6.1 Serious prejudice in the sense of paragraph c) of Article 5 shall be deemed to exist in the case of:

a) the total ad valorem subsidization

1) The total ad valorem subsidization shall be calculated in accordance with the provisions of Annex IV.

of a product exceeding 5 per cent

2) Since it is anticipated that civil aircraft will be subject to specific multilateral rules, (the threshold in this subparagraph does not apply to civil aircraft.

;

b) subsidies to cover operating losses sustained by an industry;

c) subsidies to cover operating losses sustained by an enterprise, other than one-time measures which are non-recurrent and cannot be repeated for that enterprise and which are given merely to provide time for the development of long-term solutions and to avoid acute social problems;

d) direct forgiveness of debt, i.e. forgiveness of government-held debt, and grants to cover debt repayment.

3) Members recognize that where royalty-based financing for a civil aircraft programme is not being fully repaid due to the level of actual sales falling below the level of forecast sales, this does not in itself constitute serious prejudice for the purposes of this subparagraph.

6.2 Notwithstanding the provisions of paragraph 1, serious prejudice shall not be found if the subsidizing Member demonstrates that the subsidy in question has not resulted in any of the effects enumerated in paragraph 3.

6.3 Serious prejudice in the sense of paragraph c) of Article 5 may arise in any case where one or several of the following apply:

a) the effect of the subsidy is to displace or impede the imports of a like product of another Member into the market of the subsidizing Member;

b) the effect of the subsidy is to displace or impede the exports of a like product of another Member from a third country market;

c) the effect of the subsidy is 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;

d) the effect of the subsidy is an increase in the world market share of the subsidizing Member in a particular subsidized primary product or commodity

1) Unless other multilaterally agreed specific rules apply to the trade in the product or commodity in question.

as compared to the average share it had during the previous period of three years and this increase follows a consistent trend over a period when subsidies have been granted.

6.4 For the purpose of paragraph 3b), the displacement or impeding of exports shall include any case in which, subject to the provisions of paragraph 7, it has been demonstrated that there has been a change in relative shares of the market to the disadvantage of the non-subsidized like product (over an appropriately representative period sufficient to demonstrate clear trends in the development of the market for the product concerned, which, in normal circumstances, shall be at least one year). "Change in relative shares of the market" shall include any of the following situations: a)there is an increase in the market share of the subsidized product; b) the market share of the subsidized product remains constant in circumstances in which, in the absence of the subsidy, it would have declined; c) the market share of the subsidized product declines, but at a slower rate than would have been the case in the absence of the subsidy.

6.5 For the purpose of paragraph 3c), price undercutting shall include any case in which such price undercutting has been demonstrated through a comparison of prices of the subsidized product with prices of a nonsubsidized like product supplied to the same market. The comparison shall be made at the same level of trade and at comparable times, due account being taken of any other factor affecting price comparability. However, if such a direct comparison is not possible, the existence of price undercutting may be demonstrated on the basis of export unit values.

6.6 Each Member in the market of which serious prejudice is alleged to have arisen shall, subject to the provisions of paragraph 3 of Annex V, make available to the parties to a dispute arising under Article 7, and to the panel established pursuant to paragraph 4 of Article 7, all relevant information that can be obtained as to the changes in market shares of the parties to the dispute as well as concerning prices of the products involved.

6.7 Displacement or impediment resulting in serious prejudice shall not arise under paragraph 3 where any of the following circumstances exist

2) The fact that certain circumstances are referred to in this paragraph does not, in itself, confer upon them any legal status in terms of either GATT 1994 or this Agreement. These circumstances must not be isolated, sporadic or otherwise insignificant.

during the relevant period:

a) prohibition or restriction on exports of the like product from the complaining Member or on imports from the complaining Member into the third country market concerned;

b) decision by an importing government operating a monopoly of trade or state trading in the product concerned to shift, for noncommercial reasons, imports from the complaining Member to another country or countries;

c) natural disasters, strikes, transport disruptions or other force majeure substantially affecting production, qualities, quantities or prices of the product available for export from the complaining Member;

d) existence of arrangements limiting exports from the complaining Member;

e) voluntary decrease in the availability for export of the product concerned from the complaining Member (including, inter alia, a situation where firms in the complaining Member have been autonomously reallocating exports of this product to new markets);

f) failure to conform to standards and other regulatory requirements in the importing country.

6.8 In the absence of circumstances referred to in paragraph 7, the existence of serious prejudice should be determined on the basis of the information submitted to or obtained by the panel, including information submitted in accordance with the provisions of Annex V.

6.9 This Article does not apply to subsidies maintained on agricultural products as provided in Article 13 of the Agreement on Agriculture.