UNITED STATES – TAX TREATMENT FOR "FOREIGN SALES
CORPORATIONS"
Recourse
by the European Communities to Article 21.5 of the DSU
The
following communication, dated 17 November 2000, from the Permanent Delegation
of the European Commission to the Permanent Mission of the United States and to
the Chairman of the Dispute Settlement Body, is circulated pursuant to Article
21.5 of the DSU.
_______________
On
20 March 2000, the Dispute Settlement Body (the "DSB") adopted the
Appellate Body Report and the Panel Report, as modified by the Appellate Body,
in case WT/DS108 United States – Tax Treatment for "Foreign Sales
Corporations". The resulting DSB
recommendations and rulings include the recommendation that the United States
bring its measures found to be inconsistent with the Agreement on Subsidies and
Countervailing Measures (the "SCM Agreement") and the Agreement on
Agriculture into conformity with its WTO obligations, and that the United
States withdraw the export subsidies at the latest with effect from 1 October
2000.
On
12 October 2000, in a special session, the DSB agreed to the US request to
allow it a time period ending on 1 November 2000 to implement the DSB
recommendations and rulings.
On
15 November 2000 the President of the United States signed an Act of the US
Congress entitled FSC Repeal and Extraterritorial
Income Exclusion Act of 2000 (the "FSC Replacement Act"). It is the
EC understanding, as confirmed by US Ambassador to the WTO Mrs Hayes during the
DSB meeting of 17 November 2000, that the United States considers this Act to
bring the US into compliance with the DSB recommendations and rulings in case
WT/DS108.
The
European Communities strongly disagrees.
The EC considers that the US has failed to comply with the
above-mentioned DSB recommendations and rulings by 1 November 2000.
Furthermore, the FSC Replacement Act appears to replicate the violations of the
WTO Agreement found in the original dispute rather than remove them.
In
particular, the European Communities' considers that: