Article VI of the GATT 1994 dealt with the provisions of subsidies and Countervailing measures in general, but these provisions have been elaborated in the Agreement on Subsidies and Countervailing Measures to set the definition of subsidies, its forms, and mechanisms for addressing it and reducing its adverse effects. The Agreement on Subsidies and Countervailing Measures defines the concept of subsidies in general and where subsidies are Specified or prohibited, which allows Member States to take action to address it. The agreement allows the importing member states​, if they have conducted an objective investigation through which their import from the product under investigation is established to receive specific subsidies, which has caused or threatened to cause material injury or obstructed an establishing ​industry to impose Countervailing measures on such imports equal to the number of subsidies calculated.

In the event that a Member State of the organization does not import the product in its domestic markets, the products that receive specific subsidies in the markets of the State granting subsidies or in the markets of other States, WTO may be resort to requesting the cancellation of the specific subsidies program.

 

It is a financial contribution, directly or indirectly, provided by the government of the member states​ of the organization or any public authority thereto (or from a private entity entrusted to it by the government to provide subsidies programs) by providing funds, grants, loans, financing, ensuring financing on non-commercial terms, providing free services or goods (other than public infrastructure), less than their commercial prices, deduction or exemption from fees or taxes due to the government or any form of income or price subsidies with the aim of increasing exports, reducing imports or any other subsidies, and for the benefit of the subsidy recipients.

Taking action against subsidies programs is only possible by imposing countervailing measures on imports receiving subsidies or by resorting to the World Trade Organization provided that said subsidies are specified or prohibited. ​

A government subsidies program in any country whatsoever is not considered illegal​ and subject to countervailing measures or may require the intervention of the World Trade Organization unless such government subsidies are specified or prohibited and result in a benefit to the recipient, and causes material injury or threaten to cause material injury or retardation of the establishment of an ​establishing domestic industry.

• Type 1: Prohibited Subsidies
  

  Subsidies specific by their nature, i.e. subsidies imposing conditions related to export performance or using domestic goods instead of imported goods.
  Any of the member states can confront this type of subsidy by resorting to the World Trade Organization and request its elimination without the need to prove the material injury or threat to cause material injury, or request the suspension of its WTO obligations which shall be equal to the amount of the provisionally calculated amount of prohibited subsidization offered by the granting country. The prohibited subsidy can be confronted by imposing countervailing measures that do not exceed the calculated amount of subsidy, if the member state imports the product that receives prohibited (specific) subsidies, after conducting an objective examination that proves the receipt of the prohibited (specific) subsidy, as well as the material injury or threat to cause material injury and the causal link between them.

• Type 2: Specific Subsidies​
  

  The granted subsidy (whether within or outside the law system),  which is only available to a certain industry, company, group of industries or companies, targeting a specific geographical area in the member state, or when the subsidy is prohibited.
  The member state that imports products with specified subsidies ​can impose countervailing measures without exceeding the calculated subsidy amount,if an objective examination conducted to prove that the subsidized imports cause material injury or threaten to cause material injury or retardation of the establishment of domestic industry​. Furthermore, the member state affected by products receiving specific subsidies in the markets of the country of origin or another member state can turn to the WTO to request an investigation on this product. If the injury proven, it may request to cancel the specified​ subsidies program or the suspension of its WTO obligations, which shall be equal to the amount of the provisionally calculated amount of prohibited subsidization offered by the granting country.

• Direct or indirect financial contribution.
• Contribution granted by a government of a member state, an official entity related to the government, or a private entity mandated by the government to provide the subsidy.
• Subsidies resulting in a benefit to the recipient of the subsidy.
• The subsidies shall be specific or prohibited.
  

If the specific subsidy is proven, countervailing measures are calculated on the basis of the calculated subsidy amount for each unit of the imported product receiving the specific subsidy.

 

The subsidy is specific when the granting authority limits access to the subsidy to a specific institution, industry, or geographic area, when a large part of it is actually granted to certain institutions, or when the subsidies are prohibited.

The purpose of imposing countervailing measures is to counteract the injury or material retardation of an establishment of the domestic industry​ caused by the specific subsidy. This is the result of the government's allocation of specific subsidies, which provides a certain industry with an unfair competitive advantage in its export prices of subsidized products, as opposed to local producers in the importing country, which do not receive a specific subsidy. Therefore, factories benefiting from specific subsidies can unfairly lower their prices, allowing them to acquire market shares in importing countries at the expense of domestic producers​ in these countries.

The amount of subsidy is the amount that represents the benefit received by the recipient of the subsidy. The investigation authority determines the amount of subsidy by calculating the value of the recipient's benefit, as per the following equations:

• Determine the total amount of subsidy allocated to the products under investigation during the investigation period.
• Expenses related to the subsidy's request, as well as taxes, fees, any expenses associated with the export of the product under investigation, or discounts requested by the relevant party, shall be deducted from the subsidy amount.
• The value of the benefit is determined on a per-unit basis.

Example: Total benefit value = Total subsidy amount - total expenses and fees = 100,000-20000 = $80,000 Benefit value per unit of the product under investigation = Total benefit value ÷ Number of units of the product under investigation = 80000÷8000 = $10 per unit

The requirements for filing a countervailing measures complaint, investigation procedures, investigation period, as well as subsidy and injury investigation period, are similar to anti-dumping requirements. Moreover, the requirements to determine injury and causal link are compatible with the provisions of the anti-dumping investigation.