Proposal for a COUNCIL REGULATION (EC) on protection against subsidized imports from countries not members of the European Community
Date: 1997-02-17
Institutions: European Commission
Subjects: countervailing charge, economic survey, export subsidy, market protection, third country

COMMISSION  OF THE EUROPEAN COMMUNITIES 

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Brussels,  17.02.1997 
COM(97) 46 final 

97/0034 (ACC) 

Proposal for a 
COUNCIL REGULATION (EC) 

on protection against subsidized imports from countries not members of the 
European Community 

(presented by the Commission) 

EXPLANATORY  MEMORANDUM 

The  Council,  by  Regulation  (EC)  No  3284/94,  adopted  rules  for  protection  against 
subsidized  imports  from  countries not  members of the European  Community.  Following 
the  publication  of  this  regulation,  it  became  apparent  that  there  were  significant  errors 
(linguistic and otherwise) in the text. 

In  the  interests  of  clarity,  transparency  and  legal  certainty,  it  is  considered  that  the 
regulation  should  be  repealed  and  replaced,  without  prejudice  to  the  countervailing 
proceedings  already  initiated  under  it.  It  should  be  noted  that  no  changes  of  substance 
have been made to the text. 

It will be recalled that Regulation (EC) No 3283/94 on protection against dumped imports 
from countries not  members of the European  Community  was repealed  and  replaced  for 
similar reasons in March 1996. 

It is proposed,  therefore,  that,  as in the case of the anti-dumping  regulation,  the Council 
repeals Reguation (EC) No 3284/94 and adopts the attached regulation in its place. 

Proposal for a 
COUNCIL REGULATION (EC) 

on protection against subsidized imports from countries not members of the 
European Community 

THE COUNCIL OF THE EUROPEAN UNION, 

Having  regard  to  the  Treaty  establishing  the  European  Community,  and  in  particular 
Article  113 thereof, 

Having  regard  to  the  Regulations  establishing  the  common  organization  of  agricultural 
markets and the Regulations  adopted  pursuant  to Article 235 of the Treaty  applicable to 
goods manufactured  from  agricultural  products,  and in particular  the provisions of those 
Regulations  which  allow  for  derogation  from  the  general  principle  that  protective 
measures  at  frontiers  may  be  replaced  solely  by  the  measures  provided  for  in 
those Regulations, 

Having regard to the proposal from the Commission, 

Having regard to the Opinion of the European Parliament1, 

(1)  Whereas, by Regulation (EEC) No 2423/882, the Council adopted common rules for 
protection  against  dumped  or  subsidized  imports  from  countries  which  are  not 
members of the European Community; 

(2)  Whereas  those  rules  were  adopted  in  accordance  with  existing  international 
obligations, in particular those arising from Article VI of the General Agreement on 
Tariffs  and  Trade  ("hereinafter  referred  to  as  "GATT"),  from  the  Agreement  on 
Implementation  of Article  VI  of the  GATT  ("the  1979 Anti-Dumping  Code") and 
from  the  Agreement  on  Interpretation  and  Application  of  Articles  VI,  XVI  and 
XXIII of the GATT (Code on Subsidies and Countervailing Duties); 

(3)  Whereas the conclusion of the Uruguay Round of multilateral trade negotiations has 

led to the establishment of the World Trade Organization ("the WTO"); 

(4)  Whereas  Annex 

to 

1A 

the  Agreement 

the  WTO 
("the WTO Agreement"),  approved  by  Council  Decision  94/800/EC3,  contains, 
inter alia, the General  Agreement  on  Tariffs  and  Trade  1994 ("the  GATT  1994"), 
an Agreement  on Agriculture  ("the  Agreement  on Agriculture"),  an Agreement  on 
implementation  of  Article  VI  of  the  GATT  1994  (hereinafter  referred  to  as  the 
1994 Anti-Dumping  Agreement"),  and  a  new  Agreement  on  Subsidies  and 
Countervailing Measures ("the Subsidies Agreement"); 

establishing 

1 
2 

3 

OJ No C 
OJ  No  L  209,  2.8.1988,  p.  1,  as  last  amended  by  Regulation  (EC)  No  522/94  (OJ  No  L  66, 
10.3.1994, p. 10). 
OJ No L 336, 23.12.1994, p. 1. 

(5)  Whereas, in order to reach greater transparency  and effectiveness  in the application 
by the Community of the rules laid down in the  1994 Anti-Dumping Agreement and 
the  Subsidies  Agreement  respectively,  it  is  considered  necessary  to  adopt  two 
separate Regulations which will lay down in sufficient  detail the requirements for the 
application of each of these commercial defence instruments; 

(6)  Whereas  it  is  therefore  appropriate  to  amend  Community  rules  governing  the 
application of countervailing measures in the light of the new multilateral rules, with 
regard  inter alia to the procedures for  initiation of proceedings and the conduct  of 
subsequent investigations, including the establishment and treatment of the facts, the 
imposition  of provisional  measures,  the imposition  and  collection  of  countervailing 
duties, the duration and review of countervailing measures, and the public disclosure 
of information relating to countervailing investigations; 

(7)  Whereas in view of the extent of the changes brought about by the new Agreements 
and to ensure a proper and transparent  application of the new rules, the language of 
the  new  Agreements  should  be  brought  into  Community  legislation  as  far  as 
possible; 

(8)  Whereas,  furthermore,  it  seems  advisable  to  explain,  in  adequate  detail,  when  a 
subsidy  shall  be  deemed  to  exist,  according  to  which  principles  it  shall  be 
countervailable (in particular whether the subsidy has been granted  specifically), and 
according  to  which  criteria  the  amount  of  the  countervailable  subsidy  is  to  be 
calculated; 

(9)  Whereas it is clear that  in determining the existence  of a subsidy  it  is necessary  to 
demonstrate  that  there  has  been  a  financial  contribution  by  a  government  or  any 
public authority within the territory  of a country,  or that there has been  some form 
of income or price support  within the meaning of Article XVI  of the GATT  1994, 
and that a benefit has thereby been conferred  on the recipient enterprise; 

(10)  Whereas it is necessary to explain in sufficient  detail which kind of subsidies are not 
countervailable  and  which  procedure  shall  be  followed  if,  during  an  investigation, 
it is  determined 
investigation  has  received 
non-countervailable subsidies; 

that  an  enterprise  undergoing 

(11)  Whereas 

the  Subsidies  Agreement  states 

the  provisions  concerning 
non-countervailable  subsidies  shall cease to apply five years after  the  date  of entry 
into force of the WTO Agreement, unless they are extended by mutual agreement of 
the  Members  of  the  WTO;  whereas  it  may  therefore  be  necessary  to  amend  this 
Regulation accordingly if the validity of those provisions is not so extended; 

that 

(12)  Whereas  the  measures  listed  in  Annex  2  to  the  Agreement  on  Agriculture  are 

non-countervailable, to the extent provided for in that Agreement; 

(13)  Whereas  it  is desirable  to  lay  down  clear  and  detailed  guidance  as  to  the  factors 
which may be relevant for the determination of whether the subsidized imports have 
caused material injury  or are threatening to cause injury; whereas, in demonstrating 
that the volume and price levels of the imports concerned  are responsible for  injury 
sustained by a Community industry, attention  should be given to the effect  of other 
factors and in particular prevailing market conditions in the Community; 

(14)  Whereas it is advisable to define the term "Community industry" and to provide that 
parties related  to  exporters  may be excluded from such  industry,  and  to  define  the 
term "related"; whereas it is also necessary to provide for countervailing duty action 
to be taken on behalf of producers  in a region of the Community  and to  lay down 
guidelines on the definition  of such region; 

(15)  Whereas it is necessary to lay down who may lodge a countervailing duty complaint, 
including  the  extent  to  which  it  should  be  supported  by  the  Community  industry, 
and  the  information  on  countervailable  subsidies,  injury  and  causation  which  such 
complaint  should contain; whereas it is also expedient to  specify  the procedures for 
the rejection of complaints or the initiation of proceedings; 

( 16)  Whereas, it is necessary to lay down the manner in which interested  parties should 
be given  notice  of the  information  which  the  authorities  require,  and  should  have 
ample  opportunity  to  present  all  relevant  evidence  and  to  defend  their  interests; 
whereas it is also desirable to set out clearly the rules and procedures to be followed 
during  the  investigation,  in  particular  the  rules  whereby  interested  parties  are  to 
make themselves known, present their views and submit information within specified 
time limits, if such views and information  are to be taken into account; whereas it is 
also appropriate to set out the conditions under which an interested  party may have 
access  to,  and  comment  on,  information  presented  by  other  interested  parties; 
whereas  there  should  also  be  cooperation  between  the  Member  States  and  the 
Commission in the collection of information; 

(17)  Whereas it is necessary  to  lay down the  conditions  under  which  provisional  duties 
may be imposed, including conditions whereby they may be imposed no earlier than 
60  days  from  initiation  and  not  later  than  nine  months  thereafter;  whereas  such 
duties may in all cases be imposed by the Commission only for a four-month  period; 

(18)  Whereas  it  is  necessary  to  specify  procedures  for  the  acceptance  of  undertakings 
eliminating  or  offsetting  the  countervailable  subsidies  and  injury  in  lieu  of  the 
imposition  of  provisional  or  definitive  duties; whereas  it  is also  appropriate  to  lay 
down  the  consequences  of  breach  or  withdrawal  of  undertakings  and  that 
provisional  duties may be imposed in cases of suspected violation  or where  further 
investigation  is  necessary  to  supplement  the  findings;  whereas,  in  accepting 
undertakings,  care  should  be  taken  that  the  proposed  undertakings,  and  their 
enforcement,  do not lead to anti-competitive behaviour; 

(19)  Whereas it is necessary to provide that the termination of cases should,  irrespective 
of  whether  definitive  measures  are  adopted  or  not,  normally  take  place  within 
12 months,  and  in  no  case  later  than  13  months,  from  the  initiation  of 
the investigation; 

(20)  Whereas an investigation or proceeding should be terminated whenever the amount 
of the  subsidy  is found  to  be de  minimis or  if,  particularly  in  the  case  of  imports 
originating in developing countries, the volume of subsidized imports or the injury is 
negligible, and it is appropriate to define those criteria; whereas, where measures are 
to be imposed, it is necessary to provide for the termination of investigations and to 
lay down that measures should be less than the amount  of countervailable  subsidies 
if such lesser  amount  would  remove  the  injury,  and  also to  specify  the  method  of 
calculating the level of measures in cases of sampling; 

(21)  Whereas it is necessary to provide for  the retroactive collection  of provisional  duties 
if that  is deemed  appropriate  and  to  define  the circumstances  which  may  trigger  the 
retroactive  application  of duties  in  order  to  avoid  the undermining  of the  definitive 
measures  to  be  applied; whereas  it  is  also  necessary  to  provide  that  duties  may  be 
applied retroactively in cases of breach or withdrawal of undertakings; 

(22)  Whereas it is necessary to  provide that  measures are to  lapse  after five years  unless 
a  review  indicates  that  they  should  be  maintained;  whereas  it  is  also  necessary  to 
provide,  in cases where  sufficient  evidence  is  submitted  of  changed  circumstances, 
for 
investigations  to  determine  whether  refunds  of 
interim  reviews  or  for 
countervailing duties are warranted; 

(23)  Whereas,  even  though  the  Subsidies  Agreement  does  not  contain  provisions 
concerning  circumvention  of  countervailing  measures,  the  possibility  of  such 
circumvention  exists,  m terms  similar,  albeit  not  identical,  to  the  circumvention  of 
anti-dumping  measures;  whereas  it  appears  therefore  appropriate  to  enact  an 
anti-circumvention provision in this Regulation; 

(24)  Whereas  it  is expedient  to  permit  the  suspension  of countervailing  measures  where 
there  is  a  temporary  change  in  market  conditions  which  makes  the  continued 
imposition of such measures temporarily inappropriate; 

(25)  Whereas  it  is  necessary  to  provide  that  imports  under  investigation  may  be  made 
subject  to  registration  upon  importation  in  order  to  enable  measures  to  be 
subsequently applied against such imports; 

(26)  Whereas,  in  order  to  ensure  proper  enforcement  of  measures,  it  is  necessary  that. 
Member States monitor, and report to the Commission, the import trade in products 
subject  to  investigation  or  subject  to  measures,  and  also  the  amount  of  duties 
collected under this Regulation; 

(27)  Whereas  it  is  necessary  to  provide  for  consultation  of  an  Advisory  Committee  at 
regular  and  specified  stages  of  the  investigation;  whereas,  the  Committee  should 
the 
consist  of  representatives  of  Member  States  with  a  representative  of 
Commission as chairman; 

(28)  Whereas  it  is  expedient  to  provide  for  vérification  visits  to  check  information 
submitted  on  countervailable  subsidies  and  injury,  such  visits  being,  however, 
conditional on proper replies to questionnaires being received; 

(29)  Whereas it is essential to  provide for  sampling in cases where the number  of  parties 
or  transactions  is  large  in  order  to  permit  completion  of  investigations  within  the 
appointed time-limits; 

(30)  Whereas,  it  is  necessary  to  provide  that,  where  parties  do  not  cooperate 
satisfactorily,  other  information  may  be  used  to  establish  findings  and  that  such 
information  may be less favourable to the parties than if they had  cooperated; 

(31)  Whereas provision  should  be made for  the treatment  of confidential  information  so 

that business or governmental  secrets are not divulged; 

(32)  Whereas it is essential that provision  be made for  proper disclosure of essential  facts 
and  considerations  to  parties  which  qualify  for  such  treatment  and  that  such 
disclosure  be  made,  with  due  regard  to  the  decision-making  process  in  the 
Community, within a time period which permits parties to defend  their interests; 

(33)  Whereas  it  is  prudent  to  provide  for  an  administrative  system  under  which 
arguments  can be presented  as to  whether  measures  are in the  Community  interest, 
including the interests of consumers,  and to lay down the time periods within  which 
such  information  has  to  be  presented,  together  with  the  disclosure  rights  of  the 
parties concerned; 

(34)  Whereas in applying the rules of the  Subsidies Agreement  it is essential,  in order  to 
maintain  the  balance  of  rights  and  obligations  which  this  Agreement  sought 
interpretation  by 
to establish, 
the ..Community's  major 
legislation  or 
in 
established practice, 

trading  partners,  as 

take  account  of 

the  Community 

reflected 

their 

that 

(35)  Whereas,  by  Regulation 

(EC)  No  3284/94  of  22  December  1994  on 
protection against  subsidized 
the 
imports  from  countries  not  members  of 
European Community4,  the  Council  replaced  Regulation  (EEC)  No  2423/88  and 
instituted  a  new  common  system  of  defence  against  subsidized  imports  from 
countries not members of the European Community; 

(36)  Whereas  drafting  problems  in  the  text  of  Regulation  (EC)  No  3284/94  became 

apparent on publication; whereas, moreover, it has already been amended; 

(37)  Whereas, in the interests of clarity, transparency  and legal certainty,  that  Regulation 
should  therefore  be  repealed  and  replaced,  without  prejudice  to  the  countervailing 
proceedings already initiated under it or under Regulation (EEC) No 2423/88, 

HAS ADOPTED THIS REGULATION: 

Article 1 

Principles 

1.  A  countervailing  duty  may  be  imposed  for  the  purpose  of  offsetting  any  subsidy 
granted,  directly  or indirectly,  for  the  manufacture,  production,  export  or  transport 
of any product whose release for  freecirculation  in the Community causes  injury. 

2. 

For  the  purpose  of  this  Regulation,  a  product  is  considered  to  be  subsidized  if  it 
benefits from a countervailable  subsidy as defined  in Articles 2 and 3. 

OJ  No  L  349,  31.12.1994,  p.  22.  Regulation  as  amended  by  Regulation  (EC)  No 1252/95 
(OJNoL122. 2.6.1995, p. 2). 

3. 

Such  subsidy  may  be  granted  by  the  government  of  the  country  of  origin  of  the 
imported product, or by the government  of an intermediate country from which the 
product is exported to the Community, known for the purpose of this Regulation as 
"the country of export". 

The  term  "government"  is  defined,  for  the  purposes  of  this  Regulation  as  a 
government  or  any  public  body  within  the  territory  of  the  country  of  origin 
or export. 

4.  Notwithstanding  paragraphs  1, 2 and  3, where  products  are  not  directly  imported 
from  the country of origin but are exported to the Community from  an intermediate 
country,  the  provisions  of  this  Regulation  shall  be  fully  applicable  and  the 
transaction  or  transactions  shall,  where  appropriate,  be  regarded  as  having  taken 
place between the country of origin and the Community. 

5. 

For  the  purpose  of  this Regulation  the tenn  "Uke product"  shall be  interpreted  to 
mean a product which is identical, that is to say, alike in all respects, to the product 
under  consideration,  or  in  the  absence  of  such  a  product,  another  product  which 
although not alike in all respects, has characteristics closely resembling those of the 
product under consideration. 

Article 2 

Definition  of a subsidy 

A subsidy shall be deemed to exist if: 

1. 

(a) 

there is a financial contribution  by a government  in the country  of  origin  or 
export, that is to say, where: 

(i) 

a government  practice involves a direct  transfer  of funds  (for  example, 
grants,  loans,  equity  infusion),  potential  direct  transfers  of  funds  or 
liabilities (for example, loan guarantees); 

(ii)  government  revenue  that  is  otherwise  due  is  forgone  or  not  collected 
(for  example, fiscal incentives  such  as  tax  credits);  in  this  regard,  the 
exemption of an exported product from duties or taxes borne by the like 
product  when  destined  for  domestic  consumption,  or  the  remission  of 
such duties or taxes in amounts not in excess of those which have been 
accrued,  shall  not  be  deemed  to  be  a  subsidy,  provided  that  such  an 
exemption is granted in accordance with the provisions of Annexes I, II 
and III; 

(iii)  a  government  provides  goods  or  services  other 

than  general 

infrastructure,  or purchases goods; 

(iv)  a government: 

makes payments to a funding mechanism, or 

entrusts  or directs a private body to  carry  out  one or more  of the 
type of functions  illustrated  in points (i), (ii) and (iii) which would 
normally be vested  in the government,  and the practice,  in no real 
sense, differs from practices normally followed by governments; or 

(b) 

there  is  any  form  of  income  or  price  support  within  the  meaning  of 
Article XVI of the GATT  1994; and 

2. 

a benefit  is thereby  conferred. 

Article 3 

Countervailable subsidies 

1. 

2. 

Subsidies  shall  be  subject  to  countervailing  measures  only  if they  are  specific,  as 
defined  in paragraphs 2, 3 and 4. 

In order to  determine  whether  a subsidy is specific  to  an enterprise  or  industry  or 
group  of  enterprises  or  industries  (hereinafter  referred  to  as  "certain  enterprises") 
within the jurisdiction of the granting authority, the following principles shall apply: 

(a)  Where the granting authority, or the legislation pursuant to which the granting 
authority  operates,  explicitly  limits access to  a  subsidy  to  certain  enterprises, 
such subsidy shall be specific. 

(b)  Where the granting authority, or the legislation pursuant to which the granting 
authority  operates,  establishes  objective  criteria  or  conditions  governing  the 
eligibility for, and the amount of,  a subsidy, specificity shall not exist, provided 
that the eligibility is automatic and that such criteria and conditions are strictly 
adhered to. 

For the purpose of this Article, objective criteria or conditions mean criteria or 
conditions  which  are  neutral,  which  do  not  favour  certain  enterprises  over 
others,  and which are economic in nature  and horizontal  in application,  such 
as number of employees or size of enterprise. 

The criteria or conditions must be clearly set out by law, regulation,  or other 
official  document, so as to be capable of verification. 

(c) 

If,  notwithstanding  any  appearance  of  non-specificity  resulting  from  the 
application of the principles laid down in subparagraphs (a) and (b), there are 
reasons to believe that  the subsidy may in fact  be  specific,  other  factors  may 
be  considered.  Such  factors  are:  use  of  a  subsidy  programme  by  a  limited 
number  of  certain  enterprises,  predominant  use  by  certain  enterprises,  the 
granting of disproportionately  large amounts of subsidy to certain enterprises, 
and  the  manner  in  which  discretion  has  been  exercised  by  the  granting 
authority in the decision to grant a subsidy. In this regard,  information  on the 
frequency  with which applications for  a subsidy are refused  or  approved  and 
the reasons for such decisions shall, in particular, be considered. 

In  applying  the  first  subparagraph,  account  shall  be  taken  of  the  extent  of 
diversification  of  economic  activities  within  the jurisdiction  of  the  granting 
authority, as well as of the length of time during which the subsidy programme 
has been in operation. 

3.  A  subsidy  which  is  limited  to  certain  enterprises  located  within  a  designated 
geographical region within the jurisdiction of the granting authority shall be specific. 
The setting or changing of generally applicable tax rates by all levels of government 
entitled  to  do  so  shall not be deemed  to be  a  specific  subsidy  for  the  purposes  of 
this Regulation. 

4.  Notwithstanding  paragraphs  2  and  3,  the  following  subsidies  shall  be  deemed  to 

be specific. 

(a)  Subsidies  contingent,  in  law  or  in  fact,  whether  solely  or  as  one  of  several 
other  conditions,  upon  export  performance,  including  those  illustrated  in 
Annex I. 

Subsidies  shall  be  considered  to  be  contingent 
in  fact  upon  export 
performance  when  the  facts  demonstrate  that  the  granting  of  a  subsidy, 
without  having been made legally contingent  upon  export  performance,  is in 
fact tied to actual or anticipated  exportation or export earnings. The mere fact 
that a subsidy is accorded to enterprises which export shall not for that reason 
alone  be  considered  to  be  an  export  subsidy  within  the  meaning  of 
this provision. 

(b)  Subsidies  contingent,  whether  solely  or  as  one  of  several  other  conditions, 

upon the use of domestic over imported goods. 

5.  Any determination  of specificity  under the provisions of this Article shall be clearly 

substantiated on the basis of positive evidence. 

Article 4 

Non-countervailable subsidies 

1. 

The following subsidies shall not be subjected to countervailing measures: 

(a)  Subsidies which are not specific within the meaning of Article 3(2) and (3). 

(b)  Subsidies  which  are  specific,  within  the  meaning  of  Article  3(2)  and  (3), 
but which  meet  the  conditions  provided  for  in  paragraphs  2,  3  or  4  of 
this Article. 

(c)  The  element  of  subsidy  which  may  exist  in  any  of  the  measures  listed  in 

Annex IV. 

2. 

Subsidies  for  research  activities  conducted  by  firms  or  by  higher  education  or 
research  establishments  on  a  contract  basis  with  firms  shall  not  be  subject  to 
countervailing  measures,  if the  subsidies cover  not  more than  75% of the  costs  of 
industrial research or 50% of the costs of pre-competitive development  activity, and 
provided that such subsidies are limited exclusively to: 

10 

(a)  personnel  costs  (researchers,  technicians  and other  supporting  staff  employed 

exclusively in the research activity); 

(b) 

costs  of  instruments,  equipment,  land  and  buildings  used  exclusively  and 
permanently  (except  when  disposed  of  on  a  commercial  basis)  for  the 
research activity; 

(c) 

costs  of consultancy  and equivalent  services used  exclusively  for the  research 
activity, including bought-in research, technical knowledge,  patents, etc.; 

(d) 

additional overhead costs incurred directly as a result of the research activity; 

(e) 

other running costs (such as those of materials,  supplies and the like), incurred 
directly as a result of the research activity. 

The  first  subparagraph  shall  not  apply  to  civil  aircraft  (as  defined  in  the  1979 
Agreement  on  Trade  in  Civil  Aircraft,  as  amended,  or  in  any  later  Agreement 
amending or replacing such Agreement). 

For the purpose of the first subparagraph: 

(a) 

the  allowable  levels  of  non-countervailable  subsidy  shall  be  established 
by reference  to  the  total  eligible  costs  incurred  over  the  duration  of  an 
individual project. 

development 

In  the  case  of  programmes  which  span  both  "industrial  research"  and 
of 
"pre-competitive 
non-countervailable  subsidy  shall  not  exceed  the  simple  average  of  the 
allowable  levels  of  non-countervailable  subsidy  applicable  to  the  above  two 
categories,  calculated on the basis of all eligible costs as set forth in points (a) 
to (e) of the first subparagraph; 

allowable 

activity", 

level 

the 

(b) 

(c) 

the  term  "industrial  research"  means  planned  search  or  critical  investigation 
aimed at discovery of new knowledge,  with the objective that such knowledge 
may  be  useful  in  developing  new  products,  processes  or  services,  or  in 
bringing  about  a  significant  improvement  to  existing  products,  processes 
or services; 

the  term  "pre-competitive  development  activity"  means  the  translation  of 
industrial  research  findings  into  a plan,  blueprint  or  design for  new,  modified 
or improved  products,  processes  or services,  whether intended  for  sale or for 
use,  including the creation of a first prototype  which  would  not  be  capable  of 
commercial  use.  It may further  include  the conceptual  formulation  and design 
of  products,  processes  or  services  alternatives  and  initial  demonstration  or 
pilot  projects,  provided  that these  same  projects cannot  be  converted  or used 
for  industrial  application  or  commercial  exploitation.  It  does  not  include 
routine  or  periodic  alterations  to  existing  products,  production 
lines, 
manufacturing  process,  services,  and  other  ongoing  operations  even  though 
those alterations may represent improvements. 

11 

3. 

Subsidies  to  disadvantaged  regions  within  the  territory  of  the  country  of  origin 
and/or  export,  given  pursuant  to  a  general  framework  of  regional  development, 
which  would  be  non-specific  if the  criteria  laid  down  in  Article  3(2)  and  (3)  were 
applied  to  each  eligible  region  concerned,  shall  not  be  subject  to  countervailing 
measures, provided that: 

(a) 

(b) 

each  disadvantaged  region  is  a  clearly  designated  contiguous  geographical 
area with a definable economic and administrative identity; 

the  region is  regarded  as  disadvantaged  on the basis  of  neutral  and  objective 
criteria,  indicating  that  the  region's  difficulties  arise  out  of  more  than 
temporary  circumstances;  such  criteria  must  be  clearly  spelled  out  by  law, 
regulation, or other official  document,  so as to be capable of verification; 

(c) 

the  criteria  mentioned  under  (b)  include  a  measurement  of  economic 
development  which shall be based on at least one of the following  factors: 

either  income  per  capita,  or  household  income  per  capita,  or  GDP  per 
capita,  which  must  not be above  85% of the average for the territory  of 
the country of origin or export concerned, 

unemployment  rate, which must be at least  110% of the average for  the 
territory of the country of origin or export concerned; 

as measured  over a three-year  period;  such measurement,  however,  may be a 
composite one and may include other factors. 

For the purpose of the first subparagraph: 

(a) 

a  "general framework of  regional  development"  means  that  regional  subsidy 
programmes  are  part  of  an  internally  consistent  and  generally  applicable 
regional  development  policy  and  that  regional  development  subsidies  are not 
granted in isolated geographical  points having no, or virtually no, influence  on 
the development  of a region; 

(b)  "neutral  and  objective  criteria"  means  criteria  which  do  not  favour  certain 
regions beyond what is appropriate for the elimination or reduction of regional 
disparities  within  the framework of  the  regional  development  policy.  In  this 
regard,  regional  subsidy  programmes  shall  include  ceilings  on  the  amount  of 
subsidy  which  can  be  granted  to  each  subsidized  project.  Such  ceilings  must 
be  differentiated  according  to  the  different  levels  of  development  of  eligible 
regions and must be expressed  in terms of investment  costs or the cost  of job 
creation.  Within such  ceilings,  the  distribution  of  subsidy  shall be  sufficiently 
broad and even to avoid  the predominant  use  of a subsidy by,  or the granting 
of disproportionately large amounts of subsidy to, certain enterprises. 

This definition  shall be applied in the light of the criteria set out in Article  3(2) 
and (3). 

4. 

Subsidies  to  promote  adaptation  of  existing  facilities  to  new  environmental 
requirements  imposed  by  law  and/or  regulation  which  result  in  greater  constraints 
and  financial  burden  on  firms  shall  not  be  subject  to  countervailing  measures, 
provided that the subsidy. 

12 

(a) 

is a one-off non-recurring measure; and 

(b) 

is limited to 20% of the cost of adaptation; and 

(c)  does not cover the cost  of replacing and operating the subsidized  investment, 

which must be fully borne by the firms; and 

(d) 

is  directly  linked  to  and  proportionate  to  a  firm's  planned  reduction  of 
nuisances and  pollution,  and  does  not  cover  any manufacturing  cost  savings 
which may be achieved; and 

(e) 

is  available  to  all  firms  which  can  adopt  the  new  equipment  and/or 
production processes. 

For  the  purpose  of  the  first  subparagraph  the  term  "existing  facilities"  means 
facilities  having  been  in  operation  for  at  least  two  years  at  the  time  when  new 
environmental requirements are imposed. 

Article 5 

Calculation of the amount of the countervailable subsidy 

The  amount  of  countervailable  subsidies,  for  the  purpose  of  this  Regulation,  shall  be 
calculated in terms of the benefit  conferred  on the recipient which is found  to exist during 
the  investigation  period  for  subsidization.  Normally  this  period  shall be the  most  recent 
accounting  year  of  the  beneficiary,  but  may be  any  other  period  of  at  least  six  months 
prior  to  the  initiation  of the  investigation  for  which  reliable financial and  other  relevant 
data are available. 

Article 6 

Calculation of benefit to the recipient 

As regards the calculation of benefit to the recipient, the following rules shall apply: 

(a)  Government  provision  of equity capital  shall not be considered  to  confer  a benefit, 
unless  the  investment  can  be  regarded  as  inconsistent  with  the  usual  investment 
practice  (including  for  the  provision  of  risk  capital)  of  private  investors  in  the 
territory of the country of origin and/or export. 

(b)  A loan by a government  shall not be considered to confer a benefit,  unless there is a 
difference  between  the  amount  that  the  firm  receiving  the  loan  pays  on  the 
government  loan  and  the  amount  that  the  firm  would  pay  for  a  comparable 
commercial  loan which  the firm could  actually  obtain  on the market.  In that  event 
the benefit  shall be the difference  between these two amounts. 

(c)  A loan guarantee by a government shall not be considered to confer a benefit,  unless 
there is a difference  between the amount that the firm receiving the guarantee pays 
on a loan guaranteed by the government  and the amount that the firm would pay for 
a comparable commercial  loan in the absence of the government  guarantee.  In this 
case the benefit  shall be the difference  between these two amounts, adjusted  for any 
differences  in fees. 

13 

(d)  The provision of goods or services or purchase of goods by a government  shall not 
be considered to confer a benefit, unless the provision is made for less than adequate 
remuneration  or  the  purchase  is  made  for  more  than  adequate  remuneration.  The 
adequacy  of  remuneration  shall  be  determined  in  relation  to  prevailing  market 
conditions  for  the  product  or  service  in  question  in  the  country  of  provision  or 
purchase  (including  price,  quality,  availability,  marketability,  transportation  and 
other conditions of purchase or sale). 

Article 7 

General provisions on calculation 

1. 

The  amount  of  the  countervailable  subsidies  shall  be  determined  per  unit  of  the 
subsidized product exported to the Community. 

In  establishing  this  amount  the  following  elements  may  be  deducted  from  the 
total subsidy: 

(a) 

(b) 

any application fee,  or other costs necessarily  incurred  in order to qualify  for, 
or to obtain, the subsidy; 

export taxes, duties or other charges levied on the export of the product to the 
Community specifically intended to offset  the subsidy. 

Where  an  interested  party  claims  a  deduction,  it  must  prove  that  the  claim 
is justified. 

2.  Where  the  subsidy  is  not  granted  by  reference  to  the  quantities  manufactured, 
produced,  exported  or  transported,  the  amount  of  countervailable  subsidy  shall be 
determined by allocating the value of the total subsidy, as appropriate, over the level 
of  production,  sales or  exports of the  products  concerned  during  the  investigation 
period for subsidization. 

3.  Where  the  subsidy  can  be  linked  to  the  acquisition  or  future  acquisition  of  fixed 
assets,  the  amount  of the  countervailable  subsidy  shall  be  calculated  by  spreading 
the subsidy across a period which reflects the normal depreciation of such assets in 
the  industry  concerned.  The  amount  so  calculated  which  is  attributable  to  the 
investigation period, including that which derives from fixed assets acquired  before 
this period, shall be allocated as described in paragraph (2). 

Where the assets are non-depreciating, the subsidy shall be valued as an  interest-free 
loan, and be treated in accordance with Article 6, point (b). 

4.  Where a subsidy cannot  be linked to the acquisition  of fixed assets, the  amount  of 
the benefit  received during the investigation period shall in principle be attributed to 
this period, and allocated as described in paragraph (2), unless special circumstances 
arise justifying  attribution over a different  period. 

14 

Article 8 

Determination of  injury 

1. 

For  the  purposes  of  this  Regulation,  the  term  "injury"  shall,  unless  otherwise 
specified,  be  taken  to  mean  material  injury  to  the  Community  industry,  threat  of 
material  injury  to  the  Community  industry  or  material  retardation  of  the 
establishment  of  such  an  industry  and  shall  be  interpreted  in  accordance with the 
provisions of this Article. 

2.  A determination  of injury  shall be based  on  positive  evidence  and shall involve an 
objective  examination  of  both  (a)  the  volume  of  the  subsidized  imports  and the 
effect  of  the  subsidized  imports  on  prices  in  the  Community  market  for  like 
the 
(b) 
products,  and 
Community industry. 

the  consequent 

imports  on 

impact  of 

those 

3.  With regard to the volume of the subsidized imports, consideration shall be given to 
whether there has been a significant  increase in subsidized imports, either in absolute 
tenus  or  relative  to  production  or  consumption  in the Community.  With regard to 
the  effect  of  the  subsidized  imports  on  prices,  consideration  shall  be  given  to 
whether  there  has been  significant  price  undercutting  by the subsidized  imports as 
compared  with  the price  of a like product  of the Community  industry,  or whether 
the effect  of  such  imports  is otherwise  to  depress prices to a significant  degree or 
prevent  price  increases  which  would  otherwise  have  occurred,  to  a  significant 
degree. No one or more o.f these factors can necessarily give decisive guidance. 

4.  Where imports of a product from  more than one country are simultaneously subject 
to  countervailing  duty  investigations,  the  effects  of  such  imports  shall  be 
cumulatively assessed only if it is determined that: 

(a) 

(b) 

the amount  of countervailable  subsidies established in relation to the imports 
from each country is more than de minimis as defined in Article 14(5) and that 
the volume of imports from each country is not negligible; and 

a cumulative assessment  of the effects  of the imports is appropriate in light of 
the conditions  of competition  between  imported  products and the conditions 
like 
of 
Community product. 

imported  products  and 

competition  between 

the 

the 

5. 

The examination of the impact of the subsidized imports on the Community industry 
concerned  shall  include  an  evaluation  of  all  relevant  economic  factors  and indices 
having a bearing  on the state  of the industry,  including: the fact that an industry is 
still in the process of recovering from  the effects  of past subsidization or dumping, 
the  magnitude  of  the  amount  of  countervailable  subsidies,  actual  and  potential 
decline  in  sales,  profits,  output,  market  share,  productivity,  return on investments, 
utilization  of  capacity;  factors  affecting  Community  prices;  actual  and  potential 
negative  effects  on  cash  flow,  inventories,  employment,  wages,  growth,  ability  to 
raise capital or investments and, in the case of agriculture, whether there has been an 
increased  burden  on  Government  support  programmes.  This list is not exhaustive, 
nor can any one or more of these factors necessarily give decisive guidance. 

15 

6. 

It  must  be  demonstrated,  from  all  the  relevant  evidence  presented  in  relation  to 
paragraph  2,  that  the  subsidized  imports  are  causing  injury  within  the  meaning  of 
this Regulation.  Specifically,  this shall entail a demonstration that the volume and/or 
price levels  identified  pursuant  to  paragraph  3  are responsible  for  an impact  on the 
Community industry as provided for in paragraph 5,  and that this impact  exists to a 
degree which enables it to be classified  as material. 

7.  Known factors other than the subsidized imports which are injuring the Community 
industry  at  the  same  time  shall  also  be  examined  to  ensure  that  injury  caused  by 
these  other  factors  is  not  attributed  to  the  subsidized  imports  pursuant  to 
paragraph 6.  Factors  which  may  be  considered  in  this  respect  include  the  volume 
and  prices  of  non-subsidized  imports,  contraction  in  demand  or  changes  in  the 
patterns  of  consumption,  restrictive  trade  practices  of,  and  competition  between, 
third  country  and  Community  producers,  developments  in  technology  and  the 
export performance and productivity of the Community industry. 

8. 

9. 

The effect  of the subsidized imports shall be assessed in relation to the production  of 
the Community  industry of the like product when available data permit the  separate 
identification  of  that  production  on  the  basis  of  such  criteria  as  the  production 
process,  producers'  sales  and  profits.  If  such  separate  identification  of  that 
production is not possible,  the effects  of the  subsidized  imports shall be assessed by 
examination  of  the  production  of  the  narrowest  group  or  range  of  products 
including the like product, for which the necessary information can be provided. 

A determination of a threat of material injury shall be based  on facts and not  merely 
on  allegation,  conjecture  or remote  possibility.  The  change  in  circumstances  which 
would  create  a  situation  in  which  the  subsidy  would  cause  injury  must  be  clearly 
foreseen and imminent. 

In  making  a  determination  regarding  the  existence  of  a  threat  of  material  injury, 
consideration should be given to inter alia  such factors as: 

(a) 

(b) 

(c) 

the nature of the subsidy or subsidies in question and the trade effects likely to 
arise therefrom; 

a significant  rate of increase of subsidized imports into the Community market 
indicating the likelihood of substantially increased imports; 

sufficient freely disposable capacity of the exporter or an imminent  substantial 
increase  in  such  capacity  indicating  the  likelihood  of  substantially  increased 
subsidized  exports to  the  Community,  account  being  taken  of  the  availability 
of other export markets to absorb any additional exports; 

(d)  whether  imports  are  entering  at  prices  that  would,  to  a  significant  degree, 
depress  prices  or  prevent  price  increases  which  otherwise  would  have 
occurred, and would probably increase demand for further imports; and 

(e) 

inventories of the product being investigated. 

16 

No  one  of the  factors  listed  above by itself  can  necessarily  give  decisive  guidance 
but  the  totality  of  the  factors  considered  must  lead  to  the  conclusion  that  further 
subsidized exports are imminent and that, unless protective action is taken, material 
injury will occur. 

Article 9 

Definition  of Community industry 

For  the  purposes  of  this  Regulation,  the  term  "Community  industry"  shall  be 
interpreted as referring to the Community producers as a whole of the like products 
or  to  those  of  them  whose  collective  output  of  the  products  constitutes  a  major 
proportion, as defined  in Article  10(8), of the total Community production of those 
products, except that: 

(a)  when  producers  are  related  to  the  exporters  or  importers  or  are  themselves 
importers of the allegedly subsidized  product, the term "Community industry" 
may be interpreted as referring to the rest of the producers; 

(b) 

in  exceptional  circumstances  the  territory  of  the  Community  may,  for  the 
production  in question, be divided into two or more competitive markets and 
the producers within each market may be regarded as a separate industry if 

(i) 

(ii) 

the  producers  within  such  a  market  sell  all  or  almost  all  of  their 
production of the product in question in that market, and 

the  demand  in  that  market  is  not  to  any  substantial  degree  met  by 
producers  of  the  product  in  question  located  elsewhere  in  the 
Community.  In  such  circumstances,  injury  may be  found  to  exist  even 
where  a major  portion  of the total  Community  industry  is not  injured, 
provided that there is a concentration of subsidized imports into such an 
isolated  market  and  provided  further  that  the  subsidized  imports  are 
causing  injury  to  the  producers  of  all  or  almost  all  of  the  production 
within such a market. 

For  the  purpose  of  paragraph  1,  producers  shall  be  considered  to  be  related  to 
exporters  or  importers  only  if  (a)  one  of  them  directly  or  indirectly  controls  the 
other; or (b) both of them are directly or indirectly controlled by a third  person; or 
(c) together they directly or indirectly control a third person, provided that there are 
grounds for  believing  or  suspecting that  the effect  of the  relationship  is such  as to 
cause the producer concerned to behave differently from non-related  producers. For 
the  purpose  of  this  paragraph,  one  shall  be  deemed  to  control  another  when  the 
former  is legally or operationally in a position to exercise restraint or direction over 
the latter. 

Where the Community industry has been interpreted  as referring  to the producers in 
a certain region, the exporters or the government  granting countervailable  subsidies 
shall be given an opportunity to offer  undertakings pursuant to Article  13 in respect 
of the region concerned.  In such cases, when evaluating the Community interest  of 
the  measures,  special  account  shall  be  taken  of  the  interest  of  the  region.  If  an 
adequate  undertaking  is  not  offered  promptly  or  if  the  situations  set  out  in 
Article  13(9) and (10) apply, a provisional  or definitive  countervailing  duty may be 

17 

imposed  in respect  of  the  Community  as  a whole.  In  such  cases  the  duties  may,  if 
practicable, be limited to  specific  producers or exporters. 

4. 

The provisions of Article 8(8) shall apply to this Article. 

Article  10 

Initiation  of  proceedings 

1. 

Except  as provided for in paragraph  10, an investigation to determine the existence, 
degree  and effect  of  any alleged  subsidy  shall  be  initiated  upon  a written  complaint 
by any natural or legal person, or any association not having legal personality,  acting 
on behalf of the Community industry. 

The complaint  may be  submitted  to  the  Commission,  or to  a Member  State,  which 
shall  forward  it  to  the  Commission.  The  Commission  shall  send  Member  States  a 
copy  of  any  complaint  it  receives.  The  complaint  shall  be  deemed  to  have  been 
lodged  on  the  first  working  day  following  its  delivery  to  the  Commission  by 
registered mail or the issuing of an acknowledgement  of receipt by the Commission. 

Where,  in  the  absence  of  any  complaint,  a  Member  State  is  in  possession  of 
sufficient  evidence  of  subsidization  and  of  resultant  injury  to  the  Community 
industry, it shall immediately communicate  such evidence to the Commission. 

2. 

A  complaint  as  referred  to  in  paragraph  1  shall  include  sufficient  evidence  of  the 
existence of countervailable  subsidies (including,  if possible,  of their amount), injury 
and  a  causal  link  between  the  allegedly  subsidized  imports  and  the  alleged  injury. 
The  complaint  shall  contain  such  information  as  is  reasonably  available  to  the 
complainant on the following: 

(a) 

(b) 

(c) 

(d) 

identity  of  the  complainant  and  a  description  of  the  volume  and  value  of  the 
Community  production  of  the  like  product  by  the  complainant.  Where  a 
written complaint  is made on behalf of the Community industry, the complaint 
shall identify the industry on behalf of which the complaint  is made by a list  of 
all  known  Community  producers  of  the  like  product  (or  associations  of 
Community  producers  of  the  like  product)  and,  to  the  extent  possible,  a 
description  of  the  volume  and  value  of  Community  production  of  the  like 
product accounted for by such producers; 

a complete  description  of  the  allegedly  subsidized  product,  the  names  of  the 
country  or countries  of  origin  and/or  export  in question,  the  identity  of  each 
known exporter or foreign producer and a list of known persons importing the 
product in question; 

evidence with regard to the existence,  amount,  nature and countervailability  of 
the subsidies in question; 

information  on changes in the volume  of the allegedly  subsidized  imports,  the 
effect  of those imports on prices of the like product in the Community market 
and  the  consequent  impact  of  the  imports  on  the  Community  industry,  as 
demonstrated  by  relevant  factors  and indices  having  a bearing  on the  state  of 
the Community industry,  such as those listed in Article 8(3) and (5). 

18 

3. 

The Commission shall, as far as possible, examine the accuracy and adequacy of the 
evidence provided in the complaint, in order to determine whether there is  sufficient 
evidence to justify the initiation of an investigation. 

4.  An investigation  may be initiated  in order to  determine whether  or  not  the  alleged 

subsidies are "specific" within the meaning of Article 3(2) and (3). 

5.  An  investigation  may  also  be  initiated  in  respect  of  subsidies  which  are  non-
countervailable  according to Article 4(2), (3) or (4), in order to  determine whether 
or not the conditions laid down in those paragraphs have been met. 

6. 

If a subsidy is granted  pursuant  to a subsidy programme which has been notified  in 
advance  of  its  implementation  to  the  WTO  Committee  on  Subsidies  and 
Countervailing Measures in accordance with Article  8 of the  Subsidies Agreement, 
and  in  respect  of  which  the  Committee  has  failed  to  determine  that  the  relevant 
conditions laid down in Article 8 of the Subsidies Agreement have not been met, an 
investigation shall not be initiated in respect of a subsidy granted pursuant to such a 
programme,  unless  an  infringement  of  Article  8  of  the  Subsidies  Agreement  has 
been  ascertained  by  the  competent  WTO  Dispute  Settlement  Body  or  through 
arbitration as provided in Article 8.5 of the Subsidies Agreement. 

7.  An  investigation  may  also  be  initiated  in respect  of  measures  of  the  type  listed  in 
Annex  IV,  to  the  extent  that  they  contain  an  element  of  subsidy  as  defined  by 
Article 2, in order to  determine whether the measures in question  fully  conform  to 
the provisions of that Annex. 

8.  An  investigation  shall  not  be  initiated  pursuant  to  paragraph  1 unless  it  has been 
determined,  on  the  basis  of  an  examination  as  to  the  degree  of  support  for,  or 
opposition to, the complaint expressed by Community producers of the like product, 
that  the complaint  has been made by or on behalf of the Community  industry.  The 
complaint shall be considered  to have been made by or on behalf of the Community 
industry  if it  is supported  by those  Community  producers  whose  collective  output 
constitutes more than  50% of the total production  of the like product  produced by 
that portion  of the Community industry expressing either  support for  or  opposition 
to  the  complaint.  However,  no  investigation  shall  be  initiated  when  Community 
producers  expressly  supporting  the  complaint  account  for  less  than  25%  of  total 
production of the like product produced by the Community industry. 

9. 

The  authorities  shall,  unless  a  decision  has  been  made  to  initiate  an  investigation, 
avoid  any  publisicing  of  the  complaint  seeking  the  initiation  of  an  investigation. 
However,  as  soon  as  possible  after  receipt  of  a  properly  documented  complaint 
pursuant to this Article, and in any event before the initiation of an investigation, the 
Commission  shall notify  the country of origin and/or  export  concerned, which shall 
be  invited  for  consultations  with  the  aim  of  clarifying  the  situation  as  to  matters 
referred  to in paragraph 2 and arriving at a mutually agreed solution. 

10. 

If,  in  special  circumstances,  the  Commission  decides  to  initiate  an  investigation 
without  having  received  a  written  complaint  by  or  on  behalf  of  the  Community 
industry  for  the  initiation  of  such  investigation,  this  shall  be  done  on  the  basis  of 
sufficient  evidence  of  the  existence  of  countervailable  subsidies,  injury  and  causal 
link, as described in paragraph 2, to justify  such initiation. 

19 

11.  The evidence both  of  subsidies and  of injury  shall be considered  simultaneously in 
the  decision  on  whether  or  not  to  initiate  an  investigation.  A  complaint  shall  be 
rejected  where there is insufficient  evidence of either countervailable  subsidies or of 
injury  to justify  proceeding with the case. Proceedings  shall not be initiated  against 
countries  whose  imports  represent  a  market  share  of  below  1%,  unless  such 
countries collectively account for 3% or more of Community consumption. 

12.  The  complaint  may  be  withdrawn  prior  to  initiation,  in  which  case  it  shall  be 

considered not to have been lodged. 

13.  Where,  after  consultation,  it  is apparent  that  there  is  sufficient  evidence  to  justify 
initiating  a proceeding,  the  Commission  shall  do  so  within  45  days of the  lodging 
of the  complaint  and  shall  publish  a  notice  in  the  Official  Journal  of  the 
European Communities.  Where  insufficient  evidence  has  been  presented,  the 
complainant  shall, after  consultation,  be so informed  within 45 days of the date on 
which the complaint is lodged with the Commission. 

14.  The  notice  of  initiation  of  the  proceedings  shall  announce  the  initiation  of  an 
investigation,  indicate the  product  and countries concerned,  give a summary  of the 
information  received,  and  provide  that  all  relevant 
is  to  be 
communicated  to the Commission; it shall state the periods within which  interested 
parties  may  make  themselves  known,  present  their  views  in  writing  and  submit 
information,  if such views and  information  are to be taken  into  account  during the 
investigation; it shall also state the period within which interested  parties may apply 
to be heard by the Commission in accordance with Article 11(5). 

information 

15.  The  Commission  shall  advise  the  exporters, 

importers  and  representative 
associations of importers or exporters known to  it to  be concerned,  as well as the 
country  of  origin  and/or  export  and  the  complainants,  of  the  initiation  of  the 
proceedings  and,  with  due  regard  to  the  protection  of  confidential  information, 
provide  the  full  text  of  the  written  complaint  referred  to  in  paragraph  1 to  the 
known  exporters  and to  the authorities of the country  of origin and/or  export, and 
make  it  available  upon  request  to  other  interested  parties  nvolved.  Where  the 
number  of  exporters  involved  is  particularly  high,  the  full  text  of  the  written 
complaint  may instead be  provided  only to  the authorities  of the  country  of origin 
and/or export or to the relevant trade association. 

16.  A  countervailing  duty 
customs clearance. 

investigation  shall  not  hinder 

the  procedures  of 

Article 11 

The investigation 

1. 

Following  the  initiation  of  the  proceeding,  the  Commission,  acting  in  cooperation 
with the Member States, shall commence an investigation at Community level. Such 
investigation  shall  cover  both  subsidization  and  injury,  and  these  shall  be 
investigated  simultaneously.  For  the  purpose  of  a  representative  finding,  an 
investigation  period  shall  be  selected  which,  in  the  case  of  subsidization  shall, 
normally,  cover  the  investigation  period  provided  for  in  Article  5(1).  Information 
relating  to  a  period  subsequent  to  the  investigation  period  shall  not,  normally,  be 
taken into account. 

20 

2. 

3. 

4. 

5. 

Parties  receiving  questionnaires  used  in a countervailing  duty investigation  shall  be 
given  at least  30  days  to  reply.  The time  limit  for  exporters  shall  be  counted from 
the  date  of receipt  of the  questionnaire,  which  for this  purpose  shall  be  deemed  to 
have been received one week from the day on which it was sent to the respondent or 
transmitted  to  the  appropriate  diplomatic  representative  of  the  country  of  origin 
and/or  export.  An  extension  to  the  30-day  period  may  be  granted,  due  account 
being taken of the time limits of the investigation,  provided that the party shows due 
cause for such extension, in terms of its particular circumstances. 

The  Commission  may  request  Member  States  to  supply 
information,  and 
Member States  shall  take  whatever  steps  are  necessary  in  order  to  give  effect  to 
such  requests.  They  shall  send  to  the  Commission  the  information  requested 
together  with  the  results  of  all  inspections,  checks  or  investigations  carried  out. 
Where  this  information  is  of  general  interest  or  where  its  transmission  has  been 
requested  by  a  Member  State, 
it  to  the 
Member States,  provided  it  is  not  confidential,  in  which  case  a  non-confidential 
summary shall be forwarded. 

the  Commission  shall  forward 

The Commission  may request  Member  States to  carry out  all necessary  checks and 
inspections,  particularly  amongst  importers,  traders and Community  producers,  and 
to  carry out investigations  in third countries,  provided that the firms concerned  give 
their consent  and that the government  of the country  in question has been  officially 
notified  and  raises  no  objection.  Member  States  shall  take  whatever  steps  are 
necessary in order to  give  effect  to  such requests from the Commission.  Officials  of 
the  Commission  shall  be  authorized,  if  the  Commission  or  a  Member  State  so 
requests, to assist the officials  of Member States in carrying out their duties. 

The  interested  parties  which  have  made  themselves  known  in  accordance  with 
Article  10(14),  shall be heard if they have, within the period  prescribed  in the notice 
published  in  the  Official  Journal  of  the  European  Communities,  made  a  written 
request  for  a hearing  showing  that they  are an interested  party  likely  to  be  affected 
by the result of the proceeding and that there are particular reasons why they  should 
be heard. 

themselves  known 

6.  Opportunities  shall,  on  request,  be  provided  for  the  importers,  exporters  and  the 
in  accordance  with 
complainants,  which  have  made 
Article  10(14),  and the government  of the country of origin  and/or  export,  to  meet 
those parties having adverse interests,  so that opposing views may be presented and 
rebuttal arguments offered.  Provision of such opportunities must take account of the 
need to preserve confidentiality  and of the convenience to the parties. There shall be 
no  obligation  on  any  party  to  attend  a  meeting,  and  failure  to  do  so  shall  not  be 
prejudicial  to that party's case.  Oral information  provided  under this paragraph shall 
be  taken  into  account  by the  Commission  in  so  far  as  it  is  subsequently  confirmed 
in writing. 

7. 

The complainants, the government  of the country  of origin and/or export,  importers 
their  representative  associations,  users  and  consumer 
and  exporters  and 
organizations,  which  have  made 
in  accordance  with 
Article  10(14),  may,  upon written request,  inspect  all information  made available  to 
the Commission by any party to an investigation,  as distinct from internal  documents 
prepared  by  the  authorities  of  the  Community  or  its  Member  States,  which  is 
relevant to the presentation of their cases and is not confidential  within the meaning 
21 

themselves  known 

8. 

9. 

of Article 29, and that  it  is used  in the investigation.  Such parties may respond  to 
such  information  and  their  comments  shall  be  taken  into  consideration  wherever 
they are sufficiently  substantiated in the response. 

Except  in  circumstances  provided  for  in  Article  28,  the  information  which  is 
supplied by interested  parties and upon which findings are based  shall be examined 
for accuracy as far as possible. 

For  proceedings  initiated  pursuant  to  Article  10(13),  an  investigation  shall, 
whenever possible, be concluded within one year.  In any event,  such  investigations 
shall in all cases by concluded within  13 months of initiation, in accordance with the 
findings made pursuant to Article  13 for undertakings or the findings made pursuant 
to Article  15 for definitive action. 

10.  Throughout  the  investigation  the  Commission  shall  afford  the  country  of  origin 
and/or  export  a  reasonable  opportunity  to  continue  consultations  with  a  view  to 
clarifying the factual  situation and arriving at a mutually agreed solution. 

Article 12 

Provisional measures 

1. 

Provisional duties may be imposed if: 

(a)  proceedings have been initiated in accordance with Article 10; 

(b) 

(c) 

a notice has been given  to  that  effect  and  interested  parties  have  been given 
adequate  opportunities  to  submit  information  and  make  comments  in 
accordance with Article 10(14); 

a  provisional  affirmative  determination  has  been  made  that  the  imported 
product  benefits  from  countervailable  subsidies  and  of  consequent  injury  to 
the Community industry; and 

(d) 

the Community interest calls for intervention to prevent such injury. 

The provisional duties shall be imposed no earlier than 60 days from the initiation of 
the proceedings but no later than nine months from the initiation of the proceedings. 

The amount of the provisional countervailing duty shall not exceed the total amount 
of  countervailable  subsidies  as  provisionally  established  but  it  should  be  less  than 
this  amount,  if  such  lesser  duty  would  be  adequate  to  remove  the  injury  to  the 
Community industry 

Provisional  duties  shall be  secured  by  a guarantee  and  the  release  of the  products 
concerned  for  free  circulation  in  the  Community  shall  be  conditional  upon  the 
provision of such guarantee. 

The  Commission  shall  take  provisional  action  after  consultation  or,  in  cases  of 
extreme  urgency,  after 
the  Member  States.  In  this  latter  case, 
consultations  shall  take  place  ten  days,  at  the  latest,  after  notification  to  the 
Member States of the action taken by the Commission. 

informing 

2. 

3. 

22 

4.  Where  a  Member  State  requests  immediate  intervention  by  the  Commission  and 
where the conditions of the first and second subparagraphs  of paragraph  1 are met, 
the Commission  shall, within a maximum  of five working  days from receipt  of the 
request, decide whether a provisional countervailing duty shall be imposed. 

5. 

6. 

The Commission  shall forthwith  inform  the Council  and the Member  States  of any 
decision taken under paragraphs  1  to 4. The Council, acting by a qualified  majority, 
may decide  differently. 

Provisional  countervailing  duties  shall  have  a  maximum  period  of  validity  of 
four months. 

Article 13 

Undertakings 

1. 

Investigations may be terminated  without the imposition of provisional or  definitive 
duties upon receipt of satisfactory voluntary undertakings under which. 

(a) 

(b) 

the country of origin and/or export  agrees to eliminate or limit the subsidy or 
take other measures concerning its effects; or 

any exporter  undertakes to revise its prices or to cease exports to the area in 
question as long as such exports benefit  from countervailable subsidies, so that 
the Commission,  after  consultation, is satisfied  that the injurious  effect  of the 
subsidies  is eliminated.  Price  increases  under  such  undertakings  shall  not  be 
higher than is necessary to offset  the amount of countervailable  subsidies, and 
should  be less than  the amount  of countervailable  subsidies if such  increases 
would be adequate to remoye the injury to the Community industry. 

2.  Undertakings  may  be  suggested  by  the  Commission,  but  no  country  or  exporter 
shall  be  obliged  to  enter-into  such  an  undertaking.  The  fact  that  countries  or 
exporters  do not  offer  such undertakings,  or  do  not  accept  an invitation  to  do so, 
shall in no way prejudice  consideration of the case. However,  it may be determined 
that a threat of injury is more likely to be realized if the subsidized imports continue. 
Undertakings  shall not be sought  or  accepted from countries  or  exporters unless a 
provisional  affirmative  determination  of  subsidization  and  injury  caused  by  such 
subsidization  has been made.  Save in exceptional  circumstances,  undertakings may 
not be offered  later than the end of the period  during which representations may be 
made pursuant to Article 30(5). 

3.  Undertakings  offered  need  not  be  accepted  if  their  acceptance  is  considered 
impractical,  such as where the number of actual or potential exporters is too  great, 
or  for  other  reasons,  including  reasons  of general  policy.  The  exporter  and/or  the 
country  of  origin  and/or  export  concerned  may  be  provided  with  the  reasons  for 
which  it  is  proposed  to  reject  the  offer  of  an  undertaking  and  may  be  given  an 
opportunity to make comments thereon. The reasons for rejection shall be set out in 
the definitive decision. 

4. 

Parties  which  offer  an  undertaking  shall  be  required  to  provide  a  non-confidential 
version of such undertaking, so that it may be made available to interested parties to 
the investigation. 

23 

5.  Where  undertakings  are,  after  consultation,  accepted,  and  where  there  is  no 
objection  raised  within  the  Advisory  Committee,  the  investigation  shall  be 
terminated. In all other cases, the Commission shall submit to the Council  forthwith 
a  report  on  the  results  of  the  consultation,  together  with  a  proposal  that  the 
investigation be terminated.  The investigation shall be deemed terminated  if,  within 
one month, the Council, acting by qualified majority, has not decided otherwise. 

6. 

If the undertakings  are  accepted,  the investigation  of  subsidization  and  injury  shall 
normally be completed.  In such a case, if a negative determination  of subsidization 
or  injury  is made, the undertaking  shall automatically  lapse, except  in cases where 
such a determination  is due in large part to the existence of an undertaking.  In such 
cases, it may be required that an undertaking be maintained for  a reasonable period. 
In the  event  that  an  affirmative  determination  of  subsidization  and  injury  is made, 
the  undertaking  shall  continue  consistent  with  its  terms  and  the  provisions  of 
this Regulation. 

7. 

The  Commission  shall  require  any  country  or  exporter  from  whom  undertakings 
have been accepted to provide, periodically, information  relevant to the fulfilment  of 
such undertaking, and to permit verification  of pertinent data. Non-compliance with 
such requirements shall be construed as a breach of the undertaking. 

8.  Where  undertakings  are  accepted  from  certain  exporters  during  the  course  of an 
investigation, they shall, for the purpose of Articles  18,  19, 20 and 22, be deemed to 
take effect from the date on which the investigation is concluded for the country of 
origin and/or export. 

9. 

In case of breach or withdrawal of undertakings by any party, a definitive  duty shall 
be  imposed  in  accordance  with  Article  15,  on  the  basis  of  the  facts  established 
within the context  of the investigation  which  led to  the undertaking,  provided  that 
such investigation was concluded  with a final determination  as to  subsidization and 
injury,  and that the exporter concerned, or the country of origin and/or export, has, 
except in the case of withdrawal of the undertaking by the exporter or such country, 
been given an opportunity to comment. 

10.  A  provisional  duty  may,  after  consultation,  be  imposed  in  accordance  with 
Article 12 on the basis  of the best  information  available,  where  there  is  reason  to 
believe that an undertaking is being breached, or in case of breach or withdrawal of 
an undertaking  where the investigation  which  led  to  the undertaking  has not  been 
concluded. 

Article 14 

Termination without measures 

1.  Where the complaint  is withdrawn,  the  proceeding  may be terminated  unless  such 

termination would not be in the Community interest. 

2.  Where,  after  consultation,  protective  measures  are  unnecessary  and  there  is  no 
objection  raised  within  the  Advisory  Committee,  the  investigation  or  proceeding 
shall be terminated.  In all other  cases, the Commission  shall  submit  to  the Council 
forthwith  a report  on the results  of the consultation,  together  with a proposal  that 

24 

3. 

4. 

the proceeding be terminated.  The proceeding shall be deemed terminated  if,  within 
one month, the Council, acting by a qualified majority, has not decided otherwise. 

There shall be immediate termination of the proceeding where it is determined  that 
the  amount  of  countervailable  subsidies  is  de  minimis,  in  accordance  with  the 
provisions  of  paragraph  5,  or  where  the  volume  of  subsidized  imports,  actual  or 
potential, or the injury, is negligible. 

For  a  proceeding  initiated  pursuant  to  Article  10(13),  injury  shall  normally  be 
regarded  as  negligible  where  the  market  share  of  the  imports  is  less  than  the 
amounts set out in Article  10(11). With regard to investigations concerning imports 
from  developing  countries,  the  volume  of  subsidized  imports  shall  also  be 
considered  negligible  if it  represents  less  than  4%  of  the  total  imports  of  the  like 
product  in  the  Community,  unless  imports  from  developing  countries  whose 
individual  shares  of  total  imports  represent  less  than  4%  collectively  account  for 
more than 9% of the total imports of the like product in the Community. 

5. 

The amount of the countervailable  subsidies shall be considered  to be de minimis if 
such amount is less than  1% ad valorem, except that 

(a) 

(b) 

as  regards  investigations  concerning  imports  from  developing  countries  the 
de minimis threshold shall be 2% ad valorem, and 

for those developing countries Members of the WTO referred  to in Annex VII 
to  the  Subsidies Agreement  as well  as for  developing  countries  Members of 
the  WTO  which  have  completely  eliminated  export  subsidies  as  defined  in 
Article 3(4) (a) of this Regulation,  the de minimis subsidy threshold  shall be 
3%  ad  valorem,  where  the  application  of  this  provision  depends  on  the 
elimination  of  export  subsidies,  it  shall  apply  from  the  date  on  which  the 
elimination  of  export  subsidies  is  notified  to  the  WTO  Committee  on 
Subsidies  and  Countervailing  Measures,  and  for  so  long  as  export  subsidies 
are  not  granted  by  the  developing  country  concerned;  this  provision  shall 
expire eight years from the date of entry into force of the WTO Agreement; 

provided that it is only the investigation  that  shall be terminated  where the amount 
of the countervailable  subsidies is below the relevant de minimis level for  individual 
exporters, who shall remain subject to the proceedings and may be re-investigated in 
any subsequent review carried out for the country concerned pursuant to Articles 18 
and 19. 

Article 15 

Imposition of definitive duties 

1.  Where the facts as finally established show the existence of countervailable subsidies 
and  injury  caused  thereby,  and  the  Community  interest  calls  for  intervention  in 
accordance with Article 31,  a definitive  countervailing duty shall be imposed by the 
Council, acting by simple majority on a proposal submitted by the Commission  after 
consultation  of  the  Advisory  Committee,  unless  the  subsidy  or  subsidies  are 
withdrawn  or  it  has  been  demonstrated  that  the  subsidies  no  longer  confer  any 
benefit  on the exporters involved. Where provisional duties are in force,  a proposal 
for  definitive  action  shall  be  submitted  to  the  Council  not  later  than  one  month 

25 

before  the  expiry  of  such  duties.  The  amount  of  the  countervailing  duty  shall  not 
exceed the amount of countervailable subsidies from which the exporters have been 
found to benefit,  established pursuant to this Regulation, but should be less than the 
total amount of countervailable  subsidies, if such lesser duty would be adequate to 
remove the injury to the Community industry. 

2.  A countervailing duty shall be imposed in the appropriate amounts in each case, on a 
non-discriminatory basis, on imports of a product from all sources found  to  benefit 
from countervailable  subsidies and causing  injury,  except  as to  imports from those 
sources  from  which  undertakings  under  the  terms  of  this  Regulation  have  been 
accepted.  The regulation imposing the duty shall specify  the duty for  each supplier, 
or, if that is impracticable, the supplying country concerned. 

3.  When  the  Commission  has  limited  its  examination  in  accordance  with  Article  27, 
any countervailing duty applied to imports from exporters or producers which have 
made themselves known in accordance with Article 27 but were not included  in the 
examination  shall  not  exceed  the  weighted  average  amount  of  countervailable 
subsidies established for the parties in the sample. For the purpose of this paragraph, 
the Commission shall disregard any zero and de minimis amounts of countervailable 
subsidies and amounts of countervailable  subsidies established  in the circumstances 
referred  to  in  Article  28.  Individual  duties  shall  be  applied  to  imports  from  any 
exporter  or  producer  for  which  an  individual  amount  of  subsidization  has  been 
calculated as provided for in Article 27. 

Article 16 

Retroactivity 

1. 

Provisional  measures  and  definitive  countervailing  duties  shall  only  be  applied  to 
products  which  enter  free  circulation  after  the  time  when  the  measure  taken 
pursuant  to  Article  12(1)  or  Article  15(1),  as  the  case  may be,  enters  into  force, 
subject to the exceptions set out in this Regulation. 

2.  Where a provisional duty has been applied and the facts  as finally established  show 
the  existence  of  countervailable  subsidies  and  injury,  the  Council  shall  decide, 
irrespective  of  whether  a  definitive  countervailing  duty  is  to  be  imposed,  what 
proportion  of the provisional  duty is to be definitively  collected.  For this purpose, 
"injury"  shall not  include material retardation  of the establishment  of a Community 
industry,  nor  threat  of material  injury,  except  where  it  is found  that  this would,  in 
the absence of provisional measures, have developed into material injury.  In all other 
cases involving such threat or retardation,  any provisional amounts shall be released 
and  definitive  duties  can  only  be  imposed  from  the  date  on  which  a  final 
determination of threat or material retardation is made. 

3. 

If  the  definitive  countervailing  duty  is  higher  than  the  provisional  duty,  the 
difference  shall not be collected.  If the definitive  duty is lower than the provisional 
duty,  the  duty  shall  be  recalculated.  Where  a final determination  is  negative,  the 
provisional duty shall not be confirmed. 

26 

4.  A definitive  countervailing  duty may be levied  on products  which were entered  for 
consumption  not  more than 90  days prior  to  the  date  of application  of provisional 
measures  but  not  prior  to  the  initiation  of  the  investigation,  provided  that  the 
imports  have  been  registered  in  accordance  with  Article  24(5),  the  importers 
concerned have been given an opportunity to comment by the Commission, and: 

(a) 

there  are critical  circumstances where for  the  subsidized  product  in  question 
injury  which is difficult  to  repair  is caused  by massive imports in a relatively 
short  period  of a product  benefiting from countervailable  subsidies under the 
terms of this Regulation; and, 

(b) 

it is deemed  necessary,  in order to preclude the recurrence  of such injury,  to 
assess countervailing duties retroactively on those imports. 

5. 

In cases of breach or withdrawal of undertakings, definitive  duties may be levied on 
goods entered  for  free  circulation  not  more than  90 days before  the  application  of 
provisional measures, provided that the imports have been registered  in accordance 
with  Article  24(5)  and  that  any  such  retroactive  assessment  shall  not  apply  to 
imports entered before the breach or withdrawal of the undertaking. 

Article 17 

Duration 

A countervailing measure shall remain in force only as long as, and to the extent that, it is 
necessary to counteract the countervailable subsidies which are causing injury. 

Article 18 

Expiry reviews 

1.  A definitive countervailing measure shall expire five years from  its imposition or  five 
years from the date of the most recent review which has covered both  subsidization 
and injury,  unless it is determined in a review that the expiry would be likely to lead 
to  a continuation  or  recurrence  of subsidization  and  injury.  Such  an expiry  review 
shall be initiated on the initiative of the Commission,  or upon a request  made by or 
on behalf of Community producers,  and the measure  shall remain in force  pending 
the outcome of such review. 

2.  An  expiry  review  shall  be  initiated  where  the  request  contains  sufficient  evidence 
that  the  expiry  of  the  measures  would  be  likely  to  result  in  a  continuation  or 
recurrence  of  subsidization  and  injury.  Such  a  likelihood  may,  for  example,  be 
indicated  by  evidence  of  continued  subsidization  and  injury  or  evidence  that  the 
removal  of  injury  is partly  or  solely  due to  the  existence  of measures  or  evidence 
that  the  circumstances  of  the  exporters,  or  market  conditions,  are  such  that  they 
would indicate the likelihood of further  injurious  subsidization. 

3. 

In  carrying  out  investigations  under  this  Article,  the  exporters,  importers,  the 
country  of origin  and/or  export  and  the  Community  producers  shall  be  provided 
with  the  opportunity  to  amplify,  rebut  or  comment  on  the  matters  set  out  in  the 
review  request,  and  conclusions  shall  be  reached  with  due  account  taken  of  all 
relevant  and  duly documented  evidence presented  in relation  to  the question  as to 

27 

whether  the  expiry  of  measures  would  be  likely,  or  unlikely,  to  lead  to  the 
continuation or recurrence of subsidization and injury. 

4.  A  notice  of  impending  expiry  shall  be  published  in  the  Official  Journal  of  the 
European  Communities  at  an  appropriate  time  in  the final year  of  the  period  of 
application  of the  measures  as  defined  in this  Article.  Thereafter,  the  Community 
producers shall, no later than three months before the end of the five-year period, be 
entitled  to  lodge  a  review  request  in  accordance  with  paragraph  2.  A notice 
announcing the actual expiry of measures under this Article shall also be published. 

Article 19 

Interim reviews 

1. 

The  need  for  the  continued  imposition  of  measures  may  also  be  reviewed,  where 
warranted,  on the initiative of the Commission or at the request  of a Member  State 
or, provided  that  a reasonable period  of time of at least  one year has elapsed  since 
the imposition  of the definitive  measure, upon  a request  by any exporter,  importer 
or  by  the  Community  producers  or  the  country  of  origin  and/or  export  which 
contains sufficient  evidence substantiating the need for such an interim review. 

2.  An interim  review  shall  be  initiated  where  the request  contains  sufficient  evidence 
that  the  continued  imposition  of the  measure  is  no  longer  necessary  to  offset  the 
countervailable subsidy and/or that the injury would be unlikely to continue or recur 
if the measure were removed or varied, or that the existing measure is not, or is no 
longer, sufficient  to counteract the countervailable subsidy which is causing injury. 

3.  Where the countervailing duties imposed are less than the amount of countervailable 
subsidies  found,  an  interim  review  shall  be  initiated  if  the  Community  producers 
provide sufficient  evidence that the duties have led to no movement,  or  insufficient 
movement,  of  resale  prices  of  the  imported  product  in  the  Community.  If  the 
investigation  proves  the  allegations  to  be  correct,  countervailing  duties  may  be 
increased  to  achieve  the  price  increase  required  to  remove  injury;  however,  the 
increased duty level shall not exceed the amount of the countervailable subsidies. 

4. 

In  carrying  out  investigations  pursuant  to  this  Article,  the  Commission  may 
inter alia  consider  whether  the  circumstances  with  regard  to  subsidization  and 
injury  have  changed  significantly,  or  whether  existing  measures  are  achieving  the 
intended  results  in  removing  the  injury  previously  established  under  Article  8.  In 
these respects,  account  shall be taken  in the final determination  of all relevant  and 
duly documented evidence. 

Article 20 

Accelerated reviews 

Any exporter  whose exports are subject  to  a definitive  countervailing  duty but  who  was 
not  individually  investigated  during  the  original  investigation  for  reasons  other  than  a 
refusal  to  cooperate  with  the  Commission,  shall  be  entitled,  upon  request,  to  an 
accelerated  review  in  order  that  the  Commission  may  promptly  establish  an  individual 
countervailing  duty  rate  for  that  exporter.  Such  a  review  shall  be  initiated  after 

28 

consultation  of the Advisory  Committee  and after Community producers have been given 
an opportunity to comment. 

Article 21 

Refunds 

1.  Notwithstanding  Article  18,  an  importer  may  request  reimbursement  of  duties 
collected  where  it  is  shown  that  the  amount  of  countervailable  subsidies,  on  the 
basis  of  which  duties  were  paid,  has  been  either  eliminated  or  reduced  to  a  level 
which is below the level  of the duty in force. 

2. 

3. 

4. 

In  requesting  a  refund  of  countervailing  duties,  the  importer  shall  submit  an 
application  to  the  Commission.  The  application  shall  be  submitted  via  the 
Member State  in  the  territory  of  which  the  products  were  released  for  free 
circulation,  within  six  months  of  the  date  on  which  the  amount  of  the  definitive 
duties to be levied was  duly determined by the competent  authorities  or of the  date 
on which a decision was made definitively  to collect  the amounts secured by way  of 
provisional  duty.  Member  States 
the 
Commission forthwith. 

forward 

request 

shall 

the 

to 

An application for refund  shall be considered  to be duly supported by evidence  only 
where  it  contains  precise  information  on  the  amount  of  refund  of  countervailing 
duties  claimed  and  all  customs  documentation  relating  to  the  calculation  and 
payment  of such amount.  It  shall also  include  evidence,  for a representative period, 
of the amount of countervailable  subsidies for the exporter or producer to which the 
duty  applies.  In  cases  where  the  importer  is  not  associated  with  the  exporter  or 
producer concerned  and such information is not immediately  available,  or where the 
exporter or producer  is unwilling  to  release  it  to  the  importer,  the application  shall 
contain  a  statement  from  the  exporter  or  producer  that  the  amount  of 
countervailable  subsidies has been reduced or eliminated,  as specified  in this Article, 
and  that  the  relevant  supporting  evidence  will  be  provided  to  the  Commission. 
Where  such  evidence  is  not  forthcoming  from  the  exporter  or  producer  within  a 
reasonable period of time the application shall be rejected. 

The  Commission  shall,  after  consultation  of  the  Advisory  Committee,  decide 
whether  and to  what  extent  the  application  should  be  granted,  or it  may  decide  at 
any time to  initiate an interim review,  whereupon the information  and findings from 
such  review,  carried  out  in  accordance  with  the  provisions  applicable  for  such 
reviews,  shall be used to  determine whether and to  what  extent  a refund  is justified. 
Refunds  of  duties  shall  normally  take  place  within  12  months,  and  in  no 
circumstances  more than  18 months after the  date on which a request  for  a refund, 
duly supported by evidence,  has been made by an importer of the product  subject to 
the  countervailing  duty.  The  payment  of  any  refund  authorized  should  normally  be 
made by Member States within 90 days of the abovementioned  decision. 

29 

Article 22 

General provisions on reviews and  refunds 

1. 

The  relevant  provisions  of  Articles  10  and  11,  excluding  those  relating  to  time 
limits,shall apply to any review carried  out  pursuant to Articles  18,  19 and 20. Any 
such  review  shall  be  carried  out  expeditiously  and  shall  normally  be  concluded 
within 12 months of the date of initiation of the review. 

2.  Reviews  pursuant  to  Articles  18,  19 and  20  shall  be  initiated  by the  Commission 
after  consultation  of  the  Advisory  Committee.  Where  warranted  by  reviews, 
measures  shall  be  repealed  or  maintained  pursuant  to  Article  18,  or  repealed, 
maintained  or  amended  pursuant  to  Articles  19  and  20,  by  the  Community 
institution  responsible  for  their  introduction.  Where  measures  are  repealed  for 
individual exporters, but not for the country as a whole, such exporters shall remain 
subject  to  the  proceeding  and  may  be  re-investigated  in  any  subsequent  review 
carried out for that country pursuant to Articles 18, 19 and 20. 

3.  Where a review of measures pursuant to Article  19 is in progress at the end  of the 
period of application of measures as defined  in Article  18, the measures shall also be 
investigated under the provisions of Article 18. 

4. 

In all review or refund  investigations carried out pursuant  to  Articles  18 to  21,  the 
Commission  shall,  provided  that  circumstances  have  not  changed,  apply  the  same 
methodology  as in the investigation which led to the duty,  with  due account  being 
taken of Articles 5, 6 and 7 and Article 27. 

Article 23 

Circumvention 

1.  Countervailing  duties  imposed  pursuant  to  this  Regulation  may  be  extended  to 
imports from third  countries of like products, or parts thereof, when circumvention 
of the measures in force is taking place. Circumvention shall be defined  as a change 
in the pattern of trade between third countries and the Community which stems  from 
a  practice,  process  or  work  for  which  there  is  insufficient  cause  or  economic 
justification  other than the imposition of the duty, and where there is evidence that 
the remedial effects  of the duty are being undermined  in terms of the prices and/or 
quantities  of  the  like  products  and  that  the  imported  like  product  and/or  parts 
thereof still benefit from the subsidy. 

2. 

Investigations  shall be  initiated  pursuant  to  this  Article where the request  contains 
sufficient  evidence regarding the factors  set  out  in paragraph  1. Initiations  shall be 
made,  after  consultation  of  the  Advisory  Committee,  by  Commission  Regulation 
which  shall  also  instruct  the  customs  authorities  to  make  imports  subject  to 
registration 
to  request  guarantees. 
Investigations  shall  be  carried  out  by  the  Commission,  which  may  be  assisted  by 
customs authorities, and  shall be concluded  within nine months. When the facts  as 
finally  ascertained  justify  the  extension  of  measures,  this  shall  be  done  by  the 
.Council,  acting  by  simple majority  and  on  a proposal from the  Commission, from 

in  accordance  with  Article  24(5)  or 

30 

the  date on which registration  was imposed  pursuant  to  Article 24(5)  or  on which 
guarantees  were  requested.  The  relevant  procedural  provisions  of  this  Regulation 
with  regard  to  initiations  and  the conduct  of investigations  shall  apply  pursuant  to 
this Article. 

3. 

Products  shall not be subject  to  registration  pursuant  to  Article 24(5)  or  measures 
where they are accompanied  by a customs certificate  declaring that the importation 
of the goods  does not  constitute  circumvention.  Such certificates  may be issued  to 
importers,  upon  written  application  following  authorization  by  decision  of  the 
Commission  after  consultation  of  the  Advisory  Committee,  or  decision  of  the 
Council imposing measures, and they shall remain valid for the period, and under the 
conditions, set down therein. 

4.  Nothing  in  this  Article  shall  preclude  the  normal  application  of  the  provisions  in 

force concerning customs duties. 

Article 24 

General provisions 

1. 

Provisional  or  definitive  countervailing  duties  shall be imposed  by Regulation,  and 
collected  by Member  States in the form,  at the rate  specified  and  according  to  the 
other  criteria  laid  down  in the Regulation  imposing  such  duties.  Such  duties  shall 
also  be  collected  independently  of  the  customs  duties,  taxes  and  other  charges 
normally imposed on imports. No product shall be subject to both anti-dumping and 
countervailing  duties  for  the  purpose  of  dealing  with  one  and  the  same  situation 
arising from dumping or from export subsidization. 

2.  Regulations 

imposing  provisional  or  definitive  countervailing  duties,  and 
Regulations  or  Decisions  accepting  undertakings  or  terminating  investigations  or 
proceedings, shall be published in the Official  Journal of the European Communities. 
Such Regulations or Decisions shall contain in particular, and with due regard to the 
protection  of confidential  information,  the names of the exporters, if possible, or of 
the countries involved, a description of the product  and a summary of the facts and 
considerations  relevant  to  the  subsidy  and  injury  determinations.  In  each  case,  a 
copy  of the Regulation  or  Decision  shall be  sent  to  known  interested  parties.  The 
provisions of this paragraph shall apply mutatis mutandis to reviews. 

3. 

4. 

Special provisions, in particular with regard to the common definition of the concept 
of origin, as contained  in Council Regulation  (EEC) No 2913/925, may be adopted 
pursuant to this Regulation. 

In the Community interest, measures imposed pursuant to this Regulation may, after 
consultation  of  the  Advisory  Committee,  be  suspended  by  a  decision  of  the 
Commission  for  a  period  of  nine  months.  The  suspension  may  be  extended  for  a 
further  period,  not  exceeding  one year,  if the Council  so decides,  acting by simple 
majority  on  a  proposal  from  the  Commission.  Measures  may  only  be  suspended 
where  market  conditions  have  temporarily  changed  to  such  an  extent  that  injury 

OJ  No  L  302.  19.10.1992,  p.  1;  Regulation  as  last  amended  by  European  Parliament  and 
Council  Regulation (EC) No 82/97 (OJ No L 17, 21.1.1997, p. 1). 

31 

would  be  unlikely  to  resume  as  a  result  of  tjie  suspension,  and  provided  that  the 
Community  industry  has  been  given  an  opportunity  to  comment  and  that  those 
comments  have  been  taken  into  account.  Measures  may,  at  any  time  and  after 
consultation, be reinstated if the reason for suspension is no longer applicable. 

5. 

The  Commission  may,  after  consultation  of  the  Advisory  Committee,  direct  the 
customs  authorities  to  take  the  appropriate  steps  to  register  imports,  so  that 
measures  may subsequently  be  applied  against  those  imports from the  date  of  such 
registration.  Imports  may be  made  subject  to  registration  following  a request from 
the  Community  industry  which  contains  sufficient  evidence  to  justify  such  action. 
Registration shall be introduced by Regulation which shall specify  the purpose of the 
action and,  if appropriate,  the  estimated  amount  of possible  future  liability.  Imports 
shall not be made subject to registration for a period longer than nine months. 

6.  Member  States  shall report to  the Commission  every month  on  the import  trade  of 
products  subject  to  investigation  and  to  measures,  and  on  the  amount  of  duties 
collected pursuant to this Regulation. 

Article 25 

Consultations 

1. 

Any  consultations  provided  for  in  this  Regulation,  except  those  referred  to  in 
Articles  10(9)  and  11(10),  shall  take  place  within  an  Advisory  Committee,  which 
shall  consist  of representatives  of  each Member  State,  with  a representative  of  the 
Commission  as  chairman.  Consultations  shall  be  held  immediately  on  request  by  a 
Member  State  or  on  the  initiative  of  the  Commission,  and  in  any  event  within  a 
period of time which allows the time limits set by this Regulation to be adhered to. 

2. 

The  Committee  shall  meet  when  convened  by  its  chairman.  He  shall  provide  the 
Member States, as promptly as possible, with all relevant information. 

3.  Where necessary, consultation may be in writing only; in that event, the Commission 
shall notify  the Member  States and shall  specify  a period  within which they  shall be 
entitled  to  express  their  opinions  or  to  request  an  oral  consultation  which  the 
chairman  shall  arrange,  provided  that  such  oral  consultation  can  be  held  within  a 
period of time which allows the time limits set by this Regulation to be adhered to. 

4. 

Consultation shall cover, in particular: 

(a) 

the  existence  of  countervailable  subsidies  and  the  methods  of  establishing 
their amount; 

(b) 

the existence and extent of injury; 

(c) 

the causal link between the subsidized imports and injury; 

(d) 

the  measures  which,  in  the  circumstances,  are  appropriate  to  prevent  or 
remedy  the  injury  caused  by  the  countervailable  subsidies  and  the  ways  and 
means of putting such measures into  effect. 

32 

Article 26 

Verification visits 

1. 

2. 

3. 

The Commission  shall, where it considers it appropriate, carry out visits to examine 
the  records  of  importers,  exporters,  traders,  agents,  producers,  trade  associations 
and organizations, to verify information  provided on subsidization and injury.  In the 
absence of a proper and timely reply a verification visit may not be carried out. 

The  Commission  may  carry  out  investigations  in  third  countries  as  required, 
provided  that  it  obtains  the  agreement  of  the firms concerned,  that  it  notifies  the 
country in question and that the latter does not  object  to the investigation.  As soon 
as the agreement  of the firms concerned  has been obtained  the Commission  should 
notify the country of origin and/or export of the names and addresses of the firms to 
be visited and the dates agreed. 

The firms concerned  shall be advised of the nature of the information  to be verified 
during verification  visits and of any further  information  which needs to be provided 
during  such  visits,  though  this  should  not  preclude  requests  made  during  the 
verification for further  details to be provided in the light of information  obtained. 

4. 

In  investigations  carried  out  pursuant  to  paragraphs  1,  2  and  3,  the  Commission 
shall be assisted by officials  of those Member States who so request. 

Article 27 

Sampling 

1. 

In  cases  where  the  number  of  complainants,  exporters  or  importers,  types  of 
product or transactions is large, the investigation may be limited to: 

(a) 

a  reasonable  number  of  parties,  products  or  transactions  by  using  samples 
which are statistically valid on the basis of information  available at the time of 
the selection; or 

(b) 

to the largest representative volume of the production,  sales or exports which 
can reasonably be investigated within the time available. 

The  selection  of parties, types  of products  or transactions  made under this  Article 
shall  rest  with  the  Commission,  though  preference  shall  be  given  to  choosing  a 
sample  in  consultation  with,  and  with  the  consent  of,  the  parties  concerned, 
provided that  such parties make themselves known and make sufficient  information 
available,  within  three  weeks  of  initiation  of  the  investigation,  to  enable  a 
representative sample to be chosen. 

In cases where the examination has been limited  in accordance with this Article, an 
individual amount  of countervailable  subsidization  shall, nevertheless, be calculated 
for  any  exporter  or  producer  not  initially  selected  who  submits  the  necessary 
information  within the time limits provided  for  in this Regulation,  except where the 
number of exporters or producers is so large that  individual examinations would be 
unduly burdensome and would prevent completion of the investigation in good time. 

2. 

3. 

33 

4.  Where it is decided to  sample  and there is a degree  of non-cooperation  by  some  or 
all  of  the  parties  selected  which  is  likely  to  materially  affect  the  outcome  of  the 
investigation,  a new  sample may be  selected.  However,  if a material  degree  of non-
cooperation persists  or there is insufficient  time to  select  a new sample, the relevant 
provisions of Article 28  shall apply. 

Article 28 

Non-cooperation 

1. 

In  cases  in  which  any  interested  party  refuses  access  to,  or  otherwise  does  not 
provide,  necessary  information  within the time limits provided  in this Regulation,  or 
significantly  impedes  the  investigation,  provisional  or final findings, affirmative  or 
negative,  may be made on the basis of the facts available. 

Where  it  is  found  that  any  interested  party  has  supplied  false  or  misleading 
information,  the  information  shall  be  disregarded  and  use  may  be  made  of  the 
facts available. 

Interested parties should be made aware of the consequences of non-cooperation. 

2. 

Failure  to  give  a  computerized  response  shall  not  be  deemed  to  constitute 
non-cooperation,  provided  that  the  interested  party  shows  that  presenting  the 
response as requested would result in an unreasonable extra burden or unreasonable 
additional cost. 

3.  Where the information  submitted by an interested party is not ideal in all respects it 
should  nevertheless  not be  disregarded,  provided  that  any  deficiencies  are not  such 
as to  cause undue difficulty  in arriving at a reasonably  accurate finding and that the 
information  is  appropriately  submitted  in good  time  and  is  verifiable,  and  that  the 
party has acted to the best of its ability. 

4. 

5. 

If  evidence  or  information  is  not  accepted,  the  supplying  party  shall  be  informed 
forthwith  of  the  reasons  therefor  and  shall  be  granted  an  opportunity  to  provide 
further  explanations  within  the  time  limit  specified.  If  the  explanations  are 
considered unsatisfactory,  the reasons for rejection of  such evidence  or  information 
shall be disclosed and given in published  findings. 

If determinations, including those regarding the amount of countervailable subsidies, 
are based on the provisions of paragraph  1, including the information  supplied in the 
complaint,  it  shall,  where  practicable  and  with  due  regard  to  the  time  limits  of  the 
investigation,  be  checked  by  reference  to  information  from  other  independent 
sources  which  may  be  available,  such  as  published  price  lists,  official  import 
statistics and customs returns,  or information  obtained from other interested  parties 
during the investigation. 

6. 

If  an  interested  party  does  not  cooperate,  or  cooperates  only  partially,  so  that 
relevant  information  is  thereby  withheld,  the  result  may  be  less  favourable  to  the 
party than if it had cooperated. 

34 

Article 29 

Confidentiality 

1.  Any information which is by nature confidential,  (for example, because its disclosure 
would  be  of  significant  competitive  advantage  to  a  competitor  or  would  have  a 
significantly  adverse  effect  upon  a  person  supplying  the  information  or  upon  a 
person  from  whom  he  has  acquired  the  information)  or  which  is  provided  on  a 
confidential  basis  by  parties  to  an  investigation  shall,  if  good  cause  is  shown,  be 
treated as such by the authorities. 

2. 

3. 

4. 

5. 

Interested  parties  providing  confidential  information  shall  be  required  to  furnish 
non-confidential  summaries thereof. Those summaries shall be in sufficient  detail to 
permit a reasonable understanding  of the  substance of the information  submitted in 
confidence.  In  exceptional  circumstances,  such  parties  may  indicate  that  such 
information  is  not  susceptible  of  summary.  In  such  exceptional  circumstances,  a 
statement of the reasons why summarization is not possible must be provided. 

If  it  is  considered  that  a  request  for  confidentiality  is  not  warranted  and  if  the 
supplier of the information  is either unwilling to make the information available or to 
authorize  its disclosure  in generalized  or  summary  form,  such  information  may be 
it  can  be  satisfactorily  demonstrated  from  appropriate 
disregarded  unless 
sources that  the  information  is  correct.  Requests  for  confidentiality  shall  not  be 
arbitrarily rejected. 

This  Article  shall  not  preclude  the  disclosure  of  general  information  by  the 
Community  authorities,  and  in  particular  of  the  reasons  on  which  decisions  taken 
pursuant to this Regulation are based, nor disclosure of the evidence relied on by the 
Community  authorities  in  so  far  as  is  necessary  to  explain  those  reasons  in  court 
proceedings.  Such  disclosure  must  take  into  account  the  legitimate  interests  of 
the parties  concerned  that  their  business  or  governmental  secrets  should  not 
be divulged. 

The  Council,  the  Commission  and  the  Member  States,  or  the  officials  of  any  of 
these,  shall  not  reveal  any  information  received  pursuant  to  this  Regulation  for 
which  confidential  treatment  has  been  requested  by  its  supplier,  without  specific 
permission  from  the  supplier.  Exchanges  of  information  between  the  Commission 
and Member  States, or any information  relating to  consultations  made  pursuant  to 
Article 25, or consultations  described  in Articles  10(9) and  11(10),  or  any internal 
documents prepared by the authorities of the Community or its Member States, shall 
be not be divulged except as specifically provided for in this Regulation. 

6. 

Information  received pursuant to this Regulation shall be used only for the purpose 
for which it was requested. 

35 

Article 30 

Disclosure 

1. 

2. 

3. 

4. 

The complainants, importers and exporters and their representative associations, and 
the country of origin and/or export, may request disclosure of the details underlying 
the  essential  facts  and  considerations  on  the  basis  of  which  provisional  measures 
have  been  imposed.  Requests  for  such  disclosure  shall  be  made  in  writing 
immediately  following  the  imposition  of  provisional  measures,  and  the  disclosure 
shall be made in writing as soon as possible thereafter. 

The parties  mentioned  in paragraph  1 may request final disclosure  of  the  essential 
facts  and  considerations  on  the  basis  of  which  it  is  intended  to  recommend  the 
imposition  of  definitive  measures,  or  the  termination  of  an  investigation  or 
proceedings without  the imposition  of measures, particular  attention  being paid  to 
the disclosure of any facts or considerations which are different from those used for 
any provisional measures. 

Requests for final disclosure shall be addressed to the Commission in writing and be 
received,  in  cases  where  a  provisional  duty  has  been  applied,  not  later  than  one 
month after  publication of the imposition of that duty. Where a provisional duty has 
not  been  applied,  parties  shall  be  provided  with  an  opportunity  to  request final 
disclosure within time limits set by the Commission. 

Final disclosure shall be given in writing. It  shall be made, due regard being had  to 
the  protection  of  confidential  information,  as  soon  as  possible  and,  normally,  not 
later  than  one  month  prior  to  a  definitive  decision  or  the  submission  by  the 
Commission  of any proposal  for final action  pursuant to  Articles  14 and  15. Where 
the Commission is not in a position to disclose certain facts or considerations at that 
time,  these  shall  be  disclosed  as  soon  as  possible  thereafter.  Disclosure  shall  not 
prejudice  any  subsequent  decision which  may be taken  by the  Commission  or  the 
Council but where such decision is based  on any different  facts  and  considerations 
these shall be disclosed as soon as possible. 

5.  Representations made after final disclosure is given shall be taken into consideration 
only  if received  within  a period  to  be  set  by the  Commission  in  each  case,  which 
shall be at least ten days, due consideration being given to the urgency of the matter. 

Article 31 

Community interest 

1.  A determination as to whether the Community interest calls for intervention  shall be 
based  on  an  appraisal  of  all  the  various  interests  taken  as  a  whole,  including  the 
interests  of  the  domestic  industry  and  users  and  consumers;  a  determination 
pursuant  to  this  Article  shall  only  be  made  where  all  parties  have been  given  the 
opportunity  to  make  their  views  known  pursuant  to  paragraph  2.  In  such  an 
examination,  the  need  to  eliminate  the  trade-distorting  effects  of  injurious 
subsidization 
given 
effective 
special consideration.  Measures,  as  determined  on  the  basis  of  subsidization  and 
injury  found,  may  not  be  applied  where  the  authorities,  on  the  basis  of  all  the 

competition 

restore 

shall 

and 

be 

to 

36 

2. 

3. 

4. 

5. 

6. 

information  submitted, can clearly conclude that it is not in the Community interest 
to apply such measures. 

In order to  provide  a  sound  basis on which the authorities  can take  account  of all 
views  and  information  in  the  decision  as  to  whether  or  not  the  imposition  of 
measures  is  in  the  Community  interest,  the  complainants,  importers  and  their 
representative  associations,  representative  users  and  representative  consumer 
organizations may, within the time limits specified  in the notice of initiation  of the 
countervailing duty investigation,  make themselves known and provide  information 
to  the  Commission.  Such  information,  or  appropriate  summaries  thereof,  shall  be 
made  available  to  the  other  parties  specified  in  this  paragraph,  and  they  shall  be 
entitled to respond to such information. 

The parties which have acted in conformity with paragraph 2 may request a hearing. 
Such requests shall be granted when they are submitted within the time limits set in 
paragraph 2, and when they set out the reasons, in terms of the Community interest, 
why the parties should be heard. 

The  parties  which  have  acted  in  conformity  with  paragraph  2  may  provide 
comments  on  the  application  of  any  provisional  duties  imposed.  Such  comments 
shall be received within one month of the application of such measures if they are to 
be  taken  into  account  and  they,  or  appropriate  summaries  thereof,  shall  be  made 
available to other parties who shall be entitled to respond to such comments. 

The Commission shall examine the information  which is properly  submitted  and the 
extent to which it is representative, and the results of such analysis, together with an 
opinion on its merits, shall be transmitted  to the Advisory Committee.  The balance 
of views expressed in the Committee shall be taken into account by the Commission 
in any proposal made pursuant to Articles 14 and 15. 

The parties which have acted  in conformity  with paragraph 2 may request  that  the 
facts  and  considerations  on  which final decisions  are  likely  to  be  taken  be  made 
available to  them.  Such  information  shall  be  made  available to  the  extent  possible 
and  without  prejudice  to  any  subsequent  decision  taken  by  the  Commission  or 
the Council. 

7. 

Information  shall  be  taken  into  account  only  where  it  is  supported  by  actual 
evidence which substantiates its validity. 

Article 32 

Relationships between countervailing duty measures and multilateral remedies 

If  an  imported  product  is  made  subject  to  any  countermeasures  imposed  following 
recourse  to  the  dispute  settlement  procedures  of  the  Subsidies  Agreement,  and  such 
measures are appropriate to remove the injury caused by the countervailable subsidies, any 
countervailing duty imposed with regard to that product  shall immediately be  suspended, 
or repealed, as appropriate. 

37 

Article 3 3 

Final provisions 

This Regulation shall not preclude the application of: 

(a) 

(b) 

any special  rules laid  down  in agreements  concluded  between  the  Community  and 
third countries; 

the Community Regulations in the agricultural sector and Council Regulations (EC) 
No  3448/936, (EEC) No  2730/757 and  (EEC) No  2783/758; this  Regulation  shall 
operate  by  way  of  complement  to  those  Regulations  and  in  derogation  from  any 
provisions thereof which preclude the application of countervailing duties; 

(c) 

special  measures,  provided  that  such  action  does  not  run  counter  to  obligations 
under the GATT. 

Article 34 

Repeal of existing legislation and transitional measures 

Regulation (EC) No 3284/94 is hereby repealed. 

However,  the  repeal  of Regulation  (EC) No  3284/94  shall  not  prejudice  the  validity  of 
proceedings initiated thereunder. 

References to Regulation (EEC) No 2423/88 and to kegulation (EC) No 3284/94 shall be 
construed as references to this Regulation, where appropriate. 

Article 35 

Entry into force 

This Regulation shall enter into force on the day of its publication in the Official  Journal of 
the European Communities. 

This  Regulation  shall  be  binding  in  its  entirety  and  directly  applicable  in  all 
Member States. 

Done at Brussels, 

For the Council 
The President 

6 
7 

8 

OJ No L 318, 20.12.1993, p. 18. 
OJ  No  L  281,  1.11.1975,  p.  20.  Regulation  as  last  amended  by  Commission  Regulation 
(EC) No 2931/95 (OJ No L 307, 20.12.1995, p. 10). 
OJ  No  L  282,  1.11.1975,  p.  104.  Regulation  as  last  amended  by  Regulation  (EC)  No  2916/95 
(OJ No L 305, 19.12.1995, p. 49). 

38 

ANNEX I 

ILLUSTRATIVE  LIST OF EXPORT  SUBSIDIES 

(a)  The provision by governments of direct subsidies to a firm or an industry contingent 

upon export  performance. 

(b) 

'Currency  retention  schemes  or  any  similar  practices  which  involve  a  bonus 
on exports. 

(c) 

Internal transport and freight  charges on export shipments, provided or mandated by 
governments, on terms more favourable than for domestic shipments. 

(d)  The provision by governments or their agencies either directly or indirectly through 
government-mandated  schemes,  of  imported  or  domestic  products  or  services  for 
use in the  production  of  exported  goods,  on  terms  or  conditions  more  favourable 
than for provision of like or directly competitive products or  services for  use in the 
production  of  goods  for  domestic  consumption,  if  (in  the  case  of  products)  such 
terms  or  conditions  are  more  favourable  than  those  commercially  available9 on 
world markets to their exporters. 

(e)  The full  or  partial  exemption,  remission,  or  deferral  specifically  related  to  exports, 
of direct  taxes10 or  social  welfare  charges  paid  or  payable  by  industrial  or 
commercial enterprises11. 

(f)  The  allowance  of  special  deductions  directly  related  to  exports  or  export 
performance,  over  and  above  those  granted  in respect  of production  for  domestic 
consumption, in the calculation of the base on which direct taxes are charged. 

9 

1 ° 

The term "commercially available" means that the choice between domestic and imported products 
is unrestricted and depends only on commercial considerations. 
For the purpose of this Regulation: 

the term "direct taxes" shall mean taxes on wages, profits,  interests, rents, royalties, and all 
other forms of income, and taxes on the ownership of real property; 
the term "import charges" shall mean tariffs,  duties, and other fiscal  charges not elsewhere 
enumerated in this note that are levied on imports; 
the term "indirect taxes" shall  mean  sales, excise, turnover,  value added,  franchise,  stamp, 
transfer,  inventory  and equipment taxes, border  taxes and  all  taxes other  than  direct  taxes 
and import charges; 
"prior-stage" indirect taxes arc those levied on goods or services used directly  or  indirectly 
in making the product; 
"cumulative"  indirect  taxes arc multi-staged  taxes levied where there  is no mechanism  for 
subsequent  crediting  of  the  tax  if  the  goods  or  services  subject  to  tax  at  one  stage  of 
production are used in a succeeding state of production; 
"remission" of taxes includes the refund or rebate of taxes; 
"remission  or  drawback" 
import charges. 

the  full  or  partial  exemption  or  deferral  of 

includes 

Deferral  may  not  amount  to  an  export  subsidy  where,  for  example,  appropriate  interest  charges 
are collected. 

39 

1 ' 

(g)  The  exemption  or  remission,  in  respect  of  the  production  and  distribution  of 
exported  products,  of  indirect  taxes10 in  excess  of  those  levied  in  respect  of  the 
production and distribution of like products when sold for domestic consumption. 

(h)  The  exemption,  remission  or  deferral  of  prior-stage  cumulative  indirect  taxes10 on 
goods  or  services  used  in  the  production  of  exported  products  in  excess  of  the 
exemption,  remission  or  deferral  of  like  prior-stage  cumulative  indirect  taxes  on 
goods  or  services  used  in the  production  of  like  products  when  sold  for  domestic 
consumption; provided,  however,  that  prior-stage  cumulative  indirect  taxes  may be 
exempted,  remitted  or  deferred  on  exported  products  even  when  not  exempted, 
remitted  or  deferred  on  like  products  when  sold  for  domestic  consumption,  if  the 
prior-stage  cumulative  indirect  taxes  are levied  on  inputs that  are  consumed  in the 
production  of  the  exported  product  (making  normal  allowance  for  waste)12.  This 
item shall be interpreted in accordance with the guidelines on consumption of inputs 
in the production process contained in Annex II. 

(i)  The  remission  or  drawback  of  import  charges10 in  excess  of  those  levied  on 
imported  inputs  that  are  consumed  in  the  production  of  the  exported  product 
(making normal allowance  for waste); provided,' however,  that in particular cases a 
firm  may use a quantity of home market inputs equal to, and having the same quality 
and characteristics as, the imported inputs as a substitute for them in order to benefit 
from  this  provision  if  the  import  and  the  corresponding  export  operations  both 
occur  within  a reasonable  time  period,  not to  exceed  two  years.  This  item  shall  be 
interpreted  in  accordance  with  the  guidelines  on  consumption  of  inputs  in  the 
production process contained  in Annex  II and the guidelines in the determination  of 
substitution drawback  systems as export subsidies contained in Annex III. 

(j)  The provision by governments (or special institutions controlled by governments)  of 
export  credit  guarantee  or  insurance  programmes,  of  insurance  or  guarantee 
programmes  against  increases  in the  cost  of  exported  products  or of  exchange risk 
programmes,  at  premium  rates  which  are  inadequate  to  cover  the  long-term 
operating costs and losses of the programmes. 

(k)  The grant by governments  (or  special  institutions  controlled  by and/or acting under 
the  authority  of  governments)  of  export  credits  at  rates  below  those  which  they 
actually  have  to  pay  for  the  funds  so  employed  (or  would  have  to  pay  if  they 
borrowed  on  international  capital  markets  in  order  to  obtain  funds  of  the  same 
maturity and other credit terms and denominated in the same currency as the export 
credit),  or the  payment  by them  of  all  or part  of the  costs  incurred  by exporters  or 
financial  institutions  in  obtaining  credits,  in  so  far  as  they  are  used  to  secure  a 
material advantage in the field of export credit terms. 

12 

Paragraph (h) does not apply to value-added tax systems and border-tax adjustment in lieu thereof; 
the  problem  of  the  excessive  remission  of  value-added  taxes  is  exclusively  covered  by 
paragraph (g). 

40 

Provided,  however,  that  if  a  Member  of  the  WTO  is  a  party  to  an  international 
undertaking on official  export credits to which at least  12 original such Members are 
parties as of 1  January  1979 (or a successor undertaking which has been adopted by 
those original Members), or if in practice a Member of the WTO applies the interest 
rates  provisions  of the  relevant  undertaking,  an  export  credit  practice  which  is in 
conformity with those provisions shall not be considered an export subsidy. 

(1)  Any other  charge on the public account constituting an export  subsidy in the sense 

of Article XVI of GATT 1994. 

41 

GUIDELINES ON CONSUMPTION OF INPUTS IN THE 

PRODUCTION PROCESS13 

I 

ANNEX  n 

1. 

2. 

Indirect tax rebate schemes can allow for  exemption, remission or deferral  of prior-
stage cumulative indirect taxes levied on inputs that are consumed in the production 
of the exported  product  (making normal allowance for  waste).  Similarly,  drawback 
schemes can allow for the remission or drawback of import charges levied on inputs 
that  are  consumed  in  the  production  of  the  exported  product  (making  normal 
allowance for waste). 

The  Illustrative  list  of  export  subsidies  in  Annex  I  makes  reference  to  the 
term "inputs  that  are  consumed  in  the  production  of  the  exported  product"  in 
paragraphs  (h)  and  (i). Pursuant  to  paragraph  (h), indirect  tax  rebate  schemes can 
constitute an export subsidy to the extent that they result in exemption, remission or 
deferral  of  prior-stage  cumulative  indirect  taxes  in  excess  of  the  amount  of  such 
taxes actually levied on inputs that  are consumed in the production  of the exported 
product.  Pursuant  to  paragraph  (i),  drawback  schemes  can  constitute  an  export 
subsidy to the extent that they result in a remission  or  drawback  of import  charges 
in excess of those actually levied  on inputs that  are consumed  in the production  of 
the  exported  product.  Both  paragraphs  stipulate  that  normal  allowance  for  waste 
must be made in findings regarding  consumption  of inputs in the production  of the 
exported product. Paragraph (i) also provides for substitution, where appropriate. 

II 

3. 

In  examining  whether  inputs  are  consumed  in  the  production  of  the  exported 
product,  as part  of a countervailing  duty investigation  pursuant  to  this Regulation, 
the Commission must normally proceed on the following basis: 

4.  Where  it  is  alleged  that  an  indirect  tax  rebate  scheme,  or  a  drawback  scheme, 
conveys a subsidy by reason of over-rebate or excess drawback  of indirect taxes or 
import  charges on inputs consumed  in the production  of the exported  product,  the 
Commission must normally first determine whether the government of the exporting 
country has in place and applies a system or procedure to confirm which inputs are 
consumed  in the production  of the exported  product  and in what  amounts.  Where 
such  a  system  or  procedure  is  determined  to  be  applied,  the  Commission  must 
normally  then  examine  the  system  or  procedure  to  see  whether  it  is  reasonable, 
effective  for  the  purpose  intended,  and  based  on  generally  accepted  commercial 
practices in the country of export. The Commission may deem it necessary to carry 
out,  in  accordance  with  Article  26(2),  certain  practical  tests  in  order  to  verify 

13 

Inputs consumed in the production process are inputs physically incorporated, energy, fuels and oil 
used  in  the  production  process  and  catalysts  which  are  consumed  in  the  course  of  their  use  to 
obtain the exported product. 

42 

information  or  to  satisfy 
effectively  applied. 

itself  that 

the  system  or  procedure 

is  being 

5.  Where there  is no  such system  or procedure,  where it is not reasonable,  or where it 
is  instituted  and considered  reasonable  but  is  found  not  to  be  applied  or  not  to  be 
applied  effectively,  a  further  examination  by  the  exporting  country  based  on  the 
actual  inputs  involved  will  normally  need  to  be  carried  out  in  the  context  of 
determining  whether  an  excess  payment  occurred.  If  the  Commission  deems  it 
necessary, a further examination may be carried out in accordance with paragraph 4. 

6. 

7. 

8. 

The Commission must normally treat inputs as physically incorporated if such inputs 
are  used  in  the  production  process  and  are  physically  present  in  the  product 
exported.  An  input  need  not  be  present  in  the  final  product  in  the  same  form  in 
which it entered the production process. 

In determining  the amount  of  a particular  input  that  is  consumed  in the  production 
of  the  exported  product,  a  "normal  allowance  for  waste"  must  normally  be  taken 
into  account,  and  such  waste  must  normally  be  treated  as  consumed  in  the 
production  of  the  exported  product.  The  term  "waste"  refers  to  that  portion  of  a 
given input which does not  serve an independent function in the production process, 
is  not  consumed  in  the  production  of  the  exported  product  (for  reasons  such  as 
inefficiencies)  and is not recovered, used or sold by the same manufacturer. 

The  Commission's  determination  of  whether  the  claimed  allowance  for  waste  is 
"normal"  must  normally  take  into  account  the  production  process,  the  average 
experience  of the  industry  in the  country  of  export,  and  other  technical  factors,  as 
appropriate.  The  Commission  must  bear  in  mind  that  an  important  question  is 
whether  the  authorities  in  the  exporting  country  have  reasonably  calculated  the 
amount of waste,  when  such an amount is intended to be included in the tax or duty 
rebate or remission. 

43 

ANNEX  IE 

GUIDELINES  IN THE DETERMINATION  OF SUBSTITUTION  DRAWBACK 

SYSTEMS AS EXPORT  SUBSIDIES 

I 

Drawback  systems  can  allow  for  the  refund  or  drawback  of  import  charges  on  inputs 
which are consumed in the production process of another product and where the export  of 
this latter product  contains domestic  inputs having the  sanie quality  and characteristics  as 
those submitted for the imported inputs. Pursuant to paragraph (i) of Annex I,  substitution 
drawback  systems  can  constitute  an  export  subsidy  to  the  extent  that  they  result  in  an 
excess  drawback  of  the  import  charges  levied  initially  on  the  imported  inputs  for  which 
drawback is being claimed. 

II 

In  examining  any  substitution  drawback  system  as  part  of  a  countervailing  duty 
investigation  pursuant  to  this Regulation,  the  Commission  must  normally  proceed  on  the 
following basis: 

1. 

Paragraph (i)  of Annex  I stipulates that  home  market  inputs may be  substituted  for 
imported  inputs in the  production  of a product  for  export  provided  such inputs are 
equal  in quantity to,  and have the  same  quality  and  characteristics  as,  the  imported 
inputs  being  substituted.  The  existence  of  a  verification  system  or  procedure  is 
important because it enables the government  of the exporting  country to  ensure and 
demonstrate  that  the  quantity  of  inputs  for  which  drawback  is  claimed  does  not 
exceed the quantity of similar products exported,  in whatever form, and that there is 
not drawback of import charges in excess  of those  originally levied on the imported 
inputs in question. 

2.  Where  it  is  alleged  that  a  substitution  drawback  system  conveys  a  subsidy,  the 
Commission  must  normally  first  proceed  to  determine  whether  the  government  of 
the  exporting  country  has  in  place  and  applies  a verification  system  or  procedure. 
Where  such  a  system  or  procedure  is  determined  to  be  applied,  the  Commission 
shall  normally  then  examine  the  verification  procedures  to  see  whether  they  are 
reasonable,  effective  for  the  purpose  intended,  and  based  on  generally  accepted 
commercial practices in the country of export.  To the extent that the procedures are 
determined to meet this test and are effectively  applied,  no subsidy will be presumed 
to exist. It may be deemed necessary by the Commission to carry out, in accordance 
with Article 26(2),  certain practical  tests  in order to  verify  information  or to  satisfy 
itself that the verification  procedures are being effectively  applied. 

3.  Where there are no verification  procedures, where they are not reasonable,  or where 
such  procedures  are  instituted  and  considered  reasonable  but  are  found  not  to  be 
actually  applied  or  not  to  be  applied  effectively,  there  may  be  a  subsidy.  In  such 
cases,  further examination by the exporting country based on the actual  transactions 
involved  would  need  to  be  carried  out  to  determine  whether  an  excess  payment 
occurred.  If  the  Commission  deems  it  necessary,  a  further  examination  may  be 
carried out in accordance with point 2. 

44 

The  existence  of  a  substitution  drawback  provision  under  which  exporters  are 
allowed  to  select  particular  import  shipments  on which  drawback  is claimed  should 
not of itself be considered to convey a subsidy. 

An  excess  drawback  of  import  charges  within  the  meaning  of  paragraph  (i)  of 
Annex I would be  deemed  to  exist  where governments  paid interest  on  any  monies 
refunded  under  their  drawback  schemes,  to  the  extent  of  the  interest  actually  paid 
or payable. 

45 

ANNEX  IV 

(This Annex reproduces Annex 2 to the Agreement on Agriculture. Any terms or 

expressions which are not explained herein or which are not self-explanatory  are to 
be interpreted in the context of that Agreement) 

DOMESTIC  SUPPORT: THE BASIS OF EXEMPTION FROM THE 

REDUCTION  COMMITMENTS 

1. 

Domestic  support  measures  for  which  exemption from the  reduction  commitments 
is  claimed  shall  meet  the  fundamental  requirement  that  they  have  no,  or  at  most 
minimal, trade-distorting effects  or effects  on production.  Accordingly,  all measures 
for which exemption is claimed shall conform to the following basic criteria: 

(a) 

the  support 
in  question  shall  be  provided  through  a  publicly-funded 
government  programme  (including  government  revenue  foregone)  not 
involving transfers from consumers; and, 

(b) 

the  support  in  question  shall  not  have  the  effect  of  providing  price  support 
to producers; 

plus policy-specific  criteria and conditions as set out below. 

Government  service programmes 

2.  General services 

Policies  in this  category  involve  expenditures  (or  revenue  foregone)  in  relation  to 
programmes  which  provide  services  or  benefits  to  agriculture  or  the  rural 
community.  They  shall  not  involve  direct  payments  to  producers  or  processors. 
Such  programmes,  which  include  but  are  not  restricted  to  the  following  list,  shall 
meet  the  general  criteria  in  paragraph  1  and  policy-specific  conditions  where  set 
out below: 

(a) 

(b) 

research, 
including  general 
environmental  programmes, 
particular products; 

research, 
and 

research 

research  programmes 

in  connection  with 
to 

relating 

pest  and  disease  control,  including  general  and  product-specific  pest  and 
disease  control  measures,  such  as  early-warning  systems,  quarantine 
and eradication; 

(c) 

training services, including both general and specific training facilities; 

(d) 

extension  and  advisory  services, 
including  the  provision  of  means  to 
facilitate the  transfer  of  information  and  the  results  of  research  to  producers 
and consumers; 

(e) 

inspection services, including general inspection  services and the inspection  of 
particular products for health, safety, grading or standardization purposes; 

46 

(f)  marketing  and  promotion  services,  including  market  information,  advice and 
promotion  relating  to  particular  products  but  excluding  expenditure  for 
unspecified  purposes that could be used by sellers to reduce their selling price 
or confer a direct economic benefit to purchasers; and 

(g) 

schemes,  and 

infrastructural  services,  including:  electricity  reticulation,  roads  and  other 
means  of  transport,  market  and  port  facilities,  water  supply  facilities,  dams 
and  drainage 
infrastructural  works  associated  with 
environmental  programmes.  In  all  cases  the  expenditure  shall  be  directed  to 
the  provision  or  construction  of  capital  works  only,  and  shall  exclude  the 
subsidized  provision  of  on-farm  facilities  other  than  for  the  reticulation  of 
generally  available  public  utilities.  It  shall  not  include  subsidies  to  inputs  or 
operating costs, or preferential user charges. 

3. 

Public stockholding for food  security purposes14 

Expenditures  (or  revenue foregone)  in relation  to  the  accumulation  and  holding of 
stocks  of  products  which  form  an  integral  part  of  a  food  security  programme 
identified  in national legislation. This may include government  aid to private storage 
of products as part of such a programme. 

The  volume  and  accumulation  of  such  stocks  shall  correspond  to  predetermined 
targets  related  solely  to  food  security.  The  process  of  stock  accumulation  and 
disposal shall be financially  transparent.  Food  purchases by the government  shall be 
made at current  market  prices and  sales from food  security  stocks shall be made at 
no  less  than  the  current  domestic  market  price  for  the  product  and  quality 
in question. 

4.  Domestic food aid15 

Expenditures (or revenue foregone) in relation to the provision of domestic food aid 
to sections of the population in need. 

Eligibility to receive the food aid shall be subject to clearly-defined  criteria related to 
nutritional  objectives.  Such  aid  shall be in the  form  of  direct  provision  of food  to 
those concerned  or the provision  of means to  allow eligible recipients to  buy  food 
either at market or at subsidized prices. Food purchases by the government  shall be 

14 

15 

For the purpose of paragraph 3 of this Annex, governmental stockholding programmes for food 
security  purposes  in  developing  countries  whose  operation  is  transparent  and  conducted  in 
accordance with officially  published objective criteria or guidelines shall be considered to be in 
conformity with the provisions of this paragraph, including programmes under which stocks  of 
foodstuffs  for food security purposes arc acquired and released at administered prices, provided 
that the difference between the acquisition price and the external reference price is accounted for in 
the AMS. 

For the purposes of paragraphs 3 and 4 of this Annex, the provision of foodstuffs  at subsidized 
prices with the objective of meeting food requirements of urban and rural poor in developing 
countries on a regular basis at reasonable prices shall be considered to be in conformity with the 
provisions of this paragraph. 

47 

made  at  current  market  prices  and the financing and  administration  of the  aid  shall 
be transparent. 

5. 

Direct payments to producers 

Support  provided  through  direct  payments  (or  revenue  foregone, 
including 
payments in kind) to producers for which exemption from reduction commitments is 
claimed  shall  meet  the  basic  criteria  set  out  in  paragraph  1,  plus  specific  criteria 
applying to individual types of direct payment as set out in paragraphs 6 through  13. 
Where  exemption from reduction  is claimed  for  any  existing  or  new  type  of  direct 
payment  other than those  specified  in paragraphs  6  through  13,  it  shall  conform  to 
criteria  (b)  through  (e)  in paragraph  6,  in addition  to  the  general  criteria  set  out  in 
paragraph  1. 

6. 

Decoupled income support 

(a)  Eligibility  for  such  payments  shall  be  determined  by  clearly-defined  criteria 
such  as income,  status  as  a producer  or landowner,  factor  use  or  production 
level in a defined  and fixed base period. 

(b)  The  amount  of  such  payments  in  any  given  year  shall  not  be  related  to,  or 
based  on,  the  type  or  volume  of  production  (including  livestock  units) 
undertaken by the producer in any year after the base period. 

(c)  The  amount  of  such  payments  in  any  given  year  shall  not  be  related  to,  or 
based  on,  the  prices,  domestic  or  international,  applying  to  any  production 
undertaken in any year after the base period. 

(d)  The  amount  of  such  payments  in  any  given  year  shall  not  be  related  to,  or 
based on, the factors of production employed in any year after the base period. 

(e)  No  production shall be required in order to receive such payments. 

7.  Government  financial  participation  in  income  insurance  and  income  safety-net 

programmes 

(a)  Eligibility  for  such  payments  shall  be  determined  by  an  income  loss,  taking 
into  account  only  income  derived  from  agriculture,  which  exceeds  30%  of 
average  gross  income  or  the  equivalent  in  net  income  terms  (excluding  any 
payments  from  the  same  or  similar  schemes)  in  the  preceding  three-year 
period  or  a  three-year  average  based  on  the  preceding  five-year  period, 
excluding  the  highest  and  the  lowest  entry.  Any  producer  meeting  this 
condition shall be eligible to receive the payments. 

(b)  The  amount  of  such  payments  shall  compensate  for  less  than  70%  of  the 
producer's  income  loss  in  the  year  the  producer  becomes  eligible  to  receive 
this assistance. 

(c)  The  amount  of  any  such  payments  shall  relate  solely  to  income;  it  shall  not 
relate  to  the  type  or  volume  of  production  (including  livestock  units) 
undertaken  by  the  producer;  or  to  the  prices,  domestic  or  international, 
applying to such production; or to the factors of production employed. 

48 

(d)  Where  a  producer  receives  in  the  same  year  payments  pursuant  to  this 
paragraph and pursuant to paragraph 8 (relief from natural disasters), the total 
of such payments shall be less than  100% of the producer's total loss. 

8. 

Payments (made either directly or by way of a government financial participation in 
crop insurance schemes) for relief from natural disasters 

(a)  Eligibility for such payments shall arise only following  a formal  recognition by 
government  authorities  that  a  natural  or  like  disaster  (including  disease 
outbreaks,  pest  infestations,  nuclear accidents,  and war on the territory  of the 
Member concerned) has occurred or is occurring; and shall be determined by a 
production  loss  which  exceeds  30%  of  the  average  of  production  in  the 
preceding  three-year  period  or  a  three-year  average  based  on  the  preceding 
five-year period, excluding the highest and the lowest entry. 

(b)  Payments  made  following  a disaster  shall  be  applied  only  in respect  of  losses 
of  income,  livestock  (including  payments  in  connection  with  the  veterinary 
treatment  of  animals),  land  or  other  production  factors  due  to  the  natural 
disaster in question. 

(c)  Payments  shall  compensate  for  not  more  than  the  total  cost  of  replacing 
such losses  and  shall  not  require  or  specify  the  type  or  quantity  of 
future production. 

(d)  Payments made during a disaster shall not exceed the level required to prevent 

or alleviate further loss as defined in criterion (b). 

(e)  Where  a  producer  receives  in  the  same  year  payments  pursuant  to  this 
paragraph and pursuant to  paragraph  7 (income  insurance  and income  safety-
net  programmes),  the  total  of  such  payments  shall  be  less  than  100% of  the 
producer's total loss. 

9. 

Structural adjustment assistance provided through producer retirement  programmes 

(a)  Eligibility  for  such  payments  shall  be  determined  by  reference  to  clearly 
defined  criteria in programmes designed to facilitate the retirement  of persons 
engaged  in  marketable  agricultural  production,  or  their  movement  to  non-
agricultural activities. 

(b)  Payments  shall be  conditional  upon the total  and permanent  retirement  of the 

recipients from marketable agricultural production. 

10.  Structural adjustment  assistance provided through resource retirement  programmes 

(a)  Eligibility  for  such  payments  shall  be  determined  by  reference  to  clearly 
defined  criteria  in  programmes  designed  to  remove  land  or  other  resources, 
including livestock,  from marketable agricultural production. 

(b)  Payments  shall  be  conditional  upon  the  retirement  of  land  from  marketable 
agricultural  production  for  a  minimum  of  three  years,  and  in  the  case  of 
livestock  on its slaughter or definitive  permanent disposal. 

49 

(c)  Payments shall not require or specify any alternative use for such land or other 

resources which involves the production of marketable agricultural products. 

(d)  Payments shall not be related to either type or quantity of production  or to the 
prices,  domestic  or international,  applying to  production undertaken using the 
land or other resources remaining in production. 

11.  Structural adjustment assistance provided through investment aids 

(a)  Eligibility  for  such  payments  shall  be  determined  by  reference  to  clearly-
defined  criteria  in government  programmes  designed  to  assist  the financial or 
physical  restructuring  of  a  producer's  operations  in  response  to  objectively 
demonstrated  structural  disadvantages.  Eligibility  for  such  programmes  may 
also  be  based  on  a  clearly-defined  government  programme  for  the 
reprivatization of agricultural land. 

(b)  The  amount  of  such  payments  in  any  given  year  shall  not  be  related  to,  or 
based  on,  the  type  or  volume  of  production  (including  livestock  units) 
undertaken  by  the  producer  in  any  year  after  the  base  period  other  than  as 
provided for under criterion (e). 

(c)  The  amount  of  such  payments  in  any  given  year  shall  not  be  related  to,  or 
based  on,  the  prices,  domestic  or  international,  applying  to  any  production 
undertaken in any year after the base period. 

(d)  The  payments  shall  be  given  only  for  the  period  of  time  necessary  for  the 

realization of the investment in respect of which they are provided. 

(e)  The  payments  shall  not  mandate  or  in  any  way  designate  the  agricultural 
products  to  be  produced  by  the  recipients  except  to  require  them  not  to 
produce a particular product. 

(f)  The  payments  shall  be  limited  to  the  amount  required  to  compensate  for  the 

structural disadvantage. 

12.  Payments under environmental  programmes 

(a)  Eligibility  for  such  payments  shall  be  determined  as  part  of  a  clearly-defined 
government  environmental  or  conservation  programme  and  be  dependent  on 
the  fulfilment  of  specific  conditions  under  the  government  programme, 
including conditions related to production methods or inputs. 

(b)  The  amount  of payment  shall  be  limited  to  the  extra  costs  or loss  of  income 

involved in complying with the government programme. 

13.  Payments under regional assistance programmes 

(a)  Eligibility  for  such  payments  shall  be  limited  to  producers  in  disadvantaged 
regions.  Each  such  region  must  be  a  clearly  designated  contiguous 
geographical  area  with  a  definable  economic  and  administrative  identity, 
considered  as  disadvantaged  on  the  basis  of  neutral  and  objective  criteria 
clearly  spelt  out  in  a  law  or  regulation  and  indicating  that  the  region's 
difficulties  arise out of more than temporary circumstances. 

50 

(b)  The  amount  of  such  payments  in  any  given  year  shall  not  be  related  to,  or 
based  on,  the  type  or  volume  of  production  (including  livestock  units) 
undertaken  by  the  producer  in  any  year  after  the  base  period  other  than  to 
reduce that production. 

(c)  The  amount  of  such  payments  in  any  given  year  shall  not  be  related  to,  or 
based  on,  the  prices,  domestic  or  international,  applying  to  any  production 
undertaken in any year after the base period. 

(d)  Payments shall be available only to producers in eligible regions, but generally 

available to all producers within such regions. 

(e)  Where  related  to  production  factors,  payments  shall  be  made  at  a  degressive 

rate above a threshold level of the factor concerned. 

(f)  The payments  shall be limited to the extra costs or loss  of income  involved in 

undertaking agricultural production in the prescribed area. 

51 

ISSN 0254-1475 

COM(97) 46  final 

DOCUMENTS 

EN 

11  02 

Catalogue number  :  CB-CO-97-040-EN-C 

ISBN 92-78-15554-3 

Office  for Official  Publications of the European Communities 

L-2985 Luxembourg 

sz