Ukraine Trade Policy Project: Countervailing Duty Calculation Methodology

331-XIV as of 22 December 1998, "On Protection of the Domestic Producer from Subsidized Imports." This methodology is intended to clarify the process of calculation and introduce greater certainty for economic operators and foreign governments. The Law implements the provisions of the World Trade Organisation (WTO) agreement on subsidies and countervailing measures, and it lays down rules on the basis for the imposition of countervailing duty measures on injurious subsidised imports. Pursuant to the Law, such imports can be subject to measures if it is determined, following an investigation, that they benefit from a countervailable subsidy, cause or threaten material injury to the Ukrainian industry producing the like product, and countervailing measures are in the Ukrainian national interest. The calculation of subsidy per unit or ad valorem is a critical component of the countervailing duty methodology. The Law assumes that an important effect of a subsidy is always to reduce a firm's costs, and the methodology adopted to calculate countervailing duties reflects this. The objective of the calculation is to arrive at the amount of subsidy per unit of production during the investigation period. In the case of consumer products, such as television sets, the appropriate unit would be each individual item. If bulk products, such as fertilisers or chemicals, are involved, it would be appropriate to calculate the subsidy, say, per tonne, or other appropriate unit of measurement. The per unit subsidy can be converted into an ad valorem rate by expressing the per unit subsidy as a percentage of the average cif (duty unpaid) unit import price. This is necessary to determine if the subsidy is de minimis. The calculation of subsidy per unit or ad valorem is a critical component of the countervailing duty methodology, and it is essential to arrive at the correct amount of subsidy to determine the appropriate countervailing duty. The Ministry has also established guidelines for calculating certain types of subsidies, including grants, loans, and other forms of income or price support. In the case of a grant, the value of the subsidy is the amount of the grant corrected for any differences between the point in time of its receipt and the investigation period. Any lump sum of revenue transferred or foregone, such as income tax or duty exemption, rebates, or money saved from preferential provision of goods and services, is considered as being equivalent to a grant. The calculation of subsidy for loans involves determining the amount of interest saved by the recipient company during the investigation period. In the case of accelerated depreciation, the amount of subsidy is the difference between the amount of tax that would have been paid during the investigation period under the normal depreciation schedule for the assets concerned, and the amount actually paid under accelerated depreciation. The Ministry's methodology for calculating countervailing duties is designed to ensure that the amount of subsidy is accurately determined, and that the appropriate countervailing duty is imposed to offset the effect of injurious subsidisation. The methodology is intended to provide greater certainty for economic operators and foreign governments, and to ensure that the Ukrainian industry is protected from injurious subsidised imports.