If a WTO member concludes that another member is

providing a prohibited or actionable subsidy as defined by

Articles 3 and 5 of the ASCM, it can challenge the subsidy
using multilateral dispute settlement procedures.
Prohibited subsidies are specific types of subsidies (export
and import substitution subsidies), while actionable
subsidies include all specific subsidies that have certain
predefined adverse effects. This chapter discusses the
concepts of prohibited and actionable subsidies and then
provides an overview of the multilateral remedy procedures
applicable.

Article 3.1 provides that subsidies contingent upon export

performance and those contingent upon the use of
domestic over imported goods are prohibited. If a member
grants or maintains a prohibited subsidy, other WTO
members may challenge the subsidy in a special
multilateral dispute settlement procedure, described in the
last part of this chapter.

Article 3.1(a) prohibits subsidies that are contingent, in law

or in fact, whether solely or as one of several other
conditions, upon export performance, including the
programs enumerated in the illustrative list of export
subsidies in Annex I of the ASCM.

The word contingent in Article 3.1(a) means the grant of

the subsidy must be conditional or dependent upon export
performance; the export contingency may be the sole
condition governing the grant of a prohibited subsidy or it
may be one of several other conditions.

Article 3.1(b) prohibits subsidies that are contingent,

whether solely or as one of several other conditions, upon
the use of domestic over imported goods.

Specific subsidies that do not meet the Article 3.1 definition

of prohibited subsidies are actionable. Unlike prohibited
subsidies, actionable subsidies are permissible so long as
they do not cause adverse effects to the interests of other
members.
Article 5 defines adverse effects as follows:
(i) injury to the domestic industry of another Member;
(ii) nullification or impairment of benefits accruing directly
or indirectly to other Members under GATT 1994 in
particular the benefits of concessions bound under Article
II of GATT 1994; or
(iii) serious prejudice to the interests of another Member.

The concept of injury to the domestic industry of another

member involves an analysis of the effects of allegedly
subsidized imports on prices in the domestic market for
like products and of the impact on the imports on the
domestic producers of the like product.

Article 6 provides further guidance on the concept of

serious prejudice, including the threat of serious prejudice.
Article 6.1 previously contained rules for assessing whether
serious prejudice has occurred; however, as per Article 31 of
the ASCM, they expired at the end of 1999. Consequently,
proof of serious prejudice must now be made primarily
with reference to the above-mentioned rules of Article
6.3.13 Article 6.3 provides that serious prejudice may arise
where an actionable subsidy has one or more of the
following effects:

1. it displaces or impedes imports of a like product of

another member into the market of the subsidizing
member;
2. it displaces or impedes the exports of a like product of
another member from a third-country market;
3. it results in a significant price undercutting by the
subsidized product as compared with the price of a like
product of another member in the same market or
significant price suppression, price depression, or lost sales
in the same market; or
4. it leads to an increase in the world market share of the
subsidizing member in a particular primary product or
commodity as compared to the average share it had during
the previous period of 3 years, and this increase follows a
consistent trend over a period when subsidies have been
granted.