RESTRICTED
WORLD TRADE G/SCM/Q2/ARG/9
11February 1997
ORGANIZATION(97-0501)
Original: Spanish Committee onSubsidies andCountervailing Measures
SUBSIDIES
Replies ofARGENTINA toQuestions posed byCANADA1,JAPAN2,
KOREA3,POLAND4,theUNITED STATES5
andtheEUROPEAN COMMUNITY6
Thefollowing communication, dated 27January 1997, hasbeenreceived fromthePermanent
Mission ofArgentina.
_________________
CANADA (1)
Refund Scheme forPatagonian Ports
Question 1
CanArgentina advise astowhether allusers ofportfacilities oronlyexporters areeligible
forassistance under thisprogramme?
Reply
Theproducts eligible under theprogramme areclearly defined andareproducts from the
Patagonian region exported through theportsfromSanAntonio Oeste toUshuaia (listofportsincluded
inLaw23,018).
Question 2
Can Argentina clarify whether thelistofgoods indicated inAnnex VII of
ANA Resolution 3304 of14December 1987 isanexhaustive listofgoods thatmaybenefit from
theprogramme?
1G/SCM/Q2/ARG/2.
2G/SCM/Q2/ARG/3 +Rev.1.
3G/SCM/Q2/ARG/1.
4G/SCM/Q2/ARG/5.
5G/SCM/Q2/ARG/6.
6G/SCM/Q2/ARG/4.G/SCM/Q2/ARG/9
Page2
Reply
Thelistofgoods represents onlypartoftheeligible products andtheyarementioned because,
upto31December 1986, theywereeligible under theRSPP (Refund Scheme forPatagonian Ports)
eventhough theywere notproduced inthePatagonian region.
Question 3
Article 25requires information inrespect oftheform ofthesubsidy. CanArgentina
indicate theform ofthesubsidy provided?
Reply
Theformofthesubsidyisapaymenttoexportersofproductsoriginating/producedinPatagonia.
Thepayment ismade when thegoods areexported andiscalculated byapercentage onthe
f.o.b. export value andispaidbytheCustoms afterverifying theorigin ofthegoods. Thepercentage
ranges from 7to12percent, depending ontheportofshipment (Art. I,Law23,018).
CANADA (2)
Question 1
Argentina willphase outtheprogramme bytheyear2007. CanArgentina confirm that
theprogramme andallpayments under theprogramme willbeended? WillArgentina consider
phasing outthisprogramme atafaster rateinaccordance withitsobligations under theAgreement
onSubsidies andCountervailing Measures?
Reply
Thephasing out,starting intheyear2002, willbecompleted by2007. Yes,theprogramme
willbeended, together withanypayments under it.
Itcould bephased outatafaster rateifanalternative programme forthedevelopment of
Patagonia, nowunder examination, isintroduced.
Question 2
Whatarethemajoragriculturalproductsbenefitingfromthesupplementaryrefundscheme
forPatagonia ports (Law 23,018)? Could Argentina provide anannual breakdown oftotalrefunds,
export volumes affected, andperunitrefund bymajor agricultural product fortheperiod 1994
tothepresent? Could Argentina alsospecify thetotalexports ofeachofthese products during
thisperiod?
Reply
Itisdifficult tocompile theproduct breakdown requested. Thetotalamount ofrefunds paid
uptothefirsthalfof1994iscontained inthenotification. For1995weareonlyinaposition togive
abreakdown ofthetotals paidfortheperiod 1January 1995to31December 1995. Thisinformation
issetoutinthetables inAnnex 1.Annex 2contains thefigures forthesecond halfof1994.G/SCM/Q2/ARG/9
Page3
Question 3
Onpage13ofthenotification, there aretwotables withdataonadditional refunds and
general reimbursements. How dothey relate tothePatagonian Refund, Law23,018? If
"additional" isthesame as"supplementary", could Argentina indicate what isincluded under
"general reimbursement" andwhat payments havebeenmade under general reimbursement since
1July1994.
Reply
Additional isthesame assupplementary refund andbotharesimply different names forthe
benefit under Law23,018.
Ageneral reimbursement istheonegranted under Law22,415 andDecree 1011/91 andconsists
ofapayment toexporters equivalent totheamount ofindirect taxes paidatprior stages inproducing
theexported product.
Question 4
Incompatibilities: Onpage8ofthenotification, reference ismade toother "specific, special
orzonal promotional schemes". Could Argentina provide examples ofsuch schemes andhow
theyaffect exports?
Reply
Theexplanation forthereference isthat,atthattime, in1983, therewereindustrial promotion
programmes intheprovinces ofNeuquén, RíoNegro, Chubut andSanta Cruz. These schemes came
toanendin1992andwerenotcontinued. Atthepresent time, therearenoother promotional schemes
inthearea.G/SCM/Q2/ARG/9
Page4
NATIONAL CUSTOMS ADMINISTRATION
Statistics Department
Systems Division
Export Systems Section
23May1996
ANNEX I
TOTAL AMOUNT OFADDITIONAL REFUNDS, PATAGONIAN PORTS
(inpesos)
Period -1January 1995 to31December 1995 (Law 23,018) Copy No.7
Customs Total refunds inpesos
14. Comodoro Rivadavia 277,806.39
19. Deseado, Puerto 12,084,778.84
47. Madryn, Puerto 29,364,633.76
48. RíoGallegos 2,067,997.56
49. RíoGrande 97,263.06
61. Santa Cruz 16,931,294.82
67. Ushuaia 8,114,550.15
80. SanAntonio Oeste 12,359,274.29
81,297,598.87G/SCM/Q2/ARG/9
Page5
NATIONAL CUSTOMS ADMINISTRATION
Statistics Department
Systems Division
Export Systems Section
23May1996
ANNEX II
TOTAL AMOUNT OFADDITIONAL REFUNDS, PATAGONIAN PORTS
(inpesos)
Period -1July1994 to31December 1994 (Law 23,018) Copy No.7
Customs Total refunds inpesos
14. Comodoro Rivadavia 39,365.09
19. Deseado, Puerto 6,255,363.78
47. Madryn, Puerto 11,573,067.92
48. RíoGallegos 1,254,621.19
49. RíoGrande 46,536.60
61. Santa Cruz 1,037,713.15
67. Ushuaia 8,847,588.81
80. SanAntonio Oeste 3,143,228.24
32,197,484.78G/SCM/Q2/ARG/9
Page6
JAPAN
Question
(a) Does theScheme correspond to"subsidies contingent upon export performance"
or"upon theuseofdomestic overimported goods" within themeaning ofArticle 3
oftheSCM Agreement?
(b) WillArgentina phase outtheScheme inthefollowing timeframe:
- Subsidies contingent upon export performance: within eight years;
- subsidies contingent upon domestic content: within fiveyears.
(c) Has Argentina already notified theScheme under Article 28.1 ofthe
SCM Agreement?
Reply
(a) TheRSPP Scheme doesnotcorrespond toanyofthese definitions inArticle 3and,
accordingly, isnotdeemed tobeaprohibited subsidy.
(b) Argentina willphase outtheScheme within aperiod starting intheyear2002.
(c) TheScheme hasnotbeennotified under Article 28.1because itisnotdeemed tobe
asubsidy "inconsistent" withtheprovisions oftheSCM Agreement.
KOREA
Question 1
Article 25oftheSCM Agreement prescribes thatevery country shall notify allspecific
subsidies, asdefined inArticles 1and2,thattheygrant. Argentina hasnotified onlyoneprohibited
subsidy.
Does Argentina notgrant ormaintain anyother actionable subsidy other than theone
notified?
Reply
Argentina hasnotified thePatagonian Ports Refund Scheme (RSPP) because itisasubsidy,
butdoesnotconsider thesubsidy tobeeither specific orprohibited.
TheRSPP isnotaprohibited subsidy because itdoesnotfulfiltheconditions setoutinArticles 2
and3oftheSCM Agreement.
TheRSPP isnotaprohibited subsidy because itcannot bedeemed tobeaspecific subsidy
inaccordance withArticle 2orunder Article 3.
Article 2deems asubsidy tobespecific when:
(a) Itislimited tocertain enterprises;G/SCM/Q2/ARG/9
Page7
(b) itdoes notrespond toobjective criteria governing eligibility anditisapplied
automatically.
TheRSPP isnotlimited tocertain enterprises, within themeaning ofArticle 2.1ofthe
SCM Agreement, there isnolimitonthebeneficiaries, anditisgranted inaccordance withdirectly
applicable objective criteria governing eligibility.
TheRSPP isnotaprohibited subsidy asdefined inArticle 3intheSCM Agreement, where
Note 4especially points outthatthemere factthatasubsidy isgranted toenterprises which export
shallnotforthatreason alone beconsidered tobeanexport subsidy within themeaning ofArticle 3.1(a)
oftheAgreement.
Lastly, Argentina considers thattheRSPP could bedeemed tobeasubsidy falling under the
terms ofArticle 8,andinparticular, Article 8.2(b).TheScheme isintended topromote thedevelopment
ofaneconomically backward region oftheArgentine Republic, namely Patagonia, which covers the
provinces ofRíoNegro, Neuquén, Chubut, Santa Cruz andTierra delFuego. Itisaregion where
percapita income islower thanthenational average andunemployment ishigher thanthenational
rate. Inother words, itisasubsidy toassist adisadvantaged region within ageneral framework of
regional development anditisnotspecific within themeaning ofArticle 2.
Question 2
TheRSPP. Thenotification states thatthesubsidy willbeinforce until theyear2007.
Isthere anyschedule tophase outthesubsidy inconformity withtheSCM Agreement?
Reply
Thephase outscheduled willstartintheyear2002.
POLAND
Question 1
WefindtheRefundSchemeforPatagonianPortsaprohibitedsubsidystipulatedinArticle3
oftheSCM Agreement. Ifso,hasArgentina notified thissubsidy pursuant toArticle 28.1of
theSCM Agreement? Prohibited subsidies aretobebrought intoconformity withprovisions
oftheSCM Agreement within 3years; evenifArticle 27concerning special treatment ofdeveloping
countries asapplied, andasubsidy should bephased outwithin aneight-year period (i.e.in2002),
while Argentina wants tomaintain thisScheme inforce until2007. Weshould likeclarification
onthispoint. Ifnot,please explain whythissubsidy isnotaprohibited subsidy.
Reply
TheRSPP isnotaprohibited subsidy because itcannot beregarded asaspecific subsidy in
accordance withArticle 2orunder Article 3.
Article 2considers asubsidy tobespecific when:
(a) Itislimited tocertain enterprises;G/SCM/Q2/ARG/9
Page8
(b) itdoes notrespond toobjective criteria governing eligibility anditisapplied
automatically.
TheRSPP isnotlimited tocertain enterprises, within themeaning ofArticle 2.1ofthe
SCM Agreement, there isnolimitonthebeneficiaries, anditisgranted inaccordance withdirectly
applicable objective criteria governing eligibility.
TheRSPP isnotaprohibited subsidy asdefined inArticle 3intheSCM Agreement, where
Note 4especially points outthatthemere factthatasubsidy isgranted toenterprises which export
shallnotforthatreason alone beconsidered tobeanexport subsidy within themeaning ofArticle 3.1(a)
oftheAgreement.
Lastly, Argentina considers thattheRSPP could bedeemed tobeasubsidy falling under the
terms ofArticle 8,andinparticular Article 8.2(b). TheRSPP Scheme isintended topromote the
development ofaneconomically backward region oftheArgentine Republic namely, Patagonia, which
covers theprovinces ofRíoNegro, Neuquén, Chubut, Santa CruzandTierra delFuego. Itisaregion
where thepercapita income islower thanthenational average andunemployment ishigher thanthe
national rate.Inotherwords, itisasubsidy toassist adisadvantaged region within ageneral framework
ofregional development anditisnotspecific within themeaning ofArticle 2.
Question 2
Point 5oftheArgentine notification doesnotspecify clearly what istheform ofthesubsidy
applied andweguess thatitisadirect payment totheexporter. Could Argentina confirm this?
Reply
TheRSPPconsistsofpaymenttotheregion'sproducersofasumofmoney,namelyapercentage
ofthef.o.b. export value ofthegoods thatranges from 7to12percent, depending ontheportof
shipment.
UNITED STATES
General question andlistofprogrammes
Question
Please provide information concerning thefollowing programmes which didnotappear
tobeincluded within Argentina 'snotification, yetmaymeet thenotification requirements of
GATT 1994 and/or theSCM Agreement. Ifthese programmes areencompassed elsewhere in
Argentina 'snotification, please explain. Ifnot,please include information relevant totheelements
requested inthenotification format orexplain thebasis onwhich Argentina determined thateach
programme didnotmeet thenotification requirements referenced above.
(Note: Certain ofthefollowing programmes havebeenfound tobecountervailable subsidies in
United States countervailing dutyproceedings, including certain apparel products, standard and
linepipeandoilcountry tubular goods).
A. Rebate upon export ofindirect taxes paid (Reembolso). Legal basis/Authority:
Decree 1555/86, 16October 1986. Policy: export; taxrebate paidupon export calculated as
apercentage ofthef.o.b. invoice price oftheexported product.G/SCM/Q2/ARG/9
Page9
A1. Reply
ThisprogrammewasreplacedunderDecree1011/91,whichestablishedanexportrefundpayable
toexporters intheformofareimbursement isequivalent totheincidence onthevalue oftheexported
products ofthecumulative indirect taxes ongoods and/or services usedintheproduction process.
Itispaidonthebasisofthef.o.b. price oftheexported product andiscalculated byapercentage that
varies depending ontheproduct. Thevalue oftemporarily goods imported andexempted frompayment
ofimport duties isdeducted from thef.o.b. value. Commission paidabroad isdeducted.
A2. Reply
Thisprogramme isnotdeemed tobeasubsidy inaccordance withthedefinition inArticle 1
oftheSCM Agreement and,inparticular, Note1,which states that,inaccordance withArticle XVI
ofGATT1994(NotetoArticleXVI)andtheprovisionsofAnnexesIthroughIIIoftheSCMAgreement,
theexemption ofanexported product from duties ortaxes borne bythelikeproduct when destined
fordomestic consumption, ortheremission ofsuchduties ortaxes inamounts notinexcess ofthose
which haveaccrued, shallnotbedeemed tobeasubsidy.
B. Question
Discounts ofForeign Currency Paper (bills ornotes) under Circular RF-21.
Legal basis: Central Bank Circular RF-21 replaced byCommunication A-1205 dated
June 1988.
Policy: export; provides preferential financing forupto80percentf.o.b. value ofexport
shipments.
Reply
Thisregime isnolonger inexistence. OPRAC Communication A-1205 wasrescinded by
Communication A-1595 of1January 1990andCommunication A-1807 of8March 1991andwasnot
replaced byanysimilar regime.
C. Question
Pre-Export Financing under OPRAC-1, Circular RF.153.
Legal basis: Central Bank, Circular RF.153.
Policy: export; allows exporters toreceive pre-export financing from Central Bank for
upto70percentofthef.o.b. value oftheexported merchandise atanannual interest rateof
upto1percent. Loans indexed toUSdollar.
Reply
Theregime wasabolished, liketheonereferred toinquestion B.
D. Question
Post-Export Financing under OPRAC 1-9.G/SCM/Q2/ARG/9
Page10
Reply
Theregime wasabolished, liketheonereferred toinquestion B.
E. Question
TaxDeduction under Decree 173/85.
Reply
Theregime under Decree 173/85 hasnotbeeninexistence since Decree 553/89 wasadopted
inApril 1989.
F. Question
Exemption from Stamp Taxes under Decree 186/74.
Reply
Thedecree establishing exemption from stamp taxforexport contracts wasDecree 174/86.
Thestamp taxhasbeeneliminated forallcontracts foreconomic transactions, except contracts relating
toimmovable property.
G. Question
Tucuman Regional TaxIncentives.
Reply
Theregime isnolonger inexistence andhasnotbeenreplaced byanother one.
H. Question
Patagonia Regional TaxIncentives.
Reply
Theonlyregional incentives forPatagonia arethose which havebeennotified, namely, export
refunds forgoods produced intheregion andshipped through Patagonian portsfromSanAntonio Oeste
andUshuaia. Thelegalbasis isLaw23018.
I. Question
Corrientes Regional TaxIncentive.
Reply
Thetaxincentive system fortheprovince ofCorrientes doesnotexistanylonger (1984).
J. Question
Export Payments under Decree 176/86, Special Export Programmes (PEEX).G/SCM/Q2/ARG/9
Page11
Reply
ThePEEX andDecree 176/86 wereabolished under Decree 963/88. Furthermore, theregime
established thatregistered programmes could lastuptoamaximum offiveyears, aperiod which expired
in1991.
K. Question
Financing ofInvestments forExport under Communication A-980 (FIDEX).
Reply
Thisregime wasabolished under Communication A-1589 of18December 1989.
L. Question
Government Counterguarantees.
Authority: Ministry ofFinance.
Policy: Guarantees ofloans provided bytheBanco Nacional deDessarrollo (BANADE).
Reply
TheBANADE operated inArgentina untilitwasdecided toclose itdown andterminate its
activities inJune1993.
M. Question
Medium andLong-Term Loans under Law22,510.
Reply
Law22,510 wasenacted on6November 1981, creating asystem toenable banks togrant
financing toenterprises withdebtproblems. Theregime wasabolished in1988andwasnotreplaced.
N. Question
Price Support forLeaf Tobacco.
TheUnitedStatesunderstandsthatArgentinaprovidesaproductionsubsidyforleaftobacco
funded bya7percentexcise taxandaperpack taxoncigarettes, generating anannual revenue
of$170million. Itfurther understands thatalarge percentage ofthis$170million goestowards
supporting theprice oftobacco. Could Argentina explain whythissubsidy wasnotincluded in
thenotification?
Reply
TheNational Tobacco Fund isbeing notified inthecontext oftheAgreement onAgriculture,
incompliance withcommitments.G/SCM/Q2/ARG/9
Page12
EUROPEAN UNION
Argentina submitted on7August 1995 itsnotification ofsubsidy programmes totheWTO
pursuant toArticle XVI:1 GATT 1994 andArticle 25oftheSubsidies Agreement.
Inthisrespect, theCommunity would liketoobtain clarification onanumber ofissues onthe
notified scheme asdescribed below.
Moreover, theCommunity hasobtained information onother subsidy schemes which were
notnotified totheWTO, although theirnotification seems necessary pursuant toArticle 25.2ofthe
Subsidies Agreement.
I. NOTIFIED SUBSIDY PROGRAMMES
Argentina notified oneprogramme which islisted below. After examination, theCommunity
hasserious concerns ontheextent andthepractical implications oftheprogramme. Thepresent analysis
constitutes theremarks oftheCommunity andarequest forclarification.
A. Refund Scheme forPatagonian Ports
Question
Could Argentina provide thecriteria foreligibility?
Argentina states thattheprogramme willendin2007. Could Argentina comment onthe
compatibility oftheending date with thecommitments under Article 27.2 oftheSubsidies
Agreements?
Reply
1. TheeligibilitycriterionissetoutinLaw23,018andNationalCustomsAdministrationResolution
No.3304/87. They establish thatthegoods mustoriginate intheregion located south oftheColorado
riverandmustbeexported intheirnatural stateormanufactured inindustrial establishments located
inthesaidregion. Thisincludes exports ofmanufactures produced inindustrial establishments inthe
aforementioned region using inputs notoriginating therein, provided thatthesaidprocess results in
achange oftariff heading intheNomenclature andthattheresulting product istheconsequence of
anindustrial process andnotsimply ofanassembly procedure.
2. Theprogramme willbephased outoveraperiod starting intheyear2002. Argentina is
considering introducing aregional development programme forPatagonia thatcould modify theScheme.
Thenewprogramme would fallunder Article 8,onnon-actionable subsidies.
II. ADDITIONAL PROGRAMMES NOT NOTIFIED TOTHE WTO
Question
Argentina hasnotnotified alarge number ofprogrammes which appeared tobenotifiable
under Article 25.TheCommunity finds thattheschemes described below provide afinancial
contribution which confers benefits onthelocal industry. Inaddition, theschemes areclearly
specific (aspertaining toaspecific sector orcontingent upon exports). Inaddition tothespecific
questions asked, theCommunity would likeclarification whythese programmes werenotnotified
totheWTO andrequests that,ifappropriate, Argentina supplies anotification under Article 25,
using thestandard format.G/SCM/Q2/ARG/9
Page13
Reply
1. Special Trade Area ofTierra delFuego
Theregime wasestablished under Law19,640, in1972. Since 1992, ithasnotlonger been
possible toestablish newenterprises under thisregime.
2. Subsidies fortheautomotive sector (including subsidies fortheproduction ofspare partsand
pieces)
Thepresent regime forenterprises intheautomotive sector wasnotified totheWTO under
theprovisions oftheAgreement onTrade-Related Investment Measures (TRIMs) inMarch 1995.
3. Incentives fortheforestry industry
Theregime topromote forestry plantations wasintroduced in1996andisadministered bythe
Ministry ofAgriculture, Fisheries andFood.
TheArgentine Republic isatthepresent timeexamining theappropriate terms fornotification
ofthisprogramme.
4. Special Fund forTobacco
TheNational Tobacco Fund isbeing notified inthecontext oftheAgreement onAgriculture,
incompliance withcommitments.
5. Reimbursement ofindirect taxpayment toexporters
1. Theprogramme mentioned wasreplaced under Decree 1011/91, which established anexport
refund payable toexporters intheform ofareimbursement equivalent totheincidence onthevalue
oftheexported product ofcumulative indirect taxesonthegoods and/or services usedintheproduction
process. Itispaidonthebasis ofthef.o.b. value oftheexported product andiscalculated bya
percentage thatvaries depending ontheproduct. Thevalue oftemporarily imported goods exempted
frompayment ofimport duties isdeducted fromthef.o.b. value. Commission paidabroad isdeducted.
2. Thisprogramme isnotdeemed tobeasubsidy under thedefinition inArticle 1oftheSubsidies
Agreement and,inparticular, Note1,which states that,inaccordance withArticle XVIofGATT 1994
(Note toArticle XVI) andoftheprovisions ofAnnexes Ithrough IIIoftheSCM Agreement, the
exemption ofanexported product from duties ortaxes borne bythelikeproduct when destined for
domestic consumption, ortheremission ofsuchduties ortaxesinamounts notinexcess ofthose which
haveaccrued, shallnotbedeemed tobeasubsidy.