WT/DS267/R/Add.3 
Page L-1 
 
 
  
ANNEX L 
  
COMMUNICATIONS FROM THE PANEL 
  
Contents Page 
L-1.  Communications to Parties  
Annex L-1.1 Communication of 21 May 2003 L-2 
Annex L-1.2 Communication of 27 May 2003 L-3 
Annex L-1.3 Communication of 28 May 2003 L-4 
Annex L-1.4 Communication of 20 June 2003 L-6 
Annex L-1.5 Communication of 25 July 2003 L-11 
Annex L-1.6 Communication of 30 July 2003 L-27 
Annex L-1.7 Communication of  5 August 2003 L-28 
Annex L-1.8 Communication of 19 August 2003 L-31 
Annex L-1.9 Communication of 23 August 2003 L-32 
Annex L-1.10 Communication of 25 August 2003 L-33 
Annex L-1.11 Communication of 5 September 2003 L-34 
Annex L-1.12 Communication of 12 September 2003 L-36 
Annex L-1.13 Communication of 18 September 2003 L-37 
Annex L-1.14 Communication of 24 September 2003 L-38 
Annex L-1.15 Communication of 13 October 2003 L-39 
Annex L-1.16 Communication of 3 November 2003 L-50 
Annex L-1.17 Communication of 14 November 2003 L-53 
Annex L-1.18 Communication of  8 December 2003 L-54 
Annex L-1.19 Communication of 23 December 2003 L-65 
Annex L-1.20 Communication of 24 December 2003 L-68 
Annex L-1.21 Communication of 12 January 2004 L-69 
Annex L-1.22 Communication of 3 February 2004 L-71 
Annex L-1.23 Communication of 16 February 2004 L-78 
Annex L-1.24 Communication of 20 February 2004 L-80 
Annex L-1.25 Communication of 24 February 2004 L-81 
Annex L-1.26 Communication of 4 March 2004 L-82 
Annex L-1.27 Communication of 7 April 2004 L-83 
L-2.  Communications to Third Parties1  
Annex L-2.1 Communication of 28 May 2003 L-84 
Annex L-2.2 Communication of 25 July 2003 L-86 
Annex L-2.3 Communication of 30 July 2003 L-93 
Annex L-2.4 Communication of 13 October 2003 L-94 
 
 
 
                                                      
1 Communications included as L-1.4, -1.7, -1.11, -1.12, -1.13 and -1.14 were also sent to 3rd parties. WT/DS267/R/Add.3 
Page L-2  
 
ANNEX L-1.1  
 
 
COMMUNICATION TO BRAZIL 
AND THE UNITED STATES 
 
21 May 2003 
 
  I refer to the letter from the United States dated 21 May 2003and addressed to the Chair of the Panel.  I understand this was also copied to your  delegation.  The Panel wishes to ask Brazil to 
communicate its views, if any, in writing in response to this letter.  
 The Panel would appreciate if Brazil's written r esponse could be submitted before the close of 
business this Friday, 23 May 2003.  This is in view of the fact that the Chairman of the Panel, Mr. Rosati, is proposing to convene an organiza tional meeting with the parties on Monday 26 May 
2003 from 11:30 a.m.  The venue will be communicated to you shortly.  
 WT/DS267/R/Add.3 
Page L-3 
 
 
ANNEX L-1.2 
 
COMMUNICATION TO BRAZIL 
AND THE UNITED STATES 
 
27 May 2003 
 
 
 The Panel takes note of the United States' comme nts with respect to the Panel's timetable and 
working procedures, dated 21 May 2003, and Brazil's communication dated 23 May 2003. 
  Attached you will find the Panel's proposed working procedures and timetable .  The Panel 
intends to hold an organizational meeting with the parties at 8 a.m. on Wednesday, 28 May  2003 
at room C in order to hear the parties' views on these proposals.  
  As indicated in the attached proposed timetable , prior to the submission by the parties of their 
first written submissions, the Panel intends to request th e parties to address, in their initial briefs to the 
Panel, the following:  
 
• whether Article 13 of the Agreement on Agriculture  precludes the Panel from considering 
Brazil's claims under the Agreement on Subsidies and Countervailing Measures  in these 
proceedings in the absence of a prior conclusi on by the Panel that certain conditions of 
Article 13 remain unfulfilled.  In particular, the Panel invites the parties to explain their interpretation of the words "exempt from actions" as used in Article 13 of the Agreement on 
Agriculture , as well as bringing to the Panel's attenti on any other relevant provisions of the 
covered agreements and any othe r relevant considerations whic h the parties consider should 
guide the Panel's consideration of this issue. 
  As also indicated in the attached timetable,  the Panel will invite the parties to submit any 
written comments on each other's comments on this i ssue.  The Panel currently wishes to signal its 
intention to clarify to the parties its view on these is sues prior to the parties' submission of their first 
written submissions.    In the event that the Panel were to rule th at Article 13 precludes the Panel from considering 
certain claims raised by Brazil prior to a conclusi on that certain conditions of Article 13 remain 
unfulfilled, we may decide to adjust the timetable to permit the parties to make further submission(s) 
after the second substantive meeting and to schedule further substantive meeting(s), as necessary, with 
the parties.   With respect to the participation of third par ties in these Panel proceedings, the Panel is aware 
of the provisions of Article 10.3 of the DSU , which states that third parties shall receive the 
submissions of the parties to the dispute to the first meeting of the Panel.  Given the significant 
systemic issues in this Panel proceeding, and in exercise of our discretion to manage these Panel proceedings, we believe that it would be appropriate in  this case for the third parties to have access to 
the parties' initial written comments (and any writte n comments the parties may make on each others' 
comments) as well as to have the ability to s ubmit any written comments they themselves may have 
on the issue that we have identified above.  We ther efore intend to invite the parties to serve also on 
the third parties their initial briefs and any respondi ng comments.  At the organizational meeting, we 
will invite any comments you may have on this propo sed approach to third party participation.  
 
[Attachment omitted] WT/DS267/R/Add.3 
Page L-4  
 
ANNEX L-1.3 
  
COMMUNICATION TO BRAZIL 
AND THE UNITED STATES 
 
28 May 2003 
 
 
 Attached you will find the timetable and working procedures adopted by the Panel for this dispute in accordance with Article 12.1 of the Understanding on Rules and Procedures Governing the 
Settlement of Disputes  (the " DSU ").  In adopting the timetable and working procedures, the Panel has 
carefully considered the parties' comments at this morning's organizational meeting. 
 
 As indicated in the attached timetable, prior to the submission by the parties of their first 
written submissions, the Panel requests the parties to a ddress, in their initial briefs to the Panel (to be 
submitted on 5 June 2003
), the following:  
 
• whether Article 13 of the Agreement on Agriculture  precludes the Panel from considering 
Brazil's claims under the Agreement on Subsidies and Countervailing Measures  in these 
proceedings in the absence of a prior conclusion by the Panel that certain conditions of Article 
13 remain unfulfilled.  In particular, the Panel i nvites the parties to explain their interpretation 
of the words "exempt from actions" as used in Article 13 of the Agreement on Agriculture , as 
well as bringing to the Panel's attention any other relevant provisions of the covered 
agreements and any other releva nt considerations which the pa rties consider should guide the 
Panel's consideration of this issue.  For greater clarity, the Panel invites the parties, during this 
initial stage of the proceedings, to focus on matters  of legal interpretation, rather than upon 
the submission of any factual evidence that might  be associated with the substantive elements 
of Article 13.  
 
 As also indicated in the attached timetable,  the Panel will invite the parties to submit any 
written comments on each other's comment s on this issue (i.e. on 13 June 2003 ).  The Panel intends to 
rule on these issues on 20 June 2003 , prior to the parties' submission of their first written submissions.  
  As has been indicated, the Panel recognizes that  it may need to revisit certain aspects of its 
timetable and working procedures in light of develo pments during the course of the Panel procedures, 
including the nature of the Panel's ruling that is sch eduled for 20 June 2003.  In particular, in the event 
that the Panel were to rule that Article 13 precl udes the Panel from considering certain claims raised 
by Brazil prior to a conclusion that certain conditions  of Article 13 remain unfulfilled, we may decide 
to adjust the timetable to permit the parties to ma ke further submission(s) after the second substantive 
meeting and to schedule further substantive meeti ng(s), as necessary, with the parties.  Related 
amendments to the working procedur es may also be made, if necessary. 
  With respect to the participation of third par ties in these Panel proceedings, we have carefully 
considered the parties' comments at this morni ng's organizational meeting.  In exercise of our 
discretion to manage these Panel proceedings, we con tinue to believe that it would be appropriate in 
this case for the third parties to have access to the parties' initial written comments (and any written 
comments the parties may make on each others' comments) as well as to have the ability to submit any written comments they themselves may have on the issue that we have identified above.   The 
Panel considers that such third party participation in this initial stage of the Panel proceedings is 
appropriate for the following reasons.  
 WT/DS267/R/Add.3 
Page L-5 
 
 
 The Panel is aware of the pr ovisions of Article 10.3 of the DSU , which states that third parties 
shall receive the submissions of the parties to the disp ute to the first meeting of the Panel.   We would 
also observe that the factual circumstance that pres ents itself here is not itself specifically addressed 
by the DSU .  In our view, the legal issue that the Panel has asked the parties to address in their initial 
briefs will necessarily have ramifications for the remainder of the Panel proceedings, including the 
scope of the first substantive meeting, at  which third parties will participate.  
  We therefore invite the parties to serve also  on the third parties their initial briefs and any 
responding comments.  The Panel will also invite third parties to submit any written comments they 
might have concerning the initial phase of these proceedings.  The deadline for any third party 
comments is 10 June 2003
.  The parties' comments to be submitted on 13 June may, of course, also 
address comments made by third parties.    
[Attachment omitted] 
 WT/DS267/R/Add.3 
Page L-6  
 
 
ANNEX L-1.4 
 
 
COMMUNICATION TO BRAZIL AND THE 
UNITED STATES AND THIRD PARTIES 
 
20 June 2003 
  1. In a communication to the Panel, dated 21 May 2003, prior to the Panel's adoption of its working procedures, the United States had "propose[d] that the Panel organize its procedures to deal 
with the threshold Peace Clause issue at the outset of this dispute".  The United States asserted inter 
alia that "[b]ecause in this dispute Brazil has made claims under 17 different provisions of the WTO 
Multilateral Agreements with respect to numerous US programmes under at least 12 US statutes, we 
believe the Panel’s consideration of the critical Peace Clause issue would be aided by briefing and 
argumentation focused on this threshold issue".  Brazil submitted a communication in response, dated 
23 May 2003, opposing the US proposal. 
 
2. On 28 May 2003, after having heard the views of the parties, we adopted our timetable and working procedures in accordance with Article 12.1 of the Understanding on Rules and Procedures 
Governing the Settlement of Disputes  (the " DSU "). 
 3. At the same time, we indicated that we w ould consider giving a ruling on certain issues on 
20 June 2003, prior to the submission by the parties of their first written submissions, in relation to the 
following question and we requested the parties and third parties to address us in relation to it:   
 
"whether Article 13 of the Agreement on Agriculture  precludes the Panel from 
considering Brazil's claims under the Agreement on Subsidies and Countervailing 
Measures  in these proceedings in the absence of a prior conclusion by the Panel that 
certain conditions of Article 13 remain unfulf illed.  In particular, the Panel invites the 
parties to explain their interpretation of the words "exempt from actions" as used in 
Article 13 of the Agreement on Agriculture , as well as bringing to the Panel's 
attention any other relevant provisions of the covered agreements and any other 
relevant considerations which the par ties consider should guide the Panel's 
consideration of this issue.  For greater clarity, the Panel invites the parties, during 
this initial stage of the proceedings, to focu s on matters of legal interpretation, rather 
than upon the submission of any factual ev idence that might be associated with the 
substantive elements of Article 13." 
4. The parties submitted their initial briefs on this question on 5 June 2003.  On 10 June, the 
following six third parties submitted briefs:  Arge ntina; Australia; European Communities; India, 
New Zealand and Paraguay.  The parties s ubmitted further comments on 13 June 2003.  
 5. Article 13(a)(ii) of the Agreement on Agriculture  states that domestic support measures that 
conform fully to the provisions of Annex 2 of the Agreement on Agriculture  shall be exempt from 
actions based on Article XVI of GATT 1994  and Part III of the Agreement on Subsidies and 
Countervailing Measures  (the " SCM Agreement ").  Article 13(b)(ii) of the Agreement on Agriculture  
states that domestic support measures that conform fu lly to certain conditions shall be "exempt from 
actions based on paragraph 1 of Article XVI of  GATT 1994 or Articles 5 and 6 of the Subsidies 
Agreement, provided that such measures do not gr ant support to a specific commodity in excess of 
that decided during the 1992 marketing year."  Articles 5 and 6 of the SCM Agreement are each 
qualified by the proviso that "[t]his Article does not  apply to subsidies maintained on agricultural WT/DS267/R/Add.3 
Page L-7 
 
 
 
products as provided in Article 13 of the Agreemen t on Agriculture".  Article 13(c)(ii) of the 
Agreement on Agriculture  provides that export subsidies that conform fully to the provisions of Part V 
of that Agreement, as reflected in each Member's Schedule, shall be "exempt from actions based on 
Article XVI of GATT 1994 or Articles 3, 5 and 6 of the Subsidies Agreement".  Article 3.1 of the 
SCM Agreement , which prohibits export subsidies, is qualif ied by the proviso: "Except as provided in 
the Agreement on Agriculture ...".  These provisions of Article 13 afford a conditional exemption from 
certain obligations relating to certain actionable and prohibited subsidies under the provisions of the 
SCM Agreement  and Article XVI of the GATT 1994 .  This conditionality requires, inter alia , a 
comparison of facts with the applicable exemption requirements. 
 
6. Briefly, Brazil asserts that the Panel can si multaneously consider all of the arguments and 
evidence on the substance of its claims under the SCM  and Agriculture Agreements , while the 
United States asserts that the Panel is precluded from examining the SCM claims concerning prohibited and actionable subsidies in the absence of a prior ruling that the conditions of Article 13 of 
the Agreement on Agriculture are not satisfied, and, even if no t, the Panel should exercise its 
discretion to order its proceedings in this way.  All of the six third parties that made submissions 
support the view that the Panel is not precluded fro m simultaneously considering all of the arguments 
and evidence on the substance of Brazil's claims under the SCM  and Agriculture Agreements , or, 
putting this another way, that conclusions on the applicability of the Article 13 exemptions do not 
have to be made before consid eration of SCM claims in relation to the measures concerned.  
 
7. We are faced with two questions:    
• first
, whether we are required  to defer any examination of certain of Brazil's claims based on 
Articles 3, 5 and 6 of the SCM Agreement  and Article XVI of the GATT 1994  until after 
making a ruling or expressing views on the issue of fulfilment of Agreement on Agriculture  
Article 13 conditions; and  
• second , if not, then how we should exercise our discretion to best structure our examination of 
the matter before us. 
8. These questions concern the manner in which we  should or must treat the claims of Brazil 
based on Articles 3, 5 and 6 of the SCM Agreement  and Article XVI of the GATT 1994  having regard 
to the provisions of Article 13 of the Agreement on Agriculture .   
 
9. We therefore look first to the dispute settlement procedures governing disputes under the 
SCM Agreement .  Article 30 of the SCM Agreement  states:  "The provisions of Articles XXII and 
XXIII of GATT 1994 as elaborated and applied by the Dispute Settlement Understanding shall apply 
to consultations and the settlement of disputes under this Agreement, except as otherwise specifically 
provided herein." 
 
10. We thus turn next to the Understanding on Rules and Procedures Governing the Settlement of 
Disputes  (the " DSU ") and to the terms of the SCM Agreement  itself (in order to see whether or not 
there is anything otherwise specifically pr ovided therein).  Article 1.1 of the DSU  is entitled 
"Coverage and Application".  It states that "[t]he  rules and procedures of this Understanding shall 
apply to disputes brought pursuant to the consu ltation and dispute settlement provisions of the 
agreements listed in Appendix 1 to this Unders tanding (referred to in th is Understanding as the 
"covered agreements")."  11. As the Appellate Body has observed, "[a]rt icle 1.1 of the DSU establishes an integrated 
dispute settlement system which applies to all of  the agreements listed in Appendix 1 to the  DSU  (the 
"covered agreements").  The DSU is a coherent syst em of rules and procedures for dispute settlement WT/DS267/R/Add.3 
Page L-8  
 
which applies to "disputes brought pursuant to the consultation and dispute settlement provisions of" 
the covered agreements."
1  The SCM Agreement  and the GATT 1994  are Multilateral Agreements on 
Trade in Goods in Annex 1A of the WTO Agreement  and are therefore "covered agreements" listed in 
Appendix 1 of the DSU .  The general DSU  rules and procedures do not set forth any specific distinct 
way to deal with claims under the SCM Agreement  and the GATT 1994  having regard to the 
provisions of Article 13 of the Agreement on Agriculture .  
 12. Article 1.2 of the DSU  provides, in relevant part, that the rules and procedures of the DSU  
shall apply subject to such special or additional rules and procedures on dispute settlement contained 
in the covered agreements as are identified in Appendix 2 to the DSU .   
 
13. We therefore examine whether Appendix 2 to the DSU  identifies any special or additional 
dispute settlement rules or procedures relating to the SCM Agreement  or to Article XVI of the  GATT 
1994.    
 14. Appendix 2 of the DSU  does not identify Article XVI of the GATT 1994  as a special or 
additional rule.  It does identify Articles 4.2-4.12 and Articles 7.2-7.10 of the SCM Agreement  as 
"special or additional rules and procedures".  These provisions contain special procedures and 
remedies for disputes involving prohibited and actionable subsidies governed by the SCM Agreement .  
However, none of these provisions purports to confer any sort of precedence or priority for considering SCM remedies in a dispute involving claims under the Agreement on Agriculture .  
Furthermore, Article 7.1 of the SCM Agreement , which is not identified as a special or additional rule 
or procedure in Appendix 2 of the DSU , indicates that it applies:  "Except as provided in Article 13 of 
the Agreement on Agriculture....".  This clearly indicates  to us that this provision must be read in the 
light of the provisions of Article 13 of the Agreement on Agriculture .  Moreover, as noted in para. 5 
above, the substantive provisions to which these re medial articles are linked – Articles 3, 5 and 6 – 
stipulate either that they apply "except as provi ded in the Agreement on Agriculture" (Article 3 
relating to prohibited subsidies), or that they do "not apply to subsidies maintained on agricultural 
products as provided in Article 13 of the Agreemen t on Agriculture"  (Articles 5 and 6.9 of the SCM 
Agreement , entitled "Adverse Effects" and "Serious Prejudice", respectively).   
 15. The cited provisions of the SCM Agreement  refer, as just indicated, to the Agreement on 
Agriculture , and some specify more precisely Article 13 of the Agreement on Agriculture .  We 
therefore examine the rules applicab le to dispute settlement under the Agreement on Agriculture , 
which is also a Multilateral Agreement on Trade in Goods in Annex 1A of the WTO Agreement  and 
is, therefore, a "covered agreemen t" listed in Appendix 1 of the DSU .  Article 19 of the 
Agreement on 
Agriculture  is entitled "Consultation and Dispute Settlement".  It states that the provisions of 
Articles XXII and XXIII of GATT 1994 , as elaborated and applied by the DSU , shall apply to 
consultations and the settlement of  disputes under that Agreement. 
 16. Appendix 2 to the DSU  does not identify any special or additional dispute settlement rules or 
procedures relating to Article 13 of the Agreement on Agriculture.    
 
17. Consequently, consistent with our consideration of the relevant provisions, there is no special 
dispute settlement requirement foreseen in the covered agreements in respect of a panel's consideration of the fulfilment of Article 13 conditi ons.  The issue of fulfilment of the conditions of 
Article 13 of the Agreement on Agriculture  is to be resolved using generally applicable DSU  rules and 
procedures.  The fact that certain very specifi c provisions are included in Appendix 2 of the DSU  as 
special  or  additional rules  indicates  that,  when the drafters intended to make  a particular  provision 
                                                     
 
 1 Appellate Body Report, Guatemala – Anti-Dumping Investigation Regarding Portland Cement from 
Mexico ("Guatemala – Cement I "), WT/DS60/AB/R, adopted 25 November 1998, DSR 1998:IX, 3767, 
para. 64. WT/DS267/R/Add.3 
Page L-9 
 
 
 
applicable as a special or additional dispute settlement  rule, they did so explicitly.  Therefore, their 
failure to include a reference to any provision of the Agreement on Agriculture  in the text of 
Appendix 2 demonstrates that they did not intend to  make any provision of that Agreement a special 
or additional dispute settlement rule.  It is not necessary for us to look for any further interpretive 
guidance on this issue.  
 18. We next turn to the issue of how we shoul d structure our procedures to consider the matter 
before us.  As we have  concluded above, this issue is subject to the DSU  but not otherwise affected by 
the covered agreements.  In this regard, within the overall parameters set by the DSU of prompt and 
efficient dispute resolution
2, we must exercise our discretion as to how best to organize our 
procedures.  Our discretion must be guided by the instructions given to us by the DSU .  Pursuant to 
Article 12.1 of the DSU , "[p]anels shall follow the Worki ng Procedures in Appendix 3 unless the 
panel decides otherwise after consulting the parties to  the dispute".  Moreover, Article 12.2 provides:  
"Panel procedures should provide sufficient flex ibility so as to ensure high-quality panel reports, 
while not unduly delaying the panel process."  
 19. Article 11 of the DSU , entitled "Function of Panels" provides that the function of panels is to 
assist the DSB in discharging its responsibilities under the DSU  and the covered agreements.  
Accordingly, a panel should make an objective as sessment of the matter before it, including an 
objective assessment of the facts of the case and the a pplicability of and conform ity with the relevant 
covered agreements, and make such other fi ndings as will assist the DSB in making the 
recommendations or in giving the rulings provided for in the covered agreements.  Article 11 
contemplates that a panel must make an “obj ective assessment of the facts of the case and the 
applicability of and conformity with the relevant covered ag reements.”  It does not require that a panel 
must conduct its proceedings in any particular way, pr ovided that its requirements are fulfilled.  It is 
within our discretion to manage our procedures so as to best fulfil the requirements of Article 11.   
 20. Given the potential complexity of the claims before us, the conditional nature of certain of 
these claims and the volume of evidence which may be  introduced by the parties in support of their 
claims and arguments, and in order to organize our pr oceedings in an orderly, effective and efficient 
manner  which serves to facilitate an objective assessment of the matte r before us, and optimizes use 
of our resources, we have adopted the following modi fications to our procedures (as indicated in the 
attached timetable):  
• The Panel intends to express its views on whethe r measures raised in this dispute satisfy the 
conditions in Article 13 of the Agreement on Agriculture , to the extent that it is able to do so, 
by 1 September 2003 , and will defer its consideration of claims under Articles 3, 5 and 6 of 
the SCM Agreement  and Article XVI of the GATT 1994  as those provisions are referred to in 
Article 13 of the Agreement on Agriculture  until after it has expressed those views.  The 
Panel's views may be expressed in the form of rulings which could affect the Panel's further 
consideration of this dispute. 
• In order that third parties may participate effec tively at the first meeting at which the claims 
under Articles 3, 5 and 6 of the SCM Agreement  and Article XVI of the GATT 1994  as 
referred to in Article 13 of the Agreement on Agriculture  are examined (as necessary), the 
Panel intends to divide its first meeting into  two sessions, each of which will include a third 
party session.   
                                                     
 
2 Article 3.3 of the DSU  provides:  "The prompt settlement of situations in which a Member considers 
that any benefits accruing to it dir ectly or indirectly under the covere d agreements are being impaired by 
measures taken by another Member is essential to the effective functioning of the WTO and the maintenance of 
a proper balance between the rights and obligations of Members." WT/DS267/R/Add.3 
Page L-10  
 
• Accordingly, for the purposes of the first se ssion of the first substantive meeting on 22-
24 July 2003, the Panel does not require the par ties to address claims under Articles 3, 5 and 6 
of the SCM Agreement  and Article XVI of the GATT 1994  as referred to in Article 13 of the 
Agreement on Agriculture .  Having said this, the Panel notes that this does not preclude the 
parties from addressing such matters in their first submissions. 
• All other claims of Brazil in relation to measures which Brazil maintains do not involve a 
consideration of Article 13 of the Agreement on Agriculture  should also be addressed in first 
submissions, in order for the other party and th ird parties to have an opportunity to express 
their views on any such claims.  
• For the purposes of allowing the Panel to expr ess its views on the exemption conditions of 
Article 13 of the Agreement on Agriculture  by 1 September 2003, in relation to those 
measures which may be affected by Article 13,  full and complete submissions on factual and 
legal issues related to Article 13 in this dispute will need to be provided, at the latest, in the 
parties' rebuttal submissions (t o be submitted on 22 August 2003).  
21. We recognize that we may need to revis it certain aspects of our timetable and working 
procedures in light of developments during the cour se of the Panel procedures.  Related amendments 
to the working procedures may also be made, if necessary.  We have been mindful of due process 
considerations in revising our timetable and will con tinue to ensure that the parties have reasonable 
time to prepare for any subsequent stages of the dispute, as appropriate. 
  
[Attachment omitted] WT/DS267/R/Add.3 
Page L-11 
 
 
 
ANNEX L-1.5 
  
COMMUNICATION TO BRAZIL 
AND THE UNITED STATES 
 
25 July 2003 
   Please find attached a communication from the Panel on the following issues:  1.  The Panel's view on the preliminar y ruling requested by the United States. 
2.  Questions from the Panel to the parties. 
3. A copy of the Panel's questions to third parties (sent for your reference)   The Panel's questions are intended to facilitate the work of the Panel, and do not in any way 
prejudge the Panel's findings on the matter before it.  Nor does the fact that th e Panel has placed these 
questions under certain headings prejudge the Panel' s findings on the matter before it.  Each party is 
free to respond to or comment on questions posed to the other party or third parties.     Please be reminded that as stated by the Chairman  of the Panel in the meeting, parties are 
requested to submit answers by the close of busin ess of 4 August 2003.  Subsequently, parties can 
submit comments to each other's responses by the close of business 22 Au gust, the same deadline 
applicable to the rebuttal submissions WT/DS267/R/Add.3 
Page L-12  
 
Panels' views on the preliminary ruling requested by the United States
 
  1. The United States requests a preliminary ruling that:  
 (1) export credit guarantee measures relati ng to eligible US agricultural commodities 
other than upland cotton, 
  (2) production flexibility contract payments  and market loss assistance payments, and 
 
 (3) the Agricultural Assistance Act of 2003  
 are not within the Panel's terms of reference.
1 
 2. Brazil asserts that these items are properly with in the Panel's terms of reference and asks the 
Panel to reject the United States' request.
2 
 3. The Panel wishes to indicate to the parties how it intends to rule on items (1) and (2), in order 
to assist them in deciding what argumentation and evidence to submit in thei r answers to questions 
and rebuttals.   
4. The DSB established the Panel at its mee ting on 18 March 2003 with the following standard 
terms of reference:
3   
 
"To examine, in the light of the relevant provisions of the covered agreements cited 
by Brazil in document WT/DS267/7, the matter  referred to the DSB by Brazil in that 
document and to make such findings as will assist the DSB in making the 
recommendations or in giving the rulings provided for in those agreements". 
5. With respect to item (1), the Panel intends to  rule in its report that "export credit guarantees 
… to facilitate the export of US upland cotton, and other eligible agricultural commodities" as 
addressed in document WT/DS267/7, are within its terms of reference.   
6. With respect to item (2), th e Panel intends to rule in its report that production flexibility 
contract payments and market loss assistance payments as addressed in document WT/DS267/7 are 
within its terms of reference.  This is without prej udice to the relevance, if any, of those payments 
under Article 13(b) of the Agreement on Agriculture, Articles 5, 6 and 7 of the SCM Agreement and 
Article XVI of GATT 1994 .  
 
7. The Panel has not yet decided upon its approach to item (3) and asks the parties not to exclude consideration of the Agricultural Assistan ce Act of 2003 in responding to the Panels' written 
questions and in rebuttal submissions.  
                                                     
 
1 US First Written Submission, para. 218. 
2 Brazil's Oral Statement at the First Substa ntive Meeting, paragraphs 90, 144 and 145. 
3 WT/DSB/M/145 (paragraph 35) WT/DS267/R/Add.3 
Page L-13 
 
 
 
Questions from the Panel to the parties – 
First session of the first substantive Panel meeting 
  
UPLAND COTTON 
 
1. Please confirm that all information and data th at you have provided to  the Panel relating to 
"cotton" in fact relates to upland cotton only. BRA, USA   
 
PRELIMINARY ISSUES 
 Note to parties:  As indicated in the cover note, the Panel has expressed its views in respect of the 
three United States requests for preliminary rulings .  The Panel's questions reflected in this 
compilation relating to the requested preliminary rulings on which the Panel has expressed its views 
are those that were posed in the c ourse of the first session of the first Panel meeting.  This is to give 
an opportunity for the parties to transpo se into writing their oral responses.   
 
Product scope of Panel's terms of reference relating to Brazil's export credit guarantee claims 
 
2. Is Brazil's claim in relation to export credit guarantees against the measures said to constitute 
the GSM-102, GSM-103 and SCGP programmes in thei r entire application, or against the measures 
said to constitute the GSM-102, GSM-103 and SCGP  programmes in their application to upland 
cotton, or both?  BRA  
 
3. If the request for consultations in this dispute omitted certain products  in relation to export 
credit guarantees, on what basis is it argued that it failed to identify the measures  at issue in 
accordance with Article 4.4 of the DSU ?  USA  
 
4. Is it argued that the export credit guarantee programmes concerning upland cotton are each a 
separate or independent measure , in that they operate independently?  USA  
 5. Is there a specification in any legislation or regulation (or any other official government document) which limit or restrict the export cred it guarantee programmes at issue exclusively to 
upland cotton?  USA  
 6. For the purposes of the Panel's examination of  Brazil's claims relating to GSM-102, GSM-103 
and SCGP under the Agreement on Agriculture  and the SCM Agreement , is accurate data and 
information available with respect to these e xport credit guarantee programmes concerning upland 
cotton alone (e.g. with respect to "long-term operati ng costs and losses")?  In this respect, the Panel 
also directs the parties' attention to the specifi c questions below relating to the programmes.   USA   
 7. Are commitments with respect to export subsidies under the Agreement on Agriculture  
commodity-specific?  How, if at all, is this relevant?  BRA, USA  
 
8. Does the United States confirm that the questi ons referred to by Brazil in paragraph 92 of 
Brazil's oral statement were posed to the United States in the consultations? USA  
 9. How does the United States respond to paragraph 94 of Brazil's oral statement? USA  
 10. What actual prejudice, if any,  has the Un ited States suffered as a result of the alleged 
omission of products other than upland cott on from the request for consultations?  USA  
 WT/DS267/R/Add.3 
Page L-14  
 
11. Does the United States agree that Brazil's re quest for establishment of the Panel can be 
understood to indicate that Brazil's export credit guara ntee claims relatesto products other than upland 
cotton?  How, if at all, is this relevant?  USA  
 12. Please address issues and submit eviden ce regarding the three export credit guarantee 
programmes concerned relating to upland cotton and other eligible agricultural commodities in your 
answers to questions and rebuttal submissions.  BRA, USA  
 13. Please include any argumentation and eviden ce to support your statement during the Panel 
meeting that the inclusion of such other eligib le agricultural commoditi es would create additional 
"work" for the Panel with respect to each  of these commodities under Article 13 of the Agreement on 
Agriculture .   USA  
 
Expired measures 
 14. Please submit evidence regarding the progra mmes under the 1996 FAIR Act, in particular, 
production flexibility contract payments and market lo ss assistance payments, to the extent that they 
would be relevant to the Panel's de termination under Article 13 of the Agreement on Agriculture  in 
your answers to questions and rebuttal submission.  USA  
 15. Do the parties agree that it is beyond a Pa nel's power to recommend a remedy for an expired 
measure?  Could  the Panel coul d be required to examine "expired measures" in order to conduct its 
assessment of the matter before it?  How, if at all, is Article 7.8 of the SCM Agreement  relevant to 
these matters?  BRA, USA   
 
Agricultural Assistance Act of 2003 
 
16. What, if any, prejudice in terms of the pr esentation of its case does the United States allege, 
should the Panel proceed to consider the  measu res constituting the cottonseed payments under the 
Agricultural Assistance Act of 2003? USA   
 17. (a) What is the relationship of the Agricultural Assistance Act of 2003 to other 
legislation in the request for establishment of the Panel?  BRA, USA   
  (b) Do the legal instruments follow directly one  after another, or are there temporal gaps?  
Are payments authorized under a broad legi slative authority or are they specific to 
each legal instrument?  BRA, USA  
 
 (c) Please provide any implementing regula tions.  Do these implementing regulations 
resemble those relating to previous prog rammes or payments?  Are payments made 
retrospectively?  How if at all is this relevant? BRA, USA  
 18. If the Panel is correct in understanding th at cottonseed payments are divided between 
processors and producers, how is this reflected in Brazil's calculations?  BRA  
 
Measures at issue 
 
19. The Panel notes that Brazil's panel request refers, inter alia , to alleged "subsidies" and 
"domestic support" "provided" in various contexts.  Please specify the measures, in particular, the 
legislative and regulatory provisions, by number and le tter, in respect of which Brazil seeks relief and 
indicate where each is referred to in the panel request.   BRA  
 
 
 WT/DS267/R/Add.3 
Page L-15 
 
 
 
 
ARTICLE 13(B): DOMESTIC SUPPORT MEASURES 
 "exempt from actions"     
 
20. In paragraph 8 of its initial brief (dated 5 June, 2003), the United States argued that the word 
"actions" as used in the phrase "exempt from actions" in Article 13 of the Agreement on Agriculture  
includes the "bringing of a case" and consultations.  In paragraph 36 of its first written submission 
(dated 11 July, 2003), the Unite d States stated as follows: 
 
"[P]rior to this point in the process, the DSU  rules did not afford the United States 
any opportunity to prevent the dispute from proceeding through consultations and panel establishment automatically, regardless of the U.S. insistence that its measures 
conform to the Peace Clause." 
Is it the United States' understanding that the draf ters used the phrase "exempt from actions" knowing 
that under the DSU it would not be possible fully to exempt " actions", as the United States interprets 
that term? USA 
 21. In US - FSC  and US - FSC (21.5)  the Appellate Body made findings under the SCM 
Agreement  relating to export subsidies in respect of agricultural products without making a finding in 
respect of Article 13 of the Agreement on Agriculture.   How is this relevant to the United States' 
interpretation of the phrase "exempt from actions" as used in Article 13? USA  
 
"such measures" and Annex 2 of the Agreement on Agriculture  
 
22. Please explain the difference, if any, between  the meaning of "defined" and the meaning of 
"fixed" in the phrase "a defined and fixed base pe riod" in paragraph 6(a) of Annex 2 of the Agreement 
on Agriculture . BRA, USA  
 23. Please explain the meaning of "a" in "a define d and fixed base period" in paragraph 6(a) of 
Annex 2 of the Agreement on Agriculture , the meaning of "the" in "the base period" in 
paragraphs 6(b), (c) and (d), and the differe nce between these and the phrase "based on the years 
1986-88" in Annex 3.  BRA, USA  
 24. How often can a Member define and fix a base period in accordance with paragraph 6 of 
Annex 2 of the Agreement on Agriculture ? BRA, USA  
 25. Does the United States consider that there is  any ambiguity in the term "type of production" 
as used in paragraph 6(b) of Annex 2 of the Agreement on Agriculture ? USA  
 26. Can the United States  confirm Brazil's ass ertions in paragraph 174 of its first written 
submission that the implementing regulations for dir ect payments prohibit or limit payments if base 
acreage is used for the production of certain crops?  If so, can the United States clarify the statement 
in paragraph 56 of its first written submission that direct payments are made regardless of what is 
currently produced on those acres?  Can the Unite d States confirm the same point in relation to 
production flexibility contracts?  USA  
 
27. Does Brazil argue that any United States measure that does not comply with the fundamental requirement of paragraph 1 of Annex 2 of the Agreement on Agriculture  is actionable independently 
of any failure of that measure to comply with th e basic or policy-specific criteria in Annex 2?  BRA  
 
 WT/DS267/R/Add.3 
Page L-16  
 
28. Please explain the meaning of the word "criteria" in Articles 6.1 and 7.1.  What effect, if any, 
does the use of the word "Accordingly" in paragraph 1 of Annex 2 of the Agreement on Agriculture  
have on the meaning of the preceding sentence?  BRA  
 29. Please explain the meaning of the words "the fundamental requirement" as used in 
paragraph 1 of Annex 2 of the Agreement on Agriculture.  USA  
 30. Do the parties consider that direct paym ents and production flexibility contract payments 
meet or met the basic criteria referred to in paragraph 1 of Annex 2 of the Agreement on Agriculture ?  
BRA, USA  
 
31. If the first sentence of paragraph 1 of Annex 2 is not a stand-alone obligation, then must new, 
non- or minimally trade-distorting measures that do not conform to the criteria listed in Annex 2 be 
classified as non-Green Box?  BRA, USA  
 
32. If the first sentence of paragraph 1 of Anne x 2 expresses a general principle which informs 
the interpretation of the criteria in Annex 2, pl ease explain how this affects the assessment of the 
direct payments programme's complianc e with paragraph 6 of Annex 2.  USA   
 
"do not grant support to a specific commodity" 
 33. According to the United States' interpretation of the word "grant", when can a Member claim 
that a measure is not exempt from action under Article 13(b)?  What if the measure is enacted annually?  Can the Member obtain a remedy in respect of that measure under the DSU ?  USA  
 34. Does Brazil interpret the word "grant " as used in Article 13(b)(ii) of the Agreement on 
Agriculture to mean payment made in a specific year or payment made in respect of a specific year?  
BRA  
 
35. Does a failure by a Member to comply in a given year with either the chapeau of 
Article 13(b) or the proviso in subpa ragraph (ii) of Article 13(b) impact  its entitlement to benefit in an 
earlier or a later year from the exempti on from action provided by Article 13(b)? BRA, USA  
 
36. Does a failure by a Member to comply with Article 13(b) in respect of a specific commodity  
impact its entitlement to benefit in respect of other agricultural products from the exemption from 
action provided by Article 13(b)? BRA, USA  
 
37. In the United States' view, why did the drafters not use the exact term "product-specific" in 
Article 13(b)(ii)? USA  
 38. Given the fact that subsidies available for mo re than one product could have various effects 
on production, how does the United States demar cate between product-specific support and non-
product specific support ? USA  
 
39. If "such measures" in Article 13(b)(ii) refers to all those in the chapeau of Article 13(b), why 
are they not all included in the potential comparisons  with 1992?  In what circumstances can measures 
which grant non-product specific support lose exemp tion from action under Articles 5 and 6 of the 
SCM Agreement and Article XVI of 
GATT 1994 ? USA  
 
40. In relation to which other provisions in the Agreement on Agriculture  is it relevant to 
disaggregate non-product specific support in terms of specific commodities?  BRA  
 WT/DS267/R/Add.3 
Page L-17 
 
 
 
41. What is the position of Brazil with regard to  certain other domestic support measures not cited 
by Brazil that were notified by the United St ates as non-product-specific (e.g. G/AG/N/USA/43), 
some of which presumably deliver support to uplan d cotton (e.g. state credit programmes, irrigation 
subsidies etc).   Why have budgetary outlays for such measures related to upland cotton not been 
included in the comparison of support with 1992?  BRA  
 42. If the word "specific" were deleted from Artic le 13(b)(ii), would this change the meaning of 
the subparagraph?  BRA    
 
43. What are the precise differences between defici ency payments and counter-cyclical payments 
that lead you to classify the former as product-speci fic and the latter as non-product specific?  How do 
you classify market loss assistance payments?  USA  
 44. Do you allege that counter-cyclical paymen ts could be considered product-specific?  BRA  
 
45. If the Panel considered that Step 2 payments paid to exporters were an export subsidy, would 
the United States count them as domestic support measures for the purposes of Article 13(b)?  Please verify Brazil's separate data for Step 2 export pa yments and Step 2 domestic payments in Exhibit 
BRA-69 or provide separate data. BRA, USA  
 
46. What is the relevance, if any, of the concept of "specificity" in Article 2 of the SCM 
Agreement and references to "a  product" or "subsidized product" in certain provisions of the SCM 
Agreement  to the meaning of "support to a specific commodity" in Article 13(b)(ii) Agreement on 
Agriculture ? BRA, USA  
 "in excess of that decided during the 1992 marketing year" 
 
47. Where does Article 13(b)(ii) require a year-on-year comparison?  BRA, USA  
 48. Does Article 13(b)(ii) require a comparison of support granted with support decided?   How 
could such a comparison be made?  BRA, USA   
 
49. Brazil claims that the terms "grant" and "decide d" in Article 13(b)(ii) have broadly the same 
meaning.  If so, why did the drafters not use the same term?  BRA  
 50. Please provide any written drafting history wh ich could shed light on why the proviso was 
added to what is now Article 13(b)(ii) and, in pa rticular, why both words "grant" and "decided" were 
used.  USA  
 51. Could the United States please comment on th e interpretation advanced by the EC, in 
paragraphs 16 and 18 of its oral statement, of  the words "decided during the 1992 marketing year"?  
USA  
 
52. Please comment on an interpretation of the word s "decided during" in Article 13(b)(ii) that 
would read them as synonymous with the words "authorized during".  BRA, USA  
 53. Assume, for arguments sake, that the only "d ecision" made in the United States in 1992 was 
the target price. How would Brazil make the comparison vis-à-vis , for example, the year 2001? BRA  
 
54. Please identify all United States legal and regul atory and administrative instruments decided 
during the marketing year 1992, with the respective dates of decision, that decided support for upland 
cotton. BRA, USA  
 WT/DS267/R/Add.3 
Page L-18  
 
55. Please provide a copy of the instrument in which the rate of support for upland cotton during 
the marketing year 1992 was decided, indicating the date of the decision.   USA  
 56. Could the United States please explain how s upport granted under legislation that dates back 
to 1990 can have been support "decided during the marketing year 1992"?   USA  
 
57. If the United States decided on a rate of support for MY1992, does that not mean that it decided on whatever budgetary outlay was required to meet that rate of support, even if the exact 
amount was not known at that time?  USA  
 
58. Please comment on the argument advanced by the EC, in paragraph 17 of its oral statement 
that: "Had WTO Members intended a limitation to th e support provided or granted in 1992 the word 
'for' would have been used in place of 'during'."  BRA  
 59. Should the rate of support as indicated in Article 13(b)(ii) include the market price?  If so, 
why is it appropriate to include it in the comparison under Article 13(b)(ii)?  BRA, USA  
 60. Can you provide information on support decided in 1992 and the years with which you believe it should be compared, on a per support programme / per unit of production / per annum 
basis?  If possible, please specify how, if at all,  budget outlays may be transposed into units of 
production, and which units of production are best to use.  BRA, USA  
 
61. Does the United States consider that Article 13(b)(ii) permits a comparison on any basis other 
than a per pound basis? USA   
 62. According to Prof. Sumner's calculation, the per pound support increased by approximately 
24% from 1992 to 2002. On the other hand, the Pa nel  understands that the total budget outlay, 
according to Brazil, increased more than that. What, in Brazil's  view, is the reason for this difference 
in the rate of increase?   BRA  
 63. In relation to Prof. Sumner's presentation at the first session of the first substantive meeting, 
please elaborate on the reasons behind the increas e in the figures (from 1992 to 2002) concerning 
Loan Support and Step 2 payments.  BRA  
 64. Do the figures cited in Prof. Sumner's presenta tion at the first session of the first substantive 
meeting indicate amount available or amount spent?  Can the Panel derive amount spent from these 
figures?   If Article 13(b)(ii) requires a rate of support comp arison, is the rate of support the "rate" of 
support available or the "rate" at which the support was spent?  BRA  
 65. Does Brazil consider that adjustment for inflati on is relevant in the context of the comparison 
under Article 13 (b)(ii) ? BRA  
 66. Could you please comment on the relative me rits of each of the following calculation 
methods for the purposes of the comparison of supp ort to upland cotton with 1992, irrespective of 
whether a particular measure s hould be included or excluded: 
  (a) Total budgetary outlays (Brazil's approach).  USA 
 
 (b) Budgetary outlays per unit of upland co tton:   Could you please calculate and provide 
an estimate for the marketing years 1992 and 1999-2002, respectively, and draw attention to any factors/qualifications that  the Panel would need to be aware of.  
BRA, USA 
 WT/DS267/R/Add.3 
Page L-19 
 
 
 
 (c) Per unit rate of support (United States approach):  How should changes in acreage, 
eligibility and payment limitations per farm (s) (commodity certificate programs) be 
factored into this approach?  BRA 
 
 (d) Per unit rate of support for upland cotton (Prof. Sumner's approach at the first session 
of the first substantive meeting ).  USA  
 67. The Panel requests the parties to calculate  and submit estimates of  the AMS for upland 
cotton  for marketing years 1992, 1999, 2000, 2001 and 2002.  For this purpose the parties are each 
requested to submit AMS calculations for upland cotton (using the budgetary-outlay/non-price gap  
methodology employed by the United States in  respect of cotton in its DS Notifications (e.g., G/AG/N/USA/43) and using the formats and suppor ting tables in document G/AG/2) on the same 
basis as would be the case in calculating a produc t specific AMS for the purposes of the calculation of 
the "Total Current AMS" in any year in accord ance with the relevant provisions, including as 
appropriate Article 1(a), (b) and (h), Article 6 and Annex 3 to the Agreement.   BRA, USA  
 68. Could you please clarify the result of the cal culations of, and the meaning of the title, in 
Appendix Table 1 "Estimated per unit Subsidy Rat es by Program and Year" in Annex 2 to Exhibit 
BRA-105, page 12.   Why are the numbers calculated for marketing loans considered to be subsidies?   
Could the Panel, for example, read the "total le vel of support" (bottom line of the table) as the 
effective support price for upland cotton or the maximum rate of support for upland cotton? BRA, 
USA  
 
69. Can the United States confirm that the "marke ting year" for upland cotton is 1 August  to 31 
July ?  Can the United States confirm the Panel's understanding that USDA data for the "crop year" 
corresponds to the "marketing year"? USA  
 
EXPORT CREDIT GUARA NTEE PROGRAMMES 
 
70. How does Brazil respond to the United States' as sertion that Brazil is trying to realize through 
litigation what it could not achieve in past negotiations ?  BRA  
 71. (a) Is an export credit guarantee a financial c ontribution in the form of a "potential direct 
transfer of funds or liabilities (e.g. lo an guarantee)" within the meaning of 
Article 1.1(a)(1)(i) of the SCM Agreement ? Why or why not? Does it confer a benefit 
within the meaning of Article 1.1(b)? Why or why not? If so, to whom? USA  
  (b) How, if at all, would these elements be  relevant to the claims of Brazil, and the 
United States response thereto?  BRA, USA  
 72. Could Brazil expand on why, as indicated in pa ragraph 118 of its oral statement, it does "not 
agree" with the United States arguments relating to the viability of an a contrario  interpretation of 
item (j) of the Illustrative List of Export Subsidies in Annex 1 of the SCM Agreement ? BRA  
 73. The Panel could arguably take the view that Articles 1 and 3 of the SCM Agreement  were 
relevant in assessing the WTO-consistency of Unit ed States export credit guarantees.  The United 
States has yet to submit any evidence or argumentati on on this point, either as potential context for 
interpretation of the terms in Article 10 of the Agreement on Agriculture  or in relation to Brazil's 
claims under the  SCM Agreement .   The Panel would therefore appreciate United States views in 
respect of this situation, and invites the United States to submit relevant argumentation and evidence. 
USA  
 WT/DS267/R/Add.3 
Page L-20  
 
74. If the Panel decides to refer to provisions of the SCM Agreement  for contextual guidance in 
the interpretation of the terms in Article 10 of the Agreement on Agriculture , should the Panel refer to 
item (j) or Articles 1 and 3 of the SCM Agreement  or both? BRA, USA  
 75. The Panel's attention has been drawn to Article 14(c) of the SCM Agreement  (see e.g. written 
third party submission of Canada) and to the panel report in DS 222 Canada- Export Credits and 
Loan Guarantees .  How and to what extent are Article 14(c) of the SCM Agreement , and the cited 
panel report, relevant to the issue of whethe r or not the United States export credit guarantee 
programmes confer a "benefit"?  What would be th e appropriate market benchmark to use for any 
comparison?  Please cite any other relevant material. BRA, USA  
 
76. How does the United States respond to Brazil's statement that :  "...export credit guarantees 
for exports of agricultural exports [ sic] are not available on the marketplace by commercial lenders."?  
USA  
 77. How does the United States interpretation of "l ong term operating costs and losses" in item (j) 
as claims paid give meaning to both "costs" and "losses"?  Do claims paid represent "losses" or 
"costs" or both?  If claims paid is represented by  "losses", what would go into the "cost" element of 
item (j)?  Could the United States expand on why it disagrees with the items which Brazil identifies for inclusion in the examination to be conducted under item (j)?  USA  
 
78. Can the United States provide supporting documen tation for data used relating to "costs and 
losses" in paragraph 173?  Could the United States co nfirm that the figures cited in paragraph 173 of 
its first written submission relate to the SCGP? Why did the United States cite these figures after 
stating that it is not possible to make any assessment of the long-term operating costs and losses of this programme?  USA  
 
79. In respect of what time periods does Article 13(c) require an assessment of conformity with 
Part V of the Agreement on Agriculture ?  How does this affect, if at all, your interpretation of 
Article 13(b)? BRA, USA  
 80. In Brazil's view, why did the drafters of the Agreement on Agriculture  not include export 
credit guarantees in Article 9.1? BRA  
 81. How does the United States respond to the following in Brazil's oral statement:  USA  
  (a) paragraph 122 (rescheduled guarantees) 
 (b) paragraph 123 (interest on debt to Treasury) 
 (c) paragraphs 125 ff. (guaranteed loan subsidy)  (d) paragraphs 127-129 (re-estimates, etc.)   (e) Exhibits BRA-125-127   (f) the chart on page 53 of Brazil's oral statement at the first session of the first Panel 
meeting relating to "Guaranteed Loan S ubsidy and Administrative Expenses of US 
Export Credit Guarantee Programs GSM-102 GSM 103 and SCGP"? 
 (g) In respect of (a)-(f) above, how and to what extent do the information and data 
presented for the export guarantee programmes concerning "program" and "financing", "summary of loan levels", "s ubsidy budget authority", "outlay levels", 
etc., in particular in Exhibits BRA-125-127,  reflect "actual costs and losses" of the 
GSM-102, GSM-102 and SCGP export credit guarantee programmes(see e.g. Brazil's 
closing oral statement at the first session of the first substantive meeting, paragraph 24)? USA  
 WT/DS267/R/Add.3 
Page L-21 
 
 
 
82. Please explain each of the following statemen ts and any possible significance it may have in 
respect of Brazil's claims about GSM-102 and GSM-103 (7 CFR 1493.10(a)(2), Exhibit BRA-38): 
BRA, USA  
  (a) "The programs operate in cases where cred it is necessary to increase or maintain U.S. 
exports to a foreign market and where U.S.  financial institutions  would be unwilling 
to provide financing without CCC's guara ntee.  (7 CFR 1493.10(a)(2) Exhibit BRA-
38) 
 
 (b) "The programs are operated in a manner intended not to interfere with markets for 
cash sales .  The programs are targeted toward those countries where the guarantee is 
necessary to secure financing of the expor ts but which have sufficient financial 
strength so that foreign exchange will be av ailable for scheduled payments."  (7 CFR 
1493.10(a)(2) Exhibit BRA-38) 
 
 (c) "In providing this credit guarantee  facility,  CCC seeks to expand market 
opportunities for US agricultural exporters and assist long-term market development 
for US agricultural commodities." (7 CFR 1493.10(a)(2) Exhibit BRA-38) 
 83. Could Brazil explain how the procedure in Annex V of the SCM Agreement would be relevant 
to its claims concerning agricultural export subsid ies, prohibited subsidies and agricultural domestic 
support? (e.g. note 301 in Brazil's first submission a nd paragraph 4 of Brazil's oral statement at the 
first session of the first substantive meeting). BRA  
 84. Is the Panel correct in understanding that, under the GSM-102 and GSM-103 programmes , the 
exporter pays a fee calculated on the dollar amo unt guaranteed, based on a schedule of rates 
applicable to different credit periods?  How and on wh at basis are the fee rates fixed?  Do the fee rates 
ever change?  If so, how and for what reason?  W ould it be necessary to amend the legislation and/or 
regulations in order to adjust the fee rates?  USA  
 85. Is the Panel correct in understanding that, under the SCGP , the exporter pays a fee for the 
guarantee calculated on the guaranteed portion of th e value of the export sales? How and on what 
basis are the fee rates fixed?  Do the fee rates ever  change?  If so, how and for what reason?  Would it 
be necessary to amend the legislation and/or regulations in order to adjust the fee rates?  Please explain any "risk" assessment involved in the programme.  USA  
 
86. Is there a risk categorization in relation to three export credit guarantee programmes (GSM-
102, GSM-103 and SCGP)? Does this have any imp act on premiums payable and the ability of the 
CCC to on-sell the guarantees ? USA  
 87. What proportion of CCC (export-related and to tal) long term operating costs and losses are 
represented by GSM-102, GSM-103 and SCGP programmes?  USA  
 
88. (a) Is the Panel correct in understanding that the United States' argument is that, at 
present, by virtue of Article 10.2 of the Agreement on Agriculture , there are no 
disciplines on agricultural export credit guarantees under the Agreement on 
Agriculture (or the  SCM Agreement) ?  USA  
 
 (b) Does the United States agree with the following proposition:  a WTO Member may 
therefore extend agricultural export credit guarantees without charging a premium, 
and for an indefinite period, in additi on to any other terms and conditions it may 
wish?  How would this reconcile with the title of Article 10 of the Agreement on 
Agriculture  ("Prevention of Circumvention on Export Subsidy Commitments"), and WT/DS267/R/Add.3 
Page L-22  
 
with other commitments contained in the Agreement on Agriculture ? Please cite any 
relevant material, including any past WTO dispute settlement cases.  How would this 
reconcile with the United States' own statemen t, at paragraph 21 of its closing oral 
statement that "of course, the United States may not provide subsidies without any limit".  USA 
 
 (c) If, as the United States argues, ther e are no disciplines on export credit guarantees in 
the Agreement on Agriculture , how could export credit guarantees "conform fully to 
the provisions of Part V" of the Agreement on Agriculture  within the meaning of 
Article 13 (how can you assess "conformity" or non-conformity when there are 
allegedly no disciplines against which such an assessment could occur)?  USA  
  (d) Is the United States advocating the vi ew that its own export credit guarantee 
programmes, which pre-dated the Uruguay Roun d, are effectively "grandfathered" so 
as to benefit from some sort of exempti on from the export subsidy disciplines of the 
Agreement on Agriculture ?  How, if at all, is it relevant that the SCGP did not, 
according to the United States, become rele vant for upland cotton until the late 1990's 
(i.e. after the entry into force of the WTO Agreement )?  USA 
 
STEP 2 PAYMENTS 
 89. Does the United States confirm Brazil's statemen t in paragraph 331 of its first submission that 
"The conditions and requirements for Step 2 domestic payments remain unchanged with the passage 
of the 2002 FSRI Act"?  What is the releva nce of this, if any, to this dispute? USA  
 
90. Does the United States confirm Brazil's statemen t in paragraph 235 of its first submission that 
the changes concerning Step 2 export payments from the 1996 FAIR Act to the 2002 FSRI Act are:  
increase in the amount of the subsidy by 1.25 cents  per pound and the removal of any budgetary limits 
that applied under the 1996 FAIR Act?  What is the relevance of this, if any, to this dispute? USA  
 91. What is the significance of the elimination of the 1.25 cent threshold payment in the 2002 
FSRI Act pertaining to Step 2 payments? USA  
 92. Does the United States confirm that Exhibit BRA-65 represents a sample contract for exporters of eligible upland co tton to conclude with the CCC under the FSRI 2002, and that an 
application form (Exhibit BRA-66) needs to be f illed out with data on week ly exports and submitted 
to the USDA FAS. Is Exhibit BRA-66 - Form C CC 1045-2 – also a valid example? If not, please 
identify any differences or distinctions.  USA   
 93. Please elaborate why the United States deems that Step 2 payments upon submission of proof 
of export are not subsidies contingent upon export.  Is it the US contention that, in order to be 
contingent on export, exportation must be the exclusive condition for receipt of the payment? USA  
 
94. Is the Panel correct in understanding that Braz il alleges an inconsistency with Article 3.1(b) 
of the SCM Agreement  only with respect to Step 2 domestic  payments? BRA    
 95. Do the criteria in 7 CFR 1427.103(c)(2) (Exhibit BRA-37) that Step 2 "eligible upland 
cotton" must be "not imported cotton" apply to both domestic and export payments?  USA  
 96. Is a domestic sale a "use" for the purposes of St ep 2 payments? Is a sale for export, or export, 
considered a "use"?  USA   
 WT/DS267/R/Add.3 
Page L-23 
 
 
 
97. How does the United States respond to Brazil's assertion, at paragraph 70 of Brazil's oral 
statement at the first session of the first substantive meeting, that "I t is obvious that a single bale of 
cotton cannot be both exported and used domestica lly."  Is this a relevant consideration? USA  
 
98. How many Step 2 payments are received if a bale of upland cotton is exported, and then 
opened by a domestic user in the United States, or vice versa ? USA   
 99. How does the United States respond to Brazil's arguments in paragraphs  71-75 of Brazil's oral 
statement at the first session of the first Panel m eeting concerning the relevanc e of the Appellate Body 
Report in  US-FSC (21.5) .  USA  
 100. How does Brazil respond to the statement in  note 119 of the United States' first written 
submission that "...to the extent a consumer that had intended to export inst ead opens the bale, then 
that consumer could still obtain the Step 2 paymen t upon submission of the requ isite documentation".   
The Panel notes that Step 2 payments all involve upland cotton produced in the United States.  What 
are the two distinct factual situations that Step 2 payments involve?  Other than the panel report in 
Canada-Dairy  and the findings of the Appellate Body in US-FSC (21.5)
4, do any other dispute 
settlement reports offer guidance on this issue?  For example, how, if at all is the Appellate Body's 
report in Canada-Aircraft  relevant here?5  BRA  
 
101. How does Brazil respond to the United States' as sertion at paragraph 22 of its oral statement 
that the programme involves "elig ible users" who constitute the "entire universe" of potential 
purchasers of upland cotton? BRA  
 102. How does Brazil respond to the United States' a ssertion at paragraph 129 of its first written 
submission, that "[t]he program is indifferent to wh ether recipients of the benefit of this programme 
are exporters or parties that open bales for the processing of manufacturing raw cotton into cotton products in the United States." BRA  
 103. Is the Step 2 programme fund a unified fund th at is available for either domestic users or 
exporters, without a specific amount earmarked fo r either domestic users or exporters?  Please 
                                                     
 
4 "We recall that the ETI measure gr ants a tax exemption in two differ ent sets of circumstances:  (a)  
where property is produced  within  the United States and held for use  outside  the United States; and (b)  where 
property is produced  outside  the United States and held for use outside  the United States.  Our conclusion that 
the ETI measure grants subsidies that ar e export contingent in the first set of  circumstances is not affected by the 
fact that the subsidy can also be obta ined in the second set of circumstances .  The fact that the subsidies granted 
in the second set of circumstances  might  not be export contingent does not dissolve the export contingency 
arising in the first set of circumstances. 4  Conversely, the export contingency arising in these circumstances has 
no bearing on whether there  is an export contingent subsidy in the second set of circumstances.  Where a United States taxpayer is simultaneously producing property  within and outside the Unit ed States, for direct use 
outside the United States, subsidies may be granted under the ETI measure in respect of both sets of property.  
The subsidy granted with respect to th e property produced within the United St ates, and exported from there, is 
export contingent within the mean ing of Article 3.1(a) of the  SCM Agreement , irrespective of whether the 
subsidy given in respect of property produced outside the United States is also export contingent." 
2 5 There, the Appellate Body stated that,  
"the fact that some of TPC's contributions, in some industry sectors, 
are  not contingent upon export performance, does not necessarily 
mean that the same is true for all of TPC's contributions.  It is enough 
to show that one or some of TPC 's contributions do constitute 
subsidies "contingent ... in fact … upon export performance".5   WT/DS267/R/Add.3 
Page L-24  
 
substantiate your response, includi ng by reference to any applicable statutory or regulatory provisions. 
USA  
 
104. How does the United States respond to the data presented in Exhibit BRA-69?  Is it accurate? 
Please substantiate.  USA  
 
105. Why is the Step 2 programme separated into "domestic users" and "exporters"?  Apart from 
differentiating between exporters and domestic users, with conse quential differentiation as to the 
forms that must be filled out and certain other co nditions that must be fulfilled, are the eligibility 
criteria for Step 2 payments identical?  Are the fo rm and rate of payment, as well as the actual 
payment made, identical? USA  
 106. With respect to paragraph 139 of the United States' first written submission, are Step 2 export  
payments included in the annual reduction comm itments of the United  States? If so, why? USA  
 
107. Please comment on any relevance, to Brazil's de jure  claims of inconsistency with the 
provisions of the Agreement on Agriculture , of Exhibit BRA-69, which shows Step 2 payments made 
to (i) domestic users and (ii) exporters.  This Exhibit shows that, from FY 91/92 through 02, the 
Step 2 payments for exporters exceeded those for domestic users in FY 94; FY 95; FY 96 (in fact 
there were no domestic payments in FY 96); and FY  02.  In the other years, the domestic payments 
are greater than export payments.  BRA, USA  
 
108. At paragraph 135 of its first written subm ission, the United States states :  "[T]he subsidy  is 
not contingent upon export performance..." (emphasis a dded).  Again, in the course of the first Panel 
meeting, the United States admitted that the Step  2 payments were "subsidies".  Does the United 
States thus concede that Step 2 payments cons titute a "subsidy" within the meaning of the WTO 
Agreement ? USA  
 109. How does the United States respond to Brazil's arguments concerning a mandatory/discretionary distincti on and the allegation that certain United States measures (including 
s.1207(a) of the 2002 FSRI Act) are mandatory? (This is  referred to, for example, in paragraph 28 of 
Brazil's first written submission).  Does the United St ates agree with the assertion that (subject to the 
availability of funds) the payment by the Secretar y of Step 2 payments is mandatory under section 
1207(a) FSRI upon fulfilment by a domestic user or  exporter of the conditions set out in the 
legislation and regulations?  If not, then why not?  To what extent is this relevant  here?  What 
determines the "availability of funds"? Please cite an y other relevant measures or provisions which 
you consider should guide the Panel in respect of this issue.  USA  
 
110. Section 1207(a) of the 2002 FSRI Act provides that during the period beginning on the date of the enactment of the FSRI Act through 31 July 2008, " .. the Secretary shall issue marketing certificates or cash payments, at the option of the recipient, to domestic users and exporters for 
documented purchases by domestic users and sales fo r export by exporters...".  The Panel notes that 
Brazil does not appear to distinguish between the tr eatment of (i) cash payments and (ii) marketing 
certificates in terms of the issue of whether or not a "subsidy" exists.  The United States refers to 
"benefits" and "payments" and "programme" in as serting that Step 2 is not export contingent 
(paragraphs 127-135 of the United States' first written submission).     (a) Do the parties thus agree that there is  no need to draw any distinction between the 
treatment of (i) cash payments and (ii) marketing certificates in terms of the issue of 
whether or not a "subsidy" exists for the purposes of the Agreement on Agriculture ?  
BRA, USA
 
 WT/DS267/R/Add.3 
Page L-25 
 
 
 
 (b) Why would a domestic user or an exporter select to receive a marketing certificate 
over a cash payment?  What is the pr oportion of cash payments vs. marketing 
certificates granted under the programme?  USA 
 
111. Does the United States maintain its argumen t that actions based on Article 3.1(b) of the SCM 
Agreement  are conditionally "exempt from actions" due  to the operation of Article 13 of the 
Agreement on Agriculture ? USA  
 112. In the event that the Panel finds that Article 6.3 of the Agreement on Agriculture  does not 
preclude an examination of Brazil's claims under Article 3.1 of the SCM Agreement  and Article III:4 
of GATT 1994 , how does the United States respond to the mer its of Brazil's claims relating to Step 2 
payments under those provisions? USA  
 113. Is it necessary for measures directed at agricultural processors included in AMS to 
discriminate on the basis of the origin of goods? USA  
 114. With respect to the last sentence of paragr aph 22 of Brazil's closing oral statement, could 
Brazil elaborate on the circumstances in which a local content subsidy would comply with Article 3.1(b) of the SCM Agreement ?  BRA  
 
115. What is the meaning and relevance (if an y) to Brazil's claims under Article 3 of the SCM 
Agreement  and Article III:4 of GATT 1994 of the phrase "measures direct ed at agricultural processors 
shall be included to the extent that such measure s benefit the producers of the basic agricultural 
products" in the Agreement on Agriculture ? BRA, USA  
 
116. With respect to paragraph 32 of the oral stat ement of the EC, are subsidies contingent on the 
use of domestic goods consistent with the Agreement on Agriculture ?  Does the phrase "provide 
support in favour of domestic producers" in Article 3.2 of the Agreement on Agriculture refer to, 
and/or permit such subsidies? BRA, USA  
 117. What is the relationship between Step 2 pa yments to exporters and the marketing loan 
payments, both of which appear to compensate for the price differences relative to the Liverpool A-
Index?  For example, is there double compensation?  Or is one of the explanations that these export-
related price compensatory payments are paid to di fferent operators (namely, the producer, on the one 
hand under the marketing loan arrangements,  and the processor/users (Step 2 programme) 
arrangements on the other? USA  
 
118. Can the United States confirm that it does not rely on Article III:8 of GATT 1994 ? USA  
 
ETI ACT 
 
119. How does the United States respond to Br azil's reference to the panel report in India - Patents  
(EC)  (at paragraph 138 of its oral statement at th e first session of the first substantive meeting)?6  
                                                      
6That panel stated:   "It can thus be concluded that panels are not bound  by previous decisions 
of panels or the Appellate Body even if the subject-matter is the same.  In examining dispute 
WT/DS79 we are not legally bound by the conclusions of the Panel in dispute WT/DS50 as modified by the Appellate Body report.  However, in the course of "normal dispute settlement 
procedures" required under Article 10.4 of the DSU , we will take into account the conclusions 
and reasoning in the Panel and Appellate Body reports in WT/DS50. Moreover, in our examination, we believe that we should give significant weight to both Article 3.2 of the DSU , 
which stresses the role of the WTO dispute settlement system in providing security and 
predictability to the multilateral trading system, and to the need to avoid inconsistent rulings WT/DS267/R/Add.3 
Page L-26  
 
How, if at all, should the Panel take this report in to account in considering the issues raised by Brazil's 
claims relating to the ETI Act? USA  
 120. Concerning its claims on the ETI Act, Brazil relies on the US – FSC case.  However, it 
appears that the United States did not raise the issu e of the Peace Clause in that case, nor did the 
United States appear to invoke Article 6 of the Agreement on Agriculture .    If the Panel's 
understanding is correct, how, if at all, are these di fferences relevant here? Could you direct the Panel 
to any relevant findi ngs or conclusions by the panel or Appellate Body in that case?  BRA  
 121. How do you respond to the reference in paragr aph 43 of EC third party oral statement with 
respect to the relevance of Article 17.14 of the DSU , and, in particular, the phrase "a final resolution 
to that dispute" (emphasis added)?  Please explain the use, and relevance (if any) of the term 
"disputes" in Articles 9.3 and 12 and Appendix 3 of the DSU , and please cite any other provisions you 
consider relevant. USA, BRA   
 
 
[Attachment on questions to Third Parties omitted] 
                                                                                                                                                                    
 
(which concern has been referred to by both parties).  In our view, these considerations form 
the basis of the requirement of the referral to  the "original panel" wherever possible under 
Article 10.4 of the DSU ." (footnote omitted)  
 WT/DS267/R/Add.3 
Page L-27 
 
 
 
ANNEX L-1.6 
 
 
COMMUNICATION TO BRAZIL 
AND THE UNITED STATES 
 
30 July 2003 
 
 
 The Panel is in receipt of the communication from the United States, dated 29 July, requesting 
an extension of the deadline for the submission of  the parties' responses to questions, as well as the 
response from Brazil, dated 30 July.   Taking these communications into account, the Pa nel has decided to extend the deadline for 
the submission of the parties' responses to questions from Monday 4 August to Monday 11 August .  
The Panel reminds the parties that paragraph 17(b)  of the Panel's working procedures indicates that 
the responses should be submitted by 17:30  (Geneva time). 
  The Panel has also decided upon the follow ing additional changes to its schedule:  
 
 Panel's views on certain issues:       5 September 2003 
      Further submission of Brazil:          9 September 2003       Further submission of the US:         23 September 2003       Further submission of the third parties (as necessary):       29 September 2003       
 For the time being, all other dates remain unchanged.  This includes the deadline for the 
submission of the parties' comments on each other's responses, as well as the submission of the parties' rebuttal submissions (i.e. 22 August).  It al so includes the dates for the resumption of the first 
substantive meeting (as necessary) and the sec ond substantive meeting (i.e. 7-9 October). WT/DS267/R/Add.3 
Page L-28  
 
 
ANNEX L-1.7 
 
 
COMMUNICATION TO BRAZIL AND THE 
UNITED STATES AND THE THIRD PARTIES 
 
5 August 2003 
  
1. The Panel has received a letter from the Europ ean Commission, dated 31 July 2003, in which 
the European Communities ("EC"):   
• seeks clarification of the Panel's procedures for its expression of views on 5 September 2003 
in relation to Article 13 of the Agreement on Agriculture ; and  
 
• makes two requests for additional third party rights.  
 2. The Panel sought the views of the parties to the dispute on these requests, which it received in 
letters dated 1 August 2003.  Neither party objects to the Panel communicating its views to the third 
parties on 5 September 2003, but neither party ag rees that the Panel should accept the EC's requests 
for additional third party rights.  The EC responded to  the parties' letters in a further letter dated 
4 August 2003. 
 
1. Panel's procedures for its expression of  views on 5 September 2003 in relation to 
Article 13 of the Agreement on Agriculture 
 
3. The Panel confirms that, in accordance w ith its communication dated 20 June 2003, as 
amended on 30 July 2003, it intends to express its vi ews on whether measures raised in this dispute 
satisfy the conditions in Article 13 of the Agreement on Agriculture , to the extent that it is able to do 
so, by 5 September 2003.  Those views will be communi cated to third parties, as well as to the parties 
to the dispute, in order to enable them to partic ipate, as necessary and appropriate, in any second 
session of the first substantive meeting in a full and meaningful fashion.  
 
2. EC requests for additional third party rights 
 
4. The EC requests the following additional third pa rty rights:  (a) access to the oral statements 
of the parties to the dispute at the first ses sion of the first substantive meeting held on 22-
24 July 2003, and  (b) the opportunity to commen t on their responses to the Panel's questions, or 
questions that they have posed to each other.
1   
 5. Third parties have certain rights in panel proceedings under Article 10 of the DSU, which a 
panel may not deny.  The grant of third party ri ghts beyond those provided in the DSU lies within the 
discretion and authority of a panel.  That discretion is  limited by  the requirements of due process.    
Article 10.1, 10.2 and 10.3 of the DSU provides as follows:  
 
                                                     
 
1 The Panel notes that the parties to the dispute have not posed any written questions to each other, and 
therefore does not need to address th e request to allow third parties to comment upon the re sponses to such 
questions.  
 WT/DS267/R/Add.3 
Page L-29 
 
 
 
Third Parties 
 
"1. The interests of the parties to a dispute and those of other Members under a 
covered agreement at issue in the dispute shall be fully taken into account during the 
panel process. 
"2.  Any Member having a substantial interest in a matter before a panel and 
having notified its interest to the DSB (refe rred to in this Understanding as a "third 
party") shall have an opportunity to be  heard by the panel and to make written 
submissions to the panel.  These submissions shall also be given to the parties to the 
dispute and shall be reflected in the panel report.  
"3. Third parties shall receive the submissi ons of the parties to the dispute to the 
first meeting of the panel." 
6. In our view, written versions of  the parties' oral statements and the parties' responses to the 
Panel's questions do not form part of  "the submissions of the parties to the dispute to the first meeting 
of the Panel", as provided for in Article 10.3 of the DSU.  Articles 10.2 and 12.6 and the working 
procedure in paragraph 3 of Appendix 3 use the terms "written submissions" and "submissions" 
interchangeably.  Appendix 3 distinguishes between "written submissions" in pa ragraphs 3, 4 and 10 
and "a written version of … oral statements" in paragraph 9.  Under the standard panel working 
procedures set out in Appendix 3 of the DSU, third parties may only attend the third party session and  
are not present during the rest of the panel's mee tings.  The granting of access by the Panel to written 
versions of the parties' oral statements would ru n counter to the standard practice under the DSU of 
holding the sessions at which those statements are made in the absence of the third parties. 
 7. As the Panel indicated in its communication dated 20 June 2003, the first meeting in this 
dispute is to be held in two separate sessions two months apart, as necessary.  The issues under 
consideration at each session are distinct, so that th e written versions of oral statements at the first 
session cannot be considered submissions to the second session.  The Panel's working procedures 
currently envisage that third parties will receive the parties' written submissions to any second session 
of the first meeting, and will have  an opportunity to present their views at any such session.  Thus, 
with respect to the issues that form the subject of each session of the first meeting, each third party 
will receive the rights provided for in Article 10.2 and 10.3 of the DSU.  
 
8. Therefore, in our view, third parties ha ve no entitlement under the DSU to the additional 
rights requested by the EC, and we also note that th ere is no agreement between the parties that such 
additional rights should be granted.  In any case, th e EC indicates in its letter dated 4 August 2003 that 
this was not the thrust of its requests but, rather , it would be a "reasonable exercise of the Panel's 
discretion" to allow the third parties also to comme nt on the responses of the parties to the dispute to 
the Panel's questions.  9. The Panel must consider whether it should gran t such additional rights as part of its duty to 
ensure due process of law for third parties, or w ithin its discretion to grant or refuse the rights 
requested as it believes appropriate, keeping firmly in mind the Panel's duty to ensure an objective 
assessment of the matter before it in accordance with  Article 11 of the DSU, and the requirement that 
the interests of the parties to the dispute and t hose of other Members under a covered agreement at 
issue in the dispute shall be fully taken into account during the panel process, in accordance with 
Article 10.1.  
10. The EC has argued that access to oral statemen ts would permit third parties to respond to 
arguments made by the parties to the dispute wh ere such a response would be of relevance in 
answering the Panel's questions to third parties, an d that this would benefit the Panel since the third WT/DS267/R/Add.3 
Page L-30  
 
parties would be able to provide more complete responses to the Panel's questions.  It also argues that the third parties' comments on each others' responses  to questions will be more full and meaningful, 
and consequently more beneficial to the Panel, if it is also possible for them to comment on the 
responses of the parties to the dispute.  
11. In addition to the issues raised by the EC, the Pa nel is keenly aware of the implications of this 
particular dispute for third parties, including th e systemic importance of the interpretation of 
Article 13 of the Agreement on Agriculture  and its trade policy impact. 
 12. In fact, the Panel has already taken into account , to a certain extent, the systemic implications 
of this dispute and the issues now raised by the EC.  The Panel has posed a large number of questions 
to third parties, including 39 questions addressed specifically to the EC.  Through the third parties' responses to these questions, the Panel hopes to r eceive their views on the merits and systemic 
considerations presently at issue in this dispute, which it will take into account in its assessment of the 
matter before it.  The questions are detailed precisely to ensure that third parties' views are fully taken 
into account in what is a complex case.  The Pa nel believes that, through the questions that it has 
posed to the parties to the dispute and to third part ies, it has ensured that it will benefit from third 
parties' input and that nothing prevents them from participating in a full and meaningful fashion. 
 13. This is not the only opportunity for third par ties to express their views in this dispute.  The 
Panel specifically sought the views of third pa rties on the issue of whether Article 13 of the 
Agreement on Agriculture precludes the Panel from considering Brazil's claims under the Agreement 
on Subsidies and Countervailing Measures in these pr oceedings in the absence of a prior conclusion 
by the Panel that certain conditions of Article 13 re main unfulfilled.  Six third parties, including the 
EC, made submissions to the Panel on that issue, which the Panel took into account.   
 
14. Nothing precludes the Panel from posing further qu estions to the parties to the dispute or third 
parties as the Panel deems necessar y or appropriate throughout the course of these proceedings.  The 
Panel may also seek the views of third parties in further questions at any second session of the first 
meeting that may be held, by posing questions on the issues under consideration at that session. 
 15. The Panel notes that none of the third par ties, including the EC, requested any additional 
rights prior to the first meeting, even after the Panel's communication of 20 June 2003, in which it 
announced that the first meeting would be held in  two sessions, as necessary.  The parties to the 
dispute therefore delivered their oral statements at that meeting in closed session without third parties 
present, as is the usual procedure under Article 12 a nd Appendix 3 of the DSU, on the basis that the 
confidentiality of those statements was within thei r own respective control.  The Panel is therefore 
unwilling to direct the parties to grant access to written versions of those statements after the event. 
 16. The Panel notes that nothing in the DSU or the Panel's working procedures precludes a party to the dispute from disclosing statements of its ow n positions to the public, as foreseen in Article 18.2 
and paragraph 3 of the working procedures, and that  the United States has indicated that it makes its 
oral statements available on its website and has already provided a copy directly to the EC. 
 
17. For the reasons set out above, the Panel denies both the EC's requests for additional third party rights.  Nonetheless, in view of the phased na ture of the first meeting, the Panel directs the 
parties to the dispute to make best efforts to ensu re that their submissions to any second session of the 
first meeting are understandable either on their own or in conjunction with the submissions to the first 
session of the meeting.  In particular, such submis sions should not refer to any document to which the 
third parties do not have access without, at the very  least, a summary, explanation or description of 
the contents of that document (or a citation i ndicating where that document may be found on the 
public record). WT/DS267/R/Add.3 
Page L-31 
 
 
ANNEX L-1.8 
  
COMMUNICATION TO BRAZIL 
AND THE UNITED STATES 
 
19 August 2003 
 
  The Panel has received a communication from Br azil dated 14 August 2003 in which Brazil 
draws attention to the timing and format of serv ice of the United States' responses to the Panel's 
questions, in light of paragraphs  17(b) and (d) of our Working Procedures, and in which it raises 
issues of procedural fairness.   
 
 The Panel has taken note of the matters rais ed in the communication from Brazil and draws 
them to the United States' attention.  The Panel recalls that, at its meeting with the parties on 
22 July 2003, it also drew the attention of the Un ited States to these issues as raised by Brazil in 
connection with the filing of the United States'  first written submission and comments on Brazil's 
initial brief. 
  In its communication dated 14 August 2003, Brazil also requested the right to comment on any new information, arguments or documents presen ted for the first time in the United States' 
rebuttal submission with respect to specific questions po sed by the Panel.  It raised considerations of 
due process and requested that the Panel provide it until 28 August 2003 to file any such comments 
without granting the United States any corresponding right. 
  The Panel has a duty to ensure the fairness of its proceedings, which requires that the parties 
receive sufficient opportunity to comment on info rmation, argumentation a nd documents submitted.  
Due to the phasing of the first meeting, a party mi ght lack sufficient opportunity to comment on such 
material presented for the first time in a rebuttal submission before the Panel expresses its views on 
certain issues in dispute.  However, this w ill depend on what the rebuttal submissions actually 
contain.   Accordingly, when each party receives the othe r party's rebuttal submission, it is invited, 
without delay, to draw the Panel's attention to  any specific material on which it has not had an 
opportunity to comment and to show cause why it needs such an opportunity.  Upon a showing of good cause, the Panel will permit that party to comm ent in writing by 27 August 2003.  The Panel is 
willing to grant such permission on Saturday, 23 August 2003, if necessary. WT/DS267/R/Add.3 
Page L-32  
 
ANNEX L-1.9 
  
COMMUNICATION TO BRAZIL 
AND THE UNITED STATES 
 
23 August 2003 
 
  The Panel has received a communication from Br azil dated 23 August 2003 in which Brazil 
requests the opportunity to comment on specific paragr aphs of the United States ' rebuttal, and exhibits 
thereto, as the parties were invited to do by the Panel in its communication dated 19 August 2003.  
 
 The Panel considers that Brazil has not had sufficient opportunity to comment on new 
material specifically listed in its communica tion of 23 August 2003.  The Panel notes that the 
argument raised in paragraph 123 of the United States ' rebuttal is not new but was raised earlier in the 
United States' response to question 66(d) posed by th e Panel and in section 2.3.2 of Brazil's rebuttal. 
 
 Accordingly, the Panel permits Brazil to comment in writing on such new material by 
27 August 2003. The procedures regarding service of doc uments set out in para graph 17 of the Panel's 
working procedures shall apply. WT/DS267/R/Add.3 
Page L-33 
 
 
 
ANNEX L-1.10 
  
COMMUNICATION TO BRAZIL 
AND THE UNITED STATES 
 
25 August 2003 
 
 
 The Panel has received a communication from the United States dated 25 August 2003 in 
which the United States requests the opportunity to comment on specific paragraphs of Brazil's 
rebuttal, and comments on responses to questions, as the parties were invited to do by the Panel in its 
communication dated 19 August 2003.  The Panel has also received a response to that communication 
from Brazil, also dated 25 August 2003, in which Braz il submits that the United States' request should 
be rejected.  
 The Panel considers that the United States has not had sufficient opportunity to comment on 
new material specifically listed in its communicat ion of 25 August 2003, other than the alleged 
misstatements in paragraphs 88, 90-94 of Brazil' s rebuttal which the Panel can check against the 
cross-referenced United States' responses and Panel report, if necessary.   Accordingly, the Panel permits the United Stat es to comment in writing on such new material 
by 27 August 2003.  The procedures regarding servi ce of documents set out in paragraph 17 of the 
Panel's working procedures shall apply.   The Panel notes that the United States welcomes the opportunity to respond to any further questions that the Panel may have .  Therefore, the Panel poses the following additional question to the 
United States and seeks a response by 27 August 2003: 
 
67bis.  Please state the annual amount granted by the US government in each of the 
1999, 2000, 2001 and 2002 marketing years (as applicable) to US upland cotton producers, per pound and in total expenditur es, under each of the following programs:  
production flexibility contract payments, market loss assistance payments, direct 
payments and counter-cyclical payments.  WT/DS267/R/Add.3 
Page L-34  
 
 
ANNEX L-1.11 
 
 
COMMUNICATION TO BRAZIL AND THE 
UNITED STATES AND THIRD PARTIES 
 
5 September 2003 
  
1. On 20 June 2003, the Panel communicated to the parties and third parties that:    
 
"Given the potential complexity of the clai ms before us, the conditional nature of 
certain of these claims and the volume of  evidence which may be introduced by the 
parties in support of their claims and arguments, and in order to organize our 
proceedings in an orderly, effective and effi cient manner  which serves to facilitate an 
objective assessment of the matter before us, and optimizes use of our resources, we have adopted the following modifications to our procedures …" 
2. The first modification to our procedures was as follows: 
 
"The Panel intends to express its views on whether measures raised in this dispute 
satisfy the conditions in Article 13 of the Agreement on Agriculture , to the extent that 
it is able to do so, by 1 September 2003, an d will defer its consideration of claims 
under Articles 3, 5 and 6 of the SCM Agreement  and Article XVI of the GATT 1994  
as those provisions are referred to in Article 13 of the Agreement on Agriculture  until 
after it has expressed those views.  The Pane l's views may be expressed in the form of 
rulings which could affect the Panel's fu rther consideration of this dispute." 
3. In a fax dated 30 July 2003, the Panel decide d to modify the date for expression of its views 
to 5 September 2003.  4. The Panel takes note of the correspondence fro m the parties dated 27, 28 and 29 August 2003 
and declines to make findings at this stage as to whether measures raised in this dispute satisfy the 
conditions in Article 13 of the Agreement on Agriculture , for the reasons given in its communication 
dated 20 June 2003.  The Panel's findings on that issu e will be included in its interim report, on which 
the parties will have the right to commen t in accordance with Article 15.2 of the DSU . 
 5. The Panel has now had the opportunity to consid er the parties' and third parties' evidence and 
arguments to date . At this stage, the Panel cannot conclude  its assessment of the matter before it on 
the basis that the measures raised  in this dispute satisfy the conditions in Article 13 of the Agreement 
on Agriculture .  The expression by the Panel of this view is without prejudice to the Panel's eventual 
findings, and is subject to paragraph 6 below. In this context, the Panel is of the view that 
consideration, as appropriate, of Brazil's  claims under Articles 3, 5 and 6 of the SCM Agreement  and 
Article XVI of the GATT 1994 , as those provisions are referred to in Article 13 of the Agreement on 
Agriculture , is warranted in order for the Panel prope rly to discharge its responsibilities under the 
DSU  and the relevant covered agreements.  Therefor e, the Panel will consider those claims at a 
second session of the first substantive meeting.  6. The Panel also wishes to inform the parties that, on the basis of the evidence and arguments 
presented to date, it is unable to form any view  on whether the ETI Act satisfies the relevant 
provisions of the Agreement on Agriculture . 
 WT/DS267/R/Add.3 
Page L-35 
 
 
7. Regarding the Panel's procedures:  (a) the Panel invites the parties to address in  further submissions, due  on 9 and 23 September 
respectively, the claims referred to in paragraph 5 above; 
 
(b) the Panel also invites the parties to addr ess further the issue whether the export credit 
guarantee programs at issue constitute export subsidies for the purposes of the  Agreement on 
Agriculture ; 
 (c) the Panel confirms that items (o), (p) and (q ) of its timetable will be necessary, and confirms 
the following dates: 
  Further submissions of the third pa rties:       29 September 2003; 
  First substantive meeting with the parties 7, 8 and  
 (resumed second session) :   (as necessary) 9 October 2003; 
  Third party session:    8 October  2003 
1; 
 
(d) the Panel invites the third parties to address in  their further submissions the claims referred to 
in paragraph 5 above;  
 
(e) the Panel intends to postpone the second substantive meeting;  and 
 
(f) the Panel invites the parties to comment on the a ttached draft further revised timetable.  Such 
comments should be submitted no later than cl ose of business on Tuesday, 9 September 2003.  
 
 
[Attachment omitted] 
                                                      
 1 The Panel wishes to inform parties and third parties that due to the availability of meeting rooms, the 
third party session , previously scheduled for 9 October, will now be held on Wednesday, 8 October .  The Panel 
will continue its meeting with the parties after the thir d party session and also on 9 October, as necessary.  WT/DS267/R/Add.3 
Page L-36  
 
ANNEX L-1.12 
  
COMMUNICATION TO BRAZIL AND THE 
UNITED STATES AND THIRD PARTIES 
 
12 September 2003 
 
 
 Having carefully considered the parties' co mments received on 9, 10 and 11 September,  the 
Panel intends to follow the revised timetable, as attached.    In this connection, the Panel would like to in form the United States that the deadline for its 
"further submission" is 15h00 (i.e. 3 pm) Geneva time  on Monday, 29 September. 
  The Panel also wishes to draw the attention of third parties  that the deadline for their 
further submissions  has been changed to 3 October .   
 
 In light of the US request for an opportunity to comment on the new dates of the second 
meeting, now rescheduled to be 2 and 3 December 20 03, the Panel invites the US and Brazil to submit 
comments, if any, on these dates.  Such comment s, which should focus on the date of the second 
substantive meeting and other dates directly affect ed by this date, should be submitted no later than 
close of business on Tuesday, 16 September .   
 
 
[Attachment omitted] WT/DS267/R/Add.3 
Page L-37 
 
 
ANNEX L-1.13 
  
COMMUNICATION TO BRAZIL AND THE 
UNITED STATES AND THIRD PARTIES 
 
18 September 2003 
 
  The Panel has received letters from Brazil and the US dated 16 September and 17 September, 
in which they submit further comments on certain dat es we indicated in our fax dated 12 September.  
  Having carefully considered the views of both parties,  the Panel amends the dates indicated 
in the 12 September fax as follows: 
 -  The deadline for the receipt of answers to Pa nel's questions (previously, 22 October) will be 
changed to 27 October .  
 
- The deadline for the receipt of further rebuttals  of the parties (previously, 3 November) will 
be changed to 18 November. 
 
 In respect of items (u) and (v), the Panel not es Brazil's preference for "the completion of the 
parties' main substantive work still in 2003".  The Pa nel reminds the parties that, as indicated in the 12 
September fax, items (u) and (v) are deadlines that would apply "as necessary".  They may, therefore, 
depend upon various factors, including the number and nature of any questions the Panel may actually 
pose to one or both parties at that juncture.  Therefore, at least for the time being, the Panel prefers to leave these dates as indicated (22 December and 19 January, respectively).   
 All other dates indicated in the fax of 12 September remain unchanged, and are now 
confirmed. WT/DS267/R/Add.3 
Page L-38  
 
ANNEX L-1.14 
  
COMMUNICATION TO BRAZIL AND THE 
UNITED STATES AND THIRD PARTIES 
 
24 September 2003 
 
  The Panel has received a letter from the Un ited States dated 23 September, in which it 
informs the Panel of delays in the preparation of  its further submission caused by hurricane Isabel, as 
well as a response from Brazil, also dated 23 Septembe r. Having carefully considered the views of 
both parties, the Panel further amends the dates we indicated in our fax of 12 September as follows: 
 
 deadline for the US's further submission: 30 September, 2003 (by 17:30 Geneva time)  
  All other dates and deadlines  indicated in the fax of 12 September (and subsequently 
amended in the fax of 18 September) including th e deadline for the "further submission from third 
parties" (3 October), remain unchanged . 
   The Panel notes that the time for the third parties to review the US's "further submission" before making their respective written submissions is  limited. The Panel reminds third parties that 
they are free to present arguments in  addition to those set out in thei r written submissions in their oral 
statements to be presented on 8 October.  WT/DS267/R/Add.3 
Page L-39 
 
 
ANNEX L-1.15 
  
COMMUNICATION TO BRAZIL 
AND THE UNITED STATES 
 
13 October 2003 
 
 
1. Please find attached the Panel's questions to  the parties following the resumed session of the 
first substantive Panel meeting.  Parties are reminded that responses are due by 27 October 2003 .  
 2. The Panel's questions are intended to facilitate  the work of the Panel, and do not in any way 
prejudge the Panel's findings on the matter before it.  Nor does the fact that th e Panel has placed these 
questions under certain headings prejudge the Panel' s findings on the matter before it.  Each party is 
free to respond to or comment on questions posed to the other parties or third parties.  3. The Panel takes note of Brazil's request in its  letter dated 2 October 2003 regarding the late 
receipt of submissions, and the US response in its  letter dated 6 October 2003.  In accordance with 
paragraph 17(b) of the Panel's working procedures,  the Panel sets the following time for the provision 
of submissions by the parties: 11:59 pm, Geneva time  on the dates concerned.  This time refers to 
receipt of submissions by the other party and th e Secretariat and not to commencement of 
transmission.  For greater clarity, this time for r eceipt of submissions also refers to the time of 
completion of receipt of any Exhibits and service of all Exhibits (if necessary, electronically) to the 
other party and to the Secretariat as envisaged in paragraphs 17(a)-(d) of the Panel's working 
procedures.  All other provisions of the Working Procedures remain unchanged.  The Panel confirms 
the dates in the revised timeta ble, as revised in its communication of 18 September 2003.   
 4. The Panel has set this time in light of the re peated service of submissions by the United States 
after 5.30 p.m. and in order to ensure due process and secure a balance between the two parties.  The 
Panel stresses its expectation that the parties will re spect all of the rules and procedures set out in the 
DSU  and in the working procedures, including the new time set by the Panel above for the dates in 
question.  
5. The Panel takes note of the United States' re quest in section II of its further submission for 
three preliminary rulings, regarding interest subs idies and storage payments; cottonseed payments; 
and export credit guarantees for products other than upl and cotton.  The Panel is not currently in a 
position to rule on these issues.  The Panel will ma ke rulings as necessary and appropriate in the 
course of this proceeding and hopes to be in a pos ition to express its views, or give a ruling, on these 
requests, as appropriate, by 3 November (that is, shor tly after the date of receipt of written responses 
to questions).  Meanwhile, the Panel requests the par ties not to exclude consideration of these issues 
in their responses to questions.   WT/DS267/R/Add.3 
Page L-40  
 
Questions from the Panel to the Parties – 
Resumed first session of the first substantive Panel meeting 
  
A. REQUEST FOR PRELIMINARY RULINGS 
 122. Does Brazil allege that cottonseed payments, interest subsidies and storage payments are 
included in the subsidies that cause serious prejudice?  Do they appear in the economic calculations?   
BRA  
 
123. Does Brazil’s request for the establishment of the Panel name the statute authorizing 
cottonseed payments for the 1999 crop?    BRA  
 
B. EXEMPTION FROM ACTIONS 
 124. According to its revised timetable, the Panel w ill issue its report to the parties after the end of 
the 2003 calendar year.  Does this have any impact on “exempt[ion] from actions” under Article 13(b)(ii) and 13(c)(ii) of the Agreement on Agriculture ?  BRA, US  
 
C. IDENTIFICATION OF THE SUBSIDIZED PRODUCT  
 125.   (1)  In view of requirements in the FAIR Ac t of 1996 and the FSRI Act of 2002 that contract 
acreage remain in agricultural or conservation u ses and which impose penalties if the producer grows 
fruits or vegetables, how likely is it that the pr oducer with upland cotton base acreage will not use his 
or her land to produce programme crops or covered commodities?  US 
 (2) Brazil has submitted that "The record suggests that historic producers are current producers."  
It points to factors including the specialization of upland cotton producers, the need to recoup 
expensive investments in cotton-specific equipm ent, and the geographic focus and climatic 
requirements of upland cotton production in the "c otton belt".  (Brazil's rebuttal submission, 
footnote 98, on page 24)  
(a) Regarding the specialization of upland cotton producers and the geographic focus of upland 
cotton production, how does Brazil take account of the fact that cotton is produced in 17 of 
the 50 states of the United States and that average cotton area is approximately 38% of a cotton farm's acres? (This information is taken from the US's response to question 67 bis, 
footnote 35).  BRA  
 
(b) Regarding the geographic focus of upland cotton production, how many other crops can 
upland cotton producers viably grow in the cott on belt, other than fruits and vegetables?  US 
 (c) Regarding the high cost of upland cotton prod uction, can Brazil show that farms who planted 
upland cotton could only have covered their cost s by receiving upland cotton, rice or peanut 
payments in every year from 1999 through 2002?  BRA  
 (d) Regarding the need to recoup investments in cotton-specific equipment, is it important to 
planting decisions that upland cotton producers cannot run any other crop through their cotton-pickers?  How does this affect the likelihood that they will grow other crops?  US 
 
(3)  In calculating the amount of PFC, MLA, direct  and counter-cyclical payments that went on 
upland cotton, Brazil made an adjustment for the ratio of current acreage to base acreage (see its WT/DS267/R/Add.3 
Page L-41 
 
 
answer to question 67, footnotes 2, 3, 4 and 5).  Is this an appropriate adjustment for the particular 
factors referred to above?  Why or why not? BRA, US  
 (4)   Dr. Glauber has alleged that there are statistical problems in comparing planted acres to programme acres because of abandonment of crops and also because planted acres are only survey 
estimates, not reported figures (See Exhibit US-24, the first full paragraph in P2).  Would it be more 
appropriate to divide harvested acreage by base acrea ge?  What margin of error is there between the 
survey estimates and reported figures? BRA, US 
 
(5)  Do the acreage reports under section 1105(c) of the FSRI Act of 2002 indicate or assist in determining the number or proportion of acres of upland cotton planted on upland cotton base acres?  
Was there an acreage reporting requirement for upland cotton during MY1996 through 2002? BRA, 
US 
 
(6)  Please prepare a chart showing upland cott on base acreage, planted acreage and harvested 
acreage for MY1996 through 2002.  Does the planted acr eage fluctuate within a broad band?  If not, 
does this indicate any stability in decisions to  plant the same acres to upland cotton?   BRA, US 
 (7)  Brazil states that one third of all US farms with eligible acreage decided to update their base 
acreage under the direct payments and counter-c yclical payments programmes using their MY1998-
2001 acreage.  What is the proportion of the current base acreage for upland cotton resulting from 
such updating?  Is the observed updating of base acreag e consistent with Brazil's argument that it is 
only profitable to grow upland cotton on base acreage (and peanut and rice base acreage)?  BRA
 
 
(8)  How could one take account of upland cotton producers who receive PFC, MLA, direct and counter-cyclical payments for other covered commodity base acreage?  BRA, US 
 
(9)   Assuming that Brazil's payment figures were to amount to a prima facie case, please answer 
the following questions:  US 
 
(a)  How would the United States calculate or estimate the proportion of upland cotton producers  
who receive subsidy payments for upland cotton base acreage?    
 
(b)   Should any adjustment estimates be made for any factors besides those listed by Brazil?    (c)   What adjustment estimate would it be appropriate to make? 
 
(d)  How could one take account of upland cotto n producers who receive decoupled payments 
 for other programme crop base acreage?    (e)  Could the US specifically indicate what, in its  view, are the flaws in the approach summarized 
in paras. 6-7 of Brazil's closing oral statement
1 on 9 October (i.e. the use of the ration of 0.87 
to adjust the amount of total upland cotton direct and CCPs for the MY to obtain the amount 
of subsidies received by upland cotton produ cers)?  Can the US suggest an alternative 
approach that would yield reliable results in its view? 
 
                                                      
  1  All of the paragraph numbers in relation to oral statements (opening statement and closing 
statement) cited in this document corresponds to the numb ering made in the version available to the Panel on the 
date of the statement.    WT/DS267/R/Add.3 
Page L-42  
 
D. "LIKE PRODUCT" 
 
126. Does the US agree that the product at issue is upland cotton lint and that Brazilian upland cotton lint is "like" US upland cotton lint with in the meaning of Article 6.3(c) of the SCM Agreement  
in that it is a separate like product that is identi cal or has characteristics similar to the upland cotton 
lint from the United States?  (e.g. Brazil's further submission, para. 81) US 
 
E. "SUBSIDIES" 
 127. The Panel notes that the US contests that export credit guarantees constitute "subsidies".  The 
Panel recalls that the US agrees that Step 2 paymen ts are "subsidies" and wishes to have confirmation 
that it is correct in understanding that the US does not disagree that the following are "subsidies" for the purposes of Article 1 of the SCM Agreement : marketing loan/loan deficiency payments, PFC, 
direct payments, market loss assistance and CCP  payments, crop insurance payments, cottonseed 
payments, storage payments and interest subsidy (w ithout prejudice to the Panel's rulings on the US 
requests for preliminary rulings on the latter two payments).   US 
 
F. PROHIBITED SUBSIDIES  
 
128. Could the US respond to Brazil's assertions relating to the meaning and effect of the 
introductory phrase of Article 3 (“Except as provided in the Agreement on Agriculture ....”)?  Would 
the meaning/effect change if Article 13 of the Agreement on Agriculture  did not exist? BRA, US  
 
G. SPECIFICITY / CROP INSURANCE 
 129. In the event that the Panel does not consider that the alleged prohibited subsidies fall within 
the provisions of Article 3 and are therefore, pursuant to Article 2.3, "deemed to be specific", are there 
any other grounds on which Brazil would rely in or der to support the view that such measures are 
"specific" within the meaning of Article 2 of the SCM Agreement (see, for example, fn 16 of Brazil's 
further submission)? BRA  
 130. Does Brazil agree that the US  insurance premium subsidy is available in respect of all 
agricultural products?  Please cite relevant portions of the record.  BRA  
 
131. How should the concept of specificity – and, in  particular, the concept of specificity to "an 
enterprise or industry or group of enterprises or industries" -- in Article 2 of the SCM Agreement  
apply to subsidies in respect of agricultural commodities? Please answer the following questions, 
citing the principles in Article 2 of the SCM Agreement :   BRA, US  
 
(a) is a subsidy in respect of all agricultural, but not other, products specific? 
 (b) is a subsidy in respect of all agricultural cr ops (i.e. but not to other agricultural commodities, 
such as livestock) specific? 
 
(c) is a subsidy in respect of certain identified agricultural products specific? 
 (d) is a subsidy in respect of upland cotton, but not other products, specific? 
 (e) is a subsidy in respect of a certain proportion of the value of total US commodities (or total 
US agricultural commodities) specific? 
 
(f) is a subsidy in respect of a certain proportion of total US farmland specific?  WT/DS267/R/Add.3 
Page L-43 
 
 
132. Please state the amount and percentage of upland cotton acreage covered by each crop 
insurance programme and/or policy under the ARP Act of 2000.  US 
 133. Concerning Brazil's arguments in its oral st atement, para. 7, can the US indicate if any 
producers of  livestock outside a pilot programme are covered by the crop insurance programme?   US 
 
134. Please state the annual amount of premiums pa id or contributions made by US upland cotton 
farmers relating to each of the crop insurance progr ammes and/or policies supported by the US Risk 
Management Agency and the Federal Crop Insura nce Corporation in each year from 1992 through 
2002.  US 
 
135. Please state the annual amount of insura nce indemnity payments made by the US 
government; or insurance companies participati ng in crop insurance programmes and/or policies 
under the ARP Act of 2000 to upland cotton fa rmers in each year from 1992 through 2002.  US 
 
136. Is the US arguing that crop insurance subsid ies corresponding to "over 90 per cent of insured 
cotton area" (US 7 October oral statement, para . 46) in MY1999 through 2002 are consistent with 
paragraph 8(a) of Annex 2 of the Agreement on Agriculture ?   Is it correct that in the past these 
subsidies were nonetheless notified to the Co mmittee on Agriculture as non-product specific AMS 
(see, for example, G/AG/N/USA/43 in Exhibit BRA-47)?  US 
 
H. EXPORT CREDIT GUARANTEES 
 137. Please elaborate the meaning of "net losses" as is used in paragraph 70  of Brazil's 7 October 
oral statement. BRA  
 
138. Please comment on Brazil’s views stated in pa ragraph 70 of its 7 October oral statement. US 
 139. In the context of export credit guarantees, is the Panel correct in understanding that Brazil's 
claims of inconsistency with the Agriculture Agreement  involve GSM 102, GSM 103 and SCGP, but 
that it limits its "serious prejudice" allegations in  respect of export credit guarantee programmes to the 
GSM 102 programme, and does not challenge GSM 103 and SCGP in this respect?  If so,  
  (a) could Brazil please explain why it did so, and confirm that all the data relied upon in its 
further submissions (e.g. in Table 13) relate to the GSM 102 programme rather than to GSM 
102, GSM 103 and SCGP (and, if the data needs to be adjusted to take account of a narrower 
"serious prejudice" focus, supply GSM-102-relevant data)?   BRA  
 (b) for the purposes of Article 13(c)(ii) of the Agreement on Agriculture , is it necessary for the 
Panel to examine only GSM 102 or should the Pa nel's examination include also GSM 103 and 
SCGP?  Why or why not?  BRA  
 
140. Could Brazil explain how, if at all, it ha s treated export credit guarantees for the purpose of 
Table 1 of its further submission? BRA  
 141. The Panel notes the US argument, inter alia  in its further submission, that the export credit 
guarantee programmes are "self-sustaining".  Recalling that item (j) of the Illustrative List of Export 
Subsidies in Annex I of the SCM Agreement  refers to "premium rates", could the US expand upon 
how it takes into account the premium rates for the e xport credit guarantee programmes in its analysis.  
US 
 
142. The US has pointed out that there are many limitations on granting export credit guarantees 
and that there is no requirement to issue any pa rticular guarantee (US further submission, paras 153-WT/DS267/R/Add.3 
Page L-44  
 
156).  Can the Commodity Credit Corporation declin e to grant an export credit guarantee even in 
cases where the programme conditions are met?    US 
  143. Brazil agrees with National Cotton Council estimates of the effects of the GSM 102 
programmes (Brazil's further submission, para. 190) but  it also cites a different conclusion by Prof. 
Sumner (paragraph 192).  Brazil cites other estim ates by Prof. Sumner throughout its further 
submission.  Does Brazil adopt Prof. Sumner's conclu sions and estimates as part of its submission?  
BRA  
 
I. STEP 2 PAYMENTS 
 
144. Is the Panel correct in understanding that th e US does not dispute that Step 2 (domestic) 
payments are contingent upon impor t substitution, and that it argues that such measures are permitted 
due to the operation of the provisions of the Agreement on Agriculture ?  How is that relevant to a 
claim under Articles 5 and 6 of the SCM Agreement ?  US 
 
J. ACTIONABLE SUBSIDIES 
 
145. The Panel notes that different remedies are available in respect of prohibited and actionable 
subsidies under Articles 4.7 and 7.8 of the SCM Agreement .  If the Panel were to conclude that a 
subsidy was prohibited and were to make a recommendation under Article 4.7 of the SCM Agreement  
to withdraw the subsidy without delay, can the Panel:  (a) also conclude that the same subsidy had resulte d in adverse effects to the interests of another 
Member?  If so, what would be the value of su ch a conclusion in terms of the settlement of 
the matter before the Panel?   BRA, US  
 (b) take into account the effects of the interac tion of those prohibited subsidies with other, 
allegedly, actionable subsidies?  If so, how is this relevant to the issue of causation under 
Article 5 of the SCM Agreement ?  BRA, US  
 
146. Brazil acknowledges that there are some inter action effects that may increase or decrease the 
overall effects of the subsidies (Brazil's further submission, para. 225).  How would your analysis 
under Articles 5(c) and 6.3 of the SCM Agreement and Article XVI of GATT 1994 differ if it 
excluded, for example, crop insurance subsidies, PFC and/or direct payments?  BRA  
 
147. Does the US agree that s ubsidies provided under the marketing loan programme, counter-
cyclical payments and market loss assistance are or were more than minimally trade-distorting?  If so, 
please elaborate on the type of effects which are more than minimally trade-distorting within the meaning of Annex 2 of the Agreement on Agriculture  but less than adverse effects within the meaning 
of Article 5 of the SCM Agreement .  US 
 
148. How should the significance of price suppression or depression be assessed under Article 6.3(c) of the SCM Agreement ? In terms of a meaningful effect?  Or another concept? BRA , 
US 
 149. What is the meaning of "may" in the chapeau of Article 6.3(c) in the context of Brazil's 
assertion that there is no need to conduct a distinct analysis of "serious prejudice" under Article 5(c) after having made a finding under 6.3(c) or (d)?  (B razil's further submission, paras 437 ff).  How, if 
at all, are Articles 6.2 and 6.8 relevant in this  context?  What context should the Panel use for 
assessing serious prejudice under Article 5(c) of the SCM Agreement  if the Panel takes the view that 
Article 6.3(c) and (d) are permissive conditions  for a determination of serious prejudice?  US 
 WT/DS267/R/Add.3 
Page L-45 
 
 
150. Is the list in Article 6.3 of the SCM Agreement  exhaustive, or could serious prejudice arise in 
circumstances other than those liste d in paragraphs (a) through (d)? US 
 151. Where in the text of Article 6.3(d) of the SCM Agreement is there a basis to take into account 
that 1998 may be a "misleading" year for the purposes of comparison?  For example, unlike the text of 
Article XVI:3 of the GATT 1994, there does not seem to be a general reference to "special factors".  
US 
 
152. If the US is correct in asserting that the Article 13(b)(ii) Agreement on Agriculture  analysis is 
a year-by-year analysis, how would this affect the Panel's examination of  Brazil's claims of serious 
prejudice, including  the three year period and the trend period in Article 6.3(d) of the SCM 
Agreement ? US 
 153. Would the conditions in Article 6.3(d) of the SCM Agreement be satisfied in respect of time 
periods other than the one specified? What relevan ce, if any, would this have for Brazil's claims? 
BRA  
 
154. Does the US agree that upland cotton is a "primary product or commodity" within the meaning of Article 6.3(d) of the SCM Agreement ?  (ref. Brazil's further submission, para. 262)  and 
within the meaning of Article XVI:3 of the GATT 1994?  US 
 
155. Please respond to Brazil's identification of  the seven-year period beginning with MY1996 
(following the passage of the FAIR Act of 1996) as the "most representative period" for the purposes 
of Article 6.3(d)? (ref. Brazil further submission, para. 269)  US 
 156. Does the US agree that "...footnote 17 [of the SCM Agreement] does not carve out upland 
cotton from the scope of Article 6.3(d) of the SCM Agreement"? (ref. Brazil further submission, para. 
275).  US 
 157. Does the reference to "trade" in footnote 17 of the SCM Agreement  have any impact on the 
interpretation of "world market share" in  Article 6.3(d))  If so, what is it?   US 
 
158. Please respond to Brazil's assertion that " ...the absence of any payment, production or 
expenditure limitations in the US marketing loan pr ogramme is analogous to the EC sugar regime that 
was challenged in EC – Sugar Exports II (Brazil)  and EC – Sugar Exports I (Australia) ."  (ref. Brazil 
further submission, para. 317)  US 
 
159. The EC, in its oral statement (paras 9 and 10), disagrees with the US interpretation of the 
terms "same market". Can the US comment on the EC's view? US 
 160. Without prejudice to the meaning of "world ma rket share" as used in Article 6.3(d) of the 
SCM Agreement , can you confirm the world export share statistics provided in Exhibit BRA-206? US 
 
161. Would a finding of serious prejudice under Article 5(c) of the SCM Agreement  be 
determinative for a finding under Article XVI:1 of the GATT 1994?  Why or why not?  What, if any, 
is the role of footnote 13 of the SCM Agreement  in this context?   BRA, US  
 
162. Can the US confirm that marketing loan/LDP, step 2 and counter-cyclical payments are 
mandatory if the price conditions are fulfilled? US 
 163. Are US cotton producers able to cover the fi xed and variable costs without subsidies? Please 
provide substantiating evidence.  Of what relevan ce is this, if any, to Brazil's actionable subsidy 
claims ? US, BRA  
 WT/DS267/R/Add.3 
Page L-46  
 
K. CAUSATION  
 
164. When the US points, in its oral statement of 7 October, to the alleged "bias" of Prof. Sumner's 
model, is it arguing that US subsidies are irre levant to the movement in prices and production 
(acreage) of upland cotton? US 
 165. Please comment (and submit substantiating ev idence) on the US assertion that the FAPRI 
model has been designed and develope d for prospective analysis, and is  not suitable for retrospective 
counterfactual analysis.   What is the reliability  of past FAPRI-produced analyses when compared 
with actual data for the period covered by them?  Is there any other instrument that can be used to try 
to identify the effect of subsidies al ready granted, or of their removal? BRA, US  
 166. The US states that "futures prices demonstrat e that market participants predict increasing 
upland prices over the course of the marketing year" (US 7 October oral statement, para. 62). Please elaborate on this argument including citing specific futures prices. US 
 
167. How does Brazil react to Exhibit US-44? BRA 
 168. Please confirm that the production figures cite d in Exhibit US-47 are for upland cotton only 
and do not include textiles. US 
 
169. Can the US confirm the accuracy of the fact s and figures cited in the four bullet points in 
paragraph 12 of Brazil's 7 October oral statement?  US 
 170. Brazil quotes a report that states that a 10% increase in soybean prices reduces upland cotton 
acreage by only 0.25% (Brazil's 7 October oral st atement, para. 27). Could Brazil indicate if this 
analysis is done on a short-run basis or a long-run basis? BRA  
 171. In paragraphs 22 and 23 of its further subm ission, we understand that the US is, in short, 
claiming that increased total supply (i.e. including polyester) drove prices down.  On the other hand, 
we note that, according to the figures in the chart in  paragraph 22 of the same submission, the world 
production of cotton during this period has basically been steady. Do all polyester fibres as 
represented by these figures compete directly with cotton? That is to say, do these figures for polyester fibres include, for example, those that are used for textiles that technically cannot be 
substituted by cotton? US 
 
172. Please estimate the price effect, in cents per pound, of the growth in the US retail market 
which it is said has directly contributed  to strengthening world cotton prices.  US 
 173. The US asserts that "burgeoning US textile imports … shifted the disposition of US cotton 
production from domestic mills to export markets"  (US further submission, para. 20).  A similar 
description appears in paragraph 33, together with the explanation that "the share of world cotton 
consumption supplied by US cotton has been roughl y the same since 1991/92". Why have sales of US 
cotton for export increased and sales of cotton imported into the US increased?  US  
 174. How, if at all, did the Asian financial crisis affect the United States' wo rld market share?  Did 
it disproportionately affect the US as compared to other exporters? US 
 
175. With reference to paragraphs 57-58 and th e related table on page 21 of the US further 
submission, could you please clarify the arguments regarding the ratio of the soybean futures to the cotton futures prices since in the table the inverse ratio is used?  US 
 WT/DS267/R/Add.3 
Page L-47 
 
 
176. With reference to Figure 4 of Brazil's Further Submission, how does Brazil explain the apparent  decrease in prices in 2001 and the incr ease of the A-Index in recent months, despite the 
continued use of US subsidies on upland cotton? BRA  
 177. Could the United States further elaborate on pa ragraph 50 of its 7 October oral statement?  
US
 
 178. The Panel notes Exhibit US-63.  Could the US please provide a conceptually analogous graph concerning US export sales during the same period? US 
 
179. Could Brazil comment on the argument that decoupled payments and other subsidies to 
upland cotton are largely being capitalized into land values and that removing these subsidies would 
reduce the cost of production of upland cotton producer s (US 7 October oral statement, para. 48).   
What would be the net effect of these adjustments?  BRA  
 180. Please describe the precise formula as to how USDA determines the "adjusted world price" 
using the Liverpool A-Index, the NY futures price a nd any other relevant price indicators.  Please 
submit substantiating evidence.  BRA, US  
 181. Please provide a side-by-side chart of the w eekly US adjusted world price, the Liverpool A-
Index, the NY futures price, and spot market pric es from 1996-present.  What, if anything, does this 
reveal?  BRA, US  
 
182. Please explain why the US can be taken to be price leaders , or price setters , (and not just 
takers) when US producers receive large subsid y payment to support the difference between world 
prices  and their own costs?   BRA  
 
L. ARTICLE XVI OF GATT 1994 
 183. Why does Brazil believe that the appropriate "previous representative period" is the term of 
the previous Farm Bill, MY1996-2002?  (Br azil's further submission, para. 282)  BRA  
 
184. Why does Brazil believe that an  "equitable share" is one which factors out all subsidies?  To 
the extent that domestic support and export subsidies are permitted by the Agreement on Agriculture , 
why should they not be accepted as being normal cond itions in analyzing an equitable market share?  
(See Brazil's further submission, paras 288-289)  BRA  
 
185. Please respond to the following questi ons concerning the relationship between 
Article XVI:3 of the GATT 1994, the disciplines on export subsidies and domestic support in the 
Agreement on Agriculture  and the disciplines on prohibited export  subsidies and actionable subsidies 
in Articles 3, 5(c) and 6.3(d) of the SCM Agreement .    BRA, US  
 (a) Are agricultural domestic support programm es challengeable under Article XVI:3 of the 
GATT 1994?  How, if at all, is the title of  Section B of Article XVI ("Additional provisions 
on export subsidies " (emphasis added)) relevant?  How, if at all, are Articles 13 and 21.1, or 
any other provisions of the Agreement on Agriculture, relevant?  
 (b) Are the requirements of Article XVI:3 of  the GATT 1994 reflected in, developed by or 
subsumed by the requirements in Article 6.3(d) of the SCM Agreement , or in any other WT/DS267/R/Add.3 
Page L-48  
 
provisions of the covered agreements?  Of what  relevance, if any, is the Appellate Body 
Report in US-FSC , para. 117
2 here? 
 (c) Of what relevance, if any, is the fact that  the definition of "subsidy" in Article 1 of the SCM 
Agreement  and the prohibition on subsidies continge nt upon export in Article 3.1(a) were 
introduced in the Uruguay Round, but did not exist at the time that the GATT 1947 was 
negotiated?    
 
186. Could the United States please expand upon its statement that "[t]hese are the types of 
considerations that led to the negotiation of th e Subsidies Agreement...." (US further submission, 
para. 109)?  Is there any relevant material, includi ng, for example, drafting history that might support 
this statement? US 
 
M. THREAT CLAIMS 
 
187. Please provide USDA's projections of marke ting loan/LDP payments, direct payments and 
counter-cyclical payments to be made during MY 2003 through 2007 based on the most recent USDA 
baseline projection.  US  
 
                                                      
2 WT/DS108/AB/R, para 117:  
"… the provisions of the SCM Agreement  do not provide explicit assistance 
as to the relationship between the export subsidy provisions of the 
 SCM Agreement  and Article XVI:4 of the GATT 1994. In the absence of 
any such specific textual guidance, we must determine the relationship 
between Articles 1.1(a)(1) and 3.1(a) of the  SCM Agreement  and 
Article XVI:4 of the GATT 1994 on the basis of the texts of the relevant 
provisions as a whole.  It is clear  from even a cursory examination of 
Article XVI:4 of the GATT 1994 that it differs very substantially from the subsidy provisions of the SCM Agreement , and, in particular, from the 
export subsidy provisions of both the SCM Agreement  and the Agreement on 
Agriculture .  First of all, the  SCM Agreement  contains an express definition 
of the term "subsidy" which is not contained in Article XVI:4.  In fact, as we 
have observed previously, the  SCM Agreement  contains a broad package of 
new export subsidy disciplines that "go well beyond merely applying and interpreting Articles VI, XVI and XXIII of the GATT 1947".  Next, 
Article XVI:4 prohibits export subsidies only when they result in the export 
sale of a product at a price lower than  the "comparable price charged for the 
like product to buyers in the domes tic market."  In contrast, the 
 SCM Agreement  establishes a much broader prohibition against any subsidy 
which is "contingent upon export performance".  To say the least, the rule contained in Article 3.1(a) of the  SCM Agreement  that all subsidies which 
are "contingent upon export performance" are prohibited is significantly 
different from a rule that prohibits only those subsidies which result in a lower price for the exporte d product than the comp arable price for that 
product when sold in the domestic market.  Thus, whether or not a measure 
is an export subsidy under Article XVI:4 of the GATT 1947 provides no 
guidance in determining whether that measure is a prohibited export subsidy 
under Article 3.1(a) of the  SCM Agreement .  Also, and significantly, 
Article XVI:4 of the GATT 1994 does not apply to "primary products", 
which include agricultural products.  Unquestionably, the explicit export 
subsidy disciplines, relating to agricultural products, contained in Articles 3, 8, 9 and 10 of the Agreement on Agriculture  must clearly take precedence 
over the exemption  of primary products from export subsidy disciplines in 
Article XVI:4 of the GATT 1994." WT/DS267/R/Add.3 
Page L-49 
 
 
188. Can the United States comment on the FAPRI projections for cotton provided in Exhibit BRA-202?  US 
 
N. CLARIFICATIONS 
 189. Please indicate whether the correct figure in pa ragraph 37 of Brazil's 7 October oral statement 
is 38.1% or 38.3%? BRA  
 190. Please confirm that the figure "17.5" in paragra ph 43 of Brazil's 7 October oral statement, is 
"percentage point".  BRA 
 191.  Brazil clarify its statement in para. 12 of its  9 September further subm ission:  "Alternatively 
crop insurance is  not specific because the 2000 ARP Act denies benefits to commodities representing 
more than half of the value of US agriculture.  Further US crops represent only 0.8 per cent of total US GDP." (emphasis added) BRA  WT/DS267/R/Add.3 
Page L-50  
 
ANNEX L-1.16 
  
COMMUNICATION TO BRAZIL 
AND THE UNITED STATES 
 
3 November 2003 
 
 
1. The Panel recalls that paragra ph 5 of its 13 October 2003 communication reads as follows:   
"The Panel takes note of the United States' request in section II of its 
further submission for three preliminary rulings, regarding interest subsidies and storage payments; cottonseed payments; and export 
credit guarantees for products other than upland cotton.  The Panel is 
not currently in a position to rule on these issues.  The Panel will make rulings as necessary and appropriate in the course of this proceeding and hopes to be in a position to express its views, or give a ruling, on these requests, as appropriate, by 3 November (that is, 
shortly after the date of receipt of written responses to questions).  
Meanwhile, the Panel requests the parties not to exclude consideration of these issues in their responses to questions." 
2. Accordingly, please find attached a communication from the Panel. WT/DS267/R/Add.3 
Page L-51 
 
 
Panel's views on the preliminary ruling requested by the United States  
in its further written submission of 30 September 2003  
  1. In its further written submission of 30 Se ptember 2003, the United States requests a 
preliminary ruling that: 
  (1) Brazil may not advance claims under either Article 4 or Article 7 of the SCM 
Agreement with respect to export credit guarantee measures relating to eligible US 
agricultural commodities other than upla nd cotton, because it did not include a 
statement of available evidence with respect to these measures as required by 
Articles 4.2 and 7.2 of the SCM Agreement ;  
  (2) cottonseed payments made for the 1999 and 2000 crops are not within the Panel's 
terms of reference;  and 
 
 (3) storage payments and interest subsidies referred to as "other payments" for upland 
cotton are not within the Panel's terms of reference.
1  
 2. Brazil asks the Panel to reject the United States' request.  In respect of item (1), Brazil asserts 
that the US request is not new and is untimely, groundless and "mooted by" the Panel's 25 July 
communication indicating that the Panel intended to ru le that export credit guarantees to facilitate the 
export of US upland cotton and other eligible agricu ltural commodities are within the Panel's terms of 
reference.
2  Brazil asserts that items (2) and (3) are properly within the Panel's terms of reference.3 
 3. The Panel wishes to indicate to the parties how it intends to rule on items (1) and (2), in order 
to assist them in deciding what argumentation a nd evidence to submit in their further rebuttal 
submissions.    4. With respect to item (1), assuming arguendo  that the US request was timely,
4 the Panel 
intends to rule in its report that Brazil provided a statement of available evidence with respect to 
export credit guarantee measures relating to eligible  US agricultural commodities other than upland 
cotton, as required by Articles 4.2 and 7.2 of the SCM Agreement .  As previously indicated in the 
Panel's communication of 25 July 2003, the Panel also  intends to rule that "export credit guarantees 
… to facilitate the export of US upland cotton, and other eligible agricultural commodities" as 
addressed in document WT/DS267/7, are within its terms of reference.   
5. With respect to item (2), the Panel intends to rule that cottonseed payments made under 
Public Laws 106-224 and 107-25 (in respect of the 2000 crop) are within its terms of reference, but 
that cottonseed payments made under Public Law 106- 113 (in respect of the 1999 crop) are not within 
its terms of reference.  This is without prejudice to the relevance, if any, of the cottonseed payments in 
respect of the 1999 crop to the conditions set out in Article 13(b) of the Agreement on Agriculture . 
                                                     
 
1 US Further Written Submission, Sections II and XIII. 
2 Brazil's Oral Statement at the Resumed Fi rst Substantive Meeting, paragraphs 73-78. 
3 Brazil's Oral Statement at the Resumed Firs t Substantive Meeting, paragraphs 79-81.  
4 The Panel recalls paragraph 12 of its working procedures but, in light of its intended ruling, does not 
need to address the issue of timeliness here.  WT/DS267/R/Add.3 
Page L-52  
 
 6. The Panel has not yet decided upon its approach to  item (3) and asks the parties not to exclude 
consideration of these other payments in  their further rebuttal submissions.  WT/DS267/R/Add.3 
Page L-53 
 
 
 ANNEX L-1.17 
  
COMMUNICATION TO BRAZIL 
AND THE UNITED STATES 
 
14 November 2003 
 
 1. The Panel takes note of the United States' written request of 14 October 2003 for certain 
information relating to the quantitative simulation mode l used by Dr. Sumner in his analysis presented 
in Annex I to Brazil's 9 September 2003 further written  submission.  The Panel also takes note of the 
parties' related communications da ted 5, 11, 12 and 13 November 2003 , and the submissions by Brazil 
on 12 and 13 November 2003. 
2. The Panel confirms the dates in its ex isting timetable, subject to the following. 
3. The Panel does not require the parties' 18 N ovember further rebuttal submissions, nor their 
oral statements during the second Panel meeting, to  address the methodology, equations or parameters 
underlying the quantitative modelling simulation in Annex I to Brazil's further written submission 
which are directly linked to the information requ ested by the United States on 14 October 2003 and 
the submissions by Brazil on 12-13 November 2003.  Having said this, the parties are not precluded 
from doing so.   
4. Mindful of the requirements of Article 12.4 of the Understanding on Rules and Procedures 
Governing the Settlement of Disputes  and in keeping with its duty to conduct an objective assessment 
of the matter before it, the Panel invites the Unite d States to submit, on 22 December, in conjunction 
with its responses to any questions following th e second Panel meeting, any comments that it may 
have on Brazil's submissions of 12-13 Novemb er 2003.  Brazil may submit any comments on any 
such US comments by 12 January 2004, and the Un ited States may submit any further comments by 
19 January 2004.  If necessary, at the discretion of th e Panel, a further Panel meeting with the parties 
may be held to address this specific material.  
5. This decision is without prejudice to the relevance and significance which the Panel may 
ascribe to the quantitative simulation model and rela ted evidence and argumentation in its report.   
6. Finally, the Panel wishes to ask the Un ited States to respond, by 22 December, to the 
following: 
Is the Panel correct in understanding that the US government (including the United States 
Department of Agriculture) does not have a licen se or any other form of permission (standing 
or otherwise; free of charge or otherwise) to run, electronically, the FAPRI/CARD model 
and/or Professor Sumner's adaptations thereto?   WT/DS267/R/Add.3 
Page L-54  
 
ANNEX L-1.18 
  
COMMUNICATION TO BRAZIL 
AND THE UNITED STATES 
 
8 December 2003 
 
 1. Please find attached:  
• a communication from the Panel concerning its views on one of the preliminary ruling 
requests from the United States. 
• a communication from the Panel concerning the FAPRI model, the essence of which was 
communicated to the parties by the Chairman of the Panel on 3 Decembe r 2003.  As indicated 
therein, any US comments are due by 22 December . Brazil will be given until 
12 January 2004 , to comment on the US comments. 
• the questions from the Panel. As was indicated earlier, responses to these questions are to be 
submitted by 22 December . 
2.   As stated by the Chairman on 3 December, the United States will be given until 
18 December  to respond to Brazil's request made in Exhibit BRA-369. Brazil will be given until 
12 January 2004 , to comment on the US response.   
 3. The parties may submit any furthe r comments on each other's comments by 
19 January 2004 .  WT/DS267/R/Add.3 
Page L-55 
 
 
Panels' views on the preliminary ruling requested by the United States  
regarding the Agricultural Assistance Act of 2003  
  7. The United States requests a preliminary ruli ng that any measure under the Agricultural 
Assistance Act of 2003, including a cottonseed payment under that Act, is not within the Panel's terms 
of reference.
1 
 8. Brazil asserts that that Act is properly within th e Panel's terms of reference and asks the Panel 
to reject the United States' request.
2 
 
9. The Panel wishes to indicate to the parties how it in tends to rule on this item in order to assist 
them in deciding what argumentation and eviden ce to submit in their answers to questions.  
 10. The Panel intends to rule that cottonseed pa yments made under the Agricultural Assistance 
Act of 2003 are not within its terms of reference.  This  is without prejudice to the relevance, if any, of 
those cottonseed payments to the conditi ons set out in Article 13(b) of the Agreement on Agriculture . 
 11. The Panel notes that it has not expressed a view  concerning the United States' request for a 
preliminary ruling that storage payments and inter est subsidies referred to as "other payments" for 
upland cotton are not within th e Panel's terms of reference.
3   The Panel has not yet decided upon its 
approach to this item and asks the parties to re spond to its written questions relevant to these 
payments, and not to exclude consideration of these payments in their answers to other questions.  
                                                      
1 US First Written Submission, paras 217, 218; US Further Submission, para. 8. 
2 Brazil's Oral Statement at the first session of the First Substantive Meeting, para. 145; Brazil's 
Response to Panel Question No. 17 and comments on US Response to Panel Question No. 17. 
3 US Further Written Submission, Sections II and XIII. WT/DS267/R/Add.3 
Page L-56  
 
Panels' communication concerning the FAPRI model 
 
  1. The Panel has been advised by Brazil that, to th e best of Brazil's knowledge and belief, all of 
the information used by FAPRI to generate the various results presented in Brazil's submissions 
concerning the effects of the subsidies, and thei r removal, has been provided to the US in an 
electronic format.  Conceptually sp eaking, the information is in two parts: (a) the model used as the 
basis for generating the results ("the FAPRI model" ), and (b) adaptations to the model and other 
specific pieces of information which effect th e calculations made by the model ("the Brazil 
information").  FAPRI has possession of the FAPRI model and the Brazil information. Brazil only has 
possession of the Brazil information. Brazil instructed  FAPRI as to the use of the Brazil information 
that FAPRI then used to generate the vari ous results presented by Brazil to the Panel.  
 2. We say that the US has all of the information (ie both the FAPRI model and Brazil's information) "to the best of Brazil's knowledge a nd belief" because Brazil itself has never had access 
to all of the data comprising the FAPRI model, which is voluminous. FAPRI considers the model to 
be its own work product. At the request of Brazil, FAPRI has made all of the information available to 
the US.  Why it has done this in the case of the US, but not Brazil, relates to the relationship 
(commercial or otherwise) between FAPRI (which  receives US funding for its work) and the US 
Government.  FAPRI has provided a ll of the information to the US on the express stipulation that the 
model not be provided to the Panel or  Brazil ("the FAPRI stipulation"). 
 
3. At para 74 of its Opening Statement at the Second Panel Meeting, the US asks this of the 
Panel:  
 
"[W]hether it intends the United States to comment on this new model, 
documentation, and results by the original  22 December deadline to file comments on 
the methodology underlying the Annex I model." 
4. During the Second Panel Meeting, Brazil advised  the Panel that it had no objection, then, to 
the US looking at the information provided to it by  FAPRI, notwithstanding the FAPRI stipulation.  
The Panel acknowledges this, but also notes that it w ould be open to Brazil to reconsider its position 
depending on anything that the US may wish to present to the Panel about the FAPRI model. 
 
5. The Panel's view in these circumstances is that the US should comme nt on the FAPRI model, 
if it believes that it needs to do so in the interests of presenting its case to the Panel, by 22 December .  
The FAPRI stipulation does not, in the Panel's view , affect the Panel's ability to make an objective 
assessment of the matter before it in the terms of  Article 11 of the DSU.  The Panel will assess the 
reliability and relevance of the FAPRI model on th e basis of the evidence presented to it by the 
parties.  6. Brazil will be given until 12 January 2004 , to comment on the above US comments.   WT/DS267/R/Add.3 
Page L-57 
 
 
 
Questions from the Panel to the Parties – 
second substantive Panel meeting 
  
A. TERMS OF REFERENCE 
 192. Regarding the interest subsidies and storag e payments listed by the United States in its 
response to the Panel's Question No. 67: 
 
 (a) Please provide a copy of the regulations  under which they are currently provided and 
under which they were provided during the marketing years 1996-2002;   
   (b) Please indicate whether there are any such payments which are not provided to 
implement the repayment rate for upland cotton within the marketing loan 
programme.  USA 
 193. Are interest subsidies and storage payments  already included in the amounts shown in your 
submissions to date for payments under the marke ting loan programme?  Has there been any double-
counting?  BRA 
 194. Does the United States maintain its position stat ed in response to the Panel's Question No. 67 
that "it would not be appropriate for the Panel to  examine payments made after the date of panel 
establishment"?  If so, please explain why.  Can Brazil comment on this statement?  BRA, USA  
 
B. ECONOMIC DATA 
 
195. Does the United States wish to revise its  response to the Panel's Question No. 67 bis, in 
particular, its statement that "the United States ... does not maintain information on the amount of 
expenditures made under the cited programmes to US upland cotton producers"?  Did the United 
States make enquiries of the FSA in the course of preparing its original answer? USA 
 196. Please provide the latest data for the 2002 marketing year on payments under the marketing 
loan, direct payments, counter-cyclical payments, user marketing certificate (step 2) programmes and 
export credit guarantee programmes.  BRA, USA  
 197. Please provide actual data for 2002/2003 for US exports, US consumption and per cent of 
world consumption to replace the projected data in Exhibit US-47.  If available, please provide projected data for 2003/2004 to replace the forecast data.  USA  
 
198. Please comment on the respective merits of the price-gap calculations of MY1992 deficiency 
payments in US comments of 27 August, footnote 14 ($867 million), and Brazil's response to the Panel's Question No. 67 ($812 million).  BRA, USA  
 199. What is the composition of the A-Index?  We do note footnote 19 and, for example, Exhibit 
BRA-11, but please explain more in de tail how this index is calculated. BRA  
 200. Concerning the chart on page 37 of Brazil's fu rther rebuttal submission, why did Brazil use a 
futures price at planting time?  Is this a relevant measure for assessing acreage response?  BRA  
 201. Is data available to show the proportion of  US upland cotton production sold under futures 
contracts, and the prices under those contracts, at different times during the marketing year?  If so, WT/DS267/R/Add.3 
Page L-58  
 
please provide summarized versions to the Panel.  How does a futures sale impact the producer's 
entitlement to marketing loan programme payments?  BRA, USA  
 202. Concerning paragraph 7 of the US oral statem ent, are the expected cash prices shown for 
February only?  Can the US provide the prices for January and March of each year as well?  USA  
 
203. Please provide information concerning the organi zation, mandate, credentials and standing of 
FAPRI.  BRA  
 204. Which support to upland cotton is not capture d in the EWG data referred to in Brazil's 
18 November further rebuttal submission?  BRA  
 205. Does the United States accept or agree with th e EWG data submitted by Brazil?  If not, please 
explain your reasons.   USA  
 
206. Please explain how the graph in paragraph 40  of the US further rebuttal submission was 
derived.  In so doing, please clarify whether the figures are on a cents per pound basis or some other basis.  What averaging method was used?  Can you prepare individual charts showing average US and Brazilian cotton prices for each of those third country markets?  USA  
 207. Please indicate whether any of the measures challenged in this dispute obliges  cotton farmers 
to harvest their crop in order to receive the benefit of the programme (subsidy).  USA  
 208. Please provide data for the marketing y ears 1992 and 1999-2002 of the "quantity 
of production to receive the applied administered price" ( Agreement on Agriculture , Annex 3, 
paragraph 8) for purposes of a  price-gap calcul ation of support through the marketing loan 
programme. USA   
 209. It is understood that the  data in the graph in paragraph 5 of the US oral statement are as at 
harvest time, while the data in the graph in paragr aph 39 of Brazil's oral statement are as at planting 
time.  Please explain why the trend of US acreage increase/decrease differs between these two graphs. 
BRA, USA   
 
210. Are worldwide planted acreage figures available?  BRA, USA  
 211. Brazil presents a graph in paragraph 59 of  its further rebuttal submission indicating the 
increasing cumulative loss incurred by cotton producer s.  Please comment on the argument that US 
cotton producers could not continue operati ng without subsidies.   In particular: 
  (a) to what extent does the use of 1997 surv ey technological coefficients with annually 
updated values affect the results?  
  (b) to what extent do producers base planti ng decisions on their ability to cover operating 
costs but not whole farm costs? USA      
 212. Brazil states in paragraph 37 of its oral statement that studies of Westcott and Price found that the effect of the programme on cotton is to add an additional 1 to 1.5 million acres during marketing 
years 1999-2001 and to suppress US prices by 5 cents per pound. Does the US reject these findings? 
Why or why not? USA    
 213. What differences, if any, can be observed in the results of econometric models in the literature 
which use lagged prices and those which use futures prices to analyse the effect of prices on planting 
decisions?  BRA, USA  
 WT/DS267/R/Add.3 
Page L-59 
 
 
 
C. DOMESTIC SUPPORT 
 
214. Please provide a copy of regulations regard ing the marketing loan programme and loan 
deficiency payments published at 58 Federal Regi ster 15755, dated 24 March 1993.  What does this 
regulation indicate about the target price?  USA  
 215. Please expand or comment on the statement at  paragraph 91 of the US further rebuttal 
submission that the counter-cyclical target price ce ases to be paid when th e farm price rises above 
65.73 cents per pound.  In this scenario, shoul d the Panel disregard Direct Payments?  BRA, USA  
 216. How many times have upland cotton producers be en able to update their base acres since 
1984?  How do upland cotton producers come to note the possibility of future updating?  Please provide examples of relevant material.  BRA, USA  
 
217. What is the reason for reducing payments unde r the PFC and direct payments programmes for 
planting and harvesting fruit, vegetables and wild rice on certain base acreage?   Please comment on 
the statements by the European Communities that "the reduction in payment for fruit and vegetables, 
if the EC understands correctly, is in fact designe d to avoid unfair competition within the subsidising 
Member." (EC oral statement at first session, firs t substantive meeting, paragraph 29) and "To find 
otherwise would not permit a WTO Member wishi ng to introduce decoupled payments to take 
account of important elements of internal comp etition (…)" (EC response to Panel third party 
Question No. 5).  USA  
 218. Please comment on the testimony of USDA Ch ief Economist Keith Collins cited in paragraph 
36 of Brazil's oral statement regarding the trade- distorting and production-distorting nature of the 
marketing loan payments.  USA      
 
D. EXPORT CREDIT GUARANTEES 
 219. Under the Agreement on Agriculture  the general position is that the use of export subsidies, 
both those listed in Article 9.1 as well as those within the scope of Article 1(e) which are not so listed, 
may only be used within the limits of the product specific reduction commitments specified in Part IV 
of Members' Schedules.    One might theref ore have expected that Article 3.3 of the Agreement on 
Agriculture  would have prohibited the use of both liste d and non-listed export subsidies in excess of 
reduction commitment levels in the case of schedul ed products and, in the case of non-scheduled 
products, would have simply prohibited the use of  any export subsidy.  Instead, the Article 3.3 
prohibition is limited in both cases to export subsidies listed in Article  9.1. What significance, if any, does this contextual aspect have for how Artic le 10.2 might be interpreted having regard, inter alia , 
to:  
 
 (a) the fact that export performance-related tax incentives, which like subsidised export 
credit facilities were considered  as a possible candidate for listing as an Article 9.1 export subsidy in the pre-December 1991 Draft Final Act negotiations, have been 
held (for example, in United States – Tax Treatment for Foreign Sales Corporations , 
WT/DS108) to be subject to the anti-circum vention provisions of  Article 10.1; and  
  (b) the treatment of international food aid and non-commercial transactions under 
Article 10?  USA   
 220. What will be the relevance of Articles 9 and 10.1 of the Agreement of Agriculture  to export 
credit guarantees when disciplines are internationally agreed?  BRA  
 ..... WT/DS267/R/Add.3 
Page L-60  
 
221. In respect of the table in paragraph 161 of  the US August 22 rebuttal submission (concerning 
the cohort specific treatment of export credit gua rantees), the Panel notes the subsequent US 
agreement (footnotes 82 and 96 in US further submi ssion of 30 September 2003; footnote 160 in US 
18 November further rebuttal submission) to Braz il's assertion (footnote 67 in Brazil's 27 August 2003 
comments on US rebuttal submission) that the tota l figure net of re-estimates should be $230,127,023 
instead of the figure which originally appeared ($381,345,059). 
  (a) Please submit a corrected table reflecti ng all of the necessary information to produce 
this result, to the extent this is possible fo r the reasons indicated in footnote 96 in US 
further submission of 30 September 2003.  
 
 (b) Please clarify whether and how the Panel should treat the figures in Exhibit BRA-182 
for the net lifetime re-estimates for each respective cohort.   
  (c) The Panel notes that the CCC 2002 financia l statement in Exhibit BRA-158 refers to 
annual "administrative" expenses of $4 million,  and that the US has also referred to 
this figure in its submissions (e.g. US first written submission, paragraph 175).  
Please confirm whether the figures in the table in paragraph 161 of the US August 22 rebuttal submission (or a corrected vers ion thereof) includes "administrative 
expenses", of approximately $4 million pe r year over the period 1992-2002, and 
explain why (or why not) this affects the substantive result.  
 
 (d) Please identify what is considered an "a dministrative expense" for this purpose.   
  (e) The Panel notes the US statement in para graph 160 of its answers to Panel questions 
following the first meeting that all coho rts are still open although the 1994 and 1995 
cohorts will close this year.  Is this still an accurate statement?  If not, please indicate 
whether any cohorts have since "closed" for the period 1992-2002.   
  (f) The Panel notes the current "high" figures for 1997 and 1998 indicated in the original 
US chart.  Pending their confirmation and/or updating by the US, why does the US assert that a cohort will necessarily reach a "profitable" result (for example, the 1994 
cohort, which has almost closed still i ndicates an outstanding amount)?  Do "re-
estimates" reflect also expectations about a cohort's future performance?  
  (g) Why should the Panel "eliminate" the 2001 and 2002 cohorts from its examination, as 
suggested in paragraph 198 of the US further rebuttal submission?  
 
 (h) Why should the Panel "eliminate", in a ddition, the 2000 cohort, as also suggested in 
paragraph 198 of the US further rebutta l submission for which information is 
presumably more "complete"?   
  (i) Under the US approach, at what point in time could a Panel ever make an assessment 
of the programme, if it had to wait for each cohort to be completed before it could be 
"properly" assessed?  Why is it inappropriate  for the Panel to include these "most 
recent years" in its evaluation, as the US suggests in paragraph 199 of its 18 November further rebuttal submission?  USA  
 
222. For GSM 102, 103 and SCGP, please provide year-by-year amounts from 1992 to 2003 with 
respect to: (i) cumulative outstanding guarantees; (ii) claims paid; (iii) recoveries made; (iv) revenue 
from premiums; (v) other current revenue, including in terest earned; (vi) interest charges paid; and 
(vii) administrative costs of running the programmes.  Please indicate any allocation methodologies used to calculate administrative costs.  USA  
 WT/DS267/R/Add.3 
Page L-61 
 
 
 223. Are the premium rates applicable to GSM 102, 103 and SCGP subject to regular review as to 
their adequacy in enablin g the operating costs and losses associat ed with these programmes?  If so, 
what criteria or benchmarks are taken into consideration for this purpose? Secondly, how do the 
premium rates applied compare with the implicit co st of  forfaiting transactions and with premiums 
for export credit insurance?  USA  
 224. Please indicate how the CCC's cost of borro wing was treated in the 2002 financial statement 
of the CCC, in Exhibit BRA 158.  USA  
 
225. Please indicate whether there was any instance where the CCC "wrote off" debt and, if so,  
please indicate the accounting regulation or principle used.  If a "written off" debt is subsequently 
recovered, do the CCC's accounts reflect both the inter est cost and interest received in relation to the 
debt during the time it was "written off"?  USA  
 
226. If a debt was "written off" more than ten years ago, does it still create a cost to the 
programme?  If so, how is this reflected in the 2002 financial statement of the CCC, in Exhibit BRA 
158 (or any other material)? USA   
 227. The United States has indicated that Brazil c ontinues to "mischaracterize" the amount of $411 
million in the 2002 financial statement of the CCC,  in Exhibit BRA 158, pp. 18 & 19.  Can the 
United States please indicate how it believes this amount – referred to on p. 19 of the Exhibit as 
"Credit Guarantee Liability-End of Fiscal Year" - should be properly characterized?   How, if at all, 
does it represent CCC operating costs or losses?  USA  
 228. What accounting principles should the Panel use in assessing the long-term operating costs 
and losses of these three programmes?  For example, if internal US Government regulations require 
costs to be treated differently to generally accepte d accounting principles, is it incumbent on the Panel 
to conduct its analysis in accordance with that treatment?  BRA, USA  
 
E. SERIOUS PREJUDICE  
 229. What is the meaning of the words "may arise in any case where one or several of the 
following apply" (emphasis added) in Article 6.3 of the SCM Agreement ?  Please comment on the 
possibility that these words indicate that one of the Article 6 subparagraphs ma y not be sufficient to 
establish serious prejudice and that serious prejudice should be considered an additional or overriding 
criterion to the factors specified in the subparagraphs.  BRA  
 230. Please comment on Brazil's views on Article 6.3 of the SCM Agreement as stated in 
paragraphs 92-94 of its  further submission. USA   
 231. Do you believe that the now-expire d Article 6.1 and/or Annex IV of the SCM Agreement are 
relevant context for the Panel's interpretation of Article 6.3?  USA  
 232. How, if at all, should the Pane l take into account the effects of other factors in its analysis of 
the effects of US subsidies under Article 6.3? If th e Panel should compare the effects of other factors 
to establish the relative significance of one compared  to others, how would this be done? What would 
be relevant “factors” for this purpose? BRA  
 233. In Brazil's view, what is or are the "same ma rket(s)" for the purposes of Article 6.3(c)? Does 
Brazil's view of "world market" imply that regardless of which domestic (or other) "market" is examined, price suppression will be identifiable? BRA  
 
 WT/DS267/R/Add.3 
Page L-62  
 
 234. Does "significant" price suppression under Ar ticle 6.3(c) necessarily amount to "serious" 
prejudice within the meaning of Article 5(c)?  Could the level of "significance" of any price 
suppression under Article 6.3(c) dete rmine whether any prejudice under Article 5(c) rises to the level 
of "serious prejudice"?  USA, BRA  
 
235. Please comment on paragraphs 8, 9 and 10 of  the US 2 December oral statement, in 
particular, why the average Brazilian price is shown as lower than the average US price.  BRA  
 236. The Panel notes Exhibit US-47 (and the chart in paragraph 13 of the US 2 December oral 
statement).  Please provide a conceptually analogous  chart to Exhibit US-63 with respect to data 
relating to the US interpretation of "world market share".  USA  
 237. Could a phenomenon that remains at approxima tely the same level over a given period of 
time be considered a "consistent trend" within the meaning of Article 6.3(d) ?  Do parties have any 
suggestions as to how to determine a "consis tent trend", statistically or otherwise?  BRA, USA  
 238. According to the US interpretation of the term "world market share":   (a) should the domestic consumption of closed  markets be added into the denominator?   
 
 (b) if US production and consumption increased by the same percentage, whilst the rest 
of the world's production and consumption remained steady, would this imply an increase in the US "world market shar e" by a different percentage?   
  (c) does Saudi Arabia have a small world market share for oil?  USA     
 
239. How does the US respond to Brazil's assertions that, under the US interpretation of the term 
"world market share":    (a) there would be no WTO disciplines on pr oduction-enhancing subsidies that increase a 
Member's world market share of exports?  (see paragraph 64 of Brazil's 2 December 
oral statement); 
  (b) a Member's exports would have to be di sregarded in calculating their "world market 
share" in terms of "world consumption"? (see e.g. paragraph 65 of Brazil's 2 December oral statement)  USA  
 
240. Does Article XVI:3 of GATT 1994 provide cont ext in interpreting Article 6.3(d) of the SCM 
Agreement ?  Do these provisions apply separately?  If not, could it indicate that "world market share" 
is intended to mean the same as "share of world export trade"?  USA  
 241. How does the US reconcile its data on consum ption for 2002 in US Exhibit 40, Table 1 with 
the "consumption" data it refers to in its 30 September submission,  paragraph 34, Exhibit US-47 or 
US-71?  USA  
 242. How much of the benefits of PFC, MLA, CCP and Direct Payments go to  land owners?  If not 
all of the benefits go to land owners, what proportion goes to producers?  USA  
 
243. Can the Panel assume that any support at all, even marketing loan programme payments, 
benefits upland cotton if an upland cotton producer  has other agricultural production besides upland 
cotton?  USA  
 WT/DS267/R/Add.3 
Page L-63 
 
 
244. What proportion of the 2000 co ttonseed payments benefited producers of upland cotton , 
given that payments were made to first handlers , who were only obliged to share them with the 
producer to the extent that the revenue from sale of  the cottonseed was shared  with the producer? (see 
7 CFR §1427.1104(c) in Exhibit US-15). BRA  
 
245. Can a panel take Green Box subsidies into account in considering the effects of non-Green 
Box subsidies in an action based on Articles 5 and 6 of the SCM Agreement ?  BRA, USA  
 246. Can a panel take prohibited subs idies into account in considering the effects of subsidies in an 
action based on Articles 5 and 6 of the SCM Agreement ?  BRA, USA  
 
247. Can the Panel take into acc ount trends and volatility in market and futures prices of upland 
cotton after the date of establishment of the Panel?  If so, how do they affect the analysis of Brazil's claim of a threat of serious prejudice?  BRA, USA  
 
F. STEP 2 
 248. In respect of the level of Step 2 payments in certain time periods, the Panel notes, inter alia , 
footnote 129 in the US first written submission; f ootnote 33 in the US 18 November further rebuttal 
submission; and Exhibit BRA-350.  Have Step 2 paymen ts ever been zero sin ce the elimination of the 
1.25 cent per pound threshold in the FSRI Act of 2002 ?  In what circumstances could a Step 2 
payment be zero?  How does the elimination of th e 1.25 cent per pound threshold in the FSRI Act of 
2002 affect your response?  BRA, USA  
 249. The Panel notes that the definition of eligib le "exporter" in 7 CFR 1427.104(a)(2) includes "a 
producer":   
  (a) How does this reconcile with Brazil's argument that Step 2 "export payments" do not 
directly benefit the producer?
4  How, if at all, would this be relevant for an analysis of 
the issue of export contingency under the Agreement on Agriculture  or the SCM 
Agreement ?  BRA  
 
 (b) How does this reconcile with Dr. Gla uber's statement in Exhibit US-24, p. 3 
(referring to "the 1990 Farm B ill and subsequent legislation") that Step 2 payments 
do not go directly to the producer?  USA  
  (c) What proportion of Step 2 "expor t payments" go to producers?  Please supply 
supporting evidence.  USA  
 
G. REMEDIES 
 250. Does Brazil seek relief under Article XVI of GATT 1994 in respect of expired measures?  
What type of recommendation would the Panel be au thorized to make?  (Bra zil further submission, 
paragraph 471 (iii))  BRA  
 251. In light, inter alia , of Article 7.8 of the SCM Agreement , if the Panel were to find that any 
subsidies have resulted in adverse effects to the in terests of another Member within the meaning of 
Article 5 of the SCM Agreement , should it make any recommendation other than the one set out in the 
first sentence of Article 19.1 of the DSU?  BRA  
 
                                                     
 
4 For example, Brazil's response to Panel Question 125, paragraph 14.  WT/DS267/R/Add.3 
Page L-64  
 
252. Without prejudice to any findings by the Panel,  if the Panel were to find that any of the 
challenged measures constitute proh ibited subsidies within the meaning of Article 3 of the SCM 
Agreement , what are the considerations that shoul d guide the Panel in making a recommendation 
under Article 4.7 of the SCM Agreement  relating to the time period "within which the measure must 
be withdrawn"? What should that time period be? BRA 
 
H. MISCELLANEOUS 
 
253. Regarding the adjustment authority related to Uruguay Round compliance in s.1601(e) of the 
FSRI Act of 2002 (the so-called "circuit-breaker provision"): 
  (a) Does it relate to export credit guarant ees, crop insurance and cottonseed payments? 
 
 (b) Does it relate only to compliance with AMS commitments? 
 
 (c) Is the authority discretionary?  If so, can  its exercise be limited by the legislative 
branch of government?  
  (d) How would the Secretary exercise her au thority to prevent serious prejudice to the 
interests of another Member?  How would she exercise her authority to prevent a 
threat of serious prejudice to the interests of another Member?  At what time and on 
the basis of what type of informati on would she exercise her authority?   
  (e) What does "to the maximum extent practi cable" mean?  In what circumstances would 
it not be practicable for the Secretary to exercise her adjustment authority? USA  
 
254. Would payments made after the date of panel establishment be mandatory under the 
marketing loan, direct payments, counter-cyclical payments and user marketing certificate (step 2) 
programmes, but for the circuit-breaker provision?  USA  
 255. How does Brazil respond to US assertions concerning the circuit-breaker provision? (see US 
2 December oral statement, paragraph 82).  Does th is mean that US subsidies cannot be "mandatory" 
for the purposes of WTO dispute settlement?  BRA  
 256. The United States submits that the Panel ca nnot make rulings without allocating precise 
amounts of payments to upland cotton production.  Howeve r, to the extent that such precise data is not 
on the Panel record, to what extent can the Panel rely on less precise data, and on reasonable 
assumptions, in fulfilling its dut y under Article 11 of the DSU  in this case?  USA  
 
 WT/DS267/R/Add.3 
Page L-65 
 
 
ANNEX L-1.19 
  
COMMUNICATION TO BRAZIL 
AND THE UNITED STATES 
 
23 December 2003 
 
 
Please find attached additional questions from the Panel.   We would ask the parties to provide their responses by 12 January 2004.  The parties may 
submit any comments on each other's responses by 19 January 2004 .  
 WT/DS267/R/Add.3 
Page L-66  
 
Additional Questions from the Panel to the parties – 
following the second substantive Panel meeting  
 
257. The Panel takes note of the Appellate Body Report in United States – Sunset Review of Anti-
Dumping Duties on Corrosion-Resistant Carbon Steel Flat Products from Japan (DS244), which was 
circulated to WTO Members on 15 December 2003.  Th e Panel is aware that this report has yet to be 
adopted by the Dispute Settlement Body.  Neverthe less, the Panel asks the parties to respond to the 
following related questions.  (a) In that report, the Appellate Body cautioned against the "mechanistic" application of the so-
called "mandatory/discretionary distinction" and stated that the import of this distinction may 
vary from case to case (para. 93).  For the Appellate Body, the question of whether a measure is mandatory or not is relevant "if at all"  only as part of the assessment of whether the 
measure is, as such, inconsistent with particul ar obligations.  How, if at all, are these 
statements and the related findings concerning th e mandatory/discretionary distinction in that 
Appellate Body Report relevant to: 
  (i) the legal standard and elements Brazil sets out to establish its export and prohibited 
subsidy claims under the provisions of the Agreement on Agriculture  and Articles 
3.1(a) and (b) of the SCM Agreement , concerning:  BRA  
 
  - Step 2 payments (see, e.g. paras. 244-245 & 250 Brazil's first written 
submission; Panel Question 109 and par ties' responses/comments thereon); and 
   - export credit guarantee programmes: GSM-102, GSM-103 and SCGP (see, e.g., 
para. 90 Brazil's oral statement at second Panel meeting).  
 
 (ii) the legal standard and elements Brazil sets out to establish its serious prejudice and 
"threat of serious prejudice" claims, and in  particular, its designation of marketing 
loan; crop insurance; counter-cyclical payments; direct payments and Step 2 as "mandatory"?   BRA  
 
 (iii) the legal standard and elements Brazil sets out to establish its " per se " "serious 
prejudice" claims ( e.g. Brazil's 9 September further submission, para. 417 ff; US oral 
statement at second Panel meeting, para. 86 ff.)? BRA  
 (b) How and to what extent are the legal and re gulatory provisions cited in paras. 415 and 423 of 
Brazil's 9 September further submission "normative" in nature and treated as binding within 
the US legal system (see, e.g., para. 99 of the Appellate B ody Report)?  Does your response 
differ depending on whether the payments are dependent upon market price conditions? BRA  
 (c) Does Brazil challenge as "mandatory" the "subs idies" themselves, the subsidy programmes or 
the legal/regulatory provisions for the grant or maintenance of those subsidies, or something 
else?   BRA  
 (d) Does the "requirement" upon the CCC to make available "not less th an" $5.5 billion annually 
in guarantees have a normative character and operation? (see, e.g. Brazil's response to Panel Question 142; Exhibit BRA-297, 7 USC 5641(b)(1); 7 USC 5622(a) & (b); paragraph 201 of 
US 18 November further rebuttal submissions).  Is this requirement "mandatory"?  If so, how 
does the CCC have "discretion" not to make th is amount of guarantees available in a given 
year?  USA  
 WT/DS267/R/Add.3 
Page L-67 
 
 
(e) Does the US agree that, under the Budget Enforcement Act of 1990, the Office of 
Management and Budget classifies the export cr edit guarantee programs as "mandatory" (see 
Brazil's response to Panel Question 142, para. 89)?  Does this exempt the programmes from 
the requirement to receive new Congressional budget authority before it undertakes new 
guarantee commitments ( e.g. Exhibit BRA-117 (2 USC 661(c)(2))?  USA   WT/DS267/R/Add.3 
Page L-68  
 
ANNEX L-1.20 
  
COMMUNICATION TO BRAZIL 
AND THE UNITED STATES 
 
24 December 2003 
 
  The Panel has received a letter from Brazil da ted 23 December (numbered 760), in which it 
requests extension of certain deadlines. The Panel has also received a response from the US, dated 23 
December. Having carefully considered the views of both parties, the Panel notifies the parties that it 
would amend the four immediate deadlines and schedules as follows: 
 
 (1) all submissions originally du e 12 January 2004 would now be due Tuesday, 
20 January 2004 
 
 (2) all submissions originally due 19 January 2004 would now be due Wednesday, 
28 January 2004 . 
  (3) issuance of descriptive part of the re port to parties (currently scheduled for 
26 January) would be rescheduled to Wednesday,  4 February 2004 . 
  (4) receipt of comments by parties on the descriptive part of the report (currently 
scheduled for 19 February) would be rescheduled to Monday, 1 March 2004 . 
    All subsequent dates remain unchanged. However,  please be reminded that such dates may be 
changed in light of further developments.  
 WT/DS267/R/Add.3 
Page L-69 
 
 
 
ANNEX L-1.21 
 
 
COMMUNICATION TO BRAZIL 
AND THE UNITED STATES 
 
12 January 2004 
 
 
 The Panel takes note that, as stated in its  letters dated 18 and 22 December 2003, the 
United States provided certain data requested by Br azil, but deleted from farm-level planted acreage 
data any fields that could identify individual farms.   Brazil commented on this in its answer to Panel 
Question No. 196.  The United States stated in its le tter dated 18 December 2003 that "the release of 
planted acreage information associated with a partic ular farm, county and state number is confidential 
information that cannot be released under US domesti c law, in particular the Privacy Act of 1974."  
 
The Panel has reviewed the material submitted in support in Exhibits  US-102 through 107, 
and makes the following observations:  
• in the sample Freedom of Information Act ("FOIA ") determination submitted to the Panel, the 
FSA appears to have relied on the fact that th e acreage requested concerned a single producer 
only and that there was no public interest in disclosure of records which did not directly 
reveal the operations or activities of the US Federal Government; 
 
• in that sample FOIA determination, the FSA  applied the relevant US domestic law and 
expressly acknowledged that disclosure of individual data on commodity programme recipients can be released where the recipien ts' privacy interests in that information are 
outweighed by the public interest in disclosure; 
 
• the information which the US asserts that it ca nnot disclose is relatively generic, concerning 
planted acreage, and does not relate to one indi vidual but to tens of thousands of business 
people, and can be protected under the DSU and our working procedures; 
 
• farm-specific information on contract payments is already available free of charge on the 
internet on the EWG database, having been disclosed under the FOIA;  and 
 
• comprehensive farm-specific in formation concerning rice, including planted acreage data 
associated with particular farm, county and state numbers, was provided on request under the FOIA to a member of the public who was assi sting Professor Sumner in the presentation of 
Brazil's case to the Panel.  A sample of this data is set out in Exhibit BRA-369. 
 
Article 13.1 of the DSU relevantly provides as follows: 
 
“A Member should respond promptly and fully to any request by a panel for such information as the panel considers n ecessary and appropriate. Confidential 
information which is provided shall not be  revealed without formal authorization 
from the individual, body, or authorities of the Member  providing the information.” 
 Pursuant to Article 13 of the DSU, the Pane l requests the United States to provide the same 
data that it agreed to provide in its letters da ted 18 and 22 December 2003 but in a format which 
permits matching of farm-specific information on contract payments with farm-specific information WT/DS267/R/Add.3 
Page L-70  
 
on plantings.  The Panel considers it both necessary a nd appropriate to seek this information in a 
suitable format in order to undertake its mandate to assist the DSB in discharging its responsibilities 
under the DSU and the covered agreements.  Disclosur e is sought to permit an assessment of the total 
expenditures of PFC, MLA, CCP and direct paymen ts by the US Federal Government to upland 
cotton producers in the relevant marketing years.  
 
The United States may again designate the data as confidential in accordance with 
paragraph 3 of the Panel's working procedures.  Disc losure can be limited to Brazil's delegation, the 
Panel and Secretariat staff assisting the Panel.  Th e United States may also protect the identity of 
individual producers by, for example, using substitute farm numbers which still pe rmit data-matching.   
 
A refusal by the United States to provide the information as requested without an adequate 
explanation may lead to adverse inferences being drawn.   The Panel reminds Brazil that it may not disclo se the above information outside its delegation 
in this proceeding if it is designated by the United States as confidential.   
  The Panel also wishes to pose the following additional question to Brazil: 
 
258. Please submit a detailed explanati on of the method by which one could 
calculate total expenditures to producers of upland cotton under the four relevant 
programmes on the basis of the data which it seeks. 
 The Panel asks the parties to provide the respective information requested by 
20 January 2004. WT/DS267/R/Add.3 
Page L-71 
 
 
ANNEX L-1.22 
  
COMMUNICATION TO BRAZIL 
AND THE UNITED STATES 
 
3 February 2004 
 
  Please find attached the Panel's supplementary  request to the United States for information 
pursuant to Article 13 of the DSU, as well as add itional questions to both parties.  The Panel would 
like to ask the parties to provide the information requested and responses to the additional questions 
by Wednesday 11 February 2004 .  The Parties are invited to submit, by Wednesday 
18 February 2004,  any comments on material submitted on 11 February by the other party.  
   In light of the above development, the Pane l  intends to postpone the  issuance of the 
descriptive part until Friday 20 February  2004 .  The remainder of the Panel's schedule remains 
unchanged for the time being.  
 
 The Panel recalls that it indicated, in its communication dated 14 November, that "[i]f 
necessary, at the discretion of the Panel, a furthe r Panel meeting with the parties may be held" to 
address the issue of econometric models.  The Panel woul d like to indicate that, at this stage,  it does 
not see the need to hold such a meeting.    
 The Panel has noted the US letter dated 30 Ja nuary, Brazil's response dated 2 February, and a 
further letter from the US dated 3 February 2004.   Keeping in mind the dictates of due process and 
relevant provisions of the cove red agreements -- including Article  12.2 of the DSU which requires 
Panel procedures to provide sufficient flexibility so  as to ensure high-quality panel reports while 
not unduly delaying the panel process --  the Panel is of the view that the above  revisions to 
the timetable provide the United States and Brazil sufficient opportunity to comment on each other's 
comments.  Accordingly, the US is free to submit its comments on Brazil's above mentioned submission by 11 February ( but no later ).   
  This is without prejudice to any definitive view  of the Panel on the characterization of any of 
the above communications by the parties and, in  particular, of the doc ument submitted by Brazil 
entitled "Brazil's Comments and Requests Regard ing Data Provided by the United States on 
18/19 December 2003 and the US Refusal to Provi de Non-scrambled Data on 20 January 2004".  WT/DS267/R/Add.3 
Page L-72  
 
 
PANEL'S SUPPLEMENTARY REQUEST FOR 
INFORMATION PURSUANT TO ARTICLE 13 OF 
THE DSU AND ADDITIONAL QUESTIONS 
 
 
  The Panel has reviewed the United St ates' letters dated 18 December 2003 and 
20 January 2004, and the material  submitted in support in Exhib its US-102 through 107, and Brazil's 
response to Question No. 258.  
 
 Pursuant to Article 13 of the DSU, the Panel requests the United States to provide: 
 (a) such of the information requested on 12 Ja nuary 2004 in the format requested, as regards 
payment recipients who do not have interests protected under the Privacy Act 1974, if any; 
and 
 (b) the following information for each of the PFC, MLA, CCP and direct payments programmes 
for each of the 1999, 2000, 2001 and 2002 ma rketing years, showing as many of the 
underlying calculations as possible: 
 
• How many farms had fewer upland cotton planted acres than upland cotton base acres, or 
equal numbers of each?  We refer to these as "Category A" farms.  What was the total of their upland cotton base acreage?  What was the total of their upland cotton planted acreage?   
 
o How many Category A farms did not plant any other covered commodities?  What 
was the total of their upland cotton base acreag e?  What was the total of their upland 
cotton planted acreage? 
 
• How many farms had more upland cotton planted acres than upland cotton base acres?  We 
refer to these as "Category B" farms.  What was the total of their base acreage for each 
covered commodity, including upland cotton?  What  was the total of their planted acreage for 
each covered commodity, including upland cotto n?  Please also provide the following 
information concerning these farms: 
 
o How many Category B farms had equal num bers of acres planted to all covered 
commodities and base acres for all covere d commodities?  We refer to these as 
"Category B-1" farms.  What was the total of the base acreage of Category B-1 farms for each covered commodity, including uplan d cotton?  What was the total of the 
planted acreage of Category B-1 farms for each covered commodity, including 
upland cotton? 
 o How many Category B farms had fewer acr es planted to all covered commodities 
than base acres for all covered commodities?  We refer to these as "Category B-2" 
farms.  How much was the total acreage of  Category B-2 farms pl anted to all covered 
commodities less than their base acreage for all covered commodities?  What was the 
total of the base acreage of Category B-2 farms for each covered commodity, including upland cotton?  What was the to tal of the planted acreage of Category B-2 
farms for each covered commodity, including upland cotton? 
 
o How many Category B farms had more acres planted to all covered commodities than 
base acres for all covered commodities?  We refer to these as "Category B-3" farms.  WT/DS267/R/Add.3 
Page L-73 
 
 
How much did the total acreage of Cate gory B-3 farms planted to all covered 
commodities exceed their base acreage for a ll covered commodities?  What was the 
total of the base acreage of Category B-3 farms for each covered commodity, including upland cotton?  What was the to tal of the planted acreage of Category B-3 
farms for each covered commodity, including upland cotton? 
 
• How many farms had upland cotton planted acres but no upland cotton base acres?  We refer 
to these as "Category C" farms.  What was th e total of the base acreage of Category C farms 
for each covered commodity?  What was the tota l of the planted acreage of Category C farms 
for each covered commodity, including upland cotton?   
 
• In addition, for the marketing year 2002, please reply to the above questions with respect to 
all crops on cropland covered by the acreage re ports, not simply commodities covered by the 
programmes. 
 
• In addition, please provide all of the above information on a state-by-state basis. 
 
You may wish to present your responses regarding acr eage for each covered commodity in a table as 
follows: 
 
TABLE 
Programme: Marketing year: 
Category of Farm:  
 
 
  
Covered commodities 
 
 Upland 
Cotton Barley Corn Oats Rice Sorghum Wheat Soybeans* Other 
Oilseeds*
Base acres          
Planted 
acres          
 
* Where applicable.   
 The Panel considers it both necessary and appropria te to seek this information to undertake its 
mandate to assist the DSB in discharging its  responsibilities under the DSU and the covered 
agreements.  However, the Panel reserves its views as to the extent to which any methodology might 
be appropriate to determine support provided to upland cotton in the circumstances of this case. 
 
A refusal by the United States to provide the information as requested without an adequate 
explanation may lead to adverse inferences being drawn.   The Panel also wishes to pose the followi ng additional questions to the United States 
(Nos. 259 – 275) and to Brazil (No. 276):  .....  WT/DS267/R/Add.3 
Page L-74  
 
 259. With respect to the Privacy Act of 1974, 5 U.S.C. 552a:  (a) Whose interests are protected under secti on 552a(b) in light of the definition of 
"individual" in section 552a(a)(2)?  Do all pa yment recipients, including corporations and 
organizations, have Privacy Act rights?  If not, is the United States prevented by its domestic 
law from releasing such of the information requested on 12 January 2004 as relates to 
payment recipients without Privacy Act rights?  Please explain with references to case law.  (b) The Panel notes that data concerning the four relevant programmes, in particular, 
payment amounts, identified by specific farms, is freely available on the internet.  Please 
explain why that data can be disclosed but the requested planted acreage data cannot.  Do 
individual recipients have Privacy Act rights w ith respect to their entrepreneurial activity?  
Please explain with references to case law.  
(c) Please provide any further available ev idence of the USDA's long-standing policy 
that planted acreage information will not be released.    260. On 27 August 2003, in its response to Question No. 67 bis, the United States 
indicated that "it does not maintain informa tion on the amount of expenditures made under the 
cited programmes to US upland cotton producers" .  On 12 January 2004, the Panel requested 
the United States to provide information "to pe rmit an assessment of the total expenditures of 
PFC, MLA, CCP and direct payments by the US Federal Government to upland cotton producers in the relevant marketing years".  On 20 January 2004, the United States informed 
the Panel that "the data already provided by the United States to Brazil and the Panel would 
permit an assessment of total expenditures of  decoupled payments to farms planting upland 
cotton."  Is the latest statement responsive to the Panel's request?  If so, how can it be 
reconciled with the first statement?  261. Please confirm that each record in the act ual planting database relates to a specific 
farm (Filenames: rPFCplac and rDCPplac in E xhibits US-111 and US-112).  For example, in 
the data from rDCPplac:
 
  
First line : 
Field9;Field16;Field22;Field28;Field34;Field40;Field46;Field52;Field58;Field64;Field70;Field76;Field82;Field88;Field94;Field100 
 
Second line : 
237.10;23059.80;5566.20;0.00;0.00;0.00;0.00;0.00;0.00;0.00;0.00;0.00;0.00;0.00;0.00;0.00  
  
Does the second line represent data on plantings by the same farm?  
 262. The Panel has noted the two CD-ROMs de livered by the US in the evening of 
23 December 2003. They are marked "US-111" an d "US-112" respectively, but the contents 
actually do not correspond to the indication. The Panel also takes note of the US letter dated 28 January 2004 and the CD-ROM delivered toge ther with it. For the record, please clarify 
the correct CD-ROMs and provide corresponding de scriptions of their contents with exhibit 
numbers.  
  
 263. The Panel has noted that the United Stat es' response to Question No. 214 refers to 
Exhibits US-117 and US-118. Are these the co rrect documents to which the United States 
intended to refer in that response?  If not, pl ease provide a copy of regulations regarding the WT/DS267/R/Add.3 
Page L-75 
 
 
marketing loan programme and loan deficiency  payments published at  58 Federal Register 
15755, dated 24 March 1993. 
  264. The Panel asks the United States to clarify certain aspects of Exhibit US-128:  
 (a) Is the Panel correct in understanding th at -- as Brazil asserts in footnotes 290 and 291 
of Brazil's 28 January 2004 comments on US responses to questions -- Exhibit US-128, all data are presented on a cohort-specific basis?   If so, please also present the information 
originally requested by the Panel in another chart containing programme  (as opposed to 
cohort-specific) activity by fiscal year.   
 
 (b) Does the US agree with the statement in paragraph 135 of Brazil's 28 January 2004 
comments on US responses to questions that the difference between the $1,148 billion in the 
chart at para. 165 of Brazil's 11 August answer s to questions and the $666 million amount in 
Exhibit US-128 ($1.75 billion) closely corres ponds to the total "Claims rescheduled" figure 
reported by the US in Exhibit US-128 (column F)?   
  (c) Does the US agree that from the formul a in column G (that is: (Column (D) minus 
(E) minus (F)), it follows that a rescheduled claim no longer constitutes an outstanding claim 
at the moment the terms of the re-scheduling ar e agreed and that a rescheduling is treated as 
100 per cent recovered, as Brazil states in f ootnote 292 of Brazil's 28 January 2004 comments 
on US responses to questions? 
  (d) Is the Panel correct in understanding that the amount of $888,984,792.04 in column F 
in Exhibit US-128 under "ALL" for 1992 re presents the total continuing amount of 
unrecovered claims for the 1992 cohort, and that the amount of 387,692,219.39 represents the 
total continuing amount of unrecovered claims for the 1993 cohort, etc?  Please indicate and 
substantiate how much principa l and/or interest has actually been paid/recovered/rescheduled 
annually  1992-2003 in respect of each of the am ounts shown in Columns D, E & F in the 
table.   
  265. In connection with the US response to  Question No. 225, please also provide amounts 
actually "written off" and "forgiven" annually for each post-1992 cohort, with annual details 
of country and amount (principal/interest). 
  266. What are the precise terms, conditions a nd duration of each rescheduling reflected in 
column F in Exhibit US-128? 
 
 267. Is the Panel correct in understanding th at "interest collected on reschedulings" in 
Column M in Exhibit US-128 refers not to amounts that have been actually collected by the CCC but rather to interest capitalized in conjunc tion with the rescheduling?  If so, what are 
the terms, conditions and duration of th e arrangements pertaining to these amounts? 
 
 268. Concerning Column N in Exhibit US-128, please elaborate upon "Interest earned 
from US Treasury on uninvested funds".  What is  the source and authority for these funds and 
for the interest thereon to be part of the CCC total revenues?  What are the terms, conditions 
and duration of the arrangements pertaining to these amounts? 
 
 269. The Panel notes the table submitted by th e US in its answer to Question No. 224 
(CCC Financing Account Payments of Interest  on Borrowings from Treasury and Interest 
Earned on Uninvested Funds).  Is the Panel co rrect in understanding that the figures in this 
table correspond to the "ALL" figures in Columns I and N of Exhibit US-128?   
 WT/DS267/R/Add.3 
Page L-76  
 
 270. With respect to Column I in Exhibit US-128,  ("Interest paid on borrowing from US 
Treasury") and Note 8, p. 25 of Exhibit US-129: 
   (i) please provide the total annual amounts (interest bearing and non-interest 
bearing) borrowed by the CCC from the US Treasury (annually since 1992), as well 
as the terms, conditions, interest rate (w here applicable) and duration of such 
borrowing.   Please provide details of an y other amount borrowed by the CCC from 
the US Treasury during this period that ma y not have formed part of the regular 
annual borrowings.  
 
  (ii) Please explain the nature of "CCC's  permanent indefinite borrowing authority 
from Treasury" referred to in Note 8, p. 25 of Exhibit US-129. 
   (iii) What determines the level of CCC export credit guarantee borrowing 
(interest-bearing and non-interest-bearing)?  Is the interest-free borrowing up to the 
amount of unreimbursed realized losses?   
   (iv) Why are repayments applied to non-interest bearing notes first, as indicated 
at Note 8, p. 25 of Exhibit US-129? 
    271. Note 8, p. 25 of Exhibit US-129 states that "In fiscal year 2003, CCC was fully 
reimbursed for its prior year net realized lo sses."  Please indicate the amounts of prior year 
net realized losses (annually, since 1992) fo r which the CCC has been fully reimbursed.  
 
 272. With respect to the US response to Question No. 226, is the Panel correct in 
understanding that the reflection of write-offs as part of the operating loss of the CCC which 
in turn was replenished through the annual appr opriations process ended with the entry into 
force of the FCRA in fiscal year 1992?  If not, what amounts have been replenished through this process annually since fiscal year 1992?     
 273. With respect to the US response to  Question No. 225, what criteria does the CCC 
apply to "independently determine" that a debt  is uncollectible?  For post-1992 cohorts, what 
are these uncollectible amounts (annually) and how, if at all, are such "uncollectible amounts" 
shown in Exhibit US-128?     
   274. The Panel notes the US statement in the US response to Question No. 81 that  "All 
rescheduled claims are currently performing " and that "all payments due up to this point 
under [rescheduling] agreements have been r eceived".  However, the Panel also notes 
Exhibit US-129 (in particular, Note 5 on p. 22)  and Brazil's reference thereto in Brazil's 
28 January comments on the US response to Question No. 222.   In this connection:  
   (a) How does the US respond to Brazil's statement in Brazil's 28 January comments 
that Exhibit US-129 confirms that rescheduli ng of export credit guarantee receivables cover 
both principal and interest, thereby confirming th at not all of the rescheduled debt performs 
and that additional interest charges were also rescheduled?  
  (b) In Note 5 on p. 22 of Exhibit US-129, what is the definition of "non-performing"?  
What is the meaning of "delinquent"?  What is the current principal balance and amount of 
interest of the three CCC export credit gua rantee programme "receivables"  in a non-
performing status (individually and together , for GSM 102, GSM 103 and SCGP))? What is 
the amount of interest on non-reporting "receivables"?   
 WT/DS267/R/Add.3 
Page L-77 
 
 
 (c) The Panel notes the US reference to th e "Paris Club" in US response to Question 
No. 225.  What is the P.L. 480 programme referred to in Note 5 on p. 22 of Exhibit US-129 (including the Paris Club debt reduction process a nd the HIPC Initiative) ?  To what extent is 
the P.L. 480 programme and Paris Club pro cess relevant to the export credit guarantee 
programmes at issue in this dispute?  Please  identify and give the amounts of all CCC export 
credit guarantee debt subject to the P.L. 480 debt reduction (or other similar) process since 
1992.   
  (d) Can the US explain the process referred to in the second column of Note 5 on p. 22  
("CCC is awaiting an apportionment from the O ffice of Management and Budget before the 
transaction can be completed.  Until such time , however, there is a 100% subsidy allowance 
established against the relevant debt as of Septem ber 30, 2003.")   Please provide details of all 
such "apportionments" relating to the three export credit guarantee programmes in fiscal years 1992-2003.  
 
 275. Please provide evidence (or cite releva nt portions of the record) that the premium 
rates for the export credit guarantee programmes are "reviewed annually" as stated in US 
28 January comments on response to Question No. 223 (see also US 22 December response to 
Question No. 107;  Brazil's 28 January 2004 co mments on responses to Question No. 223.). 
  The Panel wishes to pose the following additional question to Brazil: 
 
 276. The Panel notes the parties' respon ses and comments relating to Question No. 252 
concerning the time period within which any pr ohibited measure must be withdrawn within 
the meaning of Article 4.7 of the SCM Agreement .   Please supplement your original 
response, taking into account the particular nature of each alleged prohibited subsidy 
measure  (i.e. "Step 2" paym ents under Section 1207(a) of the 2002 FSRI Act, export credit 
guarantee programmes and the ETI Act) and the functioning of the US legal and regulatory 
system in respect of these measures. WT/DS267/R/Add.3 
Page L-78  
 
  
ANNEX L-1.23 
  
COMMUNICATION TO BRAZIL 
AND THE UNITED STATES 
 
16 February 2004 
  1. The Panel is in receipt of the letter from th e U.S. dated 11 February, the response from Brazil 
dated 13 February and another US  letter dated 16 February.   
 
2. On page 2 of the United States letter of 11 Fe bruary, with respect to item (b) of the Panel's 
supplementary request for information, the United States asks the Panel to specify which commodities 
are "covered commodities".  We would like to clar ify that "covered commodities" and "commodities 
covered", as used in the bullet points and sub-bulle ts, refer to wheat, corn, grain sorghum, barley, 
oats, upland cotton, rice, soybeans, "other oilseeds"  as defined in Section 1001(9) of the FSRI Act of 
2002, and peanuts, except that soybeans do not apply to PFC payments and "other oilseeds" and peanuts do not apply to PFC or MLA payments.  3. The Panel also confirms that the additiona l information sought for marketing year 2002 "with 
respect to all crops on cropland covered by the acr eage reports" refers to the reports filed under 
Section 1105(c) of the FSRI Act of 2002.  The re levant portions of the "above questions" are those 
that ask for planted acreage information for each Ca tegory of farms.  All crops other than "covered 
commodities" as defined in Section 1001(4) of the FSRI Act of 2002 and peanuts may be aggregated as "other crops".  
4. In relation to the third point the US raises in its letter dated 11 February, the Panel informs the 
parties as follows:  (a) Without prejudice to whether any further comme nts are necessary, we would consider the US 
request for another opportunity to comment if  Brazil submits any such comments on the US 
submission entitled "Comments of the United States of America on the Comments of Brazil 
to US data Submitted on 18 and 19 December 2003" (submitted 11 February). 
 (b) The US would be granted until Tuesday 3 March , at the latest, to submit all remaining data 
that was requested by the Panel in its communication dated 3 February. 
 
(c) The issuance of the descriptive part would be changed to Friday 5 March . 
 (d) The remainder of the Panel's schedul e remains unchanged for the time being. 
 5. The Panel notes that the data submitted by th e United States, as described in Exhibit US-145, 
does not include data on MLA and CCP payments.  The Panel asks the United States to address these 
payments and include this information in its res ponse to the supplementary request for information. 
 6. The Panel also notes that the US response to Panel Question No. 263 refers to Exhibit US-263.  Could the United States please confirm that this should refer to Exhibit US-146.  WT/DS267/R/Add.3 
Page L-79 
 
 
7. The Panel further notes Brazil's request for an opportunity to comment after the United States 
has submitted the data referred to in paragraph 4(b) above.  The Panel will consider this request after 
it has had the opportunity to review data submitted by the United States.   WT/DS267/R/Add.3 
Page L-80  
 
 
ANNEX L-1.24 
  
COMMUNICATION TO BRAZIL 
AND THE UNITED STATES 
 
20 February 2004 
 
 1. The Panel refers to its communication dated 16 February.  Item 4 (a) of this communication 
deals with the request made by the United States (i n its letter dated 11 February) that it be provided 
another opportunity to comment on a certain submissi on from Brazil.  The Panel has informed parties 
in the same 4 (a) that it would consider this requ est if Brazil submits any such comments.  The Panel 
has received on 18 February a submission entitled "Brazil's Comments on United States 11 February 
Comments on Brazil's 28 January 'Comments and Requests Regarding Data Provided by the 
United States on 18/19 December 2003 and the US Refusal to Provide Non-scrambled Data on 
20 January 2004'".  The Panel understands that this  submission corresponds to what the United States 
was requesting to be given another opportunity to comment on.  The Panel would now allow the 
United States to submit, if it so wishes, comments on this specific submission from Brazil by 
Wednesday 25 February .  The Panel informs parties that it doe s not see, at this time, the need to 
have further opportunities to comment on this submission (if any) from the United States.   2. The Panel also takes note of Brazil's ob servation in paragraph 33 of its 18 February 
"Comments on US 11 February 2004 Answers to Additional Questions from the Panel Following the 
Second Meeting of the Panel with the Parties"  that  "...the Panel did not respond to Brazil's request 
that it deny the United States' efforts to decide at  what pace it wishes to offe r responses to the Panel's 
questions".  The Panel also recalls the Unite d States' original statement in connection 
with Question 264(b) that it "expects to be able to provide an answer within the same time period as 
its response to the Panel's supplemental request for info rmation."  In this connection, we wish to draw 
the parties' attention to our statement in item 4(b)  of the 16 February communication, and to clarify 
that that statement also pertains to the Un ited States response to Question 264(b).  Thus, the 
United States has until 3 March , at the latest, to submit its response.  We further note that Brazil 
states in the same paragraph 33 that  it "reserves the right to comment" on the United States response 
to Question 264(b).  In line with what we men tioned in paragraph 7 of our communication dated 
16 February, we would decide whether it is appropriate to give Brazil the opportunity, after  we have 
had the opportunity to review the response from the United States.    WT/DS267/R/Add.3 
Page L-81 
 
 
ANNEX L-1.25 
  
COMMUNICATION TO BRAZIL 
AND THE UNITED STATES 
 
24 February 2004 
 
 
The Panel is in receipt of the letter from the United States dated 23 February 2004.  
After carefully considering the views of the Un ited States, we now change the date by which 
the United States is expected to submit its co mment from the date originally designated as 
25 February in our communication dated 20 February, to 3 March 2004 .  
All other statements in our communicati on dated 20 February remain unchanged. WT/DS267/R/Add.3 
Page L-82  
 
 
ANNEX L-1.26 
  
COMMUNICATION TO BRAZIL 
AND THE UNITED STATES 
 
4 March 2003 
 
 
The Panel is in receipt of the submissions fro m the United States dated 3 March.  The Panel 
reminds parties of our communications dated 16, 20 and 24 February 2004, especially in relation to 
our intention to consider whether or not to allow Brazil to comment on certain US submissions.  After 
carefully examining yesterday's submission from the United States, the Panel informs parties of the 
following amendment to the current timetable. 
1. Brazil is granted until 10 March 2004  to submit comments, if any, on (a) the data supplied by 
the United States, dated 3 March, in the form of a CD-ROM (i.e. 8 data files therein) and (b) the 
submission entitled "Answers of the United St ates of America to Questions 264(b) Dated 
3 February 2004, from the Panel to the Parties following the Second Panel Meeting". The Panel does 
not see the need to grant Brazil the opportunity to  comment on any other submission from the United 
States.   2. The United States is granted until 15 March  2004 to submit comments, if any, on the 
submission from Brazil to be received by 10 March 2004. 
 3.  The descriptive part will be issued on 16 March 2004 .  
 4. Comments on the descriptive part is to be received by 30 March 2004 .  
 
5. The rest of the timetable remains unchanged for now.  WT/DS267/R/Add.3 
Page L-83 
 
 
ANNEX L-1.27 
 
 
COMMUNICATION TO BRAZIL 
AND THE UNITED STATES 
 
7 April 2004 
 
The Panel informs the parties of the following cha nge in the timetable for this dispute.  As 
indicated, the Panel now intends to issue the interim report to the parties on Monday 26 April 2004.  
 
Issuance of the interim report, including the findings and 
conclusions, to the parties:  26 April 2004 
Deadline for parties to request review of part(s) of report:  10 May 2004 
Interim review meeting with the parties, if requested. If interim 
review meeting not requested, the deadline for comments on 
each others' comment.  3 June 2004 
(if a review meeting is to 
be held, 4 June  as well 
as 3 June, as necessary.)  
Issuance of final report to the parties:  18 June 2004  Circulation of the final report to Members:  [after translation] 
 
 
 
 WT/DS267/R/Add.3 
Page L-84  
 
ANNEX L-2.1 
  
COMMUNICATION TO  THIRD PARTIES 
 
28 May 2003 
 
  Your delegation has reserved its rights to  participate as a third party in the Panel United States 
-  Subsidies on Upland Cotton (DS267) - Complaint by Brazil - established by the DSB on 
18 March 2003.  The Panel has now started its work. 
  Attached you will find the timetable and working procedures adopted by the Panel for this dispute in accordance with Article 12.1 of the Understanding on Rules and Procedures Governing the 
Settlement of Disputes  (the " DSU ").   
 
 As indicated in the attached timetable, prior to the submission by the parties of their first 
written submissions in these proceedings, the Panel has requested the parties to address, in their initial 
briefs to the Panel (to be submitted on 5 June 2003
), the following:  
 
• whether Article 13 of the Agreement on Agriculture  precludes the Panel from considering 
Brazil's claims under the Agreement on Subsidies and Countervailing Measures  in these 
proceedings in the absence of a prior conclusi on by the Panel that certain conditions of 
Article 13 remain unfulfilled.  In particular, the Panel invites the parties to explain their interpretation of the words "exempt from actions" as used in Article 13 of the Agreement on 
Agriculture , as well as bringing to the Panel's attenti on any other relevant provisions of the 
covered agreements and any othe r relevant considerations whic h the parties consider should 
guide the Panel's consideration of this issue.  For greater clarity, the Panel invites the parties, 
during this initial stage of the proceedings, to fo cus on matters of legal interpretation, rather 
than upon the submission of any factual ev idence that might be associated with the 
substantive elements of Article 13.  
  As also indicated in the attached timetable,  the Panel will invite the parties to submit any 
written comments on each other's comment s on this issue (i.e. on 13 June 2003
).  The Panel intends to 
rule on these issues on 20 June 2003 , prior to the parties' submission of their first written submissions.  
  We have invited the parties to serve also on  the third parties their initial briefs and any 
responding comments.  The Panel also invites third parties to submit any written comments they 
might have concerning the initial phase of these proceedings.  The deadline for any initial third 
party comments on the specific issue identified above is 10 June 2003
.  
 
 Moreover, as also indicated in the attached timetable, the Panel invites your delegation to 
present its views at a meeting with the parties to the dispute and other third part ies, which is scheduled 
for 24 July 2003 .  The exact time and venue will be communicated to you in due time. 
 WT/DS267/R/Add.3 
Page L-85 
 
 
 The Panel would appreciate it if your delega tion could provide the Panel with your written 
submission by 5.30 p.m. on 15 July 2003 .  If you so wish, this written statement may take the place of 
an oral presentation to the Panel.  The Panel woul d appreciate the submission being kept as short as 
possible. I would appreciate it if you would advise the Panel before 1 July 2003  through me as 
Secretary to the Panel (telephone 022/739 6419) whether your delegation w ill be represented at the 
meeting and whether your delega tion will require interpretation services into and out of English. 
  
[Attachment omitted] WT/DS267/R/Add.3 
Page L-86  
 
ANNEX L-2.2 
  
COMMUNICATION TO  THIRD PARTIES 
 
25 July 2003 
 
  Please find attached a communication from the Panel on the following issues:  
1.  The Panel's view on the preliminar y ruling requested by the United States. 
 2.  Panel's questions to third parties.   The Panel's questions are intended to facilitate the work of the Panel, and do not in any way 
prejudge the Panel's findings on the matter before it.  Nor does the fact that th e Panel has placed these 
questions under certain headings pr ejudge the Panel's findings on the matter before it. Each third party 
is free to respond to or comment on questions posed to the other third parties.      Please be reminded that  you  are requested to submit answers by the close of business of 
4 August 2003.  Subsequently, third parties can submit comments to other's responses by the close of 
business 22 August. 
    
 
  
[1
st attachment omitted] WT/DS267/R/Add.3 
Page L-87 
 
 
 
Questions from the Panel to the third parties – 
First session of the first substantive Panel meeting 
 
 
ARTICLE 13 OF THE AGREEMENT ON AGRICULTURE 
 
1. Australia has argued that Article 13 of the Agreement on Agriculture  is an affirmative 
defence.  How do you reconcile this with your  view that the conditions in Article 13 are a 
"prerequisite" to the availability of a right or privilege?  Australia  Would other third parties have any 
comments on Australia's assertion? 3RD parties, in particular Argentina, Benin, China, 
Chinese Taipei  
 
ARTICLE 13(B) OF THE AGREEMENT ON AGRICULTURE :  DOMESTIC SUPPORT MEASURES 
 
2. Please explain the difference, if any, between  the meaning of "defined" and the meaning of 
"fixed" in the phrase "a defined and fixed base pe riod" in paragraph 6(a) of Annex 2 of the Agreement 
on Agriculture  . 3rd parties, in particular Australia, Argentina, Canada, EC, NZ  
 
3. Please explain the meaning of "a" in "a define d and fixed base period" in paragraph 6(a) of 
Annex 2 of the Agreement on Agriculture , the meaning of "the" in "the base period" in 
paragraphs 6(b), (c) and (d), and the differe nce between these and the phrase "based on the years 
1986-88" in Annex 3. 3rd parties, in particular Australia, Argentina, Canada, EC, NZ  
 4. How often can a Member define and fix a base period in accordance with paragraph 6 of 
Annex 2 of the Agreement on Agriculture ? 3
rd parties, in particular Au stralia, Argentina, Canada, 
China, EC, NZ  
 
5. Do you agree that a payment penalty based on crops produced is "related to type of 
production"?  EC 
 
6. Please explain the meaning of the word "criteria"  in Article 6.1 and 7.1. What effect, if any, 
does the use of the word "Accordingly" in paragraph 1 of Annex 2 of the Agreement on Agriculture  
have on the meaning of the preceding sentence?  3rd parties, in particular Australia, Argentina, 
Canada, EC, NZ  
 
7. Please explain the meaning of the words "the fundamental requirement" as used in paragraph 1 of Annex 2 of the Agreement on Agriculture .  3
rd parties, in particular Australia, 
Argentina, Canada, EC, NZ  
 
8. In your oral statement, you emphasize the u se of the word "criteria" in other parts of the 
Agreement on Agriculture , as distinct from the reference to "fundamental requirement" in the first 
sentence of paragraph 1 of Annex 2.   Is it the case that sub-paragraphs  (a) and (b) of paragraph 1 of 
Annex 2 are also "criteria"?  EC 
 9. If the first sentence of paragraph 1 of Annex 2 is a stand-alone obligation, does this allow 
effects-based claims of non-compliance with Annex 2?  If so, how does this affect the purpose of 
Article 13(b)? 3
rd parties , in particular Australia, Argentina, Canada, EC, NZ  
 10. If the first sentence of paragraph 1 of Annex 2 is not a stand-alone obligation, then must new, 
non- or minimally trade-distorting measures that do not conform to the criteria listed in Annex 2 be 
classified as non-Green Box?  3
rd parties, in particular  Australia, Argentina, Canada, EC, NZ  
 WT/DS267/R/Add.3 
Page L-88  
 
11. If the first sentence of paragraph 1 of Anne x 2 expresses a general principle which informs 
the interpretation of the criteria in Annex 2, pl ease explain how this affects the assessment of the 
direct payments programme's complian ce with paragraph 6 of Annex 2.  3
rd parties, in particular, 
Australia, Argentina, Canada, EC, NZ  
 12. Where does Article 13(b) require a year-on-year comparison? 3
RD parties, in particular 
Australia, Argentina, Canada, China, EC, NZ  
 
13. Does a failure by a Member to comply in a given year with either the chapeau of 
Article 13(b) or the proviso in subpa ragraph (ii) of Article 13(b) impact  its entitlement to benefit in an 
earlier or a later year from the exemption from action provided by Article 13(b)? 3RD parties, in 
particular Australia, Argentina, Canada, China, EC, NZ  
 
14. Does a failure of a Member to comply with Article 13(b) in respect of a specific commodity  
impact its entitlement to benefit in respect of other agricultural products from the exemption from 
action provided by Article 13(b)? 3RD parties, in particular Australia, Argentina, Canada, China, 
EC, NZ  
 
15. Is there any basis on which counter-cyclical pa yments could be considered product-specific?  
3RD parties,  in particular Australia, Argentina, Canada, China, EC, NZ  
 16. If the word "specific" were deleted from Artic le 13(b)(ii), would this change the meaning of 
the subparagraph?  3
RD parties, in particular Australia, Argentina, Benin Canada, China, EC, NZ  
 17. What is the relevance, if any, of the concept of "specificity" in Article 2 of the SCM 
Agreement  and references to "a product" or "subsid ized product" in certain provisions of the SCM 
Agreement  to the meaning of "support to a specific commodity" in Article 13(b)(ii) Agreement on 
Agriculture ? 3
RD parties, in particular Australia, Argentina, Canada, China, EC, NZ  
 18. Benin's oral statement considers the phrase "support to a specific commodity" in Article 13(b)(ii) of the Agreement on Agriculture .  How does Benin believe that phrase is best 
interpreted.  Please substantiate your response, commenting on other submissions by parties and third 
parties as you believe appropriate.  Benin  
 19. Where does Article 13(b)(ii) require a year-on-year comparison?  3
rd parties, in particular 
Australia, Argentina, Canada, EC, NZ  
 20. Does Article 13(b)(ii) require a comparison of support granted with support decided?  How 
could such a comparison be made?  21. Please comment on Brazil's assertion that the terms "grant" and "decided" in Article 13(b)(ii) have broadly the same meaning. If so, why did the drafters not use the same term?  3
rd parties, in 
particular, Australia, Argentina, Canada, China, EC, NZ  
 22. What is the meaning of "support" in Agreement on Agriculture  13(b)(ii) ? Why would it be 
used differently from Annex 3, where it refers to total outlays? 3
rd parties, in particular, Australia, 
Argentina, Canada, China, EC, NZ  
 23. Should support be compared under Article 13(b )(ii) in terms of unit of production or total 
volume of support or both? 3
rd parties, in particular, Australia, Argentina, Canada, China, EC, 
NZ 
 WT/DS267/R/Add.3 
Page L-89 
 
 
24. Please provide any written drafting history wh ich could shed light on why the proviso was 
added to what is now Article 13(b)(ii) of the Agreement on Agriculture  and, in particular, why the 
words "grant" and "decided" were used.  EC 
 25. Please comment on an interpretation of the word s "decided during" in Article 13(b)(ii) that 
would read them as synonymous with the words "authorized during".  3
rd parties, in particular 
Australia, Argentina, Canada, China, EC, NZ  
 
26. Under Article 13(b)(ii), a comparison is require d between support at different times.  One of 
the issues which is contested between the parties is  whether the only later period that the Panel can 
consider is the present one (i.e. the period underway  at the time of the request for establishment of the 
Panel).  This argument is based on the present tense of  the words "do not grant" in the English text.  
The Panel asks whether there is any difference in th e verb tense as used in the Spanish-language text, 
or any other difference which might aid the Panel in interpreting these words?  Argentina, EC, 
Paraguay, Venezuela  
 
27. If the 1992 "decision" led to or was the funding source for the money provided in 1992 and later years, is it the full amount of all that fundi ng that constitutes the "support" decided in 1992?  If 
the answer to this question is that it is the fu ll amount of all the support provided pursuant to the 
"decision" that must be taken into account, must th is be compared with the total amount of support 
that will or might flow from the decision made in the more recent period for the purposes of the 
comparison required under Article 13(b)(ii)?  If a Me mber did not make a "decision" (however that 
may be interpreted) in 1992 about "support", is it the case that the Member has a zero base for the 
purposes of the comparison required under Article 13(b)(ii)?  EC 
 28. In paragraph 13 of Australia's oral statement,  you state that a "question" is: "could conditions 
of price competition for the purposes of a non-violation or impairment claim be assessed solely on the 
basis of budgetary outlay figures, as argued by Brazil, or on the basis of a rate of payment, as argued by the United States?  In Australia's view, both factors put forward by Brazil and the United States would properly form a part of that assessment, but not the whole."  Could you please clarify this statement (indicating other elements which would co mplete the "whole" and e xplain its relevance for 
the purposes of our consideration of Article 13 of the Agreement on Agriculture ? Australia, EC  
 
EXPORT CREDIT GUARA NTEE PROGRAMMES 
 
29. (a) Is an export credit guarantee a financial c ontribution in the form of a "potential direct 
transfer of funds or liabilities (e.g. lo an guarantee)" within the meaning of 
Article 1.1(a)(1)(i) of the SCM Agreement ? Why or why not? 3rd parties, in 
particular, Argentina, Canada, EC, NZ  
 
 (b) How, if at all, would this be relevant to the claims of Brazil?  3rd parties, in 
particular, Argentina, Canada, EC, NZ  
 
30. The Panel could arguably take the view that Articles 1 and 3 of the SCM Agreement  were 
relevant in assessing the WTO-consistency of Unit ed States export credit guarantees.  The Panel 
would therefore appreciate third party views on this situation, including with respect to the viability of an a contrario  interpretation of item (j) of the Illustrativ e List (as addressed in paragraphs 180-183 of 
the United States' first written submission).  3
rd parties, in particular, Argentina, Canada, EC, NZ  
 31. If the Panel decides to refer to provisions of the SCM Agreement  for contextual guidance in 
the interpretation of the terms in Article 10 Agreement on Agriculture , should the Panel refer to item 
(j) or Articles 1 and 3 of the SCM Agreement  or both? .  3
rd parties, in particular, Argentina, 
Canada, EC, NZ  
 WT/DS267/R/Add.3 
Page L-90  
 
32. The Panel's attention has been drawn to Article 14(c) of the SCM Agreement  (see third party 
submission of Canada) and to the panel report in DS 222 Canada- Export Credits and Loan 
Guarantees .  How and to what extent are Article 14(c) of the SCM Agreement , and the cited panel 
report, relevant to the issue of whether or not the United States export credit guarantee programmes confer a "benefit"?  What would the appropriate market benchmark be to use for any comparison? 
Please cite any other relevant material. .  3
rd parties, in particular, Argentina,  Canada, EC, NZ  
 33. What is the relevance (if any) of Brazil's statement that :  "...export credit guarantees for 
exports of agricultural exports [sic] are not availa ble on the marketplace by commercial lenders."  .  
3
rd parties, in particular, Argentina, Canada, EC, NZ  
 
34. Comment on the United States' view of the m eaning of "long term operating costs and losses" 
in item (j) of the Illustrative List of Export Subsidies in Annex I of the SCM Agreement  as meaning 
"claims paid" under the export credit guarantee progr ammes.  Does the Unite d States' interpretation 
give meaning to both "costs" and "losses"?  Do claims paid represent "losses"?   3rd parties, in 
particular, Argentina, Canada, EC, NZ  
 
35. Did the drafters of the Agreement on Agriculture  include export credit guarantees in 
Article 9.1 of the Agreement on Agriculture ? Why or why not?  3rd parties, in particular, Argentina, 
Canada, EC, NZ  
 36. Please explain any possible significance the following statements may have in respect of 
Brazil's claims about GSM102 and 103 (7 CFR 1493.10(a)(2), Exhibit BRA-38)  3
rd parties, in 
particular, Argentina, Canada, EC, NZ  
 
 (a) "The programmes operate in cases where credit is necessary to increase or maintain 
US exports to a foreign market and wh ere US financial institutions would be 
unwilling to provide financing without CCC's guarantee.  (7 CFR 1493.10(a)(2) 
Exhibit BRA-38) 
  (b) "The programmes are operated in a manne r intended not to interfere with markets for 
cash sales.  The programmes are targeted toward those countries where the guarantee 
is necessary to secure financing of the e xports but which have sufficient financial 
strength so that foreign exchange will be av ailable for scheduled payments."  (7 CFR 
1493.10(a)(2) Exhibit BRA-38) 
  (c) "In providing this credit guarantee  facility,  CCC seeks to expand market 
opportunities for US agricultural exporters and assist long-term market development 
for US agricultural commodities." (7 CFR 1493.10(a)(2) Exhibit BRA-38) 
 37. The United States seems to argue that, at present, by virtue of Article 10.2 of the Agreement 
on Agriculture , there are no disciplines on agricultural export credit guarantees under the Agreement 
on Agriculture  (or the SCM Agreement ).  
 
 (a) Comment on the following proposition:  a WTO Member may therefore extend 
agricultural export credit guarantees wit hout charging a premium, and for an 
indefinite period, in addition to any ot her terms and conditions it may wish?  How 
would this reconcile with the title of Article 10 of the Agreement on Agriculture  
("Prevention of Circumvention on Export Subsidy Commitments"), and with other 
commitments contained in the Agreement on Agriculture ?  Please cite any relevant 
material, including any past WTO dispute settlement cases. 3
rd parties, in 
particular, Argentina, Canada, EC, NZ  
 WT/DS267/R/Add.3 
Page L-91 
 
 
 (b) If, as the United States argues, ther e are no disciplines on export credit guarantees in 
the Agreement on Agriculture , how could export credit guarantees "conform fully to 
the provisions of Part V" of the Agreement on Agriculture  within the meaning of 
Article 13 (how can you assess "conformity" or non-conformity with non- existent 
disciplines)? 3rd parties, in particular, Argentina, Canada, EC, NZ  
 
STEP 2 PAYMENTS 
 
38. Please comment on the statement in note 119 of  the United States' first written submission 
that "...to the extent a consumer that had intended to  export instead opens the bale, then that consumer 
could still obtain the Step 2 payment upon submission of the requisite documentation".   The Panel 
notes that Step 2 payments all involve upland cotton produced in the United States.  What are the two distinct factual situations that Step 2 paym ents involve?  Other than the panel report in Canada-Dairy  
and the findings of the Appellate Body in US-FSC  (21.5)
1, do any other dispute settlement reports 
offer guidance on this issue?  For example, how, if at all is the Appellate Body's report in Canada-
Aircraft  relevant here?2 .  3rd parties, in particular, Australia, Argentina, NZ, Paraguay  
 39. Please comment on the United States asserti ons at paragraph 129 of its first written 
submission, that "[t]he programme is indifferent to whether recipients of the benefit of this 
programme are exporters or parties that open ba les for the processing of manufacturing raw cotton 
into cotton products in the United States." .  3
rd parties, in particular, Australia, Argentina,  NZ, 
Paraguay  
 
40. With respect to paragraph 32 of the oral stat ement of the EC, are subsidies contingent on the 
use of domestic goods consistent with the AoA?  Does the phrase "provide support in favour of 
domestic producers" refer to, and/or permit such subsid ies? What is the meaning and relevance of this 
(if any) to Brazil's claims under Article 3 of the SCM Agreement  and Article III:4 of the GATT 1994..  
3rd parties, in particular, Australia, Argentina, EC, NZ, Paraguay  
 
                                                      
1 "We recall that the ETI measure gr ants a tax exemption in two differ ent sets of circumstances:  (a)  
where property is produced  within  the United States and held for use  outside  the United States; and (b)  where 
property is produced  outside  the United States and held for use outside  the United States.  Our conclusion that 
the ETI measure grants subsidies that ar e export contingent in the first set of  circumstances is not affected by the 
fact that the subsidy can also be obta ined in the second set of circumstances .  The fact that the subsidies granted 
in the second set of circumstances  might  not be export contingent does not dissolve the export contingency 
arising in the first set of circumstances. 1  Conversely, the export contingency arising in these circumstances has 
no bearing on whether there  is an export contingent subsidy in the second set of circumstances.  Where a United States taxpayer is simultaneously producing property  within and outside the Unit ed States, for direct use 
outside the United States, subsidies may be granted under the ETI measure in respect of both sets of property.  
The subsidy granted with respect to th e property produced within the United St ates, and exported from there, is 
export contingent within the mean ing of Article 3.1(a) of the  SCM Agreement , irrespective of whether the 
subsidy given in respect of property produced outside the United States is also export contingent." 
3. 2 There, the Appellate Body stated that,  
"the fact that some of TPC's contributions, in some industry sectors, are  not 
contingent upon export performance, does not necessarily mean that the 
same is true for all of TPC's contributions.  It is enough to show that one or some of TPC's contributions do cons titute subsidies "contingent ... in 
fact … upon export performance".
2  
 WT/DS267/R/Add.3 
Page L-92  
 
ETI ACT 
 
41. Concerning its claims on the ETI Act, Brazil relies on the US – FSC  case.  However, it 
appears that the United States did not raise the issu e of the Peace Clause in that case, nor did the US 
appear to invoke Article 6 of the Agreement on Agriculture .  If the Panel's understanding is correct, 
how, if at all, are these differences relevant here? Argentina, China, EC, NZ  
 42. How do you view the reference in paragraph 43 of the EC's third party oral statement with 
respect to the relevance of Article 17.14 of the DSU,  and, in particular, the phrase "a final resolution 
to that dispute" (emphasis added)?   Please explain the use, and relevance (if any) of the term 
"disputes" in Articles 9.3 and 12 a nd Appendix 3 of the DSU, and pl ease cite any other provisions you 
consider relevant.  Argentina, China, EC, NZ   
 WT/DS267/R/Add.3 
Page L-93 
 
 
 
ANNEX L-2.3 
  
COMMUNICATION TO  THIRD PARTIES 
 
30 July 2003 
 
  Taking into account a 29 July 2003 communication received from the United States, and 
Brazil's 30 July response, the Panel has decided to extend the deadline for the submission of the 
parties' and third parties' responses to  questions from Monday 4 August to Monday 11 August 
(17h30  (Geneva time)). 
  The Panel has also decided upon the follow ing additional changes to its schedule:  
 
 Panel's views on certain issues:       5 September 2003       Further submission of Brazil:          9 September 2003       Further submission of the US:         23 September 2003       Further submission of the third parties (as necessary):       29 September 2003       
 For the time being, all other dates remain unchanged.  This includes the deadline for the 
submission of the parties' and third parties' comment s on responses.  It also includes the dates for the 
resumption of the first substantive meeting and the third party session (as necessary) and the second substantive meeting (i.e. 7-9 October). WT/DS267/R/Add.3 
Page L-94  
 
 
ANNEX L-2.4 
  
COMMUNICATION TO  THIRD PARTIES 
 
13 October 2003 
 
  Please find attached the Panel's questions to third parties following the resumed first session 
of the first substantive Panel meeting.   
  The Panel's questions are intended to facilitate the work of the Panel, and do not in any way 
prejudge the Panel's findings on the matter before it.  Nor does the fact that th e Panel has placed these 
questions under certain headings prejudge the Panel' s findings on the matter before it.  Each third 
party is free to respond to or comment on questions posed to the other third parties.   
   You are requested to submit answers by close of business on 27 October 2003 .  All 
provisions of the existing working procedures, incl uding the time specified in paragraph 17(b) of the 
Panel's existing working procedures for service of s ubmissions by third parties, are confirmed.  WT/DS267/R/Add.3 
Page L-95 
 
 
Questions from the Panel to the third parties – 
resumed first session of the first substantive Panel meeting 
  
A. QUESTIONS TO INDIVIDUAL THIRD PARTIES 
 43. Please elaborate, citing figures, on your statement that polyester fibre prices actually follow cotton prices.  Argentina  
44. Please explain how Ar ticles 5 and 6 of the SCM Agreement  and Article XVI of the GATT 
1994 would permit or require the Panel to take account of any effects of the subsidies in question on 
the interests of Members other than the complaining party.   Benin and Chad  
 45. In relation to the term "same market" in Article 6.3(c) of the SCM Agreement , the EC states in 
paragraph 10 of its oral statement that a "world market" cannot exist if there are significant trade 
barriers between Members.  On the other hand, the Pa nel notes that in relation to cotton, the EC takes 
the position in paragraph 14 of its further submission that the term "same market" in Article 6.3(c) 
should be read to include the domestic market of the subsidising Member. In light of the fact that 
many domestic cotton markets, possibly including that  of China, have significant trade barriers, how 
can the EC reconcile these two positions?   EC  
 
46. Should the Panel prefer a concept of allocation of  the benefit of subsidies to later years, to a 
concept of fully expensing subsidies to th e year in which the benefit was provided? EC 
 47. In the EC further submission, it is said that  significantly different conditions of competition in 
regional markets may prevent the Panel from arriving at  the conclusion that there is a world market.  
Is the payment of a subsidy a “condition of compe tition” and, if so, how should that impact upon the 
Panel’s analysis?  EC 
 48. In the further submission of India, it is stated that “there is “no obligation under the SCM 
Agreement  to demonstrate serious prejudice separately after establishing that one of the effects of a 
subsidy listed under Article 6.3 applies, as the effect s listed in Article 6.3 them selves equate to serious 
prejudice”. How does this view relate to Article 6.3(d), which appears to contain no element of 
degree?  India  WT/DS267/R/Add.3 
Page L-96  
 
B. QUESTIONS TO ALL THIRD PARTIES 
 
49. What is the meaning and effect of th e introductory phrase of Article 3 of the SCM Agreement  
("Except as provided in the Agreement on Agriculture ...")?  All third parties  
 
50. According to its revised timetable, the Panel w ill issue its report to the parties after the end of 
the 2003 calendar year.  Does this have any impact on “exempt[ion] from actions” under Article 13(b)(ii) and 13(c)(ii) of the Agreement on Agriculture ?  All third parties   
 
51. How should the concept of specificity – and, in particular, the concept of specificity to "an 
enterprise or industry or group of enterprises or industries" -- in Article 2 of the SCM Agreement  
apply to subsidies in respect of agricultural commodities? Please answer the following questions, 
citing the principles in Article 2 of the SCM Agreement :   All third parties  
  (a) is a subsidy in respect of all agricultural, but not other, products specific? 
 
 (b) is a subsidy in respect of all agricultu ral crops (i.e. but not to other agricultural 
commodities, such as livestock) specific? 
  (c) is a subsidy in respect of certain identified agricultural products specific? 
 
 (d) is a subsidy in respect of upland cotton, but not other products, specific? 
  (e) is a subsidy in respect of a certain pr oportion of the value of total US commodities (or 
total US agricultural commodities) specific? 
 
 (f) is a subsidy in respect of a certain proportion of total US farmland specific?  52. The Panel notes that different remedies are available in respect of prohibited and actionable subsidies under Article 4.7 and 7.8 of the SCM Agreement .  If the Panel were to conclude that a 
subsidy was prohibited and were to make a recommendation under Article 4.7 of the SCM Agreement  
to withdraw the subsidy without delay, can the Panel: 
  (a) also conclude that the same subsidy had resulted in adverse effects to the interests of 
another Member?  If so, what would be the va lue of such a conclusion in terms of the 
settlement of the matter before the Panel?   All third parties 
 
 (b) take into account the effects of the in teraction of those prohibited subsidies with 
other, allegedly, actionable subsidies?  If so, how is this relevant to the issue of 
causation under Article 5 of the SCM Agreement ?  All third parties  
 53. Would a finding of serious prejudice under Article 5(c) of the SCM Agreement  be 
determinative for a finding under Article XVI:1 of the GATT 1994?  Why or why not?  What, if any, 
is the role of footnote 13 of the SCM Agreement  in this context?  All third parties  
 54. Are US cotton producers able to cover the fi xed and variable costs without subsidies? Please 
provide substantiating evidence.  Of what relevan ce is this, if any, to Brazil's actionable subsidy 
claims ?  All third parties  
 55. In light of the fact that certain third parties have provided submissions about the price effect of claimed US subsidies, which Me mber or Members is, or are, the “other party” under Article 6.3(c) 
(“another Member ”) for the purposes of these proceedings?  All third parties  WT/DS267/R/Add.3 
Page L-97 
 
 
 56. Please respond to the following questions c oncerning the relationship between Article 
XVI:3 of the GATT 1994, the disciplines on export subsidies and domestic support in the Agreement 
on Agriculture  and the disciplines on prohibited export subsidies and actionable subsidies in 
Articles 3, 5(c) and 6.3(d) of the SCM Agreement .    All third parties  
 
 (a) Are agricultural domestic support progra mmes challengeable under Article XVI:3 of 
the GATT 1994?  How, if at all, is the title of  Section B of Article XVI ("Additional provisions on export subsidies " (emphasis added)) relevant?  How, if at all, are 
Articles 13 and 21.1, or any other provisions, of the Agreement on Agriculture, 
relevant?  
  (b) Are the requirements of Article XVI:3 of the GATT 1994 reflected in, developed by 
or subsumed by the requirements in Article 6.3(d) of the SCM Agreement , or in any 
other provisions of the covered agreements ?  Of what relevance, if any, is the 
Appellate Body Report in US-FSC , para. 117
1 here? 
  (c) Of what relevance, if any, is the fact th at the definition of "subsidy" in Article 1 of the 
SCM Agreement  and the prohibition on subsidies contingent upon export in 
                                                     
 
 1 WT/DS108/AB/R, para 117:  
"… the provisions of the SCM Agreement  do not provide explicit assistance 
as to the relationship between the export subsidy provisions of the 
 SCM Agreement  and Article XVI:4 of the GATT 1994. In the absence of 
any such specific textual guidance, we must determine the relationship 
between Articles 1.1(a)(1) and 3.1(a) of the  SCM Agreement  and 
Article XVI:4 of the GATT 1994 on the basis of the texts of the relevant 
provisions as a whole.  It is clear  from even a cursory examination of 
Article XVI:4 of the GATT 1994 that it differs very substantially from the subsidy provisions of the SCM Agreement , and, in particular, from the 
export subsidy provisions of both the SCM Agreement  and the Agreement on 
Agriculture .  First of all, the  SCM Agreement  contains an express definition 
of the term "subsidy" which is not contained in Article XVI:4.  In fact, as we 
have observed previously, the  SCM Agreement  contains a broad package of 
new export subsidy disciplines that "go well beyond merely applying and interpreting Articles VI, XVI and XXIII of the GATT 1947".  Next, 
Article XVI:4 prohibits export subsidies only when they result in the export 
sale of a product at a price lower than  the "comparable price charged for the 
like product to buyers in the domes tic market."  In contrast, the 
 SCM Agreement  establishes a much broader prohibition against any subsidy 
which is "contingent upon export performance".  To say the least, the rule contained in Article 3.1(a) of the  SCM Agreement  that all subsidies which 
are "contingent upon export performance" are prohibited is significantly 
different from a rule that prohibits only those subsidies which result in a lower price for the exporte d product than the comp arable price for that 
product when sold in the domestic market.  Thus, whether or not a measure 
is an export subsidy under Article XVI:4 of the GATT 1947 provides no 
guidance in determining whether that measure is a prohibited export subsidy 
under Article 3.1(a) of the  SCM Agreement .  Also, and significantly, 
Article XVI:4 of the GATT 1994 does not apply to "primary products", 
which include agricultural products.  Unquestionably, the explicit export 
subsidy disciplines, relating to agricultural products, contained in Articles 3, 8, 9 and 10 of the Agreement on Agriculture  must clearly take precedence 
over the exemption  of primary products from export subsidy disciplines in 
Article XVI:4 of the GATT 1994." WT/DS267/R/Add.3 
Page L-98  
 
Article 3.1(a) were introduced in the Uruguay Round, but did not exist at the time that 
the GATT 1947 was negotiated?