19 C.F.R. § 351.523

Upstream subsidies

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(a) Investigation of upstream subsidies—(1) In general. Before investigating the existence of an upstream subsidy (see section 771A of the Act), the Secretary must have a reasonable basis to believe or suspect that all of the following elements exist:

(i) A countervailable subsidy, other than an export subsidy, is provided with respect to an input product;

(ii) One of the following conditions exists:

(A) The supplier of the input product and the producer of the subject merchandise are affiliated;

(B) The price for the subsidized input product is lower than the price that the producer of the subject merchandise otherwise would pay another seller in an arm's-length transaction for an unsubsidized input product; or

(C) The government sets the price of the input product so as to guarantee that the benefit provided with respect to the input product is passed through to producers of the subject merchandise; and

(iii) The ad valorem countervailable subsidy rate on the input product, multiplied by the proportion of the total production costs of the subject merchandise accounted for by the input product, is equal to, or greater than, one percent.

(b) Input product. For purposes of this section, “input product” means any product used in the production of the subject merchandise.

(c) Competitive benefit—(1) In general. In evaluating whether a competitive benefit exists under section 771A(b) of the Act, the Secretary will determine whether the price for the subsidized input product is lower than the benchmark input price. For purposes of this section, the Secretary will use as a benchmark input price the following, in order of preference:

(i) The actual price paid by, or offered to, the producer of the subject merchandise for an unsubsidized input product, including an imported input product;

(ii) An average price for an unsubsidized input product, including an imported input product, based upon publicly available data;

(iii) The actual price paid by, or offered to, the producer of the subject merchandise for a subsidized input product, including an imported input product, that is adjusted to account for the countervailable subsidy;

(iv) An average price for a subsidized input product, including an imported input product, based upon publicly available data, that is adjusted to account for the countervailable subsidy; or

(v) An unadjusted price for a subsidized input product or any other surrogate price deemed appropriate by the Secretary.

For purposes of this section, such prices must be reflective of a time period that reasonably corresponds to the time of the purchase of the input.

(2) Use of delivered prices. The Secretary will use a delivered price whenever the Secretary uses the price of an input product under paragraph (c)(1) of this section.

(d) Significant effect—(1) Presumptions. In evaluating whether an upstream subsidy has a significant effect on the cost of manufacturing or producing the subject merchandise (see section 771A(a)(3) of the Act), the Secretary will multiply the ad valorem countervailable subsidy rate on the input product by the proportion of the total production cost of the subject merchandise that is accounted for by the input product. If the product of that multiplication exceeds five percent, the Secretary will presume the existence of a significant effect. If the product is less than one percent, the Secretary will presume the absence of a significant effect. If the product is between one and five percent, there will be no presumption.

(2) Rebuttal of presumptions. A party to the proceeding may present information to rebut these presumptions. In evaluating such information, the Secretary will consider the extent to which factors other than price, such as quality differences, are important determinants of demand for the subject merchandise.

Notes of Decisions

Cited in 5 cases (1 in the last 5 years), 2009–2024 · leading case: Gov't of Sri Lanka v. United States, 2018 CIT 43 (Ct. Intl. Trade 2018).

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Gov't of Sri Lanka v. United States, 2018 CIT 43 (Ct. Intl. Trade 2018). “See also 19 C.F.R. § 351.523 . Commerce simply responded that such an analysis was unnecessary because Commerce only countervailed GSL's reimbursement payments to Camso.”

Beijing Tianhai Indus. Co. v. United States, 2015 CIT 14 (Ct. Intl. Trade 2015). “The court further finds plaintiff’s contention that Commerce should have analyzed the transactions in question under the “upstream subsidy” provision of 19 C.F.R. § 351.523 or under 19 C.F.R. § 351.”

Comm. Overseeing Action for Lumber Int'l Trade Investigations or Negot. v. United States, 2024 CIT 50 (Ct. Intl. Trade 2024). · cites it 2× “28 Commerce asserted that the Coalition failed to submit an upstream subsidy allegation consistent with the requirements of 19 C.F.R. § 351.523 (a). I&D Mem. at 38. That regulation defines “input product” to “mean[] any product used in the production of the subject merchandise.”

Washington Int'l Ins. Co. v. United States, 2009 CIT 78 (Ct. Intl. Trade 2009). “413 (1% or less considered “insignificant” for certain adjustments; therefore, greater than 1% considered significant); 19 C.F.R. § 351.523 (a)(1)(iii) (1% considered minimum threshold to trigger certain analysis); 19 C.”

Washington Int'l Ins. v. United States, 33 Ct. Int'l Trade 1023 (Ct. Intl. Trade 2009). “413 (1% or less considered “insignificant” for certain adjustments; therefore, greater than 1% considered significant); 19 C.F.R. § 351.523 (a)(l)(iii) (1% considered minimum threshold to trigger certain analysis); 19 C.”

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