I can recall talking with a number of people about the issue of whether a subsidy may exist where the financial contribution goes to one entity, but the benefit is to another. It appears that this issue has come up in the DS379 dispute. Here's a question from the panel to the U.S., and the U.S. response:
35. (To the United States) Please react to China’s argument at the second substantive meeting that there is no support in WTO jurisprudence for the proposition that a subsidy determination may be based on a finding of financial contribution to one entity, and of benefit to another entity, without a prior finding that the first entity received a benefit.
103. China is incorrect. As the Mexico – Olive Oil panel emphasized, a pass-through analysis is not required any time “there is any arms’-length transaction between unrelated companies in the chain of the production of an imported product subject to a countervail investigation. . . .”140 Indeed, paraphrasing the findings of the Appellate Body in US – Countervailing Measures, the panel noted that, “under Article 1.1(b), a benefit might be received by different recipients, . . . the recipient of the benefit might be different from the recipient of the financial contribution, and . . . a subsidy can be bestowed directly or indirectly, and in respect of production, manufacture or export of a product.”141 “In other words, it is not necessary to identify the particular recipient or recipients of the benefit and the particular manner in which a subsidy is bestowed in order to determine that a benefit has been conferred, and that therefore a subsidy exists, within the meaning of Article 1.1(b).”142
104. As the United States has explained,143 in the investigations China challenges, Commerce determined, in accordance with SCM Article 1.1, that China made a financial contribution (i.e., a provision of a good) to the trading companies that purchased input products from state-owned producers.144 Commerce also found that a benefit was conferred upon producers of subject merchandise that purchased input products from the trading companies because the input products were sold for less than adequate remuneration within the meaning of Article 14(d) of the SCM Agreement.145 Commerce explained that “[f]or these transactions, the GOC’s financial contribution (provision of a good) is made to the trading company suppliers that purchase the [input product], while all or some portion of the benefit is conferred on the [subject merchandise] producers who purchase the [input product] from the trading company suppliers.”146 Thus, in these investigations, in some instances, the recipient of the financial contribution, the trading company, was different from the recipient of the benefit that Commerce countervailed, the producer of subject merchandise. This is contemplated by the SCM Agreement, as the Olive Oil panel explained.147
105. It was not necessary to measure any benefit that may have been received by the trading companies. The amount or portion of any benefit received by the trading companies is irrelevant for the purpose of determining the benefit conferred upon the subject merchandise producers. What matters is that Commerce properly identified a financial contribution and the amount of the benefit conferred upon the producers of subject merchandise. As the United States has explained,148 Commerce did so by comparing the price paid by producers of subject merchandise to the trading companies with an appropriate benchmark price. As a result of such comparisons, Commerce determined in the challenged investigations that producers of subject merchandise received a benefit when they purchased government-provided goods because the price paid for such goods was less than the benchmark price.149
106. Commerce’s analysis identified only the amount of benefit that effectively “passed through” the trading companies and was conferred upon producers of subject merchandise. Commerce’s determinations were thus consistent with the requirements of the SCM Agreement and do not raise the concerns at issue in the Appellate Body’s admonition that “. . . Members must not impose duties to offset an amount of the input subsidy that has not passed through to the countervailed processed products.”150
