RESTRICTED  WORLD TRADE  
ORGANIZATION  WT/DSB/M/212 
20 June 2006 
 (06-2999) 
Dispute Settlement Body 
17 May 2006  
 
 
 
MINUTES OF MEETING 
 
Held in the Centre William Rappard  
on 17 May 2006  
 
Chairman:  Mr.  Muhamad Noor Yacob (Malaysia) 
   
 Prior to the adoption of the agenda
, the item concerning the Panel Report in the case on:  
"United States – Final Dumpi ng Determination on Softwood Lumb er from Canada:  Recourse to 
Article 21.5 of the DSU by Canada" was remove d from the proposed agenda following Canada's 
decision to appeal the Report.  Subjects discussed
: Page  
  
1.
 Surveillance of implementation of recommendations adopted by the DSB.........................2  
(a) United States – Section 211 Omnibus Appropr iations Act of 1998:  Status report by 
the United States. ............................................................................................................. ...........2  
(b) United States – Anti-dumping measures on certain hot-rolled steel products from 
Japan:  Status report by  the United States...................................................................................4  
(c) United States – Section 110(5) of the US Copyright Act:  Status report by the United 
States......................................................................................................................... ..................5  
(d) European Communities – Export subsidies on sugar:  Status report by the European 
Communities.................................................................................................................... ...........5  
2. Implementation by the European Co mmunities of the recommendations and 
rulings of the DSB in relation to "European Communities – Regime for the Importation, Sale and Distribution of Bananas" and related subsequent WTO 
proceedings .................................................................................................................... ............9
 
(a) Statements by Honduras, Ni caragua and Panama.......................................................................9  
3. United States – Continued Dumping and Subsidy Offset Act of 2000:  
Implementation of the recommenda tions adopted by the DSB ..........................................11  
(a) Statements by Canada, the European Communities and Japan.................................................11  
4. United States – Countervailing measu res concerning certain products from 
the European Communities ...................................................................................................14  
(a) Statement by the Eur opean Communities.................................................................................14  WT/DSB/M/212 
Page 2  
 
  5.
 United States – Measures affecting trade in large civil aircraft .........................................15  
(a) Initiation of the procedure for developing  information concerning serious prejudice 
under Annex V of the SCM Agreement and d esignation of Mr. Mateo Diego-Fernández 
as the DSB representative referred to in paragr aph 4 of that Annex for the development 
of evidence to be examined by the Panel in DS317 established on 17 February 2006 in 
the form of written responses by the United States to written questions from the DSB 
representative to the United States pursuant to Annex V, paragraph 1 and Annex V, 
paragraph 2 of the SCM Agreement. ........................................................................................15  
6. Selection process for appointment of  an Appellate Body member.....................................17  
(a) Statement by the Chairman...................................................................................................... .17 
7. United States – Tax treatment for "Foreign Sales Corporations".....................................18  
(a) Statement by the United States ................................................................................................. 18 
 
 
1. Surveillance of implementation of recommendations adopted by the DSB 
(a) United States – Section 211 Omnibus Appropr iations Act of 1998:  Status report by the 
United States (WT/DS176/11/Add.42) 
 (b) United States – Anti-dumping measures on certain hot-rolled steel products from Japan:  
Status report by the United States (WT/DS184/15/Add.42) 
 
(c) United States – Section 110(5) of the US Copyright Act:  Status report by the United States 
(WT/DS160/24/Add.17) 
 (d) European Communities – Export subsidies on sugar:  Status report by the European 
Communities (WT/DS265/35 – WT/DS266/35 – WT/DS283/16) 
 
1. The Chairman
 recalled that Article 21.6 of the DSU required that "unless the DSB decides 
otherwise, the issue of implementation of the re commendations or rulings shall be placed on the 
agenda of the DSB meeting after six months follo wing the date of establishment of the reasonable 
period of time pursuant to paragraph 3 and shall remain on the DSB's agenda until the issue is 
resolved".  He then proposed that the four sub-ite ms to which he had just referred be considered 
separately. 
(a) United States – Section 211 Omnibus Appropria tions Act of 1998:  Status report by the 
United States (WT/DS176/11/Add.42) 
2. The Chairman  drew attention to document WT/DS176/ 11/Add.42, which contained the status 
report by the United States on progress in the impl ementation of the DSB's recommendations in the 
case concerning US Section 211 Omni bus Appropriations Act of 1998. 
3. The representative of the United States  said that his country had provided a status report in 
this dispute on 4 May 2006, in accordance with Artic le 21.6 of the DSU.  As noted in the report, 
several legislative proposals relating to S ection 211 that would implement the DSB's 
recommendations and rulings in this dispute had been  introduced in the current Congress, both in the 
US Senate and the US House of Representatives.  The US administration was working with the US 
Congress to implement the DSB's recommendations and rulings.  WT/DSB/M/212 
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  4. The representative of th e European Communities  said that the negotiations and the conclusion 
of the TRIPS Agreement were major steps in th e promotion of a rule-based multilateral trading 
system and a key element in further development of international trade.  The absence of an effective 
and non-discriminatory protection of intellectual pr operty rights worldwide constituted a brake on the 
development of trade in goods.  The high priority  placed by the United States on the fight against 
counterfeiting and pirating was a perfect illustration of  how respect for intellectual property rights and 
the development of trade went hand in hand.  Howe ver, the passivity of the United States in the 
Section 211 dispute as well as in the Section 110 dispute ran against the objective of enhancing the protection of intellectual property rights.  Repea ling bills were pending in the US Congress.  Their 
adoption would remove a discriminatory legislation that was driven by specific interest and would 
bring a satisfactory solution to this dispute.  As  had been seen recently, the US Congress was perfectly 
able to work towards complia nce, when it so wished.  
5. The representative of Cuba
 said that no progress had been made in this dispute since 
2 February 2002 when the DSB had adopted th e recommendations and rulings.  The situation 
remained the same; i.e. the United States c ontinued to fail to comply with the DSB's 
recommendations.  At the previous DSB meeting, one  delegation had urged Cuba not to describe the 
submission of reports by the United States as ritual, or to describe the understanding announced by the 
United States and the EC on 20 July 2005 as a manoe uvre.  That delegation had also reminded Cuba 
that Article 3.7 of the DSU gave preference to a solution that was mutually acceptable to the parties 
and was consistent with the cove red agreements.  However, no othe r words adequately described the 
status reports that the United States was submitti ng to the DSB, including the one submitted at the 
present meeting, which contained only one change , namely, a new date of circulation.  This 
demonstrated the lack of political will on the pa rt of the United States to implement the DSB's 
recommendations.  Cuba was not dismissing the provisi ons of Article 3.7 of the DSU, but objected to 
reinterpretation of those provisions.  In Cuba's vi ew, the understanding between the parties was not 
aimed at finding a satisfactory solution, but at intr oducing delaying tactics into the implementation 
process.  It was for that reason that no reference wa s made to a possible date for such a solution.  In 
drawing attention to the provisions of Article 3.7 of the DSU, Cuba would also wish to point out that 
this Article provided that the first objective of the dispute settlement mechanism must be to secure the 
withdrawal of measures inconsistent with the provi sions of the covered agreements.  Similarly, in 
recalling the applicable rules one should bear in mind the provisions of Article 21.1 of the DSU, to the 
effect that:  "Prompt compliance with recommendations  or rulings of the DSB is essential in order to 
ensure effective resolution of disputes to the benef it of all Members".  The aim pursued by the United 
States was, and continued to be, to obtain a prom ise from the EC not to suspend concessions even in 
the face of continued non-compliance with the DSB's recommendations.  Clearly, the principal 
objective was to find a way of calmly awaiting the expiry of the time-frame for the renewal of the 
trademark by its current and legitimate owner, th ereby paving the way for the fraudulent appropriation 
of that trademark by Bacardi & Co.  The consider able delay in complying with the recommendations 
arising from this and other disputes had been systema tically denounced not only by Cuba, but by other 
Members as well, given the steadily worseni ng situation regarding compliance with the WTO 
Agreements and with the dispute se ttlement mechanism.  This was the result of the constant violation 
of, and disregard for, established rules, and it af fected the maintenance of an adequate balance 
between the rights and obligations of Members un der the covered agreements.  Cuba, once again, 
called on the United States to comply immediately, fully and unconditionally with the 
recommendations and resolutions pertaining to this dispute.  There was only one way to do this, namely, by repealing the arbitrary and discriminatory Section 211.  
6. The representative of Brazil
 said that his country wished to thank the United States for its 
status report and the statement made at the present meeting.  Based on systemic considerations, 
however, Brazil wished to manifest its concerns w ith the protracted implementation process in this 
dispute.  Article 21.3(c) of the DSU provided th at the period for implementation of recommendations 
should not exceed 15 months from the date of adopti on of a panel or Appellate Body report by the WT/DSB/M/212 
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  DSB.  In the present case, the adoption of the Pa nel and the Appellate Body Reports had taken place 
more than 52 months ago.  The United States had, th erefore, granted itself a grace period of more than 
three years on top of the Article 21 "benchmark" for the outer limit of an implementation period.  Furthermore, based on what had just been stated by the United States, there was no clear signal that 
the issue would be resolved in the near future.  This could not be reconciled with the principle of 
prompt settlement of disputes, which was one of the core objectives of the WTO dispute settlement 
system.  Brazil strongly urged the United States to ta ke the necessary and urgent steps to implement 
the relevant DSB's rulings and recommendations. 
7. The representative of Argentina
 said that, like previous speakers, his country wished to 
express its systemic concern with regard to the de lays in implementing the DSB's  recommendations 
and rulings.  Prompt compliance with the DSB's recommendations and rulings was a critical element 
of the WTO dispute settlement system, and there was no doubt that long delays in implementation 
adversely affected the credibility of the system to th e detriment of all Members.  Argentina, therefore, 
urged the United States to redouble its efforts to  ensure immediate compliance with the DSB's 
recommendations and rulings in this dispute. 
8. The representative of India  said that prompt compliance with rulings and recommendations of 
the DSB was essential for effective resolution of di sputes to the benefit of all Members, and was 
indeed the starting point of the surveillance func tions of the DSB.  While a solution mutually 
acceptable to the parties was preferred, the par ties were required to notify such solutions, and 
Members could raise points relating thereto.  Even  four years after adoption of the recommendations 
and rulings of the DSB in this dispute, it was not clear whether a positive solution was at all being 
pursued actively by the parties in this dispute.  This was a systemic matter for the entire WTO 
Membership, and the continued concern of Member s on this item needed clearer responses than the 
DSB had received in the past few months.  The DSB needed to reflect upon these systemic concerns 
as a WTO Body, and India called upon the parties to shed some light on the way they intended to fulfill the objective of prompt settlement and the act ions they proposed to achieve that objective. 
9. The DSB took note
 of the statements and agreed  to revert to this matter at its next regular 
meeting. 
(b) United States – Anti-dumping measures on certain hot-rolled steel products from Japan:  
Status report by the United States (WT/DS184/15/Add.42) 
10. The Chairman  drew attention to document WT/DS184/ 15/Add.42, which contained the status 
report by the United States on progress in the impl ementation of the DSB's recommendations in the 
case concerning US anti-dumping measures on certain hot-rolled steel products from Japan. 
11. The representative of the United States  said that his country had provided a status report in 
this dispute on 4 May 2006, in accordance with Ar ticle 21.6 of the DSU.  As of 23 November 2002, 
the US authorities had addressed the DSB's recommendations and rulings with respect to the calculation of anti-dumping margins in the hot-rolled steel anti-dumping duty inv estigation at issue in 
this dispute.  Details were provided in document WT/DS184/15/Add.3.  The US administration 
continued to support legislative amendments that  would implement the DSB's recommendations and 
rulings with respect to the US anti-dumping duty statute, and was working with the US Congress to pass such amendments. 
12. The representative of Japan
 said that his country noted the statement by the United States 
along with its latest status report stating that the US administration would continue to work with the 
US Congress to enact the legislation H.R. 2473.  Ho wever, it was regrettable that almost one year had 
already passed since the legislation had been introduced in the US Congress.  The delay in 
implementation would undermine the credibility of the WTO dispute settlement system.  Japan  WT/DSB/M/212 
 Page 5 
 
 
  wished to renew its strong hope that the United St ates would make further efforts towards full and 
prompt implementation of the DS B's recommendations and rulings. 
13. The DSB took note  of the statements and agreed  to revert to this matter at its next regular 
meeting. 
(c) United States – Section 110(5) of the US Copyright Act:  Status report by the United States 
(WT/DS160/24/Add.17) 
14. The Chairman  drew attention to document WT/DS160/ 24/Add.17, which contained the status 
report by the United States on progress in the impl ementation of the DSB's recommendations in the 
case concerning Section 110(5) of the US Copyright Act. 
15. The representative of the United States  said that his country had provided a status report in 
this dispute on 4 May 2006, in accordance with Article  21.6 of the DSU.  As noted in the report, the 
US administration was working closely with the US Congress, and conferring with the EC in order to reach a mutually satisfactory resolution of this matter. 
16. The representative of the European Communities
 said that, once more, the EC wished to 
underline the lack of progress on the part of the Un ited States in solving this long-standing dispute.  
Almost five years after the adoption of the Panel Repor t in this dispute, the United States had failed to 
take any steps to solve this dispute, and maintain ed a legislation that violated intellectual property 
rights and hurt the interests of music creators.  For several years now, the United States continued to 
state that the US administration was actively di scussing with the US Congress possible solutions to 
this dispute, but the DSB was not aware of any concrete  result in this regard.  In view of this worrying 
situation, the EC urged the United States to take the necessary action to end a situation of non-
compliance that had already lasted too long.  Finall y, the EC wished to recall that it had reserved its 
right to reactivate at any point in time the arbitration on retaliation. 
17. The DSB took note  of the statements and agreed  to revert to this matter at its next regular 
meeting. 
(d) European Communities – Export subsidies on sugar:  Status report by the European 
Communities (WT/DS265/35 – WT/DS266/35 – WT/DS283/16) 
18. The Chairman  drew attention to document WT/D S265/35 – WT/DS266/35 – WT/DS283/16, 
which contained the status report by the EC on progress in the implementation of the DSB's recommendations in the case concer ning export subsidies on sugar. 
19. The representative of the European Communities
 said that on 19 May 2005, the DSB had 
adopted recommendations and rulings in the "EC – Sugar" dispute brought by Australia, Brazil and 
Thailand by adopting the Appellate Body and the Pa nel Reports.  On 28 October 2005, the Arbitrator 
acting under Article 21.3(c) of the DSU had determin ed that the reasonable period of time for the EC 
to implement the recommendations and rulings of  the DSB would be 12 months and three days, 
thus expiring on 22 May 2006.  On 20 Februa ry 2006, the Council had adopted Regulation 
(EC) No 318/2006 on the common organization of the markets in the sugar sector.  It had been 
published in the Official Journal of the European Un ion on 28 February 2006.  As interested Members 
were aware, the adoption of this Act had been preceded by intense debate, both internally and 
internationally on how to dramatically reform  the EU sugar sector, something which had not 
been done in 40 years.  The end result, Regulation No 318/2006, set out the framework for a comprehensive and very painful reform of the EU su gar sector.  This reform addressed the root causes 
for the exportation in excess of scheduled limits of  what the Appellate Body considered to be 
"subsidised" sugar.  One of its main consequences w ould be to turn the EC from a net exporter into a WT/DSB/M/212 
Page 6  
 
  net importer of sugar.  This reform would not only  be painful for EC farmers, but also for  ACP 
countries.  
20. Regulation No 318/2006 was not the only piece of legislation that would implement the 
DSB's recommendations and rulings by 22 May 2006.  It contained also the necessary powers for the 
European Commission to adopt the implementing me asures required to fully achieve this.  These 
implementing measures were currently being adop ted.  A first such measure was the Commission 
Regulation No 493/2006 of 27 March 2006.  Followi ng the elimination of the obligation to export C 
sugar, this Regulation allowed th is sugar to be carried forward to the 2006/2007 marketing year and 
be considered to be non-quota s ugar under the terms of Regulation 318/ 2006.  It also provided for the 
reduction of eligible production under the quota in respect of the 2006/2007 marketing year so as not 
to create new stocks of sugar.  
21. Other implementing measures we re being adopted in the month of May.  Through the 
enactment of these implementing measures, the EC intended to comply with the DSB's rulings and 
recommendations in this dispute within the reasonabl e period of time specified for that purpose.  The 
EC would, of course, report on these measures, once adopted, in its next status report. 
22. The representative of Australia
 said that her country wished to thank the EC for its status 
report and for the statement it had made at the pr esent meeting.  However, Australia had serious 
concerns regarding the EC's implemen tation in this dispute.  Australia wished to  state clearly that the 
EC had not implemented the recommendations and ruli ngs of the DSB and would not have done so by 
the expiry of the reasonable period of time on 22 Ma y 2006.  First, she wished to address the EC's 
decisions taken during the course of the implementati on period and the implications of those decisions 
for the EC's compliance.  In 2005/2006, subsidized sugar exports from the EC were forecast to reach 
record levels, of between 7-8 million tonnes, compared to average annual exports of around 
5.5 million tonnes.  The EC's WTO scheduled commitment limit was 1.273 million tonnes.  The 
quantities exported in excess of the scheduled commi tment limits were roughly equivalent to the 
entirety of Australia's annual sugar production.  The question was how would the international sugar 
market react if Australian sugar production were to cease in any one year? 
23. These record sugar export levels were directly a ttributable to decisions taken by the EC, in 
consultation with member States, with the intent and effect of increasing subsidized exports.  Those 
decisions had been taken in the course of the r easonable period of time for implementing the DSB's 
recommendations and rulings.  During the course of the implementation period, the Commission, in 
consultations with its member States, had also ta ken decisions approving the export of subsidized 
quantities of quota sugar, at levels significantly in excess of its WTO commitment limits.  Further, the 
Commission and members States had approved the grant of export refunds at levels significantly in 
excess of the EC's WTO scheduled budg etary outlay limits of €499.1 million. 
24. Second, in the circumstances of this dispute the actions taken by the EC during the 
implementation period did not create a presumption of WTO-consistency.  For the 2005/2006 period, 
the facts demonstrated that the EC would contin ue to be acting inconsistently with its WTO 
obligations under Articles 3.3 and 8 of the Agre ement on Agriculture after 22 May 2006.  On the 
basis of the Sugar Management Committee records, it was evident that – in respect of quota sugar 
alone – the EC had already exceeded its WTO sched uled quantity and budgetary outlay commitment 
limits for the 2005/2006 marketing year.  Australia asked  that the DSB take note of that fact.  At the 
12 May meeting of the WTO Committee on Agricultu re, the EC's representative had acknowledged 
the relevance of 2005/2006 statistics on export quantities and export refunds to the EC's WTO 
implementation and had undertaken to provide certain  requested information at the present meeting.  
Australia looked forward to that advice which, sh e noted, had not been provided by the EC in its 
statement at the present meeting.   WT/DSB/M/212 
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  25. Third, the EC status report constituted a statement of intent.  It did not claim to have 
implemented the DSB's recommendations and rulings.  Au stralia noted that the statement by the EC at 
the present meeting was also one of intent, despite th e fact that only five days remained before the 
expiry of the reasonable period of time.  Whatever actions taken thus far a nd which might be taken by 
22 May, they must be measures in effect  during the implementation period.  They must also be 
measures for the purposes of compliance with WTO ob ligations.  While Australia welcomed actions 
to undertake reforms to the EC's sugar regime, ther e was no need to remind the EC that adoption of a 
legal framework would be insufficient to constitu te compliance with the DSB's recommendations and 
rulings.  The measures must be given effect by the date of expiry of the reasonable period of time. 
26. There was also no need to remind the EC that , in the context of Article XVI:4 of the 
Marrakesh Agreement establishing the WTO, the EC needed to ensure  the WTO conformity of not 
only its laws and regulations, but also its administrati ve procedures.  Australia particularly wished to 
refer to the Commission's existing authority to regulate quota export quantities and export refund 
levels for the purposes of compliance with WTO sch eduled limits.  Australia understood that the new 
sugar regime continued that authority and extended it to sugar produced in excess of quota.  During 
the implementation period the Commission and memb er States had not applied that authority in 
respect of quota sugar.  If they no w took the position that they did not  have to observe the WTO limits 
in their decisions on export quantities and export refu nds, there appeared to be no legal guarantee that 
they would ensure that regulatory authority would be applied in a WTO-consistent way in future 
years.  In that context, she not ed forecasts that structural surp luses and oversupply on the EC's sugar 
markets were expected to continue in 2006/2007.   She noted also that the French Beetgrowers 
Confederation had recently stated its expectations  that the Commission would continue to use the 
export market as a market management tool to dispos e of structural surpluses.  According to a recent 
report in the specialist media, a senior Commis sion official had reportedly indicated that the 
Commission would not want to apply its regulatory authority in full to the EC's exports in the future.  Article 10.3 of the Agreement on Agriculture would be relevant in such circumstances. 
27. Fourth, the EC's actions during the implementa tion period raised serious concerns.  As 
Australia had stated in 2005 in the DSB, the EC had assumed the right to a unilateral waiver of its 
WTO obligations.  The only way in which the EC could comply with its obligations under Article 3.3 and 8 of the WTO Agreement on Agriculture, was to reduce its subsidized exports and export 
subsidies to the WTO scheduled commitment limits.  The EC most certainly could not claim that 
actions designed to allow for unrestricted acce ss to export licences and unlimited export refunds 
during the implementation period – which would continue  to be disposed of on world markets for at 
least three months beyond 22 May – would constitute WTO implementing measures.   
28. Fifth, in a wider trade policy context, incl uding the Doha Round negotiations, the EC should 
be sending a signal that it was prepared to comply with its existing WTO obligations in the agriculture 
sector.  
29. Finally, it was a fact that the EC had not yet taken measures to comply with the DSB's 
recommendations and rulings.  It was also a fact that the EC would continue to be inconsistent with its 
WTO obligations beyond 22 May.  The Australian suga r industry was almost 100 per cent exposed to 
world sugar price movements.  World sugar prices were highly speculative and volatile and in large 
part responsive to actions taken within Europe.  If the EC had taken action to observe its WTO 
obligations in the 2005/2006 period  – as an alternative to decisions to significantly increase exports in 
2005/2006 – current world market conditions would ha ve been vastly more favourable for Australia 
and a number of developing countr y sugar exporters.  Australia reserved its WTO rights in this 
dispute.  Australia would also like to engage in a constructive dialogue with the EC's  authorities on 
implementing actions. WT/DSB/M/212 
Page 8  
 
  30. The representative of Brazil
 said that his country took note of the status report provided by 
the EC, and thanked the EC representative for his st atement made at the present meeting.  Brazil noted 
with satisfaction the EC's renewed declara tion that it intended to implement the DSB's 
recommendations within the reasonable period of time;  i.e. until 22 May.  Brazil was also appreciative 
of the efforts made by the EC to adjust its suga r regime and hoped that this  reform would bring the 
EC production and export regimes into  conformity with the WTO disciplines.  Brazil could not avoid 
regretting, however, the EC's decision to keep  the amount and quality of the information on the 
process of implementation in this dispute at unjustif iably insufficient levels.  Submitted after almost 
one year after the adoption of the Reports of the Panel and the Appellate Body, and less than 20 days 
before the expiry date of an extended reasonable pe riod of time, the EC's status report contained very 
little and unspecific information about the actions th e EC had taken or would take to fully comply 
with the relevant DSB's recommendations. 
31. Contrary to Brazil's expectations, this situati on had not improved with the EC's statement at 
the present meeting, only five  days before the expiry  of the reasonable period of time.  This certainly 
fell short of the most basic transparency requirement s set forth in Article 21 of the DSU.  Moreover, 
this did not help build the necessary confidence in th e EC's real ability or willingness to abide by its 
implementation obligations in this dispute.  In its  status report and in its statement at the present 
meeting, the EC had referred to Council Regula tion (EC) No. 318/2006 as the legal basis for the 
European Commission to adopt the relevant impl ementing measures to ensure compliance for the 
purpose of this dispute.  It was also mentioned that these implementing measures were currently under preparation.  At a minimum, the DSB should recei ve detailed information on (i) which implementing 
measures the European Commission had already enacted, and (ii) which further implementing 
measures the EC was considering to adopt and at  which moment the EC intended to do so.  
32. Data on the EC's exports were also crucial for an assessment of compliance in the present 
case.  He recalled that both the Panel and the Appell ate Body had found the EC in violation of its 
export subsidy commitments.  According to the EC's Schedule, read in conjunction with the 
Agreement on Agriculture, the EC's exports of subsid ized sugar must be limited to 1.23 million tons 
per year, and the EC's budgetary expenditures to s ubsidize sugar exports ha d to be below €499 million 
euros per year.  On the basis of statistical data  drawn from the EC records, the EC had already 
exceeded both its scheduled quan tity and budgetary outlay commitments for the marketing year 
2005/2006.  Brazil would appreciate reasoned and s ubstantiated explanations from the EC on these 
figures, and the submission of complete data on the actual figures, estimates and forecasts related to 
its sugar exports for the marketing year 2005/2006.  Th is was a matter of particular concern in light of 
press reports that the EC would allow exports of ma rketing year 2005/2006 sugar after the expiry of 
the reasonable period of time for those quantities under export licenses granted until 22 May.  This 
information had been confirmed by the EC at the 12 May regular meeting of the Committee on Agriculture.  Brazil would appreciate an adequate explanation by the EC regarding the compatibility 
of such a course of action and its WTO obligations.  Brazil also urged the EC to present as promptly 
as possible actual figures or estimates concerning th e quantity of sugar still to be exported and the 
amount of export refunds to be bestowed on European exporters in this scenario.  For many years, Brazil and other competitive producers and exporters ha d paid for the distortions and inefficiencies of 
the European sugar regime.  The EC had been gi ven more than a year to implement the DSB's 
decision that ruled on the illegality of its sugar exports. Brazil expected that, by virtue of full 
compliance with the DSB's recommendations within the reasonable period of time, the EC would stop 
transferring the burden of its illegal subsidies to other WTO Members.  Brazil looked forward to the 
next status report by the EC. 
33. The representative of Thailand
 said that his country wished to join Australia and Brazil in 
thanking the EC for its statement and the status report.  Thailand recognized the EC's intention to 
implement the DSB's rulings and recommendations w ithin the reasonable period of time;  i.e. by 
22 May 2006, and the EC's attempts to modify its su gar regime thus far.  However, from the details  WT/DSB/M/212 
 Page 9 
 
 
  provided by the EC, Thailand remained to be convin ced that by 23 May 2006 the EC's sugar regime 
would truly be in compliance with the rulings on either a de jure  or a de facto  basis.  On the de jure  
aspect, while the EC had mentioned in its status report that Regulation 318/2006 provided the necessary legal means for the Commission to bring it s sugar regime into compliance, the EC, on the 
other hand, had stated that the relevant implemen ting measures were still under preparation.  In other 
words, with only five days remaining of its reas onable period of time, the EC had not yet complied 
fully in law with the DSB's rulings and recomme ndations in this dispute.  Besides, Thailand 
understood from the information that the EC had recently provided to the Committee on Agriculture 
that several implementing regulations might actuall y not be ready until late June 2006, well after the 
expiry of the reasonable period of time.  
34. The EC had also failed to provide evidence that it had brought or would soon bring itself into 
compliance on a de facto  basis.  As indicated by Australia and Brazil, during its implementation 
period,  the EC had already exceeded its quantit y and budgetary outlay comm itments on sugar exports 
for the 2005/2006 marketing year, a fact exacerbated by its decision of September 2005 to declassify 
approximately 2 million tons of quota sugar to C sugar despite its obligation to limit subsidized 
exports to 1.23 million tons.  Moreover, under e xport licenses granted until 22 May 2006, the EC 
would continue to export excess subsidized sugar for at least three months beyond the reasonable 
period of time.  
35. Despite the EC's declaration of intended timely implementation, Thailand doubted that 
22 May would be the day on which Members would see th e EC's sugar regime in full compliance.  He 
asked:  How would it be possible for the EC to meet this dead line, when the EC had not yet 
implemented several necessary measures and conti nued to export illegally subsidized sugar? The 
continuous flooding of illegally s ubsidized exports of sugar from th e EC posed serious consequences 
for the Thai sugar industry.  These illegal exports a ffected the livelihood of 1.5 million farmers' and 
sugar workers' households who already lived in some  of Thailand's lowest income areas.  The longer 
the EC delayed its implementation, the heavier th e unfair burden that these farmers and workers must 
bear.  Thailand, therefore, urged the EC to live up to  its declaration so that its sugar regime and export 
levels complied with its WTO commitments, both in law and in fact, as soon as possible. To this end, 
Thailand looked forward to the EC's ne xt status report on this matter.  
36. The representative of the European Communities
 said that the EC wished to assure the 
previous speakers that their remark s had been carefully noted and woul d be conveyed to Brussels.  As 
the EC had stated in its first intervention on this  matter, the EC still needed to adopt implementing 
measures to complete the implementation.  He coul d confirm that they would be adopted before the 
end of the reasonable period of time.  In any even t, the reform would transform the EC into a net 
sugar importer, which would be a dramat ic change in the sugar world market. 
37. The DSB took note  of the statements and agreed  to revert to this matter at its next regular 
meeting. 
2. Implementation by the European Communiti es of the recommendations and rulings of 
the DSB in relation to "European Communiti es – Regime for the Importation, Sale and 
Distribution of Bananas"1 and related subsequent WTO proceedings 
(a) Statements by Honduras, Nicaragua and Panama 
38. The Chairman  said that this item was on the agenda of the present meeting at the request of 
Honduras, Nicaragua and Panama and invited the re presentatives of the respective countries to speak. 
                                                      
1 WT/DS27. WT/DSB/M/212 
Page 10  
 
  39. The representative of Honduras
 said that, as other Members had pointed out, the illegal 
measures taken under the EC banana  policy had made it necessary for three different WTO Bodies to 
consider this matter.  In the DSB, Honduras and other Members had called for the monitoring of the 
EC's failure to implement its obligations arising from the Bananas III case.  In the Council for Trade 
in Goods, Members had objected to the EC's re quest for a waiver under Article XIII of the 
GATT 1994, as they believed that such a waiver w ould unjustly overlook their concerns.  In the 
General Council, Honduras together with others had complained that their interests as banana 
suppliers and their rights to compensation as a resu lt of the 2004 EC enlargement and the cancellation 
of the bound tariff in 2006 were not  being adequately addressed.  The le vel of attention being given in 
those bodies to the illegal EC me asures was an indication that Members attached the highest 
importance to this dispute.  It also underscored th e need for the problems being raised in each WTO 
Body to be resolved as soon as possible.  In th e DSB, as in other forums, there was no progress to 
report.  Honduras' concerns over compliance intens ified rather than diminished.  In response to 
Honduras' objection that the autonomous tariff level of €176/mt was too high, the EC had now informed Honduras that the bound level was in fact  €680/mt, which was nine times higher than the 
tariff it had had before 2006.  In reply to Honduras' objection that the ACP tariff quota violated 
Article XIII of the GATT 1994, the EC was attempti ng to circumvent its complaint by requesting a 
waiver. The EC had responded to Honduras' objection that the ACP preferences infringed Article I of the GATT 1994 by maintaining that Honduras must bear  the burden of proving the existence of injury 
after at least one year of application of the new re gime.  These replies inspired no confidence that the 
EC would address the concerns of Honduras regarding compliance.  On the contrary, Honduras was 
left with the feeling that it had no choice but to file a complaint.  Honduras, together with other 
interested Members would, therefore, continue to evaluate further possible steps in order to achieve 
early compliance. 
40. The representative of Nicaragua
 said that the EC had continued to insist that the "monitoring 
procedures" was the appropriate forum in which to di scuss this matter and that his country, along with 
others, had made a mistake in opting for the "litigatio n route" instead of participating in that process 
"in good faith".  Nevertheless, tha nks to Nicaragua's interventions, all DSB Members were now aware 
that the monitoring had never aimed at the restitution of rights and that that procedure could not ease 
the tensions now present in the multilateral system owi ng to the banana issue.  Like the other parties 
concerned with banana supplies, Nicaragua did not believe that monitoring was a viable option for 
resolving the matter.  Although Nicaragua was st ill examining other options, the truth was that 
Nicaragua did not understand why the EC had rejected the "litigation route".  If the EC was so 
convinced that its new regime was compatible w ith all its WTO obligations, it should welcome the 
opportunity to demonstrate this and should do so as quickly as possible.  In any case, as the DSB had 
made clear, turning to a review panel should not be considered as a contentious act.  If a Member 
chose that option, the challenged Member should accep t it in good faith as an attempt to resolve the 
dispute, especially if the initiative had been taken by a developing country.  Nicaragua asked the EC 
to remain open to all possible solutions and to be sensitive to the special needs of developing 
economies.  It was in the mutual interests to r esolve this matter promptly, in good faith and in a 
manner consistent with WTO principles and procedur es. Nicaragua urged the DSB to work with the 
Members concerned in pursuit of those objectives. 
41. The representative of Panama  said that his country also regretted that the EC had been 
gradually toughening its stance on this matter a nd was now further than ever from meeting its 
compliance obligations.  The gradual manner in wh ich the EC had been conveying to Panama its 
message regarding the new MFN tariff level clearly reflected how matters had grown worse.  In November 2005, the EC had unilaterally announced  an "autonomous" tariff rate increase from €75/mt 
to €176/mt.  In December 2005, the EC had assured Latin American countries that it would be holding 
consultations through "monitoring" procedures.  In  January 2006, it had no longer referred to such 
guarantees, but had stated merely that it would not  hold consultations with those countries that had 
opted for litigation.  In February 2006, the EC had ag ain retracted.  It had stated that, for at least one  WT/DSB/M/212 
 Page 11 
 
 
  year, it would not be prepared to review the tariff,  even for those countries that had chosen not to 
litigate.  In March 2006, the EC had retracted yet again when it had informed Panama and other MFN 
interests that the new tariff would cancel out an y compensation to which Panama might have been 
entitled as a result of the enlargement.  The EC had stated at the same time that it had decided to 
assess the progress of the Doha Round before binding the new tariff.  The picture had grown even 
gloomier in the current month.  Some EC official s have stated that the bound tariff had been €680/mt 
all along.  To put the tariff of €680/mt into perspec tive, it should be understood that this had been the 
prohibitive tariff previously applied to out-of-quota ba nanas.  Besides, that tariff level was equivalent 
to some US$15/box or approximately 120 per cent ad valorem  – which was three times higher than 
the highest tariff level ruled against in the arbitr ation proceedings – and nine times higher than the 
previous tariff on MFN bananas.  In short, for all the months that this matter had been on the DSB's 
agenda under Article 21 of the DSU, the elements  of the new tariff level and the possibilities for 
bringing about any change in the regime are less th an it had ever been imagined.  The EC's growing 
disregard for Panama's interests was inconsistent with the obliga tion established under Article 21 of 
the DSU, which required all Members to comply promptly with their commitments arising from the 
covered agreements, paying particul ar attention to all matters that could affect the interests of 
developing country Members.  Panama again request ed the DSB's support in finding an early solution 
to this matter.  
42. The representative of th e European Communities  said that the EC had, once more, listened 
carefully to the statements made on this matter.  Ho wever, the EC must insist that it did not consider 
this to be the appropriate forum to discuss this ma tter.  In addition, the EC referred to its prior 
statements regarding its objection to the categorisat ion of this matter as an "implementation issue" 
relevant to Article 21 of the DSU.  The EC was well aware of the importance of the banana industry 
for Latin American countries, as well as for the ACP countries, and had always kept this consideration 
in mind.  This was why the EC had agreed to put its new tariff to the test of the market and to 
continue discussions with all interested MFN suppliers  with the assistance of Minister Støre (Norway) 
on the basis of the information drawn from the monitoring of the impact of the new MFN tariff.  A 
fourth meeting had taken place recently and the pr ocess was well underway.  The EC regretted that 
Honduras, Panama and Nicaragua had opted thus far fo r the litigation route rather than to engage in 
this process. 
43. The representative of the United States  said that his country continued to urge the EC to work 
with interested Members to resolve this dispute.  The United States was very concerned that the EC 
had taken no steps to do so even though this issu e had been raised by Members numerous times, 
including at the past four DSB meetings and at the Hong Kong Ministerial Conference.   
44. The DSB took note  of the statements.   
3. United States – Continued Dumping and Subsid y Offset Act of 2000:  Implementation of 
the recommendations adopted by the DSB 
(a) Statements by Canada, the European Communities and Japan 
45. The Chairman  said that this item was on the agenda of the present meeting at the request of 
Canada, the European Communities and Japan. He then invited the resp ective representatives to 
speak. 
46. The representative of Canada  said that, as he had stated previously, his country  welcomed the 
adoption of the prospective repeal of the Byrd Amendment.  As Canada understood, the operation 
of the repealing legislation, anti-dumping and co untervailing duties collected after 1 October 2007, 
would be deposited in the US Treasury, rather than disbursed to US producers.  However, the question 
was about anti-dumping and countervailing duties collected  before that date.  They would continue to WT/DSB/M/212 
Page 12  
 
  be disbursed to US producers for many years to come.  In this context, Canada questioned the 
accuracy of the US claim that by implementing th is prospective repeal it had already "taken the 
actions necessary to implement the rulings and recommendations".  Disbursements under the Byrd 
Amendment would continue for many years to come.  The United States would continue to act inconsistently with the WTO Agreement for many ye ars to come.  There was no justification for the 
United States to discontinue to submit to the DS B status reports on devel opments relating to the 
implementation of the rulings in this dispute.  Implementation now, rather than many years in the 
future.  This approach to compliance – this method of "repeal" of a measure fo und to be in violation 
of the WTO Agreement – raised important commerci al and systemic concerns.  Canada called on 
the United States to address these concerns.  It calle d on the United States to  resume the submission 
of status reports and to implement fu ll repeal of the Byrd Amendment. 
47. The representative of the European Communities
 said that the EC would like to record again 
its disagreement with the US statement at the prev ious regular DSB meeting that it had taken all 
actions necessary to implement the DSB's recomme ndations and rulings in this dispute.  The 
Continued Dumping and Subsidy Offset Act had been  found in breach of WTO rules for transferring 
the collected anti-dumping and countervailing duties to the US competitors.  Because the Deficit 
Reduction Act of 2005 provided that those transfers would continue for a number of years despite 
repeal of the CDSOA, the United States was and would remain in breach of Article 18.1 of the Anti-Dumping Agreement and 32.1 of the SCM Agreement still for a number of years as long as those transfers continued.  If the United States now c onsidered that it did not have to take any further 
action, that simply meant that it considered su fficient to bring itself into compliance at some 
undetermined date in the future while implementati on of the DSB's ruling in this dispute was due by 
27 December 2003.  This sent a very disturbi ng message regarding the credibility of the US 
commitment to the dispute settlement system and par ticularly to Members' duty to ensure the prompt 
settlement of disputes.  In the absence of the stat us report, the EC wished to ask the United States 
again if and what steps it intended to take to stop the transfer of anti-dumping and countervailing 
duties without further delay.  The FSC dispute show ed that the US Congress had been able to put an 
end to WTO-illegal transition periods.  Nothing prevented the US Congress revisiting the delayed 
termination of the Byrd Amendment.  The EC also  renewed its call on the United States to abide by 
its clear obligation under Article 21.6 of the DS U and to submit implementation reports in this 
dispute. 
48.  The representative of Japan
 said that his country regretted that it had to express, once again, 
its disappointment that the United States had not su bmitted a status report in the month of May, and 
had insisted on having taken all the necessary measures to implement the DSB's recommendations and rulings, without sufficient explanation.  As hi s delegation had stated at previous DSB meetings, 
Japan welcomed the enactment of the Deficit Reducti on Act of 2005.  At the same time, as it had also 
been stated at previous DSB meetings, Japan be lieved that the full implementation of the DSB's 
recommendations and rulings in this dispute meant that the CDSOA should be completely repealed 
and the illegal distribution under the CDSOA be termin ated.  Japan urged the United States to take 
steps to comply fully with the DSB's rulings and recommendations without further delay and to provide its status report.  Japan reserved all its  rights under the DSU until full implementation by the 
United States were to take place. 
49. The representative of the United States
 said that as the United States had already explained at 
previous DSB meetings the President had signed the Deficit Reduction Act into law on 
8 February 2006.  That Act included provisions re pealing the Continued Dumping and Subsidy Offset 
Act of 2000.  Thus, the United States had take n all actions necessary to implement the DSB's 
recommendations and rulings in these disputes.  It, therefore, continued to fail to see what purpose 
would be served by the submission of status repor ts repeating the progress the United States made in 
the implementation of the DSB's recommendations and rulings.  Finally, the United States wished to  WT/DSB/M/212 
 Page 13 
 
 
  add that given Canada's recent actions in connec tion with the CDSOA, it was surprised to hear 
Canada's intervention under this agenda item.  
50. The representative of Thailand  said that first his delegation wished to thank the EC, Canada 
and Japan for bringing this item before the DSB.   Thailand joined previous speakers in expressing 
disappointment that the United States had not submitted a status report on its outstanding 
implementation in the Byrd Amendment case for this me eting.  Thailand, therefore, affirmed its views 
expressed during the previous DSB meetings, and urge d the United States to continue providing status 
reports until it brought its actions into full conform ity with the DSB's rulings and recommendations in 
this dispute, and until this matter had been fully resolved. 
51. The representative of Brazil  said that his country wished to thank again Canada, the EC and 
Japan for raising this issue.  Brazil's position on why it considered that this dispute had not been 
resolved yet had been clearly explained in th e past three DSB regular meetings following the 
enactment of the Deficit Reduction Act in February 2006.  In Brazil's view, there would be no full 
compliance on the part of the United States until and unless all disbursements under the Byrd Amendment ceased.  This was not the case at the pr esent moment.  Short of further action by the 
United States, this would not be the case at least un til 1 October 2007.  The United States had simply 
reiterated its statement that, with the adoption of the mentioned legislation, it had complied with the 
DSB's recommendations.  Yet, no reasoned explanations  had been presented by the United States.  At 
the present meeting, Brazil asked, once again, for th ese reasoned explanations, and particularly how 
the next disbursements under the Byrd Amendment could be accepted as acts of compliance with recommendations that clearly held that each and every such disbursement was WTO-inconsistent. 
52. The representative of Canada
 said that his delegation did not know to which actions of 
Canada the United States had referred at the present meeting.  It was possible that the United States 
was referring to a ruling by the US Court of International Trade as a result of an action brought by Canada in that court, which actually had declar ed the Byrd Amendment insofar as it applied to 
Canada, not to be in accordance with US law.  As  Canada had already stated there were commercial 
and systemic reasons why the continued operation of the Byrd Amendment after the purported date of 
repeal caused concern and so Canada woul d continue to express those concerns.  
53. The representative of India
 said that his country wished to thank the EC, Canada and Japan 
for raising this matter in the DSB again.  Like other Members who had spoken at the present meeting, 
India was disappointed about the lack of a status report by the United States, given that it had not yet fully complied with its obligations in line with  the DSB's recommendations and rulings in this 
dispute.  There was no response from the Un ited States to the question of how continued 
disbursements of duties collected on imports entering the United States squared up with its compliance obligations.  This was a compliance issue, and should be a continued subject of 
surveillance by the DSB.  Until this  matter was resolved to its satisf action, India would continue to 
reserve all its rights under the DSU, including th e right to suspend concessions.  India urged the 
United States again to inform the DSB of the steps it  had proposed to take to ensure full compliance.  
India also requested again that the United States should resume submitting status reports in this 
dispute. 
54. The representative of the United States
 said that his delegation wished to respond to a 
previous intervention to clarify that Canada's acti on to which he had referred previously was Canada's 
recent decision that it would not continue to suspend concessions in this dispute.     
55. The representative of Canada  said that any decision on whether or not to impose retaliatory 
measures and whether to continue imposing them an d on what products they would continue to be 
imposed was difficult.  He did not wish to go into the very different considerations that had been 
taken into account when Canada had decided not to continue im posing retaliatory measures as of WT/DSB/M/212 
Page 14  
 
  30 April 2006.  Those measures had expired.  He u nderlined that Canada continued to consider all 
options in respect of its rights under the WTO and with respect to the Byrd Amendment.  
56. The DSB took note
 of the statements.  
4. United States – Countervailing measures co ncerning certain products from the 
European Communities 
(a) Statement by the European Communities 
57. The Chairman  said that this item was on the agenda of the present meeting at the request of 
the European Communities and invited the representa tive of the European Communities to speak. 
58. The representative of th e European Communities  said that, once again, the United States had 
failed to comply with the recommendations and ruli ngs adopted by the DSB in this old dispute.  
Indeed, the findings of the draft Section 129 determ inations were totally unjustified and groundless. 
Essentially, it was provisionally determined that th e privatizations of Aceralia and British Steel had 
not taken place on market terms.  This was supported neither by facts nor by law.  The Department of Commerce had stretched the facts and the law to such an extent that one could conclude that the result 
was pre-ordained.  First, it should be recalle d that the purpose of this second Section 129 
determination was to implement the findings of the Ar ticle 21.5 Panel in the case at issue.  The draft 
decision had found essentially that the privatisation of  British Steel was not for fair market value.  
However, in both previous WTO proceedings as well as in national proceedings that had taken place in the United States concerning the same privati zation, the United States had accepted unequivocally 
that British Steel had been privatized for fair market value.  
59. In spite of this clear evidence on the record , the United States now seemed determined to 
ignore previous findings and was retracting previous statements with the purpose of reaching different 
conclusions regarding the same facts.  Such ch erry picking was impermissible.  Whatever the 
procedural devices employed, one thing was clear.  Both previous and adopt ed Panel and Appellate 
Body reports as well as the Department of Commerce in past domestic proceedings had found that the 
privatisation of British Steel was for fair market va lue, at arm's length and it was not simply open to 
the Department of Commerce to rewrite history and make different conflicting findings.  The EC 
trusted that the Department would remedy this matter at the time of the final determination.  
60. Second, in its draft determinations, the Depa rtment of Commerce had reached the specific 
findings on the basis, among others, of the alleged deliberate withholding of pertinent information by 
the Government of the United Kingdom.  Both the Commission and the UK Government had, however, provided reasonable explanations of why th e valuation study requested was not available.  
In spite of that and in spite of ample evidence on the record proving that the privatization of British 
Steel had taken place on market terms, the Commerce Department had chosen to draw adverse inferences which were without basis and contrary to law.  The information on the record did not 
support the finding that the information requested w as deliberately withheld.  Further, the remaining 
record evidence, including previous admissions fr om the US administration regarding this matter, 
should be the basis for the final conclusions which should definitely accept that the privatisation of 
British Steel was on market terms. 
61. Third, the draft determinations also referred allegedly to certain subsidy programmes which 
had not been terminated.  Although no details were given regarding the identity of these programmes, 
it seemed that the Department of Commerce referred  to regional development aid either through 
UK national programmes or the European Regional and Development Fund.  As explained in the 
Commission comments, these allegations did not hold water.  The Commission had provided detailed 
and solid evidence to rebut the Department of Commerce allegations beyond any reasonable doubt.   WT/DSB/M/212 
 Page 15 
 
 
  The alleged programmes had been terminated a long time ago and nothing on the record demonstrated 
that British Steel had continued to receive regiona l development grants that  benefited the subject 
merchandise.  In view of this, and in the complete  absence of any breach of the applicable Community 
rules at the time of the sunset review in question,  namely the 1996 EC steel aid code, with regard to 
British Steel's steel production, the Department shoul d conclude that no CVD or ders were justified on 
this ground either.  On the basis of the above and th e evidence on the record, it was clear that the draft 
findings in this case were totally unjustified.  It served no purpose to try against all evidence to twist 
the facts in order to reach different conclusions.  When the record eviden ce was considered, the only 
defensible conclusion is that all subsidy benefits have been terminated or were de minimis .  The 
proven facts simply did not support a finding that subsidisation was likely to continue or recur.  The 
EC trusted that the US Department of Commerce w ould remedy this situation and terminate the CVD 
orders once and for all.  
62. The representative of the United States  said that his delegation thanked the EC for its 
statement.  The United States wished to respond to th e EC statements made at previous meetings and 
again at the present meeting suggesting that implementing the Panel's findings would require 
repealing the measures at issue "without further de lays".  In fact, at the EC's insistence, the 
Article 21.5 Panel stated that the United States needed to take new information provided by EC 
parties into account.  That was what the Unite d States was doing now.  The United States was 
surprised to hear the EC characterize following th e DSB's recommendations as "delays", or that repeal 
was the only way to comply.   
63. The DSB took note  of the statements.  
5. United States – Measures affecting trade in large civil aircraft 
(a) Initiation of the procedure for developing in formation concerning serious prejudice under 
Annex V of the SCM Agreement and designation of Mr. Mateo Diego-Fernández as the DSB 
representative referred to in paragraph 4 of that  Annex for the development of evidence to be 
examined by the Panel in DS317 established on 17 February 2006 in the form of written 
responses by the United States to written questions  from the DSB representative to the United 
States pursuant to Annex V, paragraph 1 and Annex V, paragraph 2 of the SCM Agreement 
(WT/DS317/5) 
64. The Chairman  said that this item was on the agenda of the present meeting at the request of 
the European Communities.  He drew atten tion to the communication from the European 
Communities contained in document WT/DS317 /5, and invited the representative of the 
European Communities to speak. 
65. The representative of the European Communities  said that the EC was disappointed that the 
United States had repeatedly opposed the EC's requ est for the initiation of an Annex V procedure.  
The terms of the SCM Agreement we re quite unambiguous.  It provided  for an automatic initiation of 
the Annex V procedure at the request of either party together with the designation of a facilitator.  The 
continued and unjustified opposition by the United States was also inconsistent with the general 
obligation to co-operate, set out in paragraph 1 of Annex V.  The United States simply could not hide 
behind the fact that in 2005 the EC had insisted – for substantial and practic al reasons – that both 
parties should consult and co- operate on modalities of the Anne x V procedure before actually 
initiating the Annex V process in this complex proceeding.   
66. The EC had never taken the position that the in itiation of the Annex V procedure as such was 
subject to the agreement of the defending party.  The United States itself was clearly on the record for 
considering the initiation of the Annex V process to be  automatic.  As stated a moment ago, this was 
clearly spelled out in and supported by the SCM Agre ement.  Annex V played an important role in WT/DSB/M/212 
Page 16  
 
  gathering the necessary facts in subsidy dispute to en able the Panel to conduct the ensuing analysis in 
the most efficient manner.  He also wished to cl arify that the EC was not seeking a resumption of the 
"old" Annex V procedure, as the United States had stat ed at the previous DSB meeting.  This should 
be quite clear from the Airgram, where the EC cl early referred to the DS317 Panel established on 
17 February 2006.  The EC had requested the desi gnation of Mr. Mateo Die go-Fernández as the DSB 
representative referred to in paragraph 4 of that  Annex for the development of evidence to be 
examined by the panel in DS317 established on 17 Februa ry 2006.  Indeed, the EC had a right to have 
the facilitator appointed.  This was clearly spelled out in paragraph 4 of Annex V, pursuant to which 
the "DSB shall designate a representative to ser ve the function of facilitating the information-
gathering process". 
67. This EC considered that this decision should ha ve been automatically adopted at the previous 
DSB meeting.  There was no possibility for this decision not to be taken, even if there was a consensus not to adopt it.  The EC had asked for th is item to be included on the agenda again so that 
there could be no doubt as to its position and insisted that the decision be reflected in the minutes of 
the present meeting.  The Annex V procedure was initiated and Mr. Mateo Diego-Fernández was the 
designated facilitator.  The EC Annex V questions  were ready for immediate transmission to the 
facilitator.  Finally, he emphasized, once again, th at the EC continued to be prepared to discuss 
practical arrangements on how to conduct this new Annex V procedure in the most expeditious and 
efficient manner for all parties involved. 
68. The representative of the United States
 said that much of what the EC had stated at the 
present meeting with the exception of its last few comments were not different in substance from its 
statements made at previous DSB meetings.  In larg e part  the United States wished to refer Members 
to the statements made at previous DSB meetings expressing its point of view.  A couple of points of 
correction, one was that if the EC and Members would look at the minutes of the previous DSB meeting it would not be correct to say that the Un ited States had stated that it thought the EC was 
seeking a resumption of the old process, in fact what  the United States had stated then, was that it was 
at the last meeting that it first became clear that  that was not what the EC was seeking, and the 
United States had expressed its surprise about how it had changed its position about that over the 
course of the past couple of months.   
69. With respect to other changes of the EC's position, he wished to repeat once again for 
Members what the EC had stated at the 31 August 2005 DSB meeting:  "consistent with WTO jurisprudence an Annex V procedure could not be in itiated unilaterally by only one party to a dispute 
but it required a meeting of the minds;  an actual agreement between the parties".  So the EC had 
taken similar positions at the two DSB meetings im mediately preceding the one to which he had just 
referred.  With respect to the very last comments made by the EC, the rather surprising suggestion by 
the EC that the DSB should depart from the consensus rule that applied to all of its decisions pursuant 
to the DSU.  That was, of course, not a position that the United States shared.  The United States 
would simply suggest that the DSB do and must do what it had done at every previous DSB meeting 
at which this particular item had been considered , namely to take note of the statements made.  
70. The Chairman
 proposed that the DSB take note of th e statements made and agree to suspend 
the consideration of this agenda item in order to  allow consultations with a view to finding a way 
forward.  He further proposed to revert to this item when he would consider it appropriate.2  
71. The DSB took note  of the statements and agreed  to the Chairman's proposal.  
                                                      
2 Subsequently, on 23 May 2006, the Chairman sent out a fax informing Members that, following 
consultations between the parties to the dispute, an ag reement had been reached that it was not necessary to 
revert to this matter and that the consideration of this agenda item did not need to be suspended.    WT/DSB/M/212 
 Page 17 
 
 
  72. The representative of Canada  said that his delegation did not wish to disagree in any way with 
the Chairman's suggestion about the suspension of th e matter, however, he wish ed to underline that 
the positions adopted by both the United States and the EC had given rise to very serious systemic 
concerns.  His delegation was consulting with capita l to try to solidify its position which was on the 
record, namely, that the launch of the Annex V pr ocedure was and ought to be automatic.  At the 
same time, the statements made at the present mee ting by the EC and the United States in respect of 
the need for consensus on launching Annex V cert ainly gave rise to systemic concerns.  His 
delegation would continue discussions with capital and,  of course, it would wait for the Chairman to 
convene a meeting, but his delegati on would appreciate adequate notice of  the meeting so that it could  
have proper instructions.  In the absence of instru ctions, of course, he did not think Members could 
have a full discussion.  So, Canada would appreciat e the Chairman's careful consideration of this 
matter.  
73. The DSB took note  of the statement.  
6. Selection process for appointment of an Appellate Body member 
(a) Statement by the Chairman  
74. The Chairman  said that he had placed this item on the agenda of the present meeting in order 
to report on the selection process for the appointment of  an Appellate Body member to replace the late 
Mr. John Lockhart for the remainder of his term  until 11 December 2009.  As Members were aware, 
eight candidates had been nominated for the positio n by the following seven countries:  Australia, 
Benin, China, Ghana, Kenya, Mexico and South Afri ca.  He recalled that a Selection Committee had 
been established by the DSB at its meeting on 17 Fe bruary to carry out the process.  He further 
recalled that this Selection Committee, as provi ded for in the procedures set out in document 
WT/DSB/1, was composed of the Chairs of the General Council, the Goods Council, the Services 
Council and the TRIPS Council;  the Director General,  and the Chairman of the DSB.  The Selection 
Committee had held an organizational meeting on 10 May.  At that meeting the Committee had agreed to conduct interviews with the eight candi dates during the period  from 27 June until 30 June.  
The Secretariat was currently making the necessary arrangements in this regard.  He noted that 
delegations wishing to meet with the candidates durin g this period were invited to contact directly the 
delegations of Australia, Benin, China, Ghana,  Kenya Mexico and South Africa to make the 
appropriate arrangements. 
75. He said that consistent with previous prac tice, the Selection Committee would also be 
available to meet, upon request, with any interested  delegations who wished to express their views on 
the candidates in person to the Committee.  In this  regard, the Selection Committee had agreed to hold 
such meetings, upon request, during the period from 5 July until 7 July.  Delegations wishing to meet 
with the Selection Committee during this period woul d be invited to contact Ms. Margaret Kennedy 
of the Secretariat's Council and TNC Division in or der to make an appointment.  Alternatively, 
delegations were free to make their views known to  the Selection Committee in writing.  Any such 
written communications should be sent to the Chairm an of the DSB in care of the Council and TNC 
Division by no later than 7 July 2006.  
76. Finally, he said that it was the intention of th e Selection Committee to complete its process as 
soon as possible in order to be able to present its recommendation to the DSB before the summer 
break.  He recalled that the last regular DSB me eting before the summer break was scheduled for 
19 July.  If the Selection Committee had not been able to complete its process by then, he would 
convene a special DSB meeting before the su mmer break, as soon as the Selection Committee was 
able to present its recommendation to the DSB.  He would report further on this matter in due course. 
77. The DSB took note
 of the statement. WT/DSB/M/212 
Page 18  
 
  7. United States – Tax treatment for "Foreign Sales Corporations"  
(a) Statement by the United States 
78. The representative of the United States
, speaking under "Other Business", said that the United 
States was very pleased to report that, on 11 May 2006, the US Congress had passed legislation to repeal the "grandfather" provisions of the American  Jobs Creation Act and the ETI Act that were a 
subject of the recent compliance proceedings in th e FSC dispute.  The United States understood that 
the US President was expected to sign the legisla tion later in the course of the day.  With that 
development, the United States understood that the Unite d States and the EC would be able to put this 
dispute behind them.  The United States welcomed news  of recent efforts by the EC in response to the 
repeal and looked forward to hearing more from the EC in the course of the day.  
79. The representative of th e European Communities
 said that the EC warmly welcomed the 
repeal by Congress of the "grandfather" provisions of the American Jobs Creation Act.  When the 
transition rules of that Act were to expire at the end of the year, compliance would finally be achieved 
in this very long saga.  In recognition of these e fforts, the Council of the European Union had decided 
on 15 May 2006, by Regulation 728/2006, to prevent th e re-introduction of trade sanctions against US 
exports.  These sanctions had b een suspended during the second 21.5 compliance review, but were 
due to be re-introduced on 16 May.  Once the US Pr esident signed the Bill, the sanctions would end.  
This was a positive signal not only for the bilatera l relationship but also for the WTO as a whole. 
80. The DSB took note  of the statements. 
 
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