 
 WORLD TRADE  
ORGANIZATION   
G/SCM/45 
30 July 2002 
 
 (02-4225) 
Committee on Subsidies  
and Countervailing Measures Original:   English 
 
 
 
CHAIRMAN'S REPORT ON THE COMMITTEE'S REVIEW MANDATED 
BY PARAGRAPH 10.3 OF THE DECISI ON ON IMPLEMENTATION-RELATED 
ISSUES AND CONCERNS ADOPTED ON 14 NOVEMBER 2001 AT THE 
DOHA MINISTERIAL CONFERENCE 
 
 Mr. Chairman, I am presenting this report to the General Council, on my own responsibility 
and without prejudice to the position of any Member, as Chairman of the Committee on Subsidies and Countervailing Measures ("SCM Committee").  This re port is submitted pursuant to paragraph 10.3 of 
the Decision on Implementation-Related Issues and Concerns adopted on 14 November 2001 at the 
Doha Ministerial Conference, where Minister s agreed "that the Committee on Subsidies and 
Countervailing Measures shall continue  its review of the provisions  of the Agreement on Subsidies 
and Countervailing Measures regarding countervailing du ty investigations and report to the General 
Council by 31 July 2002." 
 Since establishing a framework for the manda ted review in December 2001, the Committee 
has been engaged in the review of the numerous  proposals made by the proponents.  The Committee 
has held a series of informal meetings and I ha ve conducted informal consultations.  The issues 
involved in this review are highly technical.  Members have exchanged numerous documents 
containing proposals, explanations, questions and an swers, and have engaged actively in discussions, 
and this process has led to a clarification and distillation of the issues.  Attached is a technical summary giving an overview of the main points that arose in the Committee's discussions and 
exchanges of questions and responses among Members.   
  The review of these issues h as revealed that many Members recognize the importance of the 
issues raised.  During the course of the review, so me delegations have expr essed their understanding, 
and, in some cases, support, in respect of some of the proposals or elements thereof.  In addition, my 
perception is that many delegations, regardless of their views on the substance of a given proposal, 
have found the review extremely useful in enha ncing their understanding of the proposals and the 
technical issues that they raise, as well as of Me mbers' views concerning the proposals.  This is 
confirmed by the high degree of constructive spir it with which Members engaged in the detailed 
discussions on these highly technical and complex issues.  
 This said, however, my sense is that ther e exist diverging views on whether and how the 
Committee could or should proceed  after the completion of the 31 July 2002 mandate, and I have 
been unable to identify any significant basis fo r a consensus on any specific suggestion by the 
Committee in terms of the substantive aspects of the re view or with respect to any next step.  I note 
that certain delegations have expressed disappointm ent in this regard, as they had hoped that the 
Committee might be in a position to formulate some  sort of recommendations to the General Council 
on some or all of the proposals, and also had hoped th at the Committee might be able to agree to make 
a recommendation with respect to next steps forward in respect of these proposals in another forum.  
Other delegations, however, have em phasized their view that the Committee has satisfied the terms of 
its mandate, that the issues involved, as develope d and clarified through the review process, could 
now be left in the hands of Members, and that any Member may, if it wishes, submit the proposals 
and the report itself, or portions of it, for discussion in an appropriate forum.   G/SCM/45 
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 In light of all of this, I have had to conc lude that in the context of the Committee, the 
discussions of these issues have been taken as far as po ssible.  I realize that this may be less than was 
originally expected by some Members.  However,  I have to conclude, on a positive note, that I am 
reassured that the quality of the discussion and excha nge of ideas is, in itself, valuable, and supports 
my belief that we have usefully spent this time. 
  I would like to take this opportunity to thank the Members of the Committee for their active and cooperative engagement in this review, with eac h other and with me as Chairman.  I also would 
like to thank the previous Chairman of the Committ ee for his hard work on these issues, as well as the 
Secretariat for its support given to me in this process.  
  Finally, as the Committee has completed its wo rk under the existing mandate, I would like to 
express the hope that Members find useful the inform ation in this detailed report presenting the results 
of the Committee's review of the provisions of  the SCM Agreement regarding countervailing duty 
investigations, and in the documents submitted in that context.  
     
 
_________________ Milan HOVORKA Chairman Committee on Subsidies and Countervailing Measures 
29 July 2002  G/SCM/45 
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 Technical Summary 
 
I. PROCEDURAL MATTERS 
1. This report is submitted pursuant to paragra ph 10.3 of the Decision on Implementation-Related 
Issues and Concerns adopted on 14 November 2001 at the Doha Ministerial Conference, where 
Ministers: 
  "Agree[d] that the Committee on Subsidies and Countervailing Measures shall 
continue its review of the provisi ons of the Agreement on Subsidies and 
Countervailing Measures regarding counterva iling duty investigations and report to 
the General Council by 31 July 2002." 
 
2. Relevant developments preceding the Doha Mi nisterial Conference -- following the General 
Council's referral to the SCM Committee in August 2001 in respect of a review of the provisions of 
the SCM Agreement  regarding countervailing duty investigations  -- are reflected in the Reports by the 
SCM Chairman to the General Council contained in  documents G/SCM/36 and G/SCM/38, circulated 
on 2 and 26 October 2001, respectively.  As indicated in those reports, this review was commenced in 
the SCM Committee prior to the Doha Ministerial C onference.  During that period, Brazil and India 
submitted a number of proposals. 
3. Pursuant to the mandate from Ministers at Doha , at an informal meeting on 13 December 2001, 
the Committee reached an understanding on a programme  of five meetings between January and July 
2002 to take up this review in detail.  In December 2001, a checklist of issues1 raised in Brazil's and 
India's proposals was circulated to Members of th e Committee to provide a framework for discussion 
at these meetings, without prejudice to Members' pos itions.  The checklist  divided the issues raised 
by the two proponents into five general topics: Topi c 1 – Article 14; Topic 2 – Facts available; Topic 
3 – de minimis; Topic 4 – review procedures; Topi c 5 – definition of domestic industry and injury 
analysis.  The meetings with respect to some or all of these topics took place on 31 January, 13 
March, 30 April, 17 June and 25 July 2002.  Discu ssion was based mainly on written exchanges of 
questions and answers among Members.2   
4. In the following sections, the main points raised in the discussions are summarized.  To fully 
appreciate the extent and nature of the issues discus sed, this paper must be read in conjunction with 
the papers exchanged by Members, the records of  the Committee's meetings on these issues, and the 
other documents referred to herein.   
                                                      
1 Attached - Annex I.  This technical summary ad dresses the issues in the order presented in the 
checklist.   
2 Brazil's and India's proposals can be found in documents G/SCM/W/462 and G/SCM/W/464. Related 
documents and exchanges of questions and answers in c onnection with the meetings from January-July 2002 are 
to be found in documents:  G/SCM/W/474 - 479, /483, /486, /494, /496, /498, /502, /503, /510-513, /515-520. G/SCM/45 
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 II. SUMMARY OF MAIN POINTS AR ISING IN COMMITTEE'S REVIEW 
A. 
TOPIC 1 – ARTICLE 14 (SUBSIDY CALCULATION ISSUES ) 
1. The “chapeau” of Article 14 (Proposal by Brazil) 
(a) General comments relating to both elements of Brazil's proposals concerning the chapeau of 
Article 14 
5. Brazil's proposal is that the “chapeau” of Article 14 of the SCM Agreement  be interpreted to 
require Members to include in their national legislation or implementing regulation any methods used by the investigating authorities to calculate the am ount of the benefit to the recipient and that the 
calculation of the amount of the subsidy be based on the benefit conferred to the producer/exporter.  
The main points that arose in the discussion included: 
Relationship of the two elements of the proposal with current text of SCM Agreement :  Some 
Members questioned whether and how Brazil's  proposal would require a change to the SCM 
Agreement , or how it could be given effect.  Brazil initially stated that these two proposals do not 
require a change to the SCM Agreement .  They simply intend to clarify that the chapeau of its 
Article 14 should be strictly read in conjunction with the title of the same article, meaning that 
Members should fulfil all the three requirements esta blished both in the title and in the chapeau:  
(a) the calculation of the amount of the subsidy;  (b) its calculation in terms of the benefit to the 
recipient; and (c) the obligation to provide for any method used to make that calculation in the 
national legislation and implementi ng regulations.  Brazil subsequently proposed that the “chapeau” 
of that  Article should read as follows:  
“For the purpose of Part V, any calculation of the amount of a subsidy shall be 
effected in terms of the benefit confe rred to the recipient on a per unit and per 
exporter/producer basis.  Any method used by the investigating authority to calculate the amount of the subsidy in terms of the be nefit conferred pursuan t to paragraph 1 of 
Article 1 shall be transparent and adequately explained.” (…) 
Relationship between Article 14 and Articles 12,  21 and 22:  Some Members asked about the 
relationship between Articles 14 a nd Articles 12, 21 and 22 of the SCM Agreement , including whether 
Brazil's proposal would embody an interpretative decision reiterating the scope of the Article 14 
requirement, or whether Brazil also envisaged a deve lopment in relation to Article 22, paragraphs 4 
and 5.  In Brazil’s view, the SCM Agreement  shall be interpreted as a whole, and, therefore, the 
provisions of Article 14 should appl y, as appropriate, to the relevant procedures of Articles 12, 21 and 
22.  
 
(b) Specific comments relating to each of the individual elements of Brazil's proposal 
(i) calculation of the amount of the benefit based on the benefit to the exporter 
6. Brazil understands that, for the purpose of Part V of the SCM Agreement , investigating authorities 
shall calculate the amount of the subsidy in te rms of the benefit conferred to the recipient 
(producer/exporter) and do so on a product unit basis.  Brazil believes that this approach is the only 
one consistent with the title of the Article; ther efore no other basis for this calculation should be 
allowed.  Certain Members supported Brazil's proposal.  The following main points arose on this element of Brazil's proposal: 
Relationship of this element of th e proposal with current text of SCM Agreement :  Certain Members 
considered that the current Article 14 of the SCM Agreement  is sufficiently clear.  Another suggested  G/SCM/45 
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 that one way to deal with this issue would be by  way of a clarification in Article 14 that certain 
concepts should not be used to calculate the amount of  a subsidy, and raised the possibility that if the 
objective is to quantify the countervailing duty with gr eater accuracy and bring it closer into line with 
its economic impact on the destination market, it mi ght be more effective to  amend Article 19.2 to 
establish a mandatory provision limiting the countervaili ng duty to the injury.  Brazil indicated that it 
deems clarification of Article 14 necessary as the text of the “chapeau” of Article 14 might leave 
room for misinterpretations as a result of the fact th at only its title refers explicitly to the calculation 
of the amount of a subsidy in terms of the benefit to  the recipient, but not the “chapeau” itself.  Brazil 
stated that this absence may lead to  the incorrect interpretation that Article 14 refers strictly to the 
calculation of the benefit to the recipient but not to the calculation of the amount of the subsidy in 
terms of the benefit of the recipient.  Conseque ntly, Brazil stated, some may argue that, for the 
purpose of Part V of the SCM Agreement , it would be possible to adopt any method for the calculation 
of the amount of the subsidy (for instance, one based on the cost to the granting government). 
 Relationship with previous dispute settlement re ports:  One Member asked whether Brazil intended 
with its proposal to codify existing WTO case law,  which has held that Article 1.1(b) of the SCM 
Agreement  does not admit a “cost to government” approach to determining the existence of a benefit.  
In this respect, Brazil indicated that its proposal refers to the methodology for the calculation of the 
amount of a subsidy for the purposes of Part V of the SCM Agreement , that is, for the application of 
countervailing measures.  It does not refer to any ot her Part of the Agreement and it is not Brazil's 
intent to “codify” such case law, but to establish, a ccording to that interpretation, a clarification to 
Article 14.  Brazil indicated, however, that it agrees with this ruling.  Brazil also understands that the 
SCM Agreement  does not establish the “cost of government a pproach” to determining benefit, since it 
is illogical to calculate the benefit to the exporter on th e basis of the cost to another agent, that is, the 
government.  The SCM Agreement  only establishes in Article 6.1(a) that the total “ ad valorem ” 
subsidization shall be calculated in  accordance with the provisions of Annex IV, that is, in terms of 
the cost to the granting government.  
 Request for examples of calculation not on the basis of  benefit to exporter:  With regard to another 
Member's request for concrete examples in which the amount of the subsidy is calculated by product, 
but not on the basis of the benefit conferred to the producer/exporter of that same product, Brazil 
stated that presently some Members' legislations establish that the amount of the subsidy shall be 
calculated on the basis of its cost for the government, and not on the basis of the subsidy conferred to 
the recipient.  In Brazil's view, this type of  provision should be explicitly ruled out in the SCM 
Agreement . 
 Relationship with Brazil's proposal concerning samp ling:  One Member questioned how Brazil's view 
that sampling should be applied in CVD investigations, point II.A.6, infra , (which would result in 
some exporters/producers not receiving their own subsidy rate) could be reconciled with Brazil's 
position that Article 14 should be am ended to provide that the amount of subsidy should be calculated 
on a "per exporter/producer basis".  Brazil responded th at there is no contradiction:  the general rule 
should be the calculation of the amount of subsid y in terms of the benefit to each exporter under 
investigation.  Nevertheless, where the number of e xporters under investigation is so large as to make 
such calculation impracticable, the investig ating authorities could use samples.   
 
(ii) Any method used by the investigating authority to calculate the amount of the subsidy in terms of 
the benefit shall be transparent and adequately explained 
Relationship of this element of the proposal with current text of SCM Agreement :  While some 
Members were of the view that the provision was sufficiently clear and that no further clarification 
was required, others indicated they supported in creased transparency and predictability in the 
application of the Agreement.  According to Brazil,  the obligation of transp arency established in the 
chapeau (“any method used …  shall be transpar ent and adequately explained …”) can also be G/SCM/45 
Page 6  
 
 misinterpreted as only referring to the method for the calculation of the benefit and not to the method 
for the calculation of the amount of the subsidy.  Co nsequently, a Member could consider itself not to 
be required to include in its national legislation - or implementing regulation – the method used to 
calculate the amount of the subsidy.  Therefore, Br azil opined that there seems to exist a margin for 
the utilization of non-transparent methods for th e calculation of the amount of the subsidy.   
 
2. For a subsidy to exist from duties foregone or  not collected, benefit should have been 
received during the investigation period (Proposal by India) 
7. India's proposal is to clarify that for a subsidy to  be deemed to exist under Article 1.1(a)(1)(ii) of 
the SCM Agreement , the exporter concerned should have receiv ed the benefit of duty foregone or not 
collected during the investigation period.  India beli eves that it is prejudicial to the interest of the 
exporter to include a subsidy not received during the investigation period while calculating the 
amount of subsidy.  The following main points arose in the discussion:  
Relationship of proposal with current text of SCM Agreement :  In India’s view, its proposal requires 
no change to the Agreement. 
 
When benefit accrues to exporter:  Some Members asked  for clarification of India's view as to when 
the benefit accrues to the expor ter, and whether, for example,  a benefit in terms of the marketplace is 
not conferred at the time legal entitlement to a fina ncial contribution vests in the recipient.  India's 
view is that in a number of cases, the inves tigating authority has imposed a countervailing duty 
without ascertaining whether the exporters have  received the benefit during the period of 
investigation.  An exporter may have applied for but not received a subsidy during the investigation 
period.  However, if the subsidy has not been r eceived during the investigation period then it cannot 
be deemed to exist for the purposes of countervailin g investigation.  The benefit would accrue only 
after there is an instruction or order from the government specifically in respect of the concerned 
exporter which legally entitles it to the subsidy.   
 
Potential restrictive effect of proposal:  One Memb er could not support this proposal as it considered 
it to be a restriction on the investigating authority.  India reacted by noting that if no refund of duty is 
received during the period of investigation, the ques tion of benefit does not arise.  Accordingly, in 
India's view, it may be appropriate to exclude such  elements from the calculation of benefit to the 
recipient. 
 
3. Remission, exemption or duty drawback (Proposal by India) 
8. India's proposal is to clarify the provisions of the SCM Agreement  in Annex I (items h and i), 
Annex II and Annex III so that any remission, exempt ion or drawback of duties and import charges to 
the extent of those levied on inputs consumed is not countervailed and only the amount of remission, 
exemption or drawback of duties and import charge s in excess of those levied on inputs consumed 
may be treated as a countervailable subsidy.  The following main points arose in the discussion: 
Relationship of proposal with current text of SCM Agreement :  Some Members questioned how and 
why current footnote 1 and items (h) and (i) of A nnex I were insufficient.  India stated that 
investigating authorities are required to comply with obligations under Article VI:3 of the  GATT 
1994  and Article 19.4 of the SCM Agreement  so that no countervailing duty is levied on any imported 
product in excess of the amount of subsidy found to exis t.  It is therefore essential that countervailing 
duties are limited to the amount of excess remission, ex emption or deferral.  India seeks to clarify that 
the obligations under Article VI:3 of the GATT 1994 , Article 19.4 of the SCM Agreement  and 
provisions of Annex I items (h) and (i) have to be read harmoniously for limiting the amount of 
countervailing duties to the amount of excess duty remission etc.   
  G/SCM/45 
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 Where the amount of excess is not calculable or is difficult to calculate:  One Member questioned how 
the SCM provisions regarding remission, exemption or drawback of duties should be applied in 
situations where the amount of excess is either not  calculable, or can only be calculated with great 
difficulty and significant additional burden to the inv estigating authority and other parties involved.  
This Member also asked whether it was not appropria te to countervail the entire amount of a payment 
made by a government to an exporter where, a lthough such payment is nominally described as 
“remission, exemption or drawback of duties”, the government has not examined the type and/or amount of inputs consumed in the manufacture of  exported merchandise and the taxes or import 
charges levied on such inputs in order to ensure  a correlation between the remission payment and such 
taxes or import charges.  India stated that  the investigating authorities are under an obligation to abide 
by the requirement that no countervailing duty be le vied in excess of the amount of subsidy found to 
exist.  India stated that it was not clear how it was being claimed that the amount of excess remission, 
exemption or drawback of duties is not calculable or can only be calculated with great difficulty.  In order to fulfil obligations under Article VI:3 of the GATT 1994  and Article 19.4 of the SCM 
Agreement , the investigating authorities are bound to estimate or determine the excess remission, 
exemption or drawback of duties.  The Member fo llowed up by stating that, based on its experience, 
the appropriate rate of duty drawback is conti ngent, in part, for example, upon highly technical 
input/output studies; if such studies were not done or  were based on faulty pr emises, this Member's 
view was that it was unreasonable to expect the investigating authority to conduct another 
input/output study.  India requested the Member to  provide specific examples where it had faced such 
difficulties.  
 
4. Additional guidelines for Article 14 (Proposals by Brazil and India) 
(a) General 
(i) Proposal by Brazil 
9. Brazil's proposal is to include additional guidelin es in Article 14, in order to guarantee more 
predictability and harmonization of the methods a dopted by the Members for calculating the amount 
of the subsidy.  Brazil emphasized that its proposal  does not intend to cover all the relevant aspects 
that are involved in a subsidy investigation.   Brazil's proposed additional guidelines are: 
 "(e)  expenses incurred by the exporter/pro ducer in order to obtain the subsidy (e.g. 
administrative charges) shall be deducted from the amount of the subsidy.  Export taxes applicable to the export of the produc t under investigation and intended to offset 
the subsidy shall also be deducted from the amount of the subsidy; 
  (f)  in case the subsidy is not granted acc ording to the quantities that are produced, 
exported or transported, the amount of the s ubsidy shall be calculated by determining 
the corresponding proportion of the subsidy amount that is related to the production, 
sale or export, as appropriate,   of the good; and 
  (g)  in case the subsidy is granted to acqui re capital goods, the amount of the subsidy shall 
be calculated according to the rules for the depreciation of the good in the industry concerned and with the volume of production,  sale or export, as appropriate, of the 
product." 
 
10. The following main general points arose: 
Relationship of proposal with current text of SCM Agreement :  Some Members asked whether Brazil 
was seeking further elaboration of paragraphs (a ) to (d) of Article 14 or if Brazil perceived 
deficiencies in coverage beyond current Article 14 and, if so, what would those deficiencies be.  G/SCM/45 
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 Brazil stated that it does not seek further elaboration to paragraphs (a) to (d).   In Brazil's view, the 
topics Brazil wishes to cover are of a different nature (expenses, allocation of the amount of the subsidy).  Similarly to letters (a) to (d), these topics also have to do with the definition of the criteria 
for the calculation of the amount of the subsidy on the basis of the amount of the benefit conferred to the recipient.  This being the case, Brazil believes th at the practice of certain countries has suggested  
the need that Members agree to certain new Arti cle 14 guidelines in reference to cases that are not 
explicitly mentioned in Article 14.    
(ii) Proposal by India 
11. India  proposes that expenses incurred by the exporter/ producer in order to obtain the subsidy (e.g. 
administrative charges) should be deducted from the amount of subsidy and from the level of 
countervailing duty.   
(b) Specific comments on each proponent's proposal 
(i) Deduction of expenses and export taxes from amount of subsidy 
Relationship between proponents' proposals 
12. Some Members asked the proponents for their vi ews on any differences between their proposals 
on this point.  Brazil stated that it proposed that de ductions should be made from the amount of the 
subsidy, and not from the level of the countervailing duty.  For the definition of the level of the duty 
to be applied, other elements shall be considered , as for example the “lesser duty rule” of Article 19.2 
of the SCM Agreement .  For its part, India indicated that there was  no difference in India’s proposal 
and that suggested by Brazil. 
Proposal by Brazil 
13. The following main points arose in  the discussion of Brazil's proposal: 
Relationship of proposal with current text of SCM Agreement :  Some Members questioned whether 
and how Brazil's proposal would require a change to the SCM Agreement , or how it could be given 
effect.  Brazil explained that the idea behind this proposal is that, in case certain expenses exist, the 
investigating authority should calculate the amount  of the subsidy based on the net benefit to the 
exporter.  Brazil stated that there is a need for Me mbers to agree on some explicit guidelines that costs 
necessarily incurred to access the subsidy program sha ll be deducted in the calculation of the amount 
of the subsidy in terms of the amount of the bene fit conferred to the recipient.  This could be 
effectuated either by means of an understanding or an amendment.  
Nature of deductible expenses/criteria to dete rmine whether expenses are deductible:  Several 
Members asked for clarification as to the nature  of expenses Brazil was proposing for deduction from 
the amount of the subsidy, and the circumstances in  which the requirement to make a deduction would 
apply.  Brazil’s view is that only expenses incurred necessarily in order to qualify for or obtain the 
subsidy shall be deducted.  Brazil's focus is to allow for the deduction of two kinds of expenses 
incurred by the recipient:  (a) administrative charge s (e.g. application fees) incurred in the process of 
obtaining the subsidy and (b) export taxes specifically intended to offset the subsidy.  These expenses 
are of an administrative nature and are paid by the producer/exporter directly to the authority responsible for the concession of the subsidy.  Furthe rmore, according to Brazil, it must be shown that 
such payment is compulsory by la w or any applicable legislation  in order to receive the subsidy.  
Thus, payments to private parties, e.g. lawyers, accountants, incurred in applying for subsidies, would 
not be deductible.  Neither would voluntary contri butions to governments, such as donations.  For 
Brazil, these deductions (expenses and export tax es) would require the demonstration by the  G/SCM/45 
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 exporter/producer under investigation that it has effe ctively paid administrative charges and/or export 
taxes.  The burden would rest with the exporter to  request such deductions and to present verifiable 
evidence that they were warranted.  In the case of  export taxes, Brazil submits that claims for 
deductions should only be accepted if the charges involved were levied during the investigation 
period, and if it were established that they continued to be levied at the time when definitive measures 
were recommended.  
 Criteria to determine whether an export tax is intended  to offset a subsidy:  Brazil considers that the 
essential requirement for the deduction to be made should be that the exporting Member or the 
company (ies) under investigation clearly demonstrate that the export tax offsets the subsidy conferred 
and indicate the exact extent to which it does so .  Certain Members asked Brazil to clarify the 
meaning of the phrase "applicable to the operation object of the subsidy" and the criteria and 
circumstances that would determine whether an export  tax was intended to offset the subsidy.  Brazil 
stated that "operation object of the subsidy" meant an export transaction of the product under 
investigation, and that the export tax must have been imposed on the product allegedly exported with 
subsidies.  In the course of the investigation, au thorities should verify whether the export tax and the 
subsidy refer exactly to the same product and whethe r the collection of the duty and the receipt of the 
benefit occurred in the same period.  According to Br azil, the criteria could include:  the scope of the 
export tax (whether  it is applied only on exports of subsid ized products or on a large group of 
products);  the time when the decision to apply the export tax was taken (for instance, if the export tax 
is previous of the implementation of the subsidy program it is obviously not intended to offset the 
subsidy); and  whether the export tax was created as a result of bilateral consultations or of a dispute 
settlement procedure; and if not, what its motivation was.  Insofar as the legislation of some Members 
already provide for such deduction, Brazil indicated that their contribution to the debate would be highly appreciated.  One Member supported Brazil's proposal to clarify that expenses that firms 
mandatorily had to incur in order to ob tain the subsidy should be deducted.  
 
Scope of proposal:  Brazil was asked to clarify whet her it agreed that expenses incurred by a recipient 
in order to obtain the subsidy should be deducted from the amount of the countervailing duty.  Brazil 
stated that its proposal refers to deductions to be  made in the calculation of the benefit conferred to 
the recipient and not in the amount of the count ervailing duty.  One Member suggested to make 
mandatory the provision of Article 19.2, instead of seek ing clarifications to Article 14.  In this respect, 
Brazil stated that given its view th at the amount of the subsidy should  be calculated on the basis of the 
amount of the benefit conferred to the recipient, Brazil proposed certain deductions to be made from 
the amount of the subsidy.  This was a separate issu e from the level of the countervailing duty that the 
relevant authorities decide to apply.  In Brazil’s view, however, the “lesser duty rule” of Article 19.2 
is also a very important element to be taken into consideration in the definition of the level of the 
countervailing duty, and Brazil indicated that it woul d be willing to discuss any proposal in this line. 
 Proposal by India 
14. The following main points arose in the discussion of India's proposal:  
Circumstances requiring deductions:  Some Members ra ised questions about the types of expenses in 
respect of which an investigating authority woul d be required to make deductions from the subsidy 
amount.  India stated that an exporter incurs various expenses for obtaining the benefit under a 
particular scheme that is sought to be countervailed.   It is India’s contention that the investigating 
authority should be required to make certain deductions from the subsid y on account of expenses 
incurred for obtaining benefits under the schemes.  In India’s view, calculating the amount of subsidy 
without deducting expenses incurred due to the c onditions imposed by the countervailable schemes 
results in countervailing duty being imposed in excess of the benefits conferred.  India's list of the G/SCM/45 
Page 10  
 
 types of expenses to be deducted
3 is illustrative; all expenses incu rred in obtaining th e subsidy should 
be deducted while calculating the amount of count ervailing duty subsidy.  Such expenses include, 
apart from application/administration fees, bank guaran tee charges, and margin money cost etc. which 
would otherwise not have been required to have b een borne by a firm if it was not availing of the 
subsidy.  Deduction for these expenses would not co nstitute a subsidy as there would be no financial 
contribution.  
 No "double deduction":  In response to one Member's  observation that it agrees with the first part of 
the proposal that these expenses must be deducted fro m the subsidy but that it was not appropriate to 
deduct these expenses again from the countervailing measures since it had already been deducted 
before from the subsidy amount, India clarified that  its intention is that the expenses incurred in 
obtaining the benefit should not be included in calculating the benefit to the recipient.  India noted that it did not intend that expenses be deducted twice. 
 (c) Guideline on calculation of subsidy amount on b asis of proportion of subsidy amount related to 
production, sale or export of good (Proposal by Brazil) 
15. Brazil's proposal is that for subsidies not granted based on quantities produced, exported or 
transported, the subsidy amount shall be calculate d by determining the corresponding proportion of 
the subsidy amount that is related to the production,  sale or export of the good.  Brazil states that once 
the total amount of benefit relate d to a subsidy is determined for the period under investigation 
(period for which the amount of the subsidy is determ ined), the investigating authority shall calculate 
the amount of the subsidy on a per unit-basis.  The unit adopted depends on the characteristics of the 
product under investigation and normall y should be the commercial unit.  When the subsidy is tied to 
production, sales or exports, it is not a difficult task to determine the amount per unit.  Nevertheless, 
when this is not the case, some doubts could be raised  with regard to the denom inator to be adopted in 
order to calculate the amount per unit.  In order to clarify this matter, Brazil suggests that the 
denominator should be the production, sales or export,  depending on the characteristics of the subsidy.  
If the benefit of a subsidy is limi ted to a particular product, the de nominator should reflect only sales 
[production/exports] of that product.   If this is not the case, the denominator should be the recipient’s 
total sales [production/exports].  Brazil provide d several examples to illustrate its proposal.
4  O n e  
Member supported Brazil's proposal.  The following main points arose in the discussion: 
Relationship of proposal with current text of SCM Agreement :  Some Members questioned whether 
and how the proposal would require a change to th e Agreement, or how it could be given effect.  
Brazil stated that explicit and agreed upon guidelines are needed; this could be effectuated either by 
means of an understanding or an amendment.  Interpretation of  "corresponding proportion" and “is related to ”:  Responding to Members' requests for 
clarification of the phrase , Brazil stated that the idea is that in such cases the calculation of the 
amount of the subsidy shall be made by allocating th e value of the benefit actually conferred to the 
recipient in an appropriate way, according to the ch aracteristics of the subsidy granted, over the level 
of production, sales or exports of the product under investigation, during the investigation period for 
subsidization.  Brazil contends that the phrase "is re lated to" should be interpreted as a reference to the 
allocation of the value of the benefit over the leve l of production, sales or exports of the product under 
investigation, during the period of investigation for subsidization. 
 
Circumstances and criteria used to determine that a particular subsidy is “related to” a particular 
product or market:  Certain Members asked for clarif ication of the criteria and circumstances used to 
determine that a particular subsidy is related to a particular product or market.  Brazil stated that the 
                                                      
3 As indicated in paragraph 22 of India’s proposal in G/SCM/W/462. 
4 See G/SCM/W/513, p. 4.  Certain Members posed specific questions on these examples.   G/SCM/45 
 Page 11 
 
 
 proposed methodology requires that, in the course of  the investigation, authorities determine the 
procedures followed for the concession of the subsidy, such as whether it is tied to a particular 
product that has been produced, exported or tran sported.  Authorities should also examine some 
characteristics of the company(ies) under inves tigation, such as whether it produces one single 
product; whether the product under investigation is among the products benefited by the subsidy; and 
whether sales of the product under investigation are directed to the domestic and/or foreign market. 
 (d) Guideline on subsidies tied to the acquisiti on of capital goods (Proposal by Brazil) 
16. Brazil's proposal is to clarify that where a subs idy is granted to acquire capital goods, the amount 
of the subsidy shall be calculated according to the rules for the depreciation of the good in the 
industry concerned and with the vol ume of production, sale or export, as appropriate, of the product. 
Brazil states that considering that the investigati ng authorities should determine the amount of subsidy 
for the period of investigation and considering that  there are subsidies the effects of which extend 
over a number of years, it is important to introduce gui delines related to this issue, in particular, with 
respect to subsidies tied to the acquisition of capital goods.  For those subsidies, Brazil considers that 
the amount of benefit has to be spread over the useful life period of the assets.   
Relationship of proposal with current text of SCM Agreement :  Certain Members questioned whether 
and how Brazil's proposal required a change to the Ag reement, or how it could be given effect.  In 
Brazil's view, guidelines are needed to be made exp licit and agreed upon.  This could be effectuated 
either by means of an understanding or an amendment to the Agreement.  
Criteria and evidence as to whether subsidies are used to acquire capital goods:  Certain Members 
asked whether the depreciation rules would be appli cable in instances other than where a subsidy is 
granted to acquire capital goods (e.g., large, one-tim e debt forgiveness, or the provision of equity 
capital not necessarily related or tied to, capital goods ); and, if not, the evidence an investigating 
authority should require to establish whether subs idies were used to acquire capital goods.  Brazil 
replied that it understood that  depreciation rules apply to capital goods or other fixed assets.  In 
relation to subsidies tied to the acquisition of fixed assets, the depreciation methodology is relevant to 
the calculation of the benefit to the recipient.  The amount of the subsidy shall be calculated by spreading the subsidy across the period in which th e normal depreciation of the assets takes place. In 
cases where the assets are non-depreciating, the amount of the actionable subsidy would be calculated as a loan which confers a benefit, and the guidelines of Article 14 (b) would be  followed.  Appropriate 
evidence shall be collected from the respon ses to the questionnaires sent to exporters.  
 Depreciation methodology: Some Members questi oned whether, in Brazil's view, it would be 
preferable to use company rates or country rates; whether it would be preferable to use the 
depreciation rules for accounting purposes or the depreciation rules for tax purposes (where there was 
a difference) and how such rules would apply in specific circumstances; modalities for the use of 
company-specific rates and what would occur where there were no set rates for a particular industry; 
and clarification as to the period for attribution of debt forgiveness.  One Member requested an 
explanation as to the conditions in which the use of the depreciation period stated in the national 
legislation would not be required.  In addition, one Member asked whether Brazil  sought parallelism 
with Article 2.2.1.1 of the AD Agreement .  Brazil stated that, in its view, the amount of benefit has to 
be spread over the useful life period of the assets .  This period should reflect the depreciation rules in 
accordance with the generally accep ted accounting principles of the exporting country.  In cases 
where the depreciation periods actually applied by the producer/exporter differ from the industry-wide 
rules, the investigation authorities should examine the reasons.  One Member endorsed Brazil's view 
that the amount of benefit has to be spread over th e useful life period of the assets and that this period 
should reflect the depreciation rules in accordance with the generally accepted accounting principles 
(as opposed to the taxation rules) of the exporting country.    G/SCM/45 
Page 12  
 
 Brazil asserted that normally, Members’ legislation establishes a period for the depreciation of fixed 
assets and the method adopted refers to the straight-line-method.  In cases where the national legislation of the country of the producer/exporter being investigated does not establish any rules for the methodology or rates of depreciation, the investigated country is normally a non-market economy. According to Brazil, it should also be considered that some Members’ legislations allow for an 
“accelerated accounting depreciation” that is ba sed on the actual utilization of the fixed assets 
(equipments, machinery) which result in a different us eful life period of assets from that provided for 
in the legislation.  For instance, suppose a piece of equipment has a useful life period established by 
the fiscal legislation at 10 years, and consequent ly has the normal depreciation rate of 10 per cent 
(straight-line-method).  This equipment can be depreci ated in faster (higher depreciation tax) if it is 
demonstrated that its actual utilization is more in tensive than the utilization normally considered to 
determine the useful life period of the good.  In  those cases, the burden is on the producer to 
demonstrate this circumstance (more intensive use) to the tax authority, on the basis, for instance, of 
the numbers of hours of working, volume of production and/or other indicators. 
 
Scope of proposal:  Responding to comments fro m some Members concerning forgiveness of a 
particularly large debt which was not necessarily related to the acquisition of fixed assets, Brazil 
clarified that its proposal does not cover this an d that it relates to subsidies conferred for the 
acquisition of capital goods or other fixed assets.    
5. To determine useful life of assets, depreciation information of individual recipient firms 
should be used (Proposal by India) 
17. India's proposal is to clarify that to determine the average useful life ("AUL") of an asset , the 
depreciation period used for allocating the benefit should be based on the information of individual 
recipient firms.  According to India, in respect  of non-recurring subsidies for acquisition of fixed 
assets, the amount of countervailing duty is required to  be based on the benefit appropriately allocated 
across the period reflecting the normal depreciation of such assets in the industry concerned.  India 
states that it has, however, been observed that each investigating authority assumes a depreciation 
period without any scientific basis. 
Relationship of proposal to current text of SCM Agreement :  Some Members questioned whether and 
how India's proposal would require a change to the SCM Agreement , or how it could be effectuated.  
India states that the SCM Agreement  is silent on the aspect of depreciation of assets while determining 
benefit to the recipient.  Disciplines in this regard  could be included in Article 14 of the Agreement. 
 Modalities and standard to be applied:  Some Memb ers asked India to clarify the meaning of "without 
any scientific basis" and questioned whether and how India is suggesting that there is or should be a 
standard applied, the specific modalities of the sta ndard proposed and whether India is proposing an 
industry-based or company-specific AUL.  India clarif ied that in respect of subsidies granted for the 
acquisition of assets, the period assumed for allocati ng the benefits has varied considerably from case 
to case.  India’s view is that the amount of subs idy should be calculated according to the AUL of the 
asset as reflected in the financial statements of the exporters.  India further clarifies that the 
depreciation to be used should not be based on the amount calculated for taxation purposes.  India 
states that if a very small amount of subsidy has been provided which is re lated or tied to capital 
equipment the depreciation should be calculate d in accordance with the nationally accepted 
accounting practice. 
 
Scope of proposal:  India clarified that its views on depreciation rules are limited to the situation 
where a subsidy has been granted for acquisition of  assets.  No comments are offered in respect of 
other types of subsidies. 
  G/SCM/45 
 Page 13 
 
 
 6. Introduce rules on sampling similar to those in the Anti-dumping Agreement  (Proposal by 
Brazil) 
18. Brazil's proposal is to introduce sampling rules similar to those in the  Anti-dumping Agreement , 
where the number of exporters under investigation is so large as to make an individual determination 
of amount of subsidy impracticable.  The following main points arose in this connection: 
Relationship of proposal to current text of SCM Agreement :  In response to questioning, Brazil 
clarified its view that since sampling rules are not prohibited by the current SCM Agreement , they 
could be applied.  Nevertheless, Brazil expressed concern that the lack of a provision establishing 
these procedures can lead to lack of a common understanding about the implementation of sampling 
procedures in CVD investigations and therefore to divergent practices among Members.   
 
Possibility to draw on elements in the Anti-Dumping Agreement : With regard to its suggestion to 
introduce into the SCM Agreement  rules on sampling such as those contained in the Anti-dumping 
Agreement , Brazil indicated that the anti-dumping rules might be a good starting point, but that some 
other elements might also be introduced.  For Brazil, it is important that the utilization of a sample in 
a countervailing duty investigation follows specific cr iteria such as those mentioned in Article 6.10 of 
the Anti-Dumping Agreement .  Some Members were of the view  that the AD provisions could be 
adopted mutatis mutandis . 
Potential for expedited reviews for individual rates:   One Member asked whether, as a “quid pro quo” 
for sampling, Brazil would envisage a requirement for expedited reviews, where justified, to confer 
individual company rates.  Brazil indicated it is open to discuss such an approach.  
 Relationship with Brazil's proposal that calcu lation of amount of subsidy be on a "per 
exporter/producer basis":  One Member questioned ho w Brazil's view that sampling should be applied 
in CVD investigations (which would result in some exporters/producers not receiving their own 
subsidy rate) could be reconciled with Brazil's pos ition that Article 14 should be amended to provide 
that the amount of subsidy should be calculated on a "per exporter/producer basis".  Brazil responded 
that there is no contradiction:  the general rule s hould be the calculation of the amount of subsidy in 
terms of the benefit to each exporter under inves tigation.  Nevertheless, where the number of 
exporters under investigation is so large as to ma ke such calculation impracticable, the investigating 
authorities could use samples.    7. Amount for interest (Proposal by India) 
19. India's proposal is to clarify that the addition of an amount for interest on the benefit conferred 
during the investigation period is not in c onformity with the object and purpose of the SCM 
Agreement , or alternatively, to clarify whether calcula ting interest on a notional basis instead of from 
the date the benefit was conferred is a reasonable method of calculating interest.  The following main 
points arose in the discussion: 
Calculation of interest on a notional basis: Qu estions were raised c oncerning the meaning and 
objectives of India's alternative proposal for clar ification concerning calculation of interest on a 
notional basis.  India asserted that is a practic e among certain investigating authorities to add a 
notional amount for interest to the benefit confe rred during the investigation period.  The amount of 
interest is not calculated on the basis of the date when the benefit was conferred but on a notional 
basis depending on the nature of the subsidy.    India asserts that in respect of certain schemes, th e benefits have been assumed to be recurring in 
nature and half the commercial rate of interest has been applied during the investigation period.  This 
approach is incorrect and prejudicial to the inter est of exporters.  The approach of using half the G/SCM/45 
Page 14  
 
 commercial rate of interest could perhaps be justified, notwithstandi ng reservations against 
calculating interests on subsidies as an additional subsidy, only if the countervailing duty were 
collected at the end of the year in respect of all imports.  India offered examples of an investigating authority that it states has calculated the amount of benefit, 
and hence the countervailing duty, by adding an amount  for interest in its various countervailing duty 
investigations.  B. 
FACTS AVAILABLE (PROPOSALS BY BRAZIL AND INDIA ) 
1. Proposal by Brazil 
20. Brazil's proposal is to introduce into the SCM Agreement  provisions on the use of "facts 
available" such as those in Annex II of the Anti-dumping Agreement .  According to Brazil, the 
objective of the proposal in this area is to establish some sort of symmetry between the provisions of 
the Anti-dumping Agreement  on facts available (Annex II of the Agreement) and the SCM Agreement , 
which, although providing for the possibility of recour se to facts available in its Article 12.7, does not 
elaborate on the matter.   
21. Some Members expressed support for this  proposal as they believed that there was currently no 
detailed provision in SCM Agreement , or as there was a shared intent that the use of “facts available” 
should be qualified as the exceptional resort.  In addition,  Members' comments and questions touched 
upon the following main points: 
Relationship of proposal to current text of SCM Agreement :  In response to questioning about Brazil's 
experience with countervailing duty investigations and why Brazil saw the need to introduce more 
detailed “facts available” provisions for the SCM Agreement , Brazil asserted that its  experience as a 
country that has been affected by a number of CVD investigations and measures indicated that all 
Members would benefit from sound and clear rules on this subject.   
 
Possibility to draw on elements in the Anti-dumping Agreement :  Certain Members appreciated that 
this proposal considered the harmonization of  the provisions concerning countervailing duty 
investigation with those concerning anti-dumping duty investigation.  One Member questioned 
whether and how Brazil would propose to modify the provisions found at Annex II of the Anti-
dumping Agreement  for purposes of the SCM Agreement .  Brazil asserted that the Anti-dumping 
Agreement  already establishes guidance for the use of “f acts available” in its Annex II, which details, 
for instance, the procedures to be applied in case an  interested party refuses access to information or 
does not provide the necessar y information.  These two situations  are exactly those referred to in 
Article 12.7 of the SCM Agreement .  Given this fact, it is Brazil’s view that there is no reason why the 
same procedures should not be applied in CVD inves tigations.  Brazil asserts that the convenience of 
the Brazilian proposal is particularly clear in the situation where AD and CVD investigations on 
imports from the same Member are conducted at th e same time, the investigating authorities being 
obliged to follow guidelines on the treatment of th e information provided in one investigation and not 
in the other.  In addition, Brazil clarified its view that a few modifi cations should be ma de to Annex II 
in order to adapt it to the language and concepts of the SCM Agreement .  For instance, where Annex II 
reads “interested parties”, it should be read “inter ested Members and/or interested parties”; where 
Annex II reads “normal value”, it should be read “am ount of subsidy”; and, of course, where Annex II 
reads “Paragraph 8 of Article 6”, it should read “Paragraph 7 of Article 12”.  Certain members 
supported Brazil's view that the provisions of  the Anti-dumping Agreement should be applied mutatis 
mutandis .  
 Conditions and guidelines for resorting to "facts ava ilable":  Some Members asked for a clarification 
of the conditions that would enable an investigating authority to resort to the use of "facts available",  G/SCM/45 
 Page 15 
 
 
 of the meaning of "necessary information" and of wh ether it enabled investigating authorities to reject 
all information provided.  Brazil asserted that Ar ticle 12.7 clearly establishes that “facts available” 
could only be used when an interested party re fuses access to information or does not provide the 
necessary information.  Brazil considers that the “f acts available” concept allows the investigating 
authorities to reject all the information presented only in these  specific circumstances, that is, if this 
information does not correspond to the necessary in formation. The situation of investigation 
authorities not accepting the “adequacy of the info rmation” was apparently not envisaged in 
Article 12.7.  As to the meaning of "necessary information", Brazil asserts that the presentation of 
confidential information is allowed by Article 12. 4; once the conditions that are established in 
Article 12.4 are respected, that information should be accepted. 
 
Treatment of information provided to the investig ation authorities by producers and exporters versus 
the Government of the country of export: In respon se to questioning, Brazil indicated that it considers 
that the same rules would apply to the informat ion provided by Governments as to information 
provided by producers and exporters. 
 
Reliable sources where necessary information not provided:  One Member asked what would 
constitute reliable sources for ascertaining the existen ce and amount of subsidy in situations where an 
interested Member or an interested party re fuses access to, or otherwise does not provide, the 
information necessary to make these determinations.  Brazil indicated that  independent sources that 
might constitute reliable sources were, for instance,  Members’ notifications to the WTO and public 
reports of the agencies responsible for programmes. 
 Potential effect on guidelines in Annexes II and III of the SCM Agreement , in particular, with respect 
to burden of proof:  In response to questioning as to whether Brazil's proposed changes would have 
any bearing on the guidelines for investigating aut horities under Annexes II and III, in particular 
concerning those provisions which shift the burden of proof on to the government of the exporting 
country, Brazil made clear that its proposal does not  intend to have any bearing on the guidelines 
provided for in Annexes II and III of the SCM Agreement . 
 
2. Proposal by India 
22. India's proposal is to clarify that all verifiab le and timely submitted in formation (i.e. submitted 
within a reasonable period) should be  taken into account by the investigating authority, and that if a 
portion of information is not verifiable or timely submitted, "facts available" may be used for that 
portion of the information.   
23. Some Members agreed with this proposal as no detailed provisions for this existed in the SCM 
Agreement , or as they shared India's perceived intent that the use of "facts available" should be 
qualified as exceptional.  Concerns and questions we re raised with respect to the following main 
points: 
Relationship of proposal to current text of SCM Agreement :  In response to questioning about the 
extent to which India's proposal would require a change to the Agreement, and how this proposal 
could be effectuated if no change were required, India stated that its proposal could be given effect 
either through a clarification of Article 12.7 of the SCM Agreement  or by introducing a more detailed 
“facts available” provision in the SCM Agreement . 
Possibility to draw on elements in the Anti-dumping Agreement :  India is of the view that the SCM 
Agreement should have a more detailed “facts availabl e” provision, which could mirror the language 
of Annex II of the Anti-dumping Agreement .    
 G/SCM/45 
Page 16  
 
 Conditions and guidelines for resorting to "facts av ailable" for a portion of the information:  Some 
Members asked for clarification of whether India' s proposal that "all verifiable and timely submitted 
information should  be taken into account" was mandatory or hortatory.  In India’s view all 
information which is submitted within a reasonable pe riod of time and which is verifiable and can be 
used without undue difficulty should mandatorily be ta ken into consideration, unless the investigating 
authorities give detailed reasons fo r rejecting such information.  
With respect to any suggested guidelines as to the extent to which investigating authorities would be 
required to attempt to use the information when th ere are significant portions of information which 
have not been provided, in India’s view as long as there is a significant portion of the information 
which is verified, timely submitted and can be used independently of other po rtions of information, 
such information should be used by the investiga ting authorities irrespective of whether or not other 
portions of information are ve rifiable and timely submitted. 
Timeliness:  In response to a question as to how India would define a “reasonable period”, India 
stated that this would depend on the facts of th e specific case under consideration.  However, India 
suggested that the following could be used as a possible guideline for determining a reasonable period 
-- the period that allows the information to be ve rified and used in the determination taking into 
consideration the time required by the investiga ting authorities to do so.  If new information which 
would not require extensive verification is submitte d beyond pre-determined deadlines but within a 
time to allow its verification, then such informa tion should be considered to have been submitted 
within a reasonable period. 
Treatment of information provided to the investig ating authorities by producers and exporters versus 
the Government of the country of export: In respons e to questioning, India indicated that it considers 
that the same rules would apply to the informat ion provided by Governments as to information 
provided by producers and exporters.  According to India, normally the type of information required 
to be given by the exporters/producers is company-sp ecific, relating to details of exports etc.  The 
information sought from the governments relates more  to policies/subsidy schemes which are already 
well documented and publishe d.  There is no reason, a priori, that any wrong information will be 
provided by governments.  If there are gaps in info rmation then the investigating authorities may be 
justified in resorting to facts available.  On the other hand if the exporter/producer refuses access to 
information or otherwise does not provide necessary in formation within a reasonable period of time or 
significantly impedes the investigation, final dete rminations may be made on the basis of facts 
available.  
Potential for selective provision of information by responding companies:  Some Members expressed 
concern that if the proposal were adopted, responding companies would not be prevented from 
selectively providing information, which could result in a calculated rate of subsidization lower than 
the actual rate.  Moreover, these Members pointed out, the mandated use of a limited amount of 
company information will not necessarily result in a more  accurate subsidy calculation.  If, as is often 
the case in a subsidy calculation, one number (i.e. the subsidy amount) must be divided by another 
(i.e. the sales amount), if only one number is “ver ified,” its use does not necessarily lead to a more 
accurate calculation.  This is true for two reasons.  First, the accuracy of the subsidy calculation will 
be entirely contingent upon the selection of the va lue to be used for the second number, which is 
unknown.  Second, other completely different information, such as the subsidization rate found for the 
same programme in another investigation or re view, may provide a more reasonable basis to 
approximate the actual rate of subsidization.  I ndia's view is that responding companies would be 
prevented from selectively providing information in  view of provisions of Article 12.7, which 
provides that determinations may be  made on the basis of facts available.  India was concerned with 
the suggestion that instead of using the limited am ount of company information, a more reasonable 
basis to approximate the actual rate of subsidizatio n would be to rely on the subsidization rate found 
for the same programme in another investigation or review.  India is concerned with such an  G/SCM/45 
 Page 17 
 
 
 approach, as the details of subsidization would vary  from case to case and from company to company.  
According to India, a better approach would be to make use of the limited amount of company information instead of relying on the subsidiza tion rate found for the same programme in another 
investigation.  
Potential effect on guidelines in Annexes II and III of the SCM Agreement , in particular, with respect 
to burden of proof:  In response to questioning as to  whether such changes would have any bearing on 
the guidelines for investigating authorities under An nexes II and III, in particular concerning those 
provisions which shift the burden of proof on to th e government of the exporting country, India is of 
the view that the changes suggested would not have a bearing upon the burden of proof on the 
exporting country.  India’s submission is that an i nvestigating authority should not reject all of the 
information submitted on the basis that some porti on of it may not have been provided within a 
reasonable of time or might not be verifiable.  In  such situations, the investigating authority should 
not reject all of the information submitted and shou ld not resort to facts available for the entire 
information.  Instead the investigating authorit y should use that portion of information which is 
submitted within a reasonable period of time and which is verifiable. 
 C. D
E MINIMIS (PROPOSAL BY BRAZIL ) 
24. Brazil’s proposal is to introduce in Article 19 of the SCM Agreement  a provision that no duty be 
collected where the subsidy amount is de minimis .  According to Brazil, its proposal seeks to interpret 
Article 19 in a way that is compatible w ith Article 11.9.  The latter determines, inter alia , that “there 
shall be immediate termination [of an investiga tion] in cases where the amount of a subsidy is de 
minimis ”.  However, when it comes to the imposition and collection of countervailing duties, as set 
forth in Article 19, there is an omission of such a “ de minimis ” clause.  If, for a certain reason, the 
amount of the subsidy is found to be less than the “ de minimis ” threshold for a specific exporter, the 
text does not provide explicit guidance.  Accordi ng to Brazil, this lacuna, in practice, may be 
interpreted as allowing the collection of duties ev en if the amount of the subsidy is below the “ de 
minimis ”.  The following main points arose in the Committee's discussions: 
Relationship of proposal to current text of the SCM Agreement :  Certain Members pointed out that 
Article 11.9 provides the termination of the i nvestigation in case the amount of subsidy is de minimis , 
so there was no need for this proposal, or qu estioned the “lack of express language in the SCM 
Agreement  regarding this issue” and requested Brazil to explain how the proposal could be effected by 
means of “interpretation of lacunae in the text of the Agreement.”  Brazil noted  that the very concept 
of “lacuna” implies the notion of absence of something that needs to be created, built or provided for, 
in this instance language referring to the prohibiti on of collecting duties when the investigating 
authorities determine that the amount of the subsidy is “ de minimis ”.  For Brazil, a reasonable and 
effective manner to complete the Ministerial mandat e to interpret the “lacunae in the text of the 
Agreement” is to add language able to eliminate doubts that Members may have on the interpretation 
of existing provisions.  Brazil views its proposal as doing precisely this, since it does not establish a new provision but sets forth the interpretation that  Article 19 should be read in conjunction with 
Article 11.9, in such a way that in the case wher e the investigating authorities determine that the 
amount of the subsidy effectively found is below the “ de minimis ” threshold as provided for in 
paragraph 9 of Article 11, there will be no collection of the duty. 
 
Certain Members questioned whether the wording of  Article 19.3 "such countervailing duty shall be 
levied, in the appropriate amounts in each case" (e mphasis added) implies, that countervailing duties 
must not be collected if the amount of subsidy is de minimis .  Brazil indicated that it does not consider 
it to be “appropriate”, in the meaning of Article 19.3,  for a country to collect a countervailing duty 
when the amount of the subsidy is “ de minimis ”.  If the amount of a subsidy is found to be de minimis  
for a specific exporter, this exporter should be excluded from the imposition of the measure. 
 G/SCM/45 
Page 18  
 
 One Member did not consider a legal interpreta tion favouring the imposition of countervailing duties 
in the event of a subsidy being " de minimis " and based on the lack of a specific related provision in 
Article 19 to be feasible.  For that Member, this would result in Members being in clear breach of their obligations under the SCM Agreement .  Rather than amending Article 19, that Member 
suggested that the proponents consider an interpre tative decision reiterating the scope of Article 11.9. 
 
Relevance of de minimis  in "investigation" vs. "enforcement/c ollection" stage:  Certain Members 
suggested a distinction between the importance of “ de minimis ” in the investigating phase and in the 
"enforcement" phase.  For these Members, while the relevance of de minimis  is clear in investigations, 
its application in the "enforcement" stage is less so.  In particular, these Members stated, where the 
amount of subsidy was not found to be de minimis  in the original investigation and resulting injury to 
the domestic industry was established, the levying of countervailing duties on all subject imports, 
(including particular shipments benefiting from de minimis  amounts of subsidy), may be justified both 
for valid policy and administrative reasons.  Br azil maintains that the relevance of the “ de minimis ” 
clause is the same in the investigation as in th e enforcement stage (collection of duties).   
 
Certain Members agreed that if it is determined that the amount of the subsidy is found to be de 
minimis , then the investigation is terminated, and questioned whether Article 11.9 provided for 
termination where the amount of subsidy is de minimis  for a specific exporter.  Brazil stated that 
establishment of a de minimis  amount of subsidy requires the immediate termination of an 
investigation and that it follows that the same parameters should be followed in terms of the 
imposition and collection of duties.   
 Some Members questioned whether duties coul d be imposed where the exporter was above de 
minimis  during the investigation but subsequently would be de minimis .  In addition, certain Members 
recalled that Article 11.9 of the SCM Agreement  reflects or parallels Article 5.8 of the Anti-dumping 
Agreement .  These Members recalled that WTO jurisprudence has found that the de minimis  test in 
Article 5.8 does not require a de minimis  test in Article 9.3 duty assessment procedures and therefore 
cannot require Members to apply a de minimis  standard in duty assessment procedures.  Given that the 
DRAMS Panel found that the term “case” used in th e first sentence of Article 5.8 encompassed at a 
minimum the notions of an “application” and “inve stigation”, these Members asked about situations 
that would give rise to a countervailing duty bei ng imposed even where the amount of subsidy has 
been found to be de minimis  during the investigation period.   Brazil considered that there would be 
no possibility to impose duties when the amount of subsidy has been found to be “ de minimis ” during 
the investigating period.  However, in some cases,  especially when the amount of the countervailing 
duty would be assessed on a retrospective basis, when it comes to the final assessment for the 
collection of the duty, some countries would not apply the “ de minimis ” rule.   
 
Retrospective and prospective systems: Certain Members requested clarification from Brazil as to 
how the proposal would function in respect of both a retrospective and prospective duty enforcement 
system, or whether this proposal related only to re trospective systems of duty collection (and not to 
prospective systems), and whether Brazil was s uggesting that countervailing duties should not be 
collected where the amount is de minimis  in relation to the value of each importation.  Brazil’s 
position is that, in both types of systems (prosp ective and retrospective), no countervailing duties 
should be collected when the amount of the subsidy is found to be “ de minimis ” in relation to each 
importation, whether it is in the phase of imposition and collection of countervailing duties, or in the 
review phase .  However, Brazil stated that its proposal of  an interpretation of Article 19 of the SCM 
Agreement , in a way that is compatible with its Article 11.9, is applicable essentially to retrospective 
systems for the reason that, in a prospective system, the problem Brazil is trying to address does not 
happen.   In a retrospective system, the actual duty to be collected is determined on the basis of the 
amount of the subsidy calculated for a period after th e imposition of the duty.  To evaluate if this 
amount is " de minimis ", the authority considers the average e xport price for each exporter in this new 
period following the application of the duty.  According to Brazil, it is not uncommon that, when it  G/SCM/45 
 Page 19 
 
 
 comes to the final assessment for the collection of th e duty and taking into cons ideration the data from 
the new period, duties are collected even if " de minimis " margins are found .  In Brazil's view, if this 
new amount of subsidy is " de minimis ", no duty should be collected.  Brazil states that this is the 
"rationale" of its proposal.  On the other hand, Braz il states, in a prospective system, the situation is 
simpler.  The duty is collected on the basis of data  from the original period of investigation, which 
eliminates the problem mentioned above.  
 Examples of instances where countervailing duti es have been collected on subsidies below de 
minimis :  In response to questioning as to whether Brazil could identify specific examples where 
countervailing duties have been collected on subsidies below de minimis , Brazil pointed out that there 
are several instances related to anti-dumping inves tigations where duties have been collected, even 
though the actual dumping margin was “ de minimis ”.  As there exists a parallelism between the 
collection of antidumping and countervailing duties, it is quite possible that this sort of situation might 
arise also regarding the collection of countervailing duties.  One Member requested Brazil to provide 
additional illustrative examples, and Brazil took note of this request.  
 
D. PROPOSALS RELATED TO REVIEW PROCEDURES (PROPOSALS BY BRAZIL AND INDIA ) 
1. Introduce provision for assessment of degree of support for review requests (Proposal by 
Brazil) 
25. Brazil's proposal is to introduce a provision for assessment of the degree of support for review 
requests.  The Brazilian proposal applies to “sunset ” reviews conducted pursuant to Article 21.3 of the 
SCM Agreement .  Brazil suggests the adoption of the same “s tanding” test established in Article 11.4.  
Some Members share Brazil’s intent  that the review procedures under Article 21 should comply with 
the same procedural discipline that the investigation procedures under Article 11 comply with.  
Certain Members supported Brazil's proposal.  The following main points arose: 
Relationship of proposal with current text of SCM Agreement:   Certain Members questioned whether 
and how this proposal would require a change to th e Agreement, or how it could be given effect.  
Certain pointed out that Article 21.3 of the SCM Agreement  already requires that a petition must be 
made “by or on behalf of the domestic industry”, and some questioned whether Brazil agrees that the 
current provision allows for a review procedure under  Article 21 upon request by less than the degree 
of support required by Article 11.  Questions were  also posed concerning whether Brazil would keep 
the standard the same as in Article 11.4, or whet her Brazil saw the need for any modifications in the 
context of Article 21.3.  In that sense, Brazil asserte d that its proposal does not require a change to the 
SCM Agreement :  it intends to clarify that the expression “by or on behalf of the domestic industry” 
should be understood as in Article 11.4.  Brazil considers that it is relevant to make clear that the same 
test should be applied in both cases (initiation of investigation and initiation of review).  
 
Self-initiated reviews:  Certain Members expressed c oncern about any effect of the proposal on the 
possibility for an authority to self-initiate a review .  One Member disagreed with this proposal as it 
view the current provision as more flexible, giving the investigating authority the right to make the 
review without any request from any party or by the request of any interested party.  Brazil 
emphasized that its proposal should not  be construed as to impede the authorities to initiate a review 
on their own initiative.  Asked whether it could explai n whether the authorities could initiate an expiry 
review on their own initiative when the domestic indust ry has brought an application for a review but 
failed to demonstrate that it had satisfied the sta nding requirements, Brazil stated its understanding 
that, in special circumstances, the authorities could initiate a review on their own initiative, even in 
this situation.  This situa tion could also arise in the initiation of an investigation. 
 G/SCM/45 
Page 20  
 
 Scope of proposal:  In response to questioning abou t the scope of its proposal and whether it applied 
to all reviews under Article 21, Brazil clarified th at its proposal regarding “standing” applies to 
“sunset” reviews conducted pursuant to Article 21.3 and, in particular, does not refer to Article 21.2.   
 
2. Introduce provision for notification of Memb ers whose products are subject to review 
(Proposal by Brazil) 
26. Brazil's proposal is to introduce a provision in the SCM Agreement  for notification of Members 
whose products are subject to a review.  According to Brazil, in view of the fact that the initiation of a 
review under Article 21.3 of the SCM Agreement  implies that the duty may remain in force pending 
the outcome of such a review, it is important that, before this initiation, Members whose products may 
be subject to such review shall be notified of this  possibility and invited for consultations with the aim 
of clarifying the situation and arriving at a mutu ally agreed solution.  Certain Members supported 
Brazil's proposal.  Some Members share Brazil’s inte nt that the review procedures under Article 21 
should comply with the same procedural discipline as the investigation procedures under Article 11.  
Other main points that arose include: 
Relationship of proposal to current text of SCM Agreement :  Brazil states that Article 21.4 establishes 
that the provisions of Article 12 regarding eviden ce and procedures shall appl y to any review;  by 
analogy, there is no reason why the procedures of  notification and consultation as established by 
Article 13.1 should not also apply to the reviews.    Possible relationship with oblig ations in Article 22 of the SCM Agreement : One Member questioned 
the reasons for and purpose of the proposal, in ligh t of the provisions of Article 22.7.  Another 
Member questioned whether Brazil considers that Ar ticle 21.4 does not provide for the procedures set 
down in Article 12, particularly as regards notificat ion of Members once an application for a review 
has been received.  Brazil asserts that the procedures referred to in Articles 22 .1 to 22.6 relate to 
notification and public notice upon and after  the initiation of an investigation, and not to the 
notification and consultation related to the  reception of a petition.  Furthermore, Article 22.7 refers to 
the notification and public notice  due upon the initiation as well as to the other notifications and 
public notice  due in the course of the review.  According to Brazil, as this Article does not mention 
Article 13, it does not refer to the notification and consultation  prior to the initiation of the review, 
which is the precise object of the Brazilian proposal. 
 
Practice of Brazil:  Regarding a question about Brazi lian procedures on notificati on, Brazil stated that 
it has not initiated any review of countervailing duty yet.  
 
3. Introduce provision for prior consultation with  affected Members before initiating review 
and during its course (Proposal by Brazil) 
27. Brazil's proposal is to introduce a provision for pr ior consultation with affected Members before 
initiating a review (as soon as the application for re view is received) and during the course of the 
review.  Brazil refers to Article 13 as  a provision th at applies to investigations, but not to reviews.  
28. Some Members endorsed this proposal, with one sp ecifying that this was because it would give 
the parties the opportunity to present their point of view and argument, and proposed to add this to 
Article 13 (consultation).  Another Member shared  Brazil’s intent that reviews under Article 21 
should comply with the same procedural disciplin e with which investigations must comply.  The 
following main points arose: 
Relationship of proposal with current text of SCM Agreement :  Responding to questioning concerning 
whether and how its proposal would require a cha nge to the Agreement or how it could be given 
effect, and how the proposed consu ltations could fit within the time  frames set for the review, Brazil  G/SCM/45 
 Page 21 
 
 
 considers that its proposal does not require a change to the SCM Agreement :  it intends to clarify that 
all the procedures followed in an investigati on should be applied in a review, including the 
opportunity for consultation.    Scope of proposal:  In response to a question co ncerning whether Brazil's proposal applied to all 
"interested parties", or only to Members whose produc ts were subject to review, Brazil clarified that 
its proposal refers to procedures of consultations  established in Article 13 that involve only the 
exporting Members the products of which may be or are subject to sunset review. 
 
4. Introduce detail in Article 19.3 concerning ex pedited review of new exporters (Proposal by 
Brazil) 
29. Brazil's proposal is to introduce detail in Artic le 19.3 concerning expedited review of new 
exporters.  Certain Members supported Brazil's vi ews concerning these expedited reviews.  The 
discussion touched upon the following main concerns: 
Relationship with current text of SCM Agreement :  Some Members raised questions concerning the 
perceived deficiencies or disadvantages of the current  provision and the specific types of detail Brazil 
would include in Article 19.3, and the reasons for these additions.  The proponent is of the view that 
the SCM Agreement  provisions do not establish procedures to be followed in expedited reviews.  
Brazil considers that as Article 19.3 prov ides that the “investigating authorities promptly  establish an 
individual countervailing duty rate for that export er", it is necessary to define how fast the 
investigating authorities should respond to a request, as well as the duration of the review.  According 
to Brazil, one possibility would be that, since the re view refers exclusively to the calculation of the 
amount of the subsidy in terms of the benefit receive d by the exporter that re quests such a review, it 
should be normally concluded  in 6 (six) months.  Moreover, consid ering that the party requesting the 
review is the affected exporter and that the ai m is to expedite the initiation of the review, 
consultations with the exporting Member prior to the initiation would not be necessary.  With regard 
to the procedures provided for in Articles 12, 13 (e xcept for 13.1) and 22, Brazil states that they 
would apply to the new exporter.  One Member was of the view that this proposal does not provide a new subject and the current provisions in th e Agreement are better in this context. 
 Possibility to draw on elements in the Anti-dumping Agreement :  Brazil suggests that Article 9.5 of 
the Anti-dumping Agreement , which provides for the initiation and conduct of the review "on an 
accelerated basis" is an example that could inform  how fast the investigating authorities in the CVD 
context should respond to a complaint, as well as the duration of the review,.  
 Scope of proposal: One Member asked Brazil to indi cate if the other conditions outlined in Article 9.5 
regarding the eligibility for an expedited review should also be adopted in the SCM Agreement  for 
purposes of the conduct of expedited reviews.  Here it was noted that Article 9.5 provides for the 
suspension of the levying of anti-dumping duties while  an expedited review is being carried out and 
asked whether Brazil envisaged the same procedure in respect of expedited reviews for countervailing 
duty purposes.  Brazil clarified that its proposal doe s not include criteria regarding eligibility for an 
expedited review nor provision for the susp ension of the levying of anti-dumping duties. 
 
Another Member questioned whether Brazil’s proposal  was with respect to exporters that exported 
during the period of investigation, but were not cove red by the original investigation, or whether it 
covered exporters that did not export during the pe riod of investigation.  Brazil stated that its 
 proposal relates to two main issues:  (a) how fast  the investigating authorities respond to a request for 
an expedited review and (b) the duration of such a review.  Future provisions clarifying the manner in 
which authorities should deal with both issues would apply to any exporter.  As to the type of exporters entitled to request an e xpedited review, Brazil states that its proposal should be read in G/SCM/45 
Page 22  
 
 conjunction with its proposal made regarding sampling.
5  Since the latter would guarantee the 
exporter who exported during the period of inv estigation the possibility of requesting the 
determination of an individual amount of subsidy at  the very outset of the investigation, it would be 
appropriate to reserve the right for a new exporter ("new shipper") to request an expedited review. 
 Difficulty of insufficient data:  Brazil points to the difficulty facing investigating authorities to initiate 
and conclude a new exporter investigation “promptly ” in those cases where there is not sufficient data 
to calculate an individual amount of subsidy.  This  situation would arise, for instance, in the case 
where a new exporter has only exported a small quantit y during the course of the investigation, or 
after the imposition of the duty.  In that case, if the company requests a review under Article 19.3, the investigating authority would have very limited data  available to determine the individual amount of 
subsidy.  Brazil considers that further discu ssion and guidance is needed on this subject. 
 
5. Review need for continued imposition of measure upon submission of positive 
information concerning procedural mistake or ma nifest error of appreciation by authorities 
(Proposal by India) 
30. India's proposal is that an investigating aut hority shall review the need for the continued 
imposition of the countervailing duty upon submission by  an interested party of positive information 
concerning a procedural mistake or manifest error of appreciation by the investigating authority.  
According to India, there is no provision in the SCM Agreement  for an interested party to seek a 
review for any procedural mistake or manifest e rror of appreciation committed by the investigating 
authorities, and  this is against the goal of ensu ring objective decision making by the investigating 
authorities based on facts.  After the final determinations are made and doubt about the veracity of evidence arises, the interested party has no opportuni ty to seek redress apart from a judicial remedy.  
31. One Member agreed with this proposal, whic h it sees as guaranteeing fairness and objectivity, and 
suggests that it may add something practical to Article 21.1.   Another shared India's intent that the 
discipline should be enforced to en sure further objectivity of the review procedures. The following 
main points arose: 
Relationship of proposal with current text of SCM Agreement :  Some Members questioned whether 
and how India's proposal would require a change to the SCM Agreement , or how it could be given 
effect, and asked for examples of perceived disa dvantages in the implementation of the current 
provision.  India states that its proposal can be effectuated by having additional disciplines under 
Article 21.2 for providing an a dditional remedy not presently available in the Agreement.  One 
Member asked India to indicate deficiencies with current provisions.  Another observed that Article 23 already provides for judicial review where redress can be found in the circumstances cited by India, and asked India to explain why there was a need for an additional remedy under the SCM 
Agreement .  India pointed out that where doubts about the veracity of the evidence relied upon during 
the underlying investigation arose after the final de termination has been made, only judicial review 
was available.  India views the process of judicial  review as time consuming; hence the need for an 
additional remedy under the SCM Agreement . 
 Possible role of SCM Committee:  One Member ask ed whether India was recommending any role for 
the Committee in assessing whether or not a countervailing duty should apply or in 
enforcing/imposing its findings on an importing Member .  India clarified that it does not envisage any 
role for the SCM Committee regarding factual evidence submitted during course of countervailing 
duty investigations.  The review would be carried out by the investigating authority itself.   
                                                      
5 See supra,  II.A.6.  G/SCM/45 
 Page 23 
 
 
 Rationale for proposed review by same investiga ting authority:  One Member questioned why it 
would be desirable to allow for requests for review of procedural mistakes to be addressed to the same 
institution which allegedly has made such mistakes.  In India’s view, there could be a situation in 
which doubts about the veracity of the evidence re lied upon during the underlying investigation might 
arise after the final determination has been made .  India's proposal intends an additional remedy 
whereby the investigating authority could itself re view such errors in a time-bound manner.  India 
stated that the purpose of the review would be to amend the determination that was affected by certain errors, and would not extend to reviewing whet her the continued imposition of the duty was 
necessary.    
One Member observed that India's proposal appear s to presuppose that the investigating authorities 
have been unwilling to remedy the alleged errors, and questioned whether  a review under Article 21 
was the appropriate mechanism by which to resolve su ch "disputes".  India stated that it may not be 
correct to pre-suppose that the investigating aut horities have been unwilling to remedy the alleged 
errors.  It is possible that the interested party w as not aware of the errors which consequently could 
not have been brought to the notice of investigati ng authority during the underlying investigation.  In 
such a situation, a review by the investigating auth ority might be preferred over a judicial review.   
 Modalities for review:  Some Members asked India to explain the types of information that would be 
associated with such a review, and under what circ umstances such a review should be conducted.  
India indicated that there could be a situation in which doubts about the veracity of the evidence relied 
upon during the underlying investigation might arise after the final determination was made.  The 
export price could be based on forged vouchers, for ex ample, and if the interested party became aware 
of this fact after the final determination, it w ould have no remedy available apart from a judicial 
review.  To take into consideration such situations , India proposed an additi onal remedy whereby the 
investigating authority could itself review such errors.   
 
6. Clarify Article 21.2 to provide for auto matic adjustment of countervailing duties for 
schemes withdrawn (Proposal by India) 
32. India's proposal is to clarify the provisions of Ar ticle 21.2 to provide that investigating authorities 
should automatically adjust the countervailing dut y corresponding to the subsidy margins for the 
schemes withdrawn.  According to India, there may be situations where the exporter may no longer be 
receiving any benefit from a scheme that was determ ined to have been countervailable due to the 
scheme having been subsequently withdrawn by the Government of the exporting country.  In such 
situations, the subsidy margins determined at the ti me of the investigation would no longer reflect the 
benefit to the recipient after withdrawal of the benefit conferring schemes.  Continued imposition of 
the countervailing duty at levels initially determined  would amount to the duty being in excess of the 
amount of subsidy found to exist and the investigating authorities should automatically adjust the 
countervailing duty corresponding to the subsidy margins for the schemes withdrawn. 
33. The following main points arose: 
Relationship of proposal with current text of SCM Agreement :  Asked whether and how its proposal 
would require a change to the SCM Agreement  or how it could be given effect, India states that its 
proposal can be effectuated by having additi onal disciplines under Article 21.2 for automatic 
adjustment of countervailing duties for schemes w ithdrawn.  Some Members questioned how or why 
current provisions for review in Article 21.2 were not sufficient and asked for examples of perceived 
disadvantages in implementation of the current provi sion.  In India’s view, the main reason why the 
review procedures under Article 21.2 may not sufficien tly address the issue is that no time limit has 
been prescribed for completing a review under the provision.  Reviews tende d to be open-ended and 
without any finality as to their conclusion.  Thus , for a considerable time, the countervailing duty 
would continue to be imposed in excess of amount of subsidy.  Hence the need for an expedited G/SCM/45 
Page 24  
 
 process of automatic adjustment for schemes withdr awn.  One Member disagreed with this proposal, 
as, in its view, any schemes withdrawn shall be subject to a review rather than any automatic 
adjustment.   
 
Meaning of "automatic adjustment": Some Member s asked for more precision in India's proposal and 
clarification of the meaning of "automatic adju stment", the process and the basis on which such 
adjustment would take place, including whether it was limited to a permanent change of circumstances.  India’s contention is that if certa in schemes, which at the time of investigation were 
determined to have confer red benefit to the recipients were sub sequently withdrawn, then there should 
be a procedure for automatically adjusting the amount of benefit to the recipient and the 
countervailing duties.  While India indicated that the details of the administrative process could be 
worked out within the Committee, India indicated  that the following could be considered as 
constituting changed circumstances regarding subs idization:  The affected exporters seeking 
automatic adjustment would be required to subm it a copy of the relevant government notification 
withdrawing the benefit-conferring scheme.  Such  a notification would be considered by the 
investigating authorities, who might also satisfy  themselves that the subsidy scheme had been 
withdrawn and it had not otherwise been reform ulated under another scheme. Subsequently the 
amount of benefit attributable to the subsidy scheme withdrawn would be deducted from the amount 
of benefit to the recipient,  and a commensurate adjustment made to the countervailing duty.  In India’s view, the automatic adjustment should be limited to those subsidy schemes which were 
examined by the investigating authority in detail during the underlying investigation.  Since this 
would be an expedited process it might  not be appropriate to bring w ithin its ambit schemes that were 
not investigated earlier, as establishment of essential el ements like financial contribution, existence of 
benefit to the recipient, the amount of subsidy and in jury analysis could be time consuming. Issues of  
upward or downward revision of c ountervailing duties consequent to an increase or decrease of the 
amount of subsidy under a scheme would need to be addressed in the normal course as provided for 
under provisions of Article 21.2.   Downward adjustment only: India confirmed one Member's understanding that any adjustment under 
this proposal would only result in a downward adjust ment of a countervailing duty.  In India’s view 
such an expedited procedure is relevant only in re spect of those schemes, which at the time of the 
underlying investigation were dete rmined to have conferred benef it, but which were subsequently 
withdrawn.    Withdrawal vs. reformulation of scheme; non-eligib ility of exporter: India confirmed one Member's 
understanding that investigating authorities would ha ve the right to first investigate whether the 
subsidy scheme in question had been withdrawn, and that it had not otherwise been reformulated or 
reintroduced under the provisions of another programme.  A Member asked whether, under this proposal, "withdrawal" of subsidy schemes would relate only to the repeal of th e scheme as such, i.e. 
for all beneficiaries, or also to non-eligibility fo r the exporter claiming the adjustment (e.g. through 
change of the eligibility criteria) and also asked India to elaborate on the possibility to investigate 
whether the subsidy "has not been reformulated under another scheme", and whether this covered 
solely cases where the scheme remains unchanged in substance (e.g. form of  subsidy unchanged) but 
only the name of the programme changes, or also  included instances where there is a change of 
substance in the operation of the programme(s) (e.g . a grant scheme is abolished but the company can 
now avail itself of a tax exemption).  India responded that, under its proposal,  withdrawal of subsidy 
schemes would relate to repeal of the subsidy scheme as such for all beneficiaries and would not be 
confined to the exporters claiming adjustments.  In India’s view, on being presented with evidence 
from the exporters regarding withdrawal of the bene fit conferring scheme, the investigating authority 
may satisfy itself that the scheme has not been refo rmulated into another scheme.  Reformulation of a 
subsidy scheme under another scheme would cove r cases where the scheme remains unchanged in 
substance, with the type of financial contributio n and the category of potential beneficiary remaining  G/SCM/45 
 Page 25 
 
 
 the same as under the original scheme.  In case the i nvestigating authority concludes that the original 
scheme has remained unchanged in substance and h as been merely reformulated by changing the 
name of the scheme, there would be no adjustment in the countervailing duty.  However in case a new 
subsidy scheme is introduced, it is India’s contention that this would not lend itself to an expedited 
review process as various essential elements like financ ial contribution, existence of benefit to the 
recipient, amount of subsidy etc. would need to be established.  This can be a time consuming 
exercise, which India believes is appropriately addressed under the normal course as provided for under provision of Article 21.2 of the SCM  Agreement . 
 Continuing benefit stream:  India confirmed one Member's understanding that in cases where, even 
though a subsidy scheme might have been withdraw n, there was a continuing benefit stream to 
producers and exporters arising out of previously-best owed subsidies (which typically occurs in cases 
where the subsidy has been amortized over time)  this benefit stream would still constitute a 
countervailable subsidy even though the programme had been withdrawn.  
 
E. DEFINITION OF DOMESTIC INDUSTRY AND INJURY ANALYSIS  
1. Clarify "major proportion of the total domestic production" (Proposal by India) 
34. India's proposal is to clarify the term "major  proportion of the total domestic production" in 
Article 16.1 and clarify whether defining domest ic industry as those who supported the petition 
cannot be construed as an impermissible interpreta tion of the "major proportion" requirement.  In 
India's view, according to Article 15, a determination of injury for the purpose of countervailing duty 
investigation involves, in part, an examination of  the impact of subsidized imports on the domestic 
industry.  The scope of the domestic  industry is defined in Article 16.1, according to which “domestic 
industry” is to be interpreted as referring to the dom estic producers as a whole of the like product or to 
those of them whose collective output of the pr oducts constitutes a majo r proportion of the total 
domestic production of those products except when th e producers are related to the exporters or 
importers, or are themselves importe rs of the subsidized products.  On e Member shared India's intent 
that the term "domestic industr y" should be more clarified. 
Relationship of proposal with current text of SCM Agreement :  India made clear that its proposal 
would constitute a clarification of Article 16 of the SCM Agreement .  Some Members could not 
support this proposal as they saw no need for any fu rther explanation regardi ng this matter in the 
Agreement.   
Possibility to draw on elements in the Anti-dumping Agreement :  India clarified that in view of the 
textual similarity between provisions of Article 4 of the Anti-dumping Agreement and Article 16 of 
the SCM Agreement , India considers that the definition of dom estic industry should be in harmony in 
these two Agreements.   
 Definition of "major proportion":  Some Members queried how India defined "major proportion".  
While India did not offer any specific definition of “major proportion” and stated its expectation that 
the deliberation in the Committee would result in an  agreed definition, it offered the following for 
consideration:   
 (a) “Major proportion” should not be confined to include only those producers who have 
supported the petition seeking initiation of the investigation:  
 (b) “Major proportion” could be defined by indicating producers whose output constitute 
at least X % of the total domestic production of the concerned product.  The exact numeric value of X could be agreed upon by members during deliberations in the 
SCM Committee.  
 G/SCM/45 
Page 26  
 
 Relationship between "major proporti on" in Article 16.1 and standing requirement in Article 11.4:  
India emphasizes that there should be no confusi on between the standing requirements of the 
domestic industry under Article 11.4 and that of the definition of domestic industry under Article 
16.1.  Otherwise, the injury analysis would be f undamentally skewed.  If Artic le 16.1 were intended to 
define the domestic industry as those produ cers who expressly supported the petition seeking 
initiation of the countervailing duty investigati on, an injury analysis would be merely a pro forma  
exercise in which the authorities would simply check  whether the petitioning firms were materially 
injured.  This precludes any balanced assessment  and objective examination of the impact of 
subsidized imports on domestic producers as a whole of the like product or to those of them whose 
collective output constitutes a major proportion of the total domestic production of those products.  
The obligation on the investigating au thority with regard to the injury  analysis is more onerous than 
this, as the investigating authority is required to defi ne the domestic industry as  referring to at least to 
those producers whose collective output of the pr oduct constitutes a major proportion of the total 
domestic production of those products.   
Examples supporting proposal:  Some Members asked India to provide examples supporting its 
proposal and to indicate in which instances the majo r proportion requirement was considered to be 
fulfilled only by reference to support of the petitio n regardless of whether the major proportion test 
was in fact met.  In India’s view, the latter question assumes that the investigating authorities are already applying “the major proportion test” in th e injury analysis, as distinct from the standing 
requirement while initiating the investigation. India we lcomed details of any such test, which it saw as 
perhaps having been applied in any countervailing duty investigation.  According to India, there are 
several instances where the investig ating authorities have defined the domestic industry by limiting it 
to those producers who came forward with affirm ative support for initiating the investigation.   
Scope of proposal: Responding to another Memb er's question whether India sought further 
clarifications beyond the proposal that the indus try should not be defined as only those producers 
supporting the petition, India stated that its proposal seeks to obtain a clarification that for the purpose 
of injury analysis the domestic industry should not  be confined to the producers who supported the 
petition.  In addition, India would like some yards ticks to be developed for determining whether the 
investigating authority has assessed the state of dom estic industry by taking into consideration the 
producers who constitute at least a majo r proportion of total domestic production. 
 
2. Determination of like product (Proposal by India) 
35. India's proposal is that in determining the likeness of products (as in footnote 46 of the SCM 
Agreement ), account should be taken of the differentiate d nature of products even where they have 
closely resembling characteristics, inter alia , through consideration of price comparison, 
substitutability and whether in direct competition. 
36. According to India, for the like product test, investigating authorities typically look at the 
physical, technical and chemical properties of the products, their end use, consumer perceptions and 
preferences, so as to ensure that the products compared have closely resembling characteristics.  It is 
the practice in the various investigating author ities to create product groupings based on certain 
product characteristics.  However, such product groups  may not adequately take  into consideration the 
highly differentiated nature of a gi ven product under consider ation and the vastly different end uses to 
which the various constituents of a product group can be put.  This can  lead to a situation where, for 
the purposes of injury analysis, a comparison is ma de between products whose characteristics do not 
have closely resemble those of the product under c onsideration.  India notes that there have been 
instances in which a low quality and less expensiv e imported product was compared with vastly 
different, patented, high-value product produced by  the domestic industry leading to a finding of 
inflated injury.  This does not result in a fair and ba lanced analysis of injury  suffered by the domestic 
industry of the importing country due to the alleged subsidized exports.  One Member shared India's  G/SCM/45 
 Page 27 
 
 
 intent that the term "like product" in footnote 46 should be clarified.  The following are the main 
points emerging from the exchanges within the Committee: 
Relationship of proposal with current text of SCM Agreement :  Questioning revealed that, in India’s 
view, footnote 46 needs to be clarified so that  issues of price, substitutability and competitive 
relationship, where relevant, are taken into cons ideration in establishing whether products have 
“closely resembling characteristics”.  India recognizes that all of these criteria may not be relevant in 
all cases.  India agrees with some Members that ther e may be certain investigations in which price is 
not a relevant criterion for determin ing “like products” but notes that,  equally there may be situations 
in which price is a relevant criterion and in su ch situations this criterion must be used.   
 
Relationship with the definition of "like product" in the Anti-dumping Agreement :  In response to 
questioning as to whether its views went be yond the commonly accepted understanding of "like 
products" for dumping purposes, India clarified that its views did not go beyond the common understanding of like products for purposes of anti- dumping and countervailing duty investigations.  
India's point was that if the differentiated nature  of the product under consid eration and the different 
end-uses to which the various constituents of a product group can be put were not taken into 
consideration, in India's view, this would lead to a comparison between products that did not have 
closely resembling characteristics.  This would not resu lt in a fair and balanced analysis of the injury 
suffered by the domestic industry of the importing c ountry due to alleged subsidized exports.  Some 
Members could not support India's prop osal as the definition stated in the Anti-dumping Agreement  
was considered more appropriate.   
    
 G/SCM/45 
Page 28  
 
 ANNEX 1 
List of issues raised by Brazil
6 and India7 concerning countervailing duty investigations  
Article 14 
 Explicit legislation or regulation on method for calculating amount  of benefit from a subsidy 
(Brazil). 
 Basis for calculating amount of benefit should be benefit to the recipient (Brazil). 
 For a subsidy to exist from duties foregone or not  collected, benefit should have been received 
during the investigation period (India).   
 Clarification of Annexes I (items (h) and (i)), II and III such that, where duty drawback, remission 
or exemption of duties and import charges are countervailed, should be limited to the amount in excess of the amounts levied on inputs consumed (India). 
 Additional guidelines should be  added to Article 14: 
 Expenses incurred by recipient to obtain the subsidy should be deduc ted from amount of the 
subsidy (Brazil and India) and from am ount of countervailing duty (India) 
 For subsidies not granted based on quantities of product, subsidy amount should be the 
proportional amount of subsidy related to th e quantity of product involved. (Brazil) 
 Subsidies used to acquire capital goods – s ubsidy amount calculated based on depreciation 
rules for that industry and amount of product involved. (Brazil) 
 To determine average useful life of assets, depr eciation information of individual recipient firms 
should be used (India). 
 
 Sampling – introduce rules such as t hose in AD Agreement. (Brazil) 
 
 Clarify that addition of an amount for interest on the benefit conferred during the investigation 
period is not in conformity with the object and purpose of the SCM Agreement  or, alternatively, 
clarify whether calculating interest on a notional basis instead of from the date the benefit was 
conferred is a reasonable method of calculating interest. (India) 
 
Facts available 
 Introduce provisions on use of "facts available" such as those in Annex II of the AD Agreement 
(Brazil) 
 Clarify that all verifiable and timely submitted in formation should be taken into account, and that 
if a portion of information is not verifiable or timely submitted, facts available may be used for 
that portion of the information.  (India) 
 
                                                      
6 G/SCM/W/464. 
7 G/SCM/W/462.  G/SCM/45 
 Page 29 
 
 
 De minimis  
 Introduce in Article 19 a provision that no duty be collected where subsidy amount is de minimis  
(Brazil).  
 Review procedures 
 Introduce provision for assessment of degree of  support for review requests (Brazil). 
 Introduce provision for notification of Members w hose products are subject to review (Brazil). 
 Introduce provision for prior consultation with a ffected Members before initiating a review, and 
during its course (Brazil). 
 Introduce detail in Article 19.3 concerning exped ited review of new exporters (Brazil).   
 Review need for continued imposition of measure upon submission of positive information 
concerning procedural mistake or manifest error of appreciation by authorities (India). 
 Clarify Article 21.2 to provide for automatic ad justment of countervailing duties for schemes 
withdrawn (India).  
 
Definition of domestic industry and injury analysis  
 Clarify "major proportion of the total dom estic production", and clarify whether defining 
domestic industry as those who supported the petition cannot be constr ued as impermissible 
interpretation of the major proportion requirement (India). 
 In determining likeness of products, account should be  taken of differentiated nature of products 
even where they have closely resembling characteristics, inter alia  through consideration of price 
comparison, substitutability and whether in direct competition (India). 
 
__________ 
 
 