"Subsidy" refers to any specific assistance (e.g. financial contribution, income or price support schemes) directly or indirectly provided by the government of the country of export or origin in respect of the product imported into the Philippines.

An industry is deemed to have received subsidy where a benefit is conferred as a result of:

- Direct and/or potential transfer of government funds (e.g., grants, loans, equity infusion, loan guarantees);

-  The government foregoing the revenue that should otherwise have been collected (e.g., tax credits); and

- The government providing goods or services, or purchasing goods.

Subsidization is not illegal nor prohibited. However, when it injures Philippine producers, countervailing duties can be imposed after a formal investigation.

The following conditions must be met for imported products to be considered subsidized:

-    subsidy must be specific and amount of subsidy must be at least 1% ad valorem

-    the imported product is injuring or threatening to injure or retard the establishment of a domestic industry; and

-    there is a causal link to show that injury to the local industry is due to subsidization.

The imposition of the countervailing duty seeks to remedy, not punish, unfair pricing of imported products. The imposition of the duty generally benefits the domestic producers by causing the cessation or reduction of unfairly traded imports or by causing their prices to increase.