EUROPEAN COMMUNITIES AND CERTAIN MEMBER STATES – MEASURES AFFECTING TRADE IN LARGE CIVIL AIRCRAFT RECOURSE TO ARTICLE 22.6 OF THE DSU BY THE EUROPEAN UNION DECISION BY THE ARBITRATOR
Document: DECISION BY THE ARBITRATOR
Date: 2 October 2019
Document codes: WT/DS316/ARB
Complainant: U.S.
Respondent: EU, France, Germany, Spain, United Kingdom
Third parties: Australia, Brazil, Canada, China, Japan, South Korea
Dispute stage: Retaliation & Arbitration
Agreements cited: Art. 3.1, 3.2, 5, 6.3  Subsidies and Countervailing Measures (SCM)Art. XVI:1  GATT 1994Art. 1, 2  Subsidies and Countervailing Measures (SCM)Art. III:4  GATT 1994

EUROPEAN COMMUNITIES AND CERTAIN MEMBER STATES – MEASURES
AFFECTING TRADE IN LARGE CIVIL AIRCRAFT
RECOURSE TO ARTICLE 22.6 OF THE DSU BY THE EUROPEAN UNION
DECISION BY THE ARBITRATOR
BCI deleted, as indicated [[***]]

LIST OF ANNEXES
ANNEX A
WORKING PROCEDURES OF THE ARBITRATOR
Contents Page
Annex A-1 Working Procedures of the Arbitrator 4
Annex A-2 Additional Working Procedures for the Protection of Business Confidential
Information and Highly Sensitive Business Information 9
Annex A-3 Additional Working Procedures for the Substantive Meeting with the Arbitrator 21
ANNEX B
ARGUMENTS OF THE PARTIES
Contents Page
Annex B-1 Integrated executive summary of the arguments of the United States 23
Annex B-2 Executive summary of the arguments of the European Union 32

ANNEX C
DECISION OF THE ARBITRATOR CONCERNING THE EUROPEAN UNION'S PRELIMINARY RULING
REQUEST
Contents Page
Annex C-1 Communication from the Arbitrator Preliminary Ruling (Conclusion) 49

CASES CITED IN THIS DECISION
Short Title Full Case Title and Citation
Brazil – Aircraft (Article 22.6 –
Brazil)
Decision by the Arbitrator, Brazil – Export Financing Programme for Aircraft –
Recourse to Arbitration by Brazil under Article 22.6 of the DSU and Article 4.11 of
the SCM Agreement, , 28 August 2000, DSR 2002:I, p. 19
Canada – Aircraft Credits and
Guarantees (Article 22.6 –
Canada)
Decision by the Arbitrator, Canada – Export Credits and Loan Guarantees for
Regional Aircraft – Recourse to Arbitration by Canada under Article 22.6 of the
DSU and Article 4.11 of the SCM Agreement, , 17 February 2003,
DSR 2003:III, p. 1187
EC – Bananas III (Article 21.5
– Ecuador)
Panel Report, European Communities – Regime for the Importation, Sale and
Distribution of Bananas – Recourse to Article 21.5 of the DSU by Ecuador,
, adopted 6 May 1999, DSR 1999:II, p. 803
EC – Bananas III (US)
(Article 22.6 – EC)
Decision by the Arbitrator, European Communities – Regime for the Importation,
Sale and Distribution of Bananas – Recourse to Arbitration by the European
Communities under Article 22.6 of the DSU, WT/DS27/ARB, 9 April 1999,
DSR 1999:II, p. 725
EC – Bananas III (Ecuador)
(Article 22.6 – EC)
Decision by the Arbitrator, European Communities – Regime for the Importation,
Sale and Distribution of Bananas – Recourse to Arbitration by the European
Communities under Article 22.6 of the DSU, WT/DS27/ARB/ECU, 24 March 2000,
DSR 2000:V, p. 2237
EC – Hormones Appellate Body Report, European Communities – Measures Concerning Meat and
Meat Products (Hormones), WT/DS26/AB/R, WT/DS48/AB/R, adopted
13 February 1998, DSR 1998:I, p. 135
EC – Hormones (US)
(Article 22.6 – EC)
Decision by the Arbitrators, European Communities – Measures Concerning Meat
and Meat Products (Hormones), Original Complaint by the United States –
Recourse to Arbitration by the European Communities under Article 22.6 of the
DSU, WT/DS26/ARB, 12 July 1999, DSR 1999:III, p. 1105
EC and certain member States
– Large Civil Aircraft
Appellate Body Report, European Communities and Certain Member States –
Measures Affecting Trade in Large Civil Aircraft, WT/DS316/AB/R, adopted
1 June 2011, DSR 2011:I, p. 7
EC and certain member States
– Large Civil Aircraft
Panel Report, European Communities and Certain Member States – Measures
Affecting Trade in Large Civil Aircraft, WT/DS316/R, adopted 1 June 2011, as
modified by Appellate Body Report WT/DS316/AB/R, DSR 2011:II, p. 685
EC and certain member States
– Large Civil Aircraft
(Article 21.5 – US)
Appellate Body Report, European Communities and Certain Member States –
Measures Affecting Trade in Large Civil Aircraft – Recourse to Article 21.5 of the
DSU by the United States, WT/DS316/AB/RW and Add.1, adopted 28 May 2018
EC and certain member States
– Large Civil Aircraft
(Article 21.5 – US)
Panel Report, European Communities and Certain Member States – Measures
Affecting Trade in Large Civil Aircraft – Recourse to Article 21.5 of the DSU by the
United States, WT/DS316/RW and Add.1, adopted 28 May 2018, as modified by
Appellate Body Report WT/DS316/AB/RW
EEC – Apples (Chile I) GATT Panel Report, EEC Restrictions on Imports of Apples from Chile, L/5047,
adopted 10 November 1980, BISD 27S/98
Japan – DRAMS (Korea) Appellate Body Report, Japan – Countervailing Duties on Dynamic Random Access
Memories from Korea, WT/DS336/AB/R and Corr.1, adopted 17 December 2007,
DSR 2007:VII, p. 2703
Thailand – Cigarettes
(Philippines)
Appellate Body Report, Thailand – Customs and Fiscal Measures on Cigarettes
from the Philippines, WT/DS371/AB/R, adopted 15 July 2011, DSR 2011:IV,
p. 2203
US – 1916 Act (EC)
(Article 22.6 – US)
Decision by the Arbitrator, United States – Anti-Dumping Act of 1916, Original
Complaint by the European Communities – Recourse to Arbitration by the
United States under Article 22.6 of the DSU, WT/DS136/ARB, 24 February 2004,
DSR 2004:IX, p. 4269
US – Anti-Dumping and
Countervailing Duties (China)
Panel Report, United States – Definitive Anti-Dumping and Countervailing Duties
on Certain Products from China, WT/DS379/R, adopted 25 March 2011, as
modified by Appellate Body Report WT/DS379/AB/R, DSR 2011:VI, p. 3143
US – Carbon Steel Appellate Body Report, United States – Countervailing Duties on Certain Corrosion-
Resistant Carbon Steel Flat Products from Germany, WT/DS213/AB/R and Corr.1,
adopted 19 December 2002, DSR 2002:IX, p. 3779
US – Continued Suspension Appellate Body Report, United States – Continued Suspension of Obligations in the
EC – Hormones Dispute, WT/DS320/AB/R, adopted 14 November 2008,
DSR 2008:X, p. 3507
US – COOL (Article 22.6 –
United States)
Decisions by the Arbitrator, United States – Certain Country of Origin Labelling
(COOL) Requirements – Recourse to Article 22.6 of the DSU the United States,
WT/DS384/ARB and Add.1 / WT/DS386/ARB and Add.1, circulated to
WTO Members 7 December 2015

Short Title Full Case Title and Citation
US – FSC (Article 22.6 – US) Decision by the Arbitrator, United States – Tax Treatment for "Foreign Sales
Corporations" – Recourse to Arbitration by the United States under Article 22.6 of
the DSU and Article 4.11 of the SCM Agreement, WT/DS108/ARB, 30 August 2002,
DSR 2002:VI, p. 2517
US – Gambling Appellate Body Report, United States – Measures Affecting the Cross-Border
Supply of Gambling and Betting Services, WT/DS285/AB/R, adopted 20 April 2005,
DSR 2005:XII, p. 5663 (and Corr.1, DSR 2006:XII, p. 5475)
US – Gambling (Article 22.6 –
US)
Decision by the Arbitrator, United States – Measures Affecting the Cross-Border
Supply of Gambling and Betting Services – Recourse to Arbitration by the
United States under Article 22.6 of the DSU, WT/DS285/ARB, 21 December 2007,
DSR 2007:X, p. 4163
US – Large Civil Aircraft (2nd
complaint)
Appellate Body Report, United States – Measures Affecting Trade in Large Civil
Aircraft (Second Complaint), WT/DS353/AB/R, adopted 23 March 2012,
DSR 2012:I, p. 7
US – Large Civil Aircraft (2nd
complaint)
Panel Report, United States – Measures Affecting Trade in Large Civil Aircraft
(Second Complaint), WT/DS353/R, adopted 23 March 2012, as modified by
Appellate Body Report WT/DS353/AB/R, DSR 2012:II, p. 649
US – Large Civil Aircraft (2nd
complaint) (Article 21.5 – EU)
Appellate Body Report, United States – Measures Affecting Trade in Large Civil
Aircraft (Second Complaint) – Recourse to Article 21.5 of the DSU by the
European Union, WT/DS353/AB/RW and Add.1, adopted 11 April 2019
US – Large Civil Aircraft (2nd
complaint) (Article 21.5 – EU)
Panel Report, United States – Measures Affecting Trade in Large Civil Aircraft
(Second Complaint) – Recourse to Article 21.5 of the DSU by the European Union,
WT/DS353/RW and Add.1, adopted 11 April 2019, as modified by Appellate Body
Report WT/DS353/AB/RW.
US – Offset Act (Byrd
Amendment) (EC)
(Article 22.6 – US)
Decision by the Arbitrator, United States – Continued Dumping and Subsidy Offset
Act of 2000, Original Complaint by the European Communities – Recourse to
Arbitration by the United States under Article 22.6 of the DSU,
WT/DS217/ARB/EEC, 31 August 2004, DSR 2004:IX, p. 4591
US – Offset Act (Byrd
Amendment) (Chile)
(Article 22.6 – US)
Decision by the Arbitrator, United States – Continued Dumping and Subsidy Offset
Act of 2000, Original Complaint by Chile – Recourse to Arbitration by the
United States under Article 22.6 of the DSU, WT/DS217/ARB/CHL,
31 August 2004, DSR 2004:IX, p. 4511
US – Section 110(5)
Copyright Act (Article 25)
Award of the Arbitrator, United States – Section 110(5) of the US Copyright Act –
Recourse to Arbitration under Article 25 of the DSU, WT/DS160/ARB25/1,
9 November 2001, DSR 2001:II, p. 667
US – Tuna II (Mexico)
(Article 21.5 – Mexico)
Appellate Body Report, United States – Measures Concerning the Importation,
Marketing and Sale of Tuna and Tuna Products – Recourse to Article 21.5 of the
DSU by Mexico, WT/DS381/AB/RW and Add.1, adopted 3 December 2015,
DSR 2015:X, p. 5133
US – Tuna II (Mexico)
(Article 22.6 – US)
Decision by the Arbitrator, United States – Measures Concerning the Importation,
Marketing and Sale of Tuna and Tuna Products – Recourse to Article 22.6 of the
DSU by the United States, WT/DS381/ARB, 25 April 2017
US – Upland Cotton Panel Report, United States – Subsidies on Upland Cotton, WT/DS267/R, Add.1
to Add.3 and Corr.1, adopted 21 March 2005, as modified by Appellate Body
Report WT/DS267/AB/R, DSR 2005:II, p. 299
US – Upland Cotton
(Article 21.5 – Brazil)
Appellate Body Report, United States – Subsidies on Upland Cotton – Recourse to
Article 21.5 of the DSU by Brazil, WT/DS267/AB/RW, adopted 20 June 2008,
DSR 2008:III, p. 809
US – Upland Cotton
(Article 21.5 – Brazil)
Panel Report, United States – Subsidies on Upland Cotton – Recourse to
Article 21.5 of the DSU by Brazil, WT/DS267/RW and Corr.1, adopted
20 June 2008, as modified by Appellate Body Report WT/DS267/AB/RW,
DSR 2008:III, p. 997
US – Upland Cotton
(Article 22.6 – US I)
Decision by the Arbitrator, United States – Subsidies on Upland Cotton – Recourse
to Arbitration by the United States under Article 22.6 of the DSU and Article 4.11
of the SCM Agreement, WT/DS267/ARB/1, 31 August 2009, DSR 2009:IX, p. 3871
US – Upland Cotton
(Article 22.6 – US II)
Decision by the Arbitrator, United States – Subsidies on Upland Cotton – Recourse
to Arbitration by the United States under Article 22.6 of the DSU and Article 7.10
of the SCM Agreement, WT/DS267/ARB/2 and Corr.1, 31 August 2009, DSR
2009:IX, p. 4083
US – Washing Machines
(Article 22.6 – US)
Decision by the Arbitrator, United States – Anti-Dumping and Countervailing
Measures on Large Residential Washers from Korea – Recourse to Article 22.6 of
the DSU by the United States, WT/DS464/ARB and Add.1, 8 February 2019
US – Wool Shirts and Blouses Appellate Body Report, United States – Measure Affecting Imports of Woven Wool
Shirts and Blouses from India, WT/DS33/AB/R, adopted 23 May 1997, and Corr.1,
DSR 1997:I, p. 323

MAIN EXHIBITS REFERRED TO IN THIS DECISION
Exhibit Title
EU-54 Ascend, Flight Fleet Analyzer
EU-58 Flight Global, "Cathay swaps batch of A350-1000s to smaller -900",
13 September 2017
EU-59 Chicago Business Journal, "United Airlines postponing delivery of much-anticipated
Airbus-350", 6 September, 2017
EU-60 Airways Magazine, "United Converts A350-1000 Order to A350-900", 6 September
2017
EU-68 "Comparing July 2018 delivery prices based on different LCA price inflators:
(i) Hypothetical escalation rate; (ii) PPI for LCA Manufacturing"
EU-77 (HSBI) Transaero (2013) comparator campaign: projected versus actual escalation rates
EU-79 Updated Ascend Database
EU-81 Boeing cancellation rates
EU-83 (HSBI) Transaero Airlines Deposits and Pre-delivery Payments
EU-86 (HSBI) 2012/2013 Airbus lost sales campaigns: The Emirates [[***]]
EU-87 (HSBI) 2012/2013 Airbus lost sales campaigns: Cathay Pacific [[***]]
EU-88 (HSBI) 2012/2013 Airbus lost sales campaigns: Cathay Pacific [[***]]
EU-89 (HSBI) 2012/2013 Airbus lost sales campaigns: Singapore Airways [[***]]
EU-90 (HSBI) 2012/2013 Airbus lost sales campaigns: Singapore Airways [[***]]
EU-91 (HSBI) 2012/2013 Airbus lost sales campaigns: United Airlines [[***]]
EU-92 (HSBI) 2012/2013 Airbus lost sales campaigns: United Airlines [[***]]
EU-106 (HSBI) Emirates [[HSBI]]
EU-116 Boeing 2008 Annual Report
EU-117 The Seattle Times, "747-8 delay causes doubts about Boeing", 7 October 2009
EU-123 (BCI) Airbus, Status of A380 orders and deliveries
EU-125 (HSBI) Air France Campaign A380, 2001
EU-126 (HSBI) British Airways Campaign A380, 2007
EU-127 (HSBI) China Southern Airlines Campaign A380, 2005
EU-128 (HSBI) Emirates Airlines Campaign A380, 2001
EU-129 (HSBI) Korean Air Campaign A380, 2008
EU-130 (HSBI) Lufthansa Campaign A380, 2001
EU-131 (HSBI) Qantas Campaign A380, 2001
EU-132 (HSBI) Singapore Airlines Campaign A380, 2006
EU-135 (HSBI) United Airlines Campaign A350-1000
EU-138 Irwin, Douglas A., Pavcnik, Nina, 2004. "Airbus versus Boeing revisited: international
competition in the aircraft market", Journal of International Economics, Elsevier, vol.
64(2): 223-245
EU-139 Airbus, "New agreement with United Airlines increases A350 XWB order to 45",
6 September 2017
EU-140 (HSBI) Letter [[***]]
EU-141 Reuters, "Cathay Pacific defers five A350 deliveries, switches six to smaller models",
13 September 2017
EU-142 (HSBI) Email [[***]]
EU-143 (HSBI) Correcting US lost sales valuation
EU-145 The Emirates Group Annual Report, 2018-19
EU-146 Andreas Spaeth, "Emirates to buy Rolls Royce Powered A380S Says Sir Tim Clark",
Airline Ratings, 2 November 2018
USA-2 Airbus presentation by John Leahy, COO Customers, Commercial update – Global
Investor Forum
USA-3 Emirates to choose between A350-900 and 787-10 next year, Murdo Morrison,
FlightGlobal (Oct. 1, 2015)
USA-4 Wide Body Battle: Boeing 787-10 Or Airbus A350-900?, Dhierin Bechai, Seeking Alpha
(Dec. 19, 2014)
USA-5 (BCI) Boeing Declaration
USA-6 Cathay Pacific Announces Additional Aircraft Order, Cathay Pacific Press Release
(Dec. 27, 2013)
USA-7 Boeing Launches 787-10 Dreamliner, Boeing Press Release (June 18, 2013)
USA-8 United Converts 10 787 Orders to 777-300ER, Edward Russell, FlightGlobal
(Apr. 23, 2015)
USA-9 Airbus and Boeing Orders 2013, Aviation Strategy (Feb. 2014)
USA-12 (HSBI) Cathay Pacific 777-300ER Order Information
USA-13 (HSBI) Transaero 747-8I Order Information
USA-14 (HSBI) Singapore Airlines 787-10 Order Information
USA-15 (HSBI) United 777-300ER Order Information
USA-16 (HSBI) Emirates [[***]] Information
USA-19 (HSBI) Calculation of 2011 747-8I Delivery Prices

Exhibit Title
USA-20 Producer Price Indexes – Program Overview, U.S. Department of Labor, Bureau of
Labor Statistics
USA-22 (HSBI) Aggregation of Adverse Effects Determined to Exist by Year
USA-26 (HSBI) Revised 747-8I Global Delivery Prices for 2012 and 2013 (revision to Exhibit USA-17
(HSBI))
USA-27 (HSBI) Revised Calculation of 2011 747-8I Delivery Prices (revision to Exhibit USA-19 (HSBI))
USA-28 (HSBI) Revised Aggregation of Adverse Effects Determined to Exist by Year (revision to Exhibit
USA-22 (HSBI))
USA-29 (HSBI) Boeing Contracted Delivery Schedules and Actual Delivery Information for
"Comparator" Orders
USA-30 (HSBI) Boeing E-mail regarding First Set of Arbitrator Questions
USA-35 (BCI) Boeing e-mail from [[***]] (Dec. 13, 2018)
USA-36 (BCI) Boeing e-mail from [[***]] (Dec. 13, 2018)
USA-37 (BCI) Boeing Escalation Slide
USA-38 (BCI) [[***]]
USA-39 (BCI) [[***]]
USA-40 (BCI) [[***]]
USA-41 (BCI) [[***]]
USA-43 Boeing Historical Deliveries through October 2018, Boeing website
USA-44 (HSBI)
Boeing Contracted Delivery Schedules, Delivery Schedule Changes, and Actual Delivery
Information for "Comparator" Orders
USA-53 Boeing 747 deliveries (2000 – 2013), Excel download from Boeing website
USA-54 Boeing 747 Family, Boeing website
USA-56 (BCI) Boeing e-mail from [Eric Howard] (Dec. 10, 2018)
USA-57 Boeing, Lufthansa Announce Order for 747-8 Intercontinental, Boeing Press Release
USA-58 (BCI) Letter from Boeing to the U.S. Export-Import Bank (November 1, 2018)
USA-59 (HSBI) [[***]]
USA-60 (BCI) Boeing E-mail from [[***]] (Feb. 10, 2019)
USA-61 (HSBI) Calculation of Delivery Prices for Comparator Orders
USA-62 (BCI) Boeing E-mail regarding Question 112
USA-63 (BCI) Boeing E-mail regarding Question 113
USA-65 (HSBI) Survival Rate Calculation
USA-66 (HSBI) Boeing E-mail regarding Questions 116, 118, 121, 124(c), 125, 128-129, 132
USA-68 (HSBI) Cathay Pacific 2013 777-300ER Order Documentation
USA-69 (HSBI) Cathay Pacific March 2011 777-300ER Order Documentation
USA-71 (HSBI) [[***]]
USA-73 (HSBI) Singapore Airlines 2013 787-10 Order Documentation
USA-74 (HSBI) United 2015 777-300ER Order Documentation
USA-75 (HSBI) Transaero 2013 747-8I Order Documentation
USA-76 (HSBI) Korean Air 2013 747-8I Order Documentation
USA-77 (HSBI) Air China 2012 747-8I Order Documentation
USA-78 (HSBI) Air China 2013 747-8I Order Documentation
USA-79 (HSBI) Lufthansa 2006 747-8I Order Documentation
USA-80 (HSBI) [[***]]
USA-81 (HSBI) [[***]]
USA-82 (BCI) Boeing E-mail regarding Question 124
USA-84 (BCI) Boeing E-mail regarding Questions 130-131
USA-85 (HSBI) Singapore Airlines Escalation Documentation
USA-86
Machinists Back Contract With Boeing; 8-Week Strike Ends, New York Times (Nov. 2,
2008)
USA-87 (HSBI) Lufthansa Escalation Documentation
USA-89 (HSBI) Korean Air 2009 747-8I Order Documentation
USA-90 (HSBI) [[***]]
USA-91 (HSBI) [[***]] Order Documentation
USA-92 (HSBI) [[***]] Order Documentation
USA-93 (HSBI) [[***]] Order Documentation
USA-94 (HSBI) [[***]] Order Documentation
USA-95 (HSBI) [[***]] Order Documentation
USA-96 (HSBI) [[***]] Order Documentation
USA-97 (HSBI) [[***]] Order Documentation
USA-98 (BCI) Boeing E-mail regarding Question 145
USA-99 (HSBI)
Second Revised Aggregation of Adverse Effects Determined to Exist by Year (revision to
Exhibit USA-28 (HSBI))
USA-100 (BCI) Boeing E-mail from [[***]] (Feb. 11, 2019)
USA-101 (HSBI) Boeing E-mail regarding Questions 136, 139-142
USA-103 (HSBI)
Second Revised 747-8I Global Delivery Prices for 2012 and 2013 (revision to Exhibit
USA-26(HSBI))

Exhibit Title
USA-104 (HSBI)
Second Revised Calculation of 2011 747-8I Delivery Prices (revision to Exhibit
USA-27(HSBI))
USA-106 (HSBI) Net Price Calculations for Questions 153 and 154(d) Alternative Impedance Valuations
USA-114 Technical specs of 777X, Boeing website
USA-115 Boeing Website, 747-400 Deliveries Pre-1990
USA-116 (BCI) Boeing E-mail regarding Question 171
USA-117 GDP Deflator, provided on a quarterly and annual basis
USA-118 (BCI) Boeing E-mail regarding Question 173
USA-119 (HSBI) Boeing E-mail regarding Question 174
USA-120 (BCI) Boeing WACC Data for 2012, 2013

ABBREVIATIONS USED IN THIS DECISION
Abbreviation Description
747-8F Boeing 747-8 Freighter
747-8I Boeing 747-8 Intercontinental
777-300ER Boeing 777-300 aircraft – extended range variant
A321neo Airbus A321 new engine option aircraft
A350XWB Airbus A350 "eXtra widebody" aircraft
A350XWB-900 Airbus A350 "eXtra widebody" aircraft – 900 seat capacity (baseline) variant
A350XWB-1000 Airbus A350 "eXtra widebody" aircraft – 1000 seat capacity variant
BCI Business Confidential Information
BFE buyer-furnished equipment
CA Civil Aircraft
CCPs Counter-cyclical Payments
CMO Collective Management Organizations
COO Chief Operating Officer
CPI Consumer Price Index
DCF Discounted Cash Flow
DSB Dispute Settlement Body
DSU Understanding on Rules and Procedures Governing the Settlement of Disputes
(Dispute Settlement Understanding)
EC European Communities
EEC European Economic Community
EU European Union
FDE flight deck equipment
FOB free on board
FSC Foreign Sales Corporation
GATS General Agreement on Trade in Services
GATT General Agreement on Tariffs and Trade
GDP Gross Domestic Product
HSBI Highly Sensitive Business Information
LA/MSF Launch Aid/Member State Financing
LCA large civil aircraft
ML Marketing Loans
MSF Member State Financing
MTOW maximum take-off weight
MY Marketing Year
NPV net-present-value
PA Purchase Agreement
PDP pre-delivery payment
PPI for CA Manufacturing United States Producer Price Index for Aircraft Manufacturing of Civilian Aircraft
RfP Request for Proposal
RPT Reasonable Period of Time

SCM Agreement Agreement on Subsidies and Countervailing Measures
UAE United Arab Emirates
UK United Kingdom
US United States
USA United States of America
USD United States dollar
VLA Very Large Aircraft
WACC weighted average cost of capital
WTO World Trade Organization

1 INTRODUCTION
1.1 Original proceedings and compliance proceedings
1.1. The present arbitration proceeding arise s in the dispute initiated by the United States
concerning certain measures by the European Union1 and certain member States affecting trade in
large civil aircraft (LCA).
1.2. On 1 June 2011, the Dispute Settlement Body (DSB) of the World Trade Organization (WTO)
adopted the Appellate Body report in this dispute, together with the report of the original panel as
modified by the Appellate Body.2 The original panel and the Appellate Body found that certain
subsidies provided by the European Union and certain member States to the European LCA
manufacturer Airb us3 caused displacement and significant lost sales within the meaning of
Article 6.3(a)-(c) of the Agreement on Subsidies and Countervailing Measures (SCM Agreement)
which constitutes serious prejudice under Article 5(c).4
1.3. According to Articles 7.8 and 7.9 of the SCM Agreement, the European Union and certain
member States had six months from the date of adoption of the panel report or the Appellate Body
report to take appropriate steps to remove the adverse effects of, or withdraw, the relevant
subsidies. This six-month period expired on 1 December 2011. On that date, the European Union
notified the DSB that it had taken appropriate steps to bring its measures fully into conformity with
its WTO obligations, and to comply with the DSB's recommendations and rulings.5 The United States
considered that these steps failed to bring the European Union and certain member States into
compliance with the DSB recommendations and rulings. 6 On 12 January 2012, the European Union
and the United States informed the DSB of their Agreed Procedures under Articles 21 and 22 of the
DSU (the Sequencing Agreement). 7 On 13 April 2012, the DSB, at the United States' request,
established the compliance panel under Article 21.5 of the DSU.8
1.4. On 22 September 2016, the compliance panel found that the European Union and certain
member States had "failed to comply with the DSB recommendations and rulings and, in particular,
the obligation under Article 7.8 of the SCM Agreement 'to take appropriate steps to remove the
adverse effects or … withdraw the subsidy '".9 The Appellate Body reached the same conclusion ,
albeit generally on the basis of different reasoning. 10 Significantly, the Appellate Body based its
reasoning solely on the effects of the following measures: ( a) Launch Aid/Member State Financing
(LA/MSF) subsidies for the A380 aircraft in the very large aircraft (VLA) product market; and ( b)

1 This dispute contains the name "European Communities" rather than "European Union". The European
Union effectively succeeded and replaced the European Communities for purposes of this dispute following the
entry into force of the Treaty of Lisbon amending the Treaty on European Union and the Treaty establishing the
European Community on 1 December 2009. (See Appellate Body Report, EC and certain member States –
Large Civil Aircraft, fn 1). For ease of reference, we refer to the "European Union" whether discussing events
that occurred before or after the entry into force of the Treaty of Lisbon.
2 Appellate Body Report and Panel Report, Action by the Dispute Settlement Body, WT/DS316/16.
3 For further background on the history and corporate structure of Airbus, see Panel Reports EC and
certain member States – Large Civil Aircraft (Article 21.5 – US), paras. 6.946-6.957, and EC and certain
member States – Large Civil Aircraft, pp. 359-363.
4 See Appellate Body Report, EC and certain member States – Large Civil Aircraft , paras. 1299-1300
and 1412; and Panel Report, EC and certain member States – Large Civil Aircraft, paras. 7.2025 and 8.2.
5 Communication by the European Union, WT/DS316/17 (First Compliance Communication), para. 1.
6 DSB, Minutes of the meeting held on 19 December 2011, WT/DSB/M/308, para. 55.
7 Communication by the parties, WT/DS316/21 (Understanding between the European Union and the
United States Regarding Procedures under Articles 21 and 22 of the DSU). The parties agreed, inter alia, to
request suspension of arbitration under Article 22.6 of the DSU pending completion of the compliance panel
proceeding under Article 21.5 of the DSU and any appeal thereof. The parties also agreed that in the event that
the DSB, following a proceeding under Article 21.5 of the DSU, ruled that a measure taken to comply does not
exist or is inconsistent with a covered agreement, either party may request the Article 22.6 arbitrator to resume
its work.
8 DSB, Minutes of the meeting held on 13 April 2012, WT/DSB/M/314, para. 10.
9 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 7.2.
10 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
section 6.

LA/MSF subsidies for the A350XWB aircraft in the twin-aisle product market.11 The compliance panel
had based its conclusions on a broader set of subsidy measures. 12 Based on the effects of those
measures, the Appellate Body confirmed certain of the compliance panel 's findings with respect to
impedance and significant lost sales within the meaning of Article 6.3(a)-(c) of the SCM Agreement.
More specifically, and as explained in more detail in sections 6.3.4.3 and 6.3.4.4 below, the
Appellate Body confirmed that A380 and A350XWB LA/MSF caused five lost sales as well as
impedance in six different geographic markets in the relevant reference period, i.e. the 2011-2013
reference period (" 2011-2013 Reference Period "). On 28 May 2018, the DSB adopted the
Appellate Body report and the report of the compliance panel, as modifi ed by the Appellate Body
report.13
1.2 Request for arbitration and arbitration proceeding
1.5. On 9 December 2011, the United States requested DSB authorization to "take
countermeasures with respect to the European Union at an annual level commensurate with the
degree and nature of the adverse effects caused to the interests of the United States by the failure
of the European Union and certain member States to withdra w subsidies or remove their adverse
effects in compliance with the recommendations and rulings of the DSB ". In its request, the
United States "estimate[d] this figure to be between $7 and $10 billion per year".14
1.6. The United States' request seeks authorizat ion to suspend concessions or other obligations
under the General Agreement on Tariffs and Trade (GATT) 1994 as well as the General Agreement
on Trade in Services (GATS). According to the United States' request, it is neither practicable nor
effective for the United States to suspend concessions or other obligations only on imports of goods
from the European Union up to a value of approximately USD 10 ,000 million. The United States'
request also states that, given the degree and nature of the adverse effects, the circumstances are
"serious enough" within the meaning of Article 22.3(c) of the Understanding on Rules and Procedures
Governing the Settlement of Disputes (DSU) to impose countermeasures consisting of one or more
of the following:
1. suspension of tariff concessions and related obligations (including most -favoured nation
obligations) under the GATT 1994 on a list of products from the European Union and certain
member States to be drawn from the United States' Harmonized Tariff Schedule; and
2. suspension of horizontal or sectoral concessions and obligations contained in the
United States' Schedule of Specific Commitments with regard to all services defined in the
Services Sectoral Classification List, except for financial services (sector 7).15
1.7. At the DSB meeting on 22 December 2011, the European Union objected to the United States'
proposed level of countermeasures, and claimed that the United States had not followed the
principles and procedures set forth in Article 22.3 of the DSU. At the same meeting, the DSB agreed
that the matter raised by the European Union in its statement had been referred to arbitration, as
required by Article 22.6 of the DSU.16 The Arbitrator was constituted on 13 January 201217 and was
composed of the original panelists:

11 See e.g. Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 –
US), para. 5.412 and section 6. See also Panel Reports, EC and certain member States – Large Civil Aircraft
(Article 21.5 – US), section 6.5.2.3.1 (describing A350XWB LA/MSF measures); and EC and certain member
States – Large Civil Aircraft, paras. 7.367-7.381 and Table 1 (describing A380 LA/MSF measures).
12 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), section 7.
13 Appellate Body Report and Panel Report pursuant to Article 21.5 of the DSU, Action by the Dispute
Settlement Body, WT/DS316/35.
14 Recourse to Article 7.9 of the SCM Agreement and Article 22.2 of the DSU by the United States,

15 Recourse to Article 7.9 of the SCM Agreement and Article 22.2 of the DSU by the United States,

16 DSB, Minutes of the meeting held on 22 December 2011, WT/DSB/M/309, para. 4.
17 Constitution note of the Arbitrator, WT/DS316/20.

Chairperson: Mr Carlos Pérez del Castillo
Members: Mr John Adank
 Mr Thinus Jacobsz

1.8. In accordance with the terms of the parties' Sequencing Agreement, and upon a joint request
from the parties, the Arbitrator suspended arbitration proceedings from 20 January 2012 until either
party requested the resumption of its work.18 On 13 July 2018 (i.e. just over six weeks following the
adoption of the Appellate Body and panel reports in the compliance proceedin gs on 28 May 2018)
the United States made such a request, and the Arbitrator resumed its work on that day. 19 Due to
the prior resignation of the Chairperson of the Arbitrator, Mr Carlos Pérez del Castillo, on 17 February
2016, and given the unavailability o f Mr John Adank to serve as a member of the Arbitrator, the
Director-General appointed a new Chairperson and a new member of the Arbitrator on 9 July 2018,
pursuant to a request from the United States on 28 June 2018.20 Accordingly, the new composition
of the Arbitrator was as follows:
Chairperson: Mr Faizullah Khilji
Members: Mr Scott Gallacher
 Mr Thinus Jacobsz

1.9. An organizational meeting was held on 14 August 2018 to discuss procedural aspects of the
arbitration proceeding. After consulting with the parties, the Arbitrator adopted its Working
Procedures and a timetable on 17 August 2018.21 The Arbitrator adopted Additional Working
Procedures Concerning Protection of Business Confidential Information (BCI) and Highly Sensitive
Business Information (HSBI) on 31 August 2018. They were amended on 23 October 2018 and on
27 September 2019 (see section 2.2 below).22 On 6 December 2018, the Arbitrator also adopted
Additional Working Procedures concerning the recording, and delayed public presentation, of the
opening oral statements of the parties at the substantive meeting, (see section 2.3 below).23
1.10. In accordance with the timetable and Working Procedures adopted by the Arb itrator, the
United States on 11 September 2018 submitted a communication explaining its methodology for
calculating the proposed level of countermeasures ( United States' methodology paper). The
European Union filed its written submission, including a separate request for a preliminary ruling,
on 15 October 2018. The United States filed its written submission , including its response to the
preliminary ruling request, on 9 November 2018. The Arbitrator sent questions to the parties for
written responses on 16 November 2018, to which the parties responded on 30 November 2018.
The Arbitrator sent additional questions to the parties for written responses on 30 November 2018,
to which the parties responded on 14 December 2018.
1.11. The Arbitrator held its substantive meeting with the parties on 11 and 12 February 2019. The
Arbitrator issued its conclusions on the European Union's request for a preliminary ruling on
18 February 2019.24 The conclusions and the reasons underpinning them are set out in section 2.4
below.
1.12. On 19 February 2019, the Arbitrator sent additional questions to the parties for written
responses. The parties responded to these questions on 15 March 2019, and provided comments on
each other 's responses on 8 April 2019. The Arbitrator sent further questions to the pa rties for
written responses on 28 February 2019. The parties responded to these questions on 22 March 2019
and provided comments on each other's responses on 12 April 2019. The Arbitrator sent additional
questions to the parties for written responses on 24 May 2019. The parties responded to these
questions on 7 June 2019 and provided comments on each other 's responses on 21 June 2019. In
total, the parties responded to 175 questions, many with sub-parts, from the Arbitrator. The record

18 Communication from the Arbitrator, WT/DS316/22 (Suspension of the Work of the Arbitrator).
19 Communication from the Arbitrator, WT/DS316/38 (Resumption of the Work of the Arbitrator).
20 Replacement of two members of the Arbitrator, WT/DS316/37.
21 See Working Procedures of the Arbitrator, Annex A-1.
22 See Additional Working Procedures for the Protection of Business Confidential Information and Highly
Sensitive Business Information, Annex A-2.
23 See Additional Working Procedures for the Substantive Meeting with the Arbitrator, Annex A-3.
24 See Preliminary Ruling by the Arbitrator (Conclusions), Annex B-1.

of this proceeding thus encompasses hundreds of pages of submissions and thousands of pages of
exhibits. Much of this information is either BCI or HSBI.
1.13. The Arbitrator submitted its Decision for translation on 30 August 2019 and notified the
parties of this transmission. The Arbitrator on 13 September 2019 issued to the parties a version of
its Decision containing BCI and a redacted version intended for public circulation. The parties
returned with requests for additional redactions on 19 September 2019. The Arbitrator provided its
HSBI calculations underlying the number in the bottom right corner of Table 21 of this Decision on
24 September 2019. The Decision of the Arbitrator was circulated to WTO Members on 2 October
2019.
1.3 Second compliance proceedings
1.14. On 17 May 2018, the European Union communicated to the DSB that it had taken appropriate
steps to bring its measures fully into conformity with its WTO obligations, and to comply with the
DSB's recommendations and rulings.25 At the DSB meeting of 28 May 2018, the United States noted
that "based on the [United States'] review [of the communication from the European Union dated
17 May 2018], the EU document did not reflect new developments that might somehow resolve this
long-standing dispute".26 Subsequently, on 27 August 2018, at the European Union's request, the
DSB established a second panel under Article 21.5 of the DSU.27 This second compliance panel had
not yet issued its report at the time the Arbitrator issued this Decision.
2 PROCEDURAL MATTERS
2.1. In section 2, the Arbitrator addresses four procedural matters arising in these proceedings.
First, we briefly describe procedures related to page limits on the parties ' written submissions.
Second, we explain our treatment of BCI and HSBI. Third, we address the parties' request that
portions of the substantive meeting be recorded for a later presentation to the public. Finally, we
discuss the European Union's request for a preliminary ruling.
2.1 Page limits on parties' written submissions
2.2. Mindful of the length of the prior proceedings and volume of the parties' submissions in this
dispute, and the expedited nature of Article 22.6 proceedings, the Arbitrator , ahead of the
organizational meeting, proposed to introduce pag e limits on the parties ' written submissions to
facilitate the efficient conduct of this arbitration. The European Union commented that while it agreed
with the need for efficient and speedy proceedings, imposing a page limit on written submissions
would not be conducive either to efficient proceedings or to the protection of the parties' due process
rights.28 The United States considered that the page limit proposed by the Arbitrator should be
included in the Working Procedures and noted that the European Union's objection to this provision
"hint[ed] at an intent to cause delay ".29 After having considered the views of the parties, the
Arbitrator decided to increase the previously specified page limit on the parties' written submissions
and included it in its Working Procedures. No time limits were imposed on the parties ' oral
statements.
2.3. The Arbitrator's Working Procedures provide that the written submissions of the parties and
the methodology paper of the United States are not to exceed 125 pages (single -spaced, font size
10) each, excluding any exhibits accompanying such submissions. Moreover, the specified page limit
was not absolute, as the procedures provide for the possibility to grant an extension upon timely
request by a party and subject to an explanation by that party of the circumstances that in its view
warrant exceeding the page limit.30 Neither requested an extension of the page limit.

25 Communication by the European Union, WT/DS316/34 (Second Compliance Communication), para. 1.
26 DSB, Minutes of the meeting held on 28 May 2018, WT/DSB/M/413, para. 3.3.
27 DSB, Minutes of the meeting held on 27 August 2018, WT/DSB/M/417, para. 5.5.
28 European Union's communication (14 August 2018), para. 2.
30 For the full text of the adopted procedure on page limits, see Working Procedures of the Arbitrator,
Annex A-1, para. 3.2.

2.2 Treatment of BCI and HSBI
2.4. At the organizational meeting, both parties requested the Arbitrator to adopt additional working
procedures to protect BCI and HSBI submitted in the course of the p roceeding. As indicated in the
preceding section, the Arbitrator adopted such additional working procedures on 31 August 2018,
as amended on 23 October 2018 and 27 September 2019.31
2.5. The Additional Working Procedures , inter alia, (a) define BCI and HSBI for the purposes of
these proceedings, (b) limit access to, and permissible use of, BCI and HSBI submitted during the
proceedings to certain pre -designated persons and at certain designated secure locations where
applicable, (c) provide for the treatment and handling of BCI and HSBI in a party 's submissions to
the Arbitrator, and (d) provide for the return and destruction of BCI and HSBI after the conclusion
of the arbitration proceeding.
2.6. Additionally, p aragraphs 40 and 51 of the Additional Working Procedures provi de that t he
Arbitrator shall not disclose BCI and HSBI in its D ecision but may make statements or draw
conclusions that are based on the information drawn from BCI and HSBI. Importantly, it also
provides that, prior to circulating the Decision of the Arbitrator to the WTO membership, the parties
shall be given an opportunity to ensure that the Decision does not contain any BCI or HSBI. These
paragraphs form the "legal basis"32 on which the Arbitrator has redacted words or statements that
are BCI or HSBI from the public version of this Decision. Accordingly, the text of the version
circulated to Members is identical to the text of the confidential version issued to the parties, with
the exception of passages that are redacte d to protect BCI and HSBI. Such passages have been
replaced by "[[***]]" and "[[HSBI]]".
2.7. In the adoption and application of the additional procedures to protect BCI and HSBI, the
Arbitrator has strived to "ensure that an appropriate balance is struck betwe en the need to guard
against the risk of harm that could result from the disclosure of particularly sensitive information,
on the one hand, and the integrity of the adjudication process … and the rights of and systemic
interests of the WTO membership at large, on the other hand".33 We have also tried to "ensure that
the public version of [the Decision] circulated to all Members of the WTO is understandable".34 Having
said that, it is also important to note that a substantial portion of evidence submitted by the parties
in this proceeding is protected under the BCI and HSBI procedures and therefore the Arbitrator has
had to have reference to information classified as BCI or HSBI more frequently than may be usual
in previous arbitration decisions.
2.8. In accordanc e with the Additional Working Procedures, the parties on 19 September 2019
submitted specific requests regarding the redaction of BCI from the public version of this Decision
and on 23 September 2019 submitted comments on each other's requests. In response to these
communications, we made appropriate changes to the public version of our Decision.
2.3 Public presentation of the parties' opening statements
2.9. At the organizational meeting, both parties agreed that the substantive meeting of the
Arbitrator with the parties should be made public insofar as it was reasonable to do so, particularly
given the significant presence of confidential information in the proceeding. In this context,
recognizing the need to protect the confidentiality of BCI and HSBI that could be referred to at the
substantive meeting, both parties also agreed that additional working procedures should be adopted
for the substantive meeting of the parties with the Arbitrator. On 6 December 2018, and pursuant
to a joint proposal made by the partie s, the Arbitrator adopted Additional Working Procedures for
the Substantive Meeting with the Arbitrator.35 These procedures addressed issues pertaining to the
treatment of BCI and HSBI during the meeting, generally, as well as issues more specifically
pertaining to the parts of the meeting intended to be made available to the public.

31 See Additional Working Procedures for the Protection of Business Confiden tial Information and Highly
Sensitive Business Information, Annex A-2.
32 Appellate Body Report, US – Tuna II (Mexico) (Article 21.5 – Mexico), para. 5.4.
33 Appellate Body Reports, US – Tuna II (Mexico) (Article 21.5 – Mexico), para. 5.3; and EC and certain
member States – Large Civil Aircraft, Annex III, Procedural Ruling of 10 August 2010, para. 15.
34 Appellate Body Report, Japan – DRAMS (Korea), para. 279.
35 See Additional Working Procedures for the Substantive Meeting with the Arbitrator, Annex A-3.

2.10. The substantive meeting of the Arbitrator with the parties was held on 11-12 February 2019,
during which the parties' opening oral statements were recorded for a later presentation to the public
in accordance with the terms of the Additional Working Procedures. A preview of the recording for
the parties was held on 8 March 2019, which both the parties attended and at which the parties
identified utterances of BCI during the openi ng oral statements that were later deleted before the
public presentation. The public presentation of the redacted recording of the parties ' opening oral
statements took place on 30 April 2019 at the WTO.
2.4 The European Union's request for a preliminary ruling
2.11. As noted at paragraph 1.10 above, when the European Union filed its written submission, it
also filed a separate request that the Arbitrator issue a preliminary ruling at the earliest stage
possible. The United States responded to that r equest in its written submission. Soon after the
meeting of the Arbitrator with the parties, the Arbitrator issued its conclusions on the preliminary
ruling request. In this section, the Arbitrator restates its conclusions and provides the reasons
supporting them.
2.12. In its preliminary ruling request, the European Union requests that the Arbitrator await the
outcome of the second compliance panel proceeding36 before completing the arbitration proceeding.
In the European Union's view, the Arbitrator and the second compliance panel should find a "logical
way forward "37 and coordinate their work. The European Union submits that there is a unique
interdependence between the mandates of an Article 22.6 arbitrator and a compliance panel in a
dispute involving Part III of the SCM Agreement concerning actionable subsidies. According to the
European Union, the Arbitrator cannot properly fulfil its task without consideration of whether the
European Union has brought itself into conformity (which the European Union has asserted to be the
case in its most recent communication on compliance 38), and the result of the compliance panel
proceeding which has a bearing on the arbitration proceeding. The European Union considers that
there is a risk of serious and irreparable harm to the European Union if countermeasures were
imposed despite it having now complied with the DSB's recommendations and rulings.39
2.13. The European Union submits that a proper interpretation of Articles 7.9 and 7.10 of the
SCM Agreement is that the DSB can authori ze countermeasures only if no compliance has been
achieved. The European Union recalls in this respect that the question whether the European Union
has achieved substantive compliance in this dispute is currently before the second compliance panel.
In the European Union's view, the logical way forward is therefore for the Arbitrator to wait for the
outcome of "multilateral review " before determining whether the United States can receive
authorization to take countermeasures.40
2.14. The United States responds that the preliminary ruling request provides no valid reason, and
the DSU and SCM Agreement do not require, that the Arbitrator halt the proceeding to allow the
European Union to litigate its latest claims of compliance. In the United States' view, it is not justified
to halt an arbitrator 's decision in circumstances where the responding party 's initial claim of
compliance has failed, the DSB has adopted findings of WTO -inconsistency in the post -
implementation period, and the responding party has commenced a second compliance proceeding.
The United States notes that the arbitration addresses the level of suspension commensurate with
adverse effects already identified in the first compliance panel and Appellate Body reports, whereas
the second compliance panel will address allegations that a new set of measures have modified the
European Union's subsidies so that they no longer cause adverse effects. The United States further
points out that slowing down the arbitration would be inconsistent with the parties' joint commitment
in their bilateral sequencing agreement "'to cooperate to enable the Arbitrator to circulate its decision
within 60 days'".41

36 See paragraph 1.14 above.
37 European Union's request for a preliminary ruling, para. 3 (referring to Decision by the Arbitrator,
EC – Bananas III (US) (Article 22.6 – EC), para. 4.9).
38 Communication by the European Union, WT/DS316/34 (Second Compliance Communication).
39 European Union's request for a preliminary ruling, paras. 3-4, 7-9, 23-24, 52, and 74; communication
to the Arbitrator (22 October 2018), p. 2; and response to Arbitrator question No. 50, paras. 21 and 28.
40 European Union's request for a preliminary ruling, paras. 5, 7, 34, and 37.
41 United States' written submission, para. 34 (quoting the Sequencing Agreement, para. 7). See also
United States' written submission, paras. 21, 31, 34-35, 60, and 69); and communication to the Arbitrator
(25 October 2018), p. 2.

2.15. The United States argues that according to the European Union, if the second compliance
proceeding found against it, the European Union would be free to assert new claims of compliance
that would again halt the arbitration until a third compliance proceeding has been completed. In the
United States' view, such a result would negate its right to take countermeasures in response to the
European Union's failure to comply. The United States further observes that it strongly disagrees
that the European Union has achieved compliance. The United States points out in this respect that
the European Union and the United States disagree on which party should bear the risk of
uncertainty as to whether the European Union is in compliance. The United States considers that it
bore the risk of uncertainty through the end of the first compliance proceeding. In the United States'
view, now it is the European Union that should bear the uncertainty in that it will remain subject to
countermeasures until claims of compliance have been resolved. The United States also observes
that the European Union did not argue that the first compliance proceedings should have moved
quickly because the adverse effects caused by its subsidies were irreparable.42
2.16. The Arbitrator, after careful consideration of the parties' arguments, transmitted to the parties
its conclusion on the European Union's preliminary ruling request and indicated that it would provide
the supporting reasons in its Decision.43 We concluded that it was neither necessary nor appropriate
to await the ou tcome of the second compliance proceedings before proceeding to determine the
maximum level of countermeasures that the United States could be authorized to impose. We
therefore declined the European Union's request that we coordinate our work with the sec ond
compliance panel and decided to proceed with our work.
2.17. In this section, we provide the reasons supporting our conclusion. Before doing so, it is useful
to clarify the nature and practical implications of the European Union's request. Regarding the nature
of the request, the European Union asks that we delay the completion of our work to allow for the
question of the European Union's compliance to be resolved in the second compliance proceeding.
In other words, the European Union does not request that we resolve the compliance issue ourselves.
2.18. Regarding practical implications, the European Union states that we should coordinate our
work with the second compliance panel, and that we should await the outcome of "multilateral
review"44 of the European Union's claim of substantive compliance. As the report of the second
compliance panel is subject to appeal, the "multilateral review" would not be complete and final until
after any appeal that either party might initiate. The delay requested by the European Union would
thus potentially have been substantial. We note in this connection that in accordance with
Article 22.6 of the DSU, arbitrations are to be completed on an expedited basis, within 60 days after
the referral of the matter to a rbitration. If the parties had wished that we not proceed, they could
have jointly requested a further suspension of this arbitration proceeding. 45 The parties clearly did
not agree, however, that the kind of coordination with the second compliance panel th at the
European Union proposed would be appropriate.46
2.19. The European Union nevertheless asks, in effect, that irrespective of the fact that the
United States does not agree to delay the arbitration proceeding, we impose timetable coordination
with the second compliance panel. The European Union presents three main arguments in support
of its request: (a) an argument concerning Article 22.8 of the DSU , (b) an argument concerning
non-retroactivity of WTO remedies , and (c) an argument based on prior arbitration decisions. We
address each in turn below.
2.4.1 The European Union's argument concerning Article 22.8 of the DSU
2.20. According to the European Union, the right to request countermeasures under Article 7.9 of
the SCM Agreement arises in case of non-compliance at the end of the implementation period, but

42 United States' written submission, paras. 23, 26-27, 29-30, and 57; and communication to the
Arbitrator (25 October 2018), pp. 2-3.
43 Arbitrator communication to the parties, Annex C-1, (18 February 2019) (containing the Arbitrator's
conclusions on the European Union's preliminary ruling request, which form an integral part of the Arbitrator's
Decision).
44 European Union's request for a preliminary ruling, para. 37.
45 As noted at paragraph 1.8 above, at the request of the parties, the present arbitration proceeding
was suspended from January 2012 to July 2018.
46 According to the United States, the "only proper action at this stage is to move forward expeditiously
with this arbitration". (United States' written submission, para. 21).

Article 7.9 does not stipulate whether countermeasures may be requested, and authorized, in
circumstances where the responding Member has asserted compliance after the end of the
implementation period and a compliance panel has been established to determine whether
compliance has been achieved. However, in the European Union's view, Article 22.8 of the DSU
means that no countermeasures can be authorized if substantive compliance has been achieved.
The European Union submits that we should therefore await the outcome of a multilateral review of
the European Union's claim of substantive compliance.47
2.21. The United States notes that the DSB has found that the European Union has failed to comply
with the DSB recommendations and rulings, and that the DSU provides that the DSB must authorize
countermeasures at the level determined by the Arbitrator. The United States considers that
Article 22.8 does not preclude the application of countermeasures in the present dispute and that
any countermeasures authorized by the DSB could properly continue until the DSB adopts a finding
of compliance (or the parties agree that a solution has been found). According to the United States,
what matters under Article 22.8 is not the assertion of comp liance, but a finding of compliance
adopted by the DSB (which the European Union has not obtained).48
2.22. The Arbitrator first notes the text of Article 22.8, which states in relevant part that the
suspension of concessions or other obligations "shall only be applied until such time as the measure
found to be inconsistent with a covered agreement has been removed ".49 Thus, Article 22.8, by its
terms, is con cerned with the "application" of the suspension of concessions or other obligations.
Article 22.7 precedes and is part of the immediate context of Article 22.8. The last sentence of
Article 22.7 stipulates that the DSB upon request must grant "authorization" to suspend concessions
or other obligations where the request is consistent with the decision of the Article 22.6 arbitrator
(and there is no negative consensus in the DSB against granting the request). Accordingly,
Article 22.7 is concerned with "authorization", where Article 22.8 is concerned with "application" of
a suspension of concessions or other obligations. It is clear to us from these elements that
Article 22.8 addresses a post -authorization situation – a situation in which the suspension of
concessions or other obligations has already been authorized by the DSB – and not a pre -
authorization situation.50
2.23. We therefore do not agree that Article 22.8 prevents the DSB from "authorizing"
countermeasures in a pre -authorization scenario such as ours, wh ere the DSB has ruled after
compliance proceedings that the responding party has not brought itself into conformity by the end
of the implementation period and the complaining party requests that the DSB grant it authorization
to take countermeasures on the basis of the DSB's prior compliance ruling.51
2.24. In fact, the US – Tuna II (Mexico) dispute is a case in point. The DSB ruled that the
United States had failed to bring itself into conformity by the end of the reasonable period of time.
Mexico then requeste d authorization to suspend concessions and the matter was referred to an
Article 22.6 arbitrator. At around the same time, however, a revised United States' measure taken
to comply entered into force, which the United States claimed achieved compliance.52 A compliance
panel was subsequently established following separate requests from the United States and Mexico.
The arbitrator completed its work before the second compliance panel, and the DSB authorized
Mexico to retaliate. Months later, the second compliance panel found that the revised United States'
tuna measure brought the United States into conformity, and the panel was later upheld by the
Appellate Body. Thus, even though the United States was claiming to be in compliance when Mexico

47 European Union's request for a preliminary ruling, paras. 38-39; and response to Arbitrator question
No. 50, paras. 9 and 18.
48 United States' written submission, paras. 28, 48, and 50.
49 Appellate Body Report, US – Continued Suspension, para. 306 (stating that "the application of the
suspension of concessions may continue until the removal of the measure found by the DSB to be inconsistent
results in substantive compliance").
50 See also Decision by the Arbitrator, US – Upland Cotton (Article 22.6 – US I), para. 3.45.
51 Article 22.8 would, however, prevent the complaining party from continuing to apply any DSB-
authorized countermeasures if any subsequently completed compliance proceedings established that the
responding party has substantively complied.
52 The parties in US – Tuna II (Mexico) (Article 22.6 – US) disagreed about the date on which the 2016
tuna measure entered into force and the arbitrator did not find it necessary to resolve that issue. (Decision by
the Arbitrator, US – Tuna II (Mexico) (Article 22.6 – US), paras. 3.64-3.65).

sought DSB authorization to suspend concessions or other obligations, the DSB granted Mexico the
authorization.
2.4.2 The European Union's argument concerning non-retroactivity of WTO remedies
2.25. The European Union further argues that if the Arbitrator were to authorize the United States
to impose countermeasures to respond to a past breach of the SCM Agreement instead of any current
inconsistency with the SCM Agreement, this would give the United States a retroactive remedy. The
European Union submits that this would go again st the principle that countermeasures are
prospective in nature rather than retroactive.53
2.26. In the United States' view, if the European Union's recent steps achieved compliance (as the
European Union claims) this would not mean that the United States would be granted a retrospective
remedy for past adverse effects inflicted by the European Union, rather than a remedy for ongoing
effects. According to the United States, the European Union's argument ignores that the converse
would also be true. The United States submits that if the Arbitrator were to stop the proceeding and
the second compliance proceeding rejects the European Union's claims of compliance, the Arbitrator
would deny the United States' right to suspend concessions to restore the balance of rights and
obligations upset by the European Union's ongoing WTO-inconsistent subsidization.54
2.27. The Arbitrator observes that the DSB would authorize the United States to take
countermeasures prospectively (i.e. from the date of the DSB authorization going forward) to
respond to a continuing multilaterally determined breach of WTO obligations.55 Moreover, consistent
with Article 22.8, any such countermeasures could remain in place until there is a new multilateral
determination by the DSB to the effect that there no longer is a breach (or the parties have reached
a mutually agreed solution). It is only if countermeasures remained in place even after the DSB has
determined that there no longer is a breach that such countermeasures could be said to "respond to
a past breach" (i.e. a breach that has ceased). In contrast, a unilateral declaration of compliance by
the responding party does not turn multilaterally authorized countermeasures that either begin or
continue to be implemented after the date of such a declaration into countermeasures that "respond
to a past breach" from the date of their first implementation (where countermeasures begin to be
implemented after the declaration) or the date of the declaration (where countermeasures continue
to be implemented), going forward. Finally, we note that in the US – Tuna II (Mexico) dispute, the
DSB granted Mexico the right to suspend concessions or other obligations to respond to a prior
multilateral DSB determination of non-compliance despite the United States' claim that it had in the
meantime brought itself into compliance.56
2.28. In the light of the foregoing considerations, we are unable to accept the European Union's
argument that authorizing the United States to take countermeasures before the completion of the
second compliance panel proceeding would amount to granting a retroactive remedy.
2.4.3 Prior arbitration decisions referred to by the European Union
2.29. The European Union submits that three prior arbitration decisions under Article 22.6 support
its position that there is no basis to authorize countermeasures if compliance has been ach ieved.
First, the European Union points out that the arbitrator in EC – Bananas III (US) (Article 22.6 – EC)
assessed whether the European Union had achieved compliance through the measures it had taken
after the original proceedings. Second, the European Union points to the arbitration decision in US
– Upland Cotton (Article 22.6 – US I), in which the arbitrator did not include in its valuation a subsidy
programme that had been found WTO-inconsistent by the original panel, but that the parties agreed
had been withdrawn after the end of the implementation period. Third, the European Union notes

53 European Union's request for a preliminary ruling, paras. 56-58.
54 United States' written submission, paras. 54-55.
55 In EC and certain member States – Large Civil Aircraft (Article 21.5 – US), the Appellate Body
referred to the "prospective nature of remedies in WTO dispute settlement" and observed that, under
Article 7.8 of the SCM Agreement, a complaining Member can "obtain relief in the form of a prospective
remedy". (Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 5.374). (emphasis original)
56 DSB, Minutes of the meeting held on 22 May 2017, WT/DSB/M/397, para. 7.24; and request for the
establishment of a panel by the United States, WT/DS381/32 (12 April 2016).

that the arbitrator in Brazil – Aircraft (Article 22.6 – Brazil) decided that it would wait for the results
of the compliance proceeding before the Appellate Body before reaching a conclusion under
Article 22.6. The European Union notes that only one arbitrator, the arbitrator in US – Tuna II
(Mexico) (Article 22.6 – US), took a different approach outlined in a preliminary ruling ( US – Tuna
II Arbitrator's Preliminary Ruling ). The European Union considers that the circumstances of the
present dispute are different, because this dispute concerns countermeasures in response to DSB
recommendations concerning actionable subsidies. For the European Union, the pre mise of an
arbitrator's work in this context is the existence of adverse effects. In the European Union's view,
this difference dictates a different approach.57
2.30. The United States responds that past arbitration decisions do not support halting an
Article 22.6 arbitration to await the outcome of a second compliance panel proceeding. The
United States submits that the most recent relevant decision, the decision in the US – Tuna II
(Mexico) (Article 22.6 – US) dispute, is also the most analogous to this proceeding and confirms that
the Arbitrator should not halt its work to await the final results of the second compliance proceeding.
The United States considers that the reasoning developed by that arbitrator applies, with even
greater force, in a proceeding under Part III of the SCM Agreement. According to the United States,
in accordance with Article 7.10, the countermeasures must relate to the adverse effects determined
in the most recent proceeding to be inconsistent with the SCM Agreement, and not an alleged more
recent version of the relevant measure. Regarding the other arbitration decisions cited by the
European Union, the United States argues that they do not support the European Union's views.58
2.31. The Arbitrator notes that the three arbitration decisions on w hich the European Union relies
were all raised and addressed in some detail in the US – Tuna II Arbitrator's Preliminary Ruling.59
We concur with the analysis in that ruling and thus consider that these arbitration decisions do not
support the European Union's position. In EC – Bananas III (US) (Article 22.6 – EC), the complaining
party sought authorization to retaliate without first completing a compliance proceeding. The
arbitrator determined that the most logical way forward was for it to undertake its own examination
of the WTO -consistency of the European Union's measure taken to comply. 60 In the present
proceeding, there is a prior DSB determination of non -compliance from the first compliance
proceedings. In US – Upland Cotton (Article 22.6 – US I), the arbitrator excluded from its valuation
a previously WTO-inconsistent United States measure that the parties agreed had been withdrawn
prior to the compliance panel and arbitration proceedings , and on which the DSB after the
compliance procee dings did not make a determination of non -compliance.61 In the present
proceeding, there is no multilateral determination that the European Union has achieved compliance,
nor do the parties agree that the European Union has achieved compliance, and there th us is no
reason to "decline[] to authorise countermeasures "62 regarding the WTO -inconsistent adverse
effects determined to exist in the prior compliance proceedings. Finally, in Brazil – Aircraft
(Article 22.6 – Brazil), there was no DSB determination of no n-compliance from prior compliance
proceedings when the arbitration proceeding commenced. The arbitrator therefore decided to wait
for the result of the appeal in the compliance proceedings (which were expected to become available
less than two months after the commencement of the arbitration proceeding) to allow the parties to
take it into account in the context of the arbitration proceeding, since "[t]he decision of the
Appellate Body could influence the extent to which Brazil may be considered to have br ought its
legislation into conformity with its WTO obligations".63 In the present proceeding, there already is a
DSB determination of non-compliance from prior compliance proceedings. There consequently is no
need to await the final results of the second co mpliance proceeding that the European Union
subsequently initiated.
2.32. As concerns the factual circumstances underlying the US – Tuna II Arbitrator's Preliminary
Ruling, we consider that they are substantially similar to ours. As in the present proceeding, wh en
that arbitration began, there was a DSB determination of non -compliance from prior compliance
proceedings. A second round of compliance proceedings was likewise initiated shortly after the
arbitration proceeding had been initiated. Nevertheless, the arb itrator did not wait for the final

57 European Union's request for a preliminary ruling, paras. 59-61 and 63-73.
58 United States' written submission, paras. 61-69.
59 Decision by the Arbitrator, US – Tuna II (Mexico) (Article 22.6 – US), paras. 3.29-3.47.
60 Decision by the Arbitrator, EC – Bananas III (US) (Article 22.6 – EC), para. 4.9.
61 Decision by the Arbitrator, US – Upland Cotton (Article 22.6 – US I), paras. 3.21 and 3.50.
62 European Union's request for a preliminary ruling, para. 63.
63 Decision by the Arbitrator, Brazil – Aircraft (Article 22.6 – Brazil), para. 2.1.

results of the second compliance proceedings and conducted the arbitration proceeding on the basis
of the prior DSB determination. According to the arbitrator, this was justified because, in its view,
the text of Article 22.6 "mandates an arbitrator to assess the level of nullification or impairment
caused by the WTO-inconsistent original measure (where no compliance measure was subsequently
taken), or a subsequent WTO-inconsistent compliance measure, that was in existence at the time of
expiry of the RPT [i.e. reasonable period of time] ".64 The arbitrator further observed that this
measure "may or may not be the most recent version of the relevant measure".65 We have carefully
considered the reasoning that the arbitrator provided in support of these statements 66 and find it
persuasive.
2.33. Applying this reasoning to the present proceeding, mutatis mutandis, we reach two provisional
conclusions. First, we consider that it is our mandate to determine the level of countermeasures
based on the adverse effects determined to exist in the prior compliance proceedings and not by
reference to the current situation, which the European Union claims is one where there no longe r
exist any adverse effects or the relevant subsidies have been withdrawn. We recall in this connection
that in our view the reference in Article 7.10 of the SCM Agreement to the adverse effects
"determined to exist" should be construed as a reference to any adverse effects determined to exist
by the panel and Appellate Body in their reports.67 The most recent of such reports adopted by the
DSB are those circulated at the end of the first compliance proceedings. We note that fulfilling our
mandate in this manner draws a clear line of separation between the scope of our inquiry and that
of the second compliance panel. Our inquiry focuses on the facts determined to exist during the
2011-2013 Reference Period, whereas the second compliance panel focuses on the f acts as they
existed years later, in 2018, on the date of establishment of the second compliance panel. As there
thus is no apparent risk that our Decision would contradict or be inconsistent with the second
compliance report(s), it is not apparent to us t hat we should engage in the kind of "coordination"
with the second compliance panel that the European Union is seeking.
2.34. Second, even disregarding our mandate to complete this arbitration proceeding expeditiously,
we see no reason to wait for the final results of the second compliance proceedings. This arbitration
proceeding serves to determine the maximum level of countermeasures that the DSB may authorize
the United States to impose in response to the European Union's failure to comply by the end of the
implementation period in 2011. The legal basis for any such authorization is the prior DSB
determination of non -compliance resulting from the first compliance proceedings. There has been
no intervening DSB determination since that establishes that the Europe an Union has achieved
compliance. Therefore, this arbitration proceeding can and should in our view proceed without delay.
We observe in this respect that even if the DSB authorizes the United States to impose
countermeasures following the end of this proc eeding, the United States is under no obligation to
implement any such measures immediately or at all.68 Moreover, as was similarly noted in the US –
Tuna II Arbitrator's Preliminary Ruling69, it is conceivable that after any DSB authorization to impose
countermeasures, the final results to emerge from the second compliance proceedings are that the
European Union has achieved compliance. If so, and if the DSB were to adopt these results, the
United States pursuant to Article 22.8 of the DSU would have to prom ptly terminate any
countermeasures that it might have imposed after having been granted DSB authorization.70

64 Decision by the Arbitrator, US – Tuna II (Mexico) (Article 22.6 – US), para. 3.24.
65 Decision by the Arbitrator, US – Tuna II (Mexico) (Article 22.6 – US), para. 3.24.
66 Decision by the Arbitrator, US – Tuna II (Mexico) (Article 22.6 – US), paras. 3.7-3.23 and 3.49-3.55.
67 See paragraph 5.5 below. We agree with the United States that the text of Article 7.10, when read
together with Article 7.8 of the SCM Agreement, is even clearer than Article 22.4 of the DSU, read together
with Article 22.2 of the DSU, on which the US – Tuna II (Mexico) Arbitrator's Preliminary Ruling relies, in
linking an arbitration proceeding to the WTO-inconsistent original measure or a subsequent WTO-inconsistent
compliance measure that was in existence at the time of the expiry of the implementation period.
(United States' written submission, para. 66; and Decision by the Arbitrator, US – Tuna II (Mexico)
(Article 22.6 – US), para. 3.21).
68 We recall that in the US – Tuna II (Mexico) dispute, the DSB in May 2017 authorized Mexico to
suspend concessions or other obligations. To our knowledge, Mexico did not apply any suspension of
concessions or other obligations and waited instead for the final results of the second compliance panel
proceedings, which the DSB adopted in January 2019. (Action by the Dispute Settlement Body,
WT/DS381/49/Rev.1).
69 Decision by the Arbitrator, US – Tuna II (Mexico) (Article 22.6 – US), para. 3.60.
70 Appellate Body Report, US – Continued Suspension, para. 306 (stating that "[i]f, by recourse to a
multilateral dispute settlement process, the implementing measure is found to bring about substantive

2.35. Notwithstanding the foregoing, the European Union submits that the circumstances in the
present proceeding dictate a different approach from that a dopted in the US – Tuna II Arbitrator's
Preliminary Ruling. According to the European Union, this is because in this proceeding the requested
countermeasures concern actionable subsidies under Part III of the SCM Agreement. We recall that
the US – Tuna II Arbitrator's Preliminary Ruling addressed a requested suspension of concessions or
other obligations that concerned a measure in breach of different types of provisions of different
covered agreements, i.e. the GATT 1994 and the TBT Agreement. We address the European Union's
argument in the next section.
2.4.4 The European Union's argument concerning the uniqueness of actionable subsidies
disputes
2.36. The European Union argues that when actionable subsidies under Part III of the
SCM Agreement are at issue, there is a unique interdependence between the mandates of arbitrators
and the mandates of compliance panels. In the European Union's view, their mandates are
complementary, with the result that the second compliance proceedings hav e a direct bearing on
the arbitration proceeding. The European Union observes that the premise for an arbitrator 's work
in actionable subsidies cases is the existence of adverse effects and that in the present dispute the
question whether adverse effects exist is pending multilateral review before a compliance panel. In
the European Union's view, the arbitrator thus does not have exclusive jurisdiction on the existence
of adverse effects and the Arbitrator in the present proceeding should therefore coordinate its work
with the second compliance panel. The European Union contends that the US – Tuna II Arbitrator's
Preliminary Ruling concerned a dispute where no such close connection existed between the
arbitration proceeding and the second compliance proceedi ngs. According to the European Union,
this is because the second compliance panel in that dispute did not have to demonstrate the
existence of harm (nullification or impairment) to determine whether compliance had been
achieved.71
2.37. The United States argues t hat Article 7.10 of the SCM Agreement explicitly envisages an
arbitration decision based on adverse effects "determined" to exist in a prior report adopted by the
DSB. The United States infers from this that Article 7.10 instructs an arbitrator to rely on adverse
effects determined in the past to set the level of countermeasures in the present. To the
United States, this indicates that the possibility that the situation evolved after that determination
does not preclude the arbitrator from completing its work. In the United States' view, this holds true
even if it were assumed that Part III of the SCM Agreement differed from other WTO disciplines in
the ways alleged by the European Union. The United States further contends that the
European Union's premise, under which an evaluation of the negative effects of a measure play no
role outside of Part III of the SCM Agreement is incorrect. The United States cites as examples the
national treatment obligations under the GATT 1994 and the GATS, which require a show ing that
the challenged measure modify the conditions of competition to the detriment of goods or services
of another Member.72
2.38. The Arbitrator notes that actionable subsidies disputes are indeed different from many other
WTO disputes in that they involve effects-based disciplines. Under such disciplines, the complaining
party must demonstrate the existence of adverse effects to sustain a claim of violation. It is therefore
correct that in this dispute both the Arbitrator and the second compliance panel are concerned with
adverse effects: We must quantify the adverse effects previously determined to exist, whereas the
second compliance panel must determine whether, in the light of the European Union's claim of
compliance, adverse effects still existed (i.e. had not been removed through measures taken to
comply) when the panel was established.

compliance, the suspension of concessions may no longer be applied … and cessation of the suspension is
required"). The United States does not dispute that it would no longer be entitled to apply countermeasures in
this dispute if the European Union were at some point found by the DSB to be in compliance with its
obligations. (United States' written submission, para. 23).
71 European Union's request for a preliminary ruling, paras. 4, 7-8, 24, 46-47, 50-51, 71, and 74; and
response to Arbitrator question No. 50, para. 28.
72 United States' written submission, paras. 39, 44, and 51-53.

2.39. However, we do not agree with the European Union that the second compliance panel
proceeding has a "direct be aring" on this arbitration proceeding. 73 Rather, as will be evidenced
throughout our Decision, it is the first compliance proceedings that have a direct bearing on this
arbitration proceeding, because it is in those proceedings that the adverse effects with which the
United States' countermeasures must be commensurate were determined to exist. Moreover, we
focus our inquiry on the adverse effects determined to exist during the 2011-2013 Reference Period,
i.e. in the past, whereas the second compliance panel focuses its inquiry on whether there were still
adverse effects more recently, on the date of establishment of that panel. We thus perceive neither
a "complementary" relationship nor a relationship of "interdependence" between the mandates of
these two separate WTO adjudicators.
2.40. We are thus unable to accept the European Union's claim that there is a "unique
interdependence" between this arbitration proceeding and the second compliance panel proceeding.
We consequently also disagree with the European Union that the circumstances of the present
proceeding dictate an approach that is different from the approach taken in the US – Tuna II
Arbitrator's Preliminary Ruling. The two provisional conclusions that we have reached in the section
immediately above theref ore stand, as does our overall conclusion on the European Union's
preliminary ruling request.
3 MANDATE OF THE ARBITRATOR
3.1. In having recourse to arbitration under Article 22.6 of the DSU, the European Union objected
to the level of countermeasures contained i n the United States' request for authorization to take
countermeasures under Article 22.2 of the DSU and Article 7.9 of the SCM Agreement. The
European Union also claimed that the principles and procedures set forth in Article 22.3 of the DSU
had not been followed, and that the United States' proposal was not allowed under the covered
agreements.74
3.2. Article 7.9 of the SCM Agreement provides that if certain cond itions are met, "the DSB shall
grant authorization to the complaining Member to take countermeasures, commensurate with the
degree and nature of the adverse effects determined to exist, unless the DSB decides by consensus
to reject the request". Article 7.10 of the SCM Agreement stipulates that "[i]n the event that a party
to the dispute requests arbitration under paragraph 6 of Article 22 of the DSU, the arbitrator shall
determine whether the countermeasures are commensurate with the degree and nature of t he
adverse effects determined to exist".
3.3. Articles 7.9 and 7.10 constitute "special or additional rules and procedures" under Appendix 2
of the DSU. According to Article 1.2 of the DSU, "[t]o the extent that there is a difference between
the rules and proce dures of this Understanding and the special or additional rules and procedures
set forth in Appendix 2, the special or additional rules and procedures in Appendix 2 shall prevail".
3.4. This arbitration is governed by both Article 7.10 and Article 22.6. Articl e 22.7 of the DSU
defines the mandate for an arbitrator acting exclusively under Article 22.6. That is, the arbitrator
"shall determine whether the level of suspension is equivalent to the level of nullification or
impairment". Article 7.10 of the SCM Agreement defines the mandate of an arbitrator somewhat
differently. It states that in the event that a party to a dispute requests arbitration under Article 22.6,
the arbitrator "shall determine whether the countermeasures are commensurate with the degre e
and nature of the adverse effects determined to exist". In accordance with the status of Article 7.10
as one of the "special or additional rules and procedures" listed in Appendix 2 of the DSU, we conduct
this arbitration with reference to the mandate as set out in Article 7.10.75 As indicated in Article 7.10,
our mandate in this arbitration proceeding is to determine whether the countermeasures proposed

73 For clarity, we note, however, that the final results of the second compliance proceedings may have a
direct bearing on the United States' right under Article 22.8 of the DSU to continue to maintain any DSB-
authorized countermeasures that it may have imposed before the adoption of the final results of the second
compliance proceedings.
74 See section 1.2 above.
75 Article 4.11 of the SCM Agreement cross-references Article 22.6 of the DSU in much the same way
that Article 7.10 does. We thus note that no previous arbitrator acting under either Article 4.11 or 7.10 has, in
addition to determining a level of countermeasures that were consistent with the legal standard contained in
either of those two provisions, also considered it necessary to ensure that the level of countermeasures was
consistent with the standard referenced above in Article 22.7 of the DSU.

by the United States are "commensurate with the degree and nature of the adverse effects
determined to exist". However, should we find that the level of countermeasures proposed by the
United States is not commensurate, we must go on to make our own determination of the level of
countermeasures that is commensurate with the degree and nature of the adverse effects
determined to exist. 76 Similarly, should we determine that the methodology proposed by the
United States for calculating the level of countermeasures, or any alternative methodology proposed
by the European Union, has shortcomings and is not appropr iate, as presented, we could either
make appropriate adjustments or develop another, appropriate, methodology ourselves.77
3.5. In making these determinations, we will refer to prior arbitration decisions. Although many of
these arbitration decisions were condu cted exclusively under Article 22.6, it is in our view
appropriate to refer to these prior decisions in our own Decision, as and where relevant. To the
extent that our mandate is governed by Article 7.10 of the SCM Agreement, we note that Article 7.10
explicitly refers to a request for arbitration under Article 22.6, thereby confirming that arbitrations
governed by Article 7.10 are, at the same time, governed by Article 22.6. The same is true where
we refer to arbitration decisions under Article 4.11 of the SCM Agreement concerning prohibited
rather than actionable subsidies. Article 4.11 likewise confirms that arbitrations under Article 4.11
are, at the same time, arbitrations under Article 22.6.78
3.6. The general provisions of Article 22.7 of the DSU are also relevant to our mandate. They specify
that "if the matter referred to arbitration includes a claim that the principles and procedures set
forth in [Article 22.3 of the DSU] have not been followed, the arbitrator shall examine that claim ".
They further state that the arbitrator "may also determine if the proposed suspension of concessions
or other obligations is allowed under the covered agreement ". It is, therefore, also within our
mandate to examine the European Union's claim that the United States did not follow the principles
and procedures set forth in Article 22.3 and that the United States' proposed countermeasures are
not allowed under the covered agreements.
4 BURDEN OF PROOF AND DUTY TO PRODUCE EVIDENCE
4.1. As indicated, the European Union in having r ecourse to arbitration under Article 22.6 ( a)
objected to the level of countermeasures proposed by the United States, ( b) claimed that the
principles and procedures set forth in Article 22.3 of the DSU have not been followed by the
United States in considering what countermeasures to take, and (c) claimed that the United States'
proposal is not allowed under the covered agreements.
4.2. It is clear from previous arbitrations under Article 22.6, and the parties do not dispute79, that
the party challenging the proposed countermeasures bears the burden of establishing a prima facie
case that such countermeasures are inconsistent with the relevant requirements of the
SCM Agreement and/or the DSU. 80 Thereafter, the burden shifts to the party proposing the
countermeasures to rebut such prima facie case.81 According to the arbitrator in US – Upland Cotton
(Article 22.6 – US II) , this allocation of the burden of proof applies to an objection based on

76 Decisions by the Arbitrators, US – Washing Machines (Article 22.6 – US), para. 1.15 (quoting Decision
by the Arbitrator, EC – Hormones (US) (Article 22.6 – EC), para. 12 (explaining that "estimat[ing] the level of
suspension we consider to be equivalent to the impairment suffered … is the essential task and responsibility
conferred on the arbitrators in order to settle the dispute"); and US – Upland Cotton (Article 22.6 – US II),
para. 4.16.
77 Decision by the Arbitrator, US – Tuna II (Mexico) (Article 22.6 – US), para. 5.152 (noting that "in
assessing the level of nullification or impairment … , we are not bound to base our calculation on either
Mexico's or the United States' model. We could, in principle, attempt to develop an alternative model that
would more accurately represent our understanding of the relevant counterfactual").
78 Article 4.11 begins with an introductory clause that states: "In the event a party to the dispute
requests arbitration under paragraph 6 of Article 22 of the [DSU]".
79 European Union's written submission, para. 49; and United States' written submission, para. 15.
80 We note that a " prima facie case" has been understood in WTO disp ute settlement practice to mean
"one which, in the absence of effective refutation by the defending party, requires a panel, as a matter of law,
to rule in favour of the complaining party presenting the prima facie case". (Appellate Body Report,
EC – Hormones, para. 104 (referring to Appellate Body Report, US – Wool Shirts and Blouses, p. 14)). In our
view, this definition is equally applicable to arbitrations under Article 22.6.
81 Decisions by the Arbitrators, US – Upland Cotton (Article 22.6 – US I), para. 4.22; Canada – Aircraft
Credits and Guarantees (Article 22.6 – Canada), para. 2.5; US – FSC (Article 22.6 – US), para. 2.8; and

Article 7.9 to the proposed level of countermeasures as well as to claims based on Article 22.3.82 We
consider that the same allocation is appropriate also in the case of a claim that the proposed
countermeasures are not allowed under the covered agreements.
4.3. In the present proceeding, therefore, the European Union bears t he burden to submit
arguments and evidence sufficient to establish a prima facie case that the countermeasures proposed
by the United States are not "commensurate with the degree and nature of the adverse effects
determined to exist " and are, consequently, inconsistent with Article 7.9. To satisfy its burden of
proof, the European Union must engage with the methodology used by the United States to arrive
at the proposed level of countermeasures, and it is "not sufficient merely to assert that another
methodology is more appropriate ".83 If the European Union meets its burden, it is for the
United States, thereafter, to submit arguments and evidence sufficient to rebut the prima facie case
established by the European Union. Similarly, the European Union bears t he burden to submit
arguments and evidence sufficient to establish a prima facie case that the United States did not
follow the principles and procedures contained in Article 22.3 of the DSU in considering what
countermeasures to take, and that the proposed countermeasures are not allowed under the covered
agreements. If the European Union satisfies this burden, the burden shifts to the United States to
submit arguments and evidence sufficient to rebut the prima facie case established by the
European Union.
4.4. Furthermore, each party has the duty to produce evidence in support of its assertions of fact
and to collaborate with an Article 22.6 arbitrator in presenting evidence.84 Consistent with this duty
and prior arbitrations, we requested that, as a first step in the proceeding, the United States as the
party seeking authorization to take countermeasures submit a methodology paper substantiating
how it arrived at the proposed countermeasures.85
5 ARTICLE 7.10 OF THE SCM AGREEMENT
5.1. As noted, our mandate in this proc eeding is to determine the level of "countermeasures …
commensurate with the degree and nature of the adverse effects determined to exist " within the
meaning of Article 7.10 of the SCM Agreement. This standard has three basic elements: (a)
"countermeasures", which defines the type of measures that the United States may take , (b)
"commensurate with ", which defines the relationship that must exist between the level of
countermeasures and the degree and nature of adverse effects determined to exist , and (c) "the
degree and nature of the adverse effects determined to exist ", which is the metric for determining
the permissible level of countermeasures. We note that these terms have been previously
interpreted by other arbitrators, and in particular the arbitrator in US – Upland Cotton (Article 22.6
– US II). As we agree with many aspects of these interpretations, we draw on them below and add
our own observations as appropriate.
5.2. According to a prior arb itrator, "'countermeasures' are, in essence, measures taken to
'counteract' something, and specifically, in the context of Article 7.9, measures taken to act against,
or in response to, a failure to remove the adverse effects of, or withdraw, an actionable subsidy
within the required time period ".86 We note that, functionally speaking and in the context of this
proceeding, which is conducted at the same time under Article 22.6 of the DSU, we understand the
term "countermeasures" to effectively designate a te mporary "suspension of concessions or other

82 Decision by the Arbitrator, US – Upland Cotton (Article 22.6 – US II), paras. 4.13 and 5.55.
83 Decisions by the Arbitrator, US – COOL (Article 22.6 – United States), para. 4.14.
84 Decisions by the Arbitrators, US – COOL (Article 22.6 – United States), para. 4.9; US – Gambling
(Article 22.6 – US), paras . 2.24 and 2.25; US – 1916 Act (EC) (Article 22.6 – US), para. 3.2; US – FSC
85 Decision by the Arbitrator, EC – Hormones (US) (Article 22.6 – EC), para. 11.
86 Decision by the Arbitrator, US – Upland Cotton (Article 22.6 – US II), para. 4.26.

obligations" as that term is used in Article 22.6.87 We further note that a complaining party's impetus
to request authorization to take countermeasures or suspend concessions or other obligations is
triggered by a responding party's failure to bring its measures into compliance with its relevant WTO
obligations after being recommended to do so by the DSB.88 Arbitrators have further observed that
the purpose of authorized countermeasures and suspension of concessions or other obligations is to
induce a responding party's compliance.89
5.3. Moreover, we note that countermeasures and suspension of concessions or other obligations
are prospective remedies addressing a responding party 's non-compliance going forward from the
date on which authorization to take countermeasures or suspend concessions is granted.90
5.4. Turning to the next element of Article 7.10 – the term "commensurate with" – this connotes a
"correspondence" between the "countermeasures" proposed and "the degree and nature of the
adverse effect determined to exist". It is a "less precise degree of equivalence than exact numerical
correspondence", but it nonetheless indicates a "relationship of correspondence and proportionality
between the two elements", which may be "qualitative as well as quantitative".91 We further observe
that it is generally recognized that WTO remedies are not intended to be "punitive".92 Accordingly,
while the phrase "commensurate with" does not require exact numerical correspondence, this does
not imply that countermeasures commensurate with the adverse effects determined to exist may or
should incorporate any punitive element.
5.5. Regarding the last element of Article 7.10 – the term "adverse effects determined to exist " –
we note that this term "sends the treaty interpreter back to the precise findings on adverse effects
made by the panels and the Appellate Body as these constitute the 'adverse effects determined to
exist'".93 That is, it refers "to the specific 'adverse effects' within the meaning of Articles 5 and 6 of
the SCM Agreement that form the basis of the underlying findings in the case at hand ".94 The term
"degree" corresponds to a quantitative element whereas the reference to the "nature" of adverse
effects relates to a qualitative element. 95 Thus, Article 7.9 seeks "to closely tailor … the
countermeasures to the legal basis for the underlying findings ", and therefore potential
countermeasures are "limited in scope, to the 'degree and nature' of those effects of the subsid[ies]

87 Recourse to Article 7.9 of the SCM Agreement and Article 22.2 of the DSU by the United States,
WT/DS316/18, fifth paragraph (requesting "suspensions" of "concessions" and "obligations" under the
GATT 1994 and the GATS). See also Decisions by the Arbitrators, US – Upland Cotton (Article 22.6 – US II),
para. 4.24 (noting that "it is not argued by either party in these proceedings that the term 'countermeasures'
would designate, in the SCM Agreement, anything other than a temporary suspension of certain obligations,
and this is what we understand this term to refer to"); and Brazil – Aircraft (Article 22.6 – Brazil), para. 3.29
(agreeing with the parties' common position "that the term 'countermeasures', as used in Article 4 of the
SCM Agreement, may include suspension of concessions or other obligations"). We make no judgments as to
whether "countermeasures" under the SCM Agreement may take forms other than suspensions of concessions
or other obligations.
88 Articles 22.2 and 22.6 of the DSU; Article 7.9 of the SCM Agreement; and Decision by the Arbitrator,
US – Tuna II (Mexico) (Article 22.6 – US), para. 3.20.
89 Decisions by the Arbitrators, US – Washing Machines (Article 22.6 – US), para. 1.17; and US – Upland
90 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 5.374 (referring to the "prospective nature of remedies in WTO dispute settlement").
91 Decision by the Arbitrator, US – Upland Cotton (Article 22.6 – US II), paras. 4.35-4.39. (emphasis
omitted)
92 Decisions by the Arbitrators, US – Washing Machines (Article 22.6 – US), para. 1.17 (citing Decisions
by the Arbitrators, US – Upland Cotton (Article 22.6 – US I), para. 4.109); US – 1916 Act (EC) (Article 22.6 –
US), para. 5.8; and US – FSC (Article 22.6 – US), para. 5.62 (noting that even though in prohibited subsidies
disputes Article 4.10 of the SCM Agreement authorizes "appropriate" countermeasures that are not
"disproportionate", there is nothing in that Article or its context "which suggests an entitlement to manifestly
punitive [counter]measures"). See also Decision by the Arbitrator, Brazil – Aircraft (Article 22.6 – Brazil),
para. 3.55 (explaining that "[a] countermeasure becomes punitive when it is not only intended to ensure that
the [WTO Member] in breach of its obligations bring its conduct into conformity with its international
obligations, but contains an additional dimension meant to sanction the action of that [WTO Member]").
93 Decision by the Arbitrator, US – Upland Cotton (Article 22.6 – US II), para. 4.49.
94 Decision by the Arbitrator, US – Upland Cotton (Article 22.6 – US II), para. 4.50.
95 Decision by the Arbitrator, US – Upland Cotton (Article 22.6 – US II), para. 4.41. See also Decision by
the Arbitrator, US – Upland Cotton (Article 22.6 – US II), para. 4.43 (indicating that the "nature" of the
adverse effects may be understood to refer to the different types of adverse effects that are foreseen in
Articles 5 and 6 of the SCM Agreement, thus inviting a consideration of the specific type of adverse effects that
have been determined to exist).

that are the basis for the successful challenge ".96 We therefore underline that the "adverse effects
determined to exist" are those that were identified in a previous adopted panel or Appellate Body
report.97 We consider that for purposes of the present arbitration proceeding, the relevant panel and
Appellate Body reports are the compliance reports (rather than the original panel and Appellate Body
reports). It is the findings from the compliance proceedings, by establishing that the European Union
"has not taken appropriate steps to remove the adverse effects of the subsidy or withdraw the
subsidy within six months" (Article 7.9 of the SCM Agreement), which provide the basis for the DSB
to grant authorization to the United States to take countermeasures.
6 THE EUROPEAN UNION'S OBJECTION TO THE LEVEL OF COUNTERMEASURES
6.1 Overview of the parties' approaches and order of analysis
6.1. As already noted further above, this arbitration was triggered by the European Union's
objection to the United States' request under Article 22.2 of the DSU and Article 7.9 of the
SCM Agreement for authorization to impose countermeasures (hereafter, for simplicity, the
"Article 22.2 request"). Having addressed introductory, procedural, an d other preliminary matters
in the above sections of this Decision, we now turn to address the European Union's objections to
the United States' proposed level of countermeasures in more detail. In doing so, we find it helpful
first to provide an overview of the parties' approaches in this respect and, in the light of those
approaches, set out the framework that we will use to evaluate the European Union's objections.
6.2. In this proceeding, the United States sets out a proposed methodology for determining a level
of countermeasures in its methodology paper. In that methodology, the United States recalls that,
in the compliance proceedings, the panel and Appellate Body found that certain LA/MSF measures
caused adverse effects in the forms of lost sales and impedance within the meaning of Article 6.3(a)-
(c) of the SCM Agreement in the 2011-2013 Reference Period. The United States proposes that the
Arbitrator calculate the value of the lost sales and impedance associa ted with those findings, and
assign those values to the 2011 -2013 Reference Period. The United States then sums up these
individual instances of lost sales and impedance and annualizes the total value. The United States
proposes that the United States be authorized to take "countermeasures", within the meaning of
Article 7.9 of the SCM Agreement, up to that annualized amount every year going forward, adjusted
for inflation, until the authority to impose countermeasures ends under the terms of Article 22.8 of
the DSU.
6.3. The Arbitrator notes at this point that the structure proposed by the United States for its
countermeasures bears similarities to what previous arbitrators have accepted. In particular,
multiple previous arbitrators have established a single, ma ximum level of countermeasures or
suspension of concessions or other obligations that the complaining party was then authorized to
impose annually.98 For ease of reference, we will refer to this structure as "Annual Suspension". In
addition to proposing Ann ual Suspension, the United States requests that the level of Annual
Suspension be allowed to vary over time to take into account inflation.
6.4. In response to the United States' proposed methodology, the European Union has proceeded
along two related tracks. First, the European Union offers numerous criticisms of the United States'
methodology, both procedural and substantive. In offering such criticisms, the European Union often
proposes an alternative, or various alternatives, to specific steps that the United States'
methodology contemplates. Second, and based on certain principles that underlie some of the
criticisms that the European Union makes with respect to the United States' methodology, the

96 Decision by the Arbitrator, US – Upland Cotton (Article 22.6 – US II), para. 4.55. In the words of that
arbitrator, an arbitrator is therefore "entitled to take into account fully the 'degree and nature' of these adverse
effects as they present themselves in the case at hand, but [is] not permitted to do more than that". (Decision
by the Arbitrator, US – Upland Cotton (Article 22.6 – US II), para. 4.47).
97 Article 7.8 of the SCM Agreement forms part of the immediate context of Article 7.10. It refers to "a
panel report or an Appellate Body report" that has been "adopted" and in which "it is determined that any
subsidy has resulted in adverse effects". Article 7.8 thus makes clear that the adverse effects determined to
exist are adverse effects determined to exist in a prior adopted panel or Appellate Body report concerning the
same dispute.
98 This issue is discussed in more detail in section 6.3.1 below.

European Union sketches out an alternative methodology. This description occupies about two pages
in the European Union's written submission, and is summarized as follows:
[A]ny amount of countermeasures authorised by the Arbitration Panel must respect the
following principles: (i) [it must be for] a non-recurring countermeasure; (ii) [it must
be] calculated based on adverse effects that have not ceased to exist; (iii) [it must be]
distributed over time based on deliveries resulting from, and constituting, the adverse
effects determined to exist; and (iv) [it must not be] inflated by the numerous technical
errors made by the United States.99
6.5. In the light of the foregoing, section 6 on the European Union's objections to the level of
countermeasures proceeds in four basic parts:
a. First, we examine a procedural objection b y the European Union to the effect that the
United States cannot be authorized to take countermeasures in respect of the DSB -
adopted findings on impedance (section 6.2);
b. Second, we examine substantive and technical aspects of the United States' methodology.
This part will address: (a) the appropriate reference p eriod, (b) the appropriate
counterfactual, (c) general European Union arguments against the United States'
methodology, and (d) technical European Union arguments against the United States'
methodology (section 6.3);
c. Third, and based on conclusions reached in the prior sections, we explain how we calculate
the actual level of countermeasures that the United States may be allowed to impose
(section 6.4); and
d. Finally, we examine a procedural objection by the European Union regarding the level of
countermeasures that, according to the European Union, the Arbitrator's determination
may not exceed in view of the United States' Article 22.2 request (section 6.5).
6.6. We address each in turn below.
6.2 Absence of a reference to impedance in the United States' request for
countermeasures
6.7. The European Union submits that the United States' request under Article 22.2 of the DSU
provides no basis for authorizing countermeasures in response to the DSB's 2018 recommendations
and rulings concerning adverse effects in the form of impedance. The European Union notes that the
United States in its request asked for countermeasures corresponding to adverse effects in the forms
of lost sales and displacement, but not impedance. According to the European Union,
countermeasures cannot be authorized in respect of the DSB -adopted findings on impedance
because in respect of those findings the United States request does not meet the specificity
requirements contained in Article 22.2.100
6.8. The United States responds that there is no basis for t he European Union's request that the
Arbitrator exclude from its quantification the DSB-adopted findings on impedance. The United States
notes that, as a factual matter, its request is to take countermeasures commensurate with the

99 European Union's written submission, para. 365. (emphasis original) To implement item (iii), the
European Union has explained that the Arbitrator should:
[D]etermine … the counterfactual delivery year and number of aircraft delivered, and multiply
this number by the counterfactual per-unit LCA delivery price. The result would be the annual
lost revenue for deliveries that would have occurred under the lost sale, and therefore the
appropriate value of trade effects (and hence countermeasures) for that campaign and that year.
Summing the annual lost revenue across the lost sales campaigns would yield the total annual
lost revenue, and therefore the "commensurate" value of countermeasures for that year.
(European Union's response to Arbitrator question No. 25, para. 393). The European Union does not
materially expound on the implementation or quantification of its proposed methodology, beyond its
criticisms of the United States' methodology.
100 European Union's opening statement at the meeting of the Arbitrator, para. 18.

adverse effects reflected in the DSB recommendations and rulings. In the United States' view, the
statement in its request referring to lost sales and displacement explains how the United States
valued those adverse effects at the time that it filed its request. The United States submits that this
statement does not limit the adverse effects to those particular market phenomena or to those that
had been determined to exist as of that time.101
6.9. The United States also considers that its request can only be understood to refer to the adverse
effects found to exist in the compliance panel and Appellate Body reports. In support of this
argument, the United States points to the parties ' bilateral Sequencing Agreement. Under that
Agreement, either party could recommence the present arbitrat ion proceeding, which had been
suspended in 2012, if the DSB, following compliance proceedings under Article 21.5 of the DSU,
ruled that a measure taken to comply did not exist or was inconsistent with a covered agreement.102
6.10. The United States further conte nds that the European Union is wrong to claim that, as a
matter of law, the United States' request lacks specificity. According to the United States, its request
identifies the level of countermeasures in functional terms, as the annual level of adverse effects
determined to exist, and the request then goes on to estimate that, as of the time that it was filed,
that level was between USD 7,000 and 10,000 million per year. Additionally, the United States notes
that its request refers to Article 7.9 of the SCM Agreement, which authorizes countermeasures
commensurate with the adverse effects determined to exist. The United States observes that both
parties agree that the relevant determinations appear in the compliance panel and Appellate Body
reports. In the United States' view, the reference in its request to Article 7.9 thus encompasses the
findings on impedance contained in those reports.103
6.11. The European Union counters that the functional description advanced by the United States
merely paraphrases the language of Article 7.9 and does not provide any specificity regard ing the
level of countermeasures. The European Union submits that the functional description provides no
specificity in terms of the amount requested by the United States and the types of adverse effects.
The European Union argues that under the United States' reading of its request, that request does
not specify a maximum level of countermeasures in numerical terms and could cover any type of
adverse effects. According to the European Union, if the overly broad reading suggested by the
United States is the proper construction of the request, it does not support the authorization of any
countermeasures. The European Union notes that the references in the request to the specific types
of adverse effects (lost sales and displacement) and to the amount of adverse effects are not part
of the functional description.104
6.12. In the European Union's view, the factually correct reading of the request is that it defines
the level of countermeasures by reference to two specific types of adverse effects (lost sales and
displacement), while excluding a reference to additional types of adverse effects (impedance). The
European Union contends that the findings in the compliance proceedings cannot bring the
impedance findings within the terms of reference of this arbitration proceeding. The European Union
argues that if the United States had wished to request countermeasures in respect of the impedance
findings, it should have included those findings in its request under Article 22.2.105
6.13. The Arbitrator begins by setting out in full the relevant portions of the opening paragraph of
the United States' request under Article 22.2 and Article 7.9 (hereafter, for simplicity, the
"Article 22.2 request"). The passage in question consists of the following four sentences:
Pursuant to Article 22.2 of [the DSU] and Article 7.9 of [the SCM Agreement], the
United States requests authorization from the [DSB] to take countermeasures with
respect to the European Union … at an annual level commensurate with the degree and
nature of the adverse effects caused to the interests of the United States by the failure

101 United States' response to Arbitrator question No. 133, paras. 143 and 146.
102 United States' response to Arbitrator question No. 133, para. 147.
103 United States' response to Arbitrator question No. 133, paras. 149-150.
104 European Union's comments on the United States' response to Arbitrator question No. 133,
paras. 332 and 334-335.
105 European Union's comments on the United States' response to Arbitrator question No. 133,
paras. 320, 329, 336-337 (referring to Decision by the Arbitrator, EC – Bananas III (Ecuador) (Article 22.6 –
EC), para. 24) and 340.

of the EU and certain member States to withdraw subsidies or remove their adverse
effects in compliance w ith the recommendations and rulings of the DSB. This amount
corresponds to the annual value of lost sales, of imports of US large civil aircraft
displaced from the EU market, and of exports of US large civil aircraft displaced from
third country markets. T he amount will be updated annually using the most recent
publicly available data. Based on currently available data in a recent period, the
United States estimates this figure to be between $7 and $10 billion per year.106
6.14. Also relevant is the fourth paragraph of the United States' request, which states in its second
sentence that, "[a]s required by Article 7.9 of the SCM Agreement, the countermeasures are
commensurate on an annual basis with the degree and nature of the adverse effects determined to
exist".107
6.2.1 Coverage of the United States' Article 22.2 request
6.15. The central question presented by the European Union's argument s is whether the
United States Article 22.2 request permits the United States to include in its proposed level of
countermeasures adverse effects in the form of impedance that were first determined to exist in the
compliance reports adopted by the DSB in 2018. In approaching this question, we note at the outset
that Article 22.2 requests are comparable to requests for establishment of a panel under Article 6.2
of the DSU: both are requests for action from the DSB, and both define the terms of reference in
any ensuing WTO dispute settlement proceedings. 108 We further note that the Appe llate Body has
stated in respect of panel requests that they must comply with the applicable requirements "on their
face", that their texts must be examined, "as a whole, and in the light of attendant circumstances "
and that analyses of panel requests must be made "on the merits of each case".109 We find the same
to be appropriate in the case of Article 22.2 requests.
6.16. In the present proceeding, it is useful to look at attendant circumstances before parsing the
text of the Article 22.2 request, since this also assists in understanding certain aspects of that text.
6.17. The first point to be noted is that the United States submitted its Article 22.2 request on
9 December 2011 after the DSB had adopted the original recommendations and rulings on
1 June 2011 and the European Union's implementation period had expired on 1 December 2011.
The 2011 DSB recommendations and rulings reflected findings of violation on lost sales and
displacement, but not impedance.110
6.18. The present arbitration proceeding was suspended on 20 January 2012 and recommenced on
13 July 2018 after the compliance proceedings under Article 21.5 of the DSU had been completed
and the DSB had adopted the compliance recommendations and rulings on 28 May 2018.111 The
resumption of the arbitration proceeding was in accordance with the parties ' bilateral Sequencing
Agreement, pursuant to which either party could recommence the arbitration proceeding "[i]n the
event that the DSB following a proceeding under Article 21.5 of the DSU rules that a measure taken
to comply does not exist or is inconsistent with a covered agreement".112 Both parties thus formally
agreed that the outcome of any compliance proceedings must be taken into account in determining
whether to recommence the arbitration proceeding.
6.19. In the light of these attendant circumstances, it was appropriate that the United States sought
countermeasures based on the 2011 DSB recommendations and rulings concerning findings on lost

106 Recourse to Article 7.9 of the SCM Agreement and Article 22.2 of the DSU by the United States,
WT/DS316/18, first paragraph.
107 Recourse to Article 7.9 of the SCM Agreement and Article 22.2 of the DSU by the United States,
WT/DS316/18, fourth paragraph.
108 See Decision by the Arbitrator, EC – Bananas III (Ecuador) (Article 22.6 – EC), para. 20 (stating also
that both types of requests serve similar due process objectives).
109 Appellate Body Report, US – Carbon Steel, para. 127.
110 See paragraphs 1.2 and 1.5 above.
111 See paragraphs 1.4 and 1.8 above.
112 Communication by the parties, WT/DS316/21 (Understanding between the European Union and the
United States Regarding Procedures under Articles 21 and 22 of the DSU), para. 6.

sales and displacement. 113 Indeed, those were the only recommendations and rulings that could
justify countermeasures at the time that the United States submitted its Article 22.2 request. In the
words of the arbitrator in US – Tuna II (Mexico) (Article 22.6 – US), "arbitration proceedings under
Article 22.6 can be traced back to a WTO-inconsistent measure that existed when the RPT expired,
which is either the same original measure that has previously been found to be WTO -inconsistent
[as in the present proceeding] or a WTO-inconsistent compliance measure taken subsequently (but
prior to the expiry of the RPT) ".114 We therefore disagree with the European Union that the
United States could properly have included in its 2011 request a proposed level of countermeasures
that corresponded not just to lost sales and displacement, but also impedance. There were no DSB-
adopted findings of violation with regard to impedance at that time. There thus was no justification
for the United States to include the value of the claimed impedance in its proposed level of
countermeasures. As the European Union correctly notes, the United States, a few months after
submitting its Article 22.2 request, filed a request for establishment of an Article 21.5 panel. In that
request for panel establishment, which the United States filed after the European Union had
submitted a notification claiming to have implemented the 2011 DSB recommendations and rulings,
the United States claimed the existence of adverse ef fects in the form of impedance. 115 However,
the United States at that time was merely claiming the existence of impedance. The DSB did not
adopt findings of violation with regard to impedance until 2018.
6.20. With these attendant circumstances in mind, we turn to examine the text of the Article 22.2
request on its face. We begin with the reference in the first sentence of the opening paragraph to
the taking of countermeasures in response to "the failure of the EU and certain member States to
withdraw subsidies or remove their adverse effects in compliance with the recommendations and
rulings of the DSB". We consider that this reference points the reader to the most recent available
DSB recommendations and rulings. It is the most recent DSB recommendations and rulin gs that
determine whether there still is any failure to comply on the part of the European Union that provides
a legal basis for the United States to request authorization to take any countermeasures, and if so,
whether any such failure is more or less extensive than before, which in turn will impact on the level
of countermeasure that can be authorized. Applying this interpretation at the time of our review of
the matter, the first sentence thus refers us to the 2018 recommendations and rulings that reflec t
the adverse findings contained in the compliance reports. In our view, considered on its own and
applied at the time of our review, the first sentence should therefore be interpreted to set out a
request by the United States for countermeasures at an annual level commensurate with the degree
and nature of the adverse effects determined to exist in the compliance reports adopted by the DSB
in 2018. Both parties agree that those adverse effects are in the form of lost sales and impedance
and that those are the relevant adverse effects for purposes of this proceeding.116
6.21. We next consider the second sentence of the opening paragraph. That sentence expresses in
more concrete terms than the first sentence that the level of countermeasures sought by the
United States corresponds to the annual value of lost sales and displaced LCA imports and exports.
It is uncontested that the second sentence does not refer to adverse effects in the form of
impedance. As noted, however, in 2011 the United States could only describe the level of
countermeasures as reflecting the adverse effects that had been determined to exist at that time
(lost sales and displacement). At the time of our review of the matter, which follows the 2018 DSB
recommendations and rulings, the United States, in keeping with the contents of the first sentence,
is still seeking countermeasures commensurate with the adverse effects determined to exist, only
now the relevant adverse effects are those determined to exist in the compliance reports adopted
by the DSB in 2018. The above-quoted second sentence of the fourth paragraph of the Article 22.2
request also supports this view. We consequently do not consider that the second sentence can
properly be construed to limit the United States' ability to seek countermeasures, based on the first

113 Recourse to Article 7.9 of the SCM Agreement and Article 22.2 of the DSU by the United States,
WT/DS316/18, first paragraph (first and second sentences) and fourth paragraph (second sentence).
114 Decision by the Arbitrator, US – Tuna II (Mexico) (Article 22.6 – US), para. 3.20. That arbitrator
further stated that it is "the continued WTO-inconsistency of the original or a compliance measure (where a
compliance measure was taken within the RPT) at the time the RPT expires that forms the basis for any
[Article 22.2] request". (Decision by the Arbitrator, US – Tuna II (Mexico) (Article 22.6 – US), para. 3.24).
115 Recourse to Article 21.5 of the DSU by the United States, WT/DS316/23, para. 8.
116 United States' response to Arbitrator question No. 133, para. 147; and European Union's comments
on the United States' response to Arbitrator question No. 133, para. 336.

sentence of the opening paragraph and the fourth paragraph, in response to the 2018 DSB
recommendations and rulings concerning lost sales and impedance.117
6.22. In sum, the first and second sentences of the first paragraph as well as the second sentence
of the fourth paragraph, read together, and the attendant circumstances, which include the
compliance reports adopted by the DSB in 2018 and the fact that the United States in 2011 could
not seek countermeasures against adverse effects in the form of impedance that had not been
determined to exist, in our view support the conclusion that the annual amount of countermeasures
that the United States can seek in this proceeding can properly correspond to the annual value of
(a) lost sales, (b) imports of United States LCA impeded from the European Union market, and (c)
exports of United States LCA impeded from third country markets.
6.23. The European Union argues that the compliance reports adopted by the DSB cannot modify,
ex post , the t erms of reference of the Arbitrator. 118 However, under our interpretation of the
Article 22.2 request, the compliance reports did not modify our terms of reference. Rather, the terms
of the Article 22.2 request, when applied at the time of our review, cover countermeasures in respect
of the impedance findings contained in the compliance reports.
6.2.2 Specificity of the United States' Article 22.2 request
6.24. The European Union further contends that the United States' request is inconsistent with the
specificity requirements flowing from Article 22.2. The European Union refers in this respect to prior
arbitrators who found that Article 22.2 contains minimum specificity standards for Article 22.2
requests, including a requirement that such requests set out the specific level of suspension (i.e. a
level deemed equivalent to the nullification or impairment caused by the WTO -inconsistent
measure).119 According to the European Union, an inconsistency with this specificity requirement
arises because the level of suspension spec ified in the United States' request does not include
impedance and the request thus is not sufficiently specific in terms of that type of adverse effect.
The European Union also argues that if the Article 22.2 request were not understood to define the
adverse effects at issue as comprising only lost sales and displacement, the first sentence of the
opening paragraph of the United States' request could cover any form of adverse effects identified
in Articles 5 and 6.3 of the SCM Agreement, including for instance injury to the domestic industry of
another Member.
6.25. To determine whether the level of countermeasures specified in the United States' Article 22.2
request meets the minimum specificity requirement identified by prior arbitrators, the Arbitrator
deems it once again necessary to consider the attendant circumstances. As detailed above, it would
not have been legally appropriate in 2011 for the United States to have included in its request a
reference to adverse effects in the form of impedance since no such effects had been determined to
exist in the original reports adopted by the DSB.
6.26. Regarding the European Union's point concerning the broad reference to "adverse effects" in
the first sentence of the opening paragraph, we observe t hat that sentence concerns the adverse
effects caused by the failure of the European Union to implement prior DSB recommendations and
rulings. These DSB recommendations and rulings permit precise identification of the specific adverse
effects at issue.120 Moreover, the second sentence, by referring to lost sales and displacement (as
opposed to any other types of adverse effects), confirms the intention of the United States to seek

117 This interpretation of the Article 22.2 request also ensures a harmonious approach to, on the one
hand, the Article 22.2 request and, on the other, the Sequencing Agreement concluded between the parties. As
mentioned, the Sequencing Agreement contemplates that depending on the outcome of the compliance
proceedings the suspended arbitration proceeding could be recommenced or not. It would seem to us to be
incongruous to adopt an approach under which the outcome of compliance proceedings was determinative of
whether the Arbitrator could be asked to resume its work, but under which that same outcome is deliberately
disregarded when determining what level of countermeasures the United States may propose, despite an
unqualified reference to DSB recommendations and rulings in the Article 22.2 request.
118 European Union's comments on the United States' response to Arbitrator question No. 133,
para. 336.
119 Decisions by the Arbitrators, US – Offset Act (Byrd Amendment) (EC) (Article 22.6 – US), para. 2.18;
and EC – Bananas III (Ecuador) (Article 22.6 – EC), paras. 20 and 21 (quoting EC – Hormones (Canada)
(Article 22.6 – EC), para. 16).
120 As noted above, both parties agree, for example, that the 2018 DSB recommendations and rulings
concern adverse effects in the form of lost sales and impedance.

countermeasures for adverse effects that have been determined to exist in prior reports adopted by
the DSB.
6.27. Thus, reading the Article 22.2 request as a whole and bearing in mind the 2018 DSB
recommendations and rulings, it can in our view be reliably inferred that at the time of our review
the specific proposed amount of countermeas ures that the United States is seeking through its
request corresponds to the annual level of lost sales and impedance from the European Union and
certain third country markets.
6.28. In the light of the foregoing considerations, we conclude that, in the circum stances of the
present proceeding, the Article 22.2 request provides minimum specificity regarding the inclusion
by the United States in the proposed level of countermeasures of adverse effects in the form of
impedance that were determined to exist in the compliance reports. We consequently reject the
European Union's contention that the United States' request for countermeasures in relation to
impedance is not consistent with the specificity requirements for an Article 22.2 request.
6.29. In summing up, for all the above reasons we disagree with the European Union's argument
that the United States cannot be authorized to take countermeasures in respect of the DSB-adopted
findings on impedance. We will thus proceed to quantify the DSB-adopted findings on impedance in
the remainder of section 6 of this Decision.121
6.3 Assessment of the United States proposed methodology
6.30. Having rejected the European Union's procedural objection that the United States cannot be
authorized to take countermeasures in respect of the DSB -adopted findings on impedance, section
6.3 turns to assess more substantive and technical aspects of the United States' methodology. This
section will therefore address: (a) the appropriat e reference period , (b) the appropriate
counterfactual, (c) the European Union's general arguments against the United States' methodology,
and (d) the European Union's technical arguments against the United States' methodology.
6.3.1 Appropriateness of using the 2011-2013 Reference Period and accepting Annual
Suspension of concessions
6.31. The parties dedicated significant portions of their submissions to debating whether it is
permissible for the Arbitrator to determine the maximum level of countermeasures in the for m of
Annual Suspension122 based on the value of the adverse effects determined to exist in the 2011 -
2013 Reference Period, as the United States proposes.123
6.32. This appears to be the first time in an Article 22.6 arbitration proceeding that a responding
party has challenged a complaining party 's request that it be authorized to implement Annual
Suspension. Previous arbitrators have granted Annual Suspension, including the only other arbitrator
to have thus far performed an arbitration under Article 7.10 of the SCM Agreement, i.e. the arbitrator
in US – Upland Cotton (Article 22.6 – US II). However, these arbitrators have not elucidated the
rationale for doing so. This section accordingly needs to examine in more detail the rationale for
doing so and resolve the parties' disagreement in this context.
6.33. As noted in section 6.1, in its methodology paper the United States asks the Arbitrator to
grant the United States countermeasures in the form of Annual Suspension. The United States
determines the proposed leve l of Annual Suspension by calculating the value of the five lost sales
and six instances of impedance that were found in the previous compliance proceedings to have

121 We note in passing that disputes about whether the terms of the complaining party's Article 22.2
request constitute an impediment to the Article 22.6 arbitrator proceeding as the complaining party proposes
could be prevented if the parties included in any bilateral sequencing agreement a specific procedure for
updating the complaining party's Article 22.2 request, and the responding party's Article 22.6 referral,
following adoption by the DSB of any adverse compliance findings. We note in this context that Article 22.7 of
the DSU in effect already permits the modification of original Article 22.2 requests.
122 The term "Annual Suspension" is described in paragraph 6.3 above.
123 We address the separate issue of the representativeness of the 2011-2013 Reference Period in
sections 6.3.4.3.1 and 6.3.4.4.1 below.

existed during the 2011-2013 Reference Period, and then annualizing that amount. That annualized
amount is the basis for the proposed level of the Annual Suspension.124
6.34. The European Union argues that the adverse effects determined to exist during the 2011 -
2013 Reference Period, i.e. the five lost sales and six instances of impedance, cannot be us ed to
grant a level of countermeasures in the form of Annual Suspension. 125 According to the
European Union, the basic rationale for using the effects of a measure in a past reference period to
determine a level of Annual Suspension is that a measure continu es to have similar effects beyond
that reference period, a result that generally follows only if a measure is "recurring". More
specifically, the European Union submits that "to authorise [countermeasures in the form of Annual
Suspension] … , the [Arbitrat or] must ensure that the adverse effects determined to exist in the
December 2011 to 2013 reference period provide a reasonable estimation of – i.e., are
representative of – adverse effects today, and in the future".126 The European Union asserts that the
United States has not demonstrated that the 2011-2013 Reference Period provides this "reasonable
estimation", and that, in the European Union's view, the 2011-2013 Reference Period does not in
fact provide it.127
6.35. The European Union further underlines that the compliance panel and Appellate Body made
no findings that adverse effects caused by challenged subsidies would continue after 2013, and, in
fact, found that the non-recurring nature of LA/MSF for the A380 and A350XWB programmes would
result in those subsidies causing fewer, if any, adverse effects after 2013. Further to this latter point,
the European Union argues that no arbitrator has granted Annua l Suspension in an arbitration
proceeding involving a "non-recurring" measure. The European Union submits that such
considerations distinguish this proceeding from prior arbitrations in which Annual Suspension was
granted, including US – Upland Cotton (Art icle 22.6 – US II) .128 Thus, according to the
European Union, because "[t]he adopted findings [in the present dispute] simply offer no basis for
the Arbitrat[or] … to authorize [Annual Suspension]", the Arbitrator can grant the United States only
"an absolute maximum amount of countermeasures commensurate with the degree and nature of
the adverse effects actually determined to exist" in the 2011-2013 Reference Period129, adhering to
the structure proposed in the European Union's written submission, referenced in paragraph 6.4
above and described in more detail in section 6.3.3.4 below.130
6.36. Moreover, the European Union suggests that the United States' request for Annual Suspension
is inconsistent with its Article 22.2 request because the request states that the United States will
adjust the annual level of countermeasures as determined based on "the most recent publicly

124 The United States further asks the Arbitrator to adjust that level for inflation that occurred after the
2011-2013 Reference Period and that will occur in future years when the United States may apply
countermeasures. We discuss that request in sections 6.4.5.2 and 6.4.5.3 below.
125 We note that the European Union has raised certain other arguments against the United States'
methodology that appear to relate to the different issue of what adverse effects Annual Suspension may take
into account. We therefore address those arguments separately in section 6.3.3 below.
126 European Union's response to Arbitrator question No. 104, para. 134 (fns and quotation marks
omitted). See also European Union's response to Arbitrator question No. 99, paras. 84-85; and comments on
the United States' responses to Arbitrator question Nos. 99 and 103.
127 European Union's written submission, paras. 74-76, 79, 80-81, 90, 98, 100, 105-108, 118-123, 128-
129, 146, and 160; responses to first set of Arbitrator questions, paras. 18-19, 27-29, 30-38, 45, and 50;
responses to Arbitrator question No. 4, No. 10, para. 218, No. 11, No. 12, No. 14, No. 21, No. 22, No. 56,
paras. 34-102, No. 57, No. 99, para. 79, No. 101, No. 104, No. 107, No. 108, and No. 147; comments on the
United States' responses to Arbitrator question Nos. 99, 101, 103, and 108; and comments on the
United States' response to European Union question No. 1. In making these arguments, the European Union
emphasizes that, mainly due to the non-recurring nature of A380 and A350XWB LA/MSF, the lives of these
subsidies are "finite" and thus the adverse effects caused by these subsidies are also "finite" and cannot be
assumed to continue indefinitely.
128 The European Union notes that the only arbitrator who addressed a non-recurring subsidy granted a
one-time lump-sum to the complaining party to be used as countermeasures. (European Union's written
submission, para. 110 (citing Decision by the Arbitrator, Canada – Aircraft Credits and Guarantees
(Article 22.6 – Canada))).
129 European Union's response to Arbitrator question No. 8, para. 177.
130 European Union's written submission, paras. 125-127; responses to first set of Arbitrator questions,
paras. 20-21, 42, and 46-47; and responses to Arbitrator question No. 10(b), No. 12, para. 262, No. 21,
No. 25, No. 56, paras. 79-91, and No. 108. In this context, the European Union emphasizes that sales of A380
aircraft have decreased over recent years and that, in fact, Airbus is terminating the A380 programme in the
foreseeable future. (European Union's response to Arbitrator question No. 47, paras. 291-303).

available data". However, according to the European Union, doing so would involve adjusting the
level of countermeasures in the light of data regarding what adverse effects A380 and A350XWB
LA/MSF have caused after 2013, including at the present day, an exercise that the United States
does not perform.131
6.37. Finally, the European Union argues that Annual Suspension in this dispute is inconsistent with
the "temporary" nature of countermeasures – which must only apply "pending full compliance" – as
in this dispute compliance will occur with the passage of time owing to the non-recurring nature of
the subsidies in question.132
6.38. The United States appears to offer two rationales as to why it would be appropriate to
determine the maximum level of countermeasures in the form of Annual Suspension by using the
2011-2013 Reference Period to determine that maximum level: (a) "the United States is entitled to
ongoing countermeasures because the EU remains out of compliance with its WTO obligati ons, as
confirmed in the compliance reports adopted by the DSB and in the absence of any subsequent
adopted finding to the contrary "133, i.e. Annual Suspension is appropriate owing to the
European Union's ongoing status of non -compliance, and/or (b) the chal lenged subsidies have
continued to cause adverse effects beyond the 2011-2013 Reference Period and the adverse effects
determined to exist in the 2011 -2013 Reference Period provide a reasonable estimate of those
ongoing adverse effects, i.e. Annual Suspension is appropriate in view of the ongoing effects of the
measures in question.134
6.39. The United States asserts that determining a level of Annual Suspension in the manner that
it proposes is further consistent with the text of the SCM Agreement and the DSU because the level
of countermeasures would be determined with reference to "the adverse effects determined to exist"
in the compliance proceedings, and because Article 22.8 of the DSU requires no pre -determined
end-date to countermeasures.135 The United States further argues that determining a level of Annual
Suspension by valuing the relevant effects of a measure found to be WTO-inconsistent during a past
reference period is consistent with how previous arbitrators determined levels of Annual Suspension.
Moreover, the United States submits that many of the European Union's arguments relating to the
post-2013 adverse effects caused by A380 and A350XWB LA/MSF are compliance -related and thus
are properly directed to a compliance panel, are unsupported by the previous findings in this dispute,
and/or are factually unsound. Add itionally, according to the United States, selecting a reference
period other than the 2011-2013 Reference Period to determine a level of Annual Suspension would
improperly render the compliance proceedings meaningless because it would be tantamount to
asking the United States to re-litigate its compliance case, i.e. demonstrate the presence of adverse
effects in that new time-period.136
6.40. Also, in response to the European Union's argument on this subject, the United States
contends that its request to "update [the level of countermeasures] annually using the most recent
publicly available data "137 does not mean that the United States intended to alter the value of

131 European Union's written submission, para. 119.
132 European Union's written submission, paras. 99 and 131-136.
133 United States' comments on the European Union's response to Arbitrator question No. 101,
para. 106.
134 United States' written submission, paras. 77, 81-83, 86, 105, 114, 116, 119, and 123-138;
responses to Arbitrator question No. 17, No. 19(b), No. 20, No. 22, para. 49, No. 47, and No. 101, para. 22;
and comments on the European Union's responses to Arbitrator question No. 101, paras. 106-108, and
No. 104, paras. 128-131.
135 We note that, at times, the United States has appeared to characterize "the adverse effects
determined to exist" as the five specific lost sales and six instances of impedance found within the 2011-2013
Reference Period (United States' methodology paper, para. 29) and at other times appeared to characterize
them as, or as including, adverse effects that have continued beyond 2013 (United States' written submission,
para. 138). As reflected in paragraphs 6.43-6.46 below, the former appears to be the most appropriate
formulation for purposes of this arbitration.
136 United States' written submission, paras. 77, 89-98, 100-106, 108-113, and 132; responses to
Arbitrator question No. 17, No. 18, No. 19, paras. 32-33, No. 21, para. 45, No. 22, and No. 59; and comments
on the European Union's responses to Arbitrator question No. 104, paras. 133-134, and No. 108.
137 Recourse to Article 7.9 of the SCM Agreement and Article 22.2 of the DSU by the United States,

countermeasures according to the value of adverse effects occurring after the 2011-2013 Reference
Period.138
6.41. Finally, the United States asserts that Annual Suspension is "temporary" because it will be
removed once the DSB adopts a decision from a WTO adjudicator finding the European Union to be
in compliance. The United States emphasizes, however, that because the time at which compliance
will be achieved is uncertain, the United States should be able to impose Annual Suspension up until
that point is reached.139
6.42. The Arbitrator recalls that the issue is whether it may accept countermeasures in the form of
Annual Suspension at a level that reflects the level of the adverse effects determined to exist in the
2011-2013 Reference Period. In assessing this issue, we will initially examine whether we may
determine the maximum level of countermeasures by reference to a past reference period, i.e. the
2011-2013 Reference Period. Subsequently, we will examine whether the countermeasures may
take the form of Annual Suspension. After examining these aspects by reference to our mandate
and the text and object and purpose of the DSU140, we will review prior arbitration decisions to see
whether they shed useful light on the issue before us.
6.43. We first address the issue of what determines the level of countermeasures that may be
granted. Under Article 7.9 of the SCM Agreement, the DSB may authorize the United States to take
countermeasures commensurate with the degree and nature of the adverse effects determined to
exist. Our mandate under Article 7.10 is to determine whether the proposed "countermeasures" are
"commensurate with the degree and nature of the adverse effects determined to exist". As noted in
section 5, in the context of the present dispute the phrase "adverse effects determined to exist "
sends us back to the findings on adverse effects made in the compliance proceed ings that provide
the basis for the DSB to authorize the United States to take countermeasures.141 More specifically,
the compliance panel and Appellate Body found that A380 and A350XWB LA/MSF caused adverse
effects in the forms of significant lost sales wit hin the meaning of Article 6.3(c) of the
SCM Agreement and impedance within the meaning of Article 6.3(a) and (b) of the SCM Agreement.
6.44. These findings were based on specific LCA order and delivery data contained in the 2011 -
2013 Reference Period, and were identified as adverse effects only after, inter alia, fact-intensive
analyses pertaining to circumstances existing in the 2011 -2013 Refe rence Period (e.g. product
markets, conditions of competition, and non-attribution factors). These analyses demonstrated the
presence of five lost sales and impedance in six geographic markets in the 2011 -2013 Reference
Period. As these analyses did not co ver the time -period after 2013, no determination was made
regarding the existence of adverse effects after the 2011-2013 Reference Period. It is thus consistent
with the mandate set out in Article 7.10 to determine the maximum level of countermeasures based
on the five lost sales and six instances of impedance that were determined to exist in the 2011-2013
Reference Period and to consider these as "the adverse effects determined to exist" for purposes of
this proceeding.142
6.45. Article 7.10 further clarifies that we must determine whether the proposed countermeasures
are "commensurate with " the "degree and nature " of the five lost sales and six instances of
impedance. It will be recalled that the term "degree" corresponds to a quantitative element whereas
the reference to the "nature" of adverse effects relates to a qualitative element.143 We consider that,
functionally speaking and in the context of this proceeding, the quantitative element, i.e. "degree",
corresponds to the monetary value of the adverse effects det ermined to exist, whereas the

138 United States' written submission, paras. 124-125; and response to Arbitrator question No. 19(b),
para. 31. Rather, this updating pertains to using the PPI for CA Manufacturing to adjust the countermeasures
for inflation, an issue discussed in sections 6.4.5.2 and 6.4.5.3 below. (United States' written submission,
para. 124).
139 United States' written submission, paras. 111-113.
140 We recall that this proceeding is conducted under both the SCM Agreement and the DSU. (See
paragraph 3.4 above).
141 See paragraph 5.5 above.
142 We note that in this proceeding the United States has not proposed any formula that would operate
on a prospective basis and that would somehow seek to take into account instances of lost sales and/or
impedance that were not the subject of specific findings in the compliance proceedings.
143 See paragraph 5.5 above.

qualitative elements, i.e. "nature", corresponds to the type of adverse effects determined to exist –
in this case significant lost sales and impedance.
6.46. In sum, Article 7.10 supports the view that, in this proceeding, we may determine whether
the proposed countermeasures are commensurate with the value of the lost sales and impedance
determined to exist in the 2011-2013 Reference Period. As a corollary, the level of countermeasures
that the DSB may authorize the United States to take under Article 7.9 is a function of adverse
effects that occurred and were determined to exist in the past during that temporally circumscribed
reference period. The issue thus becomes whether it would be appropriate to grant Annual
Suspension based on the value of the adverse effects determined to exist when that value is
temporally circumscribed to a past time-period.
6.47. We further recall the European Union's suggestion that the United States' request for Annual
Suspension is inconsistent with its Article 22.2 request. This argument is based on the fact that the
request states that the United States will adjust the annual level of countermeasures as determined
based on "the most recent publicly available data", but the United States does not do so because it
does not adjust countermeasures in the light of levels of post-2013 adverse effects.144 We consider
that the reference to "updat[ing the level of countermeasures] annually using the most recent
publicly available data " in the United States Article 22.2 request pertains to the United States
proposal to use the US Producer Price Index for Aircraft Manufacturing of Civilian Aircraft (PPI for
CA Manufacturing) to adjust the level of countermeasures annually and does not amount to an
intention to base the countermeasures on calculations of post-2013 adverse effects.145
6.48. With this initial result of our analysis in mind, we now examine whether it is permissible to
authorize temporally indefinite146 countermeasures in the form of Annual Suspension at a level that
reflects the value of adverse effects that were determined to exist in a temporally circumscribed
past reference period (in casu, December 2011-2013). We thus shift our attention from the question
of what determines the maximum permissible level of the countermeasures that can be authorized
to the question of the time-period during which countermeasures may be imposed at that level.
6.49. Neither Article 7.9 nor Article 7.10 provides specific answers to this question. We therefore
look to the DS U for relevant guidance. Under the DSU, a complaining party 's right to request and
maintain, and the obligation to remove, countermeasures is controlled by the responding party 's
compliance status. 147 This suggests to us that the maximum permissible duration of
countermeasures is controlled not by the ongoing effects of a measure that was found to be WTO -
inconsistent, but by the responding party's compliance status. The Appellate Body has indicated that
this aspect of Annual Suspension, i.e. that it may remai n in force pending confirmation of a
responding party's substantive compliance, is consistent with the object and purpose of the DSU. In
US – Continued Suspension, the Appellate Body addressed, inter alia, the circumstances under which
Annual Suspension pr eviously authorized should be removed. In doing so, the Appellate Body
stressed the importance of a responding party achieving substantive compliance 148, noted that the
suspension of concessions is the "last resort" in securing that substantive compliance, a nd thus
recognized that "[t]o require the termination of suspension of concessions before substantive
compliance is achieved would significantly weaken the effectiveness of the WTO dispute settlement
mechanism".149

144 European Union's written submission, para. 119.
145 See sections 6.4.5.2 and 6.4.5.3 below.
146 According to Article 22.1 of the DSU, the suspension of concessions or other obligations is intended
as a "temporary" measure. However, pursuant to Article 22.8 of the DSU, the suspension of concessions or
other obligations may be applied until the WTO-inconsistent measure has been removed or a mutually agreed
solution is reached. In that sense, the suspension of concessions or other obligations is a temporally indefinite
measure.
147 See Article 22.2, 22.6 and 22.8 of the DSU. Regarding Article 22.8, see also section 2.4.1 above.
148 The term "substantive compliance" refers to the fact that a responding party's compliance is
evaluated not only with respect to the original measures that were found to be WTO-inconsistent, but also with
respect to any "measures taken to comply" within the meaning of Article 21.5 of the DSU. (Appellate Body
Reports, US – Large Civil Aircraft (2nd complaint) (Article 21.5 – EU), para. 5.328; and US – Continued
Suspension, paras. 305-309).
149 Appellate Body Report, US – Continued Suspension, para. 308.

6.50. In US – Continued Suspension, the Appellate Body was addressing the issue of when DSB
authorization to suspend concessions, previously granted, would terminate. In the present dispute,
no DSB authorization has been granted yet. Nevertheless, it is plain to us that if an arbitrator were
to structure countermeasures in such a way that they would effectively "terminat[e] … before
substantive compliance is achieved[, it] would [similarly and] significantly weaken the effectiveness
of the WTO dispute settlement mechanism ", and thus be contrary to "the DSU's objective of
providing security and predictability to the multilateral trading system ".150 The structure of Annual
Suspension avoids this concern because it may remain in place until a WTO adjudicator finds the
responding party to have achieved substan tive compliance or a mutually agreed solution has been
found.151
6.51. We make one additional observation about the Appellate Body's report in US – Continued
Suspension. The Appellate Body in that report made clear that the authorization to maintain the
Annual Suspension at issue would only lapse following confirmation, through WTO dispute settlement
proceedings or a mutually agreed solution, of the responding party's substantive compliance.152 The
Appellate Body thus well understood that the Annual Suspension could temporarily remain in force
even in cases where the responding party in fact has already achieved substantive compliance, but
this has not yet been multilaterally confirmed. In other words, it is understood that, pending such
confirmation, the Annual Suspension may continue in place for a certain period of time, even though
the relevant effects of the latest measures taken to comply would, in fact, be valued at zero given
that substantive compliance was achieved. This, in our view, further supports that it is the formal
multilateral compliance status of the responding party that justifies the maintenance of Annual
Suspension at the previously authorized level, not the notion that the authorized level correctly
reflects the relevant effects of the responding party's measures over time.
6.52. The European Union argues that Annual Suspension has so far only been granted in
arbitrations addressing "recurring" measures. The European Union has not defined this term.
Presumably, the European Union was using the term in a broad sense to refer to measures that
would be expected to produce relevant effects on an ongoing basis. As we see it, however,
"recurrence" of a measure found to be WTO-inconsistent, however one defines that concept, is not
a prerequisite to granting Annu al Suspension. Countermeasures serve to induce compliance 153 in
respect of all manner of measures found to be WTO -inconsistent, whether they are "recurring" or
"non-recurring".154 Until and unless substantive compliance has been achieved and is multilaterally
confirmed or a mutually agreed solution has been reached, there remains a valid rationale for
granting Annual Suspension and maintaining it at the authorized level.155
6.53. In this proceeding, the European Union also advocates a structure of countermeasures that
would lead to countermeasures terminating at the time of the final counterfactual delivery of an LCA
ordered pursuant to the five lost sales in the 2011 -2013 Reference Period had Boeing won the
sales.156 In short, under the European Union's approach, after a certain date, although no
multilateral confirmation of substantive compliance would exist, the level of countermeasures would
need to drop to zero. As we have explained above, in our view Annual Suspensi on may remain in

150 Appellate Body Report, US – Continued Suspension, para. 309.
151 We note that the level of countermeasures or suspension of concessions or other obligations may, of
course, vary over time in cases in which arbitrators use other structures for countermeasures, e.g. formulae
that apply on prospective bases.
152 Appellate Body Report, US – Continued Suspension, section IV.E.
153 See paragraph 5.2 above.
154 We note the European Union's assertion that there was one arbitration decision that relied on the
non-recurring nature of the relevant subsidy "to reject the higher countermeasures Brazil had proposed to
deter future subsidisation". (European Union's written submission, para. 110 (citing Decision by the Arbitrator,
Canada – Aircraft Credits and Guarantees (Article 22.6 – Canada), para. 3.111)). We note that in that decision
the arbitrator rejected a request by Brazil to upwardly adjust a proposed lump-sum of countermeasures, not a
request to determine a level of Annual Suspension. That arbitration decision is, therefore, distinguishable and
unpersuasive in the context of the present proceeding.
155 We note that there is no multilateral finding at this time that specifies the time at which the
European Union will no longer be granting or maintaining A380 or A350XWB LA/MSF, when these measures will
have been withdrawn, or when these measures' adverse effects will have been removed. (See Article 7.8 of the
SCM Agreement). There is furthermore no agreement between the parties as to when any of these events will
occur. We thus make no judgments as to whether the presence of any such finding or agreement, if it existed,
may be taken into account in an arbitration proceeding.
156 See paragraph 6.4 above and section 6.3.3.4 below.

place at the authorized level until a WTO adjudicator finds the responding party to have achieved
substantive compliance or the parties have found another solution. We are therefore unable to accept
the European Union's preferred approach, which, in our view, could significantly dilute the
effectiveness of countermeasures and undermine the DSU 's objective of providing security and
predictability to the multilateral trading system.157
6.54. Finally, the European Union argues that Annual Suspension i s inconsistent with the
"temporary" nature of countermeasures, which it says must only apply "pending full compliance".
We fail to see any inconsistency in this regard. Pursuant to Article 22.8 of the DSU, the Annual
Suspension must cease once the DSB adop ts a decision by a WTO adjudicator finding that the
European Union has brought itself into substantive compliance with its relevant WTO obligations (or
the parties agree that a solution has been found).
6.55. We now turn to examine relevant prior arbitration decisions to see whether they shed useful
light on whether in this proceeding it is appropriate to calculate the level of countermeasures by
reference to a past reference period and to grant countermeasures in the form of Annual
Suspension.158 We consider four related aspects of prior arbitration practice most relevant to the
issue at hand. First, most disputes in which arbitrations have occurred resulted in the complaining
party being granted Annual Suspension.159 These include arbitrations conducted under Articles 4.11
and 7.10 of the SCM Agreement, and Article 22.6 of the DSU. We note, therefore, that Annual
Suspension has been granted by arbitrators consistently over time and in a variety of legal and
factual contexts, including under the mandate under which we operate.
6.56. Second, the levels of such Annual Suspension have generally been determined based on the
trade effects of relevant measures during past time-periods160 by applying counterfactuals to those
periods. The past time -periods selected were usually short -term periods immediately following or

157 "A Member authorized by the DSB to suspend concessions enjoys the assurance under Article 22.8
[of the DSU] that, until substantive compliance is achieved or, in case of disagreement, multilaterally-
confirmed, the suspension of concessions continues to be permitted under the DSU". (Appellate Body Report,
US – Continued Suspension, para. 308).
158 In this section we discuss certain arbitrations conducted exclusively under Article 22.6 of the DSU.
These are nonetheless relevant in this context for two reasons. First, and as noted previously, arbitrations
governed by Article 7.10 are, at the same time, governed by Article 22.6. (See paragraph 3.4 above). Second,
the mandate of an arbitrator acting under Article 22.6 is to "determine whether the level of … suspension is
equivalent to the level of the nullification or impairment". (Article 22.7 of the DSU). (emphasis added) This is
similar in structure to our mandate, i.e. to determine whether the countermeasures are commensurate with
the degree and nature of the adverse effects determined to exist. (Decision by the Arbitrator, US – Upland
Cotton (Article 22.6 – US II), para. 5.21 (recognizing this structural similarity)). Thus, the circumstances under
which such arbitrators granted Annual Suspension under their mandate may be instructive for us.
159 Decisions by the Arbitrators, US – Washing Machines (Article 22.6 – US), section 3.6 (determining
further that the level of Annual Suspension could vary over time with inflation); US – Tuna II (Mexico)
(Article 22.6 – US); US – COOL (Article 22.6 – United States); US – Upland Cotton (Article 22.6 – US II); US –
Gambling (Article 22.6 – US); US – FSC (Article 22.6 – US); Brazil – Aircraft (Article 22.6 – Brazil); EC –
Bananas III (Ecuador) (Article 22.6 – EC); EC – Hormones (Canada) (Article 22.6 – EC); EC – Hormones (US)
(Article 22.6 – EC); and EC – Bananas III (US) (Article 22.6 – EC). Other arbitrators granted lump-sum
amounts and/or used formulae of varying complexity. (Decisions by the Arbitrators, US – Washing Machines
(Article 22.6 – US), para. 5.2; US – Upland Cotton (Article 22.6 – US I), para. 6.5; US – Offset Act (Byrd
Amendment) (Brazil) (Article 22.6 – US); US – 1916 Act (EC) (Article 22.6 – US); and Canada – Aircraft
Credits and Guarantees (Article 22.6 – Canada)). None of the latter group of arbitrators, however, refused a
request by a complaining party for Annual Suspension. We specifically note that the arbitrator in Canada –
Aircraft Credits and Guarantees (Article 22.6 – Canada), a proceeding in which "the measure at issue …
relate[d] to a finite amount of subsidy", granted a lump-sum amount, which was the structure that the
complaining party requested. (Decision by the Arbitrator, Canada – Aircraft Credits and Guarantees
(Article 22.6 – Canada), para. 3.45).
160 We note that in Brazil – Aircraft (Article 22.6 – Brazil), the arbitrator authorized Annual Suspension
under Article 4.11 of the SCM Agreement based on the projected annualized value of the subsidy between
2000-2005, although the arbitrator's decision was circulated in August 2000. This approach appeared to flow
from the unusual facts of the case, and in particular the following elements: (a) Brazil's continued non-
compliance was based on its continued issuance of bonds in the post-implementation period pursuant to
commitments Brazil previously undertook, and (b) the bonds were only issued upon delivery of aircraft.
(Decision by the Arbitrator, Brazil – Aircraft (Article 22.6 – Brazil), paras. 3.64-3.65).

including the time at which the responding party should have come into compliance. 161 Arbitrators
– including the arbitrator in US – Upland Cotton (Article 22.6 – US II) – have commented on the
appropriateness of determining levels of Annual Suspension by measuring the relevant effects of a
measure when or shortly after the responding party should have come into compliance, observing
that the basic purpose of an arbitration proceeding is to determine the harm to the compl aining
party caused by that precise failure. 162 We consider this rationale sound, including in the
circumstances of this proceeding. We further observe that the suspension of concessions or other
obligations and countermeasures are intended as temporary rather than long-term measures by the
complaining party. The assumption must therefore properly be that the responding party will in good
faith take appropriate corrective action in the short term to come into compliance promptly after
suspension of concessions or countermeasures have been authorized. It thus seems appropriate to
us to assess the short-term effects of a WTO-inconsistent measure rather than its effects in the long
term when the responding party should be in compliance.
6.57. We thus consider that the 2011-2013 Reference Period is appropriate for determining the
permissible level of Annual Suspension, not just because it is the time -period that was used in the
compliance proceedings and provides us with the "adverse effects determined to exist" to which our
mandate refers us, but because this period occurred immediately after the end of the implementation
period in this dispute.
6.58. Third, uncertainty surrounding the relevant effects of measures occurring beyond the end of
the reference periods used to dete rmine a level of Annual Suspension has not prevented any
arbitrator from determining such a level. Indeed, at least two relatively recent arbitrators have
expressly dismissed the relevance of such uncertainties. The arbitrator in US – Tuna II (Mexico)
(Article 22.6 – US) dismissed as irrelevant an alleged long -term trend of declining US tuna
consumption in determining a level of Annual Suspension based on a short -term past reference
period, i.e. a trend that suggested that a lower level of nullification or impairment existed at the
time of the arbitration proceeding and moving into the future.163 The arbitrator in US – Upland Cotton
(Article 22.6 – US II) expressly stated that "[i]n a situation where a fixed annual amount of
countermeasures is determined, that will be applied in the future and for an undetermined period of
time [i.e. Annual Suspension], there is necessarily an inherent uncertainty as to how closely the said
amount will represent the actual continued adverse effects of the measure over time ".164 The
arbitrator nonetheless determined a level of Annual Suspension based on a short-term past reference
period.
6.59. We agree that there is inherent uncertainty about how well levels of Annual Suspension will
reflect the value of effects of relevant measures over time, especially if the Annual Suspension needs
to remain in place for an extended period of time. Indeed, we consider that, in years following their
application, it will in fact rarely be the case that levels of Annual Suspension will be exactly equivalent
to, or in some cases maybe even closely approximate, the value of relevant effects of the measures
in any such year. This is so not only because of the dynamic nature of markets in which the effects
of measures occur, but also because private market ac tors will adjust their behaviour over time to
the continued application of the WTO -inconsistent measures or because responding parties may

161 See, e.g. Decisions by the Arbitrators, US – Washing Machines (Article 22.6 – US), section 3.2
(determining Annual Suspension by applying counterfactual to the year in which the RPT expired); US – Tuna
II (Mexico) (Article 22.6 – US), section 4 (determining Annual Suspension by applying counterfactual to first
full year following expiry of RPT); US – COOL (Article 22.6 – United States), section 3.2 and para. 6.32
(determining Annual Suspension by applying counterfactual to "the baseline year" following the end of the
RPT); and US – Upland Cotton (Article 22.6 – US II), paras. 4.115-4.119 (determining Annual Suspension by
applying counterfactual to the year straddling the expiry of the implementation period). See also Decision by
the Arbitrator, US – FSC (Article 22.6 – US), para. 2.15 (acting under Article 4.11 of the SCM Agreement and
determining Annual Suspension by calculating the amount of the subsidy for the year in which the
implementation period expired).
162 Decisions by the Arbitrators, US – Tuna II (Mexico) (Article 22.6 – US), para. 4.14; US – Upland
Cotton (Article 22.6 – US II), para. 4.118; US – Gambling (Article 22.6 – US), para. 3.143; and US – FSC
(Article 22.6 – US), paras. 2.14(a) and 2.15. See also Award of the Arbitrator, US – Section 110(5) Copyright
Act (Article 25), para. 4.19 (explaining that "[u]nlike Article 22.6, which closely relates to compliance (or
absence thereof) at the end of the reasonable period of time, Article 25 is silent as to the date on which a
matter referred to arbitration should be assessed"). (emphasis added)
163 Decision by the Arbitrator, US – Tuna II (Mexico) (Article 22.6 – US), para. 4.18.
164 Decision by the Arbitrator, US – Upland Cotton (Article 22.6 – US II), para. 4.117.

adopt new "measures taken to comply" that can themselves significantly change the relevant effects
of measures at issue even assuming static market conditions.165
6.60. If such uncertainties could make Annual Suspension not "equivalent to the level of nullification
or impairment" or not "commensurate with the degree and nature of the adverse effects determined
to exist" under Article 22.6 of the DSU or Article 7.10 of the SCM Agreement, Annual Suspension
might need to be continually adjusted after its authorization by the DSB (either downward or upward
to the authorized maximum level following a downward adjustment). It is our understanding that
this has not been the practice of complaining parties that were granted a fixed amount for Annual
Suspension. This is consistent with our view that under the SCM Agreement and the DSU the
maximum level of countermeasures or suspension of concessions that may be granted is a function
of the effects of relevant measures during a past reference period, while the maintenance of a
suspension of concessions at that level is predicated not on the magnitude of ongoing effects of
relevant measures, but on continued non -compliance of the responding party with its WTO
obligations.166
6.61. Fourth and finally, we note that one arbitrator has cautioned against basing levels of Annu al
Suspension on forecast effects of measures. In US – Gambling (Article 22.6 – US), the arbitrator
rejected the use of forecasts of future market behaviour as a basis upon which to determine a level
of Annual Suspension. That arbitrator explained that "different time horizons [of such forecasts]
would result in different levels of nullification or impairment that bear no relation to questions of
actual compliance ".167 We agree that determining a level of Annual Suspension with respect to
essentially a future reference period of debatable duration might lead to varying results, not just
because of the uncertainty of future market developments and the lack of actual data, but also the
chosen length of the reference period. This further supports using the effects of measures in short-
term past reference periods occurring at or shortly after the time by when the responding party
should have come into compliance as a basis on which to determine the maximum level of Annual
Suspension. 168
6.62. Bearing in mind the discussi on thus far, we recall the European Union's position that "to
authorise [countermeasures in the form of Annual Suspension] under Article 7.10 of the
SCM Agreement, the [Arbitrator] must ensure that the adverse effects determined to exist in the
December 20 11 to 2013 reference period provide a reasonable estimation of – i.e., are
representative of – adverse effects today, and in the future ".169 The European Union refers to this

165 This, of course, assumes that considering the effects of "measures taken to comply" that were not
the subject of findings in compliance proceedings underlying an arbitration proceeding to set a level of
countermeasures or suspension of concessions would even be legally appropriate. The validity of this
assumption is in doubt. (See Decision by the Arbitrator, US – Tuna II (Mexico) (Article 22.6 – US), section 3
(refusing to consider, in setting a level of Annual Suspension, the effects of a recent amended version of the
measure found to be WTO non-compliant in the underlying compliance proceeding because the amended
measure had not been considered in the compliance proceeding)). Insofar as it would be inappropriate, this
would provide more reason to decline to discern the effects of any measures taken to comply that were not
subject to prior findings in a compliance proceeding.
166 See Decision by the Arbitrator, US – Offset Act (Byrd Amendment) (Brazil) (Article 22.6 – US),
para. 3.150 (noting that a coefficient to be used in a formula governing the future levels of suspension of
concessions was calculated based on data from a past time-period and would likely prove inaccurate in the
future. The arbitrator considered that "this approach is consistent with past arbitrations where representative
periods where used to determine volumes and prices of exports in order to calculate levels of nullification or
impairment and levels of suspension fixed once and for all"). (fn omitted)
167 Decision by the Arbitrator, US – Gambling (Article 22.6 – US), para. 3.144. See also Award of the
Arbitrator, US – Section 110(5) Copyright Act (Article 25), para. 4.20 (expressing reservations about
calculating the level of nullification or impairment with reference to a date in the future, which was itself not
yet known for sure, because such an approach would "add uncertainty to the [arbitrator's] estimate by
[requiring] additional assumptions").
168 We note that the arbitrator in EC – Hormones (US) (Article 22.6 – EC) likewise assessed the effects
of the relevant measures in a short-term reference period occurring at or shortly after the time by when the
responding party should have come into compliance. We note, however, that the circumstances of that
proceeding appeared to require the arbitrator to conduct, in part, a prospective analysis. (Decision by the
Arbitrator, EC – Hormones (US) (Article 22.6 – EC), para. 41). The circumstances of our proceeding do not
require any prospective analysis as we are dealing with a short-term past reference period occurring
immediately following the expiry of the implementation period.
169 European Union's response to Arbitrator question No. 104, para. 134. (fns and quotation marks
omitted)

as the applicable "legal standard ", derived from the arbitration decision in US – Upland Cotton
(Article 22.6 – US II). This legal standard would have us determine the maximum level of Annual
Suspension that is "representative" of the value of adverse effects caused by relevant subsidies at
present and in the future. To apply this legal standard, we would, of course, have to know or
determine those until-now unidentified adverse effects.
6.63. Drawing on our considerations above, we find ourselves unable to accept the
European Union's proposed legal standard.170 As noted above, our mandate does not require us to
determine the level of countermeasures vis-à-vis until-now unidentified adverse effects. As we have
explained, in this proceeding, it is appropriate to consider that the relevant effects are the specific
lost sales and instances of impedance arising in the 2011-2013 Reference Period.
6.64. Moreover, as far as future adverse effects are concerned, it is unclear to us what our time-
frame would be, and in particular how far into the future we should attempt to identify relevant
adverse effects. This would invite contestable results. Additionally, any such predictions about the
future occurrence of adverse effects would be speculative owing to the lack of actual data. 171 We
discern no way in which we could confidently predict the futur e evolution of complex and dynamic
LCA markets, the effects of relevant measures within those markets, and the future compliance
steps of the European Union, all of which must be considered to determine the future occurrence of
relevant adverse effects.172
6.65. Furthermore, even if we therefore were to determine only present adverse effects, this would
conflate our role with that of a compliance panel established under Article 21.5 of the DSU. Indeed,
one of the main European Union claims before the second compli ance panel is that the
European Union has "remove[d] the adverse effects " within the meaning of Article 7.8 of the
SCM Agreement.173 To address that claim, the compliance panel will most likely have to similarly
analyse the existence of adverse effects. More over, no adverse effects have been multilaterally
"determined to exist " post-2013. Determining the existence of relevant present adverse effects
would effectively require the United States to re -litigate at least a significant part of the first
compliance proceedings. 174 We recall in this connection that the results of the first compliance
proceedings provide the basis for this arbitration, which was recommenced after several years of
suspension. There would also be a risk of creating conflicting findings between this proceeding and
the second compliance panel proceeding currently under way that is considering the
European Union's present compliance status. 175 Additionally, as we have noted 176, an inquiry into
the existence of adverse effects requires fact -intensive analyses. Engaging in such analyses would
therefore substantially lengthen the duration of this expedited proceeding.
6.66. Finally, we turn to the arbitrator's decision in US – Upland Cotton (Article 22.6 – US II), from
which the European Union derives the legal standard that it advocates. That arbitrator accepted the
complaining party 's proposed reference period (marketing year (MY) 2005) and rejected the
responding party's preferred reference period (MY 2005-2007) as the basis to determine a level of

170 See paragraph 6.75 below.
171 See also Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 –
US), fn 1625 (noting that "[t]he original panel observed that the parties had described the development of LCA
as an endeavour … in the face of a business environment that is shaped by factors whose very foreseeability is
impossible by definition").
172 We note that the European Union itself argues that the Arbitrator would have to consider the
European Union's compliance steps when assessing what adverse effects are being caused today and in the
future. (See section 2.4 above).
173 Communication by the European Union, WT/DS316/34 (Second Compliance Communication),
para. 13. Previous arbitrators have advised against conflating their mandates with those of compliance panels
and refused to make findings with respect to compliance-related issues. (Decisions by the Arbitrators,
US – Washing Machines (Article 22.6 – US), para. 3.29; US – Tuna II (Mexico) (Article 22.6 – US),
paras. 3.52-3.53; and US – Upland Cotton (Article 22.6 – US II), paras. 3.14-3.17). (See also section 2.4
above, discussing this topic.)
174 See Appellate Body Report, US – Continued Suspension, para. 317 (observing that "authorization to
suspend concessions is … granted following a long process of multilateral dispute settlement in which relevant
adjudicative bodies, as well as the DSB, render multilateral decisions at key stages of the process").
175 Communication by the European Union, WT/DS316/34 (Second Compliance Communication),
para. 43 ("[T]he European Union notifies the DSB that it has achieved full compliance with the
recommendations and rulings in the present dispute"). (emphasis added)
176 See paragraph 6.44 above.

Annual Suspension. It thus determined a level of Annual Suspension that was based on the adverse
effects of the United States' subsidies in MY 2005. The arbitrator circulated its decision in Au gust
2009, three years after the end of MY 2005.
6.67. The arbitrator in US – Upland Cotton (Article 22.6 – US II) did not make specific findings
regarding whether the United States' measures caused then -present-day adverse effects or then -
future adverse effects. Moreover, the arbitrator also stated that uncertainty about the future effects
of the subsidies at issue should not prevent it from determining the maximum level of Annual
Suspension based on the effects of the subsidies in a past reference period 177, even when that
uncertainty was significant.178
6.68. We further note that the arbitrator made the following statement:
We recognize that price fluctuations on the world upland cotton market may affect the
calculation of the adverse effects of the ML and CCP subsidies at issue over time. Indeed,
there may be a number of economic or other factors that would affect the evolution
over time of the impact of the subsidies at issue, and we do not exclude that there may
have been different permissible approaches to the choice of period of reference for the
purposes of such calculations. In a situation where a fixed annual amount of
countermeasures is determined, that will be applied in the future and for an
undetermined period of time, there is necessarily an inherent un certainty as to how
closely the said amount will represent the actual continued adverse effects of the
measure over time. What we must ensure, however, is that there is a legitimate basis
for assuming that the chosen period of reference may lead to a reaso nable estimation
of these effects.179
6.69. The arbitrator did not explain why, in its view, an arbitrator "must" ensure that there is a
legitimate basis for assuming that the chosen period of reference "may" lead to a reasonable
estimation of "these effects". It looks as though by "these effects", the arbitrator meant "the actual
continued adverse effects of the measure over time " that are referred to earlier in the quoted
paragraph.
6.70. We recall our own view, which is based on our mandate as set out in Article 7.10, that in the
circumstances of our proceeding we should quantify the adverse effects determined to exist in the
compliance panel and Appellate Body reports, and not any "actual continued adverse effects". The
compliance reports in this dispute contain determinations concerning the 2011 -2013 Reference
Period. That period occur red at the same time as the period immediately following the end of the
implementation period. It is noteworthy that the arbitrator in US – Upland Cotton (Article 22.6 – US
II) similarly justified its choice of MY 2005 as the appropriate reference period on the basis that it
"represent[ed] the first moment at which the United States should have come into compliance with
the recommendations and rulings at issue ".180 Thus, it wou ld in our view have been relevant and
correct if the arbitrator in US – Upland Cotton (Article 22.6 – US II) had said that the chosen period
of reference should lead to a reasonable estimation of the adverse effects in the short term, i.e. the

177 Decision by the Arbitrator, US – Upland Cotton (Article 22.6 – US II), fn 44 (explaining that "[t]he
fact that the actual level of future payments under the [subsidy] program [which cause the adverse effects]
may be uncertain to date cannot in itself be an obstacle to calculating a level of countermeasures to be
applied"). (emphasis added) This footnote accompanied the following body text: "Nor can any uncertainty
about what might happen in the future dissuade this Arbitrator from assessing the adverse effects determined
to exist in relation to a measure which did exist and which, on the facts, continues to exist". (Decision by the
Arbitrator, US – Upland Cotton (Article 22.6 – US II), para. 3.28). We note that there is no DSB-adopted
finding in this dispute that the A380 or A350XWB LA/MSF measures have ceased to exist.
178 Decision by the Arbitrator, US – Upland Cotton (Article 22.6 – US II), paras. 4.117-4.118 (noting
that "price fluctuations on the world upland cotton market may affect the calculation of the adverse effects of
the … subsidies at issue over time", that cotton prices "vary considerably from year to year" and that "there
may be a number of economic or other factors that would affect the evolution over time of the impact of the
subsidies at issue").
179 Decision by the Arbitrator, US – Upland Cotton (Article 22.6 – US II), para. 4.117.
180 Decision by the Arbitrator, US – Upland Cotton (Article 22.6 – US II), para. 4.118.

adverse effects occurring at or shortly after the date by which the responding party should have
come into compliance.181
6.71. The arbitrator in US – Upland Cotton (Article 22.6 – US II) also examined but rejected the
United States' claim that MY 2005 was an "unrepresentative" reference period, finding that the
average price of cotton during MY 2005 was closer to the historic nine-year average of cotton prices
(beginning with MY 1999) than was the average price of cotton during the United States' proposed
reference period of MY 2005-2007. The arbitrator further found that recent increases in cotton prices
were not indicative of a change in medium- to long-term price trends.182
6.72. As the arbitrator ultimately made no finding that MY 2005 did not provide a reasonable
estimation of the actual continued adverse effects of the measure over time, it remains unclear what
the arbitrator would have done if it had so found.183 The arbitrator did say in the excerpt above that
using different cotton prices would likely affect the calculation of the adverse effects of the subsidies
at issue. Also, it seems that the arbitrator was able to reach a conclusion on the issue of the
appropriate reference period after having considered only the evolution of cotton prices in reviewing
the issue of the appro priate reference period, although it had said that there were "a number of
economic or other factors"184 that affected the extent of any adverse effects of the subsidies at issue.
It is thus unclear whether the arbitrator would have proceeded to examine also any factors other
than price that affected the situation in any post -MY 2005 time-period if it had accepted to choose
a different reference period based on the evolution of cotton prices.
6.73. In this proceeding, there is no equivalent to a straightforward com parison of average prices
for alternative reference periods that would allow us to reach conclusions regarding the 2011 -2013
Reference Period. Indeed, we cannot simply assume that a certain percentage of all LCA orders that
Boeing lost to Airbus in a given year after the 2011 -2013 Reference Period were lost sales, for
example. As mentioned above, it took the prior compliance panel extensive evidence-based analyses
to reach its conclusions regarding the existence of adverse effects in the 2011 -2013 Reference
Period. We are aware of no shortcut in this regard for determining the existence of adverse effects
in the post-2013 time-period. Also, the volumes of LCA sales during the 2011-2013 Reference Period
will rarely coincide with such volumes in any other period of time. However, this is the basic nature
of the LCA industry.185 Finally, we discern no other evidence on the record pointing to any particular
aspect or event that makes the 2011 -2013 Reference Period unsuitable for purposes of this
proceeding.186
6.74. For these various reasons, we are not persuaded that the arbitrator's stated approach in US
– Upland Cotton (Article 22.6 – US II) is appropriate in this proceeding. In particular, we see no

181 Indeed, the arbitrator in US – Upland Cotton (Article 22.6 – US II) itself said that once a
countermeasure is in place, it may or may not reflect closely the actual continued adverse effects of the
measure over time.
182 Decision by the Arbitrator, US – Upland Cotton (Article 22.6 – US II), para. 4.118.
183 For instance, we do not know whether the arbitrator would have accepted MY 2005-2007 or opted for
some other alternative reference period.
184 Decision by the Arbitrator, US – Upland Cotton (Article 22.6 – US II), para. 4.117.
185 Panel Report, EC and certain member States – Large Civil Aircraft, para. 7.1719 (observing that LCA
"orders tend to be very large and sporadic").
186 The parties have suggested that it may be possible for an arbitrator to adjust certain data in a
chosen reference period if the data covered by the reference period were somehow "unrepresentative".
However, the United States proposes no such changes and the European Union casts the "representativeness"
issue as one pertaining to whether the adverse effects during the 2011-2013 Reference Period are
"representative" of present and future adverse effects. (United States' responses to Arbitrator question Nos.
103 and 119; and European Union's comments on the United States' response to Arbitrator question No. 103
and to the United States' response to the European Union's question No. 1, para. 467). We will revert to the
issue of whether we should base our calculation on data pertaining to the entire 2011-2013 Reference Period
or data pertaining to a subperiod of that Reference Period in sections 6.3.4.3.1 and 6.3.4.4.1 below.

need to ensure that our "chosen period of reference ", i.e. the 2011-2013 Reference Period, "may
lead to a reasonable estimation" of any present and future adverse effects.187
6.75. We accordingly also confirm that we cannot accept the European Union's proposed legal
standard. Our mandate does not require it and adopting it would raise various systemic concerns as
we have identified above.
6.76. Based on all of the foregoing elements, we consider it appropriate to determine the maximum
level of Annual Suspension based on the value of the adverse effects determined to exist during the
2011-2013 Reference Period and to grant countermeasures in the form of Annual Suspension. 188
This approach is harmonious with our mandate as set out in Article 7.10, the text and object and
purpose of the DSU, the adverse effects determined to exist and th e reference period used in the
prior compliance proceedings, the task of the second compliance panel proceeding currently under
way, and, insofar as Annual Suspension with no specified end-date is concerned, with the approach
followed in prior arbitration decisions.
6.3.2 The appropriate counterfactual
6.77. Previous arbitrators have noted that "in past arbitration proceedings, arbitrators have found
it necessary to base their decisions on a so-called 'counterfactual' … [which] refers to a hypothetical
scenario that describes what would have happened in terms of trade flows had the responding party
implemented the DSB recommendations and rulings ".189 According to one previous arbitrator, "the
legal standard that a scenario must meet for it to constitute an appropriate co unterfactual for
purposes of Article 22.6 proceedings is that of plausibility and reasonability ".190 We note that the
compliance panel and Appellate Body in the present dispute already used a counterfactual to identify
the very adverse effects in the 2011 -2013 Reference Period that we value here, i.e. one in which
the European Union's relevant member States never granted A380 LA/MSF and A350XWB L A/MSF
to Airbus.191 Thus, this counterfactual appears to suggest itself as the counterfactual under which
we should value these adverse effects. The parties also predicate their arguments throughout this
arbitration proceeding on that counterfactual.192 We agree that in this proceeding it is reasonable to

187 Decision by the Arbitrator, US – Upland Cotton (Article 22.6 – US II), para. 4.117. We note that the
level of adverse effects caused by LA/MSF going forward could be either above or below that of adverse effects
caused in the 2011-2013 Reference Period. Regarding the latter possibility, we note that even if we accepted
the European Union's argument that the A380 programme is winding down, deliveries would likely still occur
going forward at least for a time. (European Union's response to Arbitrator question No. 147, para. 288 and
Table 7). Ongoing sales of A350XWB aircraft may significantly increase and even replace sales of A380 aircraft.
The "indirect effects" of A380 and A350XWB LA/MSF might affect future Airbus LCA programmes in ways that
cause additional adverse effects. Moreover, the European Union might take "measures taken to comply" that
increase the severity and/or duration of relevant adverse effects. (Decision by the Arbitrator, US – Tuna II
(Mexico) (Article 22.6 – US), fn 92 ("Article 21.5 proceedings could result in a finding that a new compliance
measure causes more nullification or impairment")). We note that in the compliance proceedings A350XWB
LA/MSF was found to be a "measure[] taken to comply" within the meaning of Article 21.5 of the DSU, and,
together with A380 LA/MSF, caused lost sales in the twin-aisle LCA market that we value in this very
proceeding.
188 We recognize that there may be other permissible ways to structure countermeasures. We make no
judgments as to the permissibility of other structures, whether in this dispute or others.
189 Decision by the Arbitrator, US – Tuna II (Mexico) (Article 22.6 – US), para. 4.4.
190 Decision by the Arbitrator, US – Tuna II (Mexico) (Article 22.6 – US), para. 4.5. (emphasis omitted)
See also Decision by the Arbitrator, US – Washing Machines (Article 22.6 – US), para. 3.10.
191 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 5.558 (describing counterfactual used by compliance panel) and section 6.7.4 (using counterfactual
assuming the "absence" of A380 and A350XWB LA/MSF). It may be further noted that "a counterfactual does
not necessarily need to reflect the most likely compliance scenario". (Decision by the Arbitrator, US – Tuna II
(Mexico) (Article 22.6 – US), para. 4.5).
192 See, e.g. European Union's response to Arbitrator question No. 3, para. 79 (explaining that "there
simply is no issue of the Arbitrat[or] using a 'new' counterfactual that deviates from the counterfactual adopted
by the Appellate Body in the first compliance proceedings" if all the Arbitrator does is value the five lost sales
and six instances of impedance found in the 2011-2013 Reference Period). (fn omitted) The United States
never suggests that we use any counterfactual other than the counterfactual used in the compliance
proceedings.

use the same counterfactual to value the adverse effects that was used in the prior compliance
proceedings. We consequently adopt this particular counterfactual as the relevant counterfactual.193
6.78. At this stage , we describe one specific element of the counterfactual adopted in the above
paragraph, i.e. what United States LCA manufacturer(s) would have been present in the twin -aisle
LCA and VLA product markets (the LCA product markets in which the adverse effects that we value
in this proceeding occurred) in the years leading up to and during the 2011 -2013 Reference
Period.194 Establishing this element will help frame our subsequent analyses. In this context, the
European Union asserts that "the counterfactual that informed the adverse effects determination by
the … compliance panel and the Appellate Body is one in which, in the absence of A380 [LA/]MSF
and A350XWB [LA/]MSF, Airbus and Boeing would compete in a duopoly ".195 The United States
asserts that, in the absence of A380 an d A350XWB LA/MSF, "the Appellate Body did not foreclose
the possibility that … there would have been another U.S. industry participant, [but] the findings of
continuing adverse effects are focused on the impact the subsidies had on Boeing, which is
understandable since Boeing was the only extant U.S. LCA producer during the period reviewed".196
We further note that neither party 's arguments in this proceeding appear to assume the presence
of any non-Boeing United States LCA manufacturer in the LCA marketplace at any relevant point in
time, including during the 2011-2013 Reference Period.
6.79. Consistent with the parties ' positions in this context, we consider it reasonable to use a
counterfactual in which Boeing was the sole United States LCA manufacturer in the years leading up
to and during the 2011 -2013 Reference Period. No LCA manufacturers in the United States other
than Boeing in fact existed since 1997, when McDonnell Douglas merged with Boeing.197 In our view,
the structure of the counterfactual that the Appellate Body adopted (i.e. the absence of A380 and
A350XWB LA/MSF), when considered in conjunction with other evidence on the record , indicates
that it would have been unlikely for another United States LCA manufacturer to have entered the
twin-aisle or VLA product markets after 1997 but before year -end 2013.198 Furthermore, we note
that the product markets used by the compliance panel and Appellate Body vis-à-vis the 2011-2013
Reference Period were defined with reference to Airbus and Boeing LCA only . Additionally, the
Appellate Body made no mention of a non -Boeing LCA United States manufacturer present in the
LCA market at any relevant time in the counterfactual. Thus, we consider that, in the rele vant
counterfactual, Boeing would have been the only United States LCA manufacturer in the years
leading up to and during the 2011-2013 Reference Period, and consequently, in the counterfactual,
it is Boeing that would have won the lost sales identified in the compliance proceedings and Boeing
that would have increased its deliveries had the impedance identified in the compliance proceedings
not occurred.
6.3.3 General European Union arguments against the United States methodology
6.80. In section 6.3.1 above, we concluded that we may determine the maximum permissible level
of Annual Suspension using the value of the adverse effects determined to exist in the 2011 -2013

193 More specific aspects of this counterfactual will be discussed in later sections of this Decision as
appropriate.
194 The Appellate Body did not appear to explicitly specify this issue in its report in the compliance
proceeding.
195 European Union's response to Arbitrator question No. 7, para. 156.
196 United States' response to Arbitrator question No. 7(a), para. 9.
197 Panel Report, EC and certain member States – Large Civil Aircraft, para. 7.1620.
198 The Appellate Body found that only the effects of A380 and A350XWB LA/MSF (the two most recent
sets of LA/MSF measures) could be considered when assessing the European Union's compliance under
Article 7.8 of the SCM Agreement. (Appellate Body Report, EC and certain member States – Large Civil Aircraft
(Article 21.5 – US), paras. 5.553-5.555). The earliest grant of any such measure was in 2000. (Panel Reports,
EC and certain member States – Large Civil Aircraft (Article 21.5 – US), paras. 6.560, 6.1630, and fn 452; and
EC and certain member States – Large Civil Aircraft, para. 7.290(vii)). It follows that the counterfactual world
departs from actual historic events starting in 2000, during which the LCA industry was characterized by an
Airbus-Boeing duopoly. (Panel Report, EC and certain member States – Large Civil Aircraft, para. 7.368 (noting
that the Airbus-Boeing "effective duopoly has existed since 1997 when Boeing merged with McDonnell
Douglas")). We discern nothing on the record indicating that any non-Boeing United States LCA manufacturer
would have entered the twin-aisle or VLA product markets since 2000 in the face of competition from Airbus
and Boeing but in the absence of A380 and A350XWB LA/MSF. Indeed, the findings on the record stress how
difficult it would have been for any new LCA manufacturer to enter the LCA market in these conditions. (See,
e.g. Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), paras. 6.1215,
6.1534, and 6.1787-6.1788).

Reference Period, i.e. the five lost sales and six instances of impedance. In connection with this issue
the European Union raises several arguments concerning what adverse effects found to exist within
the 2011-2013 Reference Period we may or may not include in our determination of the maximum
level of Annual Suspension.
6.81. The European Union raises five such arguments. First, the European Union argues that the
Arbitrator must exclude from the maximum level of Annual Suspension the value of adverse effects
associated with the counterfactual sale of Boeing LCA that would have already been delivered in the
counterfactual at the time of the conduct of this arbitration proceeding. We will refer to this as the
argument concerning "past deliveries" for ease of reference. Second, the European Union argues
that the Arbitrator can include in the maximum level of Ann ual Suspension either the value of
impedance or lost sales, but not both, because it is inappropriate to temporally assign the value of
both types of adverse effects to the 2011 -2013 Reference Period. We will refer to this as the
argument concerning "over-counting" for ease of reference. Third, the European Union argues that
the Arbitrator can include in the maximum level of Annual Suspension either the value of impedance
or lost sales, but not both, because doing so would lead to the Arbitrator counting th e value of the
same adverse effects twice. We will refer to this as the argument concerning "double-counting" for
ease of reference. Fourth, and based on the validity of, inter alia, the previous three arguments, the
European Union argues that countermeasures must end on a date that corresponds to the date of
the final delivery related to the adverse effects determined to exist in the 2011 -2013 Reference
Period. Finally, the European Union argues that the Arbitrator must exclude the value of Boeing LCA
components produced outside the United States. We address each of these arguments in turn.
6.3.3.1 Exclusion of the value of past deliveries from the level of Annual Suspension
6.82. The European Union argues that, in determining the maximum level of countermeasures, the
Arbitrator cannot consider the value of the five lost sales and six instances of impedance insofar as
these adverse effects involve Boeing LCA that would have already been delivered by the present day
in the counterfactual. According to the European Union, the counterfactual deliveries of Boeing LCA
associated with those adverse effects mean that those adverse effects have ceased to exist or come
to an end (insofar as they involve previously delivered LCA in the counterfactual). 199 The
European Union infers from this that associated countermeasures vis-à-vis those adverse effects,
insofar as they involve previously delivered LCA in the counterfactual, must also come to an end.
The European Union asserts that this approach is consistent with the prospective natur e of WTO
remedies. The European Union also submits that certain passages in the panel report in US – Large
Civil Aircraft (2nd complaint) support its position in this context.200
6.83. The United States argues that the European Union's approach is (a) unacceptable because it
would leave no remedy for impedance, which is based on past deliveries , (b) inapposite because it
ignores that the countermeasures applied in any future year pertain to the adverse effects caused
by LA/MSF in that year rather than those that occurred during the 2011 -2013 Reference Period201,
and (c) unsupported by the text and purpose of the DSU and SCM Agreement. Also, the
United States submits that the passages from the panel report in US – Large Civil Aircraft
(2nd complaint) that the European Union cites in this context do not support the European Union's
position.202
6.84. The Arbitrator notes the European Union's view that the Arbitrator should not determine the
maximum level of Annual Suspension, in whole or in part, based on the value of adverse effects that
already "ended" in the counterfactual, and that counterfactual deliverie s of Boeing LCA related to
those adverse effects bring about that "end". This would result in disregarding the six instances of
impedance found in the 2011-2013 Reference Period (as they were based on counterfactual Boeing

199 The European Union also makes this argument with reference to "lost sales" that involve cancelled
orders. As explained in section 6.3.4.3.4.1 below, we exclude the value of cancelled orders from the level of
countermeasures. Thus, we do not address that aspect of the European Union's argument here.
200 European Union's written submission, paras. 149-164 (citing Panel Report, US – Large Civil Aircraft
(2nd complaint), paras. 7.1685-7.1686).
201 We note that this particular argument appears to assume that granting countermeasures in the form
of Annual Suspension is predicated on the existence of ongoing adverse effects of the same magnitude as
those found to exist in the 2011-2013 Reference Period. (See paragraph 6.38 above). We have rejected this
rationale as the basis upon which we determine the maximum level of Annual Suspension above in
section 6.3.1.
202 United States' written submission, paras. 122 and 126-128.

LCA deliveries that would by now have already occurred) and the value of any Boeing LCA that would
have been delivered by the present day pursuant to the five lost sales had Boeing won them.
6.85. Our mandate is to determine whether the proposed level of countermeasures is
commensurate with "the degree and nature of the adverse effects determined to exist", i.e. the five
lost sales and six instances of impedance in the 2011 -2013 Reference Period. We therefore must
establish the economic value of adverse effects that were determined to have exis ted in the 2011-
2013 Reference Period. The parties do not agree on whether any of the adverse effects determined
to exist have ceased to exist prior to this arbitration proceeding. Beyond this, we fail to see the
materiality in considering when such adverse effects "ended" in the sense that the European Union
uses this word. The five lost sales and six instances of impedance were "determined to exist" in the
2011-2013 Reference Period. Whether such adverse effect continued to exist in some subsequent
time-period is an extraneous consideration in this arbitration proceeding. The question of the
continued existence of adverse effects raises a compliance issue that in contentious cases should be
addressed by a compliance panel under Article 21.5 of the DSU. We further note, as explained above,
that many arbitrators, including the arbitrator in US – Upland Cotton (Article 22.6 – US II), have
determined maxi mum levels of Annual Suspension based on the effects of measures in past
reference periods.203
6.86. Finally, the passages in the panel report in US – Large Civil Aircraft (2nd complaint) that the
European Union cites in support of its argument are in our view una vailing and do not lead us to
exclude the value of past deliveries. Those passages address, inter alia , the issues of when,
conceptually, "lost sales " and "impedance", within the meaning of Article 6.3(a)-(c) of the
SCM Agreement, can be said to exist and what data should properly evidence that existence. As
explained in the paragraph immediately above, in the dispute before us, these issues have been
resolved insofar as is relevant for present purposes, that is to say, the relevant adverse effects were
found to exist in the 2011 -2013 Reference Period based on evidence deemed appropriate for that
purpose in the compliance proceedings.204
6.87. For all these reasons, we reject the European Union's argument regarding past deliveries.
6.3.3.2 Inclusion of both lost sales and impedance in determining the level of Annual
Suspension: "Over-counting"
6.88. The European Union argues that the United States' methodology results in impermissible
"over-counting", i.e. valuing economic harm to the United States on the basis of both orders
(evidencing lost sales) and deliveries (evidencing impedance) in the 2011-2013 Reference Period.
According to the European Union, doing so creates a "temporal mismatch in the allocation of harm",
resulting in overstated damage amounts in the 2011 -2013 Reference Period. The European Union
asserts that private companies would assign the value of a goods sale to the time of the order or
resulting delivery, but not both.205
6.89. The European Union asserts that because mixing an order-centric metric and delivery-centric
metric is "inconsistent" and "nonsensical"206, the Arbitrator must choose either one or the other if it
uses the 2011-2013 Reference Period to determine the level of Annual Suspension. However, in the
European Union's view, under the circumstances of the present proceeding207, the Arbitrator "must
opt for US impedance claims (i.e., based on deliveries)" and "disregard in their entirety US lost sales

203 See section 6.3.1 above. We further recall that a maximum level of Annual Suspension determined
based on a past reference period is still a prospective remedy. (See paragraphs 2.27 and 5.3 above).
204 Insofar as these passages raise issues that may bear upon the proper temporal allocation of the
value of these adverse effects, we discuss that issue in the following section.
205 European Union's written submission, sections VIII.C and IX.A.1 and fn 185; responses to first set of
Arbitrator questions, paras. 54-57 and fn 59; and responses to Arbitrator question No. 23, paras. 370-377,
No. 62, paras. 191-192, and fn 256, and No. 107, paras. 182-198 and fn 208.
206 European Union's response to Arbitrator question No. 23, para. 368.
207 European Union's response to Arbitrator question No. 23, paras. 360-367 (identifying these
circumstances as "inter alia the considerable time lag between order and delivery; the significant probability of
order cancellations, rescheduling, and conversions; and, the particularly large-scale, infrequent nature of LCA
sales").

claims".208 According to the European Union this is so because the Arbitrator should value the "trade
effects" of LA/MSF, which in the case of orders arise only upon the deliveries of the ordered LCA.
The European Union submits that because of the time lag between LCA orders and deliveries, if
Boeing had won the five los t sales, counterfactual deliveries would have occurred only after 2013.
Thus, the European Union contends that temporally assigning the value of lost sales to the times of
the orders in the 2011-2013 Reference Period improperly includes therein adverse effects that arose
after the Reference Period. The European Union emphasizes in this context that although lost sales
may have been found to exist with reference to order data in the compliance proceedings, that does
not necessarily mean that the Arbitrator s hould quantify the effects of the lost sales with specific
reference to those orders.209
6.90. The European Union argues that prior arbitrators confirmed the primacy of the "trade effects
metric" to determine levels of countermeasures and suspensions of concessions, and that arbitrators
use other metrics only if trade effects are difficult to quantify or where measurable trade effects
have not yet occurred. The European Union further states that using only impedance claims to
determine the level of countermeasures is not inconsistent with the findings in the compliance
proceedings because although panels and the Appellate Body may find the existence of lost sales
with respect to order data, an arbitrator can and should quantify the adverse effects determined to
exist using a delivery -centric metric. The European Union also asserts that both "lost sales" and
"impedance" are focused on "volume effects" and "market shares", which correspond to using a
delivery-centric metric.210
6.91. Finally, the European Union argues that basing the value of orders representing lost sales on
future counterfactual deliveries is overly speculative because LCA deliveries do not always occur as
envisioned under the relevant preceding order, and may be cancelled, converted, or postp oned.
Thus, according to the European Union, the Arbitrator "must use the actual deliveries in the relevant
years as the basis for quantifying trade effects from lost sales".211
6.92. The United States argues that no impermissible "over-counting", as the European Union uses
that term, arises if the Arbitrator values both the five lost sales and six instances of impedance in
the 2011-2013 Reference Period and determines the maximum level of Annual Suspension based on
that combined, annualized amount. The United States argues that this approach simply implements
the Arbitrator's mandate, i.e. valuing the "adverse effects determined to exist ". According to the
United States, "lost sales " under Article 6.3(c) of the SCM Agreement (identified based on LCA
orders) and "impedance" under Article 6.3(a) and (b) of the SCM Agreement (identified based on
LCA deliveries) are two distinct kinds of adverse effects. The United States further submits that both
kinds of adverse effects were found to exist during the 2011 -2013 Reference Period and thus the
value of both can be temporally assigned thereto. Further, the United States asserts that no order
representing a "lost sale" resulted in deliveries that underlie the impedance findings, and thus no
LCA is being valued twice as a result of valuing both lost sales and impedance found to exist in the
Reference Period.212
6.93. The United States submits in addition that insofar as the European Union argues that the
Arbitrator must apply a "trade effects metric" and that metric compels the Arbit rator to disregard

208 European Union's written submission, fn 185. See also European Union's responses to first set of
Arbitrator questions, paras. 54-57; and response to Arbitrator question No. 107, para. 184.
209 European Union's written submission, para. 190; and responses to Arbitrator question Nos. 23 and
26. According to the European Union, "[t]he word 'trade' in 'trade effects' is to be interpreted in the broad
sense as 'transaction', or 'transfer of goods and services', not in the narrow sense as 'cross-border transaction'
(imports/exports)". (European Union's response to Arbitrator question No. 54, fn 20).
210 European Union's responses to Arbitrator question No. 23, paras. 354-358, 364-367, and 383
(asserting that "these arbitrat[ors] … based their findings on direct exports of goods and services that were
affected by the WTO-inconsistent measures at issue"), No. 24, para. 387, No. 26, No. 54, and No. 62, fn 260.
211 European Union's written submission, paras. 178, 184-187, 188, and fns 179 and 181-183 (inter alia
citing Panel Report, EC and certain member States – Large Civil Aircraft, para. 7.1724 (noting such
uncertainties)).
212 United States' written submission, paras. 129, 131, 146-149, 156-157, and 160-161; and response
to Arbitrator question No. 54.

lost sales claims, there is no textual basis for such an approach in the DSU or SCM Agreement, and
that there has been no rigid "trade effects metric" used in prior arbitrations.213
6.94. Finally, the United States rejects the European Union's argument that assigning the value of
future counterfactual deliveries that would have followed from Boeing winning the five lost sales to
the time of the lost sale (i.e. order) involves undue speculation, stating that the Arbi trator must
assume that all Boeing LCA that would have been ordered pursuant to the lost sales would also have
been delivered (i.e. there is no basis for considering the possibility of post-order developments such
as cancellations, conversions, or delivery delays); and that the European Union's advocated
methodology for valuing lost sales involves the same kinds of uncertainties as does the
United States'.214
6.95. The Arbitrator begins by noting that the European Union's overall argument in this context is
that it is improper to temporally assign both the value of impedance and lost sales to the 2011-2013
Reference Period, as proposed by the United States. The European Union mainly believes this to be
so because it is improper, in its view, to temporally assign the value of lost sales, specifically, to the
2011-2013 Reference Period. Thus, our analysis proceeds in three steps. First, we examine whether
it is reasonable to temporally assign the value of lost sales, specifically and in isolation from the
temporal assignment of the value of impedance, to the 2011 -2013 Reference Period. Second, we
examine whether it is reasonable to temporally assign the value of impedance, specifically and in
isolation from the temporal assignment of the value of lost sales, to the 2011-2013 Reference Period.
If we answer both questions in the affirmative, we then address the European Union's remaining
arguments as to whether it would be improper to temporally assign the value of both impedance
and lost sales, when considered together, to the 2011-2013 Reference Period.
6.3.3.2.1 Temporal assignment of the value of lost sales to the 2011 -2013 Reference
Period
6.96. In the compliance proceedings, the five lost sales were represented by orders for Airbus LCA
placed in the 2011-2013 Reference Period.215 Each order was for multiple Airbus aircraft. We agree
with the European Union that, if Boeing had won the lost sales, the resulting counterfactual deliveries
would all have occurred after the end of the 2011-2013 Reference Period.216 The main issue is thus
whether, under these circumstances, it is reasonable to temporally assign the value of the Boeing
LCA that would have been sold pursuant to each counterfactual Boeing LCA order to the time of that
counterfactual order (i.e. within the 2011 -2013 Reference Period as the United States requests)
rather than assign the value of each individual ordered Boeing LCA to the time of its counterfactual
delivery (i.e. outside the 2011-2013 Reference Period, as the European Union requests).217
6.97. In addressing this issue, we once again recall our mandate, which is to determine whether
the proposed level of countermeasures is commensurate with "the degree and nature of the adverse
effects determined to exist". We begin by examining the nature of lost sales. Lost sales are described
in Article 6.3(c), which provides:
[T]he effect of the subsidy is a significant price undercutting by the subsidized product
as compared with the price of a like product of another Member in the same market or
significant price suppression, price depression or lost sales in the same market[.]
6.98. Regarding the term "lost sales", the word "sale" is defined as "[t]he action or an act of giving
or agreeing to give something to a person in exchange for money ".218 This indicates that the event
that defines a "lost sale", in the context of a sale of goods, may either occur at the time when an

213 United States' written submission, paras. 133-136 and 148; and response to Arbitrator question No.
100, paras. 12-13 (citing Decision by the Arbitrator, US – FSC (Article 22.6 – US), para. 6.40).
214 United States' written submission, paras. 149, 158, and 163; response to Arbitrator question No. 58;
and response to European Union's question No. 1, para. 242.
215 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
paras. 5.716 and 5.731.
216 See section 6.3.4.3.5 below.
217 Under the United States' methodology, we recall that the United States considers that the value of a
lost sale is the present value of the Boeing LCA that were expected to be delivered pursuant to the order.
218 Shorter Oxford English Dictionary, 6th edn, A. Stevenson (ed.) (Oxford University Press, 2007),
Vol. 2, p. 2652.

agreement to exchange goods for money is concluded or when the physical "act" of exchanging
goods for money occurs. We consider it a reasonable proposition, therefore, that the economic value
of such an agreement would be the value of the goods sold pursuant thereto. Put another way, the
value of a "lost sale", when evidenced by an agreement constituting an order for subsequent delivery
of the purchased goods and assessed at the tim e of that agreement, would be the expected value
of the goods that would have been traded if the supplier that lost the sale had won the sale. In the
light of that observation, we discern no reason to think that that monetary value could not be
temporally assigned to the time of the agreement.219
6.99. We also contrast the language of Article 6.3(c) with that of Article 6.3(a) and (b), which
describe, inter alia , impedance and are part of the context of Article 6.3(c). The text of these
provisions reads as follows:
(a) the effect of the subsidy is to displace or impede the imports of a like product of
another Member into the market of the subsidizing Member;
(b) the effect of the subsidy is to displace or impede the exports of a like product of
another Member from a third country market[.]
6.100. These provisions reference "imports" and "exports", respectively, suggesting that impedance
is focused on physical movements of goods and arises at the time that "imports" or "exports" of the
complaining party's goods are physically "impeded" from a relevant geographic market. 220 Unlike
Article 6.3(a) and (b), Article 6.3(c) nowhere mentions "imports" or "exports". The immediate
context of Article 6.3(c) therefore indicates to us that the time at which lost sales can o ccur and
temporally valued need not be the time of the resulting physical transfer of goods from the seller to
the purchaser. Instead, the value of a lost sale can be determined at the time at which an agreement
to transfer goods in exchange for money is r eached. Thus, the economic value of that agreement
can be reasonably characterized as the expected economic value of the goods that would have been
traded if the supplier who lost the sale had won the sale.
6.101. The above observations are consistent with the manner in which lost sales were analytically
determined to exist in prior proceedings in this dispute. In both the original and compliance
proceedings, lost sales were determined to exist solely based on LCA order data, i.e. data pertaining
to the time at wh ich the agreements governing the eventual physical transfer of LCA were
concluded.221 In contrast, impedance was determined to exist solely based on LCA delivery data, i.e.
data pertaining to the time of the physical transfer of LCA. The choice to identify t hese adverse
effects in this manner was in large part based on the references in Article 6.3(a) and (b) to imports
and exports.222 It is thus clear that the five lost sales in this proceeding were found to have arisen
within the 2011-2013 Reference Period. This suggests to us that the economic value of those orders,
i.e. the expected value of the Boeing LCA that would have been traded had Boeing won the sale
instead, could also be temporally assigned to the 2011-2013 Reference Period.
6.102. We further note that lost sales must also be "significant" under Article 6.3(c).223 The original
panel identified certain factors that make lost sales significant, i.e. strategic importance, learning -

219 See Appellate Body Report, US – Large Civil Aircraft (2nd complaint) (Article 21.5 – EU), para. 5.331
(stating that "[i]n EC and certain member States – Large Civil Aircraft, the Appellate Body explained that 'lost
sales' are sales that suppliers of the complaining Member 'failed to obtain' and that instead were won by
suppliers of the respondent Member") (citing Appellate Body Report, EC and certain member States – Large
220 See Panel Report, US – Large Civil Aircraft (2nd complaint), para. 7.1685 (explaining that impedance
"can … only arise at the point at which LCA deliveries take place").
221 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
paras. 5.716 and 5.731 (stating that the five relevant orders for Airbus LCA in the 2011-2013 Reference Period
"represent" the lost sales). See also Appellate Body Report, US – Large Civil Aircraft (2nd complaint)
(Article 21.5 – EU), para. 5.338 (explaining that the existence of lost sales may be identified using "order data
alone").
222 Appellate Body Report, EC and certain member States – Large Civil Aircraft, para. 1217 (noting that
order data underlie the findings on lost sales); and Panel Report, EC and certain member States – Large Civil
Aircraft, paras. 7.1747-7.1751, 7.1774, and 7.1777.
223 The Appellate Body has explained that "'significant' means 'important, notable or consequential', and
that such a term, depending on the circumstances, could have both quantitative and qualitative aspects".
(Appellate Body Report, US – Large Civil Aircraft (2nd complaint) (Article 21.5 – EU), para. 5.332).

curve effects, incumbency, the number of LCA involved in a sale, and the "dollar amounts involved
in those sales".224 The compliance panel considered that "this description regarding the significance
of losing LCA sales to a rival LCA producer … remains, on the whole, an accurate depiction of the
significance of losing LCA sales to a rival LCA producer".225 On the basis of the same considerations
enumerated by the original panel, the compliance panel confirmed that the five lost sales at issue in
this proceeding were "significant".226 We thus note that the five significant lost sales at issue in this
proceeding were determined to exist in the 2011 -2013 Reference Period because, inter alia, the
orders themselves involved large monetary amounts. 227 This further suggests to us that the valu e
of the five lost sales can reasonably be described as the expected value of the Boeing LCA that would
have been traded had Boeing won the sales instead. It would therefore also appear reasonable to
temporally assign that value to the time of the lost sale, i.e. the 2011-2013 Reference Period.
6.103. This interpretation finds further support in the original panel 's descriptions regarding the
relationship between LCA orders and resulting LCA deliveries, the validity of which have remained
undisturbed during subseq uent stages of this dispute. In these descriptions, the original panel
emphasized that "[a]t the moment an order is placed, the terms and conditions of the delivery of
aircraft pursuant to that order will in large part be set. Aircraft specification, net p rice, discounts,
non-price concessions and financing arrangements will be determined at the time of order", including
the delivery schedules.228 Thus, the original panel observed that "orders are to some extent a proxy
for future deliveries", i.e. a proxy fo r expected resulting LCA trade flows. 229 Moreover, the original
panel indicated that rational economic actors would take such expectations arising from orders into
account in making valuation decisions: "Boeing and Airbus undoubtedly make future plans taking
into account their current order book, and … market actors will take the future flows from those
orders into account in evaluating each company".230
6.104. The foregoing discussion indicates that, in the particular context of our proceeding, the value
of LCA to b e traded pursuant to an LCA order could reasonably be assigned to the time of the
order.231 As described above, the lost sales in the present dispute were identified purely based on
LCA order data, and any value ultimately realized from LCA deliveries is dir ectly traceable and
attributable to their associated order and the terms that were set therein. LCA orders further specify
the amount of money that is to be exchanged in return for the ordered LCA, and a value can thus
be placed upon the orders.232 In other words, an LCA order contract is reasonably characterized as
having an expected economic value such that when the order is lost, the supplier who would have
won the sale in the relevant counterfactual (in this case, Boeing) can be said to have lost that
expected value at the time of the lost sale.

224 Panel Report, EC and certain member States – Large Civil Aircraft, para. 7.1845.
225 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.1798.
226 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.1798.
227 We note that this finding was made with the understanding that relatively [[***]] is actually
transferred to the LCA manufacturer upon order, and instead "[i]t is at the time of delivery that a manufacturer
receives the majority of proceeds from the sale of an aircraft". (Panel Report, EC and certain member States –
Large Civil Aircraft, para. 7.1749).
228 Panel Report, EC and certain member States – Large Civil Aircraft, para. 7.1750. See also
Appellate Body Report, US – Large Civil Aircraft (2nd complaint) (Article 21.5 – EU), paras. 5.335-5.336
(making similar observations); and Panel Report, EC and certain member States – Large Civil Aircraft,
para. 7.1719 (same).
229 Panel Report, EC and certain member States – Large Civil Aircraft, para. 7.1750.
230 Panel Report, EC and certain member States – Large Civil Aircraft, para. 7.1749.
231 We note that our valuation of the lost sales involves considerably more calculation than simply
summing the value of deliveries resulting from the lost sales, however. (See section 6.4.2 below). We further
note that the valuation involves discounting the delivery prices of Boeing LCA ordered in the counterfactual.
According to the European Union, "the arbitration panel in US – Gambling explicitly rejected the requesting
Member's request to include discounted future revenues in its award". (European Union's written submission,
para. 188 (citing Decision by the Arbitrator, US – Gambling (Article 22.6 – US), para. 3.144)). However, the
passage that the European Union cites in that arbitration decision does not impugn the propriety of discounting
as an economic tool that may be used in arbitration proceedings or suggest a different approach in this
proceeding.
232 We recognize, of course, that in this context we are actually valuing orders that do not exist, i.e.
counterfactual Boeing orders. We note, however, that counterfactual Boeing orders would be structured so as
to specify the amount of money to be exchanged for the LCA to be delivered pursuant to these orders. (See
section 6.3.4.3.6 below).

6.105. Post-order developments may affect the ultimate value that an LCA manufacturer realizes
from an LCA order. 233 These include cancellations, delivery delays, or even re -negotiations of the
terms of the sale. 234 Such factors can be taken into account when assessing what ultimate value
Boeing would have realized had it won the lost sales. As further discussed in section 6.3.4.3.2 below,
the manner in which the five relevant Airbus sales have in fact evolved after 2013 can be taken into
account in assessing how the counterfactual Boeing sales would have likely evolved had Boeing won
the lost sales instead. It would further be possible to adjust the value of the lost sales in the light of
the probability that certain other mat erial changes would arise, such as the chance that future
counterfactual deliveries would be cancelled. 235 We briefly note in this context that, particularly in
the light of the availability of such adjustments, we see no reason to think that the United States'
methodology involves unacceptable speculation.236
6.106. Moreover, we do not consider that prior dispute settlement practice provides a persuasive
reason to temporally assign the value of lost sales to the times of resulting deliveries rather than to
the time of order. The European Union stresses that most previous arbitrators have used a "trade
effects metric " in determining levels of countermeasures or suspension, a metric that the
European Union argues we should adopt here and that favours temporally assigning the value of lost
sales to the time of counterfactual deliveries rather than to the time of counterfactual order.237 The
term "trade effects"238 appears neither in the SCM Agreement nor the DSU.
6.107. To clarify the relevance of a trade effects metric, ther efore, we make two observations
regarding the arbitration decisions that the European Union maintains used this metric and that
support its argument. First, these arbitration decisions generally determined levels of
countermeasures or suspension of concessions based on the increased value of counterfactual trade
that the complaining party would have realized vis-à-vis a relevant good or service had the
responding party achieved compliance. We note that the method of valuing lost sales described
above is consistent with this in that it leads to an economic valuation of the additional Boeing LCA
that would have been traded had Boeing won the lost sales. In this sense, we consider that by
temporally assigning the value of counterfactual Boeing LCA deliveries to the time of the lost sale,
we would be using a trade effects metric. 239 Second, previous arbitrators appeared to temporally
assign the increased value of counterfactual trade to the time -period in which that counterfactual

233 Panel Report, EC and certain member States – Large Civil Aircraft, para. 7.1724 (explaining that
there are "many factors that can intervene between order and actual delivery" that affect the ultimate value
realized from an order).
234 Panel Report, EC and certain member States – Large Civil Aircraft, para. 7.2178.
235 See section 6.3.4.3.4.2 below.
236 Indeed, we note that under either the United States' or the European Union's approach, we would
have to estimate the probability and timing of essentially the same counterfactual Boeing deliveries.
237 The European Union argues that the arbitrators in the following disputes used the "trade effects"
metric: Decisions by the Arbitrators, US – Tuna II (Mexico) (Article 22.6 – US); US – COOL (Article 22.6 –
United States); US – Upland Cotton (Article 22.6 – US I); US – Upland Cotton (Article 22.6 – US II);
US – Gambling (Article 22.6 – US); US – Offset Act (Byrd Amendment) (Brazil) (Article 22.6 – US); EC –
Bananas III (Ecuador) (Article 22.6 – EC); EC – Hormones (US) (Article 22.6 – EC); EC – Hormones (Canada)
(Article 22.6 – EC); and EC – Bananas III (US) (Article 22.6 – EC). (European Union's responses to Arbitrator
question No. 23, para. 364, and No. 26, para. 406). We note that the recent decision by the arbitrator in the
US – Washing Machines dispute also adopted a "trade effects" approach, i.e. measuring levels of nullification or
impairment with respect to counterfactual imports of Korean products into the United States. (Decision by the
Arbitrator, US – Washing Machines (Article 22.6 – US), paras. 3.7, 3.112-3.118, 4.57, 4.117, and 5.1-5.3).
238 The European Union cites certain arbitration decisions and panel reports using, inter alia, the terms
"trade effects", "trade-distorting impact", and "volumes and prices and flows of such trade" when discussing
the effects of subsidies and/or the character of adverse effects. (European Union's written submission,
paras. 63 and 157; and response to Arbitrator question No. 26, paras. 399-402 and fn 433). No cited passage,
however, specifically delineates the precise content of these phrases as used, and none addresses the kind of
issue surrounding the temporal assignment of counterfactual trade flows that we address here. Thus, we
consider that these terms and the passages in which they appear add little insight to our discussion here.
239 We note, however, that the term "trade effects" should not be understood to refer to only
international trade. Such a narrow understanding would be neither legally appropriate nor workable in this
proceeding where we must quantify certain identified "adverse effects" within the meaning of Article 5 of the
SCM Agreement. Indeed, one "lost sale" finding at issue in this proceeding involved United Airlines, a
United States airline customer. In the counterfactual, therefore, a United States supplier (Boeing) would have
supplied LCA to a United States airline customer (United Airlines). This would have represented domestic, not
international, trade. (See also footnote 35 of the SCM Agreement (envisioning countermeasures implemented
under Part III of the SCM Agreement being applied vis-à-vis "the effects of a particular subsidy in the domestic
market of the [implementing] Member")).

trade would have occurred (i.e. the time when the imports or exports of relevant goods or services
occurred). We thus note that under the United States' approach – at least with respect to valuing
lost sales – we would, somewhat differently, temporally assign the value of increased counterfactual
trade in United States LCA to the time of the counterfactual order that would have given rise to, and
specified the value of, the physical counterfactual trade (i.e. subsequent deliveries).
6.108. Regarding this limited difference between the United States' advocated approach and the
approach of the arbitrators that the European Union cites, however, we make the following related
observations.
6.109. To begin with , the European Union cites no prior arbitration decision that indicate s that it
would be improper to temporally assign the value of goods sales to a time other than the t ime of
physical transfer of the goods, and we are aware of none that did so.
6.110. Moreover, the United States' approach appears consistent with what we consider to be the
fundamental purpose of arbitrations conducted under Article 22.6 of the DSU. We note that the
arbitrator in US – Section 110(5) Copyright Act (Article 25)240 stated that "for purposes of these
arbitration proceedings, the relevant [lost] benefits [to be valued] are those which are economic in
nature. This is consistent with previous decisions of arbitrators acting under Article 22.6 of the
DSU".241 A subsequent arbitrator acting under Article 22.6 cited this passage while discussing the
valuation methods used by previous arbitrators, during which the arbitrator noted that such previous
arbitrators did not exclusively use a trade effects approach to valuing the relevant economic impact
of the measures in question. 242 We, too, agree with these general observations, i.e. that,
fundamentally, arbitrators acting under Article 22.6 value economic effects of measures. Indeed,
with the exception of certain arbitrations conducted under Article 4.11 of the SCM Agreement243,
arbitrators acting under Article 22.6 of the DSU and Article 7.10 of the SCM Agreement have valued
the economic impact of the measures at issue . This is so whether arbitrators employed a "trade
effects" metric, as the European Union uses that term, or valued the relevant economic impact of
the measures at issue in other ways. 244 Therefore, we consider that, in keeping with our mandate,
our task is to place an economic value on "the adverse effects determined to exist" in the Reference
Period, i.e. the five lost sales and six instances of impedance to the United States.
6.111. Finally, we note that this proceeding involves novel legal and factual circumstances. No prior
arbitrator has valued "lost sales" within the meaning of Article 6.3(c), let alone lost sales involving
goods the sales of which display multi-year lag times between their order and delivery as LCA sales
do. We further recall that the SCM Agreement directs us to value lost sales the existence of which
was determined by assessing the facts at the time of the relevant sale rather than at the time of
any deliveries. Thus, it seems to us only natural that certain differences in our valuation method and
those of prior arbitrators might arise.

240 Although this arbitration was not conducted under Article 22.6 of the DSU, the arbitrator considered
its task essentially was to quantify the level of "nullification or impairment" of the measure in question. (Award
of the Arbitrator, US – Section 110(5) Copyright Act (Article 25), para. 2.7).
241 Award of the Arbitrator, US – Section 110(5) Copyright Act (Article 25), para. 3.18 (citing Decisions
by the Arbitrators, EC – Bananas III (Ecuador) (Article 22.6 – EC); EC – Hormones (Canada) (Article 22.6 –
EC); EC – Hormones (US) (Article 22.6 – EC); and EC – Bananas III (US) (Article 22.6 – EC)). (emphasis
added) The arbitrator reasoned that this was so in view of "the object of the present proceedings, which is to
quantify the economic harm suffered by the European Communities as a consequence of the continued
application of [the measure at issue]". (Award of the Arbitrator, US – Section 110(5) Copyright Act (Article 25),
fn 38). (emphasis added)
242 Decision by the Arbitrator, US – Offset Act (Byrd Amendment) (Brazil) (Article 22.6 – US),
paras. 3.38-3.40. That arbitrator emphasized that because "nullification or impairment is [not] limited in all
instances to the direct trade loss resulting from the violation", "the 'trade effect' approach … regularly applied
in other Article 22.6 arbitrations … seems to be generally accepted by Members as a [but not the only] correct
application of Article 22 of the DSU". (Decision by the Arbitrator, US – Offset Act (Byrd Amendment) (Brazil)
(Article 22.6 – US), paras. 3.69 and 3.71). (emphasis original)
243 The arbitrators in Canada – Aircraft Credits and Guarantees (Article 22.6 – Canada), US – FSC
(Article 22.6 – US), and Brazil – Aircraft (Article 22.6 – Brazil) used the value of the export subsidy to calculate
their countermeasures.
244 The arbitrator in US – 1916 Act (Article 22.6 – US) based the maximum levels of suspension on the
sum of future final monetary judgments awarded against EC companies under the 1916 Act and future
settlement awards entered into by EC companies under the 1916 Act. (See also Award of the Arbitrator,
US – Section 110(5) Copyright Act (Article 25) (royalty income lost by EC copyright holders)).

6.112. In sum, we thus do not consider that temporally assigning the value of lost sales to the time
of the relevant orders is inconsistent with persuasive content of prior arbitrator decisions.
6.113. It emerges from the totality of the foregoing considerations that the operative question for
us is whether the United States' approach reasonably captures the economic impact that A380 and
A350XWB LA/MSF caused to the interests of the United States during the 2011 -2013 Reference
Period. In the case of lost sales, our legal and analytical task is to place an econom ic value on the
five lost sales . We thus must determine in an economically appropriate manner the value of the
associated lost orders during the Reference Period. As explained above, and consistent with
statements by prior WTO adjudicators in this dispute, it is in our view an economically reasonable
proposition that the economic value of the five lost sales, which occurred in the 2011-2013 Reference
Period, is the expected value of the additional Boeing LCA that would have subsequently been traded
had Boeing won those lost sales. Thus, we find it appropriate to temporally assign that value to the
2011-2013 Reference Period.
6.114. For all the foregoing reasons, we consider that in the circumstances of this proceeding we
should place a value upon the orders that represent the lost sales, i.e. the value of the LCA expected
to be delivered pursuant thereto, and assign that value to the time of the order, i.e. within the 2011-
2013 Reference Period. Doing so is consistent with, and follows from, our legal mandate and proper
economic valuation of LCA lost sales. Prior arbitration decisions provide no material reason to adopt
a different approach. Any differences that arise between our valuation methodology and
methodologies adopted in prior decisions are a function of the circumstances present in this
proceeding, including with regard to what the underlying legal provisions require us to value in the
context of the facts of this dispute.
6.3.3.2.2 Temporal assignment of the value of impedance to the 2011 -2013 Reference
Period
6.115. Turning to the issue of whether it is reasonable to temporally assign the value of impedance
to the 2011-2013 Reference Period, we note as an initial matter that neither party argues that it is
improper to temporally assign the value of the six instances of impedance to the 2011 -2013
Reference Period (if impedance is considered in its own right and separately from the temporal
allocation of the five lost sales). The six instances of impedance were found to exist in the 2011-2013
Reference Period based on LCA deliveries that occurred in that time -frame. This method of
identifying impedance accords with the nature of impedance as described in Article 6.3(a) and (b).
As already discussed above, these provisions refer to imports and exports, thus indicating that they
are focused on the time at which physical transfers of goods occur.
6.116. All of the A380 deliveries upon which the impedance findings were based 245 are the
consequence of orders by the airlines concerned that were placed at an earlier point in time, which
precedes the 2011-2013 Reference Period.246 These orders were not determine d to constitute lost
sales within the meaning of Article 6.3(c) in the prior compliance proceedings, however. There is
therefore no legal basis on which we could properly determine the value of those orders in this
proceeding. What we must value instead ar e the six instances of impedance that occurred during
the 2011-2013 Reference Period. Those six instances of impedance caused identifiable economic
harm to the United States between 2011 and 2013. As far as the quantification of that harm is
concerned, it in our view corresponds to the value of the additional Boeing LCA that would have
been delivered to the six geographic markets in question, during the 2011 -2013 Reference Period,
had no impedance occurred.
6.117. For these reasons, we agree with the parties and t emporally assign the economic value of
the six instances of impedance, and more concretely the value of the corresponding counterfactual
Boeing LCA deliveries to the relevant geographic markets, to the 2011 -2013 Reference Period,
during which the deliveries would have occurred.

245 These deliveries are contained in Table 12 below.
246 This information regarding the times of the orders underlying the deliveries upon which the
impedance findings were based is derived from Exhibits EU-79 and EU-125 (HSBI)-132 (HSBI).

6.3.3.2.3 Temporal assignment of the value of both lost sales and impedance to
the 2011-2013 Reference Period
6.118. We recall that the European Union's overall argument is that the Arbitrator cannot temporally
assign both the value of lost sales and impedance to the 2011 -2013 Reference Period. Having
determined above that it is reasonable to temporally assign the value of the five lost sales and the
six instances of impedance to the 2011 -2013 Reference Period, when considering each in isolation
from the other, we thus proceed to consider whether it is permissible to assign the value of both the
lost sales and impedance to the 2011-2013 Reference Period when considering them together.
6.119. At the outset, we note that Articles 5 and 6 of the SCM Agreement describe multiple kinds
of adverse effects. Article 7.10 therefore clearly envisions that an arbitrator may assess multiple
kinds of different adverse effects, the "degree and nature " of which may differ. While the
Appellate Body has noted that there is pote ntial overlap between the concepts of lost sales and
impedance, "in that both phenomena relate to a firm 's sales", it has "stressed the distinct features
of market displacement and impedance claims, compared with significant lost sales, rejecting the
notion of a 'dependent relationship' between them".247
6.120. We further note that there is no actual overlap between the five lost sales and six instances
of impedances determined to exist in the 2011-2013 Reference Period. That is, the Arbitrator counts
the value of n o counterfactual Boeing LCA twice in determining the maximum level of Annual
Suspension. This is so because none of Airbus LCA deliveries that occurred as a result of the five
lost sales underlie any of the six instances of impedance. Moreover, we note tha t, following from
this, none of the counterfactual Boeing LCA deliveries that would have occurred as a result of the
five lost sales (had Boeing won them) are valued as counterfactual Boeing LCA deliveries that were
impeded in the six relevant geographic markets.
6.121. We also consider the European Union's analogy to accounting practices in the private sector
to be inapposite. It may be the case, as the European Union asserts, that companies in the private
sector would assign the value of goods that they sell to the time of the order or the resulting
deliveries, but not both. However, we operate under a legal framework that is different from the one
applicable to such companies. Our mandate is to value the adverse effects determined to exist,
which in this proceeding encompass both lost sales and impedance.
6.122. We thus see no reason to find that temporally assigning the value based on the time of order
in the case of lost sales and based on the time of delivery in the case of impedance, is "inconsistent",
as the European Union argues. Insofar as the temporal assignment of the value of these two types
of adverse effects differs, this reflects their different nature. Consequently, the underlying findings
that provide the basis for the United States Article 22.2 request and this arbitration proceeding lead
us to value the five lost sales by reference to the time of order and the six instances of impedance
by reference to the time of delivery. On that basis, we find that it is proper to assign both the value
of lost sales (based on counter factual Boeing orders) and impedance (based on counterfactual
Boeing deliveries) to the 2011-2013 Reference Period.
6.3.3.3 Inclusion of both lost sales and impedance in determining the maximum level of
Annual Suspension: "Double-counting"
6.123. The European Union argues that if the Arbitrator determines a level of Annual Suspension
based on the value of both the lost sales and impedance determined to exist during the 2011-2013
Reference Period, this would result in impermissible "double-counting". That term, according to the
European Union, refers to "the risk of counting the same lost sales transaction twice – once as a lost
sale (in the form of orders), and once as an instance of impedance (in the form of deliveries) ".248

247 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.1808
(quoting Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 1240). (fn omitted) See also
Panel Reports, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), paras. 6.1807-6.1809
(rejecting European Union's argument that impedance and displacement must be predicated on findings of lost
sales and quoting Appellate Body Report, US – Large Civil Aircraft (2nd complaint), para. 1241 in support of its
reasoning); and EC and certain member States – Large Civil Aircraft, para. 7.1751 (rejecting European Union's
argument that displacement and impedance must be demonstrated "on a sale by sale basis").
248 European Union's response to Arbitrator question No. 56, fn 38.

The European Union asserts that this risk arises because "a given order in one year will turn into a
delivery a few years later ".249 Thus, the European Union asserts that Annual Suspension based on
both lost sales and impedance would capture the value of a "lost sale" in the form of LCA orders in
the year in which the order occurred, and then capture the value of the same transaction again when
the deliveries resulting from the lost order occur as instances of impedance in the years in which the
deliveries occur (usually a few years after the order). The Eu ropean Union agrees with the
United States, however, that there is no double -counting within the 2011 -2013 Reference Period,
i.e. none of the five lost sales resulted in any of the deliveries that occurred in the 2011 -2013
Reference Period upon which the impedance findings were based.250
6.124. The United States argues that no impermissible double -counting, as the European Union
uses that term, arises if the Arbitrator values both the five lost sales and six instances of impedance
in the 2011 -2013 Reference Period and determines a level of Annual Suspension based on that
amount. In the United States' view, this is so because (a) none of the orders associated with the
lost sales in the 2011-2013 Reference Period resulted in any of the deliveries evidencing impedance
in the 2011-2013 Reference Period, (b) lost sales and impedance are distinct forms of adverse effects
under Article 6 of the SCM Agreement, and (c) there is no textual basis in the SCM Agreement for
offsetting one form of adverse effect against another in the manner the European Union advocates.
The United States further notes that its methodology makes no assumptions about the geographic
markets in which lost sales and impedance would occur in years after 2013, and thus there is no
basis upon which to find that double-counting will arise even if the Arbitrator were to consider post-
2013 adverse effects in determining the maximum level of countermeasures.251
6.125. The Arbitrator notes that double-counting, as the European Union uses that term, could only
arise if the Arbitrator 's determination of the maximum level of Annual Suspension were to include
both the value of an LCA order at issue that represents a lost sale and the value of an LCA delivery
representing impedance and flowing from that same previous lost sale. 252 No such situation arises
in this proceeding.
6.126. As explained above in section 6.3.1, we determine the maximum level of Annual Suspension
with sole reference to the five lost sales and six instances of impedance determ ined to exist in the
2011-2013 Reference Period. Further, none of the orders associated with the five lost sales in the
2011-2013 Reference Period resulted in any of the deliveries evidencing the six instances of
impedance in the 2011-2013 Reference Period.253 Thus, we do not determine the maximum level of
Annual Suspension with respect to any LCA orders and deliveries with respect to which double -
counting may arise. We accordingly reject the European Union's argument concerning the risk of
double-counting.
6.3.3.4 Setting of an end -date for countermeasures based on counterfactual Boeing
deliveries resulting from the adverse effects determined to exist
6.127. The European Union argues that countermeasures must have a pre -determined end-date
that corresponds to the date of th e final counterfactual Boeing LCA delivery related to the adverse
effects determined to exist in the 2011 -2013 Reference Period. Specifically, the European Union

249 European Union's written submission, paras. 191-195. See also European Union's responses to
Arbitrator question No. 13, paras. 299-300, and No. 62, para. 188 (asserting that the United States' request
for Annual Suspension is based on the notion that lost sales and impedance caused by subsidies continue after
2013).
250 European Union's responses to first set of Arbitrator questions, para. 53 and fn 58; and responses to
Arbitrator question No. 13, No. 23, para. 380, No. 24, paras. 385 and 389, No. 57, paras. 123-132, and
No. 107, paras. 190-192.
251 United States' written submission, paras. 129-131 and 159-162; response to Arbitrator question
No. 19, para. 29; and comments on the European Union's response to Arbitrator question No. 107, paras. 168-
174.
252 We note that "double-counting" is thus distinct from "over-counting". The former issue arises in this
context only if the Arbitrator grants countermeasures in the form of Annual Suspension based on the value of
both lost sales and impedance in the 2011-2013 Reference Period. The latter arises under any structure of
countermeasures that is granted based on the value of both lost sales and impedance in the 2011-2013
Reference Period.
253 United States' written submission, para. 162; and European Union's response to Arbitrator question
No. 24, para. 385. Our analysis of the data on the record provides no basis upon which to question the parties'
shared position in this context.

notes that "final delivery of an aircraft related to the specific adverse effects determined t o exist is
expected for 2026. According to the European Union, this means that any authorization to impose
countermeasures must also end no later than 2026".254
6.128. The United States argues that the European Union's argument fails because it "is based on
the erroneous premise that the countermeasures in present and future years are meant to capture
deliveries in those years of aircraft ordered in the specific 2012 and 2013 sales campaigns that
provided the basis for the significant lost sales findings".255
6.129. The Arbitrator notes that the European Union's argument would have us set a firm end-date
for countermeasures based on expected final counterfactual delivery dates. This argument rests on
the validity of other European Union arguments that concern the appropriate ness of granting
countermeasures in the form of Annual Suspension and that we rejected in preceding sections. We
also recall that we do not in this proceeding ultimately value the counterfactual deliveries of aircraft
originating in lost sales found to exist in the 2011-2013 Reference Period at the time of their delivery.
The date of the last counterfactual delivery of a relevant Boeing LCA that the European Union expects
to take place therefore does not provide, under our valuation methodology, a relevant end-date. As
explained, the specific end-date for any countermeasures that the United States imposes in the form
of Annual Suspension will be determined by such possible developments as new DSB -adopted
findings confirming that the European Union has brought itself into conformity or a mutually agreed
solution reached by the parties. We accordingly reject the European Union's argument.
6.3.3.5 Exclusion of the value of Boeing LCA components produced outside the
United States
6.130. As noted in section 6.1, the United States requests countermeasures in the form of Annual
Suspension, the level of which is based on the value of the additional Boeing LCA that would h ave
been (a) sold had Boeing won the lost sales and (b) delivered had Boeing not suffered impedance.
6.131. The European Union argues that the Arbitrator cannot consider the total value of such Boeing
LCA in determining the maximum level of countermeasures. Rathe r, according to the
European Union, the Arbitrator should exclude, from the value of any Boeing LCA that the Arbitrator
includes in its calculation of the level of countermeasures, the value of components incorporated
into those Boeing LCA provided by "suppliers from other Members ".256 In support of this position,
the European Union notes that the language contained in Article 5(c) of the SCM Agreement
indicates that adverse effects in the form of "serious prejudice" are by definition tied to the manner
in which they specifically "affect the interests of 'another Member', rather than all Members ".257
Therefore, taking into consideration this language, the European Union asserts that the Arbitrator
should exclude from the level of countermeasures the value of adv erse effects to the interests of
Members other than the United States, i.e. the value of components incorporated into those Boeing
LCA added by "suppliers from other Members ". According to the European Union, this is so even
though the adverse effects findings in the prior compliance proceedings pertain to LCA, rather than
components of LCA, because Members other than the United States suffered economic harm as a
result of lost sales or impedance of Boeing aircraft.258
6.132. The European Union claims that the deci sion of the arbitrator in US – Upland Cotton
(Article 22.6 – US II) supports its position. The European Union asserts that, in that dispute, the
compliance panel and the Appellate Body determined that "the effect of the subsidies at issue was
significant price suppression within the meaning of Article 6.3(c) of the SCM Agreement in the world

254 European Union's written submission, para. 148. (fn omitted) See also European Union's written
submission, paras. 143-148 and 370-372.
256 The European Union suggests that these are suppliers whose "locus of production activity and actual
value creation" is outside the United States. (European Union's response to Arbitrator question No. 95,
para. 18). Further, the European Union argues that neither the ownership structure of the firm producing the
input nor the "origin" of the input as determined by a Member based on its own rules of origin can be used as
metrics for determining whether the inputs are non-US inputs. (European Union's response to Arbitrator
question No. 95, paras. 16-18).
257 European Union's written submission, para. 356 (citing Decision by the Arbitrator, US – Upland
Cotton (Article 22.6 – US II), para. 4.75). (emphasis original)
258 European Union's response to Arbitrator question No. 49, para. 487.

market for upland cotton constituting 'present' serious prejudice to the interests of Brazil within the
meaning of Article 5(c) of the SCM Agreement". The arbitrator, according to the European Union, in
determining the level of countermeasures for Brazil, "limited the level of countermeasures to reflect
only the extent to which Brazil was actually affected … [and] determined that it would not consider
adverse effects by worldwide cotton producers as a result of the [ United States subsidies at
issue]".259 The European Union submits that this Arbitrator should apply the same standard, i.e. limit
the level of countermeasures to the adverse effects sustained by the United States and exclude from
its calculation adverse effects sustained by other WTO Members.260
6.133. Additionally, the European Union argues that if the level of countermeasures that the
United States will be authorized to take is not limited to the adverse ef fects sustained by the
United States, this could result in double remedies against the European Union. The European Union
asserts, for example, that Japan – a major supplier of fuselage and wing components for Boeing LCA
– could bring a dispute against the European Union that it sustained adverse effects resulting from
lost sales or impedance of Boeing aircraft, which would have incorporated those Japanese
components. The European Union submits that if Japan succeeded in such a claim, it could potentially
receive authorization to take countermeasures against the European Union vis-à-vis the value of
those Japanese components, even though the United States had already received authorization to
take countermeasures in an amount that included the value of those same components as
incorporated into Boeing LCA as a result of this proceeding.261
6.134. The United States rejects the European Union's request for exclusion of the value of non -
United States (US) inputs from the value of Boeing LCA for the purpose of calculating the level of
countermeasures. The United States advances three main arguments in support of its position. First,
the United States argues that the adopted findings in this dispute pertain to LCA, not components
of LCA. The United States therefore submits that the European Union's approach cannot be squared
with the findings adopted by the DSB.262
6.135. Second, the United States argues that the premise of the European Union's argument on
double remedies, as the European Union uses that term, was rejected by the arbitrator in
EC – Bananas III (US) (Article 22.6 – EC). The United States submits that that arbitrator explained
that "the theoretical issue of double counting raised by the European Union is avoided because
Members cannot receive rights to impose countermeasures for these types of 'indirect' upstream
effects".263
6.136. Finally, the United States notes that when it applies countermeasures to imports of goods
from the European Union, it will base its application of tariffs on th e entire value of the imported
goods, without respect to the extent to which they incorporate non -European-Union inputs. The
United States thus submits that, to ensure an "apples-to-apples comparison ", the level of
countermeasures must be stated as a value of the adverse effects with respect to the entire value
of relevant Boeing LCA as a product. According to the United States, this should be done without
regard to whether such Boeing LCA incorporate non-US inputs.264
6.137. Regarding this latter United States' argument, the European Union responds that any
consideration related to how the United States intends to implement countermeasures is outside the
mandate of this Arbitrator because it pertains to "the nature of the concessions or other obligations
to be suspended", which Article 22.7 of the DSU bars the Arbitrator from considering.265
6.138. The Arbitrator notes that the question presented in this context is whether the value of
components produced by "suppliers from [non -US] Members" and incorporated into Boeing LCA

259 European Union's written submission, para. 358.
260 European Union's written submission, paras. 358 and 361. The European Union has alternatively
characterized the effect felt by Members other than the United States from lost sales and impedance to Boeing
aircraft as "adverse effects", "economic harm", "trade effects" and "lost revenues".
261 European Union's response to Arbitrator question No. 95, paras. 2-4.
263 United States' comments on the European Union's response to question No. 95, para. 5 (citing
Decision by the Arbitrator, EC – Bananas III (US) (Article 22.6 – EC), paras. 6.6-6.18).
264 United States' written submission, paras. 264-265.
265 European Union's response to Arbitrator question No. 49, para. 493 (citing Decision by the Arbitrator,
EC – Hormones (US) (Article 22.6 – US), para. 19).

should be excluded from the value of Boeing LCA in determining the level of countermeasures that
the DSB can authorize the United States to take.
6.139. Our mandate is to determine the level of "countermeasures … commensurate with the degree
and nature of the adverse effects determined to exist ". In this dispute, the compliance panel and
the Appellate Body found that the European Union and certain of its member States had failed to
comply with the DSB recommendations and rulings and, in particular, the obligation under Article 7.8
of the SCM Agreement "to take appropriate steps to remove the adverse effects or … withdraw the
subsidy by continuing to be in violation of Articles 5(c) and 6.3(a) -(c) of the SCM Agreement".266
The specific type of adverse effect that w as determined to exist was "serious prejudice" within the
meaning of Article 5(c) in the forms of lost sales and impedance within the meaning of
Article 6.3(a)-(c).
6.140. Article 5(c) provides that "[n]o Member should cause, through the use of any subsidy …
adverse effects to the interests of other Members ", including "serious prejudice to the interests of
another Member". The adopted findings in this dispute indicate that the European Union "cause[d]"
"serious prejudice " to the United States' "interests". Those findings mention no other Members '
interests in this respect. 267 Therefore, considering that the findings of the compliance proceedings
provide the basis for this arbitration proceeding, we focus on the United States' interests in this
proceeding.
6.141. We further note that Article 6.3(a)-(c) provides that the specific types of serious prejudice
contained therein arise with respect to a "like product of another Member".268 The adopted findings
on the specific types of serious prejudice in this dispute, i.e. lost sale s and impedance, pertain to
LCA – which is the product at issue in this dispute. 269 We further note that during the 2011 -2013
Reference Period LCA were only produced by two Members, i.e. the European Union (Airbus) and
the United States (Boeing).270 Therefore, the adverse effects determined to exist in this proceeding
relate to one specific product, i.e. Boeing LCA.
6.142. In sum, the adverse effects determined to exist in this proceeding are those suffered by one
Member, the United States, and with referen ce to one product, Boeing LCA. We thus reject the
European Union's position that the adverse effects in this proceeding can be considered to have been
suffered by the United States and additional Members, or with reference to any product other than
Boeing LCA. We see no legal basis for considering any adverse effects possibly suffered by other
Members or determining the maximum level of countermeasures with reference thereto.271
6.143. Contrary to the European Union's suggestion, we consider the result reached in US – Upland
Cotton (Article 22.6 – US II) consistent with our interpretation of our mandate. In that dispute, the
findings in the underlying compliance proceedings were based on a determination that the subsidies
at issue caused significant price suppression within the meaning of Article 6.3(c) in the world market
for upland cotton, constituting serious prejudice to the interests of Brazil within the meaning of

266 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 6.43; and Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 7.2.
267 The compliance panel and the Appellate Body found that the LA/MSF subsidies at issue are a genuine
and substantial cause of significant lost sales and impedance "constituting serious prejudice to the interests of
the United States within the meaning of Article 5(c) of the SCM Agreement". (Appellate Body Report, EC and
certain member States – Large Civil Aircraft (Article 21.5 – US), paras. 5.716, 5.731, 5.742, 6.31, 6.37, 6.42,
and 6.43; and Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
paras. 7.1.d.xiv, 7.1.d.xv, and 7.1.d.xvi).
268 See Article 6.3 of the SCM Agreement.
269 Panel Reports, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 1.32;
and EC and certain member States – Large Civil Aircraft, para. 2.1. We note that in the compliance
proceedings, the panel and Appellate Body found that there were three relevant LCA product markets, i.e.
single-aisle, twin-aisle, and VLA. This does not change the fact, however, that the overall product at issue is
LCA.
270 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.1215
(noting that "as it was during the original proceeding, the LCA industry continues to be characterized by what
is effectively an Airbus-Boeing duopoly"). We note that this Airbus-Boeing duopoly would also be the situation
in the relevant counterfactual. (See paragraph 6.79 above).
271 We also note that it is not within our mandate to determine whether lost sales or impedance of
Boeing LCA resulted in "economic harm" to Members other than the United States.

Article 5(c) of the SCM Agreement.272 Thus, the adverse effects determined to exist in that
proceeding were those suffered by one Member, Brazil, and with reference to one product, upland
cotton, which was the like product within the meaning of Article 6.3(c).273 On that basis, the
arbitrator determined the level of countermeasures with reference to the eco nomic impact of the
price suppression on upland cotton from Brazil274, and excluded from the level of countermeasures
the economic impact of the price suppression for upland cotton on Members other than Brazil. The
arbitrator conducted no inquiry into the va lue of any non -Brazilian cotton inputs (e.g. foreign
fertilizers used to grow Brazilian upland cotton) and did not exclude the value of such inputs from
the level of countermeasures.
6.144. Furthermore, we are aware of no previous arbitrator that has excluded th e value of inputs
not produced in the territory of the complaining party from the value of the product(s) at issue in
determining the level of countermeasures or the level of suspension of concessions or other
obligations. Indeed, one arbitrator suggested that it would be improper to do so. In EC – Bananas
III (US) (Article 22.6 – EC)275, the United States submitted that the arbitrator should take into
account the value of US inputs used in Latin American banana production (e.g. United States
fertilizer, pest icides and machinery shipped to Latin America and United States capital or
management services used in banana cultivation there) in determining the level of nullification or
impairment sustained by the United States. The arbitrator, however, declined to attribute the value
of intermediate inputs to the Member (the United States) that was producing or exporting such
inputs in its calculation of the level of suspension, basing its reasoning on considerations relating to
rules of origin.276 The arbitrator reasoned that it was evident from applicable rules of origin that the
place of origin of the end product, bananas, is the country where the bananas were grown.277 More
pertinent to the circumstances of that proceeding, the arbitrator noted that the right to seek redress
under the DSU for nullification or impairment caused with respect to the final product at issue lies
with the Members that were the countries of origin of that final product, and not with any other
Member supplying certain inpu ts for such products. Consequently, it found that "there is no right
and no need under the DSU for one WTO Member to claim compensation or request authorization to
suspend concessions for the nullification or impairment suffered by another WTO Member with
respect to goods bearing the latter 's origin or service suppliers owned or controlled by it ".278 In
short, once the final product was determined to "originate" in a certain Member, the entire value of
that product was assigned to that Member for the purpose of calculating the level of nullification or
impairment. We thus note that a previous arbitrator, when confronted with a position similar to the
European Union's argument here, rejected that position.
6.145. Fundamentally, the European Union's argument hinges on the notion that it is improper to
include in the assessment of the maximum level of countermeasures the value of a Boeing LCA that
is not attributable to US inputs. Taken to its logical end, this argument would have the United States
trace the value of Bo eing LCA back through the supply chain to the level of raw materials and
ascertain the source of each of the hundreds of components, as we could apportion countermeasures

272 Appellate Body Report, US – Upland Cotton (Article 21.5 – Brazil), para. 448(c); and Panel Report,
US – Upland Cotton (Article 21.5 – Brazil), para. 10.256.
273 Panel Reports, US – Upland Cotton (Article 21.5 – Brazil), para. 10.42; and US – Upland Cotton,
fn 258.
274 Decision by the Arbitrator, US – Upland Cotton (Article 22.6 – US II), paras. 4.88 and 4.89 (noting
that the findings in the compliance proceedings involve "'serious prejudice' to the interests of Brazil
specifically").
275 We note that this was an arbitration that was conducted exclusively under Article 22.6 of the DSU.
However, as noted in paragraph 3.4 above, to the extent that we are governed by Article 22.6 as well, we find
the decision by the arbitrator in EC– Bananas III (US) (Article 22.6 – EC) relevant to our determination.
276 Decision by the Arbitrator, EC – Bananas III (US) (Article 22.6 – EC), paras. 6.12–6.13.
277 Decision by the Arbitrator, EC – Bananas III (US) (Article 22.6 – EC), para. 6.13. It is worth quoting
in full the reasoning of the arbitrator:
WTO Members typically determine the origin of agricultural products based on the place of
production. In principle, every banana has the origin of the country where it was grown. For
purposes of WTO rules it is irrelevant whether goods or services (e.g. fertilizer, machinery,
pesticides, capital and management services) used as intermediate inputs in the cultivation of
bananas and their delivery up to the f.o.b. stage are of US origin even if US content should
amount to a significant part of the end-product's value. Also, under US rules of origin bananas
grown in Puerto Rico or Hawaii are US products regardless of the percentage of foreign input
incorporated in them or used for their cultivation.
278 Decision by the Arbitrator, EC – Bananas III (US) (Article 22.6 – EC), para. 6.14.

to the United States only insofar as it was the source of such inputs.279 This would make the exercise
of calculating the level of countermeasures "time consuming and exceedingly complicated ", as the
European Union itself notes.280 We have difficulty squaring this argument with the expeditious nature
of Article 22.6 arbitration proceedings, especially in the light of the fact that LCA production is not
unique in relying on complex and dynamically optimized international supply chains.
6.146. Additionally, we observe that were we to exclude the value of non-US LCA components from
the maximum level of c ountermeasures, we would weaken the effectiveness of the WTO dispute
settlement mechanism and diminish the compliance -inducement function of countermeasures.
Indeed, the more internationalized the production of an export good is, the more difficult it woul d
be, in practice, for the Member exporting the final good to induce compliance through
countermeasures.281 In our view, this would undermine the security and predictability of the
multilateral trading system.
6.147. Finally, we note the European Union's concern about double remedies, arising from other
Members whose producers supply inputs to Boeing for incorporation into Boeing LCA bringing claims
against it. In the present dispute, no other Member has come forward to challenge the subsidies at
issue since the United States filed its request for consultations in 2004. Moreover, the risk of input-
producing Members bringing their own disputes against the same responding party (i.e. the party
that maintains a WTO-inconsistent measure against the final product that i ncorporates the inputs)
existed in other disputes in which arbitrations under Article 22.6 were conducted, and we are not
aware of any specific adjustments made by those arbitrators in view of that risk . Finally, we recall
that one previous arbitrator expl ained that producers of intermediate inputs cannot "claim
compensation or request authorization to suspend concessions for the nullification or impairment
suffered by another WTO Member with respect to goods bearing the latter 's origin or service
suppliers owned or controlled by it".282
6.148. In the light of the above considerations, we decline to exclude the value of LCA components
produced by suppliers from outside the United States and incorporated into Boeing LCA from the
total value of Boeing LCA in determini ng the level of countermeasures that the DSB can authorize
the United States to take.
6.3.4 Technical European Union arguments against the United States' methodology
6.149. Section 6.3.4 examines more technical arguments that the European Union has raised
regarding the United States' methodology. It proceeds in four parts. First, it summarizes the
United States' technical approach to valuing the adverse effects determined to exist. Second, it
addresses certain preliminary considerations before turning to, third and fina lly, the United States'
valuation of lost sales and impedance.

279 We note that in the present proceeding, we would, in at least some cases, need to base our
determination on information about the inputs used in the manufacture of Boeing LCA and their sourcing
outside the United States from several years ago, i.e. the 2011-2013 Reference Period or even beforehand.
280 European Union's response to Arbitrator question No. 95, para. 23. Foreshadowing this difficulty, the
European Union submits that the Arbitrator should, therefore, limit itself to the locus of production activity of
the "first tier suppliers" to Boeing LCA, i.e. components manufacturers whose goods and services are directly
used by Boeing in the final assembly of its LCA, in determining the nationality of the inputs. (European Union's
response to Arbitrator question No. 95, para. 22). (emphasis omitted) However, we find such a demarcation at
the level of first tier suppliers to be arbitrary. Intermediate inputs to a Boeing LCA that are manufactured by a
Member other than the United States could be processed from raw materials that are supplied by the
United States. In such a scenario, based on the European Union's approach, the entire value added would be
treated as coming from non-US inputs although it contains raw materials from the United States.
281 Under the European Union's suggested approach, only well-coordinated WTO dispute settlement
proceedings by various input-supplying Members along with the United States as the producer of the final good
could result in countermeasures at the level that the United States is seeking in the present proceeding (i.e. a
level that is based on the total value of the additional Boeing LCA that would have been sold or delivered).
282 Decision by the Arbitrator, EC – Bananas III (US) (Article 22.6 – EC), para. 6.14. That arbitrator
further noted that such overlapping claims would give rise to the issue of double counting and should therefore
not be allowed.

6.3.4.1 Summary of the United States' technical approach to valuing the adverse effects
determined to exist
6.150. By way of background, section 6.3.4.1 describes the United States' technical approach to
valuing the adverse effects determined to exist during the 2011 -2013 Reference Period. The
Arbitrator in a subsequent section examines the reasonableness of the United States' technical
valuation.
6.151. The United States' technical approach consists of three steps.283 The first and second steps,
respectively, compute the value of the two forms of adverse effects that were determined to exist
in the compliance proceedings, i.e. lost sales and impedance.284 The last step annualizes the sum of
the values of lost sales and impedance expressed in US dollar terms of a given year in the Reference
Period, namely 2013.285
6.152. The average annual level of adverse effects determined to exist ( 𝐴𝐸𝐷𝑇𝐸) for a given
Reference Period expressed in US dollar terms of a given year 𝑇 proposed by the United States can
be summarized as follows286:
𝐴𝑣𝑒𝑟𝑎𝑔𝑒𝐴𝐸𝐷𝑇𝐸𝑅𝑒𝑓𝑒𝑟𝑒𝑛𝑐𝑒 𝑃𝑒𝑟𝑖𝑜𝑑
𝑖𝑛 𝑦𝑒𝑎𝑟 𝑇 𝑈𝑆𝐷 =( ∑ 𝐿𝑜𝑠𝑡𝑆𝑎𝑙𝑒𝑠𝑜𝑟𝑑𝑒𝑟 𝑦𝑒𝑎𝑟 𝑡
𝑖𝑛 𝑜𝑟𝑑𝑒𝑟 𝑦𝑒𝑎𝑟 𝑡 𝑈𝑆𝐷
𝑜𝑟𝑑𝑒𝑟
𝑦𝑒𝑎𝑟 𝑡
×
𝑃𝑃𝐼𝑦𝑒𝑎𝑟 𝑇
𝑃𝑃𝐼𝑜𝑟𝑑𝑒𝑟 𝑦𝑒𝑎𝑟 𝑡

+ ∑ 𝐼𝑚𝑝𝑒𝑑𝑎𝑛𝑐𝑒𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦 𝑦𝑒𝑎𝑟 𝑠
𝑖𝑛 𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦 𝑦𝑒𝑎𝑟 𝑠 𝑈𝑆𝐷
𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦
𝑦𝑒𝑎𝑟 𝑠
× 𝑃𝑃𝐼𝑦𝑒𝑎𝑟 𝑇
𝑃𝑃𝐼𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦 𝑦𝑒𝑎𝑟 𝑠

× 12
𝑀𝑜𝑛𝑡ℎ𝑠 𝑖𝑛 𝑅𝑒𝑓𝑒𝑟𝑒𝑛𝑐𝑒 𝑃𝑒𝑟𝑖𝑜𝑑

(1)

where 𝐴𝐸𝐷𝑇𝐸: average annual level of adverse effects determined to exist
 𝑇: base/reference year
 𝑡: order month/year in the Reference Period (i.e. December 2011, year 2012 or year 2013)
 𝐿𝑜𝑠𝑡𝑆𝑎𝑙𝑒𝑠𝑜𝑟𝑑𝑒𝑟 𝑦𝑒𝑎𝑟 𝑡
𝑖𝑛 𝑜𝑟𝑑𝑒𝑟 𝑦𝑒𝑎𝑟 𝑡 𝑈𝑆𝐷: lost sales value in order year 𝑡 expressed in US dollar terms of
order month/year 𝑡
 𝐼𝑚𝑝𝑒𝑑𝑎𝑛𝑐𝑒𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦 𝑦𝑒𝑎𝑟 𝑠
𝑖𝑛 𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦 𝑦𝑒𝑎𝑟 𝑠 𝑈𝑆𝐷: impedance value in delivery month/year 𝑠 expressed in US
dollar terms of delivery month/year 𝑠
 𝑃𝑃𝐼𝑡: PPI for CA Manufacturing in order month/year 𝑡
 𝑀𝑜𝑛𝑡ℎ𝑠 𝑖𝑛 𝑅𝑃: number of months in the Reference Period (i.e. 25 months).

6.153. As shown in Equation (1), the United States proposes to first calculate the value of lost sales
and then the value of impedance for the 2011 -2013 Reference Period. 287 In other words, the
United States proposes to calculate the value of lost sales and impedan ce separately for
December 2011 (expressed in US dollar terms of December 2011), the year 2012 (expressed in
2012 US dollar terms) and the year 2013 (expressed in 2013 US dollar terms). Each of these three
lost sales and impedance values represents, respectively, the value of the additional LCA that Boeing
would have sold (in the case of lost sales) or delivered (in the case of impedance) in the
counterfactual in December 2011, the year 2012 or the year 2013:
𝐿𝑜𝑠𝑡𝑆𝑎𝑙𝑒𝑠𝑜𝑟𝑑𝑒𝑟 𝑦𝑒𝑎𝑟 𝑡
𝑖𝑛 𝑜𝑟𝑑𝑒𝑟 𝑦𝑒𝑎𝑟 𝑠 𝑈𝑆𝐷 =∑𝐿𝑜𝑠𝑡𝑆𝑎𝑙𝑒𝐴𝑖𝑟𝑙𝑖𝑛𝑒 𝑖,𝑜𝑟𝑑𝑒𝑟 𝑦𝑒𝑎𝑟 𝑡
𝑖𝑛 𝑜𝑟𝑑𝑒𝑟 𝑦𝑒𝑎𝑟 𝑡 𝑈𝑆𝐷
𝑖
 (2)

283 Unless specified otherwise, this section describes the main methodology proposed by the
United States to calculate lost sales and impedance. Alternative approaches proposed by the United States in
response to the European Union's arguments are discussed in sections 6.3.4.3 and 6.3.4.4 below.
284 United States' methodology paper, paras. 32-53 and 82-89.
285 United States' methodology paper, paras. 90-100.
286 The symbol  in Equation (1) corresponds to the sum operator for each month/year 𝑡 in the reference
period: ∑ 𝑥𝑡 =𝑥2012+𝑥2013
2013
𝑡=2012 .

𝐼𝑚𝑝𝑒𝑑𝑎𝑛𝑐𝑒𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦 𝑦𝑒𝑎𝑟 𝑠
𝑖𝑛 𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦 𝑦𝑒𝑎𝑟 𝑠 𝑈𝑆𝐷 =∑𝐼𝑚𝑝𝑒𝑑𝑎𝑛𝑐𝑒𝑀𝑎𝑟𝑘𝑒𝑡 𝑘,𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦 𝑦𝑒𝑎𝑟 𝑠
𝑖𝑛 𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦 𝑦𝑒𝑎𝑟 𝑠 𝑈𝑆𝐷
𝑘
 (3)

where 𝑖: airline 𝑖 whose order was lost to Airbus in the month/year 𝑡
 𝑘: geographic market 𝑘 in which Airbus aircraft were delivered in the month/year 𝑠.

6.154. The United States proposes to apply countermeasures on an annualized basis, and for this
reason computes the average annual level of adverse effects determined to exist. However, before
computing this annual average, the United States expresses the sum of lost sales and impedance
values in US dollar terms of a same year by applying the ratio of the PPI for CA Manufacturing in the
common base year 𝑇 and the PPI for CA Manufacturing in the order month/year 𝑡 or in the delivery
month/year 𝑠. The United States expresses the level of adverse effects determined to exist in US
dollar terms of the last year in the Reference Period, namely 2013 (𝑇=2013).
6.155. For each step of the U nited States' approach, the European Union formulates several
criticisms. These criticisms are reviewed below in sections 6.3.4.2, 6.3.4.3, and 6.3.4.4.
6.3.4.1.1 The United States' valuation of lost sales
6.156. According to the United States, the scope of the valuation of lost sales in this proceeding is
determined by the findings regarding lost sales from the compliance proceedings. Five lost sales
were identified in the compliance proceedings, involving three Airbus LCA models within the
A350XWB and A380 model "families", namely the A350XWB-900 (Singapore Airways lost sale), the
A350XWB-1000 (Cathay Pacific Airways and United Airlines lost sales), and the A380 (Emirates and
Transaero Airlines lost sales).288
6.157. To value the lost sale s in the counterfactual, the United States first identifies the Boeing
models that compete most closely with the three Airbus LCA models involved in the lost sales. The
United States identifies the closest competing Boeing models in the lost sales context as indicated
in Table 1.289
Table 1: Airbus and closest competing Boeing models according to the United States290
Airbus model Closest competing Boeing model
A350XWB-900 787-10
A350XWB-1000 777-300ER
A380 747-8I

6.158. The United States proceeds with specifying the number of orders that Boeing would have
secured for the closest competing Boeing models in the counterfactual. In the context of the lost
sales, the United States assumes that, absent the LA/MSF subsidies at issue , Boeing would have
sold and delivered the same number of LCA as Airbus actually sold. Table 2 reproduces the
counterfactual orders of Boeing LCA on which the United States bases its valuation. According to the
United States, its proposed order numbers are consistent with the Appellate Body's findings on lost
sales in the compliance proceedings.291

288 United States' methodology paper, paras. 26-27.
289 United States' methodology paper, paras. 32-33.
290 United States' methodology paper, para. 33 (citing Panel Report, EC and certain member States –
Large Civil Aircraft (Article 21.5 – US), paras. 6.1308, 6.1359-6.1360, 6.1370, 6.1792, and 6.1410; and Airbus
Presentation by John Leahy, COO Customers, Commercial update – Global Investor Forum, (Exhibit USA-2)).

Table 2: Counterfactual Boeing twin-aisle and VLA orders proposed by the United States
Product
market
Lost sales
campaign
Airbus
model
Closest Boeing
model
Order
year
Number of
counterfactually
ordered aircraft
Twin-Aisle Cathay Pacific
Airways A350XWB-1000 777-300ER 2012 10
Very Large
Aircraft Transaero Airlines A380 747-8I 2012 4
Twin-Aisle Singapore Airways A350XWB-900 787-10 2013 30
Twin-Aisle United Airlines A350XWB-1000 777-300ER 2013 10
Very Large
Aircraft Emirates A380 747-8I 2013 50

6.159. The United States proposes to value each lost sale in the year in which the corresponding
order was lost, using only such information as would have been available to Boeing at the time that
the order would have been won by Boeing. The United States defines the value of each lost sale as
the discounted value, at the time that the order was lost, of the expected net delivery price of the
counterfactual Boeing aircraft at a scheduled future delivery date.292
6.160. To determine the counterfactual pricing terms for each lost sale at iss ue, the United States
uses the contractual pricing terms contained in a firm order for the closest competing Boeing model
that the same airline actually placed, [[***]], within one or two years of the sale lost to Airbus.
According to the United States, such Boeing comparator orders, [[***]], provide the best available
indication of the net delivery prices that the customers involved in the lost sales would have paid for
the closest competing Boeing model in the counterfactual. Each of these comparator orders, [[***]],
specifies the aircraft's gross price as well as the price concessions and the escalation formula. The
gross price is expressed in base -year US dollar terms. However, the base year cannot be a later
year than the order year. The aircraft net price, also expressed in base-year US dollar terms, is the
difference between the gross price and the price concessions (expressed in base -year US dollar
terms).293
6.161. Since many years can pass between the time of order and the time of the deliveries, aircraft
purchase contracts contain a [[***]] escalation formula. That formula determines the monthly
escalation factor that adjusts, for a given (future) delivery date, the base -year prices for increases
in labour and material costs resulting from inflation and othe r economic changes that are expected
to have occurred by that delivery date. The [[***]] escalation formula agreed upon between Boeing
and the respective airline is based on [[***]]. For each lost sales campaign at issue, the
United States applies the escalation factors to transform the net delivery prices (expressed in base-
year US dollar terms) into net delivery prices expressed in delivery -year US dollar terms. The
United States proposes to use [[***]] escalation factors [[***]] reported in the comparator order
[[***]] and the contractually agreed delivery schedule contained in Airbus' respective contract.294
6.162. According to the United States, the net delivery prices in delivery-year US dollar terms reflect
the expected value of the a ircraft that Boeing would have sold, but do not reflect the value of the
delivered aircraft at the time that the sale was lost. Observing that "economic activity tomorrow is
not as valuable as economic activity today", the United States proposes to apply a discount rate to
determine the discounted value of the Boeing LCA at the time of the relevant lost sale had Boeing
won the orders. The United States proposes the interest rate on United States ten-year treasury
bonds (T-Bond rate) as the appropriate discount rate because it represents the interest rate on US
sovereign debt and thus reveals the "price the United States has had to pay to transfer economic
activity from the future to the present". Dividing the projected aircraft net delivery prices (expressed
in delivery-year US dollar terms) by the discount factor provides the discounted value (sometimes

292 United States' methodology paper, paras. 52-53.
293 United States' methodology paper, para. 46; and Boeing Declaration, (Exhibit USA-5 (BCI)).
294 United States' methodology paper, paras. 42-43; response to Arbitrator question No. 135, para. 158;
Boeing Declaration, (Exhibit USA-5 (BCI)); Cathay Pacific 777-300ER Order Information, (Exhibit USA-12
(HSBI)); Transaero 747-8I Order Information (Exhibit USA-13 (HSBI)); Singapore Airlines 787-10 Order
Information, (Exhibit USA-14 (HSBI)); United 777-300ER Order Information, (Exhibit USA-15 (HSBI)); and
Emirates [[***]] Information, (Exhibit USA-16 (HSBI)).

referred to as the "present value") of scheduled future aircraft deliveries expressed in US dollar
terms of the corresponding order year.295
6.3.4.1.2 The United States' valuation of impedance
6.163. Turning to the valuation of impedance, the United States contends that in this proceeding
the scope of its valuation of impedance is determined by the impedance findings from the compliance
proceedings, which involve Airbus A380 del iveries to six geographic markets (Australia, China, the
European Union, Korea, Singapore and the United Arab Emirates).296
6.164. Having identified the Boeing 747-8I model as competing most closely with the Airbus A380
model, the United States specifies the number of additional 747 -8I aircraft that would have been
delivered to the six geographic markets in the counterfactual during the 2011 -2013 Reference
Period. The United States assumes that absent the LA/MSF subsidies at issue, Boeing would have
delivered the same number of additional 747 -8I aircraft to the six geographic markets during the
2011-2013 Reference Period as the number of A380 aircraft that Airbus actually delivered to the six
geographic markets during the same time -period. The United States further assumes that these
additional counterfactual deliveries would have occurred in the same month or year as each of those
A380 aircraft deliveries. Table 3 reproduces the additional counterfactual deliveries of Boeing VLA
on which the United States bases its v aluation. According to the United States, its proposed
counterfactual delivery numbers are consistent with the Appellate Body's findings on impedance in
the compliance proceedings.297
Table 3: Counterfactual additional Boeing 747-8I deliveries proposed by
the United States
Geographic market with
impedance
(Airlines involved)
Delivery date
Number of additional
counterfactual Boeing 747-8I
deliveries
Australia
(Qantas Airways) December 2011 1
China
(China Southern Airlines)
December 2011
2012
2013
1
2
1
European Union
(Air France; British Airways; Lufthansa)
2012
2013
4
4
Korea
(Korean Air)
2012
2013
1
2
Singapore
(Singapore Airlines) 2012 5
United Arab Emirates
(Emirates)
December 2011
2012
2013
2
11
13

6.165. The United States computes the value of impedance for a given geographic market in a given
month/year in the Reference Period by multiplying the global (worldwide) average per -aircraft net
delivery price of 747 -8I aircraft for the relevant month/year by th e number of counterfactual
deliveries of 747-8I aircraft in the corresponding month/year. According to the United States, these
global average per-aircraft net delivery prices provide the best available indication of the net delivery

295 The discount factor for a given order- and delivery-year combination is equal to the term
(1+𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡𝑅𝑎𝑡𝑒) raised to the power of the number of years between the time of order and time of delivery.
(United States' methodology paper, paras. 49 and 51).

prices that the customers that would have received additional 747 -8I aircraft in the counterfactual
would have paid.298
6.166. The United States computes the global average per -aircraft net delivery price of 747 -8I
aircraft for 2012 and 2013 by dividing the sum of all net delivery prices of actual worldwide deliveries
of 747-8I aircraft that occurred in that year by the number of 747-8I aircraft delivered worldwide in
that year. The United States takes the relevant information on these net delivery prices of 747 -8I
aircraft from [[***]]. In response to an argument by the European Union that the United States'
calculated 2012 global average net delivery price per aircraft is artificially inflated by the inclusion
of [[***]], the United States excluded prices of 747-8I deliveries to [[***]] that had been included
in the United States' initial calculation.299
6.167. As concerns the 2011 delivery price, it must be noted that no 747 -8I aircraft were in fact
delivered in 2011, and therefore no actual 2011 per aircraft delivery prices of 747 -8I aircraft exist.
The United States therefore proposes to extrapolate a 747-8I per aircraft delivery price for 2011 by
multiplying the average 2012 -2013 ratio between the global average 747 -8I per aircraft delivery
price and the global average 747-8I per aircraft order price by the 2011 global average 747-8I per
aircraft order price.300
6.3.4.1.3 Annualization of the average values of lost sales and impedance
6.168. The United States proposes to annualize the sum of the total values of lost sales and
impedance calculated over the 25-month 2011-2013 Reference Period. Having separately computed
the values of lost sales and impedance for December 2011 (expressed in December 2011 US dollar
terms), the year 2012 (in 2012 US dollar terms) and the year 2013 (in 2013 US dollar terms), the
United States proposes to express the values of lost sales and impedance that occurred in December
2011 and the year 2012 in 2013 US dollar terms. The United States proposes this to express the
values of adverse effects found within the 25 -month 2011-2013 Reference Period on a common
monetary basis. The United States further proposes to apply the PPI for CA Manufacturing to the
2011 and 2012 values of lost sales and impedance to adjust them and obtain their 2013 adjusted
values. The United States deems this PPI index to be the proper index to perform this adjustment
because the PPI for CA Manufacturing measures the overall price movement at the aircraft producer
level (i.e. Boeing). More specifically, the United States performs this adjustment by multiplying,
respectively, the December 2011 and 2012 levels of adverse effects determined to exist by the
2013-to-December 2011 or the 2013 -to-2012 PPI for CA Manufacturing ratio, as summarized in
Table 4 below.301
Table 4: Overview of the United States' annualization of lost sales and impedance
Reference
period
Adverse effects
determined to
exist (in order-
/delivery-year
US dollar terms)
PPI for CA
Manu-
facturing
ratio
Adverse effects
determined to
exist (𝑨𝑬𝑫𝑻𝑬)
(in 2013 US
dollar terms)
Annualization
Average annual
adverse effects
determined to
exist (𝑨𝑬𝑫𝑻𝑬)
(in 2013 US
dollar terms)
December
2011
(𝐿𝑜𝑠𝑡𝑆𝑎𝑙𝑒𝑠
+𝐼𝑚𝑝𝑒𝑑𝑎𝑛𝑐𝑒) × 𝑃𝑃𝐼2013
𝑃𝑃𝐼𝐷𝑒𝑐 2011
 = 𝐴𝐸𝐷𝑇𝐸𝑖𝑛 𝐷𝑒𝑐 2011
2012 (𝐿𝑜𝑠𝑡𝑆𝑎𝑙𝑒𝑠
+𝐼𝑚𝑝𝑒𝑑𝑎𝑛𝑐𝑒) ×𝑃𝑃𝐼2013
𝑃𝑃𝐼2012
 = 𝐴𝐸𝐷𝑇𝐸𝑖𝑛 2012
2013 (𝐿𝑜𝑠𝑡𝑆𝑎𝑙𝑒𝑠
+𝐼𝑚𝑝𝑒𝑑𝑎𝑛𝑐𝑒) ×1 = 𝐴𝐸𝐷𝑇𝐸𝑖𝑛 2013
Total 𝑇𝑜𝑡𝑎𝑙𝐴𝐸𝐷𝑇𝐸 ×12
25 = 𝐴𝑣𝑒𝑟𝑎𝑔𝑒𝐴𝐸𝐷𝑇𝐸

299 United States' written Submission, paras. 244-254; response to Arbitrator question No. 61, para. 42;
Boeing Declaration, (Exhibit USA-5 (BCI)); and Second Revised 747-8I Global Delivery Prices for 2012 and
2013 (revision to Exhibit USA-26 (HSBI)), (Exhibit USA-103 (HSBI)).
301 United States' methodology paper, paras. 90 and 94-96.

6.169. By placing all the estimated values of lost sales and impedance on a common 2013-US-dollar
basis, these values can then directly be aggregated and annualized to obtain an average annual
level of adverse effects for the 2011-2013 Reference Period expressed in 2013 US dollar terms that
does not require BCI or HSBI protection.302
6.170. Finally, the Arbitrator notes that, using its three-step approach, the United States calculates
the total annualized value of the adverse effects determined to exist, stated in 2013 US dollar terms,
as approximately USD 10,130 million.303
6.3.4.2 Preliminary considerations
6.171. Section 6.3.4.2 addresses certain preliminary issues applicable to our ensuing valuation of
both lost sales and impedance. First , it addresses certain general evidentiary issues. Second, it
discusses the "closest competing Boeing models" that the United States identifies in its submissions.
Third, it examines a request by the European Union that the Arbitrator determine product-market-
specific countermeasures. Finally, it evaluates the European Union's request that the values of
certain services be deducted from the prices of relevant Boeing LCA.
6.3.4.2.1 General evidentiary issues
6.172. In the ensuing parts of this Decision, and consistent with its mandate, the Arbitrator
determines the values of the LCA orders that Boeing would have secured in the counterfactual had
it won the lost sales and the LCA deliveries that Boeing would have made in the counterfactual had
it not suffered impedance. As di scussed in more detail in the following sections, these valuations
involve a number of different determinations regarding the values of the Boeing LCA that would have
been ordered and delivered in the case of lost sales and impedance, respectively. As such
counterfactual orders and deliveries, of course, did not actually occur, we must estimate the values
of these counterfactual orders and deliveries based on an appropriate methodology and the
information submitted to us by the parties. Thus, at this point, we briefly describe the general
principles that guide how we approach the parties' proposed methodologies and the information
submitted by the parties.
6.173. Regarding the legal standard that governs our assessment of the assumptions underlying
the parties' proposed methodologies, we refer to, and agree with, the arbitrator's remarks in US –
Tuna II (Mexico) (Article 22.6 – US) that any such "'assumptions should be reasonable, taking into
account the circumstances of the dispute'. We also find relevant the findi ng made in several
arbitration proceedings that assumptions should be based on 'credible, factual, and verifiable
information'".304 Furthermore, in keeping with our adjudicative role, we will conduct our assessment
of the parties' arguments and the evidence on the record in an objective manner.

302 The annualization is calculated by dividing the sum of lost sales and impedance by the total number
of months in the reference period (i.e. 25 months) and multiplying it by the total number of months in a year
(i.e. 12 months).
303 The United States in the course of this proceeding revised the proposed total annualized value of the
adverse effects determined to exist on two occasions. Initially, the United States calculated an annualized
value of adverse effects of approximately USD 10,560 million in 2013 US dollar terms, which reflected the use
of Airbus delivery schedules estimated by Boeing and the inclusion of the so-called [[***]] in the calculation of
the 2012 global average price for impedance. (United States' methodology paper, para. 97; and Aggregation of
Adverse Effects Determined to Exist by Year, (Exhibit USA-22 (HSBI))). To minimize areas of disagreement
with the European Union, the United States later recalculated the value of impedance by excluding the
so-called [[***]] from its calculation of the 2012 global average price for impedance. The corresponding
annualized value of the adverse effects determined to exist amounts to approximately USD 10,180 million in
2013 US dollar terms. (Revised Aggregation of Adverse Effects Determined to Exist by Year (revision to
Exhibit USA-22 (HSBI)), (Exhibit USA-28 (HSBI))). Finally, the United States recalculated the value of lost
sales by replacing the estimated Airbus delivery schedules with Airbus actual contracted delivery schedules
submitted by the European Union. The corresponding annualized value of the adverse effects determined to
exist amounts to approximately USD 10,130 million, which is the figure we reflect above. (Second Revised
Aggregation of Adverse Effects Determined to Exist by Year. (revision to Exhibit USA-28 (HSBI)),
(Exhibit USA-99 (HSBI))).
304 Decision by the Arbitrator, US – Tuna II (Mexico) (Article 22.6 – US), para. 5.16 (fns omitted)
(quoting Decisions by the Arbitrators, US – COOL (Article 22.6 – United States), para. 4.5; US – Gambling
(Article 22.6 – US), para. 3.3; and US – 1916 Act (EC) (Article 22.6 – US), para. 5.54). See also Decision by

6.174. We also note that, in general, negotiations on the sale of LCA are driven by a complex
interplay of factors, including customer-specific and some unquantifiable ones.305 In the context of
the present proceeding, we are therefore not just dealing with complex economic interactions
between airline customers and LCA manufacturers. Our task is further complicated by the fact that
we must estimate the value of counterfactual B oeing sales and deliveries, including the associated
sales terms (number of aircraft, price, delivery schedule) that would have been specific to each
negotiated contract. In the absence of direct, actual evidence, any such exercise by its very nature
is beset by a degree of uncertainty and will thus result in a degree of approximation.306
6.175. In the light of the foregoing, we must seek to ensure that not just our methodological
approach, but also our concrete quantitative estimation, is supported, wherever possible, by credible
and verifiable information. To that end, we have undertaken all reasonably feasible efforts to request
additional information from the parties to complete the record. Where we nevertheless ultimately
did not have access to certain desired information (e.g. because it is not readily available), we drew
appropriate inferences from the best available information on the record, provided that the best
information that we had was itself credible and verifiable.307
6.176. In connection with the issue of available information, we note that the European Union raised
certain due process con cerns. In its comments on the response to an Arbitrator question by the
United States posed after the meeting with the parties, the European Union asserted that the
United States' failure to submit primary source evidence demonstrating the reliability of c ertain
information used in the United States' valuation methodology violated the European Union's due
process rights.308 In the next round of questions to the parties requiring written responses, the
Arbitrator and the European Union both asked the United States to produce, inter alia, such primary
source documentation. The United States provided the requested documents in its responses to the
third round of questions to the parties submitted on 15 March 2019. As of that filing, therefore, the
European Union was in possession of such primary source documents.309
6.177. The European Union submitted comments on the United States' submission of
15 March 2019 on 8 April 2019. In those comments, the European Union raised a new due process

the Arbitrator, US – Washing Machines (Article 22.6 – US), para. 3.127 (indicating that "'it is necessary to rely
only on credible, verifiable information, and not on speculation' in calculating the level of nullification or
impairment") (quoting Decision by the Arbitrator, US – 1916 Act (EC) (Article 22.6 – US), para. 5.63).
305 See e.g. Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
paras. 6.1185-6.1189, 6.1216-6.1223, and 6.1412; European Union's responses to Arbitrator question No. 60,
para. 134, and No. 61, paras. 150-157 and 187; United States' written submission, paras. 195-196; responses
to Arbitrator question No. 60, para. 23, No. 61, para. 32; and Boeing e-mail from [[***]] (13 Dec. 2018),
(Exhibit USA-35 (BCI)).
306 The panel in US – Anti-Dumping and Countervailing Duties (China) took a similar view when it had to
apply Article 14(b) of the SCM Agreement, and in particular the guideline that the investigating authority in
calculating the benefit to a firm of an alleged subsidy should take into account "the amount the firm would pay
on a comparable commercial loan which the firm could actually obtain on the market". It is worth setting out
the relevant statement by the panel in full:
We note, first, the phrase "the amount the firm would pay on a comparable commercial loan
which the firm could actually obtain on the market". In our view, the use of the conditional mode
here, in conjunction with the reference to the individual borrower's situation, is an indication that
where loans are concerned, the very individualized nature of borrowing … often will limit an
investigating authority's ability to identify a fully comparable existing commercial loan held by
the investigated borrower to use as a benchmark for the investigated government loan, meaning
that some degree of approximation will be inevitable.
(Panel Report, US – Anti-Dumping and Countervailing Duties (China), para. 10.177).
307 See also Award of the Arbitrator, US – Section 110(5) Copyright Act (Article 25), para. 4.28 (stating
that "in the absence of figures grounded on facts, the Arbitrators tried to use estimates which … seemed
reasonable on the basis of the information available"); and Decisions by the Arbitrator, US – COOL
(Article 22.6 – United States), para. 5.101 (stating that "if and where a Member has submitted the best
available information, it might be appropriate for an arbitrator to decide to accept that information in that
particular proceeding").
308 European Union's response to Arbitrator question No. 96, para. 37.
309 The European Union continues to argue that the United States' information is "incomplete,
inconsistent, and non-verifiable" in important aspects. However, the European Union does not raise any due
process objections in raising those specific arguments. (European Union's comments on the United States'
responses to Arbitrator question No. 135, section B, paras. 356-367). (See paragraphs 6.312-6.318 below)
(discussing these alleged deficiencies).

objection, i.e. that "the European Union's due process right to a meaningful opportunity to answer
the case put to it by the United States" was compromised by the United States' filing of
15 March 2019.310 The European Union offers the following points in support of this argume nt: (a)
the submitted evidence was voluminous and complex, (b) the United States had "withheld" evidence
that it could and should have submitted earlier in the proceeding, which would have afforded the
European Union "multiple opportunities" to respond to it rather than just one opportunity , (c) the
United States' belated submission of evidence and the European Union's limited opportunities to
engage with it undermines the value of the debate between the parties and, relatedly, renders it
impossible for the Arbitrator to make an "objective assessment" of the matter before it, and (d) the
impact of the United States' belated submission was exacerbated by the fact that the
European Union had to work on its submissions related to the fourth set of questions from the
Arbitrator at the same time as it was working on its comments on the United States' evidentiary
submissions in question.311
6.178. The Appellate Body has explained that "[a]s a general rule, due process requires that each
party be afforded a meaningful opportunity to comment on the arguments and evidence adduced by
the other party". 312 Such an opportunity must be "meaningful in terms of that party's ability to
defend itself adequately". 313 Thus, an inquiry into whether due process has been respected in a
particular instance depends on a consideration of general and case-specific factors, which can include
the conduct of the parties, the issue to which the relevant evidence relates and the ci rcumstances
surrounding its submission, and the discretion of the Arbitrator.314
6.179. In assessing the European Union's due process objection, it is important to identify the
evidence, the submission of which the European Union claims violated its due process rig hts. The
European Union raises its due process concerns in the context of commenting on the United States'
responses to four discrete questions, i.e. question Nos. 93, 115, 135, and 136.315 We thus limit our
analysis to the content of the United States' responses to question Nos. 93, 115, 135 and 136. For
ease of reference, we refer to that content (both the content of the submission and the exhibits
provided therewith) as the Challenged Information.

310 The European Union raised such objections in its comments on the United States' responses to four
different Arbitrator questions. (European Union's comments on the United States' responses to Arbitrator
question Nos. 93, 115, 135, and 136).
311 The Arbitrator sent the fourth set of questions to the parties on 28 February 2019, with responses
due 22 March 2019 and comments on the other parties' responses due 12 April 2019. (Communication to the
parties of 1 March 2019).
312 Appellate Body Report, Thailand – Cigarettes (Philippines), para. 150.
313 Appellate Body Report, US – Gambling, para. 270. According to the Appellate Body, due process is
also intrinsically connected to notions of fairness, impartiality and the rights of parties to be heard and to be
afforded an adequate opportunity to pursue their claims, make out their defences, and establish the facts in
the context of proceedings conducted in a balanced and orderly manner, according to established rules.
(Appellate Body Report, Thailand –Cigarettes (Philippines), para. 147).
314 Appellate Body Report, Thailand – Cigarettes (Philippines), para. 155.
315 In one instance, the scope of the European Union's objection appears limited to the content of the
United States' response to that question. (European Union's comments on the United States' response to
Arbitrator question No. 136, paras. 403-406). In the other three, although the objections initially appear to
pertain to the content of the United States' responses to those questions, they also either contain or cross-
reference language that refers to the contents of the United States' submission as a whole. (European Union's
comments on the United States' responses to Arbitrator question No. 93, paras. 2-3 ("More generally, the
United States' entire approach to providing evidence has compromised, in an unacceptable manner, the
European Union’s due process right") (emphasis added) and fn 3 (referring to the European Union's comments
on the United States' response to Arbitrator question No. 135, section A), No. 115, fn 257 (referring to the
European Union's comments on the United States' response to Arbitrator question No. 135, section A), and
No. 135, section A (referencing the entire volume of the United States' 15 March 2019 submission)).
We consider, however, that a close reading of this latter language indicates that it is simply context for
understanding the European Union's more pointed objections to the specific content of the United States'
response to these four questions. (European Union's comments on the United States' response to Arbitrator
question No. 135, section A, paras. 351-355 (specifying that the European Union's due process objection
concerns the "bulk" of the United States' evidentiary submissions, i.e. "order and [[***]] data", which would
appear to encompass all exhibits submitted pursuant to Arbitrator question Nos. 93, 115, 135, and 136, less
Survival Rate Calculation, (Exhibit USA-65 (HSBI)); and Boeing E-mail regarding Questions 136, 139-142,
(Exhibit USA-101 (HSBI)), which we also include in our analysis)).

6.180. We next consider the conduct of the parties. The United States provided the Challenged
Information in response to direct questions posed by the Arbitrator and the European Union. The
United States' submission of 15 March 2019 was therefore consistent with the Working Procedures,
and the European Union does not cla im otherwise. 316 Further, we do not consider that the
United States necessarily had to provide the Challenged Information earlier in the arbitration
proceeding. This is so because the purpose of the four questions pursuant to which the Challenged
Information was submitted was (a) to present an alternative cancellation rate that could be used to
estimate the probability that certain orders made pursuant to the "lost sales" would be cancelled317,
(b) to obtain primary source documentation regarding a [[***]] to a customer that the
European Union, but not the United States, had advocated using as a comparator order in the lost-
sales context318, (c) to obtain primary source documentation to confirm the accuracy of previously
submitted non -primary source informati on by the United States regarding potential comparator
orders in the lost sales and impedance contexts , (d) to obtain additional primary source
documentation regarding the potential comparator orders mentioned in part (c) above that was
requested by the Eu ropean Union and/or Arbitrator, but that the United States had not used in its
methodology previously319, and (e) to obtain examples of how escalation factors were calculated
using escalation formulae in certain potential comparator orders that the United States had
previously offered in the lost-sales and impedance contexts.320
6.181. We also note that all numerical data that the United States used in its methodology had,
before the receipt of the Challenged Information, been supported in the United States' methodology
paper with evidentiary submissions of some kind and the United States did not rely on Challenged
Information to raise new substantive technical issues before the Arbitrator.
6.182. We further note that the European Union had 24 days to comment on the Challeng ed
Information. The European Union submitted 93 pages of written comments accompanied by one
HSBI exhibit. In those comments, the European Union responds to each of the United States'
responses to question Nos. 93, 115, 135, and 136. The European Union engaged with the Challenged
Information and in doing so also propose d valuation "corrections". The European Union submitted
no request for any extension of the deadline for commenting on the Challenged Information. 321 We

316 The Working Procedures provide that "evidence necessary for purposes of rebuttal, or evidence
necessary for answers to questions or comments on answers provided by the other party" can be submitted
after the substantive meeting, which occurred in February 2019. (Working Procedures of the Arbitrator, Annex
A-1, para. 5.1). We note that the United States filed its HSBI Version Appendix and HSBI exhibits associated
with the 15 March 2019 submission on 18 March 2019, three days following the filing deadline. This is allowed
under the BCI/HSBI Procedures, and the European Union did not object to it. We also note that "WTO dispute
settlement proceedings do not involve any particular temporal sequence of proof. Both parties will adduce
evidence in support of their own arguments or to rebut the arguments made by the other at various stages of
a dispute, sometimes simultaneously, throughout the entirety of a proceeding". (Panel Report, EC and certain
member States – Large Civil Aircraft (Article 21.5 – US), para. 6.50). We are mindful that adherence to
Working Procedures is not necessarily dispositive of whether due process has been respected. (Appellate Body
317 United States' response to Arbitrator question No. 115. The European Union argues that the
United States should have provided this alternative in its response to Arbitrator question No. 73, which
appeared in the second set of questions sent to the parties. (European Union's comments on the United States'
response to Arbitrator question No. 115, para. 187). We note, however, that that question did not ask the
United States to present an alternative methodology in this context, but to respond to the European Union's
basic assertion that a discount rate should include a component to reflect the risk of cancellation. The
United States did so, arguing that such a cancellation rate should not be used at all, but further asserted that
certain flaws existed in the European Union's proposed methodology in this context. (United States' response
to Arbitrator question No. 73).
318 European Union's written submission, paras. 209-218; responses to Arbitrator question No. 28,
para. 418, and No. 67, para. 233; and United States' response to Arbitrator question No. 93.
319 United States' response to Arbitrator question No. 135; and responses to European Union's question
Nos. 2-6.
320 United States' response to Arbitrator question No. 136. We note that this specific information was
requested to clarify how a particular escalation factor was constructed that was used by the United States to
compute a price for LCA involved in a particular lost sale.
321 The Arbitrator extended other deadlines for questions and comments in response to parties'
requests. (See United States' communication (28 Feb. 2019) (requesting extension of deadline for responses to
questions from the Arbitrator); European Union's communication (28 Feb. 2019) (requesting extension of
deadlines for responses to questions from the Arbitrator and for comments on responses); and Arbitrator's
communication to the parties regarding parties' request for extension of deadline, (1 March 2019) (extending
deadlines for responses to questions from the Arbitrator and for comments on responses)).

further note that the European Union itself requested much of the Challenged Information taking
the form of primary source documentation 322, and we find it reasonable to believe that the
European Union was aware of the kind of information that it would receive.323
6.183. We next address the evidence at issue and the circumstances surrounding its submission.
The Challenged Information consists of the United States' answers to question Nos. 93, 115, 135,
and 136, which, by and large, discusse d information contained in the 27 exhibits accompanying
these answers.324 The bulk of the exhibits consists of primary source information related to Boeing
[[***]], orders, [[***]] or [[***]] that were discussed as possible compa rator orders in the lost
sales and impedance context. The 27 exhibits' volume was significant, totalling 1,875 pages, all of
which was HSBI. 325 As already noted, the primary source documentation regarding the [[***]],
orders, [[***]] or [[***]] were offered to support previously submitted information, or was
submitted in response to the European Union's and/or Arbitrator's request.326
6.184. In the light of the entirety of the foregoing considerations, we are unable to accept the
European Union's claim that it was de prived of a meaningful opportunity to respond to the
Challenged Information, or any information in the United States' submission of 15 March 2019, for
that matter. In particular, we recall that the Challenged Information was submitted in accordance
with the Working Procedures; was submitted in response to requests from the Arbitrator and the
European Union in the form of written questions; the European Union had over three weeks to
respond to the Challenged Information; and the European Union did not seek any extension of the
deadline for responding to the Challenged Information.
6.3.4.2.2 Closest competing models
6.185. As noted above, the United States quantifies the value of "the adverse effects determined
to exist" by calculating the value of the LCA that Boeing would have sold if Boeing had won the lost
sales and had not suffered impedance.327 To carry out that calculation, the United States identifies
the Boeing LCA models that in its view compete most closely with the Airbus LCA models that were
at issue in the compliance findings concerning lost sales (i.e. the A350XWB-900 and -1000 models)
and impedance (i.e. the A380 model). Table 5 below indicates the closest competing Boeing models
identified by the United States.
Table 5: Closest competitors of Airbus models as identified by the United States328
Airbus model Closest competing Boeing model
A350XWB-900 787-10
A350XWB-1000 777-300ER
A380 747-8I

322 European Union's questions to the United States Nos. 1-7.
323 We note that the European Union itself has submitted primary source Airbus order documentation
that is of similar complexity to the Boeing primary source order documentation that forms the bulk of the
Challenged Information.
324 Question 93: Exhibit USA-59 (HSBI). Question 115: Exhibit USA-65 (HSBI). Question 135: Exhibits
USA-68 (HSBI) through USA-71 (HSBI), Exhibits USA-73 (HSBI) through USA-81 (HSBI), Exhibit USA-87
(HSBI) and Exhibits USA-89 (HSBI) through USA-97 (HSBI). Question 136: Exhibit USA-85 (HSBI) and Exhibit
USA-101 (HSBI).
325 This represented the majority of the total volume of exhibits that the United States submitted with
its 15 March 2019 submission, i.e. 46 exhibits running over 2000 pages total, most of which was HSBI.
326 European Union's response to Arbitrator question No. 96, paras. 37-40; opening statement at the
meeting of the Arbitrator, paras. 102-111; United States' responses to Arbitrator question Nos. 93, 115, 135,
and 136; and responses to European Union's question Nos. 1-7. We note that there was significant overlap
between the primary source information requested by the Arbitrator and that desired by the European Union.
Indeed, as already noted, one of the main reasons why the Arbitrator requested such information were the
earlier complaints by the European Union that such primary source documentation should be on the record.
(Compare Arbitrator's third set of questions to the parties, section 4 ("Evidentiary Requests") (19 Feb. 2019)
and European Union's questions to the United States Nos. 1-7).

6.186. The European Union does not dispute these pairings offered by the United States.
6.187. The Arbitrator notes that the United States submitted a presentation by John Leahy, COO
Customers of Airbus comparing the Airbus A350XWB-900 and A350XWB-1000 models to the Boeing
787-10 and 777-300ER models, respectively, to highlight the operational and technical advantages
that these Airbus model s have over their corresponding Boeing counterparts. 329 Additionally, the
United States refers to articles in the media juxtaposing the capabilities of the Airbus A350XWB-900
model with that of Boeing's 787 -10 model. 330 We also note that the compliance panel a nd the
Appellate Body found that, generally, the Airbus A350XWB family of aircraft (i.e. twin-aisle aircraft)
and the Boeing 787 and 777 families of aircraft (i.e. twin -aisle aircraft) compete in the same twin -
aisle product market, and that the Airbus A380 and Boeing 747 -8I models compete in the VLA
product market.331 In the light of such evidence and findings, and the absence of disagreement
between the parties in this respect, we see no basis to disagree with the United States' identification
of the closest competing Boeing models above and adopt it for purposes of our own calculation.332
6.3.4.2.3 Product-market-specific countermeasures
6.188. The European Union submits that the Arbitrator "must calibrate and quantify a level of
countermeasures that is commensurate with the adverse effects determined to exist in each product
market at issue".333 According to the European Union, the text of Article 7.10 of the SCM Agreement
supports its position because that provision requires the countermeasures to be "commensurate
with the degree and nature of the adverse effects determined to exist". The European Union recalls
in this respect that the compliance panel and Appellate Body found that adverse effects occurred in
two distinct product markets, i.e. the twin-aisle LCA and VLA product markets, and thus in order for
countermeasures to be "commensurate with the degree and nature" of those adverse effects, the
Arbitrator in the European Union's view "should make separate findings for each product market".334
The European Union also argues t hat doing so would be consistent with the approach taken in
previous arbitration decisions, and in particular the arbitrator's decision in US – Washing Machines
(Article 22.6 – US). Finally, the European Union states that the fact that it "has taken different steps
to ensure compliance in each product market"335 supports its request in this context because, if the
second compliance panel finds that the European Union has achieved compliance in one of the two
relevant product markets, the amount of countermeasures "must be reduced accordingly to
'maintain [correspondence]' and ensure that countermeasures are 'temporary'".336

329 Airbus presentation by John Leahy, COO Customers, Commercial update – Global Investor Forum,
slides 43-44 (12 Dec. 2013) (entitled, "A350-900 capability versus 787-10"), (Exhibit USA-2).
330 Emirates to choose between A350-900 and 787-10 next year, Murdo Morrison, FlightGlobal (Oct. 1,
2015), (Exhibit USA-3); and Wide Body Battle: Boeing 787-10 Or Airbus A350-900? Dhierin Bechai, Seeking
Alpha (Dec. 19, 2014), (Exhibit USA-4).
331 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 5.513 (citing Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 6.1370); and Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
paras. 6.1308, 6.1359-6.1360, 6.1370 (twin-aisle product market) and 6.1410 (VLA product market).
332 We recognize that the pairings identified above are meant to identify the closest competing models,
but not the only competing models. In this context, we recall first that a given model of LCA will not only
compete with all other aircraft in its product market to some degree (e.g. the Boeing 777-300ER model might
compete at times with the Airbus A330 model), but at times will compete against LCA in other product
markets. (Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.1416
(explaining that "important competitive relationships may also exist between pairings or combinations of
aircraft across two, or even all three, of the product markets") (emphasis original))
333 European Union's opening statement at the meeting of the Arbitrator, para. 80. (emphasis original)
We note that the European Union, in other portions of its submissions, appears to indicate that the Arbitrator
need not but may, in its discretion, provide separate amounts of countermeasures vis-à-vis each product
market. (European Union's comments on the United States' response to Arbitrator question No. 102, para. 74
(arguing that "[t]he principal disagreement between the Parties concerns the question whether, in the
circumstances of the present case, the Arbitration Panel should exercise its discretion and award separate
amounts for each of the respective product markets")). (emphasis added)
334 European Union's opening statement at the meeting of the Arbitrator, para. 82.
335 European Union's comments on the United States' response to Arbitrator question No. 102, para. 81.
336 European Union's comments on the United States' response to Arbitrator question No. 102, para. 82
(quoting Decision by the Arbitrator, US – Washing Machines (Article 22.6 – US), para. 3.5). (alteration original)
See also European Union's opening statement at the meeting of the Arbitrator, section IV; comments on the
United States' response to Arbitrator question No. 102 (citing Decisions by the Arbitrators, US – COOL

6.189. The United States argues that the Arbitrator "is not required to determine, separately for
each product market, a level of countermeasures corresponding to the adverse effects determined
to exist".337 The United States asserts that there is nothing in either the text or context of relevant
portions of the SCM Agreement that contains such a requirem ent, and no previous arbitrator has
found there to be such a requirement therein. However, the United States notes that, in any event,
the United States "methodology makes it easy to discern what portion of the countermeasures
corresponds to the adverse effects in each of the respective product markets".338
6.190. The Arbitrator notes that neither the SCM Agreement nor the DSU contains an express
requirement to determine countermeasures or suspension of concessions vis-à-vis individual product
markets in the manner that the European Union advocates. Our mandate in this proceeding is to
determine a level of countermeasures that is "commensurate with the degree and nature of the
adverse effects determined to exist". In our view, therefore, providing a single maximum l evel of
Annual Suspension based on the "degree and nature of the adverse effects determined to exist" is
consistent with our mandate. The fact that the compliance panel and Appellate Body found adverse
effects to exist vis-à-vis two different product marke ts does not compel a different conclusion.
Indeed, it is not clear to us why under the European Union's approach an arbitrator would necessarily
have to determine individual levels of countermeasures for different product markets at issue rather
than determine individual levels of countermeasures vis-à-vis, for instance, individual "lost sales".
6.191. We note the European Union's argument that prior dispute settlement practice supports its
request in this context. Two of the four arbitration decisions that the E uropean Union cites
determined the level of Annual Suspension in a single amount, rather than provide different levels
of Annual Suspension in respect of different product markets. 339 Another arbitration decision
articulated a formula that would prospectivel y control the maximum level of suspension of
concessions. It also made no distinction among different product markets.340 In the final arbitration
decision, i.e. US – Washing Machines (Article 22.6 – US), the arbitrator determined separate
amounts of suspens ion vis-à-vis different measures at issue, not specifically vis-à-vis different
product markets.341 We further find no persuasive content in other arbitration decisions that supports
the European Union's position. We therefore consider that prior dispute settlement practice does not
materially support the European Union's position.
6.192. Finally, we turn to the European Union's assertion that the Arbitrator should determine levels
of countermeasures for different product markets because the second compliance panel may find
that the European Union has achieved compliance in at least one of the two relevant product
markets. According to the European Union, in such a scenario the amount of countermeasures "must
be reduced accordingly to 'maintain [correspondence]' and ensure that countermeasures are
'temporary'".342 In our view, it suffices to note in this respect that our descriptions regarding how

(Article 22.6 – United States), paras. 6.78-6.79; US – Offset Act (Byrd Amendment) (EC) (Article 22.6 – US),
para. 3.121; and EC – Hormones (US) (Article 22.6 – EC), paras. 65 and 78).
337 United States' response to Arbitrator question No. 102, para. 23.
338 United States' response to Arbitrator question No. 102, para. 25. See also United States' response to
Arbitrator question No. 102, para. 24.
339 Decisions by the Arbitrators, US – COOL (Article 22.6 – United States), pp. 81-82; and EC –
340 Decision by the Arbitrator, US – Offset Act (Byrd Amendment) (EC) (Article 22.6 – US), section V.
341 Decision by the Arbitrator, US – Washing Machines (Article 22.6 – US), para. 3.5. The arbitrator in
that decision issued its "overall award" in three parts: (a) one amount concerning an anti-dumping measure on
large residential washers (LRWs) from Korea, (b) another amount concerning a countervailing duty measure on
LRWs from Korea, and (c) then-unknown United States anti-dumping measures that may be placed on Korean
imports (other than LRWs) in the future. (Decision by the Arbitrator, US – Washing Machines (Article 22.6 –
US), section 5). The latter component was governed by a single formula that applied to all relevant Korean
imports, irrespective of product-market distinctions. Indeed, the arbitrator's decision never mentions the term
"product market". As concerns structuring countermeasures around individual measures at issue, we note that
this would be impractical in this proceeding for two reasons. First, it is unclear what proportion of the value of
the adverse effects determined to exist in the twin-aisle LCA product market is attributable to the "indirect
effects" of A380 LA/MSF, rather than the "direct effects" of A350XWB LA/MSF. Second, there were multiple
A380 LA/MSF measures, and multiple A350XWB LA/MSF measures, the individual impacts of which on either
relevant product market are unclear as in the compliance proceeding causation was determined based on these
measures' aggregated effects.
342 European Union's comments on the United States' response to Arbitrator question No. 102, para. 82
(quoting Decision by the Arbitrator, US – Washing Machines (Article 22.6 – US), para. 3.5). (alteration original)

we calculated the maximum level of Annual Suspension should provide the parties with sufficient
guidance as to how that leve l was determined with respect to, inter alia , the product markets
involved.
6.193. Consequently, even if it generally lay within our discretion to determine levels of
countermeasures for different product markets, we do not find it appropriate to do so in the
circumstances of this arbitration proceeding.
6.194. In conclusion, in this decision we will provide a single maximum level of Annual Suspension
rather than determine a separate maximum level of Annual Suspension for each of the two product
markets at issue.
6.3.4.2.4 Valuation of services
6.195. The European Union argues that service-related components of LCA prices, such as prices
that are paid by the LCA customers for post -delivery services, should be excluded from the
calculation of the value of the LCA that Boeing would h ave sold or delivered in the counterfactual.
According to the European Union, this is because the adverse effects findings in these proceedings
concerned solely the sale and delivery of LCA, i.e. goods, and did not concern any revenue that
Boeing would have earned from providing services. The European Union therefore asserts that the
prices for such post-delivery services, to the extent that they would be included in the value for LCA
counterfactually sold or delivered by Boeing, should be excluded from the Arbitrator's valuation.343
6.196. The United States argues that it would not be appropriate to reduce any relevant
counterfactual Boeing LCA prices to account for prices paid by the LCA customers for post -delivery
services. First, the United States asserts that Boeing's post-delivery services [[***]]. Second, the
United States asserts that, to the limited extent that Boeing has obligations under an [[***]].344
6.197. The Arbitrator notes that the record indicates that the provision of post -delivery services
[[***]]. Very few sales contracts that the parties have submitted to assist us in valuing lost sales
and impedance [[***]].345 We further note that when these services [[***]].346 Indeed, the
European Union directs us to no examples of any sales contracts on the record in whi ch prices for
such services are explicitly identified in a meaningful manner, and, relatedly, the European Union
has not provided any methodology describing how the value of any post -delivery services could be
deducted from relevant aircraft prices. In the light of this, we perceive no convincing conceptual
rationale for treating them as separate from the sale of the LCA.
6.198. For all these reasons, we do not consider it appropriate to deduct the value of any services
from the value of the counterfactually ordered and delivered Boeing LCA.
6.3.4.3 Issues surrounding the valuation of lost sales
6.199. In section 6.3.4.3, we assess the approach proposed by the United States for determining
the value of adverse effects in the form of lost sales. We also address the technical criticisms raised
by the European Union against specific steps contained in the United States' approach to quantifying
lost sales, and any alternatives t o those specific steps that were proposed by the European Union.
We recall that in the compliance proceedings the Appellate Body confirmed the panel's findings that
the orders secured by Airbus in five specific sales campaigns in the twin-aisle and VLA markets that
occurred in the post-implementation period (identified in Table 19 of the compliance panel report)

343 European Union's response to Arbitrator question No. 41, para. 456.
344 United States' responses to Arbitrator question No. 41, para. 93, and No. 120, para. 80 (citing
United States' response to Arbitrator question No. 135 which contains excerpts from the pricing information in
the comparator orders to show that Boeing's service-related obligations, where Boeing had [[***]]).
345 See [[***]], (Exhibit USA-38 (BCI)); [[***]], (Exhibit USA-39 (BCI)); [[***]], (Exhibit USA-40
(BCI)); [[***]], (Exhibit USA-41 (BCI)); Cathay Pacific March 2011 777-300ER Order Documentation, (Exhibit
USA-69 (HSBI)); Singapore Airlines 2013 787-10 Order Documentation, (Exhibit USA-73 (HSBI)); United 2015
777-300ER Order Documentation, (Exhibit USA-74 (HSBI)); Lufthansa 2006 747-8I Order Documentation,
(Exhibit USA-79 (HSBI)); and Lufthansa Escalation Documentation, (Exhibit USA-87 (HSBI)).
346 Cathay Pacific 2013 777-300ER Order Documentation, (Exhibit USA-68 (HSBI)), pp. 70 and 73.

"represent 'significant lost sales' to the US LCA industry … within the meaning of Article 6.3(c) of
the SCM Agreement".347 We reproduce Table 19 of the compliance panel report below as Table 6:
Table 6: United States' "lost sales" claims in the post-implementation period348
Product Market / Customer LCA model
Number of
orders
2012
Number of
orders
2013
Twin-Aisle LCA
Cathay Pacific Airways A350XWB-1000 10
Singapore Airways A350XWB-900 30
United Airlines A350XWB-1000 10
Very Large Aircraft
Emirates A380 50
Transaero Airlines A380 4

6.200. For the purpose of determining the value of lost sales, the United States calculates the
counterfactual value of the lost sales identified in Table 19 of the compliance panel report, i.e. the
value of the orders that Boeing would have won in the counterfac tual. As discussed above, the
United States defines the value of each lost sale at issue as the discounted value of scheduled
deliveries of the closest competing Boeing model in the counterfactual. In particular, the
United States calculates, for each lost sale 𝑖, the discounted value, at the time that the order was
lost (i.e. order year 𝑡), of the net delivery price of each Boeing aircraft counterfactually delivered to
airline 𝑖 at a scheduled post-order date 𝑠.349

𝐿𝑜𝑠𝑡𝑆𝑎𝑙𝑒𝐴𝑖𝑟𝑙𝑖𝑛𝑒 𝑖,𝑜𝑟𝑑𝑒𝑟 𝑦𝑒𝑎𝑟 𝑡
𝑖𝑛 𝑜𝑟𝑑𝑒𝑟 𝑦𝑒𝑎𝑟 𝑡 𝑈𝑆𝐷 = ∑
𝐵𝑜𝑒𝑖𝑛𝑔𝑁𝑒𝑡𝑃𝑟𝑖𝑐𝑒𝐴𝑖𝑟𝑙𝑖𝑛𝑒 𝑖,𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦 𝑦𝑒𝑎𝑟 𝑠
𝑖𝑛 𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦 𝑦𝑒𝑎𝑟 𝑠 𝑈𝑆𝐷
(1+𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡𝑅𝑎𝑡𝑒𝑜𝑟𝑑𝑒𝑟 𝑦𝑒𝑎𝑟 𝑡)
𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦 𝑦𝑒𝑎𝑟 𝑠 − 𝑜𝑟𝑑𝑒𝑟 𝑦𝑒𝑎𝑟 𝑡
𝐷𝑒𝑙𝑖𝑣𝑒𝑟𝑦
𝑦𝑒𝑎𝑟 𝑠

 ×𝑁𝑢𝑚𝑏𝑒𝑟 𝑂𝑓𝐴𝑖𝑟𝑐𝑟𝑎𝑓𝑡𝐴𝑖𝑟𝑙𝑖𝑛𝑒 𝑖,𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦 𝑦𝑒𝑎𝑟 𝑠

(4)

where 𝑠: scheduled delivery date(s) of airline 𝑖's order for the closest competing Boeing model350
 𝐵𝑜𝑒𝑖𝑛𝑔𝑁𝑒𝑡𝑃𝑟𝑖𝑐𝑒𝐴𝑖𝑟𝑙𝑖𝑛𝑒 𝑖,𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦 𝑦𝑒𝑎𝑟 𝑠
𝑖𝑛 𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦 𝑦𝑒𝑎𝑟 𝑠 𝑈𝑆𝐷 : net delivery price of airline 𝑖's order for the closest
competing Boeing model delivered in year 𝑠 and expressed
in US dollar terms of delivery year 𝑠
 𝑁𝑢𝑚𝑏𝑒𝑟𝑂𝑓𝐴𝑖𝑟𝑐𝑟𝑎𝑓𝑡𝐴𝑖𝑟𝑙𝑖𝑛𝑒 𝑖,𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦 𝑦𝑒𝑎𝑟 𝑠: number of counterfactual Boeing aircraft scheduled to
be delivered to airline 𝑖 in year 𝑠.

347 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
paras. 6.31(a) (noting that "the orders identified in Table 19 of the Panel Report in the twin-aisle LCA market
represent 'significant lost sales' to the US LCA industry") and 6.37(a) (noting that "the orders identified in
Table 19 of the Panel Report in the VLA market represent 'significant lost sales' to the US LCA industry").
348 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), Table 19. We
note that this Table refers to "Singapore Airways". The parties have used the names "Singapore Airlines" and
"Singapore Airways" while referring to the same airline customer in this proceeding. We use the names
"Singapore Airlines" and "Singapore Airways" interchangeably in this Decision.
349 More technically, the United States calculates, for each lost sale 𝑖, the sum of Boeing's net delivery
prices of the aircraft counterfactually delivered to airline 𝑖 at scheduled post-order dates (expressed in their
respective delivery-year US dollar terms) divided by the term one plus the discount rate for order year 𝑡 raised
to the power of the number of years between the order year 𝑡 and their respective delivery year 𝑠.
350 For simplicity, the United States assumes that, had Boeing won the lost sales, the counterfactual
Boeing orders would all have occurred in July of a given year in the reference period (i.e. 2012 or 2013).
Similarly, the United States assumes that any counterfactual delivery would have occurred, or would occur, in
July in the expected delivery years (e.g. July 2020).

6.201. As shown in Equation (4), the calculation of lost sales proposed by the United States requires
identifying the closest competing Boeing model (an aspect which we have already addressed in
section 6.3.4.2.2 above); determining the counterfactual Boeing delivery schedules; selecting the
relevant comparator orders to retrieve information on Boeing's counterfactual delivery prices; and
choosing a discount rate. The United States proposes to apply a discount rate to express the value
of Boeing aircraft, initially expressed in delivery-year US dollar terms, in terms of US dollar terms of
the order month/year 𝑡 in the reference period.
6.202. The parties contest six main areas in this context : (a) whether the Arbitrator should use
facts post-dating the lost sales when valuing the lost sales, (b) whether to value the lost sales from
the United States' or Boeing's perspective, (c) the additional number of what models of LCA Boeing
would ultimately have sold and delivered in the counterfactual had Boeing won the lost sales, (d)
the timing of Boeing's counterfactual deliveries, (e) the prices of Boeing's additional LCA sales, and
(f) whether and how to perform a discounting exercise. This section addresses each in turn, after a
brief discussion of the representativeness of the 2011-2013 Reference Period for purposes of valuing
lost sales.
6.3.4.3.1 Representativeness of the 2011-2013 Reference Period
6.203. The Arbitrator notes that prior arbitrators have indicated that a reference period, in order to
provide an appropriate basis on which to calculate a maximum level of countermeasures or
suspension of concessions or other obligations, should be "representative". 351 We likewise consider
an inquiry into the representativeness of the 2011-2013 Reference Period appropriate in the context
of our task to place values on the lost sales and impedance that are "commensurate with the adverse
effects determined to exist" and not punitive in nature. We observe at the outset that the
representativeness issue that we are concerned with here is whether the 2011 -2013 Reference
Period can be considered representative of the short-term adverse effects (in the form of impedance
and lost sales) result ing from the European Union's failure to comply by the end of the
implementation period.352
6.204. Regarding the length of our Reference Period, we note that it is 25 months. Most arbitrators
have used shorter reference periods.353 However, in other contexts, for instance in the area of quota
administration under Article XIII:2(d) of the GATT 1994, a longer "previous representative period"
has been applied.354 The DSU does not prescribe any fixed time-period that Article 22.6 arbitrators
must use, nor are we aware of any time -period that will necessarily be appropriate in all
circumstances. The main reason for using the 2011-2013 time-period as our Reference Period is that
it was used during the compliance panel and appellate review proceedings and that in our
assessment we rely on the adverse effects that these prior adjudicators determined to exist during
the 2011-2013 Reference Period. Consistency therefore s uggests that we not depart unnecessarily
from the approach taken at the compliance proceeding stage in this dispute. As a general matter,
though, we consider that we could in principle elect to use a subperiod of the 2011-2013 time-period
on representativeness grounds, if we deemed it appropriate to do so.355
6.205. With these introductory observations in mind, we turn now to consider the
representativeness of the 2011-2013 Reference Period for purposes of our quantification of adverse

351 See Decisions by the Arbitrators, US – Tuna II (Mexico) (Article 22.6 – US), paras. 4.18-4.19; US –
Upland Cotton (Article 22.6 – US II), paras. 4.115-4.119; and US – Offset Act (Byrd Amendment) (Brazil)
(Article 22.6 – US), para. 3.150.
352 For greater clarity, we note that this inquiry is different from the kind of inquiry that the European
Union suggested we should undertake. To recall, it is the European Union's argument that the adverse effects
determined to exist in the 2011-2013 Reference Period should be "representative" of adverse effects occurring
at present and in the future. As further discussed in section 6.3.1 above, we are unable to accept this
argument.
353 See footnote 161 above.
354 See, for instance, Panel Report, EC – Bananas III (Article 21.5 – Ecuador), para. 6.39 (referring to
GATT Panel Report, EEC – Apples (Chile I), L/5047, para. 4.8, which noted that "in keeping with normal GATT
practice, the Panel considered it appropriate to use as a 'representative period' a three-year period previous to
1979, the year in which the EC measures were in effect"). See also Award of the Arbitrator, US – Section
110(5) Copyright Act (Article 25), para. 4.45.
355 The United States indicated, along similar lines, that certain kinds of data could be adjusted in a
reference period if they were found to be particularly anomalous. (See United States' responses to Arbitrator
question Nos. 103 and 119).

effects in the form of lost s ales. We note in this respect that the 2013 Emirates order for 50 A380
aircraft was, historically speaking, unusually large for an A380 order. However, as explained below
in section 6.3.4.3.4.1, we decide to adjust the order numbers down by [[***]] to acco unt for
cancellations.356 Consequently, the remainder of the 2013 Emirates order amounts to [[***]] A380
aircraft. In our view, this is not significantly out of line with the volume of orders for A380 aircraft
in other years.357 Similarly, we note that the 201 3 order from Singapore Airlines for 30 A350XWB -
900 aircraft was substantial. However , the data on record indicates that A350XWB-900 orders of
that magnitude are unexceptional.358 We also recall that substantial order size variation over time
is not uncommon in the LCA industry. 359 We thus discern nothing about the orders that represent
the lost sales, or about any data on record relating to those orders and market conditions in the
2011-2013 Reference Period, that could be objectively characterized as so anoma lous as to render
the 2011-2013 Reference Period unrepresentative of the short-term adverse effects (in the form of
lost sales) resulting from the European Union's failure to comply by the end of the implementation
period.
6.206. We therefore perceive no basis upon which to conclude that the 2011-2013 Reference Period
is unrepresentative in the context of valuing lost sales and that we should therefore use only a
temporal subset of the 2011 -2013 Reference Period rather than the entire 25 -month Reference
Period.
6.3.4.3.2 Use of facts post-dating the lost sales
6.207. The European Union argues that, in valuing the five lost sales in question, it is legally
permissible and proper for the Arbitrator to take into account facts that arose after the orders
representing the lost sales we re placed, including facts that arose after the 2011 -2013 Reference
Period, insofar as such facts bear on what monetary value Boeing would have ultimately realized
from the lost sales had Boeing won them in the counterfactual. In the European Union's view, this
includes facts concerning cancellations, conversions, or deferment of deliveries of the Airbus LCA
ordered pursuant to the five lost sales, and the use of [[***]] versus [[***]] escalation rates in
converting base-year prices to delivery-year prices.360
6.208. The United States argues that the Arbitrator, in valuing the five lost sales in question, may
only take into account facts that were known to the parties (i.e. Boeing and the relevant LCA
customers) at the time of the orders that would have been placed had Boeing won the l ost sales in
the counterfactual. According to the United States, this is so because the lost sales were identified
on the basis of orders occurring in the 2011-2013 Reference Period, and any facts arising after the
relevant orders would have been placed we re not on the record before the compliance panel or
Appellate Body in the compliance proceedings and formed no part of the findings related to lost
sales. In the United States' view, if the Arbitrator were to consider such facts, it would be improperly
altering what "the adverse effects determined to exist" are.361

356 See paragraphs 6.227 and 6.229 below.
357 Updated Ascend Database, (Exhibit EU-79) (indicating, for example, orders for A380 aircraft in the
volumes of 78 in 2001, 34 in 2003, and 32 in both 2007 and 2010).
358 Updated Ascend Database, (Exhibit EU-79) (indicating, for example, orders for A350XWB-900 aircraft
in the volumes of 139 in 2007, 80 in 2008, 85 in 2010, and 57 in 2014). Our review of the evidence on record
further indicates nothing exceptional about the orders in 2012 and 2013 by Cathay Pacific and United Airlines,
respectively, of ten A350XWB-1000 aircraft each. Although in certain years on either temporal side of the
2011-2013 Reference Period there were no orders for A350XWB-1000 aircraft, in years in which there were
orders (between 2007 and 2018) the volume of orders was generally in excess of ten aircraft per year.
359 Panel Report, EC and certain member States – Large Civil Aircraft, para. 7.1719 (explaining that LCA
"orders tend to be very large and sporadic").
360 European Union's written submission, paras. 163-164, 182-195, 227, and 255-260; responses to
80, para. 285, No. 109, paras. 206-211, No. 110, paras. 212-224, No. 147, paras. 304-308, and No. 167,
paras. 1-25; comments on the United States' response to Arbitrator question No. 135, para. 380-383; and
opening statement at the meeting of the Arbitrator, paras. 86-91. For more detailed explanations of why and
how such facts may be taken into account, see sections 6.3.4.3.4.1, 6.3.4.3.4.2, 6.3.4.3.4.4, 6.3.4.3.5.2 and
6.3.4.3.6.2 below.
361 United States' written submission, paras. 138-149, 158, 185, and 189; and responses to Arbitrator
question No. 40, para. 85, No. 43, paras. 95-100, and No. 58, paras. 14-16.

6.209. The Arbitrator begins its analysis with the United States' broad contention that it would be
improper to value the lost sales using facts that were not on the record of the compliance
proceedings. We discern no categorical legal bar to considering facts that were not on the record in
a previously conducted proceeding in this dispute. The SCM Agreement and DSU are silent in this
regard. Further, we note that because arbitrations generally involve val uation exercises that were
not the focus of previous original or compliance proceedings, the factual information put before
arbitrators not infrequently differ s significantly from the factual information that forms part of the
records of previous original or compliance proceedings.
6.210. The thrust of the United States' argument appears to be narrower, however. That is, in the
United States' view, if we used certain facts (assumed to have arisen in the counterfactual) that
would only have arisen in the counterfa ctual after the orders representing the lost sales occurred
(which, in large part occurred after the end of the 2011 -2013 Reference Period), we would be
revising the findings of the compliance panel and Appellate Body. In other words, the United States
considers the value of the orders representing the lost sales to have been set, for purposes of this
proceeding, at the time that the lost sales were determined to exist in the compliance proceedings.
We agree that we must place a value on "the adverse effects determined to exist" in the 2011-2013
Reference Period, rather than alter what "the adverse effects determined to exist" are. 362 We thus
briefly review how the five relevant lost sales found to exist during the 2011-2013 Reference Period
were determined to be "significant … lost sales" within the meaning of Article 6.3(c) of the
SCM Agreement to ensure that any approach that we take does not invalidate those findings.
6.211. As already discussed in section 6.3.3.2.1 above, and in accordance with the relevant
language of Article 6.3(c), the five relevant lost sales were determined to be such based on LCA
order data, and were determined to be "lost" because in the absence of relevant LA/MSF subsidies,
the United States LCA industry would have won the orders. 363 These lost sales were deemed
"significant" in view of a combination of the following factors: (a) strategic importance ,
(b) learning-curve effects (i.e. the beneficial learning effects that would accrue from producing the
ordered LCA), (c) incumbency (i.e. gaining or retaining the particular customer), and (d) the number
of aircraft and monetary amounts involved in the sales.364
6.212. The adopted findings that the five lost sales were "significant" were made on the basis of
facts on the record before the compliance panel, i.e. based on conditions present in the 2011-2013
Reference Period. However, at least the latter three of these factors upon which the findings of
"significance" were based, identified in the preceding paragraph 365, appear dependent, at least in
significant part, on expectations regarding the future benefits expected to accrue to the LCA producer
who won the orders. Indeed, relevant learning effects will mainly arise during the production of LCA,
i.e. an activity occurring generally years after a relevant order.366 Incumbency benefits would only
appear relevant if the customer itself remains solvent and present in the marketplace after the order
is placed (e.g. the customer does not go bankrupt and cease business). Further, regarding monetary
amounts, because only [[***]] payment is made by a customer upon order in the form of a deposit,
with [[***]] made upon delivery367, [[***]] the money realized from an LCA order will depend on
the order resulting in a delivery (i.e. that the order is not cancelled). We further note that the original

362 It will be recalled that, earlier in this Decision, we decided to use an order-centric approach to
valuing lost sales. (See section 6.3.3.2.1 above).
363 See paragraph 6.100 above.
364 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.1798
(citing Panel Report, EC and certain member States – Large Civil Aircraft, para. 7.1845).
365 We understand the point regarding "strategic importance" as mainly pertaining to instances when a
major LCA customer orders its LCA from a particular producer, and/or when a customer switches from buying
LCA from one producer to the other. (Panel Report, EC and certain member States – Large Civil Aircraft
(Article 21.5 – US), para. 6.1781; Appellate Body Report, EC and certain member States – Large Civil Aircraft,
para. 1212; Panel Report, EC and certain member States – Large Civil Aircraft, para. 7.1845; and European
Union's response to Arbitrator question No. 61).
366 Panel Reports, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), paras. 6.1214
(explaining that "[l]earning effects … result primarily from a more experienced workforce, and imply that per
unit production costs fall as output accumulates over time") and 6.1806 (explaining that "deliveries of new LCA
will lag their order date by typically at least three years, and usually many more years in respect of newly
launched aircraft") (emphasis original); and EC and certain member States – Large Civil Aircraft, paras. 7.1717
and 7.1726-7.1727 (describing learning effects and also "economies of scale" resulting from obtaining LCA
orders).
367 See paragraph 6.236 below.

panel described how the occurrence of post-order developments could easily influence the degree of
benefits – monetary or otherwise – that an LCA producer would ultimately realize from a given
order.368 Thus, we consider that the findings that the five lost sales were "significant" were, in large
part, based on expectations regarding the benefits that would arise for Boeing had Boeing won them
in the counterfactual, and not the notion that such benefits would accrue immediately upon order.
6.213. In the light of these elements, we adopt an approach that is in conformity with the findings
of the compliance pan el that (a) Boeing would have won the orders representing the lost sales in
the counterfactual, and (b) at the time of those counterfactual orders, "significant" benefits for
Boeing would have arisen immediately upon order and/or that Boeing would have rea sonably
expected "significant" benefits to arise from such orders in the future. Our assessment accordingly
takes careful account of these points.
6.214. We further recall that it is our mandate under Article 7.10 of the SCM Agreement to
determine countermeasures that are "commensurate with the adverse effects determined to exist",
i.e. the value of the identified lost sales and instances of impedance. Especially in the context of
assessing the value of lost sales, the value ultimately realized from the counterfactual orders would
depend in large part on how the terms of the orders would have played out after they were placed
(e.g. due to cancellation, conversion, delivery delays, and/or how [[***]] in fact play out over time).
Thus, if in the context of this proc eeding there now is evidence on the record indicating that a
particular order that Boeing would have secured in the counterfactual would have been cancelled
after the 2011 -2013 Reference Period in the counterfactual, whereas such evidence was not yet
available in the 2011-2013 Reference Period, we consider it appropriate to take such evidence into
consideration and adjust the value of that order downwards. In our view, this would not invalidate
the findings in the compliance proceeding involving points (a) and (b) described in the paragraph
immediately above . Indeed, if we did not do so, we would be granting the United States
countermeasures including a monetary value that Boeing would not have realized in the
counterfactual. In our view, an approach that wo uld result in the United States being granted
countermeasures in response to (some quantum of) determined adverse effects that it would not
have suffered in the counterfactual would not be in keeping with Article 7.10.369 Also, as we have
observed above 370, al though the United States may be authorized to take countermeasures
"commensurate with the adverse effects determined to exist", the legal standard of
"commensurateness" does not permit countermeasures that are punitive.
6.215. Finally, we emphasize that, insofar as we take into account in our assessment any particular
evidence that was not available during the 2011-2013 Reference Period, we do so in order to place
as accurate a value as reasonably possible on the orders that represent the lost sales that occurred
in the 2011 -2013 Reference Period, and not to alter adverse effects already established in the
compliance proceedings or to establish any additional adverse effects. Instead, in our assessment
we take into account evidence, including post -Reference Period evidence, only insofar as it sheds
light on how we should quantify the adverse effects determined to exist in the 2011-2013 Reference
Period.
6.3.4.3.3 United States' perspective versus Boeing's perspective
6.216. The United States argues that the discounting exercise that the United States uses in its
valuation of lost sales is premised on the time value of money for the United States, i.e. the value
of lost sales for the United States if that value had accrued to the United States in the year of order
instead of the yea r of delivery. The United States argues that this is the appropriate way to
conceptualize the discounting exercise (i.e. from the perspective of the United States government)
because Article 5 of the SCM Agreement describes adverse effects as occurring vis-à-vis the
"interests of another Member", not vis-à-vis a private company like Boeing. Therefore, for the

368 Panel Report, EC and certain member States – Large Civil Aircraft, paras. 7.1724 and 7.2178.
369 See Award of the Arbitrator, US – Section 110(5) Copyright Act (Article 25), para. 3.34 (indicating
that "[i]t would be quite inappropriate for the Arbitrators to award the European Communities benefits which it
is not actually losing as a result of the continued" non-compliance of the United States). (emphasis added)
370 See section 5 above (noting that countermeasures should not be "punitive").

purpose of valuing the level of countermeasures that the United States may be authorized to take,
the discounting exercise must be performed from the perspective of the United States.371
6.217. The European Union argues that the discounting exercise is premised on the time value of
money for Boeing, i.e. the value of lost sales for Boeing if that value had accrued to B oeing in the
year of order instead of the year of delivery. In the European Union's view, this is so because the
value of these private LCA sales contracts is what is at issue. According to the European Union, they
were concluded by Boeing, and Boeing make s investments and takes risks pursuant to these
contracts. The European Union indicates that the purpose of a discount rate is to capture the risks
borne by the contracting party making the investment, not some third party who is neither a party
to such a contract nor making investments or taking risks vis-à-vis the relevant sales transactions.372
6.218. The Arbitrator notes at the outset that although the parties' disagreement arises more
specifically in the context of the discounting exercise that forms just one s tep of the United States'
lost sales valuation methodology, the parties' disagreement in this context appears to have
potentially broader implications regarding how we conduct our valuation of lost sales , and we
therefore discuss this issue here.
6.219. The United States predicates its argument in this context on the fact that, in the language
of the chapeau of Article 5 of the SCM Agreement, the "[European Union] cause[d] … adverse effects
to the interests of [the United States]" rather than to Boeing. This is t rue. Yet, Boeing is a
United States LCA manufacturer. Thus, viewing the situation through the lens of WTO rules, it is
clear to us that when Boeing suffers harm, so does the United States.373 Any benefit that the
United States as a WTO Member would have realized in the absence of adverse effects caused by
the European Union would have accrued to it via the enhanced sales that Boeing would have
realized.374 Thus, we see no force in the United States' argument based on Article 5 that "the degree
and nature of the adverse effects determined to exist" should be determined from the perspective
of the United States government, rather than Boeing.
6.220. Accordingly, we consider that the European Union in this dispute caused adverse effects to
the interests of the United States through the economic impact of relevant LA/MSF subsidies on
Boeing's LCA orders and deliveries. In this proceeding, for discounting and other quantification
purposes, we therefore value the adverse effects determined to exist from Boeing's perspective. As
explained, by proceeding in this way , we reliably assess the adverse effects susta ined by the
United States.
6.3.4.3.4 Number and models of aircraft sold and delivered in the counterfactual
6.221. As discussed in section 6.3.4.1.1, the United States assumes that, absent A380 and
A350XWB LA/MSF, and with respect to each of the five lost sales at issue, each of the five relevant
customers would have ordered from Boeing a number of the closest competing Boeing model that
is equal to the num ber of Airbus LCA that each airline actually ordered. 375 According to the
United States, this assumption is consistent with the adopted findings in the compliance proceedings.
The European Union did not specifically address the United States' assumption.376 We agree with
this assumption, because the compliance panel and Appellate Body both found that the lost orders

371 United States' methodology paper, paras. 49-51; written submission, paras. 229-230; and responses
372 European Union's written submission, paras. 265, 269 and 275; responses to Arbitrator question
No. 78(c), paras. 266-270, No. 111, para. 231; and comments on the United States' responses to Arbitrator
373 See Award of the Arbitrator, US – Section 110(5) Copyright Act (Article 25), para. 3.19 (noting that
"there can be no question that the benefits which are denied to the European Communities include the benefits
which are denied to EC right holders").
374 See Award of the Arbitrator, US – Section 110(5) Copyright Act (Article 25), para. 3.48 (noting that
"the benefits which the European Communities could expect to realize are the payments which US CMOs would
make to EC right holders"). (emphasis added)
376 However, the European Union does contest certain aspects of the counterfactual that would have
arisen after the initial orders were placed.

themselves (i.e. the number of LCA that Airbus sold as part of each of the five lost sales)
"represented" lost sales to the United States' LCA industry.377
6.222. The United States also assumes that, in the counterfactual, Boeing would have delivered all
the LCA that the five relevant customers would have ordered. The European Union contests certain
aspects of this assumption. These aspects relate to (a) actual cancellations of some lost sales , (b)
the risk of future cancellation s of counterfactually ordered aircraft , and (c) actual conversions of
some lost sales to a different Airbus model. We address each in turn below.
6.3.4.3.4.1 Failure to take actual cancellations into account
6.223. The European Union argues that the Arbitrator should not include in the calculation of the
maximum level of countermeasures the full value of Boeing LCA orders that Boeing would have
secured had Boeing won the lost sales b ecause, according to the European Union, some of those
orders would have been subsequently cancelled in the counterfactual. In the European Union's view,
this is so because Transaero cancelled all four of the A380 aircraft that it ordered in the 2012 lost
sale, and Emirates cancelled [[***]] of the A380 aircraft that it ordered in the 2013 lost sale. In the
European Union's view, if Boeing had won these lost sales, the customers would have cancelled
these orders in the counterfactual as well. Thus, according to the European Union, in determining a
level of countermeasures, the Arbitrator can consider, at most, the value of the deposits and pre -
delivery payments (PDPs) that Boeing would have received in connection with those cancelled
deliveries.378
6.224. The United States, as already noted in section 6.3.4.3.2, contends that the Arbitrator cannot
consider facts, including the cancellations of orders for Airb us LCA that represented lost sales to
Boeing, that occurred after the orders representing the lost sales were placed, as such consideration
would be inconsistent with the findings of the panel and Appellate Body in the compliance
proceedings. Thus, in the United States' view, the Arbitrator should assume that all orders that
Boeing would have secured had it won the lost sales would have been delivered in the
counterfactual.379
6.225. The Arbitrator considers that, in the counterfactual, the relevance of actual cancellations of
Airbus orders depends on whether an actual cancellation of an Airbus order was solely the result of
the airline's decision and independent of Airbus' will and the characteristics of its aircraft (such that
any cancellation of Airbus orders would also have led the same airline to cancel orders for Boeing
LCA in the counterfactual). If so, such cancellations are, in our view, exogenous events to any aircraft
manufacturer that would have occurred in any counterfactual, including the one proposed b y the
United States. The United States failed to provide a valid rationale as to why Boeing would still have
made certain counterfactual deliveries where no actual deliveries occurred in reality because of
specific airlines' decisions and actions. We note that information on such actual cancellations by
definition only becomes available after the airline has placed its order.

377 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
paras. 6.31(a) (noting that "the orders identified in Table 19 of the Panel Report in the twin-aisle LCA market
represent 'significant lost sales' to the US LCA industry") and 6.37(a) (noting that "the orders identified in
Table 19 of the Panel Report in the VLA market represent 'significant lost sales' to the US LCA industry"); and
Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), paras. 6.1798 (noting
that all of the orders identified in Table 19 of that report represent "significant" "lost sales" to the United States
LCA industry and, therefore, that the challenged LA/MSF subsidies continue to be a "genuine and substantial"
cause of serious prejudice to the United States within the meaning of Article 6.3(c) of the SCM Agreement). We
note that the relevant part of Table 19 of the compliance panel report are reproduced as Table 6 further above
(containing the "Number of orders" columns). Moreover, bearing in mind the substitutability of the closest
competing Boeing and Airbus models, and the demonstrated customer demand for the specified number of
aircraft involved in the lost sales, we discern no argumentation or evidence on the record indicating that the
number of Boeing LCA that would have been ordered in the counterfactual would have differed from the
number of orders involved in the lost sales in reality.
378 European Union's written submission, paras. 163, 226-228; responses to Arbitrator question No. 43,
No. 54, para. 17, and No. 147, paras. 287 and 306; and opening statement at the meeting of the Arbitrator,
paras. 67 and 86-91.
379 United States' written submission, para. 138; response to European Union's question No. 1,
paras. 241-242; and comments on the European Union's response to Arbitrator question No. 147, para. 245.

6.226. Accordingly, given our decision to take into account up-to-date information insofar as it
sheds light on how we should quantify the adverse effects determined to exist in the 2011 -2013
Reference Period, we remove the deliveries to Transaero Airlines from any counterfactual delivery
schedule used to quantify adverse effects. The evidence on the record indicates that in 2015
Transaero Airlines went bankrupt. This is an airline -specific event not attributable to Airbus that
would likewise have occurred, along with the order cancellation, with Boeing in the counterfactual.
6.227. Similarly, the evidence on the record suggests that the decision by Emirates in 2019 to
cancel [[***]] outstanding A380 aircraft stemmed from Emirates' business strategy regarding the
VLA market generally and was not specific to Airbus VLA. Mor e specifically, we note that Emirates
was faced with external pressures, such as an increase in fuel prices; seasonality of demand in air
travel; and ongoing macroeconomic pressures, including global geopolitical tensions and volatile
currency markets. In combination, these pressures would reduce the profitability of, and the
business case for owning, a four-engine VLA that is relatively less fuel efficient and less versatile in
comparison to a two -engine twin-aisle LCA.380 Furthermore, the Emirates Group's A nnual Report
2018-19 refers to the high quality of the A380 programme, which suggests to us that Emirates'
decision to cancel some of the A380 orders does not stem from Emirates' dissatisfaction with the
A380 aircraft, but was rooted in the external pressures highlighted above.381
6.228. The evidence on the record also shows that Boeing currently has [[***]] orders outstanding
for airline or leasing company customers [[***]] orders outstanding for [[***]].382 The
United States does not explain why, particularly in the light of the weak general demand for 747-8I
aircraft, Emirates would have made a different decision in the counterfactual regarding the partial
cancellation of its VLA order had it ordered Boeing VLA. Nor does the United States address how
Boeing would have prevented such a cancellation.
6.229. Based on the above, we are of the view that Emirates' decision to cancel a portion of its
orders for A380 aircraft was part of a broader trend in certain airlines' business strategies involving
a move away from VLA towar ds twin -aisle LCA, as demonstrated by the weak observed airline
demand for VLA (except for freighters) that has resulted in a very limited number of orders for A380
and 747-8I aircraft.383 We therefore find that Emirates' decision to partially cancel its VLA order was
independent of Airbus ' will and not specific to Airbus VLA. We therefore remove the cancelled
[[***]] outstanding deliveries of A380 aircraft to Emirates from any counterfactual delivery schedule
that we use to value the relevant lost sale.
6.3.4.3.4.2 Failure to take potential future cancellations into account
6.230. The European Union argues that the risk that a specific LCA order may ultimately not result
in an actual delivery due to a cancellation of the order should also be factored into the calculation of
the value of lost sales. The European Union contends that as soon as an LCA order is concluded,
Boeing faces a positive risk of future contractual default by its customer (as the episode of Transaero
Airlines' bankruptcy illustrates) and will want to be compe nsated for such potential revenue losses
in the future. According to the European Union, and as discussed in section 6.3.4.3.6.4, this inherent
default risk in connection with future deliveries of LCA is one of the three components that has to
be reflected in the discount rate. In the absence of information on Boeing's comparator order - or
customer-specific default risks, the European Union proposes to use Boeing's average cancellation
rate based on historical cancellation rates (measured as the difference between gross orders and

380 The Emirates Group Annual Report, 2018-19, (Exhibit EU-145); and Andreas Spaeth, "Emirates to
buy Rolls Royce Powered A380s Says Sir Tim Clark", Airline Ratings, 2 November 2018, (Exhibit EU-146). The
European Union asserts that these features (relatively less fuel efficiency and less versatility) of Airbus' VLA,
which make it commercially less attractive for Emirates to own and operate VLA when faced with these
external pressures, apply equally to Boeing's VLA. In other words, the European Union argues that the 747-8I
aircraft is also relatively less fuel efficient than a twin-aisle LCA and similarly unsuited for short-haul and
regional point-to-point air travel as the A380 aircraft. (European Union's response to Arbitrator question No.
167, para. 22). The United States has neither refuted this argument, nor is there any evidence on the record to
show that the features of Airbus' VLA that now make it unattractive to Emirates are unique to Airbus' VLA and
not shared by Boeing's VLA.
381 2019 Emirates Annual Report, (Exhibit EU-145), p. 19; and Arabian Travel Market interview,
(Exhibit EU-152).
382 United States' response to Arbitrator question No. 171, para. 5.
383 Updated Ascend Database, (Exhibit EU-79).

net orders, divided by gross orders) across all LCA sales made by Boeing for the period 2008 to
2017 as a proxy for Boeing's risk of cancellation.384
6.231. In response, the United States contends that adjusting the value of the lost sales downwards
to account for any risk of potential cancellation of the orders that Boeing would have secured had
Boeing won the lost sales would be contrary to the findings of the panel and Appellate Body in the
compliance proceedings. According to the United States, this is so because the chance that such
orders might be cancelled in the counterfactual played no role in the findings on lost sales in the
compliance proceedings.385
6.232. The United States nevertheless argues that if the Arbitrator were to account for the
probability that an order might be cancelled before its scheduled delivery in the counterfactual, it
should, for each counterfactual aircraft delivery, multiply its discounted net present delivery value
by an annual "survival rate" in order to obtain a sort of "expected value"386:

𝐴𝑑𝑗𝑢𝑠𝑡𝑒𝑑𝐿𝑜𝑠𝑡𝑆𝑎𝑙𝑒𝐴𝑖𝑟𝑙𝑖𝑛𝑒 𝑖,𝑜𝑟𝑑𝑒𝑟 𝑦𝑒𝑎𝑟 𝑡
𝑖𝑛 𝑜𝑟𝑑𝑒𝑟 𝑦𝑒𝑎𝑟 𝑡 𝑈𝑆𝐷 = ∑
𝐵𝑜𝑒𝑖𝑛𝑔𝑁𝑒𝑡𝑃𝑟𝑖𝑐𝑒𝐴𝑖𝑟𝑙𝑖𝑛𝑒 𝑖,𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦 𝑦𝑒𝑎𝑟 𝑠
𝑖𝑛 𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦 𝑦𝑒𝑎𝑟 𝑠 𝑈𝑆𝐷
(1+𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡𝑅𝑎𝑡𝑒𝑜𝑟𝑑𝑒𝑟 𝑦𝑒𝑎𝑟 𝑡)
𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦 𝑦𝑒𝑎𝑟 𝑠 − 𝑜𝑟𝑑𝑒𝑟 𝑦𝑒𝑎𝑟 𝑡
𝐷𝑒𝑙𝑖𝑣𝑒𝑟𝑦
𝑦𝑒𝑎𝑟 𝑠

×𝑁𝑢𝑚𝑏𝑒𝑟𝑂𝑓𝐴𝑖𝑟𝑐𝑟𝑎𝑓𝑡𝐴𝑖𝑟𝑙𝑖𝑛𝑒 𝑖,𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦 𝑦𝑒𝑎𝑟 𝑠
×𝑆𝑢𝑟𝑣𝑖𝑣𝑎𝑙𝑅𝑎𝑡𝑒𝑜𝑟𝑑𝑒𝑟 𝑦𝑒𝑎𝑟 𝑡,𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦 𝑦𝑒𝑎𝑟 𝑠

(5)

6.233. According to the United States, the survival rate corresponds to the inverse of the probability
that an expected delivery in Boeing's backlog would be cancelled in any given year. The
United States defines the inverse of the probability that an aircraft ordered in a given year is
cancelled the following year as one minus the annual cancel lation rate in that following year. For
each combination of order - and delivery-year, the United States calculates the survival rate of an
aircraft ordered in year 𝑡 and expected to be delivered in year 𝑠 as the product of each annual
probability that an aircraft was not cancelled between the order year 𝑡 and the year preceding the
delivery year 𝑠 (i.e. 𝑠−1):387

𝑆𝑢𝑟𝑣𝑖𝑣𝑎𝑙𝑅𝑎𝑡𝑒𝑜𝑟𝑑𝑒𝑟 𝑦𝑒𝑎𝑟 𝑡,𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦 𝑦𝑒𝑎𝑟 𝑠 = ∏ 𝑃𝑟𝑜𝑏𝑎𝑏𝑖𝑙𝑖𝑡𝑦𝑁𝑜𝑡𝐵𝑒𝑖𝑛𝑔𝐶𝑎𝑛𝑐𝑒𝑙𝑙𝑒𝑑𝑟
𝐷𝑒𝑙𝑖𝑣𝑒𝑟𝑦
𝑦𝑒𝑎𝑟 𝑠−1
𝑟=𝑂𝑟𝑑𝑒𝑟
𝑦𝑒𝑎𝑟 𝑡
 (6)

6.234. The United States proposes to use Boeing's historical annual cancellation rate for all its LCA
sales, which it defines as the ratio between the number of cancellations in a given year and the sum
of backlog at the beginning of the year and gross orders in that year minus conversions and
deliveries. For any counterfactual deliveries scheduled after 2018, the United States proposes to
calculate Boeing's annual cancellation rate for the year 2018 and onwards as Boeing's average
annual cancellation rate for all its LCA sales between 2008 and 2017.
6.235. According to the European Union, notwithstanding certain disa greements specific to the
calculation methodology that the United States presented, the United States' approach to calculating
the cancellation rates can easily be reconciled with that of the European Union. In the
European Union's view, the Arbitrator may either consider contractual default risk rates as part of

384 European Union's written submission, para. 277; and response to Arbitrator question No. 29,
paras. 429-432.
385 United States' response to Arbitrator question No. 126, paras. 118-120.
386 United States' response to Arbitrator question No. 115, paras. 49-50; and Survival Rate Calculation,
(Exhibit USA-65 (HSBI)). The United States notes that this approach "would not account for PDPs paid prior to
cancellation". (United States' response to Arbitrator question No. 115, para. 50). However, as noted in
section 6.3.4.3.4.3, [[***]] in the light of the evidence on the record.
387 The symbol  in Equation (6) corresponds to the product operator for each year between the order
year 𝑡 and the year preceding the delivery year 𝑠: ∏ 𝑥𝑡 =2015
𝑡=2012 𝑥2012 ×𝑥2013 ×𝑥2014 ×𝑥2015.

the discount rate, or adjust the discounted net present delivery va lue downwards by applying the
survival rate to account for the risk of cancellation of the relevant order.388
6.236. The Arbitrator recalls that Boeing typically receives only [[***]] payment immediately upon
order. As delivery nears, the customer typically must be gin making [[***]] payments, referred to
as PDPs. At delivery, the customer must then pay whatever balance remains from the delivery price.
Because most money is paid on delivery, if cancellations occur, Boeing may ultimately retain only
any deposits and/or PDPs previously received in connection with the cancelled LCA orders.389
6.237. With this background, we note that the United States' proposed methodology to quantify
lost sales is based on a risk -free setting where the risk of cancellation is assumed to be zero. Yet,
we note, as acknowledged by both parties, that the risk of cancellation does exist, as shown by
Boeing's historical cancellation rates.
6.238. We further recall that we previously rejected the United States' conceptual argument that
actual cancellations should not be taken into account because doing so would be inconsistent with
the findings from the compliance proceedings (see section 6.3.4.3.4.1). This is the only argument
that the United States offered as to why the Arbitrator should also not consider th e risk of
cancellation in determining the value of the lost sales in the counterfactual. We therefore agree with
the European Union that the risk that specific Boeing LCA deliveries may not materialize in the future
due to cancellation of the orders should be taken into account in the valuation of lost sales.
6.239. Turning to the calculation of this cancellation risk, we note that the European Union initially
proposed a definition of the cancellation rate that was different from the one proposed by the
United States. However, the European Union later used Boeing's cancellation rates as computed
according to the United States' definition. We therefore adopt the approach used by both parties and
define the annual cancellation rate as the ratio between the number of cancellations in a given year
and the sum of backlog at the beginning of that year and gross orders minus conversions and
deliveries that have occurred in that year.
6.240. We recall that although both parties use the same Boeing average cancellation rate based
on Boeing's historical cancellations for the 2008 -2017 time-period, the parties propose to apply it
differently. The European Union's proposed approach consists of including Bo eing's average
cancellation rate in Boeing's discount rate, while the United States' approach involves adjusting the
discounted net present delivery value by applying the survival rate, which is based on Boeing's
annual probability that an aircraft is not cancelled, which itself is based on Boeing's cancellation
rates. However, the European Union is of the view that the Arbitrator may either consider the
approach proposed by the European Union with the discount rate or the approach favoured by the
United States with the survival rate. In the light of the agreement between the parties on this
particular issue, we choose to take into account the risk of future cancellations by applying the
survival rate proposed by the United States.
6.241. Although we agree with the general approach proposed by the United States to calculate
Boeing's average cancellation rate, we question the validity of calculating it as the United States
proposes, i.e. based on cancellation data from the 2008 -2017 period. This is so because doing s o
implicitly assumes that Boeing's additional counterfactual aircraft orders and deliveries, including
Transaero's cancellation390, would not have had any impact on Boeing's cancellation rate. Yet, we
note that neither the United States nor the European Union provided any rationale as to why this
assumption would hold in the counterfactual. The United States also does not explain why it included
the pre-2012 cancellation rates even though it claims that the pre -2012 cancellation rates are not
indicative of the likelihood that an aircraft ordered in 2012 or 2013 would be cancelled prior to its
delivery date. We therefore choose to calculate Boeing's average cancellation rate for the 2008-2011
period on the grounds that the cancellation rates during this period are not affected by the additional
counterfactual orders placed in the Reference Period and the deliveries made between 2012 and

388 European Union's response to Arbitrator question No. 79, para. 277; and comments on the
United States' response to Arbitrator question No. 115, para. 191.
390 According to the counterfactual delivery schedule (i.e. Airbus' contractually agreed delivery schedule)
the four 747-8I aircraft would have been delivered to Transaero in [[***]].

2017.391 We also reject the United States' suggestion that we apply the survival rate to the delivery
price for any delivery occurring after 2013. In our view, the survival rate should only be applied to
any delivery occurring after 2018. 392 This is so because, with the exception of the cancelled
Transaero orders and the partial ly cancelled Emirates order, we discern no evidence on th e record
indicating that any of the relevant Boeing counterfactual deliveries arising out of the lost sales and
scheduled to take place before the present day would have been cancelled by the relevant airline.
We thus assume them to have been delivered and to carry a zero risk of cancellation.
6.3.4.3.4.3 Valuation of deposits and PDPs for counterfactually cancelled orders
6.242. At this point, the Arbitrator notes that, in section 6.3.4.3.4.1 above, we determined that, in
the counterfactual, the 2012 Transaero lost sale (i.e . all four counterfactual orders for 747 -8I
aircraft) and a portion of the 2013 Emirates lost sale (i.e. [[***]] of the 50 counterfactual orders
for 747-8I aircraft) would have been cancelled. Thus, these Boeing LCA would never have been
delivered and Boeing would not have received the full delivery price for them. We recall, however,
that, upon an LCA order, the cu stomer will generally pay a [[***]] deposit to the manufacturer,
and, as the delivery date approaches, the customer will pay additional PDPs to the manufacturer
before paying the outstanding balance upon delivery.393 The question thus arises of whether, in the
counterfactual, Boeing would have received deposits and/or PDPs in connection with the cancelled
Transaero and/or Emirates orders, and if so, whether it would be appropriate for us to include those
in the valuation of the adverse effects.
6.243. The United States argues that the PDPs that Boeing would have received in connection with
the cancelled orders should be included in the valuation of these cancelled orders.394 Regarding the
Transaero lost sale, the United States submitted HSBI evidence indicating that [[HSBI]].395 More
broadly, the United States explains that whether Boeing [[***]], depends on the circumstances of
the cancellation. The United States does not, however, specifically indicate what the specific outcome
would have been in the circumstances surr ounding the Transaero and Emirates orders in the
counterfactual, had those orders (or some of those orders) been cancelled.396
6.244. The European Union argues that in a situation where an order that forms part of the lost
sales would have been cancelled in the counterfactual, the Arbitrator could take into account deposits
and PDPs that Boeing would have received even in the absence of any LCA delivery in determining
the value of those lost sales. According to the European Union, such deposits and PDPs are usually
paid to cover some of the direct production costs of the LCA that were ordered . However, the
European Union has offered no arguments on how these deposits and PDPs should be treated if the

391 We note that the 2008-2011 period includes years in and following the 2008 financial crisis. The
United States did not explain how the financial crisis has affected Boeing's cancellation rate. In any case, the
financial crisis is by definition an exogenous event that would have also occurred in the counterfactual. We
further note that the annual cancellation rate [[***]]. (Survival Rate Calculation, (Exhibit USA-65 (HSBI))).
392 We note that the European Union follows the same approach by setting, for any counterfactual
delivery prior to 2019, the cancellation risk at zero in its formula of the discount rate.
393 United States' methodology paper, para. 42; response to Arbitrator question No. 33, paras. 51-53;
Boeing Declaration, (Exhibit USA-5 (BCI)); and European Union's response to Arbitrator's question No. 42,
para. 459.
394 We note that the United States' foremost position is that the Transaero and Emirates lost sales
should be valued in the same manner as any other lost sale, as the compliance panel and the Appellate Body
had found these sales to be instances of significant lost sales within the meaning of Article 6.3(c) of the
SCM Agreement. Failure to value them would, in the United States' view, constitute a collateral attack on the
DSB's adopted findings, and factual developments post-dating the Reference Period should not affect the
valuation of adverse effects. We have already discussed this argument in the sections 6.3.4.3.2 and
6.3.4.3.4.1.
395 Boeing e-mail from [[***]] (Dec. 13, 2018), (Exhibit USA-30 (HSBI)) (second word to the end of
sentence of second line under [[***]] on first page). Similarly, for the Transaero order for four A380 aircraft
that formed part of the lost sales findings, the European Union submitted evidence to show that Transaero
Airlines had made deposits and pre-delivery payments to Airbus by [[***]]. (European Union's response to
Arbitrator question No. 30; and Transaero Airlines Deposits and Pre-delivery Payments, (Exhibit EU-83
(HSBI))).
396 United States' responses to Arbitrator question No. 94, paras. 2-5, and No. 32, para. 50; Boeing
E-mail regarding First Set of Arbitrator Questions, (Exhibit USA-30 (HSBI)); and Boeing E-mail from [[***]]
(Feb. 10, 2019), (Exhibit USA-60 (BCI)).

LCA manufacturer were required to return the amount received as de posits and PDPs by virtue of
cancellation of the orders.397
6.245. In the Arbitrator's view, it would appear to be reasonable to include deposits and PDPs in
the calculation of the maximum level of countermeasures only if Boeing would have both received
and retained such monetary amounts in the counterfactual in the event of a partial or complete
cancellation of an order. We therefore address whether Boeing would have received and retained
such payments with respect to the Transaero and Emirates cancelled orders in the counterfactual.
6.246. Regarding the 2012 Transaero order for A380 aircraft, we note that Transaero also placed
an order for [[***]] 747-8I aircraft in [[***]].398 When Transaero declared bankruptcy, [[***]]
these orders were cancelled along with the orders for Airbus A380 aircraft which were the subject of
the 2012 lost sale. 399 The United States explained that Boeing [[HSBI]].400 This HSBI evidence
indicates that Boeing [[***]]. In the light of this, it would in our view not be appropriate to
characterize [[***]] for the cancelled Transaero LCA. We consider this HSBI evidence as the best
evidence that we have indicating what Boeing would have done with additional deposits and PDPs
that Boeing would have received for the additi onal four 747 -8I aircraft that it would have sold to
Transaero had Boeing won the 2012 lost sale. In the absence of contrary evidence, we therefore
assume that Boeing would have [[***]] with those additional amounts. Thus, on balance, we
consider it unreas onable to include in our valuation any deposits and/or PDPs that Boeing would
have received in the counterfactual in connection with the Transaero lost sale.
6.247. Regarding the 2013 Emirates lost sale, we recognize that it would appear reasonable to
assume that, in the counterfactual, Boeing would have received certain deposits and/or PDPs in
connection with the cancelled [[***]] 747-8I aircraft orders. However, even if this would have been
so, we would still consider it unreasonable to include any such amounts in our valuation. The
United States has explained that it is [[***]] in situations involving cancellation. Indeed, according
to the United States, in situations like the Emirates cancellation, it would appear that the issue would
have been settled [[***]].401 The United States has directed us to nothing on the record indicating
what [[***]] the Emirates order in the counterfactual in the event of cancellation and would support
the view that Boeing would have [[***]] any relevant counterfactual deposits and/or PDPs received
from Emirates, [[***]] of any relevant deposits or PDPs. 402 We also have no evidence before us
regarding what [[***]] on this front in these circumstances in the event of such [[***]]. Thus, the
[[***]] any counterfactually received deposits and/or PDPs is [[***]]. In the light of the foregoing,
we consider it unreasonable to include in our valuation any deposits and/or PDPs that Boeing would
have received in the counterfactual in connection with the Emirates lost sale.
6.3.4.3.4.4 Failure to take conversions into account
6.248. The European Union argues that insofar as the orders that Airbus secured from the lost sales
have been converted 403 by customers for reasons that would have led them to convert orders of
Boeing LCA as well (had Boeing won the lost sale s instead), then the Arbitrator should make
appropriate adjustments to the value of the lost sales. According to the European Union, two of the
five lost sales (United Airlines and Cathay Pacific Airways) have involved conversions of certain
Airbus LCA as of May 2019. The European Union asserts that the circumstances surrounding such

397 European Union's responses to Arbitrator question No. 25, fn 420, No. 28, fn 455, No. 43,
paras. 465-466, No. 54, para. 17, and No. 166, fn 56; and comments on the United States' response to the
Arbitrator question No. 94, para. 20.
398 United States' methodology paper, para. 62; and Transaero 747-8I Order Information, (Exhibit
USA-13 (HSBI)).
399 United States' response to Arbitrator question No. 75, para. 92; and Boeing Contracted Delivery
Schedules and Actual Delivery Information for "Comparator" Orders, (Exhibit USA-29 (HSBI)).
400 Boeing E-mail regarding First Set of Arbitrator Questions, (Exhibit USA-30 (HSBI)) (second word to
the end of sentence of the second line from [[***]] on page 1).
401 United States' response to Arbitrator question No. 94, para. 5.
402 We consider that certain [[***]] (which we choose as the comparator order for the Emirates lost
sale) support our conclusion in this context. (See Lufthansa 2006 747-8I Order Documentation, (Exhibit
USA-79 (HSBI)), p. 18; and paragraph 6.309 below).
403 By conversions, we mean the process of changing an order for an LCA of one model (e.g. an
A350XWB-1000 aircraft) to an order for a different LCA model (e.g. an A350XWB-900 aircraft).

conversions indicate that had Boeing won these lost sales in the counterfactual, similar conversions
would have occurred vis-à-vis Boeing's orders.404
6.249. The United States submits that the European Union's conversion-related arguments are both
conceptually and factually flawed. In the view of the United States, if the Arbitrator were to reflect
in the counterfactual a conversion from the model found to be assoc iated with particular lost sales
to a different model, it would be altering the adopted findings based on a new factual record.
Moreover, the European Union wrongly presumes that because certain Airbus orders were in fact
converted, then the counterfactual Boeing order would likewise have been subject to a similar
conversion.405
6.250. The Arbitrator notes that the value that Airbus or Boeing would expect to ultimately realize
from a given order depends in part on the model of LCA that is ultimately delivered to the customer
pursuant to that order. Thus, we consider that counterfactual conversions of Boeing LCA that would
have been ordered had Boeing won the lost sales are, in principle, a relevant consideration. However,
we first have to satisfy ourselves that it is reasonable to conclude that such counterfactual
conversions would have occurred. We recall that the main disagreement between the parties in this
context is whether the fact that certain relevant Airbus LCA orders were converted means that
corresponding counterfactual Boeing LCA orders would also have been converted. We thus turn to
examine the record evidence that the parties have supplied.
6.251. Regarding the United Airlines conversion, the European Union provided evidence in the form
of specialized press articles suggesting that the reason behind United Airlines' conversion of all its
orders for A350XWB-1000 aircraft back to orders for A350XWB -900 aircraft in September 2017 406
is found in United Airlines' long-term fleet strategy and, relatedly, its evolving fleet requirements.407
We note that this evidence suggests that low fuel prices and the imminent delivery of Boeing 777 -
300ER aircraft ordered at end of line prices in 2015 allowed United Airlines to retire its 747 -400
aircraft earlier than anticipated and that in the light of this change in fleet composition United Airlines
reassessed its prior purchase of A350XWB-1000 aircraft, which had been ordered in 2013 to replace
the 747-400 aircraft. The European Union also submitted to the Arbitrator a letter to Airbu s dated
January 2017, in which [[***]] acknowledged that conversion of the A350XWB-1000 order occurred
solely at the request of United Airlines.408
6.252. The United States essentially agrees with what appears to be the main factual thrust of the
European Union's evidence in this context, i.e. that United Airlines' imminent receipt of 777 -300ER
aircraft in 2017 essentially led to the conversion of the Airbus order. The United States contends,
however, that the European Union ignores that United Airlines ordered those 777-300ER aircraft in
2015 and that, in the counterfactual, United Airlines would have ordered 777-300ER aircraft in 2013
(i.e. at the time of the lost sale, and before the airline's initial 777 -300ER orders in 2015). 409 The
United States thus infers that, to the extent that the "imminent delivery" of 777-300ER aircraft would

404 European Union's response to Arbitrator question No. 110, para. 214. As discussed in section
6.3.4.3.6.1 on delivery prices, the European Union argues that the Arbitrator should take the United Airlines
and Cathay Pacific Airways conversions into consideration by selecting an alternative comparator order, or by
downward-adjusting prices contained in an existing comparator order that is considered the most
representative, reliable, and robust available (European Union's response to Arbitrator question No. 110,
para. 218).
405 United States' written submission, paras. 185-194; responses to Arbitrator question No. 117,
para. 61, and No. 110, para. 35; and comments on the European Union's responses to Arbitrator question
406 The European Union explains that, in 2013, with a view to replacing its ageing fleet of Boeing 777
aircraft, United Airlines had converted an order for 25 A350XWB-900 aircraft into an order for the larger
A350XWB-1000 aircraft variant and at the same time ordered an additional 10 A350XWB-1000 aircraft (those
which constitute the "lost sale" at issue). (European Union's response to Arbitrator question No. 98, para. 66).
407 See Chicago Business Journal, "United Airlines postponing delivery of much-anticipated Airbus-350",
6 September 2017, (Exhibit EU-59); Airways Magazine, "United Converts A350-1000 Order to A350-900",
6 September 2017, (Exhibit EU-60); Airbus, "New agreement with United Airlines increases A350 XWB order
to 45", 6 September 2017, (Exhibit EU-139); and European Union's responses to Arbitrator question No. 98,
para. 67, and No. 162, para. 26.
408 See Letter [[***]], (Exhibit EU-140 (HSBI)); and European Union's response to Arbitrator question
No. 162, para. 28.
409 See Table 1 above (indicating that the closest competing Boeing model to the Airbus A350XWB-1000
aircraft is the 777-300ER aircraft).

have caused United Airlines to consider order conversions, it would be the imminent deliver y of
counterfactual 777-300ER aircraft ordered at the time of the lost sale in 2013. Accordingly, the
United States submits that there is no basis to assume that a counterfactual 777 -300ER order in
2013 would have been converted to a smaller Boeing model in 2017.410
6.253. Based on the evidence before us, we accept the European Union's argument that the 2017
United Airlines conversion of Airbus A350XWB aircraft was triggered by United Airlines, mainly in
the light of its changing fleet composition and, in particular , the imminent arrival of previously
ordered 777-300ER aircraft in 2015. In the counterfactual, however, United Airlines would have
already ordered 777 -300ER aircraft in 2013 as a result of Boeing winning the United Airlines lost
sale. These 777-300ER aircraft would presumably have been ordered and/or retained to replace the
747-400 aircraft. In the absence of the A350XWB-1000 aircraft, United Airlines would have needed
the 777-300ER aircraft ordered in 2013 to replace the 747-400 aircraft. It would have had no reason
to convert them to smaller aircraft. Indeed, as indicated by the evidence provided by the
European Union, United Airlines continued to order 777 -300ER aircraft between 2015 and 2018.411
In short, the event that appeared to be the driving force behind the Airbus conversion, i.e. the arrival
of 777-300ER aircraft, would have happened substantially earlier in the counterfactual than it did in
reality and there would have been no corresponding event leading to the conversion of these
particular 777-300ER aircraft in the counterfactual. This gives us serious doubts as to whether it is
reasonable to assume that United Airlines' conversion decisions would have been the same in the
counterfactual as in reality and, consequently, we do not find it reasonabl e to assume that in the
counterfactual this conversion would likewise have occurred vis-à-vis the 2013 Boeing order for 777-
300ER aircraft.
6.254. Regarding the Cathay Pacific Airways conversion, the European Union presented evidence
suggesting that Cathay Pacif ic Airways' September 2017 decisions to convert two A350XWB -1000
aircraft to A350XWB-900 aircraft and to defer five A350XWB-1000 aircraft from 2020 to 2021 were
taken at the request of Cathay Pacific Airways in the context of [[***]], and were part of a la rger
conversion and deferral effort towards smaller A350XWB -900 LCA. 412 The European Union also
submitted an E-mail by [[***]], explaining that the decision by Cathay Pacific Airways to request
the conversion was driven by the perception that the A350XWB-900 model was better suited for the
new routes and frequencies foreseen by Cathay Pacific Airways' expansion plan and would enable it
to cut costs to revive earnings. 413 In that E-mail, [[***]]. The European Union thus contends that
Cathay Pacific Airways' deci sion to convert part of its order would have also occurred in the
counterfactual.414
6.255. The United States argues that there is no basis to assume that, in the counterfactual, Cathay
Pacific Airways would have anticipated similar cost savings from the conversion of orders for the
777-300ER aircraft to orders for the smaller 787-10 aircraft, particularly since the airline would have
already had a large, installed fleet of 777-300ER aircraft, which would have made it relatively easy
for the airline to incorporate additional 777-300ER aircraft into its fleet. The United States is of the
view that a "down-conversion" to a 787-10, for example, would have required Cathay Pacific Airways
to introduce an entirely new Boeing model into its fleet. Moreover, given that the actual conversion
allegedly arose in the context of [[***]], there is no basis to assume that a simil ar circumstance
would have arisen in the counterfactual.415

410 United States' comments on the European Union's response to Arbitrator question No. 161,
paras. 19-23.
411 See Airways Magazine, "United Converts A350-1000 Order to A350-900", 6 September 2017,
(Exhibit EU-60).
412 See Flight Global, "Cathay swaps batch of A350-1000s to smaller -900", 13 September 2017,
(Exhibit EU-58). More specifically, in the context of Cathay Pacific Airways' evaluation of its request for
proposal ("RfP") for the A321neo aircraft, Cathay Pacific Airways requested a down-conversion of a total of six
A350XWB-1000 aircraft into A350XWB-900 aircraft, and a deferral of eight LCA in total. (See E-mail [[***]],
(Exhibit EU-142 (HSBI)); and Cathay Pacific Campaign A350-1000, 2013 (Exhibit EU-133 (HSBI))).
413 See E-mail [[***]], (Exhibit EU-142 (HSBI)); and Cathay Pacific Campaign A350-1000, 2013,
(Exhibit EU-133 (HSBI)).
414 See European Union's response to Arbitrator question No. 162, paras. 29-30.
415 United States' comments on the European Union's response to Arbitrator question No. 161,
paras. 19-23.

6.256. The United States also responds to the European Union's suggestion that, if certain Boeing
contractual provisions provide for conversions, the appropriate "down -conversion" might be from
777-300ER aircraft to the 777-8 aircraft416, a long-range variant of the 777X programme launched
in 2013. The United States notes that the 777-8 aircraft has standard two-class seating of 350-375
passengers and a maximum range of 8,690 nautical miles. 417 According to the compliance panel
report, the 777-300ER aircraft has standard seating for 360 or 386 passengers (according to Airbus
and Boeing, respectively) and a maximum range of 7,650 or 7,825 nautical miles. 418 The
United States argues that it is difficult to see how switching from a 777-300ER aircraft to the 777-8
aircraft, a longer -range variant with comparable seating capacity, would constitute a "down -
conversion", and still more difficult to see how such a switch would be consistent with Cathay Pacific
Airlines' reasons for converting two orders for A350XWB-1000 aircraft to A350XWB-900 aircraft.419
6.257. Based on the evidence before us, we accept the European Union's argument that Cathay
Pacific Airways converted two orders for A350XWB-1000 aircraft to orders for A350XWB-900 aircraft
in order to save costs. We note that it made this decision in the context of [[***]]. Based on the
evidence before us, we also accept the United States' argument that a "down -conversion" in the
counterfactual would have required Cathay Pacific Airways to introduce an entirely new Boeing model
into its fleet. This suggests to us that the cost savings from a down-conversion in the counterfactual
may have been significantly smaller than those expected from the conversion of two A350XWB-1000
aircraft into A350XWB-900 aircraft. The European Union did not explain why such conversion would
still have taken place in the counterfactual in circumstances that would likely have differed in
significant ways from those of the Airbus conversion. We therefore consider that it is not reasonable
to assume that in the counterfactual this conversion would have occurred vis-à-vis Boeing's orders.
6.3.4.3.5 Timing of Boeing's counterfactual deliveries
6.258. The parties also disagree as to the timing of Boeing's counterfactual deliveries. This timing
is relevant to the United States' methodology because, as discussed in section 6.3.4.1.1, the
United States establishes the value of a lost sale by summing the discounted values of all post-order
deliveries of the closest competing Boeing model. In order to determine the date from which that
delivery price should be discounted, the United States proposes to use Airbus' contractually agreed
delivery schedules of the lost sales at issue as Boeing's counterfactual delivery schedules. 420 This
section addresses (a) whether this proposal by the United States is reasonable, and (b) whether to
adjust those schedules to take into account post-order delivery deferrals. We address each in turn.
6.3.4.3.5.1 Failure to use Boeing delivery schedules
6.259. The European Union argues that using delivery schedules agreed by Airbus with the
customers in connection with the lost sales in order to estimate counterfactual delivery dates of
corresponding Boeing deliveries, as proposed by the United States, is inappropriate. According to
the European Union, this is so because, as the United States itself notes, the contracted schedule
between Airbus and the customer "reflects circumstances specific to Airbus' aircraft, operations, and
relationships".421 In the European Union's view, the use of Airbus delivery schedules fails to capture
Boeing's supply-side constraints in the counterfactual world, such as production bottlenecks, delays
in the development of the aircraft, or problems with suppliers – all of which may affect the timeline
of Boeing's counterfactual deliveries, and none of which are captured by examining Airbus' delivery
schedules.422
6.260. The European Union, instead, proposes to use the latest updated versio ns of delivery
schedules contained in selected Boeing comparator orders, i.e. LCA orders that Boeing concluded

416 European Union's response to Arbitrator question No. 161, para. 22.
417 Technical specs of 777X, Boeing website, (Exhibit USA-114).
418 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.1295
and Table 17.
419 United States' comments on the European Union's response to Arbitrator question No. 161, para. 24.
420 United States' responses to Arbitrator question No. 40, para. 83, and No. 135, paras. 157, 164, 178
and 185.
421 European Union's written submission, paras. 223-225; response to Arbitrator question No. 80,
paras. 284-287; and comments on the United States' response to Arbitrator question No. 135, paras. 372-373.
422 European Union's comments on the United States' responses to Arbitrator question No. 114,

with customers in reality and involving the Boeing LCA model that would have been ordered had
Boeing won the lost sale in question. The European Union considers that these comparator orders
contain contractual terms, including delivery schedules, reasonably similar to what Boeing and the
relevant airline would have agreed in the counterfactual if Boeing had won the lost sales. 423 The
European Union also notes that the counterfactual delivery schedules to which Boeing would have
agreed would also have been influenced by Boeing's other commitments to deliver LCA to other
customers during the relevant time-periods because Boeing only has the capacity to deliver so many
LCA in a given period of time.424
6.261. The United States responds that the counterfactual contractually agreed delivery schedule
between Boeing and each of the customers involved in the lost sales would have complemented,
rather than duplicated, any delivery schedule that appeared in any other Boeing order conc luded
with any other customer in the counterfactual. The United States therefore rejects the
European Union's proposal that the Arbitrator rely on the delivery schedules of Boeing's comparator
orders.425
6.262. The Arbitrator notes that the delivery schedule for any LCA order is the result of a negotiation
between the seller and the customer. 426 Customers will seek delivery positions that suit their
strategies and plans, while LCA producers will try to accommodate the customers' requests subject
to the supply-side constraints that they face. It can be noted in this regard that LCA manufacturers
do not produce for inventory but on demand.427
6.263. That being said, in the absence of direct evidence of the counterfactual negotiating results,
we consider it less problematic to use Airbus' contractual delivery schedules concluded in connection
with the lost sales than using the delivery schedules of Boeings in comparator orders. In our view,
although these Airbus delivery schedules reflect circumstances and supply -side constraints specific
to Airbus, we consider that they can be reasonably assumed to reflect the actual pressures from the
demand side because they have been accepted by the customers involved in the lost sales at issue.
Moreover, we do not consider that the use of a delivery schedule contained in a Boeing comparator
order would reasonably reflect Boeing's supply -side constraints in negotiations with the relevant
customers involved in the lost sales. Indeed, we consider it unlikely that Boeing, which has limited
production capacity in a given period of time, would conclude contracts containing identical delivery
schedules with multiple customers, rather than trying to sequence overall deliveries in a more even
fashion over time. In addition, although Airbus' contractually agreed delivery schedules may not
reflect exactly what the customers would have wanted from or been able to negotiate with Boeing
in the counterfactual, they at least represent a compromise that was acceptable to the negotiating
parties at the time of ord er. We further discern no other option for constructing Boeing's relevant
counterfactual delivery schedules that, in our minds, would yield a more reliable result than using
Airbus' contractually agreed delivery schedules.
6.264. In the light of the above, we consider it reasonable to use, as Boeing's counterfactual delivery
schedules, the delivery schedules found in the contracts concluded by Airbus and the relevant
customers in connection with the lost sales.
6.3.4.3.5.2 Failure to take deferrals of deliveries into account
6.265. The European Union notes that certain LCA deliveries arising from the orders that Airbus
secured in connection with the lost sales have been deferred 428 by customers. According to the
European Union, where these deferrals occurred for reasons that would have led those same

423 The issue of the choice of comparator order or [[***]] is discussed in section 6.3.4.3.6.1.
424 European Union's comments on the United States' response to Arbitrator question No. 135,
para. 389; Boeing Contracted Delivery Schedules and Actual Delivery Information for "Comparator" Orders,
(Exhibit USA-29 (HSBI)); and Boeing Contracted Delivery Schedules, Delivery Schedule Changes, and Actual
Delivery Information for "Comparator" Orders (Exhibit USA-44 (HSBI)).
425 United States' response to Arbitrator question No. 135, para. 158. The United States further argues
that the delivery schedule of the [[***]] the Cathay Pacific Airways lost sale would be a reasonable estimate to
use if there were no better data, although the delivery schedule [[***]] is less reliable because it reflects
[[***]], rather than [[***]]. (United States' response to Arbitrator question No. 40, para. 87).
426 Panel Report, EC and certain member States – Large Civil Aircraft, para. 7.1750.
427 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), fn 5196.
428 By deferral, we mean the delay of LCA deliveries beyond the contractually agreed time.

customers to defer deliveries of Boeing LCA as well (had Boeing won the lost sales instead), the
Arbitrator should assume that similar deferrals would have occurred to the LCA ordered from Boeing,
and make appropriate adjustments to the value of the lost sales. In particular, the European Union
raises the issue of deferrals in the context of the lost sales concerning orders by United Airlines
(involving an up to three-year delayed delivery from 2022 -2024 to 2025-2026) and Cathay Pacific
(involving a one-year delayed delivery from 2020 to 2021 for some aircraft).429
6.266. The United States contends that the European Union's arguments related to deferrals are
both factually and conceptually flawed. The United States argues that the European Union overstates
the frequency of deferrals. According to the United States, [[***]] of firm orders for the 747 -8I,
777-300ER, and 787-10 models have occurred as originally scheduled. In addition, delivery delays,
including in response to customer requests, have typi cally been of [[***]] delays, on average.430
More generally, the United States is of the view that there are many possible reasons for deferrals,
some of which could be specific to an Airbus aircraft in the real world and would not have applied to
the closest competing Boeing model ordered in the counterfactual. In addition, the United States
asserts that there could be differences between the Airbus contracts under which the deferrals
occurred and the contracts that Boeing would have concluded with the relev ant customers, which
could have altered the frequency and/or duration of relevant deferrals in the counterfactual.431
6.267. The Arbitrator notes that the value that Airbus or Boeing would expect to ultimately realize
from a given LCA order depends in part on when the LCA ordered are delivered. This is because the
net delivery price on a given date is determined by the escalation factor associated with that delivery
date. Thus, we consider that counterfactual deferrals of Boeing LCA are, in principle, relevant
considerations for purposes of our valuation of lost sales. However, we first have to satisfy ourselves
that such counterfactual deferrals would have occurred.
6.268. We note that some deliveries of Airbus LCA associated with lost sales have been deferred
after the initial order. 432 However, the European Union does not propose to take into account all
deferrals that arose in connecti on with Airbus' actual and future deliveries arising out of the lost
sales at issue, but only the deferrals requested by the airlines. In fact, the parties, have materially
discussed only two instances of deferrals, namely, deferrals associated with the United Airlines and
Cathay Pacific Airways lost sales, which, according to the European Union, have been requested by
both airlines in the context of conversion. 433 As explained in section 6.3.4.3.4.4, we do not take
these conversions into account in the valua tion of lost sales. We further note that there is no
evidence on the record to suggest that both airlines requested the deferrals independently of the
conversions. In the light of the foregoing, we consider that it is not reasonable to assume that these
deferrals would have been requested had Boeing won the lost sales involving United Airlines and
Cathay Pacific Airways.
6.269. With respect to the deferrals associated with the United Airlines lost sale, the European Union
additionally contends that the United States' assertion that in the counterfactual Boeing would have
delivered its LCA according to the expected delivery schedule contained in Airbus' 2013 United
Airlines order contract is not legitimate. According to the European Union, this is because the actual

429 European Union's response to Arbitrator question No. 98, paras. 73-77.
430 United States' response to Arbitrator question No. 124, para. 110 (stating that "for the 747-8, more
than [[***]] percent of the deliveries occurred as originally scheduled, and just under [[***]] percent were
delayed by, on average, [[***]]. For the 777-300ER, about [[***]] percent of the deliveries were on time, and
about [[***]] percent of the deliveries were delayed by, on average, [[***]]. And for the 787-10, there was
[[***]]"); and comments on the European Union's response to Arbitrator question No. 98.
431 United States' written submission, paras. 185-194; responses to Arbitrator question No. 117,
para. 61, and No. 110, para. 35; and comments on the European Union's responses to Arbitrator question
432 The length of such deferrals (compared to the delivery schedules contractually agreed) range, for
example, anywhere from [[***]] months to [[***]] years (in the case of Emirates) for "delivery dates re-
scheduled earlier than the original delivery dates", while other deliveries have been delayed from [[***]]
months to [[***]] years (in the case of United Airlines). However, we note that [[***]] the Airbus deliveries
pertaining to the lost sales at issue have, on average, been delayed [[HSBI]]. (Analysis based on Exhibit EU-
86 (HSBI), Exhibit EU-87 (HSBI), Exhibit EU-88 (HSBI), Exhibit EU-89 (HSBI), Exhibit EU-90 (HSBI), Exhibit
EU-91 (HSBI), Exhibit EU-92 (HSBI), Exhibit EU-106 (HSBI), and Exhibit EU-123 (HSBI)).
433 European Union's response to Arbitrator question No. 110, paras. 213-214.

deferral, which resulted in more distant delivery slots ([[***]]), was purely driven by United Airlines'
business considerations and had nothing to do with any actions taken by Airbus.434
6.270. The United States counters that, as the European Union's own evidenc e shows, United
Airlines, in September 2017, continued to take deliveries of Boeing 777-300ER aircraft (pursuant to
orders placed in 2015, after the 2013 lost sale) and did not plan to defer the entry into service of
the 787 -10 aircraft that it had ordered , even as it significantly deferred its A350XWB aircraft
orders.435 According to the United States, it would therefore be an unnecessary and inappropriately
speculative exercise to posit a counterfactual in which United Airlines would have initially ordered
the 777-300ER aircraft in 2013, converted those orders to 787-10 orders in 2017, and then deferred
the 787-10 orders by several years.436
6.271. We agree with the United States. In our view, it is implausible that United Airlines would
have converted its order for 777-300ER aircraft placed in 2013 to 787-10 aircraft orders in 2017 and
then deferred the 787 -10 aircraft orders by several years, given that it also placed an order for
777-300ER aircraft in 2015 that was not deferred.
6.272. Similarly, in the case of Cathay Pacific Airways, we are not convinced by the explanation
provided by the European Union that in the counterfactual Cathay Pacific Airways would have
converted its order for 777-300ER aircraft to an order for 787-10 aircraft which it would subsequently
have deferred.
6.273. In the light of the above, we are unable to accept the European Union's proposal to adjust
the counterfactual Boeing delivery schedules by taking into account counterfactual deferrals of
deliveries.
6.3.4.3.6 Delivery prices of Boeing's counterfactual deliveries
6.274. As discussed in section 6.3.4.1.1, to determine the value of the counterfactual Boeing's
deliveries, the United States first calculates for each lost sale the net delivery price, expressed in
delivery-year US dollar terms, of the closest competing Boeing model that would have been ordered
and then delivered in the counterfactual. For each order at issue, the valuation proposed by the
United States starts with the selection of a Boeing comparator order [[***]] that c ontains the
contractual prices of the closest competing Boeing model to which the United States assumes Boeing
and the airline would have agreed in the counterfactual. 437 The pricing information included in the
chosen comparator order [[***]] can then be used to compute the net delivery price for the closest
competing Boeing model delivered in year 𝑠 and expressed in US dollar terms of the delivery year 𝑠
as follows438:

434 European Union's response to Arbitrator question No. 98, para. 75.
435 United States' comments on the European Union's response to Arbitrator question No. 98, para. 78
and fn 91 (citing Chicago Business Journal, "United Airlines postponing delivery of much-anticipated
Airbus-350", 6 September 2017 (Exhibit EU-59 (HSBI))).
436 United States' comments on the European Union's response to Arbitrator question No. 98,
paras. 78-79.
437 United States' methodology paper, paras. 56, 61, 67, 72, and 78.

𝐵𝑜𝑒𝑖𝑛𝑔𝑁𝑒𝑡𝑃𝑟𝑖𝑐𝑒𝐴𝑖𝑟𝑙𝑖𝑛𝑒 𝑖,𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦 𝑑𝑎𝑡𝑒 𝑠
𝑖𝑛 𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦 𝑦𝑒𝑎𝑟 𝑠 𝑈𝑆𝐷 =(𝐵𝑜𝑒𝑖𝑛𝑔𝐺𝑟𝑜𝑠𝑠𝑃𝑟𝑖𝑐𝑒𝐴𝑖𝑟𝑙𝑖𝑛𝑒 𝑖,𝑜𝑟𝑑𝑒𝑟 𝑦𝑒𝑎𝑟 𝑡
𝑖𝑛 𝑏𝑎𝑠𝑒 𝑦𝑒𝑎𝑟 𝑈𝑆𝐷 −𝐶𝑜𝑛𝑐𝑒𝑠𝑠𝑖𝑜𝑛𝑠 𝐴𝑖𝑟𝑙𝑖𝑛𝑒 𝑖
𝑖𝑛 𝑏𝑎𝑠𝑒 𝑦𝑒𝑎𝑟 𝑈𝑆𝐷)
 ×𝐸𝑠𝑐𝑎𝑙𝑎𝑡𝑖𝑜𝑛𝐹𝑎𝑐𝑡𝑜𝑟𝐴𝑖𝑟𝑙𝑖𝑛𝑒 𝑖
𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦 𝑦𝑒𝑎𝑟 𝑠 −𝑂𝑡ℎ𝑒𝑟𝐶𝑜𝑛𝑐𝑒𝑠𝑠𝑖𝑜𝑛𝑠𝐴𝑖𝑟𝑙𝑖𝑛𝑒 𝑖
𝑖𝑛 𝑏𝑎𝑠𝑒 𝑦𝑒𝑎𝑟 𝑈𝑆𝐷
(7)

where 𝐵𝑜𝑒𝑖𝑛𝑔𝐺𝑟𝑜𝑠𝑠𝑃𝑟𝑖𝑐𝑒𝐴𝑖𝑟𝑙𝑖𝑛𝑒 𝑖,𝑜𝑟𝑑𝑒𝑟 𝑦𝑒𝑎𝑟 𝑡
𝑖𝑛 𝑏𝑎𝑠𝑒 𝑦𝑒𝑎𝑟 𝑈𝑆𝐷 : gross order price of closest competing Boeing model
ordered by airline 𝑖 in year 𝑡 and expressed in US dollar
terms of the base year439
 𝐶𝑜𝑛𝑐𝑒𝑠𝑠𝑖𝑜𝑛𝑠𝐴𝑖𝑟𝑙𝑖𝑛𝑒 𝑖,𝑜𝑟𝑑𝑒𝑟 𝑦𝑒𝑎𝑟 𝑡
𝑖𝑛 𝑏𝑎𝑠𝑒 𝑦𝑒𝑎𝑟 𝑈𝑆𝐷 : price concessions contained in airline 𝑖's order cont ract for the
closest competing Boeing model expressed in US dollar terms of
the base year, and [[***]]
 𝑂𝑡ℎ𝑒𝑟𝐶𝑜𝑛𝑐𝑒𝑠𝑠𝑖𝑜𝑛𝑠𝐴𝑖𝑟𝑙𝑖𝑛𝑒 𝑖,𝑜𝑟𝑑𝑒𝑟 𝑦𝑒𝑎𝑟 𝑡
𝑖𝑛 𝑏𝑎𝑠𝑒 𝑦𝑒𝑎𝑟 𝑈𝑆𝐷 : price concessions contained in airline 𝑖's order contract for
the closest competing Boeing model expressed in US dollar
terms of the base year, but [[***]]
 𝐸𝑠𝑐𝑎𝑙𝑎𝑡𝑖𝑜𝑛𝐹𝑎𝑐𝑡𝑜𝑟𝐴𝑖𝑟𝑙𝑖𝑛𝑒 𝑖
𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦 𝑦𝑒𝑎𝑟 𝑠: escalation factor for the delivery date 𝑠 calculated from the
escalation formula contained in airline 𝑖's order contract for the
closest competing Boeing model.440

6.275. As shown in Equation (7), the net delivery price expressed in delivery-year US dollar terms
corresponds to the difference between the gross delivery price and price concessions, both expressed
in base-year US dollar terms, multiplied by the escalation factor associated with the delivery date
minus additional price concessions [[***]] and also expressed in base -year US dollar terms. The
escalation factor is determined by an escalation formula that is [[***]]. In particular, the escalation
formula determines the escalation factor for each month of each year between the base year and
the scheduled delivery year. According to the United States, the use of an escalation formula is "an
industry-accepted practice to offset the increase in labor and material costs over time resulting from
inflation and other economic changes".441
6.276. Relevant data on the gross price, price concessions and escalation factors, which is necessary
to calculate the net delivery price, are available in Boeing comparator order contracts [[***]] as
well as in Boeing's internal records, including in particular its electronic revenue management
system. As summarized in Table 7, for four of the five lost sales at issue, the United States proposes
to use, as comparator orders, firm orders placed by the same customer for the closest competing
Boeing model within one or two years of the Airbus orders representing the lost sales. According to
the United States, the pricing terms contained in these comparator Boeing orders are the best
available indication of the prices that these same customers would have paid for the closest
competing Boeing model in the counterfactual.442

439 The base year does not necessarily correspond to [[***]].
440 As explained above, escalation factors are specified for the relevant month in the expected delivery
years by using the escalation formula contained in the comparator order. However, for simplicity, the
United States assumes that any delivery would occur in July in the expected delivery years.
441 United States' methodology paper, paras. 42-45.
442 United States' methodology paper, paras. 46-47, 56, 61, 67, and 72; and response to Arbitrator
question No. 135, paras. 158, 165, 172, 179, and 186.

Table 7: Comparator orders and the [[***]] proposed by the United States443
Lost sales in
the Reference Period
Comparators proposed by
the United States
Year Airline Model Order
size Year Airline Model Order
size
2012 Cathay Pacific
Airways
A350XWB
1000 10 2013 Cathay Pacific
Airways order 777-300ER [[***]]444
2012 Transaero
Airlines A380 4 2012 Transaero Airlines
order 747-8I 4
2013 Singapore
Airlines A350XWB 900 30 2013 Singapore Airlines
order 787-10 30
2013 United Airlines A350XWB
1000 10 2015 United Airlines
order 777-300ER 10
2013 Emirates A380 50 [[***]] Emirates
[[***]] 747-8I [[HSBI]]

6.277. The United States explains that with respect to the Emirates lost sale, there was no
contemporaneous Boeing 747-8I aircraft sale to Emirates that it could rely on as a comparator order.
The United States thus proposes to use [[***]] of an HSBI number (i.e. a number that is on the
record but protected by our HSBI procedures) of [[***]]. Alternatively, the United States asserts
that the Arbitrator could use the 2013 Korean Air order for five Boeing 747-8I aircraft as comparator
order.445
6.278. The European Union raises a numbe r of concerns regarding delivery prices that relate to
(a) the choice of the comparator orders , (b) the choice of the point in time from which we begin
using [[***]] escalation factors (i.e. the time of order or the present day) , and (c) the application
of price adjustments to the delivery prices contained in the comparator orders. We address each in
turn.
6.3.4.3.6.1 Choice of the comparator orders
6.279. The European Union argues that the comparator orders selected by the United States are
neither representative nor reliable, nor robust. Although the European Union is of the view that it is
the United States' responsibility to demonstrate that its selected comparators are representative,
reliable, and robust approximations of the counterfactual lost sales, it identifies a number of criteria
intended to guide the Arbitrator's assessment of the representativeness, reliability, and robustness
of potential comparator orders. According to the European Union, buyer-furnished equipment (BFE),
flight deck equipment (FDE, i.e. avionics and communication instruments); the engine supplier, type,
and performance; as well as the maximum take-off weight (MTOW) all have important implications
for LCA prices, along with other criteria, such as the "comparator LCA type", order size, del ivery
schedule, order year, and competitiveness of the campaign.446
6.280. The European Union also rejects the delivery prices in the comparator orders chosen by the
United States because in the European Union's view they are exaggerated and fail to properly
approximate the counterfactual delivery prices, resulting in artificially inflated estimates of adverse
effects from lost sales. Further, the European Union rejects some of the United States' proposed
comparator orders because of their unrepresentativeness and u nreliability. The comparator orders
proposed by the European Union are summarized in Table 8.447

443 This table only shows the comparators that the United States proposes and considers as "first-best".
444 The order size of [[***]] aircraft is taken from the Ascend database (Updated Ascend Database,
(Exhibit EU-79)). However, we note that the order size of the [[***]].
445 United States' methodology paper, para. 48; response to Arbitrator question No. 121, para. 94;
comments on the European Union's response to Arbitrator question No. 106, para. 155; and Boeing
446 European Union's response to Arbitrator question No. 106, paras. 152-154.
447 European Union's written submission para. 230.

Table 8: Comparators proposed by the European Union448
Lost sales in
the Reference Period
Comparators proposed by
the European Union
Year Airline Model Order
size Year Airline Model Order
size
2012 Cathay Pacific
Airways
A350XWB
1000 10 [[***]] Cathay Pacific
Airways [[***]] 777-300ER [[HSBI]]
2012 Transaero
Airlines A380 4 - - - -
2013 Singapore
Airlines A350XWB 900 30 2013 Singapore Airlines
order* 787-10 30
2013 United Airlines A350XWB
1000 10 2015 United Airlines
order* 777-300ER 10
2013 Emirates A380 50 2006 Lufthansa
order 747-8I 20
Note: * Same comparator order as the one proposed by the United States.

6.281. In particular, the European Union rejects the 2013 Cathay Pacific Airways order for Boeing
777-300ER aircraft proposed by the United States as a comparator for the 2012 Cathay Pacific
Airways lost sale on the grounds that it was not a competitive campaign because Airbus did not
submit any offer in that campaign. 449 The European Union further submits that the 2013 Cathay
Pacific Airways order for [[***]] 777-300ER aircraft is not of the s ame order size as the Cathay
Pacific Airways lost sale for ten aircraft. As an alternative comparator order for the Cathay Pacific
Airways lost sale, the European Union proposes the [[***]] Cathay Pacific Airways [[***]], or
alternatively the 2011 Cathay P acific Airways order for ten 777 -300ER aircraft. According to the
European Union, the [[***]] Cathay Pacific Airways [[***]] would obviate the need to identify a
comparator order, while the 2011 Cathay Pacific Airways order for ten 777 -300ER aircraft has an
order size identical to the original 2012 Cathay Pacific Airways lost sale involving ten A350XWB -
1000 aircraft.450
6.282. The United States argues that the European Union bears the burden of proof with respect to
its arguments that the United States' comparator orders are unreasonable. According to the
United States, the focus of the European Union's criteria on the physical or performance
characteristics of a Boeing aircraft sold pursuant to a comparator order is conceptually misguided
because thes e characteristics should not affect the selection of the comparator orders. The
United States argues that this is so because the European Union never established that, in the
counterfactual, the customer would have configured the Boeing model to approximate, as closely as
possible, the characteristics of the Airbus aircraft that it ordered in reality as a general matter, or
with respect to BFE, FDE, MTOW, or engine supplier/type/performance in particular. 451 The
United States further submits that the European Union's focus on BFE is irrelevant because Boeing
[[***]]. The United States also notes that the European Union failed to include the [[***]] in its list
of criteria, though the European Union has frequently recognized the importance of this factor in
ensuring an appropriate selection of comparator orders. Overall, the United States argues that the
task before the Arbitrator is to value each lost sale by reference to the Boeing LCA that the customer

448 This table only shows the comparator orders that the European Union considers as "first-best"
(European Union's responses to Arbitrator question No. 28, paras. 421 and 424, No. 68, para. 236, No. 96,
para. 35, and No. 106, para. 163; Correcting US lost sales valuation, (Exhibit EU-143 (HSBI))). It does not
show the comparator orders proposed by the European Union to account for the conversion of the Cathay
Pacific Airways and United Airlines lost sales.
449 As discussed in section 6.3.4.3.4.4, the European Union also rejects the comparator order for the
Cathay Pacific Airways lost sale proposed by the United States on the grounds that the proposed comparator
order does not take into account the conversion of two A350XWB-1000 aircraft to a smaller A350XWB-900
variant. The European Union makes a similar argument for the conversion of the United Airlines order of
A350XWB-1000 aircraft to A350XWB-900 aircraft. We recall that we have decided not to assume that if Boeing
had won the lost sales its orders would have been converted in a manner similar to how Airbus' actual orders
were converted following the placement of the orders. We thus do not further consider the European Union's
arguments regarding conversions.
450 European Union's responses to Arbitrator question No. 96, fn 23, No. 105, para. 147, and No. 161,
para. 17. According to the Ascend database, Cathay Pacific Airways ordered ten 777-300ER aircraft in March
2011 and another four 777-300ER aircraft in August of the same year. (Updated Ascend Database (Exhibit EU-
79)). However, the European Union does not consider this [[***]] to be a representative comparator order.
451 United States' comments on the European Union's response to Arbitrator question 106.

would have ordered in the counterfactual, bearing in mind that the particular characteristics of that
Boeing LCA would have differed to some degree from the Airbus model.452
6.283. Regarding the United States' comparator order for the Cathay Pacific Airways lost sale, the
United States submits that a situation in which Airbus did not submit an offer for a competitor model
in a sales campaign that resulted in a Boeing comparator order actually replicates more closely the
relevant counterfactual, where the relevant Airbus aircraft (i.e. the A380 aircraft or the relevant
A350XWB model) would not have been represented in the campaign . This is because these Airbus
LCA would not have been available for order in the counterfactual at any relevant time. According
to the United States, insisting on pricing from "competitive campaig ns" that reflect vigorous
competition from Airbus would entail a significant risk of artificially understating the real level of
adverse effects. The United States also prefers a customer -specific comparator order over a
customer-specific "final and bindin g offer" because comparator orders contain aircraft price
information to which the customer, by definition, agreed. The United States further claims that
despite the European Union's assertion of [[***]].453
6.284. The Arbitrator now turns to another comparator order that the European Union rejects – the
comparator order for the Emirates lost sale chosen by the United States. According to the
European Union, the Emirates [[***]] does not constitute a reasonable and realistic [[***]] 747-8I
aircraft to Emirates because [[***]]. The European Union further contends that the Emirates
[[***]].454
6.285. As an alternative comparator order for the 2013 Emirates lost sale, the European Union
proposes the 2006 Lufthansa order for 20 747 -8I aircraft. According to the European Union, the
Lufthansa order is the only order of a similar, albeit smaller, magnitude in terms of number of aircraft
sold as compared to the counterfactual order from Emirates that would have involved 50 747 -8I
aircraft.455 The European Union further argues that the Lufthansa order is the most accurate
comparator order because Lufthansa, like Emirates, is one of the world's premier flagship carriers,
with a similarly robust network and focus on traveller comfort.456
6.286. In addition, to obtain a relevant per-aircraft price from the 2006 Lufthansa comparator order,
the European Union proposes to use the actual average 2013 per-aircraft net delivery price of 747-
8I aircraft deliveries arising from the 2006 Lufthansa order, expressed in 2013-year US dollar terms
and as reported in Boeing's revenue management system, as the base -year net price to which the
Arbitrator would then apply the escalation formula contained in the [[***]] Emirates.457
6.287. The United States argues that the European Union's criticisms re garding the Emirates
[[***]] have no merit. The United States observes that it provided evidence concerning the
circumstances surrounding the formulation of the [[***]] and the 747 -8I prices for the [[***]],
including [[***]]. The United States argues that Emirates is a customer whom Boeing knows very
well from its 777 aircraft sales to the airline and that the 747-8I prices for [[***]].458
6.288. Moreover, the United States rejects the 2006 Lufthansa order of 20 747-8I aircraft that the
European Union proposed as an alternative comparator order for the 2013 Emirates lost sal e

452 United States' comments on the European Union's response to Arbitrator question No. 106,
paras. 148-161 and fn 204.
453 United States' comments on the European Union's responses to Arbitrator question No. 96, para. 21,
No. 97, para. 63, and No. 105, paras. 140 and 143; [[***]] (Exhibit [[***]]); and [[***]] (Exhibit [[***]]).
454 European Union's responses to Arbitrator question No. 52, para. 3, and No. 97, para. 52; and
comments on the United States' response to Arbitrator question No. 121, paras. 235-249.
455 The 747-8I is the closest competing Boeing model relative to the A380, which was the Airbus model
actually sold in the Emirates lost sale.
456 European Union's response to Arbitrator question No. 68, para. 236.
457 The European Union proposes to use this approach instead of using the per-aircraft net price
expressed in base-year US dollar terms reported in the 2006 Lufthansa order subject to the associated
escalation formula. (European Union's written submission para. 246; response to Arbitrator question Nos. 28,
52, 97, para. 53; and Correcting US lost sales valuation, (Exhibit EU-143 (HSBI))).
458 United States' responses to Arbitrator question No. 121, paras. 87-90, and No. 122, paras. 95-100;
Boeing Declaration, (Exhibit USA-5 (BCI)); Boeing E-mail regarding Questions 116, 118, 121, 124(c), 125,
128-129, 132, (Exhibit USA-66 (HSBI)); Emirates [[***]] Information, (Exhibit USA-16 (HSBI)); and [[***]],
(Exhibit USA-71 (HSBI)).

because, in the United States' view, the European Union ignores the importance of the [[***]] and
timing for determining aircraft prices. More specifically, according to the United States, the Lufthansa
747-8I delivery prices are [[***]], and were set in 2006, just after the 747-8I programme had been
launched, and more than six years prior to the Emirates lost sale. The United States further argues
that the [[***]].459
6.289. The United States proposes that if the Arbitrator were nevertheless not to use the Emirates
[[***]], it could use the 2013 Korean Air order of five Boeing 747 -8I aircraft as an alternative
comparator order for the Emirates lost sales. According to the United States, the 2013 Korean Air
order is preferable to the 2006 Lufthansa order, because Korean Air is a major airline in Asia that
has ordered and taken delivery of both A380 aircraft and 747-8I aircraft, and its 2013 order for 747-
8I aircraft occurred in the same year as the Emirates A380 lost sale.460
6.290. The European Union responds that the 2013 Korean Air order is not a representative,
reliable, and robust comparator order for the 2012 Emirates lost sale. According to the
European Union, the fact that Emirates and Korean Air are both based in Asia is irrelevant because
pricing for long-range aircraft is driven by airline characteristics, not by the location of their hub.461
6.291. The European Union further argues that the United States ignores the importance of order
size by choosing an alternative comparator order from Korean Air for five aircraft representing a
tenth of the order size of the Emirates lost sale of 50 aircraft. The European Union contends that the
Korean Air comparator order fails to account for the signalling effect that Boeing could have hoped
to reap from the large order of 50 747 -8I aircraft by Emirates and the price concessions and/or
volume discounts Emirates would therefore most likely have received. Similarly, the European Union
is of the view that the United States appears to have overlooked that, unlike Lufthansa, Korean Air's
revenue, number of passengers carried, hours flown, passenger-kilometres flown, seats offered, and
number of employees, differ consistent ly from Emirates. According to the European Union, the
similarity in airline-relevant characteristics between Emirates and Lufthansa suggests that the type
and extent of price concessions that Emirates would have received from Boeing are more accurately
captured by the 2006 Lufthansa order than by the 2013 Korean Air order. The European Union
further contends that the fact that the 2006 Lufthansa order was placed seven years prior to the
Emirates lost sale does not matter significantly given that delivery p rices are escalated year -on-
year.462
6.292. The Arbitrator notes that both parties offer comparator orders that reasonably approximate
what the delivery prices of the Boeing models sold in the counterfactual would have been. We thus
examine these comparator orders to determine whether they can be used to estimate the prices of
the counterfactual Boeing orders.
6.293. The European Union has listed a number of criteria intended to guide the Arbitrator in its
assessment of the representativeness, reliability, and robustness of the comparator orders (actually
won by Boeing). This list includes criteria that relate to the pricing terms of the relevant contracts,
such as the comparator LCA type, order size, delivery schedule, order year, and competitiveness of
the sales campaign. Other criteria listed by the European Union refer to the aircraft's physical and
performance characteristics, such as BFE, FDE, engine supplier, engine type, and engine
performance, as well as MTOW. We recognize that all these elements may impact on an a ircraft's
price in a given sales contract.463
6.294. At the same time, we consider that focusing on some of these items, in particular those
related to the aircraft's characteristics, might be conceptually misguided because Boeing and Airbus
offerings frequently fe ature different physical or performance characteristics. It seems likely that
where the customer in a given lost sale ordered a certain Airbus model with particular characteristics,
it would have ordered the closest competing Boeing model with characteristics that would inevitably

459 United States' response to Arbitrator question No. 61, para. 31, and No. 122, para. 99; and
comments on the European Union's response to Arbitrator question No. 106, para. 155.
460 United States' response to Arbitrator question No. 121, para. 94; and No. 122, para. 100; and
Korean Air 2013 747-8I Order Documentation, (Exhibit USA-76 (HSBI)), pp. 17, and 22-25.
461 European Union's comments on the United States' response to Arbitrator question No. 121,
paras. 254-265.
462 European Union's comments on the United States' response to Arbitrator question No. 121,
paras. 254-265.
463 European Union's response to Arbitrator question No. 106, paras. 153-154.

have differed to some degree in the counterfactual. We therefore decline to let such physical
characteristics (other than the use of the closest competing Boeing model) materially guide our
decision as to the proper comparator orders to use in this context.
6.295. One of the European Union's general arguments regarding the comparators selected by the
United States is that [[***]] to Airbus should be preferred to comparator firm orders. We do not
agree. To the contrary, we consider that comparator firm orders are preferable because they
represent what the same (or similar) customer (i.e. airline) actually agreed to after negotiations
occurred, and not something hypothetical (i.e. [[***]] by Boeing).
6.296. Another point of disagreement between the parties is the use of [[***]] as comparators. We
agree with the European Union that prices in [[***]] that have [[***]] have not been accepted by
the customer. It is likely that customers would try to improve prici ng conditions in [[***]]
negotiations. Specifically with regard to the Emirates [[***]], we further consider that the
information that it contains is less reliable than order information, because it was [[***]] to the
customer. Absent proof of [[***]].
6.297. To sum up, we have decided to reject the use of [[***]] as well as the use of [[***]]. This
means that we need to choose comparators from among the proposed comparator firm orders for
the closest Boeing model.
6.298. Generally, our choice of the relevant comparator firm orders is based on one main criterion,
namely the customer's identity, i.e. the airline, as applying this criterion would likely provide us with
pricing terms to which the airline would have agreed, all things being equal, had Boeing won the lost
sale. In the absence of a proposed comparator order from the same airline, we opt for a comparator
order involving a different airline that shares relatively similar characteristics to the airline that would
have placed the order. Finally, where we have different proposed comparator orders from the same
airline, but for a different order size, we select the comparator with the order size closest to that of
the lost sale.
6.299. In the light of the above, we review the comparators that the parties propose for the five
lost sales at issue. We start with the 2012 Cathay Pacific Airways lost sale.
6.300. Table 9 summarizes the main characteristics of the comparator orders that the parties
propose, either as first-best or second-best option, for the 2012 Cathay Pacific Airways lost sale464:
Table 9: Comparators for Cathay Pacific Airways lost sale proposed by the parties
Cathay Pacific Airways
lost sales Comparators proposed by the parties
Year Model Order
size Year Airline Type of
comparator Model Order
size
2012 A350XWB-
1000 10
2012 Cathay Pacific
Airways firm order 777-300ER [[***]]
[[***]] Cathay Pacific
Airways [[***]] 777-300ER [[HSBI]]

2011 Cathay Pacific
Airways firm order 777-300ER 10

6.301. We consider that the best comparator for the 2012 Cathay Pacific Airways lost sale is the
2011 Cathay Pacific Airways order of ten 777-300ER aircraft. This is so because it is a firm order
that was made by the same airline for Boeing's closest competing model and it involves the same
number of aircraft. We therefore find this comparator order provides a reasonable estimate of the
prices of the LCA that Boeing would have sold to Cathay Pacific Airways in the counterfactual.
6.302. Second, regarding the 2012 Transaero Airlines lost sale, as we explained in section
6.3.4.3.4.1, we have concluded that there would have been no counterfactual 747 -8I deliveries to
Transaero Airlines owing to the subsequent bankruptcy of Transaero Airlines, which we consider

464 This table does not show the alternative comparator order proposed by the European Union to
account for the partial conversion of the Cathay Pacific Airways lost sales, because, as we explained in
section 6.3.4.3.4.4, accounting for conversions would be speculative in our view.

should be assumed to have occurred also in the counterfactual. W e thus need not select any
comparator order for the Transaero Airlines lost sale.
6.303. Third, regarding the 2013 Singapore Airlines lost sale, we note that both parties propose to
use the same comparator order, namely the 2013 Singapore Airlines order for 30 Boeing 777-300ER
aircraft. We agree with the parties and consider that this is the best comparator for the Singapore
Airlines lost sale, because the firm order was placed by the same airline for Boeing's closest
competing model and for the same order size. W e therefore find this comparator provides a
reasonable estimate of the prices of the LCA that Boeing would have sold to Singapore Airlines in
the counterfactual.
6.304. Fourth, regarding the 2013 United Airlines lost sale, we first recall that we have decided not
to take conversions into account. We further note that both parties propose the same comparator
order, namely the 2015 United Airlines order of ten 777-300ER.465 We, too, consider that this is the
best comparator for the United Airlines lost sale , because the firm order was placed by the same
airline, for Boeing's closest competing model, and involved the same number of aircraft. We
therefore find that this comparator provides a reasonable estimate of the prices of the LCA that
Boeing would have sold to United Airlines in the counterfactual.
6.305. Fifth, regarding the 2013 Emirates lost sale, Table 10 summarizes the main characteristics
of the comparators proposed by the parties. The Emirates lost sale is the only lost sale at issue for
which there is no firm order placed by the airline associated with the lost sale ( in casu, Emirates)
for Boeing's clo sest competing model. As we explained above, we nevertheless reject the use of
[[***]], which [[***]] Emirates and which is favoured by the United States. We do so because in
our view pricing information contained in a [[***]] is likely to be less reliable than that contained in
a firm order.
Table 10: Comparators for Emirates lost sale proposed by the parties
Emirates
lost sales Comparators proposed by the parties
Year Model Order
size Year Airline Type of
comparator Model Order
size
2013 A380 50
[[***]] Emirates [[***]] 747-8I [[***]]
2013 Korean Air firm order 747-8I 5
2006 Lufthansa firm order 747-8I 20

6.306. Turning to the choice between the 2006 Lufthansa firm order and the 2013 Korean firm
order, we offer the following considerations. First, the record reflects that , as an LCA customer,
Lufthansa has more relevant characteristics (such as revenue, number of passengers carried, hours
flown, passenger -kilometres flown, seats offered, and number of employees) in common with
Emirates than does Korean Air. 466 These similarities in LCA customer characteristics between
Lufthansa and Emirates suggest to us that the pricing terms, including the type and extent of price
concessions, that Emirates would have been able to negotiate with Boeing would be more accurately
captured by the 2006 Lufthansa order than by the 2013 Korean Air order. It is also plausible that
while negotiating pricing terms with Emirates, Boeing would have been conscious of factors other
than price, such as signalling to its potential customer base that the 747-8I enjoyed the confidence
of a strategically significant LCA customer like Emirates. Based on the aforementioned similarities
between Emirates and Lufthansa, it appears to us that Boeing would likely also have been conscious
of signalling effects when negotiating pricing terms with Lufthansa. [[***]] LCA pricing.467

465 As explained above, we note that the European Union initially proposed the 2015 United Airlines
order for ten Boeing 777-300ER aircraft, but later proposed the 2013 United Airlines order for ten 787-10
aircraft to account for the conversion of the United Airlines lost sale.
466 European Union's comments on the United States' response to Arbitrator question No. 121(c),
Table 2.
467 United States' response to Arbitrator question No. 61 (noting that "[s]trategically significant
customers [[***]]. Customers vary in terms of their strategic significance to Boeing. Some customers are

6.307. Our second consideration relates to order size. T he size of the 2013 Korean Air order (five
747-8I aircraft) is ten times smaller than the size of the Emirates lost sale. In contrast, the size of
the 2006 Lufthansa order (20 747 -8I aircraft) is significantly closer to the Emirates lost sale.
[[***]].468
6.308. We recognize that there is a gap of seven years in relation to the order year between the
Lufthansa comparator order and the Emirates lost sale. However, pursuant to LCA sales contracts,
the value of counterfactually delivered aircraft is determined by applying the escalation formula
contained in the Lufthansa comparator order . This takes into accou nt the changes in labour and
material costs in the production of the 747 -8I model, to the gross price and price concessions
expressed in 2013 US dollar terms. We consider that by applying the escalation formula we can
minimize any impact that the gap between the year of order of the Lufthansa sale and the Emirates
sale would have on our determination of counterfactual Boeing prices.469
6.309. On the basis of the above considerations, we therefore find that the 2006 Lufthansa order
for 20 747-8I aircraft constitutes a better comparator order for the 2013 Emirates lost sale than the
2013 Korean Air order for five 747-8I aircraft.
6.310. As concerns the pricing terms that we obtain from the 2006 Lufthansa order, we reject the
European Union's suggestion to use the actual average Lufthansa 2013 per-aircraft net delivery price
and to apply the escalation formula contained in the Emirates [[***]]. The European Union did not
provide any economic rationale to justify combining the gross price and price concessions contained
in one contract and the escalation formula contained in another contract. We therefore prefer to
take the same approach as for the other comparator orders. That is to say, we use the per -aircraft
gross price and price concessio ns expressed in base -year US dollar terms , and the associated
escalation formula contained in the order contract, which allows us to express the net delivery price
in delivery-year US dollar terms. We also take into account any [[***]].
6.311. To sum up our decisions above, Table 11 compiles the relevant comparator orders that we
have selected to value the five lost sales.

recognized market leaders, and sales to such a customer can be expected to boost the appeal of the model to
other customers"); and European Union's response to Arbitrator question No. 61 (noting that "a manufacturer's
views on the strategic importance of a sales campaign [[***]]. A manufacturer may consider a campaign to be
of particular strategic importance for many reasons, including … the status of the airline in terms of its
perception by other airlines as a market leader").
468 United States' responses to Arbitrator question No. 61, para. 36 (noting that "[[***]]"), and No.
125, para. 117 (noting that "[[***]]"); and European Union's comments on the United States' response to
Arbitrator question No. 125.
469 We note that the United States has argued that, to the extent that the Arbitrator does not use
[[***]], it should use the 2013 Korean Air order as the appropriate comparator order for the 2013 Emirates
lost sale because the "[Korean Air] order for 747-8Is occurred in the same year as the Emirates A380 lost sale"
(United States' response to Arbitrator question No. 121(f), para. 94). However, the United States has not
offered any rationale for its assertion that the comparator order necessarily needs to be contemporaneous with
the lost sale, considering that, as we have noted above, the value of the aircraft is determined by applying the
escalation formula (which takes into account the changes in labour and material costs in the production) to the
gross price and price concessions.

Table 11: Comparator orders selected by the Arbitrator
Lost sales in
the Reference Period Selected comparator order
Year Airline Model Order
size Year Airline Model Order
size
2012 Cathay Pacific
Airways A350XWB 1000 10 2011 Cathay Pacific
Airways order 777-300ER 10
2012 Transaero
Airlines A380 4 2012 - - -
2013 Singapore
Airlines A350XWB 900 30 2013 Singapore Airlines
order 787-10 30
2013 United Airlines A350XWB 1000 10 2015 United Airlines
order 777-300ER 30
2013 Emirates A380 50 2006 Lufthansa
order 747-8I 20

6.312. As we noted above, the European Union asserts that the Challenged Information that the
United States submitted in its responses to the third round of questions is incomplete, inconsistent
and non -verifiable in important aspects. 470 We recall that the Challenged Information primarily
relates to evidence that the European Union had requested the Arbitrator to seek from the
United States on the basis that evidence previously submitted by the United States did not
sufficiently demonstrate the reliability of certain information used in the United States' valuation
methodology. The European Union's objection regarding incompleteness, inconsistency, and non-
verifiability concerns the United States' newly submitted evidence.
6.313. The European Union argues that, following the Arbitrator's evidentiary request, the
United States has modified its method of quantifying the value of lost sales by relying on pricing
terms such as gross price and price concessions from the time of the order as contained in the
Purchase Agreements (PA) or [[***]] and excluding all post-order developments on pricing terms,
[[***]]. According to the European Union, this modified approach is inconsistent with the
United States' original method of quantifying the value of lost sales using pricing terms retrieved
from [[***]] aircraft that have already been delivered.471
6.314. Furthermore, the European Union contends that the Singapore Airlines 2013 787 -10 Order
Documentation provided b y the United States contains information only on the [[***]] between
Boeing and Singapore Airlines [[***]]. According to European Union, there is therefore no objective
basis upon which to accept the accuracy of the pricing information reported in the [[***]].472
6.315. The Arbitrator notes that the evidence on the record indicates that a PA is an LCA sales
contract, which specifies, inter alia, the gross price, price concessions, escalation formula, order
size, delivery schedule, size and timing of PDPs, penalties for late deliveries and performance
guarantees, options, purchase rights, and conversion rights at the time of order. The evidence
further indicates that [[***]]. However, the final delivery price [[***]].473
6.316. We further note that the United States' initial valuation of lost sales relied on the pricing
information contained in the [[***]], with the exception of the valuation of [[***]], which was based
on pricing information contained in [[***]].474 These [[***]] reflect any post-order developments
and affected the contractual price to be paid for the LCA in question, including [[***]].475 We note,
however, that following our request that the United States provide, among other things, portions of
relevant sales contracts (including amendments), [[***]], the United States replaced previously

470 See footnote 309 above.
471 European Union's comments on the United States' response to Arbitrator question No. 135,
paras. 360-366.
472 European Union's response to Arbitrator question No. 135, para. 363; and Singapore Airlines 2013
787-10 Order Documentation, (Exhibit USA-73 (HSBI)).
473 United States' response to Arbitrator question No. 135, para. 156. Based on our review of the record,
we see no reason to doubt the United States' explanation in this context.
474 Cathay Pacific 777-300ER Order Information, (Exhibit USA-12 (HSBI)); Transaero 747-8I Order
Information, (Exhibit USA-13 (HSBI)); Singapore Airlines 787-10 Order Information, (Exhibit USA-14 (HSBI));
and United 777-300ER Order Information, (Exhibit USA-15 (HSBI)).
475 This understanding is based on comparisons of original contracts and delivery invoices on the record.

provided data on gross price and price concessions with the pricing information contained in the PAs
or [[***]] to val ue lost sales, with the exception of the [[***]].476 Unlike [[***]], the pricing
information contained in the PAs [[***]] reflects the pricing terms [[***]]. As explained in section
6.3.4.3.2, in the light of our decision to take into account up-to-date information that sheds light on
how we should quantify the adverse effects determined to exist in the 2011-2013 Reference Period,
we value lost sales using the gross price and price concessions contained in the PAs or [[***]], but
add any relevant post-order developments that have an impact on pricing terms [[***]].477
6.317. Specifically regarding the 2013 Singapore Airlines comparator order, we note that the
[[***]] makes several cross -references to the [[***]] between Boeing and Singapore Airlines.
However, we reject the European Union's contention that in the absence of the [[***]], there is no
objective basis to accept the accuracy of the delivery prices reported in the [[***]]. The European
Union has failed to explain why [[***]]. In short, we see no reason to bel ieve that the relevant
pricing information contained in the [[***]] would, unless specified therein, conflict with relevant
information in the original PA in such a way as to make the information contained in the [[***]]
inaccurate. Therefore, we see no merit in the European Union's view that the Arbitrator should not
accept the accuracy of the pricing information contained in the [[***]] for the 2013 Singa pore
Airlines comparator order.
6.318. Based on the for egoing, we do not accept the European Union's arguments that the
Challenged Information is incomplete, inconsistent and non -verifiable in any material respect such
that the Arbitrator could not reasonably rely upon it in its valuation analyses, where relevant.
6.3.4.3.6.2 Failure to use [[***]] escalation factors
6.319. The European Union rejects the United States' use of [[***]] escalation factors478 [[***]],
as proposed by the United States, on the ground that [[***]] escalation factors artificially inflate
the counterfactual delivery price. 479 The European Union proposes to apply the [[***]] escalation
factors instead of [[***]] factors for the counterfactual deliveries occurring before [[***]] and the
[[***]] escalation factors only [[***]] for counterfactual deliveries occurring after [[***]].480
6.320. The United States argues that the use of the escalation factors that were [[***]] at the time
that Boeing would have made the relevant counterfactual sale is proper and consistent with its
overall valuation approach, which does not take into account counterfactual post -order factual
developments.481 The United States further contends tha t the use of [[***]] escalation factors is
unnecessarily complicated because the difference between the [[***]] and the [[***]] escalation
factors is likely to be small and the [[***]] escalation factors would only apply to some
counterfactual deliveries given that [[***]] of the relevant counterfactual deliveries are scheduled
for 2018 or subsequent years.482
6.321. The Arbitrator notes that the delivery price paid by the airline is based on the [[***]]
escalation factors [[***]]. We further note that the difference between the [[***]] escalation factors
and the [[***]] escalation factors is due to [[***]] associated with [[***]] the escalation factor

476 Cathay Pacific 2013 777-300ER Order Documentation, (Exhibit USA-68 (HSBI)); Singapore Airlines
2013 787-10 Order Documentation, (Exhibit USA-73 (HSBI)); and Transaero 2013 747-8I Order
Documentation, (Exhibit USA-75 (HSBI)).
477 We note that the European Union, in arguing that the Challenged Information is "inconsistent" with
previously submitted information, makes no claim that such inconsistency has any detrimental impact on the
European Union's due process rights in this proceeding. Rather, this argument appears to be a critique of the
general coherence of the United States' evidentiary submissions and valuation methodology. As explained
above, however, we ultimately agree with the European Union that we should take into account relevant
post-order developments in valuing the lost sales.
478 As explained above, the escalation factor is determined by an escalation formula that [[***]]
reflecting the evolution of labour and material costs in the LCA production and used to calculate the net
delivery prices in delivery-year US dollar terms.
479 European Union's written submission, para. 255.
480 Correcting US lost sales valuation, (Exhibit EU-143 (HSBI)).
481 See sections 6.3.4.1.1 and 6.3.4.3.2 above.
482 United States' written submission, para. 223; and response to Arbitrator question No. 58,
paras. 18-19.

[[***]].483 The United States did not provide any economic rationale as to why such [[***]] could
be ignored.
6.322. To minimize [[***]], we follow the approach proposed by the European Union. That is to
say, we apply the [[***]] escalation factors for any counterfactual deliveries scheduled before
[[***]] and the [[***]] escalation factors [[***]] for counterfactual del iveries scheduled after

6.3.4.3.6.3 Failure to perform necessary price adjustments
6.323. The European Union argues that if the United States fails to demonstrate the comparability
between lost sales counterfactually won by Boeing and comparator orders that Boeing actually
secured, the Arbitrator should either select alternative comparator orders, or, at a minimum, make
price adjustments to the comparator orders to account for differences between the counterfactual
Boeing order and the comparator order, including wit h respect to order size, delivery schedule and
aircraft configuration. 484 For example, the European Union submits that, contrary to what the
United States asserts, the evidence on the record demonstrates that Boeing generally grants volume
discounts, which the Arbitrator would need to take into account. 485 Although the European Union
contends that it is difficult to propose methodologies to perform these price adjustments based on
the quality and reliability of the information provided by the United States, it suggests different ways
of applying such price adjustments.486
6.324. Specifically, the European Union proposes to draw reasonable inferences from a detailed
comparison of price information contained in (a) the [[***]] submitted by Boeing in the [[***]] lost
sales campaign, and (b) the [[***]] comparator order, proposed by the United States. According to
the European Union, the relevant differences between the [[***]], including order size and delivery
schedules, should be reflected in different pricing terms. The European Union refers to these
differences in pricing terms to adjust the prices of the [[***]] comparator orders, and the 2006
Lufthansa comparator order for the Emirates lost sale to account for their differences in order size
and delivery schedule with respect to their original Airbus orders. 487 The European Union also
explains, how, if the information pertaining to the [[***]] were deemed unreliable, a structured
comparison between (a) the [[***]] aircraft, and (b) the [[***]] aircraft would enable the Arbitrator

483 We note in this respect that the [[***]] escalation factors are, on average, [[***]] higher than the
[[***]] escalation factors. For most comparator orders, the difference between the [[***]] and the [[***]]
escalation factors tend to increase over time, while for others, the difference initially increases but then
decreases. Similarly, the [[***]] escalation factors [[***]] are larger than the [[***]] escalation factors
[[***]]. Overall, we observe that the use of [[***]] escalation factors [[***]] yields larger delivery prices than
with [[***]] escalation factors.
484 European Union's response to Arbitrator question No. 106, para. 166, and No. 166, para. 53.
485 European Union's comments on the United States' response to Arbitrator question No. 125,
paras. 276-278.
486 The European Union also proposes different methodologies to determine the degree of price
adjustments that it considers necessary to control for such criteria as differences in the type of comparator
LCA, competitiveness of the campaigns, BFE, FDE, jet engines, engine supplier, engine type, and engine
performance, and MTOW. (European Union's response to Arbitrator question No. 106, paras. 168-172).
The United States argues that while certain of the European Union's criteria of representativeness
support the use of the comparators proposed by the United States, the use of the above-mentioned remaining
criteria would be inappropriate. (United States' comments on the European Union's responses to Arbitrator
question No. 96, paras. 19-30, Nos. 105, 106, and 165).
As we explained in section 6.3.4.3.4, we consider that in the counterfactual the customer associated
with a given lost sale would have ordered the closest competing Boeing model with physical or performance
characteristics that would likely have differed to some degree from the Airbus model actually ordered. In our
view, adjusting for different physical or performance characteristics would not be appropriate. Moreover, even
if it were appropriate, in principle, to control for any such characteristics, undertaking such an adjustment on
the basis of the information before us would entail speculation on our part. Indeed, we note that one of the
methodologies suggested by the European Union would have required contract information on itemized prices
for certain aircraft specifications, [[***]], that are not reported in the order contracts to which we were given
access. Similarly, another methodology suggested by the European Union would have required [[***]].
However, we note that the European Union did not explain concretely how these methodologies could be
applied to the comparator orders for the various lost sales.
487 European Union's responses to Arbitrator question No. 28, paras. 422-424, No. 68, paras. 238-242,

to downward-adjust the prices contained in the [[***]] comparator orders to better approximate
the values of the lost sales if the orders had been won by Boeing in the counterfactual.488
6.325. Similarly, the European Union proposes to quantify volume discounts by comparing the price
and order information contained in the 2006 Lufthansa order and 2009 Korean Air order if the
structured comparison between the [[***]] and the [[***]] is "not possible".489
6.326. The United States argues that the downward adjustments to the per-aircraft prices that the
European Union proposes are spurious because the evidence on the record does not support the
premise that orders involving larger numbers of aircraft and more distant delivery positions
consistently or predictably have lower per-airplane prices than orders involving smaller numbers of
aircraft.490 More generally, the United States points out that Boeing [[***]].491 In addition, the
United States contends that there is no basis to make the Europea n Union's proposed price
adjustments because there is no relevant difference between the [[***]] Cathay Pacific Airways, the
2013 United Airlines and the 2015 Singapore Airlines comparator orders and their corresponding lost
sales.492
6.327. The Arbitrator consider s that, in principle, it may be desirable to perform certain price
adjustments to reflect potential structural differences between the comparator orders and the
counterfactual lost sales. For instance, we note that the share of [[***]].493 We further note that for
these exceptions, where the comparator order presents [[***]]. We also acknowledge that other
factors, such as aircraft configuration and timing of delivery might impact the extent of price
concessions ultimately agreed by the parties.
6.328. Nonetheless, we are of the view that the methodologies that the European Union proposes
to account for differences in order sizes and delivery schedules would entail speculation on our part.
More specifically, we note that a comparison between the [[***]] aircraft and the [[***]] would not
reasonably enable us to determine the extent to which any differences in order size or in delivery
schedules resulted in any differences in prices among the relevant contracts . In addition, and more
importantly, the Eur opean Union does not explain concretely how the result of the comparison of
[[***]] comparators could be applied to the comparator orders for the other lost sales, and we
discern no straightforward way to do so. The European Union also failed to explain why differences,
if any, revealed by the comparison of the [[***]] comparators would be relevant vis-à-vis other lost
sales not involving [[***]] and in some instances involving different Boeing aircraft models, namely
the [[***]] model in the case of [[***]] and the [[***]] model in the case of [[***]].
6.329. We further note that the European Union only provided a concrete example regarding volume
discounts. The European Union infers a volume discount rate by comparing the share of price
concessions (with respect to the gross price) reported in the 2006 Lufthansa order and the 2009
Korean Air order. While this approach is easy to implement, it suffers, in our view, from the
shortcoming that it assumes a simple linear relationship between the order size and the vol ume
discount. Indeed, the methodology that the European Union proposes could lead to an implausible
situation where the net price would become negative because the volume discount would exceed
100% for a sufficiently large order. Another shortcoming of this proposed methodology – similar to
a weakness with the comparison approach proposed by the European Union discussed above – is
that it would not reasonably enable us to determine the extent to which any differences in order size
or in delivery schedules r esulted in any differences in prices displayed between the relevant
contracts. For these reasons, we reject the methodology that the European Union proposes to infer
a volume discount.

488 European Union's response to Arbitrator question No. 164, paras. 36-37.
489 European Union's response to Arbitrator question No. 97, para. 63.
490 United States' response to Arbitrator question No. 125, paras. 114 and 116.
491 United States' response to Arbitrator question No. 125, para. 117.
492 United States' comments on the European Union's response to Arbitrator question No. 164, para. 32.
493 Analysis based on comparator orders reported in Calculation of Delivery Prices for Comparator
Orders, (Exhibit USA-61 (HSBI)); and Net Price Calculations for Questions 153 and 154(d) Alternative
Impedance Valuations, (Exhibit USA-106 (HSBI)).

6.3.4.3.6.4 Discounting of Boeing's counterfactual delivery prices
6.330. As discussed in section 6.3.4.1.1 and as shown in Equation (4) above, the final step of the
valuation of lost sales proposed by the United States involves computing the value of the net
delivery-year prices (i.e. in delivery -year US dollar terms) of scheduled deliveries e xpressed in US
dollar terms of the year in which the order was lost (i.e. order-year US dollar terms) by discounting
the value of delivery-year US dollar prices with a discount rate.
6.331. Generally, the United States argues that the discounting exercise should be done from the
perspective of the United States' government and that the discount rate therefore is "the rate that
the United States government is willing to pay to transfer the relevant economic activity, ref lected
in trade, from the delivery year to the order year". According to the United States, this rate
corresponds to the interest rate on US sovereign debt. The United States thus proposes to use the
interest rate on United States ten-year T-Bond rate as the discount rate to be applied.494
6.332. The European Union raises two main arguments on the United States' proposed discounting
exercise: (a) the Arbitrator need not find the order -year values of the lost sales and can instead
simply find the present-day (i.e. 2019) value of the lost sales; and (b) the discount rate suggested
by the United States is artificially low, resulting in artificially inflated present values (i.e. order-year
values) of lost sales. This section addresses each issue in turn.
Appropriateness of determining the present -day value of lost sales without
determining order-year values
6.333. The European Union contends that even if the Arbitrator were to conduct a discounting
exercise – in the light of the United States' apparent ultimate goal of expressi ng the value of the
adverse effects determined to exist in present -day value terms – the Arbitrator should only do so
for certain counterfactual payments. More specifically, the European Union argues that the Arbitrator
should discount future counterfactual payments, made in connection with the counterfactually sold
Boeing LCA, expected to occur after 2019. The European Union proposes to apply an appropriate
escalation formula to "de -escalate" the amount of such payments to the present day with a
downward-adjustment accounting for the risk of cancellation of the relevant order. Regarding any
relevant counterfactual payments that would have already occurred before the present day (i.e.
before 2019), the European Union asserts that it would be more appropriate to apply an appropriate
escalation formula to those payments to bring their values directly up to the present day from the
date on which a given payment would have been made in the counterfactual. According to the
European Union, this approach avoids the unnecessary and excessive rounds of inflating ( taking
forward) and discounting (bringing backward) of the net delivery price of the aircraft.495
6.334. The United States argues that an order-centric approach to lost sales is an integral part of
the findings concern ing lost sales in the reports of the original panel, compliance panel and
Appellate Body in the original and compliance proceedings. The United States asserts that such an
order-centric approach invites discounting the delivery-year prices back to the order year, if only as
an intermediary step of ultimately determining the present -day value of the lost sales. 496 The
United States further contends that contrary to what the European Union appears to assume in
advocating how to determine a present-year value of the lost sales, (a) escalating a base-year price
to a delivery-year price, (b) discounting the delivery-year price back to the order year to determine
the order-year value of the delivery -year price, and, finally, (c) adjusting the order-year value for

494 United States' methodology paper, paras. 49-51.
495 European Union's written submission, paras. 336-344; and response to Arbitrator question No. 79,
paras. 274-278. The European Union also submits that the United States' approach to determining the order-
year value of LCA delivery-year prices (deliveries of LCA generally occur years after their order) using a
discount rate is unwarranted because if the Arbitrator were to follow the overall methodology proposed by the
European Union and measure trade effects as and when they arise (i.e. at the time of delivery), the
discounting step in the United States' methodology would become moot. (European Union's written submission,
paras. 261-262). We recall that we have rejected this overall methodology proposed by the European Union
earlier in our Decision. (See section 6.3.3.1 above). We thus do not consider this proposal further in this
context.
496 As discussed in section 6.3.4.1.3 above, the United States asks the Arbitrator to determine the
present-day value of the adverse effects determined to exist by applying an inflation index to the value of the
adverse effects expressed in reference-period dollar values.

inflation to a present -day US dollar value are distinct steps that serve different purposes. In
particular, the United States argues that the application of the escalation factor is meant to value
the price of the aircraft in the year in which it is schedule d for delivery, the discounting exercise is
meant to account for the fact that "economic activity today is more valuable than economic activity
tomorrow", and the inflation adjustment is designed to make sure that the countermeasures remain
commensurate with the adverse effects determined to exist when applied in subsequent years.497
6.335. The Arbitrator recalls that, in this proceeding, it must determine the economic value of
adverse effects that were determined to exist in the 2011-2013 Reference Period.498 We have used
an order-based approach to valuing lost sales, under which we temporally assign the value of lost
sales to the 2011-2013 Reference Period.499 Consistent with these earlier findings, we consider that
it is appropriate to determine the value of the lost sales at the time that they occurred in the 2011-
2013 Reference Period and thus look to determine the order -year values of the lost sales. 500 We
therefore reject the European Union's proposal to determine the present-day value of the lost sales
because it cannot be used to determine the order-year values of the lost sales. We thus turn to
examine the reasonableness of the United States' proposed discount rate that the United States uses
to determine the order-year value of the lost sales.
Choice of the discount rate
6.336. The European Union argues that the ten -year T-Bond rate that the United States proposed
as a discount rate must be rejected because it is a United-States-government-centric rather than
Boeing-centric discount rate (i.e. it does not capture Boeing's relevant risks and circumstances,
which the European Union considers an appropriate discount rate must do). The European Union
further contends that the United States government is not a party to any of the LCA sales contracts
from which the values of the lost sales are derived, nor is the United States government making
investments and taking risks regarding those sales transactions. According to the European Union,
the ten-year T-Bond rate thus underestimates the applicable discount rate, inter alia, because it fails
to account for any risks of contractual default by an LCA customer, which, as the United States itself
agrees, reduces the present value of an LCA contract, as measured at the time of order. The
European Union argues that this leads to the particularly nonsensical situation where, because the
Boeing-centric escalation factors (used to determine delivery -year prices) are higher than th e
proposed United-States-government-centric discount rate (used to convert the delivery-year prices
to order-year value), waiting for uncertain LCA sales revenues in the future would be more valuable
to Boeing than realizing the same sales revenue with certainty today.501
6.337. The European Union asserts that the contractual escalation factor is a more appropriate
indicator of the time value of money than the ten-year T-Bond interest rate, although this approach
would still overstate the value of the lost sale at the time of the order because, for example, the risk
of future cancellation at the time of order would still need to be factored in. The European Union
thus proposes to replace the ten -year T-Bond rate with a comparator -order-specific discount rate
that captures three com ponents: (a) the real interest rate; (b) the expected LCA price inflation,
which may be approximated by the contractually agreed escalation factor; and (c) Boeing's inherent
default risk in connection with future deliveries of LCA. According to the Europea n Union, in the
absence of information on comparator-order or customer-specific default risks, Boeing's default risk

497 United States' written submission, paras. 228 (citing Appellate Body Report, EC and certain member
States – Large Civil Aircraft (Article 21.5 – US), paras. 6.31 and 6.37; Panel Report, EC and certain member
States – Large Civil Aircraft (Article 21.5 – US), paras. 6.1780-6.1781, 6.1798; Appellate Body Report, EC and
certain member States – Large Civil Aircraft, paras. 1217, 1220, 1414(l)(o)-(p); and Panel Report, EC and
certain member States – Large Civil Aircraft, paras. 7.1750, 7.1828, 7.1845, 8.2(d)), and 256-259.
498 See section 6.3.1 above.
499 See section 6.3.3.2.1 above.
500 This is so whether or not our ultimate goal will be to determine a present-day value of the adverse
effects determined to exist.
501 European Union's written submission, paras. 263, 265-268, 271, 275, and 283-290; responses to
Arbitrator question No. 29, paras. 425-434, and No. 78, paras. 254, 263-264, and 266-270; and comments on
the United States' response to Arbitrator question No. 111, paras. 143-146 (citing United States' responses to

concerning future deliveries could be proxied by the historical cancellation rates across all LCA sales
made by Boeing for the 2006 to 2017 time-period.502
6.338. Although the European Union argues that its suggested three-component discount rate best
captures the economic circumstances surrounding the individual lost sales at issue, it also mentions
the possibility of using Boeing's weighted average cost of capital (WACC) at the time of the lost sales
as a reasonable approximation of Boeing's discount rate.503
6.339. In response to an Arbitrator question, the European Union rejects the use of Boeing's cost
of debt, which is one of the WACC components, as Boeing's discount rate because it fails to meet
two of the three requirements that the European Union considers a proper discount rate should
meet. More specifically, according to the European Union, the cost of debt does not reflect price and
cost inflation that is either specific to the production of Boeing LCA models involved in the
counterfactual orders or to the LCA industry generally. Nor does the European Union consider that
the cost of debt reflects the probability that the respective LCA customer cancels the order.504
6.340. The United States responds that all of the European Union's criticisms regarding the use of
the ten-year T-Bond rate as the discount rate are inapposite, because they do not address the
relevant issue under Article 7.10 of the SCM Agreement, namely that adverse effects are being
caused to the interests of the United States government (as a WTO member), not Boeing. The
United States is therefore of the view that the valuation exercise is properly conducted from the
perspective of the United States, not Boeing. The United States further argues that the ten-year T-
Bond rate is conservative because ten years is longer than the time between the counterfactual
orders and nearly all of the estimated counterfactual deliveries at issue here, while the interest rate
on shorter bonds would be lower, resulting in higher order-year values of delivery-year prices.505
6.341. The United States also argues that if the Arbitrator nevertheless wished to determine the
order-year values of the lost sales from Boeing's perspective, then the Arbitrator could simply use
the price of the aircraft in order -year US dollar terms specified in the counterfac tual Boeing sales
contracts without escalating that price to the time of delivery and then discounting the delivery price
back to the order year. However, in response to an Arbitrator question, the United States also states
that Boeing, in the normal course of business, values its [[***]]. The United States further observes
that Boeing sometimes uses its WACC to discount anticipated future cash flows to determine their
present value. However, the United States maintains that this relates to a different context from the
valuation of the level of countermeasures. The United States does not address what discount rate
should be used in a discounting exercise undertaken from Boeing's perspective if the WACC were
found to be an inappropriate discount rate in the context of this proceeding.506
6.342. Finally, the United States is also of the view that the European Union's assertion that a
discount rate must include a risk of order cancellation "is both unsupported and needlessly introduces
technical deficiencies".507
6.343. The Arbit rator notes that the parties disagree on whether , if discounting were to be
performed, the discount rate should reflect Boeing's or the United States government's perspective.
As explained in section 6.3.4.3.3, we consider that the valuation of lost sales must be carried out
from Boeing's perspective. It follows that the discounting exercise must also be conducted from
Boeing's perspective, and that any selected discount rate must reflect Boeing's perspective.
6.344. The question now arises as to the appropriate discount rate to use from Boeing's perspective.
As a first step, we briefly describe the purpose of discounting in the present context. Concluding an

502 European Union's written submission, paras. 267-268 and 290; and response to Arbitrator question
No. 29, paras. 425-434.
503 European Union's response to Arbitrator question No. 29, paras. 435-436. A company's capital can
consist of debt and equity. The WACC measures the company's cost of debt and equity weighted by the value
of the respective share of debt and equity in the company's total capital.
504 European Union's response to Arbitrator question No. 111, paras. 225-239; and comments on the
United States' response to Arbitrator question No. 111, paras. 141-151.
505 United States' methodology paper, para. 51; written submission, paras. 227-230; and responses to
506 United States' responses to Arbitrator question No. 78, paras. 98-99 and 102, No. 111, para. 36-37,
and No. 175, para. 20; and Boeing WACC Data for 2012, 2013 (Exhibit USA-120 (BCI)).
507 United States' response to Arbitrator question No. 73, paras. 88-90.

LCA sales contract represents an investment for Boeing, i.e. Boeing must mobilize (a large amount
of) capital and invest that capital in the production of the ordered LCA. In return for that investment,
Boeing contracts for the receipt of future revenues linked to the future delivery of the ordered LCA.
However, collecting future revenues entails risks. Whether it is worth taking those risks in the light
of the initial investment amount controls, in theory, Boeing's decision whether to conclude the
contract in the first place. Indeed, if a company could, for instance, take an initial investment amount
and simply invest it in risk-free bonds and in doing so realize a greater return over time than it could
with an alternative investment contract for future revenues, this would argue against concluding the
contract. Thus, the discounted present value of future reven ues arising from an investment can be
expected to be a key component of a company's investment decisions. This also illustrates why a
discount rate applied to anticipated future revenue streams should take into account a company's
relevant costs and risks of waiting for those streams in order to compare that discounted present
value to the initial investment value. This is the essence of a net-present-value (NPV) analysis. The
key issue thus becomes how Boeing's costs and risks, associated with realizing fu ture revenue
streams in an LCA sales contract scenario, can be captured with a view to determining their NPV at
the time of order.
6.345. We consider that Boeing's risks and costs come in different forms. In particular, inflation
may erode the value of Boeing's future revenue flows relative to the order date. Boeing also incurs
the opportunity cost of allocating funds to the production of the ordered LCA rather than putting
those funds to alternative potential uses. Therefore, in our view, the discount rate that w e look for
here should capture the risks posed by inflation and the opportunity cost of waiting to receive the
payment for the production and delivery of an aircraft . Another risk that Boeing faces is that the
order may also be cancelled, and thus the future revenue streams may never be realized. We have
already decided in section 6.3.4.3.4.2 above to make appropriate adjustments for this risk by using
the survival rate. We therefore consider that we need not capture this risk again in a discount rate.
6.346. The United States submits that if the value of the lost sales were considered from Boeing's
perspective, there would be no reason to use a discount rate to express the delivery -year prices in
order-year values because the Arbitrator could simply use the or der-year prices of the
counterfactually ordered Boeing aircraft specified in the relevant counterfactual sales contract
instead.508 In support of this argument, the United States asserts that "Boeing in the normal course
[[***]]".509 While a review of Boeing's financial statements does indicate that Boeing values its LCA
order backlog, i.e. its estimated future revenues, using escalated prices510, this does not answer the
question of how Boeing would express those estimated future revenues to determine their order-
year value (i.e. the discounted value of post -order scheduled deliveries of aircraft in order -year
dollar terms). Hence, using order-year contractual prices is an appropriate alternative to determining
the order-year value of delivery-year prices (expressed in delivery-year US dollar terms).511
6.347. In addressing this argument, we recall that, in this proceeding, the value of lost sales is
essentially controlled by the revenues that Boeing would most likely have realized from the lost sales
had Boeing won them. As discussed, it is undisputed that in the counterfactual Boeing would have
realized these revenues, for the most part, years after the relevant counterfactual order dates.
Indeed, Boeing specifically bargained for these post -order revenue streams , as illustrated by the
delivery and payment schedules in the counterfactual sales contracts. As further discussed in the
paragraphs above, waiting for future revenues entails risks for which Boeing would account when
determining their order-year NPV. However, there is nothing on the record that indicates to us that
the order-year price of any LCA is necessarily equivalent to the order -year value of counterfactual
delivery-year prices to be received by Boeing years following the order. The order -year price is
simply a price that the customer would pay on the order date if the delivery could also occur on that
date (which it will not be , pursuant to the contractual delivery schedule). We therefore reject the
United States' suggestion to use order-year prices.

508 United States' response to Arbitrator question No. 78, paras. 98-99 and 102.
509 United States' response to Arbitrator question No. 175, para. 20.
510 Boeing Annual Report 2017 (excerpt), (Exhibit USA-34); and Boeing 2013 Annual Report
(Exhibit USA-102).
511 In fact, the United States itself recognizes that the value of a delivered aircraft expressed in
delivery-year US dollars reflects the expected value of the aircraft that the United States industry would have
sold, but arguably does not reflect the value at the time of sale (i.e. the time that the sale was lost).

6.348. Taking into account the above observations, we therefore agree with the European Union
that if the discount rate is to reflect Boeing's perspective, it would be desirable to use a project -
specific discount rate that takes into account Boeing's opportunity cost o f waiting to receive the
payment for the production and delivery of an aircraft, and also expected inflation. However, we
question the validity of the comparator order -specific discount rate that the European Union
proposes and that is composed of the (a) real interest rate, (b) expected LCA price inflation, and
(c) Boeing's risk of order cancellation. We note that the first two components together correspond
to a nominal interest rate, since, according to the Fisher Equation, the real interest rate is equa l to
the nominal interest rate minus expected inflation.512 In our view, it would be unusual to construct
a discount rate by adding a measure of expected inflation to a real interest rate, rather than
discounting expected future cash flows expressed in nominal terms using directly a nominal interest
rate, or discounting expected future cash flows expressed in real terms using a real discount rate.513
We also note that the three -component discount rate proposed by the European Union is only
project-specific because of the inclusion of the escalation factor as a proxy for the expected LCA
price inflation. Yet, according to the European Union, the discount rate should be project-specific to
account for the default risk of the airline, not because different [[***]] are used for different [[***]].
In other words, the European Union did not provide a project -specific discount rate that accounts
for the specific default risk of the airline. In the absence of such project -specific discount rates, we
consider that a Boeing-specific discount rate is the best available alternative.
6.349. We thus turn to address Boeing's WACC, which the European Union proposed as an
alternative to a comparator order-specific discount rate. To recall, the United States explained that
"Boeing sometimes [but not always] uses its WACC to discount anticipated future cash flows in order
to determine their present value", but observed that "[t]hat is a different context from the level-of-
countermeasures valuation exercise at issue here". 514 However, the evidence on the record is
insufficient for us to establish what Boeing's customary approach – if it has one – to discounting
these future revenue streams would be. We further observe that the WACC is a constructed rate.
Its value differs depending on how certain WACC components, in particular the cost of equity, are
calculated and on the data sources that are used to make those calculations. Both parties provided
values of Boeing's WACC that differ substantially, with the differences ranging from [[***]] to
[[***]] percentage points. Some of these differences likely reflect the fact that the parties have
provided Boeing's WACC with reference to different points in time (i.e. July 2012 and July 2013
(United States) versus December 2012 and December 2013 (European Union)). But some of these
differences could also be the result of different approaches and data sources that the parties might
have used to calculate the WACC. For these various reasons, we are not persuaded that the WACC
would be an appropriate discount rate for the valuation of lost sales in this proceeding.
6.350. We also note that both parties have mentioned the possibility of using the escalation factors
found in Boeing's counterfactual sales contracts that would have governed the lost sales had Boeing
won them as the discount rate applicable to each lost sale. We nevertheless note that, according to
the European Union, such an approach would not account for the risk of cancellations. As explained
by the European Union, applying the escalation factor a s a discount rate to the projected net
delivery-year prices to determine their discounted values at the time of order, is tantamount to
calculating the net delivery prices in order-year US dollar terms using the corresponding escalation
factor (i.e. order-year prices). Yet we note, and this is acknowledged by both parties, that escalation
is conceptually distinct from discounting. Escalating serves to determine the amount of US dollar
revenue that Boeing would ultimately receive upon aircraft delivery in connection with an LCA order
in the counterfactual. In contrast, discounting is a means by which we can express the value of those
post-order revenues in order -year values. In fact, we note that using the escalation factor as a
discount rate implicitly would assume that Boeing would have a zero -opportunity cost of time and
would place less value on immediate benefits than on future benefits, because the escalation factor
only accounts for expected changes in labour and material costs (i.e. inflation). We find such an
assumption unreasonable. Consistent with our previous decision to reject the use of order -year
prices, we reject the use of escalation factors as the discount rate.

512 European Union's written submission, fn 295.
513 Moreover, as explained in section 6.3.4.3.4.2, we agree with the European Union that the risk of
future cancellations should be taken into account in the valuation of lost sales, but we question the validity of
the approach proposed by the European Union, which consists of combining rates based on different metrics,
namely the nominal discount rate relating to the monetary value of time preferences and the cancellation rate
relating to risk-taking in terms of cancelled aircraft deliveries.
514 United States' response to Arbitrator question No. 175, para. 20. (emphasis added)

6.351. As the parties' suggested discount rates appear to us inappropriate in the circums tances of
this proceeding and given the lack of common ground between the parties on this particular issue,
we proceed to select an alternative discount rate to discount Boeing's counterfactual anticipated
post-order cash flows.
6.352. As explained above, an appropriate discount rate should in our view (a) reflect Boeing's
opportunity cost of waiting to receive the payment for the production and delivery of an aircraft, and
(b) account for inflation. With that in mind, we proposed to the parties the cost of debt as a discount
rate. The cost of debt measures the effective interest rate that Boeing pays on its current debt. It is
calculated as the sum of a T-Bond rate and Boeing's spread.515 The spread, defined as the difference
between the yield of a T-Bond and Boeing's bond, is a measure of Boeing's risk of default.
6.353. The United States opposes using the cost of debt as a discount rate, but it did not provide
any direct explanation as to why it could not be used.516 We also note the European Union's assertion
that the co st of debt does not capture price and cost inflation. 517 We disagree, since one of the
components of the cost of debt is the ten -year T-Bond rate, which is a nominal interest rate. We
also note that the ten -year T-Bond rate accounts for the opportunity cost of waiting in a risk -free
setting.518 As indicated above, a ccording to the Fisher Equation, a nominal interest rate captures
expected inflation.519 We are aware that the inflation reflected in the T -Bond rate refers to the US
consumer price index (CPI) and not [[***]]. However, we note that the 2012 -2018 correlation
between [[***]] is very high.520
6.354. In the light of all of the above, we find that Boeing's cost of debt with a ten-year maturity521
which is av ailable from the record, is a suitable discount rate to use in the circumstances of this
proceeding.522
6.3.4.3.7 Conclusion
6.355. This concludes our assessment of technical aspects of the United States' methodology for
valuing lost sales. As noted in section 6.1 above, we will apply these findings further below in
section 6.4.2 when we calculate the actual value of the lost sales.
6.3.4.4 Issues surrounding the valuation of impedance
6.356. In section 6.3.4.4, we assess the approach proposed by the United States for determining
the value of adverse effects in the form of impedance. We also address the technical criticisms that
the European Union raised against specific steps contained in the United States' approach to
quantifying impedance, and any alternatives to those specific steps that the European Union
proposed.
6.357. The Appellate Body has explained that "the phenomenon of impedance 'refers to situations
where the exports or imports of the like product of the complaining Member would have expanded

515 Boeing 2013 Annual Report, (Exhibit USA-120 (BCI)).
516 United States' response to Arbitrator question No. 111.
517 As explained above in section 6.3.4.3.4.2, we rejected the European Union's approach to include the
average risk of cancellation in the discount rate. Instead, we account for the risk of future cancellations by
applying the survival rate.
518 As pointed out by the European Union, the opportunity cost of waiting is often assumed to be
constant across individuals and situations. (European Union's response to the Arbitrator question No. 78,
para. 253).
519 European Union's written submission, fn 295.
520 The 2012-2018 correlation between [[***]] is equal to 0.987, which is very close to the 2012-2018
correlation of 0.969 [[***]] and the 2012-2018 correlation of 0.98 [[***]]. (See Boeing e-mail from [[***]]
(Dec. 13, 2018), (Exhibit USA-36 (BCI)); Boeing Escalation Slide, (Exhibit USA-37 (BCI)); [[***]], (Exhibit
USA-40 (BCI)); [[***]], (Exhibit USA-41 (BCI)); and Transaero (2013) comparator campaign: projected
versus actual escalation rates, (Exhibit EU-77 (HSBI))).
521 We chose a ten-year maturity because there is, on average, a [[***]] gap between the order year
and the counterfactual delivery year. The [[***]] figure was computed as the weighted average of the number
of years between order and counterfactual delivery, where the weights are the share of aircraft to be delivered
on a given date. As discussed in section 6.3.4.3.5.1, the counterfactual delivery schedules are based on Airbus'
contractually agreed delivery schedules.
522 Boeing WACC Data for 2012, 2013, (Exhibit USA-120 (BCI)).

had they not been "obstructed" or "hindered" by the subsidized product'". 523 In the compliance
proceedings, the panel found that challenged subsidies caused impedance in the VLA product
market524 in six geographic markets based on LCA delivery data reflected in Table 12 below. The
table reflects deliveries of Airbus A380 aircraft and Boeing 747-8I aircraft525 in these six geographic
markets in the 2011-2013 Reference Period. These two aircraft models were the only LCA in the VLA
product market in the 2011-2013 Reference Period.
Table 12: Market for very large LCA526
 European Union Australia China
Delivery Data Dec.
2011 2012 2013 Dec.
2011 2012 2013 Dec.
2011 2012 2013
Boeing Volume (Units) 0 5 5 0 0 0 0 0 0
Boeing Market Share - 55.6% 55.6% 0.0% - - 0.0% 0.0% 0.0%
Airbus Volume (Units) 0 4 4 1 0 0 1 2 1
Airbus Market Share - 44.4% 44.4% 100% - - 100% 100% 100%
 Korea Singapore United Arab Emirates
Delivery Data Dec.
2011 2012 2013 Dec.
2011 2012 2013 Dec.
2011 2012 2013
Boeing Volume (Units) 0 0 0 0 0 0 0 0 0
Boeing Market Share - 0.0% 0.0% - 0.0% - 0.0% 0.0% 0.0%
Airbus Volume (Units) 0 1 2 0 5 0 2 11 13
Airbus Market Share - 100% 100% - 100% - 100% 100% 100%

6.358. The Appellate Body modified the compliance panel's reasoning in this regard, but ultimately
found that "the 'product effects' of the LA/MSF subsidies existing in the post-implementation period
are a genuine and substantial cause of impedance of US LCA in the VLA markets in the
European Union [under Article 6.3(a) of the SCM Agreement], [and] Australia, China, Korea,
Singapore, and the United Arab Emirates" under Article 6.3(b) of the SCM Agreement.527 Thus, both
the compliance panel and the Appellate Body found that the United States' LCA industry's LCA
deliveries into these six geographic markets would have been "higher" during the 2011 -2013
Reference Period in the counterfactual. 528 Importantly, however, neither the compliance panel nor
the Appellate Body specified how much hig her those deliveries would have been in any particular
geographic market.529

523 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 5.738 (quoting Appellate Body Report, EC and certain member States – Large Civil Aircraft, para. 1161).
524 The compliance panel had found that challenged subsidies caused displacement and/or impedance in
all three product markets (i.e. single-aisle, twin-aisle, and VLA), but these findings were reversed on appeal
vis-à-vis the single-aisle and twin-aisle product markets, as were the compliance panel's displacement findings
vis-à-vis the VLA product market.
525 There are two versions of the Boeing 747-8, the 747-8F (freighter) and the 747-8I (passenger).
(Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), fn 2323). We note,
however, that the product markets in the compliance proceedings included only passenger aircraft, and thus no
findings were requested or made regarding impedance of deliveries of 747-8F aircraft.
526 The table is a reproduction of Table 22 in the compliance panel report and Table 13 in the
Appellate Body report.
527 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 6.42(a).
528 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 6.41. We thus note that an increase in absolute numbers of Boeing's deliveries to the six geographic
markets is how Boeing's relevant "exports or imports … would have expanded".
529 European Union's written submission, para. 198 (making this point); and United States' written
submission, para. 165 (noting that "[t]he United States and the EU agree that the compliance appellate report
found that the US LCA industry would have achieved a higher volume of deliveries and market share than its
actual level in the post-implementation period. However, the parties disagree as to the implications of this
finding"). (fn and quotation marks omitted)

6.359. We note that the United States, in its methodology, takes the position that the actual
deliveries of Airbus A380 aircraft that occurred in the six geographic markets during the 2011-2013
Reference Period (which, for ease of reference, we will refer to as the A380 Impedance Deliveries)
would have been replaced, on a one -to-one basis, with counterfactual deliveries of Boeing 747 -8I
aircraft (i.e. the closest competing Boeing model to the A380 aircraft) in the 2011-2013 Reference
Period.530 The United States thus computes the value of impedance in a given geographic market 𝑘
in a given month or year 𝑠 in the Reference Period, as the average net delivery price of Boeing 747-
8I aircraft in that month or year multiplied by the number of 747 -8I aircraft that would have been
delivered to that geographic market 𝑘 in year 𝑠 in the counterfactual531:
𝐼𝑚𝑝𝑒𝑑𝑎𝑛𝑐𝑒𝑀𝑎𝑟𝑘𝑒𝑡 𝑘,𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦 𝑦𝑒𝑎𝑟 𝑠
𝑖𝑛 𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦 𝑦𝑒𝑎𝑟 𝑠 𝑈𝑆𝐷 =𝐴𝑣𝑒𝑟𝑎𝑔𝑒𝐵𝑜𝑒𝑖𝑛𝑔𝑁𝑒𝑡𝑃𝑟𝑖𝑐𝑒 𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦 𝑦𝑒𝑎𝑟 𝑠
𝑖𝑛 𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦 𝑦𝑒𝑎𝑟 𝑠 𝑈𝑆𝐷
 ×𝑁𝑢𝑚𝑏𝑒𝑟𝑂𝑓𝐴𝑖𝑟𝑐𝑟𝑎𝑓𝑡𝑀𝑎𝑟𝑘𝑒𝑡 𝑘,𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦 𝑦𝑒𝑎𝑟 𝑠

(8)
where 𝑠: delivery month/year in the Reference period
 𝐴𝑣𝑒𝑟𝑎𝑔𝑒𝐵𝑜𝑒𝑖𝑛𝑔𝑁𝑒𝑡𝑃𝑟𝑖𝑐𝑒 𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦 𝑦𝑒𝑎𝑟 𝑠
𝑖𝑛 𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦 𝑦𝑒𝑎𝑟 𝑠 𝑈𝑆𝐷: average net delivery price of the 747 -8I model
delivered in year 𝑠 and expressed in US dollar terms
of delivery year 𝑠
 𝑁𝑢𝑚𝑏𝑒𝑟𝑂𝑓𝐴𝑖𝑟𝑐𝑟𝑎𝑓𝑡𝑀𝑎𝑟𝑘𝑒𝑡 𝑘,𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦 𝑦𝑒𝑎𝑟 𝑠: number of 747 -8I aircraft delivered to airline(s) in
country market 𝑘 in year 𝑠.

6.360. The parties contest two main subjects in this context, (a) how much higher Boeing's
counterfactual deliveries would have been and what Boeing LCA models would have been delivered,
and (b) the prices of Boeing's additional counte rfactual deliveries. This section addresses each in
turn, after a brief word on the representativeness of the 2011 -2013 Reference Period for purposes
of valuing impedance.
6.3.4.4.1 Representativeness of the 2011-2013 Reference Period
6.361. The Arbitrator recalls that in paragraph 6.203, we indicated that we would conduct an inquiry
into the representativeness of the 2011 -2013 Reference Period, including for purposes of our
quantification of adverse effects in the form of impedance. We note in this respect that the VLA
delivery volumes for notably one of the six relevant geographic markets were high for both 2012
and 2013. It is unlikely that the exact same number of VLA deliveries or the same customers would
have been observed in different years. However, this situation is not inconsistent with the nature of
the LCA industry.532 We thus discern nothing about the number of A380 Impedance Deliveries, or
about any record data relating to the A380 Impedance Deliveries and market conditions in the 2011-
2013 Reference Period, that could be objectively characterized as so anomalous as to render the
2011-2013 Reference Period unrepresentative of the short -term adverse effects (in the form of
impedance) resulting from the European Union's failure to comply by the end of the implementation
period.
6.362. In conclusion, we find no basis upon which to conclude that the 2011-2013 Reference Period
is unrepresentative in the context of valuing impedance and that we should therefore use only a
temporal subset of the 2011 -2013 Reference Period rathe r than the entire 25 -month Reference
Period.
6.3.4.4.2 Number and models of increased Boeing counterfactual LCA deliveries
6.363. As already mentioned above, the United States takes the position that the actual deliveries
of Airbus A380 aircraft that occurred in the six geographic markets during the 2011-2013 Reference

531 With the exception of the European Union market, the impedance findings regarding each of the
remaining five geographic markets at issue concern a single airline. For instance, the impedance findings
regarding the 2012 deliveries of A380 aircraft to Singapore refers to Singapore Airlines. Conversely, the
impedance findings regarding the 2013 deliveries of A380 aircraft to the European Union refer to deliveries to
Air France and British Airways.
532 Panel Report, EC and certain member States – Large Civil Aircraft, para. 7.1719 (explaining that LCA
"orders tend to be very large and sporadic", thus naturally resulting in non-uniform delivery volumes of
particular LCA to particular customers over time).

Period (which, for ease of reference, we will refer to as the A380 Impedance Deliveries) would have
been replaced, on a one-to-one basis, with counterfactual deliveries of Boeing 747 -8I aircraft (i.e.
the closest competing Boeing model to the A380 aircraft) in the 2011-2013 Reference Period.533
6.364. The European Union contests that position534, arguing that an economic model is needed to
determine how much higher Boeing's counterfactual LCA deliveries to the six geographic markets
would have been during the 2011-2013 Reference Period, taking into account supply- and demand-
side factors. According to the European Union, these counterfactual deliveries would not necessarily
have been Boeing 747 -8I aircraft but could have taken the form of other aircraft models, such as
other Boeing twin-aisle aircraft like the 777 -300ER. The European Union asserts that because the
United States has not provided any economic model, the United States fails to properly substantiate
its arguments with proper evidence.535
6.365. The United States responds that the European Union's arguments are inconsistent with the
findings of the compliance panel and Appellate Body, thus amounting to an attempt to re-litigate the
compliance proceedings with respect to impedance, and are unsupported by proper evidence. The
United States, however, leaves open the possibility that Boeing may have replaced certain of the
A380 Impedance Deliveries with LCA models other than the 747-8I model, such as the Boeing 777-
300ER model.536
6.366. The Arbitrator notes at the outset that neither the compliance panel report nor the
Appellate Body report in the compliance proceedings explicitly specified how much "higher" Boeing's
LCA deliveries into each of the six relevant geographic product markets would have been in the
counterfactual. Thus, in principle, we consider it appropriate to examine the European Union's
arguments to determine how much "higher" Boeing's deliveries would have been. At the same time,
we appreciate the United States' concern that, particularly given the low number of A380 deliveries
into certain of the six geographic markets above (e.g. Australia with one A380 delivery), any thing
less than a counterfactual one-to-one replacement of Airbus deliveries by Boeing deliveries in such
markets may either invalidate at least certain of the impedance findings, or may appear contrary to
apparent assumptions underlying the relevant analyses in the compliance proceedings. Furthermore,
it would in our view be implausible and inconsistent, in the absence of supporting findings or
evidence, to assume that, in the relevant geographic markets in which many A380 Impedance
Deliveries occurred, Bo eing would have made fewer additional counterfactual LCA deliveries than
Airbus in fact made, whereas in a relevant geographic market in which only one delivery was made
(e.g. Australia), Boeing would have counterfactually delivered the same (or a greater) number of
aircraft than Airbus did.537
6.367. In this case, what is clear to us is that whatever approach we adopt, we must not invalidate
the Appellate Body's findings that impedance occurred in the VLA product market in each of the six
geographic markets, individually 538, during the 2011 -2013 Reference Period. 539 We consider,
however, that an examination of the European Union's arguments in this instance is not incompatible
with that imperative. We therefore examine the European Union's arguments in order to come to a
view about how much "higher" Boeing's LCA deliveries would have been into each of the six

534 We recall that the European Union presents its arguments in this section in the alternative to its
preferred approach that the Arbitrator ignore impedance entirely in making its valuation. That approach was
determined to be improper earlier in this Decision. (See sections 6.3.1 and 6.3.3 above).
535 European Union's written submission, paras. 197-203.
536 United States' written submission, para. 234; responses to Arbitrator question No. 46, para. 114,
No. 87, para. 122, and No. 88, para. 128; and comments on the European Union's responses to Arbitrator
537 We note in this context the United States' correct observation that neither the compliance panel nor
the Appellate Body engaged in any geographic-market-specific reasoning in the impedance context.
(United States' comments on the European Union's response to Arbitrator question No. 113, paras. 221-222).
538 See Articles 6.3(a) and (b) of the SCM Agreement (referring to "the market of the subsidizing
Member" and "a third country market", respectively). (emphasis added)
539 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
paras. 5.740 and 5.742 (agreeing with findings by the compliance panel that "the volume of deliveries and
market shares that would have been achieved by the United States' LCA industry between 1 December 2011
and the end of 2013 would have been higher" in the absence of LA/MSF). (emphasis added)

geographic markets at issue during the 2011-2013 Reference Period540, and what models of Boeing
LCA those additional deliveries would have been.
6.368. This section first addresses the European Union's basic argument that an economic model is
needed to assess the relevant counterfactual situation. It then examines the supply - and demand-
side factors that the parties identify as material in this context.
6.3.4.4.2.1 Absence of an economic model
6.369. The European Union argues that the Arbitrator must use an economic model to determine
how much higher Boeing's market share and deliveries would have been in each of the six geographic
markets at issue within the 2011-2013 Reference Period. The European Union asserts that, without
such a model, the Arbitrator lacks an objective basis to test the United States' counterfactual
assumption that Boeing would have replaced the A380 Impedance Deliveries with an equal number
of 747-8I deliveries within the 2011-2013 Reference Period. The European Union argues that such
a model would, at a minimum, need to address certain supply - and demand-side factors. In the
European Union's view, in the absence of such a model, the United States' position that the A380
Impedance Deliveries would have been replaced, on a one -to-one basis, with deliveries of Boeing
747-8I aircraft in the counterfactual remains "an extreme and unsupported assumption" 541, not
based on a "credible or evidence -based approach" for ca lculating the value of impedance
deliveries.542 The European Union thus asserts that the United States fails to demonstrate that its
quantification exercise yields a level of countermeasures vis-à-vis impedance that satisfies the
"commensurate" standard in Articles 7.9 and 7.10 of the SCM Agreement.543
6.370. The United States argues that its assumption that, in the counterfactual, Boeing would have
replaced all the A380 Impedance Deliveries with an equal number of 747-8I aircraft deliveries within
the 2011-2013 Reference Period is reasonable based on the adopted findings in this dispute and the
evidence on the record. The United States recalls that the A380 and 747 -8I models were found to
be sufficiently substitutable, were the only two VLA available for delivery in the 2011-2013 Reference
Period, and that customer demand for LCA is inelastic. Based on these considerations, in the
United States' view, customers would most likely demand deliveries of the same number of
counterfactual 747-8I aircraft as they actually did A380 aircraft. The United States further asserts
that the European Union has failed to present evidence demonstrating ot herwise. Thus, the
United States argues that the use of an economic model in this context is unnecessary. Moreover,
in the United States' view the use of such a model would entail speculation about "endless
variables".544 The United States' position is that "[t]o engage in such speculation would only provide
a misleading appearance of exactitude. In truth, it would make the calculation dependent on highly
speculative inputs and the interplay between them". 545 Thus, the United States' asserts that there
is no re ason to believe that a model would yield more reliable results than the United States'
approach. The United States further notes that the compliance panel rejected the notion that
quantitative econometric analyses were instrumental for determining product markets, and instead
relied on qualitative evidence.546
6.371. The Arbitrator notes that its mandate is to quantify the degree and nature of the adverse
effects determined to exist with a view to determining whether the proposed level of
countermeasures is commensurate with these adverse effects. Article 7.10 of the SCM Agreement

540 We agree with the European Union that, in the impedance context, we should not include, in setting
a maximum amount of Annual Suspension, any Boeing counterfactual deliveries that would have occurred
outside the 2011-2013 Reference Period. (European Union's comments on the United States' response to
Arbitrator question No. 144, paras. 445-451).
541 European Union's response to Arbitrator question No. 3, para. 92.
542 European Union's written submission, para. 202.
543 See, e.g. European Union's written submission, paras. 197-203; and responses to Arbitrator question
No. 3, paras. 91-95, No. 5, No. 6, No. 46, and No. 84.
545 United States' written submission, para. 194. The United States raises this argument with respect to
determining when deliveries would have occurred as a result of the lost sales, but we consider these
arguments would also apply with respect to a more complex inquiry regarding what LCA customers would have
ordered and when deliveries of such LCA would have occurred in the impedance context.
546 United States' written submission, paras. 164, 171, 173, 177, 191-194, 231, and 236; and
comments on the European Union's response to Arbitrator question No. 151, para. 265.

is silent on the methodology that arbitrators should use to fulfil this mandate, thus leaving a degree
of discretion to an arbitrator in selecting an appropriate methodology. In making this selection, the
starting point is the methodology offered by the complaining party, in this instance the United States,
in its methodology paper.
6.372. In its methodology paper, the United States asks the Arbitrator to assume that, in the
counterfactual, all A3 80 Impedance Deliveries would have been replaced by an equal number of
747-8I deliveries occurring within the same relevant time -period, i.e. the 2011 -2013 Reference
Period. The European Union bears the burden to submit arguments and evidence sufficient to
establish that this approach leads to a level of countermeasures not commensurate with the six
instances of impedance found to exist in the compliance proceedings, and is, consequently,
inconsistent with Article 7.10. To do so, the European Union must eng age with the methodology
presented by the United States; it is "not sufficient merely to assert that another methodology is
more appropriate".547 While the European Union has engaged with the United States' methodology
and has asserted that an economic model would be more appropriate, it has not produced any such
model supporting its arguments.
6.373. Thus, to form a view on whether an approach involving economic modelling would be more
appropriate than the United States' approach, we now assess whether, in the lig ht of the evidence
on the record, the assumption underlying the United States' approach, i.e. that Boeing would have
replaced all A380 Impedance Deliveries with an equal number of deliveries of 747-8I aircraft within
the 2011-2013 Reference Period, is reasonable. If that is the case, economic modelling would in our
view not constitute an inherently more appropriate methodology. We find it convenient and effective
to organize our assessment around the supply - and demand-side factors identified by the parties .
We examine these factors below.
6.3.4.4.2.2 Supply- and demand-side factors
6.374. The parties' submissions, have identified the following supply- and demand-side factors that
the parties argue the Arbitrator must consider in its analysis of how much "higher" Boeing's
counterfactual LCA deliveries would have been into each of the six geographic markets during the
2011-2013 Reference Period: (a) inelasticity of LCA demand , (b) demonstrated customer demand
for A380 deliveries during the 2011-2013 Reference Period, (c) the substitutability of the 747-8I and
the A380 models, (d) Boeing's 747-8I production capacity, (e) market presence of the A380 aircraft,
(f) competition from twin -aisle LCA, leasing companies, and the LCA second-hand market , (g)
aggressive bidding by Airbus in certain sales campaigns , (h) Airbus' and Boeing's costs, prices and
deliveries, (i) foregone learning -by-doing efficiencies, (j) customers deferring purchases , and (k)
different customer preferences in the counterfactual. We address each in turn.
6.375. In doing so, we recall that the volume of adopted findings in this dispute from the original
and compliance proceedings run into hundreds of pages, and that the relevant findings for purposes
of this arbitration proceeding concern claims made under Part III of the SCM Agreement, which
required the identification of adverse effects within the meaning Articles 5 and 6. That being the
case, we note that a significant portion of the voluminous adopted findings in this dispute describe
the conditions of competition in the LCA industry during relevant time periods, the causal mechanism
through which A380 and A350XWB LA/MSF caused adverse effects generally, and the circumstances
surrounding the occurrence of the lost sales and impedance in question specifically. We are bound
by such findings and we thus operate within those bounds. In assessing the validity of the European
Union's arguments in this con text, we therefore note that we conduct this assessment not only in
the light of the evidence on the record of this arbitration proceeding, but also in the light of the
significant volume of adopted findings in this dispute bearing on the market conditions in which the
relevant instances of impedance arose.548

547 Decisions by the Arbitrator, US – COOL (Article 22.6 – United States), para. 4.14.
548 See Appellate Body Reports, EC and certain member States – Large Civil Aircraft (Article 21.5 – US);
EC and certain member States – Large Civil Aircraft; Panel Reports, EC and certain member States – Large
Civil Aircraft (Article 21.5 – US); and EC and certain member States – Large Civil Aircraft. We note that in
many arbitrations conducted under other provisions (e.g. Article 4 of the SCM Agreement and/or Article 22.6 of
the DSU), such findings may not be available, as relevant underlying violations may be related to structural
aspects of measures rather than their market effects.

Inelasticity for LCA demand
6.376. The parties agree that, as a general matter, demand for LCA is inelastic.549 We consider that
this supports the view that, if the customers to whom the A380 Impedance Deliverie s were made
could not have had A380 aircraft delivered to them during the 2011 -2013 Reference Period in the
counterfactual, they would likely have demanded LCA deliveries of some kind to have been delivered
to them in this same time -period instead, and par ticularly if a model of LCA were available for
delivery at that time that was sufficiently substitutable with the A380 aircraft.
Demonstrated VLA customer demand
6.377. We further note that, in reality, the customers to whom the A380 Impedance Deliveries were
made wanted to have A380 aircraft delivered to them in the relevant quantities within the 2011 -
2013 Reference Period. In the absence of evidence that these customers would have for some reason
changed this revealed preference, we consider it reasonable to ass ume that in the counterfactual
these same customers would have wanted to have the same number of sufficiently substitutable
LCA delivered to them within the 2011-2013 Reference Period.
Substitutability of the 747-8I and A380 models
6.378. The United States notes that in the compliance proceedings, the A380 and 747 -8I models
were the only two LCA in the VLA product market in the 2011-2013 Reference Period, and were the
only two VLA available for delivery during that period of time.550 The three product markets (single-
aisle, twin-aisle, VLA) identified during the compliance proceedings were found to "represent the
three segments within which most competitive interactions between the relevant aircraft will
commonly take place".551 Moreover, in the compliance proceedings the substitutability between the
747-8I and the A380 models was a key consideration in the impedance findings.552 We thus consider
that the substitutability between the 747-8I and the A380 models strongly supports the notion that,
if the customers t hat received the A380 Impedance Deliveries could not have had A380 aircraft
during the 2011-2013 Reference Period in the counterfactual, they would likely have wanted 747-8I
aircraft instead.
Boeing 747 production capacity
6.379. The European Union argues that, in the cou nterfactual, Boeing would have had insufficient
production capacity to replace all A380 Impedance Deliveries with 747-8I deliveries within the 2011-
2013 Reference Period. The European Union asserts in this regard that Boeing would not have
delivered its first counterfactual 747-8I aircraft to a commercial customer before April 2012 (i.e. the
month in which the actual first delivery of a 747-8I aircraft to a commercial customer – i.e. Lufthansa
in the European Union market – occurred), and thus Boeing could not have replaced pre-April-2012
A380 Impedance Deliveries with counterfactual 747 -8I deliveries. The European Union further
argues that the remaining 21 months in the 2011 -2013 Reference Period would have been
insufficient for Boeing to replace the A380 I mpedance Deliveries with an equal number of 747 -8I
deliveries. In the European Union's view, increasing Boeing's VLA production capacity to the required
extent may have presented Boeing with an unmanageable production workload, may not have been
economically worthwhile, and/or may have required sacrificing resources vis-à-vis other LCA
operations to an unacceptable degree. Additionally, the European Union asserts that Boeing could
not have effectively transferred production capacity from the 747 -8F programm e to the 747 -8I
programme and that Boeing's decision to [[***]] meant that Boeing would have had insufficient
resources to commit to the 747 -8I programme in the counterfactual to speed up the 747 -8I
programme's development and production. The European Unio n, however, leaves open the

549 United States' written submission, paras. 173, 177, and 186; and European Union's response to
Arbitrator question No. 5, para. 132.
550 See paragraph 6.370 above; Appellate Body Report, EC and certain member States – Large Civil
Aircraft (Article 21.5 – US), para. 5.548; and Panel Report, EC and certain member States – Large Civil Aircraft
(Article 21.5 – US), Table 18. We further note that the identification of these product markets was the result of
complex and extensive analyses.
551 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.1416.
552 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
paras. 5.734, 5.740, and 6.41.

possibility that Boeing may have been able to replace some A380 Impedance Deliveries with Boeing
777 aircraft deliveries. The European Union generally submits that only an economic model could
show how many relevant additional Boeing LCA deliveries would have occurred in the counterfactual
and what Boeing LCA models would have comprised those additional deliveries . According to the
European Union, any United States' arguments to the contrary are speculative and based on
insufficient evidence.553
6.380. The United States first raises a procedural objection to the European Union's arguments in
this context. According to the United States, the impedance findings in the compliance proceedings
were predicated on the assumption that Boeing could have increased counterfactual 747 -8I
production capacity, and the European Union's arguments that Boeing could not have done so were
considered and rejected in both the original and compliance proceedings. Thus, in the United States'
view, the European Union's arguments amount to a "collateral attack" on adopted findings in that
they seek to re-litigate settled issues.554
6.381. Regarding the substance of the European Union's arguments, the United States asserts that
it is reasonable to conclude that Boeing could and would have increased counterfactual 747 -8I
production so as to allow Boeing to replace all the A380 Impedance Deliveries with 747-8I deliveries
within the 2011 -2013 Reference Period. The United States argues that, if faced with significantly
more counterfactual 747 -8I orders in the years leading up to the 2011 -2013 Reference Period,
Boeing would have faced strong incentives to allocate more resources to the 747 -8I programme
such that Boeing could have both made its first 747 -8I deliveries to commercial customers before
April 2012, and increased 747 -8I production capacity overall. The United States indicates that
production capacity is generally driven by demand levels, and that Boeing's ability to deliver 747-8F
aircraft before 2012 demonstrates that Boeing would have had the capacity to deliver 747-8I aircraft
by December 2011. The United States further argues that Boeing could have traded off production
capacity from the 747 -8F programme in favour of the 747 -8I programme. In any event, in the
United States' view, if Boeing had faced any production capacity constraints that would have
prevented Boeing from delivering 747 -8I aircraft at the same times as any of the earlier A380
Impedance Deliveries occurred, Boeing simply would have made the 747-8I deliveries a few months
later, or delivered 777 -300ER aircraft, or perhaps another model of 747 aircraft, to the relevant
customers instead.555
6.382. The United States argues that empirical evidence regardin g Boeing's historical production
capacity levels concerning a previous version of the Boeing 747 model – the Boeing 747 -400 –
strongly indicates that Boeing would have had the ability to produce 747-8I aircraft in the necessary
quantities so as to replace all A380 Impedance Deliveries with 747 -8I deliveries during the 2011 -
2013 Reference Period. The United States submits that the European Union fails to adequately
explain why the Arbitrator should not rely on these historical 747 production data, and that t he
remainder of the European Union's arguments are speculative and unsupported by sufficient
evidence.556
6.383. Finally, the United States asserts that the Arbitrator may find that Boeing's ability to make
counterfactual 747 -8I deliveries in the 2011 -2013 Referenc e Period is immaterial because the
purpose of the Arbitrator's exercise is to calculate the future adverse effects caused by relevant
subsidies, and Boeing can deliver ample 747-8I aircraft going forward.557
6.384. In response to the United States argument that the European Union's production -capacity
arguments amount to a "collateral attack" on adopted findings in this dispute, the European Union

553 European Union's written submission, paras. 197-200 and 300-305; responses to Arbitrator question
No. 6, para. 147, No. 85, and No. 88; and comments on the United States' responses to Arbitrator question
No. 116, paras. 196-198, and No. 130.
554 United States' responses to Arbitrator question No. 7 and No. 46, para. 110; and comments on the
European Union's response to Arbitrator question No. 98, para. 80.
555 United States' written submission, paras. 178, 193, and 240-243; responses to Arbitrator question
No. 7, para. 10, No. 46, para. 114, No. 71, No. 87, No. 88, No. 127, and No. 130; and comments on the
European Union's responses to Arbitrator question No. 112, paras. 212-213, No. 113, para. 219, and No. 146.
556 United States' written submission, para. 242; response to Arbitrator question No. 71; and comments
on the European Union's response to Arbitrator question No. 146.

asserts that its arguments are aimed at the inquiry regarding the degree of impedance rather than
the existence of impedance in the six geographic markets.558
6.385. Replying to the United States' position that Boeing's historical 747-400 production rates can
evidence Boeing's production capacity of 747-8I aircraft during the 2011-2013 Reference Period, the
European Union argues tha t comparing historical production rates of the 747 programme with the
counterfactual production capacity for the 747 -8I model is inappropriate. This is because the 747-
400 model was made during a time when the market and production circumstances facing Boe ing
were different, and because the 747 -400 and 747 -8I models are very different aircraft. In the
European Union's view, historical production rates of the 777 -300ER and A380 aircraft are more
probative in this context because they are long-range LCA being developed at roughly the same time
as the 747-8I aircraft was being developed. The European Union also stresses that in order to be
meaningful, the Arbitrator should use historical production rates of an LCA programme during its
initial ramp-up phase rather than production rates when the programme is "mature".559
6.386. Finally, in response to the United States' argument that Boeing can deliver ample 747 -8I
aircraft going forward, the European Union asserts that this argument is "entirely extraneous" to
quantifying the adverse effects determined to exist during the 2011-2013 Reference Period.560
6.387. The Arbitrator at the outset rejects the United States' argument concerning Boeing's
prospective 747-8I production capacity. As explained in section 6.3.1 above, we value the lost sales
and impedance found to exist during the 2011 -2013 Reference Period in order to determine a
maximum level of Annual Suspension. Thus, we must determine how much higher Boeing's LCA
deliveries would have been in that time-period.
6.388. Next, we note the United States' procedural objection to the European Union's production -
capacity arguments. We indicated above in paragraph 6.366 that the United States makes this
objection more generally vis-à-vis the European Union's arguments in the im pedance context. We
see no reason to depart in this specific context from our general conclusions reached in that
paragraph. The original proceedings did not establish how much higher Boeing's deliveries would
have been in any relevant geographic market du ring the 2011 -2013 Reference Period. In the
compliance proceedings, although the compliance panel and Appellate Body rejected an argument
by the European Union that production delays in the 747 -8I programme prevented findings of
impedance in the VLA product market, neither the compliance panel nor the Appellate Body stated
that this factor could not alter the degree of impedance in any relevant geographic market. In
particular, the findings left open the question of how Boeing's 747-8I production delays would have
affected the extent to which Boeing would have replaced A380 Impedance Deliveries with 747 -8I
aircraft and/or 777 aircraft – an important issue for our valuation purposes, as these aircraft display
[[***]] delivery prices.561
6.389. We turn, then, to the parties' substantive arguments. As a first step, we examine whether,
in the counterfactual, Boeing would have been able to deliver 747 -8I aircraft to commercial
customers before April 2012, i.e. the month in which Boeing actually delivered its first 747-8I aircraft
to a commercial customer. This issue matters because certain A380 Impedance Deliveries occurred
before that month in the 2011 -2013 Reference Period. Thus, if Boeing could not have made those
pre-April-2012 counterfactual deliveries with 747 -8I aircraft, this would impact the counterfactual
speed with which Boeing would have had to ramp up 747 -8I production. This would mean that
Boeing would have had to ramp up the production of 747 -8I aircraft more quickly to produce the
number of 747 -8I aircraft r equired to replace all A380 Impedance Deliveries in the 2011 -2013
Reference Period.

558 See, e.g. European Union's comments on the United States' response to Arbitrator question No. 153,
fn 2 (explaining that "there remains disagreement between the Parties as to the degree of impedance – i.e.,
the counterfactual market share that Boeing VLA would have been able to capture in the absence of the MSF
subsidies at issue", and citing previous portions of the European Union's submissions).
559 European Union's response to Arbitrator question No. 146; and comments on the United States'
response to Arbitrator question No. 116, para. 194.
560 European Union's response to Arbitrator question No. 85.
561 Boeing E-mail regarding Questions 116, 118, 121, 124(c), 125, 128-129, 132, (Exhibit USA-66
(HSBI)).

6.390. We note that the first 747-8I deliveries were initially planned for 2010.562 However, several
factors led to delays in the programme, such that deliveries to commercial customers could be made
only in April 2012: (a) supply chain issues , (b) late design changes , (c) performance issues found
during testing, (d) an eight-week labour strike, (e) limited engineering resources , and (f) [[***]]
only a limited number of 747-8I orders materialized following launch.563
6.391. In our view, four aspects of these factors are noteworthy. First, the occurrences of these
problems appear generally unrelated to the effects of LA/MSF, and thus we consider that these
problems (with the possible exception of limited engineering resources, as explained in the following
paragraph) would likely have occurred in the counterfactual.
6.392. Second, while such problems may have occurred in the counterfactual, it appears reasonable
to us to assume that Boeing would have addressed at least certain of these problems more rapidly
than Boeing did in fact. This was so because Boeing [[***]] at the same time. 564 In the face of
higher order numbers that would have resulted in the counterfactual, we find it reasonable to assume
that Boeing would have increased its resource allocation to the counterfactually [[***]] 747-8I
programme, most likely by increasing its overall resource base.565
6.393. Third, these pr oblems appeared to arise during the development and initial production
phases of the 747-8 programme, resulting in Boeing's delayed ability to assemble and deliver a final
747-8I aircraft in April 2012 rather than earlier. However, we note that Boeing did in fact deliver
additional 747-8I aircraft following April 2012, thus indicating that Boeing had essentially resolved
issues encountered during the 747-8I development and initial production phases.566
6.394. Finally, Boeing's ability to deliver 747 -8F aircraft begi nning in October 2011 and Boeing's
ability to deliver 747-8I [[***]] aircraft to customers before April 2012567 suggest to us that it should
in principle have been possible for Boeing to have realized pre-April-2012 deliveries of 747-8I aircraft
to commercial customers in the counterfactual, in particular in the assumed presence of additional
resources being allocated to the 747-8I programme in the counterfactual.568
6.395. In the light of these various observations, we consider it likely that in the counterfactual
Boeing would have been able to deliver its first 747-8I aircraft to commercial customers before April
2012, although the precise time at which that first delivery would have occurred is uncertain.
Nevertheless, for present analytical purposes, we assume that, in the counterfactual, Boeing would
not have delivered any 747 -8I aircraft to commercial customers before April 2012. We expressly
note, however, that we consider this to be a conservative assumption.
6.396. We next consider whether Boeing's assumed inability to make pre -April-2012 747 -8I
deliveries to the A380 Impedance Deliveries customers would likely have prevented such customers

562 Boeing E-mail regarding Questions 130-131, (Exhibit USA-84 (BCI)).
563 United States' responses to Arbitrator question No. 88, para. 126, and No. 131; Boeing 2008 Annual
Report, (Exhibit EU-116); Boeing e-mail from [[***]] (Dec. 10, 2018), (Exhibit USA-56 (BCI)); Boeing E-mail
regarding Questions 130-131, (Exhibit USA-84 (BCI)); and Machinists Back Contract With Boeing; 8-Week
Strike Ends, New York Times (Nov. 2, 2008), (Exhibit USA-86 (BCI)).
564 Boeing 747 Family, Boeing website, (Exhibit USA-54) (indicating that in 2009 Boeing was re-
evaluating its commitment to the 747-8I programme because only one customer, i.e. Lufthansa, had ordered
the 747-8I aircraft by that time).
565 Boeing E-mail regarding Questions 130-131, (Exhibit USA-84 (BCI)) (indicating that a counterfactual
increase in resources allocated to the 747-8I programme would mean that [[***]]); and The Seattle Times,
"747-8 delay causes doubts about Boeing", 7 October 2009, (Exhibit EU-117) (discussing these problems). We
note that we assume such a counterfactual increase in 747-8I orders to be significant, as we generally
conclude later in this section that it is reasonable to assume that Boeing would have replaced all of the A380
Impedance Deliveries on a one-to-one basis with deliveries of 747-8I aircraft.
566 The Seattle Times, "747-8 delay causes doubts about Boeing", 7 October 2009, (Exhibit EU-117)
(discussing such problems in some detail); and Boeing E-mail regarding Questions 130-131, (Exhibit USA-84
(BCI)) (indicating that delays in the 747-8 programme were primarily the result of "development and initial
production phases"). (emphasis added)
567 Boeing 747 deliveries (2000–2013), Excel download from Boeing website, (Exhibit USA-53); and
Boeing E-mail regarding Questions 130-131, (Exhibit USA-84 (BCI)).
568 The 747-8I and 747-8F are produced on the same final assembly line and share significant
commonalities. (United States' response to Arbitrator question No. 88; and Boeing E-mail regarding Questions
130-131, (Exhibit USA-84 (BCI))).

from ordering 747-8I aircraft in the first place. We answer this question in the negative. The record
indicates that, immediately after the launch of the 747-8 programme in 2005569, Boeing envisioned
delivering its first 747-8I to commercial customers in 2010. It was only after developmental issues
arose primarily in the subsequent 2008 -2011 time-frame that this date was delayed. 570 As the
counterfactual 747 -8I deliveries that would have replaced the A380 Impedance Deliveries (and
especially the pre -April 2012 A380 Impedance Deliveries) would have been the first 747 -8I
deliveries, we consider it reasonable to assume that they would generally correspond to the earliest-
in time orders received as well, i.e. orders most likely received before the 2008-2011 period. Thus,
we do not consider it reasonable to assume that any relevant customer would not have ordered 747-
8I aircraft due to the abo ve-discussed developmental problems with the 747 -8 programme. 571
Moreover, both parties agree that, once ordered, customers will generally wait for the delivery of
their ordered LCA model even in the face of years of delivery delays.572 We discern nothing on the
record to indicate that these dynamics would have been any different with respect to any relevant
customer in this context in the counterfactual. We therefore consider that it is reasonable to conclude
that the customers that received the pre-April-2012 A380 Impedance Deliveries would have wanted
deliveries of 747-8I aircraft in April 2012 or as soon as possible thereafter.
6.397. At this point, therefore, we note that for Boeing to have been able to replace all the A380
Impedance Deliveries with an equal numb er of 747 -8I aircraft deliveries within the 2011 -2013
Reference Period, we assume that Boeing would have had to do so within the 21-month period from
the date of the first counterfactual delivery (i.e. April 2012) through December 2013, inclusive. For
ease of reference, we will refer to this period as the counterfactual 747-8I Ramp-Up Period.
6.398. In assessing whether Boeing could have achieved the necessary production ramp -up, we
first address the counterfactual demand for 747 aircraft deliveries in the 747 -8I Ramp-Up Period.
For analytical purposes, and in the light of certain of the parties' arguments on how far 747-8F
production may have to be taken into account, we sum the actual deliveries of 747-8I and 747-8F
aircraft during the relevant 21 -month time-period with the A380 Impedance Deliveries occurring
during the entire 2011-2013 Reference Period.573 Further, for ease of treatment of the data later on
in this Decision, we further break out these data by calendar year. We summarize this counterfactual
demand data in Table 13 below.

569 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.1220;
and Boeing E-mail regarding Questions 116, 118, 121, 124(c), 125, 128-129, 132, (Exhibit USA-66 (HSBI)).
570 United States' response to Arbitrator question No. 112, para. 44; and Boeing E-mail regarding
Question 112, (Exhibit USA-62 (BCI)). The European Union does not dispute that these problems mainly arose
in the 2008-2011 time-frame.
571 We therefore further note that we do not believe, as the European Union argues, that delays in the
747-8I would have meant that relevant customers who would otherwise have preferred to take deliveries of
747-8I aircraft would instead have ordered and taken deliveries of, for example, Airbus twin-aisle LCA.
(European Union's response to Arbitrator question No. 64, para. 121). We note that all the orders from which
the A380 Impedance Deliveries came were placed in or before 2008. (Updated Ascend Database, (Exhibit
EU-79)).
572 United States' response to Arbitrator question No. 112; and European Union's response to Arbitrator
question No. 112.
573 The 747-8I and 747-8F were the only 747 models available for deliveries in the 747-8I Ramp-Up
Period.

Table 13: 747 counterfactual demand in 747-8I Ramp-Up Period
 April – Dec 2012
(747-8I / 747-8F)
2013
(747-8I / 747-8F)
Total
(747-8I / 747-8F)
Actual A380
Impedance
Deliveries574
27575 20 47
Actual 747-8
worldwide
deliveries576
25
(11 / 14)
24
(5 / 19)
49
(16 / 33)
Total Counterfactual
747-8 demand577
52
(38 / 14)
44
(25 / 19)
96
(63 / 33)

6.399. As is clear from the above table, the issue presented is whether it is reasonable to conclude
that Boeing could have delivered 96 747-8 aircraft during the 21 -month 747-8I Ramp-Up Period
(i.e. the 49 747-8 deliveries actually made plus an additional 47 counterfactual 747-8I deliveries).
6.400. The parties have produced evidence regarding the ability of Airbus and Boeing to deliver
particular volumes of other LCA models during particular periods of time as a proxy for estimating
Boeing's counterfactual production capacity. Beyond such delivery data, there is little other empirical
evidence on the record on which to base our analysis. We thus use this empirical data to assess
Boeing's ability to produce 96 747 aircraft in the 21-month counterfactual 747-8I Ramp-Up Period.
6.401. We note that the parties rely on different historical LCA delivery rates in this context. The
European Union advocates that we rely on historical delivery rates of the A380 and 777 -300ER
aircraft, whereas the United States advocates that we rely on historical delivery rates of the 747-
400. We consider that Boeing's historic delivery rates of the 747, and in particular the 747 -400,
would best represent Boeing's ability to produce and deliver 747 aircraft in the counterfactual 747 -
8I Ramp-Up Period.578 This is so, first, because both the 747-8I and 747-400 were produced by the
same company, i.e. Boeing. Also, both are in the 747 family of aircraft. Moreover, the 747 -400 is
the predecessor passenger version of the 747-8I.
6.402. The 747-400 model was launched in 1985 and delivered until 2005.579 Under the 21-month
counterfactual 747-8I Ramp-Up Period, Boeing would have produced two 747 models, the 747-8I
and 747-8F. We thus believe that it would be meaningful to compare the counterfactual 747 -8I
Ramp-Up Period to the first 21 months following the first delivery of the 747 -400, during which
Boeing was also producing other models of the 747, albeit in much more limited numbers than the
747-400. For ease of reference, we will refer to this period as the 747 -400 Ramp-Up Period. We

574 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
Table 13.
575 This number is the sum of the A380 Impedance Deliveries made from December 2011 through
December 2012, under the assumption that customers who wanted 747-8I deliveries before April 2012 but
could not get those delivery slots would want those deliveries still within calendar-year 2012.
576 Boeing 747 deliveries (2000 – 2013), Excel download from Boeing website, (Exhibit USA-53); Boeing
E-mail regarding Questions 116, 118, 121, 124(c), 125, 128-129, 132, (Exhibit USA-66 (HSBI)); and Boeing
747 Family, Boeing website, (Exhibit USA-54). We note that these numbers include the [[***]] deliveries as
described in the United States' response to Arbitrator question No. 116, paras. 56-57, that occurred after April
2012. We further note that, apparently due to the inconsistent presence of the [[***]] deliveries in these
exhibits, the total number of 747 deliveries in this row sometimes vary across the parties' exhibits.
577 This row sums the numbers in the previous two rows above.
578 See, e.g. Award of the Arbitrator, US – Section 110(5) Copyright Act (Article 25), paras. 4.7
(preferring "a starting point grounded on historical, verified facts, even if adjustments may have to be made")
and 4.15 (noting that "since they considered it more appropriate to use figures grounded on facts than
deductions or inferences, the Arbitrators generally gave preference to approaches which relied as much as
possible on historical figures").
579 Boeing 747 deliveries (2000–2013), Excel download from Boeing website, (Exhibit USA-53)
(indicating the last passenger version of the 747-400 was delivered in 2005); Boeing 747 Family, Boeing
website, (Exhibit USA-54) (indicating the 747-400 launch date as 1985); Boeing E-mail regarding
Questions 116, 118, 121, 124(c), 125, 128-129, 132, (Exhibit USA-66 (HSBI)) (same); and Boeing, Lufthansa
Announce Order for 747-8 Intercontinental, Boeing Press Release, (Exhibit USA-57) (indicating that the 747-8
is the successor of the 747-400).

consider that assessing Boeing's total 747 production capacity during the 747-400 Ramp-Up Period
will yield a reasonable estimate of Boeing's total 747 production capacity during the counterfactual
747-8I Ramp-Up Period.
6.403. We recognize the European Union's argument that a comparison of the counterfactual 747-
8I Ramp Up Period and the 747 -400 Ramp-Up Period is inappropriate because the circumstances
and conditions of competition facing Boeing during these two time -periods were different, and
because the 747 -400 and 747 -8I models a re dissimilar. According to the European Union, this is
due, in particular, to the more advanced technologies used in the 747-8I model as compared to the
747-400 model. We accept that there are differences as between these two ramp -up periods and
the aircr aft involved. We discern no convincing reason, however, why the general conditions of
competition or circumstances of Boeing in the two time -periods invalidates a comparison between
the two time-periods for our purposes.
6.404. We also consider that the fact that the 747-8I aircraft is more technically advanced than its
747-400 predecessor does not invalidate this comparison. 580 This is so because the record of this
dispute contains extensive discussions about how the accumulation of "learning effects" helps to
improve an LCA producer's capacity to produce successively more complex LCA. Simply put, the
Boeing company in the counterfactual 747 -8I Ramp-Up Period would have been more skilled at
producing 747 aircraft than the Boeing company that existed in the 747-400 Ramp-Up Period. Thus,
we do not consider that it necessarily follows that Boeing could not have produced 747 aircraft as
efficiently during the counterfactual 747 -8I Ramp-Up Period as it could in the 747 -400 Ramp-Up
Period simply because the 747-8I is a more complex model than the 747-400.
6.405. Further to the point immediately above, we recall that we have already described the issues
that Boeing had with the 747 -8I development, some of which were possibly due to the 747 -8I
aircraft's technological complexity a nd production management. We noted, however, that these
issues appeared generally to pertain to the initial development phases of the 747 -8I programme,
rather than ongoing issues with production. We further note that Boeing was able to deliver 89 787
aircraft in the first 25 months following first delivery.581 As we understand it, the 787 model is also
a technologically complex aircraft. This, in our view, is indicative of Boeing's ability to significantly
ramp up production of technologically advanced LCA in a time-period similar to that of the 20 11-
2013 Reference Period.
6.406. We thus set out in the table below Boeing's 747 deliveries in the 747 -400 Ramp-Up Period,
organized by deliveries made in the first nine months following the first delivery of a 747-400 aircraft
and the following 12 months, consistent with how we organized the data related to the counterfactual
747-8I Ramp-Up Period above in Table 14:
Table 14: 747 deliveries in the 747-400 Ramp-Up Period
LCA programme
Deliveries in first nine
months582
(747-400 / other 747
models)
Deliveries in next 12
months583
(747-400 / other 747
models)
Total deliveries in first
21 months
(747-400 / other 747
model)
747 deliveries584 32
(29 / 3)
68
(63 / 5)
100
(92 / 8)

580 See e.g. Boeing, Lufthansa Announce Order for 747-8 Intercontinental, Boeing Press Release,
(Exhibit USA-57) (noting the features in the 747-8I aircraft that are more technically advanced than its
counterparts in the 747-400 aircraft).
581 Updated Ascend Database, (Exhibit EU-79).
582 This is the first three quarters of 1989.
583 This is the fourth quarter of 1989 and the first three quarters of 1990.
584 Boeing Historical Deliveries through October 2018, Boeing website, (Exhibit USA-43); Boeing E-mail
regarding Questions 116, 118, 121, 124(c), 125, 128-129, 132, (Exhibit USA-66 (HSBI)); Boeing Website,
747-400 Deliveries Pre-1990, (Exhibit USA-115); and Updated Ascend Database (Exhibit EU-79). The number
of 747-400 aircraft delivered during these time-periods are derived from Exhibits USA-115 and EU-79. We note
that Boeing delivered four 747 aircraft other than the 747-400 in 1989. (Boeing Historical Deliveries through
October 2018, Boeing website, (Exhibit USA-43) (listing the total number of 747 variants delivered in 1989,
i.e. 45); and Boeing Website, 747-400 Deliveries Pre-1990, Exhibit USA-115 (listing the number of 747-400

6.407. We therefore note that Boeing was able to deliver 100 747 aircraft to all customers in the 21-
month 747 -400 Ramp -Up Period – 92 of which were 747 -400 aircraft. We recall that, in the
counterfactual, Boeing would have had to deliver a total of 9 6 747-8 aircraft – 63 of which would
have been 747-8I aircraft – in order to replace all A380 Impedance Deliveries within that period in
addition to making the pre-existing 747-8 deliveries within that same period.
6.408. Furthermore, we take account of the following elements. First, we discern no significant
evidence on the record that Boeing's 747 production rate during the 747 -400 Ramp-Up Period had
reached a hard ceiling. 585 Second, it is important to note that Boeing makes 747 aircraft to order
and not for inventory, and thus its production capacity is generally controlled by demand levels,
which means that the production capacity is increased as and when demand levels increase.586 Third,
we have previously made an expressly conservative assumption that Boeing would have had only
21 months, rather than up to 25 months, in which to make the necessary additional 47 747 -8
deliveries. In the light of the above data and elements, we cons ider it reasonable to conclude that
Boeing would have been able to make the necessary 96 747-8 deliveries (which includes both 747-
8I and 747-8F deliveries) not only within the 2011-2013 Reference Period, but most likely within the
counterfactual 747-8I Ramp-Up Period as well.
6.409. We note that under our approach Boeing would have faced a counterfactual demand for 3 8
747-8I deliveries in 2012, i.e. at the beginning of the counterfactual 747 -8I Ramp-Up Period, that
is higher than the demand for 25 747 -8I deliveries that it would have faced in 2013. We note that
this contrasts with observed LCA production ramp -ups during which the delivery numbers tend to
increase over time. It is instructive in this context to compare data concerning the number of aircraft
of specified LCA models that Boeing delivered in the first nine months of each programme following
first delivery with data concerning the number of the same aircraft Boeing delivered in the following
12 months. The Boeing LCA models for which we consider such d ata are the 747 -400 model
(deliveries approximately doubled from the first nine months to the following 12 months);
777-300ER model (deliveries approximately doubled from the first nine months to the following
12 months); and the 787 model (deliveries approximately quadrupled from the first nine months to
the following 12 months).587 In the light of this data, we doubt that a delivery structure of 3 8
deliveries of 747-8I aircraft in the first nine months of the 747 -8I Ramp-Up Period and the smaller
number of 25 747-8I aircraft deliveries in the following 12 months of the 747 -8I Ramp-Up Period
would be likely. A delivery volume of 3 8 aircraft for the first nine months also significantly exceeds
the number of 747 -400 aircraft that Boeing was able to deliver in t he first nine months of the
747-400 Ramp-Up Period (which number was 29). Thus, we consider that a reasonable assumption
is that Boeing could have delivered 29 747 -8I aircraft in the latter nine months of 2012 (i.e. the
same number that Boeing was able to deliver for the 747-400 model in the first nine months of the
747-400 Ramp-Up Period) and delivered the remaining 3 4 747-8I aircraft in 2013. 588 Taking into

variants delivered during 1989, i.e. 41)). We cannot definitively determine from these exhibits the months in
which the four non-747-400 variants of the 747 model were delivered, however. Thus, we evenly distribute the
four deliveries over 1989, i.e. on average one delivery in each quarter of 1989. This yields three deliveries of
non-747-400 variants of the 747 in the first nine months of 1989 and one in the last quarter of the year, and
we allocate these deliveries as such in the table above. We note that Exhibit EU-79 also contains the numbers
of 747 aircraft deliveries of variants other than the 747-400 model for the first nine months of 1990. The
United States has explained, however, that this exhibit does not contain two 747 aircraft deliveries that Boeing
made to the US military in 1990. (United States' response to Arbitrator question No. 170, para. 4). The
European Union has not disputed the United States' assertion. Although we cannot tell from these exhibits in
what months those two deliveries were made, we believe it reasonable to allocate one such delivery to the first
nine months of 1990. We allocate that delivery as such in the above table.
585 We note that in the compliance proceedings, the European Union submitted evidence indicating
Airbus' ability to continuously increase A330 and A320 production capacity to keep pace with demand levels.
With respect to the A320, Airbus increased the number of its final assembly lines in order to do so. (Panel
Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), paras. 6.1325 and 6.1520).
586 Panel Report, EC and certain member States – Large Civil Aircraft, para. 7.2101 and fn 5196.
587 Updated Ascend Database, (Exhibit EU-79). The Boeing 777-300ER is a long-range aircraft and the
largest version of the Boeing 777. It was launched in 2000. The Boeing 787 is an advanced twin-aisle aircraft
launched in 2004. (Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), Table
17 and para. 6.1220; Boeing E-mail regarding Questions 116, 118, 121, 124(c), 125, 128-129, 132, (Exhibit
USA-66 (HSBI)) (stating the 777-300ER launch date)). Accordingly, these two LCA share similarities with the
747-8I in both certain key features and the time of launch, which in our view makes the use of the above data
reasonable under the circumstances.
588 Under this assumed temporal delivery structure, deliveries of 747-8I aircraft would therefore less
than double as between the first nine months following the first delivery and the following twelve months.

account the numbers of actual 747 -8I aircraft delivered in those two time -periods (i.e. 1 1 and 5,
respectively), this would yield an additional 18 747-8I deliveries in 2012 and an additional 29 747-
8I deliveries in 2013.589 Thus, even assuming that, in the counterfactual, Boeing would have lacked
the capacity to deliver 747-8I aircraft as quickly as Airbus delivered A380 aircraft to the six relevant
geographic markets in reality, we find it reasonable to assume that Boeing could nonetheless have
replaced all of the A380 Impedance Deliveries with an equal number of deliveries of 747-8I aircraft
within the 2011-2013 Reference Period.590 We summarize these conclusions in the following table:
Table 15: Counterfactual deliveries of 747-8I aircraft in the 747-8I Ramp-Up Period
 Apr. – Dec. 2012
(actual / additional)
2013
(actual / additional)
Total
(actual / additional)
747-8I counterfactual
deliveries
29
(11 / 18)
34
(5 / 29)
63
(16 / 47)

6.410. We note the European Union's arguments that it may be uncertain: (a) whether, in the
counterfactual, Boeing would have been able to properly manage production of an increased number
of 747-8I aircraft, (b) whether upstream suppliers could have satisfied demand for additional 747 -
8I components, (c) whether the impact of increased 747 -8I production would have had negative
impacts on Boeing's overall production operations, including with regard to other LCA programmes,
that Boeing would have found unacceptable , and (d) whether Boeing would simply have opted to
extend the delivery schedules for 747-8I aircraft for other reasons.591 However, these considerations
appear to us as speculative, particularly in the light of the volumes of 747 aircraft that Boeing was
in fact able to produce in the 747-400 Ramp-Up Period. Moreover, we recognize that, if more orders
had materialized from the beginning of the 747-8I programme – i.e. several years before the 2011-
2013 Reference Period – Boeing would have had a substantial amount of lead time to increase its
production resources overall, thus limiting the need to make compromises in other LCA programmes,
especially [[***]], for the benefit of increasing 747-8I production.592
6.411. In conclusion, based on the foregoing, we thus assume that Boeing's counterfactual 747 -8
production capacity would have allowed Boeing to replace all of the A380 Impedance Deliveries with
an equal number of 747 -8I deliv eries in the 2011 -2013 Reference Period. More specifically, we
conclude that a reasonable estimate is that, in the counterfactual, Boeing would have delivered an
additional 1 8 747-8I aircraft in 2012 and an additional 29 747-8I aircraft in 2013 to the six
geographic markets in question taken as a whole.
Market presence of the A380 aircraft
6.412. The European Union argues that, in the counterfactual, Boeing might not be able to replace
all A380 Impedance Deliveries with 747-8I deliveries because Airbus could still have made some of
these deliveries with A380 aircraft in the counterfactual. The European Union argues that this is a
reasonable conclusion because the Appellate Body left the counterfactual launch date of the A380
model open, and because in the European Union's view the counterfactual launch of the A380 model
would have occurred shortly after its actual launch in 2000.593 The European Union asserts that the
Appellate Body's findings of lost sales and impedance in the 2011 -2013 Reference Period are not
inconsistent with the A380 model being available for order and/or delivery in the 2011 -2013

589 We see little basis upon which to conclude that Boeing would have altered the dates of any 747-8F
aircraft deliveries in the counterfactual, an aircraft which Boeing had begun to deliver months before the
747-8I. We recall that under our assumptions Boeing would have had the capacity to deliver the required
number of 747-8I and 747-8F aircraft within the 2011-2013 Reference Period. We therefore see no reason to
further examine the European Union's argument that the Arbitrator would have to consider the "trade-offs" in
production capacity between the 747-8I and 747-8F aircraft in the counterfactual. (European Union's
comments on the United States' response to Arbitrator question No. 130, paras. 306-309).
590 We consider that such counterfactual delivery dates would have been acceptable to 747-8I
customers. (See paragraph 6.396 above).
591 European Union's written submission, para. 304.
592 See United States' response to Arbitrator question No. 131, para. 140 (making this point).
593 European Union's response to first set of Arbitrator questions, para. 28; responses to Arbitrator
question No. 3, paras. 87-88, No. 4, No. 5, paras. 132 and 134, No. 7, paras. 155-158, No. 10,
paras. 204-205, No. 14, paras. 314-316, and No. 46, paras. 475-476.

Reference Period in the counterfactual because Airbus could have launched the A380 model soon
after its actual launch date in 2000. According to the European Union, this delayed launch would
have meant, "[f]or example, in light of later availability of delivery positions, and/or the [A380
model's] less well-established market position or maturity, [that] certain customers would not have
ordered the aircraft", thus resulti ng in the lost sales observed during the 2011 -2013 Reference
Period.594
6.413. The United States argues that the Appellate Body found that the A380 aircraft would not
have been available for either order or delivery before the end of the 2011 -2013 Reference Period,
and thus Airbus could not have captured any of the A380 Impedance Deliveries in the counterfactual
with deliveries of A380 aircraft. The United States asserts that, in particular, because the
Appellate Body found that the A380 aircraft would not have been available for order in the 2011-
2013 Reference Period, then, a fortiori, Airbus could not have delivered the A380 in the 2011-2013
Reference Period. The United States also rejects the European Union's arguments purportedly
reconciling the findings of lost sales and impedance caused by A380 LA/MSF in the 2011 -2013
Reference Period and a counterfactual launch of the A380 model before the 2011 -2013 Reference
Period. In the United States' view, the European Union's arguments in that context have no support
in the findings in the compliance proceedings.595
6.414. The Arbitrator notes that the key disagreement between the parties in this context is whether
the Appellate Body report in the compliance proceeding resolved the issue of whether the A380
aircraft would have been available for sale in the counterfactual such that Airbus could still have
captured some of the A380 Impedance Deliveries with deliveries of A380 aircraft. In assess ing this
issue, we examine five issues addressed in the Appellate Body's report in the compliance
proceedings: (a) the effects of A380 LA/MSF on the A380 programme , (b) whether those effects
caused lost sales in the VLA product market in the 2011 -2013 Reference Period, (c) whether those
effects caused impedance in the VLA market in the 2011 -2013 Reference Period, (d) the effects of
A380 and A350XWB LA/MSF on the A350XWB programme , and (e) whether those effects caused
lost sales in the twin-aisle product market in the 2011-2013 Reference Period. We address each in
turn.
Effects of A380 LA/MSF on the A380 aircraft
6.415. We thus examine first the Appellate Body's findings concerning the effects of A380 LA/MSF
on the A380 programme. In that context, and by way of background, we find it helpful to recall that
throughout this dispute, the United States had relied on a "product" theory of causation. 596 The
Appellate Body explained that "[u]nder this product theory of causation, market distortion and
adverse effects flow directly from Airbus' entry at a particular time with a particular aircraft , which
in the United States' view would not have been possible but for the subsidies".597 In the compliance

594 European Union's response to Arbitrator question No. 4, paras. 116-117. See also European Union's
statements); and comments on the United States' response to Arbitrator question No. 112, fn 226 (same).
595 United States' written submission, paras. 165-178; response to Arbitrator question No. 7(b),
para. 15; and comments on the European Union's responses to Arbitrator question No. 112, paras. 207-209,
and No. 113, para. 216.
596 In the original dispute the United States also offered a "price" theory of causation, which was
rejected by the original panel and not pursued on appeal by the United States. (Appellate Body Report, EC and
certain member States – Large Civil Aircraft (Article 21.5 – US), fn 1618).
597 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 5.587. (internal quotation marks and citation omitted; emphasis original) See also Appellate Body
Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 5.416 (describing
"product effects" as "the effects of such subsidies on the ability of Airbus to launch and bring to market
particular Airbus LCA models as and when it did") (emphasis original) and fn 1496 (explaining that "the Panel
used the term 'product effects' to refer to the effects of LA/MSF subsidies on the ability of Airbus to launch and
bring to market an Airbus LCA as and when it did"). We note that the term "bring to market" vis-à-vis a
particular LCA is not a technical term, but, rather, has been used as a shorthand to describe an LCA
manufacturer's general ability to develop and sell a particular LCA. (See, e.g. Panel Report, EC and certain
member States – Large Civil Aircraft, para. 7.367 (explaining that "[c]onsequently, bringing a new LCA model
to market requires long-term planning and advance assessment of a wide variety of factors, including future
manufacturing needs, market trends, customer demand and prices. This means that at the time a decision is
taken to develop a new LCA model and to incur start-up costs, the eventual success of the project remains
subject to a high degree of uncertainty")). The term is often paired with the term "launch" as well (i.e. the

proceeding, the compliance panel found that, in the absence of the "product e ffect" of all pre -
A350XWB LA/MSF (arising from the "indirect" effects598 of pre-A380 LA/MSF and "direct" effects599
of A380 LA/MSF), the A380 aircraft would not have existed before or during the 2011 -2013
Reference Period. The compliance panel's findings of lo st sales and impedance in the VLA product
market were predicated on that non-existence.600 The Appellate Body, however, found that only the
effects of A380 LA/MSF could be considered vis-à-vis the A380 programme in the counterfactual.
The Appellate Body thus had to perform a new analysis aimed to "ascertain[] whether the Panel's
analysis regarding the 'product effects' of [A380 LA/MSF alone] support a finding of a genuine and
substantial causal relationship between these subsidies … and the market phenomena i dentified in
the post-implementation period" in the VLA product market.601
6.416. The Appellate Body determined what the "product effects" of A380 LA/MSF were vis-à-vis
the A380 programme by examining the findings from the original proceedings and those made by
the compliance panel.602 The Appellate Body concluded that A380 LA/MSF had a "genuine impact on
Airbus' ability to fund the timely launch of the A380"603, that "these 'direct effects' of A380 LA/MSF
continued after the original reference period", which ended in 2006, and that "the Panel's
understanding of the 'direct effects' of A380 LA/MSF on Airbus' ability to launch, bring to market,
and continue develo ping the A380 as and when it did [had] a sufficient evidentiary basis". 604
Elsewhere in its report, the Appellate Body also characterized the "product effects" of A380 LA/MSF
as follows: (a) A380 LA/MSF "enabled Airbus … to bring to market and to continue de veloping the
A380", an event that was "crucial to renew and sustain Airbus' competitiveness in the
post-implementation period"605, (b) in the absence of A380 LA/MSF "Airbus would not have been
able to offer the A380 at the time it did" 606, (c) "A380 LA/MSF subsidies continued to have effects
on Airbus' ability to bring to market and to continue developing the A380 after the original reference
period"607, and (d) A380 LA/MSF "made it possible … to bring to market the A380".608
6.417. Thus, the Appellate Body clearly found that A380 LA/MSF had an impact not only on Airbus'
ability to undertake a timely launch of the A380, but to continue to develop the A380 aircraft after

ability of an LCA manufacturer to "launch and bring to market" a particular LCA model), a construction that has
essentially the same meaning.
598 "Indirect effects" are the "learning", scope and financial effects that any given LA/MSF subsidy
provided specifically for one model of LCA may have on Airbus' ability to launch and bring to market another,
subsequent model of LCA. (Appellate Body Report, EC and certain member States – Large Civil Aircraft
(Article 21.5 – US), paras. 5.563 and 5.594).
599 "Direct effects" are the effects of any given LA/MSF subsidy on Airbus' ability to launch and bring to
market the particular model of Airbus LCA specifically funded by that LA/MSF loan. (Appellate Body Report,
EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 5.563).
600 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 7.1(d)(xii).
601 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 5.599.
602 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
section 5.6.3.5.1.
603 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 5.647.
604 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 5.609. (emphasis original) The Appellate Body also considered it "important … that the A380 programme
suffered 'extensive' production delays in 2005 and 2006", during which time "Airbus continued to receive
disbursements" under A380 LA/MSF measures. (Appellate Body Report, EC and certain member States – Large
Civil Aircraft (Article 21.5 – US), para. 5.608). See also Appellate Body Report, EC and certain member States
– Large Civil Aircraft (Article 21.5 – US), para. 5.646 (stating that "A380 LA/MSF had 'direct effects' on Airbus'
ability to launch, bring to market, and continue developing the A380 as and when it did, given that the A380
LA/MSF subsidies had not expired, as well as the fact that Airbus continued to receive disbursements under the
French, German, and Spanish LA/MSF contracts at a time when it was experiencing severe financial difficulties
resulting from the extensive production delays in the A380 programme" and concluding that A380 LA/MSF
"made it possible … to bring to market the A380"). (emphasis original)
605 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
paras. 5.647 and 6.23.
606 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
paras. 5.766, 5.769, and 5.773.
607 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 5.635.
608 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 5.646.

the original reference period, which ended in 2006.609 This illustrates that A380 LA/MSF had effects
not only on Airbus' ability to decide to launch the A380 programme at all, but to actually develop
the aircraft post-launch. Relatedly, and as noted above, the Appellate Body directly stated that A380
LA/MSF "made it possible … to bring to market the A380". W e interpret this statement as more
categorically asserting that the A380 aircraft would not have been brought to market at all in the
absence of A380 LA/MSF.
6.418. In sum, taken in their entirety, the Appellate Body's descriptions of the "product effects" of
A380 LA/MSF strongly suggest that the A380 aircraft would not have been available for order or
delivery by the end of the 2011-2013 Reference Period.610
Causation of VLA lost sales
6.419. We next turn to examine the Appellate Body's analysis of whether the "product e ffects" of
A380 LA/MSF caused lost sales in the VLA product market during the 2011-2013 Reference Period.611
This analysis is significant in our view because LCA deliveries result from previous LCA orders. Thus,
insofar as the Appellate Body's analysis of lost sales indicates that Airbus would not have been able
to offer the A380 aircraft by the end of the 2011-2013 Reference Period in the counterfactual then,
a fortiori, Airbus could not have captured any of the A380 Impedance Deliveries in the counterfactual
with deliveries of A380 aircraft, since such deliveries would result from orders placed well before the
deliveries would have been made.
6.420. We note in particular four aspects of the Appellate Body's VLA lost sales analysis. First, the
Appellate Body never stated that the A380 aircraft would have been available for order in the 2011-
2013 Reference Period, or at any time beforehand. Relatedly, the Appellate Body never explained
how A380 LA/MSF could have been a "genuine and substantial" cause of lost sales in the 2011-2013
Reference Period if the A380 aircraft would have been available for offer in the 2011-2013 Reference
Period in the absence of A380 LA/MSF. This is significant in our view because, in the absence of any
other explanation by the Appellate Body regarding the causal mechanism through which A380
LA/MSF caused lost sales, it would appear reasonable to conclude that the causal mechanism was
that described in the compliance panel report, i.e. the A380 aircraft was absent from the market and
unavailable for order during the 2011 -2013 Reference Period. Based on the totality of the
Appellate Body's report, the only reasonable explanation that we discern for the absence of such
explanations is that they were unnecessary because in the counterfactual the A3 80 aircraft would
not have been available for order in the 2011-2013 Reference Period.
6.421. Second, the Appellate Body stated that "the Panel's findings … indicate that Airbus'
competitiveness in the VLA market, gained through earlier LA/MSF subsidies, was rene wed and
sustained beyond the original reference period and into the post -implementation period due to the
subsidies it continued to receive after the original reference period and into the post-implementation
period".612 This was so because A380 LA/MSF "enab led Airbus to bring the A380 to market and
continue its development in the face of extensive production delays".613 The Appellate Body went on
to explain that, "[i]n other words, in the absence of [A380 LA/MSF], Airbus would not have been
able to be 'present in [both] of the relevant sales campaigns as exactly the same competitor selling
identical aircraft' in the post-implementation period".614 We therefore note that the Appellate Body
again stated that A380 LA/MSF "enabled Airbus to bring the A380 to market and continu e its
development", without ever implying that the A380 aircraft could have been brought to market and
developed otherwise. Most significantly, perhaps, the Appellate Body plainly stated that Airbus, in

609 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 5.558.
610 For clarity, when this section refers to the A380 aircraft, it refers to the A380 aircraft that was in fact
ordered and delivered in the 2011-2013 Reference Period.
611 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
section 5.6.4.6.4.1. The lost sales in the VLA product market were the 2012 Transaero order for four A380
aircraft and the 2013 Emirates order for 50 A380 aircraft.
612 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 5.725.
613 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 5.725.
614 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 5.726 (quoting Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 6.1789) (second alteration original).

the counterfactual, would not have been able to prese nt, in the sales campaigns leading to the
Transaero and Emirates lost sales, an aircraft "identical" to the A380 aircraft that was in fact brought
to market. We take this as a direct statement that Airbus could not have offered the A380 aircraft
in the 201 1-2013 Reference Period. Moreover, the Appellate Body's statement that A380 LA/MSF
"renewed and sustained" Airbus' "competitiveness in the VLA market" in the counterfactual post -
implementation period is consistent with the conclusion that, without A380 LA/MSF, the A380 aircraft
would not have been available for order in the 2011-2013 Reference Period.
6.422. Third, we note the manner in which the Appellate Body rejected the European Union's
argument that the compliance panel improperly dismissed certain of the Eur opean Union's non -
attribution factors:
The European Union argued before the Panel that Transaero Airlines and Emirates
Airlines chose the A380 over the 747 -8 in the orders they placed in 2012 and 2013
because of, inter alia , the A380's more advanced techno logies and greater size
compared with the 747 -8, which enabled it to satisfy both customers' very specific
requirements. However, similar to our analysis in the context of lost sales in the twin -
aisle LCA market, we do not view these factors as unrelated t o the effects of the
subsidies. Rather, our review of findings from the original proceedings and the Panel's
findings shows that, absent the LA/MSF subsidies existing in the post -implementation
period, Airbus would not have been able to launch and bring to market the A380 at the
time it did. Therefore, like the Panel, we have doubts as to whether Airbus' pre-existing
commonality advantages and other product -related advantages over Boeing could be
characterized as non -attribution factors that could be said t o "dilute" the causal link
between the LA/MSF subsidies existing in the post -implementation period and the
relevant market phenomena.615
6.423. This passage, in our view, further demonstrates that the A380 aircraft would not have been
available for offer in the 201 1-2013 Reference Period in the counterfactual. Indeed, this appears a
reasonable conclusion if these features of the A380 aircraft, i.e. "more advanced technologies and
greater size", that were offered in reality during the 2011-2013 Reference Period were not "unrelated
to the effects of [A380 LA/MSF] subsidies".
6.424. Finally, we underline that, in its VLA lost sales analysis, the Appellate Body affirmed the VLA
lost sales findings of the compliance panel, which were predicated on the market absence of the
A380 aircraft, and provided no alternative reasoning as to how A380 LA/MSF caused VLA lost sales
in the 2011-2013 Reference Period.616
6.425. These four aspects of the Appellate Body's VLA lost sales analysis in the compliance
proceeding, in our view, support the concl usion that Airbus would not have been able to offer the
A380 aircraft by the end of the 2011-2013 Reference Period, and thus, a fortiori, that Airbus would
not have been able to capture any of the A380 Impedance Deliveries during the 2011 -2013
Reference Period with deliveries of A380 aircraft.
Causation of VLA impedance
6.426. We next turn to examine the Appellate Body's analysis of whether the "product effects" of
A380 LA/MSF caused impedance in the six geographic markets. In this context, we find nothing in
the Appellate Body's analysis indicating that the A380 aircraft would have been available for order
or delivery in the 2011 -2013 Reference Period in the counterfactual. Indeed, the Appellate Body
never stated that the A380 aircraft would have been available f or delivery in the 2011 -2013
Reference Period, or at any time beforehand. Relatedly, the Appellate Body never explained how
A380 LA/MSF could have been a "genuine and substantial" cause of impedance in the 2011 -2013

615 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 5.729. (fn omitted; emphasis added) We note that other reasons that the European Union alleged led
Transaero and Emirates to order the A380 aircraft over the 747-8I aircraft appeared to be HSBI. (Panel Report,
EC and certain member States – Large Civil Aircraft (Article 21.5 – US), fn 3275 (citing HSBI versions of
submissions and HSBI exhibits when discussing the European Union's arguments in this context)).
616 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 6.37.

Reference Period if the A380 aircraft would have been available for delivery during that same time-
period in the absence of A380 LA/MSF. Moreover, the Appellate Body affirmed that even the low
number of A380 Impedance Deliveries present in Australia (a single A380 delivery), China (four
A380 deliveries), Korea (three A380 deliveries), and Singapore (five A380 deliveries) during the
2011-2013 Reference Period could support findings of impedance in each such geographic market.617
6.427. Additionally, we note the manner in which the Appellate Body rejected the European Union's
argument that the compliance panel improperly dismissed the European Union's alleged non -
attribution factor regarding delays in the 747-8I programme. Before looking at the Appellate Body's
rejection of the European Union's argument, we need to recall the following statement by the
compliance panel in the context of assessing the validity of the United States' impedance claims in
the VLA product market:
[W]e do not see the delays in the development and production of … the 747-8 to mean
that, in the absence of the "product" effects of the LA/MSF subsidies, Boeing or the
United States' LCA industry would not have won the orders corresponding to the
deliveries made in the … market [ ] for … very large LCA. The fact that Airbus would not
have existed in the absence of the LA/MSF subsidies means that customers that could
not wait for the 787 and 747-8 to become available would have turned to either Boeing's
other twin-aisle LCA, the 767 and the 777.[3326]
3326 We recall that … there is evidence that the larger versions of the 777 may also at times
challenge for sales in the market for very large LCA. (footnote original)618
6.428. On appeal, the European Union argued that the compliance panel wrongly rejected its
argument. As noted above, the Appellate Body rejected the European Union's appeal, reasoning as
follows:
We recall that the Panel did not see these delays "to mean that, in the absence of the
'product' effects of the LA/MSF subsidies, Boeing or the United States' LCA industry
would not have won the orders corresponding to the deliveries made in the different
markets" for VLA. We also note the Panel's observation that "there is evidence that the
larger versions of the 777 may also at times challenge for sales in the market for [VLA]".
Thus, the Panel's reasoning that, in the absence of Airbus' VLA offerings, customers
would have turned to other Boeing LCA products – for instance, the larger versions of
the 777 – appears to us to be reasonable . Consequently, we see no reason to disturb
the Panel's finding that this non-attribution factor would not be capable of diluting the
genuine and substantial relationship of cause and effect between LA/MSF subsidies and
the alleged market phenomena.619
6.429. We note, therefore, that the Appellate Body affirmed reasoning by the compliance panel that
expressly included an assumption regarding the "absence of Airbus' VLA offerings". Such an
affirmation would have been incongruous if that portion of the compliance panel's reasoning were
false. Indeed, in this passa ge, the Appellate Body affirmed that "customers that could not wait for
the … 747 -8 to become available would have turned to … Boeing's other twin -aisle LCA", and in

617 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 5.739. See also United States' comments on the European Union's response to Arbitrator question
No. 113, paras. 221-222 (noting the single VLA delivery into the Australian market during the Reference Period
and stating, correctly, that "[t]here were no other facts or evidence analysis specific to the Australia market.
And yet, there was a finding of impedance"). (fn omitted)
618 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.1816
and fn 3326.
619 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),

particular the 777-300ER aircraft.620 It was left unexplained, however, why, if the A380 aircraft had
been in the market in the counterfactual such that it could have competed for orders that resulted
in the A380 Impedance Deliveries, and if customers would have opted away from the 747-8I, which
is a VLA, due to production delays, customers would have opted for a twin -aisle LCA that is not a
VLA (i.e. the 777 -300ER model) rather than simply purchased Airbus VLA (i.e. the A380 model)
instead.621 Based on the totality of the Appellate Body's report, we consider the most reasonable
explanation to be th at the A380 aircraft was assumed to be unavailable, thus essentially forcing
customers to accept an LCA that only "at times" competed with VLA for sales, i.e. the twin-aisle 777-
300ER aircraft.
6.430. Finally, we underline that, in its VLA impedance analysis, the Appellate Body affirmed the
VLA impedance findings of the compliance panel, which were predicated on the market absence of
the A380 aircraft, and provided no alternative reasoning as to how A380 LA/MSF caused VLA
impedance in the 2011-2013 Reference Period.622
6.431. These aspects of the Appellate Body's VLA impedance analysis in the compliance proceeding
in our view support the conclusion that Airbus would not have been able to deliver the A380 aircraft
by the end of the 2011 -2013 Reference Period, and thus that Airbus would not have been able to
capture any of the A380 Impedance Deliveries during the 2011-2013 Reference Period with deliveries
of A380 aircraft.
6.432. At this point, we recall the European Union's argument that the Appellate Body's report could
be interpreted to mean that the A380 aircraft would have been available for both offer and delivery
in the 2011-2013 Reference Period in the counterfactual, but still lost the Transaero and Emirates
orders and failed to make at least some of the A380 Impedance Deliveries for other reasons, i.e.
disadvantages related to delivery schedules or less well-established market position or maturity. In
the light of the above discussions, we must reject these arguments. As explained above, the
Appellate Body's findings indicate to us with sufficient clarity that Airbus would not have been able
to offer or deliver the A380 aircraft during the 2011-2013 Reference Period.623
Effects of A380 and A350XWB LA/MSF on the A350XWB aircraft
6.433. Next, we examine the Appellate Body's analysis regarding the effects of A380 and A350XWB
LA/MSF on the A350XWB programme and whether those effects caused lost sales in the twin -aisle
product market in the 2011 -2013 Reference Period. The impedance findings at issue concern
deliveries of A380 aircraft , not A350XWB aircraft. However, the Appellate Body's analyses on the
A350XWB aircraft may be relevant for our purposes here. We recall in this regard that (a) the

620 We consider that the phrase "larger versions of the 777" aircraft in footnote 3326 of the compliance
panel's report, quoted further above, meant primarily the 777-300ER model in the light of the fact that the
777-300ER was the largest 777 model in the twin-aisle product market in the compliance proceedings, and
considering footnote 2415 of the compliance panel's report according to which "[i]t is asserted in the Mourey
Statement that the 747-8 may sometimes face competition from the smaller, but more 'efficient', 777-300ER,
as well as the A350XWB-1000". (Panel Report, EC and certain member States – Large Civil Aircraft (Article
21.5 – US), fn 2415).
621 We recognize that, for example, if customers only became aware of the delays in the 747-8I
programme after having ordered the aircraft, they might have seen it as beneficial to convert those orders into
another Boeing model, e.g. the 777-300ER model, rather than cancelling the order and purchasing Airbus VLA
instead. However, such reasoning is absent from the causation findings vis-à-vis the A380 aircraft in the
compliance proceedings, and thus we cannot conclude that such reasoning played any role in such findings.
622 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
paras. 6.41 and 6.42.
623 The European Union also asserts that in the compliance proceeding certain A380 orders and
deliveries in the 2011-2013 Reference Period were not found to represent lost sales or impedance. (European
Union's responses to Arbitrator question No. 57, para. 104 and fn 158, and No. 113, para. 256). The European
Union thus appears to argue that this means that the Appellate Body found that in the counterfactual the A380
aircraft was in the market in the 2011-2013 Reference Period. (European Union's responses to Arbitrator
question No. 127, para. 290, and No. 257, para. 257). We disagree. To the extent that there were additional
A380 orders and deliveries during the 2011-2013 Reference Period not subject to adverse-effects findings in
the compliance proceeding, we note that the United States did not challenge such orders and deliveries. They
are thus subject to no findings at all. Insofar as such additional orders and/or deliveries exist, they are
therefore not material in establishing the market presence of the A380 aircraft in the counterfactual.

A350XWB aircraft was launched in 2006, whereas the A380 aircraft was launched in 2000 624, and
(b) the A350XWB aircraft incorporated a significant range of technologies that were developed, inter
alia, as part of Airbus' experience with the A380 aircraft. 625 In the light of this, we consider it a
reasonable assumption that, in the counterfactual, had Airbus launched and brought to market the
A350XWB aircraft, Airbus would likely have done so after Airbus launched and at least begun post-
launch development of the A380 aircraft. 626 Thus, insofar as the Appellate Body found that, in the
counterfactual, the A350XWB aircraft would have been launched and available for order 627 by the
end of the 2011 -2013 Reference Period, such a finding could indirectly support the inference that
the A380 aircraft would have been available for order and/or delivery in the 2011 -2013 Reference
Period as well, as its development would likely have been further along than the development of the
A350XWB aircraft at that time. In this way, examining the effects of LA/MSF on the A350XWB aircraft
in the counterfactual may indirectly inform our understanding of the effects of LA/MSF on the A380
aircraft.628
6.434. In the compliance proceeding, the panel found that, in the absence of the "product effect"
of all LA/MSF (arising from the "indirect" effects of pre -A350XWB LA/MSF and "direct" effects of
A350XWB LA/MSF), the A350XWB aircraft would not have existed before or during the 2011 -2013
Reference Period.629 The Appellate Body, however, found that only the effects of A380 and A350XWB
LA/MSF could be considered vis-à-vis the A350XWB programme in the counterfactual, and thus had
to perform a new analysis aimed to "ascertain[] whether the Panel's analysis regarding the 'product
effects' of [A380 and A350XWB LA/MSF alone] support a finding of a genuine and substantial causal
relationship between these subsi dies … and the market phenomena identified in the post -
implementation period" in the twin-aisle product market.630
6.435. The Appellate Body confirmed the compliance panel's findings that (a) A350XWB LA/MSF
had "direct effects" on the A350XWB programme, and in particular that "'without A350XWB LA/MSF,
the Airbus company that actually existed [in 2006-2010] could have pursued such a programme
only by a narrow margin, with a high likelihood that it would, to some degree, have had to make
certain compromises with resp ect to the pace of the programme and/or the features of the
aircraft'"631, and (b) A380 LA/MSF had "indirect effects" on the A350XWB programme, and in
particular the "A350XWB significantly benefitted from the 'learning effects' of the A380" and that
"A380 LA/MSF had 'financial effects' on Airbus' ability to launch the A350XWB as and when it did".632
The Appellate Body concluded that, "without the aggregated 'product effects' of the existing LA/MSF
subsidies for the A380 and A350XWB programmes, Airbus would not have been able to launch the

624 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
fn 1715.
625 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 5.637. See also Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5–
US), para. 6.1747 (noting that "the A350XWB programme significantly benefitted from Learning effects arising
from previous, subsidized Airbus LCA programmes, especially (but not only) the A380 programme").
626 The European Union's arguments are consistent with this basic assumption. (European Union's
response to Arbitrator question No. 101, paras. 96-97 (arguing that both the A380 and A350XWB models
would have been launched in the counterfactual shortly after their respective actual launch dates)).
627 The first A350XWB aircraft was not delivered until 2014. (Updated Ascend Database, (Exhibit EU-
79)). Thus, in the counterfactual we focus on whether the A350XWB aircraft would have been available for
order, and not delivery, in the 2011-2013 Reference Period.
628 We therefore note that in this context, we analyse the Appellate Body's findings regarding the effects
of A380 and A350XWB LA/MSF in their own right, rather than in the light of the Appellate Body's findings
regarding: (a) the effects of A380 LA/MSF on the A380 programme, (b) causation of VLA lost sales, or (c)
causation of VLA impedance.
629 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 7.1(d)(xiii).
630 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 5.599.
631 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 5.632 (quoting Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 6.1717). (emphases original)
632 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
paras. 5.637-5.638.

A350XWB as and when it did". 633 In other words, A380 and A350XWB LA/MSF "enabled Airbus to
proceed with the timely launch and development of the A350XWB" aircraft, an event that was "crucial
to renew and sustain Airbus' competitiveness in the post-implementation period".634
6.436. The Appellate Body never stated when the A350XWB aircraft would have been launched and
brought to market in the counterfactual. Certain of the Appellate Body's characterizations of the
"product effects" of LA/MSF appear to leave open the possibility that the A350XWB aircraft could
have been launched and brought to market by the 2011-2013 Reference Period. We therefore recall
that although the A350XWB programme had been launched in 2006, the first delivery had not yet
occurred by year-end 2013. Thus, even if Airbus did not have, in the counterfactual, the ability to
proceed "with the timely launch and development of the A350XWB" aircraft, this does not mean that
Airbus could not have had the counterfactual ability to do so at a later point in time, such that orders
of A350XWB aircraft could still have occurred in the 2011-2013 Reference Period. We thus consider
that the Appellate Body's findings regarding the effects of A380 and A350XWB LA/MSF on the
A350XWB programme do not establish whether the A350XWB aircraft would have been launched
by, and available for order in, the 2011-2013 Reference Period.
Causation of twin-aisle lost sales
6.437. We now turn to examine the Appellate Body's analysis of whether the "product effects" of
LA/MSF caused lost sales, secured by the A350XWB aircraft, in the twin-aisle product market during
the 2011 -2013 Reference Period. 635 In our view, this analysis will inform our understanding of
whether the A350XWB aircraft would have been present in the market and available for order in the
2011-2013 Reference Period. 636 We n ote in particular four aspects of this analysis. First, the
Appellate Body did not state that the A350XWB aircraft would have been launched or available for
order by any particular time. Relatedly, the Appellate Body never explained how LA/MSF could have
been a "genuine and substantial" cause of lost sales in the twin -aisle market in the 2011 -2013
Reference Period if the A350XWB aircraft would have been available for offer in the 2011 -2013
Reference Period in the absence of A380 and A350XWB LA/MSF.637
6.438. Second, the Appellate Body stated that "in the absence of the [A380 and A350XWB] LA/MSF
subsidies … Airbus would not have been able to offer the A350XWB at the time it did and with the
features that the A350XWB contained . In other words, in the absence of these subsidies, Airbus
would not have been able to be 'present in all [three] of the relevant sales campaigns as exactly the
same competitor selling identical aircraft' in the post-implementation period".638 We take these as
direct statements that Airbus could no t have offered the A350XWB aircraft in the 2011 -2013
Reference Period.

633 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 5.639. These "aggregated" effects consisted of the "direct" effects of A350XWB LA/MSF and the "indirect"
effects of A380 LA/MSF. The Appellate Body also stated elsewhere in its report that in the absence of A380 and
A350XWB LA/MSF, Airbus "would have been unable to launch the A350XWB or an A350XWB-type aircraft by
the end of 2006". (Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 –
US), para. 5.714).
634 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 5.647.
635 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
section 5.6.4.6.3.1. The lost sales in the twin-aisle product market were the 2012 Cathay Pacific Airways order
for ten A350XWB-1000 aircraft, and the 2013 orders by Singapore Airways and United Airlines for 30
A350XWB-900 aircraft and ten A350XWB-1000 aircraft, respectively.
636 See paragraph 6.433 above.
637 We note, however, that certain of the Appellate Body's statements suggest that the Appellate Body
considered that the timely launch of the A350XWB aircraft, rather than the market presence of the A350XWB
aircraft in the 2011-2013 Reference Period, was in some way responsible for the competitiveness of the
A350XWB in the 2011-2013 Reference Period. (Appellate Body Report, EC and certain member States – Large
Civil Aircraft (Article 21.5 – US), paras. 5.631 (stating that "the Panel considered that an alternative aircraft
with fewer features and/or offered later in time would not have been as competitive as a timely launched
A350XWB") and 5.632 (stating that "we agree that the Panel considered that the features and timing of the
A350XWB were crucial for its competitiveness and commercial success")). (emphasis added)
638 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 5.709. (emphases added)

6.439. Third, we note the manner in which the Appellate Body rejected the European Union's
argument that the compliance panel improperly dismissed certain of the European Union's alleged
non-attribution factors. The Appellate Body stated that "we share the Panel's view that most of the
alleged non-attribution factors with regard to lost sales in the twin -aisle LCA market … including
Airbus' pre-existing commonality advantages and other product -related advantages over Boeing,
are not factors 'unrelated' to the LA/MSF subsidies existing in the post -implementation period"639,
and "agree with the Panel's assessment of the non-attribution factor concerning Singapore Airlines'
wish to split orders betwe en Boeing and Airbus. Indeed, the fact that Airbus was in a position to
offer the A350XWB in a timely manner was, in itself, largely due to LA/MSF subsidies and their effect
on the pace of the programme and the features of the A350XWB".640
6.440. Finally, we underline that, in its twin -aisle lost-sales analysis, the Appellate Body affirmed
the twin-aisle lost-sales findings of the compliance panel, which were predicated on the market
absence of the A350XWB aircraft, and the Appellate Body provided no alternative re asoning as to
how LA/MSF caused twin-aisle lost sales in the 2011-2013 Reference Period.641
6.441. The Appellate Body's findings with respect to the effects of LA/MSF on the A350XWB
programme and whether those effects caused lost sales in the twin -aisle market in the 2011-2013
Reference Period do not indicate that the A350XWB aircraft would have been launched or availabl e
for order by the end of the 2011 -2013 Reference Period. Indeed, the Appellate Body never stated
when the A350XWB aircraft would have been launched in the counterfactual, and never clarified
how, if the A350XWB aircraft had been available for order in the 2011-2013 Reference Period, A380
and A350XWB LA/MSF could have caused the lost sales in the twin -aisle LCA market. Moreover,
certain other statements by the Appellate Body, in our view, establish that the A350XWB aircraft
would not have been present in th e market in the 2011 -2013 Reference Period. In particular, we
note that the Appellate Body (a) stated that, in the counterfactual, Airbus could not have been able
to offer an aircraft "identical" to the A350XWB aircraft in the sales campaigns that resulted in the
lost sales in the twin -aisle market during the 2011 -2013 Reference Period , (b) found that the
compliance panel properly rejected alleged "product-related advantages" as non-attribution factors
because they were in fact attributable to LA/MSF subsid ies, (c) directly implied that one of the
reasons why Airbus was able to win the split order from Singapore Airlines in 2013 was the fact that
LA/MSF subsidies put "Airbus … in a position to offer the A350XWB in a timely manner" , and (d)
stated that "the fact that Airbus was in a position to offer the A350XWB in a timely manner was, in
itself, largely due to LA/MSF subsidies and their effect on the pace of the programme and the features
of the A350XWB". 642 We consider that these statements would be incongruou s if the A350XWB
aircraft would have been available for order in the 2011-2013 Reference Period in the counterfactual.
6.442. Thus, the Appellate Body's analyses involving the A350XWB aircraft examined above do not
suggest to us that the A380 aircraft would have been available for either order or delivery in the
2011-2013 Reference Period.
Conclusion
6.443. In the light of the foregoing, we consider that the Appellate Body's analyses concerning the
effects of LA/MSF on the A380 and A350XWB programmes, and whether such effects caused relevant
adverse effects in the 2011-2013 Reference Period, establish that Airbus would not have been able
to offer or deliver the A380 aircraft during the 2011 -2013 Reference Period. If this were not the
case, multiple aspects of the Appellate Body's reasoning would in our view become incongruous.

639 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 5.714. (emphasis added) We note that the Appellate Body did not specify which alleged non-attribution
factors examined by the compliance panel were, in the Appellate Body's view, unrelated to A380 and A350XWB
LA/MSF. However, as discussed above, other aspects of the Appellate Body's analysis appear to clarify that the
A350XWB aircraft, as it existed, would not have been available for order in the 2011-2013 Reference Period.
640 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 5.714. (emphasis added)
641 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 6.31.
642 Appellate Body Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
para. 5.714.

Competition from twin-aisle LCA, leasing companies, and the second-hand market
6.444. The European Union argues that, in the counterfactual, the LCA customers that received the
A380 Impedance Deliveries mi ght not have ordered Boeing LCA, such that Boeing would not have
captured all the A380 Impedance Deliveries with deliveries of new Boeing LCA. Instead, the European
Union argues that in the counterfactual these customers had a variety of options, including (a) to
purchase new Airbus or Boeing twin-aisle LCA, (b) lease LCA from leasing companies, and/or (c) buy
LCA on the second-hand market.643
6.445. The United States generally asserts that the European Union's arguments are at odds with
the findings of the Appellat e Body in the compliance proceedings, in particular with respect to
findings regarding the market absence of the A380 aircraft in the 2011 -2013 Reference Period and
the substitutability between the A380 and 747-8I aircraft, which were the only two LCA available for
delivery in the VLA product market in the 2011 -2013 Reference Period. The United States also
asserts that even if in the counterfactual VLA customers that received the A380 Impedance Deliveries
would have opted for twin-aisle LCA they would have chosen Boeing, not Airbus, twin-aisle LCA.644
6.446. The Arbitrator notes that the LCA customers that received the A380 Impedance Deliveries
purchased new and technologically advanced VLA, i.e. the A380 aircraft. In the absence of
compelling evidence to the contrary, we find it reasonable to assume that, in the counterfactual, the
same customers would have been interested in purchasing (rather than leasing) new (rather than
second-hand)645 and technologically advanced VLA (rather than twin-aisle LCA).646 The only other
such VLA that was available for delivery in the 2011-2013 Reference Period was the 747-8I aircraft.
We discern nothing in the adopted findings of this dispute, or in the arguments of the parties in this
proceeding, that indicates that the customers that received the A380 Impedance Deliveries would
have opted for anything other than 747 -8I deliveries during the 2011 -2013 Reference Period.
Indeed, a contrary conclusion would appear at odds with the findings in the compliance proceeding
that the 747-8I and A380 aircraft were the only two LCA in the VLA product market in the 2011 -
2013 Reference Period.647

643 European Union's written submission, para. 200; responses to Arbitrator question No. 3,
paras. 87-88, No. 4, No. 5, paras. 126, 132, and 134, No. 7, paras. 156 and 158, No. 10, paras. 204-205,
and No. 151; and comments on the United States' responses to Arbitrator question No. 114, para. 185, and
No. 127, para. 291.
644 United States' written submission, section V.A.2; and comments on the European Union's response
645 We note that before the original panel, the European Union argued "that in a significant number of
sales campaigns, competition is with a potential purchase of used LCA or a lease, rather than with the other
manufacturer. [Thus] …, to the extent that Boeing is not involved in these sales, an Airbus 'win' cannot be
considered a 'loss' to Boeing". (Panel Report, EC and certain member States – Large Civil Aircraft,
para. 7.1723). The original panel rejected this argument, instead finding that "[w]hile it may well be that there
is not clear head-to-head competition for each and every sale of LCA, it is apparent to us that, with only two
manufacturers in the market, there is overall competition between Boeing and Airbus for all sales of LCA".
(Panel Report, EC and certain member States – Large Civil Aircraft, para. 7.1724. See also Panel Report,
EC and certain member States – Large Civil Aircraft, para. 7.1722 (elaborating on the pervasive competition
between Airbus and Boeing for LCA sales)).
646 We recall that twin-aisle LCA and VLA comprise different product markets. Further, we recall that in
the compliance proceedings "the European Union did not argue … that the 747-8I and the 777-300ER and the
A350XWB-1000 should have been placed into the same product market". (Appellate Body Report, EC and
certain member States – Large Civil Aircraft (Article 21.5 – US), para. 5.544).
647 The Appellate Body explained that "while the three product markets the United States had chosen to
rely upon [(i.e. the single-aisle, twin-aisle, and VLA)] to bring its complaint did 'not exhaustively capture how
competition [took] place between aircraft in the LCA sector at all times', [the compliance panel] was satisfied
that 'they represent[ed] the three segments within which most competitive interactions between the relevant
aircraft [would] commonly take place'". (Appellate Body Report, EC and certain member States – Large Civil
Aircraft (Article 21.5 – US), para. 5.544 (quoting Panel Report, EC and certain member States – Large Civil
Aircraft (Article 21.5 – US), para. 6.1416)). (emphasis added by Appellate Body) We further recall our
conclusion above that the A350XWB aircraft would not have been available for order or delivery in the
2011-2013 Reference Period. We further discern nothing in the adopted findings of this dispute or the
arguments of the parties in this proceeding materially indicating that there would have been any other models
of VLA in the 2011-2013 Reference Period in the counterfactual.

6.447. The European Union offers an article that in its view supports the position that, absent the
A380 aircraft, Airbus would have captured some of the A380 Impedance Deliveries with twin -aisle
LCA such as the A330 aircraft. We note that this exhibit, in relevant part, purports to demonstrate
the impact that the introduction of the A380 aircraft would have on demand for other types of LCA
using data from 1969 -1998.648 The 747-8I aircraft was not available for either order or delivery
during the 1969 -1998 time-period and the exhibit does not consider the impact that the market
presence of the 747-8I aircraft would have had on the analysis contained in the exhibit. Thus, the
conditions of competition upon which the exhibit's analysis are based significantly differ from those
in the years leading up to and during the 2011 -2013 Reference Period in the counterfactual. We
therefore consider that this article cannot properly be used to determine to what extent customers
would have demanded deliveries of A330 instead of 747 -8I aircraft in the 2011 -2013 Reference
Period had the A380 aircraft been absent from the market before and during that time.649
Aggressive bidding by Airbus in certain sales campaigns
6.448. The European Union argues that, in the counterfactual, Airbus may still have captured some
of the A380 Impedance Deliveries through more aggressive bidding in certain key sales campaigns.
In other words, "[t]o incentivise prospective customers and to prevent them from switching over to
Boeing, Airbus might have been tempted to offer steeper discounts in that counterfactual" 650, and
with such a strategy by Airbus, "in a world in which A380 deliveries were delayed, airlines may well
have contemplated purchasing two A330s and using them in higher frequencies in order to replace
a single A380".651
6.449. The United States generally responds that this European Union argument is among those
that essentially seek to "negate in part or in full" the findings regarding impedance from the
compliance proceedings.652
6.450. The Arbitrator notes that the record reflects that Boeing and Airbu s are generally in strong
competition in the global LCA marketplace. Nevertheless, there is no evidence or findings that we
discern to provide a basis upon which to assume that Airbus would have captured any of the A380
Impedance Deliveries via aggressive bidding of LCA in the counterfactual. We recall that the A380
and 747-8I aircraft were the only LCA available for either order or delivery in the VLA product market
in the 2011-2013 Reference Period, and that we have concluded that in the counterfactual the A380
aircraft would not have been available for either order or delivery in the 2011-2013 Reference Period.
Also, if it were reasonable to assume that Airbus would have bid more aggressively in certain relevant
sales campaigns, it would appear equally re asonable to assume that Boeing would likewise have
(had to) bid more aggressively in the same sales campaigns, and could thus still have won the sales.
As concerns the European Union's assertion that airlines might have purchased A330 aircraft rather
than A380 aircraft, we refer to our considerations in the immediately preceding section. For all these
reasons, we reject the European Union's position on the grounds that it is speculative and
unsupported by material evidence.
Airbus' and Boeing's costs, prices, and deliveries
6.451. The European Union argues that in order to determine the degree of impedance in the 2011-
2013 Reference Period, the Arbitrator would need to consider the economic mechanisms through
which the LA/MSF subsidies at issue affected Airbus' (an d Boeing's) production costs, prices, and
delivery schedules of VLA and how these same parameters would have been affected in a
counterfactual involving withdrawal of these subsidies. According to the European Union, for
example, in the absence of the A380 LA/MSF, if Boeing had made additional sales and deliveries of

648 Irwin, Douglas A., Pavcnik, Nina, 2004. "Airbus versus Boeing revisited: international competition in
the aircraft market", Journal of International Economics, Elsevier, vol. 64(2): 223-245, (Exhibit EU-138),
p. 224.
649 We further recall that, in the compliance proceedings, the Appellate Body confirmed that the A380
and 747-8I aircraft are "sufficiently substitutable". There is no such finding on the record regarding the degree
of substitutability between the A330 and the 747-8I aircraft.
650 European Union's response to Arbitrator question No. 84, para. 307.
651 European Union's response to Arbitrator question No. 84, para. 305. See also European Union's
88, para. 326; and comments on the United States' response to Arbitrator question No. 130, para. 308.

747-8I aircraft in the counterfactual, Boeing would have brought down prices via the accumulation
of additional "learning-curve effects", i.e. Boeing would have become more efficient and shared (or
would have been forced to share) its cost savings at least in part with sophisticated customers
through lower prices. Also, the European Union argues that if in the counterfactual Boeing had been
in a monopoly position in the VLA product market, it would have had incentives to raise prices and/or
restrict supply of 747-8I aircraft to maximize profits.653
6.452. The United States responds that the European Union's argument regarding counterfactual
monopoly pricing by Boeing is a vague and generalized assertion, unsupported by evidence, and
does not account for the conditions of competition that would prevail in the VLA product market
absent the effects of LA/MSF subsidies. In the United States' view, the evidence on the record shows
that, in the counterfactual, Boeing would not have faced incentives to decrease the production of
747-8I aircraft or raise prices to an extent that customers would have opted out of buying that
aircraft. Moreover, the United States asserts that the historic production rates and prices of the 747-
400 aircraft shows that when the 747 aircraft family did not face competition from the A380 aircraft,
Boeing "priced and produced the 747 to meet customer demand [and] did not choke off demand in
an attempt to reap unusually high profits on a smaller number of sales".654 The United States further
asserts that the adopted findings in this dispute nowhere suggest that LA/MSF subsidies affected
Boeing's prices. Finally, the United States argues that, even assuming that Boeing would have raised
prices in response to its monopoly position in the VLA product market in the counterfactual, the
European Union would further have to demonstrate that the revenue loss associated with decreased
sales exceeded the revenue gained by increased prices, which the European Union has not done.655
6.453. The Arbitrator discerns no material quantitative or qualitative evidence on the record that
can be used to reasonably predict how any changes in Airbus' and/or Boeing's costs or prices would
have ultimately affected Boeing's or A irbus' LCA deliveries in the counterfactual. Indeed, we recall
that the LCA marketplace is characterized by complex dynamics of supply and demand. Moreover,
as noted by the European Union, Boeing would not only have faced incentives to increase 747 -8I
aircraft prices in the counterfactual (due to theoretical monopolistic behaviour), but there are
reasons to consider that Boeing would have, at the same time in the counterfactual, faced pressures
to increase production to satisfy the higher demand, which would likely have reduced the costs and
possibly the prices of 747-8I aircraft (due to pressures to share the lower costs with sophisticated
customers that would have been aware of Boeing's lower costs). We note that such lower costs
would likely have been realized because, as described by the European Union, "the more [LCA] units
that are produced [by Boeing], the lower the recurring costs per unit".656 Even assuming the validity
of both propositions, we discern nothing on the record indicating how such competing pressures
would have played out. We thus consider that any conclusions regarding the resulting net effect of
these incentives and pressures identified by the European Union would be speculative.
Foregone "learning-by-doing efficiencies"
6.454. We note the European Union's statement that any impedance analysis would need to "factor
in Airbus' actions in the VLA market in the absence of the MSF subsidies at issue, including foregone
learning-by-doing efficiencies".657 As this argument is raised vis-à-vis "Airbus' actions", we interpret
the phrase "foregone learning-by-doing efficiencies" as meaning that Airbus would have sold fewer

653 European Union's written submission, paras. 200 and 241-242; and responses to Arbitrator question
No. 65, paras. 219-223, and No. 113, paras. 262-263. The European Union also argues that the Arbitrator
would need to consider "Airbus' actions in the VLA market in the absence of the MSF subsidies at issue".
(European Union's written submission, para. 200). The European Union does not specify what those actions
would have been, other than those already discussed in this section. We thus do not consider this argument
further.
654 Boeing E-mail regarding Question 113, (Exhibit USA-63 (BCI)).
655 See United States' response to Arbitrator question No. 113, para. 45; comments on the European
Union's responses to Arbitrator Question No. 113, paras. 214-215, No. 151, para. 272, fn 373 (noting that the
original panel and Appellate Body reports affirmatively found that it could not be concluded that the
United States had demonstrated that challenged subsidies caused significant price suppression and price
depression of United States LCA (citing Panel Report, EC and certain member States – Large Civil Aircraft,
para. 7.1996)) and fn 374.
656 European Union's written submission, para. 241 (citing Panel Report, EC and certain member
States – Large Civil Aircraft, para. 7.1936 and fn 5643 (discussing, inter alia, how production of an increased
number of LCA leads to "economies of scope and scale")).
657 European Union's written submission, para. 200.

LCA in the counterfactual (as Boeing would have won the lost sales and not suffered impedance),
with the consequence that Airbus would not have realized the "learning" effects associated with
producing as many LCA as it did in reality. 658 The European Union has not explained how th ese
dynamics would have resulted in Boeing realizing fewer deliveries in the six geographic markets in
the counterfactual. It is not readily apparent to us how this could have been the case. We therefore
reject the European Union's argument as unsubstantiated by argument or evidence.
Customers deferring LCA purchases
6.455. We note the European Union's argument that, in the absence of the A380 aircraft, potential
VLA customers would have "simply waited for the A380 launch", or, alternatively stated, "deferred
purchases", rather than purchase Boeing LCA.659 We recall our earlier finding that the A380 aircraft
would not have been launched or available for offer before the end of the 2011 -2013 Reference
Period. We further recall that any additional counterfactual deliveries that Boeing would have made
in the six geographic markets in the counterfactual would have been the result of earlier orders. We
see no basis upon which to assume that LCA customers would have had any expectation of an A380
launch at any time before the 2011-2013 Reference Period. Thus, we discern no basis upon which
to conclude that customers who were in the market for VLA before 1 December 2011, and who
demonstrated a desire to have technologically advanced VLA delivered during the 2011 -2013
Reference Period, would "simply … wait" or defer purchases of VLA in the counterfactual until the
A380 aircraft was launched. This is particularly so since another VLA, i.e. the 747 -8I aircraft, was
available for order before the 2011 -2013 Reference Period such that it would have been available
for delivery in the 2011-2013 Reference Period. We therefore reject the European Union's argument
as speculative and unsupported by material evidence.
Different customer preferences
6.456. The European Union generally asserts that cu stomer preferences for LCA would have been
different in the counterfactual such that it is unreasonable to assume that Boeing would have
captured all the A380 Impedance Deliveries with 747-8I deliveries.660
6.457. The Arbitrator notes that the record reflects that customers' demand for particular LCA at a
given time is very complex and entails considerations that are subjective, idiosyncratic, and
containing unquantifiable judgments.661 We therefore do not exclude the possibility that customer
demand preferences would have been different in some way in the counterfactual. However, there
are no findings, nor is there evidence on the record, that provides a basis upon which to reasonably
assume that any customer that received the A380 Impedance Deliveries would have had different
preferences in the counterfactual, such that it would not have purchased VLA 662 and not had them
delivered during the 2011-2013 Reference Period.663 We thus reject the European Union's position
as speculative and unsupported by material evidence.
6.3.4.4.2.3 Conclusion
6.458. In the light of the foregoing, we consider that the United States' assumption that Boeing
would have replaced all of the A380 Impedance Deliveries with deliveries of an equal number of
747-8I aircraft within the 2011 -2013 Reference Period is reason able in the light of the adopted
findings of this dispute, and the evidence and arguments offered by the parties. In particular, we
note that this conclusion takes into account the fact that (a) the relevant customers desired a

658 Insofar as the European Union uses this phrase with reference to how changes in "learning effects" in
the counterfactual might have influenced Boeing's prices, this argument is addressed in paragraph 6.453 and
footnote 656 above.
659 European Union's written submission, para. 200; and response to Arbitrator question No. 64,
para. 212.
660 European Union's written submission, para. 200; and responses to Arbitrator question No. 3,
para. 89, and No. 5.
661 See, e.g. Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US),
paras. 6.1185-6.1189 and 6.1216-6.1223.
662 We recall that we have found above that the A380 aircraft would not have been available for delivery
in the 2011-2013 Reference Period.
663 Indeed, if it were reasonable to assume that customers' preferences would have been different, it
would seem just as reasonable to assume that different customers' preferences would have led them to buy
more Boeing VLA than they would have bought in the counterfactual.

confirmed number of A380 air craft during this time -period (evidenced by the A380 Impedance
Deliveries), (b) Boeing would have had the means with which to replace all such deliveries with
deliveries of 747-8I aircraft in the counterfactual, and (c) the 747-8I and A380 aircraft were the only
two VLA available for delivery in the 2011 -2013 Reference Period. As discussed above, the factors
determining LCA supply and demand are complex, often involving unquantifiable factors. However,
we discern no reasonable basis upon which to assume tha t the counterfactual number and general
timing of relevant counterfactual 747-8I deliveries would have been different from the number and
general timing of the A380 Impedance Deliveries. In fact, the European Union offers no alternative
number Boeing LCA that would have been counterfactually delivered to the six geographic markets
at issue during the 2011-2013 Reference Period.
6.459. At this point, we revert to the European Union's argument that we must use an economic
model to determine how much higher Boeing's LCA deliveries would have been in the counterfactual.
6.460. We believe that in the light of the extensive discussions above, which examine a range of
supply- and demand-side factors, we can conclude that the United States' assumption in this context
is reasonable. This conclusion is based on extensive adopted findings regarding the conditions of
competition in the LCA industry and the effects of LA/MSF, and a significant amount of both
qualitative and quantitative evidence. We also recall that a significant aspec t of those findings was
that the A380 aircraft would not have been available for order or delivery in the years leading up to
and in the 2011 -2013 Reference Period, leaving the 747 -8I aircraft as the only VLA available for
delivery in that time-period. Any other particular number of counterfactual Boeing deliveries within
the 2011-2013 Reference Period in our view finds no sufficient basis in the record.664
6.461. Moreover, the European Union, as the proponent of economic modelling in this proceeding
could have, bu t did not, propose any specific model and offer sufficient supporting evidence
(including regarding the assumptions to be made and parameters to be used), and data with which
to run a model calculation. The European Union chose not to do so, leaving us with the information
on the record upon which to base our decision in this context.
6.462. Additionally, in this very dispute, conclusions regarding complex economic issues concerning
the conditions of competition in the LCA marketplace and the economic effects of c hallenged
subsidies to LCA manufacturers have been reached in the absence of any economic modelling. The
compliance panel and Appellate Body were able to make several critical determinations without the
assistance of any economic modelling: (a) the precise number of orders, representing the lost sales
that the United States LCA industry suffered in the counterfactual665, (b) that the United States LCA
industry's deliveries would have been higher in each of the six relevant geographic markets in the
absence of subsidies, and (c) the relevant product markets, even though the competitive dynamics
between different models of LCA is highly complex.
6.463. Further to this last point, we take special note that the compliance panel rejected a similar
argument by the European Union, i.e. that the United States had to establish the existence of product
markets using quantitative economic evidence. In the compliance panel's view, even if it had had a
significant volume of historic pricing data with which to work (which it did not):
[T]he task of performing a reliable econometric analysis of the demand for LCA products
would face a number of significant methodological and data challenges. These include
deciding how to appropriately model demand for LCA products, which is itself highly
complex and influenced by a multiplicity of factors that are sometimes subjective and
"unquantifiable". When these and other particular characteristics of LCA demand are
considered in the light of the recognized difficulties associated with identifying relevant
product markets made up of differentiated products, it is apparent that producing

664 We note that a one-to-one A380-to-747-8I replacement ratio may, in fact, be conservative. This is so
because the 747-8I aircraft actually has significantly fewer seats than an A380 aircraft on average. (Panel
Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), Table 18 (indicating that the
"typical" number of seats in an A380-800 aircraft was well over 500 seats whereas the 747-8I aircraft has well
under 500 seats)). Thus, it does not seem implausible that a larger number of 747-8I aircraft could have been
needed to fulfil the same customer needs as a smaller number of A380 aircraft. (See United States' comments
on the European Union's response to Arbitrator question No. 113, para. 219 (raising this point)).
665 See paragraph 6.221 above.

accurate and reliable quantitative evidence of t he degree of demand -side substitution
between different LCA products would be a formidable task.666
6.464. We note that according to the panel, as here, "[t]he European Union [did] not venture[] any
suggestions about what such a model might look like. However, one economist who [had]
endeavoured to undertake such analysis has recognized that 'demand for aircraft is very complex,
and estimating the demand for aircraft is a formidable research agenda in itself". 667 We discern no
lesser challenge in our proceeding, i.e. modelling both supply and demand considerations to
determine precise numbers of VLA deliveries in particular geographic product markets in a discrete
period of time and in a counterfactual scenario.
6.465. Finally, we observe that economic models have not been tr eated as a sine qua non of
arbitrations of this sort. As far as we know, no arbitrator has suggested that an economic model
must necessarily be performed. Rather, as we understand the approaches taken by previous
arbitrators, they have depended on the part icular facts and circumstances of a given record,
including the adopted findings by the DSB and the methodologies and arguments that the parties
have put forward in the arbitration proceeding.
6.3.4.4.3 Delivery prices
6.466. In the impedance context, the United States defines the value of each additional
counterfactual Boeing LCA delivery in a given calendar year of the 2011 -2013 Reference Period as
the average net delivery price of all the 747 -8I aircraft actually delivered in that calendar year
expressed in delivery-year US dollar terms. As shown in Equation (9), according to the United States,
the global (worldwide) average per -aircraft delivery price for a given year is calculated by dividing
the sum of all net prices for 747-8I aircraft delivered in that calendar year by the number of 747-8I
aircraft delivered in that year.
𝐴𝑣𝑒𝑟𝑎𝑔𝑒𝐵𝑜𝑒𝑖𝑛𝑔𝑁𝑒𝑡𝑃𝑟𝑖𝑐𝑒 𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦 𝑦𝑒𝑎𝑟 𝑠
𝑖𝑛 𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦 𝑦𝑒𝑎𝑟 𝑠 𝑈𝑆𝐷 =∑
𝐵𝑜𝑒𝑖𝑛𝑔𝑁𝑒𝑡𝑃𝑟𝑖𝑐𝑒 𝐴𝑖𝑟𝑙𝑖𝑛𝑒 𝑗,𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦 𝑦𝑒𝑎𝑟 𝑠
𝑖𝑛 𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦 𝑦𝑒𝑎𝑟 𝑠 𝑈𝑆𝐷
𝑁𝑢𝑚𝑏𝑒𝑟𝑂𝑓𝐴𝑖𝑟𝑐𝑟𝑎𝑓𝑡𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦 𝑦𝑒𝑎𝑟 𝑠𝑗

(9)
where 𝐴𝑣𝑒𝑟𝑎𝑔𝑒𝐵𝑜𝑒𝑖𝑛𝑔𝑁𝑒𝑡𝑃𝑟𝑖𝑐𝑒 𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦 𝑦𝑒𝑎𝑟 𝑠
𝑖𝑛 𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦 𝑦𝑒𝑎𝑟 𝑠 𝑈𝑆𝐷: net delivery price of Boeing 747 -8I model delivered
to airline 𝑗 in month/year 𝑠 and expressed in US dollar
terms of delivery year 𝑠
 𝑁𝑢𝑚𝑏𝑒𝑟𝑂𝑓𝐴𝑖𝑟𝑐𝑟𝑎𝑓𝑡𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦 𝑦𝑒𝑎𝑟 𝑠: number of Boeing 747-8I aircraft delivered in year 𝑠.

6.467. We recall our finding that no relevant additional Boeing counterfactual deliveries of 747 -8I
aircraft could have occurred in December 2011, and thus only counterfactual Boeing deliveries in
the years 2012 and 2013 are relevant to our valuation here.668
6.468. With respect to 2012 and 2013, the United States computes the respective global average
per-aircraft delivery price of Boeing 747 -8I aircraft based on [[***]] of all 747-8I aircraft actually
delivered in 2012 and 2013, res pectively669; these 2012 and 2013 global average per -aircraft net
delivery prices are by construction expressed in 2012 and 2013 US dollar terms, respectively.670 The
United States explains that in both 2012 and 2013 Boeing only made deliveries of 747-8I aircraft to
Lufthansa pursuant to a 2006 order for 20 747 -8I aircraft, which means that these 2012 and 2013

666 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.1205.
667 Panel Report, EC and certain member States – Large Civil Aircraft (Article 21.5 – US), para. 6.1186.
668 In that context, we note that the parties disagree regarding the method for calculating the 2011
average delivery price. (European Union's response to Arbitrator question No. 83 para. 295; comments on the
United States' responses to Arbitrator question No. 139, paras. 424-432, No. 140, para. 433, No. 142,
have found that no additional counterfactual Boeing deliveries would have occurred in 2011, such
disagreements are moot.
669 United States' methodology paper, paras. 86-87.
670 Second Revised 747-8I Global Delivery Prices for 2012 and 2013 (revision to Exhibit USA-26
(HSBI)), (Exhibit USA-103 (HSBI)).

global average per -aircraft net delivery prices actually represent Lufthansa's average per -aircraft
net delivery prices of 747-8I aircraft for those two years.671
6.469. The European Union initially argued that the United States should have based its impedance
calculations on customer- and campaign-specific price information, similar to the approach proposed
by the United States to valuing lost sales.672 However, the European Union subsequently agreed with
the United States that the 2006 Lufthansa order for 20 Boeing 747 -8I aircraft constitutes a
representative, reliable, and robust basis to obtain counterfactual 2012 and 2013 747 -8I delivery
prices.673 The European Un ion further observes that there is no need for the Arbitrator to pursue
any alternative approach.
6.470. The Arbitrator notes that both parties agree that the Arbitrator should base its valuation of
impedance on global average delivery prices calculated on the ba sis of delivery prices for the 2006
Lufthansa order of 20 747-8I aircraft. Those prices could then be used to derive counterfactual 2012
and 2013 747-8I delivery prices. We further recall that the reason why the European Union initially
disagreed with the approach based on average delivery prices was that, based on available
information at that time, the European Union believed that it artificially inflated Boeing's
counterfactual delivery prices. However, after gaining access to more information in the con text of
this proceeding and following the United States' agreement to exclude delivery prices [[***]] from
the 2012 average delivery price, the European Union revised its judgment on this particular point.
6.471. Although there is an argument to be made for using the same (comparator-order) approach
for the valuation of both lost sales and impedance, we consider that there are sound reasons to
adopt a different, global-average-price approach in the impedance context. After a careful review of
the different compara tors proposed by the parties in the impedance context we consider that a
customer- and campaign-specific approach for the valuation of impedance would not have produced
a more accurate estimate of impedance. We recall in this respect that the customer's id entity (the
airline concerned) is our main criterion to select relevant comparator orders. Yet, relatively few
customers to whom the A380 Impedance Deliveries were made also ordered 747 -8I aircraft, and
thus there are very few potential comparator orders p laced by the same airline to choose from. In
those circumstances, using global average prices for actual 747 -8I deliveries in 2012 and 2013
appears to us a reasonable alternative method to estimate the counterfactual delivery prices of
additional 747-8I deliveries in those years.
6.472. In the light of the above, we agree to follow the approach supported by both parties and
thus value impedance using global average delivery prices for the additional counterfactual deliveries
of 747-8I aircraft to the relevant six geographic markets in 2012 and 2013.

671 The European Union initially argued that the United States significantly inflated the 2012 global
average per-aircraft net delivery prices of 747-8I aircraft by including prices for [[***]] aircraft sales.
(European Union's written submission paras. 322-328). The United States, to minimize areas of disagreement
between the parties wherever possible, responded to the European Union's argument by excluding deliveries of
[[***]] models from its calculation of the 2012 global average net delivery price for 747-8I aircraft.
(United States' written submission paras. 247-248).
672 European Union's written submission, para. 312. In response to the European Union's initial
suggestion to use customer- and campaign-specific price information for the valuation of impedance, the
United States identified comparators, including [[***]], and provided the corresponding calculations of the
value of impedance, while arguing that such an approach would not be necessary. (United States' responses to
Arbitrator question No. 153, paras. 4-9, and No. 154, paras. 10-23; comments on the European Union's
response to Arbitrator question No. 158, paras. 11-12; Calculation of Delivery Prices for Comparator Orders,
(Exhibit USA-61 (HSBI)); and Net Price Calculations for Questions 153 and 154(d) Alternative Impedance
Valuations, (Exhibit USA-106 (HSBI))).
The European Union rejected the choice of some of the comparators put forward by the United States
and proposed alternative comparators. (European Union's written submission, paras. 243-246 and 318-320;
and responses to Arbitrator question No. 83, paras. 297-299, and No. 158, paras. 5-10.)
The European Union also rejected the approach taken by the United States for calculating the relevant
delivery prices for impedance. (European Union's responses to Arbitrator question No. 83, paras. 297-299, and
No. 158, para. 9; and comments on the United States' response to Arbitrator question No. 153, para. 9).
673 European Union's responses to Arbitrator question No. 83, para. 295, and No. 158, para. 4; and
comments on the United States' response to Arbitrator question No. 153, para. 5.

6.3.4.4.4 Conclusion
6.473. This concludes our assessment of technical aspects of the United States' methodology for
valuing impedance. As noted in section 6.1 above, we will apply these findings further below in
section 6.4.3 when we calculate the actual value of impedance.
6.4 Calculation of countermeasures commensurate with the adverse effects determined
to exist
In the preceding sections, we have accepted certain aspects of the United States' proposed
methodology but found shortcomings in other aspects requiring adjustments to be made. In section
6.4, we apply those conclusions to calculate the maximum level of An nual Suspension that is
"commensurate with the degree and nature of the adverse effects determined to exist".674 In keeping
with the content of the above sections and our mandate, this section proceeds in five parts. First,
we explain our general methodology. Second, we determine values for lost sales in 2012 and 2013
US dollar terms. Third, we determine values for impedance in 2012 and 2013 US dollar terms.
Fourth, we determine the total annualized value of lost sales and impedance stated in 2013 US dollar
terms in order to determine the maximum level of Annual Suspension. Finally, we determine a level
of countermeasures commensurate with the previously determined annualized value of the adverse
effects determined to exist.
General approach
In section 6.4.1 we describe the approach that we consider best suited to establish the value
of adverse effects determined to exist. In accordance with our finding s made thus far, we measure
the value of the adverse effects determined to exist as the sum of the value of lo st sales and the
value of impedance. We follow a three -step approach to value the adverse effects determined to
exist, whereby we calculate (a) lost sales and (b) impedance separately, and (c) annualize their sum
over the Reference Period to obtain the ave rage annual value of the adverse effects determined to
exist expressed in 2013 US dollar terms . In implementing this approach, we in some instances
modify the United States' proposed methodology to take into account some of the arguments that
the European Union advanced and our own concerns regarding the United States' methodology.
One important departure from the United States' proposed approach is that we use all the
relevant information that the parties provided as of June 2019 to value lost sales and impedance,
so long as the information pertains to, and sheds light on, the value of the adverse effects
determined to exist during the Reference Period.
6.4.2 Valuation of lost sales
6.477. As explained in section 6.3.4.3.4, the Arbitrator assumes that absent A380 and A350XWB
LA/MSF subsidies, for each of the five lost sales at issue, Boeing in the counterfactual would have
initially sold during the same year in the Reference Period the same number of aircraft as Airbus,
and that Boeing would have sold the closest competing Boeing model vis-à-vis the Airbus LCA model
actually sold. However, we adjust the counterfactual delivery numbers of these ordered Boeing
aircraft to take into account actual cancellations (as of June 2019) of some of the aircraft ordered
from Airbus that would also have occurred in the counterfactual . Specifically, we make such
adjustments where these order cancellations were the result of the airline customer's decision, were
independent of Airbus' will and happened for reasons not specific to the Airbus company or Airbus'
aircraft.
6.478. In the light of those considerations, Table 16 below summarizes Boeing's counterfactual
orders and deliveries that would have occurred had Boeing won the five lost sales. With respec t to
the Transaero lost sale, as discussed in section 6.3.4.3.4.1, we assume that although Boeing would

674 As noted above in section 3, should we determine that the methodology proposed by the
United States for calculating the level of countermeasures, or any alternative methodology proposed by the
European Union, has shortcomings and is not appropriate, we could either make appropriate adjustments or
develop another, appropriate, methodology ourselves. As one previous arbitrator has explained "previous
arbitrators developed their own appropriate methodologies, based either on elements of methodologies
proposed by the parties, or on an altogether different approach". (Decision by the Arbitrator, US – Washing
Machines (Article 22.6 – US), para. 116). (fns omitted)

have won the order for four 747 -8I aircraft, the entirety of the order would have been cancelled,
and thus no deliveries would have occurred. Similarly, as discussed in section 6.3.4.3.4.1, we have
removed the counterfactual deliveries of [[***]] 747-8I aircraft to Emirates on the grounds that
those deliveries would also have been cancelled in the counterfactual.
Table 16: Boeing's counterfactual twin-aisle and VLA orders and deliveries
Lost sales
campaign
Airbus
model
Closest
Boeing model
Order
year
Number of
counterfactual
ordered
aircraft
Number of
counterfactual
delivered
aircraft
Cathay Pacific
Airways A350XWB-1000 777-300ER 2012 10 10
Transaero Airlines A380 747-8I 2012 4 0
Singapore Airways A350XWB-900 787-10 2013 30 30
United Airlines A350XWB-1000 777-300ER 2013 10 10
Emirates A380 747-8I 2013 50 [[***]]
 Total 104 [[***]]

6.479. We follow an order -centric approach and value each lost sale in the year in which the
corresponding order was lost. Additionally, and as explained in section 6.3.4.3.6.4, we obtain that
value by calculating the discounted value, at the time that the order was lost, of the net delivery
price of each Boeing aircraft counterfactually delivered at a scheduled post -order date and by
adjusting, where appropriate, for the respective risk of future cancellation of the counterfactual
delivery (as of 2019)675:

𝐴𝑑𝑗𝑢𝑠𝑡𝑒𝑑𝐿𝑜𝑠𝑡𝑆𝑎𝑙𝑒𝐴𝑖𝑟𝑙𝑖𝑛𝑒 𝑖,𝑜𝑟𝑑𝑒𝑟 𝑦𝑒𝑎𝑟 𝑡
𝑖𝑛 𝑜𝑟𝑑𝑒𝑟 𝑦𝑒𝑎𝑟 𝑡 𝑈𝑆𝐷 = ∑
𝐵𝑜𝑒𝑖𝑛𝑔𝑁𝑒𝑡𝑃𝑟𝑖𝑐𝑒𝐴𝑖𝑟𝑙𝑖𝑛𝑒 𝑖,𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦 𝑦𝑒𝑎𝑟 𝑠
𝑖𝑛 𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦 𝑦𝑒𝑎𝑟 𝑠 𝑈𝑆𝐷
(1+𝐷𝑖𝑠𝑐𝑜𝑢𝑛𝑡𝑅𝑎𝑡𝑒𝑜𝑟𝑑𝑒𝑟 𝑦𝑒𝑎𝑟 𝑡)
𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦 𝑦𝑒𝑎𝑟 𝑠 − 𝑜𝑟𝑑𝑒𝑟 𝑦𝑒𝑎𝑟 𝑡
𝐷𝑒𝑙𝑖𝑣𝑒𝑟𝑦
𝑦𝑒𝑎𝑟 𝑠

 ×𝐷𝑒𝑙𝑖𝑣𝑒𝑟𝑒𝑑𝐴𝑖𝑟𝑐𝑟𝑎𝑓𝑡𝐴𝑖𝑟𝑙𝑖𝑛𝑒 𝑖,𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦 𝑦𝑒𝑎𝑟 𝑠
 ×𝑆𝑢𝑟𝑣𝑖𝑣𝑎𝑙𝑅𝑎𝑡𝑒𝑜𝑟𝑑𝑒𝑟 𝑦𝑒𝑎𝑟 𝑡,𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦 𝑦𝑒𝑎𝑟 𝑠

(10)
6.480. For each lost sales campaign at issue, we have selected a comparator firm order for Boeing's
closest competing model placed by the same airline or a similar airline from which to draw on
relevant contractual pricing information to estimate the net delivery price of each counterfactually
delivered Boeing aircraft. Table 17 summarizes the Boeing comparator orders that we have selected
to value lost sales. With the exception of the 2013 Emirates lost sale, each selected comparator
order corresponds to a Boeing order placed by the same airline. As explained in section 6.3.4.3.6.1,
we consider that the 2006 Lufthansa order for 747 -8I aircraft constitutes the best available
comparator order for the Emirates lost sale, given its large order size and the similaritie s between
the two airlines.676
6.481. Regarding the relevant counterfactual Boeing delivery schedules, we use the contractually
agreed delivery schedule contained in Airbus' respective contracts for the lost sales at issue.

675 For simplicity, we assume that any counterfactual order would occur in July of a given year in the
Reference Period (i.e. 2012 or 2013) and any counterfactual delivery would occur in July in the expected
delivery years (e.g. July 2020).
676 Cathay Pacific March 2011 777-300ER Order Documentation, (Exhibit USA-69 (HSBI)); Singapore
Airlines 2013 787-10 Order Documentation, (Exhibit USA-73 (HSBI)); United 2015 777-300ER Order
Documentation, (Exhibit USA-74 (HSBI)); Lufthansa 2006 747-8I Order Documentation, (Exhibit USA-79
(HSBI)); and Lufthansa Escalation Documentation, (Exhibit USA-87 (HSBI)).

Table 17: Selected comparator orders
Lost sales in
the Reference Period Comparator order
Year Airline Model Order
size Year Airline Model Order
size
2012 Cathay Pacific
Airways
A350XWB-
1000 10 2011 Cathay Pacific
Airways order 777-300ER 10
2012 Transaero
Airlines A380 4* 2012 - - -
2013 Singapore
Airlines A350XWB-900 30 2013 Singapore Airlines
order 787-10 30
2013 United Airlines A350XWB-
1000 10 2015 United Airlines
order 777-300ER 30
2013 Emirates A380 50+ 2006 Lufthansa
order 747-8I 20
Note: * 4 post-order cancellations
+ [[***]] post-order cancellations

6.482. For each lost sale, we use the pricing terms contained in the comparator order , [[***]] to
calculate the net delivery price of the corresponding counterfactual aircraft delivery expressed in
delivery-year US dollar terms.677 The net delivery price (expressed in delivery-year US dollar terms)
is the difference between the gross delivery price and price concessions (expressed in base-year US
dollar terms) multiplied by the escalation factor associa ted with the delivery date minus additional
price concessions [[***]].678
6.483. To minimize the [[***]], and in the light of our decision to consider up-to-date information
as of June 2019, we apply the [[ ***]] escalation rates for any counterfactual deliveries scheduled
to take place before [[ ***]] and [[ ***]] escalation rates [[ ***]] for counterfactual deliveries
scheduled to take place after [[***]].679
6.484. Unless we have already made a determination that a particular counterfactual Boeing order
would have been cancelled in the counterfactual 680, we assume that all other Boeing deliveries
counterfactually scheduled for 2018 or earlier would have occurred. For counterfactual Boeing
deliveries set for after 2018, we account for the probability that such orders might be cancelled
before those deliveries occur. We do so by adjusting those calc ulated counterfactual Boeing net
delivery prices by Boeing's order - and delivery-year specific survival rate. As discussed in section
6.3.4.3.4.2, Boeing's order- and delivery-year specific survival rates are based on Boeing's historic
average cancellation rate for all its LCA sales between 2008 and 2011681, as illustrated below:

𝑆𝑢𝑟𝑣𝑖𝑣𝑎𝑙𝑅𝑎𝑡𝑒𝑜𝑟𝑑𝑒𝑟 𝑦𝑒𝑎𝑟 𝑡,𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦 𝑦𝑒𝑎𝑟 𝑠 ={ 100% if 𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦 𝑦𝑒𝑎𝑟 𝑠 ≤2018
(1−𝐴𝑣𝑒𝑟𝑎𝑔𝑒𝐶𝑎𝑛𝑐𝑒𝑙𝑙𝑎𝑡𝑖𝑜𝑛𝑅𝑎𝑡𝑒2008−2011)𝑠−𝑡 if 𝑑𝑒𝑙𝑖𝑣𝑒𝑟𝑦 𝑦𝑒𝑎𝑟 𝑠>2018 (11)

6.485. Finally, we discount each adjusted counterfactual Boeing net delivery price to obtain the
present value at the time of the lost sale in order -year US dollar terms. As discussed in
section 6.3.4.3.6.4, in the light of our decision to conduct this discounting exercise from Boeing's
perspective, we choose Boeing's cost of debt as the most appropriate discount rate available on the
record.682

677 The pricing terms include the aircraft's gross price and price concessions (expressed in base year US
dollar terms) as well as the escalation formula. Relevant [[***]] are also found in [[***]].
678 For some comparator orders, [[***]].
679 See [[***]], (Exhibit USA-38 (BCI)); [[***]], (Exhibit USA-39 (BCI)); [[***]], (Exhibit USA-40
(BCI)); [[***]], (Exhibit USA-41 (BCI)); Cathay Pacific March 2011 777-300ER Order Documentation,
(Exhibit USA-69 (HSBI)); Singapore Airlines 2013 787-10 Order Documentation, (Exhibit USA-73 (HSBI));
United 2015 777-300ER Order Documentation, (Exhibit USA-74 (HSBI)); Lufthansa 2006 747-8I Order
Documentation, (Exhibit USA-79 (HSBI)); and Lufthansa Escalation Documentation, (Exhibit USA-87 (HSBI)).
680 As discussed above, this would be the case for the Transaero lost sale and a portion of the Emirates
lost sales.
681 Survival Rate Calculation, (Exhibit USA-65 (HSBI)).
682 Boeing WACC Data for 2012, 2013, (Exhibit USA-120 (BCI)).

6.486. For each lost sales campaign at issue, the net present-value delivery prices of all
counterfactually ordered Boeing aircraft, adjusted, as appropriate, for the risk of future cancellation,
are summed to obtain the estimated value of the lost sale to Boeing, expressed in order -year US
dollar terms. Table 18 indicates the results of our valuation of the lost sales at issue.683
Table 18: Value of lost sales in the Reference Period
Lost sale Order
year
Closest
competing
Boeing
model
Number of
counterfactually
ordered aircraft
Number of
counterfactually
delivered
aircraft
Lost sale value
(in order-year
USD)
Cathay Pacific
Airways 2012 777-300ER 10 10 [[HSBI]]
Transaero Airlines 2012 747-8I 4 0 0
Singapore
Airways 2013 787-10 30 30 [[HSBI]]
United Airlines 2013 777-300ER 10 10 [[HSBI]]
Emirates 2013 747-8I 50 [[***]] [[HSBI]]

6.4.3 Valuation of impedance
6.487. Turning to the valuation of the relevant instances of impedance in the six geographic
markets, as explained in section 6.3.4.4.2, the Arbitrator assumes that absent A380 and A350XWB
LA/MSF subsidies, Boeing would have replaced the A380 Impedance Deliveries with the same
number of Boeing 747-8I aircraft in the 2011-2013 Reference Period, although the timing of Boeing's
counterfactual 747-8I aircraft deliveries would have differed somewhat from the timing of the A380
Impedance Deliveries. As further explained in paragraphs 6.409 and 6.411, Boeing would have
delivered an additional 18 747-8I aircraft in 2012 and an additional 29 747-8I aircraft in 2013 to the
six geographic markets in question taken as a whole.684
6.488. Table 19 reproduces the A380 Impedance Deliveries and Boeing's counterfactual deliveries
of 747-8I aircraft that we take into account in our valuation of impedance.
Table 19: A380 Impedance Deliveries and Boeing's counterfactual 747-8I deliveries
Delivery date
Number of Airbus A380 deliveries
in the six relevant geographic
markets
Number of counterfactual Boeing
747-8I deliveries in the six relevant
geographic markets
December 2011 4 0
2012 23 18
2013 20 29
Total 47 47

683 Regarding the Transaero Airlines lost sale, we note that our task is governed by the 2018 DSB
recommendations and rulings, which include a finding of adverse effects in respect of the Transaero Airlines
lost sale. We must therefore value that lost sale. On a correct assessment, which takes into account the post-
order cancellation of the entirety of the Transaero Airlines order, the value of the Transaero Airlines lost sale is
zero. We note in this context that according to Article 3.8 of the DSU "there is normally a presumption that a
breach of the rules has an adverse impact on other Members". However, we agree with the statement by
another arbitrator that "[t]he presumption of nullification or impairment … as set forth by Article 3.8 … cannot
in and of itself be taken simultaneously as evidence proving a particular level of nullification or impairment
allegedly suffered by a Member requesting authorization to suspend concessions … at a much later stage of the
WTO dispute settlement system". We also agree with the same arbitrator's further observation that "[t]he
review of the level of nullification or impairment … from the objective benchmark foreseen by Article 22 of the
DSU … is independent from the finding of infringements of WTO rules by a panel or the Appellate Body".
(Decision by the Arbitrator, EC – Bananas III (US) (Article 22.6 – EC), para. 6.10 (emphasis original))
684 See paragraphs 6.408-6.411 above.

6.489. In the context of our valuation of impedance, we follow a delivery-centric approach and thus
value impedance in the year in which the counterfactual deliveries would have been made. We obtain
this value by multiplying the global (i.e. worldwide) average 747 -8I per-aircraft net delivery price
for the relevant year of the Reference Period by the number of counterfactual deliveries of 747 -8I
aircraft in the corresponding year.
6.490. The 747-8I per-aircraft net delivery global average prices for 2012 and 2013 are computed
by dividing the sum of all the net delivery prices for 747-8I aircraft delivered in 2012 or 2013 by the
number of 747-8I aircraft delivered in 2012 or 2013.685
6.491. Table 20 indicates the results of our valuation of the instances of impedance at issue,
expressed in delivery-year US dollar terms.
Table 20: Value of impedance in the Reference Period
Delivery
date
Number of counterfactual
Boeing 747-8I deliveries
in the six relevant
geographic markets
Global average 747-
8I per-aircraft
net delivery price
Value of impedance
in delivery-year USD
December
2011 0 - 0
2012 18 [[HSBI]] [[HSBI]]
2013 29 [[HSBI]] [[HSBI]]
Total 47

6.4.4 Aggregated annualized value of lost sales and impedance
6.492. In sections 6.4.2 and 6.4.3 above, the Arbitrator determined the monetary values for
impedance and lost sales during the 25 -month Reference Period of December 2011 -2013. There
were no lost sales in December 2011, and we have found in the impedance context that no relevant
counterfactual Boeing 747-8I deliveries would have occurred in December 2011. Therefore, at this
point in our analysis the monetary values pertaining to both lost sales and impedance have been
expressed in 2012 US dollar valu es and in 2013 US dollar values, as appropriate. Doing so is
consistent with the United States' methodology. The United States' methodology proposes to
annualize these values in 2013 US dollar values to determine an annualized value of adverse effects
as a preliminary step towards determining the maximum level of Annual Suspension.
6.493. The United States obtains the annualized 2013 US dollar value by converting the 2012 US
dollar values into 2013 US dollar values by adjusting these values for inflation using th e PPI for CA
Manufacturing and adding that amount to the pre -existing 2013 US dollar values to reach a total
aggregate value of lost sales and impedance expressed in 2013 US dollar terms. The United States
then divides that aggregate amount by 25 (i.e. the 25-month reference period) and multiplies it by
12 (i.e. the 12 months per year). This results in an annualized value of the adverse effects
determined to exist expressed in 2013 US dollar terms. For ease of reference, we will refer to this
amount as the "2013 Annualized Value".
6.494. According to the United States, the need for annualization of the value of the adverse effects
determined to exist arises because the United States seeks to apply countermeasures up to the
authorized maximum level on an annual basis (i.e. a 12 -month period) instead of, for example, a
25-month period (i.e. the temporal length of the 2011-2013 Reference Period). In other words, the
United States requests that the Arbitrator determines the maximum amount of countermeasures
that the United States may take per calendar year so that the United States can implement its
countermeasures accordingly. The United States cites administrability and the common practice of

685 Boeing Declaration, (Exhibit USA-5 (BCI)); and Second Revised 747-8I Global Delivery Prices for
2012 and 2013 (revision to Exhibit USA-26 (HSBI)), (USA-103 (HSBI)).

complaining parties under Article 22 of the DSU as reasons for proposing to take countermeasures
on an annual basis.686
6.495. In 6.3.1 above, we determined that it is legally appropriate to grant countermeasures in the
form of Annual Suspension as proposed by the United States in its methodology. 687 As the
United States seeks to be gran ted a maximum level that it can impose annually, we consider that
annualizing the value of adverse effects determined over the 25 -month Reference Period is
appropriate. We note that other arbitrators likewise established maximum levels of suspension based
on the relevant effects of the measures in question over one year. 688 Accordingly, like the
United States, we calculate an aggregated annualized value of the adverse effects for 2013 (the
2013 Annualized Value), 2013 being the most recent year of the 2011-2013 Reference Period.
6.496. Having decided that it is appropriate to determine the 2013 Annualized Value, the question
before us is what is the appropriate inflation rate that we should use to adjust the 2012 value of lost
sales and impedance with a view to expressing it in 2013 US dollar terms. As explained above, the
United States proposes to use the PPI for CA Manufacturing. 689 The United States provides mostly
practical justifications for using the PPI for CA Manufacturing. The United States suggests that it has
the advantage that it is a reasonable proxy for the increased dollar value of LCA over time; that it
is a publicly available and regularly updated index, published by a government institution; and that
it is unlikely to be subject to manipulation by indus try participants. According to the United States,
the PPI for CA Manufacturing is also not specific to airlines, unlike the [[***]]. According to the
United States, using the [[***]] in calculating the annual countermeasures would make that
calculation exceedingly and unnecessarily complex.690
6.497. The Arbitrator considers that there is no valid reason to use the PPI for CA Manufacturing
besides the practical benefit of using a single non-HSBI index ratio. We note in this connection that
the 2012 values of lost sa les and impedance that need to be adjusted for inflation are values
concerning Boeing aircraft. Their price evolution is in our view best captured by the [[***]]
escalation formula. B ased on [[***]], the escalation formula determines an escalation factor for
each month of each year between the base year and the delivery year. This escalation factor reflects
[[***]] changes in labour and material costs resulting from inflation and other economic chang es.
Accordingly, for each 2012 lost sale at issue and the 2012 value of impedance we use the
corresponding 2013-to-2012 [[***]] escalation factor ratio to restate the 2012 values of lost sales
and impedance in 2013 US dollar terms.
6.498. On this basis, we procee d to determine the aggregated annualized value of the adverse
effects in 2013 US dollar terms.
6.499. First, for lost sales, we multiply the only remaining 2012 lost sale value – the Cathay Pacific
lost sale value (expressed in 2012 US dollar terms) – by the [[***]] 2013-to-2012 escalation factor
ratio associated with its comparator order. Second, for impedance, we apply the [[***]] 2013-to-
2012 escalation factor ratio based on the escalation formula contained in the 2006 Lufthansa
contract to the 2012 impedance v alue. Once we have expressed all the 2012 lost sales and
impedance values in 2013 US dollar terms, we add them to the 2013 lost sales and impedance

687 See paragraph 6.76 above.
688 Decisions by the Arbitrators, US – Tuna II (Mexico) (Article 22.6 – US); US – COOL (Article 22.6 –
United States); US – Upland Cotton (Article 22.6 – US II); US – Gambling (Article 22.6 – US); US – FSC
(Article 22.6 – US); Brazil – Aircraft (Article 22.6 – Brazil); EC – Bananas III (Ecuador) (Article 22.6 – EC);
EC – Hormones (Canada) (Article 22.6 – EC); EC – Hormones (US) (Article 22.6 – EC); and EC – Bananas III
(US) (Article 22.6 – EC). We note in particular the approach of the arbitrator in Brazil – Aircraft (Article 22.6 –
Brazil). In that proceeding, after determining the present value of the prohibited subsidy granted over a six-
year period (2000-2005), the arbitrator divided that aggregate amount by six (for the time-period of six years)
to determine the average annualized present value of the subsidy. (Decision by the Arbitrator, Brazil – Aircraft
(Article 22.6 – Brazil), para. 3.93. See also Award of the Arbitrator, US – Section 110(5) Copyright Act
(Article 25), fn 78 (explaining that "compensations or suspensions of concessions or other obligations have
been so far calculated on a twelve-month basis")).
689 Producer Price Indexes – Program Overview, U.S. Department of Labor, Bureau of Labor Statistics,
(Exhibit USA-20).
690 United States' response to Arbitrator question No. 38, paras. 77-79.

values. This sum is then annualized by dividing it by 25 (the number of months in the Reference
Period) and multiplying it by 12 (months).

𝐴𝐸𝐷𝑇𝐸 𝐷𝑒𝑐.2011−𝐷𝑒𝑐.2013
𝑖𝑛 2013 𝑈𝑆𝐷 =(𝐴𝑑𝑗𝑢𝑠𝑡𝑒𝑑𝐿𝑜𝑠𝑡𝑆𝑎𝑙𝑒𝐶𝑎𝑡ℎ𝑎𝑦𝑃𝑎𝑐𝑖𝑓𝑖𝑐,2012
𝑖𝑛 2012 𝑈𝑆𝐷 ×
𝐸𝑠𝑐𝑎𝑙𝑎𝑡𝑖𝑜𝑛𝐹𝑎𝑐𝑡𝑜𝑟𝐶𝑎𝑡ℎ𝑎𝑦𝑃𝑎𝑐𝑖𝑓𝑖𝑐
2013
𝐸𝑠𝑐𝑎𝑙𝑎𝑡𝑖𝑜𝑛𝐹𝑎𝑐𝑡𝑜𝑟𝐶𝑎𝑡ℎ𝑎𝑦𝑃𝑎𝑐𝑖𝑓𝑖𝑐
2012
+𝐴𝑑𝑗𝑢𝑠𝑡𝑒𝑑𝐿𝑜𝑠𝑡𝑆𝑎𝑙𝑒𝑆𝑖𝑛𝑔𝑎𝑝𝑜𝑟𝑒𝐴𝑖𝑟𝑤𝑎𝑦𝑠,2013
𝑖𝑛 2013 𝑈𝑆𝐷
+𝐴𝑑𝑗𝑢𝑠𝑡𝑒𝑑𝐿𝑜𝑠𝑡𝑆𝑎𝑙𝑒𝑈𝑛𝑖𝑡𝑒𝑑𝐴𝑖𝑟𝑙𝑖𝑛𝑒𝑠,2013
𝑖𝑛 2013 𝑈𝑆𝐷
+𝐴𝑑𝑗𝑢𝑠𝑡𝑒𝑑𝐿𝑜𝑠𝑡𝑆𝑎𝑙𝑒𝐸𝑚𝑖𝑟𝑎𝑡𝑒𝑠,2013
𝑖𝑛 2013 𝑈𝑆𝐷
+𝐼𝑚𝑝𝑒𝑑𝑎𝑛𝑐𝑒2012
𝑖𝑛 2012 𝑈𝑆𝐷 ×
𝐸𝑠𝑐𝑎𝑙𝑎𝑡𝑖𝑜𝑛𝐹𝑎𝑐𝑡𝑜𝑟𝐿𝑢𝑓𝑡ℎ𝑎𝑛𝑠𝑎
2013
𝐸𝑠𝑐𝑎𝑙𝑎𝑡𝑖𝑜𝑛𝐹𝑎𝑐𝑡𝑜𝑟𝐿𝑢𝑓𝑡ℎ𝑎𝑛𝑠𝑎
2012
+𝐼𝑚𝑝𝑒𝑑𝑎𝑛𝑐𝑒2013
𝑖𝑛 2013 𝑈𝑆𝐷)×12
25
(12)

6.500. As summarized in Table 21 below, the total annualized value of the adverse effects
determined to exist, expressed in 2013 US dollar terms, amounts to USD 7,496.623 million.
Table 21: Total annualized value of the adverse effects determined to exist
Reference
Period
year
Value of adverse effects
determined to exist
in order-/delivery-year
USD
Value of adverse effects
determined to exist
in 2013 USD
Value of annualized
adverse effects
determined to exist over
the Reference Period in
2013 USD
December
2011 0 0
2012 [[HSBI]] [[HSBI]]
2013 [[HSBI]] [[HSBI]]
Total: [[HSBI]] 7,496.623 million

6.4.5 Countermeasures commensurate with the annualized value of the adverse effects
determined to exist
6.501. Consistent with Article 7.10 of the SCM Agreement, the maximum level of countermeasures
that the United States may be authorized to impose annually (i.e. the maximum level of Annual
Suspension) must be "commensurate" with the annualized value of adverse effects. We must
therefore examine whether the level of countermeasures proposed by the United States is
"commensurate" with the 2013 Annualized Value of adverse effects that we have determined above.
If it is not, we need to determine what would be the commensurate level of Annual Suspens ion
expressed in 2013 US dollar terms (for ease of reference, we will refer to this as the 2013 Annual
Suspension Value).
6.502. The United States requests, however, that we not stop there and go on to adjust the 2013
Annual Suspension Value. Specifically, it req uests that we adjust for inflation from 2013 up to the
present day and thus express the level of Annual Suspension in 2019 US dollar terms (for ease of
reference, we will refer to this as the 2019 Annual Suspension Value).
6.503. Additionally, the United States requests that it be authorized to adjust the 2019 Annual
Suspension Value for inflation arising in future, post -2019, years in which the United States would
apply countermeasures.
6.504. The Arbitrator addresses these three issues – the "commensurate" 2013 Annual Suspension
Value and the adjustment for inflation up to 2019 and beyond – in separate sections below.

6.4.5.1 The "commensurate" 2013 Annual Suspension Value
6.505. At this point, we recall that the United States requests that the countermeasures that it will
seek auth orization to impose be based on the 2013 Annualized Value of adverse effects. The
United States calculates the 2013 Annualized Value as USD 10,560 million. We have calculated it as
USD 7,496.623 million. These two figures differ materially.
6.506. We note that the United States does not specifically propose the value of USD 10,560 million
as the level of countermeasures that it is seeking authorization to impose. It is only after adjusting
this 2013 Annualized Value for inflation and expressing it in 2019, 2020, etc. terms that the
United States arrives at its proposed level of countermeas ures for the relevant year (i.e. the value
of Annual Suspension Value for the relevant year). However, for the purpose of determining the
"commensurate" 2013 Annual Suspension Value, we compare the value of USD 10,560 million – that
value being the annual suspension value that the United States would have proposed for 2013 – to
our calculated 2013 Annualized Value.
6.507. The issue that we therefore now examine is whether the United States' value of USD 10,560
million that the United States has calculated may be c onsidered "commensurate" with the 2013
Annualized Value of adverse effects that we have calculated.
6.508. As we have explained above691, the phrase "commensurate with" as it appears in Article 7.10
of the SCM Agreement connotes a correspondence of a "less precise degree of equivalence than
exact numerical correspondence" between the "adverse effects determined to exist" and
"countermeasures" proposed. 692 Thus, the "commensurateness" standard may not require exact
equivalence between the level of countermeasures that the United States could be authorized to
take, on the one hand, and the value of the adverse effects determined to exist, on the other hand.
However, the United States does not request that it be allowed to take countermeasures in the form
of a maximum level of Annual Suspension in excess of the value of the annualized value of the
adverse effects determined by us (except for inflation adjustments, which we discuss in more detail
in the following sections). Nor does the European Union argue that we should establish an Annual
Suspension Value that is higher than the Annualized Value of adverse effects. We further note that
our calculated 2013 Annualized Value of adverse effects (i.e. USD 7,496.623 million) is significantly
lower than the United States' 2013 Annual Suspension Value (i.e. USD 10 ,560 million). Even
assuming that, as a general matter, the commensurateness standard could permit some limited
degree of discrepancy between the proposed level of countermeasures and the value of the adverse
effects determined to exist, an adjustment from USD 7,496.623 million to USD 10,560 million would
in our view exceed, by far, any permissible degree of discrepancy. We are accordingly unable to
accept USD 10,560 million as the "commensurate" 2013 Annual Suspension Value.
6.509. For the reasons indicated, we thus perceive neither a need nor a justification, in the particular
circumstances of this proceeding, for establishing the 2013 Annual Suspension Value at a level that
is higher than the 2013 Annualized Value of adverse effects that we have established. Accordingly,
we determine that the "commensurate" 2013 Annual Suspension Value is USD 7,496.623 million.
6.4.5.2 Adjustment of the annualized value of adverse effects determined to exis t for
inflation to the present day
6.510. In furtherance of its request that the Arbitrator adjust the 2013 Annualized Value for inflation
in order to determine an initial level of Annual Suspension in 2019 US dollar values, the United States
notes that it will be authorized to begin taking countermeasures only several years after the period
during which adverse effects were determined to exist (i.e. the 2011 -2013 Reference Period).
Therefore, to prevent the intervening inflation from diminish ing the real value of the Annual
Suspension to be granted and to ensure that the level of countermeasures that will be applied
prospectively starting from 2019 onwards is commensurate with the value of adverse effects, the
United States proposes that the Arbitrator adjust the value of the countermeasures for inflation at
least initially as between the 2011 -2013 Reference Period and the present day. As noted further
above, the United States proposes to make this adjustment for inflation by using the PPI for CA

691 See section 5 above.
692 Decision by the Arbitrator, US – Upland Cotton (Article 22.6 – US II), paras. 4.35-4.39. (emphasis
omitted)

Manufacturing from the year preceding the year in which countermeasures will be applied. This
means that, for example, the 2013 Annualized Value would be adjusted for inflation using the ratio
of the PPI for CA Manufacturing figure for 2018 and the PPI for CA Manufacturing figure for 2013 to
determine the maximum level of Annual Suspension for 2019.693
6.511. The European Union does not specifically object to the United States' request for inflation
adjustment.694
6.512. The Arbitrator notes that in virtually all arbitration proceedings in which the maximum level
of Annual Suspension was determined on the basis of the level of nullification or impairment or the
value of adverse effects sustained during a past reference period – an approach that we also follow
in this proc eeding – the maximum level of Annual Suspension was the value of nullification or
impairment or adverse effects found to exist during the past reference period, with no adjustment
for inflation up until the year in which the countermeasures or suspension c ould be authorized.695
This has been the case also in arbitration proceedings where the temporal gap between the reference
period and the year in which Annual Suspension could be authorized was significant.696
6.513. Considerable time has passed in this dispute sinc e the time -period in respect of which
adverse effects were determined to exist (i.e. the 2011 -2013 Reference Period). However, we are
not persuaded that in the circumstances of the present proceeding an adjustment for inflation is
necessary to preserve the effectiveness of the countermeasures that the United States may seek
authorization to impose.697
6.514. Based on the above considerations, we decline the United States' request that we adjust the
Annual Suspension Value expressed in 2013 US dollar terms (i.e. USD 7,496.623 million) for inflation
to the present day (2019).
6.4.5.3 Adjustment of the annualized value of adverse effects determined to exist for
inflation for future years in which countermeasures are applied
6.515. As we noted above, the United States also requests that it be authorized to further adjust
for inflation the maximum level of Annual Suspension for each year going forward in which the
United States would apply countermeasures. The United States thus asks the Arbitrator to adopt a

694 The European Union does, however, dispute the overall methodology proposed by the United States
in calculating the 2019 Annualized Value (i.e. escalating base prices up to delivery-year prices, discounting
delivery-year prices back to 2012 or 2013 US dollar values, and then inflating those values up to 2019). The
European Union proposes a different approach to achieve 2019 values in its written submission. (European
Union's written submission, paras. 336-344). We have already discussed why, in our view, it is appropriate to
perform escalation and discounting exercises in the lost sales context to determine the value of the lost sales.
(See sections 6.3.4.3.6.2 and 6.3.4.3.6.4 above). Therefore, we do not address these arguments again here.
695 See Decisions by the Arbitrators, US – Tuna II (Mexico) (Article 22.6 – US); US – COOL (Article 22.6
– United States); US – Upland Cotton (Article 22.6 – US II); US – Gambling (Article 22.6 – US); US – FSC
(Article 22.6 – US); Brazil – Aircraft (Article 22.6 – Brazil); EC – Bananas III (Ecuador) (Article 22.6 – EC);
EC – Hormones (Canada) (Article 22.6 – EC); EC – Hormones (US) (Article 22.6 – EC); and EC – Bananas III
(US) (Article 22.6 – EC). We note that the arbitrator in US – Washing Machines (Article 22.6 – US) adjusted
the level of Annual Suspension for inflation so as to protect the real value of that level. (Decision by the
Arbitrator, US – Washing Machines (Article 22.6 – US), para. 3.133). Since the approach adopted by that
arbitrator is relevant to both what we discuss in this section (inflation adjustment up to the present day) and
what we address in the next section (section 6.4.5.3) (inflation adjustment going forward), we revert to that
arbitrator's approach in more detail in the next section.
696 See Decisions by the Arbitrators, US – Tuna II (Mexico) (Article 22.6 – US); and US – Upland Cotton
(Article 22.6 – US II). In both these proceedings, the time period between the date by when the responding
party should have come into compliance and the date of circulation of the arbitrator's decision was four years.
The levels of Annual Suspension were determined by these arbitrators with reference to the short-term time-
period immediately following the date by when the responding party should have come into compliance.
697 Additionally, we have difficulty accepting the United States' argument that the PPI for CA
Manufacturing would be the appropriate inflation index to use. The PPI for CA Manufacturing, as the
United States explains, is a measure of "price change from the perspective of the seller" and is specific to one
industry – CA manufacturing. (United States' methodology paper, para. 94). However, the value that,
according to the United States, needs to be protected from being eroded by inflation is the value of the
countermeasures, which may be imposed by the United States government on a potentially wide range of
goods and/or services imported from the European Union.

formula that allows the maximum level of Annual Suspension to be applied to a given year to change
with reference to inflation data from the previous calendar year (e.g. the 2020 level of suspension
would be based on inflation data from 2019).
6.516. The European Union has not specifically objected to the United States request to adjust for
inflation the maximum level of Annual Suspension each year going forward.
6.517. The Arbitrator notes that the United States' request for setting an initial level of Annual
Suspension in present-day dollar values (i.e. the 2019 Annualized Value) rather than in 2013 US
dollar values (see section 6.3.4.1.3 above), and for adjusting future levels (i.e. 2020, 2021, etc.) of
Annual Suspension, both seek to protect the real value of countermeasures from being eroded b y
inflation.698 We also recall that in the preceding section, we have declined to adjust the 2013 Annual
Suspension Value for inflation until the present day (2019). In our view, the same considerations
for not performing this initial inflation adjustment apply to the requested adjustment of future levels
of Annual Suspension for inflation.
6.518. As noted above, with the exception of US – Washing Machines (Article 22.6 – US), in no
previous arbitration decision that determined a maximum level of Annual Suspension did the
arbitrator find it appropriate to adjust the level of Annual Suspension for future years based on
inflation. Rather, once determined, the maximum level of An nual Suspension was set at a fixed
monetary level going forward.
6.519. As concerns the recent arbitration decision in US – Washing Machines (Article 22.6 – US), it
seems that the parties in that proceeding agreed that (a) suspension of concessions or other
obligations could be in the form of Annual Suspension , and (b) that the maximum level of Annual
Suspension for each year could be adjusted. 699 The only disagreement between the parties in that
context was with respect to how to perform that adjustment. Korea pro posed that future levels of
suspension should be adjusted for the growth in the United States washing machines market to take
into account that the level of nullification or impairment that Korea would suffer in the future would
increase in proportion to t he growth in the United States washing machines market. The
United States, on the other hand, submitted that the economic model that it had proposed for
calculating the level of nullification or impairment could be re -run each year with updated data for
determining the level of suspension for a given year. After having found that neither party had
offered an acceptable adjustment mechanism, the arbitrator determined that the level of suspension
may be adjusted for inflation on an annual basis. 700 In doing so, the arbitrator noted that inflation
adjustment constitutes a means to ensure that the "real value of the level of suspension is
maintained over time".701
6.520. We note that the arbitrator in US – Washing Machines (Article 22.6 – US) did not explain
why the dispute before it warranted an approach that was significantly different from that followed
by all previous arbitrators that had determined a maximum level of Annual Suspension. 702 For the
reasons articulated above in paragraphs 6.512-6.513 and bearing in mind the approach followed by
all other arbitrators in respect of future inflation, we do not find it appropriate, in the circumstances
of the present proceeding, to adjust the maximum level of Annual Suspension for each year going
forward so as to protect the real value of Annual Suspension from being eroded by future inflation.
6.521. The United States has not proffered any additional justification (other than what it offered
for adjusting the 2013 value for inflation to the present day) as to why in the context of the present

698 See paragraphs 6.502 and 6.503 above.
699 Decision by the Arbitrator, US – Washing Machines (Article 22.6 – US), para. 3.123.
700 Decision by the Arbitrator, US – Washing Machines (Article 22.6 – US), paras. 3.124-3.134.
701 Decision by the Arbitrator, US – Washing Machines (Article 22.6 – US), para. 3.133.
702 It is also noteworthy in this context that in US – Section 110(5) Copyright Act (Article 25), the
arbitrator had to calculate only the level of nullification or impairment (i.e. it did not have to determine any
level of suspension of concessions or other obligations). In undertaking this task, the arbitrator decided to
reflect the evolution of the United States market. The arbitrator did so by taking into account the annual
growth rate of the United States' Gross Domestic Product (GDP) up to the date of referral of the matter to
arbitration, but not beyond that date. (See Award of the Arbitrator, US – Section 110(5) Copyright Act
(Article 25), paras. 4.23 and 4.72). That is to say, the arbitrator did not provide for an adjustment of the level
of nullification or impairment for each year going forward based on the annual rate of growth of the
United States' GDP.

proceeding we should provide for an adjustment of future levels of Annual Suspension. There notably
is no evidence on the record suggesting a substantial rise in the near -term in prices for imports of
European Union goods and services. We also note in this context that, as pointed out above 703,
countermeasures are intended as temporary measures. We should therefore not simply assume that
the United States countermeasures in this dispute will (need to) remain in place for a multi -year
time-period.704
6.522. On the basis of the above considerations, we thus also decline the United States' additional
request that we adjust for inflation the maximum level of Annual Suspension for each year going
forward.
6.5 The European Union's argument on the level of countermeasures that the Arbitrator's
determination may not exceed in this proceeding
6.523. The European Union argues that the maximum level of countermeasures that the DSB can
authorize the United States to take per year cannot exceed the maximum level contained in the
United States Article 22.2 request. According to the European Union, the arbitrator in EC – Bananas
III (Ecuador) (Article 22.6 – EC) confirmed that an Article 22.2 request must set out a specific level
of suspension that constitutes the maximum level of suspension that can be determined by the
arbitrator. The European Union notes that the maximum specific level of countermeasures contained
in the United States Article 22.2 request is USD 10,000 million per year. As a result, the European
Union submits that maximum level of countermeasures that the DSB could authorize the
United States to impose is USD 10,000 million per year.705
6.524. The European Union also notes that the United States submitted its Article 22.2 request
following the original proceeding in which adverse effects were determined to exist related to the
A320 family, the A330 family, the A340 family and the A380 aircraft, whereas the findings of the
compliance proceedings excluded adverse effects concerning the A320, A330 and A340 LCA families.
Therefore, for the European Union, it follows that the level of countermeasures commensurate with
the adverse effects determined to exist by the compliance panel and the Appellate Body must be
substantially below the amount identified in the Article 22.2 request.706
6.525. The United States responds that the level of countermeasures to be determined by the
Arbitrator can exceed USD 10 ,000 million per year. The United States argues that by agreeing in
their bilateral Sequencing Agreement to suspend the arbitration proceeding until the DSB adopts a
finding that the European Union failed to comply with the DSB recommendations and rulings in the
original proceedings, the parties expressed their clear intention that the findings of the compliance
proceedings would inform the work of the Arbitrator. According to the United States, implicit in this
agreement is the understanding that the United States will update the level of counterme asures
following the compliance proceedings. The United States also submits that the present arbitration
proceeding is unlike that in EC – Bananas III (Ecuador) (Article 22.6 – EC), in which Ecuador was
proposing to go beyond the level of suspension specified in its Article 22.2 request based on findings
and information that were already in existence at the time that Ecuador had submitted its
Article 22.2 request. The United States notes that, in contrast, its Article 22.2 request was followed
by compliance proceedings that found that the European Union had, in addition to maintaining WTO-
inconsistent measures, adopted new WTO-inconsistent measures.707
6.526. Additionally, the United States notes that its Article 22.2 request does not identify USD
10,000 million as the maximum level of countermeasures. Rather, it defines the level of
countermeasures in "functional terms", as the annual level of adverse effects determined to exist
caused to the interests of the United States by the European Union's failure to comply with the DSB's

703 See paragraph 6.56 above.
704 We recall in this connection the European Union's assertion that it has already taken appropriate
steps to bring its measures fully into conformity with its WTO obligations. (Communication by the European
Union, WT/DS316/34 (Second Compliance Communication), para. 1). We also recall that this issue is under
examination by the second compliance panel.
705 European Union's written submission, paras. 83-87.
706 European Union's written submission, para. 88.

recommendations and rulings. The amount of USD 10,000 million is explicitly stated as an "estimate"
of this functional description that is based on "currently available data in a recent period".708
6.527. The European Union responds that th e United States' argument, i.e. that its Article 22.2
request identifies the level of countermeasures in functional terms as the "annual level of adverse
effects determined to exist", would imply that the Article 22.2 request fails to set out a specific level
of suspension and therefore would not support the authorization of any countermeasures
whatsoever. However, in the European Union's view, such a reading of the United States Article 22.2
request is "erroneous".709
6.528. The Arbitrator notes that the European U nion's argument is that the DSB cannot authorize
the United States to take countermeasures at a level that exceeds the maximum level of
countermeasures specified in numerical terms in its Article 22.2 request. According to the European
Union, the maximum level of countermeasure that is specified in the request is USD 10,000 million
per year.
6.529. We note that the text of the United States' Article 22.2 request characterizes the USD 10,000
million per year level as an "estimate" of the level of countermeasures based on data that was
available when the request was made (i.e. December 2011).710 We also note that USD 10,000 million
per year in 2011 US dollar terms is equal to USD 10,830 million in 2013 US dollar terms.
6.530. In section 6.4.4 above, we determined that the maximum level of Annual Suspension that
the United States may implement per year, i.e. the "commensurate" 2013 Annual Suspension Value,
is USD 7,496.623 million. This level is lower than USD 10 ,000 million per year (in 2011 US dollar
terms) and USD 10,830 million per year, which is the 2013 US dollar term equivalent of USD 10,000
million in 2011 US dollar terms. Therefore, regardless of whether the figure of USD 10 ,000 million
contained in the United States Article 22.2 request is taken to constitute an "estimate" of a functional
description of the level of countermeasures (and thus could in principle be exceeded) or the
maximum permissible level of countermeasures specified in the request in numerical terms, the level
of Annual Suspension that we have determined to be commensurate with the degree and nature of
adverse effects determined to exist does not exceed USD 10,000 million per year (in 2011 US dollar
terms). As the European Union 's argument is that the United States must not be allowed to seek
authorization for a level of countermeasures that exceeds USD 10 ,000 million per year in 2011 US
dollar terms, this argument is moot in view of our determination of the level of Annual Suspension.
We therefore do not examine this argument further.
6.531. The European Union raises another argument, which is that the level of countermeasure s
commensurate with the adverse effects determined to exist must be substantially below the USD
10,000 million identified in the Article 22.2 request in view of the different scope of the findings in
the original and compliance proceedings. This argument go es to the question of the correct
determination of the level of Annual Suspension and not to the question of the maximum level of
countermeasures specified in the Article 22.2 request. We have undertaken our determination of the
level of Annual Suspension above in section s 6.3 and 6.4 and in quantifying the adverse effects
determined to exist have taken into account the scope of the findings in the compliance proceedings.
There is therefore no need to dwell further on this argument.
7 THE EUROPEAN UNION'S CLAIM CONCERNING THE PRINCIPLES AND PROCEDURES SET
OUT IN ARTICLE 22.3 OF THE DSU (CROSS-RETALIATION)
7.1. As noted in section 1.2, the United States requested authorization to take countermeasures
under the GATT 1994 as well as the GATS. In its request, the United States noted that it is neither
practicable nor effective for the United States to suspend concessions or other obligations only on
imports of goods from the European Union up to a value of approximately USD 10 ,000 million. The
United States' request also states that, given the degree and nature of the adverse effects, the

709 European Union's comments on the United States' response to Arbitrator question No. 133.
710 For the relevant portion of the text of the Article 22.2 request, see paragraph 6.13 above. The
Article 22.2 request further states that "it is neither practicable nor effective to suspend concessions or other
obligations on imports of EU goods up to a value of approximately US $10 billion". (Recourse to Article 7.9 of
the SCM Agreement and Article 22.2 of the DSU by the United States, WT/DS316/18, fourth paragraph)

circumstances are "serious enough" within the meaning of Article 22.3(c) of the DSU.711 Therefore,
the United States requested authorization to impose countermeasures consisting of one or more of
the following:
a. suspension of tariff concessions and related obligations (including most -favoured-nation
obligations) under the GATT 1994 on a list of products of the European Union and certain
member States to be drawn from the United States' Harmonized Tariff Schedule; and
b. suspension of horizontal or sectoral commitments and obligations contained in the
United States' Schedule of Specific Commitments with regard to all services defined in the
Services Sectoral Classification List, except for financial services (sector 7).712
7.2. As also noted, in having recourse to arbitration under Article 22.6, the European Union claimed
that the United States did not follow the principles and procedures set forth in Article 22.3 in
considering what countermeasures to take.713
7.3. The European Union thus reserved the right to raise a claim before the Arbitrator that the
United States had not followed the principles and procedures set forth in Article 22.3. As explained,
it is for the European Union to make out a prima facie case that the United States did not follow the
principles and procedures in Article 22.3.714
7.4. However, the European Union did not put forward any claim under Article 22.3 in its written
submission or oral statement. The only reference to Article 22.3 by the European Union is contained
in the "procedural history" section of its written submission where it recalls that it had "claimed that
the principles and procedures set forth in Article 22.3 of the DSU had not been followed " when it
had recourse to Article 22.6 at the DSB meeting on 22 December 2011.715
7.5. Since the European Union did not pursue its claim before the Arbitrator, we cannot examine
this issue further in the present Decision. We note that in WTO dispute settlement practice, a
Member's measure is treated as WTO-consistent until it has been proven otherwise.716 We consider
that, likewise, a complaining party's request under Article 22.3(c) must be treated as DSU-consistent
until proven otherwise. Consequently, in the circumstances of the present arbit ration, it must be
presumed that the United States' request for cross-retaliation is not inconsistent with Article 22.3(c)
of the DSU.
8 THE EUROPEAN UNION 'S CLAIM THAT THE PRO POSED COUNTERMEASURES ARE NOT
ALLOWED UNDER THE COVERED AGREEMENTS
8.1. As noted in section 1.2, in having recourse to arbitration under Article 22.6 of the DSU, the
European Union also claimed that the United States' proposal is not allowed under the covered
agreements.717 We note in this respect that Article 22.5 of the DSU provides that "[t]he DSB shall
not authorize suspension of concessions or other obligations if a covered agreement prohibits
suspensions" and recall that in accordance with Article 22.7 of the DSU "[t]he arbitrator may …

711 Article 22.3(c) provides that:
In considering what concessions or other obligations to suspend, the complaining party shall
apply the following principles and procedures:
…
(c) if that party considers that it is not practicable or effective to suspend concessions or
other obligations with respect to other sectors under the same agreement, and that the
circumstances are serious enough, it may seek to suspend concessions or other obligations under
another covered agreement.
712 Recourse to Article 7.9 of the SCM Agreement and Article 22.2 of the DSU by the United States,

713 DSB, Minutes of the meeting held on 22 December 2011, WT/DSB/M/309, para. 4.
714 Decisions by the Arbitrators, US – Upland Cotton (Article 22.6 – US II), para. 5.55; US – Gambling
(Article 22.6 – US), para. 2.27; and EC – Bananas III (Ecuador) (Article 22.6 – EC), para. 59.
715 European Union's written submission, para. 17.
716 Appellate Body Report, US – Carbon Steel, para. 157.
717 DSB, Minutes of the meeting held on 22 December 2011, WT/DSB/M/309, para. 4.

determine if the proposed suspension of concessions or other obligations is allowed under the
covered agreement".
8.2. Thus, the European Union reserved the right to raise a claim before the Arbitrator that the
United States' proposal is not allowed under the covered agreements. The onus is on the European
Union to make a prima facie case in this regard.
8.3. However, the European Union did not put forward any such claim in either its written
submission or its oral statement. Sinc e the European Union did not pursue its claim before the
Arbitrator, we do not examine this issue further in the present Decision. As no inconsistency has
been proven, for purposes of the present proceeding it is to be presumed that the covered
agreements at issue, i.e. the GATT 1994 and the GATS, do not prohibit the suspension contemplated
by the United States' request for authorization to impose countermeasures (i.e. the suspension of
United States' tariff concessions and related obligations under the GAT T 1994 on a list of products
of the European Union and certain member States, or the suspension of horizontal or sectoral
commitments and obligations contained in the United States' GATS schedule with regard to all
services defined in the Services Sectoral Classification List, except for financial services).718
9 CONCLUSIONS
9.1. For the reasons set out above, the Arbitrator concludes as follows:
a. with reference to Articles 7.10 of the SCM Agreement and 22.6 of the DSU, the level of
countermeasures "commensurate wit h the degree and nature of the adverse effects
determined to exist" during the 2011 -2013 Reference Period amounts to USD 7,496.623
million per annum;
b. with reference to Article 22.3 of the DSU, the European Union has not demonstrated that
the United States failed to follow the principles and procedures set forth in Article 22.3 of
the DSU in determining that it is not practicable or effective to suspend concessions or
other obligations in trade in goods and that the circumstances are serious enough; and
c. with reference to Article 22.5 of the DSU, the European Union has not demonstrated that
the countermeasures proposed by the United States are not allowed under the covered
agreements at issue, i.e. the GATT 1994 and the GATS.
9.2. The United States may therefore request authorization from the DSB to take countermeasures
with respect to the European Union and certain member States, as indicated in document
WT/DS316/18, at a level not exceeding, in total, USD 7,496.623 million annually. These
countermeasures may take the form of (a) suspension of tariff concessions and related obligations
under the GATT 1994, and/or (b) suspension of horizontal or sectoral commitments and obligations
contained in the United States' services schedule with regard to all services defined in the Services
Sectoral Classification List, except for financial services.