Information from the Commission - Guidelines for the calculation of the amount of subsidy in countervailing duty investigations
Date: 1998-12-17
Institutions: European Commission
Subjects: World Trade Organisation, anti-subsidy proceeding, import policy, support policy, third country

C  394/6

EN

Official  Journal  of  the  European  Communities

17.12.98

GUIDELINES  FOR  THE  CALCULATION  OF  THE  AMOUNT  OF  SUBSIDY  IN
COUNTERVAILING  DUTY  INVESTIGATIONS

(98/C  394/04)

A.(cid:217)INTRODUCTION

(i) they  benefit  from  a  countervailable  subsidy;

Articles  5,  6  and  7  of  Council  Regulation  (EC)  No
2026/97  of  6  October  1997  on  protection  against
subsidised  imports  from  countries  not  members  of  the
European  Community(cid:216)(˛)  ("Regulation  2026/97’)  contain
provisions  on  the  calculation  of  the  amount  of  subsidy.
The  purpose  of  this  communication  is  to  explain  the
in  more  detail,  using
application  of  these  provisions 
the
examples  where  necessary, 
to  clarify 
the
methodology  which  will  normally  be  used  by 
in
Commission 
countervailing  duty  cases,  unless  special  circumstances
justify  a  departure  from  this  methodology.  In  this  way  it
is  intended  to  render  the  process  of  calculation  more
open  and  to  introduce  greater  certainty  for  economic
operators  and  foreign  governments.

in  calculating  the  amount  of  subsidy 

in  order 

This  communication  does  not  bind  the  Community  insti(cid:220)
tutions  in  any  way,  but  rather  provides  guidelines  solely
for  the  purpose  of  conducting  countervailing  duty  inves(cid:220)
tigations  under  Regulation  2026/97.

The  Commission  intends  to  update  this  communication
as  necessary,  in  the  light  of  experience  in  the  adminis(cid:220)
tration  of  the  Regulation  and  taking  into  account  the
practice  of  our  major  trading  partners  in  this  area.

B.(cid:217)BACKGROUND  TO  CALCULATION

(a)(cid:217)The  Community  and  its  Member  States  are  members
of  the  World  Trade  Organisation  (WTO)  and  as
such  are  bound  by  the  provisions  of  the  WTO
agreement  on  subsidies  and  countervailing  measures
("the  Subsidies  Agreement’),  when  carrying  out
countervailing 
investigations.  Regulation
2026/97  implements  the  relevant  provisions  of  this
Agreement  and  lays  down  rules  on  the  basis  for  the
imposition  of  countervailing  duty  measures  on
injurious  subsidised  imports(cid:216)(ˇ).

duty 

(b) Pursuant  to  this  Regulation,  such  imports  can  be
subject  to  measures  if  it  is  determined,  following  an
investigation,  that:

(˛)(cid:217)OJ  L  288,  21.10.1997,  p.  1.
(ˇ)(cid:217)These  guidelines  also  apply  to 

ECSC  products 
Decision  of  3  September  1998  (OJ  L  245,  4.9.1998,  p.  3).

conducted  pursuant 

investigations  concerning
to  Commission

(ii) they  cause  or  threaten  material  injury  to  the
like

producing 

industry 

the 

Community 
product;

(iii)(cid:217)countervailing  measures  are  in  the  Community

interest.

(c) If  measures  are  found  to  be  warranted,  they  would
normally  take  the  form  of  a  countervailing  duty  or
the
of  an  undertaking 
government  of  the  subsidising  country.  The  purpose
of  either  type  of  measure  is  to  offset  the  effect  of
injurious  subsidisation.  Therefore,  as  is  explained  in
Article  15(1)  of  Regulation  2026/97:

from  an  exporter  or 

(i) the  amount  of  countervailing  duty  shall  not
exceed  the  amount  of  countervailable  subsidy
found;

(ii)(cid:217)the  amount  of  countervailing  duty  should  be  less
than  the  amount  of  subsidy,  if  such  a  lesser  duty
would  be  adequate  to  remove 
injury  to  the
Community  industry.

In  either  case,  it  is  clearly  imperative  to  know  the  exact
amount  of  subsidy.  This  requires  a  methodology  for
calculation  of  the  amount  of  subsidy.

This  communication  sets  out  a  workable  calculation
methodology.  It  is  important  to  note  that  only  measures
that  constitute  a  countervailable  subsidy  are  covered  by
these  recommendations.

C.(cid:217)BENEFIT  TO  THE  RECIPIENT

Subsidies  can  take  many  forms.  Article  2  of  Regulation
2026/97  defines  a  subsidy  as  either

-(cid:217)a  financial  contribution  by  a  government,

or

-(cid:217)any  form  of  income  or  price  support  within  the

meaning  of  Article  XVI  of  the  GATT  1994,

which  confers  a  benefit.

17.12.98

EN

Official  Journal  of  the  European  Communities

C  394/7

Pursuant  to  the  rule  laid  down  in  Article  5  of  Regulation
2026/97,  the  calculation  of  the  benefit  shall  reflect  the
amount  of  subsidy  found  to  exist  during  the  investigation
period  and  not  simply  the  face  value  of  the  amount  at
the  time  it  is  transferred  to  the  recipient  or  foregone  by
the  government.

Thus,  the  face  value  of  the  amount  of  the  subsidy  has  to
into  the  value  prevailing  during  the
be  transformed 
investigation  period 
the
normal  commercial  interest  rate.

the  application  of 

through 

D.(cid:217)CALCULATION  OF 

SUBSIDY 

PER  UNIT/AD

VALOREM

it 

is  on 

to  calculate  CVD’s 

Regulation  2026/97,  based  as 
the  WTO
Subsidies  Agreement,  assumes  that  an  important  effect  of
a  subsidy  is  always  to  reduce  a  firm’s  costs  and  the
therefore
methodology  adopted 
reflects  this.  The  objective  of  the  calculation  is  to  arrive
at  the  amount  of  subsidy  per  unit  of  production  (Article
7(1)  of  Regulation  2026/97)  during  the 
investigation
period  (see  section  F).  In  the  case  of  consumer  products,
such  as  television  sets,  the  appropriate  unit  would  be
each  individual  item.  If  bulk  products,  such  as  fertilisers
or  chemicals,  are  involved,  it  would  be  appropriate  to
calculate  the  subsidy,  say,  per  tonne,  or  other  appro(cid:220)
priate  unit  of  measurement.  Therefore,  the  simplest  type
of  subsidy  to  calculate  is  that  granted  on  a  per  unit  basis
(example  1).

amount  of  the  grant  corrected  for  any  differences
between  the  point  in  time  of  its  receipt  and  the  inves(cid:220)
tigation  period, 
the
production  or  sales  are  allocated.

the  period 

in  which 

i.e. 

(that 

its  amount 

Therefore  if  the  grant  is  expensed  during  the  investi(cid:220)
gation  period, 
is  entirely
is, 
allocated  to  production  or  sales  during  this  period),
the  interest  that  would  have  accrued  during  that
period  will  normally  be  added.  If  however  the  grant
is  allocated  over  a  longer  period  than  the  investi(cid:220)
gation  period,  the  interest  will  be  added  as  described
in  section  F  (a)(ii).

Any  lump  sum  of  revenue  transferred  or  foregone
(e.g.  income  tax  or  duty  exemption,  rebates,  money
saved  from  preferential  provision  of  goods  and
services  or  gained  from  excessive  prices  for  the
purchase  of  goods)  is  considered  as  being  equivalent
to  a  grant  (see  examples  1,  1(i),  3,  4,  5).

Specific  examples  of  grants  or  equivalent

In  order  to  establish  the  full  amount  of  subsidy,  all
of  the  amounts  in  specific  examples  below  should  be
increased  by  interest  as  described  in  the  introduction;
the  total  amount  of  subsidy  also  depends  on  whether
the  subsidy  is  allocated  or  expensed.

The  per  unit  subsidy  can  be  converted  into  an  ad  valorem
rate  at  the  Community  frontier  by  expressing  the  per  unit
subsidy  as  a  percentage  of  the  average  cif.  (duty  unpaid)
unit  import  price.

(i) Direct  transfer  of  funds

In  this  way  it  can  be  established  whether  the  subsidy
amount  is  de  minimis,  since  this  is  expressed  ad  valorem
in  Article  14(5)  of  Regulation  2026/97  (1(cid:216)%  for  imports
from  developed  countries;  2  to  3(cid:216)%  for  developing
countries).  In  certain  circumstances, 
it  may  also  be
considered  to  be  appropriate  to  express  the  counter(cid:220)
vailing  duty  on  an  ad  valorem  basis.

E.(cid:217)CALCULATION  OF  CERTAIN  TYPES  OF  SUBSIDY

(a) Grant

I n t r o d u c t i o n

The  simplest  case.  The  amount  of  subsidy  is  the
amount  received  by  the  company  concerned  (a
subsidy  to  cover  operating  losses  would  fall  into
this  category).

(ii) Tax  exemptions

The  amount  of  subsidy  is  the  amount  of  tax  that
would  have  been  payable  by 
the  recipient
company  at  the  standard  applicable  tax  rate
during  the  investigation  period.

(iii) Tax  reductions

In  the  case  of  a  grant  (or  equivalent)  where  none  of
the  money  is  repaid,  the  value  of  the  subsidy  is  the

The  amount  of  subsidy  is  the  difference  between
the  amount  of  tax  actually  paid  by  the  recipient

C  394/8

EN

Official  Journal  of  the  European  Communities

17.12.98

company  during  the  investigation  period  and  the
amount  that  would  have  been  paid  at  the
normal  rate  of  tax.

(The  same  method  should  be  applied  to  all
other  exemptions  and  reduction  of  obligation,
e.g.  import  duties,  social  security  contributions,
redundancy  payments)

(iv) Accelerated  depreciation

Accelerated  depreciation  of  assets  under  a
government  agreed  programme 
should  be
considered  as  a  tax  reduction.  The  amount  of
subsidy  is  the  difference  between  the  amount  of
tax  that  would  have  been  paid  during  the  inves(cid:220)
tigation  period  under  the  normal  depreciation
the  assets  concerned,  and  the
schedule  for 
amount 
accelerated
under 
paid 
depreciation.  To  the  extent  that  the  accelerated
in  a  tax  saving  for  the
depreciation  results 
company  concerned  during 
investigation
period,  there  is  a  benefit.

actually 

the 

such 

companies  in  a  similar  financial  situation  in  the
same  sector  of  the  economy,  or,  if  information
on 
to  any
comparable  private  loan  made  to  companies  in  a
similar  financial  situation  in  any  sector  of  the
economy.

is  not  available, 

loans 

the  domestic  market  of 

(iv) If  there  are  no  comparable  commercial  lending
the
practices  on 
rate  on  a
exporting  country, 
commercial 
estimated  with
reference  to  indicators  of  the  economic  situation
prevailing  at  the  time,  (notably  the 
inflation
rate)  and 
the  company
concerned.

loan  may  be 

situation  of 

interest 

the 

the 

(v) If  all  or  part  of  a  loan  is  forgiven  or  defaulted
on,  the  amount  not  repaid  will  be  treated  as  a
grant  depending  on  whether 
there  was  a
guarantee.

(v) Interest  rate  subsidies

Specific  cases

In  the  case  of  an 
interest  rate  subsidy,  the
amount  of  subsidy  is  the  amount  of  interest
saved  by  the  recipient  company  during  the
investigation  period.

(vi)(cid:217)It  should  be  noted  that  tax  deferrals,  or  the
financial  obligation,
deferral  of  any  other 
should  be  considered  as  interest(cid:220)free  loans  and
the  amount  of  subsidy  calculated  as  above.

(b) Loans

Basic  methodology

(i)(cid:217)In  the  case  of  a  loan  from  the  government
(where  repayment  does  take  place)  the  subsidy
is  the  difference  between  the  amount  of  interest
paid  on  the  government  loan  and  the  interest
normally  payable  on  a  comparable  commercial
loan  during 
(see
example  2(i)).

investigation  period 

the 

(ii)(cid:217)A  comparable  commercial  loan  would  normally
be  a  loan  of  a  similar  amount  with  a  similar
repayment  period  obtainable  by  the  recipient
from  a  representative  private  bank  operating  on
the  domestic  market.

(iii)(cid:217)In  this  regard,  the  commercial 

interest  rate
should  preferably  be  established  on  the  basis  of
the  rate  actually  paid  by  the  company  concerned
on  comparable  loans  from  private  banks.  If  this
is  not  possible,  the  investigation  should  consider
the  interest  paid  on  comparable  private  loans  to

from 

in  whole  or 

(vii)(cid:217)In  the  case  of  reimbursable  grants,  these  should
also  be  considered  as  interest  free  loans  until
they  are  reimbursed.  If  they  are  not  reim(cid:220)
in  part,  they  will  be
bursed, 
considered  as  grants  rather  than  interest(cid:220)free
loans 
the  date  on  which  non(cid:220)reim(cid:220)
bursement  is  established.  From  this  date,  the
normal  grant  methodology  will  apply. 
In
particular,  if  the  grant  is  to  be  allocated  over
time,  such  allocation  would  start  on  the  estab(cid:220)
lished  date  of  non(cid:220)reimbursement.  The  amount
of  subsidy  would  be  the  amount  of  the  grant,
minus  any  repayments.

(viii)(cid:217)The  same  approach  would  apply  to  contingent(cid:220)
liability  loans.  To  the  extent  that  such  loans  are
given  at  a  preferential  rate  of 
interest,  the
subsidy  would  be  calculated  as  in  paragraph  (i).
However,  if  it  were  to  be  determined  that  the
loan  would  not  be  repaid,  it  would  be  treated
the  date  on  which
as 
non(cid:220)repayment  was  established.  The  amount  of
subsidy  would  be  the  amount  of  the  loan,  less
any  repayments.

a  grant 

from 

17.12.98

EN

Official  Journal  of  the  European  Communities

C  394/9

(c) Loan  guarantees

If 

the  government  provides 

(i)(cid:217)In  general,  a  loan  guarantee,  by  eliminating  to
some  extent  the  risk  of  default  by  the  borrower
to  the  lender,  will  normally  enable  a  firm  to
borrow  more  cheaply  than  would  otherwise  be
the  case. 
the
guarantee,  the  fact  that  loans  are  obtained  at  a
lower  interest  rate  than  would  otherwise  be  the
case  does  not  mean  there  is  a  subsidy,  provided
that  the  guarantee  is  financed  on  a  commercial
basis,  since  the  financing  of  such  a  viable
guarantee  by  the  company  would  be  assumed  to
offset  any  benefit  of  a  preferential  interest  rate.

the  programme 

(ii)(cid:217)In  this  situation,  it  is  considered  that  there  is  no
benefit  to  the  recipient  if  the  fee  which  it  pays
to  the  guarantee  programme 
is  sufficient  to
enable 
to  operate  on  a
commercial  basis,  i.e.  to  cover  all  its  costs  and  to
earn  a  reasonable  profit  margin.  In  such  a
situation,  it  is  presumed  that  the  fee  covers  the
lower
risk  element 
interest  rate.  If  the  guarantee  programme 
is
viable  during  the  investigation  period  as  a  whole
and  the  recipient  has  paid  the  appropriate  fee,
there 
the
government  and  therefore  no  subsidy,  even  if
the  recipient  involved  were  to  default  on  its
loans  during  the  period.

is  no  financial  contribution  from 

in  obtaining  a 

involved 

If  the  scheme  is  not  viable,  the  benefit  to  the
recipient 
is  the  difference  between  the  fees
actually  paid  and  the  fees  which  should  have
been  paid  to  make  the  programme  viable,  or  the
difference  between  the  amount  the  firm  pays  on
the  guaranteed  loan  and  the  amount  that  it
would  pay  for  a  comparable  commercial  loan  in
the  absence  of 
the  government  guarantee,
whichever  is  the  lower.

(iii)(cid:217)In  the  case  of  ad  hoc  guarantees  (i.e.  not  port  of
it  should  first  be  ascertained
a  programme), 
whether 
those
the  fees  paid  correspond 
charged  to  other  companies  in  a  similar  position
loan  guarantee
from  viable 
which  benefit 
programmes.  If  so,  there  would  normally  be  no
subsidy;  if  not,  the  method  explained  in  (ii)
above  would  apply.

to 

(iv) If  no  fees  are  paid  by  the  recipient,  the  amount
of  subsidy  is  the  difference  between  the  amount
the  firm  pays  on  the  guaranteed  loan  and  the
amount  that  it  would  pay  for  a  comparable
the
in 
commercial 
government  guarantee.

the  absence  of 

loan 

(v) The  same  calculation  principles  would  apply  to
is
its

i.e.  where  the  recipient 
credit  defaults  by 

credit  guarantees, 
guaranteed  against 
customers.

(vi) In  the  particular  area  of  export  credits  and
guarantees, 
the  OECD
the  provisions  of 
arrangement  in  this  area  would  of  course  guide
our  approach.

(d) Provision  of  goods  and  services  by  the  government

P r i n c i p l e

(i)(cid:217)The  amount  of  subsidy  as  regards  the  provision
of  goods  or  services  by  the  government  is  the
difference  between  the  price  paid  by  firms  for
the  goods  or  service,  and  adequate  remun(cid:220)
eration  for  the  product  or  service  in  relation  to
prevailing  market  conditions,  if  the  price  paid  to
the  government  is  less  than  this  amount.

in  the 

the  domestic  market  of 

to  be
Adequate  remuneration  has  normally 
light  of  prevailing  market
determined 
conditions  on 
the
exporting  country,  and  the  calculation  of  the
subsidy  amount  must  reflect  only  that  part  of
the  purchases  of  goods  or  services  which  are
used  directly  in  the  production  or  sale  of  the
like  product  during  the  investigation  period.

Comparison  with  private  suppliers

services 

same  goods  or 

(ii)(cid:217)As  a  first  step,  it  must  be  established  whether
the 
involved  are
provided  both  by  the  government  and  by  private
operators.  If  this  is  the  case,  the  price  charged
by 
the  government  body  would  normally
constitute  a  benefit  to  the  extent  that  it  is  below
lowest  price  available  from  one  of  the
the 
private  operators  to  the  company  involved  for  a
comparable  purchase.  The  amount  of  subsidy
would  be  the  difference  between  these  two
prices.

the  company 

If 
involved  has  not  made
comparable  purchases  from  private  operators,

C  394/10

EN

Official  Journal  of  the  European  Communities

17.12.98

details  should  be  obtained  of  the  price  paid  by
comparable  companies  in  the  same  sector  of  the
economy  or,  if  such  data  is  not  availabe,  in  the
economy  as  a  whole.  The  amount  of  subsidy
would  be  calculated  as  above.

Government  monopoly  suppliers

(iii)(cid:217)If,  however,  the  government  is  the  monopoly
supplier  of  the  goods  or  services  involved,  they
less  than
are  considered  to  be  provided  for 
adequate  remuneration  if  certain  enterprises  or
sectors  benefit  from  preferential  prices.  The
amount  of 
the  difference
between  the  preferential  price  and  the  normal
price.

subsidy  will  be 

If  the  goods  and  services  in  question  are  widely
used  in  the  economy,  a  subsidy  will  only  be
specific 
is  evidence  of  preferential
pricing  to  a  particular  firm  or  sector.

there 

if 

in 

In 

the 

sometimes  happens 

It  may  be  that  per  unit  prices  charged  vary
according  to  neutral  and  objective  criteria,  for
example  large  consumers  pay  less  per  unit  than
the
small  ones,  as 
such
provision  of  gas  and  electricity. 
situations, 
that  certain  enterprises
fact 
benefit  from  more  favourable  prices  than  others
would  not  mean  that  the  provision  in  this  case
less  than  adequate
was  necessarily  made  for 
remuneration, 
pricing
that 
structure 
in  question  was  generally  applied
throughout  the  whole  economy,  without  any
preferential  prices  being  given  to  specific  sectors
or  firms.  The  amount  of  subsidy  is  in  principle
the  difference  between  the  preferential  price  and
the  normal  price  charged 
to  an  equivalent
company,  according  to  the  normal  structure.

provided 

the 

(e) Purchases  of  goods  by  government

(i)(cid:217)In  a  situation  where  private  operators  purchase
the  kind  of  goods  in  question  as  well  as  the
government  body,  the  amount  of  subsidy  is  the
extent  to  which  the  price  paid  for  the 
like
product  by  the  government  exceeds  the  highest
price  offered  for  a  comparable  purchase  of  the
same  goods  by  the  private  sector.

(ii)(cid:217)If 

the 

company 

involved  has  not  made
comparable  sales  to  private  operators,  details
should  be  obtained  of  the  price  paid  by  private
operators  to  comparable  companies  in  the  same
sector  of  the  economy,  or,  if  such  data  is  not
available,  in  the  economy  as  a  whole.  In  such  a
case,  the  amount  of  subsidy  should  be  calculated
as  above.

(iii)(cid:217)If  the  government  has  a  monopoly  for  the
purchase  of  the  goods  in  question,  the  amount
of  subsidy  as  regards  the  purchase  of  goods  by
the  government  is  the  extent  to  which  the  price
paid  for  the  goods  exceeds  adequate  remun(cid:220)
eration.  Adequate  remuneration  in  this  situation
is  the  average  costs  incurred  by  the  firm  selling
the  product  during  the  investigation  period,  plus
a  reasonable  amount  of  profit,  which  will  have
to  be  determined  on  a  case(cid:220)by(cid:220)case  basis.

The  amount  of  subsidy  is  the  difference  between
the  price  paid  by  the  government  and  adequate
remuneration  as  defined  above.

(f) Government  provision  of  equity  capital

(iv) However,  if  the  normal  price  is  insufficient  to
cover  the  supplier’s  average  total  costs  plus  a
sector
reasonable  profit  margin 
the
is 
averages), 
difference  between  the  preferential  price  and  the
price  which  would  be  required  to  cover  the
above  costs  and  profit.

(based  on 
subsidy 

the  amount  of 

(i)(cid:217)Government  provision  of  equity  capital  is  not
considered  as  conferring  a  benefit,  unless  the
investment  decision  can  be  regarded  as  incon(cid:220)
sistent  with 
investment  practice
(including  for  the  provision  of  risk  capital)  of
private 
the  exporting  country
concerned.

the  usual 

investors 

in 

service  with  a 

(v) If  the  government  is  the  monopoly  supplier  of  a
good  or 
specific  use,  e.g.
television  tubes,  the  question  of  preferential
pricing  does  not  arise,  and  the  amount  of
subsidy  will  be  the  difference  between  the  price
paid  by  the  firm  involved  and  the  price  required
to  cover  the  supplier’s  costs  and  profit  margin.

(ii)(cid:217)Therefore,  the  provision  of  equity  capital  does
not  of  itself  confer  a  benefit.  The  criterion  is
whether  a  private 
investor  would  have  put
money  into  the  company  in  the  same  situation
in  which  the  government  provided  equity.  On
the  basis  of  this  principle,  the  matter  has  to  be
taking
dealt  with  on  a  case(cid:220)by(cid:220)case  basis, 

17.12.98

EN

Official  Journal  of  the  European  Communities

C  394/11

account  of  the  Commission’s  practice  as  regards
State  aid  policy  in  this  area  and  the  practice  of
the  Community’s  main  trading  partners.

On  the  other  hand,  a  subsidy  might  exist  even  if
a  reasonable  return  has  been  achieved,  if  at  the
equity  injection  the  prospect  of  such  a  return
was  so  uncertain  that  no  private  party  would
have  made  the  investment.

(iii) Clearly,  if  the  government  buys  shares  in  a
company  and  pays  above  the  normal  market
price  for  these  shares  (taking  account  of  any
other  factors  which  may  have 
influenced  a
private  investor),  the  amount  of  subsidy  is  the
difference  between  the  two  prices.

(vii)(cid:217)In  cases  where  there  is  no  market  price  for  the
equity  and  there  is  a  subsidy  and  a  benefit,  i.e.
the  government  has  not  acted  according  to  the
usual  investment  practice  of  private  investors,
all  or  part  of  the  equity  provided  must  be
considered  as  a  grant.

in 

shares, 

for  equity 

the  price  paid 

(iv)(cid:217)As  a  general  rule,  in  cases  where  there  is  no
market 
the
freely(cid:220)traded 
government’s  realistic  expectation  of  a  return
on 
should  be
considered.  In  this  regard,  the  existence  of  an
independent  study  demonstrating  that  the  firm
involved  is  a  reasonable  investment  is  the  best
evidence;  if  this  is  not  present,  the  onus  is  on
the  government  to  demonstrate  on  what  basis  it
can  justify  its  expectation  of  a  reasonable  return
on  investment.

such 

investments  by 

is  no  market  price  and  the  equity
(v)(cid:217)If  there 
is  made  as  part  of  an  ongoing
injection 
programme  of 
the
government,  close  attention  should  be  paid  not
just  to  the  analysis  of  the  firm  in  question,  but
to  the  overall  record  of  the  programme  over  the
last  few  years.  If  the  records  show  that  the
programme  has  earned  a  reasonable  rate  of
return  for  the  government,  there  should  be  a
is  acting
presumption 
according  to  the  usual  investment  practice  of
private  investors  with  regard  to  the  case  in
question.  If  the  programme  has  not  generated  a
is  put  on  the
reasonable  return,  the  onus 
government  to  demonstrate  on  what  basis  it  can
justify  its  expectation  of  a  reasonable  return  on
investment.

the  government 

that 

A  decision  to  consider  all  of  the  equity  a  grant
would  be  made  only  in  extreme  cases  where  it  is
the  government  had  no
determined 
intention  of 
its
receiving  any 
investment  and  was  in  effect  giving  a  disguised
grant  to  the  firm  in  question.

return  on 

that 

A  decision  on  what  portion  of  the  equity  to
treat  as  a  grant  would  depend  on  how  near  the
government  has  come  to  meeting  the  private
investor  standard.  This  determination  will  have
to  be  made  on  a  case(cid:220)by(cid:220)case  basis.

(g) Forgiveness  of  government(cid:220)held  debt

Forgiveness  of  debt  held  by  government  or
government(cid:220)owned  banks  relieves  a  company  of  its
repayment  obligations  and 
therefore  be
treated  as  a  grant.  If  the  subsidy  is  to  be  allocated,
the  allocation  period  should  begin  at  the  time  of  the
forgiveness  of  the  debt.  The  amount  of  subsidy  will
be  the  outstanding  amount  of  the  debt  forgiveness
(including  any  interest  accrued).

should 

(vi)(cid:217)The  existence  of  a  subsidy  is  determined  by  the
information  available  to  the  parties  at  the  time
the  equity  injection  is  made.  Thus,  if  an  investi(cid:220)
gation  considers  an  equity  injection  that  was
made  several  years  before,  the  fact  that  the
company  has  performed  less  well  than  expected
does  not  mean  that  a  subsidy  exists,  provided
that  the  expectation  of  a  reasonable  return  was
justified  in  the  light  of  the  facts  know  at  the
time  of  the  provision  of  equity.

F.(cid:217)INVESTIGATION  PERIOD  FOR  SUBSIDY  -  CALCU(cid:220)

LATION  EXPENSE  VERSUS  ALLOCATION

The  amount  of  subsidy  should  be  established  during  an
investigation  period,  which  should  normally  be  the  most
recent  financial  year  of  the  beneficiary  enterprise  (Article
4(1)  of  Regulation  2026/97).  Although  any  other  period
of  six  months  prior  to  initiation  may  be  used,  it  is
preferable  to  use  the  most  recent  financial  year,  since  this
will  enable  all  appropriate  data  to  be  verified  on  the  basis
of  audited  accounts.

C  394/12

EN

Official  Journal  of  the  European  Communities

17.12.98

As  many  subsidies  have  effects  for  a  number  of  years,
subsidies  granted  before  the  investigation  period  should
also  be  investigated  in  order  to  determine  what  portion
of  such  subsidy  is  attributable  to  the  investigation  period
(see  below).

(i) If  the  subsidy  is  granted  on  a  per  unit  basis,  for
example,  an  export  rebate  granted  per  unit  of
product,  the  per  unit  calculation  normally  consists  of
taking  the  weighted(cid:220)average  value  of  the  rebate  over
the  investigation  period  (example  1).

(ii)(cid:217)Other  kinds  of  subsidy  are  not  readily  expressed  on
a  per  unit  basis,  but  involve  a  global  sum  of  money
which  has  to  be  allocated  to  each  unit  of  product  as
appropriate.

Two  exercises  may  have  to  be  carried  out,  in  this
respect:

-(cid:217)Attribution 

to 

the 

investigation  period  of  a
portion  of  those  subsidies  granted  before  the
investigation  period  but  whose  effects  extend
over  a  number  of  years  (Article  7(3)  of  Regu(cid:220)
lation  2026/97).

investigation  period  per  unit  of  the 

-(cid:217)Allocation  of  the  subsidy  amount  attributed  to
the 
like
product. 
appropriate
to  be
denominator 
selected  (Article  7(1)  and  (2)  of  Regulation
2026/97).

such  allocation  has 

case, 

this 

the 

for 

In 

the  normal  life  of  the  assets  (Article  7(3)  of
Regulation  2026/97).  Therefore  the  amount  of
subsidy  from,  for  example,  a  grant  (for  which  it
is  assumed  that  it  is  used  by  the  beneficiary  to
improve  its  competitiveness  in  the  long  term,
and  thus  to  purchase  product  assets  of  one  kind
or  another),  can  be  spread  over  the  normal
period  used  in  the  industry  involved  for  the
depreciation  of  assets.  This  will  normally  be
done  using 
straight(cid:220)line(cid:220)method.  For
example,  if  the  normal  depreciation  period  was
five  years,  20(cid:216)%  of  the  value  of  the  grant  would
be  allocated  to  the  investigation  period  (see
example  6).

the 

The  approach  of  allocating  over  time  means
that  non(cid:220)recurring  subsidies  granted  several
years  before  the  investigation  period  can  still  be
countervailed  provided  that  they  still  have  an
effect  during  the  investigation  period.

allocation 

interest  rate 

Conceptually, 
is
this  kind  of 
equivalent  to  a  series  of  annual  grants,  each
having  en  equal  amount.  In  order  to  determine
the  benefit  to  the  recipient,  the  appropriate
should  be
annual  commercial 
added  to  each  grant,  to  reflect  the  benefit  of
not  having  to  borrow  the  money  on  the  open
market.  In  addition,  in  order  to  reflect  the  full
benefit  to  the  recipient  of  having  a  lump  sum  of
money  at  its  disposal  from  the  beginning  of  the
allocation  period,  the  amount  of  subsidy  should
be  increased  by  the  average  amount  of  interest
which  the  recipient  would  expect  to  earn  on  the
non(cid:220)depreciated  amount  of  total  grant  over  the
whole  period  of  allocation.

(a) Attribution  of  a  subsidy  amount  to  the  investigation

period

(iii) As  an  exception  to  (ii),  non(cid:220)recurring  subsidies
which  amount  to  less  than  1(cid:216)%  ad  valorem  will
normally  be  expensed,  even  if  they  are  linked  to
the  purchase  of  fixed  assets.

in 

to 

(i)(cid:217)Many  types  of  subsidy,  e.g.  tax  incentives  and
preferential  loans  are  recurring  and  the  effect  is
felt 
the
immediately  after  granting.  Thus, 
the  beneficiary  can  be
amount  granted 
expensed 
investigation  period.  The
expensed  amount  should  normally  be  increased
by  the  annual  commercial 
interest  rate,  to
reflect  the  full  benefit  to  the  recipient,  on  the
assumption  that  the  beneficiary  would  have  had
to  borrow  the  money  at  the  beginning  of  the
period  and  repay  it  at  the  end.

the 

(ii)(cid:217)For  non(cid:220)recurring  subsidies,  which  can  be
linked  to  the  acquisition  of  fixed  assets,  the
total  value  of  the  subsidy  has  to  be  spread  over

(iv)(cid:217)In  the  case  of  recurring  subsidies  linked  to  the
acquisition  of  fixed  assets,  e.g. 
import  duty
exemptions  on  machinery,  which  date  back  to
investigation  period,  the  benefits
before  the 
the
accruing 
depreciation  period 
into
account  and  the  appropriate  amount  attributed
to  the  investigation  period  (see  example  7).

from  previous  years  within 
taken 

should  be 

(v)(cid:217)In  addition,  recurring 

subsidies  granted 

in
large,  concentrated  amounts  prior  to  the  inves(cid:220)
tigation  period,  can  in  certain  circumstances  be
allocated  over  time  if  it  is  determined  that  they
are  likely  to  be  linked  to  the  purchase  of  fixed
assets  and  still  confer  a  benefit  during  the  inves(cid:220)
tigation  period.

17.12.98

EN

Official  Journal  of  the  European  Communities

C  394/13

(vi)(cid:217)Consequently,  in  the  case  of  subsidies  expensed
as 
in  paragraphs  (i)  and  (iii)  no  subsidies
granted  before  the  investigation  period  should
be  taken  into  account.  For  subsidies  allocated
over  time,  as  in  (ii),  (iv),  and  (v),  subsidies
granted  prior  to  the  investigation  period  must
be  considered.

(vii)(cid:217)A  more  detailed  illustrative  table  of  subsidies  to
be  allocated  or  expensed  is  included  as  Annex
1.  This  table  is  for  illustrative  purposes  only;
certain  types  of  subsidy  may  be  subject  to  a
case(cid:220)by(cid:220)case  analysis  when  deciding  whether  to
expense  or  allocate.

(b) Appropriate  denominator  for  allocation  of  subsidy

amount

Once  the  subsidy  amount  to  be  attributed  to  the
investigation  period  has  been  established,  the  per  unit
amount  is  arrived  at  by  allocating  it  over  the  appro(cid:220)
priate  denominator,  consisting  of  the  volume  of  sales
or  exports  of  a  product  concerned.

2026/97) 

(i)(cid:217)As  regards  export  subsidies  (Article  3(4)(a)  of
Regulation 
appropriate
denominator  for  allocation  is  the  export  volume
during 
such
investigation  period, 
subsidies  benefit  only  exports  (see  examples  2
and  3).

since 

the 

the 

(ii)(cid:217)For  non(cid:220)export 

sales
subsidies 
(domestic  plus  export)  should  normally  be  used
as  the  denominator,  since  such  subsidies  benefit
both  domestic  and  export  sales  (see  example  4).

total 

the 

(iii)(cid:217)If  the  benefit  of  a  subsidy 

limited  to  a
particular  product, 
should
reflect  only  sales  of  that  product.  If  this  is  not
the
the  case, 
recipient’s  total  sales.

the  denominator 

the  denominator 

should  be 

is 

G.(cid:217)DEDUCTION  FROM  AMOUNT  OF  SUBSIDY

1.(cid:217)Article  7(1)  of  Regulation  2026/97  provides  that  only
the  following  may  be  deducted  from  the  amount  of
subsidy:

(i) Any  application 

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

are 

It  is  important  to  note  that  it  is  up  to  the  exporter
in  the  country  concerned  to  claim  a  deduction;  in
the  absence  of  such  a  claim  accompanied  by
verifiable  proof,  no  deduction  will  be  granted.
The  only  fees  or  costs  that  may  normally  be
deducted 
the
government  in  the  investigation  period.  It  must  be
shown  that  such  payment  is  compulsory  in  order
to  receive  the  subsidy.  Thus  payments  to  private
parties,  e.g. 
in
lawyers,  accountants, 
applying  for  subsidies,  are  not  deductible.  Neither
are  voluntary  contributions  to  governments,  for
example  donations.

those  paid  directly 

incurred 

to 

(ii) Export  taxes,  duties  or  other  charges  levied  on  the
export  of  a  product  to  the  Community  specifically
intended  to  offset  the  subsidy

if  the  charges 

for  deductions 

should  only  be
Such  claims 
levied
accepted 
during  the  investigation  period,  and  it  is  estab(cid:220)
lished  that  they  continue  to  be  levied  at  the  time
when  definitive  measures  are  recommended.

involved  were 

2.(cid:217)No  other  deductions  can  normally  be  made  from  the
amount  of  subsidy.  No  allowance  can  be  made  for
any  tax  effects  of  subsidies  or  for  any  other  economic
or  time  value  effect  beyond  that  which  is  specified  in
this  communication.

C  394/14

EN

Official  Journal  of  the  European  Communities

17.12.98

EXAMPLES  OF  SUBSIDY  CALCULATION

For  the  purpose  of  these  examples,  the  following  assumptions  are  made:

1.(cid:217)The  investigation  period  is  the  year  1996

2.(cid:217)The  interest  rate,  with  an  annual  repayment  period,  is  25(cid:216)%

3.(cid:217)The  depreciation  period  for  machinery  is  five  years

4.(cid:217)The  import  duty  on  machinery  is  50(cid:216)%

5.(cid:217)The  like  product  is  called  product  X,  measured  in  tonnes

6.(cid:217)There  are  three  producers  in  the  exporting  country;  each  exporting  100(cid:216)000  tonnes  per  year.

They  are  referred  to  as  companies  A,  B  and  C

7.(cid:217)In  all  the  examples,  the  amount  of  money  is  expressed  in  current  ecus.  In  practice,  the
amounts  would  be  denominated  in  the  currency  of  the  exporting  country  and  the  duty
expressed  in  ecus  at  the  Community  frontier.

(a) Subsidies  granted  per  unit  of  product

Example 1

(i)(cid:217)Exporters  of  product  X  receive  a  rebate  from  the  government  on  each  tonne  exported.
This  rebate  changes  according  to  season.  In  the  first  half  of  1996,  when  200(cid:216)000  tonnes
were  exported,  the  rebate  amounted  to  ECU  5  per  tonne;  in  the  second  half  of  the
year,  when  100(cid:216)000  tonnes  were  exported,  it  rose  to  ECU  20  per  tonne.

On  a  weighted(cid:220)average  basis,  the  rebate  was  worth  ECU  10  per  tonne  during  the
investigation  period.  Since  this  is  equivalent  to  a  grant,  the  amount  of  subsidy  is
calculated  by  adding  the  25(cid:216)%  interest,  which  gives  a  figure  of  ECU  12,5  per  tonne.  In
practice,  since  the  rebates  are  granted  regularly  throughout  the  year,  the  company  will
not  have  benefited  from  the  interest  for  the  whole  year  on  most  transactions.  If  they
can  provide  the  appropriate  evidence,  the 
in
proportion  to  the  weighted(cid:220)average  period  when  they  had  access  to  the  full  amount
granted.  Companies  A,  B  and  C  all  benefit  from  this  subsidy.

interest  amount  may  be  reduced 

(ii)(cid:217)Where  rebates  vary  on  a  seasonal  basis,  and  the  investigation  establishes  that  this  is  a
regular  procedure,  the  weighted(cid:220)average  amount  should  be  used.  If,  however,  the
investigation  showed  that  the  ECU  20  per  tonne  rebate  was  to  be  maintained  on  a
permanent  basis,  this  amount,  and  not  the  weighted(cid:220)average,  should  from  the  basis  of
the  subsidy  amount,  because  this  constitutes  the  actual  benefit  to  the  exporter  on
current  shipments.

(b) Subsidies  expensed  in  investigation  period

Example 2

Company  A  -  Allocation  of  export  subsidies  -  company  obliged  to  export  all  production

(i)(cid:217)Company  A  receives  further  benefits  if  it  exports  all  the  product  X  it  produces.  This  is
clearly  an  export  subsidy  as  benefits  are  contingent  upon  export  performance.  Among
other  things,  it  receives  an  income  tax  exemption.  During  the  investigation  period,  it
produced  and  exported  100(cid:216)000  tonnes.  Assuming  that  it  makes  ECU  4  million  profit
on  product  X  during  the  investigation  period  and  the  normal  tax  rate  is  25(cid:216)%,  the
value  of  the  exemption  in  total  would  be  ECU  1  million,  which  equates  to  a  per  tonne
value  of  ECU  10.  Since  for  calculation  purposes  the  tax  exemption  has  an  equivalent

17.12.98

EN

Official  Journal  of  the  European  Communities

C  394/15

effect  to  a  cash  grant,  it  is  appropriate  to  add  the  25(cid:216)%  interest,  which  makes  the  value
of  the  subsidy  ECU  12,50  per  tonne.

(ii)(cid:217)Company  A  also  receives  a  government  loan  of  ECU  5  million  at  5(cid:216)%  interest  for  the
same  project,  and  the  normal  commercial  interest  rate  is  25(cid:216)%.  Since  the  loan  is
repayable,  the  amount  of  subsidy  would  be  the  difference  between  the  interest  paid  and
the  normal  amount  payable  at  commercial  rates  (i.e.  ECU  5  million  at  20(cid:216)%)  =  ECU
1  million  for  the  investigation  period.  The  subsidy  per  tonne  would  therefore  be  ECU
10.  This  subsidy  will  recur  in  future  periods  if  the  repayment  period  for  the  loan  is
more  than  one  year;  its  exact  amount  will  depend  upon  how  much  of  the  capital
amount  of  the  loan  has  been  repaid.

Example 3

Company  B  -  Allocation  of  export  subsidy  -  incremental  increase  in  exports

Company  B,  rather  than  being  obliged  to  export  all  its  production,  benefits  from  being  able
to  deduct  from  its  taxable  income  20(cid:216)%  of  profits  made  on  its  increase  in  export  value.
This  is  clearly  an  export  subsidy,  since  it  is  contingent  upon  export  performance,  and
should  be  allocated  only  over  the  export  sales  of  the  company.  It  is  equivalent  to  a  cash
grant  for  the  purpose  of  calculation.

Company  B  produced  200(cid:216)000  tonnes  and  increased  its  export  sales  from  50(cid:216)000  to  100(cid:216)000
tonnes  in  the  investigation  period,  and  the  average  export  price  per  tonne  was  ECU  160.
This  equates  to  an  increase  in  export  value  of  50(cid:216)000  (cid:141)  ECU  160  =  ECU  8  million,  of
which  ECU  2  million  was  profit.

20(cid:216)%  of  ECU  2  million  is  ECU  400(cid:216)000.  If  the  tax  rate  is  25(cid:216)%,  the  saving  for  the  manu(cid:220)
facturer  is  ECU  100(cid:216)000.

Expressed  on  a  per  tonne  basis  over  the  100(cid:216)000  units  exported,  the  tax  saving  is  ECU  1.
By  adding  25(cid:216)%  interest,  we  arrive  at  the  value  of  the  subsidy  of  ECU  1,25  per  tonne.

Example 4

Non(cid:220)export  -  Allocation  over  total  sales

Instead  of  receiving  export  subsidies,  company  C  receives  a  production  subsidy  that  is
specific  to  the  industry  concerned  and  therefore  countervailable.  The  subsidy  is  allocated
over  the  total  sales  of  the  company,  not  just  the  exports.

(i)(cid:217)Company  C  produced  and  sold  200(cid:216)000  tonnes  of  product  X,  100(cid:216)000  on  the  domestic
market  and  100(cid:216)000  for  export,  in  the  investigation  period.  In  calculating  the  amount
of  subsidy  in  the  case  of  domestic  subsidies,  only  the  total  sales  volume,  not  the
exports,  is  relevant.

(ii)(cid:217)Therefore,  if  the  company  in  question  obtained  an  income  tax  exemption  and  made
ECU  4  million  profit  in  the  investigation  period,  the  normal  tax  rate  being  25(cid:216)%,  the

C  394/16

EN

Official  Journal  of  the  European  Communities

17.12.98

tax  saving  of  ECU  1  million  would  be  allocated  over  200(cid:216)000  units,  giving  a  subsidy  of
ECU  5  plus  25(cid:216)%  interest  =  ECU  6,25  per  tonne.

Example 5

Preferential  purchase  of  goods  or  services

For  the  purpose  of  this  example,  it  is  assumed  that  one  tonne  of  gas  is  consumed  to
produce  one  tonne  of  producte  X.  The  gas  is  supplied  by  a  government(cid:220)owned  distribution
company,  which  is  the  single  supplier  in  the  country  concerned.

In  the  absence  of  any  private  sector  supplies,  it  is  necessary  to  assess  benefit  in  terms  of
whether  the  government  supplier’s  price  covers  cost  and  whether  there  is  a  preferential
price.

ECU  70  per  tonne  reflects  the  normal  price  of  gas  to  large(cid:220)sized  industrial  consumers  as
part  of  a  price  structure  and  enables  the  government  supplier  to  cover  its  overall  costs.

However,  in  1996  it  was  decided,  in  order  to  boost  the  competitiveness  of  the  industry
concerned,  to  reduce  the  price  of  gas  to  this  industry  only  to  ECU  50  per  tonne.  This  is  a
preferential  price,  since  other  large  industrial  users  continue  to  pay  ECU  70  per  tonne.

All  three  companies  benefit  from  this  subsidy  to  the  extent  of  the  difference  between  ECU
70  (the  normal  price)  and  ECU  50  (the  preferential  price)  =  ECU  20  plus  the  normal
25(cid:216)%  interest  =  ECU  25  per  tonne.

(c) Subsidies  allocated  over  time

Example 6

Grant  for  purchase  of  machinery  (fixed  assets)

Company  A  is  given  a  non(cid:220)recurring  grant  of  ECU  5  million  to  purchase  machinery  used
to  produce  the  product  for  export.  The  benefit  of  such  a  subsidy  is  spread  over  the  normal
depreciation  period  for  such  fixed  assets.  Assuming  this  to  be  five  years  for  the  industry
involved,  the  annual  amount  attributed  to  one  year  (and  thus  the  investigation  period)
would  be  ECU  1  million,  which  equates  to  ECU  10  per  tonne.

Of  course,  in  reality,  a  lump  sum  of  ECU  5  million  is  of  far  greater  value  to  a  company
than  five  annual  grants  of  ECU  1  million  each.  In  order  to  reflect  the  full  benefit  to  the
recipient,  the  face  amount  of  ECU  10  has  to  be  increased  by  the  average  annual  amount  of
interest  that  the  firm  could  earn  from  the  non(cid:220)depreciated  amount  of  the  grant  over  the
five(cid:220)year  allocation.  For  example,  in  year  1,  this  amount  would  be  ECU  5  million  (cid:141)  25(cid:216)%
=  ECU  1,25  million;  in  year  5,  it  would  be  ECU  1  million  (cid:141)  25(cid:216)%  =  0,25  million.  Over
the  period  as  a  whole,  the  average  annual  amount  of  interest  would  be  ECU  0,75  million,
equivalent  to  ECU  7,5  per  tonne.

Therefore  the  amount  of  subsidy  for  each  of  the  five  years  is:

ECU  10  (face  amount)  plus  ECU  7,5  (accumulated  interest)  =  ECU  17,5  per  tonne.

This  amount  can  continue  to  be  countervailed  for  a  further  four  years.

17.12.98

EN

Official  Journal  of  the  European  Communities

C  394/17

Example 7

Import  duty  exemption  on  machinery  (fixed  Assets)

If  the  subsidy  dates  back  before  the  investigation  period,  the  annual  value  of  benefits
accruing  from  previous  years  within  the  depreciation  period  can  be  added.  In  the  example
below,  company  A  has  been  granted  import  duty  exemption  on  machinery  since  1990.
Since  machinery  is  in  no  way  consumed  in  the  production  process  of  the  final  product,  the
subsidy  is  countervailable.  For  calculation  purposes,  the  amount  of  duty  foregone  is
equivalent  to  a  grant.  Assuming  that  the  investigation  period  is  1996  and  that  it  imports
ECU  1  million  of  machinery  each  year,  the  amount  allocated  to  the  investigation  period
will  be  ECU  500(cid:216)000,  equivalent  to  ECU  5  per  tonne.  The  amount  of  the  subsidy,
including  25(cid:216)%  interest,  is  ECU  6,25  per  tonne.  (See  Table  1  for  a  more  detailed  expla(cid:220)
nation).

(The  same  allocation  methodology  can  be  used  for  other  types  of  subsidy,  for  example
loans).

(d) Total  amount  of  subsidy  (ecu  per  tonne)

Example

Company  A

Company  B

Company  C

1

2

3

4

5

6

7

Total(cid:218)

12,5(cid:217)

22,5(cid:217)

-

-

25,0(cid:217)

17,5(cid:217)

6,25

83,75

12,5(cid:217)

-

1,25

-

25,0(cid:217)

-

-

38,75

12,5(cid:217)

-

-

6,25

25,0(cid:217)

-

-

43,75

(e) Calculation  of  countervailing  duty

(a)(cid:217)If  the  amount  of  subsidy  is  less  that  the  injury  margin,  this  amount  should  normally
form  the  basis  of  the  countervailing  duty.  The  countervailing  duty  is  collected  at  the
time  of  the  entry  into  free  circulation  of  the  goods  and  can  be  either:

i) a  specific  duty,  i.e.  an  amount  per  tonne,  which  in  the  above  case  would  be:

Company  A:  ECU  83,75,  company  B:  ECU  38,75  and  company  C:  ECU  43,75;

(ii)(cid:217)an  ad  valorem  duty,  expressed  as  a  percentage  of  the  cif  import  price  before  duty.
If,  in  the  above  case,  the  cif  unit  price  was  ECU  180  per  tonne,  the  ad  valorem
duty  would  be:

Company  A:  46,5(cid:216)%,  company  B:  21,5(cid:216)%  and  company  C:  24,3(cid:216)%.

The  amount  is  rounded  down  to  one  decimal  place.

(b) Of  course,  the  duty  will  be  limited  by  the  injury  margin,  if  the  latter  is  lower  than  the

subsidy  amount.

C  394/18

EN

Official  Journal  of  the  European  Communities

17.12.98

ANNEX

Table  1

Import  duty  exemption  on  machinery  -  subsidy  granted  since  1990

Investigation  period  1996  -  depreciation  period  five  years

Assuming  ECU  1  million  of  machinery  imported  per  year  -  duty  rate  50(cid:216)%

Amount  allocated  to
each  year

1990

1991

1992

1993

1994

1995

1996

0,2

0,2

0,2

0,2

0,2

Acquired(cid:217)in:(cid:217)1990

0,2

1991

1992

1993

1994

1995

1996

Total(cid:218) 0,2

0,1

0,4

0,2

0,6

0,3

Subsidy  amount

Duty  rate  50(cid:216)%

0,2

0,2

0,2

0,2

0,8

0,4

0,2

0,2

0,2

0,2

0,2

1,0

0,5

-

0,2

0,2

0,2

0,2

0,2

1,0

0,5

-

-

0,2

0,2

0,2

0,2

0,2

1,0

0,5

The  subsidy  on  machinery  acquired  in  1990  and  1991  has  dropped  out  of  the  calculation  for  the  investi(cid:220)
gation  period  (1996).  The  subsidy  on  machinery  acquired  in  1993  or  after  can  continue  to  be  countervailed
until  the  allocation  period  expires.

Table  2

Illustrative  table  of  subsidies  to  be  expensed  or  allocated  over  time

EXPENSED  SUBSIDIES

SUBSIDIES  ALLOCATED  OVER  TIME

Purpose  is  for  other  than  purchase  of  fixed
assets

c x Purpose  is  for  purchase  of  fixed  assets

Recurring  and/or  small c x Non(cid:220)recurring  and/or  large

GRANTS

x Recurring  but  granted 

in 

large,  concentrated

amounts

TAX  BENEFITS/INDIRECT  TAX  REBATES/IMPORT  DUTY  EXEMPTIONS

For  operating  expenses c x For  purchase  of/related  to  fixed  assets  (e.g.

import  duty/indirect  tax  exemption  on
machinery)

Benfits  related  to  direct  taxes c

17.12.98

EN

Official  Journal  of  the  European  Communities

C  394/19

EXPENSED  SUBSIDIES

SUBSIDIES  ALLOCATED  OVER  TIME

PROVISION  OF  GOODS  AND  SERVICES

Provision  of  services/consumable  inputs c x Provision  of  fixed  assets  and  non(cid:220)general  infra(cid:220)

structure

Expense  only  if  allocation  not  appropriate c x Presumption  to  allocate

RESEARCH  &  DEVELOPMENT(cid:216)(˛)

LOSS  COVERAGE

OPERATING  COSTS

Recurring  and/or  small c x Non(cid:220)recurring  and/or  large

x Benefit  goods  not  yet  produced

Interest 

subsidy  payments  made  as 

loan
payments  become  dure

c x Subsidy  is  lump  sum  to  offest  past,  present  of

future  interest  due  or  paid

INTEREST  RATE  SUBSIDIES(cid:216)(cid:216)(ˇ)

(˛)(cid:217)This  presumption  is  derived  from  the  fact  that  R&D  subsidies  frequently  benefit  future  production.
(ˇ)(cid:217)In  such  a  case,  the  subsidy  is  non(cid:220)recurring.

EXPENSED  SUBSIDIES

SUBSIDIES  ALLOCATED  OVER  TIME

EQUITY  INFUSIONS

LONG(cid:220)TERM  LOAN  BENEFITS

(benefits  exist  over  life  on  loan)

FORGIVENESS/ASSUMPTION  OF
LONG(cid:220)TERM  DEBT

(including  princiopal  and  interest)

SHORT(cid:220)TERM  LOAN  BENEFITS

EXPORT  REBATES

SUBSIDIES  BELOW  MINIMUM  THRESHOLD
SIZE

(1(cid:216)%  of  sales  for  any  individual  subsidy)