UNITED STATES – CONDITIONAL TAX INCENTIVES FOR LARGE CIVIL AIRCRAFT REQUEST FOR THE ESTABLISHMENT OF A PANEL BY THE EUROPEAN UNION
Document: REQUEST FOR THE ESTABLISHMENT OF A PANEL
Date: 13 February 2015
Document codes: WT/DS487/2
Complainant: EU
Respondent: U.S.
Third parties: Brazil, China, India, Japan, South Korea, Russia, Australia, Canada
Dispute stage: Appellate Body
Agreements cited: Art. 1, 2, 1.1(a)(1)(ii), 1.1(b), 2.3, 3.1(b), 3.2, 4.7  Subsidies and Countervailing Measures (SCM)

UNITED STATES – CONDITIONAL TAX INCENTIVES FOR LARGE CIVIL AIRCRAFT
REQUEST FOR THE ESTABLISHMENT OF A PANEL BY THE EUROPEAN UNION
The following communication, dated 12 February 2015, from the delegation of the European Union
to the Chairperson of the Dispute Settlement Body, is circulated pursuant to Article 6.2 of the DSU.

My authorities have instructed me to request the immediate establishment of a panel pursuant to
Articles 4.4 and 30 of the Agreement on Subsidies and Countervailing Measures (" SCM
Agreement"), Article XXIII:2 of the General Agreement on Tariffs and Trade 1994 ("GATT 1994")
(to the extent incorporated by Article 30 of the SCM Agreement ), and Article 6 of the
Understanding on Rules and Procedures Governing the Settlement of Disputes ("DSU") (as
modified by Article 4.4 of the SCM Agreement, and in light of Article 1.2 and Appendix 2 to the
DSU), with respect to conditional tax incentives established by the State of Washington in relation
to the development, manufacture, and sale of large civil aircraft.
On 19 December 2014, the European Union reques ted consultations with the Government of the
United States, pursuant to Articles 4.1 and 30 of the SCM Agreement , Article XXIII:1 of the
GATT 1994 (to the extent incorporated by Article 30 of the SCM Agreement), and Article 4 of the
DSU, with respect to such conditional tax incentives. The request was circulated in document
 on 23 December 2014.
Consultations were held on 2 February 2015, pursuant to each of the above-referenced provisions,
with a view to reaching a mutually agreed solution. Unfortunately, the consultations failed to
settle the dispute.
As a result, the European Union hereby requests the "immediate establishment" of a panel, as
provided for in Article 4.4 of the SCM Agreement, with the standard terms of reference set out in
Article 7.1 of the DSU with respect to the measures identified in this request.
The European Union recalls that Articles 4.6 and 4.12 of the SCM Agreement provide for expedited
time-periods applicable to disputes such as this one, conducted under Article 4 of the SCM
Agreement. The European Union expects that the panel will observe these expedited time-periods.
I. BACKGROUND
In November 2013, the State of Washington, as part of its efforts to induce The Boeing Company
to manufacture its new 777X model of large civil aircraft in Washington State, vastly expanded and
amended its existing aerospace tax incentives, ther eby providing billions of dollars in additional
subsidies to Boeing. These expansions and amendm ents also made the continuing availability of
such tax incentives, in whole or in part, contingent upon (i) siting production of the wings and final
assembly for a new commercial aircraft model or variant in Washington State, and (ii) maintaining
all wing assembly and final assembly of such commercial aircraft exclusively in Washington State.
II. MEASURES AT ISSUE
The measures that are the subject of this request are tax incentives for civil aircraft provided by
the State of Washington, as amended by Substitu te Senate Bill 5952 (Chapter 2, Laws of 2013 3
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Special Session, 2014 Wash. Sess. Laws 2). Specifically, the tax incentives are currently contained
in the following sections of the Revised Code of Washington ("RCW"): 82.04.260(11) (preferential
Business & Occupation tax rate with respect to the manufacture or sale of commercial airplanes);
82.04.4463 (tax credits for property taxes and leasehold excise taxes on commercial airplane
manufacturing facilities); 82.04.4461 (tax credits for aerospace product development); 82.08.975
(sales tax exemption for computer hardware, software, and peripherals); 82.08.980 (sales tax
exemption for construction services and materials); 82.12.975 (use tax exemption for computer
hardware, software, and peripherals); 82.12.980 (use tax exemption for construction services and
materials); 82.29A.137 (leasehold excise tax exemption); and 84.36.655 (leaseholder property tax
exemption). Moreover, the availability of the tax incentives is subject to the conditions in
Sections 2, 5, and 6 of Substitute Sena te Bill 5952 (as codified at RCW 82.32.850 and
82.04.260(11)(e)(ii)), which are also covered by this request.
In addition to the measures cited in the above paragraph, this request also covers any
amendments, supplements, extensions, replacement measures, renewal measures, related
measures, or implementing measures.
III. LEGAL BASIS FOR THE COMPLAINT
The measures identified in Section II constitute specific subsidies within the meaning of Articles 1
and 2 of the SCM Agreement. Specifically, these measures provide a financial contribution in the
form of "government revenue … otherwise due" that is "foregone" within the meaning of
Article 1.1(a)(1)(ii), and "a benefit is thereby conf erred" within the meaning of Article 1.1(b). For
reasons explained in the following paragraph, the subsidies are specific within the meaning of
Article 2.3 of the SCM Agreement.
These measures condition billions of dollars in subsidies upon the use of aircraft components
manufactured in Washington State. Specifically, conditions contained in Sections 2, 5 and 6 of
Substitute Senate Bill 5952 (as codified at RCW 82. 32.850 and 82.04.260(11)(e)(ii)) make the
subsidies "contingent … upon the use of domestic over imported goods", in law or in fact, within
the meaning of Article 3.1(b) of the SCM Agreement. Accordingly, these measures are prohibited
subsides that are inconsistent with Articles 3.1(b) and 3.2 of the SCM Agreement, and must be
withdrawn without delay, pursuant to Article 4.7 of the SCM Agreement.

The European Union asks that this request be pl aced on the agenda for the next meeting of the
Dispute Settlement Body, which is scheduled to take place on 23 February 2015.