Page 476 - Manual Of Operating Practices For Trade Remedy Investigations

Countervailing Duty Investigations

Countervailing Duties: An Introduction
20.4 Countervailing Duties (CVDs) are applicable when a government in the
exporting country provides subsidies or assistance to a local industry. This can be in
the form of subsidized loans, tax exemptions, indirect payments, etc. The assistance
provided enables these foreign suppliers and manufacturers to potentially export
and sell the goods for a price less than that at which domestic companies of the
target member country can reasonably sell. Countervailing Duties are meant to
neutralize the adverse effects of the subsidies allowed for a particular product in
one member country, on the same industry in the other member country .
1
20.5 The SCM Agreement defines the term “subsidy” along with the concept
of “specificity”. Only a subsidy which is a “specific” within the meaning of Part I
is subject to multilateral disciplines and can be subject to countervailing measures.
A specific subsidy is, amongst others, a subsidy available only to a specific
enterprise, industry, group of enterprises, or group of industries, sector, set of
firms, geographical region(s), limited number of persons including artificial legal
persons, use of a subsidy programme by a limited number of certain enterprises,
predominant use by certain enterprises, etc. - provided by the government of
the exporting country (hereinafter an ‘exporting country’ means the country of
manufacture, production, export or otherwise of concerned article) including the
governments of the different provinces and municipalities in which the producers/
2
exporters are located .
20.6 The main object and purpose of the SCM Agreement is to increase and
improve the GATT disciplines relating to the use of both subsidies and countervailing
measures .
3
20.7 These subsidies have been categorised into two broad categories, namely:
(i) Prohibited subsidies (Part-II of the SCM Agreement); and
(ii) Actionable subsidies (Part-III of the SCM Agreement) .
4

1 Please refer to Para XX for WTO Jurisprudence
2 See Article 2 of the SCM Agreement which defines the principles to be applied to determine specificity
3 Panel Report, Brazil – Export Financing Programmes for Aircraft, WTO Doc. WT/DS46/AB/R, (Apr. 14, 1999) also
refer to Para XX of Chapter 24 for WTO Jurisprudence.
4 SCM Agreement originally contained a third category i.e. non-actionable subsidies (Part-IV of the SCM Agreement
and Rule 11(1)(c) of the CVD Rules). This category existed for five years and ended on 31 December 1999, without
being extended. The agreement applies to agricultural goods as well as industrial products. It must be noted that
the subsidies on agricultural products were earlier exempt under the Agriculture Agreement’s “peace clause”, which
expired at the end of 2003.

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