Page 481 - MANUAL OF SOP

Manual of OP for Trade Remedy Investigations

product (making normal allowance for waste). The Part 2 of Annexure III to
CVD Rules also provides that the prior stage inputs are inputs when they are
Physically incorporated; Energy, fuel and oil used in production process: and
catalysts consumed in the course of production. It also requires necessary
verification and/or practical test(s) to be carried out by the investigation
team to confirm which inputs are consumed, directly or indirectly, in the
production of the exported article and in what amounts.

20.18 LOCAL CONTENT SUBSIDIES : Rule 11 (1)(b) identifies the subsidies
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which are contingent, whether solely or as one of several other conditions, upon
the use of domestic over imported goods. These subsidies are designed to directly
affect trade and thus are most likely to have adverse effects on the interests of
other Members.

20.19 Rule 11 (1)(c) inter alia read with the principles laid down in Annexure II to
the CVD Rules identifies the subsidies which are conferred on a limited number of
persons engaged in manufacturing, producing or exporting the articles.

20.20 As per SCM Agreement, the subsidies that are not prohibited are called
actionable subsidies. However, they are subject to challenge, either through
multilateral dispute settlement or through countervailing action, in the event that
they cause adverse effects to the interests of another member country. There are
three types of adverse effects:

(i) Causes or threatens to cause material injury to any domestic industry
established in other member countries or materially retards the establishment
of any domestic industry in other member countries and such injury and/
or retardation is caused by subsidized imports in the territory of the such
complaining member country. This is the sole basis for countervailing action;
(ii) There is serious prejudice. Serious prejudice usually arises as a result of
adverse effects (e.g., export displacement) in the market of the subsidizing
member country or in a third country market. Thus, unlike injury, it can
serve as the basis for a complaint related to harm to a member’s export
interests;
(iii) There is nullification or impairment of benefits accruing under the GATT
1994. Nullification or impairment arises most typically where the improved

13 Article 3 of the SCM Agreement identifies import substitution i.e. use of domestic over imported goods as
prohibited subsidies

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