WT/DS267/46  
 
23 October 2014  
(14-6139)  Page: 1/6  
  Original: English  
 
 UNITED STATES – SUBSIDIES ON UPLAND COTTON 
NOTIFICATION OF A MUTUALLY AGREED SOLUTION 
The following communication, dated 16 October 201 4, from the delegation of Brazil and the 
delegation of the United States to the Chairper son of the Dispute Settlement Body, is circulated 
pursuant to Article 3.6 of the DSU.  
_______________ 
  In connection with the dispute US – Subsidies on Upland Cotton  (WT/DS267) ( "Cotton" ), we wish 
to notify you in accordance with Article 3.6 of the Understanding on Rules and Procedures 
Governing the Settlement of Disputes  ("DSU") that, having consulted in accordance with 
paragraph 3 of Section III of the Framework for a Mutually Agreed Solution to the Cotton Dispute 
in the World Trade Organization (WT/DS267), Braz il and the United States have concluded the 
attached understanding.  In light of this notificati on, Brazil and the United States have agreed that 
the Cotton  dispute is hereby terminated.  As a resu lt, under DSU Article 22.8 no suspension of 
concessions or other obligations pursuant to the authorization previously granted by the Dispute 
Settlement Body ("DSB") in this dispute shall be applied, and no further action shall be taken 
under DSU Article 21.5 based on a disagreement as to the existence or consistency of any measure taken to comply with the DSB’s reco mmendations or rulings in this dispute.  
  
This notification is otherwise without prejudice to the rights and obligations of Brazil and the United States under the Marrakesh Agreement Establishing the World Trade Organization .  It also 
does not imply recognition of the consistency with the covered agreements of the measures 
discussed in the Cotton  dispute and other measures contained in the US Agricultural Act of 2014, 
nor does it prejudge whether the DSB recommendations and rulings in the Cotton  dispute have 
been implemented.  The commitments of Brazil and the United States with respect to new disputes 
are as set forth in the attached understanding.   We would be grateful if you could circulate this notification to the Members of the Dispute 
Settlement Body. 
  
 
  
 
(Signed) 
Márcia Donner Abreu 
Minister Counsellor 
Chargée d'affaires, a.i. 
Permanent Mission of Brazil (Signed) 
Michael Punke 
Ambassador 
Permanent Mission of the United States 
 
 
 
 
_______________ 
 WT/DS267/46 
 
- 2 - 
 
  Memorandum of Understanding Relate d to the Cotton Dispute (WT/DS267) 
 The Government of the United States of Americ a ("United States") and the Government of the 
Federative Republic of Brazil ("Brazil") (collectively the "parties"), 
 
Hereby agree  as follows: 
 
 
Section I 
 
Transfer of Funds 
 
1.  Promptly and no later than 21 days after si gnature of this agreement, the United States 
shall transfer to the Brazilian Cotton Institute (IBA) by wire to the Banco do Brasil – New York 
Branch the amount of US$300 million. 
 2. The United States shall transfer funds for IBA to the following account at XXXXXX: 
 
XXXXXX 
XXXXXX XXXXXX 
XXXXXX 
XXXXXX XXXXXX 
 
 
Section II 
 
Brazilian Cotton Institute and Authorized Activities 
 1. Brazil shall ensure that monies transfe rred to IBA by the United States under this 
Memorandum of Understanding and under the Memorandum between the Government of the 
Federative Republic of Brazil and the Government  of the United States of America Regarding a 
Fund for Technical Assistance and Capacity Building with Respect to the Cotton Dispute 
(WT/DS267) in the World Trade Organization, signed on April 20, 2010, and any investment 
income of IBA on such transfers, are used on ly for authorized activities, including related 
reasonable administrative expenses.  For purposes of this Memorandum, "reasonable 
administrative expenses" means expenses necessary to the operation of IBA, including payment of 
taxes.  2. Brazil shall ensure that IBA has the capacity to ensure that its funds are used only for 
authorized activities and related reasonable administrative expenses, and to meet all other 
requirements of this Memorandum.    
3. Brazil shall ensure that IBA, or any entity  t h a t  r e c e i v e s  m o n i e s  f r o m  I B A ,  e m p l o y s  t h e  
monies only for authorized activities, including related reasonable administrative expenses.  In the event any amount transferred by the United States is  used for other than an authorized activity or 
related reasonable administrative expense, Brazil  shall take the appropriate measures to address 
the situation, including imposition of additional  safeguards to prevent unauthorized use of the 
monies from IBA.   
4. For purposes of this Memorandum, authorized activities are technical assistance and 
capacity building activities related to the cotton sector in Brazil and related to international cooperation in the same sector in countries in sub-Saharan Africa, in Mercosur member and 
associate member countries, in Haiti, or in any other developing country as the parties may agree. 
 5. For purposes of this Memorandum, technical assistance and capacity building activities 
consist of: 
 WT/DS267/46 
 
- 3 - 
 
  (a) Pest and disease control, mitigation and eradication; 
(b) Application of post harvest technology; (c) Purchase and use of capital equipment ( e.g., storage and ginning equipment); 
(d) Promotion of use of cotton; 
(e) Adoption of plant varieties; 
(f) Observance of labor laws; (g) Training and education of workers and employers; 
(h) Market information services; 
(i) Natural resources management and conservation; (j) Application of technologies to improve quality of cotton; (k) Application of methods to impr ove grading and classing services; 
(l) Design, planning and implementation of in frastructure projects required and solely 
used for storage, conservation and transpor tation of cotton, cotton seeds, and cotton 
inputs such as fertilizer;  
(m) Research by Brazilian public or private institutions where such research is conducted 
in collaboration with research agencies of the U.S. Department of Agriculture or with a college, university, or research foundation located in the United States. Such research 
activities, subject to agreement between the Brazilian and U.S. institutions involved, 
may be open to partnerships with third country institutions; and 
(n) Extension services related to items a-m above. 
 
 
Section III 
 
IBA Transparency and Auditing Requirements 
 
1. Brazil shall require that IBA meet all applicable requirements of Brazilian law with respect to 
accounting, auditing, and public disclosure of info rmation.  In addition, the governing documents 
of IBA, such as by-laws, shall provide for appr opriate transparency and auditing regarding the 
funds of IBA and for governmental control over its operation.  
2. Brazil shall require that IBA publish on a publicly-accessible internet website information 
regarding all activities authorized for payment or paid for using monies received by IBA within 30 days of such authorization or payment. This information shall include a description in English of 
these activities sufficient to confirm that they are authorized activities described in Section II, 
paragraph 5.  
3. Brazil shall ensure that IBA’s by-laws requir e that it undergo internal control and regular 
external auditing by recognized auditing firms.  4. Brazil shall semi-annually provide to the United States: 
 
(a) a report on each disbursement from IBA, including the amount, purpose, and 
recipient;  
(b) any official audit reports and reports on activities of IBA or any recipient entity related 
to disbursements from IBA done by or on behalf of IBA; and  
(c) a summary of all available information regarding IBA or monies disbursed from IBA, 
including with respect to any activities of any recipient entity related to disbursements 
from IBA. 
 
5. Brazil shall notify the United States in ad vance of any changes to the operation of IBA, 
including changes in the governing docu ments of IBA, such as by-laws.  
  WT/DS267/46 
 
- 4 - 
 
  Section IV 
 
Operation of the GSM-102 Program 
 
1. The United States shall not offer guarantees under the GSM-102 Program for loans of longer 
than 18 month tenor.  The United States shall no t extend or renew the tenor of a guarantee after 
it is issued. However, debt arising from default under a guaranteed obligation may be rescheduled.  
Guarantees under the GSM-102 Program shall not be used for debt rescheduling purposes. 
 2. The United States shall ensure that the f ees for the GSM-102 program guarantees meet the 
following conditions:  
 
(a) The United States will calculate and charge risk-based fees for the GSM-102 program, 
including for guarantees for loans 12 months or shorter, that cover the program’s 
long-term operating costs and losses;  
(b) Through adding an additional fee comp onent, if needed, to the risk-based fee 
described in subparagraph (a), for a given country risk grade, no fee within the 
country risk grade for a guarantee with tenor longer than 12 months but less than 18 
months will be less than 90% of the OE CD minimum premia rate (MPR) that 
corresponds to the U.S. country risk grade; and 
(c) Through adding an additional fee component, if needed, to the risk-based fee 
described in subparagraph (a), for a given country risk grade, no fee within the 
country risk grade for a guarantee with tenor of 18 months will be less than 95% of the OECD MPR that corresponds to  the U.S. country risk grade. 
 
3. OECD MPRs are set out in the OECD Arrangem ent on Officially Supported Export Credits, 
Annex VIII: Calculation of Minimum Premium Rates or its successor. 
 
 
Section V 
 
GSM Transparency Requirements 
 The United States shall semi-annually provide to Brazil information on the operation of the GSM-
102 program, including information on uncancelled guarantees registered for the period, the tenor 
of the guarantees allocated, the fees applied and the volumes of guarantees granted for each 
tenor, as well as a list of obligors whose debt was initially rescheduled during the period and the 
total amount initially rescheduled. 
  
Section VI 
 
Peace Clause 
 
1. Brazil shall not request consultations under Articles XXII or XXIII of GATT 1994 as 
elaborated and applied by the Understanding on Rules and Procedures Governing the Settlement 
of Disputes with respect to any of the following: 
 
(a) the Commodity Credit Corporation GSM-102 export credit guarantee program, or any 
export credit guarantees provided under the program, while the program operates in a manner consistent with the requirements described in Section IV; and 
(b) any current domestic support program or policy specific to upland cotton such as the 
Stacked Income Protection Program described in Section 11017 of the U.S. Agricultural Act of 2014, payments under any such program or policy, or support to 
upland cotton producers under any other domestic support program under current 
agricultural domestic support policies such as marketing loans described in Subtitle B of Title I of the U.S. Agricultural Act of 2014, until September 30, 2018. 
 
2. Until September 30, 2018, before requesting consultations under Articles XXII or XXIII of GATT 1994 as elaborated and applied by the Understanding on Rules and Procedures Governing 
the Settlement of Disputes  on any current domestic support program or policy other than those WT/DS267/46 
 
- 5 - 
 
  described in paragraph 1(b), Brazil shall inform the United States and provide a reasonable 
opportunity for informal bilateral consultations with a view to avoiding WTO dispute settlement.    
Section VII 
 
Consultation 
 
Brazil and the United States shall consult at least annually, on request of either party, on matters concerning this Memorandum.  In addition, the parties shall enter into consultations not later than 30 days after receipt by a party of a written request of the other party to consult under this 
Memorandum. 
  
Section VIII 
 
Duration 
 
1.  This Memorandum, except as provided in paragraphs 2 and 3 of this Section, shall terminate on 30 September 2018, unless the parties agree otherwise.  
2 .  S e c t i o n s  I I  a n d  I I I  o f  t h i s  M e m o r a n d u m  s h a l l  b e  i n  e f f e c t  u n t i l  t h e  d a t e  p r o j e c t s  f u n d e d  
under this Memorandum are completed and no funds remain available for allocation by IBA.  
3.  The obligations contained in Section V and paragraph 1(a) of Section VI shall remain in force 
while the GSM-102 program operates in a manner consistent with the requirements described in Section IV. 
 
 
Section IX 
 
Status of 2010 Memorandum of Understanding and 2010 Framework Agreement 
 This Memorandum supersedes the Memorandum of  Understanding between the Government of the 
Federative Republic of Brazil and the Government  of the United States of America Regarding a 
Fund for Technical Assistance and Capacity Building with Respect to the Cotton  Dispute 
(WT/DS267) in the World Trade Organization, signed on April 20, 2010, and the Framework for a 
Mutually Agreed Solution to the Cotton Disput e in the World Trade Organization (WT/DS267), 
signed on June 25, 2010.   
Section X 
 
Reservation of Rights 
 
This Memorandum is otherwise without prejudice to the rights and obligations of Brazil and the United States under the Marrakesh Agreement Establishing the World Trade Organization . It also 
does not imply recognition of the consistency with the covered agreements of the measures 
discussed in the Cotton  dispute (WT/DS 267) and other measures contained in the U.S. 
Agricultural Act of 2014, nor does it prejudge whether the DSB recommendations and rulings in the Cotton dispute have been implemented. 
 
 
Section XI 
 
Effective Date 
 
Sections I and XI of this Memorandum are effective on the date of signature.  All other sections of 
this Memorandum are effective on the date of tran sfer of funds in accordance with Section I.   
  
 WT/DS267/46 
 
- 6 - 
 
  Done at Washington, on October 1, 2014, in two originals, each in the English and Portuguese 
languages, both texts being equally authentic.  In case of divergence of interpretation, the English 
text shall prevail.    
__________