UDS 2020 IN: Certain upholstered domestic seating
Statement of Reasons—Initiation of investigations

Category 1: preferential loans and loan guarantees

Program 1: Loans from state-owned banks at preferential rates

This program relates to government loans at a preferential rate of interest. The benefit provided in this case is a lower rate of interest than would otherwise be available if the enterprises had to obtain a non-guaranteed commercial loan (i.e. the benchmark non-guaranteed commercial loan). Financial institutions may be considered to constitute “government” if they possess, exercise or are vested with government authority, which may be indicated by the following factors:

• Where a statue or other legal instrument expressly vests government authority in the entity concerned
• Evidence that an entity is, in fact, exercising governmental functions and
• Evidence that a government exercises meaningful control over an entity

The CBSA has previously countervailed this program in Fabricated Industrial Steel Components (FISC), Carbon and Alloy Steel Line Pipe (Line Pipe), Certain Pup Joints, Certain Oil Country Tubular Goods, and Certain Seamless Casing.

This program may constitute a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA, in that amounts that would otherwise be owing and due to the government are reduced or exempted, and would confer a benefit to the recipient equal to the amount of the reduction/exemption. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 2: Loan guarantee through the GOC/SOE banks/public bodies

Assurance provided by the GOC, a SOE bank or public body (the guarantor) to assume the debt obligation of a borrower if that borrower defaults. A guarantee can be limited or unlimited, making the guarantor liable for only a portion or all of the debt.

The CBSA has previously countervailed this program in Large Diameter Carbon and Alloy Steel Line Pipe, FISC, and Line Pipe.

This program may constitute a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA, in that amounts that would otherwise be owing and due to the government are reduced or exempted, and would confer a benefit to the recipient equal to the amount of the reduction/exemption. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 3: Debt and interest forgiveness on loans from state-owned banks

To stimulate the economy and support the development of key industries, the state-owned banks write off bad debts or interest owed by SOEs.

The CBSA has previously countervailed this program in Certain Seamless Casing.

This program may constitute a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA, in that amounts that would otherwise be owing and due to the government are reduced or exempted, and would confer a benefit to the recipient equal to the amount of the reduction/exemption. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 4: Preferential export financing and export credit guarantee/insurance

The China Export & Credit Insurance Corporation (Sinosure) is a state-funded policy-oriented insurance company that was established to promote China’s foreign trade and economic cooperation. The China Exim Bank and Sinosure each provide export credit guarantees which, according to information from the Bank, have “played a key role in supporting Chinese companies to go global” and promoted “the export of new- and high-tech products”

This program may constitute a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA; i.e., amounts that would otherwise be owing and due to the government are exempted or deducted or amounts that are owing and due to the government are forgiven or not collected. The above confers a benefit to the exporter by way of reducing its financial costs upon obtaining loans from a financial institution, and the benefit is equal to the amount of the exemption/deduction. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Category 2: grants and grant equivalents

Program 5: Insurance grants

Local and Provincial Government Reimbursement Grants on Credit Insurance Fees. The CBSA has previously countervailed this program in Galvanized Steel Wire, Certain Seamless Casing, Certain Oil Country Tubular Good, Certain Pup Joints, Stainless Steel Sinks, Line Pipe, and Large Diameter Carbon and Alloy Line Pipe.

The financial contribution by the government is the direct transfer of funds pursuant to section 2(1.6)(a) of SIMA. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 6: Design, research and development grants

A grant that provides financial aid for enterprises determined to have undertaken expenses in design or research and development.

The CBSA has previously countervailed this program in Sucker Rods, Copper Tube, Photovoltaic Modules and Laminates, OCTG, Unitized Wall Modules, Certain Seamless Casing, and Certain Pup Joints.

The financial contribution by the government is the direct transfer of funds pursuant to section 2(1.6)(a) of SIMA. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 7: Export development and performance grants

Companies in China receive such grants provided by the GOC to assist in the development of export markets or to recognize export performance.

The CBSA has previously countervailed this program in Sucker Rods, OCTG, Unitized Wall Modules, Galvanized Steel Wire, Aluminum Extrusions, Carbon Steel Welded Pipe, and Steel Grating.

As per the OCTG’s SOR issued at the final determination, the program was established in the Circular of the Trial Measures of the Administration of International Market Development Funds for Small and Medium-Sized Enterprises Cai Qi No. 467, 2000, which came into force on October 24, 2000. The program was established to support the development of Small and Medium-sized Enterprises, to encourage SMEs to join in the competition of international markets, to reduce the business risks of the enterprises, and to promote the development of the national economy. The granting authority is the Foreign Trade and Economic Department and the program is administered at the local levels.

The financial contribution by the government is the direct transfer of funds pursuant to section 2(1.6)(a) of SIMA. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 8: Performance award grants

A grant that provides financial aid for enterprises with excellent performances.

The CBSA has previously countervailed this program in Certain Seamless Casing, Aluminum Extrusions, Certain Oil Country Tubular Goods, Certain Pup Joints, Copper Tube, and Line Pipe.

This program is a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government and confers a benefit to the recipient equal to the amount of the grant. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 9: Reductions in land use and/or rental fees

This program provides for the reduction in land use fees and rental rates for certain number of years. Examples of this program in action include: a document titled '[2003] No. 8 Preferential Supply of Land', in order to offset costs for industrial companies in the Ninghai Economic Development Zone; or similar initiatives in the Tianjin Binhai New Area and the Tianjin Economic and Technological Development Area.

The CBSA has previously countervailed this program in Stainless Steel Sinks, Unitized Wall Modules, Certain Photovoltaic Modules and Laminates, Certain Seamless Casing, Certain Oil Country Tubular Goods, Certain Pup Joints, and Certain Carbon and Alloy Line Pipe.

The financial contribution by the government consists of government revenue that is otherwise due is foregone or not collected, pursuant to section 2(1.6)(b) of SIMA. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 10: Grant - patent assistance/award

Based on the information available to the CBSA, this program was provided in several provinces, such as Guangdong, Shanghai and Jiangsu.

For example, the GOC document associated with this program for Guangdong province may include: “Administrative Measures of Patent Award of Guangdong Province”. In Guangdong province, this program was administered by the Intellectual Property Office of Guangdong, the Bureau of Personnel of Guangdong Province and municipal level authorities. The program was established to support improvement in technology innovation and to promote intellectual property.

In addition, the GOC document associated with this program for Shanghai may include: “The administrative measures regarding the financial support/subsidy for Patents by Shanghai”. In Jiangsu province, this program was administrated by Jiangsu Intellectual Property Office.

This program is a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government and confers a benefit to the recipient equal to the amount of the grant. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 11: Environment protection grant

These are grants provided by the GOC for the purposes of improving environmental performance, for example, monitoring and cleaning pollutants, improving energy efficiency, upgrading facilities to be more environmentally efficient, and waste water treatment.

The CBSA has previously countervailed such grants in Copper Tube. In addition, the USDOC found that Chinese producers of hardwood plywood have benefited from similar programs, namely: Shandong Province’s Environmental Protection Industry Research and Development Funds and Waste Water Treatment Subsidies.

This program appears to be a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government and confers a benefit to the recipient equal to the amount of the grant. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 12: Forest certification pilot special fund

In United States – Certain Hardwood Plywood Products from the People’s Republic of China, this program was found to be countervailable.^{Footnote 58} The CBSA was unable to unearth a description of this program, however, this program appears to be specific to the forestry sector and potentially to UDS and has been countervailed in a recent investigation by the USDOC

There may exist a financial contribution by the government which consists of government revenue that is otherwise due is foregone or not collected, pursuant to section 2(1.6)(b) of SIMA. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 13: Interest loan subsidies for the forestry industry

In United States – Certain Hardwood Plywood Products from the People’s Republic of China, this program was found to be countervailable.^{Footnote 59} The CBSA was unable to unearth a description of this program, however, this program appears to be specific to the forest sector and potentially to UDS and has been countervailed in a recent investigation by the USDOC.

This program may constitute a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA, in that amounts that would otherwise be owing and due to the government are reduced or exempted, and would confer a benefit to the recipient equal to the amount of the reduction/exemption. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 14: Grants for the retirement of capacity

The GOC’s 12th Five-Year Plan for Energy Conservation and Emission Reduction calls for accelerating and eliminating “backward production capacity” in certain industrial sectors, including the elimination of 48 million metric tonnes of steel production. In 2013, the State Council issued the “Guiding Opinion on Resolving the Problem of Severe Excess Capacity,” which called for establishing special funds to accelerate the elimination of backwards capacity and to also support industries with excess production capacity.

This program is a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government and confers a benefit to the recipient equal to the amount of the grant. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 15: Grants for the retirement of capacity

As part of the GOC’s 12th Five-Year Steel Development Plan, the GOC has been locating urban based steel producers to locations outside of their current city. The GOC’s 12th Five-Year Plan for Energy Conservation and Emission Reduction calls for the relocation for “heavy polluting enterprises” and for measures to optimize the “regional spatial layout” of “key industries,” including the steel industry.

This program is a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government and confers a benefit to the recipient equal to the amount of the grant. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Category 3: preferential tax programs

Program 16: Corporate income tax exemption and/or reduction in special economic zones (SEZs) and other designated areas

This program was established under the Rules for the Implementation of the Income Tax Law of the People's Republic of China for Enterprises with Foreign Investment and Foreign Enterprises, which came into effect on July 1, 1991. The program was allegedly established to absorb investment in special economic zones (SEZs) and designated areas to take the lead in their economic development. The granting authority responsible for this program is allegedly the State Administration of Taxation and the program is administered by local tax authorities.

Under this program, it is alleged that an eligible enterprises may receive a reduced corporate income tax rate of 15%.

The complainant has alleged that several UDS manufacturers are located in SEZs, including the Dalian Free Trade Zone, Jiangyin Economic Development Zone, Anhui Province, Fujian Province, Shenzhen Special Economic Zone, and the Guangzhou Special Economic Zone.

The CBSA has previously countervailed this program in Aluminum Extrusions, Carbon Steel Welded Pipe, OCTG, Seamless Casing, and Line Pipe.

In a recent investigation by the USDOC into Hardwood Plywood from China, it appears that they countervailed this program as the following: Preferential Income Tax Policy for Enterprises in the Northeast Region; Forgiveness of Tax Arrears for Enterprises Located in the Old Industrial Bases of Northeast China; and Income Tax Benefits for Foreign Invested Enterprises Based on Geographic Locations.

The financial contribution by the Government consists of government revenue that is otherwise due is foregone or not collected, pursuant to section 2(1.6)(b) of SIMA. The program may be considered specific pursuant to subsection 2(7.2) of SIMA because it is limited to enterprises in certain geographic areas.

Program 17: Corporate income tax reduction for new high tech enterprises (“NHTE”)

Under Article 28.2 of the Enterprise Income Tax Law in China, companies designated as high- or new-technology enterprises (HNTEs) are entitled to a reduced income tax rate of 10 percent instead of the normal national corporate tax rate of 25 percent. The granting authority responsible for this program is alleged to be the State Administration of Taxation and the program is administered by local tax authorities. In its notification of subsidy programs to the WTO, the GOC listed this program.

The CBSA has previously countervailed this program in FISC, Line Pipe, Certain Seamless Casing, OCTG, and Certain Pup Joints.

In a recent investigation by the USDOC into Hardwood Plywood from China, it appears that they countervailed this program as the following: Income Tax Reductions under Article 28 of the Enterprise Income Tax.

The financial contribution by the Government consists of government revenue that is otherwise due is foregone or not collected, pursuant to section 2(1.6)(b) of SIMA. The program may be considered specific pursuant to subsection 2(7.2) of SIMA because it is limited to enterprises in certain industries.

Program 18: Municipal/local income or property tax reductions

The CBSA has previously countervailed this program in Stainless Steel Sinks, Unitized Wall Modules, Certain Photovoltaic Modules and Laminates, and Line Pipe under the title “Reduction, Exemption or Refund of Land Use Fees, Land Rental Rates, and Land Purchase/Transfer Prices.”

In a recent investigation by the USDOC into Hardwood Plywood from China, it appears that they countervailed this program as the following: Local Income Tax Exemption and Reduction Programs for “Productive” Foreign Invested Enterprises.

The financial contribution by the Government consists of government revenue that is otherwise due is foregone or not collected, pursuant to section 2(1.6)(b) of SIMA. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 19: Preferential tax policies for foreign-invested enterprises (FIEs)

Despite the implementation of the new Enterprise Income Tax Law (EITL) in 2008, which officially superseded the old FIE Tax Law, FIEs have likely continued to benefit from various incentives that were provided under the older Foreign-Invested Enterprise Tax Law (FIE Tax Law). Specifically, Article 9 of the FIE Tax Law delegates to China’s provincial and local governments the authority to provide exemptions and reductions of local income taxes for “productive” FIEs. Eligibility criteria vary by province and the relevant governmental authorities administer the application process.

The CBSA has previously countervailed this program in Pup Joints and Certain Seamless Casing. Further, the GOC has listed this title in its notification of subsidy programs to the WTO.

In a recent investigation by the USDOC into Hardwood Plywood from China, it appears that they countervailed this program as the following: Income Tax Reductions for Export-Oriented Foreign-Invested Enterprises.

The financial contribution by the government consists of government revenue that is otherwise due is foregone or not collected, pursuant to section 2(1.6)(b) of SIMA. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 20: Preferential tax policies related to research and investment

Under this program based on the 2008 corporate tax law, high- or new-technology enterprises may deduct 50 percent of their total R&D expenses from their taxable income. Eligible expenses include design costs, expenses for materials and fuel consumed through R&D activities, wages, salaries, and benefits for personnel engaged in R&D activities, depreciation expenses on instruments and equipment, and many other expenses.

The CBSA has previously countervailed this program in Certain Photovoltaic Modules and Laminates, Certain Seamless Casing, OCTG, and Pup Joints. Further, the GOC has listed this title in its notification of subsidy programs to the WTO.

In a recent investigation by the USDOC into Hardwood Plywood from China, it appears that they countervailed this program as the following: Tax Offsets for Research and Development under the Enterprise Income Tax; and Tax Offsets for Research and Development by Foreign-Invested Enterprises.

The financial contribution by the government consists of government revenue that is otherwise due is foregone or not collected, pursuant to section 2(1.6)(b) of SIMA. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Category 4: relief from duties and taxes

Program 21: Offsets to taxable income related to purchases of domestic machinery

Under this program, a tax credit up to 40% of the purchase price of domestic equipment may apply to the incremental increase in tax liability from the previous year. The legal bases of this program are the provisional measures on enterprise income tax credit for investment in domestically produced equipment for technology renovation projects of July 1, 1999 and the Notice of the State Administration of Taxation on Stopping the Implementation of the Enterprise Income Tax Deduction and Exemption Policy of the Investments of an Enterprise in Purchasing Home-made Equipment, No. 52 [2008] of the State Administration of Taxation, effective January 1, 2008.

The CBSA has previously countervailed this program in Certain Aluminum Extrusions, Certain Photovoltaic Modules and Laminates, Certain Seamless Casing, Certain Oil Country Tubular Goods and Certain Pup Joints.

The financial contribution by the government consists of government revenue that is otherwise due is foregone or not collected, pursuant to section 2(1.6)(b) of SIMA. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 22: Exemption or refund of tariff and import value-added tax (VAT) for imported technologies and equipment

The program was established to absorb investment in SEZs and encourage districts to take the lead in development. The granting authority responsible for this program is the General Administration of Customs and this program is administered by local customs authorities. Under this program, machinery and equipment, spare parts, raw and semi-processed materials, means of transportation and other capital goods necessary for production that are imported by enterprises in SEZs shall be exempted from import duties.

The CBSA has previously countervailed this program in Certain Photovoltaic Modules and Laminates, Unitized Wall Modules, Certain Seamless Casing, Certain Pup Joints, and Line Pipe.

The financial contribution by the Government consists of government revenue that is otherwise due is foregone or not collected, pursuant to section 2(1.6)(b) of SIMA. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 23: Relief from duties and taxes on imported material and other manufacturing inputs

Under a duty drawback program, a subsidy may exist where the amount of duties and taxes relieved or refunded on inputs incorporated into exported goods is found to be in excess of the actual liability that existed on those imports.

The CBSA has previously countervailed this program in Certain Photovoltaic Modules and Laminates, Certain Seamless Casing, Certain Oil Country Tubular Goods and Certain Pup Joints.

The financial contribution by the Government consists of government revenue that is otherwise due is foregone or not collected, pursuant to section 2(1.6)(b) of SIMA. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 24: Deed tax exemption for SOEs undergoing mergers or restructuring

The GOC imposes a deed tax on transfers of land and real estate. In the context of an ownership transfer by means of an asset sale, as opposed to a stock sale, a deed tax of three to five percent is levied on the amount of the purchase price, and the purchaser is responsible for paying the tax. The GOC’s “Notice of the Ministry of Finance and the State Administration of Taxation on Several Deed Tax Policies Concerning Enterprise Reorganization and Restructuring,” exempts this deed tax where the transfer of ownership occurs as part of the restructuring or merger of an SOE.

This financial contribution by the Government consists of government revenue that is otherwise due is foregone or not collected, pursuant to section 2(1.6)(b) of SIMA. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Category 5: good / services provided by the government at less than fair market value

Program 25: Acquisition of government inputs/utilities at less than fair market value

The complainant alleges that exporters may avail themselves of input materials or utilities from SOE at below fair market value. They have identified the following inputs that may be provided to UDS manufacturers at less than fair market value:M

• Electricity
• Water
• Timber
• Urea/Formaldehyde

The CBSA has previously countervailed this program in Certain Seamless Casing, Certain Oil Country Tubular Goods, Stainless Steel Sinks, Steel Piling Pipe, Large Diameter Carbon and Alloy Steel Line Pipe, and Certain Pup Joints.

This program may constitute a financial contribution pursuant to paragraph 2(1.6)(c) of SIMA as they involve the provision of goods or services, other than general governmental infrastructure. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 26: Provision of land for less than adequate remuneration by government

All land in China belongs to the government (i.e., either national or local governments, or through a “collective” at the township or village level), and government land agencies across China control the allocation of land through the granting of land-use rights.

The CBSA has previously countervailed this program in Line Pipe and Large Diameter Carbon and Alloy Steel Line Pipe.

This financial contribution by the Government consists of government revenue that is otherwise due is foregone or not collected, pursuant to section 2(1.6)(b) of SIMA. The program may be considered specific pursuant to subsection 2(7.3) of SIMA in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Category 1: relief from import tax and duty

Program 1: Exemptions of import tax and duty

Due to similarities, the following programs identified by the complainant will be grouped into one program to be investigated: Exemptions of Import Tax and Duty.

1. Preferential policies on import tax
2. Import duty exemptions for supporting industries
3. Import duty exemptions for enterprises within economic zones, industrial parks or other designated areas
4. Exemption of import tax on equipment and machinery imported to create fixed assets
5. Import duty exemptions on imports of raw materials for exporting goods
6. Import duty exemption on imports of spare parts and accessories for companies in industrial zones
7. Import duty exemptions for foreign-invested entities
8. Import duty exemptions on imported raw materials for export processing enterprises and export processing zones

These programs grant tax and/or duty exemptions on certain imported goods to certain companies, including on goods imported for manufacture of domestic exports and a five-year exemption from import duties on raw materials, supplies and components as described in Articles 12 and 15 of Decree No. 134/2016/ND-CP^{Footnote 60} respectively.

The programs of import duty exemptions are made available pursuant to the Law No. 107/2016/QH13 dated April 6, 2016, on export and import duties (Law No. 107) and Decree No. 134/2016/ND-CP dated September 1, 2016, on guidelines for the law on export and import duties (Decree No. 134). Law No. 107 replaced the Law on Export and Import Tax No. 45/2005/QH11 dated June 14, 2005, on detailing a number of articles of the law on export and import duties (Law No. 45). Decree 134 replaced Decree No. 87/2010/ND-CP dated August 13, 2010, guiding the implementation of a number of articles of the Law on Export Tax and Import Tax (Decree No. 87).

These programs are considered to be a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA, in that amounts that would otherwise be owing and due to the Government are reduced and/or exempted, and confer a benefit to the recipient equal to the amounts of the reductions and exemptions.

These programs may be considered specific pursuant to subsection 2(7.2) of SIMA because they are limited to either enterprises in certain geographic areas or investment projects specified in Appendix 1 and Appendix 2 of Decree No. 118/2015/ND-CP dated November 12, 2015, guiding the implementation of a number of articles of the law on investment.

Program 2: Refunds of import duties

Due to similarities, the following programs identified by the complainant will be grouped into one program to be investigated: Refunds of Import Duties

• Import Duty Refund for Supporting Industries
• Import Duty Refund for Enterprises within Economic Zones, Industrial Parks or Other Designated Areas

These programs allow a refund of duties on certain imported goods, including on certain re-exported imports as described in Article 34 of Decree No. 134/2016/ND-CP, to enterprises located in certain geographic areas.^{Footnote 61}

The import duty refund programs are made available pursuant to the Law No. 107/2016/QH13 dated April 6, 2016, on export and import duties (Law No. 107) and Decree No. 134/2016/ND CP dated September 1, 2016, on guidelines for the law on export and import duties (Decree No. 134). Law No. 107 replaced the Law on Export and Import Tax No. 45/2005/QH11 dated June 14, 2005, on detailing a number of articles of the law on export and import duties (Law No. 45). Decree 134 replaced Decree No. 87/2010/ND-CP dated August 13, 2010, guiding the implementation of a number of articles of the Law on Export Tax and Import Tax (Decree No. 87). Duty refund is stipulated in Article 19 of Law No. 45 and Law No. 107 and specified in Article 15 of Decree No. 87 and Article 33 to 37 of Decree No. 134.

The CBSA recently investigated this program in Corrosion-Resistant Steel Sheet 2 and identified it as a potentially actionable subsidy program.^{Footnote 62}

This program is considered to be a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA, in that amounts that would otherwise be owing and due to the Government are reduced and/or exempted, and confer a benefit to the recipient equal to the amounts of the refund.

The program may be considered specific pursuant to subsection 2(7.2) of SIMA because it is limited to enterprises located in certain geographic areas or contingent upon export performance and, therefore, may constitute a prohibited subsidy as defined in subsection 2(1) of SIMA.

Category 2: relief from land rent, tax and levy

Program 3: Incentives on non-agricultural land use tax

This program grants tax exemptions and reductions for non-agricultural land use. The complainant stated upholstered furniture production is considered a non-agricultural land use.^{Footnote 63}

The CBSA determined this program is an actionable subsidy in Corrosion-Resistant Steel Sheet 2.^{Footnote 64}

Based on CBSA research, non-agricultural land use tax is regulated by Law No. 48/2010/QH12 dated June 17, 2010, on non-agricultural land use tax (Law No. 48); Decree 53/2011/ND-CP dated July 1, 2011, guiding the implementation of this Law No. 48; and Circular No. 153/2011/TT-BTC dated November 11, 2011, guiding on non-agricultural land use tax (Circular No. 153). Articles 9 and 10 of Law No. 48 provide for tax exemption and reduction for non-agricultural land use.

Appendix 1 of Decree No. 118/2015/ND-CP dated November 12, 2015, guiding the implementation of the Law on Investment (Decree No. 118), defines domains eligible for investment promotion and domains eligible for special investment preferences. Appendix 2 of Decree No. 118 defines areas with extreme socio-economic difficulties, areas with socio-economic difficulties eligible for investment preferences.

This program is considered a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA, in that amounts that would otherwise be owing and due to the Government are reduced and/or exempted, and confers a benefit to the recipient equal to the amount of the reduction/exemption.

The program may be considered specific pursuant to subsection 2(7.2) of SIMA because it is limited to industries located in the regions prescribed.

Program 4: Exemptions/reductions of land rent, tax and levy

Due to similarities, the following programs identified by the complainant will be grouped into one program to be investigated: Exemptions/Reductions of Land Rent, Tax and Levy.

• Preferences in leases of land and water surface
• Preference for SMEs in land rents and water surface rents
• Preferences on Land Rents for Enterprises within Economic Zones, Industrial Parks or Other Designated Areas
• Land-Use Levy Exemption/Reduction
• Land Rent Exemption/Reduction
• Land Rent Exemptions for Exporters
• Land Rent Exemptions for Foreign-Invested Enterprises
• Land Rent Exemptions for Enterprises Located in Special Zones

This program grants exemptions or reductions of land rents, taxes and levy to enterprises operating in certain domains and regions entitled to investment incentives.

The CBSA determined this program is an actionable subsidy in Corrosion-Resistant Steel Sheet 2.^{Footnote 65}

Land used for production and business purposes is governed by Law No. 45/2013/QH13 dated June 21, 2013, on Land (Law No. 45); Decree No. 46/2014/ND-CP dated May 15, 2014, on regulating the collection of land rents and water surface rents (Decree No. 46); Circular No. 77/2014/TT-BTC dated June 16, 2014, guiding Decree No. 46/2014/ND-CP; and Circular No. 333/2016/TT-BTC dated December 26, 2016, amending and supplementing a number of articles of Circular No. 77/2014/TT-BTC. Land rent exemption and reduction in land rent are provided in Articles 19 and 20 of Decree No. 46.

The land-use levy exemption/reduction program was terminated on July 1, 2014, as the effective date of the Law No. 45/2013/QH13 dated June 21, 2013, on Land (Law No. 45), replaced Law No. 13. Although this program was terminated on July 1, 2014, companies that were eligible for the program could have benefited from the subsidy while it was in effect. Depending on the size of the benefits, the benefits could potentially be amortized over the following subsequent years.

This program may be considered to be a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA, in that amounts that would otherwise be owing and due to the Government are reduced and/or exempted, and confers a benefit to the recipient equal to the amounts of the reductions and exemptions.

The program may be considered specific pursuant to subsection 2(7.2) of SIMA because it is limited to the List of domains entitled to investment incentives and the List of regions entitled to investment incentives as specified in Article 110 of the Law on Land 2013; Section II, Chapter II of Decree No. 46; and Appendix II of Decree 118/2015/ND-CP.

Category 3: preferential loans and loan guarantees

Program 5: Export and import support in forms of preferential loan, guarantee and factoring

Due to similarities, the following programs identified by the complainant will be grouped into one program to be investigated: Export and Import Support in Forms of Preferential Loan, Guarantee and Factoring

• Preference in Crediting for Supporting Industries
• Export and Import Support in Forms of Preferential Loan, Guarantee and Factoring
• Preferential Lending and Export Credits from the Vietnam Development Bank
• Preferential Lending to Exporters
• Interest Rate Support Program
• Export Factoring
• Financial Guarantees for Export Activities

This program provides financial support to enterprises exporting/importing goods in the forms of preferential loans, guarantees and factoring.^{Footnote 66}

The CBSA has recently investigated this program in Cold-Rolled Steel and in Corrosion-Resistant Steel Sheet 2. In Cold-Rolled Steel, there was no participation from the GOV nor exporters hence the CBSA did not specifically countervail this program at the end of the investigation.^{Footnote 67} In Corrosion-Resistant Steel Sheet 2, the CBSA concluded that this program did not benefit any of the responding exporters during the POI.^{Footnote 68}

As the CBSA collected information on this program in one proceeding only, and the current investigation concerns goods produced in a different export sector, the CBSA will investigate this program at initiation.

Investment credit and export credit are made available pursuant to Decree No. 75/2011/ND-CP dated August 30, 2011, on state investment credit and export credit (Decree No. 75) and Decree No. 151/2006/ND-CP dated December 20, 2006, on state investment credit and export credit (Decree No. 151).

Investment credit is stipulated in Chapter II and Appendix I of Decree No. 75 and in Chapter II and List of Eligible Projects for Investment Credit of Decree No. 151. Export credit is stipulated in Chapter III and Appendix II of Decree No. 75 and in Chapter III and List of Eligible projects for export credit of Decree No. 151. The regulation of guarantee operation is detailed in the Circular 28/2012/TT-NHNN issued by the State Bank of Vietnam.

This program may be considered to be a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the Government and confers a benefit to the recipient equal to the amount of the grant.

The program may be considered specific pursuant to paragraph 2(7.2)(b) of SIMA as it is contingent upon export performance and, therefore, constitute a prohibited subsidy as defined in subsection 2(1) of SIMA.

Category 4: preferential tax programs

Program 6: Enterprise income tax preferences, exemptions and reductions

Due to similarities, the following programs identified by the complainant will be grouped into one program to be investigated: Enterprise Income Tax Preferences, Exemptions And Reductions

• Preferential policies on corporate income tax
• Preference in Environmental Protection for Supporting Industries
• Corporate Income Tax Exemptions/Reductions for Enterprises within Economic Zones, Industrial Parks or Other Designated Areas
• Establishments Dealing with Exported Goods
• Tax Exemptions and Reductions for Investment in Disadvantaged Regions
• Tax Exemptions and Reductions for Encouraged Sectors
• Enterprise Income Tax Exemption/Reduction for Business Expansion and Intensive Investment Projects
• Tax Preferences for Investors Producing and/or Dealing in Export Goods
• Establishments Dealing with Exported Goods
• Preferential Income Tax Rates for Enterprises Within Economic Zones or Industrial Parks
• Tax Exemptions and Reductions for Foreign-Invested Enterprises
• Income Tax Preferences to Companies in Special Zones
• Income Tax Preferences for Exporters
• Income Tax Preferences for Small And Medium-Sized Enterprises
• Income Tax Exemptions and Reductions for Business Expansion and Intensive Investment
• Preferential Income Tax Programs for Foreign Invested Entities

This program provides corporate income tax preferences and benefits in the form of preferential rates, exemptions and/or reductions to certain types of enterprises either involved in specific operations or located in specific geographical areas.

The CBSA investigated corporate income tax preferences, exemptions and reductions in Copper Pipe Fittings 2, Cold-Rolled Steel and Corrosion-Resistant Steel Sheet 2.

Corporate income tax and tax benefits are governed by Law No. 14/2008/QH12 dated June 3, 2008, on Enterprise Income Tax 2008 (Law No. 14); Law No. 32/2013/QH13 dated June 19, 2013, on amending and supplementing a number of articles of Law on Enterprise Income Tax 2008 (Income Tax 2008 Amending); Law No. 71/2014/QH13 dated December 8, 2014, on amending and supplementing a number of articles of the laws on taxes (Law No. 71); Decree No. 218/2013/ND-CP dated December 26, 2013, on detailing and guiding the implementation of law on corporate income tax (Decree No. 218) and Decree No. 12/2015/ND-CP dated February 12, 2015, on elaboration of the law on amendments to tax laws (Decree No. 12). Income tax rate preference is provided in Article 15 of Decree No. 218 and tax exemptions and reductions is provided in Article 16 of Decree No. 218.

Article 20.2 of Decree 218 allows the continuation of the application of corporate income tax preferences granted before the Decree’s effective date as of February 15, 2014, if those preferences are more advantaged than those granted under Decree 218.

According to Article 15 of Law No. 67/2014/QH13 dated November 26, 2014, on the Law on Investment (Law No. 67), corporate income tax preferences apply to: (1) Economic zone, high-tech zone established by Decision of the Prime Minister in area with difficult socio-economic conditions; (2) Industrial, processing zone established by Decision of the Prime Minister in areas with special difficult socio-economic conditions specified in Attachment II to Decree No. 118/2015/ND-CP dated November 12, 2015, on guidelines for some articles of the law on Investment (Decree No. 118).

This program is considered a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA, in that amounts that would otherwise be owing and due to the Government are reduced and/or exempted, and confers a benefit to the recipient equal to the amount of the reduction/exemption.

The program may be considered specific pursuant to subsection 2(7.2) of SIMA because it is limited to investment projects within certain eligible geographic areas as specified in Article 15 of Law No. 67.

Program 7: Vat preferences, exemptions and reductions

Due to similarities, the following programs identified by the complainant will be grouped into one program to be investigated: Vat Preferences, Exemptions and Reductions.

• Preference in VAT for Supporting Industries
• Preference in VAT Exemptions/Reductions for Enterprises within Economic Zones, Industrial Parks or Other Designated Areas

This program provides VAT preferences in the form of preferential rates, exemptions and/or reductions to individuals and organizations of supporting industries or to enterprises located within certain eligible geographic areas.

This program is considered to be a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA, in that amounts that would otherwise be owing and due to the government are reduced and/or exempted, and confer a benefit to the recipient equal to the amounts of the reductions and exemptions.

The program may be considered specific pursuant to subsection 2(7.2) of SIMA because eligibility is limited to supporting industries or enterprises located in specific geographical areas.

Program 8: Accelerated depreciation of fixed assets

This program lets certain enterprises operating in investment incentive sectors and geographical areas accelerate the depreciation of fixed assets, hereby conferring a benefit in the form of a reduction or exemption of an otherwise amount owing and due to the Government.

The CBSA recently investigated this program in Corrosion-Resistant Steel Sheet 2 and identified it as a potentially actionable subsidy program.^{Footnote 69}

This program may be considered a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA, in that amounts that would otherwise be owing and due to the Government are reduced and/or exempted, and confers a benefit to the recipient equal to the amount of the reduction/exemption.

The program may be considered specific pursuant to subsection 2(7.2) of SIMA because it is limited to particular enterprises with fixed assets and specialized technological capabilities.

Category 5: grants and grant equivalents

Program 9: Investment support

Due to similarities, the following programs identified by the complainant will be grouped into one program to be investigated: Investment Support.

• Preference for SMEs in Investment Credits
• Preference in investment by geographical areas

Investment Support programs provide extra financial support for new investment projects to enterprises of certain sectors operating in certain geographical areas.

The CBSA investigated this program in Cold-Rolled Steel and recently in Corrosion-Resistant Steel Sheet 2 and determined it is an actionable subsidy.

Investment Support is made available pursuant to Decree 108/2006/ND-CP of the Government, dated September 22, 2006. Decree 108 details in which areas the government will support new investments.

This program may be considered to be a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA, in that amounts confer a benefit to the recipient equal to the amount of the extra support received from the Government.

The program may be considered specific pursuant to subsection 2(7.2) of SIMA because it is limited to a list of sectors entitled to investment incentives and a list of geographical areas entitled to investment incentives as specified in Appendix I and II and of the Law.

Program 10: Export promotion

This program provides funds for trade promotion related activities to enterprises for specific trade promotion schemes.

The CBSA determined this program is an actionable subsidy in Corrosion-Resistant Steel Sheet 2.

The National Trade program was established by Decision No. 279/2005/QD-TTg of November 3, 2005. The Decision constituted the framework for state-funded trade promotion activities from 2006 to 2010. The state funding of these activities was derived from the Export Promotion Fund, established pursuant to Prime Minister's Decision No. 195/1999/QD-TTg. The Decision 279 was amended and supplemented by Prime Minister's Decision No. 80/2009/QD-TTg of May 21, 2009.

This program is considered to be a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA, where a direct transfer of funds from the Government confers a benefit to the recipient equal to the amount of the grant.

The program is specific pursuant to subsection 2(7.2) of SIMA because Article 9 of Decision 279 specifies the types of trade promotion schemes that are eligible for support and Article 10 specifies the level of support that is available for each of the eligible schemes.

Program 11: Consultancy support for small and medium-sized enterprises

This program provides a benefit in the form of a financial contribution to SMEs for consulting support offered via a consultant network. Through this program, micro-businesses, small and medium enterprises can benefit from 10%, 30% or 100% in subsidy of the consultancy contract value up to a certain amount, depending on their enterprise size and the value of the contract.

This program is governed by Circular No. 06/2019/TT-BKHDT dated March 29, 2019, on guidelines for organization and operation of consultant network, consultancy support for small and medium-sized enterprises through consultant network. The program took effect on May 12, 2010, and is given authority by The Ministry of Planning and Investment.

This program may be considered to be a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the Government and confers a benefit to the recipient equal to the amount of the grant.

According to the complainant, this subsidy is specific pursuant to subsection 2(7.3) of SIMA, in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 12: Support for the human resources development of small and medium-sized enterprises

This program provides a benefit in the form of a financial contribution to women-owned small and medium-sized enterprises (SMEs) for training-related activities in the fields of entrepreneurship and business administration for women employees. SMEs may receive 100% subsidy for training expenses for women at women-owned SMEs and a subsidy of at least 50% for the organization of a training course in entrepreneurship and business administration. Per Decree No. 118.2015/ND-CP, SMEs may receive a 100% subsidy for training expenses if they are located in extremely disadvantaged areas.

This program is governed by Circular 05/2019/TT-BKHDT dated March 29, 2019 on support for the human resources development of SMEs. The program took effect on May 12, 2020, and is given authority by The Ministry of Planning and Investment.

This program may be considered to be a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the Government and confers a benefit to the recipient equal to the amount of the grant.

According to the complainant, this subsidy is specific pursuant to subsection 2(7.3) of SIMA, in that the manner in which discretion is exercised by the granting authority indicates that the subsidy may not be generally available.

Program 13: Grants to firms that employ more than 50 employees

This program provides direct financial support to enterprises of a certain size.

The CBSA investigated this program in Copper Pipe Fittings 2 and Cold-Rolled Steel. The CBSA identified this program as a potentially actionable subsidy in Copper Pipe Fittings 2.

This program is made available pursuant to Decree No. 51/1999/ND-CP dated July 8, 1999, detailing the implementation of Law No. 3/1998/QH10 on Domestic Investment Promotion (Amended) (Decree No. 51). Article 15 of Decree No. 51 provides the eligibility criteria for investment preferences. Articles 16 to 27 provides for various types of preferences for eligible investments.

The last date that a company could apply for or claim benefits under this program was July 1, 2006, the date which Law No. 59/2005/QH11 dated November 29, 2005, on the Law on Investment (Law No. 59) came into effect. Articles 27 to 31 of Law No. 59 provides for the domains and sectors entitled to investment preference, including “labour intensive industries”. Articles 32 to 44 provides for investment preferences and supports.

This program may be considered a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the government and confers a benefit to the recipient equal to the amount of the grant.

The program may be considered specific pursuant to subsection 2(7.2) of SIMA because it is limited to particular enterprises with a certain size entitled to investment preferences because of operations in certain domains and sectors.

Program 14: Assistance to enterprises facing difficulties due to objective reasons

This program provides benefits in the form of direct financial support or reductions or exemptions of amounts owed to the government to companies facing difficulties that arise as the result of unforeseen reasons, such as policy changes in terms of taxation and other dues to the state budget; relocation of enterprises upon request of competent authorities; loss due to natural disaster, etc.

The CBSA investigated this program in Cold-Rolled Steel and in Corrosion-Resistant Steel Sheet 2. The CBSA concluded that none of the responding exporters benefitted from this program in Corrosion-Resistant Steel Sheet 2.

Depending on the form of benefit, this program may be considered a financial contribution pursuant to paragraph 2(1.6)(a) of SIMA as a direct transfer of funds from the Government and confers a benefit to the recipient equal to the amount of the grant.

This program may also be considered a financial contribution pursuant to paragraph 2(1.6)(b) of SIMA, in that amounts that would otherwise be owing and due to the government are reduced and/or exempted, and confers a benefit to the recipient equal to the amount of the reduction/exemption.

The program may be considered specific pursuant to subsection 2(7.2) of SIMA because it is limited to particular enterprises targeted by the GOV.

Category 6: goods/services provided by the government at less than fair market value

Program 15: Utilities provided at less than fair market value for enterprises in industrial zones

This program provides rates of water, power and other utilities for Less Than Adequate Remuneration (LTAR) to enterprises located in industrial zones in designated geographic regions.

This program was specifically identified by the complainant citing the USDOC final determination in the countervailing duty investigation of Laminated Woven Sacks from Vietnam.

Although the CBSA did not list this as a specific program to be investigated in either Copper Pipe Fittings 2, Cold-Rolled Steel or Corrosion-Resistant Steel Sheet 2, the CBSA investigated state-provided utilities and whether exporters were offered preferred utility rates.

This program may constitute a financial contribution pursuant to paragraph 2(1.6)(c) of SIMA as it involves the provision of services, other than general governmental infrastructure.

The program may be considered specific pursuant to subsection 2(7.2) of SIMA because it is limited to enterprises located in industrial zones in designated geographic regions.