WORLD TRADE  
ORGANIZATION   
 WT/DS108/27  
10 November 2004  
 (04-4761 ) 
   Original:   English  
 
 
 
 
 
UNITED STATES - TAX TREATMENT FOR "FOREIGN SALES CORPORATIONS"  
 
Second Recourse by the European Communities  to Article 21.5 of the DSU  
 
Request for Cons ultations  
 
 
 The following communication, dated 5 November 2004, from the delegation of the European 
Communities to the delegation of the United States and to the Chairperson of the Dispute Settlement 
Body, is circulated pursuant to Article 21.5 of the DSU .  
 
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 The European Communities hereby requests the United States of America to enter into 
consultations under Articles 4 and 21.5 of the Understanding on Rules and Procedures Governing the 
Settlement of Disputes (the "DSU "), Article 4 of  the Agreement on Subsidies and Countervailing 
Measures (the "SCM Agreement "), Article 19 of the Agreement on Agriculture and Article XXII:1 of 
GATT 1994 with respect to the American JOBS Creation Act of 2004  (the "JOBS Act ") enacted by the 
US on 22 Octobe r 2004 . 
 
 The JOBS Act was intended to implement the DSB recommendations and rulings in case 
WT/DS108 United States – Tax Treatment for "Foreign Sales Corporations"  and United States – Tax 
Treatment for "Foreign Sales Corporations " – Recourse to Article 21 .5 of the DSU by the European 
Communities but fails to do so properly and is inconsistent with the same provisions of the WTO 
Agreement  as did the predecessor legislation.  
 
 In particular, the European Communities considers that Section 101 of t he JOBS Ac t contains 
transitional provisions which will allow US exporters to continue to benefit from the WTO 
incompatible FSC Replacement and Extraterritorial Income Exclusion Act (a) in the years 2005 and 
2006 with respect to all export transactions and (b) for a n indefinite period with respect to certain 
binding contracts, thus failing to withdraw the subsidy and implement the DSB’s recommendations 
and rulings.  
 
 In the light of the above, the European Communities considers that the United States has 
failed to w ithdraw the subsidies as required by Article 4.7 of the SCM Agreement  and has failed to 
implement the DSB’s recommendations and rulings as required by Articles 19.1 and 21.1 of the DSU .  
It also considers that the US continues to violate Articles 3.1(a) an d 3.2 of the SCM Agreement,  
Articles 10.1 and 8 of the Agreement on Agriculture and Article III:4 of the GATT 1994.  WT/DS108/27  
Page 2 
 
 
 Therefore, the European Communities requests consultations with the United States to discuss 
the above matter. A statement of available ev idence as to the existence and nature of the subsidies is 
included in the Annex.  
 
 
  WT/DS108/27  
 Page 3 
 
 
 
Annex  
 
Statement of available evidence  
 
 
 The following evidence is available to the EC within the meaning of Article 4.2 of the SCM 
Agreement  
 
1. Panel and Appellate Body  Reports in WT/DS108.  
2. The American JOBS Creation Act of 2004 as signed by the President.  
3. US Congress, Joint Explanatory Statement of the Committee on Conference, 
F:/EWB/CONF/H4250CNF.STM .  
4. The US Internal Revenue Code provisions.  
 
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