WORLD TRADE
ORGANIZATIONG/SCM/Q3/GRD/7
20 June 2002
(02-3439)
Committee on Subsidies
and Countervailing MeasuresOriginal:  English
SUBSIDIES
Requests Pursuant to Article 27.4 of the Agreement
on Subsidies and Countervailing Measures
Responses by GRENADA to Questions
Posed by the UNITED STATES1
The following communication, dated 17 June 2002, has been received from the Permanent
Mission of Grenada.
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Grenada wishes to reiterate that, in keeping with Article 25.7 of the Agreement on Subsidies
and Countervailing Measures, the responses to the follow-up questions do not prejudice the legal
status of the notified programmes under the GATT 1994 or the said Agreement, their effects under the
Agreement or the nature of the programmes or measures.
Fiscal Incentives Act No. 41 of 1974
We remain concerned with the local valu e added requirements under this programme.
The discussion at the recent special meeting of the Committee on Subsidies and Countervailing
Measures concerning this issue was useful in explaining how this programme operates.
However, we seek further clarification con cerning the local value added requirements, and
therefore request consideration of the following additional questions:
1. How is local value added defined under this programme?
Reply
In accordance with the Fiscal Incentives Act No. 41 of 1974, “local value added” is defined as
the amount (expressed as a percentage of the total sales of an approved product) by which the amount
realized for the sales of an approved product exceeds:
(i) The aggregate amount of the value of imported raw materials, content of
components and parts, fuels and services (whether regional or extra-regional;
(ii) Wages or/and salaries paid to persons who are not nationals of a CARICOM
Member state;
                                                     
1 G/SCM/Q3/GRD/6.G/SCM/Q3/GRD/7
Page 2
(iii) Interest, management charges and other income payments to persons
(including companies) who are not re sident in a CARICOM Member State;
(iv) Depreciation on the imports of plant, machinery and equipment.
As indicated before, there is no requirement for enterprises to use domestic over imported raw
materials, in calculating the percentage of the local value added what is taken into consideration is thelevel of investment and employment generated.
Also, as stated in our initial request for extension, the object of this incentive is to promote
investment, which is an integral part of our development plan, as we seek to diversify our economy.
By generating more investment, we would also achieve a greater reduction in our unemployment,
which is important in our aim to reduce poverty in the country.
2. Does the use of domestically sourced raw materials, components and parts determine
the duration of the incentives provided under this programme?
Reply
Taking into consideration the definition given above, the duration of incentive is calculated as
follows:
Local value added > 10% < 25% - 10 years tax holiday
Local value added > 25% < 50% - 12 years tax holidayLocal value added > 50% - 15 years tax holiday
3. Please explain how the local value added requirement is based on the “process” not the
raw material used.
Reply
The local value added requirement is based on process not the raw materials used, that is, the
level of investment and correspondingly, employment generated.
In the computation of the local value added, no account is taken in terms of the use of
domestic goods over imported goods, it is weighted by the wages or salaries paid to nationals of theCARICOM Member State expressed as a percentage of the total sales of the products manufactured.
4. Please provide the implementing legislation, and any relevant amendments, under this
program and any accompanying regulations and decrees.
Reply
The implementing legislation, the Fiscal Incentives Act No. 41 of 1974 is attached. There
have been no amendments to this legislation.G/SCM/Q3/GRD/7
Page 3
Statutory Rules and Orders No. 37 of 1999
5. Please provide the implementing legislation, and any relevant amendments, under this
programme and any accompanying regulations and decrees.
Reply
Relevant legislation has already been submitted and can be found in WTO document
G/SCM/N/71/GR D/Suppl.1.
6. Please explain how local value added is defined under this programme.
Reply
Local value added is not defined in the legislation, but it is the Government’s policy that for
manufacturing activities to qualify under the legislation, it must achieve at least 40 per cent local
value added.  In the application of this policy th e Government applies the same definition of value
added as under the Fiscal Incentives Act.
There is likewise, no requirement to use domestic goods over imported goods.
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