351.524—Allocation of benefit to a particular time period.
Unless otherwise specified in §§ 351.504-351.523, the Secretary will allocate benefits to a particular time period in accordance with this section.
(a) Recurring benefits.
The Secretary will allocate (expense) a recurring benefit to the year in which the benefit is received.
(b) Non-recurring benefits—
(1) In general.
The Secretary will normally allocate a non-recurring benefit to a firm over the number of years corresponding to the average useful life (“AUL”) of renewable physical assets as defined in paragraph (d)(2) of this section.
(2) Exception.
The Secretary will normally allocate (expense) non-recurring benefits provided under a particular subsidy program to the year in which the benefits are received if the total amount approved under the subsidy program is less than 0.5 percent of relevant sales (e.g., total sales, export sales, the sales of a particular product, or the sales to a particular market) of the firm in question during the year in which the subsidy was approved.
(c) “Recurring” versus “non-recurring” benefits—
(1) Non-binding iIlustrative lists of recurring and non-recurring benefits.
The Secretary normally will treat the following types of subsidies as providing recurring benefits: Direct tax exemptions and deductions; exemptions and excessive rebates of indirect taxes or import duties; provision of goods and services for less than adequate remuneration; price support payments; discounts on electricity, water, and other utilities; freight subsidies; export promotion assistance; early retirement payments; worker assistance; worker training; wage subsidies; and upstream subsidies. The Secretary normally will treat the following types of subsidies as providing non-recurring benefits: equity infusions, grants, plant closure assistance, debt forgiveness, coverage for operating losses, debt-to-equity conversions, provision of non-general infrastructure, and provision of plant and equipment.
(2) The test for determining whether a benefit is recurring or non-recurring.
If a subsidy is not on the illustrative lists, or is not addressed elsewhere in these regulations, or if a party claims that a subsidy on the recurring list should be treated as non-recurring or a subsidy on the non-recurring list should be treated as recurring, the Secretary will consider the following criteria in determining whether the benefits from the subsidy should be considered recurring or non-recurring:
(i)
Whether the subsidy is exceptional in the sense that the recipient cannot expect to receive additional subsidies under the same program on an ongoing basis from year to year;
(ii)
Whether the subsidy required or received the government's express authorization or approval (i.e., receipt of benefits is not automatic), or
(iii)
Whether the subsidy was provided for, or tied to, the capital structure or capital assets of the firm.
(d) Process for allocating non-recurring benefits over time—
(1) In general.
For purposes of allocating a non-recurring benefit over time and determining the annual benefit amount that should be assigned to a particular year, the Secretary will use the following formula:
Code of Federal Regulations
Where:
Ak = the amount of the benefit allocated to year k,
y = the face value of the subsidy,
n = the AUL (see paragraph (d)(2) of this section),
d = the discount rate (see paragraph (d)(3) of this section), and
k = the year of allocation, where the year of receipt = 1 and 1 ≤ k ≤ n.
(2) AUL—
(i) In general.
The Secretary will presume the allocation period for non-recurring subsidies to be the AUL of renewable physical assets for the industry concerned as listed in the Internal Revenue Service's (“IRS”) 1977 Class Life Asset Depreciation Range System (Rev. Proc. 77-10, 1977-1, C.B. 548 (RR-38)), as updated by the Department of Treasury. The presumption will apply unless a party claims and establishes that the IRS tables do not reasonably reflect the company-specific AUL or the country-wide AUL for the industry under investigation, subject to the requirement, in paragraph (d)(2)(ii) of this section, that the difference between the company-specific AUL or country-wide AUL for the industry under investigation and the AUL in the IRS tables is significant. If this is the case, the Secretary will use company-specific or country-wide AULs to allocate non-recurring benefits over time (see paragraph (d)(2)(iii) of this section).
(ii)
Definition of “significant.” For purposes of this paragraph (d), significant means that a party has demonstrated that the company-specific AUL or country-wide AUL for the industry differs from AUL in the IRS tables by one year or more.
(iii) Calculation of a company-specific or country-wide AUL.
A calculation of a company-specific AUL will not be accepted by the Secretary unless it satisfies the following requirements: the company must base its depreciation on an estimate of the actual useful lives of assets and it must use straight-line depreciation or demonstrate that its calculation is not distorted through irregular or uneven additions to the pool of fixed assets. A company-specific AUL is calculated by dividing the aggregate of the annual average gross book values of the firm's depreciable productive fixed assets by the firm's aggregated annual charge to accumulated depreciation, for a period considered appropriate by the Secretary, subject to appropriate normalizing adjustments. A country-wide AUL for the industry under investigation will not be accepted by the Secretary unless the respondent government demonstrates that it has a system in place to calculate AULs for its industries, and that this system provides a reliable representation of AUL.
(iv) Exception.
Under certain extraordinary circumstances, the Secretary may consider whether an allocation period other than AUL is appropriate or whether the benefit stream begins at a date other than the date the subsidy was bestowed.
(3) Selection of a discount rate.
(i) In general.
The Secretary will select a discount rate based upon data for the year in which the government agreed to provide the subsidy. The Secretary will use as a discount rate the following, in order of preference:
(A)
The cost of long-term, fixed-rate loans of the firm in question, excluding any loans that the Secretary has determined to be countervailable subsidies;
(ii) Exception for uncreditworthy firms.
In the case of a firm considered by the Secretary to be uncreditworthy (see § 351.505(a)(4) ), the Secretary will use as a discount rate the interest rate described in § 351.505(a)(3)(iii).