Once the necessary findings are made, the United States Government may then impose countervailing duties to offset the impact of a subsidy. The duties are paid by the importer of record in addition to any other customs duties or charges applicable at the time of entry. The theory underlying the law is that by collecting a countervailing duty equal to the net subsidy provided by the foreign government, any unfair advantage is eliminated.

The general rule favours the calculation of individual countervailing duty rates for each exporter or producer investigated. A weighted average 'all others' rate applies to those exporters or producers not individually investigated. The averaging excludes those individual rates found to be de minimis or determined wholly on the basis of facts available (formerly called 'best information available'). If exporter-specific rates are too burdensome, the Commerce Department has the discretion to calculate a single countrywide rate.

To calculate the subsidy rate for a particular programme, the Commerce Department divides the value of the subsidy benefit in the period of investigation by the sales in that period that are 'tied' to the benefit from the subsidy programme. This calculation requires the Commerce Department to separately define the numerator and denominator. The numerator is the amount of the subsidy benefit. The denominator is the sales value of the product to which the subsidy is attributed. The Commerce Department then calculates the overall subsidy rate by dividing the numerator by the denominator.

One potential complication in making this calculation is that there are different types of sales denominators. The type of sales denominator used depends on the nature of the underlying subsidy programme. For example, for a domestic subsidy the Commerce Department will use the total sales of all products (domestic and export, subject and non-subject) to calculate the subsidy margin. For an export subsidy, the Commerce Department will use total sales of all exported products (subject and non-subject) to calculate the subsidy margin. The following sample calculations for different types of subsidies will to help clarify the methodology used by the Commerce Department to calculate the subsidy margin.

For a recurring grant linked to a particular product, assume a pharmaceutical company receives an annual, recurring grant from the government of $1 million to produce a particular drug called GEN. Assume further that the pharmaceutical company's total sales of GEN (both home market and exports) amount to $10 million. In this case, the Commerce Department will calculate the subsidy rate by dividing the total amount of the subsidy by total sales of GEN, as shown below:

Subsidy rate: 1,000,000 10,000,000 = 0.1, or 10%

The Commerce Department would use a similar approach to calculate the subsidy rate for tax credits tied to exports. In this example, assume a steel mill receives a $10 tax credit for every $100 in exports. Assume further that the steel company exported a total of $10,000 during the year, creating a total benefit of $1,000. In this case, the Commerce Department would calculate an overall subsidy rate of 10%, as shown below:

Subsidy rate: 1,000 10,000 = 0.1, or 10%

A final example shows the methodology that would be used for preferential export financing on a loan for exports to the United States market. In this example, assume the government provides preferential export financing for a company's exports of any product to the United States. The benefit is the difference between the financing cost under the government programme and the financing cost under a market interest rate - assume $500. To calculate the subsidy rate, the Commerce Department would take the value of the company's sales to the United States of all products - assume $15,000 - and divide by the total subsidy amount of $500, yielding an overall subsidy rate of 3.33%, as shown below:

Subsidy rate: 500 15,000 = 0.033, or 3.33%

These rules seem easy, but in practice there can be fierce debates over just what goes into the denominator. Depending on how these issues are resolved, the subsidy margin could go up or down by a considerable amount.

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