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WTO cases
Cases involving the EU
WT/DS108 - Tax treatment for "Foreign Sales Corporations"
Last update: 14/12/2006
- Complaint by: EU
- Complaint against: United States -
- Third parties:
Australia - Barbados - Canada - India - Japan -
Summary of case:
The FSC scheme provided for an exemption to the general rules established in the US Internal Revenue Code (sections 921-927) which resulted in substantial tax savings for US companies exporting through foreign sales corporations (FSCs). Despite later changes to the law, the relevant legislation remained WTO-inconsistent and was the subject of challenges by the EU through WTO compliance panels.
Relevant WTO provision:
Subsidies (3)
Agriculture (8, 9, 10)
Current situation:
On 14 March 2006, following the Panel and Appellate Body rulings in favour of the EC in the third round of the WTO litigation on this matter, the DSB confirmed the WTO incompatibility of the challenged US legislation that replaced the original FSC legislation in 2000 (FSC Replacement Act/ETI) and 2004 (American Jobs Creation Act). As a result, and as provided under the applicable EC Regulation, EC countermeasures had to be reintroduced automatically. On 11 May 2006, the US Congress adopted a Bill repealing the grandfathering provisions of the FSC/ETI legislation and the American Jobs Creation Act for the next taxable years. As the transition rules of that legislation were set to expire end-2006, the Commission submitted a proposal for the termination of the countermeasures. The proposal was approved by the Council through Council Regulation (EC) NO 728/2006 of 15 May 2006.
Consultation:
Date of request: 18/11/1997
Panel:
Date of request: 01/07/1998
Date of establishment: 22/09/1998
Date of circulation of report: 08/10/1999
Appeal:
Date of request: 26/11/1999
Date of circulation of report: 24/02/2000
Date of adoption - panel/AB report:
20/03/2000
Implementation deadline:
01/11/2000
Recourse to Articles:
- 13-01-2005 - Recourse to Art. 21.5 -
- 20-12-2000 - Recourse to Art. 21.5 -
WTO documents
- 09/07/1997 - Request for the establishment of a panel by the European Communities
- 28/11/1997 - Request for consultations by the European Communities
- 08/10/1999 - Report of the panel
- 26/11/1999 - Notification of an appeal by the United States
- 24/02/2000 - Report of the Appellate Body
- 02/10/2000 - Request for Modification of the Time-Period for Compliance
- 05/10/2000 - Understanding on the procedures art. 21 & 22
- 17/11/2000 - Recourse by the EC to Art. 4.10 of the SCM Agreement and Art. 22.2 of the DSU
- 21/11/2000 - Recourse by the EC to Article 21.5 of the DSU
- 27/11/2000 - Request by the US for Arbitration under Article 22.6 of the DSU
- 08/12/2000 - Recourse to Article 21.5 of the DSU by the European Communities
- 21/12/2000 - Recourse by the US to Art. 22.6 of the DSU and Art. 4.11 of the SCM Agreement
- 20/08/2001 - Recourse to Article 21.5 of the DSU by the EC - Report of the Panel
- 20/08/2001 - Recourse to Article 21.5 of the DSU by the EC - Report of the Panel - Part 2 (First Submission by the Parties)
- 20/08/2001 - Recourse to Article 21.5 of the DSU by the EC - Report of the Panel - Part 3 (Third Party Submissions)
- 20/08/2001 - Recourse to Article 21.5 of the DSU by the EC - Report of the Panel - Part 4 (Second Submissions by the Parties)
- 20/08/2001 - Recourse to Article 21.5 of the DSU by the EC - Report of the Panel - Part 5 (Oral Statements of the Parties)
- 20/08/2001 - Recourse to Article 21.5 of the DSU by the EC - Report of the Panel - Part 6 (Oral Statements of the Third Parties)
- 20/08/2001 - Recourse to Article 21.5 of the DSU by the EC - Report of the Panel - Part 7 (Answers to Questions and Comments on these Answers)
- 15/10/2001 - Notification of an Appeal by the United States
- 06/11/2001 - Appeal by the EC pursuant to Rule 23(1) of the Working Procedures for Appellate Review
- 16/11/2001 - Appellee Submission by the EC pursuant to Rule 22 of the Working Procedures for Appellate Review
- 14/01/2002 - Recourse to Art. 21.5 of the DSU by the EC - Report of the AB
- 30/08/2002 - Recourse to arbitration by the US under Art. 22.6 of the DSU and Art. 4.11 of the SCM Agreement - Decision of the Arbitrator
- 24/04/2003 - Recourse by the EC to Art. 4.10 of the SCM agreement and Art. 22.7 of the DSU
- 24/04/2003 - Recourse by the EC to Article 4.10 of the SCM agreement and Article 22.7 of the DSU
- 10/11/2004 - Second Recourse by the European Communities to Article 21.5 of the DSU - Request for consultations
- 22/11/2004 - Request to join consultations - Communication from Australia
- 14/01/2005 - Second Recourse to Article 21.5 of the DSU by the European Communities
- 09/05/2005 - Constitution of the Panel - Note by the Secretariat
- 03/08/2005 - Communication from the Chairman of the Panel
- 30/09/2005 - Report of the Panel part 1
- 30/09/2005 - Report of the Panel part 2
- 30/09/2005 - Report of the Panel part 3
- 30/09/2005 - Report of the Panel part 4
- 30/09/2005 - Report of the Panel part 5
- 30/09/2005 - Report of the Panel part 6
- 16/11/2005 - Notification of an Appeal by the United States
- 30/11/2005 - Notification of an Other Appeal by the European Communities
- 13/02/2006 - Report of the Appellate Body
- 17/03/2006 - Appellate Body Report and Panel Report pursuant to Article 21.5 of the DSU
EU submissions
- 05/01/1999 - Non-confidential Summary Of the First Submission of the European Communities
- 17/01/2001 - First written submission of the EC
- 17/01/2001 - Second written submission of the EC
- 14/02/2002 - Recourse by the US to Art. 22.6 of the DSU and Art. 4.11 of the SCM Agreement - First written submission of the EC
- 26/02/2002 - Recourse by the US to Art. 22.6 of the DSU and Art. 4.11 of the SCM Agreement - Second written submission of the EC
- 19/05/2005 - Second Recourse to Art. 21.5 of the DSU by the EC - First Written Submission of the European Communities
- 16/06/2005 - Second Recourse to Art. 21.5 of the DSU by the EC - Rebuttal Submission of the European Communities
- 30/06/2005 - Second Recourse to Art. 21.5 of the DSU by the EC - Oral Statement by the EC to the First Meeting of the Panel
Other information
- 24/02/2000 - WTO appellate body confirms that US export subsidies breach International Trade Rules - Press release
- 04/05/2000 - Foreign Sales Corporations: EU and US try to find an agreement
- 29/05/2000 - European Commission expresses concern on WTO compatibility of US proposals on Foreign Sales Corporations (FSC)
- 01/09/2000 - European Commision says U.S. FSC proposal still WTO-incompatible
- 02/10/2000 - EU and US reach agreement on procedures for handling Foreign Sales Corporations (FSC) dispute - Press release
- 12/10/2000 - EC clarifies position on Foreign Sales Corporation dispute
- 17/11/2000 - Background on latest developments in the FSC trade dispute - Questions and answers
- 17/11/2000 - EU requests WTO compliance panel and authorisation to impose sanctions against the US in Foreign Sales Corporation trade dispute - Press release
- 17/11/2000 - FSC dispute: EU requests WTO authorisation for sanctions against US worth up to $4.043 billion - Press release
- 20/08/2001 - WTO confirms US Foreign Sales Corporations are incompatible with WTO rules - Press release
- 14/01/2002 - EU welcomes WTO definitive confirmation that US export subsidies (FSC) are illegal
- 30/08/2002 - EU welcomes WTO award of US $ 4 billion of countermeasures and renews call for expeditious US compliance with WTO rules
- 13/09/2002 - EC publishes list of products that could be subject to countermeasures
- 13/09/2002 - Notice relating to the WTO Dispute Settlement proceeding concerning the US tax treatment of FSC - Invitation for comments on the list of products that could be subject to countermeasures
- 26/02/2003 - European Commission submits to MS draft list of products that could be subject to countermeasures
- 25/04/2003 - Unted States – Tax Treatement for FSC
- 07/05/2003 - Following WTO authorisation to apply countermeasures of up to $ 4 billion, EU expects US to ensure compliance with WTO rules before the beginning of next year
- 05/11/2003 - Commission prepares for the imposition of countermeasures on US products
- 05/11/2003 - Foreign Sales Corporations (FSC): Commission prepares for the imposition of countermeasures on US products.
- 08/12/2003 - Council Regulation (EC) No 2193/2003 of 8 December 2003 establishing additional customs duties on imports of certain products originating in the US
- 27/02/2004 - Foreign Sales Corporation (FSC) - Questions and Answers
- 01/03/2004 - FSC: EU starts countermeasures on US products
- 12/05/2004 - USA-Foreign Sales Corporation - Pascal Lamy welcomes US Senate vote
- 18/06/2004 - US-Foreign Sales Corporation - Pascal Lamy welcomes US House of Representatives vote
- 11/10/2004 - Foreign Sales Corporations (FSC): US to repeal illegal export subsidies as from 2007
- 25/10/2004 - Foreign Sales Corporations (FSC): EU welcomes US repeal of illegal export subsidies – EU to lift sanctions and ask for check on WTO compatibility
- 30/09/2005 - FSC: WTO condemns US subsidies to exporters; recipients of illegal support include Boeing
- 14/03/2006 - The Panel and Appellate Body rulings favour the EC. Council Regulation no. 171/2005 provides that countermeasures should then be reintroduced automatically
- 11/05/2006 - The US Congress adopts a Bill repealing the provisions of the FSC/ETI legislation and the Jobs Act for the next taxable years
- 15/05/2006 - Upon proposal from the Commission, the Council of the EU adopts Regulation No. 728/2006 repealing Regulations No. 2193/2003 and No. 171/2005, thereby ending the countermeasures