The term 'financial contribution' is explicitly defined under the statute, and includes, but is not limited to, four common types of practices used by governments to assist industries located within their borders. The four common types of practices that meet the definition of a 'financial contribution' are:

 

- Direct or potentially direct transfers of funds (grants, loans, equity, infusions, loan guarantees)

- A decision by the foreign government to forego or not collect tax revenue otherwise due (tax credits or exemptions);

- The provision of goods or services other than general infrastructure; and

- The purchase or procurement of goods from a producer.

 

Although United States law has been written to capture the most common types of subsidy programmes, it is flexible enough to permit other types of programmes to meet the definition of 'financial contribution'. Moreover, the law is written to make clear that the financial contribution provided can be provided either directly by the government or indirectly, as in those situations where the government 'entrusts or directs' a private body to provide a subsidy. These decisions are made on a case-by-case' basis by the Commerce Department.

 

An example may help to highlight some of the issues. Assume a country provides to a manufacturer a direct cash benefit of 10% of the FOB value of any product exported. Such a programme clearly provides a direct financial contribution (i.e. cash) to exporters. This analysis can become somewhat more complicated, however, when the benefits are more indirect or murky. For example, assume now that the country does not provide cash, but instead provides an income tax exemption for export earnings. Although there is no cash payment, such a programme can still be considered a financial contribution if an exporter has taxable export income. Taking the example one step further, now consider a situation in which the financial contribution is not even administered or funded by the government. For example, assume that government policy mandates private banks to extend export financing at below market rates. This, too, could be considered a financial contribution to those exporters receiving the financing by virtue of the government policy 'entrusting or directing' the banks concerned. Many other scenarios are possible.

 

Source: Business Guide to Trade Remedies in the United States: Anti-dumping, countervailing and safeguards legislation practices and procedures