WT/DS487/6  
 
21 December  2016 
(16-7000) Page: 1/2 
  Original: English  
 
 UNITED STATES – CONDITIONAL TAX INCE NTIVES  
FOR LARGE CIVIL AIRC RAFT  
NOTIFICATION OF AN A PPEAL BY THE UNITED STATES  
UNDER ARTICLE 16.4 A ND ARTICLE 17 OF THE  UNDERSTANDING ON RUL ES 
AND PROCEDURES GOVER NING THE SETTLEMENT OF DISPUTES (DSU),  
AND UNDER RULE 20 (1) OF THE WORKING P ROCEDURES FOR APPELL ATE REVIEW  
The following communication, dated 16 December  2016, from the Delegation of the United States , 
is being circulated to Members.  
 
_______________  
 
 
Pursuant to Article 16 of the Understanding on Rules and Pr ocedures Governing the 
Settlement of Disputes  ("DSU") and Rule 20 of the Working Procedures for Appellate Review , the 
United States files this Notice of Appeal to the Appellate Body on certain issues of law covered in 
the Report of the Panel in United Stat es – Conditional Tax Incentives for Large Civil Aircraft 
(WT/DS487/R & WT/DS487/R/Add.1) ("Panel Report") and certain legal interpretations developed 
by the Panel.  
The United States seeks review by the Appellate Body of the Panel 's finding and conclusion 
that the Washington State B&O aerospace tax rate for the manufacturing or sale of Boeing 777X 
airplanes (the "B&O aerospace tax rate") is inconsistent with Articles 3.1(b) and 3.2 of the 
Agreement on Subsidies and Countervailing Measures (the "SCM Agreement ") because it is 
de facto contingent on the use of domestic over imported goods.1 This finding is in error and is 
based on erroneous findings on issues of law and legal interpretations, including the Panel 's failure 
to conduct an objective assessment of th e matter as required by Article 11 of the DSU.  
The Panel erred in finding that the B&O aerospace tax rate for the 777X program is 
contingent on the use of domestic over imported wings for the 777X. In particular:  
a. The Panel erroneously interpreted and appl ied Article 3.1(b) of the SCM Agreement as if 
it prohibited subsidies conditional on the domestic siting of production activities.2  
b. The Panel erroneously interpreted and applied Article 3.1(b) of the SCM Agreement in 
finding that the B&O aerospace tax rat e for the 777X program is contingent on the "use" 
of wings for the 777X, even though Boeing does not and will not "use" wings to produce 
the 777X, and Boeing is nonetheless eligible to receive the B&O aerospace tax rate for 
the 777X program (and other prog rams).3  
c. The Panel erroneously interpreted and applied Article 3.1(b) of the SCM Agreement in 
finding that the B&O aerospace tax rate for the 777X program is contingent on the use 
of "domestic" over "imported" wings for the 777X, even though the Panel did not 
interpret the meaning of the terms "domestic" and "imported," did not provide sufficient 
analysis of what would make wings "domestic" or "imported," and did not assess 
                                                
1 See, e.g., Panel Report, paras. 7.36 9, 8.1(c), 8.2.  
2 See, e.g., Panel Report, paras. 7.360, 7.368 -7.369, 8.1(c), 8.2.  
3 See, e.g.,  Panel Report, paras. 7.219 -7.222, 7.353 -7.356, 7.368.  WT/DS487/6  
 
- 2 - 
 
  whether the 777X wings are "domestic."4 The Panel also failed to provide the basic 
rationale behind its finding as required by Article 12.7 of the DSU.  
d. The Panel erroneously interpreted and applied Article 3.1(b) of the SCM Agreement by 
relying on hypothetical scenarios with no evidentiary basis to evaluate whether the B&O 
aerospace tax r ate for the 777X program is "contingent" in fact on the use of domestic 
over imported goods.5 The Panel failed to make "an objective assessment of the matter 
before it, including an objective assessment of the facts of the case," as required by 
Article 11 of the DSU because it used hypothetical scenarios involving Boeing 's purchase 
of 777X wings from another Washington manufacturer and Boeing 's importation of 777X 
wings from a foreign producer that were contrary to the evidence before it.6 
e. The Panel failed to make "an objective assessment of the matter before it, including an 
objective assessment of the facts of the case," as required by Article 11 of the DSU in 
finding that Boeing would lose the B&O aerospace tax rate for the 777X program if it 
used 777X wi ngs produced outside Washington State, and in finding that it would not 
lose that tax rate if it sourced 777X wings from a Washington manufacturer.7 
f. The Panel failed to make "an objective assessment of the matter before it, including an 
objective assessmen t of the facts of the case," as required by Article 11 of the DSU in 
finding that the Second Siting Provision8 concerns the use of certain goods, and 
specifically the origin of those goods that enter into the production process for the 777X, 
as a condition  for the continued availability of the B&O aerospace tax rate for the 777X 
program.9 Were the Appellate Body to consider the meaning and operation of the Second 
Siting Provision as an issue of law for purposes of the DSU, then the United States 
considers t he Panel erred as a matter of law in its understanding or interpretation of the 
Second Siting Provision.  
The United States respectfully requests that the Appellate Body reverse these findings by 
the Panel.  
 
__________  
                                                
4 See, e.g., Panel Report, Section 7.5.4 (interpreting certain terms of Article 3.1(b), but not interpreti ng 
the terms "domestic " and "imported "), paras. 7.364, 7.367.  
5 See, e.g., Panel Report, paras. 7.355 -7.356, 7.359, 7.363 -7.369.  
6 See, e.g., Panel Report, paras. 7.355 -7.356, 7.359, 7.363 -7.369.  
7 See, e.g., Panel Report, paras. 7.363 -7.367, 7.369.  
8 See Panel Report, Section 7.3.2.2.  
9 See, e.g., Panel  Report, paras. 7.341, 7.348 -7.356, 7.358 -7.368.