BRAZIL - EXPORT FINANCING PROGRAMME FOR AIRCRAFT
Document: Recourse by Canada to Article 21.5 of the DSU
Date: 26 November 1999
Document codes: WT/DS46/13
Complainant: Canada
Respondent: Brazil
Third parties: Australia, EU, South Korea, U.S.
Dispute stage: Retaliation & Arbitration
Agreements cited: Art. XVI  GATT 1994Art. 3, 27  Subsidies and Countervailing Measures (SCM)

BRAZIL - EXPORT FINANCING PROGRAMME FOR AIRCRAFT
Recourse by Canada to Article 21.5 of the DSU
The following communication, dated 23 November 1999, from the Permanent Mission of
Canada to the Chairman of the Dispute Settlement Body, is circulated pursuant to Article 21.5 of the
DSU.
Canada requests a special meeting of the Dispute Settlement Body on 3 December 1999 to
consider the following agenda item:

- Request by Canada for Determination of Consistency of Implementation Measures
Both the Panel and the Appellate Body in this dispute found the Brazilian measures in dispute
to violate Article 3 of the Agreement on Subsidies and Countervailing Measures (the "SCM
Agreement"). On 20 August 1999, the DSB adopted the Appellate Body report and the report of the
Panel, as modified by the Appellate Body. The resulting DSB rulings and recommendations include
the recommendations that Brazil bring its measures found to be inconsistent with the SCM Agreement
into conformity with he provisions of that Agreement and that Brazil withdraw the export subsidies
for regional aircraft under PROEX within 90 days, i.e., by 18 November 1999.
On 16 November 1999, Canada and Brazil held consultations in Sao Paulo on, inter alia, the
measures that Brazil intended to take to implement the DSB recommendations. On
19 November 1999, the Permanent Representative of Brazil to the WTO informed the Chairman of
the DSB and announced at a meeting of the DSB on the same day the measures that Brazil has taken
and/or intends to take to implement the DSB recommendations. In his letter the Permanent
Representative of Brazil stated that Brazil "has effectively implemented the DSB recommendations
...".
The decision of the Appellate Body required Brazil to withdraw its export financing subsidies
under PROEX both with respect to as yet undelivered aircraft that will be delivered pursuant to
contracts entered into prior to 18 November 1999, and with respect to contracts and deliveries under
contracts entered into from 18 November 1999 onward. In Canada's view, Brazil's communication to
the DSB on 19 November 1999 provided insufficient information to demonstrate compliance in either
respect, and in particular as to Brazil's intentions with respect to implementation of the DSB
recommendations concerning regional aircraft to be delivered after 18 November 1999 under
contracts for sale entered into before 18 November 1999.
In view of the above, there is a disagreement between Canada and Brazil as to whether the
measures taken by Brazil to comply with the 20 August 1999 rulings and recommendations of the

DSB, in fact, bring Brazil into conformity with the provisions of the SCM Agreement and result in the
withdrawal of the export subsidies to regional aircraft under PROEX.
Canada requests that this matter be referred to the original Panel, pursuant to Article 21.5 of
the DSU. Canada further requests that the Panel find that Brazil has not taken measures to comply
fully with the 20 August 1999 rulings and recommendations of the DSB. Canada requests that the
Panel find, in particular, that, contrary to the report of the Appellate Body and the report of the Panel
as modified by the Appellate Body, Brazil has not withdrawn the PROEX export subsidies applied to
aircraft to be delivered after 18 November 1999 under contracts for sale entered into prior to 18
November 1999.
Canada and Brazil have reached an agreement concerning the procedures to be applicable in
this case pursuant to Articles 21 and 22 of the DSU and Article 4 of the SCM Agreement. This is
attached.

ANNEX

The Panel and Appellate Body reports in this dispute were adopted by the Dispute Settlement
Body on 20 August 1999.
The DSB recommendations and rulings included the recommendation that Brazil bring its
measures found to be inconsistent with the Agreement on Subsidies and Countervailing Measures (the
SCM Agreement) into conformity with the provisions of that Agreement and that Brazil withdraw the
export subsidies for regional aircraft under PROEX within 90 days, or by 18 November 1999.
There is disagreement between Canada and Brazil as to the existence or consistency with a
covered agreement of measures taken to comply with the recommendations and rulings of the DSB,
within the meaning of Article 21.5 of the Unders tanding on Rules and Procedures Governing the
Settlement of Disputes (the DSU).
Canada and Brazil have reached an agreement concerning the procedures to be applicable for
proceedings in this case pursuant to Articles 21 and 22 of the DSU and Article 4 of the SCM
Agreement, as follows:
1. On 23 November 1999, Canada will request that this matter be referred to the original panel
pursuant to Article 21.5 of the DSU. Canada will also request the convening of a DSB
meeting on 3 December 1999 and Brazil will not object to the holding of such a meeting.
2. At the DSB meeting convened in response to the request by Canada, Brazil will accept the
establishment of a review panel under Article 21.5 of the DSU and will not pose any
procedural objection to the establishment of such a panel.
3. Brazil and Canada shall cooperate to ensure that the review panel convened under
Article 21.5 of the DSU will be able to circulate its report within 60 days of its establishment.
Canada will not request authorization to suspend concessions until after circulation of the
Article 21.5 report.
4. Neither Brazil nor Canada will object to a request that the DSB be convened to consider the
report that may be submitted to it under Article 21.5 for adoption. In the event that such
report finds that Brazil has not complied with the recommendations or rulings of the DSB,
neither party will object to DSB consideration of a request by Canada for authorization to
suspend concessions pursuant to Article 22.2 of the DSU and/or Article 4.10 of the SCM
Agreement; provided, however, that Brazil may request that the matter be referred to
arbitration pursuant to Article 22.6 of the DSU.
5. Pursuant to footnote 6 to Article 4 of the SC M Agreement, Brazil and Canada agree that the
deadline for DSB action under the first sentence of Article 22.6 of the DSU shall be 15 days
after the circulation of the report under Article 21.5 of the DSU, and that the deadline
specified in the third sentence of Article 22.6 of the DSU for completion of arbitration shall
be 30 days after the matter is referred to arbitration.

6. This agreement shall be forwarded immediately to the Chair of the DSB for circulation to all
WTO Members.
AGREED TO in Geneva this 23rd day of November, 1999.
(Signed) (Signed)
H.E. Mr. Celso Amorim H.E. Sergio Marchi
Ambassador Ambassador
Permanent Representative of Brazil Permanent Representative of Canada
to the World Trade Organization to the World Trade Organization