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WTO ANALYTICAL INDEX: SUBSIDIES AND COUNTERVAILING MEASURES

Agreement on Subsidies and Countervailing Measures

The texts reproduced here do not have the legal standing of the original documents which are entrusted and kept at the WTO Secretariat in Geneva.

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Part VIII: Developing Country Members

XXVII. Article 27 back to top

A. Text of Article 27

Article 27: Special and Differential Treatment of Developing Country Members

27.1 Members recognize that subsidies may play an important role in economic development programmes of developing country Members.

27.2 The prohibition of paragraph 1(a) of Article 3 shall not apply to:

(a) developing country Members referred to in Annex VII.

(b) other developing country Members for a period of eight years from the date of entry into force of the WTO Agreement, subject to compliance with the provisions in paragraph 4.

27.3 The prohibition of paragraph 1(b) of Article 3 shall not apply to developing country Members for a period of five years, and shall not apply to least developed country Members for a period of eight years, from the date of entry into force of the WTO Agreement.

27.4 Any developing country Member referred to in paragraph 2(b) shall phase out its export subsidies within the eight-year period, preferably in a progressive manner. However, a developing country Member shall not increase the level of its export subsidies,(55) and shall eliminate them within a period shorter than that provided for in this paragraph when the use of such export subsidies is inconsistent with its development needs. If a developing country Member deems it necessary to apply such subsidies beyond the eight-year period, it shall not later than one year before the expiry of this period enter into consultation with the Committee, which will determine whether an extension of this period is justified, after examining all the relevant economic, financial and development needs of the developing country Member in question. If the Committee determines that the extension is justified, the developing country Member concerned shall hold annual consultations with the Committee to determine the necessity of maintaining the subsidies. If no such determination is made by the Committee, the developing country Member shall phase out the remaining export subsidies within two years from the end of the last authorized period.

(footnote original) 55 For a developing country Member not granting export subsidies as of the date of entry into force of the WTO Agreement, this paragraph shall apply on the basis of the level of export subsidies granted in 1986.

27.5 A developing country Member which has reached export competitiveness in any given product shall phase out its export subsidies for such product(s) over a period of two years. However, for a developing country Member which is referred to in Annex VII and which has reached export competitiveness in one or more products, export subsidies on such products shall be gradually phased out over a period of eight years.

27.6 Export competitiveness in a product exists if a developing country Member’s exports of that product have reached a share of at least 3.25 per cent in world trade of that product for two consecutive calendar years. Export competitiveness shall exist either (a) on the basis of notification by the developing country Member having reached export competitiveness, or (b) on the basis of a computation undertaken by the Secretariat at the request of any Member. For the purpose of this paragraph, a product is defined as a section heading of the Harmonized System Nomenclature. The Committee shall review the operation of this provision five years from the date of the entry into force of the WTO Agreement.

27.7 The provisions of Article 4 shall not apply to a developing country Member in the case of export subsidies which are in conformity with the provisions of paragraphs 2 through 5. The relevant provisions in such a case shall be those of Article 7.

27.8 There shall be no presumption in terms of paragraph 1 of Article 6 that a subsidy granted by a developing country Member results in serious prejudice, as defined in this Agreement. Such serious prejudice, where applicable under the terms of paragraph 9, shall be demonstrated by positive evidence, in accordance with the provisions of paragraphs 3 through 8 of Article 6.

27.9 Regarding actionable subsidies granted or maintained by a developing country Member other than those referred to in paragraph 1 of Article 6, action may not be authorized or taken under Article 7 unless nullification or impairment of tariff concessions or other obligations under GATT 1994 is found to exist as a result of such a subsidy, in such a way as to displace or impede imports of a like product of another Member into the market of the subsidizing developing country Member or unless injury to a domestic industry in the market of an importing Member occurs.

27.10 Any countervailing duty investigation of a product originating in a developing country Member shall be terminated as soon as the authorities concerned determine that:

(a) the overall level of subsidies granted upon the product in question does not exceed 2 per cent of its value calculated on a per unit basis; or

(b) the volume of the subsidized imports represents less than 4 per cent of the total imports of the like product in the importing Member, unless imports from developing country Members whose individual shares of total imports represent less than 4 per cent collectively account for more than 9 per cent of the total imports of the like product in the importing Member.

27.11 For those developing country Members within the scope of paragraph 2(b) which have eliminated export subsidies prior to the expiry of the period of eight years from the date of entry into force of the WTO Agreement, and for those developing country Members referred to in Annex VII, the number in paragraph 10(a) shall be 3 per cent rather than 2 per cent. This provision shall apply from the date that the elimination of export subsidies is notified to the Committee, and for so long as export subsidies are not granted by the notifying developing country Member. This provision shall expire eight years from the date of entry into force of the WTO Agreement.

27.12 The provisions of paragraphs 10 and 11 shall govern any determination of de minimis under paragraph 3 of Article 15.

27.13 The provisions of Part III shall not apply to direct forgiveness of debts, subsidies to cover social costs, in whatever form, including relinquishment of government revenue and other transfer of liabilities when such subsidies are granted within and directly linked to a privatization programme of a developing country Member, provided that both such programme and the subsidies involved are granted for a limited period and notified to the Committee and that the programme results in eventual privatization of the enterprise concerned.

27.14 The Committee shall, upon request by an interested Member, undertake a review of a specific export subsidy practice of a developing country Member to examine whether the practice is in conformity with its development needs.

27.15 The Committee shall, upon request by an interested developing country Member, undertake a review of a specific countervailing measure to examine whether it is consistent with the provisions of paragraphs 10 and 11 as applicable to the developing country Member in question.

B. Interpretation and Application of Article 27

1. General

(a) The Doha Round

336. As regards the Doha Ministerial Decision on Implementation relating to developing countries and non-actionable subsidies, see paragraph 292 above. See also Section V.7 of the Chapter on the WTO Agreement.

(b) Relationship with item (k) of the Illustrative List

337. In Canada — Aircraft Credits and Guarantees, the Panel concluded that Article 27 of the SCM Agreement could not be rendered ineffective by item (k) of the Illustrative List because “Article 27 accords developing country Members special and differential treatment in respect of all export subsidies, whatever form they take. Thus, to the extent that an export credit constitutes an export subsidy, it falls within the scope of Article 27, and developing country Members are in principle entitled to special and differential treatment in respect of that export credit. We are therefore unable to interpret the second paragraph of item (k) in a manner that would render Article 27, in part at least, ineffective.(450)”(451)

2. Article 27.2

(a) “subject to compliance with the provisions in paragraph 4”

338. The Panel on Brazil — Aircraft rejected the argument that “Article 27 is lex specialis to Article 3, in that it provides special rules with regard to export subsidy programmes of developing country Members” and therefore the specific provisions in Article 27 “displace the general provisions of Article 3.1(a)”.(452) Referring to the ordinary meaning of Article 27.2, the Panel stated the following:

“It is evident to us from this language that Article 27 does not ‘displace’ Article 3.1(a) of the SCM Agreement unconditionally …. Rather, the prohibition of Article 3.1(a) shall not apply ‘subject to compliance with the provisions of paragraph 4’. The exemption for developing country Members other than those referred to in Annex VII from the application of the Article 3.1(a) prohibition on export subsidies is clearly conditional on compliance with the provision in paragraph 4 of Article 27. Thus, we consider that, where the provisions in Article 27.4 have not been complied with, the Article 3.1(a) prohibition applies to such developing country Members.”(453)

339. The Panel on Brazil — Aircraft was called upon to decide the allocation of the burden of proof for claims under Article 27.4 of the SCM Agreement. In doing so, the Panel referred to Article 27.7 as context for Article 27.2(b):

“The phrase ‘subject to compliance with the provisions in paragraph 4’ contained in Article 27.2(b) can, in our view, be seen as analogous to the phrase ‘which are in conformity with paragraphs 2 through 5’ contained in Article 27.7. This supports an interpretation of Article 27.2(b) that developing country Members are excluded from the scope of application of the substantive obligation in question provided that they comply with certain specified conditions.”(454)

340. With respect to the issue of burden of proof under Article 27.4, see paragraphs 364-365 below.

(b) Exception for LDCs

341. In paragraph 10.5 of the Doha Ministerial Decision on Implementation-Related Issues and Concerns, (455) the Ministerial Conference reaffirms that LDCs are exempt from the prohibition on export subsidies in Article 3.1(a).

“Subject to the provisions of Articles 27.5 and 27.6, it is reaffirmed that least-developed country Members are exempt from the prohibition on export subsidies set forth in Article 3.1(a) of the Agreement on Subsidies and Countervailing Measures, and thus have flexibility to finance their exporters, consistent with their development needs. It is understood that the eight-year period in Article 27.5 within which a least-developed country Member must phase out its export subsidies in respect of a product in which it is export-competitive begins from the date export competitiveness exists within the meaning of Article 27.6.”

(i) Article 3.1(a)

342. With respect to the relationship with Article 3.1(a), see paragraph 338 above.

(ii) Article 27.3

343. In determining the burden of proof for Article 27.4, the Panel on Brazil — Aircraft referred to Article 27.2(b) in the context of Article 27.3. Specifically, it stated:

“As [context] for Article 27.2(b), [Article 27.3] supports the view that the relevant provisions of Article 27, which extend ‘special and differential treatment to developing countries’, serve to exclude, in a qualified or unqualified manner, certain developing countries from the scope of application of certain substantive obligations found elsewhere in the Agreement for specified periods of time.”(456)

(iii) Article 27.4

344. With respect to the relationship with Article 27.4, see paragraphs 338-339 above.

(iv) Article 27.7

345. With respect to the relationship with Article 27.7, see paragraph 339 above.

3. Article 27.3

(a) General

346. The Panel on Indonesia — Autos rejected the argument that “the obligations contained in Article III:2 of GATT 1994 and the SCM Agreement are mutually exclusive”(457) because “the SCM Agreement ‘explicitly authorizes’ Members to provide subsidies that are prohibited by Article III:2 of GATT”.(458) The Panel stated:

“Assuming that such ‘explicit authorization’ is the correct conflict test in the WTO context, we find that, whether or not the SCM Agreement is considered generally to ‘authorize’ Members to provide actionable subsidies so long as they do not cause adverse effects to the interests of another member, the SCM Agreement clearly does not authorize Members to impose discriminatory product taxes. Nor does a focus on Article 27.3 suggest a different approach. Whether or not Article 27.3 of the SCM Agreement can be reasonably interpreted to ‘authorize’, explicitly or implicitly, the provision of subsidies contingent on the use of domestic over imported goods (an issue we do not here decide), Article 27.3 is unrelated to, and cannot reasonably be considered to ‘authorize’, the imposition of discriminatory product taxes.”(459)

(b) Termination of transition period

347. The five-year and eight-year transition periods exempting developing countries and least developing countries respectively from the Article 3.1(b) prohibition on subsidies contingent on the use of domestic over imported goods terminated on 31 December 1999 and 31 December 2002, respectively.

348. With respect to the relationship with Article 27.2(b), see paragraph 343 above.

(d) Relationship with other WTO Agreements

349. With respect to the relationship with Article III:2 of the GATT 1994, see paragraph 346 above.

4. Article 27.4

(a) “shall phase out its export subsidies”

350. The Panel on Brazil — Aircraft was faced with interpreting what it termed the “internal contradiction within the text of Article 27.4”,(460) created, on the one hand, by “the mandatory language providing that a developing country Member ‘shall phase out its export subsidies’” and, on the other, by “the hortatory language in the final clause encouraging Members to perform their phase-out in a progressive manner”.(461) The Panel ultimately found that it was not necessary to resolve this issue. It held that the wording of Article 27.4 of the SCM Agreement does not specify in how many phases the elimination of subsidies should be carried out, what the time-period between these phased reductions should be, and how these phased reductions should be distributed within the eight-year period (the transition period granted to developing country Members). The Panel then found that it could not “conclude on the basis of Brazil’s actions in the first four years since the date of entry into force of the WTO Agreement that Brazil has failed to comply with the phase-out requirement of Article 27.4 by reason of a failure to undertake phased reductions within the eight-year transition period”.(462)

351. In the same context as in the preceding paragraph, the Panel on Brazil — Aircraft stated that “we do not consider that the absence of a termination date for PROEX [as of the date of the circulation of the Report, i.e. April 1999] demonstrates that Brazil is not in compliance with its obligation to eliminate its export subsidies by the end of the eight-year period”.(463)

352. Instead, however, the Panel on Brazil — Aircraft determined that “Because, under the PROEX interest rate equalization scheme, bonds relating to an export transaction are not issued until it has been confirmed that an export transaction will in fact occur, this strongly suggests that Brazil will continue to issue bonds — and hence to grant new subsidies — after 31 December 2002.”(464) The Panel regarded this as “sufficient to show, in advance, that Brazil has not complied with the condition of Article 27.4 that it ‘phase out its export subsidies within the eight-year period’”.(465)

(b) “a developing country Member shall not increase the level of its export subsidies”

(i) “Granting” of subsidies for the purposes of Article 27.4

353. In considering at what point in time payments can be considered “granted” for the purposes of Article 27.4, the Panel on Brazil — Aircraft had first found that the subsidy under the Brazilian PROEX programme does not take the form of a “potential direct transfer of funds” (the issuance of the letter of commitment), but rather the form of a “direct transfer of funds” when a payment is made or will be made.(466) The Panel then addressed the issue of when the grant of the subsidy by the Brazilian Government occurs; it held that the right to receive the PROEX payments only arises after the conditions relating to receipt of PROEX payments, and specifically the condition that the product in question actually be exported, has been fulfilled.(467) The Appellate Body first criticized the Panel for addressing the first issue:

“The issue in this case is when the subsidies for regional aircraft under PROEX should be considered to have been ‘granted’ for the purposes of calculating the level of Brazil’s export subsidies under Article 27.4 of the SCM Agreement. The issue is not whether or when there is a ‘financial contribution’, or whether or when the ‘subsidy’ ‘exists’, within the meaning of Article 1.1 of that Agreement.

…

… [W]e see the issue of the existence of a subsidy and the issue of the point at which that subsidy is granted as two legally distinct issues.”(468)

354. The Appellate Body on Brazil — Aircraft then proceeded to agree with the findings of the Panel on the precise moment of the grant of subsidy under the PROEX programme:

“We agree with the Panel that ‘PROEX payments may be “granted” where the unconditional legal right of the beneficiary to receive the payments has arisen, even if the payments themselves have not yet occurred.’ We also agree with the Panel that the export subsidies for regional aircraft under PROEX have not yet been ‘granted’ when the letter of commitment is issued, because, at that point, the export sales contract has not yet been concluded and the export shipments have not yet occurred. For the purposes of Article 27.4, we conclude that the export subsidies for regional aircraft under PROEX are ‘granted’ when all the legal conditions have been fulfilled that entitle the beneficiary to receive the subsidies.”(469)

355. For the relationship between the meaning of the word “grant” in Article 27.4 and Article 3.2 and the distinction between the existence of a subsidy and the moment of its “granting”, see paragraphs 136-138 above.

(ii) Constant or nominal values

356. In assessing whether a developing country Member’s level of export subsidies has increased, the Panel on Brazil — Aircraft used constant dollars instead of nominal dollars. The Panel considered it “appropriate in this case to use constant dollars, as that will provide a more meaningful assessment”(470) and noted that in this case, “the conclusion with respect to this issue would be the same whether constant or nominal dollars are used”.(471) The Appellate Body on Brazil — Aircraft agreed with the Panel’s decision and noted that the Panel “did not make a legal finding that the level of a developing country Member’s export subsidies must be measured, in every case, using a constant value. The Panel simply made a pragmatic observation that using constant dollars is appropriate in this case.”(472) The Appellate Body also stated that “Moreover, in our view, to take no account of inflation in assessing the level of export subsidies granted by a developing country Member would render the special and differential treatment provision of Article 27 meaningless.”(473)

(iii) Benchmark period

357. In Brazil — Aircraft, the parties disagreed “as to the benchmark period against which an examination as to whether a Member has increased the level of its export subsidies should be made”.(474) Referring to footnote 55 of Article 27.4, the Panel stated:

“[Footnote 55] offers for such Members a ceiling level of export subsidies based on their 1986 level. Implicit in this explanation is that, absent footnote 55, a developing country Member which granted no export subsidies as of the date of entry into force of the WTO Agreement would be prohibited from providing any export subsidies during the eight-year transition period. Thus, footnote 55 indicates that the relevant benchmark period against which the obligation not to increase the level of export subsidies should be measured is a period immediately preceding the date of entry into force of the WTO Agreement.”(475)

(iv) Actual expenditures or budgeted amounts

358. Considering whether actual expenditures or budgeted amounts should be used when examining the level of export subsidies, the Panel on Brazil — Aircraft found that “the level of a Member’s export subsidies in its ordinary meaning refers to the level of subsidies actually provided, not the level of subsidies which a Member planned or authorized its government to provide through its budgetary process”.(476) The Panel continued as follows:

“This reading is in our view confirmed by footnote 55 …. The verb ‘grant’ has been defined to mean, inter alia, ‘to bestow by a formal act’ and ‘give, bestow, confer’. Thus, the verb ‘grant’ in its ordinary meaning implies the actual provision of a subsidy, not its mere budgeting.”(477)

359. In its finding that actual expenditures rather than the budgeted amounts should be used when examining whether a developing country Member has increased the level of its subsidies within the meaning of Article 27.4, the Panel on Brazil — Aircraft added that “an expenditure-based measurement is consistent with the object and purpose of the SCM Agreement, which is to reduce economic distortions caused by subsidies”.(478) The Appellate Body on Brazil — Aircraft agreed with the Panel’s reasoning on the use of actual expenditures rather than the budgeted amounts when examining the level of subsidies of a developing country Member under Article 27.4 and stated:

“To us, the word ‘granted’ used in this context means ‘something actually provided’. Thus, to determine the amount of export subsidies ‘granted’ in a particular year, we believe that the actual amounts provided by a government, and not just those authorized or appropriated in its budget for that year, is the proper measure. A government does not always spend the entire amount appropriated in its annual budget for a designated purpose. Therefore, in this case, to determine the level of export subsidies for the purposes of Article 27.4, we believe that the proper reference is to actual expenditures by a government, and not to budgetary appropriations.”(479)

360. With respect to footnote 55, see paragraphs 357-358 above.

(d) “use of subsidies inconsistent with its development needs”

361. Noting the difficulties for a panel to determine whether export subsidies are inconsistent with a developing country Member’s development needs, the Panel on Brazil — Aircraft considered that “it is the developing country Member itself which is best positioned to identify its development needs and to assess whether its export subsidies are consistent with those needs. Thus, in applying this provision we consider that panels should give substantial deference to the views of the developing country Member in question.”(480)

362. The Panel on Brazil — Aircraft considered that the burden is on the claiming party to demonstrate that, because the developing country Member “has not complied with the conditions set forth in Article 27.4, the Article 3.1(a) prohibition on export subsidies applies to [the developing country Member]”.(481) The Panel concluded that “in order to prevail on this issue Canada must present evidence and argument sufficient to raise a presumption that the use of export subsidies by Brazil is inconsistent with Brazil’s development needs”.(482)

363. In Brazil — Aircraft, Canada argued that the Brazilian PROEX programme was inconsistent with Brazil’s development needs, because the Brazilian value-added of the aircraft, according to Canada, was “relatively low”. The Panel was unconvinced by this argument:

“In our view, the fact that Brazil has a generally applicable rule regarding the relationship between the domestic content of an exported product and the extent of the PROEX interest rate equalization available with respect to that product does not mean that the deviation from that rule in a particular case is necessarily inconsistent with a developing country Member’s development needs. Nor do we see any basis to conclude that PROEX payments on regional aircraft are necessarily inconsistent with Brazil’s development needs merely because the Brazilian value-added of the aircraft being exported is relatively low. There could be any number of reasons why the provision of export subsidies might be consistent with a Member’s development needs in such a case.”(483)

(e) Burden of proof

364. In Brazil — Aircraft, the Panel and the Appellate Body were called upon to address the issue of allocation of the burden of proof under Article 27.4. More specifically, the question was raised as to who bore the burden of proof with respect to the conditions contained in Article 27.4, conditions which determine whether Article 3.1(a) applies to a developing country Member. The Panel opined that the fundamental issue in this respect was “whether the prohibition in Article 3.1(a) of the SCM Agreement applies to the developing country Member in question, rather than whether the developing country Member, having been found to be subject to the substantive obligations of Article 3.1(a), and having been found to have acted inconsistently with these obligations, can find justifying protection by invoking Article 27.2(b) in conjunction with Article 27.4”.(484) Based on this reasoning, the Panel then found that the burden of proof under Article 27.4 is on the complaining Member, in this case Canada. The Appellate Body upheld this finding of the Panel, emphasizing that the fundamental issue was whether Article 3.1(a) was applicable to the developing country Member in question:

“With respect to the application of the prohibition of export subsidies in Article 3.1(a) of the SCM Agreement, paragraphs 2 and 4 of Article 27 contain a carefully negotiated balance of rights and obligations for developing country Members. During the transitional period … certain developing country Members are entitled to the non-application of Article 3.1(a), provided that they comply with the specific obligation set forth in Article 27.4. Put another way, when a developing country Member complies with the conditions in Article 27.4, a claim of violation of Article 3.1(a) cannot be entertained during the transitional period, because the export subsidy prohibition in Article 3 simply does not apply to that developing country Member.”(485)

365. The Panel on Brazil — Aircraft had opined that until non-compliance with the conditions set out in Article 27.4 is demonstrated, there is also, on the part of a developing country Member within the meaning of Article 27.2(b), no inconsistency with Article 3.1(a). The Panel therefore concluded that “it is for the Member alleging a violation of Article 3.1(a) of the SCM Agreement to demonstrate that the substantive obligation in that provision — the prohibition on export subsidies — applies to the developing country Member complained against”.(486) The Appellate Body agreed with these conclusions:

“Both from its title and from its terms, it is clear that Article 27 is intended to provide special and differential treatment for developing country Members, under specified conditions. In our view, too, paragraph 4 of Article 27 provides certain obligations that developing country Members must fulfill if they are to benefit from this special and differential treatment during the transitional period. On reading paragraphs 2(b) and 4 of Article 27 together, it is clear that the conditions set forth in paragraph 4 are positive obligations for developing country Members, not affirmative defences. If a developing country Member complies with the obligations in Article 27.4, the prohibition on export subsidies in Article 3.1(a) simply does not apply. However, if that developing country Member does not comply with those obligations, Article 3.1(a) does apply.

For these reasons, we agree with the Panel that the burden is on the complaining party (in casu Canada) to demonstrate that the developing country Member (in casu Brazil) is not in compliance with at least one of the elements set forth in Article 27.4. If such non-compliance is demonstrated, then, and only then, does the prohibition of Article 3.1(a) apply to that developing country Member.”(487)

(f) Extension of Article 27.4 transition period

366. On 26 October 2001, the Chairman of the SCM Committee issued a Report to the General Council, where he recommended that the SCM Committee continue to work on, among other things, seeking a solution for developing country Members with a small percentage share of exports in import markets and in global trade, within the framework of Article 27.4 of the SCM Agreement for extensions of the transition period for export subsidies.(488)

367. In paragraph 10.6 of the Doha Ministerial Decision on Implementation-Related Issues and Concerns, the Ministerial Conference directs the SCM Committee to extend the transition period under Article 27.4 as follows:

“Having regard to the particular situation of certain developing-country Members, directs the Committee on Subsidies and Countervailing Measures to extend the transition period, under the rubric of Article 27.4 of the Agreement on Subsidies and Countervailing Measures, for certain export subsidies provided by such Members, pursuant to the procedures set forth in document G/SCM/39. Furthermore, when considering a request for an extension of the transition period under the rubric of Article 27.4 of the Agreement on Subsidies and Countervailing Measures, and in order to avoid that Members at similar stages of development and having a similar order of magnitude of share in world trade are treated differently in terms of receiving such extensions for the same eligible programmes and the length of such extensions, directs the Committee to extend the transition period for those developing countries, after taking into account the relative competitiveness in relation to other developing-country Members who have requested extension of the transition period following the procedures set forth in document G/SCM/39.”(489)

368. The “Procedures for Extensions under Article 27.4 for Certain developing country Members”,(490) to which paragraph 10.6 of the Doha Decision refers, provide for a set of procedures in respect of requests for extension of the transition period under Article 27.4 of the SCM Agreement for certain eligible programmes of a number of developing countries.

369. Further to the requests of a number of developing country Members pursuant to Article 27.4, including requests pursuant to paragraph 10.6 of the Doha Decision, the SCM Committee granted an extension of the pertinent transition period in respect of a number of export subsidy programmes of: Antigua and Barbuda,(491) Barbados,(492) Belize,(493) Costa Rica,(494) Dominica,(495) Dominican Republic,(496) El Salvador,(497) Fiji,(498) Grenada,(499) Guatemala,(500) Jamaica,(501) Jordan,(502) Mauritius,(503) Panama,(504) Papua New Guinea,(505) St. Lucia,(506) St. Kitts and Nevis,(507) St. Vincent and the Grenadines,(508) Uruguay,(509) Colombia(510) and Thailand. (511)

370. All extensions granted in 2002 related to calendar year 2003. Those extensions granted pursuant to the procedures in document G/SCM/39 had a possibility of an annual “fast track” extension, through 2007, on the basis of mandated annual review by the SCM Committee of standstill and transparency commitments of the Members concerned. Provided all the requirements are satisfied, the final two-year period of Article 27.4 would begin on 1 January 2008. The extensions granted pursuant to Article 27.4 above, and those granted pursuant to paragraph 10.6 of the Doha Implementation Decision, are subject to the particular considerations reflected in Article 27.4, paragraph 10.6 of the Decision and the terms of the relevant decisions taken by the Committee.

371. In 2003, the SCM Committee agreed to grant a continuation of the extension of the transition period in respect of certain export subsidy programmes. These requests were made by a number of developing country Members pursuant to Article 27.4, including requests pursuant to paragraph 10.6 of the Doha Decision and the procedures in G/SCM/39, and on the basis of the mandated review of standstill and transparency commitments of the Member concerned. These extensions were accorded to: Antigua and Barbuda,(512) Barbados,(513) Belize,(514) Costa Rica,(515) Dominica,(516) Dominican Republic,(517) El Salvador,(518) Fiji,(519) Grenada,(520) Guatemala,(521) Jamaica,(522) Jordan,(523) Mauritius,(524) Panama,(525) Papua New Guinea,(526) St. Lucia,(527) St. Kitts and Nevis,(528) St. Vincent and the Grenadines,(529) Uruguay(530) and Colombia.(531) All continuations of extensions granted in 2003 were in respect of calendar year 2004.

(g) Relationship with other Articles

372. With respect to the relationship with Article 3.1(a), see paragraph 364 above.

373. With respect to the relationship with Article 3.2, see paragraphs 136-138 above.

374. With respect to the relationship with Article 25, see paragraph 334 above.

375. With respect to the relationship with Article 27.2(b), see paragraphs 364-365 above.

5. Article 27.5 and 27.6

(a) Export competitiveness

376. During 2003, one request under Article 27.6(b) was made to the Secretariat to undertake calculations with respect to export competitiveness.(532)

(b) Review of the operation of Article 27.6

377. The SCM Committee addressed the mandated review of the operation of Article 27.6 at its November 1999 meeting and took note of statements made.(533)

378. In its Decision of 15 December 2000,(534) the General Council decided:

“6.2 The Committee on Subsidies and Countervailing Measures (SCM Committee) shall examine as an important part of its work all issues relating to Articles 27.5 and 27.6 of the SCM Agreement, including the possibility to establish export competitiveness on the basis of a period longer than two years.”(535)

379. In paragraph 10.5 of the Doha Decision on Implementation-Related Issues and Concerns, the Ministers confirmed that the eight-year period in Article 27.5 for the phasing out of export subsidies by LDCs begins from the date of their export competitiveness:

380. Two requests were made in 2002 for the Secretariat to conduct calculations with respect to export competitiveness under Article 27.6(b).(536)

6. Article 27.7

(a) Relationship with other Articles

381. With respect to the relationship with Article 27.2(b), see paragraph 339 above.

7. Article 27.8

(a) “in accordance with the provisions of paragraphs 3 through 8 of Article 6”

382. The Panel on Indonesia — Autos stated that while a complaining party is, pursuant to Article 27.8, deprived of the rebuttable presumption of serious prejudice under Article 6.1(a) when trying to prove serious prejudice by virtue of a subsidy granted to a developing country Member, Article 27.8 does not establish a legal standard for making a prima facie case higher than that normally applicable under Article 6:

“We do not agree, however, that the complainants bear a heavier than usual burden of proof in this dispute or that the concept of ‘like product’ should be interpreted more narrowly than usual because Indonesia is a developing country Member…. [B]ecause Indonesia is a developing country Member, Article 27.8 requires complainants to demonstrate serious prejudice by positive evidence ‘in accordance with the provisions of paragraphs 3 through 8 of Article 6’ rather than taking advantage of the rebuttable presumption of serious prejudice that otherwise would have applied under Article 6.1(a). Article 27 does not, however, impose a higher burden of proof on complainants than that normally applicable under Article 6, nor does it provide that the term ‘like product’ is to be defined differently in the case of subsidization provided by a developing country Member.”(537)

8. Article 27.9

383. The Panel on Indonesia — Autos described the provision in Article 27.9 as follows:

“Article 27.9 provides that, in the usual case, developing country Members may not be subject to a claim that their actionable subsidies have caused serious prejudice to the interests of another Member. Rather, a Member may only bring a claim that benefits under GATT have been nullified or impaired by a developing country Member’s subsidies or that subsidized imports into the complaining Member have caused injury to a domestic industry.”(538) (emphasis in original)

9. Article 27.10

384. The Appellate Body on US — Carbon Steel, rejected the Panel’s findings that de minimis subsidization is non-injurious subsidization and noted that Article 27.10 (and 27.11) of the SCM Agreement requires termination of a countervailing duty investigation with respect to a developing country Member when “the overall level of subsidies granted does not exceed” 2 or 3 per cent:

“Articles 27.10 and 27.11 of the SCM Agreement require termination of a countervailing duty investigation with respect to a developing country Member whenever ‘the overall level of subsidies granted does not exceed’ 2 or 3 percent, depending on the circumstances. These provisions require authorities, in a countervailing duty investigation, to apply a higher de minimis subsidization threshold to imports from developing country Members. To accept the Panel’s reasoning — that de minimis subsidization is non-injurious subsidization — would imply that, for the same product, imported into the same country, and affecting the same domestic industry, the SCM Agreement establishes different thresholds at which the same industry can be said to suffer injury, depending on the origin of the product.”(539)

10. Article 27.11

(a) “notified”

385. At its meeting of 22 February 1995, the SCM Committee adopted a Format for Notifications under Article 27.11 of the SCM Agreement, which sets out the information to be provided in the notification.(540)

386. As regards the termination of a countervailing duty investigation with respect to developing country Members, see paragraph 384 above.

11. Article 27.13

(a) “notified”

387. At its meeting of 22 February 1995, the SCM Committee adopted a Format for Notifications under Article 27.13 of the Agreement on Subsidies and Countervailing Measures, which sets out the information and documents to be provided in the notification. (541)

Part IX: Transitional Arrangements

XXVIII. Article 28 back to top

A. Text of Article 28

Article 28: Existing Programmes

28.1 Subsidy programmes which have been established within the territory of any Member before the date on which such a Member signed the WTO Agreement and which are inconsistent with the provisions of this Agreement shall be:

(a) notified to the Committee not later than 90 days after the date of entry into force of the WTO Agreement for such Member; and

(b) brought into conformity with the provisions of this Agreement within three years of the date of entry into force of the WTO Agreement for such Member and until then shall not be subject to Part II.

28.2 No Member shall extend the scope of any such programme, nor shall such a programme be renewed upon its expiry.

B. Interpretation and Application of Article 28

1. Article 28.1

(a) “inconsistent with the provisions of this Agreement”

388. The Panel on Indonesia — Autos addressed the question of whether Indonesia had extended the scope of a subsidy programme which was “inconsistent” with the provisions of the SCM Agreement, contrary to the prohibition contained in Article 28.2. Under Article 27.3, the prohibition of Article 3.1(b) was not applicable to Indonesia at the time of the dispute; therefore, the Indonesian programme did not violate the SCM Agreement. Nevertheless, the United States argued that the term “inconsistent” under Article 28.1 was to be understood as distinct from the concept of “prohibited”; more specifically, the United States argued that a subsidy programme could be inconsistent with the provisions of the SCM Agreement, regardless of the applicability of Article 3 in a particular case. The Panel rejected this argument:

“In the SCM Agreement … the drafters have chosen to express the concept of subsidies meeting the substantive conditions of Article 3 by referring to subsidies ‘falling under the provisions of Article 3’ (See Article 2.3). If they had intended to express the same concept in Article 28, they could have used comparable language.”(542)

XXIX. Article 29 back to top

A. Text of Article 29

Article 29: Transformation into a Market Economy

29.1 Members in the process of transformation from a centrally-planned into a market, free-enterprise economy may apply programmes and measures necessary for such a transformation.

29.2 For such Members, subsidy programmes falling within the scope of Article 3, and notified according to paragraph 3, shall be phased out or brought into conformity with Article 3 within a period of seven years from the date of entry into force of the WTO Agreement. In such a case, Article 4 shall not apply. In addition during the same period:

(a) Subsidy programmes falling within the scope of paragraph 1(d) of Article 6 shall not be actionable under Article 7;

(b) With respect to other actionable subsidies, the provisions of paragraph 9 of Article 27 shall apply.

29.3 Subsidy programmes falling within the scope of Article 3 shall be notified to the Committee by the earliest practicable date after the date of entry into force of the WTO Agreement. Further notifications of such subsidies may be made up to two years after the date of entry into force of the WTO Agreement.

29.4 In exceptional circumstances Members referred to in paragraph 1 may be given departures from their notified programmes and measures and their time-frame by the Committee if such departures are deemed necessary for the process of transformation.

B. Interpretation and Application of Article 29

No jurisprudence or decision of a competent WTO body.

Part X: Dispute Settlement

XXX. Article 30 back to top

A. Text of Article 30

Article 30

The provisions of Articles XXII and XXIII of GATT 1994 as elaborated and applied by the Dispute Settlement Understanding shall apply to consultations and the settlement of disputes under this Agreement, except as otherwise specifically provided herein.(543)

B. Interpretation and Application of Article 30

1. List of disputes

389. The following table lists the disputes in which panel and/or Appellate Body reports have been adopted where the provisions of the SCM Agreement were invoked:

	Case Name	Case Number	Invoked Articles
1	Brazil — Desiccated Coconut	WT/DS22	Articles 32.3
2	Brazil — Aircraft	WT/DS46	Articles 3, 4.7, 27.4, 27.5 and Item (k)
3	Indonesia — Autos	WT/DS54, WT/DS55, WT/DS59, WT/DS64	Articles 1,2,5(c), 6.3(a), 6.3(c), 27.3, 27.9 and 28.2
4	Canada — Aircraft	WT/DS70	Articles 1, 3.1(a), 3.2, 27.4 and 4.7
5	Canada — Dairy	WT/DS103, WT/DS113	Articles 3.1 and 4.7
6	US — FSC	WT/DS108	Article 1, 3.1(a), 3.1(b) and 4.7
7	Australia — Automotive Leather II	WT/DS126	Articles 1, 3.1(a), and 4.7
8	US — Lead and Bismuth II	WT/DS138	Articles 1, 10, 19.3, 19.4, 21 and 27.13
9	Canada — Autos	WT/DS139, WT/DS142	Articles 1, 3.1(a), 3.1(b) and 4.7
10	US — Export Restraints	WT/DS194	Articles 1.1, 10, 11, 17, 19 and 32.1
11	US — Countervailing Measures on Certain EC Products	WT/DS212	Articles 10, 14, 19.1, 19.4, 21.1, 21.2 and 21.3
12	US — Carbon Steel	WT/DS213	Articles 21.3
13	US — Offset Act (Byrd Amendment)	WT/DS217	Article 4.10, 5(b), 7.9, 18.3, 11.4, 32.1 and 32.5
14	US — Section 129(c)(1) URAA	WT/DS221	Articles 10, 19.4, 21.1, 32.1 and 32.5
15	Canada — Aircraft Credits and Guarantees	WT/DS222	Articles 1.1(a)(1)(iii); 1.1(b); 3.1(a), 4.7, 14(d), 17.3, 17.4, 19.3, 19.4, 20.3, 21.2, 32.1 and Item (k) Illustrative List
16	US — Softwood Lumber III	WT/DS236	Articles 1, 3.1(a), 14(d), 17.3, 17.4, 19.3, 19.4, 20.6 and 21.2
17	US — Softwood Lumber IV	WT/DS257	Articles 1.2, 10, 11.4, 12.1, 12.3, 12.8, 14, 14(d), 19.1, 19.4 and 32.1 and 32.1
18	US — Softwood Lumber VI	WT/DS277	Articles 15.2, 15.4, 15.5, and 15.7

2. Standard of review

390. In US — Lead and Bismuth II, the United States claimed that under the SCM Agreement, the standards of review as set forth in Article 17.6 of the Anti-Dumping Agreement applied by virtue of a Ministerial Declaration which states that “[the] Ministers recognize, with respect to dispute settlement pursuant to the Agreement on Implementation of Article VI of GATT 1994 or Part V of the Agreement on Subsidies and Countervailing Measures, the need for the consistent resolution of disputes arising from anti-dumping and countervailing duty measures”. Both the Panel and the Appellate Body rejected the United States’ argument.(544) The Appellate Body opined that the Declaration is couched in hortatory language and does not specify any particular action to be taken or any particular standards of review to be applied. In its finding, the Appellate Body noted the provisions of Article 30 and concluded that the SCM Agreement does not “contain any ‘special or additional rules’ on the standard of review to be applied by panels”.(545)

Part XI : Final Provisions

XXXI. Article 31 back to top

A. Text of Article 31

Article 31: Provisional Application

The provisions of paragraph 1 of Article 6 and the provisions of Article 8 and Article 9 shall apply for a period of five years, beginning with the date of entry into force of the WTO Agreement. Not later than 180 days before the end of this period, the Committee shall review the operation of those provisions, with a view to determining whether to extend their application, either as presently drafted or in a modified form, for a further period.

B. Interpretation and Application of Article 31

1. Review of Articles 6.1, 8 and 9

391. The Committee on Subsidies and Countervailing Measures held a special meeting on 20 December 1999 to conclude the review under Article 31 which had commenced earlier in 1999. At that meeting, no consensus was reached by the Committee to extend Articles 6.1, 8 and 9, either as drafted or in modified form.(546) Articles 6.1, 8 and 9 have therefore lapsed. (See paragraphs 206, 233 and 231 above.)

XXXII. Article 32 back to top

A. Text of Article 32

Article 32: Other Final Provisions

32.1 No specific action against a subsidy of another Member can be taken except in accordance with the provisions of GATT 1994, as interpreted by this Agreement.(56)

(footnote original) 56 This paragraph is not intended to preclude action under other relevant provisions of GATT 1994, where appropriate.

32.2 Reservations may not be entered in respect of any of the provisions of this Agreement without the consent of the other Members.

32.3 Subject to paragraph 4, the provisions of this Agreement shall apply to investigations, and reviews of existing measures, initiated pursuant to applications which have been made on or after the date of entry into force for a Member of the WTO Agreement.

32.4 For the purposes of paragraph 3 of Article 21, existing countervailing measures shall be deemed to be imposed on a date not later than the date of entry into force for a Member of the WTO Agreement, except in cases in which the domestic legislation of a Member in force at that date already included a clause of the type provided for in that paragraph.

32.5 Each Member shall take all necessary steps, of a general or particular character, to ensure, not later than the date of entry into force of the WTO Agreement for it, the conformity of its laws, regulations and administrative procedures with the provisions of this Agreement as they may apply to the Member in question.

32.6 Each Member shall inform the Committee of any changes in its laws and regulations relevant to this Agreement and in the administration of such laws and regulations.

32.7 The Committee shall review annually the implementation and operation of this Agreement, taking into account the objectives thereof. The Committee shall inform annually the Council for Trade in Goods of developments during the period covered by such reviews.

32.8 The Annexes(547) to this Agreement constitute an integral part thereof.

B. Interpretation and Application of Article 32

1. Article 32.1

(a) “in accordance with the provisions of GATT 1994, as interpreted by this Agreement”

392. The Panel on Brazil — Desiccated Coconut considered the relevance of Article 32.1 to the question of separability of Article VI of the GATT 1994 and the SCM Agreement. The Panel emphasized that Article 32.1 makes evident that the SCM Agreement is an “interpretation” of the subsidies provisions contained in the GATT 1994. The Panel concluded that, as a result, the meaning of Article VI of GATT 1994 cannot be established without reference to the provisions of the SCM Agreement, since Article VI of GATT 1994 “might have a different meaning if read in isolation than if read in conjunction with the SCM Agreement”. In addition, the Panel pointed out that the general interpretive note to Annex 1A of the WTO Agreement reveals the possibility of conflict between GATT 1994 and the annexed agreements and that, therefore, there could also be conflicts “between GATT 1994 taken in isolation and GATT 1994 interpreted in conjunction with an [annexed] agreement”.(548) The Appellate Body agreed with the findings of the Panel but took a slightly different approach in that it focused on the phrase “in accordance with the provisions of GATT 1994, as interpreted by this Agreement”:

“From reading Article 10, it is clear that countervailing duties may only be imposed in accordance with Article VI of the GATT 1994 and the SCM Agreement. A countervailing duty being a specific action against a subsidy of another WTO Member, pursuant to Article 32.1, it can only be imposed ‘in accordance with the provisions of GATT 1994, as interpreted by this Agreement’. The ordinary meaning of these provisions taken in their context leads us to the conclusion that the negotiators of the SCM Agreement clearly intended that, under the integrated WTO Agreement, countervailing duties may only be imposed in accordance with the provisions of Part V of the SCM Agreement and Article VI of the GATT 1994, taken together …”(549)

393. In US — Offset Act (Byrd Amendment), the Appellate Body concluded that it is inappropriate to rely on the reasoning from US — 1916 Act(550) to determine what is meant by ‘in accordance with the provisions of the GATT 1994’ as that phrase relates to permissible responses to subsidies.(551) The Appellate Body also considered that “to be in accordance with the GATT 1994, as interpreted by the SCM Agreement, a response to subsidization must be either in the form of definitive countervailing duties, provisional measures or price undertakings, or in the form of multilaterally-sanctioned countermeasures resulting from resort to the dispute settlement system”.(552) Consequently, the Appellate Body upheld the finding of the Panel that the Offset Act is a “non-permissible specific action against” dumping or a subsidy, contrary to Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement.(553)

394. With respect to Article 32.3 and the term “this Agreement”, see also paragraph 400 below.

395. With respect to the discussion on the applicability of Article VI of the GATT 1994 in circumstances where the SCM Agreement does not apply, see also paragraphs 412-414 below.

(b) Relationship with other Articles

(i) Article 10

396. With respect to the relationship with Article 10, see paragraph 392 above.

(ii) Article 14

397. In US — Softwood Lumber IV, the Appellate Body reversed the Panel’s decision that the United States had acted inconsistently with Article 32.1 of the SCM Agreement, although it concluded that it was unable to complete the legal analysis on whether the Department of Commerce’s determination of benefit was consistent with Article14(d) of the SCM Agreement. Neither did the Appellate Body make findings on whether the Department of Commerce’s “determination of the existence and amount of benefit in the underlying countervailing duty investigation” was consistent with Articles 14 and 14(d) and whether the imposition of countervailing duties at issue were consistent with Articles 10 and 32.1.(554)

2. Article 32.3

(a) Transitional rule

398. The Panel on Brazil — Desiccated Coconut described Article 32.3 as “a transition rule which defines with precision the temporal application of the SCM Agreement”.(555) Addressing this temporal application of the SCM Agreement, the Appellate Body on Brazil — Desiccated Coconut examined Article 32.3 as “an express statement of intention” referred to in Article 28 of the Vienna Convention, concerning the non-retroactivity of treaties.(556) The Appellate Body stated:

“The Appellate Body sees Article 32.3 of the SCM Agreement as a clear statement that for countervailing duty investigations or reviews, the dividing line between the application of the GATT 1947 system of agreements and the WTO Agreement is to be determined by the date on which the application was made for the countervailing duty investigation or review…. the Uruguay Round negotiators expressed an explicit intention to draw the line of application of the new WTO Agreement to countervailing duty investigations and reviews at a different point in time from that for other general measures. Because a countervailing duty is imposed only as a result of a sequence of acts, a line had to be drawn, and drawn sharply, to avoid uncertainty, unpredictability and unfairness concerning the rights of states and private parties under the domestic laws in force when the WTO Agreement came into effect.”(557)

399. While discussing Article 32.3 with reference to the issue of separability of Article VI of the GATT 1994 and the SCM Agreement, the Appellate Body on Brazil — Desiccated Coconut agreed that the transitional decisions approved by the Tokyo Round Subsidies and Countervailing Measures Committee and the Contracting Parties “do not modify the scope of rights and obligations under the WTO Agreement”. Rather, the Appellate Body held these decisions “contribute to understanding the significance of Article 32.3 of the SCM Agreement as a transitional rule”:(558)

“Like the Panel, ‘we are hesitant, in interpreting the WTO Agreement, to give great weight to the effect of decisions that had not yet been taken at the time the WTO Agreement was signed’. We agree with the Panel’s statement that:

‘The availability of Article VI of GATT 1994 as applicable law in this dispute is a matter to be determined on the basis of the WTO Agreement, rather than on the basis of a subsequent decision by the signatories of the Tokyo Round SCM Code taken at the invitation of the Preparatory Committee.’(559)

…

While we agree with the Panel that these transitional decisions are of limited relevance in determining whether Article VI of the GATT 1994 can be applied independently of the SCM Agreement, they reflect the intention of the Tokyo Round SCM Code signatories to provide a forum for dispute settlement arising out of disputes under the Tokyo Round SCM Code for one year after its legal termination date. At the time the Tokyo Round SCM Code signatories agreed to these decisions, they were fully cognizant of the implications of the operation of Article 32.3 of the SCM Agreement.”(560)

(b) “this Agreement”

400. After a contextual analysis of Article 32.3, the Appellate Body on Brazil — Desiccated Coconut concluded that “[i]f Article 32.3 is read in conjunction with Articles 10 and 32.1 of the SCM Agreement, it becomes clear that the term ‘this Agreement’ in Article 32.3 means ‘this Agreement and Article VI of the GATT 1994’”.(561)

401. With respect to further discussion on the applicability of Article VI of the GATT 1994 in circumstances where, pursuant to Article 32.3, the SCM Agreement does not apply, see paragraph 412 below.

402. The Panel on Brazil — Desiccated Coconut, in a finding subsequently not addressed by the Appellate Body, rejected the argument that the reference in Article 32.3 to “investigations” limits the application of the SCM Agreement to the “procedural” aspects of investigations. Rather, the Panel concluded that “the concept of ‘investigations’ as expressed in Article 32.3 includes both procedural and substantive aspects of an investigation and the imposition of a countervailing measure pursuant thereto”.(562) The Panel also held that “one object and purpose of Article 32.3 is to prevent WTO Members from having to redo investigations begun before the entry into force of the WTO Agreement in accordance with the new and more detailed procedural provisions of the SCM Agreement. In our view, however, this consideration is equally applicable to the substantive provisions of the SCM Agreement.”(563)

(d) “reviews of existing measures”

403. The Panel on Brazil — Desiccated Coconut, in a finding subsequently not addressed by the Appellate Body, rejected the argument that Article 32.3 does not preclude the application of the SCM Agreement to the continued collection of duties after the date of entry into force of the WTO Agreement. It stated:

“It is thus through the mechanism of reviews provided for in the SCM Agreement, and only through that mechanism, that the Agreement becomes effective with respect to measures imposed pursuant to investigations to which the SCM Agreement does not apply. If … a panel could examine in the light of the SCM Agreement the continued collection of a duty even where its imposition was not subject to the SCM Agreement, and if … that examination of the collection of the duty extended to the basis on which the duty was imposed, then in effect the determinations on which those duties were based would be subject to standards that did not apply — and which, in the case of determinations made before the WTO Agreement was signed, did not yet even exist — at the time the determinations were made. In our view, such an interpretation would be contrary to the object and purpose of Article 32.3 and would render that Article a nullity.”(564)

3. Article 32.5

(a) “to ensure … the conformity of its laws … with the provisions of this Agreement”

404. In US — Offset Act (Byrd Amendment), the Panel suggested that the United States bring the Offset Act into conformity with the SCM Agreement by “repealing” the Act. The Panel had found violations of Articles 5.4 and 18.1 of the Anti-Dumping Agreement and Articles 11.4 and 32.1 of the SCM Agreement; it had also found consequent violations of Article 18.4 of the Anti-Dumping Agreement, Article 32.5 of the SCM Agreement, and therefore Article XVI:4 of the WTO Agreement.(565) The Appellate Body upheld the Panel’s findings of violations of Article 18.4 of the Anti-Dumping Agreement, Article 32.5 of the SCM Agreement, and also of Article XVI:4 of the WTO Agreement, based on the violations of Article 18.1 of the Anti-Dumping Agreement and Article 32.1 of the SCM Agreement.(566)

405. In US — Countervailing Measures on Certain EC Products, the Panel had found that the disputed legislation, Section 1677(5)(F), as interpreted by the US Court of Appeals for the Federal Circuit and the SAA, was inconsistent with the SCM Agreement, and, therefore, the United States had failed to ensure conformity with Article 32.5 of the SCM Agreement and Article XVI.4 of the WTO Agreement respectively. In this regard, the Panel was of the view that:

“[T]ogether with the other provisions of the SCM Agreement, Article 32.5 as well as Article XVI.4 of the WTO Agreement require the United States to maintain a legislation, regulations and practices that guarantee that in cases of fair market value privatization at arm’s-length no benefit vis-à-vis the privatized producer is determined to continue from prior subsidization or financial contributions bestowed on a state-owned producer.”(567)

406. The Appellate Body, however, reversed the Panel’s findings on the grounds that it did not consider that Section 1677(5)(F) had per se violated the SCM Agreement.(568)

4. Article 32.7

(a) Relationship with other Articles

407. With respect to the relationship with Article 24, see paragraph 324 above.

Footnotes: