
1994/95 649 292 407
1995/96 460 25 141
Barley 1993/94 398 204 327
1994/95 375 163 286
1995/96 359 40 163
Oats 1993/94 207 12 83
1994/95 229 16 87
1995/96 162 3 74
a/ Total Government payments toproducers wasthesumofdeficiency payments, marketing
loanpayments, loandeficiency payments, CRPpayments, andFOR storage payments.
Note: 1995/96 amounts arepreliminary.
Duration
Thepolicies described inthisnotification were ineffect through the1995 marketing year.
Newfarmpolicy legislation wasenacted on4April 1996 (the1996 Act), which decoupled incomeG/SCM/N/16/USA
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support from production forthe1996-2002 crops. Information onthe1996 Actwillbeprovided in
theUnited States ’1997 update notification.
Trade Effects
TheFood, Agriculture, Conservation andTrade Actof1990 continued theaimoftheFood
Security Actof1985 tointroduce greater market orientation inUSfarmpolicy. The1985 Acttied
pricesupportratestoanaverageofpastmarketpricesandpermittedmuchlargerdiscretionaryreductions
iftheprevious season 'sprices were loworifmarket competitiveness waslikely tobehampered by
theformula-determined rate. Thereduction ofprice support ratesresulted inlower USgrain prices
andremoved animportant impediment thatwaspricing theUnited States outofinternational markets.
Statistical information onproduction, consumption, imports andexports iscontained inthe
Appendix.
Title: Support forRice
Period covered bythenotification
Period covered -fiscal years 1994-1995.
Form; towhom andhowassistance wasprovided
Target Prices
TheFood, Agriculture, Conservation, andTrade Actof1990 amendments froze minimum
target prices forthe1991-95 crops attheir1990 levels. Target prices for1987-95 follow.
(dollars perhundredweight)
1987 11.66
1988 11.15
1989 10.80
1990 10.71
1991-1995 10.71
Amount
Itwasestimated thattheUnited States Government spent $837 million (net) ontherice
programme infiscal year1994. Theestimated amount perunitwasasfollows:G/SCM/N/16/USA
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Table 3:USSupport andFarm Prices
Deficiency
Target Loan Average Payment
Crop Year Price Rate Farm Price1Rate
__________________________________________________________________________
(--------------------dollars perhundredweight--------------------)
Rice 1993 10.71 6.50 7.98 3.98
1994 10.71 6.50 6.78 3.79
1995 10.71 6.50 9.50 3.22
1Thefarmprice estimate isasforJune1996.
Table 4:USProduction andGovernment Payments
Total
Total US Deficiency Government
Crop Year Production Payments Payments2
__________________________________________________________________________
(million cwt) (---------------million dollars---------------)
Rice 1993 156.1 569 785
1994 197.8 558 615
1995 173.9 472 472
2Total Government payments werethesumofdeficiency, storage, diversion, marketing loan
andcertificatepayments.1994and1995croppaymentswereestimates.Nomarketingloanormarketing
certificate payments occurred forthe1995 crop.
Duration
Thepolicies described inthisreport were ineffect through the1995 marketing year. New
farmpolicy legislation wasenacted on4April 1996(the1996Act). The1996Actdecoupled income
support from production forthe1996-2002 crops. Information onthe1996 Actwillbeprovided
separately.
Trade Effects
ThericeprovisionsoftheFood,Agriculture,Conservation,andTradeActof1990weredesigned
tomaintain thecompetitiveness ofUSriceinworld markets. Statistical information onproduction,
consumption, imports andexports iscontained intheAppendix.
Title: Support forCotton -Upland andExtra Long Staple (ELS)
Period covered bythenotification
Period covered -fiscal years 1994-1995.G/SCM/N/16/USA
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Form; towhom andhowassistance wasprovided
Generally, thesupport programmes forcotton provided fornonrecourse loans anddeficiency
payments toproducers whocomplied withtherequirements oftheannual cotton acreage reduction
programme (ARP). Marketing loans wererequired when theadjusted world market price wasbelow
theloanrate.Whenever theadjusted world market pricewasbelow theloanrepayment rate,theissuance
ofcommodity certificates orpayments tofirsthandlers ofupland cotton wasrequired.
Loan Rates
The1995 loanrateforStrict LowMiddling 1and1/16inchcotton, micronaire 3.5-3.6 and
4.3-4.9, strength 24through 25grams pertex,ataverage USlocation was$0.5192 perpound. The
ELScotton loanratewas$0.7965 perpound. Forthe1991-95 crops ofupland cotton, theloanrate
wasthelower of(a)85%oftheaverage USspotprices during theprevious fiveyears (excluding the
highandlowyears) or(b)90%ofrecent average northern European prices. Theloanratecould not
bereduced bymore than5%from thepreceding year'srateandnottolessthan$0.50 perpound.
Theloanperiod forcotton wastenmonths beginning withthefirstofthemonth inwhich the
loanwasmade andhadtobeextended another eight months under certain conditions. Theloanrate
forELScotton wasequal to85%ofthesimple average price received byproducers ofELScotton
during theprevious fiveyears (excluding thehighandlowyears).
Target Prices
TheFood, Agriculture, Conservation andTrade Actof1990amendments required aminimum
target price of$0.729 perpound forthe1991-95 crops ofupland cotton. The1995 target price for
ELScotton was$0.956 perpound.
Deficiency Payments
The1995 payment rateforbothupland cotton andELScotton waszero.
Amount
Infiscal year1994, USGovernment outlays were$1,539 million (net)ontheupland cotton programme
and$35.1 million ontheELScotton programme. Infiscal year1995, USGovernment outlays were
$99million (net)ontheupland cotton programme andminus $81.9 million (netreceipts) ontheELS
cotton programme. Theestimated payment rateperunitwasasfollows:
Table 5:USSupport andFarm Prices
Crop Target Average Deficiency
Year Price Loan Rate Farm Price Payment Rate
__________________________________________________________________________
(---------------------------cents perpound------------------------------)
Upland
1992/93 72.9 52.35 53.7 20.3
1993/94 72.9 52.35 58.1 18.6
1994/95 72.9 50.00 72.0 4.6
1995/96 72.9 51.92 1/ 0.0G/SCM/N/16/USA
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ELS
1992/93 105.80 88.15 78.8 17.7
1993/94 105.70 88.12 87.0 17.6
1994/95 102.00 85.03 102.5 1.3
1995/96 95.60 79.65 1/ 0.0
1/USDA isprohibited from forecasting cotton prices.
Table 6:USProduction andGovernment Payments
Crop Total US Deficiency Total 1/
Year Production Payments Government Payments
__________________________________________________________________________
(1,000 bales) (-----------------million dollars----------------)
Upland
1992/93 15,710.0 1,017.0 1,681.0
1993/94 15,764.0 1,053.0 1,783.0
1994/95 19,324.0 278.0 425.0
1995/96 17,532.0 3.0 90.0
ELS
1992/93 508.0 8.5 8.5
1993/94 370.0 10.4 10.4
1994/95 338.0 0.8 0.8
1995/96 368.0 0.0 0.0
1/ TotalGovernmentpaymentswerethesumofdeficiencypayments,disasterpayments,marketing
loangains, marketing certificates, CRPpayments, andloandeficiency payments.
Duration
Thepolicies described inthisreport were ineffect through the1995 marketing year.
Trade effects
Theprovisions ofthecotton programme oftheFood, Agriculture, Conservation andTrade
Actof1990wereexpected toincrease thecompetitiveness ofUnited States cotton exports. Statistical
information onproduction, consumption, imports andexports iscontained intheAppendix.
Title: Support forOilseeds
Soybeans
Period covered bythenotification
Period covered -fiscal years 1994-1995.G/SCM/N/16/USA
Page17
Amount
TheUSGovernment spent $109.0 million onthesoybean programme infiscal year1993, minus
$182.8 million infiscal year1994 and$76.7 million infiscal year1995. Theestimated farmprice
perunitwasasfollows:
Year Average Price Average
Beginning Support Rate
Farm Price
------------------------------($/bushel)-----------------------------
1992 $5.02 $5.56
1993 $5.02 $6.40
1994 $4.92 $5.48
1995 $4.92 $7.00
Duration
Thepolicies described inthisreport were ineffect through the1995 marketing year.
Trade effects
Statistical information onproduction, consumption, imports andexports iscontained inthe
Appendix.
Title: Minor Oilseeds
Period covered bythenotification
Period covered -fiscal years 1994-1995.
Amount
TheUSGovernment spent thefollowing amounts ontheminor oilseed programme infiscal
year1995: sunflower seed($1.02 million), rapeseed ($0), canola (-$44,000), mustard seed($0),
safflower ($0)andflaxseed (-$17,000 million).
Crop year1995 farmprices perpound:
Average Price Average
Crop Support Rate Farm Price
(-------------------dollars-------------------)
Sunflower seed(oiltype) 0.087 0.1035
Sunflower seed(other type) 0.087 0.1235
Rapeseed 0.087 0.1152
Canola 0.087 0.1195
Mustard seed 0.087 0.1100
Safflower seed 0.087 0.1385
Flaxseed 0.087 0.9380G/SCM/N/16/USA
Page18
Duration
Thepolicies described inthisreport were ineffect through the1995 marketing year.
Trade effects
Statistical information onproduction, consumption, imports andexports iscontained inthe
Appendix.
Title: Support forPeanuts
Period covered bythenotification
Theperiod covered isfiscal years 1994-1995.
Amount
Infiscal year1994, theUSGovernment spent $4.5million (net)onthepeanut programme.
Infiscal year1995, Government outlays totalled around $124.8 million. Theestimated farmprice per
unitwasasfollows:
Year Average Loan Rate Average Farm Price
Quota Additional
------------------------cents perpound----------------------------
1992 33.75 6.55 30.00
1993 33.75 6.55 30.40
1994 33.92 6.60 29.00
1995 33.92 6.60 29.00(estimate)
Duration
USdomestic commodity programmes forthe1996-2002 crops werechanged withpassage of
the1996Act.The1996Actretained thetwo-price poundage quota programme forpeanuts. However,
atleastsiximportant changes were made tothepeanut programme. These include: elimination of
theminimum quota floor, elimination ofundermarketings, provisions forsaleandlease andtransfer
ofquota within StateforallStates, forfeiture ofquota bycertain nonproducers, no-net costtoTreasury
provision, andlowering thequota price support level.
Trade effects
Statistical information onproduction, consumption, imports andexports iscontained inthe
Appendix.
Title: Support forDairy Products
Period covered bythenotification
Period covered -fiscal years 1994-1995G/SCM/N/16/USA
Page19
Amount
Forfiscal year1994, theUSGovernment spent $158 million (net)onthedairy programme,
including theDairy Export Incentive Programme.. Forfiscal year1995, thenetcostoftheprogramme
was$4million. Theestimated farmprice perunitisasfollows:
Marketing Support Price Average Farm Price Year
at3.67% butterfat ataverage butterfat
(-------------------- $perhundredweight --------------------)
1990-91 10.10 12.24(CY 1991)
1990-95 10.10 13.09(CY 1992)
12.80(CY 1993)
12.97(CY 1994)
12.74(CY 1995)
Duration
USdomestic commodity programmes forthe1996-2002 crops werechanged withpassage of
the1996 Act. The1996 Actrequires declining milkprice support levels through 1999, requires a
recourse loanprogramme forcommercial processors aftercalendar year1999, andeliminates marketing
assessments.
Trade effects
Inmanaging itsdairy support programme, theUnited States strives toavoid setting support
pricesatlevelswhichstimulateproductionbeyonddomesticmarketrequirements.However,adjustments
ofsupport prices alone hasnotproved sufficient, largely because ofcontinuing improvements inmilk
production technology. Inthose instances where dairy surpluses haveaccumulated, thepolicy was
toavoid disrupting domestic markets orexport markets fornon-subsidizing exporters indisposing of
those surpluses. Donations todomestic feeding programmes accounted for23%ofsurplus removals
in1994/95. Foreign salesofdairy surpluses were within theguidelines specified under theExport
Assistance Measures. TheUnited States remained alarge netimporter ofdairy products. Statistical
information onproduction, consumption, imports andexports iscontained intheAppendix.
Title: Support forSugar
Period covered bythenotification
Period covered -fiscal years 1994-1995.
Form; towhom andhowassistance wasprovided
Sugar prices weresupported through nonrecourse loans made tosugar processors whoagreed
topayatleasttheminimum levelofsupport fortheapplicable region toanyproducer whodelivered
sugarbeetsorsugarcaneforprocessing.The1995nationalaveragesupportprice(loanrate)was18cents
perpound forrawcanesugar. Theloanrateforrefined beetsugar fromthe1995cropwas22.90 cents
perpound.
The1949 Act,asamended, required firstprocessors ofsugar topaymarketing assessments
toCCC. Forsugarcane marketed during fiscal years 1992-94, thefirstprocessor paidanon-refundable
marketing assessment of$0.0018 perpound ofrawcanesugar processed fromdomestically-producedG/SCM/N/16/USA
Page20
sugarcane, and$0.00193 perpound ofbeetsugar processed fromdomestically produced sugar beets.
Forsugarcane marketed during fiscal year1995, theassessment was0.198 cents perpound ofraw
canesugar and0.2123 cents perpound ofbeetsugar.
Amount
Infiscal year1995, theprogramme provided $32.0 million (net)totheFederal Government
intheform ofmarketing assessments inconnection withcommodity loans. Thesupport price was
maintainedprimarilythroughimportbarriersanddomesticmarketingallotmentsratherthanGovernment
expenditures.
Duration
USdomestic commodity programmes forthe1996-2002 crops werechanged withpassage of
the1996Act.The1996Actimplements arecourse loanprogramme, which converts toanonrecourse
loanprogramme ifthetariff ratequota exceeds 1.5million short tons(rawvalue), imposes apenalty
ontheforfeiture ofanysugar pledged ascollateral fornonrecourse loans, increases themarketing
assessment ratesby25%starting withfiscal year1997, eliminates allotments, andeliminates producer
protection intheevent ofprocessor bankruptcy.
Trade effects
Statistical information onconsumption, production, imports andexports wascontained inthe
Appendix.
Title: Support forWool andMohair
Period covered bythenotification
Period covered -fiscal years 1994-1995.
Amount
Infiscal year1995, theUSGovernment spent about $97million onthewool andmohair
programmes. Thepayment rateperunitwasasfollows:
National Average Support Prices, Farm Prices andPayment Rates
Support Price Farm Price Payment Rate1/
(----------$ perpound -------------) (%)
Wool
1992 1.97 0.74 166.2
1993 2.04 0.51 300.0
1994 2.09 0.78 125.9
1995 2.12 1.04 51.9G/SCM/N/16/USA
Page21
Mohair
1992 4.61 $0.86 436.4
1993 4.74 0.82 477.8
1994 4.74 2.56 063.8
1995 4.66 1.84 076.6
1/Adding theproduct ofthispercentage ratetimes thefarmpricetothefarmpriceequals thesupport
price. Payments ratesfor1994and1995reflect the25%and50%payments, respectively, inaccordance
withlegislation phasing outtheprogrammes.
Duration
Thewool andmohair programme expired attheendofcalendar year1995.
Trade effects
Statistical information onproduction, consumption, imports andexports iscontained inthe
Appendix.
Title: Support forHoney
Period covered bythenotification
Period covered -fiscal years 1994-1995.
Background andauthority
Theprogrammes described inthisnotification wereauthorized bytheCCC Charter Actand
theAgricultural Actof1949, asamended bytheFood, Agriculture, Conservation, andTrade Actof
1990.However,theAgriculturalAppropriationsActsforfiscalyears1994and1995curtailednetoutlays
forthe1994 and1995 crops ofhoney.
Amount
Infiscal year1994, theUSGovernment hadnetreceipts of$177,000 and$10.7 million,
respectively, under thehoney programme. Support andaverage market prices areestimated asfollows:
National Average
Year Support Price Market Price
(-----------cents perpound-----------)
1992 53.8 55.0
1993 53.8 53.9
1994 50.0 52.8
1995 50.0 64.4
Duration
Thehoney programme waseliminated bythe1996 Act.G/SCM/N/16/USA
Page22
Trade effects
Statistical information onproduction, consumption, imports andexports iscontained inthe
Appendix.
Title: Support forTobacco
Period covered bythenotification
Period covered -fiscal years 1994-1995.
Background andauthority
Thesupport programmes described inthisnotification fortobacco (burley, flue-cured, dark
air-cured, fire-cured, sun-cured, cigar binder andcigar filler) were authorized bytheAgricultural
AdjustmentActof1938,theAgriculturalActof1949,andtheCCCCharterAct.SinceSeptember1995,
atariff ratequota onflue-cured andburley hasbeeninplace. Thetariff ratequota wasestablished
asaresult ofanArticle XXVIII negotiation tobring theformer domestic content legislation into
conformity withWTO rules.
Form; towhom andhowassistance wasprovided
For1995cropmarketings,thecombinedno-netcostandmarketingassessmentstotalled2.6cents
forflue-cured (0.8cents forproducers and1.8cents forpurchasers) and2.0cents forburley (1.0cent
forproducers and1.0centforpurchasers).
Thenational average loanlevel forthe1996 flue-cured tobacco cropis$1.601 perpound.
Thenational marketing quota was873.6 million pounds. Thenational average loanlevelforburley
tobacco in1996 was$1.737 perpound. Thenational marketing quota was634million pounds.
Amount
Forfiscal year1994, theUSGovernment spent anestimated $851million ontobacco support
programmes (outlays), andhadreceipts (loans repaid andmiscellaneous) of$159 million, foranet
expenditure onsupport andrelated programmes fortobacco of$692 million. Forfiscal year1995,
USGovernment hadnetreceipts of$459 million.
Estimates ofper-unit amounts interms ofsupport prices andaverage farmprices forburley
andflue-cured tobacco were given below:
National Average Average Farm
Type/year Support Price Price
(-----------------------------$/lb.----------------------------)
Flue-cured
1992 1.560 1.726
1993 1.577 1.681
1994 1.583 1.698
1995 1.597 1.790G/SCM/N/16/USA
Page23
Burley
1992 1.649 1.815
1993 1.683 1.816
1994 1.714 1.841
1995 (preliminary) 1.725 1.845
Duration
Tobacco wasnotincluded inthe1996 Act. Thus, thetobacco programme operates under
continuing legislation.
Trade effects
Statistical information onproduction, consumption, imports andexports iscontained inthe
Appendix.
Other Agricultural Programmes
Title: Conservation Reserve Programme
Period covered bythenotification
Theperiod covered isthefiscal year1995.
Policy objective and/or purpose
TheConservation Reserve Programme isavoluntary programme thatoffers landowners and
operators assistance toestablish approved conservation practices onhighly erodible andother
environmentally sensitive cropland. Theprogramme encourages participants toestablish permanent
areas ofgrass, treesandother long-term cover toreduce soilerosion, improve water quality, protect
wildlife habitats, andachieve other conservation andenvironmental benefits.
Background andauthority
TheFood Security Actof1985, asamended, most recently bytheFederal Agriculture
Improvement andReform (FAIR) Actof1996, authorized theCRP, which isfinanced through the
CCCandadministered bytheFarm Service Agency andtheNatural Resource andConservation Service.
Form; towhom andhowassistance isprovided
TheCRPprovides annual rental payments andcost-share assistance onthebasis ofcontracts
negotiated for10to15yearterms. Abonus maybeprovided formaintenance ofeligible special
environmental practices, andtheCCC canpayupto50% oftheone-time costs ofestablishing
conservation practices. Tobeaneligible participant, landowners must haveowned theacreage, or
operators musthaveleased theacreage, foratleastoneyear. Cropland musthavebeencropped in
twoofthepastfiveyears, andmust meetspecific environmentally based eligibility criteria. Under
theterms oftheCRPcontract, theparticipant mustagree toestablish approved vegetative cover and
notconductanyharvestingorgrazing,exceptthattheSecretaryofAgriculturemaypermittheseactivities
orother commercial usesoftheforage onCRPlandinresponse toadrought orsimilar emergency.G/SCM/N/16/USA
Page24
Amount
Infiscal year1995, government expenditures onCRPwere$1.7billion withtotalenrolment
of36.4million acres, themaximum authorized through 2002bytheFAIR Act.Annual per-acre rental
payments arebased onsite-specific soilproductivity andlocalprevailing cashequivalent rental rates.
Duration
TheCRPisauthorized bytheFAIR Actthrough theyear2002.
Trade effects
Upto36.4million acreshavebeenenrolled intheCRPandsome cropland thatotherwise would
havebeeninproduction hasbeenidled, thereby reducing export supplies ofUScrops. Under aproposed
ruleimplementing FAIR Actprovisions, there willbeagreater emphasis onenroling cropland that
yields thehighest environmental benefits while lesserodible andenvironmentally sensitive cropland
previously enrolled intheCRP willbereturned toproduction. Although theFAIR Actauthorizes
a36.4million acrecaponCRPacreage, future enrolment isuncertain atthistimeandwilldepend
onhowmany producers offercropland forenrolment, theenvironmental sensitivity ofcropland offered
forentry, rental ratesoffered byproducers, andother factors. Therefore, itisnotpossible toprovide
meaningful statistics ofthetypereferred tointheagreed format fornotifications under Articles 25
oftheSubsidies Agreement andXVI:1 oftheGATT 1994.
Title: Expensing ofCertain Capital Outlays Related toAgriculture
Period covered bythenotification
Theperiod covered isthefiscal year1995.
Policy objective and/or purpose
Topromote soilandwater conservation.
Background andauthority
Section 175oftheInternal Revenue Code (covering soilandwater conservation expenses),
enacted aspartoftheRevenue Actof1954, andsection 180(covering fertilizer expenses), enacted
in1960 aspartofPublic Law86-779.
Form
Income taxconcession.
Towhom andhowassistance isprovided
Farmers, other thancertain farmcorporations andpartnerships, areallowed todeduct certain
expenditures forfertilizer andother materials usedtoenrich orcondition farmland, aswellasforsoil
andwater conservation measures. Expensing isallowed, even though these expenditures arefor
inventories heldbeyond theendoftheyear, orforcapital improvements thatwould otherwise be
capitalized. Thededuction forconservation expenses islimited annually to25%ofthetaxpayer ’sgross
income from farming.G/SCM/N/16/USA
Page25
Amount
Theestimated annual revenue losswas$70million.
Duration
Indefinite.
Trade effects
Itisnotpossible toestimate what, ifany,trade effects mayresult from theuseofthese
provisions.
Title: Expensing ofMultiperiod Livestock andCrop Production Costs
Period covered bythenotification
Theperiod covered isthefiscal year1995.
Policy objective and/or purpose
Toeaserecord-keeping forsmall farmbusinesses.
Background andauthority
Section 263A oftheInternal Revenue Code, enacted aspartoftheTaxReform Actof1986.
Form
Income taxconcession.
Towhom andhowassistance isprovided
Theproduction oflivestock andcrops withaproduction period oftwoyears orlessisexempted
fromtheuniform capitalization rules. Farmers producing anygoods forsalewithaproduction period
oftwoyears orlessmayelectnottocapitalize costs.
Amount
Theestimated annual revenue losswas$85million.
Duration
Indefinite.
Trade effects
Itisnotpossible toestimate what, ifany,trade effects mayresult from theuseofthese
provisions.G/SCM/N/16/USA
Page26
Title: TaxTreatment ofLoans Forgiven Solvent Farmers AsIfInsolvent
Period covered bythenotification
Theperiod covered isthefiscal year1995.
Policy objective and/or purpose
Toaddress certain consequences ofthefarmcredit crisis ofthe1980s.
Background andauthority
Internal Revenue Code sections 108and1017, enacted aspartoftheTaxReform Actof1986.
Form
Income taxconcession.
Towhom andhowassistance isprovided
Farmers aregranted special taxtreatment bybeing forgiven thetaxliability oncertain forgiven
debt. Normally, theamount ofloanforgiveness isaccounted forasagain(income) ofthedebtor,
whomusteither report thegainorreduce hisrecoverable basisintheproperty towhich theloanrelates.
Ifthedebtor elects toreduce basis andtheamount offorgiveness exceeds hisbasis ontheproperty,
theexcess forgiveness istaxable. However, inthecaseofinsolvent (bankrupt) debtors, theamount
ofloanforgiveness never results inanincome taxliability. Farmers withforgiven debtareconsidered
insolvent fortaxpurposes, andthusqualify forincome taxforgiveness. Therelief applies onlyifat
least50%ofthetaxpayer ’sgross receipts forthethree taxyears preceding thetaxyearinwhich the
discharge ofindebtedness occurs isattributable tofarming.
Amount
Theestimated annual revenue losswas$10million.
Duration
Indefinite.
Trade effects
Itisnotpossible toestimate what, ifany,trade effects mayresult from theuseofthese
provisions.
Title: Capital Gains Treatment ofCertain Agricultural Income
Period covered bythenotification
Theperiod covered isthefiscal year1995.G/SCM/N/16/USA
Page27
Policy objective and/or purpose
Toensure thatwhen farmland issold, anyimmature, unharvested crops growing ontheland
aretreated fortaxpurposes aspartofthelandandnotaspersonal property ready forsaletocustomers.
Background andauthority
Section 1231 oftheInternal Revenue Code.
Form
Income taxconcession.
Towhom andhowassistance isprovided
Certain agricultural income which would normally betaxed asordinary income, suchasreceipts
from thesaleofunharvested crops soldtogether withfarmland, canbetreated ascapital gains.
Amount
Theestimated annual revenue losswas$145 million.
Duration
Indefinite.
Trade effects
Itisnotpossible toestimate what, ifany,trade effects mayresult from theuseofthese
provisions.
Title: Farm UseExemption from Deficit Reduction Component ofGasoline Excise Tax
Period covered bythenotification
Theperiod covered isthefiscal year1995.
Policy objective and/or purpose
Togenerally exempt off-highway business uses, including farmuses, fromapplication ofthe
Federal motor fuelsexcise taxwhich wasenacted aspartofFederal budget deficit efforts andisaimed
typically attheuseofmotor fuelsfortransportation purposes.
Background andauthority
Section 6420oftheInternal Revenue Code, which wasenacted aspartoftheOmnibus Budget
Reconciliation Actof1993.
Form
Exemption from otherwise applicable excise tax.G/SCM/N/16/USA
Page28
Towhom andhowassistance isprovided
Taxpayers mayclaim acredit orrefund ofthedeficit-reduction portion (4.3cents pergallon)
ofgasoline excise taxes paidonfuelusedonafarmforfarming purposes.
Amount
Thesavings pergallon ofgasoline amount to4.3cents; there arenoavailable estimates of
annual revenue losstothegovernment.
Duration
Indefinite.
Trade effects
Itisnotpossible toestimate what, ifany,trade effects mayresult from theuseofthese
provisions.
Title: Exemption from Excise TaxforTobacco Products Supplied toTobacco Industry Employees
Period covered bythenotification
Theperiod covered isthefiscal year1995.
Policy objective and/or purpose
Topermit producers oftobacco products tosupply theirworkers withfreecigarettes andother
tobacco products.
Background andauthority
Section 5704(a) oftheInternal Revenue Code.
Form
Exemption from otherwise applicable excise tax.
Towhom andhowassistance isprovided
Tobacco product producers arepermitted tofurnish limited quantities oftobacco products for
useorconsumption byemployees without payment oftax.
Amount
Thesubsidy perunitamounts tothefollowing: (i)forcigarettes, $12.00 perthousand; (ii)for
cigars, $1.125 to$30.00 perthousand (depending onsize); (iii)forsnuff, 36cents perpound; (iv)for
chewing tobacco, 12cents perpound; and(v)forpipetobacco, 67.5cents perpound.G/SCM/N/16/USA
Page29
Duration
Indefinite.
Trade effects
Itisnotpossible toestimate what, ifany,trade effects mayresult from theuseofthese
provisions.
AUTOMOTIVES/ENGINES/MOTORS
Title: Partnership forNewGeneration ofVehicles (PNGV)
Period covered bythenotification
Theperiod covered isthefiscal year1996.
Amount
Theamount budgeted forfiscal year1996 totalled $216 million.
Title: TheAlternative FuelVehicle Development Programme
Period covered bythenotification
Theperiod covered isthefiscal year1996.
Amount
Theamount budgeted forfiscal year1996 totalled $27million.
Title: TheMotor Challenge Programme
Period covered bythenotification
Theperiod covered isthefiscal year1996.
Amount
Theamount budgeted forfiscal year1996 totalled $5.2million.
Title: TheHeatEngines Programme
Period covered bythenotification
Theperiod covered isthefiscal year1996.G/SCM/N/16/USA
Page30
Amount
Theamount budgeted forfiscal year1996 totalled $11.2 million.
Title: TheElectric Hybrid Propulsion Programme
Period covered bythenotification
Theperiod covered isthefiscal year1996.
Amount
Theamount budgeted forfiscal year1996 totalled $89.6 million.
BUILDING EQUIPMENT AND SYSTEMS
Title: TheBuilding Equipment Programme
Period covered bythenotification
Theperiod covered isthefiscal year1996.
Amount
Inthefiscal year1996, theamount budgeted forthisprogramme totalled $17.1 million.
Title: TheBuilding Systems Programme
Period covered bythenotification
Theperiod covered isthefiscal year1996.
Amount
Inthefiscal year1996, theamount budgeted forthisprogramme totalled $20.5million.
Title: TheBuilding Envelope Programme
Period covered bythenotification
Theperiod covered isthefiscal year1996.
Amount
Inthefiscal year1996, theamount budgeted forthisprogramme totalled $10.3 million.G/SCM/N/16/USA
Page31
CERAMICS &LIGHT-WEIGHT MATERIALS
Title: TheLight-Weight Transportation Materials Programme
Period covered bythenotification
Theperiod covered isthefiscal year1996.
Amount
Inthefiscal year1996, theamount budgeted forthisprogramme totalled $10.8 million.
Title: TheContinuous Fibre Ceramic Composite Programme
Period covered bythenotification
Theperiod covered isthefiscal year1996.
Amount
Inthefiscal year1996, theamount budgeted forthisprogramme totalled $8.8million.
CHEMICALS &PETROCHEMICALS
Title: TheHydrogen Research &Development Programme
Period covered bythenotification
Theperiod covered isthefiscal year1996.
Amount
Inthefiscal year1996, theamount budgeted forthisprogramme totalled $13.6 million.
ENERGY &FUELS
(ENERGY DEVELOPMENT, STORAGE AND TRANSPORTATION
&OTHER RELATED SECTORS)
Title: TheMembrane Programme
Period covered bythenotification
Theperiod covered isthefiscal year1996.G/SCM/N/16/USA
Page32
Amount
Inthefiscal year1996, theamount budgeted forthisprogramme totalled $3.2million.
Title: TheGeothermal Energy Programme
Period covered bythenotification
Theperiod covered isthefiscal year1996.
Amount
Inthefiscal year1996, theamount budgeted forthisprogramme totalled $27.8 million.
Title: TheEnergy Storage Systems Programme
Period covered bythenotification
Theperiod covered isthefiscal year1996.
Amount
Inthefiscal year1996, theamount budgeted forthisprogramme totalled $1.9million.
Title: TheProcess Heating andCooling Programme
Period covered bythenotification
Theperiod covered isthefiscal year1996.
Amount
Inthefiscal year1996, theamount budgeted forthisprogramme totalled $1.8million.
Title: TheBiomass Power Programme
Period covered bythenotification
Theperiod covered isthefiscal year1996.
Amount
Inthefiscal year1996, theamount budgeted forthisprogramme totalled $20.6 million.G/SCM/N/16/USA
Page33
Title: TheAdvanced Turbine System Programme
Period covered bythenotification
Theperiod covered isthefiscal year1996.
Amount
Inthefiscal year1996, theamount budgeted forthisprogramme totalled $22.1 million.
Title: TheIsotope Production andDistribution Programme
Period covered bythenotification
Theperiod covered isthefiscal year1996.
Amount
Inthefiscal year1996, theamount budgeted forthisprogramme totalled $25.3 million (i.e.
toprovide excess capacity andtobring onlinenewisotopes.)
Title: TheUranium Programmes Technology Partnerships Programme -
Non-Uranium Enrichment Applications
Period covered bythenotification
Theperiod covered isthefiscal year1996.
Policy objective and/or purpose
TheobjectiveofthisprogrammeisgenerallytofacilitatethetransferofDOE-developeduranium
enrichment technology toprivate industry fornon-uranium enrichment applications. (DOE ’sinorganic
membrane, usedintheenrichment ofuranium, isatechnology adaptable toawiderange ofcommercial
applicationswhereliquidandgaseouscompoundsneedseparationandfiltration.)Amongthetechnologies
transferred arethose involving removal ofcontaminants from industrial waste andprocess streams.
Other applications include: motors, advanced machinery, instrumentation androadsafety.
Amount
Theamount budgeted forthisprogramme infiscal year1996 totalled $2million.
Title: TheCoalResearch andDevelopment Programme
Period covered bythenotification
Theperiod covered isthefiscal year1996.G/SCM/N/16/USA
Page34
Policy objective and/or purpose
Thegeneral policy objective ofthisprogramme istoaccelerate thecommercialization ofclean
coaltechnologies thatwillenable theuseofcoalasasecure, low-cost domestic energy source while
meeting environmental quality standards. Thevarious kinds oftechnologies being researched under
thisprogramme involve coalliquification, heatengines, emission control technology, coalpreparation,
fuelcells, integrated gasification combined cycle, pressurized fluidized bedcombustion, indirect fined
cycle andadvanced pulverized coalpower plants.
Amount
Theamount budgeted infiscal year1996 forthisprogramme came to$137 million.
Title: TheFuelCellforStationary Applications Programme
Period covered bythenotification
Theperiod covered isthefiscal year1996.
Amount
Theamount budgeted forthisprogramme infiscal year1996 was$52million.
Title: TheOilProgramme
Period covered bythenotification
Theperiod covered isthefiscal year1996.
Amount
Theamount budgeted forthisprogramme infiscal year1996 approximated $55million .
Title: TheNatural GasProgramme
Period covered bythenotification
Theperiod covered isthefiscal year1996.
Amount
Theamount budgeted forthisprogramme infiscal year1996 approximated $25million.
Title: TheClean CoalTechnology Demonstration Programme
Period covered bythenotification
Theperiod covered isthefiscal year1996.G/SCM/N/16/USA
Page35
Towhom andhowassistance isprovided
Assistance tocoalmining/processing/refining firmsandrelated equipment/technology suppliers
isdetermined onthebasis ofcompetitively assessed proposals. Ofthe41projects currently being
assisted, 16involve foreign firms aslicensors ofthetechnology being used.
Amount
Theamount budgeted forthisprogramme infiscal year1996 totalled $150 million.
Duration
Thefinalincrement offunding isscheduled tobecome available infiscal year1998.
Title: Expensing ofExploration andDevelopment (E&D) Costs forOil,GasandOther Fuels
Period covered bythenotification
Theperiod covered isthefiscal year1995.
Policy objective and/or purpose
Toencourage thedevelopment ofdomestic oil,gasandcoalproduction.
Background andauthority
Inthecaseofsuccessful investments indomestic oilandgaswells, intangible drilling costs,
suchaswages, thecosts ofusing machinery forgrading anddrilling andthecosts ofunsalvageable
materials usedinconstructing wells maybeexpensed fortaxpurposes rather thanamortized overthe
productive lifeoftheproperty. Integrated oilcompanies maycurrently deduct only70%ofsuchcosts
andamortize theremaining 30% overfiveyears. Thesame ruleapplies totheexploration and
development costsofsurface stripping andtheconstruction ofshafts andtunnels forotherfuelminerals.
Thisexpensing procedure isauthorized under sections 263(c), 291,616-617, 57(2) and1254 ofthe
Internal Revenue Code of1986. Theexpensing ofintangible drilling costswasoriginally established
ina1916regulation promulgated bytheDepartment oftheTreasury withtherationale thatsuchcosts
wereordinary operating expenses. Limitations onexpensing forintegrated oilcompanies wereapplied
in1976 andlateryears.
Form
Income taxconcession.
Towhom andhowassistance isprovided
Fuelmineral producers arepermitted accelerated deductions from taxable income.
Amount
Theestimated annual revenue lossfrom thisconcession is$200 million.G/SCM/N/16/USA
Page36
Duration
Indefinite.
Trade effects
Itisnotpossible toestimate what, ifany,tradeeffects mayresult fromtheuseofthisprovision.
Title: Excess ofPercentage Over CostDepletion forOil,GasandOther Fuels
Period covered bythenotification
Theperiod covered isthefiscal year1995.
Policy objective and/or purpose
Percentage depletion foroilandgashasbeenpermitted since1918orbefore. TheUSCongress
viewed oilandgasasastrategic mineral andwanted tostimulate thesupply ofoilandgas,compensate
producers forthehighrisksofprospecting andrelieve thetaxburdens ofsmall-scale producers.
Background andauthority
Independent(i.e.non-integrated)fuelmineralproducersandroyaltyownersaregenerallyallowed
totakepercentage depletion deductions rather thancostdepletion onlimited quantities ofoutput for
taxpurposes. Under costdepletion, outlays arededucted overtheproductive lifeoftheproperty based
onthefraction oftheresource extracted. Under percentage depletion, taxpayers deduct apercentage
ofgross income frommineral production atratesof15%foroil,gasandoilshale, and10%forcoal.
Thededuction islimited to50%ofnetincome from theproperty, except foroilandgaswhere the
deduction canbe100% ofnetproperty income. Additionally, thepercentage depletion deduction for
alloilandgasproperties maynotexceed 65%ofthetaxpayer ’soverall income andislimited to365,000
barrels peryearpertaxpayer. Production fromgeothermal deposits iseligible forpercentage depletion
upto65% ofnetincome, butwithnolimit onoutput andnolimitation withrespect toqualified
producers. Unlike depreciation orcostdepletion, percentage depletion deductions canexceed thecost
oftheinvestment.
Form
Income taxconcession.
Towhom andhowassistance isprovided
Independent fuelmineral producers androyalty owners arepermitted deductions fromtaxable
income forpercentage depletion.
Amount
Adeduction fromincome isallowed forthegreater ofcostorpercentage depletion. Percentage
depletion is15%ofrevenue forindependent (smaller) oilandgasproducers and10%forcoalproducers.
Therevenue lossisestimated tobe$1.1billion annually.G/SCM/N/16/USA
Page37
Duration
Indefinite.
Trade effects
Itisnotpossible toestimate what, ifany,tradeeffects mayresult fromtheuseofthisprovision.
Title: Alternative FuelProduction Credit
Period covered bythenotification
Theperiod covered isthefiscal year1995.
Policy objective and/or purpose
Thepurpose ofthecredits istoprovide incentives fortheprivate sector toincrease the
development ofalternative domestic energy resources because ofconcern overoilimport dependence
andnational security.
Background andauthority
Ataxcredit of$3.00 perbarrel (in1979dollars) ofoil-equivalent production isprovided for
several forms ofalternative fuels. Thecredit begins tophase outiftheannual average unregulated
wellhead priceperbarrel ofdomestic crude oilexceeds $23.50 in1979dollars. Thiscredit isauthorized
under section 29oftheInternal Revenue Code, andwasinstituted aspartoftheCrude OilWindfall
Profit TaxActof1980.
Form
Income taxconcession.
Towhom andhowassistance isprovided
Producers androyalty owners ofqualifying production arepermitted taxcredits against Federal
income tax.
Amount
Therevenue lossisestimated tobe$700 million annually.
Duration
Formostqualifying fuels, theproduction taxcredit isavailable through 2002, provided that
thewells were drilled before 1993. Forgasproduced from biomass, andsynthetic fuels produced
fromcoalorlignite, thecredit isavailable through 2007, provided thatthefacility wasplaced inservice
before 1997.
Trade effects
Itisnotpossible toestimate what, ifany,tradeeffects mayresult fromtheuseofthisprovision.G/SCM/N/16/USA
Page38
Title: Capital Gains Treatment ofRoyalties onCoal
Period covered bythenotification
Theperiod covered isthefiscal year1995.
Policy objective and/or purpose
Toencourage thedevelopment ofthedomestic coalindustry.
Background andauthority
Sales ofcertain coalunder royalty contracts canbetreated ascapital gains fortaxpurposes.
While thetopstatutory taxrateonordinary income was39.6%, thetaxrateoncapital gains waslimited
to28%. Capital gains treatment ofcertain coalroyalties areauthorized under sections 1231, 631and
1441oftheInternal Revenue Code. When thecapital gains rateisbelow theregular taxrate,theowner
isnotentitled topercentage depletion provided insection 613oftheCode.
Form
Income taxconcession.
Towhom andhowassistance isprovided
Theprogramme provides areduction inincome taxes forsome non-corporate taxpayers by
taxing receipts atcapital gains ratesthatarelimited to28%, rather thanregular income taxratesthat
reach amaximum of39.6%.
Amount
Therevenue lossisestimated tobelessthan$50million annually.
Duration
Indefinite.
Trade effects
Itisnotpossible toestimate what, ifany,tradeeffects mayresult fromtheuseofthisprovision.
Title: Enhanced OilRecovery (EOR) Credit
Period covered bythenotification
Theperiod covered isthefiscal year1995.G/SCM/N/16/USA
Page39
Policy objective and/or purpose
TheEOR credit wasenacted aspartoftheOmnibus Budget andReconciliation Actof1990
toincrease thedomestic supply ofoil,toreduce thedemand foranddependency onimported oil,and
toenhance theenergy security oftheUnited States.
Background andauthority
AnEOR taxcredit isprovided equal to15%ofthetaxpayer ’scosts fortertiary oilrecovery
onprojects intheUnited States. Qualifying costsinclude tertiary injectant expenses, intangible drilling
anddevelopment costsonaqualified enhanced oilrecovery project, andamounts incurred fortangible
depreciable property. Thus, thiscredit encourages theuseoftertiary methods insituations where it
would notbeprofitable otherwise.
Form
Income taxconcession.
Towhom andhowassistance isprovided
Petroleumproducersandroyaltyholdersapplyingapprovedtertiarypetroleumrecoverymethods
receive acredit against Federal income tax.
Amount
Therevenue lossisestimated tobe$100 million annually.
Duration
Indefinite.
Trade effects
Itisnotpossible toestimate what, ifany,tradeeffects mayresult fromtheuseofthisprovision.
Title: NewEnergy Technology Credit
Period covered bythenotification
Theperiod covered isthefiscal year1995.
Policy objective and/or purpose
Thepurpose istoreduce USconsumption ofoilandnatural gasbyencouraging the
commercialization ofrenewable energy technologies, toreduce dependence onimported oilandto
enhance national security.
Background andauthority
Ataxcredit of10%ofthebasisofeachenergy property placed inservice during anytaxable
yearisavailable forinvestment insolarandgeothermal energy facilities. Thetaxcredit isauthorizedG/SCM/N/16/USA
Page40
bysections 46and48oftheInternal Revenue Code. Business taxcredits were partoftheEnergy
TaxActof1978 andwere altered insubsequent legislation. TheEnergy Policy Actof1992 made
thecredit permanent.
Form
Income taxconcession.
Towhom andhowassistance isprovided
Thecredit reduces income taxes fornon-utility taxpayers thatinvest inqualifying equipment
usedtoproduce renewable forms ofenergy.
Amount
Therevenue lossisestimated tobe$100 million annually.
Duration
Indefinite.
Trade effects
Itisnotpossible toestimate what, ifany,tradeeffects mayresult fromtheuseofthisprovision.
Title: Alcohol FuelCredit andPartial Exemption from Federal Excise TaxonGasoline
Period covered bythenotification
Theperiod covered isthefiscal year1995.
Policy objective and/or purpose
Thecredits andexcise taxexemptions areintended toencourage thesubstitution ofalcohol
fuelsproduced from renewable sources forgasoline anddiesel fuel.
Background andauthority
Theprovisions exempted “gasohol ”(amotor fuelcomposed ofatleast10%alcohol), including
methanol andethanol, which arenotproduced from petroleum, natural gasorcoal(including peat),
from 5.4cents (6.0cents formethanol) ofthe18.4cents pergallon Federal excise taxongasoline.
Smaller exemptions areallowed formotor fuelwithlower alcohol content. There isacorresponding
income taxcredit foralcohol usedasafuelinapplications where theexcise taxisnotassessed. This
credit, amounting to54cents pergallon foralcohol (60cents formethanol) usedasamotor fuel,is
intended toencourage substitution ofalcohol forpetroleum-based fuel. Inaddition, small producers
ofethanol areeligible fora10centpergallon credit. Thecredit isincluded inataxpayer ’sincome.
Thealcohol fuelcredits areauthorized bysections 38and40oftheInternal Revenue Code,
while theexcise taxexemptions areauthorized bysections 4041, 4081 and4091 oftheCode. The
alcohol fuelsmixture credit andthepurealcohol fuels credit were enacted aspartoftheCrude Oil
Windfall Profit TaxActof1980, attherateof40cents pergallon foralcohol thatwas190proof orG/SCM/N/16/USA
Page41
more, and30cents pergallon foralcohol between 150and190proof. Thecredits were increased
in1982 and1984. TheOmnibus Reconciliation Actof1990 reduced thecredits to54cents and40
cents forethanol andethanol blends andintroduced thenew10centpergallon small ethanol producer
credit.
Form
Income taxconcession andreduced excise taxratesonfuelscontaining alcohol.
Towhom andhowassistance isprovided
Thecredits reduce theFederal income taxofqualifying producers andblenders. Theseller
ofalcohol fuelscontaining 85%alcohol derived from natural gaspaystheapplicable, lower motor
fuelexcise taxrate. Theblender ofethanol-based fuels(andmethanol notproduced frompetroleum,
natural gas,coalorpeat)whomixes ethanol oranother qualified alcohol withgasoline ordiesel fuel
toproduce gasohol or“diesohol ”maypurchase gasoline ordiesel fuelfromaseller ataterminal rack
atexcise tax-reduced ratesorreceive arefund iftheblender latermixes fullytaxed fuelswithalcohol;
these mixtures must bebetween 5.7and10%alcohol toenjoy thefavourable excise taxtreatment.
Amount
Theamount ofthecredit ranges from $0.40 -$0.54 pergallon forblenders and$0.10 per
gallon forsmall producers. Theexcise taxexemption amounts to$0.07 pergallon forafuelcontaining
85%alcohol derived fromnatural gas;$0.54 pergallon fortheethanol contained ingasohol; and$0.60
pergallon forthequalified methanol contained ingasohol. Theestimated annual revenue lossamounts
to$10million forthealcohol fuelcredit andwas$670 million infiscal year1996 withrespect tothe
excise taxexemption.
Duration
Thetaxcredits expire attheendoftheyear2000, while theexcise taxexemption expires as
of30September 1999.
Trade effects
Itisnotpossible toestimate what, ifany,tradeeffects mayresult fromtheuseofthisprovision.
Title: Credits forElectricity Production from Wind andBiomass
Period covered bythenotification
Theperiod covered isthefiscal year1995.
Policy objective and/or purpose
Thepurpose ofthecredits istoencourage thedevelopment andutilization ofelectric generating
technologies thatusespecified renewable energy resources, rather thanconventional fossil fuels.G/SCM/N/16/USA
Page42
Background andauthority
Taxpayers areallowed a1.5centcredit perkilowatt hourforelectricity produced fromqualified
wind energy or“closed-loop ”biomass. Theelectricity must beproduced from afacility owned by
ataxpayer anditmustbesoldtoanunrelated thirdparty. Thecredit isallowed forthefirsttenyears
ofproduction from anewfacility. Thecredit applies toelectricity produced byfacilities placed in
service after1992 andbefore July1,1999 forbiomass, andafter1993 andbefore June1,1999 for
wind. Theprovision wasadopted aspartoftheEnergy Policy Actof1992andauthorized insection 45
oftheInternal Revenue Code.
Form
Income taxconcession.
Towhom andhowassistance isprovided
Theproduction credits reduce income taxes fortaxpayers producing electricity from certain
renewable sources.
Amount
Theamount ofthecredit amounts to$0.015 perkilowatt hour, produced fromqualified wind
orbiomass. Theannual revenue losswasestimated tobelessthan$100 million.
Duration
Thetaxcredits phase outduring 1998 production.
Trade effects
Itisnotpossible toestimate what, ifany,tradeeffects mayresult fromtheuseofthisprovision.
Title: Exemption fromtheDeficit Reduction Component ofMotor FuelExcise TaxforHelicopters
Providing Transportation Services fortheDevelopment orRemoval ofHard Minerals, Oil
orGas
Period covered bythenotification
Theperiod covered isthefiscal year1995.
Policy objective and/or purpose
Toconform therules forthedeficit reduction taxonmotor fuelstothose established under
theAirport andAirway Trust Fund taxonaviation fuel.
Background andauthority
Theexemption wasenacted aspartofPublic Laws 101-239 and103-66, andimplemented in
section 4261(e)(2) oftheInternal Revenue Code.G/SCM/N/16/USA
Page43
Form
Anexemption from anotherwise applicable deficit reduction excise taxonmotor fuels.
Towhom andhowassistance isprovided
Otherwise taxable aviation fuelmaybesoldtax-free foruseinsuchhelicopters solongasthey
donotusecertain airports andarenotsubject toairtraffic control during theperiod ofexempt use.
Amount
Thesubsidy perunitwas6.8cents pergallon, falling to4.3cents pergallon beginning
1October 1995.
Duration
Indefinite after1December 1990.
Trade effects
Itisnotpossible toestimate what, ifany,tradeeffects mayresult fromtheuseofthisprovision.
FISHERIES
Title: Commercial Fishing Exemption from Deficit Reduction RateComponent ofExcise Taxon
Motor Fuels
Period covered bythenotification
Theperiod covered isthefiscal year1995.
Policy objective and/or purpose
Totreatfisherman comparably tofarmers intheprovision ofapartial exemption from the
motor fuelexcise taxforfuelconsumed inthecourse ofbusiness.
Background andauthority
Theauthority fortheexemption wasenacted inPublic Laws 101-239 and103-66, which are
implemented insections 4042(d)(1)(B) and6421(e)(2)(B)(ii) oftheInternal Revenue Code.
Form
Exemption from otherwise applicable deficit reduction excise taxrateonmotor fuels.
Towhom andhowassistance isprovided
Commercial fishermen canpurchase untaxed diesel fuelorcanreceive arefund foranytaxes
paidongasoline usedincommercial fishing boats.G/SCM/N/16/USA
Page44
Amount
Thesubsidy perunitamounted to6.8cents pergallon through 30September 1995, atwhich
point itdeclined to4.3cents pergallon.
Duration
Indefinite after1December 1990.
Trade effects
Itisnotpossible toestimate what, ifany,trade effects mayresult from thisprovision.
LUMBER &TIMBER
Title: Capital Gains Treatment ofCertain Timber Income
Period covered bythenotification
Theperiod covered isthefiscal year1995.
Policy objective and/or purpose
Toassist thegrowth ofdomestic timber.
Background andauthority
Certain timber-raising income canbetreated ascapital gains. While thetopstatutory rateon
ordinary income was39.6%, theratesoncapital gains were limited to28%. Thecapital gains tax
treatment oftimber heldmore thanayearisauthorized under sections 1231 and631oftheInternal
Revenue Code.
Form
Income taxconcession.
Towhom andhowassistance isprovided
Some non-corporate owners oftimber property canreceive areduction inincome taxrates
from standard ratesthatreached 39.6% tocapital gains taxratesthatwere limited to28%.
Amount
Theannual revenue losswasestimated tobe$15million.
Duration
Indefinite.G/SCM/N/16/USA
Page45
Trade effects
Itisnotpossible toestimate what, ifany,tradeeffects mayresult fromtheuseofthisprovision.
Title: Expensing ofMultiperiod Timber Growing Costs
Period covered bythenotification
Theperiod covered isthefiscal year1995.
Policy objective and/or purpose
Theoriginal ability toexpense indirect costs oftimber growing apparently stemmed from a
general viewthatthese costsweremaintenance costs, andthusdeductible asordinary costsofatrade
orbusiness. Following aseries ofrevenue rulings andcourtcasesovertheyears distinguishing between
whatexpenses might bedeductible andwhatexpenses might properly becapitalized, theTaxReform
Actof1986included uniform capitalization rulesrequiring indirect expenses tobecapitalized inmost
cases. However, where theapplication wasdeemed tobeunduly burdensome, suchasfortimber,
exceptions were provided.
Background andauthority
Generally, costsmustbecapitalized when goods areproduced forinventory usedinone’sown
trade orbusiness, orunder contract toathirdparty. Timber production, however, wasspecifically
exempted fromthese multiperiod costrulesandpermitted tosubject suchcosts tocurrent expensing.
These provisions were authorized bysections 162and263A(c)(5) oftheInternal Revenue Code.
Form
Income taxconcession.
Towhom andhowassistance isprovided
Timber owners mayexpense, rather thancapitalize, certain deductions fromtaxable income.
Amount
Theannual revenue losswasestimated tobe$400 million.
Duration
Indefinite.
Trade effects
Itisnotpossible toestimate what, ifany,tradeeffects mayresult fromtheuseofthisprovision.G/SCM/N/16/USA
Page46
Title: Investment Credit andSeven-Year Amortization forReforestation Expenses
Period covered bythenotification
Theperiod covered isthefiscal year1995.
Policy objective and/or purpose
Topromote reforestation onprivate timberlands.
Background andauthority
Aspecial 10%investment taxcredit isallowed forupto$10,000 invested annually inclearing
landandplanting treesfortheultimate production oftimber. Thesameamount offorestation investment
mayalsobeamortized overaseven-year period. Without thispreference, theamount would have
tobecapitalized andcould berecovered (deducted) onlywhen thetreeswere soldorharvested 20
ormore years later. Moreover, theamount offorestation investment thatisamortizable isnotreduced
byanyoftheinvestment credit thatisallowed. These provisions areauthorized bysections 48(b)
and194oftheInternal Revenue Code. Theywereoriginally enacted intheRecreational Boating Safety
andFacilities Improvement Actof1980.
Form
Income taxconcession.
Towhom andhowassistance isprovided
Applies totaxpayers ontheamortizable basisofqualified timber property acquired during the
yearandreforestation costs incurred during theyearasallowances against Federal income taxes.
Amount
Theannual revenue losswasestimated tobe$45million.
Duration
Indefinite.
Trade effects
Itisnotpossible toestimate what, ifany,tradeeffects mayresult fromtheuseofthisprovision.
Title: Exemption fromtheDeficit Reduction Component ofMotor FuelExcise TaxforHelicopters
inLogging Operations andOther Timber-Related Activities
Period covered bythenotification
Theperiod covered isthefiscal year1995.G/SCM/N/16/USA
Page47
Policy objective and/or purpose
Toconform therules forthedeficit reduction taxonmotor fuelstothose established under
theAirport andAirway Trust Fund taxonaviation fuel.
Background andauthority
Theexemption wasenacted aspartofPublic Laws 101-239 and103-66, andimplemented in
section 4261(e)(2) oftheInternal Revenue Code.
Form
Anexemption from anotherwise applicable deficit reduction excise taxonmotor fuels.
Towhom andhowassistance isprovided
Otherwise taxable aviation fuelmaybesoldtax-free foruseinsuchhelicopters solongasthey
donotusecertain airports andarenotsubject toairtraffic control during theperiod ofexempt use.
Amount
Thesubsidy perunitwas6.8cents pergallon, falling to4.3cents pergallon beginning
1October 1995.
Duration
Indefinite after1December 1990.
Trade effects
Itisnotpossible toestimate what, ifany,tradeeffects mayresult fromtheuseofthisprovision.
METALS, MINERALS AND EXTRACTION (NON-FUEL)
Title: Expensing forExploration andDevelopment Costs forNon-Fuel Minerals
Period covered bythenotification
Theperiod covered isthefiscal year1995.
Policy objective and/or purpose
Toencourage thedevelopment ofthedomestic non-fuel mineral industry.
Background andauthority
Theprovisions permit certain capital outlays associated withexploration anddevelopment of
non-fuel minerals tobeexpensed rather thandepreciated overthelifeoftheasset. They areauthorized
bysections 263(1)A, 291,616-617, 56and1254 oftheInternal Revenue Code. Theexpensing of
minedevelopment expenditures wasenacted in1951toreduce ambiguity inthethen-existing treatmentG/SCM/N/16/USA
Page48
of,andtoencourage, mining. Theprovision formineexploration wasadded in1966. TheTaxEquity
andFiscal Responsibility Actof1982limited expensing forcorporations to85%; theremaining 15%
must bedepreciated.
Form
Income taxconcession.
Towhom andhowassistance isprovided
Non-fuel mineral producers androyalty owners arepermitted, forFederal income taxpurposes,
toexpense certain capital outlays associated withthedevelopment ofnon-fuel minerals rather than
toamortize these outlays overthelifeofthemine.
Amount
Theannual revenue losswasestimated tobelessthan$50million.
Duration
Indefinite.
Trade effects
Itisnotpossible toestimate what, ifany,tradeeffects mayresult fromtheuseofthisprovision.
Title: Excess ofPercentage Over CostDepletion forNon-Fuel Minerals
Period covered bythenotification
Theperiod covered isthefiscal year1995.
Policy objective and/or purpose
Toencourage thedevelopment ofthedomestic non-fuel mineral industry.
Background andauthority
These provisions permit mostnon-fuel mineral extractors tomake useofpercentage depletion
rather thancostdepletion, withpercentage depletion ratesranging from 22%forsulphur to5%for
sandandgravel. Percentage depletion isauthorized bysections 611-613 and291oftheInternal Revenue
Code. Percentage depletion similar toitscurrent formwasprovided in1932 at23%forsulphur and
15%formetal mines. From 1932to1950, percentage depletion wasextended tomostother minerals.
TheRevenue Actof1951 granted ittomore minerals. In1954, stillmore minerals weregranted the
allowance, andforeign mines weregranted alower rate.In1969, thetopdepletion rateswerereduced.
TheTaxEquity andFiscal Responsibility Actof1982reduced theallowance forcorporations thatmine
ironoreby15%. TheTaxReform Actof1986 raised thecutback incorporate allowances ofiron
orefrom 15to20%.G/SCM/N/16/USA
Page49
Form
Income taxconcession.
Towhom andhowassistance isprovided
Non-fuel mineral extractors arepermitted deductions from taxable income fordepletable
expenditures equal tothelarger ofpercentage orcostdepletion.
Amount
Theannual revenue losswasestimated tobe$200 million.
Duration
Indefinite.
Trade effects
Itisnotpossible toestimate what, ifany,tradeeffects mayresult fromtheuseofthisprovision.
Title: Capital Gains Treatment ofIronOre
Period covered bythenotification
Theperiod covered isthefiscal year1995.
Policy objective and/or purpose
Toencourage themining ofdomestic ironore.
Background andauthority
Theprovisions permit ironore(andcertain timber) soldunder aroyalty contract tobetreated
asacapital gainforFederal income taxpurposes. Thecapital gains ratewaslimited to28%while
theregular income taxratehadamaximum of39.6%. Thereduced capital gains taxrateisauthorized
under sections 1231and631oftheInternal Revenue Code. Aswithcoal,percentage depletion isnot
allowed when thecapital gains taxrateisbelow theregular taxrate.
Form
Income taxconcession.
Towhom andhowassistance isprovided
Some non-corporate owners ofironoremining properties receive income taxconcessions in
theform ofreduced taxratesfrom ordinary taxratestocapital gains taxratesthatwere limited to
amaximum of28%.G/SCM/N/16/USA
Page50
Amount
Theannual revenue losswasestimated tobelessthan$50million.
Duration
Indefinite.
Trade effects
Itisnotpossible toestimate what, ifany,tradeeffects mayresult fromtheuseofthisprovision.
Title: Special Rules forMining Reclamation Reserves
Period covered bythenotification
Theperiod covered isthefiscal year1995.
Policy objective and/or purpose
Inallowing thecurrent deduction ofmine reclamation andsimilar expenses, theprovisions
encourage reclamation andprevent adverse economic effects onmining firms thatmight result from
application ofgeneral taxrules regarding deduction offuture costs.
Background andauthority
Theprovisions permit taxpayers toestablish reserves tocover certain costsofminereclamation
andofclosing solidwaste disposal properties. Netincreases inreserves maybetaken asadeduction
against taxable income. Theprovisions areauthorized bysection 468oftheInternal Revenue Code
andwere enacted in1984.
Form
Income taxconcession.
Towhom andhowassistance isprovided
Taxpayersengagedinminingandsolidwastedisposalpropertiesreceivedeductionsfromtaxable
income based ontheaccrual ofliabilities rather thantherealization ofcosts.
Amount
Theannual revenue losswasestimated tobelessthan$50million.
Duration
Indefinite.
Trade effects
Itisnotpossible toestimate what, ifany,tradeeffects mayresult fromtheuseofthisprovision.G/SCM/N/16/USA
Page51
Title: Materials andMetals Processing Metals Initiative
Period covered bythenotification
Theperiod covered isthefiscal year1996.
Amount
Theamount budgeted forfiscal year1996 totalled $5.4million.
TEXTILES &CLOTHING
Title: TheAMTEX Programme
Period covered bythenotification
Theperiod covered isthefiscal year1996.
Amount
Theamount budgeted forfiscal year1996 totalled $10million.
Title: TheTextile/Clothing Technology Corporation Programme (TC2)
Period covered bythenotification
Theperiod covered isthefiscal year1996.
Amount
Theamount budgeted forfiscal year1996 totalled $3million.
TIMEPIECES
Title: TheInsular Possessions Watch Programme
Period covered bythenotification
Theperiod covered iscalendar year1995.
Policy objective and/or purpose
Theinsular watch programme isdesigned toencourage watch production intheUSinsular
possessions andthereby stimulate development oftheinsular economies.G/SCM/N/16/USA
Page52
Background andauthority
TheUSDepartment ofCommerce andtheUSDepartment oftheInterior jointly administer
theInsularPossessionsWatchprogrammeunderPublicLaw97-446,asamendedbyPublicLaw103-465.
Form
Dutyexemptions anddutyrefunds intheformofnegotiable production incentive certificates.
Towhom andhowassistance isprovided
TheassistanceisprovidedtowatchproducerslocatedintheUSVirginIslands,Guam,American
Samoa andtheNorthern Mariana Islands. Atpresent, thereareproducers onlyintheUSVirgin Islands.
Theprogramme establishes anannual allocation forwatches andwatch movements assembled
inthese areas toentertheUnited States duty-free. Theprogramme alsoprovides production incentive
certificates which authorize adutyrefund fromCustoms on(USHTSnon-column 2)watch movements,
watches andparts therefor which haveentered theUnited States duty-paid. Thesubsidy amount is
based onthedutyforegone onthefinished watches aswellasthevalue oftheproduction certificates.
Since thewatches andthewatch movements produced under theprogramme already receive duty-free
treatment, thecertificate isnegotiable andmaybetransferred toanother company having arecord
ofduty-paid watch imports. Thevalue ofthecertificate isbased ontheproducer ’saverage creditable
wages perunitshipped freeofdutyintotheUnited States multiplied byafactor of90%forthefirst
300,000 unitsandbydeclining percentages inadditional increments uptoamaximum of750,000 units.
Amount
Production Incentive Certificate (“PIC”)
Year Issued (1) Total Amount (2)
1996 $3,422,685
(1) Theamount ofeachproducer ’sPICisbased onthe1995 creditable wages andthe
number ofwatch andwatch movement shipments freeofdutyintotheUnited States.
(2) 1%isdeducted from thetotalamount ofthedutyrefund shown above tocover the
administrative costs ofprocessing byCustoms.
Duty Exemption
1995 approximately$1.5millionto$2.0million.
(3)
(3) Thenumber ofduty-free shipments ofwatches andwatch movements intothe
United States in1995amounted to1,760,923 units. Theaverage unitinvoice amount
billed tocustomers wasusedtoapproximate theaverage dutyrateperunit. Thiswas
usedtocalculate theapproximate dutyexemption of$1.5to2.0million.G/SCM/N/16/USA
Page53
Duration
Under differing programmes, general dutysuspensions forinsular products appear todateback
toUSacquisition oftheterritories -1917, inthecaseoftheUSVirgin Islands. Thecriteria were
made uniform in1954andalimitwasplaced onwatches in1967. Theproduction incentive certificates
wereauthorized in1983fora12-year period andreauthorized foranadditional 12-year period in1995.
Trade Effects
Producers benefitting from thesubsidies account forabout 1%ofUSannual domestic
consumption anddonotshiptonon-US customers.
OTHER
Title: Exemption fromOff-Highway UsefromtheDeficit Reduction RateComponent oftheMotor
FuelExcise Tax
Period covered bythenotification
Theperiod covered isthefiscal year1995.
Policy objective and/or purpose
Toconform treatment ofoff-highway fueluseunder thedeficit reduction taxtothetreatment
ofoff-highway fueluseunder theHighway Trust Fund taxonmotor fuels.
Background andauthority
Thisexemption wasenacted aspartofPublic Laws 101-239 and103-66, andwasimplemented
insection 6421(e)(2) oftheInternal Revenue Code.
Form
Anexemption from theotherwise applicable deficit reduction excise taxrateonmotor fuels.
Towhom andhowassistance isprovided
Theexemption isgranted tooff-highway business users ofmotor fuel,whocanberefunded
foranytaxes paidonsuchfuel. (Note: Onlysome ofthese off-highway usesinvolved theproduction
ofaproduct.)
Amount
Thesubsidy perunitamounted to6.8cents pergallon, decreasing to4.3cents pergallon on
1October 1995.
Duration
Indefinite after1December 1990.G/SCM/N/16/USA
Page54
Trade effects
Itisnotpossible toestimate whattrade effects, ifany,mayresult from thisprovision.
Federal-Level Programmes
(Regional Assistance)
Title: Empowerment Zones andEnterprise Communities
Period covered bythenotification
Theperiod covered isthefiscal year1995.
Policy objective and/or purpose
Thepurpose ofthisassistance istoencourage revitalization ofdistressed areas. Nominated
areasmustmeetcertainpopulation,distress,sizeandpovertyratecriteriainordertobeeligible,ensuring
thatassistance istargeted toareasexperiencing higheconomic distress. Theuseoftaxincentives reflects
adesire toencourage theprivate sector, guided bymarket forces andsupported inanon-bureaucratic
fashion through government assistance, tobeadriving force behind theincreased economic activity.
Some restrictions onthetypes ofbusiness activities andinvestments wereimposed inorder tolimit
potential abuses.
Background andauthority
TheOmnibus Budget Reconciliation Actof1993(OBRA) authorized aFederal demonstration
project inwhich nineempowerment zones and95enterprise communities would bedesignated ina
competitive application process. Ofthenineempowerment zones, sixwere tobelocated inurban
areas andthree inrural areas. State andlocalgovernments would jointly nominate distressed areas
andpropose strategic plansaimed ateconomic andsocial revitalization. BytheJune30,1994application
deadline, over500communities hadsubmitted applications. OnDecember 21,1994, theSecretaries
ofHousingandUrbanDevelopmentandofAgriculturedesignatedtheempowermentzonesandenterprise
communities authorized byCongress inOBRA.
Businesses located inempowerment zones areeligible forthefollowing Federal taxincentives:
(i)anemployment andtraining credit for20%ofthefirst$15,000 ofwages paidtoemployees who
liveandwork intheempowerment zone; (ii)anadditional $20,000 peryearofexpensing, instead of
depreciation, ofcapital investments bysmall businesses; and(iii)anewcategory oftax-exempt private
activity bonds. Businesses located inenterprise communities areeligible forthenewcategory of
tax-exempt bonds.
Form
Income taxconcession.
Towhom andhowassistance isprovided
Theemploymentandtrainingcreditandanadditional$20,000peryearofexpensingareprovided
when therecipient business completes itstaxreturn. Noregistration isneeded toqualify forthetax
incentives. Thenewcategory oftax-exempt private activity bonds requires alocalinitiation andstateG/SCM/N/16/USA
Page55
offering ofthebonds. Thesubsidy isreflected inthelower interest ratecharged onthebonds, because
interest income onthem isexcluded from Federal taxable income.
The20%employment andtraining credit isprovided tozonebusinesses foreach$15,000 of
wages paidtoazoneresident. Substantially alloftheemployee ’sservices must beprovided inthe
zonetobeeligible. The$20,000 ofadditional expensing istargeted toassist small businesses because
thebenefit ofexpensing begins tophase outwhen thelevelofinvestment exceeds $200,000. Toqualify
fortheexpensing, businesses mustalsomeetother criteria, suchashaving atleast35%ofemployees
whoreside inthezone. Businesses located inenterprise communities arealsoeligible forthenew
category oftax-exempt bonds. Upto$3million perbusiness perzoneinbondfunding and$20million
perbusiness forallzones isavailable.
Amount
During thefirstfiveyears oftheprogramme, thetaxincentives areestimated toyield upto
$1.6billion inFederal government revenue loss.
Duration
Taxincentives have been available since thezones andcommunities were designated on
21December 1994. Designation willremain ineffect forupto10years. Thedesignation maybe
revoked ifthestateorlocalgovernment modifies theboundaries oftheareaordoesnotcomply with
theagreed strategic plan. Theemployment andtraining wagecredit is20%ofupto$15,000 ofqualified
wages from1994to2001. For2002through 2004, thecredit ratedecreases byfivepercentage points
eachyear.
Trade effects
Itisnotpossible toestimate what, ifany,trade effects mayresult from theuseofthese
provisions.
Federal-Level Programmes
(General Export Programmes)
Title: TheExport Credit Programmes oftheUSExport-Import Bank
Period covered bythenotification
Theperiod covered isthefiscal year1995.
Amount
Table I
Fiscal Year Direct Loan Levels Budget Authority %
($millions) ($millions)
1995 (final) 1,605.3 90.3 5.6G/SCM/N/16/USA
Page56
Table II
Fiscal Year Guarantee &Insurance Level Budget Authority %
($millions) ($millions)
1995 (final) 10,311.0 532.9 5.2G/SCM/N/16/USA
Page57
APPENDIX
UNITED STATES
Statistics ofProduction, Consumption, Imports andExports
Commodity/Year Production Consumption Imports Exports
Wheat (July-June) Million metric tons
1990/91 74.5 37.1 0.9 28.3
1991/92 53.9 30.8 1.2 35.1
1992/93 67.1 30.7 1.9 37.1
1993/94 65.2 33.7 3.1 33.1
1994/95 (estimate) 63.2 35.0 2.4 32.2
1995/96 (projected) 59.5 31.4 1.6 34.0
Feedgrains (marketing year) Million metric tons
1990/91 230.5 178.7 1.6 51.5
1991/92 218.6 185.1 2.4 49.7
1992/93 277.4 198.6 1.5 51.5
1993/94 186.4 185.8 4.0 40.3
1994/95 285.0 207.9 3.4 62.4
1995/96 (projected) 209.4 180.3 2.8 64.5
Rice(rough equivalent)
(August-July)Million metric tons
1990/91 7.1 4.1 0.2 3.1
1991/92 7.2 4.1 0.2 2.8
1992/93 8.1 3.9 0.2 3.4
1993/94 7.0 4.5 0.3 3.4
1994/95 9.0 3.3 0.2 3.3
1995/96 (projected) 7.9 3.4 0.2 2.6G/SCM/N/16/USA
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Commodity/Year Production Consumption Imports Exports
Soybeans
(September-August)Million metric tons
1990/91 52.4 34.9 0.1 15.2
1991/92 54.1 36.9 0.1 18.6
1992/93 59.6 38.3 0.1 20.9
1993/94 50.9 37.3 0.2 16.0
1994/95 68.5 42.4 0.1 22.8
1995/96 (projected) 58.6 40.1 0.1 22.5
Sunflowerseed
(September-August)Million metric tons
1990/91 1.0 0.91
0.1
1991/92 1.6 1.4 0.1 0.2
1992/93 1.2 1.31
0.1
1993/94 1.2 1.11
0.1
1994/95 2.2 1.91
0.3
1995/96 (projected) 1.8 1.61
0.2
Flaxseed (June-May) Million metric tons
1990/91 0.1 0.2 0.21
1991/92 0.2 0.2 0.11
1992/93 0.1 0.2 0.21
1993/94 0.1 0.2 0.11
1994/95 0.1 0.2 0.21
1995/96 (projected) 0.1 0.2 0.21
Rapeseed/Canola
(September-August)Million metric tons
1990/91 0.1 0.1 0.11
1991/92 0.1 0.11 1
1992/93 0.11 1 1G/SCM/N/16/USA
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Commodity/Year Production Consumption Imports Exports
1993/94 0.1 0.4 0.41
1994/95 0.2 0.4 0.3 0.1
1995/96 (projected) 0.3 0.4 0.2 0.1
Safflowerseed
(September-August)Million metric tons
1990/91 0.2 0.11
0.1
1991/92 0.1 0.11 1
1992/93 0.2 0.21
0.1
1993/94 0.2 0.21
0.1
1994/95 0.2 0.21 1
1995/96 (projected) 0.2 0.21 1
Mustardseed (June-May) Million metric tons
1990/911
0.1 0.11
1991/921
0.1 0.11
1992/931
0.1 0.11
1993/941
0.1 0.11
1994/951
0.1 0.11
1995/96 (projected)1
0.1 0.11
1Lessthan50,000 tonsG/SCM/N/16/USA
Page60
Commodity/Year Production Consumption Imports Exports
Peanuts (August-July) 1,000 metric tons
1990/91 1,634 1,358 12 296
1991/92 2,235 1,616 2 452
1992/93 1,943 1,380 1 431
1993/94 1,539 1,420 1 251
1994/95 1,927 1,500 33 398
1995/96 (projected) 1,570 1,421 68 374
Dairy/Butter (Calendar year) 1,000 metric tons
1990 591 498 2 31
1991 606 482 2 66
1992 619 505 2 159
1993 596 532 2 161
1994 588 578 2 87
1995 (preliminary) 615 572 2 70
Dairy/Cheese (Calendar year) 1,000 metric tons
1990 2,749 2,822 132 12
1991 2,730 2,870 135 6
1992 2,943 3,032 129 15
1993 2,961 3,093 145 16
1994 3,053 3,192 151 25
1995 (preliminary) 3,148 3,263 145 30
Dairy/Non-fat drymilk
(Calendar Year)1,000 metric tons
1990 399 339 1 10
1991 398 308 1 67
1992 396 331 1 126G/SCM/N/16/USA
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Commodity/Year Production Consumption Imports Exports
1993 430 280 1 147
1994 552 414 1 121
1995 (preliminary) 550 410 1 160
BeetandCane Sugar
(October-September)a/
1990/91 6,904 8,857 2,298 -
1991/92 7,238 8,846 1,486 -
1992/93 7,773 9,103 1,335 -
1993/94 7,656 9,333 1,768 457
1994/95 7,927 9,337 1,834 520
1995/96 (projected) 7,340 9,600 2,876 420
a/ In1,000 short tons, rawvalue equivalent deliveries.
Millions ofpoundsHoney (Calendar year)
1990 197.8 287.4 77.0 12.4
1991 218.3 303.4 92.2 9.6
1992 220.6 331.0 114.6 10.4
1993 229.3 342.0 133.6 8.5
1994 217.2 354.9 123.2 8.3
1995 210.0 342.0 88.6 9.3
Shorn Wool (clean)
(Calendar Year)Millions ofpounds
1990 47.2 135.4 71.7 2.7
1991 46.7 155.4 86.5 3.9
1992 45.3 158.0 89.3 3.4
1993 41.3 156.8 100.3 2.9
1994 36.5 153.3 91.7 2.9
1995 n.a. n.a. n.a. n.a.G/SCM/N/16/USA
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Mohair (greasy)
(Calendar year)Millions ofpounds
1990 12.4 1.0 d/ 11.6
1991 12.4 3.5 d/ 8.1
1992 12.2 3.5 d/ 7.9
1993 14.8 3.9 d/ 8.7
1994 12.6 3.9 d/ 11.5
1995 n.a. n.a. n.a. n.a.
d/ Lessthan5metric tons
Million 480lb balesUpland andELScotton
(August-July)
1990/91 15.51 8.66 0.004 7.80
1991/92 17.61 9.61 0.013 6.65
1992/93 16.22 10.25 0.001 5.20
1993/94 16.13 10.42 0.006 6.86
1994/95 19.66 11.20 0.020 9.40
1995/96 (projected) 17.90 10.50 0.300 7.70
Tobacco (unmanufactured, dry
weight)1,000 metric tons
1990/91 679 693 268 226
1991/92 703 755 325 260
1992/93 652 725 360 208
1993/94 641 667 264 197
1994/95 538 670 199 209
1995/96 (projected) 645 655 195 210