# **B. Subsidies Existence and Calculation**

In this section, we discuss in detail how th e DOC determined the existence of a subsidy and calculated the scale of subsidies in CFS paper imports from China. This is a summary of documentation based on what the DOC published in its m emorandum on the preliminary affirmative countervailing duty determination in March 30, 2007. From learning point of view, a summ ary of how s ubsidies are determined and calculated is useful. We provide no judgm ent or discussion on whether these subsidies exist or not, and if they are actionable subsidies or non-actionable.<sup>62</sup>

**Existence of Countervailable Subsidies.** In the original filed petition, NewPage Corporation alleged that 13 Chinese C FSP producers/exporters have received countervailable subsidies from the Government of China ( GOC). The DOC selected the two largest of them , Gold Ea st Paper (Jiangsu) Co., Ltd. (Gold East) and Shandong Chenming Paper Holdings Ltd. (Chenm ing) as mandatory respondents. The alleged subsidies include government grants, policy loans, tax exemption, export refunds, equity infusion, currency m anipulation, and others , which num ber more than 17 kinds of subsidies. The DOC has denied the invest igation on the currency m anipulation program from the very beginning.  In stead, it found that there are si x kinds of program s to be countervailable in its preliminary determination:

**1. Grant Program:** There are two grant programs that relate to this allegation: the State Key Technology Renovation Fund (“Key Technology Program”), and the Clean Production Technology Fund. The DOC has identif ied that the former program provides countervailable subsidies, and the latter not to be used.

1.1. The Key Technology Program was created by the former State Economic and Trade Commission (SETC) in 1999 and aim ed to promote: (1) technological renovation in key industries, key enterprises, and key products ; (2) facilitation of technology upgrade; (3) improvement of product structure; (4) improvement of quality; (5) increase of supply; (6) expansion of domestic demand; and (7) continuous and healthy development of the state economy. The recipients of these funds will ma inly be selected from large-sized stateowned enterprises and large-sized state holding enterprises. While this program has not operated since 2003 due to the Administrative system reform, the DOC finds that these grants are a direct transfer of funds providi ng a benefit in the amount of the grant. These grants are s pecific because the pro gram is limited to c ertain enterprises. Chenming applied and was approved to have fundi ng under the Key Technology Program in 2000, and that the funds were disbursed in 2001. The DOC used the standard grant methodology determining the countervailable subsidy to be 1.28 percent _ad valorem_ for Chenming.

1.2. The Clean Production Technology Fund is a program to provide incentives and rewards (monetary or nonmonetary) to encourage enterprises to conduct clean

> 62 In the following discussion, all materials come from _Coated Free Sheet Paper from the People’s Republic of China: Amended Preliminary Affirmative Countervailing Duty Determination_ , Department of Commerce, March 31, 2007.

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