./.WORLD TRADE
ORGANIZATIONG/SCM/Q3/DMA/7
26 July 2002
(02-4145)
Committee on Subsidies
and Countervailing MeasuresOriginal:  English
SUBSIDIES
Requests Pursuant to Article 27.4 of the Agreement
on Subsidies and Countervailing Measures
Replies to Follow-Up Questions Posed by the UNITED STATES1
Regarding the Notification of DOMINICA2
The following communication, dated 25 July 2002, has been received from the Trade and
Marketing Division for the Commonwealth of Dominica.
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Fiscal Incentives Programme
We remain concerned with the local valu e added requirements under this programme.
The discussion at the recent special meeting of the Committee on Subsidies and Countervailing
Measures concerning this issue was useful in explaining how this programme operates.
However, we seek further clarification con cerning the local value added requirements, and
therefore request consideration of the following additional questions:
Q1. Under this programme, local value added is defined as the amount realized from the
sales of the product after subtracting, among oth er things, the cost of imported raw materials,
components, parts of components, fuels and servic es. We seek clarification, therefore, whether
the use of domestically sourced raw materials,  components and parts determines, in any way,
the duration of the incentives provided under this programme.
Q2. From your explanation of the local value added requirements in G/SCM/Q3/DMA/5, it
appears that to some extent weight is in fa ct given to the sourcing of raw materials from
domestic sources in determining the duration of  the benefits under this programme.  Please
explain.
Answer to questions 1 and 2.
According to the Fiscal Incentives Act, the pe rcentage of local value added realised from
sales is used to determine the length of the tax holiday and hence the source of raw materials would to
an extent determine the length of the tax holiday.  However, in recent past and in practice the source
of raw materials, components and parts is given very little consideration in granting fiscal incentives
                                                     
1 G/SCM/Q3/DMA/6
2 G/SCM/N/74/DMAG/SCM/Q3/DMA/7
Page 2
to enterprises.  This reflects a general policy shift away from seeking to encourage the use of local
materials.  Greater consideration is given to employment generation.
Furthermore, any raw materials, which would be sourced from local sources, are very limited
and are primarily agricultural.  Apart from these all other raw materials needed for manufacturing areimported, as there is virtually no domestic production of these inputs, a factor that contributes to the
high production costs in Dominica and necessitates the granting of fiscal incentives.
As was indicated in the Government’s Report of the Trade Policy Review of Dominica,
Government does intend to revisit the existing policy and legislative framework for investment
promotion and facilitation.  Within that context the Fiscal Incentives Act will be amended to ensure
full compliance with WTO obligations.
Q3. Please provide the implementing legislation, and any relevant amendments, under this
programme and any accompanying regulations and decrees.
Reply
The copy of the legislation attached to our notification in document G/SCM/N/74/DMA
constitutes the entire legislation and amendments under this programme.
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