March 19, 2003

EC approves German shipbuilding subsidy scheme
In accordance with the European Council Regulation establishing a "Temporary Defensive Mechanism" (TDM) for shipbuilding, the European Commission has authorized Germany's shipbuilding aid scheme. In line with the TDM, the scheme's aim is to offset the effects of unfair competition from Korea in the shipbuilding sector. The scheme will allow subsidies of up to 6% of a ship's contract price. These funds may be granted to German shipyards in cases where has been unfair competition from Korean yards offering a lower price.
The TDM is part of the EU's twin-track strategy to counter alleged unfair Korean practices in the shipbuilding sector. In October 2002, the initiated WTO proceedings against Korea and at the same time permitted Member States to give shipyards temporary support for the period during which the WTO case is under consideratio

The German aid scheme approved by the Commission today, allows for aid of up to 6% of a ship's contract value that may be granted for the construction of containerships, product and chemical tankers.

German yards are eligible for this aid where there has been competition for the contract from a Korean yard offering a lower price.

In accordance with the general provisions of the Council Regulation on the TDM the German scheme is an extraordinary and temporary measure, which is limited in scope, time and also aid intensity.

The principal provisions of the TDM - which also govern the application of the measures to be put into practice by Germany - are the following: the maximum aid intensity is limited at 6% of the contract value and the scope is limited to container ships, product and chemical tankers and Liquefied Natural Gas (LNG) tankers.

Possible subsidization of LNG carrier construction is, however, subject to a new Commission investigation under the Trade Barriers Regulation (TBR) covering the full year 2002. Aid may only be granted if this study confirms that Community yards building this type of ship suffer material injury and serious prejudice, which is caused directly by unfair Korean practices.

The Council Regulation will expire on March 31, 2004. Its duration is tailored to take account of the time necessary for a WTO panel to reach its conclusions, i.e., 18 months from the end of September 2003.

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