. /.RESTRICTEDWORLD TRADE
ORGANIZATIONWT/DSB/M/93
15 January 2001
(01-0184)
Dispute Settlement Body
28 November 2000
MINUTES OF THE MEETING
Held in the Centre William Rappard
on 28 November 2000
Acting Chairman:  Mr. Kåre Bryn (Norway)
1. United States – Tax treatment for "Foreign Sales Corporations"
(a) Recourse by the European Communities to Article 4.10 of the SCM Agreement and
Article 22.2 of the DSU (WT/DS108/13)
1. The Chairman drew attention to the communication from the European Communities
contained in document WT/DS108/13.
2. The representative of the European Communities said that on 17 November 2000 the EC had
requested the DSB's authorization to impose countermeasures and to suspend concessions against the
United States in the FSC dispute for an amount of  US$4043 million.  This was equivalent to the
amount of the illegal subsidy being granted by the United States under the FSC scheme, which the ECbelieved would be appropriate to induce compliance.  The EC had also presented an indicative list of
products on the basis of which it would select the final products to be subject to sanctions.  In a letter
to the DSB Chairman, dated 27 November 2000, the United States had requested that the matter be
referred to arbitration.  On 17 November 2000, the EC had also requested consultations with the
United States under Article 21.5 of the DSU concerning the FSC Replacement Act.  These
consultations would take place in the course of the week.  In accordance with the agreed procedures
for the follow-up of the FSC dispute conclu ded by the EC and the United States on
29 September 2000, the parties would request the arbitrators, at the first organizational meeting, to
suspend their work until the Article 21.5 compliance panel procedure was completed.
3. The representative of the United States said that, by letter dated 27 November 2000, her
country had informed the DSB that, pursuant to Article 4.11 of the SCM Agreement and Article 22.6
of the DSU, it objected to the appropriateness of the countermeasures and the level of suspension ofconcessions proposed by the EC in document WT /DS108/13.  Under the terms of the DSU and
Article 4.11 of the SCM Agreement, the filing of such an objection automatically resulted in the
matter being referred to arbitration, and no further DSB action was required.  Article 22.6 of the DSU
did not refer to any decision by the DSB.  Cons equently, the matter was already being referred to
arbitration.  Nevertheless, the United States had no objections if the DSB wished to take note of thatfact and confirmed that it might not consider the EC's request for authorization, which was the agenda
item of the present meeting, since the matter was being referred to arbitration.  In accordance with the
agreement reached with the EC, and notified to th e DSB in WT/DS108/12, the United States and the
EC would be requesting the arbitrator, at the earliest possible moment, to suspend its work pending
the outcome of the Article 21.5 challenge to the FSC replacement legislation.  The United States wasconfident that should the arbitrators ever have to consider the matter, they would find that the US
objections to the EC's proposed actions were well-founded.WT/DSB/M/93
Page 2
4. The representative of the European Communities said that, as stated by the United States, a
referral to arbitration was mandatory but there was a need to stick to precedents, and it was up to the
DSB to note and agree that the matter be referred to arbitration by the original panel as required by
Article 22.6 of the DSU.
5. The DSB took note of the statements and it was agreed  that the matter raised by the United
States in document WT/DS108/15 is referred to ar bitration as required by Article 22.6 of the DSU.
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