Notice relating to the WTO Dispute Settlement proceeding concerning the United States tax treatment of Foreign Sales Corporations (FSC) - Invitation for comments on the list of products that could be subject to countermeasures

(2002/C 217/02)

1. BACKGROUND

On 22 September 1998, at the request of the EC, the WTO Dispute Settlement Body (DSB) established a Panel against the US tax treatment of "Foreign Sales Corporations" (FSC).

On 8 October 1999, the Panel report was circulated to WTO members. The Panel found that the FSC scheme constituted a prohibited export subsidy under the Agreement on Subsidies and Countervailing Measures (ASCM) and for agricultural products an export subsidy in violation of the Agreement on Agriculture (AA). The report provided that the US had until 1 October 2000 to withdraw the FSC scheme.

On 26 November 1999, the US appealed the panel report before the WTO Appellate Body. On 24 February 2000, the Appellate Body confirmed the illegal nature of the FSC scheme.

On 20 March 2000, both the panel and the Appellate Body reports were adopted by the DSB.

On 29 September 2000, the EC and the US concluded an agreement on the procedures to follow in this dispute which provided for:

- As the US was unable to adopt the FSC replacement legislation by 1 October 2000, the US would seek to obtain a one-month extension of the deadline for implementing the WTO ruling (until 1 November 2000). The extension was granted by the DSB on 12 October 2000.

- Once the FSC replacement legislation was adopted, the EC would launch a compliance panel procedure under Article 21(5) of the Dispute Settlement Understanding (DSU) to examine the WTO compatibility of the US legislation.

- The EC would also request authorisation to the DSB to adopt countermeasures against the US.

- The EC would not adopt countermeasures against the US until the WTO rules on the legality of the FSC replacement legislation.

On 15 November 2000, President Clinton signed into law the FSC Replacement Act ("The FSC Repeal and Extraterritorial Income Exclusion Act of 2000", US Public Law No 106-519).

On 17 November 2000, in accordance with the agreement on procedures, the EC presented both the request for countermeasures and suspension of concessions under Articles 4(10) SCMA and 22 DSU respectively and the request for consultations under Article 21(5) DSU.

The EC requested authorisation from the Dispute Settlement Body to adopt appropriate countermeasures and to suspend concessions. The countermeasures would take the form of imposing an additional duty on the specified products of up to 100 % 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 EC request.

On 27 November 2000, the United States of America objected to the level of countermeasures requested by the EC and the matter was referred to arbitration pursuant to Article 22(6) DSU.

On 20 December 2000, the compliance panel 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 will be 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) SCM Agreement, Articles 8 and 10(1) Agreement on Agriculture and Article III:4 GATT 1994.

In accordance with the agreed procedures, on 29 January 2002 the arbitration procedure was reactivated. The arbitrator's report fixing the level of countermeasures at USD 4043 million was circulated on 30 August 2002.

2. FINAL SELECTION OF PRODUCTS

In order to elaborate the final list of products to be presented to the WTO and which could be subject to countermeasures, the Commission invites European Community companies, trade associations or any other interested party in the European Community (hereafter "interested parties") to present their views and comments.

The products included in Annex A to this Notice are products for which the average US import share (in value) in the period 1999-2001 represents a maximum of 20 % of the average total imports into the EU and which are exported by the EU.

1. Interested parties are hereby invited to present their views and comments on the products covered by the list contained in Annex A to this notice within 60 days from the publication of this notice in the Official Journal of the European Communities.

Comments should be presented in both written form and by e-mail as per Annex B of this notice to the addresses indicated below.

- Written comments by interested parties need to include the information listed below:

- Identification of the interested party on behalf of which the comments are made, such as: address, telephone and fax numbers, place of incorporation, activities and sector where it operates, details of a contact person, and any other information that the interested party might consider relevant.

- Justification of any comment including an assessment of the economic and commercial impact that the imposition of an additional duty of up to 100 % ad valorem above bound customs duties on products covered by the list annexed to this notice is expected to have. Where interested parties suggest that products should be removed from the list, they should explain in particular why the imposition of an additional duty of up to 100 % ad valorem above bound customs duties could create sourcing problems for them and why alternative sources of supply, both within the EC and in countries other than the US, would not be available to them.

- Products referred to in the written comments must be clearly identified by using the CN code at 8 digit level(1).

- Comments received by the Commission will be treated as non-confidential. Nevertheless, if interested parties consider that the information submitted, or part of it, contains sensitive commercial data they may request that it be treated confidentially. Each request for confidential treatment shall indicate why the information is confidential and shall be accompanied by a non-confidential summary of the information or a statement of the reasons why the information is not susceptible of such summary.

Information will normally be considered to be confidential if its disclosure is likely to have a significantly adverse effect upon the supplier or the source of such information. However, if it appears that a request for confidentiality is not warranted and if the supplier is either unwilling to make the information public or to authorise its disclosure in generalised or summary form, the information in question may be disregarded. This provision shall not preclude the disclosure of general information by the Community authorities and in particular of the reasons on which decisions taken pursuant to this procedure are based.

2. The Commission might, whenever necessary, require additional information from interested parties. Responses will have to be submitted within the deadline provided in the request.

3. The Commission shall, where it considers it appropriate, verify information provided by interested parties.

Comments should be addressed to: Mr Ignacio Garcia Bercero European Commission DG Trade/D/3, (CHAR 9/74) Rue de la Loi/Wetstraat 200 B - 1049 Brussels Tel. (32-2) 299 56 61 Fax (32-2) 299 32 64 E-mail: trade-d3-fsc-comments@cec.eu.int

(1) Annex I to Council Regulation (EEC) No 2658/87 on the tariff and statistical nomenclature and on the Common Customs Tariff (as last amended by Commission Regulation (EC) No 2031/2001, OJ L 279, 23.10.2001, p. 1).

ANNEX A

LIST OF PRODUCTS

The two-digit CN Chapters are given for information purposes only. For the purposes of the imposition of any countermeasures the eight-digit product codes(1) apply.

>TABLE>

(1) Annex I to Council Regulation (EEC) No 2658/87 on the tariff and statistical nomenclature and on the Common Customs Tariff (as last amended by Commission Regulation (EC) No 2031/2001, OJ L 279, 23.10.2001, p. 1).

ANNEX B

B - 1. Company identification

>PIC FILE= "C_2002217EN.001402.TIF">

B - 2. Comments and views on a possible imposition of up to a 100 % additional duty on the products included in Annex A

Include the economic and commercial impact for products you request to remove from the list.

B - 3. Request to remove certain products from Annex A

>PIC FILE= "C_2002217EN.001501.TIF">