Special Safeguard Provision (SSP)

Generally, safeguard action can be taken only if there is existence of serious injury or the threat of serious injury to domestic production, whereas the special safeguard action can be taken without the demonstration of any adverse effect on domestic production. A special safeguard action can be taken if the import price falls below a particularly prescribed level (trigger price) or if the import quantity rises above a particularly prescribed level (trigger quantity).

Price trigger.

The trigger price is normally to be determined as the average cost, insurance and freight (CIF) import price of the product during the 1986-88 base period. If the trigger price is high, the import price may fall below this level more often, and consequently, it will be easier to take the special safeguard action.

Formula for the calculation of the ceilings of price trigger.

1) if the difference between the trigger price and the import price is 10% of the trigger price or less, no additional duty can be imposed;

2) if the difference is more than 10%, but not more than 40%, the additional duty will be 30% of the amount by which the difference exceeds 10%;

3) if the difference is more than 40%, but not more than 60%, the additional duty will be 50% of the amount by which the difference exceeds 40%, plus the duty in 2);

4) if the difference is more than 60%, but not more than 75%, the additional duty will be 70% of the amount by which the difference exceeds 60%, plus the duty in 3);

5) if the difference is more than 75%, the additional duty will be 90% of the amount by which the difference exceeds 75%, plus the duty in 4).

For example, when the trigger price is $200 per unit, and the current price falls to $80 per unit, the difference is $120.

According to 1), there is no additional duty if the difference is only up to 10% of the trigger price, i.e., $20.

According to 2), up to $80, the duty is 30% of $60 (%80-$20), i.e., $18.

Thereafter, up to a difference of 60%, i.e., $120, the duty is 50% of the difference exceeding 40%, i.e., 50% of $40 ($120-$80), i.e., $20.

Hence, the additional duty may be to the extent of $18+$20, i.e., $38 on each unit.

Quantity trigger.

If the volume of imports is higher than a trigger level of 105-125% of the average level of imports during the preceding three years, and the import is above 30% or 10-30% of the domestic consumption, special safeguard measures can be imposed. Higher import penetration will enable a Member to take SSP action at a lower level of increase in imports.

Formula for the calculation of base trigger level, i.e., the increase in the import quantity:

1) if the import is 10% of domestic consumption or less, 125% of the average quantity of imports in the three preceding years for which data are available;

2) if the import is 10-30% of domestic consumption or less, 110% of the average quantity of imports in the three preceding years for which data are available;

3) if the import is above 30% of domestic consumption or less, 105% of the average quantity of imports in the three preceding years for which data are available;

The actual trigger level is the sum of the increase in import quantity and the change in domestic consumption, and must not be less than 105% of the average quantity of imports in the three preceding years for which data are available.

The measure is, under the SSP, an increase in duty, which must not exceed one-third of the ordinary customs duty and will terminate by the end of the imposing year. For example, when domestic consumption is 1000 units and the import quantity is 280 units, i.e., 28% of domestic consumption, the base trigger import quantity level will be 110% of 280 units, i.e., 308 units. Suppose the consumption has grown to 1000 units from 900 units, which means a change in consumption of +100 units, the actual trigger level in this case is 308+100, i.e., 408 units. If the import quantity exceeds 408 units, an additional duty can be imposed. Suppose the ordinary customs duty on this item is 30%, the maximum additional duty that can be imposed is one-third of 30%, i.e., 10%.

Domestic Support.

Reduction of domestic support.

Domestic support measures are disciplined through reductions in the Total Aggregate Measurement of Support (Total AMS), including product-specific AMS and non-product-specific AMS. The Total AMS is a means of quantifying the aggregate value of domestic support or subsidy given to each category of agricultural products.

Example: Calculation of the current total AMS.

Member X (developed country), year Y

Wheat:

> Intervention price for wheat = $255 per tonne

> Fixed external reference price (world market price) = $110 per tonne

> Domestic production of wheat = 2,000,000 tonnes

> Value of wheat production = $510,000,000

> Wheat AMS (AMS 1) ($255–$110) x 2,000,000 tonnes = $290,000,000

(de minimis level=$25,500,000)

Barley:

> Deficiency payments for barley = $3,000,000> Value of barley production = $100,000,000

> Barley AMS (AMS 2) = $3,000,000

(de minimis level=$5,000,000).

Oilseeds:

> Deficiency payments for oilseeds = $13,000,000> Fertilizer subsidy = $1,000,000

> Value of oilseeds production = $250,000,000

> Oilseeds AMS (AMS 3) = $14,000,000

(de minimis level=$12,500,000)

Support not specific to products.

> Generally available interest rate subsidy = $ 4,000,000

Value of total agricultural production = $860,000,000

> Non-product-specific AMS (AMS 4) = $4,000,000

de minimis level=$43,000,000

Current total AMS (AMS 1 + AMS 3) = $304,000,000.

If a support measure exists but the method of calculation of the AMS cannot be applied to it, the calculation of an equivalent measurement of support (EMS), i.e., budgetary outlays, will be made and included in the Total AMS.

Generally, price support is measured by multiplying the gap between the applied administered price and a specified fixed external reference price, i.e., world market price, by the quantity of production eligible to receive the administered price. The fixed external reference price is the average unit price during the period 1986-88. It is the FOB price for the net exporting country and the CIF price for the net importing country.

The schedule on the reduction in domestic support prescribes that the Base Total AMS must be reduced by 20% for developed Members over 6 years (1995-2000 both inclusive) and 13.3% for developing Members over 10 years (1995-2004 both inclusive), while there is no reduction required of least-developed countries.

Measures of domestic support.

Domestic support measures are the aid granted to agricultural production that are not export subsidies. These aids are classified into three categories of two types: green and blue box measures free of reduction commitments and yellow/amber box measures subject to reduction commitments.

Green box measures: measures having no or at most minimal trade-distorting effects or effects on production, and must be provided through a publicly-funded program (including revenue foregone) not involving transfer from consumers. It implies a preference for agriculture support policies financed in a transparent way by the taxpayer as opposed to price support policies financed by the consumers.

1) Government service programs for agriculture and the rural community, such as pest and disease controls, support for training and information, infrastructure (water, electricity) or research programs, which involve no direct payments.

2) Domestic food aid programs for people in need, provided that products are bought from producers at market prices, and aid for public storage of agricultural products for food security purposes.

3) Direct payment: aid for developing agricultural structures such as resource retirement programs, or investment aid for producers totally and permanently retire from production, or de-coupled income support measures granted to producers suffering an income loss and not related to the quantities produced or the prices charged or factors of production employed.

4) Regional assistance for farmers in disadvantaged regions and environmental aid

5) Payments for relief from natural disasters.

Blue box measures: direct payments under production limiting programs made on fixed areas and yield or a fixed number of livestock, or on 85% or less of production in a defined base period, particularly aids respecting certain criteria precisely met by European direct support (the central pillar of the very recent CAP reforms) for products subject to quantitative production limits and deficiency payments granted by the US.

Blue box measures can be considered to be partially-decoupled, that is, production is still required in order to receive the payments, but the actual payments do not relate directly to the current quantity of that production.

Amber/yellow box measures: any domestic support measures not correspond to the exceptional arrangements of the green and blue boxes are classified as being yellow and must therefore be included in the calculation of reduction commitments. The reduction commitment is a global commitment. In other words, Members have not undertaken to reduce the support granted to each product by 20%. A Member is considered to be in compliance with its domestic support commitments if its domestic support in favor of agricultural producers expressed in terms of current total AMS does not exceed the corresponding annual or final bound commitment level specified in its Schedule.