Facts of the Case

In United States – Countervailing Measures Concerning Certain Products from the European Communities (WTO Doc. WT/DS212/QB/R, henceforth Certain Products), the Appellate Body (AB) of the World Trade Organization was called upon to revisit the issue of whether the United States can legally impose countervailing duties following the privatization of state-owned enterprises that had received non-recurring subsidies. In twelve cases, the United States Department of Commerce (USDOC) had applied either the “gamma method” or the “same-person method” in assessing the impact of a change of ownership on the continued existence of a benefit from a countervailable subsidy. The European Communities challenged the legality of these methods.

Under the gamma method, the USDOC applied an “irrebuttable presumption” that the benefits from a non-recurring subsidy remain in existence for the entire useful life of the assets purchased with benefit of a subsidy. The USDOC did not undertake any inquiry into whether and to what extent a non-recurring subsidy continued to benefit the producers during the useful life of the assets. Rather, when confronted with a change of ownership, the USDOC simply allocated the subsidy benefit between seller and purchaser to match the fraction of the assets that had been transferred.