1. a Member State May Take Action Against Subsidised Products Where:
(a) the products have benefited from a prohibited subsidy;
(b) the subsidy is specific and has caused any of the effects referred to in Article 112; and
(c) the subsidy is specific and does not conform to the provisions of Article 108.
2. Notwithstanding the provisions of paragraph 1, a Member State shall not take definitive action against products which are believed to be benefiting from subsidies referred to in Article 97 if the Member State aggrieved thereby has not:
(a) promulgated legisiation to permit the introduction of counter measures or countervailing duties against subsidised imports;
(b) consulted with the Member State which is alleged to have introduced or to be maintaining subsidies identified in Article 97;
(c) notified COTED of the alleged subsidisation based on preliminary investigations and failure of consultations; and
(d) received authorisation from COTED to introduce countervailing duties or countermeasures as a result of a definitive determination of the existence of prohibited subsidies which cause nullification, impairment, serious Prejudice or adverse effects caused by subsidisation.
3. Consultations for the purposes of this Part shall follow the procedures set out in Annex Il. ARTICLE 99 Prohibited Subsidies
1. Subject to this Treaty, a Member Siate shail neither grant nor maintain subsidies referred to in paragraph 2.
2. The following subsidies within the meaning of Article 96 shall be prohibited:
(a) subsidies contingent, in law or in fact, whether solely or as one of several
other conditions, upon export performance, including those listed in Schedule V; and
(b) subsidies contingent, whether solely or as one of several other conditions, upon the use of domestic over imported goods.
3. Nothing in this Article shall be construed as applying to agricultural commodities produced in the Community.
Article 100. Preliminary Investigation of Prohibited Subsidies
1. An application for an investigation may be made in writing by or on behalf of a domestic industry to the competent authority where the indusiry has reason to believe that a Prohibited subsidy referred to in Article 99 has been granted or maintained by another Member State. The authority shall examine the application and determine, on the basis of the facts available, whether to initiate an investigation.
2. An investigation initiated pursuant to paragraph 1 of this Article shall be deemed to be a preliminary investigation. The authority shall give public notice of the preliminary investigation to inform the concemed Member State, other Member States and the interested parties all of whom shall be afforded adequate time to submit information required and to make comments.
3. The authority shall make a preliminary determination whether a prohibited subsidy has been granted or maintained and, where the determination is affirmative, invite the concemed Member States and interested parties to defend their interests.
4. A request for investigation by the domestic industry under this Article or under Article 106 or 112 shall be accompanied by information set out in the Illustrative List at Annex 111 (a).
5. Wherever the term "domestic industry" is used in this Chapter, it shall mean domestic industry as defined in Annex I.
Article 101. Request for Consultations Relating to Prohibited Subsidies
1. Whenever a Member State has reason to believe, pursuant to Article 99 that a Prohibited subsidy has been granted or is maintained by a Member State, the aggrieved or any other Member State may request consultations with the Member State believed to be granting or maintaining the subsidy. The aggrieved Member State shall notify COTED of the request for consultations. A request for consultations shall include a statement of the available evidence with regard to the existence and nature of the alleged prohibited subsidy.
2. Upon receipt of a request for consultations under paragraph 1, the Member Siate believed to be granting or maintaining the subsidy shall reply within 10 days and shall furnish the relevant information requested and shall promptly enter into consultations which shall be concluded within 30 days of the date of request for such consultations unless the parties agree to extend the consultations to a mutually agreed date. The purpose of the consultations shail be to clarify the facts relating to the existence and type of the alleged subsidy and to arrive at a mutually agreed solution.
Article 102. Reference to Coted to Investigate Prohibited Subsidies
1. If no mutually agreed solution is reached at the completion of 30 days from the date of the request for the consultations referred to in Article 101, or at such time as the parties agree, or if the Member State believed to be granting or maintaining the subsidy refuses to co-operate, the Member Siate requesting consultations or any other Member State interested in such consultations may refer the matterto COTED which shall carry out an investigation to establish whether the subsidy in question is a prohibited subsidy.
2. The referral of the matter to COTED for an investigation shail not prevent the aggrieved Member State from taking, on a provisional basis, which shall not be sooner than 60 days from the date of initiation of investigations under paragraph 1 of Article 103 counter-measures to forestall injury or to prevent further injury to its domestic industry.
Article 103. Investigation by Coted of Prohibited Subsidies
1. Whenever COTED decides to carry out an investigation pursuant to Article 102, such an investigation by COTED shall proceed as expeditiously as possible. COTED may appoint competent experts to advise whether the subsidy falls to be classified as a prohibited subsidy, in which case COTED shail set a time limit for the examination of the evidence by the competent experts. COTED shall make its determination and issue its report which shall, unless extenuating circumstances arise, not exceed 90 days from the date of receipt of request for the investigation.
2. The results of an investigation carried out pursuant to Article 102 shall be made available to all Member States for information and to afford the concerned Member States an opportunity to arrive at a mutually agreed solution within 30 days from the date of issue of the report failing which COTED shall adopt the recommendations of the report.
3. If COTED is satisfied, based on the results of the investigation, that the subsidy in question is a prohibited subsidy and that the concemed Member States cannot reach a mutually agreed solution, it shall, subject to Article 104, require the offending Member State to withdraw the subsidy within a specified time-frame. Where the offending Member Siate fails to comply, COTED shall authorise the aggrieved Member State to take counter-measures on the products which benefit from such a subsidy.
Article 104. Withdrawal of Prohibited Subsidies
1. Notwithstanding the investigation confirming the existence of a prohibited subsidy in paragraph 3 of Article 103, COTED shall not impose a requirement for the Member Siates to withdraw such a subsidy sooner than specified in this paragraph as follows:
(a) with respect to subsidies contingent upon export performance:
(i) the Member States with per capita GNP of less than one thousand United States dollars shail be allowed to maintain such subsidies; and
(ii) other Member States shall be allowed to maintain such subsidies until 1 January 2003;
(b) with respect to subsidies contingent upon the use of domestic over imported inputs, the Member States with per capita GNP of less than one thousand United States dollars shall be allowed to maintain such subsidies until 2003.
2. Whenever the results of an investigation by COTED prove that the alleged subsidy is nota prohibited subsidy, any provisional countervailing measures which might have been imposed shall be promptly withdrawn and any bond or deposit which might have been effected, released or refunded, as the case may be. If the provisional measures referred to in this paragraph have materially retarded the exports of the Member State which was wrongfully alleged to have introduced or maintained prohibited subsidies, COTED shall, upon application from such a Member State, assess the effects of the provisionally applied measures and determine the nature and extent of compensation which is warranted and recommend compensation in accordance with its assessment.
3. From the date of entry into force of this Treaty until the expiration of the dates mentioned in paragraph 1, no provisional measures shall be imposed where it has been determined by preliminary investigations that prohibited subsidies are maintained.
Article 105. Subsidies Causing Injury, Nullification, Impairment or Serious Prejudice
A Member Siate may take action against subsidised imports from any other Member State where it can be established, based on an investigation, that the effect of the subsidy has been:
(a) injury to its domestic industry;
(b) nullification or impairment of benefits which it expects under this Treaty; or
(c) serious prejudice to its interests.
2. Serious prejudice shail be deemed to exist in the case where:
(a) the total ad valorem subsidisation of a product exceeds 5 per cent;
(b) subsidies cover operating losses sustained by an industry;
(c) subsidies cover operating losses sustained by an enterprise, other than one- time measures which are non-recurrent and cannot be repeated for that enterprise and which are given merely to provide time for the development of long-term solutions and to avoid acute social problems; or
(d) subsidies are granted in the form of forgiveness of government-held debt and government grants to cover debt repayment.
3. Notwithstanding the provisions of this Article, serious prejudice shail not be found if the Member State granting the subsidy in question demonstrates that the effect of the subsidy has not been:
(a) to displace or impede the imports of like products from the Member State exporting to the Member State which has introduced or maintains the subsidy;
(b) to displace or impede the exports of a like product from the affected exporting Member State into the market of a third Member State;
(o) a significant price undercutting by the subsidised product as compared with the price of a like product of another Member Siate in the same market or a significant price suppression or price depression;
(d) lost sales of another Member State in the same market; or
(e) an increase in its market share within the CSME.
4. The provisions of this Article shall not apply to Part Three.
Article 106. Preliminary Investigation of Subsidies Causing Injury, Nullification, Impairment or Serious Prejudice
1. an application for an investigation may be made in writing by or on behalf of a domestic industry to the national authority where the industry has reason to believe that a subsidy referred to in Article 105 has been granted or is maintained by another Member State and has caused injury, or resulted in nullification, impairment or serious prejudice to its interests.
2. An application under paragraph 1 shall include sufficient information about the existence of a subsidy and, if possible, its amount, injury and a causal link between the subsidised products and the alleged injury.
3. An application to initiate an investigation shall be considered to have been made by or on behalf of a domestic industry if it is supported by those domestic producers whose collective output constitutes more than 50 per cent of the total production of the like product by that proportion of the domestic industry expressing support for or opposition to the application. The investigation shall not be initiated where the domestic producers expressly supporting the application account for less than 25 per cent of the total production of the like product produced by the domestic industry.
4. Upon receipt of a request for such an investigation, the authority shall examine the application and determine, on the basis of the facts available, whether to initiate an investigation. If the authority decides to initiate an investigation, it shail issue a public notice to that effect, invite the concerned Member Siate, other interested Member States and interested parties to submit required information and comments.
5. An investigation initiated pursuant to paragraph 1 shall be deemed to be a preliminary investigation. The authority shall inform the concemed Member State and ail interested parties of the results of the investigation.
6. For the purpose of this Part, "like product" shall be interpreted to mean a product which is identical, i.e., alike in all respects to the product under consideration, or in the absence of such a product, another product, which, although not alike in all respects, has characteristics closely resembling those of the product under consideration.
Article 107. Request for Consultations Relating to Subsidies Causing Injury, Nullification, Impairment or Serious Prejudice
1. Whenever a Member State has reason to believe that a subsidy within the meaning of Article 96 has been granted or is maintained by another Member State, and that imports from such a Member State have resulted in any of the effects mentioned in paragraph 1(b) of Article 97, the first- mentioned Member State may approach the Member State believed to be granting a subsidy with a request for consultations.
2. A request for consultations shail include a statement of available evidence with regard to
(a) the existence and nature of the subsidy; and
(b) the injury caused to the domestic industry; or
(c) the impairment or nullification of benefits of exporting to other Member States in the Community; or
(d) serious prejudice to its interests.
3. Upon receipt of a request for consultations under paragraph 1, the Member Siate believed to be granting or maintaining the subsidy shail reply within 10 days, and shall furnish relevant information and enter into consultations within 30 days of the date of the request. The purpose of the consultations shall be to clarify the facts relating to the existence, type and effect of the alleged subsidy and to arrive at a mutually agreed solution.
Article 108. Reference to Coted to Investigate Subsidies Causing Injury, Nullification, Impairment or Serious Prejudice
1. If no mutually agreed solution is reached at the completion of 60 days from the date of request for consultations, or on a date mutually agreed, the Member State requesting consultations may refer the matter to COTED which shall initiate an investigation, make a determination to resolve the dispute and issue a report within 120 days of the date of the request for an investigation by the aggrieved Member State.
2. A decision by COTED to initiate an investigation shall not prevent the aggrieved Member State from taking, on a provisional basis, countermeasures which shall not be sooner than 60 days from the date of initiation of a preliminary investigation by the national authority to forestall or prevent further adverse effects.
Article 109. Investigation by Coted of Subsidies Causing Injury, Nullification, Impairment or Serious Prejudice
1. In order to arrive at a determination of the existence, degree and effect of subsidisation, and remedial action which may be taken pursuant to the referral of a complaint of alleged subsidisation mentioned in Article 108, COTED shall -
(a) carry out an investigation into the circumstances relating to the alleged grant or maintenance of the subsidy by the offending Member State; the investigation is to be completed within 120 days of the date of receipt of a complaint regarding alleged subsidisation by an offending Member State; and
(b) upon receipt of the report arising from the investigation, promptly make available the report to the concerned Member States to facilitate consultation and to permit the Member states concemed to arrive at a mutually acceptable solution.
Article 110. Consequences of Failure to Remove Subsidies Causing Injury, Nullification, Impairment or Serious Prejudice
1. if no mutually acceptable solution is reached within 30 days of the date of issue of the report by COTED, and COTED is satisfied:
(a) of the existence of a subsidy within the meaning of Article 105; and
(b) that the subsidy has caused injury to the enterprise in the aggrieved Member State; or
(o) that the subsidy has impaired or nullified benefits expected of the aggrieved Member State with respect to ifs exports to the Community; or
(d) that the effect of the subsidy was to seriously prejudice the interests of the Member Siate,
then in such a case, COTED shall request the Member State which has granted or maintained the subsidy to take appropriate steps to remedy the effects of the subsidy within six months of the date of the issue of the report by COTED.
2. If, at the end of the period of six months allowed by COTED to the Member State granting or maintaining the subsidy to remedy the effects of the subsidy, the Member State fails to comply and in the absence of agreement on compensation COTED shall authorise the aggrieved Member State to impose countervailing duties at a rate equivalent to the amount of subsidisation for such time and under such conditions as COTED may prescribe.
Article 111. Types of Subsidies Causing Serious Adverse Effects
1. The Member States shall not ordinarily impose or introduce countervailing duties or take countermeasures on products which benefit from:
(a) subsidies which are not specific within the meaning of Article 97; or
(b) subsidies which are specific within the meaning of Article 97 but which satisfy all of the conditions set out in this sub-paragraph hereunder:
(i) subsidies granted for research activities conducted by enterprises or by higher education or research establishments on a contract basis with firms if the assistance covers not more than 75 per cent of the costs of industrial research or 50 per cent of the costs of pre- competitive development activity and provided that such assistance is limited exclusively to:
(aa) _ costs of personnel (researchers, technicians and other supporting staff employed exclusively in the research activity);
(bb) costs of instruments, equipment, land and buildings used exclusively and permanently (except when disposed of on a commercial basis) for the research activity;
(cc) costs of consultancy and equivalent services used exclusively for the research activity, including bought-in research, technical knowledge, patents, etc. ;
(dd) additional overhead costs incurred directly as a result of the research activity;
(ee) other running costs (such as those of materials, supplies and the like), incurred directly as a result of the research activity.
(c) subsidies granted to assist disadvantaged regions within the territory of a Member State given pursuant to a general framework of regional development and that are non-specific within eligible regions provided that:
(i) each disadvaniaged region must be a clearly designated contiguous geographical area with a definable economic and administrative identify;
(ii) the Region is considered as disadvantaged on the basis of neutral and objective criteria, indicating that the region's difficulties arise out of more than temporary circumstances; such criteria must be clearly spelled out in law, regulation, or other official document, so as to be capable of verification;
(iii) the criteria shall include a measurement of economic development which shail be based on at least one of the following factors:
(aa) one of either income per capita or household income per capita, or GDP per capita, which must not be above 85 per cent of the average for the territory concerned;
(bb) unemployment rate, which must be at least 110 per cent of the average for the territory concemed;
(d) subsidies granted to assist entities in the adaptation of existing facilities to new environmental requirements imposed by law and/or regulations which result in greater constraints and financial burden on enterprises provided that the subsidies -
(i) are a one-time non-recurring measure; and
(ii) are limited to 20 per cent of the cost of adaptation; and
a) do not cover the cost of replacing and operating the assisted investment, which must be fully bore by firms; and
(iv) are directly linked to and proportionate to a firm's planned reduction of nuisances and pollution, and do not cover any manufacturing cost savings which may be achieved; and
(v) are available to all firms which can adopt the new equipment and/or production processes.
(e) subsidies granted to assist enterprises to undertake training or retraining of employees, whether or not the enterprise is new, and the upgrading of existing facilities to facilitate transition to competitive status within the Community, provided that such subsidies are not specific.
2. The Member States shail notify COTED of any subsidy mentioned in paragraph 1. Any Member State may request further information regarding a notified subsidy programme and COTED shall review annually all notified subsidies referred to in paragraph 1.
Article 112. Preliminary Investigation of Subsidies Causing Serious Adverse Effects
1. A domestic indusiry may submit to the competent authority an application for an investigation to verify that serious adverse effects have been caused by imports which benefit from subsidies referred to in Article 111.
2. Upon receipt of an application for an investigation to verify adverse effects, the authority shall examine the application, and, on the basis of the available facts, determine whether to initiate an investigation.
3. The investigation referred to in paragraph 2 shall be deemed a preliminary investigation. The authority shall give public notice of its decision to initiate a preliminary investigation and the concemed Member State, other interested Member States, and the interested persons shall all be invited to provide relevant information and make commenis.
4. The results of the preliminary investigation shail be made available to the concemed Member Siate, other interested Member States and the interested persons to enable them to defend their interests.
Article 113. Request for Consultations Relating to Subsidies Causing Serious Adverse Effects
1. Whenever a Member State has reason to believe that imports from another Member State benefited from subsidies within the meaning of Article 111 and such imports have resulted in serious adverse effects to a domestic industry so as to cause damage which would be difficult to repair, the Member State aggrieved may request consultations with the Member State granting or maintaining the subsidy.
2. The Member State alleged to be granting the subsidy which caused adverse effects shall reply within 10 days of the date of the request for consultations and shall enter into the consultations requested by the aggrieved Member State. If there is no mutual agreement within 60 days of the date of the request for such consultations or on a later date which was mutually agreed or if the Member State refuses to co-operate, the aggrieved Member State may refer the maiter to COTED and request COTED to carry out an investigation.
Article 114. Investigation by Coted of Subsidies Causing Serious Adverse Effects
1. The referral of the matter to COTED for an investigation shall not prevent the aggrieved Member State from imposing on a provisional basis not sooner than 60 days from the date of initiation of the preliminary investigation referred to in Article 106, countermeasures to forestall or prevent further adverse effects.
2. If COTED is satisfied that the investigation requested is justified, COTED shall carry out the investigation, make a determination and issue a report within 120 days from the date when the request was referred.
3. Where the results of the investigation carried out by COTED demonstrate that the subsidised imports caused serious adverse effects to the domestic industry of the aggrieved Member State requesting the investigation, COTED shall recommend that the offending Member State modify the programme of subsidies in such a way as to remove the adverse effects complained of.
Article 115. Consequences of Failure to Eliminate or Establish Adverse Effects of Subsidies
1. if the offending Member State fails to implement the recommendations of COTED within 6 months of the date of issue of the report referred to in paragraph 2 of Article 114, COTED shall authorise the aggrieved Member State to impose appropriate countervailing duties commensurate with the nature and degree of serious adverse effects determined to exist.
2. Whenever the results of an investigation by COTED prove that serious adverse effecis have not been caused by subsidised imports referred to in paragraph 1 of Article 111, the Member State alleging that its domestic industry has suffered serious adverse effects shail promptly refund any duties which might have been provisionally imposed and where such provisional duties had materially retarded the exports of the Member State complained against, COTED shall, upon application from such State, assess the effects of the provisionally applied duties and determine the nature and extent of compensation which is warranted and require compensation in accordance with ifs assessment.
Article 116. Imposition of Provisional Measures and Countervailing Duties
1. Notwithstanding anything to the contrary in this Chapter, a Member State aggrieved by the application or maintenance of prohibited subsidies or by subsidies which cause injury, or result in nullification, impairment, or serious prejudice, or cause serious adverse effects, as the case may be, shall introduce provisional measures only on the basis of the following rules:
(a) Provisional measures may be applied only if -
(i) a preliminary investigation has been initiated in accordance with the Provisions of this Chapter, a public notice has been given to that effect and interested persons have been given adequate opportunities to submit information and make comments;
(ii) an affirmative preliminary determination has been made of the existence of a prohibited subsidy, or a subsidy causing injury, nullification, impairment, serious prejudice, or a subsidy causing serious adverse effects, as the case may be;
(iii) consultations were requested and undertaken, COTED was notified and requested to investigate and the authorities concerned judge such measures necessary to prevent injury being caused during the investigation;
(b) Provisional measures may take the form of provisional countervailing duties guaranteed by cash deposits or bonds equal to the amount of the subsidisation calculated on a provisional basis;
(c) Provisional measures shall not be applied sooner than 60 days from the date of initiation of the preliminary investigation;
(d) The application of provisional measures shall be limited to as short a period as possible, not exceeding 120 days.
2. Where investigations by COTED continue beyond the period allowed for the maintenance of provisional measures under sub-paragraph 1(d), the Member State imposing the measures may continue with such measures until a definitive determination is made by COTED.
3. The Member States which are parties to an investigation to verify the existence and the effect of alleged subsidisation, may seek or accept, as the case may be, undertakings from the Member State alleged to have granted or to be maintaining a subsidy. Undertakings may take the form of:
(a) withdrawal, or limiting the amount of, the subsidy to such an extent that injury, nullification, impairment, serious prejudice or serious adverse effects, as the case may be, are eliminated; or
(b) a guarantee from the exporter benefiting from the subsidy to raise his price to such an extent that the injurious effect is eliminated.
4. lf a Member State accepts a voluntary guarantee pursuant to sub-paragraph 3(b), then the accepting Member Siate shall notify COTED and promptly suspend proceedings, and any Provisional measures which may have been imposed shall be withdrawn with immediate effect.
5. Inthe event that investigations to determine subsidisation have been concluded and the evidence proves injury, nullification, impairment or serious prejudice, or serious adverse effects, as the case may be, a Member State may impose countervailing duties retroactively to account for the entire period during which provisional measures have been in force. Such retroactively applied duties shall take into account the definitively assessed countervailing duties and the amount guaranteed by cash deposit or bond and:
(a) where the definitive countervailing duties are higher than the provisional duties, the difference shall not be collected;
(b) where the definitive countervailing duties are lower than the provisional duties, the excess of the deposit shall be refunded or the bond released prompily.
6. No Member State shail impose countervailing duties other than provisional
countervailing duties without prior authorisation from COTED and the determination and imposition of definitive countervailing duties shall be governed by the relevant provisions of the WTO Agreement on Subsidies and Countervailing Measures.
7. COTED shall keep under review ail counter-measures imposed by the Member States and shall ensure that the Member States observe the conditions and timetable for review and withdrawal of counter-measures that it may have authorised.
8. The Member States undertake to co-operate in establishing harmonised legislation and procedures in accordance with the provisions of this Chapter.
Part FOUR. SUBSIDIES TO AGRICULTURE
Article 117. Definition
1. For the purpose of this Part, an agricultural subsidy means any form of domestic support, financial or otherwise, including revenue foregone, provided by government or any public agency in favour of the producers of a specific agricultural product or to the agricultural sector as a whole. This includes:
(a) assistance provided by goverment or any public agency to foster agricultural and rural development or to assist low income producers or Producers with deficient resources;
(b) financial concessions granted by government or a public agency to offset the cost of agricultural inputs or to encourage investments in agriculture;
(c) any other financial concession which has the effect of providing price or income support to producers of agricultural products which is administered either through direct payments to the producers or processors of an agricultural product or indirectly through government or other publicly funded programmes;
(d) payments in kind to agricultural producers.
2. "Agricultural products" refers to the products listed in Annex IV.
Article 118. Rights
Having regard to the general use of subsidies in Member States to encourage agricultural and rural development, to promote investments in agriculture generally and to assist low- income or resource-poor producers, Member States may grant subsidies to meet those objectives, consistently with their obligations under international agreements and subject to the provisions of this Part.
Article 119. Obligations
1. Notwithstanding the right to grant subsidies indicated in Article 118, a Member State shall not use such subsidies in a manner to distort the production of and intra-regional trade in the product or products benefiting from such subsidies.
1. Notwithstanding the right to grant subsidies indicated in Article 118, a Member State shall not use such subsidies in a manner to distort the production of and intra-regional trade in the product or products benefiting from such subsidies.
2. Accordingly, subsidies provided by a Member State to agriculture shall not involve transfers from consumers, or direct payments to producers or processors which would have the effect of providing price support to producers.
2. Accordingly, subsidies provided by a Member State to agriculture shall not involve transfers from consumers, or direct payments to producers or processors which would have the effect of providing price support to producers.