United states tax treatment for "foreign sales corporations"

World Trade Organization

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World Trade



14 January 2005


Original: English

united states – tax treatment for "foreign sales corporations"
Second Recourse to Article 21.5 of the DSU by the European Communities
Request for the Establishment of a Panel
The following communication, dated 13 January 2005, from the delegation of the European Communities to the Chairperson of the Dispute Settlement Body, is circulated pursuant to Article 21.5 of the DSU.

On 8 October 1999, the Panel in this dispute found that the United States of America's "Foreign Sales Corporations" scheme violated Article 3.1(a) of the Agreement on Subsidies and Countervailing Measures (the "SCM Agreement") and Article 3.3 of the Agreement on Agriculture [WT/DS108/R]. On 24 February 2000 the Appellate Body confirmed the findings of the Panel with respect to the violations of the SCM Agreement and modified the findings concerning the Agreement on Agriculture, concluding that the Foreign Sales Corporations scheme violated Articles 10.1 and 8 of the Agreement on Agriculture [WT/DS108/AB]. On 20 March 2000, the Dispute Settlement Body (the "DSB") adopted the Appellate Body report and the report of the Panel, as modified by the Appellate Body. The resulting DSB recommendations and rulings include the recommendation that the United States bring its measures found to be inconsistent with the SCM Agreement and the Agreement on Agriculture into conformity with the provisions of those agreements, and that the United States withdraw its export subsidies at the latest with effect from 1 October 2000.
On 12 October 2000, at a special session, the DSB agreed to the United States' request to allow it a time period expiring on 1 November 2000 to implement the DSB recommendations and rulings.
On 15 November 2000, the President of the United States signed into law the FSC Repeal and Extraterritorial Income Exclusion Act of 2000, US Public law No 106-519 (the "ETI Act").
On 20 December 2000, the matter was referred back to the Panel under Article 21.5 of the DSU and on 29 January 2002 the DSB adopted the Panel [WT/DS108/RW] and Appellate Body [WT/DS108/AB/RW] reports declaring that the ETI Act violates Articles 3.1(a), 3.2 and 4.7 of the SCM Agreement, Articles 8, 10.1 and 3.3 of the Agreement on Agriculture and Article III:4 of the General Agreement on Tariffs and Trade 1994 (the "GATT 1994"), so that the US had failed to fully withdraw its prohibited subsidy scheme and failed to implement DSB recommendations and rulings in this dispute.
On 22 October 2004, the United States enacted the "the American JOBS Creation Act of 2004" (the "JOBS Act"). In purported implementation of the above DSB recommendations and rulings in case WT/DS108, the JOBS Act fails to properly implement them and is inconsistent with the same provisions of the WTO Agreement as its predecessor legislation.

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