EC Extends Shipbuilding Subsidies to LNG Carriers

The European Commission (EC) has decided to extend the granting of temporary and limited state aids in the shipbuilding sector to liquefied natural gas (LNG) carriers. The action is being taken to offset perceived subsidies by South Korea to its shipyards. EU Trade Commissioner Pascal Lamy said: "Today's decision offers a temporary relief to European LNG shipyards which are facing serious difficulties, while Korea continues to price ships below cost. I trust the WTO will soon condemn these unfair practices and that Korea will put an end to them." This decision takes place after an in-depth investigation in the framework of the Trade Barriers Regulation has confirmed that Korean unfair practices have injured EU shipyards in this sector. Direct aid in support of contracts for the building of LNG carriers will now be authorized in accordance with the provisions of Council regulation (EC) No 1177/2002 of 27 June 2002 concerning a temporary defensive mechanism to shipbuilding. Such aid is already, since October 2002, authorized for containerships and product and chemical tankers." The principal provisions of the temporary defensive mechanism are the following: Maximum aid intensity of 6% of contract value; Scope now covering container ships; product and chemical tankers and Liquefied Natural Gas (LNG) tankers; Expiry of the Regulation: March 31, 2004 to take account of the time necessary for a WTO panel to reach its conclusions.