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21 January 2000


  Original: English







(1 December 1999)


Question 1

The United States agreed, in the original dispute, that a Member is permitted to replace a prohibited subsidy with a non-prohibited subsidy, and that the consistency of the new subsidy would need to be judged on its own merits. How does the US reconcile this with its new argument that the 1999 loan should be judged on the basis of the Panel's original finding concerning the grant?

Answer 1

This Panel, consistent with Article 4.7 of the SCM Agreement, recommended that Australia withdraw the subsidy -- the $30 million grant. Under Article 21.5 of the DSU, this Panel is to review the existence or consistency with a covered agreement of measures taken by Australia to comply with the recommendation of the Panel that the subsidy be withdrawn. The 1999 Loan is a subsidy (because it was concessionary) that was provided contingent on the repayment of a portion of the $30 million grant -- part of the measures purportedly taken by Australia to comply with the recommendation of the Panel. The question presented to the Panel is whether these measures taken by Australia -- the partial repayment and its simultaneous reimbursement - withdrew the subsidy. These measures taken to comply have to be examined in connection with the grant the Australia is required to withdraw. Whether the $8 million "repayment" implements the Panel's recommendations obviously can only be determined by considering the nature of the $30 million export subsidy and Australia's obligation to withdraw it. In the same way, the impact of the 1999 Loan on Australia's implementation can only be understood through its connection with the $8 million partial repayment and the original $30 million grant. Therefore, in the context of an Article 21.5 proceeding, in which the Panel examines the "measures taken to comply" with its recommendations, the 1999 Loan subsidy must be analyzed as part of the set of measures taken to comply with Australia's obligation to withdraw the $30 million subsidy. In this sense, analyzing the 1999 Loan subsidy in this Article 21.5 proceeding is different from analyzing it in the context of an original dispute. Australia is subject to different obligations in this Article 21.5 proceeding - to withdraw the subsidy - than it would be in a normal dispute, and the 1999 Loan must be analyzed in the light of these obligations. Specifically, Australia was obligated to take back part of the export subsidy, and, partially through the benefit of the 1999 Loan subsidy, did not.

In addition, even in the case of the original dispute, this Panel found that it was required to "examine all of the facts that actually surround the granting or maintenance of the subsidy in question, including the terms and structure of the subsidy, and the circumstances under which it was granted or maintained." Panel Report, para. 9.56. There is no reason that the Panel should turn a blind eye to the facts and circumstances surrounding a subsidy provided as part of a "measure taken to comply" in an Article 21.5 proceeding. In this case, the facts and circumstances include that the 1999 Loan subsidy was a direct and contingent replacement for the portion of the $30 million that was withdrawn.

Question 2

The US argues that the task facing the Panel is to determine whether Australia has taken measures to comply with the DSB's recommendations, and whether the measures are "consistent with the SCM Agreement". Is the US argument that the 1999 loan is inconsistent because it, like the grant, is an export subsidy? Or, is the US arguing that the 1999 loan, because it cancels out the grant repayment, turns the repayment into a sham? If the US is making both of these arguments, are they arguments in the alternative?

Answer 2

Under either theory - whether the 1999 Loan subsidy is itself an export subsidy that replaces part of the $30 million export subsidy or whether it nullifies and renders nonexistent Australia's purported withdrawal - Australia has not complied with the recommendations of the Panel to withdraw the subsidy.

Question 3

Is the US arguing that there is a distinction between measures examined in an original dispute and all steps related to implementation in the context of Article 21.5 DSU? Please explain fully.

Answer 3

There is a distinction between the measures examined in an original dispute and all steps related to implementation in the context of Article 21.5 of the DSU. As a result of adoption of the Panel Report by the DSB in this Article 21.5 proceeding, Australia has an obligation that was not present in the original dispute: to withdraw the prohibited export subsidy. The Panel must examine all of the steps related to the implementation of this obligation taken by Australia to determine whether Australia has complied with the recommendations. In this case, Australia purported to withdraw only a small portion of the $30 million grant, but even that modest transaction was in fact a sham, since the grant monies were immediately replaced by the contingent 1999 Loan subsidy.

Question 4

On what grounds does the US justify relying on its own and the EC's countervail practice, and the Informal Group of Experts' report which is not adopted and pertains to serious prejudice calculations, as the basis for its proposed methodology for determining the amount of the subsidy that should be "withdrawn" to comply with the DSB's recommendation in this prohibited subsidy case? On what specific basis does the US argue that Article 14 of the SCM Agreement can give guidance regarding questions of subsidy allocation in general (as argued in footnote 10 of the US first submission), and regarding withdrawal of a subsidy in the context of Article 4 SCM?

Answer 4

One of the issues in this proceeding is how to determine what portion of the subsidy's benefit remains as of the date of adoption of the Panel Report -- that is, how much of the benefit to the recipient is attributable to the time period after the date of adoption. That is the portion of the subsidy that should be withdrawn. The determination by Members and by recognized experts as to how grants are allocated over time is, therefore, directly relevant to the issue of how much of the grant should be withdrawn.

The SCM Agreement applies to subsidies, and contains a general "Definition of a Subsidy" in Article 1. The work of Members and of the Informal Group of Experts in interpreting such subsidies is instructive, regardless of the particular Part of the SCM Agreement being studied. The focus, both of the Members and of the Informal Group of Experts, is on an economically meaningful way of determining how long a significant lump-sum grant lasts, that is, the period over which it should be allocated. That this practice and expert advice has been applied in the context of actionable subsidies (Part III of the SCM Agreement) or countervailing measures (Part V of the SCM Agreement) does not detract from its value: nothing about the nature of actionable subsidies or countervailing measures would make the allocation principles for grants specific to those situations, and inapplicable in the case of export subsidies. In fact, there are identical concerns with respect to the effectiveness of the SCM Agreement remedies: In each of the situations at issue -- prohibited export subsidies, actionable subsidies, and countervailing measures -- if the grant is not allocated on an economically reasonable basis, such as over the useful life of assets, it escapes the SCM Agreement remedies, because it can be relegated inappropriately to the past.

Further, the Informal Group of Experts was created by the Committee on Subsidies and Countervailing Measures to clarify the calculation of subsidies. The experts were chosen by the Committee based on their substantive experience in subsidy calculation methodology. Their status and expertise in subsidy calculations should therefore be carefully considered by the Panel. Further, although the Informal Group of Experts noted that there were grey areas of subsidy allocation that would have to be analyzed on a case-by-case basis, the Experts held a consistent view throughout the report about how large non-recurrent grants should be allocated. The general rule is as the United States has stated it: such grants should be allocated over time on an economically reasonable basis, such as over the useful life of assets.

With respect to the application of Article 14 of the SCM Agreement, that Article provides that Members shall determine the method of calculating the benefit to the recipient of subsidies. Under US and EC practice, determining the benefit conferred by a grant may involve an analysis of how long the benefit of the subsidy to the recipient lasts — i.e., the allocation of the subsidy over time. This is because Part V provides that Members are to calculate the "amount of the subsidy" and to impose countervailing duties that do not exceed the amount of the subsidy. Article 19 of the SCM Agreement. Article 14 sheds light on the meaning of the term "benefit".

Further, the Appellate Body has specifically used Article 14 to interpret Article 1 in a prohibited subsidy case. In Canada - Measures Affecting The Export Of Civilian Aircraft, WT/DS70/AB/R, Report of the Appellate Body (2 August 1999), adopted September 1999 (para. 158), in considering whether certain measures were prohibited export subsidies, the Appellate Body used principles set out in Part V, Article 14, to determine whether the measures constituted a subsidy under Article 1.1, describing Article 14 as "relevant context in interpreting Article 1.1(b)."

The United States emphasizes that, despite Australia's complaints that it had relied on the Panel Report in determining how the grant was to be allocated, there was nothing in the Panel Report that suggested that the grant should be allocated over sales performance targets.1 By contrast, the allocation of grants over the useful life of assets is an established and well-publicized method of allocation. Australia cannot, therefore, claim to have "relied" on the Panel Report in deciding on its implementation measures. Further, the United States rejects Australia's claim that its allocation period can only be rejected if it is a "contrivance". The issue is not whether a Member's own self-designated allocation period is a contrivance; the issue is the proper allocation for significant grants.

Question 5

Does the US agree with the following statement from para. 7 of Australia's second submission: "the measure comes into conformity automatically at the end of the allocation period as a consequence of all of the monies having been expensed"; and with the following statement from para. 13 of that submission: "As time passes, the amount to be withdrawn becomes smaller and goes to zero at the end of the period over which the subsidy is allocated. [The existence of] compensation or retaliation rights until the measure comes into conformity cannot increase, or halt the reduction over time of, the amount of subsidy to be withdrawn to bring the measure into conformity"? If the US disagrees, how does it reconcile that disagreement with its proposed subsidy allocation methodology, which seems to involve definition of a finite period over which subsidy benefits exist and are "expensed" with the passage of time?

Answer 5

The United States disagrees with the statement that the "measure comes into conformity automatically at the end of the allocation period." It is not clear how such a measure "comes into conformity" simply through the passage of time; rather, it would seem that the subsidy remains a prohibited export subsidy, but is simply a past export subsidy. More important, however, the issue in this proceeding is not whether the measure comes into conformity. The issue in this proceeding is how much of the subsidy is allocated to the time following the date of adoption of the Panel Report, and whether Australia has withdrawn that portion of the subsidy, as required by Article 4.7. Once a significant grant is found to be a prohibited export subsidy in an adopted Panel Report, it should be withdrawn, and the amount to be withdrawn does not decrease simply because the Member has delayed implementation. Further, it is not accurate to say that the existence of "compensation or retaliation rights" halts the reduction over time of the amount of subsidy that should be withdrawn. It is the adoption by the DSB of a Panel Report finding a prohibited export subsidy grant that fixes the amount that must be withdrawn: at that point, the entire prospective amount of the significant grant must be withdrawn.2 The amount to be withdrawn does not decline because a Member delays implementation.

Question 6

In the view of the United States, would a subsidy in the form of a one-time grant to a company, contingent on exportation of a given product, still need to be "withdrawn" if the recipient company completely exited that product market and no new export contingency were established in respect of other products produced by that company? If so, how would the US propose that such a withdrawal would be effectuated?

Answer 6

In the view of the United States, whether a significant grant is an export subsidy is determined based on the conditions in place at the time the subsidy was bestowed. Subsequent events would not impact this determination. See Panel Report, para. 9.68. If a Panel were requested to rule in such a situation, in which there are no exports, the subsidy would still have to be withdrawn; however, the specific means of effecting the withdrawal would depend on the facts of the case.

Question 7

Does the US agree with Australia's characterization of the US approach, reflected in para. 19 of Australia's second submission:

"[I]f the USA's punitive approach on interest were to be adopted, [the amount to be withdrawn would never decline, but rather] would increase. This would mean that at the end of the allocation period, even though there would no longer be any benefit to the company involved, the Member would still have to withdraw the original outstanding amount, together with interest, to bring the measure into conformity."

Answer 7

The United States agrees that, if a Member does not withdraw a significant grant after it has been found to be a prohibited export subsidy, the amount to be withdrawn does not decline over time. Further, after the grant is found to be a prohibited subsidy, if it is not withdrawn, the benefit includes the interest that the recipient saves by not having to borrow the funds from which it is benefitting. The United States does not agree that this is punitive. It is simply a withdrawal of the prohibited subsidy, as required by Article 4.7 of the SCM Agreement, that Member have agreed not to grant in the first place.

Question 8

Put another way, if a dispute were not brought until after the end of an allocation period, and the US agreed that the allocation period used was the correct one, would any remedy still be available? That is, would the subsidizer have to take any action to "withdraw" the subsidy? Or, because under the US approach the benefits of the subsidy would have ceased by then, would it be the US view that no remedy was necessary?

Answer 8

The United States does not rule out the possibility that, in a particular case, a country could delay bringing an action such that there might be little or no remaining subsidy to be withdrawn. This is not the case here. The United States has acted quickly in requesting that the DSB review prohibited export subsidies, and is entitled to a meaningful remedy of withdrawal. A Member that acts expeditiously should not be greeted with the response that most of the significant subsidy has be relegated to the past and is therefore untouchable by the SCM remedies, which is upshot of Australia's position.

Question 9

How does the US respond to Australia's arguments at para. 25 in Australia's second submission that "to bring the grant payments into conformity, Australia did not have to impose a punitive measure on an individual company, be it Howe or ALH. This matter is about Australia's rights and obligations as a Member"; and in para. 26 of that submission that "[t]he impact on Howe or ALH or any other Australian company is irrelevant: they are not Members, Australia is"?

Answer 9

The SCM Agreement requires that the subsidy be withdrawn. In this case, this means from the recipient who received the subsidies. Australia's argument is one that would apply to any type of WTO remedy, and has specifically been rejected. Arbitrator Beeby noted in the dispute concerning Indonesian Automotive Measures:

In virtually every case in which a measure has been found to be inconsistent with a Member's obligations under the GATT 1994 or any other covered agreement, and therefore, must be brought into conformity with that agreement, some degree of adjustment by the domestic industry of the Member concerned will be necessary.3

This does not make the required withdrawal punitive. First, given that Members have agreed not to provide prohibited export subsidies, it follows that their firms would not have a legitimate expectation of retaining such subsidies. This is particularly true here, where all those involved were on notice from the beginning that the $30 million grant was potentially a prohibited export subsidy. Second, only the prospective portion of the prohibited export subsidy must be withdrawn, not the past portion. Such a withdrawal can hardly be said to be punitive. The recipient firm is no worse off after the withdrawal than before it received the subsidy; indeed, it is better off, since it retains some portion —- the "retrospective portion" —- of the prohibited export subsidy.

Question 10

How does the United States reconcile its view that the remedy of "withdraw the subsidy" is prospective with the fact that it interprets that term to require repayment of some amount?

Answer 10

The grant is paid in a lump sum, but for purposes of assessing how long the subsidy lasts, and how long it provides a benefit, it must be allocated on some reasonable economic basis, such as the useful life of production assets. In the U.S. view, Australia is required to withdraw that portion of the grant allocable to the period after the Panel Report is adopted by the DSB.

Question 11

The United States argues that the Panel should calculate the remaining benefit to be withdrawn in an export subsidy case based on allocation methodology applied in countervailing duty cases to determine the amount of benefit that may be countervailed in any given period. However, if Australia were to have withdrawn A$28 million in this case, there would still be a A$2 million benefit to the company that could be countervailed under Part V of the SCM Agreement. It seems, therefore, that the only way to avoid the possibility that the recipient of the prohibited subsidy retains some benefit that could be countervailed, would be to withdraw the entire amount originally provided. Please comment.

Answer 11

In the context of both countervailing measures and actionable subsidies, Members and experts have considered that significant lump-sum grants should be allocated over the useful life of the recipient's production assets. This determination is based on an economically and financially reasonable assessment of how long the grant lasts. This assessment is no less pertinent in the context of prohibited export subsidies than in the context of countervailing measures and actionable subsidies. The inquiry is the same in all cases: how long does the significant grant last and continue to provide benefits to the recipient.

This is a different issue from whether the retrospective portion of the grant —- a grant whose prospective portion has been withdrawn under SCM Part II -- is still potentially subject to countervailing measures under Part V. Nothing in the SCM Agreement precludes Members from determining that a withdrawal under Article 3.1(a) is a withdrawal under Part V, making countervailing duties unnecessary.4. Therefore, it is unclear that the whole amount would have to be withdrawn in order to avoid countervailing duties.

Question 12

Is it the United States' position that an export subsidy, which the United States would consider to be non-allocable, granted prior to the adoption of the Panel's report, is beyond the reach of remedies under Part II of the SCM Agreement, and can only be reached under Parts III and V of that Agreement? If not, please explain.

Answer 12

In general, the types of subsidies that the United States would view as "non-allocable" are those that are "recurring". If a programme providing recurring subsidies was found to be a prohibited export subsidy programme, a possible remedy would be to change or withdraw the underlying programme itself. Thus, the export subsidy programme would not be beyond reach of the Part II remedies, even though the subsidies previously bestowed under the programme might not have to be repaid. It is possible, moreover, that a small grant, if provided on a one-time basis and not allocated to the period following the adoption of a panel report, would not have to be repaid. This is not the case here.


Question 1

Both parties have proposed a calculation methodology to determine what they refer to as the "prospective" amount of the subsidy to be repaid. Given that the subsidy itself was entirely paid before the Panel's report was adopted, in what sense can any amount of repayment be considered "prospective"?

Answer 1

The benefits conferred on a recipient by this significant lump sum grant continue to accrue over the average life of the production assets. The portion of the grant attributable to the period after the adopted panel report should be regarded as prospective in nature. In this sense, the repayment of that amount is "prospective" , even though the grant was paid before the Panel Report was adopted.

Question 2

On what legal basis do the parties base the argument that the phrase "withdraw the subsidy" has "prospective" effect only. One interpretation of the phrase "withdraw the subsidy", which is not argued by either party, would be that it means "repay in full" or "take back" the financial contribution to the recipient. Please comment on this possible interpretation, with specific reference to the text, context, and object and purpose of Part II of the SCM Agreement.

Answer 2

The issue in this proceeding is whether Australia has implemented the Panel's recommendation that the subsidy be withdrawn without delay. The United States submits that Australia has not done so. The question of whether Australia must withdraw the entire $30 million grant, or only the $26,346,154 prospective portion of that grant (plus interest), is less important than this Panel's determination of whether -- irrespective of the method for calculating the prospective portion of the grant -- Australia has complied with the Panel's recommendation. Neither the United States, nor Australia, nor any third party, has argued that the withdrawal should be retrospective and that the whole $30 million should be withdrawn, and there is no need for the Panel to reach this issue. Since Australia has not even withdrawn the prospective portion of the subsidy, the Panel does not have to decide whether Australia should withdraw the retrospective portion of the subsidy. The Panel need only decide whether or not Australia has complied with the recommendation of the Panel.

That WTO remedies are not retrospective, but only prospective, is reflected in several places in the DSU itself, which generally speaks in terms of the requirement that Members "bring a measure into conformity" with a covered agreement. e.g., DSU Articles 19 and 22.1. The specific rule in Article 4.7 of the SCM Agreement - that the subsidy be withdrawn - requires, in the context of a significant grant, that something be removed or taken back. Consistency with the prospective nature of DSU, however, means that what should be taken back is that portion of the subsidy that is attributable to prospective periods. Viewed in this way, the remedy prescribed by Article 4.7 would be both consistent with general prospective principles of the DSU and meaningful.

Given the prospective nature of WTO remedies, if there had been a contrary intention in Article 4.7 of the SCM Agreement - an intention to make the withdrawal retrospective instead of prospective - that intention would have been specified somewhere in the SCM Agreement, either in a preamble or in Article 4 itself. In the absence of a specific textual basis for reading the SCM Agreement to require a retrospective withdrawal the Panel should decline to so interpret the SCM Agreement.

Questions 3 & 4

In European Communities - Regime for the Importation, Sale and Distribution of Bananas - Recourse to Arbitration by the European Communities under Article 22.6 of the DSU, the Panel noted that "any assessment of the level of nullification or impairment presupposes an evaluation of consistency or inconsistency with WTO rules of the implementation measures taken by the European Communities, i.e. the revised banana regime, in relation to the panel and Appellate Body findings concerning the previous regime." WT/DS27/ARB, 9 April 1999, at para. 4.3. The Panel further noted that both parties accepted that it was the consistency or inconsistency with WTO rules of the new EC bananas regime - and not of the previous regime - that had to be the basis for the assessment of the equivalence between the nullification suffered and the level of the proposed suspension, id. at para. 4.5, and that it would be the WTO-inconsistency of the revised EC regime that would be the root cause of any nullification or impairment suffered by the United Sates. Id. at para 4.8. Is there any relationship, or should there be, between the concept of "equivalence" of the nullification or impairment of benefits to the suspension of concessions under Article 22 of the DSU, and calculation of the relevant amounts, and the calculation of the amount to be withdrawn in accordance with Article 4.7 of the SCM Agreement?

Further to the preceding question, would your answer change in light of the provisions of Article 4.10 of the SCM Agreement? That is, Article 4.10 of the SCM Agreement provides for "appropriate countermeasures" in the event a recommendation of the DSB is not followed, that is, the subsidy found to be prohibited is not withdrawn. Article 9 provides that "appropriate" countermeasures does not allow countermeasures that are disproportionate in light of the fact that the subsides in question are prohibited. Does or should this have any relation to or consequences for the calculation of the amount to be withdrawn?

Answer 3 & 4

The United States submits that, at this stage, the Panel should focus on whether its recommendations were implemented, not on the " appropriate countermeasures" or on equivalence of nullification or impairment.

Question 5

Australia has argued, based on the Panel's original decision, that it is entitled to replace a prohibited export subsidy with a WTO-consistent subsidy, and that the 1999 loan at most falls into this category of replacement. Assuming the 1999 loan is not inconsistent with the SCM Agreement, it might nonetheless be argued that once the DSB had adopted a decision that a subsidy was inconsistent, that ruling could not be implemented simply be replacing the inconsistent subsidy with a consistent one. To implement a recommendation to "withdraw the [prohibited] subsidy" by repayment, and then immediately replace it with a WTO-consistent subsidy has no remedial effect, because the harmful trade effects presumed to have been caused by the prohibited subsidy in the first instance will necessarily continue. Would the parties please comment on this proposition.

Answer 5

The United States agrees that the directly contingent reimbursement of a withdrawal payment nullifies, and makes non-existent, the putative withdrawal measure. This is precisely what the 1999 Loan subsidy does, through its significant concessionary features. Therefore, regardless of whether the 1999 Loan subsidy is itself WTO-consistent, it nullifies the withdrawal. It is therefore directly relevant to the Panel's Article 21.5 task to review "the existence . . . of measures taken to comply with the recommendations" of the Panel.



(3 December 1999)

1. The Panel's question 4 to Australia was as follows:

Australia, although arguing that Howe's interest rate is irrelevant to this dispute, criticizes the US's estimate of that rate, derived from 1997 financial statements of Howe Leather (Australia's second submission at para. 51). What in Australia's view would be the commercial interest rate and loan terms that Howe would have been able to obtain on the market for long-term borrowing during each of the past three years? Please provide a full explanation and supporting documentation.

2. In lieu of responding to the Panel's question, Australia repeats its criticism of the U.S. calculation of interest, which is based on the published audited consolidated financial statements of ALH (which includes Howe), and notes that ALH's interest rate for bills of exchange was 7.5 per cent and its overdraft rate 9.25 per cent. As "supporting documentation", ALH submitted two tables whose provenance and context were not identified.

3. This new information is not responsive. First, it is not the commercial interest rates and loan terms for long-term borrowing from Howe. To the contrary, rates for bills of exchange and overdrafts are a particular and very selective form of short-term borrowing and, since they are apparently reported with respect to ALH alone, they do not represent the cost of borrowing by Howe. Second, the "documentation" provides no support for how the interest rates were calculated, whether non-interest-bearing liabilities were excluded, or whether the rates were the actual rates paid, or simply rates available. In short, the Panel does not really know what these interest rates represent, except that they are plainly not long-term commercial interest rates and loan terms that Howe would have paid on the market, as requested by the Panel.

4. Australia states in its response that there is public information on the "full details" of all loans and the average interest rates for those loans. This is the information that the Panel requested with respect to Howe for each of the years 1997-99, and this is the information that should have been provided, but was not. The limited amount of information submitted by Australia, and its obvious inadequacy as a measure of Howe's long-term borrowing costs, cannot substitute for the interest rate information provided by the United States. The Appellate Body recently stated, in connection with Canada's refusal to provide information with respect to export subsidies:

Clearly, in our view, the Panel had the legal authority and the discretion to draw inferences from the facts before it - including the fact that Canada had refused to provide information sought by the Panel.

* * *

The continued viability of [the dispute settlement] system depends, in substantial measure, on the willingness of panels to take all steps open to them to induce the parties to the dispute to comply with their duty to provide information necessary for dispute settlement. In particular, a panel should be willing expressly to remind parties - during the course of dispute settlement proceedings - that a refusal to provide information requested by the panel may lead to inferences being drawn about the inculpatory character of the information withheld.1

5. The US method of calculating the interest rate is accurate. First, it is based on audited, published financial statements, which should be presumed to be correct. Second, it is based on a consolidated financial statement, meaning that (1) it specifically includes Howe's market costs of funds, and (2) it excludes any intra-company borrowing at non-market rates that might skew the true "market" cost of funds. Third, since it is based on actual interest expenses paid, the US method results in an actual, historical, and not a theoretical, cost of borrowing. Finally, although, in theory, a massive retirement of debt during the course of the fiscal year might influence this calculation, in the absence of any indication of such an extraordinary circumstance, the Panel should not assume it. This is particularly true here, since Australia was given an opportunity to provide what it considers to be more accurate information, but declined to do so.

6. In this connection, the United States notes that the 1997 interest rate calculation is corroborated by the 1999 consolidated financial statements of Schaeffer Corporation, ALH's parent company.2 The 1999 interest rate is 11.36%, compared to the originally submitted 1997 interest rate of 11.6 per cent.

Fiscal year "borrowing cost paid":

$ 1,884,000

Fiscal year "non-current bank loan — secured":


$ 1,884,000/ $16,583,000 = 11.36%

7. The consistency between this 1999 interest rate and the 1997 interest rate strongly suggests that, contrary to Australia's assertions, the 1997 interest rate was not distortive.

8. Plainly, the information provided by the United States is the most accurate information available on what Howe's borrowing cost is.

1 In any event, as the United States has noted in its submissions, Australia’s position ignores that there is a difference between the criteria for finding an export subsidy and its allocation over time.

2 Of course, prior to the adoption of the Panel Report, the amount to be withdrawn does decline over time.

3 Indonesia - Certain Measures Affecting the Automotive Industry , WT/DS54/15 et al., Award of the Arbitrator (7 December 1998), para. 25.

4 See, e.g., Part V, Article 19 of the SCM Agreement, which provides that countervailing duties may be imposed unless the subsidy is withdrawn.

1 Canada - Measures Affecting The Export Of Civilian Aircraft, WT/DS70/AB/R, Report of the Appellate Body (2 August 1999), adopted September 1999 (paras. 203 - 204)

2 1999 Financial Statements for ALH were unavailable.

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