Page 477 - MANUAL OF SOP

Manual of OP for Trade Remedy Investigations

SCOPE & ELEMENTS OF A SUBSIDY
20.8 Article 1 of the SCM Agreement defines the term subsidy as a financial
contribution by a government or a ‘public body’ or on behalf of a government
and which confers or results in a benefit to the recipient. If any of these elements
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are missing, the program is not a subsidy under the SCM Agreement . Each of the
elements are discussed in detail as follows:

FINANCIAL CONTRIBUTION

20.9 The principles regarding determination of a measures by a government or a
‘public body’ or on behalf of a government, that represent a financial contribution are,
amongst others, the grants, loans, equity infusions, loan guarantees, fiscal incentives,
etc. and are detailed in Annexure III of CVD Rules. However, the financial contribution
only is not actionable. A financial contribution, by or on behalf of the government or
a public body, amounting to subsidy is illustrated in Part I of Annexure III of CVD
Rules .
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20.10 Further, benefits conferred on prior stage cumulative inputs (captive
consumption) which amount to a subsidy are detailed in Part 1 with guideline
for the same in Part 2 of Annexure III of CVD Rules. Paragraph (e) alongwith its
explanation in (i) to (vii) of Part-1 of Annexure III of CVD Rules may also be referred
to for this purpose.

SPECIFICITY
20.11 The conditions for specificity of a subsidy contained in Article 2 of the SCM
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Agreement , and Section 9(3) and Rule 11 of the CVD Rules, are as under:
(i) if it has been conferred on a limited number of industry/enterprise engaged
in the manufacture, production or export of articles; or

5 Please refer to Para XX of Chapter 24 for WTO Jurisprudence.
6 Direct Transfer of Funds (grants, loans, infusions). See Appellate Body Report, Brazil – Export Financing Programmes
for Aircraft, WTO Doc. WT/DS46/AB/R, (Aug. 2, 1999), in this case, the AB determined two different aspects of
subsidy i.e. financial contribution and benefit. Economic Value is transferred to the advantage of recipient by Govt.
• Potential Direct transfer of Funds or Liabilities (Loan Guarantees)
• Government Revenue which is otherwise due is foregone
• Provisions for Goods and Services other than general infrastructure
7 Article 2.1 of the SCM Agreement includes principles such as when the granting authority operates and establishes
objective criteria or conditions governing eligibility for the subsidy or if there are other factors present such as,
predominant use by certain enterprises, granting of disproportionately large amount of subsidy etc.

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