UNITED STATES – SUBSIDIES ON UPLAND COTTON
Document: Understanding between Brazil and the United States Regarding Procedures under Articles 21 and 22 of the DSU and Article 4 of the SCM Agreement
Date: 8 July 2005
Document codes: WT/DS267/22
Complainant: Brazil
Respondent: U.S.
Third parties: Argentina, Australia, Benin, Canada, Chad, China, Taiwan, EU, India, New Zealand, Pakistan, Paraguay, Venezuela, Japan, Thailand
Dispute stage: Mutually Agreed Solution
Agreements cited: Art. 3, 5, 6  Subsidies and Countervailing Measures (SCM)Art. 3.3, 7.1, 8, 9.1, 10.1  AgricultureArt. III:4, XVI  GATT 1994

UNITED STATES – SUBSIDIES ON UPLAND COTTON

Understanding between Brazil and the United States

Regarding Procedures under Articles 21 and 22 of the DSU
and Article 4 of the SCM Agreement

 The following communication, dated 5 July 2005, from the delegation of Brazil and the
delegation of the United States to the Chairman of th e Dispute Settlement Body, is circulated at the
request of those delegations.

 Brazil and the United States would like to inform the Dispute Settlement Body that they have
agreed on the following "Agreed Procedures under Articles 21 and 22 of the Dispute Settlement
Understanding and Article 4 of the SCM Agre ement in the follow-up to the dispute (WT/DS267)".

Agreed Procedures
under Articles 21 and 22 of the Dispute Settlement Understanding
and Article 4 of the SCM Agreement
in the follow-up to the dispute
 (WT/DS267)

 Noting that the Dispute Settlement Body (DSB) adopted, on 21 March 2005, the Appellate
Body report () and the Panel repor t ( and Corr.1), as modified by the
Appellate Body report, in this dispute.

 Considering that in paragraphs 8.3(b) and 8.3( c) of its report, the Panel recommended that the
United States withdraw the prohibited subsidies referred to in paragraphs 8.1(d)(i), 8.1(e), and 8.1(f)
of the same report by at the latest within six months of the date of adoption of the Panel report by the
Dispute Settlement Body or 1 July 2005 (whichever is earlier).

 Noting that the United States informed the DSB, on 20 April 2005, that it intends to
implement the recommendations and rulings of the DSB in this dispute.

 Recognizing:

• that the United States Department of Agricultu re announced, on 30 June 2005, changes to
the Commodity Credit Corporation's (CCC) Export Credit Guarantee Program (GSM
102), Intermediate Export Credit Guarant ee Program (GSM 103), and Supplier Credit
Guarantee Program (SCGP); and
• that a legislative proposal has been sent to the United States' Congress with a view to
repealing, as soon as possible, the user ma rketing (Step 2) program for exporters of
upland cotton and domestic users of upland cotton.

 Brazil and the United States ("the parties") have agreed on the following procedures:

1. In order to fully safeguard its rights unde r the Understanding on Rules and Procedures
Governing the Settlement of Disputes (DSU), Brazil will, at the DSB meeting of 15 July
2005, request authorization to suspend concessi ons or other obligations pursuant to Article
22.2 of the DSU and to adopt appropriate countermeasures pursuant to Article 4.10 of the
Agreement on Subsidies and Countervailing Measures (SCM Agreement).
2. Under Article 22.6 of the DSU including Article 4.11 of the SCM Agreement, the United
States will object to the level of suspension of concessions or other obligations and the
appropriateness of the countermeasures and/or claim that the principles and procedures set
forth in Article 22.3 of the DSU have not been followed, and the matter will be referred to
arbitration pursuant to Article 22.6 of the DS U. Brazil will not pose any objection to referral
of the matter to such arbitration ("Article 22.6 arbitration").
3. Brazil and the United States will, at the earli est possible moment, request the arbitrator
appointed under paragraph 2 ("the arbitrator") to suspend its work.
4. At any moment after the DSB meeting of 15 July 2005, Brazil is entitled to request the
establishment of a panel pursuant to Article 21.5 of the DSU ("Article 21.5 compliance
panel").

5. At the first DSB meeting at which Brazil's Ar ticle 21.5 compliance panel request appears as
an item on the agenda, the United States will accept the establishment of that panel.
6. Brazil and the United States will cooperate to enable the Article 21.5 compliance panel to
circulate its report within 90 days of its est ablishment, excluding any time during which the
panel's work may be suspended pursuant to Article 12.12 of the DSU.
7. Either party may request the DSB to adopt the report of the Article 21.5 compliance panel at a
DSB meeting held at least 20 days after the circulation of the report unless either party
appeals the report.
8. In case of an appeal of the Article 21.5 compliance panel report, Brazil and the United States
will cooperate to enable the A ppellate Body to circulate its report within no more than
90 days of the date of notification of the appeal.
9. In the event of an appeal, either party may request the DSB to adopt the reports of the
Appellate Body and the Article 21.5 complian ce panel (as modified by the Appellate Body
report) at a DSB meeting held within 15 days of the circulation of the Appellate Body report.
10. In the event that the DSB finds that measures ta ken by the United States to comply with the
relevant recommendations and rulings of th e DSB are inconsistent with the covered
agreements referred to in the Article 21.5 comp liance panel request, the arbitrator will resume
its work at Brazil's request. Brazil and the United States will cooperate to enable the
arbitrator to circulate its report within 60 days of the resumption of its work.
11. In the event that the DSB finds that the measure s taken by the United States to comply with
the relevant recommendations and rulings of th e DSB are not inconsistent with the covered
agreements referred to in the Article 21.5 co mpliance panel request, Brazil will withdraw its
request under Article 22.2 of the DSU, thereb y terminating the Article 22.6 arbitration
procedure.
12. In case the parties reach a mutually agreed solution, it shall be notified to the DSB under DSU
Article 3.6 and Brazil will withdraw its requ est under Article 22.2 of the DSU, thereby
terminating the Article 22.6 arbitration procedure.
13. Brazil and the United States will cooperate to f acilitate the participation of the original
panelists in the Article 21.5 compliance panel and the Article 22.6 arbitration.
14. If any of the original panelists are not available for either the Article 21.5 compliance panel or
the Article 22.6 arbitration (or both), the parties will immediately request the WTO
Director-General to appoint, as soon as possi ble, a replacement for the proceeding or
proceedings in which a replacement is required. If an original panelist is unavailable to serve
in either of the proceedings, the parties to the dispute will further request that, in making this
appointment, the Director-General seek a person who will be available to act in both
proceedings.
15. Brazil and the United States will continue to cooperate in all matters related to this
Understanding and not to raise any procedural objec tion to any of the steps set out herein. If,
during the application of these procedures, Brazil and the United States consider that a
procedural aspect has not been properly addressed in this Understanding, they will endeavour
to find a solution within the shortest time possi ble that will not affect the other aspects and
steps agreed herein.

16. This Understanding does not prejudice either part y's rights to take any action or procedural
step to protect its rights or interests, including the activation of any aspect of the provisions of
the DSU.

Geneva, 5 July 2005

 (signed) (signed)
 H.E. Mr Luiz Felipe de Seixas Corrêa Mr David Shark
 Ambassador Chargé d'Affaires, a.i.
 Permanent Representative of the Federa tive Alternate Permanent Representative
 Republic of Brazil of the United States of America