UNITED STATES – CONDITIONAL TAX INCENTIVES FOR LARGE CIVIL AIRCRAFT REPORT OF THE PANEL
Document: Addendum
Date: 28 November 2016
Document codes: WT/DS487/R/Add.1; WT/DS487/R.
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
REPORT OF THE PANEL
Addendum
This addendum contains Annexes A to D to the Report of the Panel to be found in document

LIST OF ANNEXES
ANNEX A
WORKING PROCEDURES OF THE PANEL
Contents Page
Annex A-1 Working Procedures of the Panel A-2
Annex A-2 Additional Working Procedures on BCI and HSBI A-7
Annex A-3 Additional Working Pr ocedures for the partial opening to the public of the
meeting of the panel
A-19
Annex A-4 Additional Working Procedures for the partial opening to the public of the
second meeting of the panel
A-21
ANNEX B
ARGUMENTS OF THE PARTIES
Contents Page
Annex B-1 First integrated executive summary of the arguments of the European Union B-2
Annex B-2 Second integrated executive summary of the arguments of the European Union B-10
Annex B-3 First integrated executive summary of the arguments of the United States B-20
Annex B-4 Second integrated executive summary of the arguments of the United States B-28
ANNEX C
ARGUMENTS OF THE THIRD PARTIES
Contents Page
Annex C-1 Integrated executive summary of the arguments of Australia C-2
Annex C-2 Integrated executive summary of the arguments of Brazil C-4
Annex C-3 Integrated executive summary of the arguments of Canada C-8
Annex C-4 Integrated executive summary of the arguments of China C-11
Annex C-5 Integrated executive summary of the arguments of Japan C-13
ANNEX D
PROCEDURAL RULINGS
Contents Page
Annex D-1 Letter from the Panel, 15 January 2016 D-2
Annex D-2 Letter from the Panel, 4 May 2016 D-3

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ANNEX A
WORKING PROCEDURES OF THE PANEL
Contents Page
Annex A-1 Working Procedures of the Panel A-2
Annex A-2 Additional Working Procedures on BCI and HSBI A-7
Annex A-3 Additional Working Pro cedures for the partial opening to the public of the
meeting of the panel
A-19
Annex A-4 Additional Working Procedures for the partial opening to the public of the
second meeting of the panel
A-21

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ANNEX A-1
WORKING PROCEDURES OF THE PANEL
Adopted on 7 December 2015
1. In its proceedings, the Panel shall follow the relevant provisions of the Understanding on Rules
and Procedures Governing the Settlement of Disputes (DSU). In addition, the following Working
Procedures shall apply.
General
2. The deliberations of the Panel and the documents submitted to it shall be kept confidential.
Nothing in the DSU or in these Working Procedures shall preclude a party to the dispute (hereafter
"party") from disclosing statements of its own positions to the public. Mem bers shall treat as
confidential information submitted to the Panel by another Member which the submitting Member
has designated as confidential. Where a party submits a confidential version of its written
submissions to the Panel, it shall also, upon requ est of a Member, provide a non -confidential
summary of the information contained in its submissions that could be disclosed to the public.
3. Subject to this paragraph, the Panel shall meet in closed session. The parties, and Members
having notified thei r interest in the dispute to the Dispute Settlement Body in accordance with
Article 10 of the DSU (hereafter "third parties"), shall be present at the meetings only when invited
by the Panel to appear before it. The Panel may open its substantive meetings with the parties to
the public, subject to appropriate procedures to be adopted by the Panel after consulting with the
parties.
4. Each party and third party has the right to determine the composition of its own delegation
when meeting with the Panel. Eac h party and third party shall have the responsibility for all
members of its own delegation and shall ensure that each member of such delegation acts in
accordance with the DSU and these Working Procedures, particularly with regard to the
confidentiality of the proceedings.
Submissions
5. Before the first substantive meeting of the Panel with the parties, each party shall submit a
written submission in which its presents the facts of the case and its arguments, in accordance
with the timetable adopted by the Panel. Each party shall also submit to the Panel, prior to the
second substantive meeting of the Panel, a written rebuttal, in accordance with the timetable
adopted by the Panel.
6. A party shall submit any request for a preliminary ruling at the ear liest possible opportunity
and in any event no later than in its first written submission to the Panel. If the European Union
requests such a ruling, the United States shall submit its response to the request in its first written
submission. If the United States requests such a ruling, the European Union shall submit its
response to the request prior to the first substantive meeting of the Panel, at a time to be
determined by the Panel in light of the request. Exceptions to this procedure shall be granted u pon
a showing of good cause.
7. Each party shall submit all factual evidence to the Panel no later than during the first
substantive meeting, except with respect to evidence necessary for purposes of rebuttal, answers
to questions or comments on answers p rovided by the other party. Exceptions to this procedure
shall be granted upon a showing of good cause. Where such exception has been granted, the Panel
shall accord the other party a period of time for comment, as appropriate, on any new factual
evidence submitted after the first substantive meeting.
8. Where the original language of exhibits is not a WTO working language, the submitting party or
third party shall submit a translation into the WTO working language of the submission at the
same time. The Panel may grant reasonable extensions of time for the translation of such exhibits

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upon a showing of good cause. Any objection as to the accuracy of a translation should be raised
promptly in writing, no later than the next filing or meeting (whichever occ urs earlier) following
the submission which contains the translation in question. The Panel may grant exceptions to this
procedure upon a showing of good cause. Any objection shall be accompanied by a detailed
explanation of the grounds of objection and an alternative translation.
9. To facilitate the maintenance of the record of the dispute and maximize the clarity of
submissions, each party and third party shall sequentially number its exhibits throughout the
course of the dispute. For example, exhibits submitted by the European Union could be numbered
EU-1, EU-2, etc. If the last exhibit in connection with the first submission was numbered EU -5, the
first exhibit of the next submission thus would be numbered EU-6.
10. Parties and third parties are invit ed to make their respective submissions in accordance with
the WTO Editorial Guide for Panel Submissions, attached as Annex 1.
11. Upon indication from any party, at the latest on the date of the Panel's first substantive
meeting with the parties, that it shall provide information that requires protection additional to
that provided for under these Working Procedures, the Panel shall, after consultation with the
parties, decide whether to adopt appropriate additional procedures.
Questions
12. The Panel may at any time pose questions to the parties and third parties, orally or in writing,
including prior to each substantive meeting.
Substantive meetings
13. Each party shall provide to the Panel the list of members of its delegation in advance of each
meeting with the Panel and no later than 5.00 p.m. the previous working day.
14. The first substantive meeting of the Panel with the parties shall be conducted as follows:
a. The Panel shall invite the European Union to make an opening statement to present it s
case first. Subsequently, the Panel shall invite the United States to present its point of
view. Before each party takes the floor, it shall provide the Panel and other participants
at the meeting with a provisional written version of its statement. In t he event that
interpretation is needed, each party shall provide additional copies for the interpreters,
through the Panel Secretary. Each party shall make available to the Panel and the other
party the final version of its opening statement as well as its closing statement, if any,
preferably at the end of the meeting, and in any event no later than 5.00 p.m. on the
first working day following the meeting.
b. After the conclusion of the statements, the Panel shall give each party the opportunity to
ask each o ther questions or make comments, through the Panel. Each party shall then
have an opportunity to answer these questions orally. Each party shall send in writing,
within a timeframe to be determined by the Panel, any questions to the other party to
which it wishes to receive a response in writing. Each party shall be invited to respond in
writing to the other party's written questions within a deadline to be determined by the
Panel.
c. The Panel may subsequently pose questions to the parties. Each party shall then have an
opportunity to answer these questions orally. The Panel shall send in writing, within a
timeframe to be determined by it, any questions to the parties to which it wishes to
receive a response in writing. Each party shall be invited to respond i n writing to such
questions within a deadline to be determined by the Panel.
d. Once the questioning has concluded, the Panel shall afford each party an opportunity to
present a brief closing statement, with the European Union presenting its statement
first.
15. The second substantive meeting of the Panel with the parties shall be conducted as follows:

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a. The Panel shall ask the United States if it wishes to avail itself of the right to present its
case first. If so, the Panel shall invite the United States to present its opening statement,
followed by the European Union. If the United States chooses not to avail itself of that
right, the Panel shall invite the European Union to present its opening statement first.
Before each party takes the floor, it shall pr ovide the Panel and other participants at the
meeting with a provisional written version of its statement. In the event that
interpretation is needed, each party shall provide additional copies for the interpreters,
through the Panel Secretary. Each party shall make available to the Panel and the other
party the final version of its opening statement as well as its closing statement, if any,
preferably at the end of the meeting, and in any event no later than 5.00 p.m. of the
first working day following the meeting.
b. After the conclusion of the statements, the Panel shall give each party the opportunity to
ask each other questions or make comments, through the Panel. Each party shall then
have an opportunity to answer these questions orally. Each party shall send in writing,
within a timeframe to be determined by the Panel, any questions to the other party to
which it wishes to receive a response in writing. Each party shall be invited to respond in
writing to the other party's written questions within a deadl ine to be determined by the
Panel.
c. The Panel may subsequently pose questions to the parties. Each party shall then have an
opportunity to answer these questions orally. The Panel shall send in writing, within a
timeframe to be determined by it, any questio ns to the parties to which it wishes to
receive a response in writing. Each party shall be invited to respond in writing to such
questions within a deadline to be determined by the Panel.
d. Once the questioning has concluded, the Panel shall afford each part y an opportunity to
present a brief closing statement, with the party that presented its opening statement
first, presenting its closing statement first.
Third parties
16. The Panel shall invite each third party to transmit to the Panel a written submiss ion prior to
the first substantive meeting of the Panel with the parties, in accordance with the timetable
adopted by the Panel.
17. Each third party shall also be invited to present its views orally during a session of this first
substantive meeting, set aside for that purpose. Each third party shall provide to the Panel the list
of members of its delegation in advance of this session and no later than 5.00 p.m. the previous
working day.
18. The third-party session shall be conducted as follows:
a. All third parties may be present during the entirety of this session.
b. The Panel shall first hear the arguments of the third parties in alphabetical order. Third
parties present at the third -party session and intending to present their views orally at
that session, shall provide the Panel, the parties and other third -parties with provisional
written versions of their statements before they take the floor. Third parties shall make
available to the Panel, the parties and other third parties the final versions of th eir
statements, preferably at the end of the session, and in any event no later than
5.00 p.m. of the first working day following the session.
c. After the third parties have made their statements, the parties may be given the
opportunity, through the Panel, to ask the third parties questions for clarification on any
matter raised in the third parties' submissions or statements. Each party shall send in
writing, within a timeframe to be determined by the Panel, any questions to a third party
to which it wishes to receive a response in writing.
d. The Panel may subsequently pose questions to the third parties. Each third party shall
then have an opportunity to answer these questions orally. The Panel shall send in

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writing, within a timeframe to be determined by i t, any questions to the third parties to
which it wishes to receive a response in writing. Each third party shall be invited to
respond in writing to such questions within a deadline to be determined by the Panel.
Descriptive part
19. The description of the arguments of the parties and third parties in the descriptive part of the
Panel report shall consist of executive summaries provided by the parties and third parties, which
shall be annexed as addenda to the report. These executive summaries shall not i n any way serve
as a substitute for the submissions of the parties and third parties in the Panel's examination of
the case.
20. Each party shall submit an integrated executive summary of the facts and arguments as
presented to the Panel in its first wri tten submissions, first opening and closing oral statements
and responses to questions following the first substantive meeting, and a separate integrated
executive summary of its written rebuttal, second opening and closing oral statements and
responses to questions following the second substantive meeting, in accordance with the timetable
adopted by the Panel. Each integrated executive summary shall be limited to no more than 15
pages. The Panel will not summarize in a separate part of its report, or annex to its report, the
parties' responses to questions.
21. Each third party shall submit an integrated executive summary of its arguments as presented
in its written submission and statement in accordance with the timetable adopted by the Panel.
This integr ated executive summary may also include a summary of responses to questions, if
relevant. The executive summary to be provided by each third party shall not exceed 6 pages.
22. The Panel reserves the right to request the parties and third parties to prov ide executive
summaries of facts and arguments presented by a party or a third party in any other submissions
to the Panel for which a deadline may not be specified in the timetable.
Interim review
23. Following issuance of the interim report, each party may submit a written request to review
precise aspects of the interim report and request a further meeting with the Panel, in accordance
with the timetable adopted by the Panel. The right to request such a meeting shall be exercised no
later than at the time the written request for review is submitted.
24. In the event that no further meeting with the Panel is requested, each party may submit
written comments on the other party's written request for review, in accordance with the timetable
adopted by the Panel. Such comments shall be limited to commenting on the other party's written
request for review.
25. The interim report, as well as the final report prior to its official circulation, shall be kept
strictly confidential and shall not be disclosed.
Service of documents
26. The following procedures regarding service of documents shall apply:
a. Each party and third party shall submit all documents to the Panel by filing them with
the DS Registry (office No. 2047).
b. Each party and third party shall file s ix paper copies of all documents it submits to the
Panel. Exhibits may be filed in two copies on CD -ROM or DVD and six paper copies. The
DS Registrar shall stamp the documents with the date and time of the filing. The paper
version shall constitute the official version for the purposes of the record of the dispute.
c. Each party and third party shall also provide an electronic copy of all documents it
submits to the Panel at the same time as the paper versions, preferably in Microsoft
Word format, either on a CD-ROM, a DVD or as an e -mail attachment. If the electronic
copy is provided by e -mail, it should be addressed to DSRegistry@wto.org, with a copy

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to ****@wto.org and to ****@wto.org. If a CD-ROM or DVD is provided, it shall be filed
with the DS Registry.
d. Each party shall serve any document submitted to the Panel directly on the other party.
Each party shall, in addition, serve on all third parties its written submissions in advance
of the first substantive meeting with the Panel. Each third party shall ser ve any
document submitted to the Panel directly on the parties and all other third parties. Each
party and third party shall confirm, in writing, that copies have been served as required
at the time it provides each document to the Panel.
e. Each party and third party shall file its documents with the DS Registry and serve copies
on the other party (and third parties where appropriate) by 5.00 p.m. (Geneva time) on
the due dates established by the Panel. A party or third party may submit its documents
to another party or third party in electronic format only, subject to the recipient party or
third party's prior written approval and provided that the Panel Secretary is notified.
f. The Panel shall provide the parties with an electronic version of the descriptive p art, the
interim report and the final report, as well as of other documents as appropriate. When
the Panel transmits to the parties or third parties both paper and electronic versions of a
document, the paper version shall constitute the official version f or the purposes of the
record of the dispute.
27. The Panel reserves the right to modify these procedures as necessary, after consultation with
the parties.

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ANNEX A-2
ADDITIONAL WORKING PROCEDURES FOR THE PROTECTION OF BUSINESS CONFIDENTIAL
INFORMATION AND HIGHLY SENSITIVE BUSINESS INFORMATION
("BCI/HSBI PROCEDURES")
Adopted on 13 January 2016
1 GENERAL
1.1. The following Procedures apply to all business confidential information ("BCI") and highly
sensitive business information ("HSBI") on the Panel record. These Procedures do not diminish the
rights and obligations of the parties to request and disclose any information within the scope of the
SCM Agreement and Article 13 of the DSU.
2 DEFINITIONS
For the purposes of these Procedures,

2.1. "Approved Person" means a Representative or Outside Advisor of a Party, when designated
in accordance with these procedures.
2.2. "Business Confidential Information" or "BCI" means any business information regardless
of whether contained in a document provided by a public or private b ody that a Party or Third
Party has "Designated as BCI" because it is not otherwise available in the public domain and its
disclosure could, in the Party's or Third Party's view, cause harm to the originators of the
information. Each Party and Third Party shall act in good faith and exercise restraint in designating
information as BCI, and will endeavour to designate information as BCI only if its disclosure would
cause harm to the originators of the information.
2.3. "Conclusion of the Panel Process" means the earliest to occur of the following events:
a. pursuant to Article 16.4 of the DSU, the Panel report is adopted by the DSB, or the DSB
decides by consensus not to adopt the Panel report;
b. a Party formally notifies the DSB of its decision to appeal pursuant to A rticle 16.4 of the
DSU;
c. pursuant to Article 12.12 of the DSU, the authority for establishment of the Panel lapses;
or
d. pursuant to Article 3.6 of the DSU, a mutually satisfactory solution is notified to the DSB.
2.4. "Designated as BCI" means:
a. for printed inform ation, text that is set off with bold square brackets in a document
clearly marked with the notation " BUSINESS CONFIDENTIAL INFORMATION " and
with the name of the Party or Third Party that submitted the information;
b. for Electronic Information, characters th at are set off with bolded square brackets (or
with a heading with bolded square brackets on each page) in an electronic file that
contains the notation " BUSINESS CONFIDENTIAL INFORMATION ", has a file name
that contains the letters " BCI", and is stored on a storage medium with a label marked
"BUSINESS CONFIDENTIAL INFORMATION" and indicating the name of the Party or
Third Party that submitted the information; and

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c. for uttered information, declared by the speaker to be " Business Confidential
Information" prior to utterance.1
In case either Party objects to the designation of information as BCI under paragraphs 2.4(a)–(c),
the dispute shall be resolved by the Panel. If the Panel disagrees with designation of information
as BCI, the submitting Party or Third Par ty may either designate it as non -BCI or withdraw the
information. In the case of withdrawal, the Panel shall either destroy such information or return it
to the submitting Party or Third Party. Each Party or Third Party may at any time designate as
non-BCI information previously designated by that Party or Third Party as BCI.
This paragraph 2.4 shall apply to all submissions, including exhibits, by a Party or Third Party.
2.5. "Designated as HSBI" means:
a. for Electronic Information, characters that are set off with double bolded square brackets
(or with a heading with double bolded square brackets on each page) in an electronic file
that contains the notation " HIGHLY SENSITIVE BUSINESS INFORMATION ", has a
file name that contains the letters " HSBI", and is stored on a storage medium with a
label marked " HIGHLY SENSITIVE BUSINESS INFORMATION " and indicating the
name of the Party or Third Party that submitted the information; and
b. for uttered information, declared by the speaker to be " Highly Sensitive Business
Information" prior to utterance.2
This paragraph 2.5 shall apply to all submissions, including exhibits, by a Party or Third Party.
2.6. "Electronic Information" means any information stored in an electronic form (including but
not limited to binary-encoded information).
2.7. "Highly Sensitive Business Information " or " HSBI" means any business information
regardless of whether contained in a document provided by a public or private body that a Party or
Third Party has "Designated as HSBI" because it is not otherwise avail able in the public domain
and its disclosure could, in the Party's or Third Party's view, cause exceptional harm to its
originators. Each Party and Third Party shall act in good faith and exercise the utmost restraint in
designating information as HSBI. Ea ch Party and Third Party may at any time designate as non -
BCI/HSBI or as BCI information designated by that Party or Third Party as HSBI.
a. The following categories of information may be Designated as HSBI:
i. information indicating the actual selling or offere d price of any large civil aircraft
(LCA) manufacturer's products or services 3, and, except as provided in
subparagraph 2.7 (d)(i) below, any graphs or other use of the data which reflect the
movement of prices, pricing trends or actual prices of an LCA mo del or a family of
LCA;
ii. information gathered or produced in the context of LCA sales campaigns;
iii. information concerning market forecasts, analyses, business plans and
share/business valuations generated by LCA producers, consultants, or investment
banks with regard to LCA products; or

1 The erroneous failure by a speaker to make such a prior declaration shall not affect the designation of
the BCI in question.
2 The erroneous failure by a speaker to make such a prior declaration shall not affect the designation of
the HSBI in question.
3 This category includes (but is not limited to) information on individual LCA prices, prices per seat, or
information allowing the operating cost per seat of an LCA to be determined, calculated or reflected; the
negotiated or offered prices for the airframe; all concessions offered or agreed to by an LCA manufacturer
including financing, spare parts, maintenance, pilot training, asset value and other guarantees, buy back
options, remarketing arrangements or other forms of credit support. This category shall also include the actual
pricing information relating to any number of individual LCA offers and prices (including concessions)
aggregated by model or other category.

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iv. information concerning an LCA manufacturer's costs of production, including but not
limited to data regarding pricing by suppliers.
b. Each Party and Third Party may also Designate as HSBI any other category of business
information that is not otherwise available in the public domain and the disclosure of
which could, in the Party's view, cause exceptional harm to its originators.
c. Each Party and Third Party shall Designate as HSBI any information described in
subparagraph 2.7(a) that pertains to LCA produced by an LCA manufacturer
headquartered within the territorial jurisdiction of either of the Parties.
d. Notwithstanding the foregoing, the following categories of information may not be
Designated as HSBI:
i. aggregated pricing data f or a particular LCA model or family of LCA within a
particular market that is indexed (i.e., does not reflect actual prices but rather
movements in prices off a base of 100 for a particular year). Such data shall be
treated as BCI;
ii. general legal conclusion s based on HSBI (e.g., that HSBI demonstrates that a
producer engaged in price undercutting). Such conclusions shall be treated as neither
BCI nor HSBI;
iii. intergovernmental agreements and government decisions, other than information
described in subparagraph 2.7(a).
e. Information may not be Designated as HSBI simply because it is subject to bank secrecy
or banker-client confidentiality.
f. In case either Party objects to the designation of information as HSBI under
paragraphs 2.7(a) to 2.7(c), the dispute shall be resolved by the Panel. If the Panel
disagrees with designation of information as HSBI, the submitting Party or Third Party
may either designate it as BCI, as non -BCI/HSBI or withdraw the information. In the
case of withdrawal, the Panel shall either destr oy such information or return it to the
submitting Party or Third Party. Each Party or Third Party may at any time designate as
non-BCI/HSBI or as BCI information previously designated by that Party or Third Party
as HSBI.
2.8. "HSBI Approved Person" means Approved Persons specifically designated by the Parties as
having the right to access HSBI (according to the procedures laid down in Section 4).
2.9. "HSBI Location " means a room to be kept locked when not occupied and the access to
which shall be possible only for HSBI Approved Persons, located:
a. for HSBI submitted by the United States, on the premises of (i) the United States
Mission to the European Union in Brussels and (ii) the Office of the United States Trade
Representative in Washington, DC;
b. for HSBI submitted by the European Union, on the premises of (i) the Delegation of the
European Union to the United States in Washington, DC and (ii) the Legal Service (WTO
Team) of the European Commission in Brussels;
c. for HSBI submitted by a Third Party, on the premises of its Geneva Mission to the WTO.
2.10. "Locked CD" means a CD-ROM that is not rewritable.
2.11. "Outside Advisor" means a legal counsel or other advisor of a Party or Third Party, who:
a. advises a Party or Third Party in the course of the dispute;

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b. is not an employee, of ficer or agent of an entity or an affiliate of an entity engaged in
the manufacture of LCA, the provision of supplies to an entity engaged in the
manufacture of LCA, or the supply of air transportation services; and
c. is subject to an enforceable code of pro fessional conduct that includes an obligation to
protect confidential information, or has been retained by another outside advisor who
assumes responsibility for compliance with these procedures and is subject to such a
code of professional conduct.
For purposes of this paragraph, outside legal counsel representing an LCA producer headquartered
in the territory of one of the Parties or Third Parties in connection with these proceedings or
outside consultants who have been retained by such counsel to provide advice with regard to these
proceedings are not considered agents of an entity listed in subparagraph 2.11(b).

2.12. "Panel" means the DS487 panel composed on 22 April 2015.
2.13. "Party" means the European Union or the United States.
2.14. "Party-BCI" means BCI originally submitted by a Party.
2.15. "Representative" means an employee of a Party or Third Party.
2.16. "Sealed Laptop Computer " means a laptop computer having (software and hardware)
characteristics considered necessary by the submitting Party for protection of HSBI, provi ded that
it has software installed that permits such HSBI to be searched and printed in accordance with the
provisions of Section 6. However, HSBI may not be edited on the Sealed Laptop Computer.
2.17. "Secure Site" means a facility to be kept locked when not occupied and the access to which
shall be possible only for Approved Persons, located:
a. in the case of the European Union, at the offices of WTO Team of the Legal Service of
the European Commission (Rue de la Loi 200, Brussels, Belgium), the offices of
Directorate General for Trade of the European Commission (Rue de la Loi 170, Brussels,
Belgium), the offices of the Permanent Mission of the European Union to the
International Organisations in Geneva (Rue du Grand -Pré 66, 1202 Geneva,
Switzerland), and three additional sites specified in accordance with subparagraph (c);
b. in the case of the United States, at the offices of the General Counsel of the Office of the
United States Trade Representative (600 17th Street, NW, Washington, DC, USA), the
offices of the Imp ort Administration, United States Department of Commerce (600 17th
Street, NW, Washington, DC, USA), the Mission of the United States to the World Trade
Organization (11, route de Pregny, 1292 Chambésy, Switzerland), and three additional
sites specified in accordance with subparagraph (c); and
c. at three sites other than a government office that are designated by each Party for use
by its Outside Advisors; provided that the identity of those sites has been submitted to
the other Party and the Panel, and the other Party has not objected to the designation of
that site within ten days of such submission.
Any objections raised under subparagraph (c) may be resolved by the Panel.

2.18. "Stand-Alone Computer" means a computer that is not connected to a network.
2.19. "Stand-Alone Printer" means a printer that is not connected to a network.
2.20. "Submission" means any written, electronic, or uttered information transmitted to the
Panel, including but not limited to, correspondence, written submissions, exhibits, oral statements,
and answers to questions.
2.21. "Third Party " means a Member having notified its interest in the dispute to the DSB
pursuant to DSU Article 10.

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2.22. "Third Party BCI Approved Person " means a representative or Outside Advisor of a
Third Party granted access to BCI pursuant to paragraphs 4.2, 5.2, 5.3 and 5.9.
2.23. "WTO Approved Persons" means the Panel members, PGE members or experts appointed
by the Panel who in the opinion of the Panel require access to BCI, and persons employed or
appointed by the WTO Secretariat who have b een authorized by the WTO Secretariat to work on
the dispute (and includes translators and interpreters as well as any transcribers present at Panel
meetings involving BCI and/or HSBI).
2.24. "WTO Reading Room" means a room, located on the premises of the WTO, w hich a Third
Party BCI Approved Person may use to access a Party's Submission that contains Party BCI.
2.25. "WTO Rules of Conduct" means the Rules of Conduct for the Understanding on Rules and
Procedures Governing the Settlement of Disputes, as adopted by the D SB on 3 December 1996
(WT/DSB/RC/1).
3 SCOPE
3.1. These procedures apply to all BCI and HSBI received by an Approved Person and by WTO
Approved Persons as a result of the Panel process, and to all BCI reviewed, in accordance with
these procedures, by a Third Party BCI Approved Person.
3.2. Unless specifically otherwise provided herein, these procedures do not apply to a Party's or
Third Party's treatment of its own BCI and HSBI.
4 DESIGNATION OF APPROVED PERSONS
4.1. At the latest on 18 January 2016, each Party shall submit t o the other Party and Third
Parties, and to the Panel, a list of the names and titles of any Representatives and Outside
Advisors who need access to BCI submitted by the other Party and/or Third Parties and whom it
wishes to have designated as Approved Persons, along with any clerical or support staff that would
have access to the BCI. On that list, each Party shall indicate which Approved Persons need access
to HSBI submitted by the other Party and/or Third Parties and whom it wishes to have designated
as HSBI Approved Persons. Each Party may submit amendments to their list of Approved Persons
by submitting such amendments to the other Party and Third Parties, and to the Panel.
4.2. There shall be no Third Party HSBI Approved Persons. The designation of Third Pa rty BCI
Approved Persons shall be governed by paragraphs 5.2 and 5.3.
4.3. Each Party shall keep the number of Approved Persons as limited as possible. Each Party may
designate no more than a total of thirty Representatives and twenty Outside Advisors as "HSBI
Approved Persons".
4.4. WTO Approved Persons shall have access to BCI. The Director -General of the WTO, or his
designee, shall submit to the Parties and Third Parties, and to the Panel, a list of the WTO
Approved Persons and shall identify which of those WTO Ap proved Persons shall additionally have
access to HSBI.
4.5. Unless a Party objects to the designation of an Outside Advisor of the other Party, the Panel
shall designate those persons as Approved Persons. A Party also may object within ten days of
becoming aware of information that was not available to the Party at the time of the filing of a list
under paragraph 4.1 that would suggest that designation of an individual is not appropriate. If a
Party objects, the Panel shall decide on the objection within ten working days.
4.6. An objection may be based on the failure to satisfy the definition of "Outside Advisor" or on
any other compelling basis, including conflicts of interest.
4.7. The Parties or the Director-General of the WTO, or his designee, may submit amendments to
their lists at any time, subject to the overall limits set out in paragraph 4.3 and to objections for
the addition of new Approved Persons in accordance with paragraphs 4.5 and 4.6.

- A-12 -

5 BCI
5.1. Only Approved Persons, WTO Approved Persons and Third Party BCI Approv ed Persons may
have access to BCI submitted in this proceeding. Third Party BCI Approved Persons may not have
access to Party-BCI other than that included in the submissions. Approved Persons, WTO Approved
Persons and Third Party BCI Approved Persons shall use BCI only for the purposes of this dispute.
No Approved Person or WTO Approved Person shall disclose BCI, or allow it to be disclosed, to any
person except another Approved Person, WTO Approved Person or Third Party BCI Approved
Person. No Third Party BCI Approved Person shall disclose BCI, or allow it to be disclosed, to any
person except another Approved Person, WTO Approved Person or Third Party BCI Approved
Person. These obligations apply indefinitely.
5.2. Each Third Party that wants to access Party -BCI contained in the first written submission of a
Party shall submit to the other Party and Third Parties, and to the Panel, a list of the names and
titles of any Representatives and Outside Advisors (including clerical or support staff) who need
access to such BCI and whom it wishes to have designated as Third Party BCI Approved Persons.
Each Third Party shall keep the number of Third Party BCI Approved Persons as limited as possible.
Each Third Party may designate no more than a total of five Representative s and Outside Advisors
as Third Party BCI Approved Persons.
5.3. Unless a Party objects to the designation of an Outside Advisor of a Third Party, the Panel
shall designate those persons as Third Party BCI Approved Persons, following which the access
referred to in paragraph 5.2 may be given to the Third Party concerned. A Party also may object
within ten days of becoming aware of information that was not available to the Party at the time of
the filing of a list under paragraph 5.2 above that would suggest that designation of an individual
is not appropriate. If a Party objects, the Panel shall decide on the objection within ten working
days. An objection may be based on the failure to satisfy the definition of "Outside Advisor" or on
any other compelling basis, including conflicts of interest.
5.4. A Party shall make no more than one copy of any BCI submitted by the other Party or a Third
Party for each Secure Site provided for that Party in paragraph 2.17.
5.5. Parties may incorporate BCI in internal memoranda for the ex clusive use of Approved
Persons. Any memorandum and the BCI it contains shall be marked in accordance with
paragraph 2.4.
5.6. BCI submitted by Approved Persons or by Third Party BCI Approved Persons pursuant to
these procedures shall not be copied, distributed , or removed from the Secure Site, except as
necessary for submission to the Panel.
5.7. The treatment in a Party's Submissions to the Panel of any BCI shall be governed by the
provisions of this paragraph, which shall prevail to the extent of any conflict with the other
provisions of the Working Procedures (including these Procedures) relating to BCI.
a. Parties may incorporate BCI in Submissions to the Panel, marked as indicated in
paragraph 2.4. In exceptional cases, parties may include BCI in an appendix to a
Submission.
b. A Party submitting a Submission or appendix containing BCI shall also submit, within a
time period to be set by the Panel, a version redacting any BCI. This shall be referred to
as the "Non -BCI Version". However, a Party is not required to submi t a "Non -BCI
Version" of any exhibit containing BCI, unless specifically directed to do so by the Panel.
In the case of Submissions of the Parties prior to the first meeting of the Panel, each
Party shall serve a "Non-BCI Version" of its Submission on Thir d Parties by 5.00 p.m. on
the working day following the date of the Submission.
c. A Non -BCI Version shall be sufficient to permit a reasonable understanding of its
substance. In order to prepare such a Non-BCI Version:
i. A Party may request the Party that originally submitted the BCI, as soon as possible,
to indicate with precision portions of documents containing BCI that may be included

- A-13 -

in the non-BCI Version and, if necessary to permit a reasonable understanding of the
substance of the information, to produc e a Non -BCI summary in sufficient detail to
achieve this aim.
ii. Upon receipt of such a request, the Party that originally submitted the BCI shall, as
soon as possible, indicate with precision portions of documents containing BCI that
may be included in the N on-BCI Version and, if necessary to permit a reasonable
understanding of the substance of the information, produce a Non -BCI summary in
sufficient detail to achieve this aim.
iii. The Panel shall resolve any disagreement as to whether the Party that originally
submitted the BCI failed to indicate with sufficient precision portions of documents
containing BCI that may be included in the Non -BCI Version and to produce, if
necessary, a Non -BCI summary in sufficient detail to permit a reasonable
understanding of the substance of the information, and may take appropriate action
to ensure that the provisions of this paragraph are satisfied.
d. The responding Party may designate the personal offices of up to four of its Approved
Persons as additional Secure Sites for the s ole purpose of storing and permitting review
of the BCI versions of the Parties' Submissions to the Panel. All of the protections
applicable to BCI under these procedures, including the storage rules in Paragraph 5.11,
shall apply to such Submissions. BCI exhibits to Submissions may not be stored or
reviewed at these additional Secure Sites. The responding Party shall submit the address
(including room number) of each of the additional Secure Sites to the Panel and the
complaining Party.
5.8. Any document containing BCI shall not be copied in excess of the number of copies required
by the Approved Persons. All copies of such documents shall be consecutively numbered. The
making of electronic copies shall be avoided whenever possible. Such documents may be
transmitted electronically only by using secure e -mail. If a Party or Third Party submits to the
Panel an original document that cannot be transmitted electronically, it shall on the day of
submission deliver a copy of that document to one of the Secure Sites lis ted in paragraph 2.17.
The Parties shall designate one of the Secure Sites listed in paragraph 2.17 for this purpose.
5.9. Notwithstanding paragraph 20 of the Working Procedures 4, the following procedures apply to
the access by Third Parties to a Party's Submission that contains Party-BCI.
a. Except as provided in subparagraph 5.7(b), a Party's Submission containing Party -BCI
shall not be served on Third Parties unless both Parties agree otherwise.
b. Third Party BCI Approved Persons may view Party-BCI contained in a Party's first written
submission only in a Secure Site or in the WTO Reading Room. Third Party BCI Approved
Persons may not bring into such room any electronic recording or transmitting devices.
Third Party BCI Approved Persons may not remove a Party's Sub mission containing
Party-BCI from such room, but may take handwritten notes of the Party -BCI contained
therein. Such notes shall be used exclusively for this dispute (that is, DS 487). Each
person viewing a Party's Submission containing Party -BCI shall complete and sign a log
identifying the Submission the person reviewed. The Party responsible for maintaining
the particular Secure Site, and the WTO Secretariat in the case of the WTO Reading
Room, shall maintain such log until one year after the Conclusion o f the Panel Process .
Before entering and when leaving the room, Outside Advisors who are Third Party BCI
Approved Persons may be subject to appropriate controls.
c. If a Third Party BCI Approved Person removes from the Secure Site or the WTO Reading
Room a ha ndwritten memo in accordance with subparagraph 5.9(b) above, that Third
Party BCI Approved Person shall store the memo only in a locked security container.
Such memo shall be appropriately protected against improper inspection and
eavesdropping when being consulted and will be transmitted in sealed heavy duty double

4 Concerning service of documents.

- A-14 -

envelopes only. The content of such memo shall not be incorporated, electronically or in
handwritten form, into the Non-BCI Version, as defined in paragraph 5.7(b).
d. All Third Parties that have designated Third Party BCI Approved Persons must inform the
Parties of the identity of the specific room (including the address and the room number)
in which the locked security container, as referred to in subparagraph 5.9(c) above, is
located.
e. If a Third Party BCI Approved Person removes from the Secure Site or the WTO Reading
Room a handwritten memo in accordance with subparagraph 5.9(b) above, such memo
shall not be copied in excess of the number of copies required by the Third Party BCI
Approved Persons. All copies of such documents shall be consecutively numbered. The
making of electronic copies of such memo shall be prohibited.
f. A Third Party may not incorporate into the body of its Submission any Party -BCI. If a
Third Party wishes to refer to any Party -BCI, the relevant arguments including such BCI
should be incorporated into a separate Appendix. Such Appendix shall not be served on
other Third Parties.
g. On the date determined by the Panel as the deadline to make the Third Party written
submission, a Third Party shall serve its submission only on the Parties and on the Panel.
The submission shall be served on the other Third Parties only after the Parties have
confirmed that the submission does not contain or disclose Party-BCI. A Party shall make
this co nfirmation or otherwise advise of any necessary change to the relevant Third
Party within two working days of receiving the submissions of Third Parties.
5.10. A Party or Third Party that wishes to submit or refer to BCI at a Panel meeting shall so
inform the Pa nel and the other Party, and Third Parties as appropriate. The Panel shall exclude
persons who are not Approved Persons, WTO Approved Persons or, as appropriate, Third Party BCI
Approved Persons from the meeting for the duration of the submission and discussion of BCI.
5.11. Approved Persons and WTO Approved Persons shall store BCI only in locked security
containers. In the case of BCI submitted to the Panel, such locked security containers shall be kept
on the WTO Secretariat's premises, except that Panel member s may maintain a copy of all
relevant documents and materials containing BCI at their places of residence. Such documents and
materials shall be stored in locked security containers when not in use. BCI shall be appropriately
protected against improper ins pection and eavesdropping when being consulted and will be
transmitted in sealed heavy duty double envelopes only. All work papers ( e.g., draft submissions,
worksheets, etc.) containing BCI shall, when no longer needed, be shredded or burned consistent
with normal government practice for destroying sensitive documents.
5.12. The Panel shall not disclose BCI in its final report to be circulated to the Members, but may
make statements or draw conclusions that are based on the information drawn from the BCI.
6 HSBI
6.1. Unless otherwise provided below, HSBI shall be subject to all the restrictions in Section 5
applicable to BCI.
6.2. HSBI shall be submitted to the Panel in electronic form, using locked CDs or two Sealed
Laptop Computers connectable to 19" - 21" monitors, or in h ard copy form, for access by WTO
Approved Persons designated pursuant to paragraph 4.4 as being additionally authorized to access
HSBI. All such HSBI shall be stored in a locked security container in a designated secure location
on the premises of the WTO Secretariat.5 Any computer in that room shall be a Stand -Alone
Computer. WTO Approved Persons designated pursuant to paragraph 4.4 as being additionally
authorized to access HSBI may view HSBI only in the designated secure location referred to above.
A Stand-Alone Printer may be used to make hard copies of any HSBI. Such hard copies shall be

5 At the request of any of the Parties, the WTO Secretariat will try to obtain as soon as practicable a
secure safe to store all HSBI and hard copies of any HSBI, if a locked security container is deemed unsuitable
for the appropriate protection of the information.

- A-15 -

made on distinctively colored paper. Such hard copies shall either be stored in a locked security
container at the designated secure location referred to above, or dest royed at the end of the
relevant working session. HSBI shall not be removed from this designated secure location, except
(i) in the form of handwritten notes that may be used only on the WTO Secretariat's premises and
which shall be destroyed once no longe r in use; and (ii) subject to appropriate precautions, for
purposes of meetings of the Panel with the Parties and any internal deliberations of the Panel, as
provided for in paragraph 6.11(j).
6.3. Each Party shall maintain an additional copy (electronic or hard) of the HSBI it submits to the
WTO, for access by HSBI Approved Persons acting on behalf of the other Party, in the HSBI
Locations listed in paragraph 2.9. A Stand -Alone Printer may be used to make hard copies of any
HSBI. Such hard copies shall be made on distinctively colored paper. Such hard copies shall either
be stored in a safe at the relevant HSBI Location, or destroyed at the end of the relevant working
session.
6.4. If a Third Party submits HSBI, it shall notify the Parties of the fact that such submi ssion has
been made. Each Third Party submitting HSBI shall maintain an additional copy (electronic or
hard) of the HSBI it submits to the WTO, for access by HSBI Approved Persons acting on behalf of
the Parties, in the HSBI Location listed in paragraph 2. 9. A Stand -Alone Printer may be used to
make hard copies of any HSBI. Such hard copies shall be made on distinctively colored paper.
Such hard copies shall either be stored in a safe at the relevant HSBI Location, or destroyed at the
end of the relevant working session.
6.5. Except as otherwise provided in these procedures, HSBI shall not be stored, transmitted or
copied either in written or electronic form.
6.6. HSBI Approved Persons may view HSBI on the Sealed Laptop Computer maintained by the
other Party or a Thir d Party or, in the case of HSBI submitted on Locked CDs on a Stand -Alone
Computer, only in a designated room at one of the HSBI Locations indicated in paragraph 2.9, or
at the designated secure location on the premises of the WTO Secretariat referred to in
paragraph 6.2, unless otherwise mutually agreed by the Parties. The designated room shall be
available to HSBI Approved Persons from 9:00 a.m. to 5:00 p.m. during official working days at
the respective HSBI Location. The designated secure location referr ed to in paragraph 6.2 shall be
available to HSBI Approved Persons by prior arrangement with the WTO Secretariat. HSBI
Approved Persons may not bring into such room any electronic recording or transmitting devices.
HSBI Approved Persons may not remove HSBI from such room, except in the form of handwritten
notes or aggregated information generated on a Stand-Alone Computer. In either case, such notes
or information shall be used exclusively for this dispute in connection with which the HSBI has
been submitted. Each person viewing the HSBI in the HSBI Location or designated secure location
referred to in paragraph 6.2 shall complete and sign a log identifying the HSBI that the person
reviewed or, alternatively, such a log can be generated automatically. Each P arty shall, for the
HSBI Location within its territory referenced in paragraph 2.9, maintain such log until one year
after the Conclusion of the Panel Process . The WTO Secretariat shall, for the designated secure
location referred to in paragraph 6.2, main tain such log until one year after the Conclusion of the
Panel Process. Before entering and when leaving such room, Outside Advisors who are HSBI
Approved Persons may be subject to appropriate controls.
6.7. No HSBI Approved Person or WTO Approved Person design ated pursuant to paragraph 4.4 as
being additionally authorized to access HSBI shall disclose HSBI to any person except another
HSBI Approved Person or WTO Approved Person designated pursuant to paragraph 4.4 as being
additionally authorized to access HSBI , and then only for the purpose of this dispute. This
obligation applies indefinitely.
6.8. HSBI may be processed only on Stand -Alone Computers. Any memorandum containing HSBI
shall not be transmitted electronically, whether by e-mail, facsimile, or otherwise.
6.9. A Party or Third Party that wishes to submit or refer to HSBI at a Panel meeting shall so
inform the Panel and the other Party, and Third Parties as appropriate. The Panel shall exclude
persons who are not HSBI Approved Persons or WTO Approved Persons desi gnated pursuant to
paragraph 4.4 as being additionally authorized to access HSBI from the meeting for the duration of
the submission and discussion of HSBI.

- A-16 -

6.10. All HSBI shall be stored in a safe at the relevant HSBI Location or in accordance with
paragraph 6.2.
6.11. The treatment in a Party's Submissions to the Panel of any HSBI shall be governed by the
provisions of this paragraph, which shall prevail to the extent of any conflict with the other
provisions of the Working Procedures (including these Procedures) relating to HSBI.
a. HSBI may be incorporated into a separate appendix to, but not the body of, a Party's
Submission, which appendix shall be comprehensible in itself. The document containing
the HSBI shall be referred to as the "Full HSBI Version Appendix";
b. A Party submitting an appendix containing HSBI shall also submit, within a time period
to be set by the Panel, a version redacting any HSBI. This shall be referred to as the
"Redacted Version Appendix";
c. At the request of a Party, information contained in the Redacted Version Appendix may
be treated as BCI, in accordance with the provisions of Section 5;
d. A Redacted Version Appendix shall be sufficient to permit a reasonable understanding of
its substance. In order to prepare such a Redacted Version Appendix:
i. A Party may request that the Party that originally submitted the HSBI, as soon as
possible, indicate with precision portions of documents containing HSBI that may be
included in the Redacted Version Appendix and, if necessary to permit a reasonable
understanding of the substance of the information, produce a non -HSBI summary in
sufficient detail to achieve this aim.
ii. Upon receipt of such a request, the Party that originally submitted the HSBI shall, as
soon as possible, indicate with precision portions of docu ments containing HSBI that
may be included in the Redacted Version Appendix and, if necessary to permit a
reasonable understanding of the substance of the information, produce a non -HSBI
summary in sufficient detail to achieve this aim.
iii. The Panel shall res olve any disagreement as to whether the Party that originally
submitted the HSBI failed to indicate with sufficient precision portions of documents
containing HSBI that may be included in the Redacted Version Appendix and to
produce, if necessary, a non -HSBI summary in sufficient detail to permit a
reasonable understanding of the substance of the information, and may take
appropriate action to ensure that the provisions of this paragraph are satisfied.
e. The Full HSBI Version Appendix shall be kept in an HSBI Location and in the designated
secure location referred to in paragraph 6.2, as appropriate, in the form of a locked CD.
If it is not practical to keep the Full HSBI Version Appendix in an HSBI Location, the
Party may keep it in a locked security containe r in a Secure Site in the form of a
locked CD.
f. The locked CD containing the Full HSBI Version Appendix shall bear the label marked
"FULL VERSION OF HSBI APPENDIX TO SUBMISSION" and indicate the name of the Party
that submitted the HSBI. In addition, the HS BI Appendix itself shall be marked with
heading with double bolded square brackets on each page in an electronic file that
contains the notation "FULL VERSION OF HSBI APPENDIX TO SUBMISSION". The
electronic file containing the HSBI Appendix shall have a fi le name that contains the
letters "HSBI VERSION".
g. The Party shall submit one copy of the Full HSBI Version Appendix to the Panel (through
Mr Rodd Izadnia, Secretary to the Panel) and two copies to the other Party in the form of
two locked CDs. The Full HSB I Version Appendix shall not be transmitted via e -mail.
Parties shall agree between themselves beforehand on the name of the Approved Person
that is to receive the locked CD.

- A-17 -

h. The Party shall commence transfer of the locked CDs containing the Full HSBI Vers ion
Appendix no later than the deadline for the submission concerned, and, at the same
time, provide the Panel and the other Party with proof that this has been done.
i. No more than one working day in advance of a Panel meeting with the parties, a Party
may, exclusively at that Party's Permanent Mission in Geneva, use the locked CD to
produce no more than one hard copy of the Full HSBI Version Appendix for each HSBI
Approved Person planning to attend that Panel meeting. All paper versions produced
pursuant to this subparagraph shall be collected by the Party concerned and destroyed
immediately after the conclusion of the meeting.
j. WTO Approved Persons designated pursuant to paragraph 4.4 as being additionally
authorized to access HSBI may, exclusively on the WT O premises, produce paper
versions of the Full HSBI Version Appendix for the purpose of, and immediately prior to,
a Panel meeting with the parties and/or an internal meeting. When not in use, these
paper versions shall be stored in a locked security conta iner in the designated secure
location referred to in paragraph 6.2. All paper versions produced pursuant to this
subparagraph shall be destroyed after the Conclusion of the Panel Process as defined in
paragraph 2.3.
k. Parties are encouraged to submit versio ns of exhibits containing HSBI from which all
HSBI has been deleted. Such exhibits shall be referred to as "HSBI -Redacted Version
Exhibits". HSBI-Redacted Version Exhibits may contain BCI.
i. A Party may submit HSBI -Redacted Version Exhibits prepared by that Party to the
Panel, and serve them on the other Party in accordance with the applicable
procedures, at the time it serves the submission to which the exhibit relates.
ii. If a HSBI -Redacted Version Exhibit is not submitted by the Party submitting the
exhibit, an HSBI Approved Person representing the other Party may prepare an
HSBI-Redacted Version Exhibit of any such exhibit.
iii. HSBI-Redacted Version Exhibits may be prepared by an HSBI Approved Person, at an
HSBI Location, by deleting the HSBI in the exhibit (iden tified by double brackets)
from such exhibit and either printing or photo -copying the resulting document
containing no HSBI. The deletion of HSBI from the resulting document shall be
verified by a person authorized for this purpose by the Party that submit ted the
exhibit(s) in question. The resulting document containing no HSBI (but which may
contain BCI) will constitute the HSBI -Redacted Version Exhibit of such exhibit, and
may be removed from the HSBI Location.
iv. The Parties shall cooperate to the maximum e xtent possible to make available
necessary facilities, including printers, photo -copiers, and physical means for the
deletion of text from a document, to enable the preparation of HSBI -Redacted
Version Exhibits, including making available an HSBI Approved Person for purposes
of the verification provided for in paragraph (iii) above. HSBI -Redacted Version
Exhibits may be prepared by HSBI Approved Persons upon request during the times
the designated room at the relevant HSBI Location is available, as provided for in
paragraph 6.6 of these Procedures.
v. The Panel shall resolve any disagreement arising from the operation of sub -
paragraph 6.11(k), and may take appropriate action to ensure that the provisions of
paragraph 6.11 are satisfied.
l. The Panel reserves the r ight, after consulting the parties, to amend the provisions of
paragraph 6.11 at any time in order to accommodate situations arising during Panel
meetings, and the preparation of the interim report and the final report.
6.12. The Panel shall not disclose HSBI in its report, but may make statements or draw
conclusions that are based on the information drawn from the HSBI.

- A-18 -

7 RESPONSIBILITY FOR COMPLIANCE
7.1. Each Party and Third Party is responsible for ensuring that its Approved Persons and
Third Party BCI Approved Pers ons comply with these procedures to protect BCI and HSBI
submitted by each Party and Third Party, as well as with enforceable codes of professional conduct
to which its Approved Persons or other Outside Advisors are subject. WTO Approved Persons shall
comply with these procedures to protect BCI and HSBI submitted by a Party or Third Party. WTO
Approved Persons are covered by the WTO Rules of Conduct. As provided for in the WTO Rules of
Conduct, evidence of breach of these Rules may be submitted to the Chair of the DSB or to the
Director-General of the WTO, or his designee, as appropriate, for appropriate action pursuant to
Section VIII of the WTO Rules of Conduct.
8 ADDITIONAL PROCEDURES
8.1. After consulting with the Parties, the Panel may apply any other addition al procedures that it
considers necessary to provide additional protections to the confidentiality of BCI or HSBI or other
types of information not explicitly covered by these Procedures but which the Panel considers may
be of assistance in adjudicating th e claims before it, including, if necessary, information that the
United States internally classifies as "Top Secret", "Secret", "Confidential", or controlled pursuant
to the United States' International Traffic in Arms Regulation ("ITAR").
8.2. The Panel may, with the consent of both Parties, waive any part of these procedures. Such
"waiver" shall be specifically set forth in writing and signed by a representative of both Parties.
9 RETURN AND DESTRUCTION
9.1. Except as provided for in paragraph 9.2, after the Conclus ion of the Panel Process as defined
in paragraphs 2.3(a), 2.3(c) or 2.3(d), or as contemplated in paragraph 9.3, within a period to be
fixed by the Panel, WTO Approved Persons, the Parties and Third Parties (along with all Approved
Persons) shall destroy o r return all documents (including electronic material) or other recordings
containing BCI to the Party or Third Party that submitted such documents or other recordings. At
the same time, WTO Approved Persons and the Parties shall destroy and/or return any electronic
material submitted by a Party or Third Party that contains HSBI.
9.2. The WTO Secretariat shall retain one hard copy and one electronic version of any final report
of the Panel containing BCI, and one electronic version of all documents containing BC I submitted
to the Panel, recorded on locked CD(s), to be kept in sealed containers in a locked cabinet on the
premises of the WTO Secretariat.
9.3. After the Conclusion of the Panel Process as defined in paragraph 2.3(b), the Secretariat will
inform the Appell ate Body of these procedures and will transmit to the Appellate Body any
BCI/HSBI governed by these Procedures. Such transmission shall occur separately from the rest of
the Panel record, to the extent possible. Following the adoption by the DSB of the App ellate Body
report pursuant to Article 17.14 of the DSU, or a decision by the DSB by consensus not to adopt
the Appellate Body Report pursuant to Article 17.14 of the DSU, the provisions of paragraphs 9.1
and 9.2 shall apply mutatis mutandis.
9.4. The hard drive of each Stand-Alone Computer and all media used to back up such computers
shall be destroyed at the Conclusion of the Panel Process.

- A-19 -

ANNEX A-3
ADDITIONAL WORKING PROCEDURES FOR THE PARTIAL OPENING TO THE PUBLIC OF THE
MEETING OF THE PANEL
Adopted on 22 February 2016
1.1. The Panel's meeting with the parties will start at 10h00 on 24 February 2016. The Panel shall
invite the European Union to make an opening statement to present its case first. Subsequently,
the Panel shall invite the United States to present its point of view.
1.2. The oral statements of the parties will be video recorded for later viewing, as set out in
paragraph 1.8. below.
1.3. If at any point during its oral statement a party intends to address BCI or HSBI, it shall
request that the video recording be discontinued for the relevant portion of the oral statement,
after which video recording will be resumed. A party shall first deliver the part of its oral statement
that contains no BCI or HSBI, and then ask for the video r ecording to be discontinued, before
delivering a second part of its oral statement containing BCI or HSBI. Either party shall inform the
Panel if the other party or the Panel is referring to BCI or HSBI, whereupon the Panel shall instruct
that video recording be discontinued and instruct any individuals not having BCI/HSBI approval to
exit the room.
1.4. Before each party takes the floor, it shall provide the Panel and other participants at the
meeting with a provisional written version of its statement. BCI or HSBI in the texts of the oral
statements provided to the panel and the other party during the meeting and prior to the delivery
of the oral statements shall be bracketed in accordance with the BCI/HSBI Procedures. BCI should
be contained within single brackets. HSBI should be contained within double brackets and deleted.
In addition, a party including HSBI in its oral statement shall provide, prior to delivery of the oral
statement, one paper copy to the panel and one paper copy to the other party, on colou red paper,
with the HSBI included in double brackets. This document shall be subject to the same
confidentiality rules as an HSBI Appendix to a written submission.
1.5. During the meeting with the parties, the following persons will be admitted into the meeting
room: (1) the Panel; (2) all BCI/HSBI -approved members of the delegations of the parties;
(3) BCI/HSBI-approved WTO Secretariat staff assisting the Panel; and (4) the team hired by the
WTO Secretariat to video record the proceedings. If at any point durin g the meeting a party
intends to refer to BCI or HSBI, those individuals not having BCI/HSBI approval shall be asked to
exit the room. If at any point during the meeting a party intends to refer to either BCI or HSBI, the
team hired by the WTO Secretariat to video record the proceedings shall be asked to exit the
room.
1.6. After each oral statement has been delivered, the Panel will ask the respective party whether
it can confirm that no BCI or HSBI was pronounced during the video recorded portion of the oral
statement. The Panel will also ask the parties for confirmation, at the end of the meeting, that no
BCI or HSBI was pronounced during the video recorded portion of the meeting. If both parties so
confirm, the showing of the video recording will proceed acco rding to the schedule to be
determined by the Panel, as provided in paragraph 1.8. If either party requests to review the
video recording, the Panel will invite both parties to attend a review session, accompanied by a
representative of the Secretariat and the technician responsible for editing, on the premises of the
WTO at an appropriate time after the meeting. In the event, each party shall designate a
maximum of two persons, who shall be BCI/HSBI -approved persons, to partic ipate in the review
session. Parties should be prepared to advise the technician which portion of the oral presentation
presents a concern, and limit review to those portions of the video recording to the maximum
extent possible. If either party considers that a specific portion of the video recording must be
deleted – because it is BCI or HSBI – the specific portion of the video recording will be deleted.
1.7. The third party session will start at 10h00 on 25 February 2016. Third parties shall indicate to
the P anel, not later than by 13h00 on 24 February 2016 , whether they consent to the video
recording of their oral statements for later viewing. The Panel will start the third party session with

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the statements of those third parties so consenting. After such thi rd parties have made their
statements, any questions or comments from the parties, other third parties or the Panel
concerning these statements shall be made. The Panel shall then proceed to a third party closed
session during which the rest of the third p arties shall make their statements. The Panel or any
party or third party may pose questions to any third party or make comments concerning these
statements. Should any third party intend to include BCI in its oral statement or otherwise to refer
to BCI du ring the third party session, it is requested to inform the Panel by 13h00 on 24
February 2016 so that appropriate arrangements can be made to protect the confidentiality of that
information.
1.8. The showing of the video recording of the oral statements of the parties and third parties
shall take place at a date to be determined by the Panel. The showing will be open to officials of
WTO Members and Observers, to accredited journalists, and to accredited representatives of non -
governmental organizations, upon pr esentation of their official badges. Other interested persons
will be able to attend by registering directly with the WTO. To this effect, the Secretariat will place
a notice by on the WTO website informing the public of the showing and including a link th rough
which members of the public can register.

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ANNEX A-4
ADDITIONAL WORKING PROCEDURES FOR THE PARTIAL OPENING TO THE PUBLIC
OF THE SECOND MEETING OF THE PANEL
Adopted on 23 March 2016
1.1. The Panel's meeting with the parties will start at 10h00 on 5 April 2016.
1.2. In accordance with the Working Procedures adopted for the dispute, the Panel shall ask the
United States whether it wishes to avail itself of the right to present its case first at the meeting. If
the United States wishes to do so, it will be invite d by the Panel to deliver its opening statement
first. Subsequently, the Panel shall invite the European Union to present its point of view. If the
United States chooses not to avail itself of that right, the Panel shall invite the European Union to
present its opening statement first.
1.3. The oral statements of the parties will be video recorded for later viewing, as set out in
paragraph 1.9. below.
1.4. If at any point during its oral statement a party intends to address BCI or HSBI, it shall
request that the vid eo recording be discontinued for the relevant portion of the oral statement,
after which video recording will be resumed. A party shall first deliver the part of its oral statement
that contains no BCI or HSBI, and then ask for the video recording to be di scontinued, before
delivering a second part of its oral statement containing BCI or HSBI. Either party shall inform the
Panel if the other party or the Panel is referring to BCI or HSBI, whereupon the Panel shall instruct
that video recording be discontinu ed and instruct any individuals not having BCI /HSBI approval to
exit the room.
1.5. Before each party takes the floor, it shall provide the Panel and other participants at the
meeting with a provisional written version of its statement. BCI or HSBI in the texts of the oral
statements provided to the panel and the other party during the meeting and prior to the delivery
of the oral statements shall be bracketed in accordance with the BCI/HSBI Procedures. BCI should
be contained within single brackets. HSBI should be contained within double brackets and deleted.
In addition, a party including HSBI in its oral statement shall provide, prior to delivery of the oral
statement, one paper copy to the panel and one paper copy to the other party, on coloured paper,
with t he HSBI included in double brackets. This document shall be subject to the same
confidentiality rules as an HSBI Appendix to a written submission.
1.6. During the meeting with the parties, the following persons will be admitted into the meeting
room: (1) the Pa nel; (2) all BCI/HSBI -approved members of the delegations of the parties;
(3) BCI/HSBI-approved WTO Secretariat staff assisting the Panel; and (4) the team hired by the
WTO Secretariat to video record the proceedings. If at any point during the meeting a p arty
intends to refer to BCI or HSBI, those individuals not having BCI/HSBI approval shall be asked to
exit the room. If at any point during the meeting a party intends to refer to either BCI or HSBI, the
team hired by the WTO Secretariat to video record t he proceedings shall be asked to exit the
room.
1.7. After each oral statement has been delivered, the Panel will ask the respective party whether
it can confirm that no BCI or HSBI was pronounced during the video recorded portion of the oral
statement. The Panel will also ask the parties for confirmation, at the end of the meeting, that no
BCI or HSBI was pronounced during the video recorded portion of the meeting. If both parties so
confirm, the showing of the video recording will proceed according to the sche dule to be
determined by the Panel, as provided in paragraph 1.9.
1.8. If either party requests to review the video recording, the Panel will invite both parties to
attend a review session, accompanied by a representative of the Secretariat and the technician
responsible for editing, on the premises of the WTO at an appropriate time after the meeting. In
the event, each party shall designate a maximum of two persons, who shall be BCI/HSBI-approved
persons, to participate in the review session. Parties should b e prepared to advise the technician

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which portion of the oral presentation presents a concern, and limit review to those portions of the
video recording to the maximum extent possible. If either party considers that a specific portion of
the video recording must be deleted – because it is BCI or HSBI – the specific portion of the video
recording will be deleted.
1.9. The showing of the video recording of the oral statements of the parties and non -confidential
portions of the meeting shall take place at a date to be determined by the Panel. The showing will
be open to officials of WTO Members and Observers, to accredited journalists, and to accredited
representatives of non -governmental organizations, upon presentation of their official badges.
Other interested persons will be able to attend by registering directly with the WTO. To this effect,
the Secretariat will place a notice by on the WTO website informing the public of the showing and
including a link through which members of the public can register.

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ANNEX B
ARGUMENTS OF THE PARTIES
Contents Page
Annex B-1 First integrated executive summary of the arguments of the European Union B-2
Annex B-2 Second integrated executive summary of the arguments of the European Union B-10
Annex B-3 First integrated executive summary of the arguments of the United States B-20
Annex B-4 Second integrated executive summary of the arguments of the United States B-28

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ANNEX B-1
FIRST INTEGRATED EXECUTIVE SUMMARY OF THE ARGUMENTS OF THE EUROPEAN UNION
I. INTRODUCTION
1. Pursuant to paragraph 20 of the Panel's Working Procedures (adopted 7 December 2015),
the European Union now provides an integrated executive summary of the facts and arguments
presented in the European Union's (i) first written submission, (i i) first opening oral statement,
(iii) first closing oral statement, and (iv) responses to questions following the first substantive
meeting.
2. In the present dispute, the European Union challenges several subsidies, in the form of tax
incentives awarded by Washington State to aerospace companies, which are contingent on the use
of domestic over imported goods, and hence prohibited under Article 3.1(b) of the SCM
Agreement. These tax incentives, originally established by House Bill 2294 ("HB 2294"), hav e
been amended, and extended through 2040, by Substitute Senate Bill 5952 ("SSB 5952").
3. With its first written submission, the European Union established a prima facie case that
(i) the measures at issue are subsidies within the meaning of Article 1.1 of the SCM Agreement,
and that (ii) these subsidies are contingent on the use of domestic over imported goods within the
meaning of Article 3.1(b).
4. As for "subsidy", the European Union has demonstrated the existence of a financial
contribution in the form of foregoing of government revenue otherwise due, within the meaning of
Article 1.1(a)(1)(ii). Further, the European Union has demonstrated that the measures confer a
"gift" on the recipients that would not have been available in the market, thereby conferring a
“benefit” within the meaning of Article 1.1(b).
5. As for the prohibited contingency, the European Union refers to both the text of SSB 5952
(de jure contingency), and certain additional facts ( de facto contingency). While the European
Union advances both de jure and a de facto claims of contingency, its first and principal claim is
the de jure claim.
6. By way of background, the European Union notes that Washington State, itself, has
quantified the total value of the revenue foregone pursuan t to the conditional amendments and
extensions established by SSB 5952 - nearly USD 9 billion. While the quantum of subsidization is
irrelevant to a prohibited subsidy dispute as a legal matter, it is pertinent to note that the
measures at issue confer on their beneficiaries – with Boeing being the principal beneficiary – the
single largest targeted state tax break in United States history.
II. FACTUAL ASPECTS
A. The Washington State Aerospace Tax Incentives
7. At issue in this dispute are tax incentives f or civil aircraft provided by the State of
Washington (the "aerospace tax incentives"), as amended and extended by SSB 5952, and as
subject to the conditions in Sections 2, 5, and 6 thereof.
8. In 2003, the State of Washington enacted HB 2294 for the pur pose of "retaining and
attracting the aerospace industry to Washington State" and included a set of "comprehensive tax
incentives" directed at achieving this aim. This legislation was part of a package of incentives for
Boeing to locate the 787 final asse mbly facility in Washington. HB 2294 took effect upon a final
decision to site a facility in Washington State "with the capacity to produce at least thirty -six
super-efficient airplanes a year," defined by the precise specifications for the 787.
9. HB 2 294 established seven tax incentives for producers of civil aircraft (including certain
suppliers):

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 A reduction in the rate of Business and Occupation ("B&O") tax, i.e., the State of
Washington's principal business tax, to 0.2904%, compared to the generally applicable rates
of 0.484% for manufacturing, and 0.471% for retailing activities.
 A B&O tax credit for pre-production development for commercial airplanes and components;
 A B&O tax credit for property taxes on commercial airplane manufacturing facilities;
 An exemption from sales and use taxes for certain computer hardware, software, and
peripherals;
 An exemption from sales and use taxes for certain construction services and materials;
 An exemption from leasehold excise taxes on port district facili ties used to manufacture
superefficient airplanes; and
 An exemption from property taxes for the personal property of port district lessees used to
manufacture superefficient airplanes.
10. While the tax incentives that originated in HB 2294 were originall y enacted in connection
with Boeing's decision to locate the first 787 final assembly line in Washington State, HB 2294
provided that those benefits were to apply to all Boeing LCA developed and produced in
Washington State, through the original expiration date of 1 July 2024.
B. The Conditional Extension and Amendment of the Washington State Aerospace Tax
Incentives: Substitute Senate Bill 5952
1. The 777X incentive legislation
11. Over the course of 2013, Boeing publicly considered developing a new, adv anced variant of
its 777 family of long -range, twin -aisle LCA, known as the 777X. On 5 November 2013,
Washington State, Boeing, and the trade union representing Boeing machinists reached a tentative
agreement to locate production of the 777X in Washington , whereby the union would agree to a
new long-term contract, and the State would provide Boeing with billions of dollars in additional
subsidies.
12. On 9 November 2013, the Washington State legislature passed SSB 5952, which, subject to
certain conditio ns discussed below, amends and extends each of the existing aerospace tax
incentives – originally due to expire in 2024 – through 2040, at a value estimated at more than
USD 8.7 billion for Boeing, its suppliers, and other local aerospace firms. Governor Jay Inslee
signed SSB 5952 into law on 11 November 2013.
2. The Programme-Siting condition
13. Section 2 of SSB 5952 provides that the entire act would take effect only upon the decision
to locate a new commercial aircraft programme – expressly defined to include wing and fuselage
production of an aircraft, in addition to final assembly of that same aircraft – in Washington State.
Specifically, Section 2 provides that:
{this act} takes effect contingent upon the siting of a significant commercial airplane
manufacturing program in the state of Washington. If a significant commercial
airplane manufacturing program is not sited in the state of Washington by June 30,
2017, {this act} does not take effect.
The European Union refers to this provision as the "Programme-Siting condition".
14. Section 2 defines "siting" to mean "a final decision, made on or after November 1, 2013, by
a manufacturer to locate a significant commercial airplane manufacturing program in Washington
state". It further defines "significant commercial airplane manufacturing program" as:

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an airplane program in which the following products , including final assembly, will
commence manufacture at a new or existing location within Washington state on or
after the effective date of this section:
(i) The new model, or any version or variant of an existing model, of a commercial
airplane; and
(ii) Fuselages and wings of a new model, or any version or variant of an existing
model, of a commercial airplane.1
15. Accordingly, under the Programme -Siting condition established in Section 2, the aerospace
tax incentive extensions and expansion provided for in SSB 5952 were made contingent upon
Boeing's decision to locate in Washington State both (i) production of the wings and fuselage for a
new aircraft m odel, version, or variant, and (ii) final assembly of that same aircraft model,
version, or variant. In fact, the relevant aircraft turned out to be the 777X.
3. The Exclusive-Production condition
16. In addition to the Programme -Siting condition, SSB 5 952 establishes a second condition
related to the availability of the B&O tax rate reduction for the 777X, hereinafter referred to as the
"Exclusive-Production condition".
17. Pursuant to the Exclusive-Production condition, the reduced B&O tax rate would not apply to
revenue from the 777X in the event Boeing were to perform any final assembly, or any wing
assembly, for the 777X outside of Washington State.
III. PROHIBITED SUBSIDIES UNDER ARTICLE 3.1(B) OF THE SCM AGREEMENT
A. The Aerospace Tax Incentive s, as Amended by SSB 5952, Constitute Specific
Subsidies
1. Financial contribution
18. Each of the aerospace tax incentives, as amended and extended by SSB 5952, constitutes a
financial contribution by a government involving the "forego{ing}" of "governmen t revenue that is
otherwise due" within the meaning of Article 1.1(a)(1)(ii) of the SCM Agreement.
19. The identification of revenue "otherwise due" involves a comparison between the challenged
measure and a "defined, normative benchmark". According to the Appellate Body Report in US –
FSC (Article 21.5 – EC), the proper comparison must be "between the rules of taxation contained
in the challenged measure and other rules of taxation of the Member concerned", and "{i}n
identifying the appropriate benchmar k for comparison, panels must obviously ensure that they
identify and examine fiscal situations which it is legitimate to compare".
20. In response to Panel Question 24, and expanding on the European Union's prima facie
showing in its First Written Submi ssion, the European Union has further specified the relevant
normative benchmark for each of the measures at issue, demonstrating that the tax treatment
enjoyed by the beneficiaries involves foregoing of revenue that would be due under the relevant
benchmark. Additionally, the European Union has explained that Washington State, itself, has
publicly acknowledged this foregoing of revenue, and has even quantified the revenue that is
foregone under each of the measures at issue, making the Panel's task a simple one.
21. In analyzing Article 1.1(a)(1)(ii), the Appellate Body in US – FSC has explained that the
word "foregone" "suggests that the government has given up an entitlement to raise revenue that
it could 'otherwise' have raised". 2 When a government confers upon a taxpayer an entitlement to
a tax reduction, it foregoes its own entitlement to raise a part of the revenue that would otherwise
be due from the taxpayer under the normative benchmark. Through each of the tax breaks at
issue, Washington State h as conferred an entitlement on Boeing and other Washington State

1 Emphasis added.
2 Emphasis added.

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aerospace companies to receive the continued tax reductions, contingent on satisfaction of the
Programme-Siting and Exclusive -Production conditions. In that sense, the government is
foregoing, and has foregone, revenue that is otherwise due.
22. In response to Panel Question 6, the European Union has clarified that its challenge is
directed at the tax incentives, as amended and extended by SSB 5952, "as such"; this challenge is
not focused on the application of these measures during any given point in time or in any specific
instance. Having said that, the European Union has also demonstrated that the challenged tax
incentives have already foregone revenue that became due in the past, reven ue that is currently
due, and revenue that will become due in the future. All of these are relevant to determining the
existence of a financial contribution within the meaning of Article 1.1(a)(1)(ii) of the SCM
Agreement.
23. The European Union has clar ified that SSB 5952 not only (conditionally) extended the
expiration date of the existing tax incentives from 2024 through 2040, but also amended the sales
and use tax exemption for construction services and materials so that Boeing could take
advantage of that exemption in constructing its new 777X manufacturing facilities in 2015
and 2016. Thus, SSB 5952 has already led to foregoing of revenue in the past, and this was
dependent on satisfaction of the Programme -Siting condition. In addition, Boeing's co ntinued
enjoyment of the B&O tax rate reduction associated with the 777X production and sales is
currently subject to the Exclusive-Production condition.
24. With respect to the 2024-2040 period, an entitlement in favour of Boeing has been created,
and, in turn, an entitlement has been foregone by Washington State, at present. An interpretation
under which only foregoing of revenue due in the past would constitute a financial contribution
would allow Members to craft prohibited subsidy programs that incl ude a long time gap between
the intended distortion (through the meeting of the prohibited contingency) and the reward for
such conduct in the form of disbursement of a subsidy, in a manner that would limit the
effectiveness of a challenge under Article 3. 1(b). Moreover, Article 3.2 clarifies that
“maintain{ing}” a subsidy programme tied to the prohibited contingencies violates the SCM
Agreement, even when the financial contribution is yet to be “grant{ed}”, let alone actually
disbursed or used.
2. Benefit
25. The European Union has demonstrated that the financial contribution in the present dispute
– in the form of forgiveness of tax obligations – is, in the words of the panel in US – Large Civil
Aircraft, “essentially a gift from the government, or a waiv er of obligations due, and it is clear that
the market does not give such gifts”. Thus, there is a benefit because the very nature of a market
precludes the availability of multi-billion dollar gifts to a commercial actor.
3. Conclusion on “subsidy”
26. The European Union, consistent with its burden to establish a prima facie case, has
demonstrated that each of the measures at issue provides a financial contribution and confers a
benefit. Absent effective rebuttal by the United States, the very nature of a prima facie case
requires the Panel to make findings in favour of the European Union.
27. The European Union also recalls that the findings it seeks are largely consistent with the
“financial contribution” and “benefit” findings made by the panel and the Appellate Body in United
States – Large Civil Aircraft. While the European Union's reliance on these findings certainly does
not erase the burden to establish a prima facie case (which it has discharged), the goals of
predictability and security set out in Article 3.2 of the DSU, as well as the guidance of the
Appellate Body, would warrant the Panel arriving at findings consistent with those made by the
panel and Appellate Body in United States – Large Civil Aircraft , to the extent the relevant facts
have not changed.
28. The European Union acknowledges that the United States – Large Civil Aircraft panel held
that three of the tax incentives at issue did not involve a financial contribution because Boeing was
unlikely to use these incentives. These are t he (i) sales and use tax exemption for construction
services and materials, (ii) leasehold excise tax exemption and (iii) leaseholder property tax

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exemption. The panel expressly stated that its finding was a result of the European Union's claim
not being one of a financial contribution in the abstract, but one specifically of a financial
contribution to Boeing. By contrast, in the present instance, the European Union alleges financial
contribution in the abstract, warranting a different conclusion. Addit ionally, the European Union
has also demonstrated that, with the construction of the new 777X wing assembly plant, which
commenced in 2014 and is expected to be completed in 2016, there is evidence of Boeing having
used the sales and use tax exemption for construction services and materials.
B. The Aerospace Tax Incentives, as Amended by SSB 5952, Constitute Prohibited
Subsidies Contingent upon the Use of Domestic over Imported Goods
29. As a result of the Programme -Siting and Exclusive -Production conditio ns established in
SSB 5952, the aerospace tax incentives, as amended and extended, constitute prohibited subsidies
"contingent ... upon the use of domestic over imported goods" within the meaning of Article 3.1(b)
of the SCM Agreement. While the European Union advances both a claim of de jure contingency
and of de facto contingency, its first and principal claim is that of de jure contingency.
1. The legal standard for demonstrating the existence of a subsidy contingent upon
the use of domestic over imported goods
30. Article 3.1(b) of the SCM Agreement provides that "subsidies contingent, whether solely or
as one of several other conditions, upon the use of domestic over imported goods" "shall be
prohibited".
31. The United States correctly points out th at the French and Spanish texts of Article 3.1(b)
employ the terms produits and productos. The European Union agrees with the United States that
the use of the words produits and productos in the French and Spanish versions is instructive, and
the Europea n Union considers the word "goods" in Article 3.1(b) of the SCM Agreement to be
synonymous with the term "products".
32. The European Union has also indicated its agreement with the United States and Japan that
the word "over", in the text of Article 3.1(b ), means "in preference to", "in excess of" or "more
than". Further, the use of the word "over" (i.e., "in excess of") in Article 3.1(b) confirms that no
de minimis discrimination is acceptable under the prohibition in Article 3.1(b) of the SCM
Agreement. As soon as a subsidy is contingent upon the use of domestic over imported goods,
competitive opportunities between domestic and imported goods are distorted, even if no such
goods are currently imported.
33. The European Union has also set out its unders tanding that the word "use" in Article 3.1(b)
has a broad meaning, including in response to Panel Question 44. Prior guidance of the Appellate
Body, and the context afforded by other provisions of covered agreements that employ the word
"use", indicate that its meaning goes beyond simple incorporation of a domestic input in the final
subsidised product.
34. To the extent that the United States argues that a "good" , within the meaning of
Article 3.1(b), must be actually traded, the European Union disagree s. This argument ignores a
hallmark tenet of WTO jurisprudence that the disciplines on goods protect not just actual trade in
goods as seen or envisioned in the market today, but also competitive opportunities . In the
context of a purely origin -based discrimination, such as mandated by the legislation at issue, this
protection extends to "potentiality to compete" even in the absence of an actual product which is
traded at the relevant time.
35. If the United States were correct that actual trade in a product needs to be demonstrated for
it to qualify as a "good" under Article 3.1(b), the most trade restrictive of import substitution
subsidies – i.e., those which have succeeded in distorting the market so much that they preclude
even the existence of competing foreign producers in the market – would not be disciplined by
Article 3.1(b), while less trade distorting import substitution subsidies would be subject to that
provision.

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2. Application of the legal standard to the facts of this case
36. The Euro pean Union fully agrees with the United States and the third parties that
Article 3.1(b) does not discipline production subsidies. However, the measures at hand are not
production subsidies, but subsidies contingent on the use of domestic over imported go ods, which
are properly within the scope of the prohibition in Article 3.1(b).
37. In this case, pursuant to the Programme-Siting condition in Section 2 of SSB 5952, the
amended and extended aerospace tax incentives are contingent on the establishment of a new
commercial aircraft manufacturing programme that uses goods (i.e., fuselages and wings)
produced in the United States (specifically, in Washington State) in the subsidized aircraft. Under
this condition, the tax incentives would not have been extended in duration through 2040 if Boeing
had decided to "use" imported wings and fuselages in the assembly of the 777X, nor would the
scope of the sales and use tax exemption for construction services and materials have been
expanded to cover Boeing's work on the 777X manufacturing facilities in 2015 and 2016.
38. Likewise, pursuant to the Exclusive-Production condition, Boeing benefits from the reduced
B&O tax rate for the 777X only so long as it "uses" wings assembled exclusively in Washington
State for the 777X, or any variant thereof. If, for example, Boeing were to use any wings made in
Japan for the 777X, as it does for the 787, it would lose its entitlement to the preferential B&O tax
rate with respect to the manufacture and sale of the 777X.
39. In re sponse to the European Union's arguments in this regard, the United States asserts
that wings and fuselages are not "goods", and that they are not "used" in the production of the
777X. But the very wording of SSB 5952, itself, describes wings and fuselage s as "products", a
term synonymous with the word "goods". The European Union refers to the shared understanding
of the World Customs Organization, the United States' Customs authorities, Washington State,
Boeing, and Airbus – outside the context of this d ispute – that wings and fuselages are goods.
There are real world examples, including the Boeing 787 and 737, and the Airbus A350 and A380,
where aircraft wings and fuselages have been traded and transported across long distances.
40. While it is not in cumbent upon the complaining Member in a prohibited subsidy dispute to
positively demonstrate nullification and impairment – in the form of prior existing identifiable
competitive opportunity, and its erosion by the challenged measure – the European Union also
demonstrates that prior to the enactment on SSB 5952, Boeing had considered importing the 777X
wing from Japan, as it currently does for the 787. The European Union referred the Panel to a
November 2013 statement by Boeing's own Chief Technology Officer, Mr. John Tracy. According to
press reports, Mr. Tracy explained, immediately before the adoption of SSB 5952, that Boeing was
“consider{ing} all other alternatives", and specifically clarified that such alternatives included "the
possibility of taking production of the wings out of the United States to Japan".
41. The United States provides details of how Boeing today intends to produce the 777X. While
a publicly-available technical report by Washington State's Department of Ecology contradicts the
United States' current narrative about this production process, the European Union considers it
unnecessary to enter into a protracted debate on 777X production. These details are an irrelevant
distraction. It is necessary to evaluate a challenge to Article 3.1(b) in view of the market situation
at the point in time prior to adoption of a challenged measure.
42. SSB 5952 was adopted, and worded the way it is, precisely in order to take away
competitive opportunity from wing and fuselage producers outside of Washington State.
Therefore, what Boeing or any other entity does today or intends to do in the future in a market
scenario distorted by the subsidies at issue is irrelevant and extraneous to the issues at hand.
43. The United States' assertion that the conditions at hand establish the eligibility parameters
for a “production subsidy” is equally erroneous. It is true that SSB 5952 begins by providing that
the subsidized product – a commercial aircraft – must be produced in Washington State. This
aspect, taken alone, is a hallmark of a production subsidy, which would not be disciplined by
Article 3.1(b). However, the references to wings and fuselages, which the United States struggles
to read out of SSB 5952, convert what would otherwise be a produc tion subsidy into a prohibited
local content contingency.

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44. The Programme-Siting condition provides that the required “fuselages and wings” cannot be
just any type of “fuselages and wings” – rather, they must be fuselages and wings of the same
“airplane program” that must be “fina{lly} assembl{ed}” in Washington State. Similarly, the
Exclusive-Production condition does not provide only that “wing assembly”, generally, must take
place in Washington State; rather, it must be the “wing assembly of any v ersion or variant of a
commercial airplane that is the basis of a siting of a significant commercial airplane manufacturing
program in the state”. Thus, according to the text of the legislation, fuselages and wings must be
produced in Washington State, and these same components must be used in the final assembly of
the subsidized airplane program.
45. The interpretation of Washington State law is a question of fact before this Panel that must
be considered objectively, and the United States' interpretati on cannot be the correct one. When
interpreting domestic law of a Member, the role of a WTO panel is to determine whether the
description of the functioning of the law, as made by the respondent, is consistent with the legal
structure of that Member. As a matter of Washington State law, "{s}tatutes must be interpreted
and construed so that all the language used is given effect, with no portion rendered meaningless
or superfluous". The United States' proposed interpretation would, in fact, render critical parts of
SSB 5952 meaningless and superfluous – namely, the references to wings and fuselages. As such,
the United States' arguments must be rejected.
3. The violation of Article 3.1(b) is both de jure and de facto
46. The European Union has established a prima facie case in respect of its first and principal
claim – one of de jure contingency, with reference to the text of SSB 5952, which expressly sets
out a multi-billion dollar reward for the use of domestic wings and fuselages, and a corresponding
multi-billion dollar penalty for the use of imported wings and fuselages. The text of SSB 5952
does not provide, as did the measure considered by the Appellate Body in Canada – Autos, a
"multiplicity of possibilities for compliance" with the Program -Siting a nd Exclusive -Production
conditions that may "make the use of domestic goods only one possible means". It provides one
and only one possibility for compliance – the use of domestic wings and fuselages in the same
aircraft that satisfied the Programme Sitin g condition – and makes the subsidies contingent on
compliance. Thus, the very text of SSB 5952 demonstrates the de jure contingency that the
European Union alleges.
47. Additionally, the European Union has identified the following facts, which are demons trative
of de facto contingency in the present case:
 The text of SSB 5952, and in particular the language of the Programme -Siting condition and
Exclusive-Production condition;
 The statement of Governor Inslee indicating that "the legislation includes strong contingency
language";
 The fact that Boeing currently imports wings for its 787 from Japan;
 The fact that Boeing actively considered the possibility of importing the 777X wings from
Japan prior to the enactment of SSB 5952, and formally decided against t hat option once
SSB 5952 was enacted.
 The fact that SSB 5952 creates specific multi -billion dollar penalties for use of imported
wings or fuselages, and multi -billion dollar rewards for use of domestic wings or fuselages.
This penalty/reward structure w as designed to distort decision -making both at the initiation
of the new aircraft programme (i.e. Programme -Siting condition), and throughout the life of
that programme (i.e. Exclusive-Production condition).
IV. CONCLUSION AND REQUEST FOR RELIEF
48. For the reasons set out in its submissions to date, the European Union respectfully requests
the Panel to find that each of the Washington State tax incentives, as amended and extended by
SSB 5952, constitutes a subsidy that is prohibited pursuant to Articles 3. 1(b) and 3.2 of the SCM
Agreement.

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49. In accordance with Article 4.7 of the SCM Agreement, the Panel should recommend that the
United States withdraw the subsidies without delay.

- B-10 -

ANNEX B-2
SECOND INTEGRATED EXECUTIVE SUMMARY OF THE ARGUMENTS OF THE EUROPEAN UNION
I. INTRODUCTION
1. In accordance with the Panel's Working Procedures (adopted 7 December 2015), the
European Union now provides an integrated executive summary of the facts and arguments
presented in the European Union's (i) second written submission, (ii) oral statement at the second
substantive meeting, and (iii) responses (and comments on the United States' responses) to the
Panel's questions following the second substantive meeting.
2. During the course of this dispute, the European Un ion has provided evidence and argument
demonstrating that Washington State's aerospace tax incentives, as amended and extended by
SSB 5952 1, confer subsidies that are de jure contingent on the use of domestic over imported
goods, in violation of Articles 3 .1(b) and 3.2 of the Agreement on Subsidies and Countervailing
Measures ("SCM Agreement"). The Panel has before it the text of the legislation (submitted as
Exhibit EU-03), which expressly conditions the provision of over $9 billion in subsidies on the us e
of domestic "products" on aircraft manufactured in Washington State. The European Union has
also demonstrated, through additional factual evidence, a secondary claim of de facto contingency,
also under Articles 3.1(b) and 3.2.
3. Recalling the text of S SB 5952, Section 2 provides (in the "Programme -Siting condition")
that the amended and extended subsidies would not be granted unless a new commercial aircraft
program which uses domestically-made " products", namely "fuselages and wings", is sited in
Washington State. Additionally, Sections 5 and 6 (in the "Exclusive -Production condition") would
serve to remove a large portion of one of the most valuable tax incentives in the package if the
aircraft manufacturer satisfying the Programme -Siting condition we re to use any foreign-made
wings in the newly sited aircraft manufacturing facility in Washington State.
4. This statutory text is further supplemented by additional factual evidence. Most notably, in
testimony to the Finance Committee of Washington State's House of Representatives just two days
prior to passage of SSB 5952, Governor Jay Inslee explained in the following terms why he was
sponsoring the legislation, and why the legislature should quickly pass it:
Look, this is pretty simple what we a re looking at here, and that is a simple fact, and
that is the construction of the Boeing 777X and its carbon fiber wing, and assembly of
that airplane, will be the lynchpin for economic growth in the State of Washington in
the decades to come. We have an opportunity in the few days ahead of us to make
sure that advanced manufacturing of the carbon fiber wing – the first time we have
reversed the outflow of work of this nature from the State of Washington to bring it
back to the State of Washington, we can achieve that in the next few days. And I
can't overstate the significance of this event . Bringing this wing back to the State of
Washington sets the foundation for an advanced carbon fiber industrial ecosystem in
the State of Washington. When we lost the wing for the Boeing 787 , some thought
Washington would lose its lead in composites and advanced manufacturing. The 787
wing went to Japan ; the second line went to South Carolina. . . . Today, we are
going to reverse that trend with the 777X and its carbon fiber wing built here in the
State of Washington . . . .2
5. Governor Inslee's statement could not have been any clearer – SSB 5952 amended and
extended the tax incentives to the aerospace industry with conditions that will ensure that
Washington State would not, once again, "los{e} the wing" to Japan, as it did for the 787. Rather,

1 The European Union uses the term "SSB 5952" to refer to the law that is designated as Chapter 2 of
the Laws of the 2013 3rd Special Session of the Washington State legislature, and published in the 2014 volume
of the official digest of the Session Laws of the State of Washington, beginning at page 2. The United States
refers to the same legislation as "ESSB 5952".
2 Emphases added.

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through the Programme -Siting and Exclusive -Production conditions, Washington State has
"reversed the outflow" of those inputs for Boeing's latest aircraft programme so t hat they will be
"built" "in the State of Washington". This was not the statement of a leader who would have
accepted the current United States' assertions that wings of the 777X could not possibly be
imported from foreign countries. Nor would the Govern or have accepted the novel United States'
position that wings are not components of a plane that are used in aircraft production.
6. The Washington State legislature passed the Governor's proposed legislation two days later.
And, as a result of these co nditions, SSB 5952 has already been a big success – and certainly not
the "demonstrable failure" alleged by the United States – in ensuring that the wings and fuselages
for Boeing's next new aircraft programme will be domestic goods.
7. Having summarised w hat this dispute is about, it is important to clarify what the present
dispute is not about:
 Despite the United States' repeated contentions to the contrary, this dispute is not about a
simple "production subsidy" that provides a financial contribution and benefit to domestic
producers without regard to whether domestic or imported goods are used in production of
the subsidised product.
 This is not a dispute related to contingency on the use of domestic over imported
components of wings and fuselages. Ra ther, the European Union's claim is that the
prohibited contingency in SSB 5952 is based on the use of domestic over imported wings
and fuselages, which are themselves "goods".
 This is not a dispute about the use of objects that could not be consider ed "goods". In fact,
the United States, itself, accepts (as it must) that wings and fuselages are traded on a
regular basis, including for large commercial aircraft.
8. With respect to the "subsidy" element, the United States' response consists primarily of
repeated and erroneous assertions that a prima facie case has not been established, and
ambiguous observations about the types of evidence the United States might present if there were
a prima face case to rebut. For example, the United States has made cursory "suggestions" (i)
that Washington State's tax regime has a "complicated structure" that may result in an effect
known as "pyramiding", (ii) that Washington State primarily relies on a Business and Occupation
("B&O") tax, which is unlike the tax re gimes in other states in the United States, and (iii) that
there exist "numerous product-based, entity-based, use-based, and other similar tax adjustments"
in Washington State. The United States has not taken a position on how the first two of these
assertions should affect the Panel's determination of the normative benchmarks. On the third, the
United States has made certain belated and erroneous observations in its response to Panel
Question 60, which the European Union discusses below.
9. With respect to "benefit" within the meaning of Article 1.1(b) of the SCM Agreement, in
stark contrast to all WTO panels that have previously considered the issue, the United States
asserts that the existence of tax breaks constituting a financial contribution within t he meaning of
Article 1.1(a)(1)(ii), which by their very nature are a "gift" from the government to the recipient,
does not demonstrate conferral of "benefit".
10. As for contingency under Article 3.1(b) of the SCM Agreement, all of the United States'
arguments are based on three fundamental flaws – (i) an erroneous definition of "goods", (ii) an
erroneous understanding of "use", and (iii) a focus on components of wings and components of
fuselages as the relevant "domestic" and "imported" goods at issue, ra ther than the "products"
actually referenced in SSB 5592 – i.e. wings and fuselages.
11. In presenting its defense, the United States interprets both the text of SSB 5952 and that of
the SCM Agreement in a manner that contradicts their ordinary meanings (considered in context
and in light of the relevant object and purpose), while offering no substantiation for such
interpretations. As for the evidence of de facto contingency, the United States' strategy has been
to rely on assertions and statements tai lor-made for the present dispute, and to casually dismiss
inconvenient evidence from the real world as "imprecise" or "colloquial references".

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12. While the United States has erred in accusing the European Union of "trying to fit a square
peg into a roun d hole" in this dispute by characterizing the challenged incentives as prohibited
subsidies (rather than production subsidies), the actual problem here is that the United States is
attempting to drill a hole in the SCM Agreement so large that any Member co uld easily avoid the
disciplines of Article 3.1(b). The factual inaccuracies and legal fallacies associated with each of the
US assertions have been highlighted by the European Union in its submissions. In the following
sections, the European Union briefly summarizes the arguments presented in the European Union's
second written submission and its subsequent submissions
II. THE AEROSPACE TAX IN CENTIVES, AS AMENDED BY SSB 5952, CONSTIT UTE
SPECIFIC SUBSIDIES
13. The European Union's second written submissio n once again details why the tax incentives,
as amended and extended by SSB 5952, constitute specific subsidies within the meaning of
Articles 1 and 2 of the SCM Agreement. In particular, the European Union has explained that each
of the seven aerospace t ax incentives confers a financial contribution involving the "forego{ing}"
of "government revenue that is otherwise due", within the meaning of Article 1.1(a)(1)(ii) of the
SCM Agreement. For each individual tax incentive, the European Union has provided details about
the relevant normative benchmark. With respect to "benefit", the European Union again
demonstrated that the tax breaks are a "gift" from the government that the recipients would not
receive in the market. As for specificity, there is no dis pute that subsidies violating Article 3.1(b)
are deemed "specific" pursuant to Article 2.3 of the SCM Agreement.
A. Financial Contribution
14. The European Union now summarizes its responses to the United States' (1) arguments
regarding the timing of the tax incentives, and (2) suggestions related to the normative
benchmarks, as they relate to the issue of "financial contribution" under Article 1.1(a)(1)(ii) of the
SCM Agreement.
1. Timing
15. The United States first hinted at a position, similar to the one it adopted in the United States
– Large Civil Aircraft dispute, that only revenues foregone in the past would qualify as a financial
contribution within the meaning of Article 1.1(a)(1)(ii) of the SCM Agreement. The European
Union demonstrated that ther e is no textual basis for such a temporal limitation. Further, the
Appellate Body has interpreted the word "foregone" in Article 1.1(a)(1)(ii) to mean " the
government has given up an entitlement to raise revenue that it could 'otherwise' have raised", 3
an action that does not have to occur after the revenue has become payable. If accepted, the
United States' interpretation would incentivise Members to craft prohibited subsidy programmes in
which the subsidy is received as a delayed reward for satisfying a prohibited contingency; in
particular, the United States' interpretation could preclude a timely, effective challenge under
Articles 3.1(b) and 3.2 in such circumstances, where the grant is complete and the firm is already
in a position to account for, rely on, and benefit from a future revenue stream.
16. The United States subsequently modified its views on the temporal restriction it seeks to
impose on Article 1.1(a)(1)(ii). In particular, in its response to Panel Question 21, the United
States suggested that Article 1.1(a)(1)(ii) may cover the foregoing of revenue that would have
become due in the future within "the coming year", but not later. The United States has offered
no reasoning for its oscillating positions on temporal restrictions. Such legal arguments are not
only erroneous, but they are internally inconsistent.
17. In addition, putting aside the United States' flawed legal interpretation, the European Union
has explained that five of the seven tax incentives have, in fact, actually fore gone revenue in the
past, including since the November 2013 entry into force of SSB 5952. In fact, the United States
does not deny that the following tax incentives have already lowered the taxes of the Washington
State aerospace industry in the past, and continue to do so in the present: (1) B&O tax rate
reduction for the manufacture and sale of commercial airplanes; (2) B&O tax credit for pre -
production development of commercial airplanes and components; (3) B&O tax credit for property

3 Emphasis added.

- B-13 -

taxes and leasehol d excise taxes on commercial airplane manufacturing facilities; (4) exemption
from sales and use taxes for computer hardware, software, and peripherals; and (5) exemption
from sales and use taxes for certain construction services and materials.
2. Normative benchmark
18. Until its most recent submissions, the United States refused to engage in a specific
discussion of the relevant normative benchmarks in the present dispute, other than to repeatedly
assert that the European Union did not identify any such benchmarks. In fact, the European Union
has identified and detailed such normative benchmarks, beginning with its first written submission.
19. In its second written submission, the United States appeared to argue that the pre -existing
aerospace tax incentives initiated under House Bill 2294 ("HB 2294") could provide the appropriate
normative benchmark to determine whether the measures at issue involve a financial contribution
under Article 1.1(a)(1)(ii). In response, the European Union recalled that a normative benchmark
is the tax rate that would normally apply, taking into account the structure of the particular tax
system. As the panel and Appellate Body correctly found in US – Large Civil Aircraft , the
0.2904 percent tax is the subsidized B&O tax rate for commercial aircraft; as such, it cannot be
the normative benchmark.
20. The United States also suggested that the various specifically -targeted sales and use tax
exemptions offered by Washington State to entities outside the aerospace industry are somehow
relevant to identification of the normative benchmark. As the European Union has explained,
however, special tax treatment accorded to particular companies or industries does not reflect "the
tax rates that would normally apply". Rather, the tax treatment generally applicable to all actors
engaging in the relevant taxable activities within Washington State – for example, manufacturing
or retail sales in the case of the B&O tax rate reduction – is what is relevant for identifying "the tax
treatment of comparable income of comparably situated taxpayers".
21. In its response to Question 60, the United States submitted a table of figures which,
according to the United States, "suggest{s}" that the generally applicable tax rates for the taxes
at issue have become the exceptions rather than the general rule, and therefore cannot serve as
the normative benchmark. However, these belatedly submitted numbers do not warrant the
conclusion that the United States seeks. In that table, the United States treat s every instance in
which Washington State has not imposed the maximum tax liability with respect to a particular
activity – including even those instances where Washington State is constitutionally prohibited
from imposing a tax – as an "exemption". Thus , based in large part on numerous "exemptions"
completely irrelevant to an enquiry under Article 1.1(a)(1)(ii), the United States then claims that a
majority of all revenue in Washington State is subject to "exceptions", rendering the general tax
rates purely notional. In view of the figures relied upon by the United States, this proposition goes
against the Appellate Body's express guidance that a normative benchmark, "cannot, {...} be an
entitlement in the abstract, because governments, in theory, could tax all revenues." The
European Union applied corrections to this table, eliminating some instances which are not
foregoing of revenue otherwise due in the sense of Article 1.1(a)(1)(ii), and arrived at the
conclusion that far lower portions of the total revenue in Washington State are subject to
"exemptions" from the general rate.
22. Even the corrected figures presented by the European Union suffer from two major
drawbacks, however. First, these figures do not account for local property taxes or local sales and
use taxes, which are also subject to the property tax exemption, and the two sales and use tax
exemptions at issue. Second, the United States failed to remove from its calculations the tax
exemptions resulting from the very subsidies being challen ged in the present dispute. In United
States – Large Civil Aircraft , the Appellate Body found that this second error rendered similar
United States' figures useless for evaluating the normative benchmark.
B. Benefit
23. The European Union has demonstrated that the financial contribution in the present dispute
– in the form of forgiveness of tax obligations – is, in the words of the panel in US – Large Civil
Aircraft, "essentially a gift from the government, or a waiver of obligations due, and it is clear t hat

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the market does not give such gifts". A "benefit" exists because the very nature of a market
precludes the availability of multi-billion dollar gifts to a commercial actor.
24. In response, the United States presented an irrelevant "example", asking t he Panel to
consider a case where a tax break would not provide a "benefit" when, " by not taking the
challenged tax treatment, the taxpayer qualified instead for another equal or better tax
treatment". Here, the United States appeared to suggest that, in some instances, it may become
possible for the taxpayer to forego the tax incentive at issue, and instead avail itself of generally
available tax treatment that is more or equally advantageous to that incentive. This, however,
would appear to relate to th e relevant benchmark for purposes of the "financial contribution"
analysis, rather than the analysis of "benefit" conferred by a tax measure already found to provide
a financial contribution. Moreover, the United States fails to demonstrate, or even asser t, that the
facts of the present case are somehow similar to this "example". They are not.
C. Conclusion on "subsidy"
25. The European Union, consistent with its burden to establish a prima facie case, has
demonstrated that each of the tax incentives at issue provides a financial contribution and confers
a benefit. Absent effective rebuttal by the United States, the Panel must make findings in favour
of the European Union.
III. THE AEROSPACE TAX IN CENTIVES, AS AMENDED BY SSB 5952, CONSTIT UTE
PROHIBITED SUBSIDIES CONTINGENT UPON THE USE OF DOME STIC OVER IMPORTED
GOODS
26. As a result of the Programme -Siting and Exclusive -Production co nditions established in
SSB 5952, the aerospace tax incentives, as amended and extended, constitute prohibited subsidies
"contingent ... upon the use of domestic over imported goods" within the meaning of Article 3.1(b)
of the SCM Agreement.
27. The European Union has explained that, as of the moment SSB 5952 became law in 2013,
the amended and extended tax incentives provi ded subsidies contingent on the use of domestic
over imported goods. Consequently, the United States' contention that the European Union " has
the burden to demonstrate that {the} contingency obtains specifically with respect to the alleged
subsidy conferred from July 1, 2024, to June 30, 2040" does not follow from the European Union's
actual claims in this dispute.
28. The United States errs when it asserts that "the treatment prior to 2024 under any of these
measures … is a priori not contingent on any of the conditions introduced by ESSB 5952" . As the
European Union has explained on several occasions, under the Exclusive -Production condition, if a
determination is made – at any point after the Programme -Siting condition was satisfied in
July 2014 – that Boeing has sited any wing assembly outside Washington State (for any version or
variant of the airplane programme that was the basis for satisfying the Programme -Siting
condition), the B&O tax rate reduction would become inapplicable to Boeing's revenues f rom that
programme (i.e., 777X program). Additionally, had Boeing not satisfied the Programme -Siting
condition, the amendments extending the sales & use tax exemptions for construction services and
materials to cover all commercial aircraft (not just supe refficient airplanes), would not have taken
effect. Thus, the current availability of the B&O tax rate reduction for the 777X programme, and
the current availability of the sales and use tax exemptions for construction services and materials,
are already contingent on meeting the conditions on SSB 5952, even before 2024.
29. The Panel is faced with subsidies de jure contingent upon the decision by an aircraft
producer to use domestic wings and domestic fuselages for a new aircraft programme, where a
major portion of that subsidy would be lost if even a single wing for that aircraft programme is
imported through the year 2040. While these facts should be determinative of the question of
contingency under Article 3.1(b) of the SCM Agreement, the United State s seeks to obscure the
prohibited contingency through a series of erroneous and irrelevant statements.

- B-15 -

A. Three Foundational Errors Made by the United States
30. The entirety of the United States' argumentation on contingency is founded on three
erroneous propositions – (i) wings and fuselages are not "goods"; (ii) wings and fuselages are not
"used" on aircraft; and (iii) the phrase "domestic over imported goods", as it applies to wings and
fuselages, requires an enquiry into the origin of the components of the wings and fuselages, rather
than the origin of the wings and fuselages, themselves.
1. US' Error #1: "goods"
31. The United States persists with its erroneous assertion that wings and fuselages are not
"goods", although (i) the United States has a cknowledged that Boeing purchases "complete
fuselages" for the 737; (ii) Boeing has previously explained (outside the context of this dispute)
that it imports wings for the 787; and (iii) SSB 5952, itself, refers to fuselages and wings as
"products", a ter m that the United States has accepted is a synonym for the legal term used in
Article 3.1(b) – "goods".
32. Originally, the United States claimed that the protection under Article 3.1(b) would extend
only to goods that are actually traded . In its second written submission, however, the United
States conceded that the protection extends to competitive opportunities for imported "goods".
The United States qualified that concession with an assertion that the protection does not extend
to "strictly theoretical" opportunities. Putting aside the lack of any textual or jurisprudential basis
to characterize certain competitive opportunities as "strictly theoretical", there is nothing
theoretical about importing or otherwise purchasing wings and fuselages for a civil aircraft, as
even the United States acknowledges for certain aircraft.
2. US' Error #2: "use"
33. The United States continues to assert that wings and fuselages are not "used" on aircraft, or
in the production of aircraft, because they are the out put of aircraft production, rather than
inputs. The United States' erroneous position is based on its false allegations about the planned
production process for the 777X, which – even if true – would be irrelevant to a de jure analysis of
SSB 5952. As t he European Union has explained, and the Unite d States has not contested,
SSB 5952 does not even mention the 777X, but instead references only a new model, version, or
variant of a commercial aircraft with a composite wing and/or fuselage. For some other large
commercial aircraft, the United States generally agrees with the European Union that fuselages
and wings are inputs which are used in aircraft production. As a result, the US' position on the
777X production process, even if correct, does nothing to refute the European Union's de jure
claim.
34. Moreover, the United States' claims about the planned 777X production process are
contradicted by statements made by Boeing and Washington State outside the confines of the
present dispute. For example, according to press reports, Eric Lindblad, the vice president of 777X
Wing Integration, explained that "{t}he wing subassemblies will {} be moved into a final wing
assembly area in the main building, where they will be turned into full wings " and " finally put
together" before being attached to the aircraft.4
3. US' Error #3: "imported" vs. "domestic"
35. The United States continues to argue that it is relevant, and even legally determinative, that
Boeing may import components of wings and fuselages for the sited aircraft without restriction,
while still satisfying the Programme -Siting and Exclusive-Production conditions. But the European
Union is not challenging the subsidies as being conditional on use of domestic over imported
components of wings and fuselages. The European Union's challenge is clear – i.e. to satisfy the
two conditions, imported wings and imported fuselages may not be used on the aircraft that is the
subject of the siting decision.
36. The United States complains that the European Union has not explained "what is the
domestic and what is the imported good for each of the measures at issue". In fact, the European

4 Emphases added.

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Union has repeatedly and clearly stated that wings and fuselages are the relevant "goods" for
purposes of determining whether the challenged tax incentives are contingent upon use of
domestic over imported goods, under Article 3.1(b). The United States' attempt to refocus the
Panel's attention on the components of wings and the components of fuselages – rather than the
components of aircraft – provides an irrelevant distraction. The European Union is the master of
its own claims, and this is simply not a case about components of wings, nor a case about
components of fuselages.
37. The fact is that, however Washington State defines a "wing" or a "fuselage", those
"products" must be either "manufacture{d}" or "assembl{ed}" in Washington State, and used on
the sited aircraft, in order to satisfy the Programme-Siting and Exclusive-Production conditions. If,
at the time of its siting de cision, Boeing expressed an intention to import something that
Washington State understood to be a "wing" or "fuselage" for the 777X, or if something that
Washington State understands to be a "wing" is imported today (or anytime before 2040) for use
on the 777X, the subsidy (or a significant portion thereof) would be lost.
38. As an interpretative matter, the European Union has maintained a dualist view, wherein any
good that is not "imported" would be "domestic". The European Union submitted that any
different interpretative view would require a panel to examine whether goods are "domestic" under
applicable rules of origin. Given the absence of multilateral rules of origin, Members would be at
liberty to circumvent the discipline in Article 3.1(b) – and those in all other provisions of the
covered agreements employing the "domestic" and "imported" duality – by resorting to
conveniently tailored domestic rules of origin.
39. In Question 72, the Panel requested the parties to identify "provisions in the co vered
agreements" that could further assist in the interpretation of the words "domestic" and "imported",
for the purpose of Article 3.1(b) of the SCM Agreement. In response, the European Union
demonstrated confirmation of its dualist view, which divides goods into "domestic" and "imported",
with reference to Articles II:2(a), III:1, III:2, and XI:2(c) of the General Agreement on Tariffs and
Trade 1994 ("GATT 1994"); Article 15.3, footnote 57, and Paragraph I of Annex III of the SCM
Agreement; Paragraphs 1 (a), 1(d), and 1(g) of Annex C to the Agreement on Sanitary and
Phytosanitary Measures ("SPS Agreement"); and Article 3.3 of the Agreement on Implementation
of Article VI of the General Agreement on Tariffs and Trade 1994 ("Anti Dumping Agreement").
40. In its own response, the United States instead chose to again express general disagreement
with the European Union's interpretative proposal, while not identifying any provision in a covered
agreement (barring a general unexplained reference to the Agreeme nt on Rules of Origin) that
would warrant an interpretation different from the one proposed by the European Union. Nor did
the United States even attempt to assert an interpretation of its own, let alone defend one. The
United States even attempted to sh ield itself behind an assertion that it is the "EU's burden" to
interpret Article 3.1(b), and in particular the meaning of "domestic" and "imported". Yet, the
Appellate Body has explained that "the burden of establishing or proving rules of international law
cannot be imposed upon any of the parties, for the law lies within the judicial knowledge of the
Court".
B. Availability of the Subsidies to Entities Other than Boeing
41. The United States argues that the availability of the tax incentives at issue to entities other
than Boeing precludes a finding that the subsidies are contingent on the use of domestic over
imported goods, because only Boeing needs to satisfy the conditions. The United States seeks to
obscure the fact that none of the tax incentives, as amended and extended by SSB 5952, would
have taken effect in respect of any of the potential recipients had the Programme-Siting condition
not been fulfilled by Boeing (or another commercial aircraft producer). Thus, the current
availability of the am ended and extended tax incentives enjoyed by all the recipients is a direct
result of the satisfaction by Boeing of the prohibited contingency in the Programme -Siting
condition, on 9 July 2014.
42. Further, nothing in the text of Article 3.1(b) requires that the entity receiving the subsidy,
on the one hand, and the entity required to meet the prohibited contingency, on the other hand,
must be one and the same, for a measure to violate that provision. If the drafters had intended to
include such a limitation, they could have provided, for example, for prohibition of "subsidies to an

- B-17 -

enterprise contingent, whether solely or as one of several other conditions, upon the use of
domestic over imported goods by that enterprise". They did not.
C. Production Subsidies, and the United States' Flawed Examples
43. From the very beginning of this dispute, the United States has dedicated large parts of its
submissions to defending a proposition that is non -controversial – production subsidies, in and of
themselves, do not result in de jure violations of Article 3.1(b). The European Union signalled its
agreement with this proposition, in unequivocal terms, in several of its submissions, yet the United
States has persisted with this argument.
44. When faced with a c laim that a subsidy is contingent on the use of domestic over imported
goods, a Member may not evade the prohibition under Article 3.1(b) simply by characterizing a
challenged measure as a production subsidy. Such a claim should be decided on the basis of the
obligation in Article 3.1(b), and whether the measure violates that obligation. It should not be
decided on the basis of what each party understands to be a "production subsidy", which is a term
that does not appear in the covered agreements.
45. With respect to the United States' assertion that "wings" and "fuselages" are what makes a
vehicle an "airplane " and that this needed to be clear in SSB 5952, in the context of an alleged
"production subsidy" for airplanes, the European Union finds it difficult to believe that, absent such
references to wings and fuselages, Washington State would have faced the risk that recipients of
the subsidies at issue would manufacture vehicles without wings and fuselages and claim them to
be "airplanes" eligible for th e subsidy. That did not, for example, appear to be a concern with
HB 2294, which defined the airplane that needed to be manufactured in Washington State as a
"twin aisle airplane that carries between two hundred and three hundred fifty passengers, with a
range of more than seven thousand two hundred nautical miles, a cruising speed of approximately
mach .85, and that uses fifteen to twenty percent less fuel than other similar airplanes on the
market". In this definition, there is no reference to wings, fuselages, or any other components of
the airplane.
46. The United States uses its assertions relating to "production subsidies" to set up a series of
straw-men that it then proceeds to knock down. The United States creates absurd hypothetical
scenarios – most recently going so far as to invent a "production subsidy" contingent on
importation of two halves of an airplane – which consider whether a "production subsidy" should
be available to certain producers or importers. In each hypothetical, the United States first asserts
its subjective view that the subsidy it describes should be characterized as a production subsidy,
and should be consistent with Article 3.1(b). Then the United States goes on to apply what it
erroneously characterizes as the "EU's the ory" to the hypothetical, and concludes that under that
alleged "theory" (which is unrecognisable to the European Union, itself), the subsidy in question
would constitute a de jure violation of Article 3.1(b). Based on that series of exercises and
conclusions, the United States claims that the "EU's theory" should be rejected.
47. To be clear, the European Union does not offer a special "theory" on Article 3.1(b). The
European Union's position is simply that any subsidy "contingent on the use of domestic over
imported goods" is inconsistent with Article 3.1(b). That understanding applies no matter what
the goods at issue are – i.e. screws, screwboxes missing screws, front halves or back halves of
airplanes, parts of paper planes, or, most importantly for this case, wings and fuselages of
commercial aircraft.
48. The United States has argued that, if accepted, the European Union's position on the
interpretation of the words "goods" and "use" in Article 3.1(b) would mean that, to be consistent
with Article 3 .1(b), "production subsidies" could require nothing more than that a domestic
producer perform "the very last production step", such as "turning the very last screw" or "drilling
the final rivet", in the territory of the Member providing the subsidy. This argument is a red
herring, as there are numerous ways to condition a subsidy on significant domestic production (far
beyond "turning the very last screw") without creating a de jure violation of Article 3.1(b), as the
United States and Washington State al ready know. In fact, the European Union has gone beyond
its burden in the present dispute to identify several ways in which the United States could have
offered production subsidies in the present fact pattern, without resulting in a de jure violation.
Unlike the absurd US hypotheticals involving paper airplanes, airplanes split into halves, and

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subsidies contingent on use of imported goods, the examples that the European Union has
highlighted are those that various US states, including Washington State, have actually employed
in order to encourage local investment, job creation, and production activity.
D. The 777X Production Process, and the Definition of a "wing"
49. Starting with its first written submission, the United States introduced several facts relating
to the process allegedly to be employed by Boeing in production of the 777X. These assertions
seek to establish that the 777X wings and fuselages do not come into existence as separate goods
at any time before the final assembly of the aircraft. The European Union has demonstrated that
these assertions, tailor -made for the present dispute, are contradicted by assertions made by
Boeing and Washington State outside the present dispute.
50. More importantly, as the European Union has repeatedly expl ained, these allegations about
the 777X production process are irrelevant to the de jure claim, because SSB 5952 does not name
Boeing or the 777X programme. It does not even specify the size of the aircraft that should be
sited in Washington State pursuan t to the Programme-Siting condition. Any aircraft manufacturer
could have satisfied the Programme-Siting condition in respect of any aircraft that had a composite
wing or fuselage or both, even if that aircraft was much smaller than, and markedly different from,
the 777X. Thus, assertions as to how Boeing intends to produce the 777X are entirely irrelevant,
at least to the European Union's first and principal claim of de jure contingency.
51. The United States claims that the "fact" that Boeing satisfied the Programme -Siting
condition in respect of the 777X without the "use" of "domestic over imported goods" precludes a
finding that SSB 5952 contains contingencies prohibited by Article 3.1(b). However, this assertion
is again predicated on the same three foundational errors repeatedly made by the United States,
in respect of the words "use", "goods", and the US' presumption that the relevant goods for
understanding "domestic" and "imported" are components of fuselages and components of wings,
not fuselages and wings.
52. Similar to its factually erroneous and legally irrelevant assertions relating to the production
process of the 777X, the United States dedicates much effort to defining a "wing". The United
States falsely attributes to the European Union the position that only "complete finished wings"
(and not "complete wings" or "finished wings") are relevant to the present dispute. Then the
United States goes on to supply a definition of "wing" that is entirely divorced from the text of SSB
5952 and reality. Under that definition, for example, a wing that does not carry the engines and
fuel is not a wing; and a wing that is not fitted with winglets is not a wing. The European Union
has demonstrated the absurdity of this definition, highlighting that, under that definition, several
real-world aircraft – MD-80, MD-90, Boeing 717, Boeing 737 – have flown for decades without a
"wing".
53. The United States relies on this flawed definition to postulate that the 787 "wing" was not
imported, and that Governo r Inslee was imprecise in describing the contingencies in SSB 5952 in
his testimony before the House Finance Committee, specifically in asserting that "{t}he 787 wing
went to Japan". Similarly, the United States dismisses, as "colloquial references", all assertions by
Boeing and Washington State outside the confines of the present dispute indicating that the 787
wing was imported.
54. In any event, it is not necessary for the Panel to decide the precise definition of a "wing" or
"fuselage" in the present dispute, especially in context of the European Union's first and principal
claim of de jure contingency. What matters is that there is a "product" called a "wing", and a
"product" called a "fuselage" (which is different from components of whatever Washin gton State
understands to be a "wing" or a "fuselage") that, if imported, will result in the loss of the subsidy,
or a portion thereof. That is clear from the text of SSB 5952, itself.
E. Conclusion on Contingency
55. The European Union has demonstrated i n SSB 5952 the existence of a prohibited
contingency, under Article 3.1(b) of the SCM Agreement, with reference to the text of that
legislation, and additional evidence. The United States has failed to rebut that prima facie case.

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The United States' defe nses are based on three foundational errors, and are factually inaccurate
and largely legally irrelevant.
IV. CONCLUSION AND REQUEST FOR RELIEF
56. For the reasons set out in its submissions to date, the European Union respectfully requests
the Panel to find that each of the Washington State tax incentives, as amended and extended by
SSB 5952, constitutes a subsidy that is prohibited pursuant to Articles 3.1(b) and 3.2 of the SCM
Agreement.
57. In accordance with Article 4.7 of the SCM Agreement, the Pane l should recommend that the
United States withdraw the subsidies without delay.

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ANNEX B-3
FIRST INTEGRATED EXECUTIVE SUMMARY OF THE ARGUMENTS OF THE UNITED STATES
1. The EU's entire case is an example of trying to fit a square peg into a round hole. The hope
appears to be that, if the peg and the hole are not examined closely, no one will notice that the
peg cannot fit. The EU asserts that Engrossed Substitute Senate Bill ("ESSB") 5952 discriminates
against imported products by requiring the use of d omestic over imported goods as a condition for
receiving subsidies. It is on this basis that the EU challenges seven Washington tax measures as
prohibited by Article 3.1(b) of the Agreement on Subsidies an d Countervailing Measures
("SCM Agreement"). But the relevant conditions in ESSB 5952 have nothing whatsoever to do
with the use of goods, whether domestic or imported. They therefore do not discriminate against
imported goods. Article 3.1(b) does not prohibit subsidies provided to domestic producers for or in
light of domestic production.
I. WASHINGTON'S AEROSPA CE INDUSTRY AND BOEI NG'S PRODUCTION OF
COMMERCIAL AIRPLANES
2. Washington has emerged as an aerospace hub, and in turn, the aerospace sector is an
integral part of Washington's economy and emplo yment. As of February 2015, there were
1,361 firms in Washington State's aerospace manufacturing and supporting industries, with 186 of
these in the core industry. Nearly 20 percent of U.S. aerospace jobs are in Washington.
3. A major part of Washington's emergence and continued role as an aerospace hub is owed to
the presence of Boeing Commercial Airplanes ("Boeing"). Boeing has deep roots in Washington,
which continues to be the center of its operations worldwide. Two of Boeing's three major
production facilities are there. The Renton and Everett facilities produce the 737NG and 737 MAX;
and the 747, 767, 777, and 787 Dreamliner airplanes, respectively. Development of the 777X is
based in Everett, and Boeing plans to produce the 777X there as well. The third production facility
is in North Charleston, South Carolina. Except for some 787s manufactured after 2012, all
commercial aircraft ever manufactured by Boeing were assembled in Washington, and all of
Boeing's major in-house production operations are in the United States.
4. Large commercial aircraft ("LCA") are among the most complex machines ever built. They
consist of tens of thousands of individual parts, which must be integrated into a single safe,
reliable, and economic system. For thi s reason, developing LCA is extremely costly, with
development costs running into the billions of dollars. Many variables across a long time horizon
dictate the success or failure of a program, making such investments very risky. In this
atmosphere, Boei ng requires an elaborate planning system for bringing new aircraft to market,
which can be simplified as occurring in four phases: pre -launch, launch, post -launch, and entry
into service and industrial ramp-up.
5. The same elaborate planning process was required for the 777X program based out of the
Everett, Washington facility. Boeing sought to limit costs, risks, and logistical complexities of the
sort that had burdened the 787 program, where aggressive outsourcing of manufacturing activities
contributed to significant production delays and increased program costs.
II. WASHINGTON'S TAX SYSTEM AND THE CHALLENGED MEASURES
6. The measures challenged in this dispute pertain to five categories of Washington taxes: the
business & occupation ("B&O") tax, the retail sales tax, the use tax, the leasehold excise tax, and
the property tax. These taxes form an important component of the backdrop against which the
challenged measures operate. The EU submission gives them short shrift, but the details are
critical to any evaluation as to whether they constitute financial contributions and confer a benefit
within the meaning of Article 1 of the SCM Agreement, or are "contingent … upon the use of
domestic over imported goods." Accordingly, the United States describes each of these in greater
detail below.

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7. The State of Washington relies primarily on a B&O tax – rather than a corporate tax or an
income tax – for purposes of business taxation. The tax is an excise tax on "gross receipts," which
refers to the gross p roceeds of sales, gross income of a business, or the value of products. The
tax is imposed on the gross receipts of all sales, not just retail sales. No deductions are permitted
for the costs of doing business, such as expenses for raw materials, wages p aid to employees, or
component parts manufactured by others that are incorporated into a product being sold. In
addition, the B&O tax does not vary depending on the profitability of the taxpayer.
8. Washington also has a retail sales tax, which is its pri ncipal tax source ( i.e., of all revenue,
including both business and non -business tax revenue). This tax applies to sales to consumers of
tangible personal property, as well as the sale of certain services, including construction services
(e.g., construct ing and improving new or existing buildings and structures), some personal
services, and other miscellaneous services. The Washington retail sales tax rate has two
components: the state component, which is equal to 6.5 percent, and the local component, w hich
varies by jurisdiction. Local governments within Washington have the authority to set their own
retail sales tax rates, but both components are administered by the State.
9. The use tax is a tax due on the use of goods or services to the extent that the user has not
paid Washington sales tax or "a legally imposed retail sales or use tax…to any other state,
possession, territory, or commonwealth of the United States, any political subdivision thereof, the
District of Columbia, and any foreign country o r political subdivision thereof." For example, use
tax is due if goods are purchased in another state that does not have a sales tax, or has a sales
tax rate that is lower than that of Washington. The tax is imposed on the privilege of using as a
consumer specified goods or services in Washington.
10. Washington also has a property tax. Under RCW § 84.36.005, "{a}ll property now existing,
or that is hereafter created or brought into this state, shall be subject to assessment and taxation
for state, count y, and other taxing district purposes." Thus, all real and personal property is
subject to tax. However, a number of exceptions to this general rule apply. Property tax rates
vary among territorial subdivisions of Washington. However, the Washington Co nstitution limits
the regular (i.e., non-voted) combined property tax rate to 1 percent of market value.
11. Washington also has a leasehold excise tax. As noted above, property owned by federal,
state, or local governments is exempt from the property tax . However, when private parties lease
such property, they are subject to the leasehold excise tax. In effect, the leasehold excise tax
imposes a tax burden on persons using publicly owned, tax -exempt property similar to the
property tax that they would p ay if they owned the property. The 12 percent rate is then
multiplied by an additional tax, which is currently set at 7 percent. Thus, the total leasehold
excise tax rate is 12.84 percent of the rent paid for the property.
III. THE CHALLENGED MEASURES AND CONDITIONS IN ESSB 5952
12. The EU challenges seven measures in this dispute, each of which provides for certain tax
treatment under the law of the state of Washington: (i) the 0.2904 percent B&O tax rate, (ii) the
B&O tax credit for aerospace product d evelopment; (iii) the B&O tax credit for property taxes;
(iv) the sales and use tax exemption for computer hardware, software, and peripherals; (v) the
sales and use tax exemption for construction services and materials; (vi) the leasehold excise tax
exemption for port district facilities, and (vii) the property tax exemption.
13. The challenged measures have several important features. The first feature is general
availability on a non-discriminatory basis. Although the EU submission focuses on Boeing, none of
the challenged measures refers to Boeing explicitly. Rather, they set out tax treatment that is
available to any eligible company in Washington. For example, non -U.S. airplane manufacturers,
and suppliers to such companies, are eligible for the challenged tax treatment.
14. The second feature is silence with respect to the use of domestic over imported goods.
None of the challenged measures distinguishes between domestic and imported goods, let alone
condition availability on the use of domest ic over imported goods. This is true of ESSB 5952 as
well.

- B-22 -

15. The third feature is changes in conditions for eligibility. In 2006, 2008, and 2013,
Washington State enacted legislation that affected the availability of the challenged tax treatment
by expanding the class of companies that could claim such treatment.
16. The EU challenges these measures "as amended and extended" by ESSB 5952. In 2013,
Washington enacted ESSB 5952, which would extend aerospace -related tax measures if and when
a significant commercial airplane manufacturing program was sited in the state. The Washington
legislature noted that ESSB 5952 served its "specific public policy objective to maintain and grow
Washington's aerospace industry workforce."
17. ESSB 5952 contains two provisions that the EU alleges are relevant to this dispute: an Initial
Siting Provision and a Future Siting Provision. Both are silent on the use of domestic over
imported goods, and indeed do not draw any distinction between domestic and imported goods .
They contain no text that requires the use of domestic over imported goods, nor even encourages
it. They therefore do not result in any discrimination against imported goods.
18. Rather, the Initial Siting Provision requires that certain manufacturin g activities occur in
Washington. Under the Future Siting Provision, the continued applicability of the 0.2904 percent
B&O tax rate for 777X sales (because the 777X is the program that triggered the Initial Siting
provision) depends on "final assembly and wing assembly" – a narrow category of manufacturing
activity – taking place in Washington.
IV. THE EU IGNORES ITS B URDEN OF PROOF AS TH E COMPLAINANT IN A N EW
DISPUTE
19. As the complaining Member, the EU of course bears the burden of demonstrating that th e
challenged measures are subsidies within the meaning of Article 1 of the SCM Agreement, and that
they contain a "contingency" – i.e., a relationship of "contingency," or a state of "dependen{ce}
for its existence on something else." It is also required to demonstrate that this "contingency" is
"upon the use of domestic over imported goods." Each of these showings consists of several
elements, and the EU bears the burden of proving each.
20. Yet, the EU ignores this burden, seeking to establish the all eged import substitution
contingency with conclusory assertions, unsupported assumptions, and references to US – Large
Civil Aircraft, a separate dispute in which the EU failed to demonstrate that any of the challenged
measures are prohibited under Article 3.1(b). Such arguments are insufficient to establish a prima
facie case. This is only confirmed by the fact that the US – Large Civil Aircraft panel addressed
facts as they existed in the 2004-2006 period, rather than the time of this Panel's establishment in
2014, and the current dispute involves measures that differ from those at issue in the other,
separate dispute. The EU's claims fail as a result of it not even attempting to allege and prove
with evidence each of the elements of its claims.
V. THE EU FAILS TO DEMONS TRATE THAT ANY OF TH E CHALLENGED MEASURE S IS A
SUBSIDY UNDER ARTICLE 1.1 OF THE SCM AGREEMENT
21. The EU does not even attempt to make a prima facie case that the challenged measures
involve financial contributions that confer a benefit . In fact, the EU simply assumes, without
support – and it asks the Panel to assume – that the challenged measures are subsidies within the
meaning of Article 1 of the SCM Agreement.
A. Financial Contribution
22. The EU alleges that each of the challeng ed measures involve revenue foregone by
Washington during the time period from July 1, 2024 – July 1, 2040. However, the EU fails to
establish that any such financial contribution exists, and therefore fails to make a prima facie case.
23. To show a fina ncial contribution, the EU relies on the findings in a separate dispute, US –
Large Civil Aircraft . Yet the EU ignores the fact that in that dispute, three of the challenged
measures were in fact found not to be subsidies because the panel found that the EU failed to
establish the existence of a financial contribution. The EU also ignores that the US – Large Civil

- B-23 -

Aircraft panel's findings pertain to a different time period ( i.e., prior to 2007), and cannot support
a finding that revenues supposedly to be foregone after July 1, 2024, result in a present subsidy.
24. Indeed, where an allegation is specific to a particular recipient of an alleged subsidy, it is
normally necessary for that recipient to have actually used or exercised that fiscal incentive. For
some of the measures, the EU does not even allege use by Boeing.
25. The EU seems unaware, or it intentionally glosses over the fact, that references to past
findings in US – Large Civil Aircraft cannot substitute for evidence in this dispute. The EU also fails
to analyze Washington's unique B&O tax system and establish, in light of such analysis, a
normative benchmark against which alleged revenue foregone can be compared.
B. Benefit
26. As discussed above, the EU has failed to establish a prima faci e case that any of the
challenged measures involves a financial contribution. It would seem to be a potential future
benefit that would be enjoyed, if at all, 10 years from now. The EU, however, has not explained
what it believes to be such a future fina ncial contribution and benefit. Thus, it automatically
follows that the EU fails to establish that any benefit is conferred by such financial contributions.
27. In this regard, it is noteworthy that the EU has not even attempted to establish benchmarks
for any of the challenged measures, as is its burden. Rather, the EU's benefit arguments consist
of citations to other panel reports and the unsupported arguments related to financial contribution.
Accordingly, there is no valid "benefit" argument for th e United States to rebut, and the EU has
failed to establish a prima facie case.
VI. THE EU FAILS TO ESTA BLISH THAT ANY OF TH E CHALLENGED MEASURE S IS
CONTINGENT UPON THE USE OF DOMESTIC OVER IMPORTED GOODS AS PROHIBITED BY
ARTICLE 3.1(B) OF THE SCM AGREEMENT
28. The discipline of Article 3.1(b) is focused and specific. It prohibits the granting of subsidies
that are contingent upon the use of domestic over imported goods. Yet the measures challenged
here do not address the use of goods at all, let alone r equire the use of domestic over imported
goods as a condition for any particular alleged subsidy. Rather, they provide specified tax
treatment to persons that conduct certain activities (e.g., certain types of manufacturing, retailing,
R&D) in Washington. They are available to all companies that do business in Washington, whether
headquartered in the United States, the EU, or elsewhere – and regardless of whether they sell
goods for use in the supply chains of Boeing, Airbus, or another company.
29. To establish its claims under Article 3.1(b), the EU must demonstrate that a measure
established to be a subsidy is contingent upon the use of domestic over imported goods. The EU
argues that the alleged subsidies are contingent on the use of domestic over i mported goods in
breach of Article 3.1(b) of the SCM Agreement because of two conditions in ESSB 5952 regarding
the siting of certain manufacturing operations related to a commercial airplane program. The EU's
argument fails for several reasons.
30. First, the EU incorrectly states that the text of ESSB 5952 "expressly condition{s}" the
challenged tax treatment on the use of domestic over imported goods. The EU states that under
two provisions in ESSB 5952, the Initial Siting Provision and the Future Siti ng Provision, "all of the
aerospace tax incentives . . . are expressly conditioned on the use of domestic over imported
goods in the final assembly of the aircraft." In fact, these provisions – and the statutes challenged
by the EU – are silent on the use of domestic over imported goods, and indeed do not draw any
distinction between domestic and imported goods. They merely extend the tax treatment for
companies that perform certain production and non -production activities in Washington if and
when a significant commercial airplane program is sited in the state.
31. Specifically, the Initial Siting Provision states that, for the expiration dates of the challenged
tax measures to be extended, Washington's Department of Revenue ("DOR") must first determine
that a company has made a final decision to "commence manufacture" of a new model or variant
of a commercial airplane, including the wings and fuselage of a new model or variant of a new
commercial airplane, in Washington. The Future Siting Provision par tly revokes this tax treatment

- B-24 -

if DOR determines "that any final assembly or wing assembly" of that new model or variant "has
been sited outside the state of Washington." These provisions do not implicitly, much less
"express{ly}," require the use of dome stic over imported goods, as the EU asserts. In fact, they
do not mention the use of goods at all.
32. Second, the EU's argument assumes, without support, that ESSB 5952 requires the separate
production of fuselages and wings for use in the production o f commercial airplanes. It does not.
ESSB 5952 is silent on the how the manufacture and assembly of fuselages and wings fits into the
overall production process of a commercial airplane. It does not require manufacturers to produce
fuselages or wings as finished intermediate goods that can be "used" in downstream production.
33. And Boeing, in fact, does not do so. 777X fuselages and wings never exist as discrete,
standalone goods that are subsequently "used" in a downstream production process. In fa ct,
during the final assembly process, parts of the fuselage and parts of the wing are joined to each
other before a complete fuselage or complete wing is produced. In short, the 777X's fuselage and
wing are elements of the output of the final assembly pr ocess (that is, the manufacture of a
commercial airplane), not goods used as inputs to that process. In no case does Boeing purchase
(or otherwise "procure") complete wings from a supplier. Therefore, the EU's whole case is
dependent on a false premise – that fuselages and wings are goods required to be used in the
production of a commercial airplane.
34. Third, the EU relies on an incorrect interpretation of Article 3.1(b) of the SCM Agreement.
Article 3.1(b) is focused and captures a specific type of subsidy: it prohibits subsidies
"contingent … upon the use of domestic over imported goods." However, Article 3.1(b) does not
discipline subsidies provided to domestic producers for their domestic production. This
interpretation is confirmed by Article III of the GATT 1994. Article III:8(b) of GATT 1994
establishes that providing subsidy to domestic producers for production activities in the grantor's
territory cannot be equated with providing a subsidy advantaging domestic over imported goods.
And because disciplining subsidies contingent upon use of domestic over imported goods is an area
of overlap between Article 3.1(b) of the SCM Agreement and Article III of the GATT 1994,
Article 3.1(b)'s prohibition on subsidies contingent upon the use of domesti c over imported goods
also cannot be equated with subsidies provided for domestic production. Therefore, even ignoring
the many other flaws in its arguments, the EU's claims also necessarily fail on this basis because,
at best, the EU can only even attempt to show a subsidy provided for domestic production.
35. Fourth, the EU argument assumes, without support, that 777X fuselages and wings are
saleable or traded "goods" capable of importation. Prior Appellate Body guidance confirms that
"goods" within the meaning of Article 3.1(b) must be understood as products that are traded, and
therefore capable of being imported. This necessarily excludes 777X fuselages and wings, which
are not available in a commercial setting. In short, 777X fuselages and wings are not goods within
the meaning of Article 3.1(b).
36. Fifth, the EU fails to establish that the "geared to induce" standard is appropriate in the
context of Article 3.1(b), much less demonstrate with evidence that it is met in this case. In its
brief argument, the EU states that the challenged measures are "geared to induce" the use of
domestic over imported goods. The EU does not establish that this standard, which was endorsed
in the context of Article 3.1(a), is appropriate in the context of Articl e 3.1(b). Once again, even
aside from the fact that the 777X fuselage and wings do not constitute "goods" that Boeing would
"use" within the meaning of Article 3.1(b), the evidence shows the challenged measures were not
anticipated to, and did not, affect the proportions of domestic and imported content in the 777X.
37. By the time Washington was considering ESSB 5952, it was clear that Boeing would produce
the 777X, as it has every model of commercial airplane throughout its 100 -year history, in the
United States. Moreover, ESSB 5952 has not prevented Boeing from planning to import significant
foreign content for the 777X. Other Washington taxpayers too will receive the identical tax
treatment challenged by the EU despite there being no restrictions on their use of goods, whether
domestic or imported. In fact, a retailer selling exclusively imported commercial airplane
components that it manufactured abroad would be entitled to the tax treatment challenged by the
EU. The EU thus fails to establish a prima facie case, and the evidence actually contradicts its
theory.

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VII. CONCLUSION
38. The EU fails to make a prima facie case with respect to each of the elements of its claims,
and with respect to each of the seven challenged measures. All of the EU's a rguments, moreover,
are based on an incorrect interpretation of Article 3.1(b) of the SCM Agreement that conflates
subsidies that are contingent upon the use of domestic over imported goods with measures that
are contingent on domestic production. Accordi ngly, and for the reasons as set out above, the
United States requests that the Panel reject the EU's claims and find that the challenged measures
are not inconsistent with the U.S. obligations under Article 3.1(b) of the SCM Agreement.
EXECUTIVE SUMMARY OF U.S. OPENING ORAL STATEMENT AT THE FIR ST SUBSTANTIVE
MEETING OF THE PANEL WITH THE PARTIES
I. INTRODUCTION
39. The EU's entire case, which alleges that the measures at issue are import -substitution
subsidies prohibited by Article 3.1(b) of the SCM Agreement, is an effort to force a square peg into
a round hole.
II. THE EU'S FAILURE TO ESTABLISH EACH ELEMENT OF ITS CLAIMS
40. The EU bases its claims on conditions – what the United States refers to as the Initial Siting
Provision and the Future Siting P rovision – that it alleges require the use of domestic over
imported goods. In fact, the EU goes so far as to assert that the challenged measures "are
expressly conditioned on the use of domestic over imported goods." However, in reality, the siting
provisions by their plain language address only the scope of manufacturing that will take place in
Washington. Neither provision addresses the use of goods at all, much less the domestic or
imported character of goods that are used. This is evident from the explicit text of the Initial
Siting Provision and the Future Siting Provision, and illustrated by the fact that the 777X will
consist of a great deal of imported content, as well as domestic content from U.S. states other
than Washington.
41. Beyond the EU's incorrect characterization of ESSB 5952, the EU's meager submission does
nothing to lay out the relevant facts or link them to the WTO provision, Article 3.1(b) of the SCM
Agreement, that it invokes. It does not describe the operation of the multiple measures it
challenges. It does not establish that the challenged measures confer a subsidy within the
meaning of Article 1 of the SCM Agreement. It does not explain how, based on the customary
rules of interpretation of public international law used for interpreting the covered agreements, the
analysis should proceed. This falls short of a complaining party's burden to present a prima facie
case with respect to each element of its claims. And, as witnessed by the submissions of the
United States and t he third parties, the EU's many omissions have not obscured the fact that its
claims rely upon multiple distortions of Article 3.1(b).
42. The EU also does not attempt to show that, if the Initial Siting Provision or the Future Siting
Provision did require the "use" of fuselages or wings, one or both of those conditions would require
that such fuselages or wings be domestic instead of imported. This is another example of the EU's
silence on necessary elements of a prima facie case under Article 3.1(b).
43. The EU fails to explain why the 777X fuselages and wings are "goods" within the meaning of
Article 3.1(b). In not addressing this element, the EU simply ignores inconvenient facts, such as
that there are no buyers and sellers of 777X fuselages or wings , 777X fuselages and wings never
exist in their completed forms separate and apart from the product that they are supposedly used
to produce, i.e., the finished airplane.
44. The EU also invokes a "geared to induce" standard endorsed by the Appellate Bod y only in
the context of Article 3.1(a), but makes no effort to establish its proper application in the context
of Article 3.1(b) or to prove that such a standard is met based on evidence in this dispute.
45. Another example of the EU's cursory treatment of the elements of its claims is its failure to
identify the alleged financial contribution, including a normative benchmark, and benefit for each
challenged measure. Instead, the EU points to a report in a different dispute – a report, the

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United States notes, in which the panel rejected the EU's contention that three of the tax
measures challenged in this dispute were subsidies, and which examined a period nearly 20 years
earlier than the year in which alleged revenue foregone in this matter is alleged to begin. The EU
then attempts to improperly shift the burden to the United States to prove that such measures are
not subsidies. Nothing requires a respondent to rebut a case the complaining party has not made
in the current dispute.
III. THE SWEEPING SYSTEMIC CONSEQUENCE S OF THE EU'S INTERP RETATION OF
ARTICLE 3.1(B)
46. The EU's interpretation of Article 3.1(b) would also have dangerous systemic consequences
and would be at odds with the text of the provision, its context, and the object and purpose of the
Agreement. For example, by seeking to frame the final stages of a production process as making
"use" of "goods," the EU's theory would effectively turn every subsidy for production in the
grantor's territory into a prohibited import -substitution subsidy. As nearly all of the third party
submissions in this dispute make clear, this is not the proper interpretation of Article 3.1(b).
47. For example, as Canada points out, Article 6.1 and Annex IV:3 of the SCM Agreement
demonstrate unambiguously that su bsidies tied to production of a given product, without more,
are not prohibited. Rather, they are properly the subject of a serious prejudice analysis under
Article 5.
48. Australia observes that "it is important that the distinction is retained between the permitted
payment of a subsidy to domestic producers and a subsidy which is contingent on the use of
domestic over imported goods."
49. Similarly, Brazil notes that, given that Article III:8(b) of the GATT 1994 states that
Article III does not preve nt the payment of subsidies exclusively to domestic producers – which
the United States addressed in its first written submission – "it would be incongruous to interpret
Article 3.1(b) of the SCM Agreement to prohibit a measure simply based on the measure' s link to
domestic production."
50. Japan notes that among the "deficiencies" in the EU's analysis is the failure to recognize that
"a law stating that a subsidy is contingent upon the domestic ‘siting of' a certain program is
different from a law stating that subsidy is contingent upon the ‘use of 'the domestic product."
IV. THE RELEVANT FACTS DO NOT SUPPORT THE EU'S CASE, AND IN FACT UNDERMINE
IT
51. The EU has invoked a provision that applies narrowly and in very specific factual situations.
However, in this case, the measures bear none of the hallmarks of import -substitution subsidies.
For example, the company whose behavior they were supposed to influence – Boeing – can use
the tax measures despite planning to source much of the content for the 77 7X from outside the
United States and from U.S. states other than Washington.
52. This is the case because the Initial Siting Provision and Future Siting Provision pertain only
to the location of certain manufacturing activities. They do not distinguish between domestic and
imported goods, and have nothing to do with import substitution. There is no evidence that either
the Initial Siting Provision or Future Siting Provision is structured to discriminate against imported
goods. They do not, and for that reason, they have not had that effect.
53. Moreover, companies other than Boeing can also use the tax measures without having to
fulfill local content requirements or even meet production conditions. Indeed, the tax measures
are available to aerospace c ompanies for engaging in a range of activities, some of which are far
afield of the use of goods, such as engineering work and R&D. Thus, the EU's arguments simply
ignore how the challenged measures are structured and designed, and how they operate in the
real world.
54. Thus, the siting provisions themselves do not support the contention that any alleged
benefits are contingent on the use of domestic over imported goods. Moreover, the factual
evidence lends no support to the EU's allegation that the In itial Siting Provision and Future Siting

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Provision are structured to pursue, or do in fact accomplish, import substitution. Not only does the
EU adopt an improper interpretation of Article 3.1(b), but the facts only further undermine the
theory it advances.
EXECUTIVE SUMMARY OF U.S. CLOSING ORAL ST ATEMENT AT THE FIRST SUBSTANTIVE
MEETING OF THE PANEL WITH THE PARTIES
55. The EU's case remains deeply flawed. The EU proposes an overly broad interpretation of
Article 3.1(b) of the SCM Agreement that is inc onsistent with the ordinary meaning of the
provision as a whole, its context, and the object and purpose of the treaty.
56. The EU also refuses to take account of the facts, which rather than support the EU's case,
undermines and contradicts it. Instead, the EU relies on a range of false premises, including the
notion that a wing for the 777X as a practical matter can be used or imported as a separate object
prior to final assembly.
57. The EU emphasizes its de jure argument, which it identifies as its pri mary argument, and in
which case the EU is required to show that the subsidy is contingent on the use of domestic over
imported goods. However, the conditions it cites say nothing about "goods" at all, but instead talk
about the commencement of manufactur e, final assembly, wing assembly – all manufacturing and
production activities which have no explicit or implicit reference to the use of goods.
58. The United States has explained that these are very predictable ways of defining the scope
of the domestic manufacturing activity that a granting member would expect to take place in its
territory to qualify for the tax treatment. There is no aspect of the SCM Agreement that would
require any production or manufacturing subsidy to be granted only if it require d that nothing
more than the last screw was turned. Such an interpretation would turn virtually every
manufacturing or production subsidy into an import substitution subsidy.
59. The EU, in its closing statement, refers to statements it thinks show that Boeing might have,
or there would have been, some competitive opportunity in which the wing would be imported for
the 777X. We understand this to be an effort to prove a de facto claim. But the EU's notion that
the conditions of ESSB 5952 resulted in im port substitution is divorced from reality and from what
could have taken place.
60. The EU also asserts that the U.S. position that wings and fuselages are not used in aircraft is
contrary to actual practice occurring for 100 years. The EU is relying on the definition of the terms
"wings" and "fuselages," but these definitions say nothing about their use in the aircraft production
process, and nothing about whether the fuselages or wings need to be "used" as "goods" in the
777X.
61. Turning to the EU' s assertion that Boeing produces and assembles a wing, and then uses
that wing to assemble the aircraft – that is not true. Boeing does not assemble a wing and then
use that to assemble a final aircraft. A wing and a fuselage are never used prior to the final
aircraft being created.
62. Lastly, the EU is suggesting that you can subsidize airplane production and asking why the
text of ESSB 5952 specifies anything else. But the United States has made it clear that the text of
ESSB 5952 specifies the scope of production expected in producing an airplane, i.e., what it means
to produce an airplane.

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ANNEX B-4
SECOND INTEGRATED EXECUTIVE SUMMARY OF THE ARGUMENTS OF THE UNITED STATES
1 EXECUTIVE SUMMARY OF U.S. SECOND WRITTEN SUBMISSION
1. This dispute, ul timately, will turn on the Panel’s answer to a simple question: whether a
measure that allows a manufacturer to receive certain tax treatment while still being able to
import all of the parts used in the production of the product at issue, can nonetheless be
considered a subsidy that is "contingent on the use of domestic over imported goods. " In the U.S.
view, it is obvious that it cannot. The structure, design, and actual operation of ESSB 5952 lend
no support to the EU’s allegations of import -substitution contingencies. Boeing’s decision to site
the 777X manufacturing program in Washington led to the fulfillment of the First and Second
Siting Provisions, even though Boeing plans to use a wide range of imported components for the
777X, including on its fuselage and wings. Furthermore, even if all the parts used to manufacture
the 777X were fabricated outside the United States, Boeing could still satisfy the two Siting
Provisions. Companies other than Boeing are eligible for the alleged subsidies without having to
fulfill any conditions at all. Thus, if ESSB 5952 were an import -substitution policy instrument –
which is not the case – it would be a demonstrable failure.
2. This latter point should come as no surprise. In reality, ESSB 5952 was not design ed and
structured to require the use of Washington -origin goods instead of goods made elsewhere. In
other words, assuming arguendo that the challenged measures are subsidies, ESSB 5952
establishes the conditions for a domestic production contingency, rath er than an import-
substitution contingency inconsistent with Article 3.1(b) of the Agreement on Subsidies and
Countervailing Measures ("SCM Agreement"). As such, the measures at issue in this dispute, if
found to be subsidies, might be actionable under Pa rt III of the SCM Agreement, but are not
prohibited under Part II.
3. Third parties have expressed strong reservations with the EU’s view that a measure
contingent on the production of a finished good, including its major structural elements, should be
treated as contingent on the use of domestic over imported goods for purposes of Article 3.1(b).
As they have noted, this approach appears to result in all or virtually all production subsidies being
treated as prohibited import substitution subsidies.
4. The EU now acknowledges that "{p}roduction subsidies, which the United States defines as
‘the payment of subsidies to domestic producers for engaging in production activities in the
grantor’s territory’, are not prohibited by Article 3.1(b) of the SCM Agreement." However, the EU
tries to walk a tightrope between production subsidies and import -substitution subsidies by
arguing that ESSB 5952 would be fully consistent with Article 3.1(b), were it not for the
combination of specific references to finished aircraft and fuselages and wings in the definition of a
"significant commercial aircraft manufacturing program, "used in the First Siting Provision and the
reference to "wing assembly " in the Second Siting Provision. According to the EU, this
combination alone converts what would otherwise be a production subsidy into a prohibited local
content contingency.
5. The EU’s position, however, precludes Members providing production subsidies that define
the scope of required domestic production activity in terms of specific elements of the output.
Under this approach, a production subsidy would only be permitted to define the eligible recipients
by requiring a producer to perform the very last production step (perhaps by turning the very last
screw) and nothing more.
6. It is not just legal principles that disprove the EU’s arguments, but the actual facts of
Boeing’s 777X program. As the Boeing Expert Statement explains, fuselages and wings are
"elements of the output of the production process"– not inputs used in the production of airplanes.
The ordinary meaning of the word "airplane," as expressed in dictionaries and regulatory practice,
confirms that a fuselage and fixed wings are fundamental to what makes an airplane an airplane.
As the Appellate Body found in Canada – Autos, if the use of domestic over imported goods is only
"one possible means " of satisfying the requirements for obtaining a subsidy, that would be

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"insufficient for a reasoned determination of whether a contingency ‘in law’ on the use of domesti c
over imported goods exists. " In this case, the 777X program demonstrates that there is at least
indeed one such means for satisfying the two Siting Provisions, which shows definitively that the
use of domestic over imported goods is not required, in law or in fact, by ESSB 5952.
7. In its de jure arguments, the EU attempts to brush this evidence aside – even though the
Appellate Body in Canada – Autos criticized an analysis of de jure contingency that ignored real -
world evidence regarding the actual opera tion of the measures. In its de facto arguments, the EU
never discusses the elements of such a de facto analysis as described by the Appellate Body.
Instead, the EU merely asserts that ESSB 5952"rewards "the use of domestic over imported goods
and "penalizes" the failure to do so. But this argument fails because it assumes that the alleged
subsidies are contingent on the use of domestic over imported goods, which is the conclusion it is
supposedly designed to prove. The EU also omits a numerical analysi s analogous to what the
Appellate Body considered to be potentially relevant under a "geared to induce " approach.
Conducting such a numerical analysis confirms that the challenged measures are not contingent on
the use of domestic over imported goods.
II. Legal Standard: A Contingency is Prohibited Under Article 3.1(b) Only If it
Requires the Use of Domestic over Imported Goods
8. The first major error in the EU’s case is its incorrect interpretation of Article 3.1(b) of the
SCM Agreement. The parties agr ee that this obligation does not prohibit subsidies contingent on
the production of goods in the territory of a Member. Where the parties disagree, by contrast,
with respect to the legal standard, is whether the fact that a taxpayer can meet a condition
without resorting to the use of domestic over imported goods is sufficient to demonstrate that the
underlying measure is not a prohibited import -substitution subsidy. The parties also disagree
about the extent to which factual evidence can play a role in c onfirming such an interpretation of
the relevant measures. A proper interpretation of Article 3.1(b) establishes that a subsidy is
contingent on the use of domestic over imported goods only if the recipient is required to use
domestic over imported goods. That analysis must take into account all sources that elucidate the
meaning of the words used in the measure in question, including relevant factual information
regarding the application of the measure.
1.1.1 A. The Individual Elements of Article 3.1(b)
9. In the context of Article 3.1(b) of the SCM Agreement, a relation of contingency exists only
where the "use of domestic over imported goods " is required to receive the alleged subsidy. In
Canada – Autos, the Appellate Body applied this principle in the context of Article 3.1(b).
According to the Appellate Body, if there is a "multiplicity of possibilities for compliance " with a
subsidy’s "condition{s} for eligibility, " only some of which involve the use of domestic over
imported goods, then the subsidy is consistent (at least de jure) with Article 3.1(b).
10. The EU attempts to resist this conclusion regarding its burden of proof by arguing that the
reasoning in Canada – Autos applied exclusively to value-added requirements. However, the SCM
Agreement does not grant a privileged status to import-substitution subsidies that take the form of
domestic value added requirements. Rather, Article 3.1(b) treats all subsidies alike: they are
prohibited only if contingent on the use of domestic over import ed goods. Accordingly, and
contrary to the EU’s arguments, the fact that the alleged local content requirements in Canada –
Autos and this dispute take different forms under domestic law does not alter the analytic
approach under Article 3.1(b).
11. The U nited States and the EU also disagree on the meaning of the word "use" in
Article 3.1(b) of the SCM Agreement. The parties quote different editions of the Oxford English
Dictionary to define the ordinary meaning of "use," but they mean essentially the same thing. The
United States and the EU also cite largely the same provisions of the SCM Agreement as context.
However, the EU errs in two important ways. First, it fails to recognize the relevance of the
context provided by GATT 1994 Article III:8(b). A n interpretation of "use" that resulted in making
production subsidies "prohibited" would tend to render Article III:8(b) inutile, contrary to the
principle of effectiveness. Second, the EU seeks to characterize the meaning of "use" in
Article 3.1(b) as either "broad" or "very broad." This is a subjective characterization based on the
EU’s judgment, rather than the text of the SCM Agreement, and is accordingly not useful for

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purposes of interpretation. The EU also misses an important aspect of the definit ions and
examples that it cites: all connect "use" with a process for achieving a purpose, which is distinct
from the process itself. To use the non -production examples cited by the EU, subsidies contingent
on the repair, maintenance of modification of m erchandise in a party’s territory would not be
prohibited, but requiring the use of domestic goods in those processes would be prohibited.
12. The parties have also debated the meaning of the term "goods" as it appears in
Article 3.1(b) of the SCM Agreement. The United States has demonstrated that the fuselages and
wings for the 777X are not tradable in the sense necessary for Article 3.1(b). Accordingly, the EU
has failed to establish the existence of the domestic and imported "goods" that it claims are the
subject of the measures at issue.
13. The EU has done nothing to meet its burden of establishing that the goods on the use of
which the subsidy is allegedly contingent are or would be domestic. This omission is particularly
glaring, as the United States has shown that ESSB 5952 does not require the use of any domestic
parts in assembly of the fuselage or wings. In other words, Boeing is free to import 100 percent of
the parts as long as assembly occurs in Washington. The EU has not even argued, let a lone
proven, that a wing or fuselage manufactured in this fashion – even if a discrete wing or fuselage
existed at some point in the production process – would qualify as "domestic goods."
14. The dictionary definition of the word "over" is"{a}bove in degr ee, quality, or action; in
preference to; more than. " The EU argues that the relevant meaning is "more than" or "in excess
of." This position cannot be reconciled with the context of Article 3.1(b) and is contrary to
interpretations of the term in past pan el and Appellate Body reports. If "over" in Article 3.1(b)
meant "in excess of, "the prohibition would apply to subsidies contingent on the use of domestic
goods in excess of imported goods – using a greater quantity of domestic goods than imported
goods (e.g., 51 percent domestic goods). Conversely, a Member would be free to require the use
of some domestic goods, as long as the quantity was lower than the amount of imports. The
Appellate Body evinced a different understanding in Canada – Autos.
1.1.2 B. The Evidence for an Analysis Under Article 3.1(b) May Extend Beyond the
Text of the Challenged Measures, For Both De Jure and De Facto Analysis
15. The Appellate Body found in Canada – Autos that under Article 3.1(b),"contingency ‘in law’ is
demonstrated ‘on the basis of the words of the relevant legislation, regulation or other legal
instrument." It explained further that "such conditionality can be derived by necessary implication
from the words actually used in the measure. " The panel consulted multi ple legal instruments to
evaluate the contingency at issue, but the Appellate Body found that a still broader inquiry was
necessary to determine how the subsidy operated.
16. As an initial matter, where a complaining party brings a de jure challenge under
Article 3.1(b) of the SCM Agreement, the complaining party has the burden of establishing what is
the "domestic" and what is the "imported" good for purposes of Article 3.1(b) that are affected by
the measure at issue. This the EU has failed to do. Inste ad, the EU appears to believe that by
characterizing its claim as "de jure," it is excused from having to address this key threshold issue.
That is not the case.
17. The EU is claiming that the measures at issue are, on their face, contingent on the use of
domestic over imported goods. Thus, the EU needs to establish as part of any de jure claim what
is the domestic and what is the imported good for each of the measures at issue. And in
determining what, if anything, is the relevant "good," it is not a ppropriate to suggest to a panel
that it ignore or blind itself to relevant facts. Yet that appears to be what the EU is suggesting.
18. Furthermore, as Canada – Autos makes clear, while a de jure analysis is based on the words
of the measure, it does not evaluate them in a vacuum. A single clause in a piece of legislation
typically takes meaning from the surrounding clauses in the legislation. If the measure in question
amends previously enacted legislation or codified laws, provisions in that legislati on will also affect
the meaning of the words in the measure at issue. And, finally, the tools that a Member’s legal
system uses to interpret the words in that measure will also play a necessary role in understanding
the "words" for purposes of a de jure analysis.

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19. ESSB 5952 points directly to a number of sources that define its terms. The legislation itself
contains definitions, which also cross -reference the definitions applicable generally to
administration of the B&O tax. The B&O tax definitions, most notably the definition of "commercial
airplane," refer to the regulatory definitions used by the Federal Aviation Administration, and to
"ordinary meaning," which under Washington law may involve reference to dictionaries or sector -
specific meanings. In addition, under Washington law,"{g}reat weight is generally accorded to the
interpretation of a statute by the administrative agency which is charged with its administration. "
Thus, DOR’s interpretation of ESSB 5952 would also factor into the overall an alysis of its meaning
under Washington law.
20. The EU, in fact, acknowledges that a de jure analysis may involve evidence beyond the text
of a legal instrument that is the subject of a complaining Member’s claims, provided that such
evidence relates to t he text of the legal instrument. However, the EU overstates its case in
arguing that, as a general matter, such evidence "must necessarily relate to these very words of
the relevant legislation. " In fact, as Canada – Autos shows, evidence outside the scop e of any
"legislation," which pertains to the actual operation of a measure, may – and sometimes must – be
included in a de jure analysis.
21. As discussed below, that is the case in this dispute: Boeing does not use wings or fuselages,
domestic or impo rted, to produce the 777X, even though Boeing’s 777X siting decisions satisfied
the First Siting Provision, and have avoided triggering the Second Siting Provision. As an
indication of DOR’s interpretation of ESSB 5952, a statute that DOR is charged to ad minister, this
evidence has a role in the analysis of de jure contingency, consistent with the approach taken by
the Appellate Body in Canada – Autos.
22. In addition, to the extent that the EU argues that the Panel must complete its de jure
analysis based solely on the language used in the First and Second Siting Provisions, without using
any other interpretive tools, the EU is incorrect. It cites no legal support for this position, and the
only factual basis it advances is that "there is no need to exami ne ‘a particular manufacturer’s
ability to satisfy the requirements of a measure without using domestic goods’, because the two
conditions require the use of specific domestic goods: fuselages and wings." The EU’s argument in
this regard is transparently circular and does not reflect the objective approach that panels are to
take. In fact, it is only by reference to all of the tools for interpreting ESSB 5952 that the Panel
can evaluate the EU’s arguments in a meaningful way.
III. The EU Fails to Establis h that the Alleged Subsidies are De Jure Contingent on the
Use of Domestic Over Imported Goods
23. As explained above, to establish that the challenged measures are de jure inconsistent with
Article 3.1(b) of the SCM Agreement, it is not enough for the EU to assert that the use of domestic
over imported goods is one possible way to receive the alleged subsidies. Rather, the EU must
demonstrate that receipt of the alleged subsidies is "contingent" on the use of domestic over
imported goods in the sense of b eing "dependent for their existence. " The EU fails in this regard,
and in fact the evidence shows that it is possible to satisfy the two Siting Provisions while using
only imported parts.
24. The EU argues that the references to manufacturing or assembly of fuselages and wings in
the Siting Provisions "convert what would otherwise be a production subsidy into a prohibited local
content contingency, " but in reality these terms merely define the scope of production activity
required to use the tax treatment covered by ESSB 5952. As the United States has explained
before, as the two main structural elements of the airframe, wings and a fuselage together are the
essence of the airplane. And, at least in the case of the 777X, they are not parts of that airpla ne
that are "used" in its production, but rather are the output of that production process, as we will
discuss in further detail below.
1.1.3 A. The EU Fails to Show that the Text of ESSB 5952 Makes the Use of Fuselages
and Wings as Inputs a "Condition" for Receiving the Alleged Subsidies
25. The EU argues that the alleged inconsistency with Article 3.1(b) of the SCM Agreement
results exclusively from the combination of specific references to finished airplanes and fuselages
and wings in the definition of a "significant commercial aircraft manufacturing program, " used in

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the First Siting Provision and the reference to "wing assembly" in the Second Siting Provision. This
combination, according to the EU, "convert{s} what would otherwise be a production subs idy into
a prohibited local content contingency," and represents the "express conditioning of the grant of a
subsidy on use of domestic over imported inputs."
26. However, the EU’s conclusion cannot be derived from the words of ESSB 5952, which merely
require that both the aircraft itself, as well as specific elements of the aircraft – i.e., the fuselage
and wings – undergo manufacturing in Washington. Even aside from the question of whether the
measures at issue are subsidies, Article 3.1(b) does not pro hibit defining production subsidies in a
way that requires the domestic siting of manufacturing activity on both the finished product and its
defining elements. Indeed, such a definition could be useful for excluding manufacturers engaged
in minimal produ ctive activities – including those who would seek to circumvent the production
requirement – from eligibility for domestic production subsidies. Thus, defining production in
terms of the integral elements of the finished product is not, as the EU argues, tantamount to
treating the elements as domestic inputs that must be used instead of imported inputs. For these
reasons, the EU’s de jure arguments fail.
27. Assuming, arguendo, that the challenged incentives are subsidies, ESSB 5952 comes into
effect fo llowing a determination by DOR that "the siting of a significant commercial airplane
manufacturing program in the state of Washington" has occurred. In turn, "significant commercial
airplane manufacturing program " is defined as "an airplane program in whi ch the following
products, including final assembly, will commence manufacture " in Washington: "(i) The new
model, or any version or variant of an existing model, of a commercial airplane; and (ii) Fuselages
and wings of a new model, or any version or varia nt of an existing model, of a commercial
airplane."
28. ESSB 5952 further states: "{t}he definitions in this subsection { i.e., RCW 82.32} apply
throughout this section unless the context clearly requires otherwise. " With respect to the term
"commercial airplane," RCW 82.32.550 states: "‘Commercial airplane’ has its ordinary meaning,
which is an airplane certified by the federal aviation administration for transporting persons or
property, and any military derivative of such an airplane. " Under the Federal Aviation
Administration regulations, "{a}irplane means an engine -driven fixed -wing aircraft heavier than
air, that is supported in flight by the dynamic reaction of the air against its wings." Webster’s Third
International Dictionary, which Washington court s often consult in their evaluation of ordinary
meaning, defines "airplane" as "a fixed-wing aircraft heavier than air that is driven by a screw
propeller or a high-velocity jet supported by the dynamic reaction of the air against its wings."
29. RCW 82.32 does not contain specific definitions of "fuselage" or "wing," but Webster’s Third
International Dictionary defines "fuselage" as "the central body portion of an airplane designed to
accommodate the crew and the passengers or cargo " and "wing" as "one of the airfoils that
develops a major part of the lift which supports a heavier -than-air airplane." The OED, which the
EU cites, defines "fuselage" as"{t}he central body portion of an aeroplane, to which the wings and
tail unit are attached and which (in mode rn aircraft) contains the crew and the passengers or
cargo," and "wing" as "one of the planes of an aeroplane."
30. Thus, by their ordinary meanings, "fuselages" and "wings" are what makes a vehicle an
"airplane"– the one houses the passengers and cargo an d the other provides the lift that allows
the airplane to fly. The ordinary meanings of "fuselage" and "wing" in particular indicate their
status as functional elements of the finished aircraft, and not as inputs in the aircraft production
process. Accordingly, the references to fuselages and wings in the First Siting Provision reflect the
definitional elements of an airplane as a means of identifying what constitutes the manufacture of
an airplane in Washington to trigger application of ESSB 5952. These references do not entail an
import-substitution requirement, either by their express terms or necessary implications.
31. The analysis is similar for the Second Siting Provision. By requiring that wing assembly and
final assembly occur in Washington for the 0.2904 percent B&O tax rate to continue to apply to the
relevant commercial aircraft manufacturing program, the Second Siting Provision stipulates that
assembly of the whole ( i.e., the airplane) as well as one of the definitional elements of the whole
(i.e., the wing) must occur in Washington. Neither the reference to "wing assembly" nor any other
terms in the Second Siting Provision indicate that a wing (or fuselage) is an input into the airplane
production process.

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32. One reason that the terms "fuselage" and "wing" might appear in the text of ESSB 5952 –
even though they are by definition elements of an airplane, which is also referenced in the text of
ESSB 5952 – is that Washington decided not to allow a minimal manufacturing operation to satisfy
the two Siting Provisions. Indeed, it is the EU’s interpretation that is flawed, because it implies
that the class of WTO -consistent production subsidies is limited to those that permit minimal
finishing operations. According to the EU, subsidies for the d omestic production of a final product
are permissible, but such subsidies immediately "convert" into prohibited import -substitution
subsidies when the legislator defines the production process to include anything more than turning
the final screw. This vi ew has no basis in the text of the covered agreements, and indeed is
inconsistent with Article III:8(b) of the GATT 1994.
1.1.4 B. The EU Fails to Show that ESSB 5952 Requires that Fuselages and Wings Be
"Domestic"
33. In addition to the fundamental flaws in the EU’s efforts to distinguish an airplane from its
wings and fuselage, the EU also fails to meet its burden of establishing that the First and Second
Siting Provisions require that the referenced "fuselages" and "wings" be domestic. Otherwise,
ESSB 5952 does not require the use of domestic over imported goods. This omission provides yet
another, independent, reason why the EU has failed to make a prima facie case.
34. Although ESSB 5952 identifies certain production activities that must be sited wi thin
Washington to satisfy the two Siting Provisions, ESSB 5952 does not draw any distinction between
domestic and imported fuselages and wings. In addition, as noted above, a taxpayer could satisfy
the First and Second Siting Provisions by using 100 perc ent imported parts, as long as those parts
(including parts of fuselages and wings) were assembled into an airplane in Washington.
Accordingly, even if, for the sake of argument, one were to consider fuselages and wings to be
"inputs" or "goods used " in t he production of an airplane, ESSB 5952 imposes no de jure
requirement that such fuselages or wings be "domestic" within the meaning of Article 3.1(b) to
satisfy the two Siting Provisions.
35. This hole in the EU’s argument is all the more obvious because of the factual circumstances
of the 777X. And, as the United States previously noted, even if all the components of the 777X
were fabricated outside the United States, Boeing would be able to satisfy the two Siting Provisions
simply by assembling all of the imported goods into the finished aircraft, which would include its
fuselage and wings. The EU has proposed that "domestic" means anything not imported. As a
result, even under the EU’s approach, which is novel, wings and fuselages made up completely of
imported parts would not appear to be domestic goods. Thus, it could not be assumed that the
First and Second Siting Provisions require that 777X fuselages and wings themselves – even if they
ever existed as separate goods – be domestic.
1.1.5 C. The EU Fails to Rebut Factual Evidence Establishing that the ESSB 5952 Text
Does Not Condition the Alleged Subsidies on the "Use of Domestic over Imported Goods"
36. The United States recalled that if there is a "multiplicity of possibilities" for compliance with
a subsidy’s "condition{s} for eligibility, " only some of which involve the use of domestic over
imported goods, then the subsidy is consistent with Article 3.1(b) of the SCM Agreement. The
United States has shown that there is at least one very obvio us means of satisfying the First and
Second Siting Provision that does not involve the use of fuselages and wings as inputs into the
airplane production process: the 777X manufacturing program. This fact alone demonstrates that
the EU’s de jure interpretation of ESSB 5952 is at odds with the actual operation of the alleged
contingencies. This is strong evidence that the EU misunderstands the legislation.
37. As explained above, the term "use" in Article 3.1(b) refers to the employment of a domestic
good as an input or instrumentality in a productive process, or enjoyment of a good for its
intended purpose by an end user. In fact, throughout the SCM Agreement and the covered
agreements in general, the term "use" refers to the consumption of goods or serv ices in a
production process. Thus, Article 3.1(b) covers subsidies that are granted contingent on the
employment of a good as an input or instrumentality in a productive process. But Article 3.1(b)
does not cover subsidies contingent on the creation of the output of such a productive process.

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38. In this dispute, the EU alleges that the First and Second Siting Provisions require Boeing to
use fuselages and wings as "inputs" into the aircraft production process. The EU further alleges
that by requiring fuselages and wings to be manufactured in Washington, the two Siting Provisions
prevent the importation of fuselages and wings that could otherwise occur in the absence of the
challenged subsidies. However, these allegations cannot be reconciled with the fa ctual evidence
before the Panel. For example, the Boeing Expert Statement states that fuselages and wings are
"elements of the output of the production process "– not inputs. And because they are not inputs,
they are not "goods" that are "use{d}"to produce the very airplanes that are the subject of the
First Siting Provision. Accordingly, the EU fails to demonstrate that ESSB 5952 conditions receipt
of the alleged subsidies on the use of fuselages and wings as inputs into the aircraft production
process. Rather, the facts show that no such use is required.
39. Furthermore, the EU’s examples of airplanes other than the 777X that it views as being
produced by using complete fuselages and wings as inputs in the final assembly process are
insufficient to su pport its assertion that "aircraft could not be produced" without using fuselages
and wings as inputs. Again, the actual evidence of the 777X production process shows that they
can be and, in fact, that in the case of the 777X, this is precisely what happens.
40. In conclusion, to make its case that ESSB 5952 is de jure contingent on the use of domestic
over imported goods, the EU would have to show that the measure, by its terms, requires the use
of domestic over imported goods. However, the EU has failed to do so. Indeed, the express terms
of ESSB 5952 indicate that a fuselage and fixed wings are definitional to what makes an airplane
an airplane, and not simply inputs to be used in the airplane production process. Nor does the
legislation require that such fuselages and wings be "domestic." Boeing itself will not use fuselages
or wings as inputs in the production process for the 777X, which is the very aircraft program that
has satisfied the First and Second Siting Provisions. In fact, Boeing will us e a wide array of parts
for the fuselage and wings that originate outside Washington, and in many cases outside the
United States. Thus, the tax treatment provided by ESSB 5952 is not de jure contingent on the
use of domestic over imported goods.
IV. The EU’s De Facto Article 3.1(B) Claims Are Unsupported and Contradicted by the
Evidence
41. As demonstrated above in the de jure analysis, evidence regarding the 777X program
demonstrates conclusively that the First Siting Provision has been fulfilled, and th e Second Siting
Provision has been avoided, without any use of domestic over imported goods. No further factual
information is needed to refute the EU’s claims, whether de jure or de facto , because a claim
under Article 3.1(b) fails if the complaining par ty does not show, inter alia , that "the use of
domestic goods {is} a necessity and thus . . .required as a condition for eligibility for "the alleged
subsidy. However, should the Panel consider it useful to further address the EU’s arguments
regarding de facto contingency, this section addresses the many other errors made by the EU.
1.1.6 A. Boeing Has Complied with the First and Second Siting Provisions – All
Without Engaging In Import-Substitution.
42. The EU contends that the First and Second Siting P rovisions "require the use of specific
domestic goods." Yet, it has no coherent explanation for why this is the case, and the evidence
discussed below shows the EU’s contention to be baseless. The EU has largely ignored – and
asked the Panel to disregard – the facts of the 777X production process, even though this is the
most probative evidence as to what airplane production activities may satisfy the First Siting
Provision and avoid triggering the Second Siting Provision. The facts of the 777X production
process show that, with respect to the putative "goods"(wings and fuselages) identified by the EU,
Boeing did not propose to use, and has no plans to use, domestic over imported goods in the 777X
program, and the DOR determination establishes that the pro gram nonetheless satisfied the First
Siting Provision. Thus, the First Siting Provision did not make eligibility for the ESSB 5952 tax
incentives contingent on the use of domestic over imported goods.
43. The EU has not even attempted to meet its burden o f showing that the goods allegedly
subject to the contingency must be "domestic." There is no basis to assume as much. The EU
asserts that ESSB 5952 has distorted competitive opportunities for imported 777X fuselages and
wings, but the evidence shows thi s allegation to be baseless. Boeing could comply with the First

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and Second Siting Provisions, and receive the challenged tax treatment, even if every individual
part of the 777X were imported. Moreover, the histories of the 777X program and ESSB 5952
demonstrate that the challenged measures did nothing to distort competitive opportunities for
imported goods, whether actual or potential. The United States in its first written submission
recounted the development of the 777X and the program’s production pl anning decisions, with
details drawn from the Boeing Expert Statement. This evidence establishes that, regardless of
ESSB 5952, there were no actual or potential imported substitutes for the 777X manufacturing
activity Boeing sited in Everett, Washington.
44. For example, Boeing’s key make/buy and supplier selection decisions were made well in
advance of ESSB 5952 and, thus, were not influenced by ESSB 5952. In addition, ESSB 5952
places no conditions on the location of fuselage or wing structure fabricat ion, or on the origin of
individual airplane parts. Moreover, passage of ESSB 5952 had no effect on Boeing’s willingness
to use imported goods or to site fuselage and wing assembly outside the United States. The
circumstances surrounding the passage of E SSB 5952 and subsequent events provide the Panel
with a natural experiment that disproves the EU’s assertions regarding competitive opportunities
for imported 777X wings and fuselages.
45. Setting aside the fact that Boeing does not use domestic fuselages and wings to produce the
777X, the EU has no basis for asserting that ESSB 5952 distorted the competitive opportunities
available to imported fuselages and wings, or that the challenged measures are "geared to induce"
the use of domestic over imported go ods. Indeed, the evidence above shows that Boeing’s
determination to site 777X manufacturing operations in the United States was driven by
commercial considerations independent of ESSB 5952, as were its decisions to source parts from
suppliers.
1.1.7 B. The EU Fails to Establish that the Challenged Measures are "Geared to
Induce" the Use of Domestic Over Imported Goods.
46. Compared to the evidence discussed above, which disproves the EU’s claims, the EU’s de
facto arguments are noticeably thin on actual facts. The EU contends that the Panel should use a
"geared to induce " analysis in assessing its de facto claims under Article 3.1(b), based on the
Appellate Body’s use of the "geared to induce" analysis to evaluate prohibited export subsidies in
EC – Large Civil Aircraft. Yet, the EU never discusses – let alone applies – the specific elements of
the "geared to induce" analysis that the Appellate Body identified. It has also declined to engage
with much of the relevant factual evidence. In fact, a prope r "geared-to-induce" analysis would
confirm that the alleged subsidies did not induce Boeing to engage in import substitution.
1.1.8 C. None of the Factual Evidence Cited By the EU Supports Its De Facto
Arguments.
47. In its first set of written question s, the Panel asked the EU to identify the factual evidence
supporting its Article 3.1(b) claims. In response, the EU lists five "facts." With one exception, the
EU declines to explain why they might be relevant, or to link them to the "geared to induce "
analysis it would have the Panel apply to its de facto claims. Most importantly, none supports the
EU’s de facto arguments.
48. "The text of SSB 5952." The EU’s reference to the First and Second Siting Provisions does
nothing to remedy the core flaw in both its de jure and de facto claims: neither provision requires
a specific production process, let alone one that necessarily involves the use of fuselages and
wings in the production of a commercial airplane. It may be the case that Airbus manufactures a
"completed, joined fuselage" of the A320 as an "intermediate good{}"before final assembly, but it
does not follow that Boeing does the same with the 777X, or that ESSB 5952 requires it to do so
to be eligible for the challenged tax treatment.
49. Statement of Washington’s Governor. The EU cites a statement by Governor Inslee
"indicating that the ‘legislation includes strong contingency language.’" A political statement is not
direct evidence of what a measure actually requires, and the statement itse lf begs the question of
what is conditioned by the "contingency language; " it says nothing about the challenged tax
treatment being contingent on the use of domestic over imported goods.

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50. Boeing’s importation of "wings for its 787 from Japan. " Boeing do es not import
complete 787 wings from Japan. Rather, Boeing imports multiple wing -related structures from
Japan and must therefore conduct further wing assembly activity in the United States. Even if
Boeing could or did import complete 787 wings from Jap an, it would not follow that ESSB 5952
requires Boeing to "use" domestic wings on the 777X program.
51. Boeing’s supposed"active{} consider{ation}"of importing 777X wings from Japan.
The EU asserts that "Boeing actively considered the possibility of impor ting the 777X wings from
Japan prior to the enactment of SSB 5952, and formally decided against that option once SSB
5952 was enacted." This is incorrect in several respects, reflecting the EU’s refusal to engage with
the evidence. The facts directly contradict the EU’s assertion that Boeing "formally decided against
"importing 777X wings" once SSB 5952 was enacted."
52. "Rewards" and "penalties." As discussed above, the EU’s sole argument in relation to its
proposed" geared to induce " analysis is that ESS B 5952 penalizes " use of imported wings or
fuselages" and rewards " use of domestic wings or fuselages. " This" rewards"/"penalties"
formulation merely imports from the EU’s de jure arguments the baseless assumption that the
First and Second Siting Conditions require the use of domestic fuselages and wings.
53. For all of these and other reasons, therefore, the First and Second Siting Provisions would be
very poor instruments for requiring import substitution. As the factual evidence shows, they allow
Boeing to use exclusively imported parts to meet the First Siting Provision, and to avoid triggering
the Second Siting Provision. They impose no contingency whatsoever on receipt of the challenged
treatment by other aerospace manufacturing activities in Wash ington, whether conducted by
Boeing or any other manufacturer. The total configuration of the facts also reveals that there were
no potential import opportunities for ESSB 5952 to operate against.
V. The EU Fails to Establish that the Challenged Measures Confer a Financial
Contribution or a Benefit
54. As the United States previously explained, where a Member challenges the alleged grant of a
subsidy to a particular recipient of an alleged subsidy, that Member normally must establish actual
receipt of tha t subsidy. That may not be the case where a Member asserts " that a financial
contribution exists in the abstract, " which the EU has now clarified is its argument in this
proceeding. However, a challenge" in the abstract" does not excuse the complaining Member of its
burden to establish all elements of the existence of a subsidy as of the time of the proceeding.
55. Article 1.1(a)(1)(ii) defines a financial contribution to include " where . . . government
revenue that is otherwise due is foregone or not col lected (e.g. fiscal incentives such as tax
credits)." By virtue of the present tense verb " is, "this provision covers revenue foregone or not
collected in the present . Thus, Article 1.1(a)(1)(ii) deals with tax liabilities that exist in the
present, and government actions with respect to those liabilities.
56. The EU advances several legal arguments to evade the implication of the present tense
drafting of Article 1.1(a)(1)(ii). None are valid. There is no reason to consider, as the EU does,
that "maintain" in Article 3.2 of the SCM Agreement applies to the present and "grant" to the
future. Moreover, the application of Article 1.1(a)(1)(ii) depends not on theoretical entitlements,
but on an essentially counterfactual comparison. Finally, the EU conte nds that applying
Article 1.1(a)(1)(ii) exclusively to existing tax liabilities would leave Members with impunity to
impose prohibited contingencies in the present in exchange for tax breaks in the distant future.
Its concern is misplaced. The farther in the future a tax advantage exists, the less certainty the
taxpayer will have that it will continue to be advantageous, and the less likely it is to influence
current conduct.
57. In this dispute, the EU argues that a finding of benefit proceeds automatica lly from a finding
that revenue is foregone. But that is not the case. Revenue is "foregone" for purposes of
Article 1.1(a)(1)(ii) when the authorities provide tax treatment more advantageous to the
taxpayer than under the "normative benchmark " of the Me mber’s tax system. In contrast, a
benefit exists when a financial contribution provides the recipient more advantageous terms than
the market would provide. The EU’s approach treats these measurements as identical when they

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are, in fact, different. The EU bears the burden of showing in each instance that the treatment
under ESSB 5952 is better than available on the market, and has not done so.
2 EXECUTIVE SUMMARY OF U.S. OPENING ORAL ST ATEMENT AT THE SECON D
SUBSTANTIVE MEETING OF THE PANEL WITH THE PARTIES
58. During the first meeting, the United States described how the EU is trying to fit a square peg
into a round hole. This is just as true today as it was then. Even if the challenged measures were
found to be subsidies, they would be production sub sidies, which even the EU acknowledges are
not, in and of themselves, prohibited. They are simply not contingent on the use of domestic over
imported goods. The EU attempts to stretch the scope of Article 3.1(b) of the SCM Agreement,
and reads meaning into ESSB 5952 that simply is not there.
59. First, the EU’s interpretation of the terms in Article 3.1(b) of the SCM Agreement would
effectively turn production subsidies into prohibited import substitution subsidies. This result
demonstrates that its interpretation of Article 3.1(b) is erroneous.
60. Most modern production processes include multiple production steps, and Members granting
production subsidies, as they are permitted to do, will want to ensure that recipients actually
engage in the produc tion the authorities seek to promote. They will also want to be certain that
the production activity is substantive, and not a trivial operation that adds nothing to the
economy. Whether clarified explicitly in the legislation or left implied, Members typically would not
be interested in subsidizing a producer that completes only a single, perhaps minimal, production
step. But the EU’s interpretation of Article 3.1(b) would preclude a Member from requiring any
production activity more substantial than the final production step.
61. A review of the EU’s interpretation of the terms in Article 3.1(b) will expose this mismatch
between the EU’s nominal recognition that the SCM Agreement does not prohibit production
subsidies as such, and the effect of its le gal arguments. The EU has argued that "goods," as used
in Article 3.1(b) and modified by "imported," should not be limited to tradable items or otherwise
cabined. It has also argued for an expansive understanding of the word "use" and has stated that
it is irrelevant if the manufacturer of the finished good also produced the intermediate good
allegedly used. Taken together, these positions suggest every object, article, or structure that
exists throughout any manufacturing process is a "good" that is " used" within the meaning of
Article 3.1(b) when the manufacturer takes the next production step – regardless of whether the
result of that next step is an article that is unfinished, intermediate, or untradeable.
62. Furthermore, the EU has abstained from a ny detailed analysis of what would make a good
"domestic" for purposes of Article 3.1(b). Rather, it appears that the EU assumes that a "good" is
"domestic," at least for purposes of Article 3.1(b), if an article was modified in any way in the
grantor’s territory, irrespective of whether it was produced from foreign parts or how much value
is attributable to the production or assembly step. Therefore, in any production process that
involves more than one step, the first step will result in a "domestic good," and the second step
necessarily will involve the use of that domestic good. Accordingly, under the EU’s theory, a
requirement that more than one production step be performed in the grantor’s territory would
make a subsidy contingent on the use of a domestic over an imported good.
63. Second, the EU is wrong in asserting that "it is a fact that aircraft ‘use’ wings and fuselages:
without those inputs, the aircraft could not be produced. " If the EU is suggesting that fuselages
and wings are "used" as "goods" within the meaning of Article 3.1(b) merely because airplanes
have fuselages and wings, the EU is mistaken. A manufacturer does not "use" every element of a
finished good that one can point to and describe with a name. "Use" in the context of a
manufacturing process refers to what goes into the process, and not the features of the product at
the end of the process. Those are elements of the output, and not "goods" that are "used"
themselves, but elements of a distinct finished good. To take an exam ple, one can quite easily
point to a finished building’s façade, but the builder does not "use" the façade as a good within the
meaning of Article 3.1(b). Likewise, just because one can point to a finished airplane’s fuselage
and wings does not mean that the manufacturer "used" the fuselage and wings as goods within
the meaning of Article 3.1(b).

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64. If the EU is suggesting that, as a factual matter, airplanes cannot be produced without first
producing fuselages and wings as separate goods and then using them as inputs, this is
inaccurate. The fuselage and wings of an airplane effectively make up the airframe and, as such,
are functionally important elements of an airplane, but there is no definitional or physical reason
why they would have to be produced as separate goods that are used as inputs. It is certainly
feasible for an airplane to be assembled without first assembling a completed fuselage and wings
as separate goods. Rather, fuselages and wings can be – and in the case of the 777X will be –
completed only during and as part of the final assembly of the finished airplane. Therefore, the EU
is wrong when it suggests that "it is a fact that aircraft use wings and fuselages "within the
meaning of Article 3.1(b).
65. If the EU means that airplanes "use" fuselages and wings as "goods" by virtue of the fact
that airplanes have fuselages and wings, this is a misinterpretation of the term "use." If, on the
other hand, the EU means that, as a factual matter, a manufacturer must first produce fuselages
and wings as separate goods and then use them as inputs to produce the finished airplanes, this is
incorrect. As the 777X program demonstrates, a manufacturer need not assemble completed
fuselages and wings prior to assembling the finished airplane.
66. Third, the EU misinterprets ESSB 5952. The two Siting Conditions themselves do not
require any production process in particular, nor do they address the domestic or imported
character of inputs. The definition of "significant commercial airplane manufacturin g program"–
like any definition – simply provides greater clarity and concreteness. It does not, as the EU
suggests, communicate a separate substantive requirement to use domestic over imported inputs.
Furthermore, the intent of ESSB 5952 is clear – to ensure the siting of a manufacturing program
that is important to the state’s workforce. The EU’s efforts to characterize it as having the
"cardinal purpose " of import substitution is implausible, particularly given the significant use of
imports in the 777X, and the ability of taxpayers other than Boeing to receive the tax treatment at
issue without meeting any conditions, meaning they could not possibly be required to use domestic
over imported goods.
67. The EU also asserts that its interpretation is ne cessary to give meaning to the words
"fuselages" and "wings" as they appear in the definition of "significant commercial manufacturing
program." It contends that the U.S. description of the operation of ESSB 5952, by contrast, would
render those words mean ingless and superfluous. This is nonsense. The words in question ( i.e.,
"fuselages" and "wings") appear within the definition of a defined term ( i.e., "significant
commercial airplane manufacturing program"). They do what the words of any definition do – add
clarity and concreteness to a term used elsewhere in the measure. In this case, the terms "siting"
and "significant commercial airplane manufacturing program "form the condition that must be met
for the legislation to take effect. And, it is logica l that it clarified the meaning and ensured the
desired level of significance for this commercial airplane manufacturing program in terms of the
principal elements of the structural airframe, the fuselage and wings.
68. The EU also seeks to support its i nterpretation of ESSB 5952 by asserting that the "cardinal
purpose" of ESSB 5952 was "making the importation of wings and fuselages of the 777X
prohibitively expensive so as to ensure the use of domestic wings and fuselages over imported
wings and fuselages." The EU’s story is that Washington used ESSB 5952 to induce Boeing to use
domestic, made -in-Washington goods in the production of the 777X. However, Washington
decided not to require such use or otherwise define minimum local content (which, by the way , is
the actual classic example of a local content contingency). Furthermore, under the EU’s theory,
Washington chose to effect the local content requirement not through the conditions themselves,
but rather in the definitions section. According to the E U, Washington chose to focus on elements
of an airplane, but ignore Boeing’s sourcing of all of the various parts it purchases, a significant
portion of which are actually to be imported and a significant portion of which are brought in from
other U.S. states. And Washington also chose to ignore whether the goods used by all taxpayers
other than Boeing were domestic or imported, while nonetheless providing the identical tax
treatment made available to Boeing.
69. The EU’s view is implausible. The text of ESSB 5952, as well as the surrounding facts, make
it very clear that the point of ESSB 5952 was to ensure that a significant manufacturing program
was sited in the state, in order to maintain and grow Washington’s aerospace industry workforce.
And it did just that; it did not have as its "cardinal purpose," nor did it actually require, the use of
domestic over imported goods.

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70. Fourth, the EU is incorrect that the factual circumstances of the 777X program are
irrelevant. The 777X manufacturing program is the only one considered by DOR and determined
to fulfill the First Siting Provision. It also has, since that determination, not been determined to
trigger the Second Siting Provision. Therefore, it certainly is the most reliable evidence of the
proper interpretation of ESSB 5952. And the 777X program will not include the production of
completed fuselages and wings as separate goods that will then be used to produce the finished
airplane. Because fuselages or wings – whether domestic or imported goods – are not produced
as separate "goods" and then "used" as inputs in producing the finished 777X, and the program
nevertheless was determined to satisfy the First Siting Provision and has not been found to trigger
the Second Siting Provision, those Siting Provisions necessarily do not require the "use" of
fuselages and wings as "goods" within the meaning of Article 3.1(b), much less require the use of
domestic over imported fuselages and wings. Where, as here, factual evidence refutes the
complaining Member’s de jure arguments, the proper course is not to ignore the factual evidence,
but to reject the de jure claim.
71. Fifth, the EU’s entitlement theory of financial contribution highlights the insufficiency of the
EU’s cursory benefit argument. It is pos sible that an abstract entitlement exists, but no one uses
it. As the EU itself states: "it is not necessary for any . . . actual foregoing to take place in order
to qualify as a financial contribution." But if this were the case, there would be no benefit.
72. In addition, the EU’s current financial contribution argument undermines its contingency
arguments. In the context of Article 3.1(b) of the SCM Agreement, a relation of contingency exists
only where the "use of domestic over imported goods " is required to receive the alleged subsidy.
However, in this case, the tax treatment provided for by the alleged subsidies would still have
been available until July 1, 2024, even if the supposed contingencies had never been met. This is
because July 1, 2024, was the expiration date for the relevant tax treatment prior to the adoption
of ESSB 5952. Accordingly, even on the EU’s own theory, the alleged subsidies are not
"dependent for their existence" on the use of domestic over imported goods.

- C-1 -

ANNEX C
ARGUMENTS OF THE THIRD PARTIES
Contents Page
Annex C-1 Integrated executive summary of the arguments of Australia C-2
Annex C-2 Integrated executive summary of the arguments of Brazil C-4
Annex C-3 Integrated executive summary of the arguments of Canada C-8
Annex C-4 Integrated executive summary of the arguments of China C-11
Annex C-5 Integrated executive summary of the arguments of Japan C-13

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ANNEX C-1
INTEGRATED EXECUTIVE SUMMARY OF THE ARGUMENTS OF AUSTRALIA
1. Australia has taken the opportunity to participate as a third party in this dispute as there are
significant systemic issues about the interpretation of obligations under the Agreement on
Subsidies and Countervailing Measures (SCM Agreement) and the General Agreement on Ta riffs
and Trade 1994 (GATT 1994).
I. What is a prohibited subsidy under Article 3.1(b) of the SCM Agreement?
2. Australia recalls that Article 3.1(b) of the SCM Agreement prohibits "subsidies contingent,
whether solely or as one of several other conditio ns, upon the use of domestic over imported
goods." In Canada – Autos the Appellate Body found that Article 3.1(b) of the SCM Agreement
extends to contingency in fact, because to not do so "would make circumvention of obligations by
Members too easy."1
3. The EU notes in paragraph 76 of its submission that the two provisions are "expressly
conditioned on the use of domestic over imported goods. " However, the EU does not clearly
illustrate how it reaches that conclusion. It is also unclear whether the EU is suggesting that
subsidies alleged to breach the SCM Agreement are contingent on the use of domestic goods in a
de jure or de facto manner.
4. To make a claim that the legislation makes a subsidy contingent, de jure, on the use of
domestic goods, the EU must point to the infringement set out in "the words actually used in the
measure."2 This standard was set by the Appellate Body in Canada-Autos. To make a claim that
the legislation makes a subsidy contingent, de facto , on the use of domestic goods req uires
greater consideration of the facts. The EC – Large Civil Aircraft Appellate Body report provides
guidance in the context of Article 3.1(a). It states that:
[t]he existence of de facto export contingency, as set out above, "must
be inferred from the total configuration of the facts constituting and surrounding the
granting of the subsidy".3
5. Australia submits that the Panel can be guided by this approach in relation to Article 3.1(b).
Accordingly, the Panel's determination in this case will depend on the finding of facts.
II. The Relationship between Article III:8(b) of GATT 1994 and Arti cle 3.1(b) of the
SCM Agreement
6. Australia notes that there is a legitimate scope within the WTO system for subsidies to
domestic industries. This is recognised in Article III:8(b) of GATT 1994, which provides:
The provisions of this Article shall not prevent the payme nt of subsidies exclusively to
domestic producers, including payments to domestic producer s derived from the
proceeds of internal taxes or charg es applied consistently with the provisions of this
Article and subsidies effected through governmental purchases of domestic products.
7. This was interpreted by the panel in Indonesia – Autos to "confirm that subsidies to
producers do not violate Article III, so long as they do not have any component that introduces
discrimination between imported and domestic products."4

1 Canada – Autos, Appellate Body report, para 142.
2 Canada – Autos, Appellate Body report, para 123.
3 EC – Large Civil Aircraft, Appellate Body report, para 1046.
4 Panel Report, Indonesia — Autos, paras. 14.41–14.45.

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8. Australia contends that the Panel should maintain and clarify the important distinction
between the permitted payment of a subsidy e xclusively to domestic producers and a subsidy
which is contingent on the use of domestic over imported goods.
9. The Panel needs to assess whether the right to provide subsidies to domestic producers
includes the right to require that the manufacturing activity occurs within the territory of the
subsidising authority; and whether such a requirement could be characterised as one requiring the
use of domestic over imported goods.
III. The scope for Members to provide subsidies to beneficiaries within their territory
10. Australia contends that the Panel should consider whether references to a "significant
commercial airplane manufacturing program " and "fuselages and wings " in the legislation being
examined in this dispute can be regarded as merely definin g the scope of the beneficiary or
beneficiaries of a subsidy rather than a requirement to use domestically produced goods.
IV. The scope for Members to provide subsidies based on geographical location
11. The legislation in question providing tax incenti ves to the aerospace industry (SSB5952)
conditions the concessional tax arrangements on certain activities tak ing place in Washington
State.
12. Should the tax incentives provided by Washington State be found to be a subsidy, and the
references to wings a nd fuselages be found to merely define the beneficiaries of the subsidy, the
Panel may find that the tax measures in question are permitted subsidies under Article III:8(b) of
GATT. The intersection between the GATT and Article 3.1(b) of the SCM Agreement could be
further explored by the Panel in this instance.
13. Australia considers that careful consideration should be given to whether the scope of a
subsidy for manufacture and assembly based on geographical location amounts to the requirement
to use domestic products over imported goods.
14. Careful consideration should also be given to whether the requirement to site the activity
within the jurisdiction of the granting authority amounts to a local content requirement. The Panel
needs to clarify whether the beneficiary of the tax incentive would receive benefits for manufacture
and assembly regardless of the source of the inputs to manufacture and assembly.
15. Relevant context to consider the ability to limit or target subsidies to specific region s or
within designated geographical regions within the jurisdiction of a granting authority is provided
within the SCM. In particular, Article 8.2(b) and 2.2 of the SCM Agreement demonstrate that
provision of subsidies on a regional basis is permitted.
16. The Panel therefore also needs to assess whether the distinction made in the Washington
legislation is between domestic and international goods, as claimed by the EU, or whether it is the
geographical scope of a tax incentive to a business activity conducted within the geographic region
of the jurisdictional authority

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ANNEX C-2
INTEGRATED EXECUTIVE SUMMARY OF THE ARGUMENTS OF BRAZIL
I. PROPER SCOPE OF THE CONTINGENCY UNDER ARTICLE 3.1(b) OF THE SCM
AGREEMENT
1. Brazil would like to highlight that only two types of subsidies are prohibited under Part II of
the SCM Agreement. As stated by the Appellate Body in EC – Large Civil Aircraft1 :
Only those subsidies that are conditioned on export performance or on import
substitution are prohibited per se und er Article 3 of Part II of the SCM Agreement. In
contrast, all other subsidies are allowed under the SCM Agreement, albeit a Member
granting such subsidies should not cause, through the use of the subsidies, adverse
effects within the meaning of Article 5 of Part III, in which case it must remove the
adverse effects or must withdraw the subsidies themselves.
2. In the case of Article 3.1(b) of the SCM Agreement, the import substitution subsidy has a
particular contingency: "the use of domestic over import ed goods". The contingency therefore
hinges primarily on two elements: "goods" and their "use".
3. First, Brazil would like to emphasize that Article 3.1(b) of the SCM Agreement textually
requires the use of "goods" to establish its contingency. It does n ot cover production
requirements. A Member therefore is only prohibited from requiring the use of domestic "goods" as
a condition for the granting of a subsidy. In other words, it is permissible to impose a condition
upon the granting of a subsidy, as lon g as this condition is not tied to domestic goods. This is
essentially what Brazil understands to have been the position expressed by the Appellate Body in
Canada – Autos. A domestic "value -added" requirement is not prohibited unless it effectively or
necessarily requires the use of domestic "goods".
4. The contingency under Article 3.1(b) therefore must be for domestic products to the
detriment of imported products. Mutatis mutandis, the Appellate Body in EC – Large Civil Aircraft
stated with regard to export contingent subsidies:
Among the latter category of subsidies —that is, the actionable subsidies —are those
granted to an export -oriented recipient, without being contingent upon export
performance. The mere fact that such subsidies may increase the com pany's
production sold in the export market does not bring them under the discipline of Part
II of the SCM Agreement.2
In the same sense, Article 3.1(b) does not cover requirements other than requirements to use
domestic products even if they ultimately lead to a gain in productivity of the domestic industry.
5. Second, the condition must concern the "use" of domestic goods over imported goods. The
use of this term ("use") confirms that the "goods" in question must be "products" that are capable
of being "used" in a commercial context.
6. Article 3.1(b) of the SCM Agreement does not prohibit subsidies affecting domestic and
imported products generally, but only those which cause the use of domestic over imported goods.
The contingency under Article 3.1(b) of the SCM Agreement must be established upon the actual
use of the domestic product to the detriment of the imported product, not in relation to "any
domestic transaction" it may entail. Given this exclusion applicable to the payment of domestic
production subsidies, it would be incongruous to interpret Article 3.1(b) of the SCM Agreement to
prohibit a measure simply based on the measure 's link to domestic production. Article 3.1(b)
requires more concrete evidence of a de jure or de facto contingency on the use of domestic over
imported goods.

1 Appellate Body Report, EC – Large Civil Aircraft, para. 1054.
2 Id.

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7. Subsidies programs are generally linked to a localization/domestic establishment
requirement. This linkage may cause an incidental impact on local production and may benefit
domestic producers of input products. Their products may become more attractive to the producer
that established itself in the area as transportation costs go down and for other reasons. Thus,
rather than importing products, the newly established domestic producer may start to use a larger
share of domestic products as inputs. Clearly, such an indirect effect of the subsidy does not tur n
it into a prohibited subsidy.
8. In that respect, one must be careful not to make the same "false positive" - mistake that
footnote 4 of the SCM Agreement warns against with respect to export contingency: it is not
because a subsidy is granted to companies which export, that there is an "export contingency."
The same applies to domestic producers. The fact that subsidies are granted to domestic
producers does not, for that reason alone, mean that there is import substitution conditionality. In
Brazil's view, the focus of the enquiry under Article 3.1 (b) should be on the conditionality of the
subsidy and the extent to which it requires the "use" of domestic over imported "goods".
9. In conclusion, Brazil considers that in order to sustain a claim of violation of Article 3.1(b) of
the SCM Agreement , a complainant must show that the subsidy in question has a specific
contingency: that of the use of domestic goods over imported goods. Any subsidy that does not
impose such a contingency is not prohibited under Article 3.1(b) and could only be challenged as
an actionable subsidy under the SCM Agreement.
10. Blurring the line between prohibited and actionable su bsidies would undermine the overall
balance between Members' obligations under the WTO and their policy space, and it would unduly
curtail the fomenting of industrial development. At the same time, the disciplines of the SCM
Agreement must be respected in order to ensure a level playing field among Members and to
minimize trade distortions. This requires a careful examination of the specific nature and
implications of the conditions attached to a subsidy.
II. BRAZIL'S RESPONSES TO QUESTIONS FOR THIRD PARTIES
Reply by Brazil to question 1
It is not entirely clear to Brazil what the Panel means by "actual use or exercise of the fiscal
incentive". If the Panel is asking whether the mere foreshadowing of a fiscal incentive is eno ugh,
the answer is clearly no.
Reply by Brazil to question 3
In sum, Article 1 defines a subsidy for purposes of the SCM Agreement. Article 2 defines
"specificity" and also frequently refers to the "granting authority" and the "granting of
disproportionately large amounts of subsidy", thus employing the same term "granting" as found
in Article 3. Article 3 imposes a specific discipline for certain types of subsidies, prohibiting these
categories. Article 3.2 imposes a specific requirement not to grant "or maintain" such prohibited
subsidies and is thus part of the context in which the definition of a subsidy as set forth in Article 1
is to be read. In that respect, this provision is contextually "relevant", just like any other provision
of the SCM Agreement.
Reply by Brazil to question 4
In light of the Vienna Convention's disciplines that the starting point for ascertaining "object and
purpose" is the treaty itself, in its entirety, rather than a particular provision 3, Brazil understands
that the object and purpose of Article 3.1(b) of t he SCM Agreement is to prohibit import
substitution subsidies contingent upon the use of goods, domestic over imported. Therefore, the
interpretation of the term "goods" should not be made so as to blur the line between prohibited
subsidies, which affect goods, and actionable subsidies, which affect production.

3 Appellate Body Report, EC – Chicken Cuts, para. 238.

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Reply by Brazil to question 5
Brazil understands that the SCM Agreement does not prohibit WTO Members from providing
subsidies to producers contingent on the performance of production steps of a certain good in their
territories. This production requirement could fall either upon the production of a final or an
intermediate good. A subsidy can require the performance of production steps relating to the final
good whose production is being subsidized o r of the intermediate product which will be integrated
into that specific subsidized production chain. A Member could just as well legitimately create,
under Article 3.1(b) of the SCM Agreement, two separate subsidy programmes requiring the
performance of production steps in its territory, one related to the final product and one related to
the intermediate product which will be integrated into that specific subsidized production chain. In
this sense, Brazil understands that the scenario submitted by Canada would not be a de jure
contingency claim under Article 3.1(b) of the SCM Agreement.
Additionally, whether the conditionality in question amounts to a prohibited condition to "use
domestic over imported goods" must be analysed based on the text of the spec ific subsidy
program, in the light of its necessary implications and in the context of the total configuration of
the facts of each situation.
Reply by Brazil to question 6
It is not entirely clear to what "guidance from previous cases" the Panel is referr ing because the
Panel does not refer to any specific cases. In any case, Brazil considers that a de facto claim
requires a panel to go beyond the text of the specific subsidies program and its necessary
implications to examine the program in the context of the totality of the facts surrounding the
granting of the subsidy.
The Panel should take into due consideration previous jurisprudence regarding de facto claims
under Article 3.1(a) of the SCM Agreement for the analysis of a de facto claim under Article 3.1(b).
In EC – Large Civil Aircraft , the Appellate Body ruled that the standard of de facto export
contingency under Article 3.1(a) and footnote 4 of the SCM Agreement "would be met when the
subsidy is granted so as to provide an incentive to the recipient to export in a way that is not
simply reflective of the conditions of supply and demand in the domestic and export markets
undistorted by the granting of the subsidy" 4. Mutatis mutandis, the fact that the granting of a
subsidy might increase overall domes tic production or decrease imports would not in and of itself
be de facto contingent on the use of domestic over imported goods. It would have to provide an
incentive that is not simply reflective of the conditions of supply and demand for domestic and
imported goods.
In the analysis of a de facto contingency claim under Article 3.1(b), a Panel may also use some of
the same tests or factors as in Article 3.1(a), such as a "but for" test or an expected sales ratio
from a profit maximizing firm.
Reply by Brazil to question 7
The key legal matter in this connection is the proper understanding of the term "domestic" in
Article 3.1(b) of the SCM Agreement, which is not defined in the Covered Agreements. To Brazil,
the discipline contained in Article 3.1(b) requi res a definition of "domestic" that makes economic
sense. While it may be impossible to determine in the abstract the exact percentage of value
added in the country concerned that is required to characterize a product as "domestic" in all
cases, there cert ainly are cases that can be safely excluded – or included – in this definition. In
any case, in Brazil 's view, this is a factual question that is to be determined by looking at the
specific nature of the specific product and its production process, in the light of applicable domestic
legal requirements.
Reply by Brazil to question 8
Brazil refers the Panel to its answer to question 6.

4 Appellate Body Report, EC – Large Civil Aircraft, para. 1.045

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Reply by Brazil to question 11
What was emphasized in Brazil's submission was that the term "use" has already been interpret ed
by the Panel in US – Upland Cotton, which opposed the understanding that "any domestic
transaction" would fall within the meaning of use. Furthermore, Brazil emphasizes the use of
products so as to clearly delimit the prohibited subsidies from actionable production subsidies.
Brazil does not take a position on the specific facts of the case, but reiterates that the discussion of
whether a subsidy is prohibited or not in light of Article 3.1(b) requires the analysis of whether the
conditionality establis hed within the subsidy programme is related to the performance of
production steps or to the use of products. If the condition, for instance, simply requires a
domestic production activity of the producer, it will likely not amount to a prohibited conditionality.
Reply by Brazil to question 12
Brazil will not delve into the specific facts as raised by the parties and will therefore not express a
position on the ultimate merits of the parties ' allegations that follows from applying the law to the
facts of th is case. The Panel 's question whether "the use of a domestically assembled or
manufactured wing always constitute[s] the use of domestic goods" is thus to be answered based
precisely on the facts of this case rather than on the basis of categorical conclus ions of what
"always" or "never" will constitute use of domestic goods.
Brazil understands that a subsidy on the production of a certain good, with requirements on the
performance of production steps along the production chain, would not be considered de jure
contingent on the use of domestic over imported goo ds under the purview of Article 3.1(b).
Therefore, an automatic contingency would not be present when a programme requires the
assembly of a good in the territory of a Member. For a de facto contingency claim, an evaluation of
the programme in practice would be needed.
Reply by Brazil to question 14
As mentioned before, Brazil understands that there is a fundamental difference betw een a
requirement of the performance of production steps and a requireme nt of the use of domestic
products for a de jure contingency under Article 3.1(b). A de facto contingency would require an
analysis of the total configuration of the facts at hand. As a third party, Brazil only has limited
access to the parties' factual and legal arguments and thus prefers not to express a definitive view
on how the law applies to the facts of this particular dispute

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ANNEX C-3
INTEGRATED EXECUTIVE SUMMARY OF THE ARGUMENTS OF CANADA
1. The findings of the Panel in this dispute will have i mportant consequences for the way in
which the Agreement on Subsidies and Countervailing Measures (SCM Agreement) is interpreted
and applied in future disputes. Canada therefore welcomes the opportunity to present its views to
the Panel. Canada's submiss ion addresses the issue of prohibited import -substitution subsidies
under Article 3.1(b) of the SCM Agreement.
2. The European Union claims that the continuation and extension of subsidies 1 by Washington
State in the form of tax benefits to Boeing under SS B 5952 are contingent upon the use of
domestic over imported goods in violation of Article 3.1(b) of the SCM Agreement. The European
Union thus alleges that a "programme -siting condition" and an "exclusive -production condition"
require Boeing "to use wings and fuselages produced or assembled in Washington State in the final
assembly of 777X LCA in Washington State".2
3. Canada considers that the European Union's suggested interpretation of Article 3.1(b) would
improperly extend the provision to cover situa tions where subsidy recipients are required to
produce goods. The European Union appears to be arguing that a subsidy is contingent on the use
of domestic over imported goods where the producer of a final good is required to produce certain
components of that good in order to receive the subsidy.3
4. Canada understands that under what the European Union describes as the "programme -
siting condition" Boeing is required to locate the 777X development program and manufacture
and/or assemble the 777X, including fuselage and wings, in Washington State. 4 A so -called
"exclusive-production condition" confirms that Boeing must carry out the final assembly or wing
assembly of (any) of its aircraft models in Washington State, and not elsewhere, in order to
benefit from reduced taxes.5
5. Although Boeing may, in fact, "use" fuselages and wings produced in Washington State to
receive the tax subsidies, the company would be required to manufacture and/or assemble those
fuselages and wings itself. There is no requirement included in SSB 5952 to purchase wings,
fuselages, parts used in the assembly thereof or other parts used in the assembly of the final
aircraft produced in the United States. The European Union also did not provide any evidence
suggesting that Boeing woul d de facto have to "use" domestic components other than those that
the company manufactures itself.

1 The tax incentives challenged by the European Union under Article 3.1(b) are a reduced Business and
Occupation ("B&O") tax rate for the manufacture and sale of commercial airplanes, a B&O tax credit for pre-
production development for commercial airplanes and components, a B&O tax credit for property taxes on
commercial airplane manufacturing facilities, an exemption from sales and use taxes for certain computer
hardware, software, and peripherals, an exemption from sales and use taxes for certain construction services
and materials, an exemption from leasehold excise taxes on port district facilities used to manufacture
superefficient airplanes and an exemption from property taxes for the personal property of port district lessees
used to manufacture superefficient airplanes (European Union's first written submission, para. 15).
3 The European Union claims that "pursuant to the programme-siting condition in Section 2 of
SSB 5952, the post-2024 aerospace tax incentives were contingent on the establishment of a new commercial
aircraft manufacturing programme that uses goods (i.e. fuselages and wings) produced in the United States
(specifically, in Washington State). Under this condition, the tax incentives would not have been extended in
duration to 2040 if Boeing had decided to 'use' imported wings and fuselages in the assembly of the 777X".
European Union's first written submission, para. 74. (footnotes omitted; emphasis added). The European
Union continues: "Likewise, pursuant to the exclusive-production condition, the reduced B&O tax rate subsidy
for the 777X is contingent on Boeing's use of wings produced in the United States (specifically, in Washington
State) exclusively. Under this condition, Boeing benefits from the reduced B&O tax rate for the 777X only so
long as it 'uses' wings assembled exclusively in Washington State for the 777X, or any variant thereof".
European Union's first written submission, para. 75.
4 Substitute Senate Bill 5952, Chapter 2, Laws of 2013 3rd Special Session, 2014 Wash. Sess. Laws 2
(SSB 5952), Exhibit EU-03, section 2.
5 Ibid. subsections 5(11)(e)(ii) and 6(11)(e)(ii).

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6. Canada considers that a WTO Member is not prohibited from providing subsidies to its
domestic producers, including where the subsidy to the producer of a final good is contingent
either on the production or the assembly of an intermediate good by that same producer. In both
instances, the subsidy is a production subsidy that is not contingent on the use of domestic over
imported goods.
7. Nothing in the G eneral Agreement on Tariffs and Trade 1994 (GATT 1994) or SCM
Agreement prohibits a subsidizing Member from making the granting of a subsidy contingent on a
recipient producing goods in its territory. 6 In fact, GATT Article III:8(b) explicitly allows WTO
Members to provide subsidies to their domestic producers. 7 A producer of a final good that is
required to produce an intermediate good is also a producer of the intermediate good. Therefore,
a subsidy can be made contingent on the production of an intermediate as well as a final good.
8. Neither the GATT 1994 nor the SCM Agreement limit a subsidizing Member's ability to define
the level of production required for subsidy eligibility purposes. As part of this discretion, a
Member may explicitly require th e production of an intermediate good. A Member's ability to
condition the provision of a subsidy on a production requirement would be significantly curtailed if
a Member could not require the production of an intermediate good. A production requirement
would then have to be limited to simple assembly operations.
9. This position is supported by the Appellate Body's report in Canada – Autos. In that dispute,
the Appellate Body assessed whether a measure providing Canadian automobile manufacturers
with an import duty exemption contingent, inter alia, on satisfaction of a Canadian value -added
(CVA) requirement, was inconsistent with Article 3.1(b) of the SCM Agreement. 8 Under the
measure, a manufacturer could meet the CVA requirement by disclosing the aggre gate of certain
costs of producing vehicles in Canada listed in the definition of "Canadian value added". 9
A number of costs were included in the definition of CVA. The most relevant for the Appellate
Body's analysis were (1) the cost of domestic goods, that is, those domestic parts and materials
purchased by the manufacturer for use in the production of its motor vehicles 10, and (2) the cost
of domestic labour 11, that is, the cost of all labour reasonably attributable to the production of
vehicles. The latter would include the cost of labour used to produce intermediate goods.
10. In analyzing whether the CVA requirement was inconsistent with Article 3.1(b), the
Appellate Body distinguished between the cost of labour and the cost of domestic goods. It fou nd
that the CVA requirement would violate Article 3.1(b) only if it required the manufacturer to use
domestic goods. 12 However, it did not consider that a requirement to use domestic labour,
regardless of whether that requirement may imply the production o f intermediate goods, would
violate Article 3.1(b).13

6 See Annex IV:3 of the SCM Agreement, which forms part of the rules under paragraph (a) of the now
expired Article 6.1 for determining when a subsidy is deemed to have caused serious prejudice. Annex IV:3
explicitly refers to subsidies tied to the production of a given product. By contemplating that subsidies may be
tied to production in the context of a serious prejudice analysis rather than in the context of a prohibition,
Annex IV:3 recognizes that WTO Members are not prohibited from providing subsidies tied to production.
7 Article III:8(b) of the GATT 1994 provides: "[t]he provisions of this Article shall not prevent the
payment of subsidies exclusively to domestic producers, including payments to domestic producers derived
from the proceeds of internal taxes or charges applied consistently with the provisions of this Article and
subsidies effected through governmental purchases of domestic products"; See also Panel Report, EC –
Commercial Vessels, paras. 7.69 and 7.75 where the panel found that contributions provided only to domestic
producers of certain vessels were covered by GATT Article III:8(b) and therefore not inconsistent with GATT
Article III.
8 Appellate Body Report, Canada – Autos, para. 125.
9 Ibid. paras. 124 and 125.
10 Ibid. As the cost of producing intermediate goods is accounted for in the aggregate of the cost of
purchased inputs and the manufacturer's own labour, the cost of domestic goods could not include the cost of
intermediate goods produced by the manufacturer itself.
11 Ibid. paras. 124 and 130.
12 Appellate Body Report, Canada – Autos, para. 130: "if the level of the CVA requirements is very high,
we can see that the use of domestic goods may well be a necessity and thus be, in practice, required as a
condition for eligibility for the import duty exemption". (emphasis original).
13 Ibid.:"if the level of the CVA requirements is very low, it would be much easier to satisfy those
requirements without actually using domestic goods; for example, where the CVA requirements are set at 40

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11. The European Union's interpretation would nullify the right of a WTO Member to require a
subsidy recipient to produce goods, as defined by the Member, in its territory, in order to receive a
subsidy. This has no basis in law, and would have considerable, negative consequences for
industry given that most manufacturers produce intermediate goods as part of the production of
their final goods. As such, and for the reasons set out above, the Panel shou ld reject the
interpretation advanced by the European Union.

per cent, it might be possible to satisfy that level simply with the aggregate of other elements of Canadian
value added, in particular, labour costs". (emphasis original).

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ANNEX C-4
INTEGRATED EXECUTIVE SUMMARY OF THE ARGUMENTS OF CHINA
1. This integrated executive summary summarizes the arguments and viewpoints presented by
China to the Panel in its Third Part y Submission, Oral Statements and responses to the questions
following the substantive meeting. China mainly focuses on the two issues in this dispute in the
executive summary: 1) legal framework of Article 3.1(b) of the SCM Agreement; and 2) whether
the "Programme-Siting Condition " and "Exclusive-Production Condition " are consistent with
Article 3.1(b) of the SCM agreement.
The Legal Framework of Article 3.1(b) of the SCM Agreement
2. At the outset, China indicates that in order to establish a prima facie case under
Article 3.1(b), the EU is obligated to demonstrate: 1) relevant measures constitute subsidies under
Article 1 of SCM Agreement ; and 2) relevant measures are contingent upon the use of domestic
over imported goods. China will not touch upon the first condition, but only focus on the second
condition.
3. Firstly, China is of the view that "contingency" under Article 3.1(b) of the SCM agreement
includes both contingency in law and contingency in fact . T he Appellate Body clarified in
Canada-Autos that "contingency" includes both contingency in law and contingency in fact and this
legal standard applies not only to "contingency" under Article 3.1(a), but also to "contingency"
under Article 3.1(b) 1. Hence, China believes, under present dispute, if subs idies are found
contingent upon import substitution, regardless in law or in fact, they shall be determined to
constitute prohibited subsidies. In addition, China also mentions the finding of the Appellate Body
made in EC— Large Civil Aircraft so as to est ablish the test for determining whether a subsidy
is de facto contingent on export performance . Such test might be also applied in the present
dispute.
4. Secondly, China believes the term "contingent" is a "key word " under Article 3.1(b). T he
ordinary connotation of "contingent" is "conditional" or "dependent for its existence on something
else". Therefore, China is of the view that the Panel shall examine if the subsid ies granted under
"Programme-Siting Condition " and "Exclusive-Production Condition " are "conditional" or
"dependent for its existence on something else" on the use of domestic over imported goods.
5. Thirdly, China does not agree with the United States' argument concerning the interpretation
of "goods". If the logic of the United States stands, it will be contradictory to each other, since the
components of fuselages and wings from upstream will be treated as goods, while the fuselages or
wings assembled in downstream are not goods. With respect to the criterion of "traded" presented
by the United States, China believes the connotation of "tradable" means the goods has the value
of trading instead of being traded in reality. Therefore, China does not think the interpretation of
"goods" provided by the United States is convincing.
6. Fourthly, China is of the view that t he prohibited subsidy under Article 3.1(b) is established
on the basis of contingency upon "use" of domestic over imported goods. Contrary to the United
States' claim that fuselages and wings are not " inputs" that are " used" as goods in the 777X
production process2, China believes that "use" of domestic intermediate goods in the course of
production may also meet the condition on "use" of domestic over imported goods. If the
conditions concerned would result in a de facto situation that the 777X programme prefers the
domestic components or other intermediate goods, the condition of "use" of domestic over
imported goods is also met.
7. Fifthly, China is of the view that Article III of the GATT on which relied by the United States
is not relevant to the present dispute. China does not deny that it is possible that Article III.8(b) of
the GATT can be used for context in the interpretation of Article 3.1(b) of the SCM Agreement.

1 Appellate Body Report, Canada – Autos, para.123.
2 First Written Submission of the United States, para.110-115.

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However, China believes that these two Articles impose diff erent obligations to Members.
Article III.8(b) exempts the subsidy provided to domestic producers from the obligations of
Article 3.2 and 3.4 of the GATT 1994 . However, when the subsidy provided to the domestic
producers is contingent on use of domestic ov er imported goods, it will still constitute prohibited
subsidies under Article 3.1(b) of the SCM Agreement. Therefo re, China believes that
Article III:8(b) of the GATT is not the legal basis to exempt the "Programme-Siting Condition" and
"Exclusive-Production Condition" from Article 3.1(b) of the SCM Agreement.
Whether the "Programme -Siting Condition" and "Exclusive -Production Condition" are
consistent with Article 3.1(b) of the SCM agreement
8. China is of the view that the analysis regarding "Programme-Siting Condition " and
"Exclusive-Production Condition" shall take into account the contingency both in law and in fact
perspectives.
9. With regard to the "Programme-Siting Condition ", China notes that the text in SSB 5952
does not expressly or implicitly in dicate LCA must purchase any products including wings or
fuselage which are produced in Washington State to fulfill the "Programme-Siting Condition ".
There seems no sufficient evidence in law proving the "Programme-Siting Condition " would
constitute a de jure subsidy within the scope of Article 3.1(b).
10. However, China believes that t aking into account of the cost saving from logistic and tax
incentives aspects, it will be more favourable to purchase the wings and fuselages components or
other intermediat e goods produced in Washington State in the final assembly process of 777X.
Therefore, the "Programme-Siting Condition" might result in a situation domestic components are
favoured than imported components. China suggests the Panel to conduct an examinatio n on this
regard.
11. With regard to the "Exclusive-Production Condition ", according to its provisions and
statement made by the Governor of Washington State, the B&O tax rate reduction is specifically
contingent on being sited in Washington State, and it requires that both final assembly and wing
assembly have to be in the Washington State. China believes that if the both procedures have to
be in the same State, it will create more incentive to use more domestic components due to cost
saving and efficiency perspective.
12. China suggests that the Panel shall examine whether the "Exclusive-Production Condition"
provision in SSB 5952 through implicit expression shall be considered as a de jure subsidy within
the meaning of Article 3.1(b). And i f it does not c onstitute de jure prohibited subsidy, China
believes that the Panel shall make an objective assessment on th e fact in relation to the
production process of wings, so as to determine whether the "Exclusive-Production Condition "
provision in SSB 5952 shall b e considered as a de facto subsidy within the meaning of
Article 3.1(b), through evaluating (i) the design and structure; (ii) the modalities of operation; and
(iii) the relevant factual circumstances of B&O tax rate reduction under "Exclusive-Production
Condition".
Conclusion
13. To conclude, China is of the view that the Panel shall take into account of the contingency in
law and in fact to determine whether the tax incentives upon "Programme-Siting Condition" and
"Exclusive-Production Condition" within SSB 5952 constitute subsidies upon use of domestic over
imported goods within the meaning of Article 3.1(b) of SCM Agreement. In addition, China believes
that certain interpretations of the United States, including "use", "goods" and "relationship
between GATT Article III and Article 3.1(b) of SCM Agreement" shall not be supported by the Pane

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ANNEX C-5
INTEGRATED EXECUTIVE SUMMARY OF THE ARGUMENTS OF JAPAN
I. Introduction
1. The Government of Japan present s its systemic views in this dispute brought by the
European Union against the United States with respect to certain aerospace tax incentives enacted
by the State of Washington in 2003, as amended and extended by Substitute Sen ate Bill 5952
("SSB 5952").
II. Contingency Under Article 3.1(b) of the SCM Agreement
A. Legal Standard
2. Regarding the legal standard for "contingency" under Article 3.1(b) of the SCM Agreement ,
the Appellate Body in Canada – Autos has clarified that the same legal standard for establishing
contingency under Article 3.1(a) also applies for establishing contingency under Article 3.1(b).1
3. In that respect, Japan recalls that the Appellate Body in EC – Large Civil Aircraft noted that
the condition of contingency would be met under Article 3.1(a) of the SCM Agreement when the
subsidy is granted so as to provide a certain "incentive to the recipient ".2 Under Article 3.1(b) of
the SCM Agreement, Japan is of the view that this legal standard focused on the incentive requires
a comparison between the use of domestic goods and imported goods, and that this interpretation
especially suits the meaning of the word "over" used in Article 3.1(b) of the SCM Agreement.3
4. Therefore, in this regard, Japan agrees with the European Union's legal analysis that to
establish contingency under Article 3.1(b ) of the SCM Agreement the same framework as
suggested by the Appellate Body in EC – Large Civil Aircraft for Article 3.1(a) should be used.4
B. Evidentiary Standard
1. De Jure Contingency
5. Japan asks the Panel to carefully examine what exactly the law i tself states and what it
necessarily implies since, as clarified by the Appellate Body in Canada – Autos, the evidentiary
standard for a de jure contingency is that "conditionality can be derived by necessary implication
from the words actually used in the measure."5
6. When there is an ambiguity in the law or if the relevant governmental official is given a
degree of discretion, "evidence of consistent application of such laws, pronouncements of domestic
courts on the meanings of such laws, the opinions of legal experts, and the writings of recognized
scholars" should also be considered. 6

1 Appellate Body Report, Canada – Autos, para. 123. This view was later reiterated by the Panel in US –
Upland Cotton and left untouched by the Appellate Body in the same case.
2 Appellate Body Report, EC－Large Civil Aircraft, paras. 1045, 1047. (emphasis added)
3 Japan notes that the dictionary defines the term "over" as meaning "in preference to", "in excess of"
or "more than". (The New Shorter Oxford English Dictionary, 4th edn., L. Brown (ed.)(Oxford University Press,
1973, 1993). The term "over", therefore, functions as a marker of comparison. Thus, establishing whether
the domestic product is used in preference to the imported product necessarily implies a comparison between
the use of the former and the latter.
4 EU FWS, para. 77.
5 Appellate Body Report, Canada – Autos, para. 123. (emphasis added)
6 Appellate Body Report, US – Carbon Steel (India), para. 4.446 (quoting Appellate Body Reports, US –
Countervailing and Anti-Dumping Measures (China), para. 4.101; US – Carbon Steel, para. 157).

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2. De Facto Contingency
7. The United States points out that the European Union has presented no evidence or
arguments related to the anticipated ratio of the use of dom estic to imported goods for the Boeing
Company ("Boeing") with and without the challenged measure.7
8. In this regard, the Appellate Body admits in EC – Large Civil Aircraft that the assessment as
to whether a subsidy is "geared to induce" export performan ce under Article 3.1(a) "could be
based" on a comparison between the ratio of anticipated export and domestic sales of the
subsidized products (namely, the "anticipated ratio"), and the same ratio in the absence of the
subsidy (namely, the "baseline ratio").8 However, it does not mention that such ratio is always
relevant to establish de facto contingency.9
9. Similarly, in examining whether a subsidy provides an incentive to use domestic over
imported products under Article 3.1(b) of the SCM Agreement, Japan is of the view that such
comparison between the baseline and anticipated ratios may not necessarily provide a basis for
determining whether a subsidy provides an incentive to its recipient.
10. One reason for this is that the increase of the use of the domestic product may be caused by
other factors , such as certain market developments including diverging shifts in the prices of
domestic products as compared to imported products . However, such other factors causing the
increase of the use of the dome stic product must be distinguished from the effect of the subsidy
itself, and the effects that may be caused by these other factors must not be attributed to the
subsidies.10
11. Therefore, Japan asks the Panel to cautiously examine the utility of the "anticipated ratio"
test. Whether a particular subsidy provides an incentive to its recipient must be primarily inferred
from "the total configuration of the facts constituting and surrounding the granting of the
subsidy",11 rather than by relying on the "anticipated ratio."
12. Japan also recalls that the Appellate Body introduced the "anticipated ratio" test as one way
to determine de facto export contingency under Article 3.1(a) and footnote 4 of the SCM
Agreement, which reads in relevant part that a subsidy is "in fact tied to … anticipated
exportation."12 In other words, the "anticipated ratio" test has a textual basis in the term
"anticipated exportation" in footnote 4. In addition to Japan's comments on the overall utility of
the "anticipated ratio" test, therefore, in any event, the suggested "anticipated ratio" test
developed under Article 3.1(a) should not be simply imported into the evidentiary standard for the
purpose of Article 3.1(b) inquiry, since Article 3.1(b) contains no reference to "anticipate d" use of
domestic over imported goods.
C. Application of the Legal and Evidentiary Standards
13. In light of the legal and evidentiary standards described above, Japan considers that the
EU's analysis in respect of the "programme -siting condition" and "ex clusive-production condition"
may fall short of meeting the standard required to establish the contingency under Article 3.1(b) of
the SCM Agreement.
14. We urge the Panel to , firstly, very carefully examine what exactly the law itself states and
what is necessarily implied by the legislation in question (as a de jure claim) as well as its design,
structure and modalities of operation (as a de facto claim), and then, determine whether the
provision of the subsidies provides incentives for the use of domesti c goods over imported goods .
If anything, more careful explanations appear to be necessary to connect facts and legal analysis
in paragraphs 42 to 52, and 73 to 79 of the EU FWS.

7 US FWS, para. 134.
8 Appellate Body Report, EC – Large Civil Aircraft, paras. 1044, 1047.
9 Ibid., para. 1047.
10 Ibid., para. 1047 notes that when making the comparison between the "anticipated" and "baseline"
ratios, "all other things" must be equal.
12 Ibid.,paras. 1042-1045.

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1. The "Programme-Siting Condition"
15. First, in respect of the "programme -siting condition," it appears that the requirement to
locate Boeing's production of the wings and fuselage, as well as final assembly in Washington
State is not exactly tantamount to a requirement to use inputs produced or assembled in
Washington State.
16. Further, with respect to the incentive of the subsidy, there is no explanation in the EU 's
submission as to how the subsidy is granted so as to provide an incentive to Boeing to use
domestic goods in a way that is not simply reflective of the conditions of supply and demand in a
domestic market consisting of domestic goods and imported goods undistorted by the granting of
the subsidy.
17. Japan submits that certain subsidies to the producer of a final good contingent on the
production of an intermediate good by the same producer can be inconsistent with Article 3.1(b) of
the SCM Agreement , depending on the factual circumstances of a case. Had there been a n
outright exclusion of subsidies contingent on domestic manufacturing of intermediate goods from
the scope of Article 3.1(b) , it would have allowed WTO Members to easily "circumvent the
disciplines" of Part II of the SCM Agreement.13
18. Therefore, in order to determine whether a subsidy granted to the producer of a final good
contingent on the production of an intermediate good by that same producer complies with
Article 3.1(b) of the SCM Agreement, a panel should scrutinize the exact content of the
requirements for the subsidy and how they operate for particular manufacturers receiving the
subsidy. If, t hrough such scrutiny, the requirement for the production of intermediate goods is
found to require or incentivize the use of such domestic intermediate goods in final goods in actual
situations, then the requirement would be in breach of Article 3.1(b).
2. The "Exclusive-Production Condition"
19. Second, in respect of the "exclusive -production condition," the words actually used in the
legislation are not completely clear as to whether, by virtue of the requirement for the locus of the
final assembly or win g assembly, the revenue from the 777X will not benefit from the reduced
Business and Occupation ("B&O") tax rate if these assembling activities take place outside
Washington State.
III. Goods under Article 3.1(b) of the SCM Agreement
A. Imported Goods
20. Japan submits that, for the purpose of a claim under Article 3.1(b) of the SCM Agreement, it
is not necessary that the concerned goods are actually traded or are tradable.
21. The United States argues that because 777X fuselages and wings are "custom -designed for
and unique to the 777X and its production process" and "[n]o potential purchasers for such articles
exist", 777X fuselages and wings are not saleable or traded, and thus are not "goods" within the
meaning of Article 3.1(b). 14 The United States reli es primarily on the word "imported" that
qualifies the word "goods" in Article 3.1(b). To follow this logic, certain products would be
determined not to be "goods" within the meaning of Article 3.1(b) merely because an individual
company receiving the sub sidy at issue custom -designs the product and commissions a limited
number of contractors to produce it.
22. Although Japan is not fully cognizant of the precise meaning which the United States
attribute to the terms "tradeable" or "custom -designed" goods, which are not the treaty words in
the SCM Agreement, it should be noted as a preliminary issue that Japan does not agree with the
proposition that custom-designed goods developed for a particular product model are not capable
of being sold, traded, or impo rted for that matter. Japan fails to see how the particular
characteristics of "custom -design" preclude the goods from being "tradeable", e.g. from being

13 Appellate Body Report, US – Softwood Lumber IV, para. 64.
14 US FWS, Section VI.D, including para. 129.

- C-16 -

supplied at arm's length from outside sources. In addition, Japan has two concerns in relation to
the limited interpretation of the term "goods" for the purpose of Article 3.1(b).
23. First of all, such interpretation would open up an easy path for circumventing subsidy
disciplines under Article 3.1(b) of the SCM Agreement. Indeed, WTO Members would be able to
exclude a subsidy contingent on the use of domestic goo ds from the coverage of the
SCM Agreement by simply labelling products as custom-designed. Japan recalls that the Appellate
Body in US – Softwood Lumber IV cautioned against an interpretation of the provisions of the SCM
Agreement which would permit the circumvention of the subsidy disciplines and that this
consideration was highly pertinent for the Appellate Body's overall conclusion that non -tradable
goods are not excluded from the scope of " goods" for the purpose of Article 1.1(a)(1)(iii) of the
SCM Agreement.15
24. Second, such interpretation of "goods" under Article 3.1(b) has the risk of resulting in a
wholly arbitrary application of this provision with unpredictable consequences for the fo llowing
reasons. A product with the same basic characteristics may be custom -designed or sold in a
standardised form depending on the wishes of a particular customer. Likewise, a particular
company may, at times, produce and sell virtually the same produ ct with some custom -designed
characteristics, and, at different times, with standardised characteristics due to a number of
factors such as a change in economic situation or the company 's business strategy. However,
following the United States' interpreta tion, although essentially the same product is produced and
sold, whether it is covered or not covered by the SCM Agreement, would depend on the wishes of
the customer or the company's business strategy at any given point in time leading to a wholly
arbitrary application of Article 3.1(b) of the SCM Agreement.
25. Limiting the application of Article 3.1(b) to "tradeable" goods would, thus, hinder the
consistent application of Article 3.1(b) to the detriment of the object and purpose of that provision.
26. Therefore, Japan submits that, for the purpose of a claim under Article 3.1(b) of the SCM
Agreement, it is not necessary that the concerned goods are actually traded or tradable.
B. Domestic Goods
27. Japan considers that a product assembled entirely from i mported components can be a
"domestic […] good" within the meaning of Article 3.1(b) of the SCM Agreement for the following
reason.
28. As discussed above, the phrase "domestic over imported goods" in Article 3.1(b) suggests
that the term "domestic" can refer to anything that is not imported.
29. Hence, even if a product is assembled entirely from imported components, when the product
itself is not imported, the product should be regarded as "domestic". Otherwise, the product could
be categorized arbitrarily as either "domestic" goods or "imported" goods. This would significantly
undermine the object and purpose of – the SCM Agreement by creating room for circumvention of
the obligation under Article 3.1(b) of the Agreement.16
IV. Burden of Proof and the Rel evance of Findings Made by Preceding Panels and the
Appellate Body
30. The United States argues that the European Union relies on facts and legal conclusions
established in a separate dispute, US － Large Civil Aircraft, and fails to make a prima facie case.17
The United States points out, inter alia, that while the panel in that dispute addressed facts that
existed in 2006, the present dispute involves measures that differ from those at issue in th at
dispute.18 The United States submits that the existence of prior panel findings in US － Large Civil

15 Appellate Body Report, US – Softwood Lumber IV, paras. 64 and 67.
16 See Appellate Body Report, Canada – Autos, para. 142.
17 US FWS, para. 81.
18 Ibid., paras. 82 and 87.

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Aircraft does not excuse the European Union from the burden of proof that normally applies in an
original dispute.19
31. Japan agrees with the United Stat es that a complainant has to provide sufficient facts and
arguments to allow the Panel to perform its own objective assessment of the matter, as required
under Article 11 of the DSU. 20 Nonetheless, in Japan 's view, this does not mean that a
complainant is precluded from relying on findings contained in previously adopted panel report s if
and to the extent such findings are appropriate for the consideration of the matter before the
Panel.
32. Japan observes that the Panel in this dispute should make an objec tive assessment of the
facts of the case including the issue of whether and to what extent it may rely on the findings of
the previous panel, taking into consideration any difference s in the factual circumstances of the
two cases.
33. In this regard, it ap pears that the aerospace tax incentives (other than the B&O tax rate
reduction) in this dispute consist of both the tax incentives that were found by the panel in U S－
Large Civil Aircraft to involve a financial contribution and those that were not. As a complainant,
the European Union should clearly distinguish the two sets of tax incentives, and elaborate on the
reasons why it considers that the Panel is allowed to rely on the US － Large Civil Aircraft panel's
and the Appellate Body 's findings in examining the WTO -consistency of each of the challenged
measures.

- D-1 -

ANNEX D
PROCEDURAL RULINGS
Contents Page
Annex D-1 Letter from the Panel, 15 January 2016 D-2
Annex D-2 Letter from the Panel, 4 May 2016 D-3

- D-2 -

ANNEX D-1
LETTER FROM THE PANEL, 15 JANUARY 2016
The Panel acknowledges receipt of the United States' request to extend the deadline for the second
written submissions by an additional week (i .e. that the Panel set a date no earlier than 25 March
2016).

The Panel adopted the present Timetable taking into account, among other considerations, the
unavailability of the United States' lead attorney to attend a panel meeting during the week of
14 March 2016, as indicated at the organizational meeting. Accordingly, the second substantive
meeting was postponed from 15-16 March, as suggested in the draft Timetable initially sent to the
parties, to 5-6 April.

The Panel is cognisant of the direction und er Article 12.4 of the DSU that sufficient time be given
for the preparation of submissions. At the same time, it is to be recalled that these proceedings
are required, under the SCM Agreement, to be expedited. What might be considered to be
sufficient in expedited and in non-expedited proceedings will necessarily be different.

The Panel believes that it has fairly accommodated the parties' concerns as expressed at the
organizational meeting in the adoption of the present Timetable. The concerns which have now
more recently been expressed by the United States do not convince the Panel that insufficient time
has been given for the preparation of submissions by the parties. In particular the Panel does not
agree that the United States will only have two days to prepare its second submission.

Accordingly, the Panel declines the United States' request for an extension of the deadline for the
second written submissions.

- D-3 -

ANNEX D-2
LETTER FROM THE PANEL, 4 MAY 2016
The Panel is in receipt of the United States' co mmunication of 28 April 2016, in which it asked for
the opportunity to comment on certain factual evidence and arguments that were submitted by the
European Union on 25 April with the European Union's comments on the United States' responses
to Panel questions. The Panel has also received the European Union's comments of 2 May 2016 on
the United States' request.

In its request, the United States refers to eight new exhibits that were provided by the European
Union with its comments on the United States' re sponses. The United States "disagrees with the
[European Union's] interpretation of this evidence and how [the European Union] employs the
evidence in its argumentation". According to the United States, an opportunity to comment on this
factual evidence an d arguments would help to protect the United States' rights as a responding
Member without delaying this proceeding any more than necessary.

In response, the European Union asks the Panel to reject the United States' request. In the
European Union's view, the United States has not explained why a new opportunity to comment,
which is not envisioned in the Panel's timetable, would be essential to protecting the United States'
procedural rights. The European Union submits that the due process rights of the Un ited States
must be balanced with the procedural right of the European Union to a speedy resolution of the
dispute, which would be affected if the United States' request were accepted. The European Union
also states that the circumstances relating to the submission of the exhibits at issue, as well as the
nature of the exhibits themselves, do not merit an additional set of comments. According to the
European Union, the new factual evidence and related argumentation was offered as a rebuttal to
arguments that the United States made in its responses to Panel questions. Nothing in this new
factual evidence was previously unavailable to the United States and with respect to two exhibits
the United States itself relied on and referred to the relevant documents be fore the European
Union submitted them as exhibits. The European Union concludes that not having an additional
opportunity to submit comments would not prejudice the due process right of the United States in
this dispute.

Thus, in summary, the United Stat es requests the Panel to give it the opportunity to comment on
the factual evidence submitted by the European Union, and the European Union submits to the
Panel that such an opportunity to comment is not envisioned by the Panel's timetable and is not
otherwise merited.

The Panel's Working Procedures do not allow for any further submissions or comments from the
parties at this point in the proceedings, other than in the case of the parties' comments on the
interim report. Thus, the question for the Panel to decide is whether it should permit a departure
from the Working Procedures. The way in which this might be justified would be if the Panel
formed the view that the due process rights of a party – here, the United States – would be
impacted without such an opportunity.

There are a number of different considerations for a Panel to take into account in a situation such
as this. An important consideration is the degree to which the matters that a party seeks to
address were themselves new, were unexpected, or were not advanced by the other party fairly.

The Panel recalls paragraph 7 of its Working Procedures:

Each party shall submit all factual evidence to the Panel no later than during the first
substantive meeting, except with respect to evidence necessary for purposes of
rebuttal, answers to questions or comments on answers provided by the other party.
Exceptions to this procedure shall be granted upon a showing of good cause. Where
such exception has been granted, the Panel shall accord the other party a period of
time for comment, as appropriate, on any new factual evidence submitted after the
first substantive meeting.

- D-4 -

The Panel notes that the exhibits referred to by the United States in its request were provided by
the European Union as part of its comm ents on answers provided by the United States. In its
request for an opportunity to comment on these exhibits and on the associated arguments, the
United States has neither alleged nor provided any indication that the exhibits submitted by the
European Uni on go beyond evidence that is necessary for purposes of "comments on answers
provided by the other party". The Panel sees no indication that either the exhibits or the
arguments of the European Union go beyond the "purposes of rebuttal, answers to question s or
comments on answers provided by the other party". Thus, the European Union was acting within
its rights under the Working Procedures in submitting that evidence.

The Panel has also reviewed the content of each of the eight exhibits submitted by the E uropean
Union with its comments on the United States' responses. Each of these exhibits and the related
argumentation seems to relate to specific points raised by the United States in its responses to
Panel questions. There is no indication that any of the se exhibits introduces substantially new
arguments or factual evidence of a nature that had not been previously submitted or discussed by
the parties. Indeed, the United States has not argued otherwise, stating only, in support of its
request, that it "dis agrees with the [European Union's] interpretation of this evidence and how
[the European Union] employs the evidence in its argumentation".

Accordingly, the Panel finds that the United States has not established that it should have a further
opportunity to comment on the evidence and arguments submitted by the European Union at this
stage of the proceedings. Such an opportunity is not contemplated in the current Working
Procedures or timetable, and could potentially lead to a prolonged cycle of exchanges of additional
evidence and arguments between the parties. Under the present circumstances, this would not
clearly serve to protect the procedural rights of either party, and would be particularly undesirable
in the current proceedings, which under the SCM Agreement should be expedited. The due process
rights of the parties are framed by the Working Procedures, and in this case we do not see a
proper or sufficient justification to depart from them.

For the reasons expressed above, the Panel declines the req uest of the United States in its
communication of 28 April 2016.