RESTRICTEDWORLD TRADE
ORGANIZATIONG/SCM/Q2/KOR/17
25 January 1999
(99-0251)
Committee on Subsidies
and Countervailing MeasuresOriginal:  English
SUBSIDIES
Questions from the UNITED STATES Regarding the
New and Full Notification of KOREA1
The following communication, dated 19 January 1999, has been received from the Permanent
Mission of the United States.
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The following are questions regarding the notification of Korea made pursuant to
Article XVI:1 of the GATT 1994 and Article 25 of the Agreement on Subsidies and Countervailing
Measures (SCM Agreement), in document G/SCM/N/38/KOR.
1. Concerning "Support Programme for the Coal Industry" on page 19, please explain under
what terms loans are granted.
2. Under "Reduction in Customs Duty on Parts of Aircraft" on page 22, please explain what
form the tax concession takes.  What is the percentage of the tax concession and how long is
the concession in effect?
3. Under "Diesel Vehicle Low Emission Techno logy Development" on page 26, is the subsidy
provided to only one enterprise?
4. Finally, based upon the information available to us, the following programmes appear to meet
the notification requirements of Article 25 of the SCM Agreement.  Please explain why theseprogrammes were not included in your subsidy notification.
The Government of Korea has provided lending to the Korean semiconductor industry
through various government loan funds and subsidy programmes.  Much of this funding is provided
through the Korean Development Bank, the Industrial Bank of Korea, and the Korea Long-TermCredit Bank, under the 5 following loan/fund programmes:
- Industrial Development Fund
- High Technology Industry Promotion Loans
- Science and Technology Promotion Fund
- Technology Development Loans
- Production Technology Development Loans
                                                     
1 G/SCM/N/38/KORG/SCM/Q2/KOR/17
Page 2
Additional non-notified programmes, including for other sectors/industries:
- Tax Incentives for Reserves for Factory Relocation to Rural Areas – certain tax
incentives for reserves are provided to enterprises that move their factories from
metropolitan cities to rural areas.
- Tax Incentives for Reserves for Corporate Head Office Relocation to Rural Areas –
certain tax incentives for reserves are provid ed to enterprises that move their head or
main office from metropolitan cities to rural areas.
- Tax Incentives for Factory Relocation to Rural Areas – certain tax incentives are
provided to enterprises that move their factories from metropolitan cities to ruralareas.
- Tax Incentives for Corporate Head Office Relocation to Rural Areas – certain tax
incentives are provided to enterprises that move their head or main office from
metropolitan cities to rural areas.
- Support for Improving Business Management of Fishing Cooperative Association –
provides financial support to fishing cooperative associations to improve theirbusiness management.
- Subsidy for Interest Payment on Fishing Fund – provides a grant to cover losses that
lending institutions sustain due to low interest rates.
- Support for Replacement of Old Fishing Vessels – provides grants to replace small
old fishing vessels or loans at a lower than market interest rate.
- Tax Exemption for Fishing Boats Weighing Less than 20 Tons – provides an
exemption of the Acquisition Tax, Registration Tax, Property Tax and Public
Facilities Tax for fishing boats weighing less than 20 tons.
- Tax Reduction for Forestry Income – provides a 50 per cent tax reduction for forestry
income generated from forest development.
- Support for Forest Managers and Developers – provides low-interest loans to support
forestry business.
- Support for Reforestation and Forest Tending – provides grants or low-interest loans
for the purpose of reforestation and forest tending.
- Support for Private Forest Road Construction – provides grants or low-interest loans
for construction or maintenance of roads providing access to forest areas.
- Support for Forestry Successors – provides low-interest loans for forestry
management.
- Support for Forestry Mechanization – provides low-interest loans for the purchase of
forestry machinery.
- Support for Wood Production and Processing – provides low-interest loans for timber
production and processing.
- Tax Exemption for Relocation of Factories or Head Offices to Local Areas – provides
an exemption from the Acquisition Tax and Registration Tax for real estate purchased
for relocation of factories or head offices to provincial areas.
- Tax Incentives for Enterprises Relocating to Agricultural and Industrial Complexes –
provides an exemption of the Acquisition Tax, Registration Tax and 50 per centreduction of the Property Tax and Composite Land Tax for real estate used forfactory relocation to specially designated agricultural and industrial complexes.
- Rural Industry Development Fund – provides low-interest loans to cover 70-100 per
cent of the cost of certain projects in order to promote a balanced regionaldevelopment.
- The Mutual Assistance Fund – provides low-interest loans to prevent bankruptcies,
stabilize cash flow and support collective purchases and sales for small and medium-
sized enterprises (SMEs) that are members of the Mutual Assistance Fund.G/SCM/Q2/KOR/17
Page 3
- Rural Industry Development Programme – provides low-interest loans and working
capital for enterprises with approved business plans that intend to move to
agricultural and industrial complexes.
- Support for Cooperative Projects – provides low-interest loans and working capital to
SMEs that intend to move to pollution-causing Manufacturers' Complexes or
Technology and Facilities Sharing Complexes.
- Support for the Development and Commercialization of Environmental Technology –
provides loans to enterprises or individuals who intend to develop or commercializenew environmental technology.
- Tariff Reduction for High Technology Products – provides a 30 per cent tariff
reduction for enterprises in the high technology industry, such as the precisionelectronics industry.
- Industrial Technology Development Programme – provides low-interest loans to
cover up to 80 per cent of the total cost of technology development projects forcertain industries.
- Support for Overseas Mineral and Energy Resources Development – provides grants
and low-interest loans for certain projects concerning overseas resources
development.
- Assistance for Research and Development Activities – provide low-interest loans to
support R&D activities in the information and communication industries.
- Industrial Technology Infrastructure Promotion Programme – provides matching
funds to cover a maximum of 75 per cent of the cost to finance projects to promote
technology infrastructure.
- Generic Industrial Technology Development Programme – provides grants
amounting to approximately 50 per cent of the total cost of a research project tocertain public and private institutions.
5. Would you please clarify whether tariff reductions provided under Tariff Reduction for items
for Research Activities, a programme not included in your notification are available to commercial
enterprises?  If so, which enterprises?
6. The following programmes were not included in your notification and appear to be limited to
small and medium-sized enterprises.  Is there a universal definition that you use to determine which
companies receive benefits?
- Tax Incentives and Reserves for Facility Investment of SMEs
- Tax Reduction for New SMEs
- Tax Reduction for SMEs
- Tax Incentives for Equipment Donation to SMEs
- Tax Incentives for Consolidation of SMEs
- Tax Incentives for Business conversion of SMEs
- Exemption of Capital Gains Tax for SMEs
- Tax Incentives for Business Relocation
- Tax Reduction for Business Conversion of SMEs
- Tax Incentives for SMEs' Factory Relocation to Rural Areas
- Tax Reduction for Enterprises Operating in Agricultural and Industrial Complex
- Tax Deduction for Capital Increase Income
- Restructuring Fund for SMEs
- Environmental Protection Fund for SMEs
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