WT/DS353/AB/RW  
 
28 March 2019  
(19-1750) Page: 1/181 
    
 
 
UNITED STATES – MEAS URES AFFECTING TRADE  IN LARGE CIVIL 
AIRCRAFT (SECOND COM PLAINT)  
RECOURSE TO ARTICLE  21.5 OF THE DSU BY T HE EUROPEAN  UNION  
AB-2017-4 
Report of the Appellate Body  
 
 
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 Table of Contents  
 
1   INTRODUCTION  ................................ ................................ ................................ ....... 13 
1.1   Original proceedings  ................................ ................................ ................................ . 13 
1.2   Compliance proceedings  ................................ ................................ ............................  15 
1.2.1    Panel proceedings  ................................ ................................ ................................ .. 15 
1.2.2    Appellate proceedings and procedural issues  ................................ .............................  21 
2   ARGUMENTS OF THE  PARTICIPANTS  ................................ ................................ ........  26 
3   ARGUMENTS OF THE  THIRD PARTICIPANTS  ................................ .............................  26 
4   ISSUES RAISED IN  THIS APPEAL  ................................ ................................ .............  27 
5   ANALYSIS OF THE APPELL ATE BODY  ................................ ................................ ........  28 
5.1   United States' claim relating to the Panel's terms of reference  ................................ ........  28 
5.1.1    The Panel's findings  ................................ ................................ ...............................  29 
5.1.2    Claims and arguments on appeal  ................................ ................................ .............  30 
5.1.3    Whether the Panel erred in finding that claims relating to the USDOD procurement 
contracts were within the scope of th ese compliance proceeding s ................................ ..........  32 
5.1.4    Conclusion  ................................ ................................ ................................ ............  35 
5.2   European Union's claims relating to the Panel's findings concerning the USDOD  
procurement contracts  ................................ ................................ ................................ ...... 35 
5.2.1    The Panel's findings under Article 1.1(a)(1) of the SCM  Agreement  ..............................  39 
5.2.1.1    The Panel's analysis regarding Boeing's contribution to a joint venture between  
USDOD and Boeing  ................................ ................................ ................................ ..........  41 
5.2.1.2    The Pa nel's analysis of whether Boeing shares with USDOD the rewards of the  
R&D it conducts under the USDOD procurement contracts  ................................ ....................  43 
5.2.1.3    The Panel's analysis of the collaborative nature and purpose of the USDOD  
procurement contracts  ................................ ................................ ................................ ...... 48 
5.2.2    The Panel's findings under Article  1.1(b) of the SCM  Agreement  ................................ .. 56 
5.2.3    Completion of the legal analysis  ................................ ................................ ..............  58 
5.2.4    United States' conditional appeal on specificity  ................................ ..........................  60 
5.2.5    Conclusion  ................................ ................................ ................................ ............  60 
5.3   European Union's claim relating to the Panel's finding concerning FSC/ETI tax  
concessions under Article 1.1(a)(1)(ii) of the SCM Agreement  ................................ ...............  60 
5.3.1    The Panel's findings  ................................ ................................ ...............................  60 
5.3.2    Whether the Panel erred in its finding under Article 1.1(a)(1)(ii) of the SCM  
Agreement with respect to FSC/ETI tax concessions  ................................ .............................  64 
5.3.3    Completion of the legal analysis  ................................ ................................ ..............  67 
5.3.4    Conclusion  ................................ ................................ ................................ ............  71 
5.4   European Union 's claims relating to the Panel's findings concerning specificity  
under Article 2.1(c) of the SCM  Agreement  ................................ ................................ .........  72 
5.4.1    Article 2.1(c) o f the SCM  Agreement  ................................ ................................ ........  73 
5.4.2    The Panel's findings concerning industrial revenue bonds  ................................ ............  76 
5.4.2.1    Whether the Panel erred in its interpretation of Article 2.1(c) of the SCM  
Agreement  ................................ ................................ ................................ ......................  78 WT/DS353/AB/RW  
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 5.4.2.2    Whether the Panel erred in its application of Article 2.1(c) of the SCM  Agreement  ....... 79 
5.4.2.3    Whether the Panel failed to make an objective assessment under Article  11 of 
the DSU  ................................ ................................ ................................ ..........................  82 
5.4.2.4    Completion of the legal analysis  ................................ ................................ ............  83 
5.4.2.5    Conclusion  ................................ ................................ ................................ .........  84 
5.4.3    The Panel's findings concerning economic development bonds  ................................ ..... 85 
5.4.3.1    Whether the Panel erred in its interpretation of the term "limited number" in 
Article  2.1(c) of the SCM Agreement  ................................ ................................ ..................  87 
5.4.3.2    Whether the Panel erred in its interpretation and application of the term "certain 
enterprises" in Article  2.1(c) of the SCM Agreement  ................................ .............................  91 
5.4.3.3    Whether the Panel erred in its interpretation of the term "predominant use" in 
Article  2.1(c) of the SCM Agreement  ................................ ................................ ..................  93 
5.4.3.4    Whether the Panel failed to make an objective assessment under Article 11 of  
the DSU  ................................ ................................ ................................ ..........................  96 
5.4.3.5    Completion of the legal analysis  ................................ ................................ ............  96 
5.4.3.6    Conclusion  ................................ ................................ ................................ .........  97 
5.5   European Union's claims relating to the Panel's findings concerning South Carolina  
MCIP job tax credits  ................................ ................................ ................................ .........  98 
5.5.1    The Panel's findings  ................................ ................................ ...............................  98 
5.5.2    Claims and arguments on appeal  ................................ ................................ ...........  100 
5.5.3    Whether  the Panel erred in its application of Article 2.2 of the SCM Agreement  ...........  101 
5.5.4    Whether  the Panel failed to make an objective assess ment under Article 11 of  
the DSU  ................................ ................................ ................................ ........................  104 
5.5.5    Completion of the legal analysis  ................................ ................................ ............  104 
5.5.6    Conclusion  ................................ ................................ ................................ ..........  107 
5.6   Continuing adverse effects from the original reference period  ................................ ...... 107 
5.6.1    Whether the Panel erred under Article 7.8 of the SCM Agreement, or acted  
inconsistently with Artic le 11 of the DSU, by excluding transactions found to cause  
adverse effects during the original reference period from the obligation to take  
appropriate steps to remove adverse effects  ................................ ................................ ..... 108 
5.6.2    Whether the Panel erred under Articles 5 and 6.3 of the SCM Agreement, or acted 
inconsistently with Article 11 of the DSU, in its treatment of claims of continuing adverse  
effects from the origina l proceedings  ................................ ................................ ................  114 
5.6.3    Conclusion  ................................ ................................ ................................ ..........  118 
5.7   Technology effects  ................................ ................................ ................................ .. 119 
5.7.1    The Panel's analysis  ................................ ................................ .............................  120 
5.7.2    Whether the Panel erred under Articles 5, 6.3, and 7.8 of the SCM Agreement, or  
acted inconsistently with Article 11 of the DSU, by failing to consider in its counterfactual  
analysis the impact of the acceleration effects of the pre -2007 aeronautics R&D subsidies  
on the timing of delivery of the 787 ................................ ................................ ..................  125 
5.7.3    Completion of the legal analysis  ................................ ................................ ............  135 
5.8   Price effects  ................................ ................................ ................................ ...........  141 
5.8.1    European  Union's claim relating to the Panel's causation standard  .............................  141 
5.8.1.1    Whether the Panel erred under Articles 5, 6.3, and 7.8 of the SCM Agreement in 
allegedly stating that, to find significant lost sales through a price causal mechanism, there  
must be no non -price factors that po tentially contributed to Boeing having won those sales  .... 141 WT/DS353/AB/RW  
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 5.8.2    United  States' claims relating to the Panel's analysis of the tied t ax subsidies ..............  146 
5.8.2.1    The Panel's findings  ................................ ................................ ...........................  146 
5.8.2. 2   Whether the Panel erred under Articles 5 and 6.3 of the SCM Agreement, or acted 
inconsistently with Article 11 of the DSU, in its calculation of the per -aircraft amount of 
subsidization  ................................ ................................ ................................ .................  149 
5.8.2.3    Whether the Panel erred under Articles 5 and 6.3 of the SCM Agreement, or acted 
inconsistently with Article 11 of the DSU, by failing to ensure that the per -aircraft amount  
of subsidizatio n covers the entirety of the price differentials  ................................ ................  156 
5.8.2.4    Conclusion  ................................ ................................ ................................ ....... 160 
5.8.3    European Union's  claims relating to the Panel's analysis of the untied subsidies  ...........  161 
5.8.3.1    Whether the Panel erred under Articles 5 and 6.3 of the SCM  Agreement, or acted 
inconsistently with Article  11 of the DSU, by requiring that the Europea n Union demonstrate  
that the untied subsidies actually altered Boeing's pricing behaviour  ................................ .... 161 
5.8.3.2    Completion of the legal analysis  ................................ ................................ ..........  166 
5.8.3.2.1    Washington State untied subsidies  ................................ ................................ ... 168 
5.8.3.2.2    Post-2006 aeronautics R&D untied subsidies  ................................ ......................  171 
5.8.4    Overall conclusion regarding price effects  ................................ ...............................  173 
5.9   Additional claims on appeal  ................................ ................................ ......................  174 
6   FINDINGS AND CON CLUSIONS  ................................ ................................ ...............  175  
6.1   Terms of reference  ................................ ................................ ................................ . 175 
6.2   USDOD procurement contracts  ................................ ................................ .................  176 
6.3   FSC/ETI tax concessions  ................................ ................................ ..........................  176 
6.4   City of Wichita industrial revenue bonds  ................................ ................................ .... 176 
6.5   South Carolina economic development bonds  ................................ .............................  177 
6.6   South Carolina MCIP job tax credits  ................................ ................................ ..........  177 
6.7   Continuing adverse effects  ................................ ................................ .......................  178 
6.8   Technology effects  ................................ ................................ ................................ .. 178 
6.9   Price effects  ................................ ................................ ................................ ...........  179 
6.10   Additional claims on appeal  ................................ ................................ ....................  180 
6.11   Recommendation  ................................ ................................ ................................ .. 180 
 
 
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ABBREVIATIONS USED I N THIS REPORT  
Abbreviation  Description  
2006 IRS Memorandum  Internal Revenue Service Memorandum No. AM  2007-001 
AJCA American Jobs Creation Act of 2004  
B&O business and occupation  
BCI business confidential information  
Boeing  The Boeing Company  
CLEEN  Continuous Lower Energy Emissions, and Noise  
DSB dispute settlement body  
DSU Understanding on Rules and Procedures Governing the Settlement of Disputes  
EDBs economic development bonds  
ETI Act  FSC Repeal and Extraterritorial Income Exclusion Act of 2000   
FAA Federal Aviation Administration  
FILOT  fee-in-lieu-of-taxes  
FSC foreign sales corporation  
GATT 1994  General Agreement on Tariffs and Trade 1994  
HSBI highly sensitive business information  
HSBI Appendix  Appendix 2 to the Panel Report (HSBI)  
IR&D independent research and development  
IRBs industrial revenue bonds  
ITAR International Traffic in Arms Regulations  
KSA Kansas Statutes Annotated  
LCA large civil aircraft  
MCIP multi-county industrial park  
NASA  National Aeronautics and Space Administration  
NPV  net present value  
Original Panel Report  Panel Report, United States – Measures Affecting Trade in Large Civil Aircraft 
(Second Complaint) , WT/DS353/R  
Panel Report  Panel Report, United States – Measures Affecting Trade in Large Civil Aircraft 
(Second Complaint) – Recourse to Article 21.5 of the DSU by the European 
Union , WT/DS353/RW  
R&D research and development  
RDT&E  research, development, test, & evaluation  
S&T science and technology  
SCM Agreement  Agreement on Subsidies and Countervailing Measures  
Space Act  National Aeronautics and Space Act of 1958, as amended  
Spirit  Spirit Aerosystems  
TIPRA  Tax Increase Prevention and Reconciliation Act of 2005  
TRL technology readiness level  
USDOD  United States Department of Defense  
USDOD procurement 
contracts  pre-2007 and post -2006 RDT&E procurement contracts between USDOD and 
Boeing  
Working Procedures  Working Procedures for Appellate Review  WT/DS353/AB/RW  
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 PANEL EXHIBITS CITED  IN THIS REPORT  
Exhibit No.  Short title (if applicable)  Description  
EC-11 Declaration of Christian 
Scherer  Declaration of Christian Scherer, Airbus SAS, Commercial 
Aspects of the Aircraft Business from the Perspective of a 
Manufacturer (March 2007)  
EC-167 KSA Kansas Statutes Annotated , Section 12-1740 et seq. 
(2001)  
EC-627 TIPRA  Tax Increase Prevention and Reconciliation Act of 2005, 
Public Law No. 109 -222, 120 Stat. 345, 17 May 2006, 
Section 513  
EC-795 Peisen Study  Peisen et al., Case Studies: Time Required to Mature 
Aeronautic Technol ogies to Operational Readiness  (SAIC 
and GRA, Inc., November 1999)  
EU-9  A. Shain, "S.C. traveled a long road to land Boeing", 
Charlotte Observer , Charlotte, NC, 1 November 2009  
EU-23 Rumpf Report  Richard L. Rumpf and Robert J. Levinson, "United States 
Department of Defense Research, Development, Test & 
Evaluation ('RDT&E') Funding for the Boeing Company 
Applicable to Large Civil Aircraft: 2007 -2012 Estimates", 
12 March 2013  
EU-24 ITR FSC/ETI Report  International Trade Resources Report, Boeing FS C/ETI 
Tax Exemptions Post -2011 (13 December 2012)  
EU-29 2006 CRA Report  CRA International, U.S. Department of Defense (DoD) 
Research, Development, Test and Evaluation (RDT&E) 
Funding Support to The Boeing Company for Dual -Use 
Aircraft R&D  (November 2006)  
EU-100  Jeff Sloan, "PRSEUS preform for pressurized cabin walls", 
Composites World , 1 September 2011  
EU-107  Alex Velicki  and Dawn Jegley, PRSEUS Development for 
the Hybrid Wing Body Aircraft , NASA Report 
No. NF1676L -13290 (20 September 2011)  
EU-108  Boeing News Release, "Boeing Flies X -48C Blended Wing 
Body Research Aircraft", 7 August 2012  
EU-268  W. Cole, "The Value of Lessons Learned", Boeing 
Frontiers Online , December 2003-January  2004 
EU-275  United States Code of Federal Regulations , Title 48, 
Section 271.002(a)  
EU-276  U.S. Government Response to the EC -Commissioned 
Report "U.S. Government Support of the U.S. Commercial 
Aircraft Industry", March 1992  
EU-332  D. Arkell, "Exponential Potential", Boeing Frontiers 
Online , September 2005  
EU-333  D. Gates, "How B -2 data wound up in 787 program", 
Seattle Times , 22 January 2006  
EU-334  W.B. Scott, "Legacy of B -2 Bomber Innovations Apparent 
in J-UCAS and Other Programs", Aviation Week & Space 
Technology , 26 March 2006  
EU-362  United States Patent No. 5,698,316 (16 December 1997)  
EU-378  United States Patent No.  8,376,337 (19 February 2013)  
EU-379  United States Patent No.  8,376,338 (19 February 2013)  
EU-380  United States Patent No.  8,366,050 (5 February 2013)  
EU-381  United States Patent No. 8,352,486 (8 January 2013)  
EU-382  United States Patent No.  8,194,239 (5 June 2012)  WT/DS353/AB/RW  
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 Exhibit No.  Short title (if applicable)  Description  
EU-383  United States Patent No. 7,667,830 (23 February 2010)  
EU-385  United States Patent No.  8,042,767 (25 October 2011)  
EU-386  United States Patent No. 8,016,650 (13 September 2011)  
EU-388  United States Patent No.  7,861,411 (4 January 2011)  
EU-389  United States Patent No. 7,773,885 (10 August 2010)  
EU-390  United States Patent No.  7,841,152 (30 November 2010)  
EU-394  United States Patent No. 7,347,083 (25 March 2008)  
EU-402  United States Code , Title 26 (Internal Revenue Code), 
Sections  245, 921 -927, and 951 (2000)  
EU-405 TIPRA  Tax Increase Prevention and Reconciliation Act of 2005, 
Public Law No. 109 -222, 120 Stat. 345, 17 May 2006, 
Section 513  
EU-406 2006 IRS Memorandum  Office of Chief Counsel, Internal Revenue Service 
"Qualification for FSC benefits and ETI exclusions" 
(Memorandum No. AM 2007 -001), 22  December  2006 
EU-407 Boeing 2012 10 -K Boeing, Annual Form 10 -K to the United States Securities 
and Exchange Commission for the year ended 
December  31, 2012  
EU-434  Substitute Senate Bill 6828, "Aerospace Tax Incentives", 
Washington Session Laws 365 (2008)  
EU-466  Act No. 124 (H3130) (30 October 2009), South Carolina 
Code  
EU-467 Project Gemini Agreement  Project Gemini Agreement between The Boeing Company 
and the State of South Carolina (1 January 2010)  
EU-470 Boeing FILOT Agreement  Fee Agreement by and between Charleston County, South 
Carolina, and The Boeing Company (1 December 2010)  
EU-477  State General Obligation Economic Development Bond 
Act, South Carolina  Code, Title 11, Chapter  41 
EU-490  Letter dated 23 July 2012 from the South Carolina State 
Budget and Control Board regarding a Freedom of 
Information Act Request  
EU-491  Letter dated 31 July 2012 from the South Carolina State 
Budget and Control Board regarding a Freedom of 
Information Act Request Supplement  
EU-509  South Carolina Income Tax Act, South Carolina Code , 
Title 12, Chapter 6  
EU-516  Charleston County Ordinance  1626 (2  February  2010)  
EU-550  Project Emerald Confidential Site Development and 
Incentive Agreement (2006)  
EU-553  Inducement and Millage Rate Agreement between 
Charleston County and Project Emerald (21 December 
2004)  
EU-555  Charleston County Council Ordinance 1475 (5  December 
2006)  
EU-665  Craig Wilsey and Robert Stoker, Continuous Lower 
Energy, Emissions and Noise (CLEEN) Technologies 
Development – Boeing Program Overview , CLEEN 
Consortium Public Session (27 October 2010)  
EU-987  HSBI WT/DS353/AB/RW  
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 Exhibit No.  Short title (if applicable)  Description  
EU-1014 Airbus Engineers' Response  Response by Burkhard Domke, Phil A. Brown, Jörg 
Kumpfert , and Ian Whitehouse to the  June 2013 
Statement by Boeing Engineers, 19  July 2013 (BCI/HSBI)  
EU-1398  Second Supplemental Declaration of Richard A. Razgaitis, 
Sr., Ph.D., CLP (17  December 2014)  
EU-1399  D. Lerman and R. Wall, "U.S. Defense Contractors Focus 
on Foreign Buyers", Businessweek , 14 November 2013  
EU-1437  Data from US Census Bureau, Geography Area Series: 
County Business Patterns (2010 -2012) 
EU-1668  Statement of Kiran Rao, 6 October 2015 (HSBI)  
USA-188  Douglas P. Woodward & Paulo Guimarães, BMW in South 
Carolina: The Economic Impact of a Leading Sustainable 
Enterprise  (September 2008)  
USA-232  Statement of J. H. Zrust, Vice President of Tax of The 
Boeing Company (20  July 2009)  
USA-283 Boeing Engineers' Statement  Statement of Boeing Engineers Regarding the 
Technologies and Development of the 787, 737  MAX, and 
777X (June  2013) (BCI)  
USA-324  Boeing Investment in South Carolina (2010 -3Q2012) 
(BCI)  
USA-335  Charleston S.C. MSA Largest Manufacturing Employers , 
Charleston Regional Development Alliance (February 
2013)  
USA-338  A.G. Sulzberger, "Boeing Departure Shakes Wichita's 
Identity as Airplane Capital", New York Times , 18 January 
2012 
USA-359 Boeing Engineers' Reply  Reply of Boeing Engineers to EU and Airbus Statements 
Regarding the Technologies and Development of the 787,  
737 MAX, and 777X (August 2013) (BCI)  
USA-382  Updated Statement of J. H. Zrust, Vice President of Tax of 
The Boeing Company (3 December 2013)  
USA-487  International Institute for Strategic Studies, Military 
Balance 2014 Press Statement (5 February 2014)  
USA-554  Agreement for Development for Joint County Industrial 
Park between Charleston County and Colleton County 
(1 September 1995)  
USA-555  Charleston County Council Ordinance 1475 (5  December 
2006)  
 
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 CASES CITED IN THIS REPORT  
Short Title  Full Case Title and Citation  
Argentina – Import Measures  Appellate Body Reports, Argentina – Measures Affecting the Importation of 
Goods , WT/DS438/AB/R  / WT/DS444/AB/R  / WT/DS445/AB/R , adopted 26 
January 2015, DSR 2015:II, p. 579  
Australia – Salmon  Appellate Body Report, Australia – Measures Affecting Importation of Salmon , 
WT/DS18/AB/R , adopted 6 November 1998, DSR 1998:VIII, p. 3327  
Brazil – Retreaded Tyres  Appellate Body Report, Brazil – Measures Affecting Imports of Retreaded 
Tyres , WT/DS332/AB/R , adopted 17 December 2007, DSR 2007:IV, p. 1527  
Canada – Aircraft  Appellate Body Report, Canada – Measures Affecting the Export of Civilian 
Aircraft , WT/DS70/AB/R , adopted 20 August 1999, DSR 1999:III, p. 1377  
Canada – Aircraft (Arti cle 
21.5 – Brazil)  Appellate Body Report, Canada – Measures Affecting the Export of Civilian 
Aircraft – Recourse by Brazil to Article 21.5 of the DSU , WT/DS70/AB/RW , 
adopted 4 August 2000, DSR 2000:IX, p. 4299  
Canada – Autos  Panel Report, Canada – Certain Measures Affecting the Automotive Industry , 
WT/DS139/R , WT/DS142/R , adopted 19 June 2000, as modified by Appellate 
Body Report WT/DS139/AB/R, WT/DS142/AB/R, DSR 2000:VII, p. 3043  
Canada – Periodicals  Appellate Body Report, Canada – Certain Measure s Concerning Periodicals , 
WT/DS31/AB/R , adopted 30 July 1997, DSR 1997:I, p. 449  
China – Auto Parts  Appellate Body Reports, China – Measures Affecting Imports of Automobile 
Parts, WT/DS339/AB/R  / WT/DS340/AB/R  / WT/DS342/AB/R , adopted 12 
January 2009, DSR 2009:I, p. 3  
China – GOES  Appellate Body Report, China – Countervailing and Anti -Dumping Duties on 
Grain Oriented Flat -Rolled Electrical Steel from the United States , 
WT/DS414/AB/R , adopted 16 November 2012, DSR 2012:XII, p. 6251  
Colombia – Textiles  Appellate Body Report, Colombia – Measures Relating to the Importation of 
Textiles, Apparel and Footwear , WT/DS461/AB/R  and Add.1, adopted 22 June 
2016, DSR 2016:III, p. 1131  
EC – Asbestos  Appellate Body Report, European Communities – Measures Affecting Asbestos 
and Asbestos -Containing Products , WT/DS135/AB/R , adopted 5 April 2001, 
DSR 2001:VII, p. 3243  
EC – Bed Linen (Article 21.5 
– India)  Appellate Body Report, European Communities – Anti-Dumping Duties on 
Imports of Cotton -Type Bed Linen from India – Recourse to Article  21.5 of the 
DSU by India , WT/DS141/AB/RW , adopted 24 April 2003, DSR 2003:III, 
p. 965 
EC – Export Subsidies on 
Sugar  Appellate Body Report, European Communities – Export Subsidies on Sugar , 
WT/DS265/AB/R , WT/DS266/AB/R , WT/DS283/AB/R , adopted 19 May 2005, 
DSR 2005:XIII, p. 6365  
EC – Fasteners (China)  Appellate Body Report, European Communities – Definitive Anti -Dumping 
Measures on Certain Iron or Steel Fasteners from China , WT/DS397/AB/R , 
adopted 28 July 2011, DSR 2011:VII, p. 3995  
EC – Hormones  Appellate Body Report, EC Measures Concerning Meat and Meat Products 
(Hormones) , WT/DS26/AB/R , WT/DS48/AB/R , adopted 13 February 1998, DSR 
1998:I, p. 135  
EC – Poultry  Appellate Body Report, European Communit ies – Measures Affecting the 
Importation of Certain Poultry Products , WT/DS69/AB/R , adopted 23 July 
1998, DSR 1998:V, p. 2031  
EC ‒ Seal Products  Appellate Body Reports, European Communities – Measures Prohibiting the 
Importation and Marketing of Seal Products , WT/DS400/AB/R  / 
WT/DS401/AB/R , adopted 18 June 2014, DSR 2014:I, p. 7  
EC and certain member 
States – Large Civil Aircraft  Appellate Body Report, European Communities and Certain Member States – 
Measures Affecting Trade in Large Civil Aircraft , WT/DS316/AB/R , adopted 1 
June 2011, DSR 2011:I, p. 7  WT/DS353/AB/RW  
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 Short Title  Full Case Title and Citation  
EC and certain member 
States – Large Civil Aircraft 
(Article 21.5 – US) Appellate Body Report, European Communities and Certain Member States – 
Measures Affecting Trade in Large Civil Aircraft  – Recourse  to Article 21.5 of 
the DSU by the United States , WT/DS316/AB/RW  and Add.1, adopted 28 May 
2018 
EC and certain member 
States – Large Civil Aircraft 
(Article 21.5 – US) Panel Report, European Communities and Certain Member States – Measures 
Affecting Trade in Large Civil Aircraft  – Recourse to Article 21.5 of the DSU by 
the United States , WT/DS316/RW  and Add.1, adopted 28 May 2018, as 
modified by Appellate Body Report WT/DS316/AB/RW  
Korea – Dairy Appellate Body Report, Korea – Definitive Safeguard Measure on Imports of 
Certain Dairy Products , WT/DS98/AB/R , adopted 12 January 2000, DSR 
2000:I, p. 3  
Mexico – Corn Syrup (Article 
21.5 – US) Appellate Body Report, Mexico – Anti-Dumping Investigation of  High Fructose 
Corn Syrup (HFCS) from the United States – Recourse to Article 21.5 of the 
DSU by the United States , WT/DS132/AB/RW , adopted 21 November 2001, 
DSR 2001:XIII, p. 6675  
Russia – Commercial 
Vehicles  Appellate Body Report,  Russia – Anti-Dumping Duties on Light Commercial 
Vehicles from Germany and Italy , WT/DS479/AB/R  and Add.1, adopted 9 April 
2018 
Russia – Pigs (EU)  Appellate Body Report, Russian Federation – Measures on the Importation of 
Live Pigs, Pork and Other Pig Products from the Europea n Union , 
WT/DS475/AB/R  and Add.1, adopted 21 March 2017  
US – Anti-Dumping and 
Countervailing Duties (China)  Appellate Body Report, United States – Definitive Anti -Dumping and 
Countervailing Duties on Certain Products from China , WT/DS379/AB/R , 
adopted 25 March 2011, DSR 2011:V, p. 2869  
US – Anti-Dumping and 
Countervailing Duties (China)  Panel Report, United States – Definitive Anti -Dumping and Countervailing 
Duties on Certain Products from China , WT/DS379/R , adopted 25 March 2011, 
as modified b y Appellate Body Report WT/DS379/AB/R, DSR 2011:VI, p. 3143  
US – Anti-Dumping 
Methodologies (China)  Appellate Body Report, United States – Certain Methodologies and Their 
Application to Anti -Dumping Proceedings Involving China , WT/DS471/AB/R  
and Add.1, ad opted 22 May 2017  
US – Carbon Steel  Appellate Body Report, United States – Countervailing Duties on Certain 
Corrosion -Resistant Carbon Steel Flat Products from Germany , 
WT/DS213/AB/R  and Corr.1, adopted 19 December 2002, DSR 2002:IX, p. 
3779 
US – Carbon Steel (India)  Appellate Body Report, United States – Countervailing Measures on Certain 
Hot-Rolled Carbon Steel Flat Products from India , WT/DS436/AB/R , adopted 
19 December 2014, DSR 2014:V, p. 1727  
US – Countervailing 
Measures (China)  Appellate Bo dy Report, United States – Countervailing Duty Measures on 
Certain Products from China , WT/DS437/AB/R , adopted 16 January 2015, DSR 
2015:1, p. 7  
US – Countervailing 
Measures (China)  Panel Report, United States – Countervailing Duty Measures on Certain 
Products from China , WT/DS437/R  and Add.1, adopted 16 January 2015, as 
modified by Appellate Body Report WT/DS437/AB/R, DSR 2015:1, p. 183  
US – FSC Appellate Body Report, United States – Tax Treatment for "Foreign Sales 
Corporations" , WT/DS108/AB/ R, adopted 20 March 2000, DSR 2000:III, p. 
1619 
US – FSC Panel Report, United States – Tax Treatment for "Foreign Sales Corporations" , 
WT/DS108/R , adopted 20 March 2000, as modified by Appellate Body Report 
WT/DS108/AB/R, DSR 2000:IV, p. 1675  
US – FSC (Article 21.5 – EC 
II) Appellate Body Report, United States – Tax Treatment for "Foreign Sales 
Corporations" – Second Recourse to Article 21.5 of the DSU by the European 
Communities , WT/DS108/AB/RW2 , adopted 14 March 2006, DSR 2006:XI, p. 
4721 
US – FSC (A rticle 21.5 – EC 
II) Panel Report, United States – Tax Treatment for "Foreign Sales Corporations" 
– Second Recourse to Article 21.5 of the DSU by the European Communities , 
WT/DS108/RW2 , adopted 14 March 2006, upheld by Appellate Body Report 
WT/DS108/AB/RW2 , DSR 2006:XI, p. 4761  WT/DS353/AB/RW  
[BCI redacted, as marked [BCI ]] 
 
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 Short Title  Full Case Title and Citation  
US – FSC (Article 21.5 – EC) Appellate Body Report, United States – Tax Treatment for "Foreign Sales 
Corporations" – Recourse to Article 21.5 of the DSU by the European 
Communities , WT/DS108/AB/RW , adopted 29 January 2002, DSR 2002: I, 
p. 55 
US – Gasoline  Appellate Body Report, United States – Standards for Reformulated and 
Conventional Gasoline , WT/DS2/AB/R , adopted 20 May 1996, DSR 1996:I, p. 3  
US – Hot-Rolled Steel  Appellate Body Report, United States – Anti-Dumping Measures on Certain 
Hot-Rolled Steel Products from Japan , WT/DS184/AB/R , adopted 23 August 
2001, DSR 2001:X, p. 4697  
US – Lamb  Appellate Body Report, United States – Safeguard Measures on Imports of 
Fresh, Chilled or Frozen Lamb Meat from New Zealand and Australia , 
WT/DS177/AB/R , WT/DS178/AB/R , adopted 16 May 2001, DSR 2001:IX, p. 
4051 
US – Large Civil Aircraft (2nd 
complaint)  Appellate Body Report, United States – Measures Affecting Trade in Large Civil 
Aircraft (Second Complaint) , WT/DS353/A B/R, adopted 23 March 2012, DSR 
2012:I, p. 7  
US – Large Civil Aircraft (2nd 
complaint)  Panel Report, United States – Measures Affecting Trade in Large Civil Aircraft 
(Second Complaint) , WT/DS353/R , adopted 23 March 2012, as modified by 
Appellate Body Report WT/DS353/AB/R, DSR 2012:II, p. 649  
US – Large Civil Aircraft (2nd 
complaint) (Article 21.5 – 
EU) Panel Report, United States – Measures Affecting Trade in Large Civil Aircraft 
(Second Complaint) – Recourse to Article 21.5 of the DSU by the European  
Union , WT/DS353/RW  and Add.1  
US – Offset Act (Byrd 
Amendment)  Appellate Body Report, United States – Continued Dumping and Subsidy Offset 
Act of 2000 , WT/DS217/AB/R , WT/DS234/AB/R , adopted 27 January 2003, 
DSR 2003:I, p. 375  
US – Oil Country Tubular 
Goods Sunset Reviews 
(Article 21.5 – Argentina)  Appellate Body Report, United States – Sunset Reviews of Anti -Dumping 
Measures on Oil Country Tubular Goods from Argentina – Recourse to Article 
21.5 of the DSU by Argentina , WT/DS268/AB/RW , adopted 1 1 May 2007, DSR 
2007:IX, p. 3523  
US – Section 211 
Appropriations Act  Appellate Body Report, United States – Section 211 Omnibus Appropriations 
Act of 1998 , WT/DS176/AB/R , adopted 1 February 2002, DSR 2002:II, p. 589  
US – Shrimp  Appellate Body Report, United States – Import Prohibition of Certain Shrimp 
and Shrimp Products , WT/DS58/AB/R , adopted 6 November 1998, DSR 
1998:VII, p. 2755  
US – Shrimp (Article 21.5 – 
Malaysia)  Appellate Body Report, United States – Import Prohibition of Certain Shrimp 
and Shrimp Products – Recourse to Article 21.5 of the DSU by Malaysia , 
WT/DS58/AB/RW , adopted 21 November 2001, DSR 2001:XIII, p. 6481  
US – Softwood Lumber VI 
(Article 21.5 – Canada)  Appellate Body Report, United States – Investigation of the International Trade 
Commission in Softwood Lumber from Canada – Recourse to Article 21.5 of 
the DSU by Canada , WT/DS277/AB/RW , adopted 9 May 2006, and Corr.1, DSR 
2006:XI, p. 4865  
US – Steel Safeguards  Appellate Body Report, United States – Definitive Saf eguard Measures on 
Imports of Certain Steel Products , WT/DS248/AB/R , WT/DS249/AB/R , 
WT/DS251/AB/R , WT/DS252/AB/R , WT/DS253/AB/R , WT/DS254/AB/R , 
WT/DS258/AB/R , WT/DS259/AB/R , adopted 10 December 2003, DSR 
2003:VII, p. 3117  
US – Tax Incentives  Appellate Bod y Report, United States – Conditional Tax Incentives for Large 
Civil Aircraft , WT/DS487/AB/R  and Add.1, adopted 22 September 2017  
US – Tax Incentives  Panel Report, United States – Conditional Tax Incentives for Large Civil 
Aircraft , WT/DS487/R  and Add.1, adopted 22 September 2017, as modified by 
Appellate Body Report WT/DS487/AB/R  
US – Tuna II (Mexico) 
(Article 21.5 – Mexico)  Appellate Body Report, United States – Measures Concerning the Importation, 
Marketing and Sale of Tuna and Tuna Products – Recourse to Article 21.5 of 
the DSU by Mexico , WT/DS381/AB/RW  and Add.1, adopted 3 December 2015, 
DSR 2015:X, p. 5133  WT/DS353/AB/RW  
[BCI redacted, as marked [BCI ]] 
 
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 Short Title  Full Case Title and Citation  
US – Upland Cotton  Appellate Body Report, United States – Subsidies on Upland Cotton , 
WT/DS267/AB/R , adopted 21 March 2005, DS R 2005:I, p. 3  
US – Upland Cotton  Panel Report, United States – Subsidies on Upland Cotton , WT/DS267/R , 
Add.1 to Add.3 and Corr.1, adopted 21 March 2005, as modified by Appellate 
Body Report WT/DS267/AB/R, DSR 2005:II, p. 299  
US – Upland Cotton (Article 
21.5 – Brazil)  Appellate Body Report, United States – Subsidies on Upland Cotton – Recourse 
to Article 21.5 of the DSU by Brazil , WT/DS267/AB/RW , adopted 20 June 
2008, DSR 2008:III, p. 809  
US – Washing Machines  Appellate Body Report,  United State s – Anti-Dumping and Countervailing 
Measures on Large Residential Washers from Korea , WT/DS464/AB/R  and 
Add.1, adopted 26 September 2016, DSR 2016:V, p. 2275  
US – Washing Machines  Panel Report, United States – Anti-Dumping and Countervailing Measures on 
Large Residential Washers from Korea , WT/DS464/R  and Add.1, adopted 26 
September 2016, as modified by Appellate Body Report WT/DS464/AB/R, DSR 
2016:V, p. 2505  
US – Wheat Gluten  Appellate Body Report, United States – Definitive Safeguard Measures on 
Imports of Wheat Gluten from the European Communities , WT/DS166/AB/R , 
adopted 19 January 2001, DSR 2001:II, p. 717  
US – Zeroing (EC) (Article 
21.5 – EC) Appellate Body Report, United States – Laws, Regulations and Methodology for 
Calculating Dumping Margi ns ("Zeroing") , WT/DS294/AB/R , adopted 9 May 
2006, and Corr.1, DSR 2006:II, p. 417  
 WT/DS353/AB/RW  
[BCI redacted, as marked [BCI ]] 
 
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 WORLD TRADE ORGANIZATION  
APPELLATE BODY 
 
 
United  States – Measures Affecting Trade 
in Large Civil Aircraft (Second Complaint) 
– Recourse to Article  21.5 of the DSU by 
the European Union  
 
European  Union, Appellant/Appellee  
United  States, Other Appellant/Appellee  
 
Australia, Third Participant  
Brazil, Third Participant  
Canada, Third Participant  
China, Third Participant  
Japan, Third Participant   
Korea, Third Participant   
Russia, Third Participant  
 AB-2017-4 
 
Appellate Body Division:  
 
Van den Bossche, Presiding Member  
Graham, Member  
Servansing, Member  
 
 
  
1  INTRODUCTION  
1.1.  The European  Union1 and the United  States each  appeal  certain issues of law and legal 
interpretations developed in the Panel Report, United States – Measures Affecting Trade in Large 
Civil Aircraft (Second Complaint) – Recourse to Article 21.5 of the DSU by the European Union2 
(Panel Report).  The Panel was e stablished on 23 October 20123 pursuant to Article  21.5 of the 
Understanding on Rules and Procedures Governing the Settlement of Disputes  (DSU) to consider a 
complaint by the European  Union4 regarding the alleged failure on the part of the United  States to  
implement the recommendations and rulings of the Dispute Settlement Body (DSB) in the original 
proceedings in US – Large Civil Aircraft (2nd complaint) .5 
1.1  Original proceedings  
1.2.  In the original proceedings in this dispute, the European  Communities claimed that the 
United  States had provided subsidies to US producers of large civil aircraft (LCA), namely, The 
Boeing Company (Boeing), and that such subsidies are prohibited and/or actionable under the 
Agreement on Subsidies and Cou ntervailing Measures (SCM  Agreement).  
1.3.  The original  panel, established on 17 February 20066, found that certain tax exemptions and 
tax exclusions provided to Boeing under the foreign sales corporation (FSC) legislation and the FSC 
Repeal and Extraterritoria l Income Exclusion Act of 2000 (ETI  Act), including the transition and 
grandfather provisions of the ETI Act and the American Jobs Creation Act of 2004 (AJCA), were 
prohibited export subsidies under Articles  3.1(a) and 3.2 of the SCM Agreement.7 This findi ng was 
not appealed.  
                                                
1 The European  Union replaced and succeeded the European Communities as of 1  December  2009. 
Accordingly, we refer to the European Communities in this Report only in the context of the original panel 
proceedings. In all other circumstances, we refer to the E uropean  Union.  
2 WT/DS353/R W, 9 June 2017.  
3 Minutes of the Dispute Settlement Body ( DSB) Meeting held on 23 October 2012, WT/DSB/M/323 , 
para. 81 . 
4 Request for the Establishment of a Panel by the European  Union pursuant to Article  21.5 of the DSU, 
WT/DS35 3/18 (European  Union's panel request).  
5 The recommendations and rulings of the DSB resulted from the adoption on 23 March 2012, by the 
DSB, of the Appellate Body Report, WT/DS353/ AB/R, and the Panel Report, WT/DS353/ R, in US – Large Civil 
Aircraft (2nd complaint) . In this Report, we refer to the panel that considered the original complaint brought by 
the European  Union as the "original panel" and to its report as the "original panel report".  
6 Minutes of the DSB Meeting held on 17 February 2006 , WT/DSB/M/ 205, para. 73 . 
7 Original  Panel Report,  paras.  7.1434 -7.1464 and 8.2 .a. WT/DS353/AB/RW  
[BCI redacted, as marked [BCI ]] 
 
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 1.4.  In addition, the original panel found that certain specific subsidies caused serious prejudice to 
the interests of the European  Communities within the meaning of Articles 5(c) and 6.3(b) -(c) of the 
SCM Agreement. Specifically, the orig inal panel found that:  
a. payments provided to Boeing by the National Aeronautics and Space Administration 
(NASA) pursuant to procurement contracts entered into under eight aeronautics research 
and development (R&D) programmes and access to facilities, equipm ent, and employees, 
as well as payments and access to facilities provided to Boeing by the United States 
Department of Defense (USDOD)8 pursuant to assistance instruments entered into under 
the 23 research, development, test, and evaluation (RDT&E) program mes, through their 
effects on Boeing's development of technologies in relation to the 787, caused significant 
price suppression, significant lost sales, and a threat of displacement and impedance of 
exports from third country markets, with respect to the 2 00-300 seat wide -body LCA 
product market9; 
b. the FSC/ETI subsidies and the business and occupation (B&O) tax rate reduction provided 
by the State of Washington under House Bill ( HB) 2294, through their effects on Boeing's 
pricing behaviour with respect to th e 737NG, caused significant price suppression, 
significant lost sales, and displacement and impedance of exports from third country 
markets, with respect to the 100 -200 seat single -aisle LCA market10; and  
c. the FSC/ETI subsidies and the B&O tax rate reduction  provided by the State of Washington 
under HB  2294 and by the City of Everett, through their effects on Boeing's pricing 
behaviour with respect to the 777 and 787, caused significant price suppression, significant 
lost sales, and displacement and impedance  of exports from third country markets, with 
respect to the 300 -400 seat wide -body LCA product market.11 
1.5.  On appeal, the Appellate  Body upheld the original panel's finding that the aeronautics R&D 
subsidies caused serious prejudice to the interests of the Eu ropean  Communities with respect to the 
200-300 seat LCA market, within the meaning of Articles 5(c) and 6.3(b) -(c) of the SCM  Agreement, 
except that it reversed the original panel's finding to the extent that it related to a threat of 
displacement and impe dance of exports in the third  country markets in Ethiopia, Iceland, and Kenya 
(but not Australia), within the meaning of Article  6.3(b) of the SCM  Agreement.12 
1.6.  In addition, the Appellate  Body reversed the original panel's finding that the FSC/ETI subsidies 
and the B&O tax rate reduction caused serious prejudice to the interests of the 
European  Communities within the meaning of Article s 5(c) and 6.3(b) -(c) of the SCM  Agreement in 
the 100 -200 and 300 -400 seat LCA markets.13 The Appellate  Body completed the lega l analysis and 
found that, with respect to two sales campaigns involving 100 -200 seat LCA, the FSC/ETI subsidies 
and the Washington State B&O tax rate reduction caused, through their effects on Boeing's prices 
for the 737NG, significant lost sales within t he meaning of Article  6.3(c).14 The Appellate  Body also 
reversed the original panel's finding that the European Communities had failed to show that the 
remaining subsidies had affected Boeing's prices in a manner giving rise to serious prejudice with 
respec t to the 100 -200 seat and 300 -400 seat LCA markets.15 The Appellate  Body completed the 
legal analysis and found that the effects of the property and sales tax abatements related to the 
industrial revenue bonds (IRBs) issued by the City of Wichita complemented and supplemented the 
price effects of the FSC/ETI subsidies and the Washington State B&O tax rate reduction, thereby 
                                                
8 The original and compliance panels referred to the United States Department of Defense as "DOD", 
whereas the Appellate Body in the original proceedings referred to the United States Department of Defense as 
"USDOD". In this Report, we will continue to use the term "USDOD".  
9 Original Panel  Report, para.  8.3.a.i.  
10 Original Panel  Report, para.  8.3.a.ii.  
11 Original Panel  Report, para.  8.3.a.iii.  
12 Appellate  Body Report, US – Large Civil Aircraft (2nd complaint) , para.  1350(d)(i)(A). The original 
panel's findi ng as it relates to a threat of displacement and impedance of exports in Australia was not 
appealed. (Ibid., fn 2200 to para. 1069)  
13 Appellate  Body Report, US – Large Civil Aircraft (2nd complaint) , para.  1350(d)(iii)(A).  
14 Appellate  Body Report, US – Large Civil Aircraft (2nd complaint) , para.  1350(d)(iii)(B).  
15 Appellate  Body Report, US – Large Civil Aircraft (2nd complaint) , para.  1350(d)(iv)(B).  WT/DS353/AB/RW  
[BCI redacted, as marked [BCI ]] 
 
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 causing serious prejudice, in the form of significant lost sales, within the meaning  of Articles  5(c) 
and 6.3(c), in the 100 -200 seat LCA market .16 
1.7.  The Appellate Body recommended that, pursuant to Article  7.8 of the SCM  Agreement, the DSB 
request the United  States to bring its measures, found in the Appellate  Body report and in the 
origina l panel report, as modified by the Appellate  Body report, to be inconsistent with the 
SCM Agreement , into conformity with its obligations under that Agreement.17 
1.8.  On 23 March 2012, the DSB adopted the Appellate Body report and the original panel report, 
as modified by the Appellate Body report.18 
1.2  Compliance proceedings  
1.2.1   Panel proceedings  
1.9.  Subsequent to the adoption of the original panel report and the Appellate Body report, the 
United States provided a notification to the DSB on 23 September 201219, identifying "a number of 
actions to withdraw the subsidies found to have caused adverse effects or to remove their adverse 
effects", in light of which the United States considered that it "ha{d} fully complied with the 
recommendations and rulings of the Di spute Settlement Body in this dispute".20 
1.10.   On 25 September 2012, the European Union requested consultations with the United States, 
explaining that "{t}he actions and events listed by the United States in its 23 September 2012 
notification do not withdraw th e subsidies or remove their adverse effects, as required by Articles  4.7 
and 7.8 of the SCM Agreement", and that "the United States has failed to achieve compliance with 
the recommendations and rulings of the DSB ."21 The European Union and the United States  held 
consultations on 10 October 2012, but the consultations failed to resolve the dispute.22 
1.11.   On 11 October 2012, the European Union requested the establishment of a panel, in 
accordance with , inter alia, Article 21.5 of the DSU, with standard terms of ref erence.23 At its 
meeting on 23 October 2012, the DSB referred this dispute to the original panel, if possible, in 
accordance with Article 21.5 of the DSU .24 The Panel was composed on 30 October 2012 
accordingly.25 
1.12.   Before the Panel, the European  Union argued t hat the United  States had failed to implement 
the recommendations and rulings of the DSB in the original proceedings to  withdraw the subsidies 
or take appropriate steps to remove the adverse effects, pursuant to Article 7.8 of the 
SCM Agreement. In particu lar, the European  Union claimed that, subsequent to the end of the 
implementation period26, the United  States grants or m aintains subsidies to the US LCA industry 
through the following programmes and measures: (i)  NASA aeronautics R&D measures; (ii)  the 
Federal Aviation Administration's (FAA) Continuous Lower Energy Emissions, and Noise (CLEEN) 
Program; (iii)  the USDOD RDT&E programme; (iv)  income tax exemptions/exclusions pursuant to 
the FSC/ETI legislation and successor acts; (v)  property and sales tax con cessions for LCA 
component production facilities associated with IRBs issued by the City of Wichita; (vi)  certain tax 
                                                
16 Appellate  Body Report, US – Large Civil Aircraft ( 2nd complaint) , para.  1350(d)(iv)(C).  
17 Appellate  Body R eport, US – Large Civil Aircraft (2nd complaint) , para.  1352.  
18 Minutes of the DSB Meeting held on 23 March 2012, WT/DSB/M/313 , para. 79 . 
19 WT/DS353/15.  
20 Panel  Report, para.  1.9 (quoting Communication from the United States, WT/DS353/15 (dated 
23 September 2012 ), para. 2 ). 
21 Panel  Report, para.  1.10 (quoting European Union's request for consultations, WT/DS353/16 (dated 
25 September 2012) , p. 2). 
22 Panel  Report, para.  1.11. 
23 Panel  Report, para.  1.12 (referring to European Union's panel request, WT /DS353/18 (dated 
11 October 2012), para.  34). 
24 Panel  Report, para.  1.12 (referring to Minutes of the DSB Meeting held on 23 October 2012, 
WT/DSB/M/323, para. 81 ). 
25 Panel  Report, para.  1.14 (referring to Constitution of the Panel, Note by the Secretariat,  
WT/DS353/21 (dated 5 November 2012), para. 3 ). 
26 The term "implementation period" in this case means the period of six months referred to in 
Article  7.9 of the SCM Agreement, which in this dispute ended on 23 September 2012 . (Panel  Report, fn  70 to 
para. 6.21)  WT/DS353/AB/RW  
[BCI redacted, as marked [BCI ]] 
 
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 and other measures applied by the State of Washington and municipalities therein; and 
(vii) measures applied by the State of South Carolin a and municipalities therein in the context of 
"Project Gemini" and "Project Emerald", as well as "Phase II".27 The European  Union further asserted 
that these subsidies are also inconsistent with Articles 3.1(a) -(b) and 3.2 of the SCM Agreement  and 
Article III of the GATT 1994.28 
1.13.   In addition, the European  Union claimed that the subsidies collectively cause present adverse 
effects to LCA -related interests of the European Union in violation of the SCM  Agreement. In 
particular, the European  Union argued that the subsidies are a genuine and substantial cause of: 
(i) displacement and impedance, or a threat thereof, in the LCA product markets of the 
United  States, within the meaning of Article 6.3(a) of the SCM  Agreement; (ii)  displacement and 
impedance, or a threat thereof, in the LCA product markets of several third countries, within the 
meaning of Article 6.3(b) of the SCM Agreement; (iii)  significant price suppression, or threat thereof, 
in the LCA product markets, within the meaning of Article 6.3(c) of the SCM Agreement; and 
(iv) significant lost sales, or threat thereof, in the LCA product markets, within the meaning of 
Article  6.3(c) of the SCM Agreement.29 
1.14.   The Panel circulated its Report to Members of the World Trade Organization ( WTO) on 
9 June 2017. The factual aspects of the Panel proceedings are summarized in detail in 
paragraphs  1.16 through 1.32 of the Panel  Report.  
1.15.   The Panel made the following findings in its Report.  
1.16.   With respect to whether certain measures, and claims with regard to certain meas ures, are 
outside the Panel's terms of reference for purposes of Article 6.2 of the DSU or the scope of these 
compliance proceedings:  
a. The European Union's claims under Articles 3.1(a) -(b) and 3.2 of the SCM Agreement, and 
under Article III of the GATT 199 4, are within the Panel's terms of reference30, but the 
South Carolina Phase II measures, and the Washington State tax measures, as amended 
by Washington State Substitute Senate Bill ( SSB) 5952, are outside the Panel's terms of 
reference, owing to the failu re of the European Union's panel request to meet the 
requirements of Article  6.2 of the DSU with respect to  such measures.31 
b. The following measures are within the scope of these compliance proceedings:  
i. the Washington State B&O tax credits for preproduction/ aerospace product 
development32; the Washington State B&O tax credit for property taxes and leasehold 
excise taxes33; the Washington State sales and use tax exemptions for computer 
software, hardware, and peripherals; and the City of Everett B&O tax rate red uction;  
ii. pre-2007 and post -2006 RDT&E procurement contracts between USDOD and Boeing 
(USDOD procurement contracts ) funded through the 23 original RDT&E programme 
elements;  
iii. USDOD procurement contracts HR0011 -06-C-0073 and HR -0011-08-C-0044 SOW and 
assistanc e instruments HR0011 -06-2-0008, FA8650 -07-2-7716, and HR0011 -10-2-
0001 funded through the Materials Processing Technology Project of the Materials and 
Biological Technology programme element;  
iv. the provision of access to USDOD equipment and employees with re spect to the 
post-2006 USDOD procurement contracts and assistance instruments funded under 
                                                
27 Panel  Report, para.  2.2.a.  
28 Panel  Report, para.  2.2.b. 
29 Panel  Report, para.  2.2.c.  
30 Panel  Report, para.  11.4.a . 
31 Panel  Report, para.  11.4.b -c. 
32 Including amendments thereto pursuant to SSB 6828.  
33 Including amendments thereto pursuant to HB 2466.  WT/DS353/AB/RW  
[BCI redacted, as marked [BCI ]] 
 
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 the 23 original RDT&E programme elements and the "additional" programme elements 
that the Panel found to be within the scope of these proceedings;  
v. the FAA aeronauti cs R&D measure; and  
vi. the South Carolina Project Gemini measures and Project Emerald measures.34 
c. The following measures are outside the scope of these compliance proceedings:  
i. the Washington State Joint Center for Aerospace Technology Innovation ( JCATI ) 
measure;  
ii. Air Force Contract F19628 -01-D-0016 funded under the DRAGON Project of the 
Airborne War ning and Control System (PE 0207417F) programme element; Air Force 
Contract FA8625 -11-C-6600 funded under the KC -46, Next Generation Aerial Refueling 
Aircraft (PE 0605221F) programme element; and measures funded under the 
Multi-Mission Maritime Aircraft (P -8A) (PE 0605500N) programme element, including 
Navy Contracts N00019 -04-C-3146, N00019 -09-C-0022, and N00019 -12-C-0112; and  
iii. the provision of access to USDOD equipment and employees with respect to the 
pre-2007 NASA procurement contracts and USDOD assistance instruments funded 
under the 23 original RDT&E programme elements.35 
d. The European Union is precluded from bringing claims under Articles 3.1(a) and 3.2 of t he 
SCM Agreement against the following four original Washington State tax measures enacted 
under HB 2294:  (i) the Washington State B&O tax rate reduction; (ii) the Washington 
State B&O tax credits for preproduction/aerospace product development36; (iii) the 
Washington State B&O tax credit for property taxes37; and (iv) the Washington State sales 
and use tax exemptions for computer software, hardware, and peripherals.38 
e. The European Union is precluded from bringing claims under Articles 3.1(b) and 3.2 of the 
SCM Agreement, and under Article III:4 of the GATT 1994, with respect to the following 
four original Washington State tax measures enacted under HB 2294: (i) the Washington 
State B&O tax rate reduction; (ii) the Washington State sales and use tax exemptions for 
computer software, hardware, and peripherals;  (iii) the Washington State B&O tax credits 
for preproduction/aerospace product development39; and (iv) the Washington State B&O 
tax credit for property taxes40; as well as the FSC/ETI measures.41 
f. The European Union is precluded from bringing c laims under Articles 3.1(a) -(b) and 3.2 
of the SCM Agreement , and under Article III:4 of the GATT 1994 , with respect to: (i) the 
City of Everett B&O tax rate reduction, the tax abatements related to the City of Wi chita 
IRBs, and the pre -2007 NASA Space Act Agreements and USDOD procurement contracts 
at issue in the original proceedings; and (ii) the pre -2007 NASA procurement contracts 
and USDOD assistance instruments at issue in the original proceedings, as amended by 
the respective Boeing Patent Licence Agreements.42 
1.17.   With respect to whether the United States has failed to withdraw the subsidy within the 
meaning of Article 7.8 of the SCM Agreement:  
a. With regard to the pre -2007 NASA and USDOD aeronautics R&D subsidies that were the 
subject of the recommendations and rulings  of the DSB , the European Union established 
                                                
34 Panel  Report, para.  11.5.a.  
35 Panel  Report, para.  11.5.b.  
36 Including amendments thereto pursuant to SSB 6828.  
37 Including amendments thereto pursuant to HB 2466.  
38 Panel  Report, para.  11.6.a.  
39 Including amendments thereto pursuant to SSB 6828.  
40 Including amendments thereto pursuant to HB 2466.  
41 Panel  Report, para.  11.6.b.  
42 Panel  Report, para.  11.6.c.  WT/DS353/AB/RW  
[BCI redacted, as marked [BCI ]] 
 
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 that the modifications made by the United States through the Boeing Patent Licence 
Agreements to the terms of the pre -2007 NASA procurement contracts and US DOD 
assistance instruments do not constitute a withdrawal of the subsidy within the meaning 
of Article  7.8 of the SCM Agreement and that the United States, having taken no action 
with respect to pre-2007 Space Act Agreements, has failed to withdraw the sub sidy within 
the meaning of Article 7.8 of the SCM Agreement.43 
b. With regard to the post -2006 measures of the United States challenged in these 
proceedings, the European Union established that the following measures involve specific 
subsidies within the meani ng of Articles 1 and 2 of the SCM Agreement, and that by 
granting or maintaining these specific subsidies after the end of the implementation 
period, the United States has failed to withdraw the subsidy within the meaning of 
Article  7.8 of the SCM Agreemen t: 
i. certain transactions between NASA and Boeing pursuant to the post -2006 NASA 
procurement contracts, cooperative agreements, and Space Act Agreements, with 
respect to which the Panel was unable to estimate the amount of the subsidy on the 
basis of the evi dence on the record, but considered the United States' estimate of the 
amount of the financial contribution at [BCI]  between 2007 and 2012 to be credible;  
ii. certain transactions between USDOD and Boeing pursuant to post -2006 USDOD 
assistance instruments, wit h respect to which the Panel was unable to estimate the 
amount of the subsidy on the basis of the evidence on the record, but considered the 
United States' estimate of the amount of the financial contribution at [BCI] between 
2007 and 2012 to be credible;  
iii. transactions pursuant to the FAA -Boeing CLEEN Agreement with respect to which the 
Panel was unable to estimate the amount of the subsidy on the basis of the evidence 
on the record, but considered the European Union's estimate of the amount of the 
financial  contribution at US$27.99 million between 2010 and 2014 to be credible;  
iv. Washington State B&O tax rate reduction for the aerospace industry, in the amount of 
US$325 million between 2013 and 2015;  
v. Washington State B&O tax credits for preproduction/aerospace product development, 
as amended by Section 7 of Washington State SSB 6828, in the amount of [BCI] 
between 2013 and 2015;  
vi. Washington State B&O tax credit for property taxes, as amended by HB 2466 to include 
leasehold excise taxes, in the amount of [BCI] between 2013 and 2015;  
vii. Washington State sales and use tax exemptions for computer software, hardware, and 
peripherals, in th e amount of [BCI] between 2013 and 2015;  
viii. City of Everett B&O tax rate reduction, in the amount of US $54.1 million between 2013 
and 2015;  
ix. payments made by the State of South Carolina pursuant to commitments made in the 
Project Gemini Agreement44 to compensat e Boeing for a portion of the costs incurred 
by Boeing with respect to the construction of the Gemini facilities and infrastructure 
through air hub bond proceeds, in the amount of US $50 million;  
x. the State of South Carolina property tax exemption for Boeing 's large cargo freighters, 
in the amount of US $25.82 million between 2013 and 2015; and  
                                                
43 Panel  Report, para.  11.7.a.  
44 Project Gemini Agreement between The Boeing Company and the State of South Carolina 
(1 January  2010)  (Panel Exhibi t EU-467).  WT/DS353/AB/RW  
[BCI redacted, as marked [BCI ]] 
 
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 xi. the State of South Carolina sales and use tax exemptions for aircraft fuel, computer 
equipment, and construction materials, in the amount of US $2.25 million between 
2013 and 2015.45 
c. The European Union failed to establish that the following measures involve specific 
subsidies within the meaning of Articles 1 and 2 of the SCM Agreement, and therefore 
failed to establish that, by granting or maintaining these specific subsid ies after the end 
of the implementation period, the United States has failed to withdraw the subsidy within 
the meaning of Article 7.8 of the SCM Agreement:  
i. certain transactions between USDOD and Boeing pursuant to pre -2007 and post -2006 
USDOD procurement contracts, on the grounds that, assuming arguendo  that these 
measures were to involve financial contributions within the meaning of 
Article  1.1(a)(1) of the SCM Agreement, they do not confer a benefit on Boeing within 
the meaning of Article 1.1(b) of the S CM Agreement;  
ii. tax exemptions and exclusions under the FSC/ETI legislation and successor legislation, 
on the grounds that the European Union has failed to establish that Boeing actually 
received the FSC/ETI tax benefits after 2006, and that the measure ther efore involves 
a financial contribution within the meaning of Article 1.1(a)(1)(ii) of the 
SCM Agreement;  
iii. tax abatements provided through IRBs issued by the City of Wichita, on the grounds 
that these tax abatements are no longer specific within the meaning  of Article 2.1(c) 
of the SCM  Agreement and, as a result, the measure is no longer subject to the 
provisions of the SCM  Agreement on actionable subsidies;  
iv. the State of South Carolina's sublease of the Project Site, on the grounds that the 
European Union ha s failed to establish that the sublease involves a subsidy to Boeing;  
v. the State of South Carolina's provision of Project Gemini and Project Emerald facilities 
and infrastructure, on the grounds that the European Union has failed to establish that 
these mea sures involve financial contributions within the meaning of 
Article  1.1(a)(1)(iii) of the SCM  Agreement;  
vi. the State of South Carolina's fee -in-lieu-of taxes (FILOT) arrangements, set forth in 
the Boeing FILOT Agreement46 and Project Emerald FILOT Agreement, on the grounds 
that these arrangements are not specific within the meaning of Article 2 of the 
SCM Agreement;  
vii. the State of South Carolina's corporate income tax credits in connection with the 
designation of the Project Gemini and Project Emerald portions o f the Project Site as 
part of the same multi -county industrial park (MCIP), on the grounds that the tax 
credits are not specific within the meaning of Article 2 of the SCM Agreement;  
viii. the State of South Carolina's Income Allocation and Apportionment Agreeme nt, on the 
grounds that the European Union has failed to establish that the agreement involves 
a financial contribution within the meaning of Article 1.1(a)(1)(ii) of the 
SCM Agreement; and  
ix. the State of South Carolina's workforce recruitment, training , and development 
programme, on the grounds that the programme is not specific within the meaning of 
Article 2 of the SCM Agreement.47 
                                                
45 Panel  Report, para.  11.7.b.  
46 Fee Agreement by and between Charleston County, South Carolina, and The Boeing Company 
(1 December 2010)  (Panel Exhibit EU -470).  
47 Panel  Report, para.  11.7.c.  WT/DS353/AB/RW  
[BCI redacted, as marked [BCI ]] 
 
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 1.18.   With respect to whether the United States has failed to take appropriate steps to remove the 
adverse effects within the meaning  of Article 7.8 of the SCM Agreement:  
a. The European Union failed to establish that the effects of certain aeronautics R&D subsidies 
and other subsidies are a genuine and substantial cause of significant lost sales, significant 
price suppression, impedance of imports to the US market or impedanc e of exports to 
various third country markets, or threats of any of the foregoing, within the meaning of 
Articles 5(c) and 6.3(a) -(c) of the SCM Agreement with respect to the A350XWB in the 
post-implementation period.48 
b. The European Union failed to establis h that the original adverse effects of the pre -2007 
aeronautics R&D subsidies with respect to the A330 and Original A350 continue in the 
post-implementation period as significant price suppression of the A330 and A350XWB, 
significant lost sales of the A350 XWB, or a threat of impedance of exports of the A350XWB 
in the twin -aisle LCA market, within the meaning of Articles 5(c) and 6.3(a) -(c) of the 
SCM Agreement in the post -implementation period.49 
c. The European Union established that the effects of the Washington State B&O tax rate 
reduction are a genuine and substantial cause of significant lost sales within the meaning 
of Articles 5(c) and 6.3(c) of the SCM Agreement of the A320neo and A320ceo fami lies of 
LCA in the single -aisle LCA market, with respect to the sales campaigns for Fly Dubai in 
2014, Icelandair in 2013 , and Air Canada in 2013 , in the post -implementation period.50 
d. The European Union established that the effects of the Washington State B &O tax rate 
reduction are a genuine and substantial cause of a threat of impedance of imports of the 
A320ceo to the United States single -aisle LCA market, and a threat of impedance of 
exports of Airbus single -aisle LCA in the United Arab Emirates third cou ntry market, within 
the meaning of Articles 5(c) and 6.3(a) -(b) of the SCM  Agreement in the 
post-implementation period.51 
e. The European Union failed to establish that the effects of the pre -2007 aeronautics R&D 
subsidies and the post -2006 subsidies are a gen uine and substantial cause of significant 
price suppression of the A320neo or A320ceo, impedance of imports of the A320neo or 
A320ceo to the US market, or displacement and impedance of exports of the A320neo or 
A320ceo to the third country markets of Austr alia, Brazil, Canada, Iceland, Indonesia, 
Malaysia, Mexico, Norway, Russia, and Singapore, within the meaning of Articles 5(c) and 
6.3(a) -(c) of the SCM Agreement, or threats of any of the foregoing, in the 
post-implementation period.52 
1.19.   With respect to the European Union's claims under Articles 3.1 and 3.2 of the SCM Agreement , 
and Article III:4 of the GATT 1994, the Panel found that the European Union failed to establish that 
the subsidies are inconsistent with these provisions.53 
1.20.   In light of the foregoing, the Panel concluded that, by continuing to be in violation of 
Articles  5(c) and 6.3(a) -(c) of the SCM Agreement, the United States has failed to comply with the 
recommendations and rulings of the DSB and, in particular, the obligation under Article 7.8 of the 
SCM Agreement to "take appropriate steps to remove the adverse effects or … withdraw the 
subsidy".54 The Panel accordingly found that, to the extent that the United States has failed to 
comply with the recommendations and rulings of the DSB in the origi nal dispute, those 
recommendations and rulings remain operative.55 
                                                
48 Panel  Report, para.  11.8.a.  
49 Panel  Report, para.  11.8.b. 
50 Panel  Report, para.  11.8.c. 
51 Panel  Report, para.  11.8.d.  
52 Panel  Report, para.  11.8.e.  
53 Panel  Report, para.  11.9.a-b. 
54 Panel  Report, para.  11.10.  
55 Panel  Report, para.  11.12.  WT/DS353/AB/RW  
[BCI redacted, as marked [BCI ]] 
 
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 1.2.2   Appellate proceedings and procedural issues  
1.21.   On 5 December  2016, the Appellate  Body received a letter from the European  Union referring 
to an anticipated appeal in this dispute, to the ongoin g appeal in EC and certain member States – 
Large Civil Aircraft (Article 21.5 – US), and to an imminent appeal in US – Tax Incentives . Refer ring 
to Rule  16(1) -(2) of the Working Procedures for Appellate Review56 (Working Procedures) and 
Article  9 of the DSU, the European  Union requested that the schedules for these three appeals be 
harmonized and that the hearings be sufficiently proximate in time, so that a particular matter would 
not be effectively disposed of in one appeal before t he related matter is heard in the other appeals. 
The Chair of the Appellate  Body invited the United  States and the third parties to submit comments 
on the European  Union's request by 9  December  2016. The United  States argued that the 
European  Union's reque st was not supported by the DSU or the Working  Procedures and would result 
in delays in the proceedings . The United  States stated that it remained open to proposals to set 
deadlines for written submissions and dates for oral hearings in a way that would al low the 
participants and third participants in each dispute to advocate effectively their positions on appeal 
and for the Appellate  Body to consider fully the issues raised.57 The participants and third  parties 
were invited to submit additional comments by 16 December  2016. The European  Union reiterated 
its request that any oral hearings in these appeals be sufficiently proximate in time, but noted that 
it was content to leave it to the Appellate  Body to determine what that would mean in practice.58 By 
letter  dated 22  December  2016, the Appellate  Body indicated that it would bear in mind the 
European  Union's request, as well as the comments received, during the appellate proceedings in 
these three disputes.59 
1.22.   On 29 June 2017 , the European  Union notified the DSB , pursuant to Articles  16.4 and 17 of 
the DSU, of its intention to appeal certain issues of law covered in the Panel Report and certain legal 
interpretations developed by the Panel, and filed a Notice of Appeal60 and an appellant's submission 
pursuant to Ru le 20 and Rule 21, respectively, of the Working Procedures.  
1.23.   On that same date , the Chair of the Appellate  Body also received a letter from the 
European  Union requesting the Appellate  Body Division hearing this appeal to adopt additional 
procedures to prote ct business confidential information (BCI) and highly sensitive business 
information (HSBI) in these appellate proceedings. In its letter, the European  Union proposed that 
additional procedures that track those adopted by the Appellate  Body in the appeal i n EC and certain 
member States – Large Civil Aircraft (Article  21.5 – US) be adopted. The European  Union argued 
that, inter alia , disclosure of certain sensitive information on the record of the Panel proceedings 
would be severely prejudicial to the LCA manufacturers concerned, and possibly to their customers 
and suppliers.  
1.24.   Also on 29 June 2017, on behalf of the Division hearing this appeal, the Chair of the 
Appellate  Body sent a letter to the participants and third parties and invited the United States an d 
the third parties to comment  in writing on the request by the European  Union by 5 July 2017. The 
Chair also informed the participants and the third parties that, pending a ruling by the Division on 
the request to adopt additional procedures to protect BC I and HSBI, the deadlines for the filing of 
the appellant's  submission, the Notice of Other Appeal, and the other appellant's, appellees', and 
third participants' submissions in this appeal were suspended. The participants and the third parties 
were also i nformed that, pending a final decision on the European Union's request, interim additional 
protection was to be granted to all BCI and HSBI transmitted to the Appellate  Body in this appeal.  
1.25.   On 5 July 2017, written comments were received from the United Sta tes, Australia, and 
Canada. The United States broadly agreed with the European Union's request that the BCI and HSBI 
procedures adopted in the appeal in EC and certain member States – Large Civil Aircraft 
(Article  21.5 – US) should serve as the basis for BCI and HSBI procedures in this appeal. It 
requested, however, a change regarding the deadline to submit  an HSBI appendix to any written 
submission, suggesting that, if an HSBI  appendix is sent by an expedited courier service , that it be 
deemed filed and served on the date it is sent, instead of on the date it is delivered. Australia stated 
                                                
56 WT/AB/WP/6 , 16 August 2010.  
57 Comments were also received from Canada, China, and Japan.  
58 Comments were also received from Australia and the United  States.  
59 See also Appellate  Body Report s, US – Tax Incentives , para.  1.5; EC and certain member States – 
Large Civil Aircraft (Article 21.5 – US), para. 1.23 . 
60 WT/DS 353/27  (contained in Annex A -1 of the Addendum to this Report, WT/DS353/AB/RW/Add.1 ). WT/DS353/AB/RW  
[BCI redacted, as marked [BCI ]] 
 
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 that it did not object to the European  Union's request but commented that support of both of the 
participants would be important in ensuri ng fairness and orderly procedure in these appellate 
proceedings. Canada stated that, while it agreed with the European  Union's request that additional 
procedures to protect BCI and HSBI track the procedures adopted in EC and certain member  States 
– Large Civil Aircraft (Article 21.5 – US), it considered that the requirement that note -taking by third 
participants in the designated reading room be handwritten was unnecessarily burdensome, and 
requested that the procedures be modified so as to provide for a s tand-alone computer and printer 
to be made available to third participant BCI -approved persons in the designated reading room.  
1.26.   On 7 July 2017, the Chair of the Appellate  Body, on behalf of the Division, invited the 
participants and third parties to provide , by 11 July 2017 , any further views on the request by the 
European Union, taking into account the changes proposed by the United States and Canada. On 
11 July 2017, comments were received from the European  Union and the United  States. The 
European Union o bjected to the United States' proposal that an HSBI appendix sent by expedited 
courier should be deemed filed the day it is sent. For the European Union, Article  18 of the Working 
Procedures makes clear that the "filing" of a submission is not a clerical f ormality, but an event of 
legal significance, because the very status of the participants to an appeal derives from the act of 
filing the required documents. For the European Union, the Working Procedures clearly envisage a 
filing being made in Geneva, und er the supervision of the Secretariat, and being completed upon 
the receipt of the relevant documents by the Secretariat. The European Union also stated that, while 
it understands that having to transmit an HSBI appendix to Geneva poses certain practical 
challenges, such challenges are not unique to the United States. The European Union urged that any 
measures taken to address the United  States' concerns should be even -handed.  In addition, the 
European  Union stated that it did not, in principle, object to C anada's proposal to allow taking notes 
on a computer keyboard in the designated reading room, provided that it can be done in a manner 
that ensures the adequate protection of BCI.  The European  Union noted that the reason for excluding 
computers or other el ectronic devices from the designated reading room was to enhance the security 
of BCI, and that the risks of disclosure are heightened if computers or other electronic devices are 
allowed.  The European Union also noted that the participants and their stakeh olders agreed to the 
provision of BCI under the express understanding that computers or electronic devices would not be 
permitted in the designated reading room. For these reasons, the European Union considered that 
Canada's proposal would be acceptable on ly if certain heightened protections were put in place. The 
United States indicated that it did not favour Canada's request to allow note -taking on a computer 
with an attached printer. The United States considered that permitting voluminous reproduction of  
BCI with relative ease increases the risk of disclosure. According to the United  States, the relative 
difficulty of copying large amounts of information, rather than more limited notes to summarize 
information, is an appropriate feature of the proposed pr ocedures. The  United States added that 
extensive notes on the facts seem particularly unnecessary in the context of this appeal, given that 
the purpose of access to BCI at this stage is to help participants understand the legal arguments.  
1.27.   On 21  July 2017, the Chair of the Appellate  Body, on behalf of the Division hearing this appeal, 
issued a Procedural Ruling61 adopting additional procedures to protect the confidentiality of BCI and 
HSBI in these appellate proceedings. The Division did not adopt the modific ation requested by the 
United  States to the additional procedures proposed by the European  Union regarding the filing of 
an HSBI  appendix but  decided that it would endeavour to set filing dates for the participants such 
that the filing date for the HSBI ap pendix would be set three days following the deadline for the 
remainder of the submission itself. The Division accepted Canada's proposal that third participant 
BCI-approved persons be allowed to take notes on a stand -alone computer and printer in the 
designated reading room.  The Division also noted that it would make every effort to draft its Report 
without including sensitive information and that, if it considers it necessary to do so, it would provide 
the participants a timely opportunity to comment and indicate whether any BCI or HSBI was 
inadvertently included in the Report.  
1.28.   On 25  July 2017, the Division provided the participants and third parties with a Working 
Schedule for Appeal, setting out the dates for the filing of the appellant's submission and an eventual 
Notice of Other Appeal and other appellant's submission.  
                                                
61 The Procedural Ruling of 21  July 2017 is contained in Annex D -1 of the Adden dum to th is Report, 
WT/DS353/AB/RW/Add.1 . WT/DS353/AB/RW  
[BCI redacted, as marked [BCI ]] 
 
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 1.29.   On 3 August  2017, the  European  Union filed an appellant's submission pursuant to Rule  21 of 
the Working Procedures.  
1.30.   On 7 August 2017, the Appellate Body received a communication from the United  States 
requesting that the Division hearing this appeal extend the deadline, from 7 to 9  August 2017, for 
the United States to object to the inclusion of any BCI in the European Union's appellant's 
submission. The United States indicated that, due t o the volume of the European Union's submission, 
it needed two additional days to conduct the necessary review. On 8 August 2017, the Chair of the 
Appellate Body, on behalf of the Division hearing this appeal, invited the European Union and the 
third participants to provide any comments on the United  States' request by 9 August 2017. T he 
European Union responded that it had no objections to the request by the United States.  
1.31.   On 9 August 2017 , the Chair of the Appellate  Body, on behalf of the Division hearing  this 
appeal, issued a Procedural Ruling62 granting the extension by two days of the time  period set out 
in the Procedural Ruling of 21 July 2017  for the United  States to file an objection to the inclusion of 
any BCI. The Division also decided, in the interest of fairness, to extend by two days the time  period 
set out in the Procedural Ruling of 21 July 2017 for the European Union to file an object ion to the 
inclusion of any BCI in the United States ' other appellant's submission.  
1.32.   On 10 August 2017 , the United  States notified the DSB, pursuant to Articles  16.4 and 17 of 
the DSU, of its intention to appeal certain issues of law covered in the Panel Re port and certain legal 
interpretations developed by the Panel and filed a Notice of Other Appeal63 and an other appellant's 
submission pursuant to Rule 23 of the Working Procedures . 
1.33.   On 14 August 2017, the Appellate Body received a request from the United St ates to extend 
the deadline to file the HSBI appendix to its other appellant's submission from 14 to 15 August 2017. 
The United States explained that, on 10 August 2017, it had commenced transfer of the 
HSBI appendix to the Appellate Body and the European  Union via expedited international courier 
service, with the expectation that it would arrive at the United States' Permanent Mission in Geneva 
by 14 August 2017. As the shipment had not arrived before the deadline, the United States sought 
this extension t o complete the transfer of the HSBI appendix. On 15 August 2017, the United  States 
submitted the HSBI appendix to the Appellate  Body. On 17 August 2017, the Chair of the 
Appellate  Body, on behalf of the Division hearing this appeal, invited the European Un ion and the 
third parties to comment on whether the Division should accept the late -filed HSBI appendix of the 
United States. On 21 August 2017, the European  Union responded that the United States request 
did not place before the Appellate  Body all the inf ormation that the Appellate Body would require in 
order to make a procedural ruling on the matter, and that it would welcome additional explanation 
and evidence, including proof of the date and time of shipment of the HSBI appendix.  
1.34.   On 24 August 2017, the  Division requested that the United States provide relevant 
documentation relating to the time and date on which the HSBI appendix was delivered to the courier 
service for transmission to Geneva. On 28 August 2017, the United States responded by providing 
a printout of the tracking information for shipment of the HSBI appendix, together with additional 
details regarding the shipment. The United States explained that physical delivery of the package to 
the courier service occurred on 10 August 2017, and that , although the package arrived in 
Switzerland early in the morning on 14 August 2017, unexplained difficulties on the part of the 
courier service delayed delivery until the following day. The United States further maintained that, 
while it was unfortunate that the package arrived a day later than expected, a decision to grant its 
extension request would not result in prejudice.  
1.35.   On 30 August 2017, the Division issued a Procedural Ruling64 accepting the late -filed HSBI 
appendix to the United States' other appe llant's submission.  
1.36.   On 5 September 2017, the Division provided the participants and third parties a revised 
Working Schedule for Appeal, setting out the dates for filing the appellees' and third participants' 
                                                
62 The Procedural Ruling of 9  August 2017 is contained in Annex D -2 of the Addendum to this Report, 
WT/DS353/AB/RW/Add.1.  
63 WT/DS353/28  (contained in Annex A -2 of the Addendum to this Report, WT/DS353/AB/RW/Add.1).  
64 The Procedural Ruling of 30  August 2017 is contained in Annex D -3 of the Addendum to this Report, 
WT/DS353/AB/RW/Add.1.  WT/DS353/AB/RW  
[BCI redacted, as marked [BCI ]] 
 
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 submissions . The Division added that the dates for the oral hearing would be communicated in due 
course.  
1.37.   By letter dated 18  September 2017, the Chair of the Appellate  Body notified the Chair of the 
DSB that the Appellate  Body would not be able to circulate its Report in this appeal within the 60 -day 
period pursuant to Article  17.5 of the DSU, or within the 90 -day period pursuant to the same 
provision.65 The Chair indicated that this was due to a number of factors, including the exceptional 
size and complexity  of these compliance proceedings,  the substant ial workload faced by the 
Appellate  Body, the overlap in the composition of  the Divisions hearing several concurrent appeals, 
and the shortage of staff in the Appellate Body Secretariat.  
1.38.   On 10 October 2017, the European  Union and the United  States each fil ed an appellee's 
submission.66 
1.39.   On 11 October 2017, the Appellate Body received a communication from the European  Union 
requesting the Division hearing this appeal to extend, from 12  to 13 October 2017, the deadline for 
the European Union to object to the inclusion of any BCI in the United States' appellee's submission. 
The European  Union indicated that, due to the volume of the United States' submission, it needed 
one additional day to complete the necessary review regarding BCI. On the same day, the Divis ion 
invited the United States and the third  parties to provide any comments on the European  Union's 
request by 12 October 2017. The United States responded that it would have no objection to an 
extension of the deadline for both participants to object to t he inclusion of any BCI in the other 
participant's appellee's submission. Brazil, China, and Russia also stated that they do not object to 
the extension request, but Brazil and China indicated that third parties should be granted an 
extension of the deadli ne for their submissions.  
1.40.   On 12 October 2017, the Division issued a Procedural Ruling67 granting an extension by one 
day of the time  period for the European  Union and the United  States each to file an objection to the 
inclusion of any BCI in the other participant's appellee's submission. In addition, the Division decided 
to extend the deadline for the filing of third participants' submissions and executive summaries, and 
notifications by third parties under Rule 24(2) of the Working Procedures , until 30  October 2017.  
1.41.   On 13 October 2017, the Appellate Body received a communication from the European  Union, 
in which the European Union objected to the inclusion of certain HSBI in the HSBI -redacted version 
of the United States' appellee's submission, without proper designation of that information as HSBI. 
On the same day, the Division invited the United  States to comment on the European  Union's 
request. On 17  October  2017, the United States responded that the relevant information should be 
treated as HSBI, and  requested that it be allowed to submit replacement pages for the BCI version 
(HSBI -redacted) and non -BCI version (BCI - and HSBI -redacted) of its appellee's submission, and a 
corrected HSBI appendix.  
1.42.   On 18 October 2017, the Division issued a Procedural Rul ing68 granting the United  States until 
23 October  2017 to submit the replacement pages for the BCI and non -BCI versions of its appellee's 
submission, and until 26  October 2017 to submit its corrected HSBI appendix. The Division also 
decided to extend the de adline for the filing of third participants' submissions and executive 
summaries, and notifications by third parties under Rule 24(2) of the Working Procedures, until 
7 November 2017.  
1.43.   Pursuant to the Procedural Ruling of 18 October 2017, on 23 October 2017 , the United  States 
filed the replacement page s for the BCI and non -BCI versions of its appellee's submission. On 
26 October 2017, the United  States filed the corrected HSBI appendix to its appellee's submission.  
                                                
65 WT/DS353/29.  
66 Pursuant to Rules 22 and 23(4)  of the Working Procedures.  
67 The Procedural Ruling of 12  October 2017 is contained in Annex D -4 of the Addendum to this Report, 
WT/DS353/AB/RW/Add.1.  
68 The Procedural Ruling of 18  October 2017 is contained in Annex D -5 of the Addendum to this Report, 
WT/DS353/AB/RW/Add.1.  WT/DS353/AB/RW  
[BCI redacted, as marked [BCI ]] 
 
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 1.44.   On 26 October, Korea notified its intention  to appear at the oral hearing as a third 
participant.69 On 7 November 2017, Brazil,  Canada, China, and Japan each filed a third participant's 
submission.70 On the same day, Australia notified its intention to appear at the oral hearing as a 
third participan t.71 On 13 November 2017, Russia notified its intention to appear at the oral hearing 
as a third participant.72 
1.45.   By letter dated 15  November  2017, the Division informed the participants and third 
participants that the first session of the oral hearing would t ake place from 17 to 20  April 2018.  
1.46.   By letter dated 24  November  2017, the participants and third participants were informed that, 
in accordance with Rule 15 of the Working Procedures, the Chair of the Appellate  Body had notified 
the Chair of the DSB of th e Appellate  Body's decision to authorize Appellate  Body Member Mr Peter 
Van den Bossche to complete the disposition of this appeal, even though his second term of office 
was due to expire before the completion of these appellate proceedings.  
1.47.   By letter date d 12  March  2018, the Division invited the participants to indicate by 
21 March  2018 whether they wished to request the sessions of the oral hearing in this appeal to be 
open to public observation, and , if so, to propose specific modalities in this respect.  The Division 
also invited the third participants to provide comments by 23  March  2018 on any request made by 
the participants.  
1.48.   By a joint letter dated 21 March 2018, the participants proposed additional procedures to 
protect BCI and HSBI during the oral h earing in this appeal and requested that the Division allow 
observation by the public of the oral hearing. The participants proposed that the Division adopt the 
same additional procedures that the Appellate Body adopted in  EC and certain member States – 
Large Civil Aircraft (Article 21.5 – US). 
1.49.   On 23 March 2018, Canada and China each submitted comments on the participants' 
request.  Canada expressed its agreement with the joint proposal by the participants that the 
Appellate  Body allow observation by the pub lic of the oral hearing, while acknowledging that suitable 
protection for BCI is required. China stressed the importance of striking an appropriate balance 
between the risks of disclosure of sensitive information, on the one hand, and the rights and duties  
of the third participants and the WTO membership at large, on the other hand . China requested that 
its oral statement and its responses to questions at the oral hearing be treated as confidential.  
1.50.   On 5 April 2018, the Division issued a Procedural Ruling73 authorizing the participants' request 
to open the segments of the oral hearing dedicated to the delivery of opening and closing statements 
to public observation, subject to additional procedures for the conduct of the oral hearing that are 
essentially the same as those adopted by the Appellate  Body in EC and certain member States – 
Large Civil Aircraft (Article 21.5 – US). 
1.51.   The first session of the oral hearing was held from 17 to 20  April 2018. During this session, 
the Division informed the participants and third participants that the second session of the oral 
hearing would take place in the latter part of September 2018. O n 30 May 2018, the Division received 
a communication from the United  States noting certain scheduling constraints regarding its 
participation in the second session of the oral hearing. By letter dated 31 May 2018, the Division 
informed the participants and  third participants that the second session of the oral hearing would be 
held from 18 to 21  September  2018.  
1.52.   On 1 August 2018, the Division received a communication from the United  States requesting 
that the Division, in organizing the second session of the  oral hearing, take account of the absence 
of a key member of the US delegation on 19  September 2018. The United  States suggested, as a 
first option, that the Division reserve questioning regarding technology effects for 19  September 
2018, or, as a second option, alter the schedule so that the hearing begins on 17 September 2018, 
                                                
69 Pursuant to Rule 24(2) of the Working Procedures.  
70 Pursuant to Rul e 24(1) of the Working Procedures.  
71 Pursuant to Rule 24(2) of the Working Procedures.  
72 Pursuant to Rule 24(4) of the Working Procedures.  
73 The Procedural Ruling of 5 April 2018 is contained in Annex D -6 of the Addendum to this Report, 
WT/DS353/AB/RW/Add. 1. WT/DS353/AB/RW  
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 and does not take place on 19 September 2018. On 3 August 2018, the Division invited the 
European  Union and the third participants to provide any comments on the United States' req uest, 
if they so wished, by 8  August 2018. On 7 August 2018, the European Union responded that it 
preferred the second option proposed by the United  States. The European  Union indicated that 
reserving questioning regarding technology effects on 19 Septembe r would create a scheduling 
conflict for a member of the EU delegation.  
1.53.   By letter dated 9 August 2018, the Division notified the participants and third participants 
that it had decided to change the dates of the second session of the oral hearing. Specific ally, the 
Division informed the participants and third participants that the second session of the oral hearing 
would begin on 17 September 2018 and continue through 18 September 2018, and, after a 
suspension on 19 September 2018, resume on 20  September 20 18 and continue through 
21 September 2018. The second session of the oral hearing was held accordingly.  
1.54.   The participants and third participants did not refer to BCI or HSBI in their opening or closing 
statements in either session of the oral hearing, excep t for the European  Union in its closing 
statement in the second session of the oral hearing, which did include BCI. Pursuant to the 
Procedural Ruling of 5 April 2018, public observation of both sessions of the oral hearing was limited 
to the opening and cl osing statements of the participants and third participants, with the exception 
of China, who had requested that its oral statements be treated as confidential, and the 
European  Union's closing statement of the second session of the oral hearing, which inc luded BCI. 
The public observation took place on 8 May 2018  and 9 October 2018  by means of a delayed 
broadcast  of a video recording of such statements, after the participants had been given an  
opportunity to confirm that no BCI or HSBI had been inadvertentl y uttered.  
1.55.   By letter dated 15 February 2019, the  Division informed the participants that, pursuant to 
paragraph 17(xiii) of the Procedural Ruling of 21 July  2017, the participants would be provided on 
6 March 2019 with a confidential advance copy of the Appellate Body Report intended for circulation 
to WTO Members . The Division also invited the participants to indicate, by 13 March 2019, whether 
any BCI or HSBI was inadvertently included in the Report, and to request removal of such 
information . The Divisio n further provided the participants with an opportunity to respond to each 
other's comments , if any,  by 15 March 2019.  On 13 March 2019, the United States requested certain 
additional BCI redactions in the Report. On that same date, the European Union stat ed that it had 
no comments on the bracketing of BCI or HSBI in the Report, and on 14 March 2019, indicated that 
it had no objection to the United States' request. On 15 March 2019, the Division informed the 
participants that it had redacted the BCI as iden tified by the United States.  
1.56.   By letter dated 15 March 2019, the Chair of the Appellate  Body informed the Chair of the DSB 
that the Report in these proceedings would be circulated on 28 March 2019.  
2  ARGUMENTS OF THE PAR TICIPANTS  
2.1.  The claims and arguments of the participants are reflected in the executive summaries of their 
written submissions provided to the Appellate  Body.74 The Notices of Appeal and Other  Appeal, and 
the executive summaries of the participants' claims and arguments, are containe d in Annexes A and 
B of the Addendum to this Report, WT/DS353/AB/RW/Add.1.  
3  ARGUMENTS OF THE THI RD PARTICIPANTS  
3.1.  The arguments of those third participants that filed a written submission are reflected in the 
executive summaries of their written submissions p rovided to the Appellate  Body75, which are 
contained in Annex C of the Addendum to this Report, WT/DS353/AB/RW/Add.1.  
                                                
74 Pursuant to the Appellate  Body's communication on "Executive Summaries of Written Submissions in 
Appellate Proceedings" and "Guidelines in Respect of Executive Summaries of Written Submissions in 
Appellate  Proceedings" (WT/AB/23, 11  March  2015).  
75 Pursuant to the Appellate  Body's communication on "Executive Summaries of Written Submissions in 
Appellate Proceedings" and "Guidelines in Respect of Executive Summaries of Written Submissions in 
Appellate  Proceedings" (WT/AB/23, 11  March  2015).  WT/DS353/AB/RW  
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 4  ISSUES RAISED IN THI S APPEAL  
4.1.  The following issues are raised in this appeal:  
a. whether the Panel erred in finding that the European Union's claims relating to the 
pre-2007 USDOD procurement contracts were within its terms of reference (claim by the 
United  States);  
b. with respect to the Panel's analysis of the pre -2007 and post -2006 USDOD procurement 
contracts:  
i. whether the Panel acted inc onsistently with Article  11 of the DSU when finding that 
the payments and access to USDOD facilities, equipment, and employees provided to 
Boeing through USDOD procurement contracts should be characterized as "purchases 
of services", rather than as a direc t transfer of funds within the meaning of 
Article  1.1(a)(1)(i) of the SCM  Agreement and the provision of goods and services 
within the meaning of Article  1.1(a)(1)(iii) of the SCM  Agreement  (claim by the 
European Union) ; and  
ii. whether the Panel acted inconsi stently with Article  11 of the DSU when finding that 
the distribution of intellectual property (IP) rights under USDOD procurement contracts 
does not confer a benefit within the meaning of Article 1.1(b) of the SCM Agreement 
(claim by the European  Union) ; 
c. whether the Panel erred in finding that, in order to establish the existence of a financial 
contribution in the form of revenue foregone under Article  1.1(a)(1)(ii) of the 
SCM Agreement, the European Union was required to demonstrate that Boeing used the 
FSC/ETI tax concessions, and that the European  Union had not established the 
United  States' failure to comply with its obligation under Article 7.8 of the SCM  Agreement 
to withdraw the FSC/ETI subsidies to Boeing  (claim by the European Union) ; 
d. whether, with  respect to the Panel's analysis of the post -2006 NASA procurement 
contracts and cooperative agreements, the post -2006 USDOD  assistance instruments, and 
the FAA -Boeing CLEEN Agreement, the Panel erred in its application of Article 1.1(b) of 
the SCM  Agreeme nt, or acted inconsistently with Article 11 of the DSU, by disregarding 
certain terms and evidence (conditional claim by the United  States) ; 
e. whether the Panel acted inconsistently with Article 11 of the DSU in finding that 
South  Carolina's payments to Boei ng with respect to the Project Gemini facilities and 
infrastructure confer a benefit within the meaning of Article 1.1(b) of the SCM  Agreement 
(conditional claim by the United  States) ; 
f. whether the Panel erred in its interpretation and application of Articl e 2.1(c) of the 
SCM Agreement, or acted inconsistently with Article  11 of the DSU, when limiting its 
assessment of de facto specificity of the City of Wichita IRB subsidy programme to the 
period of time after the end of the United  States' implementation pe riod, and finding that 
the IRB programme is no longer specific within the meaning of Article 2.1(c)  (claim by the 
European Union) ; 
g. whether the Panel erred in its interpretation and application of Article  2.1(c) of the 
SCM Agreement, or acted inconsistently  with Article  11 of the DSU, when finding that the 
subsidy provided by the State of South Carolina to Boeing through economic development 
bond (EDB) proceeds, used to fund Project Gemini facilities and infrastructure, is not 
specific within the meaning of Article  2.1(c) of the SCM  Agreement (claim by the 
European  Union) ; 
h. whether the Panel erred in its application of Article  2.2 of the SCM  Agreement, or acted 
inconsistently with Article 11 of the DSU, when finding that the subsidy provided by the 
State of So uth Carolina to Boeing through the MCIP job tax credits is not specific within 
the meaning of Article 2.2 of the SCM  Agreement (claim by the European Union) ;  WT/DS353/AB/RW  
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 i. whether the Panel erred in the interpretation and application of Article 2.1(a) of the 
SCM Agreem ent in finding that the USDOD procurement contracts are specific within the 
meaning of that provision (conditional claim by the United States);  
j. whether the Panel acted inconsistently with Article 11 of the DSU in finding that the subsidy 
provided by the St ate of South Carolina to Boeing through the EDB and Air Hub Bond 
proceeds conferred a benefit within the meaning of Article  1.1(b) of the SCM  Agreement 
(conditional claim by the United States);  
k. whether the Panel erred in the interpretation of Articles 5, 6 .3, and 7.8 of the 
SCM Agreement in considering, in relation to significant price suppression, significant price 
depression, and significant lost sales, that a subsidized product can cause serious prejudice 
to another product only if the two products in qu estion compete in the same market (claim 
by the European Union);  
l. whether the Panel erred in the interpretation and application of Articles 5, 6.3, and 7.8 of 
the SCM Agreement, or acted inconsistently with Article  11 of the DSU, in its treatment of 
claims of continuing adverse effects from the original proceedings (claim by the 
European  Union);  
m. whether the Panel erred in the interpretation and application of Article 6.3(c) of the 
SCM Agreement, or acted inconsistently with Article 11 of the DSU, in finding that the 
European Union had not failed to make a prima facie  case of significant price suppression 
with respect to the A330 LCA (conditional claim by the United States);  
n. whether, in its assessment of adverse effects through a technology causal mechanism, t he 
Panel erred in its application of Articles 5, 6.3, and 7.8 of the SCM  Agreement, or acted 
inconsistently with Article  11 of the DSU, when finding that the European Union failed to 
demonstrate the existence of original subsidy technology effects and spil l-over technology 
effects of the pre -2007 aeronautics R&D subsidies in the post -implementation period 
(claim by the European Union);  
o. whether the Panel erred under Articles 5, 6.3, and 7.8 of the SCM Agreement in allegedly 
stating that, in order to find sig nificant lost sales through a price causal mechanism, there 
must be no non -price factors that potentially contributed to Boeing having won those sales 
(claim by the European Union);  
p. whether the Panel erred in the interpretation and application of Articles  5 and 6.3 of the 
SCM Agreement, or acted inconsistently with Article  11 of the DSU, in its assessment of 
the relative significance of the amount of the tied tax subsidies when reaching its findings 
that the tied tax subsidies cause serious prejudice in the  single -aisle LCA market in the 
post-implementation period (claim by the United  States); and  
q. whether the Panel erred in the interpretation and application of Articles 5 and 6.3 of the 
SCM Agreement, or acted inconsistently with Article  11 of the DSU, by re quiring that the 
European  Union demonstrate that the untied subsidies actually altered Boeing's pricing 
behaviour (claim by the European Union).  
5  ANALYSIS OF THE APPE LLATE BODY  
5.1  United States' claim relating to the Panel's terms of reference  
5.1.  The United State s requests us to reverse the Panel's finding that its terms of reference include 
the European Union's claims relating to the pre -2007 USDOD  procurement contracts.76 The 
United  States contends that the Panel erred in allowing the European Union to reassert i n these 
compliance proceedings its claims that the USDOD procurement contracts involved financial 
contributions that confer a benefit.77 The United States argues that these claims had been rejected 
                                                
76 United Stat es' other appellant's  submission, para. 11.  
77 United States' other appellant 's submission, para. 11.  WT/DS353/AB/RW  
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 in the original proceedings and that they cannot be relitig ated in these compliance proceedings.78 
The European Union requests us to uphold the Panel's finding that its claims relating to the USDOD 
procurement contracts are within the scope of the compliance proceedings.79 The European Union 
contends that, because t he Appellate  Body declared moot the original panel's finding that the USDOD 
procurement contracts were not financial contributions, there were no recommendations or rulings 
relating to the USDOD procurement contracts that the European Union would be reliti gating.80 
5.1.1   The Panel's findings  
5.2.  Before the Panel, the United States requested a ruling that  the European Union's claims relating 
to the USDOD procurement contracts, which had also been at issue in the original proceedings, fell 
outside the scope of th ese compliance proceeding s.81 Noting that there was no finding of 
WTO-inconsistency with respect to these measures at the conclusion of the original proceedings82, 
the United States claimed that this was because the European  Union had specifically requested tha t 
the Appellate Body not complete the legal analysis in the event that it found fault with the  original  
panel's legal interpretation .83 
5.3.  In response, the European Union argued that in the original proceedings it had pursued the 
matter before the Appellate Body to the greatest extent possible.84 In particular, it had appealed the 
legal findings on which the panel had based its conclusion that the USDOD procurement contracts 
were not subsidies.85 The European Union explained that the Appellate Body ha d declared "moot and 
without legal effect" the  original  panel's interpretation that transactions properly characterized as 
purchases of services are excluded from Article 1.1(a)(1) of the SCM  Agreement, and the panel's 
finding that the USDOD procurement co ntracts were properly characterized as purchases of services 
and were not financial contributions.86 However, given the lack of factual findings and uncontested 
facts related to the questions of benefit and adverse effects, it would have been impossible for  the 
Appellate Body to complete the legal analysis of whether the USDOD procurement contracts 
constituted specific subsidies that cause adverse effects.87 
5.4.  The Panel began by noting that complaining parties had been permitted to reassert claims in 
compliance  proceedings against aspects of measures that were unchanged from those unsuccessfully 
challenged in the original proceedings, provided that the finality of the recommendations and rulings 
of the DSB was not compromised, in particular where: (i) the origin al panel had exercised judicial 
economy with respect to one challenged aspect of an original measure, that aspect had become an 
integral part of the measure taken to comply, and the challenge was to that same aspect of the 
measure taken to comply88; and (ii ) in original proceedings the Appellate Body had reversed a finding 
by the panel, but had subsequently been unable to complete the legal analysis due to insufficient 
factual findings or undisputed facts on the panel record.89 
5.5.  The Panel then reviewed how the  panel and the Appellate Body in the original proceedings had 
dealt with the European Union's claims relating to the USDOD procurement contracts. The Panel 
                                                
78 United States' other appellant 's submission, paras. 13 -17. 
79 European Union's appellee's submission, para. 67 (referring to Panel Report, para. 11.5.a.ii).  
80 European Union's appellee's submission, para. 45 . 
81 Panel Report, para. 7. 95 (referring to United States' request for preliminary rulings, da ted 
13 November 2012, paras. 8 -9 and 60 ). 
82 Panel Report, para. 7. 96 (referring to United State s' reply to European Union's response to 
United  States' request for preliminary rulings, dated 3 December 2012, para. 27; request for preliminary 
rulings, da ted 13 November 2012, para. 9;  first written submission  to the Panel , para. 306 ). 
83 Panel Report, p ara. 7. 97 (referring to United States' reply to European Union's response to 
United  States' request for preliminary rulings, dated 3 December 2012, para. 28; request for preliminary 
rulings, dated 13 November 2012, para. 8; first written submission  to the Panel , para. 309 ). 
84 Panel Report, para. 7. 103 (referring to European Union's  opening statement at the Panel meeting, 
para. 15).  
85 Panel Report, para. 7. 102. 
86 Panel Report, para. 7. 103 (referring to European Union's supplemental submission on United State s' 
request for preliminary rulings, para. 10; opening statement at the Panel meeting, para. 15).  
87 Panel Report, para. 7. 102. 
88 Panel Report, paras. 7.33 and 7.109 (referring to Appellate Body Report,  US – Oil Country Tubular 
Goods Sunset Reviews (Article 21.5 – Argentina) , para. 150 ). 
89 Panel Report, paras. 7.34 and 7.109  (referring to Appellate Body Report,  US – Upland Cotton 
(Article  21.5 – Brazil) , para. 210 ). WT/DS353/AB/RW  
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 noted the original panel's findings that work performed by Boeing for the USDOD under the USDOD 
procurement contracts was properly characterized as a "purchase of services"; transactions 
characterized as purchases of services are excluded from the scope of Article  1.1(a)(1)(i) of the 
SCM Agreement, and therefore the USDOD procurement contracts did not in volve financial 
contributions within the meaning of that provision.90 
5.6.  The Panel further noted that in the original proceedings the European Union had appealed the 
panel's interpretation of Article 1.1(a)(1) of the SCM Agreement, in particular the panel's fi nding 
that transactions properly characterized as purchases of services are excluded from the scope of 
Article  1.1(a)(1) of the SCM Agreement91, and that the European Union had not appealed the 
application of th e original  panel's interpretation  of Article 1.1(a)(1) to any specific measures.92 
Moreover, the Panel noted the European Union's position that the Appellate Body's reversal of the 
panel's legal interpretation had implications for the panel's finding regarding the  USDOD 
procurement contrac ts, and that the European Union considered itself entitled to request the 
Appellate Body to complete the legal analysis concerning these contracts, even though the 
European  Union ultimately elected not to do so on the grounds that there were insufficient f actual 
findings by the panel or undisputed facts.93 
5.7.  Ultimately, the Panel concluded that, because the original panel had ended its analysis at the 
stage of financial contribution, it would have been impossible for the Appellate Body in the original 
proceedi ngs to complete the legal analysis of benefit and specificity regarding the USDOD 
procurement contracts.94 In these circumstances, the Panel held that consideration of the USDOD 
procurement contracts in th ese compliance proceeding s should not be precluded o nly because the 
European Union  had not requested completion of the  legal analysis in  the original proceedings.95 The 
Panel also pointed to the time and resources that had been expended in this dispute, as well as to 
the aim of dispute settlement, as express ed in Article 3.7  of the DSU , to secure a positive resolution 
to a dispute.96 On this basis, the Panel found that by reasserting claims with respect to the USDOD 
procurement contracts the European  Union would not be "'unfairly' getting a second chance" to m ake 
a case that it failed to make in the original proceeding s, and the Panel thus concluded that the 
European Union's claims relating to the USDOD procurement contracts fell within the scope of th ese 
compliance proceeding s.97 
5.1.2   Claims and arguments on appeal  
5.8.  The United States requests us to reverse the Panel's finding that its terms of reference included 
the European Union's claims that the USDOD procurement contracts were financial contributions 
that confer a benefit.98 First, the United  States contends that t he Panel erred in allowing the 
European Union  to reassert in th ese compliance  proceeding s claims regarding the USD OD 
procurement contracts that had been rejected in the original proceeding s.99 While acknowledg ing 
"exception s" to the principle that a party may not "relitigate " a claim on which it did not prevail  in 
original proceeding s, the United States asserts that such exceptions do not apply in these compliance  
proceeding s.100 The United States asserts that the European Unio n did not appeal in the original 
proceedings whether the USDOD procurement contracts were purchases of services or whether they 
conferred a benefit .101 Accordingly, the United States asserts that the European  Union decided to 
"leave in place" the original pa nel's finding that the USDOD procurement contracts were purchases 
of services and to "leave unanswered " the question of whether they conferred a benefit .102 For the 
United  States, the failure to achieve a definitive resolution of the issue in the original pr oceedings 
must be "laid at the feet" of the European Union, and therefore the European Union is not entitled 
                                                
90 Panel Report, para. 7. 111. 
91 Panel Report, para. 7. 112 (referring to European Union's Notice of Appeal, dated 4 April 2011, 
WT/DS353/8, para. 3 ). 
92 Panel Report, para. 7. 112. 
93 Panel Report, para. 7. 114. 
94 Panel Report, para. 7. 128. 
95 Panel Report, para. 7. 128. 
96 Panel Report, para. 7. 129. 
97 Panel Report, para. 7.130.  
98 United Stat es' other appellant's  submission, para. 11.  
99 United States' other appellant 's submission, para. 11.  
100 United States' other appellant 's submission, para. 11.  
101 United States' other appellant 's submission, para. 16.  
102 United States' other appellant 's submission, para. 16.  WT/DS353/AB/RW  
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 to pursue in these compliance proceedings a claim that the USDOD procurement contracts were not 
purchases of services that conferred a benefit.103 
5.9.  Second, the United States contends that the Panel erred in finding that the European Union 
could pursue in these compliance proceedings its claim that the USDOD procurement contracts 
confer a benefit.104 In particular, the United States alleges that the Panel erred in attributing 
significance to the fact that the original panel had not analysed whether the USDOD procurement 
contracts conferred a benefit or caused adverse effects, and in finding that "it would have been 
impossible for the Appellate Body to compl ete the analysis regarding the DOD procurement 
contracts."105 For the United States, the Appellate Body did not consider whether it could complete 
the legal analysis in the original dispute, because the European Union had explicitly stated that it 
was not se eking completion of the legal analysis.106 For the United States, this is what bars the 
European Union from including claims relating to the USDOD procurement contracts in these 
compliance proceedings.107 
5.10.   Finally, the United States maintains that the Panel's r eference to the "time and resources" 
devoted to an issue in litigation and to the aim of the dispute settlement system  is "legally irrelevant" 
to whether the European Union's claims against the USDOD procurement contracts fell within the 
Panel's terms of r eference.108 For the United States, these considerations should have no bearing on 
the determination of the scope of compliance proceedings pursuant to Article 21.5 of the DSU.  
5.11.   In response, the European Union requests us to uphold the Panel's finding that th e USDOD 
procurement contracts are within the scope of the compliance proceedings.109 First, in response to 
the United States' argument that the European Union should not be permitted to relitigate its claims 
relating to the USDOD procurement contracts, the E uropean Union contends that, because the 
Appellate Body had declared moot the original panel's finding that the USDOD procurement contracts 
were not financial contributions, there were no recommendations or rulings in the original case 
relating to the USDOD procurement contracts that the European Union would be relitigating.110 
Moreover, the European Union argues that the Panel was correct in considering that the 
Appellate  Body has permitted complaining parties in compliance proceedings to reassert claims 
against aspects of measures where such claims were "unsuccessfully asserted" in the original 
proceedings in situations where the finality of the recommendations and rulings of the DSB would 
not thereby be compromised.111 
5.12.   Second, the European Union maintains that its decision not to request the Appellate Body in 
the original proceedings to complete the legal analysis does not preclude the European Union from 
demonstrating that the USDOD procurement contracts confer a "benef it" to Boeing in the current 
compliance proceedings.112 The European Union points out that, because the original panel did not 
evaluate whether the USDOD procurement contracts conferred a benefit, there were no factual 
findings or uncontested facts related t o these contracts with which the Appellate Body in  the original 
proceedings could complete the legal analysis on "benefit". The European  Union further stresses 
that, as the Panel correctly understood, the European  Union cannot be penalised for refraining f rom 
asking the Appellate Body to do something that falls outside of the Appellate  Body's competence.113 
The European Union explains that the Appellate  Body can complete legal analys es "only if the factual 
findings of  the panel, or the undisputed facts in the  panel record " provide a sufficient basis for the 
                                                
103 United States' other appellant 's submission, para. 16  (quoting Panel Report, para.  7.35) . 
104 United States' other appellant 's submission, para. 18.  
105 United States' other appe llant's submission, para. 18 (quoting  Panel Report, para.  7.128).  
106 United States' other appellant 's submission, para. 19  (referring to  European Union 's appellant's 
submission in US – Large Civil Aircraft (2nd complaint) , para. 127 ("Because there are a nu mber of contested 
facts related to the {USDOD  RDT&E programme } measures that were found to constitute purchases of 
services, the European Union does not request that the Appellate Body complete the analysis. ")). 
107 United States' other appellant 's submission, para. 19.  
108 United States' other appellant 's submission, para s. 20-21 (quoting Panel Report , para.  7.129). 
109 European Union's appellee's submission, para. 67 (referring to Panel Report, para.  11.5.a.ii).  
110 European Union's appellee's submissio n, paras. 36 -38. 
111 European Union's appellee's submission, para. 42 (quoting  Panel Report , para. 7. 33). 
112 European Union's appellee's submission, paras. 48 -49. 
113 European Union's appellee's submission, paras. 50 -51 (quoting Panel Report , para. 7. 128).  WT/DS353/AB/RW  
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 Appellate Body to do s o.114 The European Union further contends that, because the Appellate Body 
may complete the analysis regardless of whether a party requests it or objects to it , the question of 
whether t he European Union requested the Appellate  Body to complete the legal analysis  is not 
relevant for determining whether the European Union's claims are within the scope of these 
compliance proceedings.115 
5.13.   Finally, the European Union agrees with the Panel's rea soning that the efficiency and 
effectiveness of the dispute settlement process are relevant contextual considerations in evaluating 
the scope of compliance proceedings under Article 21.5  of the DSU .116 In this regard, according to 
the European Union, the Panel properly considered relevant that the aim of the dispute settlement 
mechanism is to secure a positive solution to a dispute.117 
5.1.3   Whether the Panel erred in finding that claims relating to the USDOD procurement 
contracts were within the scope of th ese compl iance proceeding s 
5.14.   We now turn to assess whether the Panel erred in finding that claims relating to the USDOD 
procurement contracts were within the scope of th ese compliance proceeding s. We begin by 
addressing the question of when a Member may reassert in c ompliance proceedings,  pursuant to 
Article 21.5 of the DSU,  claims that were not resolved on the merits in original proceedings. 
Thereafter we review the Panel's analysis of whether the European Union's claims relating to the 
USDOD procurement contracts fe ll within the scope of these compliance proceedings.  
5.15.   At the outset, we note that the first sentence of Article 21.5  of the DSU  provides:  
Where there is disagreement as to the existence or consistency with a covered 
agreement of measures taken to comply wit h the recommendations and rulings such 
dispute shall be decided through recourse to these dispute settlement procedures, 
including wherever possible resort to the original panel.  
5.16.   Article 21.5 provides the basis for disputes concerning Members' compliance w ith 
recommendations and rulings of the DSB. Both original disputes and compliance disputes consist of 
a matter referred to the DSB, which in turn comprises two elements: (i) the specific measures  at 
issue; and (ii) the legal basis of the complaint (that is, the claims ).118 In defining the scope of 
compliance proceedings, the Appellate  Body has consistently distinguished between these two 
elements, and it has found certain limitations, both regarding the measu res that can be challenged 
in compliance proceedings and the claims  that can be raised  in such proceedings.  
5.17.   In the present case, the participants' disagreement relates to limitations on the claims  that 
can be raised  in Article 21.5 proceedings. The  partici pants disagree as to whether claims relating to 
the USDOD procurement contracts fall within the scope of these compliance proceedings. With 
respect to limitations regarding claims that can be pursued in compliance proceedings pursuant to 
Article 21.5, the Appellate Body has distinguished between new claims asserted for the first time in 
compliance proceedings and claims pursued in original proceedings and reasserted  in compliance 
proceedings.  
5.18.   First, with respect to new claims, ordinarily, a complainant is n ot allowed to raise claims in 
Article  21.5 proceedings that it could have pursued in original proceedings, but did not.119 However, 
this is not so for new claims against a measure taken to comply when such measure "incorporates 
components of the original mea sure that are unchanged, but are not separable from other aspects 
                                                
114 European Union's appellee's submission, para. 51 (quoting Appellate Body Report, US – Large Civil 
Aircraft  (2nd complaint) , para. 1250 and fn 2511 thereto, in turn quoting Appellate Body Report, US – 
Hot-Rolled Steel , para. 235). 
115 European Union's appellee's submission, paras. 55 -56. 
116 European Union's appellee's submission, para. 60.  
117 European Union's appellee's submission, para. 61 ( referring to  Panel Report, para. 7.129).  
118 Appellate Body Reports, Argentina – Import Measures , para. 5.13;  EC – Bed Linen (Article  21.5 – 
India) , para.  78. 
119 Appellate Body Report, US – Tuna II (Mexico) (Article 21.5 – Mexico) , para. 5.8 (quoting 
Appellate  Body Reports, US – Upland Cotton (Article 21.5 – Brazil) , para. 211; US – Zeroing (EC) (Article  21.5 
– EC), para.  424).  WT/DS353/AB/RW  
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 of the measure taken to comply".120 Therefore, the possibility to challenge an element of the 
measure at issue for the first time in compliance proceedings, even if that element may not have 
changed, hinges on the "critical question" of whether such an element forms "an integral part of the 
measure taken to comply".121 
5.19.   Second, concerning limitations on claims pursued in original proceedings and reasserted in 
compliance proceedings, we refer to the title of Article  21 of the DSU, which suggests that 
Article  21.5 proceedings are part of the process of " Surveillance of Implementation of 
Recommendations and Rulings " of the DSB, and to the fact that Article  17.14 of the DSU provides 
that adopted Appell ate Body reports "shall be … unconditionally accepted by the parties to the 
dispute".122 In this regard we also note that Article  3.3 of the DSU states that the "prompt 
settlement" of disputes "is essential to the effective functioning of the WTO".123 These co nsiderations 
support the view that compliance proceedings cannot be used to "re -open" issues decided on the 
merits in the original proceedings, because that would allow a party in Article  21.5 proceedings a 
"second chance" to reargue a claim that has been decided in an adopted report .124 
5.20.   The Appellate Body has treated differently, however, cases in which claims against aspects of 
a measure were not decided on the merits in the original proceedings, because such claims are not 
covered by the recommendations an d rulings of the DSB.125 Accordingly, the Appellate Body has 
entertained in compliance proceedings certain claims  that had been raised in original proceedings 
but on which no ruling on the merits  of the claims had been rendered. One example is where the 
Appellate  Body has reversed panel findings but has not been able to complete the legal analysis.126 
Similarly, the Appellate Body has permitted claims to be reasserted in compliance proceedings when 
the exercise of judicial economy has caused a claim to rema in unresolved in the original proceedings 
without a decision on the merits having been rendered .127 
5.21.    In sum, compliance proceedings cannot be used to "re -open" issues that were decided on 
the merits in the original proceedings.128 But claims against aspects of  a measure that are not 
decided on the merits in the original proceedings are not covered by recommendations and rulings 
of the DSB and thus can be reasserted in compliance proceedings.129 
5.22.   With these considerations in mind, we now turn to review whether the Panel erred in finding 
that claims concerning the USDOD procurement contracts fell within its terms of reference. The 
United States asserts that these claims fall outside the Panel's terms of reference, because the 
European Union had already pursued these claims in the original proceedings.  
5.23.   The Panel  explained  that whether the European  Union may reassert claims  relating to the 
USDOD procurement contracts  depended on the way in which these claims had been resolved in the 
original proceedings. More specifical ly, the Panel found that it had to consider whether the original 
measure had been "unsuccessfully" challenged on the merits in the original proceedings, such that 
it could not be raised again without compromising the finality of the recommendations and rul ings 
of the DSB .130 
                                                
120 Appellate Body Report, US – Tuna II (Mexico) (Article 21.5 – Mexico) , para. 5.8 (quoting  
Appellate  Body Report, US – Zeroing (EC) (Article  21.5 – EC), para.  432).  
121 Appellate Body Report, US – Tuna II (Mexico) (Article 21 .5 – Mexico) , para. 5.8 (quoting  
Appellate  Body Report, US – Zeroing (EC) (Article  21.5 – EC), para.  434).  
122 See Appellate  Body Report, US – Shrimp (Article  21.5 – Malaysia) , para.  97. 
123 See Appellate  Body Report, US – Shrimp (Article  21.5 – Malaysia) , para.  97. 
124 Appellate Body Reports, US – Zeroing (EC) (Article  21.5 – EC), para.  427 (fn omitted); US – Upland 
Cotton (Article  21.5 – Brazil) , para. 210. The Appellate Body has found that the same applies when a 
complainant has failed to establi sh a prima facie  case. See Appellate Body Report, EC – Bed Linen (Article  21.5 
– India) , para. 96 . 
125 Appellate  Body Report,  US – Zeroing (EC) (Article  21.5 – EC), para.  424. 
126 Appellate  Body Report, US – Upland Cotton (Article  21.5 – Brazil) , para.  210. 
127 Appellate  Body Report, US – Oil Country Tubular Goods Sunset Reviews (Article  21.5 – Argentina) , 
para. 148. 
128 Appellate Body Report, US – Tuna II (Mexico) (Article 21.5 – Mexico ), para. 5.8 (quoting 
Appellate  Body Report, US – Zeroing (EC) (Article  21.5 – EC), para.  427).  
129 Appellate Body Report, US – Tuna II (Mexico) (Article 21.5 – Mexico ), para. 5.8 (quoting 
Appellate  Body Report, US – Zeroing (EC) (Article  21.5 – EC), para.  424).  
130 Panel Report, paras. 7.41  and 7.109.  WT/DS353/AB/RW  
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 5.24.   We consider  that the approach articulated by the Panel comports with the approach we have 
outlined above. The Panel was correct in considering whether the original measure had been 
"unsuccessfully" challenged on the merits in the original  proceedings, such that it could not be raised 
again without compromising the finality of the recommendations and rulings  of the DSB .131 We also 
note that both the European Union and the United States agree with the Panel's reasoning that, in 
principle, a co mplainant is not precluded from reasserting a claim in compliance proceedings when 
there has been no decision on the merits of that claim in the original proceedings.132 
5.25.    The United States asserts, however, that in the particular circumstances of this case, the 
failure to achieve a definitive resolution in the original proceedings must be "laid at the feet" of the 
European Union and that the European Union must therefore b e barred from pursuing claims relating 
to the USDOD procurement contracts in these compliance proceedings.133 For the United  States, this 
is so because the European Union requested in the original proceedings that the Appellate Body not 
complete the legal an alysis with respect to its claims relating to the USDOD procurement contracts.  
5.26.   We observe that t he European Union's claims relating to the USDOD procurement contracts 
were pursued in the original proceedings. In this respect , we note the Panel's finding th at these 
claims were before the Appellate Body in the original proceedings.134 The Panel further found that 
the original panel's analysis had been limited to the question of a "financial contribution" and that 
the original panel had made no findings with res pect to the question of whether the USDOD 
procurement contracts conferred a benefit or caused adverse effects.135 Accordingly, these claims 
were not resolved on the merits, and we consider that the Panel was correct in relying on that fact 
in resolving the i ssue. 
5.27.   We disagree with the United States' contention that the European Union must be barred from 
pursuing claims relating to the USDOD procurement contracts in these compliance proceedings 
because the failure to achieve a definitive resolution in the origi nal proceedings must be "laid at the 
feet" of the European Union. We also disagree with the Panel's statement that the Appellate Body 
has been careful not to permit complaining parties to relitigate issues that were resolved adversely 
to them in original p roceedings, except "where the failure to achieve a definitive resolution of a claim 
cannot reasonably … be laid at the feet of the complaining party" .136 The Appellate Body has not 
relied on "fault" or the lack of it as a criterion to determine whether claim s fall within the scope of 
Article 21.5 proceedings. Instead, the Appellate Body has focused on whether certain claims were 
or were not decided on the merits in the original proceedings and were thus covered by the 
recommendations and rulings of the DSB.137 
5.28.   In keeping with this approach, whether the European  Union requested that the Appellate Body 
complete the legal analysis or whether the European Union requested that the Appellate Body not 
complete the legal analysis is not determinative for whether claims relating to the USDOD 
procurement contracts  fell within the Panel's terms of reference. While it is true that in the original 
proceedings in the present dispute the Appellate  Body referred to the absence of a request that it 
complete the legal analysis138, the Appellate Body has completed the legal analysis regardless of the 
fact that neither participant had specifically requested it to do so.139 
5.29.   In the context of the present case, we also note the Panel's finding that it would have been 
impossible for the Appe llate Body in the original proceedings to complete the legal analysis relating 
to claims concerning the USDOD procurement contracts.140 Thus, even if the European Union had 
requested completion of the legal analysis in the original proceedings, absent factua l findings by the 
                                                
131 Panel Report, par as. 7.41 -7.42 and 7.109.  
132 United States' other appellant's submission, para. 11; European Union's appellee's submission, 
para. 35. 
133 United States'  other appellant's submission, para. 16 (referring to Panel Report,  para. 7.35).  
134 Panel Report, para. 7.127 . 
135 Panel Report, para. 7.128. 
136 Panel Report, para. 7.35.  
137 Appellate Body Reports, US – Zeroing (EC) (Article  21.5 – EC), para.  427; US – Upland Cotton 
(Article  21.5 – Brazil) , para. 210.  
138 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , fn 1298 to para. 620.  
139 Appellate Body Reports, Canada – Periodicals , pp. 24 -32, DSR 1997:1, pp. 469 -476; Australia  – 
Salmon , paras.  116-135. 
140 Panel Report, para. 7.128.  WT/DS353/AB/RW  
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 original panel or undisputed facts on the record with respect to benefit and specificity, the 
Appellate  Body would not have been in a position to complete the legal analysis.  
5.30.   Accordingly, the Panel was correct not to attribute, in the particular circumstances of this 
dispute, significance to the question of whether, or to what extent, the European Union bore 
responsibility for the lack of resolution of its claims relating to the USDOD procurement con tracts. 
We consider that instead the Panel correctly focused on whether the European Union's claims relating 
to the USDOD procurement contracts had been resolved on the merits in the original proceedings.  
5.31.   Finally, we note that the United States takes issue  with the Panel's reliance on considerations 
relating to the time and resources devoted to an issue in litigation  and the aim of the dispute 
settlement system.141 The United States argues that such considerations are "legally irrelevant" to 
assess whether th e European Union 's claims against the USDOD procurement contracts fell within 
the Panel's terms of reference.142 
5.32.   In this respect , we note that the Panel concluded in paragraph 7.128 of its Report that, in the 
circumstances of this case, it did not consider t he European Union's failure to request completion of 
the legal analysis in the original proceedings to preclude its consideration of the European Union's 
claims relating to the USDOD procurement contracts. The United States is taking issue with the 
Panel's  statement in the next paragraph, introduced by the word "{a}dditionally".143 The structure 
of the Panel's analysis suggests that this "additional" consideration is not part of the reasoning its 
conclusion was based on. It is an afterthought by the Panel. As  such it does not require further 
consideration in this appellate proceeding.  
5.1.4   Conclusion  
5.33.   In sum, the question of whether a claim  falls within the scope of Article  21.5 proceedings is 
to be decided based on whether the claim has been resolved on the merits in the original proceedings 
and was thus covered by the recommendations and rulings of the DSB. A party's "fault" for the 
non-resolution of a claim, or the lack of such fault, is not determinative of whether a claim can be 
reasserted in compliance proceedi ngs. Accordingly, we find that the Panel did not err  in admitting 
the European  Union's claims relating to the pre-2007 USDOD procurement contracts i n these 
compliance proceedings.  
5.34.   We therefore uphold  the Panel's finding, in paragraphs 7.131 and 11.5.a.ii of the Panel Report, 
that the European Union's claims relating to the pre -2007 USDOD procurement contracts were within 
its terms of reference.  
5.2  European Union's claims relating to the Panel's findings concerning the USDOD 
procurement contracts  
5.35.   The European Union requests us to reverse the Panel's finding that the payments and access 
to USDOD facilities, equipment, and employees provided to Boeing through the USDOD RDT&E 
programme, and in particular through USDOD procurement contracts, are not subsi dies within the 
meaning of Article  1.1 of the SCM  Agreement.144 The European  Union alleges that the Panel failed 
to make an objective assessment of the matter, including the facts, in violation of Article 11 of the 
DSU both with respect to its findings on fi nancial contribution under Article  1.1(a)(1) of the 
SCM Agreement and on benefit under Article  1.1(b) of that Agreement.145 
5.36.   Specifically, the European Union contends that the Panel failed to make an objective 
assessment of the matter in characterizing the pa yments and access to USDOD facilities, equipment, 
and employees provided to Boeing through the USDOD procurement contracts as "purchases of 
                                                
141 United States' other appellant's submission, paras. 20 -22 (quoting Panel Report, para.  7.129).  
142 United States' other appellant's submission, para. 2 1. 
143 Panel Report, para. 7.129.  
144 European Union's appellant's submission, para. 104.  
145 European  Union's appellant's submission, para. 18 (referring to Panel Report, paras.  8.360 -8.378 
and 8.418 -8.437).  The European Union further requests us to complete the legal analysis and conclude that 
the payments and access to USDOD facilities, equipment, and employees provided to Boeing pursuant to the 
USDOD procurement contract s constitute specific subsidies. (Ibid., para. 93)  WT/DS353/AB/RW  
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 services" for purposes of Article 1.1(a)(1) of the SCM  Agreement. In the European  Union's view, had 
the Panel proper ly assessed the evidence before it, it would have found that the USDOD procurement 
contracts establish a joint -venture -type relationship in which USDOD provides financial contributions 
to Boeing akin to equity infusions, and in which USDOD provides Boeing with goods and services.146 
According to the European Union, the Panel failed to engage with the European Union's arguments 
and evidence, and failed to provide reasoned and adequate explanations and coherent reasoning in 
support of its findings.147 The Europea n Union further argues that, in assessing whether the USDOD 
procurement contracts confer a benefit on Boeing within the meaning of Article  1.1(b) of the 
SCM Agreement, the Panel "built upon the same errors" as in its analysis relating to financial 
contribu tion under Article  1.1(a)(1) of the SCM Agreement.148 
5.37.   The United States responds that the Panel analysed the USDOD procurement contracts, 
including their texts, the descriptions of the programme elements funding the contracts, and other 
evidence of how USDOD  administered the contracts.149 The United  States considers that the 
European  Union has not established a lack of an objective assessment by the Panel. Instead, 
according to the United  States, the European Union disagrees with the weight assigned by the Pane l 
to certain evidence.150 In addition, in the event that we reverse the Panel's conclusion and complete 
the legal analysis and find that the payments and access provided to Boeing under the USDOD 
procurement contracts constitute financial contributions and c onfer a benefit, the United  States 
conditionally appeals the Panel's findings relating to the specificity of the post -2006 NASA 
procurement contracts, cooperative instruments, and Space Act Agreements; the post -2006 USDOD 
assistance instruments; and the FA A-Boeing CLEEN Agreement.151 
5.38.   We begin by setting out the relevant aspects of the measures at issue and describing the 
approach of the panel and the Appellate Body in the original proceedings. We then assess whether 
in these compliance proceedings the Panel f ailed to make an objective assessment of the matter 
under Article 11 of the DSU in its analysis of whether the USDOD procurement contracts provide a 
financial contribution within the meaning of Article 1.1(a)(1) of the SCM Agreement. Finally, we turn 
to the European  Union's claim under Article 11 of the DSU relating to benefit and the United  States' 
conditional appeal relating to specificity.  
5.39.   USDOD commissions Boeing to perform certain kinds of R&D work funded through RDT&E 
programme elements152 by means of s pecific legal instruments, namely "contracts", "cooperative 
agreements", "grants", and "technology investment agreements".153 Both in the original proceedings 
and in the compliance proceedings, the latter three legal instruments (cooperative agreements, 
grants, and technology investment agreements) were referred to collectively as the "DOD assistance 
instruments". The Panel distinguished these instruments from the category of "contracts"154, 
                                                
146 European Union's appellant's submission, para. 85 . 
147 European Union's appellant's submission, para. 47.  
148 European Union's appellant's submission, para. 86. 
149 United  States' appellee's submission, para. 27.  
150 United  States' appellee's submission, para. 34.  
151 See United States' Notice of Other Appeal, para. 8.  
152 The Panel explained that USDOD's budget historically has been divided into five broad budget 
categories: Military Personnel; Ope rations & Maintenance; Procurement; RDT&E; and Military Construction. The 
RDT&E budget category funds research, development, test, and evaluation spending by USDOD, including the 
three military departments of USDOD (US Army, US Navy, and US Air Force) and other USDOD agencies, with 
a view to designing and developing military systems or technology. The RDT&E budget category is a distinct 
category from "Procurement", which funds the actual acquisition costs of military systems that are in 
production. RDT&E bu dget activities are subdivided into a number of programme elements – the major 
aggregation at which RDT&E efforts are organized, budgeted, and reviewed. Each programme element is 
divided into one or more named and numbered projects, which may be further su bdivided into activities. Each 
RDT&E programme element has specific programme objectives expressed in the "Mission Description" 
statement contained in the programme budgets. Programme elements are also identified by a particular 
"PE number". (Panel Report,  paras. 7.82 -7.83; Original Panel Report, para.  7.1147; CRA International, U.S. 
Department of Defense (DoD) Research, Development, Test and Evaluation (RDT&E) Funding Support to The 
Boeing Company for Dual -Use Aircraft R&D  (November 2006) (2006 CRA Report ) (Panel Exhibit EU -29), p. 5)  
153 Panel Report, para. 8.298 .a (referring to Original Panel Report , paras. 7.1140 -7.1141 , in turn 
referring to United States Code , Title 10, Section  2358). 
154 In its Report, the Panel referred to these as "procurement contracts" . (Panel Report, para.  8.298.a)  WT/DS353/AB/RW  
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 explaining that US procurement laws and regulations require that speci fic legal instruments be used 
in particular defined situations.155 
5.40.   Assistance instruments are used to provide "assistance", defined in the USDOD Grant and 
Agreement Regulations as the "transfer of a thing of value to a recipient to carry out a public purpose  
of support or stimulation authorized by a law of the United States".156 The recipient is required to 
contribute its own funds to the R&D on a cost -sharing basis. Moreover, at least as concerns 
cooperative agreements, the US Government is required to have su bstantial involvement in the work 
performed, including through collaboration, participation, or intervention.157 In contrast, a 
procurement contract is a legal instrument that "reflects a relationship between the Federal 
Government and a State, a local gover nment, or other recipient when the principal purpose of the 
instrument is to acquire property or services for the direct benefit or use of the Federal 
Government".158 A procurement contract, rather than an assistance instrument, should be used in 
all cases w here a fee or profit is to be paid or the instrument is to be used to carry out a programme 
where a fee or profit is necessary to achieve programme objectives.159 
5.41.   The R&D commissioned by USDOD through the RDT&E programme falls into two general 
categories.160 The first one consists of R&D commissioned under programme elements that fund 
basic research, applied research, and advanced technology developments to meet a variety of 
current and future military needs (science and technology (S&T) or "general aircraft" p rogramme 
elements).161 The second comprises R&D commissioned under programme elements that fund 
development of technologies for specific new weapon systems or components (systems acquisition 
or "military aircraft" programme elements).162 
5.42.   Before the original pa nel, the European Communities claimed that payments and access to 
USDOD facilities provided to Boeing under the 23 original RDT&E programme elements to conduct 
research into "dual -use" technologies163, in the sense of technologies having both military and ci vil 
applications164, were specific subsidies that caused adverse effects to the interests of the 
European  Communities.165 Furthermore, the European Communities challenged the payments and 
access to NASA facilities, equipment, and employees that NASA provided t o Boeing through R&D 
contracts and agreements entered into with Boeing under a number of aeronautics R&D 
programmes.166 
5.43.   The original panel concluded that transactions properly characterized as purchases of services 
are excluded from the scope of Article 1.1( a)(1)(i) of the SCM  Agreement.167 The panel then 
considered that whether the payments and access provided to Boeing could be properly 
characterized as purchases of services depended on whether the R&D that Boeing was required to 
conduct was principally for i ts own benefit and use, or whether it was principally for the benefit and 
                                                
155 Panel Report, para. 8.298 (quoting Original Panel Report , paras. 7.1140 -7.1142 , in turn quoting 
United States Code , Title 10, Section  2358; USDOD  Grant and Agreement Regulations, United States Code of 
Federal Regulations , Title 32, Subchapter C, Part 21).  
156 Panel Report, para. 8.298 .b (quoting Original Panel Report, para. 7.1142 , in turn referring to 
United  States Code of Federal Regulations , Title 32, Section 21.615).  (emphasis omitted by the Panel)  
157 Panel Re port, para. 8.298 (quoting Original Panel Report , para. 7.1149 ; referring to Appellate Body 
Report, US – Large Civil Aircraft (2nd complaint ), paras. 605 -606).  
158 Panel Report, para. 8.298 .c (quoting Original  Panel Report, para. 7.1142 , in turn referring to  
United  States Code of Federal Regulations , Title 32, Section 21.670).  
159 Panel Report, para. 8.298 (quoting Original Panel Report, para. 7.1142,  in turn quoting United States 
Code of Federal Regulations , Title 32, Section 21.670 ; referring to Section 22.205 of the  USDOD  Grant and 
Agreement Regulations).  
160 Panel Report, para. 8.300.  
161 Panel Report, para. 8.301 (quoting United States' first written submission to the Panel, para. 316).  
Fourteen of the 23 original and three of the "additional" RDT&E progra mme elements challenged by the 
European Union are S&T  or "general aircraft " programme  elements.  
162 Panel Report, para. 8.302. Nine of the 23 original RDT&E programme elements challenged by the 
European Union are systems acquisition or "military aircraft"  programme elements . 
163 The European Communities based its assessment of whether R&D conducted by Boeing under any of 
the RDT&E program me elements was likely to give rise to technologies with civil applications on an expert 
evaluation of the RDT&E program me budgets. ( 2006 CRA Report (Panel Exhibit  EU-29), para. 1.1)  
164 Original Panel Report , paras. 7 .1116 -7.1117.  
165 Original Panel Report , para s. 7.1111, 7.1116 , and 7.1596 . 
166 Original Panel Report, paras. 7.944 -7.945.  
167 Original Panel Report, para. 7.970.  WT/DS353/AB/RW  
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 use of the US Government (or unrelated third parties).168 Ultimately, the panel found that the work 
that Boeing performed under the USDOD procurement contracts was principally for the benefit of 
USDOD, it was therefore to be characterized as a "purchase of services", and the payments and 
access to facilities provided to Boeing under these contracts were therefore not financial 
contributions within the meaning of Article  1.1(a)(1).169 The panel also found that the work Boeing 
performed under the USDOD assistance instruments and the NASA aeronautics R&D measures was 
principally for the benefit of Boeing, and, accordingly , that the payments and access provided to 
Boeing under these instrument s constituted financial contributions pursuant to Article 1.1(a)(1)(i) 
and (iii).170 
5.44.   On appeal, the Appellate Body found fault with the original panel's analytical approach of 
interpreting  Article  1.1(a)(1)  of the SCM Agreement based on the assumption that t he NASA 
procurement contracts and the USDOD assistance instruments are purchases of services, and only 
thereafter examining the proper characterization of these measures.171 The Appellate  Body observed 
that, in assessing the applicability of specific provisions of the covered agreements to a measure 
properly before it, a panel must "identify all relevant characteristics of the measure, and recognize 
which features are the most central to that measure itself, and which are to be accorded the most 
significance for purposes of characterizing the relevant {measure}" .172 This will allow the panel to  
determine the discipline(s) to which the measure is subject under the covered agreements. The 
Appellate  Body also noted that the orig inal panel had not arrived at a definitive characterization of 
the NASA procurement contracts and the USDOD assistance instruments.173 Instead, the panel had 
arrived at the conclusion that the payments and other support are financial contributions by 
exclusi on, proceeding mechanically from its conclusion that the NASA procurement contracts and 
the USDOD assistance instruments were not purchases of services.174 Furthermore, the 
Appellate  Body observed that the European  Communities had presented arguments that th e 
payments under the contracts fall within  the scope of Article  1.1(a)(1)(i)  because they are grants, a 
category of financial contributions expressly mentioned in that provision. In this light, it was not 
clear to the Appellate  Body why the original panel had started from the premise that it was required 
to determine whether purchases of services, a category that is not mentioned in that provision, are 
excluded from its scope.175 The Appellate  Body pointed out that the original panel should first have 
examine d relevant characteristics  of the NASA procurement contracts and the USDOD assistance 
instruments, and then considered whether, in light of a proper interpretation of Article  1.1(a)(1), 
these measures  fall within the scope of that provision.176 
5.45.   Finally, the Appellate  Body expressed concerns about the original panel's test for determining 
whether the measures could properly be characterized as purchases of services. For the 
Appellate  Body, the legal basis of the original panel's test did not appear to be groun ded in the terms 
of Article  1.1(a)(1) of the SCM  Agreement. Moreover, the Appellate Body considered that requiring 
an inquiry into the degree to which either party (Boeing or the government/unrelated third parties) 
derives a disproportionate "benefit" from  the transaction risked conflating the financial contribution 
and benefit elements of a subsidy analysis.177 
5.46.   Regarding the characteristics of the NASA procurement contracts, the Appellate  Body found 
that the transactions between Boeing and NASA comprise a nu mber of interlinked elements and are 
collaborative in nature, and that these collaborative arrangements are akin to a species of joint 
venture.178 The Appellate Body explained that these transactions involve a provision of funds from 
NASA and a pooling of no n-monetary resources (such as access to equipment, facilities, and 
employees) on the input side , while involv ing some sharing of the fruits of the research on the output 
side.179 Concerning the USDOD assistance instruments, the Appellate Body held that the t ransactions 
                                                
168 Origin al Panel Report , paras. 7.978 and 7.1137.  
169 Original Panel Report , para. 7.1171.  
170 Original Panel Report , paras. 7.1027 and 7.1171.  
171 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , para.  585. 
172 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , para.  586 (quoting Appellate  Body 
Reports, China – Auto Parts , para.  171).  (emphasis  original ) 
173 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , para.  587. 
174 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , para.  587. 
175 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , para.  588. 
176 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , para.  589. 
177 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , para.  591. 
178 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , para.  597. 
179 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , para s. 594-596. WT/DS353/AB/RW  
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 under these instruments, similar to those under the NASA procurement contracts, are composite 
and collaborative in nature, and that these features resemble a joint venture arrangement.180 The 
Appellate Body concluded that the transactions under t he NASA procurement contracts and under 
the USDOD assistance instruments are akin to a species of joint venture.181 
5.47.   In analysing the types of financial contributions covered by Article  1.1(a)(1) of the 
SCM Agreement, the Appellate Body recalled that the pane l had interpreted the omission of the term 
"services" from the second sub -clause of subparagraph (iii)  as an indication that the drafters of the 
SCM Agreement did not intend measures constituting government purchases of services to be 
covered as financial contributions under Article  1.1(a)(1)(i).182 Since this interpretative issue was 
not relevant for the purpose of resolving the dispute before the Appellate  Body, it declared moot the 
original panel's interpretation that "transactions properly characterized as purchases of services are 
excluded from the scope of Article  1.1(a)(1)(i) of the SCM  Agreement."183 The Appellate Body also 
declared moot the original panel's finding that the USDOD procurement contracts are properly 
characterized as "purcha ses of services" and thus are not financial contributions under 
Article  1.1(a)(1).184 The Appellate Body did not complete the legal analysis regarding the USDOD 
procurement contracts.  
5.48.   As to whether the NASA procurement contracts and the USDOD assistance instruments fall 
under one of the subparagraphs of Article  1.1(a)(1) of the SCM  Agreement, the  Appellate Body 
observed that these joint venture arrangements between NASA/USDOD and Boeing  have 
characteristics analogous to equity infusions, one of the examples of financial contributions included 
in Article  1.1(a)(1)(i).185 According to the Appellate Body, this commonality  indicated that the NASA 
procurement contracts and the USDOD assistance instru ments fall within the concept of "direct 
transfers of funds" in Article  1.1(a)(1)(i).  Thus, the Appellate Body held that payments provided by 
NASA and USDOD to Boeing  to undertake the research constitute a "direct transfer of funds " within 
the meaning of A rticle 1.1(a)(1)(i).186 In addition, the Appellate  Body found that, because Boeing 
was given access to NASA facilities, equipment, and employees and to USDOD facilities, these 
contributions constitute "the provision of goods or services " within the meaning o f 
Article  1.1(a)(1)(iii) .187 
5.2.1   The Panel's findings under Article 1.1(a)(1) of the SCM  Agreement  
5.49.   The European  Union's claim that the Panel failed to make an objective assessment of the 
matter in its financial contribution analysis under Article 1.1(a)(1) of th e SCM  Agreement is focused 
on certain arguments and evidence, which, in the European  Union's view, the Panel disregarded or 
failed to sufficiently engage with. Specifically, the European Union argues that the Panel failed to 
engage with its evidence and ar guments related to: (i) Boeing's contribution of its background IP, 
including that resulting from non -reimbursed independent research and development (IR&D) 
spending, to the joint venture between USDOD and Boeing; (ii) Boeing's ability to share in the 
rewards of the R&D conducted under the USDOD procurement contracts; and (iii) the nature and 
purpose of the USDOD procurement contracts.188 
5.50.   At the outset of our analysis, we note that in assessing whether the USDOD procurement 
contracts constitute financial cont ributions, the Panel examined "the relevant characteristics of the 
DOD procurement contracts with a view to determining whether, like the NASA procurement 
contracts and DOD assistance instruments before the Appellate Body {in the original proceedings}, 
the relationship between DOD and Boeing in the particular context is one of partnership, involving 
collaboration in pursuit of a common goal for the mutual benefit of DOD and Boeing".189 Ultimately, 
                                                
180 Appellate Body  Report, US – Large Civil Aircraft (2nd complaint) , para s. 607-609. 
181 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , para.  611. 
182 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , para . 620 (referring to Original Panel 
Report, paras. 7.955 and 7.969 -7.970).  
183 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , para.  620 (quoting Original Panel 
Report, para. 7.970). (emphasis omitted by the Appellate Body)  
184 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , fn 1298 to para. 620. 
185 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , para s. 622-624. 
186 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , para.  624. 
187 Appellate Body Report, US – Large Civil Air craft (2nd complaint) , para.  624. 
188 European Union's appellant's submission, para. 51.  
189 Panel Report, para. 8.359.  WT/DS353/AB/RW  
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 the Panel found itself "unable to characterize the DOD procure ment contracts in a similar manner" 
to the way in which the Appellate Body characterized the NASA procurement contracts and the 
USDOD assistance instruments, namely as joint venture arrangements between NASA/USDOD and 
Boeing with characteristics analogous to equity infusions.190 
5.51.   We note that the Panel's analysis was focused on examining the features of the USDOD 
procurement contracts by reference to the characteristics of instruments found to constitute financial 
contributions in the original proceedings rath er than by reference to the legal standard for assessing 
the existence of financial contribution in Article  1.1(a)(1)(i) and (iii). In this respect, we recall the 
Appellate Body's observation that a panel's analysis of the relevant characteristics of the m easure 
should be undertaken for the purpose of properly determining the discipline(s) to which the measure 
is subject under the covered agreements.191 In our view, therefore, the examination of the relevant 
characteristics of a measure and the consideration of whether a measure with such characteristics 
falls within the scope of Article  1.1(a)(1) must form part of one holistic assessment, in light of the 
aim to determine properly the applicability of the relevant provisions of the covered agreements 
with resp ect to that measure. Thus, the Panel in this case was tasked with analysing the key features 
of the USDOD procurement contracts from the perspective of the elements set out in both 
subparagraphs  (i) and (iii) of Article  1.1(a)(1), in order to ascertain und er which category of financial 
contributions these measures fell, or whether they fell outside of the scope of Article  1.1(a)(1) 
altogether.  
5.52.   We recognize that the focus of the Panel's analysis was shaped by the parties' arguments192 
and the approach of the A ppellate Body in the original proceedings.193 In its analysis of the relevant 
characteristics of the NASA procurement contracts and the USDOD assistance instruments in the 
original proceedings, the Appellate Body relied on the characteristics of the categori es of measures 
listed in the subparagraphs of Article  1.1(a)(1), in particular (i) and (iii).194 While it was not 
inappropriate for the Panel to begin its analysis by considering the relevant characteristics of the 
USDOD procurement contracts from the perspe ctive of whether they resemble collaborative 
arrangements, in a second step the Panel should have addressed expressly the legal question of 
whether measures with characteristics such as the USDOD procurement contracts fall within the 
scope of one of the ca tegories of Article  1.1(a)(1) of the SCM  Agreement.  
5.53.   We further note that, having found that the USDOD procurement contracts are most 
appropriately characterized as purchases of services, the Panel found it unnecessary to address the 
interpretative issue of  whether such transactions fall within the scope of Article  1.1(a)(1) of the 
SCM Agreement, given its ultimate conclusion that the European Union had failed to establish that 
the USDOD procurement contracts confer a benefit within the meaning of Article  1.1(b).195 We 
observe in this regard that, pursuant to Article  1.1, a subsidy shall be deemed to exist if there is a 
financial contribution and "a benefit is thereby  conferred."196 Furthermore, whether a "benefit" has 
been conferred is determined by reference to  the trade -distorting potential of the "financial 
contribution" and can be identified by assessing whether the recipient has received a "financial 
                                                
190 Panel Report, para. 8.376 (referring to  Appellate Body Report, US – Large Civil Aircraft 
(2nd complaint ), para. 624 ). The Appellate Body concluded that the payments that were part of the joint 
venture arrangement constituted a direct transfer of funds within the meaning of Article  1.1(a)(1)(i)  of the 
SCM Agreement and that the provision of facilities, equipment, and empl oyees constituted a provision of goods 
or services within the meaning of Article 1.1(a)(1)(iii).  
191 Appellate Body Report, US – Large Civil Aircraft (2nd complaint ), para. 586 (quoting Appellate  Body 
Reports, China – Auto Parts , para.  171).  
192 The European U nion submitted that " the DOD procurement contracts share all of the relevant 
characteristics of the pre -2007 NASA procurement contracts and DOD assistance instruments that led the 
Appellate Body to conclude that those instruments were collaborative researc h arrangements 'akin to a species 
of joint venture', which involved financial contributions to Boeing", and the United States responded that "a 
proper consideration of all of the characteristics of the DOD procurement contracts in fact leads to the 
conclus ion that some are properly characterized as purchases of services and outside the scope of 
Article  1.1(a)(1) ." (Panel Report, para. 8.356)  
193 In the original proceedings, the Appellate Body stated that the panel should have undertaken a 
two-step approach by  first examining the measures to determine their relevant characteristics, and then 
considering whether these measures fell within the scope of Article  1.1(a)(1). ( Appellate Body Report, US – 
Large Civil Aircraft (2nd complaint ), para. 589 ) 
194 See Appellate  Body Report, US – Large Civil Aircraft (2nd complaint ), paras. 597, 609, and 624 . 
195 Panel Report, paras. 8.378  and 8.437 . 
196 Emphasis added.  WT/DS353/AB/RW  
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 contribution" on terms more favourable than those available in the market.197 Thus, a finding with 
respect to t he specific type of financial contribution under Article  1.1(a)(1) may be necessary in 
order to conduct a proper analysis of benefit as it relates to that category of financial contribution.198 
5.54.   With these considerations in mind, we now turn to assess the que stion of whether the Panel 
failed to make an objective assessment of the matter before it under Article  11 of the DSU by 
characterizing the payments and access to USDOD facilities, equipment, and employees under the 
USDOD procurement contracts as "purchase s of services".  
5.2.1.1   The Panel's analysis regarding Boeing's contribution to a joint venture between 
USDOD and Boeing  
5.55.   The European  Union takes issue with the Panel's finding that the privately funded and 
non-reimbursed IR&D expenditures incurred by Boeing in de veloping its background IP cannot be 
considered a contribution of "financial resources" to a "joint undertaking" with USDOD.199 According 
to the European Union, "{t}he Panel correctly noted that these expenditures are internal costs 
Boeing incurs  in order to  maintain the technological competence and expertise necessary to perform 
the obligations in the R&D procurement contracts."200 However, the Panel then concluded that "in 
making use of its own intellectual property and know -how in order to carry out the R&D work for 
DOD, Boeing can{not} be said to be 'contributing' its intellectual property to a joint venture with 
DOD."201 The Europ ean Union considers that, in arriving at this conclusion, the Panel failed to engage 
with relevant evidence, insofar as the procurement contracts "provide for partial reimbursement of 
IR&D expenditures by DOD"202, and "Boeing's civil technologies (funded wit h Boeing's own 
resources) may have potential military applications, such that civil to military flows can benefit DOD 
as well."203 Thus, "the non -reimbursed portion of Boeing's DOD -related IR&D expenditures should 
be seen as Boeing's contribution to the join t venture."204 
5.56.   The United States responds that the European Union's argument is contrary to the original 
panel's finding that "U.S. law requires Boeing to allocate a share of the costs of any IR&D{} projects 
benefiting both its military segment (IDS) and its  commercial segment (Boeing's LCA division) to 
each of those segments on a ' pro rata ' basis."205 Thus, "to the extent that any Boeing IR&D activity 
is 'DoD -related,' Boeing allocates it to the relevant procurement contracts, and DoD reimburses 
Boeing's expen ditures for that activity through the contracts."206 The United  States also alleges that 
the European Union "cite{s} no evidence that Boeing 'contributed' IR&D expenditures to its work 
under DoD procurement contracts".207 
5.57.   We note that, before the Panel, the Eu ropean Union clarified that it does not argue that 
Boeing's non -reimbursed, internal IR&D expenditures are a contribution of financial resources under 
the USDOD procurement contracts in the same way as Boeing's contribution of financial resources 
                                                
197 Appellate Body Report,  Canada – Aircraft , para.  157. 
198 We note that, in the particular circumstances of this case, the Panel based its benefit analysis on the 
fact that, since the USDOD procurement contracts were characterized as "principally and predominantly 
involving purchases of R&D services by DOD from B oeing", the determination of whether a benefit was 
conferred on Boeing had to involve,  consistent with Article  14(d) of the SCM  Agreement, "an assessment of 
whether Boeing was paid adequate remuneration for performing the R&D work". ( Panel Report, para. 8. 418) 
Therefore, the Panel appears to have taken  into account the specific category of financial contribution that it 
considered the USDOD procurement contracts would potentially fall within , namely the provision of goods or 
services or purchase of goods wi thin the meaning of Articles  1.1(a)(1)(iii) and 14(d) . 
199 European  Union's appellant's submission, para. 52 (quoting Panel Report, para. 8.363).  
200 European  Union's appellant's submission, para. 52  (referring to Panel Report, para.  8.363) . 
(emphasis original ) 
201 European  Union's appellant's submission, para. 52  (quoting Panel Report, para.  8.363) . 
202 European  Union's appellant's submission, para. 53 . (emphasis original)  
203 European  Union's appellant's submission, para. 53 (referring to United  States' first written 
submission to the Panel, paras. 464 -466).  
204 European  Union's appellant's submission, para. 53  (referring to European Union's second written 
submission to the Pane l, paras. 446 and 455; response to Panel question No. 16, para. 113 ). 
205 United States' appellee's submission, para. 36 (quoting Original Panel Report , para.  7.1332).  
(emphasis original)  
206 United States' appellee's submission, para. 36 ( referring to  Origina l Panel Report , para.  7.1334 ). 
207 United States' appellee's submission, para. 37.  WT/DS353/AB/RW  
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 under the  USDOD assistance instruments .208 Rather, according to the European Union, in the case 
of the USDOD procurement contracts , there is a time lag between when Boeing funds its own IR&D 
and when it uses the background IP created from that IR&D as its "contributi on" to the "joint 
undertaking" pursuant to a particular procurement contract.209 We therefore understand the 
European Union to argue that Boeing contributes to a joint venture with USDOD its own general 
professional expertise in the form of background IP tha t Boeing has accumulated over time, either 
in the context of research pursuant to governmental contracts, or independently through its own 
internal R&D expenditures.210 
5.58.   Turning to the European  Union's contention that the Panel failed to engage with relevant 
evidence, namely with the fact that USDOD only partially reimburses Boeing for its independently 
conducted R&D, we recall the Appellate Body's observation in the original proceedings that one 
feature of the NASA procurement contracts and the USDOD assistan ce instruments that pointed to 
their collaborative nature was that both parties commit resources to the research project.211 
Specifically, under the NASA procurement contracts, both NASA and Boeing contributed their 
facilities, equipment, and employees, and,  under the USDOD assistance instruments, both USDOD 
and Boeing contributed financial resources to the research project.212 As we understand it, in the 
European  Union's view, to the extent that Boeing is only partially reimbursed for its own background 
IP und er the USDOD procurement contracts, the non -reimbursed investments constitute Boeing's 
contribution to a collaborative project that would be more akin to a species of joint venture, and 
thus relevant to an analysis of a financial contribution under subpara graph (i) of Article  1.1(a)(1) of 
the SCM  Agreement.  
5.59.   In this regard, the Panel observed that the non -reimbursed IR&D expenditures referred to by 
the European  Union are "internal costs that contractors like Boeing incur in order to maintain the 
technologica l competence and expertise that enable them to provide the R&D services for which they 
are contracted".213 The Panel reasoned that " {t}hese expenditures are not specified in the 
procurement contracts as contributions to be made by Boeing" and did not conside r that "Boeing's 
privately funded IR&D expenditures can be considered a contribution of 'financial resources' to a 
'joint undertaking' with DOD", or "that, in making use of its own intellectual property and know -how 
in order to carry out the R&D work for D OD, Boeing can be said to be 'contributing' its intellectual 
property to a joint venture with DOD".214 
5.60.   As we see it, rather than failing to engage with relevant evidence, the Panel disagreed with 
the European Union's argument. In particular, the Panel appear s to have viewed Boeing's use of its 
own background IP and know -how in the context of the USDOD procurement contracts as an element 
not characteristic of a collaborative arrangement. It is in this light that we understand the Panel's 
statements that the IR &D expenditures are not specified in the procurement contracts as 
contributions to be made by Boeing, and that Boeing cannot be said to be "contributing" financial 
resources or IP to a joint venture with USDOD.215 We further note that Boeing's use of private ly 
funded IR&D is qualitatively different from Boeing's participation under the USDOD assistance 
instruments, where the contracts themselves "commit{ted} Boeing to contribute financial 
resources", and therefore provided for "joint funding of the research p rojects".216 The USDOD 
assistance instruments are also different, insofar as in that case both parties commit non -monetary 
                                                
208 Panel Report, fn  1496 to para. 8.363 (referring to European Union's response to Panel question 
No. 16, para. 113 ). We recall the Appellate  Body's finding  in the original proceeding s that the USDOD 
assistance instruments commit Boeing to contribute financial resources to the project, although, in all cases, 
USDOD funds at least 50% of the costs. (Appellate  Body Report, US – Large Civil Aircraft (2nd complai nt), 
para. 605) 
209 Panel Report, fn 1496 to para. 8.363 (referring to European Union's response to Panel question 
No. 16, para. 113 ). 
210 At the oral hearing, the European Union confirmed this understanding of its claim.  
211 Appellate Body Report, US – Large Ci vil Aircraft (2nd complaint) , para s. 609 and 611. 
212 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , paras. 595 and 605.  
213 Panel Report, para. 8.363.  
214 Panel Report, para. 8.363.  
215 Panel Report, para. 8.363.  
216 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , para. 605.  WT/DS353/AB/RW  
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 resources (facilities, equipment, and employees) to the research project.217 Therefore, we do not 
see that the Panel failed to engage wit h relevant evidence.  
5.61.   The European Union also argues that the Panel failed to provide "reasoned and adequate 
explanations" to support its conclusions that Boeing's contribution of IR&D expenditures used to 
develop background IP does not constitute a contrib ution of resources to a collaborative project akin 
to a species of joint venture.218 Further, the European  Union submits that "the Panel failed to explain 
why Boeing's making use of its own background IP … in the course of performing the research funded 
under the DOD procurement contracts does not constitute a contribution of resources by Boeing to 
a joint venture."219 As we see it, the Panel did explain its rationale when stating that "{t}hese 
expenditures are internal costs that contractors like Boeing incur in order to maintain the 
technological competence and expertise that enable them to provide the R&D services for which they 
are contracted."220 In other words, as the United States points out, the Panel viewed Boeing's 
background IP and know -how as "threshol d qualifications" required in order for a company to be 
able to engage competently in aeronautics research for USDOD, and not as something that Boeing 
"conveys as part of the effort" under the procurement contracts themselves.221 We are therefore not 
convinc ed that the Panel failed to explain sufficiently its rationale for rejecting the European Union's 
argument.  
5.62.   In view of the above, we do not consider that the Panel failed to engage with relevant 
evidence, or failed to provide a reasoned and adequate explan ation, in reaching its conclusions 
regarding the question of whether Boeing's non -reimbursed IR&D expenditures can be considered 
as a contribution to a collaborative arrangement with USDOD.  
5.2.1.2   The Panel's analysis of whether Boeing shares with USDOD the rewar ds of the 
R&D it conducts under the USDOD procurement contracts  
5.63.   The European Union submits that, in arriving at the conclusion that USDOD and Boeing cannot 
be said to share the fruits of the research under the USDOD procurement contracts, as they do 
under the NASA procurement contracts and the USDOD assistance instruments, the Panel failed to 
base its findings in evidence and failed to engage with the European Union's arguments and evidence 
that: (i) export controls, including the International Traffic in A rms Regulations (ITAR), have not 
prevented Boeing from using technologies developed under the USDOD procurement contracts for 
its own commercial purposes, and (ii) Boeing sells military aircraft to foreign governments.222 
5.64.   The European  Union's first line of a rgument concerns the Panel's conclusions on the question 
of whether export controls, including the ITAR, have prevented Boeing from using technologies 
developed under the USDOD procurement contracts for commercial purposes. The European Union 
points to a p ress report it provided to the Panel stating that Boeing has benefited from 
ITAR-controlled data in designing the 787 by "recreat{ing}" that data.223 The European Union 
explains that this evidence confirms that "Boeing finds ways to utilize military technology for its LCA, 
regardless of ITAR controls" and "is able to benefit from critical know -how and technology derived 
from DOD -supported R&D".224 Moreov er, the European Union relies on the conclusion of the original 
panel that the ITAR does not make it effectively impossible for Boeing to utilize the R&D performed 
under the USDOD R&D instruments towards LCA.225 Finally, the European  Union submits that it 
"provided extensive evidence that patents arising from R&D performed pursuant to DOD 
procurement contracts have explicit applications to commercial aircraft (as Boeing, itself, explained 
                                                
217 In this regard the Panel found  that "there {was} nothing before {the Panel} to suggest that the 
provision of facilities, equipment, and employees is anything but marginal." (Panel Report, para. 8.361)  
218 European  Union's appellant's submission, paras. 54 -55. 
219 European Union's appellant's submission, para. 55. (emphasis original)  
220 Panel Report, para. 8.363.  
221 United  States' appellee's submission, para. 38.  
222 European  Union's appellant's submission, paras. 57 -58 (referring to Panel Report, 
paras.  8.367 -8.368 and 8.422; second written submission to th e Panel, paras. 203 and 408;  comment s on 
United  States' response to Panel question No. 67, para. 41).  
223 European  Union's appellant's submissio n, paras. 59 -60 (quoting European  Union's second written 
submission to the Panel, para. 408,  in turn quoting  D. Gates, "How B -2 data wound up in 787 program", 
Seattle Times , 22 January 2006  (Panel Exhibit EU -333)). 
224 European  Union's appellant's submission , para. 60 . 
225 European  Union's appellant's submission, para. 61 (referring to Appellate  Body Report, US – Large 
Civil Aircraft (2nd complaint) , para. 579 , in turn referring to Original Panel Report, para.  7.1160).  WT/DS353/AB/RW  
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 in its own patent applications)" and that these registered patents are publicly available.226 For the 
European  Union, "contrary to the Panel's findings, the evidence demonstrates that technologies 
developed by Boeing employees in the course of conducting R&D under the DOD procurement 
contracts, for which Boeing owns registered patents, are not subject to export controls or 
classification at all, such that Boeing (and only Boeing) is freely able to use these technologies for 
its LCA."227 
5.65.   For its part, the United States contends that the Panel's conclusion that Boeing's ability to 
exploit commercially the results of research conducted under the USDOD procurement contracts is 
"restricted" or "limited" by US export controls and that the classification of national security 
information is consistent with the original panel's findings wit h respect to US export controls, since 
the Panel's conclusion "implicitly recogniz{es} that such exploitation is not completely 
impossible".228 According to the United States, "{i}t is, in fact, quite rare for Boeing's research under 
contract with DoD to res ult in a patentable invention", and the European Union's examples of 
situations in which the ITAR and classification rules did not preclude Boeing's public disclosure of the 
results of research under the USDOD procurement contracts are consistent with the Panel's 
conclusion that such use is quite restricted and limited.229 
5.66.   We note that the European Union's argument relates to the Appellate Body's reasoning in the 
original proceedings that one feature of the NASA procurement contracts and the USDOD assistance 
instruments, which characterized them as collaborative arrangements, was that, from the 
perspective of the outputs, "the fruits of the research are shared" between Boeing and 
NASA/USDOD.230 This conclusion was drawn by the Appellate  Body on the basis of the distribution 
of IP rights and rights to data between Boeing and NASA/USDOD, resulting from the research 
performed under those contracts and instruments, namely the fact that Boeing obtained title to its 
inventions and rights to data, and NASA/USDOD receive d a royalty -free government -use licence.231 
5.67.   In these compliance proceedings, the Panel found that, although, by operation of US law, 
there is a "sharing" of IP rights resulting from Boeing's performance of R&D work under all 
US Government contracts, "the 'ba lance' of that sharing is substantially more in DOD's favour and 
less in Boeing's favour than under the DOD assistance instruments, or NASA procurement 
contracts."232 The Panel considered that "{t}his different 'balance' of allocation of intellectual 
propert y rights that results from the performance of work under a DOD procurement contract" also 
affected its assessment of whether USDOD and Boeing can be said to share in the "risks and rewards" 
of the commissioned R&D.233 Specifically, the Panel recognized that "Boeing's ownership of the 
patents to inventions made by its employees in the course of work under a DOD procurement 
contract does give Boeing the legal right to exploit the military technologies in question for 
commercial purposes" and that "some of the m ilitary technologies may also have potential civil 
applications."234 At the same time, the Panel considered that "Boeing's practical ability to exploit 
those technologies for civil applications {was} limited by legal restrictions on the use of information 
and technologies developed under the DOD procurement contracts outside the military context."235 
5.68.   With regard to whether the Panel's conclusion is contradicted by the original panel's findings, 
we note the original panel's conclusion that the United States had failed to substantiate its assertion 
that the ITAR made it "effectively impossible for Boeing to utilize any of the R&D performed under 
DOD R&D contracts and agreements towards LCA".236 Specifically, while the original panel 
"accept{ed} the United States' as sertions that the ITAR restrict Boeing's ability to use certain R&D 
                                                
226 European  Union's appellant's submission,  para. 63.  
227 European  Union's appellant's submission, para. 63.  
228 United  States' appellee's submission, para. 43.  
229 United  States' appellee's submission, para. 44.  
230 Appellate Body Report, US – Large Civil Aircraft (2nd complaint ), para s. 596 and 611 . 
231 In the case of the NASA procurement contracts, the US Government receive d an "unlimited rights" 
licence to use, for government purposes, any data produced by the contractor in the course of performing 
research funded by NASA. In the case of the USDOD assis tance instruments, the US Government obtained  only 
"limited rights" over data, because Boeing co -funds the research under these instruments. ( Appellate Body 
Report, US – Large Civil Aircraft (2nd complaint ), paras. 596 and 608 ) 
232 Panel Report, para. 8.367.  
233 Panel Report, para. 8.368.  
234 Panel Report , paras. 8.367 -8.368 . 
235 Panel Report, para. 8.368.  
236 Original Panel Report, para.  7.1160.  WT/DS353/AB/RW  
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 performed for DOD towards its civil aircraft", it also found that the United  States "ha{d} failed to 
explain how its assertions regarding the ITAR can be reconciled with the fact that some  of the R&D 
funded by DOD – including R&D performed by Boeing under assistance instruments entered into 
under the ManTech and DUS&T Programs, which were subject to the ITAR – had the explicit objective  
of being applied towards civil aircraft ".237 
5.69.   The original panel's finding does not directly contradict the Panel's conclusion that 
"{a}lthough some of the military technologies may also have potential civil applications, Boeing's 
practical ability to exploit those technologies for civil applications is l imited by legal restrictions on 
the use of information and technologies developed under the DOD procurement contracts outside 
the military context."238 Contrary to what the European Union argues, the Panel did not find that 
"export controls prevent Boeing fr om applying R&D conducted pursuant to DOD procurement 
contracts"239, but recognized that Boeing has some practical ability, albeit restricted, to use military 
technologies for civil purposes.  
5.70.   Next, we turn to the two specific categories of arguments and evid ence referred to by the 
European  Union, relating to how Boeing has, in practice, benefited from ITAR -controlled data by 
re-creating it for purposes of designing the 787, and to the examples of patents arising from R&D 
performed pursuant to the USDOD procur ement contracts.240 We note that, in the context of its 
financial contribution analysis, the Panel stated that "Boeing's practical ability to exploit {the military 
technologies developed under the USDOD procurement contracts} for civil applications is limite d by 
legal restrictions."241 The Panel did not provide a basis for this conclusion in its financial contribution 
assessment. Nor did the Panel refer in this regard to the evidence presented by the European Union 
in order to demonstrate that Boeing had made u se of some ITAR -controlled data and had patented 
technology developed pursuant to the USDOD procurement contracts. We observe that the Panel 
referred to the relevant section of its Report setting out the principal legal restrictions on the 
dissemination of  military technologies and data, including the ITAR.242 However, this section does 
not address the question of how such legal restrictions apply in the context of either the USDOD 
procurement contracts, or the NASA procurement contracts and the USDOD assista nce instruments.  
5.71.   The Panel thus failed to engage in an analysis of the impact on Boeing of the legal restrictions 
on the use of military technologies on the basis of the European  Union's evidence. Specifically, the 
Panel did not explain how the legal restr ictions on the use of military technology under US law relate 
to the European Union's assertion that at least some part of the research under the USDOD 
procurement contracts has translated into USDOD -funded patents.  
5.72.   In support of its  conclusion that Boeing 's legal right to exploit military technologies developed 
under the USDOD procurement contracts for commercial purposes "is in practice restricted", the 
Panel also referred to its analysis of benefit.243 In this analysis, the Panel reiterated that "Boeing's 
practical ability to exploit any military technologies for commercial purposes outside the military 
context is circumscribed by U.S. legal restrictions on the use of military technologies and data."244 
In that context, the Panel then explained what it consid ered to be the difference between the USDOD 
assistance instruments and the USDOD procurement contracts.245 The Panel reasoned that the "D OD 
assistance instruments by definition involve 'assistance' in the sense of a transfer of a thing of value 
to a recipien t."246 The Panel therefore considered it " reasonable to assume  that the nature of R&D 
undertaken in such a collaborative context would be expected  by the parties to yield outcomes that 
Boeing would have the practical ability to commercially exploit".247 Otherwise, according to the Panel, 
                                                
237 Original Panel Report, para.  7.1160. ( emphasis original ) 
238 Panel Report, para. 8.368.  
239 European Union's appellant's sub mission, para. 61. (emphasis original)  
240 See European Union's appellant's submission, paras. 59 -60 and 63 -64. 
241 Panel Report, para. 8.368.  
242 See Panel Report, fn 1504 to para. 8.368 (referring to ibid., section 8.2.3.2.5).  
243 Panel Report, para. 8.36 7. The Panel observed that  "Boeing's ownership of the patents to inventions 
made by its employees in the course of work under a DOD procurement contract does give Boeing the legal 
right to exploit the military technologies in question for commercial purposes. How ever, as we explain in 
paragraphs  8.422 to 8.425 {i.e. the Panel's benefit analysis} the particular commercial context means that this 
legal right is in practice restricted ." (Ibid.)  
244 Panel Report, para. 8.422.  
245 Panel Report, para. 8.423.  
246 Panel Report, para. 8.423 . 
247 Panel Report, para. 8.424. (emphasis added)  WT/DS353/AB/RW  
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 "a commercial actor like Boeing would be unlikely to contribute to the costs of performing the R&D" 
and there would be no legal basis for the selection of "an assistance instrument as the appropriate 
instrument for the t ransaction with Boeing ".248 In our view, this conclusion is based on the label 
given to the relevant legal instruments under municipal law rather than on a proper analysis of the 
characteristics of the instrument. However, such a label cannot be dispositive,  and the analysis 
cannot be limited to consideration of the label.249 
5.73.   The Panel further observed that " the fact that many of the assistance instruments were funded 
through program elements with explicitly dual -use objectives would tend to support this 
conclu sion."250 We note, however, that only two of the RDT&E programme elements funding the 
USDOD assistance instruments challenged by the European Union had explicit dual -use objectives.251 
Furthermore, the existence of explicit dual -use objectives in some of the U SDOD assistance 
instruments, and not in others, was not among the relevant considerations taken into account by 
the Appellate  Body in finding that these instruments constitute collaborative arrangements with 
characteristics analogous to equity infusions. T herefore , the fact that the USDOD procurement 
contracts do not fund research with explicit dual -use objectives does not determine the extent of 
limitations on Boeing's ability to exploit USDOD -funded research for civil applications.  
5.74.   Finally, the Panel cont rasted the USDOD assistance instruments with the USDOD procurement 
contracts, as follows:  
DOD and Boeing engage with each other on a different footing in the context of the DOD 
procurement contracts. As we have explained above, in this context, the governm ent 
use licence would, as a practical matter, occupy the field of possibilities for commercial 
exploitation of the military technologies, and Boeing's practical ability to commercially 
exploit its patented technologies, whether in a military or non -militar y context, is 
consequently more limited.252 
5.75.   We note that this is the very reason the Panel provided in support of its conclusion that 
"Boeing's practical ability to commercially exploit patents that it owns as a result of performing R&D 
work for DOD, and the  practical consequences of the government use licence granted to DOD, differ 
in the context of DOD assistance instruments and DOD procurement contracts."253 In other words, 
the Panel considered that the differences between these two types of legal instrument s provided 
support for the proposition that Boeing's practical ability to exploit commercially R&D and patents 
from the USDOD procurement contracts is more limited than its ability to exploit R&D and patents 
from the USDOD assistance instruments. However, the Panel's observation relating to the reasons 
for differences between the USDOD procurement contracts and the USDOD assistance instruments 
was itself based on the underlying contention that Boeing's practical ability to exploit commercially 
R&D stemming from the USDOD procurement contracts is limited. The Panel's reasoning appears 
somewhat circular and therefore does not provide sufficient explanation of the difference between 
Boeing's practical ability to exploit R&D and patents granted in the context of  the USDOD 
procurement contracts and the USDOD assistance instruments.  
5.76.   In this respect, we observe that both the USDOD procurement contracts and the USDOD 
assistance instruments concern research primarily of a military nature that, however, has been, or 
at least has the potential of being, exploited for civil purposes in certain cases. Thus, the outcomes 
of the research under both categories of legal instruments could be expected to be covered under 
the ITAR thus leading to restrictions on Boeing's ability to use this research for civil purposes. In this 
light, it remains unclear on what basis the Panel concluded that Boeing's practical ability to exploit 
commercially its patented technologies in a non -military context under the USDOD procurement 
contracts w as "more limited" than that under the USDOD assistance instruments.254 In particular, 
                                                
248 Panel Report, para. 8.424.  
249 Appellate Body Report, US – Large Civil Aircraft (2nd complaint ), para.  593. 
250 Panel Report, para. 8.424. In defining the concept of "dual -use", the Panel similarly observed that 
the "DOD assistance instruments and procurement contracts fund R&D work to produce military technologies 
for military purposes, with the exception of DOD assistance instruments funded under RDT&E program 
elements that have the explicit  objective of developing dual -use technologies. " (Panel Report, para. 8.341 ) 
251 See Panel Report, para. 8.346.  
252 Panel Report, para. 8.425.  
253 Panel Report, para. 8.423.  
254 See Panel Report, para. 8.425.  WT/DS353/AB/RW  
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 the Panel did not engage with the European Union's evidence that patents arising from R&D 
performed pursuant to certain USDOD procurement contracts have explicit applicatio ns to 
commercial aircraft, as evidenced by registered patents and examples of how Boeing has in practice 
benefited from ITAR -controlled data.255 Moreover, the Panel failed to address the question of whether 
Boeing's use of USDOD -funded research under the USD OD procurement contracts, albeit more 
limited than the use of such research under the USDOD assistance instruments, may result in 
"sharing" of the fruits of the research and entail a relationship of collaboration between USDOD and 
Boeing.  
5.77.   We observe that t he United  States presented arguments and evidence that the 
European  Union's examples of situations in which the ITAR did not preclude Boeing's use of research 
conducted under the USDOD procurement contracts only confirm that Boeing quite rarely benefits 
from USDOD -related research.256 The United  States argued that "fewer than 1 in 100 DoD contracts 
results in a patentable invention that the EU considers worth highlighting" and "patents arising as a 
result of work under DoD contracts are not a significant part  of Boeing's intellectual property 
portfolio."257 Faced with such conflicting propositions, the Panel should have further explored the 
matter and provided a reasoned explanation for rejecting the European Union's argument relating 
to the sharing of the fruit s of the research under the USDOD procurement contracts.  
5.78.   In light of the above, we consider that the Panel failed to assess properly the European  Union's 
evidence relating to the actual use of ITAR-controlled data and technology developed pursuant to 
the U SDOD procurement contracts. Furthermore, the Panel did not provide a reasoned and adequate 
explanation for its conclusion that Boeing's practical ability to exploit military technologies developed 
under the USDOD procurement contracts for civil purposes is  more limited than under the USDOD 
assistance instruments.  
5.79.   The European  Union's second line of argument concerns the Panel's conclusion as to Boeing's 
sales of military aircraft to foreign governments. The European Union contends that "the Panel did 
not ci te to a single piece of evidence in support of its assertion that 'the rewards of the successful 
outcome of the research are primarily and in practical terms captured by the government use licence, 
owing to the fact that the technologies in question are mi litary and DOD is Boeing's only customer 
for such technologies '."258 The European  Union refers to evidence demonstrating that "{w}hile the 
United States does have the largest defence budget in the world, … the combined 2013 defence 
budgets of the next 15 hig hest-spenders is more than that of the United  States."259 The 
European  Union further refers to a news article, stating that "{i}nternational sales at Boeing's (BA) 
defense  division made up 24 percent of the company's $33 billion in defense revenue last year,  up 
from 7 percent in 2004."260 
5.80.   The United States responds that the evidence referred to by the European Union does not 
indicate whether Boeing made sales to any of the purchasers of military equipment listed there. 
Furthermore, the United States contends th at "as Boeing's defense division also sells satellites and 
commercial satellite launch vehicles, these data do not support any firm conclusion about Boeing's  
sales of military  equipment to foreign governments."261 Moreover, according to the United  States 
                                                
255 European  Union's appellant's submission, para.  63. 
256 United States' appellee's submission, para. 44 (referring to United  States' first written submission to 
the Panel, paras. 372 and 377).  
257 United  States' first written submission to the Panel, paras. 372 and 377.  
258 European  Union's appellant's submission, p ara. 65 (quoting Panel Report, para. 8.368). (emphasis 
added by the European  Union)  
259 European  Union's appellant's submission, para. 65 (quoting European Union's comment s on 
United  States' response to Panel question No. 67, para. 41,  in turn referring to  International Institute for 
Strategic Studies, Military Balance 2014 Press Statement (5 February 2014)  (Panel Exhibit USA -487), p. 2). 
(emphasis added by the European  Union)  
260 European  Union's appellant's submission, para. 65 (quoting European Union's comment s on 
United  States' response to Panel question No. 67, para. 41,  in turn quoting D. Lerman and R. Wall, "U.S. 
Defense Contractors Focus on Foreign Buyers", Businessweek , 14 November 2013  (Panel Exhibit EU -1399)). 
(emphasis added by the European  Union)  
261 United States' appellee's submission, para. 46 (referring to Boeing, Annual Form 10 -K to the 
United  States Securities and Exchange Commission for the year ended December  31, 2012  (Boeing 2012 10 -K) 
(Panel Exhibit EU -407), p. 105). (emphasis original ) WT/DS353/AB/RW  
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 the European Union's assertions "address only the source of revenues , and do not establish that it 
was Boeing  that sold military equipment to foreign purchasers" .262 
5.81.   The Panel's statement in paragraph 8.368 of its Report that "DOD is Boeing's only customer 
for {military} technologies"263 is inaccurate, insofar as the evidence indicates that Boeing does make 
sales of military technologies to foreign governments.264 However, we note that the statement in 
question is only one of several Panel statements concerning the customer base of Boeing, and in all 
other statements the Panel consistently observed that USDOD is the predominant  buyer of modern 
air weaponry and weapons technology in the world and the exclusive  buyer of such weaponry and 
technology in the United  States.265 We note that the Panel did not distinguish the statement in 
paragraph 8.368 from all other statements relating to the customer base of Boeing. Considering 
jointly all statements made by the Pane l with respect to Boeing's customer base, we do not 
understand the Panel to have found that USDOD is Boeing's only customer for military technologies 
in the world.  
5.82.   Beyond these statements, the Panel did not discuss the European Union's evidence, which 
essentially establishes that (i) countries other than the United States also have significant defence 
budgets, and (ii) Boeing's defence division makes a certain, not insignificant, percentage of sales 
internationally. As we see it, the Panel's statement that the US government is the sole purchaser of 
modern air weaponry in the United States is compatible with the argument that Boeing also sells 
some military equipment to governments other than that of the United States. Moreover, the 
European  Union's evidence does not demonstrate how the fact that Boeing may have foreign military 
customers contradicts the Panel's observation that Boeing would be limited in exploiting technology 
developed under the USDOD procurement contracts for military purposes outside the Un ited States, 
especially in light of the existing US legal restrictions on the dissemination of military technology 
and data. At the same time, we recall our observation above that, even though Boeing's use of 
research funded under the USDOD procurement con tracts may be more limited than its use of 
research funded under the USDOD assistance instruments, that in itself does not mean that there 
could be no "sharing" of the fruits of the research between USDOD and Boeing in the context of the 
USDOD procurement contracts.  
5.83.   We also note that the European  Union's evidence relating to Boeing's military customers 
outside the United States was introduced in comments to the United States' answer to a Panel 
question, in which the United States discussed "military applica tions of an invention invented during 
work under a NASA or DoD contract".266 The European Union's financial contribution argument before 
the Panel was focused more on the potential civil applications of the R&D performed under the 
USDOD procurement contracts  than on the military  applications of this R&D to Boeing's other 
customers. In any event, the figures put forward by the European  Union on the defence budgets of 
foreign governments and the percentage of Boeing's military sales outside the United  States do  not 
appear to establish a clear link between Boeing and sales  to any of those governments. Thus, we 
consider that the European  Union has not demonstrated that the Panel's failure to address explicitly 
and rely upon its evidence and arguments relating to B oeing's military customers outside the 
United  States has a bearing on the objectivity of its factual assessment.  
5.2.1.3   The Panel's analysis of the collaborative nature and purpose of the USDOD 
procurement contracts  
5.84.   According to the European  Union, in distinguish ing "the nature and purpose of the DOD 
procurement contracts from that of the NASA procurement contracts and DOD assistance 
instruments"267, and in concluding that the nature and purpose of the interaction between USDOD 
                                                
262 United States' appellee's submission, para. 47. (emphasis original ) 
263 Panel Report, para. 8.368.  
264 The United  States itself notes that " {s}ales to DOD (excluding foreign military sales) accounted for 
70 percent of { the Boeing Defense Systems division's } 2012 revenues, which include commercial and civil 
satellite sales. " (United States' appellee's submission, para. 48 (referring to Boeing 2012 10 -K (Panel Exhibit 
EU-407), p. 1) ) 
265 See Panel Report, paras. 8.338, 8.340, 8.405 , and 8.422.  
266 European Union's comments on United States' response to Panel question No. 67, para. 41 (referring 
to United States' response to Panel question No. 67, para. 15; D. Lerman and R. Wall, "U.S. Defense 
Contractors Focus on Foreign Buyers", Business week, 14 November 2013 (Panel Exhibit EU -1399)).  
267 European Union's appellant's submission, para. 67.  WT/DS353/AB/RW  
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 and Boeing "is not the same as when tw o partners work together to set research topics based on 
their aligned interests in the outcomes"268, "the Panel failed to base its findings in the evidence, 
failed to engage with or properly consider EU arguments and evidence, disregarded key evidence, 
and failed to explain its findings in light of the evidence, in violation of Article 11 of the DSU."269 
5.85.   First, with regard to the nature of the USDOD procurement contracts, the European  Union 
submits that "a primarily military technological purpose  is not determ inative of whether these 
programmes have the effect  of developing technologies and knowledge that could be applicable to 
Boeing LCA."270 The European  Union alleges that the Panel failed to consider the following evidence:  
a. examples of civil applications of R &D developed by Boeing pursuant to the USDOD 
procurement contracts, including271: 
i. "data from the B -2 stealth bomber {utilized} to develop a manufacturing process used 
on the 787"272; 
ii. "advanced 3 -D modelling and simulation techniques developed on the F -22 
progr amme played on the 777"273; and  
iii. "the US Air Force … supporting research into Boeing's blended -wing body 
configuration, which is expected to be used for both military and civil application".274 
                                                
268 European Union's appellant's submission, para. 67 (quoting Panel Report, para. 8.364).  
269 European Union's appellant's submission, para. 67 (referring to  Panel Report , paras . 8.338 -8.339, 
8.341, 8.367, and 8.369).  
270 European Union's appellant's submission, para. 68  (referring to the European Union's response to 
Panel question No. 29, paras. 171 -174; second written submission to the Panel, paras. 398 -400). (emphasis 
original)  
271 European Union's appellant's submission, para. 69. The European Union observes  that it further 
detailed the dual -use potential of a number of particular USDOD procurement contracts and even  gave explicit 
references to civil applicatio ns in certain of those contracts  (referring to European Union's response to Panel 
question No. 29, fn 205 to para. 172 ). 
272 European Union's appellant's submission, para. 69 (referring to European Union's second written 
submission to the Panel , para. 408,  in turn referring to  D. Gates, "How B -2 data wound up in 787 program", 
Seattle Times , 22 January 2006  (Panel E xhibit EU -333)). 
273 European Union's appellant's submission, para. 69 (referring to European Union's first written 
submission to the Panel , para. 290, in turn quoting  W. Cole, "The Value of Lessons Learned", Boeing Frontiers 
Online , December 2003 -January  2004 (Panel Exhibit EU -268);  D. Arkell, "Exponential Potential", Boeing 
Frontiers Online , September 2005  (Panel E xhibit EU -332); W.B. Scott , "Legacy of B -2 Bomber Innovations 
Apparent in J -UCAS and Other Programs", Aviation Week & Space Technology , 26 March 2006  (Panel E xhibit 
EU-334)). 
274 European Union's appellant's submission, para. 69 (referring to European Union's second written 
submissio n to the Panel , para. 401; first written submission to the Panel , paras. 83-86, in turn referring  to 
Alex Velicki  and Dawn Jegley, PRSEUS Development for the Hybrid Wing Body Aircraft , NASA Report 
No. NF1676L -13290 (20 September 2011)  (Panel E xhibit EU -107), pp. 1-4; Jeff Sloan, "PRSEUS preform for 
pressurized cabin walls", Composites World , 1 September 2011  (Panel E xhibit EU -100); Boeing News Release, 
"Boeing Flies X -48C Blended Wing Body Research Aircraft", 7 August 2012  (Panel E xhibit EU -108)). The 
European Union observes  that it further detailed the dual -use potential of a number of particular USDOD 
procurement contracts and even  gave explicit references to civil applications in certain of those contracts.  
(European Union's a ppellant's submissio n, para. 69  (referring to European Union's response to Panel q uestion 
No. 29, fn 205 to para. 172 )) WT/DS353/AB/RW  
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 b. the Charles River Associates (CRA) and Rumpf expert opinions275 detailing how each of 
the RDT&E programme elements "provide{s} funding and support to Boeing for R&D that 
is potentially applicable to LCA (or 'dual -use')"276; and  
c. a list of "examples of DOD -funded patents owned by Boeing (with the language therein 
drafted by Boe ing engineers and/or patent attorneys) that explicitly indicate, on the face 
of the patents themselves, that they have a potential LCA -related application".277 The 
European Union contends that, in addition, the proposition that the USDOD procurement 
contract s with a military objective result in developing patented technologies applicable to 
civil aircraft "is also supported by Boeing's 'One Boeing' concept, which is 'intended to 
share lessons between the distinct Boeing Military Aircraft and Boeing Commercial  
Airplanes sectors'", including "'the sharing of design tools and testing procedures', as well 
as collaborative work on materials, processes, physics and manufacturing technologies".278 
5.86.   The United  States submits that the evidence cited by the European  Union is insufficient to 
establish that the USDOD procurement contracts had the effect of producing research with civil 
applications to any meaningful degree, that USDOD or Boeing expected research under the 
challenged USDOD procurement contracts to produce civil applications, or that any such expectation 
is similar to the NASA procurement contracts and the USDOD assistance instruments.279 The 
United  States argues that: (i) the press accounts are "strictly anecdotal" and do not provide any 
support fo r the European Union's assertion that USDOD or Boeing expected that research under the 
                                                
275 As noted by the Panel, the European Union explain ed that its identification and discussion of the 
RDT&E program me elements that it considers "contribute t o Boeing's LCA division " was assisted by Mr  Richard 
Rumpf and CRA. CRA had been engaged by the European Communities in the original proceeding s to estimate 
the amounts of RDT&E funding received by Boeing that could be considered "dual-use" RDT&E, in the se nse of 
R&D that was  "relevant " to both military and commercial aircraft. Mr Rumpf was engaged by the European 
Union in th ese compliance proceeding s to estimate the amounts of fun ding provided by the RDT&E program me 
to Boeing f or the fiscal year s 2007 through  2012 "which support the development of technologies or methods 
that could benefit Boeing's commercial airplane division ". Using a similar methodology to that employed by 
CRA in its 2006 Report, Mr Rumpf reviewed USDOD's Future Years Defense P rogram (FYDP)  budget estimate 
statements for the fiscal years  2007 through 2013 to determine which RDT&E program me elements, and which 
projects and activities within those program me elements, funded "general aircraft " or "science and technology " 
R&D "that appeared to be dual -use to LCA ". (Panel Report, paras.  7.86-7.87 (referring to 2006 CRA Report  
(Panel Exhibit EU -29) and Richard L. Rumpf and Robert J. Levinson, "United States Department of Defense 
Research, Development, Test & Evaluation ('RDT&E') Fundin g for the Boeing Company Applicable to Large Civil 
Aircraft: 2007 -2012 Estimates", 12  March 2013  (Rumpf Report) (Panel Exhibit EU -23))) 
276 European Union's appellant's submission, para. 70 (referring to European Union's second written 
submission to the Pane l, para. 389, in turn referring to Rumpf Report (Panel Exhibit EU -23) (fn  omitted)).  
277 European Union's appellant's submission, para. 71 (referring to European Union's first written 
submission to the Panel, paras. 326 -362; second written submission t o the Panel, paras.  373-377; response to 
Panel question No. 31, paras. 190 -195). According to the European Union, " DOD-funded patents owned by 
Boeing … explicitly indicate that the patented technologies are applicable to civil aircraft." (Ibid., para. 73) 
Specif ically, the European Union referred to the following Boeing's patents discussed before the Panel:  
United  States Patent No. 5,698,316 (16 December 1997)  (Panel E xhibit EU -362); United States Patent 
No. 8,376,337 (19 February 2013)  (Panel E xhibit EU-378); United States Patent No.  8,376,338 (19 February 
2013)  (Panel E xhibit EU -379); United States Patent No.  8,366,050 (5 February 2013)  (Panel E xhibit EU -380); 
United States Patent No. 8,352,486 (8 January 2013)  (Panel E xhibit EU -381); United States Pa tent 
No. 8,194,239 (5 June 2012)  (Panel E xhibit EU -382); United States Patent No. 7,667,830 (23 February 2010)  
(Panel E xhibit EU -383); United States Patent No.  8,042,767 (25 October 2011)  (Panel E xhibit EU -385); 
United  States Patent No. 8,016,650 (13 Septe mber 2011)  (Panel E xhibit EU -386); United States Patent 
No. 7,861,411 (4 January 2011)  (Panel E xhibit EU -388); United States Patent No. 7,773,885 (10 August 2010)  
(Panel E xhibit EU -389); United States Patent No.  7,841,152 (30 November 2010)  (Panel E xhibit EU-390); 
United States Patent No. 7,347,083 (25 March 2008)  (Panel E xhibit EU-394). (Ibid., para. 72 (referring to 
European Union's first written submission to the Panel, paras. 332, 345 -348, 351 -352, 354 -356, and 
360-361))  
278 European Union's appellant's s ubmission, para. 74 (quoting European  Union's response to Panel 
question No. 29, para. 173).  
279 United  States' appellee's submission, para. 54.  WT/DS353/AB/RW  
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 USDOD procurement contracts would have civil applications280; (ii) "the Panel addressed {the Rumpf 
expert opinion } in its evaluation of its terms of reference, and found t hat its 'generalized allegations 
regarding the potential applicability to LCA of certain broad technology areas ' were not 'sufficient to 
demonstrate a close nexus between a new program element and the ones covered by the original 
proceeding '"281; and (iii) f our of the ten patents referred to by the European  Union are irrelevant, 
insofar as the inventions in question resulted from research that was not funded by the USDOD 
procurement contracts under the programme elements challenged by the European Union.282 
5.87.   We note that the European Union's argument that USDOD and Boeing "entered into the 
{USDOD procurement contracts} with some expectation that Boeing's LCA (or other commercial) 
division would benefit despite the primary military objective "283 relates to the Appel late Body's 
observation in the original proceedings that one feature of the NASA procurement contracts and the 
USDOD assistance instruments that characterized them as collaborative arrangements was that 
"looking at the output side of the transactions, {the re is no} straightforward exchange of monetary 
resources for some kind of non -monetary consideration", but instead "the fruits of the research are 
shared" between Boeing and NASA/USDOD.284 
5.88.   With respect to the European Union's allegation that the Panel failed  to consider certain 
evidence presented before the Panel, we note that the Panel did not refer to any of the three 
categories of evidence presented by the European Union in the context of its analysis of financial 
contribution relating to the USDOD procure ment contracts. In light of the detailed nature of the 
European  Union's arguments before the Panel relating to the Rumpf expert opinion, we begin our 
analysis with this category of evidence. The Panel referred to this expert opinion mainly in the 
context o f its analysis relating to its terms of reference.285 For instance, the Panel observed that:  
Mr Rumpf's assessment of the R&D involved in {the KC -46} program element that is 
potentially dual -use to LCA … refers in a very generalized way to technological area s 
such as the use of performance based logistics incorporating micro -sensors in the KC -46 
airframe, avionics R&D related to communications, navigation and adverse weather 
capabilities, physics -based modelling and simulation activities for improved design o f 
the test and evaluation flight and ground tests, and multiple systems management 
technologies and processes.  
… We are not satisfied that generalized allegations regarding the potential applicability 
to LCA of certain broad technology areas, without an ex planation of how those 
technology areas overlap with the technology areas that were the focus of the NASA 
and DOD aeronautics R&D subsidies {that are} the subject of the DSB recommendations 
and rulings, are sufficient to demonstrate the required close nexu s, in terms of nature 
                                                
280 United  States' appellee's submission, para. 56 (referring to European Union's appellant's submission, 
paras. 69 and 74) . In particular, the United  States argues that t wo of those press accounts "discuss lessons 
learned in the B -2 and F -22 programs that Boeing applied to the 787 and 777, respectively ". However, the B -2 
programme element " did not  fund any relevant contracts during the period covered by the Panel's inquiry, 
which makes evidence relating to the B -2 irrelevant to evaluation of the measures before the Pane l", and 
"{t}he F -22 was an enormous systems acquisition, such that a single exam ple of cross -application indicates at 
best that such cross -overs rarely occu r." The United States adds that the third press account " addresses 
research on a blended wing body design that the EU characterizes as 'expected to be used for both military and 
civil applications,' but that is so far in the future as to be purely speculative ". (Ibid.) Finally, the United  States 
argues that the "One Boeing" concept " describes Boeing's goal of sharing lessons between its military and civil 
divisions " and, "{t}o the e xtent this initiative is successful, it suggests similarities between Boeing's contracts 
with DoD and its relations with civil aircraft customers, which have never been alleged to be comparable to the 
company's NASA procurement contracts, let alone a joint  ventur e." (Ibid. (referring to the European Union's 
appellant's submission, para. 74))  
281 United  States' appellee's submission, para. 57 (quoting Panel Report, para. 7.198). The 
United  States adds that " even assuming arguendo that the conclusions were accu rate, the most they show is 
that certain observers (long after the fact) thought that certain research under the challenged program 
elements could  produce results applicable to large civil aircraft. They indicate nothing about the likelihood of 
such result s, whether DoD and Boeing expected  such results at any point in time, or whether any civil 
applications actually resulted. " (Ibid., para. 58) (emphasis original)  
282 United  States' appellee's submission, para. 59.  
283 European Union's appellant's submission, p ara. 68. (emphasis original)  
284 Appellate Body Report, US – Large Civil Aircraft (2nd complaint ), para . 596. See also ibid., para. 608.  
285 The Panel described the methodology used therein (Panel Report, paras. 7.86 -7.88) and addressed 
the Rumpf expert opinio n on several occasions  (Panel Report, paras. 7.189 -7.190, 7.197 -7.198, and 7.203 ). WT/DS353/AB/RW  
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 or effect, between the measures identified with respect to the KC -46, Next Generation 
Aerial Refueling Aircraft program element and the NASA and DOD aeronautics R&D 
subsidies {that are} the subject of the DSB recommendations and rulin gs.286 
5.89.   These statements are reflective of the Panel's view as to the relevance of the Rumpf expert 
opinion in the context of its analysis relating to the Panel's terms of reference assessment. However, 
the relevant question before the Panel in that context w as different from the legal question in the 
context of its financial contribution analysis. Notably, in its terms of reference assessment, the Panel 
considered the Rumpf expert opinion in its analysis of whether there were "sufficiently close links, 
in ter ms of nature, effects, and timing", between, on the one hand, certain programme elements 
that came into existence after the date of the panel request in the original proceedings and, on the 
other hand, the aeronautics R&D measures, which are the subject of  the recommendations and 
rulings  of the DSB .287 By contrast, in the context of the Panel's financial contribution analysis, the 
European  Union argued that the Rumpf expert opinion demonstrated the potential applicability to 
Boeing's civil technologies of the  research undertaken by Boeing under the USDOD procurement 
contracts. The fact that the Panel referred to the Rumpf expert opinion in the context of its terms of 
reference analysis is thus not relevant for determining whether the Panel properly considered this 
evidence in the context of its financial contribution analysis.  
5.90.   We note that the Panel also addressed the Rumpf expert opinion in describing the 
European  Union's understanding of "dual -use" in the context of its evaluation of the 
European  Union's chal lenge relating to the USDOD procurement contracts and assistance 
instruments. The Panel observed that the European Union used the term "dual -use" to "refer to the 
military technologies developed by Boeing under the various RDT&E program elements that the 
European Union considers , based on the opinions of its experts, have potential  applicability to Boeing 
LCA."288 The Panel contrasted this use of the term with the "concept of 'dual -use', which describes 
the explicit objectives of certain of the DOD RDT&E prog ram elements {and} encompasses both the 
application to military needs of technology solutions developed by industry for civilian application 
(military in -bound) and the flow of technologies from military -developed contexts to commercially 
useful application in civilian contexts".289 
5.91.   The Panel's reference to the Rumpf expert opinion in this context indicates that the Panel did 
not overlook or ignore the Rumpf expert opinion. At the same time, the Pa nel did not properly 
engage with this evidence in conducting its substantive analysis of whether the USDOD procurement 
contracts involve financial contributions within the meaning of Article  1.1(a)(1) of the 
SCM Agreement. Specifically, the Panel's observa tion regarding differences in the way the term 
"dual-use" is employed by the European Union and in the RDT&E programme elements is descriptive 
and does not demonstrate that the Panel assessed the pertinence of the European  Union's evidence 
in determining t he existence of a relationship of collaboration between USDOD and Boeing in the 
context of certain USDOD procurement contracts.  
5.92.   In its analysis of whether the USDOD procurement contracts involved financial contributions, 
the Panel stated that "{a}lthough s ome of the military technologies may also have potential civil 
applications , Boeing's practical ability to exploit those technologies for civil applications is limited."290 
This statement appears to refer to the European Union's evidence in the Rumpf expert opinion, which 
the Panel had earlier described as "the process by which the European Union identified the specific 
                                                
286 Panel Report, paras. 7.197 -7.198. (fns omitted)  
287 Panel Report, para. 7.160.  
288 Panel Report, para. 8.343. (emphasis original)  
289 Panel Report, paras. 8.341 -8.342 ( referring to Second Supplemental Declaration of Richard A. 
Razgaitis, Sr., Ph.D., CLP (17  December 2014)  (Panel Exhibit EU -1398) (BCI), para. 14 ). In this regard, the 
Panel further explained that:  
The European Union's expert, Mr Rumpf, describes his assign ment as being to estimate the 
amounts of funding provided to Boeing by the RDT&E program elements that could  benefit 
Boeing's commercial airplane division. … Rumpf indicates that his identification of the relevant 
S&T/general aircraft RDT&E program element s is based on his opinion as to the program 
elements and activities that he considers involve "dual -use", non -engine aircraft 
R&D. … Similarly, Mr Rumpf's discussion of the systems acquisition/military aircraft RDT&E 
program elements often refers to his op inion regarding the "potential" applicability to Boeing 
LCA, or "potential" to benefit Boeing's LCA development.   
(Ibid., fn 1478 to para.  8.343 (emphasis original) ) 
290 Panel Report, para. 8.368. (emphasis added)  WT/DS353/AB/RW  
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 aspects of the various RDT&E program elements that it considers could potentially have application 
to Boeing's LCA development".291 However, th e Panel did not engage in an analysis of this evidence 
put forward by the European Union or address the significance it may have for the European Union's 
argument that the USDOD procurement contracts were in the nature of collaborative arrangements 
with ch aracteristics analogous to equity infusions.  
5.93.   Moreover, the Panel did not refer to the other two categories of evidence presented by the 
European  Union, namely the examples of civil applications of R&D developed by Boeing pursuant to 
the USDOD procurement c ontracts and the list of the USDOD -funded patents owned by Boeing with 
potential LCA -related applications. In this regard, we observe that the United  States argued before 
the Panel that this evidence demonstrated that "the chance of a given DoD procurement  contract, 
task order, or assistance instrument producing an invention that the {European Union} considered 
applicable to large civil aircraft was … essentially zero."292 The United States also pointed out to the 
Panel that the examples given by the European  Union reflect very rare instances in which 
USDOD -related research has translated into patents with civil applications.293 Where a panel faces 
such conflicting propositions in relation to a key element of a claim before it based on the evidence 
submitted to it by the parties, it is difficult to see how it can comply with the obligation to undertake 
an objective assessment of the matter without engaging with that evidence and reflecting the results 
of its assessment of the evidence in its report. In the presen t case, we consider that the absence of 
any substantive assessment of the examples of Boeing's actual use of research conducted pursuant 
to the USDOD procurement contracts meant that the Panel did not sufficiently explore the evidence 
before it for purpose s of its ultimate conclusion. Furthermore, as noted, the fact that Boeing's 
practical use of USDOD -funded research under the USDOD procurement contracts was more limited 
than under the USDOD assistance instruments does not answer the question of whether a 
relationship of collaboration existed between USDOD and Boeing under the USDOD procurement 
contracts.  
5.94.   The European Union further argues that the Panel failed to address its arguments that the 
"actual and anticipated technological outcomes, rather than the stated objectives, of the R&D are 
most indicative of the collaborative character of the DOD procurement contracts."294 According to 
the European Union, the Panel's conclusion that the USDOD procurement contracts have military 
objectives such that Boeing's ab ility to exploit those military technologies for commercial purposes 
is in practice restricted is not based in evidence, and the Panel failed to provide reasoned and 
adequate explanations and coherent reasoning in this regard.295 
5.95.   We note that, in its financi al contribution analysis, the Panel assessed the "particular 
commercial context" in which payments by USDOD are provided in exchange for the performance of 
R&D by Boeing.296 The Panel, distinguished this commercial context from that of the NASA 
procurement c ontracts on the basis that "the R&D commissioned under DOD procurement contracts 
is solely directed to meeting DOD's military needs , independent of enhancing the competitive 
position of contractors such as Boeing ."297 Therefore, the Panel found that " the nat ure and purpose  
of this interaction is not the same as when two partners work together to set research topics based 
on their aligned interests in the outcomes."298 Furthermore, the Panel considered "contextual 
factors" suggesting that the balance of sharing of IP rights under the USDOD procurement contracts 
is "substantially more in DOD's favour and less in Boeing's favour than under the DOD assistance 
instruments, or NASA procurement contracts".299 Notably, the Panel relied on the fact that "DOD is 
commissioni ng R&D services to support the development of military systems for DOD's own distinct 
purposes " and "{u}nlike the DOD assistance instruments, or NASA procurement contracts, DOD's 
                                                
291 Panel Report, para. 8.343. (emphasis origi nal) 
292 United States' appellee's submission, para. 59 (referring to United States' first written submission to 
the Panel, para. 372).  
293 United  States' appellee's submission, para. 59. See also United  States' first written submission to the 
Panel, paras. 37 0-372. 
294 European Union's appellant's submission, para. 76 (referring to European Union's response to Panel 
question No. 29, para. 174). 
295 European Union's appellant's submission, para. 78 (referring to Panel Report, paras. 8.338 -8.339, 
8.341, and 8.422).  
296 Panel Report, para. 8.364.  
297 Panel Report, para. 8.364. (emphasis added)  
298 Panel Report, para. 8.364. (emphasis added)  
299 Panel Report, p ara. 8.367.  WT/DS353/AB/RW  
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 objectives do not include, or align with , advancing Boeing's development of t echnologies applicable 
to LCA."300 
5.96.   The Panel's conclusion that there is not enough "in the relationship between DOD and Boeing 
under the DOD procurement contracts that points to it being one of 'partnership', 'collaboration' or 
'joint-venture', in which both  parties act in pursuit of a common goal for their mutual benefit" was 
also based on additional reasons.301 For example, the Panel recognized that "the provision of 
facilities, equipment, and employees {under the USDOD procurement contracts} is … marginal"302, 
and that "{u}nder the vast majority of the DOD procurement contracts, Boeing is paid its costs for 
performing the R&D and earns a negotiated fee or profit, which is a smaller proportion of the overall 
cost."303 The Panel thus considered that "the risks and rewards {under the USDOD procurement 
contracts} are borne principally by DOD."304 
5.97.   At the same time, it is true that the Panel did not address the European Union's argument 
that, despite the military objectives of the R&D commissioned under these contracts, t he nature of 
the interaction between USDOD and Boeing as one of collaboration was reflected in the actual and 
anticipated technological outcomes, rather than in the stated objectives of the R&D.305 Indeed, the 
Panel's analysis focused on the objectives of th e USDOD procurement contracts and the military 
nature of the research, rather than on the actual effects of those contracts. We recall in this regard 
that, in order to identify the principal characteristics of a measure for the purpose of determining 
the o bligations attaching to it, a panel must conduct a thorough scrutiny of the measure at issue, 
both in terms of its design and operation.306 Given that the research under both the USDOD 
procurement contracts and the USDOD assistance instruments is undertaken for military purposes, 
the Panel should have properly explained the reasons for distinguishing between the two categories 
of contracts. The Panel's reliance on how R&D is commissioned and conducted under the RDT&E 
programme elements only in the context of the USDOD procurement contracts therefore remains 
unclear, to the extent that these processes apply to both the USDOD procurement contracts and the 
USDOD assistance instruments.307 In the absence of such an explanation, the Panel was not in a 
position to pro vide reasoned and adequate explanations in reaching its conclusion as to the 
characterization of the USDOD procurement contracts. Furthermore, in light of the fact that this was 
the primary argument put forward by the European  Union, as supported by the th ree categories of 
evidence outlined above, and given the conflicting propositions based on the evidence submitted to 
the Panel, it was necessary for the Panel to undertake a more detailed analysis of the 
European  Union's evidence and arguments.  
5.98.   Second, wit h regard to the purpose of the USDOD procurement contracts, the European  Union 
contends that "the Panel did not consider key EU arguments and evidence and failed to provide 
reasoned and adequate explanations to support its finding that 'the R&D commissione d under DOD 
procurement contracts is solely directed to meeting DOD's military needs, independent of enhancing 
the competitive position of contractors such as Boeing '."308 The European  Union refers to evidence 
demonstrating that the United States intends for , and encourages, USDOD contractors to extract 
commercial benefit from their work under the RDT&E programmes. In particular, the European Union 
refers to "the DOD's decision to end its previous policy of recouping 'a fair share of its investment in 
nonrecu rring costs related to products, and/or a fair price for its contribution to the development of 
related technologies, when the products are sold, and/or when technology is transferred'".309 
5.99.   The United States responds that the European Union "never alleged th at any of the Boeing 
products covered by this dispute would have given rise to fees under the policy, which DoD 
terminated in 1992", and "{i}ndeed, given the Panel's findings as to the amount of funding Boeing 
                                                
300 Panel Report, para. 8.367. (emphasis added)  
301 Panel Report, para. 8.369.  
302 Panel Report, para. 8.361.  
303 Panel Report, para. 8.368.  
304 Panel Report, para. 8.368.  
305 See European Union's appellant's submission, para. 76.  
306 See Appellate Body Repo rts, China – Auto Parts , para. 171.  
307 See Panel Report, para. 8.369 and fn 1505 thereto.  
308 European Union's appellant's submission, para. 79 (quoting Panel Report, para. 8.364). (emphasis 
added by the European Union)  
309 European Union's appellant's submissi on, para. 80 (quoting European Union's first written submission  
to the Panel , para. 239 , in turn quoting United States Code of Federal Regulations , Title 48, Section 271.002(a) 
(Panel Exhibit EU -275)). WT/DS353/AB/RW  
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 received under the challenged program elements , it is inconceivable that DoD procurement contracts 
would have led to such fees."310 The United  States further considers that "the existence  of the 
recoupment policy 25 years ago"311 does not prove that "DoD could have recouped its investment 
in commercial{is ed} technologies."312 
5.100.   We note that the Panel did not address the European  Union's argument in its analysis of 
financial contribution. At the same time, we observe that, as evident from its submissions before 
the Panel, the European Union did not rely on this  argument specifically in its financial contribution 
argumentation.313 In the context of its benefit assessment, the Panel reflected the parties' 
arguments on this issue314 and noted that it was "satisfied that the termination of the 1992 
recoupment policy sug gests that {the} U.S. Government recognizes 'the potential for crossover into 
development and production of civilian aircraft of benefits that may result from government support 
of research and development (R&D) on military items'".315 However, the Panel con sidered that this 
recognition was expressed "in very general terms" and was not persuaded that "DOD's previous 
recoupment policy would have applied to the DOD -sponsored R&D at issue in this proceeding", 
insofar as there was insufficient evidence "to conclu de that Boeing LCA would have fallen within the 
definition of a 'derivative' of a DOD developed item under the previous recoupment rules".316 The 
Panel therefore did not regard "DOD's termination of the recoupment policy in 1992 as providing 
probative eviden ce in support of an inference that the DOD procurement contracts (or assistance 
instruments)" confer a benefit on Boeing.317 
5.101.   In our view, the Panel was not persuaded that the European Union's argument regarding the 
termination of the USDOD recoupment policy in 1992, or the abstract possibility for USDOD to recoup 
any potential investments in commercialised technologies, had that policy stayed in place, 
established a sufficient link with the nature and functioning of the specific USDOD procurement 
contracts ch allenged by the European Union in these proceedings. In the absence of such link, the 
fact that the recoupment policy was terminated could not have an impact on the characterization of 
the USDOD procurement contracts as collaborative arrangements with char acteristics analogous to 
equity infusions.  
5.102.   In any event, we note that the Appellate  Body has observed that "the intent, stated or 
otherwise, of the legislators is not conclusive" as to the characterization of a measure under WTO 
law.318 While the intent of U SDOD could have to a certain extent informed the understanding of the 
context of the USDOD procurement contracts, this alone could not have altered the Panel's ultimate 
conclusion as to the characterization of the measures. Therefore, we consider that the Panel 
adequately addressed the European Union's argument regarding the relevance of the 1992 
recoupment policy and disagreed with it.  
5.103.   In sum, we make the following conclusions with respect to the European  Union's claim that 
the Panel failed to make an obje ctive assessment of the matter under Article 11 of the DSU in its 
analysis of whether the USDOD procurement contracts provide a financial contribution within the 
meaning of Article  1.1(a)(1) of the SCM  Agreement. We have found that the Panel did not fail t o 
engage with relevant evidence, or to provide a reasoned and adequate explanation, in reaching its 
conclusions regarding the question of whether Boeing's non -reimbursed IR&D expenditures can be 
considered as a contribution to a collaborative arrangement w ith USDOD. We further found that the 
European  Union has not demonstrated that the Panel's failure to address explicitly and rely upon its 
evidence and arguments relating to Boeing's military customers outside the United  States has a 
bearing on the objectiv ity of its factual assessment. Moreover, we considered that the Panel 
                                                
310 United States' appellee's submission, para. 64.  
311 United States' appellee's submission, para. 66. (emphasis original)  
312 United States' appellee's submission, para. 66 (quoting European Union's appellant's submission, 
para. 83 , in turn referring to European Union's response to Panel question No. 29, fn 211 t o para. 176).  
(emphasis original ) 
313 See European  Union's first written submission to the Panel, paras. 238 -241; second written 
submission to the Panel, paras. 395 -397. 
314 Panel Report, paras. 8.431 -8.432.  
315 Panel Report, para. 8.433 (quoting U.S. Government Response to the EC -Commissioned Report "U.S. 
Government Support of the U.S. Commercial Aircraft Industry", March 1992  (Panel Exhibit EU -276), p.  13). 
316 Panel Report, para. 8.433.  
317 Panel Report, para. 8.433.  
318 Appellate Body Reports, China – Auto Parts , para. 178 (quoting Appellate Body Report, US – Offset 
Act (Byrd Amendment) , para. 259 ). WT/DS353/AB/RW  
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 adequately addressed the European Union's argument regarding the relevance of the 1992 
recoupment policy.  
5.104.   At the same time, we have found certain deficiencies in the Panel's assessment o f the 
European Union's claim that the USDOD procurement contracts involve financial contributions . We 
concluded that the Panel failed to assess properly the European  Union's evidence relating to actual 
use of ITAR-controlled data and technology developed pursuant to the USDOD procurement 
contracts. Furthermore, the Panel did not provide a reasoned and a dequate explanation for its 
conclusion that Boeing's practical ability to exploit military technologies developed under the USDOD 
procurement contracts for civil purposes is more limited than under the USDOD assistance 
instruments. We also found that the P anel failed to assess the European  Union's evidence in the 
Rumpf expert opinion in the context of its financial contribution analysis relating to the USDOD 
procurement contracts, as well as the European  Union's argument that the actual and anticipated 
technological outcomes of the R&D under these contracts are more indicative of their collaborative 
nature than their stated objectives. The Panel also failed to address the European  Union's evidence 
relating to examples of actual use by Boeing of the research under the USDOD procurement 
contracts, namely the cases of civil applications of R&D developed by Boeing pursuant to the USDOD 
procurement contracts and the list of the USDOD -funded patents owned by Boeing with potential 
LCA-related applications.  
5.105.   We recall  that Article 11 of the DSU requires panels to consider all the evidence presented 
to them, assess the credibility of that evidence, determine its weight, and ensure that their factual 
findings have a proper basis in that evidence.319 Panels have the discret ion to address only those 
arguments that they deem necessary to resolve a particular claim320 and are not required to accord 
to factual evidence of the parties the same meaning and weight as do the parties.321 At the same 
time, panels may not make affirmative findings that lack a basis in the evidence contained on the 
panel record.322 The Panel in these proceedings failed to address several pieces of evidence and 
arguments put forward by the European Union in support of its claim that the USDOD procurement 
contra cts involved financial contributions under Article  1.1(a)(1)(i) of the SCM  Agreement, because 
they were collaborative arrangements with characteristics analogous to equity infusions. Specifically, 
given that the Panel was faced with conflicting evidence su bmitted by both parties, in order to comply 
with the obligation to undertake an objective assessment of the matter before it, the Panel should 
have explained its conclusion with regard to the existence of a financial contribution in light of that 
evidence.  In our view , taken together, these errors  undermine the objectivity of the Panel's 
assessment of the matter before it.  
5.106.   In view of the above, we find that the Panel failed to make an objective assessment of the 
matter before it within the meaning of Articl e 11 of the DSU in its financial contribution analysis 
under Article 1.1(a)(1) of the SCM  Agreement by not engaging sufficiently with the European  Union's 
evidence and arguments , and by failing to provide reasoned and adequate explanations for its 
findings . 
5.2.2   The Panel's findings under Article  1.1(b) of the SCM  Agreement  
5.107.   The European  Union argues that in assessing whether the USDOD procurement contracts 
confer a benefit on Boeing within the meaning of Article  1.1(b) of the SCM  Agreement, "the Panel 
built upon  the same errors" as in its analysis relating to financial contribution under Article  1.1(a)(1) 
of the SCM Agreement.323 According to the European  Union, "{t}he Panel's benefit findings therefore 
require consequential reversal."324 
5.108.   We recall that, having found  that the USDOD procurement contracts are most appropriately 
characterized as purchases of services, the Panel found it unnecessary to address definitively the 
                                                
319 Appellate Body Report, Colombia – Textiles , para. 5.18 (referring to Appellate  Body Report, Brazil – 
Retreaded Ty res, para.  185). 
320 Appellate  Body Report, EC – Poultry , para.  135. See also Appellate  Body Report, EC – Fasteners 
(China) , para.  511. 
321 Appellate Body Report, Australia – Salmon , para. 267 . 
322 Appellate  Body Report, US – Carbon Steel , para.  142 (referring t o Appellate Body Report, US – 
Wheat Gluten , paras. 161 -162). 
323 European Union's appellant's submission, para . 86. 
324 European Union's appellant's submission, para. 86. WT/DS353/AB/RW  
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 issue of whether these transactions, properly characterized, involve financial contributions wit hin 
the meaning of Article 1.1(a)(1).325 This was in view of the Panel's ultimate conclusion that the 
European Union failed to establish that the USDOD procurement contracts confer a benefit within 
the meaning of Article 1.1(b).326 In assessing the existence o f benefit, the Panel recalled that it had 
not characterized the USDOD procurement contracts as collaborative R&D arrangements. Therefore, 
the Panel did not consider that a focus on the allocation of IP rights, consistently with the approach 
of the Appellat e Body in the original proceedings, was "an appropriate means of determining whether 
DOD as the purchaser of R&D services from Boeing, paid too much for what it acquired".327 Rather, 
for the Panel, "{t}he question of whether Boeing was paid adequate remunera tion for performing 
the R&D work for DOD requires a consideration of all of the terms of the transaction, including how 
much DOD paid in relation to the work that Boeing performed."328 The Panel nevertheless continued 
its analysis and concluded that, even if  the assessment of benefit under the USDOD procurement 
contracts focused solely on the allocation of the IP rights arising from the performance of the R&D, 
in isolation from the other terms of the transaction, it would not regard as appropriate benchmarks 
the evidence put forward by the European Union in the form of private collaborative R&D 
agreements.329 
5.109.   In reaching this conclusion, the Panel built on the same arguments and factual findings 
relating to the USDOD procurement contracts that the European Union  takes issue with in its financial 
contribution claim. Thus, the Panel recalled its understanding that "the DOD procurement contracts 
involve complex, long -term purchases of R&D services by DOD from Boeing for the development of 
weapon systems", and consid ered that the examples of private collaborative R&D agreements 
submitted as evidence sufficiently resemble the relevant characteristics of the NASA procurement 
contracts and the USDOD assistance instruments, but not those of the USDOD procurement 
contracts .330 The Panel explained that:  
Unlike DOD assistance instruments, there is no cost -sharing between DOD and Boeing, 
and no relationship of collaboration between DOD and Boeing wherein they can be said 
to undertake a project of mutual interest. Unlike the NASA procurement contracts, the 
objectives of the commissioned R&D do not include enhancing the competitiveness of 
the U.S. aerospace industry. Rather, as we have said, the fundamental nature of the 
DOD-Boeing relationship under the DOD procurement contrac ts is one of purchaser of 
R&D services for DOD and supplier of those services for Boeing.331 
5.110.   The Panel also considered that "the government use licence granted to DOD in respect of 
Boeing -owned patents that may result from the performance of the R&D work cap tures the economic 
value of the R&D for DOD", because "DOD is the sole purchaser of modern air weaponry in the 
United States" and "Boeing's practical ability to exploit any military technologies for commercial 
purposes outside the military context is circu mscribed by U.S. legal restrictions on the use of military 
technologies and data."332 
5.111.   Above we found that, in its financial contribution analysis, the Panel did not sufficiently 
address several pieces of evidence and arguments put forward by the European Uni on, and it failed 
to explain its conclusion in light of the evidence before it. The Panel rejected the European  Union's 
evidence of the allocation of IP rights under the private actor collaborative R&D arrangements based 
                                                
325 Panel Report, paras. 8.376 -8.377.  
326 Panel Report, para. 8.378.  
327 Panel Report, para. 8.420.  
328 Panel Report, para. 8.420.  
329 Panel Report, para. 8.421.  
330 Panel Report, para. 8.421. The Panel discussed this evidence in its BCI Appendix 1 to the Panel 
Report.  
331 Panel Report, para. 8.421.  
332 Panel Report, para. 8.422. The Panel explained w hy it considered that " Boeing's practical ability to 
commercially exploit patents that it owns as a result of performing R&D work for DOD, and the practical 
consequences of the government use licence granted to DOD, differ in the context of DOD assistance 
instruments and DOD procurement contracts" and ultimately disagreed with the European  Union that "whether 
the R&D in question is funded through procurement contracts or assistance instruments , 'the US Government 
systematically receives less than a commissi oning party would in a market -based transaction, and Boeing 
systematically receives more than a commissioned party would in a mark et-based transaction.'"  (Ibid., 
paras.  8.423 and 8.425 (quoting European Union's comment s on United  States' response to Panel question 
No. 67, para. 13)) WT/DS353/AB/RW  
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 on the same deficiencies with respe ct to which we found that the Panel failed to make an objective 
assessment of the matter under Article  11 of the DSU. We therefore consider that the Panel's benefit 
analysis suffers from the same shortcomings as its analysis of financial contribution, and we 
therefore find, for the same reasons, that the Panel erred in finding that the distribution of IP rights 
under the USDOD procurement contracts does not confer a benefit pursuant to Article 1.1(b) of the 
SCM Agreement.  
5.2.3   Completion of the legal analysis  
5.112.   The European Union argues that the Appellate Body can complete the legal analysis, based 
on uncontested evidence and factual findings, and confirm that the USDOD procurement contracts 
involve joint ventures in which USDOD provides funding analogous to equity  infusions similar to the 
NASA procurement contracts and the USDOD assistance instruments.333 The United States responds 
that the European Union does not identify evidence sufficient to justify its argument that the USDOD 
procurement contracts are best viewe d as joint ventures.334 
5.113.   We recall that the Appellate Body may complete the legal analysis with a view to facilitating 
the prompt settlement and effective resolution of the dispute where the factual findings by the 
panel335 and/or undisputed facts on the panel record336 provide a sufficient factual basis for doing 
so.337 We thus turn to assess whether there are sufficient factual findings by the Panel or undisputed 
facts on the Panel record on which we can rely in completing the analysis.  
5.114.   Above we found that the Pan el did not fail to engage with relevant evidence, and it did not 
fail to provide a reasoned and adequate explanation, in concluding that the privately funded and 
non-reimbursed IR&D expenditures incurred by Boeing in developing its background IP cannot be 
considered a contribution of "financial resources" to a "joint undertaking" with USDOD.338 We also 
found that the European  Union has not demonstrated that the Panel's failure to address explicitly 
and rely upon its evidence and arguments relating to Boeing's  sales of military aircraft to foreign 
governments has a bearing on the objectivity of its factual assessment. Finally, we found that the 
Panel adequately considered the European Union's argument regarding the relevance of the 1992 
recoupment policy and di sagreed with it. In completing the analysis, we can rely on the factual 
findings reached by the Panel in the context of these arguments.  
5.115.   There are other relevant factual findings by the Panel in its financial contribution analysis 
that are not covered by t he European Union's Article 11 challenges and that we could also rely on in 
completing the analysis. For instance, the Panel found that USDOD commits to provide financial 
resources in the form of payments, which "for the most part represent Boeing's costs of performing 
the R&D work, plus a negotiated fee, representing Boeing's profit".339 The Panel also found that 
nothing on the Panel record suggested that the provision of facilities, equipment, and employees 
under the USDOD procurement contracts "is anything  but marginal".340 Moreover, the participants 
do not dispute the Panel's factual description of the objectives of the USDOD procurement 
contracts.341 
5.116.   At the same time, we found several deficiencies in the Panel's analysis of financial 
contribution. Thus, we  concluded that the Panel failed to assess properly the European  Union's 
evidence relating to actual use of ITAR-controlled data and technology developed pursuant to the 
USDOD procurement contracts. Furthermore, the Panel did not provide a reasoned and adequa te 
                                                
333 European Union's appellant's submission, para. 94.  
334 United  States' appellee's submission, para. 79.  
335 See e.g. Appellate Body Reports, US – Gasoline , p. 19, DSR 1996:I, p p. 18-19; Canada – Periodicals , 
p. 24, DSR 1997:I, p. 4 69; Australia – Salmon , paras. 117 -119; US – Large Civil Aircraft (2nd complaint) , 
para. 1255.  
336 See e.g. Appellate Body Reports, US – Lamb , paras. 150 and 172 ; US – Shrimp , paras. 123 -124, 
132, and 140 ; US – Section 211 Appropriations Act , para s. 343 -345; EC and certain member States – Large 
Civil Aircraft , para . 1176; US – Large Civil Aircraft (2nd complaint) , paras. 1252 and 1262.  
337 See also  Appellate Body Reports , Colombia – Textiles , para. 5.30; US – Anti-Dumping Methodologies 
(China) , para.  5.146; Russia – Pigs (EU) , para. 5.141;  EC and certain member States – Large Civil Aircraft , 
para. 1178; EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 5.745.  
338 Panel Report, para. 8.363 . 
339 Panel Report, para. 8.362.  
340 Panel Report, para. 8.361.  
341 Panel Report, paras. 8.364 and 8.367.  WT/DS353/AB/RW  
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 explanation for its conclusion that Boeing's practical ability to exploit military technologies developed 
under the USDOD procurement contracts for civil purposes is more limited than under the USDOD 
assistance instruments. We also found that the Panel failed to assess the European  Union's evidence 
in the Rumpf expert opinion in the context of its financial contribution analysis relating to the USDOD 
procurement contracts, as well as the European Union's argument that the actual and anticipated 
technolog ical outcomes of the R&D under these contracts are more indicative of their collaborative 
nature than their stated objectives. Finally, the Panel also failed to address the European  Union's 
evidence relating to examples of actual use by Boeing of the resea rch under the USDOD procurement 
contracts, namely the cases of civil applications of R&D developed by Boeing pursuant to the USDOD 
procurement contracts and the list of the USDOD -funded patents owned by Boeing with potential 
LCA-related applications.  
5.117.   Furth ermore, multiple aspects of the relevant evidence supporting the participants' 
arguments remain contested. Notably, there are no factual findings by the Panel relating to the 
effects of the USDOD procurement contracts challenged by the European Union, whic h was a major 
point of disagreement between the parties. The United States argued that the declared purpose of 
the USDOD procurement contracts to obtain technologies for military purposes, or to obtain new 
weapon systems or upgrade existing ones, is highly  relevant for the Panel's assessment of these 
instruments.342 By contrast, the European Union considered that an exclusively military purpose is 
not determinative of whether the research under the USDOD procurement contracts has the effect 
of providing dual -use benefits.343 The evidence presented to the Panel was shaped by the parties' 
views relating to the importance of the objectives and effects of the USDOD procurement contracts. 
Specifically, it appears from the European  Union's submissions to the Panel tha t the conclusions in 
the CRA and Rumpf expert opinions were central to its argument that the payments and access 
provided to Boeing under the USDOD RDT&E programme elements constitute financial contributions 
within the meaning of Article  1.1(a)(1)(i) and ( iii), regardless of whether they are provided under 
assistance instruments or procurement contracts .344 In turn , the United  States challenged the 
pertinence of these expert opinions and in particular the definition of "dual -use" in the Rumpf expert 
opinion345, the expertise and methodology on which the expert opinion relied346, and the probative 
value of its conclusions.347 In this regard, the parties presented detailed arguments with respect to 
each RDT&E programme element, further subdividing them under the categories S&T  or "general 
aircraft " programme elements and systems acquisition/military aircraft programme elements.348 The 
United States further contested the value and weight to be accorded to the European Union's 
examples of civil applications of R&D  developed by Boeing pursuant to the USDOD procurement 
contracts and the list of the USDOD -funded patents owned by Boeing with potential LCA -related 
applications.349 None of these arguments and related pieces of evidence was properly discussed by 
the Panel.350 
5.118.   The elements outlined above are essential for the completion of the legal analysis. The 
determination of whether the funding and access provided to Boeing under the USDOD procurement 
contracts constitute collaborative arrangements with characteristics ana logous to equity infusions 
within the meaning of Article  1.1(a)(1)(i) of the SCM  Agreement involves a multifaceted analysis, 
which needs to take into account not only the objectives and nature of the USDOD procurement 
contracts, but also their actual and p otential effects. In the absence of sufficient factual findings by 
the Panel or undisputed facts on the record relating to some essential elements characteristic of the 
nature and effect of the USDOD procurement contracts, we are not in a position to compl ete the 
                                                
342 United States' second written submission to the Panel, paras. 276 -279 and 391 -392. 
343 European Union's second written submission to the Panel, para. 398.  
344 European Union's second written submission to the Panel, paras. 433 -434. 
345 United States' second written submission to the Panel, paras. 319 -320. 
346 United States' first written submission to the Panel, paras. 296 -302; second written submission to 
the Panel, para. 321.  
347 United States' se cond written submission to the Panel, paras. 315 -317. 
348 See e.g. European Union's first written submission to the Panel, paras. 243 -362; United States' 
second written submission to the Panel, paras. 270 -428. 
349 United  States' appellee's submission, para. 59  (referring to United States' first written submission to 
the Panel, paras. 371 -372 and 377 ). 
350 For instance, despite the fact that the Panel described how R&D under these two categories of 
programme elements is commissioned and conducted, the Panel did no t explain their relevance for its analysis 
of the USDOD procurement contracts, as it did for the USDOD assistance instruments. (See Panel Report, 
paras. 8.300 -8.310)  WT/DS353/AB/RW  
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 analysis and determine whether the USDOD procurement contracts involve financial contributions 
within the meaning of Article  1.1(a)(1) of the SCM  Agreement.  
5.2.4   United States' conditional appeal on specificity  
5.119.   We recall that, in its Notice of Other App eal, the United States conditionally appeals the 
Panel's findings relating to the specificity of the post -2006 NASA procurement contracts, cooperative 
instruments, and Space Act Agreements; the post -2006 USDOD assistance instruments; and the 
FAA-Boeing CLE EN Agreement.351 The United  States' claim is contingent upon us reversing the Panel 
and completing the legal analysis to find that the USDOD procurement contracts are collaborative 
R&D arrangements that result in the same financial contribution and confer be nefit on the same 
basis as the other NASA, USDOD, and FAA instruments.352 Having found above that we are unable 
to complete the legal analysis with respect to the existence of financial contribution, the event 
triggering the United States' conditional appeal  has not occurred.  
5.2.5   Conclusion  
5.120.   In sum, we find that the Panel acted inconsistently with Article  11 of the DSU in its financial 
contribution analysis under Article  1.1(a)(1) of the SCM  Agreement by not engaging sufficiently with 
the European  Union's evidence  and arguments, and by failing to provide reasoned and adequate 
explanations for its findings . Furthermore, we find that the Panel's benefit analysis suffers from the 
same shortcomings.  
5.121.   We therefore reverse  the Panel's finding , in paragraphs 8.437.b and 11.7.c.i of the 
Panel  Report, that, assuming arguendo  the payments and access to USDOD facilities, equipment, 
and employees provided to Boeing through the pre -2007 and post -2006 USDOD procurement 
contracts were to involve financial contributions, the Europea n Union has not established that they 
confer a benefit on Boeing within the meaning of Article  1.1(b) of the SCM  Agreement.  We also find 
that there are insufficient factual findings by the Panel or undisputed facts on the Panel record for 
us to complete the legal analysis in this respect.  
5.3  European Union's claim relating to the Panel's finding concerning FSC/ETI tax 
concessions under Articl e 1.1(a)(1)(ii) of the SCM Agreement  
5.122.   The European Union requests us to reverse the Panel's finding that the European Union had 
failed to establish that, after the expiry of the implementation period, the United States continues 
to grant or maintain subsidi es to Boeing in the form of tax concessions pursuant to the Foreign Sales 
Corporation/Extraterritorial Income (FSC/ETI) measures.353 The European Union further requests 
that we complete the legal analysis and find that the United States continues to grant or  maintain 
prohibited subsidies, in that the subsidy found to exist in the original proceedings has not been 
withdrawn within the meaning of Article  7.8 of the SCM Agreement.354 
5.123.   The United States requests us to uphold the Panel's finding that the European Uni on had not 
established that, after the expiry of the implementation period, the United  States continues to grant 
or maintain subsidies to Boeing in the form of FSC/ETI tax concessions.355 The United States also 
requests that we reject the European Union's re quest to complete the legal analysis because the 
European Union failed to identify the Panel's findings of fact or undisputed evidence that would allow 
us to complete the legal analysis.356 
5.3.1   The Panel's findings  
5.124.   We begin by recalling the FSC/ETI measures at i ssue and related findings made in the original 
proceedings. Next, we turn to the arguments of the participants before the Panel and the Panel's 
findings in the compliance proceedings. Subsequently, we assess whether the Panel erred in finding 
                                                
351 See United States' Notice of Other Appeal, para. 8.  
352 United  States' other appellant's s ubmission, para. 255 . 
353 European Union's appellant's submission, para. 141.  
354 European Union's appellant's submission, para.  141. 
355 United States' appellee's submission, paras. 96 and 107.  
356 United States' appellee's submission, para.  107. WT/DS353/AB/RW  
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 that the Euro pean Union had failed to establish that, after the expiry of the implementation period, 
the United States continues to grant or maintain subsidies to Boeing in the form of tax concessions 
pursuant to the FSC/ETI measures.  
5.125.   The original panel found that, bet ween 1989 and 2006, Boeing benefited from FSC/ETI tax 
concessions pursuant to the provisions of the US Internal Revenue Code relating to the income of 
FSCs and successor legislative acts.357 The legislative acts that allowed Boeing to receive FSC/ETI 
subsidi es between 1989 and 2006 comprised certain provisions of the US  Internal Revenue Code 
relating to Foreign Sales Corporations (the original FSC measure), the ETI Act, and the AJCA.358 
5.126.   The original FSC measure359 granted FSCs a tax exemption on a portion of inco me generated 
by the sale or lease of "export property" – referred to as "exempt foreign income".360 It also allowed 
US parent companies of FSCs to defer paying taxes on certain "foreign trade income" that would 
normally be subject to immediate taxation and t o avoid paying taxes on dividends received from 
their FSCs related to "foreign trade income".361 The United States repealed the original FSC measure 
by enacting the ETI Act .362 However, Section 5(c)(1) of the ETI Act grandfathered tax concessions, 
available un der the original FSC measure, for certain transactions – in particular, transactions 
pursuant to a binding contract between an FSC and an unrelated person that was in effect on 
30 September 2000.363 The ETI  Act also introduced a new exclusion from taxation f or income 
generated by certain qualifying transactions involving the sale or lease of "qualifying foreign trade 
property" ("extraterritorial income" exclusion).364 The United States repealed the ETI Act by enacting 
the AJCA on 22 October 2004.365 However, the AJCA provided for a transitional period between 
1 January 2005 and 31 December 2006, during which the ETI tax concessions remained available to 
a limited extent for certain transactions.366 In addition, Section 101(f) of the AJCA, entitled "Binding 
Contracts ", grandfathered the ETI Act exclusion of "extraterritorial income" from taxation for 
qualifying transactions pursuant to a binding contract in effect on 17 September 2003.367 The AJCA 
also left intact Section 5(c)(1) of the ETI Act, which grandfathered tax concessions under the original 
FSC measure with respect to certain qualifying transactions pursuant to a binding contract in effect 
on 30 September 2000.368 
5.127.   The original panel found that the FSC/ETI tax concessions used by Boeing between 1989 
and 2006 consti tuted export -contingent subsidies within the meaning of Article 3.1(a) of the 
SCM Agreement and found specificity of these subsidies on the basis of Article 2.3 of the 
SCM Agreement.369 As was also found in the original proceedings (first by the panel, and t hen, on 
different grounds, by the Appellate Body), the FSC/ETI subsidies received by Boeing caused serious 
prejudice to the interests of the European Communities in the LCA market within the meaning of 
Article 5(c) of the SCM Agreement.370 
5.128.   On 17 May 2006, th e United States enacted the Tax Increase Prevention and Reconciliation 
Act of 2005 (TIPRA).371 Section 513 of the TIPRA is entitled "Repeal of FSC/ETI Binding Contract 
Relief".372 Section 513(a) of the TIPRA repeals the provision in Section 5(c)(1) of the ETI Act that 
                                                
357 Original Panel  Report,  para. 7.1419.  
358 Original Panel Report , paras.  7.1379 -7.1385,  7.1406 , and 7.1419.  
359 Panel Report , para. 8.567 ( referring to United States Code , Title 26 (Internal Revenue Code), 
Sectio ns 245, 921 -927, and 951 (2000)  (Panel Exhibit EU -402)). 
360 Panel Report, para. 8.570.  
361 Panel Report,  para. 8.570  (referring to Original Panel Report , para. 7.1379 ). 
362 Original Panel Report , para. 7.13 80 (referring to Panel Report, US – FSC, para. 8.1(a); 
Appellate  Body Report, US – FSC, paras. 177(a) and 178). S ee also Panel Report, para.  8.571.  
363 Original Panel Report , para.  7.1381.  
364 Panel Report, para. 8.571 and fn 1752 thereto. See also Original Panel Report , 
paras. 7.1380 -7.1382.  
365 Panel Report, para. 8.571. See also Original Panel Report , para. 7 .1384 . 
366 Panel Report, US – FSC (Article  21.5 – EC II) , para.  2.15. 
367 Original Panel Report , para. 7.1384.  
368 Original Panel Report , para. 7.1384.  
369 Original Panel Report, paras. 7.140 5-7.1406  and 7.1463 -7.1464.  
370 Original Panel Report , para . 7.1833; Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , 
para. 1350(d)(iii)(B).  
371 Panel Report, para . 8.573 and fn 1758 thereto (referring to Tax Increase Prevention and 
Reconciliation Act of 2005, Public Law No. 109 -222, 120 Stat. 345, 17 May 200 6, Section 513  (TIPRA) 
(Panel  Exhibit EU -405)). 
372 Original Panel Report, para. 7.1385 (referring to TIPRA (Original Panel  Exhibit EC -627)).  WT/DS353/AB/RW  
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 grandfathered the original FSC tax concessions with respect to transactions pursuant to a binding 
contract in effect on 30 September 2000. Section 513(b) of the TIPRA repeals the provisions in 
Section 101(f) of the AJCA that grandfathered the ETI Act exclusion of "extraterritorial income" from 
taxation with respect to transactions pursuant to a binding contract in effect on 17  September 
2003.373 Section  513(c) of the TIPRA provides that "{t}he amendments made by this section shall 
apply to taxable ye ars beginning after the date of the enactment of this Act."374 
5.129.   The European Union asserted in the original proceedings that the TIPRA did not fully repeal 
FSC/ETI tax concessions and argued on that basis that Boeing continued to benefit from FSC/ETI 
tax concessions after 31 December 2006.375 The original panel, however, considered that it was not 
necessary for it to decide whether Boeing would benefit from FSC/ETI tax concessions after 2006 
and, consequently , made no finding on that issue.376 
5.130.   Before the Panel  in these compliance proceedings, the European Union argued that, despite 
the purported repeal of FSC/ETI tax concessions by the TIPRA, certain concessions continued to be 
available to Boeing after 31 December 2006. The European Union asserted that, under the TIPRA, 
Boeing is eligible for FSC/ETI tax concessions with respect to income derived from certain pre -2006 
transactions and received in the post -implementation period.377 In support of its arguments, the 
European Union relied on Internal Revenue Service Memorandum No. AM  2007-001 ( 2006 IRS 
Memorandum), which provides that the TIPRA repeals FSC/ETI tax concessions prospectively for 
transactions entered into during a taxable year that begins after 17  May 2006.378 
5.131.   According to the European Union, based on the 2006 IRS Memorandum, Boeing continues 
to be eligible for FSC/ETI tax concessions with respect to foreign income received after 
31 December  2006 from: (i) a sale or lease entered into before 1 January 2005; and (ii) a sale or 
lease entered into before 1  January 2007, pursuant to a binding contract that was in place with an 
unrelated person on 17 September 2003 and at all times thereafter.379 The European Union further 
submitted to the Panel a list of Boeing's orders made pursuant to a sale or lease entered  into before 
1 January  2005 allegedly generating income after 2012 and qualifying for FSC/ETI tax concessions 
under the TIPRA.380 
5.132.   The European Union contended that, because the TIPRA had not fully repealed FSC/ETI tax 
concessions with respect to transactions  based on certain pre -existing long -term binding contracts, 
those transactions involve a financial contribution in the form of revenue "foregone" within the 
meaning of Article 1.1(a)(1)(ii) of the SCM Agreement.381 The European Union further argued that 
FSC/ETI tax concessions confer a benefit within the meaning of Article 1.1(b) of the SCM  Agreement 
and constitute specific subsidies within the meaning of Article 2.3 of the SCM  Agreement.382 Thus, 
for the European Union, the United States continues to grant or maintain FSC/ETI subsidies with 
respect to Boeing, and therefore, failed to "withdraw the subsidy" within the meaning of Article 7.8 
of the SCM Agreement.  
5.133.   In response, the United States argued that Boeing had not used FSC/ETI tax concessions 
after 2006 and  that the mere availability of FSC/ETI tax concessions in the post -implementation 
period was insufficient to establish that the United States had not withdrawn the FSC/ETI subsidies 
                                                
373 Original Panel Report, para. 7.1385 (referring to TIPRA  (Original Panel  Exhibit EC -627)).  
374 Original Panel Report,  para. 7.1385 ( quoting  TIPRA  (Original Panel Exhibit  EC-627)).  
375 Original Panel Report , para.  7.389.  
376 Original Panel Report , para s. 7.1427 -7.1428.  
377 European Union's first written submission to the Panel, paras. 394 -397. 
378 Panel Report, para. 8.578 (refer ring to European Union's first written submission  to the Panel , 
para. 394, in turn quoting  Office of Chief Counsel, Internal Revenue Service "Qualification for FSC benefits and 
ETI exclusions" (Memorandum No. AM 2007 -001), 22  December  2006 (2006 IRS Memorandum)  (Panel Exhibit 
EU-406), p. 6).  
379 Panel Report, para. 8.579 (referring to European Union's first written s ubmission to the Panel, 
paras.  394-395).  
380 Panel Report, para. 8.580 (referring to European Union's first written submission  to the Panel, 
para. 396; International Trade Resources Report, Boeing FSC/ETI Tax Exemptions Post -2011 (13 December 
2012)  (ITR FSC/ETI Report)  (Panel Exhibit EU -24), attachment 1) . 
381 European Union's first written submission to the Panel, para. 401.  
382 European Union's f irst written submission to the Panel, para s. 403-406. WT/DS353/AB/RW  
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 with respect to Boeing.383 The United States further contended that the 2006  IRS Memorandum 
relied on by the European Union to show that Boeing did use FSC/ETI tax concessions in the 
post-implementation period was the same 2006 IRS Memorandum it had relied on in the original 
proceedings.384 According to the United States, the origin al panel examined that evidence and 
declined to find that Boeing would continue to receive FSC/ETI tax concessions after 2006.385 
Therefore, in the United States' view, the European Union had not established that FSC/ETI tax 
concessions were provided to Boei ng after 2006 and in the post -implementation period.386 
5.134.   The Panel considered that the issue it had to resolve in order to determine whether the 
United  States had failed to withdraw the FSC/ETI subsidies to Boeing was whether the United States 
continued to pr ovide such subsidies to Boeing after 2006. In resolving that issue, the Panel 
addressed the following three questions: (i) whether the original panel had already made a 
determination as to whether Boeing continued to use FSC/ETI tax concessions after 2006;  
(ii) whether it would be sufficient for the European  Union to establish that, after 2006, FSC/ETI tax 
concessions continued to be available, or whether it was required to establish that Boeing used 
FSC/ETI tax concessions; and (iii) whether, based on the evidence submitted by the parties, Boeing 
did in fact continue to use FSC/ETI tax concessions.387 
5.135.   With respect to the first question, the Panel noted that the original panel confirmed that 
between 1989 and 2006, FSC/ETI tax concessions constituted specific s ubsidies. However, the 
European Communities' estimate of the amount of those subsidies did not include the alleged 
post-2006 tax concessions. Therefore, the original panel had found that it was not necessary for it 
to reach a conclusion as to whether Boein g continued to use FSC/ETI tax concessions after 2006.388 
Accordingly, there was no determination by the original panel as to whether Boeing continued to use 
FSC/ETI tax concessions after 2006.389 
5.136.   The Panel then turned to the second question, namely whether th e European Union was 
required to establish that Boeing used the FSC/ETI tax concessions after 2006, or whether it was 
sufficient for the European Union to establish that the FSC/ETI tax concessions were available to 
Boeing, so that Boeing was eligible  to use these concessions after 2006.390 The Panel concluded that, 
where a tax concession is made available – but a potential recipient does not take advantage of the 
concession – the recipient continues to pay government revenue that is otherwise due, and there is 
no act of "foregoing" or "failure to collect" revenue on the part of the government.391 Therefore, the 
Panel considered that the European Union was required to establish that Boeing received FSC/ETI 
tax concessions in order to demonstrate a financial cont ribution under Article  1.1(a)(1)(ii) of the 
SCM Agreement, and that it would be insufficient for the European  Union to show only that FSC/ETI 
tax concessions were available to Boeing.392 
5.137.   In addressing the third question, the Panel found that the evidence add uced by the 
European  Union related to the question of whether FSC/ETI tax concessions were available  to 
Boeing, and thus fell short of showing that Boeing used FSC/ETI tax concessions.393 In addition, the 
Panel found that the United States' evidence constitu ted a prima facie case that Boeing did not use 
FSC/ETI tax concessions after 2006 and that the European Union's evidence was insufficient to rebut 
that.394 
                                                
383 Panel Report, para. 8.584 (referring to United States' first written submission  to the Panel, 
para. 490; Statement of J. H. Zrust, Vice President of Tax of The Boeing Company (20  July 2009)  (Panel 
Exhibit USA-232)). 
384 Panel Report, para. 8.584 (referring to United States' first written submission  to the Panel, 
paras.  491-492, in turn referring to Original Panel Report , paras. 7.1421 -7.1428 ). 
385 Panel Report, para. 8.584 (referring to United States' first written submission  to the Panel , 
paras.  491-492, in turn referring to Original Panel Report , para. 7.1428 ). 
386 United States' first written submission to the Panel, para. 492.  
387 Panel Report, para . 8.588.  
388 Panel Report, para. 8.590 (referring to Original Panel Report , para s. 7.1400 , 7.1408, and 7.1427) . 
389 Panel Report, paras. 8.590 -8.591 (referring to Original Panel Report , para s. 7.1400, 7.1408 , and 
7.1427).  
390 Panel Report, para. 8.593.  
391 Panel R eport, para. 8.601.  
392 Panel Report, paras. 8.596 -8.597 and 8.600 -8.601.  
393 Panel Report, para. 8.606.  
394 Panel Report, para. 8.607.  WT/DS353/AB/RW  
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 5.138.   The Panel thus concluded that the European Union had not established that, after the expiry 
of the imp lementation period, the United States continues to grant or maintain subsidies to Boeing 
in the form of tax concessions pursuant to the FSC/ETI measures, because the European Union had 
failed to demonstrate that those tax concessions involved a financial c ontribution within the meaning 
of Article 1.1(a)(1)(ii) of the SCM Agreement.395 
5.3.2   Whether the Panel erred in its finding under Article 1.1(a)(1)(ii) of the 
SCM Agreement with respect to FSC/ETI tax concessions  
5.139.   The European Union appeals the Panel's finding t hat the European Union had not established 
that, after the expiry of the implementation period, the United States continues to grant or maintain 
subsidies to Boeing in the form of FSC/ETI tax concessions.396 The European  Union argues that this 
finding is bas ed on the Panel's erroneous interpretation of Article  1.1(a)(1)(ii) of the SCM Agreement 
as requiring the European Union to demonstrate that Boeing used FSC/ETI tax concessions in order 
to establish a financial contribution in the form of revenue foregone.397  
5.140.   The United States, for its part, submits that the Panel correctly found that the 
European  Union had failed to establish that Boeing received FSC/ETI subsidies in the 
post-implementation period.398 We begin by setting out our interpretation of Article  1.1(a)(1)(ii) of 
the SCM Agreement as relevant to the claim before us. Then, we turn to review the Panel's analysis 
and assess whether it erred in the interpretation of this provision.  
5.141.   Article 1.1(a)(1)(ii) of the SCM Agreement provides that there is a financi al contribution by 
a government where "government revenue that is otherwise due is foregone or not collected 
(e.g. fiscal incentives such as tax credits)."399 The term "revenue" is defined as an "individual source 
or item of (private or public) income" or "t he amount of income deriving from this".400 The term 
"government" qualifies the term "revenue" and indicates that Article 1.1(a)(1)(ii) is concerned with 
revenue to which a government is entitled. Article 1.1(a)(1)(ii) describes the relevant conduct that 
may constitute a financial contribution under this provision as the foregoing or not collecting of 
government revenue. The text of Article 1.1(a)(1)(ii) also indicates, by way of example, that 
government revenue may be "foregone" or "not collected" by means o f fiscal incentives, such as tax 
credits.  
5.142.   The Appellate Body has held that the word "foregone" in Article 1.1(a)(1)(ii), on the one 
hand, suggests that a government has given up an entitlement to raise revenue.401 The word 
"collect", on the other hand, indic ates an action of gathering something, such as contributions of 
money or taxes.402 Government revenue "not collected" in Article 1.1(a)(1)(ii) thus concerns the 
omission to gather revenue, while government revenue "foregone" refers to the relinquishment of 
an entitlement to raise revenue.  
5.143.   We recall that, in introducing the forms of financial contribution listed in subparagraphs  (i) to 
(iv), Article 1.1(a)(1) of the SCM Agreement stipulates that "there is a financial contribution by a 
government". This indicat es that each of the subparagraphs (i) to (iv) of Article 1.1(a)(1) of the 
SCM Agreement is concerned with a financial contribution made by a government .403 Thus, for a 
financial contribution to exist under Article 1.1(a)(1), it must be established that a typ e of conduct 
that matches the description in one of the subparagraphs (i) to (iv) has occurred and that this 
conduct has been carried out by a government. We note that the type of conduct that falls within 
the scope of subparagraph (ii) of Article 1.1(a)(1 ) includes foregoing or not collecting revenue. 
                                                
395 Panel Report, paras. 8.612 and 11.7.c.ii.  
396 European Union's appellant's submission, para. 105  (referring to Panel Report, p aras. 8.596 -8.612 ). 
397 European Union's appellant's submission, paras. 105 (referring to Panel Report, paras.  8.596 -8.612) . 
398 United States' appellee's submission, para. 96.  
399 Fn omitted.  
400 Oxford English Dictionary online, definition of "revenue", http://www.oed.com/view/Entry/164734 . 
401 Appellate Body Report, US – FSC, para. 90 . 
402 Oxford English Dictionary  online, definition of "collect", http://www.oed.com/view/Entry/36263 . 
403 We note that the term "government" in the introductory clause of Article 1.1(a)(1) refers to a 
government or any public body within  the territory of a Member. Furthermore, Article  1.1(a)(1)(iv) refers to a 
situation where a government "entrusts or directs a private body to carry out one or more of the types of 
functions" illustrated in Article 1.1(a)(1)(i) -(iii). However, this does no t change the requirement of a link 
between a financial contribution and a government.  WT/DS353/AB/RW  
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 Accordingly, the analysis of whether there is a financial contribution within the meaning of 
Article  1.1(a)(1)(ii) of the SCM Agreement requires a determination of whether there has been 
conduct by a government  that amounts to foregoing or not collecting revenue.  
5.144.   As noted above, government revenue may be "foregone" or "not collected" through the 
provision of fiscal incentives to taxpayers. Taxpayers may either use or not use available tax 
concessions. However, because the introductory clause of Article 1.1(a)(1) of the SCM Agreement 
refers to "a financial contribution by a government", the determination of whether revenue is 
"foregone" or "not collected" within the meaning of Article 1.1(a)(1)(ii) must focus on the conduct 
of a government, rather than the use of tax concessions by the eligible taxpayers. This means that, 
in principle, "{e}vidence relied upon in such an analysis must be located in the 'rules of taxation 
that each Member, by its own choice , establishes for itself.'"404 At the same time, we are not 
suggesting that evidence relating to the use of available tax concessions by the eligible taxpayers 
cannot be relevant in the determination of whether a government has "foregone" or "not collected" 
revenue. While evidence concerning the responding Member's rules of taxation is most relevant in 
making such a determination, the use of available tax concessions by the eligible taxpayers may 
provide additional indications that a government has "foregone"  or "not collected" its revenue.  
5.145.   Article 1.1(a)(1)(ii) further refers to revenue that is " otherwise due ".405 We note that the 
word "otherwise" is defined as "in another case" or "in other circumstances"406, while the word "due" 
denotes that something is owed o r payable as an enforceable obligation or debt.407 
Article  1.1(a)(1)(ii) thus refers to the foregoing of or not collecting revenue that would have been 
payable in other circumstances. Accordingly, Article 1.1(a)(1)(ii) does not cover any decision by a 
govern ment not to tax certain income. The words "otherwise due" ensure that only revenue that 
would have been payable in other circumstances, that is revenue otherwise due , can constitute a 
financial contribution  under Article 1.1(a)(1)(ii). In US – FSC (Article  21.5 – EC), the Appellate  Body 
underscored that a "financial contribution" under Article 1.1(a)(1)(ii) does not arise simply because 
a government does not tax income that it could have taxed.408 While, from a fiscal perspective, a 
government might be said t o "forego" revenue when it chooses not to tax certain income, it does 
not mean that this revenue is "otherwise due" within the meaning of Article  1.1(a)(1)(ii) of the 
SCM Agreement .409 
5.146.   As the Appellate Body observed in the past, the term "otherwise due" impl ies a comparison 
between the challenged measure and a "defined, normative benchmark".410 The Appellate Body 
considered that, because Members, in principle, have the sovereign authority to determine their own 
rules of taxation, the comparison under Article  1.1(a)(1)(ii) must necessarily be between the rules 
of taxation contained in the challenged measure and other rules of taxation of the Member 
concerned.411 The Appellate Body further recognized that it may be difficult to identify the 
appropriate benchmark for  comparison under Article  1.1(a)(1)(ii), because domestic rules of 
taxation are varied and complex. The Appellate Body stated that, "'{i}n identifying the appropriate 
benchmark for comparison, panels must obviously ensure that they identify and examine fis cal 
situations which it is legitimate to compare', and that this will be the case when there is 'a rational 
                                                
404 Appellate Body Report,  US – Large Civil Aircraft (2nd complaint) , para . 813 (quoting Appellate  Body 
Report, US – FSC, para. 90).  
405 Emphasis added.  
406 See Oxford English Dictionary online, definition of "otherwise", 
http://www.oed.com/view/Entry/133247 . See also Panel Report, Canada – Autos , para. 10.159.  
407 Oxford English Dictionary online, definition of "due", http://www.oed.com/view/Entry/58238 . 
See also Panel Report, Canada – Autos , para. 10.159.  
408 Appellate Body Report, US – FSC (Article 21.5 – EC), para. 88.  
409 Appellate Body Report, US – FSC (Article 21.5 – EC), para. 88 (referring to Appellate Body Report, 
US – FSC, para. 90 ). 
410 Appellate Body Report,  US – Large Civil Aircraft (2nd complaint) , para . 808 (referring to 
Appellate  Body Report, US – FSC (Article  21.5 – EC), para.  89, in turn referring to Appellate B ody Report,  
US – FSC, para.  90). 
411 Appellate Body Report,  US – Large Civil Aircraft (2nd complaint) , para. 808 (referring to 
Appellate  Body Report, US – FSC (Article  21.5 – EC), para.  89, in turn referring to Appellate Body Report, US – 
FSC, para.  90). WT/DS353/AB/RW  
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 basis for comparing the fiscal treatment of the income subject to the contested measure and the 
fiscal treatment of certain other income.'"412 
5.147.   The App ellate Body in the original proceedings further elaborated on how a panel should 
conduct the analysis of financial contribution under Article 1.1(a)(1)(ii) of the SCM Agreement. The 
Appellate  Body observed that this analysis requires a comparison between t he tax treatment that 
applies to the alleged subsidy recipients and the tax treatment of comparable income of comparably 
situated taxpayers.413 Accordingly, a panel examining a claim under Article 1.1(a)(1)(ii) of the 
SCM Agreement  should first identify the tax treatment that applies to the income of the alleged 
recipients.414 As a second step, a panel should identify a benchmark for comparison, that is, the tax 
treatment of comparable income of comparably situated taxpayers.415 Identifying a benchmark 
involves a n examination of the structure of the domestic tax regime and its organizing principles.416 
As a third step, a panel should compare the reasons for the challenged tax treatment with the 
benchmark tax treatment it has identified after scrutinizing a Member's tax regime.417 Such a 
comparison will enable a panel to determine whether, in light of the treatment of the comparable 
income of comparably situated taxpayers, a government has foregone or not collected revenue that 
is otherwise due in relation to the income  of the alleged recipients.418 
5.148.   In the present case, the European Union argues that the Panel erred in the interpretation of 
Article  1.1(a)(1)(ii) of the SCM Agreement in finding that, in order to establish that revenue 
otherwise due is foregone, the European  Union was required to demonstrate that Boeing actually 
used FSC/ETI tax concessions.419 For the European Union, the phrase "government revenue that is 
otherwise due is foregone" refers to the foregoing of an entitlement  to government revenue, 
irrespective o f whether that entitlement is actually exercised by the recipient.420 The European  Union 
submits that, as found by the Appellate Body in US – FSC, "the term 'otherwise due' implies some 
kind of comparison between the revenues due under the contested measure and revenues that would 
be due in some other situation" and that "the basis of comparison must be the tax rules applied by 
the Member in question ."421 Therefore, an enquiry of whether "government revenue that is otherwise 
due is foregone" does not require consideration of whether a tax concession provided to a recipient 
is used by an individual recipient, but it does require a comparison between what th e challenged tax 
treatment provides and what the baseline tax treatment provides.422 
5.149.   Furthermore, the European Union argues that the Panel's interpretation of 
Article  1.1(a)(1)(ii) would allow for an easy circumvention of the SCM Agreement, thereby defeating  
its object and purpose. In particular, the European Union contends that, under the Panel's 
interpretation, all that would be required to "withdraw" a subsidy would be for the recipient to stop 
unilaterally using the available tax break between the end of the implementation period and the 
closing of the factual record in the compliance dispute. In the European Union's view, however, this 
would not prevent the recipient from using the tax break again at any point in the future.423 
5.150.   For its part, the United Stat es argues that the European Union's claim before the Panel was 
that Boeing used FSC/ETI tax concessions after the implementation period. Therefore, the dispositive 
question before the Panel was whether Boeing received the alleged subsidies. The United Stat es 
thus contends that the Panel was correct in focusing on that question, without addressing the 
question of whether a financial contribution was "available" to Boeing.424 The United  States also 
                                                
412 Appellate Body Report,  US – Large Civil Aircraft (2nd complaint) , para.  809 (quoting Appellate  Body 
Report, US – FSC (Article  21.5 – EC), para.  92). 
413 Appellate Body Report,  US – Large Civil Aircraft (2nd complaint) , para. 812.  
414 Appellate Body Report,  US – Large Civil Aircraft (2nd complaint) , para. 812. 
415 Appellate Body Report,  US – Large Civil Aircraft (2nd complaint) , para. 813. 
416 Appellate Body Report,  US – Large Civil Aircraft (2nd complaint) , para. 813. 
417 Appellate Body Report,  US – Large Civil Aircraft (2nd complaint) , para. 814.  
418 Appellate Body Report,  US – Large Civil Aircraft (2nd complaint) , para. 814.  
419 European Union's appellant's submission, para. 128 (referring to Panel Report, paras.  8.596 -8.601) . 
See also ibid., para. 141.  
420 European Union's appellant's submission, para. 128 (referring to Appellate Body Report, US – FSC, 
para. 90; Panel Report,  US – Tax Incentives , paras. 7.44 -7.55). 
421 European Union's appellant's submission, para. 131 (quoting Appellate Body Report, US – FSC, 
para. 90). 
422 European Union's appellant's submission, para. 131.  
423 European Union's appellant's submission, para.  138. 
424 United States' appellee's submission, par as. 99 -100 (referring to Panel Report, para. 8.596).  WT/DS353/AB/RW  
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 considers that the Panel applied a correct approach to the asse ssment of the European Union's claim 
because the European Union challenged a subsidy recipient's use of a subsidy, rather than the 
measure at issue "as such".425 
5.151.   The United States further submits that the European Union's concerns about the 
circumvention of the SCM Agreement are not relevant in the present case, because the Panel found 
that Boeing stopped using FSC/ETI tax concessions in 2006, had not used them since, and had no 
intention of using them in the future. Thus, according to the United States, noth ing in the Panel's 
reasoning would prevent a future panel from addressing manipulations of the kind described by the 
European Union if evidenced by the facts before it.426 
5.152.   Turning to our assessment of the Panel's analysis, we recall that the Panel addressed 
whether the European Union was required to establish that "Boeing in fact 'received' or 'used' the 
FSC/ETI benefits after 2006", or whether it was sufficient for the European Union to establish "that 
the FSC/ETI benefits were available to Boeing, or that B oeing was eligible  to use the FSC/ETI benefit 
after 2006".427 The Panel did not consider that demonstrating that the "FSC/ETI benefits were 
available to Boeing is equivalent to demonstrating that Boeing receives a subsidy within the meaning 
of Article  1.1(a) (1)(ii) of the SCM Agreement".428 The Panel explained that if a tax concession is 
made available – but the recipient does not take advantage of the concession – the recipient 
continues to pay revenue that is otherwise due, and there is no act of "foregoing" or "failure to 
collect" revenue on the part of the government.429 The Panel thus considered that the 
European  Union was required to demonstrate that Boeing used FSC/ETI tax concessions in order for 
a financial contribution under Article 1.1(a)(1)(ii) of the SCM Agreement to exist.430 
5.153.   We recall that, according to our interpretation of Article 1.1(a)(1)(ii) of the SCM Agreement 
above, revenue "foregone", in the context of this provision, refers to a government relinquishing an 
entitlement to raise revenue. This m eans that the analysis of whether there is a financial contribution 
in the form of revenue "foregone" requires a determination of whether a government has 
relinquished an entitlement to raise revenue. In principle, evidence relied on in such an analysis wi ll 
be located in a Member's taxation rules.431 In the present case, the Panel did not make that 
determination. The Panel's analysis focused on whether the European Union had demonstrated 
whether Boeing used FSC/ETI tax concessions. This does not comport with  our interpretation of 
Article 1.1(a)(1)(ii) of the SCM Agreement. As noted above, the determination of whether there is a 
financial contribution within the meaning of Article 1.1(a)(1)(ii) must focus on the conduct of a 
government, rather than the use of tax concessions by the eligible taxpayers. The Panel's statement 
that there is no act of "foregoing" or "failure to collect" revenue on the part of the government if a 
tax concession is made available but the recipient does not take advantage of the conces sion reflects 
an erroneous understanding of Article 1.1(a)(1)(ii) of the SCM Agreement.432 
5.154.   In view of the above, we find that the Panel erred in its interpretation of Article 1.1(a)(1)(ii) 
of the SCM Agreement and its assessment of whether FSC/ETI tax conces sions constitute a financial 
contribution within the meaning of this provision. Therefore, we reverse  the Panel's finding, in 
paragraphs 8.612 and 11.7(c)(ii) of the Panel Report, that the European Union had not established 
that, after the expiry of the im plementation period, the United States continues to grant or maintain 
subsidies to Boeing in the form of FSC/ETI tax concessions because the European Union had failed 
to demonstrate that those tax concessions involved a financial contribution within the me aning of 
Article 1.1(a)(1)(ii) of the SCM Agreement.  
5.3.3   Completion of the legal analysis  
5.155.   We now turn to consider the European Union's request for the completion of the legal 
analysis. The European Union requests us to complete the legal analysis and find that the 
                                                
425 United States' appellee's submission, para . 104.  
426 United States' appellee's submission, para.  106. 
427 Panel Report, para. 8.593. (emphasis original)  
428 Panel Report, para. 8.596.  
429 Panel Report, para. 8.601.  
430 Panel Report, paras. 8.596 -8.597, 8.599 -8.600, and 8.606.  
431 Appellate Body Report,  US – Large Civil Aircraft (2nd complaint) , para . 813 (referring to 
Appellate  Body Report, US – FSC, para. 90).  
432 Panel Report, para. 8.601.  WT/DS353/AB/RW  
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 United  States continues to grant or maintain prohibited FSC/ETI subsidies after t he expiry of the 
implementation period and thus failed to "withdraw the subsidy" within the meaning of Article  7.8 
of the SCM  Agreement.433 The European Union has not requested the completion of the legal analysis 
with respect to whether the United States ha s taken "appropriate steps" to remove the adverse 
effects of FSC/ETI subsidies. The United States responds that the European Union has failed to 
identify findings of fact or undisputed evidence that would allow the Appellate Body to complete the 
legal anal ysis.434 
5.156.   We recall the Panel's finding that the European Union had failed to establish that, after the 
expiry of the implementation period, the United States continues to grant or maintain subsidies to 
Boeing in the form of tax concessions pursuant to the FS C/ETI measures.435 We note, however, that 
the scope of the European Union's request for the completion of the legal analysis appears to be 
formulated broadly. On its face, it may be understood to encompass FSC/ETI subsidies at large, and 
not only FSC/ETI sub sidies provided to Boeing. We emphasize that the recommendations and rulings 
of the DSB in this dispute concern only the FSC/ETI subsidies to Boeing. Accordingly, the scope of 
our completion of the legal analysis in this dispute is confined to FSC/ETI subs idies with respect to 
Boeing.  
5.157.   The Appellate Body may complete the legal analysis, with a view to facilitating the prompt 
settlement and effective resolution of the dispute, when the factual findings by the panel436 and/or 
facts on the Panel record, which are  uncontested by the disputing parties437, provide a sufficient 
factual basis for doing so.438 Accordingly, we proceed to assess whether there is a sufficient factual 
basis for us to complete the legal analysis in the present case and to determine whether the 
United States has complied with Article 7.8 of the SCM Agreement. We begin by noting that 
Article  7.8 sets out two options for the Member granting or maintaining a subsidy to comply with 
the recommendations and rulings of the DSB. The Member in question sha ll either: (i) take 
appropriate steps to remove the adverse effects; or (ii) withdraw the subsidy.439 
5.158.   The Appellate Body underscored that the use of the word "or" in the text of Article 7.8 
suggests that the Member concerned may implement the recommendations  and rulings of the DSB 
under Part III of the SCM Agreement by choosing either of these alternative pathways to achieving 
compliance.440 The Member concerned is not required to "take appropriate steps to remove the 
adverse effects" of a subsidy and to "withdraw" the same subsidy. Rather, either of these actions 
can achieve compliance.441 The Appellate Body also recognized that the words "granting or 
maintaining" a subsidy indicate that Article 7.8 reflects an obligation of the Member concerned to 
cease an y conduct amounting to the "granting or maintaining" of subsidies that cause adverse 
effects.442 
5.159.   In US – Upland Cotton (Article  21.5 – Brazil) , the Appellate Body explained that this 
obligation is "of a continuous nature, extending beyond subsidies granted i n the past".443 
Furthermore,  the Appellate Body noted that the phrases "shall take" and "shall withdraw" indicate 
                                                
433 European Union's appellant's submission, para.  141.  
434 United States' appellee's submission, para. 107.  
435 European Union's appellant's submission, para. 141.  
436 See e.g. Appellate Body Reports, US – Gasoline , p. 19, DSR 1996:I, p p. 18-19; Canada – Periodicals , 
p. 24, DSR 1997:I, p. 469 ; Australia – Salmon , paras. 117 -119; US – Large Civil Aircraft (2nd complaint) , 
para. 1255.  
437 See e.g. Appellate Body Reports, US – Lamb , paras. 150 and 172 ; US – Shrimp , paras. 123 -124, 
132, and 140 ; US – Section 211  Appropriations Act , para s. 343 -345; EC and certain member States – Large 
Civil Aircraft , para . 1176; US – Large Civil Aircraft (2nd complaint) , paras. 1252 and 1262.  
438 See also  Appellate Body Reports , Colombia – Textiles , para. 5.30; US – Anti-Dumping Methodologies 
(China) , para. 5.146; Russia – Pigs (EU) , para. 5.141;  EC and certain member States – Large Civil Aircraft , 
para. 1178; EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 5.745.  
439 See Appellate  Body Reports, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.362; US – Upland Cotton ( Article  21.5 – Brazil) , para. 236. 
440 Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.362. 
441 Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.368. 
442 Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.364. 
443 Appellate Body Report, US – Upland Cotton (Article 21.5 – Brazil) , para. 237 . WT/DS353/AB/RW  
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 that compliance with Article  7.8 "will usually involve some action" or "affirmative action" by the 
subsidizing Member, such that it "would norma lly not be able to abstain from taking any action on 
the assumption that the subsidy will expire or that the adverse effects of the subsidy will dissipate 
on their own".444 However, this does not suggest that an implementing Member has a compliance 
obligatio n with respect to a subsidy or subsidies that no longer exist.445 Rather, it reflects that the 
obligation under Article 7.8 extends to recurring annual payments "maintained" by the respondent 
beyond the original reference period.446 As observed by the Appellat e Body in EC and certain member 
States – Large Civil Aircraft (Article 21.5 – US), if a subsidy has ceased to exist, an implementing 
Member is not required to withdraw the subsidy or "take appropriate steps to remove the adverse 
effects" with respect to su ch a subsidy.447 
5.160.   In the present dispute, the United States asserts that it has "enacted legislation terminating 
the Foreign Sales Corporation and Extraterritorial Income ('FSC/ETI') tax benefits".448 We 
understand the United States to argue that, by enacting t he TIPRA, the United States has withdrawn 
the FSC/ETI subsidies with respect to Boeing by ceasing to provide the financial contribution forming 
the basis of those subsidies. Our analysis therefore focuses on whether, by enacting the TIPRA, the 
United  State s has ceased to provide the financial contribution underpinning the FSC/ETI subsidies 
to Boeing and, by that means, has withdrawn these subsidies with respect to Boeing.  
5.161.   We have found above that the Panel erred in focusing on whether Boeing had used FSC/ET I 
concessions in its assessment of whether the United States continues to provide a financial 
contribution in the form of revenue foregone after the expiry of the implementation period. The 
analysis of whether there is a financial contribution in the form of revenue "foregone" should focus 
on whether a government has given up its entitlement to revenue, instead of whether the available 
tax concessions were used by the eligible taxpayers. Accordingly, we now examine whether 
uncontested evidence on the Panel record of these proceedings and the original proceedings allows 
us to determine if, by enacting the TIPRA, the United States has ceased to provide the financial 
contribution in a manner that the US government may no longer be considered to be giving up its  
entitlement to revenue vis -à-vis Boeing.  
5.162.   We recall that the TIPRA was enacted on 17 May 2006 and is the latest legislative act 
concerning FSC/ETI tax concessions. Section 513 of the TIPRA seeks to repeal the two remaining 
FSC/ETI tax concessions – the ori ginal FSC tax concessions, grandfathered by the ETI Act, and the 
ETI Act exclusion of "extraterritorial income" from taxation, grandfathered by the AJCA. 
Section  513(c) of the TIPRA provides that "{t}he amendments made by this section shall apply to 
taxabl e years beginning after the date of the enactment of this Act ."449 
5.163.   On 22 December 2006, the IRS Office of Chief Counsel issued the 2006 IRS Memorandum 
clarifying that the TIPRA repeals FSC/ETI tax concessions prospectively on a transaction -by-
transaction bas is for transactions entered into during a taxable year that begins after 17 May 
2006.450 Before the Panel, the European Union relied on the 2006 IRS Memorandum in support of 
its position that the TIPRA allows Boeing to claim concessions with respect to incom e derived from 
certain pre -2006 transactions and received in the post -implementation period.451 The United  States 
did not specifically contest the proposition advanced by the European  Union. Instead the 
United  States submitted evidence seeking to establish t hat Boeing did not use FSC/ETI tax 
                                                
444 Appellate  Body Report, US – Upland Cotton (Article  21.5 – Brazil) , para. 236. 
445 Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.374. 
446 Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.374  (referring to Appellate Body Report, US – Upland Cotton (Article 21.5 – Brazil) , para. 237 ). 
447 Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.383.  
448 United States' compliance communication to the DSB of 23 September 2012 (WT/DS353/15), 
para. 7. 
449 Original Panel Report, para. 7.1385 (quoting TIPRA  (Original Panel  Exhibit EC -627)).  
450 2006 IRS Memorandum  (Panel Exhibit EU -406), p. 6.  
451 European Union's first written submission to the Panel, paras. 394 -397. WT/DS353/AB/RW  
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 concessions.452 The United States also confirmed in these panel proceedings that no guidance 
superseding the 2006 IRS Memorandum had been issued.453 
5.164.   On appeal, the European Union submits that the 2006 IRS Memorandum is uncontested 
evidence regarding the meaning of the TIPRA that we can rely on in the completion of the legal 
analysis.454 The United States, however, asserts that the 2006 IRS Memorandum does not set out a 
"binding interpretation" of the TIPRA.455 
5.165.   We note that i n deciding whether evidence is uncontested, and can thus be relied on for the 
purpose of completing the legal analysis, we must consider it as presented to the panel, and cannot 
take into account subsequent contestation of such evidence in the appellate pr oceedings without 
substantiation based on the panel record.456 In the present case, the European Union presented 
before the Panel the 2006 IRS Memorandum in support of its argument that, pursuant to the TIPRA, 
Boeing remains eligible for FSC/ETI tax concessi ons in the post -implementation period. In response, 
the United States submitted its own evidence regarding Boeing's use of FSC/ETI tax concession, but 
did not challenge the interpretative value of the 2006 IRS Memorandum regarding the TIPRA. Thus, 
as prese nted to the Panel, the 2006 IRS Memorandum is uncontested evidence for the purposes of 
our completion of the legal analysis. In any event, even if the 2006 IRS Memorandum does not set 
out a "binding interpretation" of the TIPRA under US law, this does not mean that it cannot be relied 
on as pertinent evidence in these proceedings. Therefore, we can rely on the 2006 IRS Memorandum 
in our completion of the legal analysis. We now turn to examine the relevant text of this 
Memorandum.  
5.166.   The 2006 IRS Memorandum pro vides, in relevant part:  
The TIPRA repeal date repeals the binding contract rules for taxable years that begin 
after May 17, 2006. Because the binding contract rules apply on a transaction -by-
transaction basis, we interpret the TIPRA repeal date as repeali ng the binding contract 
rules prospectively, on a transaction -by-transaction basis, for transactions entered into 
during a taxable year that begins after May 17, 2006. In other words, the binding 
contract rules apply to certain transactions, but only if su ch transactions are not entered 
into in a taxable year that begins after May 17, 2006.457 
5.167.   The quoted passage from the 2006 IRS Memorandum clarifies that the TIPRA repeals the 
"binding contract rules", referred to in Sections 513(a) and 513(b) of the TIPRA, p rospectively, for 
transactions entered into during a taxable year that begins after 17 May 2006. It also explicitly 
recognizes that the "binding contract rules" continue to apply to transactions that are not  entered 
into during a taxable year that begins after 17 May 2006. The "binding contract rules" refer to the 
provision of the ETI Act, which grandfathered the original FSC tax concessions, and the provisions 
of Section 101(f) of the AJCA, which grandfathered the ETI Act exclusion of "extraterritorial inc ome" 
from taxation, with respect to certain transactions occurring pursuant to a binding contract  that was 
in effect on a specified date. Thus, based on the interpretative guidance in the 2006 IRS 
Memorandum, the TIPRA terminates the binding contract rules  of the ETI Act and the AJCA for 
transactions that are entered into during a taxable year that begins after 17 May 2006. However, 
Section 513(c) of the TIPRA allows the application of the binding contract rules of the ETI Act and 
the AJCA to certain transa ctions that are entered into during taxable years before  17 May 2006. For 
                                                
452 Panel Report, para. 8.585 (referring to United States' response to Panel question No. 34, para. 146 ; 
Statement of J. H. Zrust, Vice President of Tax of The Boeing Company (20  July 2009)  (Panel Exhibit 
USA-232); Updated Statement of J. H. Zrust, Vice President of Tax of The Boeing Company (3 Decemb er 2013)  
(Panel Exhibit USA -382)). 
453 Panel Report, para. 8.603 (referring to United States' response to the Panel's request for information 
pursuant to Article 13 of the DSU, dated 28 February 2013 ; response to Panel question No.  46, para. 116 ). 
454 European Union's appellant's submission, para. 142.  
455 The United State s points out that the 2006 IRS M emorandum states that it "may not be used or cited 
as precedent ". (United States' appellee's submission, para. 107 ) 
456 In this respect, we note that, purs uant to Article 17.6 of the DSU, appeals shall be limited to issues 
of law covered in the panel report and legal interpretations developed by the panel. As observed by the 
Appellate Body in EC – Hormones , the "{d}etermination of the credibility and weight properly to be ascribed to 
(that is, the appreciation of) a given piece of evidence is part and parcel of the fact finding process and is, in 
principle, left to the discretion of a panel as the trier of facts." (Appellate Body Report, EC – Hormones , 
para. 132) 
457 2006 IRS Memorandum  (Panel Exhibit EU -406), p. 6. ( emphasis  original)  WT/DS353/AB/RW  
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 purposes of the present dispute, this means that Section 513 of the TIPRA has not removed FSC/ETI 
tax concessions for certain qualifying transactions entered into during taxable year s before 
17 May 2006. This has also been confirmed by the United States in the course of the oral hearing.458 
5.168.   The European Union argued before the Panel that the continued availability of FSC/ETI tax 
concessions for certain qualifying transactions entered in to during taxable years before 17 May 2006 
allows Boeing to claim FSC/ETI tax concessions with respect to income generated by such 
transactions after the end of the period covered by the findings of the original panel, that is, after 
31 December 2006.459 The European Union further submitted a list of orders for Boeing aircraft that 
allegedly qualify for the remaining FSC/ETI tax concessions and generate income after 31  December 
2006.460 The United States did not respond to that evidence but referred instead to the Zrust 
statement that Boeing, as a company, did not consider income received after 31  December 2006 to 
be eligible for FSC/ETI tax concessions.461 
5.169.   In its analysis, the Panel did not address the European Union's argument regarding Boeing's 
eligibility for FSC/ETI tax concessions in the post -implementation period and did not examine the 
list of orders for Boeing aircraft submitted by the European Union. The Panel focused instead on the 
evidence submitted by the United States pertaining to the question of Boe ing's use of FSC/ETI tax 
concessions.462 The Panel thus did not reach a conclusion regarding the extent of Boeing's eligibility 
for FSC/ETI tax concessions.  
5.170.    As noted above, Section 513 of the TIPRA has not removed FSC/ETI tax concessions for 
certain qualify ing transactions entered into during taxable years before 17 May 2006. This means 
that if Boeing entered into such qualifying transactions during taxable years before 17 May 2006, 
then Boeing is entitled to claim FSC/ETI tax concessions with respect to inc ome generated by those 
transactions. Therefore, to the extent that Boeing remains entitled to FSC/ETI tax concessions in 
the post -implementation period, the United States has not ceased to provide a financial contribution 
and thus has not withdrawn FSC/ETI  subsidies with respect to Boeing within the meaning of 
Article  7.8 of the SCM Agreement.  
5.3.4   Conclusion  
5.171.   In sum, for revenue to be considered "foregone" under Article 1.1(a)(1)(ii) of the 
SCM Agreement, a government must relinquish an entitlement to raise revenue. Accordingly, 
establishing that such a financial contribution exists requires a determination that a government has 
relinquished an entitlement to raise revenue. This determination mus t focus on the conduct of a 
government, rather than on the use of tax concessions by the eligible taxpayers. We find that t he 
Panel erred by focusing instead on whether Boeing used FSC/ETI tax concessions.  
5.172.   We therefore reverse  the Panel's finding, in parag raphs 8.612 and 11.7 .c.ii of the Panel 
Report, that the European Union had not established that, after the expiry of the implementation 
period, the United States grants or maintains subsidies to Boeing in the form of FSC/ETI tax 
concessions because the Eur opean Union had failed to demonstrate that those tax concessions 
involved a financial contribution within the meaning of Article 1.1(a)(1)(ii) of the SCM Agreement. 
Furthermore, we have completed the legal analysis and find that, to the extent that Boeing remains 
entitled to FSC/ETI tax concessions in the post -implementation period, the United States has not 
                                                
458 We note that, in response to questioning at the oral hearing, the United States confirmed that, 
pursuant to the TIPRA, if a company entered into a qualifying transaction in taxable years before 17 May 2006, 
it would be entitled to FSC/ETI tax concessions with respect to income generated by such transaction after 
2006. 
459 Panel Report, para. 8.579 (referring to European Union's first written submission  to the Panel , 
para. 394 and f n 1030 thereto and para. 395; 2006 IRS Memorandum  (Panel Exhibit EU -406), p. 6 ). The 
original panel found that Boeing received FSC/ETI subsidies between 1989 and 2006, but declined to make a 
finding on whether Boeing would  continue to receive FSC/ETI subsidies after 2006. (Original Panel Report , 
paras. 7.1419 and  7.1427)  
460 Panel Repo rt, para. 8.580 (referring to European Union's firs t written submission to the Panel, 
para. 396; ITR FSC/ETI Report  (Panel Exhibit EU -24), attachment 1 ). 
461 Panel Report, para. 8.585 (referring to United States' response to Panel question No. 34, para. 146 ; 
Statement of J. H. Zrust, Vice President of Tax of The Boeing Company (20  July 2009)  (Panel Exhibit 
USA-232); Updated Statement of J. H. Zrust, Vice President of Tax of The Boeing Company (3 December 2013)  
(Panel Exhibit USA -382)). 
462 Panel Report, paras. 8.606 -8.610.  WT/DS353/AB/RW  
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 ceased to provide a financial contribution and thus has not withdrawn FSC/ETI subsidies with respect 
to Boeing within the meaning of Article 7.8 of the  SCM Agreement.  
5.4  European Union's claims relating to the Panel's findings concerning specificity under 
Article 2.1(c) of the SCM  Agreement  
5.173.   In relation to the Panel's findings under Article  2.1(c) of the SCM  Agreement, the 
European  Union raises two sets of c laims relating to two different subsidy measures. First, the 
European  Union requests us to reverse the Panel's finding that the subsidies provided to Boeing 
through the City of Wichita IRBs are not specific within the meaning of the third factor in 
Article  2.1(c), second sentence ("the granting of disproportionately large amounts of subsidy to 
certain enterprises"), and its conclusion that the European  Union failed to establish that the 
United  States has not withdrawn the subsidy.463 In support of this reques t, the European  Union 
argues that the Panel erred in its interpretation and application of Article  2.1(c) of the 
SCM Agreement and failed to make an objective assessment of the matter before it under Article  11 
of the DSU, in limiting its assessment of de facto specificity of the City of Wichita IRB subsidy 
programme to the period of time after the end of the United  States' implementation period.464 For 
its part, the United  States asserts that the Panel did not err in finding that the subsidy provided 
through  the IRBs is no longer specific and correctly based the specificity analysis on information 
post-dating the implementation period.465 
5.174.   Second, the European  Union requests us to reverse the Panel's finding that the subsidies to 
Boeing provided by South  Carolina through EDBs for the funding of Project Gemini facilities and 
infrastructure are not specific within the meaning of Article 2.1(c) of the SCM  Agreement.466 In 
support of this request, the European Union claims that the Panel erred in the inter pretation of 
Article  2.1(c) by interpreting the term "limited number" in the first factor in Article  2.1(c), second 
sentence ("use of a subsidy programme by a limited number of certain enterprises"), as meaning a 
number smaller than three. The European Uni on also argues that the Panel erred in its interpretation 
and application of the term "certain enterprises" in the same clause by including in its analysis EDBs 
issued to public entities, such as cities and public colleges. Furthermore, the European Union submits 
that the Panel erred in interpreting the term "predominant" in the second factor in Article  2.1(c), 
second sentence ("predominant use by certain enterprises"), to involve a concept entirely different 
from the term "disproportionately" in the third factor in Article  2.1(c), second sentence ("the 
granting of disproportionately large amounts of subsidy to certain enterprises")467. In addition, the 
European  Union alleges that the Panel failed to make an objective assessment as required pursuant 
to Article  11 of the DSU of the factors in the third sentence of Article  2.1(c).468 In response, the 
United States submits that the Panel's specificity findings relating to EDBs were based on a correct 
interpretation and application of Article 2 of the SCM Agreement a s well as on an objective 
assessment of the evidence, consistent with Article 11 of the DSU.469 
5.175.   We begin by addressing Article  2.1(c) of the SCM  Agreement. We then turn to the 
European  Union's claims relating to the IRB subsidies that the Panel erred in its interpretation and 
application of Article  2.1(c) and failed to make an objective assessment of the matter when finding 
that the relevant period over which to consider the existence of "disproportionately large amounts 
of subsidy" in these proceedings is th e period after the end of the United  States' implementation 
period. In this context, we also consider the European Union's request for completion of the legal 
analysis with respect to the IRB subsidies. Thereafter, we address the European  Union's claims 
relating to the EDB subsidies that the Panel erred in its interpretation of the term "limited number", 
its interpretation and application of the term "certain enterprises", and its interpretation of the term 
"predominant use" in Article  2.1(c), second senten ce. Finally, we consider the European Union's 
claim under Article  11 of the DSU regarding the Panel's assessment of the factors in the third 
sentence of Article 2.1(c), and its request for completion of the legal analysis with regard to the EDB 
subsidies.  
                                                
463 Panel Report, paras. 8.640 and 11.7 .c.iii. 
464 European Union's appellant's submission, para. 145.  
465 United States' appellee's submission, para. 108.  
466 Panel Report, para. 8.843.  
467 European Union's  appellant's submission,  para. 224.  
468 European Union's  appellant's submission, para. 224.  
469 United States' appellee's submission, para. 9.  WT/DS353/AB/RW  
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 5.4.1   Article 2.1(c) of the SCM  Agreement  
5.176.   Article 2.1 of the SCM  Agreement reads:  
2.1  In order to determine whether a subsidy, as defined in paragraph  1 of Article 1, 
is specific to an enterprise or industry or group of enterprises or industries (referred to 
in this Agreement as "certain enterprises") within the jurisdiction of the granting 
authority, the following principles shall apply:  
(a) Where the granting authority, or the legislation pursuant to which the 
granting authority operates, explicitly limits acc ess to a subsidy to certain 
enterprises, such subsidy shall be specific.  
(b)  Where the granting authority, or the legislation pursuant to which the 
granting authority operates, establishes objective criteria or 
conditions {*} governing the eligibility for,  and the amount of, a subsidy, 
specificity shall not exist, provided that the eligibility is automatic and that 
such criteria and conditions are strictly adhered to.  The criteria or conditions 
must be clearly spelled out in law, regulation, or other offici al document, so 
as to be capable of verification.  
(c)  If, notwithstanding any appearance of non -specificity resulting from the 
application of the principles laid down in subparagraphs (a) and (b), there 
are reasons to believe that the subsidy may in fact be specific, other factors 
may be considered. Such factors are: use of a subsidy programme by a 
limited number of certain enterprises, predominant use by certain 
enterprises, the granting of disproportionately large amounts of subsidy to 
certain enterprise s, and the manner in which discretion has been exercised 
by the granting authority in the decision to grant a subsidy. {**}  In applying 
this subparagraph, account shall be taken of the extent of diversification of 
economic activities within the jurisdiction  of the granting authority, as well 
as of the length of time during which the subsidy programme has been in 
operation.  
{*fn original} 2 Objective criteria or conditions, as used herein, mean criteria or conditions 
which are neutral, which do not favour cer tain enterprises over others, and which are economic 
in nature and horizontal in application, such as number of employees or size of enterprise.  
{**fn original} 3 In this regard, in particular, information on the frequency with which 
applications for a subsidy are refused or approved and the reasons for such decisions shall be 
considered.  
5.177.   At the outset , we note that the chapeau  of Article 2 refers to "principles" t hat shall apply in 
determining whether a subsidy is specific to certain enterprises. We recall that the use of the term 
"principles" in the chapeau  of Article  2.1 of the SCM  Agreement (instead of, for instance, "rules") 
suggests that subparagraphs (a) thro ugh (c) of this provision are to be considered within an 
analytical framework that recognizes and accords appropriate weight to each principle.470 
Consequently, the application of one of the subparagraphs of Article 2.1 may not by itself be 
determinative in arriving at a conclusion that a particular subsidy is or is not specific. Specifically, in 
accordance with the first sentence of Article  2.1(c), despite the conclusion that there is an 
"appearance of non -specificity" following the application of the princi ples set out in Article  2.1(a) 
and (b), panels may consider that, in light of the arguments and evidence submitted by the parties, 
"there are reasons to believe that the subsidy may in fact be specific."471 In such circumstances, 
panels should consider the r elevant factual features of a challenged subsidy in light of the factors 
listed in Article  2.1(c).472 The aim of the inquiry under Article 2.1(c) is to identify evidence of 
allocation or use of a subsidy that supports a finding of specificity, notwithstandin g any appearance 
                                                
470 Appellate Body Report, US – Anti-Dumping and Countervailing Duties (China) , para. 366.  
471 Appellate Body Report, US – Large Civil Aircraft ( 2nd complaint) , para. 877.  
472 Appellate Body Report, US – Anti-Dumping and Countervailing Duties (China) , para. 370.  WT/DS353/AB/RW  
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 of non -specificity that might arise from a review of the relevant legislation or the express acts of a 
granting authority.473 
5.178.   The second sentence of Article  2.1(c) prescribes the following factors for consideration: 
(i) use of a subsidy prog ramme by a limited number of certain enterprises; (ii) predominant use by 
certain enterprises; (iii) the granting of disproportionately large amounts of subsidy to certain 
enterprises; and (iv) the manner in which discretion has been exercised by the grant ing authority in 
the decision to grant a subsidy. The third sentence of Article  2.1(c) adds that, in applying this 
provision, account shall be taken of the extent of diversification of economic activities within the 
jurisdiction of the granting authority, as well as of the length of time during which the subsidy 
programme has been in operation. Which factors are relevant to the analysis of specificity under 
Article  2.1(c) will be a function of what reasons there are to believe that the subsidy may in fact b e 
specific. Thus, a conclusion as to the existence of specificity in fact may, depending on the 
circumstances of the case, rely on an assessment of one, several, or all of those factors.474 
5.179.   The first factor in the second sentence of Article  2.1(c) refers to the "use of a subsidy 
programme by a limited number of certain enterprises". The word "limited" refers to something that 
is "{c}ircumscribed within definite limits, bounded, restricted … small, slight, low (in number or 
extent)".475 Specifically, the term "l imited number" pertains to a quantity of "certain enterprises" 
that must be found to have used the subsidy programme, and it suggests "an inquiry into whether 
the enterprises or industries so particularized constitute a quantitatively limited group".476 The 
concept of limitation is contained in both Article  2.1(a) and Article  2.1(c) of the SCM  Agreement. 
However, whereas subparagraph (a) concerns limitations found explicitly in, for example, the legal 
instruments of a government authority, subparagraph  (c) ce ntres on the existence of limitations on 
the number of enterprises or industries that actually use the subsidy.477 
5.180.   In this respect , we note the European Union's argument that what constitutes a "limited 
number" of certain enterprises in a particular case can  be determined either by reference to the 
universe of enterprises eligible to receive the subsidy, or, alternatively, by reference to all 
enterprises within the jurisdiction of the granting authority.478 According to the European Union, it 
is for the complai nant to make this choice. In this regard, we note that the principles in 
subparagraphs (a) to (c) of Article 2.1 are to be interpreted in context.479 The text of Article  2.1(c) 
makes it clear that the application of Article  2.1(c) proceeds on the basis of th e conclusions reached 
as a result of the application of the preceding subparagraphs of that provision.480 The analysis under 
Article  2.1(a) and (b) involves consideration of legislation or of a granting authority's acts or 
pronouncements that explicitly limi t access to the subsidy or establish objective access criteria or 
conditions. Consequently, where a panel's assessment proceeds from Article  2.1(a) and (b) to 
Article  2.1(c), the panel's analysis under subparagraph (c) would normally build upon the relevan t 
legislative framework, and in particular the conditions of eligibility  for the subsidy, examined under 
Article  2.1(a) and (b).481 In this regard, the Appellate  Body has stated that the inquiry under 
Article  2.1(c) requires a panel to examine the reasons as  to why the actual allocation or use of the 
subsidy differs from an allocation or use that would be expected if the subsidy were administered in 
accordance with the conditions of eligibility for that subsidy.482 
5.181.   At the same time, a de facto  specificity inqui ry under Article  2.1(c) does not require  
identification of an explicit subsidy programme implemented through law or regulation or through 
other explicit means.483 In this regard the Appellate Body has observed that "in the absence of any 
written instrument o r explicit pronouncement, evidence of a 'systematic activity or series of 
activities' may provide a sufficient basis to establish the existence of an unwritten subsidy 
                                                
473 Appellate  Body Report, US – Carbon Steel (India) , para. 4.373.  
474 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , para. 8 78. 
475 Oxford English Dictionar y online, definition of "limited ", http://www.oed.com/view/Entry/108491 . 
476 Appellate  Body Report, US – Carbon Steel (India) , para. 4.377.  
477 Appellate  Body Report, US – Carbon Steel (India) , para. 4.375.  
478 See European Union's appellant's submission, para s. 232 and 262.  
479 Appellate Body Report, US – Anti-Dumping and Countervailing Duties (China) , para. 370.  
480 Appellate Body Report, US – Large C ivil Aircraft (2nd complaint) , para. 876.  
481 See e.g. Appellate Body Report, US – Countervailing Measures (China) , para. 4.146 . 
482 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , para. 877.  
483 Appellate Body Report, US – Countervailing Measures (China) , para. 4.146 . WT/DS353/AB/RW  
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 programme in the context of assessing de facto specificity."484 Thus, depending on the spe cific facts 
at issue and the arguments made by the parties, the assessment of specificity may commence with 
an inquiry under subparagraph (c) rather than proceed from subparagraphs (a) and (b).485 Moreover, 
it may not always be possible to come to a definiti ve conclusion as to the existence of objective 
criteria or conditions governing the eligibility for, and the amount of, a subsidy within the meaning 
of Article  2.1(b), without examining factual evidence from the perspective of Article  2.1(c). In such 
circumstances, it may not be possible or appropriate for a panel to assess whether the number of 
users of the subsidy programme is small or restricted within the meaning of the first factor in 
Article  2.1(c), second sentence, in light of the conditions of eligi bility for that subsidy, either because 
no de jure conditions of eligibility exist or because their objectivity is contested. However, in those 
cases where the granting authority or the legislation pursuant to which the granting authority 
operates sets out  explicit eligibility criteria for the subsidy, panels should normally examine the 
question of whether the subsidy is used by a limited number of certain enterprises in light of these 
eligibility criteria, as assessed under subparagraphs (a) and (b).486 In any event, we consider that 
the universe of enterprises relevant for the purpose of this assessment depends on the 
characteristics of the measure and the circumstances of the case, rather than on how a complainant 
decides to frame its claim.  
5.182.   Turning to the term "certain enterprises" in the first factor of Article  2.1(c), second sentence, 
we note that this term also appears in the chapeau  of Article  2.1 and in Article  2.1(a). The chapeau  
of Article  2.1 defines "certain enterprises" as "an enterprise or indust ry or group of enterprises or 
industries". As the provision stipulates, this definition applies throughout the SCM  Agreement.487 
The Appellate  Body has observed that "enterprise" may be defined as "{a} business firm, a 
company".488 Furthermore, we note that th e term "enterprise" may refer to "{a} commercial or 
industrial undertaking,  esp. one involving risk; a firm, company, or business".489 In turn, "industry" 
signifies "{a} particular form or branch of productive labour; a trade, a manufacture"490; "an 
industry, or group of 'industries', may be generally referred to by the type of products they produce"; 
"the concept of an 'industry' relates to producers of certain products"; and the "breadth of this 
concept of 'industry' may depend on several factors in a given case."491 The Appellate Body has 
further held that the term "certain enterprises" may refer to a single enterprise or industry or a cla ss 
of enterprises or industries that are known and particularized ; that the concept of "certain 
enterprises" involves a certain amount of indeterminacy at the edges ; and that any determination 
of whether a number of enterprises or industries constitute "ce rtain enterprises" can be made only 
on a case -by-case basis.492 
5.183.   As regards the second factor in Article  2.1(c), second sentence, namely the phrase 
"predominant use by certain enterprises", we note that definitions of the term "predominant" include 
"{c}onstit uting the main … or strongest element; prevailing".493 As we see it, in the context of 
Article  2.1(c), "predominance" may relate to the number  of certain enterprises using the subsidy, 
                                                
484 Appellate Body Report, US – Countervailing Measures (China) , para. 4.149 . Indeed, b y its very 
nature, the analysis  under Article  2.1(c) that seeks to determine whether the subsidy at issue is de facto  
specifi c "normally focuses on evidence other than of the kind found in written documents or express acts or 
pronouncements by a granting authority ". (Ibid. , para. 4.146)  
485 This was the case before the panel and the Appellate  Body in US – Carbon Steel (India) . 
(See Appellate  Body Report, US – Carbon Steel (India) , para. 4.384 ) 
486 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , para. 877.  
487 Appellate Body Report, US – Washing Machines , para. 5.220. The Appellate Body has noted that the 
chapeau  of Article  2.1 "offers interpretative guidance" with regard to the scope and meaning of the rest of 
Article  2. (Appellate  Body Report, US – Anti-Dumping and Countervailing Duties (China) , para. 366) 
488 Appellate Body Report, US – Anti-Dumping and Countervailing Duties (China) , para. 373 (quoting 
Shorter Oxford English Dictionary , 6th edn, A. Stevenson (ed.) (Oxford University Press, 2007), Vol.  1, p. 841).  
489 Oxford English Dictionar y online , definition of "enterprise ", http://www.oed.com/view/Entry/62843 . 
490 Appellate Body Report, US – Anti-Dumping and Countervailing Duties (China) , para. 373 (quoting 
Shorter Oxford English Dictionary , 6th edn, A. Stevenson (ed.) (Oxford University Press, 2007), Vol.  1, 
p. 1371). 
491 Appellate Body Report, US – Anti-Dumping and Countervailing Duties (China) , para. 373 (quoting 
Panel Report, US – Upland Cotton , para. 7.1142). The understanding o f "industry" by reference to the 
producers of a particular product is also consistent with Article 16.1 of the SCM Agreement, which defines 
"domestic industry" as "the domestic producers as a whole of the like products ". (Ibid., fn 294 to para.  373) 
492 Appellate Body Report, US – Anti-Dumping and Countervailing Duties (China) , para. 373  (quoting 
Panel Report, US – Upland Cotton , para. 7.1142 ). 
493 Oxford English Dictionary online, definition of "predominant" , 
http://www.oed.com/view/Entry/149890 . WT/DS353/AB/RW  
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 the amounts  of subsidy used by certain enterprises, or the incidence  with which certain enterprises 
use a subsidy. The first factor in Article  2.1(c), second sentence ("use of a subsidy programme by a 
limited number of certain enterprises"), already captures the aspect of predominance relating to the 
number of subsidy users. In  turn, the third factor in Article  2.1(c), second sentence ("the granting 
of disproportionately large amounts of subsidy to certain enterprises"), specifically captures the 
aspect of predominance relating to the amounts of subsidy used by certain enterpris es. The fact that 
both the number of subsidy users and the amounts of subsidy used are captured by the other factors 
of Article 2.1(c) suggests that "predominant use by certain enterprises" covers primarily the element 
of the incidence or frequency with wh ich the subsidy is used by certain enterprises.  
5.184.   Finally, the third factor in Article  2.1(c), second sentence, concerns "the granting of 
disproportionately large amounts of subsidy to certain enterprises". The Appellate Body has noted 
that the language of t his phrase indicates that the first task of a panel is to identify the "amounts of 
subsidy" granted and then to assess whether the amounts of subsidy are "disproportionately 
large".494 According to the Appellate  Body, determining the existence of disproporti onality "requires 
an assessment as to whether the amounts of subsidy are out of proportion, or relatively too large" 
and "requires a panel to determine whether the actual allocation of the 'amounts of subsidy' to 
certain enterprises is too large relative t o what the allocation would have been if the subsidy were 
administered in accordance with the conditions of eligibility for that subsidy as assessed under 
Article  2.1(a) and (b)".495 Thus, in examining whether disproportionately large amounts of subsidy 
have been granted to certain enterprises within the meaning of Article  2.1(c), panels need to assess: 
(i) whether the granting of the subsidy indicates a disparity between the expected distribution of 
that subsidy, as determined by the conditions of eligibilit y, and its actual distribution; and (ii) the 
reasons for that disparity so as to determine whether there has been a granting of disproportionately 
large amounts of subsidy to certain enterprises.496 
5.4.2   The Panel's findings concerning industrial revenue bonds  
5.185.   The European Union argues that the Panel erred in its interpretation and application of the 
term "disproportionately large amounts of subsidy" in Article 2.1(c) of the SCM  Agreement when it 
failed to follow the provision in Article 2.1(c) that "account shall  be taken … of the length of time 
during which the subsidy programme has been in operation"497 (i.e. 1979 onwards) and instead 
limited its assessment of specificity of Wichita IRB subsidy programme to the period of time "after 
the end of the implementation p eriod" (i.e.  2013 onwards).498 Further, the European  Union submits 
that the Panel failed to make an objective assessment of the matter before it when it inappropriately 
deviated from the approach taken by the panel and the Appellate  Body in the original proc eedings 
to assess the existence of specificity based on the entire duration of the subsidy programme.499 The 
United States asserts that the Panel did not err in finding that the subsidy provided through the IRBs 
is no longer specific and correctly based the specificity analysis on information post -dating the 
reasonable period of time for compliance.500 
5.186.   At the outset , we note that IRBs are issued by cities in Kansas, including the City of Wichita, 
and are sold to the general public on behalf of a qualifying private entity. The proceeds are used by 
the entity on whose behalf the IRBs are issued to purchase, construct, o r improve commercial or 
industrial property (Project Property).501 In general, the City of Wichita acts as the "issuer" of the 
IRBs and retains legal title to the Project Property during the term of the IRB. The private entity 
leases the property, making ren t payments to the holders of the IRBs. For a private entity, the 
advantages of having IRBs issued on its behalf include the ability to borrow funds at lower -than-
                                                
494 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , para. 879.  
495 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , para. 879.  
496 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , para. 879.  
497 European Union's appellant's submission, para. 145.  
498 European Union's appellant's submission, para. 145 (quoting Panel Report, para. 8.634 ). 
499 European Union's appellant's submission, para. 145.  
500 United States' appellee's submis sion, para. 108.  
501 Original Panel Report, para. 7.651. The relevant state law that grants cities in Kansas the authority 
to issue IRBs is Kansas Statutes Annotated  (KSA) . (Ibid., para. 7.652 (referring to KSA , 
Section  12-1740 et seq. (2001)  (Original Panel  Exhibit EC -167))) WT/DS353/AB/RW  
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 market interest rates, property tax abatements for up to ten years on Project Property, and sa les 
tax exemptions on Project Property and services acquired with the proceeds of IRBs.502 
5.187.   The IRB scheme operated differently for Boeing and, subsequently, Spirit Aerosystems 
(Spirit).503 In particular, rather than being purchased by the public, the IRBs issu ed on behalf of 
Boeing or Spirit were purchased by the companies themselves. Therefore, the advantages of the 
IRB issuances to Boeing and Spirit were limited to property tax and sales tax exemptions. The City 
of Wichita issued IRBs to Boeing every year fro m 1979 to 2007.504 IRBs foresee property tax 
abatements on Project Property for up to ten years. Accordingly, property tax abatements stemming 
from IRBs issued to Boeing terminated in 2017. In January 2012, Boeing announced that it would 
close all of its Wic hita operations by the end of 2013.505 
5.188.   Before the Panel, the key point of disagreement between the parties was the relevant time 
period for the assessment of specificity.506 The Panel reasoned that, in the original proceedings, the 
European Communities had cha llenged the entirety of the subsidy received by Boeing since the 
inception of the IRB programme in 1979, so it was consistent with the scope of that challenge for 
the panel to consider the entirety of the IRBs granted to Boeing between 1979 and 2005. Howev er, 
the Panel considered that, in the compliance proceedings, "the relevant financial contribution is that 
which was granted after the end of the implementation period" and that it was "concerned only with 
those tax abatements granted to Boeing from 2013 o nwards".507 The Panel also noted that the 
amount of the tax abatements Boeing received after 2012 was determined by the value of the IRBs 
that were granted from 2002 onwards.508 Therefore, the Panel decided to assess "whether the 
subsidy is de facto  specific b y determining what percentage of the total amount of IRBs provided 
from 2002 onwards was granted to Boeing and Spirit".509 
5.189.   The Panel then noted that, from 2002 onwards, Boeing and Spirit received 32% of the total 
amount of IRBs issued, and that this was cons iderably less than the 69% in the original 
proceedings.510 Taking into account that the IRB programme is open to enterprises with the capacity 
and inclination to make certain investments in commercial or industrial property, the Panel did not 
consider that " Boeing and Spirit's receipt of 32% of the total amount of IRBs issued indicates a 
distribution of the subsidy that is at odds with what one would expect were the IRB programme to 
be administered in accordance with the SCM Agreement."511 In light of these con siderations, the 
Panel found that the subsidies provided to Boeing in the form of property and sales tax abatements 
related to IRBs issued by the City of Wichita after the expiry of the implementation period were not 
specific within the meaning of Article 2.1(c) of the SCM  Agreement.512 
                                                
502 Original Panel Report, para. 7.656. The authority for  the latter two benefits  arises from  KSA, Section 
79-201a, which  provides that all IRB -financed real property shall be exempt from state and local property 
taxes for a period of up t o ten years, and from  KSA, Section  79-3640, which  provides that tangible personal 
property and services acquired with IRB proceeds shall be  exempt from all sales taxes.  (Ibid., para. 7.657)  
503 Original Panel Report, para. 7.658. Boeing's Wichita division  produced commercial airplanes a nd their 
components in Wichita for more than 70 years. In 2005, Boeing sold its Wichita facilities to Spirit.  (Ibid., 
para. 7.649)  
504 Panel Report, para. 8.614. Even though Boeing sold its Wichita facilities to Spirit in 2005, for IRBs 
issued to Boeing prior to that date , Boeing continued to receive directly the tax benefits deriving from the IRBs 
because Boeing maintained its leasehold interest in the Project Prope rty. The City of Wichita continued to issue 
IRBs to Boeing following the sale of Boeing's Wichita facilities to Spirit in 2005.  (Original Panel Report, 
para. 7.662 ) 
505 Panel Report, para. 8.617 (referring to A.G. Sulzberger, "Boeing Departure Shakes Wichita 's Identity 
as Airplane Capital", New York Times , 18 January 2012  (Panel Exhibit USA -338)). 
506 The European Union argued that the Panel should assess specificity over the entire period the 
subsidy has been available, during which Boeing received 53%, and Bo eing and Spirit together 59%, of the 
subsidy. The United States contended that because no IRBs were issued to Boeing after 2007, assessing 
specificity over a shorter, more recent period of time causes the percentage of the subsidy received by Boeing 
and Sp irit to fall considerably.  (Panel Report, para. 8.627)  
507 Panel Report, para. 8.634.  
508 Panel Report, para. 8.635.  
509 Panel Report, para. 8.635.  
510 Panel Report, para. 8.636.  
511 Panel Report, para. 8.637.  
512 Panel Report, para. 8.638.  WT/DS353/AB/RW  
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 5.4.2.1   Whether the Panel erred in its interpretation of Article 2.1(c) of the 
SCM Agreement  
5.190.   The European  Union argues that the Panel erred in its interpretation of Article  2.1(c) of the 
SCM Agreement when, in conducting its de facto  specificity analysis to determine whether the City 
of Wichita had granted "disproportionately large amounts of subsidy to certain enterprises", it found 
that the relevant period over which to consider disproportionality is "after the end of the 
implementa tion period".513 Instead, according to the European Union, the Panel should have 
considered whether the IRB subsidy programme is specific on the grounds that Boeing and Spirit 
received disproportionately large amounts of the subsidy over the three -decade per iod of time during 
which the subsidy programme had been in operation (including, but not limited to, the period that 
passed since the beginning of the original panel proceedings), that is, from 1979 to 2012.514 
5.191.   The United  States disagrees with the European U nion's argument that the Panel interpreted 
the terms in Article 2.1(c) to mean something different in compliance proceedings than in original 
proceedings. For the United States, the Panel "simply applied the same meaning to a different data 
set because the  facts had changed – most importantly, the structure of Kansas' economy and the 
role of the aerospace industry in it".515 Furthermore, the United States considers that "with respect 
to Article 2.1, the relevant question is whether a subsidy 'is' specific, no t whether it was specific at 
a prior point in time."516 
5.192.   As noted above, the Appellate Body has stated that "disproportionality" is a relational 
concept.517 In particular, the analysis under the third factor in the second sentence of Article  2.1(c) 
requires determining the amounts of subsidy actually granted to the recipients under a subsidy 
programme within a certain time  period, and assessing whether there is a disparity between the 
expected and actual distribution of the subsidy. In  the present case, the specific question before us 
is whether the existence of disproportionality in the context of these compliance proceedings should 
be established on the basis of the amounts of subsidy granted during the entire period over which 
the su bsidy programme has been in operation, or whether consideration of subsidies provided over 
a more limited period of time may be appropriate.  
5.193.   We note that the text of Article 2.1(c) does not contain an express indication as to how to 
determine the time  period relevant for assessing the existence of disproportionality. We recall, 
however, that the principles in subparagraphs (a) to (c) of Article 2.1 should be interpreted together 
and a proper understanding of specificity must allow for the concurrent applica tion of these principles 
to the various legal and factual aspects of a subsidy.518 Thus, in the event of an appearance of 
non-specificity resulting from an analysis under Article 2.1(a) and (b), indications as to the 
appropriate time  period for assessing dis proportionality under Article 2.1(c) may be drawn from the 
legislative framework examined under those subparagraphs. At the same time, the analysis under 
Article  2.1(c) will normally focus on evidence other than of the kind found in written documents or 
express acts or pronouncements by a granting authority.519 Thus, indications relating to the 
appropriate time  period for the assessment of disproportionality may be drawn also from the 
structure and operation of the subsidy at issue, the circumstances of the c ase, and the evidence 
presented by the parties.  
5.194.   We note that pursuant to the third sentence of Article  2.1(c), "account shall be taken of the 
extent of diversification of economic activities within the jurisdiction of the granting authority, as 
well as of  the length of time during which the subsidy programme has been in operation." In our 
view, the third sentence of Article  2.1(c) directs panels to include in their analyses the two factors 
listed in that sentence. Specifically, the use of the word "shall" appears in the context of "account 
shall be taken of", which suggests the existence of an obligation for panels to consider  the factors 
in the third sentence of Article  2.1(c) as part of their assessment of de facto specificity, together 
with any other per tinent factor. However, the provision does not prescribe a particular manner in 
                                                
513 European Union's appellant's submission, paras. 173 and 181 (quoting Panel Report, para. 8.634). 
(fn omitted)  
514 European Union's appellant's submission, para. 181 (quoting Panel Report, para. 8.634 ). 
515 United  States' appellee's submission, para. 112.  
516 United States' appellee's submission, para. 113. (emphasis original)  
517 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , para. 879.  
518 Appellate Body Report, US – Anti-Dumping and Countervailing Duties (China) , para s. 370-371. 
519 Appellate Body  Report, US – Countervailing Measures (China) , paras. 4.145 -4.146 . WT/DS353/AB/RW  
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 which panels must consider the relevance of these factors or the importance of the factors for the 
panels' overall analysis. What precisely the import of those factors would be  in a panel's assessment 
under Article  2.1(c) would thus depend on the particular circumstances of each case.  
5.195.   In particular, while "the length of time during which the subsidy programme has been in 
operation"  must be taken into account by panels in their a ssessment of specificity, it does not follow 
from the third sentence of Article  2.1(c) that the entire  period during which the programme has been 
in operation has necessarily to be chosen as the relevant time  period in determining whether, under 
the second  sentence, disproportionately large amounts of subsidy have been granted to certain 
enterprises. Accordingly, the temporal baseline for the assessment of disproportionality under the 
second sentence of Article  2.1(c) may not necessarily be the entire durat ion of the subsidy 
programme at issue. For instance, where modifications to a subsidy programme have been made, 
consideration of a shorter time  period for the assessment of disproportionality may be appropriate. 
In particular, this may be the case in the c ontext of compliance proceedings, depending on the 
characteristics and functioning of the subsidy programme at issue and the existence and the nature 
of a measure taken to comply. We recall in this regard that the relevant question under Article  7.8 
is whe ther the Member granting or maintaining the subsidy has taken appropriate steps to remove 
the adverse effects of the subsidy or to withdraw the subsidy. Thus, in order to withdraw a subsidy 
within the meaning of Article  7.8, "an implementing Member may be able to take action to align the 
terms of the subsidy with a market benchmark, or to otherwise modify the terms of the subsidy such 
that it no longer qualifies as a subsidy ."520 
5.196.   We recall the European Union's contention that the Panel erred by interpreting t he term 
"disproportionately large" to mean "something different in a compliance proceeding than it does in 
an original proceeding", and to require, in the context of compliance proceedings, consideration only 
of financial contributions expected "after the end of the implementation period".521 The 
European  Union further argues that the Panel's interpretation would allow Members faced with 
compliance obligations easily to circumvent their obligations under the SCM  Agreement by 
"manipulating" the appearance of s pecificity for a short time following the end of the implementation 
period.522 
5.197.   With respect to these contentions by the European Union, we note our observation above 
that the assessment of disproportionality under the third factor in the second sentence of 
Article 2.1(c) does not necessarily have to be based on the entire duration of the subsidy 
programme. In this light, we consider that the Panel cannot be said to have erred in its interpretation 
of the term "disproportionately large" in Article  2.1(c) simpl y because it assessed disproportionality 
on the basis of a time  period shorter than the entire duration of the subsidy programme.  
5.198.   In light of the above, we find that the Panel did not err in its interpretation of Article 2.1(c) 
of the SCM Agreement when co ncluding that the relevant period over which to consider 
disproportionality is "after the end of the implementation period".  
5.4.2.2   Whether the Panel erred in its application of Article 2.1(c) of the SCM  Agreement  
5.199.   The European Union further alleges that the Panel  erred in applying Article 2.1(c) of the 
SCM Agreement "when it assessed specificity based on facts restricted to 'after the end of the 
implementation period' and failed to consider data for the entire duration of the subsidy programme 
in evaluating dispro portionality".523 According to the European Union, the Panel's finding on facts 
involving a time period quite different from "the length of time during which the subsidy programme 
has been in operation" constitutes an error in the application of Article  2.1(c).524 
5.200.   In the present case, the Panel decided to use in its assessment of disproportionality the 
subsidy amounts (or tax abatements) granted after the end of the implementation period (i.e. from 
2013 onwards), rather than those granted under the entirety of the subsidy programme since its 
                                                
520 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.366.  (emphasis added)  
521 European Union's appellant's submission, paras. 180 -181. 
522 European Union's appellant's submission, para. 182.  
523 European Union's appellant's submission, para. 186.  
524 European Union's appellant's submission, para. 187.  WT/DS353/AB/RW  
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 inception in 1979. The Panel reasoned that "{i}n this proceeding … the relevant financial contribution 
is that which was granted after the end of the implementation period", and that, therefore, it is 
concerned only with tho se tax abatements granted to Boeing from 2013 onwards.525 The Panel thus 
contrasted the challenge in the original proceedings, where the measure before the panel was the 
entirety of the subsidy received by Boeing since the inception of the IRB programme in 1 979, with 
the challenge in these compliance proceedings, where the measure before the Panel was the 
measure taken to comply notified by the United  States. In this context, the question before us is 
whether, in the specific situation of the present complian ce proceedings, the Panel erred in its 
application of Article  2.1(c) in considering tax abatements provided to Boeing relating to less than 
the entire duration of the subsidy programme.  
5.201.   We noted above that, in the context of compliance proceedings, it may be appropriate for a 
panel to base its assessment of disproportionality under the third factor in the second sentence of 
Article  2.1(c) on a time  period different from the entire duration of the subsidy programme, in order 
to assess whether, at the end of the reasonable period of time for compliance, the implementing 
Member has taken appropriate steps to withdraw the subsidy. This should be analysed on a 
case-by-case basis and will depend on the characteristics and functioning of the subsidy programme 
at issue, as well as other relevant facts, including the existence and the nature of a measure taken 
to comply.  
5.202.   The Panel explained its decision to focus on the post -implementation period in its assessment 
of disproportionality with the fact that the relevan t financial contribution in these compliance 
proceedings is different from that in the original proceedings. In other words, the Panel relied on the 
nature of these compliance proceedings for its finding that the subsidy is no longer de facto specific. 
We note that the Panel provided little explanation for this approach. For instance, the Panel did not 
explain how, in the context of these compliance proceedings, it was warranted to base its assessment 
on a period of time different from that of the original proceedings in light of the particular 
circumstances of the case. Furthermore, although the Panel outlined the functioning of the IRB 
subsidies, it did not clarify how its decision to limit its assessment to the timeframe after the end of 
the implementatio n period related to the nature and functioning of the particular subsidy at issue.  
5.203.   At the same time, we recall that the subsidy measure in the present case consists of issuance 
of IRBs to Boeing every year between 1979 and 2007. The subsidy thus has been d isbursed on a 
regular and periodic basis. Furthermore, the structure of the subsidy is such that IRBs are used to 
purchase property on which tax abatements are received for the following ten consecutive years.526 
The Panel recognized this structure and asses sed its specificity "by determining what percentage of 
the total amount of IRBs provided from 2002 onwards was granted to Boeing and Spirit", i.e. the 
amount of IRBs granted to Boeing and Spirit ten years before the end of the implementation 
period.527 In this way, the Panel took into consideration in its analysis the ten -year lifetime of the 
IRB subsidies.  
5.204.   Moreover, in its Compliance Communication, the United  States advised that the City of 
Wichita "has not provided any IRBs to Boeing since 2007".528 The Panel  concluded that "{b}y 
reducing considerably the proportion of the subsidy programme received by Boeing after the end of 
the implementation period, the United States has brought the measure into conformity with the 
SCM Agreement because, as a non -specific -subsidy, the measure is no longer subject to the 
provisions of Part III of the SCM  Agreement."529 We note that, since the amounts of tax abatements 
received by Boeing are directly proportionate to the amount of IRBs granted, these abatements 
continuously dimi nished since 2007 , and in 2017 "Boeing {was} due to receive a single tax 
abatement on Project Property purchased with IRB issuance in 2007."530 Furthermore, Boeing 
announced that it would close all of its Wichita operations by the end of 2013.531 While the Pan el did 
                                                
525 Panel Report, para. 8.634.  
526 Thus, for Project Property purchased with IRBs granted in 2007, Boeing received ten annual tax 
abatements from 2008 to 2017.  (Panel Report, para. 8.632)  
527 Panel Report, para. 8.365.  
528 Panel Report, para. 8.614 (quoting United States' Compliance Communication, para. 10 ). 
529 Panel Report, para. 8.639.  
530 Panel Report , para. 8.632.  
531 Panel Report, para. 8.617 (referring to A.G. Sulzberger, "Boeing Departure Shakes Wichita's Identity 
as Airplane Capital", New York Times , 18 January 2012  (Panel Exhibit USA -338)). WT/DS353/AB/RW  
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 not elaborate on these aspects in its substantive assessment of the IRB subsidies, these facts are 
pertinent to determining the relevant time  period for the assessment of disproportionality.  
5.205.   In sum, while the Panel could have better explained the ch oice of the time  period for 
assessing whether disproportionately large amounts of IRBs were used by Boeing in determining the 
existence of de facto specificity, the time  period effectively used by the Panel does not appear 
inappropriate in the particular c ircumstances of these compliance proceedings and specifically in 
light of the nature and operation of the IRB subsidies, as well as of the nature of the alleged measure 
taken to comply.  
5.206.   In any event, the Panel had to assess whether the total amount of IRBs  issued indicates a 
distribution of the subsidy that differs from the allocation that one would expect were the IRB 
programme to be administered in accordance with its conditions of eligibility. In this regard, we draw 
attention to the Panel's analysis and  findings concerning the comparison between the expected and 
actual distribution of the subsidy. The Panel noted that, based on the European  Union's evidence, 
from 2002 onwards, Boeing and Spirit received 32% of the total amount of IRBs issued, and that 
this was considerably reduced from the percentage in the original proceedings, where the panel 
found that Boeing and Spirit had received 69% of the total amount.532 Taking into account that the 
IRB programme is open to any enterprises seeking to purchase, cons truct, or improve various types 
of commercial or industrial property, and that, therefore, its availability is somewhat restricted to 
entities with the capacity and inclination to make such investments, the Panel did not consider that 
"Boeing and Spirit's receipt of 32% of the total amount of IRBs issued indicates a distribution of the 
subsidy that is at odds with what one would expect were the IRB programme to be administered in 
accordance with the SCM  Agreement."533 
5.207.   With respect to the Panel's observation t hat the distribution of the IRB subsidy "is {not} at 
odds with what one would expect were the IRB programme to be administered in accordance with 
the SCM  Agreement "534, we note that assessing disproportionality requires a panel to determine 
"whether the actu al allocation of the 'amounts of subsidy' to certain enterprises is too large relative 
to what the allocation would have been if the subsidy were administered in accordance with the 
conditions for eligibility for that subsidy  as assessed under Article  2.1(a) and (b)".535 The 
Appellate  Body has further stated that, where the granting of the subsidy indicates a disparity 
between the expected distribution of that subsidy, as determined by the conditions of eligibility, and 
its actual distribution, a panel will b e required to examine the reasons for that disparity so as 
ultimately to determine whether there has been a granting of disproportionately large amounts of 
subsidy to certain enterprises.536 Thus, the inquiry is directed at whether the allocation of the subs idy 
is in accordance with its conditions of eligibility, rather than with the SCM  Agreement.  
5.208.   We observe that, earlier in its analysis, the Panel correctly stated that "assessing whether 
Boeing and Spirit have received a disproportionate amount of the subsidy should be based on the 
amount of the tax abatements Boeing and Spirit have received, relative to the amount of tax 
abatements that all other IRB recipients have received."537 In order to determine whether, regardless 
of the discrepancies in the way t he Panel articulated the legal standard, it conducted a proper 
analysis, we now turn to review the Panel's analysis with respect to the facts of the present case.  
5.209.   We note that in its analysis, the Panel mainly relied on the observation that Boeing and 
Spirit's receipt of 32% of the total amount of IRBs was considerably lower than the 69% in the 
original proceedings. It is true that the IRB programme is available to those enterprises with the 
capacity to make investments in industrial and commercial property . In the original proceedings, 
however, the Appellate  Body found that, despite the fact that not all enterprises in Wichita would, 
at any given time, wish to enjoy the benefits of IRBs with respect to property development, it "would 
nonetheless expect that  the allocation of such benefits over the 25 -year period between 1979 and 
2005 would have produced a wider distribution of those benefits across different sectors of the 
                                                
532 Panel Report, para. 8.636.  
533 Panel Report, para. 8.637.  
534 Panel Report, para. 8.637. (emphasis added)  
535 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , para. 879. (emphasis added)  
536 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , para. 879.  
537 Panel Report, para. 8.628.  WT/DS353/AB/RW  
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 Wichita economy".538 On this basis, the Appellate  Body concluded that the actual distrib ution of the 
subsidy deviates materially from its expected distribution.539 
5.210.   We agree with the Panel that the percentage of IRBs issued to Boeing and Spirit since 2002, 
namely 32%, is reduced from the original proceedings, where the panel found that Boeing an d Spirit 
had received 69% of the total amount of IRBs. However, this fact says little about the existence of 
disproportionality under the third factor in the second sentence of Article  2.1(c). In itself, the fact 
that Boeing and Spirit received 32% of the total amount of IRBs between 2002 and 2012 does not 
answer the question of whether any disparity existed between the expected distribution of the 
subsidy, as determined by the conditions of eligibility, and its actual distribution. The existence of a 
dispa rity would depend, inter alia , on the extent of diversification of economic activities within 
Wichita's economy, in line with the first factor of Article  2.1(c), third sentence.540 The Panel, 
however, did not engage in any such assessment and provided no exp lanation as to why 32% of the 
total amount of IRBs received by Boeing and Spirit in a much shorter period of time than in the 
original proceedings, namely between 2002 and 2012, does not reveal the existence of a disparity. 
The Panel's only argument that " {t}he IRB programme remains open to any enterprises that seek 
to purchase, construct, or improve various types of commercial or industrial property" and its 
availability "is therefore somewhat restricted to entities with the capacity and inclination to mak e 
such investments"541 does not explain why 32% of the IRBs does not reveal the existence of a 
disparity. We therefore conclude that the Panel had no basis for finding whether any disparity existed 
between the expected and actual distribution of the subsidy and that thereby the United  States had 
brought its measure into conformity with the SCM  Agreement.  
5.211.   In light of the above, we find that the Panel erred in its application of Article  2.1(c) of the 
SCM Agreement by providing insufficient reasoning for its con clusion that  the distribution of the 
subsidy was not "at odds with what one would expect were the IRB programme to be administered 
in accordance with the SCM  Agreement".542 We therefore reverse  the Panel's finding , in 
paragraph s 8.640 and  11.7.c.iii of the Panel  Report , that the European  Union has failed to establish 
that the tax abatements provided through IRBs issued by the City of Wichita involve specific 
subsidies within the meaning of Articles 1 and 2 of the SCM  Agreement.  
5.4.2.3   Whether the Panel f ailed to make an objective assessment under Article  11 of the 
DSU 
5.212.   The European Union asserts that the Panel failed to undertake an objective assessment of 
the matter, pursuant to Article 11 of the DSU, by inappropriately deviating from the findings of the 
original panel and the Appellate Body.543 According to the European Union, "{i}n interpreting or 
applying Article 2.1(c), the Panel failed to take into account the intervening guidance provided by 
the original panel and the Appellate  Body"544 that requires con sideration of the "whole" subsidy 
programme when assessing whether disproportionately large amounts of subsidy have been granted 
to certain enterprises.545 In this respect, the European Union relies on the Appellate  Body's 
statement that "doubts could arise about the objective nature of an Article 21.5 panel's assessment 
if, on a specific issue, that panel were to deviate from the reasoning in the original panel report in 
the absence of any change in the underlying evidence in the record."546 
5.213.   The United States considers that the European Union failed to establish that any deviation 
from the reasoning of the original panel occurred.547 In the United States' view, the original panel 
itself recognized that specificity can be based on "a time period shorter than the l ife of the subsidy 
                                                
538 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , para. 884.  
539 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , paras. 883 -884. 
540 Furthermore, in case a disparity was found to exist, any potential reasons for the existence of such 
disparity would need to be assessed.  
541 Panel Report, para. 8.637. (fn omitted)  
542 Panel Report, para. 8.637.  
543 European Union's appellant's submission, par a. 189.  
544 European Union's appellant's submission, para. 195.  
545 European Union's appellant's submission, paras. 190 (referring to Original Panel Report, paras. 7.755 
and 7.757; Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , para s. 884 an d 888-889). 
546 European Union's appellant's submission, para. 193 (quoting Appellate Body Report, US – Softwood 
Lumber V I (Article 21.5 – Canada) , para. 103). (emphasis omitted)  
547 United  States' appellee's submission, para. 116.  WT/DS353/AB/RW  
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 programme … if 'there has been a significant change in the structure of the economy and the 
importance of the subsidized activities in the economy over the life of the subsidy'".548 
5.214.    Having reversed the Panel's finding that the European  Union failed to establish that the tax 
abatements provided through IRBs issued by the City of Wichita involve specific subsidies within the 
meaning of Articles 1 and 2 of the SCM  Agreement, we do not consider it necessary to examine 
further the objectivity o f the Panel's factual assessment in support of this finding.  
5.4.2.4   Completion of the legal analysis  
5.215.   Having found that the Panel erred in its application of Article  2.1(c) of the SCM  Agreement, 
we now turn to the European Union's request that we complete the lega l analysis and find that the 
subsidies provided to Boeing under the IRB programme are specific, and, thus, that the United  States 
has failed to withdraw these subsidies.549 The European  Union considers that we can complete the 
analysis based on uncontested e vidence on the record to the effect that between 1979 and 2012 
Boeing and Spirit received 59% of the subsidy, which represents an allocation at variance from what 
would have been expected from the allocation of IRBs in accordance with their conditions of 
eligibility.550 
5.216.   We note the European Communities' contention in the original proceedings that, in assessing 
whether a subsidy granted to certain enterprises is "disproportionately large", some information 
about Boeing, such as employment levels, should be com pared to comparable information relating 
to the entire economy in the jurisdiction of the granting authority. By contrast, the United States 
argued that such information about Boeing should be compared to information about the group of 
recipients of the al leged subsidy.551 The original panel ultimately concluded that "there is a significant 
disparity between the proportion of IRBs received by Boeing and Spirit and their place within the 
goods sector of the economy, as indicated by the proportion of the sector  they employ."552 On 
appeal, the Appellate  Body disagreed with the approach taken by the original panel focusing on the 
share of manufacturing employment of Boeing and Spirit, and it agreed with the United  States that 
"examining qualifying investments would have been a reasonable basis on which to show why the 
69% figure does not indicate that IRB subsidies were granted in disproportionately large 
amounts."553 However, the United States had not provided evidence explaining why Boeing and 
Spirit had received ove r two thirds of the subsidy's benefits.554 
5.217.   The reasoning provided by the Appellate  Body in upholding the panel's finding in the original 
proceedings is instructive in the context of completion of the legal analysis in these compliance 
proceedings. We recall that, in order to determine whether certain enterprises "are grant{ed} 
disproportionately large amounts of subsidy" within the meaning of the second sentence of 
Article  2.1(c), two things should be assessed: (i) whether the granting of the subsidy indicate s a 
disparity  between the expected distribution of that subsidy, as determined by the conditions of 
eligibility, and its actual distribution, and (ii) what the reasons  that might explain this disparity are, 
with a view to determining whether there has been  a granting of disproportionately large amounts 
of subsidy to certain enterprises.555 
5.218.   Above, we found that the Panel erred in its application of Article  2.1(c) in concluding that 
Boeing and Spirit's receipt of 32% of the total amount of IRBs issued since 200 2 does not indicate 
a distribution of the subsidy that is at odds with what one would expect were the IRB programme to 
                                                
548 United  States' appellee's submission, para. 116 (quoting European Union's appellant's submission, 
fn 385 to para. 179, in turn quoting Original Panel Report, para. 7.757).  
549 European  Union's appellant's submission, para. 197.  
550 European  Union's appellant's submission, paras. 198 an d 201.  
551 Original Panel Report, para.  7.759. 
552 Original Panel Report, para.  7.769.  Boeing and Spirit received 69% of the IRBs that included tax 
abatements issued between 1979 and 2005, but Spirit, after it acquired Boeing's LCA operations in Wichita, 
accounted for 3.5% of total employment or 16% of manufacturing employment in Wichita. Furthermore,  even 
though Boeing's employment levels during most of the period over which the IRBs were issued were double 
those of Spirit, the Panel considered that  32% of manufacturing employment was still disproportionate to a 
ratio of 69%.  (Ibid.)  
553 Appel late Body Report, US – Large Civil Aircraft (2nd complaint) , para. 887.  
554 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , paras. 886 -887. 
555 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , para. 879.  WT/DS353/AB/RW  
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 be administered in accordance with the conditions of eligibility for the subsidy. However, we also 
found that the Panel did not err in ba sing its assessment of disproportionality in these compliance 
proceedings on a time  period shorter than the entire duration of the IRB subsidy programme. In 
completing the legal analysis, we can therefore rely on the same facts the Panel relied on in its 
assessment of disproportionality.  
5.219.   The first question before us is whether this allocation of the subsidy indicates a disparity 
between the expected distribution of that subsidy, as determined by the conditions of eligibility, and 
its actual distribution. In  the original proceedings, the panel found that Boeing and Spirit had 
received 69% of all IRBs that included property tax abatements. The Appellate  Body considered that 
a wide distribution of the benefits across various sectors of the Wichita economy is to  be expected 
on the basis of the conditions of eligibility for IRBs.556 The Appellate  Body reasoned that "{e}ven 
taking into account the fact that not all enterprises in Wichita would, at any given time, wish to 
enjoy the benefits of IRBs in respect of prope rty development, we would nonetheless expect that 
the allocation of such benefits over the 25 -year period between 1979 and 2005 would have produced 
a wider distribution of those benefits across different sectors of the Wichita economy."557 
5.220.   Turning to the pre sent compliance proceedings, we note that Boeing and Spirit received 32% 
of the total amount of IRBs issued from 2002 onwards. While the IRB programme is available to 
enterprises with the capacity to make the required investments in industrial and commerci al 
property, and while the percentage of IRBs issued to Boeing and Spirit since 2002 is reduced from 
the original proceedings (69%), we have no specific information on record that would permit us to 
evaluate whether this actual distribution of the subsidy is at odds with its expected distribution in 
light of the conditions of eligibility. Specifically, while the receipt of 69% of all IRBs over the entire 
duration of the IRB subsidy clearly reflects an actual distribution that "deviates materially from the 
expected distribution of that subsidy"558 in light of its conditions of eligibility, the receipt of 32% of 
the subsidy in the relevant time  period of these compliance proceedings may or may not represent 
such deviation, depending , inter alia , on the diversifi cation of Wichita's economy.  
5.221.   Furthermore, even if we were to find the existence of a disparity, the second question before 
us would then be whether there are any reasons that explain the existence of that disparity between 
the actual and expected distribut ions of the subsidy. In the original proceedings, the Appellate  Body 
explained that, in view of the conditions of eligibility for the IRB subsidy, examining qualifying 
investments would have been a reasonable basis on which to show why one company and its 
successor received over two thirds of the subsidy's benefits over a 25 -year period.559 In this respect, 
however, there is no data on record as to the percentage of companies that funded, constructed, or 
improved industrial and/or commercial property within W ichita's economy during the relevant period 
of time (i.e. those companies that actually made investments in such property and could potentially 
benefit from the IRB subsidy), or to the diversification of Wichita's economy, namely the qualifying 
investments  of the companies that made investments in industrial and commercial property, and 
what percentage of those investments came from companies that focused on aircraft production.  
5.222.   In light of the above and in the absence of sufficient factual findings by the Panel or 
undisputed facts on the Panel record, we are unable to complete the legal analysis in relation to  the 
European  Union's claim that the Panel erred in its application of Article  2.1(c) of the SCM  Agreement.  
5.4.2.5   Conclusion  
5.223.   In sum, t he length of time during which the subsidy programme has been in operation  must 
be taken into account by panels in their assessment of specificity under Article  2.1(c)  of the 
SCM Agreement . However, it does not follow from this that the entire period during which the 
progra mme has been in operation has necessarily to be chosen as the relevant time  period in 
determining whether, under the second sentence  of this provision , disproportionately large amounts 
of subsidy have been granted to certain enterprises.  
                                                
556 Appellate Body Repo rt, US – Large Civil Aircraft (2nd complaint) , para. 883.  
557 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , para. 884.  
558 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , para. 883.  
559 See Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , para. 887.  WT/DS353/AB/RW  
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 5.224.   We therefore  find that the Panel did not err in its interpretation of Article 2.1(c) of the 
SCM Agreement in concluding that , in the specific circumstances of this case, the relevant time  
period over which to consider disproportionality was as from the end of the implementa tion period.  
5.225.   With respect to the Panel's application of Article 2.1(c) of the SCM  Agreement, we find that 
the Panel erred in finding that no disparity existed between the expected and actual distribution of 
the subsidy.  
5.226.   We therefore reverse  the Panel's fin ding, in paragraphs 8.640 and  11.7.c.iii of the 
Panel  Report , that the European  Union has failed to establish that the tax abatements provided 
through IRBs issued by the City of Wichita involve specific subsidies within the meaning of Articles  1 
and 2 of t he SCM  Agreement.  We also find that there are insufficient factual findings by the Panel or 
undisputed facts on the Panel record for us to complete the legal analysis in this respect. Having 
reversed the Panel's finding, we do not consider it necessary to address whether, in addition, the 
Panel acted inconsistently with Article 11 of the DSU . 
5.4.3   The Panel's findings concerning economic development bonds  
5.227.   The European Union claims that the Panel erred in the interpretation of the terms "limited 
number", "certain  enterprises", and "predominant" in the second sentence of Article  2.1(c) of the 
SCM Agreement.560 The European Union further submits that the Panel erred in the application of 
Article 2.1(c), by including EDBs issued to public entities in its evaluation of whether the EDBs were 
used by a "limited number of certain enterprises".561 Finally, the European Union alleges that the 
Panel failed to make an objective assessment under Article 11 of the DSU of the factors in the third 
sentence of Article  2.1(c).562 The United States submits that the Panel's specificity findings relating 
to EDBs were based on a correc t interpretation and application of Article 2 of the SCM  Agreement 
and on an objective assessment of the evidence, consistent with Article 11 of the DSU.563 
5.228.   We begin by noting that, before the Panel, the European Union alleged that several 
South  Carolina state and local measures in connection with the production and assembly of 787s in 
North Charleston are specific subsidies to Boeing. These measures were adopted pursuant to Project 
Gemini and Project Emerald. In particular, with regard to P roject Gemini, the European  Union 
challenged the:  
Provision of facilities and infrastructure at the Charleston International Airport site, as 
provided for in the Project Gemini Agreement between Boeing and the State of 
South  Carolina, dated 1 January 2010,  funded through state general obligation bonds 
issued pursuant to Title 11, Chapter 41 of the S.C. Code, as amended by Section 5 of 
H3130, Act No. 124, 2009 S.C. Acts 1092 (H3130), and S.C. Code § 55 -11-520, at no 
cost to Boeing.564 
5.229.   As a matter of background , when Boeing considered potential locations for its second 787 
final assembly and delivery line, South Carolina legislators proposed an incentive package that 
included US$170 million in government bonds , the elimination of Boeing's state corporate income 
taxes , and sales tax exemptions for computers, fuel for test flights, and construction materials and 
equipment.565 On 28  October 2009, Boeing announced that it had decided to locate the second 787 
assembly line (the Project Gemini facilities and infrastructu re) at the same site as its recently 
acquired North Charleston 787 fuselage fabrication and integration complex (the Project Emerald 
facilities and infrastructure). Also on 28 October 2009, the South Carolina General Assembly passed 
an act that was signed into law on 30 October 2009 (H3130), which amended several South Carolina 
laws in order to: (i) authorize the issuance of additional general EDBs up to US$170 million aggregate 
principal amount; (ii) authorize an agreement to apportion the income of taxpay ers either planning 
a new facility in the state, or expanding an existing facility, conditional on the taxpayer investing at 
least US$750 million in a single county and creating at least 3,800 new full-time jobs in the county; 
                                                
560 European Union's  appellant's submission, para. 224.  
561 European Union's  appellant's submission, para. 224.  
562 European Union's  appellant's submission, para. 224.  
563 United States' appellee's submission, para. 9.  
564 Panel Report, para . 8.762 (quoting European Union's panel request, para.  24). 
565 Panel Report, para. 8.708 (referring to  A. Shain, "S.C. traveled a long road to land Boeing", Charlotte 
Observer , Charlotte, NC, 1 November 2009  (Panel Exhibit EU -9)). WT/DS353/AB/RW  
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 and (iii) exempt from sales a nd use tax aircraft fuel, computer equipment, and construction materials 
where the taxpayer invests at least US$750 million in a single county and creates at least 3,800 new 
full-time jobs in the county.566 
5.230.   Under the Project Gemini Agreement, dated 1 January  2010, South  Carolina committed to 
issue a total of US$220 million in state EDBs to offset the costs of infrastructure associated with the 
project and a total of US$50  million in air hub bonds to offset the costs associated with air carrier 
hub terminal fa cilities that Boeing agreed to operate in support of the project.567 In return, Boeing 
agreed to make a new investment in real and personal property of US$750 million (the minimum 
investment requirement) and to employ 6,000 employees in the state ( the minimu m job 
requirement) within a specified period. If those requirements are not met during the applicable time 
period, Boeing will be obligated to reimburse the State of South Carolina.568 The Project Gemini 
Agreement procedures provided that Boeing enter into c ontracts to construct infrastructure and 
facilities, pay the invoices, and then submit the invoices to South Carolina for reimbursement.569 
5.231.   The Panel found that the payments made by South Carolina to Boeing pursuant to the 
Project  Gemini Agreement involve a financial contribution and confer a benefit.570 In the context of 
specificity, the Panel considered that the European Union had not offered sufficient reasoning to 
establish that the Project  Gemini incentive package is explicitly limited to certain enterpris es within 
the meaning of Article 2.1(a) of the SCM  Agreement.571 The European Union further argued that the 
transfer of bond proceeds is specific within the meaning of Article 2.1(c) on the grounds that it had 
been used only by a limited number of enterprise s and that Boeing and its suppliers had been the 
predominant users of the subsidy.572 
5.232.   With regard to the factor "limited number of certain enterprises" in Article 2.1(c) of the 
SCM Agreement, the Panel noted that the evidence before it indicated that since t he adoption of 
South Carolina legislation authorizing the issuance of EDBs in 2002, South Carolina had issued such 
bonds for BMW (in 2003 in the amount of up to US$105  million)573, the Project Emerald companies 
(in 2004 in the amount of up to US$160  million) , and Boeing (in 2010 in the amount of up to 
US$220  million).574 In addition, EDBs had been issued to three public entities in 2005, namely, the 
City of Greenville, the City of Myrtle Beach, and Trident Technical College, in the amount of up to 
US$7  million each.575 The Panel found that the European  Union had provided "no reasoning as to 
why, in light of the level of diversification in the South Carolina economy and the duration of the 
economic development bond scheme, the grant of economic development bond pro ceeds to BMW, 
the Project Emerald companies and Boeing amounts to use by a limited number of enterprises".576 
5.233.   With respect to the factor of "predominant use by certain enterprises" in Article  2.1(c), the 
Panel noted the original panel's finding that predomin ant use "requires consideration of whether the 
                                                
566 Panel  Report, para. 8.709 (referring to Act No. 124 (H3130) (30 October 2009), South Carolina Code  
(Panel Exhibit EU -466)). 
567 Panel  Report, para. 8.765 (referring to Project Gemini Agreement between The Boeing Company and 
the State of South Carolina (1 Ja nuary 2010)  (Project Gemini Agreement ) (Panel Exhibit EU -467), 
Articles  II(A)and II(B), p. 3).  
568 Project Gemini Agreement ( Panel Exhibit EU -467),  Article II,  p. 3. See also Panel  Report, 
para. 8.688.  
569 Panel Report, para. 8.766.  
570 Panel Report, para s. 8.813 and 8.823.  
571 Panel Report, para. 8.835.  
572 Panel Report, para. 8.837 (referring to European Union's first written submission  to the Panel , 
para. 585; second written submission  to the Panel , para. 639).  
573 Panel Report, para. 8.838 (referring to United States' response to the Panel's request for information 
pursuant to Article 13 of the DSU, dated 28 February 2013 , response to Panel question No. 67, para. 150; 
Letter dated 23 July 2012 from the South Carolina State Budget and Control Board regarding a Fr eedom of 
Information Act Request  (Panel Exhibit EU -490), p. 1; Letter dated 31 July 2012 from the South Carolina State 
Budget and Control Board regarding a Freedom of Information Act Request Supplement  (Panel Exhibit 
EU-491)).  
574 Panel Report, para. 8.838  (referring to Letter dated 23 July 2012 from the South Carolina State 
Budget and Control Board regarding a Freedom of Information Act Request  (Panel Exhibit EU -490), p. 1) . 
See also Panel Report, para.  8.766.  
575 Panel Report, para. 8.838 (referring to Letter dated 23 July 2012 from the South Carolina State 
Budget and Control Board regarding a Freedom of Information Act Request  (Panel Exhibit EU -490), p. 1).  
576 Panel Report, para. 8.839.  WT/DS353/AB/RW  
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 subsidy programme in issue is mainly or most frequently used by 'certain enterprises'".577 The Panel 
then noted the European Union's argument that Boeing and its suppliers have been the predominant 
users of the subsidy, benefiting from US$390 million of a total US$495 million in EDBs and air hub 
bonds, or 79% of the bonds by value.578 However, the Panel considered that this information did not 
show that the EDB scheme had mainly or most frequently been used by cert ain enterprises. Whereas 
the information could be relevant to an argument that a disproportionately large amount of subsidy 
had been granted to certain enterprises, the European  Union had not made this argument. 
Therefore, the Panel could not take the info rmation into account without confounding the factor 
"predominant use by certain enterprises" with the factor "the granting of disproportionately large 
amounts of subsidy to certain enterprises".579 
5.234.   Furthermore, the Panel rejected the European Union's content ion that the specificity analysis 
under Article 2.1(c) should not include EDBs issued for public entities, such as cities or public 
colleges, because specificity must be assessed with respect to enterprises and industries. For the 
Panel, the fact that EDBs  have been issued to public entities, namely two cities and a public college, 
in addition to private entities, suggested that the scheme was not limited to "certain enterprises" 
within the meaning of Article  2.1(c).580 Ultimately, the Panel concluded that th e European Union 
failed to establish that the subsidy provided by South Carolina through EDB proceeds to compensate 
Boeing for part of the cost of constructing the Project Gemini facilities is specific within the meaning 
of Article 2.1 of the SCM  Agreement .581 
5.4.3.1   Whether the Panel erred in its interpretation of the term "limited number" in 
Article  2.1(c) of the SCM Agreement  
5.235.   The European Union alleges that the Panel erred in its interpretation of the phrase "limited 
number of certain enterprises" in Article  2.1(c) of the SCM  Agreement, insofar as the Panel's 
interpretation precluded the possibility that a group of three enterprises would constitute a "limited 
number".582 According to European  Union, the Panel's finding that air hub bonds were used by a 
"limited num ber of certain enterprises" because they were granted to only one enterprise, Boeing, 
while EDBs, which were granted to only three enterprises, were not so "limited" reflects an 
interpretation of "limited number" to mean "one" or, at least, "fewer than thr ee".583 
5.236.   The United  States responds that the Panel did not find that the terms "limited number" could 
never refer to three, but instead found that, in the circumstances of this case, the European  Union 
had failed to explain why the grant of the subsidy to thr ee particular companies showed that the 
subsidy was de facto specific.584 
5.237.   Above, we observed that the term "limited number" in the first factor of Article  2.1(c), 
second sentence, suggests an inquiry into whether the enterprises or industries so particulariz ed 
constitute a quantitatively limited group. Furthermore, the concept of "limitation" in 
subparagraph  (c), as opposed to in subparagraphs (a) and (b), directs the inquiry specifically 
towards whether the users of the subsidy programme are small or restric ted in number. For the 
reasons explained above, what constitutes a quantitatively limited group of enterprises must be 
determined on a case -by-case basis, taking into account the particular characteristics of the subsidy 
programme and the prevailing circum stances of the case; such an analysis also has to take account 
of the factors in the third sentence of Article  2.1(c), namely, "the extent of diversification of 
economic activities within the jurisdiction of the granting authority, as well as of the length  of time 
during which the subsidy programme has been in operation".  
5.238.   Turning to the facts of the present case, we note the European Union's contention that the 
Panel's reasoning in the context of its analysis of the EDBs and air hub bonds under Article  2.1(c) 
reflects an implicit interpretation of the terms "limited number" as meaning "'one' – or, at least, 
                                                
577 Panel Report, para. 8.840 (quoting Original Panel Report , paras. 7.746 -7.747).  
578 Panel Report, para. 8.840 ( referring to European Union's first written submission  to the Panel , 
para. 585 and fn 1377  thereto) . 
579 Panel Report, para. 8.840.  
580 Panel Report, para. 8.841.  
581 Panel Report, para. 8.843 . 
582 European Union's appellant's submission, para. 231.  
583 European Union's appellant's submission, para. 226.  
584 United  States' appellee's submission, para. 129.  WT/DS353/AB/RW  
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 fewer than three'".585 We further note that, according to the Panel, the evidence before it indicated 
that, since the adoption of its legislation authorizi ng the issuance of EDBs in 2002, South  Carolina 
had issued EDBs for BMW, the Project Emerald companies, and Boeing.586 In addition, EDBs had 
been issued to certain public entities, namely the City of Greenville, the City of Myrtle Beach, and 
Trident Technica l College.587 The Panel took the view that the European Union "failed to establish 
that the transfer of funds to Boeing through economic development bond proceeds is specific within 
the meaning of Article  2.1(c) because it is used by a limited number of cert ain enterprises".588 In 
particular, the Panel found that the European Union provided "no reasoning as to why, in light of the 
level of diversification in the South Carolina economy and the duration of the economic development 
bond scheme, the grant of econom ic development bond proceeds to BMW, the Project Emerald 
companies and Boeing amounts to use by a limited number of enterprises".589 
5.239.   In the context of its analysis under Article  2.1(a) of the SCM  Agreement, the Panel 
considered that whether the subsidy is sp ecific should be determined on the basis of the text of the 
relevant legislative framework relating to the issuance of EDBs, rather than, as the European  Union 
argued, based on the individual resolutions adopted by South  Carolina authorizing the issuance o f 
the EDBs.590 In this regard, Section  11-41-40 of the South  Carolina Code provides that EDBs can be 
used to fund financing for infrastructure.591 In order for EDBs to be issued, the South  Carolina 
Department of Commerce must notify the Joint Bond Review Committee and the State Budget and 
Control Board that the related infrastructure project meets certain requirements, including a 
minimum investment and contribution to employment.592 In this context, "economic development 
project" is defined as "a project in  this State as defined in Section 12 -44-30(16) in which a total of 
at least {US$400 million} is invested in the project by the sponsor and at least {400} new jobs are 
created at the project by the sponsor".593 
5.240.   As noted above, the meaning of a quantitatively limited group should be determined , 
inter alia, in light of the factors in Article  2.1(c), third sentence, that require panels to take account 
of "the extent of diversification of economic activities within the jurisdiction of the granting authority, 
as we ll as of the length of time during which the subsidy programme has been in operation". While 
the import of these factors in any given case would depend on the particular circumstances at issue, 
they constitute important considerations that have to form par t of a panel's assessment of de facto 
specificity, together with any other pertinent factors. Therefore, to the extent that the two factors 
in the third sentence of Article  2.1(c) form part of the legal test under that provision, it would be for 
the Europe an Union to provide evidence in making a prima  facie case. Moreover, we observed that 
                                                
585 European Union's appellant's submission, para. 22 6. 
586 Panel Report, para. 8.838 (referring to United States' response to the P anel's request for information 
pursuant to Article 13 of the DSU, dated 28 Febr uary 2013; response to Panel question No.  67, para. 150; 
Letter dated 23 July 2012 from the South Carolina State Budget and Control Board regarding a Freedom of 
Information Act Request  (Panel Exhibit EU -490), p. 1 ; Letter dated 31 July 2012 from the South Carolina State 
Budget and Control Board regarding a Freedom of Information Act Request Supplement  (Panel  Exhibit 
EU-491)). 
587 Panel Report, para. 8.838 (referring to Letter dated 23 July 2012 from the South Carolina State 
Budget and Control Board regarding a Freedom of Information Act Request  (Panel Exhibit EU -490), p. 1).  
588 Panel Report, para. 8.839.  
589 Panel Report, para. 8.839.  
590 Panel Report, para. 8.830.  
591 Panel Report, para. 8.832. "Financing for infrastructure" includes land acquisition, site preparation, 
road and highway improvements, water service, wastewater treatment, employee training, environmental 
mitigation, training  and research facilities, and building associated with an air hub facility or located on 
government land. (Ibid., fn 1943 to para. 8.685)  
592 Panel Report, fn 1943 to para. 8.685. After approval by the Joint Bond Review Committee, the State 
Budget and Contro l Board adopts a resolution issuing the bonds. EDBs are backed by the full faith, credit, and 
taxing power of the State of South Carolina. The monetary value of EDBs that the State may issue depends on 
the provision under which the State issues the bonds.  (Panel Report, fn 1943 to para. 8.685)  
593 Panel Report, para. 8.832 (quoting State General Obligation Economic Development Bond Act, 
South  Carolina  Code, Title 11, Chapter  41 (Panel Exhibit EU -477), Section 11 -41-30). The South Carolina 
General Assembly Act No. 124 ( H3130 ) of 30 October 2009 amended several South Carolina laws and, in 
particular, provided for the authorization to issue additional general obligation EDBs in an aggregate principal 
amount that does not exceed US$170 million. (Ibid., para. 8.685 ) Thereafter, on 1 January 2010 , Boeing and 
South Carolina concluded the Project Gemini Agreement, under which South Carolina committed to issue , 
inter alia, a total of US$220 million in state EDBs to offset the costs of infrastructure associated with Proj ect 
Gemini. Boeing in return committed to " attain the Minimum Job requirement and the Minimum Investment 
requirement ". (Ibid.,  para. 8.765 (quoting Project Gemini Agreement (Panel Exhibit EU -467), Article II, p. 3) ) WT/DS353/AB/RW  
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 where a panel's assessment proceeds from Article  2.1(a) and (b) to Article  2.1(c), the panel's 
analysis under subparagraph (c) would normally build upon the relevant legi slative framework 
examined under Article  2.1(a) and (b).  
5.241.   In the present case, based on the de jure  conditions of eligibility for the subsidy, namely the 
relevant provisions of the South  Carolina Code, EDBs may be issued only to companies complying 
with the  minimum investment and employment requirements. That means that companies eligible 
to receive EDBs are those prepared to invest at least US$ 400 million in an economic development 
project and create at least 400 new jobs.594 We observe that the eligibility r equirements under the 
subsidy programme appear to be onerous. With respect to the legislation setting out these 
requirements, the Panel found that "{t}here is no provision in South  Carolina law limiting access for 
funds raised through economic development bonds … to certain enterprises", and "none of the 
individual pieces of legislation pursuant to which the bonds are issued limit access to certain 
enterprises."595 In these circumstances, the question before the Panel under Article  2.1(c) was 
whether, notwith standing the appearance of non -specificity resulting from the application of the 
principles in Article  2.1(a), there were reasons to believe that the subsidy may in fact be specific by 
virtue of the subsidy programme being used by a limited number of certa in enterprises. In these 
circumstances, it was for the European  Union to provide evidence demonstrating that the actual 
allocation of the subsidy differs from an allocation that would have been expected if the subsidy 
were administered in accordance with i ts conditions of eligibility, as well as in light of the 
diversification of South  Carolina's economy and the length of time during which the subsidy was in 
operation.  
5.242.   The Panel did not elaborate on the reasons for rejecting the European Union's claim that the 
EDB subsidy had been used by a limited number of certain enterprises. In particular, the Panel did 
not explicitly set out its understanding of the term "limited number" in Article  2.1(c). However, we 
also do not see that the European Union gave specifi c reasons in support of its argument. In its 
written submissions before the Panel, in the context of Article  2.1(c), the European Union argued 
that "{t}his form of subsidy has been utilized by only a limited number of enterprises", insofar as 
"{o}ther than  Boeing, economic development bonds have been issued to support projects by private 
firms on only two occasions: 1) in 2003 for a new BMW manufacturing facility ($105  million), and 
2) in 2004 for Project Emerald ($120 million)."596 The United States, by cont rast, submits that:  
BMW, the Project Emerald companies, and Boeing are among the largest employers in 
the State of South Carolina. As of early 2008, BMW employed 5,400 full -time 
equivalents in South Carolina. The Project Emerald companies committed to inve st 
$450 million in Project Emerald and employ 745 people in South Carolina. In addition, 
Boeing was the largest employer in South Carolina, with 6,000 employees and Boeing 
had invested a total of [BCI] in infrastructure in the state.597 
5.243.   In light of these arg uments, the Panel's conclusion reflects an understanding that the 
granting of the subsidy to only three companies does not necessarily demonstrate that the subsidy 
was used by a "limited number" of certain enterprises within the meaning of the first factor  in 
Article  2.1(c), second sentence. First, we note that the recipients of the subsidy are not all from the 
same sector of the economy. Furthermore, there are no indications that, in light of the eligibility 
requirements under the subsidy scheme and the di versification of economic activities within 
South  Carolina or the length of time during which the subsidy has been in operation, the actual 
allocation of the subsidy differed from its expected allocation. The European Union did not argue, 
for instance, tha t other enterprises within South  Carolina's economy could have potentially met the 
                                                
594 Panel Report, para. 8.832.  
595 Panel Report, para. 8.831  (referring to United States' first written submission to the Panel, 
para. 626). 
596 European Union's first written submission to the Panel, para. 585. (fns omitted) In its second written 
submission  to the Panel , the European Union s imply referred back to this reasoning. (See European Union's 
second written submission to the Panel, para. 770)  
597 United States' appellee's submission, para. 122 (referring to Project Emerald Confidential Site 
Development and Incentive Agreement (2006)  (Panel Exhibit EU -550), Exhibit B ; Douglas P. Woodward & 
Paulo Guimarães, BMW in South Carolina: The Economic Impact of a Leading Sustainable Enterprise  
(September 2008)  (Panel Exhibit USA-188), pp. 2 and 9-10; Boeing Investment in South Carolina 
(2010-3Q2012) (Panel Exhibit USA-324) (BCI) ; Charleston S.C. MSA Largest Manufacturing Employers , 
Charleston Regional Development Alliance (February 2013)  (Panel Exhibit USA-335)). (fns omitted) See also 
United States' first written submission to the Panel, para. 632. WT/DS353/AB/RW  
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 requirements to receive EDBs but were not granted the subsidy during the ten years of operation of 
the subsidy programme. It may well be that, depending on the diversificati on of South  Carolina's 
economy, only a small number of companies were ready to make the necessary investments and 
create the required number of jobs, and therefore be able to satisfy the legal conditions for access 
to the EDB subsidy. Thus, given the speci fic de jure  conditions of eligibility under the EDB scheme, 
the small number of enterprises to which EDBs were issued between 2002 and 2012 would not 
necessarily reflect "use of a subsidy programme by a limited number of certain enterprises" within 
the mea ning of Article  2.1(c). The European Union has also not demonstrated that other enterprises, 
outside South Carolina's economy, have applied for the subsidy but have not been considered 
eligible, or that there are other reasons to believe that the actual al location of the subsidy renders 
it de facto specific.  
5.244.   Therefore, as we understand it, in stating that "{t}he European Union provides no reasoning 
as to why, in light of the level of diversification in the South Carolina economy and the duration of 
the econ omic development bond scheme, the grant of economic development bond proceeds to 
BMW, the Project Emerald companies and Boeing amounts to use by a limited number of 
enterprises"598, the Panel has not implicitly interpreted the term "limited number" as "one" or "fewer 
than three".599 Rather, we understand the Panel to have considered that the European  Union has 
not met its burden of proof in demonstrating that, in the circumstances of the present case, the EDB 
subsidy has been used by a limited number of certain  enterprises within the meaning of the first 
factor in Article  2.1(c), second sentence.  
5.245.   The European Union also argues that it presented evidence on EDBs and air hub bonds 
jointly, but the Panel found fault with its reasoning on why the bonds were used by a limited number 
of certain enterprises, in light of the diversification of South  Carolina's economy and the duration of 
the bond scheme, only in the context of EDBs. According to the European Union, "{t}his suggests 
that the motivating factor behind the P anel's decision was the fact that three enterprises received 
EDBs, whereas only one enterprise received air hub bonds."600 
5.246.   The Panel found that the European Union established that the grant of air hub bond proceeds 
to Boeing is specific within the meaning of  Article  2.1(c), in the sense that the use of the subsidy 
programme is limited to certain enterprises. The Panel's reasoning was based on the undisputed fact 
that "air hub bonds have only been issued to Boeing during the almost three -decade long existence 
of the scheme", which was "unsurprising since the evidence before the Panel suggests that only 
Boeing meets the requirements to benefit from air hub bond proceeds, namely to be the operator of 
an 'air carrier hub terminal facility' as defined in the South  Carolina Code".601 
5.247.   As we see it, the Panel's finding with regard to the air hub bonds was not based simply on 
the fact that these bonds were granted only to Boeing. Instead, it was made in light of the specific 
language in the South Carolina Code that appear ed, de facto , to restrict the eligibility for those bonds 
to an enterprise with Boeing's specific profile. We do not consider that the Panel's reasoning in this 
context translates into an implicit interpretation of "limited number of certain enterprises" a s "just 
one (or two) enterprise(s)", as alleged by the European Union.602 Instead, in our view, the 
statements that the Panel made in applying the law to the facts of the present case do not suggest 
that the Panel considered that three or more enterprises co uld not constitute a "limited number" 
within the meaning of Article 2.1(c).  
5.248.   In view of the above, we find that the Panel did not err in its interpretation of the phrase 
"limited number of certain enterprises" in Article  2.1(c) of the SCM  Agreement by implicitly 
interpreting the term "limited number" as referring to "one" or "fewer than three" entities.  
                                                
598 Panel Report, para. 8.839.  
599 European Union's appellant's submission, para. 226.  
600 European Union's a ppellant's submission, para. 228.  
601 Panel Report, para. 8.842.  
602 European Union's a ppellant's submission, para. 228.  WT/DS353/AB/RW  
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 5.4.3.2   Whethe r the Panel erred in its interpretation and application of the term "certain 
enterprises" in Article  2.1(c) of the SCM Agreement  
5.249.   The European Union further argues that the Panel erred in interpreting the term "certain 
enterprises" in Article  2.1(c) of the SCM  Agreement as encompassing public entities, such as cities 
and public colleges. The European Union asserts that the Appellate Body Report in US – Washing 
Machines  stands for the proposition that the term "certain enterprises" encompasses only private 
entities, i.e. business firms or companies involved in commercial transactions and engagements.603 
Since public entities do not quali fy as "certain enterprises", they should be omitted from the 
specificity analysis.604 Moreover, the European Union alleges that issuance of funds within the 
government or between different levels of government should not be considered a financial 
contributio n, to the extent that Article 1.1(a)(1), by its text, concerns "a financial contribution by a 
government or any public body", not a financial contribution to a government.605 Furthermore, since 
subparagraphs  (a)-(c) of Article 14 of the SCM Agreement indicat e that a recipient of a subsidy is 
understood to be a non -governmental entity, a government cannot be the recipient of a benefit 
either.606 The European  Union also submits that the Panel erred in its application of Article  2.1(c) by 
including in its specific ity analysis EDBs provided to public entities, such as cities and public colleges, 
which are not "enterprises" within the meaning of Article  2.1.607 
5.250.   The United States disagrees with the European Union that the Panel found public entities 
that received the su bsidy at issue to be "enterprises". Rather, according to the United States, the 
Panel found that the receipt of the subsidy by three public entities "suggests that the scheme is not 
limited to 'certain enterprises' within the meaning of Article 2.1(c)".608 The United States thus 
contends that if a subsidy is granted to entities that are not "certain enterprises" as defined in the 
chapeau  to Article  2.1 – regardless of whether those entities are themselves enterprises – this 
weighs against a finding of de fact o specificity.609 In the United States' view, the European Union 
fails to address this point.  
5.251.   As noted above, the term "enterprises" in the first factor of Article  2.1(c), second sentence, 
refers to a single enterprise or industry or a class of enterprises o r industries that are known and 
particularized . Whereas "enterprise" can be defined as "{a} business firm, a company" or an "activity 
undertaken with an economic or commercial end in view"610, "industry" signifies "{a} particular form 
or branch of productive  labour; a trade, a manufacture".611 In any event, the concept of "certain 
enterprises" involves a certain amount of indeterminacy at the edges, and any determination of 
whether a number of enterprises or industries constitute "certain enterprises" has to be  made on a 
case-by-case basis.  
5.252.   The European Union's appeal raises the question of how to define the contours of 
"enterprises" in the sense of Article 2.1(c). In our view, read together, the above definitions indicate 
that the term "enterprise" in Article  2.1 can be interpreted as an entity that engages in certain 
activities of a business or commercial nature. The term "enterprise" thus refers to an entity that 
conducts certain economic activities in the market. The reference to "an enterprise or industry or  
group of enterprises or industries" also suggests that the terms of the provision relate primarily to 
the type of activity carried out by the entity and do not necessarily limit the scope of entities based 
on whether they are publicly or privately owned. The understanding that ownership is not dispositive 
of the definition of "enterprise" finds support also in the third sentence of Article  2.1(c), which 
requires that account be taken of "the extent of diversification of economic activities  within the 
                                                
603 European Union's appellant's submission, para. 236.  
604 European Union's  appellant's submission, para. 237.  
605 European Union's  appellant's submission, para. 238 . (emphasis added by the European  Union)  
606 European Union's  appellant's submission, para. 238 . 
607 European Union's appellant's submission, para. 250.  
608 United  States' appellee's submission, para. 131  (quoting Panel Report, para. 8.841) . 
609 United  States' appellee's submission, para. 131.  
610 Appellate Body Report, US – Anti-Dumping and Countervailing Duti es (China) , para. 373 (quoting 
Shorter Oxford English Dictionary , 6th edn, A. Stevenson (ed.) (Oxford University Press, 2007), Vol.  1, p. 841).  
611 Appellate Body Report, US – Anti-Dumping and Countervailing Duties (China) , para. 373 (quoting 
Shorter Oxford English Dictionary , 6th edn, A. Stevenson (ed.) (Oxford University Press, 2007), Vol.  1, 
p. 1371). WT/DS353/AB/RW  
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 jurisdiction of the granting authority"612, thereby confirming the focus of Article 2.1 on activities that 
are economic in nature.  
5.253.   Turning to the relevant context for the interpretation of the term "enterprise" in Article  2.1, 
we note that Article 1 sets out the definition of a subsidy for purposes of the SCM  Agreement. 
According to the chapeau  of Article  2.1, the analysis of specificity must relate to the measure that 
has been determined to constitute a subsidy under Article  1.1 in terms of financial contribution  and 
benefit.613 However, Article  1.1(a)(1) describes the types of financial contributions by reference to 
the specific governmental action of granting  the subsidy, and not the nature or activities of the entity 
receiving  the contributions. Thus, in defining  the circumstances in which "a subsidy shall be deemed 
to exist", Article  1.1 does not specifically address the scope of recipients of these financial 
contributions.  
5.254.   In light of the above, we consider that the determination of whether a number of enterpris es 
or industries constitute "certain enterprises" within the meaning of Article  2.1(c) should be made in 
light of  all relevant characteristics of the entities concerned, including the nature and purpose of 
their activities in the markets in question and th e context in which these activities are exercised. 
The ownership of the entity may be a relevant factor but is not determinative of whether an entity 
qualifies as an "enterprise" for purposes of Article 2. The organization of the Member's national 
economy and the classification of these activities in its legal order may also constitute relevant 
considerations in determining whether the activities examined are of economic character.  
5.255.   Turning to the Panel's analysis of the term "certain enterprises", we recall  that, since the 
adoption of South Carolina legislation authorizing the issuance of EDBs in 2002, such bonds have 
been issued to BMW, the Project Emerald companies, and Boeing, as well as to certain public entities, 
namely the City of Greenville, the City of Myrtle Beach, and Trident Technical College.614 Before the 
Panel, the European  Union took the view that the subsidy provided by South  Carolina through EDBs 
for the funding of Project Gemini facilities and infrastructure is de facto specific because it has  been 
used only by a limited number of enterprises, and Boeing and its suppliers have been the 
predominant users.615 In this regard, the European Union argued that because specificity is assessed 
with respect to enterprises and industries, the European  Union  does not include EDBs issued for 
public entities, such as cities or public colleges.616 
5.256.   In its analysis, the Panel referred to the European Union's contention regarding the relevance 
of the three public entities at issue to the Panel's specificity analysis,  and considered that "precisely 
the fact that economic development bonds can be and have been issued to public entities, namely 
two cities and a public college, in addition to private entities, suggests that the scheme is not limited 
to 'certain enterprise s' within the meaning of Article 2.1(c)."617 It is not entirely clear what the Panel 
meant when making this statement. On the one hand, the fact that a subsidy has been granted to 
both public and private entities may be potentially relevant to an assessment of de facto specificity, 
to the extent that all of these entities are "certain enterprises" in the sense of that provision. On the 
other hand, however, in making this statement, the Panel refrained from making an assessment and 
reaching a conclusion as to whether the three public entities at issue should be considered as 
"enterprises", but nevertheless considered these entities relevant to its analysis of de facto  
specificity.  
5.257.   We have noted above that an "enterprise" within the meaning of Article  2.1 is an entity that 
engages in certain economic activities. Whether this is the case should be analysed on a 
case-by-case basis by reference to all relevant characteristics of the entity, including its nature and 
operation in the markets in question. The European Union's cont ention implies that, by its very 
nature, a public entity cannot be considered as an "enterprise" under Article  2.1(c). We disagree 
with this proposition. As we have explained above, the ownership of an entity is not a decisive 
                                                
612 Emphasis added.  
613 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , para. 747. See also Appellate Body 
Report, US – Countervailing Measures  (China) , para. 4.140.  
614 Panel Report, para. 8.838 . 
615 Panel Report, para. 8.782 (referring to European Union's first written submission to the Panel, 
paras.  706-708). 
616 Panel Report, para. 8.841 (quoting European Union's second written submission to the Panel, 
fn 1064 to para. 642,  in turn referring to first written submission to the Panel, para . 585).  
617 Panel Report, para. 8.841.  WT/DS353/AB/RW  
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 criterion in determining whet her the entity constitutes an "enterprise". At the same time, we note 
that the Panel provided no analysis with regard to the features of the entities at issue and the types 
of activities they engage in. Thus, the Panel's analysis suggests that the Panel to ok into account the 
three public entities in its analysis of specificity under Article  2.1(c) without having established that 
they constitute "certain enterprises" within the meaning of Article  2.1. 
5.258.   We disagree with this approach. The chapeau of Article 2. 1 explicitly directs panels to assess 
whether a subsidy is "specific to an enterprise or industry or group of enterprises or industries 
(referred to in {the SCM} Agreement as 'certain enterprises')". The notion of specificity within the 
meaning of the SCM  Agreement therefore encompasses the universe of entities that constitute 
"certain enterprises", as determined in light of the principles in subparagraphs  (a) through (c) of 
Article  2.1. We therefore do not see the pertinence of subsidy recipients that fall  outside the 
definition of an "enterprise" for a panel's determination of whether a subsidy is specific to "certain 
enterprises".  
5.259.   It follows that, if a subsidy is found to be specific "to an enterprise or industry or group of 
enterprises or industries", th e fact that this subsidy has also been granted to certain other entities 
that do not fall within the definition of an "enterprise" has no bearing on the finding of specificity 
that has to be made with regard to the group of "enterprises". We recall, in thi s regard, the 
Appellate  Body's statement in the context of Article  2.1(a) that "{w}here access to certain funding 
under a subsidy programme is explicitly limited to a grouping of enterprises or industries that qualify 
as 'certain enterprises', this … leads  to a provisional indication of specificity …, irrespective of how 
other funding under that programme is distributed."618 Similarly, if funding under the same subsidy 
programme is granted to certain enterprises, as well as to other entities that do not const itute 
"enterprises" within the meaning of Article  2, the specificity of the subsidy programme should be 
assessed only by reference to those entities that constitute "enterprises".  
5.260.   At the same time, the Panel also concluded, with respect to the factor "use of a subsidy 
programme by a limited number of certain enterprises", that "{t}he European  Union provides no 
reasoning as to why, in light of the level of diversification in the South  Carolina economy and the 
duration of the economic development bond scheme,  the grant of economic development bond 
proceeds to BMW, the Project Emerald companies and Boeing amounts to use by a limited number 
of enterprises."619 We note that the Panel reached its conclusion before making its statement as to 
the relevance of "public entities" in the assessment of de facto specificity. Similarly, before making 
the statement in question, the Panel had already rejected the relevance of the European  Union's 
evidence for establishing "predominant use by certain enterprises" and had found t hat "{t}he 
European Union makes no other arguments why, in light of the diversification of the South Carolina 
economy and the duration of the economic development bond scheme, economic development bond 
proceeds have been mainly or most frequently used by c ertain enterprises."620 Therefore, we do not 
think that the Panel's rejection of the European  Union's claims that the EDB subsidy is specific within 
the meaning of Article  2.1(c) hinges upon its statement relating to the relevance of the three public 
entitie s in its analysis of de facto specificity. Thus, the Panel's error in its analysis relating to the 
relevance of subsidies provided to the City of Greenville, the City of Myrtle Beach, and Trident 
Technical College in the assessment of specificity does not invalidate the Panel's ultimate finding 
that the European Union failed to establish that the subsidy provided by South Carolina through 
EDBs is specific within the meaning of Article  2.1(c).621 
5.4.3.3   Whether the Panel erred in its interpretation of the term "predo minant use" in 
Article  2.1(c) of the SCM Agreement  
5.261.   The European  Union argues that the Panel erred in interpreting the term "predominant" in 
the factor "predominant use by certain enterprises" in the second sentence of Article  2.1(c) of the 
SCM Agreement as  involving a concept entirely different from the term "disproportionate {}" in the 
factor "disproportionately large amounts of subsidy to certain enterprises". In the European Union's 
view, based on this erroneous distinction, the Panel rejected the Europea n Union's evidence as 
inadequate or irrelevant for determining the existence of "predominant use".622 The United States 
                                                
618 Appellate  Body Report, EC and certain m ember States – Large Civil Aircraft , para.  949. 
619 Panel Report, para. 8.839.  
620 Panel Report, para. 8.840.  
621 See Panel Report, para. 8.843.  
622 European Union's appellant's submission, para s. 240 -241. WT/DS353/AB/RW  
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 considers that the Panel merely explained "why it was not addressing whether the subsidy was 
de facto specific because of 'the granting of  disproportionately large amounts of subsidy to certain 
enterprises'" and "did not state that 'predominant use' and 'the granting of disproportionately large 
amounts' cannot rely on overlapping evidence".623 
5.262.   We observed above that the term "predominant" in t he factor "predominant use by certain 
enterprises" in Article  2.1(c), second sentence, may relate to the number  of certain enterprises using 
the subsidy, the amounts  of subsidy used by certain enterprises, or the incidence  with which certain 
enterprises us e that subsidy. However, given the focus of the other factors of the second sentence 
("use of a subsidy programme by a limited number of certain enterprises " and "the granting of 
disproportionately large amounts of subsidy to certain enterprises "), this te rm is to be interpreted 
as relating primarily to the incidence or frequency  with which the subsidy is used by certain 
enterprises.  
5.263.   At the same time, the different focus of the various factors listed in Article  2.1(c), second 
sentence, does not imply that t he analyses under those factors have to rely on completely distinct 
sets of evidence. This is because whether a subsidy programme is mainly, or for the most part, used 
by "certain enterprises" is necessarily a question that should be answered on a case -by-case basis, 
taking into account the particular characteristics of the subsidy programme at issue and the 
prevailing circumstances of the case, and in light of the factors in the third sentence of Article  2.1(c). 
Furthermore, the Appellate  Body has highligh ted that determining which factors in Article  2.1(c) will 
be relevant to the analysis of specificity is "a function of what reasons there are to believe that the 
subsidy may in fact be specific", and panels should "remain open to the applicability of each of the 
elements set out in Article 2.1(c), and to the possibility that a conclusion in respect of specificity in 
fact may, depending on the circumstances of the case, rely on an assessment of one, several, or all 
of those elements ".624 Ultimately, the aim is  to determine whether, notwithstanding any appearance 
of non -specificity resulting from the application of subparagraphs (a) and (b), the evidence of actual 
allocation or use of the subsidy provides sufficient assurance as to the existence of specificity.625 
5.264.   With respect to the European Union's evidence presented in relation to the factor 
"predominant use", the Panel noted the original panel's reasoning that predominant use "requires 
consideration of whether the subsidy programme in issue is mainly or most fr equently used by 
'certain enterprises'", taking into account the extent of diversification of economic activities within 
the jurisdiction of the granting authority and the length of time during which the subsidy programme 
has been in operation.626 Having not ed the European Union's argument that Boeing and its suppliers 
(the Project Emerald companies) have been the predominant users of the subsidy, benefiting from 
US$390 million out of a total of US$495 million in EDBs and air hub bonds, or 79% of the bonds by  
value, the Panel "d{id} not consider this information to show that the economic development bond 
scheme has mainly or most frequently been used by certain enterprises".627 The Panel reasoned 
that: 
While this information could be relevant to an argument that  a disproportionately large 
amount of subsidy has been granted to certain enterprises, this is not an argument that 
the European Union makes. To find otherwise would be to confound predominant use 
by certain enterprises …, and the granting of disproportion ately large amounts of 
subsidy to certain enterprises …  .628 
5.265.   We note that, beyond quoting the original panel's observations about "predominant use", 
the Panel did not develop its own understanding of the meaning of this term and what evidence 
might be releva nt to establishing that the EDB scheme was mainly, or most frequently, used by 
certain enterprises in the present circumstances. In this regard, the European Union argues that 
"{t}here is nothing in Article 2.1(c), itself, or any other aspect of Article 2. 1 indicating that evidence 
relevant to one of the 'factors' in Article  2.1(c) is exclusive to that factor, and irrelevant for 
                                                
623 United  States' appellee's submission, para. 132.  
624 Appel late Body Report, US – Large Civil Aircraft (2nd complaint) , para. 878. (emphasis added)  
625 Appellate  Body Report, US – Carbon Steel (India) , para. 4.373.  
626 Panel Report, para. 8.840 (quoting Original Panel Report, para. 7.746; referring to ibid., 
para. 7.747).  
627 Panel Report, para. 8.840.  
628 Panel Report, para. 8.840. (fn omitted)  WT/DS353/AB/RW  
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 considering the other 'factors'."629 According to the European  Union, given that the overall enquiry 
is the same, that is, to determ ine whether a subsidy is specific to certain enterprises, the factors 
listed in Article 2.1(c) are closely related, and evidence demonstrating one factor of Article  2.1(c) 
could also be relevant to other factors.630 
5.266.   We agree with the European  Union that ther e may be overlap in the evidence demonstrating 
the existence of "predominant use {of a subsidy programme} by certain enterprises" and the 
"disproportionately large amounts of subsidy to certain enterprises", depending on the nature, 
functioning, and actual  distribution of the particular subsidy programme; other relevant factual 
circumstances; and the assessment of the factors in the third sentence of Article  2.1(c). Evidence 
about the number of enterprises receiving a subsidy, the amounts received by certai n enterprises, 
and the frequency with which the subsidy has been received by those enterprises may therefore be 
complementary  and, depending on the circumstances of the case, point to the existence of de facto 
specificity based on one or another factor under Article  2.1(c), second sentence. Thus, evidence on 
the percentage of bonds by value used by certain enterprises may be potentially relevant to showing 
the existence of predominant use, insofar as "{o}ne way to show that a subsidy programme is 
mainly or most frequently used by 'certain enterprises' is to show how much of that subsidy 
programme is used by certain enterprises."631 
5.267.   In the present case, the European Union put forward evidence that, since the adoptio n of its 
legislation authorizing the issuance of EDBs in 2002, South Carolina has issued EDBs to the following 
recipients: BMW ( up to US$105 million in 2003); the Project Emerald companies ( up to 
US$160  million in 2004); each of three public entities (the City of Greenville, the City of Myrtle 
Beach, and Trident Technical College) ( up to US$7 million in 2005); and Boeing ( up to 
US$220  million in 2010).632 The subsidy has been granted to relatively few entities, relatively 
infrequently, and in relatively large  amounts. In these circumstances, the question as to whether 
the subsidy programme has been used predominantly by certain enterprises would have to take into 
account not just the incidence or frequency with which Boeing and other enterprises have been 
granted the subsidy, but also the value of the EDBs granted. Only then would it be possible to answer 
the question of whether the subsidy has been mainly, or for the most part, used by certain 
enterprises for the purposes of Article  2.1(c). Thus, by excluding a category of evidence potentially 
relevant to the assessment of the existence of "predominant use by certain enterprises" and 
ultimately for determining de facto specificity, on the sole basis that this evidence was more relevant 
to the assessment of anot her factor under Article  2.1(c), second sentence, the Panel erred in its 
interpretation of these factors in Article  2.1(c).  
5.268.   We also do not share the Panel's concern that to find otherwise "would be to confound" the 
two factors under Article  2.1(c) , second sentence .633 There is no reason why a priori  certain 
categories of evidence should not be relevant in the context of more than one legal question, all of 
which have the purpose of establishing "whether a subsidy, although not apparently limited to certain 
enterprises from a review of the relevant legislation or express acts of a granting authority , is 
nevertheless allocated in a manner that belies the apparent neutrality of the measure".634 Therefore, 
in our view, the Panel should not have excluded from conside ration certain categories of evidence 
simply because they appear to relate more specifically to one, as opposed to another, factor under 
Article  2.1(c), second sentence.  
5.269.   In light of the above, we find that the Panel erred in its interpretation of the facto rs 
"predominant use by certain enterprises" and "granting of disproportionately large amounts of 
subsidy to certain enterprises" in Article  2.1(c) of the SCM  Agreement. We therefore reverse  the 
Panel's finding , in paragraph 8.843 of the Panel Report , that the European Union has failed to 
                                                
629 European Union's appellant's submission, para. 242.  
630 European Union's appellant's submission, para. 242.  
631 European Union's appellant's submission, para. 247.  
632 See Pan el Report, para. 8.838.  
633 Panel Report, para. 8.840.  
634 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , para. 877.  WT/DS353/AB/RW  
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 establish that the subsidy provided by South Carolina through EDB proceeds is specific within the 
meaning of Article 2.1 of the SCM  Agreement.635 
5.4.3.4   Whether the Panel failed to make an objective assessment under Article 11 of th e 
DSU 
5.270.   The European Union contends that the Panel failed to make an objective assessment under 
Article 11 of the DSU of the factors in the third sentence of Article  2.1(c) of the SCM  Agreement, 
namely the extent of diversification of economic activities wit hin the jurisdiction of the granting 
authority, and the length of time during which the subsidy programme has been in operation.636 
According to the European Union, "{t}he Panel had undisputed evidence before it of (i) a granting 
authority ( i.e., the State o f South Carolina) with a diverse economy in which many companies 
operated, and (ii) the length of time that the measure authorising the EDBs had existed (since 
2002)."637 
5.271.   The United  States argues that the total number of manufacturing establishments in 
South  Carolina does not indicate the number of companies that were eligible for the EDB programme, 
namely "those that establish a new economic development project in South  Carolina, involving an 
investment of at least $400 million and the creation of 400 new jo bs".638 Furthermore, the 
United  States considers that the European  Union "offers no reason to expect that, in light of the 
demanding eligibility requirements, more than six entities should have qualified for the EDB program 
during the period from 2002 to 201 2".639 
5.272.   Having reversed the Panel's finding that the European Union has failed to establish that the 
subsidy provided by South Carolina through EDB proceeds is specific within the meaning of 
Article  2.1 of the SCM  Agreement, we do not consider it necessary to examine further the objectivity 
of the Panel's assessment with respect to the factors in the third sentence of Article  2.1(c).  
5.4.3.5   Completion of the legal analysis  
5.273.   In our analysis above, we found that the Panel erred in its interpretation of Artic le 2.1(c) of 
the SCM Agreement by interpreting the factors "predominant use by certain enterprises" and "the 
granting of disproportionately large amounts of subsidy to certain enterprises" as mutually exclusive 
in terms of the evidence on the basis of whic h their existence can be established. We therefore now 
turn to the European Union's request for completion of the legal analysis.  
5.274.   The European Union requests us to complete the legal analysis and conclude that the EDB 
subsidies are specific within the mean ing of Article 2.1(c) of the SCM  Agreement.640 In the 
European  Union's view, the Appellate Body should rely on factual findings by the Panel that, since 
the adoption of its legislation authorizing the issuance of EDBs in 2002, South Carolina has issued 
EDBs benefiting only three private ventures: BMW (US$105 million), the Project Emerald companies 
(US$120 million), and Boeing (US$220 million).641 The European Union considers that the 
Appellate  Body can also take into account undisputed factual evidence that the  South Carolina 
economy is diverse, including: (i) the Panel's finding that "a wide variety of industries and 
enterprises" in South  Carolina entered into 954 FILOT agreements with the State; (ii) evidence that 
"{d}ata from the United States Census Bureau i ndicates that, in 2012, there were … 3,867 
manufacturing establishments" in South Carolina; and (iii) evidence that "many more {than two} 
                                                
635 We note that the Panel appears to have failed to reflect in its conclusions in paragraphs 8.1077 and 
11.7.c of the Panel R eport its finding in paragraph 8.843 that the European Union had failed to establish that 
the subsidy provided by South Carolina through EDBs is specific within the meaning of Article 2.1. Therefore, in 
our finding above, we are not identifying a specific paragraph from the Panel's Conclusions and 
Recommendations section.  
636 European Union's appellant's submission, para. 253.  
637 European Union's appellant's submission, para. 253.  
638 United States' appellee's submission, para. 133.  
639 United States' appellee's s ubmission, para. 134.  
640 European Union's appellant's submission, para. 261.   
641 European Union's appellant's submission, para. 262 (referring to Panel Report, pa ras. 8.687, 8.765 , 
and 8.838 ). WT/DS353/AB/RW  
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 (manufacturing) enterprises in South  Carolina invest in facilities and infrastructure" and therefore 
"had access to {t he EDB} subsidy".642 
5.275.   We recall that whether a subsidy programme is mainly, or for the most part, used by certain 
enterprises is necessarily a question that should be answered on a case -by-case basis, taking into 
account the particular characteristics of the subsidy programme at issue and the prevailing 
circumstances of the case, and in light of the factors in the third sentence of Article  2.1(c). As 
observed above , the European  Union's evidence does not provide specific information concerning 
the number of en tities with the capacity to make an investment and to create employment of the 
scale required by the criteria of eligibility under the EDB subsidy. Accordingly, we see no basis for 
assessing whether the actual allocation of the EDBs differed from the alloc ation that would have 
been expected in light of the investment and employment requirements, which in turn may establish 
the existence of predominant use of the subsidy programme by certain enterprises. Similarly, the 
fact that "many more {than two} (manufa cturing) enterprises in South Carolina invest in facilities 
and infrastructure"643 does not necessarily mean that those other enterprises have the potential to 
comply with the minimum investment and employment requirements and are thereby in a position 
actua lly to avail themselves of the EDB benefits. There are no other factual findings by the Panel or 
undisputed facts on the Panel record relevant to the assessment of whether the EDB subsidy has 
been predominantly used by certain enterprises.  
5.276.   In view of the a bove and in the absence of sufficient factual findings by the Panel or 
undisputed facts on the Panel record, we are unable to complete the legal analysis in relation to  the 
European  Union's claim that the EDB subsidy programme is de facto  specific because of its 
predominant use by certain enterprises within the meaning of Article 2.1(c) of the SCM  Agreement.  
5.4.3.6   Conclusion  
5.277.   With regard to the European  Union's claim that the P anel erred in its interpretation of the 
term "limited number" in the second sentence of Article  2.1(c) of the SCM Agreement, we observed 
that what constitutes a quantitatively limited group of enterprises must be determined on a 
case-by-case basis, taking into account the particular characteristics of the subsidy programme and 
the circumstances of the case. We disagree with the European Union that the Panel implicitly 
interpret ed the term "limited number" as "one" or "fewer than three" . Rather, the Panel considered 
that the European  Union had not met its burden of proof as to whether the EDB subsidy has been 
used by only a "limited number" of certain enterprises.  Accordingly, we find that the Panel did not 
err in its interpretation of the term "limited numbe r" of certain enterprises in Article  2.1(c) of the 
SCM Agreement.  
5.278.   With regard to the European  Union's claim that the Panel erred in its interpretation and 
application of the term "certain enterprises"  in the second sentence of Article 2.1(c) , we observed 
that the determination of whether a number of enterprises or industries constitute "certain 
enterprises" should be made in light of  all relevant characteristics of the entities, including the nature 
and purpose of their activities in the markets in question  and the context in which these activities 
are exercised. The Panel erred by taking into account three specific entities in its analysis under 
Article  2.1(c) without having established that they constitute "certain enterprises". However, the 
Panel's reject ion of the European  Union's claims does not hinge on its statement relating to the 
relevance of the three specific entities in its analysis of de facto specificity.  
5.279.   With regard to the European  Union's claim that the Panel erred in its interpretation of th e 
term "predominant use" in the second sentence of Article  2.1(c), we observed that this term refers 
primarily to the incidence or frequency  with which the subsidy is used by certain enterprises. 
Furthermore, we found that evidence demonstrating the existe nce of "predominant use by certain 
enterprises" may also be pertinent for demonstrating the granting of "disproportionately large 
amounts of subsidy to certain enterprises". Accordingly, we  find that, by excluding a category of 
evidence potentially relevan t to the assessment of the existence of "predominant use by certain 
                                                
642 European Union's appellant's submission, para. 262 (quoting Panel Report, para. 8.899; 
European  Union's c omment s on United States' response to Panel q uestion No. 142, para. 22, in turn quoting 
Data from US Census Bureau, Geography Area Series: County Business Patterns (2010 -2012)  (Panel  Exhibit 
EU-1437) , p. 1; European Union's  response to Panel q uestion No. 110, fn 319 to para. 179).  
643 European Union's  response to Panel q uestion No. 110, fn 319 to para. 179. WT/DS353/AB/RW  
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 enterprises" and ultimately for determining de facto specificity, on the basis that this evidence was 
more relevant to the assessment of another factor under Article  2.1(c), second sentenc e, the Panel 
erred in its interpretation of these factors in Article  2.1(c).  
5.280.   We therefore reverse  the Panel's finding , in paragraph 8.843 of the Panel  Report , that the 
European  Union has failed to establish that the subsidy provided by South Carolina throu gh EDB 
proceeds is specific within the meaning of Article 2.1 of the SCM  Agreement . We also find that there 
are insufficient factual findings by the Panel or undisputed facts on the Panel record for us to 
complete the legal analysis in this respect . Having reversed the Panel's finding, we do not consider 
it necessary to address whether, in addition, the Panel acted inconsistently with Article 11 of the 
DSU. 
5.5  European Union's claims relating to the Panel's findings concerning South Carolina  
MCIP job tax credits  
5.281.   The European Union requests us to reverse the Panel's finding that the European Union had 
failed to establish that the subsidy provided through the additional corporate income tax credits is 
specific within the meaning of Article 2.2 of the SCM A greement and its conclusion that the 
European  Union had not established that the United  States failed to withdraw this subsidy within the 
meaning of Article 7.8 of the SCM  Agreement.644 The European Union submits that, in reaching its 
finding, the Panel erre d in the application of Article 2.2 and also acted inconsistently with Article 11 
of the DSU. The European  Union also requests us to complete the legal analysis and find that the 
subsidy is specific within the meaning of Article 2.2 of the SCM Agreement.645 
5.282.   The United States requests us to uphold the Panel's finding that the subsidy provided to 
Boeing through the additional corporate income tax credits is not specific within the meaning of 
Article 2.2 of the SCM Agreement.646 The United States submits that the Panel did not err in the 
application of Article 2.2 of the SCM Agreement and did not fail to conduct an objective assessment 
of the matter, as required by Article 11 of the DSU.  
5.283.   In our analysis below, we first outline the measure at issue and recall the pa rties' arguments 
before the Panel and the Panel's findings, as relevant for the claims before us. Then, we turn to the 
analysis of the European Union's claims on appeal, which will proceed in three steps. We begin by 
addressing the legal standard under Art icle 2.2 of the SCM Agreement. Subsequently, we evaluate 
whether the Panel erred in the application of this provision. Finally, we address the European Union's 
claim under Article 11 of the DSU.  
5.5.1   The Panel's findings  
5.284.   Before the Panel, the European Union cha llenged the additional corporate income tax credits 
provided to Boeing by virtue of the inclusion of Boeing's production facilities within the industrial 
park jointly established by Charleston County and Colleton County (Charleston -Colleton MCIP). 
Accordin g to Section 12 -6-3360 of the South Carolina Income Tax Act, taxpayers that create new 
full-time jobs in South Carolina may receive two types of corporate income tax credits – standard 
tax credits and additional tax credits. All taxpayers that meet certain  employment -related criteria 
are eligible for the standard tax credits. However, in order to receive the additional tax credits, such 
taxpayers must be located in a business or industrial park jointly established and developed by a 
group of South Carolina counties pursuant to Section 13 of Article  VIII of the Constitution of 
South  Carolina.647 
5.285.   Section 13 of Article VIII of the Constitution of South Carolina provides that "{c}ounties may 
jointly develop an industrial or business park with other counties within  the geographical boundaries 
of one or more of the member counties ."648 Pursuant to this authority, Charleston County and 
                                                
644 Panel Report, paras. 8.931 and 11.7.c.vii.  
645 European Union's appellant's submission, para. 299.  
646 United States' appellee's submission, para. 1 43. 
647 Panel Report, para. 8.912 (referring to South Carolina Income Tax Act, South Carolina Code , 
Title 12, Chapter 6  (Panel Exhibit EU -509), Section  12-6-3360(C); quoting ibid., Section 12 -6-3360(E)(1)).  
648 Panel Re port, para. 8.913.  WT/DS353/AB/RW  
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 Colleton County jointly established the Charleston -Colleton MCIP.649 The territory of this MCIP was 
subsequently extended in order to incl ude Boeing's production facilities in South  Carolina.650 As a 
result of the inclusion of Boeing's production facilities within the Charleston -Colleton MCIP, Boeing 
became "located" within an industrial park jointly developed by a group of South Carolina coun ties 
in accordance with Section 13 of Article VIII of the Constitution of South Carolina. This entitled 
Boeing to the additional corporate income tax credits under Section  12-6-3360 of the South Carolina 
Income Tax Act, its eligibility for the standard cor porate income tax credits not being in dispute 
before the Panel.651 
5.286.   The Panel found that the provision of the additional corporate income tax credits to Boeing 
involved a financial contribution in the form of revenue "foregone" within the meaning of 
Article  1.1(a)(1)(ii) and conferred a benefit within the meaning of Article 1.1(b) of the 
SCM Agreement.652 The European  Union argued that the resulting subsidy (MCIP subsidy) was 
specific under Articles  2.1(a), 2.1(c), and 2.2 of the SCM Agreement.653 The Panel found  that the 
European  Union had failed to establish that the MCIP subsidy is specific within the meaning of those 
provisions.654 On appeal, the European Union challenges only the Panel's finding with respect to 
Article 2.2 of the SCM Agreement.  
5.287.   Before the Panel , the European Union argued that the MCIP subsidy is specific under 
Article  2.2 of the SCM  Agreement because it is "limited to certain enterprises located within a 
designated geographic {al} region within the jurisdiction of the granting authority".655 The 
European  Union asserted that: (i) the Charleston -Colleton MCIP is a particular geographical region 
designated by two counties; (ii) the State of South Carolina is the granting authority, within the 
jurisdiction in which that region is located; and (iii) the number of enterprises located within that 
region is irrelevant for the specificity analysis under Article 2.2.656 
5.288.   The United States argued before the Panel that the MCIP subsidy is not "limited to certain 
enterprises located within a designated geographical region" within the meaning of Article 2.2 of the 
SCM Agreement but is provided to a number of enterprises located within any number of different 
MCIPs throughout South Carolina. The United States asserted that MCIPs are pervasive in 
South  Carolina and are available to any business that requests the inclusion of its property within 
an MCIP.657 Furthermore, because counties can freely add property to or subtract it from MCIPs at 
any time, an MCIP is not a "designated" region within the meaning of Article 2.2 of  the 
SCM Agreement.658 
5.289.   The Panel began by noting the findings of previous panels to the effect that: (i) any identified 
tract of land within the jurisdiction of the granting authority may be a "designated geographical 
region" within the meaning of Article 2. 2 of the SCM Agreement659; and (ii) an industrial park or 
economic development zone could constitute such a region.660 The Panel further observed that when 
a subsidy is provided only to enterprises located within a region that has a "fixed geographic 
                                                
649 Panel Report, para. 8.913 (referring to United States' first written submission to the Panel, 
para. 572).  
650 Panel Report, para. 8.913 (referring to Charleston County Council Ordinance 1475 (5  December 
2006)  (Panel Exhibit  EU-555); Inducement and Millage Rate Agreement between Charleston County and 
Project Emerald (21 December 2004)  (Panel Exhibit  EU-553), p.  4; Charleston County Ordinance 1626 
(2 February  2010)  (Panel Exhibit EU -516), Section 2; Fee Agreement by and between Charleston County, 
South Carolina, and The Boeing Company (1 December 2010)  (Boeing FILOT Agreement ) (Panel Exhibit 
EU-470), Section  5.3). 
651 Panel Report, paras. 8.912 -8.913.  
652 Panel Report, paras. 8.920 -8.921.  
653 Panel Report, paras. 8.923, 8.926, and 8.929.  
654 Panel Report, paras. 8.925, 8.928, 8.931, and 8.933.  
655 European Union's first written submission to the Panel, paras. 640 and 719.  
656 Panel Report, para. 8. 929 (referring to European Union's first written submission to the Panel , 
paras.  640 and 719 ; second written submission to the Panel, para. 682) . 
657 Panel Report, para.  8.930 (referring to United States' first written submission to the Panel , 
para. 643). 
658 Panel Report, para. 8.930 (referring to United States' second written submission to the Pane l, 
para. 612). 
659 Panel Report, para. 8.931 (referring to Panel Report, US – Anti-Dumping and Countervailing Duties 
(China) , paras. 9.143 -9.144 ). 
660 Panel Report, para. 8.931 (referring to Panel Reports, US – Anti-Dumping and Countervailing Duties 
(China) , paras. 9.159 and 9.162; US – Countervailing Measures (China) , para. 7.352).  WT/DS353/AB/RW  
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 identity" , such a subsidy is limited to certain enterprises within that region because it is not possible 
for enterprises not located within that designated region to have access to the subsidy.661 The Panel 
noted, however, that this logic did not apply to the MCIP s ubsidy at issue, because the "MCIP 
designation" is "readily available upon request"662 to any enterprise regardless of its particular 
location in South Carolina. The Panel thus considered that the availability of the MCIP subsidy only 
to enterprises located within an MCIP "cannot be meaningfully considered to amount to a limitation 
under Article 2.2".663 On that basis, the Panel found that the European  Union had failed to establish 
that the subsidy provided through the additional corporate income tax credits is  specific within the 
meaning of Article  2.2 of the SCM  Agreement.664 
5.5.2   Claims and arguments on appeal  
5.290.   The European Union claims that, in finding that the MCIP subsidy is not "limited to certain 
enterprises located within a designated geographical region", the Panel erred in the application of 
Article 2.2 of the SCM Agreement and reached, on this basis, an erroneous conclusion that the 
European Union had failed to establish that the United States had not withdrawn this subsidy within 
the meaning of Article 7.8 of the SCM Agreement.665 In addition, the European Union argues that 
the Panel acted inconsistently with Article 11 of the DSU because the Panel's conclusion that the 
MCIP subsidy is not specific under Article 2.2 of the SCM Agreement is not base d on an objective 
assessment of the facts.666 
5.291.   The European Union submits that the Panel erred in the application of Article 2.2 of the 
SCM Agreement because it failed to recognize that limiting access to the MCIP subsidy to enterprises 
located within an MCIP  constitutes a geographical limitation on this subsidy.667 The European Union 
argues that the Panel based its finding that the limitation on access to the subsidy to enterprises 
located within an MCIP "cannot be meaningfully considered to amount to a limitat ion under 
Article  2.2" on the mere possibility that the geographical boundaries of MCIPs could be reduced or 
expanded in the future.668 In the European Union's view, just the possibility that this might occur in 
the future cannot justify a finding that, at p resent, the MCIP subsidy is not specific within the 
meaning of Article 2.2 of the SCM Agreement.669 The European Union further contends that the 
Panel's finding suggests that the term "designated geographical region" can encompass only a "fixed 
geographic id entity" that cannot be changed or amended in the future.670 However, for the 
European  Union, the "designated geographical region" within the meaning of Article 2.2 need not be 
strictly defined or fixed.671 
5.292.   Furthermore, the European Union claims that the Panel acted inconsistently with Article  11 
of the DSU in finding that the MCIP designation is "readily available upon request" to any 
enterprise.672 The European Union argues that the Panel did not refer to any evidence in support of 
that finding and failed to con duct an independent assessment of whether the MCIP designation was 
indeed available upon request to any enterprise.673 According to the European Union, the Panel's 
finding is contrary to undisputed evidence on the record, which shows that the MCIP designatio n 
requires a multi -county legislative action, and is therefore not easily available to any enterprise 
requesting it.674 The European Union further argues that the Panel failed to explain how its finding 
that the MCIP designation is readily available to any e nterprise accords with the distinction between 
the standard corporate income tax credits (for which an enterprise does not need to be located 
within an MCIP) and additional corporate income tax credits (for which an enterprise is required to 
be located in an MCIP) under South Carolina law. The European Union argues, therefore, that the 
                                                
661 Panel Report, para. 8.931.  
662 Panel Report, para. 8.931.  
663 Panel Report, para. 8.931.  
664 Panel Report, para. 8.931.  
665 European Union's appellant's submission, para. 266 an d fn 516 thereto . 
666 European Union's appellant's submission , para. 267.  
667 European Union's appellant's submission, para s. 283 -286. 
668 European Union's appellant's submission, para . 279 (quoting Panel Report, para.  8.931). See also 
ibid., paras. 285 -288. 
669 European Union's appellant's submission, para s. 288 -289. 
670 European Union's appellant's submission, para . 286 (quoting Panel Report, para. 8.931).  
671 European Union's appellant's submission, para . 287.  
672 European Union's appellant's submission, para.  293 (qu oting Panel Report, para. 8.931).  
673 European Union's appellant's submission, para . 295.  
674 European Union's appellant's submission, para.  294. WT/DS353/AB/RW  
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 Panel's view of the facts is implausible and unsupported by reasoned and adequate explanations and 
coherent reasoning, as required by Article 11 of the DSU.675 
5.293.   Referring to the  European Union's argument that the Panel's finding suggests that the term 
"designated geographical region" can encompass only a "fixed geographic identity" that cannot be 
changed or amended in the future,676 the United States responds that, in making this a rgument, the 
European Union inaccurately ascribes a legal interpretation to the Panel that it did not adopt.677 
According to the United States, the Panel found that the MCIP designation does not operate as a 
genuine limitation on access to the subsidy becaus e the MCIP designation is "infinitely mutable".678 
In the United States' view, however, this does not imply that a geographical designation must be 
"immutable" in order to fall under Article 2.2 of the SCM Agreement.679 In addition, the United  States 
points ou t that the measure at issue provides no way of identifying, either explicitly or implicitly, the 
areas included within MCIPs. For the United States, this supports the conclusion that the MCIP 
subsidy is not specific under Article 2.2 of the SCM Agreement.680 
5.294.   With respect to the European Union's claim under Article 11 of the DSU, the United States 
argues that the Panel's finding that the MCIP designation is "readily available upon request"681 to 
any enterprise is supported by the fact that the text of the Charle ston-Colleton MCIP Agreement 
contemplates changes to the territory of that MCIP682, as well as by the fact that such changes had 
occurred 18 times between 1995 and 2013.683 The United States further contends that the 
European  Union failed to provide evidence o f applications for the receipt of the subsidy being 
rejected. Therefore, there is no indication that the Panel's finding regarding the availability of the 
MCIP designation lacked objectivity.684 
5.5.3   Whether  the Panel erred in its application of Article 2.2 of th e SCM Agreement  
5.295.   In this section, we examine the European Union's claim on appeal that the Panel erred under 
Article 2.2 of the SCM Agreement in finding that the European Union had failed to establish that the 
subsidy provided through the additional corpora te income tax credits is specific within the meaning 
of Article 2.2 of the SCM Agreement. We first address the legal standard under Article 2.2 and then 
turn to review the Panel's analysis under that provision.  
5.296.   Article 2.2 of the SCM Agreement provides, in  relevant part:  
A subsidy which is limited to certain enterprises located within a designated 
geographical region within the jurisdiction of the granting authority shall be specific.  
5.297.   Article 2.2 concerns regional specificity of subsidies, i.e. specificity by reason of the location 
of eligible subsidy recipients within a particular geographical region.685 The phrase "{a} subsidy 
which is limited to" refers to the concept of a limitation, similar to the one contained in Articles  2.1(a) 
and 2.1(c) of the SCM Agr eement. The dictionary definition of the verb "to limit" is to "confine within 
                                                
675 European Union's appellant's submission, para.  296 (referring to Appellate Body Report s, EC and 
certain member States – Large Civil Aircraft , para. 1317 ; US – Upland Cotton (Article 21.5 – Brazil) , fn 618 to 
para. 293).  
676 United States' appellee's submission, para. 141 ( quoting  European Union's appellant's submission, 
para. 286).  
677 United States'  appellee's submission, para.  141 (quoting European Union's appellant's submission, 
para. 286 ). 
678 United States' appellee's submission, para. 141.  
679 United States' appellee's submission, para.  141. 
680 United States' appellee's submission, para. 142 (quoting  Appellate Body Report, US – Washing 
Machines , para. 5.229).  
681 United States' appellee's submission, para. 140 (referring to European Union's appellant's 
submission, para. 293, in turn referring to Panel Report, para. 8.931).  
682 United States' appellee's submission, para . 140 (referring to Charleston County Council Ordinance 
1475 (5  December 2006)  (Panel Exhibit EU -555)).  
683 United States' appellee's submission, para. 140 (referring to  United States' response to Panel 
question No. 149, para. 18; Charleston County Council Ordinance 1475 (5 December 2006)  (Panel Exhibit 
USA-555)).  
684 United States' appellee's submission, para. 140  (referring to Panel Report, para. 8.928).  
685 Appellate Body Report,  US – Washing Machines , para s. 5.213 and 5.222.  WT/DS353/AB/RW  
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 limits, to set bounds to", "to bound, restrict".686 Accordingly, Article 2.2 concerns those subsidies 
that are provided within certain bounds or limits. As Article 2.2 deals with regional specificity, the 
term "limited", in the context of this provision, suggests that access to a subsidy must be limited to 
eligible recipients located within a "designated geographical region" within the jurisdiction of the 
granting authority.  
5.298.   We not e that, in contrast to Article 2.1(a) of the SCM Agreement, the term "limited" in the 
text of Article 2.2 is not qualified by the word "explicitly". This suggests that, in principle, Article  2.2 
covers both explicit and implicit limitations on access to a subsidy. We also observe that Article  2.2 
does not prescribe a particular manner in which a limitation on access to a subsidy must be imposed. 
Unlike Article 2.1(a), the text of Article 2.2 does not specify that such a limitation must necessarily 
be found in "the legislation pursuant to which the granting authority operates", or that it must be 
imposed by the granting authority itself.  
5.299.   In order for a subsidy to be specific within the meaning of Article 2.2 of the SCM  Agreement, 
a subsidy must be limited to "certain enterprises". The term "certain enterprises" is defined in the 
chapeau  of Article  2.1 as "an enterprise or industry or group of enterprises or industries". As we 
noted above, the term "enterprise" may be understood to refer to an entity that engag es in certain 
economic activities in the market. The Appellate Body has further held that the term "certain 
enterprises" refers to a single enterprise or industry or a class of enterprises or industries that are 
known and particularized.687 The Appellate Bod y also noted that this concept involves a certain 
amount of indeterminacy at the edges and that any determination of whether a number of 
enterprises or industries constitute "certain enterprises" can be made only on a case -by-case 
basis.688 
5.300.   The chapeau  of Ar ticle 2.1 offers interpretative guidance with regard to the scope and 
meaning of the rest of Article  2689, including the term "certain enterprises" employed in different 
parts of Article 2. Therefore, in principle, the definition of the term "certain enterpr ises" provided 
therein is also relevant for the interpretation of this term in Article 2.2. However, it does not follow 
that this term necessarily has an identical meaning across all of the provisions of Article 2. Rather, 
it must be read in the context of  the specific provision of Article 2 in which it appears. As already 
observed, Article 2.2 concerns specificity by reason of the location of eligible subsidy recipients 
within a particular geographical region.690 Accordingly, we understand the term "certain enterprises" 
in Article 2.2 to refer to those enterprises that are located within a "designated geographical region" 
within the jurisdiction of the granting authority.  
5.301.   We further noted above that the term "enterprise" refers to an entity engaged in economi c 
activities in the market. The term "located", in turn, connotes a place where an enterprise has 
established itself.691 As observed by the Appellate Body, an enterprise may be considered to be 
established in a variety of places, including at the sites of it s headquarters, branch offices, or 
manufacturing facilities.692 This means that, for purposes of specificity under Article 2.2 of the 
SCM Agreement, access to a subsidy must be limited to entities that are engaged in economic 
activities in the market; have t heir headquarters, branch offices, or manufacturing facilities in a 
"designated geographical region"; or are otherwise established within such a region.  
5.302.   Turning now to examine the meaning of the term "designated geographical region" in 
Article  2.2 of the S CM Agreement, we note that the word "region" refers to "any area, space, or 
place of more or less definite extent or character"693, while "geographical" denotes that something 
                                                
686 Oxfor d English Dictionar y online, definition of "limit ", http://www.oed.com/view/Entry/108478 . 
687 Appellate Body Report, US – Anti-Dumping and Countervailing Duties (China) , para. 373  (quoting 
Panel Report, US – Upland Cotton , para. 7.1142 ). 
688 Appellate Body Report, US – Anti-Dumping and Countervailing Duties (China) , para. 373  (quoting 
Panel Report, US – Upland Cotton , para. 7.1142 ). 
689 Appellate  Body Report, US – Anti-Dumping and Countervailing Duties (China) , para. 366. 
690 Appellate Body Report,  US – Washing Machines , paras. 5.213 and 5.222.  
691 Appellate Body Report,  US – Washing Machines , para.  5.222 (quoting Panel Report,  US – Washing 
Machines , para. 7.270 , in turn quoting The New Shorter Oxford English Dictio nary on Historical Principles , 
4th edn, L. Brown (ed.) (Clarendon Press, 1993), Vol. 1, p. 1614) . 
692 Appellate Body Report,  US – Washing Machines , para . 5.222. See also Panel Report, US – Washing 
Machines , para. 7.270.  
693 Oxford English Dictionary online, de finition of "region", http://www.oed.com/view/Entry/161281 . WT/DS353/AB/RW  
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 is "considered or defined in relation to a particular place, area, or region".694 This suggests that the 
term "geographical region" in Article 2.2 refers to a geographical area, space, or place of more or 
less definite extent or character within the jurisdiction of the granting authority. Article 2.2 does not 
further specify any criteria that may distinguish a particular "geographical region" from the rest of 
the area within the jurisdiction of the granting authority. We note, in this regard, the conclusion of 
the panel in US – Anti-Dumping and Countervailing Duties (China)  that Article 2. 2 does not require 
that a region have any formal administrative or economic identity and that a "geographical region" 
in the sense of that provision may encompass any identified tract of land within the jurisdiction of 
the granting authority.695 
5.303.   Article  2.2 of the SCM Agreement requires that the relevant geographical region within the 
jurisdiction of the granting authority be "designated". The term "designated" presupposes a certain 
degree of identification of this region.696 As observed by the Appe llate Body in US – Washing 
Machines , certain aspects of the meaning of the verb "designate" – such as "specify" and "{c}all by 
name" – point to an act of explicit or affirmative identification, whereas other aspects – such as 
"indicate" and "describe" – suggest that identification may also be carried out through indirect 
means.697 The identification of a region for the purposes of Article  2.2 of the SCM Agreement may 
be explicit or implicit, provided that the relevant region is clearly discernible from the te xt, design, 
structure, and operation of the subsidy measure at issue.698 
5.304.   In sum, a subsidy is specific under Article 2.2 of the SCM Agreement when it is limited to 
"certain enterprises" located within a "designated geographical region within the jurisdiction  of the 
granting authority". This is the case when access to a subsidy is either explicitly or implicitly limited 
to entities that are engaged in economic activities in the market; have their headquarters, branch 
offices, or manufacturing facilities in a " designated geographical region" within the jurisdiction of the 
granting authority; or are otherwise established within such a region. A "designated geographical 
region" refers to an identified geographical area, space, or place of more or less definite ext ent or 
character. The identification of a geographical region for the purposes of Article  2.2 of the 
SCM Agreement may be explicit or implicit, provided that the relevant region is clearly discernible 
from the text, design, structure, and operation of the subsidy measure at issue.699 
5.305.   With these considerations in mind, we turn to examine whether the Panel erred in the 
application of Article 2.2 of the SCM Agreement in its assessment of the specificity of the MCIP 
subsidy. We recall that the Panel commenced its  analysis by noting the findings of previous panels 
to the effect that: (i) any identified tract of land within the jurisdiction of the granting authority may 
be a "designated geographical region" within the meaning of Article 2.2 of the SCM  Agreement700; 
and (ii) an industrial park or economic development zone could constitute such a region.701 The 
Panel further observed that when a subsidy is provided only to enterprises located within a region 
that has a "fixed geographic identity", such a subsidy is "limite d" to certain enterprises within that 
region because it is not possible for enterprises not located within that "designated region" to have 
access to the subsidy.702 With respect to whether the MCIP subsidy is "limited" within the meaning 
of Article  2.2 of t he SCM Agreement, the Panel found that it was available only to taxpayers located 
in an MCIP.703 We understand that this was based on Section  12-6-3360 of the South Carolina 
Income Tax Act, which provides that only taxpayers located in an MCIP are eligible f or this subsidy.704 
Thus, there is an explicit limitation on access to the MCIP subsidy based on the location of the 
                                                
694 Oxford English Dictionary online, definition of "geographical", 
http://www.oed.com/view/E ntry/77754 . 
695 Panel Report, US – Anti-Dumping and Countervailing Duties (China) , paras. 9.140 -9.144.  
696 Appellate Body Report,  US – Washing Machines , para. 5.229 (quoting Panel Report,  US – Washing 
Machines , para. 7.280 ). 
697 Appellate Body Report,  US – Washing Machines , para. 5.229 (referring to Panel Report,  US – 
Washing Machines , para. 7.280 ). 
698 Appellate Body Report,  US – Washing Machines , para . 5.229.  
699 Appellate Body Report,  US – Washing Machines , para. 5.229.  
700 Panel Report, para. 8.931 (refe rring to Panel Report, US – Anti-Dumping and Countervailing Duties 
(China) , paras. 9.143 -9.144 ). 
701 Panel Report, para. 8.931 (referring to Panel Reports, US – Anti-Dumping and Countervailing Duties 
(China) , paras. 9.159 and 9.162; US – Countervailing Measu res (China) , para. 7.352).  
702 Panel Report, para. 8.931.  
703 Panel Report, para. 8.931.  
704 Panel Report, para. 8.912 (referring to South Carolina Income Tax Act, South Carolina Code , 
Title 12, Chapter 6  (Panel Exhibit EU -509), Section  12-6-3360(C); quoting ibid., Section 12 -6-3360(E)(1)).  WT/DS353/AB/RW  
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 potential subsidy recipient. We note, however, that instead of assessing whether this is a limitation 
concerning "certain enterprises" locate d in a "designated geographical region" in the sense of 
Article  2.2, the Panel reasoned that, due to the availability of the MCIP designation upon request to 
any enterprise, this "cannot be meaningfully considered to amount to a limitation under Article 2. 2" 
of the SCM  Agreement.705 On this basis, the Panel concluded that the European Union had failed to 
demonstrate that the MCIP subsidy is specific within the meaning of Article 2.2 of the 
SCM Agreement.  
5.306.    As we see it, the explicit requirement that taxpayers be located in an MCIP in order to 
receive the additional corporate income tax credits is a limitation on access to the MCIP subsidy. 
This limitation is not made void by the fact that enterprises not located in an MCIP may become part 
of an MCIP in the futu re and then qualify for the subsidy. We understand that the size and 
configuration of MCIPs in South  Carolina may change over time. The territory of existing MCIPs may 
be reduced or expanded, and new MCIPs may be established. However, this does not change the 
fact that only enterprises located in an MCIP are eligible to receive the MCIP subsidy. We therefore 
disagree with the Panel that the requirement of Section 12 -6-3360 of the South Carolina Income 
Tax Act that taxpayers be located in an MCIP in order to  receive the additional corporate income tax 
credits cannot be "meaningfully" considered as a "limitation" under Article  2.2 of the 
SCM Agreement.  
5.307.   In view of the foregoing, we find that the Panel erred in the application of Article 2.2 of the 
SCM Agreement  in stating that the availability of the MCIP subsidy only to enterprises located within 
an MCIP "cannot be meaningfully considered to amount to a limitation under Article 2.2" of the 
SCM Agreement.706 Therefore, we reverse  the Panel's finding , in paragraph 8.931 of the Panel 
Report , that the European Union had failed to establish that the subsidy provided through the 
additional corporate income tax credits is specific within the meaning of Article 2.2 of the 
SCM Agreement.  
5.5.4   Whether  the Panel failed to make an  objective assessment under Article 11 of the 
DSU 
5.308.   The European Union also claims that the Panel acted inconsistently with Article 11 of the 
DSU. Specifically, the European Union argues that the Panel's finding that the MCIP designation is 
"readily availabl e upon request", which led it to conclude that the European Union had not 
established that the MCIP subsidy is specific under Article 2.2 of the SCM Agreement, is not based 
on an objective assessment of the facts.707 
5.309.   We have reversed above the Panel's findin g that the European Union had failed to establish 
that the subsidy provided through the additional corporate income tax credits is specific within the 
meaning of Article 2.2 of the SCM Agreement on account of the Panel's error in the application of 
Article  2.2 of the SCM Agreement. Having reversed this finding, it is not necessary for us to examine 
further the objectivity under Article 11 of the DSU of the Panel's factual assessment in support of 
this finding.  
5.5.5   Completion of the legal analysis  
5.310.   We now turn to  consider the European Union's request that we complete the legal analysis 
and find that the MCIP subsidy is specific within the meaning of Article 2.2 of the SCM  Agreement.708 
5.311.   We recall that the Appellate Body may complete the legal analysis with a view to facilitating 
the prompt settlement and effective resolution of the dispute when the factual findings by the 
                                                
705 Panel Report, para. 8.931.  
706 Panel Report, para. 8.931.  
707 European Union's appellant's submission, para. 293 ( quoting Panel Report, para. 8.931).  
708 European Union's a ppellant's submission, para. 299.  WT/DS353/AB/RW  
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 panel709 and/or facts on the Panel record, which are uncontested by the disputing parties710, provide 
a sufficient factual basis for doing so.711 At the same time, the Appellate Body has declined to 
complete the legal analysis for reasons such as the absence of full exploration of the issues before 
the panel712, considerations pertaining to the parties' due process rights713, and where doing so was 
not requi red to resolve the dispute.714 
5.312.   With these considerations in mind, we proceed to assess whether there is a sufficient factual 
basis for us to complete the legal analysis in the present appeal and determine whether the MCIP 
subsidy is specific under Article 2. 2 of the SCM Agreement. We begin by addressing the question of 
whether there is a limitation on access to the MCIP subsidy. We recall in this regard that 
Section  12-6-3360 of the South Carolina Income Tax Act sets forth the conditions of eligibility for 
the MCIP subsidy and provides that, in order to be eligible for this subsidy, taxpayers must be located 
in an MCIP.715 We thus consider that Section 12 -6-3360 of the South Carolina Income Tax Act 
imposes a limitation on access to the MCIP subsidy.  
5.313.   Turning to t he question of whether this limitation concerns "certain enterprises located within 
a designated geographical region" within the meaning of Article 2.2 of the SCM Agreement, we note 
that the European Union's claim pertains to the availability of the MCIP s ubsidy to Boeing as a result 
of the inclusion of its manufacturing facilities within the Charleston -Colleton MCIP.716 As observed 
by the Appellate  Body in the original proceedings, the specificity inquiry:  
{F}ocuses not only on whether the subsidy was provided to the particular recipients 
identified in the complaint, but focuses also on all enterprises or industries elig ible to 
receive that same subsidy.  Thus, even where a complaining Member has focused its 
complaint on the grant of a subsidy to one or more enterprises or industries, the inquiry 
may have to extend beyond the complaint to determine what other enterprises o r 
industries also have access to that same subsidy under that subsidy scheme.717 
5.314.   Thus, while the European Union's claim focuses on the availability of the MCIP subsidy to 
Boeing because of its location in the Charleston -Colleton MCIP, the assessment of wheth er this 
subsidy is specific under Article 2.2 of the SCM Agreement is broader. It concerns the question of 
whether the MCIP subsidy is limited to "certain enterprises" located within a "designated 
geographical region" and not whether it is available only t o Boeing, due to its location in the 
Charleston -Colleton MCIP.  
5.315.   In addressing this issue, we note that Section 12 -6-3360 of the South Carolina Income Tax 
Act provides that, in order to be eligible for this subsidy, taxpayers must be "located in a business 
or industrial park jointly established and developed by a group of counties".718 It does not, on its 
face, designate any particular MCIP(s) within which enterprises eligible for this subsidy must be 
located. The United States further submits that Section 12 -6-3360 does not allow the identification 
                                                
709 See e.g. Appellate Body Reports, US – Gasoline , p. 19, DSR 1996:I, p p. 18-19; Canada – Periodicals , 
p. 24, DSR 1997:I, p. 469 ; Australia – Salmon , paras. 117 -119; US – Large Civil Aircraft (2nd complaint) , 
para. 1255.  
710 See e.g. Appellate Body Reports, US – Lamb , paras. 150 and 172 ; US – Shrimp , paras. 123 -124, 
132, and 140 ; US – Section 211 Appropriations Act , para s. 343 -345; EC and certain member States – Large 
Civil Aircraft , para . 1176; US – Large Civil Aircraft (2nd complaint) , paras. 1252 and 1262.  
711 See also  Appellate Body Reports , Colombia – Textiles , para. 5.30; US – Anti-Dumping Methodologies 
(China) , para. 5.146; Russia – Pigs (EU) , para. 5.141;  EC and certain member States – Large Civil Aircraft , 
para. 1178; EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 5.745.  
712 See e.g. Appellate Body Reports , EC – Asbestos , paras. 81 -82; EC and certain member States – 
Large Civil Aircraft (Article 21.5 – US), para.  7.571; EC ‒ Seal Products , para. 5.69 ; Russia – Commercial 
Vehicles , para. 5.141.  
713 See e.g. Appellate Body Reports, EC – Export Subsidies on Sugar , para. 339; EC ‒ Seal Products , 
para. 5.69 . 
714 Appellate Body Report, US – Steel Safeguards , para. 431 . 
715 Panel Report, p ara. 8.912 (quoting South Carolina Income Tax Act, South Carolina Code , Title 12, 
Chapter 6  (Panel Exhibit EU -509), Section  12-6-3360(E)(1), in turn referring to Section 12 -6-3360(C)).  
716 Panel Report, para. 8.914 (referring to European Union's  first writte n submission to the Panel, 
paras.  631-641, 675-682, and 709-720; second written submission to the Panel, paras.  675-682 and 
733-736). 
717 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , para. 753.  
718 Panel Report, para. 8.912 (referring to South Carolina Income Tax Act, South Carolina Code , 
Title 12, Chapter 6  (Panel Exhibit EU -509), Section  12-6-3360(C); quoting ibid., Section 12 -6-3360(E)(1)).  WT/DS353/AB/RW  
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 of the areas included within MCIPs, either explicitly or implicitly.719 On this basis, the United States 
argues that Section 12 -6-3360 of the South Carolina Income Tax Act does not designate the relevant 
"geographical region" within the meaning of Article 2.2, and that, as a consequence, the MCIP 
subsidy is not specific within the meaning of this provision.720 
5.316.   We agree with the United States to the extent that Section 12 -6-3360 of the South Carolina 
Income Tax Act does no t itself predetermine the geographical areas of the MCIPs established in 
South Carolina. However, we disagree with the suggested implications of this for the analysis of 
whether the MCIP subsidy is specific under Article 2.2 of the SCM Agreement. We recall  that a 
"designated geographical region" within the meaning of Article 2.2 refers to an identified 
geographical area, space, or place of more or less definite extent or character. The identification of 
a geographical region for the purposes of Article  2.2 may be explicit or implicit, provided that the 
relevant region is clearly discernible from the text, design, structure, and operation of the subsidy 
measure at issue.721 
5.317.   In the present case, the Panel found that, while the MCIP subsidy is provided at the sta te 
level722, MCIPs are established by the South Carolina counties, pursuant to the authority granted to 
them by Section 13 of Article VIII of the Constitution of South Carolina.723 In exercising this 
authority, Charleston County and Colleton County entered int o an agreement establishing the 
Charleston -Colleton MCIP.724 The Charleston -Colleton MCIP is thus an MCIP that allows taxpayers 
located within its boundaries to claim the additional corporate income tax credits, in accordance with 
Section 12 -6-3360 of the So uth Carolina Income Tax Act. The uncontested facts on the Panel record 
further indicate that the geographical area and location of the Charleston -Colleton MCIP are defined 
in the Agreement for Development for Joint County Industrial Park, as subsequently a mended.725 In 
this respect , we recall that a "designated geographical region" under Article 2.2 may encompass any 
"identified tract of land within the jurisdiction of a granting authority"726 and that it is not required 
that it have a "formal administrative or  economic identity".727 While the geographical area of a 
particular MCIP, such as the Charleston -Colleton MCIP, is not explicitly specified in 
Section  12-6-3360 of the South Carolina Income Tax Act, it may be discerned from the instrument 
establishing an MCI P. We thus consider that the subsidy measure at issue designates the 
"geographical region" within which enterprises must be located in order to receive the subsidy.  
5.318.   We note that it was not contested before the Panel that multiple MCIPs may be created in 
South Carolina, and that the size and configuration of MCIPs may change over time. The parties, 
however, did not submit to the Panel information on the number of MCIPs established in 
South  Carolina and the frequency of changes in the size and configuration o f the MCIPs728, and the 
Panel did not conduct an assessment of those factors. We thus see no basis on the Panel record 
supporting the United States' contention that, because of a potentially unlimited number of MCIPs 
that may be created in South Carolina, or  because of the flexible nature of the territorial borders of 
the existing MCIPs, the subsidy at issue is not limited to enterprises located within the geographical 
area of an MCIP, but is in fact widely available in South Carolina.729 We have taken note of the 
Panel's statement that the MCIP designation is "readily available upon request to any company".730 
                                                
719 United States' appellee's submission, para. 142.  
720 United States' appellee's submission, para. 142.  
721 Appellate Body Report,  US – Washing Machines , para. 5.229.  
722 Panel Report, para. 8.925.  
723 Panel Report, para. 8.913.  
724 Panel Report, para. 8.913.  
725 Panel Report, para. 8.913 (referring to Agreement for Develop ment for Joint County Industrial Park 
between Charleston County and Colleton County (1  September 1995)  (Panel Exhibit USA -554); Inducement 
and Millage Rate Agreement between Charleston County and Project Emerald (21 December 2004)  
(Panel  Exhibit EU -553), p . 4; Charleston County Council Ordinance 1475 (5  December 2006)  (Panel Exhibit 
EU-555); Boeing FILOT Agreemen t (Panel Exhibit EU -470), section 5.3; Charleston County Ordinance 1626 
(2 February  2010)  (Panel Exhibit EU -516), section 1 ). 
726 Panel Report, US – Anti-Dumping and Countervailing Duties (China) , para. 9.144.  
727 Panel Report, US – Anti-Dumping and Countervailing Duties (China) , para. 9.140.  
728 We note that the United States submitted to the Panel the list of Charleston County ordinances 
amending the boundaries of  the Charleston -Colleton MCIP (United States' response to Panel question No.  149, 
para. 18). There is, however, no information on the Panel record with regard to the existence and number of 
other MCIPs in South Carolina, or changes made to their boundaries.  
729 Panel Report, para. 8.930 (referring to United States' first written submission to the Panel, 
para. 643; second written submission  to the Panel, para. 612).  
730 Panel Report, para. 8.931.  WT/DS353/AB/RW  
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 However, the Panel did not provide any explanation or reasoning in support of that statement. 
Moreover, the Panel did not provide any explanation as to how , in the circumstances of this case, 
the extent of potential access to the subsidy served to overcome the express geographical 
delimitation that attaches to each MCIP designation. In the absence of such an explanation, we 
consider that the manner in which this subsidy measure designates the geographical area of an MCIP 
provides a sufficient basis for a finding that the subsidy measure at issue designates the 
"geographical region" within which enterprises must be located in order to receive the subsidy.  
5.319.   In view of the foregoing, we find that the subsidy provided to Boeing through the additional 
corporate income tax credits, pursuant to Section 12 -6-3360 of the South Carolina Income Tax Act, 
is specific within the meaning of Article 2.2 of the SCM Agreement.  
5.5.6   Conclusion  
5.320.   In sum, a subsidy is specific under Article 2.2 of the SCM Agreement when access to it is 
either explicitly or implicitly limited to entities engaged in economic activities in the market that 
have their headquarters, branch offices, or manufactur ing facilities in a "designated geographical 
region" within the jurisdiction of the granting authority, or that are otherwise established within such 
a region. In the present case, such limitation contained in Section  12-6-3360 of the South Carolina 
Income  Tax Act is not made void by the fact that enterprises not currently located in an MCIP may 
become part of an MCIP in the future and then qualify for the subsidy. We find that t he Panel erred 
in the application of Article 2.2 of the SCM Agreement in statin g that the availability of the MCIP 
subsidy only to enterprises located within an MCIP "cannot be meaningfully considered to amount 
to a limitation under Article 2.2" of the SCM Agreement.731 Consequently, we reverse  the Panel's 
finding , in paragraphs 8.931  and 11.7.c.vii  of the Panel Report , that the European Union ha s failed 
to establish that the subsidy provided through the additional corporate income tax credits is specific 
within the meaning of Article 2.2 of the SCM  Agreement.  
5.321.   Furthermore, we complete t he legal analysis and find that the subsidy provided to Boeing 
through the additional corporate income tax credits, pursuant to Section 12 -6-3360 of the 
South  Carolina Income Tax Act, is specific within the meaning of Article 2.2 of the SCM Agreement.  
5.6  Continuing adverse effects from the original reference period  
5.322.   The European Union presents two sets of challenges to the Panel's finding  that the 
European  Union had failed to establish that certain forms of serious prejudice, which were found by 
the original panel to be the effects of the pre -2007 aeronautics R&D subsidies in the original 
reference period  in the form of significant price suppression, signifi cant lost sales, and a threat of 
displacement or impedance with respect to the A330 and Original A350, continue into the 
post-implementation period  as serious prejudice with respect to the A330 and A350XWB.732 
5.323.   First, the European Union requests us to reverse  the Panel's finding that adverse effects 
consisting of significant price suppression and significant lost sales cannot continue to be caused by 
subsidies in instances where LCA orders occurred prior to the end of the implementation period, but 
for which d eliveries remained outstanding in the post -implementation period. The European Union 
submits that the Panel erred under Article 7.8 of the SCM  Agreement, and acted inconsistently with 
Article 11 of the DSU, by excluding specific transactions found to cause  adverse effects during the 
original proceedings from the obligation to take appropriate steps to remove adverse effects.  
5.324.   Second, the European Union requests us to reverse the Panel's finding  that the 
European  Union's claim of continuing adverse effects w as unsupported by the evidence and/or was 
in contradiction with the findings made in the original proceedings. The European Union argues that 
the Panel acted inconsistently with Article 11 of the DSU by deviating from the adopted findings in 
the original p roceedings concerning the 200 -300 seat LCA market by now focusing on separate 
aircraft models. The European Union further alleges that the Panel erred under Articles 5 and 6.3 of 
                                                
731 Panel Report, para. 8.931.  
732 Panel Report, paras. 9.332 and 11.8.b. This aspect of the European Union's claims was referred to by 
the Panel as the European Union's "parallel argument" and was consid ered separately from the 
European  Union's "main case" regarding present adverse effects in the post -implementation period through 
technology and price causal mechanisms. (See  Panel Report, paras. 9.109 -9.113)  WT/DS353/AB/RW  
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 the SCM Agreement by failing to conduct a proper counterfactual analysis when  assessing whether 
there was continuing price suppression of the A330 in the post -implementation period.  
5.6.1   Whether the Panel erred under Article 7.8 of the SCM Agreement, or acted 
inconsistently with Article  11 of the DSU, by excluding transactions found to cause 
adverse effects during the original reference period  from the obligation to take 
appropriate steps to remove adverse effects  
5.325.   The European Union considers that the Panel erred in the interpretation of Article  7.8 of the 
SCM Agreement by purportedly ex cluding adverse effects "found in relation to specific transactions 
during the original reference period" from the obligation to take appropriate steps to remove adverse 
effects.733 Thus, according to the European Union, the Panel erroneously found that the original 
adverse effects were no longer present adverse effects, but rather "continuing manifestations or 
effects of past adverse effects".734 As the European Union argues, to the extent a subsidy is 
maintained and its adverse effects still exist in the post -implementation period, the implementing 
Member has an obligation to take appropriate steps to remove the adverse effects, including with 
respect to the specific transactions addressed in the original proceedings. The European Union also 
submits that the P anel erred in the application of Article 7.8 of the SCM Agreement, and acted 
inconsistently with Article 11 of the DSU, by erroneously finding that lost sales and price suppression 
begin and end at the time at which an LCA is ordered, and do not exist thro ughout the life of the 
contract until the final aircraft is delivered. For the European Union, this runs counter to the original 
panel's finding that the phenomena of lost sales and price suppression in the LCA market "should be 
understood to begin at the time at which an LCA order is obtained (or an order is lost), and to 
continue up to and including the time at which that aircraft is delivered (or not delivered)".735 
5.326.   The United States maintains that the Panel correctly rejected the European Union's 
interpre tation of Article 7.8, which is fundamentally at odds with the prospective nature of that 
provision.736 According to the United States, the fact that deliveries (from orders that were found to 
constitute adverse effects in the original reference period) were  scheduled after the expiration of the 
implementation period does not mean that they represent harm in the post -implementation period. 
Rather, the United States argues, this is simply a consequence of the original lost sale, and to require 
action with resp ect to those deliveries would require the United States retrospectively to remedy the 
specific indicia of harm from the original proceedings. For the United States, the use of the present 
tense in Article 6.3 is critical, and thus the United States conside rs that the "effects" that a complying 
Member must "remove" are those that result from the subsidies at the time of the obligation – that 
is, effects occurring after the end of the implementation period – and not those that resulted during 
the original ref erence period.737 Regarding the European Union's assertion that the Panel improperly 
deviated from the original panel's statement on the phenomena of lost sales and price suppression, 
the United States maintains that the Panel carefully considered the statem ent highlighted by the 
European Union and concluded that the original panel and the Appellate Body relied on sales 
campaign evidence and the resultant orders, not delivery data.738  
5.327.   At the outset, we note the United States' contention that the European Union 's appeal of the 
Panel's interpretation of Article 7.8 is "moot" because the Panel provided "an independent basis for 
the Panel's ultimate conclusion that the transactions were not evidence of lost sales or price 
suppression".739 This concerns the Panel's fi nding that the European Union's claim of continuing 
adverse effects was unsupported by the evidence and/or in contradiction with the findings made in 
the original proceedings.740 The United States' suggestion appears to be that , if we see no reason to 
distur b the Panel's conclusions based on these evidentiary grounds, we need not consider the 
interpretation claim in order to sustain the Panel's ultimate conclusion that the European Union had 
failed to establish that serious prejudice found to exist in the ori ginal proceedings continues into the 
post-implementation period. We note that this interpretation claim raise s issues of law covered in 
                                                
733 European Union's appellant's submission, par a. 329 (quoting Panel Report, para. 9.312 ). 
734 European Union's appellant's submission, para. 329 (quoting Panel Report, para. 9.314). 
(emphasis  added by the European Union omitted)  
735 European Union's appellant's submission, para. 35 7 (quoting Original Pane l Report, para. 7.1685) . 
736 United States' appellee's submission, paras. 161 -162. 
737 United States' appellee's submission, para. 165.  
738 United States' appellee's submission, paras. 171 -176 and 185.  
739 United States' appellee's submission, para. 151.  
740 Panel Report, para. 9.332.  WT/DS353/AB/RW  
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 the Panel Report and legal interpretations developed by the Panel, within the meaning of Article 17.6 
of the DSU. We fur ther note that the question as to how the United States' compliance obligation 
under Article 7.8 of the SCM Agreement relates to the timing of LCA orders and deliveries has a 
bearing on subsequent claims at issue in this appeal. We therefore proceed in exa mining the 
European Union's claim.  
5.328.   Article 7.8 provides that, when a panel or Appellate Body report is adopted "in which it is 
determined that any subsidy  has resulted in adverse effects … the Member granting or maintaining 
such subsidy  shall take appropri ate steps to remove the adverse effects or shall withdraw the 
subsidy".741 By indicating that the removal of adverse effects relates to "such subsidy" that was 
found to have caused the effects in the original proceedings, Article 7.8 clearly specifies that t he 
focus of the analysis concerns the removal of adverse effects caused by the subsidy that was 
challenged in the original proceedings, to the extent that such subsidy continues to be "grant{ed} 
or maintain{ed}" by the implementing Member after the end of the implementation period. As the 
Appellate Body recently stated, "Article 7.8 reflects an obligation to cease any conduct amounting 
to the 'granting or maintaining' of subsidies that cause adverse effects ."742 The Appellate  Body has 
added that Article  7.8 sets out an obligation "of a continuous nature, extending beyond subsidies 
granted in the past"743; "{w}hile a past subsidy that no longer exists may 'be found to cause or have 
caused adverse effects that continue to be present during the reference period', t he source  of the 
inconsistency under Article 5 is nonetheless the subsidy  that causes adverse effects ."744 Accordingly, 
in assessing whether a Member has taken appropriate steps to remove the adverse effects of 
subsidies within the meaning of Article 7.8, de velopments up to and including the 
post-implementation period must be taken into account. Moreover,  while the starting point of the 
analysis under Article 7.8 must be the effects of the original subsidy or subsidies found to have 
caused adverse effects in the original proceedings, the inquiry must also take into account any 
developments concerning those  subsidies, as well as any new subsidies found to be closely related 
to such subsidies, and the impact this has for any adverse effects in the post -implementation period.  
5.329.   The participants disagree as to the ongoing impact of the serious prejudice phenomena  of 
significant price suppression and significant lost sales, as they relate to particular transactions that 
were found to form the basis of adverse effects findings in the original reference period. More 
concretely, the question is when the market phenome na of significant price suppression and 
significant lost sales that arose in the original reference period could be said to continue after the 
end of the implementation period, and whether the Panel was justified in excluding the potential 
relevance of del iveries in the post -implementation period as the basis for establishing such a case.  
5.330.   Article 6.3(c) refers to significant price suppression and significant lost sales. In US – Upland 
Cotton , the Appellate Body endorsed the view of the panel that "price sup pression" arises when 
prices are "prevented or inhibited from rising (i.e. they do not increase when they otherwise would 
have) or they do actually increase, but the increase is less than it otherwise would have been".745 
The Appellate Body has also observed  that price suppression is not a directly observable 
phenomenon, and inevitably requires a counterfactual analysis involving "a comparison of an 
observable factual situation (prices) with a counterfactual situation (what prices would have been) 
                                                
741 Emphasis added.  
742 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.364.  
743 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.364 (quoting Appellate Body Report, US – Upland Cotton (Article 21.5 – Brazil) , para. 237).  
744 Appellate Body Report, EC and certain me mber States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.371 (quoting Appellate Body Report, EC and certain member States – Large Civil Aircraft , para. 712). 
(emphasis original; fn omitted)  The Appellate Body further explained that "{t} he option to 'withdraw the 
subsidy ' under Article 7.8 contemplates action  in relation to the subsidy found to have caused adverse effects  
… {t} o the extent that the underlying subsidy has ceased to exist, there is no additional requirement, under 
Article 7.8, to  remove  any lingering effects that may flow from that subsidy." (Ibid.) Unlike in EC and certain 
member States – Large Civil Aircraft (Article 21.5 – US), the Appellate Body is not confronted in this dispute 
with the question of whether adverse effects in the pos t-implementation period are caused by subsidies that 
have since expired.  
745 Appellate Body Report, US – Upland Cotton , paras. 423 -424 (quoting Panel Report, US – Upland 
Cotton , para. 7.1277).  WT/DS353/AB/RW  
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 where one h as to determine whether, in the absence of the subsidies (or some other controlling 
phenomenon), prices would have increased or would have increased more than they actually did" .746 
5.331.   In EC and certain member States – Large Civil Aircraft , the Appellate Body e xplained that 
"lost sales" are sales that suppliers of the complaining Member "failed to obtain" and that instead 
were won by suppliers of the respondent Member.747 The Appellate Body added that it is a "relational 
concept" and that its assessment "requires consideration of the behaviour of both the subsidized 
firm(s), which must have won the sales, and the competing firm(s), which allegedly lost the sales".748 
For the Appellate  Body, an assessment of lost sales also normally entails a counterfactual 
assessment , in this case in order to establish that "sales won by the subsidized firm(s) of the 
respondent Member would have been made instead by the competing firm(s) of the complaining 
Member, thus revealing the effect of the challenged subsidies ."749 
5.332.   With regard to the meaning of "significant", the Appellate Body noted in EC and certain 
member States – Large Civil Aircraft  that the term appears before the phrase "price suppression, 
price depression or lost sales" in Article 6.3(c), and accordingly unde rstood the term "significant" as 
qualifying all three situations.750 In US – Upland Cotton , the Appellate Body endorsed the panel's 
view that the term "significant" means "important, notable or consequential", and that such a term, 
depending on the circumsta nces, could have both quantitative and qualitative aspects.751 
5.333.   Depending on the circumstances of a particular transaction or set of transactions that form 
the basis for a finding of significant price suppression or significant lost sales under Article 6.3(c) , 
we do not see that the foregoing terms suggest that the particular phenomena of significant price 
suppression or significant lost sales must be limited to the moment at which the transaction or set 
of transactions first occur. With regard to price suppre ssion, for example, there may be 
circumstances in which certain payment terms in the future will continue to be a reflection of 
suppressed prices. Indeed, as the Appellate Body noted, the determination as to whether price 
suppression exists is focused on w hether, in the absence of subsidies, prices would have increased 
or would have increased more than they actually did. We do not see that such an assessment, even 
with respect to the original transactions that formed the basis of the original adverse effect s findings, 
could not continue to be relevant even after the end of the implementation period to the extent that 
the pricing terms of those transactions continue to indicate an ongoing effect of price suppression. 
With respect to lost sales, we acknowledge  that there may be a stronger case for understanding the 
phenomena as limited to the moment at which the suppliers of the complaining Member "failed to 
obtain" a sale that was instead won by suppliers of the respondent Member. At the same time, 
depending o n the nature and scope of the transaction, there may be elements affecting finalization 
of the transaction, or concerning follow -on transactions in the form of options or purchase rights, 
that may be indicative of an ongoing phenomenon of lost sales. In an y event, we would emphasize 
that the extent to which elements of the transactions underlying the original finding of adverse 
effects in the form of price suppression or lost sales endure in a manner so as to indicate the ongoing 
existence of adverse effect s will very much depend on the nature, timing, and scope of those 
underlying transactions. In addition, we are cognizant of the fact that such variables will be affected 
by the particular dynamics of transactions in a particular industry, and that how the phenomena of 
price suppression and lost sales manifest themselves in the LCA  industry may not be extrapolated 
to other industries.  
5.334.   In the context of the LCA industry in particular, the original panel remarked that, given the 
particularities of LCA producti on and sale, the phenomena of price suppression and lost sales "do 
not begin and end at the time at which an LCA is ordered ", but "should be understood to begin at 
the time at which an LCA order is obtained (or an order is lost), and to continue up to and including 
the time at which that aircraft is delivered (or not delivered)".752 The original panel also considered 
that, because the phenomena of price suppression and lost sales exist from the time an LCA is 
ordered to the time it is delivered, "data pertain ing to both LCA orders and to LCA deliveries will 
                                                
746 Appellate Body Report, US – Upland Cotton (Article 21.5 – Brazil) , para. 351.  
747 Appellate Body Report, EC and certain member States – Large Civil Aircraft , para. 1220.  
748 Appellate Body Report, EC and certain member States – Large Civil Aircraft , para. 1220.  
749 Appellate Body Report, EC and certain member States – Large Civil Aircraft , para. 1216.  
750 Appellate Body Report, EC and certain member States – Large Civil Aircraft , para. 1215.  
751 Appellate Body Report, US – Upland Cotton , paras. 426 -427 (referring to Panel Report, US – Upland 
Cotton , para. 7.1326 ) and 490 . 
752 Original Panel Report, para. 7.1685.  WT/DS353/AB/RW  
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 potentially be relevant to demonstrating the existence of significant price suppression and significant 
lost sales ."753 We note that these findings were not appealed in the original proceedings, and that 
neither participant has taken issue with these general propositions set out by the original panel.754  
5.335.   We consider that, in the LCA market, the market phenomena of price suppression and lost 
sales are not limited to what occurs at the time of an LCA order , and t hat such phenomena may , in 
appropriate factual circumstances , continue up to the point of LCA delivery. As both the panel and 
the Appellate Body remarked in the original proceedings, LCA are sold to customers through 
long-term contracts, often involving staggered deliveries over several years.755 Although the terms 
and conditions of each purchase contract are set at the time the order is made (including different 
elements, such as aircraft specification, net price, discounts, non -price concessions , and financing 
arrangements), "{c}omplete payment does not occur until delivery of the aircraft ."756 Moreover, the 
original panel and Appellate Body noted that these contracts also have escalation clauses that 
provide for increases to the basic airframe pri ce to account for the time that elapses between 
negotiation of price at the time of order and delivery of the aircraft, and that these facts can 
significantly increase the LCA purchase price.757 Thus, although the extent to which prices are 
suppressed or sal es are lost is certainly first manifest at the time LCA are ordered, the consequences 
of these phenomena may continue to be affected by factors occurring from the time of order th rough 
delivery, which indicates that the phenomena of price suppression and l ost sales could be found  to 
continue through to the moment of LCA delivery.  
5.336.   At the same time, it would be improper to suggest that in all instances involving the 
phenomena of price suppression and lost sales in the LCA market, the phenomena manifest 
thems elves to the same degree throughout the time  period from order to delivery. As the 
Appellate  Body has noted , "effects of a subsidy will ordinarily dissipate over time and will end at 
some point after the subsidy has expired"758, and thus a panel "should cons ider, where relevant for 
the adverse effects analysis, that the effects of a subsidy will ordinarily dissipate over time and will 
come to an end" .759 For instance, in the LCA industry, although price escalation clauses may continue 
to reflect evidence of ong oing price suppression, the terms have already been set at the time of the 
original order. As the original panel noted, "there is, in principle, no re -negotiation of the terms and 
conditions of the purchase contract, and assessment of the profitability of a certain contract prior to 
delivery, as well as the profit margins actually generated, is based on the terms and conditions 
established at the time of order ."760 Similarly, although there may be circumstances in which the 
consequences of a lost sale may per sist where a lost sale for which delivery remains outstanding 
continues to exert harmful consequences on a competitor, there can be little doubt that the sale was 
"lost" at the time of order when the supplier of the subsidized Member obtained that sale at the 
expense of that competitor. We therefore do not see that there can be any generalized guidance 
about the circumstances in which original findings of price suppression or lost sales may be said to 
persist beyond the moment of order.  
5.337.   Turning to the Panel 's analysis, we observe that, although the Panel took note of the original 
panel's statements that the phenomena of price suppression and lost sales exist from the time of 
LCA order through delivery761, the Panel then sought to dismiss the relevance of these  statements 
in the circumstances of this case on several grounds. The Panel noted that when the original panel 
reached findings of adverse effects consisting of significant price suppression and significant lost 
                                                
753 Original Panel Report, para. 7.1686.  
754 Although not appealed, these findings were also referenced by the Appellate Body. ( Appellate Body 
Report, US – Large Civil Aircraft (2nd complaint) , para. 901)  
755 Original Panel Report, para. 7.1685; Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , 
para. 904.  
756 Original Panel Report, para. 7.1685  (referring to Declaration of Christian Scherer, Airbus SAS, 
Commercial Aspects of the Aircraft Business from the Perspective of a Manufacturer (March 2007)  (Declaration 
of Christian Scherer) (Original Panel Exhibit EC -11) (BCI), para. 49) ; Appellate Body Report, US – Large Civil 
Aircraft (2nd complaint) , para. 904 . 
757 Original Panel Report, para. 7.1685 (referring to Declaration of Christian Scherer (Original Panel 
Exhibit EC -11) (BCI), para. 26); Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , para. 904 . 
758 Appellate Body Report, EC and certain member States – Large Civil Aircraft , para. 713.  The 
Appellate Body added that "{i} ndeed, as with a subsidy that has a finite life and materializes over time, so too 
do the effects of a subsidy accrue and diminish over time ." (Ibid.)  
759 Appellate Body Report, EC and certain member States – Large Civil Aircraft , para. 714.  
760 Original Panel Report, para. 7.1685.  
761 Panel Report, para. 9.307 (referring to Original Panel Report, paras. 7.1685 -7.1686).  WT/DS353/AB/RW  
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 sales, it did not explicitly recall this gen eral proposition, but instead relied exclusively on order 
data.762 Accordingly, the Panel considered that "it is somewhat unclear whether and, if so, how the 
idea that price suppression and lost sales 'exist from the time an order is made, up to and includin g 
its delivery' is reflected in the actual findings of significant price suppression and lost sales made in 
the original proceeding ."763  
5.338.   We consider that the Panel did not have a sound basis for distinguishing the original panel's 
general pronouncements reg arding the phenomena of price suppression and lost sales, and the 
original panel's subsequent findings regarding those phenomena. The original panel stated that, 
because the phenomena of price suppression and lost sales exist from the time an LCA is ordere d to 
the time it is delivered, "data pertaining to both LCA orders and to LCA deliveries will potentially be 
relevant  to demonstrating the existence of significant price suppression and significant lost sales ."764 
As an evidentiary matter, a party may offer,  and a panel may choose to rely upon, some combination 
of order and delivery data in seeking to establish the existence of significant price suppression or 
significant lost sales. It may even be that such a determination could be made on the basis of order  
data alone. A panel's reliance on such data in a particular dispute, however, does not, in our view, 
undermine the broader proposition that the serious prejudice phenomena themselves may not be 
confined to the time of the LCA order only, but instead may c ontinue through the point of delivery.  
5.339.   The Panel then went on to identify additional, "more important" reasons for finding the 
European Union's claim under Article 7.8 to be "problematic".765 The essential difficulty the Panel 
had with the European Union's c laim is that it suggest ed that, in order for the United States to take 
appropriate steps to remove the adverse effects of significant price suppression and lost sales, it 
must cease such phenomena with respect to the original transactions . For the Panel, s uch an 
approach: (i) is not "meaningful in a practical sense"766 since it is not clear how the United States 
could remove price suppression or lost sales occurring with respect to those specific transactions; 
and (ii)  cannot be "reconcile{d} with the prospec tive interpretation of Article 7.8"767 since it would 
seem to require the United States to undo retrospectively those original transactions. The Panel 
accordingly disagreed with the European Union's proposition that , where aircraft that were the 
subject of a past order found in the original proceeding s to be a lost sale are undelivered at the time 
of the expiry of the implementation period, this is a present adverse effect. Instead the Panel 
considered this to be "a c onsequence or manifestation of an event that occurred in the past" or as 
"continuing manifestations or effects of past adverse effects".768  
5.340.   We consider that the Panel adopted an overly rigid approach with respect to the question of 
whether outstanding deliv eries concerning LCA orders that were relied on to find  significant price 
suppression or  significant  lost sales may still provide a basis for a finding of  such effects in the 
post-implementation period. As we have noted, the original panel seems to have de veloped 
reasonable grounds for understanding such market phenomena, in the specific context of the LCA 
market, as potentially encompassing the period from order through delivery. In our view, this does 
not mean that the existence of any outstanding deliver ies in the post -implementation period is 
necessarily sufficient to establish the existence of adverse effects in that period. However, it would 
seem that what transpires between LCA orders and their subsequent deliveries would be relevant, 
particularly as it relates to evidence demonstrating the ongoing existence of price suppression or 
lost sales. Moreover, establishing the existence of serious prejudice under Article  6.3(c) with respect 
to the market phenomena of price suppression or lost sales also requi res that the phenomena be 
found to be "significant". Thus, simply because certain market phenomena of price suppression or 
lost sales may be shown to persist after the end of the implementation period, this will not 
necessarily mean that such price suppres sion or lost sales would be "significant" in the 
post-implementation period.  
5.341.   For the foregoing reasons, the mere existence of outstanding deliveries after 
September  2012 relating to original orders found to have resulted in significant price suppression or  
significant lost sales between 2004 and 2006 would not necessarily , by itself, be dispositive as to 
                                                
762 Panel Report, para. 9.308.  
763 Panel Report, para. 9.310.  
764 Original Panel Report, para. 7.1686. (emphasis added)  
765 Panel Report, para. 9.310.  
766 Panel Report, para. 9.312.  
767 Panel Report, para. 9.313.  
768 Panel Report, para. 9.314.  WT/DS353/AB/RW  
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 the existence of  significant price suppression or significant lost sales in the post -implementation 
period. Deliveries in the post -implementation period ma y indeed be relevant to an adverse effects 
analysis if there is evidence that significant price suppression or lost sales occurring between the 
time of order and delivery continues into the post -implementation period. Specifically, there would 
need to be s ome indication that subsequent developments following the initial order confirm the 
ongoing existence of such market phenomena. Therefore, while we would not agree with the 
European  Union's assertion before the Panel that outstanding deliveries in the post -implementation 
period are necessarily sufficient to establish the existence of present adverse effects, we likewise 
would disagree with the Panel's suggestion that such evidence can never form the basis of a finding 
as to the ongoing existence of such eff ects. 
5.342.   We also find the Panel's reasoning with respect to Article 7.8 un persuasive. The Panel's 
concern  that the European Union's claim would result in a retrospective remedy appears premised 
on the notion that the only means by which the United States coul d bring itself into compliance 
under the European Union's theory is to undo the original orders. However, Article 7.8 does not 
specify what "steps" are "appropriate" for purposes of removing the adverse effects, which suggests 
that it covers a range of pos sible actions. While certain actions regarding a subsidy may not lead to 
its withdrawal, they could, for example, alter the benefit of the subsidy such that it attenuates the 
causal link between the subsidy and the adverse effects. While the Panel may be c orrect to note that 
the European  Union did not explain "what kind of action the United States could have taken with 
respect to that undelivered aircraft that would have removed the 'present' adverse effects"769, this 
does not mean that such removal is not po ssible, and does not support the Panel's apparent 
assumption that the only way to remove such effects would therefore have to be a retrospective 
undoing of the original orders.  
5.343.   More importantly, the Panel's approach leads it to draw a faulty distinction be tween "present 
adverse effects", on the one hand, and "consequence{s} or manifestation{s} of an event that 
occurred in the past" or "continuing manifestations or effects of past adverse effects", on the other  
hand.770 On this basis, the Panel sought to disre gard the significance of outstanding deliveries in the 
post-implementation period by characterizing them as a mere consequence of past adverse effects. 
However, as we have noted, Article 7.8 calls on panels to assess whether an implementing Member 
has ceas ed conduct amounting to the granting or maintaining of subsidies that cause adverse effects. 
To the extent that adverse effects arising in the post -implementation period are shown to have been 
caused by subsidies that have not expired, they are themselves adverse effects, not something 
consequential to the original adverse effects. In this respect, we see no basis to categorically exclude 
consideration of delivery data concerning the post -implementation period to the extent that such 
evidence, in conjunctio n with other evidence, shows ongoing price suppression or lost sales in the 
post-implementation period. As we have said, while evidence pertaining to outstanding deliveries is 
unlikely by itself to be dispositive as to adverse effects occurring well after the LCA sales that gave 
rise to the original findings were made, we see no tenable basis to exclude the potential relevance 
of such evidence in establishing such a case.  
5.344.   For the foregoing reasons, we find that the Panel erred in its interpretation of Artic le 7.8 of 
the SCM Agreement by excluding ab initio , from an inquiry into whether the United States had failed 
to take appropriate steps to remove the adverse effects of the subsidies, evidence relating to 
transactions for which the orders arose in the orig inal reference period but for which deliveries 
remain outstanding in the post -implementation period. Accordingly, we reverse  the Panel's 
interpretation of Article 7.8 , in paragraphs 9.311 to 9.314 of the Panel Report, and its statement in 
paragraph 9.332 o f the Panel Report , that reliance on the role of deliveries of aircraft in the 
post-implementation period as evidence of a continuation of serious prejudice "is inconsistent with 
a prospectiv e interpretation of Article 7.8".771 
5.345.   Additionally, the European Union claims that the Panel erred in the application of Article 7.8 
of the SCM Agreement, and acted inconsistently with Article 11 of the DSU, by departing from the 
original panel's finding that "price suppression and lost sales … exist from the t ime an order for LCA 
is made, up to and including its delivery ."772 Having examined above the role of orders and deliveries 
                                                
769 Panel Report, para. 9.312.  
770 Panel Report, para. 9.314.  
771 Panel Report, para. 9.332 . (emphasis omitted)  
772 European Union's appellant's submission, paras. 357, 361 -362, 366, and 368 (quoting Original Panel 
Report, para.  7.1686).  WT/DS353/AB/RW  
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 in assessing a claim of continuing adverse effects, and having reversed the Panel's interpretation of 
Article 7.8 of the SCM Agreement , we need not further consider these corollary claims by the 
European Union.  
5.346.   We further note that, as a consequence of our reversal of the Panel's interpretation of 
Article  7.8 as it relates to the significance of deliveries for establishing significant pr ice suppression 
and significant lost sales, the European Union additionally requests that we reverse the Panel's 
finding in paragraph 9.407 regarding significant lost sales caused by the tied tax subsidies in the 
single -aisle LCA market insofar as it exclu ded the Fly Dubai 2008 and Delta Airlines 2011 sales 
campaigns.773 It is not clear to us whether the Panel's decision to exclude these two sales campaigns 
from its finding of significant lost sales resulted from the error we have associated with the Panel's 
interpretation of Article 7.8. Indeed, the Panel did not provide any reason for the treatment of these 
two sales ca mpaigns other than to state in  footnote s that it was "not necessary" for it to consider 
whether these two sales campaigns constitute evidence  of significant lost sales in the 
post-implementation period.774 Additionally, it appears that the basis for the European Union's 
allegation that these two sales campaigns also constitute significant lost sales is the contention that 
there remain outstanding  deliveries at the end of the implementation period.775 As we have 
explained, we do not consider this to be a sufficient basis upon which to establish the existence of 
serious prejudice in the form of significant lost sales in the post -implementation period.  Accordingly, 
we decline to reverse  this finding by the Panel in the manner requested by the European Union.  
5.6.2   Whether the Panel erred under Articles 5 and 6.3 of the SCM Agreement, or acted 
inconsistently with Article 11 of the DSU, in its treatment of clai ms of continuing adverse 
effects from the original proceedings  
5.347.   The European Union also appeals the Panel's separate conclusion that the European Union's 
arguments regarding continuing adverse effects were "unsupported by the evidence and/or in 
contradictio n with the findings made in the original proceeding".776 We first examine the 
European  Union's claim that, in reaching this conclusion, the Panel acted inconsistently with 
Article  11 of the DSU by deviating from the adopted findings in the original proceedin gs concerning 
the 200 -300 seat LCA market. According to the European Union, although the original panel made 
intermediate findings that were based on evidence relating to the A330 and the Original A350, the 
ultimate findings of the original panel related t o the 200 -300 seat LCA market as a whole, which had 
been defined to include those two LCA models as well as the A350XWB -800.777 The European  Union 
considers that, where the Panel's findings confirmed the continued existence of the same LCA market 
for which t he original panel and the Appellate Body made their respective findings of significant price 
suppression, significant lost sales, and threat of displacement or impedance, the Panel had no basis 
to deviate from the findings in the original proceedings. The European Union submits that the fact 
that the Panel deviated from the original findings and focused its adverse effects assessment on 
different aircraft models therefore constitutes legal error under Article 11 of the DSU.  
5.348.   The United States responds that t he Panel did not improperly deviate from the original 
panel's findings. According to the United States, the European Union cannot fault the Panel for 
focusing on argumentation and evidence for specific aircraft models because the original panel 
adopted the  same approach in the original proceedings, as did the European  Union when presenting 
its arguments and evidence in these compliance proceedings.778 In addition, the United States 
considers that the European Union is wrong to assert that the circumstances of  these compliance 
proceedings are the same as, and therefore require the same conclusions as, the situation before 
the original panel. This proposition, the United  States maintains, is legally incorrect and contrary to 
the evidence, and the Panel was there fore required to carefully consider the evidence and 
argumentation concerning developments since the original reference period.779 
                                                
773 European Union's appellant's submission, para. 376.  
774 Panel Report, fn 3329 to para. 9.403 and fn 3335 to para. 9.406.  
775 European Union's appellant's submission, para. 377.  
776 European Union's Notice of Appeal, paras. 15 -16 (quoting Panel Report, para. 9.332). (emphasis 
omitted)  
777 European Union's appellant's  submission, para. 955.  
778 United States' appellee's submission, paras. 509 -511. 
779 United States' appellee's submission, paras. 513 -515. WT/DS353/AB/RW  
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 5.349.   The central proposition underpinning this claim on appeal is the European Union's contention 
that the Panel acted in a manner i nconsistent with Article 11 of the DSU because it "deviated"780 
from the findings in the original proceedings. The European Union adds that, instead of following 
those findings, the Panel focused on the "entirely irrelevant"781 fact that the A330, Original A35 0, 
and the A350XWB are "different aircraft".782 The paragraphs cited by the European Union pertain to 
the Panel's consideration of the European Union's claims regarding significant price suppression, 
significant lost sales, and threat of displacement of the A350XWB.783 As the European Union explains, 
because there has been no change to the LCA competing in the 200 -300 seat LCA market for which 
the original panel and the Appellate Body made their respective adverse effects findings, the Panel 
had no basis for de viating from the approach in the original proceedings by now focusing on separate 
aircraft models.784 In this respect, the European Union relies on the observation that, although the 
original panel made intermediate findings that were based on a consideratio n of evidence that related 
to the A330 and the Original A350, the ultimate findings made by the original panel related to the 
200-300 seat LCA market as a whole, which was defined also to include the A350XWB -800.785  
5.350.   Beginning with the original panel's findi ngs of adverse effects, we understand that the 
original panel appears to have accepted the European Communities' contention that the 200 -300 
seat LCA market consisted of the Boeing 787 LCA family as well as the Airbus A330, Original A350, 
and A350XWB -800 L CA.786 Moreover, we note that the original panel appeared to base its findings 
on evidence relating to the A330 and the Original A350, but not the A350XWB. Thus, with regard to 
significant price suppression, the original panel found that it was able to concl ude, "based on the 
evidence" that, absent the subsidies, "prices of  the A330 and the Original A350  in the 2004 to 2006 
period would have been significantly higher ."787 Similarly, with regard to significant lost sales, the 
original panel found that, absent th e subsidies, "Airbus would have made additional sales of the 
A330 and Original A350 over the same period ."788 Furthermore, regarding the threat of displacement 
or impedance, the original panel found that, absent the subsidies, "Airbus would have obtained 
additional orders for its A330 and Original A350 LCA from customers in third country markets 
Australia, Ethiopia, Kenya and Iceland in 2005 and 2006 ."789 It is therefore clear that the original 
panel's findings were not based on evidence relating to the A350XWB . In addition, we note that, at 
least with respect to significant price suppression, the original panel explicitly excluded any finding 
of price suppression for the A350XWB -800 because it had no pricing data before it on which to reach 
such a finding.790 In any event, we would note that the fact that the Panel's findings were not based 
on evidence pertaining to the A350XWB -800 may not be surprising given that the A350XWB -800 
was launched in December 2006, which was the last month of the original reference per iod from 
2004 to 2006.791 
5.351.   At the same time, the European Union is correct to note that, in each instance, the original 
panel also seemed to frame its conclusions with respect to a product market and/or geographic 
markets as a whole. Thus, following its refer ence to the evidence as limited to the A330 and Original 
A350, the panel found significant price suppression and significant lost sales "in the 200 -300 seat 
wide-body LCA product market, within the meaning of Article 6.3(c) of the SCM  Agreement", and 
                                                
780 European Union's appellant's submission, paras. 954, 957, and 965.  
781 European Union's appellant's submission, para. 95 4. 
782 European Union's appellant's submission, para. 954 (quoting Panel Report, paras. 9.322 -9.324 and 
9.331).  
783 Although the European Union also makes reference to the Panel's finding of significant price 
suppression with regard to the A330, the Panel did not rely on the fact that the A330 and the A350XWB -800 
are different aircraft in order to sustain its rejection of that claim by the European Union. (See Panel Report, 
paras. 9.316 -9.321) We address below the European Union's claim on appeal that the Panel  erred under 
Articles 5 and 6.3 of the SCM Agreement in its treatment of the European Union's claim of significant price 
suppression regarding the A330.  
784 European Union's appellant's submission, para. 958.  
785 European Union's appellant's submission, para. 955 (referring to Original Panel Report, paras. 7.1670 
and 7.1672; Appellate Body Report, US – Large Civil Aircraft  (2nd complaint) , paras.  897-898).  
786 Original Panel Report, paras. 7.1670 and 7.1672.  
787 Original Panel Report, para. 7.1794.  
788 Original Panel  Report, para. 7.1794.  
789 Original Panel Report, para. 7.1794.  
790 Original Panel Report, para. 7.1793. ("There is no evidence before the Panel as to price trends for 
the A350XWB -800, nor has the European Communities presented evidence concerning the actual p ricing of the 
A350XWB in the context of specific LCA sales campaigns.")  
791 Original Panel Report, para. 7.1777.  WT/DS353/AB/RW  
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 threa t of displacement or impedance "of exp orts from third country markets  within the meaning of 
Article  6.3(b) of the SCM Agreement".792 
5.352.   In the compliance proceedings, the Panel did not accept that the original adverse effects 
findings that were made with respec t to the Original A350 could be transposed into findings of 
continuing adverse effects with respect to the A350XWB. Thus, in addressing the European Union's 
claim of continuing significant price suppression for the A350XWB in the post -implementation period , 
the Panel considered that the European Union's contention was "in contradiction with the fact that 
the price suppression that occurred in 2004 -2006 was price suppression of a different aircraft, the 
Original A350".793 With regard to the  claim of continuing significant lost sales for the A350XWB, the 
Panel stated that there was no "logical basis" to now treat lost sales of the A330 and Original A350 
as lost sales of the A350XWB, and further observed that "at the time the 787 sales were ma de, they 
caused lost sales of the A330 and Original A350, not the A350XWB ."794 With regard to the  claim of 
a continuing threat of displacement in the Australian market, the Panel stated that there was "no 
basis" to treat a threat of displacement regarding th e Original A350 now as a finding of a threat of 
displacement concerning the A350XWB.795 
5.353.   In light of the foregoing discussion, we make several observations. First, although the 
original panel made ultimate findings for eac h serious prejudice phenomenon with  respect to the 
200-300 seat LCA market as a whole, the evidentiary basis for doing so regarding the original 
reference period related solely to the A330 and the Original A350, but not the A350XWB. In our 
view, this is a relevant consideration in evaluating the extent to which the original adverse effects 
may be said to continue into the post -implementation period, and, at a minimum, does not seem to 
support the European Union's assertion that the Panel in these compliance proceedings somehow 
departed from th e approach taken by the original panel in focusing on evidence relating to specific 
LCA models. Indeed, we understand the Panel to be making the point that, because the original 
adverse effects findings were associated with particular evidence of serious p rejudice suffered by 
the A330 and the Original A350, it cannot simply be assumed that such findings would necessarily 
extend to the A350XWB -800, an LCA model that, while part of the same product market, had not 
been shown to have suffered serious prejudice  in the original reference period.  
5.354.   We further recall, in particular, our discussion in the preceding section regarding the role 
served by original findings of adverse effects in establishing whether, in compliance proceeding s, 
the original adverse effects continue after the end of the implementation period. As we have noted, 
although original findings of adverse effects necessarily serve as the sta rting point of the analysis in  
compliance proceeding s, it is incumbent on a complaining Member to establish afr esh through 
arguments and evidence whether, and to what extent, the specific serious prejudice phenomena 
from the original proceedings continue to exist in the post -implementation period. Therefore, while 
the analysis begins with the original findings of a dverse effects, the European Union had also to 
demonstrate how those particular adverse effects that were based on findings regarding  certain 
aircraft could be transposed to a different aircraft model that did not provide a foundation for the 
findings in t he original proceedings. As we understand it, however, the European Union sought to 
make this demonstration by relying principally on the fact that orders of Original A350 were 
converted to orders of A350XWB, and that certain deliveries of the latter remai ned outstanding at 
the end of the implementation period. While we have faulted the Panel for disregarding the relevance 
of developments following the original findings of adverse effects in assessing whether those effects 
continue into the post -implementat ion period, we have also disagreed with the European  Union's 
proposition that the mere existence of outstanding deliveries in the post -implementation period 
would suffice to establish continuing adverse effects.  
5.355.   We also believe that the Panel had grounds to consider that developments concerning the 
relevant LCA market since the original reference period precluded mere transposition of the original 
panel's findings into the post -implementation period. We again note that, although the 
European  Union is corre ct to observe that the original panel accepted that the A350XWB -800 formed 
part of the 200 -300 seat LCA market, that aircraft was launched at the very end of the original 
reference period in December 2006. Accordingly, while the original panel was aware of  the existence 
of that LCA model, and even acknowledged that it would be in competition with the Boeing 787 LCA 
                                                
792 Original Panel Report, para. 7.1794.  
793 Panel Report, para. 9.322 (referring to Original Panel Report, para. 7.1782).  
794 Panel Report, para. 9.325.  
795 Panel Report, para. 9.331.  WT/DS353/AB/RW  
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 in that product market segment, the findings by the original panel were not based on any evidence 
pertaining to the A350XWB -800. Even within pro duct markets there can be a degree of product 
differentiation that may be of relevance to an adverse effects analysis. Just because the 
Original  A350 and the A350XWB -800 compete with the 787 does not mean that they do so in the 
same way. In this respect, i t is important to note that, while the A350XWB -800 was accepted for 
inclusion in the product market delineation established by the original panel, by the time of the 
compliance proceedings, the Original A350 no longer featured in the product market defined  by the 
Panel.796 As has been well rehearsed in both the original and compliance proceedings, this is because 
the newer model A350XWB represented the replacement aircraft for the older model 
Original  A350.797  
5.356.   For the foregoing reasons, we do not think it was improper for the Panel to consider that it 
could not merely transpose  the findings from the original proceedings – that were based on evidence 
of significant lost sales, significant price suppression, and a threat of displacement or impedance 
concerning th e Original A350 – to establish the same serious prejudice phenomena with regard to 
the A350XWB -800, an LCA model that received only limited consideration in the original panel's 
analysis, and did not form the evidentiary basis for any of its adverse effect s findings. While we do 
not exclude that, as a general matter, serious prejudice phenomena may be established on a 
product -market -wide basis such that product differentiation within that market may be less relevant, 
we consider that, in the context of this  dispute, the Panel did not err in relying on the manner in 
which the twin -aisle LCA market had evolved between the original and compliance proceedings. We 
therefore find that the Panel did not act inconsistently with Article  11 of the DSU by deviating fro m 
the adopted findings in the original proceedings concerning the 200 -300 seat LCA market.  
5.357.   The European Union further alleges that the Panel erred under Articles 5 and 6.3 of the 
SCM Agreement by failing to conduct a proper counterfactual analysis when ass essing whether there 
was continuing price suppression of the A330 in the post -implementation period.798 According to the 
European Union, a proper counterfactual analysis required a comparison of actual A330 prices with 
counterfactual A330 prices in the absen ce of subsidies, and that, since neither the 787 nor the 
A350XWB would have been launched and delivered by the end of the implementation period, prices 
for the A330 would have been higher.799 Instead, according to the European Union, the Panel 
erroneously co mpared actual A330 prices with the actual situation in which the 787 and A350XWB 
would have already changed the competitive dynamics of the market.800  
5.358.   The United States maintains that the Panel conducted a proper counterfactual analysis. The 
United States points to the various evidentiary shortcomings and methodological flaws that were 
noted by the Panel regarding the European Union's case.801 In addition, the United States observes 
that, in response to the simplistic contention by the European Union t hat "something" must be 
holding down A330 prices in the post -implementation period, the Panel's analysis reflect ed a proper 
counterfactual evaluation that the prevailing A330 prices would not have been different in the 
absence of the subsidies because the competitive dynamic driving those prices after the end of the 
implementation period would have been the same.802 
5.359.   This challenge on appeal is focused on the Panel's rejection of the European Union's 
contention that competition from the 787 is what was holding  down A330 prices during the relevant 
period. In particular, the European Union challenges the Panel's statement that it was not clear "why 
Airbus could have legitimately expected A330 prices to ever 'recover' to their pre -2004 levels, when 
the A330 was th e technological market leader, given the reality that since then, the 787 and 
                                                
796 Panel Report, para. 9.43, Table 7.  
797 The original panel stated that "the A350XWB -800 is regarded as a technologically  superior product to 
the Original A350." (Original Panel Report, para. 7.1793) See also Panel Report, paras. 9.221 -9.228.  
798 European Union's appellant's submission, para. 967. In the European Union's view, the errors in the 
application of Articles 5 and 6. 3 of the SCM Agreement also involve errors in the application of Article 7.8 of 
the SCM Agreement. However, in its appellant's submission, "{f}or the sake of brevity, the European Union 
refers to this error as an error in the application of Articles 5 and 6.3." (European Union's appellant's 
submission, fn 1325 to para. 913) As we see it, the European Union's claim of error in the application of 
Article  7.8 is consequential to those under Articles 5 and 6.3. Thus, we focus our assessment on the alleged 
errors in the application of Articles 5 and 6.3 of the SCM Agreement.  
799 European Union's appellant's submission, para. 969.  
800 European Union's appellant's submission, para. 970.  
801 United States' appellee's submission, paras. 525 and 529.  
802 United States' appellee's submission, paras. 523 and 526 -527. WT/DS353/AB/RW  
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 A350XWB have changed the competitive dynamics of this market".803 By referring to "the reality" of 
competition between the 787 and the A350XWB, the argument by the European Union i s that the 
Panel was referring t o what was taking place in the actual  world, rather than in the counterfactual  
world. The suggestion is that, by failing to account for what that competitive dynamic would have 
been in a counterfactual scenario, the Panel did not properly consider that the accelerated entry in 
the market of the 787 and the A350XWB is what caused sup pression of A330 prices.  
5.360.   We do not consider that the Panel's statement in this context indicates that it failed to 
conduct a proper counterfactual analysis. We note, first of all, that the Panel properly explained that, 
in examining claims of significant p rice suppression, "price trend data alone is not sufficient", and 
that "it is also necessary to present counterfactual argumentation demonstrating that, in the absence 
of the subsidies, prices would have been higher ."804 In addition, we note the Panel's prio r conclusion 
that Boeing, even without these subsidies, would have been able to launch the 787 well before  the 
end of the implementation period, which means that the competitive dynamic between the more 
technologically advanced Boeing and Airbus LCA offeri ngs would already have been present by the 
end of that period.805 Thus, the Panel would have considered in the context of this analysis that the 
"actual" and the "counterfactual" situations were the same in the sense that, as of the end of the 
implementation  period, the 787 would have been launched in the LCA market regardless of 
subsidization and would have been competing with the A350XWB. In this light, we consider that the 
Panel's view that the A330 would not have been able to command the sort of price it once did, in 
view of the technological superiority of the 787 and the A350XWB, did not reflect a failure to conduct 
a proper counterfactual analysis.  
5.361.   Moreover, we note that the Panel identified other reasons for its rejection of the 
European  Union's claim.806 While these reasons do not explicitly reference a counterfactual analysis, 
they do underscore the Panel's view that the European Union had not substantiated that A330 pricing 
would have been higher in the absence of  the subsidies.  
5.362.   For the foregoing reas ons, we find that the Panel did not err under Articles 5 and 6.3 of the 
SCM Agreement by failing to conduct a proper counterfactual analysis when assessing whether there 
was continuing price suppression of the A330 in the post -implementation period.  
5.363.   Having  found no Panel error under either Article 11 of the DSU, or under Articles 5 and 6.3 
of the SCM Agreement, we uphold  the Panel's separate finding , in paragraph 9.332 of the 
Panel  Report , that "the European Union's arguments are unsupported by the evidence  and/or in 
contradiction with the findings made in the original proceeding ."807 
5.6.3   Conclusion  
5.364.   In assessing whether appropriate steps have been taken to remove the adverse effects of a 
subsidy within the meaning of Article 7.8  of the SCM Agreement , the time  period for assessing the 
removal of adverse effects may include developments subsequent to the time of order, including 
through the point of delivery. Accordingly, we  find that the Panel erred in its interpretation of 
Article  7.8 by excluding ab initio, from a n inquiry into whether the United States had failed to take 
appropriate steps to remove the adverse effects of the subsidies, evidence relating to transactions 
                                                
803 Panel Report, para. 9.319.  
804 Panel Report, fn 3182 to para. 9.321.  
805 Panel Report, para. 9.176.  
806 First, the Panel noted the incomplete pricing data  supplied by the European Union. As the Pan el 
explained, the pricing data that the European  Union present ed in connection with  its claim of  significant price 
suppression of the A330 "only covers the period  up to 2012 and was not updated to cover the 
post-implementat ion period".  (Panel Report, para.  9.318 (fn omitted)) Second , the Panel pointed to data 
presented by the United  States demonstrating that there is no correlation in price movements between the 
A330 and the 787.  (Ibid., para. 9.320 (referring to United States ' comments on the European Unio n's response 
to Panel question N os. 169 -170, para.  203)) Third , the Panel explained that a number of the empirical 
problems it identified with the European  Union 's price trend data in connection with its claims of significant 
price suppression of the A320n eo and A320ceo  "apply equally to the European Union 's price trend data for the 
A330". (Ibid., fn 3182 to para. 9.321) For instance, the Panel considered that the European Union could not  
rely on sales campaigns that Boeing won to substantiate its claims th at Airbus LCA prices were suppressed, 
and that t he European  Union appear ed to repudiate its own price trend data on the basis of certain 
methodological flaws.  
807 See also Panel Report, para. 9.315.  WT/DS353/AB/RW  
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 for which the orders arose in the original reference period but for which deliveries remain outs tanding 
in the post -implementation period. We therefore reverse  the Panel's interpretation of Article 7.8  of 
the SCM Agreement , in paragraphs 9.311 to 9.314 of the Panel Report, and its statement in  
paragraph 9.332 of the Panel Report , that reliance on the role of deliveries of aircraft in the 
post-implementation period as evidence of a continuation of serious prejudice would be inconsistent 
with Article 7.8 . Having reversed this finding, we do not address whether, in addition, the Pane l 
erred in the application of Article 7.8, or acted inconsistently with Article 11 of the DSU. However, 
because it is not clear whether the Panel's decision to exclude two additional sales campaigns as 
significant lost sales resulted from the above error, and because the European Union's request is 
based on a premise that we rejected, we decline to reverse  the Panel's finding , in paragraph 9.407  
of the Panel Report , insofar as it excludes the Fly Dubai 2008 and Delta Airlines 2011 sales 
campaigns.  
5.365.   We furth er find that the Panel did not err under Articles 5  and 6.3 of the SCM Agreement , 
or act inconsistently with Article 11 of the DSU, in separately finding that the European Union's 
arguments are unsupported by evidence and/or in contradiction with the findi ngs made in the original 
proceedings. We therefore uphold  the Panel's finding , in paragraphs 9.332 and 11.8.b of the 
Panel  Report , that the European Union had failed to establish that the original adverse effects of the 
pre-2007 aeronautics R&D subsidies c ontinue into the post -implementation period as present serious 
prejudice in relation to the A330 and A350XWB, within the meaning of Articles 5(c) and 6.3 of the 
SCM Agreement.  
5.366.   In addition, because we uphold the Panel's rejection of the European Union's cla im regarding 
continuing adverse effects with respect to the A330, we need not consider the United States' 
conditional claim that the Panel erred in finding that the European Union had not failed to make a 
prima facie  case of significant price suppression w ith respect to the A330.808 
5.7  Technology effects  
5.367.   The European Union requests us to reverse the Panel's finding that the European Union failed 
to establish that the pre -2007 aeronautics R&D subsidies are a genuine and substantial cause of 
adverse effects in the  post-implementation period through a technology causal mechanism. The 
European Union contends that the Panel, in reaching this finding, committed several legal errors in 
the application of Articles 5, 6.3, and 7.8 of the SCM Agreement, and failed to make an objective 
assessment of the matter under Article 11 of the DSU.809 
5.368.   With regard to its application claims, the European Union maintains that the Panel erred  by: 
(i) focusing its counterfactual assessment solely on the impact of the pre -2007 aeronautics R&D  
subsidies on the launch date of the 787810, without taking into consideration the timing of its 
delivery811; (ii) focusing on technology development involving later stages of LCA development 
(i.e. near-term R&D activities), while it should have also taken into account the early phases of 
fundamental R&D, which were the focus of the original panel's analysis812; (iii) focusing solely on 
the identification of the amount of time needed to perform certain fundamental research, without 
considering the implications for the sequencing of the relevant R&D in the overall process813; and 
(iv) requiring the European  Union to show the precise amount of time that Boeing would have 
required to perform each of a series of R&D tasks absent the pre -2007 aeronautics R&D subsidies, 
contrary to the applicable causation standard.814 The European Union also brings various challenges 
under Article 11 of the DSU that the Panel failed to conduct an objective assessment of the matter 
                                                
808 United States' Notice of Other Appeal, para. 10; other appellant's submission, section V. If we were 
to disturb the Panel's findings with respect to the A330, the United States submits a conditional appeal, under 
Article 6.3(c) of the SCM Agreement and Ar ticle 11 of the DSU, of the Panel's finding that the European  Union 
made a prima facie case of significant price suppression. The United States claims that, because the 
European  Union never alleged that the A330 is in the same market as a subsidized Boeing  product, it did not 
demonstrate the existence of competition required in order to establish the existence of adverse effects.  
809 European Union's appellant's submission, para. 693.  
810 In the technology effects section of this Report, unless otherwise indica ted, a reference to the Boeing 
787 is one to the 787 -8 variant of this aircraft.  
811 European Union's appellant's submission, para. 698.  
812 European Union's appellant's submission, paras. 699 -701. 
813 European Union's appellant's submission, para. 702.  
814 Europe an Union's appellant's submission, para. 704.  WT/DS353/AB/RW  
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 before it  by: (i) providing in ternally inconsistent reasoning815 and incoherent or inadequate 
reasoning816; (ii) deviating from findings in the original proceedings817; (iii) imposing an "impossible" 
burden of proof818; and (iv) failing to base its findings on a sufficient evidentiary basis.819 
5.369.   Before addressing the European Union's challenge to the Panel's analysis of the technology 
effects of the pre -2007 aeronautics R&D subsidies, we first summarize key aspects of that analysis.  
5.7.1   The Panel's analysis  
5.370.   Before the Panel, the European  Union argued that the pre -2007 aeronautics R&D subsidies 
cause significant competitive harm to the European  Union's LCA -related interests following the end 
of the implementation period through their genuine and substantial contribution to Boeing's 
accelerated developme nt of technologies for its current LCA and for future Boeing LCA. The 
European  Union alleged that Boeing benefits from the effects of the pre -2007 aeronautics R&D 
subsidies in the following ways820: 
a. Original subsidy technology effects: Boeing continues to be nefit from 787 technologies 
that were "found to be the effect" of the original pre -2007 aeronautics R&D subsidies, 
which impact the market through sales of the 787.  
b. Spill-over technology effects: Boeing has benefited from the application of the "subsidized  
787 technologies" to Boeing's more recent 787, 777X, and 737  MAX LCA developments.821 
5.371.   The Panel divided its analysis of the European Union's claims of serious prejudice through a 
technology causal mechanism into two main sections. First, the Panel examined the 
European  Union's claims regarding the technology effects of the aeronautics R&D subsidies in the 
                                                
815 The European  Union submits that the Panel acted inconsistently with Article  11 of the DSU because 
the Panel's focus on the timing of the launch of the 787 is internally inconsistent with other findings of its  
Report. (European Union's appellant's submission, para. 698)  
816 The European Union claims that the Panel acted inconsistently with Article  11 of the DSU by failing to 
provide a reasoned and adequate explanation of how instances of near-term R&D activities can replace 
early-stage fundamental R&D  in the context of the counterfactual analysis. (European Union's appellant's 
submission, para. 701) In addition, t he European Union argues that, by using an incorrect sequence in its 
counterfactual analysis, the Pane l acted inconsistently  with Article  11 by failing to provide a reasoned and 
adequate explanation for its understanding of the progression of the R&D at issue. (Ibid., para. 702)  
817 The European  Union submits that the Panel acted inconsistently with Article  11 of the DSU because, 
by focusing on the timing of the launch of the 787, it inappropriately deviated from the findings of the original 
panel and the Appellate  Body. (European Union's appellant's submission, para. 698) The European Union also 
considers th at, by using an incorrect sequence in its counterfactual analysis, the Panel acted inconsistently with 
Article  11 of the DSU by deviating from the adopted findings in the original proceedings . (Ibid., para. 811)  
818 European Union's appellant's submission, p ara. 704. The European Union argues that the Panel 
subjected the European Union to an impossible burden of proof because the evidence it demanded would have 
simply been impossible for the European Union to adduce, as its participant in the LCA markets, Air bus, does 
not have insight into the proprietary internal R&D operations of its sole competitor, Boeing. (Ibid., para. 843)  
819 European Union's appellant's submission, paras. 705 and 861. T he European Union claims that the 
Panel failed to base its findings o n a sufficient evidentiary basis by " misconstru ing" one of its statements before 
the original panel  and using that "misconstruction" to find that the European Union had accepted  in the original 
proceedings  that Boeing would have been able to launch  the 787  in 2006, absent the pre -2007 aeronautics 
R&D subsidies. (Ibid., para. 857)  
820 The European Union also contended that Boeing benefits from the effects of the pre -2007 
aeronautics R&D subsidies through "sleeper technology effects". According to the European  Union, pursuant to 
sleeper technology effects, Boeing has developed new innovative technologies based in part on research 
conducted under the original aeronautics R&D programmes, which it is now beginning to apply to its most 
recent LCA developmen ts. (Panel  Report, para.  9.118 (referring to European  Union's first written submission to 
the Panel, para.  985)) In addition, the European  Union also argued before the Panel that certain post -2006 
aeronautics R&D subsidies operate through a "main technology effect". According to the European  Union, 
Boeing is the beneficiary of new post -2006 NASA, USDOD, and FAA aeronautics R&D subsidies, which have 
enabled Boeing to develop new technologies for its more recent LCA models, such as the 787 -10, 777X, and 
737 MAX. (Panel Report, paras.  9.119 and 9.343 (referring to European  Union's first written submission to the 
Panel, para.  986)) The European Union has not appealed the Panel's analysis regarding the above -mentioned 
effects. (European Union's appellant 's submission, fn 998 to para. 695 and fn 999 to para. 696)  
821 Panel  Report, para.  9.118 (referring to European  Union's first written submission to the Panel, 
paras.  983-984).  WT/DS353/AB/RW  
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 twin-aisle LCA market.822 Second, the Panel addressed the technology effects of the aeronautics 
R&D subsidies in the single -aisle LCA market.823  
5.372.   In assessing the technology effects of the aeronautics R&D subsidies in the twin -aisle LCA 
market, t he Panel indicated that it would evaluate the European Union's claims by first examining 
whether the pre -2007 aeronautics R&D subsidies  and certain post -2006 aeronautics  R&D subsidies , 
alleged to operate through a technology causal mechanism , give rise to the particular forms of 
technology effects in the post -implementation period argued  by the European Union. To the extent 
that it would find that these subsidies have suc h effects on Boeing's product development of the 
relevant LCA, the Panel indicated that, as a second step, it would assess the consequent impact on 
Airbus' LCA sales and prices in the post -implementation period so as to determine whether the 
subsidies in q uestion, through these technology effects, constitute a genuine and substantial cause 
of the particular forms of serious prejudice alleged by the European Union.824 
5.373.   The Panel began its analysis of  the European Union's claims regarding the original subsidy 
technology effects  of the pre -2007 aeronautics R&D subsidies by indicating that neither the original 
panel nor the Appellate  Body considered that the 787 technologies were themselves  the effects of 
the pre -2007 aeronautics R&D subsidies. In other words, the pre-2007 aeronautics R&D subsidies 
were not found to have brought into existence any technology or product that would not have 
otherwise exist ed.825 Instead, the Panel noted that the original panel and the Appellate  Body found 
that the pre -2007 aeronautics R&D subsidies accelerated  Boeing's development of technologies for 
the 787, which in turn enabled Boeing to launch the 787 earlier than otherwise w ould have been 
possible, thereby reducing Boeing's time to market for the 787.826 Therefore, the Panel pointed out 
that the issue before it was whether the acceleration of Boeing's development of advanced LCA 
technologies that the pre -2007 aeronautics R&D su bsidies were found to have in the original 
proceedings is still evident or whether it had ended by the end of the implementation period.827 The 
Panel considered that the counterfactual question before it was "whether it is likely that, absent 
these subsidies , the 787 technologies would still not have been developed by the end of the 
implementation period and thus the 787 would not have been present in the market by that time."828 
5.374.   The European  Union argued before the Panel that it would have taken Boeing "at lea st 10 
years to develop only a number of select LCA technologies and design tools necessary for the 787" 
and that Boeing "would further 'require considerable time to develop the knowledge it has acquired 
through its decades of experience participating in th e US  Government -supported R&D 
programmes '".829 In contrast, the United  States submitted that, absent the pre -2007 aeronautics 
R&D subsidies, Boeing would have launched the 787 most likely no later than 2006. The 
United  States maintained that this left "ample  time" for Boeing to adapt the 787 technologies to the 
777X and 737  MAX.830 
5.375.   The Panel first examined the arguments presented by the European  Union in support of its 
time estimate , which were based on a statement by Airbus engineers submitted to the Panel .831 
                                                
822 In this context, the Panel assessed the European Union's claim that the pre -2007 aeronautics R&D 
subsidies and certain  post-2006 aeronautics R&D subsidies  benefiting the 787 and 777X  cause serious 
prejudice  to the interests of the European Union  with respect  to the A350XWB in the post -implementation 
period . 
823 Panel Report, para. 9.15 . The Panel's analysis in this context focused on the European Union's claim 
that certain aeronautics R&D subsidies benefiting the 737 MAX cause serious prejudice to the interests of the 
European Union with  respect to the A320neo in  the post -implementation  period . 
824 Panel Report, para. 9.122.  
825 Panel Report, para. 9.127.  
826 Panel Report, para. 9.126.  
827 Panel  Report, para.  9.127.  
828 Panel  Report, para.  9.128. In this regard, the Panel considered it pertinent to inquire about the 
additional time that Boeing wou ld have required in order to develop the 787 absent the pre -2007 aeronautics 
R&D subsidies. In the Panel's view, this would indicate whether it is likely that Boeing would have been in the 
market with an unsubsidized 787 prior to the expiration of the impl ementation period. (Ibid.)  
829 Panel  Report, para.  9.130 ( quoting European Union's second written submission to the Panel, 
para. 975). 
830 Panel  Report, para.  9.130 (referring to United  States' first written submission to the Panel, 
para. 709).  
831 Response by B urkhard Domke, Phil A. Brown, Jörg Kumpfert , and Ian Whitehouse to the  June 2013 
Statement by Boeing Engineers, 19  July 2013  (Airbus Engineers' Response)  (Panel Exhibit EU -1014)  
(BCI/HSBI) . WT/DS353/AB/RW  
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 According to the European Union, the counterfactual question should focus on the amount of 
additional time that it would have taken Boeing to research, develop, produce, certify, and deliver 
the 787. The Panel indicated that, if it were to formulate the cou nterfactual question in the terms 
proposed by the European Union, its conclusion would also include time to undertake activities 
(internal R&D conducted by Boeing and its suppliers, production, certification , and delivery) that 
were not found to have been effects of the pre -2007 aeronautics R&D subsidies in the original 
proceedings. In the Panel's view, the original panel did not consider that Boeing's technology 
development in relation to the 787 was solely the result of Boeing's subsidized participation i n the 
NASA and USDOD aeronautics R&D programmes, or that the acceleration effects of the pre -2007 
aeronautics R&D subsidies encompassed phases in the development of the 787 beyond its launch. 
Thus, the Panel found that "the European  Union's estimate errone ously attributes to the pre -2007 
aeronautics R&D subsidies aspects of the 787's development that were not found to have been 
accelerated by Boeing's participation in the relevant NASA and DOD aeronautics R&D 
programmes."832 In addition, the Panel noted that the European  Union had not provided a clear 
statement, or supporting evidence, that the 787 would not have launched until after the end of the 
implementation period.833 
5.376.   Turning to the United  States' time estimate, the Panel began by agreeing with the 
United  States that there was no evidence, and no support in the findings in the original proceedings, 
that suggested the possibility that Boeing would have taken a commercial decision not to proceed 
with the development of the 787, absent the pre -2007 aeronautics  R&D subsidies.834 The Panel then 
turned to address the European  Union's criticisms of the United States' time estimate. In particular, 
the Panel addressed the argument that the United  States had failed to demonstrate that it would 
have been technically feas ible to launch the 787 in 2006 (rather than the actual launch in 2004) 
absent the pre -2007 aeronautics R&D subsidies, as concluded by c ertain Boeing engineers in the 
Statement of Boeing Engineers Regarding the Technologies and Development of the 787, 737  MAX, 
and 777X  (Boeing Engineers' Statement).835 
5.377.   First, the Panel examined the European  Union's criticism of the methodology used by the 
Boeing engineers. In this context, the Panel reiterated its disagreement with the European  Union's 
argument that the counte rfactual assessment should consider the entire development period of the 
787 beyond its launch. In the Panel's view, the European  Union's approach is inconsistent with the 
findings in the original proceedings and risks attributing unsubsidized aspects of t he 787's 
development to the effects of the pre -2007 aeronautics R&D subsidies.836 In addition, the Panel 
considered the European  Union's criticism of the Boeing engineers' methodology to be 
"highly -generalized in nature, and ultimately unpersuasive".837 
5.378.   Second, the Panel indicated that the European  Union did not itself enumerate the specific 
additional tasks that the Boeing engineers should have reflected in the Boeing Engineers' Statement. 
Nor did the European Union provide evidence of how long Boeing wo uld have needed to conduct any 
of the R&D tasks that were actually performed under the NASA and USDOD aeronautics R&D 
programmes. The Panel further noted that the European  Union failed to provide specific evidence to 
rebut the timing estimates that the Boe ing engineers provide d for the specific R&D tasks discussed 
in their statement.838 The Panel noted that "{i}t is the European Union's burden to establish that 
the pre -2007 aeronautics R&D subsidies continue to cause any of the alleged serious prejudice 
market phenomena in the post -implementation period."839 Consequently, in the absence of any clear 
estimate from the European  Union as to how much additional time Boeing would have needed to 
conduct any of the R&D tasks, the Panel found it difficult  to accept the European  Union's generalized 
criticisms of the United  States' estimate.840 
5.379.   Finally, the Panel also examined the development time of the Airbus A350XWB as a 
benchmark to assess the Boeing engineers' time estimate for the counterfactual analysis  regarding 
                                                
832 Panel  Report, para.  9.152.  
833 Panel  Report, para.  9.153.  
834 Panel  Report, para.  9.157.  
835 Panel Report, para. 9.159 (referring to Boeing Eng ineers' Statement (Panel Exhibit USA -283) (BCI) ). 
836 Panel  Report, para.  9.161.  
837 Panel  Report, para.  9.162.  
838 Panel  Report, para.  9.164.  
839 Panel Report, para. 9.165.  
840 Panel  Report, para.  9.165.  WT/DS353/AB/RW  
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 the 787.841 The Panel indicated that its comparison would focus on the time required to conclude the 
pre-launch development of the two aircraft.842 The Panel observed that "{t}he time from the start 
of intensive pre -launch R&D on the 787 ( [BCI]) until formal launch (April  2004) was approximately 
[BCI]."843 In addition, the Boeing engineers assert that Boeing could have conducted all of the 
necessary research to launch the 787 before the end of April 2006 (with promised deliveries in 2010) 
absent the pr e-2007 aeronautics R&D subsidies. The Panel indicated that if it were to accept the 
Boeing engineers' estimate, "the time from the start of intensive pre -launch R&D on the  787 ( [BCI]) 
until a counterfactual -adjusted, non -subsidized launch of the  787 (April  2006), would be 
approximately [BCI]."844 Turning to the A350XWB, the Panel indicated that , if it were to treat "the 
starting point of pre -launch R&D for the A350XWB as the date when work began on the composite 
wing design for the A350XWB until its official launch in December 2006, Airbus spent approximately 
[BCI] on pre -launch R&D before formally offering the A350XWB to customers ."845 Therefore, the 
Panel found that "the United  States' counterfactual allows for two additional years of pre -launch 
development, w hich means that the 787 pre -launch development period would exceed the A350XWB 
pre-launch development period by [BCI]."846 In the Panel's view, despite the differences in the 
design and technical solutions of the 787 and the A350XWB847, the time that Airbus sp ent developing 
the A350XWB provides "a general sense of what range of estimates is reasonable".848 
5.380.   For the foregoing reasons, the Panel concluded that "it is simply not plausible, and the 
Europea n Union has failed to establish  that, absent the aeronautics R& D subsidies, Boeing would not 
have launched the 787 by the end of the implementation period in September 2012."849 The Panel 
then added that, while it was "more difficult" to "confidently predict" exactly when Boeing would 
have been able to launch the 787 ab sent the pre -2007 aeronautics R&D subsidies, "it would be well 
before (i.e. at least several years before) the end of the implementation period ."850 Consequently, 
the Panel concluded that the European  Union had failed to demonstrate that the acceleration eff ects 
of the pre -2007 aeronautics R&D subsidies in relation to Boeing's technology development for the 
787 have continued into the post -implementation period.851 
5.381.   The Panel then turned to examine the European Union's claim that the pre -2007 aeronautics 
R&D sub sidies, through their effects on Boeing's development of 787 technologies that have 
subsequently been adapted and applied to the more recently launched 787 -9/10 and 777X, give rise 
to "spill -over technology effects" with respect to those aircraft in the po st-implementation period.852 
The Panel indicated that the relevant question before it was whether , owing to the acceleration in 
the development of the 787 technologies,  any alleged so -called "spill-over technologies " applied to 
the 787 -9/10 and 777X also cam e into existence earlier than would otherwise have been the case, 
enabling an earlier launch of these aircraft.853 The Panel recalled its finding that the European  Union 
had failed to establish that, absent the pre -2007 aeronautics R&D subsidies, Boeing woul d have 
launched the 787 after the end of the implementation period in September 2012. The Panel 
considered that, regardless of whether Boeing would have launched the 787 before the end of 2006 
                                                
841 Panel Report, para. 9.167.  
842 Panel  Report, para.  9.170. T he Panel  considered that this approach would be "consistent with the 
findings in the original proceeding, and avoids attributing to the subsidies aspects of the developm ent that 
were not accelerated by Boeing's participation in the relevant NASA and DOD aeronautics R&D programmes ". 
(Ibid.)  
843 Panel  Report, para.  9.171.  
844 Panel  Report, para.  9.171.  
845 Panel  Report, para.  9.172.  
846 Panel  Report, para.  9.175.  
847 The Panel noted that the European  Union rejected the use of the A350XWB as a proxy to assess the 
United  States' estimate regarding the 787 due to the differences between these aircraft. (Panel  Report, 
para. 9.174)  
848 Panel  Report, para.  9.175.  
849 Panel Report, para. 9.176.  
850 Panel  Report, para.  9.176.  
851 Panel  Report, para.  9.177. The Panel added that the  European  Union had  therefore failed to 
demonstrate  the existence of "original subsidy technology effects of the pre-2007 aeronautics R&D subsidie s" 
in the post -implementation period . (Ibid.)  
852 Panel Report, para. 9.178.  
853 Panel  Report, para.  9.182.  WT/DS353/AB/RW  
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 or somewhat later, an unsubsidized launch of the 787 would neve rtheless have occurred "multiple 
years in advance" of the launch of the 787 -10 (in  June 2013) or the 777X (in November 2013).854  
5.382.   The Panel added that the onus was on the European  Union to demonstrate that Boeing would 
not have had sufficient time, following  the unsubsidized launch of the 787, to leverage its knowledge 
and experience to proceed with the respective launches of the 787 -9/10 and 777X. The Panel 
considered that the European  Union had not provided credible evidence to demonstrate this.855 
Consequent ly, the Panel concluded that the European  Union failed to demonstrate the existence of 
spill-over technology effects of the pre -2007 aeronautics R&D subsidies with respect to the 787 -9/10 
or 777X in the post -implementation period.856 
5.383.   In addressing the alleged technology effects of the aeronautics R&D subsidies in the 
single -aisle LCA market, the Panel began by indicating that the relevant question was whether, 
owing to the acceleration  in the development of the 787 technologies due to the pre -2007 
aeron autics R&D subsidies, any alleged spill -over technologies in relation to the 737  MAX also came 
into existence earlier than would otherwise have been the case, enabling an earlier launch of this 
aircraft.857 The Panel recalled its earlier conclusion that the European Union had failed to 
demonstrate that, absent the pre -2007 aeronautics R&D subsidies, Boeing would have launched the 
787 after the end of the implementation period in September 2012.858 While the Panel considered it 
more difficult to confidently pred ict exactly when Boeing would have been able to launch the 787 
absent the pre -2007 aeronautics R&D subsidies, Boeing would have done so well before (i.e. at least 
several years before) the end of the implementation period. Thus, in the Panel's view, it was  not 
unrealistic to believe that Boeing would have been in a position to have launched the 737  MAX before 
the end of the implementation period. Moreover, in the Panel's view, the European  Union had not 
provided credible evidence that, absent the pre -2007 a eronautics R&D subsidies, the 787 
technologies could not have been adapted to the 737  MAX in sufficient time to enable its launch in 
August 2011.859 For these reasons, the Panel concluded that the European  Union failed to 
demonstrate the existence of spill -over technology effects of the pre -2007 aeronautics R&D subsidies 
with respect to the 737  MAX in the post -implementation period.860 
5.384.   For the foregoing reasons, the Panel stated that the European Union had failed to 
demonstrate any effect of the pre -2007 aerona utics R&D subsidies o n Boeing's product development 
with respect to the 787, 777X , and 737 MAX in the post -implementation period.861 Consequently, 
the Panel found that the European Union failed to establish that the pre -2007 aeronautics R&D 
subsidies are a g enuine and substantial cause of any of the forms of serious prejudice alleged with 
respect to the A350XWB and the A320neo in the post -implementation period, through a technology 
causal mechanism.862 
5.385.   Having described the main findings by the Panel with respec t to technology effects, we turn 
to our analysis of  the European Union's claims  on appeal.  
                                                
854 Panel  Report, para.  9.184. We note that, in this part of its analysis, the Panel did not refer to the 
launch of the 787 -9 (see ibid., para. 5.98).  
855 Panel Report, para.  9.185. The Panel explained that "t his is because the European  Union  
misconstrues the findings from the original proceeding as to the effects of the pre-2007 aeronautics R&D 
subsidies ." (Ibid.,  fn 2955 to para.  9.185)  
856 Panel  Report, para . 9.186. The Panel indicated that, in light of this conclusion, it need not address 
the question of whether any of the alleged technologies identified by the European Union in relation to the 
787-10 and 777X are in some way related or linked to those on the 787 . (Ibid., fn 2956 to para. 9.186)  
857 Panel  Report, para.  9.352.  
858 Panel Report, para. 9.353.  
859 Panel Report, para. 9.354.  
860 Panel Report, para. 9.355. The Panel added that, i n light of this conclusion, it need not address the 
question of  whether any of the alleged technologies identified by the European Union in relation to the 
737 MAX are in some way related or linked to those on the 787 . (Ibid., fn 3251 to para. 9.355)  
861 Panel Report, paras. 9.218 and 9.372. We note that the Panel's findings regardi ng the effects of the 
pre-2007 aeronautics R&D subsidies also addressed the European Union's claim regarding the existence of 
"sleeper technology effects" with respect to the 787 -9/10 or 777X in the post -implementation period. Similarly, 
in its technology effects analysis, the Panel also addressed the European Union's claims regarding the existence 
of "new technology effects" of certain post -2006 aeronautics R&D subsidies with respect to the 787 -9/10, 
777X, or 737 MAX in the post -implementation period. (Ibi d.) 
862 Panel Report, paras. 9.220 and 9.486.  WT/DS353/AB/RW  
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 5.7.2   Whether the Panel erred under Articles 5, 6.3, and 7.8 of the SCM Agreement, or 
acted inconsistently with Article 11 of the DSU,  by failing to consider in its counte rfactual 
analysis the impact of the acceleration effects of the pre -2007 aeronautics R&D subsidies 
on the timing of delivery of the 787  
5.386.   We begin with the European Union's fundamental concern that the Panel erred in assessing 
the existence of adverse effect s of the pre -2007 aeronautics R&D subsidies by limiting its analysis 
to the counterfactual launch date of the 787 and excluding consideration of the impact of these 
subsidies on the timing of delivery of the 787. The European Union challenges this aspect o f the 
Panel's analysis on the basis of a claim of error in the application of Articles 5, 6.3, and 7.8 of the 
SCM Agreement and of allegations that the Panel acted inconsistently with its obligations under 
Article  11 of the DSU.863 
5.387.   We first assess the Europe an Union's claim as it relates to the Panel's application of Article s 5 
and 6.3 of the SCM Agreement.864 The European  Union considers that the Panel correctly identified 
the relevant counterfactual question as follows: "whether it is likely that, absent thes e subsidies, 
the 787 technologies would still not have been developed by the end of the implementation period 
and thus the 787 would not have been present in the market by that time".865 However, the 
European  Union contends that a proper application of Artic les 5 and 6.3 requires a counterfactual 
consideration of not just their impact on the launch  of an aircraft, but also on the delivery  of the 
aircraft. The European  Union maintains that such an analysis "would necessarily need to take into 
account (i) the t ime spent on pre -launch R&D, (ii) the time it takes to further develop technologies 
and mature them to the stage where they are ready for production, as well as (iii) the time until the 
aircraft can first be delivered to customers".866 Moreover, the European  Union submits that the 
findings of the original panel and the Appellate  Body stressed the importance of considering the 
effect of the subsidies on the timing of both the launch and the available delivery positions of an 
aircraft.867 
5.388.   The United  States disagr ees with t he European  Union's claim that the Panel erred in applying 
Articles 5 and 6.3 of the SCM  Agreement because it focused exclusively on the counterfactual launch 
date of the 787, rather than on both launch and deliveries.868 According to the United  States, the 
Panel properly focused on the counterfactual launch date while duly considering deliveries.869 In 
particular, the United  States argues that the Panel correctly focused on the 787's counterfactual 
launch timing, given that "{u}pon the 787's launch, it would unquestionably be 'present in the 
market' because it would be competing for sales against Airbus LCA."870 The United  States also 
considers that the Panel's focus on launch is consistent with the analysis of the panel  and the 
Appellate Body in the or iginal proceedings . Indeed, according to the United States, the Panel's 
approach follows the "common thread" from the original panel through the Appellate  Body that the 
                                                
863 The European  Union maintains that the Panel acted inconsistently with Article  11 of the DSU 
because: (i) the Panel's focus on the timing of the launch of the 787 is internally inconsistent with other 
findings i n its Report; and (ii) the Panel inappropriately deviated from the findings of the panel and the 
Appellate  Body in the original proceedings. (European Union's appellant's submission, para. 698)  
864 In the European  Union's view, the errors i n the application of Articles 5  and 6.3 of the 
SCM Agreement  also involve  errors in the application of Article  7.8 of the SCM Agreement . However, in its 
appellant's submission, "{f} or the sake of brevity, the European  Union  refers to this error as an error in the 
applicatio n of Articles 5 and 6.3 ." (European  Union's appellant's submission, fn 994 to para.  693) As we see it, 
the European Union's claim of error in the application of Article 7.8 is consequential to those under Articles  5 
and 6.3. Thus, we focus our assessment o n the alleged errors in the application of Articles 5 and 6.3 of the 
SCM Agreement.  
865 European  Union's appellant's submission, para.  707 (quoting Panel  Report, para.  9.128).  
866 European  Union's appellant's submission, para.  710. 
867 European  Union's appellant 's submission, para.  723. The European  Union specifies that the original 
panel found that the relevant counterfactual analysis must address " what sort of aircraft Boeing could have 
developed, and when that aircraft could have been launched and first entere d into service , in the absence of 
the aeronautics R&D subsidies ". (Ibid., para.  724 (quoting Original Panel  Report, para.  7.1774 (emphasis 
added by the European  Union))) The European  Union adds that t he Appellate  Body similarly stressed the 
importance of c onsidering how the pre-2007 aeronautics R&D subsidies aff ected the timing of both Boeing' s 
launch and delivery of the 787 . (Ibid., para.  725 (referring to Appellate  Body Report, US – Large Civil Aircraft 
(2nd complaint) , para.  1023))  
868 United  States' appellee's submission, para.  373 (referring to European  Union's appellant's 
submission, para.  722).  
869 United  States' appellee's submission, para.  373. 
870 United  States' appellee's submission, para.  374. WT/DS353/AB/RW  
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 launch date is the critical timing consideration for assessing the competitive effects of the 
aeronautics R&D subsidies.871  
5.389.   Although the participants do not take issue with the manner in which the Panel articulated 
the counterfactual question before it872, they disagree on the scope and import of the findings in the 
original  proceedings regarding the type of counterfactual analysis that should be conducted in these 
compliance proceedings. In light of this disagreement, we turn to examine certain key passages 
from the original panel and Appellate  Body reports.  
5.390.   The original pan el considered that the main issue before it was whether the pre -2007 
aeronautics R&D subsidies caused serious prejudice to the interests of the European  Communities 
by reason of their effects on Boeing's development of technologies in relation to the 787.873 
According to the original panel, the pre -2007 aeronautics R&D subsidies at issue were "precisely 
focused on those areas which, from a commercial perspective, are considered to be the most crucial 
to the LCA industry, in the sense that they carry the great est prospect of creating significant 
competitive advantage".874 In the original panel's view, "{t}hese are technologies that promise 
airline customers lower direct operating costs and those that reduce the time to market ."875 
Moreover, as indicated in the orig inal proceedings,  NASA has a system to categorize technologies 
accordi ng to their level of maturity or technology readiness level (TRL).876 In this context, the original 
panel stated that "there is clearly evidence that the development of higher risk technol ogies up to 
TRL 6 {due to the aeronautics R&D subsidies} results in an acceleration of the overall technology 
development process for an airframe manufacturer like Boeing and would therefore facilitate an 
earlier product launch  than would otherwise have be en possible."877  
5.391.   The original panel indicated that certain developments in the LCA market878 likely meant 
that Boeing needed to develop an LCA to replace the 767 in the 200 -300 seat LCA market, and that 
it would have done so in the early to mid -2000s. The  original panel specified that the question was 
"what sort of aircraft Boeing could have developed, and when that aircraft could have been launched  
and first entered into service , in the absence of the aeronautics R&D subsidies" .879 The original panel 
indicated that two scenarios would be most likely: (i) Boeing would have developed a 
767-replacement that incorporated all of the technologies that are incorporated on the 787, but its 
launch would have been significantly later than 2004 , and Boeing would not have b een able to 
promise first deliveries for 2008; or (ii) Boeing would have launched a 767 -replacement in 2004 that 
was technologically superior to the 767, but did not offer the degree of technological innovation of 
the 787.880 The original panel did not consi der that it would need to reach a definitive view on which 
of these two scenarios would have occurred because it was clear that, "absent the aeronautics R&D 
subsidies, Boeing would not have been able to launch an aircraft incorporating all of the technolog ies 
that are incorporated on the 787 in 2004, with promised deliveries commencing in 2008."881 
                                                
871 United  States' appellee's submission , para.  375. 
872 European Union's appellant's submission, para. 707; United States' appellee's submission, para. 374.  
873 Original Panel Report, paras. 7.1709 -7.1773. In addressing this issue, the original panel examined a 
series of factors, such as: (i) the s tructure and design of the aeronautics R&D subsidies; (ii) the operation of 
the aeronautics R&D subsidies; and (iii) the conditions of competition in the LCA industry. (Ibid.)  
874 Original Panel Report, para.  7.1742.  
875 Original Panel Report, para.  7.1742. (e mphasis added) The original panel  added that those 
technologies that reduce the time to market  do so , for example, by reducing development and production 
cycles . (Ibid., para.  7.1744)  
876 The Peisen Study was a study that explained NASA's system of categorizing research according to its 
TRL, ranging from the highest risk and lowest maturity technology at TRL 1 ("basic scientific/engineering 
principles observed and reported") to the lowest risk and highest maturity technology at TRL 9 ("operational 
use of actual system tested, and benefits proven") . (Appellate  Body Report, US – Large Civil Aircraft 
(2nd complaint) , para.  974 (referring to Peisen et al., Case Studies: Time Required to Mature Aeronautic 
Technologies to Operational Readiness  (SAIC and GRA, Inc., November 1999)  (Peisen Study) (Original Panel 
Exhibit EC -795))) 
877 Original Panel Report, para.  7.1748. (emphasis added)  
878 The original panel pointed to Boeing's assessment in the late 19 90s that route fragmentation would 
lead to a larger number of lower -volume routes, best served by a mid -sized, extended -range aircraft, and that 
this was a commercial assessment unrelated to the subsidies . (Original Panel Report, para.  7.1774)  
879 Original P anel Report, para.  7.1774. (emphasis added)  
880 Original Panel Report, para.  7.1775.  
881 Original Panel Report, para.  7.1775.  WT/DS353/AB/RW  
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 5.392.   As part of its appeal in the original proceedings, the United  States alleged that, by 
misreading a table in an exhibit882, the original panel miscalculated the amoun t of time by which the 
NASA research accelerated the development of the technologies used on the 787 and thereby 
understated the time and resources that Boeing itself was required to invest to bring the NASA 
research to commercial viability.883 The Appellate  Body disagreed with the United  States and pointed 
out that the original panel's findings meant that "the NASA aeronautics R&D subsidies accelerated 
the technology development process by some  amount of time, and, therefore gave Boeing an 
advantage in bring ing its technologies to market. The exact amount of time was not critical: that 
the NASA research enabled Boeing to accelerate the research process was."884  
5.393.   The Appellate  Body also expressed its agreement with the original panel that "{i}t was the 
aeronauti cs R&D subsidies that enabled Boeing to overcome the disincentives in investing in 
aeronautics R&D, and which therefore accelerated Boeing's launch  of the 787 with all of its 
technological advancements in 2004."885 The Appellate  Body also noted that, while t he original panel 
recognized NASA's contribution to the development of technologies, it "also appreciated that at 
'some point in time ', the contribution of that research could reasonably be expected to diminish ", 
such that NASA's research could no longer be considered a "genuine and substantial" contribution 
to the technologie s applied to future Boeing LCA.886 However, the Appellate  Body highlighted that 
the original panel found that this point "had not been reached  in 2004", when the 787 "entered the 
market".887 After evaluating the claims on appeal, the Appellate  Body did not consider that the 
original panel had erred in finding that, "absent the aeronautics R&D subsidies, Boeing would not 
have been able to launch an  aircraft incorporating all of the technologies that are incorporated on 
the 787 in 2004, with promised deliveries commencing in 2008 ."888 
5.394.   Having examined the findings in the original proceedings, we consider it important to note 
that the technology effects of the pre -2007 aeronautics R&D subsidies were acceleration  effects with 
respect to the development of technologies for the 787. In other words, neither the original panel 
nor the Appellate  Body considered that the 787 technologies were themselves  the effe cts of the 
pre-2007 aeronautics R&D subsidies. Rather, the original panel and the Appellate  Body found that 
the pre -2007 aeronautics R&D subsidies accelerated  Boeing's development of technologies for the 
787, which in turn enabled Boeing to reduce the time  to market for the 787.889 
5.395.   Moreover, on the basis of the above findings, we consider that the concept of "launch" was 
particularly relevant in the original proceedings. For purposes of the original reference period from 
2004 to 2006, launch was the principal  accelerated event that enabled the original panel to reach 
conclusions of adverse effects arising from a subsidized 787. Any acceleration of the 787's first 
delivery occurred after the 2004 -2006 reference period and was a consequence of its accelerated 
launch. Indeed, the original panel and the Appellate  Body acknowledged that there were also 
acceleration effects with respect to the promised first deliveries of the 787 by affirming that, through 
the pre -2007 aeronautics R&D subsidies, Boeing was able to of fer "promised deliveries commencing 
in 2008".890 We further note that , while the original panel and the Appellate  Body found that the 
pre-2007 aeronautics R&D subsidies accelerated both the 787's launch and its first delivery, what 
was of critical relevance was the fact that the adverse effects arising in the 2004 -2006 period could 
be attributed to the pre -2007 aeronautics R&D subsidies since, absent the subsidies, the 787 would 
not have existed with those technologies in the 200 -300 seat LCA market during th at period.  
5.396.   We further note the apparent view of the Panel and the participants that the findings in the 
original proceedings already settle  the question of whether, in these compliance proceedings, the 
                                                
882 The piece of evidence in question  was the Peisen Study . (Appellate  Body Report, US – Large Civil 
Aircraft (2nd complaint) , para. 972 (referring to Peisen Study (Original Panel Exhibit EC -795)))  
883 Appellate  Body Report, US – Large Civil Aircraft (2nd complaint) , para.  972. 
884 Appellate  Body Report, US – Large Civil Aircraft (2nd complaint) , para.  980. (emphasis original)  
885 Appel late Body Report, US – Large Civil Aircraft (2nd complaint) , para.  986. (emphasis added)  
886 Appellate  Body Report, US – Large Civil Aircraft (2nd complaint) , para.  987 (quoting Original Panel 
Report, para. 7.1758).  
887 Appellate  Body Report, US – Large Civil Aircraft (2nd complaint) , para.  987 (referring to Original Panel 
Report, para. 7.1758).  
888 Appellate  Body Report, US – Large Civil Aircraft (2nd complaint) , para.  1036 (quoting Original Panel 
Report, para. 7.1775).  
889 Panel Report, para. 9.126.  
890 Original Pa nel Report, para.  7.1775; Appellate  Body Report, US – Large Civil Aircraft (2nd complaint) , 
para. 1036.  WT/DS353/AB/RW  
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 analysis of the technology effects claims should focu s on the timing of the 787's launch or whether 
such an analysis should also take into account the impact of the acceleration effects of the pre -2007 
aeronautics R&D subsidies on the timing of first delivery of the 787. The Appellate Body has stated 
that a compliance panel is expected to assess the claims before it in light of the findings in the 
original proceedings adopted by the DSB.891 However, this does not mean that the legal issues before 
an original panel and a compliance panel are the same. As noted b y the Appellate Body, "the utility 
of the review envisaged under Article 21.5 of the DSU would be seriously undermined if a panel were 
restricted to examining the new measure from the perspective of the claims, arguments and factual 
circumstances that rela ted to the original measure, because an Article 21.5 panel would then be 
unable to examine fully the 'consistency with a covered agreement of the measures taken to comply', 
as required by Article  21.5 of the DSU."892 Moreover, as noted in section 5.6 above , Article  7.8 of 
the SCM Agreement sets out an obligation "of a continuous nature, extending beyond subsidies 
granted in the past".893 The Appellate Body has indicated that, "by its terms, Article 7.8 is concerned 
only with subsidies  that the Member is 'granti ng or maintaining' in the implementation period. In 
assessing conformity under this provision, a panel's analysis should focus on the subsidie s that 
continue to exist in the post -implementation period."894 The Appellate Body has also observed that, 
in assessing a compliance dispute under Article 7.8, "the source of inconsistency is the 'granting or 
maintaining' of subsidies that cause adverse effects. It is in respect of such 'granting or maintaining' 
that the findings made by an original panel require cessation."895  
5.397.   Thus, as we see it, in assessing the existence of adverse effects in the context of original 
proceedings , a panel is called upon to determine whether, under Article 5 of the SCM Agreement, a 
Memb er has caused adverse effects at a given point in time to the interests of another Member 
through the use of subsidies.896 By contrast, in the context of compliance proceedings , the analysis 
focuses on whether the adverse effects found pursuant to Article 5 in the original proceedings have 
ceased by the end of the implementation period. Accordingly, because compliance is assessed at a 
new point in time – namely, after the implementation period has expired – the question of the 
existence of adverse effects in the post -implementation period must address developments 
subsequent to those that transpired in the original proceedings, including during the 
post-implementation period.  
5.398.   We consider that the relevant counterfactual question in the original proceedings wa s 
different  from the one at issue in these compliance proceedings. The original panel was not required 
to examine whether the acceleration effects caused by the pre -2007 aeronautics R&D subsidies 
continued to exist at a particular point in time. Rather, th e original panel's task  concerned the issue 
of whether  the pre -2007 aeronautics R&D subsidies at issue caused  a technology effect by 
accelerating  the development of the 787 technologies and, if so, whether such acceleration effects 
caused serious prejudice  to the interests of the European  Communities  during the 2004 -2006 
reference period .897 In fact, the Appellate Body emphasized in the original proceedings that "{t}he 
exact amount of time was not critical: that the NASA research enabled Boeing to accelerate the 
research process was."898 For this reason, in the Appellate Body's view, it was sufficient for the 
original panel to find that "the NASA aeronautics R&D subsidies accelerated the technology 
development process by some  amount of time, and, therefore gave Boeing an advantage in bringing 
                                                
891 Appellate Body Report, US – FSC (Article 21.5 – EC II), para. 61. As the Appellate Body has noted, 
"Article 21.5 proceedings do not occur in isolation  but are part of a 'continuum of events'." (Appellate Body 
Report, US – Softwood Lumber VI (Article 21.5 – Canada) , para. 103 (quoting Appellate Body Report, Mexico – 
Corn Syrup (Article 21.5 – US), para. 121 )) This is a consequence of the mandate of an Article 21.5 panel, 
namely, to examine whether recommendations and rulings from the original dispute have been implemented 
consistently with the covered agreements. (Appellate Body Report s, US – Softwood Lumber VI  (Article 21.5 – 
Canada) , para. 103; US – Zeroing (EC) (Article 21.5 – EC), para. 301)  
892 Appellate Body Report, Canada  – Aircraft  (Article 21.5 – Brazil ), para. 41.  
893 Appellate Body Report, US – Upland Cotton (Article 21.5 – Brazil) , para. 237.  
894 Appellate  Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.373. (emphasis original)  
895 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.374. The Appellate Body added that " Article 7.8 of the SCM Agreement requires the cessation of 
ongoing conduct consisting of the 'granting or maintaining ' of subsidies that are causing adverse effects. " 
(Ibid., para. 5.375)  
896 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.373.  
897 Original Panel Report , para. 7.1774.  
898 Appellate  Body Report, US – Large Civil Aircraft (2nd complaint) , para.  980. WT/DS353/AB/RW  
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 its technologies to market."899 Therefore, the analysis revolved around the issue of whether, not by 
how long , the pre -2007 aeronautics R&D subsidies accelerated the 787's technology development 
process.  
5.399.   By contrast, in these compliance proceedings, the Panel's inquiry focused on the issue of 
whether the acceleration effects of the pre -2007 aeronautics R&D subsidies that were found to exist 
by the original panel still exist  in the post -implementation period and, if so, whether such 
acceleration effects cause serious prejudice to the interests of the European  Union in the 
post-implementation period . In these circumstances, we do not see why  the Panel , in addressing 
the European Union's technology effects claims in these complianc e proceedings, would have been 
bound by the approach adopted by the original panel, which addressed a different counterfactual 
question.  
5.400.   In these compliance proceedings, the European  Union argues that, in its counterfactual 
analysis, the Panel focused sole ly on the counterfactual launch date and did not assess the impact 
of the pre -2007 aeronautics R&D subsidies on the timing of delivery of the 787.900 In contrast, the 
United States argues that "the Panel properly focused on the counterfactual launch date while duly 
considering deliveries."901 The United States adds that, in focusing on the timing of the 
counterfactual launch of the 787, the Panel did not  take the position that a delay in the 787's launch 
would have no impact on the timing of promised  and actual  first deliver y.902 Rather, the 
United  States considers that, for the Panel, "{t}he subsidies accelerated the launch of the 787, which 
in turn accele rated promised and actual first delivery by the same amount of time."903 
5.401.   In light of these arguments, we turn next to examine whether the Panel's counterfactual 
analysis included consideration of the timing of both the 787's launch and its first delivery, or  
whether such analysis covers only the timing of the 787's launch. We note that, unless otherwise 
specified, our references below to "first delivery of the 787 " cover  both promised  first delivery and 
actual  first delivery.  
5.402.   Before the Panel, t he European Un ion argued that it was necessary to consider in the 
counterfactual analysis a number of timeframes in re lation to the development of LCA, including the 
time to develop individual LCA technologies and design tools, and the time to integrate technologies 
into a final design solution. This included a ten -year incubation period, to allow for necessary 
certification, quality testing, and material proofs.904 The Panel dismissed the European  Union's 
counterfactual time estimate on the basis that it not only concerne d the time estimate to launch the 
787, but also the time to undertake certain activities, such as internal R&D conducted by Boeing and 
its suppliers, production, certification, and delivery. The main reason provided by the Panel for its 
conclusion was that , in its view, the original panel did not consider that "the acceleration effect of 
the aeronautics R&D subsidies encompassed phases in the development of the 787 beyond its 
launch ."905 Subsequently, the Panel reiterated that a counterfactual analysis that w ould consider the 
entire development period of the 787 beyond its launch would be inconsistent with the findings in 
the original proceedings and would risk attributing unsubsidized aspects of the 787's development 
to the effects of the subsidies.906 
5.403.   It is cl ear that the Panel based its conclusion solely  on the counterfactual time estimates 
with respect to the 787's launch . Thus, the Panel's counterfactual analysis ultimately did not include 
consideration of the time estimates with respect to the counterfactua l first delivery of the 787. 
Indeed, the Panel's conclusion was that "the European Union has failed to establish that, absent the 
aeronautics R&D subsidies, Boeing would not have launched  the 787 by the end of the 
                                                
899 Appellate  Body Report, US – Large Civil Aircraft (2nd complaint) , para.  980. (emphasis original)  
900 European Union's appellant's submission, para. 698.  
901 United  States' appellee's submission, para.  373. 
902 United  States' appellee's submission, para.  376. 
903 United  States' appellee's submission, para.  398. 
904 Panel Report, para. 9.133.  
905 Panel Report, para. 9.152. (emphasis added)  
906 Panel Report, para. 9.161.  WT/DS353/AB/RW  
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 implementation period in September 2012."907 On this basis, the Panel found that "the 
European  Union has failed to demonstrate that the acceleration effect of the pre -2007 aeronautics 
R&D subsidies in relation to Boeing's technology development for the 787  … has continued into the 
post-implementatio n period."908 
5.404.   Having clarified that the focus of the Panel's counterfactual analysis was on the timing of the 
787's launch, we observe that the European Union maintains that the notion of presence in the 
marke t of the 787 – a factor mentioned by the Panel in framing the  counterfactual question – 
concerns not only the launch of a product that Boeing offers, but also the time at which the product 
is offered for delivery to customers and the timing of actual delivery.909 In contrast, the United  States 
submits that the Panel c orrectly focused on the 787's counterfactual launch timing, given that 
"{u}pon the 787's launch, it would unquestionably be 'present in the market' because it would be 
competing for sales against Airbus LCA."910 
5.405.   As we see it, a central element in the Panel's  counterfactual question indeed relates to the 
moment by which the 787 is deemed to be "present in the market".911 We recall that the Panel's 
counterfactual question was whether it is likely that, absent the pre -2007 aeronautics R&D subsidies, 
the 787 techno logies would still not have been developed by the end of the implementation period 
and thus the 787 would not have been present in the market  by that time.912 With regard to the role 
of the 787's delivery in the counterfactual analysis, the European Union ma intains that such analysis 
should include the time estimates for promised and actual first delivery.913 Thus, the key issue before 
us in these compliance proceedings is whether the Panel properly addressed the counterfactual 
question by limiting its analysis o f the acceleration effects of the pre -2007 aeronautics R&D subsidies 
to the timing of the 787's lau nch or whether a proper application of that counterfactual question also 
required consideration of the acceleration effects of the pre -2007 aeronautics R&D subsidies on the 
timing of first delivery of the 787.  
5.406.   We recall certain features of the LCA industry  that shed light on this  question. As noted by 
the Appellate Body in the original proceedings, "{s}everal of the issues relating to serious prejudice 
implicate the structure of the LCA industry as well as the nature of competition between LCA 
manufacturers ."914 In particular, the Appellate Body observed that "LCA are sold to customers 
through long -term contracts, often involving staggered deliveries of aircraft over several years. The 
terms and conditions of each purchase contract are set at the time the orde r is made, and include 
many different elements, such as aircraft specification, net price, discounts, non -price concessions, 
and financing arrangements."915 It was further observed that, while a non -refundable deposit is paid 
at the time of signature of the order contract, complete payment does not occur until delivery of the 
aircraft.916 Moreover, "LCA purchase contracts provide both the basic airframe price, as well as for 
the 'escalation' of that price to account for the time that elapses between the negotia tion of the price 
at the time of order and the delivery of the aircraft."917 In this regard, the Appellate Body pointed 
out that, "{d}epending upon the number of years between the order and delivery of aircraft and the 
escalation terms agreed at the time the  order is placed, price escalation factors can significantly 
impact the purchase price ultimately paid upon delivery."918 
                                                
907 Panel Report, para. 9.176. (emphasis added) The Panel further added that, while it is more difficult 
to predict confidently exactly when Boeing would have been able to launch  the 787 absent the pre -2007 
aeronautics R&D subsidies, it would be well before (i.e. at least several years before) the end of the 
implementation period.  (Ibid.)  
908 Panel Report, para. 9.177. (fn omitted)  
909 European  Union's appellant's submission, para.  727. 
910 United  States' appellee's submission, para.  374 (quoting Panel Report, para. 9.128).  
911 Panel Report, para. 9.128.  
912 Panel Report, para. 9.128.  
913 European  Union's appellant's submission, para.  727. 
914 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , para. 902.  
915 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , para. 90 4. 
916 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , para. 90 4 (referring to Original Panel 
Report, para. 7.1685 ). 
917 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , para. 90 4. (fn omitted)  
918 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , fn 1842 to para. 907 (referring to 
Original Panel Report, para. 7.1685, in turn referring to Declaration of Christian Sch erer (Original Panel Exhibit 
EC-11) (BCI), para. 49 ). WT/DS353/AB/RW  
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 5.407.   In addition, in these compliance proceedings, the Panel referred to the relevance of an 
aircraft's delivery availability as a significan t consideration for the outcome of certain sales 
campaigns presented by the parties. In particular, the Panel held that, "{i}n the majority of the LCA 
sales campaigns, a critical factor was the airline customers' preference for the delivery availability 
of the Boeing aircraft over the competing Airbus aircraft, in light of the airlines' particular fleet 
replacement requirements as well as Airbus' delivery delays."919 
5.408.   The Panel's counterfactual analysis was part of a broader inquiry seeking to determine 
whethe r the pre -2007 aeronautics R&D subsidies continue to cause serious prejudice within the 
meaning of Articles 5 and 6.3 in the post -implementation period.920 Thus, to the extent that 
acceleration effects from the pre -2007 aeronautics R&D subsidies are found to  exist in the 
post-implementation period, then assessing whether any of the forms of serious prejudice under 
Article  6.3 at issue was the effect of these subsidies may involve evaluating evidence related to 
events occurring after an aircraft's launch. As n oted in section 5.6 above, in the LCA market, the 
market phenomena of price suppression and lost sales are not limited to what occurs at the time of 
an LCA order  and, therefore, such phenomena may continue up to the point of LCA delivery.921 
Indeed, the term s of a sale, and the extent to which those terms may be modified until the point of 
delivery, may have a bearing on the nature and scope of adverse effects caused by a subsidy. Thus, 
depending on the nature and scope of the transaction at issue, establishi ng the existence of certain 
forms of serious prejudice in the LCA industry may require examining events subsequent to the point 
of order , potentially including events taking place up to the point of delivery. Consequently, in the 
context of the LCA market,  determining whether the forms of serious prejudice under Article 6.3 at 
issue in this dispute still exist in the post -implementation period requires assessing whether any 
acceleration effects from the pre -2007 aeronautics R&D subsidies also had an impact on the timing 
of first delivery of the 787 in the post -implementation period.  
5.409.   According to the United States, the European  Union has never established that the Panel, in 
focusing on the timing of the counterfactual launch, failed to properly capture the ef fects of the 
pre-2007 aeronautics R&D subsidies.922 By way of example, the United  States asserts that the 
European  Union "never even attempted to demonstrate that, in a counterfactual featuring a 787 
launch in 2006, promised first delivery in 2010, and actua l first delivery in 2013, greater attention 
to the delivery dates would make any difference for the adverse effects analysis".923 The 
United  States further argues that, "in the counterfactual scenario, Boeing's promised first delivery 
date (and actual first delivery, i.e., entry into service)  … can be assumed to experience a delay 
equivalent to the counterfactual launch delay."924 However, "what cannot be assumed, and what the 
{European  Union} failed to establish, is that the delivery positions Boeing offered i n any particular 
sales campaign would have been at all different, much less that the positions offered would have 
been less attractive vis -à-vis Airbus' s counterfactual offer in that campaign."925 
5.410.   The difficulty we have with the United States' argumentation is that it asserts that the 
European Union failed to establish something that, in our view, the Panel never considered in its 
adverse effects analysis. As we have explained, the Panel rejected any consideration  of whether any 
acceleration effects from the pre-2007 aeronautics R&D subsidies had an impact on the timing of 
first delivery of the 787 in the post -implementation period, on the basis of the incorrect 
understanding that it was constrained by the scope of the counterfactual question addressed by the 
original panel. The Panel considered that  a counterfactual analysis that includes  "the entire 
development period of the 787 beyond its launch (including the time it would have taken Boeing to 
develop, mature, produce, and certify 787 technologies, and the time to integrate those components 
                                                
919 Panel Report, para. 9.247 (referring to Panel Report, HSBI Appendix , paras. 10, 22, 29, 39, 48, 60, 
76-79, 89, and  111). 
920 We recall that the Panel indicated that, to the extent that it would find tha t the aeronautics R&D 
subsidies have acceleration effects in the post -implementation period, it would then assess the consequent 
impact on sales and prices of the relevant Airbus LCA in the post -implementation period so as to determine 
whether the subsidie s in question, through these technology effects, constitute a genuine and substantial cause 
of the particular forms of serious prejudice alleged by the European Union.  (Panel Report, para. 9.122)  
921 At the same time, it would be improper to suggest that, in  all instances involving the phenomena of 
price suppression and lost sales in the LCA market, the phenomena manifest themselves to the same degree 
throughout the time period from order to delivery. (See section 5.6 above ) 
922 United  States' appellee's submis sion, para.  378. 
923 United  States' appellee's submission, para.  378. 
924 United  States' appellee's submission, para.  380. 
925 United  States' appellee's submission, para.  380. WT/DS353/AB/RW  
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 into a single aircraft, as the European Union argues) … {would be } inconsistent with the findings in 
the original proceeding and would risk attributing unsubsidized aspects of the 787's development to 
the effects of the s ubsidies ."926 In our view,  the Panel was not  bound by the way in which the original 
panel framed its inquiry given that the nature of the counterfactual question in these compliance 
proceedings was different. Indeed, in the original proceedings, the analysis concerned the issue of 
whether, not by ho w long, the pre -2007 aeronautics R&D subsidies accelerated the 787's technology 
development process. By contrast, in these compliance proceedings, the Panel's inquiry focused on 
the issue of whether the acceleration effects that were found to exist by the original panel still exist  
in the post -implementation period and, if so, whether such acceleration effects cause serious 
prejudice to the interests of the European Union in the post -implementation period.  
5.411.   Moreover, if the pre -2007 aeronautics R&D subsidies  had an impact on stages of the 787's 
development – either before or after its launch – that affected the timing of first delivery of the 787 
in relation to the end of the implementation period, then assessing the timing of this aircraft's first 
delivery w ould have been particularly appropriate for determining whether the ac celeration effects 
still exist  in the post -implementation period and could be attributed to the pre -2007 aeronautics 
R&D subsidies. If there were no such acceleration effects that affect ed the timing of first delivery of 
the 787, then the Panel should have reasoned why that is the case, rather than excluding 
consideration of this issue ab initio .  
5.412.   In addition to the above considerations, we are of the view that there were several 
indicati ons before the Panel that should have led it to evaluate whether the forms of serious prejudice 
alleged by the European Union are still present in the post -implementation period by examining 
whether, absent the pre -2007 aeronautics R&D subsidies, first del ivery of the 787 would have 
occurred after the end of the implementation period. As a starting point, the original panel and the 
Appellate Body considered that the technology effects of the pre -2007 aeronautics R&D subsidies 
accelerated both the 787's laun ch and its promised first delivery .927 Furthermore, it should have 
been telling for the Panel that both parties in these compliance proceedings presented argumentation 
related to activities pertaining to, and time estimates for, the 787's launch and its firs t delivery.928 
Indeed, the European Union argued that "the relevant counterfactual question concerns the amount 
of additional time that it would have taken an LCA manufacturer like Boeing to research, develop, 
produce, certify, and deliver the 787."929 In turn , the United States estimated that Boeing could have 
conducted all of the necessary research to launch the 787 before the end of April 2006 (with 
promised deliveries in 2010) absent the pre -2007 aeronautics R&D subsidies.930 
5.413.   Moreover, we recall that the Boei ng Engineers' Statement, which sets out the counterfactual 
time estimates put forward by the United States, "is based on examples of the time and effort taken 
by Boeing and its suppliers to address early -stage R&D challenges that were either comparable  to, 
or more demanding than, the types of activities conducted under the NASA and DOD programs".931 
Some of the R&D tasks used to estimate the time that Boeing would have required to develop certain 
787 technologies absent the subsidies refer to activities that [BCI] . For instance, in relation to the 
counterfactual time estimate to develop the composite fuselage, the Panel noted that, according to 
the Boeing engineers, "Boeing could have replicated in less than two years the particular tasks that 
were accomplishe d under NASA's Advanced Technology Composite Aircraft Structures (ATCAS) 
program ."932 For this comparison, the Boeing engineers relied on "Boeing's work developing a 
one-piece composite barrel design concept for incorporation into the 7E7 baseline design, it s 
completion of a full -scale demonstration barrel fuselage section and development of design, tooling 
                                                
926 Panel Report, para. 9.161.  
927 We recall that, in a finding upheld by the Appellate Bo dy, the original panel concluded that, " absent 
the aeronautics R&D subsidies, Boeing would not have been able to launch an aircraft incorporating all of the 
technologies that are incorporated on the 787 in 2004, with promised deliveries  commencing in 2008."  
(Appellate  Body Report, US – Large Civil Aircraft (2nd complaint) , para.  1036 (quoting Original Panel Report, 
para. 7.1775))  
928 Panel Report, paras. 9.133 and 9.171.  
929 Panel Report, para. 9.152.  
930 Panel Report, para. 9.171.  
931 Panel Rep ort, para. 9.137 (quoting Boeing Engineers' Statement ( Panel Exhibit USA -283) (BCI), 
para. 7 ). (emphasis added)  
932 Panel Report, para. 9.139.  WT/DS353/AB/RW  
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 and production concepts" .933 As noted in the Boeing Engineers' Statement, although Boeing officially 
launched the 787  in April 2004 , [BCI].934 
5.414.   We further reca ll that the Panel's main reason for rejecting the European Union's time 
estimate was that "{t}he original panel did not consider that Boeing's technology development in 
relation to the 787 was solely the result of Boeing's subsidized participation in NASA and DOD 
aeronautics R&D programmes. Nor did it consider that the acceleration effect of the aeronautics R&D 
subsidies encompassed phases in the development of the 787 beyond its launch."935 It is not clear 
to us whether the Panel believed that the original p anel had affirmatively found that there were no 
post-launch acceleration effects, or whether it believed that the original panel simply had not 
consider ed them.936 In either event, the Panel appeared to assume that it was required  to evaluate 
the legal issues in these Article 21.5 proceedings in the same way in which those issues were 
evaluated in the original proceedings. As noted, the nature of the counterfactual question in the 
original proceedings was different from the one at issue in these compliance proceedings. The 
original panel was not required to examine whether the acceleration effects caused by the pre -2007 
aeronautics R&D subsidies continued to exist as of a particular point in time. Thus, in these 
circumstances, we do  not see why, in addressing the European Union's technology effects claims in 
these compliance proceedings, the Panel would have been bound by the approach adopted by the 
original panel, which was used to address a different counterfactual question.  
5.415.   For the foregoing reasons , we consider that the Panel was required to assess whether the 
acceleration effects of the pre -2007 aeronautics R&D subsidies had an impact, not only on the timing 
of the launch of the 787, but also on the timing of its first delivery.937 We are not persuaded that it 
was sufficient for the Panel to base its conclusion regarding the European Union's technology effects 
claims solely on its understanding of the original panel's findings. Given that the counterfactual 
inquiry in these complian ce proceedings was different from the one at issue in the original 
proceedings, we would have expected an analysis  from the Panel as to why a focus on post -launch 
acceleration effects was not warranted. By failing to assess in its counterfactual analysis w hether 
the acceleration effects of the pre -2007 aeronautics R&D subsidies had an impact, not just on the 
launch of the 787, but also on the timing of first delivery of the 787, the Panel did not properly 
assess the counterfactual question as to whether the re remain acceleration effects of the pre -2007 
aeronautics R&D subsidies in the post -implementation period.  
5.416.   Accordingly,  we find that the Panel erred in the application of Articles  5 and 6.3 and, as a 
consequence, Article 7.8 of the SCM  Agreement. For the foregoing reasons, we reverse  the Panel's 
findings, in paragraph 9.177 of the Panel Report, that the European  Union failed to demonstrate that 
the acceleration effects of the pre -2007 aeronautics R&D subsidies in relation to Boeing's technology 
development  for the 787 have continued into the post -implementation period , and that the 
European  Union therefore failed to demonstrate the existence of original subsidy technology effects 
of the pre -2007 aeronautics R&D subsidies in the post -implementation period . 
5.417.   The European Union also requests us to reverse the Panel's analysis with respect to the 
spill-over technology effects of the pre -2007 aeronautics R&D subsidies on the 787 -9/10, the 777X, 
and the 737 MAX. We recall that the European Union argued before the P anel that the pre -2007 
aeronautics R&D subsidies, through their effects on Boeing's development of certain 787 
technologies that have subsequently been adapted and applied to the more recently launched 
787-9/10, 777X, and 737 MAX, give rise to spill -over t echnology effects with respect to those aircraft 
in the post -implementation period.938 
5.418.   In the context of assessing the spill -over technology effects of the pre -2007 aeronautics R&D 
subsidies on the twin -aisle Boeing LCA (i.e.  the 787 -9/10 and 777X), the Pane l recalled its earlier 
conclusion that the European  Union had failed to establish that, absent these subsidies, Boeing would 
have launched the 787 after the end of the implementation period in September 2012. The Panel 
                                                
933 Panel Report, para. 9.139 (referring to Boeing Eng ineers' Statement (Panel Exhibit USA -283) (BCI) , 
para. 23) . 
934 Boeing Eng ineers' Statement (Panel Exhibit USA -283) (BCI) , para. 23.  
935 Panel Report, para. 9.152.  
936 We note that the Panel did not provide a specific citation to the original panel's analysis to support its 
understanding of the findings in the original pro ceedings.  
937 See para. 5.401 above.  
938 Panel Report, paras. 9.178 and 9.344.  WT/DS353/AB/RW  
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 further stated that "{t}he end of the  implementation period is more than eight years after Boeing 
actually launched the 787 in 2004, and is ten or more years after Boeing began pre -launch R&D for 
the development of the 787, following its decision to develop a replacement for the 767."939 In the  
Panel's view, regardless of whether Boeing would have launched the 787 before the end of 2006 or 
somewhat later, an unsubsidized launch of the 787 would have nevertheless occurred multiple years 
in advance of the launch of the 787 -10 (in June  2013) or the  777X (in November 2013) .940 The Panel 
added that, while the onus to demonstrate this was on the European Union, it had not "provided 
credible evidence that the 787 technologies … could not have been adapted and developed into 
spill-over technologies for the  787-9/10 or 777X in sufficient time to enable their respective launches 
in 2013".941 On this basis, the Panel concluded that "the European Union has failed to demonstrate 
the existence of so -called spill -over technology effects of the pre -2007 aeronautics R &D subsidies in 
respect of the 787 -9/10 or 777X in the post -implementation period."942 
5.419.   The Panel made a similar set of findings in assessing the spill -over technology effects on the 
single -aisle Boeing LCA (i.e. the 737 MAX). Indeed, the Panel recalled its e arlier conclusion that the 
European Union had failed to demonstrate that, absent the pre -2007 aeronautics R&D subsidies, 
Boeing would have launched the 787 after the end of the implementation period in September 2012. 
The Panel reiterated that, while it co uld not confidently predict exactly when Boeing would have 
been able to launch the 787 absent the pre -2007 aeronautics R&D subsidies, Boeing would have 
done so at least several years before the end of the implementation period. The Panel therefore 
consider ed that it was not unrealistic to believe that Boeing would have been in a positi on to have 
launched the 737 MAX  before the end of the implementation period. The Panel also pointed out that 
the European Union had not provided credible evidence that the 787  technologies that Boeing would 
have developed without the subsidies could not have been adapted to the 737 MAX in sufficient time 
to enable its launch in August  2011.943 On this basis, the Panel concluded that the European Union 
had "failed to demonstrate the existence of so -called spill -over technology effects of the pre -2007 
aeronautics R&D subsidies in respect of the 737 MAX in the post -implementation period".944 
5.420.   We cons ider that  the Panel's conclusions regarding the European Union's claims with respect 
to the spill -over technology effects of the pre -2007 aeronautics R&D subsidies on the 787 -9/10, the 
777X, and the 737 MAX were largely dependent on its earlier findings re garding the original subsidy 
technology effects of the pre -2007 aeronautics R&D subsidies on the 787. We have reversed the 
Panel's analysis regarding  the original subsidy technology effects. As a consequence of this reversal, 
we also reverse  the Panel's fi ndings, in paragraphs 9.186 and 9.355 of the Panel Report, that the 
European  Union failed to demonstrate the existence of spill -over technology effects of the pre -2007 
aeronautics R&D subsidies with respect to the 787 -9/10, 777X, and 737 MAX in the 
post-implementation period.  
5.421.   We have reversed the Panel's findings in paragraphs 9.177, 9.186, and 9.355 regarding the 
existence of original subsidy technology effects of the pre -2007 aeronautics R&D subsidies in the 
post-implementation period, and the existence o f spill -over technology effects of the pre -2007 
aeronautics R&D subsidies with respect to the 787 -9/10, 777X, or 737 MAX in the 
post-implementation period. As a consequence, and to that extent, we also reverse  the Panel's 
findings, in paragraphs 9.219 -9.220, 9.372 -9.373,  11.8. a, and 11.8.e of the Panel Report, with 
respect to the European  Union's failure to establish that the pre -2007 aeronautics R&D subsidies are 
a genuine and substantial cause of any of the forms  of serious prejudice alleged with  respect to the 
A350XWB and the A320neo in the post -implementation period, through a technology causal 
mechanism.  
                                                
939 Panel Report, para. 9.184.  
940 We recall that, in this part of its analysis, the Panel did not refer to the launch of the 787 -9. 
(See Panel Report, para. 5.98)  
941 Panel Report, para.  9.185.  
942 Panel Report, para. 9.186. The Panel added that, in light of this conclusion, it need not address the 
question  of whether any of the alleged technologies identified by the European Union in relation to the 787 -10 
and 777X are in some way related or linked to those on the 787.  (Ibid., fn 2956 to para. 9.186)  
943 Panel Report, para. 9.354.  
944 Panel Report, para. 9.355. The Panel added that, i n light of this conclusion, it need not address the 
second question, which is whether any of the alleged technol ogies identified by the European  Union in relation 
to the 737 MAX are in some way related or linked to those on the 787 . (Ibid., fn 3251 to para. 9.355)  WT/DS353/AB/RW  
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 5.422.   We recall that, in addition to the above claim of error in the application of Articles 5, 6.3, 
and 7.8 of the SCM  Agreement, the European Union brought  multiple claims challenging the Panel's 
findings that the European Union failed to establish that the technology effects of the pre -2007 
aeronautics R&D subsidies continue into the post -implementation period.945 Because we have 
reversed the Panel's ultimate  findings regarding the acceleration effects of the pre -2007 aeronautics 
R&D subsidies, we need not consider the additional claims and arguments by the European Union.  
5.423.   Having reversed the Panel's findings, we turn to assess the European Union's request for  
completion of the legal analysis . 
5.7.3   Completion of the legal analysis  
5.424.   The European Union requests us to complete the legal analysis and find that the pre -2007 
aeronautics R&D subsidies cause: (i) original subsidy technology effects with respect to the 787 in  
the post -implementation period; and (ii) spill -over technology effects with respect to the 787 -9/10, 
777X, and 737 MAX in the post -implementation period.946 
5.425.   The European Union submits that a counterfactual analysis, based on factual findings by the 
Panel an d undisputed facts on the record, demonstrates that, absent the pre -2007 aeronautics R&D 
subsidies, Boeing would have been able to launch and deliver the 787 mu ch later than what the 
Panel  found.947 The European  Union highlights that, in completing the legal  analysis, it is not 
necessary for us to identify the precise time at which the launch, and subsequent delivery, of the 
relevant aircraft models would have occurred.948 Rather, in the European Union's view, we would 
merely need to confirm, based on factual f indings by the Panel and undisputed facts on the record, 
that launch and delivery of these aircraft, absent the non -withdrawn subsidies, would have been 
delayed until, at least, after the end of the implementation period in September 2012.949 
5.426.   The European Un ion submits that, "in any event, the Appellate Body should assess the 
minimum amount of time it would have taken Boeing, absent the non -withdrawn US  aeronautics 
R&D subsidies, to: (i) conduct certain fundamental R&D (i.e. to develop knowledge); and to (ii)  turn 
that knowledge into technologies that are mature enough for commercial application on the 
787-8."950 The European Union specifies that we should take into account the time it took Boeing to 
develop the 787 -8, from launch in April 2004 to promised first  deliveries in 2008, and also the time 
by which the actual first delivery of the 787 -8 was delayed. According to the European Union, this 
is because the time of actual first delivery more accurately reflects the time it actually took Boeing 
to develop and mature the 787 -8 technologies to a degree that the 787 -8 was ready to be delivered 
to its first customer in 2011.951 The European Union argues that, having concluded a determination 
regarding the 787 -8, the same counterfactual R&D timeframe for the developme nt of Boeing's 
787-9/10, 737 MAX, and 777X should be applied.952 
5.427.   The European Union maintains that, "{u}ndisputed evidence shows that, after an LCA 
manufacturer conducts fundamental R&D for the development of certain aircraft technologies, 
additional R&D is necessary to further develop – and mature – these technologies prior to the launch 
of the aircraft."953 Statements by Boeing, made outside the context of litigation, indicate that "it 
takes '{u}p to 10 years for major technologies' alone to reach a TRL6 (up to prototype 
demonstration), and an additional '3 to 6 years' for an LCA to be developed, produced, and delivered 
to its first customer (TRL9)."954 The European Union considers that, i n determining the minimum 
                                                
945 See para . 5.368 above . 
946 European Union's appellant's submission, para. 863.  
947 European Union's appellant's submission, para. 865. The European Union considers that the Panel 
properly identified the counterfactual question to be " whether it is likely that, absent these subsidies,  the 787 
technologies would still not have been developed by the end of the implementation period and thus the 787 
would not have been present in the market by that time ". (Ibid. (quoting Panel Report, para. 9.128))  
948 The European Union refers to the launc h and delivery of the 787 -8, 787 -9/10, 737MAX, and 777X. 
(European Union's appellant's submission, paras. 866 -867) 
949 European Union's appellant's submission, paras. 866 -867. 
950 European Union's appellant's submission, para. 878.  
951 European Union's appellant 's submission, para. 878.  
952 European Union's appellant's submission, para. 8 80. 
953 European Union's appellant's submission, para. 8 82. 
954 European Union's appellant's submission, para. 8 82 (quoting European Union's second written 
submission to the Panel, par as. 1004 -1005, in turn quoting Craig Wilsey and Robert Stoker, Continuous Lower WT/DS353/AB/RW  
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 counterfactual R&D timeframe for the 787 -8, the mentioned "up to 10 years" indication should be 
used. The European  Union submits that, when applied to the same counterfactual start date for 
pre-launch R&D used by the United States ( [BCI]), this leads to a potential launch at a date leading 
"up to" 2012 (up to eight years later than the 787's actual launch) and possible promised first 
delivery up to 2016 (up to eight years later than the 787's promised first delivery).955 Moreover, 
taking into account the delay for actual delivery of the 787 results in  a counterfactual first delivery 
of the 787 -8 as late as 2019.956 The European  Union adds that, "{e}ven putting aside the broad 'up 
to ten years' timeframe for pre -launch R&D, and accounting only for the actual 787 delivery delays 
and the undisputed '3 to 6 years' to mature technologies from TRL6 to first delivery, would require 
a finding that the counterfactual first delivery of the 787 -8 would have taken place substantially 
after 2012."957 
5.428.   The European Union then refers to "more specific estimates" provided b y the Airbus 
engineers with respect to how long Boeing would have likely taken to "develop, mature, produce 
and certify" a number of technologies.958 According to the European Union, applying these figures 
in context results in [BCI] timeframes as the genera lized timeframes provided by Boeing engineers. 
In particular, t he European Union put forward a comparable time  period , which is HSBI,  on the basis 
of argumentation from the Airbus engineers regarding the time required for a 360 -degree composite 
fuselage ba rrel section.959 Applying th ese estimate s to the same counterfactual start date when 
Boeing began pre -launch R&D ( [BCI]), and assuming 4 years from launch to promised first delivery, 
leads to a date for promised first delivery, absent the pre -2007 aeronautic s R&D subsidies, of [BCI]. 
The European Union submits that, taking into account the actual delay in delivering the 787 -8, the 
counterfactual actual first delivery date is postponed to [BCI].960 
5.429.   Turning to the 787 -9/10, 777X, and 737 MAX, the European Union c ontends that the launch 
and subsequent delivery of these aircraft would have been affected by the delayed launch and first 
delivery of the 787, given Boeing's need for time to adapt the fully  developed 787 -8 technologies to 
these newer aircraft.961 For the purpose of determining the relevant dates for the counterfactual 
analysis applicable to these aircraft, the European Union takes their launch and promised delivery 
dates and adds a period of up to 8 years, which is equivalent to the  purported  delay of the 7 87-8 
launch in the counterfactual analysis.962 
5.430.   In response, the United States submits that "the {European Union} is asking the 
Appellate  Body to discard the Panel's careful analysis of a complex factual record and undertake its 
own de novo  analysis based on {the European Union's} argumentation rather t han undisputed facts 
or Panel findings."963 The United States adds that "the {European Union's} proposed path to each 
requested finding would require the Appellate Body to make multiple factual findings without 
                                                
Energy, Emissions and Noise (CLEEN) Technologies Development – Boeing Program Overview , CLEEN 
Consortium Public Session (27 October 2010)  (Panel Exhibit EU -665),  p. 4). 
955 Europ ean Union's app ellant's submission, para. 884.  
956 European Union's app ellant's submission, para. 885. The European Union refers to " the undisputed 
fact of the (actual) delay of 3 years and five months that Boeing encountered in delivering the 787 to its fir st 
customer ". (Ibid. (referring to Panel Report, para. 9.153; European Union's response to Panel question 
No. 45(c), paras. 331 -347))  
957 European Union's app ellant's submission, para. 886.  
958 European Union's app ellant's submission, para. 891 (referring to Airbus Engineers' Response 
(Panel  Exhibit EU -1014) (BCI/HSBI), paras. 40 and 43).  
959 European Union's appellant's submission, para. 891  (quoting European Union's second written 
submission to the Panel, paras. 1031 -1041, in turn quoting Airbus Engineers'  Response  (Panel  Exhibit 
EU-1014) ( BCI/HSBI ), para s. 40 and 43). The Airbus engineers further estimated that the development of a 
composite wing  up to the point of  first delivery would have taken nine years.  (Ibid. (referring to Airbus 
Engineers'  Response (Panel Exhibit EU -1014) (BCI/HSBI), para. 56))  
960 European Union's app ellant's submission, para. 893.  
961 European Union's appellant's submission, para. 896. The European Union maintains that "{n} either 
the Panel nor the United States addressed the question of how much time Boeing would have taken, following 
the development of the 787 -8, to leverage its knowledge and experience, and adapt and develop its 
technologies into spill -over technologies to proceed with the launches of the 787 -9/10, 737 MAX, and 777X 
models ." (European Union' s appellant's submission, para.  897 (referring to Panel Report, para. 9.185; 
United  States' first written submission to the Panel, para. 709))  
962 European Union's appellant's submission, para. 899. 
963 United States' appellee's submission, para. 487. WT/DS353/AB/RW  
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 sufficient basis, including because such findin gs would be contrary to the original findings, contrary 
to the Panel's findings, and/o r would assume a fact that the P arties dispute."964 
5.431.   The United States maintains that the European Union's arguments are "flawed" in several 
respects. To begin with, "{t}her e is no support whatsoever for the notion that R&D subsidies would 
cause current serious prejudice through a technology effects causal pathway merely because, absent 
those subsidies, the first delivery of the 787 would have occurred after the end of the im plementation 
period (e.g., in late 2012 or early 2013)."965 The United States adds that this counterfactual scenario 
(i.e. one in which the counterfactual first delivery of the 787 would have occurred in late 2012 or 
early 2013) "is consistent with a 787 lau nch date seven years earlier, in 2006 – i.e., the same 
duration as the period between actual 787 launch in 2004 and actual first delivery in 2011".966 The 
United  States maintains that, "{i}n such a scenario, the 787 would be present in the market 
throughout the entire post -implementation period, and the Appellate Body would have no basis for 
finding that the alleged indicia of serious prejudice identifi ed by the {European Union}, such as lost 
sales campaigns, would have different outcomes as compared to what actually occurred."967 
5.432.   Moreover, the United States disagrees with the European Union's reliance on "generic 
timeframes" to progress from one TRL to an other as a proxy for estimating the 787 launch delay.968 
For the United States, relying on this information "would be contrary to the Panel's unappealed 
finding that 'statements made by Boeing engineers that the European Union has cited regarding the 
time th at is required to develop and mature technologies are also highly generalized and do not 
speak to the contribution of the challenged aeronautics R&D subsidies in respect of Boeing's overall 
development of the 787'".969 Indeed, according to the United States,  the European Union "selectively 
quotes the Boeing engineers' statement on this issue", given that "the full quotation makes clear 
that no basis exists for the Appellate Body to adopt an 'up to 10 years' time -frame for the period 
between the start of pre -launch R&D and launch."970 Finally, the United States asserts that the 
European Union's reliance on "generic TRL timeframes" would be at odds with its position before the 
Panel. The United States points out that, before the Panel, the European Union agreed th at "the 
precise timeframes" in the Peisen Study (a NASA study of the average time taken to move between 
TRL levels) are of "lesser relevance" to the compliance Panel's assessment.971 
5.433.   In response to the European Union's use of estimates provided by Airbus eng ineers, the 
United  States submits that "{t}his is nothing more than an invitation for the Appellate Body to weigh 
the evidence provided by the Boeing engineers against the critiques of the {European Union} and 
Airbus engineers after the Panel already did s o and found the latter to be 'highly -generalized in 
nature, and ultimately unpersuasive.'"972 In addition, the United States maintains that the Airbus 
engineers' information is "conceptually flawed" as it concerns "the full spectrum of aircraft 
development a ctivities through first delivery, as opposed to the specific roles played by the pre -2007 
aeronautics R&D subsidies".973 Furthermore, the United  States disagrees  that it "does not dispute" 
the Airbus engineers' counterfactual time estimates for the 787, incl uding a counterfactual launch 
of the 787 as late as 2015.974 On the contrary, the United States submits that these facts are 
disputed because, through the Reply of Boeing Engineers to EU and Airbus Statements Regarding 
the Technologies and Development of the  787, 737  MAX, and 777X  (Boeing Engineers' Reply) , it 
rejected the counterfactual estimates presented by the European  Union.975 Moreover, the 
United  States argues that the European Union's counterfactual timing estimates are "in direct 
                                                
964 United States' appellee's submission, para. 488.  
965 United States' appellee's submission, para. 491.  
966 United States' appellee's submission, para. 491. (emphasis omitted)  
967 United States' appellee's submission, para. 491.  
968 United States' appellee's submission, para. 493 (referring to European Union's appellant's 
submission, paras . 882-884).  
969 United States' appellee's submission, para. 493 (quoting Panel  Report, para. 9.166 ). 
970 United States' appellee's submission, para. 493 (referring to European Union's appellant's 
submission, para. 883).  
971 United States' appellee's submission, para. 494 (referring to Panel Report, fn 2932 to para. 9.166).  
972 United States' appellee's submission, para. 495 (quoting Panel Report, para. 9.162).  
973 United States' appellee's submission, para. 495 (referring to European Union's appellant's 
submission, para. 891).  
974 United States' appellee's submission, para. 496.  
975 United States' appellee's submission, para. 496 (referring to  Reply of Boeing Engineers to EU and 
Airbus Statements Regarding the Technologies and Development of the 787, 737  MAX, and 777X 
(August  2013) (Boeing Engineers' Reply)  (Panel Exhibit USA -359) (BCI ), paras. 13 -26). WT/DS353/AB/RW  
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 conflict" with the Pan el's unappealed findings regarding the development timing of the Airbus 
A350XWB as consisting of "a period of roughly [BCI]".976 According to the United  States, a 
comparison of the Panel's analysis regarding the A350XWB and the European  Union's counterfactua l 
timing estimates for the 787 (including a launch up to 11 years later than the actual launch in 2004) 
reveal s that the latter is "patently unreasonable" .977 
5.434.   The United States adds that, given the barriers to completion of the analysis for the 787 -8, 
the Ap pellate Body  also cannot complete the spill -over technology effects analysis regarding the 
787-9/10, 737 MAX, and 777X. Indeed, "{w}ithout any basis to find in the {European Union's} 
favour with respect to the counterfactual timing of the 787 -8, the Appell ate Body … would lack a 
sufficient basis to find delays with respect to the other aircraft models."978 According to the 
United  States, the European  Union's request would require the Appellate Body  to re -weigh 
impermissibly the evidence and  make wholly n ew fi ndings about facts not in the evidence.979 
Additionally, the United States disagrees with the European Union's contention that there are "time 
gaps" between the counterfactual launch of the 787 -8 and the launches of other models that "reflect 
resource and en gineering constraints Boeing faced when launching several LCA models in close 
succession".980 In the United States' view, these are "bare assertions" made by the European Union 
attempting to fill an "evidentiary hole".981 Moreover, the United States contends t hat a Panel finding, 
which was not appealed, indicates that "{c}ommercial priorities differ between different aircraft 
programmes and these differing priorities can influence the point in time at which an aircraft 
manufacturer decides to launch an aircraft  programme."982 
5.435.   We note that, before the Panel, the United States contended that "Boeing could have 
conducted all the necessary research to launch  the 787 before the end of April 2006 (with promised 
deliveries  in 2010) absent the pre -2007 aeronautics R&D subsidies."983 These time estimates were 
based on the Boeing Engineers' Statement984 and the Boeing Engineers' Reply .985 In turn, the 
European Union presented time estimates that were somewhat general in nature. Inde ed, according 
to the European Union, "it would have taken Boeing 'at least 10 years to develop only a number of 
select LCA technologies and design tools necessary for the 787', and in addition to the ten years, 
Boeing would further 'require considerable ti me to develop the knowledge it has acquired through 
its decades of experience participating in the US Government -supported R&D programmes'."986 On 
appeal, the European  Union puts forward more specific time estimates for the 787's counterfactual 
launch and fi rst delivery. In particular, the European  Union considers that the counterfactual launch 
would take place at a date leading up to 2012, promised first delivery at a date leading up to 2016, 
and actual first delivery at a date leading up to 2019.987 
5.436.   As we see  it, the European Union's counterfactual estimate s depend on establishing that the 
counterfactual launch date of the 787 would have been as late as  2012. The European  Union 
therefore argues  that pre -launch R&D activities for the 787 would have taken "up to  ten years".988 
This estimate is based on the timeframes set out in the Peisen  Study.989 The European  Union also 
relies on the "more specific estimates" provided by the Airbus engineers.990 
5.437.   We note that the relevance of the Peisen Study for the purpose of estima ting timeframes for 
the 787's counterfactual analysis was questioned by the panel and the Appellate Body in the original 
                                                
976 United States' appellee's submission, para. 497 (quoting Panel Report, para. 9.175).  
977 United States' appellee's submission, para. 497. 
978 United States' appellee's submission, para. 498. 
979 United States' appellee's submission, para. 499. 
980 United States' appellee's submission, para. 499 (quoting European Union's appellant's submission, 
para. 900). 
981 United States' appellee's submission, para. 499 (referring to European Union's appellant's 
submission, para. 900).  
982 United States' appellee 's submission, para. 499 (quoting Panel Report, fn 2947 to para. 9.175).  
983 Panel Report, para. 9.171. (emphasis added)  
984 Boeing Eng ineers' Statement (Panel Exhibit USA -283) (BCI).  
985 Boeing Engineers' Reply (Panel Exhibit USA -359) (BCI).  
986 Panel Report, para. 9.130 (quoting European Union's second written submission  to the Panel , 
para. 975). 
987 European Union's appellant's submission, para. 890.  
988 European Union's appellant's submission, para. 884.  
989 European Union's appellant's submission, paras. 882-884. 
990 European Union's appellant's submission, para. 891. WT/DS353/AB/RW  
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 proceedings, as well as by the Panel in these compliance proceedings. The original panel was not 
persuaded that the estimates in the Pe isen Study were determinative  for calculating the time 
estimates  for the development of the 787.991 Similarly, the Appellate Body indicated that "the 
estimates in the Peisen Study were based only on average timeframes, and do not necessarily reflect 
the prec ise time that was required to develop and launch the technologies used on the  787."992 In 
these compliance proceedings, the Panel considered that the statements from the Peisen Study that 
are cited by the European  Union "are also highly generalized and do no t speak to the contribution 
of the challenged aeronautics R&D subsidies in respect of Boeing's overall development of the 
787".993 Before t he Panel , the European Union  noted that the parties had agreed  that the timeframes 
in the Peisen Study are "of lesser r elevance to the compliance Panel's assessment, because, as the 
original panel and the Appellate  Body have themselves found, the study was based on a variety of 
different aircraft technologies with widely varying maturation times".994 As noted, the United Sta tes 
contests the time estimates based on the Peisen Study, as well as those presented by the Airbus 
engineers.995 
5.438.   Therefore, as we see it, the relevant time estimates for conducting the 787's counterfactual 
analysis were highly contested by the participants in these proceedings. For example, the 
United  States disagrees with the European Union's reliance on the "generic timeframes" to progress 
from one TRL to another set out in the Peisen Study as a proxy for estimating the 787 launch 
delay.996 For the United St ates, relying on this information "would be contrary to the Panel's 
unappealed finding that 'statements made by Boeing engineers that the European Union has cited 
regarding the time that is required to develop and mature technologies are also highly genera lized 
and do not speak to the contribution of the challenged aeronautics R&D subsidies in respect of 
Boeing's overall development of the 787'".997 Moreover, the United States also questions the 
European Union's use of estimates provided by the Airbus enginee rs. Consequently, in our view, 
there are no undisputed facts regarding the relevant time estimates with respect to the 
counterfactual launch of the 787.  
5.439.   Moreover, the Panel's findings regarding the time estimate for the counterfactual launch of 
the 787 did  not specify a precise date  by which, absent the pre -2007 aeronautics R&D subsidies, 
Boeing would have launched the 787. Rather, the Panel limited  itself to a more general conclusion 
regarding a counterfactual launch date, noting that it was "difficult … t o confidently predict exactly 
when Boeing would have been able to launch the 787 absent the pre -2007 aeronautics R&D 
subsidies", but that "it would be well before (i.e. at least several years before) the end of the 
implementation period ."998 Our understanding of the Panel's finding is that the counterfactual launch 
date of the 787 therefore falls somewhere between 2006, the date proposed by the United States 
but which the Panel did not explicitly accept, and 2010, which would seem to be the l atest point at 
which the date could still be considered to be "several years" before 2012.  
5.440.   For the purpose of its request for completion of the legal analysis, the European Union 
appears to have adopted a counterfactual time lag of four years between the l aunch of the 787 and 
its promised first delivery, and a time lag of three years between the 787's promised first delivery 
and its actual first delivery. The European Union indicates that it proposes these time lags to take 
into account "the four years it a ctually took Boeing from launch to promised first deliveries" and "the 
actual delays in the post -launch development of the 787".999 We consider it important to point out 
that, since the Panel failed to assess whether the acceleration effects of the pre -2007 aeronautics 
R&D subsidies had an impact, not just on the launch of the 787, but also on the timing of the 787's 
first delivery, it also did not make any findings regarding possible time estimates for the 
counterfactual promised first delivery and actual fi rst delivery of the 787. Because the Panel did not 
examine this matter, we would be able to proceed only on the basis of the assumption s that the 
                                                
991 Original Panel Report, para. 7.1748.  
992 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , para. 980. (emphasis omitted)  
993 Panel Report, para. 9.166.  
994 Panel Report, fn 2932 to para. 9.166  (quoting European Union's response to Pa nel question No. 46, 
para. 362).  
995 See United States' appellee's submission, paras. 493 -494 and 496 -497. 
996 United States' appellee's submission, para . 493 (referring to European Union's appellant's 
submission, paras . 882-884).  
997 United States' appellee's submission, para. 493 (quoting Panel Report, para. 9.166 ). 
998 Panel Report, para. 9.176.  
999 European Union's appellant's submission, para. 890. WT/DS353/AB/RW  
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 date of promised first delivery of the 787 in a counterfactual scenario would be four years following 
its laun ch, and that the date of actual first delivery of the 787 would be three years after the 
occurrence of its promised first delivery. Similarly, we also have to assume that the acceleration 
effects of the pre -2007 aeronautics R&D subsidies on the timing of f irst delivery of the 787 would 
therefore be limited to those effects flowing as a consequence from the acceleration of the launch 
date. Such an assumption provides us little, if any, basis on which to assess the impact of the 
acceleration effects of these subsidies on the timing of first delivery of the 787. The Panel did not 
consider the question, leaving great uncertainty regarding the significance of any such acceleration 
effects for the counterfactual timing of first delivery. Therefore, without prejudi ce to the substantive 
assessment of whether there are any acceleration effects on post -launch R&D that might have had 
an impact on the counterfactual timing of first delivery of the 787, we proceed to consider how a 
completion exercise could be conducted o n the basis of the European Union's proposed four -year 
counterfactual time lag between the 787's launch and its promised first delivery , and the three -year 
time lag between the 787's promised first delivery and its actual first delivery.  
5.441.   The European Unio n urges that we "would merely need to confirm … that the first delivery 
of the 787, absent the non -withdrawn subsidies, would have been delayed until after 2012, i.e., 
after the end of the implementation period".1000 However, we consider that the completion e xercise 
would not be as straightforward as the European Union describes it. Indeed, in these proceedings, 
the participants contest the relevant time estimates for conducting the 787's counterfactual analysis. 
As a result, there are no uncontested facts wit h respect to the time that Boeing would have required 
for the 787's launch, its promised first delivery, or its actual first delivery, absent the pre -2007 
aeronautics R&D subsidies. Moreover, there are no findings by the Panel specifying a precise date 
by which, absent the pre -2007 aeronautics R&D subsidies, Boeing would have launched the 787. 
From the findings by the Panel , it is therefore unclear whether the counterfactual launch date of the 
787 would have been around 2006, 2010, or some time between thos e dates. In addition, because 
the Panel did not examine the impact of acceleration effects on the timing of first delivery of the 
787, it naturally did not specify when  the 787's first delivery would have occurred in the absence of 
these subsidies. Nor are  there any findings by the Panel regarding the substantive assessment of 
whether there are any acceleration effects on post -launch R&D that might have had an impact on 
the timing of the counterfactual first delivery of the 787.  
5.442.   Based on the foregoing unde rstanding, we simply have no basis to assess whether the 
promised first delivery of the 787 would have occurred before  or after the end of the implementation 
period. In a situation where the counterfactual launch would have taken place in 2006 or 2007, 
promised first delivery would have been in 2010 or 2011, that is, before  the end of the 
implementation period. Conversely, if the 787's counterfactual launch would have been in 2010, 
promised first delivery of this aircraft would have been scheduled for 2014.  Similarly, because of the 
indeterminate nature of the timing of the 787's counterfactual launch, there are various uncertainties 
regarding the timing of actual first delivery of the 787. Indeed, in a situation where the 
counterfactual launch would have oc curred in 2006, and on the basis of the assumption that there 
is a 7 -year time lag between the 787's launch and its actual first delivery , the 787's actual first 
delivery could possibly  have been in 2013, which would be shortly after the end of the 
impleme ntation period in September 2012. Alternatively, in a situation where the counterfactual 
launch would have taken place at a moment closer to 2010, the 787's actual first delivery could have 
occurred, under these assumptions, at a date leading up to 2017. G iven these very different 
outcomes based on different counterfactual launch dates, there is considerable uncertainty regarding 
which transactions would have  become the subject of the serious prejudice analysis. Indeed, the 
transactions that would be evalua ted in a serious prejudice analysis would depend on which time  
period is used as a basis for the counterfactual analysis. However, as noted, the Panel did not 
evaluate all of these variables and did not indicate in a more specific manner the counterfactual  time 
estimates for launch and , consequently , first delivery of the 787.  
5.443.   As a result of the lack of factual findings by the Panel or uncontested facts on the record 
regarding the timing of certain crucial moments in the counterfactual analysis and the corr esponding 
uncertainty regarding the scope of the transactions that would be examined in determining the 
existence of serious prejudice, there is no basis for us to determine  whether the acceleration effects 
of the pre -2007 aeronautics R&D subsidies also ha d an impact on the timing of first delivery of the 
787 such that those effects cause serious prejudice constituting significant lost sales in the 
                                                
1000 European Union's appellant's submission, para. 866.  WT/DS353/AB/RW  
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 post-implementation period. Consequently, given the lack of sufficient factual findings by the Panel 
or uncont ested facts on the Panel record, we find that we are unable to complete the legal analysis  
with regard to  whether there remain acceleration effects of the pre -2007 aeronautics R&D subsidies 
in the post -implementation period.  
5.8  Price effects  
5.444.   The European Union and the United States appeal different aspects of the Panel's analysis 
as to whether certain subsidies cause  adverse effects through a price causal mechanism. Our 
analysis of the participants' claims is divided into three parts.  
5.445.   First, t he European Union claims that the Panel erred in its interpretation of Articles 5, 6.3, 
and 7.8 of the SCM Agreement by identifying an incorrect legal standard when it assessed whether 
the tied tax subsidies caused significant lost sales. According to the European Union, the Panel erred 
in its analysis of whether these subsidies  led to the lowering of Boeing prices in both twin -aisle and 
single -aisle LCA sales campaigns because the Panel required that, in order to find significant lost 
sales, there had to b e no non -price factors that potentially contributed to Boeing's success in 
obtaining such sales. The European Union requests us to reverse the Panel's articulation of the 
causation standard, and to declare moot and of no legal effect the entirety of the Pa nel's application 
of that standard with respect to all sales campaigns for which the Panel did not make a finding of 
significant lost sales.1001 This claim is addressed in section 5.8.1. 
5.446.   Second, the United  States claims that the Panel erred under Articles  5(c) and 6.3 of the 
SCM Agreement, and Article  11 of the DSU, in its assessment of the relative significance of the 
amount of the tied tax subsidies in determining whether the subsidies contributed in a genuine and 
substantial way to the alleged market phenom ena.1002 The United States maintains that the Panel 
erroneously calculated the per -aircraft subsidy amount by assuming that Boeing would have pooled 
tax savings from all sales campaigns and deployed them in particularly price -sensitive sales 
campaigns. The Un ited States further argues that the subsidies cannot be considered a genuine and 
substantial cause of Boeing winning these sales campaigns because the subsidy amounts are not 
large enough to cover the difference between Airbus and Boeing LCA prices. Accord ingly, the 
United  States requests the reversal of the Panel's findings that the Washington  State B&O tax rate 
reduction causes adverse effects in the form of significant lost sales and a threat of impedance.1003 
This claim is addressed in section 5.8.2. 
5.447.   Third, the European Union claims that the Panel erred under Articles 5 and 6.3 of the 
SCM Agreement, and under Article 11 of the DSU, by requiring that the European  Union demonstrate 
that the untied subsidies led to actual price reductions of Boeing LCA sales i n order to establish that 
those subsidies cause adverse effects through the lowering of Boeing LCA prices. The 
European  Union maintains that the Panel required the European Union to identify how Boeing used 
or allocated subsidy dollars, and that such a sho wing is inconsistent with the applicable legal 
standard and deviates from the approach adopted by the Appellate Body in the original proceedings. 
The European  Union requests us to reverse the Panel findings that the European Union failed to 
establish that the untied subsidies are a genuine and substantial cause of adverse effects in the 
post-implementation period.1004 This claim is addressed in section 5.8.3. 
5.8.1   European  Union's claim relating to the Panel's causation standard  
5.8.1.1   Whether the Panel erred under Articl es 5, 6.3, and 7.8 of the SCM Agreement in 
allegedly stating that, to find significant lost sales through a price causal mechanism, 
there must be no non -price factors that potentially contributed to Boeing having won 
those sales  
5.448.   The European Union appeals the Panel's alleged finding that, in order for the tied tax 
subsidies to be found to cause significant lost sales through a price causal mechanism, there must 
be no non -price factors that potentially contributed to Boeing's success in obtaining such sales.  The 
                                                
1001 European Union's appellant's submission, paras. 582 -583. 
1002 United States' other appellant's submission, paras.  24-25. 
1003 United States' other appellant's submission, para. 32.  
1004 European Union's appella nt's submission, para. 642.  WT/DS353/AB/RW  
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 European  Union considers that, in stating that there must be "no non -price factors that explain 
Boeing's success in obtaining the sale", the Panel improperly elevated the Appellate Body's approach 
to completion of the legal analysis  in the original pr oceedings  into the applicable legal standard for 
assessing causation.1005 According to the European Union, such an understanding is contrary to 
Articles 5 and 6.3 of the SCM  Agreement because the assessment as to whether there is a genuine 
and substantial rel ationship of cause and effect does not require a determination that the subsidy is 
the sole cause of that effect.1006 
5.449.   The United States considers that the European Union misunderstands both the findings of 
the Appellate Body and how the Panel used those findings in its analysis.1007 The United States 
maintains that there is a critical difference between the legal standard regarding the role  that other 
factors play in explaining the outcome and the Appellate Body's approach when completing the 
analysis to exc lude from consideration campaigns where the role of the other factors was asserted, 
yet disputed.1008 The United States does not consider that the Panel applied a completion of the legal 
analysis standard instead of the proper causation standard; rather, the Panel's approach involved 
the weighing of evidence, with respect to both the appearance of pricing pressure and other factors, 
to make a finding as to whether each campaign was particularly price -sensitive.1009 
5.450.   We note that there is no disagreement between th e participants regarding the applicable 
causation standard as it relates to the consideration of non -attribution factors. As the Panel stated, 
and as the participants both agree, a challenged subsidy must be a genuine and substantial cause 
of adverse effec ts, and need not be the sole cause, or even the only substantial cause, of those 
adverse effects. Indeed, the Panel explicitly acknowledged that, when assessing causation, panels 
"may often be confronted with multiple factors that may have contributed, to varying degrees, to 
the relevant market phenomena".1010 Referring to the Appellate Body's guidance in the original 
proceedings, the Panel noted that it was incumbent on it to "seek to understand the interactions 
between the subsidies at issue and the various other factors, and make an assessment of their 
connections to bringing about the relevant effects".1011 As the Panel explained, a subsidy may be 
found to be a genuine and substantial cause notwithstanding the existence of other factors that 
contribute to prod ucing the relevant market phenomena , as long as the contribution of the subsidy, 
in light of a proper consideration of all other contributing factors and their effects, is genuine and 
substantial. The Panel further stated that such an analysis entails a fa ct-intensive exercise, and that 
potentially there will be considerable differences in the ways complaining parties choose to 
demonstrate the links between the subsidies at issue and their effects, and in the nature of 
supporting evidence.1012 
5.451.   Thus, the questi on on appeal as it is framed by the European Union is whether, 
notwithstanding the Panel's correct articulation of the legal standard as set out above, the Panel 
nevertheless went on to apply an incorrect legal standard by demanding that, to establish caus ation, 
the European  Union must demonstrate that there were no other potential causes of the adverse 
effects. In support of its argument, the European Union points to the repeated statement by the 
Panel that, in order for the s ales campaigns at issue to be found to be particularly price -sensitive , 
                                                
1005 European Union's appellant's submission, para. 579. (emphasis added by the European Union 
omitted)  
1006 European Union's appellant's submission, para. 581. In the European  Union's view, the errors in the 
application of Articles 5  and 6.3 of the SCM  Agreement also involve  errors  in the application of Article  7.8 of 
the SCM  Agreement. However, in its appellant's submission, "{f}or the sake of brevity, the European  Union 
refers to this error as an error in the interpretation of Artic les 5 and 6.3." (European  Union's appellant's 
submission, fn 814 to para.  548) As we see it, the European Union's claims of error under Article 7.8 are 
consequential to those under Articles 5 and 6.3, and we therefore focus our assessment on the alleged er rors 
under Articles 5 and 6.3.  
1007 United States' appellee's submission, para. 268.  
1008 United States' appellee's submission, paras. 273 -274. 
1009 United States' appellee's submission, para. 275.  
1010 Panel Report, para. 9.61 ( referring to Appellate Body Report, US – Large Civil Aircraft 
(2nd complaint ), para. 914) . 
1011 Panel Report, para. 9.61 (referring to Appellate Body Report, US – Large Civil Aircraft 
(2nd complaint ), para. 914).  
1012 Panel Report, para. 9.61  (referring to Appellate Body Report, US – Large Civil Airc raft 
(2nd complaint ), para. 915) . WT/DS353/AB/RW  
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 there must be "no non -price factors that explain Boeing's success in obtaining the sale".1013 The 
European Union reads this statement to indicate that the Panel was requiring the complete absence 
of non -attribution fa ctors such that, in order to establish causation, the subsidy must represent the 
only cause of the adverse effects.  
5.452.   If that were the correct reading of the Panel's statement, it would indeed reflect an erroneous 
legal standard. We note that the statement that was relied on by the Panel, and to which the 
European  Union refers, originated from the Appellate Body's analysi s in the original proceedings.1014 
There, the Appellate Body stated that a sales campaign would be considered particularly 
price-sensitive when "Boeing was under particular pressure to reduce its prices in order to secure 
LCA sales in particular sales campaig ns, and there are no other non -price factors that explain 
Boeing's success in obtaining the sale or suppressing Airbus' pricing ."1015 We further note, in 
particular, that the Appellate Body stated that there be no  non-price factors that  explain  Boeing's 
succe ss in winning the sale, which could also be understood to indicate the outcome of a process of 
weighing the subsidy and any non -attribution factors to arrive at a conclusion that, notwithstanding 
the presence of certain non -price factors, their impact was such that they did not attenuate the 
effect of the subsidy as being a genuine and substantial cause of Boeing obtaining the sale.  
5.453.   The European Union maintains that the Panel was wrong to have relied on the 
Appellate  Body's statement because, in attempting to complete the legal analysis in the original 
proceedings, the Appellate Body was unable to do so with respect to sales campaigns where the 
panel record showed that there had been non -price factors capable of explaining the outcome.1016 
Thus, the European Un ion contends that, by relying on this statement, the Panel inappropriately 
transformed into the applicable legal standard of causation the practical case -specific constraints 
that the Appellate Body faced in completing the analysis with respect to lost sal es in the original 
proceedings.1017 We therefore examine the Appellate  Body's reasoning in the original proceedings 
so as to understand the context for the Appellate Body statement that there must be "no other 
non-price factors that explain Boeing's success i n obtaining the sale".1018 
5.454.   In the original proceedings, the Appellate Body considered that the tied tax subsidies 
"enhance{} the firm's ability to lower its prices in order to obtain a sale, notwithstanding that the 
outcome of any given sale, and the importan ce of price to that outcome, will still be dictated by the 
prevailing competitive conditions, including the market power and the pricing strategies of the 
participants, in a particular market" .1019 The Appellate Body then stated that, given the nature of 
the tied tax subsidies, their operation over time, their magnitude, and the competitive conditions in 
the LCA market, Boeing had both the ability and incentive to use the tied tax subsidies to lower 
prices, and that there was a substantial likelihood that this  occurred in sales campaigns that were 
particularly competitive and sensitive in terms of price. The Appellate Body thus explained that, 
"where it can be established that Boeing was under particular pressure to reduce its prices in order 
to secure LCA sale s in particular sales campaigns, and there are no other non -price factors that 
explain Boeing's success in obtaining the sale or suppressing Airbus' pricing, we can conclude that 
the subsidies contributed in a genuine and substantial way to the lowering of  Boeing's prices ."1020 
The Appellate Body then went on to explain that it did not consider that the factual findings and 
uncontested facts on the panel record relating to the nature and magnitude of the subsidies, and 
the conditions of competition in the rele vant markets, themselves suffice to establish the requisite 
causal connection between the tied tax subsidies and the effects on Airbus' LCA sales and prices. 
Accordingly, the Appellate Body considered that it could only reach a finding of serious prejudice  if 
it could also identify uncontested facts on the original panel record establishing that the pricing 
                                                
1013 European Union's appellant's submission, para. 549 (quoting Panel Report, paras. 9.242 -9.243, 
9.379 -9.380, 9.383, 9.426, and 9.446). (emphasis added by the European Union omitted)  
1014 Panel Report, para. 9.240 (referring t o Appellate Body Report, US – Large Civil Aircraft 
(2nd complaint ), para. 1260).  
1015 Appellate Body Report, US – Large Civil Aircraft (2nd complaint ), para. 1260.  
1016 European Union's appellant's submission, para. 573 (referring to Appellate Body Report, US – Large 
Civil Aircraft (2nd complaint ), para. 1264) . 
1017 European Union's appellant's submission, para. 568.  
1018 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , para. 1260.  
1019 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , para. 1260.  
1020 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , para. 1260.  WT/DS353/AB/RW  
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 dynamic it had described occurred in particular LCA sales campaigns.1021 On that basis, the 
Appellate  Body indicated that it would "continue {its} examinat ion of the relevant factual findings 
and uncontested facts and scrutinize, in particular, the Panel record as it relates to particular LCA 
sales campaigns during the reference period in the 100 -200 seat and 300 -400 seat LCA markets".1022 
5.455.   Subsequently, the App ellate Body evaluated the sales campaign evidence and noted that 
there was a competitive pricing dynamic in each of these sales campaigns that was uncontested, 
but that the parties disagreed over the extent to which the tied tax subsidies contributed to th e 
market effects experienced by Airbus.1023 In particular, the Appellate Body noted that the 
United  States had identified a number of "other factors" that, in its view, undermined a causal link 
between the tied tax subsidies and the market effects on Airbus' LCA sales and prices, but that the 
original panel had failed to discuss if and how these factors may have contributed to the effects on 
Airbus' LCA sales and prices.1024 Thus, the Appellate Body explained that, where the United  States 
advanced other factors that were capable of explaining the effec ts on Airbus' LCA sales and prices 
in particular sales campaigns, it would treat the matter as being in dispute, and, accordingly, would 
not be able to complete the analysis with respect to these campaigns.1025 
5.456.   Therefore , when the Appellate  Body explained tha t causation could be established only when 
"there are no other non -price factors that explain Boeing's success" in a particularly price -sensitive 
sales campaign, it was referring to the role of those non -price factors as weighed and balanced 
against factor s relating to price. This is reflective of a proper approach for assessing causation 
whereby the effects of the subsidy must be considered together with any contribution of 
non-attribution factors, in this case, the non -price factors.  
5.457.   However, at a subseq uent stage of its analysis, the Appellate Body then recognized that, if 
any non -price factors had been advanced, this would have necessitated a non -attribution analysis 
of those factors as well as a weighing of price and non -price factors in its causation analysis, which 
would have entailed new factual findings. This is not something the Appellate Body can do when 
completing the legal analysis. In other words, by using this language, the Appellate Body was not 
requiring that there be a complete absence of a ny non -price factors such that, in order to establish 
causation, the subsidy must represent the only cause of the adverse effects. Rather, the 
Appellate  Body was emphasizing the absence of non -price factors that would explain  Boeing's 
success in obtaining the sale or suppressing Airbus' pricing. Therefore, although the European Union 
is correct that the Appellate Body ultimately was able to complete the analysis only in instances 
where the United States had not advanced any non -price factors, this was due t o the fact that the 
role and relevance of those non -price factors was contested, and thus no uncontested facts or 
alternative panel findings were available. However, this featured at a later stage, in the context of 
its completion analysis, and not at the earlier point in its reasoning where the Appellate Body was 
identifying the legal standard. Thus, we do not accept the European Union's contention that "the 
Panel erred in elevating the Appellate Body's approach to completing the legal analysis in the orig inal 
proceedings into the applicable legal standard ."1026 In our view, the Panel was relying on r easoning 
by the Appellate  Body that was reflective of the proper legal standard.  
5.458.   In addition, we find that the Panel's reasoning regarding the specific sales cam paigns further 
confirms that the Panel did not, as the European Union claims, adopt a legal standard that differed 
from the proper legal standard. In our review of the Panel's reasoning in both the non -confidential 
summary of the sales campaign evidence co ntained in the body of the Panel Report, as well as the 
more detailed explanations set out in the HSBI Appendix to the Panel Report, we do not find support 
for the proposition that the Panel adopted an approach to causation whereby it declined to consider 
whether subsidies cause adverse effects in instances where any non -price factor or factors were 
advanced. Rather, the Panel's reasoning reflects a weighing and balancing of both price and 
non-price factors in determining, with respect to each sales campaig n, "the extent to which the sales 
                                                
1021 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , para. 1261. The Appellate  Body 
noted that its  approach was analogous to the approach adopted by the Appellate  Body in EC and certain 
member States – Large Civil Aircraft . (Ibid., fn 2549 to para. 1262)  
1022 Appellate Body Report, US – Large Civil  Aircraft (2nd complaint) , para. 1261.  
1023 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , paras. 1262 -1263.  
1024 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , para. 1264.  
1025 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , para. 1264.  
1026 European Union's appellant's submission, para. 579.  WT/DS353/AB/RW  
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 campaigns were or were not particularly price -sensitive".1027 This suggests that, rather than 
declining to evaluate any sales campaign once a non -price factor was identified, the Panel in fact 
assessed whether non -price facto rs were such that they attenuated the role of price factors in 
explaining Boeing's success in obtaining the sale.  
5.459.   With respect to the twin -aisle LCA market, the Panel stated that "while pricing was discussed 
in certain of the sales campaigns, other factors  featured more prominently in the airline customers' 
evaluations of the suitability of the competing offers as well as in the evidence on record explaining 
the reasons why the airline customer chose to order Boeing aircraft over the competing Airbus 
offering."1028 The Panel then went on to catalogue the various non -price factors that mitigated the 
role of price in individual sales campaigns, including customers' preferences for delivery availability, 
choice of engine manufacturer, performance evaluations, perf ormance guarantees, programme 
maturity, aircraft size, and incumbency concerns regarding fleet commonality or diversity. The Panel 
therefore concluded , with respect to each individual sales campaign , that there were "factors other 
than price that explain w hy Airbus either did not win the sale, or in the case of the sales campaigns 
that involved 'split orders' … why there is no basis to conclude that Boeing's pricing resulted in the 
customer awarding a greater portion of the order to Boeing … than would othe rwise have been the 
case".1029 Moreover, our review of the Panel's reasoning and appreciation of the evidence in the 
HSBI Appendix to its Report underscores that the Panel sought to weigh and balance the causal 
significance of price and non -price factors, in large part by relying on internal Airbus communications 
that described Airbus' sales strategies and evaluated competing Airbus and Boeing offers.1030 
5.460.   The Panel followed the same approach in evaluating whether individual sales campaigns in 
the single -aisle LCA  market were particularly price -sensitive. The Panel found that, for most of these 
sales campaigns, wh ile pricing may have been "discussed" in some instances, Boeing did not "appear 
to have been under particular pressure to reduce its prices in order to se cure these sales".1031 The 
Panel further  explained that, for these sales campaigns, there were a number of non -price factors 
that ultimately explained Boeing's success in obtaining particular sales, most prominent of which 
was Boeing's status as an incumbent aircraft supplier, but which also included factors such as 
delivery availability, fleet replacement needs, and the technical performance of competing 
aircraft.1032  
5.461.   Perhaps  most instructive for our assessment of the Panel's approach to causation is our 
review  of the Panel's reasoning and appreciation of the evidence regarding the five single -aisle LCA 
sales campaigns that the Panel found to be particularly price -sensitive. In reviewing the HSBI 
Appendix, it appears that two of them were found not to be subject  to any non -price factors. Indeed, 
for the Fly Dubai 2008 sales campaign, the United States  did not advance any non -price factors1033, 
and for the Fly Dubai 2014 sales campaign, the Panel considered that the factor advanced by the 
United  States (which is HSBI ) was too closely related to price to be considered a non -price factor.1034 
However, for the three remaining campaigns – Delta Airlines 2011, Icelandair 2013, and Air Canada 
2013 – the United  States advanced particular factors other than price (which are HSBI ) that were 
alleged to attenuate  the effect of the subsidy in explaining why Boeing obtained the sale.1035 The 
Panel ne vertheless found for these  sales campaigns that "Boeing appeared to be under particular 
pressure to reduce its prices in order to secure the sale, and there were no non -price factors that 
explain Boeing's success in obtaining the sale ."1036 In particular, we note that the non -price fa ctor 
that was identified by the Panel with respect to the Ice landair 2013 sales campaign – which was  
found not to att enuate price as a causal factor – was the same non -price factor that was identified 
with respect to other sales campaigns for which the Pan el found that non -price factors mitigated the 
                                                
1027 Panel Report, paras. 9.245 and 9.382. Specifically, the Panel stated that the  evidence allow ed it " to 
assess with a high degree of confidence the extent to which the sales campaigns were or were not particularly 
price-sensitive ". (Ibid.)  
1028 Panel Report, para. 9.247.  
1029 Panel Report, para. 9.247. The Panel also noted that its evaluation was also consistent with 
evidence indicating that the outcomes of sales campaigns  involving twin -aisle LCA will depend to a greater 
extent on non -price factors. (Ibid., para. 9.248)  
1030 Panel Report, para. 9.245 (referring to Panel Report, HSBI Appendix).  
1031 Panel Report, para. 9.383.  
1032 Panel Report, para. 9.383.  
1033 Panel Report, HSBI Appe ndix, paras. 163 -164. 
1034 Panel Report, HSBI Appendix, paras. 270 -271. 
1035 Panel Report, HSBI Appendix, paras. 170, 249, and 263.  
1036 Panel Report, para. 9.383. See also ibid., paras. 172, 251, and 265.  WT/DS353/AB/RW  
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 role of price.1037 This demonstrates to us that the Panel did not embrace a legal standard requiring 
that there must be no other non -attribution factors and that the subsidy must represent the only 
cause of the ad verse effects. Had the Panel endorsed such a legal standard, it would have been 
precluded from reaching the findings of adverse effects that it did with respect to the Delta Airlines 
2011, Icelandair  2013, and Air  Canada 2013 sales campaigns.  
5.462.   In sum, we do  not agree with the European Union that the Panel considered that, in order 
to find significant lost sales through a price causal mechanism, there must be no non -price factors 
that potentially contributed to Boeing having won those sales. Rather, we consid er that the Panel 's 
understanding of the legal standard properly reflected a weighing and balancing of  price and 
non-price factors to reach a conclusion as to whether a sales campaign was particularly 
price-sensitive, such that the tied tax subsidies could  be found to be a genuine and substantial cause 
of serious prejudice. Accordingly, we find that the Panel did not err in the interpretation of Articles  5 
and 6.3, and, as a consequence, Article 7.8 , of the SCM Agreement, when identifying the applicable 
causation standard.  
5.8.2   United  States' claims relating to the Panel's analysis of the tied tax subsidies  
5.463.   The United States requests us to reverse the Panel's finding that the effects of the 
Washington State B&O tax rate reduction in the single -aisle LCA market ar e significant lost sales 
within the meaning of Article  6.3(c) of the SCM  Agreement, and a threat of impedance within the 
meaning of Article 6.3(a) -(b) of that  Agreement.1038 The United  States claims that the Panel erred 
under Articles  5(c) and 6.3 of the SCM  Agreement, and acted inconsistently with Article  11 of the 
DSU, in assessing the relative significance of the amount of the subsidy for purposes of determining 
whether the subsidy contributed in a genuine and substantial way to Airbus' loss of sales in fiv e sales 
campaigns between 2007 and 2015.1039 
5.464.   We first provide a summary of the Panel's findings, before turning to the United States' 
claims.  
5.8.2.1   The Panel's findings  
5.465.   According to the Panel, the parties accepted that the tied tax subsidies at issue in these 
proce edings, by their nature as per -unit subsidies, are  capable of affecting Boeing's pricing 
behaviour.1040 The Panel further noted that the United  States had described the tied tax subsidies 
as subsidies that "affect Boeing's marginal cost of producing current L CA alleged to be 
subsidized".1041 The Panel noted that the United  States distinguished between the effects on pricing 
of tied tax subsidies and the effects on pricing of untied, non -recurring subsidies, on the basis that 
tied tax subsidies correspond directly  with sales, such that fluctuations in total sales volumes do not 
affect the calculus regarding the profitability of a particular sale.1042 The Panel explained that these 
observations regarding the nature of the tied tax subsidies are also consistent with the  findings of 
the panel and Appellate  Body in the original proceedings that the FSC/ETI subsidies and the 
Washington State and City of Everett B&O tax rate reductions, by lowering the taxes incurred in 
connection with sales of LCA, have a more direct and im mediate relationship to aircraft prices and 
sales than other subsidies at issue in the dispute.1043 The Panel, however, recalled the 
Appellate  Body's finding that, while the tied tax subsidies provided Boeing with the ability and 
                                                
1037 Panel Report, para. 9.383. See also United States' appell ee's submission, paras. 277 -279, where the 
United States notes how this particular non -price factor was considered and found in the case of the Icelandair 
2013 sales campaign not to attenuate the role of price, whereas it was found to have done so in the c ase of the 
Lion Air 2012 sales campaign. As the United States argues, "{t}he difference in the Panel's findings regarding 
price-sensitivity in these two campaigns despite the {United States'} allegation that the same other factor 
explained both outcomes de monstrates that the Panel weighed the evidence and reached a determination that 
was consistent with its discretion as the trier of fact." (Ibid., para. 279)  
1038 Panel  Report, para.  11.8.c -d. 
1039 United States' other appellant's submission, paras.  24-25. 
1040 Panel Report, para.  9.238.  
1041 Panel  Report, para.  9.238 (quoting United States' comments on the European Union's response to 
Panel question No. 169, para. 27 ). 
1042 Panel Report, para. 9.238 (referring to United States' first written submission  to the Panel , 
para. 728). 
1043 Panel  Report, para.  9.239 (referring to Original Panel Report , paras. 7.1806 -7.1807 ; Appellate  Body 
Report, US – Large Civil Aircraft (2nd complaint) , paras. 1252 -1260) . WT/DS353/AB/RW  
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 incentive to lower its LCA pr ices, the competitive dynamics of the LCA markets are such that it would 
not actually do so in each and every sales campaign. Instead, according to the Appellate Body, there 
was a substantial likelihood that Boeing lowered its prices in sales campaigns tha t were particularly 
competitive and sensitive in terms of price.1044 
5.466.   For purposes of assessing the effects of the tied tax subsidy at issue in these compliance 
proceedings with respect to the single -aisle LCA market, namely  the Washington State B&O tax rate 
reduction1045, the Panel stated that, following the Appellate  Body's approach in the original 
proceedings, it would examine whether each of the sales campaigns involving single -aisle LCA was 
particularly price -sensitive. More specifically, the Panel stated tha t, where a sales campaign was 
found to be particularly price -sensitive in the sense that Boeing appeared to be under particular 
pressure to reduce its prices in order to secure the sale, and there were no  non-price factors that 
explained Boeing's success i n obtaining the sale, the Panel would conclude that the tied tax subsidy 
contributed in a genuine and substantial way to the lowering of Boeing's LCA prices.1046 
5.467.   The Panel evaluated sales campaign evidence submitted by the European  Union and 
concluded  that fi ve out of the 20 allegedly competitive sales campaigns between 2007 and 2015 in 
the single -aisle LCA market were particularly price -sensitive.1047 The Panel thus found, based on the 
reasoning of the Appellate Body when analysing the effects of the tied tax su bsidies at issue in the 
original proceedings, that the Washington State B&O tax rate reduction contributed in a genuine and 
substantial way to the lowering of the prices of Boeing's single -aisle LCA in these five sales 
campaigns.1048 These sales campaigns inc luded three sales campaigns that occurred in the 
post-implementation period, namely the Fly Dubai 2014, Icelandair 2013, and Air Canada 2013  sales 
campaigns, and two sales campaigns that occurred prior to the end of the implementation period, 
namely the Fly Dubai 2008 and Delta Airlines 2011 sales campaigns.1049 
5.468.   The Panel then noted the United States' argument that the amount of the tied tax subs idy 
is too small to cause adverse effects, and thus examined whether the relative magnitude of the 
subsidy allowed it to conclude that the subsidy is a genuine and substantial cause of lost sales of 
Airbus  LCA.1050 
5.469.   The Panel recalled the Appellate Body's cons ideration  in the original proceedings  that, 
depending on the circumstances of each case, an assessment of whether subsidy amounts are 
significant should not necessarily be limited to an inquiry into what those amounts are, either in 
absolute or per -unit te rms, but may also entail viewing these amounts against considerations such 
as the size of the market as a whole, the size of the subsidy recipient, the per -unit price of the 
subsidized product, the price elasticity of demand, and, depending on the market s tructure, the 
extent to which a subsidy recipient is able to set its own prices in the market, and the extent to 
which rivals are able or prompted to react to each other's pricing within that market structure.1051 
5.470.   The Panel noted that the total amount of the Washington State B&O tax rate reduction over 
the three -year period from 2013 to 2015 was approximately US$325 million.1052 The Panel suggested 
that this amount is relatively small compared to Boeing's revenue from its single -aisle LCA sales, 
which represented  approximately US$61.9 billion, US$63.4 billion, and US$18 billion for the years 
2013 to 2015 , respectively .1053 However, the Panel considered that this alone is not indicative of the 
significance of the subsidy amounts because "even relatively small subsidie s may have significant 
effects, depending on the nature of the subsidies, and the circumstances in which those subsidies 
                                                
1044 Panel  Report, para.  9.240  (referring to  Appellate Body Report, US – Large Civil Aircraft 
(2nd complaint) , para. 1260 ). 
1045 The Washington State B&O tax rate reduction applies to the production and sale of LCA 
manufactured in Washington. (Original Panel Report, para.  7.1803) The reduction rate is 0 .1936%. 
(Panel  Report, para. 8.662)  
1046 Panel Report, para.  9.379 (referring to ibid., paras.  9.239 -9.241, in turn referring to Appellate  Body 
Report, US – Large Civil Aircraft (2nd complaint) , para.  1260).  
1047 Panel  Report, paras. 9.381 -9.383; Panel Report, HSBI Appendix . 
1048 Panel  Report, para.  9.384.  
1049 Panel  Report, fn  3276 to para.  9.383.  
1050 Panel Report, para.  9.385 . 
1051 Panel  Report, para.  9.391 (referring to Appellate Body Report, US – Large Civil Aircraft 
(2nd complaint) , para. 1193) . 
1052 Panel  Report, para. 9.394. See also ibid., paras.  8.670 and 9.388 . 
1053 Panel  Report, para.  9.392 . WT/DS353/AB/RW  
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 are received, including the relevant market structure and conditions of competition in that 
market ."1054 
5.471.   On that basis, the Panel sought t o determine whether a price reduction enabled by a 
relatively small subsidy could nevertheless have determined the outcome of price -sensitive sales 
campaigns.1055 For this purpose, the Panel engaged in a quantitative analysis whereby it estimated 
the per -aircraft amount of the subsidy and compared this amount to the magnitude of pricing 
differentials that could change the outcome of the price -sensitive sales campaigns it had 
identified.1056 
5.472.   The Panel calculated the per -aircraft amount of subsidization with refere nce to the 
three -year period from 2013 to 2015. The Panel divided an annual average of the amount of the 
Washington State B&O tax rate reduction of US$108.3  million for that period (calculated from the 
total amount of the subsidy for the 2013 -2015 period o f US$325  million, divided by three) by an 
annual average of 54.3 single -aisle LCA ordered in the three sales campaigns in that period that the 
Panel found to be particularly price -sensitive (calculated from the total of 152 737 MAX and 
11 737NGs ordered in  the Fly  Dubai 2014, Icelandair 2013 , and Air Canada 2013 sales campaigns, 
divided by three).1057 The Panel arrived at a per -aircraft rate of subsidization of approximately 
US$1.99  million per 737  MAX and 737NG.1058 
5.473.   With respect to whether this per -aircraft subs idy amount is large enough compared to the 
magnitude of price difference that could change the outcome of the sales campaigns  in question , 
the Panel first noted the European Union's argument that, when making a choice between Airbus' 
and Boeing's respectiv e offers, customers account for the differentials in the net present value  (NPV) 
for those offers, which take s into account not only net prices but also non -price factors such as the 
size and range of the offered aircraft, their per -trip and per -seat opera ting costs, and the timing of 
their availability.1059 The Panel accepted, in general terms, that customers' NPV analyses of 
competing offers, while being subject to certain limits, could at least provide "some indication" of 
the potential for a comparatively small price reduction to determine the outcome of a sales 
campaign.1060 In this regard, the Panel noted that the European  Union had submitted an HSBI 
statement of Mr Kiran Rao, Airbus' Executive Vice  President Strategy and Marketing1061, which refers 
to a specif ic amount of NPV difference that "can easily switch" the decision of an airline or leasing 
company from favouring one manufacturer's offer to favouring the offer of another manufacturer.1062 
Mr Rao also explained that this amount is particularly relevant for single -aisle LCA sales, which tend 
to be sensitive to relatively small changes in prices offered.1063 The Panel observed that its 
US$1.99  million figure exceeds the magnitude of NPV difference mentioned by Mr Rao.1064 
5.474.   Second, the Panel considered the magnitude o f differentials in Airbus' and Boeing's 
respective net prices offered in the particularly price -sensitive sales campaigns, which the Panel 
deduced from certain sales campaign evidence. The Panel compared its US$1.99  million figure to 
the net price differen tial in each of the individual sales campaigns, and found either that the former 
exceeds the latter, or that the former covers "at least a portion of" Boeing's pricing advantage, 
contributing "in substantial part" to its winning the sales campaign.1065 
5.475.   On the  basis of the foregoing, the Panel found that the Washington State B&O tax rate 
reduction, through its effects on Boeing's pricing, contributed in a genuine and substantial way to 
                                                
1054 Panel  Report, para.  9.394 (quoting Appellate Body Report, US – Large Civil Aircraft (2nd complaint ), 
para. 1254).  
1055 Panel Report, para.  9.395 . 
1056 Panel  Report, para.  9.379.  
1057 Panel Report, fn 3321 to para . 9.402.  
1058 Panel Report, para.  9.402 and fn 3321 thereto . 
1059 Panel  Report, para.  9.398 (referring to European Union's response to Panel question No.  164, 
para. 108).  
1060 Panel Report, para.  9.400 . 
1061 Panel  Report, para.  9.399 (referring to Statement of Kiran Rao , 6 October 2015 (Panel  Exhibit 
EU-1668) (HSBI)) . 
1062 Statement of Kiran Rao , 6 October 2015 (Panel  Exhibit EU -1668)  (HSBI).  
1063 Statement of Kiran Rao , 6 October 2015 (Panel  Exhibit EU -1668)  (HSBI).  
1064 Panel  Report, para.  9.402.  
1065 Panel Report, para.  9.403.  WT/DS353/AB/RW  
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 Boeing winning, and Airbus losing, the five sales campaigns that it identifi ed to be particularly 
price-sensitive .1066 
5.476.   The Panel further examined whether, in light of its lost sales findings with respect to the five 
sales campaigns, the Washington State B&O tax rate reduction can be considered a genuine and 
substantial cause of serious prejudice, within the meaning of Articles  5(c) and 6.3 of the 
SCM Agreement, in the post -implementation period. With respect to the three sales campaigns that 
occurred in the post -implementation period – namely the Fly Dubai 2014, Icelandair 2013, and 
Air Canada 2013 sales campaigns – the Panel found that the loss of sales suffered by Airbus was 
"significant".1067 Accordingly, the Panel found that the Washington State B&O  tax rate reduction is a 
genuine and substantial cause of significant lost sales, within the meaning of Article  6.3(c), of 
A320neo and A320ceo LCA in the post -implementation period, with respect to these three sales 
campaigns.1068 
5.477.   With respect to the two remaining sales campaigns that occurred before the end of the 
implementation period – namely the Fly Dubai 2008 and Delta Airlines 2011 sales campaigns – the 
Panel found that they were "not necessary" for its findings concerning the existence of significant 
lost sales, within the meaning of Article  6.3(c), in the post -implementation period.1069 However, the 
Panel did take into account Airbus' loss of these sales campaigns, as well as other evidence such as 
market share data for the single -aisle LCA markets in the United  States and the United  Arab 
Emirates, in the context of addressing the Europ ean Union's claim of impedance and a threat 
thereof.1070 Having done so, the Panel reached the conclusion that the effect of the Washington State 
B&O tax rate reduction is a threat of impedance, within the meaning of Article  6.3(a), of imports of 
Airbus singl e-aisle LCA into the United  States market in the post -implementation period1071, as well 
as a threat of impedance, within the meaning of Article  6.3(b), of exports of Airbus single -aisle LCA 
to the United Arab Emirates  market in the post -implementation period .1072 
5.8.2.2   Whether the Panel erred under Articles 5 and 6.3 of the SCM Agreement, or acted 
inconsistently with Article 11 of the DSU, in its calculation of the per -aircraft amount of 
subsidization  
5.478.   In its appeal, the United  States claims that the Panel erred under Articles  5(c) and 6.3 of 
the SCM  Agreement and, in the alternative, under Article  11 of the DSU, in its calculation of the 
per-aircraft amount of subsidization.1073 According to the United  States, the Panel's calculation 
assumes that Boeing would have pooled the benefits of the tied tax subsidies received in connection 
with all of its sales of LCA, including both twin -aisle and single -aisle LCA, over the 2013 -2015 period 
and deployed them exclusively to lower its LCA prices in the three single -aisle sales camp aigns that 
the Panel had found to be particularly price -sensitive.1074 To the United  States, such an assumption 
contradicts the nature and operation of the tied tax subsidies discussed by the Appellate  Body in the 
original proceedings and by the compliance Pa nel itself.1075 The United  States argues that, because 
tied tax subsidies are directly tied to sales of individual LCA, they can affect only the sales to which 
they are tied, and there is no basis to assume that Boeing would deploy savings from one sales 
camp aign to lower its price in another, unrelated sales campaign.1076 The United  States submits that 
the correct per -aircraft value of the subsidy is less than US$100,000 instead of the Panel's figure of 
US$1.99 million.1077 
                                                
1066 Panel  Report, para.  9.404 and fn 3329 thereto.  
1067 Panel Report, para. 9.406. (emphasis omitted)  
1068 Panel Report, para.  9.407 . 
1069 Panel  Report, fn 3329 to para.  9.404.  
1070 See Panel  Report, para.  9.427.  
1071 Panel  Report, para . 9.438.  
1072 Panel  Report, para.  9.443.  
1073 United States' other appellant's submission, paras. 24 and 69.  
1074 United States' other appellant's submission, paras. 24 and 68.  
1075 United States' other appellant's submission, paras. 68, 79, and 86 . 
1076 United States' other appellant's submission, para. 45 (referring to Appellate Body Report, US – 
Large Civil Aircraft (2nd complaint) , para. 1252).  
1077 United  States' other appellant's submission, para.  65. This figure is calculated by multiplying an 
approximate purchase price of US$50  million by the tax reduction rate of 0.1936% . (Ibid., para. 65 and fn 76 
thereto)  WT/DS353/AB/RW  
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 5.479.   The European  Union responds that there is  nothing  in Article  5 or Article  6.3 of the 
SCM Agreement that excludes a panel from finding that a tied tax subsidy, while granted for all sales 
of a product, was nonetheless used  by the recipient to reduce prices in a subset of those sales.1078 
The European  Union explains that, while the Appellate  Body in the original proceedings and the Panel 
in these proceedings recognized that a subsidy is tied when it is triggered by a sale of an aircraft, 
neither of them limited the use of such a subsidy to a price redu ction in that particular sale.1079 
5.480.   We recall that, for  the purpose of estimating the per -aircraft amount of the Washington State 
B&O tax rate reduction, the Panel divided an annual average of the amount of this subsidy for the 
three -year period from 2013 to 2 015 (i.e.  US$325  million, divided by three) by an annual average 
of the number  of aircraft ordered in the three particularly price -sensitive sales campaigns in that 
three -year period  (i.e. 163 aircraft, divided by three).1080 Notably, the numerator of the Pan el's 
calculation encompasses subsidies arising from all Boeing LCA sales during the 2013 -2015 reference 
period, including both twin -aisle and single -aisle sales , whereas the denominator includes only the 
number of aircraft ordered in the three single -aisle sales campaigns during that period that the Panel 
had found to be particularly price -sensitive. This effectively means that the Panel allocated the entire 
amount of subsidies arising from all Boeing LCA sales between 2013 and 2015, including both 
twin-aisle and single -aisle sales, to the three single -aisle sales campaigns in that period.  Thus, the 
United States is correct that the Panel's calculation of the per -aircraft amount  of the subsidy assumes 
that Boeing would have been able to pool the entire amount of the tied tax subsidy received over 
the 2013 -2015 period and deployed this amount to lower the prices of the 737 MAX and 737NG in 
the three particularly price -sensitive sales campaigns in that period . 
5.481.   As noted, the United  States argues that, becau se tied tax subsidies are directly tied to sales 
of individual LCA, they can affect only the sales to which they are tied, and there is no basis to 
assume that Boeing would deploy subsidy benefits arising from one sales campaign to lower its price 
in anoth er.1081 
5.482.   We note that Articles  5 and 6.3 of the SCM  Agreement do not explicitly refer to tied tax 
subsidy measures. Rather, Article  5 provides generally that "{n}o Member should cause, through 
the use of any subsidy referred  to in paragraphs 1 and 2 of Article  1, adverse effects to the interests 
of other Members", including serious prejudice to the interests of another Member within the 
meaning of Article 5(c) or a threat thereof. Article  6.3, in turn, provides that serious prejudice within 
the meaning of Artic le 5(c) may arise where "the effect of the subsidy" is one or several market 
phenomena enumerated in subparagraphs  (a) through (d).  Thus, Articles  5 and 6.3 do not prescribe 
the manner in which a panel must assess how a subsidizing Member "causes" adverse effects 
"through the use of" tied tax subsidies or whether "the effect of" such subsidies are alleged market 
phenomena  enumerated  in Article  6.3. Rather,  as the Appellate  Body has emphasized,  a 
demonstration that a subsidy is a genuine and substantial caus e of the alleged serious prejudice is 
"a fact -intensive exercise, and one that inevitably involves extensive, case -specific evidence".1082 
The Appellate Body has added that the manner in which a complainant may seek to demonstrate 
the existence of the effects  and the links between the subsidies at issue and those effects, and the 
type of supporting evidence that may be adduced, are likely to vary considerably.1083 
5.483.   We further note that, contrary to what the United  States asserts, the nature of tied tax 
subsidies d iscussed by the Appellate  Body in the original proceedings and by the Panel in these 
compliance proceedings is not, in and of itself, dispositive of whether their benefits can be used only 
to lower the prices of the particular sales to which they are tied.  As noted, the Appellate  Body found 
that the tied tax subsidies had a "more direct and immediate relationship" to aircraft prices than 
untied subsidies in that they lower the taxes incurred in connection with sales of LCA, thereby 
increasing Boeing's per -unit after -tax revenue and profitability.1084 Similarly, the Panel in these 
proceedings observed that the Washington State B&O tax rate reduction, due to its nature as a 
per-unit subsidy measure, is  capable of affecting Boeing's pricing behaviour by reducing B oeing's 
                                                
1078 European  Union's appellee's  submissi on, para.  99. 
1079 European  Union's appellee's  submission, para s. 73-75. 
1080 Panel Report, fn 3321 to para . 9.402.  
1081 United States' other appellant's submission, para. 45.  
1082 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , para. 915. 
1083 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , para. 915. 
1084 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , para. 1252 (referring to Original 
Panel Report, para. 7.1807) . WT/DS353/AB/RW  
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 marginal cost of producing individual LCA.1085 However, while the fact that the subsidies are tied to 
individual sales certainly speaks to the recipient's ability  to reduce the price of each individual sale 
while nevertheless achieving the same profit  margin for that sale, it does not mean that the recipient 
will always  do so in the specific circumstances of each case. Indeed, the Appellate  Body expressly 
cautioned that, while the nature of the tied tax subsidies is relevant to assessing the effects of  such 
subsidies, the outcome of any given sale "will still be dictated by the prevailing competitive 
conditions".1086  
5.484.   In addition, the Appellate  Body explained that considerations that appeared to bear on the 
assessment of the significance of the amounts of the tied tax subsidies in the original proceedings 
include "whether the benefits of the tied tax subsidies received by Boeing were applied to its prices 
across the board in all sales, or whether they were disproportionately applied to lower prices only in 
respect of certain sales".1087 In this respect, the Appellate Body observed that, while there was a 
substantial likelihood that Boeing had used the tied tax subsidies to lower prices in "sales campaigns 
that were particularly competitive and sensitive in t erms of price", Boeing would not have done so 
"in each and every sales campaign".1088 In other words, the Appellate  Body considered that Boeing 
would have used the benefits of the tied tax subsidies to lower the prices only in certain particularly 
price-sensitive sales campaigns. Although the Appellate  Body did not explicitly determine how 
Boeing would have dealt with the subsidy benefits arising from less price -sensitive sales campaigns, 
it did not exclude the possibility that such benefits may have been used  to offer additional price 
reductions in particularly price -sensitive sales campaigns. In short, there is nothing in the nature of 
tied tax subsidies discussed by the Appellate  Body that would preclude a panel assessing the relative 
significance of the sub sidy amounts from considering, as appropriate in the specific case, that the 
recipient may deploy the benefit of the tied tax subsidy arising from one sale to lower the price in 
another sale.  
5.485.   Accordingly, we do not agree with the United  States that the Pan el erred under Articles  5(c) 
and 6.3 of the SCM  Agreement simply because it performed a calculation that assumed that the 
benefits of the tied tax subsidies could be used to lower the prices in sales campaigns other than 
the ones to which they are tied.  
5.486.   The United States also argues that, in the specific circumstances of this case, there was no 
basis for the Panel to consider that Boeing would have deployed the entire amount of the tied tax 
subsidy granted with respect to all of Boeing's LCA sales  during th e period from 2013 to 2015 , 
including both twin -aisle and single -aisle sales, exclusively for the purpose of lowering the prices of 
the single -aisle LCA ordered in the three particularly price -sensitive sales campaigns in that 
period.1089 
5.487.   The European Union r esponds that unappealed factual findings regarding the competitive 
conditions of the LCA markets support the Panel's finding that Boeing had the ability and incentive 
to use the tied tax subsidies to lower prices in particularly price -sensitive sales campa igns.1090 
5.488.   We consider that the Panel addressed several matters pertinent to the issue of whether, in 
the circumstances of this case, Boeing would have deployed benefits of the tied tax subsidies 
received in connection with less price -sensitive sales campaigns  to reduce its LCA prices in 
particularly price -sensitive sales campaigns. We first note that the Washington State B&O tax rate 
reduction is a subsidy programme that exists over a considerable period of time: it was enacted in 
2003 and will be in place unt il 2040.1091 In addition, the Panel pointed to the characteristics of the 
LCA industry, as described by the European  Union, which is effectively a competitive duopoly. Airbus 
and Boeing each hold  signif icant market share and possess  a degree of market power.1092 Airbus 
                                                
1085 Panel Report, para.  9.238.  
1086 Appellate Body Re port, US – Large Civil Aircraft (2nd complaint) , para. 1260.  
1087 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , para. 12 54. 
1088 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , para. 1260.  
1089 United States' other appellant's submission, para.  97. See also ibid., paras.  24, 29, 68, and 93.  
1090 European  Union's appellee's submission, paras.  121-123. 
1091 Panel Report, para s. 7.325 and 7.467. The original expiration date for the Washington State B&O 
tax rate reduction under HB 2294 was 1 July 2024, but it was extended to 1 July 2040  by SSB 5952 in 2013. 
(Ibid., para.  7.467)  
1092 Panel  Report, para.  9.17 (referring to Original Panel Report,  para. 7 .1688; Appellate Body Report, 
US – Large Civil Aircraft (2nd complaint ), para. 903 ). WT/DS353/AB/RW  
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 and Boeing do not compete for specific orders with the sole objective of maximizing their short -run 
profits, but instead  they compete and set their prices with a view to maximizing their overall profits 
across their long -term sales activity.1093 The P anel further explained that, while price, seating 
capacity, and direct operating costs generally are the most important factors in determining the 
outcome of LCA sales campaigns, the significance of these factors varies across different sales 
campaigns, de pending on the customer's fleet, business plans , and strategic goals.1094 The Panel 
also noted the European  Union's assertion that, due to the nature of the LCA industry, Boeing may 
"price extremely aggressively" in some sales campaigns, whereas in other camp aigns, Boeing may 
not face the need to offer such low prices in order to win the sale.1095  
5.489.   Furthermore, the Panel carried out a detailed evaluation of the varying significance of price 
and non -price factors for particular sales campaigns that the European  Union had alleged to be highly 
competitive. With respect to the 21 sales campaigns involving twin -aisle LCA that took place between 
2007 and 2015, the Panel observed that, while pricing was discussed in some  of these campaigns, 
other factors featured more pr ominently in the evidence pertaining to the reasons why airline 
customers chose to order Boeing LCA over the competing Airbus offering.1096 The Panel pointed to 
factors such as the airline customers' preference for the delivery availability of the Boeing LCA over 
the competing Airbus LCA, the choice of engine manufacturer, performance evaluations of the 
various aircraft, the size of the aircraft, and incumbency. The Panel stated that, in each of the 
21 sales campaigns involving twin -aisle LCA, there were facto rs other than price that explained 
Boeing's success.1097 The Panel also noted that the competing models of Airbus and Boeing twin -aisle 
LCA are less substitutable and, therefore, the outcome of sales campaigns involving these aircraft 
will depend to a greater  extent on non -price factors.1098 With respect to the 20 sales campaigns 
involving single -aisle LCA that occurred in the period from 2007 to 2015, the Panel found, as noted 
above1099, that five of these campaigns were particularly price -sensitive in the sense th at Boeing 
was under particular pressure to reduce its LCA prices in order to secure the sales, and there were 
no non -price factors that explained Boeing's success in obtaining the sale.1100 By contrast,  for the 
remaining 15 sales campaigns, the Panel observed  that the significance of price was rather limited, 
because certain non -price factors, such as Boeing's incumbency, airline customers' preference for 
the delivery availability of the Boeing LCA over the competing Airbus LCA, the size and timing of 
airline customers' fleet replacement needs, and technical performance of competing aircraft, played 
a "critical", "decisive", or "vital" role in determining the outcome of the sale.1101  
5.490.   All of the above considerations mentioned by the Panel, taken together, support the 
proposition that Boeing would be highly incentivized to deploy the benefits of the tied tax subsidies 
arising from multiple LCA sales over the duration of the subsidy programme to target certain highly 
competitive and strategically important sales camp aigns, including the five sales campaigns 
involving single -aisle LCA that the Panel identified to be particularly price -sensitive. This 
encompasses the possibility that Boeing would use the tied tax subsidy benefits from LCA sales in 
the twin -aisle LCA mar ket that are less price -competitive and use those benefits in particularly 
price-sensitive campaigns in the single -aisle LCA market. Such possibility seems  greater given the 
Panel's findings that sales campaigns involving twin -aisle LCA are generally less price-sensitive than 
those involving single -aisle LCA1102 and that, in fact, for each of the 21 sales campaigns involving 
twin-aisle LCA between 2007 and 2015, there were one or more non -price factors that more 
prominently explained the outcome of the campaig n.1103 
5.491.   In this connection, we are aware of the United States' contention that, even had the Panel 
been allowed to consider that Boeing would have deployed the subsidy benefits arising from less 
                                                
1093 Panel  Report, para.  9.52 (referring to European  Union's comments on the United States' response to 
Panel question No. 158, para. 109 ). 
1094 Panel Report, para.  9.20 (referr ing to Original Panel Report, para. 7.1694 ). 
1095 Panel Report, para.  9.52 (quoting European Union's comments on the United States' response to 
Panel question No. 158, para. 122 ). 
1096 Panel  Report, para.  9.247.  
1097 Panel  Report, para.  9.247.  
1098 Panel  Report, para.  9.248.  
1099 See para. 5.467 above . 
1100 Panel  Report, para.  9.383.  
1101 Panel  Report, para.  9.383 (referring to ibid., HSBI Appendix, paras. 179, 187, 194, 200, 210, 216, 
222, 237, 243, and 257) . 
1102 Panel  Report, para.  9.248.  
1103 Panel  Report, para.  9.247.  WT/DS353/AB/RW  
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 price-sensitive sales to lower the prices in particularly price -sensitive sales campaigns, it was still 
inappropriate for the Panel to tak e into account the amount of  subsidy benefits arising from sales 
campaigns involving twin -aisle LCA for the purpose of assessing the relative significance of the 
amounts of the tied t ax subsidy in the single -aisle LCA market. This is because such a calculation 
"effectively implies that subsidies to products in other markets are causing adverse effects to 
complaining Member products with which they do not compete".1104 While the precise le gal basis for 
the United  States' allegation is not entirely clear, we understand the United States to argue that 
such an approach is at odds with the proposition, also expressed by the Panel, that a "subsidized 
product", within the meaning of Article  6.3, can cause serious prejudice to another product only if 
the two products in question compete in the same market.1105  
5.492.   We note that the Washington State B&O tax rate reduction applies , inter alia , to the 
production and sale of all LCA manufactured in the State of Washington, including both twin -aisle 
and single -aisle LCA.1106 Thus, the product being subsidized under this subsidy measure (subsidized 
product ) could be considered to encompass LCA generally, rather than the particular LCA model to 
which each indi vidual transaction generating subsidy benefits is related. In addition, we recall that 
the chapeau  of Article  5 of the SCM Agreement provides that no Member should cause, "through the 
use of any subsidy", adverse effects to the interests of other Members.  Further, the analyses of 
serious prejudice under the subparagraphs of Article  6.3 all concern "the effect of the subsidy". Thus, 
these provisions do not explicitly preclude the possibility that the benefits of the subsidy that may 
be granted  in connection with one product of the responding Member (e.g. Boeing's twin -aisle LCA) 
are in fact used to lower the price of another product of that Member (e.g. Boeing's single -aisle 
LCA), which in turn causes commercial harm on a product of the complaining Member (e. g. Airbus' 
single -aisle LCA) that competes only with the product with respect to which the subsidy is used. To 
this extent, we do not consider that the term "subsidized product" in Article  6.3 must necessarily 
mean the product with respect to which the sub sidy is granted , rather than the product with respect 
to which it is used . 
5.493.   Therefore, we disagree with the United  States that, when estimating the per -aircraft 
magnitude of subsidization, the Panel was, on the basis of the term "subsidized product" in 
Article 6.3, precluded from taking into account the subsidy amounts granted for both twin -aisle and 
single -aisle LCA. Instead, allowing consideration of whether tied tax subsidy benefits arising from 
particular sales may be pooled and used to lower prices for other sales would permit consideration 
of whether tied tax subsidies granted with respect to twin -aisle LCA were used to lower prices of 
single -aisle LCA.  
5.494.   With regard to whether the Panel correctly assumed  that the entire amount of the tied tax 
subsidy gra nted with respect to all of Boeing's LCA sales during the reference period from 2013 to 
2015 would have been deployed exclusively to the three particularly price -sensitive sales campaigns 
in that period, we recall that Articles 5(c) and 6.3 do not explicit ly require that a panel addressing a 
serious prejudice claim quantify the amount of the challenged subsidy either in absolute or relative 
terms.1107 Moreover, these provisions do not require a panel to determine precisely how the benefits 
of the subsidy are u sed by the recipient. Rather, what a panel is required to do under these provisions 
is to examine whether the subsidy contributes in a genuine and substantial way to the alleged market 
phenomena.1108 Thus, as long as a panel ensures that the subsidy is a genuine and substantial cause 
of the alleged market phenomena, a panel retains a degree of discretion to determine whether it is 
appropriate to carry out a quantitative analysis and, if it chooses to do so, what specific calculation 
method it uses for such qua ntification.  
5.495.   We further recall that, when assessing the relative significance of the amounts of the tied 
tax subsidies in the context of completing the legal analysis in the original proceedings, the 
Appellate  Body did not rely on a quantification of the per-aircraft impact of the subsidies. Instead, 
the Appellate  Body noted that there was little on the  original  panel record that would have enabled 
                                                
1104 United States' other appellant's submission, para. 67.  
1105 See Panel  Report, para.  9.33; United States' appellee's submission, section  VII. 
1106 See Original Panel Report, para.  7.1803.  
1107 See Appellate  Body Report, US – Upland Cotton , para.  461. 
1108 Appellate  Body Report s, US – Upland Cotton , para. 438; US – Upland Cotton ( Article  21.5 – Brazil) , 
para. 374; EC and certain member States – Large Civil Aircraft , para. 1232; US – Large Civil Aircraft  
(2nd complaint) , para. 913; EC and certain member States – Large Civil Aircraft (Article 21.5 – US), 
para. 5.581.  WT/DS353/AB/RW  
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 it to carry out a quantitative analysis.1109 Under these circumstances, the Appellate  Body took into 
account the  absolute amounts of the tied tax subsidies at issue (i.e.  US$2.2  billion during  the period 
from 1989 to 2006, and US$451  million1110 during the reference period from 2004 to 2006)1111, as 
well as certain evidence suggesting that the FSC/ETI subsidies were an im portant aspect of Boeing's 
ability to compete with Airbus and that the tied tax subsidies enabled Boeing to lower its prices 
beyond the level that would otherwise have been economically justifiable.1112 On that basis, the 
Appellate  Body found that the origina l panel record provided some support for the proposition that 
the amounts of the tied tax subsidies had relative significance in that, "when deployed strategically", 
the benefits were of a sufficient magnitude to contribute to Boeing's ability to win sales  from, or 
suppress prices of, Airbus in particular campaigns.1113 This, together with other considerations – in 
particular the nature of the tied tax subsidies, the conditions of competition in the LCA industry, and 
the circumstances of individual sales campa igns1114 – formed the basis for the Appellate  Body's 
ultimate conclusion that, for two particularly price -sensitive campaigns in the 100 -200 seat LCA 
market (namely, the 2005 JAL and SALE sales campaigns), the tied tax subsidies at issue were a 
genuine and su bstantial cause of significant lost sales within the meaning of Articles  5(c) and 6.3(c) 
of the SCM  Agreement.1115 
5.496.   Similar to the Appellate  Body's analysis in the original proceedings, we do not consider that 
the Panel in these proceedings was required under Articles  5(c) and 6.3 to determine the precise 
degree to which the subsidy actually affected Boeing's prices in particular sales campaigns. Rather, 
to the extent that the Panel properly examined whether the subsidy can be considered a genuine 
and substanti al cause of the alleged market phenomena, it had discretion in its use of qualitative 
and/or quantitative analyses. Thus, where the Panel chose to undertake a quantitative analysis, it 
would have sufficed for the Panel to offer a general assessment of the magnitude of the per -aircraft 
impact, instead of determining the precise per -aircraft subsidy amounts for each individual sales 
campaign in question.  
5.497.   We believe that the Panel's magnitude calculation would be overstated if it necessarily 
conveyed that the entire amount of the tied tax subsidies that Boeing received in the reference 
period from 2013 to 2015 was used exclusively to lower the prices in the three  particularly 
price-sensitive sales campaigns in that period. For example, while Boeing may have all ocated 
benefits of the tied tax subsidies in favour of these sales campaigns, it is unlikely that all of the  
benefits were necessarily allocated to these particularly price -sensitive sales campaigns to the 
exclusion of any other business purpose. Moreover,  even accepting that those particularly 
price-sensitive sales campaigns are the only instances in which the benefits of the subsidy were used 
to lower prices of Boeing's LCA, Boeing may not have needed to reduce its prices to the maximum 
extent possible wi th the use of the subsidy benefits for the purpose of winning the sale.1116 
5.498.   In any event, we consider that the Panel's US$1.99  million figure calculated with reference 
to the 2013 -2015 period provides a useful estimate of the maximum  extent  to which Boeing wo uld 
have been able to lower its prices with the use of the tied  tax subsidy in the three particularly 
price-sensitive sales campaigns during that period, as well as the two particularly price -sensitive 
                                                
1109 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , para . 1254.  
1110 More specifically, Boeing received US$435 million  from the FSC/ETI subsidies, US$ 13.8 million  from 
the Washington State B&O tax rate reduction , and US$ 2.2 million  from the City of Everett B&O tax rate 
reduction . (Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , para. 1254)  
1111 Appellate Body Rep ort, US – Large Civil Aircraft (2nd complaint) , para. 1254 (referring to Original 
Panel Report, para.  7.1811 ). The Appellate Body noted that b y far the majority of this amount was accounted 
for by the FSC/ETI subsidies, because Boeing began to receive the B&O tax rate reductions only during the 
2004-2006 reference period  in the original proceedings . (Ibid.)  
1112 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , para s. 1254-1255 (referring to 
Panel Report, para.  7.1818 ). 
1113 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , para. 1254.  
1114 Appellate  Body Re port, US – Large Civil Aircraft (2nd complaint) , para. 1251.  
1115 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , para. 1271. See also ibid., 
para. 1260.  
1116 We note in this regard that, before the Panel, the parties agreed  that Airbus and Boeing  have no 
incentive to reduce their prices beyond what is necessary to win the deal . (European  Union's response to Panel 
question 164, para.  111; United Stat es' comment s on the European  Union's response to Panel question 
No. 164, para.  135) We further note that, in its other appellant's submission, the United  States suggests that 
offering a price concession in one sale can have certain repercussions on prices in other sales, for example, 
due to the so -called "most -favoured customer" clause for certain, top -tier Boeing customers.  (United  States' 
other appellant's submission, para.  97 (referring to Panel Report, fn 2724 to para.  9.50) ) WT/DS353/AB/RW  
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 sales campaigns prior to that period.1117 Such an estimat e can, in turn, be reasonably relied on in 
determining whether the price reduction made available with the subsidy benefits contributed to a 
significant degree to Boeing winning these sales campaigns. Therefore, even if such an estimate 
does not represent the precise degree to which Boeing lowered its LCA prices with the use of the 
subsidy benefits in particular sales campaigns, it still can form a reasonable basis, when combined 
with other factors – such as the nature of the tied tax subsidies, t he conditions of competition in the 
LCA industry, and the circumstances of individual sales campaigns – for concluding that the tied tax 
subsidy at issue was a genuine and substantial cause of Boeing's success in the particularly 
price-sensitive sales camp aigns.  
5.499.   For the foregoing reasons, we find that the Panel did not err under Articles 5(c) and 6.3 of 
the SCM Agreement when it provided an estimate of the per -aircraft amount of the subsidy at issue.  
5.500.   Finally, we note that the United  States has also brought an alternative claim under Article  11 
of the DSU with respect to the Panel's calculation of the per -aircraft subsidy magnitude.  
5.501.   The Appellate  Body has observed that, while an appellant may advance both a claim that 
the Panel erred in its application of a l egal provision and a claim that the Panel failed to make an 
objective assessment of the facts under Article  11 of the DSU, in most cases, an issue "will either  
be one of application of the law to the facts or an issue of the objective assessment of facts, and not 
both".1118 Similarly, in the original proceedings, the Appellate  Body indicated that, "{w}here there 
is ambiguity, it will fall on the Appellate  Body to determine whether a finding – and a related 
challenge to it on appeal – is properly characterized as legal or factual, in the circumstances of a 
specific  case."1119 In this regard, the Appellate  Body has explained that allegations implicating a 
panel's appreciation of facts and evidence fall under Article  11 of the DSU.1120 By contrast, "{t}he 
consistency or  inconsistency of a given fact or set of facts with the requirements of a given treaty 
provision is … a legal characterization issue" and is therefore a legal question.1121 
5.502.   As we understand it, the United  States' key contention in its appeal is that, for purposes of 
its analysis of adverse effects under Articles  5(c) and 6.3 of the SCM  Agreement, the Panel relied on 
an erroneous assumption that Boeing would have deployed the benefit of the tied tax subsidy arising 
from less competitive sales to lower its prices in particularly price -sensitive sales campaigns. As we 
have noted, a panel assessing the relative significance of the amount of the challenged subsidy is 
not necessaril y required to quantify the per -unit amount of the subsidy or make a factual 
determination of precisely how the benefits of the subsidy were used. Rather, a panel may rely on 
different types of approaches depending on the specific circumstances of each case , including both 
qualitative and quantitative analyses. As such, the Panel's attempt in this dispute to quantify the 
per-aircraft subsidy magnitude was only one permissible way of evaluating the relative significance 
of the subsidy amount while taking into  account the specific factual setting of this dispute, which 
include s the nature and absolute magnitude of the subsidy at issue, the conditions of competition in 
the relevant LCA markets, and the particular circumstances of individual sales campaigns. We 
consider that such an assessment relates more properly to the application of the legal standard for 
establishing causation under Articles 5(c) and 6.3 of the SCM Agreement than to the objectivity of 
the Panel's assessment of the facts within the meaning of Article 11 of the DSU. Accordingly, we do 
not further consider the United  States' claim under Article 11 of the DSU.  
                                                
1117 The Panel did not carry out a separate calculation of the per -aircraft subsidy magnitude for the 
Fly Dubai 2008 and Delta Airlines 2011 sales campaigns, which occurred prior to  the 2013 -2015 reference 
period. We note  the Panel finding that the tied tax subsidy received in t he six -year period from 2007 to 2012 
was of an amount slightly smaller than, yet comparable to, the US$325  million amount for the 2013 -2015 
period. (Panel  Report, para.  8.659) We also note the Panel finding  that the total number of Boeing's LCA 
ordered in the Fly Dubai 2008 and Delta Airlines 2011 sales campaigns was 150 , which is comparable to the 
163 aircraft ordered in the three particularly price -sensitive sales campaigns during the 2013 -2015 period. 
(Panel  Report, Table  12 at para.  9.381)  
1118 Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para. 872. 
(emphasis  original)  
1119 Appellate  Body Report, US – Large Civil Aircraft (2nd complaint) , para. 958. 
1120 Appellate Body Report s, US – Upland Cotton , para. 399;  US – Upland Cotton (Arti cle 21.5 – Brazil) , 
para. 385; EC and certain member States – Large Civil Aircraft , para.  1005; China – GOES , para.  183. 
1121 Appellate  Body Report , China – GOES , para.  183 (quoting Appellate  Body Report,  EC – Hormones , 
para. 132). WT/DS353/AB/RW  
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 5.8.2.3   Whether the Panel erred under Articles 5 and 6.3 of the SCM Agreement, or acted 
inconsistently with Article 11 of the DSU, by  failing to en sure that the per -aircraft amount 
of subsidization covers the entirety of the price differentials  
5.503.   The United  States also claims that, even assuming arguendo  that the Panel's per -aircraft 
magnitude figure of US$1.99  million were correct, there was no basis for the Panel to conclude that 
the subsidy contributed in a genuine and substantial way to Airbus' loss of sales in the five 
particularly price -sensitive sales campaigns, because the Panel failed to show that the per -aircraft 
subsidy amount covers the enti rety of the price gap between Airbus' and Boeing's respective offers. 
According to the United  States, the proper counterfactual analysis under Articles  5(c) and 6.3 asks 
not only whether Boeing's prices would have been higher in the absence of the subsidy,  but also 
whether Boeing's prices would have been sufficiently  higher such that Airbus would have won 
additional sales in the absence of the subsidy.1122 The United States therefore considers that the 
Panel was required to determine whether the magnitude of t he tied tax subsidy is enough to "cover 
the margin of victory between the final net prices of Boeing  and Airbus ".1123 In addition, the 
United  States advances campaign -specific arguments and submits that, with respect to each of the 
five sales campaigns, the P anel's analysis constitutes an error under Articles  5(c) and 6.3 of the 
SCM Agreement and/or is inconsistent with Article  11 of the DSU.1124 
5.504.   The European Union observes that the United  States' claims, including its campaign -specific 
arguments,  are based on th e proposition that a subsidy can be found to constitute a genuine and 
substantial cause of lost sales only if the per -aircraft amount  of subsidization exceeds the difference 
that the Panel found between Boeing 's winning and Airbus ' losing prices for that s ale.1125 According 
to the European Union, the United  States' assertion is without merit because it amounts to an 
erroneous proposition that the subsidy must be the sole cause of adverse effects. The 
European  Union adds that the United  States is also wrong in that it focuses solely on a strict 
comparison between the subsidy magnitude and the difference in the net prices, without taking into 
account , inter alia , the difference in the NPVs.1126 In addition, the European  Union responds to each 
of the more detailed arguments of the United  States regarding the five sales campaigns.1127 
5.505.   The Appellate Body has stated that, for purposes of establishing a "genuine and substantial 
relationship of cause and effect" between a subsidy and an alleged adverse effect, a pa nel need not 
determine that the subsidy is the sole cause of that effect, or even the only substantial cause of that 
effect.1128 Instead, a  finding of the requisite causal link can be made even in the presence of other 
contributing factors, provided that, hav ing given proper consideration to all of these factors and their 
effects, the panel is satisfied that the contribution of the subsidy has been demonstrated to be 
genuine and substantial.1129 
5.506.   As noted by the United  States, one approach to assessing the existen ce of a requisite causal 
link between the subsidy and alleged serious prejudice is by recourse to a counterfactual  analysis.1130 
With particular respect to an analysis of lost sales, the Appellate  Body has explained that such a 
counterfactual analysis would i nvolve a comparison of the sales actually made by the competing firm 
of the complaining Member with the sales that this firm would have won in a counterfactual scenario 
where the firm of the subsidizing Member had not received the challenged subsidy.1131 As such, 
where a complainant is seeking to demonstrate lost sales through a subsidy's effects on the prices 
of the subsidized firm, a proper counterfactual test may entail a comparison between, on the one 
hand, the degree of price reduction made available with  the use of the subsidy in the particular sale 
                                                
1122 United States' other appellant's submission, para. 122 and fn  123 thereto.  
1123 United  States' other appellant's submission, para.  147 (quoting Panel Report, para.  9.379, in turn 
quoting Appellate  Body Report, US – Large Civil Aircraft (2nd complaint ), para.  1263, which summarized the 
European Communities' argument before  the original panel).  
1124 United States' other appellant's submission, para.  144. 
1125 European Union's appellee's  submission, para. 145. 
1126 European Union's appellee's  submission, para s. 151 and 1 60. 
1127 European Union's appellee's  submission, paras.  168-208. 
1128 Appellate  Body Report,  US – Large Civil Aircraft (2nd complaint) , para. 914. 
1129 Appellate  Body Report s, US – Large Civil Aircraft (2nd complaint) , para. 914; EC and certain member 
States – Large Civil Aircraft (Article 21.5 – US), para.  5.582.  
1130 United States' other appellant's submission, paras. 119 -120. See also Appellate Body Report s, US – 
Upland Cotton (Article 21.5 – Brazil) , paras. 374 -375; EC and certain member States – Large Civil Ai rcraft , 
paras . 1110 and 1233. 
1131 Appellate Body Report, EC and certain member States – Large Civil Aircraft , para . 1216. WT/DS353/AB/RW  
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 in question and, on the other hand, the degree of price difference that could have changed the 
outcome of that sale. A lost sales finding may be reached when the price would have been sufficiently 
higher in th e absence of the subsidy such that the sales actually won by the subsidized firm of the 
responding Member would instead have been won by the competing firm of the complaining 
Member.1132 
5.507.   However, the Appellate  Body has voiced reservations about using a "but f or" test for 
determining the existence of a "genuine and substantial" causal link. The Appellate Body noted that 
a "but for" test may be "too undemanding" if the subsidy is "necessary, but not sufficient, to bring 
about" a market phenomenon.1133 This may be t he case where a necessary cause is too remote and 
other intervening causes substantially account for the market phenomenon.1134 By contrast, a "but 
for" test could be "too rigorous" if it required that the subsidy be the only cause.1135 
5.508.   In light of these conside rations, we do not believe that, when a panel chooses to make a 
comparison between the degree of price reduction made available with the use of the subsidy in a 
particular sale, on the one hand, and the degree of price difference that could change the outc ome 
of that sale for purposes of assessing causation, on the other hand, the panel is required to establish 
that the former exceeds the latter in order to conclude that the subsidy contributed in a genuine and 
substantial way to the subsidized firm winning  the sale. For example, in a situation where price is 
effectively the only consideration for the customer 's decision to purchase the product of the 
subsidized firm instead of the product of the competing firm – as with the particularly price -sensitive 
camp aigns that the Panel identified – it may not be necessary for the subsidy to account for the 
entire pricing advantage enjoyed by the subsidized firm. Indeed, requiring the subsidy to explain 
the entirety of the price advantage in such a case may equate to a requirement that the subsidy 
constitute the sole cause of the subsidized firm winning the sale.  
5.509.   In addition, with particular respect to the LCA markets in question, we note that the Panel 
found that customers making a choice between offers by Airbus and  Boeing consider not only the 
net prices of their respective offers but also various non -price factors to arrive at an evaluation of 
the respective NPVs for the competing aircraft.1136 Moreover, even if the aircraft models offered by 
Airbus and Boeing in a pa rticular sales campaign are competing with each other in the same market, 
they are still differentiated from each other in various respects, such as seating capacity and flight 
range, and, thus, some elements of the net price differential might be attribut able to those 
factors.1137 As such, we do not consider that a strict comparison of net prices of Airbus' and Boeing's 
competing aircraft models is the exclusive indicator as to whether the subsidy at issue contributed 
in a genuine and substantial way to the o utcome of particular sales campaigns.  
5.510.   Further in this regard, we recall that the Panel based its finding of lost sales not only on a 
comparison between the per -aircraft subsidy amount and the net price differentials in the five 
individual sales campaigns,  but also on evidence pertaining to NPV difference. Specifically, the Panel 
cited the statement by Mr Rao that refers to a specific level of NPV difference that can change a 
customer 's choice between Airbus and Boeing in highly competitive sales campaigns involving 
single -aisle LCA.1138 As already noted above1139, the Panel observed that its US$1.99  million 
magnitude figure exceeds  the magnitude of NPV difference mentioned by  Mr Rao.1140 
5.511.   We note that the Panel did not explain how much weight it attached to the NPV d ifference 
mentioned by Mr Rao, as compared to the weight it attached to the net price differentials. We further 
note that Mr Rao's statement is made on a generalized basis, without specifically referring to any of 
the five individual sales campaigns in que stion. As such, one could consider that the probative value 
                                                
1132 See Appellate Body Report, EC and certain member States – Large Civil Aircraft , para . 1216. 
1133 Appellate Body Report, US – Upland Cotton (Article 21.5 – Brazil) , para . 374. 
1134 Appellate Body Report, EC and certain member States – Large Civil Aircraft , para . 1233. 
1135 Appellate Body Report, US – Upland Cotton (Article 21.5 – Brazil) , para . 374. 
1136 Panel  Report, paras.  9.21 and  9.398, and fn  3316 to para.  9.398. See also Original Panel Report, 
para. 7.1694.  
1137 Such dynamics seem to manifest themselves, for example, in the different list prices (and, 
consequently, actual prices) for different aircraft  models found by the Panel.  (See Panel  Report, Table  4 at 
para. 9.25 and Table  13 at para.  9.389)  
1138 Statement of Kiran Rao , 6 October 2015 (Panel  Exhibit EU -1668)  (HSBI).  
1139 See para. 5.473 above . 
1140 Panel  Report, para.  9.402.  WT/DS353/AB/RW  
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 of this statement is limited such that it cannot be assumed that the differentials in the NPVs of 
Airbus' and Boeing's respective offers in these sales campaigns were indeed at the range of the 
figure mentioned by Mr Rao. The United  States appears to take such a view1141, although the Panel 
suggested that the United  States had not contradicted this evidence during the Panel 
proceedings.1142 In any event, we consider that, regardless of the generalized nature of Mr Rao's 
statement, it nevertheless provides some indication of the magnitude of NPV difference that could 
change the outcome of the five sales campaigns in question, in particular gi ven that they are clearly 
among the more competitive of the sales campaigns. In this respect, the Panel's assessment of the 
NPV difference could be understood to complement its assessment of the net price differentials, 
thereby corroborating its overall fi ndings of lost sales with respect to the five individual sales 
campaigns.  
5.512.   Accordingly, we disagree with the United States that the Panel erred merely because its 
conclusion was not based on a finding that the per -aircraft magnitude of the subsidy exceeds t he 
differential in the net prices offered by Airbus and Boeing in each of the five sales campaigns.  
5.513.   Turning to the United  States' arguments regarding specific sales campaigns, the 
United  States contends that the Panel erred in reaching its lost sales findi ngs with respect to the 
Fly Dubai 2008 and Delta Airlines 2011 sales campaigns on the basis of its observation that the 
magnitudes  of the subsidy were only capable of enabling "at least a portion" of Boeing's pricing 
advantage.1143 According to the United  States, this constitutes an erroneous interpretation and 
application of Articles  5(c) and 6.3 of the SCM  Agreement.1144  
5.514.   We recall that the Panel found that the subsidy contributed in a genuine and substantial way 
to Airbus' loss of the Fly Dubai 2008 and Delta Airlines 2011 sales campaigns, explaining that the 
magnitudes of the subsidy were "capable of enabling at least a portion of Boeing's pricing advantage, 
contributing in substantial part to its winning those campaigns".1145 Thus, the Panel explicitly 
acknowled ged that its US$1.99 million magnitude figure does not bridge the net price differentials 
in Airbus' and Boeing's respective offers. However, as we have explained, a strict mathematical 
comparison between the net prices of Airbus' and Boeing's respective L CA is not dispositive of 
whether the Panel could reach a finding that the subsidy is a genuine and substantial cause of Boeing 
winning the sale.  
5.515.   In addition, we have observed that, while the Panel's US$1.99  million figure may not reflect 
the precise  degree  to which the tied tax subsidy at issue reduced Boeing's LCA prices in the 
particularly price -sensitive sales campaigns in question, this amount could nevertheless be relied on 
as an estimate of the maximum extent to which Boeing was able to lower its pric es through  the use 
of the subsidy benefits in those campaigns. In this light, and having reviewed the specific net price 
differential figures identified by the Panel for the Fly Dubai 2008 and Delta Airlines 2011 sales 
campaigns (which are HSBI), we agree with the Panel that the subsidy could account for a 
considerable portion of the net price differentials, arguably contributing "in substantial part" to 
Boeing's pricing advantage.1146 Furthermore, as we have explained, the Panel based its overall 
findings of lost sales not only on its analysis of net price differentials, but also on its assessment of 
the evidence pertaining to the NPV difference. Under these circumstances, we disagree with the 
United  States that the Panel erred under Articles  5(c) and 6.3 of t he SCM  Agreement in reaching the 
lost sales findings with respect to the Fly Dubai 2008 and Delta Airlines 2011 sales campaigns where 
the magnitudes of the subsidy were only capable of enabling "at least a portion" of Boeing's pricing 
advantage.  
5.516.   With respe ct to the Fly Dubai 2014 sales campaign, the United States argues that, even 
assuming arguendo that the Panel's US$1.99 million magnitude figure were correct, this would not 
justify the Panel's lost sales finding because the Panel found that the outcome of  this sales campaign 
                                                
1141 United States' other appellan t's submission, para. 128 (referring to Panel Report, para. 9.403).  
1142 Panel  Report, para.  9.403.  
1143 United States' other appellant's submission, paras. 148 and 151 (quoting Panel  Report, 
para. 9.403). (emphasis added by the United States omitted)  
1144 United S tates' other appellant's submission, paras. 144 and 151.  We note that the United  States 
also refers to Article  11 of the DSU in the alternative  in paragraph  151 of its other appellant's submission. 
However, the United  States did not cite this provision in its Notice of Other Appeal.  
1145 Panel  Report, para.  9.403.  
1146 Panel Report, para. 9.403.  WT/DS353/AB/RW  
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 was a result of a certain non -price factor.1147 The United  States thus claims that the Panel erred 
under Articles  5(c) and 6.3 of the SCM  Agreement and acted inconsistently with  Article  11 of the 
DSU.1148 
5.517.   We note that the Panel found, and th e participants agree, that the most prominent factor 
that affected the outcome of the Fly Dubai 2014 sales campaign was a certain specific factor, which 
is HSBI.1149 To this extent, we agree with the United  States that the comparison between the Panel's 
US$1. 99 million and the net price differential identified by the Panel for this sales campaign was of 
limited significance in determining whether the subsidy can be considered a genuine and substantial 
cause of Airbus' loss of this sales campaign. Yet, we under stand from the nature of this particular 
non-price factor1150, as well as the participants' arguments with respect to this sales campaign1151, 
that the outcome of the challenge concerning this sales campaign turns on the same question as 
that raised in connectio n with the Fly Dubai 2008 and Delta  Airlines  2011 sales campaigns. 
Therefore, having rejected the United  States' arguments with respect to the Fly Dubai 2008 and 
Delta Airlines 2011 sales campaigns, we disagree that the Panel erred under Articles  5(c) and 6.3 of 
the SCM  Agreement, or under Article  11 of the DSU, in reaching a finding of lost sales with respect 
to the Fly Dubai 2014 sales campaign.  
5.518.   Finally, with respect to the Icelandair 2013 and Air Canada 2013 sales campaigns, the 
United  States takes issue  with certain statements by the Panel which "arguably intimated" that the 
US$1.99  million figure exceeds  the net price differentials in these campaigns.1152 According to the 
United  States, such statements find no support in the evidence, resulting in a failur e to make an 
objective assessment of the matter within the meaning of Article  11 of the DSU.1153 On this basis, 
the United  States appears to further claim that, because the Panel failed to ensure that the 
per-aircraft subsidy amount covers the entirety of the  price differentials, it also erred under 
Articles  5(c) and 6.3 of the SCM  Agreement.1154 
5.519.   As regards the Icelandair 2013 sales campaign, the United  States notes that, although the 
Panel found that evidence reflected a price differential of a specific value1155 (which is HSBI), it 
suggested that this evidence "is somewhat contradicted" by other evidence that Airbus' final offer 
for both the A320neo and A320ceo was made at a certain price level (which is HSBI), which suggests 
that, at the final stage, Airbus had "c losed the gap".1156 The United States challenges this particular 
statement by the Panel, arguing that it lacks support in the evidence.1157 
5.520.   We observe that, regardless of whether Airbus had "closed the gap" between Airbus' and 
Boeing's offered prices at the fina l stage such that the final net price differential in this sales 
campaign was smaller than the specific HSBI figure mentioned by the Panel, the subsidy amount 
available for this sales campaign – which can be as large as US$1.99  million per aircraft – could  
cover a significant portion of that HSBI figure. Moreover, the Panel explained that the fact that 
Airbus' final offer was made at a certain price level suggests that Boeing would have been under 
considerable pressure to lower its prices in order to secure  the order.1158 One implication of that 
finding might be that the Icelandair 2013 sales campaign was so closely fought that Boeing could 
not have offered substantially better pricing than Airbus without relying on an additional source of 
funds from the subsid y at issue. In any event, given the specific net price differential figure identified 
                                                
1147 United States' other appellant's submission, paras. 169 -171. 
1148 United  States' Notice of Other Appeal, para.  5. 
1149 Panel Report, HSBI Appendix , para.  271; Un ited States' other appellant's submission, para.  170; 
European  Union's appellee's submission, paras.  205-206. 
1150 We note that the Panel explained that this factor cannot reasonably be considered a "non -price" 
factor because it relates too closely to certain  price factors. The Panel thus considered the Fly Dubai 2014 sales 
campaign to be particularly price -sensitive. (Panel Report, HSBI Appendix, para.  271) 
1151 United  States' other appellant's submission, paras.  169-171; European  Union's appellee's 
submission, paras.  205-206. 
1152 United States' other appellant's submission, para. 144.  
1153 United  States' other appellant's submission, paras.  31, 144, and 173.  
1154 United  States' Notice of Other Appeal, para.  5. 
1155 Panel  Report, HSBI Appendix, para.  247 (referring to Europ ean Union's first written submission to 
the Panel, para.  1792; Panel Exhibit EU -987 (HSBI)).  
1156 United States' other appellant's submission, paras. 155 -156. (fn omitted) See also Panel Report, 
para. 9.403; Panel Report, HSBI Appendix, paras. 249 -250. 
1157 United States' other appellant's submission, para. 156.  
1158 Panel  Report, HSBI Appendix, para.  250. WT/DS353/AB/RW  
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 by the Panel for the Icelandair 2013 sales campaign, as well as the Panel's assessment of the 
evidence regarding the NPV difference, we do not consider that the Panel err ed in reaching a finding 
of lost sales with respect to this sales campaign.  
5.521.   Turning to the Air Canada 2013 campaign, the United States observes that, while the Panel 
did not identify a specific price differential for this campaign, it "insinuate{d}" that t he pricing 
differential was somewhat lower than the pricing differential in the Icelandair 2013 campaign.1159 
The United States further notes that the Panel observed that Airbus had offered incremental price 
reductions by a certain specific amount,  and then by a smaller amount, in the concluding stage of 
the campaign.1160 The Panel considered this fact to suggest that Airbus thought it was close enough 
to Boeing on price that relatively small improvements on price could affect the outcome of the 
campaign.1161 In the United States' view, however, the fact mentioned by the Panel cannot be a 
basis for its observation that the differential in this sales campaign was somewhat lower than the 
differential in the Icelandair 2013 campaign.1162 
5.522.   We recall that the Panel foun d that the Air Canada 2013 sales campaign was particularly 
price-sensitive in the sense that Boeing was under particular pressure to reduce its price in order to 
secure the sale.1163 This suggests that Airbus was also under strong pressure to reduce its price  
during this campaign. Our review of the Panel's evaluation of the evidence pertaining to this sales 
campaign, contained in the HSBI Appendix to its Report, confirms this proposition.1164 Under these 
circumstances, we agree with the Panel that the magnitudes of price reductions offered by Airbus at 
the concluding stage of the campaign offer some indication of the magnitude of the price differential 
that Airbus considered could change the outcome of the campaign. In this regard, our review of the 
incremental pr ice reductions offered by Airbus, especially the second price reduction1165, supports 
the view that the price differential in the Air Canada 2013 sales campaign might indeed have been 
smaller than the amount identified by the Panel for the Icelandair 2013 sal es campaign.  
5.523.   We note that the United  States suggests that it is not appropriate to take into account the 
magnitude of the second price reduction , because it cannot be considered a concession in price given 
the specific reason for this reduction (which is H SBI).1166 However, regardless of the alleged reason 
for Airbus' second price reduction, the fact that Airbus did not make a large price reduction at the 
concluding stage of the campaign – despite the strong pressure it had felt to reduce its price during 
the campaign – might arguably suggest that Airbus thought it was close enough to Boeing on price. 
In any event, even assuming that the price differential in the Air Canada 2013 sales campaign was 
in the range of Airbus' first price reduction instead of the sec ond price reduction, the subsidy amount 
available for this sales campaign – which can be as large as US$1.99  million per aircraft – could still 
be considered sufficiently large vis -à-vis such price differential for purposes of reaching a conclusion 
that th e subsidy contributed in a genuine and substantial way to Boeing winning the sale. We recall 
in this regard that, when reaching this conclusion, the Panel also observed that its US$1.99  million 
figure exceeds the magnitude of NPV difference that Mr Rao sta ted can change the outcome of highly 
competitive sales campaigns involving single -aisle LCA.1167 
5.524.   Accordingly, we disagree with the United  States that the Panel acted inconsistently with 
Article  11 of the DSU, or erred under Article  5(c) and 6.3 of the SCM  Agreement, in reaching its lost 
sales findings with respect to the Icelandair 2013 and Air Canada 2013 sales campaigns.  
5.8.2.4   Conclusion  
5.525.   With respect to the Panel's calculation of the per -aircraft amount of subsidization, we 
consider that there was a basis for the Panel to assume that Boeing had been able to use the benefits 
                                                
1159 United States' other appellant's submission, para. 161 (referring to Panel  Report, para.  9.403 
(stating that the pricing differential in the Icelandair 2013 campaign is "somewhat larger"  than, inter alia , in 
the Air Canada 2013 campaign)).  
1160 United  States' other appellant's submission, para.  161 (referring to Panel  Report, para.  9.403).  
1161 Panel  Report, para.  9.403.  
1162 United States' other appellant's submission, p ara. 162.  
1163 Panel  Report, para.  9.383  and fn  3276 thereto . 
1164 Panel Report, HSBI Appendix , para.  261. 
1165 Panel Report, HSBI Appendix , para.  264. 
1166 United  States' other appellant's submission, paras.  164-167. 
1167 Panel  Report, paras.  9.402 -9.403.  WT/DS353/AB/RW  
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 of the subsidies arising from all its LCA sales to lower the prices in particularly price -sensitive sales 
campaigns in the single -aisle LCA market. We thus find that the Panel did not err under Articles  5(c) 
and 6.3 of the SCM  Agreement in its calculation of the per -aircraft amount of subsidization. Further, 
we decline  to consider the United  States' alternative claim under Article  11 of the DSU because its 
challenge to the Panel's calculation rel ates more properly to the application of the legal standard for 
establishing causation under Articles 5(c) and 6.3 of the SCM  Agreement.  
5.526.   In addition, we do not consider that the Panel was required under Articles  5 and 6.3 of the 
SCM Agreement to establish that the per -aircraft amount of the subsidies available for the 
particularly price -sensitive sales campaigns exceeds the differentials in the net prices of Airbus' and 
Boeing's competing aircraft for purposes of concluding that the subsidies are a genuine and 
substantial cause of Airbus' loss of these sales. Nor do we consider that the Panel failed to make an 
objective assessment of the matter when comparing the per -aircraft subsidy amount to the net price 
differentials in those sales campaigns. We thus find that the Panel did not err under Articles  5 and 
6.3 of the SCM  Agreement, or acted inconsistently with Article  11 of the DSU, in reaching its lost 
sales finding with respect to the five particularly price -sensitive sales campaigns.  
5.8.3   European Union's  claims relating to the Panel's analysis of the untied subsidies  
5.8.3.1   Whether the Panel erred under Articles 5 and 6.3 of the SCM  Agreement, or acted 
inconsistently with Article  11 of the DSU, by requiring that the European  Union 
demonstrate that the unt ied subsidies actually altered Boeing's pricing behaviour  
5.527.   The European  Union  requests us to reverse the Panel's findings that the European Union had 
failed to establish that the "untied subsidies" – consisting of various state and local cash flow 
subsidies  and the post -2006 aeronautics R&D subsidies – are a genuine and substantial cause of 
adverse effects in the post -implementation period through a price causal mechanism.1168 According 
to the European  Union, the Panel erred in the interpretation and applicatio n of Articles 5 and 6.3 by 
requiring that, in order to demonstrate that the untied subsidies cause adverse effects, the 
European  Union must trace the dollars from the untied subsidies to actual price reductions of LCA 
sales.1169 The European  Union further all eges that the Panel failed to make an objective assessment 
of the matter under Article  11 of the DSU by deviating from the Appellate  Body's findings in the 
original proceedings.1170 
5.528.   According to the United  States, the Panel did not impose a requirement to tra ce subsidy 
dollars to price reductions, but rather found that the European Union never provided a credible 
explanation as to how untied subsidies affect Boeing's LCA prices.1171 Because the European  Union 
was unable to demonstrate that any of the untied subsi dies altered Boeing's profitability calculus, 
the United  States maintains that the Panel correctly treated the untied subsidies as the equivalent 
of additional cash that did not alter Boeing's pricing behaviour. Regarding the European  Union's 
claim under A rticle 11 of the DSU, the United  States considers that the Panel was correct to dismiss 
the European  Union's efforts to establish that any untied subsidy necessarily affects Boeing's prices 
as the equivalent of "causation through association".1172 
5.529.   In this cla im on appeal, the European Union challenges the manner in which the Panel 
addressed the role of the untied subsidies in its causation analysis. It is well accepted in this dispute 
that, unlike the tied tax subsidies, the untied subsidies are not contingent  on the production or sale 
of LCA on a per -unit basis, but instead increase Boeing's non -operating cash flow.1173 The question, 
therefore, is under what circumstances subsidies  to Boeing  in the form of additional cash can be 
found to cause adverse effects thr ough a price causal mechanism.  
5.530.   In the original proceedings, the Appellate Body faulted the original panel for failing to 
consider whether the untied subsidies also affected Boeing's prices in a manner similar to the tied 
                                                
1168 European Union's appellant's submission, para. 642.  
1169 European Union's appellant's submission, para. 587.  
1170 European Union's appellant's submission, para. 588.  
1171 United  States' appellee's submission, paras. 309 -320. 
1172 United States' appellee's submission, para.  321 (quoting Panel Report, fn  3122 to para.  9.274, in 
turn quoting Appellate  Body Report, EC and certain member States – Large Civil Aircraft , para.  1404).  
1173 Panel Report, para. 9.270; Appellate  Body Report, US – Large Civil Aircraft (2nd complaint) , 
para. 1297; Original Panel Report , paras.  7.1825 and 7.1827.  WT/DS353/AB/RW  
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 tax subsidies. According to the App ellate  Body, the original panel should not have limited its analysis 
to the question of whether these subsidies constitute a genuine and substantial cause of serious 
prejudice on their own. Rather, the original panel "should have inquired as to whether the  remaining 
subsidies had a genuine causal relationship with, that is, made a real or meaningful contribution to, 
the effects that it had found the tied tax subsidies to have on Boeing's LCA pricing".1174 The 
Appellate  Body maintained that, by doing so, the re maining subsidies could be said to complement 
and supplement the effects, and therefore the serious prejudice, caused by the tied tax subsidies.1175 
The Appellate  Body therefore reversed the Panel's finding that the untied subsidies had not been 
shown to have  affected Boeing's prices in a manner giving rise to serious prejudice, and turned to 
consider whether it could complete the legal analysis.1176 
5.531.   In completing the legal analysis, the Appellate  Body then sought to establish whether any 
of the untied subsidies had a genuine causal relationship with the effects of the tied tax subsidies. 
The Appellate Body recalled various findings it had made regarding price competition in the 
single -aisle LCA market.1177 The Appellate  Body noted its acceptance that the 100 -200 sea t LCA 
market operates as a duopoly, in which Airbus and Boeing each possess the ability, through its 
supply and pricing decisions, to influence the pricing of the other. The Appellate  Body further  
observed that price appears to have been a particularly imp ortant consideration in the 100 -200 seat 
LCA market due to the relatively high degree of substitutability between the A320 and the  737NG, 
and the fact that many customers within this product market are low -cost carriers, which tend to be 
more price -sensitive. The Appellate  Body also took note of the original panel's findings that, in late 
2004 or early 2005, Boeing altered its overall pricing strategy and became more aggressive on price, 
and that certain LCA sales campaigns are more competitive and m ore price -sensitive than others.1178 
Finally, the Appellate  Body noted its finding that Boeing was under particular pressure to reduce its 
prices in order to secure 737NG sales in two sales campaigns – namely, the 2005 JAL and SALE 
sales campaigns – and that Boeing used the tied tax subsidies consisting of the FSC/ETI subsidies 
and the Washington State B&O tax rate reduction to do so.1179 On that basis, the Appellate  Body 
considered that "the necessary causal link" between the untied subsidies and Boeing's lower pricing 
of the 737NG in these two sales campaigns could be demonstrated "if there are uncontested facts 
or factual findings by the Panel linking the remaining subsidies, or any of them, to the  737NG".1180 
5.532.   The Appellate  Body took note of the original panel's o bservation that the amount of the 
remaining subsidies was "comparatively small, being approximately $550  million" and that none of 
the remaining subsidies were "directly related to Boeing's production or sale of LCA".1181 While the 
Appellate  Body agreed with these statements to some extent, it considered that they are 
"overbroad", noting that the size of each subsidy varied considerably, from US$0.5  million to 
US$475.8  million, and that the magnitude of the subsidies was "of somewhat less consequence" 
when see king to cumulate the effects of such a subsidy with another group of subsidies, rather than 
seeking to establish that "the subsidy itself caused  the serious prejudice ."1182 The Appellate  Body 
further considered that, while untied subsidies are not contingent on the production or sale of a 
particular product on a per -unit basis, they are intended to cover some portion of the fixed costs 
that Boeing incurs and thus "some of these subsidies are more directly related to Boeing's production 
of LCA and in particular  to its production of the 737NG, than others ."1183 
                                                
1174 Appellate  Body Report, US – Large Civil Aircraft (2nd complaint) , para.  1328.  
1175 Appellate  Body Report, US – Large Civil Aircraft (2nd complaint) , para.  1328. 
1176 Appellate  Body Report, US – Large Civil Aircraft (2nd complaint) , para.  1329.  
1177 Appellate  Body Report, US – Large Civil Aircraft (2nd complaint) , para.  1336.  
1178 Appellate  Body Report, US – Large Civil Aircraft (2nd complaint) , para.  1336 (referring to Original 
Panel Report, paras.  7.1694  and 7.1820 ; Appendix VII.F.2, para.  68 and fn  4250 thereto) . 
1179 Appellate  Body Report, US – Large Civil Aircraft (2nd complaint) , para.  1336 (referring to ibid., 
para. 1271) . 
1180 Appellate  Body R eport, US – Large Civil Aircraft (2nd complaint) , para.  1337.  
1181 Appellate  Body Report, US – Large Civil Aircraft (2nd complaint) , para.  1339 (quoting Original Panel 
Report, para.  7.1827).  As the Appellate  Body noted, t he Panel further referred to the Europ ean Communities ' 
acknowledgement that the subsidies were not "explicitly targeted at lowering Boeing's costs of production of 
specific LCA models". ( Ibid., fn  2689 to para.  1339,  quoting European  Communities ' first written submission to 
the original p anel, para. 1303)  
1182 Appellate  Body Report, US – Large Civil Aircraft (2nd complaint) , para.  1339. (emphasis original)  
1183 Appellate  Body Report, US – Large Civil Aircraft (2nd complaint) , para.  1339.  WT/DS353/AB/RW  
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 5.533.   The Appellate  Body noted that , in fact , the European  Communities had argued that certain 
untied subsidies were more closely linked to LCA production than others.1184 The Appellate Body 
examined each of the untie d subsidies and found that, for seven of the eight subsidies, it was not 
persuaded that they were sufficiently linked to production of the 737NG such that they could be said 
to meaningfully contribute to the lowering of Boeing prices of that LCA. With resp ect to the City of 
Wichita IRB tax abatements, however, the Appellate Body considered that there was "a close 
connection between the IRBs and Boeing's production of the 737NG".1185 On that basis, the 
Appellate  Body was able to complete the legal analysis and find that the City of Wichita IRB tax 
abatements "enhanced the pricing flexibility" that Boeing enjoyed by reason of the tied tax subsidies, 
and therefore that "the effects of the City of Wichita IRBs complemented and supplemented the price 
effects of the FSC/ETI subsidies and the State of Washington B&O tax rate reduction, thereby causing 
serious prejudice, in the form of significant lost sales, within the meaning of Articles 5(c) and  6.3(c) 
of the SCM  Agreement, in the 100 -200 seat LCA market."1186 
5.534.   Having co nsidered the Appellate Body's analysis of the untied subsidies in the original 
proceedings, we now turn to examine how the Panel in these compliance proceedings addressed the 
question of when subsidies in the form of additional cash to Boeing could be foun d to cause adverse 
effects through a price causal mechanism. The Panel highlighted that, unlike the tied tax subsidies, 
"Boeing's receipt of the state and local cash flow subsidies is not contingent on the production or 
sale of LCA on a per -unit basis" and  therefore "represent the functional equivalent of additional cash 
to Boeing".1187 As we noted, this is consistent with the view that subsidies that are not tied to 
production may still be understood to increase Boeing's non -operating cash flow.1188 Moreover, th e 
Panel acknowledged that, "in certain specific contexts, subsidies that reduce the fixed costs of a 
producer may be shown to impact prices ."1189 This too is consonant with the proposition accepted 
by both the original panel and the Appellate  Body that the re ceipt of untied subsidies "may still affect 
the behaviour of the recipient of the subsidy in a manner that causes serious prejudice, depending 
upon the context in which it is used".1190 
5.535.   Other statements by the Panel, however, indicate that it did not endorse a critical aspect of 
the legal standard adopted by the Appellate Body in the original proceedings. The Appellate Body 
had considered that the legal standard for causation could be established on the basis of its 
assessment of several factors consisting of the conditions of competition, the magnitude of the 
subsidy, and whether there was a genuine link with relevant LCA production. On that basis, the 
Appellate Body was able to conclude that the City of Wichita IRB tax abatements caused significant 
lost sales  because they enhanced the pricing flexibility that Boeing enjoyed by reason of the tied tax 
subsidies. The Panel, however, did not accept that such an approach was sufficient to establish that 
the subsidy was a genuine cause of adverse effects. Instead, u nder the standard it adopted, the 
Panel also required an explanation of, or evidence concerning, the manner in which subsidies 
providing additional cash to Boeing would have altered its pricing strategy for a particular LCA 
programme. As it explained, the Panel considered that the European  Union had not demonstrated 
"that any particular subsidy affects the programme costs for any specific Boeing  LCA programme, in 
the sense that the subsidies in question affect Boeing's production cost forecasts for an LCA 
programme, and thereby alter the profitability calculus of sales of those LCA at particular prices".1191 
In making these statements, the Panel appears to have adopted a legal standard requiring that, in 
order for a causation finding to be sustained, it would b e necessary to demonstrate that the subsidies 
at issue in fact altered Boeing's pricing  behaviour with respect to a particular LCA programme.  
5.536.   Then, when the Panel addressed the European  Union's reliance on the Appellate  Body's 
analysis regarding the City o f Wichita IRB tax abatements, it stated:  
                                                
1184 Appellate  Body Report, US – Large Civil Aircraft (2nd complaint) , para.  1340.  
1185 Appellate  Body Report, US – Large Civil Aircraft (2nd complaint) , para.  1347.  
1186 Appellate  Body Report, US – Large Civil Aircraft (2nd complaint) , para.  1348.  
1187 Panel Report, para.  9.270.  
1188 Original Panel Report, para.  7.1827; App ellate  Body Report, US – Large Civil Aircraft 
(2nd complaint) , para.  1297.  
1189 Panel Report, para.  9.271.  
1190 Appellate  Body Report, US – Large Civil Aircraft (2nd complaint) , para.  1336 (quoting Original Panel 
Report, para.  7.1828).  
1191 Panel Report, para.  9.270.  WT/DS353/AB/RW  
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 The state and local cash flow subsidies may be related in a factual  sense  to the 
production of certain (or all) LCA by Boeing. The subsidies generally arise from Boeing's 
location of its LCA manufacturing in particu lar places. However, the fact that the 
production of certain (or all) Boeing  LCA in a particular location gives rise to certain 
subsidies, does not of itself, say anything meaningful in an economic  sense about how 
Boeing would apply the notional additional  cash represented by those subsidies, and 
more specifically, whether it would use such additional cash to lower the prices of its 
LCA, or how it would allocate that additional cash to lower pricing of different LCA 
models where the subsidies in question ar e "linked" in a factual sense to production of 
a number of LCA models.1192 
5.537.   The Panel therefore seemed to reject the notion that the legal standard for causation with 
respect to untied subsidies consisted of an assessment of the conditions of competition, the 
magnitude of the subsidy, and whether there was a genuine link to the production of relevant LCA. 
Rather, in the Panel's view, it was also necessary to have some explanation or specific evidence 
establishing how any additional cash represented by the untie d subsidies would have been allocated 
or used to lower LCA prices. As the Panel goes on to explain, it was "unable to identify any economic 
rationale or other explanation as to why untied subsidies that may be considered factually associated 
with productio n of Boeing aircraft, whether individual aircraft models, certain models, or all models, 
would contribute to Boeing's ability to lower the prices of those aircraft".1193 This led the Panel to 
express its concern that, if it were to follow the Appellate  Body's  analysis in the context of assessing 
the City of Wichita IRB tax abatements, it would be "overstretching the application of that finding"1194 
and amount to "causation through association".1195 
5.538.   We do not consider that the legal standard adopted by the Appellate Body in the original 
proceedings supports the Panel's view that, in order to establish that untied subsidies caused adverse 
effects through a price causal mechanism, it was required to find that the subsidies actually altered 
Boeing's LCA pricing behaviour  for particular LCA programmes. In our view, this amounts to a 
requirement that the untied subsidies be the sole cause, or only substantial cause, of the lowering 
of LCA prices, a causation standard that has previously been found to be too demanding.1196 Instead, 
the Appellate Body found – on the basis of its assessment of the conditions of competition, the 
magnitude of the subsidy, and the link with relevant LCA production – that certain untied subsidies 
caused significant lost sales because they "enhanced th e pricing flexibility" that Boeing enjoyed by 
reason of the tied tax subsidies.1197 We do not consider that the legal standard of causation requires 
a showing that the untied subsidies actually altered Boeing's pricing of its LCA.  
5.539.   In addition, various stateme nts by the Panel confirm that it failed to adopt the 
Appellate  Body's standard for assessing whether untied subsidies have a genuine link to LCA 
production. For example, the Panel noted that " {i}n the original proceeding, the Appellate Body 
reasoned (in relation to its analysis of the tied tax subsidies) that it is rational to expect that, where 
a subsidy is provided on a per-unit basis  in respect of LCA produced or sold, the manufacturer would 
be inclined, in the appropriate market context, to pass on all or part of that subsidy to the purchaser 
because it is possible to do so without sacrificing profit margins."1198 The Panel then questioned, 
however, that "the calculus of the extent to which untied  subsidies, which relate in a less direct way 
to production or sales than per -unit subsidies, potentially affect the profitability of an LCA sale in 
light of the competitive dynamics of the LCA markets, is far less clear."1199 The Panel then stated 
that it wa s "unable to identify any economic rationale or other explanation as to why untied subsidies 
that may be considered factually associated with production of Boeing aircraft, whether individual 
aircraft models, certain models, or all models, would contribute  to Boeing's ability to lower the prices 
of those aircraft" .1200 From these statements, it would appear that the Panel did not accept that 
                                                
1192 Panel Report, para.  9.273. (emphasis original)  
1193 Panel Report, para.  9.274.  
1194 Panel Report, para.  9.273.  
1195 Panel Report, fn 3122 to para.  9.274.  
1196 Appellate Body Report, US – Large Civil Aircraft (2nd complaint ), para. 914.  
1197 Appellate Body Report, US – Large Civil Aircraft (2nd complaint ), para. 1348.  
1198 Panel Report, para.  9.274 (referring to Appellate Body Report, US – Large Civil Aircraft 
(2nd complaint ), para. 1261 ). 
1199 Panel Report, para. 9.274.  
1200 Panel Report, para.  9.274.  WT/DS353/AB/RW  
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 untied subsidies could affect Boeing's pricing flexibility in LCA sales. This is not consistent with the 
legal standard adopted by the Appellate Body in the original proceedings.  
5.540.   This is also borne out by the Panel's statement that "{t}he European Union does not advance 
an economic theory to support its argument that subsidies that reduce Boeing's fixed costs in a 
general s ense impact its LCA prices generally or more specifically, over the short -term or over the 
long-term."1201 By contrast, the Appellate Body noted in the original proceedings that a genuine link 
may exist even though  untied subsidies are not contingent on the p roduction or sale of a particular 
product on a per -unit basis, because they are intended to cover some portion of the fixed costs that 
Boeing incurs and therefore  "some of these subsidies are more directly related to Boeing's production 
of LCA and in parti cular to its production of the 737NG ."1202 The Panel also rejected the 
European  Union's claim because it did not "attempt to demonstrate that Boeing's LCA pricing would 
not be economically feasible absent the receipt of the state and local cash flow subsidies ".1203 As 
noted, no such showing is required under the legal standard set out by the Appellate Body . 
5.541.   We take note of the United States' contention that Boeing establishes a reserve price for the 
sale of its LCA and that no amount of additional cash will cause  it to reduce its prices further.1204 
However, this does not mean that certain untied subsidies – depending on whether there is a genuine 
link to LCA production, and given their magnitude and the competitive conditions in the LCA markets 
– will not, as the Ap pellate Body explaine d in the original proceedings, enhance "the pricing 
flexibility" afforded by the tied tax subsidies in particularly price -sensitive sales campaigns.1205 Even 
if it cannot be definitively demonstrated that the untied subsidies altered Boei ng's pricing behaviour, 
we consider that a showing based on the above factors can nevertheless indicate that the effects of 
particular types of untied subsidies may contribute in a genuine way to the effects of the tied tax 
subsidies in lowering Boeing's L CA prices.  
5.542.   We note, moreover, that, because the Panel rejected the European Union's reliance on the 
Appellate Body's approach to demonstrating a genuine link between an untied subsidy and Boeing's 
pricing behaviour, it did not examine whether the purported  links advanced by the European Union 
between the untied subsidies and certain relevant LCA programmes existed. Accordingly, while the 
Panel acknowledged that "subsidies that reduce the fixed costs of a producer may be shown to 
impact prices"1206, the Panel n ever examined the European Union's arguments and evidence in order 
to assess whether these purported links met the standard set out  by the Appellate Body when it 
examined the City of Wichita IRB tax abatements. Therefore, even if, as the Panel states, one should 
not "interpret what the Appellate  Body said in that particular context as setting forth an economic 
theory or legal ruling regarding the basis on which untied subsidies, through their impact on the 
recipient's pricing behaviour, should be considered  to be a genuine  cause of serious prejudice"1207, 
the Panel did not consider how the situation in these compliance proceedings mandated a result 
different from that found in the original proceedings.  
5.543.   In sum, by rejecting that untied subsidies may be found to  have a genuine link to the 
production of relevant LCA as was accepted by the Appellate Body in the original proceedings, the 
Panel failed to apply the correct legal standard for assessing whether the untied subsidies are a 
genuine cause of adverse effects  under Articles  5 and 6.3 of the SCM  Agreement. In particular, we 
do not consider that the legal standard of causation requires a showing that the untied subsidies 
actually altered Boeing's pricing of its LCA. Accordingly, we find that the Panel erred unde r Articles  5 
and 6.3 of the SCM  Agreement by requiring that the European  Union demonstrate that the untied 
subsidies actually led to price reductions of Boeing LCA sales in order to establish that the subsidies 
caused adverse effects through the lowering o f Boeing LCA prices. We therefore reverse  the Panel's 
findings , in paragraphs 9.277 , 9.291,  9.472, and 9.476  of the Panel Report , and as a consequence 
to the extent that  this is reflected in paragraph s 11.8.a and 11.8.e  of the Panel Report , that the 
European Union had failed to establish that the untied subsidies cause serious prejudice, within the 
                                                
1201 Panel Report, para.  9.275.  
1202 Appellate  Body Report, US – Large Civil Aircraft (2nd complaint) , para.  1339.  
1203 Panel Report, para.  9.275.  
1204 United States' appellee's submission, para. 314. The United States explains that, holdin g strategic 
considerations attendant to a particular sale and other non -price terms constant, a producer's "reserve price" 
will be the lowest price it is willing to accept that will still contribute to long -term profitability.  
1205 Appellate  Body Report, US – Large Civil Aircraft (2nd complaint) , para.  1348. 
1206 Panel Report, para.  9.271.  
1207 Panel Report, para. 9.273. (emphasis original)  WT/DS353/AB/RW  
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 meaning of Articles  5(c) and 6.3 of the SCM  Agreement, in the post -implementation period through 
a price causal mechanism. H aving reversed this finding, we do not address whether, in addition, the 
Panel acted inconsistently with Article 11 of the DSU.  
5.8.3.2   Completion of the legal analysis  
5.544.   We now assess whether there is a basis for us to complete the legal analysis regarding the 
untied subsidies.  
5.545.   We recall that the Appellate Body has previously considered different methods for the 
collective assessment of subsidies. One such method – known as "aggregation" – entails grouping 
subsidy measures that are sufficiently similar in their desi gn, structure, and operation in order to 
ascertain their aggregated effects in an integrated causation analysis.1208 The Appellate Body has 
also endorsed what is known as a "cumulation" approach, whereby the effects of one group of 
subsidies may be found to c omplement and supplement the effects of a second group of subsidies 
when that first group of subsidies is shown to have a genuine  causal connection with the relevant 
effects and market phenomena caused by the second group of subsidies.1209 This is because the  fact 
that the first group of subsidies is not, in itself, a substantial cause of adverse effects does not 
exclude that it had effects similar to those of another group of subsidies that was both a genuine 
and a substantial cause of those effects. The Appe llate Body has stated, however, that cumulation 
of this sort does require an affirmative showing that there is a genuine causal link between the first 
group of subsidies and the effects and market phenomena to which they are alleged to be 
contributing.1210 
5.546.   The European Union submits that there are sufficient factual findings by the Panel and 
undisputed facts to conclude that the untied subsidies contribute to adverse effects through a price 
causal pathway "in the same way that the Wichita IRBs were found to co ntribute to adverse effects 
in the original proceedings".1211 In the original proceedings, the Appellate Body adopted a cumulation 
approach in its causation analysis with respect to the untied subsidies.1212 We therefore turn to 
consider whether there are suffic ient factual findings by the Panel or undisputed facts on the record 
to find that the effects of the untied subsidies complement and supplement the effects of the tied 
tax subsidies and thereby cause adverse effects within the meaning of Articles  5 and 6.3  of the 
SCM Agreement.  
5.547.   Regarding the tied tax subsidies at issue in these compliance proceedings, we recall that we 
have upheld the Panel's findings that the Washington State B&O tax rate reduction is a genuine and 
substantial cause of serious prejudice i n the f orm of significant lost sales with  respect to the 
Fly Dubai  2014, Icelandair 2013, and Air Canada 2013 sales campaigns, and a threat of impedance 
of imports into the United States, and exports to the United Arab Emirates, arising in part from lost 
sales with respect to the Delta Airlines 2011 and Fly Dubai 2008 and 2014 sales campaigns, 
respectively. These findings are premised on Boeing's ability to lower prices of its 737 MAX and 
737NG aircraft.  
5.548.   We also recall that, in the circumstances of this cas e, the legal standard for causation 
concerning the untied subsidies entails an assessment of the conditions of competition, the 
magnitude of the subsidy, and whether there was a sufficient link with relevant LCA production, in 
order to determine whether th ey cause the alleged serious prejudice. In this connection, we recall a 
number of key factors including the conditions of competition in the LCA market that were also 
relevant to the Appellate Body's completion of the legal analysis in the original proceed ings. For 
example, the LCA market operates as a duopoly, in which Airbus and Boeing each possess the ability 
to influence the pricing of the other.1213 Various factors such as price, seating capacity, and direct 
operating costs affect the outcomes of LCA sale s campaigns, and the significance of these factors 
                                                
1208 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , para.  1285.  
1209 Appellate Body Report s, EC and certain member  States – Large Civil Aircraft , paras.  1378-1379; 
US – Large Civil Aircraft (2nd complaint) , para. 1335.  
1210 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , para. 1335.  
1211 European Union's appellant's submission, para. 689.  
1212 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , para.  1334.  
1213 Panel  Report, para.  9.17; Appellate Body Report, US – Large Civil Aircraft (2nd complaint ), 
para. 1336.  WT/DS353/AB/RW  
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 varies across different campaigns.1214 Sales campaigns involving single -aisle LCA tend to be more 
sensitive to price due to the relatively high degree of substitutability between Airbus ' and Boeing 's 
competin g LCA, and the fact that many customers within this product market are low -cost 
carriers.1215 Moreover, with respect to certain particularly price -sensitive sales campaigns in the 
single -aisle market, the Panel, like the Appellate  Body in the original proceed ings, concluded that 
Boeing would have used the tied tax subsidies to reduce its prices.1216 
5.549.   We further recall that, of the eight untied subsidies examined in the original proceedings, 
the Appellate Body was able to complete the legal analysis only with respect to the City of Wichita 
IRB tax abatements. The Appellate Body found a "close connection between the IRBs and Boeing's 
production of the 737NG" because it found that: (i) the IRB scheme was designed to assist in raising 
revenue to fund the purchase,  construction, or improvement of industrial property used for 
manufacturing purposes, including real property as well as commercial and industrial machinery and 
equipment; (ii) the IRBs issued to Boeing were specifically aimed at, and were used for the pur pose 
of, enhancing Boeing's manufacturing facilities in Wichita; and (iii) those manufacturing facilities 
were involved , in part , in production and assembly operations for the 737NG.1217 By contrast, with 
respect to the seven remaining untied subsidies, the Appellate Body could not complete the legal 
analysis either because the panel record indicated that these subsidies were related to Boeing's 
general costs rather than directed at parti cular products1218 or benefited aircraft other than  the 
737NG1219, or because there were no Panel findings or undisputed facts indicating that these 
subsidies had been received or expected to be received in connection with expenditures related to 
the 737NG.1220 
5.550.   We consider that the above findings by the Panel in these proceedings and the 
Appellate  Body in the original proceedings are relevant to our analysis of whether the untied 
subsidies have a genuine causal link to Boeing's pricing of its 737 MAX and 737NG in th e five 
particularly price -sensitive sales campaigns in question because they establish Boeing's strong 
incentives to employ available means to lower its prices and secure those sales.1221 Similar to the 
Appellate Body's assessment in the original proceedings,  we also consider that, in the circumstances 
of these sales campaigns, and in the context of the conditions of competition in the LCA industry, 
the necessary causal link could be established where the subsidies are of a sufficient magnitude and 
there are f actual findings by the Panel or undisputed facts linking particular untied subsidies to the 
production of the LCA at issue in sales campaigns for which adverse effects have already been found. 
As the Appellate Body explained in the original proceedings, th is would suffice to establish that the 
                                                
1214 Panel Report, p ara. 9.20; Appellate Body Report, US – Large Civil Aircraft (2nd complaint ), 
para. 1336. 
1215 Panel  Report, para.  9.249; Appellate Body Report, US – Large Civil Aircraft (2nd complaint ), 
para. 1336.  
1216 Panel  Report, paras.  9.239 -9.241 and 9.379; Appellate Body  Report, US – Large Civil Aircraft 
(2nd complaint ), paras.  1260 and 1336.  
1217 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , para. 1347.  
1218 With respect to  four subsidies that were granted in connection with Boeing's relocation of its 
corporate headqu arters to Illinois, the Appellate  Body noted t he European  Communities ' argument that 
subsidies of this nature were "not directed at a particular product, but ra ther at the entire company or business 
unit at issue", but they "may reasonably be deemed to benefit all of the company or business unit's products".  
(Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , para. 1342 (quoting European  Communitie s' 
response to Panel question No. 374, para. 298)) The Appellate  Body disagreed that  these arguments suffice d 
to link clearly these four measures with Boeing's production of the 737NG  and concluded that it  could not  
cumulate the effects of these subsidies with those of the tied tax subsidies in the 100 -200 seat LCA market.  
(Ibid.)  
1219 With respect to  the Washington State workforce development programm e and Employment 
Resource Center , the Appellate  Body stated that the European  Communities' own submissions reveal ed that 
this B&O tax credit had benefited only the 787 . (Appellate  Body Report, US – Large Civil Aircraft 
(2nd complaint) , para.  1341)  
1220 With respect to the Washington State B&O tax credits for certain preproduction development 
expenditures  and the Washington State sales and use tax exemptions , the Appellate  Body stated that it saw  no 
indication on the record that the subsidies  had been  received (or expected to be received) in connection with 
expenditures related to the 737NG, and that the limited information on the record suggested  that, if anything, 
these subsidies had been granted in connection with expenditures related to Boeing aircraf t families other than  
the 737NG.  (Appellate  Body Report, US – Large Civil Aircraft (2nd complaint) , paras.  1341 and  1344-1345)  
1221 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , para. 1337.  WT/DS353/AB/RW  
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 benefits of the untied subsidies are among the means available to Boeing to lower prices in those 
particular sales campaigns.1222 
5.551.   On the basis of the foregoing, we now examine whether we can complete the legal analysis 
with respect to the untied subsidy measures that were found to constitute specific subsidies and that 
were alleged by the European Union to have a link with production of the 737 MAX and 737NG.1223 
Accordingly, we do not examine below the South Carolina untied  subsidies, which pertain only to the 
787, or the City of Wichita IRB tax abatements, for which we were unable to complete the legal 
analysis and find the existence of specific subsidies. Moreover, since we have no basis to examine 
whether the South Caroli na untied subsidies cause adverse effects in the post -implementation 
period, we need not address the United States' conditional claim that the Panel erred under Article  11 
of the DSU in assessing whether certain such South Carolina measures conferred a benefit to 
Boeing.1224 
5.8.3.2.1   Washington State untied subsidies  
5.552.   The Washington State untied subsidies that are alleged to have a link to production of the 
737 MAX and 737NG comprise: (i)  the Washington State B&O tax credits for 
preproduction/aerospace product developme nt; (ii)  the Washington State B&O tax credits for 
property taxes and leasehold excise taxes; and (iii)  the Washington State sales and use tax 
exemptions for computer software, hardware, and peripherals.1225 The European Union maintains 
that the Appellate Body  can complete the legal analysis by finding that factual findings by the Panel 
or undisputed facts on the record establish the required link between the untied subsidies and 
Boeing's research, development, production, and sale of relevant Boeing LCA.1226 
5.553.   Starting with the first untied subsidy measure – the Washington State B&O tax credits for 
preproduction/aerospace product development – the Panel found that Boeing had obtained the B&O 
tax credits for certain preproduction development expenditures on aeronauti cs-related research, 
design, and engineering activities, as well as for certain expenditures on design and preproduction 
development, computer software and hardware for the digital design, and development of 
commercial airplanes.1227 Those B&O tax credits are  applied to Boeing's liability for B&O taxes, which 
accrues in connection with the manufacture and sale of all Boeing LCA produced in the State of 
Washington.1228 According to the Panel, the B&O tax credits for preproduction/aerospace product 
development had been modified by Section  7 of Washington State SSB  6828 to expand: ( i) the 
application of the tax credits to all aerospace product development, rather than just preproduction 
development ( effective 30 June 2008 ); and ( ii) the eligible entities/persons that  may claim the credit 
(so as to permit non -manufacturing entities to claim the credit for expenditures after 30  June 
2008).1229 The Panel noted the European  Union's argument that the Washington State B&O tax 
credits for preproduction/aerospace product develop ment are "linked most closely" to Boeing aircraft 
                                                
1222 Appellate Body Report, US – Large Civil Aircraf t (2nd complaint) , para. 1337.  
1223 European Union's appellant's submission, para. 678.  
1224 United States' Notice of Other Appeal, para. 9; other appellant's submission, section IV. This 
conditional claim consists of a challenge under Article 11 of the DSU that  the Panel erred in finding that certain 
South Carolina payments conferred a benefit to Boeing. The United States request indicates that we need to 
address this claim if we were to modify or reverse the Panel's findings that the subsidies conferred through  
these measures did not cause adverse effects. At the oral hearing, the United States clarified that the condition 
for such a claim would not be triggered in the event that we were to reverse the Panel's adverse effects 
findings, but were unable to complet e the legal analysis, with respect to the relevant subsidies.  
1225 European Union's appellant's submission, para. 678. The Panel found that, although the 
European  Union had presented  the Washington State B&O tax credit for leasehold excise taxes  as a separate  
measure from the Washington State B&O tax credit for property taxes, HB 2466 in fact modified the scope of 
application of the B&O tax credit previously available with respect to property taxes, to additionally be available 
with respect to leasehold excise  taxes. (Panel  Report, para.  7.9) 
1226 European Union's appellant's submission, section X.H.3.  
1227 Panel  Report, para.  9.76. See also Original Panel  Report, para.  7.51. "Preproduction development" 
means " research, design and engineering activities performed in the development of a product ". (Original Panel 
Report, para.  7.51)  
1228 Panel  Report, para.  9.76. See also Appellate  Body Report, US – Large Civil Aircraft (2nd complaint) , 
para. 1344.  
1229 Panel  Report, para.  7.9 (referring to SSB 6828, "Aerospace Tax Incentives", Washington Session 
Laws 365 (2008)  (Panel  Exhibit EU -434)) and fn  767 to para.  7.462 . WT/DS353/AB/RW  
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 that are in preproduction, meaning the 737 MAX, 787 -10, and 777X1230, and stated that  these B&O 
tax credits "may currently be generated" in connection with these aircraft.1231 The total amount of 
the B&O tax credits Boeing received during the 2013 -2015 period is [BCI].1232 
5.554.   We note that the absolute amount of the Washington State B&O tax credit f or 
preproduction/aerospace product development can be considered substantial. Further, the Panel 
findings appear to indicate that Boeing was eligible  to obtain B&O tax credits for its expenditures on 
development of all its LCA, including the 737  MAX and 73 7NG. Such B&O tax credits, in turn, are 
applied to Boeing's B&O tax liability that accrues in connection with the manufacture and sale of 
Boeing's LCA. Thus, to the extent that it can be demonstrated that Boeing made qualified 
expenditures on development o f particular aircraft, we could find that the B&O tax credits were 
generated in connection with those aircraft, thereby reducing the costs of their development, 
manufacture, and/or sale.  
5.555.   We recall that the Washington State B&O tax credit for preproduction development (before 
the amendment under Washington State SSB 6828) was also at issue in the original proceedings, 
and the Appellate  Body was unable to find a genuine link between this subsidy and the 737NG. This 
was because, although the Appellate  Body agr eed that the B&O tax credits had been applied to 
Boeing's liability for B&O taxes that had accrued in connection with the manufacture and sale of 
Boeing LCA, it saw "no indication on the record" that these tax credits had been "received in 
connection with expenditures related to the 737NG".1233 Similarly in these compliance proceedings, 
we see no specific Panel findings or undisputed facts on the record – and the European  Union has 
pointed to none – that the B&O tax credits were generated in connection with ex penditures related 
to the 737  MAX or 737NG. Indeed, the only Panel finding that the European  Union identifies as 
allegedly establishing the requisite link between the subsidy and the 737  MAX and 737NG is the 
Panel's statement that the B&O tax credits for preproduction/aerospace product development  "may 
currently be generated in respect of Boeing aircraft that are in pre -production, such as  the 737 MAX, 
787-10, and 777X".1234 We note that the Panel qualified this statement by adding that, "given the 
nature of t his subsidy as untied, we do not consider that this necessarily provides a basis for 
concluding, in a manner analogous to the Appellate Body's analysis of the per -unit tied tax subsi dies 
in the original proceeding , that Boeing would have the ability and in centive  to use that subsidy to 
lower its LCA prices in relation to those aircraft models."1235 As we have observed above, the Panel 
erred in requiring a showing that the untied subsidy actually affected prices of the relevant aircraft 
and in applying too rigi d a legal standard for finding a link with particular LCA. While the Panel's 
qualification may have been informed by its erroneous understanding of the legal standard , it could 
also be read as suggesting that mere eligibility is not sufficient for a findin g of B&O tax credits 
enhancing pricing flexibility. In any event, because of its erroneous understanding of the legal 
standard, the Panel appeared to consider it unnecessary to engage further with the European  Union's 
factual allegation regarding the link between the B&O tax credit and the particular LCA.  
5.556.   Under these circumstances, we consider that the Panel's statement that the B&O tax credits 
"may currently be generated" with respect to Boeing aircraft "such as" the 737 MAX1236 speaks only 
to the possibility  that the B&O tax credits may be generated in connection with development of this 
aircraft. This is especially so given that the Panel, having dismissed the European  Union's claims 
regarding the untied subsidies on the basis of its overly stringent legal s tandard for establishing 
causation, did not engage with the European  Union's factual argument. Accordingly, we do not 
consider that there are Panel findings or undisputed facts on the record that would enable us to 
complete the legal analysis with respect to the Washington State B&O tax credits for 
preproduction/aerospace product development . 
                                                
1230 Panel  Report, fn  2775 to para.  9.76 (referring to European  Union's first written submission to the 
Panel, para.  1160; second written submission to the Panel, para.  1066).  
1231 Panel  Report, fn  3120 to para.  9.273.  
1232 Panel  Report, para.  8.678.b. 
1233 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , para. 1344.  
1234 European  Union's appellant's submission, para.  668 (quoting Panel Report, fn  3120 t o para.  9.273). 
(emphasis added)  
1235 Panel Report, fn  3120 to para.  9.273. (emphasis original)  
1236 Panel Report, fn 3120 to para. 9.273.  WT/DS353/AB/RW  
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 5.557.   With respect to the second untied subsidy measure, the Panel found that Boeing had received 
B&O tax credits for property taxes  to new construction.1237 The Panel noted the European  Union's 
argument that sites related to the production of the 737NG, 737  MAX, and 787 are those for which 
Boeing has most recently made the largest investments in land and facilities and, thus, the B&O tax 
credits related to th ese investments are "most closely linked" to those aircraft .1238 In addition, the 
Panel observed that the scope of the B&O tax credit was expanded by HB 2466 additionally to cover 
leasehold excise taxes .1239 In this regard, the Panel took note of the European  Union's argument 
that the B&O tax credit for leasehold excise taxes related to the Dreamlifter Operations Center1240, 
which, according to the European  Union, is used for Boeing's production of the 787 .1241 The Panel 
found that the total amount of the Washington St ate B&O tax credit for property taxes and leasehold 
excise taxes between 2013 and 2015 was [BCI].1242 
5.558.   As explained, the Panel noted the European  Union's argument that Boeing had recently made 
the largest investments in land and facilities related to the produ ction of the 737NG, 737 MAX, and 
787, allegedly generating B&O tax credits for property taxes.1243 However, the European  Union did 
not identify the specific sites in which such investments were made, or when such investments 
occurred.1244 Further, although the U nited States did not specifically comment on the 
European  Union's factual argument that Boeing had recently made qualified investments in land and 
facilities related to the production of , inter alia, the 737  MAX and 737NG, it refuted generally the 
existenc e of the requisite link between this subsidy and the particular aircraft.1245 Under these 
circumstances, we do not consider it undisputed that the B&O tax credits for property taxes were 
generated in connection with production of the 737  MAX and 737NG. We fur ther recall that, in the 
original proceedings, the Appellate  Body noted that the European  Communities had asserted that 
the Washington State B&O tax credit for property taxes benefited only the 787 and, therefore, 
considered that it could not inquire wheth er its effects can be cumulated with those of the tied tax 
subsidies in the 100 -200 seat LCA market.1246 Moreover, even assuming that the B&O tax credits 
were generated in connection with production of the 737  MAX and 737NG, it is still unclear whether 
this o ccurred before – or was expected to occur at the time of – the five particularly price -sensitive 
sales campaigns in question. Thus, we are unable to determine whether it was possible in the first 
place for Boeing to factor in the benefits of this subsidy w hen making pricing decisions in these sales 
campaigns.  
5.559.   Turning to the B&O tax credit for leasehold excise taxes, we note the Panel's reference to 
the European  Union's argument that this subsidy related to the facilities used for production of the 
787.1247 Further, the United  States argued that the value to Boeing's LCA division of the Washington 
State B&O tax credit for leasehold excise taxes is zero, and Boeing does not claim credits for 
leasehold excise taxes.1248 As such, we fail to see undisputed facts on th e Panel record that the B&O 
tax credits for leasehold excise taxes were generated in connection with production of the 737  MAX 
and 737NG. We are aware that, in its appellant's submission, the European  Union submits that there 
are Panel findings, in paragra ph 9.253 of the Panel  Report, that the Washington State B&O tax credit 
for property taxes and leasehold excise taxes is available "in connection with property where the 
787 and  777X (as well as  737 families ) are produced".1249 However, this paragraph contains only a 
description of the challenged untied subsidy measures based on the European  Union's allegation, 
rather than amounts to the Panel's own factual finding that the B&O tax credits were generated in 
                                                
1237 Panel  Report, para.  9.76. 
1238 Panel  Report, fn 2776 to para.  9.76 (referring to European Union's first written submission  to the 
Panel, para.  1160; second written submission  to the Panel, para.  1066).  
1239 Panel  Report, para.  7.9. 
1240 Panel  Report, fn  2776 to para.  9.76 (referring to European Union's first written submission  to the 
Panel, para.  1160; second written subm ission  to the Panel, para.  1066) . 
1241 European Union's first written submission  to the Panel, para.  1160. 
1242 Panel  Report, para. 8.678 . 
1243 Panel  Report, fn 2776 to para.  9.76 (referring to European Union's first written submission  to the 
Panel, para.  1160; second written submission  to the Panel, para.  1066).  
1244 European Union's first written submission  to the Panel, para.  1160; second written submission  to 
the Panel, para.  1066. 
1245 United  States ' first written submission to the Panel, paras.  825, 998, and 1068.  
1246 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , para. 1341.  
1247 Panel  Report, fn  2776 to para.  9.76 (referring to European Union's first written submission  to the 
Panel, para.  1160; second written submission  to the Panel, para.  1066) . 
1248 United  States ' first written submission to the Panel, para.  510. 
1249 Panel Report, para. 9.253. a. WT/DS353/AB/RW  
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 connection with the 7 37 MAX or 737NG, or otherwise they enhanced Boeing's pricing flexibility for 
these aircraft.  
5.560.   Accordingly, and taking into account the relatively small magnitude of the subsidy, we do 
not consider that Panel findings or undisputed facts on the record demons trate a genuine link 
between the B&O tax credits for property taxes and leasehold excise taxes, on the one hand,  and 
Boeing's pricing of the 737  MAX or 737NG, on the other hand . 
5.561.   With respect to the third untied subsidy measure – the sales and use tax exemp tions for 
computer software, hardware, and peripherals when these items are purchased for or used in the 
development of commercial airplanes or their components – the Panel noted the  European Union's 
argument that Boeing had recently made the largest inves tments in computer equipment to facilities 
related to the production of the 737NG, 737 MAX, and 787, and, thus, the tax exemptions related 
to these investments are "most closely linked" to those aircraft.1250 According to the Panel, the total 
amount of the Wa shington State sales and use tax exemptions for computer software, hardware, 
and peripherals between 2013 and 2015 was [BCI].1251 
5.562.   We note that, while the European  Union argued before the Panel that Boeing had "recently" 
made the largest investments in compute r equipment to facilities related to the production of , 
inter alia, the 737 MAX and 737NG, it did not identify the specific sites in which such investments 
were made, or when such investments occurred.1252 Further, although the United  States did not 
specifica lly comment on the European  Union's factual argument that Boeing had recently made 
qualified investments in computer equipment to facilities related to , inter alia, the 737  MAX and 
737NG, it generally refuted the existence of the requisite link between thi s subsidy and the particular 
aircraft.1253 Moreover, in its appellant's submission, the European  Union itself points to the Panel's 
statement that the sales and use tax exemptions for computer equipment are "related to 787 
production"1254, rather than 737  MAX or  737NG production. We recall that, also in the original 
proceedings, the Appellate  Body found that there was no indication on the record that the sales and 
use tax exemptions had been received or expected to be received in connection with expenditures 
related to the 737NG and that, if anything, the sales and use tax exemptions had been granted in 
connection with expenditures related to Boeing aircraft families other than  the 737NG.1255 Under 
these circumstances, we fail to see any Panel findings or undisputed facts on the record that the 
sales and use tax exemptions were generated in connection with items purchased for or used in the 
development of the 737  MAX and 737NG, or they otherwise enhanced Boeing's pricing flexibility for 
these aircraft.  
5.563.   Accordingly, a nd taking into account the relatively small magnitude of the subsidy, we 
consider that neither Panel findings nor undisputed facts demonstrate a genuine link between the 
sales and use tax exemptions for computer software, hardware, and peripherals, on the one hand, 
and Boeing's pricing of the 737  MAX or 737NG, on the other hand . 
5.8.3.2.2   Post-2006 aeronautics R&D untied subsidies  
5.564.   Before the Panel, the European Union argued that the post -2006 aeronautics R&D 
subsidies1256 operate in a manner that is "identical to the re maining state and local subsidies".1257 
According to the European  Union, those subsidies operate to lower Boeing's pricing of current LCA, 
including the 737  MAX and 737NG, because they provide Boeing with access to and use of research 
results and inputs that enable it to continue maturing technologies for application to future 
                                                
1250 Panel  Report, para.  9.76 and fn  2778 thereto (referring to European Union's first written submission  
to the Panel, para.  1160; second written submission  to the Panel , para. 1066 ). 
1251 Panel  Report, para.  8.678.d.  
1252 European Union's first written submission  to the Panel, para.  1160; second written submission  to 
the Panel , para. 1066 . 
1253 United  States ' first written submission to the Panel, paras.  825, 998, and 1068.  
1254 European  Union's appellant's submission, para.  668 (referring to Panel  Report, para.  9.253.c).  
1255 Appellate Body Report, US – Large Civil Aircraft (2nd complaint) , para.  1345.  
1256 These subsidies c onsist of the post -2006 NASA and USDOD aeronautics R&D subsidies and the 
non-flight test funding portion of the FAA aeronautics R&D subsidy. (Panel  Report, para.  9.87. See also 
ibid., para. 9.85 and fn  3126 to para.  9.278)  
1257 Panel  Report, paras.  9.278  and 9.474 (referring to European Union's first written submission to the 
Panel, paras.  1180 and 1187).  WT/DS353/AB/RW  
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 generations of LCA without having to pay the US Government for such access and use.1258 The 
European  Union explained that the post -2006 aeronautics R&D subsidies relieve Boeing from paying 
to licence the use of IP in its technology development activities.1259 Those subsidies therefore lower 
Boeing's costs of licensing IP rights to LCA technology, and of developing that technology, in order 
to continue improving its products and to maintain the competitiveness of products, "enabling it to 
act on its incentive to pass such cost savings on to its customers in the form of lower prices for 
Boeing LCA".1260 
5.565.   With respect to the amounts of the post -2006 aeronautics R&D subsidies, the Panel 
considered the parties' estimates of the subsidy amounts, which suggested that the total amount of 
these subsidies between 2007 and 2012 can potentially be as large as around [BCI], to be credible 
estimates.1261 The Panel explained that the European  Union's clai m with respect to these subsidies 
raises two issues. The first is whether the post -2006 aeronautics R&D subsidies relieve Boeing from 
paying to licence IP in its technology development activities and thus can be considered to lower 
Boeing's costs. The seco nd is whether, if the Panel accepts that characterization of the operation of 
the subsidies, these subsidies have been demonstrated to affect Boeing's LCA pricing behaviour.1262 
With respect to this second issue, the Panel found that, as with the state and lo cal cash flow 
subsidies, the European Union had failed to demonstrate that the post -2006 aeronautics R&D 
subsidies have a genuine causal link to Boeing's LCA pricing because it had not provided "any 
theoretical or other basis (such as cash flow constraints )" for considering that Boeing's LCA pricing 
behaviour would have been any different absent the subsidies.1263 On that basis, the Panel 
considered it "unnecessary" to address the first issue. Nevertheless, the Panel went on to observe 
that "the vast majority"  of the post -2006 aeronautics R&D subsidies did not appear to be related "in 
any sense" to the production of the particular LCA that are allegedly being offered to customers at 
lower prices.1264 The Panel added that, at most, those subsidies could relate to t he development 
technologies for potential application of future generations  of Boeing LCA.1265 In addition, in the 
context of examining whether the post -2006 aeronautics R&D subsidies should be aggregated with 
the post -2006 state and local cash flow subsidies , the Panel explained that the former subsidies are 
connected in an "even more indirect and speculative manner" to production of any existing LCA than 
the latter subsidies.1266 
5.566.   With respect to the first issue referred to by the Panel, we note the United State s' contention 
that the European Union never established that, absent the post -2006 aeronautics R&D subsidies, 
Boeing would have had to incur additional costs in licensing IP from the US  Government.1267 We 
further note that the Panel did not make any finding w ith respect to this issue because it applied an 
overly rigid legal standard for establishing causation and required the European  Union to 
demonstrate that Boeing's LCA pricing behaviour would have been different absent the subsidies.1268 
As a result, we see n o Panel findings or undisputed facts on which to find that Boeing enjoyed 
additional cash flow by virtue of the post -2006 aeronautics R&D subsidies that , in turn , could 
potentially be directed to reduce the prices of its LCA. In addition, with respect to t he second issue 
referred to by the Panel, i.e.  whether the alleged additional cash affected Boeing's pricing, the Panel 
not only dismissed the European  Union's claim because it was based on an erroneous legal standard , 
                                                
1258 Panel  Report, paras.  9.278 and 9.473.  
1259 Panel  Report, para.  9.279.  
1260 Panel  Report, para.  9.279 (quoting European Union's response to Panel  question No.  43, para.  280).  
1261 As regards the NASA and USDOD aeronautics R&D subsidies, the Panel stated that it was unable to 
estimate the amounts of the subsidies on the basis of the evidence on the record, but considered the 
United  States' estimates of  the amounts of the financial contribution at [BCI] and [BCI], respectively, 
between 2007 and 2012 to be credible  estimates. (Panel  Report, para.  11.7.b.i -ii) With respect to the FAA 
aeronautics R&D subsidy, the Panel stated that it was unable to estimate the amount of the subsidy on the 
basis of the evidence on the record, but considered the European  Union's estimate of the amount of the 
financial contribution at US$ 27.99 million between 2010 and 2014 to be a credib le estimate. (Ibid., 
para. 11.7.b.iii) As  the Panel noted, the European Union had argued that only the non -flight-test funding 
portion of the FAA aeronautics R&D subsidy operates through a price causal mechanism. (Ibid. , para. 9.85 and 
fn 3126 to para.  9.278)  
1262 Panel  Report, para.  9.287.  
1263 Panel  Report, para.  9.288.  
1264 Panel  Report, para.  9.289 and fn  3149 thereto.  
1265 Panel  Report, para.  9.289.  
1266 Panel  Report, para.  9.91. 
1267 Panel  Report, para.  9.282.  
1268 Panel  Report, para.  9.288.  WT/DS353/AB/RW  
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 but also denied, as a factual matter,  the existence of any link between the post -2006 aeronautics 
R&D subsidies and the production of the particular LCA, including the 737  MAX and 737NG. Indeed, 
in addition to characterizing such a link as even more "indirect" and "speculative" than that rela ting 
to the other untied subsidies1269, the Panel found that these subsidies relate only to future 
generations  of Boeing LCA.1270 We note that, in its appellant's submission, the European  Union 
maintains that the nexus to future  LCA reveals a nexus with Boeing's  research, development, 
production, and sale of present  LCA "because the research and development for future generations 
of LCA is an investment expense that Boeing must finance through the cash flows it generates under 
each of Boeing's current families of  LCA".1271 However, we disagree that the Panel's statement that 
the subsidies relate to future generations  of LCA is sufficient for finding the requisite link between 
the subsidies and production of the 737  MAX and 737NG. For these reasons, we find that neith er 
Panel findings nor undisputed facts demonstrate that the post -2006 aeronautics R&D subsidies 
complemented and supplemented the effects of the tied tax subsidies on the prices of the 737  MAX 
and 737NG.  
5.567.   Having found no basis to conclude that the post -2006 aeronautics R&D subsidies cause 
adverse effects in the post -implementation period, we need not address the United States' 
conditional claim that the Panel erred in finding that these subsidies confer a benefit within the 
meaning of Article 1.1(b) of the S CM Agreement.1272 
5.8.4   Overall c onclusion  regarding price effects  
5.568.   The Panel did not consider that, in order to find significant lost sales through a price causal 
mechanism, there must be no non -price factors that potentially contributed to Boeing having won 
those sales. Rather, the Panel's understanding of the legal stan dard properly reflected a weighing 
and balancing of price and non -price factors to reach a conclusion as to whether a sales campaign 
was particularly price -sensitive, such that the tied tax subsidies could be found to be a genuine and 
substantial cause of serious prejudice. Accordingly, we find that the Panel did not err in the 
interpretation of Articles  5, 6.3, and, as a consequence, Article 7.8 of the SCM Agreement, when 
identifying the applicable causation standard.  
5.569.   As regards the Panel's assessment of the relative significance of the amount of the tied tax 
subsidies, we consider that there was a basis for the Panel to assume that Boeing had been able to 
use the benefits of the subsidies arising from all its LCA sales to lower the prices in particularly 
price-sensitive sales campaigns in the single -aisle LCA market. In addition, the Panel was not 
required to establish that the per -aircraft amount of the subsidies available for these sales campaigns 
exceeds the differentials in the net prices of Airbus' an d Boeing's competing aircraft for purposes of 
finding that the subsidies are a genuine and substantial cause of Airbus' loss of these sales, and , 
consequently , serious prejudice. We thus find that the Panel did not err under Articles  5 and 6.3 of 
the SCM  Agreement, or acted inconsistently with Article  11 of the DSU, in its assessment of the 
relative significance of the amount of the tied tax subsidies.  
a. We therefore uphold  the Panel's finding , in paragraph  9.252 of the Panel  Report, and as a 
consequence to t he extent that this is reflected in paragraph 11.8.a, that the 
European  Union had failed to establish that the tied tax subsidies cause serious prejudice, 
within the meaning of Articles  5(c) and 6.3 of the SCM  Agreement, in the twin -aisle LCA 
market in the  post-implementation period.  
                                                
1269 Panel Report, para. 9.91.  
1270 Panel Report, para. 9.289.  
1271 European  Union's appellant's submission, para.  673. 
1272 United States' Notice of Other Appeal, para. 7; other appellant's submission, section III.A. This 
conditional claim consists of a challenge, under Article 1.1(b) of the SCM  Agreement and Article 11 of the DSU, 
that the Panel erred in conducting its benefit analysis with regard to the post -2006 NASA procurement 
contracts and cooperative agreements , the post -2006 USDOD  assistance instruments, and the FAA -Boeing 
CLEEN Agreement . The United States requests us to address this claim if we were to modify or reverse the 
Panel's findings that the post -2006 aeronautics R&D subsidies did not cause adverse effects. At the oral 
hearing, the United States clarified that the condition for s uch a claim would not be triggered in the event that 
we were to reverse the Panel's adverse effects findings, but were unable to complete the legal analysis, with 
respect to these subsidies.  WT/DS353/AB/RW  
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 b. We also uphold  the Panel's findings , in paragraphs 9.407, 9.444,  and 11.8.c -d of 
the Panel  Report, that the European  Union had established that the tied tax subsidies 
cause significant lost sales, within the meaning of Articles  5(c) and 6.3(c) of the 
SCM Agreement, in the single -aisle LCA market, with respect to the Fly Dubai 2014, 
Icelandair 2013 , and Air Canada 2013 sales campaigns, in the post -implementation 
period, as well as a threat of impedance of imports of Airbus single -aisle LCA  to the 
United  States and exports of Airbus single -aisle LCA to the United Arab Emirates, within 
the meaning of Articles 5(c) and 6.3(a) and (b) of the SCM Agreement, in the 
post-implementation period.  
5.570.   By rejecting that untied subsidies may be found to have a genuine link to the production of 
relevant LCA as was accepted by the Appellate Body in the original proceedings, the Panel failed to 
apply the correct legal standard for assessing whether untied su bsidies are a genuine cause of 
adverse effects under Articles  5 and 6.3 of the SCM  Agreement. In particular, we do not consider 
that the legal standard for causation requires a showing that the untied subsidies actually altered 
Boeing's pricing of its LCA.  Accordingly, we find that the Panel erred under Articles 5 and 6.3 of the 
SCM Agreement by requiring that the European  Union demonstrate that the untied subsidies actually 
led to price reductions of Boeing LCA sales in order to establish that the subsidie s caused adverse 
effects through the lowering of Boeing LCA prices.  
a. We therefore reverse  the Panel's findings , in paragraphs 9.277, 9.291, 9.472, and 9.476  
of the Panel  Report, and, as a consequence, to the extent that this is reflected in 
paragraphs 11.8. a and 11.8.e, that the European Union had failed to establish that the 
untied subsidies cause serious prejudice, within the meaning of Articles  5(c) and 6.3 of 
the SCM  Agreement, in the post -implementation period through a price causal mechanism. 
Having re versed this finding, we do not address whether, in addition, the Panel acted 
inconsistently with Article 11 of the DSU.  
b. We further find that we are unable to complete the legal analysis with regard to whether 
the untied subsidies cause adverse effects with in the meaning of Articles  5 and 6.3 of the 
SCM Agreement.  
5.9  Additional claims on appeal  
5.571.   We note that there are certain additional claims by the European Union, and conditional 
claims by the United States, that we do not address because we do not consider th eir disposition 
necessary for the resolution of this dispute.  
5.572.   First, the European Union claims that the Panel erred in the interpretation of Articles 5, 6.3, 
and 7.8 of the SCM Agreement in finding that "a subsidized product can only cause serious prejudi ce 
to another product if the two products in question compete in the same market"1273, as it relates to 
the serious prejudice phenomena of significant price s uppression, price depression, and  lost sales. 
The European Union maintains that we should instead "in terpret Article 6.3(c) to permit a finding of 
adverse effects in the form of 'significant price suppression, price depression or lost sales' where the 
subsidised product and the like product do not compete in the same market".1274 The European  Union 
states that, in requesting reversal of this Panel finding, it seeks to enable us, in completing the legal 
analysis, to find "significant lost sales in instances where the 787 -8/9 and the A350XWB -900 
competed for the sale, even though the Panel placed these  competing products into two separate 
product markets".1275  
5.573.   We note that, although the Panel considered that Airbus and Boeing LCA tend to be offered 
in competition with each other in two product markets consisting of medium -sized and larger -sized 
twin-aisle aircraft, the Panel nevertheless noted that there is no bright -line distinction between these 
markets and that, depending on the circumstances, certain larger medium -sized aircraft could be 
found to exercise meaningful competitive constraints on smaller l arger -sized aircraft.1276 In any 
                                                
1273 European Union's appellant's submission, para. 470 (quoting Panel Report, para. 9. 33, in turn 
referring to Appellate Body Report, EC and certain member States – Large Civil Aircraft , para. 1119).  
1274 European Union's appellant's submission, para. 470.  
1275 European Union's appellant's submission, para. 471.  
1276 Panel Report, paras. 9.43 -9.44. WT/DS353/AB/RW  
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 event, in light of our disposition of other claims on appeal, and, in particular, the fact that we are 
not called upon to consider the European Union's request for completion of the legal analysis 
regarding the twin -aisle LCA market , we need not consider any potential competitive relationship 
between the 787 -8/9 and the A350XWB -900 LCA and, therefore, do not address the 
European  Union's claim of error.  
5.574.   The European Union also claims that the Panel erred in the interpretation of  Articles 5, 6.3, 
and 7.8 of the SCM Agreement in purportedly finding that aggregation and cumulation of subsidies 
are the only two approaches to the collective assessment of the adverse effects of multiple subsidies. 
The European Union adds that, although  the occasion did not arise for the Panel to apply its 
interpretative finding in this case, the European  Union nevertheless seeks reversal of the Panel's 
interpretation since it would be, in the European Union's view, "critical for the purposes of the 
Appellate Body's completion of the legal analysis".1277 For instance, the European Union submits that 
it should be possible to follow a different approach to assessing collectively the effects of multiple 
subsidies by determining first that various subsidies are each a genuine  cause of adverse effects, 
and then concluding that they are together a substantial  cause of adverse effects.  
5.575.   The Appellate Body has previously found that "at least two approaches to a collective 
assessment of the effects of multiple subsidy  measures may be used, namely, aggregation and 
cumulation ."1278 As this language suggests, the Appellate Body has not excluded the existence of 
other methods for the collective assessment of the effects of multiple subsidies. In any event, as we 
explained in section 5.8.3.2  above , we followed a cumulation approach in assessing whether the 
effects of the untied subsidies complement and supplement the price effects of the tied tax subsidies. 
We further note that we were unable to conclude that the untied subsidi es were a genuine cause of 
adverse effects  and such a showing would also have been required under the European Union's 
proposed approaches to the collective assessment of multiple subsidies . Therefore, in light of our 
disposition of other claims on appeal,  we are not called upon to consider any such additional methods 
for the collective assessment of subsidies and, therefore, do not address the European  Union's claim 
of error.  
5.576.   Finally, we note that the United States has presented four conditional claims cha llenging 
various findings of the Panel. Above we have explained that, in light of our disposition of other claims 
on appeal, the conditions for each of these claims have not been triggered.1279 We therefore do not 
address the United States' conditional claims  of error.  
6  FINDINGS AND CONCLUS IONS  
6.1.  For the reasons set out in this Report, the Appellate Body makes the following findings and 
conclusions.  
6.1  Terms of reference  
6.2.  The question of whether a claim  falls within the scope of Article 21.5 proceedings is to be 
decided based on whether  the claim has been resolved on the merits in the original proceedings and 
was thus covered by the recommendations and rulings of the DSB. A party's "fault" for the 
non-resolution of a claim, or the lack of such fault, is not determinat ive of whether a claim can be 
reasserted in compliance proceedings. Accordingly, we find that the Panel did not err in admitting 
the European  Union's claims relating to the pre -2007 USDOD procurement contracts in these 
compliance proceedings.  
a. We therefore uphold  the Panel's finding , in paragraphs 7.131 and 11.5.a.ii of the 
Panel  Report , that the European Union's claims relating to the pre -2007 USDOD 
procurement contracts were within its terms of reference . 
                                                
1277 European Union's appellant's submission, paras. 479 -480. 
1278 Appellate Body Report, US – Large Civil Aircraft  (2nd complaint) , para. 1290.  
1279 See paras. 5.119, 5.366, 5.551, and 5.567 . WT/DS353/AB/RW  
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 6.2  USDOD procurement contracts  
6.3.  We find that the Panel acted inconsistently with Article  11 of the DSU in its financial contribution 
analysis under Article  1.1(a)(1) of the SCM  Agreement by not engaging sufficiently with the 
European  Union's evidence and arguments, and by failing to provide reason ed and adequate 
explanations for its findings. Furthermore, we find that the Panel's benefit analysis suffers from the 
same shortcomings.  
a. We therefore reverse  the Panel's finding , in paragraphs 8.437.b and  11.7.c.i of the 
Panel  Report , that, assuming argue ndo the payments and access to USDOD facilities, 
equipment, and employees provided to Boeing through the pre -2007 and post -2006 
USDOD procurement contracts were to involve financial contributions,  the European Union 
has not established that they confer a b enefit on Boeing within the meaning of 
Article  1.1(b) of the SCM  Agreement. We also find that there are insufficient factual 
findings by the Panel or undisputed facts on the Panel record for us to complete the legal 
analysis in this respect.  
6.3  FSC/ETI tax co ncessions  
6.4.  For revenue to be considered "foregone" under Article  1.1(a)(1)(ii) of the SCM Agreement, a 
government must relinquish an entitlement to raise revenue. Accordingly, establishing that such a 
financial contribution exists requires a determination t hat a government has relinquished an 
entitlement to raise revenue. This determination must focus on the conduct of a government, rather 
than on the use of tax concessions by the eligible taxpayers. We find that the Panel erred by focusing 
instead on whethe r Boeing used FSC/ETI tax concessions.  
a. We therefore reverse  the Panel's finding , in paragraphs 8.612 and 11.7.c.ii of the Panel 
Report , that the European Union had not established that, after the expiry of the 
implementation period, the United States grant s or maintains subsidies to Boeing in the 
form of FSC/ETI tax concessions because the European Union had failed to demonstrate 
that those tax concessions involved a financial contribution within the meaning of 
Article  1.1(a)(1)(ii) of the SCM Ag reement.  
b. Furthermore, we have complete d the legal analysis and find that, to the extent that Boeing 
remains entitled to FSC/ETI tax concessions in the post -implementation period, the 
United  States has not ceased to provide a financial contribution and thus has not 
withdrawn FSC/ETI subsidies with respect to Boeing within the meaning of Article 7.8 of 
the SCM  Agreement.  
6.4  City of Wichita industrial revenue bonds  
6.5.  The length of time during which the subsidy programme has been in operation  must be taken 
into account by panels in their assessment of specificity under Article  2.1(c)  of the SCM Agreement . 
However, it does not follow from this that the entire period during which the programme has been 
in operation has necessarily to be chosen as the relevant time  period in determining whether, under 
the second sentence  of this provision , disproportionately large amounts of subsidy have been 
granted to certain enterprises. Accordingly, we find that the Panel did not err in its interpretation of 
Article  2.1(c) of the  SCM Agreement in concluding that, in the specific circumstances of this case, 
the relevant time  period over which to consider disproportionality was as from the end of the 
implementation period. With respect to the Panel's application of Article 2.1(c) of  the 
SCM Agreement, we find that the Panel erred in finding that no disparity existed between the 
expected and actual distribution of the subsidy.  
a. We therefore reverse  the Panel's finding , in paragraphs 8.640 and  11.7.c.iii of the 
Panel  Report , that the E uropean  Union has failed to establish that the tax abatements 
provided through IRBs issued by the City of Wichita involve specific subsidies within the 
meaning of Articles 1 and 2 of the SCM  Agreement . We also find that there are insufficient 
factual findi ngs by the Panel or undisputed facts on the Panel record for us to complete 
the legal analysis in this respect. Having reversed the Panel's  finding, we do not consider 
it necessary to address whether, in addition, the Panel acted inconsistently with Articl e 11 
of the DSU.  WT/DS353/AB/RW  
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 6.5  South Carolina economic development bonds  
6.6.  With regard to the European  Union's claim that the Panel erred in its interpretation of the term 
"limited number" in the second sentence of Article  2.1(c) of the SCM Agreement, we observed that 
what constitutes a quantitatively limited group of enterprises must be determined on a case -by-case 
basis, taking into account the particular characteristics of the subsidy programme and the 
circumstances of the case. We disagree with the European Union that  the Panel implicitly interpreted 
the term "limited number" as "one" or "fewer than three". Rather, the Panel considered that the 
European  Union had not met its burden of proof as to whether the EDB subsidy has been used by 
only a "limited number" of certa in enterprises. Accordingly, we find that the Panel did not err in its 
interpretation of the term "limited number" of certain enterprises in Article 2.1(c) of the 
SCM Agreement.  
6.7.  With regard to the European  Union's claim that the Panel erred in its interpre tation and 
application of the term "certain enterprises" in the second sentence of Article  2.1(c), we observed 
that the determination of whether a number of enterprises or industries constitute "certain 
enterprises" should be made in light of  all relevant characteristics of the entities, including the nature 
and purpose of their activities in the markets in question and the context in which these activities 
are exercised. The Panel erred by taking into account three specific entities in its analysis under 
Article 2.1(c) without having established that they constitute "certain enterprises". However, the 
Panel's rejection of the European  Union's claims does not hinge on its statement relating to the 
relevance of the three specific entities in its analysis of de facto specificity.  
6.8.  With regard to the European  Union's claim that the Panel erred in its interpretation of the term 
"predominant use" in the second sentence of Article  2.1(c), we observed that this term refers 
primarily to the incidence or frequency  with which the subsidy is used by certain enterprises. 
Furthermore, we found that evidence demonstrating the existence of "predominant use by certain 
enterprises" may also be pertinent for demonstrating the granting of "disproportionately large 
amounts of subs idy to certain enterprises". Accordingly, we find that, by excluding a category of 
evidence potentially relevant to the assessment of the existence of "predominant use by certain 
enterprises" and ultimately for determining de facto specificity, on the basi s that this evidence was 
more relevant to the assessment of another factor under Article  2.1(c), second sentence, the Panel 
erred in its interpretation of these factors in Article  2.1(c).  
a. We therefore reverse  the Panel's finding , in paragraph 8.843 of the Panel Report , that the 
European Union has failed to establish that the subsidy provided by South Carolina through 
EDB proceeds is specific within the meaning of Article 2.1 of the SCM  Agreement . We also 
find that there are insufficient factual findings  by the Panel or undisputed facts on the 
Panel record for us to complete the legal analysis in this respect. Having reversed the 
Panel's finding, we do not consider it necessary to address whether, in addition, the Panel 
acted inconsistently with Article 1 1 of the DSU.  
6.6  South Carolina MCIP job tax credits  
6.9.  A subsidy is specific under Article 2.2 of the SCM Agreement when access to it is either explicitly 
or implicitly limited to entities engaged in economic activities in the market that have their 
headquarter s, branch offices, or manufacturing facilities in a "designated geographical region" within 
the jurisdiction of the granting authority, or that are otherwise established within such a region. In 
the present case, such limitation contained in Section 12 -6-3360 of the South Carolina Income Tax 
Act is not made void by the fact that enterprises not currently located in an MCIP may become part 
of an MCIP in the future and then qualify for the subsidy. We find that the Panel erred in the 
application of Article 2. 2 of the SCM Agreement in stating that the availability of the MCIP subsidy 
only to enterprises located within an MCIP "cannot be meaningfully considered to amount to a 
limitation under Article 2.2" of the SCM Agreement.  
a. We therefore reverse  the Panel's fi nding , in paragraphs 8.931 and 11.7.c.vii of the 
Panel  Report , that the European Union has failed to establish that the subsidy provided 
through the additional corporate income tax credits is specific within the meaning of 
Article  2.2 of the SCM  Agreement.  WT/DS353/AB/RW  
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 b. Furthermore, we complete the legal analysis and find that the subsidy provided to Boeing 
through the additional corporate income tax credits, pursuant to Section 12 -6-3360 of the 
South Carolina Income Tax Act, is specific within the meaning of Article 2.2  of the 
SCM Agreement.  
6.7  Continuing adverse effects  
6.10.   In assessing whether appropriate steps have been taken to remove the adverse effects of a 
subsidy within the meaning of Article 7.8 of the SCM Agreement, the time  period for assessing the 
removal of adverse  effects may include developments subsequent to the time of order, including 
through the point of delivery. Accordingly, we find that the Panel erred in its interpretation of 
Article  7.8 by excluding ab initio, from an inquiry into whether the United State s had failed to take 
appropriate steps to remove the adverse effects of the subsidies, evidence relating to transactions 
for which the orders arose in the original reference period but for which deliveries remain outstanding 
in the post -implementation peri od. 
a. We therefore reverse  the Panel's interpretation of Article 7.8 of the SCM Agreement , in 
paragraphs 9.311 to 9.314 of the Panel Report, and its statement in paragraph 9.332 of 
the Panel Report , that reliance on the role of deliveries of aircraft in the 
post-implementation period as evidence of a continuation of serious prejudice would be 
inconsistent with Article 7.8. Having reversed this finding, we do not address whether, in 
addition, the Panel erred in the application of Article 7.8, or acted inconsis tently with 
Article  11 of the DSU. However, because it is not clear whether the Panel's decision to 
exclude two additional sales campaigns as significant lost sales resulted from the above 
error, and because the European Union's request is based on a premi se that we rejected, 
we decline to reverse  the Panel's finding , in paragraph 9.407 of the Panel Report, insofar 
as it excludes the Fly  Dubai 2008 and Delta Airlines 2011 sales campaigns.  
b. We further find that the Panel did not err under Articles 5 and 6.3 o f the SCM Agreement, 
or act inconsistently with Article 11 of the DSU, in separately finding that the 
European  Union's arguments are unsupported by the evidence and/or in contradiction with 
the findings made in the original proceeding s. We therefore uphold  the Panel's finding , in 
paragraphs 9.332 and 11.8.b of the Panel Report , that the European Union had failed to 
establish that the original adverse effects of the pre -2007 aeronautics R&D subsidies 
continue into the post -implementation period as present se rious prejudice in relation to 
the A330 and A350XWB, within the meaning of Articles 5(c) and 6.3 of the 
SCM Agreement.  
6.8  Technology effects  
6.11.   We consider that the Panel was required to assess whether the acceleration effects of the 
pre-2007 aeronautics R&D sub sidies had an impact, not only on the timing of the launch of the 787, 
but also on the timing of its first delivery. We are not persuaded that it was sufficient for the Panel 
to base its conclusion regarding the European Union's technology effects claims s olely on its 
understanding of the original panel's findings. Given that the counterfactual inquiry in these 
compliance proceedings was different from the one at issue in the original proceedings, we would 
have expected an analysis from the Panel as to why a focus on post -launch acceleration effects was 
not warranted. By failing to assess in its counterfactual analysis whether the acceleration effects of 
the pre -2007 aeronautics R&D subsidies had an impact, not just on the launch of the 787, but also 
on the timing of first delivery of the 787, the Panel did not properly assess the counterfactual 
question as to whether there remain acceleration effects of the pre -2007 aeronautics R&D subsidies 
in the post -implementation period. Accordingly, we find that the Panel erred in the application of 
Articles  5 and 6.3 and, as a consequence, Article 7.8 of the SCM  Agreement.  
a. We therefore reverse  the Panel's findings, in para graphs 9.177, 9.186,  and 9.355 of the 
Panel Report, that the European  Union failed to demonstrate: (i) that the acceleration 
effects of the pre -2007 aeronautics R&D subsidies in relation to Boeing's technology 
development for the 787 have continued into th e post -implementation period; (ii) the 
existence of original subsidy technology effects of the pre -2007 aeronautics R&D subsidies 
in relation to Boeing's technology development for the 787 in the post -implementation 
period ; and (iii) the existence of spill -over technology effects of the pre -2007 aeronautics WT/DS353/AB/RW  
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 R&D subsidies on the 787 -9/10, the 777X, and the 737 MAX in the post -implementation 
period . 
b. As a consequence, and to that extent, we also reverse  the Panel's findings, in paragraphs 
9.219 -9.220, 9.372 -9.373, 11.8.a, and 11.8.e of the Panel Report, with respect to the 
European  Union's failure to establish that the pre -2007 aeronautics R&D subsidies are a 
genuine and substantial cause of any of the forms of serious prejudice alleged with respect 
to the A350 XWB and the A320neo in the post -implementation period, through a 
technology causal mechanism. Having reversed these findings, we do not address the 
European  Union's additional claims as to whether the Panel erred in the application of 
Articles 5, 6.3, and 7.8 of the SCM Agreement or acted inconsistently with Article 11 of 
the DSU.  
c. We further find that we are unable to complete the legal analysis with regard to whether 
there remain acceleration effects of the pre -2007 aeronautics R&D subsidies in the 
post-implementation period.  
6.9  Price effects  
6.12.   The Panel did not consider that, in order to find significant lost sales through a price causal 
mechanism, there must be no non -price factors that potentially contributed to Boeing having won 
those sales. Rather, the Pan el's understanding of the legal standard properly reflected a weighing 
and balancing of price and non -price factors to reach a conclusion as to whether a sales campaign 
was particularly price -sensitive, such that the tied tax subsidies could be found to be  a genuine and 
substantial cause of serious prejudice. Accordingly, we find that the Panel did not err in the 
interpretation of Articles  5, 6.3, and, as a consequence, Article 7.8 of the SCM Agreement, when 
identifying the applicable causation standard.  
6.13.   As regards the Panel's assessment of the relative significance of the amount of the tied tax 
subsidies, we consider that there was a basis for the Panel to assume that Boeing had been able to 
use the benefits of the subsidies arising from all its LCA sales to lower the prices in particularly 
price-sensitive sales campaigns in the single -aisle LCA market. In addition, the Panel was not 
required to establish that the per -aircraft amount of the subsidies available for these sales campaigns 
exceeds the different ials in the net prices of Airbus' and Boeing's competing aircraft for purposes of 
finding that the subsidies are a genuine and substantial cause of Airbus' loss of these sales, and , 
consequently , serious prejudice. We thus find that the Panel did not err u nder Articles  5 and 6.3 of 
the SCM  Agreement, or acted inconsistently with Article  11 of the DSU, in its assessment of the 
relative significance of the amount of the tied tax subsidies.  
a. We therefore uphold  the Panel's finding , in paragraph  9.252 of the Panel  Report, and as a 
consequence to the extent that this is reflected in paragraph 11.8.a, that the 
European  Union had failed to establish that the tied tax subsidies cause serious prejudice, 
within the meaning of Articles  5(c) and 6.3 of the SCM  Agreement, in the twin -aisle LCA 
market in the post -implementation period.  
b. We also uphold  the Panel's findings , in paragraphs 9.407, 9.444, and 11.8.c -d of 
the Panel  Report, that the European  Union had established that the tied tax subs idies 
cause significant lost sales, within the meaning of Articles 5(c) and 6.3(c) of the 
SCM Agreement, in the single -aisle LCA market, with respect to the Fly  Dubai 2014, 
Icelandair 2013, and Air Canada 2013 sales campaigns, in the post -implementation pe riod, 
as well as a threat of impedance of imports of Airbus single -aisle LCA  to the United States 
and exports of Airbus single -aisle LCA to the United Arab Emirates, within the meaning of 
Articles 5(c) and 6.3(a) -(b) of the SCM Agreement, in the post -imple mentation period.  
6.14.   By rejecting that untied subsidies may be found to have a genuine link to the production of 
relevant LCA as was accepted by the Appellate Body in the original proceedings, the Panel failed to 
apply the correct legal standard for assessing  whether the untied subsidies are a genuine cause of 
adverse effects under Articles  5 and 6.3 of the SCM  Agreement. In particular, we do not consider 
that the legal standard for causation requires a showing that the untied subsidies actually altered 
Boeing 's pricing of its LCA. Accordingly, we find that the Panel erred under Articles 5 and 6.3 of the 
SCM Agreement by requiring that the European  Union demonstrate that the untied subsidies actually WT/DS353/AB/RW  
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 led to price reductions of Boeing LCA sales in order to estab lish that the subsidies caused adverse 
effects through the lowering of Boeing LCA prices.  
a. We therefore reverse  the Panel's findings , in paragraphs 9.277, 9.291, 9.472, and 9.476  
of the Panel Report , and as a consequence to the extent that this is reflected  in paragraph s 
11.8.a and 11.8.e of the Panel Report, that the European Union had failed to establish that 
the untied subsidies cause serious prejudice, within the meaning of Articles  5(c) and 6.3 
of the SCM  Agreement, in the post -implementation period thr ough a price causal 
mechanism. Having reversed this finding, we do not address whether, in addition, the 
Panel acted inconsistently with Article 11 of the DSU.  
b. We further find that we are unable to complete the legal analysis with regard to whether 
the unt ied subsidies cause adverse effects within the meaning of Articles  5 and 6.3 of the 
SCM Agreement.  
6.10  Additional claims on appeal  
6.15.   The European Union claims that the Panel erred in the interpretation of Articles 5, 6.3, and 
7.8 of the SCM Agreement in finding that a subsidized product can only cause serious prejudice to 
another product if the two products in question compete in the same market, insofar as that 
interpretation relates to serious prejudice in the form of significant price suppression, significant 
price depression, and significant lost sales. The European  Union states that, in requesting reversal 
of this finding, it seeks to enable us, in completing the legal analysis, to find significant lost sales in 
instances where the 787 -8/9 and the A350XWB -900 competed for the sale. In light of our disposition 
of other claims on appeal, and, in particular, the fact that we are not called upon to consider the 
European Union's request for completion of the legal analysis rega rding the twin -aisle LCA market , 
we ne ed not consider any potential competitive relationship between the 787 -8/9 and the 
A350XWB -900 LCA and, therefore, do not address the European Union's claim of error.  
6.16.   The European Union also claims that the Panel erred in the interpretation of Articles 5, 6.3, 
and 7.8 of the SCM Agreement in purportedly finding that aggregation and cumulation of subsidies 
are the only two approaches to the collective assessment of the adverse effects of multiple subsidies. 
The European Union states that it seeks reversal of  the Panel's interpretation since it would be critical 
for the Appellate Body's completion of the legal analysis. In these proceedings, we were unable to 
conclude that the untied subsidies were a genuine cause of adverse effects, and such a showing 
would a lso have been required under the European Union's proposed approaches to the collective 
assessment of multiple subsidies. Therefore, in light of our disposition of other claims on appeal, we 
are not called upon to consider any such additional methods for t he collective assessment of 
subsidies and, therefore, do not address the European  Union's claim of error.  
6.17.   Finally, we note that the United States has presented four conditional claims challenging 
various findings of the Panel. In light of our disposition o f other claims on appeal, the conditions for 
these claims have not been triggered. We therefore do not address the United States' conditional 
claims of error.  
6.11  Recommendation  
6.18.   The Appellate Body recommends  that the DSB request the United  States to bring its measures 
found in this Report, and in the Panel Report as modified by this Report, to be inconsistent with the 
SCM Agreement , into conformity with its obligations under that Agreement.