UNITED STATES – CONDITIONAL TAX INCENTIVES FOR LARGE CIVIL AIRCRAFT NOTIFICATION OF AN APPEAL BY THE UNITED STATES UNDER ARTICLE 16.4 AND ARTICLE 17 OF THE UNDERSTANDING ON RULES AND PROCEDURES GOVERNING THE SETTLEMENT OF DISPUTES (DSU), AND UNDER RULE 20(1) OF THE WORKING PROCEDURES FOR APPELLATE REVIEW
Document: AND PROCEDURES GOVERNING THE SETTLEMENT OF DISPUTES (DSU), AND UNDER RULE 20(1) OF THE WORKING PROCEDURES FOR APPELLATE REVIEW
Date: 21 December 2016
Document codes: WT/DS487/6
Complainant: EU
Respondent: U.S.
Third parties: Brazil, China, India, Japan, South Korea, Russia, Australia, Canada
Dispute stage: Appellate Body
Agreements cited: Art. 1, 2, 1.1(a)(1)(ii), 1.1(b), 2.3, 3.1(b), 3.2, 4.7  Subsidies and Countervailing Measures (SCM)

UNITED STATES – CONDITIONAL TAX INCENTIVES
FOR LARGE CIVIL AIRCRAFT
NOTIFICATION OF AN APPEAL BY THE UNITED STATES
UNDER ARTICLE 16.4 AND ARTICLE 17 OF THE UNDERSTANDING ON RULES
AND PROCEDURES GOVERNING THE SETTLEMENT OF DISPUTES (DSU),
AND UNDER RULE 20(1) OF THE WORKING PROCEDURES FOR APPELLATE REVIEW
The following communication, dated 16 December 2016, from the Delegation of the United States,
is being circulated to Members.

Pursuant to Article 16 of the Understanding on Rules and Pr ocedures Governing the
Settlement of Disputes ("DSU") and Rule 20 of the Working Procedures for Appellate Review , the
United States files this Notice of Appeal to the Appellate Body on certain issues of law covered in
the Report of the Panel in United Stat es – Conditional Tax Incentives for Large Civil Aircraft
( & ) ("Panel Report") and certain legal interpretations developed
by the Panel.
The United States seeks review by the Appellate Body of the Panel 's finding and conclusion
that the Washington State B&O aerospace tax rate for the manufacturing or sale of Boeing 777X
airplanes (the "B&O aerospace tax rate") is inconsistent with Articles 3.1(b) and 3.2 of the
Agreement on Subsidies and Countervailing Measures (the "SCM Agreement ") because it is
de facto contingent on the use of domestic over imported goods. 1 This finding is in error and is
based on erroneous findings on issues of law and legal interpretations, including the Panel 's failure
to conduct an objective assessment of the matter as required by Article 11 of the DSU.
The Panel erred in finding that the B&O aerospace tax rate for the 777X program is
contingent on the use of domestic over imported wings for the 777X. In particular:
a. The Panel erroneously interpreted and appl ied Article 3.1(b) of the SCM Agreement as if
it prohibited subsidies conditional on the domestic siting of production activities.2
b. The Panel erroneously interpreted and applied Article 3.1(b) of the SCM Agreement in
finding that the B&O aerospace tax rate for the 777X program is contingent on the "use"
of wings for the 777X, even though Boeing does not and will not "use" wings to produce
the 777X, and Boeing is nonetheless eligible to receive the B&O aerospace tax rate for
the 777X program (and other programs).3
c. The Panel erroneously interpreted and applied Article 3.1(b) of the SCM Agreement in
finding that the B&O aerospace tax rate for the 777X program is contingent on the use
of "domestic" over "imported" wings for the 777X, even though the Panel did not
interpret the meaning of the terms "domestic" and "imported," did not provide sufficient
analysis of what would make wings "domestic" or "imported," and did not assess

1 See, e.g., Panel Report, paras. 7.369, 8.1(c), 8.2.
2 See, e.g., Panel Report, paras. 7.360, 7.368-7.369, 8.1(c), 8.2.
3 See, e.g., Panel Report, paras. 7.219-7.222, 7.353-7.356, 7.368.

whether the 777X wings are "domestic." 4 The Panel also failed to provide the basic
rationale behind its finding as required by Article 12.7 of the DSU.
d. The Panel erroneously interpreted and applied Article 3.1(b) of the SCM Agreement by
relying on hypothetical scenarios with no evidentiary basis to evaluate whether the B&O
aerospace tax r ate for the 777X program is "contingent" in fact on the use of domestic
over imported goods.5 The Panel failed to make "an objective assessment of the matter
before it, including an objective assessment of the facts of the case," as required by
Article 11 of the DSU because it used hypothetical scenarios involving Boeing 's purchase
of 777X wings from another Washington manufacturer and Boeing 's importation of 777X
wings from a foreign producer that were contrary to the evidence before it.6
e. The Panel failed to make "an objective assessment of the matter before it, including an
objective assessment of the facts of the case," as required by Article 11 of the DSU in
finding that Boeing would lose the B&O aerospace tax rate for the 777X program if it
used 777X wi ngs produced outside Washington State, and in finding that it would not
lose that tax rate if it sourced 777X wings from a Washington manufacturer.7
f. The Panel failed to make "an objective assessment of the matter before it, including an
objective assessment of the facts of the case," as required by Article 11 of the DSU in
finding that the Second Siting Provision 8 concerns the use of certain goods, and
specifically the origin of those goods that enter into the production process for the 777X,
as a condition for the continued availability of the B&O aerospace tax rate for the 777X
program.9 Were the Appellate Body to consider the meaning and operation of the Second
Siting Provision as an issue of law for purposes of the DSU, then the United States
considers the Panel erred as a matter of law in its understanding or interpretation of the
Second Siting Provision.
The United States respectfully requests that the Appellate Body reverse these findings by
the Panel.