COUNTERVAILABLE SUBSIDY.

SEC. 251. COUNTERVAILABLE SUBSIDY. (a) In General.—Section 771 (19 U.S.C. 1677) is amended by striking paragraph (5) and inserting the following: “(5) Countervailable subsidy.— “(A) In general.—Except as provided in paragraph (5B), a countervailable subsidy is a subsidy described in this paragraph which is specific as described in paragraph (5A). “(B) Subsidy described.—A subsidy is described in this paragraph in the case in which an authority— “(i) provides a financial contribution, “(ii) provides any form of income or price support within the meaning of Article XVI of the GATT 1994, or “(iii) makes a payment to a funding mechanism to provide a financial contribution, or entrusts or directs a private entity to make a financial contribution, if providing the contribution would normally be vested in the government and the practice does not differ in substance from practices normally followed by governments, to a person and a benefit is thereby conferred. For purposes of this paragraph and paragraphs (5A) and (5B), the term ‘authority’ means a government of a country or any public entity within the territory of the country. “(C) Other factors.—The determination of whether a subsidy exists shall be made without regard to whether the recipient of the subsidy is publicly or privately owned and without regard to whether the subsidy is provided directly or indirectly on the manufacture, production, or export of merchandise The administering authority is not required to consider the effect of the subsidy in determining whether a subsidy exists under this paragraph. “(D) Financial contribution.—The term “financial contribution’ means— “(i) the direct transfer of funds, such as grants, loans, and equity infusions, or the potential direct transfer of funds or liabilities, such as loan guarantees, “(ii) foregoing or not collecting revenue that is otherwise due, such as granting tax credits or deductions from taxable income, “(iii) providing goods or services, other than general infrastructure, or “(iv) purchasing goods. “(E) Benefit conferred.—A benefit shall normally be treated as conferred where there is a benefit to the recipient, including— “(i) in the case of an equity infusion, if the investment decision is inconsistent with the usual investment practice of private investors, including the practice regarding the provision of risk capital, in the country in which the equity infusion is made, 108 STAT. 4903 “(ii) in the case of a loan, if there is a difference between the amount the recipient of the loan pays on the loan and the amount the recipient would pay on a comparable commercial loan that the recipient could actually obtain on the market, “(iii) in the case of a loan guarantee, if there is a difference, after adjusting for any difference in guarantee fees, between the amount the recipient of the guarantee pays on the guaranteed loan and the amount the recipient would pay for a comparable commercial loan if there were no guarantee by the authority, and “(iv) in the case where goods or services are provided, if such goods or services are provided for less than adequate remuneration, and in the case where goods are purchased, if such goods are purchased for more than adequate remuneration. For purposes of clause (iv), the adequacy of remuneration shall be determined in relation to prevailing market conditions for the good or service being provided or the goods being purchased in the country which is subject to the investigation or review. Prevailing market conditions include price, quality, availability, marketability, transportation, and other conditions of purchase or sale. “(F) Change in ownership.—A change in ownership of all or part of a foreign enterprise or the productive assets of a foreign enterprise does not by itself require a determination by the administering authority that a past countervailable subsidy received by the enterprise no longer continues to be countervailable, even if the change in ownership is accomplished through an arm’s length transaction. “(5A) Specificity.— “(A) In general.—A subsidy is specific if it is an export subsidy described in subparagraph (B) or an import substitution subsidy described in subparagraph (C), or if it is determined to be specific pursuant to subparagraph (D). “(B) Export subsidy.—An export subsidy is a subsidy that is, in law or in fact, contingent upon export performance, alone or as 1 of 2 or more conditions. “(C) Import substitution subsidy.—An import substitution subsidy is a subsidy that is contingent upon the use of domestic goods over imported goods, alone or as 1 of 2 or more conditions. “(D) Domestic subsidy.—In determining whether a subsidy (other than a subsidy described in subparagraph (B) or (C)) is a specific subsidy, in law or in fact, to an enterprise or industry within the jurisdiction of the authority providing the subsidy, the following guidelines shall apply: “(i) Where the authority providing the subsidy, or the legislation pursuant to which the authority operates, expressly limits access to the subsidy to an enterprise or industry, the subsidy is specific as a matter of law. 108 STAT. 4904 “(ii) Where the authority providing the subsidy, or the legislation pursuant to which the authority operates, establishes objective criteria or conditions governing the eligibility tor, and the amount of, a subsidy, the subsidy is not specific as a matter of law, if— “(I) eligibility is automatic, “(II) the criteria or conditions for eligibility are strictly followed, and “(III) the criteria or conditions are clearly set forth in the relevant statute, regulation, or other official document so as to be capable of verification. For purposes of this clause, the term ‘objective criteria or conditions’ means criteria or conditions that are neutral and that do not favor one enterprise or industry over another. “(iii) Where there are reasons to believe that a subsidy may be specific as a matter of fact, the subsidy is specific if one or more of the following factors exist: “(I) The actual recipients of the subsidy, whether considered on an enterprise or industry basis, are limited in number. “(II) An enterprise or industry is a predominant user of the subsidy. “(III) An enterprise or industry receives a disproportionately large amount of the subsidy. “(IV) The manner in which the authority providing the subsidy has exercised discretion in the decision to grant the subsidy indicates that an enterprise or industry is favored over others. In evaluating the factors set forth in subclauses (I), (II), (III), and (IV), the administering authority shall take into account the extent of diversification of economic activities within the jurisdiction of the authority providing the subsidy, and the length of time during which the subsidy program has been in operation. “(iv) Where a subsidy is limited to an enterprise or industry located within a designated geographical region within the jurisdiction of the authority providing the subsidy, the subsidy is specific. For purposes of this paragraph and paragraph (5B), any reference to an enterprise or industry is a reference to a foreign enterprise or foreign industry and includes a group of such enterprises or industries. “(5B) Categories of noncountervailable subsidies.— “(A) In general.—Notwithstanding the provisions of paragraphs (5) and (5A), in the case of merchandise imported from a Subsidies Agreement country, a subsidy shall be treated as noncountervailable if the administering authority determines in an investigation under subtitle A or a review under subtitle C that the subsidy meets all of the criteria described in subparagraph (B), (C), or (D), as the case may be, or the provisions of subparagraph (E)(i) apply. “(B) Research subsidy.— “(i) In general.—Except for a subsidy provided on the manufacture, production, or export of civil aircraft, a subsidy for research activities conducted by 108 STAT. 4905a person, or by a higher education or research establishment on a contract basis with a person, shall be treated as noncountervailable, if the subsidy covers not more than 75 percent of the costs of industrial research or not more than 50 percent of the costs of precompetitive development activity, and such subsidy is limited exclusively to— “(I) the costs of researchers, technicians, and other supporting staff employed exclusively in the research activity, “(II) the costs of instruments, equipment, land, or buildings that are used exclusively and permanently (except when disposed of on a commercial basis) for the research activity, “(III) the costs of consultancy and equivalent services used exclusively for the research activity, including costs for bought-in research, technical knowledge, and patents, “(IV) additional overhead costs incurred directly as a result of the research activity, and “(V) other operating costs (such as materials and supplies) incurred directly as a result of the research activity. “(ii) Definitions.—For purposes of this subparagraph— “(I) Industrial research.—The term ‘industrial research’ means planned search or critical investigation aimed at the discovery of new knowledge, with the objective that such knowledge may be useful in developing new products, processes, or services, or in bringing about a significant improvement to existing products, processes, or services. “(II) Precompetitive development activity.—The term ‘precompetitive development activity’ means the translation of industrial research findings into a plan, blueprint, or design for new, modified, or improved products, processes, or services, whether intended for sale or use, including the creation of a first prototype that would not be capable of commercial use. The term also may include the conceptual formulation and design of products, processes, or services alternatives and initial demonstration or pilot projects, if these same projects cannot be converted or used for industrial application or commercial exploitation. The term does not include routine or periodic alterations to existing products, production fines, manufacturing processes, services, or other ongoing operations even if those alterations may represent improvements. “(iii) Calculation rules.— “(I) In general.—In the case of a research activity that spans both industrial research and precompetitive development activity, the allowable level or the noncountervailable subsidy shall not exceed 62.5 percent of the costs set forth in 108 STAT. 4906subclauses (I), (II), (III), (IV), and (V) of clause (i). “(II) Total eligible costs.—The allowable level of a noncountervailable subsidy described in clause (i) shall be based on the total eligible costs incurred over the duration of a particular project. “(C) Subsidy to disadvantaged regions.— “(i) In general.—A subsidy provided, pursuant to a general framework of regional development, to a person located in a disadvantaged region within a country shall be treated as noncountervailable, if it is not specific (within the meaning of paragraph (5A)) within eligible regions and if the following conditions are met: “(I) Each region identified as disadvantaged within the territory of a country is a clearly designated, contiguous geographical area with a definable economic and administrative identity. “(II) Each region is considered a disadvantaged region on the basis of neutral and objective criteria indicating that the region is disadvantaged because of more than temporary circumstances, and such criteria are clearly stated in the relevant statute, regulation, or other official document so as to be capable of verification. “(III) The criteria described in subclause (II) include a measurement of economic development. “(IV) Programs provided within a general framework of regional development include ceilings on the amount of assistance that can be granted to a subsidized project Such ceilings are differentiated according to the different levels of development of assisted regions, and are expressed in terms of investment costs or costs of job creation. Within such ceilings, the distribution of assistance is sufficiently broad and even to avoid the predominant use of a subsidy by, or the provision of disproportionately large amounts of a subsidy to, an enterprise or industry as described in paragraph (5A)(D). “(ii) Measurement of economic development.—For purposes of clause (i), the measurement of economic development shall be based on one or more of the following factors: “(I) Per capita income, household per capita income, or per capita gross domestic product that does not exceed 85 percent of the average for the country subject to investigation or review. “(II) An unemployment rate that is at least 110 percent of the average unemployment rate for the country subject to investigation or review. The measurement of economic development shall cover a 3-year period, but may be a composite measurement and may include factors other than those set forth in this clause. “(iii) Definitions.—For purposes of this subparagraph— 108 STAT. 4907 “(I) General framework of regional development.—The term ‘general framework of regional development means that the regional subsidy programs are part of an internally consistent and generally applicable regional development policy, and that regional development subsidies are not granted in isolated geographical points having no, or virtually no, influence on the development of a region. “(II) Neutral and objective criteria.—The term ‘neutral and objective criteria’ means criteria that do not favor certain regions beyond what is appropriate for the elimination or reduction of regional disparities within the framework of the regional development policy. “(D) Subsidy for adaptation of existing facilities to new environmental requirements.— “(i) In general.—A subsidy that is provided to promote the adaptation of existing facilities to new environmental requirements that are imposed by statute or by regulation, and that result in greater constraints and financial burdens on the recipient of the subsidy, shall be treated as noncountervailable, if the subsidy— “(I) is a one-time nonrecurring measure, “(II) is limited to 20 percent of the cost of adaptation, “(III) does not cover the cost of replacing and operating the subsidized investment, a cost that must be fully borne by the recipient, “(IV) is directly linked and proportionate to the recipient’s planned reduction of nuisances and pollution, and does not cover any manufacturing cost savings that may be achieved, and “(V) is available to all persons that can adopt the new equipment or production processes. “(ii) Existing facilities.—For purposes of this subparagraph, the term ‘existing facilities’ means facilities that have been in operation for at least 2 years before the date on which the new environmental requirements are imposed. “(E) Notified subsidy program.— “(i) General rule.—If a subsidy is provided pursuant to a program that has been notified in accordance with Article 8.3 of the Subsidies Agreement, the subsidy shall be treated as noncountervailable and shall not be subject to investigation or review under this title. “(ii) Exception.—Notwithstanding clause (i), a subsidy shall be treated as countervailable if— “(I) the Trade Representative notifies the administering authority that a determination has been made pursuant to Article 8.4 or 8.5 of the Subsidies Agreement that the subsidy, or the program pursuant to which the subsidy was provided, does not satisfy the conditions and criteria of Article 8.2 of the Subsidies Agreement; and 108 STAT. 4908 “(II) the subsidy is specific within the meaning of paragraph (5A). “(F) Certain subsidies on agricultural products.—Domestic support measures that are provided with respect to products listed in Annex 1 to the Agreement on Agriculture, and that the administering authority determines conform fully to the provisions of Annex 2 to that Agreement, shall be treated as noncountervailable. Upon request by the administering authority, the Trade Representative shall provide advice regarding the interpretation and application of Annex 2. “(G) Provisional application.— “(i) Subparagraphs (B), (C), (D), and (E) shall not apply on or after the first day of the month that is 66 months after the WTO Agreement enters into force, unless the provisions of such subparagraphs are extended pursuant to section 282(c) of the Uruguay Round Agreements Act “(ii) Subparagraph (F) shall not apply to imports from a WTO member country at the end of the 9-year period beginning on January 1, 1995. The Trade Representative shall determine the precise termination date for each WTO member country in accordance with paragraph (i) of Article 1 of the Agreement on Agriculture and such date shall be notified to the administering authority.”. (b) Net Countervailable Subsidy.—Section 771(6) (19 U.S.C. 1677(6)) is amended by inserting “countervailable” before “subsidy” each place it appears in the text and in the heading.