WT/DS487/R/Add.1  
 
28 November  2016 
(16-6471) Page: 1/86 
  Original: English  
 
  UNITED STATES – CONDITIONAL TAX INCE NTIVES FOR LARGE CIV IL 
AIRCRAFT   
REPORT OF THE PANEL  
Addendum  
This addendum  contains Annexes A to D to the Report of the Panel to be found in document  
WT/DS487/R . 
 
_______________  
 
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  LIST OF ANNEXES  
ANNEX  A 
WORKING PROCED URES OF THE PANEL  
Contents  Page  
Annex  A-1 Working Procedures of the Panel  A-2 
Annex  A-2 Additional Working Procedures on BCI and HSBI  A-7 
Annex  A-3 Additional Working Pr ocedures for the partial opening to the public of the 
meeting of the panel  A-19 
Annex A-4 Additional Working Procedures for the partial opening to the public of the 
second meeting of the panel  A-21 
ANNEX B  
ARGUMENTS OF THE PAR TIES 
Contents  Page  
Annex  B-1 First i ntegrated executive summary of the arguments of the European Union  B-2 
Annex B-2 Second i ntegrated executive summary of the arguments of the European Union  B-10 
Annex B -3 First integrated executive summary of the arguments of the United States  B-20 
Annex B -4 Second integrated executive summary of the arguments of the United St ates B-28 
ANNEX  C 
ARGUMENTS OF THE THI RD PARTIES  
Contents  Page  
Annex  C-1 Integrated executive summary of the arguments of Australia  C-2 
Annex  C-2 Integrated executive summary of the arguments of Brazil  C-4 
Annex  C-3 Integrated executive summary of the arguments of Canada  C-8 
Annex C -4 Integrated executive summary of the arguments of China  C-11 
Annex C -5 Integrated executive summary of the arguments of Japan  C-13 
ANNEX D  
PROCEDURAL RULINGS  
Contents  Page  
Annex D -1 Letter from the Panel, 15  January 201 6 D-2 
Annex D -2 Letter from the Panel, 4  May 2016  D-3 
 
 
 
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  ANNEX  A 
WORKING PROCEDURES O F THE PANEL  
Contents  Page  
Annex  A-1 Working Procedures of the Panel  A-2 
Annex  A-2 Additional Working Procedures on BCI and HSBI  A-7 
Annex  A-3 Additional Working Pro cedures for the partial opening to the public of the 
meeting of the panel  A-19 
Annex  A-4 Additional Working Procedures for the partial opening to the public of the 
second meeting of the panel  A-21 
 
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  ANNEX  A-1 
WORKING PROCEDURES O F THE PANEL  
Adopted on 7 December 2015  
1.  In its proceedings, the Panel shall follow the relevant provisions of the Understanding on Rules 
and Procedures Governing the Settlement of Disputes (DSU). In addition, the following Working 
Procedures shall apply.  
General  
2.  The deliber ations of the Panel and the documents submitted to it shall be kept confidential. 
Nothing in the DSU or in these Working Procedures shall preclude a party to the dispute (hereafter 
"party") from disclosing statements of its own positions to the public. Mem bers shall treat as 
confidential information submitted to the Panel by another Member which the submitting Member 
has designated as confidential. Where a party submits a confidential version of its written 
submissions to the Panel, it shall also, upon requ est of a Member, provide a non -confidential 
summary of the information contained in its submissions that could be disclosed to the public.  
3.  Subject to this paragraph, the Panel shall meet in closed session. The parties, and Members 
having notified thei r interest in the dispute to the Dispute Settlement Body in accordance with 
Article 10 of the DSU (hereafter "third parties"), shall be present at the meetings only when invited 
by the Panel to appear before it. The Panel may open its substantive meetings with the parties to 
the public, subject to appropriate procedures to be adopted by the Panel after consulting with the 
parties.  
4.  Each party and third party has the right to determine the composition of its own delegation 
when meeting with the Panel. Eac h party and third party shall have the responsibility for all 
members of its own delegation and shall ensure that each member of such delegation acts in 
accordance with the DSU and these Working Procedures, particularly with regard to the 
confidentiality o f the proceedings.  
Submissions  
5.  Before the first substantive meeting of the Panel with the parties, each party shall submit a 
written submission in which its presents the facts of the case and its arguments, in accordance 
with the timetable adopted by the Panel. Each party shall also submit to the Panel, prior to the 
second substantive meeting of the Panel, a written rebuttal, in accordance with the timetable 
adopted by the Panel.  
6.  A party shall submit any request for a preliminary ruling at the ear liest possible opportunity 
and in any event no later than in its first written submission to the Panel. If the European Union 
requests such a ruling, the United States shall submit its response to the request in its first written 
submission. If the United States requests such a ruling, the European Union shall submit its 
response to the request prior to the first substantive meeting of the Panel, at a time to be 
determined by the Panel in light of the request. Exceptions to this procedure shall be granted u pon 
a showing of good cause.  
7.  Each party shall submit all factual evidence to the Panel no later than during the first 
substantive meeting, except with respect to evidence necessary for purposes of rebuttal, answers 
to questions or comments on answers p rovided by the other party. Exceptions to this procedure 
shall be granted upon a showing of good cause. Where such exception has been granted, the Panel 
shall accord the other party a period of time for comment, as appropriate, on any new factual 
evidence submitted after the first substantive meeting.  
8.  Where the original language of exhibits is not a WTO working language, the submitting party or 
third party shall submit a translation into the WTO working language of the submission at the 
same time. The Panel may grant reasonable extensions of time for the translation of such exhibits WT/DS487/R/Add.1  
 
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  upon a showing of good cause. Any objection as to the accuracy of a translation should be raised 
promptly in writing, no later than the next filing or meeting (whichever occ urs earlier) following 
the submission which contains the translation in question. The Panel may grant exceptions to this 
procedure upon a showing of good cause. Any objection shall be accompanied by a detailed 
explanation of the grounds of objection and an  alternative translation.  
9.  To facilitate the maintenance of the record of the dispute and maximize the clarity of 
submissions, each party and third party shall sequentially number its exhibits throughout the 
course of the dispute. For example, exhibits submitted by the European Union could be numbered 
EU-1, EU -2, etc. If the last exhibit in connection with the first submission was numbered EU -5, the 
first exhibit of the next submission thus would be numbered EU -6. 
10.  Parties and third parties are invit ed to make their respective submissions in accordance with 
the WTO Editorial Guide for Panel Submissions, attached as Annex 1.  
11.  Upon indication from any party, at the latest on the date of the Panel's first substantive 
meeting with the parties, that it  shall provide information that requires protection additional to 
that provided for under these Working Procedures, the Panel shall, after consultation with the 
parties, decide whether to adopt appropriate additional procedures.  
Questions  
12.  The Panel ma y at any time pose questions to the parties and third parties, orally or in writing, 
including prior to each substantive meeting.   
Substantive meetings  
13.  Each party shall provide to the Panel the list of members of its delegation in advance of each 
meeting with the Panel and no later than 5.00  p.m. the previous working day.  
14.  The first substantive meeting of the Panel with the parties shall be conducted as follows:  
a. The Panel shall invite the European Union to make an opening statement to present it s 
case first. Subsequently, the Panel shall invite the United States to present its point of 
view. Before each party takes the floor, it shall provide the Panel and other participants 
at the meeting with a provisional written version of its statement. In t he event that 
interpretation is needed, each party shall provide additional copies for the interpreters, 
through the Panel Secretary. Each party shall make available to the Panel and the other 
party the final version of its opening statement as well as its  closing statement, if any, 
preferably at the end of the meeting, and in any event no later than 5.00  p.m. on the 
first working day following the meeting.  
b. After the conclusion of the statements, the Panel shall give each party the opportunity to 
ask each o ther questions or make comments, through the Panel. Each party shall then 
have an opportunity to answer these questions orally. Each party shall send in writing, 
within a timeframe to be determined by the Panel, any questions to the other party to 
which it  wishes to receive a response in writing. Each party shall be invited to respond in 
writing to the other party's written questions within a deadline to be determined by the 
Panel.  
c. The Panel may subsequently pose questions to the parties. Each party shall t hen have an 
opportunity to answer these questions orally. The Panel shall send in writing, within a 
timeframe to be determined by it, any questions to the parties to which it wishes to 
receive a response in writing. Each party shall be invited to respond i n writing to such 
questions within a deadline to be determined by the Panel.  
d. Once the questioning has concluded, the Panel shall afford each party an opportunity to 
present a brief closing statement, with the European Union presenting its statement 
first.  
15.   The second substantive meeting of the Panel with the parties shall be conducted as follows:  WT/DS487/R/Add.1  
 
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  a. The Panel shall ask the United States if it wishes to avail itself of the right to present its 
case first. If so, the Panel shall invite the United States to  present its opening statement, 
followed by the European Union. If the United States chooses not to avail itself of that 
right, the Panel shall invite the European Union to present its opening statement first. 
Before each party takes the floor, it shall pr ovide the Panel and other participants at the 
meeting with a provisional written version of its statement. In the event that 
interpretation is needed, each party shall provide additional copies for the interpreters, 
through the Panel Secretary. Each party shall make available to the Panel and the other 
party the final version of its opening statement as well as its closing statement, if any, 
preferably at the end of the meeting, and in any event no later than 5.00  p.m. of the 
first working day following the  meeting.  
b. After the conclusion of the statements, the Panel shall give each party the opportunity to 
ask each other questions or make comments, through the Panel. Each party shall then 
have an opportunity to answer these questions orally. Each party shall send in writing, 
within a timeframe to be determined by the Panel, any questions to the other party to 
which it wishes to receive a response in writing. Each party shall be invited to respond in 
writing to the other party's written questions within a deadl ine to be determined by the 
Panel.  
c. The Panel may subsequently pose questions to the parties. Each party shall then have an 
opportunity to answer these questions orally. The Panel shall send in writing, within a 
timeframe to be determined by it, any questio ns to the parties to which it wishes to 
receive a response in writing. Each party shall be invited to respond in writing to such 
questions within a deadline to be determined by the Panel.  
d. Once the questioning has concluded, the Panel shall afford each part y an opportunity to 
present a brief closing statement, with the party that presented its opening statement 
first, presenting its closing statement first.  
Third parties  
16.  The Panel shall invite each third party to transmit to the Panel a written submiss ion prior to 
the first substantive meeting of the Panel with the parties, in accordance with the timetable 
adopted by the Panel.  
17.  Each third party shall also be invited to present its views orally during a session of this first 
substantive meeting, se t aside for that purpose. Each third party shall provide to the Panel the list 
of members of its delegation in advance of this session and no later than 5.00  p.m. the previous 
working day.  
18.  The third -party session shall be conducted as follows:  
a. All third parties may be present during the entirety of this session.  
b. The Panel shall first hear the arguments of the third parties in alphabetical order. Third 
parties present at the third -party session and intending to present their views orally at 
that sessi on, shall provide the Panel, the parties and other third -parties with provisional 
written versions of their statements before they take the floor. Third parties shall make 
available to the Panel, the parties and other third parties the final versions of th eir 
statements, preferably at the end of the session, and in any event no later than 
5.00 p.m. of the first working day following the session.  
c. After the third parties have made their statements, the parties may be given the 
opportunity, through the Panel,  to ask the third parties questions for clarification on any 
matter raised in the third parties' submissions or statements. Each party shall send in 
writing, within a timeframe to be determined by the Panel, any questions to a third party 
to which it wishe s to receive a response in writing.  
d. The Panel may subsequently pose questions to the third parties. Each third party shall 
then have an opportunity to answer these questions orally. The Panel shall send in WT/DS487/R/Add.1  
 
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  writing, within a timeframe to be determined by i t, any questions to the third parties to 
which it wishes to receive a response in writing. Each third party shall be invited to 
respond in writing to such questions within a deadline to be determined by the Panel.  
Descriptive part  
19.  The description of t he arguments of the parties and third parties in the descriptive part of the 
Panel report shall consist of executive summaries provided by the parties and third parties, which 
shall be annexed as addenda to the report. These executive summaries shall not i n any way serve 
as a substitute for the submissions of the parties and third parties in the Panel's examination of 
the case.  
20.  Each party shall submit an integrated executive summary of the facts and arguments as 
presented to the Panel in its first wri tten submissions, first opening and closing oral statements 
and responses to questions following the first substantive meeting, and a separate integrated 
executive summary of its written rebuttal, second opening and closing oral statements and 
responses to  questions following the second substantive meeting, in accordance with the timetable 
adopted by the Panel. Each integrated executive summary shall be limited to no more than 15 
pages. The Panel will not summarize in a separate part of its report, or annex  to its report, the 
parties' responses to questions.  
21.  Each third party shall submit an integrated executive summary of its arguments as presented 
in its written submission and statement in accordance with the timetable adopted by the Panel. 
This integr ated executive summary may also include a summary of responses to questions, if 
relevant. The executive summary to be provided by each third party shall not exceed 6  pages.  
22.  The Panel reserves the right to request the parties and third parties to prov ide executive 
summaries of facts and arguments presented by a party or a third party in any other submissions 
to the Panel for which a deadline may not be specified in the timetable.  
Interim review  
23.  Following issuance of the interim report, each party  may submit a written request to review 
precise aspects of the interim report and request a further meeting with the Panel, in accordance 
with the timetable adopted by the Panel. The right to request such a meeting shall be exercised no 
later than at the t ime the written request for review is submitted.  
24.  In the event that no further meeting with the Panel is requested, each party may submit 
written comments on the other party's written request for review, in accordance with the timetable 
adopted by the  Panel. Such comments shall be limited to commenting on the other party's written 
request for review.  
25.  The interim report, as well as the final report prior to its official circulation, shall be kept 
strictly confidential and shall not be disclosed.  
Service of documents  
26.  The following procedures regarding service of documents shall apply:  
a. Each party and third party shall submit all documents to the Panel by filing them with 
the DS  Registry (office No. 2047).  
b. Each party and third party shall file s ix paper copies of all documents it submits to the 
Panel. Exhibits may be filed in two copies on CD -ROM or DVD and six  paper copies. The 
DS Registrar shall stamp the documents with the date and time of the filing. The paper 
version shall constitute the off icial version for the purposes of the record of the dispute.  
c. Each party and third party shall also provide an electronic copy of all documents it 
submits to the Panel at the same time as the paper versions, preferably in Microsoft 
Word format, either on a CD-ROM, a DVD or as an e -mail attachment. If the electronic 
copy is provided by e -mail, it should be addressed to DSRegistry@wto.org, with a copy WT/DS487/R/Add.1  
 
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  to ****@wto.org and to ****@wto.org. If a CD -ROM or DVD is provided, it shall be filed 
with the DS Registry.  
d. Each party shall serve any document submitted to the Panel directly on the other party. 
Each party shall, in addition, serve on all third parties its written submissions in advance 
of the first substantive meeting with the Panel. Each third party shall ser ve any 
document submitted to the Panel directly on the parties and all other third parties. Each 
party and third party shall confirm, in writing, that copies have been served as required 
at the time it provides each document to the Panel.  
e. Each party and th ird party shall file its documents with the DS Registry and serve copies 
on the other party (and third parties where appropriate) by 5.00  p.m. (Geneva time) on 
the due dates established by the Panel. A party or third party may submit its documents 
to anoth er party or third party in electronic format only, subject to the recipient party or 
third party's prior written approval and provided that the Panel Secretary is notified.  
f. The Panel shall provide the parties with an electronic version of the descriptive p art, the 
interim report and the final report, as well as of other documents as appropriate. When 
the Panel transmits to the parties or third parties both paper and electronic versions of a 
document, the paper version shall constitute the official version f or the purposes of the 
record of the dispute.  
27.  The Panel reserves the right to modify these procedures as necessary, after consultation with 
the parties.  
 
 
 
 
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  ANNEX A -2 
ADDITIONAL WORKING P ROCEDURES FOR THE PR OTECTION OF BUSINESS  CONFIDENTIAL 
INFORMAT ION AND HIGHLY  SENSITIVE BUSINESS I NFORMATION  
("BCI/HSBI PROCEDURE S") 
Adopted on 13 January 2016  
1  GENERAL  
1.1.  The following Procedures apply to all business confidential information ("BCI") and highly 
sensitive business information ("HSBI") on the Panel record.  These Procedures do not diminish the 
rights and obligations of the parties to request and disclose any information within the scope of the 
SCM Agreement and Article 13 of the DSU.  
2  DEFINITIONS  
For the purposes of these Procedures,  
 
2.1.  "Approved Person " means a Representative or Outside Advisor of a Party, when designated 
in accordance with these procedures.  
2.2.  "Business Confidential Information " or " BCI" means any business information regardless 
of whether contained in a document provided by a public or private b ody that a Party or Third 
Party has "Designated as BCI" because it is not otherwise available in the public domain and its 
disclosure could, in the Party's or Third Party's view, cause harm to the originators of the 
information. Each Party and Third Party shall act in good faith and exercise restraint in designating 
information as BCI, and will endeavour to designate information as BCI only if its disclosure would 
cause harm to the originators of the information.  
2.3.  "Conclusion of the Panel Process " means the earliest to occur of the following events:  
a. pursuant to Article 16.4 of the DSU, the Panel report is adopted by the DSB, or the DSB 
decides by consensus not to adopt the Panel report;  
b. a Party formally notifies the DSB of its decision to appeal pursuant to A rticle 16.4 of the 
DSU; 
c. pursuant to Article 12.12 of the DSU, the authority for establishment of the Panel lapses; 
or 
d. pursuant to Article 3.6 of the DSU, a mutually satisfactory solution is notified to the  DSB. 
2.4.  "Designated as BCI " means:  
a. for printed inform ation, text that is set off with bold square brackets in a document 
clearly marked with the notation " BUSINESS CONFIDENTIAL INFORMATION " and 
with the name of the Party or Third Party that submitted the information;  
b. for Electronic Information, characters th at are set off with bolded square brackets (or 
with a heading with bolded square brackets on each page) in an electronic file that 
contains the notation " BUSINESS CONFIDENTIAL INFORMATION ", has a file name 
that contains the letters " BCI", and is stored on a storage medium with a label marked 
"BUSINESS CONFIDENTIAL INFORMATION " and indicating the name of the Party or 
Third Party that submitted the information; and  WT/DS487/R/Add.1  
 
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  c. for uttered information, declared by the speaker to be " Business Confidential 
Information " prio r to utterance.1 
In case either Party objects to the designation of information as BCI under paragraphs  2.4(a) –(c), 
the dispute shall be resolved by the Panel. If the Panel disagrees with designation of information 
as BCI, the submitting Party or Third Par ty may either designate it as non -BCI or withdraw the 
information. In the case of withdrawal, the Panel shall either destroy such information or return it 
to the submitting Party or Third Party. Each Party or Third Party may at any time designate as 
non-BCI information previously designated by th at Party or Third  Party as BCI.  
This paragraph 2.4 shall apply to all submissions, including exhib its, by a Party or Third Party.  
2.5.  "Designated as HSBI " means:  
a. for Electronic Information, characters that are set off w ith double bolded square brackets 
(or with a heading with double bolded square brackets on each page) in an electronic file 
that contains the notation " HIGHLY SENSITIVE BUSINESS INFORMATION ", has a 
file name that contains the letters " HSBI ", and is stored on a storage medium with a 
label marked " HIGHLY SENSITIVE BUSINESS INFORMATION " and indicating the 
name of the Party or Third Party that submitted the information; and  
b. for uttered information, declared by the speaker to be " Highly Sensitive Business 
Infor mation " prior to utterance.2 
This paragraph 2.5 shall apply to all submissions, including exhibits, by a Party or Third Party.  
2.6.  "Electronic Information " means any information stored in an electronic form (including but 
not limited to binary -encoded informat ion). 
2.7.  "Highly Sensitive Business Information " or " HSBI " means any business information 
regardless of whether contained in a document provided by a public or private body that a Party or 
Third Party has "Designated as HSBI" because it is not otherwise avail able in the public domain 
and its disclosure could, in the Party's or Third Party's view, cause exceptional harm to its 
originators. Each Party and Third Party shall act in good faith and exercise the utmost restraint in 
designating information as HSBI. Ea ch Party and Third Party may at any time designate as non -
BCI/HSBI or as BCI information designated by that Party or Third Party as HSBI.  
a. The following categories of information may be Designated as HSBI:  
i. information indicating the actual selling or offere d price of any large civil aircraft 
(LCA) manufacturer's products or services3, and, except as provided in 
subparagraph  2.7 (d)(i) below, any graphs or other use of the data which reflect the 
movement of prices, pricing trends or actual prices of an LCA mo del or a family of 
LCA;  
ii. information gathered or produced in the context of LCA sales campaigns;  
iii. information concerning market forecasts, analyses, business plans and 
share/business valuations generated by LCA producers, consultants, or investment 
banks w ith regard to LCA products; or  
                                               
1 The erroneous failure by a speaker to make such a prior declaration shall not affect the designation of 
the BCI in question.  
2 The erroneous failure by a speaker to make such a p rior declaration shall not affect the designation of 
the HSBI in question.  
3 This category includes (but is not limited to) information on individual LCA prices, prices per seat, or 
information allowing the operating cost per seat of an LCA to be determine d, calculated or reflected; the 
negotiated or offered prices for the airframe; all concessions offered or agreed to by an LCA manufacturer 
including financing, spare parts, maintenance, pilot training, asset value and other guarantees, buy back 
options, re marketing arrangements or other forms of credit support. This category shall also include the actual 
pricing information relating to any number of individual LCA offers and prices (including concessions) 
aggregated by model or other category.  WT/DS487/R/Add.1  
 
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  iv. information concerning an LCA manufacturer's costs of production, including but not 
limited to data regarding pricing by suppliers.  
b. Each Party and Third Party may also Designate as HSBI any other category of business 
informat ion that is not otherwise available in the public domain and the disclosure of 
which could, in the Party's view, cause exceptional harm to its originators.  
c. Each Party and Third Party shall Designate as HSBI any information described in 
subparagraph 2.7(a) that pertains to LCA produced by an LCA manufacturer 
headquartered within the territorial jurisdiction of either of the Parties.  
d. Notwithstanding the foregoing, the following categories of information may not be 
Designated as HSBI:  
i. aggregated pricing data f or a particular LCA model or family of LCA within a 
particular market that is indexed (i.e., does not reflect actual prices but rather 
movements in prices off a base of 100 for a particular year). Such data shall be 
treated as BCI;  
ii. general legal conclusion s based on HSBI (e.g., that HSBI demonstrates that a 
producer engaged in price undercutting). Such conclusions shall be treated as neither 
BCI nor HSBI;  
iii. intergovernmental agreements and government decisions, other than information 
described in subparagraph  2.7(a).  
e. Information may not be Designated as HSBI simply because it is subject to bank secrecy 
or banker -client confidentiality.  
f. In case either Party objects to the designation of information as HSBI under 
paragraphs  2.7(a) to 2.7(c), the dispute shall be  resolved by the Panel. If the Panel 
disagrees with designation of information as HSBI, the submitting Party or Third Party 
may either designate it as BCI, as non -BCI/HSBI or withdraw the information. In the 
case of withdrawal, the Panel shall either destr oy such information or return it to the 
submitting Party or Third Party. Each Party or Third Party may at any time designate as 
non-BCI/HSBI or as BCI information previously designated by that Party or Third  Party 
as HSBI.  
2.8.  "HSBI Approved Person " means Appr oved Persons specifically designated by the Parties as 
having the right to access HSBI (according to the procedures laid down in Section 4).  
2.9.  "HSBI Location " means a room to be kept locked when not occupied and the access to 
which shall be possible only for  HSBI Approved Persons, located:  
a. for HSBI submitted by the United States, on the premises of (i) the United States 
Mission to the European Union in Brussels and (ii) the Office of the United States Trade 
Representative in Washington, DC;  
b. for HSBI submitted  by the European Union, on the premises of (i) the Delegation of the 
European Union to the United States in Washington, DC and (ii) the Legal Service (WTO 
Team) of the European Commission in Brussels;  
c. for HSBI submitted by a Third Party, on the premises of  its Geneva Mission to the WTO.  
2.10.  "Locked CD " means a CD -ROM that is not rewritable.  
2.11.  "Outside Advisor " means a legal counsel or other advisor of a Party or Third Party, who:  
a. advises a Party or Third Party in the course of the dispute;  WT/DS487/R/Add.1  
 
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  b. is not an employee, of ficer or agent of an entity or an affiliate of an entity engaged in 
the manufacture of LCA, the provision of supplies to an entity engaged in the 
manufacture of LCA, or the supply of air transportation services; and  
c. is subject to an enforceable code of pro fessional conduct that includes an obligation to 
protect confidential information, or has been retained by another outside advisor who 
assumes responsibility for compliance with these procedures and is subject to such a 
code of professional conduct.  
For pu rposes of this paragraph, outside legal counsel representing an LCA producer headquartered 
in the territory of one of the Parties or Third Parties in  connection with these proceedings or 
outside consultants who have been retained by such counsel to provide  advice with regard to these 
proceedings are not considered agents of an entity listed in subparagraph  2.11(b).  
 
2.12.  "Panel " means the DS487 panel composed on 22 April 2015.  
2.13.  "Party " means the European Union or the United States.  
2.14.  "Party -BCI" means BCI originall y submitted by a Party.  
2.15.  "Representative"  means an employee of a Party or Third Party.  
2.16.  "Sealed Laptop Computer " means a laptop computer having (software and hardware) 
characteristics considered necessary by the submitting Party for protection of HSBI, provi ded that 
it has software installed that permits such HSBI to be searched and printed in accordance with the 
provisions of Section 6. However, HSBI may not be edited on the Sealed Laptop Computer.  
2.17.  "Secure Site " means a facility to be kept locked when not oc cupied and the access to which 
shall be possible only for Approved Persons, located:  
a. in the case of the European Union, at the offices of WTO Team of the Legal Service of 
the European Commission (Rue de la Loi 200, Brussels, Belgium), the offices of 
Direct orate General for Trade of the European Commission (Rue de la Loi 170, Brussels, 
Belgium), the offices of the Permanent Mission of the European Union to the 
International Organisations in Geneva (Rue du Grand -Pré 66, 1202 Geneva, 
Switzerland), and three ad ditional sites specified in accordance with subparagraph  (c); 
b. in the case of the United States, at the offices of the General Counsel of the Office of the 
United States Trade Representative (600 17th Street, NW, Washington, DC, USA), the 
offices of the Imp ort Administration, United States Department of Commerce (600 17th 
Street, NW, Washington, DC, USA), the Mission of the United  States to the World Trade 
Organization (11, route de Pregny, 1292 Chambésy, Switzerland), and three additional 
sites specified in  accordance with subparagraph  (c); and  
c. at three sites other than a government office that are designated by each Party for use 
by its Outside Advisors; provided that the identity of those sites has been submitted to 
the other Party and the Panel, and the o ther Party has not objected to the designation of 
that site within ten days of such submission.  
Any objections raised under subparagraph (c) may be resolved by the Panel.  
 
2.18.  "Stand -Alone Computer " means a computer that is not connected to a network.  
2.19.  "Stand -Alone Printer " means a printer that is not connected to a network.  
2.20.  "Submission " means any written, electronic, or uttered information transmitted to the 
Panel, including but not limited to, correspondence, written submissions, exhibits, oral statements, 
and answers to questions.  
2.21.  "Third Party " means a Member having notified its interest in the dispute to the DSB 
pursuant to DSU Article 10.  WT/DS487/R/Add.1  
 
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  2.22.  "Third Party BCI Approved Person " means a representative or Outside Advisor of a 
Third Party granted access to BCI pursua nt to paragraphs 4.2, 5.2, 5.3 and 5.9.  
2.23.  "WTO Approved Persons " means the Panel members, PGE members or experts appointed 
by the Panel who in the opinion of the Panel require access to BCI, and persons employed or 
appointed by the WTO Secretariat who have b een authorized by the WTO Secretariat to work on 
the dispute (and includes translators and interpreters as well as any transcribers present at Panel 
meetings involving BCI and/or HSBI).  
2.24.  "WTO Reading Room " means a room, located on the premises of the WTO, w hich a Third 
Party BCI Approved Person may use to access a Party's Submission that contains Party BCI.  
2.25.  "WTO Rules of Conduct " means the Rules of Conduct for the Understanding on Rules and 
Procedures Governing the Settlement of Disputes, as adopted by the D SB on 3 December 1996 
(WT/DSB/RC/1).  
3  SCOPE  
3.1.  These procedures apply to all BCI and HSBI received by an Approved Person and by WTO 
Approved Persons as a result of the Panel process, and to all BCI reviewed, in accordance with 
these procedures, by a Third Part y BCI Approved Person.  
3.2.  Unless specifically otherwise provided herein, these procedures do not apply to a Party's or 
Third Party's treatment of its own BCI and HSBI.  
4  DESIGNATION OF APPRO VED PERSONS  
4.1.  At the latest on 18 January 2016, each Party shall submit t o the other Party and Third 
Parties, and to the Panel, a list of the names and titles of any Representatives and Outside 
Advisors who need access to BCI submitted by the other Party and/or Third Parties and whom it 
wishes to have designated as Approved Per sons, along with any clerical or support staff that would 
have access to the BCI. On that list, each Party shall indicate which Approved Persons need access 
to HSBI submitted by the other Party and/or Third Parties and whom it wishes to have designated 
as HSBI Approved Persons. Each Party may submit amendments to their list of Approved Persons 
by submitting such amendments to the other Party and Third Parties, and to the Panel.  
4.2.  There shall be no Third Party HSBI Approved Persons. The designation of Third Pa rty BCI 
Approved Persons shall be governed by paragraphs 5.2 and 5.3.  
4.3.  Each Party shall keep the number of Approved Persons as limited as possible. Each Party may 
designate no more than a total of thirty Representatives and twenty Outside Advisors as "HSBI 
Approved Persons".  
4.4.  WTO Approved Persons  shall have access to BCI. The Director -General of the WTO, or his 
designee, shall submit to the Parties and Third Parties, and to the Panel, a list of the WTO 
Approved Persons and shall identify which of those WTO Ap proved Persons shall additionally have 
access to HSBI.  
4.5.  Unless a Party objects to the designation of an Outside Advisor of the other Party, the Panel 
shall designate those persons as Approved Persons. A Party also may object within ten days of 
becoming awar e of information that was not available to the Party at the time of the filing of a list 
under paragraph 4.1 that would suggest that designation of an individual is not appropriate. If a 
Party objects, the Panel shall decide on the objection within ten  working days.  
4.6.  An objection may be based on the failure to satisfy the definition of "Outside Advisor" or on 
any other compelling basis, including conflicts of interest.  
4.7.  The Parties or the Director -General of the WTO, or his designee, may submit amendments to 
their lists at any time, subject to the overall limits set out in paragraph 4.3 and to objections for 
the addition of new Approved Persons in accordance with paragraphs 4.5 and 4.6.  WT/DS487/R/Add.1  
 
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  5  BCI 
5.1.  Only Approved Persons, WTO Approved Persons and Third Party BCI Approv ed Persons may 
have access to BCI submitted in this proceeding. Third Party BCI Approved Persons may not have 
access to Party -BCI other than that included in the submissions. Approved Persons, WTO Approved 
Persons and Third Party BCI Approved Persons shall  use BCI only for the purposes of this dispute. 
No Approved Person or WTO Approved Person shall disclose BCI, or allow it to be disclosed, to any 
person except another Approved Person, WTO Approved Person or Third Party BCI Approved 
Person. No Third Party BCI Approved Person shall disclose BCI, or allow it to be disclosed, to any 
person except another Approved Person, WTO Approved Person or Third Party BCI Approved 
Person. These obligations apply indefinitely.  
5.2.  Each Third Party that wants to access Party -BCI contained in the first written submission of a 
Party shall submit to the other Party and Third Parties, and to the Panel, a list of the names and 
titles of any Representatives and Outside Advisors (including clerical or support staff) who need 
access to s uch BCI and whom it wishes to have designated as Third Party BCI Approved Persons. 
Each Third Party shall keep the number of Third Party BCI Approved Persons as limited as possible. 
Each Third Party may designate no more than a total of five Representative s and Outside Advisors 
as Third Party BCI Approved Persons.  
5.3.  Unless a Party objects to the designation of an Outside Advisor of a Third Party, the Panel 
shall designate those persons as Third Party BCI Approved Persons, following which the access 
referred t o in paragraph 5.2 may be given to the Third Party concerned. A Party also may object 
within ten days of becoming aware of information that was not available to the Party at the time of 
the filing of a list under paragraph 5.2 above that would suggest that  designation of an individual 
is not appropriate. If a Party objects, the Panel shall decide on the objection within ten working 
days. An objection may be based on the failure to satisfy the definition of "Outside Advisor" or on 
any other compelling basis,  including conflicts of interest.  
5.4.  A Party shall make no more than one copy of any BCI submitted by the other Party or a Third 
Party for each Secure Site provided for that Party in paragraph  2.17. 
5.5.  Parties may incorporate BCI in internal memoranda for the ex clusive use of Approved 
Persons. Any memorandum and the BCI it contains shall be marked in accordance with 
paragraph  2.4. 
5.6.  BCI submitted by Approved Persons or by Third Party BCI Approved Persons pursuant to 
these procedures shall not be copied, distributed , or removed from the Secure Site, except as 
necessary for submission to the Panel.  
5.7.  The treatment in a Party's Submissions to the Panel of any BCI shall be governed by the 
provisions of this paragraph, which shall prevail to the extent of any conflict with  the other 
provisions of the Working Procedures (including these Procedures) relating to BCI.  
a. Parties may incorporate BCI in Submissions to the Panel, marked as indicated in 
paragraph 2.4. In exceptional cases, parties may include BCI in an appendix to a 
Submission.  
b. A Party submitting a Submission or appendix containing BCI shall also submit, within a 
time period to be set by the Panel, a version redacting any BCI. This shall be referred to 
as the "Non -BCI Version". However, a Party is not required to submi t a "Non -BCI 
Version" of any exhibit containing BCI, unless specifically directed to do so by the Panel. 
In the case of Submissions of the Parties prior to the first meeting of the Panel, each 
Party shall serve a "Non -BCI Version" of its Submission on Thir d Parties by 5.00  p.m. on 
the working day following the date of the Submission.  
c. A Non -BCI Version shall be sufficient to permit a reasonable understanding of its 
substance. In order to prepare such a Non -BCI Version:  
i. A Party may request the Party that orig inally submitted the BCI, as soon as possible, 
to indicate with precision portions of documents containing BCI that may be included WT/DS487/R/Add.1  
 
- A-13 - 
 
  in the non -BCI Version and, if necessary to permit a reasonable understanding of the 
substance of the information, to produc e a Non -BCI summary in sufficient detail to 
achieve this aim.  
ii. Upon receipt of such a request, the Party that originally submitted the BCI shall, as 
soon as possible, indicate with precision portions of documents containing BCI that 
may be included in the N on-BCI Version and, if necessary to permit a reasonable 
understanding of the substance of the information, produce a Non -BCI summary in 
sufficient detail to achieve this aim.  
iii. The Panel shall resolve any disagreement as to whether the Party that originally 
submitted the BCI failed to indicate with sufficient precision portions of documents 
containing BCI that may be included in the Non -BCI Version and to produce, if 
necessary, a Non -BCI summary in sufficient detail to permit a reasonable 
understanding of the  substance of the information, and may take appropriate action 
to ensure that the provisions of this paragraph are satisfied.  
d. The responding Party may designate the personal offices of up to four of its Approved 
Persons as additional Secure Sites for the s ole purpose of storing and permitting review 
of the BCI versions of the Parties' Submissions to the Panel. All of the protections 
applicable to BCI under these procedures, including the storage rules in Paragraph 5.11, 
shall apply to such Submissions. BCI exhibits to Submissions may not be stored or 
reviewed at these additional Secure Sites. The responding Party shall submit the address 
(including room number) of each of the additional Secure Sites to the Panel and the 
complaining Party.  
5.8.  Any document contai ning BCI shall not be copied in excess of the number of copies required 
by the Approved Persons. All copies of such documents shall be consecutively numbered. The 
making of electronic copies shall be avoided whenever possible. Such documents may be 
transmi tted electronically only by using secure e -mail. If a Party or Third Party submits to the 
Panel an original document that cannot be transmitted electronically, it shall on the day of 
submission deliver a copy of that document to one of the Secure Sites lis ted in paragraph 2.17. 
The Parties shall designate one of the Secure Sites listed in paragraph 2.17 for this purpose.  
5.9.  Notwithstanding paragraph 20 of the Working Procedures4, the following procedures apply to 
the access by Third Parties to a Party's Submis sion that contains Party -BCI. 
a. Except as provided in subparagraph 5.7(b), a Party's Submission containing Party -BCI 
shall not be served on Third Parties unless both Parties agree otherwise.  
b. Third Party BCI Approved Persons may view Party -BCI contained in a Party's first written 
submission only in a Secure Site or in the WTO Reading Room. Third Party BCI Approved 
Persons may not bring into such room any electronic recording or transmitting devices. 
Third Party BCI Approved Persons may not remove a Party's Sub mission containing 
Party-BCI from such room, but may take handwritten notes of the Party -BCI contained 
therein. Such notes shall be used exclusively for this dispute (that is, DS 487). Each 
person viewing a Party's Submission containing Party -BCI shall comp lete and sign a log 
identifying the Submission the person reviewed. The Party responsible for maintaining 
the particular Secure Site, and the WTO Secretariat in the case of the WTO Reading 
Room, shall maintain such log until one year after the Conclusion o f the Panel Process . 
Before entering and when leaving the room, Outside Advisors who are Third Party BCI 
Approved Persons may be subject to appropriate controls.  
c. If a Third Party BCI Approved Person removes from the Secure Site or the WTO Reading 
Room a ha ndwritten memo in accordance with subparagraph 5.9(b) above, that Third 
Party BCI Approved Person shall store the memo only in a locked security container. 
Such memo shall be appropriately protected against improper inspection and 
eavesdropping when being consulted and will be transmitted in sealed heavy duty double 
                                               
4 Concerning service of documents.  WT/DS487/R/Add.1  
 
- A-14 - 
 
  envelopes only. The content of such memo shall not be incorporated, electronically or in 
handwritten form, into the Non -BCI Version, as defined in paragraph 5.7(b).  
d. All Third Parties that have d esignated Third Party BCI Approved Persons must inform the 
Parties of the identity of the specific room (including the address and the room number) 
in which the locked security container, as referred to in subparagraph 5.9(c) above, is 
located.  
e. If a Third Party BCI Approved Person removes from the Secure Site or the WTO Reading 
Room a handwritten memo in accordance with subparagraph 5.9(b) above, such memo 
shall not be copied in excess of the number of copies required by the Third Party BCI 
Approved Persons . All copies of such documents shall be consecutively numbered. The 
making of electronic copies of such memo shall be prohibited.  
f. A Third Party may not incorporate into the body of its Submission any Party -BCI. If a 
Third Party wishes to refer to any Party -BCI, the relevant arguments including such BCI 
should be incorporated into a separate Appendix. Such Appendix shall not be served on 
other Third Parties.  
g. On the date determined by the Panel as the deadline to make the Third Party written 
submission, a Thi rd Party shall serve its submission only on the Parties and on the Panel. 
The submission shall be served on the other Third Parties only after the Parties have 
confirmed that the submission does not contain or disclose Party -BCI. A  Party shall make 
this co nfirmation or otherwise advise of any necessary change to the relevant Third 
Party within two working days of receiving the submissions of Third  Parties.  
5.10.  A Party or Third Party that wishes to submit or refer to BCI at a Panel meeting shall so 
inform the Pa nel and the other Party, and Third Parties as appropriate. The Panel shall exclude 
persons who are not Approved Persons, WTO Approved Persons or, as appropriate, Third Party BCI 
Approved Persons from the meeting for the duration of the submission and discu ssion of BCI.  
5.11.  Approved Persons and WTO Approved Persons shall store BCI only in locked security 
containers. In the case of BCI submitted to the Panel, such locked security containers shall be kept 
on the WTO Secretariat's premises, except that Panel member s may maintain a copy of all 
relevant documents and materials containing BCI at their places of residence. Such documents and 
materials shall be stored in locked security containers when not in use. BCI shall be appropriately 
protected against improper ins pection and eavesdropping when being consulted and will be 
transmitted in sealed heavy duty double envelopes only. All work papers ( e.g., draft submissions, 
worksheets, etc.) containing BCI shall, when no longer needed, be shredded or burned consistent 
with normal government practice for destroying sensitive documents.  
5.12.  The Panel shall not disclose BCI in its final report to be circulated to the Members, but may 
make statements or draw conclusions that are based on the information drawn from the BCI.  
6  HSBI  
6.1.  Unless otherwise provided below, HSBI shall be subject to all the restrictions in Section  5 
applicable to BCI.  
6.2.  HSBI shall be submitted to the Panel in electronic form, using locked CDs or two Sealed 
Laptop Computers connectable to 19" - 21" monitors, or in h ard copy form, for access by WTO 
Approved Persons designated pursuant to paragraph 4.4 as being additionally authorized to access 
HSBI. All such HSBI shall be stored in a locked security container in a designated secure location 
on the premises of the WTO Secretariat.5 Any computer in that room shall be a Stand -Alone 
Computer. WTO Approved Persons designated pursuant to paragraph 4.4 as being additionally 
authorized to access HSBI may view HSBI only in the designated secure location referred to above. 
A Sta nd-Alone Printer may be used to make hard copies of any HSBI. Such hard copies shall be 
                                               
5 At the request of any of the Parties, the WTO Secretariat will try to obtain as soon as practicable a 
secure safe to store all HSBI and hard copies of any HSBI, if a locked security container is deemed unsuitable 
for the appropriate  protection of the information.  WT/DS487/R/Add.1  
 
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  made on distinctively colored paper. Such hard copies shall either be stored in a locked security 
container at the designated secure location referred to above, or dest royed at the end of the 
relevant working session. HSBI shall not be removed from this designated secure location, except 
(i) in the form of handwritten notes that may be used only on the WTO Secretariat's premises and 
which shall be destroyed once no longe r in use; and (ii) subject to appropriate precautions, for 
purposes of meetings of the Panel with the Parties and any internal deliberations of the Panel, as 
provided for in paragraph 6.11(j).  
6.3.  Each Party shall maintain an additional copy (electronic or har d) of the HSBI it submits to the 
WTO, for access by HSBI Approved Persons acting on behalf of the other Party, in the HSBI 
Locations listed in paragraph 2.9. A Stand -Alone Printer may be used to make hard copies of any 
HSBI. Such hard copies shall be made on distinctively colored paper. Such hard copies shall either 
be stored in a safe at the relevant HSBI Location, or destroyed at the end of the relevant working 
session.  
6.4.  If a Third Party submits HSBI, it shall notify the Parties of the fact that such submi ssion has 
been made. Each Third Party submitting HSBI shall maintain an additional copy (electronic or 
hard) of the HSBI it submits to the WTO, for access by HSBI Approved Persons acting on behalf of 
the Parties, in the HSBI Location listed in paragraph 2. 9. A Stand -Alone Printer may be used to 
make hard copies of any HSBI. Such hard copies shall be made on distinctively colored paper. 
Such hard copies shall either be stored in a safe at the relevant HSBI Location, or destroyed at the 
end of the relevant wo rking session.  
6.5.  Except as otherwise provided in these procedures, HSBI shall not be stored, transmitted or 
copied either in written or electronic form.  
6.6.  HSBI Approved Persons may view HSBI on the Sealed Laptop Computer maintained by the 
other Party or a Thir d Party or, in the case of HSBI submitted on Locked CDs on a Stand -Alone 
Computer, only in a designated room at one of the HSBI Locations indicated in paragraph 2.9, or 
at the designated secure location on the premises of the WTO Secretariat referred to in  
paragraph  6.2, unless otherwise mutually agreed by the Parties. The designated room shall be 
available to HSBI Approved Persons from 9:00 a.m. to 5:00  p.m. during official working days at 
the respective HSBI Location. The designated secure location referr ed to in paragraph 6.2 shall be 
available to HSBI Approved Persons by prior arrangement with the WTO Secretariat. HSBI 
Approved Persons may not bring into such room any electronic recording or transmitting devices. 
HSBI Approved Persons may not remove HSBI  from such room, except in the form of handwritten 
notes or aggregated information generated on a Stand -Alone Computer. In either case, such notes 
or information shall be used exclusively for this dispute in connection with which the HSBI has 
been submitte d. Each person viewing the HSBI in the HSBI Location or designated secure location 
referred to in paragraph 6.2 shall complete and sign a log identifying the HSBI that the person 
reviewed or, alternatively, such a log can be generated automatically. Each P arty shall, for the 
HSBI Location within its territory referenced in paragraph 2.9, maintain such log until one year 
after the Conclusion of the Panel Process . The WTO Secretariat shall, for the designated secure 
location referred to in paragraph 6.2, main tain such log until one year after the Conclusion of the 
Panel Process. Before entering and when leaving such room, Outside Advisors who are HSBI 
Approved Persons may be subject to appropriate controls.  
6.7.  No HSBI Approved Person or WTO Approved Person design ated pursuant to paragraph 4.4 as 
being additionally authorized to access HSBI shall disclose HSBI to any person except another 
HSBI Approved Person or WTO Approved Person designated pursuant to paragraph 4.4 as being 
additionally authorized to access HSBI , and then only for the purpose of this dispute. This 
obligation applies indefinitely.  
6.8.  HSBI may be processed only on Stand -Alone Computers. Any memorandum containing HSBI 
shall not be transmitted electronically, whether by e -mail, facsimile, or otherwise.  
6.9.  A Party or Third Party that wishes to submit or refer to HSBI at a Panel meeting shall so 
inform the Panel and the other Party, and Third Parties as appropriate. The Panel shall exclude 
persons who are not HSBI Approved Persons or WTO Approved Persons desi gnated pursuant to 
paragraph 4.4 as being additionally authorized to access HSBI from the meeting for the duration of 
the submission and discussion of HSBI.  WT/DS487/R/Add.1  
 
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  6.10.  All HSBI shall be stored in a safe at the relevant HSBI Location or in accordance with 
paragraph 6. 2. 
6.11.  The treatment in a Party's Submissions to the Panel of any HSBI shall be governed by the 
provisions of this paragraph, which shall prevail to the extent of any conflict with the other 
provisions of the Working Procedures (including these Procedures) rel ating to HSBI.  
a. HSBI may be incorporated into a separate appendix to, but not the body of, a Party's 
Submission, which appendix shall be comprehensible in itself. The document containing 
the HSBI shall be referred to as the "Full HSBI Version Appendix";  
b. A Party submitting an appendix containing HSBI shall also submit, within a time period 
to be set by the Panel, a version redacting any HSBI. This shall be referred to as the 
"Redacted Version Appendix";  
c. At the request of a Party, information contained in the Redacted Version Appendix may 
be treated as BCI, in accordance with the provisions of Section  5; 
d. A Redacted Version Appendix shall be sufficient to permit a reasonable understanding of 
its substance. In order to prepare such a Redacted Version Appendix:  
i. A Party may request that the Party that originally submitted the HSBI, as soon as 
possible, indicate with precision portions of documents containing HSBI that may be 
included in the Redacted Version Appendix and, if necessary to permit a reasonable 
understan ding of the substance of the information, produce a non -HSBI summary in 
sufficient detail to achieve this  aim. 
ii. Upon receipt of such a request, the Party that originally submitted the HSBI shall, as 
soon as possible, indicate with precision portions of docu ments containing HSBI that 
may be included in the Redacted Version Appendix and, if necessary to permit a 
reasonable understanding of the substance of the information, produce a non -HSBI 
summary in sufficient detail to achieve this  aim. 
iii. The Panel shall res olve any disagreement as to whether the Party that originally 
submitted the HSBI failed to indicate with sufficient precision portions of documents 
containing HSBI that may be included in the Redacted Version Appendix and to 
produce, if necessary, a non -HSBI summary in sufficient detail to permit a 
reasonable understanding of the substance of the information, and may take 
appropriate action to ensure that the provisions of this paragraph are satisfied.  
e. The Full HSBI Version Appendix shall be kept in an HSBI  Location and in the designated 
secure location referred to in paragraph 6.2, as appropriate, in the form of a locked CD. 
If it is not practical to keep the Full HSBI Version Appendix in an HSBI Location, the 
Party may keep it in a locked security containe r in a Secure Site in the form of a 
locked  CD. 
f. The locked CD containing the Full HSBI Version Appendix shall bear the label marked 
"FULL VERSION OF HSBI APPENDIX TO SUBMISSION" and indicate the name of the Party 
that submitted the HSBI. In addition, the HS BI Appendix itself shall be marked with 
heading with double bolded square brackets on each page in an electronic file that 
contains the notation "FULL VERSION OF HSBI APPENDIX TO SUBMISSION". The 
electronic file containing the HSBI Appendix shall have a fi le name that contains the 
letters "HSBI VERSION".  
g. The Party shall submit one copy of the Full HSBI Version Appendix to the Panel (through 
Mr Rodd Izadnia, Secretary to the Panel ) and two copies to the other Party in the form of 
two locked CDs. The Full HSB I Version Appendix shall not be transmitted via e -mail. 
Parties shall agree between themselves beforehand on the name of the Approved Person 
that is to receive the locked CD.  WT/DS487/R/Add.1  
 
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  h. The Party shall commence transfer of the locked CDs containing the Full HSBI Vers ion 
Appendix no later than the deadline for the submission concerned, and, at the same 
time, provide the Panel and the other Party with proof that this has been done.  
i. No more than one working day in advance of a Panel meeting with the parties, a Party 
may, exclusively at that Party's Permanent Mission in Geneva, use the locked CD to 
produce no more than one hard copy of the Full HSBI Version Appendix for each HSBI 
Approved Person planning to attend that Panel meeting. All paper versions produced 
pursuant to  this subparagraph shall be collected by the Party concerned and destroyed 
immediately after the conclusion of the meeting.  
j. WTO Approved Persons designated pursuant to paragraph 4.4 as being additionally 
authorized to access HSBI may, exclusively on the WT O premises, produce paper 
versions of the Full HSBI Version Appendix for the purpose of, and immediately prior to, 
a Panel meeting with the parties and/or an internal meeting. When not in use, these 
paper versions shall be stored in a locked security conta iner in the designated secure 
location referred to in paragraph 6.2. All paper versions produced pursuant to this 
subparagraph shall be destroyed after the Conclusion of the Panel Process as defined in 
paragraph 2.3.  
k. Parties are encouraged to submit versio ns of exhibits containing HSBI from which all 
HSBI has been deleted. Such exhibits shall be referred to as "HSBI -Redacted Version 
Exhibits". HSBI -Redacted Version Exhibits may contain BCI.  
i. A Party may submit HSBI -Redacted Version Exhibits prepared by that Party to the 
Panel, and serve them on the other Party in accordance with the applicable 
procedures, at the time it serves the submission to which the exhibit relates.  
ii. If a HSBI -Redacted Version Exhibit is not submitted by the Party submitting the 
exhibit, an HSBI Approved Person representing the other Party may prepare an 
HSBI-Redacted Version Exhibit of any such exhibit.  
iii. HSBI-Redacted Version Exhibits may be prepared by an HSBI Approved Person, at an 
HSBI Location, by deleting the HSBI in the exhibit (iden tified by double brackets) 
from such exhibit and either printing or photo -copying the resulting document 
containing no HSBI. The deletion of HSBI from the resulting document shall be 
verified by a person authorized for this purpose by the Party that submit ted the 
exhibit(s) in question. The resulting document containing no HSBI (but which may 
contain BCI) will constitute the HSBI -Redacted Version Exhibit of such exhibit, and 
may be removed from the HSBI Location.  
iv. The Parties shall cooperate to the maximum e xtent possible to make available 
necessary facilities, including printers, photo -copiers, and physical means for the 
deletion of text from a document, to enable the preparation of HSBI -Redacted 
Version Exhibits, including making available an HSBI Approved Person for purposes 
of the verification provided for in paragraph (iii) above. HSBI -Redacted Version 
Exhibits may be prepared by HSBI Approved Persons upon request during the times 
the designated room at the relevant HSBI Location is available, as provided  for in 
paragraph 6.6 of these Procedures.  
v. The Panel shall resolve any disagreement arising from the operation of sub -
paragraph 6.11(k), and may take appropriate action to ensure that the provisions of 
paragraph 6.11 are satisfied.  
l. The Panel reserves the r ight, after consulting the parties, to amend the provisions of 
paragraph 6.11 at any time in order to accommodate situations arising during Panel 
meetings, and the preparation of the interim report and the final report.  
6.12.  The Panel shall not disclose HSBI in  its report, but may make statements or draw 
conclusions that are based on the information drawn from the HSBI.  WT/DS487/R/Add.1  
 
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  7  RESPONSIBILITY FOR C OMPLIANCE  
7.1.  Each Party and Third Party is responsible for ensuring that its Approved Persons and 
Third Party BCI Approved Pers ons comply with these procedures to protect BCI and HSBI 
submitted by each Party and Third Party, as well as with enforceable codes of professional conduct 
to which its Approved Persons or other Outside Advisors are subject. WTO Approved Persons shall 
comp ly with these procedures to protect BCI and HSBI submitted by a Party or Third  Party. WTO 
Approved Persons are covered by the WTO Rules of Conduct. As provided for in the WTO Rules of 
Conduct, evidence of breach of these Rules may be submitted to the Chair  of the DSB or to the 
Director -General of the WTO, or his designee, as appropriate, for appropriate action pursuant to 
Section VIII of the WTO Rules of Conduct.  
8  ADDITIONAL PROCEDURE S 
8.1.  After consulting with the Parties, the Panel may apply any other addition al procedures that it 
considers necessary to provide additional protections to the confidentiality of BCI or HSBI or other 
types of information not explicitly covered by these Procedures but which the Panel considers may 
be of assistance in adjudicating th e claims before it, including, if necessary, information that the 
United States internally classifies as "Top Secret", "Secret", "Confidential", or controlled pursuant 
to the United States' International Traffic in Arms Regulation ("ITAR").  
8.2.  The Panel may, with the consent of both Parties, waive any part of these procedures. Such 
"waiver" shall be specifically set forth in writing and signed by a representative of both Parties.  
9  RETURN AND DESTRUCTI ON 
9.1.  Except as provided for in paragraph 9.2, after the Conclus ion of the Panel Process as defined 
in paragraphs 2.3(a), 2.3(c) or 2.3(d), or as contemplated in paragraph 9.3, within a period to be 
fixed by the Panel, WTO Approved Persons, the Parties and Third Parties (along with all Approved 
Persons) shall destroy o r return all documents (including electronic material) or other recordings 
containing BCI to the Party or Third Party that submitted such documents or other recordings. At 
the same time, WTO Approved Persons and the Parties shall destroy and/or return any electronic 
material submitted by a Party or Third Party that contains HSBI.  
9.2.  The WTO Secretariat shall retain one hard copy and one electronic version of any final report 
of the Panel containing BCI, and one electronic version of all documents containing BC I submitted 
to the Panel, recorded on locked CD(s), to be kept in sealed containers in a locked cabinet on the 
premises of the WTO Secretariat.  
9.3.  After the Conclusion of the Panel Process as defined in paragraph 2.3(b), the Secretariat will 
inform the Appell ate Body of these procedures and will transmit to the Appellate Body any 
BCI/HSBI governed by these Procedures. Such transmission shall occur separately from the rest of 
the Panel record, to the extent possible. Following the adoption by the DSB of the App ellate Body 
report pursuant to Article 17.14 of the DSU, or a decision by the DSB by consensus not to adopt 
the Appellate Body Report pursuant to Article 17.14 of the DSU, the provisions of paragraphs 9.1 
and 9.2 shall apply mutatis mutandis . 
9.4.  The hard driv e of each Stand -Alone Computer and all media used to back up such computers 
shall be destroyed at the Conclusion of the Panel Process.  WT/DS487/R/Add.1  
 
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  ANNEX A -3 
ADDITIONAL WORKING P ROCEDURES FOR TH E PARTIAL OPENING TO  THE PUBLIC OF THE 
MEETING OF THE PANEL  
Adopted on 22 February 2016  
1.1.  The Panel's meeting with the parties will start at 10h00 on 24 February 2016. The Panel shall 
invite the European Union to make an opening statement to present its case first. Subsequently, 
the Panel shall invite the United States to present its point of view.  
1.2.  The oral statements of the parties will be video recorded for later viewing, as set out in 
paragraph 1.8.  below.  
1.3.  If at any point during its oral statement a party intends to address BCI or HSBI, it shall 
request that the video recording be discontinued for the relevant portion of the oral statement, 
after which video recording will be resumed. A party shall first deliver the part of its oral statement 
that contains no BCI or HSBI, and then ask for the video r ecording to be discontinued, before 
delivering a second part of its oral statement containing BCI or HSBI. Either party shall inform the 
Panel if the other party or the Panel is referring to BCI or HSBI, whereupon the Panel shall instruct 
that video record ing be discontinued and instruct any individuals not having BCI/HSBI approval to 
exit the room.  
1.4.  Before each party takes the floor, it shall provide the Panel and other participants at the 
meeting with a provisional written version of its statement. BCI or HSBI in the texts of the oral 
statements provided to the panel and the other party during the meeting and prior to the delivery 
of the oral statements shall be bracketed in accordance with the BCI/HSBI Procedures. BCI should 
be contained within single brac kets. HSBI should be contained within double brackets and deleted. 
In addition, a party including HSBI in its oral statement shall provide, prior to delivery of the oral 
statement, one paper copy to the panel and one paper copy to the other party, on colou red paper, 
with the HSBI included in double brackets. This document shall be subject to the same 
confidentiality rules as an HSBI Appendix to a written submission.  
1.5.  During the meeting with the parties, the following persons will be admitted into the meeting  
room: (1) the Panel; (2) all BCI/HSBI -approved members of the delegations of the parties; 
(3) BCI/HSBI -approved WTO Secretariat staff assisting the Panel; and (4) the team hired by the 
WTO Secretariat to video record the proceedings. If at any point durin g the meeting a party 
intends to refer to BCI or HSBI, those individuals not having BCI/HSBI approval shall be asked to 
exit the room. If at any point during the meeting a party intends to refer to either BCI or HSBI, the 
team hired by the WTO Secretariat to video record the proceedings shall be asked to exit the 
room.  
1.6.  After each oral statement has been delivered, the Panel will ask the respective party whether 
it can confirm that no BCI or HSBI was pronounced during the video recorded portion of the oral 
statement. The Panel will also ask the parties for confirmation, at the end of the meeting, that no 
BCI or HSBI was pronounced during the video recorded portion of the meeting. If both parties so 
confirm, the showing of the video recording will proceed acco rding to the schedule to be 
determined by the Panel, as provided in paragraph 1.8.  If either party requests to review the 
video recording, the Panel will invite both parties to attend a review session, accompanied by a 
represe ntative of the Secretariat and the technician responsible for editing, on the premises of the 
WTO at an appropriate time after the meeting. In the event, each party shall designate a 
maximum of two persons, who shall be BCI/HSBI -approved persons, to partic ipate in the review 
session. Parties should be prepared to advise the technician which portion of the oral presentation 
presents a concern, and limit review to those portions of the video recording to the maximum 
extent possible. If either party considers that a specific portion of the video recording must be 
deleted – because it is BCI or HSBI – the specific portion of the video recording will be deleted.  
1.7.  The third party session will start at 10h00 on 25 February 2016 . Third parties shall indicate to 
the P anel, not later than by 13h00 on 24 February 2016 , whether they consent to the video  
recording  of their oral statements for later viewing. The Panel will start the third party session with WT/DS487/R/Add.1  
 
- A-20 - 
 
  the statements of those third parties so consenting. After such thi rd parties have made their 
statements, any questions or comments from the parties, other third parties or the Panel 
concerning these statements shall be made. The Panel shall then proceed to a third party closed 
session during which the rest of the third p arties shall make their statements. The Panel or any 
party or third party may pose questions to any third party or make comments concerning these 
statements. Should any third party intend to include BCI in its oral statement or otherwise to refer 
to BCI du ring the third party session, it is requested to inform the Panel by 13h00 on 24 
February  2016 so that appropriate arrangements can be made to protect the confidentiality of that 
information.  
1.8.  The showing of the video recording of the oral statements of the  parties and third parties 
shall take place at a date to be determined by the Panel. The showing will be open to officials of 
WTO Members and Observers, to accredited journalists, and to accredited representatives of non -
governmental organizations, upon pr esentation of their official badges. Other interested persons 
will be able to attend by registering directly with the WTO. To this effect, the Secretariat will place 
a notice by on the WTO website informing the public of the showing and including a link th rough 
which members of the public can register.  
 
 WT/DS487/R/Add.1  
 
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  ANNEX A -4 
ADDITIONAL WORKING P ROCEDURES FOR THE PA RTIAL OPENING TO THE  PUBLIC  
OF THE SECOND MEETIN G OF THE PANEL  
Adopted on 23 March 2016  
1.1.  The Panel's meeting with the parties will start at 10h00 on 5 April  2016.  
1.2.  In accordance with the Working Procedures adopted for the dispute, the Panel shall ask the 
United States whether it wishes to avail itself of the right to present its case first at the meeting. If 
the United States wishes to do so, it will be invite d by the Panel to deliver its opening statement 
first. Subsequently, the Panel shall invite the European Union to present its point of view. If the 
United States chooses not to avail itself of that right, the Panel shall invite the European Union to 
presen t its opening statement first.  
1.3.  The oral statements of the parties will be video recorded for later viewing, as set out in 
paragraph 1.9.   below.  
1.4.  If at any point during its oral statement a party intends to address BCI or HSBI, it shall 
request that the vid eo recording be discontinued for the relevant portion of the oral statement, 
after which video recording will be resumed. A party shall first deliver the part of its oral statement 
that contains no BCI or HSBI, and then ask for the video recording to be di scontinued, before 
delivering a second part of its oral statement containing BCI or HSBI. Either party shall inform the 
Panel if the other party or the Panel is referring to BCI or HSBI, whereupon the Panel shall instruct 
that video recording be discontinu ed and instruct any individuals not having BCI /HSBI approval to 
exit the room.  
1.5.  Before each party takes the floor, it shall provide the Panel and other participants at the 
meeting with a provisional written version of its statement. BCI or HSBI in the texts  of the oral 
statements provided to the panel and the other party during the meeting and prior to the delivery 
of the oral statements shall be bracketed in accordance with the BCI/HSBI Procedures. BCI should 
be contained within single brackets. HSBI should  be contained within double brackets and deleted. 
In addition, a party including HSBI in its oral statement shall provide, prior to delivery of the oral 
statement, one paper copy to the panel and one paper copy to the other party, on coloured paper, 
with t he HSBI included in double brackets. This document shall be subject to the same 
confidentiality rules as an HSBI Appendix to a written submission.  
1.6.  During the meeting with the parties, the following persons will be admitted into the meeting 
room: (1) the Pa nel; (2) all BCI/HSBI -approved members of the delegations of the parties; 
(3) BCI/HSBI -approved WTO Secretariat staff assisting the Panel; and (4) the team hired by the 
WTO Secretariat to video record the proceedings. If at any point during the meeting a p arty 
intends to refer to BCI or HSBI, those individuals not having BCI/HSBI approval shall be asked to 
exit the room. If at any point during the meeting a party intends to refer to either BCI or HSBI, the 
team hired by the WTO Secretariat to video record t he proceedings shall be asked to exit the 
room.  
1.7.  After each oral statement has been delivered, the Panel will ask the respective party whether 
it can confirm that no BCI or HSBI was pronounced during the video recorded portion of the oral 
statement. The Pan el will also ask the parties for confirmation, at the end of the meeting, that no 
BCI or HSBI was pronounced during the video recorded portion of the meeting. If both parties so 
confirm, the showing of the video recording will proceed according to the sche dule to be 
determined by the Panel, as provided in paragraph 1.9.    
1.8.  If either party requests to review the video recording, the Panel will invite both parties to 
attend a review session, accompanied by a representative of the Secretariat and the technician  
responsible for editing, on the premises of the WTO at an appropriate time after the meeting. In 
the event, each party shall designate a maximum of two persons, who shall be BCI/HSBI -approved 
persons, to participate in the review session. Parties should b e prepared to advise the technician WT/DS487/R/Add.1  
 
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  which portion of the oral presentation presents a concern, and limit review to those portions of the 
video recording to the maximum extent possible. If either party considers that a specific portion of 
the video recordin g must be deleted – because it is BCI or HSBI – the specific portion of the video 
recording will be deleted.  
1.9.  The showing of the video recording of the oral statements of the parties and non -confidential 
portions of the meeting shall take place at a date to  be determined by the Panel. The showing will 
be open to officials of WTO Members and Observers, to accredited journalists, and to accredited 
representatives of non -governmental organizations, upon presentation of their official badges. 
Other interested pe rsons will be able to attend by registering directly with the WTO. To this effect, 
the Secretariat will place a notice by on the WTO website informing the public of the showing and 
including a link through which members of the public can register.  
________ _______  
 
 
 
 WT/DS487/R/Add.1  
 
- B-1 - 
 
  ANNEX  B 
ARGUMENTS OF THE PAR TIES 
Contents  Page  
Annex  B-1 First i ntegrated executive summary of the arguments of the European Union  B-2 
Annex  B-2 Second i ntegrated executive summary of the arguments of the European Union  B-10 
Annex B -3 First integrated executive summary of the arguments of the United States  B-20 
Annex B -4 Second i ntegrated executive summary of the arguments of the United States  B-28 
 
 WT/DS 487/R/Add.1  
 
- B-2 - 
 
  ANNEX  B-1 
FIRST I NTEGRATED EXECUTIVE SUMMARY OF THE ARGUM ENTS OF THE EUROPEAN UNION  
I. INTRODUCTION  
1. Pursuant to paragraph 20 of the Panel's Working Procedures (adopted 7 December 2015), 
the European Union now provides an integrated executive summary of the facts and arguments 
presented in the European Union's (i) first written submission, (i i) first opening oral statement, 
(iii) first closing oral statement, and (iv) responses to questions following the first substantive 
meeting.   
2. In the present dispute, the European Union challenges several subsidies, in the form of tax 
incentives awarde d by Washington State to aerospace companies, which are contingent on the use 
of domestic over imported goods, and hence prohibited under Article 3.1(b) of the SCM 
Agreement.  These tax incentives, originally established by House Bill 2294 ("HB 2294"), hav e 
been amended, and extended through 2040, by Substitute Senate Bill 5952 ("SSB 5952").   
3. With its first written submission, the European Union established a prima facie  case that 
(i) the measures at issue are subsidies within the meaning of Article 1.1  of the SCM Agreement, 
and that (ii) these subsidies are contingent on the use of domestic over imported goods within the 
meaning of Article 3.1(b).   
4. As for "subsidy", the European Union has demonstrated the existence of a financial 
contribution in the  form of foregoing of government revenue otherwise due, within the meaning of 
Article 1.1(a)(1)(ii).  Further, the European Union has demonstrated that the measures confer a 
"gift" on the recipients that would not have been available in the market, thereby  conferring a 
“benefit” within the meaning of Article 1.1(b).  
5. As for the prohibited contingency, the European Union refers to both the text of SSB 5952 
(de jure  contingency), and certain additional facts ( de facto  contingency).  While the European 
Union  advances both de jure  and a de facto  claims of contingency, its first and principal claim is 
the de jure  claim.  
6. By way of background, the European Union notes that Washington State, itself, has 
quantified the total value of the revenue foregone pursuan t to the conditional amendments and 
extensions established by SSB 5952 - nearly USD 9 billion.  While the quantum of subsidization is 
irrelevant to a prohibited subsidy dispute as a legal matter, it is pertinent to note that the 
measures at issue confer on  their beneficiaries – with Boeing being the principal beneficiary – the 
single largest targeted state tax break in United States history.  
II. FACTUAL ASPECTS  
A. The Washington State Aerospace Tax Incentives  
7. At issue in this dispute are tax incentives f or civil aircraft provided by the State of 
Washington (the "aerospace tax incentives"), as amended and extended by SSB 5952, and as 
subject to the conditions in Sections 2, 5, and 6 thereof.   
8. In 2003, the State of Washington enacted HB 2294 for the pur pose of "retaining and 
attracting the aerospace industry to Washington State" and included a set of "comprehensive tax 
incentives" directed at achieving this aim.  This legislation was part of a package of incentives for 
Boeing to locate the 787 final asse mbly facility in Washington.  HB 2294 took effect upon a final 
decision to site a facility in Washington State "with the capacity to produce at least thirty -six 
super -efficient airplanes a year," defined by the precise specifications for the 787.   
9. HB 2294 established seven tax incentives for producers of civil aircraft (including certain 
suppliers):  WT/DS487/R/Add.1  
 
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   A reduction in the rate of Business and Occupation ("B&O") tax, i.e., the State of 
Washington's principal business tax, to 0.2904%, compared to the general ly applicable rates 
of 0.484% for manufacturing, and 0.471% for retailing activities.    
 A B&O tax credit for pre -production development for commercial airplanes and components;  
 A B&O tax credit for property taxes on commercial airplane manufacturing facil ities;  
 An exemption from sales and use taxes for certain computer hardware, software, and 
peripherals;  
 An exemption from sales and use taxes for certain construction services and materials;  
 An exemption from leasehold excise taxes on port district facili ties used to manufacture 
superefficient airplanes; and  
 An exemption from property taxes for the personal property of port district lessees used to 
manufacture superefficient airplanes.  
10. While the tax incentives that originated in HB 2294 were originall y enacted in connection 
with Boeing's decision to locate the first 787 final assembly line in Washington State, HB 2294 
provided that those benefits were to apply to all Boeing LCA developed and produced in 
Washington State, through the original expiration  date of 1 July 2024.   
B. The Conditional Extension and Amendment of the Washington State Aerospace Tax 
Incentives: Substitute Senate Bill 5952  
1. The 777X incentive legislation  
11. Over the course of 2013, Boeing publicly considered developing a new, adv anced variant of 
its 777 family of long -range, twin -aisle LCA, known as the 777X.  On 5 November 2013, 
Washington State, Boeing, and the trade union representing Boeing machinists reached a tentative 
agreement to locate production of the 777X in Washington , whereby the union would agree to a 
new long -term contract, and the State would provide Boeing with billions of dollars in additional 
subsidies.   
12. On 9 November 2013, the Washington State legislature passed SSB 5952, which, subject to 
certain conditio ns discussed below, amends and extends each of the existing aerospace tax 
incentives – originally due to expire in 2024 – through 2040, at a value estimated at more than 
USD 8.7 billion for Boeing, its suppliers, and other local aerospace firms.  Governor Jay Inslee 
signed SSB 5952 into law on 11 November 2013.  
2. The Programme -Siting condition  
13. Section 2 of SSB 5952 provides that the entire act would take effect only upon the decision 
to locate a new commercial aircraft programme – expressly defined to include wing and fuselage 
production  of an aircraft, in addition to final assembly  of that same aircraft – in Washington State.  
Specifically, Section 2 provides that:  
{this act} takes effect contingent upon the siting of a significant commercial airplane 
manufacturing program in the state of Washington. If a significant commercial 
airplane manufacturing program is not sited in the state of Washington by June 30, 
2017, {this act} does not take effect.  
The European Union refers to this provision as the "Prog ramme -Siting condition".   
14. Section 2 defines "siting" to mean "a final decision, made on or after November 1, 2013, by 
a manufacturer to locate a significant commercial airplane manufacturing program in Washington 
state".  It further defines "significa nt commercial airplane manufacturing program" as:  WT/DS 487/R/Add.1  
 
- B-4 - 
 
  an airplane program in which the following products , including final assembly, will 
commence manufacture at a new or existing location within Washington state  on or 
after the effective date of this section:  
(i) The new model, or any version or variant of an existing model, of a commercial 
airplane; and 
(ii) Fuselages and wings  of a new model, or any version or variant of an existing 
model, of a commercial airplane.1 
15. Accordingly, under the Programme -Siting condition established in Section 2, the aerospace 
tax incentive extensions and expansion provided for in SSB 5952 were made contingent upon 
Boeing's decision to locate in Washington State both (i) production of the wings and fuselage for a 
new aircraft m odel, version, or variant, and (ii) final assembly of that same aircraft model, 
version, or variant.  In fact, the relevant aircraft turned out to be the 777X.   
3. The Exclusive -Production condition  
16. In addition to the Programme -Siting condition, SSB 5 952 establishes a second condition 
related to the availability of the B&O tax rate reduction for the 777X, hereinafter referred to as the 
"Exclusive -Production condition".   
17. Pursuant to the Exclusive -Production condition, the reduced B&O tax rate would  not apply to 
revenue from the 777X in the event  Boeing were to perform any final assembly, or any wing 
assembly , for the 777X outside of Washington State.   
III. PROHIBITED SUBSIDIES  UNDER ARTICLE 3.1(B)  OF THE SCM AGREEMENT  
A. The Aerospace Tax Incentive s, as Amended by SSB 5952, Constitute Specific 
Subsidies  
1. Financial contribution  
18. Each of the aerospace tax incentives, as amended and extended by SSB 5952, constitutes a 
financial contribution by a government involving the "forego{ing}" of "governmen t revenue that is 
otherwise due" within the meaning of Article 1.1(a)(1)(ii) of the SCM Agreement.   
19. The identification of revenue "otherwise due" involves a comparison between the challenged 
measure and a "defined, normative benchmark".  According to the Appellate Body Report in US – 
FSC (Article 21.5 – EC), the proper comparison must be "between the rules of taxation contained 
in the challenged measure and other rules of taxation of the Member concerned", and "{i}n 
identifying the appropriate benchmar k for comparison, panels must obviously ensure that they 
identify and examine fiscal situations which it is legitimate to compare".   
20. In response to Panel Question 24, and expanding on the European Union's prima facie  
showing in its First Written Submi ssion, the European Union has further specified the relevant 
normative benchmark for each of the measures at issue, demonstrating that the tax treatment 
enjoyed by the beneficiaries involves foregoing of revenue that would be due under the relevant 
benchma rk.  Additionally, the European Union has explained that Washington State, itself, has 
publicly acknowledged this foregoing of revenue, and has even quantified the revenue that is 
foregone under each of the measures at issue, making the Panel's task a simp le one.  
21. In analyzing Article 1.1(a)(1)(ii), the Appellate Body in US – FSC has explained that the 
word "foregone" "suggests that the government has given up an entitlement to raise revenue  that 
it could 'otherwise' have raised".2  When a government con fers upon a taxpayer an entitlement  to 
a tax reduction, it foregoes its own entitlement  to raise a part of the revenue that would otherwise 
be due from the taxpayer under the normative benchmark.  Through each of the tax breaks at 
issue, Washington State h as conferred an entitlement  on Boeing and other Washington State 
                                               
1 Emphasi s added.  
2 Emphasis added.  WT/DS487/R/Add.1  
 
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  aerospace companies to receive the continued tax reductions, contingent on satisfaction of the 
Programme -Siting and Exclusive -Production conditions.  In that sense, the government is 
foregoin g, and has foregone, revenue that is otherwise due.   
22. In response to Panel Question 6, the European Union has clarified that its challenge is 
directed at the tax incentives, as amended and extended by SSB 5952, "as such"; this challenge is 
not focused on the application of these measures during any given point in time or in any specific 
instance.  Having said that, the European Union has also demonstrated that the challenged tax 
incentives have already foregone revenue that became due in the past, reven ue that is currently 
due, and revenue that will become due in the future.  All of these are relevant to determining the 
existence of a financial contribution within the meaning of Article 1.1(a)(1)(ii) of the SCM 
Agreement.  
23. The European Union has clar ified that SSB 5952 not only (conditionally) extended the 
expiration date of the existing tax incentives from 2024 through 2040, but also amended the sales 
and use tax exemption for construction services and materials  so that Boeing could take 
advantage of  that exemption in constructing its new 777X manufacturing facilities in 2015 
and 2016.  Thus, SSB 5952 has already led to foregoing of revenue in the past, and this was 
dependent on satisfaction of the Programme -Siting condition.  In addition, Boeing's co ntinued 
enjoyment of the B&O tax rate reduction associated with the 777X production and sales is 
currently  subject to the Exclusive -Production condition.   
24. With respect to the 2024 -2040 period, an entitlement in favour of Boeing has been created, 
and, in turn, an entitlement  has been foregone by Washington State, at present.  An interpretation 
under which only foregoing of revenue due in the past would constitute a financial contribution 
would allow Members to craft prohibited subsidy programs that incl ude a long time gap between 
the intended distortion (through the meeting of the prohibited contingency) and the reward for 
such conduct in the form of disbursement of a subsidy, in a manner that would limit the 
effectiveness of a challenge under Article 3. 1(b).  Moreover, Article 3.2 clarifies that 
“maintain{ing}” a subsidy programme tied to the prohibited contingencies violates the SCM 
Agreement , even when the financial contribution is yet to be “grant{ed}”, let alone actually 
disbursed or used.  
2. Benefit  
25. The European Union has demonstrated that the financial contribution in the present dispute 
– in the form of forgiveness of tax obligations – is, in the words of the panel in US – Large Civil 
Aircraft,  “essentially a gift from the government, or a waiv er of obligations due, and it is clear that 
the market does not give such gifts”.  Thus, there is a benefit because the very nature of a market 
precludes the availability of multi -billion dollar gifts to a commercial actor.  
3. Conclusion on “subsidy”  
26. The European Union, consistent with its burden to establish a prima facie case, has 
demonstrated that each of the measures at issue provides a financial contribution and confers a 
benefit.  Absent effective rebuttal by the United States, the very nature of a prima facie  case 
requires the Panel to make findings in favour of the European Union.  
27. The European Union also recalls that the findings it seeks are largely consistent with the 
“financial contribution” and “benefit” findings made by the panel and the  Appellate Body in United 
States – Large Civil Aircraft .  While the European Union's reliance on these findings certainly does 
not erase the burden to establish a prima facie  case (which it has discharged), the goals of 
predictability and security set out in Article 3.2 of the DSU, as well as the guidance of the 
Appellate Body, would warrant the Panel arriving at findings consistent with those made by the 
panel and Appellate Body in United States – Large Civil Aircraft , to the extent the relevant facts 
have not changed.  
28. The European Union acknowledges that the United States – Large Civil Aircraft  panel held 
that three of the tax incentives at issue did not involve a financial contribution because Boeing was 
unlikely to use these incentives.   These are t he (i) sales and use tax exemption for construction 
services and materials, (ii) leasehold excise tax exemption and (iii) leaseholder property tax WT/DS 487/R/Add.1  
 
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  exemption.  The panel expressly stated that its finding was a result of the European Union's claim 
not being one of a financial contribution in the abstract, but one specifically of a financial 
contribution to Boeing.  By contrast, in the present instance, the European Union alleges financial 
contribution in the abstract, warranting a different conclusion.  Addit ionally, the European Union 
has also demonstrated that, with the construction of the new 777X wing assembly plant, which 
commenced in 2014 and is expected to be completed in 2016, there is evidence of Boeing having 
used the sales and use tax exemption for construction services and materials.  
B. The Aerospace Tax Incentives, as Amended by SSB 5952, Constitute Prohibited 
Subsidies Contingent upon the Use of Domestic over Imported Goods  
29. As a result of the Programme -Siting and Exclusive -Production conditio ns established in 
SSB 5952, the aerospace tax incentives, as amended and extended, constitute prohibited subsidies 
"contingent ... upon the use of domestic over imported goods" within the meaning of Article 3.1(b) 
of the SCM Agreement.  While the European Union advances both a claim of de jure  contingency 
and of de facto  contingency, its first and principal claim is that of de jure contingency.  
1. The legal standard for demonstrating the existence of a subsidy contingent upon 
the use of domestic over impor ted goods  
30. Article 3.1(b) of the SCM Agreement provides that "subsidies contingent, whether solely or 
as one of several other conditions, upon the use of domestic over imported goods" "shall be 
prohibited".  
31. The United States correctly points out th at the French and Spanish texts of Article 3.1(b) 
employ the terms produits  and productos .  The European Union agrees with the United States that 
the use of the words produits and productos  in the French and Spanish versions is instructive, and 
the Europea n Union considers the word "goods" in Article 3.1(b) of the SCM Agreement  to be 
synonymous with the term "products".  
32. The European Union has also indicated its agreement with the United States and Japan that 
the word "over", in the text of Article 3.1(b ), means "in preference to", "in excess of" or "more 
than".  Further, the use of the word "over" (i.e., "in excess of") in Article 3.1(b) confirms that no 
de minimis discrimination is acceptable under the prohibition in Article 3.1(b) of the SCM 
Agreement.   As soon as a subsidy is contingent upon the use of domestic over imported goods, 
competitive opportunities between domestic and imported goods are distorted, even if no such 
goods are currently imported.  
33. The European Union has also set out its unders tanding that the word "use" in Article 3.1(b) 
has a broad meaning, including in response to Panel Question 44.  Prior guidance of the Appellate 
Body, and the context afforded by other provisions of covered agreements that employ the word 
"use", indicate th at its meaning goes beyond simple incorporation of a domestic input in the final 
subsidised product.   
34. To the extent that the United States argues that a "good" , within the meaning of 
Article  3.1(b), must be actually traded, the European Union disagree s.  This argument ignores a 
hallmark tenet of WTO jurisprudence that the disciplines on goods protect not just actual trade in 
goods as seen or envisioned in the market today, but also competitive opportunities .  In the 
context of a purely origin -based dis crimination, such as mandated by the legislation at issue, this 
protection extends to "potentiality to compete" even in the absence of an actual product which is 
traded at the relevant time.   
35. If the United States were correct that actual trade in a pr oduct needs to be demonstrated for 
it to qualify as a "good" under Article 3.1(b), the most trade restrictive of import substitution 
subsidies – i.e., those which have succeeded in distorting the market so much that they preclude 
even the existence of comp eting foreign producers in the market – would not be disciplined by 
Article 3.1(b), while less trade distorting import substitution subsidies would be subject to that 
provision.    WT/DS487/R/Add.1  
 
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  2. Application of the legal standard to the facts of this case  
36. The Euro pean Union fully agrees with the United States and  the third parties that 
Article  3.1(b) does not discipline production subsidies.  However, the measures at hand are not 
production subsidies, but subsidies contingent on the use of domestic over imported go ods, which 
are properly within the scope of the prohibition in Article 3.1(b).  
37. In this case, pursuant to the Programme -Siting condition  in Section 2 of SSB 5952, the 
amended and extended aerospace tax incentives are contingent on the establishment of a  new 
commercial aircraft manufacturing programme that uses goods (i.e., fuselages and wings) 
produced in the United States (specifically, in Washington State) in the subsidized aircraft.  Under 
this condition, the tax incentives would not have been extende d in duration through 2040 if Boeing 
had decided to "use" imported wings and fuselages in the assembly of the 777X, nor would the 
scope of the sales and use tax exemption for construction services and materials have been 
expanded to cover Boeing's work on the 777X manufacturing facilities in 2015 and 2016.   
38. Likewise, pursuant to the Exclusive -Production condition , Boeing benefits from the reduced 
B&O tax rate for the 777X only so long as it "uses" wings assembled exclusively in Washington 
State for the  777X, or any variant thereof.  If, for example, Boeing were to use any wings made in 
Japan for the 777X, as it does for the 787, it would lose its entitlement to the preferential B&O tax 
rate with respect to the manufacture and sale of the 777X.  
39. In response to the European Union's arguments in this regard, the United States asserts 
that wings and fuselages are not "goods", and that they are not "used" in the production of the 
777X.  But the very wording of SSB 5952, itself, describes wings and fuselage s as "products", a 
term synonymous with the word "goods".  The European Union refers to the shared understanding 
of the World Customs Organization, the United States' Customs authorities, Washington State, 
Boeing, and Airbus – outside the context of this d ispute – that wings and fuselages are goods.  
There are real world examples, including the Boeing 787 and 737, and the Airbus A350 and A380, 
where aircraft wings and fuselages have been traded and transported across long distances.   
40. While it is not in cumbent upon the complaining Member in a prohibited subsidy dispute to 
positively demonstrate nullification and impairment – in the form of prior existing identifiable 
competitive opportunity, and its erosion by the challenged measure – the European Union also 
demonstrates that prior to the enactment on SSB 5952, Boeing had considered importing the 777X 
wing from Japan, as it currently does for the 787.  The European Union referred the Panel to a 
November 2013 statement by Boeing's own Chief Technology Offi cer, Mr. John Tracy.  According to 
press reports, Mr. Tracy explained, immediately before the adoption of SSB 5952, that Boeing was 
“consider{ing} all other alternatives", and specifically clarified that such alternatives included "the 
possibility of taking production of the wings out of the United States to Japan ". 
41. The United States provides details of how Boeing today  intends to produce the 777X.  While 
a publicly -available technical report by Washington State's Department of Ecology contradicts the 
United States' current narrative about this production process, the European Union considers it 
unnecessary to enter into a protracted debate on 777X production.  These details are an irrelevant 
distraction.  It is necessary to evaluate a challenge to Artic le 3.1(b) in view of the market situation 
at the point in time prior to adoption of a challenged measure.   
42. SSB 5952 was adopted, and worded the way it is, precisely in order to take away 
competitive opportunity from wing and fuselage producers outside  of Washington State.  
Therefore, what Boeing or any other entity does today or intends to do in the future  in a market 
scenario distorted by the subsidies at issue is irrelevant and extraneous to the issues at hand.   
43. The United States' assertion that  the conditions at hand establish the eligibility parameters 
for a “production subsidy” is equally erroneous.  It is true that SSB 5952 begins by providing that 
the subsidized product – a commercial aircraft – must be produced in Washington State.  This 
aspect, taken alone, is a hallmark of a production subsidy, which would not be disciplined by 
Article 3.1(b).  However, the references to wings and fuselages, which the United States struggles 
to read out of SSB 5952, convert what would otherwise be a produc tion subsidy into a prohibited 
local content contingency.     WT/DS 487/R/Add.1  
 
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  44. The Programme -Siting condition provides that the required “fuselages and wings” cannot be 
just any type of “fuselages and wings” – rather, they must be fuselages and wings of the same 
“airpl ane program” that must be “fina{lly} assembl{ed}” in Washington State.  Similarly, the 
Exclusive -Production condition does not provide only that “wing assembly”, generally, must take 
place in Washington State; rather, it must be the “wing assembly of any v ersion or variant of a 
commercial airplane that is the basis of a siting of a significant commercial airplane manufacturing 
program in the state”.  Thus, according to the text of the legislation, fuselages and wings must be 
produced in Washington State, an d these same components must be used in the final assembly of 
the subsidized airplane program.   
45. The interpretation of Washington State law is a question of fact before this Panel that must 
be considered objectively, and the United States' interpretati on cannot be the correct one.  When 
interpreting domestic law of a Member, the role of a WTO panel is to determine whether the 
description of the functioning of the law, as made by the respondent, is consistent with the legal 
structure of that Member.  As a matter of Washington State law, "{s}tatutes must be interpreted 
and construed so that all the language used is given effect, with no portion rendered meaningless 
or superfluous".  The United States' proposed interpretation would, in fact, render critical  parts of 
SSB 5952 meaningless and superfluous – namely, the references to wings and fuselages.  As such, 
the United States' arguments must be rejected.  
3. The violation of Article 3.1(b) is both de jure  and de facto  
46. The European Union has established a prima facie case in respect of its first and principal 
claim – one of de jure contingency, with reference to the text of SSB 5952, which expressly sets 
out a multi -billion dollar reward for the use of domestic wings and fuselages, and a corresponding 
multi-billion dollar penalty for the use of imported wings and fuselages.  The text of SSB 5952 
does not provide, as did the measure considered by the Appellate Body in Canada – Autos , a 
"multiplicity of possibilities for compliance" with the Program -Siting a nd Exclusive -Production 
conditions that may "make the use of domestic goods only one possible means".  It provides one 
and only one possibility for compliance – the use of domestic wings and fuselages in the same 
aircraft that satisfied the Programme Sitin g condition – and makes the subsidies contingent on 
compliance.  Thus, the very text of SSB 5952 demonstrates the de jure  contingency that the 
European Union alleges.  
47. Additionally, the European Union has identified the following facts, which are demons trative 
of de facto  contingency in the present case:  
 The text of SSB 5952, and in particular the language of the Programme -Siting condition and 
Exclusive -Production condition;  
 The statement of Governor Inslee indicating that "the legislation includes stron g contingency 
language";  
 The fact that Boeing currently imports wings for its 787 from Japan;  
 The fact that Boeing actively considered the possibility of importing the 777X wings from 
Japan prior to the enactment of SSB 5952, and formally decided against t hat option once 
SSB 5952 was enacted.   
 The fact that SSB 5952 creates specific multi -billion dollar penalties  for use of imported 
wings or fuselages, and multi -billion dollar rewards  for use of domestic wings or fuselages.  
This penalty/reward structure w as designed to distort decision -making both at the initiation 
of the new aircraft programme (i.e. Programme -Siting condition), and throughout the life of 
that programme (i.e. Exclusive -Production condition).  
IV. CONCLUSION AND REQUE ST FOR RELIEF  
48. For th e reasons set out in its submissions to date, the European Union respectfully requests 
the Panel to find that each of the Washington State tax incentives, as amended and extended by 
SSB 5952, constitutes a subsidy that is prohibited pursuant to Articles 3. 1(b) and 3.2 of the SCM 
Agreement.  WT/DS487/R/Add.1  
 
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  49. In accordance with Article 4.7 of the SCM Agreement, the Panel should recommend that the 
United States withdraw the subsidies without delay.  
 
 
 
 
 
 WT/DS 487/R/Add.1  
 
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  ANNEX B -2 
SECOND I NTEGRATED EXECUTIVE SUMMARY OF THE ARGUM ENTS OF THE EUROPEAN UNION  
I. INTRODUCTION  
1. In accordance with the Panel's Working Procedures (adopted 7 December 2015), the 
European Union now provides an integrated executive summary of the facts and arguments 
presented in the European Union's (i) second written  submission, (ii) oral statement at the second 
substantive meeting, and (iii) responses (and comments on the United States' responses) to the 
Panel's questions following the second substantive meeting.  
2. During the course of this dispute, the European Un ion has provided evidence and argument 
demonstrating that Washington State's aerospace tax incentives, as amended and extended by 
SSB 59521, confer subsidies that are de jure contingent on the use of domestic over imported 
goods, in violation of Articles 3 .1(b) and 3.2 of the Agreement on Subsidies and Countervailing 
Measures ("SCM Agreement").  The Panel has before it the text of the legislation (submitted as 
Exhibit EU -03), which expressly conditions the provision of over $9 billion in subsidies on the us e 
of domestic "products" on aircraft manufactured in Washington State.  The European Union has 
also demonstrated, through additional factual evidence, a secondary claim of de facto contingency, 
also under Articles 3.1(b) and 3.2.  
3. Recalling the text of S SB 5952, Section 2 provides (in the "Programme -Siting condition") 
that the amended and extended subsidies would not be granted unless a new commercial aircraft 
program which uses domestically -made " products ", namely "fuselages and wings", is sited in 
Washi ngton State.  Additionally, Sections 5 and 6 (in the "Exclusive -Production condition") would 
serve to remove a large portion of one of the most valuable tax incentives in the package if the 
aircraft manufacturer satisfying the Programme -Siting condition we re to use any foreign -made  
wings in the newly sited aircraft manufacturing facility in Washington State.   
4. This statutory text is further supplemented by additional factual evidence.  Most notably, in 
testimony to the Finance Committee of Washington Sta te's House of Representatives just two days 
prior to passage of SSB 5952, Governor Jay Inslee explained in the following terms why he was 
sponsoring the legislation, and why the legislature should quickly pass it:      
Look, this is pretty simple what we a re looking at here , and that is a simple fact, and 
that is the construction of the Boeing 777X and its carbon fiber wing , and assembly of 
that airplane , will be the lynchpin for economic growth in the State of Washington in 
the decades to come.   We have an  opportunity in the few days ahead of us to make 
sure that advanced manufacturing of the carbon fiber wing  – the first time we have 
reversed the outflow of work  of this nature from the State of Washington to bring it 
back to the State of Washington, we can  achieve that in the next few days.   And I 
can't overstate the significance of this event .  Bringing this wing back to the State of 
Washington  sets the foundation for an advanced carbon fiber industrial ecosystem in 
the State of Washington.   When we lost t he wing for the Boeing 787 , some thought 
Washington would lose its lead in composites and advanced manufacturing.   The 787 
wing went to Japan ; the second line went to South Carolina.   . . .   Today, we are 
going to reverse that trend  with the 777X and its carbon fiber wing built here  in the 
State of Washington . . . .2 
5. Governor Inslee's statement could not have been any clearer – SSB 5952 amended and 
extended the tax incentives to the aerospace industry with conditions that will ensure that 
Washington St ate would not, once again, "los{e} the wing" to Japan, as it did for the 787.  Rather, 
                                               
1 The European Union uses the term "SSB 5952 " to refer to the law that is designated as Chapter 2 of 
the Laws of the 2013 3rd Special Session of the Washington State legislature, and publi shed in the 2014 volume 
of the official digest of the Session Laws of the State of Washington, beginning at page 2.  The United States 
refers to the same legislation as "ESSB 5952 ". 
2 Emphases added.  WT/DS487/R/Add.1  
 
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  through the Programme -Siting and Exclusive -Production conditions, Washington State has 
"reversed the outflow" of those inputs for Boeing's latest aircraft programme so t hat they will be 
"built" "in the State of Washington".  This was not the statement of a leader who would have 
accepted the current United States' assertions that wings of the 777X could not possibly be 
imported from foreign countries.  Nor would the Govern or have accepted the novel United States' 
position that wings are not components of a plane that are used in aircraft production.   
6. The Washington State legislature passed the Governor's proposed legislation two days later.  
And, as a result of these co nditions, SSB 5952 has already been a big success – and certainly not 
the "demonstrable failure" alleged by the United States – in ensuring that the wings and fuselages 
for Boeing's next new aircraft programme will be domestic goods.  
7. Having summarised w hat this dispute is about, it is important to clarify what the present 
dispute is not about:  
 Despite the United States' repeated contentions to the contrary, this dispute is not about a 
simple "production subsidy" that provides a financial contribution and  benefit to domestic 
producers without regard to whether domestic or imported goods are used in production of 
the subsidised product.   
 This is not a dispute related to contingency on the use of domestic over imported 
components of  wings and fuselages.  Ra ther, the European Union's claim is that the 
prohibited contingency in SSB 5952 is based on the use of domestic over imported wings  
and fuselages , which are themselves "goods".       
 This is not a dispute about the use of objects that could not be consider ed "goods".  In fact, 
the United States, itself, accepts (as it must) that wings and fuselages are traded on a 
regular basis, including for large commercial aircraft.  
8. With respect to the "subsidy" element, the United States' response consists primarily of 
repeated and erroneous assertions that a prima facie  case has not been established, and 
ambiguous observations about the types of evidence the United States might present if there were 
a prima face  case to rebut.  For example, the United States has made  cursory "suggestions" (i) 
that Washington State's tax regime has a "complicated structure" that may result in an effect 
known as "pyramiding", (ii) that Washington State primarily relies on a Business and Occupation 
("B&O") tax, which is unlike the tax re gimes in other states in the United States, and (iii) that 
there exist "numerous product -based, entity -based, use -based, and other similar tax adjustments" 
in Washington State.  The United States has not taken a position on how the first two of these 
asser tions should affect the Panel's determination of the normative benchmarks.  On the third, the 
United States has made certain belated and erroneous observations in its response to Panel 
Question 60, which the European Union discusses below.  
9. With respect to "benefit" within the meaning of Article 1.1(b) of the SCM Agreement, in 
stark contrast to all WTO panels that have previously considered the issue, the United States 
asserts that the existence of tax breaks constituting a financial contribution within t he meaning of 
Article 1.1(a)(1)(ii), which by their very nature are a "gift" from the government to the recipient, 
does not demonstrate conferral of "benefit".  
10. As for contingency under Article 3.1(b) of the SCM Agreement, all of the United States' 
arguments are based on three fundamental flaws – (i) an erroneous definition of "goods", (ii) an 
erroneous understanding of "use", and (iii) a focus on components  of wings and components  of 
fuselages as the relevant "domestic" and "imported" goods at issue, ra ther than the "products" 
actually referenced in SSB 5592 – i.e. wings and fuselages.    
11. In presenting its defense, the United States interprets both the text of SSB 5952 and that of 
the SCM Agreement in a manner that contradicts their ordinary meanings  (considered in context 
and in light of the relevant object and purpose), while offering no substantiation for such 
interpretations.  As for the evidence of de facto  contingency, the United States' strategy has been 
to rely on assertions and statements tai lor-made for the present dispute, and to casually dismiss 
inconvenient evidence from the real world as "imprecise" or "colloquial references".   WT/DS 487/R/Add.1  
 
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  12. While the United States has erred in accusing the European Union of "trying to fit a square 
peg into a roun d hole" in this dispute by characterizing the challenged incentives as prohibited 
subsidies (rather than production subsidies), the actual problem here is that the United States is 
attempting to drill a hole in the SCM Agreement so large that any Member co uld easily avoid the 
disciplines of Article 3.1(b).  The factual inaccuracies and legal fallacies associated with each of the 
US assertions have been highlighted by the European Union in its submissions.  In the following 
sections, the European Union brief ly summarizes the arguments presented in the European Union's 
second written submission and its subsequent submissions  
II. THE AEROSPACE TAX IN CENTIVES, AS AMENDED  BY SSB 5952, CONSTIT UTE 
SPECIFIC SUBSIDIES  
13. The European Union's second written submissio n once again details why the tax incentives, 
as amended and extended by SSB 5952, constitute specific subsidies within the meaning of 
Articles 1 and 2 of the SCM Agreement.  In particular, the European Union has explained that each 
of the seven aerospace t ax incentives confers a financial contribution involving the "forego{ing}" 
of "government revenue that is otherwise due", within the meaning of Article 1.1(a)(1)(ii) of the 
SCM Agreement.  For each individual tax incentive, the European Union has provided details about 
the relevant normative benchmark.  With respect to "benefit", the European Union again 
demonstrated that the tax breaks are a "gift" from the government that the recipients would not 
receive in the market.  As for specificity, there is no dis pute that subsidies violating Article 3.1(b) 
are deemed "specific" pursuant to Article 2.3 of the SCM Agreement.  
A. Financial Contribution  
14. The European Union now summarizes its responses to the United States' (1) arguments 
regarding the timing of the tax incentives, and (2) suggestions related to the normative 
benchmarks, as they relate to the issue of "financial contribution" under Article 1.1(a)(1)(ii) of the 
SCM Agreement.  
1. Timing  
15. The United States first hinted at a position, similar to the on e it adopted in the United States 
– Large Civil Aircraft  dispute, that only revenues foregone in the past would qualify as a financial 
contribution within the meaning of Article 1.1(a)(1)(ii) of the SCM Agreement.  The European 
Union demonstrated that ther e is no textual basis for such a temporal limitation.  Further, the 
Appellate Body has interpreted the word "foregone" in Article 1.1(a)(1)(ii) to mean " the 
government has given up an entitlement to raise revenue  that it could 'otherwise' have raised",3 
an action that does not have to occur after the revenue has become payable.  If accepted, the 
United States' interpretation would incentivise Members to craft prohibited subsidy programmes in 
which the subsidy is received as a delayed reward for satisfying a  prohibited contingency; in 
particular, the United States' interpretation could preclude a timely, effective challenge under 
Articles 3.1(b) and 3.2 in such circumstances, where the grant is complete and the firm is already 
in a position to account for, re ly on, and benefit from a future revenue stream.   
16. The United States subsequently modified its views on the temporal restriction it seeks to 
impose on Article 1.1(a)(1)(ii).  In particular, in its response to Panel Question 21, the United 
States sugges ted that Article 1.1(a)(1)(ii) may cover the foregoing of revenue that would have 
become due in the future within "the coming year", but not later.  The United States has offered 
no reasoning for its oscillating positions on temporal restrictions.  Such le gal arguments are not 
only erroneous, but they are internally inconsistent.   
17. In addition, putting aside the United States' flawed legal interpretation, the European Union 
has explained that five of the seven tax incentives have, in fact, actually fore gone revenue in the 
past, including since the November 2013 entry into force of SSB 5952.  In fact, the United States 
does not deny that the following tax incentives have already lowered the taxes of the Washington 
State aerospace industry in the past, and  continue to do so in the present: (1) B&O tax rate 
reduction for the manufacture and sale of commercial airplanes; (2) B&O tax credit for pre -
production development of commercial airplanes and components; (3) B&O tax credit for property 
                                               
3 Emphasis added.  WT/DS487/R/Add.1  
 
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  taxes and leasehol d excise taxes on commercial airplane manufacturing facilities; (4) exemption 
from sales and use taxes for computer hardware, software, and peripherals; and (5) exemption 
from sales and use taxes for certain construction services and materials.   
2. Normat ive benchmark  
18. Until its most recent submissions, the United States refused to engage in a specific 
discussion of the relevant normative benchmarks in the present dispute, other than to repeatedly 
assert that the European Union did not identify any such  benchmarks.  In fact, the European Union 
has identified and detailed such normative benchmarks, beginning with its first written submission.   
19. In its second written submission, the United States appeared to argue that the pre -existing 
aerospace tax in centives initiated under House Bill 2294 ("HB 2294") could provide the appropriate 
normative benchmark to determine whether the measures at issue involve a financial contribution 
under Article 1.1(a)(1)(ii).  In response, the European Union recalled that a normative benchmark 
is the tax rate that would normally  apply, taking into account the structure of the particular tax 
system.   As the panel and Appellate Body correctly found in US – Large Civil Aircraft , the 
0.2904  percent tax is the subsidized  B&O tax rate for commercial aircraft; as such, it cannot be 
the normative  benchmark.  
20. The United States also suggested that the various specifically -targeted sales and use tax 
exemptions offered by Washington State to entities outside the aerospace industry are  somehow 
relevant to identification of the normative benchmark.  As the European Union has explained, 
however, special tax treatment accorded to particular companies or industries does not reflect "the 
tax rates that would normally apply".  Rather, the tax  treatment generally applicable to all actors 
engaging in the relevant taxable activities within Washington State – for example, manufacturing 
or retail sales in the case of the B&O tax rate reduction – is what is relevant for identifying "the tax 
treatmen t of comparable income of comparably situated taxpayers".  
21. In its response to Question 60, the United States submitted a table of figures which, 
according to the United States, "suggest{s}" that the generally applicable tax rates for the taxes 
at issue  have become the exceptions rather than the general rule, and therefore cannot serve as 
the normative benchmark.  However, these belatedly submitted numbers do not warrant the 
conclusion that the United States seeks.  In that table, the United States treat s every instance in 
which Washington State has not imposed the maximum tax liability with respect to a particular 
activity – including even those instances where Washington State is constitutionally prohibited 
from imposing a tax – as an "exemption".  Thus , based in large part on numerous "exemptions" 
completely irrelevant to an enquiry under Article 1.1(a)(1)(ii), the United States then claims that a 
majority of all revenue in Washington State is subject to "exceptions", rendering the general tax 
rates pur ely notional.  In view of the figures relied upon by the United States, this proposition goes 
against the Appellate Body's express guidance that a normative benchmark, "cannot, {...} be an 
entitlement in the abstract, because governments, in theory, could tax all revenues."  The 
European Union applied corrections to this table, eliminating some instances which are not 
foregoing of revenue otherwise due in the sense of Article 1.1(a)(1)(ii), and arrived at the 
conclusion that far lower portions of the total revenue in Washington State are subject to 
"exemptions" from the general rate.  
22. Even the corrected figures presented by the European Union suffer from two major 
drawbacks, however.  First, these figures do not account for local property taxes or local sales and 
use taxes, which are also subject to the property tax exemption, and the two sales and use tax 
exemptions at issue. Second, the United States failed to remove from its calculations the tax 
exemptions resulting from the very subsidies being challen ged in the present dispute.  In United 
States – Large Civil Aircraft , the Appellate Body found that this second error rendered similar 
United States' figures useless for evaluating the normative benchmark.  
B. Benefit  
23. The European Union has demonstrated  that the financial contribution in the present dispute 
– in the form of forgiveness of tax obligations – is, in the words of the panel in US – Large Civil 
Aircraft,  "essentially a gift from the government, or a waiver of obligations due, and it is clear t hat WT/DS 487/R/Add.1  
 
- B-14 - 
 
  the market does not give such gifts".  A "benefit" exists because the very nature of a market 
precludes the availability of multi -billion dollar gifts to a commercial actor.  
24. In response, the United States presented an irrelevant "example", asking t he Panel to 
consider a case where a tax break would not provide a "benefit" when, " by not taking the 
challenged tax treatment, the taxpayer qualified instead for another equal or better tax 
treatment".  Here, the United States appeared to suggest that, in some instances, it may become 
possible for the taxpayer to forego the tax incentive at issue, and instead avail itself of generally 
available tax treatment that is more or equally advantageous to that incentive.  This, however, 
would appear to relate to th e relevant benchmark for purposes of the "financial contribution" 
analysis, rather than the analysis of "benefit" conferred by a tax measure already found to provide 
a financial contribution.  Moreover, the United States fails to demonstrate, or even asser t, that the 
facts of the present case are somehow similar to this "example".  They are not.    
C. Conclusion on "subsidy"  
25. The European Union, consistent with its burden to establish a prima facie case, has 
demonstrated that each of the tax incentives at  issue provides a financial contribution and confers 
a benefit.  Absent effective rebuttal by the United States, the Panel must make findings in favour 
of the European Union.  
III. THE AEROSPACE TAX IN CENTIVES, AS AMENDED  BY SSB 5952, CONSTIT UTE 
PROHIBITED SUBSIDIES CONTINGENT  UPON THE USE OF DOME STIC OVER IMPORTED 
GOODS  
26. As a result of the Programme -Siting and Exclusive -Production co nditions established in 
SSB 5952, the aerospace tax incentives, as amended and extended, constitute prohibited subsidies 
"contingent ... upon the use of domestic over imported goods" within the meaning of Article 3.1(b) 
of the SCM Agreement.   
27. The European Union has explained that, as of the moment SSB 5952 became law in 2013, 
the amended and extended tax incentives provi ded subsidies contingent on the use of domestic 
over imported goods.  Consequently, the United States' contention that the European Union " has 
the burden to demonstrate that {the} contingency obtains specifically with respect to the alleged 
subsidy conferr ed from July 1, 2024, to June 30, 2040" does not follow from the European Union's 
actual claims in this dispute.  
28. The United States errs when it asserts that "the treatment prior to 2024 under any of these 
measures … is a priori  not contingent on any of  the conditions introduced by ESSB 5952" .  As the 
European Union has explained on several occasions, under the Exclusive -Production condition, if a 
determination is made – at any point after the Programme -Siting condition was satisfied in 
July 2014 – that Boeing has sited any wing assembly outside Washington State (for any version or 
variant of the airplane programme that was the basis for satisfying the Programme -Siting 
condition), the B&O tax rate reduction would become inapplicable to Boeing's revenues f rom that 
programme (i.e., 777X program).  Additionally, had Boeing not satisfied the Programme -Siting 
condition, the amendments extending the sales & use tax exemptions for construction services and 
materials to cover all commercial aircraft (not just supe refficient airplanes), would not have taken 
effect.  Thus, the current  availability of the B&O tax rate reduction for the 777X programme, and 
the current  availability of the sales and use tax exemptions for construction services and materials, 
are already contingent on meeting the conditions on SSB 5952, even before 2024.  
29. The Panel is faced with subsidies de jure  contingent upon the decision by an aircraft 
producer to use domestic wings and domestic fuselages for a new aircraft programme, where a 
major portion of that subsidy would be lost if even a single wing for that aircraft programme is 
imported through the year 2040.  While these facts should be determinative of the question of 
contingency under Article 3.1(b) of the SCM Agreement, the United State s seeks to obscure the 
prohibited contingency through a series of erroneous and irrelevant statements.   WT/DS487/R/Add.1  
 
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  A. Three Foundational Errors Made by the United States  
30. The entirety of the United States' argumentation on contingency is founded on three 
erroneou s propositions – (i) wings and fuselages are not "goods"; (ii) wings and fuselages are not 
"used" on aircraft; and (iii) the phrase "domestic over imported goods", as it applies to wings and 
fuselages, requires an enquiry into the origin of the components  of the wings and fuselages, rather 
than the origin of the wings and fuselages, themselves.   
1. US' Error #1: "goods"  
31. The United States persists with its erroneous assertion that wings and fuselages are not 
"goods ", although (i) the United States has a cknowledged that Boeing purchases "complete 
fuselages" for the 737; (ii) Boeing has previously explained (outside the context of this dispute) 
that it imports wings for the 787; and (iii) SSB 5952, itself, refers to fuselages and wings as 
"products", a ter m that the United States has accepted is a synonym for the legal term used in 
Article 3.1(b) – "goods".   
32. Originally, the United States claimed that the protection under Article 3.1(b) would extend 
only to goods that are actually traded .  In its second  written submission, however, the United 
States conceded that the protection extends to competitive opportunities  for imported "goods".  
The United States qualified that concession with an assertion that the protection does not extend 
to "strictly theoreti cal" opportunities.  Putting aside the lack of any textual or jurisprudential basis 
to characterize certain competitive opportunities as "strictly theoretical", there is nothing 
theoretical about importing or otherwise purchasing wings and fuselages for a civil aircraft, as 
even the United States acknowledges for certain aircraft.   
2. US' Error #2: "use"  
33. The United States continues to assert that wings and fuselages are not "used"  on aircraft, or 
in the production of aircraft, because they are the out put of aircraft production, rather than 
inputs.    The United States' erroneous position is based on its false allegations about the planned 
production process for the 777X, which – even if true – would be irrelevant to a de jure  analysis of 
SSB 5952.  As t he European Union has explained, and the Unite d States has not contested, 
SSB 5952 does not even mention the 777X, but instead references only a new model, version, or 
variant of a commercial aircraft with a composite wing and/or fuselage.  For some other large 
commercial aircraft, the United States generally agrees with the European Union that fuselages 
and wings are inputs which are used in aircraft production.  As a result, the US' position on the 
777X production process, even if correct, does nothing to  refute the European Union's de jure  
claim.  
34. Moreover, the United States' claims about the planned 777X production process are 
contradicted by statements made by Boeing and Washington State outside the confines of the 
present dispute. For example, accor ding to press reports, Eric Lindblad, the vice president of 777X 
Wing Integration, explained that "{t}he wing subassemblies will {} be moved into a final wing 
assembly area in the main building, where they will be turned into full wings " and " finally put 
together " before  being attached to the aircraft.4 
3. US' Error #3: "imported" vs. "domestic"  
35. The United States continues to argue that it is relevant, and even legally determinative, that 
Boeing may import components of  wings and fuselages  for the sited  aircraft without restriction, 
while still satisfying the Programme -Siting and Exclusive -Production conditions.   But the European 
Union is not challenging the subsidies as being conditional on use of domestic over imported 
components of  wings and fuselages .  The European Union's challenge is clear – i.e. to satisfy the 
two conditions, imported wings  and imported fuselages  may not be used on the aircraft  that is the 
subject of the siting decision.    
36. The United States complains that the European Union has  not explained "what is the 
domestic and what is the imported good for each of the measures at issue".  In fact, the European 
                                               
4 Emphases added.  WT/DS 487/R/Add.1  
 
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  Union has repeatedly and clearly stated that wings and fuselages are the relevant "goods" for 
purposes of determining whether the challenged tax incentives are contingent upon use of 
domestic over imported goods, under Article 3.1(b).  The United States' attempt to refocus the 
Panel's attention on the components of  wings and the components of  fuselages – rather than the 
components of  aircraft – provides an irrelevant distraction.  The European Union is the master of 
its own claims,  and this is simply not a case about components of wings, nor a case about 
components of fuselages.  
37. The fact is that, however Washington State defines a "wing" or a "fuselage", those 
"products" must be either "manufacture{d}" or "assembl{ed}" in Washington State, and used on 
the sited aircraft, in order to satisfy the Programme -Siting and Exclusive -Production conditions.  If, 
at the time of its siting de cision, Boeing expressed an intention to import something that 
Washington State understood to be a "wing" or "fuselage" for the 777X, or if something that 
Washington State understands to be a "wing" is imported today (or anytime before 2040) for use 
on the  777X, the subsidy (or a significant portion thereof) would be lost.   
38. As an interpretative matter, the European Union has maintained a dualist view, wherein any 
good that is not "imported" would be "domestic".  The European Union submitted that any 
different interpretative view would require a panel to examine whether goods are "domestic" under 
applicable rules of origin.  Given the absence of multilateral rules of origin, Members would be at 
liberty to circumvent the discipline in Article 3.1(b) – and those in all other provisions of the 
covered agreements employing the "domestic" and "imported" duality – by resorting to 
conveniently tailored domestic rules of origin.  
39. In Question 72, the Panel requested the parties to identify "provisions in the co vered 
agreements" that could further assist in the interpretation of the words "domestic" and "imported", 
for the purpose of Article 3.1(b) of the SCM Agreement.  In response, the European Union 
demonstrated confirmation of its dualist view, which divides goods into "domestic" and "imported", 
with reference to Articles II:2(a), III:1, III:2, and XI:2(c) of the General Agreement on Tariffs and 
Trade 1994 ("GATT 1994"); Article 15.3, footnote 57, and Paragraph I of Annex III of the SCM 
Agreement; Paragraphs 1 (a), 1(d), and 1(g) of Annex C to the Agreement on Sanitary and 
Phytosanitary Measures ("SPS Agreement"); and Article 3.3 of the Agreement on Implementation 
of Article VI of the General Agreement on Tariffs and Trade 1994 ("Anti Dumping Agreement").   
40. In its own response, the United States instead chose to again express general disagreement 
with the European Union's interpretative proposal, while not identifying any provision in a covered 
agreement (barring a general unexplained reference to the Agreeme nt on Rules of Origin) that 
would warrant an interpretation different from the one proposed by the European Union.  Nor did 
the United States even attempt to assert an interpretation of its own, let alone defend one.  The 
United States even attempted to sh ield itself behind an assertion that it is the "EU's burden" to 
interpret Article 3.1(b), and in particular the meaning of "domestic" and "imported".  Yet, the 
Appellate Body has explained that "the burden of establishing or proving rules of international law 
cannot be imposed upon any of the parties, for the law lies within the judicial knowledge of the 
Court".  
B. Availability of the Subsidies to Entities Other than Boeing  
41. The United States argues that the availability of the tax incentives at issue to  entities other 
than Boeing precludes a finding that the subsidies are contingent on the use of domestic over 
imported goods, because only Boeing needs to satisfy the conditions.  The United States seeks to 
obscure the fact that none of the tax incentives,  as amended and extended by SSB 5952, would 
have taken effect in respect of any of the potential recipients  had the Programme -Siting condition 
not been fulfilled by Boeing (or another commercial aircraft producer).  Thus, the current 
availability of the am ended and extended tax incentives enjoyed by all the recipients is a direct 
result of the satisfaction by Boeing of the prohibited contingency in the Programme -Siting 
condition, on 9 July 2014.    
42. Further, nothing in the text of Article 3.1(b) requires  that the entity receiving the subsidy, 
on the one hand, and the entity required to meet the prohibited contingency, on the other hand, 
must be one and the same, for a measure to violate that provision.  If the drafters had intended to 
include such a limit ation, they could have provided, for example, for prohibition of "subsidies to an WT/DS487/R/Add.1  
 
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  enterprise  contingent, whether solely or as one of several other conditions, upon the use of 
domestic over imported goods by that enterprise ".  They did not.   
C. Production Subsidies, and the United States' Flawed Examples  
43. From the very beginning of this dispute, the United States has dedicated large parts of its 
submissions to defending a proposition that is non -controversial – production subsidies, in and of 
themselves,  do not result in de jure  violations of Article 3.1(b).  The European Union signalled its 
agreement with this proposition, in unequivocal terms, in several of its submissions, yet the United 
States has persisted with this argument.  
44. When faced with a c laim that a subsidy is contingent on the use of domestic over imported 
goods, a Member may not evade the prohibition under Article 3.1(b) simply by characterizing a 
challenged measure as a production subsidy.  Such a claim should be decided on the basis of  the 
obligation in Article 3.1(b), and whether the measure violates that obligation.  It should not be 
decided on the basis of what each party understands to be a "production subsidy", which is a term 
that does not appear in the covered agreements.  
45.  With respect to the United States' assertion that "wings" and "fuselages" are what makes a 
vehicle an "airplane " and that this needed to be clear in SSB 5952, in the context of an alleged 
"production subsidy" for airplanes, the European Union finds it diffic ult to believe that, absent such 
references to wings and fuselages, Washington State would have faced the risk that recipients of 
the subsidies at issue would manufacture vehicles without wings and fuselages and claim them to 
be "airplanes" eligible for th e subsidy.  That did not, for example,  appear to be a concern with 
HB 2294, which defined the airplane that needed to be manufactured in Washington State as a 
"twin aisle airplane that carries between two hundred and three hundred fifty passengers, with a 
range of more than seven thousand two hundred nautical miles, a cruising speed of approximately 
mach .85, and that uses fifteen to twenty percent less fuel than other similar airplanes on the 
market".  In this definition, there is no reference to wings, fu selages, or any other components of 
the airplane.  
46. The United States uses its assertions relating to "production subsidies" to set up a series of 
straw -men that it then proceeds to knock down.  The United States creates absurd hypothetical 
scenarios – most recently going so far as to invent a "production subsidy" contingent on 
importation  of two halves of an airplane – which consider whether a  "production subsidy" should 
be available to certain producers or importers.  In each hypothetical, the United S tates first asserts 
its subjective view that the subsidy it describes should be characterized as a production subsidy, 
and should be consistent with Article 3.1(b).  Then the United States goes on to apply what it 
erroneously characterizes as the "EU's the ory" to the hypothetical, and concludes that under that 
alleged "theory" (which is unrecognisable to the European Union, itself), the subsidy in question 
would constitute a de jure  violation of Article 3.1(b).  Based on that series of exercises and 
conclus ions, the United States claims that the "EU's theory" should be rejected.  
47. To be clear, the European Union does not offer a special "theory" on Article 3.1(b).  The 
European Union's position is simply that any subsidy "contingent on the use of domestic over 
imported goods" is inconsistent with Article 3.1(b).  That understanding applies no matter what 
the goods at issue are – i.e. screws, screwboxes missing screws, front halves or back halves of 
airplanes, parts of paper planes, or, most importantly for this case, wings and fuselages of 
commercial aircraft.  
48. The United States has argued that, if accepted, the European Union's position on the 
interpretation of the words "goods" and "use" in Article 3.1(b) would mean that, to be consistent 
with Article 3 .1(b), "production subsidies" could require nothing more than that a domestic 
producer perform "the very last production step", such as "turning the very last screw" or "drilling 
the final rivet", in the territory of the Member providing the subsidy.  This  argument is a red 
herring, as there are numerous ways to condition a subsidy on significant domestic production (far 
beyond "turning the very last screw") without creating a de jure  violation of Article 3.1(b), as the 
United States and Washington State al ready know.   In fact, the European Union has gone beyond 
its burden in the present dispute to identify several ways in which the United States could have 
offered production subsidies in the present fact pattern, without resulting in a de jure  violation.  
Unlike the absurd US hypotheticals involving paper airplanes, airplanes split into halves, and WT/DS 487/R/Add.1  
 
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  subsidies contingent on use of imported goods, the examples that the European Union has 
highlighted are those that various US states, including Washington State, have actually employed 
in order to encourage local investment, job creation, and production activity.  
D. The 777X Production Process, and the Definition of a "wing"  
49. Starting with its first written submission, the United States introduced several facts relating 
to the process allegedly to be employed by Boeing in production of the 777X.  These assertions 
seek to establish that the 777X wings and fuselages do not come into existence as separate goods 
at any time before the final assembly of the aircraft.  The European Union has demonstrated that 
these assertions, tailor -made for the present dispute, are contradicted by assertions made by 
Boeing and Washington State outside the present dispute.  
50. More importantly, as the European Union has repeatedly expl ained, these allegations about 
the 777X production process are irrelevant to the de jure  claim, because SSB 5952 does not name 
Boeing or the 777X programme.  It does not even specify the size of the aircraft that should be 
sited in Washington State pursuan t to the Programme -Siting condition.  Any aircraft manufacturer 
could have satisfied the Programme -Siting condition in respect of any aircraft that had a composite 
wing or fuselage or both, even if that aircraft was much smaller than, and markedly differen t from, 
the 777X.  Thus, assertions as to how Boeing intends to produce the 777X are entirely irrelevant, 
at least to the European Union's first and principal claim of de jure contingency.  
51. The United States claims that the "fact" that Boeing satisfied the Programme -Siting 
condition in respect of the 777X without the "use" of "domestic over imported goods" precludes a 
finding that SSB 5952 contains contingencies prohibited by Article 3.1(b).  However, this assertion 
is again predicated on the same three foundational errors repeatedly made by the United States, 
in respect of the words "use", "goods", and the US' presumption that the relevant goods for 
understanding "domestic" and "imported" are components of  fuselages and components of  wings, 
not fuselages  and wings.   
52. Similar to its factually erroneous and legally irrelevant assertions relating to the production 
process of the 777X, the United States dedicates much effort to defining a "wing".  The United 
States falsely attributes to the European Union  the position that only "complete finished wings" 
(and not "complete wings" or "finished wings") are relevant to the present dispute.  Then the 
United States goes on to supply a definition of "wing" that is entirely divorced from the text of SSB 
5952 and r eality.  Under that definition, for example, a wing that does not carry the engines and 
fuel is not a wing; and a wing that is not fitted with winglets is not a wing.  The European Union 
has demonstrated the absurdity of this definition, highlighting that,  under that definition, several 
real-world aircraft – MD-80, MD -90, Boeing 717, Boeing 737 – have flown for decades without a 
"wing".  
53. The United States relies on this flawed definition to postulate that the 787 "wing" was not 
imported, and that Governo r Inslee was imprecise in describing the contingencies in SSB 5952 in 
his testimony before the House Finance Committee, specifically in asserting that "{t}he 787 wing 
went to Japan".  Similarly, the United States dismisses, as "colloquial references", all assertions by 
Boeing and Washington State outside the confines of the present dispute indicating that the 787 
wing was imported.   
54. In any event, it is not necessary for the Panel to decide the precise definition of a "wing" or 
"fuselage" in the present  dispute, especially in context of the European Union's first and principal 
claim of de jure contingency.  What matters is that there is a "product" called a "wing", and a 
"product" called a "fuselage" (which is different from components of whatever Washin gton State 
understands to be a "wing" or a "fuselage") that, if imported, will result in the loss of the subsidy, 
or a portion thereof.  That is clear from the text of SSB 5952, itself.  
E. Conclusion on Contingency  
55. The European Union has demonstrated i n SSB 5952 the existence of a prohibited 
contingency, under Article 3.1(b) of the SCM Agreement, with reference to the text of that 
legislation, and additional evidence.  The United States has failed to rebut that prima facie  case.  WT/DS487/R/Add.1  
 
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  The United States' defe nses are based on three foundational errors, and are factually inaccurate 
and largely legally irrelevant.   
IV. CONCLUSION AND REQUE ST FOR RELIEF  
56. For the reasons set out in its submissions to date, the European Union respectfully requests 
the Panel to find that each of the Washington State tax incentives, as amended and extended by 
SSB 5952, constitutes a subsidy that is prohibited pursuant to Articles 3.1(b) and 3.2 of the SCM 
Agreement.  
57. In accordance with Article 4.7 of the SCM Agreement, the Pane l should recommend that the 
United States withdra w the subsidies without delay.  
 
 
 WT/DS 487/R/Add.1  
 
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  ANNEX B -3 
FIRST INTEGRATED EXE CUTIVE SUMMARY OF TH E ARGUMENTS OF THE U NITED STATES  
1. The EU's entire case is an example of trying to fit a square peg into a round hole.  The hope 
appears to be that, if the peg and the hole are not examined closely, no one will notice that the 
peg cannot fit.  The EU asserts that Engrossed Substitute Senate Bill ("ESSB") 5952 discriminates 
against imported products by requiring the use of d omestic over imported goods as a condition for 
receiving subsidies.  It is on this basis that the EU challenges seven Washington tax measures as 
prohibited by Article 3.1(b) of the Agreement on Subsidies an d Countervailing Measures 
("SCM  Agreement").  But the relevant conditions in ESSB 5952 have nothing whatsoever to do 
with the use of goods, whether domestic or imported.  They therefore do not discriminate against 
imported goods.  Article 3.1(b) does not prohibit subsidies provided to domestic producers f or or in 
light of domestic production.  
I. WASHINGTON'S AEROSPA CE INDUSTRY AND BOEI NG'S PRODUCTION OF 
COMMERCIAL AIRPLANES  
2. Washington has emerged as an aerospace hub, and in turn, the aerospace sector is an 
integral part of Washington's economy and emplo yment.  As of February 2015, there were 
1,361  firms in Washington State's aerospace manufacturing and supporting industries, with 186 of 
these in the core industry.  Nearly 20 percent of U.S. aerospace jobs are in Washington.    
3. A major part of Washingt on's emergence and continued role as an aerospace hub is owed to 
the presence of Boeing Commercial Airplanes ("Boeing").  Boeing has deep roots in Washington, 
which continues to be the center of its operations worldwide.  Two of Boeing's three major 
produc tion facilities are there.  The Renton and Everett facilities produce the 737NG and 737 MAX; 
and the 747, 767, 777, and 787 Dreamliner airplanes, respectively.  Development of the 777X is 
based in Everett, and Boeing plans to produce the 777X there as well .  The third production facility 
is in North Charleston, South Carolina.  Except for some 787s manufactured after 2012, all 
commercial aircraft ever manufactured by Boeing were assembled in Washington, and all of 
Boeing's major in -house production operatio ns are in the United States.   
4. Large commercial aircraft ("LCA") are among the most complex machines ever built.  They 
consist of tens of thousands of individual parts, which must be integrated into a single safe, 
reliable, and economic system.  For thi s reason, developing LCA is extremely costly, with 
development costs running into the billions of dollars.  Many variables across a long time horizon 
dictate the success or failure of a program, making such investments very risky.  In this 
atmosphere, Boei ng requires an elaborate planning system for bringing new aircraft to market, 
which can be simplified as occurring in four phases:  pre -launch, launch, post -launch, and entry 
into service and industrial ramp -up.   
5. The same elaborate planning process was  required for the 777X program based out of the 
Everett, Washington facility.  Boeing sought to limit costs, risks, and logistical complexities of the 
sort that had burdened the 787 program, where aggressive outsourcing of manufacturing activities 
contribu ted to significant production delays and increased program costs.  
II. WASHINGTON'S TAX SYS TEM AND THE CHALLENG ED MEASURES  
6. The measures challenged in this dispute pertain to five categories of Washington taxes: the 
business & occupation ("B&O") tax, the retail sales tax, the use tax, the leasehold excise tax, and 
the property tax.  These taxes form an important component of the backdrop against which the 
challenged measures operate.  The EU submission gives them short shrift, but the details are 
critical to any evaluation as to whether they constitute financial contributions and confer a benefit 
within the meaning of Article 1 of the SCM Agreement, or are "contingent … upon the use of 
domestic over imported goods."  Accordingly, the United States describes  each of these in greater 
detail below.  WT/DS487/R/Add.1  
 
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  7. The State of Washington relies primarily on a B&O tax – rather than a corporate tax or an 
income tax – for purposes of business taxation.  The tax is an excise tax on "gross receipts," which 
refers to the gross p roceeds of sales, gross income of a business, or the value of products.  The 
tax is imposed on the gross receipts of all sales, not just retail sales.  No deductions are permitted 
for the costs of doing business, such as expenses for raw materials, wages p aid to employees, or 
component parts manufactured by others that are incorporated into a product being sold.  In 
addition, the B&O tax does not vary depending on the profitability of the taxpayer.  
8. Washington also has a retail sales tax, which is its pri ncipal tax source ( i.e., of all revenue, 
including both business and non -business tax revenue).  This tax applies to sales to consumers of 
tangible personal property, as well as the sale of certain services, including construction services 
(e.g., construct ing and improving new or existing buildings and structures), some personal 
services, and other miscellaneous services.  The Washington retail sales tax rate has two 
components:  the state component, which is equal to 6.5 percent, and the local component, w hich 
varies by jurisdiction.  Local governments within Washington have the authority to set their own 
retail sales tax rates, but both components are administered by the State.  
9. The use tax is a tax due on the use of goods or services to the extent that the user has not 
paid Washington sales tax or "a legally imposed retail sales or use tax…to any other state, 
possession, territory, or commonwealth of the United States, any political subdivision thereof, the 
District of Columbia, and any foreign country o r political subdivision thereof."  For example, use 
tax is due if goods are purchased in another state that does not have a sales tax, or has a sales 
tax rate that is lower than that of Washington.  The tax is imposed on the privilege of using as a 
consume r specified goods or services in Washington.  
10. Washington also has a property tax.  Under RCW §  84.36.005, "{a}ll property now existing, 
or that is hereafter created or brought into this state, shall be subject to assessment and taxation 
for state, count y, and other taxing district purposes."  Thus, all real and personal property is 
subject to tax.  However, a number of exceptions to this general rule apply.  Property tax rates 
vary among territorial subdivisions of Washington.  However, the Washington Co nstitution limits 
the regular ( i.e., non-voted) combined property tax rate to 1 percent of market value.  
11. Washington also has a leasehold excise tax.  As noted above, property owned by federal, 
state, or local governments is exempt from the property tax .  However, when private parties lease 
such property, they are subject to the leasehold excise tax.  In effect, the leasehold excise tax 
imposes a tax burden on persons using publicly owned, tax -exempt property similar to the 
property tax that they would p ay if they owned the property.  The 12 percent rate is then 
multiplied by an additional tax, which is currently set at 7 percent.  Thus, the total leasehold 
excise tax rate is 12.84 percent of the rent paid for the property.  
III. THE CHALLENGED MEASU RES A ND CONDITIONS IN ESS B 5952  
12. The EU challenges seven measures in this dispute, each of which provides for certain tax 
treatment under the law of the state of Washington: (i) the 0.2904 percent B&O tax rate, (ii) the 
B&O tax credit for aerospace product d evelopment; (iii) the B&O tax credit for property taxes; 
(iv) the sales and use tax exemption for computer hardware, software, and peripherals; (v) the 
sales and use tax exemption for construction services and materials; (vi) the leasehold excise tax 
exemp tion for port district facilities, and (vii) the property tax exemption.   
13. The challenged measures have several important features.  The first feature is general 
availability on a non -discriminatory basis.  Although the EU submission focuses on Boeing,  none of 
the challenged measures refers to Boeing explicitly.  Rather, they set out tax treatment that is 
available to any eligible company in Washington.  For example, non -U.S. airplane manufacturers, 
and suppliers to such companies, are eligible for the challenged tax treatment.   
14. The second feature is silence with respect to the use of domestic over imported goods.  
None of the challenged measures distinguishes between domestic and imported goods, let alone 
condition availability on the use of domest ic over imported goods.  This is true of ESSB 5952 as 
well.   WT/DS 487/R/Add.1  
 
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  15. The third feature is changes in conditions for eligibility.  In 2006, 2008, and 2013, 
Washington State enacted legislation that affected the availability of the challenged tax treatment 
by expanding the class of companies that could claim such treatment.  
16. The EU challenges these measures "as amended and extended" by ESSB 5952.  In 2013, 
Washington enacted ESSB 5952, which would extend aerospace -related tax measures if and when 
a significa nt commercial airplane manufacturing program was sited in the state.  The Washington 
legislature noted that ESSB 5952 served its "specific public policy objective to maintain and grow 
Washington's aerospace industry workforce."   
17. ESSB 5952 contains two  provisions that the EU alleges are relevant to this dispute: an Initial 
Siting Provision and a Future Siting Provision.  Both are silent on the use of domestic over 
imported goods, and indeed do not draw any distinction between domestic and imported goods .  
They contain no text that requires the use of domestic over imported goods, nor even encourages 
it.  They therefore do not result in any discrimination against imported goods.   
18. Rather, the Initial Siting Provision requires that certain manufacturin g activities occur in 
Washington.  Under the Future Siting Provision, the continued applicability of the 0.2904 percent 
B&O tax rate for 777X sales (because the 777X is the program that triggered the Initial Siting 
provision) depends on "final assembly and  wing assembly" – a narrow category of manufacturing 
activity – taking place in Washington.  
IV. THE EU IGNORES ITS B URDEN OF PROOF AS TH E COMPLAINANT IN A N EW 
DISPUTE  
19. As the complaining Member, the EU of course bears the burden of demonstrating that th e 
challenged measures are subsidies within the meaning of Article 1 of the SCM Agreement, and that 
they contain a "contingency" – i.e., a relationship of "contingency," or a state of "dependen{ce} 
for its existence on something else."  It is also required to demonstrate that this "contingency" is 
"upon the use of domestic over imported goods."  Each of these showings consists of several 
elements, and the EU bears the burden of proving each.   
20. Yet, the EU ignores this burden, seeking to establish the all eged import substitution 
contingency with conclusory assertions, unsupported assumptions, and references to US – Large 
Civil Aircraft , a separate dispute in which the EU failed to demonstrate that any of the challenged 
measures are prohibited under Article  3.1(b).  Such arguments are insufficient to establish a prima 
facie case.  This is only confirmed by the fact that the US – Large Civil Aircraft  panel addressed 
facts as they existed in the 2004 -2006 period, rather than the time of this Panel's establishm ent in 
2014, and the current dispute involves measures that differ from those at issue in the other, 
separate dispute.  The EU's claims fail as a result of it not even attempting to allege and prove 
with evidence each of the elements of its claims.   
V. THE EU FAILS TO DEMONS TRATE THAT ANY OF TH E CHALLENGED MEASURE S IS A 
SUBSIDY UNDER ARTICL E 1.1 OF THE SCM AGR EEMENT  
21. The EU does not even attempt to make a prima facie  case that the challenged measures 
involve financial contributions that confer a benefit .  In fact, the EU simply assumes, without 
support – and it asks the Panel to assume – that the challenged measures are subsidies within the 
meaning of Article 1 of the SCM Agreement.   
A. Financial Contribution  
22. The EU alleges that each of the challeng ed measures involve revenue foregone by 
Washington during the time period from July 1, 2024 – July 1, 2040.  However, the EU fails to 
establish that any such financial contribution exists, and therefore fails to make a prima facie case.  
23. To show a fina ncial contribution, the EU relies on the findings in a separate dispute, US – 
Large Civil Aircraft .  Yet the EU ignores the fact that in that dispute, three of the challenged 
measures were in fact found not to be subsidies because the panel found that the EU failed to 
establish the existence of a financial contribution.  The EU also ignores that the US – Large Civil WT/DS487/R/Add.1  
 
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  Aircraft  panel's findings pertain to a different time period ( i.e., prior to 2007), and cannot support 
a finding that revenues supposedly to be  foregone after July 1, 2024, result in a present subsidy.   
24. Indeed, where an allegation is specific to a particular recipient of an alleged subsidy, it is 
normally necessary for that recipient to have actually used or exercised that fiscal incentive.  For 
some of the measures, the EU does not even allege  use by Boeing.  
25. The EU seems unaware, or it intentionally glosses over the fact, that references to past 
findings in US – Large Civil Aircraft cannot substitute for evidence in this dispute.  The EU  also fails 
to analyze Washington's unique B&O tax system and establish, in light of such analysis, a 
normative benchmark against which alleged revenue foregone can be compared.  
B. Benefit  
26. As discussed above, the EU has failed to establish a prima faci e case that any of the 
challenged measures involves a financial contribution.  It would seem to be a potential future 
benefit that would be enjoyed, if at all, 10 years from now.  The EU, however, has not explained 
what it believes to be such a future fina ncial contribution and benefit.  Thus, it automatically 
follows that the EU fails to establish that any benefit is conferred by such financial contributions.   
27. In this regard, it is noteworthy that the EU has not even attempted to establish benchmarks 
for any of the challenged measures, as is its burden.  Rather, the EU's benefit arguments consist 
of citations to other panel reports and the unsupported arguments related to financial contribution.  
Accordingly, there is no valid "benefit" argument for th e United States to rebut, and the EU has 
failed to establish a prima facie  case. 
VI. THE EU FAILS TO ESTA BLISH THAT ANY OF TH E CHALLENGED MEASURE S IS 
CONTINGENT UPON THE USE OF DOMESTIC OVER  IMPORTED GOODS AS PR OHIBITED BY 
ARTICLE 3.1(B) OF TH E SCM AGREEME NT 
28. The discipline of Article 3.1(b) is focused and specific.  It prohibits the granting of subsidies 
that are contingent upon the use of domestic over imported goods.  Yet the measures challenged 
here do not address the use of goods at all, let alone r equire the use of domestic over imported 
goods as a condition for any particular alleged subsidy.  Rather, they provide specified tax 
treatment to persons that conduct certain activities ( e.g., certain types of manufacturing, retailing, 
R&D) in Washington.   They are available to all companies that do business in Washington, whether 
headquartered in the United States, the EU, or elsewhere – and regardless of whether they sell 
goods for use in the supply chains of Boeing, Airbus, or another company.   
29. To establish its claims under Article 3.1(b), the EU must demonstrate that a measure 
established to be a subsidy is contingent upon the use of domestic over imported goods.  The EU 
argues that the alleged subsidies are contingent on the use of domestic over i mported goods in 
breach of Article 3.1(b) of the SCM Agreement because of two conditions in ESSB 5952 regarding 
the siting of certain manufacturing operations related to a commercial airplane program.  The EU's 
argument fails for several reasons.  
30. First, the EU incorrectly states that the text of ESSB 5952 "expressly condition{s}" the 
challenged tax treatment on the use of domestic over imported goods.  The EU states that under 
two provisions in ESSB 5952, the Initial Siting Provision and the Future Siti ng Provision, "all of the 
aerospace tax incentives . . . are expressly conditioned  on the use of domestic over imported 
goods in the final assembly of the aircraft."  In fact, these provisions – and the statutes challenged 
by the EU – are silent on the use  of domestic over imported goods, and indeed do not draw any 
distinction between domestic and imported goods.  They merely extend the tax treatment for 
companies that perform certain production and non -production activities in Washington if and 
when a sign ificant commercial airplane program is sited in the state.   
31. Specifically, the Initial Siting Provision states that, for the expiration dates of the challenged 
tax measures to be extended, Washington's Department of Revenue ("DOR") must first determine  
that a company has made a final decision to "commence manufacture" of a new model or variant 
of a commercial airplane, including the wings and fuselage of a new model or variant of a new 
commercial airplane, in Washington.  The Future Siting Provision par tly revokes this tax treatment WT/DS 487/R/Add.1  
 
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  if DOR determines "that any final assembly or wing assembly" of that new model or variant "has 
been sited outside the state of Washington."  These provisions do not implicitly, much less 
"express{ly}," require the use of dome stic over imported goods, as the EU asserts.  In fact, they 
do not mention the use of goods at all.   
32. Second, the EU's argument assumes, without support, that ESSB 5952 requires the separate 
production of fuselages and wings for use in the production o f commercial airplanes.  It does not.  
ESSB 5952 is silent on the how the manufacture and assembly of fuselages and wings fits into the 
overall production process of a commercial airplane.  It does not require manufacturers to produce 
fuselages or wings as  finished intermediate goods that can be "used" in downstream production.   
33. And Boeing, in fact, does not do so.  777X fuselages and wings never exist as discrete, 
standalone goods that are subsequently "used" in a downstream production process.  In fa ct, 
during the final assembly process, parts of the fuselage and parts of the wing are joined to each 
other before a complete fuselage or complete wing is produced.  In short, the 777X's fuselage and 
wing are elements of the output of the final assembly pr ocess (that is, the manufacture of a 
commercial airplane), not goods used as inputs to that process.  In no case does Boeing purchase 
(or otherwise "procure") complete wings from a supplier.  Therefore, the EU's whole case is 
dependent on a false premise – that fuselages and wings are goods  required to be used in the 
production of a commercial airplane.   
34. Third, the EU relies on an incorrect interpretation of Article 3.1(b) of the SCM Agreement.  
Article 3.1(b) is focused and captures a specific type of  subsidy: it prohibits subsidies 
"contingent  … upon the use of domestic over imported goods."  However, Article 3.1(b) does not 
discipline subsidies provided to domestic producers for their domestic production.  This 
interpretation is confirmed by Article III of the GATT 1994.  Article III:8(b) of GATT 1994 
establishes that providing subsidy to domestic producers for production activities in the grantor's 
territory cannot be equated with providing a subsidy advantaging domestic over imported goods.  
And bec ause disciplining subsidies contingent upon use of domestic over imported goods is an area 
of overlap between Article 3.1(b) of the SCM Agreement and Article III of the GATT 1994, 
Article  3.1(b)'s prohibition on subsidies contingent upon the use of domesti c over imported goods 
also cannot be equated with subsidies provided for domestic production.  Therefore, even ignoring 
the many other flaws in its arguments, the EU's claims also necessarily fail on this basis because, 
at best, the EU can only even attemp t to show a subsidy provided for domestic production.   
35. Fourth, the EU argument assumes, without support, that 777X fuselages and wings are 
saleable or traded "goods" capable of importation.  Prior Appellate Body guidance confirms that 
"goods" within t he meaning of Article 3.1(b) must be understood as products that are traded, and 
therefore capable of being imported.  This necessarily excludes 777X fuselages and wings, which 
are not available in a commercial setting.  In short, 777X fuselages and wings are not goods within 
the meaning of Article 3.1(b).   
36. Fifth, the EU fails to establish that the "geared to induce" standard is appropriate in the 
context of Article 3.1(b), much less demonstrate with evidence that it is met in this case.  In its 
brief argument, the EU states that the challenged measures are "geared to induce" the use of 
domestic over imported goods.  The EU does not establish that this standard, which was endorsed 
in the context of Article 3.1(a), is appropriate in the context of Articl e 3.1(b).  Once again, even 
aside from the fact that the 777X fuselage and wings do not constitute "goods" that Boeing would 
"use" within the meaning of Article 3.1(b), the evidence shows the challenged measures were not 
anticipated to, and did not, affect  the proportions of domestic and imported content in the 777X.   
37. By the time Washington was considering ESSB 5952, it was clear that Boeing would produce 
the 777X, as it has every model of commercial airplane throughout its 100 -year history, in the 
United States.  Moreover, ESSB 5952 has not prevented Boeing from planning to import significant 
foreign content for the 777X.  Other Washington taxpayers too will receive the identical tax 
treatment challenged by the EU despite there being no restrictions on  their use of goods, whether 
domestic or imported.  In fact, a retailer selling exclusively imported commercial airplane 
components that it manufactured abroad would be entitled to the tax treatment challenged by the 
EU.  The EU thus fails to establish a prima facie  case, and the evidence actually contradicts its 
theory.  WT/DS487/R/Add.1  
 
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  VII. CONCLUSION  
38. The EU fails to make a prima facie case with respect to each of the elements of its claims, 
and with respect to each of the seven challenged measures.  All of the EU's a rguments, moreover, 
are based on an incorrect interpretation of Article 3.1(b) of the SCM Agreement that conflates 
subsidies that are contingent upon the use of domestic over imported goods with measures that 
are contingent on domestic production.  Accordi ngly, and for the reasons as set out above, the 
United States requests that the Panel reject the EU's claims and find that the challenged measures 
are not inconsistent with the U.S. obligations under Article 3.1(b) of the SCM Agreement.   
EXECUTIVE SUMMARY  OF U.S. OPENING ORAL  STATEMENT AT THE FIR ST SUBSTANTIVE 
MEETING OF THE PANEL  WITH THE PARTIES  
I. INTRODUCTION  
39. The EU's entire case, which alleges that the measures at issue are import -substitution 
subsidies prohibited by Article 3.1(b) of the SCM Agre ement, is an effort to force a square peg into 
a round hole.   
II. THE EU'S FAILURE TO ESTABLISH EACH ELEME NT OF ITS CLAIMS  
40. The EU bases its claims on conditions – what the United States refers to as the Initial Siting 
Provision and the Future Siting P rovision – that it alleges require the use of domestic over 
imported goods.  In fact, the EU goes so far as to assert that the challenged measures "are 
expressly conditioned on the use of domestic over imported goods."  However, in reality, the siting 
provisions by their plain language address only the scope of manufacturing that will take place in 
Washington.  Neither provision addresses the use of goods at all, much less the domestic or 
imported character of goods that are used.  This is evident from the explicit text of the Initial 
Siting Provision and the Future Siting Provision, and illustrated by the fact that the 777X will 
consist of a great deal of imported content, as well as domestic content from U.S. states other 
than Washington.   
41. Beyond the EU's incorrect characterization of ESSB 5952, the EU's meager submission does 
nothing to lay out the relevant facts or link them to the WTO provision, Article 3.1(b) of the SCM 
Agreement, that it invokes.  It does not describe the operation of the multiple  measures it 
challenges.  It does not establish that the challenged measures confer a subsidy within the 
meaning of Article 1 of the SCM Agreement.  It does not explain how, based on the customary 
rules of interpretation of public international law used fo r interpreting the covered agreements, the 
analysis should proceed.  This falls short of a complaining party's burden to present a prima facie  
case with respect to each element of its claims.  And, as witnessed by the submissions of the 
United States and t he third parties, the EU's many omissions have not obscured the fact that its 
claims rely upon multiple distortions of Article 3.1(b).  
42. The EU also does not attempt to show that, if the Initial Siting Provision or the Future Siting 
Provision did require  the "use" of fuselages or wings, one or both of those conditions would require 
that such fuselages or wings be domestic instead of imported.  This is another example of the EU's 
silence on necessary elements of a prima facie  case under Article 3.1(b).   
43. The EU fails to explain why the 777X fuselages and wings are "goods" within the meaning of 
Article 3.1(b).  In not addressing this element, the EU simply ignores inconvenient facts, such as 
that there are no buyers and sellers of 777X fuselages or wings , 777X fuselages and wings never 
exist in their completed forms separate and apart from the product that they are supposedly used 
to produce, i.e., the finished airplane.   
44. The EU also invokes a "geared to induce" standard endorsed by the Appellate Bod y only in 
the context of Article 3.1(a), but makes no effort to establish its proper application in the context 
of Article 3.1(b) or to prove that such a standard is met based on evidence in this dispute.   
45. Another example of the EU's cursory treatment  of the elements of its claims is its failure to 
identify the alleged financial contribution, including a normative benchmark, and benefit for each 
challenged measure.  Instead, the EU points to a report in a different dispute – a report, the WT/DS 487/R/Add.1  
 
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  United States  notes, in which the panel rejected the EU's contention that three of the tax 
measures challenged in this dispute were subsidies, and which examined a period nearly 20 years 
earlier than the year in which alleged revenue foregone in this matter is alleged to begin.  The EU 
then attempts to improperly shift the burden to the United States to prove that such measures are 
not subsidies.  Nothing requires a respondent to rebut a case the complaining party has not made 
in the current dispute.  
III. THE SWEEPING SYSTEMIC CONSEQUENCE S OF THE EU'S INTERP RETATION OF 
ARTICLE 3.1(B)  
46. The EU's interpretation of Article 3.1(b) would also have dangerous systemic consequences 
and would be at odds with the text of the provision, its context, and the object and purpose of  the 
Agreement.  For example, by seeking to frame the final stages of a production process as making 
"use" of "goods," the EU's theory would effectively turn every subsidy for production in the 
grantor's territory into a prohibited import -substitution subs idy.  As nearly all of the third party 
submissions in this dispute make clear, this is not the proper interpretation of Article 3.1(b).  
47. For example, as Canada points out, Article 6.1 and Annex IV:3 of the SCM Agreement 
demonstrate unambiguously that su bsidies tied to production of a given product, without more, 
are not prohibited.  Rather, they are properly the subject of a serious prejudice analysis under 
Article 5.   
48. Australia observes that "it is important that the distinction is retained between  the permitted 
payment of a subsidy to domestic producers and a subsidy which is contingent on the use of 
domestic over imported goods."   
49. Similarly, Brazil notes that, given that Article III:8(b) of the GATT 1994 states that 
Article  III does not preve nt the payment of subsidies exclusively to domestic producers – which 
the United States addressed in its first written submission – "it would be incongruous to interpret 
Article 3.1(b) of the SCM Agreement to prohibit a measure simply based on the measure' s link to 
domestic production."   
50. Japan notes that among the "deficiencies" in the EU's analysis is the failure to recognize that 
"a law stating that a subsidy is contingent upon the domestic ‘siting of' a certain program is 
different from a law statin g that subsidy is contingent upon the ‘use of 'the domestic product."  
IV. THE RELEVANT FACTS D O NOT SUPPORT THE EU 'S CASE, AND IN FACT  UNDERMINE 
IT   
51. The EU has invoked a provision that applies narrowly and in very specific factual situations.  
However , in this case, the measures bear none of the hallmarks of import -substitution subsidies.  
For example, the company whose behavior they were supposed to influence – Boeing – can use 
the tax measures despite planning to source much of the content for the 77 7X from outside the 
United States and from U.S. states other than Washington.  
52. This is the case because the Initial Siting Provision and Future Siting Provision pertain only 
to the location of certain manufacturing activities.  They do not distinguish between domestic and 
imported goods, and have nothing to do with import substitution.  There is no evidence that either 
the Initial Siting Provision or Future Siting Provision is structured to discriminate against imported 
goods.  They do not, and for that  reason, they have not had that effect.  
53. Moreover, companies other than Boeing can also use the tax measures without having to 
fulfill local content requirements or even meet production conditions.  Indeed, the tax measures 
are available to aerospace c ompanies for engaging in a range of activities, some of which are far 
afield of the use of goods, such as engineering work and R&D.  Thus, the EU's arguments simply 
ignore how the challenged measures are structured and designed, and how they operate in the  
real world.   
54. Thus, the siting provisions themselves do not support the contention that any alleged 
benefits are contingent on the use of domestic over imported goods.  Moreover, the factual 
evidence lends no support to the EU's allegation that the In itial Siting Provision and Future Siting WT/DS487/R/Add.1  
 
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  Provision are structured to pursue, or do in fact accomplish, import substitution.  Not only does the 
EU adopt an improper interpretation of Article 3.1(b), but the facts only further undermine the 
theory it advance s.   
EXECUTIVE SUMMARY OF  U.S. CLOSING ORAL ST ATEMENT AT THE FIRST  SUBSTANTIVE 
MEETING OF THE PANEL  WITH THE PARTIES  
55. The EU's case remains deeply flawed.  The EU proposes an overly broad interpretation of 
Article 3.1(b) of the SCM Agreement that is inc onsistent with the ordinary meaning of the 
provision as a whole, its context, and the object and purpose of the treaty.  
56. The EU also refuses to take account of the facts, which rather than support the EU's case, 
undermines and contradicts it.  Instead, the EU relies on a range of false premises, including the 
notion that a wing for the 777X as a practical matter can be used or imported as a separate object 
prior to final assembly.  
57. The EU emphasizes its de jure  argument, which it identifies as its pri mary argument, and in 
which case the EU is required to show that the subsidy is contingent on the use of domestic over 
imported goods.  However, the conditions it cites say nothing about "goods" at all, but instead talk 
about the commencement of manufactur e, final assembly, wing assembly – all manufacturing and 
production activities which have no explicit or implicit reference to the use of goods.  
58. The United States has explained that these are very predictable ways of defining the scope 
of the domestic manufacturing activity that a granting member would expect to take place in its 
territory to qualify for the tax treatment.  There is no aspect of the SCM Agreement that would 
require any production or manufacturing subsidy to be granted only if it require d that nothing 
more than the last screw was turned.  Such an interpretation would turn virtually every 
manufacturing or production subsidy into an import substitution subsidy.   
59. The EU, in its closing statement, refers to statements it thinks show that  Boeing might have, 
or there would have been, some competitive opportunity in which the wing would be imported for 
the 777X.  We understand this to be an effort to prove a de facto  claim.  But the EU's notion that 
the conditions of ESSB 5952 resulted in im port substitution is divorced from reality and from what 
could have taken place.   
60. The EU also asserts that the U.S. position that wings and fuselages are not used in aircraft is 
contrary to actual practice occurring for 100 years.  The EU is relying o n the definition of the terms 
"wings" and "fuselages," but these definitions say nothing about their use in the aircraft production 
process, and nothing about whether the fuselages or wings need to be "used" as "goods" in the 
777X.   
61. Turning to the EU' s assertion that Boeing produces and assembles a wing, and then uses 
that wing to assemble the aircraft – that is not true.  Boeing does not assemble a wing and then 
use that to assemble a final aircraft.  A wing and a fuselage are never used prior to the final 
aircraft being created.  
62. Lastly, the EU is suggesting that you can subsidize airplane production and asking why the 
text of ESSB 5952 specifies anything else.  But the United States has made it clear that the text of 
ESSB 5952 specifies the scope  of production expected in producing an airplane, i.e., what it means 
to produce an airplane.   
 
 
 WT/DS 487/R/Add.1  
 
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  ANNEX B -4 
SECOND  INTEGRATED EXECUTIVE  SUMMARY OF THE ARGUM ENTS OF THE UNITED STATES  
1 EXECUTIVE SUMMARY OF  U.S. SECOND WRITTEN SUBMISSION  
1. This dispute, ul timately, will turn on the Panel’s answer to a simple question:  whether a 
measure that allows a manufacturer to receive certain tax treatment while still being able to 
import all of the parts used in the production of the product at issue, can nonetheless  be 
considered a subsidy that is  "contingent on the use of domestic over imported goods. " In the U.S. 
view, it is obvious that it cannot.  The structure, design, and actual operation of ESSB 5952 lend 
no support to the EU’s allegations of import -substituti on contingencies.  Boeing’s decision to site 
the 777X manufacturing program in Washington led to the fulfillment of the First and Second 
Siting Provisions, even though Boeing plans to use a wide range of imported components for the 
777X, including on its f uselage and wings.  Furthermore, even if all the parts used to manufacture 
the 777X were fabricated outside the United States, Boeing could still satisfy the two Siting 
Provisions.  Companies other than Boeing are eligible for the alleged subsidies without  having to 
fulfill any conditions at all.  Thus, if ESSB 5952 were an import -substitution policy instrument – 
which is not the case – it would be a demonstrable failure.  
2. This latter point should come as no surprise.  In reality, ESSB 5952 was not design ed and 
structured to require the use of Washington -origin goods instead of goods made elsewhere.  In 
other words, assuming arguendo that the challenged measures are subsidies, ESSB 5952 
establishes the conditions for a domestic production  contingency, rath er than an import -
substitution  contingency inconsistent with Article 3.1(b) of the Agreement on Subsidies and 
Countervailing Measures ("SCM Agreement ").  As such, the measures at issue in this dispute, if 
found to be subsidies, might be actionable under Pa rt III of the SCM Agreement, but are not 
prohibited under Part II.   
3. Third parties have expressed strong reservations with the EU’s view that a measure 
contingent on the production of a finished good, including its major structural elements, should be 
treated as contingent on the use of domestic over imported goods for purposes of Article 3.1(b).  
As they have noted, this approach appears to result in all or virtually all production subsidies being 
treated as prohibited import substitution subsidies.  
4. The EU now acknowledges that "{p}roduction subsidies, which the United States defines as 
‘the payment of subsidies to domestic producers for engaging in production activities in the 
grantor’s territory’, are not prohibited by Article 3.1(b) of the SCM Agree ment." However, the EU 
tries to walk a tightrope between production subsidies and import -substitution subsidies by 
arguing that ESSB 5952 would be fully consistent with Article 3.1(b), were it not for the 
combination of specific references to finished airc raft and fuselages and wings in the definition of a  
"significant commercial aircraft manufacturing program,  "used in the First Siting Provision and the 
reference to  "wing assembly " in the Second Siting Provision.  According to the EU, this 
combination alon e converts what would otherwise be a production subsidy into a prohibited local 
content contingency.  
5. The EU’s position, however, precludes Members providing production subsidies that define 
the scope of required domestic production activity in terms of specific elements of the output.  
Under this approach, a production subsidy would only be permitted to define the eligible recipients 
by requiring a producer to perform the very last production step (perhaps by turning the very last 
screw) and nothing more . 
6. It is not just legal principles that disprove the EU’s arguments, but the actual facts of 
Boeing’s 777X program.  As the Boeing Expert Statement explains, fuselages and wings are  
"elements of the output of the production process "– not inputs used in t he production of airplanes.  
The ordinary meaning of the word  "airplane, " as expressed in dictionaries and regulatory practice, 
confirms that a fuselage and fixed wings are fundamental to what makes an airplane an airplane.  
As the Appellate Body found in Canada – Autos , if the use of domestic over imported goods  is only  
"one possible means " of satisfying the requirements for obtaining a subsidy, that would be  WT/DS487/R/Add.1  
 
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  "insufficient for a reasoned determination of whether a contingency ‘in law’ on the use of domesti c 
over imported goods exists. " In this case, the 777X program demonstrates that there is at least 
indeed one such means for satisfying the two Siting Provisions, which shows definitively that the 
use of domestic over imported goods is not required, in law or in fact, by ESSB 5952.  
7. In its de jure arguments, the EU attempts to brush this evidence aside – even though the 
Appellate Body in Canada – Autos criticized an analysis of de jure contingency that ignored real -
world evidence regarding the actual opera tion of the measures.  In its de facto arguments, the EU 
never discusses the elements of such a de facto analysis as described by the Appellate Body.  
Instead, the EU merely asserts that ESSB 5952 "rewards  "the use of domestic over imported goods 
and "penal izes" the failure to do so.  But this argument fails because it assumes that the alleged 
subsidies are contingent on the use of domestic over imported goods, which is the conclusion it is 
supposedly designed to prove.  The EU also omits a numerical analysi s analogous to what the 
Appellate Body considered to be potentially relevant under a  "geared to induce " approach.  
Conducting such a numerical analysis confirms that the challenged measures are not contingent on 
the use of domestic over imported goods.  
II. Legal Standard: A Contingency is Prohibited Under Article 3.1(b) Only If it 
Requires the Use of Domestic over Imported Goods  
8. The first major error in the EU’s case is its incorrect interpretation of Article 3.1(b) of the 
SCM Agreement.  The parties agr ee that this obligation does not prohibit subsidies contingent on 
the production of goods in the territory of a Member.  Where the parties disagree, by contrast, 
with respect to the legal standard, is whether the fact that a taxpayer can meet a condition 
without resorting to the use of domestic over imported goods is sufficient to demonstrate that the 
underlying measure is not a prohibited import -substitution subsidy.  The parties also disagree 
about the extent to which factual evidence can play a role in c onfirming such an interpretation of 
the relevant measures.  A proper interpretation of Article 3.1(b) establishes that a subsidy is 
contingent on the use of domestic over imported goods only if the recipient is required  to use 
domestic over imported goods.   That analysis must take into account all sources that elucidate the 
meaning of the words used in the measure in question, including relevant factual information 
regarding the application of the measure.  
1.1.1   A. The Individual Elements of Article 3.1(b)   
9.   In the context of Article 3.1(b) of the SCM Agreement, a relation of contingency exists only 
where the  "use of domestic over imported goods " is required to receive the alleged subsidy.  In 
Canada – Autos , the Appellate Body applied this principle in  the context of Article 3.1(b).  
According to the Appellate Body, if there is a  "multiplicity of possibilities for compliance " with a 
subsidy’s  "condition{s} for eligibility, " only some of which involve the use of domestic over 
imported goods, then the sub sidy is consistent (at least de jure ) with Article 3.1(b).  
10. The EU attempts to resist this conclusion regarding its burden of proof by arguing that the 
reasoning in Canada – Autos applied exclusively to value -added requirements.  However, the SCM 
Agree ment does not grant a privileged status to import -substitution subsidies that take the form of 
domestic value added requirements.  Rather, Article 3.1(b) treats all subsidies alike:  they are 
prohibited only if contingent on the use of domestic over import ed goods.  Accordingly, and 
contrary to the EU’s arguments, the fact that the alleged local content requirements in Canada – 
Autos and this dispute take different forms under domestic law does not alter the analytic 
approach under Article 3.1(b).  
11. The U nited States and the EU also disagree on the meaning of the word  "use" in 
Article  3.1(b) of the SCM Agreement.  The parties quote different editions of the Oxford English 
Dictionary to define the ordinary meaning of  "use," but they mean essentially the sam e thing.  The 
United States and the EU also cite largely the same provisions of the SCM Agreement as context.  
However, the EU errs in two important ways.  First, it fails to recognize the relevance of the 
context provided by GATT 1994 Article III:8(b).  A n interpretation of  "use" that resulted in making 
production subsidies  "prohibited " would tend to render Article III:8(b) inutile, contrary to the 
principle of effectiveness.  Second, the EU seeks to characterize the meaning of  "use" in 
Article  3.1(b) as e ither "broad " or "very broad. " This is a subjective characterization based on the 
EU’s judgment, rather than the text of the SCM Agreement, and is accordingly not useful for WT/DS 487/R/Add.1  
 
- B-30 - 
 
  purposes of interpretation.  The EU also misses an important aspect of the definit ions and 
examples that it cites:  all connect  "use" with a process for achieving a purpose, which is distinct 
from the process itself.  To use the non -production examples cited by the EU, subsidies contingent 
on the repair, maintenance of modification of m erchandise in a party’s territory would not be 
prohibited, but requiring the use of domestic goods in those processes would be prohibited.  
12. The parties have also debated the meaning of the term  "goods " as it appears in 
Article  3.1(b) of the SCM Agreemen t.  The United States has demonstrated that the fuselages and 
wings for the 777X are not tradable in the sense necessary for Article 3.1(b).  Accordingly, the EU 
has failed to establish the existence of the domestic and imported  "goods " that it claims are the 
subject of the measures at issue.  
13. The EU has done nothing to meet its burden of establishing that the goods on the use of 
which the subsidy is allegedly contingent are or would be domestic.  This omission is particularly 
glaring, as the United Stat es has shown that ESSB 5952 does not require the use of any domestic 
parts in assembly of the fuselage or wings.  In other words, Boeing is free to import 100 percent of 
the parts as long as assembly occurs in Washington.  The EU has not even argued, let a lone 
proven, that a wing or fuselage manufactured in this fashion – even if a discrete wing or fuselage 
existed at some point in the production process – would qualify as  "domestic goods. " 
14. The dictionary definition of the word  "over" is"{a}bove in degr ee, quality, or action; in 
preference to; more than. " The EU argues that the relevant meaning is  "more than " or "in excess 
of." This position cannot be reconciled with the context of Article 3.1(b) and is contrary to 
interpretations of the term in past pan el and Appellate Body reports.  If  "over" in Article 3.1(b) 
meant  "in excess of,  "the prohibition would apply to subsidies contingent on the use of domestic 
goods in excess of  imported goods – using a greater quantity of domestic goods than imported 
goods (e.g., 51 percent domestic goods).  Conversely, a Member would be free to require the use 
of some domestic goods, as long as the quantity was lower than the amount of imports.  The 
Appellate Body evinced a different understanding in Canada – Autos.  
1.1.2   B. The Evidence for an Analysis Under Article 3.1(b) May Extend Beyond the 
Text of the Challenged Measures, For Both De Jure and De Facto Analysis  
15. The Appellate Body found in Canada – Autos  that under Article 3.1(b), "contingency ‘in law’ is 
demonstrat ed ‘on the basis of the words of the relevant legislation, regulation or other legal 
instrument. " It explained further that  "such conditionality can be derived by necessary implication 
from the words actually used in the measure. " The panel consulted multi ple legal instruments to 
evaluate the contingency at issue, but the Appellate Body found that a still broader inquiry was 
necessary to determine how the subsidy operated.  
16. As an initial matter, where a complaining party brings a de jure  challenge under 
Article  3.1(b) of the SCM Agreement, the complaining party has the burden of establishing what is 
the "domestic " and what is the  "imported " good for purposes of Article 3.1(b) that are affected by 
the measure at issue.  This the EU has failed to do.  Inste ad, the EU appears to believe that by 
characterizing its claim as  "de jure ," it is excused from having to address this key threshold issue.  
That is not the case.   
17. The EU is claiming that the measures at issue are, on their face, contingent on the use  of 
domestic over imported goods.  Thus, the EU needs to establish as part of any de jure  claim what 
is the domestic and what is the imported good for each of the measures at issue.  And in 
determining what, if anything, is the relevant  "good, " it is not a ppropriate to suggest to a panel 
that it ignore or blind itself to relevant facts.  Yet that appears to be what the EU is suggesting.  
18. Furthermore, as Canada – Autos  makes clear, while a de jure  analysis is based on the words 
of the measure, it does not  evaluate them in a vacuum.  A single clause in a piece of legislation 
typically takes meaning from the surrounding clauses in the legislation.  If the measure in question 
amends previously enacted legislation or codified laws, provisions in that legislati on will also affect 
the meaning of the words in the measure at issue.  And, finally, the tools that a Member’s legal 
system uses to interpret the words in that measure will also play a necessary role in understanding 
the "words " for purposes of a de jure  analysis.  WT/DS487/R/Add.1  
 
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  19. ESSB 5952 points directly to a number of sources that define its terms.  The legislation itself 
contains definitions, which also cross -reference the definitions applicable generally to 
administration of the B&O tax.  The B&O tax definitions, m ost notably the definition of  "commercial 
airplane, " refer to the regulatory definitions used by the Federal Aviation Administration, and to  
"ordinary meaning, " which under Washington law may involve reference to dictionaries or sector -
specific meanings.  In addition, under Washington law, "{g}reat weight is generally accorded to the 
interpretation of a statute by the administrative agency which is charged with its administration. " 
Thus, DOR’s interpretation of ESSB 5952 would also factor into the overall an alysis of its meaning 
under Washington law.  
20. The EU, in fact, acknowledges that a de jure analysis may involve evidence beyond the text 
of a legal instrument that is the subject of a complaining Member’s claims, provided that such 
evidence relates to t he text of the legal instrument.  However, the EU overstates its case in 
arguing that, as a general matter, such evidence  "must necessarily relate to these very words of 
the relevant legislation. " In fact, as Canada – Autos shows, evidence outside the scop e of any  
"legislation, " which pertains to the actual operation of a measure, may – and sometimes must – be 
included in a de jure analysis.   
21. As discussed below, that is the case in this dispute:  Boeing does not use wings or fuselages, 
domestic or impo rted, to produce the 777X, even though Boeing’s 777X siting decisions satisfied 
the First Siting Provision, and have avoided triggering the Second Siting Provision.  As an 
indication of DOR’s interpretation of ESSB 5952, a statute that DOR is charged to ad minister, this 
evidence has a role in the analysis of de jure  contingency, consistent with the approach taken by 
the Appellate Body in Canada – Autos . 
22. In addition, to the extent that the EU argues that the Panel must complete its de jure 
analysis based  solely on the language used in the First and Second Siting Provisions, without using 
any other interpretive tools, the EU is incorrect.  It cites no legal support for this position, and the 
only factual basis it advances is that  "there is no need to exami ne ‘a particular manufacturer’s 
ability to satisfy the requirements of a measure without using domestic goods’, because the two 
conditions require the use of specific domestic goods:  fuselages and wings. " The EU’s argument in 
this regard is transparently circular and does not reflect the objective approach that panels are to 
take.  In fact, it is only by reference to all of the tools for interpreting ESSB 5952 that the Panel 
can evaluate the EU’s arguments in a meaningful way.  
III. The EU Fails to Establis h that the Alleged Subsidies are De Jure Contingent on the 
Use of Domestic Over Imported Goods  
23. As explained above, to establish that the challenged measures are de jure inconsistent with 
Article 3.1(b) of the SCM Agreement, it is not enough for the EU to assert that the use of domestic 
over imported goods is one possible way to receive the alleged subsidies.  Rather, the EU must 
demonstrate that receipt of the alleged subsidies is  "contingent " on the use of domestic over 
imported goods in the sense of b eing "dependent for their existence. " The EU fails in this regard, 
and in fact the evidence shows that it is possible to satisfy the two Siting Provisions while using 
only imported parts.   
24. The EU argues that the references to manufacturing or assembly  of fuselages and wings in 
the Siting Provisions  "convert what would otherwise be a production subsidy into a prohibited local 
content contingency, " but in reality these terms merely define the scope of production activity 
required to use the tax treatment  covered by ESSB 5952.  As the United States has explained 
before, as the two main structural elements of the airframe, wings and a fuselage together are the 
essence of the airplane.  And, at least in the case of the 777X, they are not parts of that airpla ne 
that are  "used" in its production, but rather are the output of that production process, as we will 
discuss in further detail below.  
1.1.3   A. The EU Fails to Show that the Text of ESSB 5952 Makes the Use of Fuselages 
and Wings as Inputs a  "Condition " for Receiving the Alleged Subsidies  
25. The EU argues that the alleged inconsistency with Article 3.1(b) of the SCM Agreement 
results exclusively from the combination of specific references to finished airplanes and fuselages 
and wings in the definition of a "significant commercial aircraft manufacturing program, " used in WT/DS 487/R/Add.1  
 
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  the First Siting Provision and the reference to  "wing assembly " in the Second Siting Provision.  This 
combination, according to the EU,  "convert{s} what would otherwise be a production subs idy into 
a prohibited local content contingency, " and represents the  "express conditioning  of the grant of a 
subsidy on use of domestic over imported inputs. "  
26. However, the EU’s conclusion cannot be derived from the words of ESSB 5952, which merely 
require that both the aircraft itself, as well as specific elements of the aircraft – i.e., the fuselage 
and wings – undergo manufacturing in Washington.  Even aside from the question of whether the 
measures at issue are subsidies, Article 3.1(b) does not pro hibit defining production subsidies in a 
way that requires the domestic siting of manufacturing activity on both the finished product and its 
defining elements.  Indeed, such a definition could be useful for excluding manufacturers engaged 
in minimal produ ctive activities – including those who would seek to circumvent the production 
requirement – from eligibility for domestic production subsidies.  Thus, defining production in 
terms of the integral elements of the finished product is not, as the EU argues,  tantamount to 
treating the elements as domestic inputs that must be used instead of imported inputs.  For these 
reasons, the EU’s de jure arguments fail.  
27. Assuming, arguendo , that the challenged incentives are subsidies, ESSB 5952 comes into 
effect fo llowing a determination by DOR that  "the siting of a significant commercial airplane 
manufacturing program in the state of Washington " has occurred.  In turn,  "significant commercial 
airplane manufacturing program " is defined as  "an airplane program in whi ch the following 
products, including final assembly, will commence manufacture " in Washington: "(i) The new 
model, or any version or variant of an existing model, of a commercial airplane; and (ii) Fuselages 
and wings of a new model, or any version or varia nt of an existing model, of a commercial 
airplane. "  
28. ESSB 5952 further states: "{t}he definitions in this subsection { i.e., RCW 82.32} apply 
throughout this section unless the context clearly requires otherwise. " With respect to the term  
"commercial ai rplane, " RCW 82.32.550 states: "‘Commercial airplane’ has its ordinary meaning, 
which is an airplane certified by the federal aviation administration for transporting persons or 
property, and any military derivative of such an airplane. " Under the Federal Aviation 
Administration regulations, "{a}irplane means an engine -driven fixed -wing aircraft heavier than 
air, that is supported in flight by the dynamic reaction of the air against its wings. " Webster’s Third 
International Dictionary, which Washington court s often consult in their evaluation of ordinary 
meaning, defines  "airplane " as "a fixed -wing aircraft heavier than air that is driven by a screw 
propeller or a high -velocity jet supported by the dynamic reaction of the air against its wings. " 
29. RCW 82.32  does not contain specific definitions of  "fuselage " or "wing, " but Webster’s Third 
International Dictionary defines  "fuselage " as "the central body portion of an airplane designed to 
accommodate the crew and the passengers or cargo " and "wing" as "one of the airfoils that 
develops a major part of the lift which supports a heavier -than-air airplane. " The OED, which the 
EU cites, defines  "fuselage " as"{t}he central body portion of an aeroplane, to which the wings and 
tail unit are attached and which (in mode rn aircraft) contains the crew and the passengers or 
cargo, " and "wing" as "one of the planes of an aeroplane. " 
30. Thus, by their ordinary meanings,  "fuselages " and "wings " are what makes a vehicle an  
"airplane "– the one houses the passengers and cargo an d the other provides the lift that allows 
the airplane to fly.  The ordinary meanings of  "fuselage " and "wing" in particular indicate their 
status as functional elements of the finished aircraft, and not as inputs in the aircraft production 
process.  Accor dingly, the references to fuselages and wings in the First Siting Provision reflect the 
definitional elements of an airplane as a means of identifying what constitutes the manufacture of 
an airplane in Washington to trigger application of ESSB 5952.  These  references do not entail an 
import -substitution requirement, either by their express terms or necessary implications.  
31. The analysis is similar for the Second Siting Provision.  By requiring that wing assembly and 
final assembly occur in Washington for the 0.2904 percent B&O tax rate to continue to apply to the 
relevant commercial aircraft manufacturing program, the Second Siting Provision stipulates that 
assembly of the whole ( i.e., the airplane) as well as one of the definitional elements of the whole 
(i.e., the wing) must occur in Washington.  Neither the reference to  "wing assembly " nor any other 
terms in the Second Siting Provision indicate that a wing (or fuselage) is an input into the airplane 
production process.  WT/DS487/R/Add.1  
 
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  32. One reason that the terms  "fuselage" and "wing" might appear in the text of ESSB 5952 – 
even though they are by definition elements of an airplane, which is also referenced in the text of 
ESSB 5952 – is that Washington decided not to allow a minimal manufacturing operation to satisfy 
the two Siting Provisions.  Indeed, it is the EU’s interpretation that is flawed, because it implies 
that the class of WTO -consistent production subsidies is limited to those that permit minimal 
finishing operations.  According to the EU, subsidies for the d omestic production of a final product 
are permissible, but such subsidies immediately  "convert " into prohibited import -substitution 
subsidies when the legislator defines the production process to include anything more than turning 
the final screw.  This vi ew has no basis in the text of the covered agreements, and indeed is 
inconsistent with Article III:8(b) of the GATT 1994.  
1.1.4   B. The EU Fails to Show that ESSB 5952 Requires that Fuselages and Wings Be  
"Domestic " 
33. In addition to the fundamental flaws  in the EU’s efforts to distinguish an airplane from its 
wings and fuselage, the EU also fails to meet its burden of establishing that the First and Second 
Siting Provisions require that the referenced  "fuselages " and "wings " be domestic.  Otherwise, 
ESSB 5952 does not require the use of domestic  over imported goods.  This omission provides yet 
another, independent, reason why the EU has failed to make a prima facie  case.  
34. Although ESSB 5952 identifies certain production activities that must be sited wi thin 
Washington to satisfy the two Siting Provisions, ESSB 5952 does not draw any distinction between 
domestic and imported fuselages and wings.  In addition, as noted above, a taxpayer could satisfy 
the First and Second Siting Provisions by using 100 perc ent imported parts, as long as those parts 
(including parts of fuselages and wings) were assembled into an airplane in Washington.  
Accordingly, even if, for the sake of argument, one were to consider fuselages and wings to be  
"inputs " or "goods used " in the production of an airplane, ESSB 5952 imposes no de jure 
requirement that such fuselages or wings be  "domestic " within the meaning of Article 3.1(b) to 
satisfy the two Siting Provisions.  
35. This hole in the EU’s argument is all the more obvious because  of the factual circumstances 
of the 777X.  And, as the United States previously noted, even if all the components of the 777X 
were fabricated outside the United States, Boeing would be able to satisfy the two Siting Provisions 
simply by assembling all of the imported goods into the finished aircraft, which would include its 
fuselage and wings.  The EU has proposed that  "domestic " means anything not imported.  As a 
result, even under the EU’s approach, which is novel, wings and fuselages made up completely of 
imported parts would not appear to be domestic goods.  Thus, it could not be assumed that the 
First and Second Siting Provisions require that 777X fuselages and wings themselves – even if they 
ever existed as separate goods – be domestic.  
1.1.5   C. The EU Fails to Rebut Factual Evidence Establishing that the ESSB 5952 Text 
Does Not Condition the Alleged Subsidies on the  "Use of Domestic over Imported Goods " 
36. The United States recalled that if there is a  "multiplicity of possibilities " for compliance with 
a subsidy’s  "condition{s} for eligibility, " only some of which involve the use of domestic over 
imported goods, then the subsidy is consistent with Article 3.1(b) of the SCM Agreement.  The 
United States has shown that there is at least one very obvio us means of satisfying the First and 
Second Siting Provision that does not involve the use of fuselages and wings as inputs into the 
airplane production process:  the 777X manufacturing program.  This fact alone demonstrates that 
the EU’s de jure interpret ation of ESSB 5952 is at odds with the actual operation of the alleged 
contingencies.  This is strong evidence that the EU misunderstands the legislation.  
37. As explained above, the term  "use" in Article 3.1(b) refers to the employment of a domestic 
good as an input or instrumentality in a productive process, or enjoyment of a good for its 
intended purpose by an end user.  In fact, throughout the SCM Agreement and the covered 
agreements in general, the term  "use" refers to the consumption of goods or serv ices in a 
production process.  Thus, Article 3.1(b) covers subsidies that are granted contingent on the 
employment of a good as an input or instrumentality in a productive process.  But Article 3.1(b) 
does not cover subsidies contingent on the creation of the output of such a productive process.  WT/DS 487/R/Add.1  
 
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  38. In this dispute, the EU alleges that the First and Second Siting Provisions require Boeing to 
use fuselages and wings as  "inputs " into the aircraft production process.  The EU further alleges 
that by requiring f uselages and wings to be manufactured in Washington, the two Siting Provisions 
prevent the importation of fuselages and wings that could otherwise occur in the absence of the 
challenged subsidies. However, these allegations cannot be reconciled with the fa ctual evidence 
before the Panel.  For example, the Boeing Expert Statement states that fuselages and wings are  
"elements of the output of the production process "– not inputs.  And because they are not inputs, 
they are not  "goods " that are  "use{d} "to produc e the very airplanes that are the subject of the 
First Siting Provision.  Accordingly, the EU fails to demonstrate that ESSB 5952 conditions receipt 
of the alleged subsidies on the use of fuselages and wings as inputs into the aircraft production 
process.  Rather, the facts show that no such use is required.   
39. Furthermore, the EU’s examples of airplanes other than the 777X that it views as being 
produced by using complete fuselages and wings as inputs in the final assembly process are 
insufficient to su pport its assertion that  "aircraft could  not be  produced " without using fuselages 
and wings as inputs.  Again, the actual evidence of the 777X production process shows that they 
can be and, in fact, that in the case of the 777X, this is precisely what happ ens.  
40. In conclusion, to make its case that ESSB 5952 is de jure contingent on the use of domestic 
over imported goods, the EU would have to show that the measure, by its terms, requires the use 
of domestic over imported goods.  However, the EU has fail ed to do so.  Indeed, the express terms 
of ESSB 5952 indicate that a fuselage and fixed wings are definitional to what makes an airplane 
an airplane, and not simply  inputs to be used in the airplane production process.  Nor does the 
legislation require tha t such fuselages and wings be  "domestic. " Boeing itself will not use fuselages 
or wings as inputs in the production process for the 777X, which is the very aircraft program that 
has satisfied the First and Second Siting Provisions.  In fact, Boeing will us e a wide array of parts 
for the fuselage and wings that originate outside Washington, and in many cases outside the 
United States.  Thus, the tax treatment provided by ESSB 5952 is not de jure contingent on the 
use of domestic over imported goods.  
IV. The EU’s De Facto Article 3.1(B) Claims Are Unsupported and Contradicted by the 
Evidence  
41. As demonstrated above in the de jure  analysis, evidence regarding the 777X program 
demonstrates conclusively that the First Siting Provision has been fulfilled, and th e Second Siting 
Provision has been avoided, without any use of domestic over imported goods.  No further factual 
information is needed to refute the EU’s claims, whether de jure  or de facto , because a claim 
under Article 3.1(b) fails if the complaining par ty does not show, inter alia , that  "the use of 
domestic goods {is} a necessity and thus . . .required as a condition for eligibility for  "the alleged 
subsidy.  However, should the Panel consider it useful to further address the EU’s arguments 
regarding de facto contingency, this section addresses the many o ther errors made by the EU.  
1.1.6   A. Boeing Has Complied with the First and Second Siting Provisions – All 
Without Engaging In Import -Substitution.  
42. The EU contends that the First and Second Siting P rovisions  "require  the use of specific 
domestic goods. " Yet, it has no coherent explanation for why this is the case, and the evidence 
discussed below shows the EU’s contention to be baseless.  The EU has largely ignored – and 
asked the Panel to disregard – the facts of the 777X production process, even though this is the 
most probative evidence as to what airplane production activities may satisfy the First Siting 
Provision and avoid triggering the Second Siting Provision.  The facts of the 777X production  
process show that, with respect to the putative  "goods "(wings and fuselages) identified by the EU, 
Boeing did not propose to use, and has no plans to use, domestic over imported goods in the 777X 
program, and the DOR determination establishes that the pro gram nonetheless satisfied the First 
Siting Provision.  Thus, the First Siting Provision did not make eligibility for the ESSB 5952 tax 
incentives contingent on the use of domestic over imported goods.  
43. The EU has not even attempted to meet its burden o f showing that the goods allegedly 
subject to the contingency must be  "domestic. " There is no basis to assume as much.   The EU 
asserts that ESSB 5952 has distorted competitive opportunities for imported 777X fuselages and 
wings, but the evidence shows thi s allegation to be baseless.  Boeing could comply with the First WT/DS487/R/Add.1  
 
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  and Second Siting Provisions, and receive the challenged tax treatment, even if every individual 
part of the 777X were imported.  Moreover, the histories of the 777X program and ESSB 5952 
demonstrate that the challenged measures did nothing to distort competitive opportunities for 
imported goods, whether actual or potential.  The United States in its first written submission 
recounted the development of the 777X and the program’s production pl anning decisions, with 
details drawn from the Boeing Expert Statement.  This evidence establishes that, regardless of 
ESSB 5952, there were no actual or potential imported substitutes for the 777X manufacturing 
activity Boeing sited in Everett, Washington.  
44. For example, Boeing’s key make/buy and supplier selection decisions were made well in 
advance of ESSB 5952 and, thus, were not influenced by ESSB 5952.  In addition, ESSB 5952 
places no conditions on the location of fuselage or wing structure fabricat ion, or on the origin of 
individual airplane parts.  Moreover, passage of ESSB 5952 had no effect on Boeing’s willingness 
to use imported goods or to site fuselage and wing assembly outside the United States.  The 
circumstances surrounding the passage of E SSB 5952 and subsequent events provide the Panel 
with a natural experiment that disproves the EU’s assertions regarding competitive opportunities 
for imported 777X wings and fuselages.   
45. Setting aside the fact that Boeing does not use domestic fuselage s and wings to produce the 
777X, the EU has no basis for asserting that ESSB 5952 distorted the competitive opportunities 
available to imported fuselages and wings, or that the challenged measures are  "geared to induce " 
the use of domestic over imported go ods.  Indeed, the evidence above shows that Boeing’s 
determination to site 777X manufacturing operations in the United States was driven by 
commercial considerations independent of ESSB 5952, as were its decisions to source parts from 
suppliers.  
1.1.7   B. The EU Fails to Establish that the Challenged Measures are  "Geared to 
Induce " the Use of Domestic Over Imported Goods.  
46. Compared to the evidence discussed above, which disproves the EU’s claims, the EU’s de 
facto arguments are noticeably thin on actual  facts.  The EU contends that the Panel should use a  
"geared to induce " analysis in assessing its de facto claims under Article 3.1(b), based on the 
Appellate Body’s use of the  "geared to induce " analysis to evaluate prohibited export subsidies in 
EC – Large Civil Aircraft .  Yet, the EU never discusses – let alone applies – the specific elements of 
the "geared to induce " analysis that the Appellate Body identified.  It has also declined to engage 
with much of the relevant factual evidence.  In fact, a prope r "geared -to-induce " analysis would 
confirm that the alleged subsidies did not induce Boeing to engage in import substitution.  
1.1.8   C. None of the Factual Evidence Cited By the EU Supports Its De Facto 
Arguments.  
47. In its first set of written question s, the Panel asked the EU to identify the factual evidence 
supporting its Article 3.1(b) claims.  In response, the EU lists five  "facts. " With one exception, the 
EU declines to explain why they might be relevant, or to link them to the  "geared to induce " 
analysis it would have the Panel apply to its de facto claims.  Most importantly, none supports the 
EU’s de facto arguments.    
48. "The text of SSB 5952. " The EU’s reference to the First and Second Siting Provisions does 
nothing to remedy the core flaw in both its de jure and de facto claims:  neither provision requires 
a specific production process, let alone one that necessarily involves the use of fuselages and 
wings in the production of a commercial airplane.  It may be the case that Airbus manufactures  a 
"completed, joined fuselage " of the A320 as an  "intermediate good{} "before final assembly, but it 
does not follow that Boeing does the same with the 777X, or that ESSB 5952 requires it to do so 
to be eligible for the challenged tax treatment.   
49. Statement of Washington’s Governor.  The EU cites a statement by Governor Inslee  
"indicating that the ‘legislation includes strong contingency language.’ "  A political statement is not 
direct evidence of what a measure actually requires, and the statement itse lf begs the question of 
what is conditioned by the  "contingency language; " it says nothing about the challenged tax 
treatment being contingent on the use of domestic over imported goods.  WT/DS 487/R/Add.1  
 
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  50. Boeing’s importation of  "wings for its 787 from Japan. " Boeing do es not import 
complete 787 wings from Japan.  Rather, Boeing imports multiple wing -related structures from 
Japan and must therefore conduct further wing assembly activity in the United States.  Even if 
Boeing could or did import complete 787 wings from Jap an, it would not follow that ESSB 5952 
requires Boeing to  "use" domestic wings on the 777X program.  
51. Boeing’s supposed "active{} consider{ation} "of importing 777X wings from Japan.  
The EU asserts that  "Boeing actively considered the possibility of impor ting the 777X wings from 
Japan prior to the enactment of SSB 5952, and formally decided against that option once SSB 
5952 was enacted. " This is incorrect in several respects, reflecting the EU’s refusal to engage with 
the evidence.  The facts directly cont radict the EU’s assertion that Boeing  "formally decided against  
"importing 777X wings " once SSB 5952 was enacted. " 
52. "Rewards " and "penalties. " As discussed above, the EU’s sole argument in relation to its 
proposed " geared to induce " analysis is that ESS B 5952 penalizes " use of imported wings or 
fuselages " and rewards " use of domestic wings or fuselages. " This" rewards "/"penalties " 
formulation merely imports from the EU’s de jure arguments the baseless assumption that the 
First and Second Siting Condition s require the use of domestic fuselages and wings.    
53. For all of these and other reasons, therefore, the First and Second Siting Provisions would be 
very poor instruments for requiring import substitution.  As the factual evidence shows, they allow 
Boeing to use exclusively imported parts to meet the First Siting Provision, and to avoid triggering 
the Second Siting Provision.  They impose no contingency whatsoever on receipt of the challenged 
treatment by other aerospace manufacturing activities in Wash ington, whether conducted by 
Boeing or any other manufacturer.  The total configuration of the facts also reveals that there were 
no potential import opportunities for ESSB 5952 to operate against.  
V. The EU Fails to Establish that the Challenged Measures  Confer a Financial 
Contribution or a Benefit  
54. As the United States previously explained, where a Member challenges the alleged grant of a 
subsidy to a particular recipient of an alleged subsidy, that Member normally must establish actual 
receipt of tha t subsidy.  That may not be the case where a Member asserts " that a financial 
contribution exists in the abstract, " which the EU has now clarified is its argument in this 
proceeding.  However, a challenge " in the abstract " does not excuse the complaining M ember of its 
burden to establish all elements of the existence of a subsidy as of the time of the proceeding.  
55. Article 1.1(a)(1)(ii) defines a financial contribution to include " where . . . government 
revenue that is otherwise due is foregone or not col lected (e.g. fiscal incentives such as tax 
credits). " By virtue of the present tense verb " is, "this provision covers revenue foregone or not 
collected in the present .  Thus, Article 1.1(a)(1)(ii) deals with tax liabilities that exist in the 
present, and g overnment actions with respect to those liabilities.   
56. The EU advances several legal arguments to evade the implication of the present tense 
drafting of Article 1.1(a)(1)(ii).  None are valid.  There is no reason to consider, as the EU does, 
that "maintain" in Article 3.2 of the SCM Agreement applies to the present and  "grant " to the 
future.  Moreover, the application of Article 1.1(a)(1)(ii) depends not on theoretical entitlements, 
but on an essentially counterfactual comparison.  Finally, the EU conte nds that applying 
Article  1.1(a)(1)(ii) exclusively to existing tax liabilities would leave Members with impunity to 
impose prohibited contingencies in the present in exchange for tax breaks in the distant future.  
Its concern is misplaced.  The farther in  the future a tax advantage exists, the less certainty the 
taxpayer will have that it will continue to be advantageous, and the less likely it is to influence 
current conduct.  
57. In this dispute, the EU argues that a finding of benefit proceeds automatica lly from a finding 
that revenue is foregone.  But that is not the case.  Revenue is  "foregone " for purposes of 
Article  1.1(a)(1)(ii) when the authorities provide tax treatment more advantageous to the 
taxpayer than under the  "normative benchmark " of the Me mber’s tax system.  In contrast, a 
benefit exists when a financial contribution provides the recipient more advantageous terms than 
the market would provide.  The EU’s approach treats these measurements as identical when they WT/DS487/R/Add.1  
 
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  are, in fact, different.  The EU bears the burden of showing in each instance that the treatment 
under ESSB 5952 is better than available on the market, and has not done so.  
2  EXECUTIVE SUMMARY OF  U.S. OPENING ORAL ST ATEMENT AT THE SECON D 
SUBSTANTIVE MEETING OF THE PANEL WITH TH E PAR TIES  
58. During the first meeting, the United States described how the EU is trying to fit a square peg 
into a round hole.  This is just as true today as it was then.  Even if the challenged measures were 
found to be subsidies, they would be production sub sidies, which even the EU acknowledges are 
not, in and of themselves, prohibited.  They are simply not contingent on the use of domestic over 
imported goods.  The EU attempts to stretch the scope of Article 3.1(b) of the SCM Agreement, 
and reads meaning in to ESSB 5952 that simply is not there.   
59. First, the EU’s interpretation of the terms in Article 3.1(b) of the SCM Agreement would 
effectively turn production subsidies into prohibited import substitution subsidies.  This result 
demonstrates that its in terpretation of Article 3.1(b) is erroneous.   
60. Most modern production processes include multiple production steps, and Members granting 
production subsidies, as they are permitted to do, will want to ensure that recipients actually 
engage in the produc tion the authorities seek to promote.  They will also want to be certain that 
the production activity is substantive, and not a trivial operation that adds nothing to the 
economy.  Whether clarified explicitly in the legislation or left implied, Members ty pically would not 
be interested in subsidizing a producer that completes only a single, perhaps minimal, production 
step.  But the EU’s interpretation of Article 3.1(b) would preclude a Member from requiring any 
production activity more substantial than th e final production step.   
61. A review of the EU’s interpretation of the terms in Article 3.1(b) will expose this mismatch 
between the EU’s nominal recognition that the SCM Agreement does not prohibit production 
subsidies as such, and the effect of its le gal arguments.  The EU has argued that  "goods, " as used 
in Article 3.1(b) and modified by  "imported, " should not be limited to tradable items or otherwise 
cabined.  It has also argued for an expansive understanding of the word  "use" and has stated that 
it is irrelevant if the manufacturer of the finished good also produced the intermediate good 
allegedly used.  Taken together, these positions suggest every object, article, or structure that 
exists throughout any manufacturing process is a  "good" that is " used" within the meaning of 
Article 3.1(b) when the manufacturer takes the next production step – regardless of whether the 
result of that next step is an article that is unfinished, intermediate, or untradeable.  
62. Furthermore, the EU has abstained from a ny detailed analysis of what would make a good  
"domestic " for purposes of Article 3.1(b).  Rather, it appears that the EU assumes that a  "good" is 
"domestic, " at least for purposes of Article 3.1(b), if an article was modified in any way in the 
grantor’s t erritory, irrespective of whether it was produced from foreign parts or how much value 
is attributable to the production or assembly step.  Therefore, in any production process that 
involves more than one step, the first step will result in a  "domestic goo d," and the second step 
necessarily will involve the use of that domestic good.  Accordingly, under the EU’s theory, a 
requirement that more than one production step be performed in the grantor’s territory would 
make a subsidy contingent on the use of a do mestic over an imported good.  
63. Second, the EU is wrong in asserting that  "it is a fact that aircraft ‘use’ wings and fuselages:  
without those inputs, the aircraft could not be produced. " If the EU is suggesting that fuselages 
and wings are  "used" as "goods" within the meaning of Article 3.1(b) merely because airplanes 
have fuselages and wings, the EU is mistaken.  A manufacturer does not  "use" every element of a 
finished good that one can point to and describe with a name. "Use" in the context of a 
manu facturing process refers to what goes into the process, and not the features of the product at 
the end of the process.  Those are elements of the output, and not  "goods " that are  "used" 
themselves, but elements of a distinct finished good.  To take an exam ple, one can quite easily 
point to a finished building’s façade, but the builder does not  "use" the façade as a good within the 
meaning of Article 3.1(b).  Likewise, just because one can point to a finished airplane’s fuselage 
and wings does not mean that the manufacturer  "used" the fuselage and wings as goods within 
the meaning of Article 3.1(b).  WT/DS 487/R/Add.1  
 
- B-38 - 
 
  64. If the EU is suggesting that, as a factual matter, airplanes cannot be produced without first 
producing fuselages and wings as separate goods and then using them as inputs, this is 
inaccurate.  The fuselage and wings of an airplane effectively make up the airframe and, as such, 
are functionally important elements of an airplane, but there is no definitional or physical reason 
why they would have to be produced  as separate goods that are used as inputs.  It is certainly 
feasible for an airplane to be assembled without first assembling a completed fuselage and wings 
as separate goods.  Rather, fuselages and wings can be – and in the case of the 777X will be – 
completed only during and as part of the final assembly of the finished airplane.  Therefore, the EU 
is wrong when it suggests that  "it is a fact that aircraft use wings and fuselages  "within the 
meaning of Article 3.1(b).  
65. If the EU means that airplanes  "use" fuselages and wings as  "goods " by virtue of the fact 
that airplanes have fuselages and wings, this is a misinterpretation of the term  "use." If, on the 
other hand, the EU means that, as a factual matter, a manufacturer must first produce fuselages 
and wings as separate goods and then use them as inputs to produce the finished airplanes, this is 
incorrect.  As the 777X program demonstrates, a manufacturer need not assemble completed 
fuselages and wings prior to assembling the finished airplane.  
66. Third, the EU misinterprets ESSB 5952.  The two Siting Conditions themselves do not 
require any production process in particular, nor do they address the domestic or imported 
character of inputs.  The definition of  "significant commercial airplane manufacturin g program "– 
like any definition – simply provides greater clarity and concreteness.  It does not, as the EU 
suggests, communicate a separate substantive requirement to use domestic over imported inputs.  
Furthermore, the intent of ESSB 5952 is clear – to ensure the siting of a manufacturing program 
that is important to the state’s workforce.  The EU’s efforts to characterize it as having the  
"cardinal purpose " of import substitution is implausible, particularly given the significant use of 
imports in the 77 7X, and the ability of taxpayers other than Boeing to receive the tax treatment at 
issue without meeting any conditions, meaning they could not possibly be required to use domestic 
over imported goods.  
67. The EU also asserts that its interpretation is ne cessary to give meaning to the words  
"fuselages " and "wings " as they appear in the definition of  "significant commercial manufacturing 
program. " It contends that the U.S. description of the operation of ESSB 5952, by contrast, would 
render those words mean ingless and superfluous.  This is nonsense.  The words in question ( i.e., 
"fuselages " and "wings ") appear within the definition of a defined term ( i.e., "significant 
commercial airplane manufacturing program ").  They do what the words of any definition do – add 
clarity and concreteness to a term used elsewhere in the measure.  In this case, the terms  "siting " 
and "significant commercial airplane manufacturing program  "form the condition that must be met 
for the legislation to take effect.  And, it is logica l that it clarified the meaning and ensured the 
desired level of significance for this commercial airplane manufacturing program in terms of the 
principal elements of the structural airframe, the fuselage and wings.   
68. The EU also seeks to support its i nterpretation of ESSB 5952 by asserting that the  "cardinal 
purpose " of ESSB 5952 was  "making the importation of wings and fuselages of the 777X 
prohibitively expensive so as to ensure the use of domestic wings and fuselages over imported 
wings and fuselage s." The EU’s story is that Washington used ESSB 5952 to induce Boeing to use 
domestic, made -in-Washington goods in the production of the 777X.  However, Washington 
decided not to require such use or otherwise define minimum local content (which, by the way , is 
the actual classic example of a local content contingency).  Furthermore, under the EU’s theory, 
Washington chose to effect the local content requirement not through the conditions themselves, 
but rather in the definitions section.  According to the E U, Washington chose to focus on elements 
of an airplane, but ignore Boeing’s sourcing of all of the various parts it purchases, a significant 
portion of which are actually to be imported and a significant portion of which are brought in from 
other U.S. sta tes.  And Washington also chose to ignore whether the goods used by all taxpayers 
other than Boeing were domestic or imported, while nonetheless providing the identical tax 
treatment made available to Boeing.  
69. The EU’s view is implausible.  The text of ESSB 5952, as well as the surrounding facts, make 
it very clear that the point of ESSB 5952 was to ensure that a significant manufacturing program 
was sited in the state, in order to maintain and grow Washington’s aerospace industry workforce.  
And it did just that; it did not have as its  "cardinal purpose, " nor did it actually require, the use of 
domestic over imported goods.  WT/DS487/R/Add.1  
 
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  70.  Fourth, the EU is incorrect that the factual circumstances of the 777X program are 
irrelevant.  The 777X manufacturing program is the only one considered by DOR and determined 
to fulfill the First Siting Provision.  It also has, since that determination, not been determined to 
trigger the Second Siting Provision.  Therefore, it certainly is the most reliable evidence of the 
proper  interpretation of ESSB 5952.  And the 777X program will not include the production of 
completed fuselages and wings as separate goods that will then be used to produce the finished 
airplane.  Because fuselages or wings – whether domestic or imported goods  – are not produced 
as separate  "goods " and then  "used" as inputs in producing the finished 777X, and the program 
nevertheless was determined to satisfy the First Siting Provision and has not been found to trigger 
the Second Siting Provision, those Siting Provisions necessarily do not require the  "use" of 
fuselages and wings as  "goods " within the meaning of Article 3.1(b), much less require the use of  
domestic  over imported fuselages and wings.  Where, as here, factual evidence refutes the 
complaining Memb er’s de jure arguments, the proper course is not to ignore the factual evidence, 
but to reject the de jure claim.  
71. Fifth, the EU’s entitlement theory of financial contribution highlights the insufficiency of the 
EU’s cursory benefit argument.  It is pos sible that an abstract entitlement exists, but no one uses 
it.  As the EU itself states:  "it is not necessary for any . . . actual foregoing to take place in order 
to qualify as a financial contribution. " But if this were the case, there would be no benefi t.   
72. In addition, the EU’s current financial contribution argument undermines its contingency 
arguments.  In the context of Article 3.1(b) of the SCM Agreement, a relation of contingency exists 
only where the  "use of domestic over imported goods " is required to receive the alleged subsidy.  
However, in this case, the tax treatment provided for by the alleged subsidies would still have 
been available until July 1, 2024, even if the supposed contingencies had never been met.  This is 
because July 1, 2024,  was the expiration date for the relevant tax treatment prior to the adoption 
of ESSB 5952.  Accordingly, even on the EU’s own theory, the alleged subsidies are not  
"dependent for their existence " on the use of domestic over imported goods.   
_____________ __ 
 
 
 
 
 WT/DS487/R/Add.1  
 
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  ANNEX  C 
ARGUMENTS OF THE THIRD PARTIES  
Contents  Page  
Annex  C-1 Integrated executive summary of the arguments of Australia  C-2 
Annex  C-2 Integrated executive summary of the arguments of Brazil  C-4 
Annex  C-3 Integrated executive summary of the ar guments of Canada  C-8 
Annex C -4 Integrated executive summary of the arguments of China  C-11 
Annex C -5 Integrated executive summary of the arguments of Japan  C-13 
 
 WT/DS487/R/Add.1  
 
- C-2 - 
 
  ANNEX  C-1 
INTEGRATED EXECUTIVE  SUMMARY OF THE ARGUM ENTS OF AUSTRALIA  
1. Australia has tak en the opportunity to participate as a third party in this dispute as there are 
significant systemic issues about the interpretation of obligations under the Agreement on 
Subsidies and Countervailing Measures (SCM Agreement) and the General Agreement on Ta riffs 
and Trade 1994 (GATT 1994).    
I. What is a prohibited subsidy under Artic le 3.1(b) of the SCM Agreement?  
2. Australia recalls that Article 3.1(b) of the SCM Agreement prohibits "subsidies contingent, 
whether solely or as one of several other conditio ns, upon the use of domestic over imported 
goods. "  In Canada – Autos  the Appellate Body found that Article 3.1(b) of the SCM Agreement 
extends to contingency in fact, because to not do so "would make circumvention of obligations by 
Members too easy. "1   
3. The EU notes in paragraph 76 of its submission that the two provisions are "expressly 
conditioned on the use of domestic over imported goods. "  However, the EU does not clearly 
illustrate how it reaches that conclusion.  It is also unclear whether the EU  is suggesting that 
subsidies alleged to breach the SCM Agreement are contingent on the use of domestic goods in a 
de jure or de facto manner.  
4. To make a claim that the legislation makes a subsidy contingent, de jure,  on the use of 
domestic goods, the EU  must point to the infringement set out in "the words actually used in the 
measure. "2  This standard was set by the Appellate Body in Canada -Autos .  To make a claim that 
the legislation makes a subsidy contingent, de facto , on the use of domestic goods req uires 
greater consideration of the facts.  The EC – Large Civil Aircraft  Appellate Body report provides 
guidance in the context of Art icle 3.1(a).  It states that:   
[t]he existence of  de facto  export contingency, as set out above, "must 
be inferred  from t he total configuration of the facts constituting and surrounding the 
granting of the subsidy ".3 
5. Australia submits that the Panel can be guided by this approach in relation to Article  3.1(b).  
Accordingly, the Panel 's determination in this case will depe nd on the finding of facts.    
II. The Relationship between Article III:8(b) of GATT 1994 and Arti cle 3.1(b) of the 
SCM Agreement  
6. Australia notes that there is a legitimate scope within the WTO system for subsidies to 
domestic industries. This is recogni sed in Article III:8(b ) of GATT 1994, which provides:  
The provisions of this Article shall not prevent the payme nt of subsidies exclusively to 
domestic producers, including payments to domestic producer s derived from the 
proceeds of internal taxes or charg es applied consistently with the provisions of this 
Article and subsidi es effected through governmental purchases of domestic products.  
7. This was interpreted by the panel in Indonesia – Autos  to "confirm that subsidies to 
producers do not violate Article  III, so long as they do not have any component that introduces 
discrimination between imported and domestic products. "4 
                                               
1 Canada – Autos , Appellate Body report, para 142.  
2 Canada – Autos , Appellate Body report, para 123.  
3 EC – Large Civil Aircraft , Appellate Body report, para 1046.  
4 Panel Report, Indonesia — Autos , paras. 14.41 –14.45.  WT/DS487/R/Add.1  
 
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  8. Australia contends that the Panel should maintain and clarify the important distinction 
between the permitted payment of a subsidy e xclusively to domestic producers and a subsidy 
which is contingent on the use of domestic over imported goods.    
9. The Panel needs to assess whether the right to provide subsidies to domestic producers 
includes the right to require that the manufacturing activity  occurs within the territory of the 
subsidising authority; and whether such a requirement could be characterised as one requiring the 
use of domestic over imported goods.   
III. The scope for Members to provide subsidies to benef iciaries within the ir territory  
10. Australia contends that the Panel should consider whether references to a "significant 
commercial airplane manufacturing program " and "fuselages and wings " in the legislation being 
examined in this dispute can be regarded as merely definin g the scope of the beneficiary or 
beneficiaries of a subsidy rather than a requirement to use domestically produced goods.    
IV. The scope for Members to provide subsidies  based on geographical location  
11. The legislation in question providing tax incenti ves to the aerospace industry (SSB5952) 
conditions the concessional tax arrangements on certain activities tak ing place in Washington 
State.  
12. Should the tax incentives provided by Washington State be found to be a subsidy, and the 
references to wings a nd fuselages be found to merely define the beneficiaries of the subsidy, the 
Panel may find that the tax measures in question are permitted subsidies under Article III:8(b) of 
GATT.  The intersection between the GATT and Article 3.1(b) of the SCM Agreement  could be 
further explored by the Panel in this instance.    
13. Australia considers that careful consideration should be given to whether the scope of a 
subsidy for manufacture and assembly based on geographical location amounts to the requirement 
to use d omestic products over imported goods.    
14. Careful consideration should also be given to whether the requirement to site the activity 
within the jurisdiction of the granting authority amounts to a local content requirement.  The Panel 
needs to clarify whe ther the beneficiary of the tax incentive would receive benefits for manufacture 
and assembly regardless of the source of the inputs to manufacture and assembly.    
15. Relevant context to consider the ability to limit or target subsidies to specific region s or 
within designated geographical regions within the jurisdiction of a granting authority is provided 
within the SCM.  In particular, Article 8.2(b) and 2.2 of the SCM Agreement demonstrate that 
provision of subsidies on  a regional basis is permitted.  
16. The Panel therefore also needs to assess whether the distinction made in the Washington 
legislation is between domestic and international goods, as claimed by the EU, or whether it is the 
geographical scope of a tax incentive to a business activity condu cted within the geographic region 
of the jurisdictional authority  
 
 WT/DS487/R/Add.1  
 
- C-4 - 
 
  ANNEX C -2 
INTEGRATED EXECUTIVE  SUMMARY OF THE ARGUM ENTS OF BRAZIL  
I. PROPER SCOPE OF THE CONTINGENCY UNDER ARTICLE 3.1(b) OF THE SCM 
AGREEMENT   
1. Brazil would like to highlight that only  two types of subsidies are prohibited under Part II of 
the SCM Agreement .  As stated by the Appellate Body in EC – Large Civil Aircraft1 :  
Only those subsidies that are conditioned on export performance or on import 
substitution are prohibited per se und er Article 3 of Part II of the SCM Agreement. In 
contrast, all other subsidies are allowed under the SCM Agreement, albeit a Member 
granting such subsidies should not cause, through the use of the subsidies, adverse 
effects within the meaning of Article 5 of Part III, in which case it must remove the 
adverse effects or must withdraw the subsidies themselves.  
2.  In the case of Article 3.1(b) of the SCM Agreement , the import substitution subsidy has a 
particular contingency: "the use of domestic over import ed goods". The contingency therefore 
hinges primarily on two elem ents:  "goods" and their "use".  
3. First, Brazil would like to emphasize that Article 3.1(b) of the SCM Agreement  textually 
requires the use of "goods" to establish its contingency. It does n ot cover production 
requirements. A Member therefore is only prohibited from requiring the use of domestic "goods" as 
a condition for the granting of a subsidy.  In other words, it is permissible to impose a condition 
upon the granting of a subsidy, as lon g as this condition is not tied to domestic goods.  This is 
essentially what Brazil understands to have been the position expressed by the Appellate Body in 
Canada – Autos .  A domestic "value -added" requirement is not prohibited unless it effectively or 
necessarily requires the use of domestic "goods" . 
4. The contingency under Article 3.1(b) therefore must be for domestic products to the 
detriment of imported products. Mutatis mutandis, the Appellate  Body in EC – Large Civil Aircraft  
stated with regard to export contingent subsidies:  
Among the latter category of subsidies —that is, the actionable subsidies —are those 
granted to an export -oriented recipient, without being contingent upon export 
performance. The mere fact that such subsidies may increase the com pany's 
production sold in the export market does not bring them under the discipline of Part 
II of the SCM Agreement.2 
In the same sense, Article 3.1(b) does not cover requirements other than requirements to use 
domestic products even if they ultimately le ad to a gain in productivity of the domestic industry.  
5. Second, the condition must concern the "use" of domestic goods over imported goods.  The 
use of this term ("use") confirms that the "goods" in question must be "products" that are capable 
of being " used"  in a commercial context.  
6. Article 3.1(b) of the SCM Agreement  does not prohibit subsidies affecting domestic and 
imported products generally, but only those which cause the use of domestic over imported goods.  
The contingency under Article 3.1(b) of the SCM Agreement must be established upon the actual 
use of the domestic product to the detriment of the imported product, not in relation to "any 
domestic transaction" it may entail.  Given this exclusion applicable to the payment of domestic 
producti on subsidies, it would be incongruous to interpret Article 3.1(b) of the SCM Agreement  to 
prohibit a measure simply based on the measure 's link to domestic production.  Article  3.1(b) 
requires more concrete evidence of a de jure  or de facto  contingency on the use of domestic over 
imported goods.  
                                               
1 Appellate Body Report, EC – Large Civil Aircraft, para. 1054. 
2 Id. WT/DS487/R/Add.1  
 
- C-5 - 
 
  7. Subsidies programs are generally linked to a localization/domestic establishment 
requirement.  This linkage may cause an incidental impact on local production and may benefit 
domestic producers of input products .  Their products may become more attractive to the producer 
that established itself in the area as transportation costs go down and for other reasons.  Thus, 
rather than importing products, the newly established domestic producer may start to use a larger  
share of domestic products as inputs.  Clearly, such an indirect effect of the subsidy does not tur n 
it into a prohibited subsidy.  
8. In that respect, one must be careful not to make the same "false positive" - mistake that 
footnote 4 of the SCM Agreement  warns against with respect to export contingency: it is not 
because a subsidy is granted to companies which export, that there is an "export contingency."  
The same applies to domestic producers.  The fact that subsidies are granted to domestic 
producers d oes not, for that reason alone, mean that there is import substitution conditionality. In 
Brazil 's view, the focus of the enquiry under Article 3.1 (b) should be on the conditionality of the 
subsidy and the extent to which it requires the "use" of domestic  over imported "goods".   
9. In conclusion, Brazil considers that in order to sustain a claim of violation of Article 3.1(b) of 
the SCM Agreement , a complainant must show that the subsidy in question has a specific 
contingency: that of the use of domestic goods  over imported goods .  Any subsidy that does not 
impose such a contingency is not prohibited under Article 3.1(b) and could only be challenged as 
an actionable subsidy under the SCM Agreement . 
10. Blurring the line between prohibited and actionable su bsidies would undermine the overall 
balance between Members' obligations under the WTO and their policy space, and it would unduly 
curtail the fomenting of industrial development.  At the same time, the disciplines of the SCM 
Agreement  must be respected in  order to ensure a level playing field among Members and to 
minimize trade distortions.  This requires a careful examination of the specific nature and 
implications of the conditions attached to a subsidy.  
II. BRAZIL'S RESPONS ES TO QUESTIONS FOR THIRD PART IES 
Reply by Brazil to question 1  
It is not entirely clear to Brazil what the Panel means by "actual use or exercise of the fiscal 
incentive". If the Panel is asking whether the mere foreshadowing of a fiscal incentive is eno ugh, 
the answer is clearly no.  
Reply by Brazil to question 3  
In sum, Article 1 defines a subsidy for purposes of the SCM Agreement. Article 2 defines 
"specificity" and also frequently refers to the "granting authority" and the "granting of 
disproportionately large amounts of subsidy", thus employing the same term "granting" as found 
in Article 3. Article 3 imposes a specific discipline for certain types of subsidies, prohibiting these 
categories. Article 3.2 imposes a specific requirement not to grant "or maintain" such prohibited 
subsidies and is thus part of the context in which the definition of a subsidy as set forth in Article 1 
is to be read. In that respect, this provision is contextually "relevant", just like any other provision 
of the SCM Agreement.  
Reply by Brazil to question 4  
In light of the Vienna Convention's disciplines that the starting point for ascertaining "object and 
purpose" is the treaty itself, in its entirety, rather than a particular provision3, Brazil understands 
that the object and purpose of Article 3.1(b) of t he SCM Agreement is to prohibit import 
substitution subsidies contingent upon the use of goods, domestic over imported. Therefore, the 
interpretation of the term "goods" should not be made so as to blur the line between prohibited 
subsidies, which affect g oods, and actionable subs idies, which affect production.  
                                               
3 Appellate Body Report, EC – Chicken Cuts , para. 238.  WT/DS487/R/Add.1  
 
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  Reply by Brazil to question 5  
Brazil understands that the SCM Agreement does not prohibit WTO Members from providing 
subsidies to producers contingent on the performance of production steps of a cert ain good in their 
territories. This production requirement could fall either upon the production of a final or an 
intermediate good. A subsidy can require the performance of production steps relating to the final 
good whose production is being subsidized o r of the intermediate product which will be integrated 
into that specific subsidized production chain. A Member could just as well legitimately create, 
under Article 3.1(b) of the SCM Agreement, two separate subsidy programmes requiring the 
performance of production steps in its territory, one related to the final product and one related to 
the intermediate product which will be integrated into that specific subsidized production chain. In 
this sense, Brazil understands that the scenario submitted by Canada  would not be a de jure  
contingency claim under Artic le 3.1(b) of the SCM Agreement.  
Additionally, whether the conditionality in question amounts to a prohibited condition to "use 
domestic over imported goods" must be analysed based on the text of the spec ific subsidy 
program, in the light of its necessary implications and in the context of the total configuration of 
the facts of each situation.  
Reply by Brazil to question 6  
It is not entirely clear to what "guidance from previous cases" the Panel is referr ing because the 
Panel does not refer to any specific cases. In any case, Brazil considers that a de facto  claim 
requires a panel to go beyond the text of the specific subsidies program and its necessary 
implications to examine the program in the context of  the totality of the facts surrounding the 
granting of the subsidy.  
The Panel should take into due consideration previous jurisprudence regarding de facto  claims 
under Article 3.1(a) of the SCM Agreement for the analysis of a de facto  claim under Article 3 .1(b). 
In EC – Large Civil Aircraft , the Appellate Body ruled that the standard of de facto export 
contingency under Article 3.1(a) and footnote 4 of the SCM Agreement "would be met when the 
subsidy is granted so as to provide an incentive to the recipient  to export in a way that is not 
simply reflective of the conditions of supply and demand in the domestic and export markets 
undistorted by the granting of the subsidy"4. Mutatis mutandis, the fact that the granting of a 
subsidy might increase overall domes tic production or decrease imports would not in and of itself 
be de facto contingent on the use of domestic over imported goods. It would have to provide an 
incentive that is not simply reflective of the conditions of supply and demand for domestic and 
imported goods.  
In the analysis of a de facto  contingency claim under Article 3.1(b), a Panel may also use some of 
the same tests or factors as in Article 3.1(a), such as a "but for" test or an expected sales ratio 
from a profit maximizing firm.  
Reply by Bra zil to question 7  
The key legal matter in this connection is the proper understanding of the term "domestic" in 
Article 3.1(b) of the SCM Agreement, which is not defined in the Covered Agreements. To Brazil, 
the discipline contained in Article 3.1(b) requi res a definition of "domestic" that makes economic 
sense. While it may be impossible to determine in the abstract the exact percentage of value 
added in the country concerned that is required to characterize a product as "domestic" in all 
cases, there cert ainly are cases that can be safely excluded – or included – in this definition. In 
any case, in Brazil 's view, this is a factual question that is to be determined by looking at the 
specific nature of the specific product  and its production process, in the light of applicab le domestic 
legal requirements.  
Reply by Brazil to question 8  
Brazil refers the Panel  to its answer to question 6.  
                                               
4 Appellate Body Report, EC – Large Civil Aircraft, para. 1.045  WT/DS487/R/Add.1  
 
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  Reply by Brazil to question 11  
What was emphasized in Brazil's submission was that the term "use" has already been interpret ed 
by the Panel in US – Upland Cotton, which opposed the understanding that "any domestic 
transaction" would fall within the meaning of use. Furthermore, Brazil emphasizes the use of 
products so as to clearly delimit the prohibited subsidies from ac tionabl e production subsidies.  
Brazil does not take a position on the specific facts of the case, but reiterates that the discussion of 
whether a subsidy is prohibited or not in light of Article 3.1(b) requires the analysis of whether the 
conditionality establis hed within the subsidy programme is related to the performance of 
production steps or to the use of products. If the condition, for instance, simply requires a 
domestic production activity of the producer, it will likely not amount to a prohibited conditio nality.  
Reply by Brazil to question 12  
Brazil will not delve into the specific facts as raised by the parties and will therefore not express a 
position on the ultimate merits of the parties ' allegations that follows from applying the law to the 
facts of th is case. The Panel 's question whether "the use of a domestically assembled or 
manufactured wing always constitute[s] the use of domestic goods" is thus to be answered based 
precisely on the facts of this case rather than on the basis of categorical conclus ions of what 
"always" or "never" will constitute use of domestic goods.   
Brazil understands that a subsidy on the production of a certain good, with requirements on the 
performance of production steps along the production chain, would not be considered de jure 
contingent on the use of domestic over imported goo ds under the purview of Article  3.1(b). 
Therefore, an automatic contingency would not be present when a programme requires the 
assembly of a good in the territory of a Member. For a de facto  contingen cy claim, an evaluation of 
the programme in practice would be needed.  
Reply by Brazil to question 14  
As mentioned before, Brazil understands that there is a fundamental difference betw een a 
requirement of the performance of production steps and a requireme nt of the use of domestic 
products for a de jure  contingency under Article 3.1(b). A de facto  contingency would require an 
analysis of the total configuration of the facts at hand. As a third party, Brazil only has limited 
access to the parties ' factual an d legal arguments and thus prefers not to express a definitive view 
on how the law applies to the facts of this particular dispute  
 
 WT/DS487/R/Add.1  
 
- C-8 - 
 
  ANNEX C -3 
INTEGRATED EXECUTIVE  SUMMARY OF THE ARGUM ENTS OF CANADA  
1. The findings of the Panel in this dispute will have i mportant consequences for the way in 
which the Agreement on Subsidies and Countervailing Measures (SCM Agreement) is interpreted 
and applied in future disputes.  Canada therefore welcomes the opportunity to present its views to 
the Panel.  Canada's submiss ion addresses the issue of prohibited import -substitution subsidies 
under Article 3.1(b) of the SCM Agreement.  
2. The European Union claims that the continuation and extension of subsidies1 by Washington 
State in the form of tax benefits to Boeing under SS B 5952 are contingent upon the use of 
domestic over imported goods in violation of Article  3.1(b) of the SCM Agreement.  The European 
Union thus alleges that a "programme -siting condition" and an "exclusive -production condition" 
require Boeing "to use wing s and fuselages produced or assembled in Washington State in the final 
assembly of 777X LCA in Washington State".2 
3. Canada considers that the European Union's suggested interpretation of Article  3.1(b) would 
improperly extend the provision to cover situa tions where subsidy recipients are required to 
produce  goods.  The European Union appears to be arguing that a subsidy is contingent on the use 
of domestic over imported goods where the producer of a final good is required to produce certain 
components of that good in order to receive the subsidy.3 
4. Canada understands that under what the European Union describes as the "programme -
siting condition" Boeing is required to locate the 777X development program and manufacture 
and/or assemble the 777X, including  fuselage and wings, in Washington State.4  A so-called 
"exclusive -production condition" confirms that Boeing must carry out the final assembly or wing 
assembly of (any) of its aircraft models in Washington State, and not elsewhere, in order to 
benefit fro m reduced taxes.5 
5. Although Boeing may, in fact, "use" fuselages and wings produced in Washington State to 
receive the tax subsidies, the company would be required  to manufacture and/or assemble those 
fuselages and wings itself.  There is no requirement included in SSB 5952 to purchase wings, 
fuselages, parts used in the assembly thereof or other parts used in the assembly of the final 
aircraft produced in the United States.  The European Union also did not provide any evidence 
suggesting that Boeing woul d de facto  have to "use" domestic components other than those that 
the company manufactures itself.  
                                               
1 The tax incentives challenged by the European Union under Article 3.1(b) are a reduced Business and 
Occupation ("B&O") ta x rate for the manufacture and sale of commercial airplanes, a B&O tax credit for pre -
production development for commercial airplanes and components, a B&O tax credit for property taxes on 
commercial airplane manufacturing facilities, an exemption from sal es and use taxes for certain computer 
hardware, software, and peripherals, an exemption from sales and use taxes for certain construction services 
and materials, an exemption from leasehold excise taxes on port district facilities used to manufacture 
super efficient airplanes and an exemption from property taxes for the personal property of port district lessees 
used to manufacture superefficient airplanes (European Union's first written submission, para. 15).  
2 European Union's first written submission, par a. 44, see also para. 52.  
3 The European Union claims that "pursuant to the programme -siting condition in Section 2 of 
SSB 5952, the post -2024 aerospace tax incentives were contingent on the establishment of a new commercial 
aircraft manufacturing programm e that uses goods (i.e. fuselages and wings) produced in the United States 
(specifically, in Washington State).  Under this condition, the tax incentives would not have been extended in 
duration to 2040 if Boeing had decided to 'use' imported wings and fus elages in the assembly of the 777X".  
European Union's first written submission, para. 74. (footnotes omitted; emphasis added).  The European 
Union continues: "Likewise, pursuant to the exclusive -production condition, the reduced B&O tax rate subsidy 
for the 777X is contingent on Boeing's use of wings produced in the United States (specifically, in Washington 
State) exclusively.  Under this condition, Boeing benefits from the reduced B&O tax rate for the 777X only so 
long as it 'uses' wings assembled exclus ively in Washington State for the 777X, or any variant thereof".  
European Union's first written submission, para. 75.  
4 Substitute Senate Bill 5952, Chapter 2, Laws of 2013 3rd Special Session, 2014 Wash. Sess. Laws 2 
(SSB 5952), Exhibit EU -03, section 2.  
5 Ibid. subsections 5(11)(e)(ii) and 6(11)(e)(ii).  WT/DS487/R/Add.1  
 
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  6. Canada considers that a WTO Member is not prohibited from providing subsidies to its 
domestic producers, including where the subsidy to the producer of a  final good is contingent 
either on the production or the assembly of an intermediate good by that same producer.  In both 
instances, the subsidy is a production subsidy that is not contingent on the use of domestic over 
imported goods.  
7. Nothing in the G eneral Agreement on Tariffs and Trade 1994 (GATT 1994) or SCM 
Agreement prohibits a subsidizing Member from making the granting of a subsidy contingent on a 
recipient producing goods in its territory.6  In fact, GATT Article  III:8(b) explicitly allows WTO 
Members to provide subsidies to their domestic producers.7  A producer of a final good that is 
required to produce an intermediate good is also a producer of the intermediate good.  Therefore, 
a subsidy can be made contingent on the production of an interm ediate as well as a final good.  
8. Neither the GATT 1994 nor the SCM Agreement limit a subsidizing Member's ability to define 
the level of production required for subsidy eligibility purposes.  As part of this discretion, a 
Member may explicitly require th e production of an intermediate good.  A Member's ability to 
condition the provision of a subsidy on a production requirement would be significantly curtailed if 
a Member could not require the production of an intermediate good.  A production requirement 
would then have to be limited to simple assembly operations.  
9. This position is supported by the Appellate Body's report in Canada – Autos .  In that dispute, 
the Appellate Body assessed whether a measure providing Canadian automobile manufacturers 
with an import duty exemption contingent, inter alia , on satisfaction of a Canadian value -added 
(CVA) requirement, was inconsistent with Article  3.1(b) of the SCM Agreement.8  Under the 
measure, a manufacturer could meet the CVA requirement by disclosing the aggre gate of certain 
costs of producing vehicles in Canada listed in the definition of "Canadian value added".9  
A number of costs were included in the definition of CVA.  The most relevant for the Appellate 
Body's analysis were (1) the cost of domestic goods , that is, those domestic parts and materials 
purchased  by the manufacturer for use in the production of its motor vehicles10, and (2) the cost 
of domestic labour11, that is, the cost of all labour reasonably attributable to the production of 
vehicles.  The la tter would include the cost of labour used to produce intermediate goods.  
10. In analyzing whether the CVA requirement was inconsistent with Article  3.1(b), the 
Appellate Body distinguished between the cost of labour and the cost of domestic goods.  It fou nd 
that the CVA requirement would violate Article  3.1(b) only if it required the manufacturer to use 
domestic goods.12  However, it did not consider that a requirement to use domestic labour, 
regardless of whether that requirement may imply the production o f intermediate goods, would 
violate Article  3.1(b).13 
                                               
6 See Annex IV:3 of the SCM Agreement, which forms part of the rules under paragraph (a) of the now 
expired Article 6.1 for determining when a subsidy is deemed to have caused serious prejudice.  Annex IV :3 
explicitly refers to subsidies tied to the production of a given product.  By contemplating that subsidies may be 
tied to production in the context of a serious prejudice analysis rather than in the context of a prohibition, 
Annex IV:3 recognizes that W TO Members are not prohibited from providing subsidies tied to production.  
7 Article III:8(b) of the GATT 1994 provides: "[t]he provisions of this Article shall not prevent the 
payment of subsidies exclusively to domestic producers, including payments to d omestic producers derived 
from the proceeds of internal taxes or charges applied consistently with the provisions of this Article and 
subsidies effected through governmental purchases of domestic products"; See also Panel Report, EC – 
Commercial Vessels , paras. 7.69 and 7.75 where the panel found that contributions provided only to domestic 
producers of certain vessels were covered by GATT Article III:8(b) and therefore not inconsistent with GATT 
Article III.  
8 Appellate Body Report, Canada – Autos , para. 125. 
9 Ibid. paras. 124 and 125.  
10 Ibid. As the cost of producing intermediate goods is accounted for in the aggregate of the cost of 
purchased inputs and the manufacturer's own labour, the cost of domestic goods could not include the cost of 
intermediate g oods produced by the manufacturer itself.  
11 Ibid. paras. 124 and 130.  
12 Appellate Body Report, Canada – Autos , para. 130: "if the level of the CVA requirements is very high, 
we can see that the use of domestic goods may well be a necessity and thus be, in practice, required as a 
condition  for eligibility for the import duty exemption". (emphasis original) . 
13 Ibid.:"if the level of the CVA requirements is very low, it would be much easier to satisfy those 
requirements without  actually using domestic goods; f or example, where the CVA requirements are set at 40 WT/DS487/R/Add.1  
 
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  11. The European Union's interpretation would nullify the right of a WTO Member to require a 
subsidy recipient to produce goods, as defined by the Member, in its territory, in order to receive a 
subsidy.   This has no basis in law, and would have considerable, negative consequences for 
industry given that most manufacturers produce intermediate goods as part of the production of 
their final goods.  As such, and for the reasons set out above, the Panel shou ld reject the 
interpretation advanced by the European Union.  
 
 
 
                                                                                                                                               
per cent, it might be possible to satisfy that level simply with the aggregate of other elements of Canadian 
value added, in particular, labour costs". (emphasis original) . WT/DS487/R/Add.1  
 
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  ANNEX C -4 
INTEGRATED EXECUTIVE  SUMMARY OF THE ARGUM ENTS OF CHINA  
1. This integrated executive summary summarizes the arguments and viewpoints presented  by 
China to the Panel in its Third Part y Submission, Oral Statements and responses to the questions 
following the substantive meeting. China mainly focuses on the two issues in this dispute in the 
executive summary: 1) legal framework of Article 3.1(b) of the SCM Agreement; and 2) whether 
the "Programme -Siting Condition " and "Exclusive -Production Condition " are consistent with 
Article  3.1(b) of the SCM agreement.   
The Legal Framework of Article 3.1(b) of the SCM Agreement  
2. At the outset, China indicates that in order to establish a prima facie  case under 
Article  3.1(b) , the EU is obligated to demonstrate: 1) relevant measures constitute  subsidies under 
Article 1 of SCM Agreement ; and 2) relevant measures  are contingent upon the use of domestic 
over imported goods.  China will not touch upon the first condition, but only focus on the second 
condition.  
3. Firstly, China is of the view that "contingency" under Article 3.1(b) of the SCM agreement 
includes both contingency in law and contingency in fact . The Appellate Body clarified in 
Canada -Autos  that "contingency"  includes both contingency in law and contingency  in fact and this 
legal standard applies not only to "contingency"  under Article 3.1(a), but also to "contingency"  
under Article 3.1(b)1. Hence, China believes , under present dispute, if subs idies are found  
contingent upon  import substitution , regardless in law or in fact, they shall be  determined to 
constitute  prohibited subsidies . In addition, C hina also mentions the finding of the Appellate Body 
made in EC— Large Civil Aircraft  so as to est ablish the test for determining whether a subsidy 
is de facto contingent on export performance . Such test might be also applied in the present 
dispute.  
4. Secondly, China believes the term "contingent " is a "key word " under Article 3.1(b). T he 
ordinary con notation of "contingent" is "conditional" or "dependent for its existence on something 
else".  Therefore, China is of the view that the Panel shall examine if the subsid ies granted under 
"Programme -Siting Condition " and "Exclusive -Production Condition " are "conditional" or 
"dependent for its existence on something else"  on the use of domestic over imported goods.  
5. Thirdly, China does not agree with the United  States ' argument concerning the interpretation 
of "goods ". If the logic of the United States stand s, it will be contradictory  to each other, since the 
components of fuselages and wings from upstream will be treated as goods, while the fuselages or 
wings assembled in downstream are not goods. With respect to the criterion  of "traded " presented 
by the Un ited States, China believes the connotation of "tradable " means the goods has the value 
of trading instead of being traded in reality. Therefore, China does not think the interpretation  of 
"goods " provided by the United States is convincing.  
6. Fourthly, C hina is of the view that t he prohibited subsidy under Article 3.1(b) is established 
on the basis of contingency upon "use" of domestic over imported goods.  Contrary to the United 
States ' claim that fuselages and wings are not "inputs" that are "used" as goods in the  777X 
production process2, China believes that "use" of domestic  intermediate goods  in the course of 
production may also meet the condition on "use" of domestic  over imported  goods. If the 
conditions concerned would result in a de facto  situation  that the 777X programme prefers the 
domestic components or other intermediate goods, the condition of "use" of domestic over 
imported goods is also met.  
7. Fifthly, China is of the view that Article III of the GATT on which relied by the United States 
is not relevant to the present dispute.  China does not deny that it is possible that Article  III.8(b) of 
the GATT can be used for context in the interpretation of Article 3.1(b) of the SCM Agreement. 
                                               
1 Appellate Body Report, Canad a – Autos , para.123.  
2 First Written Submission of the United States, para.110 -115. WT/DS487/R/Add.1  
 
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  However, China believes that these two Articles impose diff erent obligations to Members. 
Article  III.8(b)  exempts  the subsidy provided  to domestic producers  from the obligations of 
Article  3.2 and 3.4 of the GATT 1994 . However , when the subsidy provided  to the domestic 
producers is contingent on use of domestic ov er imported goods, it will still constitute  prohibited 
subsidies  under Article 3.1(b) of the SCM Agreement. Therefo re, China believes that 
Article  III:8(b) of the GATT is not the legal basis to exempt the "Programme -Siting Condition " and 
"Exclusive -Product ion Condition " from Article 3.1(b) of the SCM Agreement.  
Whether the "Programme -Siting Condition" and "Exclusive -Production Condition" are 
consistent with Article 3.1(b) of the SCM agreement  
8. China is of the view that the analysis regarding "Programme -Siting Condition " and 
"Exclusive -Production Condition " shall take into account the contingency  both in law and in fact 
perspectives.  
9. With regard to the "Programme -Siting Condition ", China notes that the text in SSB  5952 
does not expressly or implicitly in dicate LCA must purchase any products including wings or 
fuselage which are produced in Washington State to fulfill the "Programme -Siting Condition ". 
There seems no sufficient  evidence in law proving the "Programme -Siting Condition " would 
constitute  a de jure subsidy within the scope of Article 3.1(b).  
10. However, China believes that t aking into account of the cost saving from logistic and tax 
incentives aspects, it will be more favourable  to purchase the wings and fuselages components  or 
other intermediat e goods produced in Washington State in the final assembly process  of 777X. 
Therefore, the "Programme -Siting Condition " might result in a situation domestic  components  are 
favoured than imported components . China suggests the Panel to conduct an examinatio n on this 
regard.  
11. With regard to the "Exclusive -Production Condition ", according to its provisions and 
statement made by the Governor of Washington State, the B&O tax rate reduction is specifically 
contingent on being sited in Washington State, and it requires that both final assembly and wing 
assembly have to be in the Washington State.  China believes that if  the both procedures have to 
be in the same State, it will create more incentive to use more domestic components due to cost 
saving and efficiency  perspective . 
12. China suggests  that the Panel shall examine whether the "Exclusive -Production Condition " 
provision in SSB 5952 through implicit expression shall be considered as a de jure  subsidy within 
the meaning of Article 3.1(b).  And i f it does not c onstitute de jure  prohibited subsidy, China 
believes that the Panel shall make an objective assessment on th e fact in relation to the 
production process of wings, so as to determine whether the "Exclusive -Production Condition " 
provision in SSB 5952 shall b e considered as a de facto  subsidy within the meaning of 
Article  3.1(b), through evaluating (i) the design and structure ; (ii) the modalities of operation; and 
(iii) the relevant factual circumstances  of B&O tax rate reduction under "Exclusive -Production 
Condition ". 
Conclusion  
13. To conclude, China is of the view that the Panel shall take into account of the contingency in 
law and in fact to determine whether the tax incentives upon "Programme -Siting Condition " and 
"Exclusive -Production Condition " within  SSB 5952 constitute subsidies upon use of domestic over 
imported goods within the meaning of Article 3.1(b) of SCM Agreement. In addition , China believes 
that certain interpretations of the United States, including "use", "goods " and "relationship  
between G ATT Article III and Article 3.1(b) of SCM Agreement " shall not be supported by the PaneWT/DS487/R/Add.1  
 
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  ANNEX C -5 
INTEGRATED EXECUTIVE  SUMMARY OF THE ARGUM ENTS OF JAPAN  
I. Introduction  
1. The Government of Japan present s its systemic views in this dispute brought by the 
European Union against the United States with respect to certain aerospace tax incentives enacted 
by the State of Washington in 2003, as amended and extended by Substitute Sen ate Bill  5952 
("SSB 5952").  
II. Contingency Under Article 3.1(b)  of the SCM Agreem ent 
A. Legal Standard  
2. Regarding the legal standard for "contingency" under Article 3.1(b) of the SCM Agreement , 
the Appellate Body in Canada – Autos  has clarified that the same legal standard for establishing 
contingency under Article 3.1(a) also applie s for establishing contingency under Article 3.1(b).1 
3. In that respect, Japan recalls that the Appellate Body in EC – Large Civil Aircraft  noted that 
the condition of contingency would be met under Article 3.1(a) of the SCM Agreement when the  
subsidy is granted so as to provide a certain " incentive to the recipient ".2 Under Article 3.1(b) of 
the SCM Agreement, Japan is of the view that this legal standard focused on the incentive requires 
a comparison between the use of domestic goods and imported goods, and that this interpretation 
especially suits the meaning of the word " over" used in Article 3.1(b) of the SCM Agreement .3 
4. Therefore, in this regard, Japan agrees with the European Union's legal analysis  that to 
establish contingency under Article 3.1(b ) of the SCM Agreement  the same framework as 
suggested by the Appellate Body in EC – Large Civil Aircraft for Article 3.1(a) should be used .4 
B. Evidentiary Standard  
1. De Jure Contingency  
5. Japan asks the Panel to carefully examine what exactly  the law i tself states and what it 
necessarily implies  since, as clarified by the Appellate Body in Canada – Autos , the evidentiary 
standard for a de jure  contingency is that "conditionality can be derived by necessary implication 
from the words actually used in the  measure ."5 
6. When there is an ambiguity in the law or if the relevant governmental official is given a 
degree of discretion, "evidence of consistent application of such laws, pronouncements of domestic 
courts on the meanings of such laws, the opinions of  legal experts, and the writings of recognized  
scholars" should also be considered. 6  
                                               
1 Appellate Body Report,  Canada – Autos , para. 123.  This view was later reiterated by the Panel in US – 
Upland Cotton  and left untouched by the Appellate Body in the same case. 
2 Appellate Body Report, EC－Large Civil Aircraft , paras. 1045, 1047. (emphasis added)  
3 Japan notes that the dictionary defines the term "over" as meaning "in preference to", "in excess of" 
or "more than". ( The New Shorter Oxford English Dictionary , 4th edn., L. Brown (ed.)(Oxford  University Press, 
1973, 1993).  The term "over", therefore, functions as a marker of comparison.  Thus, establishing whether 
the domestic product is used in preference to the imported product necessarily implies a comparison between 
the use of the former and the latter.  
4 EU FWS , para. 77. 
5 Appellate Body Report, Canada – Autos , para. 123. (emphasis added)  
6 Appellate  Body Report, US – Carbon Steel (India),  para. 4.446 (quoting Appellate Body Report s, US – 
Countervailing and Anti -Dumping Measures (China) , para. 4.101;  US – Carbon Steel , para. 157).  WT/DS487/R/Add.1  
 
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  2. De Facto  Contingency  
7. The United States points out that the European Union has presented no evidence or 
arguments related to the anticipated ratio of the use of dom estic to imported goods for the Boeing 
Company  ("Boeing ") with and without the challenged measure.7 
8. In this regard, the Appellate Body admits in EC – Large Civil Aircraft  that the assessment as 
to whether a subsidy is "geared to induce" export performan ce under Article 3.1(a) "could be 
based" on a comparison between the ratio  of anticipated export and domestic sales of the 
subsidized products (namely, the "anticipated ratio "), and the same ratio in the absence of the 
subsidy (namely, the "baseline ratio ").8  However, it  does not mention that such ratio is always 
relevant to establish de fact o contingency.9   
9. Similarly, in examining whether a subsidy provides an incentive to use domestic over 
imported products under Article 3.1(b) of the SCM Agreement, Japan is of the view that such 
comparison between the baseline and anticipated ratios  may not necessarily provide a basis for 
determining  whether a subsidy provides  an incentive  to its recipient . 
10. One reason for this is that the increase of the use of t he domestic product may be caused by 
other factors , such as certain market developments including diverging shifts in the prices of 
domestic products as compared to imported products .  However, such other factors causing the 
increase of the use of the dome stic product must be distinguished from the effect of the subsidy 
itself,  and the effects that may be caused by these other factors  must not be attributed to the 
subsidies.10 
11. Therefore , Japan asks the Panel to cautiously examine the  utility of the  "anticipated ratio"  
test.  Whether a particular subsidy provides an incentive to its recipient must be primarily inferred 
from "the total configuration of the facts constituting and surrounding the granting of the 
subsidy",11 rather than by relying on the "antic ipated ratio."  
12. Japan also recalls that the Appellate Body introduced the "anticipated ratio" test as one way 
to determine de facto  export contingency under Article 3.1(a) and footnote 4 of the SCM 
Agreement, which reads in relevant part that a subsidy is "in fact tied to … anticipated 
exportation."12  In other words, the "anticipated ratio" test has a textual basis in the term 
"anticipated exportation" in footnote 4.  In addition to Japan's comments on the overall utility of 
the "anticipated ratio" test,  therefore, in any event, the suggested "anticipated ratio" test 
developed  under Article 3.1(a) should not be simply imported into the evidentiary standard  for the 
purpose of  Article 3.1(b)  inquiry , since Article 3.1(b) contains no reference to "anticipate d" use of 
domestic over imported goods.  
C. Application of the Legal and Evidentiary Standards  
13. In light of the legal and evidentiary standards described above, Japan considers that the 
EU's analysis in respect of the "programme -siting condition" and "ex clusive -production condition" 
may fall short of meeting the standard required to establis h the contingency under Article  3.1(b) of 
the SCM Agreement.  
14. We urge the Panel to , firstly, very carefully examine what exactly  the law itself states and 
what is n ecessarily implied  by the legislation in question  (as a de jure  claim) as well as its design, 
structure and modalities of operation  (as a de facto  claim), and then, determine whether the 
provision of the subsidies provides incentives for the use of domesti c goods over imported goods .  
If anything, more careful explanations appear to be necessary  to connect facts and legal analysis 
in paragraphs 4 2 to 52, and 73 to 79  of the EU FWS.  
                                               
7 US FWS , para. 134. 
8 Appellate Body Report, EC – Large Civil Aircraft , para s. 1044, 104 7. 
9 Ibid., para. 1047.  
10 Ibid., para. 104 7 notes  that when making the comparison between  the "anticipated" and "baseline"  
ratios, "all other things" must be equal . 
11 Ibid., para. 1046 , citing Appellate Body Report, Canada －Aircraft , para. 167.  
12 Ibid.,paras. 1042-1045.  WT/DS487/R/Add.1  
 
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  1. The "Programme -Siting Condition"  
15. First, in respect of the "programme -siting condition," it appears that the requirement to 
locate  Boeing's production of the wings and fuselage, as well as final assembly in  Washington 
State is not exactly tantamount to a requirement to use  inputs produced or assembled in 
Washington State . 
16. Further , with respect to the incentive of the subsidy, there is no explanation in the EU 's 
submission as to how the subsidy is granted so as to provide an incentive to Boeing  to use 
domestic goods in a way that is not simply reflective of the conditions of supply and demand in a 
domestic market consisting of domestic goods and imported goods undistorted by the granting of 
the subsidy.  
17. Japan submits that certain subsidies to the producer of a final good contingent on the 
production of an intermediate g ood by the same producer can be inconsistent with Article 3.1(b) of 
the SCM Agreement , depending on the factual circumstances of a case.   Had there been a n 
outright exclusion of subsidies contingent on domestic manufacturing of  intermediate goods from 
the scope of Article 3.1(b) , it would have allowed WTO Members to easily "circumvent the 
disciplines " of Part II of the SCM Agreement.13 
18. Therefore, in order to determine whether a  subsidy granted to the producer of a final good 
contingent on the production of an intermediate good by that same producer  complies with 
Article  3.1(b) of the SCM Agreement, a panel should scrutinize the exact content of the 
requirements for the subsidy and how they operate for particular manufacturers receiving the 
subsidy.  If, t hrough such scrutiny, the requirement for the production of intermediate goods is 
found to require or incentivize the use of such domestic intermediate goods in final goods in actual 
situations, then the requirement would be in breach of Article 3.1(b).  
2. The "Exclusive -Production Condition"  
19. Second, in respect of the "exclusive -production condition," the words actually used in the 
legislation are not completely clear as to whether, by virtue of the requirement for the  locus of the 
final assembly or win g assembly, the revenue from the 777X will not benefit from the reduced 
Business and Occupation ("B&O") tax rate if these assembl ing activities  take place outside 
Washington State . 
III. Goods under Article 3.1(b)  of the SCM Agreement  
A. Imported Goods  
20. Japan submits that, for the purpose of a claim under Article 3.1(b) of the SCM Agreement, it 
is not necessary that the concerned goods are actually traded or are tradable.  
21. The United States argues that because 777X fuselages and wings are "custom -designed for 
and unique to the 777X and its production process" and "[n]o potential purchasers for such articles 
exist", 777X fuselages and wings are not saleable or traded, and thus are not "goods" within the 
meaning of Article 3.1(b).14  The United States reli es primarily on the word "imported" that 
qualifies the word "goods" in Article 3.1(b).  To follow this logic, certain products would be 
determined not to be "goods" within the meaning of Article 3.1(b) merely because an individual 
company receiving the sub sidy at issue custom -designs the product and commissions a limited 
number of contractors to produce it.  
22. Although Japan is not fully cognizant of the precise meaning which the United States 
attribute to the terms "tradeable" or "custom -designed" goods, which are not the treaty words in 
the SCM Agreement, it should be noted as a preliminary issue that Japan does not agree with the 
proposition that custom -designed goods developed for a particular product model are not capable 
of being sold, traded, or impo rted for that matter.  Japan fails to see how the particular 
characteristics of "custom -design" preclude the goods from being "tradeable", e.g. from being 
                                               
13 Appellate  Body Report, US – Softwood Lumber IV , para. 64.  
14 US FWS, Section VI.D, including para. 129 . WT/DS487/R/Add.1  
 
- C-16 - 
 
  supplied at arm 's length from outside sources.  In addition, Japan has two concerns in relation to 
the limited interpretation of the term "goods" for the purpose of Article 3.1(b).  
23. First of all, such interpretation would open up an easy path for circumventing subsidy 
disciplines under Article 3.1(b) of the SCM Agreement.  Indeed, WTO Members would be able to 
exclude a subsidy contingent on the use of domestic goo ds from the coverage of the 
SCM Agreement by simply labelling products as custom -designed.  Japan recalls that the Appellate 
Body in US – Softwood Lumber IV  cautioned against an interpretati on of the provisions of the SCM 
Agreement which would permit the circumvention of the subsidy disciplines and that this 
consideration was highly pertinent for the Appellate Body's overall conclusion that non -tradable 
goods are not excluded from the scope of " goods" for the purpose of Article 1.1(a)(1)(iii) of the 
SCM Agreement.15 
24. Second, such interpretation of "goods" under Article 3.1(b) has the risk of resulting in a 
wholly arbitrary application of this provision with unpredictable consequences for the fo llowing 
reasons.  A product with the same basic characteristics may be custom -designed or sold in a 
standardised form depending on the wishes of a particular customer.  Likewise, a particular 
company may, at times, produce and sell virtually the same produ ct with some custom -designed 
characteristics, and, at different times, with standardised characteristics due to a number of 
factors such as a change in economic situation or the company 's business strategy.  However, 
following the United States' interpreta tion, although essentially the same product is produced and 
sold, whether it is covered or not covered by the SCM Agreement, would depend on the wishes of 
the customer or the company's business strategy at any given point in time leading to a wholly 
arbitr ary application of Article 3.1(b) of the SCM Agreement.  
25. Limiting the application of Article 3.1(b) to "tradeable" goods would, thus, hinder the 
consistent application of Article 3.1(b) to the detriment of the object and purpose of that provision.  
26. Therefore, Japan submits that, for the purpose of a claim under Article 3.1(b) of the SCM 
Agreement, it is not necessary that the concerned goods are actually traded or tradable.  
B. Domestic Goods  
27. Japan considers that a product assembled entirely from i mported components can be a 
"domestic […] good" within the meaning of Article 3.1(b) of the SCM Agreement  for the following 
reason.  
28. As discussed above, the phrase "domestic over imported goods" in Article 3.1(b) suggests 
that the term "domestic" can re fer to anything that is not imported.  
29. Hence, even if a product is assembled entirely from imported components, when the product  
itself is not imported , the product should be regarded as "domestic". Otherwise, the product could 
be categorized arbitraril y as either "domestic" goods or "imported" goods.  This would significantly 
undermine the object and purpose of  – the SCM Agreement by creating room for circumvention of 
the obligation under Article 3.1(b) of the Agreement.16 
IV. Burden of Proof and the Rel evance of Findings Made by Preceding Panels and the 
Appellate Body  
30. The United States argues that the European Union relies on facts and legal conclusions 
established in a separate dispute, US － Large Civil Aircraft , and fails to make a prima facie  case.17  
The United States points out, inter alia , that while the panel in that dispute addressed facts that 
existed in 2006, the present dispute involves measures that differ from those at issue in th at 
dispute.18  The United States submits that the existence of prior panel findings in US － Large Civil 
                                               
15 Appellate Body Report, US – Softwood Lumber IV , paras. 64 and 67.  
16 See Appellate Body Report, Canada – Autos , para. 142. 
17 US FWS, para. 81.  
18 Ibid., paras. 82 and 87. WT/DS487/R/Add.1  
 
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  Aircraft  does not excuse the European Union from the burden of proof that normally applies in an 
original dispute.19 
31. Japan  agrees with the United Stat es that a complainant has to provide sufficient facts and 
arguments to allow the Panel to perform its own objective assessment of the matter, as required 
under Article 11 of the DSU.20  Nonetheless, in Japan 's view, this does not mean that a 
complainant is precluded from  relying on findings contained in previously adopted panel report s if 
and to the extent such findings are appropriate for the consideration of the matter before the 
Panel . 
32. Japan observes that the Panel in this dispute should make an objec tive assessment of the 
facts of the case including the issue of  whether and to what extent it may rely on the finding s of 
the previous panel, taking into consideration any difference s in the factual circumstances of the 
two cases . 
33. In this regard, it ap pears that the aerospace tax incentives (other than the B&O tax rate 
reduction ) in this dispute consist of  both the tax incentives that were found by the panel in U S－ 
Large Civil Aircraft to involve a financial contribution  and those that were not.  As a complainant, 
the European Union should clearly distinguish the two sets of tax incentives, and elaborate on the 
reasons why it considers that the Panel is allowed to rely on the US － Large Civil Aircraft  panel 's 
and the Appellate Body 's findings in examining the WTO -consistency of each of the challenged 
measures.  
_______________  
 
 
 
 
                                               
19 Ibid., para. 90.  
20 Ibid., paras. 85 -86.; Panel Report, US－Shrimp and Sawblades , para. 7. 6. WT/DS487/R/Add.1  
 
- D-1 - 
 
  ANNEX D  
PROCEDURAL RULINGS   
Contents  Page  
Annex D -1 Letter from the Panel, 15 January  2016 D-2 
Annex D -2 Letter from the Panel, 4 May 2016  D-3 
 
 
 WT/DS487/R/Add.1  
 
- D-2 - 
 
  ANNEX D -1 
LETTER FROM THE PANE L, 15 JANUARY 2016  
The Panel acknowledges receipt of the United States' request to extend the deadline for the second 
written submissions by an additional week (i .e. that the Panel set a date no earlier than 25  March 
2016).  
 
The Panel adopted the present Timetable taking into account, among other considerations, the 
unavailability of the United States' lead attorney to attend a panel meeting during the week of 
14 March 2016, as indicated at the organizational meeting. Accordingly, the second substantive 
meeting was postponed from 15 -16 March, as suggested in the draft Timetable initially sent to the 
parties, to 5 -6 April.  
 
The Panel is cognisant of the direction und er Article 12.4 of the DSU that sufficient time be given 
for the preparation of submissions. At the same time, it is to be recalled that these proceedings 
are required, under the SCM Agreement, to be expedited. What might be considered to be 
sufficient in expedited and in non -expedited proceedings will necessarily be different.  
 
The Panel believes that it has fairly accommodated the parties' concerns as expressed at the 
organizational meeting in the adoption of the present Timetable. The concerns which have  now 
more recently been expressed by the United States do not convince the Panel that insufficient time 
has been given for the preparation of submissions by the parties. In particular the Panel does not 
agree that the United States will only have two days to prepare its second submission.  
 
Accordingly, the Panel declines the United States' request for an extension of the deadline for the 
second written submissions.  WT/DS487/R/Add.1  
 
- D-3 - 
 
  ANNEX D -2 
LETTER FROM THE PANE L, 4 MAY 2016  
The Panel is in receipt of the United States' co mmunication of 28 April 2016, in which it asked for 
the opportunity to comment on certain factual evidence and arguments that were submitted by the 
European Union on 25 April with the European Union's comments on the United States' responses 
to Panel quest ions. The Panel has also received the European Union's comments of 2  May 2016 on 
the United States' request.  
 
In its request, the United States refers to eight new exhibits that were provided by the European 
Union with its comments on the United States' re sponses. The United States "disagrees with the 
[European Union's] interpretation of this evidence and how [the European Union] employs the 
evidence in its argumentation". According to the United States, an opportunity to comment on this 
factual evidence an d arguments would help to protect the United States' rights as a responding 
Member without delaying this proceeding any more than necessary.  
 
In response, the European Union asks the Panel to reject the United States' request. In the 
European Union's view,  the United States has not explained why a new opportunity to comment, 
which is not envisioned in the Panel's timetable, would be essential to protecting the United States' 
procedural rights. The European Union submits that the due process rights of the Un ited States 
must be balanced with the procedural right of the European Union to a speedy resolution of the 
dispute, which would be affected if the United States' request were accepted. The European Union 
also states that the circumstances relating to the s ubmission of the exhibits at issue, as well as the 
nature of the exhibits themselves, do not merit an additional set of comments. According to the 
European Union, the new factual evidence and related argumentation was offered as a rebuttal to 
arguments tha t the United States made in its responses to Panel questions. Nothing in this new 
factual evidence was previously unavailable to the United States and with respect to two exhibits 
the United States itself relied on and referred to the relevant documents be fore the European 
Union submitted them as exhibits. The European Union concludes that not having an additional 
opportunity to submit comments would not prejudice the due process right of the United States in 
this dispute.  
 
Thus, in summary, the United Stat es requests the Panel to give it the opportunity to comment on 
the factual evidence submitted by the European Union, and the European Union submits to the 
Panel that such an opportunity to comment is not envisioned by the Panel's timetable and is not 
other wise merited.  
 
The Panel's Working Procedures do not allow for any further submissions or comments from the 
parties at this point in the proceedings, other than in the case of the parties' comments on the 
interim report. Thus, the question for the Panel to  decide is whether it should permit a departure 
from the Working Procedures. The way in which this might be justified would be if the Panel 
formed the view that the due process rights of a party – here, the United States – would be 
impacted without such an  opportunity.  
 
There are a number of different considerations for a Panel to take into account in a situation such 
as this. An important consideration is the degree to which the matters that a party seeks to 
address were themselves new, were unexpected, or  were not advanced by the other party fairly.  
 
The Panel recalls paragraph 7 of its Working Procedures:  
 
Each party shall submit all factual evidence to the Panel no later than during the first 
substantive meeting, except with respect to evidence necessary  for purposes of 
rebuttal, answers to questions or comments on answers provided by the other party. 
Exceptions to this procedure shall be granted upon a showing of good cause. Where 
such exception has been granted, the Panel shall accord the other party a period of 
time for comment, as appropriate, on any new factual evidence submitted after the 
first substantive meeting.  WT/DS487/R/Add.1  
 
- D-4 - 
 
  The Panel notes that the exhibits referred to by the United States in its request were provided by 
the European Union as part of its comm ents on answers provided by the United States. In its 
request for an opportunity to comment on these exhibits and on the associated arguments, the 
United States has neither alleged nor provided any indication that the exhibits submitted by the 
European Uni on go beyond evidence that is necessary for purposes of "comments on answers 
provided by the other party". The Panel sees no indication that either the exhibits or the 
arguments of the European Union go beyond the "purposes of rebuttal, answers to question s or 
comments on answers provided by the other party". Thus, the European Union was acting within 
its rights under the Working Procedures in submitting that evidence.  
 
The Panel has also reviewed the content of each of the eight exhibits submitted by the E uropean 
Union with its comments on the United States' responses. Each of these exhibits and the related 
argumentation seems to relate to specific points raised by the United States in its responses to 
Panel questions. There is no indication that any of the se exhibits introduces substantially new 
arguments or factual evidence of a nature that had not been previously submitted or discussed by 
the parties. Indeed, the United States has not argued otherwise, stating only, in support of its 
request, that it "dis agrees with the [European Union's] interpretation of this evidence and how 
[the European Union] employs the evidence in its argumentation".  
 
Accordingly, the Panel finds that the United States has not established that it should have a further 
opportunity to comment on the evidence and arguments submitted by the European Union at this 
stage of the proceedings. Such an opportunity is not contemplated in the current Working 
Procedures or timetable, and could potentially lead to a prolonged cycle of exchanges of additional 
evidence and arguments between the parties. Under the present circumstances, this would not 
clearly serve to protect the procedural rights of either party, and would be particularly undesirable 
in the current proceedings, which under the SCM Agreement should be expedited. The due process 
rights of the parties are framed by the Working Procedures, and in this case we do not see a 
proper or sufficient justification to depart from them.  
 
For the reasons expressed above, the Panel declines the req uest of the United States in its 
communication of 28 April 2016.  
__________