TM 416C

TOPIC 4 – COUNTERVAILING DUTY

By: Arnold S. Librado, LCB

 REPUBLIC ACT NO. 8751

The ‘’Countervailing Duty Act of 1999’’

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.
 REPUBLIC ACT NO. 8751

 It was signed on August 7, 1999 and took effect on August

31, 1999.

 Joint Administrative Order 02-2000 was issued to implement

Republic Act No. 8752 and its IRR which took effect on
September 25, 2000.

 The Countervailing Duty is prescribed under Sec. 713 of the

Customs Modernization and Tariff Act (CMTA).
 REPUBLIC ACT NO. 8751

RATIONALE:

 To transform the domestic countervailing law into a more workable

and simple piece of legislation providing the safety nets against the
inflow of cheap subsidized imports;

 To strengthen the rules governing the investigation of

countervailing cases;

 To align the domestic law with the WTO Agreement on Subsidies

and Countervailing Measures.
GOVERNMENT AGENCIES INVOLVED IN ADMINISTERING
THE COUNTERVAILING LEGISLATION

1. Department of Trade and Industry-Bureau of Import Services

(DTI-BIS) or Department of Agriculture (DA)
- Receives the properly documented application
- Conducts preliminary investigation

2. Tariff Commission (TC)

- Conducts formal investigation
- Makes final determination for imposition of countervailing duty

3. Bureau of Customs (BOC)

- Takes charge in the imposition of the countervailing duty
 SUBSIDY

It refers to any specific assistance (e.g., financial

contribution, income or price support schemes)
provided directly or indirectly by the government of
the country of export or origin in respect of the
product imported into the Philippines, which confers
a benefit to the foreign exporter or producer of said
product.
 SUBSIDY

An industry is deemed to have received subsidy where a benefit

is conferred as a result of:

Direct or potential transfer of government funds (e.g., grants, loans,

equity infusions, loan guarantees);

The government foregoing the revenue that should otherwise have

been collected (e.g. tax credits);

The government providing goods or services, purchasing or goods.

 ACTIONABLE SUBSIDY

Actionable subsidies or ‘’yellow’’ subsidies are

those falling under the definition of subsidy,
which are neither non-actionable nor
prohibited subsidy.
 NON-ACTIONABLE SUBSIDY

Non-actionable subsidies or ‘’green’’

subsidies those which are permitted as they
are of a general nature applied across the
board to all industries and not limited to a
specific industry or enterprise or group of
enterprises or industries.
 PROHIBITED SUBSIDY

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 import goods.
 SUBSIDY
PRICE - $10.00
EXPORT

PRICE - $10.00 PRICE - $15.00

 COUNTERVAILING PROTEST

What articles are covered by a countervailing

protest?

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
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.
 COUNTERVAILING PROTEST

Who may file a countervailing protest?

Any person whether natural or juridical, representing a
domestic industry may file a written application using the pro-
forma protestant’s questionnaire, duly supported by relevant
documents which shall include evidence of (a) the subsidy, and
if possible, the kind and amount of such subsidy, (b) injury, and
(c) causal link between the importation of the allegedly
subsidized products and the alleged injury.
 COUNTERVAILING PROTEST

What importations are exempted from countervailing

protest?

 Products imported by, or consigned to, government

agencies not organized for profit and particularly
designated by law or proper authorities to import;

 Conditionally duty-free importations (Sec. 800, CMTA).

 DOMESTIC INDUSTRY

Domestic Industry refers to the domestic

producers of like products as a whole to
those whose collective output of the products
constitutes a major proportion of the total
domestic production of those products in the
industry concerned.
 DOMESTIC INDUSTRY

What is the threshold of support by producers for

the protest 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;

 Support by producers accounting for at least 25% of the total

domestic production of the product alleged to be subsidized.
 COUNTERVAILING PROTEST

However, in special circumstances, the DTI or DA may

on its own motion, initiate an countervailing action
without having received a written application by or
on behalf of a domestic industry. The concerned
authorities should have sufficient evidence of
subsidization, injury and a causal link to justify the
initiation of the investigation.
 COUNTERVAILING INVESTIGATION

Stages of Countervailing Investigation:

A. Prima Facie Determination
B. Preliminary Determination
C. Final Determination
D. Issuance of Department Order
 COUNTERVAILING INVESTIGATION

A. Prima Facie Determination

The DTI-BIS/DA, upon acceptance of the properly
documented protest/application, has 10 days to
decide whether the facts would constitute a
countervailing case.
 COUNTERVAILING INVESTIGATION

B. Preliminary Determination
The DTI-BIS/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.
 COUNTERVAILING INVESTIGATION

C. Final Determination
In the conduct of its formal investigation, the Commission notifies all
interested parties; receives representations and/or the 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.
 COUNTERVAILING INVESTIGATION

D. Issuance of Department Order

Within 10 days from receipt of the affirmative final determination by the
Commission, the Secretary of DTI or DA issue a Department Order for the
imposition of a definitive countervailing duty, unless the Secretary has earlier
accepted an undertaking from the foreign exporter, producer or government of
country of export or origin.

In case of negative determination, either Secretary shall issue, through the

Secretary of Finance, after the lapse of the period for the petitioner to appeal to
Court of Tax Appeals, an Order from the Commissioner of Customs to
immediately release the cash bond to the importer.
 COUNTERVAILING INVESTIGATION

Circumstances may a petition be rejected and the investigation

terminated in case a product originating from developed country:

1. Amount of subsidy is de minimis, i.e. less than 1%;

2. 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

3. Injury is negligible.
 COUNTERVAILING INVESTIGATION

Circumstances may a petition be rejected and the investigation

terminated in case a product originating from developing country:

1. Amount of subsidy is de minimis, i.e. equal to or less than 2%; (3% for least
developed countries);

2. 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 imports of the product under investigation; or

3. Injury is negligible.
 COUNTERVAILING INVESTIGATION

Four elements of countervailing:

A. Like Product
B. Subsidy
C. Injury
D. Causal Link
 MEASURES/REMEDIES AGAINST
SUBSIDIZATION
a. Provisional measure – takes the form of a provisional
duty or, a security by cash deposit or bond equal to
the amount of the provisionally calculated amount of
subsidy. It is only applied after the DTI-BIS or DA has
made a preliminary affirmative determination no
sooner than 60 days from the initiation of the case. It
is valid for four months.
 MEASURES/REMEDIES AGAINST
SUBSIDIZATION
b. Definitive measure – the final countervailing duty
imposed, in addition to the regular duty and other
charges, on a protested product imported from a
specific country following an affirmative final
determination. It is valid for five years from the
date imposition.
 COUNTERVAILING DUTY

It refers to a special duty levied for the purpose

of offsetting any kind or form of specific subsidy
bestowed directly or indirectly upon the
exportation or manufacture of any product. The
countervailing duty shall be in addition to any
ordinary duties, taxes and charges imposed by
law on such imported product.
 COUNTERVAILING DUTY

Country A provides export subsidy to widget makers in the

nation, who export widgets en masse to Country B at $8.00 per
widget. Country B has its widget industry and domestic widgets
are available at $10.00 widget.

If Country B determines that its domestic widget industry is

being hurt by unrestrained imports of subsidized widgets, it
may impose a 25% countervailing duty on widgets from
Country A, so that the resulting cost of imported widgets is also
$10.00 per widget.
 COUNTERVAILING DUTY

Cargill Inc. from Australia exported 50 live cattle into

the Philippines. The shipment shows cost of
$1,800.00 per cattle. The Tariff Commission found
out that a total subsidy of $500,000.00 was granted
by the Government of Australia to Cargill Inc. to raise
1,000 live cattle on its farm. If the rate of exchange
was P48.50/$1.00, how much is the countervailing
duty?