UNITED STATES - TAX TREATMENT FOR "FOREIGN SALES CORPORATIONS"
Document: Second Recourse by the European Communities to Article 21.5 of the DSU Request for Consultations
Date: 10 November 2004
Document codes: WT/DS108/27
Complainant: EU
Respondent: U.S.
Third parties: Australia, Barbados, Brazil, Canada, China, India, Jamaica, Japan
Dispute stage: Retaliation & Arbitration
Agreements cited: Art. 1, 3, 8  AgricultureArt. 3.1(a), 3.1(b)  Subsidies and Countervailing Measures (SCM)Art. 9, 10  Agriculture

UNITED STATES - TAX TREATMENT FOR "FOREIGN SALES CORPORATIONS"

Second Recourse by the European Communities to Article 21.5 of the DSU

Request for Consultations

 The following communication, dated 5 November 2004, from the delegation of the European
Communities to the delegation of the United States and to the Chairperson of the Dispute Settlement
Body, is circulated pursuant to Article 21.5 of the DSU.

 The European Communities hereby requests the United States of America to enter into
consultations under Articles 4 and 21.5 of the Understanding on Rules and Procedures Governing the
Settlement of Disputes (the "DSU"), Article 4 of the Agreement on Subsidies and Countervailing
Measures (the "SCM Agreement"), Article 19 of the Agreement on Agriculture and Article XXII:1 of
GATT 1994 with respect to the American JOBS Creation Act of 2004 (the "JOBS Act") enacted by the
US on 22 October 2004.

 The JOBS Act was intended to implement the DSB recommendations and rulings in case
WT/DS108 United States – Tax Treatment for "Foreign Sales Corporations" and United States – Tax
Treatment for "Foreign Sales Corporations " – Recourse to Article 21 .5 of the DSU by the European
Communities but fails to do so properly and is inconsistent with the same provisions of the WTO
Agreement as did the predecessor legislation.

 In particular, the European Communities considers that Section 101 of the JOBS Ac t contains
transitional provisions which will allow US exporters to continue to benefit from the WTO
incompatible FSC Replacement and Extraterritorial Income Exclusion Act (a) in the years 2005 and
2006 with respect to all export transactions and (b) for a n indefinite period with respect to certain
binding contracts, thus failing to withdraw the subsidy and implement the DSB’s recommendations
and rulings.

 In the light of the above, the European Communities considers that the United States has
failed to w ithdraw the subsidies as required by Article 4.7 of the SCM Agreement and has failed to
implement the DSB’s recommendations and rulings as required by Articles 19.1 and 21.1 of the DSU.
It also considers that the US continues to violate Articles 3.1(a) an d 3.2 of the SCM Agreement,
Articles 10.1 and 8 of the Agreement on Agriculture and Article III:4 of the GATT 1994.

 Therefore, the European Communities requests consultations with the United States to discuss
the above matter. A statement of available ev idence as to the existence and nature of the subsidies is
included in the Annex.

Annex

Statement of available evidence

 The following evidence is available to the EC within the meaning of Article 4.2 of the SCM
Agreement

1. Panel and Appellate Body Reports in WT/DS108.
2. The American JOBS Creation Act of 2004 as signed by the President.
3. US Congress, Joint Explanatory Statement of the Committee on Conference,
F:/EWB/CONF/H4250CNF.STM.
4. The US Internal Revenue Code provisions.