A New Era for Agricultural Subsidies: Commerce Opens Door to Countervailing Broad Farm Subsidies

The U.S. Department of Commerce (Commerce) recently issued a preliminary determination in the fresh mushrooms from Canada countervailing duty (CVD) investigation (Fresh Mushrooms from Canada) that raises the likelihood of higher countervailing duties on agricultural exports by agricultural producers, both abroad and in the United States.¹

Under the U.S. CVD statute and World Trade Organization (WTO) law, for a subsidy to be countervailable, it must be “specific to a particular enterprise, industry, or group thereof.”² Commerce has a longstanding practice, and until December 2024 had a regulatory prohibition, against finding specificity where the government support is provided to the entire agricultural sector.³ When it repealed the so-called “agricultural specificity exception” regulation in December 2024, Commerce stated that it “should not be construed as a change in policy.”⁴

However, in Fresh Mushrooms from Canada, the first U.S. CVD investigation into an agricultural product since the regulatory change, Commerce seems to have departed from its prior practice. In Fresh Mushrooms from Canada, Commerce preliminarily countervailed certain direct and indirect tax exemptions available to the entire Canadian agricultural industry, regardless of province or crop.

The new approach is preliminary, but if continued into the final determination anticipated in December, it will expand the scope of countervailable programs and increase the CVD risk for all foreign producers and exporters of agricultural products to the United States. Furthermore, U.S. agricultural exports will also face the risk of foreign CVD regimes making retaliatory policy changes. Thus, foreign and domestic agricultural producers alike should be aware of these changes and the resulting risk of higher CVD rates and an expanded universe of countervailable agricultural subsidy programs.

I. Background

Commerce has long recognized that the agricultural sector is generally too broad and diverse to constitute a specific industry or group of industries for CVD purposes. Recent regulatory changes and Commerce’s Fresh Mushrooms from Canada preliminary determination, however, suggest a potential shift in the agency's approach.

A. The Agricultural Specificity Exception Prior Practice

The requirement that a countervailable subsidy must be specific⁵ is rooted in Commerce practice and U.S. case law, which has held that “all governments, including the United States, intervene in their economies to one extent or another, and to regard all such interventions as countervailable subsidies would produce absurd results.”⁶ To avoid these absurd results and preserve states’ economic regulatory autonomy, generally available tax or fiscal policies where the benefit is “broadly available and widely used throughout an economy” are not countervailable.⁷ This approach was also adopted by the WTO in the SCM Agreement in 1994.⁸

Historically, Commerce considered the agricultural sector writ large to be too broad and diverse and declined to find subsidies provided to the entire agricultural sector to be specific. As early as 1983, Commerce declined to countervail Mexico’s provision of water to the agricultural sector for less than adequate remuneration because it was not specific:

This uniform low rate applies, however, to the water used for all agricultural purposes in this area. Preferential rates are not provided to the producers of any one agricultural product. We do not consider the provision of water at a uniform rate to all agricultural producers in this region to be a benefit, which would constitute a bounty or grant, because we consider the agricultural sector to constitute more than a single group of industries within the meaning of the Act.⁹

This position continued throughout the 1980s, and Commerce’s “practice of considering the agricultural sector to constitute more than a specific industry or group of industries” was reaffirmed again in Certain Fresh Cut Flowers from Mexico as well as in other cases.¹⁰ In 1991, the U.S. Court of International Trade further affirmed this practice by holding that “Commerce correctly assumed that agriculture and the related agricultural activities did not constitute an ‘industry’ or ‘group of industries.’"¹¹

After the 1998 Uruguay Round Agreements Act implemented the WTO agreements into U.S. law, including the specificity requirement, Commerce promulgated regulations to conform its practice. In these regulations, Commerce stated that it “will not regard a subsidy as being specific under {19 U.S.C. § 1677(5A)(D)} solely because the subsidy is limited to the agricultural sector.”¹² In the preamble to the final rule, Commerce further explained that¹³ 

Instead, as under prior practice, {Commerce} will find an agricultural subsidy to be countervailable only if it is specific within the agricultural sector, e.g., a subsidy is limited to livestock, or livestock receive disproportionately large amounts of the subsidy. 

Commerce followed this regulation for the next three decades and even argued before the WTO that where crop insurance subsidies are “available to the whole United States agricultural sector, it is too broad and diverse to constitute a single ‘enterprise or industry or group of enterprises or industries.’”¹⁴ In its domestic CVD investigations, Commerce continued to conclude that assistance provided to the agricultural sector was not specific and could not be countervailed.¹⁵ Where Commerce did countervail agricultural subsidy programs, it did so under a finding of adverse facts available,¹⁶ de facto specificity,¹⁷ or where the program was limited to a group of enterprises or industries within the agricultural sector (e.g., “aquaculture and short-cycle agriculture industries” or “olive growers”).¹⁸

B. New Approach to Agricultural Programs

The tides began to change in July 2024 when Commerce proposed removing the agricultural specificity exception regulation that had prohibited finding specificity based on use by the entire agricultural sector. Commerce explained that “economic circumstances have changed” around the world and agriculture now represents a “declining share” of countries’ gross domestic product and employment. Thus, Commerce argued, where the agricultural sector comprises a “discrete segment” of the economy, such a prohibition may be in conflict with the statutory language because it requires Commerce to analyze specificity based on “the jurisdiction of the authority providing the subsidy.”¹⁹ Commerce stated that its analysis of whether an agricultural subsidy is specific would be examined on a case-by-case basis. Despite removing the agricultural specificity exception, in the final rule, the Department emphasized that it would continue to apply the statutory specificity criteria, and the elimination of “the agriculture exception to specificity should not be construed as a change in policy.”²⁰

II. Fresh Mushrooms from Canada Preliminary Determination

Based on the preliminary determination in Fresh Mushrooms from Canada, it now appears that Commerce is changing its policy because despite arguments to the contrary, Commerce preliminarily countervailed certain direct and indirect tax exemptions that apply to the Canadian agricultural sector writ large with little explanation. The following provides an illustrative list of the types of broadly available agricultural programs that Commerce has now preliminarily countervailed, and Commerce’s corresponding explanations:

• Two sales tax exemptions for “farm machinery” in British Columbia and “direct farm inputs” in Manitoba were found to be de jure specific because they are, respectively, “limited to qualifying farmers and listed equipment, goods, parts, and related services and … claimed through FIN-458 or a B.C. Farmer Identity Card” and “expressly limited to purchases for use in qualifying farming operations.”²¹
• Two property tax exemptions for “farm land” in British Columbia and Manitoba were found to be de jure specific because the applicable laws “limit favorable treatment to land that satisfies the farm-classification rules,”²² and “qualifying properties are expressly limited to those classified as ‘farm property.’”
• Two fuel charge exemptions for farmers were found de jure specific because “eligibility is limited to farming operations carrying out eligible agricultural activities, including mushroom producers” and “access to the lower fuel tax rates is expressly limited to companies engaging in off-highway applications of motor fuel, including the operation of licensed farm equipment.”²³
• Commerce also initiated new subsidy investigations on an agricultural price support program where petitioners simply identified “agricultur{e} and horticultur{e}” as the industry without any further delineation or evidence of concentration as well as an accounting method for tax purposes available to fishing and farming operations where petitioners only alleged “the program is de jure specific…because section 28 is expressly limited to farming and fishing businesses.”²⁴

Despite each of these programs being available to the Canadian agricultural sector writ large, Commerce found them de jure specific (i.e., specific by law) based on the fact that the federal or provincial governments’ respective laws restrict use to agricultural activities such as owning farm property or conducting farming operations. Commerce did not appear to analyze whether “farming” itself is a sufficiently discrete industry or group of industries within agriculture, which suggests that Commerce may now view limitations to the agricultural sector alone as sufficient to support a finding of specificity under Commerce’s shifting practice.

III. Conclusion and Recommendations

The impact of the Fresh Mushrooms from Canada preliminary determination will likely expand beyond the Canadian mushroom industry to all agricultural producers, both foreign and domestic. The preliminary determination signals a significant shift in the treatment of agricultural support programs under U.S. CVD law by expanding the universe of agricultural support programs potentially subject to CVD investigations. As a consequence, petitioners are likely to pursue challenges to foreign agricultural assistance in new petitions more aggressively, creating more investigations and higher CVD duties on agricultural imports into the United States.

Accordingly, foreign producers and exporters should reassess their CVD exposure from agricultural support programs and closely monitor ongoing CVD proceedings for agricultural products. Foreign governments may also consider the risk and use the appropriate diplomatic channels to discuss the systemic consequences of Commerce’s position and the precedent it may establish for the broader agricultural trading regime. 

At the same time, U.S. agricultural producers should be aware that U.S. programs such as income support, crop insurance support, conservation payments, climate-related agricultural programs, and tax benefits, to name a few, could all face increased attention from foreign investigating authorities if Commerce’s interpretation of specificity gains broader global acceptance. 

Whether the Fresh Mushrooms from Canada preliminary determination ultimately proves to be an isolated decision or the beginning of a broader shift in agricultural subsidy enforcement, the case deserves close attention from domestic and foreign agricultural producers, exporters, importers, industry associations, and governments.

¹ See Fresh Mushrooms from Canada: Preliminary Affirmative Countervailing Duty Determination and Alignment of Final Determination with Final Antidumping Duty Determination, 91 Fed. Reg. 28571 (Dep’t of Commerce, May 18, 2026), and accompanying Preliminary Determination Memorandum (Fresh Mushrooms from Canada PDM). 

² 19 U.S.C. §§ 1677(5)(A) & 1677(5A); see also Agreement on Subsidies and Countervailing Measures, Apr. 15, 1994, Marrakesh Agreement Establishing the World Trade Organization, Annex 1A, Art. 1.2 and 2, 1867 U.N.T.S. 14 (SCM Agreement). 

³ See 19 C.F.R. § 351.502(d) (repealed 2024); see also Regulations Enhancing the Administration of the Antidumping and Countervailing Duty Trade Remedy Laws, 89 Fed. Reg. 101694, 101722 (Dep’t of Commerce Dec. 16, 2024) (Regulations Enhancing the CVD Laws).

⁴ Regulations Enhancing the CVD Laws, 89 Fed. Reg. at 101723.

⁵ A domestic subsidy program is specific when either the providing government “expressly limits access to the subsidy to an enterprise or industry” (de jure specificity) or the subsidy is specific as a matter of fact (de facto specificity). De facto specificity applies if one of the following criteria is met: (1) the actual recipients of the subsidy, whether considered on an enterprise or industry basis, are limited in number; (2) an enterprise or industry is a predominant user of the subsidy; (3) an enterprise or industry receives a disproportionately large amount of the subsidy; (4) the manner in which the authority providing the subsidy has exercised discretion in the decision to grant the subsidy indicates that an enterprise or industry is favored over others. See 19 U.S.C. § 1677(5A)(D).

⁶ Statement of Administrative Action, HR Doc. No. 103-316 103rd Congress, 2nd Session, Volume I (SAA) at 929 (citing Carlisle Tire & Rubber Co. v. United States, 564 F. Supp. 834 (Ct. Int’l Trade 1983)).

⁷ SAA at 929.

⁸ See SCM Agreement, Article 1.2 and 2.

⁹ See Final Negative Countervailing Duty Determination; Fresh Asparagus From Mexico, 48 Fed. Reg. 21618, 21621 (Dep’t of Commerce May 13, 1983). 

¹⁰ See Regulations Enhancing CVD Laws, 89 Fed. Reg. at 101723 (citing Certain Fresh Cut Flowers from Mexico, 49 Fed. Reg. 15007, 15008 (Dep’t of Commerce Apr. 16, 1984) (“Agriculture is more than a specific industry or group of industries. Producers of a wide variety of products including fruits and vegetables, livestock, grains, meat products, milk, and eggs are eligible for FIRA financing. Producers of agricultural tools may also receive financing under FIRA”)). See also Final Affirmative Countervailing Duty Determination and Countervailing Duty Order; Lamb Meat from New Zealand, 50 Fed. Reg. 37708, 37711 (Dep’t of Commerce Sept. 17, 1985) (finding that a fertilizer price subsidy to encourage adequate pasture maintenance and development was “available to and used by a wide variety of agricultural producers”), and Fresh Cut Roses from Israel: Final Results of Administrative Review of Countervailing Duty Order, 48 Fed. Reg. 36635, 36636 (Dep’t of Commerce, Aug. 12, 1983). 

¹¹ Roses Inc. v. United States, 774 F. Supp. 1376, 1383 (Ct. Int’l Trade Sept. 16, 1991). 

¹² 19 C.F.R. §351.502(d) (repealed 2024 by Regulations Enhancing CVD Laws). 

¹³ Countervailing Duties Final Rule, 63 Fed. Reg. 65348, 65358 (Dep’t of Commerce Nov. 25, 1998).

¹⁴ See Panel Report, United States — Subsidies on Upland Cotton, WTO Doc. WT/DS267/R ¶ 7.1126 (Sept. 8, 2004).

¹⁵ See Final Determination in the Countervailing Duty Investigation of Certain Frozen Warmwater Shrimp From Thailand, 78 Fed. Reg. 50391 (Dep't. of Commerce Aug. 19, 2013), and accompanying Issues and Decisions Memorandum at 15 (“… we find that the VAT exemption on fishmeal and feeds is a subset of a sector-wide VAT exemption for agriculture and is, therefore, not specific under 19 C.F.R. §351.502(d)”).

¹⁶ See, e.g., Certain Pea Protein from the People’s Republic of China: Preliminary Affirmative Countervailing Duty Determination, Preliminary Affirmative Critical Circumstances Determination, and Alignment of Final Determination with Final Antidumping Duty Determination, 88 Fed. Reg. 87403 (Dep’t of Commerce Dec. 11, 2023), and accompanying Issues and Decisions Memorandum at 21-22.

¹⁷ See, e.g., Certain Frozen Warmwater Shrimp from the Socialist Republic of Vietnam: Final Affirmative Countervailing Duty Determination, 78 Fed. Reg. 50387 (Dep’t of Commerce Aug. 19, 2013), and accompanying Issues and Decisions Memorandum at 12 (finding both de jure specificity where the program is aimed at the “aquaculture and seafood processing sectors” and de facto specificity because “a limited number of products, including shrimp, are prioritized”).

¹⁸ See, e.g., Ripe Olives from Spain: Final Results of Countervailing Duty Administrative Review; 2017-2018, 86 Fed. Reg. 35266 (Dep’t of Commerce Jul. 2, 2021), and accompanying Issues and Decision Memorandum at 26 (“… the BPS program expressly limits access…to olive growers”) and Certain Frozen Warmwater Shrimp from Ecuador: Final Affirmative Countervailing Duty Determination, 78 Fed. Reg. 50389 (Dep’t of Commerce Aug. 19, 2013), and accompanying Issues and Decisions Memorandum at 31.

¹⁹ Regulations Enhancing the CVD Laws, 89 Fed. Reg. at 101725.

²⁰ Regulations Enhancing the CVD Laws, 89 Fed. Reg. at 101723.

²¹ Fresh Mushrooms from Canada PDM at 22, 24.

²² Fresh Mushrooms from Canada PDM at 19, 23.

²³ Fresh Mushrooms from Canada PDM at 21.

²⁴ Letter from Kelly Drye & Warren LLP to the Hon. Howard W. Lutnick, DOC Case No. C-122-874 dated March 25, 2026 (ACCESS Barcode 4901195-01); Letter from Kelly Drye & Warren LLP to the Hon. Howard W. Lutnick, DOC Case No. C-122-874 dated April 9, 2026 (ACCESS Barcode 4909805-01). See also Countervailing Duty Investigation of Fresh Mushrooms from Canada: Initiation of Investigation of New Subsidy Programs, DOC Case No. C-122-874, dated May 1, 2026 (ACCESS Barcode 4917743-01).