- Trade topics
A subsidy is a financial contribution made by (or on behalf of) a government or a public body that gives the recipient a benefit.
Some subsidies are used to pursue domestic or social policies, for example supporting industries that help create new jobs. However, unfair subsidies can distort the EU market, create unfair competition and therefore damage European industry.
The EU can impose duties to counteract a subsidy, but only if it is limited to a specific firm, industry, or group of firms or industries. Export subsidies, and subsidies based on using domestic goods over imported ones, are specific.
This document is for information purposes only and is no way binding on the Commission and the European Union. Only the text of the relevant Regulations as published in the Official Journal of the European Union is authentic and legally binding.
Types of subsidy
The recipient benefits when financial contributions are provided on more favourable terms than those available on the market.
A financial contribution can be:
- a direct or potential transfer of funds (e.g. grants, loans, equity injection or loan guarantees);
- government revenue abandoned or not collected (e.g. tax credits);
- a government providing goods and services, apart from infrastructure;
- a government purchasing goods and;
- any of the above done by a private company on the instruction of the government.
A specific subsidy is limited to a particular sector (e.g. ceramics or chemicals). A subsidy that is broadly available, like helping small businesses regardless of the industrial sector, is not considered specific.
The EU's anti-subsidy investigation
When an EU industry thinks that imports of a product from a non-EU country are subsidised and injuring the EU industry producing the same product, it can lodge a complaint with the Commission.
If the complaint shows evidence of subsidy and injury, the Commission must open an anti-subsidy investigation.
In special circumstances, the Commission may also initiate an investigation on its own initiative, i.e. without having received a complaint. This is commonly referred to as an ‘ex officio’ initiation.
While not based on a formal complaint, an ‘ex officio’ initiation is subject to the same legal and evidential requirements as those applicable to complaints. Thus the Commission may only initiate an investigation on its own motion if it has sufficient evidence of dumped imports causing injury to European industry.
Such evidence is normally only available to the European producers concerned. It requires knowledge and evidence that imports of a specific product would be dumped and, more critically, access to detailed business proprietary data relating to the performance of an industry at the level of that specific product.
Therefore ‘ex officio’ investigations are in practice limited to circumstances where the parameters of a case (e.g. definition of the product scope and the relevant information on the situation faced by the affected European producers) are already established.
A typical example is the initiation of anti-circumvention investigations. Via its monitoring of existing measures, the Commission may become aware of practices that result in the evasion of anti-dumping measures. In such circumstances, the Commission initiates ‘ex officio’ anti-circumvention investigations without awaiting a formal request from the European producers concerned.
The investigation checks if:
- the imports benefit from countervailable subsidies, including those identified in the complaint or discovered in the course of the investigation;
- the EU industry suffers material injury;
- there is a causal link between the injury and the subsidised imports, and;
- putting measures in place is in the European interest.
Types of countervailing measures
Countervailing measures counteract the effects of subsidised imports on the EU market and restore fair competition. The measures can be:
- adding a percentage of the price to the goods;
- a fixed amount per unit;
- applying a minimum import price, or;
- a 'price undertaking', where the exporter commits to sell the product under investigation above a minimum price. In return, the Commission doesn't impose a duty.
The Commission monitors import volumes and prices of all products subject to measures, to make sure the countervailing measures are working. It does so in close cooperation with:
- the customs authorities of EU countries;
- the Commission tax and customs department, and;
- the European fraud prevention agency (OLAF).
The exporting country may also agree to remove or limit the unfair subsidy.
Interim and expiry reviews
Countervailing measures lapse after five years. In that period, the Commission can conduct an interim review.
An interim review shall be initiated where the request contains sufficient evidence that the continued imposition of the measure is no longer necessary to offset the countervailable subsidy and/or that the injury would be unlikely to continue or recur if the measure were removed or varied, or that the existing measure is not, or is no longer, sufficient to counteract the countervailable subsidy which is causing injury.
In the final year of measures, the EU producers may ask the Commission to conduct an expiry review. This review determines whether the expiry of the measures could lead to continued or recurring subsidisation and injury. If so, the measures may continue for another five years.
Importers can also request a refund of the duties paid when they think that the amount of subsidy has been reduced or eliminated.
More on Anti-subsidy
- Regulation (EU) 2016/1037 on protection against subsidised imports from countries not members of the European Union
- Commission Notice concerning the reimbursement of anti-dumping duties (2014/C 164/09)
The EU's anti-subsidy rules are based on a 1994 WTO agreement which allows remedial action to be taken against subsidies that are considered an unfair trade practice.
The Commission has also adopted guidelines for calculating the amount of a subsidy.