A. Imported Goods from China

The Indonesian government, in this case the Ministry of Trade (“MOT”), will impose a high tax value, especially for goods imported from China. The General Director of Foreign Trade of the Ministry of Trade, Budi Santoso, said that it is possible that the tax rate will be up to 200% for imported goods from China.

Currently, the Indonesian Trade Safeguard Committee (Komite Pengamanan Perdagangan Indonesia, or “KPPI”) is investigating the imported goods from China. If KPPI finds that there are goods that the Chinese government subsidizes, the Indonesian government will possibly impose a tax policy of up to 200%. (Quote: https://www.cnbcindonesia.com/news/20240630061351-4-550498/siap-siap-ri-bakal-terapkan-barang-impor-dari-china-kena-pajak-200#top).

B. The Subsidies and Countervailing Measures

In addition, there are international arrangements related to the Subsidies and Countervailing Measures regulated under:

1. General Agreement on Tariff and Trade 1947 ("GATT 1947"); and
2. Agreement on Subsidies and Countervailing Measures ("ASCM").

Pursuant to Article 1 paragraph 1 point A ASCM, the subsidy constitutes a financial contribution by a government or any public body within the territory of a Member, inter alia:

1. government practice involves a direct transfer of funds (e.g. grants, loans, and equity infusions), potential direct transfers of funds or liabilities (e.g. loan guarantees);
2. government revenue that is otherwise due is foregone or not collected (e.g. fiscal incentives such as tax credits);
3. the government provides goods or services other than general infrastructure or purchases goods;
4. the government makes payments to a funding mechanism, or entrusts or directs a private body to carry out one or more of the types of functions illustrated in (i) to (iii) above, which would normally be vested in the government, and the practice, in no real sense, differs from practices normally followed by governments.

Furthermore, 3 types of subsidies are regulated in ASCM, the types of subsidies, inter alia:

1. the prohibited subsidies as regulated in Article 3 paragraph 1 ASCM.
2. the actionable subsidies as regulated in Article 5 ASCM.
3. the non-actionable as regulated in Article 8 paragraph 2 ASCM.

C. Consultation and Investigation of the Alleged Subsidy

If KPPI finds the alleged subsidies upon the imported goods, the following Steps for Handling Subsidy Investigations and Anti-Dumping Measures, as follows:

1. Consultation (Article 13 ASCM): The importing country must consult with relevant parties before proceeding with any actions related to subsidy investigations.
2. Notification (Article 11 ASCM): The importing country is required to notify the country of origin of the subsidized goods before moving forward with the investigation.
3. Initiation of Subsidy Investigation (Article 11 ASCM): This includes making public announcements, filing petitions, and distributing questionnaires to gather information from the relevant parties.
4. Verification (Article 11 ASCM): The importing country must verify the responses received from the relevant parties during the investigation process.
5. Hearing (Article 11 ASCM): A formal hearing is conducted as part of the investigation to review the evidence and arguments presented by all involved parties.
6. Temporary Countervailing Duty (Article 17 ASCM): The importing country may impose a temporary countervailing duty if preliminary findings indicate harmful subsidies.
7. Final Decision (Articles 18 and 19 ASCM): The investigation concludes with a final decision, which may include imposing a countervailing duty and measures to stabilize domestic prices.

Furthermore, there are several recommended actions for Exporting Parties Facing Subsidy Allegations

1. Active Participation: The exporting party should actively engage and cooperate throughout each stage of the subsidy investigation process.
2. Monitoring Deadlines: It is essential for the exporting party to closely monitor investigation timelines and ensure timely responses.
3. Questionnaire Responses: The exporting party should provide detailed and accurate responses to questionnaires in good faith and within the specified deadlines. 
4. Document Preservation: The exporting party should maintain and organize all critical financial documents relevant to the investigation.
5. On-Site Verification Cooperation: The exporting party must cooperate with the investigation team during on-site verifications, demonstrating transparency and good faith.
6. Understanding Importing Country Regulations: The exporting party should be well-versed in the subsidy regulations of the importing country to effectively address any allegations. 
7. Rebuttal Preparation:

The exporting party should prepare and submit comprehensive rebuttals to counter any subsidy allegations.

In an investigation to determine whether a product is subsidized or subject to dumping, specific methodologies are employed to assess if the dumping is significant. According to Article VI of GATT 1947, dumping is classified by comparing the product's normal price, primarily based on the domestic market price in the exporting country. If this method is not applicable, there are two alternative approaches: (i) using the price from another exporting country, or (ii) calculating the normal price based on the exporter’s production costs, associated expenses, and a normal profit margin. Article VI of GATT 1947 also outlines how to make a fair comparison between the export price and the calculated normal price for dumped products.

Under Article VI, paragraph 6 (a) of GATT 1947, anti-subsidy or anti-dumping duties may be imposed on imported products if it is determined that the dumping or subsidization causes, or threatens to cause, material injury to an established domestic industry or significantly delays the establishment of a domestic industry. The provisions for anti-subsidy or anti-dumping actions detail the procedures for initiating a case, conducting the investigation, and ensuring that all interested parties have the opportunity to present evidence. These measures typically expire five years after their implementation, unless an investigation reveals that terminating the measures would result in material injury.

The anti-subsidy or anti-dumping investigation must be promptly terminated if the authorized body determines that the subsidy or dumping margin is insignificant (defined as less than 2% of the export price). Additionally, the investigation must be terminated if the volume of subsidized or dumped goods is minimal (e.g. if the volume of imports from a single country is less than 3% of the total imports). However, the investigation may continue if several countries collectively supply less than 3% of imports but together account for 7% or more of total imports.

GATT 1947 and ASCM require member countries to inform the Anti-Subsidy Committee of all anti-subsidy actions from the start to the conclusion of the process, ensuring timely and clear communication. Member countries must also report on the entire investigation process twice a year. In cases of differing opinions, members are encouraged to consult with one another. If consultations do not resolve the issue, the parties may use the WTO’s dispute settlement procedures.

D. Dispute Settlement Upon the Subsidy

ASCM outlines the procedures for dispute settlement related to subsidies, which vary depending on the type of subsidy:

1. Prohibited Subsidy

For disputes involving prohibited subsidies, as outlined in Article 4 of the ASCM, there are three key procedures:

Consultations and Referral to DSB: If a mutually agreed solution is not reached within 30 days of the consultation request, any Member party involved may refer the matter to the Dispute Settlement Body (DSB) for the immediate establishment of a panel. The DSB will establish the panel unless a consensus decides otherwise.

Panel and PGE Involvement: Upon the panel's establishment, it may seek assistance from the Permanent Group of Experts (PGE) to determine whether the measure in question is a prohibited subsidy. The PGE reviews the evidence and allows the Member to apply the measure to demonstrate that it is not a prohibited subsidy. The PGE reports its findings to the panel, and these findings are accepted by the panel without modification. The panel then circulates its final report to all Members within 90 days, recommending that the subsidizing Member withdraw the subsidy without delay, specifying the time frame for compliance.

Appeals and Enforcement: If the panel's report is unsatisfactory to the alleged party, they may appeal the decision to the Appellate Body, which must issue its decision within 30 days, extendable to 60 days if necessary. The DSB adopts the appellate report unless a consensus decides otherwise. If the subsidizing Member does not comply with the panel's recommendation within the specified time frame, the DSB authorizes the complaining Member to take appropriate countermeasures, unless rejected by consensus.

Arbitration Option: The parties involved may also request arbitration to determine the appropriateness of the countermeasures.

2. Actionable Subsidy

The dispute settlement procedures for actionable subsidies, as governed by Article 7 of the ASCM, are similar to those for prohibited subsidies, with a key difference:

Consultation Request: When requesting consultations, the affected country must include a statement of available evidence regarding (a) the existence and nature of the subsidy, and (b) the injury caused to the domestic industry, or the nullification, impairment, or serious prejudice to the interests of the Member requesting consultations.

3. Non-Actionable Subsidy

Although non-actionable subsidies are generally not considered harmful, a country may request consultations if it believes that a subsidy program has caused serious adverse effects to its domestic industry, leading to potentially irreparable damage.

Consultations: The country granting or maintaining the subsidy must enter into consultations as quickly as possible to clarify the facts and reach a mutually acceptable solution.

Committee Review: If no solution is reached within 60 days, the requesting country may refer the matter to the ASCM Committee, which will review the facts and evidence. If the Committee finds adverse effects, it may recommend that the subsidizing country modify the program to eliminate these effects.

Countermeasures: If the subsidizing country does not follow the Committee's recommendation within six months, the Committee will authorize the requesting country to take appropriate countermeasures, proportional to the nature and degree of the adverse effects.