UNITED STATES – SUBSIDIES ON UPLAND COTTON
Document: Appellate Body report
Date: 9 November 2009
Document codes: WT/DS267/42
Complainant: Brazil
Respondent: U.S.
Third parties: Argentina, Australia, Benin, Canada, Chad, China, Taiwan, EU, India, New Zealand, Pakistan, Paraguay, Venezuela, Japan, Thailand
Dispute stage: Mutually Agreed Solution
Agreements cited: Art. 3, 5, 6  Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1  AgricultureArt. III:4, XVI  GATT 1994

UNITED STATES – SUBSIDIES ON UPLAND COTTON

Recourse to Article 7.9 of the SCM Agreement and Article 22.7 of the DSU by Brazil

 The following communication, dated 6 November 2009, from the Permanent Mission of
Brazil to the Chairman of the Dispute Settlement Bo dy, is circulated pursuant to Article 22.7 of the
DSU and Article 7.9 of the SCM Agreement.

 In the original proceedings, the Panel and the Appellate Body found that certain of the
measures at issue in this dispute were inconsistent with Articles 6.3(c) and 5(c) of the Agreement on
Subsidies and Countervailing Measures ("SCM Ag reement"). On 21 March 2005, the Dispute
Settlement Body ("DSB") adopted the Appellate Body report () and the Panel report
( and Corr.1), as modified by the Appellate Body report. The resulting DSB
recommendations and rulings include the recommenda tion that the United States bring its measures
into conformity with the SCM Agreement and remove the adverse effects of certain subsidies or
withdraw the subsidies within six months from the adoption of the reports.

 The period of compliance expired on 21 September 2005. On 6 October 2005, Brazil
requested authorization from the DSB to take co untermeasures pursuant to Article 7.9 of the SCM
Agreement and Article 22.2 of the Understanding on Rules and Procedures Governing the Settlement
of Disputes ("DSU") ().

 On 17 October 2005, the United States objected to Brazil's request (), and the
matter was referred to arbitration pursuant to Artic le 22.6 of the DSU and Article 7.10 of the SCM
Agreement.

 On 7 December 2005, following a joint request by Brazil and the United States, the arbitration
proceedings were suspended ().

 On 18 August 2006, Brazil requested the establis hment of a panel pursuant to Article 21.5 of
the DSU. On 18 December 2007, the complian ce Panel report was circulated to Members
(WT/DS267/RW). The compliance Panel found that th e United States had failed to comply with the
recommendations of the DSB and continued to act incons istently with Articles 5(c) and 6.3(c) of the
SCM Agreement. The Appellate Body report, ci rculated on 2 June 2008, upheld the compliance
Panel's conclusions (WT/DS267/AB/RW). On 20 J une 2008, the DSB adopted the Appellate Body
report and the compliance Panel report, as modified by the Appellate Body report.

 On 25 August 2008, Brazil requested the resumption of the arbitration proceedings
(WT/DS267/39).

 On 31 August 2009, the Arbitrator issued its Decision as follows (WT/DS267/ARB/2):

"6.5 Accordingly, the Arbitrator determines that:
(a) Brazil may request authorization from the DSB to suspend concessions or
other obligations under the Agreements on trade in goods in Annex 1A, at a
level not to exceed the value of US$147.3 million annually.
(b) In the event that the total level of countermeasures that Brazil would be
entitled to in a given year (footnote 346) should increase to a level that would
exceed the threshold described in paragraph 5.201, updated to account for the
change in Brazil's total imports from the United States, then, Brazil would
also be entitled to seek to susp end certain obligations under the
TRIPS Agreement and/or the GATS as identified in footnote 339, with
respect to any amount of permissible countermeasures app lied in excess of
that figure.
Footnote 346: It is understood that this amount is to be calculated taking into
account the entirety of the level of countermeasures that Brazil is entitled to
at that point in time, arising both fr om this Decision and from the Decision
contained in WT/DS267/ARB/1."
 Article 22.7 of the DSU provides that "the DSB shall be informed promptly of the decision of
the arbitrator and shall upon request, grant authori zation to suspend concessions or other obligations
where the request is consistent with the deci sion of the arbitrator, unless the DSB decides by
consensus to reject the request."

 Accordingly, Brazil hereby requests authorizati on from the DSB to suspend the application to
the United States of concessions or other obligations in conformity with the Arbitrator's Decision,
pursuant to Article 22.7 of the DSU.

 Every year, Brazil will notify the DSB of the c ountermeasures it intends to adopt prior to
bringing those measures into force. This annua l notice will identify the level of suspension of
concessions and other obligations and, in light of that level and of the threshold established by the
Arbitrator in paragraph 6.5(b) of its Decision, the concessions and obligations subject to suspension.