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WT/DS108 - United States - Tax treatment for 'Foreign Sales Corporations'

WTO dispute settlement case - Launched by the EU

Country or region
  • United States
Trade topics
  • Dispute settlement
  • WTO - Case launched by the EU

Summary of the case

  • Complaint by: EU
  • Complaint against: United States
  • Third parties: Australia, Barbados, Canada, India, Japan

The FSC scheme provided for an exemption to the general rules established in the US Internal Revenue Code (sections 921-927) which resulted in substantial tax savings for US companies exporting through foreign sales corporations (FSCs). Despite later changes to the law, the relevant legislation remained WTO-inconsistent and was the subject of challenges by the EU through WTO compliance panels.

Relevant WTO provision: Subsidies (3); Agriculture (8, 9, 10)


On 14 March 2006, following the Panel and Appellate Body rulings in favour of the EC in the third round of the WTO litigation on this matter, the DSB confirmed the WTO incompatibility of the challenged US legislation that replaced the original FSC legislation in 2000 (FSC Replacement Act/ETI) and 2004 (American Jobs Creation Act). As a result, and as provided under the applicable EC Regulation, EC countermeasures had to be reintroduced automatically.

On 11 May 2006, the US Congress adopted a Bill repealing the grandfathering provisions of the FSC/ETI legislation and the American Jobs Creation Act for the next taxable years. As the transition rules of that legislation were set to expire end-2006, the Commission submitted a proposal for the termination of the countermeasures. The proposal was approved by the Council through Council Regulation (EC) NO 728/2006 of 15 May 2006.

  • Consultations requested: 18 November 1997
  • Panel requested: 01 July 1998
  • Panel established: 22 September 1998
  • Panel report circulated: 08 October 1999
  • Appeal requested: 26 November 1999
  • Appeal report circulated: 24 February 2000
  • Panel/Appellate Body report adopted: 20 March 2000
  • Implementation deadline: 01 November 2000
  • Recourse to Articles:
    • 13 January 2005 - Recourse to Art. 21.5.
    • 20 December 2000 - Recourse to Art. 21.5.


EU submissions and other related documents

Full case details and WTO documents on the WTO website

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