WORLD TRADE
ORGANIZATIONWT/DS108/26
25 April 2003
(03-2225)
Original:  English/
French/
Spanish
UNITED STATES – TAX TREATMENT FOR "FOREIGN SALES CORPORATIONS"
Recourse by the European Communities to Article 4.10 of the SCM Agreement
and Article 22.7 of the DSU
The following communication, dated 24 April 2003, from the Permanent Delegation of the
European Commission to the Dispute Settlement Body, is circulated pursuant to Article 4.10 of the
SCM Agreement and Article 22.7 of the DSU.
_______________
The European Communities request that a special meeting of the Dispute Settlement Body be
held on 7 May 2003 to consider the following agenda item:
"United States – Tax Treatment for 'Foreign Sales Corporations'
Recourse by the European Communities to Article 4.10 of the SCM Agreement and
Article 22.7 of the DSU."
On 8 October 1999, the Panel in this dispute found that the United States of America's
"Foreign Sales Corporations" scheme violated Article 3.1(a) of the Agreement on Subsidies and
Countervailing Measures (the "SCM Agreement") and Article 3.3 of the Agreement on Agriculture.
On 24 February 2000, the Appellate Body confirmed the findings of the Panel with respect to the
violations of the SCM Agreement and modifi ed the findings concerning the Agreement on
Agriculture concluding that the Foreign Sales Corporations scheme violated Articles 10.1 and 8 of the
Agreement on Agriculture.  On 20 March 2000, the Di spute Settlement Body (the "DSB") adopted the
Appellate Body report and the report of the Panel, as modified by the Appellate Body.  The resulting
DSB recommendations and rulings include the recommendation that the United States bring its
measures found to be inconsistent with the SCM Agreement and the Agreement on Agriculture intoconformity with the provisions of those agreements , and that the United States withdraw the export
subsidies at the latest with effect from the 1 October 2000.
On 2 October 2000 the European Communities and the United States informed the DSB of
the "Agreed procedures under Articles 21 and 22 of the Dispute Settlement Understanding andArticle 4 of the SCM Agreement applicable in the follow-up to the United States – Tax Treatment of
'Foreign Sales Corporations' WTO dispute" co ncluded between the parties on 29 September 2000.
On 12 October 2000, in a special session, the DSB agreed to the United States' request to
allow it a time period expiring on 1 November  2000 to implement the DSB recommendations and
rulings.WT/DS108/26
Page 2
On 15 November 2000, the President of the United States signed into law the FSC Repeal and
Extraterritorial Income Exclusion Act of 2000, US Public law No 106-519).
On 17 November 2000, in accordance with the agreed procedures, the European Communities
presented both the request for countermeasures and suspension of concessions under Articles 4.10 ofthe SCM Agreement and 22 of the DSU respectively and the request for consultations under
Article 21.5 of the DSU.  The European Communities requested authorisation from the Dispute
Settlement Body to adopt appropriate countermeasures and to suspend concessions.  The request
indicated that countermeasures would take the fo rm of imposing an additional duty on the specified
products of up to 100 per cent ad valorem  above the bound customs duties.  The products concerned
would be drawn from within the list of chapters of the Combined Nomenclature attached to the
17 November 2000 request of the European Communities.
On 27 November 2000, the United States objected to the level of countermeasures requested
by the European Communities and the matter was re ferred to arbitration pursuant to Article 22.6 of
the DSU.
On 20 December 2000, the panel under Article 21.5 of the DSU was established and on
21 December 2000, in accordance with the agreed procedures, the parties requested the arbitrators to
suspend their work until the compliance proceedings were over.
On 29 January 2002 the DSB adopted the Panel and Appellate Body reports declaring that the
FSC Repeal and Extraterritorial Income Exclusion Act of 2000 violates Articles 3.1(a) and 4.7 of the
SCM Agreement , Articles 8 and 10.1 of the Agreement on Agriculture and Article III:4 of the
GATT 1994.
In accordance with the agreed procedures, on 29 January 2002 the arbitration procedure was
reactivated. The arbitrator's report authorising countermeasures at the level of US$ 4,043 million was
circulated on 30 August 2002.
Article 22.7 of the DSU provides that " The DSB shall be informed promptly of the decision of
the arbitrator and shall upon request, grant authorization to suspend concessions or other obligations
where the request is consistent with the decision of the arbitrator, unless the DSB decides by
consensus to reject the request ." As the United States has failed to implement the DSB
recommendations and rulings within the prescribed time framework, the European Communities
hereby request authorization from the DSB to take appropriate countermeasures and to suspend
concessions pursuant to Article 4.10 of the SCM Agreement and Article 22.7 of the DSU for an
amount of US$ 4,043 million per year in confor mity with the decision of the arbitrator.
The European Communities intend to take counte rmeasures in the form of the suspension of
tariff concessions and related obligations under the GATT 1994 by imposing an additional duty of up
to 100 per cent ad valorem  above bound custom duties on the attached list of US products (drawn
from the indicative list which had been circulated with the 17 November 2000 request).WT/DS108/26
Page 3
FSC-list
The two-digit CN Chapters are given for inform ation purposes only, for the purposes of the
imposition of any countermeasures the eight-digit product codes apply.  The description of thesecodes can be found in Annex I to Council Regula tion (EEC) No. 2658/87 on the tariff and statistical
nomenclature and on the Common Customs Tariff (a s last amended by Commission Regulation (EC)
No. 1832/2002, OJ L 290, 28.10.2002, p. 1).  The third column reflects the total average value of
imports into the EU from the US during the period 1999-2001 of the listed codes of each chapter.
CN Chapters Description chapter 1000 €
1 Live animals 19,823
01019019 01061200 01062000 01063200 01069000
01061100 01061990 01063100 01063990
2 Meat and edible meat offal 35,581
02032211 02032990 02050019 02085000 02101981
02032955 02044310 02083000 02089040
02032959 02050011 02084090 02089095
4 Dairy produce; birds' eggs; natural honey; edible products of animal origin,
not elsewhere specified or included4,510
04021019 04041002 04069069 04081180
04022119 04061020 04069081 04089180
04031091 04062090 04069086 04090000
04039091 04069021 04069087 04100000
5 Products of animal origin not elsewhere specified or included 12,206
05010000 05040000 05059000 05090010
05021000 05051010 05079000 05119110
05029000 05051090 05080000 05119910
7 Edible vegetables and certain roots and tubers 28,542
07020000 07094000 07102100 07109000 07123900
07031019 07095910 07102200 07114000 07129030
07061000 07095990 07102900 07115900 07131090
07069090 07096010 07108051 07119080 07132000
07081000 07096099 07108059 07123100 07133100
07082000 07099060 07108085 07123200 07139090
07092000 07099090 07108095 07123300 07141099
8 Edible fruit and nuts; peel of citrus fruits or melons 16,006
08011100 08043000 08071900 08104030 08121000
08011900 08044000 08072000 08111011 08131000
08012100 08051030 08091000 08111090 08134095
08013200 08052090 08092005 08112031 08135099
08030019 08055010 08093010 08119050
08030090 08055090 08093090 08119070
08042090 08059000 08094005 08119080
10 Cereals 3,052
10081000 10082000 10083000
11 Products of the milling industry; malt; starches; inulin; wheat gluten 907
11023000 11062090 11071099
11032040 11063010 11081990WT/DS108/26
Page 4
12 Oil seeds and oleaginous fruits; miscellaneous grains; seeds and fruit;
industrial or medical plants; straw and fodder51,765
12040090 12076090 12092600 12114000 12149091
12051090 12079920 12099910 12119075 12149099
12059000 12079998 12101000 12122000
12071090 12091000 12111000 12129980
12072090 12092280 12112000 12130000
12074090 12092311 12113000 12141000
15 Animal or vegetable fats and oils and their cleavage products; prepared edible
fats; animal or vegetable waxes23,770
15010011 15071090 15121991 15153010 15159091
15020090 15079090 15131930 15153090 15200000
15041010 15081090 15131999 15154000 15211000
15041099 15111010 15132991 15155019 15219091
15050010 15119099 15141990 15155099 15219099
15050090 15121191 15149990 15159040 15220099
16 Preparations of meat, of fish or of crustaceans, molluscs or other aquatic
invertebrates7,119
16023119 16041411 16052010 16054000
16024110 16041416 16052091 16059030
16030010 16043010 16052099
17 Sugars and sugar confectionery 17,035
17011190 17024010 17049065 17049081
17019910 17029099 17049071 17049099
17022090 17041019 17049075
19 Preparations of cereals, flour, starch or milk; pastrycooks' products 22,475
19011000 19022099 19043000 19053191 19059020
19012000 19023010 19049080 19053199 19059030
19019091 19023090 19051000 19053211 19059045
19021910 19041010 19053111 19053219
19021990 19041090 19053119 19053299
19022091 19042099 19053130 19059010
20 Preparations of vegetables, fruit, nuts or other parts of plants 53,577
20011000 20055900 20060038 20093119 20094999
20019070 20056000 20079939 20093199 20097199
20019096 20057010 20079958 20093931 20097919
20021010 20057090 20079993 20093939 20097999
20021090 20059050 20091200 20094110 20098038
20031030 20059070 20091998 20094199 20098071
20041099 20059080 20093111 20094930 20098097
21 Miscellaneous edible preparations 9,068
21011111 21022011 21042000 21069020
21011119 21023000 21050010 21069059
21021090 21039010 21050091
23 Residues and waste from the food i ndustries; prepared animal fodder 104,451
23011000 23040000 23063000 23065000 23099041
23012000 23050000 23064100 23066000
23031090 23061000 23064900 23070090WT/DS108/26
Page 5
33 Essential oils and resinoids; perfumery, cosmetic or toilet preparations 1,451
33012310 33012931 33074100
34 Soap, organic surface-active agents, washing preparations, lubricating
preparations, artificial waxes, prepared waxes, polishing or scouring
preparations, candles and similar articles, modelling pastes, dental waxes anddental preparations with a basis of plaster15,480
34012010 34060011 34060019 34060090
35 Albuminoidal substances; modified starches; glues; enzymes 1,650
35011050 35011090 35019090 35030080 35071000
41 Raw hides and skins (other than furskins) and leather 33,043
41044119 41063210 41071910 41079990 41141090
41044919 41063290 41071990 41120000 41142000
41051090 41071119 41079110 41131000 41151000
41053099 41071190 41079190 41132000 41152000
41063110 41071219 41079210 41139000
41063190 41071291 41079910 41141010
42 Articles of leather; saddlery and harness; travel goods, handbags and similar
containers; articles of animal gut (other than silk-worm gut)102,268
42010000 42022210 42029180 42032100 42040010
42021110 42022900 42029211 42032910 42050000
42021190 42023100 42029215 42032991 42061000
42021291 42023210 42029291 42032999 42069000
42021990 42023290 42029298 42033000
42022100 42029110 42031000 42034000
43 Furskins and artificial fur; manufactures thereof 291
43039000
44 Wood and articles of wood; wood charcoal 133,107
44011000 44071038 44083921 44112110 44181050
44012100 44071091 44083931 44112990 44181090
44012200 44072490 44083935 44122210 44182010
44013010 44072560 44083955 44122291 44182050
44013090 44072690 44083985 44122299 44182080
44020000 44072905 44083995 44122300 44183010
44031000 44072969 44091011 44122920 44183091
44032031 44072983 44091018 44122980 44183099
44032039 44072985 44092011 44129210 44185000
44032099 44072995 44092091 44129291 44189010
44034100 44079131 44092098 44129299 44189090
44034910 44079200 44102100 44129920 44190090
44034995 44079930 44102900 44129980 44201011
44039210 44079950 44103100 44140010 44209091
44039951 44079996 44103200 44140090 44209099
44042000 44081015 44103300 44151090 44211000
44071015 44083121 44103900 44152020 44219091
44071031 44083125 44111110 44152090
44071033 44083130 44111910 44170000WT/DS108/26
Page 6
48 Paper and paperboard; articles of paper pulp, of paper or of paperboard 194,111
48010000 48041990 48059210 48101491 48162000
48024010 48042110 48059291 48101499 48163000
48024090 48042190 48059310 48101910 48169000
48025490 48042910 48059391 48102291 48181090
48025500 48042990 48061000 48102919 48184011
48026110 48043159 48062000 48102920 48184013
48026190 48043959 48064010 48102991 48184019
48026210 48043990 48064090 48102999 48184091
48026290 48044110 48081000 48103100 48201010
48026910 48051200 48092010 48109210 48202000
48030010 48051910 48092090 48109290 48204010
48041190 48051990 48099000 48109990 48239030
48041911 48052400 48101391 48111000
48041915 48052500 48101399 48131000
48041919 48059110 48101411 48143000
48041931 48059191 48101419 48149090
49 Printed books, newspapers, pictures and other products of the printing
industry; manuscripts, typescripts and plans1,312
49070010 49070030
52 Cotton 91
52079000
54 Man-made filaments 341
54061000
57 Carpets and other textile floor coverings 18,145
57011010 57019090 57023990 57025900 57032019
57011091 57021000 57024100 57029100 57039000
57011093 57023100 57024200 57029200 57049000
57011099 57023200 57024990 57029900 57050010
57019010 57023910 57025100 57031000 57050090
61 Articles of apparel and clothing accessories, knitted or crocheted 33,658
61011090 61041100 61045100 61079200 61121200
61012010 61041200 61045200 61081100 61121900
61012090 61041300 61045300 61082100 61123190
61019010 61041900 61045900 61082900 61124990
61019090 61042100 61046110 61083110 61141000
61021010 61042200 61046190 61083190 61152019
61022090 61042300 61046910 61083211 61152090
61031100 61042900 61046999 61089190 61159100
61033100 61043100 61059090 61089200 61169100
61033200 61043200 61062000 61089990 61169200
61033300 61043300 61069030 61099030 61169900
61033900 61043900 61069090 61099090 61171000
61034110 61044100 61071200 61112090 61172000
61034190 61044200 61071900 61113090 61178010
61034910 61044400 61072100 61119000 61178090
61034999 61044900 61079190 61121100 61179000WT/DS108/26
Page 7
62 Articles of apparel and clothing accessories, not knitted or crocheted 37,517
62011100 62032990 62042380 62069010 62102000
62011900 62033100 62043290 62069090 62111100
62019100 62033210 62043310 62071100 62111200
62019900 62033290 62043919 62071900 62112000
62021210 62033310 62043990 62072100 62113100
62021290 62033390 62044100 62072200 62113241
62021310 62034110 62044990 62079110 62113342
62021390 62034190 62045100 62079190 62113900
62021900 62034233 62045200 62081100 62114100
62029100 62034259 62045300 62081990 62123000
62029200 62034331 62045910 62082100 62132000
62029900 62034919 62045990 62082200 62141000
62031200 62034990 62046110 62082900 62142000
62031910 62041100 62046233 62089119 62143000
62031990 62041200 62046950 62089190 62144000
62032210 62041300 62051000 62089200 62149010
62032280 62041990 62059010 62089900 62149090
62032310 62042100 62059090 62092000 62152000
62032380 62042210 62061000 62093000 62159000
62032911 62042280 62062000 62099000 62179000
63 Other made-up textile articles; sets; worn clothing and worn textile articles;
rags27,156
63012091 63023190 63029190 63041910 63061100
63012099 63023210 63029310 63041990 63061200
63013010 63023290 63029390 63049200 63061900
63019090 63023990 63029900 63049300 63062100
63021010 63024000 63031100 63049900 63062200
63021090 63025110 63031200 63052000 63064900
63022100 63025190 63039100 63053289 63069100
63022290 63025390 63039210 63053290 63069900
63022990 63025900 63039290 63053399 63090000
63023110 63029110 63039990 63059000 63109000
64 Footwear, gaiters and the like; parts of such articles 18,702
64019210 64023000 64034000 64042090 64062010
64019290 64029100 64035911 64051090 64062090
64019910 64029931 64035950 64052091 64069910
64019990 64029991 64035991 64052099
64021210 64031200 64039196 64061011
64021290 64032000 64039996 64061019
64022000 64033000 64042010 64061090
69 Ceramic products 20,803
69010090 69049000 69109000 69120050 69139093
69021000 69059000 69119000 69120090 69141000
69022091 69060000 69120010 69131000 69149010
69041000 69101000 69120030 69139010WT/DS108/26
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70 Glass and glassware 82,736
70021000 70052935 70109051 70132951 70169080
70031990 70052980 70109053 70132959 70181011
70033000 70053000 70109055 70132991 70181019
70042099 70071920 70109057 70132999 70181030
70049010 70071980 70109061 70133110 70181051
70049092 70080081 70109067 70133190 70181059
70049098 70080089 70109071 70133200 70181090
70051025 70101000 70112000 70133910 70189090
70051030 70102000 70131000 70133991 70193100
70051080 70109041 70132111 70133999 70199030
70052130 70109043 70132119 70139190 70200030
70052180 70109045 70132191 70159000
70052925 70109047 70132199 70161000
71 Natural or cultured pearls, precious or semi-precious stones, precious metals,
metals clad with precious metal, a nd articles thereof; imitation jewellery;
coins1,398,775
71012100 71049000 71081380 71141900 71171910
71012200 71059000 71101980 71151000 71171999
71023100 71069110 71110000 71161000 71179000
71031000 71069220 71131100 71162011 71181010
71039100 71081200 71131900 71162019 71181090
71039900 71081310 71132000 71162090 71189000
72 Iron and steel 76,972
72022910 72072090 72119019 72172030 72224010
72022990 72082700 72119090 72172050 72224093
72023000 72083790 72122090 72172090 72241000
72024199 72083890 72123090 72173019 72249001
72024910 72083910 72126099 72173039 72249019
72024950 72083990 72139990 72173090 72249091
72025000 72085130 72141000 72179010 72249099
72026000 72085299 72142000 72179090 72251910
72028000 72089010 72143000 72189111 72253000
72029100 72089090 72149110 72189911 72254020
72029200 72091500 72149990 72189991 72254050
72029300 72091690 72155030 72192110 72255000
72029919 72091790 72159090 72192190 72261990
72029930 72091899 72163111 72192210 72269110
72029980 72092500 72163211 72192290 72269190
72031000 72092690 72163291 72192300 72279095
72041000 72092790 72163310 72193100 72282019
72043000 72099090 72163390 72201100 72283020
72044930 72104990 72165010 72202099 72283089
72044991 72105010 72165099 72210010 72284010
72044999 72107090 72166110 72210090 72284090
72061000 72109031 72166190 72221119 72285020
72071116 72111920 72166900 72221129 72286081
72071210 72111990 72171010 72221191 72291000
72071914 72112351 72171039 72221910
72071919 72112950 72171050 72223051
72072079 72112990 72171090 72223091WT/DS108/26
Page 9
73 Articles of iron or steel 52,491
73021031 73051900 73102111 73160000 73231000
73029030 73053100 73102191 73170020 73239100
73029090 73053900 73102199 73170061 73239200
73030010 73061011 73121079 73181100 73239410
73030090 73063021 73121082 73181290 73239490
73041010 73063059 73121084 73181300 73239910
73041030 73063071 73121086 73191000 73239991
73043959 73063090 73121088 73192000 73242100
73043991 73065099 73142090 73209010 73251050
73043993 73066031 73143100 73211110 73251092
73043999 73066090 73143900 73211200 73261100
73044910 73069000 73144110 73218110 73261910
73045111 73072310 73144190 73218190 73262030
73045191 73079311 73152000 73218290
73045931 73079319 73158100 73218300
73045993 73084010 73158210 73219000
73051100 73089010 73158290 73221900
74 Copper and articles thereof 31,732
74011000 74032100 74072110 74091100 74152100
74031100 74032200 74072210 74092100 74152900
74031200 74032300 74072290 74111019 74181900
74031300 74050000 74081100 74112190 74191000
74031900 74071000 74081990 74112900 74199100
76 Aluminium and articles thereof 106,296
76012010 76042910 76071110 76129010 76151990
76012099 76051100 76071910 76129098 76152000
76020011 76051900 76082030 76141000
76020019 76061193 76082091 76149000
76041090 76061210 76101000 76151100
76042100 76061291 76121000 76151910
82 Tools, implements, cutlery, spoons and forks, of base metal; parts thereof of
base metal60,529
82011000 82023900 82075030 82119180 82152010
82012000 82051000 82076030 82119200 82152090
82013000 82053000 82078011 82119400 82159100
82014000 82055100 82079010 82141000 82159910
82015000 82055910 82100000 82142000 82159990
82019000 82074010 82111000 82151020
82023100 82074090 82119130 82151030
83 Miscellaneous articles of base metal 10,698
83011000 83030090 83061000 83091000
83013000 83051000 83062100 83099010
83030030 83059000 83062910WT/DS108/26
Page 10
84 Nuclear reactors, boilers, machinery and mechanical appliances; parts thereof 535,689
84021200 84194000 84322100 84485900 84614071
84031010 84198191 84322930 84501111 84615011
84031090 84198927 84333090 84501119 84615019
84073210 84201010 84342000 84512110 84623991
84073290 84209110 84378000 84513030 84629110
84073310 84219130 84379000 84514000 84641090
84073491 84221100 84383000 84518010 84642020
84081011 84229010 84384000 84521019 84642095
84081019 84231010 84401020 84521090 84649020
84081024 84238110 84401030 84522100 84659110
84081028 84238130 84401040 84522900 84659300
84081039 84238150 84411030 84531000 84659500
84081049 84238190 84411040 84532000 84659910
84081091 84238210 84413000 84543010 84661010
84081099 84238290 84425029 84551000 84662091
84082031 84243005 84431200 84552200 84669120
84082035 84243090 84431910 84553010 84672210
84082051 84248191 84431931 84563011 84672910
84082055 84251190 84431935 84563019 84681000
84089036 84251991 84431939 84571090 84691200
84089099 84261100 84432100 84573090 84692000
84109010 84261900 84439010 84581920 84693000
84128010 84262000 84440010 84581940 84702100
84137040 84263000 84451100 84581980 84702900
84137050 84269110 84451300 84589120 84703000
84137070 84269990 84453090 84589180 84704000
84137080 84271010 84454000 84589900 84721000
84142091 84271090 84461000 84591000 84732190
84146000 84272011 84462100 84592100 84742010
84161010 84272019 84462900 84593100 84743200
84163000 84272090 84463000 84593900 84751000
84181099 84282030 84471210 84594010 84773000
84182151 84283991 84471290 84594090 84778019
84182159 84284000 84472092 84595100 84798930
84182191 84285000 84472098 84595900 84798960
84182199 84286000 84481100 84596110 84801000
84182200 84289079 84481900 84596910 84803090
84182900 84295210 84483100 84602911 84805000
84183091 84301000 84483310 84602919 84806010
84184091 84306900 84483390 84603100 84806090
84185011 84311000 84484200 84603900 84807110
84185019 84313910 84484900 84609090 84818011
84185099 84321010 84485110 84613090 84859010
84191100 84321090 84485190 84614011WT/DS108/26
Page 11
85 Electrical machinery and equipment and parts thereof; sound recorders and
reproducers, television image and sound recorders and reproducers, and parts
and accessories of such articles137,214
85022092 85161011 85181020 85271290 85281291
85043400 85161019 85192100 85271391 85281294
85053000 85162100 85193100 85271900 85281295
85061091 85162910 85193900 85272170 85281298
85061095 85162950 85194000 85272198 85299051
85063090 85163200 85199200 85273111 85366110
85064090 85164010 85199339 85273119 85393210
85066090 85164090 85199389 85273198 85393250
85068011 85165000 85199912 85273290 85434000
85068015 85166010 85201000 85273920 85438915
85073093 85166051 85202000 85273980 85445920
85074090 85166059 85203211 85279092 85451910
85079091 85166070 85203219 85281220 85462091
85091090 85166080 85203230 85281254 85481021
85094000 85166090 85203299 85281256 85481029
85099090 85167100 85203311 85281258 85481099
85101000 85167200 85203319 85281262
85121000 85167910 85203390 85281266
85142080 85167920 85211030 85281272
85152910 85167980 85229093 85281276
85153918 85171910 85232010 85281281
85158091 85172200 85254019 85281290
95 Toys, games and sports requisites; parts and accessories thereof 175,303
95010010 95033090 95039032 95051090 95066210
95010090 95034910 95039034 95059000 95066290
95021010 95034930 95039035 95061110 95066910
95021090 95034990 95039037 95061129 95067010
95029100 95035000 95039051 95061200 95067030
95029900 95036010 95039055 95061900 95069910
95031010 95036090 95042010 95064010 95072010
95031090 95037000 95042090 95064090 95073000
95032090 95038010 95049010 95065100
95033010 95038090 95049090 95065900
95033030 95039010 95051010 95066100
TOTAL  (1000 €) 3,717,448
Exchange rate (ECB 14.02.03-14.03.03) 1.08509
TOTAL  (1000 USD) 4,033,766
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