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WT/DS108/12
5 October 2000
(00-4067)UNITED
STATES — TAX TREATMENT FOR “FOREIGN SALES
CORPORATIONS”
Understanding between the European Communities and the
United States
Regarding Procedures under Articles 21 and 22 of the DSU
and Article 4 of the SCM Agreement
The following communication, dated 2 October 2000, from
the Permanent Delegation of the European Commission and
the Permanent Mission of the United States to the
Chairman of the Dispute Settlement Body is circulated at
the request of these delegations.
_______________
The
European Communities and the United States would like to
inform the Dispute Settlement Body that they have agreed
on the following “Agreed procedures under Articles
21 and 22 of the Dispute Settlement Understanding and
Article 4 of the SCM Agreement applicable in the
follow-up to the United States — Tax Treatment of
“Foreign Sales Corporations” WTO dispute”
(WT/DS108).
Agreed
procedures under Articles 21 and 22 of the Dispute
Settlement Understanding and Article 4 of the SCM
Agreement applicable in the follow-up to the United
States — Tax Treatment of “Foreign Sales
Corporations” WTO Dispute
The Panel and Appellate Body reports in the WTO dispute
United States – Tax Treatment for “Foreign
Sales Corporations” (WT/DS108/R and WT/DS108/AB/R)
between the European Communities (EC) and the United
States of America (US) were adopted by the Dispute
Settlement Body (DSB) on 20 March 2000.
The parties, in reaching this agreement, contemplate that
the US Congress will pass legislation this Congressional
session to replace the foreign sales corporation
provisions of the Internal Revenue Code.
This agreement does not prejudice the parties’
rights to take any action or procedural step to protect
their rights or interests, including the activation of
any aspect of dispute settlement proceedings.
The EC and the US have agreed on the following
procedures:
1. Should the European Communities consider that the
situation described in Article 21.5 of the DSU exists,
the EC will request consultations which the parties agree
to hold within 12 days from the date of circulation of
the request so as to allow third parties to request to
join the consultations. The EC and the US agree that at
the end of this round of consultations, should either
party so state, the parties will jointly consider that
the consultations have failed to settle the dispute.
2. Consequently, the EC will be entitled to request
immediately the establishment of a panel pursuant to
Article 21.5 of the DSU (the Article 21.5 compliance
panel).
3. At the first DSB meeting in which the EC request
appears as an item on the agenda, the US will accept the
establishment of the Article 21.5 compliance panel.
4. The EC and the US will cooperate to enable the Article
21.5 compliance panel to circulate its report within 90
days of its establishment, excluding any time during
which the panel’s work may be suspended pursuant to
Article 12.12 of the DSU.
5. Either party may request the DSB to adopt the report
of the Article 21.5 compliance panel in a meeting at
least 20 days after the circulation of the report unless
either party appeals the report.
6. In case of an appeal of the Article 21.5 compliance
panel report, the EC and the US will cooperate to enable
the Appellate Body to circulate its report within 60 days
from the date of notification of the appeal.
7. In the event of an appeal, either party may request
the DSB to adopt the reports of the Appellate Body and
the Article 21.5 compliance panel (as modified by the
Appellate Body report) in a meeting within 15 days after
the circulation of the Appellate Body report.
8. Where the EC has requested consultations under
paragraph 1, and after the end of the period (the
implementation period) available to the US to implement
the DSB recommendations and rulings in the WTO dispute
United States – Tax Treatment of “Foreign Sales
Corporations”, the European Communities may request
authorization to suspend concessions or other obligations
pursuant to Article 22.2 of the DSU and to adopt
countermeasures pursuant to Article 4.10 of the Agreement
on Subsidies and Countervailing Measures (SCM Agreement).
9. Where there exist no measures taken to comply with the
DSB recommendations and rulings by the end of the
implementation period, the EC may request authorization
to suspend concessions or other obligations pursuant to
Article 22.2 of the DSU and to adopt countermeasures
pursuant to Article 4.10 of the SCM Agreement, without
having recourse to Article 21.5 of the DSU.
10. Under Article 22.6 of the DSU including Article 4.11
of the SCM Agreement, the US will object to the
appropriateness of the countermeasures and/or the level
of the suspension of concessions or other obligations
and/or make an Article 22.3 claim, before the date of the
DSB meeting considering the EC request, and the matter
will be referred to arbitration pursuant to Article 22.6
of the DSU. The European Communities will not pose any
objection to referral of the matter to such arbitration.
11. Where the EC has requested the establishment of a
panel under paragraph 2, both the EC and the US agree to
request the arbitrator, at the earliest possible moment,
to suspend its work until either (a) adoption of the
Article 21.5 compliance panel report or (b) if there is
an appeal, adoption of the Appellate Body report.
12. In the event that the DSB finds that measures taken
by the US to comply with the recommendations and rulings
of the DSB are inconsistent with the covered agreements
referred to in the Article 21.5 compliance panel request,
the arbitrator will automatically resume its work. In the
event that the DSB finds that the measures taken by the
US to comply with the recommendations and rulings of the
DSB are not inconsistent with the covered agreements
referred to in the Article 21.5 compliance panel request,
the EC will withdraw its request under Article 22.2 of
the DSU, thereby terminating the arbitration procedure.
13. The EC and the US will cooperate to enable the
arbitrator to circulate its report within 60 days of the
resumption of its work.
14. If any of the original panelists are not available
for either the Article 21.5 compliance panel or the
Article 22.6 arbitration (or both), the EC and the US
agree to request the Director-General of the WTO to
appoint as soon as possible a replacement for the
proceeding or proceedings in which this is required. If
an original panelist is unavailable to serve in both
proceedings, the parties will further request that in
making this appointment the Director-General seek a
person who will be available to act in both proceedings.
15. As this dispute has been conducted under the SCM
Agreement and the Agreement on Agriculture, the parties
agree that the timeframes under the DSU will continue to
apply to the proceedings covered by this agreement,
except as otherwise agreed herein.
16. The parties agree to continue to cooperate in all
matters related to this agreement and not to raise any
procedural objections to any of the steps set out in this
agreement. If during the application of this agreement
the parties consider that a procedural aspect has not
been properly covered by this agreement, they will
endeavour to find a solution within the shortest time
possible that will not affect the other aspects and steps
therein agreed.
Brussels, 29 September 2000
(s) Hervé Jouanjean
For the European Communities
(s)
Robert T. Novick
For the United States of America
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