WORLD TRADE  
ORGANIZATION  WT/DS317/5 
23 January 2006 
 
 (06-0332) 
 Original:   English 
  
 
UNITED STATES – MEASURES AFFECTING TRADE 
IN LARGE CIVIL AIRCRAFT 
 
Request for the Establishment of a Panel by the European Communities
 
 
 
 The following communication, dated 20 January  2006, from the delegation of the European 
Communities to the Chairman of the Dispute Settlement  Body, is circulated pursuant to Article 6.2 of 
the DSU. 
_______________ 
 
  On 6 October 2004 the European Communities (" EC") requested consultations in the above 
matter with the United States ("US") pursuan t to Articles 4.1, 7.1, and 30 of the Agreement on 
Subsidies and Countervailing Measures  ("SCM Agreement "), Article XXIII:1 of the General 
Agreement on Tariffs and Trade 1994 (" GATT 1994"), and Article 4 of the Understanding on Rules 
and Procedures Governing the Settlement of Disputes  ("DSU").
1 Consultations were held on 
5 November 2004 but failed to resolve the dispute.     At the meeting of the Dispute Settlement Body ("DSB") on 13 June concerning the request for establishment of the panel in the above case
2 the US asserted without any explanation that 13 of 
the 28 subsidy programs referenced in the panel requ est were not listed in the consultation request of 
6 October 2004 and could not be the subject of pane l proceedings.  The EC did not agree with this 
unfounded contention but expressed its readiness to c ontinue consultations in  order to clarify and 
resolve the issues, it being understood that this was without prejudice to the EC's legal position and 
rights.  Accordingly, the EC on 27 June 2005 request ed a continuation of the consultations held on 5 
November 2004.3   
 
 The requested continued consultations were held on 3 August 2005 but failed to resolve the 
dispute.    Regrettably, the US decided to use its unfoun ded procedural objections further to undermine 
the Annex V proceeding initiated in this matter by the DSB on 23 September 2005. In particular, the 
US decided not to provide answers on measures that the US unilaterally determined to be outside the 
scope of the dispute. In addition, the US repeated ly blocked endeavours by th e EC to have the Panel 
rule authoritatively on the scope of the dispute.   
 As a result, the EC has been deprived of its rights under the SCM Agreement  to obtain the 
necessary information with respect to approximate ly half of the measures involved.  This has 
seriously undermined the due process rights of the EC and its ability to prepare its case against the 
US.  
                                                     
 
1 Circulated as document WT/DS317/1 on 12 October 2004. 
2 Circulated as document WT/DS317/2 on 3 June 2005. 
3 Circulated as document WT/DS317/1/Add.1 on 1 July 2005. WT/DS317/5 
Page 2  
 
   
 To resolve this situation, the EC, in good fa ith and in an effort to resolve the dispute 
efficiently, hereby requests that a panel be established pursuant to Article 6 of the DSU; Article XXIII:2 of GATT 1994; and Articles 4, 7, and 30 of the SCM Agreement  (to the extent that 
Article 30 incorporates by reference Article XXIII of GATT 1994) to consider the matter described 
below.  This request is without prejudice to th e EC's position that all th e measures described below 
are already properly before the Panel that was es tablished on 20 July 2005.  The EC has already 
contacted the US in order to discuss how most effici ently to follow up on this request in the light of 
the developments described above and is prepared to continue these discussions with a view to 
ensuring a prompt and positive solution to this dispute. 
 
 
* * * * * * * 
  This dispute concerns prohib ited and actionable subsidies provi ded to and benefiting the US 
producers of large civil aircraft
4 (the "US LCA industry"), including, in particular, the Boeing 
Company ("Boeing") and McDonnell Douglas Corporati on prior to its merger with Boeing.  The 
measures are currently reflected in and derive from the following:    
1. State and Local Subsidies 
  US States and local authorities, where resea rch, development, production and headquarter 
facilities of the US LCA industry are located, transf er in various ways economic resources to the US 
LCA industry.    These economic resources include numerous fi nancial incentives and other advantages 
effectuated, for example, through tax breaks, bond financing, fee waivers, lease arrangements, 
corporate headquarters relocation assistance, rese arch funding, infrastructure measures and other 
benefits.   Such States and local authorities include, but  are not limited to the States of Washington, 
Kansas and Illinois and local authorities therein. 
 
a. State of Washington
 
 
Governmental authorities in the State of Washington, including municipalities and public 
bodies therein, such as Snohomish County, the Port of Everett, and the City of Everett, provide to the 
US LCA industry an incentive package of measures benefiting the developmen t, production and sales 
of US LCA. These  incentives include but are not limited to ta x and other advantages reflected in or 
pursuant to, inter alia : 
 
– Washington House Bill No. 2294 (2003);   
– Memorandum of Agreement for Project Olympus between Boeing and the 
State of Washington of 19 December 2003; 
 
                                                     
 
4 In accordance with the 1992 Agreement between the European Communities and the Government of 
the United States of America concerning the application of the GATT Agreement on Trade in Civil Aircraft on 
trade in large civil aircraft , large civil aircraft ("LCA") includes all airc raft as defined in Article 1 of the GATT 
Agreement on Trade in Civil Aircraft, except engines as defined in Article 1.1(b) thereof, that are designed for passenger or cargo transportation and have 100 or more passenger seats or its equivalent in cargo configuration.  
Boeing produces or markets the following families of LCA: 717, 737, 747, 757, 767, 777, and 787.  WT/DS317/5 
 Page 3 
 
 
  – The Master Site Development and Location Agreement between Boeing and 
the State of Washington of 19 December 2003;  
 – The First Amendment to the Master Site Development and Location 
Agreement of 2 February 2004, an d any subsequent amendments; and 
 
– City of Everett Ordinance 2759-04 (2004), amending Chapter 3.24 of the 
Everett Municipal Code. 
 
b. State of Kansas
 
 
 Governmental authorities in the State of Kansas, including municipalities and public bodies 
therein, such as Sedgwick County, the City of Wichita, and local school districts, provide incentives, including bond financing, tax benefits and other advantages, to the US LCA industry, inter alia , 
through the following:  
 
– Bond financing and payments pursuant to the Economic Revitalization and 
Reinvestment Act – Kansas  Senate Bill No. 281 (2003) , codified at K.S.A. §§ 
74-50,136 et seq.  (2004), as reflected in, inter alia : 
 
• A Resolution of the Kansas Development Finance Authority 
Declaring an Intent to Issue its Revenue Bonds to Finance a Project 
on behalf of Mid-Western Aircraft Systems, Inc., adopted 9 June 
2005;  
 
• Incentive Agreement Between the Kansas Department of Commerce 
and Spirit Aerosystems Inc., date d as of 30 June 2005, signed by 
Spirit Aerosystems Inc. on 7 October 2005 and 10 October 2005, 
signed by the Kansas Department of Commerce on 11 October 2005;  
 
• State of Kansas, State Finance Council Resolution No. 05-544, 18 
October 2005; and  
 
• Bond Resolution No. 222 Authorizing the Kansas Development 
Finance Authority To Issue Its Kansas Development Finance 
Authority Revenue Bonds (Spirit AeroSystems, Inc. Project) 
(adopted 5 December 2005).  
 – Property and sales tax abatements pursu ant to K.S.A. § 79-201a, as amended, 
K.S.A. § 79-3606, as amended, and K.S.A. § 79-3640, as amended, associated with Industrial Revenue Bonds  ("IRBs") issued for the financing 
of US LCA industry projects by the City of Wichita pursuant to K.S.A. §§ 
12-1740 et seq. , as amended, including, but not limited to, those authorized 
by the following Ordinances of the Wichita City Council:  
 
• Wichita City Council Ordinance No. 46-818 authorizing $80 million 
in IRBs for Spirit Aerosystems, Inc., dated 15 November 2005; 
 
• Wichita City Council Ordinance No. 46-817 authorizing $29 million 
in IRBs for Boeing, dated 15 November 2005;    
 WT/DS317/5 
Page 4  
 
  • Wichita City Council Ordinance No. 46-401 authorizing $67 million 
in IRBs for Boeing, dated 16 November 2004; 
 
• Wichita City Council Ordinance No. 45-914 authorizing $60 million 
in IRBs for Boeing, dated 18 November 2003; 
 
• Wichita City Council Ordinance No. 45-495 authorizing $96 million 
in IRBs for Boeing, dated 19 November 2002; 
 
• Wichita City Council Ordinance No. 45-133 authorizing $84 million 
in IRBs for Boeing, dated 20 November 2001; 
 
• Wichita City Council Ordinance No. 44-811 authorizing $41 million 
in IRBs for Boeing, dated 21 November 2000; 
 
• Wichita City Council Ordinance No. 44-428 authorizing $155 
million in IRBs for Boeing, dated 23 November 1999; 
 
• Wichita City Council Ordinance No. 44-102 authorizing $350 
million in IRBs for Boeing, dated 8 December 1998; 
 
• Wichita City Council Ordinance No. 43-642 authorizing $340 
million in IRBs for Boeing, dated 25 November 1997; 
 
• Wichita City Council Ordinance No. 43-325 authorizing $194 
million in IRBs for Boeing, dated 26 November 1996; 
 
• Wichita City Council Ordinance No. 42-949 authorizing $201 
million in IRBs for Boeing, dated 14 November 1995; 
 
• Wichita City Council Ordinance No. 42-553 authorizing $280 
million in IRBs for Boeing, dated 15 November 1994; 
 
• Wichita City Council Ordinance No. 42-228 authorizing $292 
million in IRBs for Boeing, dated 30 November 1993; 
 
• Wichita City Council Ordinance No. 41-916 authorizing $274 
million in IRBs for Boeing, dated 8 December 1992; and 
 
• Wichita City Council Ordinance No. 41-592 authorizing $206 
million in IRBs for Boeing, dated 26 November 1991. 
 Letters of intent for IRBs for the US LCA industry, including, but not limited 
to, those issued pursuant to actions of the Wichita City Council taken on 17 May 
2005, 13 July 2004, 9 November 1999, 13 February 1996, 24 March 1992, 
5 December 1989, 21 December 1982, 9 June 1981, and 23 October 1979. 
 
– Funding provided by the State of Kansas, Kansas Technology Enterprise 
Corporation ("KTEC"), and the Federal Government to the National Institute 
for Aviation Research at Wichita State University for collaborations with the 
US LCA industry. 
  WT/DS317/5 
 Page 5 
 
 
  c. State of Illinois  
 
Governmental authorities in the State of Illinois, including municipalities and public bodies 
therein, such as Cook County and the City of Ch icago, provide incentives, including tax incentives, 
relocation assistance and other advantages, to th e US LCA industry, including but not limited to: 
 
– Tax credits from the State of Illinois pursuant to the Economic Development 
for a Growing Economy Tax Credit Act, Public Act 91-0476, as amended, 35 Ill. Comp. Stat. §§ 5/211 et seq ., and 35 Ill. Comp. Stat. § 10/5-45; 
 
– Reimbursement of relocation expenses and other benefits from the State of 
Illinois pursuant to the Corporate Headquarters Relocation Act, Public Act 92-0207; 
 – Payments from the State of Illinois pu rsuant to the Illinois Large Business 
Development Act, Ill. Rev. Stat. 1989, ch. 127, paras. 2710-1 et seq. , and 14 
Ill. Admin. Code  §§ 590.10 et seq.  
 – Payments from the State of Illinois pursuant to the Illinois Industrial Training 
Program, 20 Ill. Comp. Stat. § 605/605 -800, and 56 Ill. Admin. Code §§ 
2650.10 et seq.  
 – Payments from the State of Illinois pursuant to the Technology Challenge 
Grant Program, 20 Ill. Comp. Stat. §§ 700/2001 et seq. , and 14 Ill. Admin. 
Code §§ 545.110 et seq.    
 – Property tax abatements from Cook Co unty pursuant to § 920 of the above-
mentioned Corporate Headquarters Reloca tion Act, Public Act 92-0207, § 18 
of the Property Tax Code, 35 Ill. Comp. Stat. §§ 200/1  et seq. , as amended, 
and an Ordinance of the County of Cook, Illinois Approving Execution of a 
Tax Reimbursement Payment Agreement with the Boeing Company (2001);  
 – Property tax abatements from the City  of Chicago pursuant to § 920 of the 
above-mentioned Corporate Headquarter s Relocation Act, Public Act 92-
0207, § 18 of the Property Tax Code, 35 Ill. Comp. Stat. §§ 200/1  et seq. , as 
amended, and an Ordinance of the City of Chicago, Illinois Approving 
Execution of a Tax Reimbursement Payment Agreement with the Boeing Company (2001); and 
 – Payments by the City of Chicago pursuant to the Lease Termination 
Compensation Agreement between 100 North Riverside, LLC, and the City 
of Chicago, 13 January 2001. 
 
2. NASA Subsidies  
 
The National Aeronautics and Space Administration ("NASA"), acting on the basis of the 
National Aeronautics and Space Act of 1958, Pub. L. No. 85-568, as amended,  transfers economic 
resources on terms more favourable than available on the market or not at arm's length to the US LCA industry, inter alia , by: 
 
 WT/DS317/5 
Page 6  
 
  a.  allowing the US LCA industry to par ticipate in research programmes, making 
payments to the US LCA industry under those programmes, or enabling the US LCA industry to exploit the results thereof by means including but not limited to the foregoing or waiving of valuab le patent rights, the granti ng of limited exclusive rights 
data ("LERD") or otherwise exclusive or early access to data, trade secrets and other 
knowledge resulting from government funded research.  The following are examples 
of such NASA programmes: 
 
(i) High Speed Research Program
  
 
• NASA Budget Requests for FY 1990 – FY 2001; 
 
• NASA Appropriations Acts, Pub. L. No. 101-144 (FY 1990); Pub. L. No. 101-507 
(FY 1991); Pub. L. No. 102-139 (FY 1992); Pub. L. No. 102-389 (FY 1993); Pub. L. No. 103-124 (FY 1994); Pub. L. No. 103-327 (FY 1995); Pub. L. No. 104-134 (FY 1996); Pub. L. No. 104-204 (FY 1997); Pub. L. No. 105-65 (FY 1998); Pub. L. No. 105-276 (FY 1999); 
 
• High Speed Research Program Technology Transfer Control Handbook, April 1998.  
 
(ii) Advanced Subsonic Technology Program
  
 
• NASA Budget Requests for FY 1992 – FY 2001;  
 
• NASA Appropriations Acts, Pub. L. No. 102-139 (FY 1992); Pub. L. No. 102-389 
(FY 1993); Pub. L. No. 103-124 (FY 1994); Pub. L. No. 103-327 (FY 1995); Pub. L. No. 104-134 (FY 1996); Pub. L. No. 104-204 (FY 1997); Pub. L. No. 105-65 (FY 1998); Pub. L. No. 105-276 (FY 1999); 
 
• Advanced Subsonic Technology Program Technology Transfer Control Handbook, 
August 1998.  
   
(iii) Aviation Safety Program/Aviation Safety & Security Program/Aviation Security & 
Safety Program   
 
• NASA Budget Requests for FY 2000 – FY 2007;  
 
• NASA Appropriations and Authorization Ac ts, Pub. L. No. 106-74 (FY 2000); Pub. 
L. No. 106-377 (FY 2001); Pub. L. No. 107-73 & Pub. L. No. 107-117 (FY 2002); 
Pub. L. No. 108-7 (FY 2003); Pub. L. No. 108-199 (FY 2004); Pub. L. No. 108-447 
(FY 2005); Pub. L. No. 109-108 (FY 2006); Pub. L. No. 109-155 (FY 2007 – FY 2008).  
 
(iv) Quiet Aircraft Technology Program
  
 
• NASA Budget Requests for FY 2000 – FY 2007;  
 
• NASA Appropriations and Authorization Ac ts, Pub. L. No. 106-74 (FY 2000); Pub. 
L. No. 106-377 (FY 2001); Pub. L. No. 107-73 & Pub. L. No. 107-117 (FY 2002); Pub. L. No. 108-7 (FY 2003); Pub. L. No. 108-199 (FY 2004); Pub. L. No. 108-447 (FY 2005); Pub. L. No. 109-108 (FY 2006); Pub. L. No. 109-155 (FY 2007 – FY 
2008).   WT/DS317/5 
 Page 7 
 
 
   
(v) High Performance Computing and Communications Program  
 
• NASA Budget Requests for FY 1991 – FY 2003;  
 
• NASA Appropriations Acts, Pub. L. No. 101-507 (FY 1991); Pub. L. No. 102-139 
(FY 1992); Pub. L. No. 102-389 (FY 1993); Pub. L. No. 103-124 (FY 1994); Pub. L. No. 103-327 (FY 1995); Pub. L. No. 104-134 (FY 1996); Pub. L. No. 104-204 (FY 1997); Pub. L. No. 105-65 (FY 1998); Pub. L. No. 105-276 (FY 1999); Pub. L. No. 106-74 (FY 2000); Pub. L. No. 106-377 (FY 2001). 
 
(vi) Research & Technology Base Program
 
 
• NASA Budget Requests for FY 1991 – FY 2004; 
 
• NASA Appropriations Acts, Pub. L. No. 101-507 (FY 1991); Pub. L. No. 102-139 
(FY 1992); Pub. L. No. 102-389 (FY 1993); Pub. L. No. 103-124 (FY 1994); Pub. L. No. 103-327 (FY 1995); Pub. L. No. 104-134 (FY 1996); Pub. L. No. 104-204 (FY 1997); Pub. L. No. 105-65 (FY 1998); Pub. L. No. 105-276 (FY 1999); Pub. L. No. 
106-74 (FY 2000); Pub. L. No. 106-377 (FY 2001); Pub. L. No. 107-73 & Pub. L. 
No. 107-117 (FY 2002).  
 
(vii)  Advanced Composites Technology Program
 
 
• NASA Budget Requests for FY 1994 – FY 1997; 
 
• NASA Appropriations Acts, Pub. L. No. 103-124 (FY 1994); Pub. L. No. 103-327 
(FY 1995).  
 
(viii) Vehicle Systems Program  
 
• NASA Budget Requests for FY 2003 – FY 2007; 
 
• NASA Appropriations and Authorization Acts , Pub. L. No. 108-7 (FY 2003); Pub. L. 
No. 108-199 (FY 2004); Pub. L. No. 108-447 (FY 2005); Pub. L. No. 109-108 (FY 2006); Pub. L. No. 109-155 (FY 2007 – FY 2008). 
 
(ix) Materials and Structures Systems Technology Program, including advanced 
composites materials and structures research  
 
• NASA Budget Requests for FY 1988 – FY 1995; 
 
• NASA Appropriations Acts, Pub. L. No. 100-202 (FY 1988); Pub. L. No. 100-404 
(FY 1989); Pub. L. No. 101-144 (FY 1990); Pub. L. No. 101-507 (FY 1991); Pub. L. No. 102-139 (FY 1992); Pub. L. No. 102-389 (FY 1993).  
 
(x) Aircraft Energy Efficiency Program, including Composite Primary Aircraft 
Structures, Transport Aircraft Systems Technology, and Advanced Composite 
Structures Technology Programs  
 
• NASA Budget Requests for FY 1976 – FY 1987; 
 WT/DS317/5 
Page 8  
 
  • NASA Appropriations Acts, Pub. L. No. 94-116 (FY 1976); Pub. L. No. 94-378 (FY 
1977); Pub. L. No. 95-119 (FY 1978); Pub. L. No. 95-392 (FY 1979); Pub. L. No. 96-103 (FY 1980); Pub. L. No. 96-526 (FY 1981); Pub. L. No. 97-101 (FY 1982); Pub. L. No. 97-272 (FY 1983); Pub. L. No. 98-45 (FY 1984); Pub. L. No. 98-371 (FY 1985).  
 
b. providing the services of NASA employees, facilities, and equipment to support the 
R&D programmes listed above and paying salaries, personnel costs, and other 
institutional support, thereby providing valu able services to the US LCA industry on 
terms more favourable than available on the market or not at arm's length: 
 
• NASA Budget Requests for FY 1976 – FY 2007; 
 
• NASA Appropriations and Authorization Ac ts, Pub. L. No. 94-116 (FY 1976); Pub. 
L. No. 94-378 (FY 1977); Pub. L. No. 95-119 (FY 1978); Pub. L. No. 95-392 (FY 1979); Pub. L. No. 96-103 (FY 1980); Pub. L. No. 96-526 (FY 1981); Pub. L. No. 97-101 (FY 1982); Pub. L. No. 97-272 (FY 1983); Pub. L. No. 98-45 (FY 1984); Pub. L. No. 98-371 (FY 1985); Pub. L. No. 99-160 (FY 1986); Pub. L. No. 99-500 & Pub. L. 
No. 99-591 (FY 1987); Pub. L. No. 100-202 (FY 1988); Pub. L. No. 100-404 (FY 
1989); Pub. L. No. 101-144 (FY 1990); Pub. L. No. 101-507 (FY 1991); Pub. L. No. 102-139 (FY 1992); Pub. L. No. 102-389 (FY 1993); Pub. L. No. 103-124 (FY 1994); Pub. L. No. 103-327 (FY 1995); Pub. L. No. 104-134 (FY 1996); Pub. L. No. 104-204 (FY 1997); Pub. L. No. 105-65 (FY 1998); Pub. L. No. 105-276 (FY 1999); Pub. 
L. No. 106-74 (FY 2000); Pub. L. No. 106-377 (FY 2001); Pub. L. No. 107-73 & 
Pub. L. No. 107-117 (FY 2002); Pub. L. No. 108-7 (FY 2003); Pub. L. No. 108-199 (FY 2004); Pub. L. No. 108-447 (FY 2005); Pub. L. No. 109-108 (FY 2006); Pub. L. No. 109-155 (FY 2007 – FY 2008). 
 
c. providing NASA Independent Research & Development, and Bid & Proposal 
Reimbursements: 
 
• 48 CFR § 31.205-18; 
 
• 14 CFR § 1274.204(g);  
 
• 48 CFR §§ 9904.420 et seq.  
 
d. allowing the US LCA industry to use th e research, test and evaluation facilities 
owned by the US Government, including NASA wind tunnels, in particular the 
Langley Research Center.   
 
e. entering into procurement contracts with the US LCA industry for more than 
adequate remuneration.  
 
f. granting the US LCA industry exclusive or  early access to data, trade secrets, and 
other knowledge resulting from govern ment funded research pursuant, inter alia , to: 
 
• Requirements for Documentation, Approval,  and Dissemination of NASA Scientific 
and Technical Information, section 4.5.7.1 (NPG 2200.2A);  
 
• 48 CFR §§ 27.400 et seq.  
  WT/DS317/5 
 Page 9 
 
 
  g. allowing the US LCA industry to exploit the results of government funded research, 
including, but not limited to, the foregoing or  waiving of valuable patent rights or 
rights in data as such, pursuant, inter alia , to: 
 
• 35 U.S.C. §§ 200 et seq. ; 
 
• 48 CFR §§ 27.300 et seq. ; 
 
• Memorandum to the Heads of Executive De partments and Agencies: Government 
Patent Policy, Pub. Pape rs 248 (18 February 1983); 
 
• Executive Order 12591 (10 April 1987); 
 
• 14 CFR §§ 1245.100 et seq. ; 
 
• 14 CFR §§ 1274.911 - 1274.914; 
 
• 48 CFR §§ 1827.301 et seq. ;  
 
• 48 CFR §§ 27.400 et seq.  
 
3. Department of Defense Subsidies  
 
The Department of Defense ("DOD") transfers economic resources to the US LCA industry 
on terms more favourable than available on the market or not at arm's length, inter alia , by: 
 a.  allowing the US LCA industry to participate in DOD-funded research, making 
payments to the US LCA industry for su ch research, or enabling the US LCA 
industry to exploit the results of such res earch, by means including but not limited to 
the foregoing or waiving of valuable patent  rights, and the granting of exclusive or 
early access to data, trade secrets and other knowledge resulting from government funded research, through, for example: 
 
(i) A number of Research, Development, Test, and Evaluation ("RDT&E") Programs of 
the US Air Force, Navy, Army, and the De fense Advanced Research Projects Agency 
("DARPA") including, but not limited to: 
 
• Defense Research Sciences (PE# 0601102F)  
• Materials (PE# 0602102F) 
• Aerospace Flight Dynamics and Aero space Vehicle Technologies (PE# 0602201F) 
• Aerospace Propulsion (PE# 0602203F) 
• Aerospace Sensors (PE# 0602204F) 
•
 Dual Use Applications and Dual Use Science & Technology (PE# 0602805F) 
• Advanced Materials for Weapon Systems (PE# 0603112F) 
• Flight Vehicle Technology (PE# 0603205F) 
• Aerospace Structures and Aerospace Technology Dev/Demo (PE# 0603211F) 
• Aerospace Propulsion & Power Technology (PE# 0603216F) 
• Flight Vehicle Technology Integration (PE# 0603245F) 
• RDT&E For Aging Aircraft (PE# 0605011F) 
• Manufacturing Technology/Industrial Preparedness (PE# 
0603771F/0708011F/0708011N) WT/DS317/5 
Page 10  
 
  • C-17 (PE# 0401130F/0604231F) 
• CV-22 (PE# 0401318F) 
• Joint Strike Fighter (PE#0603800F/0603800N/0603800E/0604800F/0604800N) 
• AV-8B Aircraft (PE# 0604214N) 
• Comanche (PE# 0604223A) 
• F-22 (PE# 0604239F) 
• B-2 Advanced Technology Bomber (PE# 0604240F) 
• V-22 (PE# 0604262N) 
• A-6 Squadrons (PE# 0204134N) 
• F/A-18 Squadrons (PE# 0204136N) 
• Dual Use Applications Program (incl uding its predecessor, the Technology 
Reinvestment Project).  
 
These Programmes are currently reflected in, inter alia : 
 
• DOD RDT&E Budget Item Justification, E xhibits R-2, FY 1991 – FY 2007;  
 
• DOD FY 1991 – FY 2007 Budgets for RDT&E Programs (Exhibit R-1), DOD 
Component Summary; 
 
• 10 U.S.C. § 2521 (statutory basis for Manufacturing Technology Program); 
 
• 10 U.S.C. § 2511 (statutory basis for Dual Use Programs); 
 
• DOD Appropriations Acts, Pub. L. No. 101-511 (FY 1991); Pub. L. No. 102-172 (FY 
1992); Pub. L. No. 102-396 (FY 1993); Pub. L. No. 103-139 (FY 1994); Pub. L. No. 103-335 (FY 1995); Pub. L. No. 104-61 (FY 1996); Pub. L. No. 104-208 (FY 1997); Pub. L. No. 105-56 (FY 1998); Pub. L. No. 105-262 (FY 1999); Pub. L. No. 106-79 (FY 2000); Pub. L. No. 106-259 (FY 2001); Pub. L. No. 107-117 (FY 2002); Pub. L. 
No. 107-248 (FY 2003); Pub. L. No. 108-87 (FY 2004); Pub. L. No. 108-287 (FY 
2005); Pub. L. No. 109-148 (FY 2006). 
 
(ii) providing Independent Research & Development, and Bid & Proposal 
Reimbursements.    
 
• 10 U.S.C. § 2372; 
 
• 48 CFR § 31.205-18; 
 
• 48 CFR § 231.205-18; 
 
• 48 CFR §§ 9904.420 et seq. ; 
 
• Department of Defense Directive Regard ing IR&D, Number 3204.1 (10 May 1999); 
 
• DOD Appropriations Acts, Pub. L. No. 101-511 (FY 1991); Pub. L. No. 102-172 (FY 
1992); Pub. L. No. 102-396 (FY 1993); Pub. L. No. 103-139 (FY 1994); Pub. L. No. 
103-335 (FY 1995); Pub. L. No. 104-61 (FY 1996); Pub. L. No. 104-208 (FY 1997); Pub. L. No. 105-56 (FY 1998); Pub. L. No. 105-262 (FY 1999); Pub. L. No. 106-79 (FY 2000); Pub. L. No. 106-259 (FY 2001); Pub. L. No. 107-117 (FY 2002); Pub. L.  WT/DS317/5 
 Page 11 
 
 
  No. 107-248 (FY 2003); Pub. L. No. 108-87 (FY 2004); Pub. L. No. 108-287 (FY 
2005); Pub. L. No. 109-148 (FY 2006). 
 
b. allowing the US LCA industry to use research, test and evaluation facilities owned by 
the US Government, including the Major Range Test Facility Bases.  
 
c. entering into procurement contracts, including those for the purchase of goods,  from 
the US LCA industry for more than adequate  remuneration, including in particular 
but not limited to the US Air Force contract with Boeing for the purchase of certain spare parts for its Airborne Warning a nd Control System (AWACS) aircraft, the 
National Polar-orbiting Operational E nvironmental Satellite System-Conical 
Microwave Imager Sensor, the C-22 Repl acement Program (C-40), the KC-135 
Programmed Depot Maintenance, the C-40 Lease and Purchase Program, the C-130 avionics modernisation upgrade program, th e C-17 H22 contract (Boeing BC-17X), 
the US Navy contract with Boeing for th e production and maintenance of 108 civil B-
737 and their conversion into long-range submarine hunter Multi-Mission Aircraft, 
the Missile Defense Agency's Airborne Laser (ABL) Program, and the Army's Comanche Program.   
 d.  by allowing the US LCA industry to exploit the results of government funded 
research, including, but not limited to, the foregoing or waiving of valuable patent 
rights or rights in data as such, pursuant, inter alia , to: 
 
• 35 U.S.C. §§ 200 et seq. ; 
 
• 48 CFR §§ 27.300 et seq. ; 
 
• Memorandum to the Heads of Executive De partments and Agencies: Government 
Patent Policy, Pub. Pape rs 248 (18 February 1983); 
 
• Executive Order 12591 (10 April 1987); 
 
• 48 CFR §§ 227.303 et seq. ; 
 
• 48 CFR §§ 27.400 et seq. ; 
 
• 48 CFR §§ 227.7100 et seq.  
 4. National Institute of Standards & Techno logy (US Department of Commerce) Subsidies  
 
 The US Department of Commerce ("DOC") transfers economic resources to the US LCA 
industry on terms more favourable than available on the market or not at arm's length, through the 
Advanced Technology Program operated pursuant to  the Omnibus Trade and Competitiveness Act of 
1988, Pub. L. No. 100-418, as amended, and th e American Technology Preeminence Act of 1991, 
Pub. L. No. 102-245 and 15 CFR §§ 295.1  et seq. , by allowing the US LCA industry to participate in 
this programme, making payments to the US LCA in dustry under this programme, or allowing the US 
LCA industry to exploit the results of this progr amme, including but not limited to the foregoing or 
waiving of valuable patent rights, and the grantin g of exclusive or early access to data, trade secrets 
and other knowledge resulting from government funded research.  In particular, economic resources 
are transferred to the US LCA industry through a num ber of projects, including, but not limited to, the 
following:  WT/DS317/5 
Page 12  
 
  • Project 93-01-0089 (CVD Diamond-Coated Rotating Tools for Machining Advanced 
Composite Materials); 
 
• Project 95-12-0024 (An Agent-Based Framewor k for Integrated Intelligent Planning 
– Execution); 
 
• Project 95-01-0108 (Precision Optoelectronics Assembly); 
 
• Project 91-01-0267 (Pre-competitive Adva nced Manufacturing of Electrical 
Products); 
 
• Project 97-05-0020 (Extended Enterprise Coalition for Integrated Collaborative 
Manufacturing Systems); 
 
• Project 98-01-0168 (Hot Metal Gas Forming); 
 
• Project 90-01-0126 (Solid-State Laser Technology for Point Source X-Ray 
Lithography); 
 
• Project 95-02-0036 (Plasma-Based Processing of Lightweight Materials for Motor-
Vehicle Components and Manufacturing Applications).  
 5. US Department of Labor  
 The US Department of Labor transfers econom ic resources to the US LCA industry on terms 
more favourable than available on the market or not  at arm's length, through the Aerospace Industry 
Initiative, an element of the President's High Grow th Training Initiative, under the authority of the 
Workforce Investment Act, Pub. L. No. 105-220 (1998), by granting to Edmonds Community College 
in the State of Washington funds for the training of aerospace industry workers associated with the 
Boeing 787.   
 
6. Federal tax incentives 
  The US Government transfers economic r esources to the US LCA industry through the 
federal tax system, and in particular  through the following tax measures: 
 a. Sections 921-927 of the Internal Revenue C ode (prior to repeal) and related measures 
establishing special tax treatment for "Foreign Sales Corporations" ("FSCs"); 
 
b. FSC Repeal and Extraterritorial Income Exclusion Act of 2000, Pub. L. No. 106-519; and 
 c. American Jobs Creation Act of 2004, Pub. L. No. 108-357.  
* * * * * * * 
 
 The European Communities considers that th e above measures are inconsistent with the 
obligations of the US under the following provisions:   (1) Articles 3.1(a), 3.1(b) and 3.2 of the SCM Agreement ;   
 
 (2) Article 5(a) of the SCM Agreement ; 
  WT/DS317/5 
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   (3) Articles 5(c), 6.3(a), 6.3(b) and 6.3(c) of the SCM Agreement ;  
  (4) Article III:4 of the GATT 1994.    The European Communities is of the view that the above measures, reflected in the US, State, 
and local statutes, regulations, administrative pro cedures, and other programmes and policies as listed 
above, including any relevant subsequent amendmen ts thereof or successory acts, are inconsistent 
with these provisions as such and as applied.   The measures listed above are subsidies b ecause in each instance there is a financial 
contribution by the US, State or local government, and a benefit is there by conferred within the 
meaning of Article 1.1(a)(1) and (b) of the SCM Agreement .  They benefit and will continue to benefit 
in the future the development, production, sale, a nd export of each of the individual subsidised LCA 
products of the US LCA industry.  Each of the lis ted subsidies is specific to the US LCA industry 
within the meaning of Article 2 of the SCM Agreement .   
 
 The subsidies listed above are de jure  or de facto  export contingent, and contingent on the use 
of domestic over imported goods.   
  The use of these measures causes adverse effects – i.e., material injury or threat of material 
injury to the European Community LCA industry – and serious prejudice including threat of serious 
prejudice to the interests of the European Communiti es within the meaning of Article 5(a) and (c) of 
the SCM Agreement , because, inter alia :   
 
– The effect of the measures is material inju ry, or a threat thereof, in violation of 
Article 5(a) of the SCM Agreement ; 
 
 – The effect of the measures is a significa nt price undercutting by subsidised products 
of the US LCA industry as compared w ith the price of competing European 
Community LCA products in the world, European Community, US, and third country markets where US and Community producers compete, or a threat thereof, in violation of Articles 5(c) and 6.3(c) of the SCM Agreement; 
 
– The effect of the measures is significant depression and suppression of the prices of 
competing European Community LCA products  in the world, European Community, 
US, and third country markets where US and Community producers compete, or a threat thereof, in violation of Articles 5(c) and 6.3(c) of the SCM Agreement ;  
 
 – The effect of the measures is significant lost sales of competing European 
Community LCA products in the world, European Community, US, and third country markets where US and Community producers compete, or a threat thereof, in violation of Articles 5(c) and 6.3(c) of the SCM Agreement ;  
 
 – The effect of the measures is to displa ce or impede exports of competing European 
Community LCA products in the US market, or a threat thereof, in violation of 
Articles 5(c) and 6.3(a) of the SCM Agreement ;   
  – The effect of the measures is to displa ce or impede exports of competing European 
Community LCA products in third country markets, or a threat thereof, in violation of 
Articles 5(c) and 6.3(b) of the SCM Agreement .  
 
 WT/DS317/5 
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   The above measures are neither justified unde r any provision of a covered agreement, 
including the Agreement on Trade in Civil Aircraft , nor under the 1992 Agreement between the 
European Communities and the Government of the United States of America concerning the 
application of the GATT Agreement on Trade in Civil Aircraft on trade in large civil aircraft . 
 
 The European Communities requests that a pa nel be established with standard terms of 
reference, in accordance with Articles 4.4 and 7.4 of the SCM Agreement  and Article 7 of the DSU.  
  The European Communities asks that a special meeting of the Dispute Settlement Body be 
convened on Thursday 2 February 2006 and that th is request for the establishment of a panel be 
placed on the agenda of that meeting. 
  Finally, the European Communities requests that the DSB, together with the establishment of 
the panel, initiate the procedures for developi ng information concerning serious prejudice under 
Annex V of the SCM Agreement .  This request is without prejudice to the EC's position that all the 
measures described above are already properly befo re the Panel that was established on 20 July 2005 
and therefore were covered by the Annex V proceed ing initiated by the DSB on 23 September 2005.  
The EC is prepared to discuss together with th e Representative designated by the DSB to serve the 
function of facilitating the information-gathering pr ocess, pursuant to paragraph 4 of Annex V of the 
SCM Agreement , Mr. Mateo Diego-Fernandez, and with the US, how the Annex V process can be 
pursued most efficiently.   
 
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