Primer RA8751 (CV) PDF

A. Definition of Terms 1. What is a subsidies and countervailing measure? Subsidies and countervailing measure is a trade counter-measure adopted by government to offset any bounty or subsidy given to exporters which is not generally available to other producers of the exporting co...

A. Definition of Terms 1. What is a subsidies and countervailing measure? Subsidies and countervailing measure is a trade counter-measure adopted by government to offset any bounty or subsidy given to exporters which is not generally available to other producers of the exporting country. 2. What is a subsidy? Subsidy refers to any specific assistance (e.g., financial contribution, income or price support schemes) directly or indirectly provided by the government of the country of export or origin in respect of the product imported into the Philippines. An industry is deemed to have received subsidy where a benefit is conferred as a result of:  Direct and/or potential transfer of government funds (e.g., grants, loans, equity infusion, loan guarantees);  The government foregoing the revenue that should otherwise have been collected (e.g., tax credits); or  The government providing goods or services, or purchasing goods. Not all subsidies are countervailable/actionable. A subsidy, in order to be countervailable/actionable, must be specific, i.e., explicitly limited to (i) an enterprise or group of enterprises; (ii) an industry sector or group of industries; or (iii) a designated geographic region within the jurisdiction of the granting authority. 3. What are actionable subsidies? Actionable subsidies or “yellow” subsidies are those falling under the definition of subsidy described above, which are neither non-actionable nor prohibited subsidies. 4. What are non-actionable subsidies? Non-actionable subsidies or “green” subsidies are those which are permitted as they are of a general nature, i.e., applied across-the-board to all industries and not limited to a specific industry or enterprise, or group of enterprises or industries. A subsidy under this category cannot be subjected to either countervailing measures or other disciplines under the World Trade Organization (WTO) Agreement on Subsidies and Countervailing Measures. An example of green subsidies is government assistance for research activities conducted by firms to:  Adapt existing production facilities to new environmental requirements, or  Assist in the development of industries in disadvantaged regions, provided that such assistance is not directed to specific enterprises or industries within the region. 5. What are prohibited subsidies? Prohibited subsidies or “red” subsidies include export subsidies, i.e., those that are contingent on export performance, and subsidies that are contingent on the use of domestic over imported goods. An importing country alleging this kind of subsidy can avail of remedy measures by bringing the matter before the WTO Dispute Settlement Body for redress. Examples of red subsidies are: Page 2 / Revised July 2016   Direct subsidies based on export performance;  Currency retention schemes involving a bonus on exports;  Provision of subsidized inputs for use in the production of exported goods;  Exemption from direct taxes (e.g., tax on profits related to exports);  Exemption from, or remission of, indirect taxes (e.g., value added tax on exported products in excess of those borne by these products when sold for domestic consumption;  Remission or drawback of import charges (e.g., tariffs and other duties) in excess of those levied on inputs consumed in the production of exported goods;  Export guarantee programs at premium rates inadequate to cover the long-term costs of the program; and  Export credits at rates below the government‟s cost of borrowing, where they are used to secure a material advantage in export credit terms. 6. What is a country of export? Country of export is the country from where the allegedly subsidized product was shipped to the Philippines, regardless of the location of the seller. The country of export and the country of origin may be the same, but not in all instances. 7. What is a country of origin? Country of origin is where the allegedly subsidized product was either wholly obtained or where its last substantial transformation took place. The country of origin and the country of export may be the same, but not in all instances. In case of transshipment, where a product is shipped from a third country that is not the country where the product was manufactured or processed, the country of origin would be different from the country of export. B. Scope and Coverage 8. What articles may be covered by a countervailing action? A countervailing protest may cover any product which is granted, directly or indirectly, by the government in the country of export or origin, any kind or form of specific subsidy upon the exportation or manufacture of such product, and the importation of such subsidized product is causing or threatening to cause material injury to a domestic industry, or is materially retarding the growth, or preventing the establishment of, a domestic industry. 9. Are there any importations exempted from countervailing action? Yes, the following importations or consignments shall not be subject to countervailing protest:  Articles imported by, or consigned to, government agencies not organized for profit and particularly designated by law or proper authorities to import, directly or through awardees, such articles as would stabilize and/or supplement shortages; and  Conditionally duty-free importations allowable under Section 105 of the Tariff and Customs Code of the Philippines (TCCP), as amended. Page 3 / Revised July 2016 C. The Legislation 10. What is the governing law? Republic Act (RA) 8751, otherwise known as “An Act Strengthening the Mechanisms for the Imposition of Countervailing Duties on Imported Subsidized Products, Commodities or Articles of Commerce in Order to Protect Domestic Industries from Unfair Trade Competition, Amending for the Purpose Section 302, Part 2, Title II, Book I of Presidential Decree No. 1464, otherwise known as the „Tariff and Customs of the Philippines, as Amended‟”, was signed on August 7, 1999 and took effect on August 31, 1999. It provides protection to a domestic industry which is being injured, or is likely to be injured, by subsidized products imported into or sold in the Philippines. The provisions of RA 8751 were adopted in Section 713 of the Customs Modernization and Tariff Act (CMTA). The Implementing Rules and Regulations (IRRs) of RA 8751 as embodied in Joint Administrative Order No. 02, series of 2000, took effect on September 25, 2000. 11. What was the rationale for the passage of RA 8751?  To transform the domestic countervailing duty law into a more workable and simple piece of legislation providing safety nets against the inflow of cheap subsidized imports;  To strengthen the rules governing the investigation of countervailing cases; and  To align the domestic law with the WTO Agreement on Subsidies and Countervailing Measures. 12. Which government agencies administer the countervailing legislation?  Department of Trade and Industry (DTI) - Bureau of Import Services (BIS) or Department of Agriculture (DA) - receives the properly documented application (DTI for industrial goods and DA for agricultural products); determines whether or not a prima facie case exists to warrant initiation of investigation; and conducts preliminary investigation for purposes of determining whether or not provisional measures may be imposed  Tariff Commission - conducts formal investigation and makes the final determination for purposes of the imposition of the definitive countervailing duty  Bureau of Customs - takes charge of the imposition of countervailing duty D. Procedures 13. Who may file a petition for countervailing action? A petition may be filed by, or on behalf of, the domestic industry, in writing and in a notarized form. Page 4 / Revised July 2016 14. What constitutes a domestic industry? Domestic industry refers to the domestic producers, as a whole, of the like product or to those producers of such like product whose collective output of the product constitutes a major proportion of the total domestic production of those products in the industry concerned. When producers are related to the foreign exporters or importers or are themselves importers of the allegedly subsidized product, the term domestic industry may be interpreted as referring to the rest of the producers. 15. What is the threshold of support by producers for the petition to be accepted?  Support by domestic producers whose collective output constitutes more than 50% of the total production of the like product produced by the domestic industry; and  Support by producers accounting for at least 25% of the total domestic production of the product alleged to be subsidized. 16. Under what conditions can a countervailing investigation be initiated without a written application from the domestic industry? In special circumstances, DTI or DA may, on its own motion, initiate a countervailing action even without the written application from the domestic industry. The concerned authorities should have sufficient evidence of subsidization, injury and causal link to justify the initiation of the investigation. 17. What information is required when applying for the levy of countervailing duty?  Identity of the applicant and a description of the volume and the value of his domestic production of the like product;  List of all known domestic producers of the like product and, if possible;  Description of the volume and value of the domestic production of the like product accounted for by such producers (if the application is made on behalf of the domestic industry);  Description of the allegedly subsidized product;  Names of the exporting countries, each known exporter or foreign producer, and a list of the importers of the product;  Estimated aggregated or cumulative quantity, the port and the date of arrival, the import entry declaration of the allegedly subsidized product;  Nature, extent and estimated amount of the alleged subsidy;  Number of persons employed by the affected domestic industry;  Total capital invested, production and sales volume, and aggregate production capacity of the domestic industry; Page 5 / Revised July 2016   Effect of the price of the allegedly subsidized product on the price of the like product in the domestic market; and  Consequent impact of the importation of the allegedly subsidized product on the domestic industry, i.e., prices at which the product is sold in the domestic market of the exporting country and export prices; injury and causality; volume of subsidized imports; and adverse effects of such imports on domestic prices and on domestic industries. 18. What are the stages in a countervailing investigation? a. Prima Facie Determination. The DTI-BIS or DA has ten (10) days from receipt of the properly documented petition to examine the accuracy and adequacy of the petition and determine whether there is sufficient evidence to justify the initiation of an investigation. b. Preliminary Determination. Once a prima facie case has been established, DTI or DA initiates the investigation and makes a preliminary determination on whether or not a provisional measure may be imposed within 20 days from receipt of the answers of the questionnaire from respondents and other interested parties. c. Final Determination. In the conduct of its formal investigation, the Tariff Commission notifies all interested parties; receives representations and/or other submissions; holds preliminary conference and public consultations; and conducts on-site investigation/data verification both foreign and domestic. The Commission has 120 days from receipt of the advice from either Secretary of DTI or DA to complete its investigation and submit its report of findings to the Secretary. d. Issuance of Department Order. Within ten (10) days from receipt of the affirmative final determination by the Tariff Commission, the Secretary of DTI or DA issues a Department Order for the imposition of a definitive countervailing duty, unless the Secretary has earlier accepted a price undertaking from the foreign exporter, producer or government of the country of export or origin. In case of a negative determination, the Secretary, after the lapse of the period for the petitioner to appeal to the Court of Tax Appeals, issue, through the Secretary of Finance, an Order for the Commissioner of Customs to immediately release the cash bond to the importer. 19. What is the purpose of government to government consultation and when is it conducted? Upon acceptance of a properly documented application and before initiating an investigation, the Secretary of either DTI or DA notifies the government of the country of export or origin about the impending application for countervailing duty and invites the same as well for consultation with the objective of clarifying the situation as to matters referred to in the application and arriving at a mutually agreed upon solution. Page 6 / Revised July 2016 20. Under what circumstances can a petition be rejected and the investigation terminated? a. In the case of a product originating from a developed country, when:  amount of subsidy is de minimis, i.e., less than 1%;  volume of subsidized imports is negligible, i.e., less than 3% of the total imports of the importing country. However, this rule does not apply when countries with individual shares of less than 3% collectively account for more than 7% of imports of the product under investigation; or  injury is negligible. b. In the case of a product originating from a developing country, when:  amount of subsidy is de minimis, i.e. equal to or less than 2% (3% for least developed countries);  volume of subsidized imports is negligible, i.e., less than 4% of the total imports of the importing country. However, this rule does not apply when countries with individual shares of less than 4% collectively account for more than 9% of total imports; or  injury is negligible. 21. What is meant by disclosure of essential facts? Before making the final determination, the Tariff Commission is required to disclose to interested parties (e.g., exporters or producers, their governments, and importers) the essential facts on which the decision to apply the duty is to be made. The parties are given five (5) days from the date of receipt of the essential facts to defend their interests in writing. 22. What can the investigating authorities do if the exporting enterprises refuse to cooperate, impede an investigation or make incorrect/incomplete information? The authorities can decide on the basis of the best information available. E. Elements 23. What are the four elements of countervailing? a. Like Product - a product is identical or alike in all respects to the article under consideration or, in the absence of such product, another product which, although not alike in all respects, has characteristics closely resembling those of the product under consideration b. Subsidy - refers to any specific assistance directly or indirectly provided by the government of the country of export or origin in respect of a product imported into the Philippines c. Injury - means material injury to a domestic industry, threat of material injury or material retardation of the growth or the prevention of the establishment of a domestic industry. Injury test must be based on positive evidence and shall involve an objective examination of both (i) the volume of the subsidized imports; (ii) effects of subsidized imports on the prices of like product in the domestic market; and (iii) the consequent impact of these imports on domestic producers of such products Page 7 / Revised July 2016  d. Causal link - the material injury suffered by the domestic industry is the direct result of the importation of the subsidized product. 24. What factors are considered in determining material injury to the domestic industry?  Actual or potential decline in output, sales, market share, profits, productivity, return on investments, or utilization of capacity;  Effects on domestic prices;  Actual or potential effects on cash flow, inventories, employment, wages, growth, and ability to raise capital or investments; and  Whether there has been an increased burden on government support programs. 25. What are the three modalities in determining price effects?  Price depression refers to the extent by which the domestic producer reduces its selling price in order to compete with the allegedly subsidized product.  Price suppression exists when the allegedly subsidized product prevents the domestic producer from increasing its selling price to a level that would allow full recovery of its cost of production.  Price undercutting refers to the extent by which the allegedly subsidized product is consistently sold at a price below the domestic selling price of the like product. 26. What are the factors in determining the existence of a threat of material injury?  Nature of the subsidy in question and the trade effects likely to arise therefrom;  Significant rate of increase in the importation of the subsidized product into the domestic market indicating the likelihood of substantially increased importations;  Sufficient freely disposable, or an imminent, substantial increase in, production capacity of the foreign exporter indicating the likelihood of substantially increased subsidized exports in the domestic market, taking into account the availability of other export markets to absorb any additional exports;  Whether such subsidized products are entering at prices that will have a significantly depressing or suppressing effect on domestic prices, and will likely increase demand for further importation of the subsidized products; and  Inventories of the product being investigated. 27. What are examples of injury factors not related to subsidization?  Contraction in demand or changes in the patterns of consumption;  Trade restrictive practices of, and competition between, foreign and domestic producers;  Developments in technology; and Page 8 / Revised July 2016   Export performance and productivity of the domestic industry. F. Measures 28. What are the remedies/measures imposed against subsidization? a. Provisional measure – takes the form of a security (cash deposit or bond) equal to the amount of the provisionally calculated amount of subsidy. It is applied only after the DTI-BIS or DA has made a preliminary affirmative determination and no sooner than 60 days from the initiation of the case. b. Definitive duty – final countervailing duty imposed, in addition to the regular duty and other charges, on a protested product imported from a specific exporter, following an affirmative final determination. 29. What is the duration of the imposition of countervailing measures?  Provisional measure - four (4) months.  Definitive countervailing duty - five (5) years from the date of imposition. 30. What is meant by price undertaking? Price undertaking is a voluntary undertaking by the government of the exporting country to eliminate or limit the subsidy; or voluntary commitment by the foreign exporter and/or the producer that they will increase their prices or will cease exporting to the Philippines at the subsidized price. An offer of price undertaking shall be made only after a preliminary affirmative determination of subsidization and injury to the domestic industry. Price undertaking is effective for a period of five (5) years unless the foreign exporter proves to the satisfaction of the authorities that the undertaking is no longer necessary. 31. What is the “lesser duty rule”? Lesser duty rule is the imposition of countervailing duty in amounts lower than the calculated subsidy, if such a lesser duty is adequate to remove the injury to the domestic industry. G. Reviews 32. What are the reviews available to the affected parties of countervailing measures? a. Administrative Reviews:  Sunset review - may be initiated by any interested party or upon own motion of the Tariff Commission before the sunset date, i.e., the 5th year, to determine whether the expiry of the duration of the countervailing duty imposition would lead to a continuation or recurrence of subsidization and injury.  Interim review - conducted by the Commission, motu proprio, or upon the direction of the Secretary or upon petition of any interested party to determine whether (i) the imposition of the countervailing duty is no longer necessary to offset subsidization, taking into consideration the need to protect the existing Page 9 / Revised July 2016  domestic industry against dumping, or (ii) the existing duty is not sufficient to counteract the subsidization which is causing injury. At least one (1) year should have elapsed since the imposition of the countervailing duty before an interim review can be initiated. b. Judicial Review - Aggrieved and/or any interested party may file a petition for review with the Court of Tax Appeals within thirty (30) days from receipt of notice of the final ruling on the imposition of a countervailing duty. Filing of such petition for review shall not in any way stop or suspend the imposition and collection of the countervailing duty. Page 10 / Revised July 2016